E164: Zuck’s Senate apology, Elon's comp package voided, crony capitalism, Reddit IPO, drone attack
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All right, everybody, welcome back to your favorite podcast, the all in podcast. It's episode 164. I'm down here in Miami with me again, of course, the dictator chairman himself, Tomas Palihapitiya and the Rain Man. Yeah, burn baby, David Sachs. Unfortunately, we had a little bit of a challenge this week. We don't know where Friedberg is. He's somewhere lost in his Apple vision pros, but he'll be back next week. As you guys know,

I'm incredibly generous with my friends. So I sent all the besties, the Apple Pro goggles. And so these Apple Pro goggles are amazing. But you bought me a pair of the Apple Pro. Yeah, we talked about this. Yeah, you guys actually you were using them. You just forgot. But Friedberg's been using them. Nobody can find Friedberg right now because apparently he went to Uranus. I recorded in all of these sacks what's happening inside Uranus.

each of our Apple goggles, Vision Pro. Oh my God. Oh my God. Yeah, and so, but yeah, Chamath, here they are. We actually took a picture. I had Nat take a picture of you wearing them. Do you want, hey, Zach, do you want to see what Chamath was doing in his goggles? Yeah, let's see. I recorded it. Oh, wow. Yeah, look at that. See, he imagined that he did leg day. Look at those legs. He did leg day. Oh,

Oh, he's just reveling. He's still reveling in that thirst trap that he posted in the... I know, but you see those legs? The Apple Vision Pro, Tim Cook. Can I, sorry, can I say... Oh yeah, look at that. Can I say something funny about this, which is that my legs are actually darker than my torso and my upper body. It's the weirdest thing. And so you have it in reverse, but it is true that my legs are a different shade than my trunk and my arms and my body. Okay. Well, here's SACS, by the way, SACS.

You know, he loves his goggles. Shabbat, do you have any interest in seeing what Sax was doing with his goggles? Oh my God, I can't imagine. There it is. Sax was speed running. He was doing the speed run on DJ. Absolutely getting in there. That's Saving Private Ryan, right? Yeah, that's you. That's you. You were speed running Saving Private Ryan there. Oh, I got them too. Yes. But I didn't record myself. I didn't record myself. I maybe nicked it. Oh, I was in there. Oh, look. What am I doing? Oh, I was making the melody where I'd be like...

Wait, you're telling me that they didn't have the third or fourth investor in Uber up at ringing the bell with them at the original moment? I could tell you the backstory. I was invited by TK to come to the ring of the bell. TK was disinvited. So he was there on the floor. It was very awkward.

And then they didn't have him go up and ring the bell or be even there when Dara rang the bell. It was because it was so controversial. They didn't, they banned him. It was really, it was really sad. It was super sad. But anyway, everybody, I hope you're enjoying your goggles. So you were there or not? I didn't go. Cause he was like, we're going to have a party, but we're not going to be able to ring the bell. And it was just all like very, did you go to the party?

I didn't. I should have. I regret not going. But it was unclear if there was even going to be a party or if TK was going to go because of all the drama. I don't know if you remember on CNBC, they were like, TK's in the building, but he's not on the thing. And it became a big brouhaha.

But yeah, so I missed my window. I mean, if you had known that this was going to be the big exit in your life, really the only one, then you would have made every effort to attend everything, right? Absolutely. Absolutely. Yeah. I mean, you're still riding on that Yammer and PayPal. I was talking to somebody about this the other day. Most people's careers, you have like

You know, it's not like a smooth upward trajectory. There's like maybe a few pops that you get. You're lucky, actually, if you get a few, because most people only have one or maybe two. Yes. It's like a power law. It's like anything else in venture, right? Absolutely. I'm sure if you think back on like the big outcomes in your life, it's not like there's one every year and like some sort of smooth gradient. It's basically there's like one, two or three over the course of your entire career that you remember. Right. Yeah, absolutely. Yeah. I mean, it's good.

It's good to consider that because you have to enjoy every sandwich. You have to enjoy every day what you're doing because those pops are out of your control. You don't know when they're going to happen, how they're going to manifest. But you guys didn't get these. You didn't get the goggles. But these goggles came out this week. I don't know if you saw it. What I will say is at the poker game, three of the guys were talking about these goggles. Oh.

Sammy woke up at five in the morning on the first day. He was he got them. And then Kuhn and Roble were telling me that they just like bought them randomly in the next couple of days. And it was civilians. There was no like waiting in line. They were able to just order them is what they did. Yes, but they're civilians. So just to be clear, like in Silicon Valley, we're kind of like, yeah.

whatever, you know, we've played with Oculus for so long, but now these are out and there's a bunch of demos going around. This one I thought was interesting. I don't know if you saw this, but watching a basketball game, it actually is quite compelling to have all the stats on the screen with you and you can kind of move them around.

I maybe could see myself doing this. I don't know. Do you think you would do this watching a game? Maybe. So wait, are you actually watching the TV through the goggles? Like what part is real world and what part is augmented? Obviously all the stats are augmented reality. Yeah. But the TV itself is, is that, that's a stream. That's a stream coming into the goggles. Yeah. It's not your actual TV. So,

So, you know, I think he's just putting it on the TV there, but you could literally be outside on your deck. You could be on an airplane and do this. So that's like, you can see through the goggles, right? Is that the idea? It's you can, if you want to, I think you can still see through the goggles. Yeah. Is the idea. Yeah. You know that you could, you can see the fact that you live in a tattered apartment without a girlfriend dressed poorly. Yeah.

You can see the dishes in your sink. You can see the cupboard being bare. You can see the spoiled milk in your refrigerator. Your half-used bong that you use to soothe yourself to sleep at night. Whatever all of these 20 and 30-year-olds do to cope, you'll see all of that while still being in an immersive environment. It's amazing. Yes.

I mean, it is so dystopian. I just think like, if you take out your phone, your spouse is like, what are you doing on your phone? I can you imagine the audacity of being with your spouse or your family and be like, Hey, guys, I'll be right back. And you put the goggles on to watch the Knicks game with the Warriors. I mean, I think that's a snap divorce. I don't know. You said it.

very well about the Oculus one, which is, you had a turn of phrase, which I really like, but basically it's like, you were very quick to try it and then there was like a period and then you lost interest. I think that's just going to be the key thing with this. And the fact that it costs $3,500, they have to get the price down fast enough for average folks to want and be able to buy it, right?

Yeah, I call this experience the try, oh my, goodbye. You try it, you're like, oh my God, this is incredible. And then you're like, we put it in your drawer, you never use it again. Because there's not an application. It's really a proof of concept. Look, I think it's a great thing for innovation that they're starting with this, you know, like you said, expensive headspace.

headset that maybe is not that ergonomic, but eventually it'll come down and the form factor will be glasses or sunglasses. Facebook, I don't know if the product's out yet, but do you see their product where it has the AI built into it and you can ask it questions and it will do computer vision and give you answers based on what it's seeing?

It was a phenomenal demo. I don't know if that's actually real yet, but did you see that demo? Yeah, these are the Facebook Ray-Ban glasses. And I do think

These are Meta's smart glasses. They work particularly well taking pictures and sharing them on Instagram. So they're kind of single function. You know how Zuckerberg is. He cribbed what Evan Spiegel did a couple of years ago with the Snapchat Spectacles. Right, but he put out a demo that was a little different. The demo was like he was in his closet. He was wearing this and he had picked out a shirt or something and that said, give me...

you know, tell me what I should match this with. Yeah, what goes with a gray shirt that I've worn for the last 14 years? Did you guys see this thing where they all had to testify in front of the Senate? Yeah, I guess we'll just jump right to that. It was like a public flogging.

Yeah. Once again, a public flogging. We'll just jump to it real quick since we didn't want to go too deep on that one. But Josh Hawley made Zuck turn around and apologize to people in the audience. It was really intense. Yeah. So this is the name of this hearing was Big Tech and Online Child Sexual Exploitation Crisis. Zuckerberg, he was questioned along with the CEO of TikTok, Discord, X and Snap. But obviously, this is all around

kids online safety, and also Section 230, which I think these senators are, this is one of the few bipartisan moments, I think. They're honing in on it. Yeah, they realize this is kind of like a winning... They're going to take a run at this. They're taking a run at it, for sure. They realize it's a winning ticket. Let's just play the clip and then I'll get your thoughts, Saxon and Jamal. Let me ask you this. There's families of victims here today. Have you apologized to the victims? I've

Would you like to do so now? They're here. You're on national television. Would you like now to apologize to the victims who have been harmed by your product? Show them the pictures. Would you like to apologize for what you've done to these good people? I'm sorry for everything that you've all gone through. It's terrible. No one should have to go through the things that your families have suffered. And this is why we invest so much and are going to continue doing industry-leading efforts to make sure that...

No one has to go through the types of things that your families have had to suffer. It was a powerful moment. And for Zuckerberg to get up and actually face the parents, he turned around, he faced his parents. It was a very dramatic moment. And he apologized. Ned, do you respect him for doing that? And you think that was like a...

a powerful moment as well. And where does this all wind up? This was a kangaroo court. I mean, this was basically all theatrics. This is basically a bipartisan moral panic where all these senators are basically grandstanding. And these are the same types of accusations that we've been hearing for years. Remember, this goes back to the whole Frances Haugen claims, where she says that Facebook wasn't doing enough to prevent various kinds of online harms. And I think that

We're going to regret where this all leads because where it's going to lead if they do repeal Section 230 is towards greater censorship. All these companies are going to spend even more resources restricting what we can say and hear online, which is not the right direction. Listen, do some harms occur online? Yes. Do I believe that Facebook is taking substantial measures to stop them? Yes. I mean, but edge cases are always going to get through.

When you're operating at that kind of scale, there are going to be these edge cases of kids who got harassed or

content that shouldn't have getting through. It's just part of the fact that the internet operates at gigantic scale, and these harms have always been out there. I think that these companies do their best to try and stop them, but they're always going to get through. And you can't make every aspect of our society perfectly safe and harm-free. Somehow we have this expectation that we can eliminate 100%.

of every harm that occurs. And I do think that these online companies have been unfairly picked on in a sense. I mean, if you're going to talk about these types of harms, why aren't you targeting the music industry for all their incendiary lyrics that basically encourage all sorts of violent or sexist behavior? Why don't you target the advertising industry for creating unrealistic body image expectations? Why don't you target the Kardashians for setting unrealistic expectations around

And you could go on down the list. I mean, why don't you target Hollywood for releasing a show like Euphoria, which is a hit? It seems to me that the problem in our culture is not coming from the edge cases. It's coming from the mainstream entertainment industry.

that is fully allowed and is popular and is our hit shows and hit records and hit products. I mean, that's where the toxic pollution is coming from in our culture. So to turn around and now blame the online companies for creating all of this, I think is just anything. Basically, they're being scapegoated. I mean, again,

This is a moral panic. Chamath, do you think it's a moral panic or, you know, there have been statistics and studies done about what is viral on social media, the algorithms targeting users, the addictive nature of it. You spoke earlier about the addictive nature of just gamification on watches. Social media is a little bit different than music and some of these other things because they have these algorithms to increase watch time and engagement. So

I think that's what the other side would say. What do you say? What do you say, Chamath? Where do you stand on this? Let me just give a coda to a couple of things that Zach said. It is true that we've taken turns attacking other forms of media when they were ascending in their popularity. So in the 1990s, if you guys remember,

Politicians and their censorship attempts around gangster rap and NWA and 2 Life Crew and certain songs. Al Gore's wife, right? What was her name? Tipper Gore. Tipper Gore had a whole tirade against rap lyrics. What was the NWA song, you know, F*** the Police?

That whole thing just sent off a huge fear about people potentially, David, being motivated to kill cops or something, right? In the 80s, there was a trial. Judas Priest went on trial. Right. Because if you played one of their records backwards, supposedly it promoted devil worshipping. Devil worship. I don't know who's playing records backwards, but if you did, then it promoted devil worship. I think a kid committed suicide, and so they basically prosecuted Judas Priest for it. So that's comment number one, which is...

this is not new. And the reason why social media is in the crosshairs is because instead of having this really diverse ecosystem of many small players, you have three or four folks. And so it's easier to bring them up on stage and sort of pillory them. Second is I actually thought that Zuck had a lot of moral clarity because it's like, that's a tough position to be in. And the fact that he had the courage to turn around and actually apologize to those people

shows he's trying to do the right thing. But the reality is, and Sachs is right, if you apply a very, very small error rate to an incredibly large number, so they have a network of three and a half billion people monthly, right, or daily or whatever the thing is, even if you say that there's one tenth of 1% of an error rate, meaning things that are unintended, well, that's 3 million unintended consequences, right? That's a lot of unintended consequences. And so

There's this massive law of large numbers at play. So what do we do, I guess, is the question. And I think that there is enough knowledge that we have to know that the ability for a 35-year-old to use certain products today is very different than the ability for a 12-year-old to use that same product because of where they are physiologically.

I think we all know that to be scientifically true on the dimension of many products. And I think what we need to decide as a society is whether software and electronic products fall into that categorization. And if so, what does it mean? So in the case of China, they mandate top down what products can be used and how many hours...

you can use them for. Specifically video games you're referring to. Yeah. And David's right, which is that if we go there and we rewrite the law, then there's going to be a different set of unintended consequences that's going to create, I think, a much poorer business landscape, frankly, to innovate and a bunch of other things. And building on your comments, there's clearly an age at which kids shouldn't be on these systems and an age where maybe with some guidance they can

Yeah. You wanted to add something, Shemant? Yeah. And then I think the third thing is around the Section 230 thing itself. I think that, Sachs, I'll give you a slightly different take. I don't think that the Section 230 rewrite is going to be broad and sweeping. What I noticed from a bipartisan perspective by both the Democrats and the Republicans is that the one single narrow issue that they all seem to align on is not necessarily about

all of the different rules around censorship, but that the lack of liability for these folks should be relieved. And I think that if you were to write a narrow amendment to Section 230 that said that these social media companies or other organizations that had certain characteristics were more liable, where today they have no liability, I'm not saying that it's right.

But my read of the temperature in that room was that that is the very narrow change in Section 230 that I think they all seem to want to make.

And so that seems like a very likely thing that will happen in the next two or three years. Unpack that for the audience who might not know how they would do that. Section 230 says, if you're a publisher, you're a common carrier, you're not responsible for what people post on your system, blog, web host, or social media company. But where these social media companies move from being just a common carrier, you know, like paper might be, or a website hosting company like WordPress or Squarespace,

is when they flip over and they have an algorithm, and then they start picking and choosing. So once you start doing editorial, like the New York Times, and you have editors, then you're liable. If you're CNN, you're liable. If you're Fox, as we saw in the Dominion case, that's where the liability comes in. So I guess the question to you, Sax, is,

you know, at the end of the day, now that we've seen these things at scale, is there not an argument that when you start editorializing through an algorithm and you start promoting certain content, that you have some level of responsibility like Fox News, CNN, or the New York Times has? Where would you stand on that issue? Some liability if you're picking winners and losers in terms of what gets

promoted in the system. Well, apparently, I'm the last person in America who thinks that Section 230 was a good idea and a visionary piece of legislation that actually enabled the creation of user-generated content platforms. Just to kind of slightly modify your description of how it works, I would analogize it to a newsstand where there's magazines on the newsstand, there are publishers, and then there's the newsstand itself, which is a distributor. If a magazine is

engages in defamation, they're liable for it. But the newsstand is not. The newsstand can't be sued. So the question is, when you have these massive user-generated content platforms, are they operating as a publisher or as a distributor?

And I think what Section 230 made clear is, look, if you don't write the content, if the content is generated by users, you're a distributor. And that is, I believe, the better analogy to make for these huge UGC platforms. Now, at the same time, what Section 230 said is,

is that if you take good Samaritan actions to reduce things like sex and violence on your platforms, then we won't make you liable. Because what happens in a lot of cases is that you can waive your protection legally by basically getting involved. And so the legislation didn't want to deter these platforms for taking, again, good Samaritan steps.

I think it's a pretty good combination of legislation. And that's what you see right now is that Zuckerberg doesn't want to let these edge cases through. I actually believe that they are taking huge efforts at scale. They have 40,000 people to give him some credit. There's 40,000 people moderating stuff. That's a big number. Yeah, these are edge cases that get through. And by the way, you have to wonder where were the parents when all of this stuff happened? I mean, they're acting like they're victims in the audience, and I'm sorry for their particular cases. But at the end of the day,

We do need the parents to step up here. If we want to have social media at scale at all, the parents have to play a more active role. But in any event, to go back to Section 230, I just think that Republicans in particular are going to really regret getting rid of Section 230 because it's only going to lead to more censorship. I think what they're going to do, if I had to bet, is that they're going to write a very narrow amendment to that law and

during some budget process or some other thing where you have a big Christmas tree bill, this will get in there. And I think it will have bipartisan support that effectively removes the liability protection that these companies have. That's not a small change. That's the entirety of Section 230. I think like these companies will not be able to use that. That's a massive change. Listen, there are plaintiff's lawyers. The plaintiff's lawyer's bar is

you know, the trial lawyer's bar is salivating over the possibility that would happen. That's why this is going to happen. You know, this is how America works. They have personal injury, hold on, they have personal injury lawsuits and tort lawsuits lined up in every jurisdiction in the United States. And here's the thing is because Facebook and all these other sites operate, you know, across the entire nation and across the entire world, they can be sued in every single jurisdiction.

if you allow these types of lawsuits. - Okay, Chamath, you go, then I'm gonna get my position and we'll move on. - I'm gonna say this in as unopinionated as a way as possible. Whether we like it or not, there's an element of American capitalism that takes companies through seasons.

And there are seasons where you're growing. And then there are seasons where you're over-earning. And then there are seasons where, if it is possible, the machinery, if you see that you are over-earning for a long time, the machinery of the economy comes and kind of pulls you back down to earth. You've won too much. And you're perceived as too powerful. And I'm not saying this...

whether or not it's right. I'm just saying that if you look back in history, these chapters have been written umpteen times. And I think, David, what you said is the absolute single most important thing, if you had to figure out where this was going to go, is exactly that. The plaintiff's lawyers, the class action lawsuits, the amount of money that they think they can extract from

And they compare it to the amount of money that they were able to extract in two different kinds of cases. One was tobacco, and then the second was pharma. And I think that they look at this class of app and the lack of empathy or the lack of popularity that the leaders of these companies have is

in Washington as a reason why they will probably be able to get this done to create this. Again, I'm not saying I think that's good. I'm saying that I think it's likely. And I think when that does happen, you will see a replay. Again, it'll be slightly different in terms of how it plays out, but exactly the kinds of plaintiff's lawsuits that we saw in pharma and in tobacco. And I think it's going to play out here. And David, you're right. That hearing to me was a setup for that.

Yeah. And if you if you look at this through that lens, there will be some sort of negotiation and it might be age, because when you look at this, really what Americans are upset about is the impact this is having on kids. We have a limit for the age of smoking, vaping, et cetera. And when these things happen, I think an easy concession that Zuckerberg and others will make is, hey, these products will be for 16 years old and up.

That's my that's the age I think it's appropriate 15 or 16 seems to be well he also said by the way Jason to your point Lindsey Graham was the one that brought this up and Lindsey Graham made the connection to tobacco and also to firearms. Yeah, and then mark at some point in there basically said well listen like let's look at apple and google we should expect them to do the actual age verification on us.

Right, because they have the devices and they have the credit cards, etc. That's actually a very reasonable thing for Americans to come to. The only thing that breaks down a little bit, Saxon, your argument, and listen, there's no perfect analogies here, but if there was a repeated offense of a magazine on a newsstand, for example...

If there was some magazine that had underage, you know, an adult magazine that had underage kids in it, and people knew that, and a newsstand continued to publish it, they would have liability for trafficking in child pornography or whatever it happens to be. And so the newsstand does get some liability. So there's, again, no perfect analogies here. But I think... But Facebook and all these other sites are trying to remove the child porn or whatever. I don't think much of that gets through at all. You know, I think maybe you have a better argument.

And there is the argument that people make is that because of the feed, they're making editorial judgments and that's publishing, not distributing. However, my counter arguments to that is that the feed just gives you more what you want. I mean, it just looks at what you're clicking on, what you're viewing, the time you're spending, and they just give you more of that. I don't think it's editorializing.

Now, back to Jamal's point about this is the way things are headed, that may well be right, but I think we're going to regret it. I mean, first of all, the Democrats' interest, one of their biggest donors is the trial lawyers bar, and they generally will support any legislation that opens up the causes of actions, and that's where this is headed.

And what's going to happen is if they get rid of Section 230 is that every time there's an alleged harm that occurs, every time a kid gets bullied or beat up in school, every time something goes wrong in their life, they're going to try and pin it.

on social media and try and show that they imbibe something on social media that led them down this dark path. And these types of companies are going to get sued in every jurisdiction in America. Recently, we've seen huge judgments related to defamation, where if you have, say,

a politically red defendant in a blue jurisdiction. Huge awards. I think we could probably see the opposite as well, that basically you'll start seeing blue defendants taken on in red jurisdictions. We've seen completely disproportionate judgments, and again, around defamation, disproportionate relative to the harm that actually took place. You're going to see that on steroids if we get rid of Section 230. Now, historically, it was the job

of Republicans to oppose Democrats on this stuff because they knew that Democrats were shilling for the plaintiff's bar. Republicans have not done that because they're so mad at these social media companies for censorship. So remember when I talked about Good Samaritan liability, these companies created content moderation to basically try and remove the violent material, the pornographic material, the sexual material, the harassing material. But

in the process of doing that, they started making political judgments and they started engaging in political censorship. And that has made the Republicans so angry that they have now turned against these companies and they are willing to remove Section 230. My point is, I think Republicans at the end of the day are going to regret that because if you remove Section 230, it's going to open up this flood of litigation. It'll be a free-for-all. It'll be a free-for-all. And what's going to happen is that these

companies, just driven by simple corporate risk aversion, are going to clamp down even more. I mean, the content moderation is going to be even stricter. And because the content moderators of these companies basically are liberals, if you empower them to take down even more content, they're going to take down Republican stuff even more. It'll be very easy for the plaintiffs to target that type of content. They'll say that, oh, that

you know, all of that Republican or conservative content that influenced people in a very negative direction that created all of these harms. There'll be lawsuits targeting that sort of content and Facebook and others will respond in the economically rational way, which is to shut it down completely. So I think senators like Josh Hawley are not going to get what they want. They're not thinking straight. Yeah. Chamath is going to backfire. Yeah, it's going to backfire. Chamath. The reason why this is going to happen, if it does happen,

and you wanted to try to be probabilistic about it, is because when you look back at the tobacco settlement, the original settlement in today's dollars is about $370 billion. If you were the trial lawyers and you're looking at a combination of Facebook and TikTok and all of that money, I suspect that they probably think that the potential that they can extract from these companies is going to be multiples of that number.

And then as a result, their fees will be between 20 and 50% of that. So you're talking about hundreds of billions of dollars of revenue potential that will motivate, I think, these folks to get the law changed. And then the byproduct will not be framed in terms of dollars. These are highly kinetic issues when you're talking about sexual exploitation and young people and mental health and

suicide and bullying these are very kinetic issues right and so bringing these to jury trials all across the united states i think that they probably think that they're on the right side of history and winning those things so you know again i'm not saying it's highly emotional i mean listen it's gonna win people's kids it's gonna win you bring a case of say teen suicide okay

horrible that it happens. But there's going to every time something like that happens, there's going to be a huge temptation, I'm sure there'll be trial lawyers who specialize in this, to bring a case against Facebook or some other social media company. And they're going to scour through these accounts and try to point to examples that could have led to this result. And

And the truth of the matter is that maybe social media contributed a little, but what about popular culture and popular entertainment? What about all the messages? I'm not debating any of that. I know, I know. I'm just, I'm pointing out what's going to happen. What about all the messages they received?

not through the edge cases I got through on social media, but through the mainstream entertainment. I mean, all the shows they're watching on television, all the music they're listening to, the things that happened in their schools and day-to-day conversations with other kids. But you can't really sue any of those other things, but you can sue social media. By the way, the crazy thing about all of this is that all of these lawsuits are funded in part by these hedge funds who will do litigation finance. And part of putting together

A well-performing litigation finance fund is underwriting the probability of success. And I think when you flow through the probabilities and you apply it to these companies, largely because of their profitability and their ability to over-earn and generate profits, I suspect that Wall Street is probably already involved. And if not, they'll probably get involved in due course.

But it's an unfortunate thing, David, I agree, because this is sort of like, hey, the rules on the field were X, and folks operated by those, and they are trying to do their best. But again, this is where capitalism, the part of capitalism that can be awkward and uncomfortable is when

industries over earn for long periods of time, other folks say, I'm going to compete away those returns somehow. And I want a share of those profits. And I think that that's going to be the large motivator. And it's just going to result in I think, these things changing and a plethora of lawsuits. And at the end of the day, this is about children and protecting children. So the obvious solution here is society has to come up with a number. Well, sadly, I think that could be a veneer, Jason.

You know what I mean? Hold on, let me finish my thought here. The key thing is there's some age in which we all agree it's reasonable for kids to be using social media. And there's a certain age when we think it's not reasonable. And back to capitalism, I think a very good point you made, Chamath. These companies are going to have to say, well, if we lose the 12 to 15 year olds, is that

better for society and better for our business. And we just all agree that social media should start at 15 or 16. And then the handset manufacturers and the social sites all have, you have to get permission from your parents to use them, period, full stop. And that's it. And that may be where this all winds up, I think. And then also explaining the algorithms, I think is the next thing that's going to happen. People are going to have to disclose how these algorithms work. I think you're making a very good point, which is that is the right conversation to have. My point was that instead of having that conversation, which is more

societal, it involves, David's right, parental responsibility. What is our role? Absolutely. But being actively involved. And by the way, the trends around family formation and the fact that there's way more single parent families make this problem even harder because now there's only one person to check in and not two people to check in. So all these things societally build on itself. Jason, that is the absolute right conversation to have. My point is, that's not going to be why

The rules need to get rewritten. The rules will get rewritten because there's an economic argument by a different sector of the economy, in this case, the trial lawyers and other folks that say there's a trillion dollars to be had if we get this law changed. They are motivated enough to do that. Yeah. A parasitic sector. So there is a bill right now working its way through the California Assembly that would go to Gavin Newsom that would prohibit the use of social media by under 16 year olds. So that is actually happening.

Yeah, I agree with you. That's a better debate to have than changing Section 230 in a way that's going to lead to more censorship, by the way, just just on that point.

I think Republicans need to understand this in particular, is that the anger towards these companies is bipartisan. The outrage is bipartisan. The moral panic is bipartisan. You saw it in that hearing. You couldn't really tell the difference between Republicans and Democrats. Okay? So- Full display. I wouldn't be surprised if they agreed, like Jamal said, on some sort of change to Section 230. But here's the catch.

is that Republicans and Democrats have fundamentally different objectives. Fundamentally, Democrats want there to be more censorship. They say this all the time. We want you taking down more content, not less. Republicans want there to be less censorship. Okay. So if they agree on the same piece of legislation, only one of them can be right.

Okay. And the question is, who's going to be right? My guess is that if Democrats and Republicans agree on a Section 230 modification, the Democrats know what they're doing. And the Republicans, generally being the stupid party who get outsmarted all the time by Democrats, are going to agree to something that they later regret. So at the end of the day, I don't think that

bipartisan legislation should be possible. The anger is bipartisan, but the objectives are not. And if something gets through, it's going to be because Republicans make a huge mistake. And just to give a tangible example of this, okay, take

Okay. Do you think that in this world where there's no section 230, that Republicans are still going to be able to have conversations online about say gun enthusiasm? No way. Because every time some harm happens, every time there's a shooting of some kind, a plaintiff's lawyer is going to sue not the person who posted the content to

talking about how much they love their guns. And, you know, look, it could be totally innocuous. Okay. It could be a forum on Facebook or Reddit where people are just having conversations about gun reviews. It could be totally innocuous conversations. Okay.

People having the right kind of conversations about guns. Okay. But you know that every one of those websites that hosts those conversations will be targeted in relation to any harm that occurs in the real world. And very soon Reddit and Facebook and all the rest will feel compelled to ban any conversation related to even second amendment rights. Okay. Yep.

This is where it will lead if Republicans get rid of Section 230. You will be the ones targeted, not liberals. All right. Great discussion. You know, it's important to have the right discussion. This reminds me of the abortion discussion where nobody would ever talk about the number of weeks. Like, that's at the core of the issue. If we could agree on the number of weeks, we can agree on the age here, you know, for kids to use these things, maybe we can move forward. Let's move forward on the docket here. We got so much to talk about. And I think the number one story of the week

was Elon's pay package and this ruling that occurred in Delaware. Let me just tee this up here. Many of you probably know about this already, but in 2018, Tesla's board approved a performance-based compensation package for Elon. It was approved by 73% of shareholders. Elon and his brother, Kimball,

would have put that at 80%, but they were excluded, obviously. This is lower than maybe some other support levels. According to Reuters, you typically see 95% for a executive compensation packet. But this one was very unique. It was all stock. There's no cash bonus, no salary. 12 tranches of stock. It was very creative in how this was put together because Elon got nothing if he doubled the value of Tesla, but then

If he increased the value of the top line revenue and the market cap increased by $50 billion, he got 1% more of the outstanding shares, which is an amazing deal for shareholders, obviously, because the market cap on the company went up $50 billion. The initial plan was only worth about $2.6 billion. But since Tesla crushed it from 2018 to 2023, we'll throw up a chart here. It's one of the great runs in the history of capitalism, how revenue and sales grew at this company.

So it made it the largest comp package in the history of public markets. And if you compare Tesla to Apple, the second highest increasing stock price during that same time period, Apple went up 345%. Tesla went up 800%. In 2018, a Tesla shareholder sued Elon and Tesla's board, claiming the pay package was unfair. The guy had nine shares, a full nine shares, not 10, nine, worth $2,500. His stake went 10x in those six years. So he made a fortune

on that bet. And then on Tuesday, a Delaware judge voided Elon's pay package, siding with the investor. Elon can appeal it to the Delaware Supreme Court. Sachs, your thoughts on this ruling? I teed it up. I think I got all the details in there. If I missed any, please add them.

Well, I think in order to reach this ruling, the judge had to find three things and all of them had to be the case in her opinion. Number one, that the pay package was excessive. Number two, that the process by which they came up with the pay package was not fair, meaning it was not sufficiently adversarial enough that the directors, in her opinion, had too many ties to Elon and didn't, again, take enough of an antagonistic approach.

role in negotiating that package. And number three, and I think most importantly, that the shareholder vote was invalid. Because even if the first two had been true, the shareholders approved it. And that would have been good enough. But she said that the shareholders weren't sufficiently informed. And specifically, I think this argument hung on a few internal emails where people said that they thought that they could hit the numbers.

I think that of the three legs of this, well, all three have been challenged by opponents of this verdict. I mean, number one, yes, the pay package ended up being a gargantuan amount, but you have to look at an ex ante, not ex post. Nobody thought Elon could hit all these numbers back at the time this package was negotiated. Let's be frank. It was absurd.

The idea that he would 10x, it was crazy. There's a great clip with Andrew Ross Sorkin where they're all laughing at the idea that he's going to hit these numbers. Remember, this was at a time when Elon was going through what was called production hell, where he was sleeping on the floor of the factory. Yeah, I was there. The Model 3 hadn't come out yet, and nobody believed that the Model 3 was going to be the hit that it was. In fact, all the stories were poo-pooing that idea and basically saying that Tesla is basically screwed because they can't get the production line working correctly.

Yeah. You want to play this? Tesla now announcing a radical new compensation plan. It could be perhaps the most radical compensation plan in history. The executive will receive no guaranteed compensation of any kind at all. He gets no salary, cash bonus, equity. He only gets equity that vests over time, but only if he reaches these hurdle rates, which are, dare I say, crazy. The only part of it that I think is really relevant is where Sorkin says that milestones are

are crazy, meaning that everyone thought it was a pipe dream that the company would ever hit these numbers. Okay, so that's point number one on magnitude. On the second part of the ruling about the process, it is true that like in most venture-backed startups, there's a longstanding relationship between the founder and the investors because they work collaboratively to try and make the company a success.

There were emails that came out where Elon shows that I'm not trying to go for the maximum here. So, you know, did the investors go in with a hostile antagonistic attitude that we're going to try and pay you the least? No. But did Elon go in with the attitude that I'm going to try and take the most? No. The email showed that. What they tried to do was come up with something that they thought was fair, that would fairly reward him for outsized performance. And if he had merely increased the value of technology,

Tesla from $59 billion to $100 billion, he would have gotten nothing. Let's just keep that in mind. So they tried to come up with something that would reward him for outside performance and give him absolutely nothing for merely decent or good performance. The third point about the shareholder vote, I don't think that

there was anything about the shareholder vote that the shareholders didn't know. I don't think that the company didn't release it. Elon always said, yeah, we're going to do this. We're going to be one of the most valuable companies in the world. He's always been super optimistic about their ability to reach these targets. But if you looked at all the Wall Street analysts, including Sorkin there, they thought that these targets were unreachable. Also, to add to that, Sax, this had the largest short position, I believe, at that time of any company ever.

People were betting with their dollars that this company was going to zero. There were a ton of people who the narrative was they'll never deliver the Model 3. It was two years late, right? Or something in that range. They kept trying to get the Model 3 out. It was taking forever. So yeah, it's absurd. Also in that case, Sorkin said in that same clip, there's been a lot of speculation of Elon stepping down after the Model 3.

is in production in the judge's ruling. She said the exact opposite. There is no reason to believe Elon would leave, except that he was running like two or three other companies. It was actually quite possible that he would leave. He never wanted to be CEO of Tesla. People forget that too. He had tried three CEOs of Tesla and he only took over Tesla. And I remember it was because he said, Jason, this thing's going to fail if I don't take it over. He tried three different CEOs in the beginning. People forget that fact.

And there was a scuttlebutt that he would hire somebody. I remember there was like rumors about Sheryl Sandberg maybe getting off of the job or something like that. I remember he was going through production hell. He was sleeping on the factory floor. Yeah. And he was talking in interviews about how miserable his life was at that time. I mean... Can confirm. Yeah, exactly. So look, did he have leverage to basically say, you know what, let's just hire a CEO? Yeah, absolutely. Okay. Shamath, any steel man you can do of the other side here, like as an investor, public market investor sometimes...

When you saw that pay package, what did you think? I don't know if you were a shareholder of Tesla at the time or not. In the mid-teens, I started investing in public stocks as well as private tech companies. And I got invited to give a presentation at the Irisone Conference, which is like the most prestigious conference.

conference of public market investors. In May, you show up at Lincoln Center and everybody in the audience is paying like 10,000 bucks a ticket or something. All the proceeds go to a foundation in support of this gentleman, Ira Sohn, who passed away. In any event, it's like Ackman, Tapper, Einhorn, and I picked Tesla. I was a very big supporter in many ways and still am.

And I think that I knew the company, frankly, better than most people, except for him, obviously. But I think that I studied this company quite deeply. And I'm just setting the context. When I saw the pay package, I thought, he's making a mistake. This is unachievable. I thought the probabilities were in the low single digits. And then he did it, which just kind of shows how incredibly adept he is as a

a CEO and a manager and an executor. So then, you know, to go back five or six years later, after he actually does something that so massively disproportionately positively impacted investors,

And then to just rescind it and unwind it, I think is really un-American and unfair. And I think it sets a very poor standard for why anybody should actually build a company governed in Delaware. It makes no sense anymore. And just to give you that example, he and I have both now done this, but like these incremental companies that I've started are in Nevada. They're in different places because I find the Delaware court slightly and increasingly

unpredictable, and acting with other mandates that they weren't ever given. So you- What do you think that mandate is? You had a place where there was highly predictable governance, and they had very narrow ways in which they would act in opine. And I think in a situation like this, where you had every opportunity to

to actually vote this thing down. And what little of the documentation that I saw about the communication back and forth doesn't seem to support this theory that he rammed it through. Nobody rams anything through over nine months where he takes month-long breaks and he tells the GC, this is actually more than I wanted. Nobody does that if you're ramming. It's the opposite of ramming something through. And I suspect if you really asked him, and I haven't, but I would,

He probably thought it was like largely crazy. And so I think a lot of people thought that we were, as shareholders, and I'll tell you that I felt this way, getting his hard work and that he may have just mathematically been mistaken. So yes, he got 55 or that package is worth 55.8 billion, but you're missing the point where every other investor made $500 billion.

And the investors did approve it. It will have a chilling effect, I think, in how people think about compensation. It will cause companies to be even more constipated and sclerotic and unimaginative as a result of this because the most talented individual entrepreneurs now have even more of an incentive for incorporating in other places and also staying private. And I think what that deprives...

is the broader shareholders, including this gentleman. Look, we live in America. He had the right to sue. He had nine shares and he was able to bring this lawsuit. Nine shares.

I mean, David Elias. Yeah. The idea that nine shares who 10x their money could do this is unimaginable. I don't know if he remained a shareholder through this whole period, but even those nine shares 10x in value. Yes. Yes. But he would now be deprived of that in this next iteration of Elon Musk's because why would they ever go through this to put that much

work into something to be so at risk personally, your own mental and physical health. We saw him in those periods.

And then to have it taken away, I think is deeply, deeply unfair. Sax. You're right. This deal was a win-win. I mean, if Elon could achieve these numbers, it was good for him and it was great for shareholders. And that's why I think the key point is that 73 or 80%, depending on how you want to count it, approved this deal. I think they knew everything relevant that they needed to know when they approved it. This is the deal that most shareholders in most companies would want for the CEO.

The deal is you get nothing unless you deliver an outsized return for shareholders. Most CEOs won't sign up for this deal. Most CEOs work their way up through the corporate ladder. They get into the CEO chair, and then they pay themselves huge amounts of money regardless of whether the company succeeds or fails. And that's the deal they want because they don't really have confidence in themselves to deliver what Sorkin called the crazy outcome.

Elon had the confidence in himself to deliver the crazy outcome. And nobody was really complaining about this until, like you said, this small shareholder who's really basically just, you know, a named plaintiff for the trial lawyer's bar or somebody who wants to get Elon to bring the suit. 6%.

to create 600 billion in value. I mean, it's quite a bargain, folks. And I think if you went to Ford or GM and said, Hey, would you like Elon to be your CEO? I think that often half the company, Mary Barrett doesn't want this deal. Yeah, no, J. Cal Sacks said something really important that you just mentioned as well, which is that if you actually look at the average compensation plan of most public company CEOs, it actually is very much counter to shareholder value. I'll give you one simple example.

If you look at the number of CEO comp packages that are tied to earnings per share growth, but then if you actually look at how these CEOs achieve their EPS targets, they do it by raising debt. So indebting the company, right? Increasing the enterprise value by loading the company up with debt and then driving repurchase plans.

And what do those do? I mean, look, if you look at Disney, where do their repurchases come from? From debt. So does debt help an equity shareholder? It categorically does not. Under no world does it do that. However, for the CEO and for the handful of investors that can hold on for long periods of time or have you, they benefit from a lower share count, they benefit from increased EPS, and then the CEO gets compensated. And so to say that tacitly,

What you disapprove of are performance incentives. And what you are actually approving of are mechanics that saddle a company with debt and allow basically gaming of numbers is what you've implicitly also said. And this is where I think the Delaware court

used to be known for a level of intellectual clarity that would have prevented that implicit assumption. But that's now what's left on the table. And I think it will have a ripple effect

across how so many other companies design their compensation plans, how CEOs think about risk. No CEO, as Zach said, will ever want an incentive-laden plan like this, ever. They will want to get- Right, because 10 years later, you could do all the work and then it gets canceled. Canceled. So why would you take the risk? They will want something that is totally gameable,

right, where you'll have 90 plus percent support and approval, because of how vanilla and benign it is on the surface. But it will actually be quite a terrible plan underneath the surface. And what I mean specifically are these EPS targets for CEOs. So Elon did the one thing that was crazy, which was I'm just going to do it based on pure profitability and performance.

And he gets punished. And all these CEOs in this other class were like, let me saddle these companies with debt that actually undermine shareholders.

have been rewarded. There is already a mechanism for somebody who disagrees with the comp package. This person who on the nine shares could have sold their shares. It's a liquid market. At any point in time, that person can say, I don't agree with this. I'm taking my nine shares and $2,500. I'm going to put it in Apple. I'm going to put it into, I like Tim Cook's pay package better. I like Benioff's package better. And I'll make my bed there. The person had choice. Yes, Axe?

This person was not a victim. He's not a victim because he could have sold the shares and bought other shares, and he's not a victim because he 10x'd his shares and beat the market. Yeah, I mean, look, I don't place the blame on the shareholder per se.

Because this is really about a judge's interpretation of Delaware law and what companies are allowed to do. So whether the shareholder was harmed or not, or had one share or a million shares, that's just the way that this case gets into court. The question is the interpretation of Delaware law. And again, the part of this I would go back to that I think was the mistake is that I think the shareholder vote was valid. I think the process was valid as well. I don't know

That the process has to be this extremely adversarial process where one side's pulling for the most and one side's pulling for the least. I don't think either side operated that way. But again, I think shareholders knew what they needed to know. And the evidence of that is in all of the public coverage at that time, nobody thought Elon was getting a good deal, right? No one thought he was getting excessively good. They thought he was getting a delusional deal, meaning delusional for him.

And everybody seemed to be okay with the idea that if somehow Elon could pull off this miracle, that he would be entitled to this compensation. And he would get nothing if he didn't. Now, again, I would go back to, do you think Mary Barrow would have wanted this deal? While Elon was spending the last five, six years making Tesla go 10x, let's look at GM. GM stock price was trading more or less in a flat range.

I don't even think the share price doubled. Yeah, compare it to. You see the compare to button there? Put compare to and then put Tesla in there. Right. So if Mary Barra, GM, had signed up for that comp package, she would have gotten absolutely nothing, which is why I'm sure that the thought in everyone crossed her mind of having an all incentive-based comp package that doesn't even start until you at least double the value of the company. By the way, on those milestones...

It wasn't just the share price. It was share price and revenue or profit targets being met. So in other words, if the stock just rallied because of macroeconomic conditions, like for example, interest rates go down and then all of a sudden the whole stock market goes up, that was not good enough. It was also tied to the combination of stock value increases with

revenue and profit targets being met. It was a comp package that couldn't be gamed. I mean, you have to hit the numbers in order to get the comp package. That's what she got. And I don't want to pick too much on Mary Berry here. I guess I'm picking her out because Joe Biden said that she created the EV revolution. Yeah, well done. They've sold 17 cars. I think they canceled the car. Yeah. Congratulations. By the way, there was a remarkable article in the Wall Street Journal just in December where they finally admitted that this whole idea...

that GM had been leading any kind of revolution or had been a transformational company was revealed as basically a ruse. But look, you have to wonder how much of this is political. I mean, Delaware is Joe Biden's state. He's the senator. There were articles describing how this judge was connected to a law firm that had helped Joe Biden get elected. And you just kind of wonder whether

Biden's directive from the White House podium that we got to get this guy or we got to look into this guy, that he's an enemy, which has been reflected through all of these different administrative agencies, sudden actions against Elon's companies for the Glass House. Starlink and the FCC. Yeah, there's been a whole bunch of these issues. And you just wonder, is this another manifestation of that? Yeah, I mean, the conspiracy theories are quickly becoming

closer to reality. And we definitely need to investigate that for sure, because the FCC thing is crazy. Spending $15,000 putting fiber into people's homes when you could spend $1,500 giving them Starlink makes no sense. And those same people who have to wait for fiber, we talked about this on a previous episode, they're just going to get Starlink anyway. They're going to buy Starlink while they're waiting for the government fiber for 10 years. It's absurd. I do want to up-level this just back to what I was saying, and I'll try to make the point better

I think it's really, really unfair what's happening to Elon. But I want to take a step back and think about just the bigger picture. If we want an economy of vibrant companies that do great things, we're going to need to reward people to work at those companies. And in order for the United States to sort of continue to exert

some amount of dominance in the areas that we think are important, we need to be economically vibrant, right? And fair. And fair. And the problem is that this really perverts incentives, and it's going to exacerbate a trend that I think has actually held a bunch of our companies back. So the first thing I just wanted to show you guys was just this little thing that it's just a pie chart that shows, okay, how do CEOs get paid, right? So we want CEOs to go and run really important companies, right?

Right. We want those companies to do great things in the world. We want these CEOs to be deeply motivated to go and push the boundaries of what's possible. Right. We want all that. And so we want to compensate them to do those things. This is just a representation of how CEOs have structured their pay packages. And you'd say, well, all of these numbers seem reasonable. Return on capital, total shareholder return, earnings per share.

So what you need to do then is double click into this, right? So this is how CEO pay packages are made. But the problem is, and Jason, this is my problem with a bunch of these companies that

All the returns, all that shareholder return that you saw, the return, it's all driven by share buybacks. Yep. This is an artificial gamesmanship of performance. This is not companies pushing the boundaries. You know, this is not Disney figuring out. It's not innovation. This is, this is not M&A. This is Disney creating foot faults and falling into potholes of their own making. But you can drive great compensation because you can game the way that you are paid. This doesn't make

America great. It doesn't create American exceptionalism. In fact, it just creates a bunch of financial engineering that results in marginal companies. And David just gave an example of one that could be considered that. So the point is that when you have one person that tries to buck this trend, I just think it has a huge impact.

impact by basically saying, hey, play the game like everybody else. Just game it. Just dial it in from your country club. Make sure that you become a member of Augusta. That's more important to us than actually sleeping on the factory floor. And don't take risk. I mean, if you think about what do you do if you're Apple, you're Google, you're Microsoft, you're sitting on tons of cash. It's a safe thing to do. You see what they do. You just buy back the shares.

You can't do M&A. You issue debt. Yes. And then you buy back the shares. Arbitrage. You encumber the shareholders with debt, and then you artificially inflate total shareholder return and earnings per share and the return on invested capital because of how we can play these games in America. So right now, what we are doing is we are not motivating CEOs.

to run great companies. We're motivating CEOs to understand financial arbitrage. The result will be crappier companies that diminish American exceptionalism. That is the only outcome.

Perfect, we said. And there really are two caveats there. Number one, we have to let M&A occur as well, because that's a better thing to do in some cases with this excess capital profits people have sitting there. And the only time really to buy shares back is when you think they're undervalued. You would agree. Well, to your point, I actually think you're absolutely right. If you have a bunch of CEOs that don't know what they're doing, which is what these charts kind of show, let them buy whatever they want, because you're going to screw it up. And that's fine for us anyways. Yeah, it's great for a fluid marketplace.

The CEO that you don't want to have be able to buy companies is the actually motivated one to get paid when things go really well and to be more profitable. So that would be the CEO where you would be scared, oh my gosh, more M&A for that person may be bad. But more M&A for these CEOs is who cares? Yeah, Microsoft starts buying a bunch of stuff. Google starts buying stuff at their primes. Man, that's scary, right? When Bill Gates went on a heater, he bought, I think he bought

PowerPoint, a bunch of these suite was bought, not created. And then Google and Facebook, man, they went on heaters, YouTube, Instagram, WhatsApp. And that was the golden age of M&A. All right, we got a couple more things on the docket. I just found these stats. Go ahead, Sax. Great conversation. So just while we were talking, I just looked up what Mary Barra's compensation was over the past several years. And according to this source,

She was paid $167 million for four years. So while Elon got zero, thanks to the judge's decision, Mary Barra, basically, if you add in probably the fifth year, let's call it roughly $200 million of compensation over the last five years. Now look at the stock chart of GM. Literally, it is...

the same price today as it was five years ago. It's $38 a share today. It was $38 a share five years ago. No, but it's worse. It's probably worse because they've issued options since then. So there's dilution. You have to take in. So it's worse than that, actually. But at best, the stock price is flat. And the stock basically fluctuated in line with market trends. So when there was an asset bubble in 2021, the

the share price went up about 50% and she got even more stock and options during that time. But it was, it was a no lose proposition. Basically she got paid regardless of how the stock did. And then when there was simply market volatility, she did even better.

One of the nice things about Elon's package is that unless Tesla at least doubled in value, he would get nothing. And it was tied to milestones around revenue and profit. So he couldn't just ride market volatility to getting more comp. If you gave this executive the same deal as Elon, she would have had to double 38. So, you know, she would have had to get to $76. About $80, roughly $80 a share. Yeah, she would have to get to $80 a share before she got anything.

I bet you if she got zero, she got paid $1 in her health care and she had to get to $80 a share. I bet you that would be an $80 stock price. Well, I don't I don't know if she has the ability to engineer that outcome, but I doubt I doubt. So she's saying she's unqualified. No. Well, the Wall Street Journal said it. The Wall Street Journal just had this tenure of. No, that's my point. Where they said that she failed.

They they're they're hiding the point is then. Yeah. Well, look, I mean, I don't want to say she's incompetent. I just want to say that the stock price is the same. The Wall Street Journal had an article talking about all her swept to transfer all of her transformation initiatives have failed. She swept roughly 200 million over just the last five years. I think she's been there. So how is she in charge? She's probably made several hundred million dollars.

And the company hasn't created any value for shareholders. So how is she still in charge? Because Jason, this is the way the Fortune 500 works. It's a country club, okay?

Who gets appointed to these companies? These companies are not run by founders. They're not even run by VCs who have serious skin in the game, the kind of directors that this judge didn't like. It's run by people who play the game. They basically are on other boards, and it's basically a backscratching club. And they choose the CEO. They choose someone who's politically savvy, who's worked their way up through the system, who donates to the right people, who

who can get Joe Biden to come to a factory and talk about how great they are and hold an EV summit at the White House and invent this fiction that they were responsible for this innovation. This is basically how the system works. So corrupt.

I'm glad that women have been admitted to this country club. It is still a country club. It is still a back-scratching club. It is basically a collection of people who don't create any value, but pay themselves enormous amounts of money, hobnob at the right people, and work their way in with the powers that be at the White House, who then talk about how great they are, while actually accomplishing nothing. Nothing. 0.0. I think the common through line in these two conversations we've had this morning is about

just how capitalism can be perverted, if you will, by a small group of actors.

In the first example, I think what we were talking about is the trial lawyers association and their ability to impact and influence what is going to happen around Section 230. And in this example, I think what it speaks to is the influence that a small group of consultants can have in having built a very thriving business in designing these compensation plans for CEOs. And it reminds me of a clip of Buffett and Munger

And Nick, if you just want to play it, I think they say it in very clear, plain English and not to debate their opinion, just to state it. But Nick, if you want to play it.

Because they make life way more complicated, and everybody gets a vested interest in going to conferences and calling in other consultants, and it takes on a life of its own. Well, I would rather throw a viper down my shirt front than hire a compensation consultant.

Tell me which kind of consultants you actually like, Charlie. Oh, man. Waldorf and Statler, you know, from The Muppet Sacks. Remind me of Statler and Waldorf. Hilarious. Yeah. Well, you mentioned... Grumpy. You mentioned this is a problem in capitalism. I think there's two kinds of capitalism, broadly speaking. There's crony capitalism and there's risk capitalism. Risk capitalism is the founder who starts with nothing but an idea, a

along with the investors who are willing to write a check, knowing that nine times out of 10, it's going to be a zero. But maybe in that one out of 10 chance, it's going to be an outsized return. That is true risk capitalism. Everyone has skin in the game. They work together.

entrepreneur, board members to try and create a great outcome. And they work out an arrangement where everyone benefits. It's a win-win situation. Okay. That is risk capitalism. That's the part of our economy that drives all the innovation, all of the progress, all of the job creation. Then you got crony capitalism. You got these companies that have been around for a hundred years. The value was created by people long dead and it is now managed by

by both directors and professional managers who work their way up through, they go to like the right business schools and they join the right organizations and they donate the right politicians. And they somehow engineer a situation where they get in control and then they pay themselves as much comp as they can possibly justify, whether or not they create any value for the shareholder. That's what we saw at GM. And that's crony capitalism. And while they're doing it,

The president's son is probably going to figure out a way to take a nice big chunk out of it too. Okay. Oh, that's, that's the system that we have. Here we go. Now, which of these two systems receives the brunt of the criticism by the mainstream media? Who is attacked and who is celebrated? Okay.

There we go. There's your rant. That's a great point. I've seen a zillion attacks on Elon Musk. I saw one article pointing out that all of Mary Bear's transformation in General Motors was a failure, created no value for shareholders, and the whole thing was basically a fraud. Well, how's the union doing and how did the union vote? One article. And I'm frankly shocked that the Wall Street Journal even ran that article. Yeah. Okay. Yeah. And how did the union do and who did the union get behind and vote for? Yeah. Let's maybe double click on a couple items there. We'll see.

All right, listen, I want to go over one more thing. We're cooking with oil here. And I just wanted to talk a little bit about IPOs possibly coming back. I just interviewed Alexis Ohanian, the founder of Reddit, which according to Bloomberg, they've been advised by potential IPO investors to target a $5 billion valuation. They're going to go public possibly in March, which is wild. That's only a couple of weeks away. In peak Zerp, Reddit had raised at a $10 billion valuation. That was back in 2021.

They were valued in $15 billion in the secondary market. That's where people like previous employees, angel investors, et cetera, might trade their shares. And so if it goes out of five, it's going to be between a 50% to their tear cut. And it is trading at $4.5 billion. Shamath, we talked about this a bunch, the down run IPOs, Instacart, I think, being the best example. They got out, but they've been hovering.

at a really low number for a long time. And people have been talking about them possibly being a takeout candidate by DoorDash or Amazon or Uber. So your thoughts on the Reddit IPO news? I think that if I had to price the IPO, I would be modeling two important levers in the business. The first is, what is the actual attainable revenue from my audience? And so what is the ARPU of the average person

Reddit user. And you can model it as a distribution. And I think Facebook has the best data because they've been publishing it in their quarterly returns for a very long time now, for over a decade, which is there is a distribution of value of a Facebook user economically, right? At the upper end, you have the folks that are on Facebook proper in America,

in a certain age band in certain states that are probably like 30, 40, $50 ARPUs, all the way down to in developing countries, those users are worth low single digit dollars economically. And I think that people will have to very much understand what is the average Reddit user and what is the distribution of economic value that they represent. That's the first thing. And I think that that's really the thing that will determine whether it's worth 5 billion or 10 billion or frankly, 2 billion.

And then the second key lever, it will be the risk factors in the IPO because where the shareholder lawsuits will come from, which will really dictate how the hedge fund community buys this thing, is going to be the potential for my ad ran against content that is deeply offensive to me, that whole construct. And I think that they are going to have to very carefully ring fence that liability and

to get this IPO to be successful, but also for them to execute a scaled ad revenue business. And not spending enough time on Reddit, I don't know how bad of a problem this is. I don't think it's 4chan or 8chan as an example.

But I also don't think it's Facebook and Instagram. And so it's kind of somewhere in the middle. And I think that those risks are really what's going to determine its terminal valuation. You nailed it. They've always been under-monetized. $800 million in revenue, reportedly, and $400 million monthly active users. So $2 a user compared to $20, $30, $40 for the prime users in

On Facebook's network. So it's totally underutilized. Part of it is it's a little bit of spicy content. Part of it is that that's the number, including all the international users. Of course, there is this concept that Reddit has the greatest pool of data for large language models. And, you know, something like, say, Quora, YouTube amongst the great.

pools of data. So we think there's a play here with that. They have talked about they want to get paid for licensing and that if you want to use their data for your language money, you got to get permission to your thoughts, Axe. Sure. I mean, that's going to be an incremental revenue source for sure. It's hard to know exactly how valuable that is because we're still in the early innings. But I mean, they can definitely do something with that data. Grok's whole competitive advantage is having exclusive access to Twitter's data, which is updated in real time, basically by hundreds of millions of users. So yeah, look, that data is valuable. We don't know how much.

I guess the numbers I saw were that they're doing about $800 million of revenue, growing about 20% a year. The $5 billion valuation seems, I think, pretty good. I mean, is it down from 10 at the peak in 2021? Sure, but everything is down since that peak. I mean, that was definitely a bubble. I mean, I can tell you, we bought some shares as a late-stage investment, I think in 2018, at a $2 billion valuation.

So, you know, a two and a half X in five years, I mean, it's not setting the world on fire, but it's not a bad outcome. And, you know, the investment bankers will know how to price this to take it out and make it successful. Yeah. And if it had a, if it was a, if it becomes a billion dollars in revenue and they have a 20% profit margin, 200 million, you know, you can, you can start doing your back of the envelope math there for a 25 EBITDA, you know, 20 times.

price earnings ratio. So it doesn't seem outrageous. It does seem like such valuable and under-monetized asset. Do you think there's a likely acquirer here, if you were to think about somebody who might want to own this? Do you think it's a Microsoft for the data, Google for the data? Yeah, I think there's probably people who'd like to own this. But the problem is that, well, two problems. One is they just can't get it through. We've talked about this before. The M&A window is even

More closed than the IPO window, I would say. And the other thing is just because of the raunchy content and all of the brand issues that come with that, it's not clear to me that, let's say, Microsoft would want to own that headache. They might not want to be hauled up in front of these congressional hearings that we talked about.

these kangaroo courts where it's very easy to go on Reddit and pick out, well, what about this post? What about that post? Why'd you let that one through? Why'd you let that one through? Well, because it's a, it's a platform of user generated content where hundreds of millions of people post what billions of items, uh,

And you can have the best content moderation policy in the world. There's always going to be edge cases I get through. I think that Reddit is the honeypot of edge cases. It is the place you go when you're just so disaffected that you can just let loose anonymously. It's not. Right. I mean, at a certain point, you have to realize that when people cherry pick those edge cases, what they're really saying is a platform like this shouldn't exist.

Yeah. Right. Because there's no way to eliminate every single one. Which is basically like saying, if you just take platform, you just say conversation, you're saying this conversation shouldn't be allowed to exist. They don't want user generated content to exist. They don't want what, remember what the New York Times called unfettered conversations. Unfettered conversations. They want controlled conversations. Yeah. Yeah. Pretty dangerous. It just reminds me of, remember,

Bob Iger for like 10 seconds was actually considering Disney buying Twitter. Can you imagine if they actually bought it? What would have happened? I mean, it would have been chaos.

Well, it would have been content moderation on steroids where they would have massively empowered and scaled up content moderation even more than what Jack Dorsey's Twitter was doing. Because I think Jack actually, he was unable to operationalize his principles, but he did have principles in favor of free speech to some degree. Whereas Disney, I don't even think has those principles. So they would have censored everything. Yeah. You know, it's paradoxically the most censored

social media platform is TikTok. My TikTok is bulldogs and sandwiches like you, Chamath, and then Sopranos clips. And every time there's a Sopranos clips, when somebody gets whacked, they have to blur it out or the person who's uploading it takes that clip and cuts out the actual person being whacked. It's crazy. All right, I got to give Sachs his red meat. We're going to now go to our war correspondent, David Sachs. But in all seriousness, tragically, we had a terrorist attack

And the response from some of our Republican senators was absolutely insane. They want to bomb Tehran and go after Iran and start World War III. Sachs, I know you have some strong feelings on this and you're always about diplomacy and pursuing peace. What's your reaction to Lindsey Graham and the neocons?

Well, you had several Republican senators try to goad Biden into striking Iran immediately. It was, you know, not just Lindsey Graham, who was in favor of every war, but it was Mitch McConnell, the Senate Republican leader, John Cornyn, and there were some other ones who were, you know, demanding immediate retaliatory strikes. It's very unfortunate that we had three of our troops get killed and another dozen or so get injured. This was at a base...

on the border between Syria and Jordan. Some of us have been saying that we have no business being in Syria. I mean, I tweeted 10 months ago that all we were doing was putting our troops in harm's way and risking getting drawn into a larger conflagration. And that's exactly where we are right now. I mean,

You had to know, and many commentators pointed out that these bases are very exposed. They're very vulnerable. They don't have good enough air defense against, they don't really have a good answer to the swarms of drones that these local militias have. And based on the intelligence we have right now, this base, this Tower 22, is attacked by an Iraqi militia that's operating there.

Why did they get attacked? Well, these militias want the United States out of their countries. They want them out of Iraq. The government of Iraq has said, we want the U.S. out of Iraq. The government of Syria says, we want you out of Syria. We are there without a congressional authorization for...

military force. I mean, what are we doing in Syria? We're just occupying that country without, again, without a war being ever declared against the Assad regime. So some of us have been saying we need to get out of there for some time. And if we don't, it's inevitable that something like this is going to happen. And sure enough, it did. And when it does happen, you get this lunatic fringe who unfortunately are some of the leaders of the Republican Party calling for a larger war against Iran. And I think

Biden, to his credit, has so far held back and he has not. A lot of restraint. A lot of restraint. Has shown some restraint. However, they've been actively talking about this and all the reports are they're gaming this out and there is going to be some sort of retaliatory strike. It might be focused on these militias in Syria and Iraq. It could be attacking Iran.

Iranian assets, we don't know. If they do attack Iranian assets, Iran has promised a response. So I think the Biden presidency is at a little bit of a crossroads here. Depending on the action they choose, we could very rapidly find ourselves engaged in a wider regional war on five different fronts. I mean, a war with Iran would involve us

in iran iraq syria lebanon and yemen were already bombing so this could turn into a huge conflagration in the middle east and i don't think i should be drawn into this yeah no answers here and yeah the the craziness to me is like these people want to go bomb tehran because you have you know some militias doing these activities i mean this like would be

Some terrorist who's French, we're going to just blow up Paris and a bunch of civilians are going to die. There's no proportionality here and there's no direct relationship here. It's like two or three steps removed. What are your thoughts, Shema? I think the thing that we've lost in this whole issue is how is it possible that a multi-deca-billion dollar drone system

was designed by the military industrial complex in a way where when one of our drones is coming back and there's an inbound drone, that doesn't seem like a weird edge case where we couldn't handle it. Because at the root cause of what happened was a pretty faulty way in which we were dealing with confusion about what was our drone and what was the enemy drone. And I think that that's also worth talking about before we talk about bombing another country is

We're the most sophisticated technological country in the world. Our weapon systems are the most sophisticated weapon systems in the world. Am I supposed to believe that if Palmer, Luckey, and Anduril were building this system, that this is what would have happened? Absolutely not. No. That there's no beaconing system on these drones that you could turn on remotely? That there's no way when you see the number of drones in an aerospace that are yours so that you can quickly triangulate which ones are not yours? And all of this, to me, I think is also worth exploring because...

If it's really, again, faulty engineering because of this monopoly oligopoly in certain sectors of our economy that then cause us to go and make a foreign relations decision about going to war. And we don't even talk about this thing as a root cause. It's worth talking about a different example on the same vein of this is like it turned out that in that Alaska Airlines issue, they actually shipped the plane without the door plugs.

Oops. We are the most sophisticated country in the world, guys. Our most sophisticated industries are not showing their best in this moment. And I think that this is yet another example of before we make totally separate decisions about war and implicating our children's safety, we can also just ask, wait, we spent billions of dollars on this thing. How is it possible that this, like, honestly, like, this is exception handling. This is like,

CS 101 type stuff, guys. Door plugs. Put the plugs in the door. And it's regulatory captures the answer. This is crazy. There's no competition and they're charging cost plus. They're not innovating anymore. And they need competition, right? Just like SpaceX was massive competition for all of the governmental agencies around. We have faulty execution in our industrial space.

complex. And now the way to answer that turns out to be a foreign policy decision to go to war. And I think that those two things need to be decoupled for a second so that we can deescalate and say, hold on a second, this thing happened

But why did it happen? Meaning, of course people are going to attack us. We are the bright, shining beacon on a hill. People should hate us and want to attack us. That's just the nature of being a winner. To be fair, they're not attacking us because we're the shining city on a hill over here, just minding our own business. They're attacking us because we're occupying Syria and Iraq. But I'm saying the minute we're there, we should expect that these things work. We should expect it. So-

There's a few things happening here with our military industrial complex. So the first one is that drones have been a huge game changer. We've seen this in the Ukraine war. The one really new technological element has been drones has completely changed the face of war. And one of the things it does, it's a huge leveler because these cheap drones are

give these militias in Syria and Iraq, or it gives the Houthis in Yemen, a capability to strike at us that they didn't have before. And we saw that our air defenses are just not really cut out to deal with this. There was that article recently,

describing how it was costing us $2 million to use an air defense missile to shoot down a drone or a cheap rocket that costs just a few thousand dollars. So you have this asymmetric warfare now where we simply cannot afford over a sustained period to shoot down all these drones. But wait, sorry, can I ask a question? Yeah. Our most important partner in that region is Israel. Israel has...

what we have thought to up until now, an impregnable system, right? The Iron Dome.

Which is meant to deal with all of these edge cases, right? Projectiles of all sorts, shapes and sizes coming in every direction. I've never heard of when the Iron Dome has failed. And we are sending Israel billions of dollars. Why couldn't we actually just buy the Iron Dome system for them and say, you know what? We're going to secure our bases in Syria and in all of these other places. Yeah. Well, I'll tell you. So there's a military analyst named Stephen Bryan who I follow. He's a former...

Under Secretary of Defense, and he talked about this. He has been calling now for before this attack happened to send two iron domes systems to Syria, to Iraq, to basically the Middle East to protect our troops. It makes sense. He says he said in his article, the reason why the US Army hasn't done that is because they didn't want to buy the Israeli system. They've been favoring some homegrown system that hasn't proven corruption.

So there's a big problem there that we should be deploying Iron Dome there. Look, I would just get out of that area. I don't think we should be there. But at a minimum, if we are going to stay there, we have to protect our troops. So yes, we should be deploying Iron Dome. But the problem is that, again, just these drones are...

a game changer and they can overwhelm a system even iron dome can be overwhelmed if uh israel gets in a war with hezbollah which supposedly has one drone it's n equals one we were overwhelmed by n equals one well i mean i'm just i'm saying like it's true right we were overwhelmed when n equals one there was a report just the other day that one of our ships in the red sea

It was fired on by a missile from Yemen. And it made it through the Aegis system. And they took it down with their last line of defense, these close-in guns. That was kind of scary because the Houthis have missiles that are capable of making it through our main air defense system for ships. So I'm just saying what's happening with these cheap rockets and these drones is it's giving...

our opponents capabilities that level the playing field a little bit. But this is what I'm saying. I understand that concept, but I also understand that we have people on the ground that work for Team America. Again, I'll just, I'll take Palmer Luckey as the example, who frankly, I would bet on a thousand times over a Huti Rebel. He'll outsmart and outpower these guys. Why aren't our best and brightest people in a position to make these things? Well, because you're right. The defense industry is dominated by five of these prime

defense contractors who work on cost plus are basically an oligopoly. They're not particularly innovative, but they just keep charging more every year for the same product. So we're getting less for more money. And they're led by leadership who are motivated in a way where the returns that they generate and the success and the progress they make is not really coupled to progress, right? It's not really coupled to building an even better version of Iron Dome. It's about, as you said,

Having a job that you've earned over many years of fealty

and then getting paid an enormous amount of money to just keep it going in the same direction, even if that direction means you've been adrift for decades. That's the shame of it. And then you're seeing every day, like, isn't it incredible? And then Lindsey Graham is saying, hit Iran. And I bet you Lindsey Graham is to getting donations from those five companies. I don't know, but. Look, there's no question that we need to shake up the military industrial complex. We need to get a lot more startups in there. There's a lot of VCs now who are funding

Yeah. Defense startups. So it is a big area. Andrew obviously is kind of the leader of the pack, but there's a bunch of others getting funded. I saw that Eric Schmidt even created a drone company. So this is going to be a huge area of innovation. And I think that because of the Ukraine war, the Pentagon must now realize the urgency of being able to mass produce effective drones as well as create effective drone systems.

Air defense. Countermeasures, yeah, countermeasures. Yeah. Just to give you a sense of this, like we led the Series A in a company called Sail Drone about seven years ago. And they make drones for the seas, right? And what we did was we put these massive sensor arrays in these drones. And because of the sensors, it has...

perfect visibility into what's going on in any condition of weather, right? Day, night, it doesn't matter. And so these drones in the Middle East, all over the waterways allows us to have perfect understanding of what's going on. But despite that, it has taken years for us to be in a position to generate enough revenue. And now we're finally at that scale with the Navy and whatnot.

But David, to your point, it is incredibly hard for startups, no matter how innovative we've been to break through this logjam. And the reason is because what we are good at is not what's rewarded. We are good at engineering and execution, but what is rewarded, to your point, is this very- Lobbying. Specific form of relationship management, right? And cultivating certain pockets of influence. It's a very difficult game to play if what we come as

bright-eyed bushy-tailed from California with a product that we think is superior that actually helps advance American exceptionalism, it still doesn't always land. It takes a lot longer than it needs to in some cases. Yeah. I mean, so the Pentagon and the military industrial complex is going to be a lot more permeable to this type of innovation. I think that they're going to be incentivized to do it now because they have to see –

what's happening in Ukraine, what's happening in the Middle East. And they realized that the gap is closed. And we had three innocent people that were killed. These people didn't deserve to die. They didn't deserve to die in an N of one. It's not an edge case. N of one. There was a drone.

Come on, guys. We're better than that. And so what do you think is going to happen if we get into a war with Iran? Every single one of our bases in Syria and Iraq, and we have a lot, are going to be sitting ducks. To your point, you're forecasting, you're orchestrating a game plan for them because it's like, if you were going to enter a war, does it take a brilliant strategist to sit in a room and say, wait a minute, if they can't defend against one... What happens when we send 12? What happens when we send 12 to every single place? And to your point, Jason, this is like the unnecessary...

escalation that then happens because then we have to respond with more force and with more kinetic energy. It was a certainty. Look, I've been talking on the show about how our bases in Syria and Iraq have been under attack by these militias for months. I think the last time we talked about it, there had been something like 80 attacks. And it was just a matter of time before America's

servicemen were killed, unfortunately. And so, like you said, Jamal, this was predictable. What's also predictable is that if we get in a war with Iran, every single one of our bases will be attacked. If we strike on their soil, they will strike back. And they have hypersonic missiles, they have

precision missiles, they can destroy every one of these bases, unless those bases have the top-of-the-line air defense, which most of them don't. But if you go to someone like Lindsey Graham and say, listen, our troops are vulnerable. We need to basically either pull out of Syria and Iraq, or we need to consolidate down to a few bases that have Iron Dome or the best systems. These neocons will say, absolutely not. We're not conceding anything.

So they would never pick up a gun. They never wear a uniform. Right. But they want us to strike Iran. So these strategies don't line up. If you wanted to attack Iran, the first thing you would do is basically get all of our troops out of harm's way who are currently sitting ducks for Iranian retaliation. By the way, I think it'd be a terrible idea, but that's what you do. So they have these strategies that don't make any sense. All right, everybody. It's been an amazing show. Four.

The dictator chairman himself, Shamath Palihapitiya. The Rain Man, yeah. David Sachs. I am the world's greatest moderator. We missed you, Sultan of Science. David Freiburg couldn't make the show. And we'll see. He's still in there. If anybody gets into the Apple ProVision, Vision Pro, and is somewhere out in the universe by Uranus, and you see him, bring him back for next week. Somebody go find him. We've got to send out a search party to Uranus. Love you, boys. Bye-bye. Bye-bye. Bye-bye.

Rain Man David Sack. And it said, we open sourced it to the fans and they've just gone crazy. Love you, Westies. Queen of Kinwally. Westies are gone.

We should all just get a room and just have one big huge orgy because they're all just useless. It's like this like sexual tension, but we just need to release them now. You're the beat. What? You're the beat. What? We need to get merchies. I'm going. What?