E108: Doxing debate, Nuclear fusion breakthrough, state of the markets & more

Dec 17, 2022

Disclaimer:

The content below is a transcription from The All-In Podcast E108. All sponsored links go to the besties’ accounts. I’m not affiliated with them in anyway. I just like to read pods too :)

JCal

A hacker figured out a way to take all this data and track, you know, people's yachts, people's planes, obviously, one of those people was Elon, Elon had a security issue, this is all public information.

So the larger issue at stake here is the fact that the law allows for people to do this persistent tracking of planes, which then becomes persistent tracking of a person. And what really is at stake here is how we define the term doxing. For people who don't know the term doxing, it means giving a person's location, that could be your home, that could also be you're at a location for some period of time, you're at a hotel, you know, for a basketball game.

And it's pretty clear, you can take a picture of a celebrity, say there's a celebrity here, oh, Lady Gaga is at the farmer's market. What I object to here, we all understand doxing is dangerous. And it, in fact, is against the law to just give people's addresses and stuff like that.

The issue here is a new type of doxing, which I'll call, you know, persistent, coordinated doxing, where dozens of times a month, you're giving a person's location. It may not be against the First Amendment sacks, I think you would agree. But we have to ask ourselves, do we want to live in a world where whether a person's on an electric bicycle or an airplane or any device in between, somebody should be releasing dozens of times a month, a specific dedicated feed of their location, it is terrorizing as a parent. When this happens, I've had doxing people on the call here have had various security concerns. We don't want to live in a world with de facto doxing. What these sites were doing was de facto doxing.

Friedberg

I think it was a bad decision and I think that it represented you on the least generous statement would be that it represents deep hypocrisy in that not just a few weeks ago did he say he would never delete that account, but he also said he was buying Twitter to enable freedom of speech and freedom of expression and that he wouldn't come in and do the same sort of content moderation that was done by the old regime. And then he came in and did exactly what the old regime did, which is that he took the rules and he took the quote moderation policies and he found a way to use them to make some editorialized decisions that he thought was appropriate.

Now, the more generous thing is what you guys are saying, which I don't think is necessarily wrong, which is that he's trying to protect people where there's some loophole or some law that doesn't seem right morally, but it is the law and it is what it is. In those cases, I think you run into the exact same issue that the old guard at Twitter had that the moderators and the executives at YouTube have dealt with and that the executives at Google have dealt with and that we sit here and we criticize until you're on that side of the table, and you're forced to make these moderation decisions, you're forced to make these policy decisions, and you're forced to implement these policy decisions because of some moral framework that you now think is appropriate.

And guess what, some people will say that's not freedom of expression. That's not freedom of speech. You're taking that away from some people, you're taking this particular case away from a 15 or 16 year old kid who's built a Twitter feed.

And so I think what it shows is just how hard it is to moderate these sites, these platforms, and that there is no simple, easy, idealistic ideologue of, hey, all these things are open, all these things can be used by anyone all the time, because as soon as one of these edge cases start to happen, you want to come in and do something about it.

JCal

Southwood.

Palihapitiya

What do you think? What should happen going forward? So I have had these issues happen to me multiple times. I'm not nearly as important as Elon is. But it feels the same when you're in the middle of it. It feels pretty terrorizing.

That being said, I think the real decision for somebody like me is that if it's too much is frankly just to get rid of it and, you know, to find a different mode of transportation that's a little bit more anonymous. You're pragmatic about it.

And the reason I say that is that I just think that you would have to go and get the government to basically change the law, which they're not going to do. And so then as a result, your reaction will seem somewhat contrived and deeply personal. And in that, I think you lose credibility. Let me just summarize this and be the first one to just state this.

Sacks

Like, comment, subscribe.

Palihapitiya

I think that if there's any person in the world that can figure out Twitter, it's probably Elon, but man has he taken on just a gargantuan battle and increasingly, I am not a fan of this battle and I'll tell you why.This is a man who is essentially proven that he can bend the laws of physics on behalf of humanity. He's done it twice, once in electric cars and once in rocketry.

The problem is that the realm of decision making at Twitter has nothing to do with the laws of physics and is governed by emotions and psychology in which there is no canonically right answer and so he's quickly finding out that half the population will always find fault with him no matter what he does and now the implication of that becomes very important.

We saw yesterday that he had to sell another $3.8 billion of Tesla stock. Why is that? It's because this transaction, which was very tight to get done, probably required lots of margin. Look, I have a margin loan at Credit Suisse so I know how these things work and you can very quickly get margin called. You have to sell down things that you own in order to maintain your collateral limits. We've talked about this before. He's had to do this twice now in the last few weeks and that's because, again, not because of the demand at Tesla as far as we can tell but because people believe he's distracted and so people are anticipating weakness at Tesla. People are now shorting the stock.

Well, look, if you define what Elon is doing there as acting as a judge arbitrating on every little content moderation decision, is that a great use of his time relative to what he could be building at Tesla and SpaceX and doing on behalf of humanity? Then no, clearly not.

But if you define what he's doing in the larger sense as restoring free speech to the most important town square social network, hopefully thereby inspiring other tech companies to move in the direction of opening things up, then I actually think it's a pretty good use of his time.

So, look, I think we can quibble about this or that decision that he makes or this or that tweet, but I think the overall thrust of what he's doing is very important for the country and for humanity. So, I get where you're coming from.

Hopefully, he'll find some people at Twitter who he can empower and trust to make these content moderation decisions so he's not drawn into every single little battle. We do want him focused on the highest priority problems.

Palihapitiya

My point is just that I get that. I just think that what he's learning and what we're living and seeing in real time is that there is no canonically right decision ever in this space. There's only a decision where some percentage will support and some percentage will always be against. That's my point.

JCal

That's my point. Correct. He did say when he took over, he knew that would be the case. He said, you will know I'm doing the good job when both sides are equally upset.

Just to put a pin in it. I think it's important for people to understand what the new policy is. So I'm just going to quickly read it just to hang on to it.

Friedberg

Well, just hang on. Sorry, hang on one sec before you get to because I think the philosophical point rather than the specific one is an important one. And I just want to respond to what you said and have sacks respond to this.

In the case of the points you make around the Twitter files. And by the way, I don't agree with any of the moderation decisions personally. So I don't think that someone should be suspended for posting public information. I don't think someone should be suspended for saying controversial things. That's my personal opinion, just so I'm clear on that. Because I know that, you know, that would describe yourself.

JCal

that would describe yourself as a libertarian, libertarian.

Friedberg

a libertarian speech. Yeah, libertarian. Sure.

on his off-duty, on-duty, that's the thing we're talking about here.

Palihapitiya

on duty, that's the thing we're talking about. I'm just saying, like, let's just say he gives a speech every week. Is that illegal? No, if you're giving a speech...

Sacks

No, if you're if you're giving a speech at a public place where you've announced that you're going to be appearing at a certain time and place, you've already made public where you're going to be. What we're talking about is and what what what Ilan jet was showing was a live stream of precision GPS coordinates over a sustained period of time.

the decision should not be based on what affects him personally, there needs to be a principle basis, there needs to be a principle basis for any decision about content moderation or censorship, maybe in the first few hours that decision, it wasn't handled perfectly, because there wasn't a principle basis. But since then, one has been put in place. The principle basis is what J kal showed. And this applies to everybody.

Palihapitiya

The point is that you have, let's just call it 12 hours, you know, a functional executive time that you can apply to a problem. And you can break that down into these blocks, right? I would really love what is basically the smartest human and the most productive human of our generation to be filling those blocks with things that sort of like really transcend.

And increasingly, and I agree that freedom of speech is important, increasingly those buckets are being filled with things that are very low level and hyper-tactical and are distractions at best to the path of free speech. And so I think that hopefully he gets all this shit under control over there, he finds a good executive team, I would like to see him get back to landing rockets on barges, getting to Mars. Let's do it. Let's do it.

Sacks

again.

Friedberg

Thank you.

Sacks

getting finished self driving, we're almost there. Chamath definitely has a point. I just say one of the reasons why we don't care that much about this issue is because I think something to understand that's important is there are different kinds of speech and different kinds of speech deserve different levels protection.

The fact of the matter is like business advertising is not as protected as political speech. Porn is not as protected as political speech. Political speech, speech criticizing the people in power is the most protected category of speech, because the founders of the country understood that the people in power will always try to insulate themselves from accountability by limiting that kind of speech. But that is precisely the kind of speech that the former rulers of Twitter suppress the most and show the least sensitivity to.

So listen, I mean, is Ilan gonna be the perfect content moderator? No, I mean, nobody is nobody nobody is, but I do not believe that puts him in the same category as, you know, Vijaya Gadi or Yoel Roth, who showed no sensitivity for political speech, he has indicated a desire to restore freedom of speech. And I think they ultimately ended up in a one I want him to get us to Marcy. I want him to

JCal

you know i mean it is not driving we're almost there

JCal

Nobody is. Nobody is.

Palihapitiya

I want him to get us to Mars. I want him to get us to Mars. I don't care about banning Twitter handles.

Nuclear fusion breakthrough and geopolitical ramifications

When that happens, some energy is released, because the total mass of the fusion of those, those nuclei is actually less than those nuclei when they're on their own. And so some energy is released, and that energy drives a chain reaction. And so fusion is this concept that is fundamental to physics and fundamental to the energy driver of our universe. So the star in our, in our sky, the sun is driven by fusion, and only about 15% of the mass of the sun at the center is dense enough to actually drive fusion.

So the big challenge with fusion is how do you get these, these atomic nuclei close enough together and moving fast enough that they'll actually fuse and release energy. And that's super hard. The reason it happens in the sun is because the sun has so much mass, that the gravity pulls all those particles together, they get close enough, they get hot enough, they move fast enough, and fusion happens, boom, all this energy comes out and every day we're warm.

Now, to do it on Earth is very difficult. But if we can do it, what happens when you fuse nuclei together is you don't release any, this isn't like a radioactive fission reaction. You release energy that can be harnessed to drive our systems, our technology. How is it done?

Yeah. So in the 1950s, you know, this was theorized, hey, we could do fusion on Earth, we got to get a really, really dense plasma, meaning the atomic nuclei and the electrons have kind of gone off the atoms. And it's just the nuclei spinning apart, you got to get them to move super fast, like 10s of millions of degrees Celsius, and you got to get them really close together. So how the heck can you do this?

So there's a couple of concepts to do this, one of which is called inertial confinement, which is where you basically create a little pellet of the material, you're going to try and get to fuse, and you put a ton of energy on the outside, you compress it really hard, really fast. And when you compress it really hard, really fast, and you can get it to be done in a perfect sphere, and you can get it to collapse on itself very quickly without, you know, kind of shooting all over the place, enough of those particles will come close enough together fast enough hot enough, and they will start to fuse.

Another way is through magnetic confinement, where you use magnetic fields to create a really hot plasma, get it to spin around or to move. And then the magnet brings that super hot plasma closer and closer and closer together until all those particles are moving fast, and they're dense enough that they start to fuse. So you know, one is called magnetic confinement, the other ones inertial confinement.

And today we have an iPhone that can do 2 trillion flops of compute in your pocket. I think that what we're seeing with fusion today is similar to what we saw with the ENIAC computer in the 1950s, which is the demonstration that compute is possible. And now we're seeing a demonstration that fusion is possible. And a lot of folks have anticipated this moment, and they've invested ahead of this.

I, I think that I'm just glad that you guys are fighting, not me and Sax. Guys, please let me finish. Okay. I think that this.

Palihapitiya

I think that this breakthrough is really valuable. I think it's interesting to see that these kinds of scientific breakthroughs continue to happen in government-sponsored facilities and not private companies. I think that that's probably where a lot of these innovations will continue to come from because look at the scale of what had to be built, three football fields, 322 megajoules of energy, and 192 lasers. This is really complicated, expensive stuff. I'm an enormous fan of these kinds of scientific breakthroughs, I want to be clear.

I think that where I struggle is translating this into actually an investable area, and I worry that this is going to consume lots of money by folks that could otherwise put money to work in things that will actually pull forward our energy independence and energy abundance sooner and faster. For example, there are all kinds of things that we could do to secondary, ternary, third and fourth and fifth generation batteries that aren't happening today. There are a bunch of things that we could do to actually create an infrastructure of green hydrogen. The simplistic answer is we could do it all, but the reality is money is finite and we can't.

All I'm observing is I do think that more practical things that do have geopolitical ramifications sooner are not going to get funded because people do get enraptured by this and my skepticism is that this is still in the realm of government-sponsored research and is not really an area that for-profit private companies can tackle. I would rather those for-profit companies, for example, Y Combinator just today put out something where they were a call to action, a request for startups in climate. When you look at that list, those are really practical investable areas and I just want to make sure that the capital allocators that listen to this weigh those equally.

I'm glad that the U.S. government did this. I hope they do more of this, but if you're asking me quite honestly, I would rather the next $10 billion go into energy efficiency HVAC than fusion because A, fusion exists and B, I think it's going to happen at an innovative bench scale level by the government and not by a private company.

Palihapitiya

I am glad I'm dead.

Friedberg

let me just let me just respond to that real quick. Tama, I think that the idea of allocating our resources as a society should be done on kind of, you know, on a portfolio basis, 80% on the pragmatic near term, 15% on the kind of next gen and 5% on the moonshot. And this maybe starts to shift from the 5% to the 15%. Maybe it's still in the 5%. But I don't see kind of overfunding happening.

Friedberg

I think the fact that Jake and Saks spent a couple nights together this past week has really improved the mood of the show. I mean, when you guys go out and drink together and have fun, you guys are hilarious. Saks and I laughed.

JCal

It really does. It really improves the mood of the show. You guys should check it out.

Sacks

I mean

JCal

Sacks

He did, but I thought the more important part of the set was he came right out, like, calling out all this, you know, holier-than-thou woke stuff, yeah. And there was that undercurrent to Chappelle's set as well.

JCal

And also, he said, Listen, words can't hurt you, unless you write them on a piece of paper and time to a brick. We these a bigger point right now, and this does tie into our first story is I think comedians look at Twitter as a place to get canceled, not a place to be part of the discourse. And that's a huge loss that's indicative of our society being broken.

And it's incredibly important that these comedians be allowed to mock, and to speak, and to step over the line and challenge us as citizens in a free society. And we should cherish them. And we should not even try to cancel them, let them cross the line, let them say things that make us uncomfortable, so that we can understand ourselves and our society better. And I just want

Sacks

to say. I'll see you next time. Good night.

JCal

Do we want to have a discussion about it? I can't. No, I want to have a conversation about it.

Sacks

Bye.

Sacks

Oh, my God, I can't stop session about it. What's the next time? Okay with mocking? I just don't

Friedberg

I'm okay with mocking. I just don't start you guys you did so well come on. Here we go

Palihapitiya

Come on, man. Let's go.

JCal

No, JK, I'll cut it out. All right, well, we have two more science corners to get to. All right. Well, if you don't want, I mean, I just want to say... No, let's talk about...

State of the markets: Coupa acquired by Thoma Bravo, startups at all stages seeing heavy valuation reductions, what LPs are thinking

Sacks

sacks your thoughts. So on Coupa, I thought the most interesting thing was just the we got a public comp. Well, we got a comp on what private equity is paying for public companies right now. So the deal happened at an $8 billion valuation, that was a 31% premium to the public price. It was 8.4 times next 12 months revenue. And on a trailing basis, it was about 10.4 times the last 12 months revenue.

And by the way, all the comments were around how what a rich price Toma Bravo was paying, people generally thought they're paying a premium to the valuation. So I think this

But here's the thing you have to weigh against that is that these early stage private companies, many things go wrong. Yeah, and they hit a plateau, they fizzle out, or their growth rate starts to the bigger they get, the harder they should be.

Palihapitiya

Yeah, exactly.

JCal

So they should be priced at a discount, not a premium, because there's risk.

Sacks

There's more risk. They're growing faster, but there's more risk. But also, it's very hard. Once you get to a bigger number of ARR, 50-100 million of ARR, it's extremely difficult to beat doubling or tripling year-over-year.

Friedberg

let me just point one thing out. So I looked at the numbers on Coupa. I think they had about 170 million of stock based comp expense in the last nine months. So those are employees that are getting $170 million in compensation in the form of shares. So they get those shares, they can then sell those shares and get cash for them on the market, and then on the public markets and pay their bills.

So when a company like this goes private, for those employees to just remain at their baseline comp, that stock based comp needs to be replaced with something else, or else they're seeing their salaries reduced. So, you know, there's this balancing game, when these companies go private, in terms of how do you give them the comp that they're earning to keep them engaged in the business, the answer is you don't, versus no, but you let them, you let them pay.

JCal

The answer is you don't. You let them quit because you want to do a riff anyway.

Friedberg

Right. So I mean, but for the people that stay, right, so so there's a balance because it's not just Hey, cut the opex, you have to cut the opex, including stock based comp. And this company generated about $100 million, sorry, $210 million of free cash flow or operating cash flow in the last 12 months. So if you if you take out the stock based comp, these guys are actually breakeven or losing money roughly. So yeah, I'm growing break even roughly.

So there's a real question mark on this business and businesses like this that go private, where if you actually cut the opex and you cut the salaries and you cut the headcount, but you have to find new ways to pay people because you've been paying them with stock in the past, how do you kind of bridge that gap? And I think that's probably a little bit of the balance and the art of what these guys do well to

Palihapitiya

Um, yeah.

Palihapitiya

Sacks

Look, there's going to be three major sources of slowdown for software companies next year. Number one, new business is going to dry up. Companies are just going to be spending a lot less money next year because they're all cutting costs. You should expect your new business to be roughly 50% of what it was. Next year, it'll be 50% of what it was last year. That's my rule of thumb for most companies. New business down 50%.

Number two, churn is going to be higher. We haven't seen that much logo churn yet, but next year, a lot of companies are going to start going out of business, and it's going to happen over the next two years. You're simply going to see logo churn rates, say, among small businesses, go from a historical norm of 15% to maybe 25% or 30%, especially if you're- In other words,

JCal

In other words, your customer, the logo, goes poof. That's what a logo means, yes, the actual entity.

JCal

The logo goes poof.

Sacks

LOCO

Sacks

JCal

Batten down the hatches!

Palihapitiya

Can I build on this? I think Freeberg said it very well. The scam in venture capital is demonstrated in the following chart. This is using Cambridge and our friend Brad Gerstner helped put this together. So what is this?

This goes back all the way to 1997 and the gray bar is what venture capitalists share with their limited partners as to how well they are doing. What is called- The top quartile of venture capitalists. And this is the top 25%, okay? So this is a venture capitalist and our returns have been consistently top quartile. So instead of cherry picking anybody else, I'll just use us, but it could be Sequoia, Benchmark, you name it. We would go back- Launch, we're in there. Launch, you would go back to folks, craft, you would go back to folks and say, hey guys, the total value of our portfolio is three times your money in 1997's vintage, okay? It was four times your money in the 2010 vintage. Feels really good. But again, the job of the venture capitalist is to convert the gray bar into the purple bar. And historically, there's been a decay. So for every dollar of gray bar that you show, you typically only get 73 cents actually returned to people. Okay? That's the value of-

Friedberg

The paper value, the book value, versus you. The valuations that you get when you sell your company or goes public end up being 73% of what you marked at the peak, what you said they were worth.

Sacks

The value, the book value versus you.

Palihapitiya

right. Exactly right. And the actual value of this purple bar going back, you know, 30 years is 1.7 x. So just to put numerical numbers on this, if you were a venture capitalist, you would raise $100 fund at the peak, you would actually show that that $100 became 200 and about $28. But when when push came to shove, and when it was all said and done, you would return $170 back to your investors. That's the rough equation. So what's the problem?

acquisitions

JCal

Let's fuckin'-

Palihapitiya

Also key second point, profligate extravagant or wasteful in the use of resources just so we get the word of the day from David Sachs. That's David Sachs is word of the day. After a very powerful bowl. This is this. That went crazy. Do you see the true month boy for winter? We will. This is we will we've all went. We went viral.

Palihapitiya

This is- This-

Well, I think that there are lots of valuations that have supported huge TVPIs, these, you know, paper gains that have allowed venture funds to raise enormous amounts of incremental capital in new funds. And so they are going to try to wait as long as possible before they're held accountable for that. And the best way to do that is to not change the valuation. And so it will happen slowly. It'll be a trickle of these things. And I think that takes probably four or five years for it to really sort itself out.

But in the meantime, companies will still need to get financed. Companies will still need to get built. That's why I think like the public markets, I think what SAC says is true, giving us a signal of what these true market clearing prices are will eventually slip into these, you know, series D or E companies because a venture capitalist who has now taken some big write downs in one part of their portfolio, I suspect will now be very open to selling to private equity for another part of their portfolio so that they can return capital. Totally. I totally agree.

TV catch up, worst person in tech bracket

All right, everybody. I love you besties. Shout out to David Sachs. Love you guys. And we'll see you all next time on the all in podcast. Love you besties. Love you guys. Bye.

JCal

You

Palihapitiya

I love you guys.

Show Notes

Follow the besties:

https://twitter.com/chamath

https://linktr.ee/calacanis

https://twitter.com/DavidSacks

https://twitter.com/friedberg

Follow the pod:

https://twitter.com/theallinpod

https://linktr.ee/allinpodcast

Intro Music Credit:

https://rb.gy/tppkzl

https://twitter.com/yung_spielburg

Intro Video Credit:

https://twitter.com/TheZachEffect

Referenced in the show:

https://www.finextra.com/newsarticle/41483/checkoutcom-chalks-70-off-valuation

Cernovich @Cernovich

@CNN When the left digs up old tweets, it’s journalism. When anyone else finds creepy stuff from the left, y’all claim harassment. No one falls for these fake rules anymore!

Elon Musk @elonmusk

Last night, car carrying lil X in LA was followed by crazy stalker (thinking it was me), who later blocked car from moving & climbed onto hood. Legal action is being taken against Sweeney & organizations who supported harm to my family.

https://en.wikipedia.org/wiki/National_Ignition_Facility

https://www.ft.com/content/4b6f0fab-66ef-4e33-adec-cfc345589dc7

https://www.neimagazine.com/news/newsfusion-industry-survey-shows-significant-increase-in-private-investment-9860867

https://www.reuters.com/markets/deals/thoma-bravo-buy-coupa-software-615-billion-2022-12-12

https://www.finextra.com/newsarticle/41483/checkoutcom-chalks-70-off-valuation

All-In Podcast

E108: Doxing debate, Nuclear fusion breakthrough, state of the markets & more

Disclaimer:

Contents

Jason’s new gig!

​​JCal

Sacks

JCal

Palihapitiya

JCal

Sacks

Palihapitiya

JCal

Friedberg

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Palihapitiya

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Twitter’s new privacy rules, @elonjet suspension, doxxing dynamics

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