Fed Hesitates on Tariffs, The New Mag 7, Death of VC, Google's Value in a Post-Search World

We went to an amazing restaurant Friday night. She So is the name of this restaurant. Wonderful food. The owner of this restaurant. Shimoth is a is a super fan as well of the all-in podcast. Is that a French restaurant? Jason, she said it was um more like an Asian fusion restaurant. Like great sushi. We had this incredible hotel. Del just just aces all the way. The guy comes and uh we go to pay. He says, "Oh my god, Phipe, listen to this story. This is the most money is no good here. Your money is no good here. Oie, he refuses to let us pay after we ran up a hell of a bill. And now you see Freeberg's running. Freeberg just ran off the show. Why did he run off the show, Jim? Okay, so Jason says to me, Jamal, this is absolute this is an absolute You guys, you guys, you guys make this  up to try and make entertainment out of me. I'll tell you the truth. Okay, I'll just tell you the truth. I'll tell you. Okay, ready? I'm gonna tell the truth. So Jason says, "Guys, I'll see you guys later." If they're care's gonna talk for more than three minutes anyway. Go ahead. You said if they're if they're going to comp all the food, just make sure you give a great tip. Huge tip. Huge tip. Huge and Jal level tip. To T totally makes sense. Freeberg's like, "Yeah, got it. No problem." We had like $19,000 of food. And he goes, "Is is $175 appropriate?" Literally Freeberg calculates it. And so Jason says, Jason says, "No." And then Freeberg says, "Hold on. Oh, fine. Fine. I'll double it to 350." Now, he was around. He was joking. I gave the guy a,000 bucks. It was gave a,000 bucks. And I said, "Actually, I think we should give two 3,000." So then we tipped the woman an extra 2K. So we gave her 3K for a 10erson dinner, which I think is appropriate. She was ecstatic. The food was phenomenal. It was great. Go to Shiso if you're in Miami. Dave, are you adjusting the tips for the no tax on tips? So, you're like making the middle smaller tips. [Music] We'll let your winners ride. [Music] We open sourced it to the fans and they've just gone crazy with it. Hey everybody. Hey everybody. Welcome back to the number one podcast in the world. We're going to have an amazing episode today. The besties are riding high. Why are we riding high? Because we went to Miami. Oh my goodness. We had so much fun at F1 thanks to I mean it was fun. I mean, so many great stories. Uh so much good times. We were laughing the whole time. We did a little stage show and uh Tony Robbins came up. We had Nico Rossberg. He's a Formula F1 champion. our guy Antonio Gracias who's working on Doge, Valor Capital, front of the pod, and Mayor Francis Suarez joined us. And uh then at the end of the show, surprise guest, none other than Sergey Brin, who is punching a clock. He's working like 70 hours a week over at uh Alphabet. And we'll talk about that today a bit. Did you have a favorite speaker, Mr. Sultan of Science, the one and only David Freeber? Do you have a favorite speaker or a moment? Sergey Sergey. Sergey did a great job. He was very casual, very chill. We had a great conversation. I think we should probably publish that as a standalone. I thought it was really good to drop him like a little midweek drop or something. But I will say Antonio, I I gave him a shout out just because I think the work Antonio is doing is so important. I am super impressed and I was really appreciative of him taking time to come hang out with us, but obviously he's working with Elon on Doge, but he's also uncovering a lot of stuff in the government that it's really powerful to see someone actually go in, do the digging, and present it the way they are with the transparency he is. And he's not doing it for any angle. There's no money. There's no benefit to him individually. He's just doing it's probably net negative on the margins for him. Really hard for him. And yeah, and it's just amazing. Based on Elon's experience, it's definitely net negative. People uh maybe don't like having their grift cancelled. Shimoth Polyhapatia, our chairman dictator. Do you have a favorite moment with the speakers or a favorite speaker, you know, a highlight from the programming specifically? I thought all five of them were amazing. I do I did think that Sergey did a really good job. I like Nico Rosberg a lot. I did too, for sure. I'm really excited to see what Francis does next after being the mayor of Miami. Maybe governor. We'll see what uh love party says. I think they were all great. Tony Robbins, I have to say, his energy is very unique and when you're near it, I didn't have many interactions with Tony up until that first time. Really, I'd met him through Peter Goober a couple of times when I was part of the ownership team of the Warriors. Peter's a co-owner. They're very good friends, but I'd never really spent much time with him. He's a special person. And you can tell there's a there's a big energy there. They're all great. Yeah. You know, I'm interested to see how the audience likes that interview because, you know, he uh he is a ball of energy. I tried to get him to open up, talk about himself a little bit, but you know, he was kind of on his own tip, but the audience loved him. And we did a great like meditation exercise that everybody loved it. It was a lot of fun. Joining us this week from CO2 management. Yes, we have Phipe Leafant who is his older brother and uh Phipe welcome to the program for the first time. Thanks guys great to be here. Have you heard the show before? Have you have listened to the Allin podcast Philippe? Let me ask you that question right off the bat. I've been listening about it for a week at speed of 1.8. So I think I've gone through about like 10 or 12 episodes. Okay. Catching up and uh All right. Are you an F1 fan? You're French, so I don't know. Is that like popular in France? The F1. Hey, we had a good F1 pilot, right? Alan Frost. Alan Frost. He won a few years, you know. So, okay. It's incredibly popular in Europe. Jason, what did you think of Formula 1? That was your first time, right? It was my first time to F1. You know, there was a lot of um pomp and circumstance. We're very lucky that the trophy house, my friend Ford, whose partners on the trophy house, included us. He gave us a level of trophy house. Trophy house. There it is. Beautiful structure. Three amazing floors, tons of activations uh which means free stuff for those of you who are not in these like uh circles where celebrities get all kinds of free stuff. And we had a poker game. Was wonderful. Best way to watch the F1. Play poker. By the way, when you're live at the F1, it's a little bit hard to get into the experience because like the cars just zip by you, so you get to see the car for like a few seconds and then kind of like dead time. Yeah, it it was um very exciting. I have to say it was a very social experience and we made an executive decision because it was raining to pull the table and put it inside the trophy house. And then we had an incredible view of like the finish line and uh there's Freedberg standing up, me next to him. We had an incredible lineup. Travis joined us. You can see there Phil Helmuth heranging poor Travis from Uber sitting next to me. I mean this is he always has to have his hand on a billionaire. He's not within 5t of a billionaire. He has a panic attack. So and there's Helmouth. Poor Helmouth. Um my friend Timothy Shalamé came by to say hi to me. And of course like tackling him. Look at those meat hooks just going over a giant tanda bear and Shalom's the bamboo. I felt so bad for Timothy. You know, he's he's done such amazing work and you can see how engaged he is in Phil Helmouth. He's like, who is that person? Why is he grabbing me? But you know, then again, Phil Helmouth is presenting him. And now here's a proper way. Can I say something? Is that dealer is that dealer Larry Summers? He sort of looks it is Larry Summers after his appearance actually dealt by Larry. Well, after he was here, he he lost so much sponsorship and and so so many uh you know so many deals that he uh now is working on moonlighting as a dealer. He wanted to continue the great debate. Yeah. But but can I just point out here the proper way to embrace an A-list celebrity who you're friends with is to just let them come up to you. Look at so Timothy comes. Timothy and I are just me just as a background. This is my friend. This is your good friend Timothy Shalom. Right. I will not say good friends. We we've met a couple of times like a handful of times because we're both Knicks fans and I'm friends with Ben Stiller. Ben Stiller, myself Timothy and my brother Josh went to the Pistons game, you know, versus the Knicks when we crushed them and crushed their souls. So Timothy came over just to say hi to me and his friend Yeah. Frankie and his other friend Cody Block. Frankie Bones. He's got a great crew and you know he came over to say hi to me and he was thanking me for the tickets I I was able to get cuz it was hard to get tickets for that. Anyway, for Helm Youth, don't tackle people at all in events. This is why Chimant banned you. Just complete inappropriateness. And then Helm Youth was going around. I don't know if you knew this. He was telling everybody that he created Allin and that he was like the executive producer for life. Just so much inappropriateness from Phil Helm Youth. It was brutal. Man, if I may, let me also thank we had a partner, OKX, the new money app, and they they're a big major sponsor of the McLaren F1 team. They're the main sponsor on McLaren. Oh, they're the main. And they won the race. So, we were there with Haidider, the C CMO. Very cool guy and his team. Super guy and his wife. Nice guy. We had dinner with them. Shout out to those guys. And they just launched their crypto exchange here in the US. So, if you love AllIn, do me a favor, go check out OKX. And uh thanks to some of our other partners, Salana, Google Cloud, BVNK, Circle, shout out my guy Jeremy Lair, and my brother in Nyx Fandom, Shane from Poly Market, who I got to hang out with a whole bunch. This is a really great guy. Wonderful event. We're going to do it again. We're going to run it back, I think, for maybe F1 Austin, Vegas, and we're going to and maybe Vegas. Who knows? Uh maybe the Super Bowl, maybe NBA Finals. We're going to do some more of these 200 to 500 person events. I got to say it was so fun to hang out also with the the fans that came in for the show, the sponsors. It was just so great to like go to these events and hang out with people. I need to ask you guys a question. What was the most fun? The Friday, the Saturday, or the day of the race? Saturday for me. So, you like the content best? Okay. Saturday was I woke up, I went straight to Jeff Gross's house. Me, Travis, Helm, Youth, and a couple of others. We played poker until 4:00. I ran to the hotel, took a shower, went on stage at 5. I spent four hours prepping. 5 hours out of your pockets. It was great. Yeah. I was in the nightclub till 5 a.m. That's a true story. All right, start the show. Let's get the show. I'm going to start the show once I remind people that September 7th, 8th, and 9th, we'll be in Los Angeles if you want to come hang with us like we did in F1 for the All-In Summit, the fourth year. And my lord, I got a preview from Freedberg of the content. It is going to be another peak all-in event, you know, and our goal is to have the world's most important conversations, yada yada yada. Our experience at the summit this year is what's going to be awesome. It's in addition to the content being great. We've got some really awesome Well, you told me the party location, which I won't say here, but you also told me that you're I did 900K was the peak two years ago. Then you spent 1.2 two million on the party last year and now you told me you're spending 2 million on this year's party. Forget is that true? The two the two million whispers. It's going to be more than that. Oh my word. Anyway, if you want to apply for tickets allin.com/summit and um yeah, Chimath and I were on Megan Kelly. Let's get started. I love it when Jal and Megan Kelly like have their Oh, it's the best. It's the best. Well, she likes She understands it's broadcaster on broadcaster action. We like to mix it up. We know how to do ratings. He's a radio show. Come on. All right. The Fed held their rates steady again this week. Uh if you remember last year, the Fed cut 50 bips in September, then 25 bips in November and December. Uh but so far in 2025, the Fed has kept rates in a steady range, 4.25 to 4.5%. They said they want to wait and see. They're in wait and see mode because they don't know what Trump's doing with these tariffs and how that's going to impact the economy. Here's the quote from the Fed. Economic activity has continued to expand at a solid pace, but they warned about potential stagflation. Risks of higher unemployment and higher inflation are their concerns. And I I talked about that last week. I'm I'm hearing a lot of uh hand ringing about layoffs coming soon. So, what do you think, Phipe, about the Fed not taking any action? And what's your general take on the markets? you know, the the markets have seemed to recover largely from the Trump uh Independence Day um tariff announcement, but it's uh feels a lot pretty shaky out there. A lot of M&A on hold, a lot of hiring on hold. What What are you seeing on the streets? Yeah. Well, it hasn't been a boring year, has it? So, I would say on the Fed, right, a lot of people are saying, "Oh, you know, the Fed should cut and this and that." I actually think that there's also the scenario that what if the Fed is cutting because things are not so great. Maybe that's actually not a good message. And what if the Fed is not cutting because actually the economy is really strong. And so I think that the Fed not cutting is actually not that bad of a message. And I'm surprised just in general at how bad sentiment is, but how good the hard data is. And we have this ratio at CO2 where we sort of divide hard news as a numerator and sentiment as a denominator. And it's the first time where the news is so good and the sentiment is so bad. And I don't know if the sentiment is bad because just the market went down a lot or for other reasons. But I actually think the economy is doing really well. Uh and we also learned two really important things. One is when the market did go down a lot, the government did budge and said, "Hey, we need to step in here." And the second part is the Fed did something that I thought was very clever. They basically said, "We're not going to cut just to bail out the equity market, but if the market's liquidity is no longer functioning, emphasis on liquidity, then we'll step in to restore liquidity." And I think those two things really brought the market back up. And I think it's more a little bit the case of a tariff correction or a tariff tantrum, but not a tariff crisis. So you said there was a lot of good fundamental news. What would you put at the top of that list? And you said there were things in terms of sentiment that were making people quite negative. The the um economy as viewed by consumers is really shaking. So what is the sentiment news that you are most tuned into and what are the hard data that you're most tuned into? So on the on the hard data, the part that's most surprising is that consumers have very very weak sentiment but in the meantime consumer spending is remarkably resilient and you can see this in a number of ways. You can look at the Visa and Mastercard earnings, but I also like just to listen to like little quotes, little tidbits that you pick up in the transcripts of tr of of companies reporting earnings and stuff. And people will say like even in the month of April, consumer spending is very strong and even in the last week when we adjust for the front loading, some people are pre- buying ahead of the tariffs. Even when we strip that out, consumers really good. So I think the part that to me is most surprising, consumer is great. With respect to sentiment, it's really bad. But one thing that's funny is whenever the market goes down, sentiment is bad. And so I don't think sentiment is necessarily good leading indicator. I almost think it's like a lagging indicator. I bet you that now that the market's gone up, we look at sentiment in a month from now and it'll be like, oh, sentiment's getting better. So I think that's what's going on. Chimatha uh our friends at Poly Market are showing in uh June 84% chance of no change. July 51% chance of no change. And then September 48% chance of a cut. And then pal obviously Trump's been mixing it up with him saying he's going to fire him, he's not going to fire him. What's your take on the Fed and what they should be doing here at this moment in time? And then maybe you could respond to Phipe's sort of insight there that I think was pretty good that there is a juxaposition between what people are saying they're going to do consumers and how they feel about the economy than what they're actually doing. I agree with Philip's diagnosis that the Fed will really be focused on liquidity. I agree with that. In fact, Nick, I just sent you something on signal if you could just throw it up here, which is a really interesting view on subprime. And what it shows you is the spread between where credit acceptance is versus capital ones. And the point in bringing this up is that when you look back historically around these subprime lenders, whenever these guys start to see price to books just start to escalate and get to highs, it tends to portend a liquidity crisis. It tends to show that things are about to roll over. And from that perspective, I think that there are some blinking yellow lights that the Fed needs to take seriously. But then where I deviate from Phip's perspective is I think that the Fed is getting increasingly political in how they want to react to the conditions on the ground. I'll give you two perspectives. The first is if you actually read the press release, either the word waiting or some synonym of that word was littered in there 22 times. It just seemed like an incredible amount of verbal gymnastics to try to justify why they weren't cutting. And if I had to just take that at its face value, I would at least put some percentage of probability that you have to assign to this case where Powell views that if this lever is the only thing that he has going into the midterms, it's almost as if he's holding it back because I think that if you look at some of these leading indicators, particularly on the liquidity side, I agree with Phipe about how important that specific metric is. I don't believe in the Fed put. We've talked about this, but I think the liquidity measures are starting to blink yellow. And I think that if the Fed really wanted to get ahead of it, they could cut, but the political overlay is cutting helps Trump. And I think there's this tension between these two people. And I think that the Fed is saying we're not going to cut. So your position is or what you're hypothesizing here is that the Fed is saying, "Hey, we have to wait for Trump to clean up the tariff stuff." the trade war stuff and that that's a political act by Powell in retaliation for Trump saying he wanted to fire him. Is that what you're insinuating? No, no, no, it's not what I'm insinuating. What I'm saying very directly is that the Fed is acting in in a manner that is as much politically motivated as financially metric motivated because the financial metrics some of the most critical leading indicators particularly around liquidity and the credit health of the American consumer are blinking yellow. So right now they are choosing to ignore these historically useful leading indicators. And the only reason that I can come up with to ignore it are political reasons. So Freeberg, do you think there's a political beef going on here between the two parties? And what do you think about subprime uh and maybe this being a lead indicator that maybe it's time for a cut? Maybe we're going to see people miss mortgage payments, car loans, etc. I was just looking at the mortgage delinquency rates. They're pretty uh flat right now. And that's I think because so many people did refinance when rates were low and there's a tremendous amount of mortgage balance with a with a low rate outstanding. But remember, I think the Fed has a whole bunch of data that they're still going to need to wait on. The CPI data for March was 2.4%. Their target is 2%. The next CPI report comes out, I think next Tuesday. And so that's going to be an important indicator. But I do think one other data point that is now going to be part of the calculus is what do these trade deals look like? So this morning it was announced that there's a trade deal with the UK and in that trade deal there are lots of provisions that relate to parody and what is expected to provide better market access for American businesses into the UK. But there's also a really important piece of data there, which is that there's a 10% tariff rate for imports from the UK into the US. So this is the first time we're seeing a trade deal that actually gets announced and finalized through this whole tariff trade negotiation process that's been underway now for several weeks with all the hoopla and all the drama attached to it. And what we're seeing is that for one of our friendliest allies, for one of our best trade partners, we are keeping in place a 10% tariff rate. So if that holds with other trade deals and that becomes kind of a standard across the board as they get more of these trade deals done perhaps with countries that are less friendly with more ownorous with less regulatory parody in the trade relationship between the US and that country maybe there's higher tariff rates. What that means ultimately is that there is now maybe a pretty sizable long-term revenue stream for the federal government that didn't exist before, which means that there's room to cut taxes, which means that this is all going to be part of the calculus of the Fed's decision on whether or not and why they would need to cut rates because this is going to drive inflation. It's going to drive GDP growth. It's going to drive employment. And so I think that there is a pretty dynamic situation at play right now. It's not just that there's a static tax revenue base and a static federal spending model and then CPI and employment data that is going to follow them. Do you think Powell thinks that this Trump thing is going to work? So he's holding bullets in the chamber because he's worried about inflation. I think they're going to wait for data. I would agree with that. Yeah. Dave, in fact, uh, a couple things I was wondering your opinion on is one. I was with this retailer, gigantic retailer in the US, and there's this sort of false narrative that when you have tariffs, like 100% of tariffs are going to get passed through in pricing, and therefore tariff is like a tax, right? That retailer told us that they think only about 50% of the tariff gets passed in pricing. So, I I sort of agree with you. there is going to be a net net positive and that retailers have way to uh work things around and stuff like that. I would also say today post this announcement the market's very strong and initially I was a little bit surprised because um we're taxing 10% not only the most uh friendly country but one where we actually have a surplus. So it's like if it's 10% when we have a surplus, what is it when we have a deficit? But on the other hand, the market is speaking as we speak. And I also think that uh there were a lot of announcements that seem to make it like, hey, we're going to make a deal with China. We want China to do well, but we need to do well, too. It seems to me that at some point maybe there'll be a bit more of a win-win versus such an acrimonious and maybe that's why the market's reacting a little bit more positively. By the way, that trade deal we also eliminated the 2% tax on big tech companies. And then Howard just said today that they're going to announce a10 billion order from Boeing on top of that as well. So these are going to drive GDP. They're going to drive employment. It's really hard to cut rates into a market where there is not yet priced in or not yet well understood, but an expectation of a driver for GDP, driver for employment and potentially an impact on inflation. It's really hard to go into that sort of an environment and cut. I mean, if we're in a sustained period of four to 5% rates, I mean, we should talk about that at some point, but there's huge implications to the economy if this thing stays where it is. Huge. Philipe, are you in the uh camp of 4D chess with these uh tariffs and these negotiations or, you know, throw some stuff against the wall, react to it in real time, you know, he's shaking the snow globe, it's it's chaos, etc. Where where do you sit between those two opinions we've heard on this podcast over and over? You know, when you ask a tech investor for like his opinion on macro. Yeah. Uh this is the beginning of the end, right? I think I've like predict I think I've like predicted like seven of the last three recessions, you know? So my my track record is pretty weak. Well, let me ask a different then question. How is this impacting the tech market? Private companies that are thinking about going public, M&A, we saw Door Dash buy two companies this week. We've seen a bunch of companies file to go public. We've seen them pausing. Does this kind of uncertainty which it seems like is causing the disconnect, right? You you explain this disconnect how people feel about the economy and then their behavior. Is that disconnect caused by the sort of communication that Chimath and I and other folks were saying, hey, needs to be improved here. And it seems to be with this UK. If this had been the process from the start where we're like, "Hey, we're going to do one of these a week for 50 weeks and uh you're going to get this good news each week as as we sort this out." That seems to me like something that would build confidence as opposed to, hey, everybody's going to go back and forth. You say 50, we're going to go to 150 tit for tat. So maybe talk about the impact this has for founders, startups, executive teams. I think for tech guys by and large, you know, a lot of the tech is in services. So that's out of the picture for now. Uh but there's obviously going to be a lot of tears for semis and then for the assembling of the motherboards into computers. So those are the two key areas and one of the difficulty is we have these sort of base tariffs but we also have these sector tariffs and we've had sector tariffs in cars 25%. There's rumor to be sector tariffs in pharma that could come out next week and there's also been potential uh sector tariffs, you know, in semis. So, it's been pretty disruptive and I don't really know how to think about it and I think nobody knew which is why the market just took a 25% peak to trough down. And then after that, we learned well the government is actually smarter. They're going to one of the things that I love to see is all these executives that get to come to also plead their case in Washington and maybe that was never the case you know a few months ago and there seems to at least be a feed a feedback loop okay we do something we see what breaks we listen we readjust and stuff like that but to be honest I don't really know how it's going to play out and I sort of was very conservative for a period of time just waiting and then to me what happened last week with uh Microsoft saying that like AI had really picked up. That was like a really big deal and I almost like uh coined it in my own mind like tokens greater greater than tariffs and I think like one of the reason why the market's moving up right now. Hold on just explain that just a little bit over tariffs. Tokens I don't know I put the greater greater sign you know tokens are much greater than tariffs. Tokens you mean AI tokens? AI tokens. Yeah. So I I sort of view tokens, you know, I I don't really understand the as as well as Dave for sure, you know, all the AI models and stuff like that, but I sort of view tokens to an AI model is like fuel to a car or electricity to a computer, right? And Microsoft said that in their Q1, they processed 100 trillion tokens, 50 trillion alone in March. And so the tokens are really going basically vertical which is probably because of these reasoning engines which are much more sophisticated and require more compute power. And I think the market it didn't to to it's a bit unfair for Trump but the market did not just go down because of tariffs. If you remember it went down because people freaked out we're in an AI bubble. AI is not really working. What's the ROI on AI? That was maybe I don't know half a third to a half of the problem. And I think what Microsoft said is like capex is going up and everybody has a gigantic shortage of chips right now. That I know for sure from all of our private companies, public companies. There's a shortage of chip, a shortage of compute power. And so I think that's also maybe why the market's going up. And so for me it was sort of a way emotionally I got so drained with the tariffs and thinking about tariffs and having to think about something I don't really understand and I feel now there's a chance when you look at the next year or two at some point tariffs goes away Trump makes this big deal with uh deregulation the tax breaks sort of cancel out the tariffs we move on and what are we left with we're left with tokens and I think the world of tokens for me I've been doing this for 35 years It's maybe the most exciting trend and thing that I've seen. And all these people that say, "Oh, this is the end of American exceptionalism." I almost wanted to say, "No, you guys are wrong. This is the beginning of American exceptionalism because we've got Wall Street. We've got Silicon Valley, and we still got a pretty good government that at least tries to get stuff done. So, I'm pretty excited by that. I've been talking with my management team a lot about AI first principles and we're actually doing an offsite in two weeks on this because I've been following a lot of what the other CEOs have been doing and hearing stories. We had a great conversation with Sergey. He gave us two anecdotes of how he personally has used some of these tools to make management decisions and his observation was managers are the first to go. And if you zoom out from that statement and you zoom out from the comments you're making, Phipe, there's I would say like a once in a generational opportunity to select companies that are going to accelerate growth because of the leverage they're going to create by adoption of these tools. Not tech companies in the traditional sense, but across the entire economy. And some of what we're seeing right now in the reformation of venture capitalists and and I know you're going to talk a little bit about CO2 here in a bit, but so much of the thesis is around traditional businesses being reinvented using AI. And as a result, it's not just the few tech companies that are providing the fuel, but there are these fires that are going to take off in all these different markets that we could sit and spend probably hours kind of, you know, extrapolating and theorizing on that creates a real opportunity for incredible market value creation. And traditionally, it's like the market grows and the differentiation among the competitors is minim minimized once the market has matured. But for the first time ever, every mature market can be completely disrupted. And so so if you're smart about selecting management teams and selecting companies, there seems to be an incredible opportunity to realize investment returns. Okay. Even in a mature equity market. Well, let's move on to our next topic, which is obviously super related. Google was down 8% on Wednesday after some bad search data came out because the Justice Department, as everybody probably knows, is doing this antitrust lawsuit with Google. And the key part of that lawsuit is Google paying Apple 20 billion a year to be the default search engine on iPhones. Obviously, we all know iPhones have elite customers. Those are very uh precious searches from people with a lot of money cuz iPhones are expensive. Anyway, Eddie Q, who's been with Apple for 35 years. He said, quote, "For the first time ever last month, our search volume actually went down." Quote, "That has never happened in 20 years. If you ask what's happening, it's because people are using chat GBT. They're using perplexity. I use it at times. He believes that AI search is going to replace classic search like Google. Quote, "Again, there's enough money now, enough large players that I don't see how it doesn't happen." Bloomberg reported on Q's comments at 11:00 a.m. An hour later, Google was down a hundred billion dollars in market cap. It bounced back a little bit today when we're taping this uh on Thursday. Here's the statement from Google. Responding to Q's comments, we continue to see overall query growth in search. That includes an increase in total queries coming from Apple's devices and platforms. Freeberg, is it time for Google to panic, Google shareholders to panic? We talked last week about making bold decisions about what is the default and how might Google get out of this classic innovators dilemma. What do you think? We keep coming back to is search dead conversation. Everyone knows that the search click repeat paradigm is over and there's a new model in what I would zoom out a little bit and say is kind of the difference in human computer interaction for knowledge information and services. It may not be that I type something into a search box. It may be that I'm having a chat. That chat may happen in a chat window. It may happen via voice. It may happen on a screen. It may happen in an earpod. We don't yet know where the consumer is going to go with this. But there's a lot of paradigm shifts underway. I will say Google has models that are if not the best competitive. So the underlying models, the underlying technology exists. They are certainly aware of the shift in the paradigm. And so the transition for Google doesn't need to happen overnight to a chat interface that looks like chat GPT. It may be a standalone app. They have a standalone app. As Chimath has pointed out in the past, they don't do a great job promoting it. They don't do a great job integrating the chat interface into search or replacing search of a chat interface because remember search ad revenue today is $200 billion. And the cost to serve an AI query is order of magnitude higher than the cost to serve a search query. So flipping the search interface over to a chat interface overnight doesn't make sense. And they don't need to. They have the users, they have the models, they already have the product. So it's going to be a slow kind of process of finding the optimal course for them to make the transition would be my guess on what they're doing. It's a question of at what point do you change the default on Google? Do you make it a slow one box, which is that answer section at the top of the search page, and you slowly get people used to that, and you lead them over to the chat interface, or do you do it all at once, or do you tell people, "Hey, go use the app instead of the search box." So, there's a lot that I think they're going to discover. And if anything, this is an organization that is used to doing testing and then making incremental changes and then making big changes once they're, you know, kind of tested and proven. I'm pretty positive on their ability to respond to the shift if there is one underway. I guess two important data points Jimoth that I'd like you to respond to. Search is only like 56% of Google's revenue right now. People forget they have cloud. So they have diversified. It's not a one revenue stream company anymore. And then also these Google search results at the top of the page, they're dropping precipitously the number of clicks below it. So different studies 15 to 35% of the clicks below the box are not get you know are dropping. So this is significant but it seems manageable. Where do you stand on it right now? Time to panic or as Freeberg was saying before hey maybe it's a great opportunity for Google to add yet another product line yet another revenue stream. They definitely have the best models in many domains. I would say that the codegen models from anthropic are really good but in many other domains including general information and chat I think Gemini is exceptional. So what is the problem? The problem is that they were effectively at 99% share and now we were always just waiting for that shoe to drop which is where they started to go from 99 to something less than 99. And the point is now that it has happened, it is very easy for anybody to build a model that precisely calculates the economic value of every single basis point of share shift that happens. And what you saw was an initiation of that process this week. So what do you do? The problem is that this is not Google's problem. This is a consumer choice issue and they have chosen something different. And whether we like it or not and whether they like it or not, the reality is that chat GPT is running away with it. And if you look at the growth and the share that OpenAI is seeing, it's quite an incredible thing. So what does one do? I think that instead of waiting for data, I think that you have to assume that you're going to go from 99% share to 75% in the next two years as an example. And you need to start asking yourself what will go wrong. And if you can ask yourself that question honestly and red team that then I think the conclusion you get to is you need to start very aggressively integrating Gemini as the front-facing window to Google Inc. But again as I sort of said last week that requires a combination of taste and courage. Otherwise, what'll happen is if you're waiting for the data, you're just going to get caught off guard because Apple will do things and then make a press release months after the fact. Open AI will announce a press release, Facebook will do something. And what that does is it destroys the morale of the company of the brilliant product managers, of which there are many, and the brilliant engineers of which there are many inside of Google. If you're sitting around waiting to react to some sandwich served up by your competitors, that is a terrible approach. Philipe, what are your thoughts here on Google? You obviously participate in public markets. Is it a buy right now? I mean, I don't want to give investment advice, but do you think the company has the talent, the temperament to make these hard decisions and to turn this around or avoid the iceberg? uh if the iceberg being chat GPT and people getting answers instead of links. Well, I think you guys have summarized the situation pretty well. I would just add just a couple small things. One is the market cap of Google is like 1.8 trillion and that of chat GPT is let's say 300. So Google is worth six chat GPT. And is that the correct ratio into the future or not? The second one is I was around sadly in uh the times of the yellow pages and I remember when the yellow pages the way you go somewhere to bounce and go somewhere else and basically these yellow links got replaced by the blue link and the yellow page companies went away. Now part of the reason they went away is they were very levered. Google has no leverage sits on a lot of cash and imagine what someone like Elon would do if he had to re-engineer Google. I think they have um you know uh it's it's a much larger company let's say than Twitter. So like the part that I'm wondering about, I haven't made an opinion on Google is like, "Hey, is this the next IBM? You're going to stick around for a really really long time, but you're just not going to be like a company growing as fast as you used to, and maybe there'll be little growth and you just sort of struggle ahead. Or can they completely re-engineer their business?" And they do have two great businesses, Whimo and YouTube, and really cloud and all the cloud apps. So they have three great businesses and then they have this one search business like you said maybe it's 60% of the revenue. It's probably 85% of the profits because it's just so profitable. No, I would say it's 110% of the profits. 110, right? So you're right because some of these others lose money. That's actually a good point. So um if you put that together, it's just a classic innovators dilemma and imagine that they create a Gemini app and we start downloading the Gemini app. I would love to be the fly on the wall between the head of the Gemini app and then the head of like the search box and they're both fighting because one guy is stealing the business from the other and stuff like that. Personally me I found that these stocks they're like a little bit too complicated for me and I think that sometimes in life you just got to say hey this is just tricky. There's like a lot of forces at work. But the one thing stepping out that I would think about is there was this concept of the Mac 7. And for the last two or three years, everybody is like, "Oh, you just need to own the Mac 7. Uh, it's really easy. I can do it on my own." And I think what AI is showing is that at a time of great change. And like you guys said on the show, a couple of you, AI is sort of precipitating so many fast changes. To me, it's a little bit like the end of the Mac 7. And what we should do is almost think like, hey, what is the next? Remember when the Mac 7 used to be Fang and then Fang Pl+ and nobody talks about Fang anymore. Uh, and now I don't know like the Max 7, the sexy 6, the Fabulous 5. There's going to be a new index that comes up and I think we should think about like who's going to be on the new index, which private companies, which public companies. And I think Google for sure has some struggles, but it's got a lot of advantages and a lot of cash. You know, to your to your point though, to just to add one thing, which I I love this framing. Here's another data point. If you were going to make the case that we need to go into harvest mode, right, and say we don't know the rate of change of the search business, so let's just have as much money on hand so that we have as much optionality. That's a very reasonable and fair strategy. You would probably not spend $75 billion a year of capex on making these models. The opposite is also true. If you're going to drain your cash at a rate of change that's greater than it needs to be to the tune of an extra $75 billion a year, there's probably a case to be made. Well, if we've made the cake, let's sell the cake. You know, we've made the dog food, let's have the dogs eat the dog food. It's the in the middle strategy of both spending the money but then stagegating the product that is the worst outcome in my opinion. I think they're right to invest. I find these companies that decide to harvest, you know, the cash cow and buy all their shares back, you know, it never really works. I think that the only chance that Google has to create an amazing company is you got to take some risks. At the end of the day, the man in the arena, he who takes the risk usually gets the spoil and they've got to invest in the future. It'll be interesting to see if the shareholders, you know, agree with that or not. What do you do, Jac? What do you think? Great question. You guys teed it up perfectly. I think they're going to cut a large number of employees, get people to return back to office and take this a little more seriously on a corporate level because you got that sense from Sergey who's in the office every day. And I use Gemini and I have a sort of AI first company where everybody's required to do their work on AI two or three different Claude, Gemini, Grock, etc. And what I've been noticing inside these products is they're very deeply integrated. I got surprised just the other day. I was asking it about a travel question and it referenced my GCAL. I didn't know they could do that. Then obviously you can use chat uh you can use Gemini inside of Google Docs. Now they have four or five products right now that are one or two billion users per month. Obviously Chrome might get spun out but you have YouTube, you have Google Docs, you have Android. They have such a data advantage and such a deep integration into people's lives because they use three or four services. I use YouTube TV. I use YouTube and I have a subscription to that YouTube music. They have such integration. I think Google's going to figure this out. And if they cut their team size down, the earnings are going to go massively uh up and they're spending 75 billion dollars on infrastructure. I think it's going to be would you integrate these models more aggressively into in front of the consumer or would you is this the rate that makes the most sense in your mind? I think you mentioned like maybe go all in on certain other services. I think YouTube search is the place to go allin right now. When you do a YouTube search, it just gives you 10 links, right? It just gives you that rolling bang. You should be able to ask a question to YouTube and you should be able to ask questions to your calendar. You should be able to say, "Who have I met with over the last 10 years who I'm no longer in touch with and what are they up to?" And it should do a Gemini search inside of Google Calendar. It's very light right now. And then if you did that on YouTube, hey, tell me everybody's opinion on COU and their strategy over the years and how it's changed. And you asked that on YouTube with all their transcripts, they could make a super cut of all of that. This would train people, you know, at the point of pain in a very deep way without sacrificing Google search queries, you know, too aggressively. So there's YouTube's such a secret weapon. I hear you. I would just remind the Google management team that very very very smart people like Phipe and others who control trillions of dollars I wish well collectively are not making the decisions about today but are taking the trail of breadcrumbs of what they see today and guesstimating what 18 to 24 months in the future looks like and all I'm encouraging them to do is I think that that data point from Eddie is the beginning of a stream of such data points and I just encourage them to inoculate them from the morale hit that will come if they don't have an explicit aggressive strategy and instead if they become reactive to external data. It's really demoralizing. But what if what if they're actually tracking the data and they're seeing their own sense of search queries driving clicks and then driving positive response to the AIdriven onebox results that they show at the top. Oh, I think that's exactly what they're seeing. But that's and they're just making the they're making the requisite kind of balancing decisions, right? No, no. What I'm saying is that's absolutely what they're seeing that the demonstrated strategy is emblematic of exactly that. It's the rationalization. My point is there's something that you can't rationalize because you don't know until it's presented to you, which is what is the other company doing. They don't have spies inside of OpenAI. They don't know what the OpenAI product strategy looks like. They only hear secondhand what the OpenAI growth looks like. And all I'm saying is it's a bit of a sword of damicles. At some point, the sword drops. you're not in control of it. And once you start to see a trend, that's the rationalization that I think puts companies in a very difficult and tricky strategic situation. It takes a lot of courage to say, "Oh my god, like it's like but Buffett said this, like Buffett has this very famous thing of just putting his CEOs on the spot and saying, "Stop telling me all these things that can go right. Let's go paint the death case. what can absolutely go wrong and bread team me the solution and then justify for me why you haven't done it and all I'm saying is if you start to think about like for example you saw open AI today Fiji Simo she's leaving Instacart right she's going to go and be the CEO of apps inside of open AI you're seeing a level of talent concentrate that I have not seen since I was at Facebook there was nobody we couldn't get when we thought we were building a model that was totally orthogonal to Google now it did not mean that Google diminished in any way, but it creates a different use case. In that example, though, the social use case was very much non-cannibalistic to the blue links. And to your point, David, if it turns out that question asking is not cannibalistic to search, Google will be fine. All I'm encouraging them to do is play the scenario where it is cannibalistic and figure out what to do. I think there's a chance that we're underestimating the power of Google's ad network right now. It's quite possible that knowing your queries in Gemini, knowing what you're doing in calendar, knowing what you're watching on YouTube could lead to a stream of more target ads that do better and are more valuable. And so we've been seeing a number of companies, startups, you know, in the early stages and year one startups that are figuring out how to use your queries and what you're doing in AI to present to you search results. So imagine you're doing a Gemini search Jamoth and or Philippe and on the side of it it's giving you a rolling list of ads or offers that you might be more interested in. That could be a better advertising product than even search itself. Freeberg, your thoughts? Well, let me ask all three of you a question which is since chat GPT's come out and Gemini and other tools like it, do you find that you're doing generally more stuff or less stuff? I find that I am using search a lot less. I But but the aggregate is your aggregate like usage of the internet to do things for yourself for work kind of are you getting more? Yeahve yeah I've learned how to ask things that I've always wanted to know but didn't even know were possible. Right. But all of that to me goes to open AI and to X. I use that that's fine. But I'm just saying like like if you were to cuz I'm I'm what I'm trying to do is paint the picture of where the denominator of quote search queries is going because if search queries is no longer that's the wrong way to think about this. No, I like your I like your I'm doing five times as many queries and I would say they're spread across a number of different platforms because instead of asking humans to do work, I'm now doing it myself. You used to ask a human, hey, can you do this research for me? They would come back to you. You would hire somebody or use a consultant. Now I'm doing it myself. So you're on to something that the total volume the total pi could be 510 per person. Yeah. If if the old paradigm is like measuring search queries and quote market share as a function of search queries I don't know if I care about having 99% of that or if I'm actually better off having 80% of something that's now three times bigger. Yes. Where there's so much more. Imagine you get you lose 99% of one bucket, but you're only getting 10 or 20% of the new bucket. That's the bad scenario. That's exactly right. That is the bad scenario. That's the issue, guys. That bucket is getting built right now, and they're in nowhere'sville in that bucket. How are you going to show up in 18 months and say, "Oh, that new bucket that's so shiny. Pick me. Pick me." This is why it's a strategic error. Well, think about the let's say you're running growth at Facebook Chimop and you guys have a new product you want to launch. You've got a billion users. How do you get them to use that new product? Because Google has a a chat GPT competitor. How do you get them to use that product? Yeah, I walked through this last week, but I'll do it again, which is I think that today the part that I agree with you is this whole view on search is antiquated and it makes no sense. I think instead what you need to think about is where are the inbound actions into the house that is Google, right? Google Inc. And you have to have a very simple way of deducing what is the value of that inbound action. And if you rank them, the inbound actions to the Google search bar are obviously way more valuable than the inbound actions in all these other apps. I would start in those places that are more bottom of the list on the money side but high on the list in terms of intention and behavior and I would reddo the experience around Gemini but that requires taste and cannibalization that you're that you have to be willing to take the hit on which service you think is number one YouTube I think your idea Jason around YouTube is a very smart one because it's a juggernaut business I also think workspace we use workspace here every day Gmail calendar. I think workspace could be really interesting as well. Gmail is a great one. Yeah, inside of Gmail and it is going to get better. Like there are smart people thinking about this. All I'm saying is that the market will now start to price this decay in. I'm long. Well, Philipe, I want to know your bucket of what are the most important companies that matter the most. Okay, I I'll try, but I have to ask you guys a question before. Do you guys think that the two founders come back in a very forceful way into the company? I don't know exactly why, but one thing that I was wondering, Chamath, is you you bring up a very important word, taste. Do you have to be a founder to be able to impose this sort of new taste? And do you need sort of founder credibility at the junction at which Google is at? It seems like this is a big junction, right? This is the first time in their 20 25 year history where I feel like, wow, there's a real threat. How do you do that without the founders? Yes. And on top of that, they're alive. You know, it's just they ask Larry. No, Sergey is going to do it. I think he's building up the reason we're seeing at the all-in events, the reason he's going to work every day is that he's building up his knowledge base here. And I don't want to speak for him, but I've seen him really engaged on this stuff. And the Gemini app is kick ass. And I've had long conversations with him about like little details in the Gemini app. He is super engaged. Like I've had conversations with him about granular details of Google local and YouTube searches and how they should be presented in the results in the Gemini app. He's into it. He's into it. You're bringing up something which I think is very important. when you're at a junction this important who has the gravitas to come in and actually make a difficult change like this I think in general it's the founders and you know in fairness to Larry and Sergey these are two brilliant brilliant guys they've done it once and in fairness they probably did it kind of a second time when they created Alphabet because now you have these other businesses that are pretty impressive now they're just going to have to do it a third time but they're going to have to impose their will and they're going to have to develop some very specific specific taste. This is nothing against Sundar and the team, by the way. This is just to say that the only people that can come in and say, "Guys, we're going to make a change that could have this negative impact to a $ 1.8 trillion company are people that are going to feel it the most, they will feel it more than anybody else." And so, if they say that it should happen, they'll have the moral credibility to make it so. I love this question that you were just asked, Philipe. Go through your top 10 companies. Why you What's the number? What's it? Not top 10. What's the number? What are the companies that matter the most? Yeah. So, I have a I've thought about that a lot. I'm not sure, you know, great answers. But the first one is I keep defaulting to the number 25. I can't explain you why, but they're not a 100 companies. But if you think there's only five and all these money managers, you know, they have like five stocks that represent 80%. I feel the level of risk that you're taking is too high. And that one has to be, you know, I start with a h with the public markets. I would say most French people are not known to be particularly humble, but at least if you've been in the stock market as a French guy, you've been beaten up so bad. I started January 1st, 2000. So imagine what my first three years looked at. I got reduced to, you know, ashes, just beaten up by the market. you know, we we did reasonably well uh uh because uh thank god being a hedge fund, you know, you have different tools that you can do. And so I think you need to have a certain number of stocks. You need to know that some stuff you get lucky, some stuff you get unlucky, some stuff you get right, and some stuff you get wrong. And then I think that there's a second phenomenon. Once you agreed to the 25, you say, "Wait a minute. Why are there no IPOs? Why are these private companies, amazing private companies, some of the best in the world, SpaceX, Stripe?" Answer that question. Why? Open AI, why in your mind? I think that the cost of being public is too difficult. One, what? think like the the reputation, the regulatory like you get busted like left and right by uh agencies and like when's the last time that a public company I think that you know during the last administration something like someone told me I don't know if it's true or not but I love the I love the quote so much that I'm using it without checking if it's 100% true or not something like 35% % of the S&P had an issue with a government agency in the last few years, right? When's the last time that you guys remember a private company that has an issue with a government agency? Like I'm sure it happens, but like off the top of my mind it seems like a fraction of that, right? And then I also think that the private markets have become so sophisticated that in essence like our private markets, public markets that just trade three times a year like uh you know these companies they do these uh uh rounds you know once or twice they're becoming pretty sophisticated. They match buyers and sellers and I think that's okay. And then the last piece which I think that's a very bad piece for the four of us and all of us on this call and many of your uh listeners is that there's such a view that like large companies are bad and we got to bust them and we're not going to let them do any M&A and as a result of that small companies no longer get bought by big ones. And for me, it's a disaster because if I fund small companies, but now you take away one of the best ways that I have to monetize my investment, why should I invest in risky private companies? I can just buy the public one. And so I'm really hoping that as part of this deregulatory move and you guys and Sachs will have way more influence than we, but to convince people that in my mind the best way to create competition is to allow these large companies to fight against each other. And the battle between OpenAI and Google is the best way to do that. But not by telling Google not to buy something or telling Open Double Click on that, Philipe. I think it's a super important point. The singles, the doubles in the industry. I've been harping about this on this program as well. So, we're sympotico. What about a proposal where maybe the non-MAG7 let's let's pick a number under a trillion market cap under 750 billion. We let those companies buy and sell each other at a very vibrant pace. We saw Chat GPT buy a $3 billion company. I think this past week in the um kind of uh coding space like I mentioned earlier in the program, Door Dash bought two companies. What if we said hey okay we understand Google getting bigger, Apple getting bigger, Microsoft getting bigger competitive would be but how does size make a difference to whether or not someone should buy a company? Very simple because they have such a market dominant position. Hold on, let me finish my sentence. They have such a market dominant position when a company like uh Apple has, you know, half of the mobile phones or Google has Chrome, Android, plus all these things that they could shove that product for free down the throats of users, price dump it, which is illegal, and create less competition in the future. But if you said Door Dash and Lyft or, you know, Coinbase plus a stable coin company, this would build the Max 7 to the max 70 and then you would have many more larger companies. What What do you think of this, Philipe? I I'll respond to that because I don't think that that makes any sense and I think that the the comments you're making about size shouldn't drive these decisions. The fact that Apple, for example, has a minority market share in operating systems on mobile phones. Remember, Android is the majority. That's no longer true in the US, by the way. Right? Not globally, right? And Apple comes along and says, "Hey, I want to buy a car company or I want to buy something else." Why should that affect consumers in any way whatsoever? it the the ultimate objective of antitrust authority is to prevent monopolistic practices that hurt consumers and hurt the market and take away options and choice and freedom in the market. But if companies want to make um orthogonal acquisitions, if companies want to continue to grow and become a you know a large holding company, why should we step in and say, "Oh, you're too big now." Ultimately, Jason, you're you could see that threshold very quickly becoming a slippery slope that leads to a general like anti- capitalist concept where people say, "Well, let's stop all companies from getting bigger than a billion or let's stop them all getting bigger than 100 million now." And that that is a very slippery slope. Scale shouldn't matter. At the end of the day, protecting consumers from um monopolistic or antitrust practices should be the objective of these antitrust authorities. Yeah, I think my response to that would be except in the case where the bundling, as we've talked about in previous episodes, makes it so any of the large companies can hold Hold on. Let me finish my sentence again. In the case that a large company could kill all the competitors instantly by price dumping. So, you take something that people are paying for, you know, like say uh Robin Hood or Coinbase. You, you know, Google buys Robin Hood or Apple buys Coinbase and they just say everything's free. we're going to make our money from our main business. Yes, it's better for consumers, but it's not as good for a competition and in the long term then you would kill all the competitors and then they can do unnatural acts. That would be the argument. I'm not saying it's a great argument. That's a great argument for what you're talking about. It is not a great argument for stopping companies above a threshold of of market cap from doing stuff and companies below because a company below a threshold in market cap could have the same effect as what you're describing in a smaller market and they could have you have to be thoughtful about you're 100% correct if they're in the same arena. So Coinbase, Robin Hood, and Erade merging could cause the same effect. You're right, Philip. What are your thoughts on just how to get the country out of this debate? Because big companies bad. No, we shouldn't let them do m any M&A. The wrath of Lena Khan. Is there a is there an offramp here? Can can Trump just unilaterally kind of make this happen? What are your thoughts? Or should he? Oh, I think that to me one of the best part being an investor of venture capital is when you have a really big idea and it works out, it takes care of a lot of sins. You know, there's a little aspect like would you like to play the lottery? if the lottery was capped like hey if you win the lottery you can't win more than $30 million 30 million is insane amount of money but I I read that there's some lottery guys who make 1 billion and two billion and the reason why people are willing to bet so much and most people are willing to lose is they all think that they're going to have this one ticket that's worth a billion and I think when you reduce the incentive the financial incentive of and I agree with Dave like success should be rewarded as much as possible. But if you've done something wrong, then use these, you know, the existing uh laws to define what success is. I don't think you can cap because once you start capping and then what happens if the stock market goes down, do you then have to just recap? So, but I I agree with you. You bring up an interesting point which is in these bundles like Amazon Prime bundle, Apple bundle, there's a Costco bundle, right? We seem to be living in this world of bundles where the stock market is willing to pay 40 50 times earnings just for the you know the membership fee as long as whatever you do on the side you basically make no money like Costco I think makes 100% of its money more or less on the membership fee and trades for 50 60 times earnings there is a limit to like how big the bundle is before you start uh dumping so I don't think I'm saying anything super interesting I just hope that you don't cap the upside because that's what enables all of us to fund these new companies. The reason why all of you guys and me were willing to fund these companies knowing that many of them are going to fail is the hope that you get open AI. Yeah, it's well said the power law. Chimath, I think maybe a good time to maybe talk about private markets and liquidity in VC. Yeah, I mean it's just so hard. It's hard to make money. And if you view making money as some derogatory thing and you put a bunch of impediments in the way, the downstream impact is interesting ways to make money will be out of fashion and simple ways of making money will be the only things that people do. The problem is that society doesn't move forward if all you do are simple things. You need people who are willing to put risk capital to buy these lottery tickets. And if you marginalize the upside, you're just going to have exactly that, a stagnant society of marginal things that doesn't move along. And unless people fundamentally embrace that idea, we're going to lose. We being America. Yeah. Yeah. If you look for example in the last 5-year period in China or Canada where both of them two totally different political regimes but they both had the same thing happened which is the the the amount of investment capital that went into both of those countries fell off of a cliff for two totally separate reasons. What is interesting is going to be what is the downstream impact of that in 10 and 15 and 20 years and you can look historically back and we know what this looks like which is countries stagnate in the absence of investment and risk capital. So you will become a marginalized also ran country and you know not to slag Europe but part of what Europe got wrong was that compact didn't exist too many administrators too many hall monitors not enough ability to put risk capital to work and actually get gigantic outcomes. So the most important thing we can do on that dimension is to figure out how to have less regulation, have these companies fight it out and create the incentives for for these smaller businesses to be bought andor to go public. So let's uh back this up with some data here. Nick, pull up the chart on exits. This is an important one for people to see. we've had since the wrath of Lena Kong last four years under Biden. You know, you had this 2021 spike of IPOs, peak zer, a lot of inventory, a lot of risk capital have been put to work for 10 years. And after that 2021 spike, things have been flatlined and companies are preferring to stay private. And now we have venture capital constricting in terms of new funds being done and people are making larger funds to do later and later stage investments. And Jason, it's constricting at the absolute worst time because what Philipe said before is we're in the midst in the early phases of an entirely new economy that's going absolutely parabolic. But the people that are supposed to accelerate that innovation and make these companies come to life are going to run out of gas because if they don't return money to their limited partners, where are they going to get the incremental capital from? Yeah, it's retail investors and sovereign wealth funds outside the US seem to be the answer to that question. This lead to a normalized market, Phipe and Chimath. So ultimately, shouldn't the exit volume define the amount of capital that LPs should invest in this asset class to get an out a return that compensates them for the ili liquidity relative to public markets with the same kind of risk levels. At the end of the day, it is what it is and you're going to see a reduction in venture dollars and that's just the market normalizing. The econ the economy only grows and only innovates at a certain pace maybe is what the data shows. I think the way that I think about this as an LP and maybe Philipe can talk about this as a GP but as an LP when I think about putting capital into different funds I have a base return in my mind which is I want after taxes net of everything to generate about 10% a year that's where my risk of ruin is basically zero it compounds to infinity I like the profile of my return of my assets how do I get to 10%. Well, sometimes when I'm holding short-term stuff, I'm only generating four or 5% in paper. So, then I have to go out on the risk curve. So, I talk to a hedge fund. They're going to give me 12 or 13% net maybe in some cases. I try to understand their risk, but I can only get so much working. So, then I have to go further out on the risk curve. Then I talk to some private credit and private equity guys who tell me, "Yes, I can give you mid- teens returns." Then I do the analysis on that and I think, "Okay, I'll give you some money, but they are going to lock me up for five or six years." it's still not enough to get to a blended rate of return of 10%. So then I go yet further out on the risk curve. I call my friends at SEOA and all these other places. And when you talk to the venture investors, the problem is you are so illquid for so long that the rates of return need to be in the mid to high 20s net to me. But when you look at the data of what's possible, they actually look like a three and fouryear hedge fund. And part of the reason is because of this strangulation of illiquidity that's caused artificially by administrations, by regulations, and by agencies like the FTC. The question is if they didn't exist or if the regulations were a lot smaller, what would the upside return be? It's probably 500 to a,000 basis points higher. Much higher. 100%. Yeah. But I think at current course and speed with the lack of IPOs and with the lack of M&A, you can't justify that asset class on its own in my opinion unless you think about it as like something that you're doing almost philanthropically unless capital comes out and then prices come down and then m return multiples go up. Let me put some numbers on this. Here's the second chart. annual IPOs and just give you some, you know, broad strokes here of how amazing 2021 was for a lot of firms. Rivian went out at 66 billion, a firm at 24 billions, Qualrix 25 billion, Robin Hood, which I was involved in, one of the first investors, 30 billion, Dualingo 5 billion, Toast, etc. Roblox 42 billion, Squarespace, and then you had all this M&A Square app bought Afterpay for 29 billion, Zoom acquired 59 for 15 billion. Mailchimp, remember that one? 12 billion. Microsoft and Nuance the um spoken uh the um models 20 million. Do you know what the distribution? Do you know what the distribution of these IPOs were by method? Spack versus direct listing versus traditional IPO. I don't have that here. We'd have to do it not just on the names but also on the amount uh distributed. Yeah, that's a good question. You know, when I look at that data, what what what I look at if if you just bring it back for one second is ever since, you know, the 20 and 21 which were very high. Yeah. If you look at 22, 23, 24, and now the 25, I'm like, how is this that it's worse than 04, 05, 06 that were normal years? How is this worse than 13 and 14 and 15? Yeah. She scared the hell out of people. She scared people. Correct. M&A. I've talked to M&A people, Philipe, and they have said it's not even worth bringing it to the board. Worth the discussion. She can't connect the dots. You know, she's like, I want people to not, you know, play the lottery anymore. I don't care for them. She doesn't understand that our system is based on this risk takingaking. And so, listen, I think it's almost I think it's this might change. It's also worse than that. I think that they probably look at like Adobe Figma and they look at the cap table and they probably just make a judgment that, hey, I don't want these people to be billionaires. Yuck. I hate these people, but they don't understand, to your point, the waterfall effect of not returning capital to all kinds of other investors who are in the business of taking risk. It's this like collateral damage. You know, one of the things I feel none of these people understand so well is like all the collateral damage. You think you're moving in one direction and all these dominoes sort of fall around you. Exactly. Well, the second and third order impacts this cascade. You know, it's Ford Foundation, it's Harvard, it's California retirement. Those are the people who are the going to be the beneficiaries. And the third thing, because I've been talking to a lot of geographies in the Middle East, Japan, Australia, Singapore, etc., Asia, they all want to recreate what we have here. Well, what we've created here in Silicon Valley and in America is these diasporas that start when a company like Google goes public and then those people go create Facebook or go work at Facebook like Cheryl Sanberg did and they accelerate the growth there and then those people become angel investors. They become LPs. This incredible flywheel was cooking. I mean, it was so smooth. And now we've literally stuck a stick in it and the car flipped over and you you don't have the downstream effect of Canva in Australia that you I don't know if you know that company has done incredibly well. Phenomenal. They were Oh, you are involved. Yeah, we're we're we're involved. But sorry, just one thing I would add because it makes what you said so much more powerful. On top of that, when these people die, most of them gave all their money away to foundation, which is something very different between the US and Europe. In Europe, a lot of the wealth and in many other countries outside of the Europe, the wealth basically continues for generations. In America, these people built companies, create new companies, invest in new companies, coach new companies, mentor new companies, and when they die, all that money goes to foundations that continue to promote and do some of the work that governments would do. Finally, how great is it that some foundations are competing with the government to decide what needs to be done as opposed to a larger government, right? And and so that ultimately serves the Doge mission. Atlassian and those incredible founders who did Jira, etc., bought other companies, they wound up being the seed investors in Blackbird, the the venture firm in Australia that did Canva, and they were the investors in Canva. Both of those companies are creating this incredible flood of entrepreneurship in Australia and we're breaking that in America. Australia copied that playbook. I want to know about the new fund you're doing, Phipe, and why. Maybe you could explain to people. I guess this is one of these what do they call it? Closed or open-end funds and and they operate differently than venture ones. And also the seating you you seated it in a very unique way with a couple of very unique family offices. Yeah, you guys are nice to ask and couple of you have tweeted some nice things about it. So, I I really appreciate it. I loved it. I loved it. Let me tell you the the a bit the story behind it. Right. So, I was like on one hand you've got private funds. They're only available for the super super rich. Like you got to be uh like, you know, a super duper accredited investor. You put your money in there and you might not see anything for 10 years. And then for me as a GP, every three years I need to raise a new one of these funds. So god forbid we have one fund that doesn't work. Can we raise the next one or not? Right? So that was on one side of it. And then on the public side, what basically is going on in the public is very strange. But in essence, the black rocks of the world and the vanguards of the world and make it that almost everybody wants to invest in an index. And as a result of that, the people who are still active managers, they're all basically closet indexers because the risk of being wrong, you're you do better for 10 years and then you do worse for one year, you're out. So basically the public market, everybody wants to index, which is I think why the max 7, you know, is so big and stuff like that. And uh the other part that's weird with the public markets is since everybody needs to be indexed, everybody needs to be fully invested at all times. I'm like, why? Why is it that you need to be fully invested in 1999 if the P multiple of the market is 60? Why is it that you want to be fully invested when you're already down 10%, things are not working? Why not raise cash a lot? Sort of, you know, freshen up your ideas a little bit. go take a long walk on the beach and try to uh understand maybe you've made some mistakes and stuff like that. So I've always wanted to do two things which is one on the public side have the ability to be different in the stocks that I own but also that if I'm nervous then what's wrong with holding cash and I hate to put this in the same word but you look at Bergkshire Haway today and everybody wants to compare themselves to Bergkshire a little bit but Bergkshire today is a trillion dollar company a third in cash a third in public equities a third in private equities right and so I was like okay well what if we have a system where we can be in public stocks, we can be in private companies, but we also can be in lots of cash and where investors know on day one, please do not compare me to an index. If you come in, you got to give me sort of five or seven years to do my work and I'm also going to let you take a little bit of money every year. So in essence, I'm willing to work at much lower fees because you give me capital for longer, but you don't give me the capital forever and you're not stuck forever. And so these interval funds are really interesting uh because uh I think the minimum investment is like $50,000 or something like that. And the conditions to qualify for such a fund are much smaller. So there's many more investors that can come. And I look at it a little bit of like this is the democratizations of tech investing and I really believe in it. I've been doing my thing for 30 years for institutional investors. Why can't I do it for like people who don't have access to Let me ask you a question. You have what 53 billion under management something like that. Something in that zone. So I mean obviously you've been phenomenally successful. talk about the fees and the carry and how you decided how to set that and then tell us how your competitors reacted when you announced this fund. I'm very curious about that both of those two things. Yeah. So, we got a little bit lucky in that we studied the fees of other funds. These are things called interval funds and it seems like the fees were more like u 1.25 25 and 12. And so we're like, well, can we live at 1.25 and 12? And I was like, yeah, you know, it's a really good deal for other people, but I get something for it, which is I get near permanent capital. And in exchange for that near permanent capital, I'm willing to live at lower fees because I think I'm going to be able to compound it for longer. So in essence, it's not like I'm being altruistic. I'm not claiming, oh, I just want to do a good deal for people. Is I'm being selfish. If I can compound capital at 12 and a half percent incentive fee for a very long time, it's better than 20% for a short period of time. And for the investor, I love the fact that I'm sort of investing like if you told me, Philip, start from scratch, write on a little blank piece of paper. What would you do? I think all of us on the show would say, well, it would have to be something that looks like Berkshire Haway, right? Bergkshire is the model. and you want to do cash, you want to do publics, you want to do private, you want it to be a good deal for people, you want it to be permanent capital for you, and you want to try to be able to do that for a long time. And I think that's sort of what those uh things do. And then I was like, okay, but then the problem is like you have a snowball at the top of the mountain. How do you get it to roll and to be big? And I was like, you know, we're not very well known. I have to admit this is sort of one of my first podcasts, you know, uh ever. So I really appreciate you're doing great being here with you guys. So, I was like, I got to get the ball rolling at the top. And so, I thought, okay, maybe I can get some tech entrepreneurs to help me out who believe in this concept of democratizing tech investing and stuff like that. So, I went to see the family officers. I didn't quite see the founders directly, but the family officers for both the Bezos family and then the Dale family. And I sort of pitched them the idea. They like the idea. Then we pitched it uh to the founders and then we got to some agreement and they gave us a combined billion dollars to get going and then we're also going to put a lot of personal money in it and I was like great and I had read I don't know if it's true that the largest fund that was ever launched was the one of the first Blackstone was 1.3. So then I said okay I need to launch the fund that's 1.301 like that I can claim that it's the largest launch ever. So, I don't know if I'll get there or not, but that was the idea. And I think it's nice to have the backing of these guys. So, typically what happens is people come to see me in my office. I'll ask some folks to do diligence and then I sign up to an LPA. Is that how this works? Like if I'm interested, what is that what I do now? I or is this totally different? You mean you as an LP now? Yeah. Yeah. Yeah. Yeah. Me is just a normal person. So, uh this fund in particular starts to be marketed by uh one of the Wall Street firms. It's in in this one. Uh we picked UBS. They were the first ones who believed in us but many other firms will work with others and we have great relationships with JP Morgan and others. So in time it'll be available on all these different platforms and then most of the people that we target usually have a relationship with a wealth management firm and our hope in time is to work with a bit the leading uh wealth management firms and uh you can invest and frankly I'm like hey just start giving me a little bit of money see if you like what I do on that how many people can be involved because when you do venture obviously there are caps. You can only sell to accredited and qualified purchases. That's about 6% of the country. And you can only have 99 accredited investors in a in a venture fund and then it's I think uncapped and then you can have 200 you can have up to 10 million and I think it can be 250. I did this when I did our fourth fund and I had 120 million in interest. I can only take 10 million of the accredited. So it it really is capped in the venture space. But you're doing a different type of vehicle. Is there a cap on the number of LPS you can point? And of course, I knew I should be more prepared doing this. I don't remember exactly what the caps are, but the point is is that the number of people that can join the fund is much greater and the number and the amount of money they can put in is also much smaller. And as a result of that, you're reaching a wider audience. And that particular audience, they're happy because if you think about that fund, right? One thing that's a pain in the ass. How do you manage all the capital calls? They drive me crazy. How do you manage all the distributions? Oh, I just got some stock in a public IPO. Should I keep it? Should I not keep it? Is it a good company like Google that's going to 20x post IPO? Or is it another company that I should just sell immediately? Right? You basically have one structure. It manages everything and then you get a 1099 instead of like a bunch of K1 which are so do you think like Seoia and Dre and Kla founders fund how do they respond that's question one and then two does it change the behavior of the fundraising cycle or process for you and your partners when you're evaluating companies or for the entrepreneurs like does any of that change so how do how does how does competition react and then how Do companies and CEOs react? Listen, um, when you start worrying about your competitors, in my mind, it's a bit of a version of the grass is greener elsewhere and you have to focus on ourselves. It's such a hard business. There's so many smart people and this and that. We tried to design something that plays to our strength. And our strength was we got the public markets, we got the private markets, and then we've got risk management with the cash and knowing when to be in and out. I would suspect that other people will do the same. Hopefully, it'll be different because they have different strength and stuff like that. And I thought that what was nice for us is to sort of uh do this a bit of a hybrid uh public private and frankly in private you guys think there's venture, there's the growth capital, there's private equity, this vehicle could own 100% of a company, you could do debt, you could go up and down the cap. What is your plan then to do with private companies specifically? Do you see yourself, you know, leading a series A or participating in one of those or buying secondary in SpaceX on the open market from former employees, maybe buying out strips of other venture firms that are looking to wind down or get early liquidity and you come into some, you know, midsized uh $300 million fund and buy out 20% of it? What What's the strategy here with private specifically? This is a good point. It's a bit like, hey, so what's your northstar? Don't tell me you can do everything. like what are you going to really do right and to me the northstar is uh Jason I got to build for you in 10 years the new mag seven that's my job so we know we know who are the 10 largest companies in the S&P or the NASDAQ today what are they going to be in 10 years some are already public they're just going to get bigger and some are private so to that extent I don't believe that necessarily venture is the right model for this particular because it's like uh it's a th00and to one to go from zero to 1 million in revenue then it's 100 to one to go to 10 million that's the insight that and you mentioned this on our call earlier today that I actually think is really really really powerful the mag seven was this set of correlated seven companies that sucked up all the attention all the money they moved in unison dollar for Now that that correlation has broken down, it allows you to ask this question which is what is the real MAG X companies? And to your point, if it's a 25 company basket, you're absolutely right. Like SpaceX would be in the basket. It's private. Correct. So, so Stripe would be in the basket. Like so to belong some rando public company because it's public and ignore SpaceX and Stripe would just be stupid. So to your point that is really that's really powerful. The the the optimal basket of the companies you'd want to own for the future because of these rules and regulatory burdens are partially public, partially private, and so you need a vehicle that can straddle both if you want to own it. Yes. I I think that that makes a ton of sense to me. That's the idea. And also like the people who choose who the Mac 7 are, it's like some employee at MSCI World or something like that. Will you actually go out on a limb and try to publish what you think the version of that index is as you construct it inside of that fund or we have some public requirements which will force us to do that. The private markets are overheated. There's a lot of secondary offerings. So if you try to get into Stripe, SpaceX, Androl or like there was recently one of these, you know, robotic companies that has zero revenue and wanted a $40 billion, you know, valuation and there's all these civilians, retail investors who are investing in your fund, but also have direct access to these secondary markets. I mean, you also have to buy at the right price and these I know firsthand for the for those top companies are massively inflated. You have 30 $40 billion valuations on companies that are pre-revenue sometimes. How do you think about that? I have no idea of the company you just referred to. I have no idea which one it is. I don't want to say, but yes, maybe they did a maybe they did a trial with BMW that was in the factory or not in the factory. I don't know. Listen, humanoids is a pretty exciting area. I don't know what companies are, but there is going like let me in in my top 25. I don't think I think it's a bit early. I would have a humanoid company. Hm, I'd have a robot taxi company. You know, I try to find some whoever is the leader. And I think the point that you make that's really good, Jason, is we also have to wait. To me, there's two key things. Can I establish with 75% chance that this is the leader? I don't want to do it if it's like a 1% chance that it's the leader. I got to pay more later. That's one. But two, there's one advantage that the public markets have over the privates that we know how to value things because we have comps and we know about revenues and profits and earnings and P multiples and stuff like that. Sometimes private investors, they just value a private company like, hey, if the last round was 100, well, this round's 200. And I'm like, but why, you know, why is where the CEO is really good on camera and funny Twitter like doubles, right? And so I think that in the growth business like being a public investor is important because it lets you at least say if this company were already public what it be worth and then when you own public company the one thing that the private company gives you if you want the public comp the public business it gives you discipline but what the private business gives you which is really cool it gives you the telescope into the future and I think that to be a good investor, you need to have one side of your brain which is imagination, creation, believing in the future. And you need to have another side that says, "Hey, slow down chemo. This is like 80 times earnings and it's twice as expensive and be patient." And for me, the best investors are the ones where you sort of have the telescope in the future, but you also have the day-to-day discipline of the public markets. And as I said before today, man, you get beat up in the public markets so bad all the time cuz you buy something, it goes down by half. You in the private markets, it goes up, goes up, goes up, and then one day it just goes to zero. Yeah. Yeah. It's like we're out of business. You take the loss. Hey guys, some breaking news. Breaking news. The Pope has been selected. And I thought, you know, since you guys haven't been here, let's go through it. Here it is. The smoke has come out and Phil Helmuth is Pope Helmut. A little work to be done on these language models. Oh, look. Here's another one coming out. Chumat, congratulations. The first No, that was a black smoke. That's black smoke. That's black. Black smoke. Oh no. Maybe Chimat didn't win it. Oh no. Who do we got next? She was trading. She did better than you, Phipe. You didn't beat the Pelosi index. So you don't become divine intervention. Divine intervention on her portfolio. Maybe a little insider information. Okay. Wonderful episode. Phipe, you're amazing. Yeah, that was great. Thomas, you got competition. Your big brother. He did pretty well. So now you know we don't have two. We have one or the other. So we'll let the audience decide. For Chimamoth Poly Hapia, your German dictator for Arzar, who couldn't make it today, and your Sultan of science. I am the world's undisputed greatest moderator, Jake. We'll see you next time. Bye-bye. Bye-bye. We'll let your winners ride. Rainman David. And it says, "We open sourced it to the fans and they've just gone crazy with it." Love you queen of kin. [Music] Besties are gone. That is my dog taking notice your driveways. Oh man, my appetiter will meet. You should all just get a room and just have one big huge orgy cuz they're all just useless. It's like this like sexual tension that we just need to release something else. Your feet. We need to get Mercury's I'm going all [Music] in. I'm going all in.