August 20 2022
- Friedberg is moderating!!!!
- Dave Friedberg
- Chamath Palihapitiya
- Sacks
- JCal
- Rationale for what’s going on with the podcast
- Differing points of view
- Last couple of weeks have been a struggle
- Adam Neumann is back
- $350M from A16z
- Flow - residential apartments
- 3000 apartment unites in Miami, Fort Lauderdale, Atlanta, Nashville
- People are wondering why he’s able to raise funding
- His track record is great
- He started Greendesk
- WeWork is the strongest brand in co-working space in
- He put $300M of his own money to buy these apartments
- Bet could be good
- Sacks - Craft doesn’t do non-software investments
- Stuff in physical world with atoms is 10x harder than to do with bits
- Most startups fail and Most founders are good - so together = many repeat founders
- WeWork is just REIT - Adam was able to pitch a non-tech REIT as a tech company
- WeWork is now a $3.6B public company
- He was pitching people that didn’t want to hear about REIT
- It seems he’s starting another REIT, except residential this time
- He has again found a technology investor to buy a non-tech company as a potential tech company
- REITs are very structured - most valuable REIT in the world is Prologis - $100B company, 1B sqft under management
- The only mistake Softbank made was a velocity of money mistake - should have done 10 years instead of 5
- a16z is also in the same boat except without the same quantum of money
- a16z wants to become Blackstone for technology - $35B
- Blackstone is $100B - credit, Private equity and real estate
- a16z is trying to build a public ownable security using technology
- They want to become a credible reliable institution to absorb 100s of billions of dollars
- Landlords care about high quality tenants - want to cover their bear market
- WeWork was highly levered to a boom cycle - arbitrage goes away in troubled times
- Flow is different - they’re going to create a brand for apartment living around the country
- Can he extract more rent and less vacancy from apartment units with financial decision?
- FFO = Funds from operations
- Its a positive for a16z - they’re being bold - their business model works by taking as much Oxygen as possible from the room - so always keep raising funds - like Blackstone, Carlisle, etc
- a16z wins
- Adam Neumann chose them
- 1 check to deploy $350M
- Biggest predictors of success in startup = second time founder - first round capital did survey a few years ago
- This might be ultimate case of that
- Housing Policy - Bay area, Houston, Miami differences
- Andreesen wrote essay during pandemic - “Build” - to build housing
- And last week wrote complaint to city of Atherton against multi-family housing, complaining about prices
- CA housing is a mess - tenant rights movements have gone so far that landlords cannot evict anyone - crazy taxes - 6% transfer tax - they took 6% of Sacks’s home
- Atherton example is zoning - you are buying a house in that neighborhood and investing in character of the neighborhood - so understandable that residents would be against that - builders can’t just come in and buy SFH and convert to apartments
- Look at areas around public transit like BART etc - and build up in that neighborhood
- What if someone built a skyscraper in the farm they buy next to you if you’re a farm owner?
- Venice and SF people are also able to object
- CA needs to build 3.5M by 2025 - focusing on a town with 7k people is not the place to fix it
- Atherton has bad flood infrastructure - there are no sidewalks, you just walk on the road - residents of that town wanted that lifestyle
- Just south of that - Menlo Park or Palo Alto - they could absorb it - but what if they also object?
- But now there is a state mandated objective for each town and zipcode and city to build more housing
- Millions of homes can only be absorbed in cities - SF has infrastructure to absorb it - they have sidewalks, stop lights
- Hypocrisy here is that its not for multi-story housing, its townhomes which will be $3M - most probably tech company CTOs
- Redwood City is awesome now - they built 10s of thousands units - and downtown there is awesome now
- WFH - 30-40 mins of commute + = quality of life suffers
- People are buying apartments for their nannies, etc
- Atherton can pay for the houses to be built in Millbrae, etc
- NYC is less sentimental about their buildings and are able to scale up and be dynamic
- Houston and Miami are doing better
- Houston has no zoning - hospital, school, etc
- This problem is worse in democratic states and cities - they want to gerrymander school districts - they want to protect tax dollars, to send to their public schools - zip code oriented scheme
- China, Saudi Arabia, Russia increase relations - should US be worried?
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Xi Jinping went to Saudi Arabia - a month after Biden’s strained visit - his first visit in 2 years is to Saudi Arabia
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After 6 years of negotiations, China will yuan for Saudi oil - this might hurt US dollar on global economic stage
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China and Russia are doing military stuff in Russia
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Saudi Aramco has most profitable quarter - more than Tesla, Meta, Apple, MSFT combined
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Saudis are buying shares in Alphabet, Zoom, MSFT - $600B in US equities - US is dependent on Saudi funding
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Is the future a China, Russia, Saudi axis?
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Biden in his 1st year pushed Saudi Arabia into China’s arms
- He called them a pariah
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He lowered US energy production and ruined relations with Saudi, etc
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Better to be friend with them than to not have them as a friend
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Deal with the regime that they have instead of complaining about it - we don’t know regime change will work in US favor
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Basically declared US to be in proxy war with Russia - its dangerous for US even if you feel sorry for Ukraine
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Ukraine war could escalate out of control and poses huge global risk - John Mearsheimer just wrote another article
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This is opposite of Divide and Rule - China and Russia have not been friends traditionally - they are neighbors who have issues typically - and now US is uniting its enemies
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Every country in the world should monetize their natural resources as much as they can
- And diversify by leveraging sovereign wealth funds
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We should collaborate with frenemy countries
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PhD student in Leeds went to jail in Saudi Arabia on vacation because she retweeted people
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- Inflation Reduction Act
- Climate change improvements might be good
- This bill gets rid of Carbon Tax basically
- This will put everything on a level playing field and let the market play it out
- CBO says we will increase deficit by $330B next 5 years and decrease $320B next 5 years
- 87000 IRS agents are being hired
- Companies making more than $1B revenue will give
- IRS got $80B
- Imagine how much you could get from just a machine learning and AI startup to solve this tax exception problem - such a grift
- Bill Gates is doing a good job of investing in climate friendly companies
- Can increase national security
- Lots of Climate Tech funds
- JCal has his own syndicate also in this area
- Others are into energy, materials, food, industrial manufacturing
- Lot of startups’ unit economic models are good now - they will become profitable
- Chamath and Elon get audited every year
- Chamath employs a big4 accounting firm
- Ultra wealthy people can’t evade taxes - there is a lot of infrastructure there
- These IRS agents will come to us middle class and upper middle class folks
- Prescription drug price cap hurt pharmaceutical companies’ profits
- So companies are estimating that 2 fewer new drugs will come out every ear
- Real Clear Investigations
- Same group that raided Mar a Lago - led Trump Russia investigation - discredited, people went to jail from that - same people
- Christopher Rae instructed this unit to not take warrants from the FISA court
- How can this not create a conflict of interest or appearance of impropriety?
- We will move past Trump as a country but we should not create dangerous precedents that DOJ and FBI might be politicized
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