All In Podcast Episode 110 Notes January 6 2023

January 6 2023

• Sacks in Florida
• 2023 Bestie Predictions
  • WSJ seems to copy what the Besties do
    • Citadel made $45B in the last 2 years
  • Biggest Winner Politics
    • Sacks - Asian American college applicants - lawsuit against Harvard and UNC - by students for fair admissions - claiming they violate title 6 - supreme court took up the cases - so these policies discriminate against Asian Americans - last group its OK to discriminate against in America
      • Problem is very liberal institutions are playing judge, jury and executioner against certain parts of society
      • Always issues of classism disguised as racism
        • Kushner $5M check from father that helped son (apparently?)
      • Cannot punish kids for willing to work hard
      • Affirmative action will get repealed
      • Any institution that gets federal funds cannot discriminate
    • Friedberg - MBS (Mohammed Bin Salman) - Saudi Arabia will have the most important year in the modern era - Xi Jinping calls for oil trade in Yuan - Saudi Arabia has relations with US, Russia and China
      • MBS can significantly influence who sits on top in each of the big nations
      • He will rocket to the top because of his ability to jockey
      • Biden’s official stance is quite confrontational with MBS - there will be a glut of supply in the market based on Saudi
      • Saudi’s intent is to diversify away from oil into other emerging technologies - if US is creating a barrier for them then China and Russia will be favored
      • Trump had open dialog with North Korea, China, Saudi Arabia, Russia
    • Chamath - Nikki Haley (long), Ron DeSantis (short)
      • People are getting exhausted with lunatic fringes of both parties - so this favors moderates
      • Very negative thing to be in the lead so early going into Iowa caucuses - so risk is to DeSantis, things get discovered, he gets attacked because he is ahead
      • Person who emerges will probably be from the South - will have a history of winning and history of normalcy, electing woman as President of US will come from the Republicans than the Democrats
      • 2 wings in Republican party
        • Establishment
        • Maga
      • Candidate needs to unite both wings - DeSantis is supported by both, Haley doesn’t have support from populist wings - he is capable of uniting both
    • Jason - Trump will lose 50 lbs, will get indicted by Garland, then will go after DeSantis based on weight and height, then gets the Richard Nixon style pardon for all the stuff he has done
      • Jason has used Ozempic and SuperGut
      • Statins might be interesting
      • Metformin is also worth looking into
      • American diet is pre-diabetic?
  • Biggest Loser Politics
    • Friedberg - US influence. But also world has too much debt, so there will be lot of issues, global debt is $235T in public/private - so $15-25T interest payment per year
      • Lot of debt markets start to unravel
      • IMF will step in to help - no matter what they do they will look bad (like Jerome Powell this year in US with interest rates) - so IMF will get heat for not acting fast enough or acting too aggressively
    • Sacks - Kevin McCarthy may not survive week so CA, city of SF - both will have giant budget shortfalls. In 2021 CA due to asset bubble had $74B surplus and now has $26B deficit - instead of putting 1/3rd of that in a rainy day fund, Newsom spent it on electorate. SF similar problem, tax base is based on commercial real estate which has been hit so lot of austerity and pain coming
    • Chamath - DeSantis
    • Jason - DeSantis peaked too early and forever Trumpers will be hard to handle
  • Biggest Winner Business
    • Chamath - his portfolio - he is the only one who he knows is non trivially large in SpaceX and Relativity Space
      • Relativity is probably second most highly valued space business
        • Early YC business - Chamath invested in Series A and every time since then basically
        • They do 3D print everything
          • Repeatability
        • Launch soon from Cape Canaveral and if it works it will unlock $10B order book
    • Friedberg - OpenAI
      • Either became AWS providing tooling to startups, etc
      • Or integrated with Microsoft for Bing, voice search, etc
      • They invested in DScript which AllIn uses
    • Sacks - America’s natural gas industry
      • Natural Gas prices in Europe have fallen to before the war
      • EU totally killed off their connection to Russian gas (nordstream pipeline blew up)
        • Also imported from US, Qatar, etc - sweeping away environmental
        • Cold hard American interest in this war is to turn Europe into a vassal of America’s natural gas industry - someone blew up Nordstream now they are importing America LNG and they will pay more
          • Biden pulled a 180 - he cancelled Keystone, etc - now he is taking care of natural gas industry
          • LNG is undergirding the war
    • Jason - laid off tech workers, those who get together and start companies together - those who choose to take control of their destinies - 3 founder companies get funded faster than those with 1
  • Biggest Loser - Business
    • Friedberg - General category of capital intensive Series B+ growth businesses - people writing bigger checks - $20M Series B now want to write $5M Series A or seed - 99.5% of these companies will die, 0.5% will be Google, Amazon
      • Lot of hardware, biotech companies which are very capital intensive will find investors retreating
      • Seed, A investing hot as a button
    • Sacks - Consumer - is finally going to tap out in the economy - average credit card rate hit 19.6%, mortgage hit 7.7% so no chance buying or selling a house
      • Neil Kashkari is saying rates will hit 5.4%?
      • This will break the back of the economy
      • Tech industry has been in a recession for a year - recession is here, its unequally distributed, BNPL has been hit, people’s savings are going down
    • Chamath - end of Q4 he did 5 deals, companies are worth less than preference stack
      • Convert benefits VCs who want to maintain illusory valuation from before - to assuage LP
      • People who get screwed are common shareholders, employees get wiped out - the people who did all the work
      • Google Search - as measured by pure profitability and engagement
        • Google could lose 10-15% of usage to other competitors
    • Jason
      • Founders who refused to downsize
      • VCs from 2020
      • Gary Gensler
      • Google
      • White collar workers with no hard skills - surplus elites :) - mid managers who don’t actually code or build a product or sell a product or do real work - they are going to have a hard time
        • Andy Jassy cut 18000 white collar workers
        • Salesforce cut 8000 jobs - so their vendors get less money, they fire people, etc
          • Sacks predicted this
  • Biggest Business Deal
    • Chamath - Starlink will cut a deal - Starlink’s valuation will be at least 50% of SpaceX’s private mark
      • So Elon will create some breathing room for himself
      • Already have a million subscribers
      • Best in class broadband connection for a plane is KABand, $500K per year - so Starlink is dramatically better
    • Sacks - Deal between Putin and Xi - met via satellite late last week - there could be a trillion dollar deal between Russia and China
    • Friedberg
      • Petro Yuan trade, Saudi China trade, oil could be sold in Yuan - marks the beginning of the end that the US dollar is the global reserve and risk free currency of the world
      • Wild card - Apple ends up buying something completely out of the ordinary - they are facing lot of headwinds with relationship in China, lot of political pressure, so they will go to Vietnam, etc. 30% app store pressure. Pressure on waning consumer demand for electronics - Samsung forecast lower electronics sales, so Apple will also be hit - so they will diversify their business - like buy content - Disney, like buy automotive company, etc
    • Jason - Amazon’s 3 legged stool becomes a sturdy chair with a 4th pillar
      • Ecommerce
      • Prime memberships
      • AWS
      • 4th will be continuation of following Health stream - they acquired OneMedical, they will buy Roman Hymns, will buy Peloton, etc
      • Runner up prediction - Tiktok will divest under duress
        • Bipartisan support for banning it
        • People will be disrupted but will just go to YouTube or Instagram
  • Most contrarian belief
    • Sacks - Bromance between Biden and Zelenskyy ends in 2023
      • Massive Ukrainian counteroffensive in the spring
        • Either Russian stalemate
          • Biden will say wrap it up, get it over with I am busy in election
        • or very successful - back to Feb 23 point so Crimea is in play
          • Biden will say stay calm and don’t take Crimea - this could escalate into nuclear war
      • Either way there will be a rift
      • Bleed Putin till the end and sell Zelenskyy out
    • Chamath - inflation won’t fall off a cliff
      • 2021 - energy inflation
        • $10 gas the pump - caused initial spike in inflation
      • 2022 - goods inflation
        • input costs went up
        • high number of articles on wage inflation
          • Biden used 1800s law to prevent railroad strike, etc
      • 2023 - pendulum is swinging away from capital and towards labor
        • will be harder and harder to get people to do the work you need at the company you have
        • So wage inflation will cause inflation not going down as much
    • Friedberg - Beginning of the end of US dollar being reserve currency
    • Jason - American exceptionalism continues to soar
      • America is on turbo right now - using Dollar and SWIFT as geopolitical tool
        • US will send Bradleys, our best tanks to Ukraine and Germany will send Marders to Ukraine
  • Best performing asset of 2023
    • Jason - seed stage investing, (maybe Series A)
    • Chamath - Conservative assets, Cash, TBills, all the way up to 2 year bonds - while you wait for things to become more certain
      • Rather wait for first 10-15% of rally than overcorrect and hit a bottom
    • Sacks - Just put all your money in short term t-bills, set it and forget it, everything is going from equities into bonds
    • Friedberg - Semiconductor companies, KLA Tencor, etc
      • Oil and Gas services, Schlumberger, Baker Hughes
      • Deere and Caterpillar
      • Main - Pharma infra - ThermoFisher
        • Danaher, Honeywell, they are growing, cash flow positive, dividend paying companies
          • These 3 buy small companies, get efficient - and you get high teens ROIC on these companies
  • Worst performing asset of 2023
    • Jason - energy - people will lower consumption - ????
    • Chamath - separate valuation of a company from its value in society (like Zoom)
      • Markets do not give you credit for your value in society
      • Tech will have a tough year, Energy will have a really shit year
      • Main - junk debt, variable rate loans will go from 5-6% to 11-12%, companies will go bankrupt
    • Sacks - office towers in SF, 27% vacancy rates - growing, mainly office towers, no one wants to be in SoMA, mired in homelessness - this was the hottest real estate market in the country a few years ago
      • Blackstone BREIT - had so many redemptions that people took all their money out - and went to UC pension system, got $4B of capital and guaranteed 11% interest and put their own $1B money - we finally see the beginning of reckoning in commercial real estate (not just in SF) - so building owners have huge variable rate loans, like Twitter is refusing to pay rent
    • Friedberg - in Vegas right now (1:12 mark) - its never been so busy in December, consumers are still spending like crazy - so will hit a real wall in consumer credit - so defaults are coming
  • Most anticipated trend of 2023
    • Jason - austerity - Chamath drove back and forth car to Tahoe instead of flying private (till 1:16)
    • Sacks - Trump’s influence in GOP continues to wane, Trump’s endorsement was useless to Kevin McCarthy - Gaetz and Boebert are openly defying Trump
      • Republican party doesn’t like his electability and looking back always
      • They lost georgia runoff because of Trump
    • Friedberg - Cell and gene therapy
  • Most anticipated Media of 2023
    • Jason - Chris Nolan movie - Oppenheimer
      • Tenet was his worst film
      • Ashoka
      • Padawan
      • Michael Lewis book about SBF
    • Sacks
      • Loki season 2 - Kang villain
      • Prince Harry book - Spare
        • Leonard Nimoy wrote a book - I am Spock and then one called I am Not Spock
    • Chamath - Dune 2
    • Friedberg - Generative AI based media
      • First AI written symphony
      • First AI published novel
      • Short films based on AI driven script
      • AI based interactive video games
      • AI driven media
  • ChatGPT trying to do $29B deal, Founders Fund and Thrive Capital
    • This could be a $300B company
    • Their origin was a non-profit
      • Then they flipped but capped everyone at 100X
    • Commercializing might get hit with lawsuits
    • Get Sam Altman or Andrej Karpathy to come on and talk about this
    • Paul Graham said Sam Altman is the most impressive person he has met since Steve Jobs