Transcript of SpaceX-Cursor Deal, SaaS Debt Bomb, New Apple CEO, SPLC Indictment, Colon Cancer Spike New

Jason, you are the unique person that is at the intersection of both the [MASKED] and the SPLC files. Do you have a comment? No comment. Do you have a comment, Jason?

No, I'm not in the SPLC files.

Yes, you are.

I'm adjacent.

You're SPLC adjacent and you're [MASKED]. What does that mean in the Venn diagram?

Thank you though for putting me in the crosshairs of all the losers.

He's got a really good way to select.

There's a reason why I'm carrying this, guys. Oh my God. It's because the [MASKED] people—

What the [MASKED] is going on?

There's a reason why I carry a stiletto. At a P-35.

What the fuck are you doing?

There's a reason.

If you want to jump the fence, feel free.

J. Cal is ready.

Let your winners ride.

Rain Man David Sachs.

And instead, we open source it to the fans and they've just gone crazy with it.

Love you, Messi. Queen of Kin Wah.

All right, everybody, welcome back.

Welcome back to the greatest podcast in the universe, episode 270 of the All In Podcast, your podcaster's favorite podcast. With me again, your Sultan of Science, David Freeberg, the Dick Tater, Chamath Palihapitiya, and yeah, the Rain Man is back. Yeah, it's definitely David, David Sachs. He's definitely in DC with POTUS. Yeah, POTUS lets him drive in the driveway. Uh, Sachs, what's going on? You, you pushed back, you, uh, big-shotted the entire crew and pushed the show back an hour.

Simple text, he's like, with POTUS, started.

It's unbelievable.

Start later. Okay, we'll just wait.

Okay, Daddy, look at him. All right, all right, big shot, what's going on?

No, look, I was in DC today and I was at the White House and I just asked if the president had time and he made time. And we did have a little meeting, and so we did push back the pod for that. One thing I just want to say is just what a pleasure he is to deal with. You know, when I read in the media, they're always describing him in a certain way that, you know, he's yelling at people or he's moody or something like that, and that's never ever been my experience with him. He's always pleasant to be with. He's always genial. Super chill. He asks questions. He's interested in the subject matter. It's just a completely different portrayal. I don't get where the media's coming from at all on this.

He's charming AF.

Totally.

Let's just call it what it is. Totally. He's charming.

I mean, maybe if you double-crossed him, maybe, I don't know, but I've just never seen any evidence of how they describe him at all. And I think on our issues of AI, I think we're really lucky that he's the president who's in the White House when this AI revolution is happening.

I mean, do an alt history, Sacks. What would happen if Kamala Ding Dong was in right now and we'd have like no data centers?

Would have no data centers and they'd be using AI to censor us and they'd be promoting DEI values through AI. That was in the Biden executive order. President Trump just wants the country to win and be successful, and he doesn't have these like doomer neuroses about it. That's not to say we don't support any regulation at all, but we should have specific solutions for specific problems as opposed to being cowering in fear over this and just trying to halt all progress. And I think a really good example of that was his idea around data centers where he said over a year ago, before data centers even became a hot political topic, that we should let our AI companies stand up their own power generation behind the meter. And that's a much better approach than the Bernie Sanders approach of just shutting everything down. So I don't know, I think we're like very fortunate that he's the president during this critical time and development of this technology. And like I said, he's always been interested in it. He talks to a lot of business leaders. I'm always actually very impressed with what he already knows. He listens to all the top guys in the industry and he synthesizes what he hears.

I think he's very good at that.

He was talking about the Anthropic guys and he was like, "These are brilliant guys," and he was giving the flowers to them and how genius they were and that they were working on a deal. Any insights there about the relationship between the White House and Anthropic?

I thought what he said was very balanced and accurate. Like you said, he said that they were very smart guys. They do have a great product. I've certainly acknowledged that. He also said that they were very left-wing, but that was something we could work through. Didn't have to be a deal killer. He said they tried to tell the Pentagon what to do, which the Pentagon didn't like. But in any event, I mean, look, he wants American companies to be successful and he, I think, genuinely really does like high IQ people. I mean, he says it all the time and people think he's joking, but I actually think it's like one of his core convictions is he just really likes smart people.

He likes being around smart people, loyal people, smart people, people who are good on camera seem to be the three circles. And hey, Sachs, you fall into two of the three. Uh, all right, not that the audience figured that out. Uh, topic one, SpaceX has signed a huge deal with Cursor. You know Cursor, that's the AI coding startup. Really, the, the, they define the category. xAI and Cursor are building and collaborating on a new AI coding model that would, quote, be the world's best coding and knowledge work AI. Here's the deal as it's been explained: SpaceX will either buy Cursor by the end of 2026 for $60 billion— that's $10 billion more than they were rumored to be raising at— or they will pay Cursor $10 billion for their collaboration together. Bloomberg says you can think of that $10 billion essentially as a breakup fee. So I think it's fait accompli that this deal is going to get done. Cursor's run rate, $2 billion at the end of February. This is a money printing machine. They expect to end 2026 with a $6 billion run rate. They're going to triple it. SpaceX projected revenue between $22 and $24 billion in 2026.

So this is quite accretive to the revenue story at SpaceX, at the IPO of SpaceX, which is now targeting a valuation of $2 trillion. Which would be trading at roughly 80 times top-line revenue, which is a— people would say it's a high valuation, but also can measure it with the opportunity. Cursor's valuation would be 30x. So this is a good deal, I think, for everybody at the end of the day. Cursor started, I think, built off of Anthropic's LLM. You could use any LLM previously on it, but in March, Cursor released the second version of their proprietary model, Composer 2. And, uh, here it is. It's, it's ranked pretty high right now. It's between, uh, GPT 4.5.4 and Opus 4.6, as you can see on the screen. The key part of the story here is that Elon has 550,000 GPUs in Colossus. He's scaling up to 1 million, and then of course he's going to bring it to space. So if you believe that infrastructure matters, and it's pretty clear it does, this is incredible for Cursor, who has been compute constrained. So this is peanut butter and chocolate if you put these two together.

I predict that this is going to move SpaceX, xAI, and Cursor to the front of the coding leaderboard within 12 months. That's my prediction. Chamath, shareholder in SpaceX via the acquisition of the Starlink company that you were a backer of, what are your thoughts?

The acquisition was essentially negotiated and the way that it's structured is so that the S-1 doesn't go stale. So I think the way that it was announced has more to do with the fact that they don't wanna slow down and have to rewrite parts of the S-1, have to redo the disclosures, um, have to redo the risks. And so I think what you're going to see is that this will get done. In fact, the deal is effectively done. But what's so smart is that where is SpaceX today? Let's call it a trillion. Where could it be? Just for the purpose of this argument, let's say $2 trillion. So when the deal gets done on a stock-for-stock basis, it's going to be— if again, if it's $60 billion in tomorrow dollars, effectively Elon's gotten a 50% discount. And what has he bought? He can issue $60 billion of stock at a $2 trillion valuation and get a model and a service that I think is extremely compelling in coding, which is where we know all of the immediate and short-term revenue gains are. It's also patterns that are hard-fought and are really valuable in reinforcement learning.

He gets all of that, and then he gets a very crack team, which we've known for a while that the Cursor team is absolutely excellent. If you look at the Groq usage, it shows why he had this excess capacity. There was a moment where Grok had a very steep and very aggressive discount on their output tokens, and in that moment there was just a lot of experimentation in usage, and over time that sort of went away. So there was a lot of capacity and a relatively low utilization, I think, inside of Colossus that he was able to turn around, jiu-jitsu move the whole thing, and basically acquire the most interesting and valuable third-party wrapper service in AI right now. So, uh, and the fact is that they got it effectively, I think, at this price for $30 billion. So I think it was a really good deal, really smart deal.

Facture thoughts, if you want to unpack it a bit, uh, under the framing. I think it'd be interesting for you if we were sitting here 3 years ago, the, uh, Biden administration didn't invite Elon to the EV summit and the SEC and other organizations, uh, Delaware, they were explicitly involved in lawfare. They were trying to put Elon in prison. And here we are, the most important company in the history of, uh, the United States, SpaceX, XXXAI, and Tesla now on the verge of just creating the greatest products in the history of humanity between SpaceX clusters in space and Optimus. Your thoughts?

Well, you're right. I do remember a press conference where Biden said we got to look at the sky. And so on the heels that, the DOJ brought a lawsuit attacking the company for not hiring enough—

SpaceX.

—asylees.

Remember that?

Yeah, exactly. SpaceX, which they can't under ITAR. They couldn't, exactly, under ITAR.

Anyway, that's all ancient history. So let's put that behind us. Look, I agree with your guys' analysis on this. I think these two companies are very complementary. Cursor obviously is very strong in coding. That's what it brings to xAI. XAI brings compute and they bring a foundation model. And the problem that Cursor had is that even though coding is kind of like the white-hot area of AI right now, when it got started, it was really competing against generalists in the form of OpenAI and Anthropic. But now those generalists have decided to vertically integrate in this area of coding, right? And so Cursor's now competing against Cloud Code and OpenAI's Codex. And so they were dependent on foundation model companies that were getting in the business of competing with them, which was just not a good place to be, right? So now they have this new alliance with a different foundation model company, which also brings the compute. Just makes a lot of sense. And then they bring— Cursor brings to xAI the training data, a lot of enterprise clients, and the experience in coding. And I think this will accelerate xAI in this area.

Sax, you think they're going to dump KIMI K2.6? Because I think Cursor Composer 2 uses the Moonshot model. There's no reasonable way that Elon's going to pay $60 billion and not run on top of Groq. I got to think.

It seems like it.

Likely, but I don't know. I think it might be tough depending on the users. One of the things that makes Cursor so good is that the— Wait, wait, wait.

Say more on that.

What do you mean?

So I think that the different developers want to have choice in that sense. There's a toggle. So one of the things that's really good about Cursor is they've got this very well-built-out IDE, this application layer that puts them probably from a UX perspective, meaning developers are using the tool above Codex, above Claude, above anything else. You can use a third-party IDE and integrate the models or integrate whatever other third-party service you're using. But I would imagine that the developers are going to want to continue to have at least some choice on what's actually writing the code for them. The thing that people are waking up to in the last 120 days is just how much of the value of AI is being realized by writing software. And we've kind of got this wrapper term, we call it agents, but agents are fundamentally just quickly spun up applications. But for all of them, as we're realizing very quickly, you end up making too many agents. They end up being super inefficient. They need to be engineered, and you still need to have a strong software engineering capability and competency to fix all the agents, to build all the harnesses, to make everything work well together.

And that's why having a strong developer environment, a strong IDE, actually solves that biggest problem. So eventually all the enterprises that are getting hot and heavy on agents are gonna be like, whoa, wait a second, we've actually gotta fix how this is all being done. As we saw this week in that story with Amazon. Where there's like a million agents being spun up inside and everything's wasting resources, redundant data creation, redundant data stores, redundant API calls, etc. Tons of money being wasted. So you have to centralize still, you have to have good software engineering talent that's making good infrastructure and good use of these agents. And that ultimately will require an integration of the AI tooling with a standard software engineering frontend, which is the IDE that Cursor has. So I think that that's probably where everyone's waking up to the fact that having the, uh, the software engineers may end up winning you the arms race here. And seems pretty smart for Elon to buy Cursor.

One other piece of it, you mentioned Kimi, uh, K2.6. Yeah. I mean, so I think that one of the things that's going to become a priority over the next several months is this idea of optimizing because enterprises' token bills are going through the roof right now. I mean, just month over month, they're spending increasingly large amounts because their employees are just building more and more software. But I'm not sure that anyone's been incentivized yet to be efficient about it. And it really only makes sense to go to a frontier model for a frontier task. But more mundane things could be done using an open source model or a less expensive model. Totally. And I think, like you're saying, whether it's the IDE or something else, there needs to be some sort of middleware that determines which model you go to and how much you're willing to spend and what the most efficient way of getting the tokens is going to be.

I am deep in playing with, uh, xAI's suite of products, and I would predict we're going to be sitting here in 6 to 12 months and they are going to be dramatically, dramatically improved.

Let me just flag one other area that I think is maybe the white-hot center within this red-hot area of coding, which is cyber. And I think Mythos has kind of woken everybody up to the potential of frontier models to be a weapon that can be used by either cyber offense or cyber defense. Now, the issue with Mythos is that it's very large and expensive. It's something like a $10 trillion parameter model, and there's a lot of reports that Anthropic just doesn't have enough compute to be able to serve it. I'm not sure it was ever built to be a commercial model, to be honest, because I just think it's so big and expensive. But I think what'll happen is these companies will start training dedicated cyber models. Let's say Mythos-comparable models, but with a lower token cost. And I think there's a real race on right now to get those products to market because I think IT departments and CISOs are very worried about the risk of hacks right now, AI-powered hackers. So this is something I think over the next 3 to 6 months will be, again, maybe the hottest part of the market.

Polly Market says all of this is fait accompli. SpaceX acquiring Cursor, 74% chance. SpaceX IPO by the end of August, 88% chance. So this is happening, folks. All right, let's keep moving.

By the way, I think that deal structure is smart because I mean, to Chamath's point, yeah, it prevents the IPO process from being disrupted. Also, it kind of gives a huge motivation to these Cursor guys to bust their ass and make it work over the next, I don't know, 6 months. Yeah, they have a $10 billion breakup fee, but I'm sure they want the deal to be successful.

Well, the $10 billion breakup fee will go back to SpaceX anyways, because if they actually run the compute and they're not owned by SpaceX, they're going to have to pay for it. That is not cheap.

I mean, we saw a bunch of these xAI co-founders leave after the acquisition by SpaceX. I don't know if that was the reason why, but all of a sudden they're sitting on SpaceX stock, and they may have felt like they had it made, you know. Yeah, well, which is always a problem. It's always a problem with, with M&A.

This cursor thing came about pretty quickly because— okay, let's just say friends of ours who were supposed to wire into that round were like, where's the wiring instructions? It all just evaporated.

Here's a tweet from Elon. We don't have to, um, speculate too much here, Sachs. He was very clear that, uh, xAI wasn't Built right the first time around. The quote, "XAI was not built right first time around, so is being rebuilt from the foundations up." Same thing happened with Tesla. And that tweet is from about 5 weeks ago.

How crazy is it that when he tweets, he gets 50.8 million views? It takes the 4 of us 7 months to get 50.

I mean, it's probably our collective.

It's unbelievable the distribution he has.

Well, also, how many CEOs would just fess up like that and say, yeah, that we didn't do it right the first time, now we're rebuilding it? I mean, most really not credibly to say that he's a magnet for talent.

He's a magnet for the right kind of talent, and the SpaceX talent has his philosophy. He inherited, I think, a lot of, you know, maybe people for xAI or for Twitter that were not in his mold, and they're clearly getting aligned. And it's also going to make his day-to-day life much easier when all of these things are occurring in the same building with the same team. The continuity of not having to task switch between companies is going to be great. We talked a little bit about the possibility of Tesla and SpaceX merging.

Even Walter Isaacson now is on the Tesla-SpaceX merger train. There you go. He just did a pod. Everybody's confirmed it. It's going to happen. We called it here first.

Okay, topic 2: is there a SaaS debt bomb in private equity? Toma Bravo. We had Orlando Bravo at the 4th All In Summit, uh, last year, is nearing a deal to hand its portfolio company Medallia over to its creditors. This is a SaaS for customer experience company. TB acquired them in 2021 for $6.4 billion, all cash, at the top of the market. As part of the deal, They incurred $3 billion in debt. And for background, in 2021, this company had $470 million in revenue, growing 20% a year. Earlier this month, Bloomberg reported that TB's debt servicing costs for Medallia were about to triple from $100 million a year to $300 million a year. Blackstone and other firms refused to extend a lifeline to the company, to the SaaS company. So it looks like Thoma Bravo just handed the keys back and wiped out $5.1 $1.5 billion in equity. Chamath, your thoughts? We've been talking about the SaaS headwinds for a bit. You've been quite vocal about it.

Well, first of all, I think Thoma Bravo is an unbelievably well-run organization. Their returns are bonkers, and Orlando is a really, really, really good investor. So what do I think happened? I suspect that they probably got enough of their equity, if not all of their equity, there's probably a decent chance that they did at least 1 or 2 dividend recaps in the last 5 years. And if I had to guess, I suspect that they are positive return. It may not be the return that they would want. And so turning the keys over becomes easier. 'Cause you have to remember in private equity, the entire playbook is for transformations of assets that are at some point not working. Right. It's very rarely that they're buying the same kinds of businesses that the four of us would buy, which is just sort of this clean white sheet, de novo, grow at all costs kind of business. So they have operating partners and all of these other people waiting in the wings to unfuck fucked situations. That's the whole playbook. So to turn it over, I suspect means that there is a core rot that people couldn't fix.

Combined with the fact that they have probably gotten enough downside protection that it's not a huge thing for them. Now, this is an issue for the bondholders, and then that'll maybe flow through to the borrowing cost that Tomah Bravo has to pay maybe for a subsequent deal. I don't know, but I doubt that they would just walk away from a business. So I suspect they probably got most of their money out.

I don't know if that's true. There was someone that published some internal data showing that the sales team was like 18% of target at Medallia. Do you guys know what this company does, Adalia?

Customer support, uh, is the general arena and customer experience.

Customer experience management.

Yeah, like surveys. I don't know what that means. Yeah, they'll basically send— like, you go on Caribbean cruise ships and you get a survey afterwards, and then they use that survey data to provide management insights and operational insights to the leadership team and the operating team on how to improve the quality of their product. Or their service. So it's sort of like this feedback surveying loop. So if I were to tell you guys, hey, you want to build a feedback surveying loop to run your business better, are you going to buy SaaS today? Are you going to ask your AI to spin up an agent for you to do that? And I think that's a big part of what's happened is all these sorts of companies where the alternative to buying a SaaS product is to spin something up internally. And it's much cheaper and easier to spin it up internally. You get a custom workflow.

No, no, I agree with that. I'm just saying in the last 5 years, you think they sat on their hands and didn't take a dollar out? They're not that dumb.

Maybe they took cash out, maybe they didn't, but there was still a big debt overhang, and the debt's clearly, um, gotten impaired, which means the equity—

the debt holders, the debt holders are clearly screwed here. Yeah. The question is, is Thoma Bravo screwed? And I would say if you sat around for 5 years, they're— that's not their style. They generate too much money. They're too good.

So they may have taken cash out and covered some of their, their costs, but the equity got fully impaired, and then the debt is clearly impaired because you can see how the debt and The, uh, CLOs are trading, which indicates that this business is just not doing well. And then someone else on Twitter posted some internal information from Adalia saying the sales team is just not hitting their targets. They're like way, way off their sales targets, which I think speaks to the underlying problem here. Yes. Which is that— unpack that.

Yeah, please.

Yeah. So the underlying problem is that these businesses in the SaaS space where you're driven by net new sales every year, how many new customers are you signing up and then you're trying to manage retention and you're trying to increase sell-through and retain customers, they're just having a really hard time sourcing new customers and there's probably higher than modeled attrition. That's right. And when you have a very kind of typically historically predictable business where you can say, hey, I've got a net revenue retention of 118% or what have you, meaning I'm, I'm selling into my install base by 18% over what I'm making last year. And then I'm signing up new customers. You can lever that business, right? You can borrow money against those cash flows because it becomes predictable. And what's happened in the last year in particular is agents have become so good and so fast and so cheap that many enterprises can simply spin up an alternative to a vertical SaaS solution. And that's crushing the sales team's ability to sell in. That's who you're competing against. Now, I wanna make one point and just link this with something else that happened this week, and that's Kevin Walsh's hearing for Fed Reserve Chair.

Kevin Walsh went and talked a lot about the deflationary effect of, AI. And I actually think we all talk about the SaaS-pocalypse as if it's this sort of like isolated business phenomenon where these SaaS companies are getting blown up. I think another lens to look at what's going on is the incredible deflation of how much it costs to successfully run a business. And you don't have to pay a premium price for SaaS products anymore, meaning that that piece of the business suddenly get much cheaper. That's right. AI is delivering on its deflationary promise. I'll just say one thing about what Worch said. Worch spoke a lot about the deflationary evolution promised by AI and that he expects that it will drive productivity growth like we've never seen before. But he said, I don't know what that's gonna do to the job market, that there may be a dislocation between that productivity growth being realized and how the labor markets are gonna be able to respond to those things. But fundamentally, he's saying that we're going to see economic deflation. The problem with economic deflation is that when it occurs, it means some business is seeing their revenue go down.

And if that segment of the economy is levered, if they have debt sitting on top of that piece of the economy where it's supposed to always, always, always grow, like a SaaS company's top line is always supposed to grow, suddenly that debt gets impaired and that can have an economic ripple effect that is adverse. But what he's pointing out is that as a result of deflation, because it's not coming from some cost cutting or economic contraction. What he's saying is that the deflationary forces ultimately lead to economic expansion because other parts of the economy will now grow. So if I can suddenly cut, you know, call it 50% of my SaaS budget and I can reinvest that capital in other ways of growing my business instead of managing my expenses, all of a sudden my enterprise will grow and the economy will grow. He also said, just as an aside, and I wanna make sure I cover this so, so that we're really clear. He said the way that we've been measuring inflation is wrong and that he doesn't agree with the way the Fed has been measuring inflation because you can do a survey of any household and they'll tell you, my God, everything's so expensive.

So all of the indices and bullshit that are being used to calculate an inflation index is completely misrepresenting what the average American is actually feeling. And so he wants to rethink how the Fed is addressing inflation from an interest rate perspective. But he does think that the overall kind of economic picture is one of deflationary pressure and productivity gains coming out of AI.

Saks, I'll drop this off to you. I think it's pretty clear what's happening here is that the loss— SaaS's loss is the token dealer's gain, right? And startups are now— and we always see that they're the tip of the spear. They're writing their own tools. They're making their own dashboards. I see that every day. And if you look at the SaaS product index, here it is. Salesforce down 32%. Uh, in the past 6 months, shout out to Bestie Benioff, best guest we've had, huh, Sax, uh, at the summit. ServiceNow down 54%, Snowflake down 43%, Adobe down 33%, Figma, which had a huge IPO pop and is now down 67%. So what is the role of venture capital and then private equity in addressing the software market? Software was eating the world. Now tokens are eating, uh, the SaaS business and the software business. Yeah. Well, I'm of two minds about this.

I'm going to talk about the opportunity for private equity. Let me just say backing up that historically we only had two good exits for software businesses. One was IPO, the other was M&A. And then these big private equity shops came along and gave us a third potential exit, which is you would sell to them and then they would raise the capital based on, I don't know, one-third equity and two-thirds debt. So it was debt-financed buyouts. Which is something that's been around in, let's call it, the non-tech part of the economy for a long time, but was a relatively new entrant into the world of technology. And the reason for that is that if you're going to debt finance a purchase, you need to have very stable cash flows because if you miss, if your cash flows miss and you can't pay your interest on the debt, then you're going to lose all your equity because the debt holders will foreclose. So in order to do a debt financing of any kind, you have to have very predictable cash flows and It was believed for a long time that software did have those predictable cash flows, at least for the mature businesses, the ones that were at the stage where they could IPO as a potential alternative.

So it was a very attractive thing. I, like I said, I think it was great to have that third option. I, I'm of two minds about where the private equity business is today. On the one hand, the pricing now has gotta be super attractive for them. I mean, we're seeing public SaaS companies that are doing a billion. They're free. They're free. They're free. With 20% growth rates, 80% gross margins, and they're trading at 3 times ARR. Yeah. You can buy a dollar for 50 cents.

So is that an opportunity, Sachs? Do you think we're at rock bottom? We should do a roll-up?

Well, on the one hand, I do think that the pricing has never been more attractive if you're a private equity shop looking at a business like that. I mean, those companies used to be valued at 13 times ARR. Now it's 3. Uh, I'm talking about like a category leader. Now the downside of that, by the way, Salesforce is off 9% today.

I don't know if you guys saw this, but the market's absolutely tanking today after the, uh, Medallia, uh, announcement came out.

Right. Okay. So, so that would be like, you know, I said I'm of two minds about it. So I would be bullish for private equity just based on pricing, but the bearish part is that in order for their business model to work, you have to have predictable cash flows. You can't have a SaaS company. Go from, I don't know, 120% net dollar retention one quarter to 80% net dollar retention 6 months or a year later because a big part of their customer base is attrited to using tokens, right?

Or to basically creating some bespoke software. You just said the absolute critical thing in all of this, which is you have to have predictable cash flows. I think what happens is when you're a startup, you typically have to figure out how to disruptively price to enter the market. So you're like, okay, if I deliver $10 of value, I'm gonna charge a dollar. And that's, that's the normal playbook, like a 10% ratio, right? Of price to value. The problem is when you start to stack venture capital into it and you then you stack growth equity into it, what you're effectively creating in, in the preference stack of your company is that you are creating a higher return hurdle, right? You gotta clear. 300 million, 500 million, a billion of pref, and then you have to return 15 or 20% on top of that. So what do people do as they raise more money? They increase price. But the problem is at some point when you increase price, you engender a ton of competition and you put a huge target on your back. Private equity is the last stop because when they come in and they layer in billions and billions of dollars of not just equity but also debt.

And that has to then be completely predictable and paid back, their only lever is to raise price. They can never cut price to take share. They don't, they can't underwrite that to pay back their debt holders. And so Sachs, part of the big problem here and why nobody wants to touch these companies is that they are overpriced. Yes, they're making a billion dollars of ARR, but the unit cost has gotten outta control. It used to be 10% of value. It's probably now 30% of value. And everybody's looking at their contracts thinking, well, when it comes time to a renewal, I'm going to just cut this in half, or I'm going to cut this by two-thirds, or I'm going to cut this by 75% because the value isn't there anymore.

Or they can threaten to and negotiate a better deal.

And it becomes even worse because the minute you make these products headless and you say, I'm just going to communicate with these products via MCP and with agents, you can't charge on a per-seat basis. What do you do then? Friedberg doesn't need 50 seats of Workday. He needs 2 seats because the agents act as the way to write in and out of Workday. So he wants to pay for 2 seats, not 50. And then if you multiply that by a million companies, that's what gets us to this place where it just feels like a falling knife. And I think it comes down to these unit costs. The unit costs and the price to value of these products are out of whack with what the market needs and wants. And until they reset that, or you find new products that can do it cheaper, we're not going to get a cleansing and a clearing here.

Yeah, I think— by the way, Salesforce today is down 9%, $140 billion enterprise value on $15 billion of free cash flow. This thing is trading at less than 10 times free cash flow. It's unbelievable.

I think it might be a bargain, to be honest.

Yeah, it sounds like bargain hunting. And what if Benioff, who's the king of acquisitions. What if he just starts cleaning up and buying? He's buying his own stock.

Yeah. And we didn't put this on the docket, but did you guys see his kind of headless product announcement? Yeah. Did you see this? It's, it's actually very— it's very smart. Yeah. I mean, I think it's very smart. There's ways that that business can maneuver, right? And I think they're pretty unique. It may be that of all the businesses in the scape like that, you know, the ones that have that scale, that have that multi-product platform, that have a lot of your data, there's a lot of opportunity for them to, you know, maneuver their way into an evolution of the business. And he also is the first one.

And because like, if you look at it and you compare it, for example, to other companies, I think the Workday response was to say, you can't have an AI interact with us without paying some kind of like toll.

You're exactly right. That's the key.

Whereas Danny Yeltsin's the exact opposite, which is he's like, okay, we're going to go headless for the whole thing, which is brilliant.

You're exactly right. You're exactly right. I think that's, that's going to be the distinction of winners here and the losers, and are you on the wrong side of this?

The problem is that we have to figure out what is the bottom clearing price, and that has nothing to do with business quality. And so is Salesforce a good buy at 10 times free cash flow? Historical artifacts would tell us a screaming yes. The problem is that if you cut everybody's cash flows off at year 5 or 6 or 7, then all of a sudden I think you see the natural compression to between 3 and 5 times free cash flow. And that has nothing to do—

that's, that's crazy.

That has nothing to do with business quality. That just says you, you literally mathematically take years 7 through N of the future and you discount it to zero.

And having free cash flow in a war chest gives massive optionality. We've seen this with Salesforce, we've seen it with Apple, we've seen it with Meta, with Google, with Uber. Just having massive free cash flow and you've got tens of billions of dollars. You can put it to work and you can weather these storms.

J Cal, I think another way to think about this is, you know, to the question about maneuverability and who has the gumption to make the hard choices right now. Yeah. Look at Benioff. He's the founder of the company. He's run this thing since its founding decades ago. He is willing to bet it all. He's willing to make the change. And it may be that the index you buy in this era of AI transformation is the index of founders, that the founders who are still running their businesses are going to be the ones who are most likely to see the future. They'll burn the boats, they'll make code changes, they can code. And all of the guys who have hired managers to run the business are going to do the things that Chamath's talking about, which is try and charge fees and try and maintain the old way of doing things as opposed to reinvent for the new future.

If you look at the 10-Ks, if we could figure out what the unit price cost and the trend and the inflation is of a per-seat license for these products, I will point to the ones that are going to die first.

Can I make two quick points? Yeah, wrap us up. One is, yes, I would fully endorse what you said about Benioff. He's made every previous wave work to his benefit, whether it was social, whether it was mobile, whether it was big data, all that kind of stuff. What are the odds he's going to make AI work to his benefit? I'd say pretty good. So his stock might be a bargain right now. So that'd just be point number one. I want to say just a quick thing about venture debt, which is, look, I think it's fine when private equity guys use it because they know what they're doing, but I've always hated when founders take on venture debt. And I know, Jake, how you agree with me. Part of it is that founders forget that they have to pay it back. They treat it like venture capital and they forget about that, and then they get surprised. But the other thing I've never liked about it is it makes you more fragile. It basically subjects you to a bunch of business covenants, and it makes it harder for you to do an abrupt shift in your business because now you've got a bank looking over your shoulder and they want to make sure they get paid and they have to review your financials and all the rest of it.

And to your point, J Cal, the companies that have free cash flow right now are the ones that have the most maneuverability. I hate taking away maneuverability from founders, and that is what debt does because it subjects you to a fixed schedule of payments. And so this is always a thing to remember, whether you're a business or you're an individual. You know, when you put on that debt, it makes you more vulnerable to big disruptions in the market.

Yeah, it just— you become incredibly brittle. And founders who are listening, when you get that in, in peak markets, peak ZIRP, you're going to have venture debt people offer you tons of cash. And then the problem Dave and I saw up close and personal, many different companies, where the founders would look at it as like, oh, I'm extending my runway. Well, if you're a hot startup, there's always more venture capital, there's always more people who want to own equity. The equity sale gives you optionality, and you have more people on your team, more people rooting for you and aligned with equity interest, as opposed to now you have a debt instrument. They have a different goal, they have different downside. They're trying—

no bank wants to be your last 3 to 6 months of runway. Because that, that means that in a high percentage of cases, they're gonna lose their money. Yeah. So they're, they're built to try and avoid that.

I've never seen venture debt work well to improve the quality of a business. Never, never. It doesn't work. I've only, only, only ever seen venture debt. A hundred percent. That damage companies. And if you get the venture debt, you can never actually use it. So the venture debt investors that ultimately make money, it's because they put money in a company and the company never actually used the money they gave them. I hate this business. I think venture debt's like the worst vulture-like business in Silicon Valley.

It's terrible. If you get down, if, if the last money in the bank is the debt you owe to the bank, they're gonna rug you. That's when you get rugged. 100%. You think they can afford to lose 100% of their money when they're getting an 8% return or something like that? That's right. No way. That's not how it works. VCs can afford that because we have the opportunity for a 10x or 100x or 1000x for that moonshot. So we can accept a bunch of zeros. The bank can't accept a bunch of zeros.

Well, and then when they, when they do get scared and when they do think they're going to lose their money, wait till you see what they extract in terms of value, what they ask for. They will ask— they'll double the interest rate, they'll ask for warrants. It's basically like being in debt in prison. Chamath, you could talk a little bit about your experience when you were in debt in prison. It's not going to be pleasant.

I've been in debt. I mean, I've had a $420 million credit line. Oof. And I had a moment where it was reflexively kind of collapsing inward because the assets that I was using to secure it shrank in value in a moment of market disruption. I was scrambling. And then at the same time, there was a risk. It was the worst moment of my professional working life. I had like a couple hundred million dollars sitting at Credit Suisse, and they were about to implode. And so on a weekend, I was trying to figure out whether my money was still there. I had always had this rule, don't have debt, and then I violated it to try to run the number up. I almost got run over. I almost lost everything. I will never do it again. And if I ever do it again, if you guys ever hear me do it again, please just come and punch me in the face. Uh, we will.

We've been waiting for an excuse.

Can we punch you in the face for other things too? Yeah.

Buffett has this line about, yeah, this is how smart guys go bankrupt. Is they take on debt. Debt equals prison, bitch.

Keep it in your mind, guys.

You will be— unless you socialize the debt, and then everyone thinks it's okay, which is what we do with governments. And that's the problem with government.

Yeah, don't push the button. All right, listen, we gotta talk about another—

just, just, uh, just a quick aside on that. In the 1950s, all the corporations in America had pension plans where you would get some guaranteed payout at the end when you retire. And they were all like, we're all gonna go bankrupt because a pension plan is either significantly overfunded or underfunded. If it's underfunded, you're bankrupt. If it's overfunded, you've wasted all this money. You can't do anything with it. So they all moved to 401(k)s and everything got moved to defined contribution plans except, except governments. And that's because the government employees form public employee unions and they're like, we wanna keep the pension plans. And now the pension plans, it turns out 70 years later, are gonna bankrupt all the governments. In the United States.

That guy Spencer— by the way, that guy Spencer Pratt, who's running for mayor, he started uncovering all of the salaries of the union folks and their pensions in Southern California. It's bonkers. They're making $400,000 or $500,000 a year right before they go on pension, then they double their overtime and they get two-thirds or a half. The pension doesn't work. You got to go superannuation fund.

I don't know how many times we've talked about it here, but Well, you don't need a vacation fund, you just need a 401k. Let people have a— have an account. They got their money in their account.

Yeah, but it's just a way to force people to contribute to it. So a forced 401k is different than a 401k. You got to force people, and it's— you're not allowed to force people into the 401k, as you know.

Yeah, as we've seen in California, everything related to the government is a giant grift. It's a giant scam. There's tons of fraud going on. Uh, we've talked about the homeless industrial complex, $12 billion a year to homelessness, but the number of homeless keeps going up. There's a million examples like that. The racism industrial complex. Yeah, let's shift to SPLC because I think it's a good example.

Well, we'll get to it, we'll get to it. Um, yeah, but you know what's even better is you can just pass a law like the Nick Shirley Act and you can put your fingers in your ear, cover your eyes, and say la la la la la, and just pretend the fraud's not happening, which is their reaction in California.

How much fraud has Nick Shirley uncovered so far in California? He should be a billionaire.

Where he should be a billionaire. You know, he should be doing it privately and then getting the whistleblower awards. I think that actually would be a better strategy for him.

We told him that was the— we told him that business model, remember?

Yeah, no, he— I think he's addicted to the views, but I mean, he could literally raise money on— well, he's making— concept—

he's making thousands when he could be making billions, to Greenberg's point.

No, well, but it's better— it's better for the public that he's doing what he's doing.

Thank God for Nick Shirley.

So thank you, Nick Shirley, whether you could be making more money or not. What you're doing is—

and you know what he also did? He shamed the mainstream media who's forgotten about investigative journalism, who forgot the ability to knock on a door and just ask a basic question. And now Bari Weiss with CBS has deputized one of her reporters and she's doing the exact same playbook and meeting him punch for punch. Where's CNN? Anderson Cooper should have a Nick Shirley on his team. The New York Times should have a Nick Shirley. The LA Times should have a Nick Shirley. Why don't they? That should be your number one hire.

You're talking, you're talking about old media that does things one way. And the point about Nick Shirley is it's new media, it's citizen journalism, it's people on the street distributing fact-finding, distributing information gathering. And old media, in order to survive, became an opinion organization.

Didn't the media used to care that the Pentagon was paying $900 for a hammer or what have you? I mean, like 60 Minutes used to do things. Now it's like the media just wants to protect the waste, fraud, and abuse No matter how egregious it is.

Remember that guy, Dennis Kozlowski, the CEO of Tyco, who went to jail and they had just a field day? His umbrella stand. Umbrella stand. Yes, the umbrella stand. $6,000 umbrella stand.

Made out of ivory from albino elephants.

Sacks, I know you bought that. I also didn't shoot your mom. Sacks, you're so right. People really used to care except when it was their team. And then the minute that it was their team, they're like, oh, no, no, let's just look the other way. It was insane.

You're right. If a CEO basically engages engages in some misbehavior, and I'm not defending it, the press will be all over that, all over. But when the government does it, they don't do anything. Free pass. And in fact, we had one of the most successful, probably the most successful entrepreneur of our generation donating his time to the government to find waste, and the media basically drove him out.

They vilified him and drove him out. Yeah, they made it untenable. Well, this is— whoever comes up with a way to eliminate waste, fraud, and abuse like Doge did, and they productize that and make them— make that their platform, that's the way to win in 2028 and going forward, is to convince the public that they don't need to have their taxes raised. They could have their taxes reduced just by eliminating the minimum of 20 or 30% of waste, fraud, and abuse there is in the system. Uh, we'll get to Tim Cook stepping down in just a moment, but I want to remind everybody, Liquidity sold out. I'm sorry, we added a couple of tickets. We, we burned through them immediately. But you can still get into the All In Summit. This is our 5th edition in Los Angeles, September 13th, 14th, and 15th. Allin.com/events to apply. Please apply, and then don't come to us 60 days out and say, I didn't get a ticket, I'm a bestie, get me in. Just buy your damn ticket and don't get left out.

I have a liquidity announcement. Oh, yum yum. We are going to do one political panel. Okay. And it's going to be Dave McCormick and John Fetterman, the two sitting senators from Pennsylvania, on stage with us talking about all topics from a left and right perspective.

Amazing. So Fetterman's coming, which means the dress code is now sandals, uh, shorts, and a t-shirt. That's great.

Yeah, construction chic. Get your Timberlands out.

I mean, is he really gonna show up looking like a hobo?

I love his hobo style.

It's great. McCormick's very fit and handsome, so like he, he'll balance him out.

So we should— that's what we should program it as. Like, he should wear his best Brioni suit versus the Old Navy for Federman. Who wore it better? All right, listen, just rapid fire here on the Tim Cook, uh, resignation and moving on. This guy John Ternus is a 25-year vet. He did lots of hardware, worked on iPad, AirPods. And he was the favorite on Polymarket since day one. He's a bold decision maker according to reports. And unlike Tim Cook— Cook, Tim Cook did a great job of squeezing every last nickel out of Steve Jobs's product line, which lasted for a decade. iPhone, Apple TV, Watch. I don't need to repeat them. But here we are. We got a product person in the seat, which is what we all know they needed because, hey, these tools are getting a little bit stale. Série des Graciades, AirPods des Graciades. The whole system is not built on innovation anymore. It's built, Freeberg, I think you would agree, on just wringing more profits, more profits. What's your hope here? Because man, they missed so many great swings at bat. They didn't get the Oculus, Ray-Bans that Meta did. They canceled their self-driving car.

What would you hope that this new CEO of Apple focuses on Friedberg in terms of innovation? They don't have a problem selling phones still. They don't have a problem selling laptops and making a ton of money. But if you were in the seat, if you were on the board of Apple, which wouldn't be a bad idea for them if I'm being honest, what would you tell the new CEO to focus on? David Friedberg. I mean, I don't know.

The software layer of the future is not the software layer of the past. So, okay. It's pretty obvious. I don't know how much there is to talk about, but you just need the Siri equivalent that's ubiquitous in all of your devices. Knows who you are, personalized to you, sees your email, sees your calendar entries, knows what kind of music you like, has connection to your home. Basically build that AI layer for your life and make it ubiquitous in all of your Apple devices that no matter what device you're using, it knows who you are. You can engage with it using kind of a natural language method. And it's, you know, it's, it's pretty obvious.

Yeah. They should buy Whisperflow. Yeah. I mean, that would be—

I don't know how they're, I don't know how they're running the business.

But well, they're running it for profits, obviously, Sachs. Uh, I would say buy WhisperFlow and just replace the Siri team with that, because Siri's been just— the fact that Siri can't spell polyhapatia or callicanus after 20 years of us giving them $20,000 for iPhones is just disgraceful. Sachs, if you were on the board of Apple— again, not a bad idea— what would be your hope for the company? What would be your sage advice for the new CEO?

Well, I mean, everybody is going to be asking the same question, which is what are you going to do about AI? I don't know that they needed to be on the bleeding edge of it, but they are going to need an answer at some point and Siri's going to need to be AI empowered. Probably the way it should work is that you get to choose your model. I mean, I don't know that they need to pick just one model provider. It could be a setting where you go in and you set up your account with whatever ChatGPT or Grok or Claude or what have you, and you can choose your own model provider, and then you'll have more customization and more ability to control your, your storage. Let me just say, just on Tim Cook's retirement, he had an incredible run as CEO of, of Apple. I mean, he ran it very effectively for 15 years. The market cap of the company went up by over 10x. The revenue grew from roughly $100 billion a year to over $400 billion a year. He also improved the quality of revenue by moving the mix into services, which is partly why it got— yeah, why it got a higher valuation.

And, you know, people say that, well, they never did any innovation under Tim Cook, but, you know, I've seen people tweet lists of products that were released under him, and there were a lot of them. Now, it's true, nothing as big as the iPhone, but they did release a lot of products under Tim Cook. And then just finally, I mean, you, you look back over the last 15 years and there really weren't any public snafus or scandals or imbroglios with Apple. It's one of the few tech brands that is still, I think, beloved by the population. I think a major part of that was Tim Cook's dedication to privacy and keeping the company on the right side of that, which I think users do appreciate. And Tim Cook even got praise from the president. I think it was just unsolicited where the president Talked about how Tim Cook didn't call him up that often, but when he did, it was something important, and therefore the president tried to help them out. Seems like he nurtured a good relationship with the president over, over the last decade or so. So you just have to say that he navigated what could have been a turbulent period with a great deal of grace and aplomb.

Clearly, uh, Chamath, he was a great steward of the brand, even though that list of products were all developed under Steve Jobs and they were just executed well, but he didn't bring in a lot of new products or services. Any final takeaways?

Actually, Jake, let me ask you a question. What do you think, other than AI, AI-powered Siri, let's say, what do you think he missed? I mean, what should Apple have done that they didn't do?

They would have out by now a pair of glasses that weren't 17 pounds like the Apple Vision Pro. They would have gotten glasses that pair perfectly with your phone, take videos for kids, and they're coming out with it. It's just on a really broken timeline. They would've had a killer Siri. They would've had a search engine-ish, Perplexity-like product. They would've had a self-driving car. When you went to the Apple Store, you would've been buying 2 or 3 very important products, glasses, a car, And probably a television set. If you look at actually what they did innovative under Tim Cook, I think that they have great taste and Apple TV produced a lot of great programming. He was working on a television set, not Apple TV clunked onto the back. I think those 3 products would have been— 4 products, Siri, glasses, car, television set, those would've been extraordinary. And who knows what he would've come up with when they lost Jony Ive, And obviously Steve Jobs passed away. They lost the soul of the company. They lost the innovative, groundbreaking soul of the company, and they just went into profit and iteration mode, but no acquisitions of note.

Nothing important was acquired and nothing important was released. Vision Pro, you can give them like, maybe that's like the 6th best product or something, but it obviously hasn't hit the mainstream. Chamath, any final thoughts from you?

Yeah, I have 3 specific things to say. The first is that he had honestly an impossible job. It's sort of like you play basketball with Michael Jordan and then you're asked to be Michael Jordan. And I think that that's an impossible task. And on that dimension, I think he has done just an incredible job. He has been an incredible steward of the business. Sachs is right, no major staffoos. I think he did a really smart thing around doubling down on privacy and just as a practical matter of being a great CEO, like if you, I think you can categorize CEOs in two buckets. One is the innovator, the person that's pushing the envelope, and then the second is just a great steward. He's at the top of the top of that second category. I sent you a couple of charts just to show this, and he found a lane that allowed him to separate himself from Steve Jobs. So, you know, as an example, like what does it mean to be a steward? Well, when you're a steward, you're allocating resources, and the two most important resources you control is capital and people. And I think on that dimension, what Tim did, if you just look at this, is He was able to invest appropriately in R&D.

They completely divested their need of Intel. They spun their entire new line of silicon. That silicon, it turns out, and this will be important in the future, is very useful in AI with all of this Open Claw stuff. And some of you guys are completely addicted to it. And they've kept the acquisitions light. So he was very capital efficient. If you look at the The next chart, what's so interesting is it is the exact opposite of what Steve Jobs did. Look at the amount of money that Steve Jobs returned to shareholders in his tenure at Apple. It's easy to count. It was zero. He loved to keep that money on the balance sheet and he probably, or maybe I'm guessing, would've directed that at some huge shot on goal. In the Tim Cook era, it was very different. He shrank the share count by almost 50%. I think it's 40%. That's insane. Is there any corollary to that, Chamath? No. He's been a prolific shareholder-friendly CEO finding ways to give us money back, which I think everyone who's owned the stock has very deeply appreciated. The last thing I'll say though is what is the future for John Ternus?

And I think it's in this final chart. We talked about the problematic nature of increasing per-unit pricing in SaaS. And what I would say is if you look at the iPhone, the unit price has gone up and people would say, yes, but the capabilities have gone up in turn. And I acknowledge that. But the problem with the per-unit pricing being as high as it is, is what Freeberg says is going to happen. AI rips open the canvas of the devices that we will use to interact with information and knowledge. We are going to live in a much more heterogeneous world in the future. It's not going to be two devices and two different operating systems that get you to knowledge. There's going to be all kinds of stuff, pens, orbs, who knows, Jason, your glasses, whatever. And so the problem is if you get too addicted to a single thing that has an incredibly juicy profit margin and great stickiness and the ability to raise price, It's a hard drug to get off of. I think really what John Ternus has to do is figure out how to move to this world where everybody will be launching umpteen devices via MCP or otherwise.

All of these services will be open. It'll be agentically talking to everything. I think the moats decay. I think if that happens, that's problematic if you're too reliant on a single thing to keep it going. Yeah.

And just expanding on what you said, wearables is where they really made some good inroads in terms of getting people to use them, whether it's AirPods or the watch. And the next wearable, this is a Plaud pin that I use to record. You can put it here or put it on your wrist. That AI synchronicity of having your eyes, having your ears, having your watch, having your phone, your desktop, all sync together with AI, could be a huge product line. I'll also add a fifth— robotics. You know, the— I think to— I think Steve Jobs, if you were alive today, would have been looking at Roomba, he would have been looking at Optimus, and he would have said, hmm, consumer robotics in addition to a consumer car. Those are two things I think he would have absolutely, uh, executed on at a high level.

Okay, let's keep moving here.

And we'd love to have you on the pod, John, so just come on the pod when you're ready. We'll have you come sit in. Go ahead, Sax, you get the final word.

Just one last point on this is that I think the succession at Apple is reminiscent a little bit of the succession at Disney. And apparently Steve Jobs and Tim Cook had this conversation back when Steve was alive and Steve told Tim, "Don't do what Disney did," where basically after Walt Disney died, the company languished because it felt so beholden to Walt's vision that they never really iterated. Now, when Walt died, his brother Roy took over, and Roy was already in the business. He was sort of like the business co-founder. He was a COO type, a little bit like Tim Cook. And he kept the magic going for about 5 years, and then he himself died. I think it was around 1971. And then you had this string of CEOs who took over, kind of uninspired. And it wasn't until Eisner came in in 1984 that he sort of revitalize the business. And so as I understand it, Steve and Tim had this conversation and Steve told him, don't be too beholden to my vision. You need to figure out your own and extend it. I think that, you know, you could argue that Tim in a way was like the Roy figure here.

Very effective business partner of Steve. He got a 15-year run. Roy only got 5. And I think again, he, added a zero to the value of the company. Crazy. The market cap went up over 10x. So you have to say fantastically successful run as CEO. I think the question now for John Ternus is, okay, you're now past, let's say, the Walt Disney and Roy Disney part of the business. Is it going to be like the 1970s Disney or is it going to be more like the 1980s? Do you figure out a way to revitalize it or do you have to go through kind of a funk first. Yeah.

And I think it's really illustrative of this discussion, Eisner and Iger, because Eisner's innovation was he realized that Disney was, I think he called it the vault strategy. He would, and we probably remember this from our childhoods, he would re-release all into theaters, all of their IP every 7 years. You couldn't get some of those Bambis, whatever, Snow White and the Seven Dwarfs. You couldn't get those products except in theaters, and he figured out a cadence to keep publishing. But then Iger came in and said, "Hey, what if we use this balance sheet and we use this distribution at the parks with their brand to buy Pixar, Marvel, and Star Wars?" And so there's multiple ways to do it. There might be something there in terms of acquisitions, bold acquisitions, with the Apple balance sheet could be super accretive to shareholders as opposed to lowering the share count and just distributing a ton of cash. All right, listen, we're going to talk about the Southern Poverty Law Center.

Racism Corner. Let's go to race— fake, fake Racism Corner. I want to know how the SPLC managed to accumulate $822 million in offshore bank accounts. Yeah, this is incredible.

These are big numbers.

Okay, SPLC. How is that possible? What is going on?

All right, let me tee it up here for the team.

This is like one of the biggest grifts of all time. Anyway, Jake, this is a big one.

SPLC has been indicted— indicted, not found guilty yet— on 11 counts of wire fraud and money laundering. Keep that in the back of your head: wire fraud and money laundering. Here's the core allegation: between 2014 and 2023, the Southern Poverty Law Center used hidden bank accounts to funnel $3 million in donor money to paid informants. Like, these are confidential informants, like the police or FBI might use. They use these as a nonprofit NGO to infiltrate hate groups. And so the official mission of the SPLC is, quote, to be a catalyst for racial justice in the South and beyond, working in partnership with communities to dismantle white supremacy, strengthen intersectional movements, and advance the human rights of all people. Okay, sounds great on paper. Examples of organizations they were trying to infiltrate KKK, Aryan Nation, neo-Nazi groups, and the Unite the Right organizers. Proud Boys labeled as a hate group by the SPLC. Oath Keepers not listed as a hate group but part of the militia movement. My friend Sam Harris, he was not listed as a hate group, but he was also pinned by the SPLC as like, uh, hate adjacent in their Hate Watch headlines.

And this is something that I had a major problem with this organization on, which is they would just very loosely label people as hate speech and try to get them canceled. All of this kind of, uh, came to a head. The revenue before Charlottesville— you remember the incorrectly clipped, uh, Charlottesville hoax where they said Trump said both good people on both sides, but they didn't give his full quote. Very unfair to President Trump, uh, we found out later. And that was the reason Biden of course ran. He said the Charlottesville both sides thing was his inspiration 58 million in 2026, to your point, Chamath, doubled and spiked to 136 million, more than double, and it's remained elevated ever since. Here are some, you know, images. For the indictment, and I'll wrap on this and then get everybody's feedback, they had F-37 as one of their confidential informants. He was a member, and this is according to the indictment, quote, member of the online leadership chat group that planned the 2017 Unite the Right event in Charlottesville. Virginia and attended the event at the direction of the SPLC. F37 made racist postings under the supervision of the SPLC and helped coordinate transportation to the event for several attendees between 2015 and 2023.

The SPLC secretly paid F37 more than $270,000. That's the legal case here. Let me pause there.

Can I add one thing? Sure, keep adding.

There's a lot of detail to this case.

Yeah, so you're right that the SPLC allegedly did fund $270,000 to help plan Charlottesville. In addition to that, they secretly funneled more than $3 million to a bunch of violent racist extremist groups, including the Ku Klux Klan, the American Nazi Party, Aryan Nation, United Clans of America, and it goes on from there. So I think— don't forget about the $3 million. So this group that was supposed to be fighting racism, in fact was fomenting racism by paying these groups to basically organize protests that SPLC could then point to and say that America has a huge racism problem, donate to us. And that's basically what happened after Charlottesville. They increased the amount of money that they were able to fundraise by $81 million. So that $270,000 investment led to an $81 million return. Pretty good. But this is kind of the whole point of the story, is that these guys are basically running a grift and One of the ways that you know this is a grift is because, according to the indictment, that they opened bank accounts under fictitious entities to conceal the payments that they were making from their own donors. Because if their donors knew that they were funding the KKK, they wouldn't be getting all these contributions from Hollywood celebrities and all the rest of it.

So it's really just this unbelievable story Under— uh, it really boggles the mind.

And just to clean up a little bit there, these are allegations. They haven't made the jump from planning these events, and the SPLC claims they were not planning these things, they were monitoring. So that's going to be their argument on the side. I'm not saying I agree with—

I know, I know, you're, you're right that the SPLC's cover story is that they were simply paying informants. That's what they've claimed. But there's two problems with that story. Number one is they were paying the actual leaders of these groups, not just sort of moles who were infiltrating the groups. And second, these leaders, they weren't paid to inform. They were paid to foment the activities. So I'm just saying that's the flaw. I understand they have this cover story that they were just paying informants. I'm just saying, in my view, that does not hold up. And again, if they were just paying informants, Why the extraordinary efforts to conceal the payments from their own donors? If they were proud of these efforts to infiltrate these groups, they should have basically informed their donors what they were doing. In fact, they hid it.

And well, here's the reason, uh, that it was hidden according to them. Again, I'm not taking the side— SPLC is not an organization I'm endorsing in any way. Their version of this is we didn't plan any of this. If we put SPLC bank accounts together for informants. That would be like the FBI sending a check to an informant from an FBI account. That's their explanation.

They're not a law enforcement agency.

Well, that's actually the question I had about all this, is like, what is a nonprofit doing hiring confidential informants, Chamath, to infiltrate these organizations? To what end? And then if you show me an incentive, you're going to, you're going to see an outcome. And the outcome here is, hey, we'll get more donations if there's more racism. Uh, your thoughts, just generally speaking here. Chamath, again, all of this is alleged.

These NGOs have completely run amok. They're cosplaying as these overlords and power brokers in our lives, and it needs to get stopped. They should all be dismantled. The people that donated to the SPLC should sue them, rip open all of the documentation, get their money back. Because just so you guys know, if you are listening or watching and you have donated There is $822 million of your money sitting in an offshore bank account waiting for you to get it back. Okay? And then separately, if you are thinking of donating to any of these organizations in the future, unless there is a full transparent auditing of it, you actually may be doing the opposite of what you thought. If you are against racism, you may be supporting racism. If you are against discrimination for gays, this could be actually promoting discrimination for gays. If you are this may be pushing back against trans rights because the playbook seems to be do the opposite to create the narrative, give it to your friends in the media who will look the other way and just amplify it, tell the lie, create the craziness, and then raise a bunch of money, make a bunch of stink, and try to curate power.

Freeberg, do you think this is, in your estimation or your gut tell you this is arsonist firefighters? They're lighting things on fire so that they can go put it out? Or do you think this is like, um, lawfare, as some people are claiming? Because there hasn't been— to Chamath's point, it's— they don't have donors taking this action. They're being accused of wire fraud on behalf of donors who haven't shown up yet to do, you know, a legal action. What's your take on all of this, Friedberg?

The IRS definition of what a 501(c)(3) nonprofit organization is meant to be doing is to engage in exempt activities. The definition of exempt activities is charitable, religious, educational, scientific, literacy, public safety, or fostering amateur sports competition, or preventing cruelty to children or animals. You tell me how the fuck 90% of what we call nonprofits today fall under that definition. We have completely fucking closed our eyes to the fact that organizations, regardless of political affiliation, social interest, have fundamental commercial and probably not aligned interests with the definition of a 501(c)(3), and we've allowed them all to get away with it for far too long. I don't think that this is a blue or red thing. I think that this is a thing where we let these organizations make it easy to get money to hide the money and to do whatever the hell they want with the money. And we need to stop it. And I think that it's an amazing opportunity right now for everyone to kind of reset the decks by cleaning all this shit up and getting all of these organizations flushed and make sure that any organization that wants to do whatever bullshit nefarious things they want to do, by all means do it.

But it's not a nonprofit and you shouldn't get a charitable donation deduction and the government should not be putting money into these sorts of things. This is an entirely different sort of activity in the social order. And as a libertarian, I'm all for it, but I don't think that they should be tax-exempt, and I don't think they should be getting government money, and I don't think that individuals should be benefiting from giving them money. And if we could fix all that shit up, I think a lot of these problems are going to go away. And I think this is a major problem.

I think the theme of this episode is audit everything, whether it's government waste and abuse or it's these NGOs Or it's people like Dow making these chemicals that 30 years later, you know, perhaps are correlated with cancer. We need to audit everything. We need to take a fresh look at this because it's not red versus green— red— this is not red versus blue, it's green. This is clearly a monetary incentive, and it is incredibly disruptive for society to not know the truth about what's going on with race in this country. I got Absolutely. You guys might not know this, but in— this is part of the cancel culture moment in time where they tried to take people having reasonable discussions about race in this country and tried to cancel them. They tried to do this to me in 2014 very famously. You guys may not know this, but I have won a couple of awards in my career. Most offensive tweet ever by Vice in 2014 was my alleged racist tweet where I said, hey, if you want to get into blogging and journalism. There's no racism in Czech journalism. All you have to do is publish for a couple of years a blog post, nobody can stop you, and there'll be a ton of jobs available to you.

And then what they did was they tried to cancel me and tried to cancel all my media properties, my investing. And this stuff had a modest impact on me maybe for a year. And then now it's obviously all being— Wait, wait, wait.

I'm not sure I understand. J Cal, you're saying the SPLC put you on a cancelation list?

No, they put Sam Harris on it. Vice put me on a cancelation list. I didn't get picked up by the SPLC, but I experienced the same thing, which was they said because I said, you know, race does— race doesn't play a role in hiring.

You're so careful about your virtue signaling, I'm just shocked that anyone would try to cancel you.

Well, that's what's shocking about it, is like, I know I was very clear. I said in journalism, like a very vertical thing, and I have a lot of experience.

You're a very skilled virtue signaler, so I mean, they tried to cancel me, guys.

I don't, you know, it's— they tried to cancel you too, Jamal. Jason, go ahead.

You have a question for me? I'm uncancelable. Yes, because I don't give up. That's what we found out through all this. You care about what all these idiots think? No, I don't. I never have. Jason, I have a question for you. Go ahead. What percentage odds now do you keep in the back of your mind that your petite little illustrious Human Rights Watch is actually creating human rights abuses to try to This is actually a very good point.

You know, a lot of the human rights organizations from back in the day—

what is the organization that you were— what is it called? Amnesty International.

Oh yeah, when I worked at Amnesty International, a very fine mandate. The mandate was human rights abuses as described in the Universal Declaration of Human Rights created by Eleanor Roosevelt.

And the, uh, this is like Science Corner.

No, but it was torture. It was people being put in jail and being tortured. It was people being censored because of freedom of speech. And that's what I worked on when I was at Amnesty International. These groups went adrift in order to get money, Human Rights Watch included, and then they started taking on things like, you know, uh, transgender rights, this rights, that rights, and censoring people. They went after Sam Harris because he had Charles Murray from The Bell Curve.

Stop with all this bullshit.

I'm asking, I think it's a 50-50 chance that all these organizations are involved.

So you think 50-50 50-50 chance depending on the organization.

SPLC, I'm gonna guess 95%. Yeah.

Amnesty International, you think is 50-50 that they're engaging in nefarious bullshit to try to whip up people's belief that there are human rights abuses happening that are not happening? You're saying it's a coin flip?

I think it's probably a coin flip. Yeah, that's what I would say today, because these organizations all got co-opted. SPLC might have had a great origin story, but now— I admire your intellectual honesty, and I appreciate you saying that. Well, I mean, just based on facts. So let's see what this legal case brings about.

Well, let's— I am all for them investigating SPLC, 100%. When you bring a grand jury indictment, you've already previewed the evidence. This is not like some guy's trying to whip up lawfare, okay?

Um, actually, you don't have to bring all the evidence, but that's a side thing. And, and they're very frisky about allowing you to indict somebody, as we experienced with Trump grand juries are a whole different animal. Yeah, they will indict a ham sandwich is the line. Um, so we'll see. Let's give them their day in court is always my position.

Well, I mean, regardless of what happens in court, if it's true that the SPLC is funding the Ku Klux Klan, they stop using confidential informants.

That's good enough for me. Out loud, it's insane.

It's good enough for me. Listen, here's the thing. Here's the systemic problem with nonprofits and NGOs is— let me just contrast it with business. In business you set up a company, the company has to make revenue, has to make profits, and if it doesn't, it's gonna go outta business, right? Because it'll lose money. So there's a feedback mechanism from the market. The company has to create products that people are willing to buy, and those products have to make money. With an NGO, nonprofit, what have you, they raise money. They don't sell things, they fundraise from donors in order to engage in an activity. But what happens over time is the actual activities may stop mattering. And all that really matters is they're able to keep fundraising, right? Because they're just trying to figure out a justification to keep going back to donors to get more and more money out of them. That's what perpetuates the organization. And they're trying to keep their job. Exactly. And then if it's an NGO that gets money from the government, then it's even worse because all they do from that point forward is try to lobby the government to get more money.

And it doesn't really matter whether the program is working or not. All that matters is whether they can spin it as working.

Why wouldn't the Southern Poverty Law Center focus on Southern poverty, which is an issue that actually still exists? It's a better thing. I mean, and why do you call it one thing, focus on racism, and then all of a sudden whip up—

I'll tell you why. Here's my theory. Here's my theory on it is I do think that at one time in this country, civil rights was a noble cause, a very legitimate cause. Of course it was. Of course we had the legacy of segregation and Jim Crow, and there were groups that were set up to basically change that, and they succeeded. But again, no one in an NGO or a nonprofit ever declares victory. Exactly. They're never going to say, you know what, we addressed this problem, we solved it. I always saw that in 2008—

Fire me, fire me, my job's done.

Yeah. When Obama got elected in 2008, I thought that regardless of whether you liked you Obama or not, or agree with his politics, I thought that at that point most people could see that this was not a racist country. 100%. Whatever else you could say, the fact that the highest office in the land was not denied to anybody showed that this country was not holding people back based on their skin color. And instead of just basically packing up shop and saying, okay, we've achieved our goal, the goalposts all got moved. Remember, that's when the whole anti-racist racism thing started was, was around Obama's second term. And what anti-racism was, it said that it's not good enough not to be, just not to be racist. You actually had to be anti-racist. But what anti-racism meant was, was basically that all the distributions had to match the population. Basically it meant equality of outcomes, not equality of opportunity. So effectively this whole goalpost was moved from equality of opportunity to equality of results.

Once you see it, you can't unsee it. It's like they sat around and And they said, now what? And one person was like, I got an idea. Well, and make racism again.

Exactly.

But if they just said, if they just said at that time, you know what, we're going to move the goalposts from a quality of opportunity to a quality of results. We're going to basically make everyone equal at the finish line, which is to say, I guess, communism or some sort of identity socialism. People would have said, eh, no, we're not on board for that. So instead they created this whole new terminology. To justify it. And it's taken us years to unpack that and realize what's really going on.

Gosh, I don't want to put myself in a position of defending SPLC. They were partners with the FBI for a long time. To your point, Chamath, or, or Sacks's point rather, there was probably a time when it was important to infiltrate the KKK and the Nazi groups.

It's not 2025.

It's not in 2026, like, I think necessary to be doing this work. I think law enforcement can handle it. Uh, in 20—

okay, I'm gonna give you guys a news flash. I just got— this just hit the wire. Um, this is really important. Breaking news here: America is profoundly less racist than you think.

Okay, there we go. Okay, breaking news, wake up! Friedberg wanted to do a surprise Science Corner. This is the first. We don't know what he's about to talk about, but David looks like he's been working really hard and he needs a nap. So Friedberg, you have the microphone. Let's go.

This was— Surprise science. Yeah, this is not necessarily a big surprise, but there was a really interesting paper published this week on trying to elucidate the underlying cause or predictor of colorectal cancer. So I don't know if you guys know any young friends, but colorectal cancer— Nick, if you could just pull up this first image— or colon cancer has become now the third leading cancer Over the last 20 years or so, there's been a scary rise in the number of young people, people generally under 50 years old that are getting colon cancer. That number has climbed by over 80% in just the last two decades. Historically, it's been an age-related disease. So as you get older, over 70 years old, your probability of getting colon cancer shoots through the roof. But this rise in young people getting colon cancer has been pretty alarming. And there's been a real question mark on what is causing it, what's the underlying trigger. So this research team out of Barcelona in Spain did an amazing study where they looked at the difference in the epigenome or the gene expression in tumor cells of patients that are under 50 years old and those that are over 70 years old.

This sort of data will show you what different environmental triggers are associated with those changes in gene expression. So whenever we're exposed to something in the environment, whether it's some food or some drink or whatever else it is, some chemical in the environment, the cells in our body that are exposed to that chemistry or exposed to that environmental trigger have genes that get switched on and off. And you can see which genes are on and off by looking at the RNA of those genes, which tells you that those genes are expressing RNA. To make protein or not make protein. And you can look at that gene expression to determine what is changing when a cell is exposed to a particular environmental trigger. And so they were able to get these samples of colon adenocarcinomas from the Cancer Genome Atlas, which is funded by the federal government. And they were then able to take a look at these cancer cells from colon cancer in patients that are under 50 and patients that are over 70, and look at the difference in the gene expression profile and what, um, environmental triggers are associated with that gene expression profile.

So that will tell you, hey, these environmental triggers are more likely the cause or an underlying driver of the risk of getting this colon cancer. And one thing rose to the top. So they looked at a whole bunch of things. They look at lifestyle factors, They look at eating index, how much you ate, how overweight you were, alcohol, birth weight. They adjusted for gender, they adjusted for all these different things. And as you look down this list, you'll see this is the difference between people that got colon cancer that were over 70, when you typically have a very high chance of getting it, and people that are under 50 when you don't. And what is going on with people under 50? And you can see there's this one row here. That's all orange. That row is a pesticide called picloram. Picloram is a pesticide that was developed by the Dow Chemical Company in 1963. This is the chemical formula for that pesticide. It's related to auxin, which are these hormones that plants make. And in the 1960s, there was this big rush to try and make synthetic plant hormones that you would then apply to a plant.

It would cause the plant to overgrow and the plant would quickly die. And Picloram became a very widely used herbicide in our environment. It's used to manage weeds in rangeland and pastureland where cattle graze. It's used to control weeds near roads and near railroads, on industrial sites to clear weeds away from highways and utility corridors. And the problem with Picloram, one of the things that's been known about it is it's very persistent. It doesn't biodegrade very well. Picloram sticks around for well over a year. It stays in the water, it moves into groundwater, and it's persistently in the environment after it's been used for some period of time. I went back and looked at the EPA data on this chemical. The last time there was an EPA safety study done was in 1995. And so this was before we had this capacity to do epigenomic studies like what was just done to elucidate that even though a chemical might not be causing cancer immediately, and you can't apply it to a cell and see it trigger a cancer. The long-term use or exposure to certain chemicals in our environment causes a change in the epigenome, which means that these genes are being turned on and off.

And when certain genes are turned on or off in the wrong way, it can trigger cells in the tissue to start to malfunction and go haywire and ultimately lead to cancer. And I think that this paper shows a pretty strong effect of Pichlorum in driving colon cancer in young people. It will very likely lead, and it should lead, to an EPA review on whether this should be legally allowed. But it should also lead to a new mechanism by which we assess chemistry that we're using in our food supply, in our environment, in our industrial applications, because we can now look at all of this sort of epigenomic data to try and figure out what are these chemicals doing to us before we see them cause the problem. So I thought this was like an amazing paper done by this team. They did a lot of work to try and make sure that the statistics were sound in the studies that they did. It really, uh, I think elucidated something pretty scary.

Is this like a Monsanto thing where like one company makes it, or picloram is broadly available? It's off patent now.

And so I'm pretty sure— my guess, I haven't looked into this, but my guess is most of this is made generically in China, and then it's probably packaged up with lots of different brands in the US and all over the world. So it's one of these chemicals that's just become ubiquitous in our use. That just shows up everywhere. But I think it really speaks to the fact that historically, think about 1995, you can look at what the immediate chemical application of something does to a rat or a human cell, and you can say like, oh, it didn't cause cancer, it's good to go, let's go, you know, didn't, didn't cause, quote, toxicity.

Can I ask you a question? In that study, are you exposed to picloram based on where you live?

Because like, yeah, sorry, that's a, that's a great question, Chamath. So I was going to talk about this. Thank you for asking that. They then took that piclorum exposure and then they looked at all the counties across the United States. They were able to gather data where there's enough data in California, Connecticut, Georgia, Iowa, New Mexico, Utah, Washington. And they were able to look at piclorum use estimates from the Pesticide National Synthesis Project and try and deduce in places where piclorum was highly used and not highly used. And once again, it elucidated signal, which is that when piclorum was used in the environment in the counties more frequently, there was a much higher frequency of colon cancer in those counties.

And that R-squared is weak or it's strong?

Reasonably strong. The odds ratio is like 3x. It's very strong.

This is accomplished, Freeberg, from a combination of big data and this, uh, science.

You know, I study these. Yeah, I think it's important.

Increased testing as well, right? So you have this confluence of increased testing, increased data, you know, knowing where these instances are occurring And if you add a layer of AI onto this, Freeberg, this is like a really positive use going back and looking at all these compounds and figuring out which ones we need to eliminate. Yeah. Yeah.

So I'll, I'll put my PCAST hat on. Thank you, David Sachs, for the role. And I think this speaks to one of the important roles that government has in doing fundamental science and fundamental research. So the, the National Cancer Institute and the federal government stood up this genome atlas with $100 million a couple years ago. They spent a only a few million dollars a year now to maintain it, to get cancer tissue samples and then create the availability to scientists to use those cancer tissue samples to do this sort of epigenomic analysis and study supported by, you know, government grants, or in this case supported by a foreign university getting funding to do it. And so there's, there's an important role that fundamental science still has in elucidating this that we would have otherwise not been able to see if we didn't have this resource available to us from the federal government and federal funding of scientific programs like this. And that leads to this discovery. You don't need fancy AI for this, to be frank, J Cal. There's an incredible amount of data, data that's available or, or resources that are available. What's happened in the last couple years is what's called RNA sequencing, where you can actually look at which genes are on or off, not just what's the DNA, but in the DNA.

Remember, we've talked a lot about the epigenome, what genes are on or off. And how that changes when you have different cancers or when you have different chemicals. And when you have a certain chemical like piclorum, your colorectal cancer goes through the roof and you can see that relationship in those tissues. And then you can put all the data together and say, oh my gosh, there's a lot of evidence here that points to this connection. Very powerful. I think it's important that it opens up the window that this shouldn't just be a one-off research project conducted by a team in Spain, but maybe should be a fundamental role that some of the government agencies play. Which is to stop Americans and the world from getting friggin' cancer. Let's figure out the things that we got wrong in industry and go back and delete them out of our food supply and out of our industrial supply. Um, and I think this is a really good example of that.

So, uh, how does Freeberg's focus on Uranus, uh, you know, inform your co-leading of PCAST here? Are you going to go deep into this colon research? How deep do you plan on going, and how will you get through 8 of these presentations a day at PCAST.

It's all good. This is why we hired Freeberg. Yes. By the way, did you guys— he's gonna handle, uh, Mars, Neptune, and Uranus. Absolutely. He's gonna go deep into Uranus and clean it up.

We need to clean up Uranus.

Uh, great work, Freeberg.

Great, great. Anyway, I think, I think this is important, and I don't think there's any news attention on this since it came out a couple days ago, so I thought it would be worth bringing up on the show. Absolutely. Making people aware. All right, but thank you guys for sitting through it.

Well, no, I think it's, it's great work you're doing there.

I just read the paper, but yeah.

All right everybody, that's it for episode 270 of The World's Greatest Podcast. I am your world's greatest moderator. Thank you, Chamath Palihapitiya, David Sacks, and David Friedberg for the episode. To your friends, your neighbors, and we'll see you all next time. Bye-bye.

Love you boys. Bye-bye.

Let Your Winners Ride. Rain Man David Sacks. And it said we open source it to the fans and they've just gone crazy with it.

Love you, Westside Queen of Kin Wah. Let Your Winners Ride.

Besties are gone.

That is my dog taking a shit in your driveway, Sacks.

Oh man. Oh man.

We should all just get a room and just have one big huge orgy, 'cause they're all just useless. It's like this sexual tension that they just need to release somehow. Wet your beak, beak.

Wet your beak, beak. Wet your beak, beak.

We need to get merch. I'm going all in!