E101: Ye acquires Parler, Snap drops 30%, macro outlook, VC metrics, valuing stocks & more
All-In with Chamath, Jason, Sacks & Friedberg Podcast Recap
Published:
Guests: Brad Gerstner
What Happened
Kanye West, also known as Ye, is acquiring Parler, a social media platform previously created by George Farmer, Candace Owens' husband. This acquisition comes amidst West's controversial social media activity, which many interpret as a manic episode. The podcast discusses the ethical implications of media platforms engaging with individuals during mental health crises and the competitive landscape of social media.
Snapchat's market cap has drastically fallen from $160 billion to $12 billion, marking a 91% decline. Despite steady daily active user growth reaching around 350 million, Snap struggles with revenue challenges due to Apple's IDFA changes. The company's governance structure, where common shareholders have no voting power, and a recent 20% workforce reduction highlight significant structural challenges.
The episode explores the broader macroeconomic environment, with tech stocks suffering as interest rates rise from 0% to 4.5%, affecting market stability. The discussion notes that historically, tech has performed well with interest rates around 4-5%. However, poor governance in tech firms, exemplified by Snap, might deter investors as interest rates increase.
Venture capital (VC) metrics show a power law market where a small percentage of deals generate the majority of returns. Concerns are raised over high valuations in private markets, with a $101 million funding round for Stability AI despite no revenue or product. Venture funds from 2016 and 2017 are still maturing, with potential impairments of $600-700 billion anticipated in venture capital portfolios.
Chamath Palihapitiya criticizes Blue Bottle Coffee for its default use of oat milk, which he describes as a 'chemical spew'. This leads to a broader discussion on the ethics of plant-based versus animal-based milk alternatives. Precision fermentation is presented as a promising method for producing animal proteins without harming animals, using yeast or bacterial cells.
The episode anticipates changes in tax policy, with Proposition 30 in California proposing a 1.75% tax on incomes over $2 million to fund clean energy. Governor Gavin Newsom opposes this, viewing it as a scheme by Lyft, which has spent nearly $48 million in support. The broader context of U.S. debt and tax policy suggests potential long-term increases in tax rates for wealthy individuals to manage national debt.
The podcast touches on the U.S. debt to GDP ratio, which has doubled from 57% to over 120% in the last 20 years. Despite this, there is a belief that debt to GDP can continue to rise without severe consequences, referencing Japan's 200% ratio. Different global tax environments are compared, highlighting regions with zero corporate gains and income taxes, contrasting with high-tax states like California.
Finally, the episode mentions stock picking challenges and Warren Buffett's successful bet against hedge funds with the S&P 500. The average returns of 8% to 10% annually from the S&P 500 are cited as a more reliable investment strategy compared to individual stock picking, which often underperforms the index over time.
Key Insights
- Kanye West's acquisition of Parler highlights the competitive and controversial nature of emerging social media platforms. Parler, having raised $56 million, is seen as a less stable version of Twitter, indicating potential challenges for new entrants in the market.
- Snapchat's significant market cap decline from $160 billion to $12 billion underscores the impact of governance issues and external factors like Apple's IDFA changes. Despite steady user growth, Snap's revenue struggles and lack of voting power for common shareholders present serious hurdles.
- The venture capital landscape is marked by a power law dynamic, where a small percentage of deals drive the majority of returns. The high valuations seen in private markets, such as the $101 million funding for Stability AI, raise questions about sustainability and potential impairments in VC portfolios.
- Taxation and national debt are critical topics, with Proposition 30 in California proposing a tax increase on high earners to fund clean energy. The U.S. debt to GDP ratio has more than doubled over 20 years, sparking discussions on long-term tax rate increases for the wealthiest to manage this debt.
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