Trump's Cabinet, Google's Quantum Chip, Apple's iOS Flop, TikTok Ban, State of VC with Keith Rabois

The Besties welcome Keith Rabois! (0s)

• The All-In Podcast is the number one podcast in the world, hosted by Chamath, Jason, Sacks, and Friedberg, and they welcome Keith Rabois as their guest (0s).
• Keith Rabois is a venture capitalist who has worked with several companies, including PayPal, LinkedIn, and Square, and has also started his own companies (1m44s).
• Keith Rabois has a strong belief in the "founder mode" and has even held a conference in New York called "Hiring the Art of Hiring for Founder Mode" (2m43s).
• In founder mode, the CEO is like a dictator, and Keith Rabois believes that this is the best way to run a company, especially in the early stages (2m40s).
• Keith Rabois has a background in computer science and went to Stanford with Peter Thiel and other successful entrepreneurs (3m11s).
• Keith Rabois worked at LinkedIn, which was started by Reid Hoffman after he left PayPal, and then joined Square as the 20th employee (3m32s).
• Keith Rabois spent six years at Khosla Ventures and five years at Founders Fund before becoming a venture capitalist in 2013 (3m54s).
• Keith Rabois is known for his American exceptionalism and supremacy, and he does not like dictators, but believes that it's not always America's job to fix all the problems in the world (2m17s).
• Keith Rabois is excited to be on the podcast and is looking forward to discussing various topics, including the state of venture capital (1m49s).

Keith explains why he returned to Khosla Ventures, the differences between Founders Fund and Khosla, and his husband Jacob Helberg's role in Trump Admin (4m1s)

• Keith Rabois was drawn to venture capital (VC) since 2003 and was an active angel investor, writing many checks, which likely influenced his decision to become a professional investor (4m52s).
• Typically, executives become VCs by forging relationships with board members, such as Keith's experience with Square, where he was on the board and eventually joined Founders Fund (4m22s).
• Keith left Founders Fund to join Khosla Ventures (KV) mainly due to his dislike of commuting from San Francisco to Palo Alto every day, as he believed the future of investing was more prominent in San Francisco (5m40s).
• Keith discussed the differences between Founders Fund (FF) and Khosla Ventures (KV), with FF being a momentum investor, often investing at $500 million or more in true valuation, and KV being involved as early as possible, typically at the seed or series A investment stage (6m44s).
• Keith mentioned that almost every successful investment at Founders Fund was invested at a later stage, with exceptions like Andreessen and Ramp, while KV's investments were mostly at the early stage, with the exception of Stripe, which Keith led in 2013 (7m5s).
• Keith emphasized that KV is an input-driven organization, focusing on early-stage investments (7m36s).
• Founders Fund is an output-driven venture capital firm, whereas some other great technology companies, such as Amazon and Apple, are input-driven, and certain people are better suited to specific environments (7m37s).
• Keith Rabois prefers to invest as early as possible, often with just a keynote deck and no product or metrics, as he believes that metrics can be confusing, and his sweet spot is assessing founders and their potential to build iconic companies (8m2s).
• Rabois enjoys company-building and helping founders increase their chances of success, which is a key part of his role at Founders Fund (8m37s).
• Founders Fund has a mantra of finding great founders and getting out of their way, whereas other firms, like Kosla Ventures, are more proactive and participatory in their approach (9m5s).
• Kosla Ventures, led by Venod Khosla, has been extremely helpful to portfolio companies, adding board members, introducing commercial partners, and being actively involved in the business (9m19s).
• Founders Fund has also shown its value in protecting its portfolio companies, as seen in a situation where they supported a founder in a board dispute, which ultimately led to a massive exit within a year (9m46s).
• Brian Singerman is leaving Founders Fund, and there is speculation about his next move, possibly an ambassadorship, although the details are not clear (10m1s).
• The individual has chosen not to join the Trump administration, despite being interested in politics, as they feel they are in the prime of their venture career and cannot take time off without falling behind in the rapidly emerging technology field (10m48s).
• The individual's husband, Jacob, is joining the Trump administration as the chief economic officer, a role that involves building foreign policy from a business standpoint and promoting economic success as the foundation of power in the world (11m46s).
• Jacob's job is to export the administration's economic philosophy and rebuild American strength, serving as the primary point person under the Secretary of Economic Affairs (12m44s).
• The role of under Secretary of State for economic affairs has been expanded to include additional responsibilities such as environment, but it is hoped that these additions will be removed and the title will revert to its original form (13m3s).
• The individual believes that economic success is critical to the administration's goals, citing the example of the United States' economic engine being a key factor in its victory in World War Two (12m9s).
• The individual is proud of their husband's new role and believes it is exciting for him and the country, with the potential to make a positive impact on the nation's economic strength (11m49s).

Business acumen of Trump's cabinet and appointees, diversity of opinion (13m9s)

• Trump's administration is assembling a diverse group of people with varying opinions, which may lead to unpredictable decision-making due to the consideration of multiple sources of input (13m11s).
• Trump's decision-making process involves asking a lot of people different questions and then making a decision based on the input received (13m51s).
• The administration's team includes a large number of business people, which is unusual in modern US politics and creates an interesting contrast with the Democratic party (15m7s).
• The presence of business people in the administration is seen as a positive development, as it brings in people with real-world experience and judgment to oversee the economy (16m11s).
• The idea of successful business people taking a pause in their careers to work in government is not commonly accepted in the Democratic party, where it is seen as unfashionable (15m40s).
• The Republican approach to tapping successful business people for government roles may set a new standard for future presidents and lead to better outcomes (15m59s).
• The founding fathers envisioned a system where people with business experience would serve their country for a limited time before returning to their professions, rather than becoming career politicians (16m47s).
• A more powerful model for government is one where individuals participate in the process as a civic duty and then return to their private lives, rather than making a career out of being politicians, which can create nasty incentive structures (17m5s).
• People who are independently wealthy, such as billionaires, have different motivations than those trying to increase their net worth, and their independence creates a higher degree of freedom and aligns them with the long-term outcome of government (17m43s).
• Independently wealthy individuals are often smarter and have a better understanding of the real world, which is not always the case with professional politicians and bureaucrats (18m21s).
• The Department of Justice's (DOJ) theoretical guidance on the Google antitrust matter was criticized for being disconnected from reality, and it was suggested that the DOJ does not understand the company's true value, such as its advancements in Quantum Computing (18m31s).
• Google has made significant advancements in Quantum Computing, including the development of a super chip, which demonstrates the company's capabilities and innovation (18m52s).
• Professional politicians and bureaucrats often lack a deep understanding of the real world and the latest developments in various industries, which can hinder their ability to make informed decisions and guide regulatory agencies (19m14s).
• It is suggested that politicians and bureaucrats should gain experience working in the real world, such as in companies, to better understand the issues and make more informed decisions (19m24s).
• The counterargument to having businesspeople in government is that they may bring business interests into the government, but it is argued that this is how it should work, and the US can no longer afford to be a "bleeding piggy bank for bad ideas" (20m18s).
• The current system of appointing government officials is not logical or meaningful, as it often results in unqualified individuals making decisions without transparency, and a more effective approach would be to appoint business people with a direct point of view and transparency, even if it means they could potentially advantage themselves, as this would be more obvious and laid bare (21m0s).
• The issue with the current system is that officials often "burrow" into mid-level positions and make decisions that benefit themselves, but this is not transparent, and it would be better to have a system where officials are transparent and accountable for their actions (21m20s).
• Keith Rabois believes that successful people, such as those appointed by Trump, can be effective in government roles, even if they are not from the industry they are regulating, as they have proven themselves through merit and can bring a fresh perspective (21m56s).
• Rabois also notes that Trump's appointees are not typically from the industries they are regulating, and that this can be beneficial, as it brings in new ideas and perspectives (22m0s).
• The idea of penalizing successful people for their success is not effective, as it can stigmatize success and lead to less of it, and instead, society should aspire to emulate successful people and encourage them to participate in government (22m36s).
• Rabois suggests that transplanting successful people into industries they are not familiar with can be beneficial, as it can bring in new ideas and perspectives, and that laws can be passed to prevent conflicts of interest, such as prohibiting lobbying or working for certain companies after leaving government (22m55s).
• Trump is the only president in the last 60 years whose net worth decreased after leaving office, which sets a positive example for government officials (23m21s).
• Domain expertise can be a limitation for founders, as it can lead to a narrow perspective and a failure to recognize new ideas, and it is often beneficial to bring in people with different perspectives and expertise (23m43s).
• When evaluating a startup, it's essential to avoid falling for the trap of relying on people with expertise, as they often provide opinions based on a prior world and may not consider new possibilities (24m3s).
• When conducting due diligence, the key question to ask experts is what is metaphysically impossible about the startup's idea, and if they can't provide a specific principle that makes it impossible, their opinions can be ignored (24m19s).
• Experts often have a narrow perspective based on their prior knowledge, and their opinions may not account for new and innovative ideas (24m40s).
• Donald Trump's effectiveness can be attributed to his ability to ask questions and challenge the status quo, constantly asking "why" and seeking new perspectives (25m14s).
• Trump's approach is similar to that of successful founders, who often ask "why" and challenge assumptions in their domain, even if they don't have prior knowledge or expertise (25m41s).
• The ability to ask questions and challenge assumptions is a key predictor of success for founders, as seen in the case of Airbnb, which challenged traditional assumptions about the hotel industry (25m45s).
• The discussion is set to move on to various topics, including Google's quantum chip (25m57s).

Google's new quantum chip: potential impact on encryption, cryptography, and more (25m59s)

• Google has announced its latest Quantum chip, called Willow, which was fabricated in Google's new chip plant in Santa Barbara and is considered a significant milestone in the evolution of Quantum Computing (25m59s).
• Willow performed a standard Benchmark computation under five minutes that would have taken today's fastest supercomputer 10^25 years, or billions of times older than the universe (26m20s).
• Quantum Computing uses qubits, which can be in multiple states at the same time, unlike traditional binary computers that use bits, which are either 1 or 0 (26m40s).
• The breakthrough in Willow is that it demonstrates the ability to contain and interact with qubits, allowing for Quantum computation and the potential to solve complex problems that are not possible on traditional computers (27m40s).
• The challenge in Quantum Computing is building a computer with multiple qubits that can hold their state for a long enough period of time to perform a computation without making too many errors (29m22s).
• Google's announcement is based on a paper published in Nature, which follows a pre-print released in August, and has been making headlines this week as a significant milestone in Quantum Computing (27m4s).
• The impact of Quantum Computing is expected to be significant, but it is still unclear when it will have a practical impact, similar to how Nvidia's GPUs have had an impact on traditional computing (27m33s).
• Quantum bits, or qubits, can be entangled, meaning two molecules can relate to each other at a distance, and can also interfere with each other, allowing for complex problem-solving (28m33s).
• Quantum Computing creates new opportunities for algorithms that can solve problems that are not possible on traditional computers, and Google's announcement is a significant step forward in this field (29m0s).
• Google has made a significant breakthrough in quantum computing by demonstrating that the error rate in their quantum chip decreases as the number of cubits increases, achieving a lower fault tolerance and enabling the possibility of building a large-scale quantum computer with multiple interacting cubits (29m41s).
• This breakthrough has important implications for cryptography, particularly in the context of Shor's algorithm, which can be used to factor large numbers almost instantly, potentially breaking modern encryption standards such as RSA and those used in Bitcoin's blockchain (30m35s).
• Shor's algorithm, developed by MIT professor Peter Shor in the 1990s, is a quantum algorithm that can factor large numbers exponentially faster than traditional computers, which could compromise the security of current encryption standards (30m41s).
• The development of a large-scale quantum computer could potentially allow Google to run quantum algorithms like Shor's algorithm, which could crack current encryption standards in a matter of seconds or minutes (31m50s).
• As a result, there is a growing need to transition to post-quantum encryption standards, which are resistant to quantum computer attacks, and this transition is expected to happen in the next few years (32m7s).
• To break RSA 2048, approximately 4,000 stable logical cubits would be required, while breaking SHA-256, the underlying encryption framework for Bitcoin, would require around 8,000 cubits (32m41s).
• Google's quantum chip, known as the Willow chip, has made significant progress in error correction, achieving a 99.7% accuracy rate, but still has a long way to go to reach the target fault tolerance of 1 * 10^-6 to make it logically useful (33m56s).
• The Willow chip's error correction improves as more chips are used together, but there are still significant challenges to overcome, such as logical interconnects and communication between chips (33m17s).
• Google's investment in quantum computing is a significant step forward, with the potential to change the world, and is a testament to the company's ability to fund and incubate innovative projects (33m54s).
• The development of quantum computing is still in its early stages, and it may be a decade or more before it becomes a commercial product or application (35m53s).
• There are concerns about the verifiability of quantum computing claims, and the impact of quantum computing on encryption and financial services is still unclear (36m19s).
• Google's ability to fund innovative projects like quantum computing is a result of its successful business model, which has generated significant revenue and allowed the company to invest in research and development (35m11s).
• DeepMind, a UK-based artificial intelligence research organization, is also working on innovative projects, and its research has the potential to make significant contributions to humanity (35m47s).
• Nevan's Law, proposed by Hartmut Neven, the head of Google's Quantum AI Lab, is a concept that describes the exponential growth of quantum computing power (35m3s).
• Google's quantum chip has been analyzed, but there's a chance the results may not be accurate due to the long time it takes to verify, potentially up to 20-50 years, which is a significant hole in the RCS Benchmark framework used (36m34s).
• Even if the results are accurate, making quantum computing practical and fast is a challenge, and there's also the issue of post-quantum computing encryption, which many important things have switched to, leaving historical communications vulnerable (37m7s).
• Historical communications encrypted under old paradigms will become increasingly vulnerable over time, but the more time it takes to develop practical quantum computing, the safer private communications and exchanges will be (37m11s).
• There's a question of order magnitude improvement needed in quantum computing, with each step potentially requiring significant time and effort, and it's unclear how long it will take to achieve the necessary improvements (37m44s).
• Quantum computing requires a completely different approach to software development, and even if it becomes available, it will require rewriting software from scratch, which could be an interesting business opportunity (38m10s).
• There are many complicated questions surrounding the development of quantum computing, including how to build compilers, languages, and applications, and who will write the necessary code (38m21s).
• While there's been significant work done in the space of quantum computing and algorithms, industrial-scale systems are still not available, and simulating and testing quantum computers is a complex task (38m50s).
• Google's announcement included a reference to the idea that quantum computation occurs in many parallel universes, which may be more of a PR statement or a nod to science fiction rather than a serious scientific claim (39m17s).
• Quantum physics is a complex and mind-bending field, and the idea of quantum mechanics and parallel universes is still a topic of debate and speculation (39m41s).
• Quantum mechanics is a complex and non-intuitive field that requires deep thinking, as demonstrated by the concept of a qubit, which collapses to a value when measured and exists in a superposition of multiple states until observed (39m57s).
• The act of observing a particle in quantum mechanics can change its behavior, as seen in the slit experiment where observing a light as a particle versus a wave changes the outcome (40m56s).
• Schrödinger's cat is a thought experiment that illustrates the concept of a quantum state, where the cat is both in and out of the box until observed (41m42s).
• Keith Rabois is more open to discussing science and is kinder and more articulate in his responses, unlike another person who would have been dismissive and unengaged (42m23s).
• The advantage of Monday partner meetings is the opportunity to watch and learn from science fiction, which can provide a basic understanding of complex concepts over time (42m43s).
• The person does not play chess because they want to be proficient in the activities they pursue and do not have the time to dedicate to it (42m57s).
• A big shoutout is given to Gukesh, an 18-year-old Indian friend who became the new world chess champion, and it is mentioned that the Indian community is connected through a group chat (43m13s).

Apple developing new server chip for AI inference, iOS flop, why its product culture is failing (43m50s)

• Apple is developing its own AI server chips for internal use, with the help of Broadcom and TSMC, and plans to start mass production in 2026, but does not intend to sell the chips or use them for cloud computing (43m50s).
• The goal of this development is to make the iPhone the primary interface and to have AI working locally on the device, prioritizing user privacy, and providing a compelling AI experience (44m30s).
• The recent iOS 18 update has been plagued with issues, including phone crashes, problems with the photos app, and difficulties with making calls, which is surprising given Apple's scale and resources (44m50s).
• Apple's decision to develop its own chips is seen as a move to catch up with the perceived disruption caused by AI, and to maintain its competitive advantage through vertical integration (45m42s).
• Vertically integrated companies like Apple have a significant competitive advantage that can last for decades, as they can design and build chips that perfectly fit their desired interface, use cases, and UI (46m4s).
• Apple's success with its processors and phones, such as the M4 and Mac Mini, demonstrates the benefits of vertical integration, and the company is likely to continue down this path, combining hardware and software development (45m52s).
• There are few world-class companies that excel in both software and hardware, with Nvidia being a possible exception, but even they may not be able to match Apple's level of integration and UI expertise (47m1s).
• Apple's competitive advantage comes from its vertical integration of software and hardware, a strategy that Steve Jobs implemented when he returned to the company in the 1990s, allowing them to leverage this advantage for about 15 years now (48m0s).
• This strategy has given Apple incredible advantages, but it has also led to sloppiness in other areas, especially over time, as they don't have to compete at the cutting edge of certain features, such as the photos app, which is completely unusable (48m41s).
• The company's cultural and structural decay is evident, and eventually, someone will figure out an angle to challenge them (49m12s).
• The lack of fear of being held accountable for mistakes, which was present during Steve Jobs' time, is no longer there, and this has led to a lack of urgency in addressing issues, such as the problems with the photos app (49m35s).
• User acceptance testing (UAT) is crucial for apps with a large consumer footprint, and it's reasonable to expect companies like Apple to go through this process to identify and fix issues before releasing updates (50m11s).
• The problems with Apple's operating system go beyond the photos app, with core structural issues affecting the overall functionality of the iPhone (50m41s).
• The current state of Apple's iOS is frustrating, with features like the Command Center not functioning as expected, and the constant need to adjust brightness settings, which could be simplified through machine learning and data analysis (50m46s).
• The lack of an "Arbiter of taste" at Apple, a person who can make decisions based on their intuition and sense of style, is a problem, as data alone cannot replace the need for human judgment and taste in software engineering (51m20s).
• Without a leader with taste, companies like Apple may struggle to make decisions and may rely too heavily on data, which can lead to a lack of innovation and poor user experience (51m52s).
• The departure of leaders like Steve Jobs and Johnny Ives from Apple has left a void in terms of taste and decision-making, and the company's reliance on data may not be enough to fill this gap (52m7s).
• Other companies, like Google and Meta, use data and scaffolding to make decisions, but this approach can also have its limitations, and the lack of taste and human judgment can lead to poor user experience (52m21s).
• The concept of taste is not just limited to technology, but also applies to other fields, such as venture capital, where early-stage investing requires a sense of taste and intuition, while later-stage investing can rely more on data and scaling (53m24s).
• The loss of a leader with taste can have a lasting impact on an organization, similar to the decay function seen in sports teams when a key coach or player leaves, and it can take time for the effects of this loss to become apparent (53m41s).
• Apple has advantages in AI, but also faces significant organizational and structural disadvantages in the field of artificial intelligence (54m12s).

TikTok panics after appeals court upholds the "divest-or-ban" law, with a January 19th deadline (54m30s)

• TikTok is facing a January 19th deadline for divestment after an appeals court upheld the decision, posing a threat to the National Security of the United States due to its data tracking and potential manipulation by the Chinese government (54m31s).
• The CEO of TikTok allegedly lied under oath to congressional committees about the company's data protection policies, and there is evidence that people in China have access to American user data despite the company's claims of storing data in Texas (55m30s).
• The parent company of TikTok, ByteDance, used an app to track the location of journalists in 2022, highlighting the company's willingness to use its technology for surveillance purposes (56m19s).
• A Chinese law requires companies to provide user data to the Chinese Communist Party (CCP) upon request, posing a structural threat to the United States and raising concerns about the influence of Chinese companies on US policy (56m41s).
• The use of TikTok raises questions about fair trade and the ability of Chinese companies to compete in the US market while American companies are restricted from operating in China (57m55s).
• The Pegasus spyware, which can infiltrate WhatsApp and allow for remote listening, has been mentioned as a related concern, highlighting the potential risks of foreign surveillance and data manipulation (58m5s).
• There is likely a "back door" in TikTok that allows for data collection and surveillance, as evidenced by the bipartisan vote to ban the app, which was taken a week after an intelligence briefing to the House and Senate intelligence committees (58m18s).
• The vote to ban TikTok was extremely bipartisan, with 360 votes for and 58 against in the House, and 79 votes for and 8 against in the Senate, indicating that there may be information about TikTok that is not publicly available (58m30s).
• Government officials and military personnel, such as Navy SEALs and Special Forces, are not allowed to use TikTok and other apps due to security concerns (59m16s).
• Tracking someone's child's TikTok usage can reveal the parent's location and potentially compromise national security (59m21s).
• The fact that TikTok has 200 million users means that even if only a small fraction of them are of interest to state actors, it is still a significant security risk (1h0m54s).
• State actors may be able to triangulate and identify specific individuals to target for surveillance, even if the majority of users are not of interest (1h1m15s).
• The Chinese government's treatment of its own citizens, including tracking and surveillance, suggests that they would have no problem doing the same to adversaries (1h1m41s).
• The fact that TikTok's shareholders, including Jeff Y, may prioritize profits over security concerns, raises questions about the company's motivations and potential risks (1h1m55s).
• The discussion revolves around the potential ban of TikTok, with the suggestion that the company should be willing to divest if it wants to go public, and that the Chinese Communist Party (CCP) sees TikTok as a valuable tool (1h1m57s).
• The idea of divestment is compared to giving up nuclear weapons, and it's argued that the CCP wouldn't name a fair market price for TikTok, suggesting nefarious intentions (1h2m24s).
• The conversation shifts to the topic of phones being used as weapons, referencing instances where people have been injured by pagers (1h3m3s).
• The discussion then moves on to the topic of venture capital, with Keith Rabois being asked about his eating habits, specifically his preference for steak (1h3m9s).
• Keith Rabois reveals that he enjoys a medium-cooked steak, preferably 8-12 ounces, and mentions his fondness for Wagyu beef from Australia or Japan (1h3m23s).
• The conversation also touches on the topic of red meat, with a mention of "red meat Republicans" and a shoutout to a friend named Kimo (1h3m39s).
• The discussion concludes with a mention of a Denver Cut steak, which was recently tried and found to be incredible (1h3m51s).

State of Venture Capital, why Stripe is still private, thoughts on crypto (1h3m55s)

• Venture capital deal activity has been recovering, with the number of deals and the amount being invested approaching pre-2022 levels, although exits are not keeping up (1h3m56s).
• ServiceNow went public with a 50% increase, and Andrew Ferguson has replaced Lina Khan as the head of the Federal Trade Commission, which is seen as a positive development for business and free markets (1h4m25s).
• The venture industry is seeing a mixed trend, with AI companies being funded quickly, while non-AI companies are experiencing a different environment (1h5m5s).
• The market for AI companies is hot, but may be cooling down, and companies with the right team are getting funded quickly (1h5m15s).
• Non-AI companies, including enterprise software, are experiencing a cooler market, but the recent IPO of ServiceNow may inspire more traditional companies to go public (1h6m13s).
• Stripe is seen as a company that should go public, but has not done so yet, and is at risk of being disrupted by crypto and stablecoins (1h6m27s).
• Keith Rabois believes that companies like Stripe should go public as early as possible, with a minimum of $50 million in revenue and a clear path to $100 million and $200 million, in order to promote accountability, transparency, and discipline (1h6m52s).
• Some of the most innovative companies in the world are public companies, and it takes the right leader to drive innovation and ignore bureaucratic and legal distractions (1h7m25s).
• Different founders have different approaches to going public, with some companies like SpaceX and Stripe remaining private for a long time, while others prefer to go public early to access capital resources and be strategic (1h7m46s).
• Going public early can provide optionality and allow companies to make strategic acquisitions, such as Facebook's purchase of Instagram, which had a significant impact on the company's timeline (1h8m22s).
• Having public currency can increase optionality and make it easier to acquire private companies, as the acquired company's investors can sell their shares on the public market (1h8m45s).
• Stripe's decision not to go public is based on the company's first-principal thinking, where they ask why they should go public and what advantages it would bring, and they have been able to construct alternatives to most of the advantages of being public (1h9m16s).
• The burden of proof is on companies to justify going public, and Stripe has been able to create alternatives to the advantages of being public, but not every company can do this (1h9m18s).
• The conflation of Lena Khan's big company break-up mandate with tech M&A is incorrect, and the main issue holding up acquisitions and IPOs is investor and board expectations on valuation relative to where they put money in the last couple of years (1h10m7s).
• The high valuations of companies from 2021 to 2023 mean that investors cannot take those companies public today without taking a loss, which is holding up the IPO market (1h10m34s).
• There is a public market appetite for anything at all times, but it depends on the valuation, and the current issue is that many venture capitalists and late-stage private equities do not want to take companies public and face a 60-70% haircut on the IPO, so they prefer to keep them private and try to earn their way back into the original valuation (1h10m47s).
• The exit and liquidity environment is driven by the sell side and investor expectations, rather than the markets, and there is also a cultural aspect, with some public companies preferring to build competing functions rather than doing tuck-in acquisitions (1h11m21s).
• The leaders of public companies are taking a cautious approach to M&A, with some having told their corporate development teams to stop pursuing deals due to the risks and costs involved, and instead focusing on building competing functions internally (1h11m34s).
• Small deals are different, and companies like Google have made acquisitions in areas like cybersecurity, but the sellers of high-quality companies often demand too high a premium, which can deter buyers (1h11m58s).
• Keith Rabois agrees that the current antitrust leadership is flawed, and he has criticized the current leader for publishing a paper with false data, which has been critiqued by Benedict Evans (1h12m20s).
• Rabois also notes that the alleged quintessential example of Amazon's dominance is not supported by the fact that Shopify has successfully competed with Amazon and dominated the DTC commerce market (1h12m52s).
• Despite his criticism of the antitrust leadership, Rabois does not believe that their actions have significantly affected exits, as high-end venture capital returns are typically driven by IPOs rather than M&A (1h13m23s).
• Institutional venture capital funds need IPOs to return their funds, as the returns from M&A are typically not sufficient to drive returns for large funds (1h13m47s).
• Venture funds with $500 million to $2 billion in capital can drive returns through mergers and acquisitions, but this is not always the case, and the IPO window has started to open, with companies like Gentlemen We Ride, Pony AI, and Clara planning to go public in the US (1h14m46s).
• The Trump Administration's policies, including tariffs, may have an impact on the economy, but the Treasury Secretary and the National Economic Council understand the subtleties of the economy and are committed to reducing inflation (1h15m52s).
• The Administration's plan to impose tariffs, especially against China, may not lead to inflation, as consumers can substitute goods and the net inflation might be negative, and the FED Reserve has a study that suggests housing prices are inflated due to illegal immigration (1h17m2s).
• The Trump Administration's policies may also have an impact on companies like Sheen, a fast-fashion company that may face problems due to tariffs, and the Administration's commitment to reducing inflation may lead to a decrease in the cost of goods like eggs and groceries (1h15m10s).
• The IPO market is opening up, with several companies planning to go public, including Gentlemen We Ride, Pony AI, and Clara, and the Trump Administration's policies may have an impact on the economy, but the Treasury Secretary and the National Economic Council understand the subtleties of the economy (1h14m46s).
• The hardest area to reduce actual prices is Healthcare, which is a major driver of cost to individuals, and ObamaCare has been a disaster, but a solution is not readily available (1h17m46s).
• Tariffs, immigration, and inflation are debated topics, even among those with experience in implementing tariffs, and the practical experience differs from the fear-mongering (1h18m2s).
• The devil is in the details of tariffs, including which markets, goods, and tariffs are involved, and what the reasons are, but studying the second and third-order impacts could help (1h18m26s).
• Tariffs can act as a reverse subsidy for American companies to compete, such as in the electric motor market, where rare Earths are required, but it is impossible for non-Chinese companies to manufacture them economically (1h18m42s).
• The US has large deposits of rare Earths, but environmental regulations prevent their mining, and loosening these regulations could help the American economy (1h20m17s).
• The lithium supply chain is another market that could benefit from changes in regulations, and there are many other markets, such as appliances, where American companies struggle to compete with Chinese equivalents (1h20m40s).
• Chinese companies, such as BYD, copy designs and feature sets from companies like Tesla and sell them at half the price, which could decimate US and German automakers if allowed to continue (1h21m7s).