Key Moments
E55: Valuing crypto projects, Rivian worth $100B+, inflation: causes and corrections and more
All-In PodcastKey Moments
All-In Podcast discusses crypto valuations, Rivian's IPO, inflation, China's leadership, and corporate breakups.
Key Insights
Valuing crypto projects requires understanding their economic utility, developer activity, and tokenomics.
Rivian's high valuation despite minimal sales highlights speculative market behavior fueled by low interest rates and exuberance.
Persistent inflation is driven by labor shortages, supply chain issues, and excessive monetary/fiscal stimulus.
China's Xi Jinping securing indefinite leadership could lead to increased geopolitical risk, particularly concerning Taiwan.
The trend of corporate breakups (GE, Toshiba, J&J) indicates a market preference for focused, synergistic businesses over conglomerates.
Investors should focus on productive assets and conduct thorough due diligence rather than relying on speculative trends or advisor opinions.
THE SOLANA CONFERENCE AND CRYPTO DISCOURSE
The podcast begins with a discussion about the Solana conference in Portugal, highlighting the significant attendance and enthusiasm. This segues into a discussion about a previous episode's censored segment related to Solana, addressing accusations of a pump-and-dump scheme. The hosts clarify their involvement, emphasizing that their firm, Multicoin, was an early investor and is distributing tokens to limited partners (LPs), not dumping them. They stress the importance of understanding crypto markets, developer activity, and economic utility when evaluating projects, cautioning against speculative tribalism.
VALUING COMPANIES AND MARKET SPECULATION (RIVIAN)
The valuation of Rivian, an electric vehicle company with minimal sales but a massive market capitalization, is scrutinized. The hosts compare its valuation to Tesla's at IPO, noting the disconnect between current revenue and market cap. This intense speculation, especially in a low-interest-rate environment, is flagged as a sign of market dysfunction and potential bubble behavior. The discussion emphasizes that even established companies like Elon Musk's and Jeff Bezos' are selling significant holdings, urging investors to consider such signals.
THE PERSISTENCE OF INFLATION
The podcast delves into the causes and potential corrections for rising inflation, citing a 6.2% CPI increase. Key drivers identified include increased wages for entry-level jobs, supply chain bottlenecks, and continued government stimulus. The discussion highlights a potential 'contagion' phase where businesses raise prices simply because others are. The hosts debate the effectiveness of traditional inflation-fighting tools like rate hikes and spending cuts, given current government debt levels, and question the feasibility of simply 'giving money to the free market.'
GEOPOLITICAL TENSIONS AND XI JINPING'S ASCENDANCY
Xi Jinping's consolidation of power in China, positioning himself as a 'historic figure' for indefinite leadership, is discussed. This move implies potential for increased assertiveness on the global stage, particularly concerning Taiwan, which is framed as a geopolitical tripwire akin to the Cuban Missile Crisis due to its semiconductor industry importance. The discussion touches on the comparative strength of global navies and the inherent risks of conflict in an inflationary environment where a 'wag the dog' scenario could arise, though the immediate economic impact is debated.
THE UNWINDING OF CONGLOMERATES
The recent announcements of GE, Toshiba, and Johnson & Johnson splitting into separate entities are analyzed as a trend against the conglomerate model. The hosts argue that conglomerates often lack synergistic value, leading to financial engineering rather than genuine business improvement. Investors can better assign value to focused businesses, driving overall market capitalization higher when companies de-risk by separating disparate units. This reflects a market realization that focused operations often yield superior results compared to historically favored large, diversified corporations.
INVESTMENT STRATEGY IN VOLATILE MARKETS
The conversation strongly emphasizes the need for investors to conduct their own due diligence and focus on 'productive assets' (businesses generating value) rather than speculative assets (those relying on future price increases). The hosts caution against blindly following market trends, influencers, or seeking easy investment advice. The podcast concludes by highlighting the challenges of capital allocation in the current environment, with some opting for company formation and others expressing confusion about where to invest, underscoring the principle of informed decision-making.
Mentioned in This Episode
●Software & Apps
●Companies
●Organizations
●Concepts
●People Referenced
Common Questions
The hosts redacted content to avoid fueling a 'pump and dump' conspiracy theory on the internet. David Sacks and Chamath discussed the possibility of an OTC Solana transaction because Sacks’ firm, Multicoin, was distributing Solana to its LPs, but they later realized the market was deep enough not to require it. They did not want to legitimize the unfounded accusations.
Topics
Mentioned in this video
A pharmaceutical company producing a COVID-19 vaccine; its booster dose is specifically dose-regulated (lower amount) unlike Pfizer.
An electric vehicle company mentioned alongside Nikola as having very shaky proof of concept despite public market presence.
Reported a similar plan to GE, splitting into separate companies, indicating a trend away from conglomerates.
Announced a split, separating its medical devices and pharma business from its consumer goods business, exemplifying the trend of deconglomeration for increased shareholder value and focus.
A company being spun out by Dell, expected to generate significant cash and shareholder value.
Originally part of eBay, its spin-out was seen as a major success, unlocking a quarter-trillion dollars of value. Its stock price suffered after rumors of acquiring Pinterest.
A social media platform that PayPal was rumored to be acquiring, leading to a shareholder revolt and a significant drop in PayPal's stock price.
Mentioned as potentially spending 37.5 to 50 billion on R&D, showing that traditional industrial companies can have large R&D budgets, though with different accounting classifications than tech companies.
An augmented reality startup mentioned as an example of an overhyped company that received a high valuation without a tangible product and ultimately disappointed.
An electric vehicle company whose IPO valuation (1.7 billion with significant revenue) is compared to Rivian's. Also, a car model with a delivery period extending to October 2022 due to chip shortages.
An NBA team discussed as shooting lights out, indicating strong performance.
A venture capitalist firm that was an early investor in Solana, holding a large position and distributing tokens to its LPs. They believe Solana could flip Ethereum in developer activity within the next year.
A fraudulent health technology company cited as an example of a startup that received a billion-dollar valuation without a product and ended in fraud.
A short-form streaming platform, mentioned as an example of a company that failed after high expectations and a large valuation.
An electric vehicle company discussed as having a shaky proof of concept, related to accusations of fraud.
A company mentioned by a CNBC interviewee who did not know what the company does, despite promoting its stock.
Announced a split into three separate companies (aviation, healthcare, and energy), marking an end of an era for the former top US company, reflecting a trend towards deconglomeration.
A company that resisted spinning out PayPal despite its obvious benefits, eventually requiring activist shareholder intervention (Carl Icahn).
A technology and consulting company whose market cap decreased significantly despite large stock buybacks, highlighting a lack of R&D investment and potential for better capital allocation through acquisitions of innovative teams.
A pharmaceutical company whose COVID-19 vaccine David Sacks received for his booster shot. Its booster dose is the same as the initial doses, unlike Moderna.
A social media platform where crypto maximalists and anonymous accounts spread rumors and engage in tribal behavior, creating a culture the hosts dislike.
An electric vehicle company that went public with a valuation of over $100 billion with very few public sales, sparking debate about overvaluation and 'suspending disbelief' in the market.
A crypto exchange that is now providing services for VC firms to distribute crypto tokens in kind to their LPs.
A social news aggregation, content rating, and discussion website. There's more engagement on subreddits about simple work life than Wall Street Bets, indicating a cultural shift.
Taiwan Semiconductor Manufacturing Company, the primary manufacturer of semiconductors in Taiwan, making Taiwan crucial to the new economy's resources.
Mentioned as spinning out VMware, expected to create significant cash and shareholder value they are doing a huge dividend.
A social media platform acquired by Mark Zuckerberg, considered one of the few truly successful acquisitions by a larger conglomerate.
A tech company that has engaged in large stock buybacks ($20 billion), questioning whether it is effective capital allocation or a sign of lacking ambitious R&D projects. Also discussed its culture of focus on few products.
The National Football League, criticized for not taking action against Aaron Rodgers for allegedly lying about his vaccination status.
A financial news channel where an interviewee was seen giving investment advice about Upstart without knowing what the company does, highlighting the dangers of relying on external advice.
A favorite source of economic information for David Sacks, mentioned for an article discussing federal debt.
A Golden State Warriors player described as "otherworldly" in his current performance.
One of the General Partners at Multicoin Capital, who believes Solana represents an "iPhone moment" for blockchain due to its scalability and low cost.
The Federal Reserve Chairman, whose dovish stance on interest rates and potential non-reappointment by Biden are discussed.
Co-founder of Twitter, mentioned as having tweeted about the change in CPI measurement goals in 1980.
Co-founder of Apple, credited with instilling a culture of focus on very few products, a strategy that has worked well for Apple.
Calculated as having an impressive 42% return on invested capital over decades at Amazon by reinvesting free cash flow. He has also significantly reduced his Amazon stockholdings, signaling to investors.
US President, whose election was spurred by the economic recovery following Paul Volcker's actions to curb inflation.
Former Federal Reserve Chair and current Secretary of the Treasury, who rejected Trump's suggestion of 100-year T-bills, a decision criticized in the context of rising debt service costs.
A historian and commentator cited for his insightful framing of Taiwan as being like "Cuba and Berlin and the Persian Gulf all rolled into one."
An NBA player rumored to be playing basketball soon due to potential lifting of vaccine restrictions by Eric Adams.
One of the "smartest founders of our generation" who, along with Jeff Bezos, has sold over $11 billion of his holdings this year, signaling to investors to reconsider positions.
Former US President, mentioned as a comparison for Biden due to perceived economic mismanagement and potential for high inflation.
The founder of the People's Republic of China, with whom Xi Jinping is now being politically reflected as being on the same level.
An investor known for successfully allocating capital to growing businesses, standing in contrast to the inefficient capital allocation of conglomerates.
Founder of Facebook (Meta), whose acquisition of Instagram is considered a successful acquisition, setting a high bar for other conglomerates.
CEO of Apple, whose era might be judged by the success of upcoming AR glasses, seen as his potential signature product.
A notable NFL player who allegedly lied about his vaccination status, drawing criticism from the hosts.
The current New York City mayor-elect at the time, rumored to be lifting vaccine restrictions.
The US President, whose administration passed significant COVID-19 relief and infrastructure bills, contributing to inflation. He is also described as rattling sabers about Jerome Powell's reappointment.
Former US President, whose suggestion of issuing 100-year T-bills was rejected by Janet Yellen, a missed opportunity to lock in long-duration maturities at low interest rates.
The architect of China's free-market reforms, with whom Xi Jinping is now being politically reflected as being on the same level.
Former CEO of Chrysler, another iconic business leader from the 80s and 90s, whose public recognition contrasted with contemporary leaders outside of tech.
Founder of Y Combinator, his term "default alive" is used in the context of Rivian's strategy to build delivery trucks for Amazon to ensure financial viability.
Former Federal Reserve Chairman, credited with taming 1970s inflation by aggressively raising interest rates, a strategy the current Fed cannot replicate due to national debt levels.
The current leader of China, who has consolidated power to become a ruler for life, on par with Mao Zedong and Deng Xiaoping. His next major goal is seen as the annexation of Taiwan.
An NBA player who has been publicly speaking out against China on CNN and other platforms.
Former CEO of General Electric, an iconic business leader of the 80s and 90s, whose prominence highlights a shift in business leadership from traditional industrial companies to tech founders.
Former CEO of eBay, who fiercely resisted the spin-out of PayPal, seeking support against activist investors.
Portrayed as the "silver" of the crypto world. Its network is slower and more expensive than Solana, leading to a developer battle.
Described as the "gold" of the crypto world. Its concept of miners as resource providers is used to explain decentralized networks.
A blockchain platform that offers faster transaction confirmations (400 milliseconds) and lower gas fees (pennies) compared to Ethereum. It trades off some decentralization for scalability, using 20 validators based on token holdings. Developers are increasingly interested in building on Solana.
Hosted the Solana conference due to easier COVID-19 restrictions.
An island nation described as a potential flashpoint for global conflict, likened to Cuba, Berlin, and the Persian Gulf due to its geopolitical significance and critical role in semiconductor manufacturing (TSMC).
A US territory where Israel's Iron Dome system is being tested as a defense against Chinese cruise missiles in relation to Taiwan.
A transaction directly between two parties, bypassing a public exchange. Discussed in the context of selling Solana tokens.
An economic theory that provided a school of thought eager to justify high government spending, arguing that debt to GDP ratio shouldn't be the focus, but rather debt service to GDP.
A decentralized network that incentivizes individuals to map the world, using a resource provider model similar to Bitcoin miners.
Amazon's cloud computing arm, which projects like Render aim to displace by offering decentralized alternatives.
A project focused on building a decentralized graphical processing (GPU) infrastructure, which can displace costly AWS instances.
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