E101: Ye acquires Parler, Snap drops 30%, macro outlook, VC metrics, valuing stocks & more

they don't have the skill set to execute at a high level at any point in the cycle, except when rates were zero, like many business models. And now that rates are not at zero, these people are turning out to be extremely underdeveloped and unable to run these businesses. And when he said that, it really struck a chord because he's right.

You know, I think it's again, when Facebook was doing really great and Snapchat was doing great, nobody complained about Super Voting Stock. Okay, so I think that, you know, my preference would be that I partner with a company where I know the founder, irrespective of their votes, right, listens, cares, and has the mental flexibility to make course corrections, right?

And so we just completely whipsawed to the other side and said we need to own anything that grows. So tech got a disproportionate amount of attention, but in that we lost our standards. And we are now going to go through the hangover of dealing with it. And so, you know, Snap will be an example of where investors are going to abandon that company.

And so Google is slowly inching towards that plan. Microsoft is in that plan. And so the only big four horsemen that hasn't really gotten the script yet is Metta, but they will. It's just we're just debating when.

You've doubled the number of people working in the business over the last few years, right? There's nothing magical about 10%. The real question is, what is the optimal number of employees to produce the best outcome for our customers and our advertisers?

I think it continues to support the point that I've made a few times, which is I don't think that anyone has a monopoly in social media networks. We've seen every couple of years, competitors emerge, people proclaim monopoly, those monopolies get destroyed by the next thing, you know, from Friendster to MySpace to Facebook to Instagram to Snapchat to TikTok.

Here's the important thing to note, which is that if you look at the MAU growth of Snap, it's actually been extremely steady.

For all the things we say about Instagram, I mean, TikTok has had explosive growth, 30% growth each of the last three years. But even the incumbent platforms, really sticky usage, this is about how they're monetizing those users, and the real story is Apple.

I think the other thing it does, this idea of the industrialization of venture, the SoftBank, the Tigers, it's a myth. You can't industrialize. You can build an index fund of the public market because you can buy every company. You might even be able to build an index like fund in private equity because everybody can go bid for every company. But in venture, the founder chooses you.

On earnings, there's kind of a conventional wisdom emerging from many folks that $3,200 at the bottom or maybe $2,700 at the bottom, that we're going to go from $225 in S&P earnings back to $200. That seems to me to be, you know, again, a lot of people making that bet. I don't see any evidence in Q3 earnings.

Free capital hurt good companies from being great companies. They hired too many people. Their margins were too low. You know, SoftBank funding all of these rideshare companies around the world to compete with Uber meant that Uber, even though they were a market leader, did not have market leadership economics. And so the ringing out of the system of that excess, that grift, that stupidity, that's going to be good for the fundamentals of these business. But the transition from, you know, that low rate environment to the high rate of our it's dislocating for investors. It's dislocating for management at these companies. And it's going to be this. This is not, you know, a six month phenomenon. We're going to have two years of ringing out, right?

And at this point, you should have enough scale that you should be able to earn. And if you cannot, the market will punish you for it. And that's certainly what seems to be the incentive and the pressure on the buy side to the executives across all these organizations today.

Which is disgusting. And I find out that is now their default. And I said, there's a lot of normal people that don't want to ingest that chemical spew into their body.

There's certainly a calculus going on with Newsom, I believe, in the impact that having higher tax rates would have on what is clearly not just a theoretical, but an actual evidenced exodus from the state of wealthy and high income earners.

So I think that, in my opinion, actually, like there's actually this beautiful symmetry where even if taxes are high, your earnings potential is commensurately higher, such that the net that you're left with is the same as if you were in another place where taxes may be zero, but you're just not going to get exposed to the same ways to make money.

There is a hostility toward business that has emerged in California that I think is commensurate and related to the tax rate, but also separate.

As I sit here today, yes, we're going to have harder times ahead economically, but it feels to me like a lot of it is priced in. I don't think we have huge asymmetry and skew to the downside. I think that's like fighting the last battle.

My hunch is that by the time the cash is actually distributed, the returns are going to revert to that orange line mean, which means there are hundreds of billions of dollars in markdowns sitting in LPs and GPs portfolios that are likely to come because nobody really thinks that the deals done in 15, 16, 17, 18 are going to be that far above the mean return.

So then you would say, oh, my gosh, well, if there's $500 or $600 billion of impairment coming down the pipe, maybe more, maybe it's going to be $750 million.

I mean, Apple is the apex predator of this entire market. We wouldn't be having this conversation but for the fact that Apple's changes with IDFA literally pickpocketed the industry $2 billion this year under the auspices of privacy. And so if you look at these companies usage up, pricing or ARPU down.

But when your interest rate is zero, you divide by zero, you get infinity. So you were able to kind of explain everything away into the future. Now you actually have an interest rate at 5%.