E118: AI FOMO frenzy, macro update, Fox vs Dominion, US vs China & more with Brad Gerstner

But I don't think they're going to be because that's not the legal standard. I believe that if a television network knowingly spreads and endorses baseless accusations against somebody, which they know or should know is basically untrue, I think they should absolutely be liable for libel or defamation. But that is not what the law requires.

I'm not going to invest in venture in the next two vintages, which may be the best two vintages we've seen in a long time because prices are adjusting

This feels like the best it's been for me as an angel investor, seed investor, seed fund for a long time. This is fantastic. Great deal flow.

But if you're talking about new investment, new rounds, new companies that are starting with a clean sheet of paper and a blank slate, you're right. Things seem good and normal. People are making intelligent investments.

It may all end up with Microsoft and Google. I mean, this may end up looking like iOS and Android at the foundation model level.

Maybe it just all ends up accreting to the big companies who can make massive investments in this space.

So there is more and more money coming into people's pockets that we don't realize.

Add in the things that Chamath's talking about, and I'm not sure you took a lot of money out of people's pockets.

I'm a much bigger shareholder of Metta who stands to do incredibly well if TikTok in the US is banned.

Will it be banned? Yes, because it's the most obvious cultural way to pick a fight with China without actually picking a fight with China.

I just think Chamath is right that TikTok is going to be GPC roadkill. And GPC stands for Great Power Competition.

Can you imagine the totality of stock based comp that's been given out by all these companies since two thousand and fifteen when they were cagering their employee bases by twenty five percent a year? I bet you it's a trillion and a half dollars at least.

One hundred percent. This has been the greatest grift in the history of Silicon Valley for sure.

I would argue that it's not just the Chips Act. It's also IRA, which is another trillion dollars of funding for basically onshore and supply chains.

We're going to rely on Central and South America in a meaningfully bigger way.

I think subscale small funds with no DPI, they're going to find a really, really tough time to Chamath's point about DPI raising capital. And you're going to see the scale player scale.

Find five companies that you think are going to grow and earn more money, irrespective of the direction of rates and inflation. Own those and enjoy your life.

My suspicion, if you look at Morgan Stanley and Goldman Sachs, the consensus view is that we're still heading in the direction of 4% faster than I think people emotionally think. So I would say there's maximum uncertainty in the world. The fear that inflation is uncapped, the way Larry Summers was articulating November and December, is less today than it was.

And now all of a sudden we have complete optionality and now we can deal with the greater Chinese hegemony in a much more balanced way.

So I think this is going to be a game changer. I think this is based on the ChatGPT 3.5 API and, of course, coming out with 4 later this year.

For OpenAI, the way that it could become a trillion dollar company is actually by cutting the cost to such a low degree that nobody else can effectively compete with it.

And I think it's a really important change because I think it breathes new productivity into all these businesses.

And the thing that I took away from it was just how much agency, you know, CEOs have that they're not using.

And it's probably, you know, sort of 50 percent headcount reduction. That's probably the the bound in which things break.

once we all realize that these earnings are fake and you reset down 15%, that's where you get to the mid-3000 in the S&P 500

I think it's at the silicon layer, because you need to really re-architect how compute will actually work in a world of all of these models. Those folks will get paid. If you look at AMD and Nvidia, they've been getting paid for years.

when the risk-free rate is somewhere north of 5 or 5.5% and banks are willing to give you 6.5% in the short term, you have to generate more than three times that to make an investment make sense when you're investing in the long term.

My governing principle, I think I probably said it too many times, but I'll say it again. Rates are going to be higher than we like, and they'll stay here longer than we want. So if you use that as a principle, whenever the consensus thinks we're done, it's been pretty profitable to be on the other side of consensus. And so I still kind of maintain that we're probably going to have a 5.5% fed funds rate.

So I tend to be a little bit gloomy with respect to the big macro picture because I just don't see how you can change rates this fast.

I think we're going to see in the second half of 23 and all of 24 is a lot of medicine being taken, a lot of down rounds, a lot of structure.

And at the same time, there are a lot of companies who don't want to see the writing on the wall and will do all kinds of gymnastics to try to stick a landing on a contorted financing.

And so the 500-odd companies, Jason, you mentioned, will get a lot of it and it'll get torched because most of them probably won't amount to much of anything in the short term.

But, you know, when I look at $10 or $11 billion, you know, let's put it in context. Meta is going to spend $20 billion in one year alone on ARVR.

If you're a founder and you build one feature on top of the open AI API, now all of a sudden you're going to market yourself as an AI company.

You have to remember, all these models are open-sourced and none of them mean anything in the absence of the data you give it to train on.

I personally don't think we should promote any stories by the mainstream media. We have no idea whether it's true or not.