E62
E62: Elizabeth Holmes verdict, fraud origins & takeaways, navigating "The Great Markdown"
2022-01-08 spoken.md · speaker-labeled ▶ watch ← E61 all episodes E63 →
1
ideas born
11
ideas moved
18
captures · 4 voices
4
dissenting
+87.8
conviction added
-109.2
decay · 102 silent
Every number here is replayed from score_events — the same ledger the pool ranks on. Decay is what the 102 ideas nobody mentioned gave up this week; it applies only when an episode is processed.
Tier crossings
conviction thresholds crossed by this episode — 65 / 45 / 15 · ideas born here show where they landed. why 65 isn't always green
▲ +5.4
📈 The SPAC boom's back end breaks into the 2022 shot clock
watch
→
green threshold
64.4 → 69.8
still watch — green gate not met
▲ +19.7
📈 Low-diligence capital breeds a fraud wave in the venture-backed cohort
ember
→
watch
33.4 → 53.2
▲ +10.6
🌍 Supply-chain crunch tips the US into 1970s-style stagflation next year
ember
→
watch
37.2 → 47.8
▲ +43.5
📈 Private capital concentrates in a few mega-GPs that take themselves public
born at
ember
43.5
Kill dates that landed since E61
0 hit · 0 partial · 1 miss — windows that closed after 2021-12-29 and up to 2022-01-08, auto-scored against price data and never hand-set. verdict · R · α
| idea | verdict | R | α | closed |
|---|---|---|---|---|
| 🌍 Delta variant is a non-event — no reopening reversal | MISS | -9.1% | -20.1 | 2022-01-03 |
Who moved the board
each voice's force on conviction this episode — supports and opposes, weighted exactly as the replay applied them · share = % of this episode's movement
What got argued (11 ideas)
ordered by how hard each idea moved · quotes are verbatim from the transcript, timestamps deep-link into the episode
NEW
▲ BX
📈 Private capital concentrates in a few mega-GPs that take themselves public
closed 41
CONTESTED
▲ +43.5
0.0 → 43.5
Private-market capital is concentrating into three or four mega-firms (Andreessen, Tiger, SoftBank) that will deploy ~80% of it within two years, and at that scale the rational move is to take the GP public the way private equity already did. The listed read-through is the scaled alternative-asset managers whose AUM-based GP valuation is the template Chamath prices the trade off.
plays
BX ·primary
APO
KKR
evals 2024-01-08
Silicon Valley in terms of capital is seeing power returns itself. There's going to be a few firms that are going to control 80% of the capital. ... if you look at the aggregate capital that's being deployed into private markets right now, in probably two years, 80% of it's going to come from three firms or four firms.
The problem is if you're running that much money, you're insane to not take your GP public because it's the only way. ... when you're sitting on 20, 30, 40 billion of imputed wealth by being the owner of the GP of Tiger or Andreessen, you'd be insane to not go public.
▼ IPO
📈 Low-diligence capital breeds a fraud wave in the venture-backed cohort
closed 49
▲ +19.7
33.4 → 53.2
You guys all see these top 50 companies, and we all know, having met a lot of these companies, as you go down that list, these 20 companies are total scam companies, they're fraud, they're not going to work, they're grifters ... Oh, by the way, I did short it. It worked out really well.
Well, it's a major regression to the mean on public company evaluations in both SaaS, but also more generally. The high growth stocks have corrected more than the indices. So that would imply that there might be more correction to come against the indexes. ... So you could say that if it fully reverts to the mean, we still got like another negative 20% to go.
we're probably, to be honest with you, like, actually, like, we've puked it all out for the most part, in my opinion. ... And if you look at all these corrections in the world of computer traded algorithms and ETFs and passive money, and it's all the snapbacks are so fast, you correct 20% and then you whip it back and you go.
there's certainly opportunities within as there is in any market that's moving quickly to find businesses that now are prices, mature, non growth value businesses, and they're profitable and growing. And there's a bunch of those out there now. And that wasn't the case a month ago.
to take a write down on 900 unicorns is going to cause a write down of hundreds of billions of dollars across all VC portfolios in aggregate, because they're not going to end up going public. ... they've all got these great marked books right now. You know, the books are all marked to 3X, you know, multiple and invested capital. And now they're going to end up having these liquidity events that are going to come in at shockingly low valuations. And there's going to be this great write down and retrenchment.
Mid-tier maybe, but my point is when you have 900 companies with a billion dollars in plus, they have to go public. They have to go public. Correct. You can't go public into a valuation framework that values you at 30 to 40% less of your last private mark.
One is The Athletic yesterday, which had raised money at 500 million just two years ago, just sold for about 500 million to The New York Times. ... And so there'll be plenty of those that occur. So there'll be a lot of pushes, I think, is my prediction of those 900 unicorns.
I think that the trickle down effect is inevitable, but I'm not sure it's fully kicked in yet. It's going to take a few high profile deals to land at, say, 50 times ARR instead of 100 times ARR in order for everybody to know that there's a new valuation level.
▲ QQQ
🌍 American exceptionalism soars and the economy booms in 2022
closed 7
CONTESTED
▼ -13.5
50.7 → 37.2
we're in the midst of a giant re-rating because we're realizing that so much of the peak values we were seeing in 2020 and 21 were the result of artificial liquidity. ... I guess my big prediction for business losers this year were asset classes that were highly dependent on liquidity. You guys predicted crypto would be one of those. Clearly, it's taken a massive hit.
▼ SPY
🌍 Supply-chain crunch tips the US into 1970s-style stagflation next year
closed 73
CONTESTED
▲ +10.6
37.2 → 47.8
▲ TLT
🏦 Inflation may not show up — breakevens are rolling over
closed 19
CONTESTED
▲ +9.4
28.7 → 38.1
the volatility in the 10-year yield is slowing way down. And if that continues to hold, that means that people are really saying there's a small amount of real inflation, a reasonable amount of transitory inflation, and we're about to kind of wash most of it through the system with 100 basis points of rate hikes.
Episode digest
written during extraction and stored in data/extractions/ep062.json — the auditable source of truth, including everything market-adjacent that did not earn a capture
First episode after the annual predictions, and it is the one where the 2022 growth unwind stops being a forecast and becomes the topic: Jason opens the markets block with Altimeter's SaaS-multiple chart and the words 'the great write down has occurred.' Sacks owns the segment and is table-pounding: a major regression to the mean in SaaS and 'more generally', high-growth already down more than the indices so 'more correction to come against the indexes', median EV/NTM off a ~15x peak to ~10x versus an ~8x historical mean, i.e. 'another negative 20% to go' if it fully reverts — and he explicitly cashes his own four-day-old E61 annual prediction ('my big prediction for business losers this year were asset classes that were highly dependent on liquidity'), diagnosing the peak values as 'artificial liquidity' and pointing at crypto ('a sponge for liquidity', off hard in the last week) as the confirming tape. That is a strength-3 support on qe-end-liquidity-drain and a support on crypto-bubble-shakeout inside a week of both being coined. Sacks also breaks the other way on Jason's E61 boom call: he thinks the Fed nailed it in mid-December, then blew up its own guidance in the minutes ('they put us on drugs and now they're going cold turkey'), so 'much greater risk now of the economy going to recession this year' and 'they're going to tank the thing' — logged as oppose on us-boom-2022 and support on supply-chain-stagflation-recession-2021 (note the mechanism he cites is monetary overreaction, not the ports/labour story the E51 idea was built on). Chamath is the bull case and the honest ledger at once: he confirms the derating happened ('chopped the head off of all of these fast growing growth multiples') but says 'we've puked it all out for the most part', trillions sit in money markets, and algorithmic/passive snapbacks are violent — logged as oppose on rate-driven-growth-derating-2021, with Friedberg leaning the same way (profitable, mature value names are now buyable and 'that wasn't the case a month ago'). The highest-signal capture in the episode is Chamath's disclosed positioning: Q4 was 'the most difficult quarter of my professional life', he 'exited a ton of positions, all my pipes, my third party PIPEs, I basically sold off except for one', generated liquidity elsewhere, and did it partly because 'Jeff and Elon were selling' — a proposer of spac-boom-unwind-2021 exiting the exact instrument the thesis says breaks first. Second-highest: Friedberg quietly disclosing 'by the way, I did short it, it worked out really well' about the unnamed public biotech he and Chamath call 'Theranos 2.0' (Chamath: 'there's a fraud in biotech going on right now'), attached with his 'these 20 companies are total scam companies' line to low-diligence-capital-breeds-fraud-2021, which Chamath reinforces with the cycle claim that 'that level of grift happens right before we have to re-rate valuations.' The private-market write-down is the other big block: Friedberg's 900-unicorn arithmetic ('hundreds of billions of dollars across all VC portfolios', 2015-19 vintages marked at 3x facing 'liquidity events at shockingly low valuations', 'this great write down and retrenchment'), Chamath's 'you can't go public into a valuation framework that values you 30 to 40% less than your last private mark', Jason's The Athletic push ($500M raise, $500M sale to NYT) as the template — all supports on Sacks' risk-capital-golden-era-peaks-2021, which is notable because Friedberg brushed that exact idea off at E49 ('you sound like the old guy at Starbucks') and now argues it harder than its author. One inflation wrinkle worth watching: Chamath's 10-year read (yield vol collapsing, 'a small amount of real inflation, a reasonable amount of transitory inflation', washed out by 100bps of hikes) is a support on his own inflation-fades-breakevens-2021 — the idea he personally reversed at E53 — so he has now flip-flopped twice on transitory in nine weeks; I did NOT log it as a reversal on stimulus-inflation-real-2021 because he frames it as what the bond market is saying, conditional on the trend holding, and closes with 'that's one view based on the past'. New idea coined: venture-mega-gp-consolidation-2022, off Friedberg's 'in probably two years 80% of private capital comes from three or four firms' plus Chamath's 'you'd be insane not to take your GP public' Blackstone-AUM math (a16z had just announced ~$9B). Jason also sarcastically buries the bitcoin-as-uncorrelated-hedge story ('so much for them being uncorrelated') — oppose on bitcoin-reserve-currency-hedge-2021. Not captured: 'Visa and MasterCard, nobody's allowed to buy these big companies' is about M&A blockage, not the V/MA peak thesis; Chamath's MSFT/AAPL-vs-GOOG/FB multiple-dispersion aside is an observation with no direction and, if anything, inverts the pairing in software-quality-inflation-hedge-2021; Sacks' 'maybe SaaS stabilises at 10x because they're the best businesses to own' was too hedged to log against saas-pricing-power-expands-2021; nothing at all was said about battery metals, energy, defense or Ukraine, so E61's battery-metals-supercycle and global-conflict-energy-defense got zero re-litigation. Labels: all four hosts present (Jason 91, Chamath 75, Friedberg 55, Sacks 43) and content-verified clean — 'Counselor Sacks' / 'Sacks, explain to us what's happening here' / 'What are you seeing, Sacks?' all answered by the David Sacks label, 'Friedberg, what are your thoughts as our life science guru' answered by David Friedberg with the microfluidics/assay science corner and 'my Climate Corp' receipts, Chamath's turns carry the Facebook-insider, poker-house, third-party-PIPE and 'largest climate investment' fingerprints, Sacks' carry PayPal/Yammer, the burn-multiple blog and the December Bloomberg/Bartiromo hits, and Jason's carry TechCrunch conferences, The Dropout appearance and the E62 sign-off. One micro-anomaly: Friedberg's 50:44 turn absorbs what is clearly a Jason interjection ('what are you also saying to be independent of valuation?') mid-turn — no capture depends on it. Transcription quality is mediocre in places ('Al Timitor' for Altimeter, 'Brad Gerson' for Gerstner, 'Kraft Ventures' for Craft, 'John Kerry' for John Carreyrou); quotes were chosen to avoid the garbled spans.