See show notes and transcript: https://riskreversal.com/okay-computer/okay-computer-podcast-shifting-mindsets-with-rick-heitzmann/
Dan and FirstMark Capital’s Rick Heitzmann discuss when the frozen IPO market may finally come back to life (2:52), JPMorgan CEO Jamie Dimon’s new forecast for the economy (6:44) the outlook for Snowflake & the battered SaaS sector (9:48), the brutal fundraising market for startups (14:19), SoftBank’s disastrous recent performance and how it’s paying for its investing “sins” (18:13), former WeWork CEO Adam Neumann getting a stunning $350 million investment from Andreesen Horowitz for a new housing startup (22:17), why more high-profile founders are leaving their companies (25:18), and Elon Musk attending a Republican retreat in Wyoming (30:25).
Dan and FirstMark Capital’s Rick Heitzmann discuss when the frozen IPO market may finally come back to life (2:52), JPMorgan CEO Jamie Dimon’s new forecast for the economy (6:44) the outlook for Snowflake & the battered SaaS sector (9:48), the brutal fundraising market for startups (14:19), SoftBank’s disastrous recent performance and how it’s paying for its investing “sins” (18:13), former WeWork CEO Adam Neumann getting a stunning $350 million investment from Andreesen Horowitz for a new housing startup (22:17), why more high-profile founders are leaving their companies (25:18), and Elon Musk attending a Republican retreat in Wyoming (30:25).
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NewsTranscript
00:00 Hey listeners, it's Dan here. I want to tell you about a company that I'm really excited about.
00:04 It's called Current. It's a fintech company that's completely disrupting traditional banking.
00:08 I'm a new Current customer and it's already helping me and my entire family manage our finances,
00:13 all from one easy to use app. So try Current for yourself and get the app by going to Current.com/ok.
00:20 That's Current.com/ok. Current is a financial technology company, not a bank.
00:26 Banking services provided by and Visa debit card issued by Choice Financial Group, member FDIC,
00:32 pursuant to a license from Visa USA Inc. and can be used everywhere Visa debit cards are accepted.
00:37 Alright, welcome to OK Computer. I am Dan Nathan. I am here with FirstMark Capitals' Rick Heitzman.
00:44 We are going to cover this FOMO rally in the NASDAQ. Maybe it's getting a little long in the tooth.
00:49 We'll figure that out a little bit. Jamie Dimon, CEO of JP Morgan,
00:54 had a whole heck of a lot of things to say about the economy and what he sees.
00:59 Back from the dead, Adam Neumann with some new funding here. The cult of the founder.
01:05 Rick, it's back baby. We got a lot of stuff to talk about. What's going on? How are you?
01:11 Things are good. Things are good. Full rundown of a lot of great stuff.
01:16 And the world's kind of coming back to life as people in different parts of the country are going back to school
01:21 and everyone's going back to work and thinking about what you're going to do between now and the end of the year.
01:26 Yeah, well, it's funny. I use the term FOMO, the fear of missing out, as our listeners know what that means here.
01:32 But when you kind of have the turning of the page, we had a lot of trepidation as I think investors headed into the summer.
01:40 It seemed like we had this kind of buildup of bad news that was happening throughout the first half of this year.
01:47 We had geopolitical events. We had inflation at 40-year highs. We had a stock market that for the first time in a couple of years had been trending lower.
01:55 And it feels like this summer, there was a lot of things where maybe people had a little time away from their screens or away from investor meetings or LP meetings or wherever you live in this investment universe or tech ecosystem.
02:09 There was crypto in there too, right? I mean, crypto was careening lower. It seemed like all of those Web 3.0 narratives were falling out of place.
02:17 And it seems like we've found a little bit of support, if you will. So we get to the end of the summer.
02:24 People are optimistic about maybe what's to come between now and year end. Is that kind of how your mindset's working?
02:29 That's what I'm feeling. I mean, it was the old sell in May and go away. But I think in 2022, it was more like don't buy in January and then go away.
02:40 Well, come up with something snappy, something that rhymes with January there.
02:44 Never buy in January and run away. But what we saw was we had a company that was getting ready to go public in January this year.
02:51 By the time all the machinery got working, there just was no market for IPOs. And this entire year, right, we're getting into the end of the third quarter.
03:01 And we have, therefore, a lot of visibility for no IPOs this year. And once that stops, it's the train that we had talked about.
03:09 When the IPO window stops, therefore M&A slows down because there's not the competitive tension there.
03:16 Then later stage investors don't get paid. They start to withdraw. The growth stage investors start to withdraw.
03:23 Early stage investors start to withdraw. So it's a gradual unwinding through the capital supply chain, which we saw happen actually beginning at the end of last year, but through this period.
03:35 And now, although we're not seeing the exit windows open, we're starting to see the kind of the world come back to life at these new multiples and at this new range.
03:45 Well, I mean, I guess the key point there, and we've covered it a lot on the pod over the course of this year, was really what the Federal Reserve decided to do with interest rates to combat inflation.
03:54 And that kind of changed the name of the game. And you just used this was expressed in valuation multiples.
04:00 As rates went higher, valuations came down, which limited the options of a lot of companies that had been doing just fine, but then threw in the probability of a recession both here and abroad.
04:12 And a lot of these companies' growth prospects, whether they be public or private, they start to change, causing investors to rethink valuation.
04:21 So it's kind of this virtuous cycle. When you talk about the stock market, though, it is interesting.
04:26 The Nasdaq's up 18.5% this quarter. The S&P is up 13.5%. It's still down, both of them.
04:34 The Nasdaq 100 is still down 16.5%, and the S&P 500 is down about 10%. So we have a scenario here where the jury's still out on the stock market.
04:45 Our investors chasing a little bit. We know this. We know this behavior, man.
04:49 As soon as it kind of feels like maybe we're out of the woods, we don't have a protracted bear market, we're not going to crash, if you will,
04:56 I think the Fed changing their tune a little bit from more aggressive rate hikes that we've become accustomed to over the last couple of meetings to maybe a little less at the September meeting.
05:07 At least it's giving investors in the public markets a little optimism that some of that valuation expansion may come back if rates are going to moderate,
05:16 at least the trajectory higher is going to moderate, or maybe even go down.
05:20 Thoughts here of how you're thinking about that?
05:22 There's probably two things that we're seeing. I think you're exactly right on some of the macro and public market thoughts.
05:29 In the private markets, we're seeing two things that really matter. First of all, a lot of our companies are continuing to perform.
05:36 We were concerned about the consumer six months ago. We were frankly concerned in our direct-to-consumer businesses about the changes in privacy and Apple's changes and the ability to acquire customers at significant scale.
05:51 We were concerned about a lot of these things rolling through the system.
05:54 On the enterprise side, we're concerned about the end of unlimited hiring. With less employees, you might need less seats for all your enterprise applications.
06:04 Those things have come to pass, and we haven't really seen a degradation in performance in our companies.
06:10 In a very positive way, although you're seeing the clouds remain on the horizon from a macroeconomic perspective,
06:17 and we might be in a recession now, depending on how you define a recession, but we're not seeing that show up in our company's numbers, which makes us feel really good about that.
06:27 I guess the point is, again, going back to the macro, where are we? None of us know. None of us have a crystal ball.
06:32 I think that if you're looking for anyone who's got probably the closest read on that would be Jamie Dimon, CEO of J.P. Morgan.
06:40 He was quoted – Yahoo Finance had this long piece, we'll throw it in the show notes – on this call that he did with some of their wealthy clients.
06:46 He was talking about the economic outlook. He said it's a strong economy, which I think is interesting, because back in June – this is my comments here – he was saying he sees storm clouds on the horizons.
06:58 He has not been consistent, but it's always interesting, given the data points he has, to see what he has to say.
07:04 That's a really good point. He has actually been all over the map, I think, in 2022, but this is what he's saying.
07:09 I guess as of this summer, consumer balance sheets are in good shape. Businesses are equally in good shape.
07:14 When you forecast, you have to think differently. What is out there? There are storm clouds.
07:19 Rates, QT, oil, Ukraine, war, China. If I had to put odds on a soft landing, I'd say about 10 percent.
07:27 Harder landing, mild recession, 20 or 30 percent. Harder recession, 20 or 30 percent.
07:34 Maybe something worse at 20 percent to 30 percent. I don't know if all those percentages add up to 100 percent, but they can't go much higher than 100 percent.
07:44 Some of the headlines that I saw this morning was that last bit, something worse at 20 to 30 percent or so.
07:52 Something worse really means a protracted bear market, possibly a double-dip recession.
07:58 When I think about what you just mentioned that's not showing up in your companies, Rick, is it fair to say that you're just taking one snapshot over this period of time where a lot of preemptive action was taken on rationalizing costs?
08:12 We've been talking about that. You said to me back in the spring on the pod, something that I've seen echoed a lot by a lot of your peers in VC since then, but you were saying cut and cut hard.
08:23 If the visibility is this poor after a period of just really easy monetary policy and a consumer that had been really in good shape because of just all of the stimulus, if things are going to get worse, it's not likely to be a one-quarter thing and you're going to have to fix your costs early rather than often.
08:42 I think we saw that in Q1 and Q2. The best companies in Q1, the laggards in Q2. Maybe what we haven't seen is the impact of that.
08:51 That would be one of the storm clouds that would be concerning. If folks are going through layoffs in Q2, you might not see the impact of that on the laid-off employee spend in the Q2 results, and that would come through in the second half of the year.
09:07 But even in things like hospitality where we were investors in Airbnb and Vekasa, in those results, everybody's concerned, but people are putting up Airbnb on July 4th had the record day of all time.
09:21 You're seeing RevPAR continue to trend up, especially in cities that were left for dead. You're starting to see historical results being excellent, although people can still concerned about going forward.
09:35 One of the things that I guess the shoe that hasn't dropped yet is some sort of warning about enterprise spending slowing down. We're starting to see some of these big tech companies cut jobs.
09:46 I just wonder when I look at a company like Snowflake, which was obviously a huge bull market darling in the private markets and then came during that pandemic period and was trading at a multiple of sales of like 25 times.
09:59 I think 44 times at the height. I think it was the highest SAS multiple per time.
10:04 Right. And so, you know, when you see this stock, correct, 65 something percent and analysts are still downgrading the stock.
10:11 Yet there are 26 buy ratings, Rick, on this stock. There's only eight holds and two sells. And there was a downgrade today. And one of the fears is about enterprise spending.
10:21 So I guess my point here is that even a stock like this that has been cut in half, it's multiple is down dramatically, still trades at a multiple of like 26 times sales this year.
10:32 It's not profitable on a gap basis. You'd say to yourself, Rick, there's a lot of room to the downside on this one.
10:39 There is. There is. I think that's an exceptional company with Frank Slootman being maybe one of the best CEOs out there in technology.
10:48 So that has premium built into it and a huge TAM and basically everything that going for it.
10:54 You know, I'd probably be more concerned with non-differentiated companies that are still trading at high multiples.
11:01 But if you look back at some of the SAS multiples, the median SAS company is trading in five to six times revenue, which is back to historical averages, maybe even a little bit worse than historical averages.
11:13 So maybe one of the reasons I think folks are starting to get back into the market and dip their feet in is saying, hey, we're back to reasonable pricing, not chasing momentum anymore.
11:24 I don't think we're necessarily, to your point, seeing a value based market.
11:29 But what you're seeing is somewhere in between that valuations have been reset and now there are willing buyers and willing sellers.
11:36 And you're starting to see certain companies with our baby in the bathwater analogies establish themselves as the winner that shouldn't be thrown out with the bathwater.
11:45 I guess where I push back a little bit is like, here's a company again, you just said, you know, with this tremendous TAM, I look at a company that did two billion dollars in sales are expected to do this fiscal year and three billion next and maybe four and a half the year after that.
12:01 And fine, here's a company that has gross margins of 72 percent.
12:07 I know plenty of SAS companies that have much higher margins somewhere in the low 80s and are doing five, 10 plus billion.
12:14 And I look at 26 times the existing sales, 17 times next.
12:19 And I say to myself, if you have an enterprise slowdown, this company will get cut in half again, or at least the stock will get cut.
12:27 Yes, I mean, that's the case.
12:29 I mean, they're trading at that multiple because they're growing 50 percent plus year over year and they anticipate to continue to grow at that rate.
12:36 If there was an enterprise slowdown and they got cut back to sub 30 percent, that multiple will get cut in half also.
12:43 What's interesting, a juxtaposition here is on the flip side.
12:46 I mean, look at Microsoft. It's only down 12 percent of the year.
12:49 Apple is down 2 percent on the year.
12:51 Google down 15 percent of the year.
12:53 So you're starting to see at least some investors crowding towards the size and monopoly again.
13:00 But maybe the jury is still out on a bunch of these other names that, again, have not been proven during periods of recessionary events.
13:08 And again, we don't know if we're going to have a recession.
13:10 I think the probability is very high in the next year or so.
13:14 And some of the trends or at least some of the slowdowns that we're seeing, if you start cutting Salesforce, if you're a big enterprise company like this,
13:21 you're going to see sales growth slow down, correct?
13:24 Yes. And that's kind of what's the crisis of confidence that's happening now.
13:28 And even we see in our companies, people are trying to figure out, is this 2001?
13:33 Is this 2008? Or is this the three months of dark COVID?
13:38 Where should we be cutting? Obviously, everyone's cut the dead weight already.
13:42 How much should we cut into it? And are we going to have our slightly underperforming, our average salespeople?
13:49 Should we cut them because they're going to be less efficient, a harder environment?
13:53 Or should we be leaning in because there's nothing in our business which has said even the average salespeople aren't efficient?
14:00 There's a bunch of different signals.
14:02 And it'll be interesting to see if anybody's going to lean into that level of uncertainty.
14:08 Yeah. So we're talking about what some of these companies that have already raised, what they should do to conserve capital a little bit in the private markets.
14:15 Let's talk about those that actually still need to raise. Our friend Jeff Richards over at GGV, he had a tweet thread out this morning.
14:22 I thought it was interesting. You and I chatted about it briefly here.
14:24 But in quotes here, positive fundraising Twitter, he's speaking to them, does not reflect reality for founders last two to three months.
14:32 Most brutal fundraising in market I have seen since the early 2000s post crash.
14:37 Optimistic we will see things improve with market bounce and people returning from vacation.
14:42 This is kind of what you were just kind of saying, but it's been rough for clarity.
14:46 This is primarily for growth stage valuation, 100 plus, and especially true for late trade valuation less than 500 million.
14:54 Lots of activity interest at early stages, albeit with some recalibration on valuation.
14:59 We've just mentioned that. But as he's saying, last thing here, as I've said, I'm optimistic because in my humble opinion, sentiment reached a low in May, June, July, plus 20 percent.
15:09 The Nasdaq bump has a funny way of shifting mindsets.
15:13 Thoughts there, because that's really what we're talking about here.
15:16 I generally agree. I mean, I think Jeff is a great guy and he sees a lot across his portfolio, but generally has been a little bit more bullish.
15:24 Yeah, I think you saw trough sentiment in probably March and April where companies couldn't even get meetings.
15:31 And then, folks, when the second quarter started to turn, you were starting to see more people take meetings, although not invest.
15:39 And now you're moving to the point where the machine's starting to get a little bit unclogged.
15:44 But what you haven't seen, which really drives investment, is exits.
15:49 So in absence of exits, I think there's people who have dollars to deploy who want to deploy.
15:55 I think there's folks who have maybe sat on the sidelines and now are getting itchy.
16:00 And therefore want to deploy. But you haven't seen the biggest driver.
16:05 And what that leads you to be susceptible to is kind of that dead cat bounce of, hey, I'm sitting here.
16:12 I'm tired of not deploying capital. So maybe I'll start deploying capital because I feel good about evaluation reset.
16:18 And I feel good about historical numbers.
16:21 If you start to see real results in Q3 and Q4 not be strong and either markups not happening and the IPO window not opening,
16:30 those folks will look for cover again and they'll be back out of the market.
16:34 And that's where you talk about the double dip.
16:37 Hey, Dan.
16:39 What up, guy?
16:40 You're into this FinTech. What's all this I'm hearing about Current?
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16:48 Wait a second. Does that mean I don't have to drive to the bank anymore?
16:52 Yeah, exactly. I'm a new Current customer and I manage all of my finances from one easy to use app.
16:58 Well, I got to get this app. But where can I learn more?
17:00 It's super easy. Just go to Current.com/ok, O-K-A-Y, and download the app. That's Current.com/ok.
17:08 Current is a financial technology company, not a bank.
17:11 Banking services provided by and Visa debit card issued by Choice Financial Group, member FDIC,
17:17 pursuant to a license from Visa USA Inc., and can be used everywhere Visa debit cards are accepted.
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19:01 Yeah, all right, let's talk about some of the late stage sort of funding that might not exist from one player
19:06 that was driving up valuations for years in that soft bank.
19:09 There was a headline the other day that hedge fund Elliot dumps soft bank stake after souring on Masa Sun.
19:16 Talk to me a little bit about this because I think as a VC competing for deals and access for years,
19:23 I think that soft bank and all the capital they had and their just kind of indiscriminate investing
19:29 in later stage really distorted the market a great deal here.
19:33 But we've seen this thing kind of come all the way around and I do think it's interesting
19:37 and we're going to talk about Adam Neumann in his next act here a little bit.
19:42 Masa was an enabler of Adam Neumann for years and they saw just an absolute crumbling of a valuation
19:49 of $48 billion to $8 billion on the eve of that expected IPO in September of 2019.
19:54 And if you remember three years ago at this very time, I mean all anybody could talk about
19:59 was we were going public north of $50 billion or something like that.
20:04 And weeks later, the deal is called off and the thing is being scrapped and Adam Neumann is gone.
20:10 That was still in a bull market. That was not, hey, the market's falling apart.
20:15 We're looking for profitability, not growth. This was a market still looking for growth,
20:20 not caring as much about profitability, and they still couldn't hit those hurdles.
20:26 I guess the writing was on the wall. The capital kept on coming in, I guess, from the Mideast to SoftBank here.
20:32 Talk about what this means to you, though, to see funds like Elliott, which are activist funds
20:37 that were invested in SoftBank, but just some of the other kind of marks that a SoftBank is taking
20:42 and some of the comments that they've made maybe about retrenching a little bit
20:46 in these kind of growth tech markets.
20:48 Matsuhisa-san came out in earnings this week and did a full mea culpa.
20:52 He did a full apology of, hey, he got way over his skis, and it's probably as close,
20:58 especially as you'll see Japanese CEO take the blame for what is clearly a disaster.
21:05 They write the book on this phase of a bull market, especially in tech and especially investors.
21:11 That'll be the chapter, right, of shouldn't we have known it was the top
21:15 when there was a guy who was willing to give people who were writing billion-dollar checks
21:21 who didn't want to do diligence, and they were the poster child of low diligence, too much capital,
21:29 one of the cardinal sins, we think, in venture capital and private markets of trying to use capital
21:35 as a competitive advantage because you're really not going to be able to scale like that.
21:40 They committed all of these sins, no work, overfunding companies,
21:45 not being capital efficient through all these things.
21:48 So they're going to be that chapter in the book of maybe we should have known it was a peak then.
21:53 Then they committed another sin.
21:55 They didn't sell at the top, so they actually had certain public positions, DoorDash, Uber,
22:01 which they could have sold in the public markets but held on.
22:05 So it really is a disaster.
22:07 They are retrenching.
22:09 They are kind of the penultimate late-stage player, as we've seen a lot of late-stage players kind of retrench,
22:16 not participate in this market, trying to figure out how to tell their investors that it's going to be different this time.
22:23 They're going to be thoughtful.
22:24 They're going to take diligence seriously.
22:27 They'll think more holistically about capital efficiency.
22:30 All those lessons, which we've talked about over the last year, they're trying to absorb.
22:36 So if they're writing the book in three years, this might be the beginning of a bottoming out, right,
22:42 where the excesses have been identified, people have apologized for it,
22:47 whatever the 12-step program of getting back to a normal market is,
22:51 it feels like we're getting through maybe the first half dozen steps of the drunkest guy at the party apologizing for things that he didn't say.
23:00 Yeah, well, let's talk about that, okay, because, again, it's a pretty decent bookend.
23:05 Adam Neumann in the press this week, his new company, Flow, he wants to do what he did to the corporate office space.
23:12 He wants to do that to retail rentals for consumer apartments and homes and the like here.
23:19 Andreessen Horowitz investing, I guess it's reported, $350 million at a $1 billion valuation.
23:25 Marc Andreessen is going to join the board here.
23:27 And, again, this is an interesting scenario.
23:30 I don't know what Andreessen is looking at.
23:32 I obviously have to be fairly well enamored with Adam Neumann and trust him to invest that amount of capital in this sort of thing after the fabulous blowup.
23:41 But the last one, you think about how much capital went poof in WeWork.
23:45 You could say it was the best idea, maybe kind of just mis-executed or the cult of the founder allowing him to kind of conduct himself and his organization the way they did.
23:56 At the end of the day, that's what cost investors billions and billions of dollars here.
24:01 Curious as like quick thoughts on this, was this like a friendly sort of deal or has the Flow deck been going around here a little bit in the VC ranks?
24:09 People knew he was working on Flow.
24:11 It does kind of rhyme with WeWork a little bit as they've already signed a lot of leases, taken control of a lot of multifamily residential properties.
24:21 I don't have any idea what the scale of that is.
24:24 So people were claiming it's a billion dollar pre-seed round, no different than the other character of the era, Travis and his cloud kitchens.
24:33 Those guys made enough money on their other businesses that they were able to deploy some of that capital and get the business going, especially both physical world businesses, sign leases and prove some things out.
24:45 The billion dollars was a post-money valuation.
24:48 So it was 650 pre, which is even if this was a seed or a series A, way outside the bounds of what's normal.
24:56 Not knowing enough about it, I don't feel as strongly about it as the thousands of people who have opined on Twitter over the last 24 hours.
25:04 But what I do know is he's probably as good of a salesman as anybody as we've seen over the last 20 years in venture in being able to sell things.
25:16 He obviously was able to raise a lot of money and was able to sell people on a dream of this WeWorld.
25:23 And frankly, this sounds a lot like WeLive, which was part of that plan we had known when we were investors in WeWork through an acquisition.
25:32 So it's kind of part of the same playbook and we feel like it could be interesting.
25:38 But clearly a character, clearly someone who you've had many series about you on Hulu.
25:45 There's a lot to unpack there.
25:47 Yeah, no, I get it.
25:48 And it's kind of interesting this week.
25:50 There was an article in The New York Times, which, again, it seems like they were trying to make up for maybe some poor titling a few weeks ago.
25:57 They caught a lot of heat about that girl bosses article, but this one was the boy bosses of Silicon Valley are on their way out.
26:04 And I thought this would be interesting because I know that, you know, Ben Silberman very well.
26:08 You were the first what institutional investor in Pinterest.
26:12 You were on their board for years.
26:13 But Ben Silberman, a co-founder of the digital pin board service, Pinterest, resigned as chief executive.
26:19 Joe Gebbia, a co-founder of the home rental company Airbnb, also one of your portfolio companies, announced his departure from the company's leadership.
26:26 And Instacart founder CEO Mata is also departing here.
26:32 So I thought this was interesting because their contentions is obviously the resignation signified the end of an era at these companies, which are among the most valuable and well-known to emerge from Silicon Valley in the past decade.
26:43 So talk to me.
26:44 What is this?
26:45 Does it mean anything to you?
26:46 Are they all individual situations?
26:48 Does it mean something about where these companies are relative to kind of the growth trajectories when they went public on those exits?
26:55 Because, again, it's a different market here.
26:57 These were companies that until they went public over the last few years were a bit of a darling.
27:03 And now they're all been at least cut in half from those highs.
27:06 So just thoughts here.
27:08 If these companies are kind of do they need new leadership to kind of navigate these what are going to be, I think, difficult public markets for some time here.
27:16 What's very clear and having worked with companies have gone from starting all the way through the public markets is that being a founder CEO is really, really hard.
27:26 And you're working almost all the time, dawn till dusk, weekends, not taking vacations.
27:33 Many of those founders didn't have a lot of money when they were started.
27:37 So living hand to mouth.
27:39 And then you have to evolve.
27:41 Your job as a CEO of a seed company is different than an A company.
27:45 It's different than a growth company.
27:47 It's different than a late stage company.
27:49 It's massively different than a public company.
27:52 So just to be able to stick around in that seat for that arc means that you have to be able to develop a lot of skills.
28:01 Oftentimes these guys have had to turn their team over two or three times as the team members might not have scaled as they've gone through this arc.
28:10 You're basically sprinting a marathon over this 10, 12 years.
28:14 And I think what you're seeing is Joe was there for probably 12, 14 years.
28:18 Ben about the same.
28:20 I'm not sure about the Instacart situation as I wasn't an investor there.
28:24 What you're seeing is it's really hard to be a public company CEO.
28:28 And it's even harder if you've been there for that period of time.
28:32 I think the average tenure for a public company CEO is a little over three years.
28:38 So these guys have held that seat for three to five times longer.
28:42 And, therefore, it's unsurprising they transition.
28:45 I mean the same thing said, hey, what happens to Oracle when Larry Ellison leaves or Salesforce when Mark Benioff leaves?
28:51 I'm sure there will be a lot of ink spilled when Zuckerberg leaves Meta.
28:56 But I think all of these guys, even when they talk about it now or Bill Gates, is that, hey, it's really hard.
29:04 You get really tired.
29:06 And at some point you're tired.
29:08 You have other interests.
29:09 And you also have to create space for folks who have been with you for a long time to be able to come in and grow.
29:14 Yeah, I guess there's no playbook for that.
29:16 And if you think about some of the massive tech companies that you just mentioned, there's been some really good succession.
29:22 There's others where the jury's still out.
29:23 I think the one that we've talked about a bunch, and I can't really wait to see what happens here, is just Amazon.
29:29 When you think of what an absolute revolutionary CEO/founder Jeff Bezos was in the early/mid '90s
29:37 and what he turned that company into in turning over the reins after 25 years, the jury's still out on how that one works out.
29:44 It's been a little more than a year.
29:46 Amazon's stock and the corporate performance is something that I think will be debatable for a while because of this post-pandemic period.
29:53 But if you think about Microsoft and that move, Satya, Apple, obviously Tim Cook taking over the reins 10 years ago,
30:00 and then Sundar at Google, they're all doing OK right now.
30:04 Yeah, about 50% of all new CEOs fail.
30:08 Obviously Sundar, obviously Satya, a lot of the guys who started 10 years ago had the benefit of momentum from a bull market.
30:16 And we'll see if Bill and this next generation of CEOs of these companies can have a little bit of the same benefit of some tailwinds.
30:24 But in general, those have been great businesses.
30:27 Satya I think will be one of the great non-founder CEOs of all time in tech from what he did there.
30:34 And people always try to read too much into it, but you could have picked any era and there's always folks who are ready to move on to their next challenge.
30:42 Yeah, I would just say that as a public markets investor and someone who's kind of watched a lot of these transitions in tech over the last, call it 25 years or so,
30:49 I think one of the most consistent themes to success is taking over for a founder.
30:54 Obviously Satya did not do that.
30:57 Ballmer was essentially a founder, but it wasn't Bill Gates.
30:59 They all put their own imprint on the company and their path forward here.
31:03 And so that'll be really important.
31:05 Andrew Jazzy or Andy Jazzy has already made an acquisition of One Medical.
31:09 And there's probably some other things that they'll kind of go in a different direction of Bezos, what he might have done.
31:14 All right. Last thing, Rick, before we get out of here, it wouldn't be OK, computer,
31:17 if we didn't have a fun story to report on of Tesla CEO Elon Musk Bloomberg just now saying Musk among guests as McCarthy raises money on Liz Cheney's home turf.
31:29 Elon Musk is among the guests at a Wyoming event hosted by House GOP leader Kevin McCarthy the same day that Representative Liz Cheney faces a likely primary loss to a challenger backed by the Republican establishment.
31:41 And you know what's going on here, Liz Cheney.
31:43 This is basically, I think, payback for her leading the Jan 6 inquiry, a Republican doing that.
31:49 Kevin McCarthy very much in bed with Donald Trump.
31:52 So this is a candidate chosen to oppose Liz Cheney and oust her from her seat.
31:57 I guess the only point here is that I've made this point on many occasions here over the course of 2022.
32:03 Musk's alt right turn is very quizzical to me.
32:06 It doesn't really seem representative of the kind of customer base that you would expect to keep Tesla moving forward here.
32:13 Thoughts here, because, again, maybe this is just a throwaway story, but it's just another example of him acting in a way that I don't think is really in accordance with the beliefs of his customers at Tesla.
32:25 Yeah, I think he's acting consistently.
32:28 He's been somewhat volatile.
32:30 He's been a little out of the news after they scheduled the Twitter hearings, probably trying to keep evidence out of the public domain.
32:37 It is an odd choice given his customer base, given the ideals of Tesla and SolarCity to go alt right.
32:46 I'm not sure if all of his customers really understand his politics or they're thinking through all of that.
32:53 I forget what you're over under is, Dan, on Elon Musk being the CEO of Tesla.
32:57 Listen, I've said under five, I've said under two.
33:00 I mean, it depends what podcast you catch me on.
33:02 But let me ask you this.
33:03 You have a Tesla.
33:04 You love the car.
33:05 At some point, is there some sort of behavior?
33:08 Like, for instance, if this is true, he's backing a candidate that believes in the big lie.
33:14 He's backing a party that believes in the big lie.
33:17 I believe this to be a destabilizing sort of movement for our democracy.
33:23 And at some point, do you say, hey, listen, I'm not going to do things that are going to enrich a guy like this.
33:29 He's the richest guy in the world.
33:31 His company has a $900 billion plus market capitalization, and it's totally divorced from the reality of the fundamentals of this company, in my opinion.
33:41 How much of this bullshit behavior are you going to put up with as a customer, I guess?
33:46 As a customer, I think I'm going to wait and see.
33:48 I like the car.
33:49 It's a great product.
33:50 I've enjoyed it.
33:51 I enjoyed the first generation.
33:52 I'm enjoying this generation.
33:54 If he really comes out and is pro-January 6th or does something extreme, it might force my hand a little bit more.
34:02 But until this all plays out, I'm going to enjoy my car and see what happens.
34:07 But I agree with you.
34:08 I think my over-under would be Gen 124, that he's not going to be the CEO of Tesla.
34:15 And if he's running Twitter, which he owns at that point because it's forced upon him, or he's moved to a different phase of his life, I think he's definitely going to move on from Tesla at that point.
34:25 Yeah.
34:26 Well, listen, if that is the case, at some point there's a multi-hundred billion dollar air pocket in the stock to the downside because I think the cult of Elon has driven a lot of this kind of excess valuation, in my opinion.
34:38 But I'll also say that we're talking about what would be bookends to this bear market.
34:41 We kind of used that example of Adam Neumann in 2019, right before we kind of had the crash in 2020.
34:49 Another crack before the straw that broke the camel's back of the Ukraine, maybe.
34:55 But I would say, yes, putting all your sins to bed, meme stocks and overvaluing people who are CEOs of multiple companies.
35:03 Crypto, NFTs.
35:05 You know what it would be?
35:06 Rick, it'd be like the end of a Godfather movie where the Godfather just cleans up all the messes here a little bit.
35:12 Taking care of the family business.
35:14 So this is Dan's family business list of Neumann, Kalanick, Musk.
35:19 Who else has to go?
35:21 I mean, as far as I'm concerned, you just named a bunch of shysters.
35:24 I mean, these are people that raised billions and billions and billions of dollars, enriched themselves massively.
35:29 They did it.
35:30 Listen, it's not just their fault.
35:31 They had plenty of enablers and people were willing to give them that capital.
35:34 But we've seen this in every market cycle here.
35:37 You always see these sorts of ills be corrected.
35:40 And I think until the Tesla ill is corrected, I don't think we're done with this period of euphoria.
35:46 So how's that?
35:47 All right, listen, we covered a lot of ground here, Rick.
35:49 I appreciate you being here.
35:51 Oh, it's great being on.
35:53 Even in the dog days of summer, being able to get on and have some real conversations and prep people for as they're thinking about what's going to happen when we all go back to school.
36:03 We got it, baby.
36:04 I know it.
36:05 Like as your friend Josh Wolfe likes to say, "Suit, suit, suit, so you better get yours to the dry cleaner.
36:10 Come September, buddy.
36:11 You got to put your suit on."
36:12 You got to make sure it still fits.
36:14 All right, I'll talk to you soon.
36:15 Thanks.
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