E73: Late-stage VC markdowns and mistakes, market strategy, Ukraine/Russia update with Brad Gerstner

**Jason Calacanis** (0:00)
Hey, everybody. Hey, everybody. Welcome to another episode of the All-In Podcast. We have a new Bestie Guestie filling in for the Prince of Panic Attacks, the Queen of Quinoa, the Sultan of Science can't make it this week. I think after his incredible performance last week and him trending on TikTok with his incredible insights over, sadly, the potential famine that could come after this Ukraine war, he decided he would take a week off. I think it's just a little too much attention for him. So we have a Bestie Guestie today. Yes, the Shaman of Stocks is with us.
He brings the equanimity to equities. You know him. He'll bring that namaste to your payday. Predictions are the anti-Galloway.
Brad Gerstner, welcome back to the program.

**Brad Gerstner** (0:46)
Thanks for having me.

**Jason Calacanis** (0:47)
Namaste. And also with us, of course, the Rain Man himself. He's bitter on Twitter. He's brawling on Colin. He's the Bill of Rights from Pack Heights.
David Sacks.

**David Sacks** (1:01)
Boy, you've really outdone yourself today.

**Jason Calacanis** (1:03)
And the Prince of Palo Alto, the overlord of the Overton Window, Chamath Palihapitiya.

**David Sacks** (1:11)
JKL are you the stinker of stonks?

**Jason Calacanis** (1:13)
Oh, God.
It's been a pretty crazy couple of weeks here. We are not a political show here, but obviously when world affairs become acute, as they have, we cannot ignore the war that is occurring in Ukraine.
We're going to talk a little bit about markets. I think we'll start with those, with Brad Gerstner here. The SaaS market and the index. Why don't you walk us through this chart here? Because everybody's wondering what's happening with the markets, given the war, given interest rate hikes and the repricing of stocks. I don't know how you would look at what happened in November, December, January. Brad, how do you contextualize?

**Brad Gerstner** (2:14)
Well, it's certainly a repricing. It's certainly a repricing, but I think of it more as normalization. Right? Chamath was saying it in November. I was on CNBC talking about the fact that when we got to a post-COVID world, rates were going to normalize, go back to where they were in January 2020 That was around 2%.
And the growth multiples would have to come off of this historic red bull high that we were on during most of 2020 and 2021 So we were 30 to 50% depending upon the index above the five-year average growth multiple pre-COVID. So that just needed to happen. Like we should be celebrating in one sense that that happened because that means that we overcame a global pandemic. The downside is we couldn't play with artificial money, 0% rates, trillions of dollars of Congressional and Fed injection in order to prop up valuations.
And when it happened in and of itself, that was going to be extraordinarily painful.
What I didn't anticipate and what most people didn't anticipate is that on top of that, we're going to have increasing fears of hyperinflation, not just getting back to normal rates. And that we were going to find ourselves in the middle of an incredibly devastating war in Ukraine. Those two things added to the uncertainty, the risk premiums, added to uncertainty around future inflation. The dot plot exploded higher and expectations of forward rates went higher. Now, why the hell does this matter? It matters because when you take, you know, if you're looking at that chart, the five-year average, the 10-year was two and a half percent. We all got comfortable investing in this period of time. The markets hate uncertainty. We had a predictable way for us to estimate where we thought our wax should be in our discounted cash flow models.
All of a sudden, that was thrown into, thrown into the air. Oh, my God. Look what we got going.

**Chamath Palihapitiya** (4:12)
Look at this.

**Jason Calacanis** (4:13)
Oh, yeah. I never compete with babies or animals.

**Brad Gerstner** (4:15)
No chance.

**Jason Calacanis** (4:17)
No chance.

**Chamath Palihapitiya** (4:17)
This is Talita.

**Jason Calacanis** (4:19)
Talita.

**Chamath Palihapitiya** (4:20)
Look at this little, look at this little butterball.

**Jason Calacanis** (4:23)
Oh, my Lord. Look at that.

**Brad Gerstner** (4:24)
So, so good.

**Jason Calacanis** (4:25)
Sacks, that's called a child. It's a, you have three of them.
Those are babies. And what you're seeing there is affection from a father and a child.

**Chamath Palihapitiya** (4:32)
Look at how cute this little baby is.

**Jason Calacanis** (4:35)
Sacks is like, this is taking from my time. Get that baby out of here.
So cute. So, Brad, I guess what everybody wants to know now that we see this repricing occur is what do you think is going to happen in 2022 and then into 2023?