Virgin Galactic CHAIRMAN: Bitcoin has returned me over 100 times, not ethereum and Defi

Original title: virgin Galactic Chairman: Bitcoin has paid me over 100 times, not Ethereum and Defi

Original author: Laura Shin

The last night's porridge & NBSP;

Write before: Former AOL executives, Facebook, now of the Social Capital, chief executive officer, the chairman of the board of virgin galactic, the golden state warriors, the boss of the billionaire Chamath Palihapitiya, said in an interview with Unchained himself had let family office in 2013 to 1 million BTC is configured on the price of $80, after his massive BTC to its investment DCG (gray) management, but he is just the COINS as a financial hedge, He also said he would not invest in Ethereum and did not care what Defi was.

In this article, Chamath Palihapitiya talks about a wide range of issues, including Bitcoin, coVID-19, civil strife, and broad economic trends and predictions. Here are some highlights:

- Whether his economic projections have changed since the coVID-19 outbreak;

- Why he believed there would be a debt crisis;

- How he sees BTC's success as a hedge against the dominance of the asset class;

- How the economic pendulum will swing to consumers;

- Why he doesn't mind the demise of big companies and hedge funds;

- Whether he agrees with the argument that Bitcoin is irrelevant;

- Why the COVID-19 pandemic has not yet prompted institutions to adopt cryptocurrencies;

- Why he didn't see the good in Ethereum;

- How the economy will become more decentralized in the future, and whether blockchain will be part of it;

- Why he prefers SPAC to ICO;

- Why he treats capital as a service;

- Why he thinks the government should crack down on big companies;

(Photo: Chamath Palihapitiya, CEO of Social Capital and chairman of Virgin Galactic)

Chamath Palihapitiya:Hi, how are you?

Laura Shin: Good, nice to have you. You were the youngest VP at AOL, you worked at Facebook when it became a mainstream Social network, you became a billionaire at 32, you became the boss of golden State Warriors at 33, and you founded Social Capital, investing in Slack, SurveyMonkey, Box, Wealthfront, Digital Currency Group, and more. Then, in 2018, some of your Social Capital partners left, and you made a sudden shift from being a venture Capital firm to what you call a technology holding company.
At that time, the silicon valley to this comment in succession, then, in early 2019, Kara Swisher interviewed, you talked about how you live this luxury lifestyle, you take part in a lot of party, but didn't feel satisfied, and said that many of these changes, are part of your emotional awakening, is you to understand what truly makes you happy, and become a better person.
So I want to know, here we are in 2020, and you've made a huge difference, and I want to know how have you weathered the epidemic, mentally or psychologically, especially in terms of social distancing and dealing with all the economic uncertainty?

Chamath Palihapitiya: I'm sure this is my real moment of growth, but it's really hard. I think this is the first time in my life that I've gone through a period where, you know, there are times when I'm depressed, there's anxiety, I can't sleep as well as I used to, and sometimes I really feel alienated from the people around me, and I think it's more difficult than I thought. It's really hard to build a habit. I used to take a lot of little things for granted.
You have to live in a place where you live, where you love, and where you work, and everything becomes chaotic, without clear boundaries. It became very monotonous and there were no clear boundaries, so Saturday looked just like Wednesday. I've put on some weight and don't exercise as much. So over the past three months, I've done some soul-searching on my own.
Have more toughness and I think it need me, but I think, this also let I can reflect on their own progress more, learn more friendly to yourself, to think more, realize what is important, I'm really proud of his journey, staying at home could make me more grateful, because I know that this is a very difficult process.

Laura Shin: Yes, I would also like to ask, in your podcast interview with Kara Swisher at the beginning of the new Coronet pandemic, how do you anticipate that the credit markets will seize up and that this will eventually have a chilling effect on the stock market, private equity, real estate, etc., and you think this will also lead to a freeze in venture capital. So, by now, we've been through three months, and the stock market is basically up. The Federal Reserve has just announced that it will buy up to $250bn of personal corporate bonds, and I wonder if there are any revisions to your projections of how the epidemic will unfold economically given what you have seen so far?

Chamath Palihapitiya: Yes, I mean, I think the broad premise that I'm talking about is still right, but in fact, the timing is wrong, and frankly, it's still wrong. Therefore, when I say that sentence, I really have a feeling that I think we have seen is that the fed will do anything to support the stock market and bond market, this is almost a symbol of America's economic recovery force, even if it's not necessarily reflect the actual operation of the economic situation, does not necessarily reflect how we will measure success or actual happened, you just need to accept the result, to accept the fact that that you can't fight the fed, and they actually have unlimited printing presses.
So, just recently, when they announced that they were going to buy individual bonds, what we know is that right now for every dollar the Fed buys in the bond market, the stock market goes up in price. If you put in another $250bn of liquidity, you could see stocks rise a few hundred basis points more.
So, when the music is playing, you have to dance, and now, frankly, when interest rates are zero, using leverage for a long time may not be so penalized. Therefore, I think you must participate in the market now until further notice.

Laura Shin: Earlier, when you said you would change the schedule, you said you thought it might take 36 months to fully recover. Would you ever change the schedule?

Chamath Palihapitiya: You have to wait for something very important to happen. The good news is that markets still have a lot of room to correct, and if you go back to the Fed, I'll give you a concrete example. So when the Fed announced their tier 1 and tier 2 loans, they announced a set of rules, and if you look at the rules, there are still a lot of people who don't qualify.
Some American companies eligible for the fed's aid indeed, but they refused to accept, because they don't want to in terms of compensation and other regulated, so, when you put all these together, there is still some companies in the real world can not earn enough money to repay debts, when you see a default (most likely in the next 12 to 36 months default), you don't need so many actions in many markets.
So, specifically, when you look back at 2008, all the money came from very specific parts, including mortgage-backed securities and credit derivatives associated with them. Also, now, I spent a lot of time to study investment grade index, and high-yield index around the equivalent securities and credit derivatives, credit default so, 5% - 9% of defaults is possible, this is only because issuing debt in the United States, but in a dollar money to make money and the number of companies unable to repay the debt is on the rise. So the debt crisis is imminent and only getting worse. We're really just pushing the can down the road, and the only thing the Fed needs to do is broadly buy any security, including stocks, which is, frankly, the only tool they have left.
I think if they do that, it's going to put a lot of pressure on the dollar, and frankly, it's going to put a lot of pressure on the U.S. economic system, which nobody has ever done. At worst, we don't know yet; at best, Japan. In Japan, the Bank of Japan now owns 80% of all etfs; .
Eighty percent of every dollar is owned by their own government, it's been 20 years, it's a mess, and unfortunately, unless we find a solution, the United States will eventually see that. The question is when, I think, the non-US companies that hold US debt will be the kind of companies that will push us over the cliff.

Laura Shin: You said on CNBC that you think the government is doing too much to save these companies, and you said it like you don't care that hedge funds don't go bankrupt, and I just want to know, if the government does what you suggest, are you willing to be eliminated?

Chamath Palihapitiya: I mean, I've never really been defined by my money. I think I'm an evolutionist with the same values. I may be a little skeptical when I'm younger or harder to deal with, but I'm still the same person, and frankly, when I was growing up on welfare or growing up, or when I was in my 20s or 30s or 40s, I felt I had the same value as anyone else. In my opinion, money is a projection used by others.
I used it myself for a while, and now I use it less, so it's true to really realize that a teacher who makes $60,000 is as important as I am, so you can take it all, I really don't care. Anyway, it was an interesting trip. I think I've created a series of wonderful memories for myself, and it's been a wonderful journey, and I hope to live it for another 50 years.
And what I said on CNBC was just an expression of disappointment. The United States is an economy where the vast majority of GROSS domestic product is created by consumers, and the way consumers improve the American economy is by spending money, and when you take income away from American consumers, they lose their jobs or they can't earn their wages, then they spend less, which means the economy shrinks, and you get into a recession.
Therefore, the first original rational mind will tell you, you put money into the hands of consumers, and put enough money into their hands, the amount so that they have more than their life needs, then they will spend extra money, and this is important, because it forced the company reopened, faster then hire more people. Always, what you'll see is that they'll have to pay more, and then consumers will have more money, but it's actually a nice rebalancing of what's happened over the last 40 years, and that's the pendulum has swung.
In economics theory, the pendulum swinging between Labour and capital, in the past 40 years of trickle-down economics, we really do is to put the pendulum has swung back to the capital and the labor class does not actually they used to have the ability to make money, but put more money into their hands, in fact, you have to pay them more money, they can come back to work, this is not a bad thing.
What is leveraged to readjust it very unbalanced distribution, so the handing labor power, put more money in handing labor, is actually a subversive, to a certain extent over a trickle of economic theory, it may play a role in the 80 s, but frankly, in the 90 s and 2000 s, and now, this is an outdated economic philosophy, it can't reflect the operation mode of the world.

Laura Shin: You said that everyone has an unrelated hedging space in their portfolio, and you said bitcoin can serve that. You also call it a fool's insurance and I wonder if you think the novel Coronavirus pandemic is something like a Bitcoin moment?

Chamath Palihapitiya: Not really. I think, when I talk about foolproof insurance, I'm talking about what we want, frankly, to protect our wealth, no matter how much we have.
For me, the currency is so far I have seen only a decision-making process and decision-making institutions are not related things, because at the end of the day, any other asset classes, stock, debt, real estate, commodities are closely related, they are connected with the legislative framework and financial market, which makes many government together to do so.
So it's almost like sort of betting on the dominant asset class and making sure you have a little bit of insurance, and insurance is not something that makes 50 cents on the dollar, insurance is something that makes 1,000 dollars for a dollar.
And you want to return these huge, asymmetric, because you want to ensure that a small amount of insurance basically can make you whole growth, that is why I think you should get 1% of the portfolio investment is used to configure the currency, then don't go to see it, don't see anything, and hope this 1% to zero, then you've got 99%, but one thousand this 99% to zero, then this 1% could be worth as much as 120%, and then you will feel oneself is a genius.

Laura Shin: But I guess I'm confused if you know that the government is not dealing with coVID-19... I mean, in terms of the best way to deal with the stimulus and the economic impact, why don't you think this is a time for people to turn to unrelated assets?

Chamath Palihapitiya: Since the financial crisis, governments have resorted to six or seven forms of QUANTITATIVE easing, depending on the level of technology you want. So we can pick any one of these moments and say this is the Bitcoin moment, and what I want to convey to you is that I think people who are waiting for the big event, are likely to bring more speculation than for the health of bitcoin.
I think it's a terrible parade. A bunch of little things that end up adding up and making us think that the whole way the world's financial infrastructure works is gone would be the sum of many bad decisions, and I don't think it's worth the time.
I just think this is a kind of mode, when you see this kind of mode, I think you only need to ready to hedge it, standing on the other side of the it, hope this model to stop, to be honest, if your currency bet pay off, it will cause catastrophic damage to the world, it will have a significant impact to many people, we all know that these problems, they care about who is not the currency hedge, so you almost don't want that to happen.

Laura Shin: But you really only see one path to success. You don't see any other reason for it to succeed, even in a world where not everything else collapses?

Chamath Palihapitiya: No. I mean, one might say this is a frictionless payment mechanism or payment trajectory. But I don't think so. I think there are products that are easier to use that will eventually become the virtual payment mechanism that connects the world, whether it's WhatsApp or Cash App, Venmo or WePay. All of these things will eventually be linked together in an underlying framework that will allow seamless money transfers and zero cost payments in real time in a ledger that gives you security and transparency.
I think all of these things are going to happen eventually, so the use cases of Bitcoin will become less and less and more and more of a tool, and then you have to think about what the potential value of that tool is. People have been trying to make the case that gold has industrial USES, and I would probably say that most of the time, people use it as a hedge against other parts of their assets and other parts of their portfolios.
Similarly, we're going to defend bitcoin's industrial value indefinitely, but for most people, the overwhelming use case would be a financial hedge, and I think that's good enough for us to make money.

Laura Shin: Out of curiosity, when you first heard about Bitcoin, did it take you a while to understand its potential? Because a lot of people say, in the beginning, I dismissed it, and I wonder if you do too.

Chamath Palihapitiya: Well, there's a very famous person in the Bitcoin ecosystem, Wences Casares, who gave me The bitcoin back in 2010. On the day we were going to Las Vegas to celebrate his 40th birthday, he introduced me to bitcoin, and I remember calling my family office three days later and telling them to buy a million bitcoins. That's how I got started, when the price of Bitcoin was still around $80, which sounded interesting.
It took me a few years to really understand it, and I didn't fully understand all the mechanisms, and to be honest, I've forgotten most of them now. I studied it, I made a decision, I bought it and I never thought about it again, in general, I never thought about it again. I mean, I remember my family office getting out of control when it hit $20,000, and they were like, well, I was like, guys, don't tell me.
I don't want to know. It's like, take it off the balance sheet. Don't look at it, don't be psychologically affected by the number. It didn't make any sense, and then it went down to about $3,000, and then they called me back. They're like, well, I'm like, guys, I told you, it doesn't matter what's going on here, so I don't know where it is, 9000,8000,10000, whatever.

Laura Shin: I think it's 9,500.

Chamath Palihapitiya: Yes, I can't tell you what the price is.

Laura Shin: I'm curious, you did say that your fund owns almost 5% of all bitcoins, and I don't believe that anymore, so I wonder what percentage of the total amount of bitcoins you have now.

Chamath Palihapitiya: To be honest, I can't tell you. I don't know, but we are very active buyers, and of course there are some sellers in the fund, because in addition to myself, some of the fund is LP. I gave DCG a bunch of bitcoins so they could hold up the Grayscale ETF, so I don't know, but, yeah, I'm happy with what I have. Like I said, I should hedge 1%.

Laura Shin: Like you want to rebalance?

Chamath Palihapitiya: Actually, I haven't done that yet. I've already gotten distributions from other people, so when I get more, frankly, it's Grayscale, because I don't want to do it myself. I'd rather take shares in an ETF because it's easier for me to manage. So I don't want to touch bitcoin, I just think it's a huge administrative and logistical burden that I don't want to bear. In a way, it's a security issue that I don't want to take on. So, this is a grayscale problem, or Coinbase problem.

Laura Shin: Well, I have to ask you one thing too. You said that you don't really follow the Bitcoin market, but you also heard that at the same time as the panic from novel Coronavirus hit the stock market, Bitcoin took a big hit. I wonder if that affects your argument that this is an unrelated hedge?

Chamath Palihapitiya: well, I mean, I think it's more strengthened, now, people engaged in day trading or speculative, with day trading or other financial markets are the same people, therefore, they will suffer the same ups and downs, so when people sell the stock, because they want more liquidity, whether it is because the margin pressure, or because they have a directional views on the stock market.
I think the same is true of Bitcoin, because many everyday market participants are actively trading just like they trade any other stock, bond or commodity, so it's not surprising to me that bitcoin goes down when the stock market goes down. I just want to tell you that there's a segment of the population that sees it as a hedge and will never look at it, and then, to be honest, there's a large segment of the population that sees it as a hedge and makes money in short-term increments.
And as long as the number of these people is greater than or equal to the number of people who see it as hedging, it maps to other financial markets. When stocks fall, you may see the currency is falling, when the stock rose, you may also see the currency to rise, in general, I think this is what we see, and it illustrates the more current asset classes in the short-term nature of people, but as time goes on, that are likely to change...
Once again, when there are hundreds of thousands, millions, tens of millions, hundreds of millions of people like me who own Bitcoin, and these lazy people who buy it for completely different reasons than speculation, who have neither the time nor the interest to care about its day-to-day functions, that will be very beneficial for Bitcoin.

Laura Shin: One more thing, you said in another interview that you don't agree with the notion that bitcoin is digital gold, and I want to know why you don't agree with that. I don't think that's necessarily incompatible with irrelevant hedging ideas.

Chamath Palihapitiya: I mean, the problem is that when people talk about gold, they become very strict. And frankly, I think some people hold gold because they believe that at some point, we're going to go back to the gold standard, or philosophically, they believe very strongly in the gold standard. Others do have reason to believe that, you know, industrial USES, some of the trade value fluctuates according to their industrial value, and that's not wrong.
I don't think there are enough people, and I'll think it is a pure inflation hedge or market hedge, so my comment is that use gold to describe it, can make interpretation becomes more complicated, if you want to the mass market acceptance, so any product (including the currency), you need is the real simple, that is why I encourage people to truly accept COINS simplicity, that is to say, it is basically a fool type of insurance, in case of one thousand head really messed up financial.

Laura Shin: Now we're going to talk a little bit about cryptocurrencies, and I want to know what impact you think this corona-like pandemic will have on the cryptocurrency market as a whole, not just bitcoin.

Chamath Palihapitiya: Well, I really want to see how traditional market participants react at a time like this. If you run a hedge fund, you should do two things, or one thing you should do, and one thing they should do. What they do is, they usually get very leveraged because they try to take very small incremental risks, and the way they do that is they usually hedge. That's why it's called a hedge fund.
I think at this point they'll look at bitcoin and add it to their tool basket to run hedging market strategies, but in general, that hasn't happened yet. I think there's a certain amount of activity going on right now, but the infrastructure of Bitcoin doesn't allow for real massive involvement of market participants, and that would involve a lot of leverage, using their prime broker, all of these are typical things that we do when we go into the stock market or the bond market.
I mean, for example, I could trade billions of dollars of credit default swaps tomorrow, and I could actually trade tens or hundreds of millions of dollars. I have the infrastructure to be able to trade on a large scale or conduct on a large scale.
So it's still too hard for hedge funds to get into the bitcoin market. There aren't enough people and there isn't enough liquidity. There's not enough leverage, there's not enough insurance, there's not enough understanding of bitcoin by traditional players and prime brokers, so all of these things are going to slow down the natural progression of bitcoin, so I hope that at this point people will think about these things out of necessity.
Unfortunately, bitcoin is still largely tied to the S&P 500, so you can't really think of it as a hedge. Those who are long-term bulls of the S&P index will not find Bitcoin any better.

Laura Shin: Well, I'm curious, but have you seen the value of other cryptographic assets, especially Ethereum?

Chamath Palihapitiya: No, not really.

Laura Shin: Why not?

Chamath Palihapitiya: I'll use a fair example to illustrate this. When Obamacare was passed, there was a clear tailwind for health insurance, and you could buy a basket of health insurance companies, or you could buy UnitedHealthcare, and the basket was doing just fine.
UnitedHealthcare has grown tenfold in the last 10 years. If you believe in smartphones, you could have bought a basket of phone stocks in 2010, 2008, or 2009 when the iPhone was first released. You could have bought Nokia, MOTOROLA, Samsung, and HTC, or you could have bought Apple, which, frankly, crushed the other phone companies. The point is that just because there is a clear winner in any market doesn't mean that nothing else can't win.
But there's a strange psychological effect that almost drives these second - and third-line winners, and it's this desire for insecurity, and then what they do is create these convoluted narratives, and can they win? Sure, but have they ever won like category killers? No.
I mean, do you really want to be long Lycos and DuckDuckGo, or do you just want to be long Google?
So, if you really want to make money, my point of view has always been to find that to win, Facebook, Microsoft, apple, Google, amazon, and then to buy, and you should not do, is to try to some complex spread trading, or to participate in 2, 3, 4, 5 mark, of course, you can earn some money, but for brain injury and cause too much pressure, and can lead to complications, this is absolutely not worth it.

Laura Shin: So you basically look at all cryptographic assets as a category? For example, you don't divide them into different categories, because a lot of people would say bitcoin is a currency and Ethereum is a decentralized application platform, and they don't see it as a competition. Of course, some people think of them as competing, but a lot of people just see them as fundamentally different things, but you...

Chamath Palihapitiya: I'll give you a different example. You can see Mercado Libre as an incredibly complex, central and South American delivery platform, and you can see Wayfair as an incredible example of how you can buy or design furniture over the Internet. And Then I look at them, like the Spanish Amazon and the Furniture Amazon, so I think, well, I'll take the Amazon.
Actually, Laura, this can be traced back to one of my philosophy, with the passage of time, I learned that I really make my life more difficult than necessary, I make too many decisions in life, and as the growth of the age, I realized that the best decision is the true instinct, the most simple decision, and you use a lot of data, you can find all sorts of clever ways to slice and analyze things.
But in the end, a simple decision is often the best, the most defensive and lasting decision, and one of the most simple decision, you can do is to buy category winners, and hope that the whole class are doing well, because if it is, if you keep your category at the top of the category, they will receive a disproportionate share of the profits, but also from memory, since that is absolutely right in the market.

Laura Shin: I'm also curious, have you seen what's happening in the DeFi domain?

Chamath Palihapitiya: I don't even know what that is.

Laura Shin: Ok, so...

Chamath Palihapitiya: But I have Bitcoin.

Laura Shin: Ok, let's move on. I want to ask you, too, because at some point, we're already getting to that topic. In your interview with Jason Calacanis in 2017, when you said that THE ICO campaign was about doing meaningless things on the margins, you said that people really need to get back to core basic business principles.
You say, like a pension is devised, or work in a hospital, don't need a digital wallet encryption currency, and you may have heard of this kind of investment argument, namely many encryption monetary fund, said the current services and products provided by the technology giant, can fundamentally transform, through an encrypted currency network provide the decentralization of service, the user can through the token has part of the network, they call it the similar Web3 investment theory.
So I want to know what you think. Do you think this is valuable, or do you continue to call it fringe nonsense?

Chamath Palihapitiya: No, I think it has value. However, I think its concrete framework is too intelligent and complicated. Again, Facebook and Slack are just a few examples of products I've worked on that have really scaled, and when I ran AIM at AOL, and Winamp, the predecessor to iTunes, All of which I've helped expand to over 100 million users.
I'll tell you about my experience there. Take Facebook, for example, which has billions of users. Simplicity of design, simplicity of ambition, doesn't mean you don't have ambition, it just allows you to make and filter decisions within a more basic framework, so you don't get these complex product features or implementation paths and so on.
One thing to realize is that the product development cycle on the Internet also tends to be a pendulum, as I said in the previous business cycle example, where the pendulum is somewhere between labor and capital. On the Internet, the pendulum of product iteration is somewhere between highly clustered and highly dispersed, and now we're in the very clustered part of the cycle.
We have several companies that have done many, many things for consumers, but they will fall apart. It will collapse because consumers are fed up with the Swiss Army knife. Consumers want better, simpler products, and companies will fill the gap. Part of the reason for this is that standards for product development are becoming more open and standardized, so communication between applications is good.
All of this can lead to more open collaborative product processes that benefit consumers, and then the other part is that the government will become more aggressive and undermine trust, so they will pull these big products apart. So in all of these areas, I think we're going to become more decentralized, and I think the product iterations over the next 15 to 20 years will be. It will be nice for many classification services to work together neatly. That means the company itself won't be that big, but it's also a good thing.
I think just building a $5 million or $10 million company and making a few hundred thousand dollars in profit, and then living in a place they want, where they can have a humane life, raise a family, and connect with the community. I think it's a lot easier than trying to be the next $5 trillion behemoth, because a lot of it is just a matter of luck and timing, and no matter how smart you are, you can't replicate it.
What I'm trying to say about this long and complicated statement is that it's an idea that deserves to be widely used. And I don't think when you ask clients, they want or say anything about blockchain. They're going to describe a use case, and no matter how you implement it, the better and faster you get there, you're going to win, and if it includes blockchain, that's great, but if you presuppose it and include it or something else, then I don't think that's the right starting point, and you're going to fail.

Laura Shin: Actually, I'd like to ask you more about this, but first, before we get started, I'd like to explore your views on ICOs a bit more deeply, because you've been trying to reinvent ipos, or at least use Social Capital to address some of the issues that have been involved in the IPO process. If I say something wrong, you can correct me, this basically implements the SPAC. So why do you think this is a better way to do an IPO, and ICOs also provide easier liquidity... But you obviously don't see an ICO as a way out. So, do you see any way blockchain technology can be used, or is it, as you say, irrelevant and the SPAC may just solve the problem you see?

Chamath Palihapitiya: Technology doesn't matter. Results do. In this case, the following is important. In 2000 there were 8, 000 or 9, 000 listed companies; now there are about 4, 000. Two-thirds of the S&P 500 have no r&d budget. Now, you could say it's a stock market problem, but I actually think it's an economic problem for the United States, which is that we don't have the capital markets to support new, high-growth, fast-moving companies, and what we don't have is a tenacious way to really build for America's future.
So we need thousands of companies to go public, so we need to build capital markets in a way that they understand why they should buy future growth and product iterations and r&d, VS current cash flows. It is this obsession with current cash flows that has fuelled the private equity boom, the debt boom, the shrinking of 8, 000 listed companies to 4, 000 and the unnecessary volatility of many public equity markets.
Therefore, through the establishment of the platform, the IPO 2.0 platform, I really wanted to do, and my partner is a kind of way, to some extent to develop for those who can spend a lot of money in the next five to 10 years younger, high-growth companies listed provide a way, and I do this way is our connection for the IPO. We plan the investors, we explain what we're doing, we explain the dynamics of the market, we find the target companies, and we break the business model for those people. We priced it in a reasonable way and eliminated a lot of the excess inventory.
So, for ceos and founders, the benefit is that they are better understood in the public markets and therefore have more long-term support. They're going to go public in 90 days, not 18 months, which is a lighter process, and then what's really important for the public market is that we use the accumulated "social capital and credibility" to explain to you why we should hold this thing for five to 10 years.
Also, I can only build one company at a time, although in the current case, the first one is Virgin Galactic, which is a real success. I financed two more SPAC cases, so let's see what happens. I want to do more cases after that, but by doing it step by step.
An ICO, on the other hand, is an arbitrage in a very murky gray market, and you know, people don't know enough about the financial ecosystem to profit from it.
Many of these things, I think, will not stand the test of time, and I think there will be extraordinary fraud and theft, essentially lying, and they have no basis. They don't really represent real business, so they're kind of like penny stocks. Do they exist? Of course. Can I tell any reasonable, intelligent investor to focus on them? No! Will I tell my grandparents to buy them? No!

Laura Shin: so I want to ask another thing is, combine we discussed two aspects, because you have been saying, get rid of the new champions league big popular method is to restore elasticity, and what do you think it might push more nationalism, because it has exposed the fragility of our supply chain, but as we have just said, when I ask you about these three questions, you also say that they think there will be a decentralized power, in general, at least in my world, which means that they like borderless encrypted network, This is clearly a far cry from the nationalist route. So I was wondering, where do you think these two trends intersect?

Chamath Palihapitiya: I think the government is going to basically push companies to be more flexible, and that means they're going to have to outsource a lot of their work, and they're going to have to do a lot of things onshore because they need to look at things from a national security point of view, and the economic incentives may motivate people to do that.
All this forces companies to do things that are more flexible and less profitable, so that's the way the world is going. But, most importantly, there are a few people who do make products that cross borders, which is very accurate and true in your point of view, and they know no borders.
Most of these products are online, but What I think will happen is that the economic value of these products will converge to zero, the economic value associated with them will converge to zero, and they will become highly transparent and monitored by the government, and they will behave no differently than the payment networks we have today.
Is like this, when you are in between two parties or make a deal between the two countries, the us department of justice can be within a nanosecond understood what was going on, the federal bureau of investigation and all others can also be clear at a glance, I think, all of these have no boundary based on the user's network will eventually do so, it's not necessarily because they want to do this, but because they will be forced to do so, I think all the government will remain consistent.

Laura Shin: Well, speaking of China, the People's Bank of China has been experimenting with its digital currency. They also have a very comprehensive blockchain initiative, which has more than 500 companies in various financial sectors blockchain projects, and I wonder, when you look at what's happening in China, do you think it puts them ahead of the US in terms of using blockchain-based systems and central bank digital currencies? Do you think this is a problem for the United States?

Chamath Palihapitiya: All of this is... China has a goal, which is basically to topple the dollar as a reserve currency, which has huge implications and is mainly positive for China, so the blockchain is a good way for them to promote transparency, theoretical transparency and viability of the Chinese authorities. Arguably, their digital currency could become lighter and easier to use.
But frankly, this is all about services, not about exploiting digital currencies or blockchains. This is an attempt to topple the dollar as the world's reserve currency, so you can only look at it that way. Will the US respond? Maybe, but if they do, it will be in the context of what they have to do to maintain the value of the dollar unit.

Laura Shin: So what do you think of Libra?

Chamath Palihapitiya: Signs of the Zodiac?

Laura Shin:Facebook's stabilisation currency project.

Chamath Palihapitiya: I don't know.

Laura Shin: Well, haven't you heard of it?

Chamath Palihapitiya: Is it like Microsoft's Zune?

Laura Shin: What's so funny about that?

Chamath Palihapitiya: I'm bullish on the iPhone.

Laura Shin: Funny you should say that, because I have a friend who works at Microsoft, and I remember she had a Zune, and she tried to convince me.

Chamath Palihapitiya: I mean, you know Zune exists, right, or like a real player, but you never saw it, and then you always hear...

Laura Shin: Well, I've seen one.

Chamath Palihapitiya: Oh, no, my friend has one, but that's not true. You only see iphones and iPods, so I don't know what Libra is. I'm a Libra and I was born in September, which I know because it's true.

Laura Shin: Wait, but I just want to know, you didn't say you didn't follow Facebook... Oh, this is your former employer, you know...

Chamath Palihapitiya: It's been 10 years, I mean, like, do you remember who you dated 10 years ago? Do you remember what you ate 10 years ago? Things will happen, people will move on.

Laura Shin: Oh my God, I love it. Well, let's talk about the latest news. There was a worldwide outcry against systemic racism, and your company launched a service called capital as a service. Can you describe what that means for the audience? Can you describe how these investments differ demographically from traditional venture capital investments?

Chamath Palihapitiya: Capital-as-A-Service. Well, it was built on something else. So this topic is very sensitive to me. I've always thought that prejudice exists. I also kind of believe that I got over it, and maybe I'm more clear or frank, smarter, faster, better than my white counterparts, so I've always been kind of good, but...

Laura Shin: Actually Chamath, can you say what you mean, because I don't know if any of my listeners know your personal story?

Chamath Palihapitiya: I mean, listen, I was born in Sri Lanka, and when I was six years old, I moved to Canada. My country had a civil war, my parents applied for refugee status, and I stayed in Canada. I grew up on welfare. My mother was a housekeeper, and my father, when he lost his job, couldn't hold on to his job, suffered from depression and drank too much.
In some ways, it's just a hard and mean way to grow up, but you know, they're good people, and they try their best. I am a by-product of many social safety nets. Health care and education are the two main ones. I spend thousands of dollars a year on university in Canada. And then I made it to America, and I went from nothing, you know, I've accomplished a lot.
But there are a lot of people who grew up in the same circumstances that I grew up in, and they didn't make as much progress, and it's not because they weren't as talented, they were around me, and I was just lucky. Said there is a compelling example, I remember when I was 10 or 11, we have to face immigration judge, our life is in danger, I only remember the early 40 s or 50 s white judges and sitting on a bench, they decided to the whole of my fate, I see it, because it has been imprinted in my memory, I sat beside my father, it's a bit like a court environment, if you can imagine the court environment, I have been crying. There is only fear and insecurity, because you will feel illegitimate.
In the end, the judge allowed us to stay because he believed it was important for us to stay. So we stayed, and I would say we've paid back, I've paid billions of dollars in taxes, and I've donated tens of millions of dollars to Canada.
This is a coin flip event that could have been reversed, and I probably wouldn't have had it today. Then the 911 event, it happened five years later, when I was in boarding past security, they will ask me all sorts of problems, and then I finally realized that I only after the 911 event is racial discrimination, maybe they think I am a Muslim extremists, I thought, you have to take a written "you don't have to be afraid of me" brand slogan? I'm just going from Washington, D.C. to New York for a meeting. When I was living in Washington DC and working for AOL, I got stopped by the police a lot, and when I was in California, I got stopped by the police a lot, and everything I went through, it was like...
And my black friends, they've been through this thousands of times, they've been through more extreme situations, when it happens to them, you know?
When I create Social Capital, The first thing I do, is my first project outside investment business, this is I to do with The Information of Jessica Lessin cooperation, I said we were going to decompose The population of each investor in The risk investment and ethnic composition, we announced it, people are very upset, I remember I have written an article called "brother brother, they all hate it.
They hate it because it's true, and it's said out loud, and they're uncomfortable, and... I think they've stuck with it ever since. I took it to the next level, and we started a project called Capital as a service, and the idea is that entrepreneurs exist in all shades, colors, genders, sexual orientations.
Instead of letting a bunch of unconscious bigots make that decision, why don't we let the Numbers speak for themselves? You find all sorts of people around the world running incredible businesses because we allow them to provide only data, and we automatically make financing decisions using an algorithm that doesn't care what your first or last subject is, what your gender is, where you're from.
This algorithm will only look at the quality of your business and make some reasonable predictions about what will happen in the future, and will bring you money.
I don't know what will happen next, but I think things like "capital as a service", forced to change may be needed, and cash flow, that kind of thing is a really critical part of the writing and make things more balanced, because money is lubricant, and you know, when you have the opportunity to use money, you can do much more than when no money, I have experienced both, so I can tell you this.

Laura Shin: Yes, to make it clear to the audience that in the capital as a service funded companies, women are 30 percent of the leaders, compared to 4 percent in traditional VC firms, and 80 percent of them are non-white, compared to 77 percent in traditional VC firms. It's a completely different set of data, which is determined by the algorithm. So I also wanted to ask about some of the topics that have been hot in recent weeks. In your 2017 interview with Stanford Business School, you talked about how you felt social media tools were tearing at the fabric of our society.
And this was after the 2016 election, and as we all know in your interview, Russia used fake news on Facebook to somehow interfere with the election, and apparently, Facebook said it wouldn't fact-check politicians very controversially. It doesn't remove or tag posts by politicians who promote violence, and I was wondering if you agree or disagree with Mark Zuckerberg's position and let them stand alone?

Chamath Palihapitiya: I think it's a business decision that he's made, and he's the CEO of this company, so he's allowed to make these decisions, and he can even shut it down.

Laura Shin: If you are in charge, do you make those decisions?

Chamath Palihapitiya: I would look at it a little differently, but the thing is, I don't know what he's been through, I don't know what pressures he was under at the time, and obviously he's done something that's made a lot of his employees unhappy, but he made his decision anyway. So, on balance, I think he made the right decision because this is a for-profit company, and ultimately he has to be accountable to the real stakeholders, the people who expect a return on their investment.
The usability of the product, if you want to give priority to, it is very complicated, because I don't know Facebook use and dependence in the city, just like in other demographics, so you can see the political divide, intent on Twitter have more democracy, while on Facebook more republicans use, it doesn't make me feel surprised, because it strengthens people have seen the idea.
It's almost impossible to be neutral, and you know that when you talk about UGC, those concepts aren't neutral anymore. So it's in the impossible position of basically making decisions that appeal to one audience rather than another, or either deciding to implement some neutral algorithm, which is almost impossible.
I think it will make people feel better, but the product will get worse, so I think his decision is probably the best framework in that context.
Some people were so upset with Facebook that they went to TikTok. Some people will stay and grow up with TikTok, some people will go to Snap, and vice versa, and in all of these things, the content is more and more consistent, more and more the same. The difference is what people add to the narrative, what they choose to emphasize, what they describe.
You can see that today, because if you go to third-party media sites, a lot of the same content appears on all of them, just in different packaging. The explanation is different, and that's basically what's happening in the broadcast media today. ABC, NBC, CBS, Fox, HBO, they all behave in different ways and cater to different audiences, and I think that's the state of these big networks.

Laura Shin: Before I ask the last question, I want to know, you mentioned earlier that you think it takes trust to destroy big tech companies, but the feeling you've just described is like describing some sort of self-selection process between customers. So, do you think we're going to see government intervention, do you think we should see government intervention, or is it not necessary?

Chamath Palihapitiya: I really don't know if they should. I think they will, and the reason they will is because of money, which means that I think the first thing that happens is actually the view on taxes. The real truth is that these companies made a lot of money and they now do it in every country in the world.
So, to a state government, legal government or the federal government, in these 6-7 big technology companies to operate in any country, it's just too tempting to pass up, they don't go to the income, but just passed a law that tax treaty has begun, but from now on, if you want to make money from my citizens, you will need to pay to me, I think this is the way of beginning, so as you can imagine this happening in 180 countries and regions in the world, big technology companies long-term yields will decline, it will affect the market value, investor sentiment and other effects.
This can also lead to a large number of employees leaving to start their own businesses, or to go to smaller companies, which can lead to the disintegration of companies. The next form of breach of trust, I think, is distributed control and the risks and responsibilities that these large distributed networks take. Now, they can protect themselves under the protection of Internet laws, but I think more and more governments around the world... You can already see that.
Australia is doing it now. Europe is working on it right now, and they're going to attack these protections, and they're going to treat online media in the same way, and then the last thing they're going to do is, they're going to create more competition in distribution. It's kind of like... You don't have to predict these, because they're actually happening.
So, that's not my grand vision. It's just what I see in the news every day, when people start, and then politicians get bolder, and 10 years from now, we'll look back, and it looks like, oh, yeah, obviously, this is what happens, once politicians smell blood, it's impossible to put the genie back in the bottle.

Laura Shin: When you write the 2020 investor letter, what do you say in the letter?

Chamath Palihapitiya: I had a couple of themes that I spent a lot of time thinking about. It seems to me, from a racist point of view, that this is a public health issue and an economic relief issue. A healthy, diverse population, I think, creates the most prosperous companies and economic ecosystems, creates the most prosperous communities.
So, if you just want to be happier, if you want to live in a wealthier, more humane, more successful society, that's actually going to go a long way. That is one problem; the other will be credit. I spend a lot more time in the credit markets, in fact, than I do in the stock market, and I can say a lot of interesting things, and I don't know if I'm going to make any money.
But by the end of the year, I'm sure I'll have more stories that, frankly, have helped me mature and become more focused and focused on who I am and who I want to be.
So I'll write more about that, and then, obviously, the Berkshire Hathaway connection. We've had a great year, and I'm not sure If I can say that we'll make another $2 billion like we did in 2019, or we'll improve our performance by 200 basis points from inception to now. Going into this year, our annual revenue was 33 percent, which is pretty tough on $4 billion, and I learned a lot. So I have to keep honing. We'll see.

Laura Shin: Great, thank you so much for being here in Unchained.

Chamath Palihapitiya: I really appreciate it. Thank you.

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