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- [00:02]
Charles Schwab
Support for the show comes from Charles Schwab. At Schwab, how you invest is your choice, not theirs. That's why when it comes to managing your wealth, Schwab gives you more choices. You can invest and trade on your own plus get advice and more comprehensive wealth solutions to help meet your unique needs. With award winning service, low costs and transparent advice, you can manage your wealth your way at Schwab. Visit schwab.com to learn more.
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Snoop Dogg
It's time to review the highlights. I'm joined by my co anchor Snoop.
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Hey what up doe snoop?
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Number one has to be getting iPhone 16 with Apple Intelligence AT T Mobile.
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Yeah, you should hustle down to T Mobile like a dog chasing a squirrel chasing a nut.
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Number two at T mobile families can switch and save 20% on plans plus streaming services versus the other big guys.
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What a deal. Y'all giving it away too fast. T Mobile slow down. Head to T mobile.com and get iPhone 16 on them.
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Yeah you can save on wireless and.
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George Hahn
Streaming versus the other big guys.
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Snoop Dogg
@T mobile.com/ Apple Intelligence requires iOS 18.1.
- [01:02]
Scott Galloway
Or later okay business leaders, are you here to play or are you playing to win? If you're in it to win, meet your next MVP. NetSuite by Oracle NetSuite is your full business management system in one convenient suite. With NetSuite, you're running your accounting, your finance, your HR, your E commerce, and more, all from your online dashboard. Upgrade your playbook and make the switch to NetSuite, the number one cloud ERP. Get the CFO's Guide to AI and Machine Learning at netsuite.com Vox netsuite.com Vox.
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I'm Scott Galloway and this is no mercy, no malice. This past weekend, Elon Musk called me cruel, mean and deceitful. Two and a half years ago, I called him a welfare queen. You decide. Cruel, mean and deceitful as Read by George Hahn.
- [01:59]
George Hahn
This post was originally published August 19, 2022. What's the most successful venture capital firm in history? Kleiner Perkins and Sequoia Capital backed many Internet era success stories. Andreessen Horowitz no one organization towers above. This firm was there before the first transistor was printed, and it will be there after we receive brain implants. One investor funded the computer, the Internet, speech recognition, last mile distribution, mapping the human genome, the core technologies of fracking, and the first horizontal shale drill. And today it's driving down the cost of solar and wind power, but below that of coal. Even better news if you're a U.S. taxpayer, you're a limited partner. Founded in 1776 by general partners Washington, Jefferson and Madison and headquartered today in a Beaux arts corporate campus in the District of Columbia, the US government is the world's premier funder of technological and commercial innovation. The Inflation Reduction Act IRA is being hailed hated as a climate bill, but it's really just the most recent investment by Eagle Capital. Opponents of the legislation claim it's a poor investment. Eaglecap's track record suggests otherwise, and we can expect big returns. The IRA awful name will direct $369 billion to a variety of clean energy initiatives, largely through tax credits. The largest investments are for solar, wind and nuclear power generation, where Eagle builds on a track record of success. The government has invested over $3 billion in wind power R&D since 1976 and it's been offering tax credits for wind and solar since since the 1990s. Just since 2010, the cost of solar has dropped 85% and the price to harness wind energy has been halved. Public funding through R and D and tax credits has been instrumental to that progress. 90% of US coal fired power is now more expensive to operate than replacement wind or solar sources. And that's not for lack of investment in coal. Conservative accounting puts government subsidies for coal at $20 billion per year. And the IRA includes investments in carbon capture technology intended to support coal energy for several years. Eaglecap's $528 million loss on solar cell manufacturer Solyndra, which declared bankruptcy in 2011, was a notable miss. But failure is inherent to venture investing. One analysis found the best performing VC firms have more money losing investments than the average funds. The key difference is the magnitude of their successes and aggregate portfolio returns. Solyndra was a miss, but the $30 billion Department of Energy loan program that funded it turned a profit. There are many notable wins. One business that took a $465 million loan from the same program in its early days. Tesla. You likely didn't know that as its CEO spends more time shitposting America than crediting it. Early stage future leaning research is riskier and requires large amounts of patient capital. Private industry struggles to justify long term mammoth investments in deep science. The most enduring societies have one thing in common. Their governments play the long game. In the 1960s in the US this meant computer and networking technology. At its peak, Federal RD spending approached 2% of GDP. The most cutting edge work was done by the Defense Advanced Research Projects Agency darpa, which developed or funded the development of almost every building block technology of our tech infrastructure. From the Internet and the mouse to graphical user interfaces and gps. More recently, DARPA has been a major funder of AI projects, notably speech recognition. Both Dragon and Siri spun out of DARPA. Speech illuminates the difference between government and private RD. In the 1950s, private Bell Labs aka the phone company, did pioneering work on speech recognition, but only on phone digits 0 through 9. The government also invests upstream by supporting public education and universities. Stanford established its leadership in engineering thanks to a unique three way partnership between the university, industry and government contracts centered around the Stanford Research Institute, where many DARPA innovations have been created. Marc Andreessen coded Mosaic, the first consumer friendly graphical web browser. It was the precursor to Netscape Navigator while attending the publicly funded University of Illinois and working at the federally funded national center for Supercomputing Applications. Again, did you know that? Why would you According to an MIT study, technology developed at universities and then licensed to industry between 1996 and 2010 created $388 billion in GDP and 3 million jobs. Double click on any major tech product or company and you'll find government funded tech. Apple, intel and Qualcomm were all beneficiaries of a loan program similar to the one that funded Solyndra and Tesla. Google's core algorithm was developed with a National Science foundation granted Economist Mariana Matsukado, in her book the Entrepreneurial Slate, calculates that US Government agencies have provided roughly a quarter of total funding for early stage tech companies and that in the pharmaceutical industry, a sector requiring immense experimentation and a willingness to fail, 75% of new molecular entities have been discovered by by publicly funded labs or government agencies 50 years from now. The field most likely to spawn more value than digital computing is genetics, and similar to digital computing, genetics is an Eagle Cap portfolio industry. The Human genome project cost U.S. taxpayers $3.8 billion, was completed under budget and two years ahead of schedule, and has generated $966 billion in economic activity and $59 billion in federal tax revenue. It's estimated the federal government's $3.3 billion in annual spending on genetics projects generates $265 billion in economic activity annually. This number doesn't account for the improved health outcomes and quality of life flowing from genetic breakthroughs, which have an estimated value of $1 trillion per year and growing. One of Eaglecap's recent wins in this space the Moderna COVID vaccine, the result of a $25 million DARPA grant to the company for developing RNA vaccine technology. The biggest critics of the government are, oddly, some of its biggest beneficiaries. Tech billionaires are often the first to shitpost America, even as they continue to harvest wealth from the investments taxpayers make via the US Government. In fact, the biggest bitcher may be the biggest financial beneficiary. Elon Musk says we should get rid of all government subsidies, that the government is the biggest corporation with a monopoly on violence, and last week mocked Washington for hiring more employees at the irs. Let's be clear. Elon didn't build an EV company in South Africa or start a rocket company in Canada. He built Tesla and SpaceX in the United States, and both continue to be heavily dependent on US government support. There would be no SpaceX without NASA, its largest customer. Tesla built its Fremont Factory with a $465 million DOE loan in 2010, and its first 200,000 cars benefited from tax credit subsidies of up to $7,500. For years, the company was able to report profits thanks to the sale of of emissions credits to other carmakers. All told, the company has accepted an estimated $2.5 billion in government support. Marc Andreessen says he's pro gridlock because, quote, when the government does things, it usually doesn't end well. Except for providing the state sponsored platform for his career, the University of Illinois and ncsa. Now Mark is making news because he's concerned about our nation's housing crisis. We aren't building enough houses, he wrote recently, and that's a driving force behind inequality and anxiety, except when the housing is near his house. Another outspoken billionaire, Peter Thiel, says the US government is socialist and believes we have much worse outcomes than the Soviet Union in the 1950s. His solution is to take up seasteading, that is building floating autonomous ocean communities that aren't subject to regulations or taxes. But Thiel's current venture, Palantir, is a government contractor that provides data analytics to the CIA, DoD and other government agencies. And these contracts make up almost 60% of its revenue. Note, Palantir has lost money every year of its existence. That feels like a Soviet outcome. In the 1980 presidential run, Ronald Reagan advocated tearing up our social safety net on the manufactured claim that it offered nothing more than handouts for lazy people. He popularized the notion of the welfare queen, someone living large on the government's dime, having more children to generate more welfare income. It was a classist, racist stunt, and it worked. 22 states passed laws banning increased welfare payments to mothers who had additional children. And we've been slashing and burning the government ever since. Reagan's welfare queen was a caricature, a country club cocktail fantasy of the ungrateful beneficiary of hard earned tax money. The new welfare queens are tech billionaires. The only difference is they're real. VCs claim they partner with entrepreneurs. Many do bring unique insights. Most don't and care about the founder. Read Money. What's clear is that the economic model of 20% carried interest, investors and VCs get 80% and 20% of the gains on capital respectively, has been flipped on its head regarding public investment where investors taxpayers often get less than the VCs and entrepreneurs they back. Ironically, a Democrat held up the legislation until the most obscene tax break in our tax code was restored. I hope someday somebody loves me the way Senator Sinema loves VC and private equity. We're on vacation and my kids made $27 from their lemonade stand yesterday. They then spent $29 on Nerds and Airheads candy and were 100% confident they should have unfettered access to their returns before, during after dinner as they earned it. The gap in the math was that dads spent $38 on supplies, table sign market pitcher cups, lemonade mix, et cetera. Take this times a trillion and you're starting to get warm with regarding the relationship between taxpayers, Sandhill Road and the innovators they back A wonderful thing about our country is that the people who are the most patriotic are the ones who've made the greatest veterans. Less heartening are the individuals who've registered the greatest benefit, are the least grateful, and are often the the most critical. VCs who relocate to Miami and before buying sunblock disparage constantly the state they built their wealth in. Also mega welfare queens who cash EV subsidy checks and sell carbon credits as they mock the elected leaders who pass those laws. By the way, nobody believes you move to Florida or Texas for better governance. You wanted the chance to recognize a capital gain at a lower tax rate than the middle class taxpayers who funded your infrastructure. Fuck off. The first trillionaire will likely be an entrepreneur who builds a layer of innovation on top of the bold investment American citizens are making to address climate change. Let's hope they display more grace and citizenship and our elected leaders demonstrate more backbone representing investors. The lower 99.99%.
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Scott Galloway
Life is so rich.