E134: Ukraine counteroffensive, China tensions, COVID Patient Zero, RFK Jr reaction & more

Conference Vibe and Market Sentiment

• The hosts attended the CO2 Summit in Santa Barbara, a large two-day conference focused on connecting US and Chinese tech founders.
• The prevailing atmosphere is described as "sober" and somber, a stark contrast to the "crypto mania" of the previous year when SBF was the central figure.
• Founders were told at the summit that unprofitable tech companies cannot expect to bounce back like the "Magnificent Seven" (Meta, Tesla, NVIDIA, Amazon, Alphabet, Microsoft, Apple).
• The conference message emphasized that companies must either achieve profitability, improve operational efficiency ("get fit"), or sell their business due to the end of endless capital availability.
• Speakers, including Larry Summers and Stanley Druckenmiller, project a roughly 30% probability of a hard economic landing in Q4 2023 or Q1 2024.
• Software sales have deteriorated significantly, with companies re-forecasting down due to customer consolidation and vendors "sharpening their pencils."
• Venture capital growth targets have shifted, with 2x growth now considered the new benchmark that previously required 3x growth.
• The event was criticized for poor catering, described by the hosts as resembling "dog shit" or a "surprise" left by a dog, featuring unappealing vegan food options.

Ukraine War and Geopolitics

• The Ukrainian counter-offensive, expected since late 2022 to reverse Russian gains using Western equipment like Leopard tanks and Bradley IFVs, has resulted in minimal territorial gains after ~19 days.
• Estimates suggest up to 25% of Ukrainian armored vehicles have been destroyed and casualties could reach 10,000 soldiers out of a 50,000-strong force.
• Russian defenses include three fortified lines, extensive minefields, concrete "dragon teeth" obstacles, and uncontested air superiority via attack helicopters and fixed-wing aircraft.
• The hosts discuss a potential ceasefire/peace deal from May 2022 proposed in Istanbul, which would have seen Russia withdraw to pre-war lines in exchange for Ukraine's neutrality regarding NATO.
• Citing a May 2022 article in Ukrainian Pravda, the hosts claim Boris Johnson traveled to Kyiv and advised President Zelensky to reject the deal to pressure Putin, a decision they argue the West ultimately chose over peace.
• Former Israeli Prime Minister Naftali Bennett has confirmed to the hosts that a deal was negotiated before the war started but was rejected by the West.
• Jason Calacanis argues the US objective has been to weaken and deplete Russia's military capabilities, potentially aiming for regime change, rather than securing peace.
• The US is reportedly out of 155mm artillery shells, a critical shortage that advantages Russia, which produces ~20,000 shells per day compared to US production of ~20,000 per month.
• A "de facto alliance" between China, Russia, and Iran is forming, with Iran providing drones to Russia and Russia offering fighter jets to Iran.
• US-China relations are at their lowest point since normalization; a recent trip by Secretary of State Antony Blinken to Beijing resulted in a 10% drop in the KWEB Chinese index despite initial positive momentum.
• President Biden's comment at a fundraiser calling China's leader a "dictator" and claiming ignorance of a spy balloon incident was criticized as undisciplined and damaging to diplomatic efforts.
• The hosts express concern that the war has inadvertently strengthened the "China-Russia-Iran" axis, creating an adversary with greater combined manufacturing capacity than the US.
• Henry Kissinger is cited with the warning that "it is dangerous to be an American enemy, but it is absolutely fatal to be an American friend," suggesting the Ukraine conflict may deter Taiwan from opposing China.
• Warren Buffett's sale of his TSMC holdings is interpreted by the hosts as a signal that a US land war over Taiwan is unlikely, making the asset a high-risk exposure.

Political Discussion: RFK Jr. and Media

• The hosts defend their decision to host a fundraiser for Robert F. Kennedy Jr. (RFK Jr.) and refute claims by Matt Iglesias that the podcast is "boosterism" for RFK as a "bank shot" to harm Joe Biden.
• The hosts state they support RFK Jr. on specific issues: ending the war in Ukraine, prioritizing free speech over censorship, supporting the middle class, and addressing perceived failures of the FDA regarding COVID-19 mRNA treatments.
• Chamath Palihapitiya clarifies that RFK Jr. is not anti-vaccine generally; he supports the MMR vaccine but opposes the labeling of mRNA treatments as "vaccines" and the mandates surrounding the COVID treatment.
• The hosts argue the mainstream media acts as an enforcer for the establishment, citing that 46% of TV news advertising revenue comes from pharma companies, creating a conflict of interest regarding the investigation into the origins of COVID-19.
• Jason Calacanis notes that investigative journalism once exposed truth but now often protects elite interests, comparing current media suppression to past stories like the Wuerzburger Lab "Patient Zero" theory which later gained traction via mainstream reporting.
• The hosts reject the label of being "pro-nuclear" or "anti-vax" in a dogmatic sense, emphasizing their support for long-form debate and independent thinking against established orthodoxy.

Market and Investment Trends

• Secondary markets for private startup shares are seeing significant discounts, with a median discount of 61% from peak funding valuations as of late May.
• Tiger Global has begun allowing secondary investors to bid on individual companies rather than bundles of 30, after failing to sell bundled portfolios.
• Brad Gerstner of Altimeter Capital estimates that of the 1,400 unicorns from late 2022:
  • 30-40% are "zombie unicorns" without product-market fit that will likely disappear.
  • 40-50% are viable companies facing down rounds of 50-80%.
  • Less than 10% are on a trajectory to grow back to previous valuations.
• Only a small subset of companies (less than 5% of unicorns) currently offer enough margin of safety for Altimeter to invest, though the market is approaching a "clearing zone" over the next 18 months.
• Public market equivalents, such as the Goldman Sachs unprofitable tech index, are down 64% from their peaks.

US Industrial Policy and EV Loans

• Ford received a conditional $9.2 billion loan from the US Department of Energy to build three EV battery factories in partnership with SK Innovation.
• The loan program (LPO), which has $400 billion in lending capacity, aims to onshore manufacturing and reduce reliance on foreign supply chains.
• Critics argue this represents inefficient industrial policy, noting the cost per job created ($440,000) and the risk of "Solyndra-style" failures if politically connected companies are subsidized over superior private competitors like Tesla.
• Brad Gerstner acknowledges the inefficiencies and potential for waste in industrial policy but supports the initiative as a national security imperative to achieve energy independence and secure supply chains for batteries and chips.
• The hosts discuss the US debt burden ($32 trillion) and argue that spending billions on war is more wasteful than investing in domestic manufacturing, though they agree the primary goal should be ending foreign conflicts.
• Chamath Palihapitiya suggests the government should take equity warrants in addition to loans to recoup upside for taxpayers, though he acknowledges the current loan structure still requires private risk capital.