E158: Global trade disrupted, Adobe/Figma canceled, realtors sued, Trump blocked
All-In with Chamath, Jason, Sacks & FriedbergFri Dec 22 2023
Global Trade Disruption in the Red Sea:
- The Houthi movement's attacks on commercial ships in the Red Sea have led to a pause in transfers through the Red Sea by all five of the world's largest shipping conglomerates.
- This interruption has caused increased oil and gas prices, thousands of extra miles for shipping from Asia to Europe, and spiked insurance costs.
Potential Impacts on Global Prices:
- The disruption is expected to impact European consumer prices more than those in America due to longer transit times and reduced shipping capacity.
- It may lead to inflation upticks again in Europe, impacting Chinese manufacturing and supply chains. However, it won't significantly affect American markets due to alternative shipping options.
Geopolitical Ramifications and Potential Resolutions:
- The conflict could extend beyond local regions and have far-reaching effects on global markets similar to previous conflicts like Russia-Ukraine.
- Middle Eastern countries see an opportunity to resolve long-standing conflicts as they aim for multi-decade investment plans, potentially leading them to work towards ending hostilities.
Global Trade Disruption in the Red Sea:
- The Houthis' actions are linked to the Israel-Hamas war, potentially leading to a larger regional conflict involving the US and causing an oil shock.
- Concerns exist about potential escalation into a larger Middle Eastern war due to various geopolitical factors, impacting global trade and stability.
Challenges of M&A Deals:
- Recent cancellations of major M&A deals, such as Adobe/Figma and Illumina/Graal, reflect regulatory challenges affecting the venture capital industry.
- Regulatory uncertainties surrounding large-scale M&A deals may lead startups to focus more on sustainable profitability or consider alternative paths like direct listings or SPACs for going public.
Impact on Startup Building and IPOs:
- Due to regulatory uncertainties surrounding large-scale M&A deals, startups may need to prioritize sustainable profitability or consider alternative paths like direct listings or SPACs for going public.
- The current environment presents challenges for VC investors and founders seeking viable exit strategies beyond IPOs due to limited options for M&A.
Resilience of Global Supply Chains Post-COVID:
- The physical infrastructure layer of supply chains has not significantly changed post-COVID, with continued bottlenecks and fragility highlighted by recent disruptions caused by geopolitical events.
- Air freight remains significantly more expensive than sea freight, posing challenges for logistics networks impacted by unforeseen events such as conflicts or disruptions.
Implications for Capital Markets & Investor Behavior:
- A shift towards building stronger, profitable companies is anticipated as investors prioritize sustainable growth amidst evolving market conditions.
- Concerns arise regarding the viability of risk capital flowing into the United States if regulatory hurdles continue to limit potential exits through M&A.
Startup Building and Funding:
- Entrepreneurs are advised to consider raising a friends and family round using AI tools to build a slow, steady, profitable business.
- The reward for VCs is shifting, potentially leading to the need for entrepreneurs to capitalize their businesses differently.
- The analysts covering companies can act as a backstop or apply pressure on management, encouraging performance and accountability.
Public Market Evolution:
- In the 90s, public markets were influenced by information arbitrage but changed with the regulation Reg FD that emphasized full disclosure.
- The constraint of touch points between companies and public markets has led to limited research coverage and organized ways to hold companies accountable.
- There's an opportunity for banks to use AI tools to generate statistical measurements of public companies from filings, providing free access for investors.
Profitability and Long-Term Vision:
- Companies are experiencing a bias towards profitability due to a shift in investment opportunities favoring near-term cash-generative services over longer time cycle investments.
- CEOs emphasize building great products for customers while reinvesting profits into ambitious plans without focusing on liquidity or unnatural acts.
Real Estate Industry Class Action Lawsuits:
- The lawsuits highlight the 6% commission tradition in the US real estate industry and its impact on sellers and buyers.
- Federal jury in Missouri found the NAR guilty of inflating home sale commissions, resulting in a $1.8 billion damages payment.
- Discussion revolves around monopolistic practices, MLS requirements, and challenges faced by individuals attempting to list properties without traditional agents.
- Comparison of brokerage commissions across countries reveals varying percentages; for instance, the US averages at 5.5% while other countries like the UK have lower rates.
Impact of Real Estate Commission Structure:
- Exploration of buyer and seller agent roles within the real estate market, including their influence on property transactions.
- Consideration of alternative models such as direct transactions between buyers and sellers without broker involvement or flat fee structures.
- Analysis focuses on challenges faced by individuals attempting to list properties without traditional agents.
Legal Disqualification of Trump from Colorado Presidential Ballot:
- The decision by the Colorado Supreme Court to remove Trump from the state's presidential primary ballot is critiqued for its potential impacts on democracy and political dynamics.
- Speculation about potential consequences such as emboldening Trump's base, impacting voter turnout, and influencing public perceptions of democratic processes.
- Opinions expressed about how this decision might affect Trump's chances in future elections, with perspectives suggesting that it could solidify his position as a frontrunner or be indicative of broader partisan strategies.
Implications of Legal Decision on Trump’s Candidacy:
- Criticism directed towards judicial appointments and affiliations with Ivy League institutions as factors influencing legal decisions related to high-profile political figures.
Trump's Legal Situation:
- Trump was not found guilty of insurrection in a court of law.
- Discussions occurred about disqualifying him from state ballots for the presidency.
- The Department of Justice (DOJ) declined to prosecute Trump for incitement or insurrection, fearing they would lose the case.
Implications of Using 14th Amendment:
- The invocation and interpretation of the 14th Amendment as a means to exclude a presidential candidate lacked historical precedent.
- Concerns were raised about setting a dangerous precedent for future elections if political warfare led to preventing leading candidates from running.
Potential Consequences:
- It was highlighted that such actions could lead to depriving individuals of their rights without due process.
- The discussion emphasized the potential long-term impact on election processes and individual liberties if these tactics became normalized.
Reactions and Recommendations:
- A podcast recommendation "Cafe.com" by Preet Bharara was suggested for detailed analysis of cases against Trump.
- Another podcast, "lawfare," was recommended for balanced views on cases against the former president.