May 13, 2022 · 1h 41m · allin
E80: Recession deep dive: VC psychology, macro risks, Tiger Global, predictions and more
Chamath Palihapitiya · 31m spoken David Sacks · 22m spoken David Friedberg · 19m spoken Jason Calacanis · 16m spoken
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In episode 80 of the All-In Podcast, the hosts analyze the ongoing global market crash, detailing the macroeconomic forces, venture capital pullback, and consumer credit risks driving the recession. They provide actionable frameworks for startup founders to navigate tightening liquidity, valuation write-downs, and changing operational realities.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The hosts hold 99.7% of the talking time here. How this is scored →
The hosts as informed peer 7.8 Guest teaching 3.3 Guest disagreement 2.7 The hosts pushing back 2.7
speaking balance: gold is the hosts, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:34:50 Sacks slams Biden and Powell leadership
David Sacks aggressively attacks President Biden and Fed Chair Jerome Powell, calling them Tweedledee and Tweedledum and declaring them the worst President and Fed Chair pairing in history.
Hardest push from the hosts ▶ 20:57 Chamath refutes Friedberg's housing market crisis comparisonChamath directly rejects Friedberg's argument that home price-to-income ratios signal a 2008-style housing crash, citing specific regulatory shifts in mortgage capitalization rules.
Biggest teaching moment ▶ 37:51 Chamath delivers mega-fund return data shockerChamath schools the room with concrete historical data, revealing that out of 1,276 billion-dollar-plus private equity and growth funds raised since 1994, only 22 returned more than 2.3x capital.
The host holds their own ▶ 7:17 Chamath demonstrates deep macro financial domain authorityChamath displays impressive macro expertise by citing the exact 0.92 correlation between Fed balance sheet expansion and S&P 500 growth, alongside detailed global wealth destruction statistics.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The hosts as informed peer | Guest teaching | Guest disagreement | The hosts pushing back | Why |
|---|---|---|---|---|---|---|
| Global Wealth Destruction & Macro Liquidity Shock | 8 | 2 | 1 | 1 | Chamath delivers a detailed macro analysis showing a 0.92 correlation between S&P 500 performance and Fed money printing from 2018 to Q4 2021. He contrasts the current $35 trillion global wealth destruction (14% of global wealth) with the 2008 financial crisis (19%). | |
| Panic Selling, Real Estate, and the Surging Consumer Credit Crisis | 7 | 2 | 2 | 2 | Sacks analyzes panic selling across asset classes, noting the total capitulation in crypto compared to prior drawdowns. He cites Axios data showing real wages fell 2.6% due to inflation while consumer credit surged by $60 billion. | |
| Quantitative Tightening, Paper Wealth, and Housing Bubble Comparisons | 8 | 5 | 4 | 6 | Friedberg argues home price to income ratio (7x) is worse than in 2008 (5x), warning of a consumer credit bubble. Chamath strongly pushes back, arguing mortgage capitalization rules and qualifying limits make housing dynamics fundamentally different from 2008. | |
| Labor Market Trends, Startup Survival & Biotech Down Rounds | 8 | 4 | 2 | 2 | Friedberg presents industry data showing 40% of public biotech companies have under 20 months of cash and 30% trade below net cash reserves. Sacks and Chamath describe board-level shifts to extreme bear-case planning. | |
| VC Psychology, Mega-Funds, and Tiger Global's Implosion | 9 | 6 | 3 | 2 | Chamath schools the room with historical VC data: out of 1,276 mega-funds (>$1B) since 1994, only 22 returned over 2.3x capital. He highlights Benchmark's disciplined $550M fund size model versus reckless fund bloat. | |
| Decacorn Fund Math & VC Return Realities | 8 | 3 | 2 | 2 | Sacks breaks down Tiger Global's $12.7B fund depletion and the flaw in using inflated public multiples to arbitrage late-stage private rounds. Chamath notes how capital-as-a-service models fail without long-term underwriting validation. | |
| Macro Liquidity, Fed Policy & Market Addiction | 8 | 3 | 2 | 2 | Chamath traces central bank intervention back to TARP in 2008, explaining how the market developed a psychological addiction to the 'Fed put' reinforced by modern monetary theory academics. | |
| Dry Powder Allocation & Mega-Cap Capital Dynamics | 7 | 3 | 3 | 4 | Friedberg asks whether $250B of VC dry powder will concentrate into mega-caps like Stripe. Chamath counters that top-tier companies will refuse over-priced, messy capital from struggling VCs. | |
| Startup Survival Playbook & Downturn Metrics | 8 | 3 | 2 | 2 | Sacks lays out explicit financial disqualifiers for tech startups in a downturn: gross margin below 50%, CAC payback over 12 months, and burn multiple exceeding 2x net new ARR. | |
| Founder Reality Checks & Early-Stage Market Reset | 8 | 4 | 3 | 4 | Sacks suggests 3x growing startups can still achieve up rounds despite public SaaS multiple collapse (15x down to 5.6x). Chamath challenges the math, pointing out how rare $1B+ ARR software businesses are in practice. | |
| Preference Stacks, 409A Valuations & Employee Equity | 9 | 5 | 2 | 2 | Chamath and Sacks explain liquidation preferences, preference stacks, and 409A valuation repricing. Chamath warns tech employees that inflated valuations render option packages worthless without governance resets. | |
| Tech Layoff Contagion & Return-to-Office Mandates | 7 | 2 | 2 | 2 | Jason and Friedberg discuss tech layoff contagion and mandatory return-to-office policies, highlighting Apple's acceptance of an AI executive's resignation over mandatory 3-day office presence. | |
| Investor Psychology & Catching Falling Knives | 8 | 4 | 4 | 4 | Chamath draws parallels to multi-strategy hedge funds (Citadel, Millennium) reallocating capital away from bruised managers. Sacks explains why crossover investors are terrified of career risk when catching falling knives. | |
| Capital Discipline, RIFs & The Founder Emergency Playbook | 8 | 3 | 3 | 3 | Jason and Chamath attack negligent startup CEOs who crash companies instead of executing necessary 25% RIFs. Chamath outlines a 3-step action playbook: reset valuation, re-incentivize employees, reduce burn. | |
| Michael Burry's Market Bottoming Analysis | 8 | 3 | 4 | 4 | Friedberg cites Michael Burry's analysis showing historical market bottoms require 6x share turnover compared to the current 0.5x. Sacks displays charts showing negative real Fed funds rate and criticizes Powell. | |
| Emerging Consumer Credit Risks and Long-Term Leverage | 7 | 2 | 5 | 3 | Sacks launches a sharp political critique, calling Biden and Powell 'Tweedledee and Tweedledum' and predicting they will go down as the worst President and Fed chair combination in history. | |
| Potential Market Bottoms and Fiscal Responsibility | 8 | 3 | 2 | 2 | Chamath identifies short-squeeze green shoots suggesting an S&P 3800 market bottom. Sacks notes Larry Summers's accurate inflation warnings that were ignored by the Biden administration. | |
| Shift Away from Easy Money, Airbnb Vibe Search, and Universal Basic Income | 6 | 2 | 3 | 2 | Chamath uses Airbnb's new 'vibe search' feature as an example of easy-money era excess, while Jason critiques UBI and NFT speculation, insisting real economic value requires hard work and software production. |
Statements from this episode (42)
Chamath: Fed money creation correlated 0.92 with S&P 500 (2018-2021)
“From 19 or from 2018 up until about Q four of last year, there was a .92 correlation between that and the S&P 500 going up.”
Chamath: $35 trillion in global wealth destroyed in early 2022
“Since the beginning of this year till about yesterday, so I think the number is still going up probably by at least by a trillion dollars. We have destroyed collectively as a society 35 trillion dollars in global market value. Now, to give you a sense of that,…”
Chamath: The 2008 financial crisis destroyed 19% of global wealth
“And for reference in 2008, when we went through, you know, a cataclysmic shock to the system that threatened the banking infrastructure of America and a potential contagion to the world that destroyed 19% of the world's global wealth at that point.”
Chamath: US unemployment rate will start rising in 2022
“Jobless claims are now starting to tick up, which means that companies are beginning to affect layoffs because they feel this pressure. So now you're going to see an unemployment rate that starts to go up.”
Sacks: US real wages fell 2.6% over the past year
“And then because of inflation, that wages in real terms fell 2.6% over the past year.”
Friedberg: US consumer credit jumped $60B in a single month
“Sachs's point is like, I mean, the number was sixty billion of new consumer credit last month, which is like something we haven't seen in a very long time as consumers try and bridge this gap to afford the things that they've gotten used to spending money on. …”
Sacks: Average public SaaS revenue multiple collapsed from 15x to 5.6x
“And yet, you know, the SAS index is down like 80%. You know, the average SAS multiple, it was over 15 times, you know, last year in the, on the public comps, and now it's down to 5.6.”
Sacks: A major economic recession is now inevitable
“I think, like, recession now is just inevitable. You, to Jamal's point, you can't have 14% of global wealth wiped out practically overnight and not have that translate into a big recession.”
Chamath: Fed QT will run $90B monthly, taking three years to drain $3T
“So the process of quantitative tightening, which is the Fed's mechanism of removing liquidity, is going to start now to the tune of about ninety billion dollars a month. But to run off all the money that they printed will still take three years, right? So we h…”
Friedberg: US median home price to income ratio reached 7x vs 5x in 2008
“In the 2008 financial crisis, the median home price to median income in the United States was five X. Today it's seven X.”
Chamath: Boards not forcing startup burn cuts are derelict in duty
“If the boards of these private companies haven't been doing that for the last five or six months, and the burn hasn't dramatically changed, I think that they are, they've been a little derelict in their duty.”
Friedberg: One-third of public biotech stocks trade below cash
“Roughly one third of public biotech stocks are trading below cash.”
Friedberg: Venture capital had $230B in dry powder at end of 2021
“At the end of 20, 21, if you look at the total funds raised and the total capital deployed by venture funds, we have a two hundred and thirty billion dollar capital dry powder hangover.”
Chamath: Only 22 of 1,276 billion-dollar funds returned over 2.3x capital
“Okay, so now of those 1276 private equity funds, or growth funds, or crossover funds, how many do you think have actually managed to return more than 2.3 times the money? 22 of them.”
Chamath: Market faces years of down rounds and liquidation preferences
“We're going to go through a few years of sorting this down rounds, liquidation preferences, nonsense”
Sacks: Growth capital entering venture capital markets has completely dried up
“All of this capital that flooded the venture markets, this growth capital that came in over the last couple of years, It's gone. I mean, that's basically dried up.”
Sacks: Tiger Global's model would have worked if valuations were accurate
“I actually think they did a reasonably good job in creating a great approach for founders who want late-stage capital. If the valuations have been correct, I think it would have worked.”
Chamath: Well-run startups should only take downturn capital to consolidate
“So if you're sitting at the board of any really good well run company, of course, you'll take some bite size, you know, amounts of very decisive capital in these moments if you think you can market consolidate or whatever.”
Sacks: High-growth, moderate-burn startups will get funded; high-burn won't
“Startups with high growth and moderate burn will get funded through this downturn. Starts with moderate growth and high burn will not get funded.”
Sacks: VC funds will extend deployment timelines from one year to three
“The big traditional venture funds will have large funds, but they're going to deploy them much more slowly. These one year pace of deployments, they're going to stop. They'll be back to three.”
Calacanis: Seed valuations back to $6M–$12M range
“I am doing deals back at six to twelve million dollars in the seed space with, you know, 200 K in revenue and real founders and discipline.”
Calacanis: Seed venture deal timelines expanded from days to 4–6 weeks
“The deals went from taking two, three days. Now they're back up to four to six weeks.”
Chamath: Late-stage startup valuations face 30% to 70% correction
“All these late stage companies are mispriced. It doesn't matter whether you're the bottom decile or the top decile, you are massively mispriced and there needs to be some correction between 30 and 70% on valuation.”
Sacks: SaaS companies growing 15-20% need a decade to recover peak valuations
“When you've lost 80% of your value and you're only growing 15 to 20%, it's going to take you a decade to grow back into your old valuation.”
Calacanis: Opendoor has $2.3 billion in cash against a $3.7 billion market cap
“Some of these things are hard to believe, like, Opendoor has 2.3 billion in cash and a 3.7 billion dollar market cap.”
Calacanis: Coinbase holds $6 billion in cash against a $12 billion market cap
“Coinbase, six billion cash, twelve billion dollar market cap.”
Chamath: VCs accept inflated valuations because preference stacks protect them
“So this is why venture investors have an incentive to pay and set these crazy valuations because they don't really care what the valuation is as much as they care how much of all this preference is building. And do I rationally believe That the liquidation val…”
Chamath: Startup options are effectively worthless if valuations reset
“Otherwise, what will happen is if you join a company in this moment, at a fake valuation, and the valuation gets reset, you can effectively assume your options are worth zero.”
Sacks: Over-capitalized startups must create employee carve-outs for acquisition exits
“The other thing is that if you're in a turnaround situation where you're actually worried that the pref stack is larger than the value of the company. In other words, more money has gone into the company than the company may be worth at exit. Then what you nee…”
Calacanis: Job openings and low unemployment could prevent severe recession
“We're bouncing along record low unemployment. Those two things could be what saves us could save us during this recession.”
Calacanis: Tech startups skipping layoffs will face investor pressure
“If you're a company that doesn't lay off people, you're gonna look pretty weird in this market to your investors. And they're gonna be wondering, why aren't you laying people off?”
Friedberg: $250B in VC dry powder will stimulate economy and job creation
“I do think that this capital overhang, however, this quarter trillion dollars of dry powder that's sitting in VC coffers is going to be significantly stimulatory in a very good way. I think it will create real jobs and enable real progress.”
Chamath: Facebook took a 40% valuation haircut during the 2008 crisis
“I remember we raised money from Microsoft at a 15.3 billion dollar valuation. The great financial crisis took hold and Mark to his credit reset the valuation. We were already profitable, so we didn't necessarily need to raise that money, but we, I think we rai…”
Chamath: Inexperienced VC allocators will burn through $250B in capital
“There's probably there shouldn't be a quarter trillion dollars of funds that are probably stranded in the hands of Really inexperienced allocators who are going to light it on fire for the most part, and they're not going to have the courage to sort of lead th…”
Past market crashes saw stock turnover reach 6x total shares outstanding
“On average, it took six times their total shares outstanding for them to go from top to bottom, meaning that the shares ultimately turned over six X the total, you know, diluted shares out.”
Major stocks had turned over only 0.5x total shares since peak
“And so far in those stocks, we've only seen half of the total shares outstanding turnover since peak.”
Sacks: Violent Fed rate hikes caused stock market crash and recession
“They should have stopped the QE right then and there, and then gradually started raising rates instead of these violent moves that we've had this year that are plunging the economy into recession that have caused the stock market crash.”
Friedberg: US faces consumer credit crisis within nine to twelve months
“I really think we're going to run into a consumer credit bubble here. I do not think that consumers are going to slow down their spending or change their lifestyle as quickly as investors are changing their investing style. We have seen investors in public mar…”
Sacks: Biden and Powell will be remembered as worst President and Fed chair
“Biden and Powell are going to go down as the worst President and Fed chair of all time.”