Jason Calacanis is an angel investor, entrepreneur, and co-host of All-In Podcast and This Week in Startups. Please support this podcast by checking out our sponsors:
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OUTLINE:
0:00 - Introduction
1:51 - WallStreetBets and Robinhood
12:58 - How does the WallStreetBets saga end?
16:09 - Capitalism
21:30 - Ideas vs Execution
22:37 - Learning to learn
28:05 - Risk-aversion
34:06 - Robinhood
42:33 - Parler and AWS
44:58 - Social networks
51:32 - Leadership
56:21 - Work-life balance
1:04:43 - Great leaders lead by example
1:12:29 - Advice for startup founders
1:16:56 - Clubhouse
1:17:42 - When will we fully re-open the economy
1:28:19 - Augmented reality
1:31:47 - When should a startup raise money?
1:38:43 - David Goggins
1:40:40 - Disagreement with Chamath Palihapitiya
1:53:52 - Story about Elon Musk's darkest moments
2:02:07 - Friendship

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The following is a conversation with Jason Kalacanis, who's an entrepreneur, investor, author of Angel, How to Invest in Technology Startups, and as many people may know, he's a fun, brilliant, long-time podcast host of This Week in Startups, and co-host of the all-in podcast with Chamath Palihapitiya, David Sachs, and David Friedberg, who all happen to be poker buddies and self-proclaimed besties.

The result is always a great listen due to both the love and the heated disagreements.

Quick mention of our sponsors, Brave Browser, Linode Linux Virtual Machines, 4 Sigmatic Mushroom Coffee, and Rev Speech-to-Text Service.

Click the sponsor links to get a discount and to support this podcast.

As a side note, let me say that I've been learning a lot about real-world finance in the past few months.

To give you a bit of context, on the side, I've studied trading from an algorithmic trading perspective as a machine learning and a game theory problem off and on for a few years in undergrad and grad school.

I found the distributed complex system aspect of finance and economics in general fascinating.

But now I find even more fascinating the human side of the whole thing.

Ideas of greed, power, freedom, and truth.

Wall Street bets, Robin Hood, and the whole beautiful mess around this topic allows us to have great conversations about human nature and the systems that underlie the rise and fall of civilizations.

If you enjoy this thing, subscribe on YouTube, review it on Apple Podcast, follow on Spotify, support on Patreon, connect with me on Twitter at Lex Friedman.

And now, here's my conversation with Jason Kulakanis.

I have a million things to talk to you about, but we do happen to be living through what I would think of as a historic event in terms of its impact, in terms of almost philosophically thinking about the role of people and how they can fight power with this whole Wall Street bets and GameStop situation.

I was wondering, you've covered in your amazing All In podcast, You guys have been having fascinating battles over this whole situation.

I was wondering if you could tell maybe from your perspective as it's unrolling, the saga of Wall Street Bets and GameStop, What are some interesting insights that you have about this whole set of events?

In full disclosure, I was an angel investor in Robinhood before they launched.

And when I met the founder, Vlad, and his partner, you know, they pitched me at a bar, not too far from where we are right now in Palo Alto called Antonio's Nuthouse.

And my friend Adeo, it's a really good story, my friend Adeo had asked me to speak at his Founders Institute, which is kind of like an accelerator for people who are thinking about starting a company.

And so I gave a talk and then he said, hey, let's go to Antonio's Nuthouse and we'll meet Elon for a drink.

You hanging out with Elon at a crappy bar.

Yeah, I mean, it is the worst bar in the peninsula.

Like, just garbage on the floor, and like cheap beer and warm beer, and like you pick up your pint glass and be lipstick on it, it's just brutal.

Not your lipstick, you understand, somebody else's lipstick.

And so we're sitting there and Vlad walks up with his partner and he says, you're Jason Kalacanis.

He said, how do you know I have a startup?

And I was like, oh yeah, yeah, I know about that.

That's like you guys make algorithms and then try to beat the market, right?

I was like, so you're going to pitch me on a startup and you're going to sell your algorithm to other people and if it was so good, why wouldn't you just use it yourself and print money?

He's like, yeah, yeah, no, no, that's not our business.

Our business is we're going to create an app to get millennials to trade stocks." And he said, you do realize there's no retail investors anymore.

The dot-com crash plus the 2008 financial crisis eliminated any individual's belief in participating in the stock market.

He said, well, we're going to get these millennials to trade.

I said, the same ones who live in their mom's basements and take Uber and Lyft and are on their parents-

Have no money, got screwed and went 250K into debt for school and now can't get a job.

I'm like, okay, they have no interest in their future, but they're going to trade stocks.

I was like, how are you going to make money?

And I said, so your idea is to get a group of people who have no interest in saving for their future to trade, and your business model is free.

Because in almost all cases, the crazy outlandish ideas that nobody believes in are the ones that have the greatest returns.

I mean, Uber, I introduced to about 25 investors and 3 of us said yes.

So, a full 12% of the community who saw that deal decided to do it.

So, your sense about this idea of being good had to do with the fact that this guy was just crazy and ambitious and bold thinking, or was it that there was something here in allowing a much larger magnitude of people to be able to be investors?

Yeah, the way to do really well as an angel investor or just in technology or in life is to not say what could go wrong, but to say what could go right, and then to just imagine for a moment, if it does work, what would the world look like?

And so when Elon was investing in Tesla, and some other guys were running it, and he was trying to save the company.

It was almost positively not going to work, and he knew that.

But if it does work, What does the world look like?

And so that's really what you're looking for is not the chances of success, but if it does succeed, what would that look like?

And that's what the world needs more people doing.

And so when you looked at Robin Hood, It was like, well, if he does succeed, what would the world look like?

You have a generation who are so financially sophisticated that they know how to do puts and calls and shorts and research at a level that dominated the hedge fund industry.

These traders sitting there on a subreddit, in a Discord server, are able to do analysis and research and then act in unison to say, we're going to beat, in the Robin Hood sense, this group of sophisticated insiders who have more access and more access to capital, but we will figure out how to solve this problem.

It's like the Wikipedia, there's no way the Wikipedia would ever work, except it did.

You're like, how is this ever going to work?

You're not paying anybody, but it's built the largest corpus of an encyclopedia ever.

And then what we saw was this system and a lot of the systems in our society, whether it's the political system, the Constitution of the United States, education, higher education, which you're involved in, and then even the financial system, we have not stress tested it.

And we don't actually know all the edge cases and how it works.

So Trump was able to just really put this crazy stress test.

Are we going to break this 200-some-odd-year-old experiment?

And then we looked at the financial markets, and it turns out there were more people shorting the stock than shares were available.

And then I'm trying to uncover, where can I see a list of people who have shorted the stock?

And it's like, you can't, but we can tell you sort of how many every 2 weeks or maybe twice a week.

I was surprised that nobody knows the list of people who were shorted and you guys were trying to figure that out.

Yeah, there's no transparency on a lot of these systems.

And if you call to try to short a stock, it's almost like they'll tell you on the phone, let me see, I think I might know a guy who has shares to loan out.

So it's like, am I calling to try to find a 73 Mustang Grande in gold?

It's like, shouldn't this be on a ledger somewhere and be completely transparent?

And I think the investigations will make it super clear.

But of course, in a vacuum without information, there are so many investors in these startups that conflicts can start to appear.

And then you know how it is with people and conspiracy there is, the mind starts to wander.

And so in some cases, there is actually a conspiracy.

And then in other cases, people's mind will fill in like, oh my God, there's some grand conspiracy here.

I can tell you Robinhood's only goal is to get more people to trade stocks and to democratize it even more.

And they apparently were on the brink of seizing as an entity if they didn't get more money to cover all these trades.

I mean, they were on the brink and they raised 3 and a half billion dollars or something like that in a week.

Yeah, so in some sense, Robinhood enabled this very, like the magic of this distributed system of Wall Street bets, right?

You said Wikipedia, which is another, which is probably 1 of my favorite websites and 1 of my favorite examples of like a distributed system somehow coming together in a way, just like you said at that crappy bar, I would have guessed it would never work, but if it does work, it changes everything and it did.

And Robinhood in that same way probably enabled or was 1 of the major enablers of Wall Street Bets of giving power, like empowering young kids to learn about how this whole messy financial system works and take on the big elite centralized players.

Yes, and you know, it's very easy when these companies get big, 1 thing that's changed is the footprint of these startups and the velocity at which they grow.

So something like Airbnb is another perfect example of something that should really not work in practice, but it does.

Like I'm gonna rent my couch or my extra room to somebody like a serial killer, or I'm gonna stay in somebody's house like a serial killer's house.

And it's like, it really sounds scary, but it actually works.

And it has not destroyed the hotel business, it has added.

So the best startups induce a market to exist.

If you look at Uber or Airbnb, people replace their cars and Uber was not competing ultimately with taxis.

They were competing with car ownership, public transportation, walking, or just not going out.

And then you look at Airbnb, a lot of people who stay in an Airbnb would not be taking a trip to Kyoto, if not for the fact that they could get a $75 beautiful room with great reviews in Kyoto for 3 weeks.

It inspires people and it manifests a market because the product is so transcendent, right?

And I think that's 1 of the things that Robinhood did.

You can't learn how to do this options trading and puts and calls and all this sophistication stuff unless you actually do it.

It's just too hard to learn, except in practice.

If you wanna learn how to play poker or guitar or tennis or skiing, you can talk about it, you can watch YouTube videos, but at a certain point you gotta get on the mountain.

At a certain point you gotta put some chips in the pot and it's gonna be painful.

Like poker's gonna be painful, you're gonna lose a lot of money and that's why you should play at the small tables first and you know, even in trading, like you look at people who are doing this crazy trading in GameStop, a company that's worth maybe a couple of billion dollars, but certainly not tens of billions of dollars.

Of course, the people who are throwing their money in last are going to lose it.

And so it was a momentum play and they're betting against the hedge funds.

So I think it's good for people to learn and become financially literate and just always understand the concept of the risk of ruin.

The good news is for a young person, the risk of ruin might be like they lose $5,000 or something and then they have to build their stack back up.

But that's really the only thing I am concerned about is there are people who will play poker or blackjack or sports betting or whatever it is and lose control.

Just like there might be people who try alcohol and lose control, but we can't build a system based upon limiting the average person's behavior based upon somebody who can't control their ability to drink 2 glasses of wine instead of

So I think there were some of the hedge funds that were crying initially.

That may be some of the Wall Street Bets people who bought last would be crying.

And then eventually there's probably another set of hedge funds or even the Wall Street Bets mob, that army, some of them might've broke ranks and then shorted the stock.

So everybody has to be aware of what's happening in the game.

So if Wall Street Bets said, hey, let's squeeze these hedge funds because they have too much short interest, let's all buy the stock.

Then some of them might've said, okay, it's at 2 or $300, maybe I'll join the short movement now that they've covered.

And they could have shorted their double agents.

So people have to understand this stuff is gnarly and it's a free for all.

There's a kind of morality, like a big statement that Wall Street Bets made in terms of like the elites can't just push us around, they can't bully around.

But At the same time, they're also interested in making money.

You said that some of the people in the Wall Street Bets might have broken off and shorted the stock.

Are they more interested, there was an emergent morality that emerged and said like, we're not gonna put up with the centralized elites, but is that going to continue?

Are they going to fight the power structures that are bad for society?

Are they going to now like, I mean, are they ultimately going to introduce more chaos that's going to damage the economy and damage the world, or are they going to continue being the good guys and fighting the evils that manipulate the market?

You know, it really feels like the Dark Knight series of films where like some people just wanna see the world burn.

I think there is a contingent of people who just literally want to see chaos.

You know that contingent on some of these forums who just want to create chaos.

There's certainly that chaos contingent, but I think overall what the arc will show is a group of people getting massively educated.

There was like a three-year period where all of these failed entrepreneurs who I knew who couldn't build companies were then coming back to me after their companies has failed or after they gave up or couldn't clear a market raising money with the venture capital community and they were doing ICOs.

And I was like, this white paper with spelling errors in it that says you're going to destroy Airbnb because everybody's apartment's going to be on an immutable ledger.

Wouldn't that be better in a regular database that was private and not public?

Like, why does it need to be on immutable ledgers?

I'm like, not changing the database is a feature?

That's, that does not seem like a good feature.

They were like, well, just people are interested in ICOs.

And What it showed was there was a global appetite for risk.

This is 1 of the great things about the human spirit.

It is 1 of the great things about capitalism.

1 of the things that concerns me most about where we're at in society is the socialism, communism, entrepreneurship is bad, technology is bad, and polarization of wealth, and people getting rich is a bad thing.

When I grew up, I'm 50 now, but when I was a Gen Xer growing up, we kind of maybe too much idolized Bill Gates and people who were doing interesting things in the world, and we thought capitalism was a force for good.

I still believe capitalism is a force for good because when a group of people builds a product or service that changes the world and it gets globally distributed, whether it's Tesla or SpaceX or Google or Airbnb or Uber or Robinhood, you know, everybody gets to benefit from that product or service having to compete.

And if you look at the places where there's no competition, like public education or less, you know, you know, established, you know, colleges and stuff like that, less competition for accreditation degrees.

Like, things tend to get a little weird, don't they?

And people tend to be protected, and that's not good.

Does it mean that, You know, people shouldn't have global health care.

It doesn't mean that we shouldn't have a safety net.

But we need to keep capitalism vibrant, especially because China has now co-opted capitalism and created their own version of capitalism, which is communism with capitalism.

We still want to keep communism so we can take any of your gains at any time, but we'd like you to be entrepreneurial.

And then you have somebody like, you know, you know, the founder of Alibaba, Jack Ma, who disappears for a couple of weeks.

He kind of disappears for a couple of weeks and then he comes back and he's really sorry about the things he said and then he disappears again.

If China wins capitalism, This is gonna be an existential threat for humanity.

I mean, they are seriously focused and they are picking the winners.

It's a very weird system because it is in fact, I don't know what you call it, like communism and capitalism is such overloaded terms, but they do encourage entrepreneurship, but they, and they do a good job of it.

But then they're like, they're like the surveillance thing and they're controlling things in a way.

It's weird because it seems to work really well for them in the short term.

Yes, it's definitely got short-term benefits.

So the question is like, how that gets distorted and becomes worse and worse and worse, which it potentially might be.

And I think on the entrepreneurial spirit, which you have a podcast all centered around the entrepreneurial spirit, is 1 of the magical things that makes this country great.

I don't know if Money is deeply tied into that.

I do get bothered by people treating the word billionaire as if it's a bad word.

But in general, all the hard things, all the difficult things we're going through in this country it seems like the way out is going to be making the entrepreneur the hero of society, of letting that young kid with the big dream and the guts to take the big risks and build something totally new, giving them a chance and whatever that involves.

I don't think it's about taxes, I don't think it's about regulation, all that stuff.

It's about us and just public discourse saying that that kid, that guy, that girl, they're badasses.

We have to have people buy in to the fact that they have that opportunity.

And I think 1 of the problems in society is there's a group of people who actually don't believe that they can succeed or they don't believe even more perniciously that other people can.

And that's the group of people that I think are highly vocal, but a small group of people, which are generally people of incredible privilege, rich parents, white city dwellers, liberals.

They kind of look and say, poor people cannot change it a lot.

And they're battling in their minds to protect poor people.

But they have this very weird patriarchal kind of approach to it, which is they think that they're not capable of changing their lot in life.

And then once in a while I'll tweet something where I say, you know, it's really incredible that every piece of knowledge you could possibly want is now available for free on YouTube.

And every course from MIT and Harvard and Stanford is available on edX or Coursera.

And all that information is there freely available.

And then people will be like, yeah, but people don't have access to it.

And they're like, yeah, but they don't have internet.

And I'm like, Here's the chart of internet penetration in America.

And they're like, well, poor people don't have internet.

Find me any downtrodden person without a smartphone, with a high-speed connection, that capitalism provided for $12 a month or $15 a month.

And we have it so well in this country, and there's so much opportunity, but people don't believe it.

See, the average American still watches 4 or 5 hours of television a day.

And often I meet people and they're like, I need a technical co-founder, but all I need is a million dollars.

And I'm like, okay, well, what is your skill?

Well, as my friend, Sam Harris, I think your friend as well, says, like, everybody has like a million ideas an hour.

Like, you don't really get credit for those.

Even when you're asleep, your idea is spewing ideas, like 0 credit for your ideas.

to believe that you yourself can be the core of that execution.

And no matter what your circumstances are, I mean, we could talk about structural racism and all those kinds of things that push things down.

But from the individual perspective, when you just are coaching or giving advice to an individual, you can literally change the world.

I mean, Wall Street Bets is an indication of that in the financial space that you yourself can have, can change the world.

Still the best country in the world, right?

I mean, it still is amazing the opportunity provided to people, all this educational experiences online.

And the ability, what I tell young people who are looking for advice, I say, you know, the skill you need to refine is the ability to learn new skills.

Like if you become good at learning a new skill, and Tim Ferriss, a friend of mine, has really pioneered this, like, he can get to 60 or 70% of the knowledge in a skill in some incredibly short period of time.

Now, I'm not saying he's going to become a virtuoso drummer or a great basketball player, but Tim and I were on vacation together, like a group vacation in Italy, and there was a basketball court.

And I was like, okay, come on, I'll teach you.

He tried to dribble a basketball and do a layup, and it looked like he had a blindfold on.

You've never seen something less elegant than Tim Ferris doing a layup in basketball.

And then he watched me do it 3 or 4 times, and I watched him study me.

And listen, I've been playing basketball in Brooklyn since I was a kid.

I got a couple moves, and he was just taking notes and taking notes and taking notes.

And by the end of a couple of hours of doing this.

I could just watch him checking his form and figuring it out.

And what I tell people is like, I'm like, did you watch Game of Thrones?

How about you don't watch the next 2, and you put that 400 hours into learning how to be a graphic designer, a UX person, a developer, whatever it is, and learn how to add skills.

I was a kid from Brooklyn, went to school at night, but I was very quick to get to maybe 50% of the knowledge base of graphic design or being a writer or being a sales executive, whatever it was, a developer even.

And I was just good enough to not have people be able to bullshit me when I hired them.

When you know enough that people can't snow you, that's a really good 1.

And look at yourself, you figured out how to set up an entire podcast, people don't know this, but you don't have a team around you.

I have a team of like 5, 6 people working on my podcast.

see, even knowing enough about to set this up, you would then be able to hire a team.

And you'll be able to call them on their bullshit if they're not doing a good job.

And I don't know that much about this whole thing, but I know enough to be able to then see who knows their stuff or not.

And the process of learning how to learn is essential there, because I did martial arts, jiu-jitsu and so on, and it's so funny to watch.

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Jason Calacanis: Startups, Angel Investing, Capitalism, and Friendship | Lex Fridman Podcast #161