E101: Ye acquires Parler, Snap drops 30%, macro outlook, VC metrics, valuing stocks & more

Over the coming years, social-media-style 'town square' platforms (e.g., Twitter, Facebook, YouTube) will continue to face viable alternative competitors (such as Parler, Rumble, etc.), demonstrating that no single company will maintain an unchallenged monopoly in this category.

“it's really clear. I think it's a really clear, supporting fact that there are going to be alternatives and that these what we thought were monopolies and what kind of became digital town squares and almost infrastructure are really just application layers. They're editorialized and there are going to be competitors.” View on YouTube

If interest rates stay roughly in the 3–5% range over the next 4–5 years (from late 2022), IPO candidates with aggressive founder-control structures (e.g., extreme supervoting, no effective shareholder rights) will face meaningful resistance from public-market investors and bankers, making it significantly harder for such governance overreach to get done in IPOs.

“that dog doesn't hunt when rates are at 4 or 5%. I don't care who you think you are, but when you try to go public in over the next 4 or 5 years, if rates are sustained, you know, three, 4 or 5%, that will be the check on all of these people's overreach, because you will have, you know, liquid alternatives that on a risk adjusted basis, seem better. And when rates are zero and everybody was forced to own tech, we all gave up our standards.” View on YouTube

Over the next several years, Snap Inc. will suffer sustained investor flight: its shareholder base will shrink and its stock will trade as an out-of-favor, thinly owned "refugee" in the public markets due to perceived poor governance and lack of influence for outside shareholders.

“so you know, snap will be an example of where investors are going to abandon that company because because it's just there's no point. There's no governance. There's no ability to have a conversation. It's in the too hard bucket, so people will just leave it. It'll be, uh, stranded and it'll be a refugee in the public markets.” View on YouTube

Within a few years, Meta (Facebook) will adopt the same cost-discipline and capital-return playbook as Microsoft, Google, and Apple (e.g., meaningful cost cuts, higher margins, and shareholder-friendly capital allocation), and its business and stock performance will converge toward the "mean" of those large-cap tech peers.

“I think meta will be fine eventually, because I think that they will revert to the mean. And the mean is Microsoft, Google and Apple. And we already know what that playbook looks like. So I think what Brad predicts is more likely than unlikely.” View on YouTube

From roughly late 2022 through about two years thereafter, public tech and growth companies will experience an extended "ringing out" period (no quick V-shaped recovery), characterized by continued valuation and business-model adjustment without a rapid, Fed-driven rebound.

“the wringing out of the system of that excess, that grift, that stupidity, that's going to be good for the fundamentals of these business. But the transition from, you know, that low rate environment to the high rate environment, it's dislocating for investors, it's dislocating for management at these companies. And it's going to be this is not, you know, a six month phenomenon. We're going to have two years of ringing out, right? Because there's no bailout here by the fed. There's no V-shaped recovery for these companies.” View on YouTube

By the end of this roughly two-year adjustment period following the 2022 rate shock, many tech companies will exhibit stronger underlying fundamentals (higher-quality margins, more disciplined cost structures) as a result of shedding the excesses of the zero-interest-rate era.

“So the wringing out of the system of that excess, that grift, that stupidity, that's going to be good for the fundamentals of these business.” View on YouTube

Absent a new, severe negative shock, S&P 500 earnings per share will not fall from about 225 to 200 in the near term (the next several quarters from Q3 2022); instead, aggregate earnings will at least remain roughly flat to modestly up year-over-year through Q1 2023.

“to go from 225 down to 200. We can't just be a slowing of the rate of growth of earnings. You have to reverse course entirely. So we have to see something we're not seeing yet.” View on YouTube

From late 2022 forward, after the large drawdowns already seen, broad equity markets (especially tech/growth) are unlikely to experience another massive, highly asymmetric leg down driven purely by valuation/rate repricing; instead, expected returns are roughly neutral to modestly positive from these levels, barring a new major shock.

“as I sit here today, yes, we're going to have harder times ahead economically, but it feels to me like a lot of it is priced in. I don't think we have huge asymmetry and skew to the downside. I think that's like fighting the last battle. It's not to say in this distribution of probabilities one of those events can occur. But from my vantage, when stocks the average stock down 20%, stocks like meta down 50 to 60%, a lot of stocks down 70, 80, 90. That doesn't seem like the time to call the Big Short. That seems like a time to be like neutral to positive.” View on YouTube

Over the next few years (starting in 2022), publicly traded small- and mid-cap companies across sectors (SaaS, consumer, B2C, hardware, etc.) that cannot demonstrate a credible path to positive earnings and cash generation will see their stocks severely punished and will trade at very depressed valuations ('end up in the shitter').

“what a lot of people are watching, is how many of the small and mid-cap guys can actually do that, and those that can't will. It will become pretty evident pretty fast, and they're going to end up in the shitter.” View on YouTube

As venture funds raised in vintages roughly 2011–2018 mature and fully distribute capital over the coming years, their ultimate cash-on-cash returns (DPI) for top-quartile funds will revert toward the long-term industry mean shown by the orange line, implying that there will be on the order of hundreds of billions of dollars of valuation markdowns across LP and GP venture portfolios from their peak reported TVPI marks.

“My hunch is that by the time the cash is actually distributed, the returns are going to revert to that orange line mean, which means there are hundreds of billions of dollars in markdowns Down sitting in LPs and GPS portfolios that are likely to come because nobody really thinks that the deal is done in 15, 16, 17, 18 are going to be that far above the mean return.” View on YouTube

Total capital managed in venture funds is near its cyclical peak as of 2022 and will generally decline (rather than grow) over the subsequent decade (approximately 2022–2032).

“I think ultimately this market is probably going to end up being a multi-decade cycle of capital in and capital out. We're probably at peak capital being managed in venture funds right now, and it'll likely decline for the next decade.” View on YouTube

At some point within roughly the next 15–20 years from 2022, the top marginal federal income tax rate on the wealthiest Americans will exceed 60%.

“I don't see a world where we don't have over 60% tax rates on the wealthiest people in this country at a federal level.” View on YouTube

For the United States to maintain economic stability and growth over the next 15–20 years (roughly through 2040), federal tax rates on high earners will be increased to levels that, as of 2022, would be considered exorbitantly high (significantly above contemporary rates).

“I don't see how the United States continues to thrive over the next 15 to 20 years. Without tax rates that will today seem exorbitant.” View on YouTube

At some point in the future (beyond 2022), US federal debt-to-GDP will surpass 200% and later 300%, without causing systemic collapse of the US economy or government functioning.

“We are in a debt spiral. That is a feature, not a bug, of how democratic societies work... The first time the United States went past 100%, we thought it was the end of the world. It turned out it wasn't. We'll will eventually go past 200... Then we'll get to 300%. We'll keep moving forward.” View on YouTube

Within 10–15 years from 2022 (by roughly 2032–2037), the majority of retail milk sold in stores will be produced via biotechnological methods (e.g., precision fermentation) and will be compositionally identical to conventional cow’s milk in protein composition.

“In the next 10 to 15 years. Most of the milk you buy at the store will be identical to cow's milk. Same protein composition.” View on YouTube

Biotechnological methods such as precision fermentation will become the primary means of producing animal proteins for human consumption in the future, displacing traditional livestock-based production as the dominant source.

“Precision fermentation is the future of making animal proteins. And it is how we're going to.” View on YouTube