The Major Problems Facing the World | Chamath Palihapitiya on Invest Like the Best

 Check Out the Invest Like The Best Podcast Episode Page & Show Notes

Key Takeaways

  • Chamath Palihapitiya sees inequality as the biggest risk to democracy
    • His solution? Teach people the importance of saving and investing 
      • “I think the key to peace and prosperity today…is to close the inequality gap and to close the inequality gap is to show people everyday normal people, how they can earn and save and invest and be a part of capital, not just be a part of labor.” – Chamath Palihapitiya
  • The 3 biggest issues Chamath is trying to fix: 
    • 1) Inequality
      • Solution: Help people become part of the capital class by having the government invest $2,000 into the market when they’re born
    • 2) Climate change
      • Solution: Create environmental security so people have access to water and a plant-based diet
    • 3) Education
      • Solution: Instead of having students rack up $120,000-250,000 in student loans and then graduating with no meaningful chance of employment, a better alternative to student debt would be an ISA (income share agreement) 
  • Chamath shares his one-page thesis on his investments to show people that being smart doesn’t always require complexity and to give retail investors a chance to invest alongside him 
  •  The biggest reason why Chamath loves about SPACs is that it gives folks who can do the diligence themselves, the chance to get into an IPO book which they otherwise would never get the opportunity for
    • “It is the single most powerful way to allow normal, ordinary folks to cross the chasm between labor and capital’ – Chamath Palihapitiya
  • Things Chamath would change if he were president:
    • Introduce a carbon tax
    • Cut personal taxes
    • Raise corporate tax
    • Create massive incentives to rebuild an entire economy that’s focused on climate change, technology, and biotechnology

Intro

Chamath’s Early Years

  • Chamath’s first job was working at Burger King for $4.55 an hour
    • He saw that the manager at Burger King had a University of Waterloo jacket which made Chamath realize that there’s no guarantee of success by going to school
  • Chamath later got a job at Newbridge Networks, which was run by billionaire entrepreneur Terry Matthews
    • Chamath was now making $10 an hour
      • Because Chamath’s family was tight on money, he had to quickly learn about personal finance, budgeting, and paying bills 
  • Chamath’s first job out of college was being a derivatives trader
    • He owed $27,000 in student loans but because he picked some good stocks, his boss wrote Chamath a check to pay it off

Personal Finance & Inequality Problems

  • Chamath’s thoughts on the lack of personal finance education:
    • “Being poor is a systemic condition in North America. It is a disease that’s equivalent to diabetes and heart disease or depression or any other kind of mental illness, except that it’s structural and institutionalized. It’s not something that’s wrong with your physiology. Poverty is just something that’s conditioned into people in the way that society works in a Western.”Chamath Palihapitiya
  • Chamath sees inequality as the biggest risk to democracy
    • His solution? Teach people about the importance of saving and investing 
      • “I think the key to peace and prosperity today…is to close the inequality gap and to close the inequality gap is to show people everyday normal people, how they can earn and save and invest and be a part of capital, not just be a part of labor.” – Chamath Palihapitiya
  • There’s a big difference between labor and capital:
    • Labor is when you get paid for the work you do
    • Capital is when you own a piece of a business and get paid as it thrives
  • Chamath is a believer in UBI (universal basic income) because he believes individuals can spend money better than the government
    • He would also like to see a birth dividend: The government invests $2,000 for you when you’re born and puts it into the market and you can’t access it till you’re 65

Biggest Issues of Our Time

  • The 3 biggest issues Chamath is trying to fix: 
    • 1) Inequality
      • Solution: Help people become part of the capital class by having the government invest $2,000 into the market when they’re born
    • 2) Climate change
      • Solution: Create environmental security so people have access to water and a plant-based diet
    • 3) Education
      • Solution: Instead of having students rack up $120,000-250,000 in student loans and then graduating with no meaningful chance of employment, a better alternative to student debt would be an ISA (income share agreement) 

Social Capital

  • Chamath likes investing on the behalf of other people because it keeps him accountable and enjoys building wealth for others
  • How did Chamath get better at investing? He put in the reps. 
    • “I feel like a vet, like a veteran baseball player or a veteran golfer. You just learn after infinite reps, how to hit the shot or how to see the specific pitch come out of the pitcher’s hand.” – Chamath Palihapitiya
  • Investing is a very long term game. You won’t know who the true winning investments are for 10-20 years.
  • Chamath’s current areas of investment: eCommerce, deep tech, healthcare, biotech, fintech, and climate change
  • Chamath shares his one-page thesis on his investments to show people that being smart doesn’t always require complexity and to give retail investors a chance to invest alongside him 

Why Chamath Loves SPACs

  • The biggest reason why Chamath loves about SPACs is that it gives folks who can do the diligence themselves, the chance to get into an IPO book which they otherwise would never get the opportunity for
    • “It is the single most powerful way to allow normal, ordinary folks to cross the chasm between labor and capital’ – Chamath Palihapitiya
      • Chamath loves the David versus Goliath concept of everyday people being able to compete in the markets with hedge funds or huge investors

Solving Climate Change

  • Solving climate change depends on 2 inputs:
    • 1) Minerals and resources
      • These are things like lithium, nickel, cobalt, manganese, aluminum, copper. They go into permanent magnets that are used in electric motors and batteries.
    • 2) Next-generation forms of material science
      • These are things like polymers and ceramics that will interface with directly or indirectly for the end stage of carbon.
  • There’s a lot of room for improvement in extracting minerals:
    • “There’s a lot of things that we can do to more efficiently and more thoughtfully extract what we need from the environment without completely screwing up the environment.” – Chamath Palihapitiya
  • A few of Chamath’s investments into fighting climate change:
    • MP Materials
    • Desktop Metal
    • Sunlight Financial
    • Proterra

We Need More US Manufacturing

  • The US is overreliant on China and that needs to change:
    • “The reality is whether you like it or not, and whether it’s politically correct or not to say it, we need to completely dismantle the stranglehold that China has on US GDP.” – Chamath Palihapitiya
      • The US government needs to create credits and tax offsets to encourage more manufacturing in America
        • More US manufacturing would also lead to more middle-class jobs 

More Liquidity Is Needed

  • The biggest issue with early-stage capital markets is liquidity
    • “Early-stage capital markets act like a cartel. And the way that this cartel works is that you have venture capital firms that you have to go to.” – Chamath Palihapitiya
      • Even companies like SpaceX and Tesla had a hard time getting funding
        • Chamath would like to make the early-stage capital markets more transparent and accessible to anybody 

Healthcare Needs Fixing

  • Chamath would like to see a state-sponsored alternative to healthcare
    • “I  think it’s ludicrous that the richest country in the world doesn’t guarantee every single citizen and permanent residents of its country guaranteed healthcare.”  – Chamath Palihapitiya
  • Over the past 20 years, there’s been a decaying quality of life and life expectancy as healthcare costs have gone up
    • Chamath’s solution? Have 3-4 competitive solutions in the market at all times, including a government alternative, where market forces drive performance

Additional Notes

  • Chamath predicts Amazon will get split up into retail and Amazon Web Services
  • Things Chamath would change if he were president:
    • Introduce a carbon tax
    • Cut personal taxes
    • Raise corporate tax
    • Create massive incentives to rebuild an entire economy that’s focused on climate change, technology, and biotechnology
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Notes By Alex Wiec

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