Would you take a billion from China?
Billionaires grapple with an NBA question
Continued from yesterday’s post, marking the open of the Olympics in Beijing, called The Sports World Whiffs on China.
BY HENRY ABBOTT
You can see why the hosts of All-In have made a lot of money. They are each plainly brilliant—by some definition. They are all practiced in the multivariate analysis of deciphering, among all those markets, moats, and entrepreneurs, which startup is most promising. Calacanis made a fortune with an early investment in Uber. Sacks is kind of a Silicon Valley legend. When the topic shifts from human rights to potential investments, the quietest member of the group, David Friedberg, details, off-the-cuff, the disease mechanism of multiple sclerosis.
But when it comes to the depravity of the rich and powerful, they mostly insist the topic is beyond assessment. Is incarcerating a million people bad? They find this hard to answer. We lock up more than that in the United States, Warriors investor Chamath Palihapitiya notes, and disproportionately Black and brown men. “I don’t think that I have the moral absolutism to judge China,” he explains.
Calacanis pushes back. He points out that there are bad actors, and they want to do business with venture capitalists on this podcast. “I’m talking specifically about entrepreneurs, capital allocators,” says Calacanis. “That doesn’t mean we have to engage in business and building their chip stack.”
Palihapitiya will have none of it. “If you want the strongly worded press release, you just got it from Biden.”
“I want to see us talk about it,” presses Calacanis, “the three of you.”
Palihapitiya addresses American white men, saying “when you guys clean up the inside we can talk about the outside.”
Calicanis says Palihapitiya should be talking about human rights, and that’s when Palihapitiya says “nope not my problem.”
To which Calacanis replies “not my problem is the problem.”
Autocrats love it when billionaires suggest there’s no meaningful difference between right and wrong. When Hitler needed America to stay out of the war so the Nazis could take Great Britain, he had a secret agent in New York meet with titans of business. He offered them business deals in the new regime. In exchange he needed them to fuzz up America’s case for war. It almost worked, until FDR found moral clarity.
Calacanis notes that there are non-profits who approach human rights concerns with data and sober analysis, quantifying how many people are jailed, tortured, sexually assaulted, and the like. Palihapitiya doubts such things can be well measured: “these quantifiable scores,” he says, “are crazy.”
Before his Uyghur comments, the central crisis of Palihapitiya’s career was the period of 2018 when he evidently got a new Italian girlfriend, started no-showing for important meetings, inspired a mass desertion of top talent, and alarmed his investors. Axios reported he thought he could weather the storm by “relying on algorithms to do much of the deal-sourcing and due diligence work.”
This is a man who believes in the power of data to handle challenges once seen as too complex even for humans. He has the brain to design the system to quantify super complex things. These are the people who walk around with disease mechanisms in their heads. Of course they could lay a little clever data around the issue of human suffering and see if America’s or China’s or any other country’s systemic problems rated high enough to matter to Silicon Valley podcasters.
First, though, they’d have to want to.
David Sacks once made news by throwing a multimillion-dollar Let Them Eat Cake-themed birthday party for himself, with Snoop Dogg on the mic. All-In has a poker-themed intro. The undertow of every comment is money. They have made lots. It’s a celebration of winning. Calacanis’s claim to fame is the hundreds of millions he made investing in Uber, a company in the vanguard of creating a new kind of worker, the gig worker, to whom the company commits no minimum wage, no benefits, no long-term anything. Workers without employment. So it’s a weird set of hosts to shop for someone to speak for the little people, for victims, for rights. But Calacanis takes it up, and in establishing his bona fides, discloses that he once worked for Amnesty International.
Evidently, this is a surprise. Some minutes later Sacks smiles, and throws his hands in the air. “My mind’s still blown that you actually worked for Amnesty International!” Sacks treats it as cute. And it touches off a conversation at the heart of the NBA in the autocracy era: Whose money is it OK to take?
Silicon Valley can be insular. Less than four one thousandths of one percent of the globe’s population lives there. Highly successful investors are a tiny sliver of that. And within that group, there’s an even smaller subset who helped to found Paypal, known as the “Paypal Mafia.” (The group includes Elon Musk and Reid Hoffman.) Within that handful of men, two key members are white South Africans who once started a movement at Stanford savaging liberals: All-In co-host David Sacks and his neighbor, noted Trump supporter, and Deadspin-destroyer, Peter Thiel. The L.A. Times’ Sam Dean wrote about Sacks and Thiel’s writing and editing at the Stanford Review:
In the publication’s “Rape Issue,” Sacks wrote in defense of a Stanford senior accused of rape, opining that the victim had not resisted and that statutory rape itself was a phony crime, “a moral directive left on the books by pre-sexual revolution crustaceans.” He and Thiel also found a cause celebre in Keith Rabois, a Stanford law student who had stood outside the home of a lecturer and screamed a homophobic slur followed by “Hope you die of AIDS!”
Rabois, who went on to work at PayPal and is now a general partner at Founders Fund, the VC firm that Thiel co-founded in 2005, did not face any disciplinary consequences, but he was publicly reprimanded by school officials. Sacks and Thiel framed the school’s response to Rabois as an outrageous example of censorship, and they included the episode and their takes on campus rape in a book they co-wrote after Sacks’ graduation in 1994, “The Diversity Myth: Multiculturalism and Political Intolerance on Campus.”
Rabois, Thiel, and Sacks are neighbors, according to property records Dean researched, in the islands off Miami Beach.
Max Chafkin’s recent book on Thiel illuminates the thinking that defined Paypal. It was overtly anti-government, a forerunner of cryptocurrency, a way to move money without oversight, “a Swiss bank in your pocket.” One passage has lessons from Thiel’s own book:
The book argues, among other things, that founders are godlike, that monarchies are more efficient than democracies, and that cults are a better organizational model than management consultancies. More than anything, it celebrates rule-breaking. Thiel bragged that of PayPal’s six founders, four had built bombs in high school.
Chafkin also writes:
[Thiel] told classmates that concern about South African apartheid, perhaps the single buzziest issue on American campuses, was overblown. “It works,” he told Maxwell. (Thiel’s spokesman has said that Thiel doesn’t remember being asked his views on apartheid and never supported it.)
In this crew, compassion has been in the crosshairs for decades. The New Yorker’s Noam Cohen describes how the work of Thiel, Sacks, and others at Stanford fostered a sense of white outrage that rattled at least one Black student:
William Brown, who ended up leaving Stanford for Howard University Medical School and is now the head of vascular surgery at the Naval Medical Center in Portsmouth, Virginia, told me recently that he wishes his fellow computer scientists had heeded his warnings. “Compassion and equity and humanity matters more than your right to say whatever comes out of your mouth,” he said. “That environment sort of sparked the attitude that yes, if you came from a refined enough background, you could say whatever you wanted. Somehow the First Amendment was unlimited and there was no accountability.” The problem, Brown added, remains all too pervasive. “I see that attitude today,” he said. “It doesn’t matter whether it’s Stanford or the alt-right.”
Jason Calacanis wants to know if compassion is relevant to investment strategy at all. David Sacks wants to know if Calacanis would take money from one of the biggest investors in the world, Saudi Arabia’s Prince Alwaleed. Friedberg asks the same question about “a Chinese billionaire.”
Calacanis says he wouldn’t take money from an authoritarian regime.
Sacks says “they’re not an authoritarian regime.” Meaning the billionaires.
“I think it’s a legitimate position for you to say you’re not going to take money from dictators,” explains Sacks. “But to then say that any family office from any individual who was born in that country, you’re not going to take their money either? Unless they’re willing to risk their lives by denouncing their own government to the extent that you like?”
This brings us to a very real NBA conundrum.
Whose money would you reject? Once upon a time Mikhail Prokhorov didn’t make the NBA cut. Then the markets crashed, cash became scarce, and next thing you know Bruce Ratner was on a plane to Moscow to schmooze his deep-pocketed new friend. A U.S. congressperson or two protested about Prokhorov’s unsavory business ties, David Stern savaged them in public for daring to question his judgment.
There’s every reason to wonder if Prokhorov was Putin’s stooge. Maybe Putin, through Prokhorov, got to de facto invest in the NBA and purchase Stern’s protection in the process. I went to PutinCon, and asked one of Putin’s prominent experts and critics about that. Vladimir Kara-Murza said “a lot of things exist in the gray. But if it’s black and white, and Putin chooses white, so does Prokhorov choose white.” Later another expert explained to me that Putin didn’t need money because he had something much more useful: power. Any oligarch asset was Putin’s if he wanted it. When he needed stadiums built to host the Sochi Olympics, he simply told oligarchs to build them. Their power is his power.
Could Nets billionaire Joe Tsai really keep his fortune if he fell out of line with the Chinese government? If not, who’s ultimately in charge of his assets, including the Nets? According to experts, Tsai’s public position hewed closely to the Chinese Communist Party position when Beijing and the NBA had a falling out. Are billionaires who are under authoritarian rule truly free to undermine authority for long?
Prince Alwaleed, Sacks’ preferred example, is an interesting case. Yes, he is one of the richest and most successful investors in the world, with six percent of Citibank and seven percent of Newscorp among his holdings. But the Economist raised questions about the source of his wealth as far back as 1999, suggesting he may be a front man for other Saudi investors. And then in 2018, he was one of more than 300 royals detained by Saudi Arabia’s new leadership, and he was reportedly forced to hand over an unspecified but enormous portion of his wealth. He has evidently been unable to travel since.
In other words, that money may or may not have been his to begin with, and may or may not be his now. Authoritarian rulers routinely use friends and oligarchs to hold their money. For a long time Prince Alwaleed was the largest outside investor in Apple—until he sold his stake in 2005. Whatever he made from that could be, after his incarceration, in the hands of the man who reportedly ordered the killing of Jamal Khashoggi. Take money from opaque sources, or autocratic ones, and there could be evil in your chip stack. The show’s called All-In.
You might be thinking that the killing of Khashoggi tells us little or nothing about Prince Alwaleed. But it tells us plenty about Mohammed bin Salman, or MBS, who seized control of Saudi Arabia, and likely a good chunk of Alwaleed’s fortune. MBS employs an American-trained team that travels with a bone saw. There’s audio of Khashoggi’s torture, and of his body being sawed up, if you care to listen.
There are many different moral systems on planet earth, I am not aware of a single one that condones building a chip stack, as it were, by sawing up real live truth-telling humans. (A quick googling of the Bible: “Love one another with brotherly affection. Outdo one another in showing honor,” and “You shall not murder; and whoever murders will be liable to judgment.”)
35 minutes into the All-In Podcast, Chamath Palihapitiya, a reputable man of Silicon Valley, raises a right index finger. “Saudi Arabia probably just did the one wrong thing. Every country engages in extrajudicial killings. They just got caught.”
Can everyone murder then? Or is this a special loophole for huge chip stacks? Do the vicious get a pass if they’re rich enough? (What was that about unfairness in the justice system?) Can any billionaire lose the trust of Silicon Valley’s titans who host podcasts and invest in NBA teams?
The Paypal Mafia, which includes Reid Hoffman, has crossed paths with many bad people.
Calacanis points out there are venture capitalists who won’t take money from Saudi Arabia. Palihapitiya and Sacks open a torrent of whataboutism: Abu Ghraib, Afghanistan, Iran Contra, Libya … America has done all the things Saudi Arabia has been accused of doing, they say.
The PayPal Mafia might lead the world in investing in technology to snoop on regular people—Sacks owns a chunk of Palantir, Thiel invested in Clearview A.I.—and yet Sacks raises “surveillance” as one of the bad things the U.S. does that makes it hard to criticize China.
Sacks also purports to be outraged that the U.S. did business with Afghan warlords who were reportedly raping little boys. Is he saying … the U.S. should apply a moral filter when it picks business partners? If so, Sacks and Palihapitiya have lost this hand.
Or maybe he’s saying there are so many wrongs it’s impossible to find business partners who aren’t creepy. All-In is not my favorite show, but it’s at least honest to have microphones on for powerbroker conversations that usually happen in the back room.
At one point, Palihapitiya is grilling Calacanis about whether he’d take money from a Chinese billionaire or Saudi royal. “Would you morally disqualify them? Would you disqualify them on moral grounds?” he asks.
Before Calacanis can answer, Sacks jumps in to point out “that’s not the way to make allies, J-Cal.” Like the men who lead the Olympics, the NBA, and Apollo Global, the men of All-In need confederates. In other words: no judgment in the back room. Are powerbrokers out of hand in consolidating power? Powerbrokers say no.
Thank you for reading TrueHoop.
Remarkable articles, Henry. Adam Smith wrote that a free economy and a country’s prosperity depend on people acting ethically. And the state has to act ethically, too. Easy question, why are these fascist arrangements between state actors and businesspeople occurring?
What an incredible read. Thanks Henry.