Alex Karp and Stan Druckenmiller
Some notes from the discussion between Palantir CEO Alex Karp and Investor Stan Druckenmiller on "Global Instability and Software’s Opportunity"
We took some notes from the discussion between Alex and Stan and here are the most important quotes:
“Hello Darkness my old Friend”:
[00:27:06] Druckenmiller: First of all, full disclosure I've had a bearish bias for 45 years, and I've had to work around it. I like darkness.
[00:07:25] Druckenmiller: One of the gentlemen I respect the most with regard to Russia and Ukraine basically predicted everything. But he told me that he thinks, barring some intervening factors, Ukraine could very well win this war next spring. Let me ask you this. Does that present a scarier world? If that is going to be correct in Putin's mind, does the collapse of Russia present a scarier world even than we have right now? How is Putin going to let that happen and get out of the situation alive? And if he's not gonna get out of it? What's he gonna do?”
[00:08:25] Alex Karp: One of the things that we struggle with in America and the west is zero-sum thinking. So if you look toward China and Russia, it's tough for us to understand the decision-making will be because we don't make zero-sum decisions, especially in lead institutions. In Russia and China, you have very zero-sum thinking. If you lose a war in Russia, you will lose your life. You will not be the leader of the country after you've lost whereas if you go to elite schools and fail, you get your next job and a raise. So it's not part of how we see the world. If we want to avoid a very dangerous situation, we have to have a way to do both. I like ‘and’ clauses instead of ‘or”. We should fight to win and engage in dialogues not ‘or’. The fighting to win part is their heroism, software, and light hardware. And then, what does it mean to win? What does it mean for the world? I, personally, am not an interventionist. I want to win, but I don't want to change Russia into a different society. I just want it to be clear that there will be pushback if you cross borders and cross norms. You have the problem of who will conduct the dialogue on the American side. There are a lot of tricky questions. But, unfortunately, you usually have two factions: those who don't want to fight to win and want dialogue. And I think you need both.
[00:09:58] Druckenmiller: Xi Jinping decided he was going be Putin's BFF like two weeks before Putin made what looks like a fatal error. Given the success of our intelligence there and what's going on in that war, do you think his calculus of behaving differently than he might otherwise in his zone sphere has changed or been delayed?
[00:10:40] Alex:...The weird thing about in the China context, at least from my perspective, is you're dealing with one person; it's very hard to know what his calculus is…if I had to make a bet in the spirit, I would reasonably believe the decision would be to go long on being aggressive towards adversaries and not to go short on it. And simply because it's his calculus and not the calculus of other variables. And I think calculus has a short, limited amount of time to live, and I'm going to push really.
On the macro environment:
[00:12:42] Druckenmiller: For those who don't know, I make a living supposedly forecasting changes in the economic environment and in the financial markets. With the caveat that I've been doing this for 45 years and between the pandemic and the war and the crazy policy response in the United States and worldwide, this is the hardest environment I've ever encountered to try and have any confidence in a forecast 6 to 12 months ahead. There are brewing issues when you get the price of oil doing what it's doing historically and when you get interest rates doing what they're doing historically. It becomes a global phenomenon with tightening liquidity, and you've got war. The odds of a global recession and a change in the macroeconomy are about as high and as severe as I've seen them in decades.
On the financial bubble that has been:
[00:27:22] Druckenmiller: First of all, full disclosure I've had a bearish bias for 45 years, and I've had to work around it. I like darkness. So when I look back at the bull market in financial assets since 1982, and particularly the last 10 years went into hyperdrive, all the factors that created that not only have stopped, they've reversed. We had a government back then with a new president, who said, government is not the solution. They're the problem. We had a guy who wanted to deregulate, as opposed to regulate. We had a chairman of the Federal Reserve named Paul Volcker, a little different than Jerome Powell. Maybe most importantly, we were right on the cusp of globalization that led to a lot of productivity, disinflation. The response after the global financial crisis was zero rates, and a lot of money printing, quantitative easing, that created an asset bubble in everything. Now they're like reformed smokers! They've gone from wanting to print a bunch of money to like driving a Porsche 200 at 200 miles an hour, like not only taking the foot off the gas, just slamming the brakes on.
Flat Markets Ahead:
[00:28:54] Druckenmiller: So there's a high probability in my mind that the market at best will be flat for ten years, sort of like the 1966-1982 time period, but the nice thing is there were companies that did very well in that environment back then. That's when Apple computer was founded, and Home Depot was founded, coal and energy companies and chemicals made a lot of money in the 70s.
Learning from Venture Capital:
[00:34:40] Druckenmiller: One of the Cardinal rules I learned early on in Venture capital is to look where the kids are going. And I think I bought your stock in ‘08, ‘09, and I checked, you guys were a magnet for talent. And then things went up and down some, and Alex, whenever I would talk to you when you looked the most enthusiastic and happy is when I ask you about the culture at Palantir and you started talking about Palantiarians.
Learning from Steve Jobs:
[00:41:15] Druckenmiller: So there was a guy named Steve jobs and he broke the number one rule of businesses. He made products, not that the customer was demanding. He made this product and assumed if I make it, they will come. I get that sense that you guys do that here at Palantir too. And I know that what a gamechanger Foundry was for you.
On Outlook for China:
[00:38:09] Druckenmiller: I'll never forget my partner who interviewed you a year or two ago, said to me, during the Trump reign, he said, “I don't think people realize this will be the peak of US-China relations in the next 25 years. They're not gonna do anything but get worse.” And it sounded so ridiculous at the time it was, three or four years ago and it looks like that's we're on that track.
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