The coronavirus pandemic is a calamity across so many spheres. In a moment when it’s hard to know what to hope for, perhaps the greatest case for optimism is that technology can make the problem manageable in the months ahead. What that process might look like, and what the world will be like afterward, are questions that venture capitalist and Golden State Warriors co-owner Chamath Palihapitiya has spent a lot of time trying to answer lately. That has included thinking about the technological, political, and economic implications of the pandemic on his new podcast, All In.
Palihapitiya came to prominence in Silicon Valley as an early executive at Facebook. He made headlines a decade later when he said that he didn’t let his own kids use screens, and that he felt “tremendous guilt” about his role in building a social-media platform that was “destroying how society works.” He is now, as CEO of his own venture firm Social Capital, predicting all kinds of reckonings in the years ahead. He was doing so even before the pandemic: His widely read annual letter to investors this year focused on America’s unsustainable wealth inequality, arguing that “the last few years seem very much akin to the beginning of the end of our modern Gilded Age and the beginning of a new Progressive Era.” I spoke with him last week to get a sense of where he sees both opportunity and danger ahead.
The news is moving fast, but what’s your general view on the pandemic right now?
I’m hopeful, but generally a little bit pessimistic. What I mean by that is: I think that it’s not in our nature to quarantine ourselves in this way. It’s also not in our economic best interests, obviously, to shut the economy down the way we have. And so it would have been much better if, on a global organized basis, the entire world in February got together and basically said, “All right, guys. We’re all going to stand six feet apart from each other for the next two weeks straight, and we’re going to be done with this.” That would have nipped it in the bud completely. We didn’t have that. And so now we’re only as strong as our weakest link. So the question in the United States is: What is that? Well, right now, the weakest link is probably a premature decision to get back to business as usual. One, because there’s a huge psychological toll if you’re wrong. And the second is that there is an enormous complexity in restarting an economy as complicated as the United States.’ And it’s not clear how you do it.
So we need to take our medicine here, put a real dent in the viciousness of this thing, and buy ourselves enough time for treatment therapies in the near term that will allow us to deal with acute and critical care. And then, kind of in a one-year frame, have a vaccine that knocks this thing out.
If we are premature, we’re going to be starting and stopping the U.S. economy in fits and starts for months. I think that would be a horrible outcome.
How long do you think we’ll need to stay in lockdown?
I think that it’s probably two to four months until we have a credible therapeutic solution, or set of solutions, that doctors can try essentially to make sure that the most critically ill people are okay and that we can either prevent or minimize ICU or critical-care bed consumption. And that’s going to be important because it will allow the economy to get back to 100 percent — or as close to it as possible. And then we can deal with small bursts — or second or third waves — of the coronavirus until we have a vaccine, which is probably 12 to 18 months.
So that would probably be the most optimistic way that this could roll out. And I think that the reality is that we have so many smart scientists, and basically the entire world’s scientific community, pouring everything they have at this. I would be pretty surprised if we didn’t find something credible in the next quarter.
So your expectation is a series of partially effective measures that together can make things work until you can get to something more permanent?
I think so. This would be very different if this was a virus from a body of viruses that weren’t as well understood as SARS. We know what these coronaviruses look like. We’ve dealt with them before — different versions, but we’ve dealt with them. And so I do think that we can do a lot of damage to it’s long-term impact, and we can dent the curve in a big way.
You have voiced a bit of optimism that widespread serological testing — that is, blood tests for coronavirus antibodies — might be an important step in understanding the pandemic. There’s a theory going around that perhaps a much larger share of the population than we are now aware of has already been infected. If that’s true, we could have millions, or tens of millions, of Americans who are immune but don’t know it yet.
You just have to start broad-based serological testing ASAP. We need to know conclusively how many people have had it, how many people have overcome it, who doesn’t have it. And the people who have overcome it, and the people who don’t have it, need to get back to work right away.
I don’t think that doing this testing is a scientific imperative. I’m coming from a different imperative, which is economic.
We have no choice. We have to do it.
Have you seen any data points that support this theory that a sizable percentage of the population has already been exposed and developed antibodies?
I think it’s pretty theoretical. But why are we not acting like it’s Election Day and standing up offices all over the place — except those offices would be staffed with people who can basically take your finger prick, take the few drops of blood, run it through? It’s a 15-minute test. You’d know right away whether you have the antibody or not.
If you could have your wish and put that into process, what do you think is a realistic time frame for something like that?
I think we should start that this week.
On your podcast, David Friedberg mentioned that there might be some private-sector efforts to fly over a bunch of cheap tests from China.
I mean, you could buy those tests. Anybody can buy these tests. There’s a company called RayBiotech in the United States that makes these IgG and IgM antibody tests. I bought some. Anybody can buy them.
Right now, they’re a little expensive because I think they’re taking advantage of the surge in interest in these tests. So I don’t think they’re for everybody. But again, these tests really do cost pennies — dollars, maximum, per test. And this is just the cost that the government should pay.
We will look back retrospectively and think we have caused literally tens of trillions of dollars of damage for a disease that could have been solved for hundreds of millions of dollars. If we had two billion N95 masks, that would have cost a couple billion dollars. If we had 330 million PCR tests ready [the nasal and throat swab tests which detect acute cases of COVID-19], that would have cost $330 million. And if we had 500 or 600 million antibody tests, that would have cost another $1 billion. So, for $4 billion, we could have prevented tens of trillions of dollars in damage.
It’s so wild — several orders of magnitude.
It’s just incredible to know that, if we had a mask and a test, we would be functioning normally. A mask and test for every man, woman, and child in the United States.
And that was very doable. The WHO recognized this outbreak in late December.
Yeah, I think we also have to have a much larger conversation — which is how much influence and how much trust do we have in our institutions, and how hollowed out have they been over the last 20 or 30 years of rampant capitalism? And I think the answer is: We don’t have much trust, and they have been largely hollowed out. So you don’t have people with the credibility who can step on the world stage and actually get people to act. That’s not a value judgment. That’s just a practical assessment of where we are.
Which brings us back to a big question I have about the serological testing. Given dysfunctional public institutions at the moment, could a private actor step in and do it? Not to pick on them, but, say, the Gates Foundation? Couldn’t they say, Screw it — we’re throwing a billion dollars at this problem and getting large-scale testing done in the next two weeks?
Yes. Somebody. Somebody take the leadership here. Please.
Are you optimistic about pharmaceutical interventions? Do you think we’re moving in the right direction at the right speed?
I think that a set of therapeutics, then eventually a vaccine, is very tractable. The fact that you can take plasma from someone who’s recovered — basically isolating the antibodies and then giving them to someone who hasn’t recovered, and it works — just shows you that, at the end of the day, you could have the most complicated technology in the world but viruses are elegant, simple things that have existed for billions of years. And we understand them well enough that we could solve this problem.
So the solution is tractable. Again, we have to fight time. And time comes in two forms. One is the technical complexity, but because we have so many people looking at this, the chance that we find something is high. But then we have regulatory complexity. And that’s something that we’ll all have to collectively decide about. How much testing do we want? Must it be double blinded? Can someone just decide to use a treatment on a compassionate-use basis? Who knows.
I’ve heard some smart people evince skepticism about the prospects for a vaccine, given that we’ve never developed one for a virus in the corona family.
Well, I think we are going to have versions of this and mutations of it and it’ll become like the flu. And we will beat it back to the point where it will be flulike in its severity.
You have suggested that we need to consider a system of “green zones” — places where everyone has either tested positive for antibodies or has tested negative with a swab test. The idea being to create restricted-access safe areas where people know they won’t get infected.
The only solution to get back to work, and get back to life as we know it, is to establish pockets of cities and towns where it’s safe.
You get a stamp in your passport, or you get a special ID card, or you get a special bracelet. Then you can go into the green zones inside of your city or town and get back to work. And everybody else stays in a red zone for a certain amount of time until you can clear that test.
You can’t get this, the last time I checked, from somebody who doesn’t have it or has had it. You can only get it from somebody who does have it. So you’ve got to test! What choice do we have other than that right now?
Essentially having your medical data as a required public document seems concerning. It sounds more like a policy designed for the People’s Republic of China than the United States.
Yeah, but we have these moments when huge cataclysmic things happen. The large overreaches against civil liberties happen in moments like this — and they’ll happen this time around. I think most of us will be okay with it.
I would want to know before I go into a movie theater that everybody there had to badge-in with a card that had updated antibody screens that showed they were legitimately not shedding something communicable. We would never have thought that before this, but now I think it’s quite reasonable. When you look at the economic damage that’s done by the rampant nature of these kinds of things, do you want that to happen again? So I think people will be very open to giving up an amount of personal freedom for those assurances about the people around them.
Whatever happens inside our borders, presumably systems like this are going to start popping up for international travel.
I don’t know what the answers are, but I suspect that I’m going to need an additional form of identification for me to cross borders. Why would China ever let me in if I didn’t take a PCR test and couldn’t prove I didn’t have coronavirus after the shit that they went through?
And why would the United States ever let anybody in without knowing? Why take the risk? Why? You take the test. You wait the five, 15, 20 minutes. You sit there at the airport. Boom! You get a stamp. You’re clear. Go. Enjoy yourself.
And what if you’re a governor of a state that has an elderly, aging population versus you’re a governor of a state that has an extremely young population? The governor of Florida just said that people who fly in from New York and New Jersey will be ordered to quarantine themselves. If that continues, we’re now locking state-level borders in the United States.
These are big implications.
What do you think of the argument that this pandemic is a death knell for the 20th-century version of globalism?
That version of globalism is dead. But it wasn’t really globalism. That was profit maximization and efficiency. That’s what it was.
And now we have to tip it hard toward resiliency, which is meaningfully less profitable — but it’s much more valuable. And it still promotes diversity and multiculturalism and a global perspective. It’s just that you don’t have these monolithic megacorporations that run the world, aggregate all the profits, and basically do nothing with them. It’s very difficult to see that continuing after all this.
If that’s true, it means that doing business is going to be more expensive and less profitable going forward, especially for the largest companies. Does that mean that our stock market is structurally overpriced right now?
I think so. I think that when we deal with this, we have to reprice the long-term risk and potential profitability. I just don’t see how countries running trillions of dollars in debt don’t tax every company.
It’s going to be very difficult to tax individuals after this. But it’s not that difficult to tax a company. You want companies paying individuals more and then you want companies getting taxed more so that their marginal profitability is relatively de minimis. Right? Who has the political wherewithal to run up taxes on individuals in the United States now? Nobody. Who’s going to get in front of Apple and tell them they have to pay another $50 billion a year of taxes? Nobody. Not a single person.
Hasn’t one of the hurdles to taxing companies more been that they would just go offshore? For example, pharma companies have done it — say, just gone to Ireland.
This is my point. That was profiteering and efficiency seeking. What I’m saying is: I think those days are over. I don’t think you’re going to be allowed to do that anymore. Meaning, governments will force you to have very resilient supply chains because they don’t want these kinds of demand or supply shocks roiling economies like that. And, by the way, even if governments don’t say it, shareholders will.
By that perspective, we ought to be in the midst of a major repricing for stocks — but presumably of other sorts of asset categories too. The business climate you’re describing is very different than the one we’ve had in recent decades.
Probably. Think about real estate … I mean, it’s lost. I don’t know what lifeline you could provide real estate. It’s really lost.
How is that?
If you look at commercial class-A real estate, a big thing you realize is that if you can work remotely, it really doesn’t make sense for companies to be spending so much on fancy office spaces. It just doesn’t make any sense. So class-A commercial real estate just goes into a tailspin, I think. Why am I going to spend $1,000 a square foot? I could spend $200 a square foot and spend three days a week working from home on Zoom. Most service providers are already doing that, and they do just as good of a job, if not better. They can lower rates and grow their business.
And if you have commercial-real-estate exposure to retail, it’s difficult. Most of those businesses are going bankrupt. The malls are effectively closed, and they could definitely be turned over to the banks. And then depending on how long this forbearance is on residential mortgages, you may have another mini housing crisis afterward.
So I think that real estate is very, very challenged. Private equity, which thrived off of debt — that business model is really challenged. And corporate debt is going to be much, much more expensive than U.S. Treasuries. And so a lot of those businesses may be insolvent. Hedge funds have been just crushed. Venture capitalists may have invested in a bunch of non-resilient businesses.
So yeah, I just don’t see what asset class hasn’t been affected.
What do you see for the economy in the months ahead?
I think that we’re in a … [pauses]. I mean, I hate to use this word, but I think it’s going to be Depression-like in its severity. And I just hope that it’s not 10 years of deflation and a world war that gets us out of it. I don’t think it will be. But I just think it’s going to require enormous ingenuity and invention of the American economy, and this is the right time.
I think markets will be down by a third. Take everything down by 30, 40 percent and okay. Don’t expect a lot of growth in those assets. But the U.S. still does well there because whatever happens here, it’s going to be way worse in emerging markets and the eurozone. So the marginal dollar will seek safety in the United States before anyplace else.
If you’re right that we’re headed into a depression, how should the average person be preparing for this?
So, I think, for the average person, what you have to do is be in a position where you can fund your obligations — your mortgage payments, your car payments, credit-card payments, etc. Save as much as you can and hope that the United States government does what they need to. Not just now, but in two or three years from now — whoever’s in charge — when it comes time to passing the landmark legislation we need to really grow our way out of this. If you remember, the best thing about the Depression was the fact that we got the New Deal out of it.
And I think that it stands to reason, whatever you call this — the Green Deal, the Green New Deal … whatever you call America spending tens of trillions of dollars to overhaul its infrastructure. This is the moment in time. Our energy infrastructure, our roads, our bridges, our climate infrastructure — we need to become a more resilient society. It’s going to cost tens of trillions. The United States government is the only one that can do it. And it’ll get us out, and we’ll be okay. And in the fullness of time, like always, we will be okay.
Obviously, this question of a 21st-century New Deal is a really big one. What do you think of what’s going on in Washington right now? Does the $2 trillion stimulus that Congress just passed qualify as a first step in that direction?
No. An ER doctor would probably give you a better, more technical explanation, but this is where you have somebody with a gunshot wound. They’re bleeding out. You’ve got to stop the bleeding.
Do you think this does that?
Yeah, probably one or two more turns. So another $3 trillion to $7 trillion will get the job done. But then, once that’s done, then you get into rehabilitation. Once you take the bullet out and the gunshot wound is healed, then you have to get yourself back on your feet. That’s very different. That’s where I think the Green New Deal, or some version, whatever anybody wants to call it.
The stimulus involves cutting checks to most Americans. Do you think that evolves into some kind of universal basic income program? Do you see UBI as part of the New New Deal?
No. I just don’t think that’s the appetite that Americans have, to be honest. A lot of the people that love UBI are rich elitists who’ve never been on the dole. I’ve been on it. It sucks.
You mentioned that we’re headed — hopefully — toward a national investment of tens of trillions of dollars. One of the classical arguments against ramping the federal debt like that is that it will ultimately be inflationary.
The Great Depression was a massively deflationary moment in time. There was no real inflation until after the war.
You think we’re in an analogous situation here.
Yeah.
So we basically have a green light to spend as much as we need to, to kind of keep the country afloat — and we better do it.
Yeah. This is not the time for dithering.
One of the conversations that’s already started is around this widely shared sense that we are entering a completely different era, and that a lot of what we thought of as the rules are about to change in big ways. Is that something you’ve started to think about?
This Biological Patriot Act. I think it’s — it will be crazy for us to not do it.
And by that, you mean medical records just being the equivalent of a driver’s license.
Stamp on a passport, yeah. A digital ID card that basically tracks that you’re up-to-date. I mean, kids should have to tell us that their parents are anti-vaxxers and so this kid could have measles. And schools should have the right to say, “Sorry, no thanks. Not in my school.”
If you’re talking about a depression-style scenario, then we’re still at the beginning, correct?
The bottom of the first inning.
You are a part owner of an NBA team. Are you optimistic about professional sports at a moment when people are afraid to gather in large groups?
Yeah. I mean people ultimately have short memories for these things. Yes, it took 20 months for people to start flying again after 9/11. But then — we’ve seen expansion of that since.
So these things are shocks and they force us to take a step back, but we’re a resilient species. People will forget and move on and we’re just going to have to build the infrastructure to give us muscle memory.
Do you think the NBA will have playoffs this season?
I have no idea.
Maybe it’s an opportunity for your green zone idea.
How great would that be for the country’s morale? If you could green-zone some professional sports right now, everybody would watch.
Have you heard anyone talking about that in a serious way?
No, because, like I said, people aren’t yet at the point of really seriously considering broad-based serological testing of Americans.
