Jake out do you have intros today no I don't have time for intros oh come on all right fine he started as a nerd with no followers on Twitter now he's a nerd that gets recognized when leaving the [ __ ] he turned water into wine he just wants to please us now he's a mixture of Kermit defrog and a science nerd Jesus he's the man with the stands the queen of quinoa the Sultan of science the prince of Prozac the Lord of Lexapro he gets stops for selfies all over town my producer fee gave him a mental breakdown the zultan of Zoloft Mr David Friedberg it's true it did give me a breakdown but you're over it now you just name dropped three ssris in that intro is incredible well I talked to his I talked to his psychiatrist he said he's working on the cocktail yeah save some for me oh oh you speaking of you he's got a very quick wit and impeccable grammar known for building beautiful products that don't work oh my God like Colin and Yammer he used to invest in SAS quite a lot now he's fighting a brigade of Ukraine Bots he's spending so much time in his bunker it's starting to get smelly we see him only three times a week all in Tucker and Megyn Kelly he'd invest in your startup if you had the Knack but right now he needs that cash for his GOP Super PAC the world's biggest [ __ ] the Rain Man himself Mr David sacks that's all that's a repeat joke that's not I know but it kills every time so I'm gonna keep repeating it until you tell you it's friends with his white truffles he scaled Facebook to a billy that wine collection it's just [ __ ] silly he's on the world tour meeting with princes and kings is he talking luxury sweaters or maybe bigger things the dictator himself chamath polyhapatia that was really nice actually wow I mean I appreciate it you were obviously trying to get invited to dinner tonight because I'm trying to get off the alternate alternative list he's trying to get off the alternate that the email was harsh nine was alternate all right you were trolling me I know I have a seat as for me I'm the world's greatest moderator who can take a note compared to these guys I'm just a millionaire who's broke the all in Summit almost killed us but we came back from Death store I knew he peaked when Friedberg took over the Dance Floor we love the fans but we love each other more thanks for the first 100 fellas here's to 100 more really good wow that's really really good look at you touching surprisingly you came prepared today first time he fought after 100 he finally to prepare so that was the note just prepare your job just do your job do your job do your job do your unremutirated job do your job speaking of unremmediated we heard that somebody's grifting off the Pod oh yeah so good point what we heard sex is that you got a big care package from Montclair yeah that's true what what I think we're all going to declare today is that we all want to wet our beak and if Montclair sends each of us a care package we will all wear Montclair gear at episode 100 of course my brand go to your own brand yeah we decided to jamasca Laura piano I got Montclair you go get like you know Izod or something I saw it actually I got eyes on too you have to just uh I got Uniqlo we got Gap Kids for Jay cow it sucks you didn't you didn't declare your Moncler gift package that was the discovery we made this weekend so I want to thank I want to thank the folks that there's a company called and they sent me this uh gift actually this hoodie this Montclair hoodie which I never said what is this plug they send you a hoodie for 1200 or from Montclair yeah these guys are getting hundreds of thousands of dollars yeah how bad is your portfolio that you're grifting did you put this Montclair stuff onto like eBay after you got it I was already wearing it they sent me more so I'm gonna wear this hoodie is pretty cool what can I say I'm not gonna work it's three cents and all of a sudden you're grifting uh hey just for everyone listening I'm looking for a wardrobe too soon okay just send my package to my own let me tell you something there's no upgrade that's gonna help Freeburg I think you're [ __ ] no I'm gonna bring you guys Montclair shirts to the poker game tonight gee thanks sax appreciate that how did how did you guys even find out that he got this gift we're at his Fleet Week party and there was an angel some uh Blue Angels party and there's someone there who started telling me like did you hear the sex cut this whole thing oh somebody there's a rat there was a I'm not telling you there's a rest but he's got to leave he's got a mole we were talking about the podcast we were talking about 100 100 it was away 100 no no it wasn't what way no 100 was it Jeff I know what are my one of my friends was in the man cave and he saw this like care package from Montclair and he really admired this like jacket it was like a puffer jacket but with like wool sleeves or something so you gave it to him and I gave it to he liked it so much I'm like I'm like here you take it you're not even on the Pod he's not even on the podcast give it to producer Nick so he was walking around with it he was really appreciative so maybe he said something or well see let's just say there was a lot of conversations going on about your care package socks well and it makes us Wonder sacks are there other care packages that have come in and like have you been promoting other stuff on here so who makes the captions behind the magazines that you wouldn't want how much of your Laurel piano have you actually paid for over the past year that's 100 here 100 I would never I would never accept it for free it's important look wait no all joking aside it's hard if you're running a clothing business especially if you're like a small Niche provider stuff so yeah you have a responsibility to pay for this stuff not to grift and get it for free I know when I was at the Laura piano store on 57th Street in Manhattan the 18 000 square foot store I was thinking the same thing these poor people how do they survive well literally 170 square foot renters Friedberg exploiting poor baby goats well whatever I mean the fact is the Market's down there's gonna be a little grifting on the margins it's understandable [Music] let your winners [Music] we open source it to the fans and they've just gone crazy with them Freeburg he loves to produce every 17th episode he does a great job oh no I like to prepare or at least know what the heck we're going to talk about when we get together oh God all right so first up on uh freeberg's curiousness this is uh free bird this is how you're gonna do it let's skip ahead to the next section come on no no okay so um go go go why do you think chamoth people love the podcast why do you think they listen why do you think they love it what is the the phenomenon what what lightning has been captured in this bottle first is I think that they appreciate our friendship it's kind of like odd and quirky and I think a lot of you know it maps to like relationships that they have amongst their own friends so that's what makes it relatable but the second is that all of us uniquely have a point of view about stuff that matters more and more in the world I think that's just the basics of it like it's not like technology is going away and it's not like its impact in the world is going away and the more it becomes mainstream the more it's important for a lot of folks to understand what's happening and I think we provide a pretty unfiltered view of it and we do it where and this is a lot of credit to sax more than anyone else on this show to take a Counterpoint and steal man what would otherwise be controversial views and if he didn't have his three friends around him that would make the Pod meaningfully worse I think can you evacuate for people who don't know what steel Manning is what that means well just it just means like to have intellectual honesty around a point of view and actually put your best foot forward and trying to explain it even when it's not Orthodox even when it's not what the mainstream would say is right and so what it actually does is it creates a contrast against every other alternative that you have to learn about things which you find incrementally is biased and I think that's what we've gotten right we are four friends that have a reasonable point of view rooted in some amount of success and I think that that's important because it gives us credibility and we take all sides of issues yeah and oftentimes it is not the obvious simple reductive answer and I think that that's where um it really shines just so people know about the steel man argument you want to make sure people are currently I think most people refer to it as the act of presenting the other argument in the strongest way possible to be intellectually honest like the opposite exactly obviously because the way the way the debate happens on Twitter and so forth is it's almost like the intellectual debate is uh being attacked uh using opposition research tactics like or a political campaign so in other words they go back through anything you might have said or written take the the thing that was most wrong or at least justifiable or the thing they can even just take out of context and then they'll try to make it about that as opposed to the argument you're actually making and we just see this tactic over and over again and it's not an intellectually rigorous way of having a debate about something you don't learn anything right and deep down inside you know that it's contrived and that is the in a nutshell so it has it almost in many ways has less to do with how good we are but frankly how bad all the alternatives are so even if you wanted to learn about tech and you go up and you sign up for these newsletters or if you look at some of these Tech sites they're really terrible and they have done an increasingly terrible job over the last five years in telling the most important things the truth and everything in between and so if you can find a source for an hour a week that is trying to tell you how basically the world is going to come together in a really integrated multi-faceted way it's not like we're right and it's not like we know better than other people in fact many times a lot of the criticism I get is how dare you talk about X or how dare you talk about why because it makes people who are experts in that field you know feel like how dare you come into my realm and even have an opinion on you know uh what Russian politics was like in the 1980s and those things really annoy these folks because they feel that those opinions and that knowledge should be cordoned off and held tightly as this secret that only they are allowed to talk about into the world and this is the point where with the internet all this knowledge is accessible so the value of that knowledge in my opinion is the least it's ever been it's the interpretation that's valuable and it's the ability to actually like think narratively around how all these things connect and this is where I give a lot of credit I think you guys do an incredible job I think the way fried Brooke thinks is super unique I think the way that saxis thinks is unique I think jaycal your courage to basically fight back is very special all of it together is a really unique recipe it works and what I will tell you consistently is the number of people that listen to this of import and influence I am constantly shocked and if you are not sure of it you need to get out of this stupid little Echo chamber of Silicon Valley go to New York go around the world and if you're in the right meetings it's incredible how folks are getting educated using this pod and I think that's that's really amazing yeah I think I I think there's like been a tendency in like what we call Media today historically kind of you know communication amongst humans it was very slow for a communication cycle to go from beginning to end to close because we had print and books and then telegraphs and telephones and then television and then and radio and the internet I think has really changed the cycle um the loop cycle to the point that you know a story iterates and proliferates very quickly a lot of people talk about the new cycle being very short nowadays and what that means is that there is a group think approach to resolving to a point of view on what the news is so the news comes out everyone iterates on it they form their point of view and all of a sudden everyone's on the same point of view and so there is no room for Dissent or debate or discussion because the cycle closes so quickly and everyone coalesces around the same point of view and nowadays I think we see not just that unipolar behavior but we see this bipolar Behavior where everyone coalesces on their point of view and how their point of view is is the opposite of the other side and everyone has their own heuristic for what the other side is there's this populism versus elitism sighting there's this red versus blue sighting there's this Us Versus Them citing US versus China citing everything is now bipolar and so you very quickly coalesce around what your poll says and what your poll is instructing you to believe and that is what is fundamentally wrong with how the system is working today and I think what people find refreshing about a discourse that doesn't succumb to that bipolarity as a standard is that it provides people the ability to have a real rational out of sync point of view that maybe changes one's point of view and changes one's mind in a meaningful way and I think that's what's really missing today and I think maybe sometimes we do a good job and we touch on that and so that's what I would strive to do is to always try and avoid that bipolarity on everything you know the um Zen Buddhists call it dualistic thinking you know the human brain and generally the universe seems to evolve into this kind of dualism on everything and it's not really always the case that there are Shades of Gray that there um is Nuance uh that there is a complex uh dimensionality to things that I think people really if they take the time to understand recognize that maybe it's not left and right maybe it's not Elite and populism maybe it's not all black and white and that's an important hopefully framing that maybe we can bring bring to light through our diagnosis of what's going on in things right now yeah and I I'd like to add to that I think there's there's a ton of great journalism going out there we see it um there's a ton of great sub Stacks out there people go deep there's other great podcasts out there and right now it's a tumultuous time for media journalism and and getting information and do what trust what sources do we actually trust who actually is thinking in a crisp way um and informing people and you know having been a former journalist when we were journalists we knew that we would get 10 20 30 40 of a story we would publish it and we would try our best uh but journalism has changed dramatically in the last 20 years and I can tell you journalism is dead sorry okay I'm sorry there's some great journalism occurring it's on the margins it's irrelevant and I'll tell you why because the facts are known instantaneously on Twitter and through the internet we don't need people to relay facts we need people to wrap facts in context and allow us to come to our own conclusions that's why I think journalism isn't what it used to be that's why people who are historically journalists struggle because now they actually have to create context and narrative and have an opinion but when you publish that into the Wall Street Journal or the New York Times it becomes very confusing they don't know that that's what they were supposed to do that's not what they used to do that's not how Pulitzer prizes were were historically given out and that's why everybody then you know Rants and rails about things kind of going is you know if you if you look at it as journalists people don't know this but journalists are being compensated they're little salaries in many cases are based on their follower accounts they're based on what audience they're bringing to the table and you see this in sub stack sub Stacks just said we're going to hire the top journalists on who have the most followers on Twitter but you have to change the word so that you change how people think about it these people are not journalists these people are opinion makers okay in some cases they're doing journalism in some cases no no there are some cases where they're actually doing real journalism there are people doing investigative reporting still it's not the majority of what you see but it still exists it's just a very much smaller percentage but putting that aside if you think about but you can't wrap a virtuous blanket around every a thousand people because of the acts of one I'm not and I'm not I said there's a range here it's a small percentage but this is what do you think that percentage of content creation I put it at five percent so that's you know one out of 20. yeah shocked yeah anyway I think it's less than one percent but let me just finish this one thought here you know if you are going to be hired and compensated and we we talk about systems here a lot so just thinking from first principles if you're a journalist if you're a writer opinion writer whatever you produce content for Wall Street Journal for podcasts Etc today let this sink in your follower account is what your book Advance is it's what your compensation is it's who hires you now if that's the truth and it's it's not all the time but I think that your job is not to relay facts we can get facts exactly let me finish my thought here and so then what happens is how is follower account on Twitter actually derived how do you get that follower count by being tribal and so what's happened is journalists that became tribal they get big followings they give spicy takes they pick a side and then their compensation follows it and that's why New York Times said can we all stop on Twitter and they literally put an edict out then you look at this podcast I think people look at us as you know in their mixture podcasting long form taking the time week after week to spend 90 minutes chopping these things up I think that's what to the original question Freeburg you had is what people find so great I I when people ask me I say it's really about the fact that there's a there's a friendships here and it's funny but it's also informative and it it's insightful and at times as you're pointing out your mouth you know random acts of bravery and taking positions that are not popular and and to think that you and Friedberg almost blew this up over a few hundredk I didn't oh yeah no the two of you equally should share I wouldn't classify it that way by the way here we go now the bad feelings are ready getting spicy I'm more of an ethical framework but yeah that's mine go ahead that's even worse look at Jim Bob stirring the pot just to chime in on this point I mean I think I'm in violent agreement with you guys but I'd frame it a little differently I think the reason why people seek out our podcasts and other podcasts and sub Stacks is and and sort of this kind of independent journalism and are willing to pay for it is because the mainstream media has become totally devoid of substance it's as partisan and idiol and ideologized as it's ever been reporters are extremely ideological you look at the New York Times The Washington Post the your major television networks it's all kind of the same thing and yeah there is like you know a little bit of an echo chamber problem in terms of the partisan politics but the mainstream media is the most ideologized it's ever been I mean just to give you one small example that we talked about in the pod the you know we had two quarters of negative GDP growth which the media is always considered to be the definition of recession and then all of a sudden they said no we can't know what a recession is anymore because they know that'd be a horrible headline for Biden right before the midterm elections that's more of a partisan version I think on the you know a more ideological version would be just around this Ukraine war I mean it's just incredible how biased the coverage is they don't even present the other side of the story like it's called the meershimer take about how we got to this point that we're in so the American people just aren't being informed at all I you know we we love to talk about how the people of all these other countries are being propagandized by their governments we never talk about how propagandized the American people are the media does not present the other side of the story at all on how we got into the Ukraine war and how we're now at the brink of what Biden calls Armageddon that we see you know effectively short formed and short form meaning it can be presented in a sound bike or on a tick tock clip or in a couple paragraphs where someone's attention span before someone's attention span lapses out always misses the dimensionality that got us to that point and so there's one perspective one point of view on one dimension and the dimension like tax is talking about about the time and the history of the Dynamics of all the countries and all the people and all the interactions that have happened for the past couple of decades that led up to this moment but then this moment is taken in its context alone and reclassified as being something that is good versus evil it completely misses the entire storyline of what happened it's like going to be end of a fairy tale and saying here's this moment of what happened and all the build up and all the things that occurred are often missing and all the different sides of the story are missing and I think that that's really what makes it so difficult today to feel like you can trust Authority and that you can trust the the media that's presented to you as a consumer not just in the US or in the west but around the world because there's so much that's left out and manipulated and kept away and what people are waking up to is the fact as kamath points out that so much of that information the direct information is available now and so this investigation this ability to uncover the data and the story lines and the perspectives that are typically missing from one form of media is making people realize that there's so much that's being left out the lie about this 100 100 and I think in this podcast that's what's really shocking to people nowadays and I think that's what makes maybe to some degree hold our conversations a little more appealing I'll I'll drop to you in a second there sex but I did see this happen in three specific topics that we discussed here uh if you remember we talked about abortion and we were on that topic very early and no one wanted to talk I remember when we started talking about the number of weeks maybe how Europe looks at this that wasn't part of the popular conversation it was always just are you against Choice are you for killing babies it was like a very two-dimensional look at it immigration same thing nobody would talk about the numbers nobody talked about recruitment nobody talked about the point systems used in other countries it was almost like those basic things were not allowed to be discussed why can't the media discuss those nuances and freedom of speech is I think the biggest one and the search for truth you know nobody wants to talk about the fact that the ACLU used to actually protect unpopular speech and unpopular speeches you know the hardest thing in the world to protect but how did that become something we can't even talk about now right and and just the snap uh silencing of any opinion whether it's Chappelle or you know pick a topic in freedom of speech Trump Etc you know who gets protection for freedom of speech and we'll talk about it later on the news with Alex Jones obviously a very uh controversial topic as well go ahead sax do you want to add something to it well I think just to take this Ukraine situation as an example I think the media's biggest power is the power to Define when time begins on an issue well like right with Ukraine we're part of an escalatory spiral that's been going on for well more more than eight or nine months this issue's been going on since 2000 decade yeah for a decade so in other words if you come in in like the seventh inning okay so it's a free Works point you come in at the end of the story and it's been an escalatory spiral but the media just pretends like time begins on February 24th of course you're gonna have a certain kind of view on the subject whereas if you know the history of the situation if you know that back in the 1990s you had people like George Kennan who was the architect of our Cold War containment policy you had uh William J Perry was Bill Clinton's defense secretary you had Henry Kissinger you had John meersheimer all warn that bringing NATO right up to Russia's front porch was extremely provocative to them that they would see that as a provocation it would eventually lead to a moment of crisis when that moment of Crisis finally came you know we're not told that this was predicted we're told that anyone who says that this war has anything to do with NATO expansion is basically a Putin apologist and is spouting Putin talking points all right let's not let's not let's save some of that for the Ukraine talk we're going to talk about it you could agree or disagree with that take but the point is the media doesn't even portray it they really just pick a side and they I think I like your analogy of like just coming in for the last 15 minutes of the game and just describing that you know we you need to have a deeper discussion of how did we get here how did we get here on immigration why don't we have a point system why do we look at people suddenly coming from South of the Border differently than we did just 20 years ago how did that become a politicized issue what's the right solution here especially if we can't hire people for basic jobs in the United States everybody wants to know this question what's your favorite you have a favorite moment or a least favorite moment a a great moment in the show history and then I guess we'll move on maybe to some audience questions here but let's let's get this one because an embarrassing moment your favorite moment your least favorite moment a moment now you look back on and you you're particularly proud of tomorrow I love the cold opens I I think that they are uh unbelievably human and funny and normalizing they are by far the best part of the pod and yeah that's my that's my absolute favorite part by by like miles and miles uh it's actually got a favorite moment other than Ukraine other than Ukraine I know you got Ukraine on the brain probably you when you started talking like Joe Pesci the Joe Pesci voice do it on command I'm [ __ ] a [ __ ] bad idiot uh no seriously you have any other favorite moments um or things you're particularly proud of things that people tell you you know hey I love what do you I love this part of the show I'm also proud that we we were able to air our Dirty Laundry a little bit in public and still get over ourselves and our own Egos and we're still here I think that takes a lot of courage and a little bit of a little bit of maturity that's that's not in uh public visibility all the time in the media I like that sentiment a lot I think there's a lot of people yeah they were uncomfortable about it you know I I think there's a lot of personal growth that's going on here uh for everybody involved yeah a Freebird you got a favorite moment other you know I don't like it when you and sex fight that's just that's your least favorite moment I literally turned I turned my headphones off and I like do some emailing it really is just it really is just this political thing but yeah it does come up you know I don't like the fact all the moments I've been interrupted by you that like that just happened five seconds ago like you know those are usually pretty tough go ahead I don't know what I what I did enjoy I did enjoy meeting people at the summit who shared that this has been like a really important thing for them to listen to I I think I I was at a Pete's Coffee in the city and some guy came up to me this was when early after uh early when we were doing the podcast and he was like listening to you guys has really helped me get through covid and he was like locked in his apartment and he didn't have a lot of friends and he didn't have a lot of people to talk with and just being able to hear through you know kind of a good conversation around when's this going to end how's covid gonna you know what's going to change in the city and hearing our friendship really made a big difference for him and it was actually really interesting that was off the show but it made me realize that this show actually is impactful and helpful and made gave me kind of the energy to keep going even though I've had uh frustrations um in the past so I don't know I like I like those moments a lot to be honest that there's real value here for people I also I thought the summit was a lot of fun I mean I had a good time well you know it's uh I I think we're steering towards I think we're staring towards Summit 2023. that was me starting the pot a little bit George 20 I'm done listen as far as I'm concerned you do it you produce it or you hire a producer I'll show you I'm if you I don't need to make a producer fit you can do it you can take the producer free whatever it is all right guys I got a couple of questions here from the audience you guys uh see this list yeah we can stand out for you guys well you pick you pick so here's a question um we got it over email from Nathan and Nathan said we know the reasons uh the reason you guys started the Pod what is the motivation of each bestie to continue doing it every week and I asked myself that every week that sex is therapy hey it was that was Derpy yesterday I was thinking about taking a break not because I don't like doing it but it is time consuming and I do want time to get back to doing some business writing I was on a pretty good track to publish a book about SAS before he started doing the Pod I had written a lot of business blogs and this is kind of taking a break how many weeks because wait 10 weeks what are you thinking maybe like a month or something yeah oh four weeks ah wait you can take that's not a big piece maybe I don't know 40 times all right there's there's a I've got like a right now it's like doing jumping jacks in his backyard put me in the game well we could do that I mean I've got like five half written business blogs in my Hopper that I really want to finish and um so I don't know the show does take a lot of cognitive energy is what you're saying it takes a lot of those things a lot of your time each week sex I mean as you guys know the taping is only a couple hours but then it's just keeping track of all the issues and then you know if I'm preparing takes for this pod I also turn some of those takes into articles this is foreign because he is the most heterodox is the heaviest and this is like poorly understood it's easy to just basically be on the side of the current conventional wisdom or to not have an opinion and to talk about things that are orthogonal but David is consistently the one that Wades into the middle of the ocean and it is it I can I can understand why no because he he knows and that he has to be more prepared than the rest of us yes because he is more open to the attacks from all of these nitwits he just did I mean on Twitter I'm being told these are like uninformed nitwits you know they're they're the cancer the cancer of people who comment on Twitter is the following they suffer from the worst kind of cancer which is a lack of belief in themselves and so what they do is they point to other people and try to convince yet more people to not believe in them but that has nothing to do with anything it's just misdirection from their core problem which is they don't believe in themselves and so you know David has to fight all of that stuff off but he has to fight it off with logic which must be exhausting you know my Approach has just been to turn off comments and to not start this is the single biggest problem I think with social media is it's at this heightened point where it's this virulent strain of a lack of belief in oneself that manifests in this hatred that you direct to anybody else that believes in themselves interesting interesting Theory yeah and I would just just to add to that you know it's not like I haven't heard any of the arguments that they're making no I guarantee you they have not heard the arguments I'm making but but I've heard all the arguments are made 100 I'm totally familiar with 1938 Munich Neville Chamberlain all this kind of stuff I just don't think that is the correct understanding of what's happening right now I think the correct historical analogy is either 1914 with World War One and the blank check guarantee or is 1962 the Cuban Missile Crisis the people on the other side generally don't understand that they are just kind of part of this like Twitter mob who's buying into the current thing and whatever they're told by the media so it it is it is a little bit exhausting I think that that's what people don't realize is you know you when this thing got very popular the two or three days after an episode comes out becomes your text your email your DMs and your replies become filled especially again I would I would encourage you to keep doing this thing and just to turn off comments and don't look back yeah it's hard for the first few weeks and then you realize 99 of people who comment have nothing important or useful or interesting to say like zero like negative zero and you forget that there's like 99.99 of the world that just reads your content and couldn't even care about their comments but it would still be time consuming I there is a bunch of business blogs I want to get done so I mean I said you take two weeks off you come back and see how you feel I mean you can do it week by week too I mean just take one week off and see it I think you'll I think he'll come back he'll be back of course he'll be back great great question from Nathan thank you for your participation that's Nathan um next question I actually like this one I'm gonna pull it out it's an email question from Juan T oh hey wanted uh wanted uh Bill Gurley recently put out a piece explaining how this might be as good a time as in a decade to build a company how are you guys seeing your own portfolio companies trying to take advantage of the situation and I guess I'll add do you guys agree and how do you think about this as a moment for company building okay I could take that one I am seeing a lot of the companies that were you know had done a great job racing around seed round series a never got product Market fit now wrap it up right they're they're shutting down they're doing the wind down process and then we're seeing lists of very talented people and I've talked about this before on the show The consolidation of talent behind the winning ideas the the the experiments that actually worked products that got some traction are now having an easier time hiring talent and so to Bill's point he's got a lot more experience in this than the four of us put together is absolutely right when you build in this down Market yeah it's harder to raise money of course but Talent is what makes great products and products that Delight customers get the flywheel going and if you survive through this and you have that Talent you're not going to face 20 copycats and there's not 50 new products coming out a day people have more time to actually engage and try a product which they've been burnt out on and the peanut butter spreading you know we have this thin layer of peanut butter Talent now it's getting Consolidated in the winter so absolutely a great time for five CEOs with and Founders or you know 10 Founders across five companies to consolidate down to two do those tuck-in Acquisitions and get focused and build really good teams and cut the weakest people on the teams there's a lot of weak talent that have been overpaid and aren't actually contributing to these teams and they need to get cut and then you pull in the All-Stars it's a fantastic time he's 100 right all of the if you look back in history since 2000 all of the best performing funds of all times were the ones that were formed right in the middle of the downturns 030809 these are the vintages that have always been the best and what that means it's a proxy for investing which is it's the hardest time right now it's when you have the shakiest hand when you're writing the check but it'll probably be where all of the real money is made or the real generational wealth both for the entrepreneurs who have the courage to start and the investors who have the courage to invest there was a story that I heard in New York I was talking to a really well-known hedge fund or family office and they were talking about how they were meeting with a CEO of a fintech unicorn very well known fintech unicorn and they said they left the meeting and they said this person had an unbelievable disrespect for money and it was the most arrogant interaction that they had ever heard and they said under no circumstances would we invest in this guy in this company at any price and you know lo and behold a year later that company is now visibly going through a bunch of hiccups and it just reminds me that Jason we've always had two problems when times are good problem number one is that there's never been a check and balance on that kind of behavior a lack of respect for Capital and uh and a almost a disregard for business models which is just inexcusable and I think it's partly the fault of a very young entrepreneur but it's also partly the fault of a board who doesn't know how to direct that person enablement is real yeah but then the second the second thing is we've always had this you know this big Tech put on the table where every time you would try to really hone in on running a lean highly efficient organization the alternative would be to go work at you know Google Facebook Apple Amazon Microsoft where the terms were just completely different to what the experience was you know at a startup and the bigger the Gap the harder it was for you to be able to hire and retain good people without just copying them and now that that's also coming off the table that is a key moment so Gurley is a hundred percent right there is no longer the big Tech put those are the generals that are about to get shot over the next eight to twelve months in my opinion in the public markets in terms of market cap and employment and perks and then second is that these really thoughtful investors who felt pretty deeply disrespected will now be able to call the shots and these Founders will have to come back hat in hand and either apologize or just completely find a different religion and I think in that you'll have a lot of amazing opportunities to build companies I think it's well said tax what are you seeing yeah I think that's right I mean look when times are as frothy as they were a lot of bad ideas get funded and there's a lot of bad behavior that occurs I don't think all of it's intentional some of it is just the lack of discipline that when capitalist is so freely available people are building their businesses in ways that we're optimizing solely for one variable which was Top Line growth they just weren't paying enough attention to gross margins or burn and when you then have a downturn in capital is not so available you have to build your business in a much more Capital efficient way and you can't create fake businesses where you're buying growth that's not economically Justified you know where you've got negative unique economics around the growth so I think that this downturn is going to create a ShakeOut it's going to weed out bad ideas bad practices and and a lack of support Focus bad boards and yeah one-trick ponies you know there's just a lot of one-trick ponies out there who've optimized growth but don't have a real business and it's going to require it's going to require entrepreneurs to to play sort of more like multi-variable calculus or math not just single variable it is extremely difficult to convert TDPI to DPI you know the value of paper values into actual distributions and that takes a skilled hand and I think that a lot of young folks were hired into Venture that fundamentally did not know what they were doing they've neither ever built a company or helped build a company or actually learned how to generate returns but they became very good at buying you know free call options on companies you know I remember like a lot of people the way that you these young people I remember I heard a story that you would sell against Gurley right so let's just say you were trying to do a deal and Bill gives you a a term sheet from Benchmark and you get you know somebody else the Young Folks are like oh Bill's too negative and he doesn't get it and they would try to convince these entrepreneurs that you know these rainy days don't happen my experience with Gurley is he is the most sophisticated investor of Our Generation and what I mean by that is you know he was trained as an equity analyst that really understood business models and cost of capital and so in A Moment Like This the way that Gurley would help you on a board is meaningfully more important than how some you know middling VP at some Randall startup who's now a you know a junior partner at a venture firm because that person has literally no clue and so these companies are going to go through a very difficult moment which again is the reason why a good Steady Hand who knows what they're doing will make a ton of money in this next cycle and for people who don't know tvpi let me just give you a quick definition this is the total value divided by the paid in capital so total value is distributions like hey here's your Robinhood stock here's your Uber stock here's Cash Plus the net asset value what's that fancy word for the value of the uh shares of the companies that haven't had an exit and so you divide those two numbers you get a ratio 1.5 1.2 Etc but to schmatt's point net asset value is debatable in some of these right and distributions are what matter you can't you can't eat the uh the irr you got it you got to eat the stuff that's been distributed yeah all right let's keep going I've I'll do one more I'm going to skip over well I'll just the the question on Twitter that got the most votes was what's the exact net worth of each bestie uh I would make the case that that's probably not the best way to measure oneself and you know I don't think we're gonna do it I also would argue that we're probably all exposed to a lot of Fuzzy Math With Private assets that we own and in terms of companies who cares like how does that correlate with happiness in life it doesn't right so it doesn't really stupid question and I don't think it's a big focus in terms of objectives I'll say the next uh one that got a lot of votes which I really like it's a lagging indicator and a byproduct of what we do there are moments when what we do reflects in value that frankly where we are over earning and then there are periods where what we do is under reflected and we are under earning and so the through line has to be that you need to survive in both good times and bad times which means you got to like what you're doing and if you get caught up in a numerical number there's all kinds of math you can do to make it look a lot bigger than it is but it's all meaningless yeah I would argue you're as long as you're actively developing yourself over time the weighing machine will do its job somebody told me in my 20s when I was at AOL he said you know if you're because at the time I you know I grew up on welfare I thought the goal was to make money I didn't know any better I've learned later that there's a lot more leading indicators of happiness and things that actually cashier create happiness why truffles white truffles um I was gonna say friendship my family but yeah friendship and family laughs I Define it as laughs and friendships you know friendships but uh but but he said to me you know your goal should be to just be in the upper few percent of your age bracket and just enjoy what you're doing and he said let time take care of everything else because as long as you find something you're you know you decently enjoy and are good at you'll just get better and better at that thing and then at some point you know you will lose track of what the you know measurement of that is because you're just too caught up in in how much you enjoy doing the thing and I thought that he had no idea what he was talking about and now 25 years later I can tell you he was totally right totally right yeah by the way this this was a question I was trying to skip over so no but it led to a good Fork yeah okay what is happiness yeah yeah I think after you know observing outcomes for 25 years in Tech what I would say is that if you're a smart hard-working don't have behaviors that sabotage yourself and you know take intelligent risks you will be successful in this business I mean technology is such a wind at your backs it's such an engine of wealth creation how can you not do well but the exact magnitude of how well you do I think is ultimately it is substantially affected by timing and you know like if you were employee whatever number X at Google you're going to do better than most Founders even of the Unicorn company and when you found your company and then when you exit what the market is doing those things have a huge impact on the ACT on the magnitude so you know whether you end up being you know a billionaire or a centimillionaire you know a Deca million or whatever you want those things are very affected by timing and chance but not whether you're going to be successful at a substantial level and so it just you know be smart be hard working don't sabotage yourself you know get into Tech and you will do well trust the exact amount of how well you do will be dependent on some you know stochastic factors but not the fact that you're going to do well we are enormous beneficiaries of having been born when we were because we are a bunch of late 40 and early 50-somethings that in the prime of our career in Tech um the Federal Reserve took rates to zero and we had no idea a priori how important that would be in all of our outcomes but they were and even more importantly PCS Internet and mobile happens all of that hard work was done beforehand by an entire court of people that had to fight much stronger headwinds than we had to fight so you know David I just want to build on that like we were extraordinarily lucky and so don't get caught up in that because there's all these factors you don't you cannot control I'll say one more thing that I think is the most important observation I've made in terms of whatever it is Building Wealth over time is to make sure you're building equity uh in yourself if you're in a Services business and every day and whether that's serving the clients of the company you work for or just serving clients on behalf of yourself and everything you do is a transaction and that transaction doesn't build on itself doesn't compound value in some way then you're missing out on an opportunity every year that goes by that you're earning income where you're not building Equity uh is is a non-compounding year and it's compounding Equity value that I think ultimately pays off for you as an individual and I can give a lot of examples of this but if you're in a let's say a brokerage business and you just do deals and you might make have a good year you might have a bad year the real question you need to ask yourself is what is compounding are you growing a client base are you growing your skill set are you next year able to do more things or have more options than you had this year and if the number of options you have is declining or static every year then you're limiting your Equity value and that ultimately will translate into limited wealth creation can I chime in on that point around Equity so yeah when I discovered what Equity was this was when I was in law school and actually the guy who explained to me was Antonio gracias a light bulb really went off for me because my dad is a doctor and I was on a path to becoming a lawyer and in both those cases you're a professional the way you get paid is you more or less charge an hourly rate and so the amount of money you can make is capped right just take the number of hours in the day and in the week multiple apply it by your rate and that's the most money you can make in a year and the difference between that and Equity is with Equity you own a piece of a business and that business could be ultimately worth you know any amount and so your Equity could therefore be worth virtually any amount and so you're uncapped and so just you know if you want to have outside success you have to have equity in something I think that is exactly right if you're just basically working for wages you even if you are the best at what you do and you get paid an insane hourly rate you again you can be successful but you're not going to be uncapped and so that is the beauty that's the beauty of Silicon Valley is all these companies offer Equity to everybody and it's not just shares in something you can actually get equity and create leverage in your life in this era more than any human has ever had in any era prior because of software and Computing and automation you can create a website that prints cash for you every day if you wanted to you can create a service that you get leverage out of and there's Equity value in that and I think that's really key because then you can go build another one another one and you're building value over time and that's just the most simplistic example of how technology today provides leverage that can really allow anyone to pursue a path of equity and and I think you make a good point about what what are you getting leverage off of yeah so there's there's a bunch of different things so the old way was leverage off labor and I guess if you were to own like a consulting firm or like some sort of factory then the more people you have working the more money you'd make the other way would be like you can get leverage off Capital like a fund manager or you can get leverage off of Technology because software can basically create these super scaled outcomes so you need to figure out like what is it you're getting leverage off of yeah I'll go so I'll do the last one which I thought was a really good question and I got a lot of votes from Marcos Ortiz if you had to start from scratch no money no connections only the knowledge you have right now and 100 bucks what would you build in 2022 I would build something in energy transition or in life sciences with a hundred dollars yeah I would build a startup incubator Venture fund of some type a way to fund entrepreneurs and just be a capital allocator much earlier in my career I would create a B2B software company that actually I'm already creating it so I haven't unveiled it yet but there's something I'm incubating right now let's go David go whoa where's the bad week wait whoa whoa wait what your beak what is going on here I haven't gotten the subscription I've not raised money yet my subscription documents sir you can think of this idea as Yammer 2.0 so Jake how you're not in because you criticize the Amber but it was a joke I gave of you though I let you win TechCrunch fifth yeah I put the [ __ ] fixing for you David just to put my pitch in I ran Eamon icq helped Facebook was an investor in Yammer was the for series a investor in slack so I'm ready for you yeah I'm right here you were there for us when we needed you back at Yammer days unlike J Cal what are you talking about your meme let me in let me leave it one million round round thank you did you just agree on TV yes well assuming hold on there's one thing you have to do which is you've got to rip out slack and use this instead yes 100 100 I will do that just so you know Community well I'm gonna be very honest with you the day I left Facebook I stopped using it the day we sold we distributed slack stopped using it so don't worry about me I am right I am 100 alive with you I'm all in I'm all in absolutely all right let's do the show let's do the show Freebird you didn't answer that question what would you do well actually I would get some water vaporizers and then I would get some molecule and I would make a new super protein that was made out of good sorry let's keep going I like it I think it would be something with the protein slurry you'd make some kind of steak that takes better mistakes it's some type of protein I would definitely build a business again I think the you know the challenge is uh As you move past that stage in your career where you know you have the willingness and the time to be a hundred and twenty percent building one product every day uh it's it's really hard to go back to that and I think if I was in a position again where I had no money and had no I think that's the key part of the question not the hundred dollar part yeah I think I would go back to building something I do think the intersection of Life Sciences with software creates this era of opportunity it would probably be something in the realm of AIML meets Life Sciences where you can actually work in a leveraged way with software to drive outcomes in these important markets so I would actually create right yeah we could have started something yeah maybe we can still oh okay the co-founders sax will let you in the pre-round if you let us in your pre-round okay sounds good okay all right Kelly you want to take us forward should we go forward okay let's see what's on the docket we've got Russia's invasion of Ukraine you had Biden last week saying we're facing the risk of Armageddon how is that not the top story go taxi poop go take it all right here we go let me just queue it up for uh sax fine last week so we're facing risk Armageddon that's your tia okay we go and then Leon Panetta just let's teed up Jayco we don't need everyone knows what's going on Leon Panetta just who was the former Secretary of Defense and director of Central Intelligence wrote an op-ed for Politico saying that intelligence analysts have now raised the probability of a use of a technical nuclear weapon in Ukraine from one to five percent at the beginning of the war to 20 to 25 percent now is what he says so and I don't think he'd be saying that if this wasn't pretty much conventional wisdom in Washington now I mean Panetta is sort of an uh very respectable figure in in the Beltway so you might have said it right for the first time said that we're facing the most dangerous situation and the highest risk of nuclear war since the Cuban Missile Crisis he called the risk of Armageddon the problem is that nobody is willing to say what we should be doing differently to avoid this situation so you know people are always attacking us or having a point of view on foreign policy first of all this affects us I don't know why we're not allowed to have a point of view but you know in in our business thinking where there is an existential issue you have the attitude of drop everything and figure this out if somebody told you that there's a 25 chance of your company blowing up maybe in the next few weeks you would drop everything and focus on that problem but it's like you know after the Armageddon comments it's like the media just passed over it it's like oh this is like crazy Biden or whatever it was minimized it was textualized the White House walked it back nobody's really focusing on this and what we should be doing differently and in fact what Panetta recommends and Petraeus said the same thing is that if Russia uses attack nuke in Ukraine then we should respond by attacking Russia directly now if we do that we are literally in World War III and remember at the beginning of the war Biden was really clear that we weren't going to get directly involved he vetoed the idea correctly of of the no-fly zone which would have required us to shoot down Russian planes Biden remember he was asked in the press conference at the beginning of the war by Lester Holt he said Holt said you know Mr President what if Americans are trapped Behind Enemy Lines in Ukraine would you send in American troops to go get them buy and said no I think very properly said no because he said listen we do not want to risk War III but now because of mission creep and the slippery slope and we've all gotten more involved in this war we've gotten more emotionally committed you now have Panetta and Petraeus calling for us to directly attack Russia and get in World War III the Russians almost certainly would respond with nuclear because that's all they've got they don't have the conventional forces to stand up to us so look at how close we have now gotten to the brink of a nuclear Showdown and has anybody reassessed is any anyone calling for us to reevaluate because that's the conversation we should be having right now and free break this brings up two points that I think you you can comment on Naval uh actually the founder of angelist angel investor and uh just public thinker I would say public intellectual he came on to call him with the two of you and he you know outlined like who does get to have an opinion on Ukraine and other issues which has dovetail with this like who gets to be an expert in the world today and of course at the same time not only Sachs has been commenting on hey what's the off ramp here Elon has been talking about hey you know how do we get out of this do we have some votes uh you know by these uh regions that have been annexed or that are in dispute AOC now is getting criticized under for people shouting her down at a public event today or yesterday that she's a war monger and she won't speak out against War how do you frame the public dialogue about this Freeburg and then do you see a potential off-ramp here other than Putin leaves Russia which is I think the public stance uh by a lot of folks you know Putin can end this he just has to leave Ukraine in order for this to end so two questions there for you free bird it's very hard to have good dialogue about any situation where an argument could be made on the grounds of morality in an absolute sense making it really difficult to have a discourse around what the right thing to do is because you don't agree fundamentally on the objective you're shooting for one side says the objective is to preserve the Integrity of democracy and the freedom of people and the other side says the objective should be to secure the interests of the West and the United States and preserve the world from nuclear Holocaust I think that's what makes this a challenging conversation the objective can be reframed and then from that objective each side can make their own case without being forced to take in the point of view of the other side and it's why we're at a bit of a standstill and it's also why it's so easy to get swept up in a mass point of view a coalesce point of view of the masses that makes one feel good about what may end up being a very bad situation it feels good to say I'm doing this for freedom of the people I'm doing this to save lives and the end of the day it may cause a nuclear war and it's okay because I feel good going into this debate that this is the right thing it's the morally Superior thing to do what's very hard is that we can't actually say as a group our objective should be to preserve the Integrity of democracies around the world to an extent and that's a nuanced point of view to an extent means I'm willing to preserve the democracies through certain actions but I'm not willing to cross a certain line and absolutism doesn't need to come into play that's what I think is making this such a very difficult conversation and it's why it's so hard to actually have a conversation around it and it's really I would argue the most poignant and the most dramatic moment in what we talked about earlier which is this deep-seated kind of you know bipolarity and once you're sitting on your pole you don't want to come off and you don't realize that so much of the dialogue is in this middle and we have to come to some point of view that maybe this isn't about an absolute outcome it's not absolutely going to be nuclear war and it's not absolutely going to be the end of democracy there's some conversation in the middle that's very difficult to have and people that work somewhere in the world hopefully ambassadors foreign policy people State Department people hopefully are having the more nuanced critical conversation about how do we resolve to the maximal outcome that doesn't necessarily take us to an absolute end to that point it's going to be an imperfect outcome here I think this is much much simpler than all of this Leon Panetta is a senior counselor to this defense Contracting agency called Beacon Global strategies who works on behalf of Raytheon I found that out while Friedberg was talking in a two-second Google search I suspect that if you looked for petraeus's conflicts of interest you would find that through some Byzantine set of you know strategic Consulting organizations and whatnot he also works on behalf of the defense industry so you have these people who will generate more revenue and more profit if there is a massive war and those people have been trying to push us into a land war in Europe since this whole thing started and so this is just yet another attempt it's just the most final way of doing it so I would just encourage people whenever you see all these folks clamoring for war um it's just to keep in mind that they are riddled with conflict and that you can find it out again this information is sitting in plain sight on the internet and you can figure out whether this person is is really advocating a truth that makes sense or they're getting paid to shill um a revenue generating mechanism for some part of the military industrial sex how much of this is people talking their book their book being the military industrial complex in your mind I think it's a big part of it I think all these Washington think tanks are funded by defense contractors I think it's short-sighted obviously because if it leads to a nuclear war there's nobody with the defense industry there won't be anything left so but look I think that I think that Washington is wired for war in part because there's a huge Lobby for it for all these defense contractors and what's the lobby for peace I mean there's no one really arguing for peace speaking of this Elon oh I I'll tell you what I'll tell you what's lobbying for peace and I'm going to connect what may seem two disparate ideas together but the single biggest thing I think that will prevent nuclear war is the inflation that we're feeling and the reason is because it allows the FED in my opinion for the first time really in the last 15 years to act properly and if they hold the line and they take interest rates to four or five percent I think one non-obvious outcome of all of that is it becomes extremely expensive next to Impossible to finance military adventurism abroad and that's a practical economic outcrop of really you know meaningfully High rates greater than zero and so I actually think the reality is that for a lot of these governments the more that inflation sticks around the stickier it is the higher rates are in general the bigger the problems at home are and the less prone they're going to be likely I actually think that explains that explains the escalation of this rhetoric because people want to try to make this issue and put it on the table but you understand that you know these folks don't say it's a 90 likelihood they go from one percent to 25 which if you understand probabilities is effectively a left tail risk that's effectively the same and the reason they're trying to do it is they're trying to get it back David as you say to time stamp it to get it in front of people's perspectives to make it important in a moment where everybody increasingly not just in the United States but in the UK in Europe are looking internally and trying to figure out how to keep their economies in a reasonably functioning way and how to make sure that their financial and other infrastructure keeps working so you're saying and that is not necessarily a priority when rates are zero but when rates are four percent I mean just by the way if you guys saw what happened today it was the competing of two narratives this week there was a financial Narrative of the UK having to bail out their pension system right of all of a sudden the pensions being forced sellers of those four sellers now you know uh spilling into the United States debt markets around Clo's and collateralized Loan obligations and junk debt which then could theoretically spill as a contagion into other parts of the market that was narrative one and and all of that by the way is a result of hiding inflation and the you know fed moving up rates and you know other countries being forced to to attack inflation with higher rates and creating all these dislocations narrative one versus narrative two which is hey all of a sudden we have to put the nuclear risk on the table and if you actually saw the print that was spilled the disproportionate amount of the rhetoric actually focused on the former narrative and not the latter and so I think that that's why the these folks are escalating the rhetoric in order to kind of create an equality so that they get enough print they want that version of the outcome what you're saying is you have the world saying we can't afford to have this conflict we are broke well not too many chaotic issues the world is saying we are increasingly under enormous domestic pressure and as a result we cannot spend on things abroad we can't afford this and then on the other side saying well we need you to afford this so nuclear is going to happen there's going to be a nuclear and there's a small attention there's a small strain of folks who would economically benefit yeah who are now ratcheting up their rhetoric so that that second path is more and more on the table what do you think of this freeberg this analysis that shamoth has these two polar these two uh groups vying for the attention and or budget of the world the the military-industrial complex versus yeah uh citizens saying our country can't afford this we need to focus inward not citizens the central banks but I think the central banks influenced by citizens right like there's a whole system here we're talking about people are you know watching their questions away they're watching jobs get cut if I was a betting man I spent that I I would guess that the next half a trillion to a trillion dollars that is spent in Western world economies will be to subsidize something that's broken internally inside of one of our countries whether it's the UK pension system or whether it's the high-yield credit markets and it will not be the finance military adventurism in Russia people um so there's an article today in the Washington post about how the U.S government's Debt Service is going to be around 570 billion this year which is a 45 increase Biden's budget for 2023 is only 1.6 trillion so you're talking about something like over a third now of the official budget is already going to Debt Service because it's not variable right it's a variable right exactly because so much of it is is um it's not locked in long-term rates so because interest rates have gone up so much The Debt Service gone up and interest rates are still going up and so you know druckmiller had those points around how the debt services within a decade is going to eat up practically the whole federal budget so trimath is right that we've never really had to choose between guns and butter before in the past it was just let's just do both and we'll rack up more national debt I do think there will be more and more pressure to question this type of spending and why we've already given Ukraine 80 billion dollars in handouts when we can't afford to basically pay for you know major entitlements at home so I think there'll be more pressure now I think I don't know if that pressure is going to come in time though to de-escalate this Ukraine it's more it's not and that's what concerns me and just to just to cut to the chase on this I think where the rubber meets the road on Ukraine is Crimea it's and why because the Russians have a major Naval Base there at sevastopol it's the home of the Black Sea Fleet and they will never give that up they are willing to use nukes I believe to basically protect that asset it's a vital interest of theirs hold on 80 of the population of Crimea they're Russian and three quarters of them according to polling that was done by Gallup and by a German polling firm so not Russian polls indicated that they see themselves as Russian and only part of Russia so if we supported self-determination we'd be fine with Crimea being part of Russia but here's the rub Ukrainian nationalism demands that every square inch of Crimea goes back to Ukraine and it is State Department policy right now that we will never recognize Crimea as being Russian will never recognize the annexation which happened back in 2014. so something's got to give here something's got to give either we have to sit down zielinski and say to him listen you're not getting back from me yet we're going to make that part of a peace deal or we are going to back the ukrainians in their military effort to retake Crimea with the result that I think is quite likely that the Russians will be willing to use a tactical nuke to prevent their total defeat so at some point we're gonna have to choose here which of these outcomes do you want do you want to basically go for a negotiated settlement which means telling the ukrainians they cannot have everything they want or do you really want to risk a nuclear war to take back Crimea which is Russian and the people there see themselves as Russian so we need to make a choice here yeah so Elon put out a tweet for and got Savage for it and he outlined sort of what you're saying here so do you think his plan he said redo elections of annex regions under U.N supervision Russia leaves if that is the will of the people and then he says Crimea formerly part of Russia as it's been since 1783 water supply to Crimea assured as you're saying Ukraine remains neutral should the West Force Ukraine to accept these type of terms essentially elections and I don't know why Crimea wouldn't be part of that election process do you think U.N supervised elections in those regions should occur and we should force Solinski to do that so he who pays the pipe or calls the tune of course we need to have a point of view on how this war should be resolved should we force him to do that listen it's not about Force they can fight on and do whatever they want as long as they want hold on with our support American weapons so you think he should do that weapons if he doesn't if zielinski wants our weapons and support which appear to be infinite we should not give him a blank check guarantee the blank check is how is what started World War One the German Kaiser gave Austria a blank check guarantee and it led to World War one that is how great Powers get pulled into the wars of minor powers and we absolutely have to have a point of view on how we do not get pulled into this and I think our one of our lines should be that we are not going to fund the ukrainians in retaking Crimea got it so just to put a to clear this so we can move on to the next topic you're in support of removing or not giving further weapon support to the Ukraine unless they negotiate this it's not going to come to that we need to have a point of view on how you are in support of stopping our support if they don't sit down and negotiate a settlement here that's what you would do America needs to have a point of view of what is in its own interests what is in our interest is for this to get resolved diplomatically at some point through a negotiated settlement not for it to escalate into a nuclear war that we could get pulled into the only way that's going to happen Okay is if Crimea goes back to Russia I'm telling you they will be willing to pull out all the stops they could even use Tech nukes before Crimea but can you answer the question though that I asked three times would you remove American support and weapons if they don't accept that if Ukraine doesn't accept that would you be comfortable taking away our support in wealth I don't think it's going to come to that but yes we should be willing to threaten that okay that's it I'm just trying to get you to answer that one question hold on a second they are a client state of the U.S they do not call the shots we're America we call the shots we're the big dog here all right that's the bottom line and you really want to get pulled into a nuclear war but I do not I just wanted you to answer that one question if they don't let's get real okay it's not about our future you know we're our American nationalist at least I am I'm not a Ukrainian nationalist I support self-rule I think we accomplished something by preventing Kiev from getting toppled but I want to support self-rule for the people of Korea it's time for a settlement in Saxon I think the most important thing that we can all be thankful for which I think will prevent a lot of wars in the next 10 or 20 years is inflation and non-zero interest rates it's just going to be really tough like you know the UK cannot do anything right now other than make sure that they have foreign currency reserves to back up the pound which they don't really have that much they're going to need money to bail out their pension system whoever thought it was a good idea to allow pensions to run levered risk was it's obviously insane could you imagine if it turned out that the teacher's pensions and the firefighters pensions in America were running levered long I mean this has to get resolved now I mean it's just another Breaking Point yeah it's clear you know what a pension is I know yeah it's just no no I'm saying it I I'm saying don't use some fancy intellectual argument I'm saying practically speaking the treasurer is not allowed to call Goldman Sachs and say I'm going to run two turns of Leverage on this money that is not allowed to happen in the United States okay I get in some fancy way it could be thought of as levered long with you know all kinds of indirection but that is not how the world works today practically speaking it is how the UK Works a treasure in a UK pension system is allowed to call a an investment bank and actually run levered that is insane okay so my point is when rates are non-zero all of that Jig Is Up governments are forced to batten down the hatches and you know husband cash for God knows what will break in the system and I think that that is and and as disruptive as that is it may actually be the bulwark against War The Jig Is up folks uh I mean I think that's what we should take away from this is we can't afford this and the United States is funding it we have to force a settlement here and it will be a profile it may be the silver lining of inflation okay Andy jassy's uh had an all hands meeting Amazon is freezing hiring for corporate roles in its retail business almost 90 VPS or higher level execs have left Amazon since 2021 earlier this week there was an all hands presentation and the slides were leaked to Business Insider some of them constraints breed resourcefulness self-sufficiency and Innovation there are no extra points for growing headcount budget size or fixed expense of slide instructed employees to accomplish more with less sounds familiar sounds like something the U.S needs to do and foreign policy needs to do Amazon leadership team urged employees to double down on frugality chassis also spoke in the meeting just a couple of quotes and then I'll get your thoughts chimoff it's on a lot of people's minds and of course none of us know for sure what's going to happen but there are a lot of signs that point to this being a difficult and rough economy ahead of us and I don't know how long that'll last but I think it's one of the things that we are thinking about and we've decided that we're going to be more streamlined in how we expand in 2023 good companies that last a long period of time who are thinking about the long term always have this push and pull trimath what do you read into this I'll say uh three quick things one is that today Thursday October 13th we had an inflation print which was worse than expected and the markets are materially higher right so you know strange why well I you know we talked about this a few weeks ago but you know my thought then and same is it's the same that I think now is that we've effectively seen the near-term bottom and we're now consolidating and so every opportunity people have to justify that most of the news is behind them they take and they use that as a reason to buy okay so that's number one which is that we are sort of near the end the second however is that if we do see another leg down there is really only one cohort of company that hasn't been really whacked and I'll summarize it very quickly by saying it's Microsoft Amazon Apple and Google that's it even Facebook has now been sort of put into the bucket of everybody else where you know we've been crushed 60 70 80 in those companies so so so what does that mean well those four companies are now being identified for what they may be which in capitalism is called over earning okay they are making more money than we think is appropriate this letter from Andy jassy is his way of effectively telling his major shareholders that he is now moving the business to become more of a cash cow business Tim Cook made this incredible decision in 2016 1718 that effectively did the same thing that's when Buffett came in that's when he established a huge ownership in the stock that's when the stock absolutely ripped because it moved into a different bucket in people's minds it became growth at a pretty reasonable price and I think Andy is making the case that Amazon is going to become one of these GARP stocks growth at a reasonable price he's going to generate a ton of cash flow he's going to keep expenses nominal he's going to return a ton of cash to shareholders with BuyBacks that's the reading in between the lines of that letter I think it's a really profound statement and a very smart move because you haven't seen that letter or a version of that letter yet for Microsoft and you started to see hints of that letter from Sundar where he said you know it's it's and he's not he's saber rattling he's not there yet he's in the appetizer part you know he's emus Bouche where he's like oh you know guys you got to work harder hey guys let's create some fancy acronyms but sundar's got courage no no but he's got courage he is going to rip the Band-Aid off too and so I think what it means is these three and maybe these four companies are going to draw a hard Line in the Sand and say we are not over earning do not abandon this stock that again will help put in the bottom in the stock market what do you think free Burger you worked at this company and uh you know the the the principals across the board the saber rattling will turn into saber swinging uh in Q4 q1 you think Google Apple Cuts coming Amazon is affected in a different way because they operate this physical supply chain business they're delivering Goods to people's homes that people are buying so they're they're uh they really have to uh change their trajectory very quickly it was incredible you guys remember when covet hit you tried to place an order on Amazon it was like three weeks to deliver because the infrastructure wasn't there to do it so they actually were seeing more orders than their system had predicted and they did massive build out they hired what a million people or something uh in their network uh to meet demand and then over the next year uh earnings went through the roof uh their infrastructure and employee head count went through the roof and now we're obviously coming back down the other side of a mountain and they're having to shift uh strategy and and shift their operating model yet again there's a a broader set and that's because they're in the direct Commerce business Microsoft Google and other kind of software companies some of which benefit from advertising which is almost like a first derivative on the consumer Market or a first derivative on the spending of companies that sell to Consumers have a little bit of a different calculus they're a much higher margin business 30 ebitda kind of business with ebitda margin business with a very uh distinct kind of set of challenges on how advertising revenue is going to be affected over the next couple of quarters and balancing that against their Cloud platform which is sold to Enterprises and their media consumption platform which is generally like YouTube at Google's case which is less affected so it's not as much of a direct calculus I will say what's happened over the past decade which we're now seeing change is these companies have had extraordinary growth uh hiring people to no end there's always been you know kind of this extended expense on Capital on human capital and that expense on human capital has driven the average cost per employee through the roof and it's not just the salaries it's the cost of the rsus it's the cost of the facilities and the free ice cream and the gyms and all the other stuff that's gone on to compete that's now changing and so it really is creating a different model for operating that hasn't existed for the last decade where everything has been you know how many more things can we throw in the kitchen you know throw like the kitchen sink at this problem to get all the human capital here and I think that's really you know what's what's going to kind of structurally change in the valley it's not as acute as what Amazon is dealing with it does feel like um that is those are the last cities to falchum off they are the ones they are the ones that take the index to 3200 if we're going to try to do it there's only one place to look you've whacked everybody else everything is down you know 50 to 90 in some cases so and then finally you know and by the way sorry just just at the end of life of last year a quarter of every s p dollar was crowded in those names a quarter so you got to go there yeah I mean and also they're automatically bought right they're automatically bought by these index funds and and so who's at the wheel saying we're not we're going to take the money out of them right who who in their right mind is taking money out of apple Amazon and Microsoft where do you put it I guess is everybody's question right trim off like if you take it out of there where do you put it well no I think I think it's just that when when you have patterns of selling typically as I've seen it uh my experience is that initially it's the algorithms that really start to push a market in a direction then you have you know the more traditional fund complexes that's the hedge funds and the long onlys they follow suit and then the last group tends to be retailed and it works in reverse the other way as well and so you know obviously there's exceptions to all of these but as a general rule so if retail starts bailing on Amazon well they are right now and apple yeah they are sellers now but okay now time to buy it right but again this is this is where sort of organized Capital now is finding a bottom again like when you start to shake just think about the psychology of like being delivered bad news after bad news you go through the cycles right there's denial there's anger there's depression there's bargaining but then at some point there's acceptance and in that acceptance phase you're like yeah you're right things are bad but when you see a market rally into a print like this it's uh it's really really interesting psychological Turning Point as a proof point to what you're saying sax uh chamoth and sax I want to get your comment on this Venture Capital firms like Sequoia Excel and others that have now uh changed their status as you know just private companies but also dabbling in public are buying public equities which basically means they see more opportunity in public underpriced tech stocks growth stocks Etc then they do in late stage private companies correct and you saw the Wall Street Journal story I'm assuming sex yeah I saw that what is what do you read what you read into that is it overblown or is it indicative of something I think it's probably overblown because Sequoia created that fund that is a hedge fund and an Andreessen Horowitz became a richer investment advisor so they could buy public security so I look I don't think most Venture funds are all of a sudden investing in public markets we aren't even allowed to do that as far as I know nor will we ever try to so I think probably it's exactly you have to give up socks your VC exception exemption but you could do it you could do it yeah yeah I mean we wouldn't want to but it's kind of the point but look I can't explain why the market did what it did today it could have liked him I said it could have been some sort of algorithmic you know buying or selling um but I just think that the overall news today was the economic news was just another really bad report I mean just look at these headlines from The New York Times today okay I'm going to read you the headlines on a single sort of scrolling page here number one inflation came in much faster than expected bad news for the FED takeaways from another painful inflation report three disappointing inflation data keeps Democrats on defense out of midterm elections four food prices climb again Weighing on household budgets five rent inflation remain tepid a troubling sign six used car prices aren't declining as much as economists of the host slow down get give Freeburg a chance to take some time take his Xanax for you gas prices fall slightly but overall energy costs are soon expected to rise and eight retirees are getting an 8.7 Social Security costs living raise the biggest in decades I guess that one is sort of positive but it's like literally negative headline efforts in the New York Times but can I reinterpret that for you I think I think the way to think about it is this gives the fed the resolve it needs it's going to go by 75 it's probably going to go another 75. we're going to have rates by four to four fifty to five percent probably within q1 which means if you're trying to figure out where the bottom is it's roughly now ish and so that's why you see smart money David shaking this thing off um and starting to enter the market and so again and the other version interpretation is when rates are four or five percent the cost of servicing United States debt is so meaningful as a percentage of their budget the incremental spend that they would need to make to enter a new war is too much I think I love this point I love this point where we're we're weaving all these things together so so right so on the economics page of the New York Times disasters headline after the disasters headline then you turned the foreign policy page you got Tom Friedman writing a column here saying we are suddenly taking on China and Russia at the same time and Tom Freeman historically has been a huge Hawk and he is even saying he's saying yeah pump on the brakes never fight Russia and China at the same time yeah so he says we are an Uncharted water Waters I just hope these are not our new forever Wars It's Like Whoa so basically look our economic base our economy is crumbling at home at the same time that we are doing unprecedented saber rattling abroad this does not compute we we need to take a timeout my prediction but my my prediction is that we will not enter a new war with rates flexing up as aggressively as they are I love it I love weaving these two stories together I think it makes a lot of sense we didn't have time for Alex Jones but we'll save that for another episode gentlemen I think it's our best episode ever it's an honor and a privilege to spend this hour or so with you every week I love you like brothers and it's been a great hundred episodes I look forward to a hundred more sacks if you need a mental health break Dr friedberg's oh no he's got him doped up David David will be back next Friday I just want to say hey David don't read your replies get off of that I just want to say how much I love you guys and I'm really proud of what we've created and I'm really excited to get to the next hundred and uh I'll see you guys tonight I'll break out the light so we're all you want to keep going that's the news today I will say that Jake house moderation has been a lot better since he got brigaded that is his way [Applause] I love you I love you Freeburg let's see if we can get sacks to do it it's been 100 episodes he hasn't said it yet but I love David Zacks David's are you coming tonight taxi before you coming yeah I'll come I'll come you're coming oh wait wait wait wait uh let me check I'll get back to you offline I'll see you tonight Rain Man Davidson I'm going home and I said we open source it to the fans and they've just gone crazy [Music] it's like this like sexual tension that we just need to release somehow we need to get Mercies [Music]








welcome everybody to episode 101 deutsax is on vacation sitting in Brad gershner from altimeter group welcome back to the Pod Brad how you doing it's good to be back good to be back I mean first you first you guys uh you know tilted Friedberg and now a little bit on uh sax is getting attacked on Twitter and so you roll me back in when yeah when you got a little problem whenever the brigad dunes come out Brad gerstner comes I think sax will be okay but shout out to sacks you know who probably hates the term brigadunes the nitwits that are in the brigadunes Cricket Tunes oh the Brigadoon it's all gonna end at some point because I think the Brigadoon new ownership at Twitter is Gonna Change like the whole spam the Rogers and Hammerstein musical right yeah yeah yeah but now I think brigad Dunes could stick I don't I've never heard anybody use that for the Braves rolling calling the Twitter mob the brigad dunes is a good new thing I like yeah it's pejorative it's funny it Seasons everything a little bit tones it down I like it it feels goofy it completely disempowers them they really want to be taken seriously but they're just a Brigadoon I mean to be a pretty dude though you have to have four or more accounts and you have to reply to each of those accounts as if it's another conversation yeah when you retweet something as a social justice Warrior as an example you're trying to join the Brigadoon ah got it it's just a different Brigadoon it's a brigade Jacob are you sometimes a Brigadoon right you're part of brigad Dunes Jacob no I'm not part of anybody [Laughter] nice for my brother [Music] [Music] well anyway uh Kanye West can't leave an amazing career alone and he is going to buy parlor which apparently Candace Owen's husband George farmer had created so he's gonna buy his own social network if you don't remember parlor is like a really shitty version of Twitter that never seems to have worked or been stable it crashed the first 10 times I used it miraculously this steaming pile of garbage had raised 56 million in funding and Kanye is on a social media media tour saying horrific anti-semitic stuff he seems to be having a mental breakdown again uh there's a big discussion now I guess should people be platforming them to the point uh that he's doing three four five hour interviews with people and it does seem like it's acute mental illness slash breakdown I don't want to like diagnose anybody from afar here and I'm not qualified you just did well I mean he has been in public about his struggles with mental illness it's not a huge leap for any of us that have had family members have manic episodes I mean this is clearly America it's pretty much right out of the textbook so my question for you guys is what you have somebody with great wealth great creativity he's obviously a savant in so many different categories with a huge social media following plus money plus Fame and then you add social media to the mix which is an accelerant and then all of these you know Tucker Carlson and every other publication every podcast using this moment I think in a way to kind of I don't know get ratings off of this train wreck I find it abhorrent to interview somebody when they're in a manic episode like this I'll be totally honest I wouldn't do it what is your take on this I have a family member a blood relative that is in severe mental health crisis if the emails and the text messages that this person sent were public you you I read these things and they've severely severely impacted me to the point now where I have like a rule that when they're in a manic episode I just kind of harvest them and archive them just in case something bad happens but I can't even take the effort to read it and because it takes such a toll and then I feel really guilty because I think maybe there's a something in there where I could be missing something so this is what when you're in the middle of a of of of a severe episode this is what the family and the loved ones of that person is also dealing with so I have I have no idea what's happening with Kanye but what I would tell you is when you're in a manic episode the more the the thing that you need is for the people around you to try to step in to help you and it's really freaking hard and I can tell you that in I've seen this person in my family say and say things and do things that are just so beyond the pale yeah and it's part of when they're in that moment and the whole goal is to try to get them out get them back on their meds get them rebalanced it's a really really complicated thing to deal with well look I mean the guy the guy's buying a social media platform I think it continues to support the point that I've made a few times which is I don't think that anyone has a monopoly in social media networks we've seen every couple of years uh competitors emerge people Proclaim Monopoly those monopolies get uh destroyed by the next thing you know from Friendster to Myspace to Facebook to Instagram to Snapchat to tick tock and I think that the the reality is the users of those platforms ultimately coalesce around a set of standards they want to see happen on that platform and those standards become kind of the editorialized or produced model for how that platform should operate because that's what the users say they don't want anti-Semitism they don't want what they would call kind of challenging an institution they don't want fake news whatever the the classification is there's an editor or an editorial board that editorializes what is and isn't allowed to be set on that platform and ultimately there is a fringe Voice or a voice that feels unheard or feels like it cannot speak on that platform and what we're seeing now with I think Elon acquiring Twitter and Kanye acquiring parlor um and generally a number of kind of emerging networks uh like uh what's it called rumbler as an alternative to YouTube communication maybe what's it called Rumble I think yeah I think it's 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 and I think there are folks that want to have a voice that feel like they've been editorialized out of the existing networks like Kanye like Trump like Elon to some degree and they're um you know those that have resources they're changing that and I think that speaks to a really healthy competitive market so having folks like Kanye step in and try and create a new platform that has alternative voices long term I believe in freedom of speech I believe that we should have alternative voices but I also believe that consumers and customers should be able to choose what platform they want to be on based on the editorialization that happens on those platforms and I do believe that the owners of those platforms should have their own rules because it creates a different differentiated product Jason is that why you we're hoping to get comment on or this idea of the media Feeding Frenzy feeding on Kanye's mental breakdown yeah I was talking about the media frenzy that's the thing that I think is pretty abhorrent here in fact YouTube just pulled a bunch of the interviews he did recently because there's so much anti-semitic stuff in it and you know when somebody's in a mental breakdown like this which I think it's pretty clear he's in you know they do this behavior and of course it's hurting them it's to your point you know I'm sure it's hurting his uh kids or or Ex-Wives or ex-wife and you know can I ask what's that can I ask who do you think is to decide that because he's done interviews where he said I have episodes and those episodes actually provide me with creativity yeah yeah I think it's up to the post the person who is the host of that show who has to make an editorial decision and so Tucker Carlson's going for Ratings or if somebody else does it and they want the ratings because Kanye's a big name that's you know I get it he's he's a great Gat right and if you are somebody who likes to interview people that's like a lifetime get that could be the get that you know makes people learn about your podcast I just think it's unethical to do that when somebody is suffering like that to then feature them and to platform them in order to get your own ratings that's a personal decision let me ask you a different question though so I wouldn't do it would you hold him accountable for what he said well this and this is the Nuance you know and I think we do have to think about that because anti-Semitism uh exists in the world he's got a big fan base that means if he's got people in his fan base who are also having a manic episode they could then be inspired by what he's saying to do something horrific and cause real world harm and and this is where you know the accelerant of social media I think is particularly dangerous you know in the old days if somebody said this stuff on a talk show maybe they don't air it where they say it it's in the newspapers but when he could have a continuing dialogue across many podcasts a week he's done like 10 podcasts in the last week he'll he'll go on air with anybody and then he has whatever tens of millions of followers he's reaching hundreds of millions of people all you need is one person who's mentally ill to then go do some horrible thing in the world that we've seen happen many times and that's what I'm concerned about you have to understand your the it's the law of big numbers basically Tomorrow there's a large number of people yeah just to give you a sense of it you know when this family member of mine um you know we've had we've had to have interventions we've had police we've had um the government get involved in Canada we had had their driver's license taken away then I mean it is an unbelievably complicated set of interventions and I am so thankful that she doesn't have massive social media awareness because it would just be chaos and I would hate that you know because of their Association to me that this person gets more attention than they should in a moment where what they really need is help and I think that that it should be the governing principle in moments like this where if a bunch of your family members or your health care providers or whatever can raise their hand and say hey hold on a second this is completely off the rails you know Freeburg to your I don't think that editorial Freedom matters in that point I think there's just a more Humane idea around get this person off the airwaves and like allow themselves to add it get out of that Loop settle down yeah yeah and and typically what happens is that you know these folks at Lee again and just in my experience will have titrated a medicine well and then when that titration fails their ability to regulate their emotions fail and this is the loop that they enter and you know you really have to find a way of like taking all of these mechanisms off the table so that they can re-regulate themselves and I think that as a society we have to sort of move towards that so that if you know family members can call Twitter or Facebook or Instagram or whatever and say listen or the doctor you know here's the doctor's note like you have to be able to shut this stuff down because you have to mute all of these other things so that this person can then get back into a mode where they re-regulate that should be the priority yeah compassion for the person yeah it's and it's not forgiving what they say but it is having maybe a little bit more compassion in that moment to get them back to their to their children this one's a little easy to say hey Kanye's having a mental breakdown because he's talked about mental illness in the past it's a lot harder to make these you know supposed determinations as a reporter or a podcast host if someone says something crazy and then it's easy to raise your hand and say hey they're crazy cut it out or there's some mental health issue going on here but Freeburg if he's not if he's not having a mental issue right now then he is a horrible human being who is an anti-semite who is spreading just the most vitriolic horrible things you and tropes you could ever imagine at a time when you know uh there's enough division in the country and somebody could get hurt you know uh so either in either case his accounts have to get paused if he's going to say anti-semitic stuff on them that's that I mean there's really clear guidelines across all these platforms on what's inappropriate and certainly I think folks will start to adhere to them I guess if I had anything to contribute I mean I think Chima said this well about a mental health angle but what I would say is I actually think that the social platforms have done a reasonably good job the fact that he's buying parlor I think is evidence of the fact that there actually is an editorial layer yeah that's doing a reasonable job it's a tough decision ever there's always going to be a long tail of podcasts somebody will you know somebody will go grift off of uh you know an episode or whatever but I think you know a few years ago we were talking about no editorial standards and I think today you know across these platforms obviously there's attention there's a tension that's existed for a hundred years plus around free speech on these platforms I get that tension but I think uh a little credit where credits do we're seeing we're not seeing these memes spread like wildfire uh in part because the platforms with the most reach are doing their job snaps down 30 percent today you guys see this I think it's it's related in the sense that everyone historically talked about social networks as being these uh you know the network effect where you know multiple people get on and they link up with you with each other it's harder and harder to break the network and it gets bigger and more valuable and can generate more Revenue clearly not happened over the years with Twitter to the degree that people thought it should have and now clearly it's not happening with SNAP I think it also speaks to this idea of fragmentation I don't know if you guys want to talk about snap but pretty significant decline from well here's the here's the 60 they were 160 billion market cap and today they're trading at 12. they're down 91 from Peak to track 91 yeah here's the important thing to note which is that if you look at the Mau growth of snap it's actually been extremely steady and they've had an incredible March forward and I think that they're roughly around 350 million Nick I'll send you the dis right I'll send you the link yeah I think it's like the Dow you count is incredible it's incredible so it's like yeah it's a service that is incrementally every day more relied upon than the day before and it's a service that's providing a set of features that is incrementally more important to a larger and larger group of people so how do you then square that with its stock performance and in my opinion I'll just be really honest with you and I don't know Evan Spiegel and I've never trafficked in Snapchat at all okay but it is the most glaring example of corporate misgovernance that has ever happened on the internet and the reason is when you look at what happened in the IPO it basically created a governance structure where the common shareholder had all voting power taken away so a hundred percent effectively the de facto voting power stayed with the class that was held by the founders and so you you do not have a normal check and balance and it was egregious other companies would have voting programs where it was 20 to 1 and you would sometimes say oh it only should be ten to one or it should be 50 to 1. this was like a hundred to zero and what you have now is no real feedback loop because there is no person who can own enough equity with enough say to sit across the table from that CEO and say Here's what you're not seeing and here's what you're getting wrong and I think you're always better off by having those kinds of people be able to get a meeting with you in the first place and have a vested interest where you take them seriously but how would you receive a meeting when you're sitting across the table from somebody in the back of mine you're like wow this person has literally no say in what I do after this meeting ends literally none you can't vote even to even it's different than alphabet and meta at ten to one because they I think they both have dual class right that yeah I think zero is in my opinion a deep sign of disrespect I think you can I think you can agree you know that um there is a separation between you know the voice of the common shareholder in these companies and and the direction of the companies but I think it obscures what's going on chamoth I totally agree with you if you look at usage the number of customers walking into the store um snaps gone from 265 to 360 million dau's Twitter 190 to 240 meta from 1.8 to 2 over the course of the last three years they're all growing more people are walking into the store and using the service the story here is all about pricing how much is each of those users worth I mean apple is the apex predator of this entire Market we wouldn't be having this conversation but for the fact that Apple's changes with idfa literally pickpocketed the industry two billion dollars this year under the auspices of privacy and so if you look at these companies usage up pricing or arpu down okay recently Apple's come under a bunch of pressure so now they're out with scad 4 which is their update to uh the the the ad policy post idfa that allows you to Target advertisers or individuals with 10 000 attributes instead of a hundred attributes so we're gonna see some realignment I expect that the real question is what happens to arpu next year but to me the story here is that the usage in the health of these core platforms is remarkably sticky yeah for all the things we say about Instagram I mean Tick Tock has had explosive growth 30 growth each of the last three years but even the incumbent platforms a really sticky usage this is about how they're monetizing those users and the real story is Apple yeah and if you for people who don't know idfa is the identifier for advertisers some people refer to it as made mobile ID ad ID I'm sorry um and so what that does is it lets you track a user anonymously across have you ever have you ever owned and have you ever owned any clicks to a sound have you ever owned Snapchat stock no why not um certainly governance is a key component of it but the second thing is like do you have do you have any belief that you could even get a meeting with the CEO and management where they would listen to you appropriately we've certainly got meetings with management before so yes I believe we could whether or not that impacts you know how they build product how they how they run the business you know the influence Etc but again I I think that's not really the problem here but the point I would totally agree with you on Shima we've had 10 years of where the cost of capital was Zero 10 years of hyper growth for these social networks right in each of the last five years Facebook has hired more people in each of the last five years than they had 10 years after the company was founded okay so as we've seen this growth begin to turn over I have seen the companies really slow to react to right-size their behavior that they had over the course of the last decade to put themselves in a position to compete for the next decade so it's one thing just to throw your hands in the air and say well this is all Apple we couldn't do anything about it but we we really haven't seen leadership in terms of cost control we really have we all know these companies yeah of the of the major companies Brad snapped into a 20 riff that had 6 000 employees or so and they cut 20 percent Facebook is the one that's perplexing because they seem to be massively oversap staffed as you talked about and they have been massively um they've had a massive decline in their uh stock price and they are the one who is affected most by what Apple did in terms of app tracking transparency is I think that there's a perception though I mean I'm still stuck on this issue I really think that stock prices tend to ebb and flow based on sort of like friction or momentum and when there's momentum more and more people can easily underwrite it and when there's friction fewer and fewer people can underwrite it and so I think that if you are a CEO of a public company you have to think about how many headwinds do I have and how many Tailwinds do I have all the time and some of them are in your control and some of them are not at least in the case of meta as with Apple and Google they meta is forced to copy the best decisions of these bigger companies why because they were one of those biggest now they had may have been the smallest of the biggest but it's going to be very hard for meta eventually to not Converge on those same set of decisions and the most important one is what Brad just alluded to which is that there was a point in 2016 and 2017 where you literally could not give away Apple stock and the big turn of the dial and you know some say it was Carl Icahn who knows was this theoretically this famous dinner that Carl Icahn had with Tim Cook where he laid out a plan and it's like listen you need to start managing costs better managing Opex better return a ton of cash buy back the stock and you'll be a darling and Tim Cook was rewarded and he's he's been rewarded with an incredibly performant company and so you know Google is slowly inching towards that plan Microsoft is in that plan and so the only Big Four Horsemen that hasn't really gotten the script yet is meta but they will it's just we're just debating when and so there's a perception that you know meta will copy what the rest of these big guys do but these other long tail companies the headwinds are just greater and so when you you know don't have a company that can be broadly owned by intelligent thoughtful investors that's a headwind right when you give nobody votes that's a headwind and so that's why you see a company that's continuing to grow impact not being able to translate that into economics and if I were the board of that company that should be a wake-up call because eventually that'll flow into the morale of the employees and the ability to retain and then the ability to invest in the future and I think the simple answer is enough with all these you know gymnastics around control you know if you looked at Elon the most incredible thing from day one was there's common stock you know and his whole thing was like I'm just gonna do the best and you know what if I'm not the best I'm going to be out he literally said vote me out vote me out he's never ever played these games so in this funny way control is a symbol of a lack of ability to run the business masterful Mastery of a business you can translate that to being I'm just going to have common stock um tracking back to the high voting class for Founders was that they would be challenged by the investors in the market and you can see the things that Carl I can and others ask for they say we want to see you cut Opex we want to see you pay dividends we want to see you buy back stock and we want to see you grow and so the trade-off then in the mind of a Founder uh that that that started this business and scaled it to billions in revenue is well that means I've got to make short-term decisions over long-term decisions I've got to make the I got to give up some of my long-term opportunities to trade for my short-term opportunities that's that was the argument I think originally for the voting class and you can read this in Google's Founders letter as well does that not apply any Founders at Google don't even show up at the company why do they have to have super voting control they don't probably even know what's going on inside the company I just want to hit on zuck's point because Zuck has said look you know this this VR AR metaverse stuff in the future it's everything this is where I want to invest our resources so look what happened but look what happened they they made a missive they said we're going in this direction investors really smart thoughtful supportive investors including Brad were like uh hold on check your role and they capitulated now to your point did Super voting control come into play there no of course he could have said you know what guys pound sand I'm gonna do what I want instead he's like I'm a smart guy these guys are smart guys so I'm going to make the smart decision so in my opinion all of these things are red herrings these are in directions right so this idea of I'm just going to take my toys out of the sandbox like a crying baby is what super voting control means to me as a shareholder Brad okay I think the era of super voting control for Founders uh taking companies public is over nope should it be you know I I think it's again when Facebook was doing really great and Snapchat was doing great nobody complained about super voting stock okay so I I think that you know my preference would be that I partner with a company where I know the founder whether irrespective of their votes right listens cares and has the mental flexibility to make course Corrections right and and the reality what I'm trying to point to we have lived through a decade of excess everybody knows all these companies could do exactly the same Revenue David this is the push back to your point unlike what the Google argument was exactly the same Revenue with vastly less investment in terms of people Etc right a 20 riff that meta would literally only take them back to where their personnel expense was in 2021 yeah nobody argued in 2021 and they said they were going to do this too Brad right and just hasn't happened yet this is this is part of the problem Jay Cal everybody so why 10 percent why 10 you've doubled this the number of people working in the business over the last few years right there's nothing magical about 10 the real question is what is the optimal number of employees to produce the best outcome for our customers and our advertisers and what Bill Gurley has pounded on and we've all talked a lot about there has been in a zero cost of capital world a unilateral March two more more of everything invest in everything hire more people Silicon Valley would do itself a favor these big companies vacuumed up every single engineer in Silicon Valley they ought to return that pool to the startups that are actually inventing the future they don't need this money in place I mean last night I read a report came across Bloomberg the the elon's talking about 75 reduction at Twitter yeah so that would leave Twitter just to give people some context here that wasn't that that originated in the Washington Post that would take them from around 7 500 workers to maybe two thousand eighteen hundred and so he's starting from first principles how many people do I need to build the next generation of Twitter that's the question start with a blank sheet of paper and ask that question you'll come up with very different answers I think that you you can correlate these kinds of uh governance overreaches with zero interest rates that dog doesn't hunt when rates are at four or five percent I don't care who you think you are but when you try to go public in uh over the next four or five years if rates are sustained you know three four five percent 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 we all stopped saying you know oh you know the things that we used to think were important before like one person one vote you know uh a check between the board and the CEO a check between the executives and the shareholders it all went out the window no discipline no hygiene right because when interest rates are at zero percent you have to remember right how does how does the the structural basics of of the financial markets work it is meant to make money on half of every single entity and person and thing in the world from a pension fund to a university to a research lab to a government to an individual but in that ability to make money when we took interest rates to zero forty percent of what we all used to own bonds yielded nothing and so we just completely whipsawed to the other side and said we need to own anything that grows so Tech got a disproportionate amount of attention but in that we lost our standards and we are now going to go through the hangover of dealing with it and 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 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 and I think in the future to David friedberg's point I think it'll be very hard to justify these things you know Bankers will be able to push back because the buy side ultimately guys like us who have to buy the stock when these things go public will say nope you want to have these you want to have these dumb governance games no not for me I'll just go buy something else I'll go buy more Tesla where it's one person one vote why you know so it's hard when the best CEO in the world is like judge me keep me fire me on an equal basis and everybody else is like I'm smarter than this guy and so you know what let me make sure that whenever I feel like it I can throw a temper tantrum and take my toys out of the sandbox and let's use it there's analogy here it doesn't work look at look at um Steve Jobs ousted from his own company company company made a huge mistake asking him some people argue it was a learning experience for Steve to get better at his job he comes back and he absolutely turns the company around so there's an example thus far you've proven that the two most impactful and important CEOs of the last 50 years had the courage to basically say let my performance do the talking not my protective Nanny control correct and Steve's performance was light in that first period he had some problems and uh and he learned and he still won but this is what the greats do the greats know how to perform not you know use some no trade clause to make sure that you can just sit there and underperform forever do we think Brad when we get to the sort of macro look at this let's assume we're in this 405 or three four five percent interest rate for some extended period of time let's call it a decade what does the tech industry look like because it does seem if Elon does with Twitter what seems to have been leaked here correctly uh according to all reports and there's a 20 rifat uh Facebook and we start to see people take the medicine is that the ultimate setup for now hey these companies are being run to throw off cash and we have some way out of this uh what people think is going to be a very hard Landing well I mean you know first just let's talk about you know where rates are three you know today you know we're at 4-3 on the on the 10 year I mean Technology's performed incredibly well for a long period of time with rates in this in this range so the adjustment period is very difficult right and so when when you look at the convexity in going from zero percent interest rates to four and a half like that has been a shock to the system it has been destabilizing to multiples multiples were basically infinite last year and now multiples have come back to reality and so I don't question in fact I actually think free Capital was a weapon of economic destruction right free Capital hurt good companies from being great companies they hired too many people their margins were too low you know SoftBank funding all of these Rideshare companies around the world to compete with Uber meant that Uber even though they're a market leader did not have Market leadership economics and so the ringing 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 of iron is dislocating for investors it's dislocating for management at these companies and it's going to be this this is not you know a a six-month phenomenon we're going to have two years of ringing out right because there's no bailout here by the vet there's no v-shape recovery for these companies this is now going to be I heard somebody say this week if the last 10 years was about beta the next 10 years is about Alpha not all companies are going to do well not all companies are going to bounce back this is going to be about what companies have the courage to build great products and to drive a great business model that allows them to compete and continue to invest at high rates in the next wave of innovation whether it's AI Etc and so um you know to me the markets jcal have largely put in a box at this point inflation and rates right rates have come up 65 percent in the you know from 2.7 to 4 3 in the last 60 days and the Market's basically sideways it's down five to ten percent rates are up another 10 percent in the last two weeks and Google and apple are up that tells me that the Market's gotten you know gotten its arms around rates and inflation what the market really is worried about now are two things number one is earnings and number two is the long tail of risks on earnings there's kind of a conventional wisdom emerging from a from from many folks that 3200 is the bottom or maybe 2700 at the bottom that we're going to go from 225 and in s p earnings back to 200. that seems to me to be you know again a lot of people making that bet I don't see any evidence in Q3 earnings United Healthcare United Airlines Schlumberger Tesla Etc their earnings are up on a year-over-year basis they've guided now to Q4 their earnings are going to be up on a year-over-year basis and the consensus expectations in q1 are the earnings are going to be up on a year-over-year basis to go from 225 bound down to 200. we it 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 so on an earnings growth that's where the mark there's some tension in the market then finally what I would say is there are a lot of big brains in the world who look at this level of dislocation rates going on the two-year or on the front end of the curve from zero to four and a half and drucken Miller or Soros would say negative reflexivity [ __ ] breaks when you have this much volatility in the world the world is not equipped to deal with these exponential moves and so there's a lot of concern in the world whether it's about Ukraine Taiwan UK bonds the Japanese Yen nobody knows what it will be but they're just saying demand a higher margin of safety because the propensity the likelihood that ship breaks when you have this much dislocation is higher so I don't know Black Swan could come any minute and could cause another downdraft but last year we were all sitting here and said asymmetry to the downside multiples at all-time high interest rates at all-time low we saw that starting to roll over we saw smart people Elon bases Etc start to sell into it 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 skewed 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't occur but from my vantage when stocks the average stock down 20 percent stocks like meta down 50 to 60 percent 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 new channel to positive should we go to tvpi DPI and talk about the privates I just want to say one thing about a favor question uh which kind of ties into some of what Brad said but you you asked the question about does this mean that these companies are now going to kind of cut costs and start spitting out cash I think there is certainly a market incentive to do that to keep share prices up and the companies that can do that are certainly taking action with the head count reduction across some of the big guys what I think is going to be interesting and 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 [ __ ] um you're talking to a Peloton or something like that it doesn't matter across SAS across consumer across D to C across Hardware everyone is now saying can you actually earn and at this point you should have enough scale that you should be able to earn and if you cannot the market will punish you for it and that's certainly what seems to be the incentive and the pressure in the on the buy side to the the executives across all these organizations today so I think that's a big trend of what's happening right now is everyone's going through their portfolio spending time with management and asking can you earn can you actually get this business to generate cash what is the path show it to me prove it to me in the quarterly results and if you can't then you're not fitting in a bucket that I can own you the only irony there Friedberg is that that comes as a surprise God forbid we should actually expect companies to prove unit economics and and to make profits yeah but when you when your interest rate zero you divide by zero you get infinity so you know you were able to kind of explain everything away into the future now you actually have an interest rate at five percent I Gotta Be You Know making uh I'm not gonna pay a lot more than 20 times earnings and I want to see that that's really my earnings you know I want to see that you can actually earn there is a person at Brad's investor date who Brad interviewed and I won't say his name but he's a star of stars he's a bit of a goat and he had I'll just say the generalized version and said the following which is so true it's like we've gone through an entire decade of under training an entire generation of people in Silicon Valley you know we have under under trained and under-mentored the product managers the engineers the senior executive management the CEOs many of these people unfortunately are not um they don't have the skill set to execute at a high level at any point in the cycle except when rates were zero like many business models and now that rates are not at zero these people are turning out to be extremely underdeveloped and unable to run these businesses and when he said that it really struck a chord because he's right and you know he was also saying it just got even more exacerbated in this era of remote work because now there is even less opportunity to mentor and to coach and to talk one-on-one and people think you know that this is a boon and it's not so you know we we're going to deal with also the aftermath of an entire generation of Highly underskilled companies because the executive and Senior leadership and CEO ranks of many of these companies are not in a position to win if I may there was an interesting moment this week when we talk about this discipline that has been lacking the last couple years a hundred and one million dollar funding led by kotu uh Lightspeed Venture partners at a one billion dollar valuation for stability AI uh this is a for-profit company built off the backs of the open source project stable diffusion they have no Revenue they have no product they've been around for you know a millisecond any thoughts on this type of funding happening pre-product pre-revenue on an open source project I mean there's still there's always going to be these these asymmetric bets that people think if it works it's worth 100x and they'll price it as they price it I think I think what we were just talking about is a little different which is how do public markets rationalize evaluation uh these businesses need to start earning for the public investors to be able to represent to their investors that they're doing their job and making sure that they're holding management accountable to demonstrating earnings potential but these early stage bets you can see valuations range depending on the asymmetric outcome potential of the and you know what the upper and you know what the upper bound is the upper bound is that when rates were zero and governments were printing money more than they could get their hands on the top five tech companies represented a quarter of the S P 500 but there was a pretty steep fall off and everybody else represented the next you know about 10 percent of the market cap so the point is that we had bounded outcomes when rates were zero the average market cap of a successful company was around three or four billion dollars so I'm not going to judge this company at all and those investors are very smart investors Lightspeed and CO2 what I will say is at the end of the day there's a terminal buyer of these companies and we had a period of time that we can look back on to understand that when the party is absolutely rip roaring the alcohol is free you know everything everything is going well yeah we know what the upper bound is which is the average company if you were able to get out would be worth about three to four billion and then there was a very very steep dispersion where then there was four companies that were you know a quarter of the market cap and a few in between so if you do a deal at a billion the overwhelming odds is that the terminal exit multiple is going to be somewhere between a 3X and a 4X x of dilution and X of all of the other Capital that comes in and all of those features that may be attached so I think everybody should be allowed to make different kinds of bets and you'll see over time um which kind of deal can generate which kind of return this will be a really interesting data point the the common thinking was these kind of deals were not going to happen in this kind of a market so when you saw this kind of deal happen or some other that we've talked about privately what do you think is happening in terms of discipline in the private markets I think I think I think maybe you should tee this up with Brad because I think that what I have to say follows on okay with him but there's a there's a there's a macro view of the Venture industry that again it's like everybody wants to never look at the past everybody wants to assume that this time is different and there's some work that he did which is really instructive jcal to help answer this question I think so yeah maybe you should ask him and then I'll jump in afterwards this is the TV tvpi uh study yeah so I mean Brad in relation to my stable diffusion and and yeah DPI maybe you could well you know we we shared this with our investors at our investor today that that you guys are at this week this is a modern industry it's only been around since the mid 90s right so the history Adventure you know is uh you got to look at when you look at returns it's to say by the way what an incredible chart you guys put this is so good yeah let's describe the charts for people the truth hurts so break down let's go ahead Jake Al do you want I mean just so if just for people who know we on Spotify and on YouTube you can search for all in episode uh 101 and you could uh see this chart if you're watching the video if you're listening um the video describes 1997 to 2020 there's an orange line across it with the DPI average uh so why don't you define DPS you know what we did is we took the top quartile of data from Cambridge Associates who invest in all across the entire Venture industry is widely used as kind of industry data and we just asked a simple question of the top quartile top 25 of venture capital firms right what were in those vintage years of the fund so funds raised in 97 98 99 fine what were the average cash on cash returns right tvpi is what your mark is that's where you're carrying the marks total value to paid in capital so this could be just so we're clear because it's a little confusing to people you have a company on your books that on paper is worth 10 billion you had put in at a billion and on paper you've got this 10x return right correct right cash distributed to your investor so that's cash on the barrel head so the reason if you look on this charge and just just to build just to be very clear for everybody the whole goal is to be able to convert your tvpi so what your theoretical book is worth into DPI which is here's money back to my investors and what you want on this chart is the blue line to catch up to the gray line so you want the Gray Line to be as high as possible and eventually over time you want the blue line um to come up correct right so the blue line here we're looking at 2010 just for one example you have a 4X for the tvpi you 4X everybody's money but the Blue Line only got up to it looks like 3.5 x maybe or something in that right but let me just point out because that's an interesting Year Jason yeah we were coming out of the 2008-2009 period everybody was despondent they said I'm sure they said what you just said about stable diffusion don't invest in anything everybody's stupid but they were incredible companies that were invested out of that vintage right Snowflake and [ __ ] out of our vintage shortly thereafter so maintaining this Duality that yes the world sucks but the the secular curve of innovation continues so that is a vintage where people actually got things sold got them public distributed the cash back to investors the real question is this on the vintages between 2011 2012 and now how how much of those gray lines how much of those marks look those are historical marks marks have never been this high how much of those marks will actually return turn into cash on the barrelhead and how much of those will actually just be mean reversion it'll all get marked down and the returns at the top quartile will look much like the returns did in the period between 2000 and 2007. 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 markdown 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 and so people also understand this these are vintage ears so these are funds formed in that year and so this Trails a venture fund takes about 10 years they're formed without Concept in mind to become realized so if you're looking at you know the year 2016 and 17 these are but five-year-old funds at this point right correct yeah so they they do need time for these companies to grow how much of this tremoth and Freiburg do you think is attributable to entry price because entry price during 2017-18 1920 is going to be extraordinarily High entry price I.E the value of the company when investors invested in 28 2008 to 2011 when I had a lot of my hits was pretty low I invested in Uber Thumbtack and um you invested in Uber com those three were 15 million dollars combined almost three evaluations did you you invested an Uber uh yeah maybe third or fourth semester I can't remember let's talk about entry price because entry price does matter Brad uh or maybe Trump you want to take an entry price for Freeburg well look there's this I think I think what that setup is that's probably a chart that most VC organizations don't even look at because if you looked at that chart um you would have to take a real investing approach to things so if you were looking at that chart as a GP there are two takeaways the first takeaway is oh my gosh what is the sum of the invested dollars Above This Orange Line since 2012. 2011. right because all of that stuff could just basically get whacked if we mean revert and the answer is about five or six hundred billion dollars of paid in capital so then you would say oh my gosh well if there's five or six hundred billion dollars of impairment coming down the pipe maybe more maybe it's going to be 750 million because the other thing to keep in mind is over time the the orange line has a tendency to go down not up right because as you add more and more of these things and some slight performers you have a general Decay function in every asset class as it scales in size so this this Orange Line theoretically goes down which means more of those gray bars get destroyed okay so there's let's just call it 600 billion or 700 billion the most important thing you would want to do is now look inside your portfolio and try to answer the question uh oh um How likely am I to see that impairment and Jason this is a proxy of answering your question the important question for a venture fund which then has a downstream implication to the to the entrepreneur is now what do I do knowing that all of these gray bars could get destroyed Nick go to the next chart while I calculated it for you guys so I'll give you the answer here's a simple thing and you know this is publicly available data now why did I do this because when Brad showed me that chart my immediate mind went to how do I make sure I'm not susceptible to losing a ton of money well what happens in markets is that when things go down the things that are highly correlated go down the most because they are the things that are the most highly trafficked which means that they're the things that have the most investors which means that in an up Market they have the propensity to have the highest prices so we put we you know pulled all this data from pitchbook and we just started I just took a smattering of firms here and recent index Greylock Benchmark Sequoia GC Founders fund tiger Excel Kleiner coastla and us you could pick anybody because this data is publicly available and I started to calculate the overlap coefficient so how how correlated are you with other people's portfolios trying to estimate at the upper bound and at the lower bound what will happen so Jason this is a a proxy of answering your question what about entry price well if you have a very low correlation which touch would we have you're less you're less exposed to bad entry price because it wouldn't have been a bidding war to get into these companies exactly you picked your right spot you you went into areas that were earlier so you were able to risk manage a little bit better but if you have a highly correlated portfolio now your marks become very susceptible so my guess is if you take the 700 billion dollars and you calculate it for all the VCS and you look at their correlations and their overlaps you can probably guesstimate where that 700 billion dollars of impairment will come to and you can you can lay it out across any organization that you're interested in trying to find a solution for by just stack ranking them and by looking at the at the at these correlations and this is by the way to be clear nothing about the quality of the organization or the people but this is just simple portfolio mathematics and how portfolios tend to play itself out in moments like this well and there's some interesting data in here as well a freeberg you probably are aware of where some fund like let's say Founders fund and coleslaw have a close relationship because Keith were boy was at kosa and then he moved to Founders fund so you see that nice dark purple there where they have a high correlation Investments interestingly index seems to just follow Benchmark and Bill gurley's Investments and plow into them that seems like the highest correlation see here's the thing if you had to steal man the defense of that strategy Jason I would say in an up Market Benchmark is a 500 million dollar fund where I get no allocation if I was a smart LP and I did this work I'd be immediately knocking on index's door saying can I put money in you because in the back of my mind it's basically getting leverage on benchmarks portfolio yeah you figured out how to follow them yeah yeah but when the cycle reverts and you know you're not the only one that wants to copy benchmarks portfolio everybody does and if these correlations are too high and the overlaps are too high then you start to get into a cycle where you put yourself in a position to actually suffer from the market beta much more even when you can benefit from the market beta in an upcycle free break you want to analyze this chart and chamat's uh thinking here his theory I don't know I mean I just think this has become a pretty competitive market and a lot of the values been competed away well I mean I think for a lay person please yeah the long-term value creation of Technology of new technology is going to remain high the Market's going to pay for that and so you know new market value creation new market cap is going to continue to be built every year what's happening when venture has a low multiple is that number one the good companies end up the founders end up owning more of the company and they end up you know having a higher percentage ownership when the company ultimately gets sold or goes public because they were able to get VCS to compete against one another and as a result pay a higher valuation and as a result buy less of the company and then number two is that because the VCS that couldn't get into that company still had a bunch of money to manage they wouldn't put money into crappy companies so you know it's a lucrative business you guys everyone's in that business because it's a lucrative business and that certainly it takes a decade to realize whether or not you're good at it so you know you have this period of time as Brad shows that maybe a decade before the lp Market learns who is and who isn't bad and meanwhile those folks who got competed out of the good deals you know they don't look very good and the folks that are left in the good deals own less of a company and their returns get diminished and you know I think ultimately this Market is I'm 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 Brad Howard yeah Brad how would LPS look at chamat's analysis there and how do they look at the Clubby nature and overlap you know writ large in our industry and then whatever other insights you have yeah no I I mean I think uh very much disagree with with David that all the returns are getting competed away the the huge difference between the Venture market and the private Equity Market or the public market is it the Venture Market is unquestionably a power law Market okay 90 of the gross profits and the returns go to 10 of the deals and 10 of the investors right so we just showed the average of the top quartile but if we show Benchmark one or two or Benchmark six or seven it's ridiculous right the cash on cash returns over 20 years on those funds let's just go ahead and explain that to folks most Venture firms here are getting 2x on average that's the average and is that average for the top quartile or all VC firms it's the top quartile of VC firms their average is 2x yeah this is at the upper 20 to 25 percent would include the 75 bottom what would the trash Brad let me ask you a question What If instead of looking at the top quartile you just looked at the top 10 Venture firms yeah because the number of venture firms has exploded over the last decade and a half let's see and so I think the point that you're not getting is the top 10 changes every vintage and and the problem is if you are aping the wrong portfolio in that vintage you'll get run over right and so the real goal of this and I I also tend to disagree freebrook with what you say I don't think the returns are getting competed away I actually think it's more Alpha than ever correct and you got to be a good picker and if you're a momentum investor you just need to be aware on the way in that you are going to put your portfolio under tremendous pressure in drawdowns I think the other thing the other thing it does this idea of the industrialization of venture the softbanks the Tigers like like it's a myth you can't industrialize that you can indust you can build an index fund to the public market because you can buy every company you might even be able to build an index like Fund in private Equity because everybody can go bid for every company but Venture the founder chooses you that early GP chooses you and so if you try to build an index fund that misses the best deals and I think there's adverse selection the bigger you get the less likely you're to convert the best deals now you're really in trouble Brad do you think an index of first time VCS outperforms kind of that you know top quartile index so you know there's some LPS that select in to just solo GP first time fund manager first time fund or you know maybe second time but solo GP but it's kind of like you know first into the market before you really scale up that's where so many of the returns are found it's a lot of funds like MIT they look for emerging managers because you tend to be younger hungrier you have experience you've got a lot on the line but certainly if you look at the hundreds of startups in VC land over the course of of the last several years uh 99 of them are probably garbage and will fail and and won't work so the All-Stars will be All-Stars and and the rest won't somebody asked me I use this analog they said hundreds of new people have come into Venture and I said yeah it's like it's kind of like a marathon you're right we had 500 Runners and now we have a thousand runners but from my vantage it's the same five to ten Runners competing for the podium week in and week out in that top ten in that power law it doesn't change a lot yes there have been people break in we know how hard it is to break in to Silicon Valley nobody invited altimeter to the dance nobody invited Social Capital to the dance nobody invited Jason and Candace to the dance it was the opposite they locked my doors because it's a highly lucrative business dominated by some incumbents that had huge Brands they didn't want to share the fruits of that we showed up we worked hard we build incredible teams we had conviction right and we were we also had good fortune right yes we were smart we were we placed some good bets but you also have to get lucky in this business we were lucky to be born at this point in time lucky to start when we did in Silicon Valley I'm going to finish just with this one point this whole experiment of venture capital is less than 30 years old the Modern Age of venture capital is 30 less than 30 years old we're going through this period where everybody wants to [ __ ] all over the industry you know tvpi is going to come down all this other stuff I think that Venture my dad when he went to start a business had to borrow money mortgage the house think about the friction for somebody with a young family if the cost of failure was losing your house putting your family In Harm's Way versus some young startup in Silicon Valley today where the consequence of failure particularly if you if you conduct yourself with Integrity is that you learn a lot right there's no losing a house there's no cataclysmic outcome for your family so to me when you look at the economic unlock that we have in this country by reducing friction to invention by reducing friction to experimentation I am incredibly bullish on the future of venture I think Founders are the engine that drives the world forward right that's where we get electric cars that's where we get rockets that land themselves that's where we get mRNA vaccines and so there will be cyclicality there will be industrialization there will be big funds in small funds but the reality is that this ecosystem is a massive competitive Advantage for this country I think when we look forward at the information age over the next 30 Years the power of this ecosystem is more strategic advantage to this country even than natural resources I'll say I'll say something orthogonal to this which is in order for that to happen just to build on the point Brad of of your guests that you think we have an entire generation of uh financially enumerate General Partners at Venture firms and Venture needs to be a pillar of growth in society and I think people need to have more financial tools and underpinnings to do their job why because over these next 10 years when maybe you have 500 to three quarters of a trillion dollars of value destruction and it's because you didn't think about portfolio construction properly that entrepreneur that needs your money you will have to say no to them or renege on a deal or let them down and the reason is that you didn't think about that on the way in and so these are practical skills that every other part of the financial asset infrastructure has to learn we are taught the hard way you know we are taught in the public markets how to think about dispersion correlation Alpha Beta you're taught in private Equity how to do it you're taught in every other asset class and we romanticize venture to think that none of that matters but in a moment like this you will see how much or how much it doesn't matter and if you're going to live up to the to the actual commitment you make to an entrepreneur you better get financially smarter is what I would say all right let's uh move on do you want to go to uh stock picking or Lyft versus Newsom on this prop 30. I want to hear that Friedberg dive tribal stockpicking you do okay I want to hear it on here well anyway there's a bunch of people talking about uh index funds versus um buying individual shares and being a stock picker Elon and Kathy Wood uh got into this on Twitter and we all know the arguments for passive versus active and there's large active funds out there uh that are just programmatically buying and Elon and many think that active would be better for society or a bit more active free bird what's your take a business is a over time it's supposed to be a machine that takes money in and puts money out and then there's money left in the machine it's like a box money comes in money goes out and over time the objective the money coming in which is sales or Revenue exceeds the money going out and the Box Grows Right the assets grow and the best way to look at that is in the financial statements of that business you know the income statement the balance sheet the cash flow statement but we and then there's this narrative that can be layered on top of those metrics that measurement of how well that business is performing over time and that narrative is what drives a lot of investment decisions uh today right I see whether it's an analyst writing an analyst report or a portfolio manager or an individual picking a stock everyone's got a reason why they're buying the stock and they say here's my thesis and what happens is everyone looks at that box looks at that business looks at that thesis from a different angle and there's always something you're missing so there you know there's some element that is driven by imperfect information and in some cases it's just heavy bias you know you look at a stock you're like hey I really like Disney plus I really like the subscriber growth but the question fundamentally is over time what is the revenue generation and the profit generation potential of that one thing you're looking at and what are the hundred other things that are going to contribute to that business that box taking in more money or spending more money is that box going to run into a regulatory problem is it going to run into a customer problem is it going to run into a Content problem is it going to run into competition the number of issues and opportunities that any one of these businesses can and will face is infinite and every participant in a market is looking at some different set of those opportunities or threats and every participant in that market is making a difference value judgment and so very often people will buy a stock because they see their sliver they convince themselves that based on the sliver of the perspective that they have that this is something I want to own they don't do the work on what's the income statement balance sheet cash flow gonna tell me over time about the quality of that business and they don't do the work on what the valuation of the business is relative to comparables relative to Future earning potential and I just wanted to have this diatribe because I see so many individuals doing stock picking and over time because of this Myriad of things that could go wrong and will go wrong or may go right or won't go right or the regulatory thing or the market thing or whatever interest rate thing hits that stock and the stock price goes down eventually everyone gets hit on the head and everyone reverts to mean or below mean meaning the average of the index over time or underperforms that index over time and so I mean for me I spent two years I I know we all went through some sort of investment banking training I spent two years out of college without a I had no Finance econ or business background I worked in Investment Banking learned how to read an income statement balance sheet cash flow learn to understand how business performance ultimately translates into Financial outcomes and spent a lot of time on valuation and figuring out just because you like the story of a stock you like the story that the CEO is telling you it doesn't necessarily mean that you're paying a fair price so if you if everything they do goes right this price can still drop and I think that this is a really important set of lessons for people that are individuals that are doing stock picking which is to number one message and this diatribe is specifically targeted towards day Traders retail correct I don't know if it's just them I think it's just generally like make sure you understand how to read and ink buying a stock you know what the total value of the company is based on the price you're paying and how do you justify that that total value makes sense relative to your model of the future outcomes for that business and then number three recognize and be cognizant of the fact that whatever one thing you're seeing that you think you've got some Edge or some advantage on because no one else is seeing it there's 99 other things that you're not seeing and this is where everyone learns this lesson over time and everyone gets bonked on the head at some point and making these decisions and it's why every stock picker or nearly every we can talk about the greats at some point here and where Alpha can be generated and so on but generally most stock Pickers over time underperform the index um and it's just particularly with the retail movement of the last couple of years I I see a lot of thesis here's my reason for buying this talk that excludes understanding the financials understanding the valuation metrics and also excludes the whole Litany of things and all the diligence that goes into thinking about all the other angles you might be missing a bottle it turns out that it's hard to be good at anything insert the blank takes tens of thousands of years of practice in investing I think what I have learned is that it's very easy to get caught up in the Mania I have also learned in the last decade that you know we really benefited from zero interest rates it was a tie that lifted all boats and I have learned how to think about correlation and the difference between Alpha and beta and how to construct portfolios that I think can be all weather portfolios to friedberg's point those are nuanced long tail skills that you'll only take up if you're really passionate about the craft it's not dissimilar to a person I'm just going to use golf as an example who learns how to hit a fade versus a draw and who learns how to really manipulate you know their wedges in very specific ways and these are all long tail skills that come in when you decide you want to master something and it's just important to note that that Mastery is required to be really good because otherwise there'll be times where you'll go out on the golf course and you'll crush it but then you know there'll be other times and most other times where you can go and get run over because it's hard so that's my only comment is that this is like everything else it's not nearly as easy as it looks like Brad you pick stocks for a living should retell how involved should retail investors basically they just buy an index I don't think it's fair to say retail what I think my point was really about no his point is everybody okay sure everybody my point is saying a thesis and excluding all these other factors that are critical in making a decision about what you're buying and whether you're paying the right price means that you have to make sure that you're expanding your point of view on whether or not a stock is worth buying at the market price today and I think having that broader perspective is what I see missing in 99 of the chatter on Twitter 99 of you know folks talking about what thing to buy maybe they're buying it and I think it's critically important you're saying that most investing that you see is very narrative driven and that narrative can sometimes be so powerful that it overpowers all the other elements that one should be doing to get a full picture of why you should be buying something is that I think that's a fair summary tomorrow yeah yeah and I think it's um you know it's and it's it's it's just about how so much of what goes on on CNBC on uh a lot of Reddit boards not all of them there's very sophisticated folks there doing very sophisticated financial analysis and looking at all the angles of a stock setting the valuation but so much of these conversations exclude what you're paying and what you're getting and exclude the broader context of all the things that could and may not happen with a particular business and as a result at some point one of those things blocks you on the head you lose 50 and you're like oh my gosh and sometimes and sometimes if you try to inject that logic into those channels you'll get brigadooned bring it it'll be absolutely brigadooned Brad what do you what do you think uh in terms of people's access to markets I guess would be another way to look at this and people's propensity to just you know gamble let's call it or maybe not make thoughtful decisions I kind of think if our friend Bill Gurley was here he'd be like this is a five-minute conversation about the statement of the [ __ ] obvious um you know this is stock picking's hard really is that the theme of this section yeah stock cooking's hard very little Alpha has ever been generated in a sustainable way even by the greatest people of all time I think you know maybe something that is a little bit useful to add two things not all good companies are good Investments price of Entry matters okay so I hear a lot of people saying well I'm gonna buy that because it's a good company that I don't even know what that means exactly right good good relative to the price of Entry but the second thing is the single greatest power we have as investors the Green Greatest single source of alpha right other than stock selection so choosing the right company time Arbitrage okay so do you have the ability to own something that is a growing asset over a long period of time so that if you got number one wrong you bought it at the wrong time [ __ ] happened in the world they miss a quarter Etc that you're not forced to lock in those losses because you over allocated to that so this idea around portfolio management is a principle component of overall stock picking is it's just absolutely critical so I think it you know I don't really I love the fact what I put myself through college I put myself through law school through business school day trading stocks out of the back of the classroom I'm grateful I live in a country that let me feel like I had some Alpha and that I could do that and I could go read the newspaper and sort it out and I wasn't building sophisticated Financial models so like you know I think there are ways that folks can do this there are a lot more ways to lose money than there are to make money in a sustainable and durable way right and so as investor what we try to do you know we've got 90 percent of our portfolio and our top five or ten companies okay I'm not an index and the deal I have with rlps is I'm very transparent with them they know that we're going to own companies in size and it's that portfolio concentration and our time Arbitrage holding companies for three years or longer that is a strategy they choose to believe in and sign up to but I know a lot of greats who would never subscribe to that strategy so know your strategy execute it allocate a reasonable amount of capital so when all of these unknowns that day Friedberg talks about come along you can react accordingly and you know the final thing is if it's not fun for you right like if you're actually not passionate and curious about like studying this stuff and learning about it not everybody is then don't do it right then don't do it then just put your money in it you're not going to be good at it the analytical depth and rigor that the greats employ to be successful at picking stocks at picking businesses and investing in them and selling them at the right time over time it does not make for good Tick Tock content it does not make for Good short form content and I think that's why we've seen this dumbing down and this kind of short form thesis-driven Narrative Approach to content creation around markets and stocks that ends up causing a lot of people a lot of harm uh you know you watch the Jim cramers of the world I don't mean to disparage any one individual but that sort of content that's like this is a great company we should buy it like let's go and uh the the depth and rigor takes a lot of time and a lot of effort to really do right and then you get hit in the head you know when we um and that's that's what I've observed lately and in a really kind of flurry way particularly across social media and so on that's uh that's why I just wanted to talk about this topic today just to build on top of what you're saying Warren Buffett made this very famous bet in 2000 it was him versus a bunch of hedge fund managers and they were able to pick a basket of hedge funds and he said I'm not even going to pick myself I'm going to pick the s p 500. and the low-cost ETF the Vanguard ETF and he said we'll check in like 20 years later anyways you know the punchline of the story Buffett won he won like a million bucks that he donated to charity and these hedge fund folks lost and so to build on your point Jason time and time again the smartest investors in the world I.E guys like him have shown us that the most predictable way to make money if that is your goal is to own the S P 500 which is you know a dynamic index of the 500 best companies in the world so there are these people doing all the hard work for you and they have very strict criteria of who's in S P 500 company or not now yes if you cherry pick other companies that are not or you concentrate in some will you generate better returns absolutely but systematically over time that thing has lurched forward at eight percent a year you know nine percent a year if you invest dividends you can approach 10 a year um and so if if you really want to just grow your wealth that's a very simple Steady Eddy way to do it and to take a small amount and then go and you know experiment with it to learn make sense but I think it's important to make sure you're going Their Eyes Wide Open to try to actually learn Buffett of course says the index works really well but then he's got 50 percent of his public portfolio in apple over the last few years so he clearly believes in Alpha as well but you know back to friedberg's point since we brought up Buffett you know somebody asked Monger why can't why can't people just copy what Buffett does and he said because nobody likes to get rich slow nobody likes to get rich though if you wanna what did a zero percent rate environment remind us all over the course the last few years everybody had a grift everybody had a get rich quick scheme I don't care whether it was crypto flipping or whether it was house flipping or whatever it was everybody thought you know this was easy and frankly looked at guys like us oftentimes and said you're the dumb ones you're playing the game that's really hard why don't you just you know uh flip some crypto and I think we're back to a world that if you really want to you know by the way yourself how dumb did you feel I felt so stupid all these tokens minting minting billionaire billionaire billionaire billionaire billionaire billionaire and I just I just sat on the sideline to your place it just made you it made me feel so stupid I felt super nice just like I I what who's the customer and how much do you charge them and when you can't get that basic answer of who the customer is and how much it costs for them to buy the product or service the Brad's point I think the punch line is and then you know at the 11th hour it's like there's a tendency to just capitulate and say okay forget it I'm in and that's when all the money gets torched real quick there's a proposition here in California where we vote on specific uh ballot measures not every state has this but we have prop 30 coming out this is a 1.75 tax on income earned incomes earned over 2 million for the next 20 years in California which by the way had 100 billion dollar Surplus that would go towards clean energy this was proposed originally by environmental groups but uh Newsome has come out to battle against this which would seem counter-intuitive because he's so Pro environment what this would do is spend about 80 percent of this hundred billion in new tax revenue over the next 20 years 80 would go towards charging stations for EVS and motivating customers to buy EVS 20 would go toward to combat the uh crazy amount of wildfires we're having here he uh gavinusum that is called this um a cynical scheme devised by a single Corporation Lyft to funnel state income tax revenue to their company Lyft has provided almost all of the 40 almost 48 million in funding for this prop 30 and the reason is because California is going to require 90 of ride sharing miles to be traveled by zero emission vehicles in 2030. you know on top of that that California is going to not let you sell anything other than EVS in 2035 if this continues now you've got a bunch of people on the other side of this doing anti-prop 30 including the California Teachers Association because they want the money read Hastings over at Netflix Moritz over at Sequoia Sam Altman over at open AI what do you think of this um Freeburg I'm curious sorry what side are they on Jacob no they're they're saying don't do this because they are trying to control taxes and they're on Newsome side Newsome side hey this is a grift by Lyft because Lyft is concerned that they're gonna have to you know bear the brunt of 90 of miles so I guess the I don't know if it's original sin but the the one of the levers here is Lyft is got the majority of their rides are in California Uber has stayed out of this because they don't have as much exposure because the number of rides in California is a smaller percentage of their overall Revenue Brad you have some thoughts too here I think so Freeburg or Brad I'm just looking at the board of directors and Lyft and thinking to myself good God what are these people thinking spending 40 to 50 million dollars on this it just seems that they've totally lost the script the company has way bigger problems way bigger problems to focus on right than you know this measure have a little faith in the system that if we don't get to a place where this is reasonably practical over the next 10 years then I'm sure we will evolve right uh the legislation around this you know kudos to DAR and the team at Uber for not Running Scared on this right for not trying to push this through these corporate governance initiatives guised as referendums in this state I mean this is just bad politics bad policy I mean we got Valerie Jarrett on the board of this company you've got political sophistication on the board of this company I want to be you know I wish I was a fly on the wall I want to know the conversation that went down and who raised their hand and said this is the highest and best use of 40 million dollars of our money crazy yeah right makes no sense Freiburg you have thoughts on if I mean you've talked before about how you think the free market should solve this what is the what is the governance structure of lift guys I knew that was coming I knew it was coming did they have security shares here anybody look I don't know the answer to that so I think that the tax rate in California is high enough now that we all have friends friends in our poker group who have left for the State of Texas or the State of Florida where there are lower tax rates and where they feel like they're getting more value uh for their tax dollars there's certainly a calculus going on with Newsom I believe in you know the impact that having higher tax rates would have on what is clearly not just a theoretical but an actual evidenced um you know Exodus from the state of wealthy and high-income earners this could be like you know at some point there's a Tipping Point that looks a lot like France where you raise the rates high enough enough wealthy people leave and the net tax dollars actually go down like what happened in France when they introduced their wealth tax then they reversed it and everyone came back I will say I don't more important long-term point 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 if you look at um if you assume a five percent long range call it 15 20 year uh Horizon for uh for interest rates even four percent on 30 trillion dollars of outstanding debt and you assume that the voter base will never vote to reduce Social Security or Medicare uh entitlement programs and obviously the defense budget won't get cut we are not going to see a situation in this country on a federal basis where we can actually meet all of our fiscal obligations without incremental tax revenue and I think it is much more likely that you know look whatever happens with the state initiative happens but I think it's very likely that over time the only way for the United States to uh to bridge its fiscal Gap is going to be to raise income to increase the tax rates I don't see another solution because I don't think that the federal government or in our kind of democratically elected Congress we're going to see a system that's going to say hey let's go for austerity measures let's reduce entitlement programs both sides will say that it's just not going to happen so tax rates higher tax rates I think are coming well you know maybe California will skip over this particular generation but I don't see how the United States continues to thrive over the next 15 to 20 years without tax iterate that will today seem exorbitant well in the last 20 years we blew through a debt to GDP that was I think 57 percent and it basically doubled and so David to your point when we wanted to feel prosperous what we did was we financed it we went out and we you know put out a ton of debt in order to make sure that our entitlement spending or our defense spending or whatever the things were that we need it as a population to feel like we were growing and moving forward as a society we had so that is the Practical nature of what happens and look a lot of people think that there is some upper bound to debt to GDP and I'm actually of the opposite view which is I think that you know the quote unquote invisible hand justifies us moving debt to GDP to higher and higher rates so the first time the United States went past 100 percent we thought it was the end of the world it turned out it wasn't we'll eventually go past 200 somebody will clamor and you know be anxiety riddled but they'll take some ssris they'll be okay we'll keep moving forward then we'll get to 300 percent we'll keep moving forward so we are in a debt spiral that is a feature not a bug of how Democratic societies work as a companion to that I do agree with you that taxation kind of is a pendulum it it Ebbs and flows and you know we're in the part where it's going to go higher before it goes lower but I want to tell you a story which is that in the beginning of this summer or sorry this fall I was in the Middle East and then I was in Asia and they have very different taxation schemes right and many of them have zero corporate gains tax and you know sometimes zero income tax but then the opportunities for them to be able to invest and drive returns is also commensurately lower meaning there's not as much Alpha in most of the opportunities that they see whereas if you go to California you have to pay 60 tax but then you know you could be an angel investor in Uber you know and all of a sudden take 25 000 and turn it into a hundred million which is UN ungodly it's incredible so I think that in my opinion actually like there's actually this beautiful symmetry where even if taxes are high your earnings potential is commensurately higher such that the net that you're left with is the same as if you were in another place where taxes may be zero but you're just not going to get exposed to the same ways to make money and I think obviously there's Corner cases where that's not true but I don't think sweating taxes is a really important waste it's important way to spend somebody's time I just think it doesn't matter Brad funnel word I would just say the beautiful thing about Federalism is we get to a B test in real time uh different points of view and so we're seeing it the biggest a B test maybe in the history of federalism between the state of California the state of Texas and the State of Florida and it's not just tax rates right when when Elon leaves to go to Texas we have the head of the California General Assembly right changing her Twitter profile to say Good Riddance and flipping the flipping the bird to Elon right there is a hostility toward business that has emerged in California that I think is commensurate and related to the tax rate but also separate at the same time we have the mayor of Miami texting us asking us to come down for a visit we have friends uh in Texas who are literally politicians who are marketing their state to people in in California and we're going to be able to political scientists will look back in five or ten years and they'll be able to answer those questions for you but I suspect that that makes us a much stronger place for experimentation than countries like France where it's all or none and just to give people an idea to Jamal support about point about debt to GDP here's the chart early part of our lifetimes 50 percent 1990s 60 70 percent uh after the Great Recession the pandemic 120 Japan's at 200 I think so there's obviously it doesn't it doesn't mean anything I know that your payments at some point yeah I really don't think so because I think what will happen is you'll just move the yield you know the yield to maturity will move out and you know we'll issue again you know this is the funny thing we talked about this last night at poker like you know Trump's ideas some of them were actually very brilliant they were just packaged through this lens of being a total goofball so you could take it seriously but 100 Year bonds when rates were zero now looks like oh my God what a brilliant move well I mean if you could take a 50-year worldview about climate about nuclear energy about semis we didn't get to semiconductors again this week we got so much good stuff but you know we do need to take very long multi-deca looks at investment and why not make a 25 or 50 year bond for semiconductors can I actually just do a small PSA sure quickly public service announcement from Tremont the more you know go I went to Blue Bottle Coffee today and I asked for a latte and uh they gave me a latte with oat milk that's their default which is disgusting and I find out I find out that is now their default and brutal and I said there's a lot of normal people that don't want to ingest that chemical spew into their body and so this is just a shout out like just a comment to Blue Bottle like can you please realize that a lot of us are normal we want to come to your store and then you know not have to ask for the long tail alternative can you just serve the things first you're signaling coffee shop yeah most of the people still drink milk okay um I'm not trying to Brigadoon you blue bottle but I'm not going to go to you anymore as a customer because I find this stuff really dumb like can you just have milk so that I can ask for the oat milk if I want to versus giving me chemical stuff that I don't want I don't want that yeah that's and and complaining about oat milk is that what's going on no it's this is this is where we are moment it's just like I just want milk I want a latte I mean I want to go and support you guys I want to maybe you know maybe the cow doesn't want to make that milk for you after its baby was ripped away from it oh boy here we go you know here we go it's day we and we we survived 90 minutes and here it comes is the point you know did the cow agree to be in service to you to make your milk you think I need to have a verbal contract with cows I mean well yeah I mean are we going to do the olive fed beef next week or not the best translator of the cow human protocol who who is it you is it one of your friends like what I don't know actually I am working on a neural link I'm not sure I'm not sure that the default assumption that the cow should be there to do whatever you want it to do is a fair assumption I think that'll change over time but it'll take some time I I think that that's completely fair and reasonable but what I'm saying is right now while there's an entire you can't believe you said that economy is made my will well there's an entire entire economy of people that shouldn't get rolled over because you want to impute the emotions of cows I'm allowing you your freedom to want to impute those emotions of cows while I would like to support the dairy industry and buy milk so can I please do that no I want to impute the freedom and rights of the cows but that's going to take some time but sure go ahead have your milk for now and you're allowed but I right now will take the side of the Dairy Farmer I just want milk did anybody get your chicarin outrage your trim off Karen outrage shut your Karen on tape is this trending on Tick Tock yet when you admonished the barista's fault I just think it's I didn't make a scene or anything I just got it I taste it because I just said can I please have a latte assuming that it would come with milk like most normal places yes and now I have to actually ask for milk because they think that this chemical composite stuff that's called oatmeal have you looked at the ingredients we had this conversation yes we didn't even get to MailChimp CEO Ben Chestnut who is you know like one of the kind great CEOs of Our Generation getting yeah his memo is his last name really Chestnut I believe it is yeah his sister is a great guy I've met him so many times incredible human and he's been ousted should we do outros because you didn't do intro did you happen all right so here's the outro yeah four uh for the Sultan of science the queen of quinoa himself climbing the Stray Cat leaderboard as we speak David Friedberg follow him on his Twitter handle where you can get all kinds of hot takes from science to Ukraine at Friedberg is talking about I never tweet I know that's the joke okay so with with us again the anchor he'll be doing a Twitch streaming where he translates the emotions I'm actually doing my cooking show which has a base of oat milk it's my oat milk top 10 beverages tonight on Twitch just follow stray Friedberg get it I don't want to get brigadooned by the oat milk Lovers by the way they're coming they have milk stands are coming for you man you listen I don't want that chemical stuff in my body but I'm not going to stop you from doing it I'll do a diatribe on chemicals in oat milk next week what should we drink if you did have a choice Freeburg if you didn't want to drink the chemicals in a Oatley what would you drink what would you advise what do you drink I don't know I'm gonna drink soy milk oat milk whatever okay all right but you okay but you're okay and uh um bringing tasted milk I drink the beautiful glass jar no I'm asking free burgers three dollar returns for each glass bottle I returned them and get them from goodies have you tried have you tried look I'll tell you what is going to happen in the next he's never had milk 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 it will be built in a slurry I mean you can make fun of it but you do work in the tech industry but yeah I mean Precision fermentation is the future of making animal proteins I'm telling you there is an economic model that will work that's great you know but I'm saying by the way between now and then can I just do things number one is there's a taste in a flavor profile I've grown up with that I would like and I don't think I'm a bad person so I'd just like to have that okay not be made to feel guilty about it okay and and and number two I don't want to put chemicals in my body okay so if I can find a natural thing that I like can I please just drink that can I just please blue bottle have that in my and coffee without having to explicitly ask for it yes you you will get that and number two they're short it's still owned by Nestle and they're the largest Gary but has still has a short on Oatley so let's just keep this going for just two more weeks okay let me ask you an ethical moral questions no I'm joking he does not have a short I don't even know if oatley's public I'd rather you ask me an ethical moral question than a political one so I'm going to yeah I mean we got a break from Ukraine this week would you have a if the synthetic version of milk or steak was made like and is a protein that is exactly the same to a cow would you have a problem morally with eating and or drinking it no so the objective of what's called Precision fermentation or some people call it biomanufacturing you take the DNA from the cow or from the chicken you put it in a yeast cell or a bacterial cell and you put in a fermenter tank you put sugar water in the tank and the yeast Cellar bacterial cell eats that sugar water and it spits out that protein you've programmed that organism to make that protein and instead of growing a whole cow or growing a whole freaking chicken you're growing the protein no because no animal died in the making of the process you know you're not taking can I quote Dave Chappelle here go ahead yuck all right it's identical to the protein you're eating otherwise tastes the same it's the exact same compound oh like there's nothing about it that's different and thanks to the dictator thanks to the southern science and for the fifth bestie coming in and and doing a great job today on behalf of our friend this [ __ ] David sacks who is busy in a secret clandestine peace uh making junket to Ukraine I am the world's greatest moderator Jason Kyle Kennis we'll see you next time on all in love you boys we'll let your winners [Music] and they've just gone crazy [Music] besties [Music] release [Music] [Music]










my stance really took over the comment board yeah sax how was your week off when uh you you gave up on the Pod for a week and then did four media appearances for 90 minutes each on other pods you did six hours you took off from this pod to give your ratings to Megan Kelly and uh Dave Rubin yeah I did uh 45 minute hit with Dave Rubin on Ukraine so be sure to check that out and then yes I do but no Megan Megan Kelly uh Friedberg and I did that the week was that this week or okay surprisingly she didn't invite you back yeah I don't know what could have happened it was so great it was so great that was awesome I love Megan kelly didn't she call you a prick yes you did yes she did [Music] [Music] sax we have not had such negative panning comments on YouTube since jaycal got brick of doomed for his uh Pro Ukraine for sacks not showing up I get doing for asking him a question then I could bring a dude from him getting rigadooned I don't know maybe it's just honestly when will you guys realize that there are three to five million people a week that listen to this podcast a hundred nitwits who comment on YouTube they're neither right nor wrong they should just be completely ignored turn the comments off the only thing that matters are the ratings if you care about that at all and last week was one of the best rated shows we've ever done I think it was highest rated after elon's episode it would have been even better with David so we should bring a dune the brigadooners those nitwits should be ignored I think this is a little bit like a band where like you can't mess with the chemistry of the band and that's the lesson even though there's a lot of infighting in the band like it works and so you don't want to second-guess it too much well and then if somebody from the band gets sick and somebody sits in some incredible guitar players sit in people are like that's not have the T-shirt of I need my guitar player back all right anyway well I'm just glad Ringo showed up 22 minutes late welcome back Friedberg uh let's get started I don't mean to [ __ ] with the bed I'm not gonna [ __ ] with the fan Ringo was an underrated drummer Freebird you have a role here that's amazing I think you're more alive maybe bass maybe bass player you know I'm John bass guitar George Harrison George Harrison yeah actually George Harrison very underrated but you know I'm I'm pretty clear have you guys ever heard uh the version of Blackbird that Paul McCartney did just with the ukulele no I'd like to hear that maybe one of the best songs ever recorded one of the best records I've ever heard fantastic incredible all right listen there's so much to start with but I've black birds swimming in the dead of night night take these broken wings and learn to learn sax were you at a building on Market Street Yesterday by any chance no fly zone the homeless shelter well I think you can talk about Abandoned homeless shelter I think it's fair to say that there will be a lot of people that we know that will go and help make Market Street better make Market Street Great again make marketing absolutely absolutely I'm looking forward to some tofu salads and meditation Namaste literally I think 8 000 square feet is meditation rooms that haven't been used in five years quite honestly though like on the other side of this I would say parag agrawal does deserve a statue for shareholder value creation what 54 20 a share which by the way we said was going to happen and it did happen was ginormous in this market and I just want to see the look on that barista's face when they're warming up the oat milk very very tough knuckled uh company Builders walks through that door yeah the only has left the building let's just leave it at that wow so I guess we can talk about it now uh Elon has closed the deal we can talk about it now well no I'm just saying sax and I could not talk about this because we had you know we couldn't talk about it for legal reasons they deserve a statue in front of the bronze statue for shareholder value creation Market Street in front of that Twitter building best um Tech CEO of the year girl hold on a second so your theory is that he did such a bad job in terms of suppressing viewpoints and and censorship that he actually induced Elon to want to buy the company so he could fix their censorship problem no my theory my theory is simpler than this which is they got great representation to do a very bulletproof deal and it turns out that contract law still matters in the United States and Elon did the right thing and just said you know what I'm gonna own this thing and probably double or triple my money so I'm just gonna go and do it and I'll do it for the benefit of everybody else but my point is more that they and the board had the wherewithal to fight because you know that they could have easily gotten intimidated and capitulated and in doing that whether they were right or wrong or good or bad is irrelevant to me they represented shareholder values well and they got shareholders paid in a moment where the stock market is still down 20 30 40 percent where big Tech is down 50 some of these big tech companies are down eighty percent these guys sold the company at a premium and so that just you know we just have to acknowledge that that happened that's all well and just give you a little bit of background on Twitter historically you know in 2013 the stock was trading at 69 dollars and it got sold for 54. like this company has been sideways for a decade essentially in terms of its market cap and so but there's no doubt that I think Elon can turn this around pretty quickly and make it massively profitable I think and clean up the bot problem very quickly if you can land two rockets at a time create self-driving cars I think you can figure this out this isn't rocket science and elon's done rocket science so I think he's going to figure it out right yeah for what it's worth I think elon's really excited about it and yeah there is tremendous potential at Twitter I mean the company's been sideways because it hasn't done that much in 10 years but there's so much you can do with that product it's just you know there's a ton of potential I think the best way to think about it is he bought a quarter of a billion miles for 44 billion dollars and in the grand scheme of things that is I think going to turn out to be pretty reasonably cheap especially if he can layer in a few of his bigger ideas and uh and I think that those mouths the value of those monthly active users could probably double or triple pretty quickly right I think that was the so I just sent you guys this link from this analyst and he said that Twitter was bought at 172 dollars per monthly active user compared to 81 dollars per monthly active user at meta where they said today so but that's but that's for a very different point which we can double click into because meta is its own bag of you know it's a little bit of an unfortunately you know already attached to it well and I'll explain why because the met the meta problem is it's it's a deep and a very dangerous situation that they've put themselves in which is why their male values are this low but you know if you had done this analysis a few years ago the trade was looking at meta's male values being so high where you would have said why isn't Twitter doing more so I know that this this is a little bit in my opinion cherry picking yeah well I think making everything verified and a path to verification which Elon has talked about publicly many times and payments uh you know he's talked about publicly many times just those two things alone could make the experience of being on Twitter absolutely delightful if everybody could verify themselves this thing could turn around so quickly I'll say I'll say what you're saying in a slightly more I think the most powerful change that Twitter could make today is there are two classes of users people who are verified real world identity yeah and people who want to stay Anonymous correct there is a hundred percent distribution fire hose for people who are real and there is a fire hose for fake people or fake names that you need to pay to amplify just that one simple change will cut through all the nonsense because if you want to see where the money is being spent you will be able to see very quickly because otherwise there'll be virtually no distribution for anonymous fake people and it'll Force those people if they really want to be heard that and that there's something valuable to say to spend against it well this really is about the brigad dunes and elon's been very clear about this you know it's pretty easy to get rid of the Bots and if people are opting in to putting themselves into the top class of verified users well that's a revenue stream right and so all of a sudden you know I don't know how many millions of people would instantly say I'll pay for this for five or ten bucks I think you're verified I think you're right and I think like what we want to do is like you know no offense to all the people out there although I don't really care but no offense but you cannot use Twitter as a coping mechanism okay like I get that life is hard or that you know life hasn't lived out to your expectations or you know there's envy and whatever of other people but to go out there and spew hate doesn't solve anything are you talking about brigad Dunes well there's also just a lot of people that are just in general they're just they're just mean and I'll give you a perfect example there's a woman that I saw on Tick Tock and she's like uh you know been married for 13 years mother of two kids and she was she had a thing that went viral where she was talking about who's in charge her or her husband and it was a very funny little thing and so I've I followed a couple of her videos just to see what else she had posted and one of the videos was how she has some complicated health issues which she was very public about PCOS and how it causes you know issues in losing weight and she posted a pre and post picture of her which takes a lot of courage and she was like brigadooned and it's like what is wrong with these broken people yeah that have to give this woman a hard time and it just it so to me these social media channels are not coping mechanisms they were never meant to be and so you know if they have to go to 4chan or a Chan or Reddit or whatever better to sort of create these honey pots of hatred than to have it spew everywhere because it makes for the rest of us these platforms to be unusable well sax you were the CEO of PayPal with Elon and Roloff and TL and everybody and that crew over 20 years ago and verified you understand pretty well because you yourself have been brigaduned of late and you've experienced this firsthand the psychological torture that made you take a week off from the show in fact because you were so under directs I'm kidding you had a planned week office you're allowed to have occasion which of the two ideas is the bigger idea payments making Twitter into PayPal including that x.com which was the original name of uh that was elon's payment company and he owns a domainx.com which is a bigger idea the payments or the verification which is the bigger idea for increasing shareholder value which would you do first I mean payments is an entire roadmap right so there's a lot that could be done there explain well I mean it's it's about I mean you could layer on a lot of services on top of that so it's not just like one feature look I think they're both compelling in terms of where they could lead I think what's amazing about Elon as an entrepreneur is he always starts with a mission and then he figures out how to turn it into a great product and a great business so for example with SpaceX the mission was to get to Mars to make life multi-planetary you would think that be a spectacularly unprofitable business but in the course of pursuing that mission he figured out the launch business and then the satellite business was starlink and I think starlink's going to be a phenomenal business phenomenal and like and likewise with Tesla he started with the mission of moving the world to sustainable energy yeah and in the process of doing that he created the world's best car not just the world's best electric car but I just think it's the best car in the world and Tesla is this amazing business today it's so far ahead of every other car company so look I think what's cool about what Elon is doing is he's starting with this mission of restoring Twitter to being a free speech platform of being the Town Square it was always meant to be and in the process of doing that he's going to figure out how to make Twitter into an even better product and in into a great business which is not today I think Twitter's losing you know a few hundred million dollars a quarter so there's work to do on all those fronts but um I think you know it's really impressive to see and you know he's still operating at the top of his game I mean 20 years after PayPal some of us are just doing a podcast but he is uh he's still alive some of us are exhausted I know I know we're tired but we're tired and he's like working 68-hour days he's been leveling up for 20 years and at this point he's like a level 99 Mage or something no he's like a crazy it's amazing to to see Freeburg the biggest issue I perceive in the short term for Twitter is going to be what to do with people like Trump and Kanye West or yay and of course that's all going to seem like Elon is making those decisions as an individual as opposed to for the platform Etc should he let somebody like Kanye West I'm sorry yay is Alex call himself who is in the middle of an obvious manic episode back on the platform should he let Trump back on the platform how do you think he should handle those two polarizing individuals specifically look I mean I think this is what's going to be really interesting to watch because there have been very successful very inspirational very intelligent very creative entrepreneurs that have started and built generally kind of open platforms at the beginning only to over time be challenged with the content that doesn't feel appropriate and then they come back and they make the necessary kind of moderation guidelines and they make the necessary edits to the way the platform operates this is how Google operated originally you know and then they ended up saying you know what if we're going to be in China we do have to create a censored version of the internet and they did that and that was controversial with YouTube they've got a lot of censoring and it was supposed to be just a generally open platform for anyone to use and they were even Larry and Sergey were kind of flouting dmca at the beginning and they were like it's not our job to monitor copyright you have to file a takedown notice and they kind of wave their hands in the air over time they realize that that could actually damage and completely ruin the platform and they had to go in and create guidelines and moderation systems and um the same with crew of EV and Jack and Twitter the same with crew of the founders at Reddit and I don't know if you guys you know remember that period of time when Ellen Powell was CEO of Reddit and she went in and cleaned up a lot of the bullying and harassment and nastiness that was going on on Reddit and she got a lot of controversy for why are you closing it down why are you censoring it Elon is a reasonable person and he's going to be faced with unreasonable people on this platform and when that happens he's going to have very tough decisions to make about what kind of platform he wants to have what's the quality of that platform you need to look like and then all of a sudden he's gonna have to look in the mirror and say did I step on the wrong side and you know he's he's idealistic and it's great and it's wonderful and I hope that he's successful but to some degree some amount of moderation is going to be necessary to create a high quality product would you if you were in charge or sell Freeburg would you put Trump back on the platform and under what circumstances and would you allow somebody like Kanye West back on the platform at some point obviously easily yeah you personally yeah look my content moderation guidelines you know it gets very nuanced very quick what do you allow people to say what are you not allowed to say and then if they violate them is there the opportunity for a lifetime ban I don't think so I don't think anyone should have a lifetime ban on these platforms so I'm totally would you do that for Kanye West who has been saying crazy anti-semitic stuff which has real world danger that's already started to spell over where people are putting up banners like Kanye's right about the Jews and they're putting up banners like over the you know 10 Freeway as you may have seen in Los Angeles how would you deal with Kanye specifically in a manic anti-semitic episode that he's been in look I think I think the question is anyone that's saying anything racist or what you know whatever might be deemed kind of uh to fall in that category there is a tagging mechanism and you have to figure out how to create the tagging mechanism based on that tagging mechanism the default is it's like when you go to Google and you search for stuff they exclude porn so all porn content that's indexed on Google index servers um is index is porn and it's default off there's a safe search thing you got to turn um I think off or something to access stuff that Google deems inappropriate sure how do you how do you do that and by the way I'll tell you when I worked at Google we used to have pizza weekends where you would go into the office on the weekends they give you free pizza and everyone would tag you know you'd watch porn and you would tag porn and so you basically go through the indexing servers they show you images and Google images and you click porn or not porn and it was just like hey come and volunteer come and help us do it and there was all these Engineers sitting in the freaking cafeteria attacking porn but actually you know that happened to sax and he saw Tucker Carlson and he said yeah that's porn I think it's my personal support yeah so I think Montclair had yes I think the same mechanism is needed on these social networks which is that you have to figure out well you have to figure out a way to use AI got it to tag content and then think about them is cable just let me finish for one second you think about them it's Cable cable stations on a cable company so they're the cable company and there's different stations and you as a user decide what do you not want to opt into and what do you want to opt into what content do you want to exclude from your version and your experience of Twitter and if you're okay with the stuff Kanye says you're okay with the stuff Trump says you can keep that stuff in if you want to exclude that type of content it's it's excluded for you and I think that's what Twitter ultimately has to become what do you think chamoth would you put Trump back on the platform and seeing you know Kanye West having this manic episode and saying you know basically participating in hate speech explicitly how would you handle those two specific instances in 2022 going into 2023. I think that there has to be a way where nobody is banned forever okay I think that it when somebody is banned temporarily they can be banned for any reason that violates a term of service that's well understood and uniformly enforced got it and I think that's the right of a private company but there has to be a way to get back on in the case of both of these folks there should be a way to basically you know have because of the the step uh the the quantity of their reach some sort of almost like tribunal or you know mediator that can understand what's going on because if somebody's going through a manic episode it's absolutely right to turn that off I mean these guys should have turned him off much much sooner because when you're in the middle of a Mania and I said this last week like you know like for example like this this relative of mine when they're in a manic episode it's 60 70 80 emails a day and text messages a hundred texts that I get and they're honestly they're vile yeah okay and they don't even remember them half the time and and you know they go through paranoia they go through Mania they go through these periods where they think they're completely right they go through these periods where they look completely sane and normal so yeah so it's a tough the most important thing when you have a family member in Mental Health crisis is to get the phone away from them that is a weapon that only continues the loop and to re-regulate this person and then there should be a way to prove that you're back in a re-regulated state to get these tools back but I think that that needs to we just need to acknowledge like there's just a lot of people with mental health issues there's a lot of social media there's a lot of damage that can be done it's not to forgive these people but it's to explain that in moments you've got to shut these channels down and then give them a way to come back when they've re-regulated sex how do you think about it well with regard to Trump I don't know what the continuing reason is for him not being allowed on the platform remember that when he was banned it was considered to be a temporary measure because he was supposedly inciting a riot right so I think incitement to violence is legitimate grounds for taking down speech but once that breach of the peace is over I don't know why it would become a permanent ban as opposed to a timeout so I don't even know how the companies continue to justify the ban on Trump except for the fact that they just think that he's a threat to democracy well I don't think that's for social networks to determine is that who gets to participate in our political process so it's not actually the first thing I would do but do I think that Trump should be allowed back yeah I do with regard to Kanye it's a little more complicated because like you're saying it's hard to know whether he's having a manic episode or he's just you know being Kanye what he's saying right now is probably not in his own interest and probably it would be in his best interest to have a timeout but what I would look for guidance here is there is a Supreme Court decision and my general view on on the content moderation is that these social networking companies should be looking to for inspiration to stream Court decisions because Supreme Court's been wrestling for these with these issues for hundreds of years whereas social networks are just making it up as they go along and there are nine major categories of speech that the Supreme Court has said are not protected because they actually are dangerous speech so for example in this decision called chaplinsky versus New Hampshire which came out in 1942 the Supreme Court held that so-called fighting words were not protected and they Define fighting words as speech that tends to incite an immediate breach of the piece through the use of quote personally abusive language that when addressed the ordinary citizen is as a matter of common knowledge inherently likely to provoke a violent reaction so you know I would use that type of decision by the Supreme Court as inspiration to say that racist misogynistic homophobic and other sort of racial racial and ethnic slurs yeah shouldn't be out on these networks because it doesn't do anything to enhance the public debate now there is a question like could Kanye frame his arguments in a way that is still incredibly offensive to us but doesn't you can say slurs yeah for example he could say hey here are the top 10 media companies here are the executives here's the percentage that are Jewish and this is you know my concern is that this is a and here's the percentage people who are Jewish in the population you could some [ __ ] like that and then you're like okay did he say something anti-semitic you know and you're kind of in this bubble area and there's always going to be edge cases and people are always going to be pushing the envelope and so listen just because we find it offensive and you know it's specifically offensive to me uh that doesn't mean that it should automatically be banned and you know I think slurs slurs banned or out but but arguments I don't know that we should be banning entire categories of arguments and and look part of the problem here is that lots of people are hearing the arguments that yay is making whether he's making them on Twitter or not and because he's there's a total ban people can't really engage with him on Twitter and so he's not getting off-ramped from this Rabbit Hole he's falling into and nobody else who might be a fan of his is hearing the other side of the argument so I don't know that it's ultimately in the long-term interest of the Town Square to be banning you know the argument the you know ACLU and other people have is like hey you put a little sunlight on these bad opinions at least everybody knows who has the bad opinions and you can fight them paradoxically I mean do you really want these folks going to the dark web and you know being untraceable there is some value in kind of knowing who's getting radicalized and hopefully exposing them to other opinions in the same conversation that can all framp them yeah I mean paradoxically while we're talking uh Elon just tweeted at 11 18 a.m Twitter will be forming a Content moderation council with widely diverse viewpoints no matter no major content decisions or account reinstatements will happen before that Council convenes so he's going to take the same approach that Facebook has they have a council as well that Zuckerberg tried to set up so I think he realizes there should be a thoughtful uh discussion sexy gonna be on that Council I have no idea that sounds like a uh the worst Purgatory you could ever be in is to be the person who has to make these decisions like talk about a no-win situation I'm curious shamath we talked last week about Kanye and then Lex Friedman dropped his episode Lex came at it with uh he pushed back on Kanye I don't know if you watched some of the highlights I saw some of those he pushed back pretty hard I watched the whole thing okay so he pushed back really hard on the anti-semitic stuff and we had a discussion last week I said hey you can't platform this guy but it looks like Lex had a specific point of view which is he has a friendship with Kanye of some level and he wanted to try to convince him in this manicness that he's wrong about things did do you think Lex succeeded and he should have done it I obviously we won't question Alex's intent we know I I have had replace Lex with me and Kanye with my relative wasn't on television or whatever but I've had these same kinds of I'll call them interventions and like I said this person goes through periods of lucidity periods of mania periods of paranoia periods of anger and so that's all I saw when I was watching this thing is just what a lot of people in the United States deal in the world deal with when they have relatives who are suffering from one of these things and you know my relative has said the same thing there's nothing wrong with me you know I don't need medication I'm not on these meds blah blah blah I don't want to judge because I don't know him but I'll tell you in my situation trying to like you know for example like this person thinks that you know myself and one other person like we hacked into a computer system of the place that they worked to manipulate the financial records to point to this person as having committed a fraud and has and then thinks that people are now listening and bugging the phone I mean there's all kinds of stuff over and over again and then sometimes they don't think that and sometimes they do and it's like it's magic what I'm trying to tell you is like when you're not when you're in a normal State a regulated State and you're talking to somebody who's dysregulated it's not two normal people having a conversation where you're trying to get them to see the logic of your ways so again I just think that it's not it's not a thing that should be litigated in the media I think it is a thing that is where people that care for this person need to surround them and get them with a doctor to help them rebalance in in in the in the case of our family what it turns out is that this person needs to constantly be re titrated the drugs for them to be regulated that may be different for other people and I don't know Kanye's situation so anyways I I see all that and I and and I and I go to my own family situation which I'm which we actively deal with today and I don't have much of an idea of what to do about Kanye because it brings up too much stuff about what I'm dealing with in the real time with my own family I'm sorry you're going through that and I uh yeah like I said I mean I think Lex had good intent I don't think it's worth doing no he's from somebody he's incredible you know he's a really beautiful empathetic person Lex is in general yeah so I think he tried to do the best job he could so I saw I saw part of the The Lex interview it was two and a half hours and I wasn't going to sit through two and a half hours of it you know I went to the I went to the chapter titles and I was in the middle it was like Holocaust and like right and I was like okay let's just go right to the train wreck yeah so I skipped to there but anyway I think the argument that that Lex should have made or pointed out to Kanye is like go see the the new Elvis movie which is all about how an artist basically got taken advantage of by his business manager and you'll see that this idea is a very familiar Trope in the music business but that manager uh Colonel Tom Parker he wasn't Jewish he was a Dutch con man pretending to be a southern pick so this can happen and it's a very common story and it's got nothing to do with the uh religion or race or whatever of the the business people so and in fact the person in that movie who has the best advice for Elvis is BB King who says to Elvis at a very early point in the movie he says if you don't do the business the business will do you hmm and so look I think Kanye again if I was to sort of Steel Man and respond to it is listen you know what you're describing is a pretty common of artists being taken advantage of is is a common issue it goes back a long time and it's got nothing to do with religion and quite frankly you know there's probably a lot of other Jews in your life who've helped you I mean I wonder the last time you went to a doctor did you notice whether they were Jewish or not you know and so he's developed a little bit of a fixation here of noticing that some people are Jewish but probably he's not noticing when other people are Jewish you've probably helped him yeah so that's probably like the argument I would have made with him you know if I were conducting that interview and you make the argument to a person who's in a manic episode and that just there's no limit they don't even realize what they're saying they forget what they say when they get through the manic episode these parents these paranoias don't tend to come up when you're in a regulated normal State exactly all right let's talk about uh meta Brad Gerson was on last week we've had an ongoing discussion about big Tech entitlement spending the number of employees at these companies on Monday Brad I I think you know got a little worked up on the last pod maybe and dropped an open letter some might say activist he would say constructivist to Zuckerberg and the team over there hey maybe pump the brakes on the cap ax maybe do a riff maybe become profitable anyway the uh revenue and the the third quarter was a complete utter disaster for meta and the stock has plummeted and been under a hundred dollars a share I don't know who wants to start on this one but okay look there's a lot to unpack here so I think I think we should take our time because I think one part of it is meta okay but one part of it is actually about what we talked about a few episodes ago which is like this big Tech put right where they Define the rules of the game on the field for every other startup and I think the third part is just about like the era of big Tech being over and what it means for the stock market if I think if you section it out in those three ways Jason we can have a pretty rich convo I'd love to tease somebody where do you want to start okay so let's let's start with meta so Nick can you please throw up Apple versus meta for a second and let me just give you guys the the talk track and then maybe we can go from there so when you look at Apple versus meta there's this really interesting thing that comes up which is in 2016 you know and we've said this before you could not give Apple stock away they were generating a ton of cash it was sitting on the balance sheet in many ways Facebook was doing the same thing and there was this famous dinner I don't know if it was a dinner that ever happened but that's how the the lore is told between Tim Cook Carl Icahn and I think Luca meistry the CFO and in it what carlikon said is listen I have a below the line suggestion for apple and what does that mean if you look at a p l you have your revenues that's above the line you have costs that's also above the line and then you have your profits and then it's what you do with the profits so what he was suggesting is below the line the fact he had no suggestions for how the business should be run he just said give us back the money and we will reward you the stock price will go up and what's interesting to note here is the black line is the performance of Apple stock as as they've given back and they've used a ton of their own balance sheet cash to buy back the stock okay so they've spent 396 billion dollars since 2016 to buy back stock in the same time Facebook has spent almost 100 billion now here is here's where you start to see the Divergence so you would have said well shouldn't Facebook's stock have reacted in the same way and for a very long time it actually looked like it was right until about September 21 and then obviously this thing fell off a cliff and the reason why it started to fall off a cliff was somebody started to notice that hold on a second even though you're buying back all these shares the bottom of the funnel right you're leaking all of these shares to all of these new employees why are you hiring so many people and this is when people started to uncover what was happening above the line at Facebook and is what caused this massive dispersion so Nick if you go to the first chart so what has actually been going on above the line here's what's going on if you look at the light purple bar Facebook in the last two years have spent 25 billion dollars on reality dabs and they said that they're going to spend you know meaningfully more in 2023 and then sustain that investment for a while so if you do a little bit of math if they spent you know they spend around 4 billion a quarter right now so 16 billion a year that'll go to 25 billion in 2023 and then they'll sustain that what that means is that over this you know 12 or 13 year life of reality Labs as we've seen it these guys will have spent a quarter of a trillion dollars and what I did here was I just wanted to understand hilarious I wanted to understand a quarter of a trillion dollars in the context of other major leaps in humanity so at the left is what Apple spent in its entirety by the way these are all inflation-adjusted dollars for today Apple spent 3.6 billion dollars to create the first iPhone and what they did was they said every subsequent version of the iPhone would only be funded from the cash flow and profits of the generation before it right so they used consumer demand as their guiding principle so it was a very incremental approach iPhone 1 iPhone 2 and now we're on iPhone you know 14 or whatever 13 but the point is it took 3.6 billion to get that Juggernaut off the ground um the Manhattan Project will cost 23 billion in today's dollars to create the atomic bomb Tesla in its entire life spent 25 billion to get to free cash flow profitability and they took this incremental approach as well will create the you know the the coupe uh the Roadster then the model S then the model X they iterated their way they used customer demand and all of that Revenue to fund future growth the cumes spend on Tesla was 25 billion Boeing spent 32 Google and other bets has spent 40. the only thing that I could find in history that is comparable to what meta has basically said they're going to spend is the entire Apollo program which cost in today's dollars a quarter of a trillion as well so the problem is that below the line meta was doing the right things above the line they've created I think an enormous set of pressures for themselves which is you know if you think about the Apollo program this was 13 years of building Rockets getting to low earth orbit then getting to be able to you know orbit the earth then eventually building an entire infrastructure and capability to land on the moon and get back so there was a lot of incremental progress there I think what people don't understand is where is this quarter of a trillion dollars going and is it going to be a leap in humanity at the scale of the Apollo program because it now is becoming the single largest Capital allocation program in capitalism history nothing comes close so I think that that is a really interesting maybe jumping off point to talk about what's going on inside of this business it's I think they're doing all the right things below the line but there's this one major big red flag above the line that has to be probably better explained by them if they want to have long-term shareholders and basically what happened was when people heard this they said this is a dumpster fire we're out here sax what do you can ask the question what happened with the whole uh Brad gerstner's uh proposal was that actually discussed on the call on the earnings call they you know they ignored well I I don't want to say it was totally ignored because I I do think that they should be given credit for a couple of things I think that the Core Business continues to March forward and they basically said look we're gonna slow head count growth some teams will shrink I think the problem is really in this reality Labs the amount of investment that they're making is so outsized and so abnormal and doesn't compare to anything anybody's ever seen I think everything else in the business seems to be actually quite functional so the problem is that this above the line thing though has become so big it could sink the business you know it's very very hard to see an investment case for a quarter of a trillion dollars of money in the door before you really start to see something magical now they may have something super magical that nobody knows about that they're going to unveil and say ha See told you and maybe there should be a set of outcomes where we plan for that but the reality is it's you know 25 billion dollars a year for the next umpteen years and it's it's and I think it's 10 billion where did the 25 billion come from no this number it's 4 billion a quarter right now so 16 billion a year and they said that they're going to significantly increase it to 2023 so I just assumed it was a 50 increase maybe significant means a hundred but 16 goes to 25 and they said they're gonna keep going at that pace and so if you run that out till 2030 that's how you get to 250 billion dollars you think there's a business here in vrar Saks you think this will be the next platform I guess that's a a key question to ask here yeah I mean I I like I actually like these Oculus products I think it's a very cool product the question is really just about the magnitude of the investment level but I think there is a future in VR and AR and it is a you've tried the Oculus headset before it is like a very magical you know experience with software one of the most magical that I've had the question is just we're talking about magnitude and time frame this I think also comes to mind for me sacks like uh I everybody seems to you know try and then say Oh My and then say goodbye to these headsets like people buy them they try them and they're like this is incredible but there's no use case for them on a regular basis we just invested in a company that is creating professional flight simulators using VR as a component education yeah I think training is actually a huge use case huge and by the way these are not like video game flight simulator programs these are actual they create physical cockpits with knobs and dials and stuff it's just that the pilot is using a professional grade VR headset and so they're able to load you know a lot more training programs and scenarios and they're able to train on more planes they can like change up the cockpit by the way the the cockpit's on Gyros so it actually moves around let me put a date in a different way I think that we should assume that VR and AR is going to be a really important part of our existence and I do think that as David said many of these experiences are magical I think what investors reacted to was spending 25 billion dollars a year needs to be measurable somehow and I think what they said is the things that we're seeing don't necessarily tell us that this bed is going to make any sense at that level of spend so if you were spending 2 billion a year or 3 billion a year I don't think people would have said anything it's just a magnitude relative to the progress that's being demonstrated publicly and and that's the thing that I think the Tesla program got right the Apple phone program got right the Boeing program even the Apollo 13 program for that Quantum of spend so it's not to say that you can't spend a quarter trillion dollars over the next decade but you gotta eat what you kill you have to be able to show progress in a way that says Ah this this investment is tracking Freeburg I think the biggest issue he's having is he's trying to build a moon shot that you'll only get to see when I'm done it's like hey I'm behind the curtain over here I'm Willy Wonka I'm gonna come out with the most amazing chocolate bar in 10 years and after I spend 100 billion dollars but don't worry it's going to be awesome trust me shareholders it's going to be amazing and with consumer products in particular not guys you keep saying 100 it's 250. yeah whatever it ends up being I in general I think consumer products you want to see them in the market and you want to iterate to success tell me one consumer product that launched and didn't iterate after launch and didn't kind of evolve over time in a way that responded to what the market was telling the Builder into that product but free Brick In fairness to them they're doing that too it's just I think what people can't square is we see the next gen oculuses and then we see the spend and we think that they're upside down relative to what we're seeing in terms of progress I think that's what people are reacting if you were spending 5 billion a year this wouldn't be an issue to a month right a nothing Burger nothing people would say good idea throw a long ball I think that there's two kind of ways to think about the distinct things that they're building one is this Hardware platform with oculus and a better kind of experience for immersive experiences whether that's VR or ar the second is what's all the software layer look like and what goes on in that platform that's where this thing seems to be pretty short and where people seem to have a lack of confidence and conviction the hardware seems super interesting but I gotta tell you epic games just raised money earlier this year at a 31 billion dollar valuation if Zuck was a smart guy he would go to 10 cent and cut him a check and buy the whole thing for 50 billion and you know buy those guys because that's a platform that has a couple hundred million active users is making money has a really deep immersive but two-dimensional experience it's not 3D it's not on VR right and on top of fortnite and on top of their um their engine that they've built um there are just countless experiences and worlds and interactions and models that exist today that are already active that are being iterated that have been evolving for years and if you look at where fortnite and some of the tools and experiences that have been built into fortnite over the past couple of years sit relative to when fortnite was first launched I don't think that Tim Sweeney and that team would have ever said hey this is where we're going to be in a couple of years that's what we're going to be doing it was part of an evolutionary experience of building a great platform and having an Engaged user base and unfortunately there doesn't seem to be a great engaged user base in the software layer of what he's built here today making it very difficult to track a path to get consumer feedback and to identify where that goes over time the hardware experience totally understand that that takes time to build something incredible also should be in the market and getting iterative feedback but really that that software piece is what what feels short to your point I think that that's another great example of a below the line decision that they could have made with all of this money you know if you compare what Brad asked Facebook to do on Monday versus what icon asked Apple to do in 2016 you know icon basically said just make this below the line change and everybody will be happy it's a Do no harm solution none of us are getting in the way we're not telling you how to run the business the thing that I think that you know what Facebook had to react to was Brad suggestions were fundamentally above the line it's like you know firing 20 of the people or 30 or changing the capital allocation would require some changes to strategy and I think this is a a good moment to recognize it as as much clarity as Brad's letter had and as much sense as it probably makes to Outsiders looking in the minute you have to tell companies how to change above the line it's just a good reminder to me that no it's not going to happen because these folks will not want to make those changes they don't you're saying Zuck won't make the changes I think it's natural human psychology I think you want to make those changes yourself you don't want to be told what to do got it sax what do you think this is going to do to governance in Silicon Valley writ large probably nothing really excited it's not going to change anything well it is it is interesting if you look at elon's Twitter deal there is no dual class everybody has this is one class of security this is one type of stock so it's simple majority voting Elon actually had the choice of doing dual class and he decided not to so that's pretty interesting so if people want to follow elon's example then they would you know not not necessarily go for adults Tesla doesn't have super shares either and you said it many times if you want to vote me out you can vote me out right SpaceX either yeah he's putting his neck on the line I don't know I has a SpaceX should I have no idea class structure yeah I can't remember SpaceX isn't public yet so maybe it doesn't matter like they haven't reached that decision Point yeah yeah yeah yeah I will tell you I just I think starlink has such a huge opportunity I just got starlink for two locations as a backup because you know you lose your internet a couple times a year and you can get these routers now that'll fail over so since I'm doing business like I can't really lose the internet so for a thousand bucks a year I can have starlink as a backup and I started using it and uh the speed is getting pretty compelling already uh like Zoom calls you can't tell the difference right now most of the time and certainly for web browsing or watching a movie you know it just works so I I could see many companies putting in starlink even if they have a fiber line or whatever just as a backup that business alone could be ginormous just to provide both sides of the story here I mean the reason why dual class emerged and was seen as viable is that if you look at the historic performance of internet companies the ones that have done the best perform the best are the ones where the founder stays involved for a long time and the ones where the founder checked out like after a few years and hired a professional CEO those are the ones that went off the rails it happened again and again so there there is an argument for dual class in the sense that you keep the founder involved and you sorry you avoid a power struggle that's not what happened well but that was why it was considered acceptable well I think it was considered acceptable because in the Google bake off all these Banks were clamoring so hard and you know there were two vectors of iteration one vector was on the way that you know Google wanted to do this uh IPO process they pick Credit Suisse they did this Dutch auction the other one was the bankers basically pitched them on a dual class voting control structure and was Morgan Stanley Morgan Stanley and once Google got it everybody else was able to copy because all the bankers realized that if you want to win a bake off you're not trying to win over the CFO you're actually trying to win over the CEO and giving that person control turned out to be an incredible commitment uh and a way to win the deal and so I actually think it was never a governance issue or a reflection of how value was created it was just basically a feature that you that one Banker used in an IPO Bake Off to try to differentiate versus another this is why you know like I said like Elon has never cared about that stuff because it's like if I'm not doing well vote me out which is so clarifying because he realizes that that's actually the best check on him making bad decisions you know and I think part of it is why he's done so well you know one class has thought he was able to negotiate an incredible compensation package and it's he's he has Clarity a lot of the few things of the business that matter but I think he's also more compelling than some of these other guys and there may be some degree of feeling like this is a mechanism that other people need that Elon has a degree of confidence and a degree of of Charisma and salesmanship that gets him what he wants I just want to read you guys the excerpt from Larry and sergey's Founders letter from the IPO in 2004. as a private company we've concentrated on the long term and this has served us well as a public company we will do the same in our opinion outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly Market expectations sometimes this has caused opportunities to manipulate Financial results in order to make their quarter and they go on and on and on and they say look you might ask us how long is long term usually we expect them in a couple of years and they go on many companies are under pressure to keep their earnings in line with analysts forecast therefore they often accept smaller predictable earnings rather than larger and less predictable returns Sergey and I feel this is harmful and we intend to steer in the opposite direction I think that the statement that they made really resonated in Silicon Valley at the time particularly during this era of what people were calling web 2 and the internet was being rebuilt and all these businesses were starting to thrive and it was like we have this massive road ahead of us this long road ahead of us and we can really change the world but in order to do it well in order to do it effectively we have to as entrepreneurs as Engineers be able to have the freedom to operate for the long term I don't think it had anything to get stuck in the short term had nothing to do with anything that there was no pressure on them it's not like they shied away it's not like that super voting control allowed them to make one seminal decision there were quarters where Google was getting a lot of heat for the amount of money they were spending on capex because they were building their own data centers they were building their own server first they were building their own eventually dram they started to build their own switches every element of how Google built a competitive advantage over time was difficult for analysts to understand but you're not saying but you're not saying the obvious thing the reason why they were allowed to do it in the end was because more and more users used their product because it was better and better and they consistently meet and beat every expectation this is not I didn't need to use this option this was not I didn't need to call this option this is not a company that went back and forth between meeting and missing expectations okay they were up and to the right they were they were up and to the right is correct that is the general principle but the time to return the roic the time frame to hit their roic targets was long and it was hard for people to get that when they bought YouTube true that is not YouTube David watch YouTube and they spent tens of billions of dollars investing in YouTube before generated cash again I think that that would yeah but you're not math you're not what you're saying is not true it is not mathematically true what you you're saying there was no 13-year royk play that they executed on not true and you can just both agree they put their own they put their own fiber optic lines across the oceans the capex I understand scrutinized and not well understood I get it you can read but tomorrow you can read the analyst reports and see how difficult this was all I'm asking for you to do is look at a head voting shares is what gave them the ability to do this [ __ ] I think that if you look at their performance their ebitda margins and their roik was exceptional when they were making those investments in fact I would say the opposite I would say that they were surprised by hi how by how high quality their business model was they were generating so much cash but they were probably thinking back in the day was oh my gosh we need to make sure that we are actually making long-term Investments and now we have the ability to do it because we have all this cash we didn't expect and we should probably bleed off cash so that we don't show 50 gross margins to raise all of the attention of regulators and everybody else and so what do you think Zuck is doing what's different today I think that they have an incredible core business because he's got good business good ebitda margins good Revenue growth what's different they have an incredible Core Business and they have decided for whatever reason to make an enormous bet and that bet could be a very good bet but the way that you make a bet and you've said this well is you have to look at incremental progress and you have to demonstrate that all of these bets make sense because the problem is when you get compared to the Tesla program look Tesla is Reinventing an entire category trillions of dollars of energy generation and transportation but they did it on in one year of meta reality lab spend Apple reinvented an entire compute platform on one quarter of meta's reality lab spent that's not a judgment that's just a numerical observation so if you want to get people on your side you just have to be able to double click into that in an elegant articulate way and say here are all of these things that justify 25 billion dollars a year hey guys let me show you a chart here's a chart of alphabets Capital expenditures by quarter and here is their revenue the blue line at seven billion dollars right now this is my point yeah they struggled to find ways display they they create a Project Loon they were gonna do balloons guys they wanted to do fiber they wanted to build they wanted to build they wanted to build at one point a ladder to the Moon a ladder they thought they could go from Ted to them but yeah whatever an elevator is in that seven point to climb there right the elevator was in the purple line yeah and somewhere in there they spent a billion or whatever on maps and it ended up being a phenomenal asset when the whole world moved to mobile I think we're not seeing the obvious thing we spent a lot less on them we're not we're not we're not saying the obvious thing which is great leaps of progress in humanity are not correlated to Dollars all the time in fact most examples are the exact opposite which is it's more about small and extremely Nimble and talented management teams that generate human progress and again if you go back to that first chart of Apple versus meta you know the fact that you've hired so many people to work on a category with so much money it just violates a lot of pattern recognition that people have historically seen so all I'm saying is maybe this is a great bet they just need to do a better job of explaining this would have been so much easier if you had just put yourself just I'm saying this could be this could have been such a better transition he should have put Cheryl Sandberg a CEO of the Facebook Corporation he should have become CEO of meta and then he should have ran that other business to print even more profits and then if you look at some of their forays into building a super app they edit Facebook Marketplace to Facebook and it was a huge hit they started to pull the a Commerce string over at Instagram it started to work there's just no focus on those products if you look at the Facebook collection of billions of users what apps could you add to that you know whether it's payments they did the whole crypto thing they gave up on that it seems like there's no leadership on the Facebook side that actually wants to take take swings over there they just are obsessed with this one thing it makes no sense to me I I think that there's probably part of it which is that you know when you're working on a thing for a long time there's a certain personality type that loves the Mastery that comes from working on the thing for a long long time yep and then there's a different personality type that likes more shiny new things yeah and you kind of have to have a balance of all of those different people um and so maybe what we're seeing as well is that you know you're right maybe the boring business was just labeled too boring internally and there wasn't enough heat around wanting to work on it forever nobody wanted to keep grinding and so you wanted to throw these big Hail Marys all I'm saying is you just need to explain the Hail Mary all right let's by the way let me just ping you on this so the um meta spend in the quarter relative to their revenue it's about 15 are the the virtual reality stuff it's about 15 billion 15 does that sound right I don't know but they said it was 4 billion this quarter yeah so 4 billion out of 27 of Revenue so it's about 15 and alphabets last quarter Revenue was 70 billion and they spent about a billion billion let me show you I actually I actually have this chart handy because I was talking about it on which is 1.4 so on a relative basis alphabet is spending one tenth of what meta is per dollar earned or top line revenue earned um on their other bets category so tomorrow do you think it's a relative spend problem that because they're spending 10 times as much as a percent of Revenue that it's causing so much heartache even if it is directionally correct if you want to see the capex versus Revenue here's that uh on the screen right now yeah no we know we know what we haven't shown this is Google and and meta on the same chart the blue line on the red on the bottom nine billion in capex for Facebook 70. for Google is this your new like charting tool that you guys have built yeah no no this weekend startups all the time what do you use what is it yeah actually beep it out because I don't want to give them a free response I'm not giving a free promo they didn't let you invest whatever I mean truth comes out they didn't let him invest no no they've been around forever they've been around forever it's a good product I've used them just a beef that's a good product listen if we're gonna promo something it's gonna be call in or can you throw up the histogram super gut this is super gut charts so look this is the new charting feature on Colin I think the problem is look here's the problem let's just say that you're an analyst that works at a large hedge fund or a mutual fund and you woke up on Wednesday and you you know had a decent day and then you went into the earnings call believing that you know there's a this is there's a value play here and there's a lot of upside which I think there is actually you know this company can throw off an enormous amount of cash but then what you hear is okay we're spending four billion a quarter that's going to go up materially and then we're going to keep 23 spending levels roughly the same in the to the Future so then you have to go back and build a model you're going to be hard-pressed to not get to this number maybe you don't get to 250 maybe you get to 200. my point is all of a sudden you have to go back into your you know portfolio manager and say uh you know they're going to spend all of this you know after tax cash flow on this stuff or sorry not after tax capsule but you know below the you know above the line spending on this stuff which won't come back to us as shareholders and we're going to dilute the stock two or three percent a year so that's another 20 dilution and it just becomes what I again I've said this before it you move the stock into What's called the two hard bucket you know from the it's obvious to wow that's really tough and I'll just take a wait and see approach you know I think yesterday there was a quarter of a I think a quarter billion shares that traded hands uh of Facebook just a ginormous number and so you look I think you think that's tax loss harvesting too at the end of the year maybe some people want to take the loss so there's tax loss harvesting for individuals by the way there was a couple comments which we should talk about and explain what tax loss harvesting is but a bunch of these mutual funds year-ends are actually October 31st so to your point Jason you know the stock basically gets decimated 20 you know 25 percent in a day the T Rose and the fidelities are like all right book the tax loss and be done we'll we'll re-look at it next year quote unquote next year so you know if you put on the spread trade so we talked about the spread trade there was a big hedge fund manager that you know on November 6th right when we were basically calling the top of the market told people to sell one of the trades that he put on Nick if you want to just throw it up was this long Google short meta spread trade he called to tell me that you know he closed it out yesterday this is how that trade did so yeah there was just a lot of folks that just kind of like went to the exits and said you know what we're kind of done for the short term I just think that it's it's a it's a moment in time where those folks have to realize that they just have to explain a little bit better how they want to spend the money and show a little bit more incremental progress that justifies that level of spend otherwise people will be a little skeptical they'll build their own histogram and it'll violate too many rules and so it goes into the two hard bucket okay we got macro we got Ukraine and well I think I think the you should talk about big Tech because Amazon puked as well Jason the can you just throw up the big Tech chart because I think like you guys should see this because I think this is very important for Silicon Valley Amazon reported their Q3 earnings yesterday Thursday total revenue 127 billion up 15 year over year five percent quarter of a quarter net income was 2.9 billion and they're predicting uh they're they're giving slower guidance going forward I mean what's incredible on this chart is that you know when when everybody talks about being along the S P 500 it was always really a proxy for being long Amazon Facebook Google Microsoft and Apple and at the peak you know in May of this year it was still you know 25 cents of every single dollar of the S P 500 were these five companies and you know we always said the market bottom will be when the generals quote unquote get shot you know to borrow a Fraser and Gavin Baker and it looks like the generals have been shot yeah and what's incredible is this week every single one of those companies other than Apple really reported pretty crappy earnings they got totally taken to the woodshed the percentage of the of these companies as a percentage of the s p is now you know off by 500 basis points it's down to 20 yet the markets are ripping higher today so I think it's kind of what we talked about three weeks ago like the bottom is kind of in for the short term you know so it's really exciting actually to see I think this is the point where you have to now start to get pretty constructive about where things are going because if this stuff could not bring the market down it's hard to see something other than an exogenous event probably some Russia Ukraine event really having a negative impact so to me I'm kind of like I don't know it seems like pretty bullish for me also GDP was 2.6 so I mean the this this very weird conflicting data we had two negative quarters of growth we're in a recession then we have a the third quarter is up 2.6 so okay but remember Jason I I said that we were gonna have a double dip that was sure that was most likely thing so we had this sort of mild technical recession based on nominal GDP growth not being bad but simply not quite keeping up with the inflation rate yeah now things are a little bit better but I still think the huge recession is to come next year because all the interest rate increases we've seen so the FED is you know pedal to the metal on interest rate increases just like they were pedal to the metal on printing money and so first they you know they were too loose and now they're probably being too tight too fast so I think we're headed for a huge recession next year and I think you're seeing that in in the softness of all these forecasts yeah look at that look at look at the the mortgage uh rates right now something like 7.1 percent um they broke the backs of the housing market the inventory and prices inventory shot up prices have shot up new mortgages have uh gone down and you know we we talked about job openings here's the the Fred chart for job openings real quick you can see the the peak we were talking about we were wondering if that would come plummeting down well here it is folks yeah plummeting down from 11 million uh losing a million in a month yeah job openings coming smashing down there's the FED fund rate you know that's a pretty high ramp so you think double dip recession what do you think Freeburg chamoth in terms of what 2023 looks like you're sort of saying a bottom is forming I kind of agree with that I think the stock market is going up then it'll go back down because I think what David said is right but for the short term this thing is going up short term up we've generally been positioned for it to go up and uh and at some point we will reverse and position for it to go back down but it's going up sax it seems like you took a week off from the all-in podcast and people stopped talking about Ukraine uh you want to give us an update I mean obviously the war is not over but it does seem like it it somehow has fallen out of the Public's Consciousness a bit I don't know if I go that far there was um the big event in the Ukraine war debate this week was that the house Progressive caucus put on a letter signed by 30 Progressive members to merely suggest that while we continue to fund Ukraine on a virtually unlimited basis we also in parallel open up a diplomatic track with Russia to mitigate against the threat of us being drawn into the war and specifically a nuclear war and just that very I'd say Anodyne letter that very tepid sentiment really they weren't questioning in any way the providing again of virtually unlimited support to Ukraine that met was such a fierce reaction on social media and in the traditional media that I think all but one of the signatories recanted or walk back the letter and kudos to representative rokana for not being one of the people who recanted he so tall and gave an interview on CNN and MSNBC saying why has diplomacy become a dirty word I voted for every single appropriation to give Aid and weapons to Ukraine I'll continue to do that but I don't see a problem with us maintaining diplomatic relations we might need those to avoid an unwanted escalation well and here we are kudos to him for standing tall but it's amazing to me that the progressive caucus which used to be one of the groups in Congress that questioned American involvement in Foreign Wars like the Iraq War they basically they they have moved off that and they they threw in the towel so quickly on this it was really kind of pathetic to see I mean it really like this is back to Shakespeare like politics makes for strange bedfellows you find yourself aligned with the most left part of the democratic party in trying to just say hey maybe we should negotiate peace a little more further wants to pursue the right foreign policy and I don't really care which party has said you would you would actually donate to anybody who is pushing for that so did you actually make any I mean I I just happened but I I plan to donate to members of both party who push for a correct foreign policy which I believe needs to be a little bit more restrained a little bit more questioning of what is in it for the United States and we need to be careful about overextending ourselves and we need to ask what is in America's vital interests you can support ecoc be coming to the uh with it with AOC she's proud she recanted so she's one of the ones that were candidate what do you think happens in a situation like that well how do they get them to recant yeah like why what is the point of recanting something that was so benign it's not totally no but what do you think like what what's happening behind the scenes like why are people so afraid to say that you know you can be in support of Ukraine but also still try to find a resume why was that turned into such a Scarlet Letter it's a great point and I think it just shows the heat right now on the issue here here's what I think does it do that or does it just show how the progressives as just kind of clown tones I mean it's it's kind of sad I mean jayapal who is sort of the leader who put out the letter threw her own staff under the bus and I guess there was this snafu where the members all signed this letter in July and then held it for a few months and then they put it out two weeks for the election I can see why that timing didn't make sense I don't know why like they release it now not two months ago not three weeks from now after the election I can understand all those political considerations but once you put the letter out to stand by it don't throw your own staff under the bus because like you're saying the letter was really a pretty Anodyne statement of Hey listen do you think we can just have diplomacy on a parallel track at the same time that we're arming Ukraine I just don't see the downside but look here's why I think they took so much heat is there's a lot of people on this issue Who start with the end result of what they want and the end result that they want is uh Putin and Russia leave Ukraine with their tail tucked between their legs and they basically don't get one square inch of Ukraine they believe that is the only acceptable moral outcome here and they may be right about that but then what they're doing is they're kind of reverse engineering all the beliefs that they have based on that outcome that moral outcome they want to get to so for example for the longest time you heard things like Putin is definitely bluffing about using nuclear weapons well how do they know that they don't know that they can't say that for sure but it's what they want to believe because if you believe that nuclear war is a possibility you might not go all the way for that Maximus position of the only acceptable outcome here is Russia leaving with this tail tuck between its legs and I think I think the same thing is happening here with diplomacy is people who want a certain result in the war are afraid that diplomacy might result in something less than that that's not a reason not to engage in diplomacy and it's not a reason to deny the potential of this war to spin out of control potentially into a nuclear war sax is like a walking thesaurus so Jacob for you I looked up Anodyne and it means not likely to provoke dissent or offense inoffensive often deliberately so yeah like uh whatever I mean listen I got a thesaurus over here also I didn't know what it meant so thank you but seriously what is the I want to know of the Fallout from two things and then we're going to do science corner so number one what is the I've been getting a lot of oat milk stands emailing me different brands of oat milk have been emailing me this week just give us an update generally speaking on the ultimate milk crowd and your inbox tomorrow oh they're trying to they're definitely trying to Brigadoon me but what these people like you know what's so funny about these folks they have no judgment clearly because they can't even say you know what it actually tastes much crappier than these Alternatives but I choose to for XYZ reasons that I could respect it's the oh my God it's incredible and it tastes so much better you know look at this little mustache disgusting it doesn't foam properly it tastes like dishwater it's ridiculous and then Saks discussed this this horrific uh illustration of you in the New Republic I saw um look like Dolly broke and they use Dolly to make that illustration no offense to the illustrator we're gonna paid a thousand bucks well it was like it was free ozempic sacks I thought it was yeah that's the problem if you're chubby sacks or chubby J Cal it sucks when people base an illustration on a previous one but it's like a dream I mean you look like well look they got Elon and Peter up there too it's such a stupid hit piece Elon looks like Hugh Grant uh Peter Thiel looks like he's rolling on uh Molly he's got molly jaw and also he's uh he he you show a lot of stubble which you also don't have but look how fat they make you look look at your feet look like yeah Jesus my Lord but what I mean what's going on in terms of the general reaction to the amount of attention you're getting for political commentary now sex David sacks will be our next secretary of state well no I'm here for it I can't wait I'll go along that David sacks will be our secretary of state within two or three presidents he's got to make a little more cash My Views My Views are so out of step with the foreign policy establishment I wouldn't buy you a win that's why you that's why I wouldn't feel the need to be so out there on this issue if the foreign policy establishment was doing its job if you actually had you know people from the policy Elite going out there saying sensible things about Ukraine it wouldn't fall on me or people like China like Elon basically posted that straw poll on Twitter which was totally reasonable got condemned for it and then Bill Ackman actually who's been in Twitter spats with me before we've been on opposite sides of issues actually came out and retweeted something I wrote as basically being supportive because the weird things want this war to escalate out of control I think the weird thing is people are there's a group in the in the media class other podcasters other journalists who are saying you have no right to talk about this topic and I what I said is you know Hey listen sax and I could disagree about things on the margin here or there but I'm glad we're having the discussion shouldn't all Americans be having a discussion about our foreign policy and what our goals are that's our civic duty is to have this discussion so whenever you hear the political class the podcasting class the coastal Elites which we are part of when they tell you you can participate or this person can't participate in the discussion because they're successful in this other aspect of life that's complete [ __ ] everybody should talk about this and disagree or agree and try to work towards some common understand ending you're right so first of all whenever they say listen to The Experts and you're not an expert first of all they're expressing an opinion themselves and they are expressing equally passionate opinions on the other side about this whole Ukraine war so first of all why are they allowed to have an opinion so whenever somebody uses this you're not allowed to have an opinion argument it's always very selective and it's only applied to people they disagree with not to people who are equally inexpert on their side of the debate so that's Point number one hold on point number two is I've listened to plenty of experts okay I've listened to the IR scholar John mearsheimer I've listened to the International Development Economist Jeffrey Sachs I've gone back and listened to our former ambassador to the Soviet Union Jack Matlock I've read George kennen's interviews I've read Bill Burns our current CIA director on this matter there are plenty of experts who warned that our policy of trying to bring NATO right up to Russia's border would eventually blow up on our faces it would poison our relations with them and lead to conflict and this war so there are plenty of authoritative sources going back many years on this topic and the problem is that the people on the other side of this debate simply want to memory hole all of these warnings and deny that they that this war was ever predicted because if this war was predicted it means it could have been avoided and they don't want to admit that this war could have been avoided or how about this how about war is messy resolving things internationally with dictators can be very hard and nobody wins in some of these cases no there's no perfect outcome here and you could hold in your head two things number one Putin's a dictator we need to hold the line and make sure he doesn't invade other countries and number two yeah you probably want to keep normal relations with these people and negotiate with them to resolve conflict I'm getting a little concerned about the saber rattling on both sides in China you know we're escalating all this chip stuff we're escalating and Xi Jinping is taking complete control I'm wondering who's going to meet with him who's going to talk to Xi Jinping about how we could collaborate together who's left to talk to him Tim Cook there's a there's a bunch of unforced Errors happening in China how do we de-escalate well there's a bunch of unforced errors that you have to let play out because they have huge economic implications so I don't think this I don't think this is a time for again I think David's generally right we do not have time for adventurism right now because even before we engage in some of these other places there are a lot of you know uh headwinds that are working against for so for example in China you have these massive demographic headwinds that are just building um we have to see what the chips act does in terms of follow-through to China's ability to expand militarily or technologically there are all of these things that that you owe as a citizen of the United States to see some more data on the ground in terms of its empirical impact before you re-underwrite a different strategy right now the strategy is working you know we we are observing this you know one China policy I think that's the right thing to do and now let all of this other stuff play out can I say one thing about this yeah so what the administration did in Banning uh China from buying from us or any of our Allied countries these Advanced semiconductor chips that's what they did they'd only banned the sale of trips to China they banned the sale of equipment that could make the chips and they even prohibited American citizens and companies from working in China to basically help them set up their own foundries and and Chip Fabrications so they are essentially cutting off China from Advanced chips that's the goal here and you know we've talked about on this pod before how chips are the new oil right these Advanced semiconductors are the new oil so this is almost like an oil embargo of China if you go back it is yeah if you go back and look what is the reason why the reason why is they don't want these in weapons correct that is the stated reasons that's the tip of the spear but I think the more impactful mechanism is to prevent an entire layer of infrastructure to be built in China that allows them to advance all of these next Generation cyber capabilities including a whole bunch of things in AI that we want to make sure that as often and as often as possible is is for the United States and our allies as we choose so all this next Generation silicon will do a lot more to push that forward and so if you put that in the hands of Chinese technology companies or Chinese governments or the Chinese government in the parts that are actually technological you actually increase the surface area in which you compete by preventing that technology to go to them you decrease the surface area in which you're competitive and they are one or two steps behind and have and are forced to build it themselves so Friedberg if that happens do you think that China escalates and says well why are we building iPhones here no I think China makes decisions a little differently than perhaps U.S policy makers and foreign policy makers make decisions they think forward and calculate the series of events that will follow from that decision whereas we are typically reacting to some event that's happened in the past not necessarily always thinking through the second and third or third order effects and consequences of our decisions so the China calculus would likely look something more like if we were to say stop making iPhones here we would estimate that the US would do the following to retaliate back against us and as they do through that calculation you end up realizing pretty quickly that there isn't as much to gain as there is more to lose by doing that that would be my guess I'm no China expert I'm no foreign policy expert but from my understanding of how Chinese policy makers do think and do make decisions it's much more about what's the rational calculated set of outcomes that will emerge and evolve from this decision and in my experience talking with people in the United States that are in various communities of influence it's much more about let's do what we consider to be the right or moral thing right now and in response and in retaliation and let's do an eye for an eye so that's why I don't think that they're likely to be the first step in an escalation escalatory ladder there'll probably be a few more series of provocations before that may happen at which point it may need to be kind of an inevitable step that they'd have to take but again I don't know I mean so so in terms of the motivation for this I think it's pretty clear this is an attempt to hobble the Chinese economy not just that all their weapons programs but their economy itself and hold them back and slow down their rise and their rapid growth now is that a good idea I mean I think what this shows is we've moved from sort of economic logic which is about finding Trade Surplus and win-win scenarios to geopolitical logic which is about balance of power and this sort of ban on sales of semiconductors to them it's very much geopolitical because it's hurting our companies but it hurts China more and so it's about it's about it's about increasing our balance of power against them and now listen I think you can make the argument that we were overdue to be thinking in terms of great power competition and geopolitical rivalry and this is an attempt now to correct the bad decisions that were made 20 years ago in terms of how we fed the Chinese economy until it became a pure competitor of the United States so I think you can make those arguments the the thing that concerns me most about it is do our leaders really have the bandwidth to manage a second front in the sort of great power competition right now while we've got Russia and Ukraine going on on the one hand are they really ready to manage an escalation of the competition with China and to freberg's point have they really thought through all the second third fourth order consequences of this have they thought through the incentives this may create on China for example to take Taiwan I mean if Taiwan is the place that makes all these chips through tsmc for example and we have now cut them off we have now embarked them from these chips does it strengthen China's incentive to go after Taiwan does it strengthen China's incentives right now to help Russia in its war in Ukraine in retaliation because they don't want to see they don't want to see Russia decisively defeated and then they will solely be in the gun sites of of U.S Hawks so I think there's a lot of things that could go wrong here when the U.S is now escalating geopolitical tensions and competition not just on one front but on two fronts and and especially given how weak the U.S economy is and that we're headed into a major recession next year it just feels to me like they are you know they are um kind of putting their foot on the accelerator in terms of geopolitical risk at a time when we're not really in a great spot to be taking those risks also on a foreign policy basis is there no Common Ground are there no things we could collaborate on and work on together right and that's the thing that seems to be missing in the foreign policy for the last couple of administrations is are there things that we could be building together are there things that we could be working on the environment energy sustainability education I I don't know what it is but it felt like you know with China for a couple decades we felt like we were working in a very collaborative way and now it feels like every single instance is adversarial right because the problem is that those policies of constructive engagement that you're talking about fed the Chinese tiger until it became a dragon yeah another size of uh Vega or something that that's also 100 levels and the U.S policy establishment in the pentagon look at the rise of China and they're like what have we done we have created a pure competitor to the United States we need to stop their economic rise and I think that again I think there is a geopolitical logic and strategy to what the administration has done but I question the timing of doing it at the same time that we have this unresolved war in Eastern Europe well it is nice that we're seem to be getting some of this onshoring of chips and that money is actually starting to flow it does seem like we're thinking a little bit like in decades and strategy say the other part I think Biden and blinken have done a good job they've done a good job on this right now they've played it well well I don't know about that I just come on first of all questions did a horrible job hold on a second Biden Mike and did a horrible job hope the tiger hold on hold on you poked the tiger no hold on they I'll tell you where they did a bad job is last year they had a whole year to negotiate to avoid this Ukraine war from happening but I didn't even had a summit with Putin on June 16th last year they never engaged in diplomacy and now they have stacked this geopolitical risk with China on top of the risk they've already created in Ukraine I this policy may or may not ultimately turn out to be correct I like I said I can see the strategy behind it but I do not believe that Biden and blinken have thought through the second third and fourth order consequences just like Friedberg said so I think it's a little early to be giving them credit on this all right uh free but you got anything in the science Corner we gave we gave saxes red meat and he ripped it to shreds now it's time to give you your soy tofu Burger I'll give you guys a quick uh a quick science Corner please please so we've talked in the past about the human gut biome 10 trillion bacterial cells living in our gut biome and it turns out and there has been this theory for many years that a lot of human disease actually originates in the gut and there's increasingly evidence of how and why this happens so it turns out that your immune cells can sometimes see a protein on the outside of a bacteria that sits in your gut and it attacks that bacteria and it tries to get rid of it that protein can look a little bit like a human protein at some cell in your body and so that then triggers an autoimmune reaction meaning you are now making these antibodies to proteins that look a lot like your proteins in other parts of your body and then your cells start to destroy yourself and you end up having inflammation and disease and they found evidence of this across a lot of disease States so just the other day published in the journal science translational medicine was a really interesting paper paper by a team that identified a very specific bacteria that we find in the gut that can actually trigger rheumatoid arthritis and so you know I think two million Americans have rheumatoid arthritis it's a really debilitating inflammatory disease and we never understood where the inflammation comes from why is the human immune cell creating antibodies to attack its own protein in the joints of the body and now it looks like that the protein that we find in the joints of the body has some overlap or three-dimensional structure that looks similar to the protein we'll find on this very specific gut bacteria that they found which creates obviously a path now for if we can stop that gut bacteria from proliferating or you know existing in the gut over time that can have a reduction rate of rheumatoid arthritis did they guess what the mechanism of action was so so this technology so the mechanism of action is typically what's called generally speaking protein mimicry and so protein mimicry means that there's some so think about a protein as being like you know a a clumpy Rock and there's some part of the clumpy rock that looks a little bit like the part of another clumpy Rock and that's the protein think about that as being the protein on the bacterial cell and the protein in your joint cells and so your body makes an antibody to that little part of the rock on the bacterial cell to get rid of it and then it that there's some overlap that looks a little bit like your own cell and so that's called protein mimicry and because of the ability now to do DNA sequencing and now with um uh you know some of the alpha full technology we can actually take the genome from that bacteria predict the 3D structure of the proteins created that by that bacteria and then potentially identify that there's a mimicry or overlap between our own protein and our cells and the protein of the bacteria which is why we're having autoimmunity which now our immune cells are not just protecting the bacteria we could solve arthritis we solve for arthritis and so there's a lot of disease states that are starting to look like this so the combination of DNA sequencing and our ability to identify organisms in the gut biome and by the way so much of this goes back to the gut biome we're finding all these disease States from lupus to Sjogren's to rheumatoid arthritis that have some linkage back to some bacteria that shows up in your gut and so now we can be very targeted potentially about eradicating that bacteria from the gut or you know kind of changing our gut biome in a way that ultimately resolves to eliminating that disease risk and so it's really fascinating yeah any thoughts on this cup bio I mean I always knew the solution was either in friedberg's gut you know or anything in his gutter on Uranus every bird again do it again the joke didn't land all right here we go one more time okay you can't allow till after you land the joke come on do it again start coming it was coming around the corner and by the way you guys three two all right chamoth it seems like very interesting science uh they're coming in the science corner 50 pounds I didn't even get it out I mean oh you tried to get it out of his anus like a little turtle coming out of his name but you couldn't get it out it's like the entire science quarter is just here for us to beat up the nerd and throw him in a locker oh my God you ever see Smokey in the Bandit when they have the the reals at the end sax I just keep losing it that's what this is done oh my God it's like I'm going to say sides quarter and people are going to just start laughing and thinking about free brexitas all right listen welcome home sacks we miss you for your week off uh uh we missed you David thanks guys thanks and uh we'll see you over on Market Street no announcements right now no testimonials no announcements I'll see you at yoga doing our second homeless shelter we're volunteering today right yeah volunteering let's see over at the homeless shelter yeah if you could get me a tofu salad with extra tempeh before uh free Burger don't don't go don't get me started on tempting I'm gonna go I'm gonna pour all the oatmeal out I'm going right to the cafeteria I'm going right to the cafe I'm getting all the oatmeal right down the tree there should be there should be one milk non-lactose alternative and then one black coffee and that black coffee that's it if you're lactose intolerant yeah lactose intolerant milk they'll have one if you have one thing without lactose so whatever that is can we wrap the show now no we're having too much fun can you imagine can you imagine the distribution of gluten-free snacks I mean they should have a few but you know all kinds of different snacks and by the way the keto snacks have horrendous amounts of chemicals in it the xylift hall what is Xylitol well screw up your stomach man do not have that horrible favorite you want to tell everybody about Xylitol and the impact it has on your anus no it seriously does I think xylitol is the thing that gives you a lot of gas and you just keep ripping I think it's really bad for you here's an idea way to go Jay cow yeah now he's going to turn into a school well that's your fault you were mean to him you came up with the anus jokes that was all I've been doing that joke for five years with him you're a bully I'm not no no freeberg off the shelf you brigaded him we break a dude our bestie sorry bestie all right four the dictator himself chimath polyhapatia going into sweater season I might know it's going to be a big big Q4 for us big Q4 and the beep of the beep Corporation David sacks oh if you mean the general partner of craft Ventures yes the general partner Adventures that's it and the queen of quinoa the prince of panic attacks the ambassador of your Uranus David Friedberg we will see you next time I'm Jake [Music] we open source it to the fans and they've just gone crazy [Music] besties [Music] is [Music] [Music]








what the f what are you wearing Jason what oh Uber had a big week so this is the Uber Montclair crossover hat oh look at that all right and I also bought a Montclair shirt you bought that or I sent it to you oh what oh you got the watch in the mug oh you don't know about the Apple Montclair watch or the commemorative mug or the new tech you don't know about the new neckties that are coming from Montclair it's actually nettec oh my God oh so good I'd just say somebody got their be quiet I'm not saying that I got a hundred thousand dollar sponsorship but we don't have a rule in the agreement about logo placement do we listen Jay Cal if anyone was willing to sponsor you every square inch your clothing will be covered in ads like a race car driver it is look you'd be like wearing a jumpsuit every day you know Montclair sponsorships are great this is five five dollars plus 17 of shipping from France on its Etsy I'm ready to go [Music] Rain Man David said we open source it to the fans and they've just gone crazy [Music] how was everyone's week what'd you guys do this week ah just busy working um trying to be helpful where I can and that'll be the extent of my comments today how is Market Street this time of year look there's all sorts of wild report I've gotten all sorts of inbound from people asking me if I'm like leaving craft Ventures to do something at Twitter no it's not true we're just Jason and I are just pitching in and helping out while Elon establishes his permanent team at that company elon's the CEO he's running it he's the decider he's making the decisions and that some of us are just kind of helping out in any way we can and that's really the extent of it it's a you know very much part-time thing we're just helping a friend but it's been like blown up in by the media into something much more than it actually is it is a hundred percent accurate I am still doing my day job podcasting investing in 100 companies a year just helping out on the margins uh that's it the end I do want to try talking about one issue that's already public because it's already been tweeted so Elon had a tweet this morning about how there's now like an Advertiser boycott going on and This falls on the heels of a bunch of reports that came out over the last couple of days that supposedly there's been a big influx of like racist tweets and Jason I actually saw what was really going on which was it's all not true I mean what happened is that within hours of Elon taking over the company on Friday there was a 4chan attack where basically people from this message board created Bots to post hundreds of thousands of spam messages that contained racist words and epithets and within hours this has been detected and Yol who runs the the trust and safety implementation he met with me and Jason and Elon directed him to shut it down and he UL actually posted a tweet story about it that's the only reason I feel comfortable talking about it is because you already posted a tweet storm but maybe people don't haven't seen it or they haven't connected all the Dots here but what's really I think unfair about this is that as you've as you've seen it's not like your feed was all of a sudden filled with racist things these were spam accounts or bot accounts that were posting to zero followers they generally have zero followers or if they do have followers it's other bot accounts right so they're posting racist tweets Into The Ether so to speak it's not degrading anyone's experience it was shut down promptly but then what happens is these activist groups they're monitoring the fire hose right and so they publish a report saying that racist tweets have gone up 500 since Elon took over Twitter the truth is Elon hasn't even had a chance to change anything about the content moderation policies he's posted that like guys I haven't even I haven't changed anything about content moderation whatever the rules are they're the same rules that existed prior to him taking over and this is just an organized operation by people who want to create that report so then these activist groups basically publish this report they feed it to news outlets and then somebody then takes those those reports and then feeds them to advertisers and you get a boycott but I think the point here is that Elon didn't do this this is being manufactured by people who are not operating in good faith they are trying to manufacture an incident that they can then use to hurt the company yeah and it was thwarted immediately and fixed have you guys seen episode 333 of the Lex Friedman podcast he um he interviews Andre carpathy who is really I mean one of the great minds of our of our time particularly around Ai and ML and the question that Lex asked which Andre expounded on which I think is really interesting is what is the next generation of bots look like and I think where the problem gets very hard for all platforms so this is not a Twitter Twitter specific discussion is that you can now generate such real life like human images that are unique and you can also generate high quality text to things like gpt3 that's also you know that can offense essentially push the boundaries of you know a low-level Turing test I think the real problem over time for Bots for spam for coordinated attacks on any platform is that when you use these tools you're going to have to become very sophisticated in how you try to detect them and then to block them it's a really interesting discussion between you know two pretty meaningfully smart people carpathy was the head of uh autopilot at Tesla right autopilot Vision yeah so he's really smart yeah I have no doubt that Elon is going to do a much better job stopping bots on Twitter once he has a chance to do it because he's got this amazing team of AI engineers and and he's just going to be more focused on it you know what I like the most about what I heard this week is the idea that you can do either micro payments or subscription to third-party content providers because I think so much of my news feed is delivered to me through the Twitter app and then I click on an article and then it's like a paywall or it's some sort of difficulty in kind of accessing the content having some integration there or some ability to kind of make a micro purchase to read an article it's going to be I think a super feature the other thing that I would love Twitter to experiment with is if you have a micropayments model to Publishers it would be great if you could publish content without a byline allow The Economist and see what that does to information quality right you know if you if you if you do not get any credit to your individual name for writing stuff but instead it goes to the Masthead publication whatever it is the times the post I think it could have a really important Behavior change in how journalists cover the news it's worth experimenting with at least and if you're paying them enough money I think that you could probably demand that Facebook could probably demand that today you know strip the byline away and just it just says New York Times just like today it just says The Economist yeah it is a um The Economist is a very polarizing gig in journalism for that reason uh there are going to be actually a lot of journalists who would prefer to have their byline taken off one of the problems with journalism today is even if you're doing reporting in good faith tramoth and you put your byline on there harassment you know threats Etc can become very acute if you're just covering certain topics and so I actually think a lot of you know writers and journalists would opt into this they might prefer it I think they should because I think the two ends of the spectrum are better than this you know Gross Middle that we have the end of the spec one end of the spectrum is you have the New York Times The Washington Post and the economists with no byline and no attribution to reporters the other end is if you want to build a brand that's based on your name go start a sub stack yeah and I think that there's a very good balance there and the New York Times could Syndicate that as well but if you separate the two all of a sudden the news becomes more likely to be truthful news versus you know well disguised opinion the the other issue is you know for readers if you do choose to do a no byline publication you're really going to need time to build trust and for people to understand what you're doing because they will think you're taking the byline off in order to pursue a certain agenda right so that is the the that is the suspicion that can build up The Economist has been able to do this over decades with trusted reporting yeah and sub stack proves that you can have no reputation whatsoever and if you're publishing great content you can build a great business from scratch so yeah you don't need to pay your dues quote unquote by getting a byline at the New York Times to be a clever writer you can start that business today and get paid so I think the New York Times should just focus on being the New York Times and sub Stacks should focus on individual people and I think if you could clean up the middle that would be much better for all of us anyways I'm excited for you guys to help out and pitch in I hope you guys do some good with it I'd love to come back and use Twitter more often can we talk about the reporting that happened with the two guys that trolled the journalists and pretended to be fired employees because I actually thought that was such an interesting moment this week that all the journalists immediately parroted it because it fed their narrative Johnson checking done there was no reporting done and then several of them including I think Deirdre Bosa from CNBC came out and publicly apologized for that report and if folks uh listening aren't familiar with what happened these two guys came out they pretended to be fired Twitter employees on Monday walked out with a box up and they were like hey we just got fired it's terrible life is awful no it's even worse husband and wife you know the guy's name was one guy's name is Rahul ligma and the other guy's name was like Mike Johnson so the whole thing was ligma Johnson so I now here's what's so funny about due diligence hold on I read this story without giving away that punch line to my kids all of my kids immediately started howling they're like Dad if you say these two names are ligma Johnson and I was like oh my God and so you know when when like you know pre-teens can figure this out but the journalism industry could not that is kind of a very telling sign Friedberg made the key observation which is they didn't figure it out because they didn't want to because it fit their narrative so they don't they don't fact check things that fit their narrative this was my point about journalism I it just it was so poignant to me this week when this happened particularly as it relates to Twitter and the importance of call it open journalism or citizen journalism and the Integrity of kind of you know of the voices that we all kind of trust as our our kind of journalistic authorities that these guys came out and they were pawned right outside Twitter's offices into telling a story that fit their Sensational narrative and it was really a kind of poignant moment for me well do you remember that story I think it was originally a rolling stone and then Rachel maddowell Amplified it where it was in Oklahoma City where supposedly all these Mega Republicans were eating horse Pace because Trump told them to and they were and this is basically I thought it was like a coveted therapy and then they were going to the emergency rooms of all the hospitals and then they were turning away heart attack victims because there are so many of these these people going to the emergency room anyway it all turned out to be like a made-up story like a hoax but the media reported it because the story was too good right it just it fit too many of their preconceptions there's also one there's another Vector sex which is live coverage is um you know you really have to to be careful because when doing live people will call in and say oh they're at the scene of an accident and then they will do a baba buoy or whatever you know kind of Charades and so without fact checking and without saying hey we haven't confirmed this yet but these two employees are claiming this people want to get real-time coverage it's fine to do real-time coverage I think everybody in the audience has to understand so much credit what about the editor there was a picture and it said ligma Johnson why are you covering for these people I'm not covering I'm just trying to explain it no you're gonna even let me unpack the whole point let me unpack the whole point there's also you interrupted me well here's the thing there is a different standard for live news coverage and then there we've ripped out fact checking from a lot of these Publications and basic fact checking and a little bit of time I'm explaining why they make this mistake I'm not protecting them you want to know the reason they make it that's part of it but they've also ripped out fact checking and then they are in such a race to get the clicks on social media no no here's what's going on if the story fits their priors they run with it immediately and they don't do any fact checking because they don't want to know that it's not true that's what's going on there is an element let's check a story if it's a narrative they don't like because they're gonna they're gonna try and make sure it's not true yeah that's true of both sides and they'll use proxies this thing there's only one mainstream media this is the mainstream media who's the alternative Fox is uh the the number one network the alternative to the number one network is do you think journalists do this tell me the writer tell me the writer on sub stack wow there's a lot of different ones there so I who got fooled what sub stock writer got fooled by ligma Johnson fooled by ligma Johnson I don't think so I'm not defending don't make me just defend ligma I'm not defending we are both sidesing it I'm not both sizing it I'm telling you what is happening in journalism today they have ripped out fact checking and they are in a race to beat each other because the first person to get the story up gets a clicks that's the dysfunctional thing they try to create a story when there was no story there they agree with that as well they went and camped out outside of an office mid-market Street yes and they said hey there's this Sensational thing happening and there was no Sensational thing happening correct and so the little drop that fell into their laps the little thing that fell into their laps became the story because that's the story they wanted to see created there was no story beforehand that then that there were all these people being fired walking out with boxes and then they said let's go send live TV producers down there they sent the live TV producers down there and then the same things they did the same thing in New York at Bears to read the cover when they had other major layoffs at Bear Stearns and stuff like that during the financial crisis of course they sent people to do live coverage there not defending it I'm just explaining to you what's going on in the background as well with live TV and and the gutting of newsrooms and having no fact checking a lot of these stories go out but what about 20 years ago my 11 year olds and 10 year olds better copy editors than these adults at these that's crazy incredible Publications my kids started howling they were like Dad do you understand what you just said there's a league budget yeah I mean awesome I mean come on this is like prepubescent humor that these people fell for it it's ridiculous it's embarrassing it's certainly embarrassing yeah it is embarrassing and this connects with the 4chan board it's the same problem this is a grievance industrial complex right they're manufacturing grievances it's funny in the case of ligma Johnson it's not funny in the case of the 4chan board but these are people who are inventing stories because yeah to manipulate media because they know it's so easy to manipulate the media right anyways big shout out to Rahul ligma that was a great stunt well played sir it happens to be a huge fan of the all-in podcast apparently sir come on as the bestie guesty anytime he wants oh no well no definitely not please all right we should talk about layoffs and Tack lift 13 riff 700 employees let go yesterday stripe 14 riff a thousand employees open door chime Dapper Labs all hundreds of employees Open Door the most significant they're 550 18 percent Dapper 22 percent uh and Twitter we'll see what the Riff winds up being but that's occurring as we're taping here so and then Jason Apple did a pause Amazon did a pause right and Google and Facebook yeah maybe trying maybe signaling a pause but haven't they've been hiring like in absolutely uh at a crazy crazy pace and we'll pull up the chart here actually it's instructive to look at Facebook and Google because they have not slowed down by any stretch of the imagination just by the raw numbers uh this all started to Peak in June and now it's starting up again so there's a website uh layoffs.fyi that's been tracking all these layoffs you can see the number of layoffs these are kind of major layoffs and the number of employees impacted been pretty consistent in the third quarter it started to die down in September from the Peak in May and June and now right yeah it feels like this is the double dip we were talking about I think this is the beginning this is not even unpack it well I think that we had if you take a very balanced view of what happened this week you have to start I think with the Federal Reserve and really what they said is rates will probably be higher than all of you think and they'll be higher for longer than all of you want and again without debating whether you know that's going to come to pass or not the thing that you can do is you can build a little sensitivity model to understand the mathematical implication of it and basically what it means is that the dollar that's right in front of you is now meaningfully more important than the dollar that's far far away from you so let's just assume that you know the FED funds rate goes to five and a half percent or so even five let's let's go to the optimists and say it's only going to go to five tech companies have to achieve 500 basis points above that minimum so we all have to generate 10 to 11 percent returns for us to be on a risk-adjusted basis better than a Government Bond the problem with that is all of a sudden you know if you're trying to generate cash even three or four years from now it's not worth that much you need to generate dollars today and so you know they are really re-prioritizing the value of short-term profits and that's going to affect how companies get money the cost of capital so how much dilution you have to take so I think this is what companies are now bearing down for they're realizing oh man I need to get my cost structure way in line it is way better now just to put think about this contrast it's way better to grow at 20 and be profitable than it is to grow at 100 and burn money because it's not clear where that second company is going to get the incremental dollars they need for growth and that's just a mathematical realization when rates are five percent risk-free rates are five percent so I think this is this is that moment where you see that pivot from pivot growth to profit yeah yep we've been talking about it for six months but this is this is this is how it is Manifest in Silicon Valley companies is of scale is through layoffs and cost reductions and cost savings so the investments in future growth are reduced and the timeline to drive greater profits is improved I think what if what Elon is going to do at Twitter or what is reported so this is nothing to do with anything anyone told me just what I've read in the reporting it's accurate that he's going to cut so deep he's going to cut 30 40 50 potentially of the employee base it really sets a new standard for how profitable a tech company can get and again I'll give credit to a Twitter poster named post Market who I didn't give credit to a few weeks ago when I read this tweet which I think was a good one which was that elon's really going to show everyone just how profitable these tech companies can be just how lean they can be run and you know when you're doing a 10 riff or a 13 riff you may or may not even be getting to profitability with that riff when you cut 30 40 50 deep and you can actually turn a real profit on a business an Enterprise scale business like a Twitter or like many other enterprise software companies that are out there right now it really kind of sets a new standard that a lot of folks might then end up saying you know what maybe we should go deeper and there could be the case that private Equity firms take a look at this and there's a lot of these distressed mid cap and small cap software companies out there that private Equity firms now realize wow you don't actually need 50 of the workforce in order to keep the product running and to drive to profitability and you could see a bit of a flurry of buyout activity as more folks come in and maybe try and mimic the Elon Playbook so you know that's one kind of prediction I think may arise if Elon is successful in making Twitter a much more profitable Enterprise it could set a new model that catalyzes a lot of other M A activity a lot of other buyout activity of these distressed small and mid-cap companies uh by uh by other actors can I build on what you're saying Nick could you please just throw up that tweet that I sent just for all of these guys to look at because I think it's incredible so to your point this is an incredible uh slide just an incredible slide and essentially what it shows for those folks that are not watching this on YouTube is it essentially shows the private software universe and then the public software Universe at different levels of valuation so as an example right now there are 15 companies private companies that are valued greater than 10 billion dollars and there are 40 public ones that are valued greater than 10 billion there are 50 companies between you know more than 5 billion but only 60 that are public that are valued more than five and here's what's crazy there are 400 companies who have an average valuation of 3 billion and then there are already 70 companies in the public markets where they have a billion dollars of next 12 months of Revenue and it just goes to show you to your point freeberg if these folks have to generate an 11 hurdle rate their cost of capital is 11 percent the companies on the left will have to go through a lot of very difficult cost cutting potentially head count reductions you know repricing of the product all kinds of things yeah no not none of them have oh of these many of these are the left tracker you're on the Left Right 400 there there's almost 500 companies here that have to do an enormous amount of work so that they have a chance to be on the right hand side of this chart the point is that you didn't have to do this when rates were zero there was just an abundance of free money and risk seeking and duration that is now out of the market I think there's also a story that of the 200 companies that are software public software companies that you see on the right some number of them will need to go private in order to do the restructuring that the market is demanding that they do in order to get rightly valued and to your point it will happen at meaningfully lower valuations than where they probably went public or their last drive around which will you guys as you guys enormous instructions yeah if you guys look at these 200 companies on the right how many of them do you think go private over the next 18 months to get restructured Allah what Elon is showing everyone is possible on Twitter 18 is 18 months is hard to predict but to your point Freeburg I think if you look at the number of them that are unprofitable at least half of them will have difficulty and about so I think about two-thirds of these companies really have no line of sight to profitability in the next two to three years and again if you if you layer in this cost of capital argument all of those companies David will have to raise money at very egregious terms in order to keep themselves going as a public business in which case their alternative is to go private in a PE transaction so it's probably at least half these businesses I mean it's a lot there's 100 PE deals to be done yeah 100 wow Stacks what do you think because you know these businesses and the models I mean some of them it's hard to get profitable if you're a scaling SAS business right like you have to get to a certain scale before it's possible well I don't I don't that's like a very specific question of like how many of them are gonna get acquired by pe firms versus going public or going private after being public that's that's like a very specific question I think the larger point is just that it feels to me like the economy is headed off a cliff right now I mean I can tell you within our larger portfolio of companies like I can see the trajectory so after q1 board meetings I would say about two-thirds of portfolio companies were hitting their numbers and one-third were missing and it still appeared to be like problems related to those specific companies not a macro Trend I would say after Q2 board meetings two-thirds were missing and one-third were hitting their numbers and it you could start to feel okay maybe there's like a macro Trend here and I would say after Q3 board meetings like now the entire portfolio is is reforcasting uh maybe there's like a handful of companies here or there that aren't if you're one of those congratulations but like even the best companies our portfolio now are seeing major headwinds and this is just I think an economy-wide slowdown do you think there's restructuring possible I mean can these companies yeah because let me just ask in the public markets do you think those public companies can get restructured as public companies in order to yeah it just yes it will yes of course it is extremely expensive well it's expensive I don't even think it's will I think it's just expensive yeah I mean coinbase as an example like look take coinbase versus carvana right these are both businesses that issued convertible debt sort of right before things got very very hard and if you look at where their convertible debt trades it's trading basically at an implied yield of about 12 or 13 both companies now one is probably you know a legitimate bankruptcy risk which is carvana that's what the market would think whereas the other one you know I think it has a very fortified balance sheet and could weather the storm coinbase but unfortunately in a moment where you know rates are again the risk-free rate goes to five five and a half our cost of capital to do business goes to 10 or 11. these guys have to pay 12 or 13 my gosh it's really really deluded to be in business right now so it just goes to show you that you can stay public but if you want to get incremental money to cover your burn the only way you can do it without really you know blowing up your cap table and doing a massive recap will be through convertible debt but it has a huge overhang and you risk turning the keys over to the debt holders of the company so the alternative for that business is to go into the hands of private equity and get out of the spotlight of these public markets but public private Equity is very smart and the thing that's happened to them is they can't raise debt right so what do you think they do they just have to pay 50 less than what they would be willing to pay before because they have to write you know 100 Equity check so right there is no free lunch anymore I think is the big is the big point to to point out anywhere in the market right now I think one of the things I'm most concerned about or would be is I was talking with a friend who works at a private you know unicorn software company any we talked about the numbers of the business and I was like oh that company's probably worth X and I gave him a number and then I asked him how much money they've raised and they've raised more than x so I was like dude your options are worthless like you know this is a real problem I think that's probably going to become very systemic for scaled unicorn software companies what happens to these businesses sacks in the market you know as they kind of need another round but the value of the company is now less than the total cash that they've raised that all is sitting as preferred stock listen it's it's survival of the quickest those who are most willing to adapt the most quickly are going to survive and the ones that are stubborn and refuse to accept the new regime the market regime are gonna die we showed that chart remember that chart from Sequoia months ago on this podcast remember that where it basically showed what happens if you're a company that doesn't cut burn until the very end then you're still going to run out of money and die but if you make the cut right away quickly you you have enough Runway to weather the storm and I think that what we've seen is you know at my firm craft yeah this is exactly it yeah we showed This months ago we've been begging our Founders to embrace this we did a portfolio a review with our entire set of founders of our portfolio companies we did one in February when we felt the markets were changing and we did another one in May and we showed the slide and this is the most important thing for Founders to internalize is you have to make the changes quickly you know one way for them to think about it is let's say say you're a unicorn company okay and you raised at the peak let's say second half of 2021 you raise 100 million dollars at a billion dollar valuation and let's say you've got 50 million left in the bank right so you've burned 50 million a lot of these Founders are thinking that 50 million they've got left is only 5 dilution but that's what it was historically if you were to raise a new round today you might only be valued at 250. so that 50 million you have left is actually 20 dilution and that's if you could even raise which might be very very hard the most important thing Founders can do is forget about the historical terms on which you raise that money forget about how much money you were burning in the past just think about how much money you have in the bank today impute evaluation to it so you really internalize how much dilution that money represents and then create a new plan moving forward to preserve that cash as long as possible can I say something else quickly on top of this that's I think that's really good advice the thing that again people should do is you should just build a little spreadsheet for yourself to understand what the alternative financing options are for people who are in the business of investing so David to your point the current three-month t-bill rate is four percent you know you can buy munis now between four and five percent that are that are Triple Tax advantaged right you can buy uh high quality corporate bonds that are six seven eight percent and so it's stocks that have a dividend yield of five percent of growth growing Market leading growing and so all of them dividend yield exactly and so all of a sudden like turning around and giving it to a company where there is no end in sight in terms of it doesn't get you to profitability is a really really hard thing to do I was talking to an entrepreneur David soloff just yesterday and he said it really well he's like listen you know I'm not a macro Economist I'm not trying to forecast but he's like what I understood yesterday this is David talking about the FED as an entrepreneur the angle of attack has changed the FED has said this is not going to be some triangle Sawtooth it's not going to go up sharply and then come back down sharply which is what we would all want if we wanted things to get back to normal sooner the angle of attack is now a little bit slower which means it's going to take longer to get where we need to be and then we're going to stay there for a lot longer than we want and when you roll those two things together a lot of companies may run out of money and so if you can't get to default alive you have to look at your cost structure and figure out how to right size this thing because the cost of capital is just going to be really really expensive and this was the fed's goal right they wanted to take away this free Capital they want to slow the economy down and it seems like they're making progress they did the 75 basis point hike this week but we're adding jobs to the economy we have more job openings and we had 2.6 percent GDP growth so I guess my question to the to everybody here is what is the Fed gonna have to do or can they stop this consumer and this growth it's very strange right Powell Powell said he'd rather over correct and break things because he has a toolbox to fix the broken bones but he doesn't have a toolbox to fix if they under correct and they have rampant inflation I mean not more explicit you can't get Jason so he's going to take rates until demand is destroyed and enough demand is destroyed such that inflation is tamed but that has huge implications to all of us because we all have to do our job trying to build a company trying to raise money trying to invest money it's just getting much much much harder than I even thought so like you know for me I'm like wow I thought that we could get through the worst of this by mid-23 but now you have to plan for the worst which means okay now I'm thinking that man rates could be higher for much longer which means you know we could be in this market until early 25 and you may say hey that's way too conservative yeah but you have to plan for conservatism in this point so how do I invest money right now honestly I'm like hmm I should just put more into T bills isn't that crazy if a company's like hmoth can have another 10 15 20 million bucks I'm like wow I mean I don't think that that gets you anywhere and oh by the way that 10 or 20 million dollars I can generate four percent what a what a tough trade-off right for well for somebody who has access to private markets which should be high growth companies to take the guaranteed four over the 50x 25x10x whatever we're trying to bet on here yeah that's not it's not just the guaranteed four but if you want to take Tech risk then you could go buy the corporate bonds of some high quality companies for the 10 or 11 so you take moderate risk so you're also competing with that not to zero risk can you explain that for the listeners what that corporate debt is and why it you know pays more sure there are there are you know high quality public companies tech companies that have bonds and that's corporate debt and they obviously have to pay a higher rate than what the treasury pays because the treasury is is risk-free and corporations could default so there is some risk to it it's not zero risk but you know it's like if you're willing to take Tech risk then why wouldn't you buy a bond at 10 meaning the equity always has to beat that threshold return but but hey can we just go back to the jobs report for a second I mean the U.S government could default but it's considered the least likely to default of all issuers of debt in the world and that's right yeah that's why people call it the risk-free rate because it is the least risky the U.S can always repay its debt because the debt is denominated in dollars and the treasury can always at the end of the day print more money that would just be monetizing the debt other countries that owe money in dollars and obviously don't control the U.S mint they can't do that so they could actually default but since we're the world's Reserve currency we're never going to default however the dollars that you get paid back by the US government might be worth a lot less in the future because of inflation and that's the real risk you have to think about but there's no default risk right whereas with corporate debt there is but let's just go back to this the Jaws picture for a second Jason you asked about this so there is news this morning that we added 261 000 jobs in October and obviously given that there's an election in a few days then you know the administration is eager to point to this but if you dig a little deeper in the report I just posted the link there you see in the Raw numbers that there's actually 328 000 fewer employed Americans and the number of unemployed Americans actually increased 36 000. so and the labor force participation rate declined for the Third consecutive month to 62.2 percent so like I don't really understand like how all these numbers add up but the point is like the data is very mixed our new and and this very definitely negativity in there and this feels to me like the last gasp of the bull market where there's like this residual job creation but you look at like just what's happened in the last week where it's stripe cutting I mean Stripes probably the single highest quality I think it's probably the most valuable private company okay but but like software pure software company they had a 14 cut you're starting to see now the riffs really start to pile up so I think we're at the beginning now of a long cycle of the unemployment rate going up I mean it just feels like the economy is slowing so fast the markets are you know they've been puking now for six months it just feels like this is the beginning of a like really serious recession yet we had GDP growth yet we had job uh openings we had two quarters we had two quarters of net negative GDP growth this is when we had the debate about what our recession is it was true that if you looked at growth in nominal terms that appear to be strong and then it was net negative once you subtracted the inflation rate you know we said several months ago my prediction was a double-dipper session where you had this shallow technical recession then it bounced back in Q3 but now I think we're headed into the second part of it which is the real recession a recession characterized by joblessness and you're starting to see economists say we're going to go from three point something percent unemployment rate to say five or six percent unemployment next year so I think we're just beginning to see the the job Cuts start to add up this is I think this is what Powell met which is you know he'll take it as far as it takes and then he can fix it on the back end by reintroducing you know quantitative easing and reintroducing lower interest rates to stimulate demand but there's what are the odds he gets this right it seems to me that the FED has a habit of reacting too slowly they were too slow to react to inflation my guess is that they'll be too slow to react to the recession so we'll end up with a period of rates being higher than they should too long and then they will correct they'll drop rates but that could be two years from now and meanwhile we could be in a pretty deep recession two charts for you to look at the GDP uh by quarter and then after that the labor participation rate so there's your GDP q1 Q2 being negative Q3 bouncing back we'll see what happens in Q4 here's your fed Force participation rate for labor as we discussed the thing with the labor participation rate that we're still not sort of like truly factoring in is like you know we had a million Americans die because of covid and you know starting in that Trump presidency we lost like seven or eight million immigrants so those eight million people have a huge effect on this number yeah right and it's not properly really factored in because if if you see that at the start of the Trump presidency it's just it's it just fell off a cliff basically and you also have people who retired early that was a big Trend and this all peaked in 2000 labor participation hitting that like 67 68 I think it's the peak and just slowly going down as Boomers retire early because they made so much on their 401ks and homes and then you're right your mouth we've had negative we've really cut immigration in the last whatever five six years I think there's an element in here that's missing on how much people individually are finding other ways to earn income that doesn't qualify and show up in the labor force numbers people have set up Etsy stores Shopify stores have tripled since covid people are making more money on YouTube on Instagram on Tick Tock than ever before there's a whole new class of work that revolves around the individual creating their own business creating their own income stream that's simply taken off and have taken off it was it was kind of a trend pre-covered but it really took off during covid and there's an element of this that's really more about the transition of how people work and how they earn that isn't reflected in these numbers I don't think that the idea that everyone should go be an employee at a company is necessarily the right way to think about Labor going forward the amount of money that individuals are earning is probably the better way to frame this up going forward and as really thinking about the earning power and the economic health of this country this is something important you're bringing up here gig workers are about nine percent of the uh Workforce and uh Uber and Dara had um they they grew over 70 this year but I think the big number that I watched for was drivers are making 36 dollars an hour in the United States working for Uber so you're exactly right people are finding other options whether it's doordash or Uber and that doesn't qualify in labor force right because they're no contract independent contractors are counted yeah they are counted I that's based on my preliminary research if somebody wants to fact check us that'd be great but my understanding is independent contractors which is what gig workers are classified under are counted in labor participation I don't know how they're counted so uh we'll we'll look that up and figure that out there was a story in BBC that the bank of England has now warned that the UK is facing its longest recession since uh Records began some of this is getting to be fear porn yeah but look here's what I think is scary about going into a recession is number one you don't really know how long it's going to take to get out we know the average recession lasts about 18 months but the truth is once it starts you just don't know and the second thing is you don't really know who's been stress tested people claim that they can weather the storm but the truth is that there's no there's no way to simulate truly simulate a stress test they claim they can but the only way is to really subject you know an institution to that pressure and that stress and then you see if they come out the other side so that's the issue is you're just going into this it's there's there's all there's a lot of unknown unknowns and and this is why I would just urge Founders to be cautious is because if the recession ends up being shallower and shorter than people expect great you'll be surprised to the upside but if the recession ends up being deeper and and longer than expected you don't want to go out of business you want to be protected against that so again you know we've been saying this since February and may but again I just reiterate I think it really makes sense for Founders to be conservative prioritize your survival above all else you know this recession probably will last about two years you want to make sure you survive it and to shama's point if you survive it with lower growth that's fine you can keep growing on the other end of this thing but if you go out of business because you grew too fast then you're not going to get the chance to fix that problem when the recession is over I just don't see anybody rewarding hyper growth that is burning a ton of cash where you have to be back in Market every year because it's it's just very hard to feel comfortable that the conditions on the field aren't going to be drastically different a year from now right it's not like we know that it's going to be better or worse and I think that that uncertainty is actually really bad for companies so to your point it's just like a lot of folks have tried to shy away David from actually revisiting their valuations they've done these complicated converts and they've tried to basically you know it's I think it's sort of like managing their ego or the board's ego and I think like the next shooter drop has to be these Founders and these boards just saying okay let's just take the hard medicine what's the real you know market clearing price and valuation let's get a third party to price it and let's get new fresh equity and then move forward because if you don't do that and you wait until everybody's trying to do it then it's going to be a really tough scenario so better to your point you know this is why I like stripe it's so smart better to cut now again it's always hard to let people go but it's better to do that now than 18 months from now because you just have no idea how much more expensive or hard it's going to be then and who's going to even be in the business of lending money or investing money in 18 months and you know that that sounds pretty crazy but it's it's like I think that that's that's the moment that we're in to your point uh Friedberg I did a little research here and um according to the FED of St Louis if you accounted uh casual workers informal workers over doing over 20 hours a week of informal work AKA gig work you would increase labor participation between a half point and a point if you counted all of them maybe even uh slightly more than two percentage points higher so probably about a point uh seems like a realistic way to look at Labor participation and of the eight points or maybe now the six or seven points the ten percent it would then account for 10 to 20 of the 10 drop in labor participation it's just alarming statistics because if most people have most of their personal net worth tied up in their home asset and their home values are declining are going to decline and we're seeing this dramatic spike in Consumer Credit in the U.S it paints a really ugly picture for the next two years wow guys I'm just looking at I'm just looking at the markets today git Labs down 15 snowflakes down 13 Mondays down 14 percent uh at least down 30 percent in one day a Yelp is down 17 percent is down 16 percent so it's just a horrible oh my gosh the cloud computing index wcld has hit a new low for the year it's down to 23 bucks I think the previous low was 25 is down almost eight percent today and this is on a day in which the NASDAQ is down less than one percent so the point is they're rotating out of growth stocks yeah it's just brutal and so listen if you're a startup founder you got to realize these are like some of the highest quality public so Leo's down 40 today twilio is down 37 in a day today whoa but guys this is this is just math you know it's not a judgment on any of these companies it's just pure math this is why I think you have to be utterly unemotional in this moment and if you're if you're a CEO running a company particularly a SAS business you have to really figure out how to how to right size your cost basis and make this money last profitable industrial companies are Bill Gurley had a tweet a tweet about this a few months ago about how the biggest mistake people make in riffs is they just do like a tepid riff like a 10 ish riff and they have to come back and they do it again and they do it again this is what I think the the Elon action this week really sets a standard he shows the entirety of Silicon Valley that you can cut deep and you can turn a profit and you can do it fast and it could set a new standard for how folks are managing this Jack Welch used to in his management principles recommend dropping the bottom 10 of people every year and so you know the 10 13 Cuts don't really pass muster as a public market investor kind of looks at the the management across these different companies to turn a profit they're going to say the folks that are making the deepest cuts the fastest are the ones that are going to get valued it's unfortunate and it's a difficult circumstance for everyone in Silicon Valley to deal with from the employees to the investors to the public and private shareholders it's really brutal one quick question for you guys really it's really just this kind of Market motivation that's underway right now here's the chart uh and my question for you is when do Google and Facebook stop this I mean if you look at the number of employees being added it is truly extraordinary here's the chart and this includes the latest quarter so they are not turning off hiring yet what do you think hold on didn't they announce a hiring freeze they announced that they were at Google they announced that they were going to hold people accountable to better performance and they were going to go do more with less and then they added more people Facebook said that they would do a hiring three percent today yeah Facebook said it would do a hiring freeze well whatever jobs last quarter yeah well you're right they just announced the hiring freeze you look at Apple Apple just announced in non-r D functions a hiring freeze this is Apple like the most valuable most profitable company in the world so if Apple basically is putting the brakes on non-engineering hiring that tells you something about how fast the economy is slowing down I think that was a huge signal yeah the point Freebird makes is so correct which is if you're doing a riff obviously there's a reason why but I think we we're seeing too many riffs where the details of the Riff and the magnitude of the Riff don't match up with what the objective of the Riff is the objective of the Riff for a lot of these companies should be to get them cash flow positive or at least to put them on a Runway or a trajectory where they can get cash flow positive with their existing cash on the balance sheet right they won't need to raise money again and we're seeing a lot of companies where they don't achieve that and they have to come back again and again and hit it again and that creates more turmoil for the company and it's more unfair for the employees by the way sex to that point I'll just say how deep these come these companies are cutting and how you management is expressing shareholders how they're going to turn a profit becomes a signal for those shareholders on whether or not they want to stay in that stock and the companies that are doing it fast and are doing it deep the investors and the shareholders say you do actually have a path that makes sense here I'm going to stay in the stock cash today versus cash in the future sure off let me ask you a question in terms of strategy for one of these companies let's say the Facebook Corporation or perhaps even Google or apple even if they were to cut their expenses which might take obviously a riff and then because their stock prices are so depressed right now maybe even a mid cap one like a twilio or an Uber or an Airbnb if they were cut costs and then start buying back their shares which some companies have been doing what would that do in terms of the Market's appreciation of those stocks or management teams I think it's hard to tell I think that the if you have not lost investor trust I think it would be really well rewarded if you have become unreliable and undisciplined even those cuts I think would be met with some amount of excitement but but probably not a broad base support so you know it then it just goes to narrative meaning if Google did it I think that people really trust Sundar and Ruth and I think the stock would go Bonkers they would they would probably move very quickly into the echelon of apple and apple is sort of a first among equals like they're just they're just in a different class unto themselves Facebook I think is a little bit harder because I think folks have gotten burned and you know they would have to make some really really deep Cuts but then you know where do you do it you can't capitulate on this meta strategy but then the other part is where you make all the money and so you have this huge morale issue that you have to manage so it's just a really hard game to play just one more thought on on um on the rift stuff I think one thought experiment for Founders is to think about what was your plan at the end of 2019 why do I say that because 2020 and 2021 were two of the most distorted years ever in the history of financial markets and the economy because we had covet and then we had the reaction to covid right and so you saw there was this um you know zooms market cap hit 100 billion all the e-commerce companies were doing extremely well you you know you had all this money printing you know you had zero interest rates and so on you had SAS companies hitting all-time Highs at the end of 2021 so we lived through this incredibly distorted time so as a thought experiment go look at what your plan for 2020 was supposed to be when you created it at the end of 2019 because that was the last time that you were thinking without any distortions you know that were then created and I think if you were to go back and look at your 2020 plan again created it at the end of 2019 you'd probably see that you could get by with half the head count you have now because probably you doubled your head count during the last two years during these heady heady times and yet I think Founders start thinking oh I can't go back to operating you know I can't operate at half the level of head count but you were you were operating with half the level of head count by death definition at some earlier point I also think sometimes I think what Founders say is what will people think if I cut 50 meaning all of a sudden the perceived success of my business would be different and I think that this is where you have to realized no like there's a lot of ego tied up in these things which slows people down from doing the thing that they need to do yes it's a really it's a really it's hard to do I mean look at Airbnb as an example I mean they did this ginormous riff during covid because they had no choice I mean they're they're Revenue went essentially to zero and now the business is incredibly strong it's throwing off massive amounts of free cash flow and the stock market seems to really love what Airbnb has done uh and a similar story over at Uber in terms of having done significant riffs and probably could is still down almost 75 off its high right so when you say the stock market love it so they're they're up today three percent so meaning they're not down 30 in one day but they have gone down with the rest of the market they have gone down with the rest of the market but it feels like the business I'm talking about the business fundamentals when you're throwing off almost a billion dollars yeah now you're going to start people are going to perceive that business maybe as uh of this cohort the flight to safety right or same thing with Uber throwing or free cash flow now I think a lot of these names are gonna I don't know Airbnb right now but they do on Uber I think the people throwing off the free cash flow are going to look pretty attractive and be able to buy their stock back maybe all right let's talk about the midterms a lot of big uh Senate races and obviously Governors uh Pennsylvania Georgia Arizona Wisconsin Ohio all really important races sex what do you think well it looks to me like there's going to be a republican wave there was an interesting article actually on CNN where they it's called five scary numbers for Democrats and what they point to is that Biden right now has a 42 percent approval rating 61 percent of the American people say he hasn't focused on the key problems so this is called the out of touch index 51 say the economy is number one issue compared to only 15 for abortion and then 78 say we're on the wrong track I don't think I've seen a right track wrong track index that was so negative and 75 percent of the country says we're in a recession so you know when you look at polling numbers like that it must translate I think into a republican wave and you have now Real Clear Politics currently has the GOP gaining four Senate seats so winning in the Arizona Nevada Georgia and New Hampshire that's a big change from just a couple weeks ago and winning 31 House Seats so this is this is kind of what it's looking like right now but look the the margin is still within the within the margin of error on the polling so Nate silver has pointed out that within one standard deviation you could either have a republican wave or you could have basically the Republicans fizzle out so it's going to be very close but ultimately I think this breaks Republican yeah the to me the way that I've I'm looking at it right now is that it seems like most scenarios the Republicans will have the majority in the house and the real question is what happens in the Senate it's really really kind of a coin flip and that's going to be really interesting to see so you know things where I thought would break Republican in the Senate like Pennsylvania are now back to almost a you know a statistical Dead Heat so it's a really interesting moment actually it's uh but most scenarios David I think you'd agree is that the Republicans win the house and then there's a non there's a plurality of scenarios where they also win the Senate the house will almost certainly go Republican but I think the Senate now the the official percentages are 55 percent likely to tip Republican but I I just think that in a wave year like this where the wrong track sentiment is so high I think all these races that are a dead heat they're more likely to break in One Direction as opposed to like a random distribution which is why I think you could just as easily end up with and you know instead of it being a 5149 Senate it could be 55 45 because all these things could break the same way so right now so I I would slightly disagree in Pennsylvania I think Oz has improved as a candidate fetterman did that debate and since he suffered that stroke he kind of came across as somebody how do we feel about that I I I had very very hard to watch that happen and yeah I mean the guy the guy has suffered a stroke and is sad but he you know he doesn't present as someone who can be a senator right now I think what does the science say about that like a re as a society is this a good idea to have somebody post-stroke be in office I'm not picking any political side here I'm just talking about the the medical issue Alice is actually doing the right thing right now which is he's not actually focusing on that issue because it's so obvious he doesn't want to be seen as beating up on fetterman and instead he's a human he's focusing on the issues and actually fetterman's issues are very unpopular in a state like Pennsylvania so I actually think for both reasons Oz is going to win that I think fetterman's manifestly unqualified but also I think his positions are fairly unpopular so I think Pennsylvania will will almost certainly tip so let me pull up the chart here just so people can see Ohio is going Republican and then Arizona I think is really the interesting one where Blake Masters is now tied after being behind Mark Kelly throughout this campaign he is now tied in New is popular your guy is really unpopular and now he's tied interpretation it's the Peter too he was he was doing really poorly I think because I think listen I think that I think that Arizona is probably gonna be the closest race in the country I think it's gonna be a nail biter but I think Blake's gonna pull that out sex what do you think are the biggest policy shifts that take place in this country Host this predicted Red Wave is there anything that changes so just you know talk to folks about what's on the docket from a legislative point of view going into the next congress with all these new candidates the reality is we have a separation of powers in this country and you're gonna have to divide a government the Republicans will will control Congress the Democrats will control the presidency and so as a result you're going to be largely in a gridlock situation but gridlock may be a lot better than what we've had over the last couple of years so you know you've had basically this orgy of spending and money Printing and I think that's going to stop obviously the other thing that's going to happen is Republicans may not be able to pass much legislation but they're going to do investigations and there's a lot of questions that need to be answered I think about still about covid you know these lockdown policies that we had that started at the top at NIH why did they happen we need to start having accountability for some of these horrible decisions that were made during covid and there's been no willingness in Washington to hold anyone accountable at a minimum they need to have some Congressional investigations and find out why we pursued such bad policies over the last couple of years by the way did you see did you see what happened this week where the CDC you know after this entire opioid epidemic and all of these lawsuits the CDC came out and actually said Hey listen we need to really make sure that we're getting access putting opioids in the hands of Americans who are really suffering with pain management and whatnot and I didn't read the article to really understand the details but I just thought it was an incredible headline where it's like it's just it's so counter to The Narrative of what we've been told is happening which is like you know over prescription and misprescription if we learned anything during Covetous to question every organization everybody and to really collect your own information while you know looking at these organizations we trusted over time I know I look at the world differently now that you couldn't say covid was possibly a lab leak without having your podcast taken down or being banned on YouTube and now propublica has done an investigation and they're saying along with Vanity Fair and they're going to win a Pulitzer for this I bet that this conspiracy theory from two years ago is probably actually the leading theory and that the the Wuhan lab Lab was showing if you didn't see it reporting an incident in late November of last year uh before covet broke 2019. it's really it's really incredible there was an article in the Atlantic that came out over the past week called let's declare a pandemic amnesty no yeah investigation right so basically at everything yes all the experts who told us Jason that we weren't allowed to have an opinion because we weren't expert enough that if we raise any questions about the origin of the virus that it might have come from a lab that that basically needs to be censored the people who said we had to do lockdowns and implemented all these authoritarian tactics now they're saying that they need an amnesty that what that really means no one's looking no one's looking to criminally prosecute them what we're looking to do is have some accountability around the public policy what they want is they want to pull the expert card to say that they're the only ones who get to have an opinion and make a decision but then when it all goes horribly awry they basically want to be completely insulated and unaccountable no account in their decisions no way no way we're not going to give you full investigations we're in alignment on this side by the way can I just yes hold on I just want to say sex we're in alignment on this for a rare moment of Peace on this podcast the same thing after 9 11 shouldn't all Americans understand what happened after 9 11 and what the failures were in our intelligence just so we can get better I I'm not picking a political horse here but it's kind of crazy that you could people said to our podcast and other people who were questioning it forget about what political party you're in just want to understand how the world Works what are the chances that this breaks out in the one or two places where they're studying the coronavirus that you have a lab leak it was so obvious to everybody the other reason why you need to have accountability for this is that there are still a long tail especially around the damage that we did to our kids educationally yes and now and now the over prescription of stimulants and so if you don't depression sensors you can't go after these problems like there was a there was like stimulant prescription is now the single biggest epidemic in children it is now twice as prescribed as contraceptives and Asthma drugs and why chamoth why are we doing this to get them to score higher on a test to be more attentive in school well it's it's actually this negative feedback loop where these children were miseducated during covet it had huge psychological and academic damage to them our test scores have fallen off of a cliff relative to how we used to do relative to other countries I think the teachers unions have found a way to try to explain it to basically Shield themselves from any sort of critique and so the loot and then part of that Loop is then to look at a bunch of kids that are underperforming in school and instead of saying well maybe these lockdowns and masking and all of these things that we implemented actually had a huge impact they say uh you know you're misbehaving so let's put you on a stimulant yeah it's crazy we're in that Loop right now just so you guys know the data is outrageous twice as many prescriptions for stimulants as the sum of contraceptives and Asthma drugs for All American Kids yeah it's not that suddenly everybody's got ADHD so we failed them we failed our children and and we're going to use stimulants to have them ketchup weeks but we should be doing Summer Schools after school programs we failed them because of our response to covet that is why we need answers to all that stuff because you need to link these things together to have some real accountability absolutely here is the uh just so we have the people see the numbers here's the 538 poll of uh how Joe Biden's popularity has switched this is uh 654 days into his presidency started out really strong 54 and now a little rebound since the summer obviously that uh dip started uh with the economy it's the economy stupid and if we go down a little bit on the same page and you zoom in on the left there you can see compared to Donald Trump uh he started out much more popular than Donald Trump day by day and now he's just as unpopular as Donald Trump was at this point in his presidency well look I mean look the setup is really interesting for 2024 because it's probably going to be the case that we're in the middle of a recession going into that election cycle maybe we'll be sort of like getting ourselves out of it but there'll be a lot of economic damage high unemployment and you know typically folks in power will have to sort of be held accountable for that it's a really interesting setup that both Gavin Newsom and Ron DeSantis have to figure out now and navigate if they're going to get the nomination on each side and breaking news today sax would love to get your thoughts on this axio says uh and we'll go to science Corner next that Trump's going to announce on November 14th that he is running for president look I I kind of have the Joe Rogan philosophy on this which is why I give it oxygen let's just wait and see there's certainly no needs to talk about it before it happens you know we're not even past this election yet but but hey I want to go back to the the Biden popularity because I think part of the issue here is what are the arguments that Biden is making to the country about why people should vote Democratic and he gave another speech on Wednesday night where he basically claimed that if you vote for a different party that that is a threat to democracy in other words the perpetuation of single party rule is what you must do if you care about democracy that is a sales pitch that's not going to appeal to anybody outside of the viewers of MSNBC it's just not he's not talking about the issues that really matter to the country you know what the country wants to know is that he's focused on the economy he's focused on inflation he's focused on crime he's focused on the schools and fixing this learning loss that Jamal was just talking about he's not doing those things instead he's basically saying that the Democrats should be kept in power forever because there was a riot at the Capitol on January 6 and look that was a stain on the country okay it was terrible that that happened disgusting that is not a reason hold on a second that is not a reason to keep Democrats in power forever and actually there's a um a liberal guy a liberal Democrat named Josh Barrow who wrote a pretty good blog about this and what he said is the message is that there's only one party contesting this election that is committed to democracy the Democrats and therefore only one real Choice available if voters reject Democrats agenda or their record on issues including inflation crime and immigration they have no recourse to The Ballot Box they simply must vote for Democrats anyway and that argument is just not flying and actually he's a a Democrat who is pointing this out but I don't think that Democrats are getting the message on this but I think they will after this election and they're gonna have to find a new sales pitch to The Country well you know and he does have a good sales pitch doesn't each a month with these major bipartisan uh wins he had the infrastructure deal got done the technology bill and the chips you got gas prices going down yeah GDP growth you got job growth the problem is that those things happened frankly too early in his presidency and things are getting materially worse so I just sent you a link can you just throw this up here for a second you know Jason you mentioned this cheaper gas thing yeah but the reality is um if you look at this we have now depleted our strategic goal Reserve by almost 50 percent yep so we are running out of oil that we can introduce into the market at effectively zero cost to bring the price down and because we've lost our relationships with folks like Saudi Arabia there's no way to influence them in order to produce more in fact they're going to cut Supply so that they can control the prices that they have which that they can sell into the market and so now what are we left with well the only three places where you can have incremental supply of energy which the country still needs is from Russia Iran and Venezuela and so you know all of these things Jason I think come back and really put Biden in a tough place because as as Sac says he does have to answer to all of these things because these are his decisions look I still believe in the Democrats you know I I'm hoping I gave a million bucks uh to the Senate pact trying to sort of tip the Senate I really think it's important that we have a split government because I've kind of I gave up on the house I think it's clear that the Republicans are going to win but the Senate is still is still up for grabs and the reason is because I think that we need to sort of have stasis so that nothing bad happens between now and 2024 because I think the economic conditions on the ground are going to be bad in and of themselves and then just the one last thing I'll say is the instructive thing that I think we should look at is what happened in Germany because what happened in Germany is really interesting when the economy turns and inflation is out of control and energy is out of control what they basically did was they sidelined the European Central Bank they stepped in with their own balance sheet and said you know what we're going to nationalize assets and I know that this sounds crazy to say but if it can happen in a place like Germany I know most people would say it'll never happen in America but I'm not so sure and I think that you want to make sure that there's a split government so that these things are never possible and so hopefully there's some you know Common Ground in a Democratic Senate and a republican house and we just kind of get through 24 and see where the chips land and I still think it's going to be uh DeSantis versus uh Newsome Freeburg any final thoughts here on politics my first um observation is that I think it's funny that chamoth and sax are funding opposite uh sides of the uh yeah why don't you just guys just give the money to me and Friedberg to get a plan each other's money up yeah I could think of other ways for you guys to use that money but David and I may have canceled each other out you're right I mean yeah so far Peter Thiel made the better trade he's it looks like the teal wave in the Senate so look I would say my very broad statement is democracies evolve in a cyclical nature over time right you often see swings from one political party to the other and um it's just the nature that once someone's been in office they form the new establishment and then folks in the next election cycle want to vote against that establishment because there are things that they want that they aren't being given today and therefore the Democracy forces a change from what is the current establishment back to the other side and generally political parties seem to kind of adopt whatever the other side is and that's how the cyclical evolution of democracy seems to play out the recent Trend that has been more alarming which I think we can kind of take pause to notice is the rise of populism where populism is this really kind of vehement Die Hard opposition to elitism and the establishments that everyone feels kept down by and everyone feels taken advantage of by and um the the rise of trump the rise of bolsonaro the rise of Boris Johnson and I would argue even the rise of AOC Bernie Sanders and Elizabeth Warren all similarly speak to the the crying voice of the the Democratic populations that they want to see these establishments taken apart they don't feel like they're Fair they don't feel like they're just they don't feel like the institutions that oversee us and are meant to service us are servicing us um and so there was this big rise the problem is like a normal pendulum would swing back and forth between one side and the other with the rise of populism you get such a strong push of that pendulum it can knock through a wall and I think we saw that on January 6th and I think it gave a lot of people pause we saw the the motion of brexit knocking through a wall and we saw these kind of very radical outcomes and then the cost of those outcomes blow up in our face and as a result I think we're seeing a bit of a receding of the tides right now away from populism during this current electoral cycle where folks are saying you know what maybe we just need to have some sort of an establishment so I can feel safe and secure less than the volatile volatility that I've experienced of late look I think you look at the economic mess we're in okay populist did not cause that okay populists did not cause 10 trillion dollars of money printing it was Modern monetary Theory and the experts the FED who did that it wasn't populous who created the great financial crisis of 2008 that caused the zurp and we're still living with all the downstream effects of that it was the experts on Wall Street who said they could manage all these derivatives and the collateralized mortgage obligations and all that stuff that they lost control over I would argue hold on it was not populous who caused the horrible handling of that pandemic even though they were blamed for remember we were told it was a pandemic of the unvaccinated then it turns out the vaccine doesn't stop it it was not populous who caused the reaction to the pandemic it was the experts the CDC and falching people like that who shut down our economy who caused the learning loss it was those experts so Freeburg listen you may not like this populist waiver that we have in the country and I get that but it's in reaction to something real which is the failure of this expert class and if you want to stop having this populist wave rise up we need to start having experts in position of power who actually know what they're doing well one way to say that sorry Jake out hang on a second I don't have any opposition to the populist wave I'm making the observation that the uh the effects of some of the populist movements have started to become too volatile for people to feel like they should continue forward with that electoral path that was my observation okay I'm not kind of criticizing the populist movement I'm just saying that events like January 6th and the conditions in the UK for example are making people say wait a second maybe I need to take pause on the extreme the bond market basically fired list trust I mean she's not a populist and you know in Bolson bolsonaro in Brazil he actually just lost and there was this big narrative that somehow he was gonna not relinquish power and he just announced that he will relinquish power right so you know some of the stuff that is about how populists pose this great danger I think is threat inflation and that the threat is magnified by Elites who want to stay in power and the truth of the matter is we need accountability for the people in power and when they set the wrong policies and decisions they need to be replaced no more no more unaccountability yeah I just just to my personal belief 100 agree that's all of these institutions accountability maybe competence and also transparency and accountability like I think that's what the public wants I mean competencies there's no way to perfectly react to the pandemic but in your mistakes owning them and explaining them would it be much better than trying to obscurify it and asking for amnesty chamoth you're not um if you want to hear an incredibly interesting interview because it's very thought-provoking of a modern Progressive uh but with a very different mindset or sorry you know maybe you don't want to call him a progressive but is the president of El Salvador naive bouquelli and he did this incredible interview with Tucker Carlson on Fox News I encourage everybody to watch it on both sides of the political Spectrum that man is impressive did we just get an admission that your mouth watches Tucker I watch I watched that interview you watch the talker oh my Lord Jason's head's explode you know because I I try not to be against the moment ignoramus it's an Entertainer I like to watch things on both sides but that interview is incredible He is unbelievable impressive and it's a it double clicks into you know the skepticism that smart people like him the outsider class has with The Insider expert class in a nutshell if you want to see it I would encourage you to watch this interview because it's it's incredible incredible really really Jason The Peasants with pitchforks are rising up against this Elite Class who put themselves up they've set themselves up as Lords they want exclusive control over their blue checks and we're about to overturn this establishment because it is corrupt and it is incompetent be great if the people who worked for us were confident back on Megan Kelly owned and we're transparent you know I think that's why people are opting out of this is they don't feel that there's a level of competence in these institutions nor ownership and transparency and it really is frustrating whether it's education or it's health or you know any of these topics we've talked about here on the show let's go to science corner and we can rap what do you got free bark for us to mock I think we were going to cover the Facebook meta announcement that their AI research team had generated the physical structure of 617 million proteins from these metagenomic data sets and so remember Alpha fold made this big announcement that they had highly um accurate predictions of protein structure the three-dimensional shape of proteins and remember proteins are kind of the Machines of biology that do everything from catalysis to enzymes where they break stuff down and they're like you know they have all this structure that allows them to do specific physical things and proteins are coded in DNA every three letters of DNA codes for an amino acid a string of amino acids makes a protein and so you know we have about a million species where we've sequenced the entire Genome of those species only about 3 000 Animals by the way including humans half a million from bacterial species and then a bunch of viruses and other stuff but but call it about a million species that we've sequenced and so you know earlier this year Google's Alpha fold project published the 3D structure of 200 million proteins that they had derived from the whole genome databases that existed where we've gone through and figured out what's the full DNA sequence of all these different species now when you look at the DNA in the environment around us you were just to take the DNA out it turns out that we have seen very little of that DNA the vast majority of DNA that you would find in a teaspoon of soil for example we've never classified it's not part of a species that we've actually built the whole genome around we may not even know what species that DNA is from and so when you take a teaspoon of soil you'll get about 100 billion microorganisms in that soil from about a million unique species but you don't see those species because the way DNA sequencing or shotgun sequencing works is DNA is chopped up into little 250 base pair of Lights little 250 strands and those 250 letters are read at a time and then statistically bioinformatics puts together all of that little DNA segments and tries to create long strands of DNA to figure out what the genes are or what the whole genome is and so shotgun sequencing gives us kind of a snapshot of the DNA but until we've done the hard work of figuring out the whole whole genome we don't know what species that DNA comes from so when you take a sample of soil or you take a sample of human poop and you sequence it or even a teaspoon of ocean water and you just sequence the DNA in it you get all of these little segments of DNA that we've never seen before and you can string them together statistically because you get lots and lots of copies of them and you can figure out the overlap and then you can create these genes and a gene is a segment of DNA that codes for a protein and those genes make up the metagenome or the combination of all the genes that we find in a in a piece of of the environment and that meta genome comes from millions of species that we've never seen before so what Alpha what they did at meta is they took all of those genes that we pull out of the soil or we'd pull out of the ocean and they picked a bunch of random samples and they then predicted the physical structure of the proteins from just those genes without knowing what organism they came from and this gives us a whole new universe of proteins that we've never classified before or never seen before now I will just kind of speak a little bit critically about it number one they didn't do what Alpha fall did what Alpha full did is they took 3D structures from typically x-ray crystallography then they took the the DNA code and they built machine learned models to figure out the 3D structure from the DNA code what these guys did at meta is they took the 3D structures and the code and they basically did a fill in the blank they found all the metagenome data out of these samples and a lot of it was missing and they filled in the missing blanks using kind of common protein structure that existed out there in the wild that we already knew from the alpha full data and so they kind of did a fill in the blank and as a result it allowed them to very quickly build these 3D models versus doing the hard and rigorous work that Alpha fold had to do so they claimed that it was 60 times faster but it's actually an entirely different technique and the second thing is that they represent that only about a third of it is high quality meaning only about a third of the proteins that they've created structure for are really useful or or that could be kind of Applied uh in terms of this is the real representation now why is this interesting and important proteins can form the basis of new medicines so you know we can find proteins in the soil a genomes in the soil and proteins in the soil that can kill certain fungal pathogens that can kill bacteria and those can be turned into fungicides they can be turned into antibiotics we can find proteins that bind to specific things we can find proteins that fix nitrogen from the atmosphere and those proteins can be turned into new types of fertilizer so you know searching through this universe of proteins that exists in the metagenome will allow us to find new molecules to do new and interesting things with in the applied engineering world and I will say like this is what would the output of these be is what everybody's going to be thinking antibiotics fertilizers I mean the idea of the metagenome is rather than start with the species and then take the genes out of it just go get the genes the genes are already there they're in this they're in the ocean they're in the soil and there's millions of genes hundreds of millions billions of genes that we've never seen before therefore there's billions of proteins now we could randomly create proteins but the number of proteins that could exist is more than the number of atoms in the universe because remember there's 20 amino acids so 20 to the 200th power or 20 to the 300th power or 20 to the thousandth power meaning how many different combinations of amino acids can you make that's more than there are atoms in the universe so the best place to start is what evolution has already given us all the proteins that exist in the environment so let's go find those proteins in the environment and then let's figure out what do we think they can be used for can they be used in industrial applications in medicine can they be doing them in Material Science you're saying Material Science and so you know a lot of drug Discovery mines proteins it tries to find proteins and figure out what can these proteins be used for and now we have all these new data sets of proteins that are being generated from these metagenomes and so it's amazing I mean you know look at the world around you look everywhere up and down on the walls on the ground below you there are billions of species of organisms that we've never classified before that are making billions of unique proteins that we've never classified before and any one of them could unlock an amazing commercial opportunity for industry so and for medicine and for human health that's what's really exciting about this ability to kind of mine the metagenome silly question for you or maybe not silly uh we have gotten the precursors to DNA for meteorites if I understand correctly what do they call them nucleobases nucleic acids yeah yeah um thymine Etc like things that exist in DNA that are precursors we've never had DNA from space obviously but we could at some point start to find DNA out there in space and this could have an even crazier impact on what we built here is that the next card to turn over after we every human gene home what's here no I wouldn't say so I like I think look if there's DNA that's coming to us for meteorites call it a couple hundred genes you could pick up a piece of uh soil and find over a billion genes in that teaspoon of soil right so uh we have far more to mine here on Earth and the low cost of DNA sequencing and shotgun sequencing coupled with bioinformatics where we take all that so just to give you guys when you take a teaspoon of soil and you get the DNA out and you read the DNA out of it sequence the DNA that's potentially tens of gigabytes of data and then you could do that millions of times over and then you statistically can find genes and then statistically estimate what they physically look like what those proteins look like and then you can start to build models around which ones do we want to try and use for drug applications which ones do we want so there's so much work to do it just in terms of what we have here on Earth and the tools are getting so cheap and so available there are Labs that are all over the world starting to kind of spring up to do this work it's super exciting adults it's kind of it you know just to put two ideas together I've said before like the two big investable themes that I'm orienting my organization around is this one is that the marginal cost of energy goes to zero and the second is that the marginal cost of compute goes to zero and the second one is really about shifting compute to more parallelism on gpus and Asics and fpgas but that's why all of this stuff is possible the fact that you know meta can do this and Google can do alpha fold is largely because the cost of all of this stuff is you know trivial for these kinds of companies so it's really exciting it's going to move science in my opinion out of this in Vivo in vitro experimentation model into silica and so those who can actually build learning machines will solve some of the most important biological problems so I I'm a real believer in this stuff I think it's super exciting when do you think this stuff actually hits Friedberg our life that's always when people talk about these discoveries yeah a lot of people don't realize it but so many um molecules that that are used in agriculture like fungicides to to kill fungus in the fields those are derived from this sort of work a lot of antibiotics a lot of medicines are already derived from mining genomes finding new proteins and seeing what those proteins can do because these proteins didn't evolve in the environment randomly they evolved to do something and in many cases we can take that thing that they do and then harness it into a product and that's what's so exciting and this this affects everything Material Science you know agriculture human health it's uh it's a food it's really profound awesome all right everybody there you have it that's another all in podcast in the camera by the way so many so many of Freeburg stands were afraid Jay Cal that you and I were gonna make some joke and we didn't no we didn't and so for all these fans I just I hope you guys can exhale take a deep breath man have some you know eggless mail and uh enjoy your weekend uh enjoy your week bye bye everybody see you next time love you besties love you guys we'll let your winners ride Rain Man David's side we open source it to the fans and they've just gone crazy with it [Music] besties [Music] is [Music] [Music]








sacks the United States is maybe not going to send weapons to Ukraine indefinitely and they're asking them to sit down and negotiate something that people on the left started to do and got I got smashed for something you've been pushing for so I guess mini Victory lap for you sax what what's the end game here well yeah I mean I've been talking common sense about this for months just saying that we need to be open to diplomacy because total defeat for Russia also means a a maximum risk of nuclear war I mean these things go hand in hand that's the Paradox of this war is that if Russia faces the prospect of a total defeat that's when they're most likely to escalate this conflict into something much much worse so therefore we need to be open to diplomacy but it was good to hear Administration officials over the past week say things that I've been saying for months and that I've been accused of being like a Putin sympathizer for so apparently there's a bunch of Putin sympathizers in the administration and just to read you some of these remarks actually I want to play like a fun game with you guys instead of just oh really yeah instead of just mentioning these quotes I want to play a game called Millie or sax so I want you guys to guess okay whether it was General Millie who said the quote or whether I said the quote okay does that sound like a fair fair game yes fair game let's put some game show music here yeah Leo sax I'm gonna read you like four or five quotes and you guys are gonna say whether it was Millie yeah or sax who said it first quote who said it General Millie or sax one of the lessons that should have been learned from World War one is that European powers refusal to negotiate compounded the human suffering and led to Millions more dead million or sex sex I'm going sax I'm going sex it's a very historic Millie said that no next one next one go go go okay a regional War turned into the first world war because all parties made Maximus demands and assumed others were bluffing it can happen again exactly or something you said bluffing that bluffing is a word that you would use all right that was sex that was sex maximalist yes okay would never say maximalist yes he would never say bluffing yeah go ahead where there's an opportunity to negotiate when peace can be achieved seize it Millie Miller it's very it's pithy it's pithy like Millie all right that was Millie yes good all right I'm two and one two in one me and you two for one two for one it's deeply Earth responsible not to try for diplomacy when the stakes are so high sax that's an emotional statement I go milk it was socks damn it two and two three there has to be a mutual recognition that military Victory is probably in the true sense of the word may not be achievable through military means and therefore you need to turn to other means oh that's Millie it's a word to work it's a milli word salad it's too too convoluted for sacks Saks I'll go Millie I go Millie I think it's Millie that's Millie yeah smart salad Millie Ah that's it I caught up now I'm three and two tied with your mouth last one last one okay it must be our objective now to help achieve a ceasefire and negotiated peace rather than protract the conflict um wow it's so formal nilly so formal feels like somebody said that on the steps of like a building outside it's very formal it's well spoken it's crisp can we hear it one more time may we hear it one more time it must be our objective now to help achieve a ceasefire and negotiated peace rather than protract the conflict Millie it's a little too formal for a podcast but in a tweet it wouldn't be so it could be a sex Tweed but I'm thinking this little podcast I gotta go melee I gotta go Melly sex ah God damn it damn it you can't tell Millie from Saks is what we've learned what a great game right now we're gonna play the next game this is called Bernie Madoff or SBF Ernie Madoff or SPF [Applause] [Music] [Music] all right everybody Welcome to the all in pod with us again the dictator in a beautiful purple sweater sweater Karen man it's The Fall season will be the inside the inside of this is suede oh very nice very nice so uh multiple animals killed you are a pleasure yeah got it all right what animal do they kill to make suede is that like a type of leather or what is that I hope it's an endangered one well actually that version of sway that he's wearing is from a white rhino so they just take the hide and they throw everything else away oh my God so hard can we take this out of this these are ivory buttons I think it's baby seal fur around the house no how many baby seals were killed to make your outfit all right also with us is uh the Sultan of science uh David Friedberg racing from the airport how is that JetBlue mint yeah I heard you upgraded to Mint no comment well you don't want to talk about the 1200 upgrade you did to your JetBlue ticket wait you don't want to talk about JetBlue mint why are you embarrassed to fly commercial what did you eat are you embarrassed to fly jaycal yeah I'm the president I'm like hold on mint coming through all right then I start spreading out I think Jayco Class is like the seat by the bathroom in the back do you think you save 150 bucks each way what is is JetBlue meant the name of like JetBlue mint is their first class uh Coast to Coast it is so delightful they just have figured out a way to make like sleeper seats you know that are very nice and it's an upgraded service where they they put like a little wall between you and everybody else it's kind of like having a private plane if you didn't and um sax is here the whole Cruise here basically uh we'll have a surprise uh bestie guesty jumping in in the middle of this I'm not going to tell you who because nothing's going on this week nothing is going on this week I mean there's so much to talk about let's just start with the elections and then we have to start with my mayor culpa throwing red meat to sacks but I mean at this point all right so DeSantis won by double digits in Florida he got a huge amount to the vote but all the Trump high profile Trump back candidates seem to have lost Dr Oz Dan Cox just it was a shellacking I guess or the Red Wave became like a puddle or like an eye dropper or something but some of the Trump back candidates did win some of the um Peter Thiel collection JD Vance one so I guess that's a big win I wasn't a trump candidate though because if you remember when uh Trump went to stump for JD Vance he forgot his name I got his name so anybody from your side you don't need friends anybody that Trump actually cared about turned out to be just a complete dud and lost and everybody that kind of you know had to keep him somewhat around just so that he didn't throw bombs actually did decently but I mean Trump is a just a a weight on the neck of the Republican party and it's time to just get rid of him sax what happened to your Red Wave yeah listen I got this wrong um I think there's a few reasons for it so I think when you get an election wrong you have to admit it and figure out what you've what you what your mistake was otherwise you're not going to improve I mean number one I was looking at you know the RCP polling this real clear politics were they taking average of all the different polls they were adding a factor to it they were showing by the way plus three or plus four in the center for Republicans but they were adding a factor to it based on the underweighting uh that the pollsters did in the last election cycle and it turns out that the pollsters I think did a pretty decent job correcting their polls and so the RCP overweight turned out to be just basically completely wrong the other thing that I got wrong was I was looking at the fundamentals I mean three quarters of Americans think we're on the wrong track and we're in a recession So based on that you would think that this would be a great year for republicans and in fact the out of power party usually wins in a midterm and Biden's popularity is at historic lows at like 41 42 so everything was teed up for the Republicans so what went wrong I think a couple of things number one two days before the election Trump basically comes out in pre-analysis that he's running oh yes you know this basically plays into the narrative that Biden has already created that this is a this is not a referendum on Biden it's a referendum on democracy and basically Trump made it into a choice election who do you like better Biden or Trump and the fact of the matter is if you look at the exit polling as unpopular as Biden is Trump is even more unpopular so that did absolutely nothing to help the Republicans in it I think it really hurt them at the margins the other thing that turned out I think the other big thing that helped Democrats was Dobbs and I never thought that it wouldn't be a factor but if you looked at the polling before the election 15 of likely voters said that it was their number one issue if you looked at Exit polling after the election it was 28 so Dobbs turned out to be twice as significant as what the early polling was showing and if you remember Jason go back to the episode we did on abortion I said the shrewd play for Republicans here was that Roberts compromise what did Roberts want to do he basically was going to allow the 15-week restriction on abortion but not have the headline of Roe v Wade overturned and that basically is what DeSantis implemented in Florida he basically restricted abortion after 15 weeks it's the purple State compromise it's where I think the purple States and where most of the country is going to end up and the sooner Republicans get their heads wrapped around that fact the better they're going to be long term and ask you one question their sax who stacked the Supreme Court deliberately to turn over Roe v win listen I mean there this was a long-term priority of Republicans obviously that's not a question Jacob well no when we you have to recognize that Trump said he would do that he did it so this is doubly Trump's fault every party nominates justices that align with their values and it Cycles yeah but Trump said he's going Trump said he would specifically do it in order to know what the president doesn't choose who dies in the Supreme Court and when yeah right yeah it's also more complicated than that because what does Dobb's decision did is throw the issue back to the states and the fact of the matter is that now it's up to each of these states to determine where they're going to come out in this issue so if you look at there were ballot initiatives in red States like Kansas and like Kentucky that's right that's what I'm saying is there a pro-life ballot initiatives in red states that lost and so you can see all over the country that the Republicans tried to go too far or they do try to go too far when they try to impose a total ban what it seems to be popular is this what I'm saying is the purple stay compromise it's what yes DeSantis did in Florida it seems like most of the country tree we talked about this on that episode yeah most of the countries in the messy middle they want abortion to be safe legal rare and early they're willing to support it in say the first 15 weeks but then after that there needs to be some restrictions that I'm saying most the country supports that now it's also the case that Democrats though are staking at a pretty extreme position too because most of the Democrats were taking the position that abortion should be legal up into the ninth month which is not even that's more radical than even Roe Roe said that you can restrict it after 23 weeks so you know what we said on that podcast Jason was the party that gets the middle first on this issue is the one that's going to do well not just this issue yeah and I and I think yes I think it's true on this and I think it's true on other things so look I think the Republicans can correct here pretty easily if they listen to folks like DeSantis and yonkin and Kemp uh people who understand that they have there's a compromise here and the ones who basically insist on pushing a total ban are going to go down in flames there's a couple of things I think that are worth looking at now that we have all the exit polling and the results the Democrats strategy of helping to promote these extremist Maga candidates in the primaries turned out to be a huge winning strategy because every single one that they helped put up against the Democrat the Democrats won but number two so what that shows is the extreme right cannot field a winning candidate but on the other side all of these extreme left-leaning Democrats also did not do very well either and so you're back to David what you said which is we have been saying for a while the winning strategy is that messy middle it's the moderate person that kind of like talks to the center and this is what you see everywhere around the country all of the battle ballot initiatives every time you had an extremist ballot initiative whether it was a complete ban on abortion in a red state or whether it was a tax the rich policy in a blue State they failed and so I think the message that you have to take away is the extreme left doesn't work the extreme right doesn't work right if you look at for example like Kathy hokel almost lost in New in New York state because of who because of like AOC and all of that extremist Progressive Rank and file of that party so people need to really understand and look at the data on the ground if you want to win in 24 you got to be in the middle and you got to clean up all of this extremist rhetoric freeberg any thoughts I think the Georgia Senate runoff race that we had in the 2020 election cost the U.S 10 trillion dollars and I think it uh because if you'll remember that was the race that when the Democrats won tipped the power in Senate to the Democrats and all this legislation for the last two years was passed including a lot of the fiscal stimulus and spending that very likely may have faced significantly more opposition than could have been faced where the Democrats had the White House and the Senate and the house and so that single seat and and the loss of that seat in the runoff to the Democrat Party I think ended up allowing a lot of loose Behavior over the last two years that's going to cost this country for a very long time and in part perhaps we could argue a lot of the inflationary pressure and now the debt load the U.S debt load increasing by 10 trillion dollars in the last two years since that election by the way and so I think one of the most important things that perhaps people don't cognizantly recognize but feel in some way is that having a balance of power is really important in this country and so to some degree while there may be issues that folks can argue about disagree about there may be candidates that are vile to us I think ultimately folks are recognizing the benefit and the value and having a good legislative debate and a good check and balance in this country and so I I think that there's a lot of what sax is saying that that ties into that kind of emotional conditioning that's probably underway okay sax Trump said he was going to announce he went after DeSantis called him to sanctimonious obviously the the Trump endorsements here didn't help uh Roe v Wade didn't help the situation what is going to happen here is the Republican Party finally going to cut ties because they want to start winning or uh is Trump going to just announce next week and cause massive chaos what's going to happen in the Republican Party in the coming weeks because we're 14 months away from Iowa right I mean this is so now the next issue the question comes down to do Republicans want to start winning elections yes or no and Freeburg brought up the the right point in the last election cycle he's right that the reason why we got 10 trillion dollars of unnecessary spending is because of that Georgia runoff see we're about to have another one where Purdue won that seat on Election night and then Warnock won in the runoff why did things go against Purdue because Trump had a six-week hissy fit after the election the Georgia runoff happened on January 5th and it all culminated in the ride on January 6th so the fact of the matter is Trump has been having this extended hissy fit and living in denial since the loss in 2020 and a as a result of that we lost the Georgia runoff I think we did worse than we had to in this midterm I think we're going to lose the Georgia runoff again if Trump continues with these Antics and so it really comes down to Republicans do you want to win and look I know that there's call it 40 percent of the country passionately loves Trump but here's the problem he's capped at 40 percent Independence and moderate centrists will not give the guy another look and so you cannot win a major national election in this country with 40 percent of the vote no matter how passionate that 40 percent is you know what 40 percent is 40 percent is Charlie Crist the guy who just answers beat who wiped out in Florida that was a 60 40 election that is what a 40 of the electorate looks like Landslide it's a landslide exactly so the bottom line is that who your messenger is in politics is incredibly important and Trump just gives his enemies way too much to work with now if he weren't a republican it might be different take fetterman for example okay this guy fetterman okay he's being portrayed as this man of the people he's got the goatee and the the tattoos and the hoodie or whatever who is he really he's a trust fund kid who never had a job until his mid-40s but the Press completely gives them a pass on that they would never do that for Republican if federmen were a republican the Press would expose him in two seconds now that's a complaint but the fact of the matter is Republicans deserve to accept it these are the rules of the game if you're a republican candidate for office you have to be perfect you have to be focused you have to be disciplined you have to be DeSantis you cannot give your opponents something unnecessary to work with every fight DeSantis pix has been a smart fight that he's won and same thing with Len yonkin as well he doesn't give his opponents things to work with and unless Republicans realize that these are the kinds of candidates we need to nominate in this media environment we're going to keep losing elections yeah any final thoughts here as we wrap up election I'm going to DC next week doing the rounds high five and back slapping yeah just to finish the thought one other quote from New Hampshire Governor Krista Nunu who's kind of a he's a republican who's been in space with Trump he said listen the message of this election is first fixed crazy then fixed policy if you're coming across like you're crazy their voters will reject you now that doesn't mean you can't stand for principle Ron DeSantis says that Florida is where woke goes to die he says we will fight woke in the boardrooms we'll fight in the classrooms this is certainly not a liberal position these are pretty conservative positions he's taking but he does it in a calculated disciplined way I'll say this right now he is a winning candidate and the scale of Reagan if the Democrats also don't figure out how to clean up their act because the other message that's so interesting that I took away is the legislative agenda that works is actually what Biden has always believed the problem is that Biden seems to get distracted or confused or hijacked by the left wing of his party and they introduced all these unbelievably crazy iterations of progressive policy that just are not popular even in blue States just look at the number of bills that failed so he also has to fix what he's doing by the way because he doesn't think that could fail uh the a U.S judge in Texas I'm not sure you can tell me if this is legit or uh or not no they stayed that well we should talk about that in the context of the economy actually well that was predictable that was predictable thrown out is completely unconstitutional for a presence of a trillion dollars without congress's approval can I build on Jamal's Point here DeSantis won Miami-Dade County which went for Hillary by 30 points okay he showed that a competent executive a a an energetic youthful operator who actually runs the state well okay can win over moderation Independence and Democrats no he's the winner these are the types of candidates Republicans are yeah he's a winner he's the winner we got uh we got a call breaking in here uh we have a special bestie guesty you know it's been a big news week it's not just the elections FTX crypto exchange went belly up and uh we thought well let's bring somebody in who's super credible in crypto and that's a friend of the past God it's credible because he's wearing a tie yeah hey Brian I'm shrunk how are you doing brother Ryan Armstrong you look fantastic yeah what are you testifying today I'm doing great it's not it's not Montclair and it's not uh Laura Piana but um you know normally I just I just wear the black T-shirt and the hoodie but you know when times like this I gotta go talk to Media policy makers regulators and it's a it's a good time to you know spruce up the image this is a week to break out the tie yeah Hey listen Men's Warehouse it never looked better you look great thank you I see a red tie and I think fiscally responsible I guess Brian just to kick it off FTX in spectacular fashion blew up this week and uh it's pretty gnarly you run an exchange as well what's your take on what happened with FTX and then what is your position in terms of making sure your customers understand that coinbase is not going to have a similar Fate To All the Other exchanges that seem to be blowing up every couple of months yeah well first of all I mean I think we were all shocked that somebody like Sam who seemingly is so smart and and capable ended up in this really the situation where he appears to have done something quite unethical and illegal so you know my job right now this week has been to go out there and just help people understand that coinbase is not like that we've been pursuing a different strategy for the last 10 years we're a public company we're we're regulated our financial statements are audited they can show that you know customer funds are segregated they're backed one to one we're not investing customer assets without their explicit Direction and so that's been the first step is just to make sure people understand that but then after that we need to kind of think about how we go forward as an industry here and both take a long-term perspective make sure the good companies in the space aren't allowing one or two Bad actors to kind of mess it up for everybody else and it feeds into the whole regulatory story too because companies like coinbase are already regulated but we're regulated like a traditional financial service business but we don't have clarity about the crypto specific regulations like what's a commodity what's a security and that lack of regulatory Clarity I believe has pushed a lot of this business offshore to these less regulated exchanges that's part of what caused the blow up today they were based in the Bahamas you know and they just there's not sophisticated Financial Regulators overseeing what they were doing Brian there's a lot to unpack but maybe we can just take a step back and for the uninitiated or for the person who's only been just following this very superficially can you just in a nutshell explain what happened yeah so my understanding is and again this is from people I've talked to and I spoke with Sam and CZ briefly during this but I didn't get details from them I got it from other people you spoke to them this week yeah I mean this was all going down I mean I spoke to Sam about you know he was trying to raise emergency financing and things like that and I spoke to Cece about why he was considering buying the asset I thought it was a bad idea but my understanding of what happened at this point again I don't have all the facts this is just my my understanding is that you know FTX was in a position where they had this Market maker Alameda that was investing in Risky things and that's fine like market makers hedge funds they're designed to take more risk it appears at this point that back during the last uh shake up in the crypto industry where you know it's Terra Luna and Voyager and Celsius and three arrows went under it appears that Alameda took a big loss at that time as well they may have even been underwater and instead of just saying hey you know this hedge fund's going to blow up too which would have been unfortunate people would you know Sam would have lost money it's embarrassing but it's not illegal for a hedge fund to blow up that happens with some regularity instead of just letting it blow up it seems like at this point he took customer funds but you have to explain he all he owns both that's for the people that may not understand that right so it's a related part he owns his own exchange called FDX and he owns his own hedge fund called Alameda which operates inside of FTX as well as in other places right but again Alameda seems to have blown up sorry Brian back to you yeah so it seems they had this solvency issue and instead of just letting it blow up Sam basically said um hey we have a bunch of customer assets over here at FTX or he somehow basically made a loan from FTX into Alameda to try to prop it up I don't know why he did that I mean that that's the moment in my mind where he crossed the line into probably committing fraud and I I think he probably lied to users lied to investors and he went around and tried to bail out these different companies like like Voyager and blockfy and to sort of prop up this thing and and maybe he thought he could trade his way out of it or something I I'm not sure but that seems to be where the mistake was made Brian can ask one question which I which I think will help frame the contagion risk set of questions that everyone's having when people have an asset we all talk about customer deposits and customer assets held at these exchanges but those assets and those deposits are very often some form of coin I have someone amount of Bitcoin some amount of ether some amount of something else is it the case that there's an assumption of total asset value that's held in a in a portfolio of coins that doesn't necessarily match the individual users accounts and then when one coin goes down in value nominally to dollars that the whole value of the portfolio goes down and now you can't actually make the customers whole so in the statements that have been made by these guys and other exchanges that we have enough liquidity to cover customers accounts that the Assumption might be we have enough liquidity if you assume the current market price for a whole bunch of different coins but then if one coin tanks the total liquidity tanks and they don't actually have it matched up correctly because now the customer account value didn't go down as much as the exchange of the total uh asset value does that make sense it does and is that part of the contagion risk that's going on here is that they're not matched truly between customer accounts and the exchanges you know holding of coins so not exactly okay so if you're a regulated financial service business um that's but you're not a bank you know we're regulated as a Trust Company a money transmitter Etc you're required to hold customer assets one for one and denominated in the the asset so in other words if you say you the customer has one Bitcoin you have to hold one Bitcoin if they say they have a hundred dollars you have to hold a hundred dollars and so that's the case with coinbase you don't have to take our board for it by the way you can look at our audited public financial statements as a public company with a independent you know big four accounting firm who went to go verify all of that and that's what various custodians and exchanges that's what they all should be doing if by the way if you're regulated as a bank you can actually uh go invest some of those but there's very strict regulation around that and capital requirements and whatnot and we're not a bank so we we hold one to one now if you're an investment fund or a hedge fund or or something like that then you can try to take positions in different coins and different assets and they could go up and they could go down you know you may you may lose your investors money but there's no such thing as the customer assets being involved in that there needs to be clear segregation of those customer funds and from from what an investment fund would be or corporate funds and that's where they got in trouble they basically co-mingled customer funds with their hedge fund a massive fund yeah can you explain the contagion by the way just so we can because everyone's been talking about the contagion and understanding what's next so that's why I just want to yeah because I think people are going to be asking that a lot this weekend yeah so I do think there's there is some contagion risk here I think there's other firms that had first of all there's firms that had money just sitting in FTX and that's now going through bankruptcy court so that's been bad I mean multi-coin came out publicly and said that they had 10 percent of their portfolio sorted on FDX um there's other firms that Alameda may have had loans with and those firms are probably struggling I you know I don't want to say who but we have received a couple of inbound calls from other people trying to get emergency financing there's people who may have just totally different from fgx and Alameda they may have just had their own portfolio that they took margin or leverage on to buy crypto and now as the prices have come down a little bit they're getting stopped out so um that's all been very challenging and I again just for the sake of clarity I should say that coinbase did not have any material exposure to Alameda FTX or ftt token can we just talk about this issue of customer deposits because this is really a Crux of the issue from a legal standpoint right I mean I remember when I was doing PayPal like 22 years ago and the company was like six months away from running out of money I remember the lawyers told us really clearly you cannot use customer deposits to fund the operating expenses of your business in other words if this business ends up going bankrupt you'll still have all the customer money there and they'll be able to get it back and you know it was really clear like hey if you use customer funds to pay for the burn of the business to operate the business that is a do not pass go go directly to jail type offense and so like that's really the heart of this now I read in some articles covering this that the way it worked is that Alameda had a bunch of these ftt or F these ftxt called ftt and they basically use that as like a marker as collateral so that they basically borrowed what is it like six billion of customer funds from FTX and then they use their own token to then as collateral so back stop it yeah exactly and then what happened is apparently like CZ got wind of this and he owned a whole bunch of these tokens and he signaled that he was going to dump it and the price basically went down and so now all of a sudden the collateral for the customer loans was insufficient and then there was a run on the bank and by the way this has happened this happens in the public markets a lot as well so like when you see heavily shorted names or when you know that certain hedge funds are on the brink other hedge funds will go in and essentially Force a margin call and a stop out because then it's what causes all these runs and if you look actually inside a GameStop the reason why you got all this gamification in the game stock equity and a bunch of these other names was in part because of this Dynamic folks that are highly levered folks that don't have the right matching of risk and what happens is they're solvent but a liquid and then if you run the instrument into the ground they both become insolvent and illiquid all at the same time so Brian the question is now that we know what happened which is all of these crazy inner party related transactions and you know all of this stuff seems very illegal there was a bankruptcy filing today and up until today it seemed like this issue was really about FTX International and Alameda and it didn't touch FTX us which for a lot a long time tried to position itself as you know well run and regulated as coinbase to be you know they tried to say that but now if you look inside the Wall Street Journal all the Articles say that this is actually FTX group so the whole thing seems to be imperiled can you just help us explain that because there now that's a lot of us people that were following the rules thinking that this thing was matched one to one that maybe also affected yeah so look I I don't know who inside ftx's and its orbit of companies actually knew that the the fraud had been taking place I it would not surprise me I have no idea to be honest but it would not surprise me if FTX U.S people and employees had no idea that this was happening I'm imagining if Sam was doing when he when he started doing this he probably wanted to keep it to a very small group otherwise this is the kind of thing that leaks and the whole thing blows up now that being said I don't necessarily think FTX us is worth anything as a business right now because of the brand being so tainted and there probably was not great separation of these entities in the sense of you know like did they have truly separate boards and beneficial owners and governance and it Sam seems to have you know it appears that they didn't FTX didn't really have a CFO or maybe even like a real board or anything like that and so it's hard to imagine we found on there was an article that appeared that said that the head of compliance at FTX was also the head of compliance at a poker site called ultimate bet which in the 2010s did this exact thing apparently some version of this where they went in and they looked at whole cards of poker players and then a few employees inside the business would basically play against these folks knowing what the whole cards were ran this cheat stole millions of dollars somehow that person found a way to be out of compliance at FTX yeah 10 years later which is incredible but back to this question so so now what happens now is you have the international business and the US business and Alameda research all rolled up into this one Frozen entity right with now Regulators having to so do you know what happens in a process like this like is it that the the doj and the SEC get priority or is there some international monetary like who who's who unwinds all of this how how do people get their money back if at all yeah so I'm not an expert at this but my high level understanding is that the bankruptcy courts will essentially and I believe they filed bankruptcy in the U.S which is an interesting thing I didn't know why they did that versus Bahamas but anyway the bankruptcy court will basically go through and try to find any assets of value so I mean they must they still have some tokens and value they have a venture portfolio they you know I think Sam owns nine percent of Robin Hood there's various things that they may own and then they'll kind of auction those off to various bidders on distressed assets and then try to distribute those funds to the customers I I don't know the exact process beyond that though I mean if you remember the Madoff wind down took many years and for years he was uh trying to find assets and then he found a market sold them there's this the trustee and he's still active and then you know tried to redistribute the funds obviously so many more customers here than I was with Madoff but it can be a very long and winding process to identify all the assets then run the market sale process on them then figure out who gets what first and then distribute there was an interesting thing that Larry Summers did I think for Bloomberg where he was asked whether this was Lehman or Enron and he said it seems more like an Enron than it is a Lehman and Brian I'm just curious how you think about it like is this sort of a fraud perpetuated by a group of Executives to essentially take advantage of a situation or do you think that this is more like a Lehman situation which is a well-run business I guess that just you know got caught in a liquidity trap I think it's my guess is it's a little more like Enron in the sense that I mean yes they were over levered and that kind of thing but the minute that they moved customer funds in some way shape or form to backstop the hedge fund that that was in my mind fraud and you know that's more like Enron do you think now that we have to open the gates on regulation like the whole point of crypto in some ways was you know trust nobody and you know decentralization is the key but here what we see is a lot of people were tricked into trusting FDX and having their deposits there and it was a centralized exchange which caused all these problems so it's like it almost violates the principles of what the whole product Market fit was supposed to be so what what should sort of the Observer expect and what do you expect as a business in terms of how governments now react to all of this yeah well I think it's really important to distinguish between the centralized players in crypto which are custodians exchanges Etc coinbase has a big business there and the decentralized players which are you know self-custodial wallets D5 protocols web 3 that whole world so the centralized players should be regulated and today they're regulated already like like kind of traditional Financial Service businesses but they don't have the regulation clear when it comes to the crypto aspects so for instance in the US we we actually don't still have clarity about what is a commodity what's a security should which one should cftc regulate or versus SEC that kind of thing and that lack of regulatory Clarity and frankly the the climate of Regulation by enforcement the negative rhetoric from you know chair ganzar in particular has created this sort of chilling effect in the U.S that has pushed a lot of that centralized actors activity offshore in fact 95 of the trading volume in crypto is now outside the United States and it's come down a lot since the beginning of this year even now the decentralized players self-custodial wallets D5 web 3 this is where crypto really has an opportunity to make a more fair and free and transparent system because you can go look at any smart contract to see exactly what it's doing anybody can audit the code if you have a self-custodial wallet you you can just trust yourself you don't have to trust any other intermediary out there and um that's where you get true decentralization and I think that's actually uh you know those areas still have a couple of their own challenges you know sometimes people will lose their password or their phone and they'll lose their own money so if you're if you're trusting yourself you still have the you have to trust you know that you're going to do that piece correctly but there's a lot of good things we can do there around making social recovery mechanisms and MPC wallets and things like that we uh remember just a couple of months ago Gary gentler started saying hey these things are all securities and you went and visited the SEC a couple years ago or you tried to they wouldn't meet with you you were very public you did a tweet store and we talked about this on my other pod that hey like we want to meet we want to talk about that now we're still in a position where the sec's position is these are all Securities which means the anything that's trading it would have to be limited to accredited investors Etc what should the United States do here and how close are we to getting Clarity because I know you're trying to talk to the SEC directly about can we just get some clarity here can people buy these tokens or not what is the status of are they tokens are are they Securities or are they not here in the United States yeah so luckily since then we have had a lot of productive dialogue with both the SEC and the cftc and Treasury and all kinds of people in Congress and I do think the US is making some steps in the right direction there was actually there was a bill going through Congress recently called the DC CPA or the staff now Bozeman Bill although it's having some challenges now frankly due to this FTX blow up because SPF was one of the people sort of pushing that bill forward but regardless of that the the sort of system that we should have is there should be a clear designation between what is a crypto commodity and that can be regulated by the cftc and what is a crypto security now this is one of those legal by the way what is also a stable coin and artwork and other things that are not any of those things the challenge lies in that there's kind of a fuzzy line between what is a commodity and what is a security and a lot of this law is based around the Howie test which says a security is an investment in a common Enterprise with an expectation of of profit and so it's basically a point-based system and in the absence of really getting a clear list between the cftc and the SEC are in this Turf battle I would love it if you know they could basically put out a list get their heads together and put out a list hey cftc is going to do these SEC is going to do these a bunch maybe are in the middle let's let the courts figure that out or whatever but that just hasn't happened and it's a it's a missed opportunity in the U.S so if the Howie test is not perfect given the dynamic nature of cryptocurrencies and all the Innovation if Brian Armstrong was going to say hey this is in the best interest of Americans balancing you know some amount of security and safety for people making bets on this currency and allowing Innovation what would you say is the best definition the best way for us to regulate crypto coins putting nfts aside putting downside just specifically yeah Jason hold up hold on let me just tweak your question sure because because we should switch to SPF as well and just talk about the person but to me it seems the whole issue if you you come back like what is the first string that you pulled that unraveled the sweater was the fact that these tokens were created out of thin air they had no meaningful value somebody prescribed the value and all of a sudden everybody else in the economy all of a sudden said yeah I'll take that as collateral look you cannot do that in the regular world I can't call JP Morgan and say I've invented this thing it's called a share in XYZ and I'd like you to margin loan you know give me a loan against it so Brian explain like there's a ton of these tokens that have been engineered right and there's been a ton of these tokens that have been sold so what should people do that own these things thinking that there was going to be some safety or value or you know like how do you think about all of these tokens that are that that could be as basically as as fragile and shitty and worthless as ftt yeah well there there is this concept of like an exchange token and there's a couple other firms out there that have them and that's something we haven't done and I do I think I think you're right like the the actual utility of those things is a little questionable and so if someone's gonna sort of Mark those up on a low Supply and then a low float and then somehow leverage that that that's going to get yourself into trouble but look I don't want to throw out the entire concept of people creating tokens I think there's actually a lot of good stuff there and it comes down to this idea of if if you're trying to raise money for your company and through a token that's fine that should be a security and there should be a regulated way to do that in the US like go register it with the SEC you know let it trade on broker dealers that's that's what we've been wanting to do for a long time and the SEC is taking their time getting there they don't you know cancer to be honest he doesn't seem that um excited about the idea of this whole industry existing and so anyway but it should it should exist and it should be happening in regulated ways so if people want to issue a token that's right raising money for a company let's regulate it as a security if they want to issue a token that's truly on a decentralized protocol or has some other purpose like voting in a dow or Rewards or something like that then that's probably not a security and let's be honest about that and allow those things to trade in a different environment a different regulator under the cftc we're probably running out of time with you because you said you had a hard stop so let's ask the million dollar question tell us about SPF like what's who is this character when did you first suspect yeah what's your read on the psychology that this wasn't legit do you think that it was his altruistic intent that allowed himself to convince himself to do this or do you think this was like malicious the whole way or what's your sense of the guy hmm so again I'm speculating here I mean I've spent time with I've met him a bunch of times and I have to say I did not see this coming like he he appeared to me to be a very bright credible competent person perhaps a bit young perhaps you know a bit Reckless at times but not unethical and not not committing fraud I definitely did not see that you know if I look back to see were there any warning signs that I should have thought twice about it you know one of the things I noticed was that in 2021 you know coinbase had a good year we we did seven billion in revenue for a billion of positive ebitda we went we became public as a company at that time FTX did about 1 billion in revenue and I knew how much money we had for our Venture budget and just like different Investments we wanted to make and I knew their revenue and I had to scratch my head a bunch of times and I was like where is this guy getting all this liquidity because he was like buying nine percent of Robin Hood he was putting like a billion dollars into this he was donating to all these politicians and I was like I it did not make sense to me where he was getting all this cash people just kept telling me Oh his Market maker Alameda is just printing cash like it's like okay I guess you know it seems like a conflict of interest to own an exchange to Market maker that's why we haven't done it but more power to him I guess and so I was surprised I didn't speak up I cannot I can't explain in the psychology of it at this point whether he's a pathological liar or if he's started off good and somehow under the pressure of this whole thing went bad but the minute you can you can go watch the interviews he's he's lying to people about why he's he's bare you know bailing out Voyager and blockfy and these and he he knew at that time that most likely he knew at that at that time that they were not solvent Alameda was not solvent and so that's where he crossed a major line in my book man we see it time and time again Elizabeth Holmes Bernie Madoff I mean once the LIE gets too big you can't get out of it anymore uh if that's the case really incredible and the most important thing at this point Brian is that the United States makes a decision on do we want to be in crypto do we want to have a say in this and create a regulatory framework that entrepreneurs like yourself can deal with that is the most important thing to happen in the next year but you're saying the SEC is not motivated I guess why are they not motivated they're just cya oh they're motivated now this is a political issue now so they but let's see yeah answer here what do you find out who who did SPF give all this money to because he was touted as one of the future biggest donors of the democratic party Democratic if you want signals so if you want signals I would say there are some pretty big signals here number one he said he's going to donate a billion dollars Democratic party and he kept touting this like effective altruism whatever the saving the world stuff now why do you need to do that unless your reputation laundering and trying to buying political protection come on okay you don't think that was a little bit of a signal right here I'll tell you I'll tell you an even more explicit signal we he pitched Us in that 17 billion dollar round and I did a zoom with him and after the zoom I'm like this doesn't make much sense but I'll have my team do some work we did some work and we sent him a two-page deck and we said here are our recommendations for taking the next step one was the formation of a board the second was the creation of dual class doc the third was some reps and warranties around Affiliated transactions and related party transactions and the person that worked there called us back and literally I'm not I'm not kidding you said go [ __ ] yourself was quote unquote the response to us we're like okay so that was the easy decision but message receives message received but I still thought okay I'll just put that in the bucket of these guys are unbelievably arrogant and smug but Brian I thought what you thought which is maybe it's because they've print they've created some money making machine in the Bahamas and so they they have that level of it of confidence you know I it but then to see this thing to the extent of which is now we're only scratching the surface guys you know that we're going to find out stuff every day it's gonna be crazy but Brian to the question I asked before about the SEC and what should happen you said I want to pick up on what you said which is the SEC doesn't seem motivated why is the SEC in your mind not motivated well I think you're right that I hope that they use this as a moment to come together and help you know local companies in the U.S being built here to end up in a better place and I do believe you know David I think said it's it's right it is a political issue at this point there's going to be a major impetus to get the clarity here in the U.S and hopefully to help build the companies here in the US that are going to serve the rest of the world and in every major Financial Hub so we're committed to building that together with all the Regulators around the world and crypto is here to stay this is a temporary setback um but I'm I'm here to keep building and make this thing happen all right we really appreciate you taking the time Brian yeah listen I mean story after Story here about you know SPF was going to create this billion dollar philanthropy to you know save the world improve Humanities long-term prospects number two donor to the entire Democratic party and on and on and on and like quite frankly what this shows is you want to know what effective altruism means it means that you steal other people's money while bragging about saving the world while taking a big chunk for yourself that's what it means there's a research paper in 2011 and this research team looked at drug addicts and Drug abusers 4 000 people and they found that the biggest addicts had the highest intelligence that you were twice as likely to become an abuser or an addict uh if you were any kind of intelligent uh quintile quantile that they were measuring and I someone explained this to me at the time that the smarter you are the more you can convince yourself that when you're doing bad things you're actually doing good things even if you're doing bad things to yourself or bad things to other people that you really may actually care about you can convince yourself that there's some reason to keep doing it he seems like a brilliant guy I think that to some extent he may actually I don't know the guy but he may actually believe that the um you know the the ends did justify the means and he thought that he was doing good for the world and this was something that had to be done in some way and oh it just got a little bit away from me but it's it's still I think I think the problem is bigger than FTX uh and I'll say the uncomfortable part out loud and nobody needs to necessarily comment if you don't want to but there were an enormous number of venture firms that talk their their way into just completely doing zero work here I mean and the the tip of the spear is this thing uh well who's the guy that works at Founders on bulgar bulgar is zebul Jared thank you yeah yeah that tweet that he had where he basically took the snapshot of the Sequoia transcript was one of the funniest things that I've ever seen I mean this was a 215 million dollar decision and Sequoia documented it and put it on their own website and I think that's an example of something that was happening which is people just looked the other way and didn't even want to do the layer of work come on let me just sing together a couple of things we've talked about over the past few episodes and I think you'll agree with this point but generally speaking there seems to be a very heavy lack of governance in investing given the amount of capital and the velocity of capital in Silicon Valley particularly in private markets of late and a lot of the stuff that's been talked about where last week we talked about super voting shares and the founder does whatever they want and there's no governance and there's no board and there's no oversight and particularly with this FTX situation where clearly there wasn't a board uh that that was you know getting the necessary information that had the necessary influence that had the necessary controls the meta conversation but all of these threads tie together the concept that maybe there's not a lot of governance and not a lot of diligence going on and the amount of money that's flowed into Silicon Valley has allowed a lot of this Lucy sequence of it let's thank Brian Armstrong for joining us I know it was a very busy day and uh what a great uh candid insightful thanks Brian uh yeah thank you Brian thank you and insightful finish your Dutch month I just want to say the second uncomfortable thing out loud which is there was a lot of venture firms in Silicon Valley in this period of both not doing any work or diligence who also took the extra step and actually created classes and would teach teams how to create these tokens okay and those artifacts those video links and artifacts are sometimes on their website they're still on YouTube they're inside of Twitter and what these folks would do when we talked about this the game that they played was they would get a team they would create a token they would also buy Equity at some crazy valuation the equity was locked up but the tokens were not and then they would put them on an exchange and sell them to unsuspecting people and they would be able to dump these tokens and if you look inside of that Trend what you're going to see and Brian just mentioned this those were the sale of Securities except it was done in a completely unregulated way so if the SEC is really and the doj is really going to take this ftt token issue seriously and what happened to FTX they're going to start to look at a bunch of other tokens and token sales and you're going to end up looking at some very well known Venture firms inside of Silicon Valley this is going to be super gnarly and we talked about it before on this pod there are people who knew better so you get a bunch of kids who are living in the Bahamas in a house and and they're you know winging this thing that's one level of responsibility and they'll go to jail but when we talk about Venture capitals Capital allocators who've been at it for decades point and they're teaching people how to do this and they're hiring attorneys and creating offshore Panama you know BVI whatever uh places to put these coins and then teaching people how to do it and then flipping them potentially this is we're just peeling back the onion on this I have a feeling that this is going to be the turning point and all that token guys let's be honest is not the only token that has been engineered by Silicon Valley venture firms and it is also not the only token that's gone to zero that was engineered by Silicon Valley venture firms well I mean who knows engineered by but yeah adjacent to at the very least Jason Jason there's videos today on some of the most well-known Venture firm sites on how to do this oh wow I'm gonna have to see those um yeah so they're basically your point chamoth is they're instructing people on how to do this and that is what it's what it's what they it's what they did can I ask your guys a point of view on just one big macro philosophical question I'm obviously not big in the crypto world and haven't been but so much of the positioning has been that these networks get decentralized through the cryptographic verification systems that obviously enable you know them to operate effectively and truthfully and correctly and without centralized control or manipulation But ultimately while these networks themselves may be decentralized the user's point of access often ends up being centralized as a point on the network and it is that point on the network that accrues the same level of influence power control and value as what we saw in the prior centralized Network model you know we had biology on last year and you know I tried to get to this point with him we had to cut the thing up the conversation short but I've still not heard from anyone and I've spoken with Brian separately about this point and and the the the concept I use is like look media if you put all the YouTube videos on on a decentralized network and anyone can access them and they're distributed everywhere you still need to have a really good application and whoever makes the best application is going to get all the usage and then all the users will use that application and that becomes effectively the point of control and influence and value once again and so it seems to me like in this case the exchange was being used as a centralized wallet certainly you can do met you know exchange through the exchange but but mechanistically these guys were storing their coins their cryptocurrency inside of ftx's wallets had control over their assets and so the network centralized and so does the decentralized model it's a question I'd love to just ask you guys your point of view on does this decentralized model actually ever manifest where everyone has their own wallet I know there's all these new protocols and these distributed wallets and B5 things but I don't know enough you basically recreated an exchange without a regulator and of course someone ripped you off and it blew up like I mean how's it any different than what we had in version 1.0 and is there really a model where decentralized works or ultimately because of the network effect and the and the economies okay yeah all right we got the question yeah no I mean I I have I have I don't know the answer to Freebird question because I don't I don't know this space well enough I mean you know I my my biggest purchase ever was Bitcoin in 2011. you know I've bought a bunch of these tokens that have massively depreciated in value I think lots of investors have you know I kind of fell into it as well like I thought wow this is incredible I get to buy these tokens they do all of this cool stuff they represent all this value and my experience has been the opposite of that I've lost a lot of money in these things um and so you know I really hope that Regulators not just obviously I hope that Regulators do their do the best they can to get investors money back in FTX but I really also hope they figure out all these other tokens as well because you can just rank them in terms of market cap start at the top and work your way down and you will see that these were unregulated Securities Jason that were manufactured and sold by our brethren people who understand the law around accredited investors and the stuff very well yeah do you guys think crypto investing uh is dead or what do you think how do you think people think about that risk profile now inside of I think investing in the tokens is going to end investing in the corporation is going to begin and any of the tokens are going to be super regulated building on what you said chamoth about the ultimate bet is it possible that Alameda the trading hedge fund was looking at the FTX data which they had insights into and essentially that's the same as seeing the whole cards in the ultimate bet and so they're making their trades based on what they see the consumers are making their trades front running their trades or otherwise that's not illegal you know Citadel does this in the regulated market that's what payment for order flow is it's right it's the ability to front run retail volume and so you know in dark pools that is legal by the law in the United States and that's what allows Citadel and you know I think Jane Street and Susquehanna you know all these folks basically run these dark pool exchanges for regulated Securities like options and bonds and and stocks and they get this order flow and they front run it by a millisecond and they they just take small Vig but they can't print the ftt tokens and otherwise manipulate the market to the level that I think sbl could I just think that there's there's there's these really uh strict walls and segregation as you heard Brian talk about when you have those businesses in these regulated markets the problem here is that this is totally wild west unregulated wild wild west so who knows what's going on really and we're pushing the business acts off of the shores of the United States as you said 95 of this is happening offshore what do you think should happen regulatory wise sacs in terms of America and competitiveness or do we not to be need to be competitive in this no I think we should be I mean what if what if crypto and Defy is the future of Finance I mean it's an important technology that I think we should enable through some sort of constructive regulatory framework I think I think the regular should listen to Brian and help come with a appropriate framework but to be clear look what Sam did is way worse than people going on an exchange and speculating I mean look I I think that people who speculated in the buying and selling these tokens they're they were using it like a casino okay like that's different than a customer putting their money on FTX and having their money gets stolen that's a big difference so I think there's levels here now jamas to your point about who's minting these tokens you're right maybe that's like another category but I do think that the reason why this is on a different level is because it wasn't Sam's money to give away there is such an easy solution I'm just I'm just great I'm I agree with you on that point but I think don't underplay when there's an organized process to create an illegal security with special rules for them that allows the liquidity for one class of asset and not liquidity yeah you're right so that's a separate bucket I don't think it's the same as what Sam did and I don't think no I agree I agree no I'm saying that's something that needs to be looked at and we need a constructive regulatory framework for that there is such a simple Silver Bullet for all of this which is these things need to be there needs to be proper governance people have to have skin in the game insurance people signing off on the taxes boards onshore here in the United States and then we need to have and I'll keep saying this a way for Americans to become sophisticated investors only six percent of this country fall into the qualified purchaser and accredited if you want to trade in these things or you want to trade in nfts or private companies we should have a driver's license-like test a Firearms a sophisticated test and about the product into it with an education the problem is when you have guys like this it sets that desire back by a decade if not more okay because it sucks I agree because every single so frustrating every single person inside of Washington right now who's anywhere near this from a regulatory perspective or a policy perspective is meeting on Monday morning and the meeting topic is how do we defend the mom-and-pop folks that lost money here yes that's the only thing so we took this out of you know because I I remember I remember I texted into the group chat hey guys what what what do we think the the legal ramifications are that drive prosecution and one of our friends said legal ramifications these are political ramifications yeah which means that this is going to go to the utmost level and it's going to have the most scrutiny and they're going to act really quickly it is they're gonna drop a hammer instead of having a path to accreditation I agree with you they're going to drop the hammer because their constituents some grandma and grandpa or some people put their college education to this and lost everything we just need a test let people prove they're sophisticated and let them participate well first and only if they get a license haven't you been a proponent for letting people invest in startups that are just Mom and Pops and democratizing access I'm only allowed to do that with accredited investors I would like there to be a test and I actually teach your course Angel University six times a year for charity I do it for charity it's a four hour course where you learn about diversification you learn about the asset class you learn about 70 80 go to zero we teach you about the power law I try to teach people about this stuff so that they can participate intelligently it would it would be the equivalent for your brick and thank you for asking the question it would be equivalent if we had a poker test and to play in the World Series of Poker you had to go to a five hour seminar and you had to take a practical test and you had to say you know a flush beats a straight and you have to just prove that you had some level of knowledge of how to play the game it's such an obvious path to removing these problems while staying competitive as a country and instead we're letting people do this offshore like CZ with no rules or whatever rules he chooses it's just infuriating it's so stupid our politicians in Washington are so dumb can I just say something I think the challenge is there's always a spectrum of understanding and you'll always end up seeing the people on the wrong end of the spectrum getting taken advantage of there's this notion of adverse selection distributions are not equal people will end up um you know kind of opting in to spend money on things or making Investments that they think are good Investments but they're actually getting taken advantage of because they're not Savvy enough where they miss an important angle or important perspective about the person or the thing that they're giving their money to and there will always be some number of those and the way that regulation has worked historically is not by first saying hey let's figure out the right way to create a framework for operating it's that some sort of people got advantage that story then becomes the regulatory framework and that story has repeated itself for 500 years across Capital markets we're talking about a multi-layered thing here we want to see crypto have a framework we want it to Blossom here in the United States and then there's multiple level of people who are um causing chaos in this ecosystem in this very promising technology with their goddamn griffs whether it's VCS grifting or SPF or incompetence we just need to clean this framework up if people sometimes people I understand in DC listen to this podcast if they're listening it's essential that America be competitive here it's essential that everybody participate in Risk capital and get educated let's clean it it up and make a framework that allows all Americans to participate and educates them and then stops these grifters from doing stupid things if people were educated that's the first step and it's the best talk about the economy sure you want to talk about Facebook with eleven thousand you want to talk about the uh Market popping so the beginning of October yeah I think what we basically said kind of generally speaking is markets up right markets I went from nibbling to being constructively positive and basically being positioned long here's this really interesting setup we have a bunch of very positive news that I think we all have to process first positive news was that inflation takedown now here's what I'll tell you there's a caveat here I talked to a bunch of pretty smart Sharps on Wall Street and oh two things number one is they all gave credit to David sacks and they said Saks was totally right double dip recession is coming but then they said tell sacks that we think that these are the sharps we think that there's a double hump in inflation coming which means it's coming down to come back up and there's a bunch of reporting vagaries that may cause that so keep that in the back of your mind but positive news number one is inflation ticking down um number two and Jason we talked about this a federal judge basically stayed Biden's attempt at giving student loan relief now that would have been a 500 billion dollar transfer payment from the government into the hands of individuals it is deflationary to not put give that money to people it's effectively taking stimulus away from folks number three it looks like we're headed towards a split government which means that we are not probably going to see any more stimulus over the next two years number four uh Ukraine wins and Curzon I hope I'm pronouncing that right number five the United States uh announced yesterday through the Wall Street Journal that they had essentially said no to Ukraine's request for advanced drones and they said to Ukraine essentially you need to go and negotiate an end game here and number six China has started to relax as covet policies and G is pivoting to economy first so if you took all the way take seven don't forget seven Facebook which would not take the medicine they refused Brad gerson's letter cut eleven thousand people 48 hours ago Facebook matters that much to be honest well but it matters that big Tech is and they're taking but it doesn't matter to the economy to be complete I I think it does if people are going to start cutting jobs but okay keep going my point is these seven things are macro level things that affect everybody yep and I think if you take them together what it says is that wow there's there's the potential for a lot of great positive developments over the next six or nine months and I don't think that that was adequately priced in the market but here's the problem and this is what's why we've been rallying the problem is that most of this rallying has been because of a bunch of short covering by folks that who were pretty pessimistic and negative after the last few inflation prints so this is not really net new buying that we saw over the last couple days so you take it all together we talked about this Jason when the vix gets into the low 20s or the High Teens that's probably the short term top and then it turns around and unfortunately we're here yeah the low 20s High Teens so that's kind of my thought on things right now okay Freebird you have any thoughts on the inflation print yeah so I think there's two things one of which I'll give credit to a guy named Carl uh two I hope I pronounced Carl's name right he's from William Blair he puts out these excellent research reports and we used one of his Graphics a few weeks ago so I put it up here and basically he showed that with the the NASDAQ move that we saw this week so you can see this here he basically tracked the move in the 10-year Treasury against the the one day move in the NASDAQ and uh he said that it really indicates a unique sentiment shift whereas in other times you've seen big moves in the NASDAQ that weren't really seeing significant moves in in the treasury rate at the same on the same trading day and that this is such an outlier what happened uh this week the only other time that we've seen anything like it was when the bank of England issue happened back at the end of September uh in the last you know 20 times that we've seen this big of a move in the NASDAQ in a single day and so we saw 31 basis point move in tenure treasuries in a single day at the same time that we saw what a seven point move in the NASDAQ so he said because you don't normally see the bond Mark in the equity market trading this way together it really speaks to a big shift in sentiment now what is that what is that shift in sentiment that there is going to be less of a driver for the FED to raise interest rates at this point because it seems like the inflation print indicates that inflation is coming under control faster than what folks had otherwise anticipated and so there may not be as many rate hikes as quickly as folks who are anticipating which will you know benefit uh benefit benefit equities and the bond market traded that that with that perspective as well now the counter narrative which uh I just put a tweet by a guy who I've never heard of before uh but someone shared this with me his name's Gordon Johnson and he said um the CPI surprise may actually be due to a technical print that within the CPI one of the biggest indicators is health insurance cost and um you know it the the health insurance cost plunged by four percent October to September but at least healthcare costs didn't actually magically collapse there was just an accounting difference in how they're shifting how they're accounting for health care costs uh that that took place during the month and if you did not uh um if you assumed that that was flat uh month over month uh you would end up actually with a 6.7 percent year-over-year print which was higher than expected so there is a counter narrative going on in the market I don't know how significant this guy is or how much of a voice he has but I don't know if we're out of the woods yet but some folks are saying that the market is saying we're feeling a lot better but there are still analysts that are indicating that maybe there is still risk uh to be had ahead of us I think the sharps tend to be on that second second perspective and by the way I'll say this week I heard five and a half points even after that print so is where we're gonna get to I think consensus we have here is is that we're in the end game now maybe what two quarters three quarters four quarters of choppiness chamoth what would your gut tell you if you I I've been telling all of our startups that you need to plan to have money through the first quarter of 2025. you must yeah you absolutely must and the way that there's a catch okay the way that I framed that out to them is nine yeah eight or nine quarters of cash ideally nine and the reason is that we have all of this positive news in the offing but but the but the problem is again there is still a lot of risk to the downside we haven't seen David's second you know dip in the recession right so that double dip is going to be expensive and again the sharps think that inflation will come back at some point in the next six months that will keep the fed's foot on the gas maybe it's two or three more 50 basis point hikes the point is Jason you could be at five and a half again we said this last week we're going to get to a point that's probably higher than what people expect that's probably around five and a half and will stay there longer than people want that's probably through the middle part of 24. and if you don't prepare for that worst case scenario you're doing yourself a disservice I think the market can start to Rebound in the second half of 24. but if you're a company you need to balance and and plan for the first quarter of 25 because you know again most Venture investors are going to want to see six months of data on the ground that things are better before their sentiment changes yeah and we're just starting to see the drawdowns we're just starting to see the impacts in people's portfolios that will drive Behavior change I mean this SPF thing is the tip of the iceberg in terms of the money at risk you know I went and by the way I did it in analysis I shared it in the group chat hopefully we can show this up Brad has a little chart Nick maybe you can throw up the the historic drawdowns so for people that care about early stage technology since 2018 through 2021 and including an estimate for 2022 we have injected one trillion dollars into venture capital and if you look at historically how money has been lost in periods like this and you layer that into 2018 to now what it basically tells you is about 500 billion dollars of that trillion from 18 19 20 21 and 22 is going to be destroyed we haven't even started to see that yet right and then if you factor in another 100 billion or so from older vintages we're talking about a 600 or 700 billion dollar destruction of paid in capital so there's still for all the good news there's still a bunch of these unfortunate pieces of bad news that have to work its way through the system if and for people who are looking at the chart right now and you can see the charts on Spotify or if you search for all in on YouTube we have a video version there you just take a look at 1997 the peak tvpi was you know seven and a half X seven and a half times you know cash on cash money and uh what actually got realized was 5x right so what paper said and what got distributed were two different things anecdotally uh what I'm seeing in the startup or ultramoth is people are taking the medicine and a lot of people are shutting their companies down they're giving up on raising money and then asking me which portfolio company can I get a job at because I on my personal balance sheet have been you know taking a 5k draw a month and I had I have two kids I need a job can you get me a job at Amazon or another portfolio company and a lot of Aqua hires have started to happen and so what's happening is the consolidation of talent people who would be a great number three or four person but maybe they weren't suited to be the number one person are now consolidating into startups with these layoffs at meta and other corporations we're starting to see very talented people who had Peak comp of 300 700k a year are going to go to startups or go to smaller companies and that is also positive more consolidation of talent stronger companies did you guys hear the story yesterday that uh Nick if you could just bleep out the name told about his friend his friend basically makes a hundred and forty thousand dollars working for a tech startup and then also makes two hundred and eighty thousand dollars working for meta and so and he's been working at both of those companies virtually for the last two years the guy makes 400 450 000 a year and nobody knows and he says he works about 20 22 hours a week on both combined so the 80 hours and and remember when we started in startups in the night late 90s and into the turn of the century the number of hours that was expected at a startup was what sax when you were at six hours a week I would say 60 60 days I was expecting the Baseline yeah Baseline yeah Baseline 10 hours a day plus come in on the weekend for a couple hours yes yeah for sure easily probably more early days of Facebook are are our executive management meetings wouldn't start till 9 pm I think elon's gonna be a Trailblazer in a lot of ways on this Twitter thing you know first he did the big head count reduction but then he also just this past weeks everyone needs to come to the office and if you don't come to the office you you don't have to come to the office you have a good excuse if you're an exceptional performer and you've got a good reason they never have to but the Baseline is everyone comes to the office by the way just to put this point into Focus Nick can you just throw up this chart for these guys to see because I think it's just ridiculous so this is basically what we're dealing with which is like if you look at and these are just a couple of examples but this is meta Amazon snowflake datadog versus Gilead Raytheon and Exxon what is the point of this the point of this is just to show you that we have had a massive rotation away from our industry is the point right where normally the things that we would work on were just so well received by so many different kinds of investors that unfortunately just isn't the case anymore and I think it just goes to show you that the reason why this is happening is because people are hedging their bets about how long the economic pain lasts that's why you know they'd rather be long Health Care stocks you know industrial defense companies and oil companies because at the end of the day they're banking on oil and War and sickness of you know versus social media and e-commerce and SAS software and if we look at this chart just no matter how good by the way so this is not an indictment on these companies go watch the the prediction episode from last year I think that was a prediction episode yeah we you and I nailed it on crypto we both said crypto is going to Crater these four horsemen here datadog meta Amazon snowflake down 23 to 27 and then the Gilead Raytheon Exxon cohort eight to 28 up I think chamoth what this says also is we don't think your management style and how you're running these businesses is appropriate for this moment in time please consider uh some austerity measures and some thoughtfulness in how you treat shareholders well I mean it's just watching the number uh you know how people are running companies I think we took it too far in Silicon Valley we took it too far whether you know Jacob I I know that I know it's sort of a pet issue of ours because we have to deal with some incredible hubris and arrogance sometimes on the boards of these companies because folks don't want to listen to to reasonable advice and we come off as wet blankets but that chart to be honest is is because of what we explained last week which is the when rates go up the value of a dollar that you earn today is just meaningly meaningfully more worthwhile than a dollar that you may earn even two or three years in the future that's why that chart looks the way that it does and if you believe that David's forecast of a double dip procession is accurate which again most of the sharps do and then you also layer in this idea that inflation could come back you have to be really defensively positioned you know you can't take a lot of risk which is why startups have to expect that if that's the dynamic and 600 billion dollars is going to get destroyed in Venture Capital portfolios how open are VCS going to be for business they're probably not going to be that open and so you have to plan I think for the middle for the early part of 25. if Amazon and how do you get incremental dollars in these tech companies Amazon does a riff some austerity measures they raise prices a little bit if they can you know maybe you see more incremental dollars coming today and maybe that incentivizes people look at what happened I uh we were at 89 for Facebook shares last week tomorrow when he made the Riff 107 he went up like 15 20 what does that tell you I mean I think it tells you that a lot of people were short going into that and they were probably caught offside a little bit by the magnitude of it I think that that's good the the issue that a lot of these companies have even in the face of riffs is that you have to reset expectations now on earnings and if you do that the problem is that when you flow that through to what people think the s p will look like in a year there's some real issues so this is not free you know it's really hard treading and I just I would I would just encourage people it feels wonderful to have a few days of like it's like a respite in the middle of a huge storm right it feels like we've been getting whipsawed back and forth and the sun came out and the wind came out but I would just really encourage people in this moment to to reset your energy which I think is good but you got to go back into that office and you gotta find the money and the wherewithal I think to last through 24 if possible it's Grind Time Facebook by the way you need at least two years two years yeah yeah 24 months is the new yeah eight quarters is the new six quarters and by the way Tino the thing that employees need to do now in this moment is to hold the management teams of your companies accountable because in those q and A's hopefully you're not just glad hunting talking about [ __ ] you actually go and ask the question how much money do we have what decisions are you going to make to get this company to be you know in a position to survive that is really what's at stake here for the Venture Capital industry is just survival of as many of these companies as possible through these next two years the conversation has to shift from like culture and features to like the bottom line and grinding it out and just proving it to Wall Street into the investment community that your business is worthy of investment as you're saying the dollars today matter all right it's been a crazy week thank you to David Friedberg for showing up unfortunately no time for science Corner apologies to the Friedberg stands who are many and we'll see you in the YouTube comments for the dictator himself to my palihapatia with just a wonderful sweater going into the strong November strong showing for November with that purple sweater I don't know if it's mauve or purple whatever you got going there looks wonderful thank you for team Montclair Sasol himself David sacks people don't understand what you're saying when you say that Jason oh they know you're an [ __ ] uh they they're no that's what they think you're saying they don't know understand they don't know we're adding the Sass to it yes so uh David also is a great executive in software as a service in addition to being an [ __ ] so you put the two together and you get [ __ ] no I'm just joking David's a wonderful person people are really excited that you and I are uh friends again it's a amazing moment that was your chance to make a joke so I actually missed it throw it up there for you I threw up the softball for you to say you're not we're not friends all right we'll see you all next time bye bye we'll let your winners ride rain man [Music] we open source it to the fans and they've just gone crazy [Music] foreign [Music] foreign [Music]










can I tell you a funny story so I I was in I was in and then when I landed there was a an assistant message on the plane and then uh the pilot texted me like hey bad news We're not gonna be able to take you tomorrow there's an error message and if we can't resolve it we can't fly that's it okay so I text sax I'm like hey dude I'm in a really tough spot is there any way that you know I could catch a flight you know with you tomorrow absolute dead silence oh three hours later Paul pilot Paul text me and says good news cleared us we're going tomorrow I text sax right away hey no worries it's all resolved in eight seconds he responds awesome with an exclamation mark yeah also he had zero intention of bringing me and my family with him zero I filibustered he fell about you the truth is the plane was with me I was using it I'd be happy to let you borrow the plane if I'm not using it here's sax the last time we went to dinner ready the check comes Miller unlocks lands on the table here sacks what you're seeing see that you know what that is sack's going for his wallet you can just count it it's almost ironic because I can't remember the last time he's almost remember the last time you picked up a check Jayco what do you every time am I pick it up on the way in maybe for a slice of pizza come on sax is one of the most generous people I know I remember we went to a bar once we barely had time to get a glass of Still Water a Diet Coke and some of the free nuts and then Jake how was like guys it's on me I pulled out a 20 I gave it right to the bartender that's true my turn my turn I got it my turn you got the the white truffles and the filet mignon last week I think these bar nuts are on me fishes yeah throw in some cashews too throw in the cashews and raisins the trail mix I'll get the trail mix because you got the truffles last time chamoth [Music] we open source it to the physics [Music] all right everybody Welcome to the all in podcast we're still here episode 105. I don't know if you saw boys last week the pot hit a new high water mark 16. overall in the world so congratulations incredible I thought we peaked at 14 actually was it 14. people listened to this pod when I was in DC this week I had a bunch of meetings and so many of the of the staffers listen to the Pod and they came up to me they're like hey love you guys listen every week it's really great it's really crazy actually the reach of this thing it's really cool now when you were in DC how gleeful were they about Sax's absolute shellacking last week that must have been high fives all over the Dems like they won twice Trump announced and sax lost listen we uh we talked a lot of us are they about SBF and how much money he gave them in order to stop that Red Wave take it easy I talked to it I talked to a lot of folks folks and what I would say is we talked a lot about energy policy life's Life Sciences obviously two areas that I invest a lot of money in and foreign policy and um actually David you'd be surprised by how many fans you have there cool well I mean like General Millie like we talked about last week he's come around Jake Sullivan just this week said that he told the ukrainians it was reported that they can't have Crimea back get realistic so Jake Sullivan and Millie are like the voices of reason now in the administration on this and they're just saying the same thing I've been saying for which I was excoriated by the foreign policy establishment and I got into a little Twitter spout with Ian Bremner this week because all the the sudden he posts that oh everybody has been privately saying that we need to negotiate no no you haven't you were criticizing you were denouncing Elon as a Kremlin agent when he posted that Twitter poll suggesting that the ukrainians should negotiate so you were publicly denouncing those of us who are calling for negotiations and now all of a sudden you're saying well this has always been the position but I think what's significant about that is the guy's just a Weather Vein for the blob and the the foreign policy establishment and so the Weather Vein is now pointing towards negotiations so that's the good news here do you think that if DeSantis wins the presidency you will be nominated as a Secretary of State Treasury what would you take treasury state in fact if you were offered a cabinet position would you take you should you should take that what you what you have to understand is that my position on foreign policy or Ukraine specifically is not it's not uh it's not adopted by either party I mean McConnell and the Senate Republican leadership are very much on board with the bind administration's policy on this they are very very hawkish it's really the unit party on this issue there's really just one Consolidated blob okay but back to the question would you would it be a dream of yours would you find great joy in having a White House position to when DeSantis goes in to serve your country would you sir would I serve if if the president of the United States calls you up and asks you to do something obviously you have to get to serve your country but it's not something I'm obviously looking for that's a yes what if he asked you to serve as the U.S ambassador to Burkina FASA where the Ambassador roles are so funny it's like you have to compete for the good ones and then some people get stuck with the bad ones those are those are available for purchase yeah yeah exactly you know there's like a there's like a menu of these things like these ambassadorships like yeah I don't think it's like written down anywhere but it's kind of like unspoken it's like if you want the ambassadorship to the UK that's like 10 million dollars and then you know the the thing was with UK and France it's every every Embassy every ambassadorship comes with an annual budget but the cost of actually running that Embassy and really throwing the parties is much more so for the UK and France the Gap is 10 million a year that you have to fund out of pocket so you got to be really willing you know to put the money up uh but apparently you've got to pay for the parties my friend my friend was was the ambassador to the UK under Obama and I went to a party there it's unbelievable and he has the best life because like you know he was meeting everybody in the world you can imagine goes through the UK and then wants to meet the U.S ambassador it was a great job for him right but the money I'm talking about is the cost of buying one of these Snickers you have to typically raise that much money yeah you bundle that much money for whoever this is what I've heard I mean I don't know this is what I've heard is that but does that mean that sbf's parents if Elizabeth Ward wins the presidency right now the Illuminati right now just revoked all of our Illuminati cards we're not supposed to talk about this guys uh that you can buy an ambassadorship but speaking of buying politicians and coverage uh let's get an update on FTX so Trump speaking of politics I mean you know because if I bring it up I didn't want to tilt something in the first five minutes the only thing I want to bring up is yeah I think I'm entitled to and I Told You So on this there was a story where the FBI said that the reason why Trump kept the boxes in his basement they've now the FBI has definitively said it's because he was just trying to preserve mementos not try to sell State secrets to the Saudis or something like that that like some people were making wild conspiracy theories about so Jake how it looks like I was I was right about that in fact I think we had that very discussion on this pod yeah I mean we I I said I thought he was keeping it for like keepsakes like mementos that was my position too because you didn't you didn't support the salary let me ask a question because I mean I wouldn't put it past him he's a maniac I think if you believe that this was about mementos which the FBI has now said it was I think you also have to say that the FBI's approach in raiding his home with armed you know soldiers was heavy-handed now I'm not saying they didn't have the legal right to do it I'm sure they checked all the right boxes but it was heavy-handed but look that brings me to another Point why do they do it I actually suspect now that what the Bible ministration's trying to do is keep Trump in the news I think they actually want to provoke they want him to run they want to run it's the exact it's the exact same thing remember the the 50 million that went into Republican primaries to support the you know the election denier candidate turns out that was a successful strategy for them as much as I hate to admit it it's as Reckless as I think that was and hypocritical because I don't think you can be out there claiming that these candidates are threat to democracy at the very same time you're funding them so I think it was completely hypocritical and sort of Machiavellian but it worked and I think in a similar way what the Democrats are going to try to do over the next years is is keep Trump in the news as much as possible and in fact CNN ran his entire speech announcing last Tuesday I think for this reason if Trump wins the Republican nomination he's going to then he will lose the presidency because if you look at all of these exit polls that came out of these midterms he's just so massively unfavorable but that's not what's going to be you know litigated in the primaries in the primaries it's just Republican non-republican and there are a non-trivial number of paths where Trump actually beats DeSantis and I think that's very scary to the Republicans who want to just move on and have a chance of actually consolidating power and it's gleefully Blissful for the Democrats because if again and we saw this look if if the Democrats were able to fund and field Maga candidates in the Republican primaries that then lost in the general election well the best mega candidate of all is Trump so it David Sachs is completely right now like the balance of power here should be if you're the Democrats whatever you can do to keep him in the news whatever you can do to induce him to run makes a lot of sense because he will he'll [ __ ] the Republican party let's put he'll split look at how Jacob's got a big writ he's admitting to the hypocrisy which is for years he's just screaming about this is your voice hold on a second you've been screaming about what a threat to democracy is how he's secretly on the payroll of the Kremlin or foreign governments and yet and yet you want to keep him in the news you want to be the nominee and you Republicans to kick him out of the party no I do take him out come on I was on the DeSantis train before the midterms election you on this pod will never kick him out of the party you should say disavow him publicly disavow him how I've already said I support DeSantis I said it before the midterms what else do you want me to do but I'm talking about the party at large I think I think you're I think you and many other people on the Democratic side in the media are being very hypocritical about this because you want to claim that he's this unique threat to democracy while playing this game where you want to keep him in the news you want to basically provide him with as much oxygen as possible because you think he's more beatable and by the way I agree that he's less electable than DeSantis which is why part of the reason why I'm on the Santa's trainer I also think DeSantis would get more done but look um I don't think it's a foregone conclusion that he's gonna be the nominee did you see the new polling that came out after the midterms DeSantis is now the favorite in among Republican primary voters among every different slicing that you want to do of whether it's likely a Republican voters primary voters whether it's Fox News viewers and on and on and on DeSantis is now ahead of trump I about okay wait hold on need to be able to stay at my position because sax interrupted me seven times I just would like to get my position on here number one you all backed somebody who is a horrible human being who made terrible decisions and now you guys keep supporting him at some point you have to put your foot down and say listen we don't want this guy you have to publicly say January 6th you know and this guy's approach the election denial you guys have to come out and just say we don't want this person to run I think you've been hedging too much I think that's the problem now who has I am not how can I get the Republican Party yeah now you always were a little bit like because I I did no yes hold on and this very pot I asked you if he run would you support him would you ever vote for him again and you were like wow and you would vote for him again if he wins the nomination you'll vote for him that's the truth Republicans will still vote for him look you know that before it was popular before the midterms I was on the DeSantis train I was saying so on this pod for over a year when it was very unpopular certainly in the area in which I live and so you know and there are a lot of Republicans now most Republicans now agree with me on this issue according to the polling that just took place but if he wins the nomination you will vote for Jason is that you want us to buy into every [ __ ] narrative that you've ever told about this issue January 6th of [ __ ] no it was an election today let him finish let him finish well he's interrupting me every two seconds stay out of a free bird oh I just want you guys to guys I just want you guys to speak and then let the other person speak that's it I don't care my point is just here we go again I don't I don't want to rehash every single thing in the past but but look the point is that I think we have more electable candidates I think we have candidates that would get more done in office but and I've already said so but I you know but I don't that doesn't mean I believe this whole like threat to democracy thing I think that is massive inflation of the actual threat but but look if you want me to say that we have more electable candidates we have cancer will get more done who frankly would be less alienating to moderates and independents and could even win over some moderate Democrats the way that DeSantis did in Florida to win by 19 points yes happy to say that and I've been saying that I will just say if I if I'm if I'm if Freeburg allows me to make a point I would like to say it is a threat to democracy January 6 and election denial those two things are accused party fund over 50 million dollars to those candidates cynical because they wanted to win cynicism pure cynicism okay we're on the same page about that yeah yeah it's pure cynicism um but do you let me ask you a question and then we'll wrap on this because I know it's uncomfortable for free bird to watch Mommy and Daddy fight um it's okay Bobby dad used to love each other even if we fight sometimes it just makes me want to turn the volume down go ahead we're almost done anyway I do think Fielding moderate candidates is the path and I think Tremonti brought this up a ton of times who it's the race to whoever can get that moderate middle and I hope that they feel better candidates but do you think Sachs he's running this is one of the cynical takes is that he's running because it will help all the legal cases against him do you think there's anything to that my guess is that that they see him as an easier candidate to beat and they're going to do everything they can to try and keep them in the news and and I don't I actually I don't think that's your position I actually think that you're being sincere that you don't want him to win a second term I mean remember like we don't know I think we all believe that we're gonna have a pretty severe recession next year so just because the Democrat cynical strategy in the midterms of promoting you know what they called election deniers in the primary that happened to work but just because it worked last time doesn't mean it's going to work next time and abortion absolutists and a whole bunch of other things I think I think the point is pretty much this which is that people gave Trump a lot of credit for being an idiot savant but it looks like he's more of an idiot savant minus the Savant okay this is a this is kind of a goofball who has a brilliant media strategy and he had his finger on the pulse in a moment and then he just couldn't execute couldn't put two and two together couldn't put one foot in front of the other and he was way too divisive and he got booted out and he lost fair and square and now what the Republicans have to realize is if they don't figure out how to field somebody out of the primaries that is different than Trump the Democrats will win because if it is Trump whoever the Democratic candidate is I don't think it really matters will crush Trump yeah look I I think that's likely correct I mean I think I think that we talked about it last week you cannot win the presidency with call it 45 of the vote I mean Trump is capped at that amount and the scary thing for Republicans by the way is Trump does a much better job than anybody else in getting his base activated so the thing that all these polls get wrong and I think they've consistently gotten wrong and and as a result have underestimated him is they don't give him the credit he deserves duly for being able to curate a fervent base of that 30 or 40 percent of America that will show up for him and even if they didn't show up as much in the midterms they sure as hell showed up in the primaries for his candidates oftentimes so I just think it's a very dangerous cocktail that that you can't sleep on so the Republicans have to take this really serious moderate Republicans want to have a chance of winning you guys have to figure out how to beat Trump in a ground game because if his base shows up he has a decent chance of winning the nomination but then you will lose the general yeah I think that's I think that's pretty much spot on I think Republicans really have to be smart and disciplined and think about we have to nominate the the most electable candidate but here's the thing is we're not even debating policy right now no one no one really says that hey on a policy basis there's a huge difference between say Trump and Desi answer to some other folks it's all about personal style and is it really worth it to the Republicans to potentially lose the next election based on personal based on style points it's a silly reason to lose you know William F Buckley a long time ago said that he would always support the most electable Conservative candidate he didn't always go with the most Conservative candidate he wanted to go with the most electable candidate who met a basic policy bar and he sometimes got in trouble for that for example he supported Bush 41 over Jack Kemp I know I'm going back a long way but but in any event you know having thinking about electability is just really important there's one silver lining here the head of the Republican Party Rupert Murdoch has uh absolutely dissed Trump I don't know if you saw the New York Post but he put on the cover lower like 10. Florida man makes announcement and on page 26 he had the announcement of trump running for president and the funny thing was Rupert Murdoch if he didn't even name Trump as the presidential the absolute last line of that column and he said oh and he also happened to be the 45th president of the United States yeah it was very funny well you're seeing a lot of Republicans saying I think correctly is that if you want to win elections you have to look out the windshield you know not in the rearview mirror and what we saw in the midterms is that even talking about 2020 was at minimum a giant waste of time and a distraction and at maximum potentially caused these candidates to lose I mean the fact of the matter is that that a lot of candidates including semi-supported in Battleground States who got lured into trying to relitigate 2020. they all got vaporized and I just think it's stupid to be talking about the past voters want you to focus on the future and especially when there's no policy outcome that matters that's at stake for you to be talking about a pass election instead of the future questions this is politically stupid Freeburg if I may bring you into this discussion uncomfortably as it might as uncomfortable as it might be would you vote for Biden incredibly old I don't know he's gonna be 81 or 82 in the next election but you vote for Biden or DeSantis as I go through the list of things I'm most concerned about in the world today number one is the debt and spending cycle of the federal government in the U.S I'm I think it's the most kind of scary set of facts and conditions that we're getting set up for kind of a major crisis 10 to 15 years from now because you can't afford all the debt that we've taken on as a country as well as the entitlement as well as defense and so something's got to give and there's a bunch of paths that could emerge from that set of conditions that are all really scary paths and not good I'm more concerned about that than I am about nuclear war or climate change uh just to be clear because I think that the social effects and the the global geopolitical effects that arise from the U.S kind of destructuring because of our our debt and spending cycle that we're in right now are far more significant than what we'll experience over the same period of time and again I do think that technology is going to resolve a lot of our issues with climate change and I think nuclear war cool heads will prevail everyone's got a family so that's what I'm most concerned about so any kind of voting decision I make is made with that lens which is what's the the best path to supporting some some fiscal responsibility setback or step back to resolve those issues as Charlie Munger said so well in this interview that was published this week and I've said it a few times on the show but he he did he's a much better speaker than I uses far fewer words but you know in democracy eventually the populist realize that they can vote themselves all the money and you know that's what we see happen in an accelerated way in Latin America we've seen that with a lot of these democracies and ultimately resolved to kind of socialism and in the U.S we're seeing a lot of this Behavior where we're kind of voting ourselves all the money we're putting in place politicians and the populace is saying I want I want I want and more money comes out and it it um it totally decreases the strength and the resiliency of our nation and our economy and it's the most concerning thing to me because the the incredible Innovation and economic engine that is the United States has threatened and it really threatens a lot of stability uh in the world today any any final thoughts here as we wrap up the political discussion I think you're obviously a Democrat so you're voting for Biden but you also care about fiscal responsibility so where are you at with your vote for 2024. I don't think that we know who's actually running on either ticket yet just to be completely honest so that's my perspective my other comment is I think what David said is so spot on the single biggest issue that we have is that we have made a huge decision to de-globalize and that deglobalization has the risk of introducing a hyperinflation Loop and we won't know how bad that is for another year or two why would it do that why would it well think about decisions so today let's just say you buy a chip to make the iPhone you buy that chip from you know tsmc that makes it uh in Taiwan ships it to China and the entire world is serviced with that supply chain that keeps that chip as cheap as possible now with the chips act as an example we will build resilient Supply chains where now instead of one place it'll come from six places five of those six will be in Allied territories the United States western Europe potentially Mexico the thing with that is that that now is 6X more equipment that you're buying right instead of one machine you now have six machines instead of one person operating the machine in one country you have six people in six countries as you can imagine when you layer up all these costs there is no world in which that chip is as cheap as it was before and so the cost of that has to be born either by the consumer who pays a higher price that's measured as inflation or by the government who subsidizes it at the point of import that'll be measured by debt and so one way or the other in our in our path now towards more resiliency and National Security which by the way I think is the absolute right decision okay energy Independence all of this stuff we have to do today we are at risk of a hyperinflationary loop if not managed well and so you have to be really on the levers of the economy and you have to understand it deeply the person that deserves the most credit of preventing this hyperinflationary Loop right now is Joe manchin and hopefully the history books whatever Jay Powell does I think has been good but the fact that Mansion prevented Six Trillion more dollars of being pumped into the economy in the last two years is probably the single thing that prevented inflation instead of being peaking at nine from peaking at 15 or 16. I think it would have been a national disaster without that charmath is right that extra Six Trillion that Manchester would have been a national disaster but let's also give credit to every Republican because they also voted against it I mean the fact that the pressure was on Mansion to do the thing and see the force from the trees and he did that yeah no look I agree I I agree that encouragement I agree that he was in the hot seat well so is cinema by the way Cinema didn't go for the three and a half trillion build back better but then Mansion you went along with the 750 billion dollar version of BBB which they renamed the inflation reduction act that was kind of a disappointment so frankly like I give more credit to the Republicans there against all of it and the Democrats jammed it through so if you're worried about all of this trillions and trillions of unnecessary spending why don't you give them a chance I'm talking about the Delta between what was spent and what could have been the entirety of the Gap is really was prevented by Joe manchin I know but it was Joe manchin siding with the Republicans was perfect on spending they both want to spend too much money but at this particular Moment In Time the Republicans are more restrained about spending than the Democrats let's go to number one issue for each person hold on number one issue for Freeburg is fiscal responsibility I was going to say the same thing it is my number one issue in this next election I want to see austerity fiscal responsibility and get this spending under control so that our kids do not inherit you know stagflation hyperinflation or whatever cocktail of disastrous economic policies we are handing to them what is your number one issue sax for 2024 if you had to pick a number one issue what would it be for David sacks look I think it's simple the president's job is to ensure peace and prosperity so you guys are talking about the prosperity side I think we do need fiscal responsibility we need to have a good economy there's like a bundle of policies that go into that starting with I think greater fiscal restraint and then on the peace side I think we need to adjust America's foreign policy to be less interventionist where we're you know we're involving ourselves Here There and Everywhere all over the world and I I'm hopeful that when I'm hearing out of the administration in the last couple weeks from Jake Sullivan from Millie these are some good things that I'm hearing but you know I would like to see us dial back on the foreign interventionism if you head to 60 40 that or whatever is is one more important the other are they both equal and then we'll go to chamoth both equal for you which one's more important they're both I mean look how can you have a successful United States if we're either in a recession or at War you don't want any either of those situations so those are your top two equally what is it for youth what what what do you think there's also a third one which is culture jaycal so this one's a little bit hard to categorize but I do think culture matters and you know I want us to have a culture of Excellence I want in the schools for example I think schools should have grades they should have advanced math we should hold our kids to a high standard I think that we want to have safe cities we want to you know have cities where crime's not out of control we need to have you know a sound border policy so I think there's like a collection of policies there under you know schools crime border that are sort of broadly cultural I guess but or maybe you could call them quality of life issues so you know yeah we need to have a good economy we need to stay out of Foreign Wars but also we need to have a high quality of life can I still man something for you because I I really agree with those three things David that you said but I've I've spent a lot of time thinking about this in my formation is that there's one thing that allows us to solve all three if you bear with me for a second and I think that that is the energy independence of the United States if you look inside of what's happening in the U.S today the cost of generating energy is effectively as cheap as it's ever been and as close to zero as it ever has been and it's only going to get cheaper the problem that we have is that we have all of these decrepit laws and infrastructure and Regulatory capture that causes us to always be in an imbalance and as a result we do all kinds of crazy things we borrow enormous amounts of money to create subsidies we go and we fight all of these you know Foreign Wars that don't make any sense we wrap the energy problem and set in climate change language which causes this cultural division but my belief quite honestly is that the the reason the IRA was so important is as it is the most clarified piece of legislation we've seen that essentially puts all forms of energy on a Level Playing Field and has the chance to get America to permanent energy Independence and if the cost of energy is zero and we can abundantly create it in the United States what I think happens David is we have energy to rebuild our supply chain much cheaper so inflation gets under control we don't borrow as much we have a completely different lens on foreign policy so that this interventionism and fighting over resources is much harder to justify and we put the climate change language aside and we use energy Independence as a form of National Security which gives us the courage to battle all these other cultural taboos that we otherwise have to say we agree with even if they don't necessarily make any sense and there's a bunch of them so I don't know my my my answer to your question Jason is that one thing if we accomplish in the next five to ten years has a chance to really change the course of the United States right and then but so I'm guessing then Biden's your vote because if it is in fact because Biden is the one who who pushed for these clean energy tax credits and this policy in it what do you think cancel you also cancel our energy Independence I mean look we were energy independent based on fracking you may not like fracking but it did get us energy independent you may think that there's environmental consequences to it that you don't like and and that has to be balanced but we did everything against I believe in that gas I believe in Coal actually as a bridge fuel I believe in all of these things I believe that these are all more important than going off to all of these foreign lands and trying to justify spending trillions of dollars and putting tens of thousands of American lives at risk essentially for resources that we can actually create for ourselves at home well I agree with you on that 100 I'm fine with I mean I'll tell you clean fracking as a way as a bridge go ahead to getting to you know more Independence through nuclear and renewable like I said before China's declared that they're building 450 nuclear power plants the net cost effective cost of electricity production out of a nuclear power plant is somewhere between one and five cents per kilowatt hour the US on average is paying 11 to 15 cents per kilowatt hour nuclear is just through utilities of free perk that's with all the regulatory capture and all that trash that you have to spend for example we have to spend 220 billion dollars a year to replace the power lines in America by law that's 2.2 trillion dollars just there right and so the cost for solar and wind off grid I think is around three to seven cents a kilowatt hour in that range right so it gets nowadays it's gotten much more competitive but I think that the nuclear solution it's just not even being engaged in the conversation now I want to go back to the previous point which is because I didn't State the numbers before so I just want to State them because they're so shocking and this is what what shocks me the current uh federal debt is 30 trillion dollars our GDP is around 23 trillion five percent interest rates on 30 trillion dollars is one and a half trillion dollars in interest payments alone every year and our social security so so one and a half trillion dollars I mean that alone is about six percent seven percent of GDP so you have to tax every transaction in the country by six or seven percent just to pay the interest payments on the debt and then we have Medicare and Social Security that math is wrong because you have maturities of all different types with different yield to maturities and different coupons it's not today's numbers it's what's happening on time so as you look out and you look at the the yield on treasuries and you apply that to the current debt level and the increment in the debt level you'll get to that level right you'll get to a trillion five a year in interest payments that need to be made plus another call it three four five trillion dollars a year in mandatory spending and so that's where the country starts to run into a problem because at some point when you have to tax so much to cover the cash payments that need to be made by the federal government the economy really gets hurt and things start to [ __ ] and then if you were to take those entitlements away Social Security Medicare you have a real problem with people's ability to support themselves in an economy where they're not working these are elderly retired people so there is a mate at work to pay these expensive medical bills so there's a major crash coming if we don't figure out how to bridge our way to this Gap so if someone wants my vote and they're going to run for president they would put up a simple chart like Bill Clinton used to do then show me a 10 to 30 year plan and just say here's where we're headed and here's what we're going to to do to make sure that doesn't happen and that chart alone I think can win the vote okay let's pull up the chart then so here is the federal debt total public debt as a percentage of gross domestic product as you can see in the 70s and 80s we were at under 50 the 90s we started you know growing I don't think this matters I think everybody every self-proclaimed intellectual looks at this chart and says oh my God we've exceeded a hundred percent you know the the Empire is going to go to ruin that's not why the Empire goes to ruin we have the reserve currency of the of the world and there's an enormous amount of power that comes from that position so what the right number is is TBD that's the most honest way to think about it it was a hundred it's at 150 it could go to 200 many countries operate at the levels above us and still haven't imploded per se the real thing is what part of what Friedberg said is look if you really want to look at what we pay today we pay 400 billion dollars this year that's the interest payments okay that's when you calculate all of the different maturities we have with all of the different coupons we have that's what we owe today and David is Right mathematically that if interest rates go to five percent and stay there forever but we know that that's not how economies work they ebb and flow okay so the real problem that we have to understand is how do you actually create enough growth and then the next time that we have a meaningful fall in interest rates like every other person does you know look a lot of people in America know how to refi their credit cards refi their home loans refi their mortgages the United States could have had a much more aggressive and thoughtful strategy of refining by pushing out these maturities way into the future and again Trump actually suggested that but because he sounded like a goofball everybody said absolutely no way but in hindsight that one move would have saved us trillions of dollars over the next decade if we had done it and this time around we have to have politicians who are smart enough and have the werewolf fell to say it doesn't matter where this idea came from it's really smart rates are now back to two percent or one and a half percent let's now issue 50 and 100 Year bonds and let's refi this problem out into the future that makes a ton of sense and we have to do it the refi makes a ton of sense just to pull up a chart here and to counter your position there that it doesn't matter maybe you can respond to if you look at GDP ratios here number one two and three Japan Venezuela Greece Sudan and you know you know some smaller countries there but United States currently these countries none of these countries this entire world runs on the US dollar complex whenever we raise rates yes it is true that on the one hand our interest payments go up but proportionately and on a relative basis I think I think maybe let me take a step back look one of the most important things in investing which is appropriate here is that people ask what is the price of a stock well before you go public you're calculating what the intrinsic value of a company is okay all the things that they do all the money that they make here's what we think it's theoretically work worth but the minute it goes public the intrinsic value no longer matters it's what is it valued relative to everything else okay the United States is a relative if it's a stock if all these countries are stocks we are valued relatively to others not not intrinsically and the reason why we have so much power is because everybody else is actually valued relative to us so this is why I think the right thing to look at Jason is the rate of change of debt to GDP for the entire G8 or G20 or the rest of the world and what you'll see is something that goes up and to the right nobody in the world has been rewarded for not investing in their populations and basically borrowing from tomorrow to invest in today's human capital okay so we have a disagreement here Freeburg do you think this is a major issue yeah do you think it's manageable Free Bird yeah I think there's two things that are missing one is the inflationary effect so you look at that list of countries that are there they're paying higher interest and they're paying in the form of inflation so they have less that they can spend on their people and ultimately what ends up happening it's just simple arithmetic it's not about relative value of a currency it's the arithmetic that we have a check we have to write every month to pay for Medicare and Social Security and it is written into law what that check needs to be and the rate of which we're having to write those checks the the increment of those checks is going going up so significantly that when you add on the interest payments and you look at those checks and then you add on defense something's got to give because you cannot raise taxes in the amount that's needed to fund all of that outlay without this causing either number one massive inflation if you just take on more debt or number two you know significant loss of services either Social Security Medicare or defense and so something's going to give and the the distribution I think is not being discussed so I just want just one point the president's budget anybody who is a president of the United States gets hold of their annual budget it's about five and a half trillion dollars this year so you're talking about interest payments that are still less than 10 of their total budget now that includes the entitlement payments okay so about three billion dollars three trillion sorry three and a half trillion is what you have to pay for twenty percent no three trillion dollars is the sum of Medicare and Social Security okay so the president still has one and a half to two trillion dollars of leeway of which a quarter are debt payments so my perspective quite honestly is mathematically there's a lot of room to run here before these things get really out of control and even if they do I think the relative problem is for the rest of the world will be so egregious that the ability for the United States to go to those Banks and those economies and basically sell in more U.S debt is quite High because they cannot afford to own debt in their own country so if you think that if the United States is bad go back to that list guess what those central banks in those countries are going to be buying US Dollars faster than they can go out of stock unless we see some Union of India China Saudi Arabia Russia Japan Brazil obviously not Japan but some some of that consortia will become a closer trading partner and perhaps could cause a shift in the balance of the dominance of the US dollar and that's one path to to consider sax what do you think of the balance you hear obviously we have two opposing opinions here from tremath and Freeburg where do you stand on the United States balance sheet are we over our skis balance sheets of disaster what are we at like 130 percent of debt to GDP I mean we have like 30. yeah it's not even stable I mean we can't spending is 27 of GDP right now 27 it should be 15 right so the spending where does that number come from why there's a there's a bunch of economists who have shared these papers morons morons hold on hold on if you look at it if you look at government tax receipts over time with all different kinds of tax rates including very very different top marginal tax rates what you see is that a federal tax receipts as a percentage of GDP is in the 17 to 19 range and like the best years you make 19 is usually in a good economy and in a bad economy it's like 17 and it really it doesn't matter whether Reagan was President or Clint Bill Clinton and so on so there's only so much blood you can get from a stone and historically spending was around 90 of GDP and so you would have a one or two percent you know deficit every year and that really accelerated first you had the financial crisis of 2008 and then you had covid and freeburg's right you know we we went from call it you know 20 of GDP spending to roughly 30 or more during covid as kind of this emergency measure but like everything else in government you know the emergency measure becomes a permanent program so now we're at 27 percent it doesn't seem to be going down and the Democrats want a lot more I mean we talked about it build back better would have been three and a half trillion instead of 750 billion if they just had one or two more votes incentives they now have so so hold on so so Freeburg is right there's like nothing stable about the point we're at it's the point we're at is bad on its own terms having 30 trillion of debt let's say that interest rates stabilized at three percent that's still a trillion a year of Debt Service which is more than the entire trillion if interest rates stabilized at three percent which is optimistic and we're servicing a trillion sorry 30 trillion of debt that's roughly a billion dollars a year of Debt Service payments that could be spent that should be spent on other things you guys keep saying billion when it's a trillion the average yield to maturity needs to be factored in there so over a 15-year period David you would be right mathematically if all matured but that's not what this is because you rear you'd have to refi and reissue a bunch of debt that is at lower yield right now at these interest rates I want to be clear I'm not sure if any of this is good I mean remember I I understand I'm not saying that this is a good or it's a trend what I'm saying is I have this issue that all of a sudden people make up and you guys are doing it now an arbitrary number with no rooting in history or fact and say this is bad and all I'm saying is I know it feels bad to us and I think we would all run this country differently if we could get control of the balance sheet I would as well I would try to get debt way way down I would try to get deficits way way down but all I'm saying is using this justification of an arbitrary number always falls flat so I'm encouraging us all let's find a better model of reasoning because every time we point to some rando's book and say 127 is bad nobody listens and I think the message that you should take away is it's because it's imprecise and it's not rooted in any actual logic and if there's a better building the reason I believe that this is concerning is I look at the top 10 countries that have you know debt ratios that see them out of whack and I think wow what is their Fortune been for the last 10 years vis-a-vis Japan it's not the right comparison the right comparison okay to go back look at the British Empire and when and what was the debt to GDP when it started to actually fall off does anybody ever collapsed I collapsed no I'm saying okay was it triggered was it triggered by debt to GDP and I think your answer will be in part again they took on runes debt and they couldn't make maintain their empire anymore and the whole thing collapsed I'm just asking for some numerical specificity a lot of numerical specificity there is a ton of work that's been done pulling [ __ ] out of their ass so it shows that it's historically the best way to manage the growth in in a in a country is to have deficit spending be equal to or less than the growth rate of the economy of that country so for example if your income the the tax revenue that's being generated by the government is equal to say 15 of GDP you do not want your spending to be more than 17 or 18 if the economic growth rate is two to three percent that's it if you do anything more than what happens you know if you do anything more than that you're borrowing from the future to pay for today that's the simple truth okay so what happens and when you do that the rates go up and the prices go up and eventually your currency doesn't work so you're making a bet read the book that I talked about last year the the most recent Ray dalio book he goes through six stories with the economic data to prove it the factual data the history of what's happened with six Empires over the last 500 years were this exact same scenario has played out this isn't some random arbitrary story I read that book and everyone had the exact same perspective that you have when they were living in those days and they said you know what we're going to be okay because we're the reserve currency and the world loves us and we're the Empire and we have influence everywhere and they all lost Primacy and their currencies collapsed and they all broke apart and that's not saying that that can't happen in America what I'm saying is you get so full-throated I read that book it's great narrative but the numbers are brittle okay they're fragile and they're mostly made up so all I'm saying is in the absence in the absence of numerical specificity I agree with you that this trend is alarming and it's bad I agree with you and I agree that we should spend a lot less what I'm saying is when you say to the world stop spending because XYZ number is bad you have no credibility because it's not it's something that you can actually back up and all I'm saying is if you could find a better logical argument you would probably get a lot more people to you you're just being ignorant you're ignoring it you're saying you don't want to actually believe it the numbers are there show me the numbers and I'm not saying ignorant in a disparaging way I'm saying you're literally just ignoring the data show me the numbers I'll send it to you tonight I promise and I'll post it on our freaking things so people can watch it all right okay listen the the group chat's gonna be on fire this weekend sax final word for you okay final word okay final one please obviously on opposite sides I think it's great I still respect and love you if you go back in history and look at debt to GDP levels the only other time we're anything remotely like the level we're at right now is right after World War II when we had just saved the world from Nazism okay that was worth going into debt for you look today what is it that we've gotten into this 130 debt to GDP what is this 30 trillion dollars of debt for what if we bought with all that money huge amounts of it have been squandered you're right and Biden won and more if if the courts didn't stop him he would have spent a trillion for giving a bunch of student loans to for basketball degrees or liberal studies or whatever me graduate degrees that brown in my heart will be finished that's Point number one is that this money is being squandered at levels we've never seen before and the squandering is continuing it's not like we've reached a steady state it just keeps going and going and it's great goes on I can't precisely saw a second I can't precisely say when it's gonna break but I do know it's gonna break the other thing the point number two is about consequences today there is a phenomenon economists call crowding out where when interest rates go up more and more money flows into the risk-free rate of return and then that crowds out investment capital and we've talked about it on the last pod where if the risk-free rate is five percent and then like high quality corporate bonds are offering eight to ten percent now Equity Investments must generate 15 and VC must generate 20 and there are very few VC Investments that can generate that kind of irr so what happens the money flows out of VC and there's less money for risk capital what drives our economy risk-taking data entrepreneurship so hold on a second so this massive Debt Service that we have which drives up interest rates will crowd out the very kind of economic activity that the United States needs to stay on The Cutting Edge of the rebuttal to the rebuttal no you're so right so why don't you just bookend the argument exactly the way you just did my point is not that you said it just before that we don't know at what upper bound these things break or don't break and all I'm saying is every time you throw up a random number you guys sound like the boy who cries wolf okay and you're shouting into a vacuum is is just the is the advice that I'm trying to give you guys I agree with you I spend my entire days investing in and trying to figure out what is the risk-adjusted rate of return of the things that I'm doing and I'm trying to tell you as somebody with some reasonable Financial numeracy every time I hear you or Ray dalio or somebody else say this number is where it all breaks and it doesn't you lose a little bit of credibility then you go to this number and you're like oh at 100 how much is too much how much debt can we handle and how much spending as a percent of GDP should we handle what is the limit in your mind and how do you decide what that limit can or should be I think the honest answer is every time that I have been alarmed that we had hit a threshold that was meaningful so for example like I think under Obama we passed a hundred and it felt very scary because I was like wow that seems like a demarcation it turned out to not be a demarcation at all because it's relative to every other country and what they're going through and I understand that you don't want to believe that but I do think that America's economic fatality is not an independent uh function it is a dependent function on everybody else we are relative to everybody else if there's a a different Cosmos and a different planet somewhere maybe this will all reset but right now it's not and so we all trade relative to the United States and in as much I would like to just say I don't know enough to guess what this number is and I'd rather focus on what David said which is there are things that we need to do that we need to incentivize people to invest in extreme risk-taking that create new businesses that move the world forward you can have that conversation without bellyaching and crying to Mommy about a GD debt to GDP number because every time you throw it out there nobody knows what you're talking about nobody knows what reaction to have and everybody feels over time David Friedberg that you're crying wolf so all I'm saying is I get that it's concerning to you and it creates anxiety but every time you probably this is not the first time you've had anxiety you probably had anxiety at 50 75 100 125 guess what I bet you'll have anxiety at 150. I don't know what it means I do know what sex means though which is that right now we have a risk-free rate that's going to five we have corporate bonds that'll be at 10. we have Equity investing of the most risk-taking which is the early stage Venture that has to return 25 and that is an incredibly High bar but we need to do it and we need to do maybe fewer Investments quite honestly with fewer participants with less dollars that are more effectively put to work okay maybe this is a good jumping off point to talk about all the waste in Silicon Valley and that stuff can happen without debating incessantly this debt to GDP number which is awesome all right Freeburg sacks and then we're gonna move go I agree I've never had anxiety about debt to GDP it's never been anything on my radar the conversation I'm trying to have today is the amount of spending the federal spending including interest payments as a percent of the GDP as a percent of how much we can tax to pay all those to make all those payments every year and so what I'm concerned about is the ballooning cost of paying out all the obligations the federal government have you say something different than what you were just saying that's if you were cared about only that then refinancing the debt is an equally valid proposition and changing the duration expense it's not the only expense so interest payments are ballooning in addition to interest payments Social Security and Medicare payments are also ballooning and defense out of control spending everybody add those four big categories together you don't have any room left over you're talking about discipline in spending in defense great I agree you're talking about discipline and capping health care costs great I agree what does that have to do with this other orthogonal thing you've been talking about which is this random number debt to GDP it doesn't okay okay let's move on from that discussion let me make one final point we can move on so look it takes time for the final Point go it's important discussion apparently look in the in the interests of bestie Harmony I will partially agree with the point that your mouth is making which is that for a long time in American politics people have sort of cried wolf about debt to GDP for example if you remember way back in 1992 Ross Perot basically bases candidacy on the idea that the US was racking up way too much debt you know what debt to GDP was in 1992 41 okay so people used to care a lot about this I remember when Reagan was President and jets GDP was 30 people were saying that he was just like you know wild spender okay but I think that precisely because nothing broke at 30 40 80 100 you then had the rise of this Theory called mmt or modern monetary Theory which said that the debts don't matter if you're the reserve currency you can print as much money as you want and so people started indulging in this and so now I actually think we are at a point I can't say precisely where it breaks but I do think that because debt to GDP didn't seem to matter for so long I actually think we got carried away and now we're at levels which are just going to be ruinous if for no other reason than our debt service is going to crowd out whether you want more guns or more butter in our federal budget if you want more defense spending you want more entitlements you want more discouraging spending there's no question that debt service is getting bigger and bigger is going to crowd out those programs there's no question we need to spend less I 100 agree with you okay but all I'm saying is we should spend less on defense because we have different ways of Defending ourselves That Should Be The Logical argument for Leicester energy Independence is defense and a balanced budget could be defense as well if you look at the IRA that was less than a trillion dollars over a decade okay that has the potential to shift trillions of dollars a year in defense spending yes okay okay so let me wrap okay let me wrap here for a second thank you everybody you can look at these bills in and of themselves and try to actually do the right thing for the country without wrapping up all of these random arguments and I by the way just be clear I don't believe it don't do it don't do it the world's worth moderator come on during the Obama presidency we had a thing called the sequester I don't know if you guys remember this yeah but Republicans and Democrats agreed that basically that because we had just had like these trillion dollar uh deficits because of the 2008 Global financial crisis they got together and said listen we're going to hold the line on spending and there'll be no increase on defense spending in exchange for no increase in discretionary spending social programs and for a few years we held the line on spending actually and then of course both Democrats Republicans didn't want that for different reasons and the sequester went away we need to go back to something like that there are two things one one detail like when you go and send a bill so look the way you pass a bill right you have to send it to the CBO to get scored one of the things that I learned this week is that sometimes the CBO and they're not really empowered to actually tell you how things get offset so for example like if you have a medicine what they will do is say well we'll look at at the population level how much would this medicine cost if it's taken by the population but if that medicine then all of a sudden has the potential to actually off-ramp you over here those savings are not really factored in as well so David to your point another way that we can refine how we build budgets to make sure that we're not overspending is to actually improve the toolkit and the data that like the CBO is given so that when they score things they can actually look at the total impact like for example like the IRA again one of the biggest benefits will be to defense spending if we choose to make those cuts you will be able to do it differently once we have you know no Reliance on foreign energy okay to wrap this segment the first segment which took 57 minutes it's obviously wow really well I think it's an important discussion Hey Jake how would you vote for DeSantis if he promises fiscal responsibility well here's the thing I am going to take a look at the candidates I'm going to make the best decision in terms of what I think is that that's for the countryside yeah it depends on if DeSantis gives you everything you want a fiscal policy why wouldn't you vote for him if he stays out if he if he's in favor of a woman's right to choose for the first 15 weeks that's Florida policy are you yes you know I would take a look I would take a look not to vote for him 15 weeks right to choose combined with fiscal responsibility okay but to wrap up here the two things that matter I believe and based on our panels discussion austerity and Excellence are what are going to get us out of this mess here is what the platform seems to be shaping up our 2024 platform control spending everybody here thinks that's important energy Independence everybody here thinks that's super important stop fighting unnecessary Wars uh and maybe rethinking our foreign policy I think we all agree on that and the cultural focus on Excellence not excess this is shaping up to be a little bit of an all-in platform here great discussion everybody speaking of austerity measures I think you know we should just talk right right up top here about what's going on at Google Chris hone uh I believe is how you pronounce his name chrisone he sent a letter to Google and Amazon Amazon today after already announcing 10 000 layoffs they just said again Andy said prepare for more layoffs in 2023 and these are not Factory workers these are white collar high-paying jobs that are being laid off here there's Surplus Elites Surplus Elites uh it is definitely a part of the Zeitgeist right now so they're going to reduce headcount massively but in this letter to shareholders he points out notably not just hey Google needs to do a riff a reduction in force but he points out a more granular point that I want the panel to talk about here which is he says hey you need to reduce the actual salaries at Google the average salary being 296 000.67 higher than an incredibly well paying Workforce Microsoft quote we acknowledge that alphabet employs some of the most talented and brightest computer scientists and Engineers but these represent only a fraction of the employee base many employees are performing general sales marketing and administrative jobs who should be compensated in line with other technology companies and he says we need to establish an ebitda margin Target as you can see in this chart and reduce the losses on other bets perhaps increasing share BuyBacks as well so what we're looking at here now after Facebook business my God I mean the business is nuts Freeburg you worked there what in this Rings true to you uh or not and then how many people does Google need to employ to operate the business and invest in the future of the business in your mind they have a hundred eighty seven thousand employees at Google it's grown 24.5 rounded up 25 year over year they grew 25 percent year over year in their business how many people need to run this business to have it aggressively grow look I think there are um two main drivers of the issue that Google maybe meta maybe Twitter prior to elon's involvement and and really Silicon Valley as a whole uh the bigger companies have faced the first is the war for talent the war for Talent started I mentioned this last time around 2004 2005 because prior to that there weren't as many grads coming out of um undergrad with computer science degrees right I think 10 of of grads in the Bay Area Schools were finishing with computer science degrees today the number is like 60 so you know around that time the war for talent LED organizations particularly Google down a path of offering more perks and benefits to their employees to create a workplace that was more competitive and that ends up being a slippery slope because then other organizations try and find parity and then other organizations try and overdo it and push it even further so this leads to both wage inflation across the um uh the uh ecosystem but it's also LED to almost like the acceptance or the allowance for degrees of complacency and so I'm not saying that the workforce is all complacent but I do think that complacency is Forgiven some amount of complacency I'm going to take a Friday off I'm going to take two Fridays off all of a sudden I'm not working any Fridays the other thing that's happened is as this Workforce has aged I worked at Google 20 years ago and a lot of the folks I work with almost all of them now have families at the time everyone was young and as the demographics of Silicon Valley has matured you have more people that are less about killing themselves and giving everything that they have to their organization and they're more interested in being with their families and now spending less time at work especially in light of the fact that compensation has ballooned to a point that you can now live a very very comfortable lifestyle and you don't need to have a big payday in order to be able to take really good care of your family which was the case as a startup and then the other issue is just one of innovation at Google if you work on a new project and it doesn't work there's no loss you still have your job and they've started programs where they'll give you equity and new startup ideas or they'll give you all the stuff so they'll give you upside if you win they'll give you bonuses if it succeeds but there's no downside and so the pain and the burn that you would feel as a startup founder or as someone building a new business isn't experience to realize and I cannot I don't need to tell you guys this but for anyone else that's listening that many not really be fully aware the lack of pain the lack of risk the lack of downside the lack of having no safety net and and falling through the pits removes all of so much of the incentive to succeed and to drive and to innovate and I think that's become part of the complacency problem that's caused larger organizations to Simply say let's throw more heads at the problem and when you just throw more heads at the problem you have more of kind of talent War problem that I mentioned number one what is the average salary 280 000 300 000 rounded up yeah that doesn't Cloud I don't know if that includes benefits whatever let's just call 300 000 yeah and by the way that doesn't mean that those people should all get some of my best friends work at Google it's a great organization people do incredible work there but in terms of Return of dollars invested as a shareholder that's the question that's the that's the analysis that's the scope that the shareholder is looking at is do I want to spend a dollar to make a dollar five or do I only want to spend a dollar where I know I'm gonna get a dollar eighty back and so if you just bucketed where the dollars are going you would end up saying you know what I'd rather just focus on the places where I spend a dollar and I get two dollars back or a dollar eighty back and I don't want to do any of the stuff where I spend a dollar I make a dollar five back and that's called roic or return on invested capital and that's includes return on invested human capital and so the analyst in the stock that that's an investor in the stock will look at it through that lens whereas everyone that's working there is still contributing meaningfully they're still doing valuable work but in terms of return on invested capital a good chunk of the projects are not driving the majority of the value a minority of the projects a minority the ad count is driving almost all the value I mean if you sensitized it to what you said David a if it was just 75 or a half that number then you know the stock goes up 35 overnight and if it goes up to the full number yep the stock goes up 65 overnight I think that's totally feasible and then and then I think what you do is you take accountability model that you speak to the street about and you say here's how we're going to hold ourselves accountable to investing this 10 billion dollars every year and not just have everything be a nebulous 50 in your project and then it's always a 15-year project and you're always just burning cash to go after those projects that are highly nebulous if you had to Steel Man the other side I think the argument would be I I would say they they would make probably three arguments argument number one is like look don't get overly distracted by other bets because it's a small category of spend and we've contained that cost pretty rationally relative to the rest of the Core Business the second thing that they would probably say is there's an enormous amount of work that is never seen by Wall Street that explains how good our service is whether that's you know in early iterations of you know technical capability like GFS and bigtable to things like TPU to things like tensorflow and all of that builds up all the things that deepmind does all the compute we have to throw against search to support that so I think they would probably say well people probably don't have a great sense of today that it's not just 25 of the team that's required and then the third thing is what they would probably say is it's very hard to explain but Google has all kinds of other things that they do for free to create the ecosystem so that the internet works well you know I I heard this one thing where somebody was explaining that Google is like you know the the DNS server right Google is the time server and all of the stuff they do for free and all of it is just about making the internet work more efficiently and that has some costs so that's probably how they would steal man how to build back up to some number but it's probably there's still a gap between that number of David and what their prevailing headcount is yeah I think that's that's totally true because the infrastructure struck Byers is the most engineering organization on planet Earth in my opinion and they have laid um fiber lines across the Atlantic they have built their own data center infrastructure their own switches their own silicon like everything is built by this team from the ground up from first principles and it gives extraordinary modes and advantages to the business it makes the internet a better place it allows you know Ultra fast super cheap YouTube video viewing across the internet I mean there's just so much of of these core advantages in the business but if you look at the head count over time you have to ask yourself the question you know how many of these Investments that are core are really you know captured in the head count that blossomed from 2013 47 000 people so that the business has gone up in headcount by Forex in the last nine years one of the things that Jeff Bezos was always so incredible at and I saw him give a speech on this at one point Bezos gave a speech that I saw and he said we are really good at failing and he showed all these projects that Amazon tried and he said we tried A9 we tried to do our own search we tried to build our own cell phone a fire phone we tried to do this we tried to do that when they don't work we kill them and when they did work they became 100 multi-hundred billion dollar Enterprise Value creators for them like AWS which was one of these projects and so Amazon was so good at taking the stuff that wasn't working knowing when it wasn't working and ending it and they were still able to drive an innovation engine one of the challenges I see with alphabet is that they are so good at bringing the best talent to work on these Innovation problems but where they're not good is saying you know what this isn't working it's time to move on and if they did just that if they added that one disciplinary capability then I think this as you said the market cap would go up by 600 billion dollars what about this um I just want your reaction to this thing that a lot of people whisper in Silicon Valley which is part of what the big companies should do it's part of the positive Game Theory is to not let these talented people actually leave it's better to pay them 300 000 or 200 000 or whatever and stay at Microsoft and meta and Google or whatnot then go off and start up build a startup that could actually then disrupt them and so you know it's it's a cost worth bearing because it's actually mitigating strategy yes it's a blocker strategy yeah what do you think about that super interesting idea I think that the people that are likely going to actually be able to execute on that are going to leave and do it anyway look I was not super I had made a little money when I worked at Google but I was not super wealthy and I left the last the vast majority of my stock options and rsus on the table when I left Google in 2006. here's our climate Corps because I could not help but do that I could not help myself I had to go do that thing of course and I think the kinds of people that are going to succeed in entrepreneurism cannot help themselves it doesn't matter how much money is being thrown at them here's the chart basically these companies have been correlating their spend and their head count to their revenue not what's necessary you look at alphabet total employee change since 2018 95.36 I mean I don't know that looks pretty good today Revenue 132 it's pretty good it doesn't look like they were massively over hiring if you asked me totally totally so what are you guys talking about so maybe I'm wrong I will say look a big part of um Larry Page's decision to shift the company from Google to alphabet was he believed that the core business at some point would ultimately be disrupted that the core advertising engine was going to be disrupted and there wasn't going to be the sustaining long-term growth advantage in that business maybe he's been disproven or maybe that it hasn't been just it hasn't been proven yet but the concept was we need to find the next Google and we need to build the next Google and so we want to allocate Capital within a portfolio of bets and have some number of those things maybe not all of them maybe not even a lot of them maybe just one or two of them turn into the next 100 billion dollar Revenue line for us now he always said that that's going to take a long time he definitely underestimated the quality of Google search and the the dominance of it now it's probably it probably stands to reason that if we have enough Innovation at the fundamental model level in AI particularly like a bunch of really powerful multimodal models the new form of search can disrupt Google but the problem is they are so ahead of everybody else with respect to those models as well so the real question is even that next big LeapFrog isn't going to happen without billions of dollars of capital invested and you know the most likely folks that are able to do it I think open AI at some level but again they're going to always have to raise money from other folks Google can self-fund it and it makes an enormous amount of sense to drive that technical mode so it just seems like Larry what do we think is going to happen here and any are they going to make the cuts or not you think they'll make do they have the ability to not make cuts and just ignore a six percent shareholder Tremont or are they just gonna make them and then we're going to go on to you the dynamic will be how much Ruth is able to convey Ruth pour out is the CFO and she's hardcore she's hardcore she's incredibly everyone on that leadership team is incredibly impressive but she um has a very particular lens uh a Wall Street lens and she understands what the shareholders are thinking and looking at and she will convey these points to the board and um and there will be engineers and Sundar is an engineer and he will and he's a very good he's very good at Gathering and the different points of view and having balance around this and he will share his points of view at the board and I think ultimately it will come down to my guess is like we just talked about some portfolio allocation decisions which is how much risk and how how much beta how much Alpha and do we have the right mix in our portfolio and it is inevitable there's going to be some cutting so I think that there will likely be some reduction um five percent ten percent ten thousand employees that seems like the number that people are going with yeah yeah let's see my guess okay sax what's your take on austerity measures uh and moving to an age of excellence and efficiency which is happening inside of the tech industry as we speak I think freeburg's right that these companies could operate a lot more efficiently I think there's an economic argument there but I want to up level it and talk about the cultural aspect of this for a second and also bring in two of the huge stories this week the um the SPF Story the interviews he did with the New York Times in Vox and then this Hysteria around you know what's happening at at Twitter look I think that there something clearly has hit a nerve here in this last week where you have all of these employees who have voluntarily left creating all of this drama and you know Antonio Garcia Martinez had a good quote about this he said what Elon is doing is a Revolt by entrepreneurial Capital against the professional managerial class regime that otherwise everywhere dominates and that same PMC which includes the media is treasing it as an act of last measure State there's another version of this that came out a couple weeks ago and by the way let's match yesterday just means like you're insulting the monarchy resulting in the crown there was a good one here uh there's an article on Compact magazine a couple weeks ago where the editor Jeff schallenberger tweeted the layoffs at Twitter are no different than what's happening across Silicon Valley but because the ideological antagonism of the professional left uh musk they made clear what's at stake the collapse of a jobs program for Surplus Elites and then um and then there's a great quote from this article which again that's that's so hard hitting I know it's different it's a deep nerve I'll get into it differently yeah exactly so the quote from this article said one of the biggest and least talked about social questions in the west is how do economically provide for our own modern version of France's impecunious Nobles that is how to prop up high status people who can't really do much economically productive work I think this is really hitting a nerve because the fundamental quid pro quo of our civilization is that in order to achieve economic and social advancement you go to college and get a degree and you submit to voluntary re-education of yourself at one of these woke madrasas one of these re-education camps that's the pro quo and you get a degree now some people did your punch-up guy write that intro no no look this is this is where I believe for a while now there are some number of people who get useful degrees like computer science or engineering but huge numbers of people get degrees and like we talked about at the basket weaving or whatever the you know politically correct degree is for sure and they graduate with a quarter million dollars in debt and no marketable skills right and right and what was propping up all these people were these fantastically wealthy monopolies tech companies that were hiring huge numbers of these people now all of a sudden we get to a point where we're in an economic recession and these companies are starting to do layoffs and they're starting to do a little bit more soul searching about who's really adding value and people are starting to get laid off and I think there this hysteria is coming from a place of deep insecurity you had all these people go to college they did not learn critical thinking skills what they learned was that listen if we pay lip service to the right platitudes then we will have career advancement and now they're learning that that may not be true and actually the person who's pulled the mask off this entire regime is another other than SBF and he did it in an interview with Vox and we have to go to this okay he's the devil but he basically pulled the mask off this whole civilizational quid pro quo that is a sham okay and here's what he said that the Vox reporter said you were really good about talking about ethics for someone who kind of saw it all as a game with winners and losers what did SBF said yeah he he I had to be it's what reputations are made of to some extent I feel bad for those who get [ __ ] by it basically all these people who incurred a quarter million dollars in debt and think they can just spouse the right you know platitudes he says by this dumb game we woke westerners play where we say all the rightship will us so Everyone likes us how stupid does the New York Times feel right now how stupid do all these non-profits and Foundations who received all this money from SPF he played them all he had to do was say the right words that say the magic woke words and they would basically cover for the most enormous grift that's ever been perpetrated that is basically the quid pro quo of our civilization is be woke and you will have indefinite career opportunities no matter how uncomfortable signaling would be another way to say it I mean it doesn't necessarily have to be the work woke ideology but virtue signal and give donations to people this has been a Playbook of grifters for a long time Bernie Madoff gave a ton of you know donations and he used the same place how many donations did he give to the Republican Party none they're not part of the regime how many how many conservatives I'm not sure this is a political I don't know I'm not making a political point I'm making a cultural Point okay good who were the Charities that he donated to it was all the right woe causes not you know it was not endemic one was not woke he was passionate about the pandemic stuff are you kidding me freaking out about the pandemic no no he explained it to me the Neurosis it was the news no no that was not what he was funding sexy I actually talked to him about this when I interviewed him he said he wanted to do pandemic uh prevention and early warning systems and wanted to invest in strategies to fight and definitely freaking out about covid is was essential of the professional managerial class for the last couple of years it is but that's not what he was funding I just want to make that point yeah whatever he wanted to prevention I mean you could frame it as not but I actually literally talked to him about it he wanted to do pandemic prevention in the future he wants to steal money from California taxpayers via ballot initiative to fund his brother's organization which would have dispersed the money in who knows what ways probably not legitimate out of a professed concern about the next pandemic why because the PMC is neurotic about the last pandemic come on this is what you're saying to them I understand of course yes thank you it's pandry I understand it's absolutely now listen why well hold on a second why did this work why did this work virtue signaling work and again why were they only uh Charities and causes that appeal to the sort of the left is because they're the ones with the power in our society and in our culture to Define what virtue is when you're virtue signaling who are you signaling to the people with the power to decide what is virtue and what is vice right that is why people go to work at the New York Times that is why they basically go into you know all these influential jobs at non-profits and Foundations they're the ones deciding what virtue is they're the dupes they're the ones who are fooled and now what's happening is there's an economic consequence to it which is it is coming out these people have no marketable skills and companies are tightening their belts and now all of a sudden they're starting to become deeply insecure about their own future my comment is that you know when you look at Twitter as an example Bill Gurley had a really powerful quote as well which is when companies cut you know they don't cut nearly enough and they and they misestimate and underestimate how resilient a company is back in you know Twitter had 200 million Mau they had only a thousand employees and so clearly at that point they knew what they were doing and now the business has you know increased in Mau by call it 50 to 300 million but the employee base increased by seven and a half X so clearly something is misaligned and I think the thing that you know people are going to find out is by the way with contractors probably 12x right so I think that well there you go so I think that the the thing that frustrates a lot of folks uh that are leaving or that are trying to throw bombs is they don't want Elon to be right because I think to David's point if Elon is successful he has uncovered this very uncomfortable truth that was frankly hiding in plain sight which is that many of these technology companies using technology get so much operational leverage that they have some enormous efficiencies and then it's only a decision by the professional managerial class to reward themselves with fiefdoms and kingdoms of employees and you know the serfs that work for them I mean it's really quite crazy if you think about it well Freeburg made this you know early on in the history of this podcast well hold on I want to add to your position Freeburg said something that adds to your position which is early in this podcast he said the nature of organizations is they want to grow and that's government or even these departments you're talking about anybody who runs a department is never going to say my department needs to be 20 less so we can hit the bottom line they're going to say give me 20 more because everybody else is getting 20 go ahead and then if you if you if you layer in the Charlie Munger quote show me the incentive and I'll show you the outcome you can understand why because the professional managerial class is rewarded by compensation that is actually independent of dilution right because if you look at these compensation plans all of these professional stock owners they complain all the time about stock base comp right and these companies have budgets between two and five percent a year that they give away and so you have this situation where an engineer or an engineering manager or a sales manager or a marketing manager in success at a thousand people can grow to five thousand or ten thousand their compensation doesn't change in any other organization their compensation would change because let's say that it's a percentage of the profits that are distributed unless the company is phenomenally growing eventually you'll see it in the bottom line of what you take home and so these folks are incentivized to have these status signals of value I have a 50 you know you guys have heard this I have a 50 percent I oversee 3 500 employees and you've and everybody is conditioned to fake oh my God that's incredible you must be really important and so we're going to sort of now see in real time a questioning of that belief system and if Elon proves to be right it's a really important decision point for a lot of other technology companies because if you are an 80 to 90 gross margin business built on software maybe you have a bigger responsibility than you've discovered to date to your shareholders and to the existing employees to find the efficient rate of return right what is the efficient Frontier of headcount the other thing is it now allows let's just say that now Twitter goes to making up a number 2 000 employees after this whole Google form thing the great thing about the 2001st employee for the 2000 employees and for the shareholders is that that 2001st new employee is a hundred percent aligned because they're coming into something Eyes Wide Open and I think that that's also an interesting thing that is isn't getting enough recognition is he's putting out there what he stands for this hardcore culture irrespective of whether we think it's right or wrong all the people that stay are voting that it's right and you know as long as it's not breaking any laws he's allowed to do that and so if people now want to join that organization they should be allowed to do that too just like the people who don't want to should be allowed to leave sacks you and I came up and we talked about this I think on last week's show or maybe it was two weeks ago we talked about what the expectation was in Silicon Valley at a startup what startup culture was in terms of just the effort that was required to build a winning company and we all said 60 hours a week was the Baseline that's something that you know has been I think a lot of people you mentioned this trim off people working two jobs for 30 hours a week and taking two salaries from two of the fan companies go into Tick Tock and search for you know engineering salaries you'll see some of the craziest tick tocks kids are making 350k working 30 hours a week it's nuts and so I think we're going to have is that I think we're going to have a cultural divide here they're going to be a series of companies that say this is classic Silicon Valley we're gonna we're gonna crush it we're gonna work aggressively we're gonna put in 50 60 70 hours a week and we're all going to benefit from that and then there'll be another class of companies that says hey no we want to have a more lifestyle business and if people want to work 30 40 hours a week and they contribute we don't need to be perfectly efficient and you know what the playing field of entrepreneur the playing field of capitalism will show who is Right sex yeah I mean look I actually went out of town a few days ago so I wasn't keeping up with you know every detail of what was happening at Twitter and I started getting all these text messages about how Twitter was dead or dying or whatever like the site had been unplugged or what have you and I'm like what is going on and you know you tweeted this morning hey is this working and I'm like yeah like like yes it's working like and yeah this morning is this working today and so my tweet went through yeah so I came to learn what they're talking about is that all Elon did was give a voluntary offer that if you didn't want to stay you could take three months Severance now remember last week they had a riff you know which was basically economically required in which they gave employees three months Severance which is 50 more than what he had to it was generous now it seems to me that what if you're one of the employees in the other half that made the cut but yet you're not really motivated to stay and maybe you don't really want to operate like a startup I mean elon's basically saying we're gonna go back to working and operating like a startup that means that you might have to work nights and weekends like a startup what if that's not what you signed up for you may be sitting there at Twitter saying oh man I wish I'd gotten Rift well now Elon is offering you the opportunity to take the same package yeah so I'm like how can this possibly be a bad thing it's actually the great management technique that Tony Shea rest in peace from Zappos created he would say when people went through their first couple of months of training he'd say now if you don't want this job I will pay you a month's salary this is on their first day after they went through training their first like day on the job he said okay now that you've gone through the training I'll pay you I think it was five thousand dollars or three thousand dollars to not take the job and something like one out of five people would do it and so he said listen I I don't have to fire them later on this is going to make my management easier it was it is actually a kind thing to do to give people the opportunity to understand how giving employees an option because the reason people are upset let's be on to sex is some people you know live to work and some people work to live and the people who are working to live find a crazy that hustle culture even exists and people who are part of hustle culture like the four people on this podcast it's just working hustle culture is working above the hours you're being paid for that's that's basically what hustle culture is when you're getting paid that's how most people would Define it salary is actually not you work for 40 hours a salary means you get your job done okay that's how we look at it that is not how other people look at it oh my God there's no question that Elon is going to raise can I just say sorry if we if we lose American Primacy it's because of that not because I agree with you I'm just I'm still meeting the other side I'm still man on the other side people look at their salary and they look at themselves as getting compensated for 40 hours and every hour above that but do you know this generation's mind looks just as hustle culture there are people that are not working with it there are people that are working 60 70 80 hours a week as a teacher to make 30 40K firefighters you know working on oil rigs and to hear somebody like hustle culture at a startup where you're making 350 Grand and you're upset because like the matcha lot ran out or whatever it's just so out of touch I'm not disagreeing yeah look my my view on it is that people need to love their jobs and love what they're working on because I think the only way to be successful is to work hard but the only way to work hard and be happy is to really love what you're doing and if there's a lot of people at this company or others who don't really love it and they are just there to pay the bills or whatever then I actually think it's extremely generous for Elon to be offering them a package it's the right thing to do I don't understand how giving them an option was anything but positive and yet the media has gone berserk on it meanwhile while giving SBS a virtual pass on the largest one of the largest frauds in history a made-off level fraud you read the New York Times alleged no there's no alleged dude it's come out he loaned himself like this is just one data point he loaned himself a billion dollars and he learned the head of engineering 500 million dollars off the balance sheet nothing to see here what possible justification and you know and SPF David the reason just say the word to say the hard part out loud the reason why these same Publications are not covering this is because they were complicit in his reputation laundering yes the New York Times before that article put out this other puff piece where they talked to him and they were excoriated on Twitter because it was like not a single question about the fraud for a legend alleged elections obviously 10 billion dollars suddenly goes missing and no one knows where it is I'm willing just to call that a fraud are you willing to jump defense they're busy scrambling to sort of save their own reputations which is why they are trying to like hide the cheese effectively and point over here and say hey look at what's happening Elon sent an email where it's only one button yes I mean let's be intellectually honest I love that Meme that Elon tweeted out do you see that the two rhinos oh God I mean you know this is all gonna get reblogged it's too funny it's just too funny it's too good it's too good to not put up on the screen that's that nature photographer is the New York Times it's okay yeah people who don't see it there are two rhinos they're fornicating complicated calculating is like it's two 2 000 pound animals populating doggy style ten feet behind a nature police behind I'm trying to be the world photographer a nature photographer with a six thousand dollar tele you know photo lens Serengeti but he's 10 feet behind him are the two rhinos the two rhinos it says FTX losing over a billion dollars of flying funds and uh the the photographer is centers calling for the FTC to investigate but the important thing is the photographer is pointing in completely the wrong direction the wrong direction he's just totally missing the thing that is obviously right in front of his face right that he should be photographing yes he's using that long telephone lines that is the New York Times that's the point the arrow in the right direction yes point the camera in the right direction is the point um I just want to point out my one biology tweet on this in this regard oh God apology is not capable of one tweet that's going to be 76 tweets but it's a really good one of course it's a trade service biology he says think of a regulator as a binary classifier what's their false positive and false negative rate BTF Bitcoin ETF blocked for years FTX ignored for years the actual filter is not is this a scam the actual filter is is this m ooh it's not consumer protection it's re-election that's an alliteration it Rhymes Can young Spielberg make a banger out of that it is a banger it's not consumer protection it's re-election if you are part of these interlocking power structures that we call the regime it's the New York Times it's the regulatory State it's a Democratic party you get a big Republican hold on let's be clear your your team Now controls the house and so who's team I understand but starting in January you know there's any amount of congressional yeah no no hold on a second let me say this right now the first investigation by the House of Representatives needs to be SPF and FTX not hotter Biden SPF makes Hunter buying look like a [ __ ] I mean yeah you know Hunter Biden was what a couple million dollars of grift this is 10 billion dollars plus a Griff so I think it also it also touches Regulators it could touch you know it's it's a big it's a big it's a systemic failure that knows how to party so let's be honest here I mean that is the issue I just think the quote of the week goes to uh John J Ray he's FTX his new CEO he famously oversaw the liquidation of Enron and he says I have over 40 years of legal and restructuring experience I have been the chief restructuring officer and board chief executive officer in several of the largest corporate failures in history I have supervised situations involving allegations of criminal activity and malfeasance Enron nearly every situation in which I have been involved has been characterized by deficits of some sort in internal controls regular implies human resources and system Integrity never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information has occurred here this is the person who oversaw Enron saying this is unprecedented Enron was the previous unprecedented situation which is now being framed as manageable by none other than John J Ray what a great name congratulations on being the chief restructuring officer of FTX there is an article that showed Nick if you could please throw the picture up on the screen of of all the people that invested uh the universe of SBF oh my God what and they and the article headline was it's a who's who of VC and my comment is actually no this list is a who's who of people who did no diligence yeah whatsoever and I just want to call one person Nick if you look at the Alameda research this uh this firm called one inch jcal invested in a firm named after the length of his penis come on come on maybe coming out of the cold pledge okay but you know that cold plunge this shrinkage listen I'm a show or not I'm a grower not a shower all right listen you guys coming at everybody knows coming out of the coal plunge it's it's not going to be the best performance for any of us oh God what is that we've lost the script on the show Jesus please we got a rap I mean it's just too much do you guys not think that all these investors receive audited financials and no you know they got they had a lawyer a legal firm to represent these financials did you guys see who ftx's auditing firm was it's called Prager medicine that says it's based in the metaverse this is like the Hollywood upstairs Medical College of the auditing World their address was in decentraland Bernie Madoff I think his brother-in-law ran the accounting firm that did their audits right it was like and it was on a dead floor in the lipstick building it was in the same building right on the lipstick building they had like a secret floor with nobody on it like look I mean even in that case people relied on an audit from a CPA that said here are the numbers and those numbers were fraudulently conveyed and I think that there's probably some you know some forgiveness necessary here that there was maybe there may have been serious fraud that took place and I don't want to be too disparaging of all this stuff that work at these investment firms made an investment and they all got duped and the LPS got duped and so I don't think this is just fundamental like a failure of diligence so we but we we we were part of the process where they tried to show like and I have to be careful my lawyers reminded me that we're still under NDA actually with FDX so but what I can tell you is we did not get any financials so we were verbally what was going on right when you asked for it when you said we sent a two-pager of stuff anyways I can't say more than that but yeah don't get yourself in trouble oh I want to say something else by the way last Friday David and I were at Yuri Milner's birthday party and there was a chess tournament and uh uh Magnus Carlson was there and anyways David was in the finals okay it was David and his partner look at the smile on Davis versus hold on wait I'm getting to a great punchline versus Magnus Carlson and his partner David one oh wow amazing partner was was uh should I say Yuri's daughter who I think is probably what like 10 years she's incredible yeah she's like second in America yeah she's good she's incredible anyway yeah thank you to Yuri that was a really unique thing it was partner chess my partner was uh prognananda who's an Indian Grandmaster who's like a superstar yeah and look playing you know with Magnus Carlson was obviously that was a real thrill yeah there you go so when you ranked this with the birth of your children your marriage and this where would that rank on the scale of one through five this is uh this is for your poor kids but you know what speaking look at this model oh my God I haven't seen him that happen since since Trump won guys look at look at that document I just said before before but I want to show you this basically I pulled all IPO since 2020 so this excludes all SPAC mergers and real estate Finance material energy utility so kind of the big bulky private Equity type stuff so it's mostly Tech consumer 627 IPO since 2020. more than half of them are basically half of them are trading at less at 0.2 times the total cash they've burnt so um there you know you can kind of look at total lifetime Capital burned by these companies in the retained earnings line on the balance sheet and so when you pull out the retained earnings it shows you right how much money they've earned over their lifetime and so the total money burnt by half of these companies is about 107 billion dollars um and the market cap of those companies is only 26 billion dollars in aggregate so a 0.2 times return on Capital invested to date in terms of Enterprise Value divided by total capital uh investors let me say let me say it in English and you tell me if I said it right so 627 non-spack non-real estate non-finance companies went public so basically 627 startup companies went public since 2020 so two years yep and of those 627 tech companies almost half or three hundred of them 48 of them are today worth about 0.2 times all the money that went into them yep oh my gosh wow yep it's tough and then and then on the other half the other half is um is the ones that have worked so this kind of goes back to a power law point but like as a venture industry you think once you get a company public it's successful and the reality is that many of these companies from a from an economic perspective are still not successful it looks like half um and perhaps much more if you include all the SPAC mergers uh which uh is another couple hundred and I would guess the vast majority of those meet this criteria are trading at less than the total cash that's been invested in them Freeburg this speaks to the Age of Excess that we just went through we just weren't as efficient as we needed to be in running these companies and now we're in the age of efficiency austerity Excellence that's just great setup for a rebound isn't it Freeburg like I was looking through these look I mean one way to read this I was speaking with someone who I um you can bleep them out I was talking with two weeks ago three weeks ago and he showed me in their um how much should I say here this is a big investment firm and they have a big growth portfolio less than uh they have about 160 uh Investments 180 investments in their growth portfolio 85 of the returns are generated by 10 companies of the 180 and that's in the growth portfolio these are supposedly de-risk businesses also exists even in exists in growth and as you can see here the power law exists quite dramatically post IPO as well so you know as you can see here only nine percent of these businesses have generated positive earnings over time um 43 or about half of them are worth more than the total cash that's been invested in them um and that multiple this is a production board study here by the way this is your done by your firm yeah yeah yeah it's off public data so the um the multiple on the value of the companies that are worth more than their the cash invested is 5.5 times so in aggregate IPO since 2020 are worth 4.3 times the total cash that's been invested in them over their lifetime um but the crazy statistic is half of them are worth significantly less than cash that's been invested in them only 0.2 times so the power law dominates both early growth and and clearly uh being public but I think to your point J Cal it also seriously speaks to the amount of excess and it's really going to rationalize probably based on the conversations we had today about Twitter meta Google Amazon Amazon and this as well so um certainly also the big new series and correct me if I'm wrong here tomorrow we want more companies to go public and have that discipline of being a public company this was the big critique of this quiet era of companies taking 10 12 14 years to go public this is going to be a strength for these entrepreneurs to have to fight it out in the public market under scrutiny correction 100 I think like the Chris home letter uh I think that there are a lot of VCS on Boards of companies who would love to say the equivalent thing to their private private company yeah um and part of the the Dynamics as as Freebird just said because it's such a power law and people believe that you know you being with other VCS are really important it turns out that most of these VCS abandoned their role on these boards and don't really hold people accountable because they're worried it will affect their deal flow and so and the problem is it's a negative reflexive loop it's but so these companies do poorly and then as a result their viewed as not an effective board member and so the next deal they get is a poorer and poorer quality so the highly correlated portfolios in Silicon Valley are the ones that will get torched because most of those companies will receive very poor or no advice and then the few that will get to the end is because they have hard-nosed people on the board that will force them to make really hard decisions yeah that's it uh sax any thoughts here on the public markets I'm sorry last thing and by the way Sequoia who has had exceptional returns has always been known to be hard-nosed you know a lot of people the critique against Sequoia from Founders which would be that oh if I take sequoia's money they may fire me well yeah because if you're not good it's the mission of the business is bigger than your ability to be the CEO and so you know you just have to remember like there is no free lunch we were not giving out free money here swung One Direction too far they used to the tradition Silicon Valley Used to Be You always replace the CEOs the found the founders with the professional CEO uh and Google being the turning point there or maybe the last one and then it became Founders will control their companies with super voting shares forever hopefully the pendulum now swings to some equilibrium sex what are you seeing in private markets program for Surplus Elites is going away the jobs professional managerial classes under pressure yes that's for sure if you went woke you may go broke because you have no marketable skills all right four the Sultan of science David Friedberg and also the executive producer of all in Summit 2023 and the Rain Man himself chess master and champion David sacks as well as the dictator I'm gonna go on a little road trip aren't we dictator a little road trip for the dictator and Jay cow we are it's gonna be fun I am the world's greatest moderator who couldn't control the panel today I'll do better next week and we'll see you next time love you guys Happy Thanksgiving podcast Happy Thanksgiving boys [Music] nice Queen [Music] besties [Music] it's like this like sexual tension that we just need to release somehow [Music] we need to get Mercies foreign [Music]








I'm now recording Jesus you look terrible what's going on did you sleep last night do I look tired you look a little tired you look unshaven yeah what happened last night I had a holiday party at my house last night from my office and you look destroyed yeah what's going I mean did you drink I did drink yeah what does vodka and oat milk taste like you had a White Russian a White Russian people with oatmeal he's like I want a White Russian with oatmeal oh my God actually my white russian is made with only and please compliment that with a huge punch in the face give me five minutes I'm gonna go I'm gonna go shave and it's called The Hair of the Dog yeah yeah either a little Bloody Mary you're banana man should I go get a beer I might get a beer just to beat this hangover go do it yeah go get a beer hang on I'll be right back [Music] [Music] all right listen uh we have to start with scam Bank Run fraud I mean Sam I've been free I get that wrong sometimes uh he was interviewed by uh Andrew or Sorkin the suit at deal book who gave him softball after softball then the next day he was on good morning really passive aggressive right now a little bit Yeah but Jake house got a point he's got a point a little bit a little bit a little bit anyway the New York Times continues to embarrass themselves uh by handling Sam Bachmann fraud with kid gloves wow George Stephanopoulos my Greek brother Stephanopoulos the Spartan came in and absolutely fricassade and filleted sambachment freed a Good Morning America very important to note that Good Morning America uh the segment was between holiday cocktails and the cast of The White Lotus and Andrew Sorkin was at the deal book Finance conference but you know that that Stephanopoulos interview was two hours but they reduced it down to 10 minutes so there were probably a lot of sort of cordial conversation banter and then softball questions and then he does stick the knife in and and does the fricassee but he cuts out all the other stuff so he just gets it down to the 10 minutes what Stephanopoulos did to him was extraordinary in that he said over and over again in the FTX terms of service you cannot touch the user accounts but you at Alameda were taking them and you were loaning them out I don't know who is advising uh Sam bankman Freed at this point but why he is talking so much he was also on a two hour Twitter spaces after all this at this point sax what do you think is going on here in the mind of Sam bankmanfried and also the media which seems to have a very variable way of dealing with this obvious fraud and crime right okay well you know I can speculate about SBF I think if there is a strategy here it is this he is basically copying two criminal negligence in order to avoid the more serious charges of Fraud and I think again if there's a strategy here it is he saw himself being defined as Bernie Madoff 2.0 in the press and if that image which may well be true cemented around him then prosecutors would never stop they would never accept a plea that basically gave him anything less than I made off like sentence which would be you know decades in prison maybe a life sentence so he is out there doing what lawyers would tell you never to do which is basically incriminate yourself create more of a record but he's doing it to change the public perception maybe muddy up the public perception get people thinking that okay he you know this that he he's admitting he did something wrong but it wasn't deliberate it wasn't fraudulent it was just basically carelessness or sloppiness if he succeeds in mudding the waters enough then maybe the prosecutors will give him a plea deal that allows him to have his life back at some point I think that would be the crazy like a fox explanation of what's Happening now there is you know an alternative explanation as well which is I just think that these types of guys you could call it you know a narcissistic fraudster do you think they can talk the way out of anything you know because they have they have um you know when they've talked their way into getting hundreds of millions of dollars of investment billions billions uh in some cases and so they just feel and they've been trained by employees Partners investors the press that they can talk their way out of any of this stuff I think yeah the average person is not really used to dealing with one of these personality types who um is I mean they clearly are smart and they're articulate articulate and they know what to say and they're crafting their words what they've learned through their life is that if they use the precise magic words with a person they can pretty much you know convince them of anything get them to do anything and in particular I would say investors tend to fall for this not because investors are dumb but because investors are so clear about what they're looking for and we're predictable they're predictable yeah like we're you know VCS especially we're looking for the 100x outcome or whatever so it's easy for this type of personality to construct a story to essentially stroke the erogenous zones of a VC whoa yeah and and and sort of trick them and so there is probably a positive reinforcement Loop that gets created in the minds of one of these people who and they start to think that they can basically talk their way out out of any situation so I think that would be part of what's going on here and you know if you look at sort of the tactics that he's using to do this you know all of a sudden he's trying to portray himself you know before this he's portraying himself as a smart guy in the room now all of a sudden it's this babe in the woods impression where I didn't know it was my subordinator I wasn't really in control right each individual decision he says looked sensible to him it's just it all added up to something he didn't anticipate like really you know loaning yourself a billion dollars of of basically the company's money which was basically customer money that seemed reasonable to you I don't know how you defend that individual decision and there's many like that but but this is sort of the narrative that he's trying to construct and um let me stop there but I think there's a lot more that can be said to dismantle The Narrative he's trying to create what's your take on this and then can I make a comparison to SBF and Trump through the lens of the media so if you go back to 2016 you know Donald Trump violated every single establishment bias that these left Progressive journalist Elites had and so they basically just attacked attacked attacked attack attacked but then you went into the election and there was a very clear data point that said whatever you thought was that was at best limited and you missed the tone of the country because 50 plus percent of the country held a very different view about this person and instead of taking a step back and and then the left media the mainstream media re-underwriting and learning and then saying you know what Mia khalpa I got this wrong they just doubled down and they said no it still doesn't meet our priors and so we're just going to ring fence this problem and we're going to just try to destroy this issue because you know we want to control the narrative and and and by result we want to control Power now you look at SPF it's the exact opposite he went to the perfect elite private high school then he went to one of the most prestigious elite private universities MIT his parents teach governance of all things at one of the most elite liberal institutions in America Stanford they are in the establishment of the progressive left and what happened was he took customer funds and all of this money he made tens of millions of dollars of political donations he wrapped himself in this blanket of a progressive left-leaning cause called effective altruism and all of the mainstream media fell for it and embraced him as well as some politicians because it met everything that they themselves also bought into yes and now you have this cataclysmic event a multi-deca billion dollar fraud or bankruptcy millions of customer accounts who are frozen you know tens of millions to hundreds of millions to billions of dollars lost and stolen from them and they refused to re-underwrite this kid and the reason is because in order to do so it's like eating your own tail and that's why they don't want to do it and so this is why you have the media basically allowing him to do an apology tour now this is his second time at manipulating them the first time he was able to manipulate them by basically being one of them and now he's allowing them and their desire to basically protect themselves so that he can create some kind of a defense for himself and I just think the whole thing is gross because it misses the entire mood of the nation this is an enormous financial fraud that was perpetrated on tens of millions of people and there's no accountability because in order to do so the media would effectively have to admit that they missed it and they got it wrong and they refused to do it and I think like that is the really big problem that nobody is really speaking out about is like well if these folks are meant to be the last stop to make sure that there's truth and honesty and transparency in society and you can't count on them and in fact they're just going to reflect their own narrative what is one supposed to do to learn the truth in a way what you're saying and then we'll go to your freeberg is this fraud was encased in all the Gilded facade that America hates right now reflects the institutional rot of America it reflects every single aspect of institutional rot that every non-elite talks about all the time but Elites when they have those labels will refuse to give up and just to add to that the the thing that's missing that I'd say one of the big issues with the institutional rot in our country is the lack of accountability when somebody gets it wrong we saw this with covid right the health establishment is saying that they want amnesty yeah and Atlantic magazine was willing to give it to them so the point is that this this class of people think that when they get it wrong that they're the experts but when they get wrong there should be no accountability and such a mouth to your point the media and these institutions are not willing to re-underwrite SBF when he so clearly as a fraudster uh Freeburg what do you think the of this Theory you had a large amount of donations to politicians uh obviously you have coming from Stanford MIT Etc and then uh you have these Investments gifts slash advertising slash donations to propublica Vox this new publication semaphore The Intercept that have all been uncovered now did he do this paying off of all the elites you know splashy cashy giving money to everybody because he knew he was doing a fraud and that this is evidence of this is a premeditated fraud or do you think this is a deranged individual who just was seeking status I don't know there's a video you can watch of this guy for some reason FTX has left up all of their videos on YouTube from three years ago called quantitative trading seven and a half thousand cell wall of Bitcoin on binance it's a 17 and a half minute YouTube video of SBF Trading Arbitrage across markets I think it provides probably the best like natural non-scripted insight into this guy's Behavior that you could see you know because it's not like him being interviewed it's just him living in his world and he's just you know a mouth trying to get a piece of cheese like he's you know he's like out there he's you know scrambling around in the markets he's finding edges he's finding advantages and he's and he's clearly just taking advantage of them all day every day that's who he is now you put a person like that in an unregulated environment and there was this clustering demand for an unregulated environment because of a lot of what you guys are saying which is people have this disdain for the elitism and the and the institutional Roth and all these things so Bitcoin emerged as a solution out of 2008 to the you know the the what felt like institutional wrought that that governments have a key role in but when you have no regulation and you have no trusted Central Authority involved mice that are trying to find cheese will rule the day and I think that's what happened here if it wasn't this guy it was someone else it was going to be someone else and then all of a sudden everyone's clamoring and saying hey we needed the government to protect us no one protected us someone's got to save us we're The Regulators we're people that are supposed to keep an eye on the stuff when the whole premise of so much of what was being sold was non-regulatory regimes was openness was peer-to-peer trust protocols and it turns out that in that sort of an environment the mouse that is hungry is for the cheese will get the cheese and that's exactly what happened I don't I don't know how much of it was I don't agree with this him saying I'm creating intentional fraud which certainly seems to be the case versus him saying I'm going to pay these guys I don't know how much it was even that intelligent but the guy was clearly like trying to get a piece of cheese okay so this cheese eater this rat is a League of Legends uh you know expert playing on eight different monitors at a time the cryptocurrency game while hopped up on speed yeah I'm not saying that to be cruel I'm saying that because they admitted it they talked about it in their staff meetings instructing their Traders and team members of how to take speed he admitted to it in an interview this week he said that it was all legal prescription drugs but they were taking them yes yes and literally in the same videos you're referencing people see speed patches or I don't even understand this but there are patches you can put on your body to deliver speed to you at some you know dose or whatever sex you buy this Theory no care that this isn't about the elite side of it it's about the non-elite the Anarchy side of it no and this cheese eating rat which just wanted to eat more cheese I don't buy this narrative because I see too much design intentionality between what happened so in other words it wasn't just a series of individual decisions that didn't add up many of those individual Decisions by themselves were totally unjustifiable and moreover there were too many there's too much evidence of sophisticated Behavior here again he overnight went from portraying himself as a smart guy in the room to the to the babe in the woods and so for example when you look at the construction of all these entities and the corporate org chart you know of all the related entities it's a very sophisticated attempt to obscure and construct certain you know protections when you look at the way that Alameda was Exempted from the normal margin requirements on FTX there was the so-called back doors there was intentionality there there was intentionality in terms of who was hired to staff these organizations again they wasn't hired no board no CFO yeah the guy the guy who was in charge of compliance what like Trump talked about in a previous episode was the guy who was involved in the ultimate bet poker achieving Scandal you know not super mode yeah exactly right or look at this goofy goofball Caroline Ellison who was put in charge of Alameda right his girlfriend it's being done for a reason right he's setting it up in a certain way and you know the one time I interacted with him at this Tech conference he was sitting there holding court and he had all of his minions around him who were following his orders this was a guy who was controlling his business he was making the decisions at I think a task level and um he knew exactly what was going on here so look I just don't buy I do not buy this idea that um that he was like a blind Mouse who's just a stimulus response you know in the Moment by the way that wasn't that wasn't my point sax my point was whether it was him or it was going to be someone else it was bound to happen the idea that we want to have completely free unregulated Bahamian base trading you know environments that we can supposedly trust because someone puts on a good face when there is no real regulatory body and Regulatory Authority overseeing it at some point it was going to happen well no hold on it is look coinbase is a fully regulated industry they're not set up in the Bahamas and they're not unregulated he set up and he had no oversight he had no board there was no regulatory regime there was nothing how was he able but okay so first of all look I don't think this had to happen I think that again I think that excuses too much because it implies that if it wasn't SPF it'd be somebody else I actually think that this was a highly concerted effort listen he courted Regulators he donated to politicians he courted the media and donated he was really good at it he was unusually good at it no and I totally agree on that yeah super smart super connected really thoughtful design on how he committed this I only think an Insider could have pulled off something at the scale I think I agree I think this is where chamoth you're exactly right I think you needed to be of cynicism here is he new to the Playbook and he admitted it you pointed this out with the chats that were released where he said he he he he yeah look I mean just like the he he chat look how like convoluted and intertwined all these people are like gensler's intertwined with the parents yeah parents apparently bundled a bunch of money to Elizabeth Warren you know he was dating the CEO of the business that he owned 90 in they're all these other random shell companies that he owned 100 of where they were lending back and forth hundreds of millions to billions of dollars yeah to David's point that is a sophisticated con that you have to architect and the way that he was able to get away with it is that not a single reporter or regulator thought to dig in and the reason I think is because he said all of the right things that wanted them to embrace him and the reason is this is a dumb game that we woke westerners have to say the right to the less and then everyone thinks we're a good person exactly imagine pull that card up on what he said because it's actually a good thing that's what I just said exactly what he said yes he said it's it's the game that we woke westerners have to play we didn't say the right Shiba less so Everyone likes us he actually said the most uncomfortable thing out loud which is look by having gone to Crystal Springs High School by having professors my parents that went to Stanford by having gone to MIT I can pull this off that's that's what he said because he can go with those things because I'm a I'm a champion of effective altruism that I can justify any of these decisions how amoral or immoral that they be because I'm trying to help you know my brother stand up a multi-million dollar pandemic response business I'm trying to do this I'm trying to do that and all of these regulators and all of these reporters said okay you get the hall pass now imagine if you replaced him with some random kid in some developing country or even from the United States who did went to Public High School who went to some random State School do you think that they could have pulled any of this stuff off no you need the patina of the privileged class the New York Times that's what he had the majority of the privilege class even after this fraud the New York Times wrote more of a puff piece on him than the hit piece they wrote on Brian Armstrong last year when Brian Armstrong wouldn't toe the line on allowing politics at work remember that yeah unbelievable yeah so the big end I think what chamoth is kind of saying here is that the big enabler here is not crypto per se it's all these institutional biases and Elite biases that he was able to play into partly because he was a big Insider I mean in a way he monetized his parents life work the problem that I think this allows us to put a fine point on is the following you know in society we've confused a lot of people to think that the opposite of liberal is conservative or Republican and I think that's the cycle that drives the Mind virus inside the mainstream media the problem is the opposite of liberal is illiberal okay and what a liberal means is to be narrow-minded and unenlightened it means to be puritanical it means to be Fundamentalist and this is really what it allows us to see now we have now had six years of data case after case after case where if you are woke if you are a social justice Warrior if you have the right credentials that justify your upbringing if you have institutional uh Bona fides that come from your parents you get to create the narrative and you get a hall pass and everybody else basically is at the subject and the mercy of the mainstream media and so if you don't kiss the ring and bow down to them they will try to destroy you or run you out of town but if you are one of them they will give you a hall pass and when it's time for them to change their mind in order to tell the truth they won't do it and so these types of grips will continue as Friedberg said because there is no check and balance without a healthy Independent Media there is no way for all of us to actually know what's really going on guys some person in the media could have asked the question and dug in deeper around the connections between Alameda and FTX for the last 24 months at no point could any person have asked these questions and found ex-employees and said you know are there any unseemly connections here between FDX and Alameda there was no disgruntled employee I mean every company has disgruntled employee whistleblowers but here where there was billions of dollars being made by tens of people not a single person who felt on the outs said anything well he was also giving millions of dollars hold on because the questions weren't asked and then this kid paid hush money to the mainstream media let me ask you a question of you guys do you think that it's the media's responsibility in this context or do you think that there should have been a regulatory Authority that had oversight of this business like there is for every bank and every trading operation in the United States and every one of those businesses has a compliance officer and has Regulators up the Wazoo making sure that customers are kept safe and protected or do we think that that should should offshore Vehicles be allowed like this that allow people to operate it's a reasonable question but there was a chicken and egg question we were all standing around holding our hands while the cftc and the SEC were fighting that's not something that consumers can be expected to adjudicate so yes we should have legislation that clearly defines all of this but there were enough parameters that created regulatory Frameworks where a bunch of good actors did operate in them and are continuing to do so like coinbase so I don't think this is a regulatory issue I think that if you believe there are people who are supposed to forensically examine things and get to the bottom of things and ask hard questions those people did none of that here and and what's what's even more worrisome is what they're showing is now with a massive amount of data that shows that you could ask hard questions they don't care to because it makes them look bad I disagree with this Tremont I think Regulators failed here because they have been reactive to crypto they have not been proactive and they have not been clear with the crypto community that what they were doing was illegal and they should have put the regulations in quicker and they're playing catch-up but all three groups fail the media failed The Regulators failed and VCS failed Capital allocators failed I apparently to due diligence here and install proper governance you cannot put a company like this you know in business billions of dollars and have no board of directors no no I agree with you or he lied to them my point is that while Regulators are are basically fighting a territorial Turf War okay the media could have still done their job they chose not to guys it was worse than that because not only it's not just a case where the SEC failed to exercise any oversight of him or dig into any of these questions he was in the room with them crafting the next set of regulations he was working on the regulations that you're talking about that are supposedly needed while breaking them they let the fox in the hen house yeah he was gonna crash a a new type of regulatory license for these types of exchanges with the result that he was going to get one and some of his competitors weren't this is one of the things that triggered CZ to basically you know do what he did which is basically that SPF was trying to get binance and competitors like that band while SPF would be one of the sole people to get the license with The Regulators yeah Jason you just said something derogatory towards easy he rug pulled them did he do that or did he actually expose the fraud that's what I mean by rug pulling yeah that's not what rug pull means Jason okay well he was partners with him and then he realized he was weak and that he was doing some stuff that was shady and he decided he would eliminate a partner who was creating regulation a sack said whatever you want to say he knifeled all he did was indicate a desire to liquidate his position in a token that was supposedly perfectly liquid and that's basically that caused the everything to unravel yeah but these were Partners right I mean they were these were deep business partners they were collaborating on these tokens together so they were they were not Jason like part of the big loan that that initiated all of this stuff like a year and a half ago was to buy FTX off the cap table so you know this all I'm saying is like you used words and you're framing of a guy you know who's built the business is like he is this nefarious bad actor David Jackson that's his first investor hold on a second but but David's right all the guy did as far as we can tell right now his tweet I'm selling this token because I don't believe in the capital structure of this entity and he got those tokens by being bought out of the cap table I know he was partners with them so if if you if you don't like rug pulled how about backstage business partners they're not Partners you still don't understand of course I understand they had he was the first investor so to do this yeah hold on part of the consideration were these tokens these I understand tokens yes Jason when you when Uber went public yes and you got distributed stock yeah did you distribute and sell Uber at any point foreign a partner of uber you're just a stockholder yeah this is slightly different I think but okay fine you guys if you guys listen Jason investor in the company they were a business historical situation but their status at the time that CZ tweeted was that they were competitors okay fine I mean they became competitors I agree and by the way to Jamal's point about this rug pulling language I think we're getting kind of done a rabbit hole here but yeah but CZ CZ did perform a service in this sense okay SBF claims that 4 billion more was about to come in I personally don't believe that sounds like [ __ ] to me but if it is true that would have been a bad thing the more money that came in to that operation svf proved that he was a very poor custodian of customer funds for sure but the longer this one I'm just highlighting the language that you use is sort of like Again part of that establishment Elite narrative and I'm just questioning you should maybe steal man take a second to just steal man yeah a more dispassionate view which is here's a counterparty okay yeah who when he left the cap table was given half cash half tokens okay and he decided to sell his tokens yeah and tweet it publicly and cause a run on the bank so there was something to run on the bank there was no Bank where's the bank on the bank language okay is something this was in the semaphore coverage okay you did it publicly that's my point so I'll steal management no no no these tokens are worthless I need to liquidate them as fast as possible but why would you do that publicly why why would you do it privately you're about to move the market he wanted to move the market he's letting people know why but he wanted to kill his competitor as charmath who's just saying CeCe wanted to kill him say he was trying to do that we got to back up here because I think we've done a lot of like 30 000 foot like lessons and like takeaways from this whole thing but we haven't really established what it is that SBF did wrong so I think we need to sort of take a second to unmutty the waters okay and part of that I think we should start with this idea of a run on the bank because the favor the Press you've been writing puff pieces about SBF I'd say mainly some of four which he was a big donor to yeah you've been trying to frame it as a run on the bank and then that implies that it's not really his fault it could happen to anybody lots of banks have had this problem okay first of all they're not a bank Banks actually have the legal right under certain conditions to take customer deposits and loan them out okay yes they did not their terms of use did not allow that as Stephanopoulos pointed out svf's answer to that was well we had this like margin account program there were other Provisions in other terms of use but most of the customers who lost money the vast majority did not opt into that program they never agreed to that so that's that's Point number one point number two is I think we need to to look at this language of margin account okay SVS explanation of how customer money was siphoned off for his own personal use I.E to Alameda is that Alameda had a margin account so I think we could perform a service here by explaining why it wasn't a margin account and you know and you guys understand this really well the way that a margin account works is the following okay because I think some of us have them set up with investment Banks you go to an investment Bank say Morgan Stanley and you over you post collateral you actually over collateralize so for example you might take 100 million dollars of stock posted at the investment bank and then they will let you loan a certain percentage nowhere near 100 maybe 50 percent if you have a very very liquid security you may get 50 coverage which means if you posted a hundred million dollars you could get a 50 million dollar loan okay 100 million in Amazon stock you're some Amazon VP you can get 50 million loans and if it's a private asset it's anywhere as high as 30 35 but typically it's about 25 my expectation is in a liquid token like this would have basically gotten five or ten percent coverage ratio at the best of it and then what happens is you have these maintenance values so if all of a sudden the value of these entities multiplied by that percentage that you're allowed to loan Falls below you have to post money that's how a margin account works it's just there is no free lunch in that yes exactly there's let me just say quite simply very simply what I it appears this guy did he took customer deposits in US dollars he then converted those dollars into some other asset and he had a mark on that asset let's call it a dollar a token and then those dollars were moved to somewhere else no this is because someone transferred in some other token listen we need to finish the explainer around the margin account okay because what SPF did is this he took customer deposits gave them to himself no he gave he took customer deposits in U.S dollars they were wired in correct he took those dollars out and he put a fake token in and he called that that's right he said he said therefore he said the balance sheet is good but the value of that token it turns out isn't a dollar it's 10 cents that's right it was his it was his sort of it was sort of his made-up token that yesterday that he tightly controlled the training of and and artificially propped at the price yeah yeah but but here's the thing it wasn't just the fact that his collateral was no good it was also the fact that and this is from the bankruptcy uh filing by the the new the Enron trustee guy he specifically said that Alameda unlike every other margin account on the platform had the Auto Liquidation Provisions turned off so wait we have to finish the thought around how margin works so like Thomas said you over post collateral and if the value of that collateral goes down or the the the the the position your trading account the value of that goes down you either have to post more collateral or they will actually liquidate your collateral to pay off the loan so Morgan Stanley will never lose money on a margin account never like the whole point is because they don't make money on it they loan you the money at like you know a few percent it's like very cheap yeah loan Libor plus so yeah exactly that is not a risk account to them and so in the example let's use an example in the case of the VP at Amazon we've got 100 million in Amazon they have a 50 million dollar loan if Amazon loses half its value then that triggers the automatic selling of Amazon shares to get it back down to 50 25 million of Amazon shares if the full 50 million was pulled down to get back down to 25 to 50 leverage yes and they don't wait until like Amazon stock is at the exact level where now the collateral equals 100 of the loan they will keep that 50 loan to value yes and they will liquidate you you know and by the way you can lose your entire amount right so yes you know this is why trading a margin is so risky is that you can get wiped out because you can get wiped out very very quickly with a small move down because they are the custodians of that Amazon stock they are holding it for you now and they have the right to sell it to cover your margin you're saying that Governor that basic tenant that basic safety control was turned off by Alameda and it's even more Sinister Alameda controlled like 90 or 95 of these ftt tokens and was owned by Sam bankman fraud so he owned that company then he claims he had no operating position what should have happened is with that collateral is that as the value of their position was going down and or as the value of the collateral was going down it should have been liquidated to pay off the margin loan and that did not happen and the reason it didn't happen is that Alameda got a special exception on the platform to turn off Auto Liquidation therefore it was never a margin account if even if it was a margin account okay and and FTX somehow misadministered the margin account it should never have taken other customers deposits and use them to pay back that money what should have happened is if FTX was going to lose money on a margin account that would hit the FTX corporate Treasury okay and when the FDX corporate treasury ran out the company files for bankruptcy then and then all the other customers hold on their account is still there their money is there in segregated accounts and in bankruptcy they get their money back the idea that a margin account could ever cause another customer to lose money that like whatever that is that's not a market there's a great article there's a great article uh this one was a journalist that did his job properly his name is David Z Morris he wrote an article in coindesk that summed up for anybody that's interested all of the actual fraud and all of the crimes that were committed in excruciating detail and what's so sad about all these interviews in this press tour is if anybody would just read this article you can construct the right questions to ask this guy just based on this one article but the the point I wanted to make is that one of the most interesting insights was these guys had lost an enormous amount of money already in calendar year 21. and so this is what's so crazy Jason about you know you using language like rug pulling and like you know nobody actually trying to like be clear like you guys are giving this guy a hall pass any industrious reporter could have found an employee who said wait a minute we just blew a three billion dollar hole in our balance sheet and calendar year 21 20 and now we're sitting here at the end there's 22. hold on I need to respond I am not giving him a pass and for you to blame journalists who are reflecting the crime and not putting any light on VCS and the capital allocators who made this investment and who did know diligence ended up with governance in it is the height of arrogance Shema this is not the process they're not doing that either this is the VCS this is the capital allocator's fault you're blaming the people who are telling the story after the story they're covering the story up handle the truth Jason they're covering the story enough time can I get in here can I get in here all right listen Jason I will defend you against Jamal saying that somehow you're uh you know that you're letting us be off off the hook I know you don't want to let especially however you are letting the press off the hook and the reason why hold on a second the reason why you're using this inaccurate language like rug pulling and run on the bank when there was no run and there was no bank is because you've been infected by this language that the media has inserted into the discourse the immediately listen and hold on a second investors may have got it wrong last year investors may have got it wrong when they did that last round but I think investors Now understand what's happening but the media is still covering for SPF by Mis explaining what happened okay give me a percentage acts of who's to blame here VCS who invested and didn't set up any governance Regulators who did not set uh rules around crypto and then through the media what percentage out of a hundred percent is the investors The Regulators and the Press go three numbers I would say that before the fraud got exposed one-third one-third one-third one-third each before the Frog got exposed but they were all jointly and severally liable but after the Fraud's been exposed no investor is still defending SBF but I I think that the investors who were swindled by him they feel bad about it so Thirty Thirty Thirty is absurd the Press had no way to know the fraud was going on just like the VCS are you stupid like wasn't that yours wasn't the journalist that exposed to product theranos he's the guy that went and did all the work John should be celebrated hold on a second John Kerry you went and found this thing when no when everybody else was like this is perfect it meets all of our priors let me finish please it meets all of our priors this is great hold on and so John Kerry was like this doesn't surpass the smell test to me let me go do some work and he pulled one little string and over the course of 18 months he exposed the whole bloody things so hold on a second so what is incredible to me is that it was possible to expose this thing before nobody did I agree with David it's about equal responsibility before but afterwards the bulk of the responsibilities now sits with Regulators to clean it up and journalists to tell the truth okay and now may I respond to that since you call me stupid you are delusional number one every one of those investors in theranos could have taken a [ __ ] blood test at two different places like Jean-Louis gassier did and write a blog post and prove that theranos didn't work and they withheld disbelief investors putting in a hundred million dollars including Rupert Murdoch didn't even take a [ __ ] blood test or tell one of their diligence teams to do it the same thing happened here with the investors in FTX they did zero diligence they set up zero governance this was a failure of the investors and the governance for 99 of the problem and then Regulators should have caught it and The Regulators in fact did catch therano so you're completely wrong chamoth again the journalists come in after the fraud is happening the investors and governance is responsible for stopping these things FTX was a failure of governance and investors and so is theranos the end you're completely wrong the question is post post exposure why are you guys obsessed with post how about avoiding these things you guys are bless the story is ongoing because these stories for something that is capital allocators responsibility it is our responsibility to due diligence it is our responsibility to create a board of directors that checks on Elizabeth Holmes I don't disagree with you just call me stupid you just call me stupid for pointing out something that you refuse to accept what are you talking about allocators are giving a pass to the investors again I'm not doing Fredo I'm not doing Fredo you guys are being absurd this is why people say Don't call them dumb the reasons like the guy you can't call dumb totally he loses it goes berserk yeah don't call me dumb hey investors I think that they did a horrible job here too it's a great episode um but the reality is just went up but the reality is I think that if you think that you can if you it's your decision to defend the mainstream media I think that that's fine I'm not defending them no you are you said they have no responsible I'm blaming the VCS it's different the culpability is with the investor class that has not had proper governance Jason how many articles have been written excoriating them uh yeah somewhere like fools yeah I mean show me show me the Washington close Capital no show me the Washington Post New York Times that's like digging in to that malfeasance or that lack of oversight and holding them accountable in a way that you feel exposes this problem to create change well if we look at theranos uh those people uh who invested including um Draper and um to show me the examples Rupert Murdoch they they really went after them for sure yeah what about here uh Wall Street Journal one day ago Sequoia Capital apologizes to its fund investors for FTX loss Venture Capital firm tells fund investors that's hard hitting it will improve due diligence on future Investments they really got it let me let me read you it's a cover story Wall Street Journal I'm gonna I'm gonna read you I'm going to read you a sentence from The New York Times coverage of SBF and Sam Banger freed is neither a Visionary nor a criminal mastermind he is a human who made the same poor choice that generations of money managers have made before him are you effing kidney times coverage yes you are they also said I am just reaching them and then semaphore who was on the take who received Millions hold on a second where is their apology Sequoia has apologized where is their apology oh it has to come I'm not defending the Press yes I'm just saying yes I am not I am literally telling you that the New York Times has the Twitter spaces yesterday did a better job of trying to ask questions and getting to the truth then a single journalist has done or the collective body of olive journals absolutely literally randos on Twitter spaces did a better job than Sorkin let me tell you why the why no one trusts the Press Jason first of all they have an agenda that's an agreement when they make a mistake they never admit it when's the last time they did an apology or attraction when's the last time they did what Sequoia did I don't know and they need to apologize I am in agreement with you on that but I think we have to first say and this is where you guys should be ashamed of themselves is what is the responsibility of capital allocators and governance and Regulators I think it's one two three our industry is responsible for setting up proper governance The Regulators are responsible for making sure that your scientific and then press is a distant third you know who I think is responsible yeah one two and three and then we can talk about four five and six okay four five and six Capital allocators Regulators the press a distance sixth I agree let's go on to China God it's so spicy today it's so hot I mean I do think I do think when we attack the mainstream media Jason feels a little twin tinge of like uh insecurity and illegitimacy because he were a journalist my personal perception is I think that's [ __ ] no I haven't I think that you have a an incredibly romantic view of the craft as you practiced it back then which I think is full of Integrity yes I think that's true I think that you you don't adequately realize how massively the industry has changed in the last 20 years since I realize it more than you do I fully realize that the media has absolutely become biased or they can have lost uh in some cases yes I mean if you're taking money are they providing are they giving him they are corrupt if they are taking money from SPF and then giving him Kick Love coverage absolutely that is the definition of corruption in my mind what is what is it called when you don't take money necessarily like the New York Times and still treat them with kid clubs what is that it is Extreme bias and the New York Times became incredible why do you think the bias why do you think that bias exists they were always left-leaning but I can tell you why they when Trump came in a generation of new journalists became activist journalists they didn't want to tell stories and take it straight down the middle and let the facts tell the story and let the audience make their own decision they felt that existential risk when Trump came into office they got trumped Arrangement syndrome they picked a side like MSNBC and fox did and the business model became for the New York Times pick a side and get the subscribers it was a deliberate cynical choice on the New York Times part to go full MSNBC for full Fox the two Extremes in mainstream media in order to get the subs and they literally rallied the troops there to do anti-tac anti-trump uh coverage and they became activists and when journalists become activists they are no longer journalists they're activists or commentators and that's the problem it's being presented as journalism when in fact it's activism so shout out to Matt taibi who just did a monk debate uh yeah on this very topic and he has a great great sub stack basically saying what you're saying Jason and the the best quote is the story is no longer the boss instead we sell narrative he's a lifelong journalist whose father was a lifelong journalist and he understands the way the business has changed and it's like what you're saying and and this is why Independent Media whether it's sub Stacks whether it's call in shows whether it's all in podcasts or other podcasts Joe Rogue and Sam Harris whoever it is independent voices are now what consumers are seeking out because they can sense the bias they know Rachel Maddow and Tucker have an ax to grind and they're left and right they didn't what about these New York Times Washington Post and Wall Street Journal to you know they knew they were leaning they didn't expect them to pick a side do you think we should cancel if folks do you think folks are better off keeping their New York Times subscription or replacing that New York Times subscription with a basket of sub stacks and yeah you answered your own question it's the latter I think you're on your own as a consumer now you're going to have to and I think this podcast and the Nuance we have shout out to Freeburg for nuance what we've done on this podcast is what's that funny sound to explain to people freeware is not the only one with Nuance nobody would describe David sacks with the word he's a nuanced department on this podcast what am I 100 he is but you would know that because you leave when science is in the church Department okay sometimes all right I'm the truth Department consumers need consumers need to become extremely literate and they have to do their own search for truth in today's age they don't they shouldn't trust New York Times they shouldn't trust us they should trust themselves they shouldn't trust necessarily the CDC or you know the World Health Organization they should trust themselves and come up with their own process for figuring out the truth in the middle of this mess by the way this is a good reflection on what's happened with the rest of media with respect to the Creator class where right it used to be the movie studios and you know a handful of kind of aggregated creators that made all of the content the record labels and now you know Independent Artists Independent Producers independent creators and now independent journalists are going to become the bulk of volume that's going to be consumed it's just a different consumption model but we've already seen acts of Journalism we saw it happen with movies and we've seen this disruption happen across all these other media classes journalism and what we call the Press is very likely going to be kind of that next layer of disruption I would trust having a conversation with you about science topics over reading a science article 100 you know in the New York Times or Wall Street Journal if I'm being 100 I would much prefer to talk to you about it and if it was markets I'd rather talk to chamoth and if it was SAS I would talk to sax or operating a company speaking of operating a company or politics we'll see we'll see uh but I do have to talk about I think it's about having unique inside Insight right like that wasn't the case and what's interesting is that the people who are the professionals that have the knowledge and the touch points are also becoming journalists in the sense that they're also becoming speakers of their truth right and I think Twitter is a good enabling platform for this we see it on YouTube where like scientists are putting out their own videos or Market actors like people that are traders in the market go out and they put out their own videos and they put out their own podcast and I think we're probably a good reflection of that yeah uh in the sense that like we are the actors in the market and we're not just the independent Observer that has kind of a surface level view we have the depth to be able to talk about the things that we choose to talk about and I think that's where consumers find Value and we'll continue to find Value in terms of who the journalist or speaker is that they're going to start to trust for their information I saw that interview you did with um newcomer oh yeah yeah I saw that coverage I mean yeah he speaks a lot about the uh this phenomenon of going direct and of course he's against it now he interprets going to direct as an attempt by um newsmakers to avoid answering tough questions or take tough questions I think that's ridiculous because for example I go on CNBC all the time I go on Emily Chang and um Bloomberg all the time I submit to like really tough questions I actually like those sort of sparring sessions yeah I did hard talk this week have you ever done that exactly that's not what's going on here I think what's going on is we have expertise we want to communicate them and we do feel like the media has become a very unreliable narrator there is too much bias and sloppiness not all of it is agenda some of it's just pure sloppiness and there's no reason why we shouldn't go direct and people want to hear from us the audience wants to hear from us same for look look at Draymond look at Draymond and the success he's had with his paws but no basketball player has ever gone direct and created content like draymond's created and it's totally changed the game and he was so clear he's like We Are I Am the media now JJ Reddit you know old man and the three amazing amazing podcast I was going to tell you guys a story so I was in the Middle East last week or this week sorry and um I had this crazy experience where I was trying to understand what was going on in China and so I started on CNN and the whole thing was the propaganda machine around a democratic Revolt you know pushing for democracy and trying to depose G then I moved to Al Arabia so one channel up I went from Channel 10 to channel 11. and instead what they were actually doing was interviewing people on the ground and what they were talking about was literally how these PCR tests have become far too burdensome and they just wanted it to end and more reasonable restrictions to get in and out of quarantine then I went from there to uh BBC and in BBC they had a China scholar who was talking about how for decades actually the Communist Party supports local level protests and demonstrations because they've realized that it is a part of their political system to make sure that people feel like they have a say and I was like taking a step back and I'm like if you listen to the U.S narrative and even Jason like in our group chat people formenting for like Revolution and this is Tiananmen 2.0 and I'm like well I'm reading two other channels that tell us a completely different set of things and I just thought man people just really fit the data such a good point to fit their bias yeah we are projecting we want to see a revolution in China the people in China want you to have their lives back well I would love to see more democracy in the world yes guilty as charged I would like to see people be more free in the world dictator I think most people just want to improve their condition and I don't think people are as tied up on the philosophy of the government as they are about improving their condition and as long as their condition is improving they're willing to put up with any form of government and history shows that by the way the conditions in China have improved better than everybody's in the lives of people out of abject poverty uh and that's the great success of Engagement isolationism would not have created that amazing outcome 500 million people you're referring to us you're saying building factories is what I'm referring to oh okay so you guys if they if they want to build something over there I guess that's better than us throwing up open our markets and giving China mfn status to destroy American manufacturing and build up their economy so they can become a peer competitor to the United States yeah I mean this is the balance of Engagement if you engage too much you give everything up in sex which of the current Republican agenda do you disagree with most strongly just as an aside well most Republicans are in favor of our Ukraine policy this sort of unlimited appropriation of weapons and Aid to them don't you disagree with immigration policy of Republicans and Democrats well I have a more nuanced position on immigration which is I think we need to have a border and it can't be just like an open border which is the day Factor policy we have now but at the same time I do think that we should have H-1B visas and we want to like jamasa we want to be an All-Star team for the world we want to have the best people want to come here so there's a balance it's a balance and then you know look I think that I was happy to see the marriage equality Bill finally passed the Senate yes they did again about a dozen 12 Republicans voted for it and supported so that's right yeah but that's not the majority unfortunately you know look on on what I would categorize as the old social issues uh you know like gay marriage like cannabis legalization I was on the liberal side yeah I don't think you know Banning abortion entirely a total abolition is going to work for this country I think Republicans will lose elections if they insist on that and I think they're getting that message so um so yeah I mean look I I think that um I've always considered myself to be pretty Centrist and so you're not a globalist you don't believe in open Global markets but the U.S in general I understand the benefits of free trade and I don't think we should be isolationist with respect to trade I don't think that we can be a successful country if we are we isolate our economy so I do want to trade however with China in particular I think we made a mistake in throwing open our markets to their products giving them mfn status while the most favored nation is enriching them to the point where they became a pure competitor of the United States now look I understand why we made that mistake 20 years ago because everybody thought the theory was that if we help China become rich that China would inevitably become more democratic and they'd be filled with gratitude towards the United States and it actually become more uh more hospitable towards us more westernized and I think that theory has just proven to be wrong I mean they have not or it's going very slowly one or the other let's own our Clips here uh here is shamat's prediction from episode 61 and we'll see you on the other side of this quick clip my worldwide uh biggest political winner for 20 2022 is Xi Jinping I think this guy is uh he's firing on all cylinders and he is basically ascendant so 2022 marks the first year where he's essentially really ruler for life and so I don't think we really know what he's capable of and what he's going to do and so that's just going to play out you think he's the biggest political winner really oh my God I think it's going to be a he's going to run roughshod not just domestically but also internationally because you have to remember he controls so much of the critical supply chain that the Western world needs to be I think he's completely wrong I think you're completely wrong I think he's losing his power he's scared that's why he took out all these CEOs he's consolidating power because he fears that they're gonna when too big and then displace him and he has massive real estate problems over there that could blow up at any moment in time he could face a civil war there I think he's totally isolated himself Civil War and they don't even have every major country is removing their factories and removing this dependency there what are you talking about what are they going to Riot with uh did you not see Tiananmen Square did you not see the riots in Hong Kong are you not paying attention there's been many riots in China so those were crushed he still will have massive amounts of uh I believe protests and yeah I think I think the the bigger risk is is that China gets better for Xi Jinping but worse for everybody else in China it's already worse for all the billionaires uh over there it's worse for the tech industry you've now got ever Grand that whole uh you know gigantic debt implosion I think there could be contagion from China next year I don't think she's gonna lose his grip in any way but I'm not sure China's gonna have a good year next year wow nailed it I think all three of us kind of got this right what are you talking about you got none of it right well I I said they were going to be there were going to be riots and then they're gonna have uh a recession I mean squashed that's exactly what happened both things happened I actually think I have a pretty decent ability to steal man pretty concretely the details I think that at best when it comes to things like democracy and your belief in U.S exceptionalism in a specific political worldview at best you strawman and I think that you get very biased without seeing the forest from the trees the reason I said that is not because I'm like you know some huge G supporter I'm just trying to steal man what happens when one individual person gets anointed leader for life of 1.3 billion people that then controls 20 of the world's GDP there is no other single human being as powerful as him as of this month can I just say that this show this show is going to become insufferable if every time you sort of said something in the past that was sort of correct we're gonna have to replay it keep playing that one for you sacks who nailed it I was giving that was a softball to you actually every week Jay Cal all right this Show's gonna slow down if we play every clip that I got right you guys are asking to pull Clips all the time I just pulled one clip about China where you nailed it no no look I I think like and also it's the king of pull a clip the the evergrant thing look what he did this week they said okay you know what the real estate industry can now issue secondary stock sales raise equity and equitize themselves so they're going to find a soft Landing for the equity part up for the real estate industry in China and now they're reopening so I don't know I mean like I'm not sure what we're supposed to comment what I'll what I will stand by is what I said which is I don't think we have a very clear view about what's going on what the substance of these protests are and what people actually want if you're only consuming U.S media and so if you find a way to get a diet from a bunch of different sources all around the world you maybe get a better sense I had an accidental window into that by being in a completely different part of the world this past week Freeburg any final thoughts on China and what's going on there before we move on to chat GPT your favorite story I think one of the things we often miss is that China the CCP does have their hand on the throttle like big throttle up and down we always think that it's a linear line and that it's super dogmatic and fixed but there's certainly responsiveness and the release of the lockdowns in Guangzhou and Beijing this week seems to have been a pretty good indication that when things do get when when things when the tides do do change leadership there seems to respond not always but enough to kind of keep things going so should they reopen I think it's 60 of the population or so is vaccinated with obviously vaccines that maybe aren't as don't have the same efficacy as the ones uh here in the United States do you think they should open up and just let it rip uh or do you think they should stay still try to maintain this zero covet policy because that is the debate right now what's what's the objective because obviously asking you yeah well from the objective of economic growth they need to open up and they need to keep their economy working and they need to keep their labor force engaged or else they're going to continue to suffer so if economic growth is the objective they need to open up right if the long-term Health cost of the nation balanced again against that is the calculus that they're kind of weighing there's probably some more Nuance to that and certainly um my understanding is there may be a precedent setting which is hey we've said that it's a zero covet policy therefore we have to hold strict to it hold toe the line um else it looks like we're weak and so there's also this you know maintaining the authority of the CCP objective so there's a lot of maybe competing objectives right now I certainly don't have a sense of how they're they're weighing them all but but I think that one once all those videos came out this week yeah you guys saw them but people were screaming there was an apartment on fire where the doors were locked with steel beams on the on the base of the building at least that's what the the video said I don't know how much truth there is to that but that's what was said and clearly people are extremely distraught and unhappy with the conditions of the lockdown at some point enough people with enough loud voices you know something's going to change I mean let's just remember like the bargain that struck in that country and with all countries is that you know the citizenry to some extent are willing to tolerate their government so long as their conditions continue to improve and there's a bargain there's some bargain that struck and as soon as that bargain starts to go south for for the citizenry then that that that governing entity is at risk and I think that that's what we sort of started to see this week was the conditions are getting far far worse and far less livable for so many people in that country that the government had to shift do you think chamoth this uh covet strategy and then we'll move on was basically Xi Jinping wanting to get to that Congress his coronation and now that that's over maybe he can change gears and then like I said I my belief is that I have a very poor access to enough data to have a to steal man um what is actually going on there but one explanation could actually be that in the absence of enough Hospital infrastructure and ventilators and a bunch of these other things they had to take a pretty severe approach to this disease I don't know what they know or didn't know maybe they understood you know the virulence of it maybe that they have a slightly different aging characteristics of their population maybe they genetically responded to the SARS kovi II virus I don't know any of these things enough to tell you Jason yeah but the reality is what freebrook says is Right which is that you cannot grow an economy if people are inside locked in their apartments and it looks like they have decided that that's coming to an end and they're going to you know deconstruct all of these things so you know the the Chinese growth engine is coming back and I think that that's going to be an important factor economically that we're going to have to figure out because it's going to have a huge implication to American growth and American inflation sax if uh in fact the if the lab League theory is correct China might have some insights into this disease that maybe the West didn't maybe that plays into their policy a bit any follow-ups here Jacob I'm just surprised to hear that you have a problem with their lockdown uh policy over there because aren't they just implementing Democratic party Orthodoxy I mean isn't this the policy that Tony fauci and Barbara Ferrer I was not in favor of lockdowns what are you talking about you're the one who had all your masks and had ventilators day one isn't this uh why am I getting us because I'm just asking a question as the moderator isn't this basically why am I getting a stray isn't this I'll answer the question yes I was in favor if people wanted to stay home stay home and then if people wanted to go out and take the risk take the risk I was always in but it wasn't this what Gretchen Whitmer in Michigan and Gavin Newsom in California subscribe to the idea that the way to fight covid was through lockdowns now yes Newsom had 10 pages of exceptions for his political donors and he didn't use the police to lock people in apartment buildings he may have wanted to but they didn't actually do that but can you really tell me that this lockdown policy has been disavowed by people like fauci or by the the health authorities like the Barbara farrers of this world they still subscribe to this view do they really is anybody doing show me well they're not able to do it because no one agrees anymore yeah but tell me tell me where anybody tell me where any of the health experts who said that lockdowns were the correct response have repented and disavowed that view yeah I don't know I haven't been I haven't been tracking their uh mayakopa's you yourself were in favor of lockdowns period of time yes you were no you absolutely were out there was a mass mandate no it's not true I was in favor of a mass mandate and I said the mass mandate was the alternative to lockdowns okay I was saying that by May of 2020. all right listen let's move on to the next thing I don't represent I'm an independent I don't represent the Democratic party I don't represent fauci no you wrote the media I do not represent mainstream media you just said I was an old school journalist who's mortified with where it is today I'm giving you a hard time I thought your explanation was fabulous oh thank you thank you obviously Jacob I'm giving you a hard time too I know that you were not a big lockdown proponent but you understand the point I was making would you understand your points making me the Democratic spokesperson no I'm feeling a lot better after my beer let's talk about come on so listen let's do a little talk about open AI all right open AI is a a company that builds artificial intelligence software and platforms they have one platform called GPT it is on its third version as part of gpt3 they created chat GPT which is a chat interface where you can ask questions to AI the results are nothing short of stunning when they hit some of them are a little bit mixed but Freeburg has spent the last 48 hours uh drinking white Russians with Oatley milk and playing with chat GPT including his question to the chat GPT which was write a script of chemath sax and J Cal uh talking about the future of AI in the style of a Quentin Tarantino movie and I have to say it was pretty great the result go ahead uh freeberg tell us what you described I think you guys should read this real quick we can cut it out if it's stupid but okay actually read the script yeah the Quentin Tarantino part right I mean I think it was like impressive but it there's no f-bombs there's no like Tarantino s dialogue and by the way they are they took they took out all cursing and violent cussing and violence from open AI that explains it because this is a Tarantino script there would be some Choice languages but it's interesting it's like the PG Tarantino script because okay no violence yeah you do the narrative go ahead [Music] Jackson California sitting at a dimly lit table in a smoky bar a bottle of whiskey sits in the center of the table half empty Jamal's leaning forward his eyes intense so what do you guys think about this chat GPT thing David sacks takes a sip of his drink it's impressive no doubt about it a large language model trained by open iei that can generate human-like texts in a variety of styles and formats as a game changer Jason nods definitely it's one of the most advanced AI systems we've seen to date it's going to have a huge impact on the way we use and interact with AI to moth frowns that's what I'm worried about with a technology like this the possibilities are endless but so are the potential dangers sacks leans back in his chair oh come on chamoth you're not still stuck on that whole AI is going to kill us all thing are you timoth leans forward again his voice low and serious look I'm not saying that Chad GPT is going to turn into Skynet overnight but we need to be careful about the way we develop and deploy AI we need to make sure that we're using it for good and not just for our own game J Cal nods I agree we need to make sure that we're responsible in a way we use Ai and that includes making sure it's accessible and affordable to everyone not just a select few to moth with a dirty smirk and let's not forget about the impulse records calling cut oh God that's it scene yeah we're not gonna finish it it's not that far off I mean it's 60 on the way there I actually they're they're uh Biden for sacks if you blame Biden it would have been perfect let me tell you guys something stunning about this um this platform so this is GPT 3.5 which is an interim model to the what people are saying is the long-awaited GPT 4.0 model um which I think they announced in 2020 and has been in development for some time so the model this GPT 3.5 model was trained in three steps they do a great job explaining it on the openai blog site where they collect some some data and then there's a supervised model meaning that there are humans that are involved in tagging and then the model kind of you know learns from from that system then you ask the model questions you get output and then humans rank the output and so the model learns through that ranking system and then there's kind of this third optimization thing and then it's fine-tuned so the the model itself um has several steps of kind of human involvement and you know kind of it sources its own data and and builds it you know what's incredible about this model the total size of the software package that runs the model is about 100 gigabytes isn't that amazing like you could fit this model on probably what 20 of the storage space on your iPhone and you could run this thing and you could probably just talk to it for the rest of your life um and it's really kind of an incredible Milestone but I think what was so stunning to me about this I I know you guys are probably expecting something to be said like this but you could see so many human knowledge worker roles and and and functions being replaced by this extraordinary interface so kids can do homework that's easy uh software Engineers can get their code optimized and can get their code written for them there's great examples of how software code has been written uh by this interface you could see real estate insurance sales people being replaced by some sort of software like interface writers copywriters you know make me a hundred versions of a commercial or an ad customers customer support completely replaced right if you guys remember there were these automated customer support companies that started uh you know two decades ago and there was this great flurry all BPO businesses were all about lower cost human labor now the cost of human labor goes to zero my prediction which is so everyone's got the obvious prediction which is there's going to be a hundred thousand startups that are going to emerge I mean this is kind of like this moment where the internet came along and everyone's like this changes everything I do think everyone thinks and feels that so the obvious next step is a bubble wool form so can I ask a technical question though Freeburg um and then uh you're probably thinking the same thing I just finished my market prediction but I think because everyone's so hyped about this and and we all know this it'll be over fun PC attention all the investor attention is Shifting to this capability and how do you apply this sort of capability across all of these different Industries and all these different applications and as a result my guess is the next hype cycle the next bubble cycle in Silicon Valley will absolutely be this generative AI business okay but this is a little technical but how would it know the difference between like y-o-u-r and you are when it is processing natural language if you were to do like your anus or Uranus how would that Freeburg how would it know the difference between Uranus and your space anus it'll it'll learn that you know it was a joke yeah yeah I probably would have made a better joke than that I would have made a better joke for sure in our group chat and said can I do an insurance like jaycal and they were terrible so at least AI to pretend you're the all-in Pod besties telling Uranus jokes sorry let me just say one more thing about this open AI thing I I do think that the biggest and most interesting um thing to think about is how this will um disrupt the search box the the search you know the way search works at Google you know an internet search is there are these kind of servers these web crawlers that go out and gather data someone starts your data feeds and some of them are just crawlers and then that data is indexed or in in the structured way it's kind of made available for for serving directly on the search page and so much of that is is indexing so I search for a bunch of keywords those keywords and perhaps there's some natural language contexts are matched to a result page and I click on that and it's linked out years ago Google started a product called the one box where they could take structured data like what is the weather in San Francisco today and that the top of the search result page just presented that data because it knows with high certainty the question you're asking and it knows with high certainty the answer it can give you yeah Clifton from somebody's website right so if that starts to become everything then that one box interface and it's not just Google's ability to access all this data and index it and serve it and store it there could be a lot of competitors to the one box and a lot of competitors ultimately to search um and ultimately you know Google's core product their their search engine could be radically disrupted by an alternative set system or set of systems that have more of a natural language chat interface which um and I literally which is literally why Google bought deepmind and there were a collection of human-powered search engines Mahalo included Cha-Cha answers.com who are trying to do the human based version of this it just didn't scale we don't want to get ahead of ourselves because one of the things we don't know is how much is going on in deepmind they're they're not very open like open AI is they talk about some of the advanced Frontier stuff like um Alpha fold and so on and they've been public about that but a lot of that is really to generate interest in hype and what's next but my understanding is deepmind's been applied to everything from ads ad ad optimization but also the ranking on YouTube videos to get people more engagement on YouTube Etc et cetera so there's all these ways that deepmind's been applied within Google services that we don't certain and certainly within search yeah but the question is is there an entirely new interface for search yes that risks Google's course search business and I think that there certainly will be a lot of money thrown at this and if anyone has any interesting ideas send me an email sax and then chamoth yeah that's a really interesting point I saw a thread on this where somebody was asking GPT you know a bunch of questions like they were like generally like coding questions and they were actually comparing the result in Google versus GPT and Google would just give you a reference to like a link to some page whereas gpt3 would actually construct the answer like a multi paragraph answer that was far more detailed and in a way user friendly yeah whereas like the Google page would kick you over to a reference where it was like this one two three sort of maybe someone who created a checklist but it just wasn't that detailed it really is pretty interesting I thought um Andreessen tweeted a really interesting example as well where he asked GPT to create a seen from a play starring a New York Times journalist in a Silicon Valley Tech entrepreneur they were arguing about free speech in each passing asserts the view associated with his profession and Social Circle we don't need to read the whole thing but I thought this was like spot on where I was actually like both sides are making their best arguments and it's like to each other in a conversation that seems intelligible like they're making their points at the right time in the conversation it's like they're playing off each other in other words it actually reads like a conversation I actually thought this one was more impressive than the one with the bestie impersonation because I agree I actually thought that the one about all in didn't really capture our personalities per se but this one actually does a pretty good job capturing the arguments in this debate so pretty impressive any thoughts here yeah lots I mean I've been spending a lot of time learning about this area six years ago a team that I partnered with who was at Google that built TPU we've been building silicon for this space so we've been kind of going from the ground up for the last six years a couple things that I'll say the first is that I think we're going to replace SAS with what I call Mass which is models as a service and so you know a lot of what software will be particularly in the Enterprise will get replaced with a single use model that allows you to solve a function so these chat examples are one and you can name a bunch of SAS companies that were purveyors of SAS that'll get replaced by essentially gpt3 or some other language model and then there'll be a whole bunch of other things like that if it's a you know expense management company they'll have a model that'll allow them to actually do expense management or blah blah blah forecasting better so I think SAS will get replaced over time with these models incrementally that's phase one but the problem with all of these models in my opinion is that they're still largely brittle they are good at one thing they are a single mode way of interfacing with data the next big leap and I think it will come from one of the big tech companies or from openai is and we talked about this I talked about this a few episodes ago a multimodal model which then allows you to actually bring together and join video voice data in a unique way to answer real substantive problems so if I had to steal man the opposite side reaction so I think there's a lot of people gushing over the novelty of gpt3 if I had to or chat GPT if I had to if I had to steal man the opposite what I would say is it's gonna get somewhere between 95 to 99 percent of all of these very simple questions right because they're kind of cute and simple there is no consequence of saying write a play because there is no wrong answer right you either kind of it it it tickles your fancy or it doesn't it kind of entertains you or it doesn't when this stuff becomes very valuable is that when you really need a precise answer and you can guarantee that to be overwhelmingly right that's the last one to two percent that is exceptionally hard and I don't think that we're at a place yet where these models can do that but when we get there all of these models as a service will be very much commoditized and I think the real value is finding non-obvious sources of data that feed it so it's all about training so meaning you can break down machine learning and AI into two simple things there's training which is what you do asynchronously and then there's inference which is what you're doing in real time so when you're typing something into chat API or a chat GPT that's an inference that's running and then you're generating an output but the real key is where do you find proprietary sources of data that you can learn on top of that's the real arms race so one example would be let's say you build a model to detect tumors right there's a lot of people doing that well the company that will win may be the company that actually then vertically integrates buys a hospital system and get access to Patient data that is completely proprietary to them and covers the most number of women of all age groups and of all ethnic you know ethnic categories those are the kinds of moves in business that we will see in the next five to ten years that I find much more exciting and trying to figure out how to play in that space But I do think that chat gbt is a wonderful example to point us in that direction but I'm sort of more of that case which is it's a cute toy but we haven't yet cracked the one to two percent of use cases that makes it super useful but I think the first step but just sorry but the first step will be the transformation of SAS to Mass and then from there we think we can try to figure this out it reminds me of in a way when you when you give that description of like hey this is really interesting but it's not complete is remember when GPS came out and like people were like doing turn-by-turn navigation they drive off the road because they were trusting it too much and then you know over 20 years of GPS we're kind of like yeah it's pretty bulletproof but keep your eyes on the road same thing that's happening uh and and these changes these last these last hundreds or 200 basis points literally takes decades exactly so the last 15 of self-driving is like the decade-long you know sloth let me take a century 15 may take a century but the last two percent will take a few it's like the change happens very slowly and then all at once for people who don't know what a TPU is that's a tensor processing unit this is Google's um application specific circuits right and custom silicon that they invented for tensorflow at the time yeah so if you want to try it although now the modality of AI we've changed that as well so now we're totally in the world of Transformers so we're not even using you know you're not letting the tensors float the way they used to all right there's been a Slowdown in SAS sax uh what is happening in the software as a service World there was a good update by uh jam and ball who works for Altima our friend Brad gerstner he does these really great updates on what's happening in the SAS world the big thing this week is that Salesforce had its quarter and I would consider Salesforce to be the Bellwether for the whole SAS category I think they're the largest pure SAS company they were the first multi-tenant SAS like company at scale and what they've shown is a huge slowdown basically their net new ARR that they just added in the previous quarter dropped two-thirds compared to the previous quarter but because their sales and marketing spend was the same as the previous quarter it exploded their CAC payback which means the amount of time it takes to pay back your customer acquisition costs for a given customer so you see there are 155 months it would take now to pay back the customer acquisition costs that's over 10 years that doesn't work I mean I think before this quarter it was more like two and a half years that's something that you can afford a company can't you know if you're spending 10 years of you know gross profit on a customer to acquire them the business doesn't make sense so now I'm not saying any of this to pick on Salesforce it's an exceptionally run company you know one of the absolute best uh Mark benioff fantastic CEO founder great human being but I think the point here is that what you're seeing is the whole SAS industry is really slowing down here in the first half of the year you saw SAS valuations correct now we're actually seeing SAS Top Line correct and you know there's an interesting question here if your CAC payback goes from two and a half years to ten years you have to bring your CAC down how do you do that you can either reduce marketing or you can reduce sales so in other words you can reduce me cut the sales team you can either cut people and head count from your own team or you can cut spending you do on advertising or events or money that you spend on other companies either way there's going to be a big contraction in jobs basically around this industry and I think that what that could do is cause a vicious cycle where that's we start seeing I wouldn't say death spiral I think this vicious cycle for the next year or so where seat contraction becomes the norm instead of seat expansion so if you go back over the last 10 years a major Tailwind at the backs of SAS startups has been that every year year you start with 120 130 150 percent of last year's Revenue just from your existing customers why because they were hiring more and more people and they needed to buy more and more seats but now head count growth is frozen and in fact companies are doing major layoffs so the Baseline for next year year could be seek contraction so instead of starting with 120 of last year's Revenue you might start with 80 or 90 percent because there's going to be so much churn so I think that you know SAS companies need to take this into account this idea that like growth is on autopilot that could start to go in reverse I don't think permanently but I think for the next year or so this is why I also I tweeted you know two x's is the new 3x if you can grow 2x year over year and this Incarnation that comes as good as or better than growing 3x last year clearly it's clearly better like a lot of companies that weren't that great could grow 3x last year because it was so times were so frothy everyone was buying everything but now it is going to be really hard to even double year over year companies need to take that into account into their financial planning uh you need to restrain your burn because a lot of the revenue that you predict is going to be there may not be there all right uh thanks so much to the Secretary of SAS I think you got a board meeting I did I gotta run one of the interesting things I saw in terms of use cases is somebody used the chat GPT to describe rooms then they took the descriptions of those rooms and then they put them into like dolly or stable diffusion one of those and it created the visual I'm curious if you'd think you know the self-driving apis uh and machine learning that's going on then you got images then you got chat maybe you have proteins going on with the alpha fold stuff when these things start talking to each other is that going to be the emergent behavior that we see of General Ai and that's how we'll interpret it in our world is these hundred different vertical AIS uh hitting some level of reasonableness to chamat's point on data sets and then all of a sudden the self-driving AI is talking to the one that's looking at cancer and tumor diagnosis in the chat and the image ones it may be stable diffusion the protein Ai and the one that's looking at cancer cells start talking to each other yeah I'm not sure that's as likely as the there's a lot of solutions that will emerge within verticals and I think you can distinguish them so I kind of gave this example a few months ago if you remember Kai's power tools was a plug-in for Adobe Photoshop came out in 1993 I believe of course and Kai's power tools completely transformed the potential of Adobe Photoshop because Photoshop had all the basic brushing and editing capabilities within it Kai's power tools with statistical models that basically took the Matrix of the pixels and you know created some evolution of them into some visual output like a blur and so you could blur motion blur or something and you could change the parameters and now your photo looked like it was going through a motion blur ultimately Photoshop bought and implemented those tools but those were similar they were statistical models that made some representation of the input which was the image and then created an output which was an adjusted image I would argue that that is very similar although the models behind it are very different in terms of the contextual application of statistical models in software and you could see stuff like for example a chat bot that replaces helped me figure out whether my credit card charges are correct or not instead of having a customer service agent an offshore customer service agent helping you resolve that or help me return my item or there are very specific kind of verticalized applications that can plug in that ultimately replaced what was manual and human driven before because humans used to manually make the motion blur in Photoshop and then it was automated with the software packages and I think you can kind of think about it in that same way that these These are known nodes they don't require necessarily a human physical labor or some you know human responsiveness that if 95 of the work can be handled it will get handled by some verticalized solution so I think the physical labor versus the non-physical labor is one way to think about the distinction meaning is there some change in the physical world driving is absolutely a change in a physical world you have to move physically through space so that one is a very distinct class all the stuff that's like communication imagery static imagery audio and then visual video there's some stacking that happens there and some of those will be kind of siled and then some of them will merge and you'll have these kind of unique kind of combo models and so look as they start to work together I think we'll see them you know completely rewrite some of these verticals like movie production or music production right or advertising or we're seeing it now with with video and and creative arts uh with um you know some of the the visual stuff on opening to be honest a lot of Journalism a lot of creative arts have become the wisdom of the crowds over the last two decades where you know artists were looking at the collective works of the internet interpreting it and then coming up with content which is kind of what these AIS are doing and then who legally owns the collective content is going to be a big question chamoth you talked about data sets you know Microsoft is being sued right now and GitHub because they used open source to create Tools in AI to help augment programmers like rather programming and writing code it gives them suggestions and now the open source Community is suing them for using their data set so what do you think about the legality of data sets tremoth and should they get some kind of protection if you make a gpt3 based on quora or based on Wikipedia should you have to get approval to use that data what look at the exact opposite yeah it's it's the exact opposite they say that this is actually your work um and I think that that's the right legal framework but the the answer to your other question is this is why I think the hunt for proprietary data actually becomes the hunt that matters all of this other stuff I think is a lot less important because I think you have to assume that all of these models will eventually just get commoditized so they'll be there'll be a you know like you see like Jasper Ai and you see a bunch of these generative AI companies it's really interesting but the problem is when you sit it on top of the same substrate you'll have a convergence right everybody's chat model will eventually look and sound and feel like the same thing unless you're giving it a few special ingredients that other people are not and so it's the hunt for those ingredients that will make this next generation of of models really valuable so to give it an example you would have Wikipedia which is Creative Commons anybody can use but Cora as a data set not everybody can use that's owned by a company would have an advantage take an extreme example if quora didn't allow themselves to be crawled right okay but then and then they develop their own language model which used the best of the internet so call it you know GPT and quora maybe they are slightly better in certain domains than others the The Other Extreme example is the one that I used in healthcare which is you know if you have access to Patient data that you will not license to anybody else you know it stands to reason that that model actually then has much better chances of Highly Effective clinical outcomes versus any other model Apple watch comes to mind right Apple has all that watch data if they could pair that with epics it's another data set example what could they do together so this is going to be like this is the new oil is going to be data and by the way like to to to to talk about Apple for a second the smart thing is they've gotten so methodically they've never touted the AI you know they introduce one or two distinguishing features every year right so like the the the ECG which was introduced many many years ago is has only gotten slightly more usable like five or six years later but in the meantime there's you know tens of millions of watches collecting this kind of data so to your point it's it's using these devices as Trojan horses to collect training data that is the oil Uber and Tesla have all this data of the data being collected by you know the well hold on so phones or the cameras in the cars the other difference though is that you have to be in a realm where you don't need Regulators to go The Last Mile so the problem with Adas I think or level five autonomy is that eventually you get to a point where even if the model becomes quote unquote perfect you still need regulatory approval and what I'm saying is I think you have to focus on areas of the economy that are not subject to that or where the regulatory pathway is already defined so for example if you use that Health Care example let's say that you had the largest Corpus of breast cancer image data and you could actually build an AI that was a much better classifier for tumors versus other things the FDA actually has a pathway to get that approved very quickly the problem with you know level 5 autonomy is that there is no clear pathway it's not again we go back to almost a crypto example we don't really know who will govern that decision and we don't know how that will be governed so I think the the thing that investors have to do and entrepreneurs entrepreneurs have to pick their End Market very carefully and investors have to realize that this Dynamic exists as well if you're going to do this right imagine the Robin Hood trading you know uh Trader data set watching people sell and shares and then predicting markets with it with AI I mean it could be crazy you have that or payment for order flow that's used by Citadel and the other big but not AI right so who knows maybe they are losing it they are I I can tell you as somebody who sells we sell a lot of machine learning Hardware into this Market the biggest buyers are the US government and these ultra high frequency trading organizations I'll give you the final word uh how could this affect astronomy how could this affect you know our search of the galaxies you know going out past Pluto Saturn breaching your anus any any of those things how could it impact any I'm trying to get a Uranus joke to land help me out there Tremont I think you need to have more uh space related um yeah which Workshop this one with me or got or gut biome related you know yeah so how would this affect use the promo code twist you have to trick Friedberg into thinking we're asking a serious question get him down the science path and run pull him no that's that's right use the proper rug pull exactly okay let's do it here we go let's work so uh tell us you know when you're doing like super gut use promo code twist to get 25 off when you're doing super gut you're analyzing people's guts how would you then have machine learning in this you know API uh this chat API and gpt3 how could that help processing all of that especially when it passes through Uranus forever okay over there Freeburg you are hungover I'm hungover but I also had like a 7 A.M board meeting so I'm also just a little beat up were you grumpy on the board meeting did you get a little cantankerous kept the rage I had my caffeine Fuel and then I kind of cranked down afterwards all right everybody we will see you next time for the Secretary of SAS The Dictator and the Sultan of hungover we will see you next time bye bye love you guys bye-bye we'll let your winners Rain Man [Music] it's like this like sexual tension that they just need to release somehow [Music] [Music]










you were bloated last night what else is new I said not bloated my God you really are though you look bloated listen that's coming from you you started to look like Bert and now you're back to Ernie your face is getting round again all I have to say is hold on a second guys I gotta get a drink is that okay you guys got a minute for me to get a drink yeah yeah I definitely do I definitely do go ahead hold on a beer no no um I'm actually you know I've been working on my weight so I'm just gonna pick here I think I have the mocha latte from Super got and I also have the chocolate shake do you have a recommendation here for me Friedberg because I'm going to put it in my coffee is mocha on a mocha yeah you can't go wrong thank you double mocha is a win just on a completely unrelated topic did you happen to invest in super gut Jayco no no I haven't invest yet but use the promo code oh okay it's been a big part of my weight loss Journey it's also been a big part of me and Freeburg uh becoming besties and creating a unified block for all in Summit 2023 so I've got two solid votes I'll be very honest with you if you guys give me a credible plan where we can maintain the Integrity hold on continue listen to me listen to me listen to me if you if you two idiots I'm not involved yes you are you clearly are involved with it with this [ __ ] great important vote hold on no continue I'm writing this and I'm writing it down if you two idiots the two of you have to do this together because otherwise I'm with David and there's an absolutely got it you two idiots you need to come up with a plan where we can each make make four million bucks each net then I'll do it four million net okay great look at jaycal writing that down as as if he respects a contract okay got this got this I signed the [ __ ] car I signed the contract for Jacob the negotiation begins at the point where there's a signed contract yeah exactly it's like okay now I'll negotiate with you [Music] [Music] all right everybody the show has started the four of us are still here by some miracle we're still going after 107 episodes and it's better than ever last week we were number 12. so mainstream media we'll see you in the top 10. here we go Twitter files part one part two despite your oppressive conditions yes if I was getting five paid five bucks for this I'd be on strike right now guys not only are you getting five bucks you're getting a bill for the production okay here we go how beautiful is it that the same reporters who couldn't stop writing about the oppressive working conditions that Elon Musk was supposedly creating because he simply wanted the employees to go back to the office and work hard and if they didn't he'd give them a generous three months severance package yeah those same reporters are now on strike because the salzburgers are running a click bait Farm over there with oppressive working conditions the intellectual dishonesty has never been higher in the world honesty yes will the publisher of the New York Times agree that anybody who isn't happy there can have a voluntary three-month severance package yeah click this link and do you want to work hard or do you want three month Severance if the New York Times publisher did that you know it would happen 800 of 1200 people would take the severance of course all right here we go Twitter files have dropped part one dropped with the legendary award-winning highly respected journalist Matt taibi if you don't know who he is he is a left-leaning journalist who worked at Rolling Stone and did the best coverage hands down of the financial crisis and the shenanigans and he held truth to power to that group this is important to note the second drop was given to Bari Weiss who is a right-leaning independent journalist these are both independent journalists she previously worked at the New York Times itself now I think we should work backwards from two to one do you agree yes for sure let's start with the drop that just happened last night yes so last night a drop happened so here's what happens in Twitter files part two I'm gonna give a basic summary and then I'm going to give it to sax because he's chomping at the bit we now have confirmation that what the right thought was happening all along which is a secret silencing system built into the software of blacklists was tagging right wing conservative voices in the system and these included people like Dan uh bongino is that you pronounce it yes he was tagged with being on a search Blacklist what that means is you're a fan of of Dan's who is a former secret service agent who is now a right-wing conservative I could just say conservative instead of wing a conservative radio host podcast host he was not allowed to be found in search engines for some reason Charlie Kirk who is a conservative commentator he was tagged with do not amplify I guess that means you can't Trend into people's feeds even if they follow you and then there were people who were banned from the trends Blacklist including a Stanford professor Jay a did I get it right yes okay I got it right doctor of Stanford school of medicine and he was not allowed on the trends Blacklist because he had a dissenting opinion a Stanford Professor had a decision on covet that's turned out to be true and this is where the danger comes in because all of these actions were taken without any transparency and they were taken on one side of the aisle by people inside of Twitter essentially covertly no ownership of who did it and they never told the people they gaslit them they could see their own tweets they could use the service but they couldn't be seen even by their own fans in many cases here sax when you look at that let's just start with that first piece the shadow Banning as it's called in our industry where you can participate in a community but you can't be seen are any is there any circumstance under which this tool would make sense for you to deploy and then what's your general take on what has been discovered last night okay look two more questions yes let me start with what's been discovered here let me boil it down for you this is an FTX level fraud except that what was stolen here was not customer funds it was their free speech rights not just the rights of people like Jay about acharya and Dan bongino to speak but the right of the public to hear them in the way that they expected okay and you had statement after statement by Twitter Executives like Jack Dorsey like Vegeta Gotti like you know Yol and others saying we do not Shadow ban and then they also said we certainly this is their emphasis do not Shadow ban on the basis of political Viewpoint and what the Twitter files show is that is exactly what they were doing they in the same way that SBF was using FTX and customer funds is his personal piggy bank they were using Twitter as their personal ideological piggy bank they were going in to the tools and using the content moderation system these big brother-like tools that were designed to basically put their thumb on the scale of American democracy and suppress viewpoints that they did not agree with and they did not like even when even when they could not justify removing content based on their own rules so there are conversations in the slack that Barry Weiss exposed where for example Libs of tick tock they admit in the slack that we can't suppress limits of tip talk based on our hay policy Libs of tick tock hasn't violated it we're going to suppress that account anyway now it's important to note what Libs of tick tock does this is a great talking point Libs of tick tock finds uh people who are trans people who are you know maybe not lgbtq and they feature their tick tocks and they mock them on Twitter now this certainly is Free Speech and the argument from the safety team was by putting all of these together you're inciting violence towards those people and they said they haven't broken a rule but collectively they could be in some way targeting those people is there anything fair Friedberg to that statement that they targeted them by collecting their let's say views that are I'm asking this question for discussion purposes I'm not giving myself hold on I want free breakfast why can't I finish I'm going to go back to you spoke for two minutes that's why Friedberg you turned down moderating today sex you could everybody else yesterday as long as I want and I get interrupted you got two minutes yes let me just finish the SPF analogy okay the filibuster continues then you can both sides of this don't worry sex while you're speaking let's drop one or two words on you and then yeah why did people like ADI and Yol deny that they were engaged in Shadow Banning even though that's clearly what they were doing because they knew that they had an obligation to be stewards of the public trust they were custodians of public trust they knew they were violating that trust the same way that SBF had a duty to be custodians of his customers funds they did not Implement their own policy that they said they were implementing why because they were suppressing accounts that personally offended them that personally they disagreed with and they wanted to deprive the public of the right to hear okay so now the way that they're justifying this hold on the way that the media is today justifying it is they're pointing to obscure Provisions in the terms of use around spam accounts things like that saying oh well the terms of you showed that they had the right to do this this is like the margin account okay they do not have the right to use these tools in this way okay Jay bhattacharya was not posting spam Professor it doesn't yes opposed to lockdowns that was the Great Barrington declaration and they suppressed it what is the justification so now you have to answer my question then sex since you want to talk so much hold on sax I want you to answer the question then since you are so interested I want him to answer one question then it's going to you free bird sax should lives of tick tock be able to collect uh trans people uh living their life making tick tocks put them into a group feed mock them and if those people experience harassment because of it is that something that Twitter should allow I'm asking you this without giving my opinion I'm curious your opinion specifically for the libs of tick tock since you opened that door and you wanted to bring up that very thorny issue go listen so unless there's Tick Tock my understanding of that account is that they only take videos that have already been made public by another account they're all public they're all in the public domain and then they repost them sometimes they make a snarky comment but usually they just let them stand on their own that is not a violation of free speech now the way that I think these Twitter Executives have interpreted it is that they live in such a bubble and they live in with such privilege and entitlement that they think that when their point of view gets criticized or challenged that that in and of itself is harassment that's not that is public debate and they want to make themselves and their points of view immune to public debate and the way that they do that is that they claim that any criticism is harassment it's not if in aggregate final final follow-up if an aggregate those people report being harassed and they have evidence of being harassed what should Twitter do listen if somebody is harassed I'm I'm fine with taking that down but being publicly criticized or simply retweeted is not harassment okay harassment needs to be targeted and it needs to be more than just public criticism or even a snarky comment here or there and so you don't consider a not you know a a daily feed of trans people being uh mocked you don't consider that Target harassment got it don't listen to me about it listen to Twitter's own slack Files about it they knew that the account that lives of tick tock was not violating the rules yet they suppressed that they've suspended it six times they knew they were on Shaky Ground they wanted to do it anyway why because they because you know because people are experiencing harassment that's why they did it but it is a thorny freedom of speech issue I agree with you I think uh I think sax has articulated a vision for the product he wanted Twitter to be but I don't think that's necessarily the product that they wanted to create it's not that Twitter set out at the time or stated clearly that they were going to be the harbinger of truth and the Free Speech platform for all I think they were really clear and they have been in their behavior and as you know demonstrated through this stuff that came out which to me feels a lot like uh we already knew all this stuff this is a bit of a nothing burger that they were curating and they were editing and they were editorializing other people's content and the ranking of content in the same way that many other internet platforms do to create what they believe to be their best user experience for the users that they want to appeal to and I'll say like there's been this long debate and it goes back 20 years at this point on how Google does ranking right I mean you guys may remember Jeremy stoppelman went to DC and he complained about how Google was using his content and he wasn't being ranked high enough as Google's own content that was being shoved in the wrong place and there's a guy who ran kind of he was a spokesperson for the SEO the search engine optimization rules at Google and it was always the secret at Google how did the search results get ranked and I can tell you it's not just a pure algorithm that there was a lot of manual intervention a lot of manual work in fact the manual work gets to be the to the point that they said there's so much stuff that we know is a is the best content and the best form of content for the user experience that they ranked it all the way at the top and they called it the one box it's the stuff that sits above the primary search results and that editorialization ultimately led to a product that they intended to make because they believed it was a better user experience for the users that they wanted to service and I don't think that that this is any different than what's happened at Twitter Twitter is not a government agency they're not a free speech they're not the internet they're a product and the product managers and the people that run that that product team ultimately made some editorial decisions that said this is the content we do want to show and this is the content we don't want to show and they certainly did wrap up um you know a bunch of rules that had a lot of leeway for what they could or couldn't do or they gave themselves a lot of different excuses on how to do it I don't agree with it it's not the product I want it's not the product I think should exist I think Elon also saw that and clearly he stepped in and said I want to make a product that is a different product than what is being created today so none of this feels to me like these guys were the Guardians of the internet and they came along and they were distrustful they did exactly what they did what a lot of other companies have done exactly what they set out to do and they editorialized the product for a certain user group and by the way they never blocked they never edited people's tweets they changed how people's results were showing up in rankings they showed how viral they would get in the trend box those were in-app features and in-app services this was not about taking someone's tweet and changing it and people may feel ashamed and they may feel you know upset about the fact that they were de-ranked uh or they were kind of quote Shadow banned but ultimately that's the product they chose to make and people have the choice and the option of going elsewhere and I don't agree with it and it's not the product I want and it's not a product I want to use and I certainly don't feel happy seeing it but so you want to see products in you want free work to summarize it you want to see the free market do its job you worked at Facebook Facebook seems to have done I would say an excellent job with content moderation I think in large part correct me if I'm wrong because of the real names policy uh but you tell us what you think uh you know when you look at this and the 15-year history of social media and moderation I think moderation is incredibly difficult and typically what happens is early on in a company's life cycle and I I'm going to guess that Twitter and YouTube were very similar to what we did at Facebook and it's very similar to probably what Tick Tock had to do in the early days which is you have this massive tidal wave of usage and so you're always on a little bit of a hamster wheel and so you build these very basic tools and you uncover problems along the way and so I I think it's important to humanize the people that are at Twitter because I'm not sure that they're these super nefarious actors per se I do think that they were conflicted I do think that they made some very corrupting decisions but I don't think that they were these evil actors okay I think that they were folks who against the tidal wave of usage built some brittle tools built on top of them built on top of it some more and tried to find a way of coping and as scale increased they didn't have an opportunity to take a step back and reset and I think that that's true for all of these companies and so you're just seeing it out in the light what's happening at Twitter but don't for a second think that any other company behaved any differently Google Facebook Twitter bite dance and Tick Tock they're all the same they're all dealing with this problem and they're all probably trying to do a decent job of it as best as they know how so what do we do from here is the question okay the reason somebody needs to do something about this is summarized really elegantly in this Jay bhattacharya tweet so please Nick just throw it up here so that we can just talk about this this is why I think that this issue is important critically this is a perfect tweet still trying to process my emotions on learning that Twitter blacklisted me okay who cares about that here's what matters the thought that will keep me up tonight censorship of scientific discussion permitted policies like school closures and a generation of children were hurt now just think about that in a nutshell what was Jay bhattacharya to do maybe he was supposed to go on Tick Tock and try to sound the alarm Bells through a tick tock maybe he was supposed to go on YouTube and create a video maybe he was supposed to go on Facebook and you know post into a Facebook group or or do a news feed post the the the problem is that and the odds are reasonably likely that a lot of these companies had very similar policies in this example around covet misinformation because it was the CDC and you know governmental organizations directing you know information rules reaching out to all of these companies right so we're just seeing an insight into Twitter but the point is it happened everywhere the implication of suppressing information like this is that a credible individual like that can't spark a public debate and in not being able to spark the debate you have this building up of errors in the system and then who gets hurt in this example which is true is like you couldn't even talk about school closures and masking upfront and early in the system if you had scientists actually debate it maybe what would have happened is we would have kept the schools open and you would have had less learning loss and you'd have less depression and less over prescription of you know ritalin and adderall because those are all factual things we can measure today so I think the important thing to take away from all of this is we've got confirmatory evidence that whether they're you know these folks under a tidal wave of pressure made some really bad decisions and the implications are pretty broad reaching and now I do think governments have to step in and create better guard rails so this kind of stuff doesn't happen I don't buy the whole it's a you know private company they can do what they want I think that that is too naive of an expectation for how important these three companies literally are to how Americans consume and process information to make decisions incredibly well said sax your reaction to your besties I largely agree with what Jamal said but let's go back to what Freiburg sex I think what freeburg's point of view is is really what you're hearing now from the mainstream media today which is oh nothing to see here you know that they told us all along what was happening this was just content moderation they had the right to do this you're making a big deal over nothing no that's not true go back and look at the media coverage starting in 2018. article after article said that this idea of Shadow Banning was a right-wing conspiracy theory that's what they said furthermore Jack Dorsey denied that shadow Banning was happening including at a congressional hearing I believe under oath so either Eli or he was lied to by his subordinates I actually believe that the latter is possible I think I don't think it's true with SBF it might be true with Jack because he's so checked out furthermore you had people again like Vegeta Gotti again tweeting and repeatedly stating we do not Shadow ban we certainly don't Shadow band on the basis of political Viewpoint so these people were denying exactly what their critics were saying they were accusing their critics of being conspiracy theorists now that the thing is proven the mountain of evidence has dropped they're saying oh well this is old news this was known a long time ago no it was not known a long time ago it was disputed by you and now finally it's proven and you're trying to say it's not a big deal it is a big deal it's a violation of the public trust and if you are so proud of your content moderation policies why didn't you admit what you were doing in the first place that's what I said you feel good that elon's running this business now I mean like the things that you're concerned about as a user as someone who cares about the Public's access to knowledge uh to opinions uh to free speech this has got to be a good change right like this has come to light it's clearly going to get resolved everyone's going to move forward I mean do you think that there's penalties needed for the people that work there or like what what what's the anger because because no you won like I think look I think we got I think we basically got extremely lucky yeah that Elon Musk happened to care about free speech and decided to do something about it and actually had the means to do something about it he's just about the only billionaire who has that level of means who actually cared enough to take on this battle but are you saying that this is praise for that but I mean unless Elon can buy every single tech company which he clearly can't I think you guys are right this is happening a lot of other Technologies we're about to rewrite the government the United States government is going to make an attempt to rewrite section 230. I think that what this does is put a very fine point on a comment that Elon actually tweeted out and Nick if you could find that please that's a very good tweet where he said going forward you will be able to see if you were Shadow banned you were able to see if you were de-boosted why and be able to appeal and I think that that concept to be very honest with you should be enshrined in law and I think that should be part of the section 230 rewrite and all of these media companies and all of these social media companies should be subject to it and the reason is because it ties a lot of these Concepts together and says look you can build a service you're a private company make as much money as you want but we're going to have some connective tissue back to the fundamental underpinnings of the Constitution which is the framework under which we all live and we're going to transparently allow you to understand it and I think that's really reasonable make that a legal expectation of all these organizations the companies the companies will love it because I think it's super hard for you to be in these companies and they probably are like take this responsibility off my plate it's just very simple this is a there's really four problems that occurred here number one there was no transparency the people who were Shadow banned taken out of search Etc they did not know if they were told and it was clear to users we could have a discussion about was that a fair judgment or not in the cases we've seen so far from Bari Weiss's reporting in the Twitter files part duh it's very clear that these were not justifiable number two these were not evenly enforced it's very clear that one side because we don't have one example of an a person on the left being censored when we if we do then we could put balls and Strikes together and we could say how many people on one side versus how many people on the other it's pretty clear what happened here because these all occurred with a group of people working at Twitter which is 96 or 97 percent left leaning the statistics are clear number three the shadow Banning and the search Banning and I think this is something we talked about previously chamoth it feels very underhanded this was your point if we're going to block people they should be blocked and they should know why the fourth piece of this which is absolutely infuriating and this is a discussion that myself Saxon and um Elon have had many times about this moderation and I'm not speaking out of school now because he's now very public with his position and you know his position he came to on his own it's not like this is sax and I you know coming up these positions this is why Elon bought the business if you really want to intellectually uh test your thinking on this and I am a moderate who's left-leaning I can tell you there's a simple way for anybody who is debating the validity of the concerns here imagine Rachel Maddow or Ezra Klein or whoever your favorite left-leaning pundit is was Shadow Band by a group of right-wing moderators who were acting covertly and without any transparency how would you feel if Maddow reporting on you know uh all the Russian coordination with Trump's campaign did this or Ezra Klein with whatever topics he covers and you will very quickly find yourself infuriated and you should then intellectually as we say on this program steel Manning if you argue the other side it's infuriating for either side to experience this and that is what the 230 change needs to be chamoth you're exactly correct if you make a an action it should be listed on the person's profile page and on the tweet and if you click on the question mark you should see when the action was taken by who you know which department maybe maybe not the person so they they get personally attacked and then what the resolution to it is this has been banned because it's targeted harassment this can be resolved in this way then everybody's Behavior would steer towards whatever the stated purpose of that social network is you can get better Behavior by making the rules clear by making the rules unclear and making it unfair you create this insane situation go ahead chamoth and that's why I'm infuriated about it I think you have to take it one step further to really do justice to why this should be important to everybody and I do think this school example it really matters to me like we have like I don't know now we know what the counter factual is which which is that we have I mean we've relegated our children to a bunch of years of really complicated relearning and learning that they never had to go through because of all the learning laws they gave them but like what if Jay bhattacharya who's I mean like you can't be you know have a higher sort of role in society in terms of you know population credentials I mean imagine if if you know there was a platform where he could have actually said this and that you know people would have clamored and said you know what you and fauci need to get to the bottom of this or where legislators could have seen it and said you know what before we make a decision like this maybe hey fauci go talk to Jay because he's a Stanford Prof he's probably not an idiot why does he think that or maybe let's convene you know an actual group of 20 or 30 scientists and the fact that this one version of thinking about things was deemed so heterodoxical it is just such a good example they shut down an important conversation you know that the decision was so wrong and the damage was so severe so we know what happened by suppressing that speech and that's one example well it's in in my in my estimation it is the Silver Bullet example that cleans through all of this other stuff because you know I don't really care if Rachel Maddow has your client who the hell cares this is important stuff because it affects everybody irrespective of your political persuasion and what editorial you want to read sure math what if the investigation into the Catholic church and the abuses that occurred there somebody said oh this person it needs to be shut down and then children are molested for another decade by the way we have an example of that Sinead O'Connor came out on SNL you can look it up for if you're under 40 years old and said fight the Real Enemy she ripped up a picture of the Pope because of the scandals there she was excommunicated she was canceled at that time one of the first people to be canceled because she spoke truth to power what if somebody an investigative journalist at the New York Times the Boston Globes are in the movie Spotlight those are the people who broke the story of the Catholic church if somebody came in and the Catholic Church put pressure on a social network he said hey you can't put this stuff up here you can't have this discussion here's here's another example why are we shutting down discussions in America remember the Vietnam papers because because Jake how the media the media does not value transparency anymore if you go back and look at the way the media portrays itself like in the movie The Post which is about the revelations about the Catholic church or you go back to All the President's Men what the media surprised and what they congratulated themselves on was first of all EX transparency and exposing the lives of powerful people well that is exactly what has happened here the lies of the powerful group of people who were running Twitter policy and suppressing one side of the debate has been exposed and the media is treating it with a yawn like there's nothing to see here why because they were complicit in this they were complicit in suppressing the views of people like Jay bhattacharya they were complicit in choosing the views of fauci and the elite on covet and so they have no interest now in bringing making in making what's happened here at Twitter fully transparent I have to own it I think by the way just so just a quick correction there I think sax when you said the post Washington Post Watergate Spotlight exactly I'm not even thinking about Spotlight sorry it was Main Event okay but like but the post is another example that that movie was about another event like this which could have been easily suppressed in today's world much harder there which was the Pentagon papers and in that world you know there was an immense amount of pressure that the government put on the Washington Post but then they said you know what we're going with it and they still published it and it created a Groundswell of support to really re-examine the Vietnam War and it had a huge impact but could you imagine this time around which is like hey guys there's going to be some kind of misinformation you know these Pentagon papers are not real it's it's coming from the Russians suppress it and nobody could it's so much easier now to run this plane what journalists need to realize is that today's conspiracy theories are tomorrow's Pulitzer prizes on to you sex not in the current media environment they work for these uh corporations and they don't get rewarded for telling the truth oh no they they're going for pulitzers trust me they are but what they need to do is start thinking short term and think long term anytime there's a conspiracy theory you must give it some validity and say is there any truth here because it could in fact be a scandal that's being covered up they're involved in the cover-up right now this is a cover-up I agree I'm in agreement with you let's bring the first batch of Twitter files into the conversation the one that mataibi exposed what he did was confirm that a completely True Story by the New York Post about Hunter Biden that came out a month before the election was suppressed by Twitter Executives including at the behest of you know of of FBI agents and uh former Security State officials so this has now been exposed there was no legitimate basis for suppressing that story it was true it was a respect to publication they did it anyway this is election interference you know the same people who Pride themselves on strengthening democracy are engaged in this wide scale censorship of one side of the political debate including of true stories for an election and then they puff out their chest and say we're protecting democracy they're not protecting democracy they're interfering with democracy they're interfering with the Public's right to know and then we look at a country like China and we say we're so much better than them because they've got this problem over there where the state and big Tech are colluding to create a big brother-like system well what is this what are these tools that have been exposed one person is a big brother like system okay yeah but just you have to I know you want to make it like an equivalency it's less than a one percent equivalency because in our society we can have moments like this and we can have investigations so just to put it in person I don't look I think I don't think we're equivalent but what I'm saying is that this is very much like a big brother social credit system alarm Bells should be going off just we had this one idiosyncratic billionaire who believes in free speech if he didn't decide to take this on we would never have known this stuff okay tell me what happened in between these two things there is an attorney at uh Twitter and under the details of this uh right okay it does not work for the Twitter Corporation I do not speak for the Twitter Corporation sax does not work for the Twitter Corporation and does not speak for it but there was in between these two drops something that happened yes so basically what was discovered and this is all just publicly reported is the former FBI lawyer named Jim Baker had now become Deputy general counsel at Twitter and this guy Jim Baker is like the zelig of the whole Russian collusion hoax he was involved in the uh in the fisa warrants that were that the FBI applied to the fisa courts that had all the errors and Emissions he was involved in the alpha Bank hoax he was the guy that that Perkins uh Coe lawyer assessment was feeding this like phony uh phony scam 2 and he I don't think he was officially sanctioned but basically he was asked to leave the FBI and then lo and behold where does he land at Twitter and he is involved in their content moderation policies I think what it shows is How Deeply intertwined our big tech companies have become with the security state now how did this get exposed well Barry Weiss was basically putting forward document requests for this for the latest batch of Twitter files and she wasn't getting anything back and she's like what's going on here and the guy who's giving her the files is his name is Jim and she's like well wait like wait Jim Jim who and she finds out wait Jim Baker wait that Jim Baker the New York Post had a long story about this guy and so it was discovered that the guy who was curating the Twitter files was this former operative of the FBI who was involved in the Russian collusion hoax and then was involved in their their Blacklist decisions so in any event once this came out Twitter fired him and then you know Barry apparently received all these files that are now the the second batch of the Twitter files and just to be clear that's not James Baker if you're you know thinking it's the former right and Cabinet member not James Baker this is Jim Baker who's a different person right but a lot of people are wondering well how could this have been missed listen he's an FBI yeah these guys don't want to be found I mean they they this is some people call it you know the permanent Washington establishments some people call it the Deep State the administrations come and go the people who work in Washington stay there forever and they can simply effectuate policy by outlasting everybody else and clandestinely implementing what they believe and they've become a constituency of their own that exercises power like a praetorian guard in Washington so in any event this guy is an expert at Bowl weavling himself into the bureaucracy great praetorian guard bully you're yes when they finally rooted this this mole out of the FBI he bow evils himself into another powerful bureaucracy what is that word like Burrows like Burrows like that so he digs his way into the Twitter bureaucracy to the point where he isn't even found and then somehow he has put himself in the position to be intermediating the Twitter files can you believe this so once once it was discovered Roman army that served as personal bodyguards and intelligence agents the praetorian guard okay got it well you understand what happened is is that the pritarian guard originated because they were to defend the life of the emperor and that's what people are that then they became so powerful that uh that whoever bribed the praetorians would become emperor and then finally the last step is that the praetorians themselves would pick the emperor and whoever basically led the praitarian guard would be the next emperor at any event I mean we're not we're not at that point yet but the point is look the point is that these Security State officials have power that they should not have Okay that's the bottom line they should not be involved in our elections in this way they should be completely non-partisan and non-political they should just do their jobs as law enforcement officials but we know from the hunter Biden story that a very important piece of this was the pre-bunking that the FBI went to Facebook and Twitter and social networks and said be on the lookout for a story about Hunter Biden it is Russian disinformation and they Prime these social networks to suppress that story when it came out that was something they never should have done and they knew they knew the story was not fake they knew it was not Russian discrimination because they had the laptop in their possession since 2019. well okay that has not the Providence of the um laptop is still being reviewed In fairness and they're still going to hold on you're wrong and there is an investigation going on of Hunter Biden you all also have to put the context in here and please let me finish there is a context here of there was massive election interference going on both sides of the aisle Republicans Democrats all wanted to see the Russian interference and the Ukrainian interference and Trump's encouraging the Ukraine and the Republican the the Russians to interfere in elections everybody was on high alert and that happened to drop uh like it was announced 30 days before and it dropped 10 days before the election so everybody was on high alert and I agree that's why it was the perfect it should have been done it should have been done properly they should have said they should have come out publicly and say we don't know the Providence of this we could be hacked it might not be hacked Jason let's wait and see we have to reserve Justice let me tell you what happened let me just tell you what happened okay so they make sure you Source this I will so look it's all in the New York Post okay they've done oh great no it nobody has refuted it nobody is refuted it no let me just get let me just get this on the record here so from the post the FBI was given the laptop in 2019 by the lab store owner those guys have forensics they have cyber experts they knew the laptop was real we know it's real now nobody questions that in fact the FBI has admitted that the laptop was real and that the honor buying files are real nobody disputes that okay but what they did before the election is they use this excuse of Russian disinformation to discredit the story before it even came out but they had no business getting involved in the story that way they simply didn't they should have stayed out of it completely I don't I don't understand how you can possibly justify that yeah I mean I think we do have to look at the context of that time period when Hillary's emails were hacked and we had a problem that's a perfect excuse I will finish the sentence and we had a president which you will agree Are Presidents and presidential candidates should not be encouraging foreign powers to hack their uh their adversaries with that answer my question do you agree that president you're still wrapped up on this you can't let it again you personally attack me you don't answer the question that's fine we'll move on you can't be intellectually honestly the audience knows you're not being intellectually you don't even know what you're talking about if you could answer the simple question should presidents encourage foreign powers to hack their adversaries then you would be being intellectually dishonest I am absolutely disappointed that you will not answer that simple question it's an obvious yes it's an obvious yes but of course but I don't really believe that happened because you know Trump's going to win the primary let's keep going listen I I don't I've said so many times in the show that he's not my candidate I don't know what you're talking about you're going to win what you're doing right now is like delusional you're going back to some throwaway comment he made it a rally in 2016. it's got nothing absolutely nothing to do with this story and the fact you're even bringing it up is like pure TDS and I don't know what wasting time instead of answering a question that's your Technique is to call me names instead of answering the question I want to unmody the waters I want to make one more time another technique that I'm muddying the water so I'm not budding the words let's move on I want to make one final Point okay I'll make a final Point there's no letter listen there was a letter with this Hunter Biden thing this is 2020 election Jason we're not going back two elections ago I wanted to talk about the most recent one okay fine you had Clapper you had Comey you had 50 of these Security State officials they write a letter saying that the hunter Biden story has all the Hallmark works of Russian deformation they claimed that it was Russian inspiration when it wasn't they knew it wasn't and it was the same story that the FBI was telling uh Twitter and it was the same story that these Twitter Executives were indulging it even though they all knew or had reason to know it wasn't true and they suppressed the New York Post story anyway I don't know why you're bringing up this Trump stuff it has nothing to do with the real issue here the hold on a second the real issue is this does social media have the right to suppress true stories put out by our media before the month before an election yes or no I will answer your question yes or no and you will not answer mine because you're being intellectually dishonest yes we should know we should not suppress news stories if it was and I will argue both sides if it was Snowden if it was the Pentagon papers if it's Hunter Biden's laptop taking out the sex stuff which we both agree on or if it is uh Russia and uh Ukraine where your presidential candidate at the time Trump asked zelenski to find dirt on Biden before the election and he asked the Russians to hack Hillary's email and they did that and they released it 10 days before the election that is facts that happened and that is that's not what this one you said you would let me speak and you will let me see your money in the waters no stop interrupting me and stop insulting me I will say my part you said yours and then we will move on the fact is Trump encouraged hacking of other candidates and he did it twice in a four-year period back-to-back elections we need to be on higher alert when you have a republican candidate Trump doing something so absolutely treasonous story this is why it was a perfect cover story is because the trees in this behavior let's move on I I don't think it was a perfect phone call I think it was Shenanigans there were lots of shenanigans hold on I'm not defending anything Trump did okay I don't feel the need okay I never defended it but here but the deal is that you're letting your TDS I don't justify he's crazy you're letting you're you're allowing this Russian deformation to be a cover story I don't think post should have been blocked you're you're you're misconception wasn't even bringing this up under which the car the reason I'm bringing it I agree that the person did a great cover story that's your interpretation the context also is everybody was on high alert waiting for a hack to drop and in fact a hack dropped 10 days before you have okay we found out subsequently was a hacked they knew at the point Twitter and Facebook did not know Twitter and Facebook didn't know that's the point you you go back to the Twitter files the first drop Jim Baker hold on a second Jim Baker and Vijaya Gotti said okay that there were in a lot of internal questions about whether that that honor buying story could be justified under the Hacked policy okay and there were many legitimate questions raised internally about whether they could maintain that party line and the emerging view was that they could no longer maintain that line and still Gotti and Jim Baker said no we will maintain the idea that this was hacked information until proven otherwise even though it was not hacked it was a New York Post story okay agree to disagree let's move on why are you bringing up all this like irrelevance the audience and the other besties want us to move on so let's move on China ends most zero coveted rules and Iran might be abolishing its morality police news broke uh in the past week on Wednesday China's Health authorities overhauled its zero coveted policy and announced a 10-point national plan that scrapped most health code tracking and also they're rolling back their Mass testing and this allowed many uh positive cases too just simply quarantine at home like we were doing I guess a year ago now and uh they're limiting some of these uh lockdowns this all comes from a Foxconn letter which we don't know the cause causation here but we don't know that's why I just said we don't know cause and correlation here give give us some perspective here trema well I just think it's kind of ridiculous to assume that the second largest economy in the world pivots based on one letter from one CEO so I know that that's how the Western describe the letter please yeah well apparently what happened was Terry guo who's colloquially known as Uncle Terry who's the CEO of Foxconn wrote a letter that essentially said you know if we don't figure out a way to get out of these Panda this this lockdown process we're going to lose um you know our leadership in the global supply chain and apparently that jolted the central Planning Commission to realize that they needed to you know get out of these lockdowns I think it's something different which is I think this has been part and parcel of a very focused and dedicated plan baiji phase one was to consolidate power phase two was to get through November and to basically get reappointed for life and dispel any other you know Rivals that he actually had and now phase three is just to reopen the economy again so this guy can basically sit on top of the second largest economy in the world so I think this is sort of a natural uh flow of things the other part of it which I think is being underreported is I think that the way in which they did it was less responsive in my opinion to a letter from Uncle Terry but was more responsive to the fact that there are people on the ground and I think that these guys are getting very sophisticated and understanding how to give the Chinese people some part of what they want so that they're roughly happy enough to keep moving forward and I'm not going to morally judge whether it's right or wrong but it's just a comment on what the gameplay and The Game Theory seems to be coming from the leadership of China so it says I think this is it's it's it's good for the Chinese people and the real question is what will it mean for the U.S economy if these guys get their um get their economy going again we talked about this previously but this is a good example of the autocrat not necessarily being absolute uh in in their Authority and the sense that I think we get at this point coming out of China is that there was enough dissent from the populace on the lockdown and the experience of the lockdowns and we can all go online and see the videos of Steel bars being put on doors to keep people in their apartment buildings and people screaming and buildings being on fire people can't escape the buildings how much of that was true or not and riots in the street and people fighting with the covet testers how much of it is true or not we don't really know but it certainly seems to indicate that there was enough dissent and enough unrest that in order to stay in power the CCP had to take action and they had to shift their position and shift their tone and I think it's a really important moment to observe that sometimes the CCP um and you know perhaps even we can extend this into other autocratic regimes that we think are absolute in their Authority and their Empower and their power perhaps are necessarily influenced by the people that they are there to govern and that they are you know uh ruling over and that while we don't think about these places as democracies perhaps they're not entirely the traditionally defined autocracy that there is the an influence that the people can have and maybe we see the same change happening in Iran with young people and a population that's more modern that's growing and swelling in size that doesn't want to accept some of the traditional norms and the traditional laws and you know maybe that will kind of start to resonate around the world that the internet is starting to do what everyone hoped and wanted it to do which is the democratization of information the democracation of seeing other people's conditions and seeing what the rest of the world is and is like gives the populace the ability to rise up and to say this is what we want because we know that there are better things out there and these autocratic regimes have to start to shift slightly and over time maybe that has a real impact here's a specific statistic and chart for everybody the demographics of uh Iran are incredibly um notable if you look at this chart now for those of you listening it just shows people by age and how many what percentage of the population they are or actually the raw numbers of the population as you can see it's basically like a pair uh you have very few old people and you have a lot of people in their 20s and younger and so young people I don't know Jason it's really 40s and 30s is really yeah okay so 40s 30s uh you don't have the geriatric population that you see in other countries like Japan and so the demographics of Iran are extremely uh weighted towards younger people Millennials gen xers and younger and uh they have vpns virtual private networks they can see everything happening uh in the Free World uh versus let's say closed societies and so I think that's what gives me a lot of Hope is that these countries are going to have to evolve because young people are seeing how the rest of the world lives and I think that's a big part of the change tomorrow what are your thoughts about Iran specifically I think demographic change and then China and demographic change protests I've said this before and I've been tweeting about this for years but people so poorly understand demographics everybody thinks that we have a surplus of people and we don't and we need to have a positive birth rate in order to kind of continue to support the expansion of the world and GDP and we need that and right now we're not in that situation if you look at a country by country basis a lot of these countries um are facing that in a pretty cataclysmic way the most sensitive country to this is China I mean their population got current course in speed I think the last number is it's going to have by 2100 there'll be about 600 million people in China which is unbelievably disruptive in a very negative way for them right because you will have a lot of people who are entering the workforce having to support an entire cohort of people above them in terms of age right who are retired Etc so the state's going to have to get much much more actively involved over the next 50 years in China and then you look at other countries like Nigeria or India who are in uh you know at the beginning of what could be a multi-decade boom because you have 20 year olds that will be entering the workforce you know they'll effectively work for less than their older counterparts right so then they'll be an incentive then to bring work on Shore into those countries and so it's going to have huge impacts because then you have Rising GDP you'll have Rising expectations of living quality you'll have Rising expectations of how governments treat those people so it's all kind of positive in general but the world needs more people let's just be clear especially in Western countries we are going to be not we're not as badly off as China but we're not far behind yeah here's a quick view of China and Japan which is in the same kind of I don't know what they exactly call these charts are kind of like vertical histograms but you start and again you know data's hard to come by in some countries but you know China's starting to get top heavy uh when compared to Iran and then if you look at Japan quite stunning there's just no young people left and uh they live very uh to much older ages in Japan it's this longevity is one of their great strengths as a population as a country and so these demographics can't be fought uh you're going to have a contraction constricting economy in Japan and their place in the world is going to be very very different okay where do we want to go to next we never asked my opinion on on uh usually you just talk so go ahead I didn't want to I didn't know no I usually have to fight to give my opinion oh here we go listen have your agent call my age and we'll talk about it okay uh we'll talk about it I have a slightly different view of what's happening in China uh Jason which is you know I think that the people there need to stop harassing the CCP you see the Chinese Communist Party they're the elites they've set things up for the benefit of the people they're not engaged in Shadow Banning they're just you know they have a system there to you know to engage in censorship to prevent abuse and harm yeah right that's the system continue they've set up right yeah and the people just need to understand that that when they say things like you know when they oppose things like covet lockdowns like jabaracharya did they need to understand that that is engaging in abuse and harm exactly yes and you know what they they re-education camps for citizens who need you know to uh maybe rethink their positions on freedom and their wages the hours they work and their and their social conditions you're you're absolutely correct China really has built a perfect model for our society yeah well well said sex all right now we can move forward let's go for it we already finally we're in agreement by the way you know that's going to get clipped out and go viral do you understand right according to it's according to our Elites according to our Elites sites Yol Roth or Taylor Lorenz to criticize them is a form of harassment you understand that right so therefore what the people in China are doing specifically by opposing lockdowns you know they're taking the j-podacharya point of view they're engaging in harm and abuse and harassment of their betters the disagreements why won't they just submit to the social credit system that has been set up for them for their benefit it's for their benefit why question it yeah just accept accept your fate and work hard for the good of the people great great points let's move forward should we talk about sales I think it's actually a pretty it's a it's a pretty good satire I agree all right I think we have to talk about FTX I I don't know if you saw and I the the people covering for SPF it continues to be an absolute joke the number of interviews that SBF is doing is absurd but the people carrying water for him is is even more offensive I mean if you're a criminal trying to cover up your crime okay we get it you're trying to cover up and stay out of jail uh but Kevin O'Leary um who um calls himself Mr Wonderful uh was on CNBC trying to defend the fact that he was given this is stunning by the way 15 [ __ ] million dollars to be a spokesperson for FTX so the grift not only went to the Press politicians uh but now commentators on CNBC 15 million dollars to put that in context I mean you're talking what an elite NBA player gets from Nike this does not exist in the world uh you know Kevin O'Leary might get you know 50 to 200k for speaking gigs but nobody gets 15 million dollars to show here's a 75 second clip that I don't know if you've all have seen but is unbelievably stunning see on the other side of 75 seconds if you're a defense attorney that represents someone that you know is guilty you gotta say yeah well they're Innocent but you may know they're guilty you may know they're guilty if you find someone if you watch someone kill someone yeah they're innocence there's only the murder of my money in this case okay it's murder of of ftx's money it's My Views everybody's look Joe if you use money that you've got I don't I don't know I don't think you should be singing the blues right now at all oh yes I'm singing the blues why because you're 15 million didn't pass out that you that's a lot of money a paid spokesperson it's a lot of money you didn't have to do much for that that's pretty that's found a different decision that's a different discussion you know you can make that decision on your own but I'm going to this point if you want to say I'm guilty before he's tried I just don't understand it but it may end up costing me 15 minutes for a reputation on everything else that's the problem that's why I stayed on this Pursuit I'm very transparent about it I've disclosed everything I know about it I will find out more information if I make the credit committee I will act as a fiduciary for everybody involved I will testify I am an advocate for this industry and this changes nothing just look at the numbers that came out of circle today I'm an investor there too you've got the I lost it all in FTX and we have a fantastic print on Circle the promise of crypto remains this will not change it pretty crazy 15 million bucks any thoughts on the continuing SBF Saga sex well I don't know why we should care so much about him I mean Kevin Leary but um but it's indicative right it's indicative of all these guys that got money from this who is he who is he he's on track tank he's the one what he's on Shark Tank and he's a contributor to CNBC who's on multiple times a week the point is like you've got the grift I'm just trying to point out 15 million dollars to a CNBC commentator is just an extraordinary payoff I've never heard of anything like that I don't I don't think it's fair to pick on Kevin O'Leary per se because there is a bunch of those guys that took money from him you know a bunch of athletes did probably a bunch of movie stars you know Republicans yeah like everybody got paid by this guy okay just like in the just like in the Twitter example I think it's important in this case to generalize because the generalized thing is the real problem look if you want to focus on the Crux of this you have a concept in law that sax knows better than the rest of us called fraudulent conveyance and we have example after example where it does not matter whether it was in the Bernie Madoff example or for example Jason we talked about it the guy in La that lost all the money client funds playing poker yep you have to give the money back especially if it was fraudulently conveyed to you explain can you explain this in detail for a second so the audience understands well on my understanding which is very basic and I think David can probably do a much better job is the following which is if you get money some way but it comes from somebody who fraudulently acquired that money you have to give the money back so in this example what it would mean is if that they can show that that 15 million dollars that this guy got came from SBF basically rating the piggy bank of user accounts he's going to have to pay the money back just like for example in the Madoff fraud the the the folks that went to find the money were able to go back to folks that actually redeemed even the beginning early ones and said I understand that you didn't know any better but this was fraudulently conveyed to you so we need the money back and they got the money back in that case if they had put a million in and it grew to 3 million they got their million principal back but the two million in gains which were ill-gotten had to be returned returned return returned exactly so as I as I understand it based on just what I've read that there's a 90-day rule around contributions meaning that if I think this has to do with the bankruptcy that that if he donated money within 90 days then that can be Unwound so um yeah but I do think it creates potentially a powerful incentive here by politicians and various political groups for him not to be convicted of fraud for him to be able to plead this out into some sort of negligence because they don't have to give the money back they keep the bag what an incredible Insight well this is what I think so interesting about the governor Larry thing it's not about Kevin O'Leary but it's about the fact that the money was spread around so widely and into such like deep trenches of the regulatory Society Society like into the blood influencers um yeah and basically I think the guy like cemented this the he thought that like which which I think by the way is a really interesting product of the crypto ecosystem and the model that so many kind of crypto businesses have engaged in over the years which is if you can Fester the belief then there is a business if you cannot Fester the belief there is no business that there isn't a fundamental productivity driver it's about building a belief system and you can buy a belief system if you can take money that people have given you you can embed it in influencers and celebrities and politicians and regulators and if you give it to enough of these people and you give enough of it to them maybe that belief system solidifies and your thing becomes real which is of course a Griff technique by the way in the grifters oh tell us all about it Jacob yeah yeah it's a master no no it's the patina and it's this uh you know you look like you're incredibly Rich you know you're going to fancy restaurants you're wearing an expensive suit you're getting in a sports car and then you own some Palazzo or whatever and then some other rich person comes and you get them to invest in something and then you have Scotland with the money but they see all the accoutrements you check all the boxes your parents were Stanford you went to MIT and you are donating large sums of money and you got this big table at the club and you got a penthouse everybody starts to feel well might is right you got the wealth there might be how would you guys like how would you guys feel about honestly honestly no backing a CEO of a growth stage company that you put your firm's money into who lives in a hundred and thirty million dollar house and has not yet exited the business yeah absolute alarm Bells everywhere and this is why I'm not a fan let me ask you guys a question okay secondary sales yeah let me ask you guys a question do you think that a billion dollars of dark money could stop a red wave just asking for a friend sex no honestly do you think it's overweighted the money yes his mother was a huge Democratic bundler yeah and moreover the the specific politicians he needed to influence there yes there were some Republicans but by and large it was the SEC so are you the first person to make this clan I want to say did you hear it here first on the olive pod mushrooms David sacks making the Declaration because of well let me ask you let me ask a follow-up question what do you think would have more impact on our election enormous amounts of dark money going to Democrats or extensive Shadow Banning of conservative influencers yeah which one do you think would have a bigger impact in the 50 50 country where I mean the scales are like balance where these elections are just a few thousand votes yeah what do you think the result is going to be if we actually have a Level Playing Field we get rid of this swindler's dark money yeah that's an interesting question um Let me let me add a link to that um what would have a bigger impact this uh I think this is a great except for when you guys had your fight like or taking away a woman's right to choose after 50 years of giving it to them which would have a bigger impact on the red wave that didn't have a big impact but I think we're going to move across that I think we're gonna move past that yeah all right great yeah great great great strategic what do you think about the cinema Kristin Cinema Kirsten Cinema flipping to Independent do you think that's a big deal or I think I think it's really interesting I think it's actually a very shrewd move on her part well first of all I think she's great you know yeah just tell us tell us about her sex no well she she's she is the center from Arizona a formerly Democrat now independent who is in the mold of you know John McCain who is a former center from Arizona sort of this Maverick independent and she does not kowtow to her party Orthodoxy and when Biden wanted to pass three and a half trillion of buildback better spending she along with Manchester to post it and I think save the administration from this gigantic boondoggle that would have been inflation much much worse now imagine got all the credit but she was equally responsible for putting a hold on that and then as a result they only did the 750 billion inflation reduction act so she's willing to Buck her own party now as a result of that I think they were planning on she was going to get primaried that the progressive wing of the party was planning on primary her and by moving to an independent in a sense she preempts that because what she's now saying is she's now sort of like you know uh Bernie Sanders is an independent or this guy uh Angus King from from Maine they still caucus with the Democrats but their independence and the in and the Democrats don't run uh candidates against them because they know that if they do you'll have a republican a Democrat and independent and the Democrats in The Independents will split the vote and the Republican will win so basically she's now daring the Democrats hey if you want to run a candidate against me I'm not going to sit around and get primaried by them you go ahead and run somebody but then we're both going to lose so they're a republican that's what's smart about it is I think she's daring Schumer to run somebody against her it's also interesting she's she's the only member of Congress I've read That's non-theist which is kind of like eighth issue doesn't talk about God or doesn't believe in God and I think she's the first openly bisexual member of Congress she's a Maverick certainly sex do you think she held up on making this decision until after that Georgia Senate runoff election finished and do you think that it influenced the decision I don't know but I I think that the the Democracy well imagine if she doesn't make this move now okay and then in two years well I guess really next year she gets primaried okay and then what if she loses the primary it's going to be very hard for her to run as an independent at that point it'll look like sour grapes sore loser right but if she goes independent now she's saying listen I'm running as an independent no matter what the question you have to make is what the Democratic party is whether to support me or basically take this election and throw it will we see more of this purple approach I was just going to ask you what does this mean for Joe mentioned well I don't think Joe manchin has this problem and I'll tell you why because um West Virginia unlike Arizona is like a plus 22 Red State Joe manchin is the only politician in that state who could win that seat for the Democrats when Joe manchin retires that seat is going Republican and Schumer knows this the Democrats know this they think they're lucky stars every day that they got Joe manchin because otherwise that would be a republican seat and so look all this stuff about how the progressives were upset with mansion and all that publicity he got that may be you know the sort of progressive Wing is going to say that publicly but the smart Democrats know that they're very lucky to have a politician like Joe manchin on their side of the aisle I could ask a question to you chamoth why do Democrats why why are they it seems to be so anti-moderate Democrats why are they so resistant to the concept of a moderate Democrat when obviously moderate Democrats seem to have an advantage in these elections well no I think David described it well which is that in many of the seats this is both true for republicans and for Democrats you're not really competing in a general election you're competing in a primary and if you win a primary you're probably going to win so like you know if you're in Mississippi for example you just have to win the Republican primary Nothing Else Matters and then you're just going to skate to Victory and so the real question is who votes and those are different oftentimes and who votes in the general and this is why you get this dispersion that's happening where folks seem to be getting more and more extreme it's reflecting the sound bites that those primary voters want to hear and this is the big problem that we have and that's why like if you have a bunch of this you know ranked Choice voting or you know these other kinds of methods it starts to clean that up so that you move people more into the moderate middle but that's why that's why you have this crazy stuff happening all right everybody this has been another amazing episode of the all-in podcast for the dictator the Sultan of Science and David sacks I am Jake out we'll see you next time bye we'll let your winners ride rain man [Music] we open source it to the fans and they've just gone crazy [Music] it's like this like [Music] your feet we need to get Mercies oh yeah [Music]






Captain calacanus is here reporting for Duty with us Spirit Airlines cup absolutely Spirit Airlines I just want to say all in podcast now sponsored by Montclair and Spirit Airlines or now sponsored by the Village People [Music] wow are you a pilot or a flight attendant Jayco he's a flight attendant I don't think he's thin enough to be a flight attendant are you fat shaming me are you body shaking you can't do that nowadays that'll get you canceled get exact canceled at this point like fat shaming would be number 72 on the list he can't get canceled because all the libs have left Twitter there's nobody to there's no Home monitors left they all pretend no they quit every week yeah it's like all the Lives who said they moved to Canada when Trump got elected yeah Canada immigration go ahead [Music] let your winners ride [Music] [Music] a hacker figured out a way to take all this data and track you know people's Yachts people's planes obviously one of those people was Elon Elon had a security issue this is all public information so the larger issue at stake here is the fact that the law allows for people to do this persistent tracking of planes which then becomes persistent tracking of a person and what really is at stake here is how we Define the term doxing for people who don't know the term doxing it means giving a person's location that could be your home that could also be you're at a location for some period of time you're at a hotel you know for a basketball game uh and it's pretty clear you can take a picture of a celebrity say there's a celebrity here oh Lady Gaga's at the farmer's market what I object to here uh we all understand doxing is dangerous and it in fact is against the law to just get people's addresses and stuff like that um the issue here is a new type of doxing which I'll call you know persistent coordinated doxing where dozens of times a month you're giving a person's location it may not be against the the First Amendment sacs I think you would agree but we have to ask ourselves do we want to live in a world where whether a person's on an electric bicycle or an airplane or any device in between somebody should be releasing dozens of times a month a specific dedicated feed of their location it is terrorizing as a parent when this happens I've had doxing people on the call here have had various security concerns we don't want to live in a world with de facto doxing what these sites were doing was de facto doxy I think it was a bad decision and I think that it um uh represented on the least generous statement would be that it represents deep hypocrisy in that not just a few weeks ago did he say he would never delete that account but he also said he was buying Twitter to enable freedom of speech and freedom of expression and that he wouldn't come in and do the same sort of content moderation that was done by the old regime and then he came in and did exactly what the old regime did which is that he took the rules and he took the quote moderation policies and he found a way to use them to make some editorialized decisions that he thought was appropriate now the more generous thing is what you guys are saying which I don't think is necessarily wrong which is that he's trying to protect people where there's some loophole or some law that doesn't seem right morally but it is the law and it is what it is in those cases I think you run into the exact same issue that the Old Guard at Twitter had that the moderators and the executives at YouTube have dealt with and that the executives at Google have dealt with and that we sit here and we criticize until you're on that side of the table and you're forced to make these moderation decisions you're forced to make these policy decisions and you're forced to implement these policy decisions because of some moral framework that you now think is appropriate and guess what some people will say that's not freedom of expression that's not freedom of speech you're taking that away from some people you're taking this particular case away from a 15 or 16 year old kid who's built a a Twitter feed and so I think what it shows is just how hard it is to moderate these sites these platforms and that there is no simple easy idealistic ideologue of hey all these things are open all these things can be used by anyone all the time because as soon as one of these edge cases start to happen you want to come in and do something about it what do you think what should happen going forward so I I have had these issues happen to me multiple times times I'm not nearly as important as Elon is but it feels the same when you're in the middle of it it feels pretty terrorizing that being said I think the real decision for somebody like me is that if if it's too much is frankly just to get rid of it and you know to find a different mode of transportation that's a little bit more Anonymous and your practice about it and the reason I say that is that I just think that you you would have to go and get the government to basically change the law which they're not going to do and so then as a result your reaction will seem somewhat contrived and deeply personal and in that I think you lose credibility let me just summarize this and be the first one to just State this I think that if there's any person in the world that can figure out Twitter it's probably Elon but man has he taken on just a gargantuan battle and increasingly I am not a fan of this battle and I'll tell you why this is a man who is essentially proven that he can bend the laws of physics on behalf of humanity he's done it twice once in electric cars and once in rocketry the problem is that the realm of decision making at Twitter has nothing to do with the laws of physics and is governed by emotions and psychology in which there is no canonically right answer and so he's quickly finding out that half the population will always find fault with him no matter what he does and now the implication of that becomes very important we saw yesterday that he had to sell another 3.8 billion dollars of Tesla stock why is that it's because this transaction which was you know very tight to get done probably required lots of margin you know there I look I have a margin loan at credit Suite so I know how these things work and you can very quickly get Margin Call you have to sell down things that you own in order to maintain your collateral limits we've talked about this before he's had to do this twice now in the last few weeks and that's because again not because of the demand that Tesla as far as we can tell but because people believe he's distracted and so people are anticipating weakness at Tesla people are now shorting the stock anyways it's causing this downward spiral and can he fix it I think so can he pull it all out sure is it just putting himself under an enormous amount of pressure that he could have avoided somewhat yes and I think that this is sort of where we're at um six weeks in my gosh I mean I was saying this guy learned in six weeks What it Took YouTube seven years to learn how hard it is to moderate content and you know I think the thing is that's what I disagree is okay you're attributing so much good faith to these content moderators at YouTube and Twitter when the Twitter files reveal that they made no effort to suppress their bias in fact they were like pretty much dancing in the streets every time they booted off someone they didn't like fair enough before you react to What Friedberg just said at the end that Coda can you respond to what I just said isn't it true like it's like well look I mean if you define what Elon is you know doing there as you know acting as a judge arbitrating on every little content moderation decision is that a great use of his time relative to what he could be building at Tesla SpaceX and doing on behalf of humanity then no clearly not but if you define what he's doing in the larger sense as restoring free speech to the most important Town Square social network hopefully thereby inspiring other tech companies to move in the direction of opening things up then I actually think it's a pretty good use for his time so look I think we can quibble about this or that decision that he makes or this or that tweet but I think the overall thrust of what he's doing is very important for the country and for Humanity so I get where you're coming from hopefully he'll find some people at Twitter who he can Empower and Trust to make these content moderation decisions so he's not drawn into every single little battle right we do want him focused on the highest priority problems my point is just that I get that I just think that what he's learning and what we're living and seeing in real time is that there is no canonically right decision ever in this space there's only a decision where some percentage will support and some percentage will always be against because that's my point correct he did say when he took over he knew that would be the case he said you will know I'm doing the good job when both sides are equally upset just to to put a pin in it I think it's important for people to understand what the new policy is so I'm just going to quickly read it just hang on sorry hang on one sec before you get to because I think the the philosophical Point rather than the specific one is it's an important one and I just want to respond to what your mom said and and have sax respond to this in the case of the the points you make around the Twitter files and by the way I don't agree with any of the moderation decisions personally so I don't think that someone should be suspended for posting public information I don't think someone should be suspended for saying controversial things that's my personal opinion just so I'm clear on that because I know that you know describe yourself as a strong Free Speech yeah libertariance okay sure and um and so in this particular case I think what really irked me I was trying to identify why it made me so angry yesterday it triggered me it really did and I think the reason was that in the case of the Twitter file points um it was a minority it was a minority that was affected it was one person that was affected did because the majority wanted to do that thing to that person and I think in this case it's that the minority wants to affect the majority in the sense that Elon has aggregated this control and this power over moderation and he's benefiting himself and a few people that have private planes and he's shutting down hundreds of twit feeds Twitter feeds that are using publicly available information and so it feels even more onerous of a um a use of power and influence because he's taking um he's doing something that benefits a small number and affecting a large larger number whereas the alt where's the other one was affecting a small number that benefited a large number because that's what a lot of people wanted to see happen a lot of people wanted to see Trump suspended and it wasn't right either okay I don't know if that if that makes sense yeah we understand your position completely I just want to add to that in this policy I think it's very important to understand what he is saying about this accounts dedicated to sharing someone else's live location are going to be suspended going forward you can still share your own location obviously content required uh you know content for public engagements you know the president is speaking somewhere whatever you just really can't be persistently consistently tracking an individual Otherwise Known and you know stalking but Jason if NPR is live tweeting sure Jerome Powell's speech perfect XYZ location not a problem if they do Jerome Powell's location for the next year for the next year 10 times a week on his off duty on duty that's the same thing we're talking about I'm just saying like let's just say he gives a speech every week is that illegal no if you totally fine if you're giving a speech at a public place where you've announced that you're going to be appearing at a certain time and place you've already made the public where you're getting a problem what we're talking about is and what what Elon jet was showing was a live stream of precision GPS coordinates over a sustained period of time yes and not to be too dramatic about it but if you look at like the weapons that are so successfully being used in Ukraine right now they're all Precision GPS guided now right now you have to be a state actor to get a hold of those weapons but you could imagine over the next decade that having someone's precise GPS coordinates over a sustained period of time it would be pretty easy to Target them for and not to be dramatic here but for assassination yo that is a security risk there's no way around that I brought this up with Palmer lucky man I'm scared that dude could come at me anytime when I get my jet I don't want farmer lucky taking me out yo Palmer I'm sorry dude do not take me out I'm gonna get my jet I'll be on my first flight and he's just gonna to send a drone in but look let's talk about hypocrisy for a second okay because here we go let's let's talk about CNN's hypocrisy and the media's hypocrisy because earlier in the week they were saying that any criticism of yoel Roth who is Twitter's former head of trust and safety amounted to a threat to his safety and they had this like theatrical tweet where they claimed you as having to flee his house which a lot of people found uh pretty Preposterous they were basically saying that public criticism of someone who has put themselves out there to engage in a public debate who's writing op-ed's New York Times that is a threat to safety however publishing someone's real-time location on a continuous basis so they could be taught not intellectually consistent it's not intellectual consensus safety that is not sorry if if one of those two things is a threat to safety it's the real-time doxing of somebody yes I think we Now understand why Elon did what he did he basically had an incident in LA in which the safety of his kid was threatened because he's got stalkers coming after him so his safety is a real issue it's not like a made-up issue yeah why should his personal experience affect the usage of the service that hundreds of millions of people use and that's the big issue the decision should not be based on what affects him personally there needs to be a possible basis there needs to be a principal basis for any decision moderation or censorship maybe in the first few hours of that decision it wasn't handled perfectly because there wasn't a principal basis but since then one has been put in place the principal basis is what jaycal showed and this applies to everybody and so you know now it's a debate about whether that policy makes sense now is Elon just as arbitrary and capricious as the former uh Executives who are running trust and safety at Twitter I don't think so for two reasons number one he's promised transparency he said that when we ban or Shadow ban an account there has to be a reason for it and you have to be alerted to it in other words none of the Shadow stuff no should be informed you've got your speeding ticket you get your ticket it's there right no more shadow that is different and then the second thing is that and again I think you could say they didn't do this perfectly in the first few hours but there needs to be a principal basis for a censorship decision and it needs to be applied to everyone equally and so far we haven't seen any basis for believing that he's not applying this principle equally I mean still very early whereas the former rulers at Twitter were indulging their personal bias and personal preferences and who were they were Banning there were two standards of Justice if you were someone who has allied with them it was almost impossible to get censored no matter how hateful your tweets were but if you were somebody on the other side of the political debate they were eager to suppress you and I think that at least so far Elon has not shown that type of selectivity he's selected against someone that put him at personal risk he I think yes if that's where the decision had stayed yeah then I would agree with you but I think that since then they've put in place they've undergirded that decision with a personal policy I think those sites are I think those tweet um streams are cool I think there's some cool tweets streams that some of these people run and there are hundreds of them and they're actually kind of cool you can see where these different you're in favor of people tracking people's planes like where Air Force One is they show all these different planes it look and whether or not the FAA should be publishing this data as a separate question but it's on the open internet it is already there it's like turning off the RSS feed from the open internet to protect himself okay that's why it feels owner so here's the part I agree with which is I think this policy with regard to playing specifically is going to be futile yeah it's going to be at best harm reduction because as long as there's many ways to publish this information on Facebook so listen I think this whole I think this whole policy on Twitter is a little bit of a red herring I think the real issue issue the real underlying issue is that the FAA is publishing these iCal numbers thereby making every plane personally identifiable I don't think there's I haven't I have a counter to explain why if that's necessary I have a counter to it actually sex if I may what we saw whether you agree with it or not with the mass Banning of certain individuals did actually silence them and take them out of the Public Square one of the reasons in fact Elon wanted to buy Twitter so if you look at certain individuals whether it's Milo Alex Jones Trump himself right on down the line when they got banned across all systems it was dramatic in terms of the reach of the that information so because of the size and scale of YouTube Facebook Twitter Etc when they act in coordination they can have a dramatic impact not a perfect impact but a dramatic which is why we have this issue of hey should 230 be rethought because when they act on mass it is extraordinary what they can do to an individual they took Alex Joe who how do you consume Alex Jones you have to seek that out in a major way it's distinctly different last word and then we're moving on to what could be the greatest science Corner ever in the history of all in pod final words I think this is this is a great transition we're about to talk about nuclear fusion and my point is I don't care about any of this stuff like I said yeah like this is my point is like the if you if you take like an average person okay you know we are let's say awake 16 hours a day and you know if you take out the time with our family David the family is people that are related to you um can we DM sax those people one more time we'll send you their names um but if you take that out and you take out you know exercising and you know can we also explain that to sax that's when you uh crease your heart rate and sweat sex the point is that you have let's just call it 12 hours you know a functional executive time that you can apply to a problem and you can break that down into these blocks right I would really love what is basically the smartest human and the most productive human of Our Generation to be feeling those blocks with things that sort of like really transcend and increasingly and I agree that freedom of speech is important increasingly those buckets are being filled with things that are very low level and Hyper tactical and are distractions at best to the to the path of free speech and so I think that hopefully he gets all this [ __ ] under control over there he finds a good executive team I would like to see him get back to Landing rockets on barges getting to Mars finish self-driving we're almost there moth definitely has a point but I just say one of the reasons why we don't care that much about this issue is because I think something to understand that's important is there are different kinds of speech and different kinds of speech deserve different levels of protection the fact of the matter is like business advertising is not as protected as political speech porn is not as protected as political speech political speech speech criticizing the people on power is the most protected category of speech because the founders of the country understood that the people in power will always try to insulate themselves from accountability by limiting that kind of speech but that is precisely the kind of speech that the former rulers of Twitter suppress the most and showed the least sensitivity to so listen I mean is Elon going to be the perfect content moderator no I mean nobody is nobody is but I do not believe that puts him in the same category as you know vijayagati or yoel Roth who showed no sensitivity for political speech he has indicated a desire to restore freedom of speech and I think they ultimately ended up in a place I want him to get us let's move on to Twitter best science Corner ever so according to sources scientists work for the U.S government have achieved a net energy gain in a fusion reaction no for the first time not net energy gain get it right we had ignition energy which is very different from that energy gain okay hold on I know that you're in the anti-camp please let the science nerd have you you have to you have to say it correctly so that people understand what you're talking about let me just make it even simpler then explain to us what Fusion is Dr Friedberg and explain to us why this could potentially change everything we did this on a on a show once before but I'll kind of do a quick kind of summary again basically if you take Atomic nuclei which are made of protons and neutrons and uh they repel one another right because protons are positively charged so they want to push apart from each other so with enough energy and enough density meaning that they're moving fast enough and they're close enough they'll overcome their repulsion and and jam into each other when that happens some energy is released because the total mass of the fusion of those those nuclei is actually less than those nuclei when they're on their own and so some energy is released and that energy drives a a chain reaction and so Fusion is this concept that is fundamental to physics and fundamental to the energy driver of our universe so the star in our uh in our sky uh the sun is driven by fusion and only about 15 of the mass of the Sun at the center is dense enough to actually drive Fusion so the big challenge with Fusion is how do you get these these Atomic nuclei close enough together and moving fast enough that they'll actually fuse and release energy and that's super hard the reason it happens in the sun is because the sun has so much mass that the gravity pulls all those particles together they get close enough they get hot enough they move fast enough and fusion happens boom all this energy comes out and every day we're warm now to do it on Earth is very difficult but if we can do it what happens when you fuse nuclei together is you don't release any this isn't like a radioactive fission reaction you release energy that can be harnessed to drive our systems our technology how is it done yeah so in the 1950s you know this was theorized hey we could do Fusion on Earth we got to get a really really dense plasma meaning the atomic nuclei and the electrons have kind of gone off the atoms and it's just the nuclei spinning apart you got to get them to move super fast like tens of millions of degrees Celsius and you got to get them really close together so how the heck can you do this so there's a couple of um Concepts to do this one of which is called inertial confinement which is where you basically create a little pellet of the uh the material you're going to try and get diffused and you put a ton of energy on the outside you can press it really hard really fast and when you compress it really hard really fast and you can get it to be done in a perfect sphere and you can get it to collapse on itself very quickly without you know kind of shooting all over the place enough of those particles will come close enough together fast enough hot enough and they will start to fuse another way is through magnetic confinement where you use magnet genetic fields to create a really hot plasma get it to spin around or to move and then the magnet brings that super hot plasma closer and closer and closer together until all those particles are moving fast and they're dense enough that they start to fuse so you know one is called magnetic confinement the other one's a neutral confinement and so what we saw happen this week is at the national ignition facility which is a facility that was built starting in 1997 and they've spent about three and a half billion dollars to date they demonstrated a net energy output from the fusion reaction Governor neutral confinement system and what that means is they took a little pellet and that pellet was made up of deuterium and tritium the atomic nuclei that they use the particles that they use are deuterium which is a proton and a neutron stuck together and then tritium which is a proton and two neutrons stuck together and the reason they use those two combinations is of all the different ways you could fuse nuclei together this has the best energy output of any kind of reaction Freebird yeah what actually happened this time that made this work for what apparently only three billion dollars you said you didn't say three trillion said three billion three yeah about a third of what Sam bankman fraud stole we have done something here yeah allegedly so what actually happened that is so dramatic that we have a press conference everybody's losing their mind so yeah I just want to highlight one more thing about why this is so hard you have to get such an incredible density you have to get an incredible energy so high temperature and high density that confining those atoms and not letting them escape and and you know um basically dissolve before they fuse is super difficult it requires so much energy in such a controlled way in such a perfect and precise way that all of the digital technology the magnets all the measurement systems all the software it's taken us decades to get everything that allows us to to do this today and now we're at the point that we may be able to start to realize production scale Opera kind of versions of this so what they did is they had a small deuterium and tritium pellet and they've shown 192 lasers onto this container that held that little fuel those 192 lasers the whole thing happened in a billionth of a second the laser is pulsed boom here's an image of it and as they did that they you know basically x-rays kind of Hit the sphere this little BB if you will uh BB kind of thing and compressed it and it compressed so quickly and with such heat and it didn't dissipate because it was done so precisely all the lasers hit at the exact Right Time Boom this thing compressed and then energy came out and the energy that came out that was measured was one and a half times the energy that kind of went into that reaction and here's a chart that that I'll show you from the national ignition facility which shows just how inefficient the system still is and this isn't even speaking to um to chemov's point but basically these guys um lose 90 percent of the energy that they put into the the center of the system only 10 is actually used to drive the compression the rest of it is lost and there's a lot of ways to improve the efficiency of the system from here but basically they put two megajoules in they got three Mega joules out and so it was the first proof Point production proof point in the 70 years that we've been theorizing about nuclear fusion here on planet Earth that this is possible and it's real now this is these kind of inertial confinement systems there are 33 private technology companies today that have raised about three to four billion dollars so far this year to pursue several other Technologies besides what the national ignition facility is showing to try and build production-ready versions of nuclear fusion and so these 33 companies are using a bunch of different types of tools one of which is the Tokamak if you show the image I'll show you this one there it is yeah tokamac this is what we talked about that is the magnetic spinning thing that looks like Iron Man's uh Arc Reactor which I think this one based it on yeah yeah you create a plasma you basically speed up the hydrogen nuclei super super fast these deuterium and tritium nuclei super super fast and then you use magnets and the magnetic field has to precisely squeeze the plasma squeezing it squeezing it squeezing it and if it's slightly off and even the tiniest way think about a balloon right if you put a pinhole in a balloon everything escapes from the balloon yeah you gotta do it that's how technically hard this is you're basically trying to create a balloon with a magnetic field and you're trying to keep the gas and you're trying to make it smaller and smaller and smaller and if any tiny hole emerges the entire plasma is that what happens in Uranus like when you're trying to hold in the wagyu anyway uh let me ask this question then um about the consistency of this and then we'll go to YouTube off can they do it consistently or do you think this is like they got lucky once uh or are we going to be sitting here a year from now and they're like we put in two when we got out six so and we did it five times yeah so so now we've proven that humans can do this okay which is look I mean I want to give you guys some uh and I know kind of some of chemov's concerns which is how much can recreate the sun is what we this comes down to no yeah but no because no I I want to just say one like if not even close I want to say one important thing from a historical context all breakthrough technology starts out seeming impossibly large impossibly expensive and impossibly slow the Human Genome Project 20 years ago cost a hundred million dollars to sequence the human genome today we can do it in a couple of minutes for a hundred dollars okay incredible the first computer the Antioch computer had 500 flops of compute capacity it filled a room it cost eight million dollars to build 20 years later we had a Mainframe no this is all this emotional [ __ ] you're using the wrong examples okay let them finish then you got your mom good finish your sentence Freeburg and then we go and today we have an iPhone that can do 2 trillion flops of compute in your pocket I think that what we're seeing with Fusion today is similar to what we saw with the eniac computer in the 1950s which is the demonstration that compute is possible and now we're seeing a demonstration that Fusion is possible okay and a lot of folks have anticipated this moment and they've invested ahead of this now I don't know if any of these companies that are currently kind of being built are going to be production ready anytime soon my estimate is that we will see production demonstration confusion here we go 23rd in the 2030s so call it eight years from now plus and then you'll see grid scale scale up in the 2040s so this isn't something that's going to happen next year or two years it's already happening what are you talking about okay now tremath your rebuttal oh my God knowing you're a huge fan of solar this is the most Naval gazing hit up your ass scientific [ __ ] okay couple points let's start with the basics the first is that there was no previous technical change like why are you angry at me I'm not angry I find this so tiring hearing this it's all seriously he's right yeah it's not like I don't get it because I don't find this intellectually honest okay let me finish let me finish okay when you talk about sequencing the genome there was no alternative so you're right it was an enormous technical Leap Forward when we built a computer there was no analog it was an enormous technical leap and so you're right we have a cost curve we don't understand and then we iterate as rapidly as possible and all these Innovations where we've built an entire infrastructure to ride down the cost curve the thing is Fusion Energy exists today it's called the sun we actually know how to capture it had virtually no cost right now so according to the iaea today you can capture grid level solar energy for about three cents a kilowatt hour that's as close to zero as we've ever been and over the next 10 years their forecast is it's going to get to one and a half cents if you then want to store it and you layer in storage costs we'll be at a whopping three cents a kilowatt hour that's where we are today and so I think that Fusion does exist I do think that this is an incredible technical leap to replicate something that exists and I think that's where the intellectual dishonesty is it it does exist it has been captured it can be harnessed and there is a positive energy equation just in a different modality that doesn't speak to these technically minded individuals a couple of other points about what I saw I think it's incredible what happened okay but just to make sure we're clear this is 192 lasers the size of three football fields that consumed 322 megajoules of energy which then ultimately delivered two megajoules to a Target which then released three so this is why I'm saying we had positive what's called Ignition energy we did not have positive electrical energy captured so yeah could we figure this out absolutely can we then shrink the three football fields down to something that looks the size of a laptop we possibly could will it take 20 or 30 years possibly but in the meanwhile if the goal is unlimited Costless energy you're on that cost curve already yeah but why can't it be both so you said I was being intellectually dishonest dishonest yeah you're comparing what you're saying is right yes you can get which seem to be in agreement like yeah I I just think that I think that you're trying to say that this is an entirely new thing no it's a different approach to a thing we've already beaten and and basically captured let me bring what I would argue to mop and I think this is important future on say a football field sized facility from solar is you know a tiny fraction of the energy you could generate from a football field size Fusion reactor and that's why the argument would be like hey you know when we were developing computers hey we have abacuses we shouldn't be developing computers and I think that's that's the analogy I would use here this is why the cost per kilowatt hour is what the uh the levelized cost of energy tries to do it tries to to normalize that argument away because everybody would say that hey hold on a second you're going to need plain fulls of this or boatloads of that and people said no what's the levelized cost of energy how what is the cost per kilowatt hour to generate energy and what I'm saying is that is an absolute scale and free is zero and we're at 1.5 cents here's what I would say once check out one sec okay the opportunity here is not necessarily about cost reduction it is about scalability and if hydrogen is abundant which it is on this planet it is nearly infinitely abundant we can take that hydrogen and we can scale up energy and electricity production in a way that is unimaginable compared to solar and I don't think that solar should be excluded solar is key today and should be scaled up and I'm 100 agreement with you but the scalability to go 100x if we want to make a hundred times more electricity I think we need fusion and I think that it's feasible so I think we have uh reached a good settlement here chamath you're saying Hey listen we're getting solar down so cheap we can solve this problem all forms of energy okay great we are solving that so for our needs today and then what Friedberg is saying but what if you had unlimited a thing that we can't even imagine beautiful now watch as I get sacks involved in a science conversation he has zero interest in Mr David sacks if in fact there was one hundred percent more free electricity available in this time frame the next 10 days 100x the available energy in other words supply of energy just becomes flooded and it's free essentially what would be the geopolitical reaction on planet Earth in terms of uh this incredible rivalry rivalry we have with China and for Humanity on a political basis such a good question Jacob go ahead that's a good question here we go thank you world's greatest moderate ATM while we let Freeburg answer it no no but you're the politics guy get in there what um I already has thought about this let's I want to hear his answer I actually want to hear your answer unless you know in in a world where you know energy becomes more abundant hasn't been paying attention guys this is what he's trying to say I'll call your intellectual dishonesty and raise you a steel man good go ahead I love you I love you you know I do have a great night out Monday night a Sunday night let's talk later I just wanted to go together last week he called me Petty too here's what I want to be clear I think that I'm just glad you guys are fighting not mean sex guys please let me finish okay I think Memphis breakthrough is really valuable I think it's interesting to see that these kinds of scientific breakthroughs continue to happen in government-sponsored facilities and not private companies um and I think that that's probably where a lot of these Innovations will continue to come from because look at the scale of what had to be built three football fields and 322 megajoules of energy and 192 lasers this is really complicated expensive stuff I'm an enormous fan of these kinds of scientific breakthroughs I want to be clear I think that where I struggle is translating this into actually an investable area and I worry that this is going to consume lots of money by folks that could otherwise put money to work in things that will actually pull forward our energy Independence and energy abundance sooner and faster so for example you know there are all kinds of things that we could do to secondary ternary third and fourth and fifth generation batteries that aren't happening today there are a bunch of things that we could do to actually create an infrastructure of green hydrogen and the the simplistic answer is we could do it all but the reality is money is finite and we can't and all I'm observing is I do think that more practical things that do have geopolitical ramifications sooner are not going to get funded because people do get enraptured by this and my skepticism is that this is still in the realm of government-sponsored research and is not really an area that for-profit private companies can tackle and so I would rather those for-profit companies for example why combinator just today put out something where they were you know call to action a request for startups in climate and when you look at that list those are really practical investable areas and I just want to make sure that the capital allocators that listen to this weigh those equally I am glad I'm glad that the U.S government did this I hope they do more of this but if you're asking me quite honestly I would rather the next 10 billion dollars go into Energy Efficiency HVAC then Fusion because a fusion exists and B I think it's going to happen at an Innovative bench scale level by the government and not by a particle let me let me just respond to that real quick I think that the idea of allocating our resources as a society should be done on kind of you know on a portfolio basis eighty percent on the pragmatic near term 15 on the kind of next gen and five percent on the moonshot and this maybe starts to shift from the five percent to the 15 maybe it's still in the five percent but I don't see kind of overfunding happening so I'll tell you guys there was a survey done there's 33 private companies in Fusion that are kind of fusion companies today uh VC back eight new this year so the numbers kind of increased by 33 this year and um so far this year those companies have raised around three to four billion dollars which by the way is a fraction of what was done by 15 minute delivery companies exactly my point and and by the way the biggest funding is happening in iCare which is the largest construction project in Europe and this is a 30 billion dollar production scale Fusion demonstration system that should be online by the end of the 2020s government sponsored government sponsored yeah and so this is my point I'm a huge fan of government-sponsored research how we get finally the first science Corner Everybody Breaks themselves it's the first science corner where David sacks has it about the Cherry sacks here we go come on you're coming in you can do it again your question was a little bit was was not a let me rephrase okay what's the geopolitical impact if this does happen 100x energy is fantastic for the United States if it actually happens and the reason is if you look across the world there's this thing in politics known as resource curse where the worst governments the most despotic governments tend to be in the countries that have the biggest natural resources ironically so the countries that have huge amounts of petroleum or other kinds of minerals they tend to have pretty corrupt governments and the reason for that is that if you're sitting on a giant oil Reserve you don't need to make anything else work you just fight over who gets to control that oil reserve and that's what politics ends up being you don't need to create policies that Foster Innovation or attract knowledge workers right you just basically mine that oil so if all of a sudden you're talking about turning energy into a software problem or an innovation problem that looks a lot more like the software industry that's an area where the United States has a huge advantage and yeah I think it would pull the rug out from under many countries all over the world in favor of the United States I mean it's a big if because where I agree with chamoth is this stuff still seems pretty far off and it's still pretty unproven from a commercial standpoint but I agree with Freeburg why not try investing in it and cultivating it and see where it goes okay fantastic this was a fantastic science corner where we actually engaged David Sachs which country uh did you have anything to disagree with there Jacob all right take it easy this I just want to let people know that I think you you like that answer right well I I love all of your intellectual enough for you or was it I love your intellectually I love Turtles I was a steel person it felt so fresh it felt silver so romantic but I love when you're intellectually honest silver personing yeah it's just over vaying you're super thing was that platinum gold or silver you're you're in Platinum with some diamond dust um can I just say spent a couple nights together this past week has really really does the mood of the show I mean when you guys go out and drink together and have fun hilarious you guys are sax and I laughed our asses off Sunday night can I just say we Saks and I had the best 48 hours together in a decade this is Sunday night it turns out Chris Rock and Chappelle are playing at the chase Center where um Shabbat used to own a piece of the Warriors right and this incredible Arena has this incredible show and you know me and sax and some friends we'll leave it at that go to the show our bestie Draymond is at the show so I text Dre and I'm like hey you going to see Chris Rock by chance tonight with uh Chappelle you say yes sir I said hey I'm gonna go with a couple friends maybe we roll together hang out after the show we go and after the game after the show which was incredible we go backstage and I'm sorry to the to the practice court and we're hanging out with Draymond in the practice court with Dave Chappelle Dave Chappelle and I start shooting hoops David sacks is talking to Chris Rock about free speech Steph Curry comes out and starts giving Dave Chappelle and Jay cow uh shooting lessons where Chappelle and I are bricking like old men you know you know uh on a concrete court all of a sudden Steph says hey Jacob you got it and by the way he's a fan of the show he says you're short every time and uh just you know hit the backboard you got to go long then he tells Chappelle you got to change this all of a sudden we start hitting shots like you know we're on rainy threes you're reigning threes it was literally like cut into here over these mid-range jumpers or threes I was a free throw line extended free throw line extended cut into here Rain Man and rain dance from Along Came Polly rain dance Raymond let it ride Rain Dance Let It Ride Let It Rain I was hitting brick after brick rest in peace Philip Sumer Hoffman so then we're chilling and uh sax and I are talking to Dave Chappelle Joe lakum owner of the Warriors are there the majority owner uh you know as opposed to you being a minority owner the only person who draws more names is Phil Hellmuth I mean absolutely I'm trying to catch up anymore so we I kid you not Chappelle comes over and says chica sex you guys want to go to uh after to do it go go see me do a show at like 1am at this like local comedy club with 70 seats I said word yes we go at 1am Chappelle sits on stage smoking cigarettes and doing 90 second pauses and then having a beer and interacting with the audience and does a two hour set after doing this set with Chris Rock at the chase Center me and sax and Draymond hilariously laughing the the stuff Chappelle is a genius and when you see his show and Chris Rock by the way he puts a tight set together I mean Chappelle's got this storytelling thing where he kind of meanders a little bit and then he hits you with it but Chris Rock is just bang bang bang bang bang extraordinary just two Incredible Minds at the top of their game artists artists at the top of their game doing what Society needs but more importantly doing what David Saxon I needed which was to laugh our asses off together and remember our friendship so it was a great night out I want to say to bestie Draymond Dave Chappelle and Chris Rock thank you the David sacks Jake house bestie friendship has never been stronger I don't know about Freeburg and Tremont that seems to be on the Rocks yeah it's weird we'll be in there we'll be vacationing together next week so we'll I love it I love feedback yeah well well we are going to be whatever whatever's going on we'll take a walk and figure it out well I just want to say the alliances amongst the besties I'll be honest I got mad at Friedberg when he edited that Google bit to say the exact opposite of what he actually said yeah just beep that but yes that is the thing that bothered me I have to be honest that's you playing to the crowd versus you being honest and telling what you think if put that in the form of question Freeburg has your Fame as the Sultan of science because listen you nobody knew who you were outside of Silicon Valley before this look has it impacted your ability to speak no no not my standard look I I'll be I'll be honest and I'll speak openly about this I had said that there could probably be a significant head count reduction of like 75 at Google and the business could keep operating and I took it out and I took it out because I have a lot of friends that work at Google Google's a close partner of mine they're an investor of mine and um frankly I just want to be careful about that it's not something I commonly do you know as you guys know I usually speak my mind pretty clearly but I was just trying to be respectful and that's the reason I did it you know I think that that was fine what I'm saying is not that it's just that the part that you edited in actually made it seem like you were not saying that at all but the opposite I think if you would cut the whole thing it would have been more honest so to keep that other thing in actually led the perception of the opposite so you were triggered by that no no I don't have triggered I'm saying but I think you should have a principle very often like yeah I know I think that we should just have a principle to not play to what the perception of what we say should be especially if it means we could be saying the opposite of what we actually mean that's all intellectual honesty is it bestie tenant it's a bestie tenant I think so absolutely bestie always and the other bestie besties always come back together if we have a fight we always come back together sax can I I'm still mad at you a little bit I'm just kidding okay we're just talking about hypocrisy I mean so how great was Sunday night gets up there and he gets like right out of the gate he's attacking woke right out of the gate swinging Came Out Swinging like Will Smith Shooks Matthew Smith he took down Will Smith I mean the Will Smith takedown which you will see in this special is so complete it is just chef's kiss but how great was his scent let's say just give Chris Rock his flowers did he fillet and fricassee he he did but I thought the more important part of the set was the he came right out like calling out all this you know you know older than thou woke stuff yeah and and there was that undercurrent to Chappelle's set as well and also he said listen words can't hurt you unless you write them on a piece of paper from time to a brick we these uh a bigger point right now and this does tie into our first story is I think comedians look at Twitter as a place to get canceled not a place to be part of the discourse and that's a huge loss that's indicative of our society being broken and it's incredibly important that these comedians be allowed to Mock and to speak and to step over the line and challenge us as Citizens in a free Society and we should cherish them and we should not even try to cancel them let them cross the line let them say things that make us uncomfortable so that we can understand ourselves and our society better and I just want to say why can't you include Elizabeth's Tick Tock in that oh do we want to have a discussion about it I can't watch the next conversation about it what's the next time okay with mocking I just don't start you guys you did so well come on let's go here we go cut it out all right well we have two more science Corners to get all right well if you don't I mean I just want to talk about the Koopa deal and sex this is right up your alley have you ever had this attention to it to be honest oh really the thing you guys asked is like you know what signal will Elon moves at Twitter uh be for the rest of uh the tech industry I think the biggest wake-up call is to actually PE companies so if you played this out and you think that Koopa is you know explain please Koopa is a is a software as a service company that does revenue management I guess or expense forecasting or some something in the financial realm I don't particularly know to be honest but anyways this is a company that you know was off 70 or 80 from the high like a lot of SAS companies were when rates started to go up and they got this offer from from Toma Bravo but here's what's so interesting about this deal if you think that you know these guys bought a company I'm just going to make up a number at 20 times ebitda right and and you see Elon at Twitter and you think well wait maybe we can't cut 75 but maybe we can cut 50 a headcount and the company can still do well and you know you take half of the expenses out of the business all of a sudden you know if you keep it to doubles you're actually buying it at 10 times so I think the thing that is the that is the real insight here is twofold private Equity can still put out a lot of private credit to fund these deals and SAS companies are perfect because they have huge free cash flow right so instead of funding it based on earnings they can fund it based on ACV and ARR so private Equity will be super active and two all these Rifts basically show what the efficient Frontier is for the number of employees you need to run a company and if you can cut 50 of the headcount private Equity folks will do that and so I think Koopa is like the canary in the coal mine it is the beginning of what I suspect is a tidal wave of PE sponsor deals in tech companies largely SAS but may go into other Realms yeah recurring Revenue that can take advantage of these two things top private credit markets and finance it based on ARR and then fire 50 of the team and double earnings capacity Saks are those so on on Koopa I thought the most interesting thing was just the we got a public comp well we got a comp on what private Equity is paying for public companies right now so the deal happened at an eight billion dollar valuation that was a 31 premium to the public price it was 8.4 times next 12 months uh revenue and on a trailing basis it was about uh 10.4 times the last 12 months revenue and by the way all the comments were around how what a rich price Tomar Bravo was paying people generally thought they were paying a premium to the valuation it was 77 premium uh before the rumors came out that this was happening so it's a pretty good premium yeah and there was and there was a there was a bidding war with Vista and so it was uh it was a really rich kind of deal that got done here right so so my my point is that people thought this was a really rich deal and yet the valuation of multiples are so much lower than what private company Founders expect so remember last year at you know the peak Founders were thinking a hundred times the AR was normal a hundred times and you know you could roughly say you know ARR is is roughly equivalent to the next 12 months Revenue it's not perfect but it's roughly the case so these Founders were expecting evaluation uh multiple 10 times what the public markets are paying and the public more and and actually the public markets are are half of where tomorrow Bravo was in this particular deal so the public markets right now are valuing uh the median SAS company at about five and a half times and a high growth that'd be for like a 20 year rear growing company and they're valuing the high growth companies that maybe eight times you know until Bravo did this at 10 times so that gives you a sense of what the ballpark is and these are companies that are already public they're at scale they're doing roughly a billion dollars of ARR they have already kind of won their category to some degree whereas private companies are subscale they're you know typically you're talking about companies with 1 5 10 usually under 20 million dollars of ARR they are they're not de-risk they're still a ton of risk we've seen many many SAS companies fizzle out and Plateau at 20 million of ARR never get to 100 million never mind a billion and yet these Founders think that they're entitled to you know even in this market 30 to 40 times ARR no way I mean like it's getting to the point now where you know maybe it should be 10 times 20 times like Max for and that would be for a company that's growing two and a half three x year over year so I still think that like so I think basically what we're seeing here is even a good scenario like a coupe acquisition that was done at a premium like it's still a wake-up call to the private markets that the valuations are still completely and utterly out of whack yeah let me ask you a question Zach so this company was growing 45 last year they're growing 35 this year and they got this multiple why is it not worth a significantly higher multiple if a company's growing two and a half to three x which is 250 300 percent and these guys are only growing 35 sure I mean it it is um and that's what you're paying a premium for but so the so the the here's the theory of it is that if you can invest in a private company that's say tripling year over year and they can do that for another five years or whatever then you're paying for that you're paying for that outcome in a couple years right yeah basically well think about it you're getting a discount to the outcome in a couple years well if you're paying 30 times today and it triples next year you're only paying 10 times next year you're only paying three times so if that keeps going that's where your Arbitrage is but here's the thing you have to weigh against that is that these early stage private companies many things go wrong and they hit a plateau they fizzle out or their growth rate starts to the bigger they get the harder it is so they should be priced at a discount not a premium because there's risk there's more risk they're growing faster but there's more risk but also it's very hard once you get to a bigger number of ARR 50 100 million of ARR it's extremely difficult to be doubling or tripling over a year let me just point one thing out so I looked at the numbers on Koopa I think they had about 170 million of stock based comp expense in the last nine months so those are employees that are getting 170 million dollars in compensation in the form of shares so they get those shares they can then sell those shares and get cash for them on the public market and then on the public markets and pay their bills so when a company like this goes private for those employees to just remain at their Baseline comp that stock based comp needs to be replaced with something else or else they're seeing their salaries reduced so you know there's this balancing game when these companies go private in terms of how do you give them the comp that they're earning to keep them engaged in the business the answer is you don't versus no but that's quick because you want to do a riff anyway right so I mean do you but for the people that stay right so so there's a balance because it's not just hey cut the Opex you have to cut the Opex including stock base comp and this company generated about a hundred million dollars sorry 210 million dollars of free cash flow or operating cash flow in the last 12 months so if you if you take out the stock based comp these guys are actually Break Even or losing money roughly um yeah right so yeah yeah Break Even roughly so there's a real question mark on this business and businesses like this that go private where if you actually cut the op-x and you cut the salaries and you cut the head count but you have to find new ways to pay people because you've been paying them with stock in the past how do you kind of bridge that Gap and I think that's probably a little bit of the balance and the Art of what these guys do well chamoth if I may can you explain to the audience uh what a private Equity firm's expectation is in terms of return when they buy a company like this and then sax I saw your tweet that you want to feature and you'll go next month well I think it's changed over time and this is what's so powerful about the private Equity industry um look you have to think about what their incentive is because it kind of guides the outs um early on they were very much like Venture capitalists they were out in the you know edges of risk taking um doing all kinds of very difficult gnarly deals so if you look back in the history of private Equity you know these huge crazy deals like RJR Nabisco or TWA Airlines were the first of the industry and they reaped enormous returns but there was a lot of risk and it required very heavy-handed management oftentimes what that meant was firing a lot of people over time private Equity has gotten institutionalized and they don't generally feature themselves as a place to get the best necessarily returns but they are places where you can put enormous amounts of money where the the likelihood of loss is extremely zero and you generate very good rates of return now again this depends on whether you want to look at irr or DPI right so a lot of people will Market irr which you know I think is kind of like a gameable metric but you know those irrs can be 20 25 if you look at DPI which is really how much cash you get back you know private Equity firms can generate one and a half to two x of the money you give them um but they do it consistently and they very rarely lose money so all of that is important into understanding what's going to happen in this cycle these folks are going to buy a ton of these private software companies I think that they are going to fire lots of people I think they are going to make these companies run hyper efficiently and they will make sure that they generate that 1.2 to 1.7 x that has been historical very rarely will they lose money in these things by the way that's going to mean that a lot of these other companies will have to reset valuation so you saw yesterday checkout.com went from a 40 billion dollar valuation down to 11. you're seeing some companies only go down 10 or 15 percent but it's a process isn't it your mouth isn't this just like what happens in real estate where beginning of this process yes because in in real estate my understanding having lifted these boob muscle Cycles is the person living in the home still believes they're always worth you know this incredible evaluation and then the people who want to buy it are like that doesn't match reality and then the real estate brokers go back and forth trying to get people to you know go through this messy middle and come to True price Discovery a private company it's hard to get true price Discovery until they're on the brink of insolvency they don't have the money right well we just got some data on that actually can we bring this Coulee data let's do it yeah so Cooley looked at a law firm in Silicon Valley yeah there are prominent Silicon Valley Law Firm they looked at a thousand deals over the last three quarters of this year and what they saw is that your the later the stage the bigger the valuation Corrections the series D rounds went from three and a half billion to 527 million that's an easy one seven percent oh yeah that's an 85 drop series C went from 502 million to 130 million 274 drop series B went from 164 to 90. that's a 45 drop and then series a went from 58 to 45 that's only a 22 drop there's just less room to compress there but the point is that series B roughly a 50 drop series C roughly a three-quarters drop and series D roughly a um 85 yeah one seventh drop so I think Founders right now are they're just like a little bit delusional about this money they raised last year they're still way too anchored on last year's valuation and if only they would think in terms of this Capital they raised last year in terms of of its real dilution in terms of what the company is worth now I think they'd be treating it more more precious so for example for example hold on it's like they won the lottery and they don't want to they don't realize they won the lottery I had this conversation with the founder this is the only money they're ever going to see is the bottom line and they're spending it like they're going to win the lottery every year so for example we're a company yeah let's say you take a company that raised 200 million last year at 2 billion so it was 10 dilution so in their heads they're thinking oh well this isn't that expensive like 10 dilution surrounding era but really probably the company is worth maybe 400 million now right because it's gone down 80 percent this 200 million of your 400 million is half the value of the company yes and you're squandering it you're squandering it at a rate of 100 million a year so you're basically burning up 25 of the value your company this year and then next year and then by the way you're going to be in crisis after that because you're probably like a lottery winner buying like a giant super yacht I had an observation that a lot of the investors that sit on the boards of these companies they have an incentive to not see those valuations come down too quickly do they not and so there is this sort of like interest in hey I don't want you to have to go reprice the company or do a Down Round because then my portfolio gets written down and then I'm in the middle everyone's always in the middle of a fundraising cycle with LPS and then I'm going to have a tough conversation with melp it's about my my value so do you not see vces and investors playing an active role in trying to keep the valuations propped up to some extent particularly where they have big markups hundreds either by extending Bridge rounds or doing other sorts of you know uh look nobody nobody likes to go through a Down Round and that includes Founders and existing investors in the company that being said we're not talking here about new financing conversations what we're talking about is advice that is happening in board meetings and you know maybe other VCS aren't pushing as hard as we are but the advice I'm giving in board meetings is what I'm telling you probably quickly today which is this is the last money you'll be able to raise on attractive terms if at all you need to treat it much more preciously the world has fundamentally changed and by the way we haven't even gotten into what's coming the demand contraction that's coming next year explain what demand contract construction is for the audience please thank you okay look there's going to be three major sources of slowdown for software companies next year number one new business is going to dry up companies are just going to be spending a lot less money next year because they're all cutting costs so you should expect your new business to be roughly 50 of what it was next year it'll be 50 of what it was last year that's my rule of thumb for most companies new business down 50 number two churn is going to be higher we haven't seen that much logo churn yet but next year a lot of companies are going to start going out of business and it's going to happen over the next two years so you're simply going to see logo churn rates say among small businesses go from like a historical enormous fifteen percent to maybe 25 or 30. in other words your customer the logo yes that's what a logo means yes yes logo churn means the entity doesn't exist then you've got seat contraction which is these companies are not hiring as fast in fact they're doing layoffs so they're simply not going to buy as many seats of your software as you need to in the past for the last decade we've had a Tailwind an enormous Tailwind for software companies of seed expansion which is every year your existing customers would buy more seats of your product for their new employees now they're actually going to have fewer employees or maybe headcount freezes so they're actually buying by the way if you if you take all those three things the deal of the century was figma selling to Adobe for 20 billion because if you take those three things I mean oh my God they just absolutely top ticked before any of this stuff was no totally so today Adobe could probably buy this thing for like seven billion instead of 20 billion so does that mean they try to do a breakup fee and get out of the deal I don't know if I was figma I'd try to close this thing ASAP and get that money yeah yeah yeah you're right about that and by the way what I'm seeing from Founders is that they still want to grow 100 plus over the next year the problem is that the headwinds are going to be intense so if if you're applying a plane and the headwinds are extremely intense and you try to maintain your speed you're going to burn an enormous amount of fuel you're going to be incredibly head efficient it's better to basically just moderate your speed let the headwinds basically pass we're going to have major economic headwinds for the next four to six quarters call a year and a half it's okay to have a slower growth rate preserve your cash don't burn up your fuel bunker down so what we're trying to do down the hatches we're trying to give permission to our Founders to grow at a slower rate because they feel this enormous pressure from their VCS to grow at at insane rates can I build on this I think Friedberg said it very well the scan in venture capital is demonstrated in the following chart this is using Cambridge and our friend Brad gerstner helped put this together so what is this this goes back all the way to 1997 and the gray bar is what Venture capitalists share with their limited partners as to how well they are doing what's the top quartile of interest and this is the top 25 okay so this is this is a venture capitalist and you know our our returns have been consistently top quartile so instead of cherry picking anybody else I'll just use us but it could be Sequoia Benchmark you name it we will go back we're in there launch you would go back to folkscraft we'll go back to folks and say hey guys the total value of our portfolio is three times your money in 1997's vintage okay it it was uh four times your money in the 2010 vintage feels really good but again the job of the venture capitalist is to convert the gray bar into the purple bar and historically there's been a Decay so for every dollar of gray bar that you show you typically only get 73 cents actually returned to people okay the valuations that you get when you sell your company or goes public end up being 73 of what you've marked at the peak what you said they were exactly right exactly right and the actual value of this purple bar going back you know 30 years is 1.7 x so just to put numerical numbers on this if you were a venture capitalist you would raise a hundred dollar fund at the peak you would actually show that that hundred dollars became 200 and about 28 dollars but when when push came to shove and when it was all said and done you would return 170 dollars back to your investors that's the rough equation so what's the problem well the problem as you can see in this church is right around 2015. which is all of a sudden you know what we've started to see are these continually elevated gray bars yes this stuff is worth seven times six times five times but we have not seen the purple bars catch up now some people will say well yeah but you have to give it time and you know this is and all you need to do is do what's called a regression and you need to regress these things to the mean and make the following assumption assume for a second that this time is not different assume that these historical averages 2.2 x 1.7 x holds well that's what the the black line here shows you can calculate the area above the curve as the value at risk right the amount of money we will destroy because of all these shenanigans that Friedberg just talked about propping up marks not willing to look at actual market clearing prices well if you do the math the sum of the area above this black line is almost a trillion dollars around the world and it is about 600 billion dollars for U.S Venture capitalists this is the dynamic that the private Equity industry is going to prey on so if you saw Tomo Bravo just close to 32 billion round you know Vista is raising a 20 billion dollar round everybody's stepping into Tech they are going to destroy those gray bars would you describe that as bottom feeding no no they are they are the rational actor yeah okay who is finding the true market cleaner and I will say this I think the private Equity industry is unbelievably precise and talented in being dispassionate and telling us what these things are they're Cut Throat they're logical no no it's not hot they're just opportunity for the private Equity industry is going to be created by profligate Founders and look you could blame VCS for the high marks last year as well they were profligated too but look if you're a Founder if you don't start acting in a more Capital efficient way and preserve your cash your company is ultimately going to be owned by a private Equity Firm and they're going to make all the money well here's another because because when you sell to them at a low price price all you're going to end up doing is paying back the liquidation preference and then that private Equity Firm that was willing to do or less but that private Equity Firm will be willing to do what you were not willing to do which was simply act cut your burn cut your costs and act in a more Capital efficient way and they will end up making all the upside for your decade of hard work because you got basically addicted to venture capital and the high evaluations and refused to again adjust to the regime I'll give you an alternative I'll give you an alternative the alternative is that the majority of Acquisitions made by private Equity firms are not actually peer Acquisitions they're bolt-on Acquisitions meaning that these are companies that are added to existing platforms that they own so this acquisition they're doing of Koopa I think it's very likely over the next couple of years you will see like the Playbook and private Equity includes not just cost cutting but also Synergy building and they typically do bolt-ons and add-ons and this happens across all private Equity platform deals of new products and services that can be be sold through the existing sales channel the existing customer base and as an add-on to the existing service or product that's already offered so one of the fee one of the things that I think you may see in Silicon Valley over the next couple of years is a rationalization away from funding feature companies and thinking much more carefully about what can be true Standalone product companies sure and many of these companies that have raised a ton of capital and have gotten crazy valuations at the end of the day they're more likely better equipped to be a feature of another platform than they are to be a standalone platform company of their own and that's where the majority of these Acquisitions will likely end up going in in the private Equity landscape and they will be vacuumed up and attached to existing platforms that these private Equity guys are building out and by the way just look as an example at what Oracle did over the years what Salesforce did over the years what Google did so many of these companies sold on acquisitions by bolt-on acquisitions by building a second Channel building a platform and then um adding on top of that and I think that's a lot of these guys are going to try and mimic two critical points number one what about the bottom 75 percent of VCS oh wait if you show that chart just for one more second I just want to remind everybody that is the absolute cream of the crop VCS are the best these are folks I mean again I'll just say uh Sequoia Benchmark we've consistently thank you launchcraft these are these are top returns thank the Lord what about the bottom 75 they're not gonna be able to raise funds man it's over a lot of these people who raise first time funds in the last three or four years also it's also the companies because like like it's like the the today is the most now is the moment for the sober founder and the sober venture capitalist to sit and say what is the real valuation what do we need to do to make sure that this company has a chance because what Zach said is so true otherwise all these profit dollars will be made by the private Equity Fleet in order to win today you're gonna have to grind you're gonna have to work 50 60 hours a week you're gonna have to be absolutely embrace the age of austerity and you're gonna have to focus on your customer your product and your bottom line the Age of Excess is over if you're not working 50 60 70 hours a week you're not going to cut it in Silicon Valley also key second Point profligate extravagant or wasteful in the use of resources just so we get the word of the day from David sacks that's David Sax's word of the day after a very powerful bull that went Craig did you see the Tremont Boulevard well we've all went uh we went viral this is I think elon's biggest uh non-obvious impact In This Moment Jay towel here's your uh one answer to your question about what happens to the the bottom 75 percent of venture firms it's equivalent to what happens with the you know kind of this is the bottom of the top the slide that I just shared it's the one we looked at a few weeks ago and I keep referring to it because it's just such a staggering like demonstration of what people call the power law which is how you know kind of excess returns accumulate to minority of Investments so just a few Investments make up the bulk of value that the you know market cap of 43 percent of companies that have gone public since 2020 is 750 billion dollars the market cap of 300 the other 300 is only 26 billion dollars and the cash that went in to the 750 billion dollars is 136 and the cash yet went into the 26 is 107. and so the cash that went in to generate that 26 billion that 107 that's your bottom 50 percent and the top 50 percent put in 136 to make 750 and I think it gets even narrower As you move further up to that top quartile so you know it's just I can tell you what LPS are saying because it's a hard business this is this is the companies that went public so this is also of the top company of the top funds and the top companies that were actually able to IPO and so it highlights how much of a power law actually plays through and so the majority of these companies as in chamac even in your chart you show the top quartile the bottom uh 75 percent or the bottom 50 I've looked at this data as well of those various vintages or below 1.0 they lose money for their LPS consistently and it's just it's a cycle and so what ends up happening is the next Generation comes through nlps they make a portfolio of bets and they hope that they make enough bets in the right VCS that their portfolio generates greater than you know market returns greater than College fifteen twenty percent Target fifteen percent Target um but they're gonna expect that the majority units I have an LP of report I'm I'm out there raising launch fund four right now and I moved from like the accrediteds the individual investors say that oh yeah because you're yeah yeah so I'm I'm publicly erasing it and I've moved on from Individual investors 45 million dollars in commits after five webinars amazing now I'm talking to you no it was amazing it's just 506c is going to change the entire industry letting the the you know the masses have some access to this capital and this opportunity accredited cubis is going to change the world I believe do you have to do deal with everyone one of them or is it easy to administer it's incredibly complex because you have a large number of people and they all want to talk to me so I did webinars five webinars and it resulted in 100 commits hundreds of commits for 45 million dollars you'll be able to get all those Capital commitments drawn down when you need to like you have to go ping a couple hundred people and get them all the wire money you'd have more operations people and we only do four we we let them one thing one thing you may want to do is like for for these smaller slugs is you can pre-wire you can set up an escrow account where you pre-wire 100 of the capital yes and then you also don't have to you take it down when you're going to deploy it so you keep your irr correct so we're actually looking into those Solutions I'll talk to you offline but I just did my first two meetings with endowment since cetera fund of funds the entire discussions right now are around what is your secondary strategy how are you getting in earlier not later and how are you building a larger position it is and even like some of the QPS who are sophisticated and are you know are in over 10 Venture funds the entire discussion governance of these companies are you taking board seats or not how early are you getting in and building a larger position over 10 percent and what is your secondary strategy when are you going to start taking some chips off the table so the and and I gotta say if you're an LP who didn't sell into the up Market at all uh and you're on your first fund you know and you had all these great marks and they're getting they're coming crashing down they're not going to deal with you they just have too many options of top phones in the course I don't think they've they've started to come down yet I don't think we know what the top quartile is really going to look like over these last few years I think that's going to take four or five years to really sort out yeah of course yeah um so I think explain why chamoth just so people understand yeah well I think I think that there are lots of valuations um that have supported huge tvpis these you know paper gains that have allowed Venture funds to raise enormous amounts of incremental capital and new funds and so they are going to try to wait as long as possible before they're held accountable for that and the best way to do that is to not change the valuation and so it will happen slowly it'll be a trickle of these things um and I think that takes probably four or five years for it to really sort itself out but in the meantime companies will still need to get financed companies will still need to get built that's why I think like the public markets I think what Sac says is true giving us a signal of what these true market clearing prices are will eventually slip into these you know series D or E companies because the Venture capitalists who has now taken some big write Downs in one part of their portfolio I suspect will now be very open to selling to private equity for another part of their portfolio so that they can return Capital totally totally agree yeah it's going to be rough out there you guys uh watched White Lotus yeah it's just started season one I'm uh it's a third episode in okay what a treat we wouldn't say anything but how great was a season two uh oh the rap was awesome it's just incredible the last the last two episodes are extraordinary yeah just finished watching all of handmaid's still which is that is a [ __ ] stressful show uh it's like it's like you're putting in work when you're done those episodes you're like oh emotional labor you know when they said this emotional labor watching that show is like oh my God it could could it could not be more sadistic and insane uh it is brutal uh but you can't look away incredibly well done uh all right listen this has been an amazing episode and this is news for the other besties Friedberg and I have been secretly collaborating no we have come to a plan we're working on a joint plan for all in Summit 2023 because we are both helping each other out on secret projects I'm ready to tip guys I love it the tip we don't need you I'm a permanent no perfect that's all that's fine we know that I love that I have sex as my anchor on this one I can always float back that way this thing could flip but Friedberg and I I'm like octopus in this case but power and influence Friedberg had so much of a good time at all in Summit 2022 that his hatred of my producer fate is less than his Joy from the event and we are collaborating on yeah super gut yeah I have made up for my producer's faith by using super gut and becoming a big problem I've used the promo codes he paid you for that that's the quid pro club oh yes yes no conflict no interest the only the only person that you've been taking money from is SPF I mean pretty much anybody else oh by the way can I point out on the most loathsome person in Tech [Music] I only want the bracket do not mention the pockets we're not giving them any just black out that uh in post I want you to black out I don't want to give these guys any credit so here we go the worst person in techs we wouldn't say it's a b podcast that's run by literal socialists oh well look Jamal's got a very tough draw I mean of course to SPF yeah versus in the most hated person inside by one percent that's [ __ ] who Andy Jesse is he is a complete gentleman Andy jassy is delightful human compared to Andrew Jackson just inspires that is I want a recount I want to recap this is election interference union busting this is election interference something you're a specialist in I guess is worse to be a union busting Amazon CEO than a reactionary conservative investor yeah I don't get it this is ridiculous I just want to point out that the biggest travesty here is that I did not make the list there are things you know what these guys are trolling me these guys shout out to producer Nick who just retreated this but basically you basically picked the what is it the 30 most relatively well-known people in Tech that's what tilts Jake Cal the most this is terrible worst person in Tech I don't make the list I'm gonna double down this year I'm constantly kowtowing to the media you're you're right you're right I need to be horrible I need to be a worse human like you sex I'm gonna try my best this year to work against humanity and society and be more loathsome than you I'm really going to redouble my efforts obviously I can't catch up with Jamal you buy into all their phones you're too kind I got a big heart I care I have empathy I know my empathy but here's the problem these guys left me off on purpose between Andreessen and Bill Gates oh wait driesen that's a lock that's interesting of course oh interesting questions a16 co-founder and man of terrible teams Market treason is a world-class [ __ ] poster Bill Gates is hiding somewhere nobody Bill Gates is doesn't tweet Marcus recent blocks unblocks he [ __ ] posts with the best of them he's up there I mean that guy's a dark meme Lord any other I mean I really I really sympathize with each month that you got your ass handed to you there that's just that's like going up against the Dream Team hold on hold on slow down bro you're not even letting us read these things all right okay Twitter former idiot CEO versus Airbnb CEO making oh my God that's so well written Ryan hold on this weekend he's a great guy guy who really tried to make us believe web3 was going to happen versus World coin and open of course Chris Dixon wins much more loathsome than Sam Altman right okay guys listen Freeburg you didn't even come I want to just congratulate freeberg on an amazing the best science Corner ever an amazing product in super gut that has helped me lose weight I feel great and four uh you know recovering from whatever illness you had all right everybody I love you Besties shout out to uh David sacks love you guys and we'll see you all next time on the all in podcast love you besties love you guys bye [Music] we open source it to the fans and they've just gone crazy [Music] besties [Music] it's like this like sexual tension that they just need to release somehow where did you get Mercies [Music]








hey everybody Merry Christmas happy holidays it is the end of 2022 and once again we're doing our bestie Awards yes at the end of the year we do our bestie Awards this is where we give Awards to the biggest winners losers and many other categories that you love with me again of course the Sultan of Science deep in his Kurosawa uh Vibes how are you doing Sultan it was great to see you guys for dinner last night sax we missed you that was a lot of fun we all got together twice this week for dinner uh while we were on vacation and uh during our dinner we took a vote and sax you are now the director of the all in Summit congratulations yes congratulations yes the Griff design My First Act is to veto it okay there you go sorry to the fans also with us of course is the dictator himself chamath polyhapatia deep in his turtleneck phase and his Vibes tell us about uh your winter Vibes bestie I mean I can't believe that we all took over Lake Tahoe for a week together it's cool it's been a lot of fun I gotta say socks you'll be surprised jaycal has the life hack of life hacks here he's figured out how to basically get everything pre-wired all the restaurants all the reservations it's been great I've loved it we've had a wonderful time it's an eight person table for every night and he does it what months in advance every two weeks out I get a table of eight uh for five six nights in a row and then I invite my besties out and oddly it turned out there was only one person from Jake outside just himself yes there was always a room for the rest of us to show up we had a wonderful time uh I picked up the check for the nachos and tremath brought six thousand dollars worth of wine I brought my own also to the restaurant yesterday so we could open the wine properly it was wonderful we've had a wonderful time and of course with us looks like he had to work over the Christmas break uh sax how are you doing brother you working today I'm good I'm just hanging out somewhere well come on you could be honest you're at the Twitter HQ I recognize that incredible architecture and design they spent so much money on that office space beautiful that's definitely beautiful often it's got their own bespoke coffee shop here called The Perch we're the people that work there too soon too soon the people are working too hard to be hanging out in the coffee shop [Music] [Music] okay so let's get started with our bestie Awards this is uh very controversial we start with a political award and uh last year you know this is our just so we're clear this is not the prediction show that next week will be the prediction show this week is our winners cue the music yes cue the music right there okay here we go 2022 predictions this is what we predicted for the bestie award for biggest political winner I said Ron DeSantis and so did David sax we predicted in 2022 after me you said it after me and the way you introduced it you said what did Tucker Carlson's Writers come up with I said to santis and then you said to santis are you starting already literally okay take it easy you're gonna get your flowers so Ron DeSantis obviously a big winner uh so those were those were great predictions Freeburg with a wild card there he predicted Putin would be a winner in 2022 that one fell a little flat did it not our friend Freeburg not a winner no I think he you know I mean my projection was really built on what I thought would be a big kind of influence that he would gain this year you know whether he's viewed negatively or positively he's certainly at the center of the stage right now now chamoth you're 22 prediction this is your prediction last year for this year was that the biggest political winner would be Xi Jinping okay now we go to our actual biggest winner this is where we tell you who we thought was the biggest winner of 2022. let's start with you sax who is your biggest winner for 2022 political base winner this was the prediction that I nailed as as you mentioned it so the Red Wave fizzled everywhere else but it crashed over Florida hard so DeSantis is my pick he won re-election by about 20 points and his coattails carried four new GOP House Seats which happens to be the exact size of the GOP majority uh several polls have now shown him beating Donald Trump by significant margins for the 2024 GOP nomination he is shattering fundraising records Florida is now the fastest growing state so he is my pick for the biggest winner uh political winner of 2022. great who is your biggest political winner I mean it's obvious it's uh Xi Jinping you know there is no single person in the world that is now as powerful as this one man he um has complete authoritarian control over 1.2 odd billion people and 20 of the world's GDP and a large amount of the world's debt including a lot of U.S dollar debt and so you know it's pretty there's there's it's hard to find anybody that won nearly as much as he did okay now to you Friedberg who is your biggest political winner of 2022. I mean I think you're the santis and Xi Jinping calls were really like good I think the biggest surprising winner for me is like you know unexpected and that would be zelinski um from the Ukraine I don't think going into this year people paid as much attention to him he was certainly not a sung hero but coming through this conflict and I think leading the storyline about our common enemy of the West um and common enemy of democracy being Vladimir Putin uh really kind of made him a superstar and a hero on a global stage and I think that's evidenced by the fact that he was in the white house and he gave an address to the U.S Congress yesterday so I would make him kind of the biggest winner of the year it's hard to go against desanta so um you know he he clearly uh has as sax correctly pointed out gone into the lead we'll see if he can beat Trump in the primaries I have my doubts but he does seem to be pulling in some of those moderates right I don't understand why you guys say he's a political winner what did he win he hasn't won the nomination yet he got re-elected to a state that he had before 2022 so what did he win exactly well I think a couple of things one is when he won election to the governorship four years ago it was by less than one percent it was a tiny margin of Victory this was margin of almost 20 percent he had coattails and he is now the front runner for the GOP nomination in 24. I think you can argue you can make the case that maybe he's peaking too soon well I'm glad you brought that up because if you look at the data you know I think in the last seven or eight nomination Cycles the person that's been leading the popularity contest going into the Iowa caucuses has not won the nomination he's peaking too soon almost that's a possibility uh because when you're the front runner everyone takes shots at you on the other hand he if he stays this dominant he will drive out other contenders out of the primary and he may be able to solidify it and if if it can just be distances versus Trump in the primary he has stands much better shot than if it's Trump versus a bunch of other Challengers and I think that if he continues to pull this well within the Republican party I think Trump might not run again because Trump definitely does not want to risk being a loser in the Republican primary so yeah there's always front-runner risk but it's hard to say that coming out of this year that he wasn't a huge political winner okay if we're going to challenge other people's picks I would maybe challenge the zielinski there's no question that he's been a global media hero but two-thirds of Kiev is currently without power eighty percent of Keith doesn't have water 30 percent of the Ukrainian power stations have been destroyed nearly half of the countries without power uh there's something like 8 million displaced ukrainians in the country and over a hundred thousand ukrainians have been killed in this war so yes he's been a very strong charismatic War leader for them but Friedberg your response I'm not advocating for his performance as a leader I'm advocating for his accumulation of political Goodwill and that's it okay uh and he is winning the war uh so is that winning well in in war they say there nobody wins uh but it's certainly better than having your country taken over by Putin so some would argue that's winning let's go to biggest losers biggest losers uh in 2022 we predicted again this is our predictions from last year and then we'll go on to our actuals for this year uh last year we predicted uh chamat said the progressive left sack said Nancy Pelosi Friedberg you said U.S influence globally interesting and I said the extremes both Biden and Trump let's go with our predictions I'm sorry with our actuals for this year chamoth why don't you go first this time who is your biggest political loser for 2022 I mean I don't think it's as written about as much but the progressive left did see as much failure as the Maga right so they were a huge loser I mean to the extent that anybody thought that leftist you know quasi-socialist policies and politics was a winning strategy I think that was pretty soundly refuted even in places that were pretty staunchy Democrat it was really difficult for the progressive left to do much of anything but lose so I think that was a really powerful and important repudiation and I think it it's marginalizes them to a bunch of you know Kooks almost and I think that that's really healthy for politics going forward so your prediction and your actual are going to be the same then yeah I think they were the biggest political loser in the United States at least okay yeah Elizabeth we don't hear people talking about Elizabeth Warren or Bernie Sanders much this year yeah and I think that the biggest political loser outside of the United States was probably the European Union okay you want to expand on that a little bit if you just think about the coroner that they painted themselves into how much they had to basically literally go 180 degrees away from what their policies were you know there was a huge raft of whether it was green ESG kind of woke liberal politics that manifested itself in all kinds of National Security decisions and energy decisions that in this last year they literally had to undo in order to stay alive and um that makes that whole political construct I think very fragile so they were they were a pretty big political loser outside of the United States okay sax it's gonna be hard here to guess this one but sax who is your biggest political loser in 2022 I have no idea who you're going to pick here by the way I got Pelosi right last year that she did lose the gavel so you've got to say that the war in Ukraine was the biggest event of the year and obviously you can spread the blame around to a lot of people starting with Putin because he's the one who ordered the invasion but I would say this is a slightly different take on the category which is biggest political blunder occurred on January 27th of this year when blinken said that NATO's door is open and must remain open and that is our commitment he basically shut the door he kept NATO's door open but shut the door on any means of a diplomatic off-ramp to end this conflict by promising Russia that Ukraine would not become part of NATO that was the single biggest diplomatic blunder of this year or maybe the last couple of decades because there's a good chance we could have avoided this disastrous War if we had just been willing to close NATO's door wonderful great crisp answer thank you for that nice and tight Friedberg who's your biggest political loser for 2022. it was a tie for me between Jerome Powell and Liz truss Liv trust just has to get recognition here for only being in office for 45 days as prime minister of the United Kingdom I mean I think that is uh cannot be overlooked uh the uh uh some of the the policy and folks that she put in in office uh caused you know massive chaos it was just a clear dysfunction over a very short period of time uh Jerome Powell I think this was a big surprise this year to see how the Fed chair became um so politicized and his role became so politicized both kind of the the left and the right finding reasons to question uh his leadership um in his decision making the failure to raise rates soon enough led to massive inflation is what you'll hear from one contingent of politicians and the public at large and then the rate at which he's raising rates now to catch up to the and to calm inflation is causing people to complain on the other side so there is really no one that seems to be happy with Jerome Powell and I think that uh that that was a a shooting star that seems to have completely lost its luster okay so the FED yes good pull there okay mine is pretty clear and objectively it is of course the GOP the Red Wave failed it turned into a trickle uh Trump is back and I believe there's a good chance he will win the primary Roe v Wade a complete unmitigated disaster four Republicans they caught the car and plus marriage equality and having to deal with that women and the LGBT community vote and they have long Memories the GOP the biggest political losers for me okay I'm sure Saks has no rebuttal there so we will move on to the next category uh which is oh by the way if you say it that way then you know the biggest political loser in 2022 were women look at like fundamental human rights were Stripped Away from 50 of the population so that's not cool and they could have left it alone and they could have left it alone well if if what you mean is that the issue was sent to the states and each state then gets to decide then you're right but but if you look at the battles that have happened at the states even red States like Kentucky and Kansas have rejected the the subsequent political push to Outlaw abortion so it has not turned out to be just by the fact that all of these red States basically re-confirmed and enshrined a woman's right to choose may actually go more to show that the Supreme Court is totally out of touch and that they didn't need to touch Roe v Wade and the fact that they did opened up you know a huge can of worms in 50 states that now go and need to go and adjudicate this thing where it looked like actually that decision even back in the day even though the way that it was done you know there was a lot of room for improvement clearly everybody agrees with that but was actually after you know 50 plus years reasonable law and so now that you took that law away now folks even in the red States you're like no it was fine which means that this whole thing was a huge political Gambit more than it was actual societal intention okay so we are going to move on now I just I'll add my final two cents to that uh as I said I do think women and the LGBT community have very long memories and the people who are in the moderate are not going to forget how they were treated by the GOP in this specific issue so biggest political surprise we didn't do predictions last year but I'll just run down what everybody said was their political surprise I said the fact that Kamala Harris was sidelined was pretty surprising to me and uh that's continued you said Joe manchin was your biggest political surprise Glenn Younkin uh winning saxat was your biggest surprise and Friedberg the January 6th crowd making it into the capital during the Insurrection was your biggest political surprise so here we go our 2022 biggest political surprise sax let's start with you you have a lot to say about politics go well the biggest political surprise to me was no Red Wave so I admit I got this prediction wrong you know I got all my previous ones right Jay kalis I'm gonna admit I got this one wrong uh you know I believe that the electorate would focus on the fundamentals three quarters of the country thought were on the wrong track three quarters think we're in a recession nevertheless the Republicans did not do nearly as well as predicted they only gained nine seats in the house they actually lost a seat in the Senate and I think that that had something to do with candidate quality and of course the whole election denial narrative uh basically was a disaster for them I hope that the Republicans move on and stop talking about the past what voters want to hear about is the future Freeburg did you have a biggest political surprise for 2022 free book yeah it's also the failure of the Red Wave I mean that was my my pick I think the consensus going into the election was with uh you know Rising inflation and the disdain that everyone had for the way politicians kind of managed us through covet and then managed us through the economic recovery it's uh it was inevitable to see a flip and it didn't happen I think obviously we talked about why that is but that was a big surprise for everyone chemath your biggest political surprise of 2022 the absolute toothlessness of Maga and Donald Trump I mean he was just a Scarlet Letter if you were anywhere near this guy you were going to lose and that's surprising considering how traditional Republicans were pandering to him up until frankly just a few months ago so I think that we exposed the Emperor of as having no clothes and that he marginalizes and Sidelines candidates into a fringe following that cannot go mainstream that was uh it was really surprising to see how Stark that was this year fantastic I'm gonna build on your chamoth uh I had two here number two was Roe v Wade but we've beaten that uh I think and we just discussed it as much as we possibly could my number one building on your shmath is that despite what's happened with Trump the documents the the uh his cases in the United States and New York uh and about taxes despite all of this the January 6th Insurrection despite all this Trump is still viable I can't believe he's still viable and that he is going to be out there in the primaries and he's going to have to debate to santis and I don't know that DeSantis can beat him in a debate I think he might uh win so this is completely scary for both me and sax I think it's terrifying Sax's Nightmare and mine well I think he's mainly viable in the minds of the Maga dead Enders and the mainstream media who want to keep him alive and the blind Administration wants to keep him alive and they'll do anything to keep him alive and in the news and you love keeping him in the news so it's a yes it's a co-dependent relationship between the mainstream media which you sometimes front for and Trump oh be careful telling me what I think my attendance CJ Cal well I wish the Republican Party would finally take ownership of This Disaster that is Trump and tell him that he has no business but you guys keep him in the game and the fact that he's viable again your personal Nightmare and mine okay biggest business winner everybody excited to get off politics right now and get to our Kill Zone which is business so last year we had predictions in this category I had said Disney that's an up and down prediction I'll get into that in a moment Tremont you said small and medium-sized businesses the Old smbs Sac said rise of the rest the flyover states and Freeburg you said stripe uh Tremont let's start with you smbs what did you get right what did you get wrong here uh I mean I whiffed it just completely missed the global macro shift that we embarked on in full force starting in q1 of this year it was it is the most important business Story of the Year it's just like we have an absolute complete regime change and by the way that regime change is so complete and so you know um thorough that it even touched Japan just a few weeks ago or sorry just a few days ago where Japan who fight you know finally yielded on this idea of you're gonna we're gonna have negative interest rates in yield curve control even they finally broken it and raised rates so it is an absolute worldwide sea change in how we need to think about risk and I think that's worth talking about a little bit later in the show but that was the single biggest business Story of the Year said I missed this too even though on another prediction when you ask what the biggest business loser would be I think I said that it would be asset classes that have been pumped up by the fed's money printing because you start to feel now so I got that part right but what I didn't connect it to were all the asset classes actually got pummeled so I kind of conceptually understood that rates were Rising but I totally underestimated the magnitude of the shift the way that growth stocks would get hammered the way that crypto would get destroyed the fact that like tiger basically got blown out of the industry I mean I had the right General intuition but I didn't translate it into the specific asset types and the magnitude of the shift and also the like what jamas said a real regime change now and how markets are viewing stock performance it's really incredible uh Freeburg let's get in on this this is somewhere where you can contribute deeply what do you think about your take last year and you still believe in stripe yeah I mean look it's a it's a business that obviously benefited greatly from the pandemic and the adoption of um you know the payment processing infrastructure that they've built across their across various kind of e-commerce platforms it's I've been I'm not an investor so I don't have any numbers but there are public reports that have highlighted that the revenue increased 66 percent this year they've indicated that they're probably going to experience significant Revenue slow down with the recession ahead but it still seems like a super high quality business and you know valuation wise who knows what things are going to be worth when they ultimately come to Market there's certainly no one going to uh going public right now so at some point we'll see you know whether valuations play out but it seems like it continues to be a very strong one of the strongest private businesses that's being built in Silicon Valley we will get to 2022 biggest business winners in one second I will just say for Disney yeah man what a swing Bob chapek uh in and then out and now Bob Iger back so I feel like I got this one wrong and right at the same time I still believe in the company deeply I think they're gonna have a big win let's get to our actual biggest winner of 2022 sax why don't you lead us off with your biggest winner of 2022 for business I said Lockheed Martin along with other defense stocks uh Lockheed Martin which makes javelins and high Mars is up 40 in the past year when most the Market's been weighed down Northrop grumman's also up almost 40 percent and even some of the Lesser performers like Raytheon and General Dynamics are up about almost 20 percent in a terrible Market environment the fact the matter is war is terrible but it appears to be good business we've sent so many weapons to Ukraine that there's recent press reports that are the U.S stockpiles of missiles javelins and Stingers are now depleted so these companies are going to keep doing well for the next year at least now there's a new appropriation sailing through something like 44 billion of new funding for the war it's now over a hundred billion dollars McConnell says this is a Republican's number one priority this is now a bipartisan concern and if you think the war is expensive just wait for reconstruction that's estimated to cost at roughly a trillion dollars to build uh Ukraine back sax can I ask you a question about that it are these when we uh fund these wars I've heard uh different versions of this can't get a clear answer when we provide weapons uh and systems like this are they not on account and we ask for money back at some point do you know the answer to that question you think we're gonna get money back are you kidding it seems to be sometimes that we do so that's why I was asking I think it's something there hasn't been Clarity on look I think the the war has been phenomenal business for the military industrial complex so that's what we're seeing here uh not so great for the rest of the economy free bird what do you got yeah I mean I think you guys will remember last November I predicted energy and defense to be the best performing stocks for this year sax is right I think defense is up 40 so I I kind of went with the bigger oil and gas companies um are up uh you know across the board about 47 in terms of equity value in the public markets a year to date uh compared to the s p being down about 20 percent uh so over the short term I would argue oil and gas companies but I think that um over the long term there were a couple of big breakthrough moments uh that I would give kind of you know the winner in business that will benefit over the long term to open Ai and to Fusion startups and we'll talk more about why uh for those two obviously later when we get to the biggest winner in Tech and science um but yeah short-term oil and gas they benefited from the supply constraints and the conflict in the Ukraine and the longer term I think open AI infusion startups well and by the way I mean just just to give Freebirds some credit here you actually predicted the war or you predicted a war I don't know if you predicted this war but you predicted yeah I predicted the war and Putin kind of rising to the center stage and the defense that was a huge prediction because I don't think most people even most analysts well they were surprised even when The Invasion happened I think people were still very surprised both that Putin would order it but also if you study the situation I think you got to be surprised that we didn't negotiate harder to try and prevent it I traded it too I bought an energy ETF so it worked out for me okay chemath your biggest business winner of 2022. uh Nick can throw it up but it's basically any single person that understands the following formula so if you this is the that's so good this is the this is the capital asset pricing model so what is this this is like before you make any investment what it actually tells you is here's the rate of return that you need to generate above the risk-free rate in order for you to justify making that investment and if you really understood the capital asset pricing model going into 2022 it would have been difficult for you to not make money because all of a sudden as the 10-year flexed up and as you know the volatility particularly of things like tech stocks went crazy you could have figured out where you to park your money and all these people that have built businesses around this Capital asset pricing model so you have companies obviously so you know you have sectors of the economy like defense or energy stocks consumer goods and Staples they all had moments where they all did well but if you take it one step above the organizations that actually ran big macro books or really understood how to algorithmically implement this Capital asset pricing model just ran roughshod over the markets and you know said in a different way it's sort of my background which is you know if you understood the capital asset pricing model you would have been a massive bear and the bear got fed this year to a degree that none of us could have anticipated okay so am I correct saying the capital asset pricing model is the biggest winner or no people that understood it people that understood it got it okay and for my biggest winner I went with chat GPT open Ai and their partner Microsoft why did I pick that as the biggest winner well uh on my other podcast this week in startups we played a game chat GPT versus the first result of Google's and Molly and I could not tell the difference and in fact we picked chat gpt's answers often above Googles Google one of the greatest businesses and franchises ever created has no answer at currently for chat GPT because Google's business model is to get you to click on an ad between links if you give the actual answer then the person doesn't stops clicking if they stop clicking Google stops making money there is no business model in search if the person gets their answer because they're done this is an existential threat like we have not seen and our friend Sam Altman has a line chat GPT open AI with Microsoft Microsoft I think is going to release a and there's a prediction as well a search engine with openai that has a significant impact on Google's franchise we didn't think this would ever happen and it's here okay the biggest losers in business we made predictions last year I said in 2020 I predicted in 2021 The Biggest Loser in 2022 would be crypto by the way Friedberg you agreed with me and we nailed it you agreed with me well yes that's right that's correct we were in agreement how about that independent you said uh and chamath Visa slash MasterCard we'll get into that and sax you said asset classes benefiting from government pumps very interesting the FED stopping QE interesting anybody have comments on their predictions or each other's predictions from last year on a percentage basis David absolutely nailed it sax absolutely nailed it on a dollar basis the biggest business loser of this year was big Tech and I think that you saw three things happen which I think are important for the future the first was it was the most crowded trade both by professional money managers as well as retail and that fever finally broke in the last half of uh in the second half of this year and now going into into these last few weeks you're seeing a lot of panicked selling to cover losses and other things so I think that um number one that happened number two Regulators basically said we're going to go after these guys every single which way we can and then number three I think it started to change the Innovation cycle where people now actually believe that they can't outspend because folks won't tolerate it and the things that they're spending their money on seem kind of foolish and so I think the you know big Tech is probably not discussed enough but it was a huge loser for this year in terms of what happened 2022's actual biggest business loser chamat says big Tech Freeburg who is your biggest business loser for 2022. I mean this one's just a simple FTX I mean that was such a incredible uh revelation of the scale of the scam and the fraud and the craziness that went on and I think what was interesting about FTX is it had implications not just for crypto and not just for kind of offshore or regulatory not just for fraud but also for the investors we had a whole debate about whether the press and journalists failed to kind of you know appropriately investigate this guy rather than give him accolades because he said the right things which he said he did over I am and investors failed to do relevant amounts of due diligence or form aboard and have proper governance over him because they wanted to be part of the hot new thing and everyone had Capital to deploy and I think what was interesting about the FTX failure is it didn't just it wasn't just a failure due to fraud but it revealed so many parts of kind of you know I call it uh um you know systemic laziness and and systemic kind of Blind Eye and systemic bias uh that allowed and enabled this to happen it was really a revealing kind of failure and that's why I kind of gave it the the award Mr David sacks who is your biggest business loser of 2022 well you kind of mentioned this uh I picked Bob J Peck who's the former Disney CEO he was iger's hand-picked successor three years ago then the pandemic hit which shut down the theme parks but then I think the big mistake was allowing himself to be Mao Mao by woke employees into picking a fight with DeSantis over the so-called don't say gay Bill uh that caused DeSantis to retaliate by threatening the special privileges that Disney enjoys in the state and then he had Iger undermining him behind the scenes this was revealed I think it was a Wall Street Journal story that he was grousing to insiders that jpeg was not soliciting his advice and he was undermining confidence in with the board and uh recently chapek was forced out Naga was put back in Detroit fantastic choice for The Biggest Loser how brutal does Iger look in that Wall Street Journal piece I mean would anybody work for him yes he is incredible he looks terrible I agree I read that piece twice actually the CFO calling him up she was the one who stabbed him uh you know in knifed chapek It's a Great Wall Street I don't think I don't think that that happens without the support of the person waiting in the wings Hey listen there's a couple of jobs you never quit you never quit a hit TV show you never quit a hit band like Roger Waters with Pink Floyd why didn't they just extend it don't quit the Disney job it's the best job in the world but Jason why go through this never quit why go through the theatrics of like grooming somebody putting them in your job and then undermining them like I I all I'm saying is if you're I think he made a mistake I think he made a mistake he quit and he wanted to come and also if like if you're a good up and coming exec I mean what do you do if like all of a sudden like you know you have the opportunity to get groomed for that job it just seems really risky yeah I mean I I think Bob Iger realized when he in that piece they say he went on his yacht his wife didn't come with him The Wall Street Journal piece is incredible and he's got bored and he's 70 something years old he's almost like an early 70s why would you give up the greatest job in the world so he went back and he took it back didn't Disney have a mandatory retirement age but this is my point is he was so he was so prolific he could have extended it why not just extend it and be done with it yeah did you guys read the book he wrote uh that right of our lifetime what is it yeah and I think that what was interesting about that book was the entire thing was built around a series of deals that he did it was like I did this acquisition and I did this acquisition then I did this acquisition and everything for him was building this this this Empire by doing deals and someone whose storyline and narrative that they tell of themselves that's built as a series of deals is a deal junkie and you're not going to be a deal junkie where that's your excitement that's the thrill that's the adventure that you get out of life and then you go and sit on a yacht you're not doing any deal sitting on a yacht and you're going to want to get back to that and I think it's less about kind of management and product and it was much more about being in the midst of doing deals and that's probably why that's why he came back if this was part of iger's diabolical strategy to get back let me just say like one of the ways he did it I mean jpeg had the right instincts which is when this whole Florida debate happened over don't say gay highly contentious no comment no comment his Instinct was just stay out of it but then Iger made some statements about how companies have to live with their values and that gun stuff and then the employee started you know again you know Mao Maui him to get involved and he took the bait and he got involved and what he didn't expect is that DeSantis wasn't going to just roll over to Santa's hit him back really hard and it cost them economically and then yeah and in the first interview that Iger gave when asked about this question he was like no comment yeah we're not going to give all the politics anymore it was hilarious that was in hilarious nuts JPEG to basically get involved in politics and then obviously became cannon fodder for DeSantis exactly we're out of this now I mean how diabolical is that well it's absolutely so dirty the other two things were jpeg said we're going to take away your P L's to each of the leaders that is like just neutering them that he basically said everybody's under the CFO everybody's going to be on one p l that infuriated all the creatives and then he went to war with Scarlett Johansson over a 10 million dollar settlement for her black widow he couldn't handle Talent he couldn't handle the politics and he wanted to control everybody's piano just unforced error after unforced era congratulations to my guy bobager I own the stock do you think he was diabolical at all oh in the best possible way in the best possible way which means that Disney stock is going to go up yes I'm buying more Disney stock this year is is all like the woke Progressive politics that he projects is that all just a game to mask what a Viper's Nest their Executive Suite really is are you telling me that Disney is a political Corporation after Eisner and Bob Iger and all of this Michael Ovitz I mean it's the history of Disney it's the greatest job in the world it is Game of Thrones to get that job and Bob Iger got it back he's my guy I'm sticking with him okay they have the best IP in the business I don't care how he gets that job back he's awesome I gotta say the IP at Warner media is a real strong Contender I mean we were talking about this yesterday how good White Lotus season two was all right let's open an incredible discussion it is incredible how HBO produces extraordinary hit after extraordinary hit the quality and the consistency of that quality coming out of HBO is like nothing else you'll go I mean look Avatar 2 I did not like Avatar one I thought it was junk Avatar 2 is getting panned for being junk as well not everything that comes out of Disney is a hit they certainly have the best franchises but man Warner media has a lot to contend with and uh you know they could end up being a real Challenger to Disney in the years ahead sax did you watch the White Lotus season two yes or no okay no problem it is absolutely fantastic we have to do a little fan service here what did you love chamoth about white letter season two give the fans a little service here but wait it's on season two I didn't even see season one I don't even know what you guys are talking about okay how to show in television well I'll tell you what's incredible is there's a diversity of characters and they weave the super like you know interesting story together but each of the characters are so distinct and the characters are played so well I mean we were talking about um you know we were kind of at dinner last night talking about who our favorite character was on the show and everyone has a different answer and everyone has a different reason and then there are characters that you hate but the fact that you hate them and the fact that you despise them draws you in you're drawn into these characters I think that the the way that they kind of portrayed and the way that the characters were acted by the um by the actors uh and then the way that they all kind of weave together to tell this extraordinary story uh it was really um it was really compelling and it was like just super impressive uh directing acting writing everything a handful of scenes in season one and season two which I would say are unbelievably psychologically violent hmm and there's just no other way to describe like how they just Expo and and by the way they do it with simple shots very simple dialogue it's almost nonchalant in the way that they present these truth bombs and you have to sit there and process it and you're just like oh my God it's just it's wave after wave it's an incredible incredibly well written show the character development is extraordinary amazing production and set design by the way also I mean when you when you watch don't you want it you want it to go to those locations do you guys remember in season Once sax will remember this because sacks watched it season one the family is sitting at the table where they're watching the Hawaiian dance and Paula the guest of the family gets up and leaves she can't take it anymore and then the next day they're in a discussion about it and the father says something about I think hierarchy or imperialism or something and it goes around the table and she just dead pan she says well maybe it's just time for others to eat talking about you know like fixing these wrongs and I had to listen to it two or three times I'm like oh my God that is that is a line that just sticks in your brain there's a few of those in in that show that I think I would say and I was saying like they they really draw you in the set design the production design is so compelling you want to be there you want to be in that experience with those characters the pineapple sweet I mean and then in this season that whole hotel I looked up the hotel by the way online they hadn't you know their own set design people come in and redo the hotel but it is an actual hotel and they just made it so magical yeah it was such an incredible oh we should make that the host off the wall in Summit 2023. I'm sorry I'm working on my Jennifer Coolidge tell your director uh David sacks what would you like completely for you yeah my Biggest Loser was crypto and I think there'll be a subsequent Domino to fall which is now that Gary G out of the SEC has FTX and the ftt tokens as the grift he's going to go down the list of other tokens and he is going to start doing more prosecutions of griffs in crypto Biggest Loser for me all right biggest business surprise let's see if we can get Zach's back engaged in the conversation now that we're not talking about art and life sex last year your biggest business surprise it's actually produced a movie about Dolly I know he is I'm joking with him he's a control artist and he sold it to Mark Cuban congratulations on the sale uh David I guess me and Cuban are besties now fantastic in 2021 our selections for business biggest business surprises I was very surprised by dows chamath by moderna sax by Tech moving to Miami and Friedberg you were surprised by nfts what were we surprised by in 2022 Freeburg we'll start with you Elon musk's acquisition of Twitter I think took Everyone by surprise it kind of went I mean this is such an obvious one but it went from a Whimsical fantasy and idea to suddenly you know cold-hearted reality with uh you know a huge kind of negotiating Saga that took place and Court battles and all the drama that ensued and here's what I think was most surprising about it it wasn't just the acquisition and the and the fact that the acquisition closed but it was the the incredible veracity of the head cutting cost cutting the demands that people return to work return to the office and then what was most surprising that followed that is the impact that that seems to have had on the rest of Silicon Valley where now nearly every VC I speak with every CEO every board is looking to elon's behavior for right or for wrong for you know Moral Moral or not and saying that's a model for how you can challenge your team to achieve the impossible in an impossibly difficult environment which is what we find ourselves in and so I think it was a series of surprising events he bought Twitter he made these incredible changes and then everyone seems to be looking to that as a model and it's really resonated it's quite a Rippling effect I'm not saying it's good I'm not saying it's bad I'm not saying it's moral right or wrong but the whole thing was really an incredible surprising unexpected Saga this year so I give the Elon acquisition on Twitter kind of the award chamatha do you have a biggest surprise I would say it's uh Jerome Powell and the fed and their staunch hawkishness uh on inflation I think everybody wants all of this to be over and I think we're definitely in the last few Innings of it but I think what was surprising was how consistent and how hawkish and how bearish Jerome Powell was every chance he got he didn't capitulate or waver from the key message which he was saying from the beginning which is we have the tools to fix a broken economy but we don't have the tools to fix runaway inflation and so we will raise rates higher than anyone expects and keep them there longer than anybody wants because on the back end of it we can fix a few broken bones but if left unchecked this could really do a lot of damage and I think that that was an enormous surprise that all the political pressure in the world all of the financial Capital markets pressure in the world did nothing to change his position sax what was your biggest business surprise of 2022 David sack's biggest well it was it was a pretty big surprise that adobe bought figma for 20 billion that price tag in this environment pretty big surprise but I gotta say I think Freeburg nailed it uh gotta say that the business Saga of the year was Elon buying Twitter first the liberal media was up in arms that he might do it then they insisted that he must complete the deal in any event he he did ultimately buy the company and now he's affecting his changes I agree that's the big business story this year certainly it was a big surprise for me that I got deposition for six hours is it a surprise that you're sitting in Twitter's headquarters today right now yeah it is a surprise but just by the way the rumors and speculation are getting out of hand I am not a candidate for CEO of Twitter so I want to put the composure on that because it's starting to get out of hand and the job is yours my friend congratulations all right again let me know you've worked hard yeah take out the last man standing The Last Man Standing outwit Outlast now that sax has said he is not taking the job a bunch of Libs have just stopped taking Xanax the libs biggest fear with sax was gonna get that job we just canceled a bunch of Xanax uh prescriptions uh congratulations to the lib sax is not going to be your overlord on Twitter for me it's obvious uh the Twitter acquisition is the biggest surprise by Far and Away Freeburg I couldn't have summarized it better I will say in six weeks what we have seen there is nothing short of extraordinary have there been bumps in the road has it been a little chaotic at times perhaps but the features that are coming Fast and Furious are gonna be the story going forward you've seen uh Twitter for business sax had his fingerprints all that you may fingerprints all over that you may have seen uh hashtags for stock tickers I was briefly involved in that they're going to be so many features coming and this is what Elon zone of Excellence is product he is an engineer he's a product genius the proof is in the pudding whether it's rocket chips or the cars we're going to see a parade of features I predict in another six to 18 weeks we will see people talking about all the great features in Twitter not any of the transitional issues and people will be shocked my runner-up metastock collapsing that was my runner-up for the biggest business uh shock is that they just absolutely collapsed I was just going to add to what you're saying about new features launching while we've been sitting here on this pod and I've been checking my Twitter feed there's a new feature where there's a view count on all of your tweets and all of everybody else's tweets as well so you can see how many views a tweet is generating so this tweet that I posted yesterday has 1.5 million views it's like incredible so it really shows the incredible reach of Twitter and anybody who's thinking about going to like some knockoff like Madison or something is gonna have to contend with the fact that it doesn't have nearly the distribution so I think this really shows the power of Twitter and then Dave Rubin noticed my I tweeted this just a second ago and Dave Rubin noted that the New York Times doesn't have anywhere near the views for its tweets because they bought all their followers which is interesting I didn't know that but I just went over to the New York Times profile and and my tweets are routinely getting 10 to 20 times more reach more views than theirs so this is a super interesting indicator of who actually people are paying attention to on Twitter it's fascinating this is fascinating I'm looking at my own I just did how do you give a 30 billion fraud Bell referring to SPF and that was just less than an hour ago no it's 30 minutes yeah an hour ago and I have 50 000 views already which is uh 10 of my follower account so this is an extraordinary you see right next to likes retweets quote tweets the feature train is coming and this will change the dialogue all these haters who are like Twitter's gonna go down who are rooting against Elon let me tell you something if a guy can land two rockets at a time and he can literally restart the electric car movement and he becomes the number one car in any category he releases a car and how on Earth would you bet against him to build software you have to be idiotic this is way too much I mean you guys like we should sorry it's like an ad yeah you're selling them whatever for a company that you guys are working at like I mean come on I'm not working yeah well you guys are advisors right Nick can you let me show another feature because I think it's cool Nick sure let's go yeah let's go pull up my profile real quick welcome to this week in Twitter God Twitter now has affiliate badges you can see I've got a little craft Ventures badge next to my name so if you you should be able to click on it actually to get to the craft Ventures profile yeah so you're gonna be able to affiliate users with business accounts and it creates kind of secondary badges after the blue check I think even the corporate journalists are going to love this because if you're a New York Times writer you'll have a little nyt badge next to your name Wall Street Journal whatever you'll have the little badge so more and more people are going to get blue checks and then people are going to have secondary or even tertiary badges that are basically specific to their affiliations okay so I think let's make sure we get let's get an all-in badge we are going to have all in badges really soon awesome okay let's go for free work free works that was our biggest business surprises and we just canceled your account Freebird they're locked out we just took away no one goes through it anyway it's all good don't worry about it okay best science break they're here's an easy one for us to do 2022 biggest science breakthrough what have you got Sultan of science we core of course have to start with you 22 biggest science breakthrough Freeburg yeah I'm I'm gonna give it obviously to the um the demonstration of net energy gain from the national ignition facility in plasma Fusion uh that we talked about last week I I wouldn't call it a breakthrough by the way I think we we use that as a misnomer last week but I'm still going to put it in this category it's more of a milestone along a very long path a very arduous path a very difficult work that's been taking decades so it's a great milestone but I think what was so important and impactful and Powerful about it is that it's really catalyzed the change a sea change in the investing in the Outlook that this is becoming more reality as I mentioned last week we've seen an increase of nearly 40 percent in the number of fusion startups and the amount of capital that's flowing in is now reaching 10 billion a year so this is becoming you know a real investable or an area that's getting real investment some people might not think it's very investable but that's why I think it's it's been an important year for fusion and I think um you know it's something I highlighted last year I was excited about and I too picked Fusion uh also just point of clarity last week some people chamoth before you go to your prediction were saying hey you're talking your book on solar when you're in your disagreement with Friedberg that's obvious you've been very upfront that you're investing in solar you placed your bet yeah 100 percent yeah so just depends everybody knows he made that bet he's talked about it incessantly plus those idiots that were saying that are stupid but um yes let me uh let me further clarify what I said last week and why it's important if Nick can you bring up the capital asset pricing model again the most important thing for me is to make sure that we don't misallocate human capital into Endeavors that I think are best left for research institutions funded by the government and I think when you look at a capital asset pricing model and try to build one out for Fusion as an example the expected rate of return that you need to get from this is just astronomically High because of the beta of that investment risk and the market risk premium you have to generate and so you know from my perspective I think that there are probably four or five labs in the world that are capable of actually getting us to a positive energy equation I think Friedberg I really thank you for actually saying that it wasn't a breakthrough in more of a milestone I think the real breakthrough is when we have positive not just joules but we actually convert that into electrical energy right and we actually talk about power and watts and I think that most people listening probably don't even understand the difference between joules and Watts or don't even care and they want to jump around here or there so the point is that there's an enormous path we need to take in physics and I think it's best done in governments and I don't want to see a bunch of billions of dollars get wasted to get to to get marginal cost of energy to zero right now I think there is a point in time where private startups can take the the last 20 or 30 percent but I think about this like the internet which is you need a DARPA to build V1 and then it could be handed over to Private Industry and I think Fusion when we look back will look very similar and all the folks that try to build you know versions of the internet that were private I think found themselves lagging because there's just a level of investment that's required that's best served in government so anyways that's let's clarify that for all the for all the folks who got their panties but in any event my science breakthrough of the year is that there was a 13 year old girl this was you know because of all of this Fusion stuff actually we didn't even get to cover it because it happened in the same week and I think this is infinitely more impressive and is an actual breakthrough which is a 13 year old girl in the United Kingdom who had a heretofore uncurable form of leukemia T Cell acute lymphoblastic leukemia so typically you start in chemotherapy if chemotherapy doesn't work you move to bone marrow transplants and it was uncurable and a lab in the UK basically using crispr edited these transplant T cells to go in and wipe out her cancer and now her cancer is literally undetectable now if you bring up that Capital asset pricing model again Nick what I'll tell you is the rate of return on a human life in my opinion is infinite and so here is an unbelievable breakthrough that got very little attention because everybody was wrapped around the axial effusion it happened in the same week so maybe it's understandable I didn't understand it but I think this is the single most important thing that happened in science not just this year but frankly in the last decade because if you can actually now do base editing and eradicate at least in this case a blood-based Cancer and eventually we'll be able to bring that and use that towards solid-state tumor cancers it's a huge breakthrough in in just human longevity and human quality of life and that happened just a few weeks ago okay and of course for David sacks his biggest uh science breakthrough is I don't care so moving on sex go ahead tell us yeah no this category reminds me of when Biden had that moment where he's like America can be defined in a single word and he's like that's kind of how I feel about this category America is a nation that can be defined in a single word foreign amazing how you figured out a way to be derogatory about Biden in the science section a new low even for you sex oh it's a good one sex I like it all right biggest flash in the pan 2021 this is what we said where the biggest flash in the pan I said uh the woke socialist leadership of cities I.E Chessa boudin freebrook said the Constitution Dao Sac said the word transitory very well played and Tremont said the metaverse also very well played everybody yes very good everybody get your flowers uh enjoy all of those seem like pretty good uh selections but this year is what everybody wants to hear about Freeburg tell us now who is your 2022 biggest flash in the pan the undisputable who here we go biggest flash in the pan of 2022 was the all in Summit it went that'll always be a strong and significant memory it was such a hot thing for a minute and then it died so um to the all-in summit I I uh when I used my glass I pour one out I toast to you to Miami and uh unless David sacks carries it from here uh it was a flash in the pan it was a flash in the pan uh sex who's your flash which Democrat is The Flash in the plan for you exactly this is where I had uh Liz truss as you guys mentioned she only survived 44 days as PM I mean that's only four scaramuccis she was basically fired by the bond markets after she combined a thatcheress tax cut with massive energy subsidies to counter the price spikes caused by the war in Ukraine that's just been actually committed to this was deemed untenable by the UK Central Bank it crashed the pound and I think there is a serious Point here which is that as much as Thatcher and Reagan were the two towering heroic figures of the 1980s I think zombie thatcherism is not going to be electorally viable in the UK just like zombie reaganism is not going to be viable the United States I think that the conservative movement has to stop living in the past we have to develop fresh ideas to meet the economic and foreign policy challenges of today tremath do you have a flash on the pen I actually think Fusion literally was a flash in the pen it was it lasted 10 to the negative 10 seconds so that more less of a flash you can't have without being a flash in the pen ah they have it hey uh I see somebody who's here oh look who's oh is it the proprietor the proprietor the owner to her customer support at your service so actually spent the last 15 minutes selling your new features uh yeah on the podcast pretty exciting well the the like the views are like incredible yeah I mean and I saw Dave Rubin already made an observation that if you look at New York Times their views are maybe one tenth Like My Views just me as a lone Tweeter and he said that their followers are inflated by just basically buying a bunch of follower accounts yeah the views thing is huge that's why I I pushed the views which is like actually a lot harder feature to implement than you'd think because the sheer number of uh transactions uh per second like uh it's I think it sort of requires system-wide on the order of of three three million transactions a second to actually calculate the view to you know calculate and display the view count FYI for Twitter Twitter Global so it's like three million per second it's a lot for those of you listening uh Elon Musk has joined the Pod Elon how's uh how's the first six weeks been generally speaking of owning Twitter well it's been quite a roller coaster which uh obviously you've um but witnessed and been on the roller coaster as well yes the Dramamine I've taken the Dramamine it's it's quite yeah I mean it's exciting uh but I think it's sort of has its highs and lows to say the least um but overall that seems to be going in a good direction and um you know we've got the the expenses reasonably under control so the company's not like on the in the fast lane of bankruptcy anymore and we're uh releasing features uh faster than Twitter's history at the same time as having contained the costs and and uh reduced the cost structure by a factor of three maybe maybe four so you know the the verified uh is obviously that's that's that's huge it's the revenue stream as well as um uh a means of identifying of like knowing that it's a real person and not a botter or trial situation the having the affiliation organization affiliation which I suspect you talked about that was a an idea of David's that was great um to uh you know have organizational affiliation so you can know that somebody is um an actual professor at Stanford or uh does that this particular handle is actually Disney not someone simply putting I work at Disney in my in their bio so I think that's going to be really helpful it they're just really just having um detailed and uh nuanced verification so of all the various things that you say you are are these things validated by other people and organizations can you tell us how you do product iteration Elon because one of the things that I think some people got guilted by over the last couple of weeks is like a bunch of things got taken away or changed or rules changed or policies changed and there was very quick action and then people had all this negative feedback about the the quick action without communication but your extraordinary Talent is to iterate product to success can you just maybe share with people how you do product iteration in this context to help them understand how some of these decisions get made and why moving quickly is so important and just you know how you're doing this I'm a big believer in like you want to look at the net output um so it's sort of like a you know what's the batting average uh if it's like baseball the point is is not that you're like uh you know hit the ball but it's like well how many home runs you get and how like what's your actual your slugging percentage Yeah selling percentage Yeah Yeah it's like you've got to swing for the fences you're gonna you're gonna you know strike out a bit more but we're gonna swing for the fences here at Twitter um and we're gonna do it quickly so and I think uh generally like my error rate uh and sort of being the chief twit uh will be less over time um but you know in the beginning we'll we'll make obviously sort of a lot more mistakes uh and you know because it's I'm new to the I'm like hey I just got here man um so I mean if you look at like the actual amount of improvement that's happened at Twitter in terms of like I said like having costs that are not insane uh and getting and actually shipping product that on balance is good I think that is uh that that's great like I think we're actually executing well and getting things done I think we'll have fewer um pure gaffs in the future how did you get to your intuition on what the efficient Frontier of employees needed to be to make the product better well um yeah I I observed part of this where you basically asked the question who here is critical and who here is exceptional yes I mean is so I mean it really the what are the criteria is trying to apply and obviously you're not gonna be perfect um if you're moving fast and and there's a lot of you know people you're talking about here is that anyone who is exceptional what they do where the role is critical and they have a positive effect uh on others um and they are trusted meaning they've put the company's interests before their own uh should stay pretty straightforward yeah and you know also and it also is up for working you know working hard like uh that would not that would not this this that starts was not Twitter's prior culture yeah were you surprised that that the intersection of that Circle and the people that left was basically 25 were you surprised it was that deep or did you think your intuition was like it's probably somewhere in here well I think you could just stand back and say without knowing how many employees Twitter has at all and say how many people are really needed to run Twitter like let's say you don't know what the employee account number is at all how many people needed to keep the site operational like let's say if excluding product product Evolution you basically have to keep the servers going and uh you have to have customer sort of a support function to take down a material that is in violation of the law how many people what's the minimum number of people that's in the hundreds probably it's not uh exactly it's not it's not like a giant number yeah Twitter saw is like 2 000 people right yeah we still have two thousand people it's not nothing and and actually if you there's there's actually on the order of uh like almost 5 000 uh contractors like almost yeah almost all of the what's called trust and safety work which is like um the the support functions for the site are done by contractors you're doing a lot more to take down hate speech than the company previously was doing yeah absolutely I hate speech impressions are down by a third and we'll get even um lower maybe you could speak a little bit to the what we discovered uh I think in those early weeks which was the incentive the incentive previously was to create as many accounts as possible and there were a lot of quick fixes to lowering all these you know what people might call bot accounts in some cases it was people opening many millions of accounts but uh we discovered this very early how easy was it for you uh with the tech team to maybe lower the bot count and all the fake accounts maybe you could speak a little bit to that because people have seemed to think that gosh it's a really hard thing to get rid of bots and it turns out it isn't um but we still have a fair number of bots in the system but the like I think the the internal structure the way Twitter set up previously was this Relentless focus on what they called mdao which is monetizable daily active users although I would say the monetizable part is the dubious but at least things that appeared to be monetized or could be passed off as monetizable daily active users so this I created an incentive to turn a blind eye to a fake account so if the incentive structure is like you know maximize the appearance of monetizable daily active users then you're just it's a strong incentive to pretend that a bot is real and that's what happened so um we're taking a lot of steps to reduce the Bots and trial situation um so many um and um I think you're seeing that in in the usage like it's not it's not like relatively rare to have your replies filled with crypto scams I'm not seeing any anymore Freebird you had a question yeah I mean just on your earlier question you know Elon when you first started um making changes at Twitter after you bought the business a lot of people kind of took notice at how extraordinarily Swift and significant those changes were yeah and um there's a lot of technology companies that have CEOs and investors and boards and we all talk to a lot of them and they're all now having a conversation like look at what Elon did at Twitter how can we do something as aggressive as Swift as deep do you think much about kind of the the model you're playing for other businesses and other Business Leaders particularly in Silicon Valley and how you're operating Twitter do you ever kind of talk about that because I know you mostly talk about your business and you talk about the businesses you're running but you're having a big influence I think in how other people kind of act and behave that are other Business Leaders and run other technology companies I mean to Frank I'm not I'm not really you know act are thinking about that much because I'm just thinking about like how do we um I'm just like you know uh just get Twitter to be in a financially healthy place um and and and fix the engine of engineering so we can have a rapid evolution of of new products so and you know I I mean I guess I'm gonna sort of in some ways an unfortunate position where I uh don't have to answer it it's not public and we don't have a board really so uh I mean so I can just go you know and and I can take actions that are uh drastic and and obviously if if if I make a bunch of mistakes then the then Twitter won't succeed and that'll be pretty embarrassing and uh sad but as long as like I said as long as the batting average is is good um um wins uh out you know significantly outweigh the mistakes then um you know it'll be a great future and I think I'm very optimistic about where things happen I think a lot of people want to talk about or understand Elon your position on freedom of speech and your principles I'm curious you've been pretty upfront about it how do you think about it post acquisition you know what speech should be allowed on the platform Kanye came back he just went insane his account got revoked what have you learned I guess now that you own it because you must be getting a lot of inbound from people asking you hey how are decision is going to be made Etc you've been clear transparency is super important in this but what are your thoughts on free speech and speech on a platform like this well I mean the the general principle I think is that we should Hue close to the low in any given country so the lowest vary quite a lot by by country um and um so I think we should be doing free speech that's that's close close to the low and uh that's that's that's the general principle um the I think there are other things where it's like okay we um like for example like if you're an Advertiser um you don't want to Nestle you don't you don't want your ad like let's say it's a family movie next to some you know uh NSFW content even if that content is text you know you know it's like um but they'll be like uh that's probably that's we don't you know so so that's okay so that's you know part of what you know like when like so there's there's more of an allowance for what you write what someone call hates feature on the system but it's just it's not going to be promoted it's not like it's we're not going to be recommending hate speech it's a risk of stating the obvious and we're not going to monetize hate speech so or negative speech like that's nor would advertisers want us to you know any any I think it's going to be a rare product that wants to be uh next to uh seriously negative stuff I would say you refer to it as hey freedom of speech but not reach because this is a very nuanced discussion like should this stuff be able to hit the trends you know in that kind of stuff yeah like it's certainly possible it's some things that will be regardless hate speech will hit we'll hit it we'll hit Trends but I think it's going to be relatively unusual uh especially as we are doing a better job of controlling the the bot Central situation and uh and yeah I don't exercise like this difference between the Boston trolls like Boston like fully automated accounts but like a troll phone would be where you've got like you know 100 people in a warehouse somewhere each with 100 phones and so they're actually humans and they're gonna pass a capture test or you know and they can you know reply and reply and they're because they're actually humans but it's actually ten thousand accounts that are just they're they're obviously not operating as as as real people so that that's you know stuff like that can cause things to to Trend negatively that's why I'm like a big reporters of having just a low-cost um verification capability and um yeah so but like this is definitely a work in progress so there's um like I said it's gonna be and I did like one of the first things I said uh after the acquisition closed was like we're gonna make a bunch of mistakes but then we'll try to recover from them quickly and that's uh that's what we've done and I think we've generally succeeded in uh recovering it from them quickly and um it's been going pretty well was the Paul Graham and journalists suspensions mistakes from have you talked about this publicly about how that all kind of got resolved at the end uh yeah I mean the program uh suspension was definitely a mistake and I actually called the program to apologize personally for that one yeah great yeah um so uh you know on the journalist front the I think the journalist essential suspensions were were not not a mistake uh in that um for some reason uh a bunch of journalists thought they were um better than regular than everyone else and that if they engage in doxing and and uh you know other and break the rules in various ways that that they're not subject to suspension even though your average your average citizen is and I think that's just messed up uh the same rules should apply to people who call themselves journalists as to you know anyone else on the system they shouldn't be uh sort of above the rules for some reason they thought they they should be that's that's that doesn't make sense I don't think that's right yeah and the rules being transparent and upfront I think that's what everybody's looking forward to maybe some just complete Clarity and transparency and you've said from the beginning when somebody gets suspended or the shadow Banning or this sort of tips into this really weird stuff that we discovered during or you discovered uh where the journalists discovered during the Twitter files it's it's kind of a bummer that people are being sanctioned or Shadow banned and they don't know it if we're going to have a system the rules should be clear to everybody yeah absolutely so the the something I've committed to and we'll uh well I think probably be able to roll that out in January um just by the way there is like a bit of a you know we are not going to be rolling out a ton of new features over you know Christmas and New Year's and stuff so there's like a you know what's been the next sort of feature set will probably roll out mid to late January um and hopefully in that we'll uh we can include um information about why an account is suspended or uh has uh what as uh called within Tesla to Twitter uh visibility filtering uh AKA Shadow Banning so um uh and and some of these things like are like there's a lot of things that just happen accidentally where there's um you know the rules in the system that are meant to detect whether someone's a sort of Bot or troll or or like brigading where they're like you know and and then and an account is sort of innocently caught up uh in that so um like there was some accounts just suspended uh yesterday because um but temporarily suspended like they got like 12 hour suspensions because someone in customers it's someone in trust and safety thought that they had posted a nude photo of Hunter Biden or something oh no but they hadn't they hadn't actually done that um I don't know it was just basically a mistake there were some accounts that would go to 12 hour suspension yesterday for uh an error why it happened it was just essentially a mistake uh in the with Twitter customer support that was corrected Elon let me uh let me ask you just a slightly broader question one of the things we just talked about was the regime change that's happened where you know we all have to act differently now that the risk-free rate is probably going to get to five percent and I'm just curious across all your businesses so Twitter yes but really more importantly Tesla SpaceX are there decisions that you will make differently or not at all or will make that you wouldn't have made otherwise in this new regime and how often do you think about that kind of stuff well I think like it's more like like it does seem like we're headed into a recession here um in 2023 the magnitude that recession is debatable but I think it's at least a a life to moderate recession potentially it's on the order of uh 2009. um so that's so I think it's it's wise to kind of like prepare for the worst hope for the best prepare for the worst don't get too adventurous like watch out for margin of debt like I really advise people to not have uh margin debt uh in a volatile stock market and uh uh you know from a cash standpoint keep keep powder dry you can get some pretty extreme things happening in a down Market um like Brett Johnson who was a CFO who is the CPO CFO of SpaceX was at um broadcom in 2000 and he he said that uh and that's a good company making good products and he said the the from from Peak to trough I think in less than 12 months uh broadcom went down 97 percent so like even if you had a small margin loan there you got you got crushed um it subsequently recovered and I think you know to to much higher levels but you know if there's like mass panic in the stock market uh then you've got to be really be careful about margin debt so but I mean this is just as we know this the economy is cyclic so you and it's somewhat overdue for a recession and my best guess is that you know we have sort of Stormy times for a year to a year and a half and then things start to Dawn breaks roughly in uh Q2 24 if if I were to get that's like my best guess recessions don't like booms don't last forever forever but neither do recessions and it's a 14-year boom so a six quarter recession seems like yeah that may that might actually bounce out the last time it was what four or five quarters so yeah it's it's not easy hey um the Twitter files how how how much longer are these gonna go on uh it seems like every week another drop uh and these are pretty controversial um how much longer are the Twitter files going to go on uh in your mind yeah and maybe why is this important to you to make sure that people understand the stuff yeah I think it's important to like you know if we're going to be trusted in the future to kind of clear the decks for stuff that's happened in the past so um I mean to be totally Frank um almost every conspiracy theory that people had about Twitter turned out to be true so is there a conspiracy theory about Twitter that didn't turn out to be true so far they've also turned out to be true and if not more true than people thought is there a part of the files that really shocked you more than the rest of them like of the things that have been disclosed of all of these things is there something that really sticks out with you is like holy [ __ ] I had no idea this was happening or is the whole thing just a big dumpster fire and they were just looking at one huge thing um you know like psyops versus the hunter Biden Thing versus the yeah the number of FBI people involved that was yeah it was pretty intense yeah the FBI psyop stuff to me was probably the one that was the most Insidious like the rest of it I could think of like you know a bunch of overzealous Libs got used yeah got it you know what I mean sure sure but to have like a secure skiff that essentially sends things that you know government agents want the populace to basically think it seems like out of like a really bad dystopian novel and then it turns out it existed and then also the thing is it couldn't have just existed at Twitter so what are we going to do about all the other places where this shit's happening YouTube Facebook yeah none of it seemed that surprising to me I mean I don't know maybe I just believed all the conspiracy theories but I've also been inside some of these companies and seen how they operate so honestly none of it was a surprise to me was it a big shock to you Elon well you you Freeburg you were I I think you can claim that you weren't surprised that these companies were Shadow Banning although they denied it but did you really suspect that the FBI was playing a role in flagging content for these companies to take down it's like that blew me away content that's got nothing to do with like terrorism yeah they're not investigating crimes like there's no crime right yeah they literally flagged satire maybe they didn't get the joke I don't know but uh they don't seem to be a humor driven group but um they don't seem to have the best senses of humor but aren't they supposed to get warrants isn't that how it's supposed to work in a democracy they want information that's troubling to me put yourself on either side of the extremes we have Michael schellenberger here who broke the FBI story in the Twitter file so let's listen to him and to see because I think maybe the audience isn't caught up on like what was discovered so now I know I have to follow Elon Musk that doesn't seem fair yeah hey guys see you later hey guys oh hey Michael how are you uh I'm good uh just a quick question for you Michael Michael first of all first of all who makes that sweater oh I'll send you mine man do you want it or are you making fun of it I praise from you brother I praise uh just briefly Michael um isn't the FBI supposed to get warrants uh to yes take actions with folks and then I guess is that at the Crux of this are they doing this at other companies you think are they just like embedded in YouTube should we expect they're embedded at meta and that they don't get warrants and they're kind of tipping the scales and is that a good thing for a society or a bad thing for society it's a bit of a basic question yeah well I think there's a there's multiple issues relating to FBI that I think have to be unpacked a bit but the first one is that yeah FBI was constantly pushing the boundaries of what is legally and ethically acceptable in terms of requesting information now I think what you saw over the last uh three weeks was a shift in I think our own understanding that we did see more pushback from Twitter Executives against FBI and some alarm Bells being uh wrong in terms of the requests that were being made from the intelligence Community but these guys were really persistent they kept asking for more they kept getting more and more cooperation it's very troubling it does look like Congress is going to look into this uh the two heads of the Committees that are tasked with this or have said that they're going to look into it next year I think the other thing that we saw that I think is is more troubling was this persistent uh effort to basically communicate to Twitter Executives but also to news media National Security correspondence that there was this heavy foreign infiltration going on this this Russian disinformation and it appeared to me looking at all the evidence both that we saw from within Twitter and from outside of it that this was pretty organized effort to convince uh key Executives at Twitter and Facebook but also these key reporters that that they should expect a hack and leak operation sometime right before the elections having to do with Hunter Biden I I find that very suspicious can I make an observation I think that maybe what we're finding out is that the mainstream media tried to go back to its 1980 Cold War Playbook and turn Russian to a boogeyman but as we're seeing in the Ukraine war you know they're not nearly the formidable foe that we thought they were and so it could probably be the case that in 2016 they were as inept technically as as they are militarily right now and so we may have just built up this monster that uh is kind of more like you know a a much smaller thing to be worried about and we all ran with it because we had no evidence but the Ukraine Russia war is evidence that you know this highly sophisticated War Machine and propaganda machine is not that good at their job right yeah I mean I think that what's there's a lot of interest that were being served by hyping the so-called Russian misinformation threat I mean one of them was just to Simply explain away the Trump phenomenon as a consequence of foreign interference uh certainly the people that ran Hillary Clinton's campaign had an interest in doing that but then you saw it become a sort of way I think to condition people for the release of the Biden laptop and again we can't I can't prove that but it is striking that the Joel Roth this means Twitter executive who I think was the object of this misinformation campaign um testified under oath that he was being bombarded with these messages all throughout 2020 that they should expect some sort of a hack and leak operation so when the New York Post finally did report on that computer uh in 2014 it was briefly censored by Twitter but I think more importantly it was discredited in the minds of many voters including myself I really didn't think that that laptop was what they said it was and it turned out that it was so I do think it's there's a real troubling pattern of behavior by both the FBI agents but also by the former FBI Executives including the Deputy Chief of Staff and the chief counsel from FBI that that were at Twitter as Executives at the time and In fairness Michael this has been brought up many times but I just would like your take on it because you're a lifelong Democrat correct until until last year great so it would you know uh just unless anybody think that you are like some Maga supporter here just with my sweater yeah exactly this was all in the backdrop of trump asking for the Russians you know during that debate to hack Hillary for him interfering with solanski and trying to get him to give dirt on Biden and the fact that Hunter Biden was obviously dirty uh so to expect a hack there was massive precedent for it so that set the stage for this correct for sure and there is definitely uh that going on and maybe that's all there was to it it is just striking of course because and I didn't even mention in my this is by the way this is Twitter thread uh part seven that I did on this issue um I didn't even get into the fact that you know within a few days the many uh former senior heads of intelligence organizations and others came out and said that it was the result of a Russian disinformation campaign so yeah sure I mean I I guess we could find some other explanation uh for it um whether it was innocent or coordinated but it is it is striking also I think the other thing that we found was the contrast between the the threat inflation and what what Twitter was Finding themselves I mean there was you know you'll repeatedly Joel Roth would would respond to FBI that yeah we looked into these accounts that you mentioned and they were all very low follower accounts with very little activity so they just weren't finding very much foreign influence on the Twitter platform and so I just think it was grossly inflated either for kind of good reasons or bad reasons I would say yeah yeah and it's uh there there's no perfect way to police this stuff obviously and uh okay well listen we appreciate your reporting thanks for doing it um and uh if you haven't uh read Michael's book uh San Francisco you did some great reporting there as well and uh continued success in your investigative journalism thank you Michael thanks guys appreciate it all right Michael sorry oh lost him hey you did an interview uh on that I think I saw it on YouTube or something where you interviewed someone who was homeless in San Francisco and they were addicted to drugs and they kind of said some narrative about how they were uh in this condition because San Francisco basically pays them to be homeless and pays them to do drugs on the street did that ever get published and did that come out because it was such a compelling couple of minutes that you got on tape there it really for me sent home a message of how far kind of a progressive policies can take a society and it's such a beacon for where things might go as other people start to think about adopting similar policies around the world which is why I thought it was such important reporting whatever happened with that and where can folks see that because it was such a moving interview for me yeah if you just Google Michael schellenberger YouTube homeless you'll be able to find all my videos there's a lot of them that we did with people on the street all of them of course people asking and wanting to do them but yeah I mean what we I also wrote about that in my book which is basically San Francisco pays a cash welfare payment of somewhere between six to seven hundred dollars plus you can get 200 in food stamps and a lot of uh people sadly use that to maintain their addiction and this gentleman uh James with the tattoos on his face was very honest about how he was playing the system in fact he was himself we found this increasingly kind of horrified by the incentives that San Francisco was creating for people to live on the streets and and live on the streets in their in their addiction so yeah you can find that on YouTube so many people say incentives Drive behavior and unfortunately these policies all came from a good place from a kind heart and the idea that we could help people in need and unfortunately the way that the incentives get structured they can actually cause more harm than good it's such an important lesson I just wanted to say that because I think you're reporting on this really hit that home uh so so thanks for doing that I think it's really important because we have we have to do the right thing for people but we also have to be careful that the policies are done in the right way so I think it's so well said Friedberg because when you're Michael and I I just think you're very courageous for doing it because it's very easy for somebody to say oh well you are being callous the truth is incentives matter and we saw we we've seen this over and over again if you pay for something you get more of it and really San Francisco is burying the burden I think this is what your book and uh um you know in a lot of the videos you've made at least the message I got was San Francisco has the lowest price of drugs the lowest enforcement and the most incentives therefore they suffer because every person who is you know addicted comes here because they speak to each other and 90 of the people who are in San Francisco are here because we have created an incentive structure is that directionally correct as we wrap here yeah 100 correct including just the non-enforcement of laws against sleeping on the sidewalk doing drugs in public not requiring ultimately three times more people die living outside is an unsheltered homeless person rather than live than being in a shelter and for me that's all you need to know to know that you usually we cannot allow our brothers and sisters to sleep on the street no matter how desperate they sound about wanting to avoid going inside it's three times deadlier to be on the street than inside so the compassionate thing is to force people into housing but you know because you're we have this perception that people have freedom and they should have the right to do this but a person who's taking fentanyl in your research is not thinking correctly and if it was any family member of ours we would not want them to make that decision for themselves we'd want somebody else to make that decision for them correct uh ABS I would want that from if I was on the street so desperate that I was you know smoking Fentanyl and breaking multiple laws every day of course I would want to be hospitalized you know and usually you know people overcome their addiction that's the good news we always leave out of it but it is possible people do overcome their addiction all the time but they often need some some an intervention from family and friends and if that's too late for that then you need the intervention from the from the city all right Michael thank you Michael appreciate it thanks guys so as we get back to the all-in news network we've now gone 24 hours a day the all-in news network has launched we'll just have a road we should sit at various offices throughout Silicon Valley letting Executives and CEOs imagine we did like a 12-hour Marathon show for charity where just people showed up and we did a what do they call those on TV what is the Charities yeah no no just a yeah telephone jaycal has to still fly commercial and we'll do a telephone hey sax thank you for setting up those amazing uh drop-ins well done yeah I think sex I think that's your jacket that's a great jacket is that custom that is this is the Christmas or holiday jacket who is it by Isaiah it's uh Valentino all right well that's that's that's nice also um okay no it's nice okay but okay let's keep going here we gotta go to lightning round all right let's move biggest flash in the pan we were was our last I went with crypto pretty easy to say that I'm not going to give myself a big high five but what did you guys think of the Elon conversation real quick well he's very talkative any anything interesting or surprising for you I mean he said the biggest you know thing that people want to make sure to avoid is margin debt I thought that was I mean he's working hard and um he's just such a product a focused guy he just gets his he's like so deeply into it he's like yeah just ultimately product wins right Friedberg I mean if anything's oh my god of course everything yeah that's it that's it yeah so I mean and you know products are made by teams so what I think is distinctly different here I'm just giving my personal opinion I don't have Microsoft teams no no teams make products and so what I just want to say here is you know like the second teams suck no that I'm not no don't trigger uh the bundle but I just want to say you know like this is a takeover as opposed to building a company from scratch he's had to assemble a team and then work at this incredible product pace and I think those two things are starting to click week yeah for sure it's gonna look very different than week the first six weeks so yeah the products are really looking awesome and it was nice of them to give me that shout out on the you know the affiliate badges but I'll just give a shout out I didn't hear it what was it oh well he gave me he gave me some credit for the affiliate badges but I wanted to give credit to the PMS who approached me about that idea troll I win again oh okay let me get let me give credit to the actual PM's uh Evan Jones and Patrick trogger who they approached me about this idea they had and then I helped you know give it some momentum here's the truth when Dave and I spend the first couple weeks there now that it's a little more public anyone's been on the program what we found over and over again was that there were great features that were ready to be released that were being held back by management and there were brilliant people with all the ideas that you'd think should have been released and they just weren't allowed to release a lot of these products why who knows but now that is an in charge I think you'll see the product cycle is going to go much quicker the most important thing I saw which is such an important lesson for anyone running a business in Silicon Valley is that the pace of decision making matters far more than the accuracy of decision making it's always been like one of my three big mottos um yeah for me like my number one like my three things are always like grit biased action and then narrative but like buy of tax and the rate at which you can make decisions is a far greater predictor of success than the accuracy of the decisions you do make and so you have to be willing to embrace failure you have to be willing to make decisions that could result in something not being done correctly or making a mistake and even getting embarrassed on the internet you know by making mistakes and having to call people like Paul Graham and apologize for them and that was a big moment as a business scales as professional managers are brought in their incentive is to not make mistakes their incentive is to do things that are predictably going to work and are predictably not going to fail and therefore they avoid taking the risks and they reduce the rate of action the rate of decision making and that's why so many businesses ultimately don't scale past some sort of inflection point or when founders that are willing to push that envelope step out everything starts to fall apart and it's so critically important I think to look at that as being I think elon's defining traits and characteristics that this regardless of the scale of the organization and the Enterprise he's still willing to act with that level of bias to action that you typically see in a small startup okay can put his reputation at risk yeah I um I sat in a meeting yesterday he said that if we're not rolling back ten percent of the time we haven't pushed hard enough right wonderful there you go I mean if you're never rolling anything back because you never make a mistake maybe you're just not right moving fast enough not ambitious enough you're not faster you have enough of a bias towards action you're too afraid of making a mistake by the way here's what's so interesting about the views feature is that a bunch of websites I think it started because Instagram did a bunch of apps deprecated you know likes because they felt that it was too it was part of this negative cycle and so they took all this stuff away and basically views is going sort of back in that direction and giving more granularity in terms of outside in social engagement on a post which is I think interesting to see it's happening in a moment where all these other sites and apps are actually going in the opposite direction [Music] well it's it's like a standard feature on YouTube and it's very powerful for YouTube's Network effects because it shows you how many views you get so it discourages people from using other sites because you know you get the most Distribution on YouTube so it's weird that other social networks don't want to follow suit I mean in one hour they had it but they deprecated that's what's so interesting but I guess you know my point is we've only had this feature for an hour and I didn't realize how much distribution my tweets were getting and it definitely undermines my incentive to want to go use some other platform when I see the distribution I'm getting on Twitter well if you're getting 10 times more distribution than the New York Times you know what's going to happen is people stop listening and reading them well I mean it's sort of like this podcast itself like I mean we people ask us to go and my point is we have to rely on social proof and anecdotes about the actual scale and the breadth and the reach because it's impossible for us to get one holistic View that shows across all of these different modalities whether it's Spotify or apple podcast or YouTube how many people listen or watch and you know we add it all up and you know we think it's in this you know sort of three to five million range of people but if you just had a numerical canonical number that was irrefutable you just run over everybody this turns it into a meritocracy this could be terrifying to some blue check marks when they see that the people who they report on get 10 times as many views as they do of course which is why when when people journalist look at Sean Hannity go to Sean Hannity's profile and for the number of followers he has hypothetically engaged his audiences it's all Bots it's all trolls it's all nobodies I looked at Mitt Romney just put out a video Whatever in the first like half hour he had a hundred thousand views like every politician who starts seeing this is gonna go wait a second I mean the world I'm getting more views here than I am on MSNBC or Fox the world I need to do this more rational place if Mitt Romney actually has more influence than Sean Hannity let's hope okay let's move on we got to get through this quickly it's our longest episode ever here we go we are gonna do next up it's very this is a very important category best CEO of 2022 in 2021 I went with Frank slootman and Elon Musk uh chamoth went with Satya Nadella sax went with Brian Armstrong and Freeburg went with Jack Dorsey now we go on to 2022 sax who everybody wants to know sax is best CEO of 2022 go ahead sex uh every founder took my advice to get leaner so down their burn create Runway you know whether the storm down you know so you're getting a generic answer not a person yeah exactly I mean look I think actually a lot of the names a lot of the names well here's the problem is that you know yeah can I finish Jacob the the names that you mentioned from last year would be the top candidates for this year I mean I think Sacha Nadella had a good year obviously what elon's doing we just talked about it's amazing um Brian Armstrong I think stock hasn't done great but he's been a strong CEO but I don't want to repeat the same names I think that you know every CEO who responded to the regime change by cutting costs getting leaner extending Runway I think deserves to be on this list and unfortunately a lot of them are just resisting and they're just not yet taking the medicine or they've been taking the medicine in little drips and drives instead of just like swallowing it whole and getting a move on yeah just drink the whole two tablespoons of medicine don't sip it you gotta just take it it's not getting better I mean the stock market today should be a wake-up call I mean this is one of the worst days in the market the whole year so things are getting worse before they're getting better chamoth who is your best CEO of the Year well the numerical answer is Vicki hollab who's the CEO of Occidental Petroleum stocks up like 140 this year it's technically the best performing stock of the year 63 billion dollar company but that's just a numerical answer who I uh I actually want to double down on David's answer Sax's answer because I agree with that I have been guiding uh our portfolio company CEOs to be at cash flow break even now or extend Runway to q1 2025. and they're 25 yes because I I mean I think he's not 24. well Elon and I are kind of roughly in the same place we have been for a while which is like you know mid 24 is when the recession ends and you need to give yourself two to three quarters of buffers so that you can go and raise around which takes a quarter to two quarters and once you start to get kind of get escape velocity out of a recession having money through end of q1 2025 I think is a is a minimum requirement and you know of the companies that I think were the most precariously positioned there was five of them that got their acts together and really did it but these are all CEOs of companies that you know I mean if you said them you would know some of them but I I do agree with David I think the CEO that bit the bullet so maybe publicly what I would say is you know the CEO of klarna deserves a huge you know metal for Having the courage to do it before anybody else did the CEO of checkout.com just took a huge write down these CEOs are making sure their companies survive Friedberg best C EO 2022. my vote for best CEO is Warren Buffett and I think it is just simple arithmetic uh he has for years and now for decades proven himself uh to be just not just an exceptional investor or stock picker whatever the kind of typical quip is about what he does for a living but I think what's so extraordinary about Buffett is that regardless of the market conditions he can kind of remain steadfast in his uh intent and in his mission and he doesn't kind of waver and you know he doesn't take an active role in ranting and complaining about markets and politics and I think that that's what makes him such an extraordinary leader he stays within his zone of competence he doesn't do things that he doesn't know about he doesn't let the macro drive him and cause him to be kind of um you know affected by it and he says this is what I know how to do this is what I can do and that is all that he does do and he does it so exceptionally well and to Jamal's point he is the largest shareholder of Occidental Petroleum along with many other uh incredible businesses and I think he's proven in a market like we just had this year why he is kind of the most extraordinary CEO or one of the most extraordinary CEOs but one of the you know best kind of capital allocators of all time I'm going to go in a similar fashion as Chama off and sacks and go with the money losing CEOs who have dedicated themselves to free cash flow and to getting to profitability from the last cycle Airbnb and Uber were the money losers and now Airbnb is my number one they become a money printer they are now making bank and they're still growing very uh quickly and then Uber I put in my second they need to do another riff they need to cut some expenses but they too are hitting the free cash flow and the network effects so I'm giving it to uh chesky and then Dara one and two okay let's keep moving best investor uh for me uh I'm going with the investors like a general category who are demanding governance and doing diligence again uh or who never stopped let me say it that way there's a generation of investors who've raised their funds in the last five years and didn't do diligence didn't demand board seats didn't demand boards those uh idiots are now paying the price and they created a lot of this mess of entitlement and a lack of governance I want to give a shout out to the bill girlies of the world who fought for governance and fought for diligence in the face of being told okay Boomer you don't get it who do you have uh best investors I will pick the what are called the pot shops so these are folks that have strategies where they have hundreds of investing pods underneath an umbrella and they have this very sophisticated risk infrastructure so this is what Ken Griffin owns in Citadel this is what Izzy Englander owns in millennium Brevin Howard is another one de Shaw's another one so they have all kinds of strategies but that are essentially run by computers that allocate risk you know scale you up scale you back turn you on turn you off fire you overnight and those strategies as a whole ran over the market this year they were the best performers they are giving back billions of dollars they've generated double-digit positive returns they're raising their fees in some cases some of these folks are moving their annual fee up to four percent a year they're carry up to 40 percent a year incredibly incredibly well-run performant businesses they were by and Away the best investors uh this year okay we're gonna go lightning around from here uh Sachs do you have a uh best investor yeah I said uh Stan uh drucken Miller he has to recall last year he predicted that inflation would be lasting this is the spring of 2021 when transitory was the word of the day this year he predicted the bear Market rally we had in July and August and I remember back at the coaching Summit in may they were around that time he was interviewed and he basically was saying that as soon as there was a bear Market rally over the summer that he would then put a short position on I don't know if he actually did that but he said he's going to do that and then it turns out that the summer rally that we had was a dead cap bounce so he was right about that and now he is predicting a hard Landing in 2023 with a deeper recession than many expect so sadly I suspect he may be right yet again Friedberg best investor for you 2020. damn yeah I had drunken Miller I I indicated that he's been doing interviews pretty much every quarter for the last two years and he's been pounding the table telling everyone what's going to happen and it all happened and he even told people the trades in mid-2021 he said he was short long dated treasuries and he was long Commodities and if you had put those two trades on at that time and held them to today you would have made a fortune and so I think he's extraordinary in his um ability to kind of see macro in a way that others don't but also to take extremely brave action with his portfolio he's renowned for how big the bets are that he makes and how quickly he can change his mind when he's wrong and make another big bet and still get himself out of the hole he's incredible so definitely give it to Stanley brooken Miller this year 2021 we did our best turnarounds I pick Disney Jamal Ford Freiburg what about the worst investor of 2022 can we do that coach moth you want a freestyle tell us your worst investor of 2022. I mean I'll put myself in the category along with anybody else who was long tech hey Steve Nick if you can just bring please back up this Capital as a pricing model any of us that didn't understand this got run over this year and just to put some very specific numbers here there was a decent little tweet thread uh that Elon was a part of where he they actually calculated what the expected rate of return of Tesla was and it turned out to be almost 14 a year and so you know when you start to compound 14 over three four five years these numbers get very big very quickly and the reason why is that it has a huge beta and we're in a world now where the risk-free rate is quite high so all of us benefited from this equation essentially being upside down for the last 15 years and all of us who were over allocated into things that benefited from those Dynamics frankly got run over this year so we were as a class the worst investors of 2022. okay here we go let's do our best turn around I am going to go with uh me for me it's meta they were losing money hand over Fest they refused to do a rift and then finally bestie Brad gerstner said uh let's get fit he did a memo and finally finally Zuckerberg made some Cuts reportedly rumors he's making a 15 10 or 15 cut I heard in the back channels right now based on performance so he's not calling it a riff or a layoff they're just going to cut the bottom 10 or 15 again so I think zuck's gonna turn it around anybody have a best turnaround so you're saying zoc mission accomplished turn around this year I'm going with meta so your answer is meta was turned around by Zuck this year yes they got down to 85 and now they're up what 110 115 yes he turned it around at the end of the year it was like a Hail Mary at the end of the year he's turned it around I think he's going to continue to yes that is my position go with that Jacob okay so if we're talking about very partial turnarounds here I would say I would say that you can measure the turnaround as of October 24th to now yes exactly so uh San Francisco is still overall a mess but there were a few positive events that happened over the past year and since we're looking back we should call these out so first of all back this is towards the beginning of the year we recalled three members of the school board uh most particularly Allison Collins remember her this was done by something like a 70 30 margin an 80 20 on on Collins this was the school board that had dragged his feet on school reopenings they destroyed the merit-based Lowell High School they wasted hours of meetings on a silly plan to remove the names of names like Abraham Lincoln from this from the schools in any event they were removed then Jake how you referred to this we got chase a boudin recalled the bias 60 40 margin as San Francisco D.A this was the D.A who whose agenda was decarceration he tried to release as many repeat offenders as possible the voters San Francisco had enough and then most recently the far less supervisor Gordon Marr just got rejected by his own Community this November and the new tough D.A Brook Jenkins um got reelected in her own right after being appointed by London breeds so there's still a long way to go in San Francisco but there are definitely some green shoes that the electorate here has had enough and is looking for the let's say called the Centrist Democrats as opposed to the radicals okay we're in the lightning round here we're in hour three of the all in podcast uh Marathon this uh Telethon got a best turnaround for 2022. Hard One to give so any green shoots for 2022 as sax would say no I mean the everything everything's just got a disaster great freeberg anything that you have there may be no turnaround award until 2025 fine okay yeah we have a little split on this free bird you got anything if you're you're an incisive [ __ ] Viewpoint and I'll pick Zuck and meta that makes sense 94 it's at 117. it's one of my best J trades I'm gonna take it didn't you also say Disney was your pick of the year or something I'm buying more I'm buying more Disney I'm buying more this is I'm telling you Disney Warner which you talked about before yeah and Facebook are three of my uh bit and uh you know three of my big ones let's say worst human being here well I think look given that this is supposed to be the year 2022 I mean you got to say that SPF was the winner of this hands down okay congratulations to SPF you are consensus worst human being for this year I mean not ever but for this year only for this year right yeah we we all hate you equally okay who's who's number two why do you hate him why do I hate him because all those people lost their money and you know there's some pot it's causing chaos I feel terrible for all these people who lost money that's why I hate him ugh that's disgusting did you see anybody have a second mode the two guys copped to please Caroline Ellison and uh Gary black pancakes but it turns out that they actually did engineer a back door into FTX and Alameda has been doing this oh my God oh my God that's game over we're getting 10 years he's getting my game over okay well should we talk about that interesting defense strategy that we were um discussing in in the chat oh yeah I think this is actually a fascinating defense strategy I think this is their only shot one of our besties had this theory that he was prescribed two prescription drugs one was Adderall what was the other one called this was awesome the patch it's it's a drug I wasn't familiar with I guess it's a patch but when you combine these two things apparently it basically shuts down or kills the part of your brain that deals with inhibition inhibition it's cocaine yeah what if his defense strategy was yeah like only an insane person would do this and I was acting insane because I was prescribed these drugs that had these drug conflicts and it like killed part of my brain I mean and you think about every Criminal on Wall Street said cocaine is my defense but this you could say he was maybe he was legally prescribed it if you could show the prescription oh by the way I'm not saying yes this should get him off I'm just we're basically workshopping what is the only shot of his defense would be right well and think about it sax he acted manic after FTX collapsed so that Mania of doing 20 Twitter spaces would be there's something so insane about what he did right that you that all it's almost like a like a prescribed Insanity defense like I was preside a drunk combination that made me insane did anybody have a most loathsome company as we wrap the only way that you could come up with that is like you you'd have to have two parents that were like law professors or something all right most most loathsome company this is his defense you know yeah my parents boohoo no no no he'll claim Insanity Jay Cal he'll say of course yeah and they'll have a I mean do we think that his parents aren't going to help his defense you know at this point this this kid's got to go away for life that's it wow I think it's got to be life I think it's got to be 30 plus years I mean it's just gonna be billions of dollars what kind of justice system do we have when people go away for 20 30 40 years per billion would you sentence a decade per billion at least yeah I mean just you got something unfortunately Sex You Gotta don't you think the justice system needs to look at other people who are in jail for selling cocaine for selling marijuana for for robbing a a convenience store they'll put somebody away for robbing a convenience store for a decade or two where are they gonna put him in jail for just because somebody came in with a gun and robbed a convenience store they get 20 years this kid's gonna get off screw that look I think what do you guys think the over under is here you think it's like I'll set it at I'll set it at 35 years I'll take the over I'll take 30. I said a good line then I think this is made off of no I agree over on 30. yeah I think I think I said 35. I think it's going to be a multiple hundreds of years I agree and you'll be gone for Life yeah I think it's gonna be life but I set a good line uh okay most slows some company is FTX anybody want to go for a second keep moving no I'll add one I'm gonna this year I'm gonna give my last year I gave it to Tyson Foods one of the largest slaughterer of animals on Earth this year I'm going to give it to a company called innotiv i-n-o-t-i-v This is the company that had was busted by the feds for their animal abuse in their dog breeding facility uh where 4 000 beagles were rescued one of which I adopted and this is a publicly traded company stocks down 90 some odd percent which I'm thrilled to see terrible business awful awful kind of you know inhumane behavior and so I I want to kind of give them a special shout out this year look at you and you're getting the virtue signaling points of rescuing the dog to increase your Q factor amongst besties well done Max Q factor Max Q factor yeah anybody else have a low sum yes I'd like to pick this company which uh destroyed the environment for a bunch of endangered species that I would otherwise have used for various fur pelts for my sweaters and such yes and I would like to go with blah blah blah which was torturing puppies uh 18 of which I rescued and I am now have them in the J Cal puppy rescue I am the most sensitive and caring person uh also I would like to add Sea World I am in the process of raising money to build bigger uh pools to eventually release all the orcas in captivity that is my new Focus for next year okay moving on oh God do we want to do best meme do we want to do best new tech I'll do best new tech I don't have a best meme I've been going with Fusion for best new tech I'm going with uh I'm gonna go with chat GPT I think what was so impressive about chat GPT um and and the experience that everyone's had using it is that it really for the first time I think elucidated where uh these kind of machine learning tools can take us and what the kind of new product experience can be what generative AI can yield uh things Beyond I think the scope of what a lot of people were imagining before so it was really so revealing and as you guys know there's an absolute friggin tidal wave of people trying to start companies that are leveraging tools and generative AI uh to kind of reinvent everything from what workplace tools Enterprise software all the way through to Media games and entertainment so that's why I think chat GPT was the most impressive new technology and then sax lightning round please best new tech Alpha full three which basically has almost near perfect accuracy and protein folding sax best new tech I can't improve on the chat GPT so yeah let's keep rolling best Trend best trend in business and in the world mine is startups getting back and investors getting back to reality and the what I call the age of austerity the age of focus after the Age of Excess that's the best trend in our world the age of austerity what's your best trend for 2022 marginal cost of energy generation and storage is now in the low single digit pennies per kilowatt hour which basically means that uh not only will energy be free and abundant but it will I think over the next decade or two create a massive peace dividend it will rewrite our foreign policy it will rewrite National Security that is the reason why people should care about energy transition not necessarily climate change although that's important it's a distant second to keeping men and women out of War and keeping our borders safe well said anybody else have a best friend last year I'm I said the Creator economy uh which I think referred to all these kind of creators creating new products and and businesses beyond their content this year I I think that the trend that was again enabled and demonstrated through chat gbt is the narrator economy I think this is going to be a really important Trend going forward we'll talk about it in the prediction episode but I think the idea that people are and they're starting to experience this in using chat gbt and Dolly and other kind of generative AI tools is how much you can kind of narrate the product you want to see created and have it created for you on the Fly and I think that that's a really kind of powerful mind shift for people and friendship for people um and I think it really starts to change a lot of the way that people behave entertain themselves businesses operate and so on so I'd call it the narrator economy and I think it's really kind of starting to emerge okay do you have a trend sex yeah I would say best friend is the growing realization that the corporate media is failing does not tell the truth it has an agenda more and more people are opting out of it and going with Independent Media I think you know what Elon mentioned where we're going to start holding these corporate journalists the same standard on Twitter as regular citizens they're outraged by that but that's a huge step in the right direction the fact of the matter is is that the press or the media is the prism through which reality is refracted and if it's not giving us an accurate representation of the world we can't begin to solve our problems since we don't have accurate information and I think more and more people are waking up from the Matrix and realizing that we're living in this media controlled simulation and um again I don't think we're able to make progress until the um this power that the media seems to have overall reality gets uh gets broken okay let's go for worst Trend my worst trend is the Fed trying to play catch-up the FED trying to play ketchup sorry buddy the FED trying to play catch-up is the worst trend for me over steering into the crash what do you got chamoth for the worst trend of 20. the first Trend was the continued profligate spending by the federal government we have record deficits record debt and this year we're ending the Year by adding another 1.65 trillion dollars of spending that nobody can seemingly account for it is truly the Christmas tree of Christmas trees uh in terms of bills so we describe not gotten religion yet around being measured and how we spend money good one worst Trend sax last year my worst Trend was authoritarianism growing all over the world and I think that's pretty decent prediction this year's uh worst trend is the government colluding with big Tech to engage in censorship this is how they're going to do the authoritarianism we talked about it with schellenberger and Elon this whole series of Revelations known as the Twitter files we can see this collusion this cozy relationship between the sensors at Twitter and big Tech and the bureaucrats at the FBI and DHS and Pentagon this is a really disturbing dystopian relationship as we talked about it earlier and you know I feel like we spent all this time talking about the authoritarianism in Russia and China we seem to be obsessed with combating that and going to war with that but we don't spend enough time talking about this growing authoritarianism at home the media doesn't seem to want to report all the Twitter files at all let's focus on stopping authoritarianism here well said Friedberg what's your worst trend for 2022 is what I would call interest rate Mania and I think that this is the Mania that we've been caught up in on this show that other people on our thread people in the business community and the investing Community where everyone's obsession with did the FED act soon enough or late enough and that interest rates ultimately Drive success or failure with building businesses and making good Investments and the truth is when interest rates go the wrong way good Investments uh you know can kind of strengthen their way can can make their way through those environments bad Investments cannot good businesses can make their way through and bad Investments cannot and so I think our our Mania around the fact that interest rates and the FED ultimately drove bad outcomes in businesses and Investments is a flawed kind of assertion and we all want to kind of get back to the drunken days where you know a low interest rate environment enables us all to be successful and wealthy and I think that that's kind of changed so I think it's time for us to get away from the interest rate media and focus more on solid investing and solid business building okay here we go lightning round we got two to go favorite media of 2022. for me it was Top Gun House of the Dragon White Lotus 2 but I'm gonna pick my favorite here or something you may not have heard of the film tar I highly recommend it but I did like those other three tremendously what do you got sacks for your favorite media of 2022 how's the dragon I guess I enjoyed quite a bit like you did um I'll give a shout out to my movie Dolly land which will be coming out next summer if we're going to include podcast episodes I would give a shout out to the unheard episode where Freddy Sayers interviews John mershimer the professor of international relations he explains the origins of the Ukraine war and has some really pessimistic predictions about what might happen next I suggest everyone watch it if they want to understand this conflict and where it may be going next year tomorrow if you have any favorite media for 2022 you want to share I thought Yellowstone kicked ass absolutely incredible there's uh I think it's on Hulu um but there's a show with Steve Carell a little short series called the patient a serial killer that kidnaps his psychologist and locks him in his basement to try to help him prevent him killing more people and I thought it was really really well done never have I ever the latest season another just brilliant offering from Mindy Kaling she's unbelievable those are those are probably the top ones what do you got Freeburg any media yeah I read a book this year that I really liked um it's called the vital question by a guy named Nick Lane someone recommended it to me it's uh he's a biochemist and he kind of talks a little bit about the origin of life on Earth it really ties into this idea that there are certain call it principles of physics and statistics that make life predictive and predictable but I think the way that he kind of walks through how a lot of things emerge in life and and how life ultimately kind of developed on this planet are are really well shown so yeah I give his book a shout out it was a it was a really good so that book the vital question is incredible the other one that he wrote which is called life ascending those two books you must read if you don't want to be a letter in my opinion all right uh I will also for those people who don't understand the difference between power and energy you will learn what that is very good I have two book recommendations putting the rabbit in the Hat is uh Brian Cox you may know him from secession he um has a great book and he reads the audiobook very enjoyable I'm halfway through Quentin Tarantino's Cinema speculation and enjoying it very much Zach you will enjoy it tremendously okay and now we do the Rudy Giuliani award for self-emulation this is for the person who poured lighter fluid and gasoline over themselves and lit themselves on fire for no apparent reason I go with Kevin O'Leary who secured a 15 million dollar bag from FTX and then decided to try to defend it uh 18 Ways to Sunday burning whatever reputation he had who do you have in your Rudy Giuliani award this will be controversial for you guys I'm gonna go with Elon Musk I don't think that Elon put himself in the position that he did uh with bad intentions or without paying attention I think he's taken on a role uh in buying and running Twitter that is you know principled and uh you know in his mind and many other people's minds a really important role that someone needs to play uh unfortunately I think his reputation has gotten really hurt because of you know that role he's not making a lot of friends and uh he's not he's causing a lot of reputational damage he obviously had a lot of good and important things he was working on prior to taking on the additional burden of Twitter and while many people appreciate his doing it I think that it's causing him a lot of reputational damage and so yeah I I don't mean to kind of be offensive in saying that but I think he's gotten it's certainly been a hard thing to do it's certainly been a hard thing to do sex but you're saying self-immolation Freeburg because he took it on himself he could have just he took it on himself yeah I'm not saying stupid interpretation yeah it's not it's not like the Rudy Giuliani idiocy I think he's taking on the burden of doing this and I think it's causing him a lot of reputation okay it's an interpretation of the award what do you got your mom a sacks in Jamal well I mean if if I were to interpret the award I think the way it was originally intended I think I got to give it to Herschel Walker this year unfortunately and I I wish Republicans would stop winning this award at least Herschel never gave any speeches next to a dildo shop but uh nonetheless I am so sorry that I'm so delighted sax that you've been so self-aware about the Follies of the dying Maga the last throws of the magination I want to find some Democrats to give this to I want to give it to that brain dead Senator uh from Pennsylvania what's his name uh fetterman thank you I wanted to give it to fetterman but he won so I don't know what I'm supposed to do you know it's like no listen when when a republican self-immolates like Rudy or Herschel or something like that they get laughed out of town and when the Democrat does it like ephederman they just get elected so I I don't know what to say all right you got any final words here good I mean you gotta end this episode it's gonna be the longest episode ever poof I think it's poor poor producer Nick whoever signed the papers for the whole search and seizure at Mar-A-Lago looks kind of like an idiot so that that was not politically astute okay I think you would say the FBI then okay poorly handled perhaps that's actually great that's a great one actually if we're gonna get serious for a second the combination of Revelations if we're going to look over this whole year remember Jason when I I basically spoke up at the time they raided a Mar-A-Lago and said that it was heavy-handed and unnecessary for years Donald Trump is an idiot savant minus the Savant why all of you guys just project all of this like insane genius evil level stuff he's not capable of that this is a simpleton who likes attention he stole a bunch of souvenirs that he didn't read when he was in my opposition hasn't read now kept in a box downstairs just to say he had them that's exactly right I was the one who championed the souvenir I know he's a souvenir guy you said he was selling secrets to the South no I did not say that I said veneers no suggested it yes Kushner an elaborate conspiracy theory I'm saying I know it's not a conspiracy theory when you do it and and guys and this is the same person that basically in the in the beginning of his presidential campaign in 2016 in front of Hillary Clinton said absolutely I bend the laws that you created the tax laws to my favor because I'm not stupid when she called him a tax Dodger and it turns out after all these years he was telling the truth he basically once again the show ends with Trump he's been a great 2022. no no but honestly like like did we learn anything except that these tax laws are egregiously stupid and the only people that are consistently guaranteed to make money in these tax laws are Real Estate Investors if you put these two things together a real estate investor who happened to be very poor at his job which Trump turned out to be packed billions of dollars of nols that he was able to use to wash his taxes for years and years and by the way and he was clearly proud of it he was just goading the Democrats and not releasing them they went through all this rigmarole and what did we find out he had huge nols he had huge deductions and he paid no taxes is that shocking to any of us it's like it's like Chappelle said he came out of the house told everyone everything you think is going on inside that house is going on and went back and then he walked back inside the house yeah it was pretty great she fell got it all right listen for David sacks the Rain Man Four the queen of quinoa Sultan of science David Friedberg and the dictator himself it has been an honor and a privilege to do this podcast with you gentlemen this is the longest show in the history of the Pod enjoy everybody uh R.I.P producer Nicks uh next 48 hours and we'll see everybody next year love you bye-bye happy holidays love you bestest back at you will let your winners Rock Rain Man [Music] we open source it to the fans and they've just gone crazy [Music] besties [Music] we need to get Mercies 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all right everybody Welcome to 2023. everybody's well rested ready to take on 2023 yes Tremont how's your break amazing okay sexy poo I know you don't go to uh temperatures that are under 57 degrees anymore should have a nice break did you go somewhere warm yes okay that's a confirmation uh wow man of so many words and Freeburg I'm over cold weather vacations yeah that does happen at a certain point actually we went to Florida we went to the the free state of Florida oh really what what what's going on in Florida at the turn of the new year I wonder that Drew you down to the great state of Florida we're just freeing It Up In The Free State of Florida [Music] we [Music] have our 2023 predictions now uh play some music and all that kind of stuff producer Nick at this point let's get to it last year do you guys notice that every time we talk about something somewhere between sort of two months to a year later the Wall Street Journal ends up writing a big piece about it think peace about it yeah so I tweeted into the group chat like last year we all talked about Sequoia and distributing public equities and yeah how it's very fraught and difficult and then today they write this big article about how people have just burned enormous amounts of billions of dollars that they could have returned to LPS like these Venture investors by not Distributing that makes sense three weeks ago when we did our end of the year wrap up my big winner for 2022 were the pot shops right Citadel and today in the Wall Street Journal an article lands that these guys with 56 billion of AUM over the last two years have made almost 45 billion dollars of revenues isn't that incredible and this is what happens usually uh they are these guys are just crushing and then Citadel Securities did like almost you know seven and a half billion in Revenue I mean it's unbelievable these businesses how good they are yes so let's get into uh and this is typical if you think about journalists they're trying to get into the conversations that are occurring at the bar after the event the late night conversation the group chat's well and that's what this podcast is it's the exposed back channel right and so if you listen to this pod you got the back channel of Silicon Valley politics Tech science Etc so let's do our predictions in 2020 we said our biggest political winner would be uh sax and I both said to Santa XI Japan and Friedberg said Putin who do we think is our biggest political winner uh going forward who do you pick sacks biggest point of winner for 2023 who will be your biggest political winner for 2023. well I went a little bit outside the box here because I think we're gonna have gridlock in Washington so not expecting a ton to be coming out of Washington over the next year my pick for biggest political winner is Asian American college applicants there are two Supreme Court decisions that the court heard on Halloween last year uh there was a lawsuit against Harvard and another lawsuit against UNC by a group called students for fair Admissions and that they maintain that Harvard and UNC violate title VI Civil Rights Act because Asian American applicants are far less likely to be admitted than similarly qualified applicants from other groups and the the federal courts in Boston and North Carolina rejected this argument but the Supreme Court took up the cases so they kind of went out of their way to hear this and I think that they are going to they're going to refuel affirmative action I think the majority will rule to strike down these policies that uh really discriminate against Asian Americans and I think they're the last uh group in America where it seems to be okay to discriminate against and uh really I think the Supreme Court is gonna is gonna find that unconstitutional belts there you have brought this up multiple times on the podcast over the last two years I have said that this was unfortunately affirmative action when it started I think had very very good intentions and I still think that there's a place for it the problem is that these very liberal institutions decided to play judge jury an executioner on which minorities counted in affirmative action and that's not what the intention was the intention was to look at the establishment and their ability to get their progeny into these incredible schools even when they didn't deserve to be there and so I think this was always an issue of classism that was disguised as racism and people who were in the upper classes of society have always had an edge you had the legacy admissions into Harvard you had people the Kushner is very famously right like the five million dollar check from the father that got the son into the school all of this stuff it's all it's been well written about and whether or not those things are right isn't the point I think the point is that there are folks in emerging lower middle classes who have the potential to crush and those kids should have a chance and you can't just decide who those kids are based on the color of their skin and in this case what happened was some blacks were still allowed in some Hispanics were allowed in but Asian Americans broadly were discriminated and that was a really stupid outcome you cannot punish kids for willing to work their ass off and I think that that was the unfortunate outcome of what affirmative action has become by 2022 so it is going to get repealed the reason it's going to get repealed is that you know we have case law that very clearly states that that any institution that accepts federal funds cannot have any form of discrimination and this is how these folks who have tried to repeal affirmative action have taken up this lawsuit and hopefully the outcome is a more meritocratic system that also tries to create a plurality of different people from different backgrounds freeberg any thoughts uh if not your biggest political winner for 2023. um my biggest political winner for 2023 is um MBS Mohammed bin Salman I think that Saudi Arabia will have the most important year in kind of the modern era in terms of their role I don't know if you guys saw this Reuters report from a few weeks ago but there's kind of a deepening discussion about the oil Yuan trade in that um Saudi would sell oil to China and they would get paid in Yuan Saudi Arabia sits at the intersection of the United States Russia and China they have relationships with all three nations and in the kind of conflict and power struggle that is underway I think that ultimately the direction of where Global Currency kind of reserves will be taken and the importance of these great Nations and who sits atop whom can actually be dictated and significantly influenced by MBS this year by some of the deals and trades he might put in place and the and the the kind of Partnerships he might Forge I think as a result you will see him kind of rise in terms of influence not in terms of you know hey the world has accolades for this for this guy but I think in terms of global influence uh he will rocket ship to kind of the top because of this this kind of uh jockeying he can now do between these three great nation states and defining you know what's going to happen with the US and what's going to happen with China and what's going to happen great collection of currency reserves great selection I mean the shitty thing by the way about your selection is that Biden are explicit stance is unfortunately quite confrontational with MBS and yeah you saw that play out in Q4 we asked them to ease up on OPEC Plus to introduce Supply cuts and they did some nominal hundred thousand Barrel per day cut didn't do much of anything there was an article to your point free bird just recently about Saudi really doubling down on getting the oil out of the ground and monetizing their petrochemicals so there's just going to be a glut of Supply in the market and we have the least amount of influence with Saudi Arabia than we've ever had and it seems like we could change that if we decided to but I think Biden has taken this very confrontational approach which doesn't seem to make and remember a lot of sense their stated intent is to diversify away from oil and into technology and other kind of emerging growth economies that's why they funded the vision fund that's why MBS made that big kind of visit to Silicon Valley a few years ago and there is technology that they want to import into Saudi Arabia and they want to have ownership in around the world and if the U.S is creating a barrier for them to import US tech into Saudi or for Saudi to kind of invest in the U.S but China and Russia have open arms and all they want is for Saudi to start doing trades in Yuan it's going to happen and I think that's where this guy has kind of a real opportunity to shift the global economic Dynamic say what you will about Trump he uh had open dialogue with North Korea China Russia if your enemies close sure you want to be able to talk to anybody and he was able to talk to anybody now you also want to be able to say Hey listen you can't dismember a journalist like khashoggi and you need to be able to have both of those ideas in your head you can't be rigid in foreign policy you have to be fluid and keep people at the table talking chamath who is your big political who do you predict will be the big political winner of 2023 shamots prediction everybody go ahead I really like spread trades right where you go long something and short another so I'd like to pair my biggest political winner with my biggest political loser for 2023. okay and I am going to focus on the Republican nomination and I am going to go long Nikki Haley and I'm going to go short Ron DeSantis now let me explain if you're watching if you're not watching sex right now he is ready to interject go to mother so I think that all of this nonsense for example in the house Speaker race all of the midterm results what it really speaks to are is people are getting exhausted with the lunatic fringes of both parties that's Point number one and point so that favors moderates as an emergent class and point number two is that if you look back through many many cycles of Republican and Democratic nominations it is a very negative thing to be in the lead so early going into the Iowa caucuses in January and so if you put those two things together the risk is that DeSantis decays things emerge people attack him because he's the clear FrontRunner and the opportunity just like it was for Trump in 16 or for Clinton or for George Bush not Herbert Walker but you know w is to emerge from the back and so if I think about a moderate person who can emerge from the back who can consolidate the ranks they should probably be from the south they will have a lot of these purple compromises that sax mentioned in their policy program and they will have a history of winning and a history of normalcy and so I think that of all of the places where you could ever elect a woman as president of the United States I think it will come from the Republicans before it comes from the Democrats I mean the Democrats are unfortunately increasingly judgmental and I think it's very difficult for a woman to emerge there but I do think that Nikki Haley has a shot so I'm going to go long Nikki Haley and I'm going to short Ron DeSantis okay I like a spread trade for his prediction well done before sax you interject let me just do mine and because then you'll have two to interject too uh I was looking uh at Biden and Trump and thinking Hmm which one of these is going to have the big win in 2023 so the two biggest I think uh players I have a prediction for Trump I think he's going to lose 50 pounds on the ozempic everybody loves a weight loss story I think he is going to be indicted by Garland is he on wait a minute sorry he's on ozenpick no I'm predicting an ozempic run and he's gonna drop 40 50 pounds then we're gonna have a schvelt trump get indicted by Garland and the debates and the and the and the rigmarole with DeSantis I think he's gonna go after DeSantis based on weight and height and then he's going to win the nomination in 24 and we're going to have Trump versus Biden but this is a crazy prediction here I think we're gonna have a settlement I think he's going to agree to not run and get the pardon this is a crazy prediction I know but I think he loses the weight he wins the Nam he gets indicted and then he gets the Richard Nixon pardon Global pardon for all of the [ __ ] he's done sax you can reply now to these two crazy predictions this French random mine I mean this is like proof positive that everything you have to say about Trump is an act of projection I mean like asempic I mean like I mean are you talking about yourself or Trump I strike boom yeah and super good yes both of those things are fasting have you sacked on any of them yeah I've tried it yeah um I think everybody should be looking into this if you're uh have weight issues it's a it's a it's a great news I want to say it even more broadly I've been reading a lot about these glp ones and I I got to tell you statins are a clear wonder drug yes okay I think that the 50-year longitudinal data on its value is pretty unimpeachable metformin even taken prophylactically has shown incredible benefits for cell regeneration longevity and glucose management and the real look the reality is let's just take a step back the American diet we're all pre-diabetic okay so let's just let's just not beat around the bush the way that Americans eat and our food supply and also probably in Western Europe is pre-diabetic by definition it's [ __ ] it's trash so metformin makes a lot of sense and again its longitude data is incredible but I got to tell you the early data on these glp ones are unbelievable it's extraordinary firsthand experience I would lose half a pound a week when I would diet no but what I'm saying is it's beyond that um what I'm talking about is insulin response it's cardiac health and so if this data tracks like this man you're just going to want to put everybody on these gops well I just want to also put a disclaimer out here do your own research work with your doctors whether it's for metformin or zempic but I had great results on it I recommend if you're struggling with weight loss like I did for many years you talk to your doctor about it that's it it's not a commercial for a govier or something but I do think these things are going to change well and they're getting better and it seems like diab people with diabetes are on them for life so if your question is like if I could do this for a year to lose weight you know I think diabetics are on it for life so when I made my decision again work with their doctors not random podcast or Venture capitalists for your health advice I was like well if all of these people who have diabetes are gonna on it for years unless it's non-toxic go get a pre-nuvo scan just make sure absolutely you got that right so there you have it those are our uh predictions I wanna I want the sax to react to my spread Trader yeah okay so so look I think you know if you're going on a betting site I think that um you could place that bet that your mouth made pretty cheaply and probably it's like has some good upside to it so I don't criticize it as a bet do I think it's actually going to happen no and I I think the reason is is this that if you look at what's happening right now with the speaker's race there's two very clear Wings in the Republican Party there's establishment wing and then there's kind of this populist Maga wing and the candidate whoever it is in 24 needs to unite those two wings and I think this is really the best argument for DeSantis is he's widely accepted by both I think Nikki Haley's problem is that she's very well regarded within the establishment wing of the Republican party but she has no meaningful support within the populist wing and so I don't think she's capable of bringing the party together at least at this point in time she would have to prove let's call it populist bona fide that she just doesn't have right now so this is why I think you know DeSantis even he does have front runner wrists you're right that people are going to keep taking shots of them as long as he's the front runner but all right let's use capable he's capable of uniting the party in a way that a desperately needs right now as we're seeing with the Kevin McCarthy thing playing out yeah okay let's go for our biggest losers uh we'll rip through this last year I said Biden and Trump in the extremes had the progressive laugh again the extreme sack said Pelosi who just wrapped up her tenure and Friedberg said U.S influence globally was the biggest political loser uh let's get our predictions for the biggest political loser of 2023 Freeburg who do you think would be the biggest political loser of 2023 the world wants to know Freiburg I would continue my U.S influence but I I am going to shift here's what I think is going to happen this year my big prediction is based on I think the world has too much debt I think that the economic slowdown coupled with Rising interest rates globally and a and a dearth of uh kind of asset uh Capital inflows means that there's going to be a lot of issues with a number of debt markets around the world particularly kind of emerging sovereign debt just to give you guys a sense Global debt is about 235 trillion dollars in public and private um you know that's somewhere between five and fifteen trillion dollars of interest payments a year depending on what the net rate is on 96 trillion dollar Global GDP and there's another trillion and a half of unfunded liabilities in the U.S and pensions and Social Security and all that sort of stuff I think this is the year where a lot of the debt markets start to unravel the so freedberg is this ability that steps in or a political loser I'm going to tell it one second this is the political yeah so the political ramifications so the political ramifications for me I think that the um the entity that steps in to try and support these um unwinding moments is the IMF and I think that no matter what the IMF does they're going to look bad I think that the you know it's sort of like like Jerome Powell this this past year right like you you raised rates too late you raised rates too quickly no matter what you do it has some adverse effect and impact it's either inflationary or it impacts growth and so I think the IMF is going to get a lot of heat for either acting not too soon uh or sorry not fast enough or or acting too aggressively and causing inflation as a bunch of these markets face credit risk this year so My Big bet is the IMF is going to play a major role and we're going to be talking a lot about the IMF later this year I think as a result the IMF will get a lot of heat and you'll end up seeing a lot of pressure and political you know just like we blame NATO just like we blame Jerome Powell and the FED will end up blaming the IMF for a bunch of problems uh that'll arise but the natural physics of what's going on is the world has too much debt and not enough growth to cover the debt the cost of debt that's it okay and the IMF will be the political kind of you know hit that'll that'll result well you have a point of view but I think yeah and who do you have uh as your biggest political loser prediction for 2023 Mr Davis hacks well I mean Kevin McCarthy may not survive the week so let me go in a different direction I think California is my big political loser and I would say in particular the city of San Francisco both are going to have gigantic budget shortfalls you may remember that this is back in 2021 when we had that asset bubble California had a surplus of 76 billion and then insane and then 2022 happened and now the state is looking at a 24 billion dollar deficit well if we had taken say a third of that Surplus from 21 and put it in a rainy day fund we wouldn't have to worry about this deficit but that was never done Newsome started handing that money out like candy to the electorate to Goose's election his re-elect numbers and to get him past the that recall remember okay so the the state never got a Cisco Outlook in order and now I think it's going to be even worse in 2023 and San Francisco the city uh very similar kind of problem where it's uh tax base is heavily dependent on Commercial Real Estate which is really suffering so you know the city of San Francisco and the state of California they've moved their tax base to to highly volatile capital gains and with a really lousy stock market I don't know how these guys are going to meet their budgets so a lot of pain is going to be a lot of austerity and pain coming that's for sure and these people do not know how to manage a budget they're incompetent so you say California Freeburg says IMF jamoth who do you think the biggest political loser for 2023 will be already gave us your predictive sentence I'm in alignment with you I think descent has peaked a little too early and the forever trumpers and the in the chaos is going to be a little too much for him to handle okay now we get into what everybody wants business business biggest business winner for 2023 who do you have chamoth for your biggest biggest business winner of 2023. I'm going to pick something out of my portfolio I think I'm the only non-trivially large investor in both SpaceX and relativity space relativity space has a huge SpaceX is clearly just crushing on all cylinders and they're really the only game in town with respect to launch capability and if you just Google it you'll see that the Europeans you know have a hit or miss capability and launch the Russians are completely unable to do launch now because of all of these sanctions the private companies in New Zealand or the United States have also had fits and starts really incapable relativity which is really which is now the second most highly valued space business is about to do a launch in the third week of January and the big difference between it and SpaceX which is sort of why we did it this is a early YC company I did the series a and kind of went along the whole way they have 3D printed everything and the reason why 3D printing is interesting is you take a so if you if you think a rocket costs five billion dollars if built by NASA Elon was able to take that to a hundred to 500 million and if you 3D print everything you can take that cost to like five to fifty million and so it allows you to just have this repeatability and manufacturability now SpaceX also has a lot of 3D printed Parts but relativity is entirely 3D printed it has a launch in three weeks at Cape Canaveral I think and we have like a 10 billion dollar order book that gets unlocked so I don't know how to see beyond a lot of these Market forecasts right now so I'd rather pick a company I'll pick something in my portfolio if the rocket does not blow up there's a 10 billion dollar order book and this company is now on a trajectory to be as valued as SpaceX all right talking his book times two and if it doesn't it goes to zero Freeburg go ahead and talk your book times two or three let's see if you can one-up chamoth which one of your investments will be the biggest business winner of 2023 Freeburg I'm not an investor my big bet is open AI it's just way too obvious to be anything else this year as you guys know there are dozens of startups that are being started right now based on an open ai's demonstration of Dolly and uh Chachi BT I think we're seeing this in the Enterprise and consumer markets I think open AI will become to some degree maybe they could be as many paths they could take the AWS providing tooling and infrastructure to all these startups that are building applications for consumers and business users or they will end up doing a massive deal with Microsoft I think it's inevitable they're going to get a billion dollar plus investment this year they could power you know AI driven Bing search and Voice driven search they could build their own products and their own tools and they're becoming great investors they invested in dscript which is a product company we use here for our podcast which is an incredible product and I think that Sam Altman is a very smart and screwed investor as well so for a lot of reasons I think openai could end up having an amazing year this year and a lot of different paths they could walk and we're going to come out of this year and say they're one of the top tech companies in the valley okay sax open AI has of course increased your ability to talk to other humans so you're seeing a lot of big wins there I know um he's how do I talk to a child about their college hopes and aspirations no no how do I talk to a child about their day hello it literally is hello hello progeny of mine how are you faring today in this complicated write me a script of talking to a 12 year old about their hopes and dreams say it's interesting using GPT for talking points on different topics I should try that for the Pod you know oh okay we should have done the GPT predictions or answer these categories sex as a person on the Spectrum uh yeah how delightful is uh this uh chat EBT and you know your treatment of your condition that's great let me let me get to my answer here okay so um my answer for the big business winner of the year is America's natural gas industry and I have to admit this is an aspect of the Ukraine war that I didn't fully appreciate until I read this New York Times article the other day about how natural gas prices in Europe have now fallen to the level they're at before the war and everyone thought that there'd be this huge shortage and then we'll be able to heat their homes well what happened the the answer is that Europe completely cut off their dependence on Russian gas and in fact the Nordstrom pipelines were blown up so physically they separated but then on top of it they basically started importing liquefied natural gas from the U.S and here's the key paragraph in this article from The New York Times is that Europe rapidly built terminals to receive liquefied gas sweeping away many of the usual bureaucratic obstacles and environmental objections so in other words what normally would have taken decades to get approvals now was all put on a fast track and Europe is now completely dependent on American natural gas and I think this is again the thing maybe I underestimated that cold hard American interest in this war is to basically turn Europe into a vassal of America's natural gas industry previously they were about to be dependent on Russia and Nordstrom was going to make that situation permanent we've you know somebody blew up nordstream now they're dependent on American LNG they're going to pay higher prices for that but it's uh it's been a pretty impressive win for the American natural gas industry and I think Biden has really pulled a 180 here because you remember when he first came into office he canceled Keystone he canceled drilling he was very tough on the oil and gas industry I think after he then delivered the hundreds of billions for the climate special interest and the inflation reduction act now he is taking care of the oil and gas industry I love it yeah not and so what you're saying is Biden dynamically changed course based on inputs like a great leader would okay well done sex well I don't I don't listen I don't know well no listen I think Biden has done something politically smart here there's no question about it I am giving him credit does it mean that this war was worth it no I don't I don't think we should be engaging in oil Wars like we did in the Middle East we agree so I'm not justifying this war but I am saying that there is a cold hard American interest undergirding the uh our position which is it's about LNG it's not it's not just about moral platitudes yeah I mean the strong start to 2023 vassal and undergirding uh my biggest predictions I'm working backwards from two here I think the door dashes airbnbs Ubers etsy's of the world who need entrepreneurs they need workers they need Supply they've always been Supply constrained as unemployment becomes let's call it what it is sticky you're going to see a lot more people participating in Gig platforms or entrepreneurial platforms that enable them to make money so I think they will be huge beneficiaries especially if they continue to lay off employees like doordash and Airbnb did to right size their businesses but my first one my number one is laid off Tech workers I think laid off Tech workers who get together in groups of two three or four uh developers product managers people who actually build stuff and start companies together are going to become extremely successful and they're going to make incredible lemonade from these lemons of these big Tech layoffs so I think the startup space is again and these laid off Tech workers who choose to take control of the destiny and starts companies are going to be the true Big Winners if you do it do it with two or three friends because you're going to need developers you're going to need those those talented people in the startups that have three founders get funded faster than the ones with one uh so those are my two winners all right oh yeah and last year our biggest business winners were chamat said smbs Sac said rise of the rest uh Freeburg set stripe and I said Disney Millennials and gen Z let's go on to biggest business loser for 2023 Friedberg who do you think will be the biggest business loser in 23 this year in fact okay so my Biggest Loser is the general category of capital intensive series B through D growth businesses in the startup landscape private companies um as you guys know there's been a big shift in capital allocation a lot of the folks who were writing big checks into growth rounds are retreating back to writing smaller checks and seed and a rounds they don't want to write the 20 million dollar series B they want to write the five million dollar seed in a round uh no one wants to kind of follow the valuation no one wants to set the valuation for these growth businesses particularly if after this round you know you need another big round of capital and no one's sure if someone's going to be waiting on the other end as a result we're seeing tons of these businesses run into capital and fusion walls they can't pivot I think we'll see what we saw in the.com bubble we're 99 and a half percent of these companies actually die the half percent that we are going to emerge as the next hundred billion dollar Enterprise is the Googles and the Amazons of the world so there will be light at the end of the tunnel for the winners but generally there are hundreds of companies in Hardware in sinbio in biotech and high growth Enterprise software that require significant sales investment expense a lot of these businesses where the capital intensive nature of the business just doesn't have the market for it right now and there and and investors are are all retreating and they're going to be selective so that that's where I think there's going to be more people intensity by the way see in a investing hot as a button uh that's what that yeah that's it okay sax biggest business loser for 2023. well I just by the way 100 agree with what Friedberg said but my my Biggest Loser for business in 23 is the consumer I just don't understand how the consumer isn't going to finally tap out in this economy I mean they they have a mountain of personal debt credit card debts at all-time highs I think the average credit card rate hit 19.6 last week and is expected to rise even further uh the mortgage rates are above seven percent now so forget about trying to buy a new home or uh sell your home and your stock portfolio is down too and now layoffs are starting to pile up so I just don't understand how we're going to avoid a recession and you saw you know Kashkari saying that right the fed's gonna keep raising 5.4 his prediction you know I don't understand how if if rates are at five and a half percent that doesn't finally break the back of this economy and uh we go into a recession you think sax that the economy is actually broken right now we just don't have the day data because the data lag 60 days in most people's minds because it does feel like the consumer is just and real estate has just broken at this very moment it seems like I mean the pain is very unequal right but in the tech industry we've been in a recession for a year I mean like the growth stocks are down 80 percent but Freeburg said is true no one's going to fund these you know High burning companies there's an enormous amount of retooling that has to happen look I think the recession is here it's just very unequally distributed distributed exactly yeah well I mean if you look at it uh buy now pay later that's a category starting to break credit card debt as you're saying hitting you know uh big um a bad records in terms of how much we love spending also people's um savings are going down so the consumer's back has been broken I think we're just going to feel it in the in the first and second quarter chamath who's your biggest business loser prediction for 2023 the world wants to know let me just build on what Freiburg and Sac said for a second before I give you my pick sure I this is the conversation you and I had when we just got on guys what I was telling jaycal is at the end of Q4 I did five deals and four were proratas one was a new deal and they were all clean markups so the four deals that other people put money into and I was looking at them and I was trying to figure out okay what differentiates these things in Freebird to your point these were super clean startups with very clean cap tables that had clear progress and then conversely I had seven converts showed to me for companies whose valuations were anywhere between three and I would say 12 billion and I did none of them and not only did I do none of them nobody else did any of them and the problem was the real market clearing price was 80 to 90 percent down and so I was like what is going on here so fever to your point I don't even think it's just cash intensive startups I think it's like all growth companies are in a really bad place I thought that this growth stuff would get sorted out in two to three months and now I'm worried it's two to three years I think it's it's toxic toxic here's the definition of what I think has happened and where I think the cutoff is is when the value the implied Market valuation of the company based on where public comps are trading is less than the total Capital preference in the company the total preferred stock now so many companies now that raised 400 million in a two billion valuation but the company is actually worth 300 million now based on public market comps so they're worth less than their preference stack so worth it no that this is why I think all these converts are getting done that's where the rubber meets the road on all these deals yeah that's right who does the convert benefit the convert benefits the VCS who want to maintain the illusory valuation that they had before they do their work they do that to assuage The Limited partner who gave the money that the marks aren't as bad as they thought but the people that really get screwed as Jason said are the common shareholders because eventually those convert deals that do get done those people will end up owning the company the cap table gets completely flushed and reset and the employees get wiped up yeah and then you gotta basically take all the employees who were there previously who now hate the founder and give everybody all yeah they're wiped the people to do all the work get [ __ ] and the people don't do none of the work and who just want to maintain this shell game gets to basically Live Another Day basically people are investing as you gave in the example earlier like if it's a three billion dollar company but it's actually worth 750 people instead of taking the valuation from 3 billion to 750 will say okay buy one share at the three billion dollar price and we'll give you three or four shares for free or for a penny warrants they're called typically or you know just different ways to structure this and then all of a sudden Nobody Knows the actual denominator they may own them 10 000 shares but they don't know how many shares are actually issued because the warrants are not on the cap table they're in some side document in a folder in a lawyer or cfo's office so let me let me tell you my biggest business loser yes please I think that the biggest potential business loser this year is Google search who has measured by pure profitability and engagement I think it's easier for me to see where the the usage comes from as opposed to picking open AI or chat GPT in terms of where the usage goes to and the reason is because I think a lot of people don't still fully understand how machine learning and AI work but just 30 second primer there's two big buckets of work there's what's called learning which is how you learn how to make predictions and then there's what's called inference which is when you actually type something into the search box you get the answer the thing with learning and what chat GPT is showing is that they have learned by crawling the entirety of the web there are five or six other organizations that are capable of crawling the entire web in terms of cost in terms of compute in terms of the quality of the Transformers and the quality of the AI and so I find it easier to predict the decay in the quality of Google search as that much better than everybody else then I find it is to predict who will win because I think that with enough time and money Oracle Microsoft Google the Chinese internet companies can all compete Facebook and so I think that you'll Converge on the same training which will lead to the same inference and so I think consumers end up getting confused and will end up being able to get high quality search results from many places versus today you know you wouldn't only think that Google is the only game in town quite honestly for most people well so I think the statistics you know that Google could lose 10 or 15 percent of usage to all these other sites and that may not make any of those sites that relevant but it'll have a material measurable impact to Google and Google fantastic prediction and I think you know Chachi potatoes other ones are going to have a very interesting marketing attack that they can do on Google is why search when you can get an answer right hey we'll just give you the answer you don't have to search I had so many losers that I went through here I'm just going to run backwards to them number five I thought Founders who refused to downsize in 2022 could be big losers in 2023. obviously have five and the rest of us are just I'm just going to tell you my thought process this was the one I had a long time number four I thought VC funds founded in 2020 then I thought crypto because Gary getzer says it's all a stock then I went with youth number four Google my God they got so many headwinds against them with the shot GPT but I wound up on why collar workers with no hard skills Twitter going down to I think you know Elon said a couple of hundred people is all you need to run Twitter and I think he said he has two thousand employees or something like that he has shown everybody you know Hey listen these more can be done with less uh or these things are overstaffed in a massive way I think white collar workers now the idea that you're going to have four offers and you're gonna be able to play them off each other is over you're saying Surplus Elites sure white collar workers AKA Surplus Elites people who actually you know are mid managers who don't who don't actually code or don't actually build a product or sell a product don't actually do real work as I think uh many people would frame it in the managerial class or the CEO class man they're going to have a hard time and this week Andy Amazon Andy cut 18 000 white collar workers not the Blue Collar the white collar workers at Amazon that was a big turning point and Benny off you know he's Ohana he is Mahalo he is uh Aloha he does not like to lay people off he considers Salesforce or family he laid off 8 000. I predicted that yeah and I mean that is to tweet about that well I mean the reason is pretty simple right they're gross slowed down by two-thirds in the most recent quarter but they're still spending the same amount on sales and marketing so when that happens your CAC payback explodes right you go from three years pay back to like 10 years so they have to cut costs in order to rationalize your unit economics so and now it it Cascades right because all of salesforce's vendors are going to be getting less money from Salesforce because they're tightening their belts so then those companies are gonna have to cut and the cycle just keeps going and going right and everybody tightens their belts at the same time freezes the economy AKA recession uh and and possibly were so that mine was a surplus Elite so that's a nice uh little quartet in 2022 just so you know uh I picked crypto freeberg also picked crypto which must have Visa Mastercard and Sac said assets classes that benefit from government uh dumps and publicity yeah all right let's go to biggest business deal of 2023 it's a prediction what do we think could be the biggest business easy easy this one okay let's go okay quickly starlink will go public oh SpaceX will cut and paste the cap table and we will take yum it'll be yummy and delicious and my prediction is that the starlink valuation will be at least half of spacex's current private Mark 75 Billy just 75 billion it will be phenomenal and I think the reason why is that I think in order for Elon to have complete Financial flexibility and do what he needs to do and you know he talked about this on our pod about the difficulties and the dangers of margin loans and all of that stuff yes he's gonna create breathing room for himself ah this is the simplest and most obvious way for him to do it it'll give him a ton of more dry powder sure so I think that this is an obvious outcome in 2020. they already have a million subscribers in there better than nothing beta as they call it I have two of them I think uh this is a great great uh I was the first one to get it for uh for the global 7 500. so okay well I I got it for yeah Tahoe so yeah similar uh so uh they're my Clayton in your house in the same size yes exactly so there you go uh there is a point here people are underestimating The Tam I think of this product The Tam is not existing Broadband connections it's second connections it's connections where connections didn't exist just so you know buses the Best in Class the Best in Class broadband connection for a plane is called Ka band and it costs 500 Grand a year that's ridiculous and you can replace it for you know a tenth of the cost and start a link on a plane is dramatically better bi-directionally so I think starlink is going to go public and I think it's going to be it's going to be the best chance that we have of opening up the capital markets in 2023. there's another way of saying people who own private jets if they are flying 250 hours a year which would probably be a reasonable number to 300 hours a year they're paying two thousand dollars an hour for their internet service that is Bonkers okay sax who is your uh big deal biggest business deal prediction for 2012 steals 23 prediction is there will be a deal between uh Putin and G and they met by satellite late last week to discuss ways to further help each other in 2023 Putin characterized it as a no limits partnership you may remember that the two of them Inked a 175 billion dollar gas deal in early February last year that was three weeks before Putin invaded Ukraine I think now Russia is even more dependent on China we've really driven Russia into China's arms and I think there will be a big deal not just on energy but on agricultural products mineral products and rare earth minerals that you know chamoth likes to talk about I think there could be a trillion dollar deal between Russia and China this year if I was going to go out and live and make prediction okay so there is your 2023 prediction of the biggest deal the Legion of dictators is Foreman I do think it's uh it is like uh you know that the axis of Evil this is more Legion of dictators like hey let's do business together treeberg he got a prediction for the biggest business deal of 2023 this is really going on a limb here I'll do two real quick the first was the similar to what Zach said but it's kind of echoing what I said earlier which is the Petro you on trade I think that's the Saudi China trade if this happens and oil is sold in Yuan it marks the beginning of I think um the end of the assumption that the US dollar is the global reserve and the risk-free currency in reserve for the world so I think the Petro you want to trade if you guys um here's the Reuters article covering ji's visit uh to Saudi Arabia last month for the second week of December once this gets Inked and signed it's a real shift uh globally I think the other one that I'm that I'm going to point out that I think is a bit of a out of left field one maybe and maybe I'm just gonna look like a total idiot at the end of the year about do a wild card I like it this is my wild card so my wild card is I think Apple ends up buying something completely out of the ordinary and here's why I think Apple's Core Business they're facing significant pressure with respect to their relationship and ties to China as you guys may have seen last week Foxconn announced that they're actually going uh further Downstream in terms of their production model and they're trying to diversify away from being kind of the sole service provider to Apple apple as you know is under such pressure to get out of China politically that they've started to try and invigorate activity in Vietnam and elsewhere so a lot of pressure on their relationship with their low-cost producer and low cost production partner they're also under a lot of political pressure because of the App Store revenues you guys know this 30 App Store that they take a lot of people are calling it monopolistic and antitrust is getting involved so they're feeling that pressure there's also the pressure with respect to the you know waning uh consumer demand for high-end Electronics Samsung last yesterday or last week and or yesterday I think announced significant declines in consumer demand for electronics or their forecast as such that has to impact apple as well so when you put all of this together right they're they're they're being pressured to get out of their low-cost manufacturing center they're being pressured to stop making money on the app store they're being pressured because the demand may be waning they have to do something big to kind of diversify the business so I think they might end up doing something like buying a real content company maybe they do something like buy a Disney maybe they do something like buy an automotive company like Fiat Chrysler I think there are a number of these kind of like what may seem today outrageous deals that Apple might end up kind of being pressured into doing so that they can get ahead of their forecast of the impact that all these pressures are going to have on their Core Business and so I think this is something interesting to kind of think may happen this year I certainly have no Insight or Intel on anything or I could be completely wrong on this one but it feels like they've got to do something this year I'm necessarily to keep that business I think this is I think I love your wild card because the MBS China trade and that relationship sure Legion of dictators but this one is really good it's hard to buy Disney monopolistic issues but buying a car company pretty easy because that's a fragmented Market I love this prediction I mean now with Tesla with this depressed stock price Apple can make a run at Tesla they have they could almost buy it with cash let alone BMW Volvo one of those Brands they could buy easily what a great prediction for me the prediction is Amazon's three-legged stool grows into a sturdy chair chair with a fourth pillar for those folks who are not familiar with how Amazon has built their businesses there are three pillars in their stool e-commerce obviously when you buy stuff Prime memberships which is kind of considered a separate Revenue stream and of course AWS cloud computing I think the fourth is going to be this continuation of following the health stream not advertising because that's not a consumer-based product that's just the way they make money health is going to be a big one for them uh they obviously acquired one medical which was a small purchase I think they're going to buy Roman hymns they're going to buy Peloton they could buy a whoop and they're going to go all in on health and you know that three-legged stool becomes a very sturdy chair and my runner-up is Tick Tock is going to divest under duress I think that it's going to have to go public and the Chinese are going to divest their interest in it uh and just take their chips because they're going to be faced with the existential threat during the political debates over the next two years there will be unanimous support from Democrats and Republicans to get Tick Tock out of the U.S therefore they divest can I just test that which with you guys because we've talked about this a lot that hey we're going to ban Tick Tock how many of your friends kids or your kids do you guys know spend hours a week on Tick Tock it's a lot 90 how do you get over the political mountain of trying to ban Tick Tock if you try and ban Tick Tock whoever raises their hand and says we should ban Tick Tock and actually gets it done they're out of office there is going to be so much pressure and backlash because people are hooked and love that app and use it all the time to take that away from people will feel like this kind of young kids that don't have phones actually get everything that Tick Tock has on YouTube shorts so I don't think Tick Tock is that important because it is not actually there is no sticky Network effect inside that app so there isn't usage that's dependent on people you know or a graph that you build it's a lot of passively consumed content and so you know you're you're getting pushed a lot of algebra algorithmically defined content you can do that on YouTube and so I actually don't think it's that meaningfully important if tick tock goes away I think the content creator stayed it's harder for them to build a business on YouTube shorts but if you look at the and measure the density of content inside Tick Tock it exists almost one to one on YouTube that's interesting it's an interesting even it'll you think it'll be okay if we if we cancel Tick Tock in the US and we say that too you can't have taken everybody moves to YouTube and it's going to be disruptive but people will just go to YouTube and Instagram it's not that big of a deal in fact a lot of the my favorites if there was a network effect inside there then I think people would have a reason to complain to somebody whether it's your representative or whether it's somebody else to say hey don't do this this would have a deleterious impact on my quality of life or my quality of experience and you could make that clear claim on Instagram Facebook you know Google YouTube but Tick Tock is is much more brittle that way and that's why they need to get public sooner and monetize this bloody thing because I think that it's very easy actually to deconstruct tick tock's value into these other places I can tell you my favorite Tick Tock is Chef's reactions and I consume him now on Instagram because he posts he just copies one to the other and so Chef's reactions is a great example where he actually got banned by Tick Tock and then Diversified on his own and now what he does is he publishes across multiple streams and if you look at all the big creators they all do that because it makes no sense to actually give the power to any one of these things why have a dependency well I have a dependency all right let's keep the trains moving most contrarian belief this is the Peter Thiel award your chess partner sex who's winning in 2022 in chess how many chess games do you have going with Peter Thiel right now and who's higher rated you demolished me with your Queen's Gambit I played one game I got killed in seven moves I'm I'm ranked at 800 900 right now sax is at 1800 he just walloped me who's higher rating right now you accepted the Queen's Gambit well you know I just I don't even know what it was I was like what opening is this you're like uh Queens Gambit you're dead I don't want to accept the Queen's Gambit okay very pleasant game for white I'm gonna go on a linear you know and risk being wrong uh my my prediction or most contrarian belief is that the Bromance between Biden and zielinski comes to an end at some point in 2023 and uh let me State the part that I think is conventional wisdom and everyone agrees with which is there's going to be a massive Ukrainian counteroffensive in the spring and I think that could go one of two ways either it could make limited gains basically the Russians fight them to a stalemate or it could be successful and they could basically push the Russians back to the February 23rd lines and then make a play for Crimea I predict that in either one of those circumstances zelinski's interests and Biden's interest will start to diverge so in the case of a stalemate which I think is probably 50 50 here Biden's gotta start going into election mode for 2024 and I think we're saying that we're going to be in a recession so I think that if there's a stalemate I think Biden's going to tell zelinski wrap this thing up it's time to negotiate we need to get this over with by the same token if the counter offense is successful I think that the administration hopefully cooler heads will prevail and not let them take Crimea that's basically what they're gunning for is they not only want to get back to the February 23rd lines they want to go all the way back to the 2014 lines of retaking Crimea I think that's extremely dangerous I think that could precipitate a nuclear war and I think that the cooler heads the administration will tell zelinski to stand down and that's the right time to make a deal so I think in either one of these scenarios I think you will start to see a Divergence between the Ukrainian and the American interests and that could create a rift and I think no one's really predicting that I I think this is great this is kind of what I thought the plan all along was which was to deplete Putin of resources distract him them and then get the West off of his oil and and try to do regime change but do it by bleeding him this would be uh proof positive of that strategy which is bleed him to the end and then sell zelinski out I think that's actually I know that's I know it's cynical but I think that's what we're doing I think Ukraine is a tool to deplete Putin and then maybe get to regime change uh I'm cynical as it gets with this chamoth what's your most contrarian belief of 2023 I will go and pick that inflation which people expect to fall off a cliff doesn't fall off a cliff as fast or as meaningfully as people want and so I will explain inflation as three different chapters and we've seen the first two chapters play out so 2021 chapter one was all about energy inflation and you know we all talked about having almost ten dollar gas at the pump and what does it mean for everybody and it caused that initial Spike in inflation and then we had it come off and sax called this he said you know we're going to have this sort of double hump and 2022 was really the story of goods inflation right all these prices and all of these things went up because the input costs went up and we all had to Bear the implications of that but then that started to ebb and now if you looked at the tail end of 2022 what I found super interesting was the number of articles I saw about wage inflation whether that was Biden using an 1800s era law to prevent a Railroad Strike the number of states that increased minimum wage the trend around unionization so in general my thought is that the pendulum is swinging very markedly away from capital and towards labor and as the labor participation rate stays low and continues to go down and also it's compounded by an unemployment rate that may go up right people are it's going to be harder and harder to get people to do the work you need at the company you have unless you pay them more and if that gets exaggerated then inflation will stay where it is it won't be as muted and it won't fall off a cliff as people want it'll be persistent that's my big contrarian God wager for this year is that we that is equation we see wage inflation that keeps inflation not going down as much as people want this is contrarian because everybody's saying hey it's over the consumer's back has been broken the credit card debt is high and everybody's being laid off yada yada therefore goods and services there'll be more Supply than demand and the prices will lower very contrarian free break you have a contrarian belief for 2023. I think my it follows my earlier points about the Saudi China Russian Russia trade this year exiting 2023 it may be the case that you know there's historically been this belief and this continuing belief that the US dollar will always be the de facto Global Reserve currency and the current Mantra is that it's better than the rest everyone else is worse off than the US Western Europe is in trouble Japan is in trouble China is in trouble everyone's in trouble but if there is a coalition an economic Coalition a scaled economic coalition that starts to shift the balance of power a little bit and the US meanwhile is taking on extraordinary debt load sending 1.7 trillion dollars in an Omnibus Bill you know has this massive unfunded social security problem coming down the pipe and are trying to manage multiple funded conflicts around the world it could be that the US dollar coming out of 2023 starts to trade more like a risk asset and less like a risk-free asset and so I think that that's my big contrarian bet is that maybe this year marks the beginning of the end of the US dollar as the kind of global de facto Reserve currency based on some of these big trades that I talked about happening unbelievable so that would be my um my big kind of contrarian perfectly said uh that's your contrarian bet the accent the Legion of dictators the mbs's ETC they become they form a new Global Currency yeah my term not yours I'm not calling it yeah I wouldn't say a legion of dictators and I wouldn't say form a new Global Currency but I do think that the fact that that large economic trading models start to be done in non-dollar denominated form got it you know weekends the uh the kind of Reserve status of the dollar to some degree not fully right it doesn't happen in a binary way and then the dollar starts to trade more like a risk asset like other currencies do to some degree not fully so maybe once again here we start to see that shift once again I take the exact opposite of your contrarian belief I believe American exceptionalism continues to soar as Russia China Saudi Arabia to a lesser extent continue to self-sabotage themselves with insane Wars like Putin has done or cutting off uh the heads of entrepreneurs in China figuratively uh I'm saying here I think you cannot have exceptionalism without entrepreneurs without people having freedom and I think that means American exceptionalism based on freedom is going to continue and the Legion of dictators I believe are going to stab each other in the back before they change the world or move the currency you can't trust them they'll snip at each other and all their self-sabotages yeah I think that America is really feeling its Wheaties right now I think that American power is immense I think that the superiority of our weapons in Ukraine has been one of the big surprises of the war let's go Palma lucky I don't see the world in the simplistic uh good guys versus bad guys frame that Jacob does however America is on turbo right now and um yes it is true that the bricks would love to get off of the dollar because we are now using the dollar and the financial system as Swift as a as a geopolitical tool and a weapon and they would very much like to be off of our dependence on our currency but I don't think they're anywhere close to being able to do that yet and like I said America is on turbo right now now one thing one thing I want to mention this just came out White House correspondent named Jennifer Jacobs just reported that the U.S has agreed to send Bradley armored vehicles basically our best tanks to Ukraine previously U.S officials had balked at sending armored vehicles saying heavier weapons be too difficult for Ukraine to operate and maintain but allies are moving to provide such weapons so we keep providing ukrainians with more and more sophisticated weapons more and more support like I said this is leading up to a huge Ukrainian counteroffensive in the spring and I really don't know what's going to happen at that point I do think that the Russians will escalate I don't think they can afford to lose this war they view it as existential and I like I said I hope cooler heads will prevail and if the ukrainians are successful at breaking through I hope that the Bible Administration will shut this down before they try to retake Crimea because you know we've discussed this before I think the Russians confronted with a choice between a total defeat that includes losing Crimea and their Naval base sevastopol and sees the Ukrainian flag flying over their base at sevastopol if that's a choice between that or potentially using a tactical nuke maybe at the mouth of the Crimean Peninsula as a firewall I think they could choose the nuke option so it's a very dangerous situation and um you know very very Dynamic there's a lot of possibilities all right let's go on to best performing asset of 2023 I'm going with sea stage investing again I don't think people want to get into these toxic cap tables at the late stage as chamoth pointed out so I go with seed stage and you know and up to series a the people brave enough to place bets the founders brave enough to start companies I believe it's the best performing asset class of 2023 tomorrow yeah I think that there's still a lot of uncertainty in the world and in the markets and so I'm generally concerned that there's a lot of chop and so I picked something that's pretty conservative but I would have a combination of cash and the front end of the yield curve so t-bills all the way up to two year bonds so you can generate four and a half probably by the end of this year five percent pretty safely owning this stuff while you wait for things to become more certain and the way that I think about it is that I would rather Miss the first 10 or 15 percent of a rally once we're really done this stuff then try to over correct and try to pick a bottom just because I think that you could lose a lot of money so I think the goal for this year is to stay resilient and in the game and so owning having a bunch of cash on the sidelines ready to pound it in meanwhile a portion of it collecting five percent is not such a bad thing while you wait for the bottom fantastic my answer was actually very very similar which is if kaskar is right that rates are going to 5.4 percent in q1 why wouldn't you just put all your money in short-term t-bills you earn five five and a half percent risk free yeah like set it and forget it yeah and that's why Capital flows are moving hugely right now from equities into bonds especially if we're going to a recession which is inherently deflationary what do you got Freeburg performing asset class of 2023. one of the things so I think it's inevitable that we continue to have significant infrastructure spending from both the stimulus and security point of view so you know we kind of want to continue to stimulate the economy and and support growth we want to continue to create jobs and support this transition and the risk if this if the recession predictions play out true and the job market does lucid it's very tight right now um there's going to be even more of an impetus to continue to do infrastructure investment but I think there's also these big economic transitions happening underway right now with Pharmaceuticals with semiconductors with energy there's a lot that we've talked about where there's a security problem and a redundancy problem and so you know there are a couple of ways to kind of play this infrastructure is spending thesis in each of those areas I've kind of highlighted four of them one is in semiconductor Capital equipments okay like 10 core Applied Materials that that range of businesses that provide and sell the equipment into the uh the Fabs and the and the organizations that build semiconductor Manufacturing facilities the second is kind of an oil and gas services so similar to what Saks said earlier Schlumberger Baker Hughes that class of businesses I think benefit in this in this environment and this is independent of kind of economic conditions certainly because these are Big multi-year spending projects the third is in the equipment to support them so deer and caterpillar and then the fourth I think is an important one I'll talk about this in a minute with respect to my biggest kind of anticipated thing for next year which is in a pharmaceutical infrastructure so Thermo Fisher and there's some company and others like them because there's a lot of build out happening to support these big transitions happening and the modalities that are being used in pharmaceutical drugs and Diagnostics and then I think that there's also a couple of these businesses that are Diversified like danaher Honeywell Thermo Fisher is a good example that play across multiple of these um these opportunities so those are those are all great businesses to own and you don't need to worry about you know they're they're growing cash flow positive dividend paying companies and you don't need to worry about you know am I getting five percent or five and a half percent based on the equity price this year these are long-range businesses that are building real value growing their Top Line and compounding value from within and then they're acquiring a lot of smaller businesses very cheap I'll say well that's an important Trend I've seen across these companies Dan and her Honeywell Thermo Fisher they buy small companies they pay very little and they immediately get massive return on invested Capital like they're in the High Teens so why get five percent on t-bills when you can get high teens roic uh on the management teams running these incredible platforms so that's where I'm most excited for this year okay now let's move on that was like a mad that was like my mad my Mad Money segment I've never done the Mad Money segment before but there you go worst performing asset I I went with energy because not that I think it's not important but it just feels like everybody rushed into it in 2022 so it feels like it's overheated and if we are in a recession people might lower consumption uh in terms of energy and uh be looking for cheaper alternatives so it could be overheated so I went with energy worst performing asset you got one I think that if we've learned anything from the last three years you have to separate the valuation of a company and how it performs in the stock market with its value in society so for example if you look at Zoom zoom's valuation has cratered but its value in society has probably continued to go up it's still a massively relied upon tool the point is that markets do not give you credit for the value in society they will give you credit when you are about to over earn but then they'll pull it all back when they think that you're going to under earn so in that lens I think that Tech will have a tough year I think energy will have a really [ __ ] year and probably the biggest asset class that is going to get pressured is going to be junk debt and the reason is a bunch of these variable rate loans when rates are at five and six percent that all of a sudden are like 11 12 13 14 coupons a bunch of companies will have trouble meeting their debt obligations and will have to restructure the debt or we'll have to file so tax energy first performing asset for 2023. uh some category of what monster said I think office Towers in San Francisco are that is some serious toxic debt 27 vacancy rates and growing as Lisa's role uh I think that a lot of these buildings maybe virtually all of the San Francisco downtown is going to be owned by the bank soon because the real estate in San Francisco the office tower specifically the office Towers because no one wants to be in those the skyscraper buildings south of Market you know mired in homelessness so um yeah I mean I think that a lot of those buildings can be owned by the Banks there's gonna be some major fire sales remember this was the hottest commercial real estate market in the country a few years ago and now it's the worst well look what I think about it look what happened to be reap what do you think about that crazy thing that happened with the Blackstone read I mean that's nuts you know explain what happened yeah Blackstone has a product called b-read it's like a 70 billion dollar exchange traded fund effectively and what it is is the ability for individual investors don't act access to blackstone's you know commercial real estate portfolio and they had such a massive amount of redemptions that they had to close redemptions at the end of Q4 and they were worried that the redemptions were going to continue to go up these are individual investors who basically seized the writing on the wall as David said and wants their money out and so they went to the University of California pension system and they essentially got a huge infusion of capital I think it was about four billion dollars were they guaranteed 11 and a half percent interest to these guys for the four billion dollars and they also posted a billion dollars of their own equity in in the actual Reit to backstop it so what does it show you I think what sax is saying is really right it's it may not just be in San Francisco but you know with all of these people either getting laid off with all of these people now working remotely we may finally start to see the beginning of the Reckoning in commercial real estate which has been an unbelievably performant asset class up until right about now and and on top of that you have to factor in these much higher rates and so these building owners if they financed it which they invariably have always financed they have huge variable rate payments that are due on these buildings the rent rolls are lower even people like Twitter is just refusing to pay the rent so you have to take them to court so it elongates when they have to pay and so you could miss a bunch of rent payments and all of a sudden the banks could just go crazy and take ownership of these things okay do you have a worse performing asset class for 2023 prediction Sultan of science queen of quinoa David Friedberg it's really simple I've mentioned it before it's Consumer Credit we assume that raising Rising rates and inflation would taper down consumer demand meaning consumers buying goods and stuff and that certainly hasn't happened I'm in Vegas right now I was in the car yesterday and the driver grew up in Vegas uh he's like in all the I've lived my whole life in Vegas he's like I've never seen a December like we just had it was packed the entire month he's like normally in Vegas it's dead up until Christmas and then New Year's people come into town but it's normally dead he's like I've never seen such a busy month and I think we see this in the numbers consumers are still spending like it's 2021 they're still spending like interest rates are zero as we talked about um consumer credit is skyrocketing while rates are skyrocketing um and so I think we're going to run into a real wall with respect to Consumer Credit in um sometime this year and you're going to see as you guys know this is such a complicated interwoven Market of assets that the way that this this can be traded there's a lot of different ways to trade it but I think it's going to be in general consumers are not going to be able to meet their debt obligations could be mortgages could be credit card debt defaults are coming yeah the markets the market has priced in a bunch of this stuff obviously companies like a firm and the um what are they called buy now pay later companies but credit card companies mortgages there's a lot of assets that you can start to kind of pick apart where do you think this unravels first how does it what gets hit hardest what's underpriced and overpriced probably a lot of good pair trading to do is Jamal kind of loves to talk about uh with respect to which of these are more likely or less likely to be sensitive to this Dynamic but there's I think it's going to be a pretty ugly scene consumers just have way too much debt relative to their earnings right now and it's pretty nasty and they have some confidence that they'll always have a job or some way to pay their four easy payments it's hard it's muscle memory is serious you know you come out of 2021 when you had um it's not just stimulus checks it was the low interest rate and easy credit availability everywhere and it's just easy to jump into getting new stuff and cool stuff and then when you get used to getting these stuff every week or every month you kind of stick with it and you're like I don't want to give it up just yet I just not just yet not just yet you know and so it's hard to kind of step back from spending when you have a new type of lifestyle and I think that's what's going on I think this is an incredible observation yeah there's a great Tick Tock of this guy that runs car dealerships and he sent them out unlike how much incredible money like what a significant percentage of people's income they are spending on their monthly car payments and people buy these cars that are well beyond what should be kind of a reasonable budget if you were to go to Susie Orman do not buy that freaking car they stretch and the stretching is gonna it's gonna snap this year yeah absolutely which brings us to the most anticipated try I love it great one most anticipated trend of 2023 related to yours I went with austerity I have a friend who sometimes flies private often and I was talking to him about his Christmas vacation this friend of mine Shama instead of flying private to his vacation he had to pick up his kids he had to go back and forth he was driving his car that was three hours that was you oh okay I didn't want to die it was so great who would normally fight private to Lake Tahoe and he's like no I can't go out with you skiing on Friday I gotta pick up my kids and then I'm driving back I say wait a second how are you doing that he's like I'm driving a car I said what who's driving the car he said I'm driving the car and that's why I say austerity is my anticipated train of 23-3 I agree with you I actually think this is a really good opportunity to pull back on so much waste I haven't really looked at my household budget in probably two or three years didn't even bother why and then and then when I looked at it I was like wow this is really inflated to a level that I didn't expect yes but it makes a lot of sense to live in a more heads down austere way I don't know yeah I well I mean look at tonight's menu you went with duck I guess the olive fed wagu everything's off the menu now no black truffles we're having duck we're down to poultry next week we're gonna have pasta it's okay oh austerity measures for everybody they call it foul for a reason right oh God sax uh do you buy into austerity where shamath and I are austerity belt hiding as our trans where are you what's your Trend first I think that's a pretty good Trend the trend that I am going to suggest uh will be to your great disappointment J Cal which is Trump's influence in the GOP continues to wane you're seeing it in real time right now the headline is Trump's endorsement proves worthless to Kevin McCarthy and the speaker bid even the Maga faithful like Matt Gates like Lauren bobert they are ignoring Trump's pleas to get behind my Kevin and in fact they're kind of not just defying him but making fun of him Matt Gates had a repost Trump saying sad exclamation point and bobert was saying that Trump needed to get behind her movement so we have now a level of of open Defiance to Trump and the GOP his endorsements just not are not what they once were and even if somehow Kevin McCarthy pulls us off I think all that means is that Trump gets blamed for every swampy Rhino compromise that McCarthy has to make to keep the government running over the next two years so it's a lose-lose does that mean that populism is on because the it's the electorate that got him elected in the first place he was not very popular with politicians the he was kind of an outcast when he got elected the first time and that may be the case now but he still got elected because the population loved him people loved him is that going to happen do you think that means that the populism is kind of waning or the interest of the the voters is waiting on him or is it just the political party's alignment Wilbur only won by a few thousand votes she didn't exactly crush it in Colorado I think a lot of this has to do with Trump's personal standing after the midterms the candidates that he personally picked that were all in tough Races they all basically lost it was about the distraction he caused by making the 2020 election such a big deal constantly looking backwards so I think the Republican party doesn't like the Antics it's not about the policies I don't think I think it's 100 about the about Trump's electability and about his ability to get things done and it's not really about the positions per se so I think Freiburg to answer your question I think that the future that GOP will incorporate this populism but it's going to find a better integration with the establishing wing of the Republican party and future candidates will have to basically satisfy both of those wings of the party sex was it was a straw that were maybe the two shrouds that broke the camel's back for republicans and Trump in that relationship was it January 6 and the election denial like for Republicans is it just like come on those are the two things this constant focusing on the 2020 election first it costs them the cost Republicans that Georgia runoff's seat with Purdue against Warnock Purdue won on Election night didn't clear 50 had to go to the runoff this was happened the day before January 6th this happened on January 5th of 2021. that was the first race where Trump's Antics cost them then you had this midterm election where you know all the candidates who had to appease Trump by talking about again the last election instead of looking to the Future they got punished by the the voters I think Republicans want to win I mean they're tired of losing that's simple it's that simple yeah the job of a politician is to win freeberg you got an anticipated trend of 2023. I am excited about and want to share the point of view that I think I'm selling Gene therapies are becoming more mainstream so these are pharmaceutical modalities where we use a gene editing systems where you can actually go in and change or add a genetic material to cells in your body to resolve things like genetic diseases or change protein deficiencies or introduce new proteins and then cell therapies where we engineer cells put them in the body and those cells go and do things like attack and Destroy cancer cells for example there are currently 27 FDA approved cell and Gene therapies on the market there are over a thousand in clinical trials many of which are already showing extraordinary efficacy and benefit today these therapies cost upwards of a million dollars so I think there's a massive and talking about the infrastructure investment conversation earlier because of the number of diseases and the number of conditions a number of people that these therapies can treat I think there's massive infrastructure investment opportunity coming forward this year but also seeing these come to Market come out of the clinical trials get FDA approved we have to ramp up and build up the infrastructure needed because it's not traditional we make a drug in a factory and send it to people and they get it injected these are much more complex they require much more complicated delivery mechanism you have to have systems to engineer cells and edit them and put them back in your body those systems today take days or weeks and cost you know as a result a Million Dollar Plus per treatment so I think that um the cell and gene therapy opportunity you know the JPMorgan Healthcare conference starts this week uh it's the biggest biotech and Healthcare conference in the world starts in San Francisco on Monday this is uh one of the biggest areas of interest and one that everyone's investing against but as these come to Market there's you know we talked about this last week genetic diseases types of cancer that are going to be addressed and I'm really excited about seeing more of these products come to Market and seeing the whole kind of infrastructure and delivery system change all right sorry to interrupt trying to keep the trains moving Gene editing very good choice all right we end with this it's a little bit fun most anticipated media for 2023 these are things we like to talk about the media here sometimes we talked about White Lotus season two uh amazing uh season and maybe what you're looking forward to next year I am really looking forward to in film Oppenheimer Christopher Nolan's movie about the Manhattan Project that should be extraordinary I loved uh it was Dunkirk his as well I love Dunkirk I like everything he does and when he is this is him becoming like a history Uncle I'm here for it I'm here for Nolan becoming our history Uncle instead of Batman what was the one after Inception though that was really confusing the one with Denzel Washington's son with John Washington uh yes um it was um I couldn't finish it I tried twice I gotta go the third shot on that one it was oh yeah it was it was his worst film uh what's the name of it I can't remember it was called uh tenet tenant tenant yes about like time and reverse and this it was impossible to follow did you guys see his original film which was incredible Memento of course it was fantastic yeah it was enough mine mine yeah it was mind-bending enough that you're like oh my God incredible and then I think they took it too far tenant I tried to watch it three times I'm generally pretty good with these sorts of films and love them but oh my God it was impossible to follow he he took it too far okay so hopefully he goes back to his roots in terms of TV series I'm looking forward to secession coming back Ashoka who is uh Anakin Skywalker AKA Darth Vaders uh Padawan Ted lasso season three coming up those are for me incredible and then on the book front man the Michael Lewis book about SBF is going to be next level I cannot wait for that sax you're a media junkie what do you got on your list of things you're looking forward to or should say what is Tucker's writers what do they put down for you I thought the for movie you're gonna pick cocaine bear right extraordinary a bear is in the woods and a I guess people who are trafficking in cocaine drop their or crashes and the bear eats the cocaine and then goes on a rampage it's kind of like a a genre film like in the crocodile way by the way I'm listening to Quentin Tarantino's book by the way of criticism get the audiobook you'll like it sax he talks about all the films in the 70s very good shout out to Quentin what do you got what do you got on your short list uh history uncle me yeah I just gave you one but the code and bear top of your list we'll watch it again was on my list and I think uh Marvel is doing a good job developing a new villain to rival Thanos with this with king I don't know what phase they're on now but Loki season two and then the new Ant-Man movie and um you know I thought after Thanos who wouldn't really be able to top that but yeah they've come up with a really good concept I think for the next you know 20 Marvel movies well and then it will eventually become Galactus yeah you guys have completely [ __ ] up you have missed the most obvious slam here we go Sade's new album go on part two oh I haven't watched number one yet wait what you know what's happening wasn't it my wife wants to watch it it is so stylistically beautiful it is a little boring there's not a lot going on slow but it's so well shot it's a fun it's visually just stunning I mean if you need to watch it on a big screen with big speakers and uh but part two comes out in November this year absolutely that's okay great Freeburg tell us what documentary on veganism do you recommend and you're anticipating for 2023 what vegan documentary or animal abuse documentary I am excited about the generative AI based media that I think is going to start to kind of Rocket this year we could see for example the first you know AI written Symphony the first kind of AI written published novel how interesting would that be like a full novel published by AI and and more maybe short films based on an AI driven script and maybe even what I'm really excited about is these AI based interactive video games or um kind of experiences where you the user kind of get to create and live your own world uh through some sort of video game type modality so I think AI driven media all right there you have it folks there are speaking of Pop Culture chaos I guess Prince Harry has a book coming out that's called spare when you're playing uh bowling no but you know like in in the English Monarchy they there's the air and the spare uh so he's calling himself but to me that's like a weird self-description yeah like that's that's how you see yourself is just being self-deprecating he didn't pick that they paid him so much money I heard they have to sell 1.7 million books to break even but you know what it reminds me of is uh when Leonard Nimoy wrote a book I think he wrote a book called I am Spock and then he wrote a book called I am not Spock nice you can never get comfortable with the fact that he was just Spock yeah and there's something weird about calling yourself spare like you know you're clearly not comfortable with it's like everything yeah everything they taught you everything I learned at Harvard Business School and everything they don't teach at Harvard Business School you can you can do both books all right listen this has been great uh breaking news as we're talking here chat GPT uh open AI doing a tender offer 9 billion obviously you're losing three billion a day oh my God who is buying a 29. it's Founders fund or reportedly according to the journal it's Founders fund Thrive Capital so Founders fund does not generally do super overpriced deals yeah from here I wouldn't I would not totally could be by the way you guys remember that the um open AI I don't know what the current situation is but it was a non-profit where they said investors put money in but the investors maximum return was 100 X on the dollar invested so it's a non-profit up to 100 no no that happened afterwards it's when they converted the original model yeah no the original model was appearance the original model was a pure non-profit where there was no cap because there was no concept of equity yeah when they flipped they capped everybody to 100x on the return so the original money thanks but not even more or still but no the original money which was like elon's money so I don't know how it converted but that's when they or did it convert did those people who funded it originally get any shares before profit we could we could find out probably they did I mean it would make sense I mean wait if this is a tender office 27 billion you wouldn't buy shares at 27. so again like the the thing that I want to impress upon you is like there is an enormous amount of work that they do that what their biggest Gap to monetizing this will be finding unique content that they learn on that nobody else has access to and this is why I really think it's important to understand if you have enough compute these all of these unsupervised learning models if you run them on the same training set will converge to the same answer so you're just getting there first so in order to be really defensible you have to get there in a unique way and so either you're going to hand tune or you're going to have inputs that are different so I don't know I don't know the answer that's why like they they have to answer that question in their fundraising and I'm sure that they did because these are smart investors but that's the big idea that you have to overcome and again you have to think like you think Google is sitting on their hands no 129 billion like what fundamentals is that based on like why not 5 billion why not 3 billion I mean like why not 10 billion like what makes sense valuation that's what it is it's all this is all momentum said nothing to do with reality right I mean it this would imply at a 30 the the public comps of the Google trades at what 25 or 30 ebit times ebitda so this would imply a billion dollars in ebitda a billion dollars in ebitda 3 million dollars a day they're losing three million dollars a day on computer report at least three million dollars a day and profit on what product I don't know if they have a that's probably the issue I think look I mean my point was if these guys open up a set of tools that support all these applications and services to emerge on top of what they've built and they're getting red share getting payments out of that it's going to very quickly turn into a real here's the problem this is why that can't happen they don't have the rights to the data they built the training set on and the second they commercialize it the second anybody pays them whoever they based this on conversation into Oblivion I predict suit into Oblivion let's talk about let's let's actually let's talk about that in the next show because I think that's like the the way that AI works and we should probably bring someone like Sam on to talk about it but the way that AI works on trading data and now people are making claims that the training data is copyright therefore model output is protects that copyright is I think worthy of a good conversation what's interesting is you know the earlier the early version of the of the internet was very simple it's like you had this file called robux.txt and you would basically be open to a crawl or not and that's what would allow Google to basically Go and Spider your pages right and so we have to replace this concept of that with this ai.txt well you could make a claim that this is no different than you know a spider crawling a web page except that in in the search case it was much cleaner which is we're just going to index your page and redirect people to you uh here it's we're actually going to create a derivative work because of you in part and I do think that that's going to be a very interesting legal threshold that has to get figured out well here it is chamoth you're you're nailing it exactly it's a derivative work and they did not have permission to use it and it impedes upon the original authors whether it's a photo it's a song it's a piece of code it impedes upon their ability to do Commerce in the world you are interfering with their ability to monetize their content and the percentage you're using is a hundred percent so when you get to fair use non-commercial use is very protected parodies protected education's protected but when you dip into using the entirety of the work which they're doing and you impede upon the person's ability to Commerce and you confuse the public well this is the test that they will fail fail fail this is why I think that most people don't understand what AI is they don't even understand the difference between training and inference so hopefully there is some more understanding of this but if you use the same data set you will eventually converge to the same outputs absent of hand tuning weights which has its own issues and absent any asymmetrically different data that you have that nobody else has absolutely yes so if you are Apple and you have the watch data or your Google and you have the search data or you're a weather company you have the weather data and your proprietary of course there's a very easy solution to this to mouth number one citations when the algorithm gives you an answer it should say what were the top percentage sources of this information how did the AI look if you look inside of a transformer the problem is okay that you're going to have trillions of ranks trillions of Weights trillions and so how are you going to decide how to basically draw a line under a threshold this was actually a useful input and this was not so again I I just think that it's hard a very few small class of people actually understand this like the great person to actually bring in to talk about this would be Andre carpeth not and I think because Andre was there sure and a Tesla and he but he can say it in a very dispassionate way to explain this to people I think we should we should ask him to come on yeah for sure I mean I can ask him okay I mean this is brand is this law Sachs you're an attorney you understand fair use copyright all this stuff the law correct me if I'm wrong here sax does not anticipate this look this is a highly specialized area I don't want to pretend like I understand the law in this area you know I'd want to talk to a specialist yeah okay so anybody let's have this conversation because I think yeah the SE are great um work for us to talk about because all right this is probably why by the way they started as open source because it was like a slam dunk thing to make this a non-profit and open source everything be maybe in part because of these issues but if you just let the code Run free you probably don't have to even deal with these issues right well they they closed it remember their claim the claim was this is too dangerous their original claim was it's too dangerous for people to not see the code then Sam flipped on that and he said it's too dangerous for people to see the code and it started out as a non-profit where the idea was the way to keep this safe is for everybody to see the code but they didn't make any money whatever they went private and they flipped the decision so keep that in mind as well he's a he's a very very very clever business person he's savvy and you know Paul Graham when Paul Graham picked Sam to run YC Paul Graham said that this is the most impressive person I've met since Steve Jobs yeah remember come on the pot I do remember that um well you said something similar about Gary tan is now running YC starting this week yeah Sam Altman friend of the pot come on all in any time and has played in our poker game several times makes sense yes we we had a tough situation there where you interfered in the hand if you remember uh all right listen this is what happened there was a Sam and I were in a hand of Poker he raised I had two pair and I'm trying to figure out does he have a set or is he bluffing me I think he's got top pair and you were like oh look at this and you started commenting on the hand oh my God I haven't made the call or not yet oh my God and I'm like for my La Bouche let's let's stop talking here because I'm trying to I'm playing I'm like okay Sam would get and I basically came to the conclusion Sam would get to like great Delight bluffing me off a hand he's a risk taker he knows I'm conservative he knows he's a risk taker I'm gonna call here with my I had bottom two how much does he have a set and there was also a stray on the board I'm like [ __ ] it I I I at best I'm you know even money here uh but there was a lot in the pot so I was just doing the pot odds while I'm doing the pot odds you were like hey which is usually I'm usually want to be reprimanded for talking right Dad but it was notable all right listen love you besties why don't you tell people that there's no comments and uh just as a programming note we turned off comments for a couple of weeks on the YouTube just to see how it psychologically affects me and it's for jamaat to just f with all you brigadooners we love you uh uh besties this has been a great episode two great uh and his uh Twitter is at chamoth and he does it read it just so everyone listening no sax and I voted against turning off comments just just I voted in favor of whatever got uh chamat's vote for the all assignment 23. so that's how I vote this is for horse trading now but the podcast has never been better besties spending time together on the slopes is the cure to all evils we'll see you next time love you back bye bye love you guys bye bye let your winners ride Rain Man [Music] we need to get Mercies [Music]








is anybody else seeing a half a second lag with jaycal or like a second line test test one two one two from like the way his mouth moves well that always happens oh God here it comes his mouth never stops moving black sex relaxed sex are we going are we recording are you ready to go this is a plus material all right let's go this is Chappelle at the punch line let's go let's go [Music] [Music] all right everybody Welcome to episode 111 of the world's greatest podcasts according to slate the podcast that shall not be mentioned by the Press apparently you know what do you mean they just did a profile on us well they did this is the conundrum it's so much of a phenomenon that we're the number one business and the number one Tech podcast in the world hands down that the Press has a hard time giving us any Oxygen because they want to hate us they want to cover it you're saying they take the ideas but not the they don't want to cite it they don't want to cite it they don't want to cite it but anyway shout out to Slade yeah what I thought was interesting was the guy pointed out that we don't want to subject ourselves to Independent journalists asking us independent questions therefore we go direct and that that's kind of the the thing nowadays when everyone says they want to go direct it's because they don't want to be subject to Independent journalists well one might ask themselves why subjects don't want to go direct yeah exactly you mean don't want to go to journalists yeah because it there's a there's a specific reason why principles the subject of stories do not want to have the Press interpret what they're saying is because they don't feel they're getting a fair shake they feel like the challenge is that then we avoid independent scrutiny of our points of view and our decisions they're constantly writing hip pieces about us the the question is when we want to present our side of it do we need to go through their filter or not why would you go through their filter when it's always going to be a hit piece right well I mean they have a class hatred of basically of Technology entrepreneurs and investors you're right Jake how they don't hate you because you genuflect to their political biases you see if if you do if you do what SPF did which is basically agree with all of their biases then yes they'll treat you better that's the deal that's how it works a specific large media outlets right she's not referring to Fox News okay you can name one I'll trade you I'll tell you what I'll trade you fox for MSNBC and CNN and the New York Times The Washington Post and the Atlantic Magazine on and on and on you get a lot of mileage out of being able to name Fox the fact of the matter is Megan Callie that's a podcaster she's independent now that's true you can name one I mean literally one Outlet that is not part of this you know mainstream media and they all think the same way there are very small differences the way they think that's true it's all about clicks uh at this point and it's all about journalism and advocacy well you're calling advocacy is bias and activism it's activism it's that's what I'm talking about activism journalism yes I think the Draymond also highlights a really important point which is you know he started his podcast it's become one of the most popular forms of sports media and he can speak directly without the filtering and you know classification that's done by the you know journalist and it seems to be a really powerful Trend the audience really wants to hear direct and they want to hear unfiltered Raw point of view and there and maybe there's still a role for I think the journalism separate from that which is to then scrutinize and analyze and question and it's not journalism to activism they're just activists there are also journalists out there sites right so actually well it depends what the topic is and what the outlet is right but I I actually I would argue that most of these journalists are doing what they're doing for the same reason that we're doing what we're doing which is they want to have some kind of influence because they don't get paid very much right but the way they have influence is to push a specific political agenda I mean they're activists they're basically artists become advocacy journalism yes that's the term I coin for it it's advocacy you guys see this brouhaha where Matt Iglesias wrote this article about the fed and about the debt ceiling and through this whole multi-hundred word thousand word tome he didn't understand the difference between a percentage point and the basis points yeah I did see that yeah wow so wait a second you're saying the fed's raising 25 percent that's a huge difference between my mortgage is coming up 25 between a principal and an outside analyst right like a principal has a better grasp typically of the topic than the material but you know the argument within the journalist Circle he's considered the conventional wisdom I get it but the argument from a journalist is that by having that direct access that person is also biased because they're an agent because they're a player on the field they do have a point of view and they do have a Direction they want to take things so it is a fair commentary that journalists can theoretically play a role which if they're an off-field analyst and that don't necessarily bring I would argue they're less educated and more biased than we are that may or may not be true what the two of you guys are debating which is a very subjective take but the thing that is categorical and you can't deny is that there is zero checks and balances when something as simple as the basis point percentage Point difference isn't caught in proofreading isn't caught by any editor isn't taught by the people that you know help them review this and so what that says is all kinds of trash must get through because there's no way for the average person on Twitter to police all of this nonsensical content this one was easy because it was so numerically illiterate that it just stood out but can you imagine the the number of unforced Errors journalists make today in their search for clicks that don't get caught out that may actually tip somebody to think a versus B that's I think the thing that's kind of undeniable right yeah there's a very simple test for this if you read uh the journalists writing about a topic you are an expert on whatever the topic happens to be you start to understand okay well on that story I'm reading that they understand about 10 or 20 or 30 percent of what's going on but then when you read stories that you're not involved in you know you read a story about Hollywood or I don't know pick an industry or a region you're not super aware of you're like okay well that must be 100 correct and the truth is journalists have access to them there is a name for it yeah it's called the Gelman Amnesia effect you just plagiarize Michael Crichton who came up with that yeah so you yeah no it's exactly right but I think it's worse than that it's because now the now the mistakes aren't being driven just by sloppiness or laziness or just a lack of expertise I think it's being driven by an agenda so just to give you an example on the Slate thing the Slate article actually wasn't bad it kind of made us seem you know cool the sub headline was a close listen to all in the infuriating fascinating safe space for silicon Valley's money men okay but the the headline changed so I don't know if you guys noticed this the headline now is Elon musk's Inner Circle is telling us exactly what it thinks first of all like they're trying for clicks yeah so they're trying way too hard to like describe Us in terms of Elon which you know is maybe two episodes out of 110 but before inner circle the word they used was cronies and then somebody edited it because I saw cronies in like one of those tweet you know summaries you know where like it does a capsule or whatever yeah yeah and those get Frozen in time so you know they were trying to bash us even harder and then somebody took another look at it and turned it down I'll tell you what happens in the editorial process whoever writes the article the article gets submitted maybe it gets edited proof read whatever maybe it doesn't even in some Publications they don't have the time for it because they're in a race then they pick there's somebody who's really good at social media they pick six or seven headlines they a B test them and they even have software for this where they will run a test sometimes they'll do a pay test they put five dollars in ads on social media whichever one performs the best that's the one they go with so it's even more cynical and because people who read the headlines sometimes they don't read the story right obviously most people just see the headline they interpret that as a story that's why I told you when they did that new Republic piece on you with that horrific monstrous monstrosity of an illustration don't worry about it people just read the headline they know you're important nobody reads the story anyway no but it wasn't a bad article actually it was well written actually I was in shock I was like who is this writer that actually took the time to write some prose that was actually decent yeah he had listened to a lot of episodes clearly that was a really good moment actually that was great advice because you gave it to him and you gave it to me because both of us had these things and Jason said the same thing just look at the picture and if you're okay with the picture just move on and I thought this can't be true and it turned out to mostly be true yeah but my picture was terrible yeah but it's close to reality oh wow but that just shows how ridiculously biased it is right Hugh Grant Elon let's pull that up one more time here Elon looks like Hugh Grant that's just kind of he does kind of not bad kind of looks like Hugh Grant and like Notting Hill I knew that article was going to be fine when the first you know item they presented as evidence of me doing something wrong was basically helping to oust chase a boudin which was something that was supported by like 70 of San Francisco yeah which is a 90 Democratic City so not exactly evidence of some you know right-wing movement look at the headline the quiet political rise of David sacks silicon Valley's prophet of urban Doom I'm just letting you know people don't get past the sixth word in the image yeah that's 99 of people are like oh my God congrats on the you know Republic article it could have literally been Laurel what do they call them uh Laurel lipsums you know like it could have just been filler words from their second graph down and nobody would know yeah but now apparently if you notice that San Francisco streets look like you know Walking Dead that apparently you're a prophet of urban do I mean people are so out of touch I mean they can't even acknowledge what people can see with their own eyes that's the bias that's gotten crazy and I don't know if you guys saw this really horrible dystopian video of an art gallery owner who's been dealing with owning a storefront in San Francisco which is challenging and having to clean up feces and you know trash and whatever uh every day and I guess the guy snapped and he's hosing down a homeless person who refuses to leave the front of a store oh I saw that I saw just like the humanity in this is just insane like really like you're hosing a human being down it's terrible who is obviously not living a great life and is you know I can feel for both of them I agree that it's not good to hose a human being down on the other hand think about the sense of frustration that store owner has because he's watching his business go in the toilet because he's got homeless people living in front of him so they're both like being mistreated the homeless person say more the the homeless person is being mistreated the Stormer is being mistreated by the city of San Francisco yeah is not in a privileged position that person probably the store owner the store owner he's probably fighting to stay in business I'm just saying I'm not saying that's right but no no I'm laying the Rope you're trying to do what you're trying to do is oh my God look at this this homeless person being horribly oppressed no that store owner is a victim too oh yeah there's no doubt it's horrible to run a business what is that person supposed to do no wait this is this is symbolic of the breaking down of basic Society like these both of these people are obviously like it's just a horrible moment to even witness it's like oh he it's like something Jason do you have equal empathy for the store owner and the homeless person or no under no circumstances should you hose a person down in the face who is homeless like it's just horrific to watch it's just inhumane this is a human being now but as a person who owns a store yeah my dad grew up in the local business if people were abusing The Story You're trying to make a living and you've got to clean up you know whatever excrement every day which is terrific yes and this is dystopian look in that moment the empathy is not equal I think you have more empathy obviously for the person on the receiving end of that hose okay but in general our society has tons of empathy for homeless people we spend billions of dollars trying to solve that problem you never hear a thing about the store owners who are going out of business so on a societal level you know not in that moment but in general the lack of empathy is for these middle class store owners who may not be middle class working class who are struggling to stay afloat and you look at something like what is it like a quarter or a third of the store fronts instead Francisco are now vacant the city yes this person is running the shocking thing is like this person is running an art gallery storefront in San Francisco like why would you even bother why would you bother to have a storefront in San Francisco I mean everybody's left it's just what do you mean why do you bother if you soap into stores so what are you supposed to start to code all of a sudden well no I mean you would shut it down at some point and find an exit and do it has large fixed costs right 10 years ago exactly at some point you have to shut down your story in San Francisco the second you can get out of the solution to everything jcal isn't go to coding school online and then you know I didn't say it was I'm just but moving to another city is a possibility oh true a lot of folks in Silicon Valley I think in this weirdly [ __ ] up way do believe the solution to everything is learn to code or it's an Uber driver yeah get a gig job get a gig years the guy spent years building his retail business I mean the thing is English person camps in front and the homeless and he calls the the police the police don't come and move the homeless person the homeless person stays there he asks nicely to move customers are uncomfortable going into store as a result yeah I stopped going to certain stores in my neighborhood because of homeless tents being literally fixated in front of the store and I go to the store down the road to get my groceries or whatever like I mean it's not a kind of uncommon situation for a lot of these small business owners they don't own the real estate they're paying rent uh they've got high labor costs you know everything's inflating generally city populations declining it's a brutal situation all around I think if everybody learns to code or drives an Uber the problem is that in the absence of things like local stores and small businesses you hollow out communities you've got these random detached places where you kind of live and then you sit in your house which becomes a prison while you order food from an app every day I don't think that is the society that people want so I don't know I kind of want small businesses to exist and I think that the homeless person should be taken care of but the small business person should have the best chance of trying to be successful because it's hard enough as it is the the mortality rate of the of the small business owner is already 90 percent it's impossible in San Francisco let's just be honest I'm not trying to push people listen yeah you are because here here's something I'm saying the guy I'm just shocked that the guy even has a storefront I would have left alone you're showing a tweet that's a moment in time and you're not showing the 10 steps that led up to it oh a thousand steps five times he called the police station customers the stuff that free burgers were just talking about or maybe there was physical conflict that we didn't see in that you know and he's resolving it man it's really hard to look at these videos and know what's going on it's awful to see but man we don't know it's the whole thing actually you want to know another reason why we can't solve this problem this is the language we use around it the fundamental problem here is not homeless no it's addiction it's addiction because and it's mental illness shellenberger's done the work it's like he said 99 of the people he talks to it's either mental illness or addiction but we keep using this word homeless to describe the problem right but the issue here is not the lack of of housing although that's a separate at problem in California but it's basically the lack of of treatment totally so we should be calling them treatmentless and mandates around this because and enforcement you you cannot you can't have a super drug be available for a nominal price and give people you know a bunch of money to come here and take it and not enforce it you have to draw the line that's at fentanyl I'm sorry fentanyl is a super drug there's three Alternatives is mandated rehab mandated mental health uh or jail or you know Housing Services if you're not breaking the law you don't have mental illness you don't have drug addiction and then provide those are the four Paths of outcome here of success and if all four of those paths were both mandated and available in abundance this could be a attractable problem unfortunately the man the Mandate I mean you guys remember that Kevin Bacon movie where Kevin Bacon was locked up in a mental institution but he wasn't like he wasn't mentally ill it's a famous story you guys someone's probably gonna call me an idiot for for messing this whole thing up but I think um there's a there's a story where mandated Mental Health Services like locking people up to take care of them when they have mental uh mental health issues like this became kind of inhumane and a lot of the institutions were shut down and a lot of the laws were overturned and there are many of these cases that happened where they came across as like torturous to what happened to people that weren't mentally ill and so the idea was like let's just development yeah well that's another one right and it's unfortunate but I think that there's some you know we talk a lot about nuance and gray areas but there's certainly some solution here that isn't black or white it's not about not having mandated Mental Health Services and it's not about locking everyone up that has some slight problem but there's some solution here that needs to be crafted uh where you know you don't let people suffer and you don't let people suffer both as the the victim on the street but also talking about a 5150 I think like when people are held but because they're a danger to themselves or others kind of thing right but Jacob think about the power of language here if we refer to these people as untreated persons instead of homeless persons and that was the coverage 24 7 in the media is this is an untreated person the whole policy prescription would be completely different we'd realize there's a shortage of treatment we'd realize there's a shortage of Remedies related to getting people in treatment as opposed to building housing but why why and laws that mandate it that don't enable it because if you don't mandate it then you enable the free reign and the free living on the street and the open drug markets and all this sort of stuff there's a really easy test for this if it was if it was yourself and you were addicted or if it was a loved one it's one of your immediate family members would you want yourself or somebody else to be picked up off the street and held with a 5150 or whatever code involuntarily against their will because they were a danger would you want them to be allowed to remain on the street would you want yourself if you were in that Dire Straits and the answer of course is you would want somebody what's interesting policy perspective on this Jake house so let me ask you as our uh our Die Hard liberal on the show no I'm not a die-hard liberal no no he's an independent only votes for Democrats please get it right 75 of the time I voted Democrat 25 right independent of us are Democrats okay 25 Republicans is it not that your individual liberties are infringed upon if you were to be quote picked up and put away you know my position on it is if you're not thinking straight uh you're in you're high on fentanyl you're not thinking for yourself and you you could lose the liberty for a small period of time 72 hours a week you know especially if you're a danger to somebody you know yourself or other people and in this case if you're on fentanyl if you're on meth you're you're a danger I mean I think if more I think if some people have that if more people have that point of view and have that debate as sax is saying in a more open way you could get to some path to resolution on just not in San Francisco it's not how it happened so you guys know this we won't say who it is but someone in my family has some pretty severe mental health issues and the problem is because they're an adult you can't get them to get any form of treatment whatsoever right right do you only have the nuclear option and the nuclear option is you basically take that person to court and try to seize their power of attorney which is essentially saying that you know individual liberties are gone yeah and by the way it is so unbelievably restrictive what happens if you lose that power of attorney and somebody else has it over you it's just a huge burden that the legal system makes extremely difficult and the throttle law is a backstop you know if the person's committing something illegal like camping out or doing fentanyl math whatever you can use the law as the backstop you know all that person can do is really get arrested even that is not a high enough bar to actually get power of attorney over somebody the other thing that I just wanted you guys to know I think you know this but just a little historical context is a lot of this crisis in mental health started because Reagan defunded all the psychiatric hospitals he emptied them in California and that compounded because for whatever reason his ideology was that these things should be treated in a different way and when he got to the presidency one of the things that he did was he repealed the mental health I think it's called the mental health systems Act mhsa which completely broke down some pretty Landmark legislation on mental health and it's and I don't think we've ever really recovered and that we're now 42 years onward from 1980 but or 43 years onward but just something for you guys to know that that's that's well that breaking had a lot of positives yeah but that's one definitely negative check in my book against his legacy is his stance on Mental Health in general and what he did to defund mental health well let me let me make a couple two points there so I'm I'm not defending that specific decision there were a bunch of scandals in the 1970s and epitomized by the movie One Flew Over the Cuckoo's Nestle Jack Nicholson about the conditions in these mental health homes and that did create a Groundswell to change laws around that but I think this idea that like somehow Reagan is to blame when he hasn't been in office for 50 years as opposed to the politicians who've been in office for the last 20 years I just think it's letting them off the hook I mean Gavin Newsom 10 15 years ago when he was mayor of San Francisco declared that he would end homelessness within 10 years he just made another declaration like that as Governor so I just feel like not saying it's Reagan's fault I'm just saying it's an interesting historical moment I think it's letting I think it's letting the politics Society needs to start thinking about changing priorities we didn't have this problem of massive numbers of people living on the streets 10 15 years ago it was a much smaller problem and I think a lot of it has to do with fentanyl the power of these drugs is increased yes massively there's other things going on here so in any event I mean you can question what Reagan did in light of current conditions but I think this problem really started in the last 10 15 years yes like in in an order of magnitude bigger way these are super drugs until people realize like these are a different class of drugs and they start treating them as such it's gonna just get worse as far as I know Reagan didn't hand out to these addicts 800 a week to feed their addiction so they can live on the street San Francisco that is the current policy of the city all I just wanted to just provide was just that color that we had a system of funding for the mental health infrastructure particularly local mental health infrastructure and we took that back and then we never came forward and all I was saying is I'm just telling you I think that's part of the solution here is yeah we're going to have to basically build up shelters we're going to build up and support the problem now for example is Gavin Newsom says a lot of these things and now he's gone from a massive Surplus to a 25 billion dollar deficit overnight which we talked about even a year ago because that was just the the law of numbers catching up with the state of California and he's not in a position now to do any of this stuff so this one this problem may get worse well they did they did appropriate I forget the number it's like 10 billion or something out of that you know huge budget they had to solve the problem of homelessness so I would just argue they're not tackling it in the right way because what happened is there's a giant special interest that formed around this problem which is the the building industry who gets these contracts to build the quote you know affordable housing or this industrial complex so they end up building 10 units at a time on Venice Beach like the most expensive land you could possibly build because you get these contracts from the government so there's now a giant special interest in lobby that's formed around this if you really want to solve the problem you wouldn't be building housing on Venice Beach you'd be going to cheap land just outside the city totally and you'd be building scale shelters I mean shelters that can house 10 000 people not ten and you'd be having treatment services but with treatment built into them right you'll be solving this problem at scale and that's not what they're doing by the way do I do you guys want to hear it this week in grift oh sure we're all in that's a great example of grift I um I read something today in Bloomberg that was unbelievable there's about two trillion dollars of debt owned by the developing world that has been classified by a non-profit The Nature Conservancy in this case as eligible for what they called nature swaps so this is two trillion of the umpteen trillions of debt that's about to get defaulted on by come countries like Belize Ecuador Sri Lanka Seychelles you name it and what happens now are the big bulge bracket Wall Street Banks and The Nature Conservancy goes to these countries and says listen you know you have a billion dollar tranche of debt that's about to go upside down and you're going to be in default with the IMF we'll let you off the hook and you know we will negotiate with those bondholders to give them 50 cents on the dollar but in return you have to promise to take some of that savings and you know protect the rain forest or protect a coral reef or protect some mangrove trees all sounds good except then what these folks do is they take that repackage debt they call it ESG they mark it back up and then they sell it to folks like BlackRock who have decided that they must own this in the portfolio so it literally just goes from one sleeve of BlackRock which is now marked toxic Emerging Market debt and then it gets into someone's 401K as ESG debt is that unbelievable so you convert your signal and buy some ESG to make yourself feel good yeah two trillion dollars ESG is that Exxon is like the number seven like top ranked company according to ESG and Tesla is even on the list disastrous how crazy is that it's it's a complete game yeah all of those that we've said this many times but each of those letters individually means so much and should be worth a lot to a lot of people but when you stick them together it creates this toxic soup where you can just hide the cheese yeah I mean governance is important in companies of course the environment is important social change is important I mean but why are these things grouped together in this it just perverts it's an industry Jacob it's an industry absolutely all right Speaking of Chris um Microsoft is going to put 10 billion dollars or something into chat GPT degenerate AI as I'm calling it now is uh the hottest thing in soccer Valley the technology is incredible I mean you you can question the business model maybe but the technology is pretty well I mean yeah so what I'd say is a 29 billion dollars for a company that's losing a billion dollars on Azure credits a year that's one way to work at it that's also look at a lot of other businesses that ended up being worth a lot down the road I mean sure you can model out the future of a business like this and create a lot of really compelling big outcomes you know potentially yeah so Microsoft is close to investing 10 million and open AI in a very convoluted transaction that people are trying to understand it turns out that they might wind up owning 59 of open AI but get 75 percent of the cashing properties back over time 49 49 yeah of open AI but they would get paid back the 10 million dollars over some amount of time and this obviously includes Azure credits uh and chat GPT as everybody knows this um just incredible demonstration of what AI can do in terms of text-based creation of content and answering queries is taken the net by storm people are really inspired by it sax do you think that this is a defensible real technology do you think this is like a crazy hype cycle well it's definitely the next VC hype cycle everyone's kind of glomming on to this because VC really right now needs a savior just look at the public markets everything we're investing in is in the toilet so we all really want to believe that this is going to be the next wave and just because something is a vce hype cycle doesn't mean that it's not true so as I think one of our friends pointed out you know mobile turned out to be very real I think cloud turned out to be I'd say very real social was sort of real in the sense that did lead to a few big winners on the other hand web 3 and crypto was a hype Cyclone it's turned into a big bust VR falls into the hype cycle it's probably a hype cycle so far no one can even explain what web3 is in terms of AI I think that if I had to guess I would say the hype is real in terms of its technological potential however I'm not sure about how much potential there is yet for VCS to participate because right now it seems like this is something that's going to be done by really big companies so open AI is basically a it looks like kind of a Microsoft proxy you've got Google I'm sure will develop it through their deep mine asset you know I'm sure Facebook is going to do something huge in AI so what I don't know is is this really a platform that starts gonna be able to benefit from I will say that some of the companies we've invested in are starting to use these tools so I guess I guess where I am is I think the technology is actually exciting I wouldn't go overboard on the valuations so I wouldn't buy into that level of the hype but you think there could be hundreds of companies built around an API for something like chat gbt Dolly maybe yeah I don't I don't think startups are going to be able to create the AI themselves but they might be able to benefit from the apis maybe that's the thing that has to be proven out there's a lot of really fantastic machine learning services available through Cloud vendors today right so as there has been one of these kind of vendors and uh obviously open AI is building tools a little bit further down on the the stack but there's a lot of tooling that can be used for specific vertical applications obviously the acquisition of instabeat by bioentec is a really solid example and most of the big dollars that are flowing in biotech right now are flowing into machine learning applications where there's some vertical application of machine learning tooling and techniques around some specific problem set and the problem set of mimicking human communication and doing generative media is a consumer application set that has a whole bunch of really interesting product opportunities but let's not kind of be blind to the fact that nearly every other industry and nearly every other vertical is being transformed today and there's active progress being made in funding and getting liquidity on companies and progress with actual products being driven by Machine learning systems and there's a lot of great examples of this so you know the fundamental capabilities of large data sets and then using these kind of learning techniques in software and statistical models to make kind of predictions and drive businesses forward in a way that they're not able to with just human knowledge and human capability alone is really uh real and it's here today and so I think let's not get caught up in the fact that there's this really interesting consumer Market hype cycle going on where these tools are not being kind of you know validated and generating real value across many other verticals and segments when you look at this Microsoft open aidl and you see something that's this convoluted hard to understand what does that signal to you as a capital allocator and Company Builder I would put deals into two categories one is easy and straightforward and then two is you know cute by half or you know the two heart bucket this is clearly in that second category but it doesn't mean that is it in that category well it doesn't mean that it won't work in our group chat with the rest of the guys one person said there's a lot of complex law when you go from a non-profit to a for-profit there's lots of complexity in Deal construction the original investors have certain things that they want to see there may or may not be you know legal issues at play here that you encapsulated well in the last episode I think there's a lot of stuff we don't know so I think it's important to just like give those folks the benefit of the doubt but yeah if you're asking me it's in the too hard bucket for me to really take seriously now that being said it's not like I I got shown the deal so I can't I can't comment here's what I will say the first part of what Sac said I think is really important for entrepreneurs to internalize which is where can we make money the reality is that well let me just take a prediction I think that Google will open source their models because the most important thing that Google can do is reinforce the value of search and the best way to do that is to Scorch the Earth with these models which is to make them widely available and as free as possible that will cause Microsoft to have to catch up and that will cause Facebook to have to really look in the mirror and decide whether they're going to cap the betting that they've made on AR VR and reallocate very aggressively to AI I mentioned this in the I did this Lex Friedman podcast but that should be what Facebook does and and the reason is if Facebook and Google and Microsoft have roughly the same capability in the same model there's an element of machine learning that I think is very important which is called reinforcement learning and specifically it's reinforcement learning from Human feedback right so these rlhf pipelines these are the things that will make your stuff unique so if you're a startup you can build a reinforcement learning pipeline how you build a product that captures a bunch of usage we talked about this before that data set is unique to you as a company you can feed that into these models get back better answers you can make money from it Facebook has an enormous amount of reinforcement learning inside of Facebook every click every comment every like every share Twitter has that data set Google inside of Gmail and search Microsoft inside of Minecraft and Hotmail so my point is David's right the huge companies I think will create the substrates and I think they'll be forced to Scorch the Earth and give it away for free and then on top of that is where you can make money and I would just encourage entrepreneurs to think where is my Edge in creating a data set that I can use for reinforcement learning that I think is interesting that's kind of saying I buy the ingredients from the supermarket but then I can still construct a dish that's unique and you know the salt is there the pepper is there but how I use that will determine whether you like the thing or not and I think that you know that is the way that I think we need to start thinking about it interestingly as we've all pointed out here open AI was started as a non-profit the stated philosophy was this technology is too powerful for any company to own therefore we're going to make it open source and then somewhere in the last couple years they said well you know what actually it's too powerful for it to be out there in the public we need to make this a private company and we need to get 10 billion dollars from Microsoft that is the the disconnect I am trying to understand that's the most interesting part of the story Jason I think if you go back to 2014 is when Google bought deepmind yeah and immediately everyone started reacting to a company as powerful as Google having a toolkit and a team as powerful as deepmind within them and that that sort of power should not sit in anyone's hands I heard people that I'm close with that are close to the organization and the company comment that they thought this is the most kind of scary threatening biggest threat to humanity uh is Google's control of deep mind and that was a naive kind of point of view but it was one that was close that was deeply held by a lot of people so Reid Hoffman Peter Thiel Elon Musk a lot of these guys funded the original kind of open AI business in 2015 and here's the link so I'm putting it out here um you guys can pull up the original blog post do all those don't people who donated get stock it was all in a non-profit and then the non-profit owned stock in a commercial business now but your point is interesting because at the beginning the idea was instead of having Google on all of this we'll make it all available and here's the the statement from the original blog post in 2015 open AI is a non-profit AI research company our goal is to advance digital intelligence in the way that is most likely to benefit Humanity as a whole unconstrained by a need to generate Financial return since our research is free from Financial Obligations we can better focus on a positive human impact and they you know kind of went on and the whole thing about Sam Greg Elon Reed Jessica Peter Thiel AWS YC are all donating to support open AI including donations and commitments of over a billion dollars although we expect that to only be a tiny fraction of what we will spend in the next few years which is a really interesting kind of if you look back historical perspective on how this thing all started seven years ago and how quickly it's evolved as you point out into the necessity to have a real commercial alignment to drive this thing forward without seeing any of these models open sourced and during that same same period of time we've seen Google share Alpha fold and share a number of tensorflow predictive models and and Tool kits and make them publicly available and put them in Google's cloud and so there's both kind of tooling and models and outputs of those models that Google has open sourced and made freely available and meanwhile openai has kind of diverged into this deeply profitable profit-seeking kind of Enterprise model and when you invest in open AI in the round that they did before you could generate a financial return capped at 100x which is still a pretty amazing Financial return you put a billion dollars in you can make 100 billion dollars that's that's funding a real commercial Endeavor at that point well and then to it is the most striking question about this whole thing about what's going on in our Ai and it's one that elon's talked about publicly and others have kind of sat on one side or the other which is that AI offers a glimpse into one of the biggest and most kind of existential threats to humanity and the question we're all going to be tackling and the battle that's going to be happening politically and Regulatory wise and perhaps even between nations in the years to come is who owns the AI who owns the models what can they do with it and what are we legally going to be allowed to do with it and this is a really important part of that story yeah to build on what you're saying I just put in pie torch people don't know that's another framework uh p-y-t-o-r-c-h this was you know largely built inside of Facebook and then Facebook said hey we want to democratize machine learning and they made and I think they put a bunch of Executives they may have even funded those Executives to go work on this open source project so they have a huge stake in this and they went very uh open source with it and then tensorflow which you have an investment in Tremont tensorflow was inside I don't I don't have a investment in tensorflow we've no tensorflow the public Source came out of Google and then you invested in another company but we we're building silicon for machine learning that's different right but it's based on tensorflow no no no no no it the the the founder of this company was the founder of tensorflow oh got it okay all right no sorry not a tensorflow part of me of the of TPU which was Google's internal silicon that they built to accelerate tensorflow right if that makes sense and so that's the I you know I don't mean to be cynical about the whole project or not it's just the confounding part of this of what is happening here it reminds me I don't know if you remember this the biggest opportunity to hear the biggest opportunity here is for Facebook I mean they need to get in this conversation ASAP I mean to to think that like look pytorch was like a pretty seminal piece of technology that a lot of folks in in Ai and machine learning were using for a long time tensorflow before that and what's so funny about like Google and Facebook is they're a little bit kind of like they're not really making that much progress I mean Facebook released this kind of like Rando version of alpha fold recently it's not that good I think these companies really need to get these products in the wild as soon as possible it cannot be the case that you have to email people and get on some list I mean this is Google and Facebook guys come on this is the I think the big innovation of open AI sax to bring you in the conversation they actually made an interface and let the public play with it to the tune of three million dollars a day in Cloud credits or costs which by the way just on that my my son was telling me he's like hey Dad do you want me to tell you when the best time to use chat gbt is I'm like huh he's like yeah my friends and I have tried we've been using it so much we know now when we can actually get resources oh wow and it's such an interesting thing where like a 13 year old kid knows you know when it's mostly compute intensive that it's unusable and when to come back and use it when's the last time Sachs a technology became this mainstream and captured people's imagination this broadly maybe the iPhone or something yeah yeah look it's it's powerful there's there's no question it's powerful I mean I I'm of two minds about it because whenever something is the hype cycle I just reflexively want to be skeptical of it but on the other hand we have made a few investments in this area and I mean I think it is powerful and it's it's going to be an enabler of some really cool things to come there's no question about it I have two pieces of more Insider information uh one I have a chat GPT IOS app on my phone one of the nice Folks at openai included me in the test flight and it's the simplest interface you've ever seen but basically you type in your question but it keeps your history and then you can search your history so it looks sacks like you're in iMessage basically and it has your threads and so I asked them hey what are the best restaurants in yawnville yeah a town near um Napa and then I said which one has the best duck and it literally like gave me a great answer and then I thought wait a second why is this not using a Siri or alexa-like interface and then why isn't it oh here's a video of it I gave the video to Nick by the way Jason this what you're doing right now is you're creating a human feedback reinforcement learning pipeline for chat GPT so just the fact that you asked that question and you know over time if chat GPT has access to your GPS information and then knows that you went to restaurant a versus B they can Intuit and it may actually prompt you to ask hey Jason we noticed you were in the area did you go to Bottega if you did how would you rate it one through five that reinforcement learning now allows the next person that asks what are the top five restaurants to say well you know over a thousand people that have asked this question here's actually the best answer versus a generic rank of the open web which is what the first data set is that's what's so interesting about this so this is why if you're a company that already owns the eyeballs you have to be running to get this stuff out there well and then this answer uh and you know cited Yelp well this is the first time I've actually seen chat GPT site and this is I think a major legal breakthrough it didn't put a link in but if it's going to use yelp's data I don't know if that permission for me out but it's quoting Yelp here it should link to French Laundry Bottega and Bouchon Bouchon actually has the best confit for the record and I did have that duck so I asked this afterwards to see you know in a scenario like this but it could also if I was talking to it I could say hey which one has availability this afternoon or tomorrow for dinner and make the phone call for me like Google Assistant does or any number of I was thinking about next tasks this was an incredibly powerful display in a 1.0 product I was thinking about what you said last week and I thought back to the music industry in in the world of Napster and what happened was there was a lot of musicians I think Metallica being the most famous One famously suing Napster because it was like Hey listen like you're allowing people to take my content which they would otherwise pay for there's economic damage that I could measure that legal argument was meaningful enough that ultimately Napster was shut down now there were other versions of that that folks created including us at Winamp we created a headless version of that but if you translate that problem set here is there a claim that Yelp can make in this example that they're losing money that you know if you were going through Google or if you're going through their app there's the sponsored link revenue and the advertising Revenue that they would have got that they wouldn't get from here now that doesn't mean that chat GPT can't figure that out but it's those kinds of problems that are going to be a little thorny in these next few years that have to really get figured out reading every review on Yelp about duck then you could write a blog post in which you say many reviewers on Yelp say that Bouchon is the best doc so the question is like is GPT held to that standard or exactly or something different and as linking to it is linking to it enough this is the question that I'm asking I don't know it should be because I'll argue it should be because if you look at the four-part test for fair use which I had to go through because blogging had the same issue we would write a blog post and we would mention Walt mossberg's review of a product in somebody else's and then people would say oh I don't need to read Walt mossberg's in need of Wall Street Journal subscription and we say well we're doing an original work we're comparing two or three different you know human is comparing two or three different reviews and we're adding something to it it's a you know it's not a uh it's not interfering with Walt mossberg's ability to get subscribers in the Wall Street Journal but the effect on the potential Market is one of the four tests and uh just reading from Stanford's uh quote on fair use another important fair use factor is whether you're used deprives the copyright owner of income or undermines a new or potential market for the copyrighted work depriving a copyright owner of income is very likely to trigger a lawsuit this is true even if you are not competing directly with the original work and we'll put the link to Stanford here this is the key issue and I would not use Yelp in this example I would not open the Yelp app Yelp get no Commerce can Yelp would lose this so chat GPT and all these Services must use citations of where they got the original work they must link to them and they must get permission that's where this is all going to shake out but forget about permission I mean you can't get a big enough data set if you have to get permission in advance right yeah it's it's going to be the large data sets quora Yelp the App Store reviews Amazon's reviews so there are large corpuses of data that you would need like Craigslist has famously never allowed anybody to scrape Craigslist the amount of data inside Craigslist as but one example of a data set would be extraordinary to build chat GPT on chatgpt is not allowed to because as you brought up robots.txt last week there's going to need to be an ai.txt are you allowed to use my data set in Ai and under and how will I be compensated for it I'll allow you to use Craigslist but you have to link to the original post and you have to note that the other gray area that isn't there today but may emerge is when section 230 gets Rewritten because if they take the protections away for the Facebook and the Googles of the world for the basically for being an algorithmic publisher and saying an algorithm is equivalent to a publisher what it essentially saying is that an algorithm is kind of like doing the work of a human in a certain context and I wonder whether that's also an angle here which now this algorithm which today David you use you said the example I read all these blog posts I write something but if an algorithm does it maybe can you then say no actually there was intent there that's different than if a human were to do it I don't know my point is very complicated issues that are going to get sorted out and I think the problem with the hype cycle is that you're going to have to marry it with an economic model for VCS to really make money and right now there's just too much betting on the come so to the extent you're going to invest it makes sense that you put money into open AI because that's safe because the economic model of how you make money for everybody else is so unclear right oh it's clear actually I have it for business I just signed up for chat GPT premium they had a survey that they shared on their Discord server and I filled out the survey and they did a price Discovery survey uh Freeburg what's the least you would pay the most you would pay what would be too cheap of a price for chat GPT Pro and what would be too high of a price I put in like 50 bucks a month was would be what I would pay but I was just thinking imagine chat gbt allowed you Friedberg to have a slack Channel called research and you could go in there or anytime you're in slack you do slash chat or slash chat GPT and you say slash chatgpt tell me you know what are the venues available in which we did this actually for I did this for values for on summer I could say what are the venues that seat over 3 000 people in Vegas and it just gave us the answer okay well that was the job of uh of the local event planner they had that list now you can pull that list from a bunch of different sources I mean what would you pay for that a lot well I think one of the big things that's happening is all the old business models don't make sense anymore in a world where the software is no longer just doing what it's done for the last 60 years which is what is historically defined as information retrieval so you have this kind of hierarchical storage of data that you have some index against and then you go and you search and you pull data out and then you present that data back to the customer or the user of the software and that's effectively been how all kind of data has been utilized in all systems for the past 60 years in Computing largely what we've really done is kind of built an evolution of application layers or software tools to interface with the fetching of that data the retrieval of that data and the display of that data but what these systems are now doing what AI type systems or machine Learning Systems now do is the synthesis of that data and the representation of some synthesis of that data to you the user in a way that doesn't necessarily look anything like the original data that was used to make that synthesis and that's where business models like a Yelp for example or like a web crawler that crawls the web and then presents web page directories to you those sorts of models no longer make sense in a world where the software the signal to noise is now greater the signal is greater than the noise in being able to present to you a synthesis of that data and basically resolve what your objective is with your own consumption and interpretation of that data which is how you historically use these systems and I think that's where there's you know going back to the question of the hype cycle I don't think it's about being a hype cycle I think it's about the the investment opportunity against fundamentally rewriting all compute tools because if all compute tools ultimately can use this capability in their interface and in their modeling then it very much changes everything and one of the advantages that I think businesses are going to latch onto which we talked about historically is novelty in their data in being able to build new systems and new models that aren't generally available example in biotech and Pharma for example having screening results from from very expensive uh experiments and running lots of experiments and having a lot of data against those experiments gives a company an advantage in being able to do things like drug discovering we're going to talk about that in a minute versus everyone using publicly known screening libraries or publicly available protein modeling libraries and then screening against those and then everyone's got the same candidates and the same targets in the same you know kind of clinical objectives that they're going to try and resolve from from that output so um so I think novelty and data is is one way that Advantage uh kind of arises but really you know that's just kind of you know where's there an edge but fundamentally every business model can and and will need to be Rewritten that's dependent on the historical on the legacy of kind of information retrieval as the core of what Computing is is used to do sacks on my other podcast I was having a discussion with Molly about the legal profession what impact would it be if chat GPT took every court case every argument every document and somebody took all of those legal cases on the legal profession uh and then the filing of a lawsuit the defending of a lawsuit public defenders prosecutors but what data could you figure out like if and like just to think in recent history look at Chessa Boudin you could literally take every case every argument he did put it through it and say you know versus an outcome in another state and you could uh figure out what's actually going on with this technology what impact could this have on the legal field that you are a non-practicing attorney you have a legal degree I I never practiced other than one summer at a law firm but no I think did you pass the bar was I did pass the bar yes yeah yes I did try yes of course of course yeah come on here I went to Stanford dude I may not have passed the bar but I know a little [ __ ] enough to know that you can't look I I I would be curious in terms of a very common question that a an Associated Law Firm would get asked would be something like you know summarize the legal precedence in favor of X right and that you can imagine GPT doing that like instantly now I think that the question about that I think there's two questions one is can you prompt GPT in the right way to get the answer you want and I think you know tremath you shared a really interesting video showing that people are developing some skills around knowing how to ask GPT questions engineering away exact prompt engineering why because GPT is a command line interface so if you ask gbt a simple question about what's the best restaurant in you know Napa it knows how to answer that but there are much more complicated questions that you kind of need to know how to prompt it in the right way so it's not clear to me that a command line interface is the best way of doing that I could imagine apps developing that create more of like a GUI so we're an investor for example on copy AI which is doing this for copywriters and marketers helping them write blog posts and emails and so you know imagine putting that like you know GUI on top of chat GPT they've already been kind of doing this so I think that's part of it I think the other part of it is on the answer side you know how accurate is it because in some professions having 90 or 95 or 99 accuracy is okay but in other professions you need six nines accuracy meaning 99.9999 accuracy okay so I think for a lawyer going into court you know you probably need I don't know I mean it depends on on the the ticket versus a murder trial is two very different yeah exactly so is 99 accuracy good enough is 95 accuracy good enough I would say probably for a court case 95 is probably not good enough I'm not sure GPT is at even 95 yet but could it be helpful like could could the associates start with chat GPT get an answer and then validate it probably yeah if you had a bunch of Associates bang on some law model for a year again that's that reinforcement learning we just talked about I think you'd get Precision recall off the charts and it would be perfect by the way just a cute thing I don't know if you guys got this email it came about an hour ago from Reed Hoffman and Reed said to me hmoth I I created fireside chat Bots a special podcast mini-series where I will be having a set of conversations with chat GPT so you can go to YouTube by the way and and see Reed having and he's a very smart guy so this should be kind of cool and by the way chat GPT will have an AI generated voice powered by the text-to-speech platform play.ht go to YouTube if you want to see Reed have a kind of a conversation with chat GPT I mean we have a conversation with the two Davids every week what's the difference we know how this is going to turn out hey but actually so synthesizing to Moss Point about reinforcement learning with something you said jaycal in our chat which I actually thought was pretty smart well that's first yeah so I'm gonna give you credit here because I don't think you've said it on this this episode which is you said that these open AI capabilities are eventually going to become commoditized or certainly much more widely available I don't know if that means that they'll be totally commoditized or it'll be four players but there'll be multiple players that offer them and you said the real Advantage will come from applications that are able to get a hold of proprietary data sets and then use those proprietary data sets to generate insights and then layering on what you must said about reinforcement learning if you can be the first out there in a given vertical with a proprietary data set and then you get the advantage the mode of reinforcement learning that would be the way to create I think a sustainable business just to build on what you said this week is the JPMorgan conference Friedberg mentioned it last week I had dinner on Wednesday with this really interesting company based in Zurich and what they have is basically a library of ligands right and so these ligands are used as a substrate to deliver all kinds of molecules inside the body and what's interesting is that they have a portfolio of like a thousand of these but really what they have is they have all the nuclear medicine about whether it works so you know they're they target glioblastoma glioblastoma and so all of a sudden they can they can say well this ligand can actually cross The Blood Vein barrier and get to the brain they have an entire data set of that and a whole bunch of nuclear imagery around that they have something for Soft Cell carcinoma so then they have that data set so to your point that's really valuable because that's real work that Google or Microsoft or openai won't do right and if you have that and you bring it to the problem you can probably make money you know there's a business there to be built just building on this conversation I just realized like a great prompt engineer is going to become a title and an actual skill the ability to interface with these here you go hey guys Lanier somebody who is very good at talk to these you know instances and and maximizing the result for them and refining the results for them just like a detective who asks great questions the that person is going to be 10 or 20 times more valuable they could be the proverbial 10x engineer in the future of as a as in a company and as we talk about austerity and doing more with less and the 80 less people running Twitter now or Amazon laying off 18 000 people Salesforce laying off 8 000 Facebook laying off 10 and probably another 10 000. what catalytic effect like could this have we could be sitting here in three or four or five years and instead of running a company like Twitter with 80 less people maybe you could run it with 98 less people look I think directionally it's the the right statement I mean you know I've I've made the statement a number of times that I think we moved from this idea of greater economy to narrator economy where historically was kind of Labor economy where humans use their physical labor to do things than we were knowledge workers we used our our brains to to make things and then ultimately we kind of I think resolved to this narrator economy where the the way that you kind of can State intention and better manipulate the tools to drive your intentional outcome the more successful you're going to be and you can kind of think about this as being the artist of the past Da Vinci was um what made him so good was he was technically incredible at trying to reproduce a photographic like imagery using uh using paint and there's these really great kind of Museum exhibits on how he did it using these really interesting kind of like split mirror systems and then the the better the artist of the 21st century the 20th century was the best user of Adobe Photoshop and that person is not necessarily the best painter and the artist of the 22nd century isn't going to look like the Photoshop expert and it's not going to look like the the painter it's going to look like something entirely different it could be who's got the most creative imagination in driving the software to drive new outcomes and I think that the same analogy can be used across every Market in every industry however one thing to note jaycal it's it's not about austerity because the the Luddite argument is when you have new tools and you get more leverage from those tools you have less work for people to do and therefore everyone suffers the reality is new work emerges and New Opportunities emerge and we level up as a species and when we level up we all kind of fill the gaps and expand our productivity and our capability set I thought what J Cal was saying was more that Google will be smaller didn't mean that the pie wouldn't grow it's just that that individual company is run differently but there will be hundreds of more companies or thousands more Millions more yeah that's sort of I have an actual punch-up for you yeah instead of narrative it's the conductor economy it's you're you're conducting a symphony oh a bunch up punch up there but I do think like we're gonna there's gonna be somebody who's sitting there like remember Tom Cruise a Minority Report as a detective was moving stuff around with a interface the in yeah you know with the gloves and everything this is kind of that manifested you could even if you're not an attorney you could say hey I want to sue this company for copyright infringement give me my best arguments and then on the other side Say Hey I want to know what the next three features I should put into my product is can you examine who are my top 20 competitors and then who have they hired in the last six months and what are those people talking about on Twitter you could have this conductor you know who becomes really good at that um yeah the leveling up that happens in the book Enders game I think is a good example of this where the guy goes through the entire kind of ground up and then ultimately he's commanding armies of spaceships and space and his orchestration of all of these armies is actually the skill set that wins the war yeah you predicted that there would be like all these people that create these next-gen forms of con content but I think this Reid Hoffman thing could be pretty cool like what if he wins a Grammy for his you know computer created podcast mini series that's one thing the thing I'm really excited about it's the first AI novel gonna get published by a major publisher I think it happens this year when's the first AI Symphony gonna get performed by a major Symphony Orchestra and when's the first AI generated screenplay get turned into an AI generated 3D movie that we all watch and then the more exciting one I think is when do we all get to make our own AI video game where we instruct the video game platform what world we want to live in I don't think that's happening for the next three or four years but when it does I think everyone's got these new immersive environments that they can live in I have a question when you know when I say live in I mean video game wise yeah sorry go ahead when you have when you have these computer systems just like to use a question of game theory for a second they're these models are iterating rapidly these are all mathematical models so inherent in let's just say this the perfect answer right like if you had perfect Precision recall foreign models get there at a system-wide level everybody is is sort of like they get to the game theory optimal they're all at Nash equilibrium right all these systems working at the same time then the real question would then be what the hell do you do then because if you keep getting the same answer if everybody then knows how to ask the exact right question and you start to go through these iterations where you're like maybe there is a dystopian hellscape where there are no jobs maybe that's the Elon World which is you can you can recursively find a logical argument where there is no job that's possible right and now I'm not saying that that path is the likely path but I'm saying it is important to keep in mind that that path of outcomes is still very important to keep in the back of our mind as we figure these things out well Freeburg you know you were asking before about this like you know will more work be created of course artistic Pursuits podcasting is a job now being an influencer is a job yada yada new things emerge in the world but here in the United States in 1970 I'm looking at um Fred I'm looking at the St Louis Fred 1970 26.4 percent of the country was working in a factory was working in manufacturing you want to guess what that is in 2012 sorry what percentage it was 26 in 1970 and in 2015 when they stopped the percentage in manufacturing United States they discontinued this it was a 10. so it's possible we could just see you know the concept of office work the concept of knowledge work is going to follow pretty inevitable the path of manufacturing that that seems like a pretty logical Theory or no I think we should move on but yes okay so how would we like to ruin the show now should we talk about Biden and uh the documents and ruin the show with political talk or should we talk about since it's been such a great episode so far what do we want to talk about next again a couple of choices don't want to talk about um give it to him hold on a second we all know jaycal that according to you when a president is in possession of classified documents in his home yes that apparently have been taken an unauthorized manner basically stolen he should have his home raided by the FBI almost close close yeah if so anyway the Biden uh as of the taping of this has now said there's a third batch of classified documents this group I guess there was one at an office one at a library now this third group is in his garage with his Corvette certainly not looking good uh they say they say that in his defense they say the garage was locked meaning that uh you could use a garage door opener too to open or close that that's what it was locked when it went closed so we're pretty much as secure as the documents at Mar-A-Lago same equivalency no no no actually I mean just to be perfectly Fair the documents in Mar-A-Lago were locked in a basement the FBI came checked it out said we'd like you to lock those up they locked them up so got it a little safer than maybe a little safer then but functionally the same functional functionally the same uh the only difference here would be what sacks when you look at these two cases well that in one case mayor Garland is appointed an independent Council to investigate Trump and there's no such a special counsel or investigator appointed to investigate Biden I mean yeah these things are functional put somebody on it though I don't think they've appointed a special counsel yet no they did as of an hour ago a special counsel was appointed did that just happen yeah one hour ago uh Robert her is his name okay I guess there are real questions to look into here the documents apparently were removed twice why were they moved two ordered that what was a classified document doing in Biden's personal Library what do the documents pertain to do they touch on the Biden families business dealings in Ukraine and China so there are real things to look into here but let me just take a step back now that the last three presidential candidates have been ensnared in these classified document problems remember it's Biden now and then Trump and Hillary Clinton before Trump I think it's time to step back and ask are we over classifying documents I mean are we fetishizing these documents are they all really that sensitive it seems to me that we have an over classification problem meaning that ever since uh foia was passed the Freedom of Information Act the government can avoid accountability and and prying Eyes by simply labeling any document is classified so overclassification was a logical response by the permanent government to the Freedom of Information Act and now it's gotten to the point where just about everything handed to a president or vice president is classified so I think I can understand why they're all making this mistake and I think a compounding problem is that we never declassify anything there's still all these records from the Kennedy assassination well that's crazy classified they they and they're supposed to have Declassified these the CIA keeps filibustering on the release of the JFK assassination documents and they've been told they have they have to stop and they have to release them and then they keep redacting stuff conspiracy theorist here but what are they trying to cover up I mean this is a long time ago that's the only way to interpret it but even for more mundane documents there are very few documents that need to be classified after even say five years you could argue that we should be automatically declassifying them after five years unless they go through a process to get reclassified I mean I'd say like just you guys in business I know it's not government and business how many of the documents that you deal with are still sensitive are Trade Secrets five years later certainly 20 years later they're not right like okay let's say like five years I mean the only documents in business that I think I deal with that you could call sensitive are the ones that pertain to the company's future plans right because you wouldn't want to compare the table to get those yeah there's a handful of things legal issues yeah even cat people is not that sensitive Because by the time you go public it's legally has to be public yeah at some point like there's a hundred people who have that I mean it's exactly so like in business I think our experience has been there's very few documents that stay sensitive that need to remain secret now look if Biden or Trump or whatever they're reviewing the schematics to the javelin missile system or to you know how we make our nuclear bombs or something obviously that needs to say secret forever but I don't believe our politicians are reviewing those kinds of documents well I mean we both I don't really understand what it is that they're reviewing why are they keeping needs to be classified five years why are they keeping them was the issue we discussed previously we actually agreed on that I think they're just keeping mementos I think there's a simple explanation for why they're keeping them Jason which is that the that everything is more classified and there's a zillion documents and if you look like both Biden and Trump these documents were mixed in with a bunch of personal effects and mementos my point is if you work in government and handle documents they're all classified so I mean if the National Archive asks for them back or you find them you should just give them back I mean that is that's going to wind up being the rugby Trump didn't give them back fair enough I did so that's the only difference here well no no hold on the FBI went to Trump's basement they looked around they said put a lock on this they seem to be okay with it initially then maybe they changed their minds I don't know I'm not defending Trump it's pretty clear that he wouldn't give him back him that was the point I'm making is that now that Biden Trump and Hillary Clinton have all been ensnared in this is it time to rethink the fact that we're over classifying so many documents I mean just think about the incentives that that we're creating for our politicians okay just think about the incentives number One never use email remember Hillary Clinton the whole email server yeah you got to be nuts to use email number two never touch a document never touch a document what never let anyone hand you a document flush them down the toilet never let anyone hand you a documentary if you're a politician an elected official yeah the only time you should ever be handling anything is going to a clean room right you know make an appointment go in there read something don't take notes don't bring a camera and then leave I mean this is no way to run a government it's crazy who does this benefit who does this benefit it doesn't benefit our elected officials it makes it almost impossible for them to act like normal people that's why it benefits the Insiders the permanent government you're missing the most important part about the sex this was if you want to go into conspiracy theories this was a setup Biden planted the documents here we go so that we could create the false equivalency and start up Biden versus Trump 2024 this ensures that now Trump has something to fight with Biden about but and this is going to help Trump because they're both tainted equally tainted yes the same Source in the new cycle no I think but I think it's the opposite I think mayor Garland now is going to have to drop the prosecution against Trump for the stolen documents or at least that part of what they're investigating him for they might still investigate him over January 6th or something but they can't investigate them seems more sticky yeah I agree with that actually I think it's going to be hard to do but my point is like just think about look but both sides are engaged in hyper partisanship the way right now the that the conservatives and the right they're attacking Biden now for the same thing that the left was attacking Trump for my point is like just take a step back and again think about the incentives we're creating about how to run our government you can't use email and you can't touch documents and by the way if you're don't ever go into politics if you're a business person because they'll investigate every deal you ever did prior to getting into politics what are you going to do when you try to get uh your treasury a position what's going to be nuts you got to be nuts to go so you're not going to take a position that the Washington insiders by which I mean the permanent Washington establishment I.E the Deep state they're creating a system in which they're running things and the elected officials barely can operate like normal functioning humans there interesting I heard a great rumor this is total gossip mongering oh here we go uh that you know one of Ken Griffin's best out is to get DeSantis elected so that he can become treasury secretary I mean Ken Griffin would get that if he wanted it and then he would be able to divest all of Citadel tax-free so he would Mark the market like 30 billion dollars which is a genius way to go out now then it occurred to me oh my God that is me and Sax's path too why would it be tax-free when you get appointed to those branch those senior posts you're allowed to either stick it in a blind trust or you can sell with no capital gains yeah what well because they want you they want you to diverse yes anything that presents a conflict they want you to divest and so the argument is if you have if you're forced to divest it to enter government you shouldn't be forcibly if I become mayor of San Francisco or Austin Secretary of Transportation Jay Cal you can do that oh I'm qualified for that I've take the bus I got an electric bike to answer freeburg's point I think Citadel Securities there's a lot of folks that would buy that because that's just a Securities trading business and then Citadel the hedge fund probably something like a big bulge bracket bank or Blackstone probably Blackstone in fact because now Blackstone can plug it into a trillion dollar asset machine it's a I think there would be buyers out the door this is this is an incredible grift now I know why it's not a grift at all but it's a it's an incredible come on man a cabinet position for No Cap gains well that's not a grift that's like those are the laws they force you to sell everything and then you do Public Schools I think you're I think you're misusing the word to continue to genuflect to the left lane you're being a little defensive that or you're dumb I'm not stupid man that's when I see it you take a camera position where does that exist yes if you were asked to serve look any normal person who wants to serve in government you can't use email and you can't touch a document and every deal you've ever done gets investigated yes yes why would you want to do it I mean I'm saying that you get to divest tax-free me think thou dot protesteth too much David the fact that you two know this rule no I know I know it it's like a well-known language I know this rich people I looked up Grifton stage it means that to engage in a petty or small scale Swindle I don't think selling a 31 billion dollar engine no it's not a combination of BlackRock and Blackstone would be considered a petty small did any of you guys watch the Madoff uh series on Netflix no was it good no oh my God it is so so depressing I gotta say like just that that Madoff series there is no glimmer of light or hope or positivity or recourse everyone is a victim everyone suffers it is just so dark don't watch it it's so depressing is so depressing it's so good they all kill themselves and die and like all the ones one guy died of cancer person pick hard I didn't realize all this the trustee that went and got the money he went and got money back from these people who were 80 years old and retired and had spent that money decades ago and he sued them and took their homes away from them and no one and and they had no one they were part of the scam no one no one won it was a brutal awful whole thing yeah by the way that's going to be really interesting as we enter this SPF trial because 100 that that is the track that that is what happens if you guys southern district of new York said that this case is becoming too big for them because all the places that SPF said money all those uh pacts and all those political donations before they have to go and investigate where that money went and see if they can get it back and it's going to open up an investigation into each one of these campaign finance and election and kind of interfering right now propublica sorry propublica on the other end of the spectrum I did watch this weekend triangle of sadness have you guys okay sadness is great it's so dark to The Davids uh listen this is one of the it I thought it was it didn't pay off the way I thought but this is one of the best setups you'll see in a movie so basically it's a bunch of people on an on a luxury yacht so you have a bunch of rich people as the guests then you have the staff that interacts with them and this is like mostly Caucasian and then under in the bowels of the ship what you see are Asian and black workers that support them okay so the the in some ways is a little bit of a microcosm of the world Oh I thought you would say a microcosm of something else and then and then what happens is there's like a shipwreck basically right oh don't spoil it come on okay and so but no but I'll just say so so the plot is you have this Caucasian patriarchy that that gets flips upside down because after the Shipwreck the only person who knows how to make a fire and catch the fish is the Filipino woman who is in charge of cleaning the toilets Social Security comes in charge so now you flip to this immigrant Matrix pretty great meditation on class and um survival it's it's pretty well done it didn't end well I thought I thought okay yeah well it's hard to wrap that one up well you know what they say Boys still a little and they throw you in jail still a lot and they make you King uh famous Bob Dylan quote uh all right well this has been a great episode great to see you besties uh austerity menu tonight tremath uh what's on the austerity menu tonight what are we doing salad uh some tuna sandwiches no I think uh I think Kirsten is doing uh I think durad yeah that's yeah that's a good fish Jake and I once had a great rod in Venice in Venice Venice [Music] so good I agree when it's done well the durad kicks us there's only one way to cook it to rod do you know what that is you gotta you gotta it's the way they did in Venice you got to cook the whole fish yeah yeah okay and then after you cook the fish then you de-bone it right and uh right yeah absolutely that's the way to do it that was back when sax and I used to enjoy each other's company this podcast made us into mortal enemies check out I'm a little disappointed you couldn't agree with my take on this document Scandal instead of dunking in a partisan way I tried to explain why it was a problem of our whole political system I like your theory I I I I think you know you you keep I just think your party Crystal a little bit more but you know compare your grift are we gonna play Saturday after the wild card game are you guys interested in playing Saturday as well because I got the hall pass I can I can do a game outside I don't know I have to check with my boss who's going to the are you guys walking on sex are you gonna come to play poker at that live stream thing for the day in a way I doubt it no oh he doesn't want to interact with humans that does not uh play well in confirmation hearings you know the last time I did one of those Alan Keating destroyed me on camera feet and every time he bluffed I folded every time he had the the nuts I called that's true a shellacking a classic saxophone saving thing is that what's going on here no no no no it has to do with the cabinet positions he doesn't need to be seen recklessly gambling so badly you could do any cabinet position sacks which one would it be steak I don't know that those like cabinet positions are that important I mean they run these giant bureaucracies that again are are permanent you can't fire anyone so if you can't fire a person to the early report to you right Trump's idea was like put a bunch of Hardline CEO type people in charge have them blow up these things and make them more efficient it didn't really work did it yeah well you know why as CEO is actually in charge like Elon he walks in if he doesn't like what you're doing he'll just fire you you can't fire anyone how do you manage them when they don't have to listen to anything you say that's our whole government right now our cabinet heads are figureheads for for these departments for these Giants is that a no or is that a yes you'd still take state look at that well you know I think I have another feeling first what is the best ambassadorship well you can't you can't digest everything you can tell which ambassadorship is the best one based on how much they charge for it yeah so I think I think London is the most expensive I think that one is a million for London 10 to 15. yeah 10 15 million that's that's what Sax's fourth least expensive home cost no no you have to spend that every year to run it Jason you only got you gotta pick for him you could be the ambassador to guinea or the ambassador to the UK you get the same budget actually what's kind of funny is I know two people who serve as ambassadors under Trump and it was really cheap to get those because no one no one should be part of the Trump Administration two for one they were on they were on fire sale after because of trump who wants to be tainted but by the way one of them and you can just beep out the name was telling me it was the best thing because he ended up selling they already did the all-time highs to take the job he was like I gotta get out of all of his stuff no but listen let me tell you the the ambassadorships it was it was a smart trade by those guys because Ambassador is a lifetime title so your Ambassador whatever no one remembers was president when you were Ambassador no one cares so you are going for the Ambassador so stay I think it's fair I think he's going to Ambassador I'm not interested in ceremonial things I'm interested in making an impact and the problem with all these positions I mean being a cabinet official is not much different than being an ambassador so you're gonna you're gonna enlist in the navy no what what would it what has a bigger impacts or being an ambassador who's more influential Saks on the all in pod or beep as the ambassador of Sweden actually all in pod is more impactful by the way this is why I take issue with your statement about the term mainstream media because I think you have become the mainstream media more than most of the folks that are Independent Media we're Independent Media trust me it's Independence things happen by thread and stop genuflecting three episodes I just like saying the word genuine you like genuflecting I know because that is the top word of 2023 so far for me oh is that is somebody doing an analysis with Chad chapite of the words used here no but sax brought that word up it was just so it's a wonderful word it's it's not used enough all right everybody we'll see you next time on the all-in podcast comments are turned back on have at it you animals love you guys love you besties bye Rain Man [Music] besties [Music] foreign [Music] [Music]








check out you have a really long nose hair thank you on your on your left this one here this side yeah yeah okay hold on one side you see it Nick you see it see that you can see it take care of it every show we have this issue every show he's got all this like I'm getting old man here so I feel like sex oh you gotta get a grooming tool I am tired of treasure hunting a lawn mower manscape makes one I'm gonna get it yeah just look in the mirror bro can you come over on the way to Parker Freeburg and help me manscape yeah you're not coming to Poker don't come to Poker if I manscape can I come to poke foreign [Music] okay so jaycal you're gonna be a participant today the world's greatest moderator is taking a week off to allow his voice to recoup to recover to heal so he can come back blaring with his usual mid-sentence interruptions and excellent moderating tactics next week we with his Foghorn Leghorn moderation we are gonna We Are Gonna Miss You at the moderation welcome to the top 20. sax you're welcome welcome to the top 20 podcast in the world okay well hold on who should be thinking whom I mean you've been doing this for 10 years I walk in here off the street all of a sudden we're top 20. yeah let me explain something to you number one blog in the world I created it with my guys Engadget okay top five magazine in the world then I do a podcast with you three idiots and all of a sudden I drop down to top 20 in this medium so drop what are you talking about yeah exactly I drop this has been a b tested no I mean this week it started I don't want to embarrass you but look at twist ratings compared to ours this weekend startups is about startups it is a niche Audience by Design and it's the number one startup podcast in the world that's what you wanted this show to be the show is about all topics every time we try to talk politics you're like it's too much politic sex I think you're talking about free bird I think you're talking about Freeburg let's focus on narrow legalistic technicians that's true you we had this discussion sax and I said we should always do the top story of the week even if it's politics and now it's taking credit for my insight about McLaughlin group I saw you on some pod who was it I absolutely designed this pod around McLaughlin group everybody said McLaughlin group okay it's possible for two people to have the same idea sex we both grew up on McLaughlin group that's why we're both cantankerous [ __ ] moderator intervention cut it out no one is individually responsible for this podcast it was Tim Ferriss Yeah Tim Ferriss here's what happened so I was on YouTube and um you know I'm not gonna watch some two-hour like podcasts with Jay Cal of course but for some reason for some reason Tim Ferris 10 minutes of Jacob the video is called the origin of the all-in podcast I can't stand what he does oh God here we go I can't stand what he does that yeah so I'm like okay so I gotta watch this it's in the partnership agreement he said here's the the party line and jaycal will not stick with it because we're going to recreate and watch this I got to see this alternative reality that Jacob's trying to create about the origin of the ball excuse me I wrote I wrote in our leadership history yes and I changed no yeah the origin story that you signed up to are you saying you changed the origin story Remains the Same no it doesn't you call me after CNBC the origin story that he told Tim Ferriss which is like a 10-minute story of how he created the whole thing the concept was his it was based on McLaughlin Group which I'm the one creation concept is mine obviously by default how I moderate the program is by my design yes you didn't come up with this concept especially your Chagrin of course I did no of course I designed my moderation I was the first one who said we should record us having conversations at the poker table no that idea came from him right that's why it's called the all in pod no I came up with the name all in number one number two was his idea to tape a pod because he came out to see me anyway who cares the pod's here it's successful why do you keep going on podcasts telling everyone that you're the Mastermind of the all in pod people are saying out the game other podcasters I'll explain to you other podcasters are in awe of my ability to moderate you three mile contents you did not have the idea for the foursome based on McLaughlin group that happened that happened spontaneously as a result of the fact that no Freeburg was I think the first guest I was the second guest then we did the four of us together okay it was a jam session that worked out that's okay fine the way that the way I moderate this is of note to the world's greatest podcasters they want to know Jake out how do you take three misanthropic malcontents and make them actually palatable to the world and I say you know what because I am the world's greatest moderator and someone like Tim Ferriss wants to know excuse me excuse me what makes me a misanthropic male content exactly just your behavior in world view and what does my world view your absolute contempt for Humanity no you're amazing it's a joke it's called a joke it's called a joke oh now you set them off jaycal you really that that hurt you should apologize it's called a joke I think you guys are wonderful I think you guys were wondering well I mean I may be misanthropic but malcontent I'm not no Saxon freebing are the mountain that's for sure I'm not content I'm pretty damn happy you're happy the last descriptor anybody who knows you would ascribe to Friedberg was happy no I would say no I think he's happy he's anxious but he's happy yeah he's anxious but happy did you see the roast that was not a happy man that was tearing you up that was funny yeah that was okay yeah that was venting yeah that was rage no I think I think when Freebird tries to be funny it comes out kind of mean yeah maybe that's true it's been a rage the only person that sets me off into making me unhappy is you Jay Cal I mean like the four of us could go to therapy or we could keep recording this podcast every week which is cheaper I think it's cheaper for us to just record the Pod you know what I for one am thankful to whoever gave you whatever sickness you have that causes you to not be able to talk this week okay great you're talking a lot for a guy who can't talk cause you're coming at me be nice to me while we're talking about all kinds of random stuff the number two thing that I see in the what's happening tab on Twitter right now is how Ron DeSantis is getting blasted for Banning AP African-American studies because he thinks it falls under the stop woke act that's this the headlines it's going absolutely nuclear on Twitter right now here are some of the quotes shocking Ron DeSantis has banned all caps the teaching of AP African American studies in Florida Florida has gone from don't say gay to don't say black next tweet claiming it violates the stop book act and has no educational value Florida Governor Ron DeSantis has banned AP African American studies from schools let me make a prediction right now this will all red down to his advantage the same people who said that he was death scientists for basically not instituting coveted lockdowns he was proven correct then they said that this bill that prohibited the teaching of gender fluidity to five-year-olds they quite try to claim that was a don't say gay Bill 70 of Florida supports that that went down to his Advantage I don't know the story behind this particular course but if the question is whether CRT is going to be funded by the state and he's preventing that again I think that'll be a 70 popular issue so let's just wait and see how this plays out fair enough I just want to claim that my spread trade maybe it's tough to be the leader in the Republican nomination process in January of 2022. it's starting yeah the front runner in either party but I'd say the bigger threat to the santis is there's a new poll where Trump came out on top so Trump's still his biggest threat yeah so unfortunately jaycal may be right that the Republicans may do something stupid here and a nominate a candidate who's I think less electable than DeSantis I actually don't take any joy in it I actually I think Nikki Haley's going to come out of nowhere and win this thing well it's possible I you know I I really would like to see some non-political non-career politicians run for office the Bloomberg you know sort of category it feels like these career politicians are just really really bad at executing his scumbags you know you know who likes Nikki Haley who Democrats Democrats why you guys why why do we like her obviously polarizing she's polarized so she's a safe establishment Republican who basically is not going to put up any Fierce resistance to what the Davos crowd wants to do I don't think that's true I think she was pretty she liked another Republican nomination I don't think she cares about Davos people to save her life I think that she is a moderate reasonable person who had to govern in a Southern state and got everybody on board that's that's pretty crazy she's a pro-life person who negotiated a 20-week support for abortion in 2014. so this is a person that knows how to get stuff done South Carolina happens to be the state that's actually at the Leading Edge of climate transition she's had more jobs and more money coming into a southern red state of people and companies willing to build for climate change than any other state in the country so you like her I don't know she's just she's so I just think that she's actually like normal and sane and not an idiot would you vote for her absolutely over Biden absolutely absolutely interesting 100 so yeah look if you're really willing to vote for then that's interesting absolutely I would she's you know she's young her parents had a small business she was a small business person it's tough to be a winner at all of those levels and she managed to do it I mean how do you as a brown woman get elected to governor of South Carolina and do a lot of really good stuff that's kind of tough yeah so I don't know I think she deserves a close look and she's the only one that didn't kowtow to Trump she was able to play the game manipulate him get him to be on her side and then still told him to go pounce in that's pretty cool well a lot of a lot of Governors managed to do that I don't know what I'm saying I'm saying she got she she went to the United Nations she did what she needed to do there that's an important role at that time actually Nikki Haley expressly has said she will not run if Trump runs so she's kowtowed to Trump too she wanted to be his VP right like she was trying to shank uh Pence right that was her plan maybe it's a smart strategy but she said she will not run against Trump the main alternative to Trump in the Republican party is DeSantis and then I'd say the number three in the Republican party after Trump into census Glenn young right now huh based on what metrics based on interest in the party and you know I've talked to people and I think the polling will eventually reflect this he's very talented Jake how you talk about appealing to Independence he was able to win a blue State remember Virginia went for Biden by 10 points and Yanko was able to win that state if you ever listen to any game campaign he's a very talented campaigner I think yonkin is very very talented don't get me wrong and I think that he would be an extremely credible candidate for president here's the thing that yonkin will get destroyed on is he's literally not been in the job for but for a few you know 18 months so he hasn't done anything and I think that if it does boil down now it may not matter right because look Obama was a senator for two years or whatever right so it may not matter but to the extent that Republicans demand some Bona fides I think that you'll see Trump and DeSantis attack yankin more viciously in a presidential primary then they attack Haley on that dimension of you have no experience and it'll be hard for him to back it up just one final point you know forget the Steel Man the other side so final point we got it we got to get started final Point Virginia has this wonky one-term term limit on Governors so you know he's got no choice but to make a play in 20 uh 24. because he's gonna be termed out anyway okay Jay Cal has a lifelong independent who's only ever voted Democrat which of these Republicans Republican to be clear so which of these candidates for Republican one time when he was 12. yeah no no I voted it three times young kid three times I would like somebody who's younger and actually I've been quite influenced by your framing of a person who can control the budget and reduce spending because I do think it's kind of the most existential risk we have right now so I might be moving to more of a single issue uh Vote for This presidential election I love that issue I love that about you I just think like we we have to have somebody younger who is not going to bankrupt the company and the more these candidates talk about social issues and not economic ones I think it's a tell that they're not the right person for the job that's where I'm personally at is like this country has a serious Financial existential crisis on its hands and we have to get off social issues and we have to get on to financial standpoint so I assume then you support the Republicans in this looming budget Showdown I actually do yes I do think we should hold the line on spending so you support the Republicans voting no on raising the debt ceiling yeah I actually do I think we should start pumping the brakes on spending and I do think the Tea Party no that doesn't mean I like those candidates they're kind of whack jobs actually but you think George Santos is a whack job listen it's the whack pack the Republican party has turned into some crazy Howard Stern whack pack sax is appalled by it he just can't some elements of both parties look exactly would you ever invite to Mark Santos to your house who would you invite okay actually are you kidding me who would you be willing to hold a dinner it's not a fundraising dinner but just invite to the house you can pick between two people oh no Alexandro ocasio-cortez or George Campos who would you pick for I'd rather probably meet and talk to AOC of course because it would be interesting do I want a fundraise for her no but no no I'm not asking fundraising who just let in the door front door unlock the front door for me to AOC yeah what would you do to George would you not even return the email if he said David I'm in town I wouldn't let him in the house for dinner don't let him know him yeah he might he might steal the silverware or something it's so crazy I mean it's so nuts Listen Hold on hold on hold on we gotta get started um as your moderator I'm gonna try and keep us on track good luck uh yeah no look it's a it's an energetic day I appreciate I appreciate my co-hosts and their enthusiasm enough recognition for supporting the Republicans in this budget Showdown I mean I'm like blown away by this I think it's great I think it's great as you guys know just to restate it's my number one concern on Earth today yep and I I think that the importance of this topic really needs to kind of Rise Above politics of all the things you've said Freeburg in the last like six months on this program it's the one thing that stuck with me and it's one thing that has like actually now I realize is the most important thing for this country is fiscal responsibility austerity measures and looking at how we're spending money and looking at immigration and looking at economic velocity and employment and competing on the world stage with a solid balance sheet is the balance sheet is how you compete the balance sheet is how you compete I think it rises above social issues and it rises above climate change cannot you you cannot address climate change or social issues or infrastructure or unemployment unless we have the ability to operate as a country over the long term and have the ability to have for the continuing credit of the United States dollar and that's why I think it's so important free break I'm dealing this with with startups I have right now and I tell them the balance sheet is how you compete if your balance sheet is flipped upside down and you're going to be out of business in nine months you're not competing with these two other companies in your sector you have to have a strong balance sheet take the austerity measures make the cuts and then compete with a strong balance sheet it's just so obvious this country's balance sheet is getting flipped upside down and we are going to have so many yeah very complex second and third order effects with the interest payments if you value austerity if you value austerity if you look back in history and you actually ask of the prime ministers or presidents of various countries particularly First World countries that have actually had an impact in implementing austerity you know what the unifying thing that I can say is women do a much better job than men okay you want austerity you're better off with with Margaret Thatcher with then with a dude AKA Nikki Haley enter station it's a very hard position to be in as a politician because you have to position your objective as one of taking things away and the primary way to get elected in a democracy just like in junior high when you run for president of the junior high class is I'm going to make the vending machines free you get elected and when you run in politics you always promise your constituents what they're gonna get that they don't have today and that's the model for getting elected whatever the issue is of the day whatever the issue deserved a decade whatever it's all about what I'm going to give you that you don't have today and so to flip that conversation around we all have to sacrifice together for the long-term viability of our economic Prosperity we need to do we need to give up the following things that is a very hard platform to run on when someone on the other side of the podium on the other side of the stage is saying I'm going to give you these 10 things and it's very hard to get elected and that's why democracies ultimately eat themselves and I forgot who said it but ultimately all democracies end up realizing they can vote themselves all the money and then you have this big cycle applicants did the most brilliant thing ever recently they moved from stop to steal to stop the spend this is a genius they may stumbled into nobody wants to hear them talking about the election being stolen that's complete nonsense but stop the span everybody is seeing in their own personal balance sheets they're seeing it in their companies they're seeing it in their families they're seeing it with their mortgage payment they're looking at their you know uh College tuition bills they're looking at their car payments going from 400 to 700 and they're seeing what variable interest does we have variable interest debt this stuff is going to Skyrocket whether it's elon's payments for Twitter or your payments for your mortgage or our country's payments for our debt we have to stop the spend effective interest rates yes yeah but guys let's just continue the conversation and talk a little bit about this world economic Forum Gathering that that took place in Douglas I know you guys wanted to talk about it this week intellectual honesty I'm like blown away right now because he's sick okay so look um no it's because I'm not moderating when I moderate I'm always trying to get the best out of you sex the as it relates also to the global economy and growth so Davos took place uh you know over this past week just so everyone knows and I remember you know working at Google 2004 I remember like how exciting it was for the executives to kind of start to transition into the davo stage it became this moment where you're kind of finally on the world stage it's an exciting moment for CEOs for world leaders for Global economists to get together talk about the state of the global economy where the world is headed what we can and should be doing about it and Davos is also this this place of Pride and Prestige for being invited and being a part of the party the global Elite party as some people are now calling it and that's what I think is the important conversation is that the world economic Forum gathering in Davos has recently been cast as this Gathering of the global Elites those who are trying to take control and run the world as they see fit and sax I'd love your point of view on how that transition has happened because one of the important ways that the Davos Gathering has been cast in the world economic Forum has been cast is in the negative light of being globalists and globalism has had a really important role in driving global economic growth and prosperity and it has had these adverse effects in the US as we've seen with wealth inequality loss of jobs offshoring gutting of Industries and so on I think that there's a really important way that Davos has been politicized but the risk of that is significant because if we do lean into this globalist notion and say it's all about Elites trying to take control of our world and we all become isolationists that countries around the world can suffer deeply from The Economic Consequences of that shift so maybe tax you can kick this off and especially in light of our conversation today about the need for economic growth and the reduction of global debt to support you know a more prosperous world in the future this idea that right now we're talking about Davos and the world economic Forum as a gathering of global Elites and maybe sax you can kind of give us the history and the point of view on how that positioning has come about well it's a meeting of of global business and government leaders so they are the elites I mean you add them all together and they do control a substantial portion of the world economy and most of the you know nations with the biggest economies so there's no question these are some of the most important people in the world the bunch of the Articles coming out of Davos reported the somber mood and tone of the conference the level of anxiety and worry was very high and I think that for a brief moment it looked like these people were staring in the mirror and realizing that their management of the global economy over the last couple of decades has been a bit of a disaster I mean you do have ruinous deficits and debts piling up in the U.S and across the world something like 350 percent debt to GDP globally so we've talked about that you've got this war in Ukraine that I and many people around the world think was easily avoidable and was a diplomatic failure you're coming off of two years of badly botched covid mismanagement where the governments of the world pursued a horrible policy on covet and made everything worse you've got Decades of energy policy promoted by the world economic Forum where they want to get people off fossil fuels and natural gas and get them onto less dense less reliable energy including promoting things like organic farming in Sri Lanka which we talked about on the show cause their economy to collapse you've got the world economic on promoting ideas like you're going to own nothing in the year 2030 and you're going to be eating insects because no one should be eating meat so you've got these like wacky extreme you know environmentalist ideas and anti-capitalist anti-property ideas coming out of Davos so I think the whole thing's been a bit of a disaster and for a brief moment it looked like these people again were self-reflecting on their role in creating these disasters but of course the tone quickly shifted to blaming disinformation on social media as the root cause of all these problems as opposed to their Decades of decision making running you know the leading nations of the world and the leading companies of the world and I think that the blame is properly put not on social media but on these leaders for making you know bad decisions do you believe in the benefits of global trade where countries trade with one another and shift the sourcing of supply and labor to the cheaper source so that that the buyer can benefit from having things at a lower price and ultimately the global economy grows as kind of being beneficial to the us over the last 30 years or net negative because we talked you know about the the obvious consequences of global trade where we've had Industries gutted in the United States and now we're trying to onshore them again and build redundancy and so on but that's becoming very expensive and ultimately leads to the inflation of goods and services and so as you look at kind of the yeah the positive agenda of the world economic Forum over the last 30 years being about improving global trade and Global relations to enable global trade are you an anti-globalist and you know do you start to see yourself falling more in that camp as you see and hear more of what comes out of Davos and from these organizations like them well look all economic Prosperity comes from trade if we didn't have trade then we would all be subsistence farmers and hundreds and gatherers so we basically specialize in something and then create an over a bunch of that and trade it for the rest of our Necessities the issue is that trade not only creates Prosperity it creates dependencies because you're dependent on the people you're trading with and also it has distributional effects in terms of geopolitical consequences so trade with China has created some Prosperity but it's also hollowed out the American Manufacturing sector while also making China very rich which has basically turned China into a major geopolitical competitor for the United States so I'm not like a free trade fanatic I mean I understand the ways that trade creates wealth but I think it can also create these downsides that have to be managed and the fact of the matter is that this unfettered free trade ideology contained the seats of its own destruction because all the revisionist powers who are seeking to revise the U.S led Global Order they were basically enriched and built up by the very free trade ideology that neoliberals were promoting so this neoliberal world order has kind of created the seeds of its own destruction I think that it would have been much smarter for us two decades ago to be much more restrained in the China trade and to not throw up in our markets to Chinese products we basically gave them mfn status this is back in the early 2000s and it was a bipartisan project a bipartisan decision but the result of that has been the rapid rise of China at the expense of our manufacturing sectors and to the benefit of our consumer class right I mean we do you have 600 iPhones because of it and we do have cheap TVs and there has been a consumer Market that's demanded these low price Goods to live a better life right like so yeah but so so everyone gets cheap Goods at Target but in exchange for that we now have a real peer competitor to the United States which is capable of disrupting let's say our Primacy in East Asia and you know is creating a much more challenging world so look I I can understand the reasons why people bought into this two decades ago but I think that if we had it to do all over again I think most people would recognize that we should not have given China permanent mfn status and we should have been more temperate in our willingness to throw up in our markets to these countries do you think that the world economic Forum has kind of transitioned into this kind of neoliberal organization now that's promoting these neoliberal beliefs that aren't really tied to the original construct of Global enabling and supporting global trade and supporting the global economy and creating more prosperity and security around the world I think it appeals to the insecure overachiever Elite yeah and nobody building anything really gives a [ __ ] about Davos nobody is thinking what's going on nobody even knows when it happens right so who cares about it people who like status and went to fancy schools and wants to feel like they're in the club and that's how they've made it is going to this place which underneath is a membership organization where people pay based on the number of people that get to go so is it really that important substantively no but overachieving Surplus Elites in the west really valued the signal that it represents to other overachieving Surplus Elites in the West so that's what Davos is that's what the Allen and Company conference has become a lot of these things started off much purer than what they are today but these are all membership driven Revenue generating efforts in 30 or 40 years the all-in summit will probably become that too it's just the nature of things so I wouldn't spend so much time focused on a group of people getting together the funniest thing about Davos that I saw was Zero Hedge which said that the amount of prostitution is at record levels in Davos and so it just kind of boils down to what it is which is like any other conference it just happens to be with more security guards and less security guards and the same stupid stuff happens at Davos that happens in Vegas at name your conference CES it's just a different kind of attendee so I think the bigger thing is that we are learning that the world tends to have these policy perspectives that swing in a pendulum and the problem with the pendulum is that it it is at extremes and sax is right we went from an extreme where we were very closed off and we were essentially subsistence Farmers all of us were and then the pendulum has essentially peaked probably in the mid teens of this decade or of this Century where we realized too much globalization actually Hollows out local economies so we need to find the equilibrium point and that inherently has more inflation that inherently has higher prices and that inherently has slower progress but more consistent progress that benefits more people and this is what is so ideologically disruptive to again Surplus Elites because they need the 600 iPhone the idea that they can't upgrade every year drives them into such a tizzy that they need to export all the jobs whereas a thousand dollar iPhone or a fifteen hundred dollar iPhone may just mean that your upgrade cycle is two years and just ask yourself how many times have you upgraded as soon as the phone came out to realize man this phone is actually worse than the previous version and I probably could have just waited and there's a lot of work that actually goes into building these things to actually make them better so all you're doing is you're giving up optionality you're allowing your brothers and sisters to struggle to basically Feed The Profit motives of one company that in hindsight doesn't need to happen so there's an equilibrium and I think that these next few decades will be about finding it we have decided it's categorical that that level of globalization that we have had this unitary singular monocultural way of thinking about things is over and David's right it's because that system has created too many threats to the hegemony that brought us there Jacob and you that's a good thing I think in general it'll be it'll be more prosperity for more people but it'll be slower and it will create points of friction that are represented in inflation in higher prices right that's right so as jaycal as you know chamoth points out like if you're upgrading every two years instead of one year your economy doesn't grow as fast you have less spending yeah if the price of things go up you have inflation the net cost of de-globalization is higher prices and lower economic growth that's just fundamental kind of macroeconomics no that's not true that's not true because the deglobalization in an individual economy will actually create GDP because you'll have to rebuild the things that are used to import that's right yeah and over a period of time theoretically you could catch up and accelerate but jaycal like when you weigh this conversation about Davos and globalization and U.S security against the one we just had which is why I wanted to talk about this we're running into a debt crisis we have limited spending capacity we have a significant amount of investment needed if we are going to cut global trade ties that we've depended on historically and start to build redundancy can we afford this as a country can the West afford this given the economic slowdowns and inflation right now and you know how do we balance kind of these conversations against our domestic challenges economic Davos has a pretty serious PR problem they have dubbed themselves like essentially a self-appointed illuminati for the rest of us and that they're going to set some Global agenda I think this year's agenda was like finding the future or defining the future nobody asked these people to be in charge and if you look at what's happened in the world the chaos of covid and you look at what's happened in terms of energy policy in Europe and then this obsession with social issues and being told you know these Farmers these truckers you're bad people you're not woke whatever it is I think the public looks at Davos as the manifestation of these Global Elites who are lording over them some master plan whether it's real or not that they're not part of and that doesn't take them into consideration and that takes into consideration only their profits and when you actually peel it back as chimoff correctly pointed out Dolphus is a huge grift they they recruited me to be part of their world leaders 15 years ago after I had sold did you go to Second company and I met Claus the guy who runs it uh some New York Four Seasons event and uh then I got the bill and to be a world leader was 40 [ __ ] thousand dollars and I was like what a global future leader I don't know what that means uh but I'm not giving you forty thousand dollars you had to pay you had to pay to be a global what future leader and you didn't have to pay for a six thousand dollar Ted ticket at the time this was 40 large and uh I just thought you know this is not for me uh and what a joke I think people would much rather see some resiliency in the supply chain and they would rather see the origins of kovid and why we spent two years in a lockdown and was that a cover-up of the United States funding gain of research you know being done in Wuhan like and and why are we shutting down nuclear power plants and what exactly is the energy policy in Germany people are looking at incompetent Elites going to Davos having a big party and then setting an agenda for them that they don't understand or want and I think this is where you know the the the contempt for Davos is peaking this year and it should if you're being invited to Davos and other people are not being invited and they don't have a seat at the table and a voice at the table you can tell that all the journalists there are on an access journalism pass what does that mean access journalism they get to come there and they get to hang out with Elites if and only if their coverage fits a certain profile and if you find me the top 10 most critical anti-globalization journalists in the world I can guarantee you that they don't have credentials I think it's like a bankrupt organization that should just be shut down and the people who are going there are involved no I think it's culturally bad you guys have so much disdain it's interesting no idea not what the world wants right now the world wants transparency and the world wants ownership of all the screw-ups you know from kovid yeah to energy policy we want ownership of those issues not a bunch of Elites drinking champagne I'd rather spend a week with entrepreneurs or frankly spend a week with my kids or Frank yeah spend a week playing poker with my friends of course let's do it they're they're like umpteen things that are above the list so it's kind of like let them get together I think it's fine for them to get together they should do it I just think that if you're not there I would not weigh these things so heavily because it speaks more to your own insecurity than it does to their actual influence on things yeah the term Elite is an interesting one you you could companies need a CEO to run the company it's not run by 10 000 employees and governments need a president to oversee the government and I think the idea that some small number of people that are in charge getting together is now being cast as an elite Gathering and elitism in itself is the failure I think it's very important to get this nuanced rights it's a gathering of Elites and that's very different than an elite Gathering an elite Gathering is when like Michael Jordan and LeBron James and Steph Curry get together and work on their basketball game that's an elite Gathering a gathering of Elites is what's happening in Davos but they are the presidents of their companies and the presidents of their countries so I would differentiate between the people who are merely attending who are paying the Forty thousand dollars you know probably a bunch of hangers on it's now 250 by the way 250 000 250 yeah anyone willing to pay that is like you know totally an insecure you know Surplus Elite by the way I just got back from Davos oh you did okay well congratulations looks good on you though go ahead what's good on you did you spend your own money or your LP's money no I didn't get it down oh my Lord if I mean one person that went to Davos and spent their own money that's like probably not right exactly so then there's the hangers on you're spraying 250 000 to feel important but then there's the people who are invited who probably don't spend any money who are basically speaking right and you got to say that the the group of people who are speaking at Davos individually and collectively are quite influential they are the leaders of countries and and Fortune 500 companies sure but you can agree that they literally don't say anything that's noteworthy because they're not allowed to they're not saying anything that's that different of what they would say the previous week or the following week so but it's it's a forum it's a platform for yeah it's a 44. yeah to get together look in terms of the critique of it Freebird you asked how far back does this go it's this is not like a new thing the the term Davos man was coined back in 2004 by a Harvard Professor Named Sam Huntington who wrote a book called class civilizations he's the Press of international relations at Harvard and he coined the term Davos man to refer to a globalist Who quote had little need for National loyalty who viewed National boundaries as obstacles that are thankfully uh Vanishing that's how Huntington defined Davos man and there's been a reaction to these Thomas men that's been growing for a couple of decades I mean obviously the election of trump was a reaction to that brexit was a huge reaction to that and I think that the resistance to the imposition of their again their globalist policies which I guess you could Define as believing in this like borderless world you know economically and politically I think that's been receding in favor of more nationalist leaders who want to promote their own country's interests and I think that that trend is going to continue let's let's transition this to the the broader question that I think we got into it a couple episodes ago on how can we afford this transition if there is this mounting kind of trend against globalization that's mounting deglobalization movement and effort particularly in the U.S and again as sax pointed out Global debt to GDP is something like 300 to 350 depending on how you count and we're running into a debt ceiling here in the U.S I guess the question is how do we afford to build the infrastructure redundancy and make the Investments at home to replace global trade can we afford to do it and how's this going to play out as we run into this you know debt ceiling vote I don't think that's the right question I think it's the inverse of that question how can we afford not to with the amount of discontent and the amount of economic strain that people feel if you want to really call populism you're going to have to create economic vibrancy at home when people are making money and they find purpose they're less agitated they're not storming the capital they're not electing Fringe candidates they're not doing domestic terrorism they're just going to work and building a life right we know that so how can we afford not to how can we afford not to like bring back jobs to the heartland of America so the reality that I have and I think a lot of people have is that this debt to GDP thing is a bit of an intellectual red herring and the reason is people talk about this thing constantly in these absolute terms with no historical precedent that relates well to our current moment there is no magic number at which thing this experiment that's called America fails so I think that you have to be a little bit more intellectually honest and say that at best it's a relative problem and it's relative to the countries that have already established dominance of which there are eight or nine and then the emerging economies and then thinking about what critical things will they bring to the table in 15 or 20 years from now and in that context I think that people will him and ha But ultimately they'll capitulate they will raise the debt ceiling and they'll continue to fund this transition away from globalism and I think that's the argument that we'll get the Republicans over the line because it's going to bring a lot of spending and stimulus and jobs to frankly a lot of red states that would otherwise kind of continue to wither and die on the vine I think here's my biggest concern we're either trying to walk a tightrope or there's no tightrope to walk and if we make these Investments and they're not economically viable Investments it's a path to ruin and what I mean by that is if we're building factories manufacturing facilities infrastructure that relies on yesteryear's technology and systems of production and Glo and and kind of economic systems and there are alternatives that are competing on a global stage that are better more productive more advanced then we lose and we've made an investment in a negative Roi way can I ask you a question yeah see when you say that though you're making a very basic assumption which I think you can question which is you are underpinning that on fundamental economics that can change if we choose to for example let's take like natural resources okay every time you do a plan the industry and I Define the industry as every for-profit company and Wall Street and the debt markets they refuse to underwrite this thing at a higher cost of capital they use a whack of six or seven or eight and they will fight tooth and nail to use the smallest discount rate possible because it allows them to capture more of the profit dollars but if you actually had a realistic whack of like 10 percent on an on a massive infrastructure project guess what you're actually pretty equivalent to a government and in fact in many cases a government becomes cheaper so I think the thing that is worth debating and I'd like your reaction to this it's not that what you're saying it's we refuse to change the guard rails on our profit-making ability and if you extended the window if you change a discount rate if you said PES can be different you would have a very different economic justification for what you just said it completely changes a hundred basis points changes everything you're saying by tens of years one way to describe that yeah is another way to reframe what you just said is that the youthful lifespan of an investment isn't 40 years or 50 years but it may be 12 years and if you if you recast the investment decision as this has to be a 12-year return instead of allowing it to be modeled as a 40-year return then you start to really filter out a lot of the nonsense and you can actually see real payback it doesn't make sense to spend a hundred billion dollars on a train to take people from LA to Fresno or whatever craziness the the California High-Speed Rail program has turned into it was originally like a billion dollars to go from LA to San Francisco there was economic justification to get payback on 100 billion dollars or whatever it's ballooned into the whole system should be shut down so I guess there's a from a policy perspective an accountability framing that's missing but also bringing in the time Horizon on which we need to get paid back for these things my point was that in China and I've made this point many times but I just think it's a really important one that'll play out over the next couple of years they're building 450 nuclear power plants they're going to get the cost of industrial power below five cents or four cents a kilowatt hour and they're electrifying all their factories as they do that it's no longer a unit of human labor that's needed to produce Goods it's a unit of electricity and if they're driving down the cost of electricity and all products can be made using electricity you have a huge economic Advantage it's not the cure-all that you think that is even if you have free energy you have to think about the inputs and the thing about China but no sorry I'm not talking about energy I'm just saying a general framing like no no I understand my point being like the Investments we should be making are where is the puck headed not where has the puck been no no so I just I just wanted to comment on where the setting even if energy is zero in China you have to think about inputs meaning factories make things with inputs and if you look for example in natural resources the inputs by and large don't exist in China and so all I'm saying is that all of these inputs whether again you can take natural resources that proliferate massively in the United States it turns out that India is utterly utterly utterly poorly addressed in a geographical survey perspective and we're finding that India's raw resources are off the charts okay there are certain places in Africa tons of stuff in Indonesia and Australia all of those things may not have to go to China because there are subsidies or there are equivalently cheaper decisions that governments can make so that they choose not to send it and all of a sudden all of that spending doesn't matter as much because the Australian government makes a trade-off that says you know what I'd rather have these jobs here and I'm willing to have a longer payback cycle for these jobs to be here then instead of ship it to China and he they tell that they tell the Australian citizens I'm sorry guys but you're gonna have to replace your car every seven years as opposed to every five I hope you're okay with that but that'll mean full employment and it'll prevent Fringe candidates and populism and let's go forward where do you invest ing I am investing a lot of money in those places that control the natural resources that are poorly understood meaning there are places like India where our Geological Survey capacity is relatively naive and it turns out that in critical parts of the energy supply chain or other places they can play a huge role and the Indian government's cost of capital has an element they're sophisticated enough to add a an element to the formula that accounts for Full Employment if I build it in this state and if I try to get this many jobs created the full circle feedback of that allows me to actually transfer price it into the Indian Market at this price which is cheaper than anything that China can do even at zero energy that's the kind of sophisticated decision making that is emerging because of this deglobalization trend and it's happening everywhere so the Indians are doing it the Germans are doing it and then the US is doing it and then on top of that what they're what they're doing in terms of Game Theory which I think is even more sophisticated is they're not letting China be alone they're actually now slowing China down because China turns out actually needs inputs from these Western economies and they're like we're just not going to give them to you anymore so do the best you can for example in semiconductors the Dutch the Germans the Americans we've now essentially embargoed all of our most sophisticated equipment from ever getting in there that will increase even with zero energy the cost of what comes out of there and that will balance the playing field so that the Germans the Dutch the Americans can bring other partners in at a different cost of capital to make it economically neutral in that parity and the reason they'll do it is to create jobs for Americans or the Dutch or for the Germans okay I think the most yeah go ahead Jacob freeberg I I just I I think the most important thing here isn't like energy I don't think it's infrastructure I don't think it's natural resources at least for America it's entrepreneurs and that's what it's always been for this country and it's immigration is the Silver Bullet here and inspiration and the freedom that this country has for entrepreneurs and Founders to pursue a vision to start a company that's why we've won so big historically is the the combination of immigration and the inspiration that these entrepreneurs do on a global basis to get more entrepreneurs to come to this country to go to Stanford to start companies and that's why China is now losing they cribed this incredible formula we had of letting Jack ma do Alibaba and then they decided to for whatever you know insecure or stupid reason or pragmatic reason to consolidate power and that's what will push the world forward and and make our country Thrive we have to fix immigration we have to keep letting entrepreneurs Define the future because the government can do so much they can underwrite a couple of Chip factories here or there sure we could put money into nuclear or fission or fusion and whatever the next technology is but you need a singular person who wants to make it their life's mission who wants to have their sense of Pride and Innovation push the world forward and those people are rare and we are in a competition globally that we are not focused on that we need to get refocused on to recruit the greatest Minds in the world who want to change the world to do it on American soil I do not disagree with you jaycal I think you know to my earlier comment about how do we walk the tightrope of the debt burden the deglobalization and populism movements and the and the challenges and opportunities ahead it has to come through Innovation I think that's how you you have to invent a new tightrope basically I think the challenge though is Freeburg that it takes a recognition that there are singular individuals in the world one in a million one in ten million one in a hundred thousand whatever it is who can just drive an entire economy forward whether it's gates with Microsoft or Steve Jobs with apple there are singular individuals who come to this country Bam Bam Brogan with uh the tunneling company nobody knows what you're talking about except for me there are people who will push these things forward and and take risks and we have to yeah recognize that it's a small number of individuals backed by a large amount of capital that create massive jobs and great prosperity it's an uncomfortable conversation for people to realize that it might just be a couple of dozen people a year immigrating to this country that change the fate of this country yeah why do you need to allow three million migrants to stream across the Sun border every year because you don't know which one it's going to be that's why really you know that's that's your immigration policy is open border so that one is a millionaire I said recruitment so you're immigration yeah explain that it's a great question sex there are there are two things to look at here there is Jason let me finish my sentence no I'm just going to ask you to just verify as you say it's you're are you saying that the PHD student that starts Google is streaming across the border or actually applying for no absolutely notified for you there's immigration and then there's Recruitment and if we frame this process with those two different words there are people who are yes immigrating streaming across the border however you want to frame it sax I don't look at it in a political way and then there's recruiting the most elite talents in the world we can do both of these things one of them you know uh helps Farmers have people to work the fields to have people take entry-level jobs to work in the service industry we should bring in two or three million of those people per year we should make it legal and we should celebrate it because we have so many of those positions open that Americans don't want to take we should then also in parallel and without confusing the issue for political reasons recruit people to come to our universities and when they graduate have their citizenship staple to that diploma and not let them leave the company country and let them start companies here instead what we do is we make them fight to stay here we should be recruiting the smartest most talented people that will be hundreds of thousands of people per year low hundreds of thousands okay Millions coming across the border sick J Cal is very reasonable no yeah it's great yeah I think he's so much better when he doesn't moderate yeah yeah go ahead sex you know I'm an immigrant you know my dad came over yeah my dad came over in 1977 when I was five years old of course he had an MD he was a doctor he actually had like skills and wasn't immediately can become a net government dependent so I think that it makes sense to allow immigrants who can actually add something to our economy and bring skills and all the rest of it but the problem we have is that if you want to take that reasonable position you're told that you basically have to accept a situation of de facto open borders which is ridiculous no you don't these are two separate things and they've become inflated it's the number one party that conflates these two issues you know they're two separates Democratic party is conflated these issues okay both parties are conflating them here at the all-in podcast can we agree that yeah a group of people could recruit people for PHD programs more than one group of people allows across the border to take service jobs is the way to go but but look let me tie this back to Davos man what was the definition of Davos man it was somebody who is pushing this ideology of free trade and open borders to such an extent that it creates a nationalist backlash or populist backlash fair enough yeah that's exactly what's happened at our Southern border is you have the people who believe in Immigration push that ideology to such an extent that they won't create a rational sensible Southern border and process in our Southern border it's chaos down there I'm in favor of bringing in the Dream Team yeah in favor of bringing the Dream Team but the response of open borders is the creation of this nationalist movement right the Nationalist movement only exists in the face of open borders I think that's that's the point right like the extreme there's the extreme I think the immigration system should be based on points just like Canada Davos men don't if the Davos men don't start taking in start taking into account these National considerations around the defense of their borders and these issues around trade hollowing out the middle class then there's going to be an intense backlash and I don't think those Elites have been managing the situation very well it would have been better for them to pursue the more nuanced policy you're talking about why are we conflating the issue then why do the Democrats and the Republicans sacks make this such a polarizing issue instead of stating it the way I did recruitment because it's so busy you know when you when you conflate them you can incite an emotional response from your voting base that's it that's 100 of these issues that's why all of these issues get based out they get spaced out to the point that then you can drive someone to vote for you because you've now framed the other side as this extreme side and yeah you earlier said hold on before you got suddenly very reasonable you said that we have it's always where you haven't listened I'm in a quote something you just said a minute ago you said that we had to allow two to three million two to three million completely destitute practically illiterate migrants to stream across our border because one in a million of them might be an Elon Musk no no this could be no no hold on I was talking about you can take it back immigration typically includes when you say that word the Corpus of people coming in for education and the people coming across the southern border so if you were to say immigration most people would recently say that's both of those buckets I separated them out here so we could have a reasonable discussion recruitment of higher education talented people with low education migrant workers they are two different buckets and you have to be able to say these are two different buckets and that we should have a point based system if and this is the conversation that doesn't happen amongst politicians but can happen here look at Canada look at Australia they have what's called a point-based immigration system they give you points for everything that you bring to the country if you bring money if you speak the native language if you have a degree if you have a higher education degree or you have skills that that country needs our country needs to move to a point-based system if you're coming across the board and you don't speak the language and you don't have an education you have zero points if you have a master's degree two or three points and you can let in buckets of people based on compassion based on meeting service workers and based on needing the next Elon Musk or the next David sacks or Shabbat polyhapatia I think the the argument jaycal is that the compassion argument falls on deaf ears in a time where people feel we cannot afford it and it's a luxury to embrace that's the level of immigration right now just pick a number we can reasonably absorb this is what finally look at the southern border and see chaos obviously they want to get that under control before they're going to adopt your you know point-based system we can do two things at once we could do another point-based systems I like the idea of I don't know if my point was your points but in concept I like to find your points no no we don't need to I like the idea of admitting immigrants based on skills the country actually needs and a simple recognition that's better to bring in people who are neatly productive hold on they could add to our economy as opposed to being net government recipients dependents we're done we're done there are countries I just want to make a point there are countries the Scandinavian country specifically that have said we can accept up to this many folks who are uneducated who don't speak the language because we have this many teachers and this many slots in school and so I think it was Finland and Sweden they said we can accept 50 000 per year of this type of immigration based on compassion that's the reasonable discussion that has to happen here did you just say that we have to do these two things at the same time meaning that until we impose a an overhaul of our entire immigration system to be based on skills and points that we can't enforce the southern border no I think you can enforce the southern border and do it at the same time let me just tell you there's going to be Canada and Australia are already doing it let me just tell you there's not going to be a broad-based constituency in this country for the type of immigration reform you're talking about until you get the southern border under control because people look at that on the news and see chaos and there's no excuse me they should be thoughtful they should be thoughtful and they should just look at what Canada and Australia have done those countries have actually controlled this and it's not a polarizing issue there it's a pragmatic issue okay guys I'm going to move us forward to the uh the Banning of tick tock so I want to kind of change the the tone a little bit this uh story recently is that Tick Tock has been banned for use on the campus Wi-Fi network let's go at a number of universities including UT Austin Auburn Boise State the University of Oklahoma so college students can't access the app when they're on the campus Network this is following 19 states that recently banned Tick-Tock and government devices as everyone knows Tick Tock is a product from bike dance which is a chinese-based company and there's been quite a lot of political and Regulatory Huffs and Gruffs about bike dance having this level of insight and access to users in the United States with the Assumption being that much of the data that they're pulling out of the app is available to the Chinese Communist party which creates a security threat to the United States that's one argument I think there is also a significant tie-in to bike dance there's over eight billion dollars of capital invested in bike Dance by firms that we know well like Sequoia Capital tiger Global kotu Susquehanna and others they're trying to find a way to monetize their investment in what is truly the most viral fastest growing highest revenue growing biggest startup in the world right now in bike dance so there's a restructuring proposal apparently underway that's being discussed in Washington DC right now to try and restructure the organization and the ownership structure and the oversight of tick tock and bike dance such that U.S regulators and U.S companies can oversee the data the use of the data the algorithms underlying Tick Tock and monitor them from within the United States question for this group here on the McLaughlin group of 2023 is does that do enough for you McLaughlin do you guys think that that's enough first up is uh chamoth who's been silenced for a bit I think this is really bad news for bite dense basically what's happening is that and tick tock all the frustration that all these legislature legislators and politicians have had over Facebook and Google and other sort of big tech companies is going to get focused on bite dance because you have this common enemy that you can point to as a boogeyman of sorts and I'm not saying that it's right but I think that what you're starting to see is it's much easier to pick a fight with the Chinese company and win and get broad-based support than it is to pick a fight against an American company with a bunch of American employees and American market cap and American know-how and American IP that gets impacted so I don't think this is going to end well for tick tock and I think the goal if I were any of these people on the cap table would be to sell it in secondary to somebody else and get out I think the next big shoe to drop is going to be advertisers who come under a lot of pressure so for example think of all the advertisers that have left Twitter there is a point of efficiency where you can live with all of the mess that Twitter has because it comes with a lot less scrutiny and oversight and political pressure than advertising on tick tock and that I think is the next kind of like big wave here so I think it's very very bad I think the Enterprise value of this company is quite challenged and these guys should try to sell and get up who are the buyers in that secondary Market though I mean that's a lot of capital the thing is the cap tables haven't been segregated so what you own is equity and bite dance right but the problem is the look through ownership would will discount a lot of tick tock if they see a lot more of this stuff happening you guys have to remember this is the first three or four weeks of 2023. wait till we're here in September and October or November wait till the election year starts it's not good so it's a discount on bike dance that probably takes bike dance down by 70 or 80 billion so that's a 35 40 discount to their last mark so you know if somebody can sell in the high 100 billions of dollars I think you should I think they should probably they should consider it there's it's worth it I think Jacob I know you've got strong opinions I think you have to be incredibly pragmatic here this is the same as the 5G issue you cannot trust the Chinese government to not steal intellectual property or to put back doors into the software it is common business practice there Huawei was banned they basically stole the source code from Cisco that was proven and it was proven that they were spying on people Canada the UK the United States Vietnam everybody has banned using 5G technology from China for a reason because they will use it to spy on you this is uh the nature of an authoritarian government it is far too powerful to have a not only the surveillance capabilities that are built into owning Tick Tock in the hands of the Chinese Communist Party to have the ability to very in a very nuanced fashion Trends certain videos that would steer the United States in a certain direction yeah stupidity is one of course right they're letting their you need 16 minutes that 60 Minutes clip is incredible right they're showing science videos to the kids in China exactly and they're showing stupid nonsense to the kids in America what do you think over they're trying videos our children versus their children you can be 100 certain they're doing psyops on our children as we speak they are trying to make us dumb and distracted while they get smart and sharp by the way it's very simple if you're a Zucker so this is not the choices of our kids the algorithm just gives you more what you want exactly of course but that that's like saying if you gave kids a choice between broccoli and chocolate bars of course chocolate bars if you put this on the supermarket and say eat they're gonna go right to the cereal the job of a parent tax is number one know their name and then number two differentiate genetic pen and Pad sex good things and that's your questions the future is not bright for tick tock here because it's gotten caught up in the geopolitical Rivalry between China and the United States and that's only going to keep getting more and more intense the US and China are headed for a big security competition and by dance is caught in the middle so I agree with Jamal about the future but you know this claim is made that Tick Tock is spyware and you know it's listening to you it's surveilling you it's keeping track of you like what is the evidence for that claim I just want to understand that a little better like has anyone ever proven that like Tick Tock is spyware and if it is why doesn't Apple stop it can you just explain that to me yeah I think apple has a complicated relationship with China so the claim that they're not going to believe all right so Jake your claim is let me I just want to pin Jake out down on the first section your claim is that 100 Tick Tock is spyware and apple is letting it happen because their relationship with the CCP I do not have the evidence of specific instances of them spying but I do know that this is what the Chinese government uh aspiration is is to be able to have back doors to spy on all Americans that's why they you know are trying to get wow away well you don't even need to know that because you can just open your eyes and look at and I mean that's an insult but you can just look at what Tick Tock has the access to it has access to your location has access to your camera roll and it knows you know uh everybody in your Social Circle because it has your address book so by having your address book having your location and having access to your photo role they have you compromised by default the default settings when you install Tick Tock it turns on local network turns on microphone turns on camera turns on background app refresh and turns on cell data so tick knock is no worse than anybody else in that because a lot of other apps are very aggressively trying to harvest all that data as well sucks like it's like Alexa's always listening to you right but you feel but you feel safer with Alexa because it's a it's an American company or the perception of safety is there so I don't think there's a huge thing to prove other than yeah there's a setting that allows you to turn on the microphone and it's a default and they do it but they were caught I just want to make sure you guys understand this according to the New York Times by dance the Chinese parent company of tick tock said on Thursday that an internal investigation found that employees had inappropriately obtained the data of U.S Tick Tock users including that of two reporters over the summer a few employees on a bite dance team responsible for monitoring employee conduct tried to find the source of suspected leaks of internal conversation and business documents to journalists in doing so the employees gained access to the IP addresses and other data of two reporters and a small number of people connected with reporters via their Tick Tock accounts they were trying to determine if those individuals were within the proximity of by dance employees according to this company so there's an example of them using the technology to try to track down leaks hold on a second that's exactly what any app a company can do the photos the screenshots we got from Twitter that were shared in all those files or whatever that happened a few weeks ago showed that that many Twitter employees were able to log in and just view the direct messages between Twitter users and that there's no necessarily blogging or access privileges required to have access to that information there are these holes in all of these social networking and consumer uh digital consumer product companies that allow individuals to go in and do things it's a feature sure but it doesn't reference like some systematic um yeah but those aren't controlled by a government agency no that's that's the key thing what Jay Cal just said is a key thing everybody tries to get these things turned default on every app tries to get access to your camera roll to your contacts to turn on the microphone the problem isn't that those settings exist because Apple created them and Apple created a privacy framework where you have to opt out of it okay the issue is that that data instead of going to an American company with American on a with American data centers and American Service it's going to somebody in China or it's the perception that that's happening that I think is a Death Note and this is also excluding all of the work that every single big tech company must be doing to point the finger away from them and this is something they can all agree on if yeah if you got Andy jassy and Zuck and Sundar and Satya Nadella in a room what do you think they could all agree on hey guys are we better off pointing the fingers at each other or should we just point it over there to a company based in China so do you think do you think that Tick Tock in a way is being scapegoated here or do you think it's a real security threat both both yeah that's yes to both and you know what I think what we saw with the the Twitter files for me personally the one that uh was most concerning was the fact that the FBI was being treated they didn't have control of it like the Chinese government has control over by dance at a wholesale level but they were being given you know pretty um close to giving God privileges but they had more influence than they should have and they should have gotten subpoenas right so even in a democracy like the United States you can see the FBI using techniques to get employees on their side to get information on specific users imagine if the FBI just had God Mode for Twitter or Facebook like what would happen even in a democracy we see it happen we see abuse the Chinese government is a Communist party they have no problem sucking the data down of every single person and using it however they want I think the the problematic thing is that when you look at the capital structure of these Chinese companies post now XI being ruler for life is the Chinese government has typically a seat on all of these boards they also typically have a golden vote and so when you think about the governance the governance of these companies has tilted far away from a normal cap table where it's one shareholder one vote two you are allowed to exist on this cap table at the benevolence of the government and so I think that you have to factor that in as well Sac so you know is it Amplified probably but is there also non-trivial risk that we would never give to any other company absolutely like you know take the opposite example how would we react if the government had a golden vote and a board seat on meta going into an election I mean one party would be crazy and the other party would stay mum's the word that's what would happen well I mean let's talk about but let's let's be pragmatic the news reports that came out this week indicate that they're talking about restructuring bike dance so let me propose this to you guys if Tick Tock us were set up as Tick Tock us Inc it's its own C Corp it's based in the U.S and bite dance owns passive non-voting shares in Texas all the software all the services the algorithms are all run in the US the data is only sitting on servers and the Chinese have an economic interest ultimately and what happens with that asset but that asset is entirely managed right that's totally fine that should be a goal in the US shut it down or do that and if that happens you trigger cepheus so you'd have to then make an exception that sounds like it's part of the discussion that's underway right now is how do we get past this regulatory hurdle because I don't know guys I don't know how you turn off Tick Tock for 100 million people that are using it for two hours a day guys we're rejecting deals left right and Center at much much smaller thresholds because of cepheus because it's we're not and we're not even dealing with China assume you get past if yes assume that there's no that thing that's right away it's a bad assumption right but like that's obviously there's eight billion dollars a capital that's right the minute that if you at the Chinese government around and do an end around on cepheus to own 30 passively then everybody who's had a deal rejected for a much smaller threshold for a much more benign issue will sue except that they started with this asset versus buying into it right that's the difference and what they're doing is they're seeding that the difference here is their seeding control of the asset to U.S investors and oversight by the US government versus the reverse which is trying to come in and buy an economics that's not what cepheus adjudicates it doesn't adjudicate where was this originated adjudicates in this cap table does this person exist should they exist at what threshold what do they know and are we giving something that we shouldn't give and I'm saying yeah let me give you another um interesting if the pragmatic answer is you can't just make up a bunch of stuff that blows up a bunch of others though let me frame it differently what if bike dance sold Tick Tock us to a U.S owned private Equity Consortium I'm a U.S private Equity Consortium that effectively bought Tick Tock us and operated it here in the US but that's exactly what should happen but my point is those people are smart enough to not pay full price they'll say you're [ __ ] that asset is worth zero I will buy it for 10 billion dollars take it or leave it and you know what they'll have to do they'll have to take it so my point is the equity value is so impaired in this thing would you buy that for 10 billion of course I'm a buyer but these guys are smart enough to drive a huge barg a hard bargain so if you're existing on the cap table and you've marked it at 320 I would be [ __ ] selling it okay well look something like this is gonna happen so it'll be interesting to watch and if any group of people got together and tried to actually buy it for what the fair market value is worth via a spreadsheet is a horrible investor In This Moment if you should hold a gun to their head and you should extract a massive pound of Flesh that gives you a huge margin of safety and makes you money good we know people who are shareholders if they could have sold it at 320 or 120 they would have sold already well no there are there are people that will buy this thing in the hundreds that's in size then sell everything you can and then put it into another company now the problem is you have to show a markdown because you've already marked it at 320 so I got to take a 65 discount yeah if you're if if you're underwater you're underwater but for anybody who got into the sub 1 billion round you can't eat irr and you can't eat paper markups you can only eat the distribution so get the DPI and move on as well get the DPI and move on it's another bet you could place Why Try to okay be greedy and get the last 3x out of this investment I want to move away from software meets Leisure to software meets human health and productivity a couple weeks ago we were going to talk about this last week it was announced that bio and Tech was buying insta-deep insta-deep is a broad horizontal AI or machine learning tools company services business they partner with big businesses to help them build out ml driven infrastructure to improve their products and their operations and their businesses one of their customers was bioentech the company that designed and owned VIP for the original Pfizer covid vaccine one of the original Originators of mrna-based technology bioentec doesn't just focus on mRNA technology they also focus on cell and Gene therapies the the novel new kind of modalities that are emerging in in Therapeutics and you know it was a really interesting acquisition it was a 250 I think person team that they bought the company for about 600 million dollars specifically to improve how AI can be used to accelerate drug discovery I'll just make a comment on this and then sax I'd love to kind of hear your point of view on these types of businesses broadly the capabilities of machine learning when applied to a particular vertical are quite profound I you know I've certainly been involved in this space in agriculture and increasingly doing more of this work in Pharmaceuticals and and biotech and you know when you can have large unique data sets that you can then model using these tools and these capabilities and be predictive about what the next product iteration should be it can really change the value and the trajectory of your business one of the big trends in Pharma right now is to move from in vitro testing meaning you're running biochemical experiments in labs in assays iterating testing experimenting to see what molecules work or what protein does what and if it binds to the Target and doing more of this in silica as it's being called which is in software and rather than just doing testing and software you can actually use tools like Alpha fold that can be predictive of large molecules and how they can drive outcomes to make decisions about what to put in your pipeline so if you take 99 of the junk out of the top of your pipeline and you only focus on the one percent that the software predicts will be more successful you much more quickly get drug Discovery through the pipeline and you have a much higher hit rate so the ROI is extraordinary particularly when you're talking about multi-billion dollar revenue streams coming out the other end of that pipeline and so I think you know the way this reads these guys raised 100 million dollars in a round last year sold the company for 600 million it seems very similar to deepmind being bought by alphabet a few years ago where the application of the the team is pretty broad across a number of opportunities but bioentec bought them to focus on the kind of Pharma space so I guess tax you know in in the earlier stage and you know I see a lot of teams now that are like Hey we're AI for this or ml for that a lot of Pharma and biotech deals have to have the catchphrase ml or AI in their writing now because of the economic Improvement of those businesses are you looking at Enterprise software businesses that aren't necessarily about the typical subscription model where you sell a seat license and people pay for that but have this broad tool set and toolkit where these folks are earning Revenue share or participating in a Services Revenue stream for enhancing the value of their their their partner in the AI or ml space and what's the Better Business model because I think this is where so many new teams are starting out is what's the business model and what should we be focused on with our ml toolkit I mean the short answer is no we're having done any deals like that uh I mean we're not Pharma investors so I don't know how I would be able to evaluate even if it is a software product I don't know how to evaluate its um effect on Pharma outcomes so I mean we haven't done any deals other verticals I mean like do you look at ML and AI companies that are more services or partner oriented versus just selling seat licenses to a software tool I mean is that a big Trend you're seeing I don't think we have enough data to tell you what the trend is we did a deal called Pearl which is creating an AI for Dentistry so what it'll do is it scans in all of the x-rays and you know down records from from Dental practices and it gives a kind of a second opinion it can spot things like cavities and things like that or just changes in the condition where it's really powerful is over time right if it's got your last six sets of x-rays over uh whatever six year period it can detect changes that are probably you know hard for a human to see so they think they can get to like better than human sort of diagnosis by using computer vision and then we invested in sort of after that where we realized okay this is kind of like a powerful application so we invested in a company called Robo flow which creates tools for computer vision so Pearl created its own tools for taking a large number of you know X-rays and classifying them and then creating their own AI tools roboflow gives you that same tool set but you can run it on any computer vision project and they seem to be building a pretty big universe of software developers who are using their tools and in this case this was a team that was bought they bought a 250 person team for 600 million dollars that just had this capability set really and a toolkit does that change your outlook for investing in mlai companies when you see a 600 million dollar exit for effectively a capability they didn't have you know a core product that was in Market they were doing kind of these co-development deals but I mean how much does this already yeah ai's already the hot thing and everyone's kind of looking at this now I don't know like you know ever want to base an investment decision on the fact that some acquirer might come in and buy you for a large amount of money when you have no revenue or business model I just think like that's not really a sustainable although it does seem that AI Engineers go for 2 million each I think is kind of your point Dave on an m a basis yeah I mean your Deep Mind got bought for what 600 by Google and I think they had 200 people I think it was like 400 yeah it was like was it 400 yeah so yeah it does seem like and I think deepmind did not have a business Concept in mind when they were funded they just wanted to do research right that was kind of thing about that company platform capability similar to instant deep I mean there's a lot of these that's what I'm pointing out is like some of these platform capabilities end up just getting fought for you know huge Psalms yeah the amount you can't invest in a company hoping for an unreasonable acquisition meaning unreasonable meaning that unreasonable acquire yeah yeah like unreasonable meaning that your own metrics don't reflect that valuation as a business you might be worth it as a strategic acquisition of somebody else but you you actually raise interesting question which is is a seat model the right way for one of these companies to price the product and you may be right that that the seat license model doesn't really work because like how many seats do you really need to buy for these companies look I mean one of my like one product engineer yeah like I mean we've seen this we've even seen we've had these debates inside the companies I mentioned where like you know charging a 10 or even 100 a month seat doesn't doesn't really reflect the value of the insights that are being created and so yeah there are like you know they're I don't think this has been figured out yet but this is the big question in ml and AI when I was at Monsanto you know we had all this IP licensing deals we do or um new products would come to Market and it was never Cost Plus or simple pricing it was always about value capture it's in an Enterprise setting you know because we sold to Farmers it's like how much value Are you delivering for the farmers if it's a hundred dollars a profit an acre you try and charge an incremental thirty dollars an acre for that product and it was always a one-third value capture model and the same is true in biotech and Pharma the producer of the product or the co-developer of the product is often front of value capture and it's not a site seat license and it's not a service fee it's more ultimately we want to get a royalty on the outcome on the Improvement that we can deliver to you and so there's all these novel business models that are emerging at least that I'm seeing in Pharma and biotech to participate more meaningfully ultimately in the drug development outcome versus just getting charged a fee for doing a service or a fee for a license to a software packet the value of these companies has gone down I was a early investor series a investor in a company called Flatiron Health we sold it for 1.9 billion dollars to Roche that's the biggest exit in this space for this machine learning enabled stuff it happened in 2018 and so what's really happened is the value of acquisition in M A has gone down even as a technology capability has gone way way up and why is that it's because this stuff has yet to be proven to actually meaningfully improve the hit rate for these drug companies so whether it's biotech or Roche or anybody else the biggest problem we still have is getting the design space guessing that better and these machines are better at doing raw calculations but they're not necessarily better at veering towards this design space over this design space and so as a result you're not improving the the either the slugging percentage or the batting average of these Pharma companies and that's why they're paying less and less so everybody will have this capability as an adjunct the thing that you have to do is sort of what what you guys have said which is if there's a company that can actually do better guessing at the top of the funnel the thing that you should probably do is just give it away in return for a back-end rev share and a royalty and that business also exists so you know the best performing company in Pharma is a company called royalty Pharma it's a 22.5 billion dollar company that has 90 ebitda margins it exists in Ireland it's run in New York by this wonderful entrepreneur Pablo lagaretta but that's what he does he buys small pieces of royalties and his whole thing is like the Paul Graham thing at YC I'll give you just that little amount of support and all you need is a little lift in valuation to justify giving me the six percent and the tooling company the AI company that does that could win who would go to Roche and buy on Tech or lily or somebody else and just say look use my tools and whatever drug you generate off of me I just want a three percent royalty and all you need to do is just show a three percent lift across a portfolio of assets that would be a killer business model because if you look at what Pablo's done over a large number of successes that's a ginormous company Jacob I mean are you investing in the seed stage mlai companies and are there novel business models that you're seeing we're not sensors yet to be honest we are seeing people play with chat GPT and kind of do you know experiments but you know the more I've used chat GPT we've connected it to our slack so you can actually ask a question in our slack in a channel called AI testing and it will give the answer and everybody can see people like playing with it he you know it's kind of like a parlor trick now I'm in like that phase where I'm like yeah this is impressive but it didn't actually solve my problem and it's slightly faster than doing a Google search so I am thinking there's going to be a really good business uh created in taking the open source projects and forking them and verticalizing them like you know saxes one that's doing dental work you know like this makes sense to me somebody should do it in accounting somebody should learn all of Gap accounting which is pretty simple because it's published fasbi all of this nonsensical accounting rules and give you a hundred percent guarantee of no malfeasance so for example you guys saw this Brazilian company you want AI accounting that's your that's your look at this company Logistics look at this company americanas in Brazil which just torched 20 billion dollars of Enterprise Value why because these guys were using Excel to do a bunch of complicated capitalization and cost accounting made two or three years of mistakes it added up to two or three billion dollars and they're basically going to file bankruptcy in the next few days that's completely avoidable human error that should never happen and an AI would be perfect for that like this is not super controversial to just follow Gap accounting right yeah I don't know if you need AI for that I think you just need software like a database would be good but no the problem is the database exists today like everybody sits on top of Oracle GL or workday it doesn't prevent these errors so my point is you got to get humans out of the system and the AI should be the accountant the AI knows the rules generates the p l and says this is it and by the way that's way better risk management for the CEO and the CFO because as you guys know if you're the CEO of a public company you have to sign your signature that these things are legitimate and how do you know right I would way better know that a computer did it like an open AI algorithm tells me Tremont this p l is perfect then some dude I don't know at Ernst Young okay I have a question for socks saxypoo can you please explain to me why Alec Baldwin is going to get charged with manslaughter for this rust thing that seems really crazy can you just say could you explain what happens on a set with guns and how the hell did this happen like what the hell is going on well I've produced two movies but neither one of them involved you know guns or shootouts or anything like that so I haven't had like first-hand experience with this I have you're a gun owner so you're an intersection of movie producer and gun owner so it's a good yeah I understand the rules of gun safety and and that kind of stuff look Alec Baldwin did not follow the rules of gun safety the first thing I would do if I was ever handed a gun would be to clear it I'd like check to see if it was loaded and clear it I mean you never pointed at you at somebody you always treat a gun as if it's loaded even if you think it's not but he was in a very specific situation which is he's on a movie set and the person who's handing him the gun is the armorer and someone whose job it is and said Colt gun yeah exactly it's somebody whose job it is to make sure that the gun is handled properly and unloaded and all that kind of stuff and they're using it on a set so I agree with you I don't quite understand why Alec Baldwin is liable in that situation for the gun going off the person who screwed up here the person who screwed up is the armor the armor I have a question a person whose job it was to never allow live ammunition on the set but to handle the guns properly this person movies was that they were flying blanks yeah they were so you're in blanks but they had blanks and regular ones in their kit for whatever reason because they were shooting real ones as well but this is involuntary manslaughter and I think Baldwin is also the producer of the film so I don't know it has to do with his hiring of the armorer you know what I'm saying that I can that I can speak to listen yeah you you frequently give stars in an independent movie a producer title he's not responsible for the physical production of the movie I bet anything he's not there's a guy called the line producer who's responsible for the physical production and my guess is he wasn't even responsible for the business side of the production they've got other producers for that so it doesn't make sense to me if they're going to charge him for having some sort of overall liability as a producer to then not charge the other producers that just doesn't make any sense so I think this producer credit thing's probably a red herring like I said I think the armorer is the person who is seriously responsible for this situation there are the ones who screwed up they're the ones who had a responsibility to make sure that the gun handed to an actor I mean Alec Baldwin's an actor yeah look conservatives in social media are dragging the guy because they think he's a douchebag and he doesn't know how to handle guns but that's not his job he doesn't he's asking questions in movies why would you ever have live ammunition on a movie set you shouldn't they shouldn't have you shouldn't it's a mistake so so it's not as if like the scene is different if you have a real Bullet versus a blank if I remember right there was a story about how the gun Armory people were taking members of the cast and crew and they were shooting guns for fun in the distance they were doing like targets and messing around and teaching people gun stuff and just playing around but using live ammunition and that that led into an accident that there wasn't good kind of transition that's really bad that sounds like the kind of negligence that caused this but unless there are facts we don't know about I don't know why being charged by the way the armor that sounds totally legit to me so guys listen I need to run another call I was going to talk about this really fantastic paper on the one of the driving forces of Aging as demonstrated by a team from Harvard in in collaboration with many others on epigenetics and the loss of data integrity and epigenetics really being the core driver of Aging in mammalian cells it's an incredible paper it speaks a lot to what we talked about last year yamanaka factors and partial epigenetic reprogramming of cells how they can reverse aging these guys have demonstrated it in a really powerful way I'd love to spend some time on it maybe we pump that science corner to next week wrap up for today I think we've talked about all sorts of fun stuff it's been a real pleasure and an honor to be in the seat of the world's greatest moderator we missed him today we honor him we look forward to having his return next week chatting with you gentlemen and on behalf of the all-in Pod and my co-hostia David sacks Jason callicanus thank you for listening bye bye love you boys your Winner's ride rain man [Music] we open source it to the fans and they've just gone crazy [Music] besties [Music] we need to get Mercies [Music]








sexy blue how much heat and momentum has Nikki Haley gotten this week oh my God stop trying to make Nikki Haley happen fetch is not happening stop trying to make fetch happen stop trying to make Snapchat it's happening this is like my long Google short Facebook spread trade of last year it's happening that's just that's happening okay stop [Music] stop Rain Man David attack [Music] just as a um programming note we did a Twitter survey and you selected sax as the person you wanted to moderate the Pod most next so welcome to Fox News Sunday and here's your post David sucks you're really chafed about this aren't you Jacob no I'm excited for it I'm so excited just to save a keyboard Warrior the time I will never ever ever moderate this thing so I'm here to talk all right three two welcome to the all in pod I am your host the Rain Man David sacks the famous Doomsday Clock that Atomic scientists use to measure the threat of nuclear Annihilation has never been closer to midnight not even during the Cold War but since the best you think it's more important to discuss their stock portfolios we're going to save Ukraine for later in the show priorities right gentlemen and why not who says you can't take it with you the dictator is planning to be entombed with his money like an Egyptian pharaoh and with his sweaters too even though it certainly won't be cold where he's going and of course he'll throw in the world's greatest moderator Jason calcamus and the tune to be his servant in the afterlife it's a little Jake house been preparing for all his life by sucking up to every Tech founder of BC you can get in a room with I give better odds to the Sultan of science David freberg he's just paranoid enough to survive with me in the bunker even though he still won't be questioning the Davos Elites that got us here how much did that intro cost does he come with the money back refund you guys are laughing I'm laughing I don't know I'm laughing I thought with you or at you that's good the funniest part was when you almost read aloud like it's like you were like and then David Friedberg insert pause here it's an intro it's an intro I'm so glad we do an unscripted show okay go ahead Freebird I remember when you did the intro come on did I read actually didn't we cut it yeah you read and then you cut it you hated it and then we made you put it back in or something like that all I have to say Tremont is job security is here all right well done okay issue one issue one Google breakup the justice department and eight states are now seeking to break up Google's business brokering digital advertising across the internet this is one of the most important legal challenges the company's ever faced filed a lawsuit on Tuesday the justice department did alleging that Google abuses its role as one of the largest broker suppliers in online auctioneers of ads placed on websites and mobile applications the filing promises a protracted Court battle with huge implications for the digital advertising industry of course Google responded to the lawsuit in a blog post saying that the doj's request for it to unwind to previous Acquisitions from a decade ago is an attempt to rewrite history they said the doj mischaracterizes how its advertising products work they say that people choose to use Google because they're effective and the company highlights other companies Making Moves In the advertising industry as well such as Microsoft Amazon apple and Tick Tock so I guess I'll kick it to you chamoth do you think the doj has a case here do you believe that Google has a monopoly in online advertising and is unfairly using it to gain market share and is this the right remedy breaking up the company yeah I think that this is a totally ill-founded lawsuit and I think it just shows more of the personal enmity and anger that some people in the U.S government has towards entrepreneurs and Entrepreneurship than anything else now why is that let's just think about what a monopoly is I mean a monopoly or a monopolist effectively creates a completely stagnant non-vibrant Market in which they have pricing power and complete control now the argument that I think that refutes that just on its face is if you actually look number one at their share and number two how the rest of the share has changed over time so Nick can you just please throw that up from Bloomberg this is just in a Bloomberg article that I just shared with you guys but Google controls 26.5 percent of a market 43.4 percent of that market is with a diverse group of others meta has 18.4 percent and Amazon has 11.7 this is not the type of pie chart you would see if you had a monopolist so for example if you went back to the big big big monopolist case in the 1980s which is when we broke up Ma Belle well what that Circle would have shown is that they basically had effectively a hundred percent share and what this shows is that there's a huge diversity of people in this market the second thing is that if you had done this chart many years ago Amazon would not have really even been there and over the last five years they represent almost 12 percent of the entire market and it means that if you forecast It Forward they could be at 15 to 20 percent in a few years as well so while the pie is growing and definitely Google takes a lot of the profit dollars the distribution is so much more than what anything looks like in a monopoly and so I just think it means that the doj is more focused on trying to punish these Great American companies than it is in trying to be logical and reasoned and so I don't think this is going to work the last thing I'll say about this is that if you think about what you should have done if I were the US government I would have actually focused on search because search is a monopoly for Google and while Google would try to argue that there are other ways of acquiring information that is really not true and if you could prove that that Monopoly then led to pricing power in ads I think that's a much more nuanced but logical argument that could work but by focusing on this I think it's going to get deconstructed it's going to fail the Texas version of this exact lawsuit already was thrown out of federal court so I think that judges and the legal system don't have a lot of patience for this thing it just meant more to kind of scare American companies and try to play Boogeyman and decision maker and I don't think it's going to work freeway let me go to you I think you know tremath raises a really great point that if you define the market as digital advertising that you know Google's market share is only about a quarter that doesn't seem like a monopoly however what the government says is that you shouldn't look at digital advertising as a whole but rather this sort of brokered advertising that you know Google does for third-party websites and applications let me show a chart from their lawsuit you can see here that the way they Define it again they see it as this brokering of sell side inventory which our website Publishers and then buy side demand which are advertisers defines this way it looks like Google has 90 or more market share on the sell side because the doubleclick acquisition they've got somewhere between 40 and 80 market share on the demand side with advertisers and then in the middle they have over 50 market share of the ad exchange is this the right way to look at Google's business or should we be just thinking about in terms of the overall digital advertising Market I've been involved in ad networks since about 2002 so it's been obviously I'm not directly involved in the business anymore but I was pretty close to this and I was pretty close to double click in the acquisition I was a business product manager for a period of time on AdWords so the way that that chart kind of shows the connection between advertisers and Publishers is correct that an ad network uh generally speaking brings buyers of AD inventory to the sellers of AD inventory and the sellers of AD inventory have the option to sell their inventory on an ad Network and if the money that they're making on those ad slots that they have whether it's a slot on the side of a page at the top of a page or an interstitial video ad whatever it is they're going to keep selling their inventory through that network if they're getting paid the most and the real reason Google has won is two-part one is because they ran their ad Network as an auction meaning advertisers were competing with each other to pay the most for an ad spot that was the highest quality there's also an ad Quality Index uh calculation a click-through index a bounce back index so there's all this data that feeds into Google's ad Network auction so that the ad that's shown on the publisher site is not just the best ad for the publisher but the best ad for the consumer and then when the consumer clicks on the ad the publisher gets paid and the second thing that Google did and so the auction Dynamic is a really powerful Dynamic it creates the best price for the publisher and it creates the highest quality ad for the user which translates typically into higher click-throughs and and better Revenue what they also did that was really powerful is they did the highest revenue share in the market so historically ad networks had like a I think initially like a 60 40 red share where they only paid Publishers 40 of the revenue The Advertiser paid then the network started to move to a 55-45 model then a 50 50 model then a 45-55 model I believe on average Google currently is paying somewhere between 70 and 80 percent to their publishers I gotta check my math on that or whatever the latest yeah yeah so but call it 70. and so it is a very competitive share now the the point being because it's an auction system and because it's opt-in by the publisher if they're not paying the highest price the publisher can go and get ads from somewhere else and historically Publishers built their own sales force to sell ads and to Source advertisers and to make money off of their ad inventory and it turns out it was a lot more effective to use an ad Network to do that the other AD Network simply haven't been as good at building an auction model and building competitiveness but I will tell you that when you get to a certain volume and it's not a big volume you don't need a million advertisers bidding against each other you only need a few dozen advertisers and once you have a few dozen advertisers bidding against each other you start to get very competitive in inventory so Google's real lock-in with Publishers and the real reason they win in this Marketplace is because they've their pay the Publishers the most and if you try and break this up and if you actually do try and you know get into the the weeds of this whole system and change it the Publishers ultimately will make less money and this will be a real problem on the publisher side that they're making the most money they're getting the highest share of advertisers spend and consumers are getting the best quality experience that's what makes Google's model so hard to tackle from an Anti-Trust perspective because it's giving so basically is what you're saying that because fundamentally this is an auction model it prevents Google from extracting Monopoly rents correct and and already paid the highest share on their ad Network back to the Publishers and so you could go in and say hey high 60s or 70 they should be paying 90 what's the real right number if they're already paying more than anyone else to the Publishers they're already making a lower margin than anyone and I'll say let me just let me just add two more things sorry which I think are just well can I go to jaycal first I just want to get Jake Owen here even though he wouldn't do the same for me yeah Jake how do you agree with Freeburg that uh that the reason for Google success is that they're hyper efficient and this auction mechanism prevents Monopoly Behavior no I there is Monopoly Behavior going on at Google obviously with search and putting their own content and services up top and to shimon's point like that's probably the easier Target here this just feels like they are maybe 10 years behind they should have just blocked the double click you know acquisition in 2008 and this consolidation of power the the what Publishers would say to friedberg's point is when you're selling your own advertising you get a much higher CPM when you go direct to Samsung or IBM or Disney and so you want to create those direct relationships how much do those direct relationships cost it's probably 20 or 30 percent which is exactly to the percentage that uh Google is taking off the top so Google's pretty aware of that but it's just paradoxical that they're doing this at this time David because Amazon has developed a huge ad business Netflix and Disney have now have ad tiers for their services to go up against YouTube so and then for the first time we're even talking about Google search Supremacy being challenged by chat GPT so right with Microsoft you know they're they're just late 10 years too late maybe right right so to use one of your favorite words is the doj acting as a rug puller here for Google in the sense that they're trying to unwind 10 year old Acquisitions is that does that make sense yeah it doesn't make much sense should the government be able to unwind Acquisitions that happened a decade ago does that make any sense no of course no that they should they should learn from it and not do it again yeah sex what do you think I think it's a pretty bad way to approach things because it creates so much uncertainty in the marketplace and has a chilling effect on future Acquisitions yeah like when you get approval from the government you want to know you're good yeah and we have an approval process so it seems to me I agree with Jayco like if the government is going to have a problem with an acquisition state it up front but then once they approve it you're approved you're done otherwise you know companies will be much less likely to engage in Acquisitions and that's kind of a chilling effect on m a behavior in the ecosystem which is bad for the ecosystem as a whole well it really does it puts us competitiveness against every other country and any other regulatory regime that'll be more permissive to this stuff that doesn't make any sense and I think this is what's lost on this I just feel these lawsuits right now are bordering on the mean-spirited because these things have been tried they've generally failed and so the real solution it always goes back to this and it's ugly and messy is you need to rewrite the actual laws to reflect how business conditions exist today and so it's not the responsibility of the doj to try to fit a round peg into a square hole it doesn't work like that and that's what they're trying to do they're trying to manipulate and contort the law to try to go after somebody that shouldn't frankly be gone after because these deals to your point were done a decade ago and they were done legally and they were done rightly so if you have an issue with how the market has evolved change the law right I'll also add I totally agree with chamoth I think that this action you know as one of our friends put it on our on our text stream it's like killing the Golden Goose I mean this is one of the the big job creators innovators and taxpayers and employers and drivers of economic growth and why would we allow that to go and kind of burgeon offshore as a as a government this is absolutely um going to become uh kind of an opening for some you know International competitor to come in and try and provide alternative services with similar economics I'll also say I just sent you guys a link I'll send you one more the market itself is becoming so much more challenging to operate in as an ad Network you know e-commerce so Amazon's ad business is booming right as Jamal pointed out earlier but so much more of consumer behavior is Shifting where people are going direct to e-commerce sites and then the ads that are getting the highest click-through and where advertisers are spending more and more money uh is on e-commerce sites I know this from experience on a couple boards I'm at where companies stop spending on Facebook and Google and just started spending exclusively on Amazon and that's where you get consumers that are much more likely to purchase the purchasing proclivities higher the click-through rate is higher so the return on ad spend is much higher and then I think that there's a big shift happening right now as you guys know with third-party cookies Google has declared that they're removing third-party cookies in 2024. this means that in 2024 it is going to be very hard to track a user from one website to the next if you go to a website and look at furniture and then you go to another website third party cookies allow an Advertiser to find you on that other website knowing that you were just looking at furniture and send you a Furniture ad and say hey come on over and you're more likely to click on that ad it's been very effective for advertising and particularly in the segment of advertising called retargeting but it is becoming much harder to do this with third-party cookies and with the Apple identifier being Inked and Google just made an attempt to try and get this change with the w3c that was rejected and that change is now going to make this hit very very hard beginning in 2024. so the ad networks themselves are already being massively hurt by apples ID changes the third party cookies being removed it's becoming harder to Target consumers harder to make money as a um for Publishers so meanwhile the Market's being challenged Amazon's coming in the inverse definition of a monopoly when you have a market where there is dynamism where companies are changing the rules and that is reallocating share gains to different players that's the definition of a dynamic Market that's self-regulating totally five years ago this would have made more sense yeah much more sense so I think just this goes back down to one basic thing which is do our elected and appointed officials really understand what's going on in the economy and I think this is an example that highlights not as much as they should and before a lawsuit like this gets filed they should call us up if they called 30 of us into a room one by one and said can you please explain how this works you would have come to a different conclusion because we could have articulated these things and it would have been clearer and so why do they not do that or if they do do it who's actually in there either way whatever's getting to the conclusion of let's go file this lawsuit in 2023 is late at a minimum and misguided at best you know you have to ask the question like how is this different than Xi Jinping saying you know what Jack ma is too powerful therefore he's going to learn Japan I think this is like Google it is totally different totally different other than that of course I think that this lawsuit makes no sense you always better bring it back to China does everything in your brain have to Virtue signal like it's like intellectually interesting conversation Jason intellectually honest position exactly let me finish before you jump the fence very simply you asked like why are they filing something that makes no sense my position I think they want to have an outcome and their outcome is they want to stick it to Big Tech because it's too powerful and then you just said yourself square peg round hole they're trying to find something to get Google on this is not it how does it because it relate to China agree with Jay Cal here actually I'll defend it for a second world second greatest moderator yeah third greatest take China out of it for a second because that could mean that could mean a lot of different things and so I don't want to get hung up on that but it does feel to me like the government is lashing out against companies like Google because they're perceived as being too powerful that's what's going on and in fact I mean that's Lena Khan's theory is that we have to stop big tech companies from getting bigger because power but in this case it doesn't make any sense because the auction market for advertising is very competitive and the remedy of unwinding 10 year old deals doesn't make any sense so yeah they're they're just kind of barking up the wrong tree there's two other things that they really should be looking at as these ad Networks are losing their market share in the overall digital ad spend there are two other players Disney uh you know and uh Netflix doing these digital ads on their platforms and having ad tiers and then you may have noticed Uber's doing an ad business now they did 350 million dollars in the first year of that business a million a day and they're projected to do a billion next year and those have location information in it because you have your destination yeah and so those networks and opportunities are emerging it's a dynamic space I just want to say like you guys are making like I think a really important macro point which is like in a Marketplace it's always easy to hate the winners and claim that their success is unfair if you're not part of it and I I think that just because something's successful in a Marketplace doesn't mean it's a monopoly you know this whole thing of envy you know we've we've heard from like the Berkshire shareholders meeting I think there was a good conversation around this but Envy really is ultimately the Doom of innovation and democracy it's like you see the success you want to take down the successful nothing can be too successful or else it has to be destroyed and then you know as we talked about it's going to go somewhere else well I mean just play Devil's Advocate with it on that free bird it sounds like we all agree that the government has kind of the wrong Theory and is barking up the wrong tree here however isn't it the case that Apple and Google are too powerful maybe not in this auction advertising auction Marketplace but when it comes to the App Store I mean they have an operating system in opoly with IOS and Android or duopoly but I think you're you're bringing up the key point which is these nuances are the ones that matter there is a body of law today David that you can apply pretty intelligently and thoughtfully to that exact problem and also to Google search and so it's a bit of a head scratcher why the doj hasn't spent the time to figure out to even understand that that's actually where they should be focused because that is where there is truly in the afternoon it's a duopoly so it's very clear the share shift has already been set there is no share shift happening to a third player there is no side loading that's really happening and so domestically in the United States and Western Europe there's a de facto duopoly complete control completely inflexible inelastic pricing that is a monopoly and then separately for surge in the United States it is also an effective Monopoly and those are the things where if you really wanted to go after them because you think there's some damage being done to people I would have focused there but the ad business has nothing to do with any of this and just means that right they don't understand how the market works right okay so shifting gears Microsoft has just been sued on Anti-Trust accounts or rather there's a pro by the EU and this was based on a complaint actually from slack slack filed a complaint back in 2020 that Microsoft was basically engaging in in bundling or tying of products the allegation is that Microsoft fairly ties Microsoft teams and other software to its widely used office suite do you guys think that's a better claim okay so I mean I'll just say like you know there was an episode that we did I think back in September where I basically railed against Microsoft for exactly this kind of bundling it seems like the EU has picked up that theory and wants to go after bundling we did slack series a I was on the board took it public blah blah blah I'll tell you the thing that we talked about a lot that was the thing that I was always like the most afraid of which is how can we compete with a better product in the face of Superior Distribution I think what Microsoft did was anti-competitive but I don't think it was monopolistic and I think that the EU in that time has a much better framework of laws that they had demonstrated up until now they were willing to enforce around anti-competitive pricing and so part of what slack was trying to do was create some airspace for that to get into The Ether to the discussion that it's like we could build the best product in the world but if Microsoft gives it away with this other product that is quasi-essential they'll always beat us and there's nothing we can do about it what do you think and I think that was basically the question that was posed to the European authorities because we thought that they would pay attention to it what's interesting about it is that then you know when the acquisition happened to Salesforce it sort of waters down that claim because now Salesforce also has a set of really essential products that are useful and needed in the market that slack can go and attach themselves to and in many ways David it forced the hand of slack to be acquired by Salesforce and if not Salesforce it would have to have been somebody else but could it have been an independent company had we not had to compete against teams in that way meaning if we had to compete against another well-funded startup would it still be public I suspect so I don't think we would have sold to Salesforce well that's exactly was my point when we talked about this last time is that if Microsoft can basically clone the sort of the the Breakthrough Innovative product you know just to say they do one every year and then they put a crappy version of that in their bundle yeah 10 20 or 50 worse but they give it away effectively for free as part of the bundle and then they basically pull the legs out from under that other company so it can't be a vibrant competitor and then the next year they'll just raise the price of the bundle right and they've done that with slack they've done that with OCTA they've done that with zoom you know Jake how can we have a vibrant Tech ecosystem at least in B2B software if Microsoft can just keep doing that indefinitely yeah it's it's a difficult question I don't know though if what the consumer harm is here if you keep adding great features to a bundle so to take the other side of the argument you know Zoom has now added channels like slack slack has added huddles which are essentially Zoom calls and now they're both going to try to add the coda and notion wiki wiki style you know documents to both zoom and slack so everybody's copying everybody's features everybody's incorporating everybody's features it takes a little bit of time this is actually a lot better behavior for Microsoft than the old days when they would do something called vaporware they used to announce products to chill people from buying them so they would announce a slack two years before slack came out just to get people to not install slack they did that with Lotus Notes they said they had a Lotus Notes competitor coming for two years and it never materialized so I think the marketplace will compete and if you look at slack itself it's still growing the same percentage growth it did inside of Salesforce that it did as an independent company so it's growing at a similar point about that great Nick can you pull up this chart yeah it was like High Teens or something was there was there I mean it looks like from this chart that slack is kind of leveled no no that's the number of users I was talking about Revenue okay if you look at slacks Revenue quarter over quarter it's basically it wasn't there a report that it's been a little bit of a disappointment to Salesforce or no well I mean you know this number here that we're looking at where it says 75 million Microsoft teams members 12 million stock members by the way if you wanted to if you wanted to play conspiracy theorists maybe that's why there's a falling out between benioff and Brett I mean Brett was the champion of this deal you know 28 billion dollar acquisition and 28 billion dollars is threading a needle the the only one of that scale that's really worked out definitively has been LinkedIn so if slack hiccuped in a moment when we also had a regime change in rates and valuations now look at benioff as looking down the barrel of a activist investor program from Elliott man I mean yeah maybe it's not doing as well as they needed it to I got the sense that benioff was genuinely sorry that Brett decided to leave and that it was voluntary voluntary on Brett's part and regretted basically as opposed to you know a non-regretted termination I have no idea like I said I was I was pre-qualifying with saying let's play conspiracies fair enough okay you have a suggestion here's a suggestion for The Regulators that are listening or watching our podcast a really valuable thing for the industry that you could do would be to introduce transparency on elas what are those Enterprise licensing agreements these are these things that these big companies use to throw everything in the kitchen sink into a deal when they sell to a company but if there was transparency and there was a sense of how those things were priced so think of it like the FDA saying here's you have to publish your ingredients right and what percentage of it is this and that it would be really beneficial because it would slow down the tendency of these big companies to try to kill the small companies with these poorer products and something around elas and more transparency around pricing to the market could be a good Governor without having to go down the path of all this antitrust legislation after the fact I think there is some good advice for Regulators there I think they should focus on anti-competitive tactics and like clarifying what those are as opposed to some of these crazy lawsuits to break up companies that don't seem to have well-grounded theories it'd be I think better to focus on the specific tactics that create the harm and identifying what those are Jake out of your point about how what Microsoft is doing doesn't seem to be harming anybody it seems to be benefiting consumers I think that's a valid point but I would bring up a different example which is if you look at the anti-competitive behavior of dumping where a company will basically dump its product on the market for free destroy all the other competitors and once they're out they can raise prices because the barriers to entry are high there's a huge cost of like basically entering the industry I think that this bundling behavior is a form of dumping where in the short run it looks like consumers are benefiting because they're getting Zoom a zoom clone for free or you know a slack clone for free but then what happens is once they've you know hobbled those companies they raise the price of the bundle so I think if we want to have a healthy long-term ecosystem I think this type of like bundling behavior is bad I think it's anti-competitive it's a great point but I think there's a very specific solution for it you don't need to break up Microsoft what you need to do is require that when they create a bundle every product in that bundle needs to basically have an individual price exactly and the price of every product in that bundle should add up to the cost of the bundle so they can't do like you said charmath these like transfer payments or subsidies to basically you know take over systematically take over every SAS vertical I think that would be amazing by the way there are many other markets David where that exactly exists where if you have the ability to preferentially put your product into your distribution Channel you have to transfer price it transparently at the market and it's what everybody else would be able to get it at and that then allows the best product to win in the market and it gives the government the ability to say I understand that these rails are roughly monopolistic but I'm going to leave them alone as long as you treat everything that sits on top of those rails equally and that Nuance is missing in software so I think the combination of transparency in these Enterprise licensing agreements and more transparency and accounting treatment for what you just said would solve a lot of this problem and you would have a more vibrant ecosystem where the big guys can't just snuff out the small guys whenever they want yeah I disagree with you guys oh let me just let me just play let me just play my devil's advocate which is kind of how I feel uh as well I think these concepts of um monopolistic bundling made a lot of sense I make a lot of sense in the sense in if if what you're bundling in the service or the product or whatever is a commodity product and these statements that you're making assume that one messaging service is the same as a another messaging service that one video app is the same as another video app and that by giving a discount they're going to win the market the real that may have made sense back in the day when there were things like trains and trains had a monopoly on where things could go or electricity or oil production and all of the kind of origins of kind of monopolistic antitrust laws and actions started to kind of emerge here in our free market in the U.S but when it comes to software if your product is the same as the other guy's product maybe they deserve to win by bundling and maybe it's okay for them to offer a discount and beat you on pricing because if your product is actually better and it provides better Roi for the customer it has a better feature set it's faster it has a bunch of stuff that the other product doesn't have the market will pick it it's not that the Market's going to say hey we're just a bunch of idiots these products are so differentiated but because these guys are giving me a discount I'm going to go over to the discount that's not how it works and you guys know this I'm not saying that Microsoft can't copy slack and then under charge a different price and charge a different price and a lower price and discount it what I'm saying is they can't cross subsidize they're a slack competitor it's the fact that they can copy slack that makes Slack that means that slack should lose the fact that that slack actually creates almost look software new software is really hard to create but really easy to copy I mean the first version of a new product is hard to create but you can reverse engineer almost any software product show me where someone's made a better competitor to Google search show me where like consumers don't choose to go to another search engine because Google's built a better search engine no it's because there's a Data Network effect there that the more searches they provide the more data they get it's the reinforcement learning I'll say I'll say it differently it's easier to copy there's an asymptote to that quality point though I don't think that that's necessarily no I think there's a Nuance here that and by the way all the social networks that people thought were had massive lock-in effect turns out they don't right David no dude that's not true look there's more lock-in deeper in the stack that you exist there's very little lock-in at the application layer so workflow apps which effectively is what most of these Enterprise software things are are very copyable because there's nothing that really locks it in but if you're a social network or if you're some deep machine learned thing that basically generates great search results that's much harder to copy because more and more of the product precise generates the product quality is underneath the water line but I think in Enterprise software it's all thin UI layers on top of very simple then don't compete because the bigger guy that offers a discount is always going to be you what he's saying which I agree with is you just if you could add transparency so that you understand what is happening I don't think anybody's against transparency nobody should be against against it and if if Microsoft wants to charge a penny a seat for teams then they should be allowed to do that I don't think we're saying that they shouldn't a lot of startups have used the opposite tactic where they've entered with free offerings or free services and then they try and upsell later and we don't complain about that there's a lot of ways to compete in the marketplace but that's my point there's a lot of ways to compete in the marketplace If the product you're offering is of parents no the problem is a commodity build something that's different enough that people are willing to pay for it well then you know that they're willing to pay more than they'll pay the big guy that's giving them a bundling discount just build a better product then the whole B2B SAS space should basically pack up shop and go home we should just stop funding VCS just to stop funding new SAS companies because and all those productivity games will just go up the window yeah why would you fund any you know it's a definition of anti-competitive then yeah how's that bad for the customer they're paying less and they're getting a better price there'll be fewer new products created yeah freebrook at the limit what you're basically saying is because Comcast is a monopolistic provider of my internet connection I should have to take their video offering and will never or use Netflix no it's a they have they offer a commodity that's my point if you're offering a commodity these things should apply it makes a ton of sense effectively and what you just said is that B2B software is effectively commodity and you want to copy it anyone can reply to you I'm turning this off you only have one choice and it's mine because these is my rails and I built it you would turn to the government to help you because you would say but Netflix is a better product and what David is saying is the exact same argument so my point is unless you also believe logically that you're allowed to turn off Netflix if you're Comcast and take their crappy VOD service then you're you're at least intellectually consistent commodity too steel is a commodity too and you can't engage in dumping I mean this is the argument is that for example you know with respect to China the argument was that they were dumping cheap Steel in the U.S market to drive all the US producers out of business and then once they were out of business they'd raise the price the point is there's all these examples where we have had the intelligence and the ability to be nuanced about this to see that these things are possible and they shouldn't exist we don't let Comcast turn off Netflix okay we have a law around that I understand so my so I think what we're saying is Embrace and extend this law for these new markets that didn't exist 50 and 100 years ago when these laws were written so that the same benefits that we have in the steel market and in the cable Market we have in the software Market it'll just create a healthier ecosystem Jacob you want to get in on this yeah I wonder when you install teams does it automatically when you install the Microsoft Office Suite does it automatically install teams because it does seem to default there matters do people have to actively turn it on or is it actively built in and so the bundling of it I think matters and that interoperability matters so there are other vectors here to force them interoperability so if you open your Windows machine do you have a choice of it depends which browser let's just let's just say that you use exchange for certain things but in other things for example to manage your name space you may use OCTA but then they say actually no we need you to use our version of OCTA it all becomes complicated I think it's too complicated for a government to understand so I think the general thing is can we extend the definition of these basic rules that we've agreed to in other markets to include technology and would we be better served and I think for the most part I do think it would be it would better serve startups it would better serve the folks that want to build how would that work in practicality though you would you would I think that David says turned it on for a dollar a person or something here's introductory price I think the combination of what David said and I said would do the trick which is if you force these highly complicated licensing agreements to be transparent it would not allow them to dump and then the second thing is that all of that transfer pricing that goes into that license cost needs to sum up to the cost itself now why is that important you can learn about how they prevent this in healthcare so let's take Pfizer good example here's a company with 30 billion dollars on the balance sheet right and Pfizer has a need still to subsidize all of the r d of their drugs and you would say well yeah they have 30 billion dollars so they should just take the money off the balance sheet and do it why don't they do it it's because the accounting laws and all the complicated anti-competitive laws say well if you want to take this cash pile and use it over here it goes from an asset liability item 30 billion of cash and all of a sudden I'm going to net it against your EPS all right there's an actual cost for these companies to do this stuff to bundle to cross to all of this stuff and so what do they do they go into the market they ask startups to build stuff and then they buy it that's the kind of Market I think is better for us yeah let's have that be the last word on this topic because we've been going for a while but I'm glad you brought up Pfizer because this brings us to issue two oh boy which is and I think we can show this red meat for David yeah so Albert berla who's the CEO of Pfizer went to Davos last week and he probably expect to Davos you know the the conference of the Surplus Elites and he expected probably nothing but softballs and fawning treatment from The Establishment media and instead he probably had the most uncomfortable walk of his life when two reporters from Rebel news approached him outside the Ruiner and I started asking him some tough questions let's roll tape what's Rebel news borla can I ask you when did you know that the vaccines didn't stop transmission how long did you know that without saying it publicly thank you very much I'm sorry that question I mean we now know that the vaccines didn't stop transmission but why did you keep it secret good question you said it was 100 effective then 90 then 80 then 70 percent but we now know that the vaccines do not trans stop transmission why did you keep that secret have a nice day I won't have a nice day until I know the answer why did you keep it a secret that your vaccine did not stop transmission we should cut this okay we can stop from there but that wow welcome to Infowars first of all you know what real journalism looks like not a bunch of New York Times the reporters covering for powerful people but asking them tough questions what do you think of the question is it legit or not you got you guys are about to get us down ranked on YouTube and Spotify we're about to get warning labels for this sort of thing yeah look by the way you're right that YouTube banned that video we had to watch it on Twitter because Elon Musk Twitter is still free okay listen she's actually protecting why hold on why is YouTube abridging freedom of the press in order to protect the powerful CEO of Pfizer foreign did they cover up the fact that the vaccines didn't transmit I think it's like a legitimate question that I would actually want to know the answer to I don't know why you didn't just answer that no we didn't cover it up Freeburg what are you you're asking me if I know what whether Pfizer did a cover-up is that what you're asking the legitimate question is what I'm getting at why are you unwilling to question the Pfizer CEO oh no I'm not I'm not unwilling to question at all but I'm not I don't think that this is a fight look first of all Pfizer is uh commercial Enterprise so they have the incentive to make money 100 right so their objective is to sell a vaccine I think they're making 10 to 15 billion dollars on this vaccine this year you're absolutely right that the economic incentive is there for Pfizer to continue to push and rationalize the sales of this vaccine the efficacy of the vaccine weighing very quickly as this virus evolved and mutated it became pretty evident pretty fast that the uh the rate of Transmission in vaccinated people continue to go up and you know this may be a function of the quality of the vaccine or the efficacy of the vaccine more likely a function of the fact that the virus as predicted evolved and therefore the antibodies that that are produced and the T Cell response that that's induced by the original vaccine becomes less efficacious over time so the real question is a policy question a behavioral question but look Pfizer didn't have another product to sell so it certainly makes sense for them to continue to sell their product and there is still good data that represents that there is some immune response and some benefit in certain populations to continuing to get a booster and all the stuff with the original yeah let me ask you about the data the fact that that Pfizer only has this product to sell is not exactly a ringing endorsement of their behavior but but let's stay on the data for a second there was a study in nature which is you know one of the most preeminent scientific journals about the risks of myocarditis and pericarditis which is basically inflammation of the heart tissue which can basically lead to heart attacks saying that the risk among young people especially young men in 18 to 24 years was elevated if they got thought the vaccine this was a study out of France so it's pretty clear that the there are yes efficacious as we thought but is it less safe than we thought as well I I generally I don't know the answer to this I would like to know it's an important question and there's a lot of work being done to uncover it and here's a link to a paper that was published in the Journal circulation is the name of the journal not too long ago by a team led by a researcher at math General and um what this and so just to address the myocarditis question and and just so everyone that's listening knows I take a very objective view on all this stuff I don't have a strong bias one way or the other so the Mass General team identified 16 people that had myocarditis that were vaccinated and 45 people that didn't were part of their control group and they tried to understand what the difference was between these two groups there have historically been three kind of theories about why there is incidence of myocarditis in certain populations that get the uh the covid vaccine and by the way the incidence rate is still typically less than a two out of every hundred thousand people that get the vaccine but as you saw in the paper you just shared and others have validated it it can be as high as 30 times more likely to happen in young people that take the the moderna vaccine which is still a low incidence but but 30 times higher is is significant worth understanding so the three kind of reasons or the three ideas 30 times higher that sounds like a lot yeah so the reason and off a small base but yes and so the three ideas or the three theories around why this is happening number one is what's called protein mimicry where certain people the protein on their their heart tissue for example or certain proteins found in the cells in their heart tissue maybe look like the um some element of the spike Protein that's created by the vaccine therefore when you make antibodies to bind to and clear your body of Spike protein it's also binding to your own cells and causing an autoimmune response and those are called kind of Auto antibodies the second is just general immune system activation that maybe genetically some people are predisposed to having a very active immune system in response to the vaccine and therefore with a very active immune system they get inflammation and damage and then the third is this idea that there's just massive proliferation of your B cells some of which have Auto antibodies and some of which therefore destroy your heart tissue and cause this inflammation so what this team did is they looked at the blood difference between people that had myocarditis and people that didn't they found no Auto antibodies they found no big changes in the T or B cell populations meaning that there isn't a big immune system activation difference the big difference that they found was that the people that had myocarditis actually had a lot of the spike protein floating around in their blood whereas the people that didn't did not have the spike protein floating around in their blood so this answers one question but but opens up many more doors which is what's really going on so if you have Spike protein in your blood and your body is not clearing it right well how how long after getting vaccinated where the spike protein still floating around because I remember when the MRNA vaccine first came out they said the spike proteins would go away after a couple of days three weeks have they done a study like you know six months after or year after not yet but that's that's being done right now so what they're identifying is what's going on with the immune system of these this population where their body's not able to clear the spike protein and when their body doesn't clear the spike protein a bunch of cytokines and other inflammatory things start to get released and it causes inflammation on the heart tissue because you know there's a particular reasons let me ask you I remember I remember when you know the vaccine first came out I remember Rogan almost got canceled for saying that if he was a young person a young man he's like 50 so he got vaccinated but he said that if I was a young person in my 20s I would not get vaccinated because I don't think the risk return makes sense and he almost got canceled for that was right about that so you know I have been thinking a lot about this decision to get vaccinated or not and how we came to that decision and then I think what Friedberg said earlier is super interesting be because the virus mutated the efficacy of these vaccines obviously uh changed and wasn't necessary and so I think it was a moving Target to understand if you should take it or not it was a very personal decision clearly for people who were over 65 years old the chances of dying were pretty significant uh for people under that a certain age it was lower so everybody had to make a very personal decision here was it a personal decision when you had vaccine mandates and then on top of that on top of that you had the media were dunking on anti-vaxxers throughout 2021 remember that I mean they were saying about anti-vaxxers that that if you didn't get the vaccine you got sick there wouldn't be a hospital bed for you there was you know a lot of like dancing on the graves of these people yeah where you know there were like all these articles that you know there'd be like some preacher who you know said don't get vaccinated and then they would die of covet and there's a lot of like morbid sort of ghoulish like articles dancing on their graves I mean it was not this objective personal decision there was tremendous social and legal pressure to get vaccinated you're right you're right there was and I think part of the reason I myself got vaccinated is because I wanted to be able to travel again I wanted to be able to go to Madison Square Garden and watch the Knicks and I also thought well I don't want to be if I'm overweight like one of the people who dies from this so you know we all sat here we all got vaccinated do we regret our decision to get vaccinated now that we see this you know studies like maybe it wasn't necessary it also it was apparently oversold so when the Pfizer CEO would say when they knew it wasn't going to stop transmission I think it's a valid question to investigate what Pfizer knew and when uh and just keep everybody accountable for this uh for future things that happen because right now we're in a position where if Pfizer is not being honest with us if the origin story of covet isn't being honest with us these conspiracy theories are now starting to start to look like reality let me go to YouTube moth I mean so we were all felt this tremendous pressure in 2021 to get the vaccine right we all care about our health you care a lot about your health we all thought we could trust the experts that the vaccine was both efficacious and safe we know it was not efficacious in the sense that they're telling us that we have to get revaccinated every two months for it to work on safety I don't want to get over my skis because we only have some data but clearly like this myocarditis data is not good so were we basically stampeded into making a decision right that was not actually good for us and would you make that same decision today let's just lay the foundation for understanding how we got here so there are these Pathways inside the FDA to get drugs approved and if you take a normal pathway for a normal drug you're going to spend nine or ten years maybe more 12 13 in some cases and more than a billion dollars to get a drug approved and the way that it works is in Phase One you do a study on toxicology effectively like is this safe or not safe and you have to have enough people take it and you need to observe them for enough time where that phase one outcome essentially says this won't hurt people it's benign we don't know the mechanism of action we don't know whether it's going to solve the problem but we know that it's safe and then in phase two you then try to really understand the mechanism of action and if that works you go into phase three where you actually scale it out you create a double arm study you may do a control group you may do an open label companion you may overpower it with thousands of people and the FDA is incredibly rigorous okay even down to like it's incredible by the way like how you're allowed to open the results and they have all of these services that make sure that you can't influence the results or manipulate them it's incredible the FDA has an incredible process the thing is that they also have a way to jump around that fence and that is what we use for the covid-19 vaccines so in a molecule 13 years if it's for a really important drug you can shorten it to six or seven with this thing called breakthrough designation for a biologic 12 or 13 years but if you get this thing called rmat six or seven years so you're still talking years and thousands of people David but then there's this one special asterisk that exists inside the FDA called emergency use authorization and in moments of deemed emergency you can shorten even six years down to in some cases six seven nine months a year two years right are you you're describing operation warp speed so that emergency use authorization fast tracked these vaccines to market now the thing to keep in mind is there are still two classes of vaccines they are the messenger RNA vaccines that's the Bion Tech and Pfizer ones and then there are the more regular ones that in many cases the West was dumping on AstraZeneca and Johnson Johnson we used to ship those to developing countries and say we'll just keep the MRNA wants you guys think Dave Chappelle had this funny joke he's like I took the J J vaccine right but it turns out that now when we're looking back the long tail of issues may actually apply to these things that were fast tracked these mRNA vaccines that were fast-tracked under emergency use why because of what Friedberg said this protein mimicry thing is something we don't understand now why don't we understand it it's because our tools are not precise enough to exactly know when we engineer these solutions that it only binds to this specific protein and what we're learning is that there these proteins are some they're so similar that there can be a little collateral damage that this other thing that looks 99 will also all of a sudden attract this this antigen so this is a very complicated body of problem and because we didn't give it enough time to bake in the wild we're learning about this thing in real time if you if we had gone to what you had suggested which is a massive masking mandate while this stuff played out could the outcome be different well we don't know because we didn't make those decisions but I think that's what people will be debating the last thing I'll say on this is specifically to myocarditis I have an Interventional cardiologist in La I've seen him every three years ever since Goldie passed away out of respect for Goldie and Cheryl who initially asked me to go but it's been a great thing that I've done I've learned a lot from him he introduced me to pcsk9 Inhibitors and a bunch of things he called me two years ago and such mouth I want to do a study that were a year ago I want to do a study that looks at actually myocarditis and the the effects of this vaccine and Nick I don't know if you can just throw it up but we publish something and basically you know what we see David is that for folks with myocarditis you're releasing troponin and this is a Sim this is a A protein that you would otherwise use to figure out whether you're having a heart attack or severe you know some sort of heart abnormality and so it just goes to show you that there is some collateral damage in some cases in this example this is one case that we published which is a 63 year old white woman I'm saying that implicitly so that people understand that these things really matter on age gender and race all of the data that comes out of France really was focused on I think it was 18 to 34 year old males of all racial Persuasions and we've thought that it this issue is prevalent only in males but we've had a few cases that we've talked about now that that touch women as well so it's a complicated set of things because our tools are not fine-grained enough to engineer the drug for incredible specificity and I think that's the thing that we're dealing with now and by the way last thing because of all this it probably is reasonable to take a step back and have a commission that just uncovers all of this stuff look we've had commissions usage in baseball like if we need an investigation this goes back this goes back to Rebel news asking berla a very simple question which is what did you know and what did you know with respect to the efficacy and safety of these vaccines if they did not tell the public that these vaccines did not work the way they were supposed to because they want to keep minting money that is a legitimate Scandal we have a right to know but Freeburg let me ask you a question here I think you know Chamas talked about this sort of sped up process to cut through red tape and get a vaccine to Market more quickly I personally actually think that that kind of process is fine for patients who want to assume the risk you know as as sort of a Libertarian I support that but I go back to the fact that people in many places were not given a choice they had to get vaccinated or they could lose their job or their freedom participate in society and now we're finding out that they may have been forced to do something that in their particular case may not really have been a great cost benefit decision for them what do you think that the sort of impact is going to be of this just like socially I mean you've talked about I think that there's a decline in Trust of institutional Authority in the U.S and that's a huge problem I mean isn't this going to contribute to that yeah look I mean I think that there's been institutional Authority overreach that's been building for quite some time and you know look I mean you guys can go back to our first episode in our earliest episodes and I wasn't and haven't been and I I think the first time I tweeted I tweeted about the adverse impact that lockdowns could have and we should be weighing the cost of the lockdowns against the benefit and ultimately the benefit was Zero because we ended up accumulating call it 10 trillion dollars of of you know four trillion dollars of net costs that we have to pay off at some point and not to mention the economic uh consequences of the lockdowns and uh you know the benefit was negligible because the the virus continued to spread and evolve and there was no way to really stop the virus in its tracks hindsight is 2020 fog of War lawmakers made decisions was it the right decision would you have made the same decision it's really hard to say you feel like you're saving the world when the world is ending uh it's easy to kind of act with some degree of what is now viewed as overreach I do think that the mass vaccination requirement may have also been deemed overreach given the limited data that was available and the rapid Evolution that was pretty apparent in the virus at the time as well but vaccines are required for a number of other illnesses in a number of school systems around the country you know you start to question I I think we will start to see people question whether those are appropriate but again those are longer studied better understood the the cost benefit analysis is is much there yeah actually I think I think you're right that one of the costs of this policy is going to be that people will stop trusting vaccination in general even though I think that these coveted vaccines I'm not even sure you can really call them vaccines I mean every other vaccine that I've ever heard of completely prevents that disease the polio vaccine ended polio the MMR vaccine ended measle mumps rubella the covid vaccine just didn't work I don't think it was a vaccine but I think now what's going to happen is people are going to have a lot more distrust is it tremendous there's a there's a tremendous amount of post-activity rationalization going on where once you kind of made a statement that the vaccine will stop transmission of the virus or stop hospitalizations and suddenly it doesn't and you've made that statement with such Surety and brevity and funded it with so much money and caused such cost in doing so at that point you're too far removed to go back and say you know what it doesn't and as we're seeing now the consequences of not being willing to say that you were wrong may be far greater then the consequences of kind of continuing or kind of you know making this change so it's uh actually that's a good point all right final question to Jay Calvin on that point yeah so I mean Jake out look you were dunking or at least concerned trolling on anti-vaxxers during this time period do you reconsider that at all I mean in other words everybody was saying that the anti-vaxxers were these stupid unsophisticated people wow yeah I I think but maybe but maybe it was the elites who were the ones suffering from group think I mean look and I put myself in this bucket we were all herded into this idea yeah we all took that being an early adopter of a product and now we're finding out yeah we In fairness we said we knew this was experimental we knew this was the first time mRNA but we also knew like a billion people had gotten them or we when we got ours we knew hundreds of millions hold on let me just you have some questions so let me finish and so I think people made a risk assessment knowing this was an experimental vaccine knowing that the covid was mutating at the time and yeah it could have been oversold of course that that seems to be the case all right Nick pull up this tweet but you know we need to I I think we have to look at because we had this conversation you and I of you were very much in favor of everybody getting the Mandate and everybody being forced to get the the no no I never supported the Mandate you did we had a conversation about that like if should people be able to work should people do it on trains and your position was no I I did not support a mandate I thought it should always see people's choice I did but yeah hold on I made the mistake I made the mistake of believing the experts in the mainstream media I think if the last couple years have taught us anything it's that they can't be trusted the level of distrust we should have is even greater than we thought I never supported a mandate so I thought it should be People's Choice yeah um and I certainly wasn't I don't think I was dunking on the anti-vaxxers let's pull up this tweet Nick yeah my Lord Trump history Fox News are killing their own constituents with this anti-vaxx nonsense yeah uh do you retract that do I retract it um I'm trying to look at the date by the way this is this is a tweet that um Jason put out what was the date Danforth 2022 that sax pulled up just so yeah yeah that was only a year ago yeah I know at this point people were saying that uh no I get it I get it this is not so rare this is not a rare sentiment but I'm sorry hold on hold just to give this just stand by this well hold on a second I'm just reading it this was showing the deaths of uh from covid were happening at a magnitude more by people who didn't take the vaccine and we know the vaccine was had reduced deaths so we still know that correct freeberg the the vaccine reduced reduces the cases of deaths correct yeah the the this new bivalent booster um Eric Topol put out a tweet I gave you guys the link here where he covered a paper that was done recently and the paper shows a reduction in hospitalization rate and death rate for folks that are getting this new bivalent booster so but again that is a benefit that is the benefit yeah in one's own kind of personal safety and there's a risk profile associated with that as taxes pointing out but this notion that the vaccines stop the virus and are a true vaccine in the sense of how we talk about polio and chickenpox or uh smallpox and this other stuff not equivalent very good for free Burger wait that data how long after vaccination was that data because I thought that with respect to the vaccine one of the big problems is that the the benefits only last for two months unless you're willing to get re-vaccinated every two months no that's yeah look it's not really realistic generally speaking this is not like a vaccine in the sense of a uh smallpox or all right it's just a shot it's a treat it's a it's a it's a modest muting of the effects and it's one that people need to take kind of a risk-based decision on for one's personal thing but having mandates on whether or not you can go to school and whether or not you can you know be in places and whether or not it's appropriate for for workplace setting there's still high degrees of infectiousness with this ever-evolving virus the virus that we have today is not the virus that we had in February of 2020. it's a very different virus and it has evolved to such an extent now and it's continuing to evolve that it's very difficult to say there's a vaccine for this virus it's uh it's uh why won't you just say this the that this the so-called vaccine has been a failure we don't know hold on I'm gonna it's a failure we don't we don't know the full safety implications like I said I don't want to get too far out of my skis on that however yeah we know the efficaciousness of it has been a failure unless you're willing to get reducing unless you're willing to get jabbed six times a year which I don't think anybody here would do that and something that's not necessary because it's we hold on there was a time period where it was effective correct Friedberg and it did reduce deaths massively so I think that's the the issue that we're talking about here is that now the kovich strains are so weak that maybe it's not as necessary but there was a time period where people were not taking the vaccine and Republicans specifically weren't taking the vaccine and they were dying at a much higher percentage so it didn't if you're defining the vaccine as not getting not transferring the disease sure it was a failure it didn't block like we thought it would in terms of reducing debt but reducing death it did work for a period of time if it only lasted for two months and covet is still around and it's basically endemic it's everywhere how did the vaccine make any difference whatsoever I think now it's too much but back then it wasn't but you know free burglary Freeburg is that true what's the question I'm I'm losing track at this point how long does the the lowering the percentage of deaths the benefits of it yes of reducing what you've learned is they only last two months is that true yeah it depends on the population and yes there is a decline in the benefit over time as well as the fact that the virus is evolving those are both two yeah kind of independent things and as a result over time you know like yeah we got to keep getting boosted or shots and Pfizer's making a great business out of it you're right there's a massive economic incentive here for them and moderna to keep this great gravy train rolling and there's a massive incentive for government officials politicians to continue to stand by what they said before because otherwise they're going to be called wrong and they're going to get beat up honestly I feel like I feel like you're making an effort you're making an effort to stand by what you previously said yeah I think we should just come out and say that look regardless of where the safety data ultimately comes out just based on efficaciousness we can say that this thing didn't work and therefore mandating it was an even worse thing because hold on we put every we put the drug through this rapid process and we didn't let people make an individual cost benefit decision we basically herded them into this and at best it didn't do very much I don't think that that decision if you come if you make that conclusion I'm not sure that it gives us a toolkit to do better the next time and I think we've all said this and Friedberg was the one that first really taught us about this there will be a next time unfortunately so I think that we have to focus our energy here in acknowledging that the tools that we have to create these messenger RNA vaccines and other types of solutions we are pushing the boundaries of Science and the body is still very poorly understood and so the sensitivity and specificity of these drugs may not be what we think up front and as a result of that maybe we need to find a different way of using emergency use authorization in the future and I don't know David to your point I'm beyond my ski tips on scientific knowledge to know how right I would say as a minimum that if we're going to do emergency use it shouldn't be mandated let patients okay let's move on so we have a moment of agreement one question for free birds yeah would you advise or in your life would you can would you continue to get a booster or are you going to consider getting a booster every year no if they keep about them and now would you advise parents or you know adults over 65 or 70 to get one because those seem to be the high risk group right so if your parents said should I get it or not I would advise advise them to talk to their doctor and their doctor would advise them to to do it what do you think most doctors would tell somebody above 65 or 70 at this point it depends what state they're in at this point but basically would be split on political ones unless this virus turns into Ebola I'm never getting boosted again I'll tell you that right now what about you guys I'm not getting boosted again I think that speaks volumes right there that's it like we could have discovered here for 10 seconds guys we are literally not this sure let's move on hold on Freeburg but the fact that all of us can arrive at that and then we're worried about getting banned to tell you how screwed up you're right you're right he is like you're right what we can't like have an honest conversation about this by the way the other thing this is going to do it's going to inflame a large number of people just hearing us say this and because people have these deep what's happened is this has now become a sense of identity a sense of tribalism and a sense of it's a belief system it's no longer about an objective decision well we saw this with the mass the mass became the blue became the blue woman of the redness so the vaccine is basically uh you know it's become tribal but but people need to move beyond that because this is a scientific question of of constant benefits related to this medical treatment okay let's just move on there's too much other stuff doctors not for Venture capitalists about your vaccine yeah please don't listen to us all right by the way by the way speak to your doctor and just remember uh vaccine manufacturers have a business to run and politicians have to get reelected all right let's move on because we've gotten stuck on this okay look there's been some important developments in Ukraine I think we should just cover quickly this week there are a bunch of things the by Administration said they're going to send Abrams Tanks as well as Bradley's and leopard twos the Abrams tank in particular is our best most expensive tank at the beginning of the war they said they would not send them so they reversed their decision on that now the ukrainians are saying they want Jets as well that's sort of the next issue that's going to come up the by Administration also in a New York Times article that came out earlier this week said that they were warming to the idea of of supporting an invasion of Crimea some Europeans like Peter Hitchens are getting very nervous about this level of escalation he had a pretty amazing piece talking about the risk of this creating nuclear war and even if the ukrainians Prevail in this war there was a really interesting statement by Larry Fink at Davos last week saying that he estimated the cost of reconstruction at 750 billion dollars and Fitch ratings agency says that Ukraine is headed towards default so major major developments I think in the war this week I want to get your guys opinion on this we know from history that Wars tend to escalate and to be far more costly than the participants ever thought is that the track we're on now and in hindsight knowing what we know now should we regret that we didn't use every diplomatic tool we had to prevent the war most notably taking NATO expansion off the table Friedberg I'll go to you it's such a tough situation is the situation escalating to a point where we should be concerned you know there's a lot of information we don't have and there's a lot of intelligence gathering and conversations and chatter that we're not privy to so to sit here and kind of be an armed chairman I I don't know what diplomatic conversations have gone on or are going on uh all I know is what we're reading on the internet right so I I I'm not I don't know this this war is extremely well covered and there are no diplomatic conversations going on yeah so we're escalating the War I mean here do you guys have any concerns about the direction this is headed at all yes I'm concerned I also agree with Freeburg that I don't think we have all the information but I'm not exactly sure what we can do right now it's it seems like they have decided that there is a play to exert a lot of pressure come the spring and that's something that you've mentioned as a very likely thing and so I guess the calculus on the ground is that there's a way to really push Russia into a corner and the only way to do that is with more military support and then on the heels of that David the link that you sent is then it's not just the war machine that is now spinning up but it's the aftermarket Financial Services infrastructure that's also spinning up or Larry Larry Fink you mean the grift aspect of this war well yeah where Larry Fink was like hey they're gonna need three quarters of a trillion dollars of reconstruction support we saw that play out in Iraq as well where at first it was the War Machine and then it was the Reconstruction machine and together it was trillions and trillions by the way you know what that's called they're called infrastructure funds and those infrastructure funds raise hundreds of billions of dollars to make investments to build new infrastructure in markets that need it that are willing to pay for it and it will likely end up being kind of long-term debt assumed by that region to pay to do this work and the beneficiaries will be the investors and owners of those infrastructure funds I think there's two sides to the sacks that are worth kind of noting one is the telegraphing of this decision because it's not being done secretly it's being done out in the open there's certainly a calculus to that why are they telegraphing this and what do they intend to do with that messaging being put out there like this and it may be that it's uh to assert or assume a stronger negotiating position certainly to go into some sort of you know mild modest exit or settlement coming out of this thing but you're right the flip side is and the cost here is one of extreme outcome which is there may be a France Ferdinand moment here where one thing goes too far and triggers a cataclysmic outcome and in this case the cataclysmic outcome is tactical nuclear weapons and tactical nuclear weapons as we've talked about and I think I've I I had some conversations and some dinners I shared with you guys with some folks in the intelligence community and this has been talked about by uh ex-intelligence Community folks publicly are a key part of the Russian war Playbook that this is um there is a tactical nuclear weapon response system that is in place and you know these are very possible paths that we could find ourselves kind of walking down obviously were that to happen it would be a massive escalation and you're right there could be a France Ferdinand kind of moment that emerges by shaking the cage and and lighting a fire and there may be a stronger negotiating position to get to a settlement Faster by doing this I I don't have a strong point of view on the probability of either of those and and why but I think you know maybe both are certainly in play here yeah it was interesting to me that the Wall Street Journal on the heels of all of this stuff also published an article about Roman abramsic and the interesting thing about it was a quote in the article that effectively said something tantamount to well now that he's proven not as useful we need to Target him with sanctions so I just think that what all of this is is now sort of they're entering the end game David to use a chess analogy and it looks like they're setting the wheels in motion to kind of put all the pieces together for a negotiated settlement do we know that I mean what but is that yeah or is it continual escalation I mean Jacob I actually at the beginning of the war we didn't want to give the ukrainians Abrams Tanks because they were that was considered too provocative now we're giving them to them I think what's going on here is and I I suspected this you know from the beginning is that we are trying to engage them in a war of attrition and it's working and so I think the West collectively is trying to further that goal of just making Russia economically politically militarily culturally irrelevant or angled in some way and if you think about what's now happening with uh energy you know his primary export he is going to lose those customers and his customers will be you know bottom feeding India China low-cost you know oil and he is going to be a pariah so what I'm looking at is if there's going to be a negotiated settlement this year what is the next five or ten years going to look like for Russia what is their place in the world going to be the West is never going to trust them again the Germans are never going to buy their oil again everybody is going to be looking for ways to distance themselves from them so how does he have an exit ramp and we talked about this from the the get-go here on this podcast is what's the golden bridge for him to retreat across and and we really need to find that golden bridge quickly because I do think this is starting to look desperate for him the West keeps giving better and better Munitions he keeps losing economically he's going to keep losing and and politically who would ever want to engage Putin in anything with you know any kind of cultural or International Trade it's going to be a disaster for him so this war of attrition has to resolve itself with a some sort of settlement but we kids can't go on for two or three years can it I mean it has to settle at some point I think that it certainly can go on and I think that history proves that Wars tend to escalate and the costs incurred are much greater in many cases than participants ever dreamed of and that they had to go and do it all over again they wouldn't have gone into it in the first place so yeah I think this is concerning I think you know the the crazy thing is the war of attrition strategy I think I think it has developed into a war of attrition and I think you're right that I think there's two possibilities Jay Cal I think that the maybe the more cynical or realistic members of the administration think there's benefit in wearing Russia down and grinding them down however I also think there's kind of a True Believer camp that sees pushing Russia out of Ukraine nothing less than that will do and we have to punish their aggression maybe they want regime change I think there's dueling factions in the administration remember General milley several months ago said that everything that the ukrainians could achieve militarily just about had been done and they should negotiate and even Jake Sullivan had said that they should take Crimea off the table that was just the leaks a few months ago now the administration is leaking that they're going to support a Korean Invasion so I think there's these both schools within the administration the True Believers the more cynical folks and it feels to me like the True Believers are on top right now because we just keep escalating this war more and more and I think that's dangerous that polarizes the outcomes right so I think jaycal if you had your way it sounds like you had grind the Russians down but at a certain point you would say enough is enough and like a poker player like you do it at the poker table you'd say have on my I won my Prius for the night I don't need to risk that to win a Tesla so I'm going to cash in my chips and get away and Walk Up Walk Away right yeah I wish I could do that I wish I could do that consistently yeah exactly getting up from the table is a rare skill that's right but I'm not sure the administration is getting up from the table I mean I think we've achieved the American position on this I think has largely been achieved we've prevented Russia from taking over Ukraine we've prevented we've basically shifted Europe onto American Natural Gas we've destroyed Nordstrom I think we're close to achieving our major objectives but I'm not sure we're going to stop there yeah all right anyway all right let's move on Friedberg you have a science corner I was going to share the this was last week I think we talked about uh talking about it this week so um there was a paper that is a pretty um compelling paper published by a team uh LED out of Harvard on identifying what may be the the core driver of Aging and demonstration on an ability to kind of reverse aging so I'll just start really quickly that you know in the human body we have many different types of cells right we have 200 roughly different kinds of cells and I sell a skin cell a brain cell a heart cell they all have the same DNA the same genetic code the same genome at the nucleus of that cell what makes those cells different and the reason they act and behave differently is they have different gene expression meaning different genes in that cell are turned on and off and when a gene is turned on the protein that that Gene codes for is expressed and made in the cell and the genes that are off those proteins are not made and remember proteins are the biochemical machines in biology so when certain proteins are produced they do stuff and other proteins don't do stuff and the cell acts and behaves very differently so some cells when you turn genes on and off you get a neuron some cells you turn them on and off you get a muscle cell in your bicep some of them you get a heart cell and so all of these cells are differentiated by the genes that are expressed the general term for the expression of genes is the epigenome and an epigenome basically refers to these these systems whereby the certain parts of the DNA certain segments of genes are uncoiled a little bit so if you zoom in on DNA you know there's 23 chromosomes they're tightly wrapped in these coils and when you go even closer you see that there's these segments called nucleosomes and a nucleosome means it's like a bead and a bunch of DNA is wrapped around the bead and how closely those beads are together how much of the DNA is wrapped allows a segment of the DNA to be opened up and then expressed meaning copies of the DNA are turned into RNA which floats into this thing called the ribosome and the ribosome is the protein printer so the more these little segments of genome are exposed the more they're expressed and there are certain chemicals these methyls and acetyls that kind of attach to the genome and certain elements that allow parts of the the chromosome to wrap up and get really tightly bound or to unwrap and to express the gene so the epigenome is almost you can think about it like the software and and the genome or the DNA is the hardware and so the hardware basically defines what you can make the epigenome defines what is being made what stuff is turned on and what stuff is turned off so this paper and this work that was done historically we've always thought that aging meant that over time the DNA in our cells was mutating and errors were accumulating in the DNA and as a result of those errors the cells start to dysfunction and what these guys really did a good job of proving with this paper is that it may not be mutations in the DNA that's causing aging but actually changes in the epigenome and that the DNA remains pretty stable and pretty consistent over time and the way they did this is they broke the DNA and just so you guys know every second of your life about a million breaks in DNA in cells throughout your body are happening your DNA is being broken up and then there's all this Machinery in your cell that fixes the DNA when it breaks now what happens when it fixes that it turns out it's actually really good at fixing it and the DNA doesn't change and we historically thought that the DNA changed a lot and mutations accumulate over time but in reality what may be happening is as your DNA gets fixed the epigenome the acetyl and methyl groups on the Gene uh on on the um the chromosome don't get put in the right place and over time what happens is the epigenome degrades and this is considered and a lot of people refer to this now as the information Theory of Aging you can kind of think about making a lot of copies of software a lot of copies of a photo and a photo printer over time and every time you make a copy there's a little error a little error and those errors accumulate and the errors that accumulate cause the epigenome to change and as a result certain genes are turned on that are supposed to be off and certain genes are turned off that are supposed to be turned on and then those cells start to get dysfunctional because the wrong proteins are being made and the cell can no longer do what it's supposed to do so what these guys should be the could it be the ribosome as well that gets screwed up over time the printer the ribosome is um a pretty you know uh static protein it just does its thing and there's hundreds of ribosomes in a Cell so you know if one of them's dysfunctional it just doesn't do anything and then the other ones kind of step in and do it so the ribosomes are constantly running what these guys did is they basically took two mice two populations of mice and they gave the one population of Maui a certain thing that caused its DNA to break at three times the rate of the other population and then as the DNA broke they could they could see that this mouse population got older and older faster and by a bunch of measures on how do you measure age but what they did is they then measured they then sequenced the DNA of the two populations of mice and what they showed is that the older mice the ones that had their DNA changing a lot by the way these were genetically identical mice um the ones that had their DNA broken a lot more they had the correct genome their genome was the exact same as the other mice that that stayed Young and so what that tells us is that it's the epigenome and not the the DNA itself that's changing so then here's what they did remember last year we talked about yamanaka factors which are these four proteins these four molecules that can be applied to to DNA to a cell and they cause all of the gene expression to reset back to looking like a stem cell remember all of those differentiated cells come from a stem cell and when they did that the older population of mice suddenly started to act younger and all of the measures of age reversed and they did this across different tissue types they measured this in a lot of different ways cognitive function uh Health cellular Health Etc and so it is not just a fantastic new proof point of how yamanaka factors can actually reverse age but it demonstrates that the epigenome itself is what is the core driver of aging and you guys remember Altos Labs raised three billion dollars in a sea ground last year and remember at the end of 21 I said like yamanaka Factor as an aging research is going to be kind of the next thought thing I think this paper is going to be one of the seminal papers that really kind of illustrates and proves the point that this epigenome is the driver of aging and as we now are investing a lot of money in figuring out how yamanaka factors and other transcription factors like the yamanaka factors can be applied in specific ways to actually reverse aging and cause the cells to start functioning correctly again and then people will start to act and resolve in a healthy way once again there's a lot of work to go between here and there but now we have a much more kind of definitive proof point that this information Theory of Aging may be real that it's tied to the epigenome and that there are solutions that can work and we we have to figure out how to put them together and how to engineer a fantastic outcomes so really great paper by a team led out of Harvard I think really validates a lot of the work and the money that's going into the space both in the public and the private sector and obviously a lot of new startups kind of chasing this opportunity to figure out how we can use these transcription factors to reverse aging and that this may end up leading us to uh you know a much kind of healthier life and by the way when they applied those yamanaka factors to the mice the mice lived 107 percent longer than they were supposed to but more importantly the health span as it's defined improved so the mice not only lived longer but they actually lived healthier they're all the measures of healthiness in the body improved so it's a really kind of is this going to help us in the next 10 years it may yeah it very well made there are now some therapists in this corner I feel like science corners should only discuss things that can happen in the next few years let's put it that way to look at it I'll tell you I'll tell you one way one thing for sure you can make you can make money as an investor over the next 10 years in finding the right teams that are going to have the highest likelihood of progressing clinical trials in this space I will say that there may be clinical trials that can come to Market really fast particularly with kind of these ex-vivo Therapeutics where you take cells out of your body apply the yamanaka factors and then put them back in your body for certain tissue types like eye cells for example or T cells in your blood there's a lot of ways that this may come to Market faster and it's not just about reversing your age overall but reversing the age of certain cell types in your body that can then have profound Health impacts in the near term so that's the kind of stuff that's going to start to come through clinical stage sooner than later and then maybe you know some number of years down the road we figure out a way to reverse the age and all the cells in our body and the whole body becomes more youthful but for now it's going to be targeted cells in a very specific way to reverse aging and improve health very powerful very interesting lots of investment opportunity and you know certainly some some very smart folks yeah the realistic time frame is for like you know reversing aging because I mean we need that 30 years yeah but I think I think it'll be 80. does that mean we're gonna be able to like live to 100 because we'll be able to like reverse age is can you live well to a hundred I think that's the question we don't know but if you could reverse aging yeah but we don't know what that means because there's all kinds of things that you inherit over time that this may not for example like if you have long-term heart disease I could see how the cells could get healthier but it can't eliminate the plaque in your arteries right you know that's totally different calcium that shit's there so right you you have to leave the same with Alzheimer's like Alzheimer's has pla there's a plaque element but the the the cause of that and the cellular dysfunction may be reversible it could definitely be that like injury rates of older people hips knees shoulders arms all the sort of like soft musculoskeletal stuff you can you can really do a good job of because at the same time as you get older like people to intake less protein they process it less well you lose a lot of muscle mass as you get older those are things that I think are like short-term Solutions but no to be honest with you socks the stuff that really can screw you which is heart disease and brain function this probably won't do much for a long time so check it out screwed yeah yeah I'm in the best shape I've been in 20 years I feel great I'm getting irreverse whatever is wrong with Jayco or is that in the plot category can I do a quality of life shout out can I do a quality I got an email we all got it from a guy who I won't say just about not to violate his privacy privacy but he's in Saskatchewan he listens to the Pod where his father is and made him get a pre-nuval scan oh flew the father to Vancouver they found a five centimeter cancerous tumor on his kidney and uh three days ago had it removed and looks like guys totally healthy and well eliminated he was saying so another live saved but I but I wanted to show you guys a picture so yesterday I went to Los Angeles to see my Interventional cardiologist and what they do is they do What's called the contrast CT scan so they put you into an IV and they put this contrast inside of your neck you want to put throw the picture up please and then they use all the software to actually create an extremely accurate 3D model of your heart and what they can do is go inside of your arteries and actually measure the calcium buildup I've mentioned this before this this is a service called heart flow h-e-a-r-t-f-l-o-w [Music] in any event my calcium score is still zero thank God touch wood keep grinding but I just wanted to put this out there for anybody who has a history of heart disease in their family for them or for their parents or what have you if you go and ask your doctor this is a third party service that they can do it you go get a contrast CT and you can get a very accurate sense of your heart health this is amazing they they found it's incredible they found that you have a heart they did find that I have a heart this is this is a practical technology because all of us we would try to find if you had a heart for all this 112 episodes Dr Carlsberg was shot they found a heart it looked huge it looked like secretariately yeah I do have a big heart boys as you guys know no I mean this is shocking for the audience it's a natural size that can't be actual size it's bigger than its brain it's got a big part well glad you're healthy bestie that's fantastic so go get go get a hard flow if anybody has heart disease go talk to your doctor all right well for David sacks was was the moderation okay uh yeah I mean listen it was interesting funny as if you were doing a j Calvin all right fairness I'll come back to moderate next week I'll moderate this I'll be honest with you I would give both The Davids a robotic b-minus C plus I think they're better off opining than moderating okay and I think that Jason really doesn't have anything interesting to say so he's better off moderating audience liked my comments last week and then we can minimize the number of times he finds any random way to take it back to Virtue signaling and genuflecting about China I was gonna ask Jason what he thought about the Cowboys 49ers game where Kittle was an ineligible downfield receiver and they didn't call a penalty very important catch for that game that again the Cowboys now losing every single time they get to the playoffs but I didn't want to ask you because I was I thought that you'd Veer it towards Xi Jinping in some China comments no why no any genuflecting would you like to do before you go back to your I will admit that the moderation thing is harder than it looks well it's harder than it looks to be entertaining I think that's that's that's the thing entertaining thank you plus a plus moderator get back to your job Jacob yeah I will I will come back next week and moderate I I have been under the weather if passed the ball and let and let us put the ball in the basket I will put the ball exactly where you each like it perfectly look for some great assist coming next week when Jake I was back at 100 strength thanks uh to The Davids for filling information the last two weeks and we'll see you all next time on the island boys we'll let your winners ride Rain Man [Music] we open source it to the fans and they've just gone crazy [Music] besties [Music] where did you get Mercies [Music]