let's go jason start let's go do you have any intros let's go let's go let's go let's go all right if you want intros we're not willing to pay for him so don't even go there sax is awake all right well then we'll start with you sex if you want to do your job you'll do the intros and if you want to if you want to slow roll your effort because you think you're negotiating with us don't we don't give a [ __ ] listen i'm doing all the projects i think we care about your intros do a bad job we don't care oh my god it's so true do a couple bad jobs so that we can boot you off the show oh that'll be so cool all right here we go [Music] [Music] all in summit i pack the joint but sax won't give me an extra point his crypto holdings they can't find a floor gonna have him flying commercial for the first time since 2004. welcome david sachs back to the program the rain man good to be here ah now freeberg i never wanted to see him go but you gotta show up for work you can't do every other show the sultan of science he's certainly not a fad but then again did you see those ratings with brad welcome back the sultan of science by the way our show beat brad's rating so thank you very much jake out okay well a little drama always builds a little audience okay here we go champa little healthy competition well chamathi is in italy living a life so grand his next back a luxury wine and sweater brand this market is leaving him in a daze so he's been tipsy in the mediterranean for the past 10 days welcome back the dictator thank you thank you i just i put them on stun i didn't want to do any kill shots there since everybody's a little on edge including the audience the audience had a lot to say about whether we cover a lot of the controversial topics um roe v wade january 6 and ukraine all i did a bunch of surveys 50 of people want us to talk about 50 don't so uh we'll see which ones we get to say yeah do you think we should be surveying the audience to ask them what they want us to talk about because when we started the show we just talked about stuff that we thought was interesting sure and people happen to like it and listen and tune in for it if you end up asking the audience what they want don't you end up becoming like a fox news or like any other media company where you just ultimately use the feedback loop to drive yeah i mean i wouldn't every week of the show i will tweet like hey anything you want on the docket because sometimes people have good ideas um but yeah certainly you shouldn't base it on like a survey no i think it was just like a way to get some feedback yeah we were just yeah that's how we started was we were just kind of being intellectually honest with each other and curious about stuff we were interested in and it and it worked and if people don't like it they don't like it i mean i mean we should the the big controversy like like a vote for your topics and that's what we follow definitely not we should i think we'll agree on that i think just there is an ongoing debate amongst the audience of what percentage of this show should be politics and when should we talk about politics and are we doing too much politics and so i think let's start with markets let me ask you one more question do you think our objective should be to grow the audience or should our objective to be talking about the things we want to talk about yeah what do you think i mean what do you think sex yeah i don't think it's a good idea to pull the audience about what you want to talk about i mean the audience yeah well i think it's good to have an audience otherwise what are we doing but yeah um but look what the audience showed is that half and wanted to talk about those topics roughly and half did it i suspect that most topics are going to be like that you know unless there's not markets and people like i think 80 90 of people want to hear us talk about markets and startups yes like our core stuff right david i'm just saying if your objective function is to maximize your audience you're gonna end up making a tick tock video of people twerking or something you know it's not like the show did you just volunteer to twerk on the show i'm not going to do that now i think so i'm pretty sure it's traumatic i have the video of fredberg twerking at uh all in summit anyway all right let's get started with um i think what's going on in crypto because people do want to hear about that and it's been quite stunning a british virgin island court ordered the liquidation of three arrows capital three ac after creditors sued the crypto hedge fund for failing to repay its debt they had three billion in assets under management they had a huge position in the now defunct uh stablecoin terra and it's token luna and they were trading on some massive amount of margin uh how much and what deposits they were using to do this uh we will find out um now they're being forced to liquidated to be liquidated 3ac owed voyager digital 650 million could not pay it which sent voyager stock down 60 and cost them to need a bailout from sam bankman freed which has led to uh sbf as he's known in the industry bailing out a couple of other major folks in crypto he provided a 200 million credit line to voyager digital this is a canadian crypto lender uh they'll lend you money against your crypto uh and uh ftx provided a 250 million dollar credit line to block fi uh ftx is obviously sbf's company and according to early block five investors the ftx credit line would wipe out all existing shareholders so we're starting to see the really uh onerous term sheets to keep these things alive this is of course in the face of an entire crypto collapse with many crypto coins seeing what we saw in growth stocks is this the end of crypto uh is it going to rebound again what are your thoughts jamaat saks free burke who wants to start on crypto did you guys see the chart that i posted into the group chat that showed bitcoin activity as a function of year and value nick can you just put that up just so that we can look at that together the crazy thing about this chart when you look at it and it's pretty obvious is that we are collectively in one way shape or form basically trading up uh ever since 2018 really with all the stimulus because if you look at you know the mean price of bitcoin of 2018 it was a nothing burger you know what we were talking about was you know a price that was sort of between a few thousand dollars two three thousand ten three thousand you know and then all of a sudden when all of the stimulus money hit the market look what happened to it but i think something unique also happened which is that people really understood how to run these very complicated off-chain bitcoin arbs and i think we should explain what those are because those are what's behind the three arrows capital it's behind you know i think sam had this kind of um oblique tweet that said you know some of these exchanges are actually already insolvent they're already the walking dead so the first thing to keep in mind is that you know this is a completely unregulated market right there are no middlemaker market makers per se that actually have reporting requirements to any regulatory authority there aren't any clearing houses there isn't a way for us to understand systemic risk as it builds in the crypto market so what happened starting in 2018 and 19 is people realize the following things were true it's sort of what we talked about last week you go and do some crazy round you uh you know mark up some phantom equity in a company that company then issues tokens you then list the tokens not on you know a blockchain per se obviously but uh in a place where trades can happen off-chain right and there's a bunch of exchanges where these things happen off-chain because it's one you know uh company and then they have a bunch of segregated sub-accounts and what happens is when these things initially get listed retail goes crazy the price goes up folks basically dump on retail um and you know you spin that loop as fast as you can and you can extract an enormous amount of money along the way all these things like d5 all of a sudden popped out of nowhere and it's like hey you can earn 15 16 17 18 just deposit the bitcoin and so folks would deposit bitcoin but then what would happen is like the places where those deposits were held but then need to obviously find places to make that 11 12 or 13 and so then they would go off chain to some other random person who was offering to pay them even more than that and they would try to arb the difference but it all catches up with you because when something like a tara goes to zero all the bitcoin that was used to basically you know uh run that defy process around tara vanishes you know and then all of a sudden you the lender are like hey can i have my uh bitcoin back and the broker is like well actually i don't have it i lent it to somebody else let me ask that someone else and they're like i'm sorry i don't have it but i have these tara coins you know because i was running some arb and now it went to zero and that's essentially what we're seeing right now so we have two big problems and then i think we have a third that's kind of funny the first big problem is like obviously in the absence of any regulatory oversight this stuff is going to happen systemic risks are going to build up that's what we're facing right now is an enormous amount of systemic risk largely around bitcoin a bunch of this money i think has been essentially just vaporized and so all these people that try to find their deposits especially in custodial accounts in off-chain brokers may be sol at some point and i think that's just going to be a huge [ __ ] show if that actually happens and to be clear chamath they don't have the keys to their own bitcoin they gave money to a custodial account they then did this lending went out to get them to 15 and they don't have any recourse here they can't get there but look at this bitcoin owners put them in a wallet and own the keys does anybody have recourse to this three euros capital and all of this other interrelated parties that are now you know gone completely bankrupt because of this camp the answer is absolutely not so that that's the first problem you have absolutely zero oversight which means systemic risk has been built up in the system um the second thing is that exactly what you just said jason is that people don't even understand chain of custody here which is that you thought that you owned this bitcoin it turns out you actually may not actually own them at all you thought that you were properly lending them out you actually don't there is no enforceable contract it turns out and so i think that's going to be an entire set of different legal issues that are now going to come to the service because people who actually legitimately lent this stuff out for example like if you short a stock and you go and borrow stock from any one of us they're really tight guard rails you know if you wanted to go and put a credit derivative swap on against that there's a central clearinghouse that make sure you're not over levered you know you have to go and get audited by a bank to even get in the kind of account that allows you to put these derivatives on none of that was possible at crypto and then the last thing which i think is kind of funny is that we've had to listen to every millennial and gen z market observer in crypto tout how this is not like boomers and they turn out to be the same i mean this is the [ __ ] of all it's like of all of the times you've had to hear how it's so different it turns out it is entirely the same entirely entirely in fact worse the custodian issue is definitely a major one saks what do you think is happening in crypto right now the price is obviously going down a lot i don't really have a new point of view on it i'm mainly pissed off that sbf is trying to raise my taxes in california explain that sam bankman freed he runs ftx and his company he lives in the bahamas okay and there are probably reasons for that related to liability or taxes or something like that can you tell us what what fdx does they're like a coinbase competitor but they obviously think it's beneficial to be offshore not under us jurisdiction and they're very profitable right super yeah supposedly they're super profitable i mean he's worth like 10 or 15 billion dollars that's my understanding so he's been very successful at this i don't know why they're in the bahamas i think either they're in there for securities regulation reasons or for tax reasons but it's one of those two in any event he doesn't live in california and yet he is sponsoring a ballot initiative here that would add a 0.75 tax on incomes over 5 million to finance a pandemic prevention institute of his design he's doing this with dustin moskovitz another billionaire doesn't know what to do with his money he was you may remember that dustin was the guy funding chase boudin in any event this would be this pandemic preventions to be governed by an unaccountable board as opposed to something like the university of california this is like them using the ballot initiative system to fund their pet philanthropic projects i mean there's really no need for this i mean first of all this is sounds like something that should be done federally yeah exactly it's well first of all it's looking in the rear view mirror in terms of like a budgetary priority but even if you believe this was a priority i don't know why it'd be the responsibility of california taxpayers exclusively and even if it was you'd want to do it under say the uc system some sort of accountable board as opposed to having a report to you know sam and dustin so it makes no sense and this is really going to hurt the california tax base because if you start raising taxes on you know california millionaires more of them are going to leave the state and then that tax revenue leaves the state and so it actually hurts the general budget and that's why you know california teachers association for example opposes this is because they know that this is going to have a negative impact on core services what is well what's offensive to me is i mean so first of all this is just a stupid idea in like every possible way but what is a guy who lives in the bahamas doing funding ballot initiatives in california to raise our taxes thereby worsening the california fiscal situation to fund his philanthropic projects if you're worth 10 billion just fund it on your own you know do it through your family foundation i don't know why you need to raise the taxes on all of us yeah that's very bizarre why is he giving well the simple answer is because i think it helps curry favor with politicians that he needs for other things it that's why i would do it this is occurring negative favor because first of all every millionaire in california should be up in arms over this but even i'd say yeah i mean but i'd say even liberal politicians and interest groups in california like that like the teachers association don't want this because the money's not going to a cause they support and it will probably it will almost certainly drive down the state's tax base right because people on the margins are going to leave we already have the highest taxes in the nation we're at what like 13.3 percent for the top end we have 100 billion surplus for a reason all these ipos all of these venture capitalists ceos and rank and file tech workers are just paying massive amounts of tax here and they're leaving right but that's highly levered to capital gains right and so last year we had a boom market we now know in hindsight that it was inflated that was all driven by this liquidity bubble so do you think that's going to be the case this year i think we're due for a huge budget shortfall next year because there's going to be no capital gains they better hold on to that 100 billion for sure the california tax base is highly leveraged to this boom bust cycle and driving the top earners out of the state is only going to worsen that impact so you know but again i question why is a guy in the baha it'd be one thing if it was just dustin doing it i guess but i don't understand why sam's taking the lead when he's not even a california taxpayer because i think he's a very sophisticated player in not just crypto but frankly uh regulated and unregulated finance and look he i think he spends a lot of money in dc as well and i think that he has a very thoughtful game plan and then you know when you look at who his parents are his parents are really really smart thoughtful people as well two law professors at stanford and so i suspect not knowing and having spoken to them that i think that there's a really specific strategy that these guys have around who they need to influence and what they care about and then willing to as a pass through fund those things in order to create the you know influence that he needs for the things that he cares about and i suspect that it's that kind of worse trading which is i think it's pretty typical in u.s politics um the the question though is what will happen if ftx um has to really talk about you know everything that's actually happening in crypto crypto you know i'm sure that ftx could do a lot to help understand a lot of this off chain activity some of the you know especially the stuff that's really in the gray especially the stuff that's going to come to light over the next few years is i mean you you have to understand guys like you know we've torched 2 trillion dollars and it's not of institutional capital you know this is overwhelmingly retail capital all of this is going to inspire a lot of uh district attorneys and doj activity the discovery is going to be bonkers and it's all going to be regulated to the point of in which it kills a lot of the opportunity i think this is going to become the most regulated space we've got i don't know i mean i i if the goal here was to curry favor then i think sam must think there's not going to be a red wave in november because i don't think republican politicians are going to look very favorably on a guy who's using his money to raise taxes in a state he doesn't even live all right let let's move back to the crypto piece at this point with this many retail investors well actually let me let me start with this freeberg is there a real technology here and how much of what we've just witnessed with this crypto collapse in the crypto boom bus cycle how much is this based on what you would perceive as real technology that is going to advance the human species forward and how much of this was hype if you were to put a percentage on it you know trillions of dollars in assets you know created and then wiped out how much of this was actually real technology how much of it was complete utter waste of [ __ ] time and a grift i'm no crypto expert and i've not been an investor in crypto currencies i read the original bitcoin white paper makes sense bitcoin itself to me makes sense as a potential uh initially was kind of interesting as a potential alternative currency but the transaction fees were very high and so it never really seemed to make sense as a replacement for traditional financial networks until those transaction fees dropped below those of the traditional financial networks um and the biggest concern i've always had which i've mentioned multiple times on the show is that whenever anyone talks about a quote cryptocurrency they talk about the price of it in dollars and if it really is meant to be an alternative to the us dollar why are you talking about it in the price of u.s dollars and it's up and it's down relative to dollars and that implies ultimately that the intention would be to transact back to us dollars which implies that the intent is not to be a replacement for the u.s dollar which was a lot of the early prognostication of bitcoin was it was going to be a replacement for the us dollar it's gonna be an alternative to traditional monetary systems but ultimately if you're just measuring this in dollars and it's up and it's down everyone's freaking out every day about crypto's up cryptos down that means it really is more like a security except securities definitionally are supposed to have a secured interest in some underlying set of assets and there's no underlying asset it's not actually a security because it doesn't provide you a secured interest in anything so it is effectively a bet on some systems of computers that are meant to facilitate some set of activities that you know ultimately people really only seem to value in us dollars so um so i i don't know i mean like where does it all go it seems like i mentioned at our predictions episode last year that all of these smaller things are going to get blown out these quote-unquote cryptocurrencies even though many of them don't really act like a currency and you know maybe bitcoin itself persists and it seems to me like that's always going to have good staying power as an observer i'm not a participant and uh you know anytime someone telling you something's in dollars and it's going up and it's going down and you're betting on whether it's going to go up or go down and your intention is to transact back to dollars you know and and there's no one there's these have been securities the whole time this is the problem i have with it this has been you know a shadow securities stack that was created in parallel to the existing one with a lot of you know oversight and what did we think would happen if you created a global casino with no rules other securities have an underlying interest in something this has an underlying sure interest in some line on the blockchain of that particular network that's exact that's exactly what it does yeah it's a secured interest in a line of code in on a distributed no it's a it's it's it has a security a bitcoin has a legitimate uh non-fungible entry in a blockchain that says it and only it represents that thing and i think that that you know is is i guess the the the link some may call it tenuous but i i mean i tend to think at this point bitcoin has to be regulated like a security even even if it is not and it's more of a commodity only because of the the volume and the sheer size of both the market and the the potential fallout is the way you're saying it right the potential fallout when things go off the rails is so great you kind of need to have some rails yeah i mean i mean like like again as i've said like look if you're a market participant trying to trade you know very sophisticated you know derivatives of any kind for example in the credit markets we have to go and we create these things called isdas they're called vistas you know and it's basically a kind of an account that allows us to go and you know take risk in some of these very esoteric markets but the the underlying principle around that is a common set of parameters a clearing house the ability to monitor risk none of those things exist here and i think that's really what folks have to solve for now secondarily is what were all these kind of like shadow activities you know it just it turned you know it seemed too good to be true when you would hear wow this d5 protocol will yield you 24 and you're just like who is paying the 24 hours was it it never made sense really but then none of us really questioned it you know i you know i had people on the sweet startups i questioned it all the time and they could never explain it to me and then now the explanation was well we were giving you we were giving short-term loans to other people who basically wanted a margin loan you know they want to they don't want they want to hold their bitcoin but that was only four or five percent what they were also doing was giving you tokens in some other cryptocurrencies uh that they were basically originating so they basically were like we'll give you four percent on your bitcoin loan somebody else will pay that uh you'll pay that but then the other eleven percent is coming from some tokens we're giving you that actually you know you have airline miles we have to we're giving you airline we have to answer a really important question if you we've we you know look the the markets have incinerated many trillions of dollars i just saw like for example there was 1.7 trillion you know that was just torched in etfs alone just in the since the beginning of this year right we've done that or more uh in the crypto side we've done that or more on public equities right we're probably going to do that or more in other markets but every other market is regulated and there's a full accounting of the p l's on the dollars that are won in the dollars that are lost and here some folks have just you know basically escaped with billions and billions and billions of dollars and the bag holder is just you know a regional investor so the real question is are regulators going to actually care to try to do something because oh yeah the level of grip that's happened in this market is extreme and especially when especially when everybody was telling you no this time is different this market is completely different it's transparent it's on chain you can see every and it turns out actually most of it was not on chain it was off-chain and they were using they were using this hey have fun being poor this like psyops to get you to participate okay boomer you don't get it gensler i was talking to kramer on cnbc here's the quote some like bitcoin and that's the only one jim i'm gonna say because i'm not going to talk about any of those these tokens that my predecessors and others have said are a commodity um and then he said many of these crypto financial assets have the key attributes of a security aside from bitcoin he believes you know like these things are securities and that makes sense because 99 of people buying them sacks were buying them because they wanted to see them appreciate they were never using these as utility tokens they were buying them to you know i see them appreciate and to flip them so what do you think sucks is there is there when we look back on this whole mess in 10 years is it going to be like the dot-com era where we're like yeah i got overheated but amazon and google came out of it or are we going to look at it and go well that was tool up season well i think there is um a future technology platform here with crypto but i mean i've been saying this for the last year that just because there's a future technology platform doesn't tell you what the pricing should be and the price action got decoupled from the level of progress in the space you know you should always be looking at what is the real usage use cases customers revenue things like that and people stopped doing that and i think part of the reason why the narrative was so powerful if you go back to last year and the chart that chamas showed about the the increase in the price of bitcoin which is really the root of everything right because you know first bitcoin appreciates and then if you think about it like ethereum is ethereum's market cap is like a derivative of of the bitcoin market cap it's been roughly 40 and then the altcoins sort of get the market cap the all coins is sort of derivative off ethereum's market cap so the whole thing kind of moved up in in sync and the reason why bitcoin moved up so much is that as the fed kept printing more and more money you had fans of bitcoin saying look the fed is debasing the us dollar we're gonna need an alternative currency that was a powerful narrative that the fed seemed to be vindicating and there was a positive feedback loop which is the more the fed debased the currency the more that the price of bitcoin went up now the reason the price went up was not because they were debasing the currency it was because they were creating so much liquidity that that they created a liquidity effect that then drove up the price that and so so consumers had money that they could buy bitcoin because they were there was more money in the system yeah you created more buyers that's exactly what happened they i mean all of this idiotic you started sorry good sex yeah you saw an increase in speculative investments across the board including but unlimited crypto so again you know when the fed prints too much money it creates asset bubbles but there's a powerful reinforcement because as the fed was printing bitcoin and supporters of bitcoin had a really great explanation for why bitcoin was going up which is they're destroying the us dollar we're gonna need an alternative soon now i think in the very very long term could bitcoin be a non-fiat currency yes i mean i actually think the technology works you could create a a new kind of currency that's backed by math and by cryptography as opposed to fiat government but that could take a really long time i mean that could be decades in the future and but what happened is the market started thinking well that's going to happen soon and that's where it just got ahead of itself that was the tulip part of it yeah i think that i think that they found all of these words you know written in these economic textbooks that allowed them frankly to justify what a lot of people were doing in a lot of other markets which is just straight up speculation because the money printer was going burn and you know if the if you look at this 92 correlation to the equity markets i suspect in bitcoin and crypto is probably closer to even 100 um because it really was the furthest out on the risk curve and it just made the most sense when you thought money was you know effectively infinitely going to be available to just buy the riskiest risk assets think about the friction taken out of this chamath you could buy these you know uh cryptocurrencies so easily you could trade them so easily you could create one so easily people were popping up forks of these things so in a way what technology has done over the last 30 or 40 years from cloud computing to software to open source has made it very easy to pop up a startup well you could pop up a currency and then you could get an incredible reward and you get this incredible reward before you actually make a product for consumers and and absolutely zero rules in oversight no oversight yeah the feature that was touted was actually the first one to get thrown away which was transparency yeah when all of this activity was actually happening off-chain this is why you have this systemic risk issue now when sam is saying some of these exchanges are actually insolvent what he's saying is well that exchange has one master wallet address every time you open an account and transact on such exchange you're actually just transferring between a database entry inside of that company and so it may look like it is fine but it is actually not fun that's what he's claiming this is the problem with all of this so all of this activity you know built on these principles of openness and you know defensibility and you know you you can't inflate it and you know devaluate and debase it turned out to not even matter because the fundamental principle that would allow us to verify all of that was violated right from the get-go which was transparency all of it is happening in the dark most of this stuff is happening off-chain and if you think that you know it's okay to torch a trillion dollars of equities well at least there's rules on the equity side but to torch two and a half trillion dollars in crypto where there are no rules it'll be really you know it'll be a very telling sign to see if these folks get their act together and by meaning regulators and politicians and do something well then we made this crazy hybrid where we had the venture community and i'm not going to talk about any specific firm here and to be clear you know nobody knows exactly what's happening but you had coins you can't know by the way you can't know because it was happening off-chain exactly so somebody would originate a coin and i was you know offered these deals and you would as a venture capitalist be buying some equity in a company and then some amount of tokens would be created before the token was released to the public or before anybody had insights into this these tokens were swapping around everybody had different rights some people could sell early some people could never sell and it was as if you know you took the process of going public and you gave that to a seed stage or a series a company before they launched their product so you're taking a company public essentially before they go but if you if you subpoena they launch their product if you subpoena the exchanges all of this gets turned over yeah because the exchanges are the honeypot of off-chain activity yeah so and that's what's going to happen i think in all of this and it's going to be really funky this is and what's terrible about this is this is why the accreditation laws exist is like oh only sophisticated people top six percent of americans are allowed to participate in private companies and what did we do we allowed a hundred percent of people on the globe to participate backed by privacy that less than a thousand people in the world actually understand that what could go wrong what could go wrong you cannot buy a stock but you can buy this cryptographically secure you're not allowed to buy a share of linkedin or uber or airbnb even though you stayed in an airbnb we you're an airbnb host you're too stupid to buy airbnb shares when it's private but you can buy this cryptocurrency that doesn't even have a product in marketing and and here's this white paper that has you know university level pure math as the explanation of why it nothing can go wrong and you turns out again because nobody actually understood in the first place this is going to be a decade of discussion if you look at that if you look at that price chart what it really means is like again you know we talked about this if the equity markets have to rebase and get all this qt a qe out of it yeah right and then you have to rebase for earnings if you believe you're in a recession and then you have to rebase for margins if you believe that there's rampant inflation those three things have to happen in the equity markets we're in the midst of that yeah but that also has to happen on the crypto markets in the crypto markets and if you look at that chart what it really tells you is that the baseline price of bitcoin where things seemed you know where rational supply and demand were beating each other before all these you know five ten thousand thirty five hundred to five thousand yeah i would say about five thousand still seventy five percent from here yeah it's twenty thousand now so yeah we got we could have ways to go one thing that i thought was an interesting sign of potentially bouncing along the bottom zendesk has agreed to be acquired by an investor group in an all-cash transaction they're basically going private here uh for around 10.2 billion uh if you don't know zendesk is a help desk software company it's a sas software company they turned down a similar acquisition of 17 billion earlier this year their market cap is 9.1 billion in the public markets it's gone up obviously since it's announced this was announced but um they have uh a billion three in revenue they're up 30 year-over-year so this is a strong company but the acquisition price is 7.7 times their 2021 multiple sorry did you say they're up 30 percent a year over year the revenue's revenue is up 30 year over year they have 1.5 billion dollars in cash and securities uh that are you know marketable securities so they're cash rich small loss 223 million for the year in 2021 so they have six years of runway if nothing were to change yeah what do you make of the sacks is why would they do this they don't have to so and is this to you like the sign of a bottom if we start seeing a bunch of these companies that went public that are seemingly strong start to go private and to go maybe clean up their balance sheet and go public again in three years what's going on here well i mean this isn't a horrible outcome and by the way i mean i remember we shared uh when i was doing yammer a decade ago we shared a floor in uh our an office building at 410 townsend with um with zendesk and they launched that techcrunch 50. yeah yeah exactly so we had i think 5 000 square feet and they had the other 5 000 square feet and we were in a standoff both of us were expanding and we needed the other half of the floor and it was like who would move first basically and anyway they ended up moving and we took over their space but so i mean look this is a company that you know was worth 100 million bucks 10 years ago so whatever it was i mean they were still you know they were very early stage so this is still a great outcome should they have taken the 17 billion sure with 2020 hindsight that would have been better but look you're seeing the valuations here being roughly the sas index is now down to about five and a half times revenue i think next 12 months revenue for them for the media and sas company and the median sas company is growing about 20 percent if you're a high-growth company which starts at 40 you're trading at about eight times the next 12 months revenue so zendesk is sort of in there i mean that is what they're trading for and sas founders why go why would the founders the board want to go private is the question on people's minds it's not it's not that they wanted to go private i think that they wanted to stay public and they wanted to build a large business but this is where the law of large numbers catches up with every company that's why it's so rare to have an apple or a google or a microsoft or a facebook or netflix where you can grow for 20 years at 25 plus percent because at some point 25 growth over last year just becomes too hard of a mountain it's a big knife and so what zendesk suffered from is what most of these sas companies not and i'm not trying to disparage them just calling it out will have to go through which is the following the easiest kind of sas company to start and the one that folks you know really talented investors like saks will fund overwhelmingly over others are what's called bottoms up sas right things that sell to the low end of the market things that sell into you know individuals can buy them in a corporation as opposed to the cio yeah the the unfortunate part of that growth curve is that it's pretty terminal within seven to ten years and after that you're forced to go to the mid market and that eventually you're forced to go enterprise but when you go to the mid market and you're selling to 500 and you know 1 000 2 000 companies and then eventually even enterprise you're talking about massive investments of opex people engineers product managers sales people and all of that stuff costs money and it's not clear that your product is any good so in the zendesk example it's not to say their products were bad but all of a sudden they were going up and selling a crm tool sales force automation tool and now you're going head-to-head against companies like salesforce who are going down market and all of a sudden salesforce and microsoft and all these companies can play very aggressive pricing games with their products they can bundle all kinds of other things in for free they can give you discounts and it's very hard to compete as a single individual company so your growth starts to stall so i suspect what happened at zendesk is they said we can make it and we believe in ourselves and they found that it was hard then instead of organically growing that's when they turned down the 17 billion offer they tried to grow inorganically they looked at surveymonkey right which our friend zander runs and said we're going to try to buy that for 4.1 billion and the market said uh-uh no and then the market basically contracts and now they're like well if we go and now torch our ebitda goals and tell the market we're going to go and spend all that billion dollars we have to try to go up against salesforce and microsoft with a product that we don't know is going to work our stock's going to be at a dollar and so i think that that's sort of the the parade of terribles that happened for them but it's a little bit of a warning sign for how difficult it is to get big like what salesforce pulled off right and what workday is starting to pull off what service now has pulled off i mean it you can't underestimate the quality of this i mean google apple facebook you know i'm saying i'm saying specifically enterprise yes those companies service now probably being the last one that's really did it incredible so difficult palo alto networks is probably the next closest one now salesforce acquisitions right salesforce doesn't matter how you get there organically and organically it doesn't matter the point is it's very hard most ceos fail nobody so is this going but okay so my original question is is this the bouncing along the bottom moment because we have peloton buzzfeed well this is a warning sign that says you cannot go into a massive investment cycle for all companies unless you can prove that you can sustain margins sustain growth and minimize opex but isn't this a very sophisticated buyer taking it private they must have a thesis of how they're going to get their money back right so that's my point is sexy you think that this is like if the company's already public and somebody thinks hey you know if i take this private i can do better than if it's public and i'll reintroduce it to the public markets to get liquidity later isn't that what's going to happen here in all likelihood you're making that statement in the absence of understanding how these things are financed well it's got a billion five and it's and it's break even almost so okay what about the what about the billions of dollars of debt they're going to take out and slab on this company right what about the number of people they make you're talking about post going private at the end of the day the private equity firms are not trying to make you know this 10 billion dollars go to 25. they're trying to make the 2 billion of equity they put in go to three and there's a lot of ways that two can go to three before 10 goes to 25. so they want a modest return 50 return it's a lot it's making a billion dollars it's hard yeah but but compared to the management team and the board's view of being a public company and growing 20 a year or actually in their case 30 wouldn't that be a better opportunity for those shareholders that's what doesn't add up here saks what do you think if i had to guess i mean i haven't talked to mikel about why they're doing it i think that they're operating at a new stage of the business i don't think it's as fun to be growing a company at call it 20 to 30 a year and all of a sudden you have to generate cash flow and you're being valued on that i mean they're passionate so management is your thesis i don't know i mean it seems a potential visas i think that's basically why people sell good businesses like i actually don't think there's a problem in their business i think that growing 30 a year with 1.3 billion in revenue plenty of cash in the bank i think they have a good product i don't think there's anything wrong with the business yeah i think that that i do think founders get burned out and this is an exit and i do think that the phase of their business they're in right now is not going to be as fun as the high growth phase look when you're growing 100 200 a year and investors are willing to fund that growth and they don't really care if you're profitable that is just more fun than growing a business 20 to 30 a year and investors are breathing down your neck saying when are you going to deliver cash flow and what the private equity guys do is they're going to go in there and they're going to restructure the business to deliver cash flow now i think ultimately these types of businesses they're great these software businesses they're great businesses to own because they're high gross margin and you know they've got a subscription base that just keeps growing organically if they've got positive net dollar retention so you've got a let's call it a 1.3 billion dollar subscription base that will grow to 2 billion over the next whatever half dozen years and quite frankly i bet you the private equity guys are going to take out half the cost structure there's no reason this thing can be generating 500 million a year in free cash flow but the management team would be unwilling to do that because it would suck it kind of sucks to do that every day to come in and fire half the team that you hired and take that hard medicine it just is a bummer for that personality type i think it is a different kind of management challenge and yeah i don't think that's fun and but look the thesis behind software companies the justification for them burning money was look we're gonna we're gonna spend every dollar in revenue that we make and then some because we're building a subscription revenue base that again has positive net dollar retention so one day okay one day we won't have to keep investing so much in sales and marketing we won't have to keep investing so much in r d we'll still keep investing to some degree we'll make the product better but it's going to be a little bit more maintenance mode we will get to maturity and then you can lay off a third of the staff and all of a sudden and then and then all of a sudden the company's gonna be super profitable and the fact of the matter is is that day never came because the markets never demanded it now that day is here no no hold on it never came because the markets kept demanding more growth if you look at their long-term operating margins you know when they first beca when they first came out public it like had like a negative 30 margin two years later they had a negative 50 margin and over the last seven years so that was 2015 up to now they've crawled their way back to negative 13 so at some point i think investors said oh my gosh this company has never made money it needs to keep investing more in order to grow and i think david to your point may be the decision that he didn't want to make was to flip it to a cash cow i don't think that's true i looked at um these guys have been generating cash their reported gap earnings are negative because of the stock-based comp expense meaning that they're issuing well there's a big topic to discuss here and i think that's actually worth highlighting because this is an important one because people have been talking about this considerably lately so this company's been making money every quarter they generate cash but in the last quarter they issued 60 million dollars in stock to employees to compensate them for the work that they do so that's 250 million roughly of dollars per year of stock based comp which is two and a half percent of the total shares outstanding in the company are issued as employee comp every year that number results in a dilutive effect to shareholders over time even though the business is generating cash your relative ownership as a shareholder in a business that's generating cash is going down by two and a half percent every year because of all the new shares that are being issued to compensate employees for the work that they're doing and i think that's part of the issue that a lot of folks kind of have taken for granted this was well rooted in i would say probably google who became very generous very early on with issuing rsu's and stock in their publicly traded securities to employees as part of their compensation package but google has a 30 40 ebitda margin in terms of incremental contribution of new revenue and um they can afford to take a point or two of dilution google by the way is actually not dilutive they they buy back shares with their extra cash so as a shareholder you actually benefit from this considerable cash generation but a lot of uh software businesses and tech companies in general have had to rely on issuing shares to compensate employees for the work that they do so even though the core fundamental of the business is generating cash and cash is going up every year the business doesn't know how to get out of this cycle of how do you pay these engineers 400 000 a year without diluting shareholders by issuing all these new shares every year and you'd have to do that more likely as a private company to figure out how to consolidate earnings how to trim head count and actually get the thing to generate the cash it has to generate but free book isn't that a real like you're pretending like it's some fake cost yeah it's not it's it's a real cost it's a cost to shareholders for sure but why but why why the asterisks well no there's a specific reason because the business itself operates running out of cash it's not burning cash the business is growing its cash balance but in order to compensate employees for that cash balance they're diluting you the shareholder right i look when you own a share of a company okay which by the way is another way of saying that the company is effectively issuing two and a half percent new stock every year to fund its operations i mean that's another way to think about it look i'll give you the warren buffett goal you can tell me that it's stupid but it kind of makes sense which is you take the number of shares you own you divide it by the total number of shares outstanding you look at the total profits and you say my look through earnings equals that percentage times the total profits yeah and your percentage is going down every year with stock based comp that's so cool and so the question is it's also going down because you're buying real estate you're hiring people you're paying them more like it's going down for a whole host of reasons that asterix is an irrelevant asterisk in my opinion like at the end of the day you spend money to grow how you spend the money is not that important to me let me say two two quick things on the topic one is um yeah i totally agree it's an expense yeah on on enterprise software and saks you're you're the the the master of the art but um you know as an observer it seems to me that many of these companies once you have an enterprise account you benefit from being able to cross sell new products into that account and you can grow this net revenue retention number over time and ultimately generate cash many of the big enterprise software companies that we've talked about from salesforce to workday and others have succeeded in doing that autodesk is another good example and carl bass i think is on the board of zendesk they've done um they've done this successfully by bulking up their product categories and they're they've done acquisitions or they've done build outs and so over time your incremental cost to uh just to sell a new product and generate um incremental growth profit goes down and the business performs better with scale this seems to be one of those businesses where ultimately they couldn't bulk up through acquisition and they couldn't organically product and they tried and so the challenge is they're kind of a i don't want to say a one-trick pony but the portfolio of things that a business like this can sell into and ultimately increment gross profit is very limited and that business becomes challenging to operate as a public company because you really do have to show that momentum as a scaled enterprise software business that you're actually generating real cash over time the other thing i just want to say on stock based comp and sorry sex i'll come back here one sec but chamath and you guys i don't know if you realize this but the standard in silicon valley today um when a company goes public in an ipo is to have what's called an evergreen stock grant proposal and evergreen basically means that every year the company is authorized the board automatically authorizes the issuance of some percentage of new shares per year this is typically in the range of four percent and iss and other you know kind of institutional shareholder advisory services actually vote against these shareholder proposals and push back against them but most of the companies in silicon valley that go public automatically include evergreens as part of their you know kind of ipo prospectus i mean can we agree on control like it's yeah every year they can they can dilute shareholders by four percent and independent of how the business operated that year which is effectively the same as doing a four percent secondary cash offering every year because it's this you're issuing those shares into the public market and instead of getting cash you're paying your employees with them and so it avoids you having to use your own cash balance to pay your employees so you're effectively raising money every year and you're allowed to raise up to four percent dilutive effect to shareholders to do that every year and it's become a real topic and it seems to me that a lot of the big portfolio managers of big institutional funds are starting to pay really close attention to this quote-unquote standard in silicon valley that stock-based comp expense has become so high and evergreens have become kind of a standard as almost like an ordinary course of business and it's become um you know a really contentious topic and i don't think it would be too surprising number one to see cash salaries go up and number two as a result of that to see salaries become rationalized in silicon valley where engineers may start to get challenged on the standard 400k per year that everyone's become used to um you know in terms of you know high tier uh you know remote work maybe there is a a compromise that could be had but this compensation you have to remember has been outrageous in some cases especially for senior management and so it makes the core business look broken but what you actually have is maybe people who are on these boards are also in on this compensation and it's just bad hygiene and it's not related to the performance of the company right i don't think i don't think the board people are quote in on it i think that's it's just it's you have to pay an engineer 400k a year to compete effectively in silicon valley today i was talking more about the managements the managements.com the managements.com is different than the engineers you would agree for very like there have been some enormous stock grants yeah yeah certainly if you want to run the company as a high growth startup with employing these high paid engineers and executives including stock compensation that is a certain kind of way of running the business but again if you're trying to run the business for profitability that's a different way of running the business and just to add a layer to what happened here that zendesk was under intense pressure from an activist investor called janna who is basically trying to replace the board of directors they're running a proxy battle against them so janna has been pressuring them to replace the board to to make all these changes that to take the 17 billion offer i guess back in march they didn't do it now they did a lower offer at 10 billion why i think because the market has clarified we now it's it's clearer that we're in this regime change what the market is valuing is free cash flow as opposed to profitless growth and my guess is again without having talked to mikkel my guess is they probably just threw up their arm and said listen you know like it's not going to be fun to run the company this way but you also have to you have to ask the question why are these highly sophisticated private equity firms buying it for 10 billion i think they're going to make a lot of money and the way they're going to make a lot of money more than a billion yeah they are going to slash the hell out of the cost structure they're going to run it to be highly profitable they'll probably bring the growth down from 30 a year to 20 or 15 but the benefit the offsetting benefit to reducing the growth a little bit will be they could probably generate three four 500 million of free cash flow on that business if it's doing 1.3 billion and they stop investing in r d and they stop and they bring down the sales and marketing that could be a that could be a cash cow like you said so i think that's probably what's what's going on here um is that i just want you guys to know not to burst this bubble but when people talk about free cash flow they touted a lot tech companies touted a lot because you're allowed to add back in stock based comp as if it didn't exist the problem is that stock based comp is non-cash so when when you're only source so if you see a company that has negative ebitda negative everything all of a sudden are like quote unquote free cash flow positive it's because they were able to add back in stock based comp but that money is not real so when the only source of free cash is stock based comp that free cash flow doesn't reflect the company's true profitability this is what i mean by people play these shell games with these numbers to allow you know oh let's you know value something based on ebitda actually no because you know our stock based comp is off the charts let's actually go to something else you know we'll do a non-gaap ebitda measure you know you know adjusted ebitda and then oh actually wait sorry look at free cash flow because you can add back in this gargantuan amount of stock base comp i mean it's crazy i'll just the quote from community we work the the the quote from warren buffett summarizes the best if compensation isn't an expense what is it and if real and recurring expenses don't belong in the calculation of earnings where in the world do they belong i think what we're seeing right my point is is not that comp isn't an expense it is but rather that it's an expense that you can control by reducing the amount of staff no i guess i think these private equity guys are going to basically whack the cost structure of this this i'm just saying you can distort free cash flow as well because you can cut back in stock based comp it's a joke it's a little bit of a shell game going on it's like the dirty secrets let me ask you a a like an important investing accounting question let's say that a business like um zendesk is generating 100 million dollars of free cash a year i don't know what does that mean well hold on so every year their cash balance goes up by a hundred million dollars they have a business it generates 100 million dollars of incremental cash every year the cash balance goes up so you as a shareholder own shares in a company that is creating 100 million dollars of cap of incremental capital per year however your shares that you own are going down because they're getting diluted every year by roughly two and a half three percent and that's it's two and a half percent of zendesk's actual number so every year you're getting diluted by two and a half percent would you rather have a business that you are getting diluted by two and a half percent but it's incrementing its overall balance by a hundred million dollars or would you rather own shares in a company that's burning cash each year and i think that's where this ended up from a market perspective getting rationalized his shareholders said i want to have the safety and security of cash generation and i'm willing to take on the delusion for it and that's how this became you know as standard as it is when i think about funding a new startup and i look at the competitive landscape when i see that the competitors have all been acquired by private equity companies i generally think okay there's room for innovation here because i know that the first thing the pe firms are gonna do when they acquire a company is like zero out r d or just put the product on maintenance mode there's no innovation that happens yep with the product once the pe firms buy that buy it right so the reality is i think so those are good targets for startups acquisitions right sex i mean they'll find something yeah they'll they'll do roll-ups right because it's they will do financial innovation they will innovate the the structure cut all the wasteful spending and all the nonsense and lunches yeah exactly once like cut out all the kind bars yeah the kind of exposed brick walls like all this nonsense who do you think is a vegas trip yeah this stock based compensation is going to go away because they're going to get rid of all the high price engineers they're going to get rid of the a lot of the high price executives they're going to probably they're going to have to keep customer support they're going to increase cash salaries probably they'll bonus people they'll just do bonuses for hitting targets instead of giving people as much equity in the business and they'll run it like a you know private equity type type play sex it's not fun it's not interesting to me right yeah i mean we're gonna see it's not like you're building this product i think david the other reason why it wouldn't be fun is like it's a it's a level of financial engineering which is highly sophisticated i think for some people it is fun i think for us it's less fun because you're not necessarily creating any company per se not innovative you're not being a product person you're yeah but i would say that it is highly sophisticated and the folks that do it at these places that these private equity firms are incredibly they're very good at it savvy at how they do it um and it's it's all the twists and turns of how you you know lever this up and use debt and blah and use a margin loan and pre-fund the com i mean and it's not the stuff that necessarily we want to be thinking about but that's what you would have to do as well i totally agree with that look i'm i'm happy they exist in the ecosystem because we need firms we need more exits right and we know that right now in washington the the regulatory regime is very difficult it's very hard to get deals through so at least you have private equity firms that are providing some exits and we need the ecosystem needs and those eggs that you're saying sacks don't trigger like com competitive concerns with lena khan and her group right like yeah she's like some private equity firm took this private okay salesforce didn't buy it so we don't need to get through regulators right you're going to see a lot we need exits in order to justify the risk capital that goes in at the earliest stages which in most cases going to be a zero and just to give you some other numbers out there manscaped which is a company sells razors for guys uh they had 315 million in net loss in 2021 with 310 million in stock based com by the way that number can also be distorted just to be clear if you give a one-time big grant to an executive like a ceo yeah the way that the accounting works on stock based comp it's not the kind of thing you can have a very simple kind of descriptor on but you can have these very significant short-term costs associated with a big grant that could vest over a long period of time sure with that that has very high strike prices i mean when elon got that massive grant at tesla the stock based comp expense was significant but yeah but you know what the interesting way into it it was that was there were 20 targets or something crazy like that and all of them were based or a lot of them were based on the stock price and the delivery of cars so that's one of the things that i think is broken yeah yeah so this is one of the things that's broken in silicon valley is that the comp in the stock based comp is not tied to performance it's like just giving people guaranteed salaries in fact i was going to say jason i could be wrong like there is more sophistication to be clear in executive comp and public uh technology coverage i think that should trickle down to the junior people too i think everybody should rise and fall with the company's performance that's my personal feeling i mean this is the problem with entitlements you know and people being entitled to sorry to be like a red pelt here but we should have like performance should be lauded and compensated for not just showing up and hanging out there's going to be a bunch of companies in this position so look for this as a trend peloton 964 million last quarter in revenue lost 757 million in the quarter they have a 3.1 billion market cap they've only got 879 million dollars worth of cash i'm just looking at these numbers hopefully they're they're tight um and they have a billion for an inventory that company's going to get taken out uh buzzfeed i don't know why that even went public they're down 84 percent they had 91 million dollar media company 91 million dollars in q1 revenue they lost 45 million their market cap is down to 210 million and they've only got 74 million in cash or so with some you know maybe 100 million in accounts receivable so there's a bunch of companies right now that are public that are about to hit in a couple of quarters running out of cash going into a recession are we going to see some big flame outs do you think and are you watching specific companies because the private equity folks must be salivating watching this well i mean look jacob you asked what the takeaway was around this and i think the takeaway is there's been a regime change in the public markets the way that investors look at these companies is changing it's not about growth at all costs anymore they're not just looking at revenues it's also about margins and cash flow and you know we talked about in the last pod how i think a lot of founders understand intellectually that we're headed for a downturn if not a recession but they weren't taking the medicine of basically reducing their burn well this is an indication of what investors are valuing if the only way for zendesk to create value as a public company is to sell to a private equity firm who's going to have the staff is going to cut off or some huge number of staff to run it for free cash flow that's just an indication of the regime change so you know we need founders to start internalizing this information so they can run their businesses more efficiently you know what investors want right now they still want growth but they want it with low burn high burn operations are going to get punished i've transitioned most of my public markets time to focus on debt um and i've been looking at these companies because yeah because there's a lot of these really interesting tech companies with a lot of because what david said i think is a hundred thousand percent right what saks just said there is a massive massive regime change here and yeah and shockingly if you don't take the medicine yeah and and what's funny is like so many of these companies have been left for dead but what is really juicy is the few companies that you think will survive and specifically making sure you're protected in the capital structure which means to own the debt because the debt is always senior to the equity and there are some really really interesting companies out there that are in that situation and it's just like it's a much better risk reward in a moment where again you know we talked about this but why would you give up your liquidity today i don't know the answer why why let's go around yeah you've used this term jason before like skipping along the bottom i just think it's like psychological wishful thinking as opposed to sort of like a rational summation of the actual jerome powell just said i will tank the economy in order to beat inflation he just said it in the wall street journal uh but people believe inflation might be turning over do you buy that or not no as i've said i think you're gonna see eight and nine percent inflation prints for at least the next three or four months minimum i think that things could get um marginally better after that but i think the thing we don't know and again it just touches and i don't care what the [ __ ] audience thinks touches russia and ukraine so sorry to bring up politics but none of these things are inexorably intertwined and if people want to go and venture and gamble in the stock market you might as well understand this because i think you know many of the scenarios will trade because of what's going to happen with putin let me ask the question here how many quarters will this recession be if we had to pick a range pick a two quarter range i'm thinking three to five what what do you think i have no idea okay freeburg you gotta if this is the second how many quarters plus or minus two let's say uh is this recession gonna be so five plus or minus two four plus or minus two plus or minus one what are you thinking will be the bottom out point i don't like the term i've told you guys i don't like the term quote recession as if it's some absolute negative thing i mean negative gdp growth coming off of inflated gdp doesn't feel to me as uh systemically challenging to the economy as uh you know but some other circumstance where for example there was a global financial crisis or uh 911 or some other kind of factor that that drove things uh that that really affected the core economy certainly we hadn't we had something that that affected the core economy and coveted then we had massive stimulus so i i don't i think there's this unfortunate general characterization of quote-unquote recession being an absolute negative and i think that there's relative growth and if you're if your relative growth is negative off of an inflated number but over okay let me give you let me let me just finish but over a historic two or three year period you're still growing the economy considerably because jobs uh jobs are growing and production is growing uh it's not as negative as it's being made out to be so i i'm not gonna okay i get you get into let me let me ask you this way then how many more quarters will we have of stocks and real estate and assets declining in value or being flat that's a financial markets question which i think that's a different one and one thing i've realized is that financial markets in the short term uh you know the old warren buffett quote or whoever it is that over the long term equities are a weighing machine in the short term they're a voting machine as we've seen with crypto it was a voting machine that everyone voted on the hot thing to your and now everyone's voting against it so i i don't know they're weighing it now yeah well yeah i mean at some point there's nothing there you hold a cryptocurrency long enough you'll find out how much fundamental productive value it's grading and the same is true for owning businesses or other real assets you'll find out over the long run how much productive value they're creating so so you don't want to answer the question of when we hit a floor okay saks when do you think we hit are we are we hitting a floor now we have a lot more to go down i'll tell you one point of view i am looking at buying high quality share businesses buying shares of high quality businesses right now okay i think that there are things that are that are cheaply priced if i own them for a long enough period of time the underlying productive value of that business will return my capital to me and so you have one that you might want to mention here that you're looking at i don't because you don't want to share some stock tips at the summit with our friend uh sonny he's his trades are up but like i told him these are longer-term trades what do you think in terms of and then we'll go to some of the political stuff that affects markets after this well i mean i think it's all related so there's three things going on here right now economically or three underlying causes one is rate expectations have changed massively interest rates have gone up and rate expectations are going up even more fueled by inflation and until we see where we're at on inflation whether that gets controlled that issue is not going away the second big issue is economic slowdown the recession so the first one is wall street this is main street and these two things are related because companies are slamming on the brakes because they're seeing that the capital availability is greatly getting reduced by this re-rating this regime change in markets so we're seeing an economic slowdown that threatens to turn into a recession and consumer confidence is part of that right when your wages don't buy you as much because food and gas prices are through the roof that reduces consumer confidence and that also plays into that so that's the second big issue and i don't think we're going to know about recession it's going to take you know potentially through the rest of the year before we figure out what's happening there and then the third part of this is the overhang of this war in europe the ukraine war which is now threatening to become a forever war there was a pretty stunning article in the washington post this week in which the administration officials were quoted as saying that they would effectively prefer or countenance was their word a global recession and famine over letting russia keep the donbass region so they are committed now to basically prying russia out of the dawn bass even if it means global recession not to mention they say specifically the donbass or specifically standing up to putin because that's kind of minimizing what we're talking about is is the donbass region what's happened is look the russians lost the first few weeks of the war in which they tried to strike they they basically went for a knockout blow to take over keeve topple zielinski i think we accomplished something in preventing that but since then they have achieved their objective of taking over this eastern portion of the country this donbass region in which this is where most of the ethnic russians live and these ukrainian separatists who are ethnically russian they've been fighting alongside the russian troops and the russians have basically won that part of the war and so the question is what do we do now and what you had is you had administration officials saying that they would not accept the status quo that they are willing to fight on for years you know the same geniuses who gave us the forever wars of the middle east are now giving us a forever war in eastern europe and they are saying they are willing to basically continue this fight even if it means global recession now i don't think the american people ever voted for this but this is what the administration is pursuing and you know you've got to remember that there's always the risk that this war spins out of control that we get a nuclear escalation so i think that this is a huge overhang on markets it's the third big problem that we have so i don't see how we get out of this bear market until you get clarity and resolution of inflation and rates number one slow down to recession number two and basically this war in europe number three and it's reflexive because uh these next three months as i as i kind of indicated last week i think we're gonna see inflation uh prints that are really high in part because things like rents which haven't you know which are on a lag will get folded back in so we're going to be printing eight and nine percent and then guess what jason it's the fall it starts to get colder you know uh russia's depriving europe of nat gas um where's the oil gonna come from opec is basically still stiff-arming the united states with respect to expanded production capacity why because they didn't like the way that we were strong-arming them and a whole bunch of other topics is in it you know and so where do we stand you could have 180 barrel oil by november december when it's cold not just here but in continental europe now all of a sudden inflation gets kicks right back up again it could be seven eight nine percent again i saw i just think all of these things are now so inexorably intertwined i think david's right we need to put this war to bed and the unfortunate consequence is that right now if we want to fight a proxy war there is no elegant off-ramp that i see so the prediction markets just so people know are predicting 0.8.9 uh additional inflation in june overall and i think that's over last month and last month was 8.6 so we're gonna be at nine and a half jason could you imagine what the markets do if we print a double digit inflation print ten and a half percent 10.1 just the psychology of that uh well consumer psychology is really low right now no not consumer psychology i'm thinking market psychology no market too yeah so we put those two things together and then if this war is never ending and the famine that um and the impact on 40 million people or something like that that freeberg predicted is actually going to happen in the next six months this is gonna feel quite chaotic to people around the world so we we do need to put this work to bed for sure there's no deal on the table right now but the deal that we've talked about on previous shows there was always the broad construct here even before the war began was there were three pieces to it number one was that that ukraine had to remain a neutral state as opposed to being brought into nato and having american troops weapons and bases on russia's border that was always a red line to them and in exchange for neutrality ukraine would get security guarantees piece number two was that in the eastern region where you had these russians these russian speakers that their rights would be respected and that they would have some autonomy and again that was something that ukraine agreed to under the minsk accords but it was never properly implemented and the third piece was that russia got to keep crimea which again was a fatal complete that happened in 2014. smart observers of this conflict have been outlining that three-point plan for over a year and that is what we're going to end up with the only difference is that it's going to be implemented by force and ukraine will be destroyed in the process that is basically where we're at right now russia has they've taken over the donbass they've taken over this eastern 20 of the country they have crimea and ukraine basically the the rest of it will not be part of nato that is basically what the russians have done is implement by force a plan that frankly we could have agreed to through negotiation a year ago and avoided all this death and destruction my my council is maybe i mean we don't know putin's intent and that's that's the wild card here he is a bit of a madman i mean he's pretty much of a wild card here he's a dictator who invaded another country yeah my my calculus is slightly different i think i see two things in order to get us back to a state of relatively predictable growth and price stability number one is we need to reset supply and demand by taking 30 trillion dollars out of global markets and then the second is we need an off ramp to this ukraine russia war so that there is predictable energy and food supply to the world so that folks can just get back to what they do best and if those two things can happen then the markets will have found the bottom um but until those two things happen in my opinion and by the way the first thing doesn't actually have to happen entirely you just need to see a path for it and you know we're the only one that's doing quantitative tightening right now the ecb hasn't even started taking all this crazy money out you know i don't know when the bank of england is going to do it when is you know the bank of japan going to do it so this has to be a global coordinated effort before we find the bottom and this war has to stop well can i go back to this uh unpredictable mad men narrative jason yeah look if we're in the translator yes if what you're trying to say here is that putin bears moral culpability and moral responsibility the blood is on his hands for this war i agree with you on that okay however this could you how could you not i mean he's the person who invaded yeah right but but just like there but right but the idea that this war was unpredictable or could not have been predicted is simply false because many experts did predict it and they did tell us exactly what's going to happen and the reason they knew was going to happen is because russia has been saying since at least 2008 when there was this bucharest summit and nato declared its intent to bring ukraine into nato the russians been saying that is a red line and russia experts biden's own cia director a guy named bill burns he was then our emissary to russia and he wrote a memo to then secretary of state condoleezza rice and what he said is that the idea of bringing expanding nato to ukraine was a red line for the entire russian elite not just putin so uh and if you go back and look about what other russian leaders said about nato expansion gorbachev said it was a humiliation to russia yeltsin was against it they've all been against it and so bill burns warned in 2008 this was a red line and the russians been saying this since 2008. and they were saying it all of last year if you go look at contemporaneous headlines describing the tensions between the us and russia this is the headlines of articles that can provide to nick we can put on the screen they were saying this was an absolute red line for them so the idea that this conflict was unpredictable because pune is a madman listen you can call him a dictator we can also predict highly predictable yeah okay and you know what's also highly predictable is that china considers you know taiwan or renegade you know um province like yes dictators you know uh will tell us what they're gonna do the question is does the free world want to stand up to dictators and so while you know uh it's messy to stand up to a dictator the west you know kind of doesn't have a choice to stand up to dictators or else they will roll into other countries history has shown that so as messy as this is and as terrible as it is for the economy i do think that we have to stand up to dictators there are plenty of dictators where we work with by they're not invading other countries they're not invading other countries and that that's the difference here saks you're giving putin a bit of a pass here he invaded the country we must stand up to dictators who invade other countries well look what you're saying i don't mean just america i mean the free world yeah well look look where you've got us then with this policy you and the people we could have avoided yeah because you are basically spouting this this nonsense that look the question is stand up to dictators who invade other countries i think you would agree that's a good idea let him talk let us discuss okay freeburg okay listen there's no question that russia has been the aggressor but the question is why did they do this you don't really have a theory on that jason except that you believe that on february 24th putin woke up and went nuts that's basically your explanation no that's not for what's happening in the world no it's a debated we know it's a debated region we know that they've had this conflict for a long time okay so we could just sit here on the pod many times every every president from bill clinton to obama who has dealt with putin has written largely the same account of him in their memoirs which is look they know that he's a thug they know that he's a dictator however he always said they always said he's very businesslike he's very direct he told them what their issues were okay putin was very direct he and biden had a summit in june of last year the russians been very direct your attempt to bring ukraine into nato is a red line for us why it's a violation of our security interests the idea of bringing a country into nato it has huge security externalities for them by the way we understand this in other contexts we understand that in the context of cuban missile crisis we didn't say that cuba had the right to join any military alliance that it chose to because we wouldn't be able to sleep as well as at night if cuba had nukes pointed at us with a first try capability we've had this conversation yes should sweden and finland be invited into nato i would table that issue until the war is over i don't know why we need to basically deal with that right now but listen we don't even have to go back to the cuban missile crisis right now okay there's a country called the solomon islands about 3 000 miles off the australian coast they entered into a deal with china's security deal and the u.s has been up in arms about that so you know and the reason is we don't want china extending its footprint in asia okay so we treat that deal as having a security externality for us and yet we refused last year to recognize that there would be any security externality for russia if we brought ukraine into nato the russians were abundantly clear about what they needed so my point is this conversation on the podium yes my point is this that this war was easily avoidable through the use of diplomacy the administration chose you believe that you don't know that you believe that you don't know that you don't even try it we've never even tried it you don't know that it's worse than that jason because here's what happened after the june 16th summit in geneva between putin and biden last year okay putin tells biden to his face this is a red line as they've always said so what does the administration do not only do they not negotiate with the russians they invite zilinski to the white house on september 1st of last year we talked about that and then on november 10th they published a massive 10-year charter agreement this was a huge finger in the eye to the russians and on the heels of that november 10th charter agreement the russians basically delivered an ultimatum to the u.s demanding a written guarantee that ukraine not joined nato and then in january blinken was tasked with negotiating with lavrov and blinken said there has been no change there will be no change nato's door is open it will remain open this administration was incredibly stubborn they were absolutely refused to use diplomacy to defuse the crisis now you say well we can't know what would have done well but the point is they never tried is the ukraine a sovereign country yeah they are but do they get to pick what they do in their fate look this idea that they're doing they get to pick their fate as a sovereign country i think you would agree yes okay well here's the question is you're what you're trying to do and is is create a doctrine okay you're trying to create a new doctrine that a country gets to join whatever security alliance they want whatever military alliance they want that is not a doctrine we believe in when it comes to the solomon islands it's not a doctrine we believe in with respect to cuba and the cuban missile crisis and the fact the matter is is that the nations of the world are engaged in security competition and the re and if if a country like ukraine joins a new military alliance that has huge externalities and so we do not believe in that doctrine jason this is a doctrine that did not exist until february wait we don't believe more people should be able to join nato while sweden we clearly believe that but this this doctrine that the countries of the world should be able to join whatever military alliance they want that is not a that is not we do not practice that doctrine that is not advantageous cuba and then more recently the solomon islands okay yeah i mean listen i i i'm not saying this war is not a mess all wars tend to be a mess i'm not saying we shouldn't try to resolve it with everything we have i do think the people of the ukraine and you know get to pick their fate and i am in surprise and i am in support of the of nato being stronger and stronger and i'm in favor of isolating putin uh you know and using diplomacy as the primary tactic to do that and making sure he doesn't run over countries because he won't stop at one i think that's the the big question i think is will he stop at one do you think he'll stop at one country history has proven he won't you just are you okay with stopping him listen you you just said that you want to use diplomacy is the primary tactic okay so we agree on that the question is what you're willing to give up because the administration was not willing to engage on the key russian concern which is the admission let me ask you about ukraine into nato do you think russia will stop with ukraine or don bess do you think that's actually the stopping point for putin listen i think there's a few ways to come at that question one is to ask what is the motivation which is very hard to know because it's inside putin's head okay so the second is what are their interests and the third is what are their capabilities the capabilities question is pretty easy to answer i mean they have had a very hard time winning this war they've won this eastern region of the dawn bass because i think why is that one why did they have a hard time well because their military capabilities are obviously not as great as people thought and ukraine got a lot of weapons from the west from nato exactly so this idea listen i've said it before the eu's gdp is 10 times greater than russia's and you know economic strength is the foundation for military strength moreover we've seen that these nato weapons are incredible the us's weaponry i mean it's so you're in support of providing weapons to ukraine nato the eu the european countries i'm not in favor of creating a forever war in eastern europe that is none of what's in the cards but the question is jason you just said that we have to isolate putin we have to deprive him of any of any positive outcome from this war no no no we have to stop him from invading countries that's right we stop him from invading more countries he's not going to invade nato countries because he's so outmatched well not nato but i mean there's a lot of countries that are not in nato so i mean i think that's the thing but i mean listen we discussed this a million times here we'll i think we both agree we want the war to end i think we might just the question is what are you willing to do to end the war and you know my my point is this that the question is what is putin willing to do in terms of starting wars innovating other countries and what does the west have to do to react to that you know i think that's what we're talking about here we didn't start this war you know but anyway let's move on i think well hold on we have started this war but we failed to prevent it through the use of diplomacy that's always been my point yeah i think this war i think that's normal i think this war was easily preventable if we had listened and engaged in diplomacy easily yes okay yes i'm not sure that's what let me just tell you right now the deal that would end this war is the same deal that was on the table last year with zero bloodshed which is ukraine remains a neutral state there's autonomy for the russian speakers in the dawn bass and crimea basically remains part of russia that was the deal that is the deal that will be the deal the only question is does the whole country have to be destroyed all right well we're going to find out in the coming months and does the world have to go through a global recession and famine these are big questions uh yeah it's not the sacrifice it takes to stand up to dictators is very significant and especially ones with nuclear bombs and it will be even worse with taiwan i mean if we think that this is difficult can you imagine this kind of escalation with a capable adversary if russia is not super capable and their weapons turned out to not be as strong my god what would taiwan look like did you guys read this story where um it was the deputy foreign minister got demoted and there was all this um speculation like why did he get demoted and one of the things that came out was that you know he was very very pro-russia and and she is not and g is not and g was is much more hedged and moderate and yeah you know wanted to have more optionality and felt that he was cornered because i think there was some what was the quote i mean nick you can pull it but it was something about like you know the the strength between basically china and russia is infinite but that was that was a quote that he said that was a little bit off the reservation it seems and so yeah this kind of defense yeah yeah yeah yeah you know it's an important story as well i mean and you know it's one of the things that we can look at what's happening in these political situations i think we probably have 50 60 70 of the information not even not even really quick tell us what's going on in alpha fold world sultan of science there was a paper published about two weeks ago in the journal science it's actually an important paper because it used alpha fold to do some really important work and the work is to actually create a 3d structure 3d model of the nuclear pore complex and that nuclear pore complex is really the scaffolding that makes up the nucleus of a cell so all eukaryotes you know all plants and animals have a nucleus in our cells and the nucleus holds the dna and the big question fredberg's internet connection is getting bored [Laughter] sharks just let him finish his sentence did it break up oh yeah you're fine keep going you're internet connection because it was so boring what you're talking about keep going so what does this mean in terms of well hold on so um so what this team did and this is a the problem that's uh kind of been around for decades is we've never really understood what the physical structure of the nucleus in a cell looks like and this is important because the physical structure regulates how molecules get into and out of the nucleus and how dna is expressed and how the rna that comes out of the dna goes into the rest of the cell and this regulates so much of human health in fact it's been shown and demonstrated that dysfunction in the nuclear pores or the nuclear pore complex in the cell can lead to things like viral infection brain injury cancers cardiovascular disease many diseases their underlying driver may result from dysfunction in the transmission of molecules into and out of the nucleus of the cell and so scientists have always tried to figure out what does that transport mechanism look like what does that infrastructure look like and um so for the first time and scientists have published theories on this and they've shown using x-ray imaging you know some theory around what these complexes look like and what this team at harvard did that they published two weeks ago is a really groundbreaking extremely detailed view of the entire nuclear comp nuclear pore complex around the nucleus of the cell by combining both x-ray imaging and alpha fold and so what they did is they took the predicted physical structure of those proteins from alpha fold and use that to construct a sample of what the you know the nuclear pore complex looks how do they know it's accurate and so using this x-ray imaging they've been able to kind of verify some of the assumptions alpha fold yields and now they've created this 3d model and this 3d model now gives and by the way just to think about this physically what it means like for a second the nuclear pore complex think about it as like a fence like a spherical fence that sits around the nucleus and some parts of that fence open and close some parts are static and the way that certain things open and close and what can fit through them and how they fit through and how stuff gets stuck is really important to understand as a way to both understand the underlying cause of diseases like cancer but also how we can create therapeutics and how we can target specific things that we can fix and how we can get molecules into the nucleus of the cell to regulate dna expression and edit the dna inside that's mind-blowing so wait if i were to translate this from nerd you basically alpha fold predicted no i'm being sincere there's a map here that we were not able to see through x-rays and through you know phys physics but alpha photo predicted some of that and filled in the gaps so now we have the map has been filmed that's a great that's a great way to describe it and so now we have this incredibly detailed 3d image and nick can share the images on our youtube stream here of what the nuclear pore complex looks like and how each of those pores work how do they open and close what's the structure of them this isn't simply like a circle this is like all these weird tentacles and little things sticking out and that can help us predict what molecules get stuck and how one error in one of those proteins can cause things to get stopped like a cancer or something like that yeah how this can cause certain dna to be overexpressed or underexpressed causing things like cancer so we're going to live forever a whole new area of research in medicine gene therapy and new things that we can think about targeting to fix a lot of these underlying diseases and so this was a groundbreaking paper incredible what's the name of the paper can we just get the name of the paper so people can google it we'll put it in the show notes as well uh it's been an amazing episode yeah so it's a team out of harvard we'll send the link in the in the show note structure of cytoplasmic ring of nuclear pore complex by integrative cryo em and alpha fold uh terrible naming not for the general audience no no it's okay saks is printing it out right right now and he's going to use it uh for his his uh new kittens i just want to highlight you know because we talked about alpha fold i think last year or the year before and how it was going to open up all these new areas of race here we are a year later incredible example of how alpha fold's been used to solve this really misunderstood or never really well understood aspect of biology that is that the root cause of so much of disease and creates all this opportunity for medicine and therapeutics research and discovery all right um this is good it's great it's great to see this breakthrough sorry we didn't get to january 6 or roe v wade we'll get to those the next episode no no no no listen i think roe v wade i'm not sure there's uh i mean i should do something about the reactions but we did a pretty thorough episode folks really want us to double click we double clicked with two of the most popular constitutional experts in the space when it first got leaked so please go and watch yeah or listen to that all right we'll put it in the show notes it'll be in the show notes for everybody and we'll see you all next time bye bye bye bye bye love you so [Music] david much and it said we open source it to the fans and they've just gone crazy with it [Music] we should all just get a room and just have one big huge orgy because they're all just useless it's like this like sexual tension that they just need to release [Music] your feet [Music] we need to get mercy's [Music]








you're seeing now the the fresh summer collection of lower piano this jason oh really is the thin summer jale okay really beautiful cashmere container uh it's called like the king's cashmere or something and then this is called a lovely yellow boating sweater anyways i took saks to my tailor and i took him to uh laura piana and then at some point i just lost him and then i haven't seen him since so you took him to your tailor and to lawrence wow great that the show remains accessible to the every man and woman they're sucks good to see everybody's focused on what matters okay everybody welcome to all in episode 86 end of the world except for these two douchebags we thought it'd be really funny to vote to find the exact same outfit at laura piana i feel fully styled what a great look you guys look so good it's like dumb and dumber in italy we'll let your winners ride rain man david hey everybody welcome to episode 86 of the all-in podcasts we're not dead yet uh still publishing with us from italy uh the rain man and the dictator in matching outfits gentlemen how is italy it's fantastic and also with us the sultan of science himself david friedberg from an undisclosed conference uh somewhere which we can't talk about how you doing i'm off the record this week off the record this week and a little hungover it seems yeah you need a cup of coffee are you drinking a little scotch last night late night a little scotch i went scotch and beer and it was a it was a late night all right everybody we got a lot of news to get through let's just parse through some of the data because data's been coming in and the minutes from the june fed are out the key quote significant risk that elevated inflation could become entrenched if the public began to question the resolve of the fed so they went from transient to now fearing entrenched jobs have slipped a little bit this is something we've been talking about but just to give some context here we're still a historic uh number of job openings we peaked in march 11.9 million uh in may we uh we dropped down to 11.3 and uh 11 million for six straight months it's just extraordinary if you look at this fred chart it's just astounding to think that this many jobs are available two for one in the united states there are two jobs available for every one person who needs a job and this they're just absolutely stunning if you look at the um what do you think this is a precursor to uh dropping down dramatically in the white collar sector is what the data is showing what's your wage or major wage inflation i mean yeah that work that work clearly has to be done and if you lay people off the number of unemployment not unemployed will go up but at the end of the day the thing that we know here is we have a structural unemployment problem as you said two openings for every person which means those openings aren't paying enough for people to leave the sidelines and get on the field yeah or they've been incentivized to to be on the sidelines exactly so obviously yeah these these job openings might actually be indicative of the opposite of what the fed is telling us right the fed wants us to believe that they can just keep jacking up rates and then we're not going to go into recession because we have all these open job wrecks but what if we should see the labor market as really two separate markets they're sort of white-collar professionals and you're seeing all of these tech companies that we're involved in slam on the brakes really quickly right now so we're going to see greater unemployment there and then on the blue collar side you have this issue of record low labor participation yeah and so you still have inflation there because they can't fill all the jobs because there's all these like warped incentives around that there are to just put a number on it saks we're ten percent off the peak in terms of participation and if those folks would participate it would really fill a lot of these jobs that would increase the production of goods and services that might take some of the pressure off inflation and it would also increase monetary velocity rights people would spend the money they make which then get us out of this mess possibly i think part of the problem with the fed's approach here is that it's assuming that if they just keep jacking up rates that will that will reduce demand and that will stop or slow down inflation and there's some truth to that however i don't think this inflation is purely a problem of excess demand i think there's also a supply problem meaning that not enough goods and services are being produced and the commodities the inputs that we need to the production of goods and services those prices are increased they've been inflated and that started well before the ukraine war but i think the ukraine war has now exacerbated this problem with respect to energy and food if you had seven minutes for your over under uh for saks to mention ukraine you took the under you won i'm just mentioning it as a exacerbator of the situation i think that's actually really good framing um that it's an exacerbator um yeah so if you look at the quits let me just give you the quits number because this is really interesting these are people who are quitting jobs it's still at a record high so this concept of the great resignation we're still having over 4 million people quit their jobs every month free pandemic quits averaged under 3 million a month and if you look at that chart it's just staggering to think that in an economy that's going down people are still quitting now what is that indicative of it's indicative of people believing that they can get another job you don't quit your job if you don't think you can get another one or you have some savings available you want a yolo uh maybe you know um you know spend a little free time going on vacation or there's a new economy emerging right i mean one of the the cases to be made is that the pandemic and the stimulus that followed created a staggering short shift in the types of jobs and the types of businesses that people you know used to make money and you know a lot of people were able to shift to work from home and when you shift to work from home you have more flexibility and freedom to choose other jobs that you can now do from home and people don't want to work in restaurants they don't want to work in fast food and if they can find another job a gig like or services like or on demand type job where they can have more freedom and flexibility and more earnings in their life they'll make that choice and this happens so quickly because of the shutdown the lockdowns and then the stimulus the trillion dollars or two trillion dollars that poured in it created all these new opportunities and all these new incentives for new types of work and the fact is the old economy the old businesses all the fast food restaurants and the coffee shops they're sitting with half employment and they can't fill the jobs because that's you know that used to be a job that there was demand for and now it's not the case you know and i think that that's what by the way i don't i don't know if that necessarily reverts in the near term because i do think that there's been a substantial almost permanent change in some of these sectors of the economy not necessarily all some will revert but it leaves big gaps in parts of the economy and maybe fast food restaurants are not going to be as cheap as they used to be because in order to get people to work there you got to charge more and there's other parts of the economy like services and you selling stuff on etsy and whatnot that are working for people let me just put a number on that and then hand it off to you sax so just put a number on that the jobs that fell the most white collar off 325 000 and manufacturing 200 8 000 the jobs that are increasing the most hospitality and retail so exactly to your point people feel more options this whole thing was accelerated during the pandemic sex well the question i want to ask freeberg is do you actually think that these new options of work from home and remote work have actually made the economy more productive it seems to me that obviously employees if you give them the no freedom over the decision of their trade-off between work and leisure and so let's see what's made the economy more expensive how so if you take a big step back to the day before the lockdowns started we had a normal functioning economy that was growing by call it two percent a year and the minute that we enforce these lockdowns i actually think what we did was we started a supply side recession it's what sac said earlier so what does that mean let's just say you're a factory and you make wheels okay just make something really simple you were growing at two percent a year everything seemed hunky-dory you had employees it was fine you used to sell your products make 10 15 percent profits everything was fine and then the day after the government said you need to shut your factory down because we can't have people spending too much time close together because we need to get a handle on this pandemic okay so you shut it down and then for the next 12 or 18 months what happens that stuff sits idle these people that used to work for you get two and a half trillion dollars put into their bank accounts they spend their time doing other things and then all of a sudden people say okay it's time to start the factory up again people want to buy wheels and now all of a sudden you find that because everything all around the world was shut down there's no rubber to make the wheels there's no steel to make the axle there's no people to put them all together and so what happens well prices go up because again you gave everybody else two and a half trillion dollars so they're like well i used to pay a dollar for your wheel i'm willing to pay you two dollars now just make the wheel give it to me before you give it to somebody else so that is like the classic definition of a supply-side recession there's another piece of that too and sorry just to finish the point and the fed basically confirmed this in the minutes that they just released today jason can you just read the quote that you had in the in the notes well the one up top significant risk that elevated inflation should become entrenched if the public begins to question the resolve their result i think the point is that you know we were kind of in a supply side recession and now by raising rates to some crazy amount the end of which we're still not sure about may actually then trigger the demand destruction to have a demand side recession and so i don't i don't know that we have lived in a modern point in time where both things have been true right there's been a principle of macroeconomics that you're everybody's always kind of debating is this a supply side issue is it a demand side issue we know that in kovit it was a supply side issue we took all the supply out of the market and now we're trying to figure out when we exhaust you know all of the money we've given people and we destroy demand and take the incentives for demand to go away right consumer confidence is now starting to turn what happens then well we're going to figure that out in the next six or nine months but the thing is you have both that are true it's not as if the supply side of the economy has been fixed it's not as if everybody is running at 100 capacity it's not as if all the supply chain issues have been worked out yep so i don't know i just think it's a very complicated situation yeah it's a perfect pivot and just to build on that um chamoth the downstream effects we always talk about the second order uh impact because people are not going to work anymore downtown areas are dying so office space commercial real estate saks you're in that so you can comment on what's happening and then restaurants and commuting and all the stuff that was happening downtown san francisco's downtown mayor london breed had a press conference and she's been tweeting hey we have to revitalize you know soma in san francisco that's never going to happen that's off the table it's like bite and tweeting we got to drop gas prices yeah i mean we have complete markets we'll get to politics uh sacks don't worry we've got plenty of politics real estate i i read an amazing statistic today from uh like one of the major brokers uh they they said that by the end of the year they're expecting 30 million square feet of office vacancy 30 million in san francisco by the end of the year san francisco is tiny by the way because of sub leases and uh and then tenants rolling off so the first thing i did is i tried to google what's the total square footage in san francisco and i think it's about 75 million of office space oh my gosh you're talking about 40 vacancy by the end of the year i've never heard of such a thing 40 let's be clear san francisco is fairly unique and a bit of an outlier in the circumstance because so much of it was you know tech heavy and so much of it went remote yeah and the city called everyone and it all got crime but like generally that's not the case i mean you know new york is apparently still pretty stable right and miami's obviously doing well la often but here's the piece of it that people aren't really thinking about which is the only reason it's stable is because tenants sign up for long-term leases and this is why it turns out that we work with a pretty bad business model is because if you're if all your leases are month to month and you hit a recession your revenue gets whammied this is why landlords like long-term leases with credit worthy tenants they sign seven years ten years and so letters of credit right right putting together what that means though is that as these um tenants start to roll their leases roll over the next few years they don't need as much space because they've either gone remote or they're like hybrid now and so they're thinking of their office less as a headquarters which everyone needs to go to and more as like a co-working space their employees occasionally go to so they're all reducing their footprints this is why san francisco keeps increasing its vacancy is that as more and more of these leases roll there's just no need they don't need as much space so they're also downsizing now here's the problem here's the problem is that these buildings have debt on them right and that debt has what's called a debt service coverage ratio dscr and basically you become you as a building owner become in default on your debt covenants if your revenue from the building drops below a certain number and here's the problem all these new leases that get signed to the extent there are any they're going to be at a fraction of what the old leases were because this this vacancy is going to create a massively low market clearing price am i right to understand that they're not allowed to sign those leases because they're under it so that's better than nothing or do they are not allowed to take it it's not that it's just that the market clearing price is going to be so much lower than their old leases that when they then look at the revenue from the building and by the way that buildings can have a lot of vacancy on it now they're just not going to hit their their their debt service coverage ratio so they'll be in default what that means is i don't understand how in a place like downtown san francisco half the buildings don't end up getting owned by the banks well the banks don't want to own all these buildings so they're going to be a fire sale going to happen then you need developers to come in and have the capital to to basically make all those changes again it takes a long time but but think about the systemic risk from that right if you know that a huge chunk of the real estate in is the commercial real estate in downtown san francisco which used to be blue chip i mean the most blue chip right yes who are those financial institutions who own those assets because they are now toxic assets and they will be revealed to be toxic assets as soon as the leases roll well and then there are debt funds and banks as well right and so what are the cascading effects when those shoes start to drop yeah okay and so just to put a finer point also on the the jobs and that was our flop um net international migration um has just plummeted we're well under a million folks uh coming into the country so the obvious solution to our employment issues is to recruit people from other countries but let's go to the turn card uh yeah and there it is um we have just stopped letting people trump just absolutely close the borders as you can see 2016. biden also is in favor of closing the borders it's also sentiment it's like you know america is not the shining yeah people still light on the hill it used to be not in the same way and there are we could easily have three or four million people coming into the country if we wanted to yeah but we have three million people have come in just under biden and illegal migration does that chart count illegal migration no this is legal this is legal okay well so just make sure you count that because we've basically had uh open border policy yeah if we didn't allow those workers then what would happen um okay let's go to the turn card consumer confidence conference boards consumer confidence index in june fell to 98.7 from 103.2 in may uh expectation was 100 so it's under the expectation the expectation index so when you look at consumer confidence there's two your confidence in the present situation that's the blue on the chart and then there's uh your expectations of the future and what you see is a huge divergence there uh starting to happen people are starting to look towards the future as negative but they feel pretty good about today um and so gentlemen what do you think of this chart it seems to me like this is sort of akin to what saks was relaying about that founder at the co2 conference which is like you know he thinks everybody else is gonna you know uh roll up their sleeves and and buckle down but he has no intention of doing it i think people um are roughly the same way and i think their behavior is well you know um if things are going to get hard i'll deal with it in the future but right now i have money in my pocket and you know if you look at airlines and um how many people are trying to travel if you just look at like the cost of a hotel room if you look at what's happening this summer it does not seem like people are slowing down or tapping the brakes in any way yeah this is where i get concerned about credit because it's not coming from wage gains you know the increased cost is there the increased income is not and you know we're seeing continue month after month increases in consumer credit balances um and that i think you know this was the point i made a few episodes ago was i don't think people are going to slow down how they're living and how they're spending it's exactly um there's an inertia there's actually i don't know about that i don't know i i just think after two years of a lockdown i do think that people are anxious to re-establish some amount of normalcy and this is really the first summer where everybody wrote large can be out and do the things that they were planning fake summer yeah last year was a little bit of a head fake and look you have two years of pent-up plans of you know 50th anniversaries and weddings and all of this stuff that's happening and so i think people are really spending money and if you look at it you know the the consumer is holding up amazingly it's got to be some combination of jobs home prices um and this inflation but this is why there has not been a downtick in demand i don't know why everybody thinks that there's been a downtick in demand there was an article today numbers yet it's not showing up in the numbers yet very subtle okay sure it is there is a subtle i actually disagree with you guys i actually think that the economy is pivoting on a dime here and it's it's starting to show up subtly in the numbers here's some other data points consumer sentiment biggest drop in consumer sentiment in 40 years that was in the last month right track ron track polling only 10 of the country thinks we're on the right track if you poll people and ask are we in a recession something like plus 60 of the country already thinks we're in a recession there's a slight political tent to that more republicans than democrats think we're in a recession however even roughly half of democrats think we're in a recession so those are all feelings not behavior though sacks we're looking at the data not the sentiment i think the behavior will catch up with the sentiment i think the behavior is i think the behavior is pivoting it's just that i think you have to dig beneath the surface and you have to look at things like retail sales things like that i'm not sure david if you look back on all the number of times consumer sentiment is dipped that the correlation to spending patterns is so uniformly predictive as we think i mean i think that there are there's a slight positive correlation i remember but i don't think it's like you know .75.8 it's not that so there's this weird preference falsification that happens when you get asked what do you think is going to happen versus what do you do yeah and i think a lot of consumers that's why they have you know we know the data in america like less than a month of savings or whatever those numbers are despite all of the sentiment analysis and all of the stuff you would think that there be behavior change but mostly people kind of just live in the moment and you know that that's partly because they don't have the structural support to save or other things but the reality is that most folks from what they say to what they behave there is a gap yeah and to your point saks um this is starting to catch up we're seeing a slight uh down tick and we'll go to real estate next but if you look i found i was doing some research on gasoline because that's obviously where people getting hit the most the average household is now spending 5 000 a year on gasoline that's almost double last year so this is gonna have an impact it's going to catch up but there's so many jobs available and there's so many people unemployed i think it's manageable so to your point your mouth it feels like consumers can manage even this great headwind let me just put a point to it i think the average uh per capita income in the us is about 38 thousand dollars a year that works out to about 17 bucks and 50 cents an hour roughly um think about a person um with that level of earnings the average household in the u.s has historically you know spent about a third on housing about 13 on food and about 16 on you know their car and their gas and they only have about 12 left over for savings so you know if that 13 on food has jumped by 30 percent the 16 that they're spending on gas has jumped by 40 or 50 percent and even if housing prices take up a little bit all of a sudden your savings are gone and you're actually not getting it's actually doubled freeburg it's doubled i guess so yeah by the way it's worse than you say no it's worse than you say because you're you're using a per capita number yeah yeah and so what but i think what i'm trying to highlight is that there is a distribution there is a group of um the united states a small percentage of minority that have earned good income and are having their 50th anniversary like jamaat is talking about taking their travel and that shows up in the numbers there's outsized spending happening with a segment of the economy and what saks is saying i think is right as well which is that the majority of americans are facing this really critical budget crisis where their personal spending levels are now exceeding their income levels and there's a critical need for credit and for personal debt and spending to go down and that's what's going to drive significant risk in the next couple of months and quarters and years is the majority it looks some of the numbers will look good because there's a segment of the economy that is overspending but the majority of the economy is as sax is saying probably turning on a dime and i think both things can be true yeah let me let me maybe tie a couple of these things together because i i tend to agree with you like i think that we have been in a supply-side recession that is what has caused inflation we have to go through a process of taking all the excess money that's been put in out and when you do that we will destroy demand and then that will trigger a demand side recession because people will asset values and we will destroy asset values so that process asset values went real quick yeah that will happen second so the balance sheets of that segment of the population that is overspending right now once their balance sheets really take the hit and they take a hard look at what their savings are they're going to cut spending right yeah so but the point is i think we're still firmly in that first phase and and i hate to be the bearer of bad news but the reason why i think that we're still in the first part of this process is because people broadly speaking still have a lot of savings because of all the stimulus checks there is still a lot of money so what how will we know maybe is the better point when all of that excess savings has been you know torn away from these people because of high prices i suspect it's when jason's first chart starts to close right so when people are you know go they're more motivated to re-enter the workforce i think that's the signal free br your signal is another one which is when credit delinquencies really start to spike it's because people then you know tapped out their savings then they tap their credit cards and then all of a sudden they become delinquent when all of those things happen you're probably now at a point where that first phase of the supply side issues are largely done and now you get to the demand destruction but all of those roads unfortunately lead to the same conclusion which is like you know equities get really under pressure there is no scenario where there's a bid to equities why would you buy something that has lower earnings in the future or why would you buy something that has a lower discount rate for profits in the future in this case both are true all right let's get to that because the piece we haven't got to so here's the river card is housing because people's homes are the majority of their wealth here in the united states and that i think will be the true indicator chamoth to your point labor participation certainly won but when this hits housing that's when we're going to know we're in the end game the mortgage rate just hit 5.3 percent um why why do you say housing is the end game well i i think we haven't seen uh the collapse of housing prices yet we're in a housing shortage and historically mortgages are still at um you know the 30-year average so let me just give you the statistics here the mortgage rate is uh 5.3 uh if you look at this chart from our childhood on our parents in the 80s were paying 15 16 70 17 for their mortgages we're well below the 50-year average even with the uh rate hikes and so the 50-year average for mortgages the 30-year mortgage is 7.77 so we're at 5.3 well below that but well uh this has been a very quick turnaround from two and a half percent mortgages all the way up to five point three percent home sales have started to show weakness so to sax's point this is starting to show up in the numbers but ever so much um we're down six percent almost seven percent year over year and 3.5 month over month but we're holding up historically so for the last 10 years we've been selling over 5 million homes a month with the exception of the pandemic shutdown and that's this next chart you're going to see here and this is a really amazing chart i found which is existing home sales versus a 30 year fixed rate mortgage in our childhoods in the 80s we're selling 2-3 million homes a year as you see the rates that's the orange line come down massively from 17 and then under 10 percent housing starts to flip people start flipping houses more and more often um but we're still at that 5 million that number's got to drop down to probably four and then we would actually have some capitulation uh feedback from the panel i mean look there's an old saying that a recession is when your neighbor loses his job and a depression is when you lose your job and the reality is we haven't had the big job losses yet it's starting we can start to see it and the number of open wrecks are getting closed and then there were those job loss numbers that just came out which were a little higher than expected so the job losses are starting but so far it's really been the step prior to that which is people are seeing their 401ks get destroyed stock markets down they're seeing their wages get destroyed by inflation food and gas prices being much higher so there's a really good reason why people are sentiment is so negative out there people feel poorer than they were before and this could get worse like you're saying jason with their nest egg in their homes getting hit i agree that's the next shoe to drop just like the commercial real estate is the next shoe to drop but i think the really big question over the next six months is what sort of job losses do we see because that really is going to be the big determinant of of how hard this recession hits yeah i agree with you and it's it doesn't look like if we if we're losing 300 000 jobs a month it's going to take a long time for us to even get to one for one jobs and so this is just honestly i think i think you're right but i think we're not even close to that i just don't see where all of a sudden there are these writ large mass layoffs for example i would believe what you're saying if if the headline in the wall street journal said walmart lays off 10 000 people right that's not what's happening in in fact it's the exact opposite walmart's like well you know we seem to have record demand we're raising prices and and every supplier will have to pay a gas tax and a supplier tax and deal with it so i just think that you're you're going to be right in the end i just think we're way too early in this process to get to that place where we did we're debating this i i don't see so chamath are you on board with the the ackman trade basically you know ackman basically came out that tweet storm a couple of days ago basically saying that listen inflation is still the big problem not recession the economy is humming along there's plenty of jobs and we're going to have a persistent problem with inflation i think he's kind of right and kind of wrong i think that you can have inflation and a recession at the same time this is what my point is i think we have been in a supply-side recession meaning the day of the pandemic it's not as if demand stopped it's not as if you and i david didn't want to go out or use door dash or take an uber or watch a movie in a movie theater we were not allowed right and so we found other ways in in order to fulfill our demand that's why shopify you know did so well on behalf of the merchants that they served that's why robin hood did so well that's why fortnite did so well right we found other places to spend money but what went away was the supply and those incentives didn't come back and they're still not back that's why prices keep going up this is the problem is the definition of a recession right chemotherapy it's not the problem that most people don't understand that you can have a supply side recession and a demand side recession they just manifest in different ways so well i think i think i think like i guess ackman is roughly right in some ways he's roughly not so right in some others i think that we have an issue where we are going to transfer the supply side issues that are driving inflation to average everyday consumers and their ability to buy things i still think that the average everyday consumers desire to buy things is what it was from before and on the margin is probably higher i do think at some point it will start to change when prices get high enough but i don't think we've reached that point of equilibrium yet and the reason is because companies like the walmarts of the world who see this demand on literally a real-time basis knows better than anybody else when and how much they can raise prices downstream into their supply chain so when you see something like this in the wall street journal i would just encourage us all to say they must see that demand is the same or better and so they're going to now push those price increases down to everybody else because now walmart says here is an opportunity for me to defend my earnings power and this is why i think we're in this first inning of this so i don't know whether ackman is right or wrong but i think we're in the early phases of a two-phase recession and i don't know what that looks like because i've never lived through one of those and i think in many ways it's the combination of the two and it was it was largely because of government failure government failure and how we reacted to the pandemic in hindsight saks was right all along we overreacted by shutting everything down we probably could have kept some supply online by understanding masking early on and then second we exacerbated with failed government policy because we gave everybody trillions and trillions of dollars and we entered the capital markets and perverted it with another seven or eight trillion more and by the way that has consequences well the consequences are still talking about giving stimulus now in order to um help people deal with so we are not we are not learning second you can't pour fire so if i lean on the fire if i had to basically put what we are all saying into a neat little bow i would say there needs to be a multi-phased economic correction one that corrects the supply that we took out of the market during the pandemic one that corrects for all the excess money and then one that corrects for demand that's a lot of stuff we have to do and so the more misguided government policy we have the farther away from finding that equilibrium point we're going to be the longer it's going to take the more damage it's going to be so sax the fed is obviously uh it's pretty much consensus they're going to do another 0.75 75 basis points later this month could be 50 basis points who knows there seems to be a couple of people saying that that might happen if that does happen and it feels like inflation is starting to top out do you think inflation you know starts to turn or do you think we're still going to see prices go up because it does feel like it was starting to bounce along the ceiling what do you think's going to happen if the 0.75 happens you're seeing the market rally today in the last few days especially growth stocks because of this idea that the fed is tackling inflation they're raising rates and the market is looking out six months and seeing the possibility of recession and they believe that is going to bring down demand and bring down prices and it could i mean what i just described would be a soft landing i just am skeptical there's going to be a soft landing because of what math is saying which is this is a multi-part problem and until we fix the supply side i don't think that merely reducing demand is going to get us out of this i really agree with you it's a production problem it's a demand problem and it's also as we just talked about a few minutes ago an employment problem because the businesses that need to grow that need to generate revenue cannot get the businesses that are dependent on people to do service jobs cannot get those jobs filled and so they cannot grow their revenue cannot make their profits and there's a trickling effect in the economy of that you know what we talked about that kind of job shift that job market shift that's happened so all three and so all three are just this like dislocation that's happened totally right and it's unclear you know someone very smart i was talking to yesterday who's a former um member of um an administration said um we just there's literally no way to predict we just don't because think about the complexity of throwing three rocks in a pond how do those three rocks interact and how the ripples interact is really what we're trying to predict and it's very hard to do i mean if you translate this into the markets for one second i think what we've done since november of 21 then nick you should play this clip because you know not to say you know we didn't see this coming but we really did you know we pointed to you know one of our friends and the person somebody else that we kind of know bezos and elon and we said when the two smartest capital allocators in the world start divesting they clearly understand and see things that the rest of us should pay attention to and to ignore it seems reckless or the clip and we'll be back in 30 seconds after the clip the two most important founders of our generation the two smartest people who have really consistently won elon musk and jeff bezos have collectively sold more than 11 billion of their holdings this year alone and if you can't take all of that and decide for yourself what's right for you and your family you're doing yourself a disservice i think it's important for me to never sort of like be forced to tell folks whether i'm buying or selling although i'm willing to do it in moments where i think it's important but i think it's really important to understand the context and so i think like these folks that like think derisively about individuals who are managing risk i think it's really naive and i think it's um it creates a lot of missed opportunity for them as well if the smartest people in the world are now selling their core holdings that they told you they would never sell and you are not reconsidering your position on things you're either much smarter than them or you're being really really reckless that was november you know and at that moment i started a bunch of things in process which we can talk about at the end but i also sold a bunch of the warriors positions i started a process at that point and i sold a piece in december and then i just sold the last piece this week but then you know i sold a big piece of sofia in that moment um but the the point was more the following which is since that clip to today what we've gone through is a massive re-rating of the discount factor of these companies assuming nothing else changes right that's all we've done we've we've not questioned whether earnings can change you know all we said is okay well now we're going to take the discount rate up which means the value of this company is less than it used to be that's all we've done through all of this wealth destruction that's happened since november but now the second shoe has to drop which is if you believe that after the supply-side issues are resolved you go through a demand destruction phase the earnings of these companies are in real trouble and jason you posted something i think about the social media companies and addresses gonna get hit right so one of the first things to go into recession is advertising if you're going to belt titan at a company where can you do it well you lay off employees but you can't get out of your leases as we talked about in real estate but you can cut your spending on marketing and so uh right now the the it's looking pretty bleak for uh facebook because of the headwinds they have so the earnings could drop which means and by the way the tax ratio could be totally we talked about that things are not real right well we talked about that we talked about that over the last few weeks which is every time the market rallied oddly facebook would be stagnant or trade off and we know when i called people on wall street what they said was because you know we think this is the company that has the most pressure on earnings i don't know if that's true or not but they took every opportunity and rallies to trim their position in facebook now if that's true you have to remind yourself that is one of the 10 best companies in the entire world and so if you're going to go and question the earnings power of one of the 10 best companies in the world you may want to consider the earnings power of every other company that's not facebook there are so many things to the facebook story they are facing a unique disruptive moment with apple uh ankling their ability to target users supposedly google might follow suit with that which would be super anti-competitive and also the surging tick tock uh taking market share from them there's some good news in energy which will then dovetail into politics and into this farming situation freedberg turkish government claims it discovered almost 700 million metric tons of rare earth minerals it's 15 times china's reserve if this is true you guys probably know we use about 150 000 metric tons a year right now that's going to double by 20 30. this is something like 4 000 years at the current demand and this would put them far beyond anybody else's chamati you've got investments in this space i don't know if you've been tracking this news thoughts on another massive discovery of rare earths what did you guys just have dinner dinner reserve what do you guys no that's the best she brought she brought us she got a little pasta show me there's an incredible restaurant here in milan called desantis which makes the best paninis you've ever tasted is this a harbinger of the future desantis what could be more perfect than that oh the desantis panini here you go this is the oracle sex with the subliminal influence absolutely so good this is what's going to get us out of this situation desantis all right chem off just quickly on the rare earths uh if this is actually true what would this do uh and have you been tracking this situation because it does seem to happen there's some truth to it yeah i think it's important to just take a step back and kind of look at this thing with not like complete skepticism but just a little skepticism it's okay not surprising that there's additional deposits all around the world meaning we've always said rare earths are not particularly that rare it's just the question is you know which of the 17 rare earth elements at what grade meaning at what percent concentration does it exist and then really importantly at what cost to extract it economically yeah right so meaning there's a ton of underdeveloped rare earth athletes in canada the us africa australia brazil brazil they're just under under developed because when you put all of these factors together it's really tough so the government release says they're going to process like 570 000 tons of war that'll produce around 10 000 kilotons per year of rare earths that implies sort of a 1.75 to 2 grade it's fine so there's just a lot more work i would just sort of say it's really directionally great a lot more work needs to be done and more importantly they need to release enough of this detail so folks like us and others can actually diligence it to to tell you more accurately but the press release was exciting freeberg this reminds me a little bit of the peak oil head fake we had you know 15 years ago everybody basically said we're not going to find more oil here's what's left of oil and then norway is like yeah we just found more oil than existed previously it's been pulled out and the whole concept that the world's going to run out of oil is now gone so freeberg what is happening in science that we just can't predict what resources are available we know very little about what's inside the below the a certain depth of the crust of the earth so um you know there's some estimates but we're always surprised and we know very little about the distribution of those elements in the crust of the earth and below the crust of the earth you know mining is an incredible industry i don't know the state of the art in engineering and mining very well but you know from a pure geophysics point of view by some estimates we have 10 billion years of energy reserves below the crust of the earth that we can access in the form of nuclear reserves geothermal power and that's excluding you know some of the the you know the potential of some of these elements and what they could do um in building a more sustainable energy economy why is people so pessimistic when we keep surprising ourselves and more resources anyone wants a great book uh none of you guys were at the dinner that i did a few weeks ago where we had stephen pinker come for dinner yeah read his book enlightenment now or you could watch one of his uh videos on youtube where he's got like all 60 slides and he highlights like you know humans have a tendency to focus on the risks and the concerns and the downsides and we miss the incredible optimism um that is apparent as we actually look at the data of what's happening with our species and what we're doing on our planet we have every reason to be optimistic you know we have fewer wars than we've ever had murder rate per capita is lowest than it ever been longevity is increasing health is increasing per capita i think everything's increasing and i think that the same is true in terms of you know scientific breakthroughs discovery and engineering our way to a more sustainable energy and food future this is one of the great things about having you as a friend freeberg is your relentless optimism and your actual cool comp collective lack of anxiety uh another amazing news for me the eu parliament has flipped again credit thurmberg is completely tilted we talked about the virtual signaling eu parliament you know and uh germany turning off their nuclear power plants and and just securing the bag for putin the eu parliament flipped and they are now saying these virtual signaling knuckleheads they came to the sensors and now they believe nuclear is green also green according to the eu parliament is natural gas so uh this to me feels like the beginning of the end for putin in saudi arabia uh if you look at the us becoming a net exporter uh of energy uh it's quite possible the eu could become that as well if they actually and this is a big f if they actually you know start building nuclear it could be the beginning of the end of what some people are calling the woke green movement and this is certainly over this realization that to transition to the next car to the uh beyond the carbon economy is going to require continuing to invest in and support the carbon economy until those alternative solutions emerge and to have dual track investing and i think that's what we're seeing around the world in the united states in europe now and europe has always been farther way farther left in the united states in taking this point of view and i think now this this has been a wake-up call for everyone and all it took was just a little bit of six dollar gasoline and for people to personally suffer for them to change their virtual signaling nonsense yeah this is this is markets at work yeah this is literally educating the public would you rather be beholden to putin they pivoted because would you rather have nukes they pivoted from banning energy production to banning food production should we talk about so on the energy side uh i did a in the group chat just a little breakdown on the math i think it may be interesting for people to understand but today globally around the world every single country in the world that is involved in the oil business is able to produce exactly one million more barrels per day than we need so let's assume that we you know need a hundred million barrels of oil a day as a as a as a world to continue to do everything we want to do we produce 101 million so we're right on the knife's edge by august we're going to go through um a capacity increase in opec plus which is you know opec plus russia etc uh saudi arabia is going to go from 10 million barrels a day to 11 million barrels so not a huge increase um russia has is is thought to be able to cut production if they feel pressure up to 5 million barrels a day without having any impact to their economy so jp morgan i think and um uh credit suisse they they did this sensitivity analysis and here's what they found they found that if russia were to cut three million barrels of oil so we would go from being over supplied by one million to under supplied by two the price of oil would go to about 180 a barrel if they cut 5 million so the threshold at which their economy doesn't really get that impacted the price of oil could go as high as 380 a barrel while you would say okay well we just need to pump more oil from other places and this is the problem in all of these rules that have existed for so long the capacity doesn't exist right we were destroying supply governments all around the world were making it very difficult to generate the supply of nuclear to generate the supply of oil and to generate the supply of nat gas so saudi arabia says we can get to 12 million well guess what they can only start the work in 2024 they'll be done in 2027. yeah so to your point all of a sudden we realize wait we needed these bridge fuels all along how did we allow all of the supply destruction to happen and now we need to unwind it it's going to be a very complicated process and if any of these things happen if russia decides to play hardball against europe or america we better hope that it's a mild winter because very quickly you can go from plus one million barrels to minus two in a heartbeat yeah at american start and the last point on this about saudi arabia you'd say okay well saudi arabia is going to go from 10 to 11 so that's good they have been at 11 million for a sum total of eight weeks in their entire lifetime if we look at this i mean americans also buying 20 to 25 mile per gallon cars that's got to end too and so personal responsibility uh is part of this the really interesting thing is china already has this plan uh their nuclear strategy with the belton road initiative is to put 30 nuclear actors in countries outside of china that they're trying to have influence in and they're they're building 30 nukes right now they got 150 planned so china's just ultimately savvy and thinking big here about energy independence and we need to follow them uh other big anybody have anything else on the energy situation before we go to uh the farming situation let's get to the farming situation okay so dutch farmers are in revolt after a new proposed law to cut emissions uh on tuesday dutch lawmakers voted on proposals to slash emissions of pollutants uh like nitrogen oxide and ammonia they're targeting a 50 cut nationwide by livestock produces these emissions so the plan will likely force dutch farmers to cut their livestock herds or stop working all together farmers protested they put their tractors outside buildings they dump fertilizer 40 000 farmers gathered last week in the central netherlands agricultural heartland to protest these plans um and started shooting at them uh these uh tractors were doing some uh pretty gnarly things uh and stopping traffic and guess um and there were some shots were fired were they no wait the government fired shots the protesters were unarmed as far as but supposedly they were doing something dangerous were they honking threatening the safety of this is the other side of the story saks um listen neither of us were there but according to the sources they were using the tractors to threaten the police like physical bodily harm and that's why they unload it we don't know all the details it'll come out but that sounds proportionate i i mean if you had a tractor coming at you to kill you and you're a police officer okay so let's talk about the science of its science let's go wait is it like the scene in austin powers where there's a steamroller coming towards austin exactly jason's like oh they're using the tractor as a weapon that's like really just i'm i watched people doesn't have a you were not there i was not there i'm just telling you what was reported reporting and reporting what's reported and nobody knows if those reports are true so i think look i think it's worth just highlighting because this is a really important this is the first time we've seen government action of this scale and and the resulting kind of rebound effect on something that's really important humans use roughly between two and six percent of our energy on earth every year to make ammonia ammonia is the primary fertilizer we use to fertilize our crops around the world and if not for the invention of the haber bosch process which you can read about in the book the alchemy of air and the creation of ammonia as a synthetic fertilizer humans would all have starved in the mid 20th century it's an incredible technology breakthrough what we've learned over the years however is that when ammonia sits on the ground for too long it volatilizes and it basically binds with oxygen and turns into nitrous oxide and goes into the atmosphere nitrous oxide is 300 times more potent as a greenhouse gas than co2 it lasts longer and it absorbs more heat so there has long been concern about the overuse of fertilizer and the overproduction of ammonia that just sits on the ground for too long that ultimately creates this incredible greenhouse gas effect and so there has been talk in the united states under the obama administration under multiple epas there was a supreme court ruling a few weeks ago that started to touch on whether or not the epa has regulatory authority here to actually regulate the use of ammonia farmers generally put a lot of ammonia on the ground because they get higher yields out of their crop the problem is if that ammonia sits there for too long it turns into a greenhouse gas and so regulating ammonia and regulating this nitrous oxide emission has been you know at the forefront of green the green movement at the forefront of climate change as one of the ways to manage um and and and reduce the effects of global warming from human industry um and now you know the dutch government has come out and started to do some of this regulation it's a little bit um off because it comes from cows and and we're seeing what happens off free brook can we finally admit that it's the vegan's fault now well at this point actually um you know is it is that a yes no no the ammonia production in the netherlands is from i mean the netherlands just you guys know the netherlands is the world's third largest dairy exporter uh they export three billion dollars a year of milk to the rest of the world to other countries um and so they have all these cows that are like densely packed and they're peeing everywhere and that pee is ammonia and it's causing all of these problems the other problem with ammonia is if you guys look at the united states corn farmers farm in the midwest when it rains the ammonia on their fields goes into the streams goes into the mississippi river and goes into the gulf of mexico in the gulf of mexico there is a massive hypoxic zone there are no fish they're all dead because when ammonia ends up in the water it kills life and so there's this green algae and no fish and everything dies and so that's what the dutch are trying to regulate and the eu generally has been trying to regulate is the removal of excess ammonia in ag production and in in right but again i still hear though that if if if we ate less vegetables this wouldn't be a problem not correct not correct most of the production of ammonia is used to make animal feed which is used to feed animals to make beef which is a terrible decision you could feed it olives as we know olives tastes delicious with there because the issue here that is the issue here that the regulators hit the brakes too hard on these farmers and they should have maybe had a more gradual landing for that is it's been talked about for a long time and in the us there's just no way a law is going to pass because the u.s senate is controlled primarily by rural states which are ag heavy so you see a lot of bit you don't see a lot of bills that hurt farmers get passed in the united states because the senate is controlled by farmers that are elect sorry senators that are elected by farmer by big farming communities and farming states and so um you know it's been hard to get a regulation like this past where folks have tried to and talked about doing it um around the world however in a place like the netherlands and the eu or as i mentioned before they're far more progressive and have this very kind of green hat on they're starting to take this sort of climate change action as they're calling it and that climate change action you know does have the ramifications of destroying by the way one of the things they said is we expect and this will destroy the livelihoods of many dairy farmers in in the netherlands that was horrible by the way look all kidding aside i said that they said that directly by the way and the dairy farmers are like fu you're not destroying our business for climate change i have a specific question though which is has there not been some efforts to engineer how these plants themselves absorb nitrogen yes i have three businesses on this totally right technology is going to solve this problem i'm super optimistic on that there are microbes that are being used to coat seed those microbes can pull nitrogen out of the atmosphere directly so you don't need ammonia you use far less ammonia there's a couple companies that are doing this really effectively they're growing like crazy they're doing really well there are other projects uh and there's very simple solutions my last company we had a product called nitrogen advisor where we basically told farmers instead of dumping all the fertilizer at the start of the season you paste it out so the fertilizer doesn't sit there and volatilize there's all these solutions that technology allows from software to bioengineering to these microbial solutions and so we're definitely um i think going to resolve this but meanwhile these governments are in a frenzy to solve the climate change problem and you know they're going to start to pass these laws that really hurt the livelihoods of uh you know ag producers how do you guys think something like this happens because typically you would expect when a government is about to pass something like this there's sort of like a pretty fulsome review and all sides are brought together and there's working groups and all of this stuff and at some point you would talk to some scientists at other points you would talk to economists at other points you talk to the people who'd be directly affected like the farmers is it that the virtue signaling around sustainability and climate change is just so high that people just turn off their brains or well like what is actually happening here i think what's going on is you got a bunch of technocratic bureaucrats in brussels who don't know anything about farming or these people who live in the netherlands who've been doing this for generations and they sit there in brussels and they make up these completely arbitrary guidelines and requirements 50 by 2030 those are suspiciously round numbers okay and then some other you know authoritarian technocrat in the netherlands then says well we got to implement this and they pass some crazy law and they don't even think about the impact on these farmers why because they're deplorables i mean it's complete class bias it's just like the canadian truckers they don't think about these people they don't factor into their equation they don't know how they live and so that's what's going on here and so you've got this global elite of of technocrats who are willing to use authoritarian tactics they're appropriating their farms they're taking them away that's why they're up in arms see the rest of it which you're not saying it's not just technocrats it's the actual globally writ large have wrapped themselves around the sustainability blanket and they believe that that word justifies all kinds of bad unscientific enumerate policies right and by the way they're they've just woken up on energy right they they had just banned energy production in europe they realized oh wait a second this is making us dependent on russia and authoritarians well what is the other big export of ukraine it's food so they got smart on energy and now they're about to repeat their same dumb mistake of basically prohibiting this area where they have an enormous natural advantage which is food production so you know it's like they just keep making the same mistake over and over again and by the way let me ask you a question by the way yeah look i'm not going to question you on the science freeberg but here's what i would say is i think there's a tendency on the part of these technocrats to think that the science is a lot more bulletproof than it actually is that is certainly what we saw with covid is we had these same sort of global elitists these technocrats who claimed to be health experts they made up all these lockdown rules that we talked about the beginning of the show and what did they do no this isn't speculative but but what but i will i will they're willing to use they're willing to use heavy-handed authoritarian tactics and i just don't believe that the science of this especially this 50 by 2030 why is that the guideline who can prove that those are the exact right numbers and they're willing to use any tactics necessary to to implement their crazy rules let me ask you a question sex let's assume that there's a technology transition possible that there are solutions that could be used i highlighted a few of them they just cost money they require some investment and you know creating this distortion in the market by saying you can't release 50 of the ammonia that you've been releasing forces a technological shift that otherwise would have taken longer in the market do you agree that there may be a scenario here whereby you know governments can and should intervene and i'm not making the case personally i'm just trying to you know highlight for you that i think this is where folks are coming from right but there are alternative ways to make the dairy there are alternative ways to feed the cows they're all or um here's where i think you're going with that which could make sense which is okay you're saying there is a pollution externality here uh being created by the farmers well we need to basically internalize the externality we need to capture the cost of that so what you could do is gradually introduce some sort of permit system you know or a tradable permit system right where that would incentivize the creation of these technologies that you're talking about you want to do it gradually so you don't destroy the livelihoods of these farmers who've been doing it for generations so that would probably be the approach you'd want to take i agree with you by the way i think i think that is what is going to happen around the world is that that sort of cap and trade or taxation system is going to get slowly rolled out for a lot of these externality costs in production and industry and agriculture particularly because there are technological alternatives and it will incentivize the switch to those alternatives because the alternatives will cost less than the taxes saks based on what you're saying is one of the problems here that these technocrats these professional politicians they don't actually have great strategic thoughtful um you know real world experience to do planning you know looking at germany their inability to see the writing on the wall of what building a gas pipeline from russia to germany and shutting down nukes would do it just seems like over and over they're just really bad strategic thinkers combined with this fight you're wrong no jason they are influenced by these cultural elites who they want to create favorites group think it's a lot of group thing going on yeah behind the group think is a class bias right they only associate with other members of the professional class who have you know basically graduate degrees they don't even interact with these farmers just like the just like the legislators making covid rules the health experts never interact with canadian truckers so there's a huge amount of class prejudice saying that these people just don't matter we can force them to obey our rules and if they don't like it we'll confiscate their farms and by the way the rest of you you're gonna have to learn to eat bugs or tofu or tempeh or recycled excrement or whatever i was the desantis what was your desantis was the desantis uh prosciutto what did you have on there was it some mozzarella and a roast beef that's a beautiful roast beef beautiful roast beef by disaster brought to you by dessert it's gonna become a meme after this episode i have prosciutto is the best market campaign ever he's a lock for president jacob i had prosciutto cotto with brie white truffle cream and lemon i mean did you have the white truffle on it uh that's like a plus what's that bro this is 80 euros no it's like eight euros eight euros yes bring something back bring some back uh wait i wanna i wanna say something about this i hope the democrats uh embrace this agenda wholeheartedly because if we get all the voters who wanna eat roast beef i'm pretty sure that's the super majority in this country the way to solve this freeberg is with the right economic incentives there's no reason why the dutch government had to go and basically put thousands of farmers out of business instead what they could have done is actually created the tax incentive that allowed farmers to adopt some of these bleeding edge technologies when they were probably too expensive to make it economically equivalent that i mean by the way that is not a newfangled idea this is not genius talk here so the reason why they don't do the obvious simple thing is class bias it is exactly what david said it is the influence of people who look hold on who look down on these people okay and who believe that they are more virtuous because of their desire to defend climate change there's also a pragmatic piece of this this reminds me of the cold debates we had there are 62 000 coal miners in this country like this is a small number of people who are impacted we could just you know basically give them severance or in a soft landing instead of the you know this crazy or or let them continue to do their job and egress off naturally the economic free market will manage it will manage it on its own and instead what you could do is actually green light nuclear subsidize some of these more adventurous ways in which you can extract and refine lng but my point is this is where it's it's a real head scratcher why politicians don't do this and i think the only thing that i can come up with is that they are overly influenced by these cultural elites with their perspectives i agree that do judge very harshly what they believe to be right and what they believe to be wrong can we take a victory lap here in the united states that we're energy independent and that we're food independent can we take that victory how much longer jason no well i think we now need to think instead of just being independent i think our mission should be surplus jason our president you know canceled the keystone pipeline he cancelled a bunch of exploration permits in the gulf you know again it's we are one bad winter away from all of a sudden being in the same situation as everybody else so it's not as solid one bad we're not one freeberg where are we in terms of our independence jkl we are the number one ag exporter in the world and by the way under under a different president just a couple of years ago we were the number one energy exporter in the world the fact of the matter when it comes to food and energy we have the greatest natural resources and we should be developing that we should be moving but no sex my point is what if the united states took a philosophy of not just being an independent but being even like a stronger surplus to the point of like building that up we are we're we're working it out the market's working it out and we're taking you know we're we just need to feels like we could do better it feels like we do i mean the issue with nuclear power as you know is the regulatory cost so you know it's 10 billion dollars and 30 years to get it let's move to the lightning round no i just want to show you guys the monmouth pole which i think is worth highlighting okay we didn't talk about it but the monmouth pole that was published a few days ago which is the june 2022 poll the number one concern that america the number one thing americans are concerned about nick you could put the chart the table in the in the uh the show nuts 33 percent care about inflation 20 15 care about gas prices 9 care about the economy six percent care about everyday bills and groceries you know you add that up um that's the vast majority of what people are concerned about and all the way down at the bottom of the table is climate change at one percent yeah absolutely so i think it just speaks to the point about you know there there is and by the way i'm not advocating that this is the right position but i will say that there is a huge distinction or discrepancy between what the average american is worried about and you know where political leaders are trying to carry us forward i'm not sure what the right answer is but there's definitely a disconnect and i think it's being played out in this netherlands situation right now one point for you on that as well nick i put this article in the in the chat but the the top esg fund manager in europe um of the of 2022 uh they released their um results and the guy was up like uh almost 16 percent um and he disclosed what he owns and he turns out that he owns conoco valero and exxon and according to the esg rules that these folks have passed this qualifies as an esg fund because he doesn't own weapons porn and um oil sense but it allows all these people to walk around thinking that their investments are tied up and things that are actually clean so it's not true so the point is that there are there are these structural lies that have been baked into the system um that they are supported by very shoddy accounting or rules or science and if we're really going to fix this problem i think you have to go and inspect these things and call them out but like all of this esg investing which perpetuates by the way perhaps you know why these governments just have no clue what's going on sit on top of all of these lies there's nothing esg about conoco and exxon per se that's ridiculous let's just call it for what it is this guy's a good fund manager it's a he's a good fund manager he did well in a period where everybody else was down let's just celebrate that and not tell all these it had a good marketing spin for a while so you know no but it's not just marketing it allows people to believe that there's a solution that is being affected that is not true that's the part about it that's super nefarious yeah okay listen we moved science up because science got a short shrift last week what is a lightning round what is that i just wanted to things that were small that weren't like full segments i my concept here was to just put things at the end of the show that we missed but what i did was give you a shout out you're doing a great job moderating today by the way thank you put a couple extra hours in by the way i think freeberg made a really interesting point a minute ago about me being a great moderator no not that okay um about the um about the polling the monmouth polling where if you look at what voters care about and what the elites and the elected politicians care about there's a huge divergence huge that's clearly what happened in holland right you got these dutch farmers their livelihoods are being taken away by people in brussels who don't even understand what they do i mean people want to make a living yeah pretty but but this is why you're seeing populist nationalist uprisings in all these countries is you've got a crowd of people who go to davos and make policy and they're completely disconnected they're completely disconnected from the real concern look at pojo electorate bojo just got booted today why ultimately at the root causes he was throwing covet parties when he was telling the same thing that everybody nailed gavin newsom for this guy just got booted out as prime minister they're better than the united states they're hypocrites and they're incompetent at their jobs let's call it what it is the association is you try and do what you believe to be best for everyone but it's not it's not what's best for you you know and i think that that's the point like climate fixing climate change stopping kovid i gotta do x y and z for everyone but i still want to fly in a private jet and i still want to go to a covet party you know to a dinner party exactly like super spread um this is why i think biden is very unpopular i mean look he's at hold on hold on let me cheat out for you hold on let me see here okay so we are going to tear up okay i have a good joke just let me do it all right so all of the free berks stands were breaking my chops that chamoth was cackling and laughing during a science segment and we rushed him so i moved sides up so to the freedberg stands please stand down now we go to biden arrangement syndrome segment at the end of the show joe biden's cognitive decline is becoming the topic sacks have at it well listen if if you call this uh bind arrangement syndrome 62 percent of the country has biden arrangements because it's like we all did for uh trump violence poll numbers are down to something like 38 it's historic low for this point in time of a presidency but look the point i was trying to make was i think that biden's problems flow from this dynamic we're talking about which is he campaigned as scranton joe he was a working class hero who is going to give us a return to normalcy and what has he done he's basically implemented every wacky idea of the progressive left he basically is representing that part of the party that is completely disconnected from the ordinary desires of the working class and what are people concerned about right now food and energy prices what is biden concerned well first of all he's blaming it on mom and pop gas stations even even jeff bezos had to that's what was insane yeah so just to queue up the tweet my message is biden suite my message to the companies running gas stations and selling and setting prices at the pump is simple this is a time of war and global apparel bring down the price price you are charging at the pump to reflect the cost you're paying for the product and do it now and then almost all small business franchises which is absurd and that's just not how the economy works do you think that they look at a chevron and think it's owned by chevron or they cannot be who's tweeting for what some some millennial some millennial with a couple of master's degrees and 400 000 if that is rage tweeting from the strategy to make him look incompetent i mean i am forever thankful for joe biden to getting trump out before he took a third or fourth it would take an eight-second google search to know that less than ten percent of the gas stations in america are owned by these corporates well here's basis these are mom-and-pop businesses this is insanity a lot of immigrants it's a lot of south asians this is why it's very sensitive to me these gas stations they are mom and pop owned a lot of them are owned by immigrants and this is their small very strengths of the american dream and biden comes along and he's saying you're doing too well i mean these people their profit margins like two percent two percent two percent nothing my buddy's family by the way owns a bunch of gas stations in the bay area and he told me they make no money on gas they make all their money selling cigarettes and soda that's it that's the whole business yeah it's a way to get people into a convenience store here's my thought i think i'm going to state it right here bezos is going to run for president in 2024. this is why he retired what this is why he's giving money away i will bet anything against them okay he's playing legacy games no why else would he become a poster on twitter ouch inflation is far too that wasn't even a post well anyway he's he's basically he doesn't have to run a company anymore he's bezos after dark that wasn't even a post that was kind of like he was outraged by the financial illiteracy this year stupidity and the economics take on the president there's no upside there he's not starting a fight jacob it's just calling out something that on its face that tweet it was not written by joe biden so let's not pin the blame on him but that office and that strategy is clearly broken because it is run by someone at a minimum who's enumerate and who's clearly financially illiterate who doesn't know how to google anything because that's the only way you could write something that insipid biden should fire whoever it is that wrote that 100 biden is looking for scapegoats okay his popularity is at historic lows the right track wrong track numbers are at historic lows he's looking for anyone to blame and he's been going through a whole sequence and the the putin price hike wasn't working he couldn't even say it right so now they're looking for anyone else remember elizabeth warren did something similar when they had um food inflation they started blaming the meat the meat packing industry or whatever look this is not how these industries work but they are looking for someone to blame for their own mismanagement of the economy and biden baked this cake last year we've discussed this before he canceled energy independence his first day in office and then moreover look on this ukraine situation if you knew you were going to take this tough putin approach jason that i know you support okay but if you knew a proxy war was coming or you're willing to let one happen you would want to basically create an energy glut not an energy shortage you'd want to basically maximize the amount of american production and you would not want to alienate the saudis so what is biden doing now he's going over saudi arabia had in hand totally humiliating to beg for forgiveness for last year ostracizing them and calling them pariahs so no hold on a second they had no grand strategy if they wanted to pursue a tough on russia strategy they should have maximized energy production instead they didn't even think about it they didn't even think about it energy inflation i agree with you there it also i will say is notable i think the democrats are actually now um i think they're quietly pushing the joe biden cognitive decline so that they can put it they can feel it what do you mean quietly how do you allow a governor a sitting governor to run ads in a different state against the the presumed uh republican nominee unless it's ordained well i'm saying the cognitive decline being i think they're obviously not going to come out jason i don't think this is happening surreptitiously okay here's the tweet from bezos just so people hear it ouch inflation is far too important a problem for the white house to keep making statements like this it's either straight ahead misdirection or a deep misunderstanding of basic market dynamics this is a very strong statement and the point i was trying to make before is why would bezos why would bezos at this time why would he take on the administration i think it's important for biden to take control of his communication strategy and to reclaim more of the center going into the midterms i think a lot of this content the naming the shaming the blaming tends to be more of the playbook from the far progressive left and i think that there's probably too many people that have infiltrated the white house from those ranks and i think he needs to close ranks a little bit more and so uh i don't think he wrote this okay and i don't think he would have wrote it if he was given a chance so it's clearly something is breaking between what is being discussed as a team and then what is being executed on the ground sex look biden's staff the ron claims been with him for years they reflect his desires i think this is classic biden if you look at his career in the senate he's a grandstander he always like to basically scapegoat and demonize this is this is a playbook he may not have written the tweet but he certainly endorsed it and he's given speeches now where he's calling out this scapegoat and that scapegoat for basically the energy prices which are totally his fault he could have had a better strategy around that santa's versus bezos you heard of your horse on the bezos thing hold on a second jason you're not taking into account this is actually the second time that bezos has tweeted about inflation so i'm taking this into account yeah okay that was back in may he called out the administration so yes it's on this particular issue i think he feels strongly about this issue and i think he's looking at what the administration is doing into saying this is a level of political stupidity and financial illiteracy that i just cannot stand and by the way who is jeff bezos bezos is a very liberal guy he's an outspoken critic of trump and he owns a very liberal media house at the washington post so i think this is a reflection that biden has even lost the jeff bezos of the world and he's trying to spend it as a good thing as if we don't need these billionaires but if you're losing jeff bezos you're losing a lot of people in the center probably the entire follow the breadcrumbs he bought the washington post he bought the largest house in dc and now he's taking on the administration i think it's a clear path that he wants to run you can you can you can mention me on twitter if you disagree i'll tell you a funny story to end uh after after the sale of the warriors completed and i tweeted this thing out uh it was really beautiful uh dre sent a beautiful text to me um so did david lee and then i got one text message from phil hellmuth saying i dispute how much credit you've given me i expected more wow he so seven seconds to fill again it only took seven seconds and then he called and then he called i showed i showed sax the text right it's it's an unbelievable text sax can sacks can testify to it and then he's like lost his mind again he lost his mind he said basically like you know he he he took the credit that i gave him want to throw out the window he thought i really tried to him over and then he said i i'm gonna block you for a week but then change his mind just tell him you'll buy him into the to the big game or something and he'll be fine no he didn't tax money he just wanted more credit more credit but you want more tell him you'll stake him because he did he did introduce you to the deal correctly is it true is it true that he is that phil hellmuth introduced you to the deal yes or no he introduced me to joe lacombe got it so if if not for phil you probably would not have made that trade um i don't know it's not clear because they had maybe they had no they had bankers and i was you know i was using allen and company so i mean there's not a lot of people running around in that moment trying to write to ten percent does he deserve any credit for you buying your stake in the warriors in fact and i thought i gave him an appropriate amount of credit yeah jeremiah tweet stormed it was like it was phil peter teal and like one other oh and then jacob jacob yeah and it's like better company he couldn't find himself in like it's the best he's ever been except when he was with michael jordan and jay-z but other than that this was the best phil's ever done i mean you know when i get did you see he made it to the second when i get my fourth ring i'm going to take a picture like michael with the four rings but but jamal in the interest of piece maybe you should just thank uh phil right now oh i have a great idea to tell chill free look at free bricks laughing he's the only one that got that joke did you get that joke i was wondering if i should tell you to cut it or not i don't know i think it's good here's a great one you know how don't cut that part i think it's a funny joke you know how phil gives his bracelets away uh as like a recognition you don't have to do this but pretend that you're giving since you have four rings that you wanted to thank the other three bessies on the show and that you're keeping one ring for yourself oh my god giving us the other three rings oh my god thank you for all the support we've given you all the support for the warriors yeah for the warriors that we gave you and all the council we gave you over the years this will put him on me super chilly one of the four rings super tough it's the greatest april actually that reminds me phil's next ring is going to me so i can't say anything critical bracelet yeah the next bracelet's going to me so i gotta i can't say anything critical you know what you're going to do whatever i said that was critical i guarantee you takes the bracelet and loses it in the first three days and never wears it it doesn't care right in the garbage care never talks about it again all right everybody we're back the team is playing professional crisp ball again point guard is back we'll see you on episode 87 we're gonna make it to a hundred i feel like we can make it to a hundred bucks yes we're going to make it that the vibe is back the vibe i love you guys this show in the text but it's great here i got to say i love i love hanging i love hanging out with saxypoot like live and physical he's a little he's very you just want to take him yeah he's he's an last time i hung out live with him he had an iv hooked up and he was recovering from the night before snacks on an iv basically on an iv now that's how bad it's gotten for him zach you look terrible can you please get some sun and just maybe eat one less sandwich he's losing weight he looks good i had two no but you could afford to you're in great shape i mean sacks maybe a half of desantis maybe you should have a half of desantis i think i'm gonna put you on half the centers we'll see you all next time on the all in love you guys bye bye bye bye and they've just gone crazy with it get mercies








wait that's not even a sweater that's a sweatshirt no no it's not even cashmere it looks like polyester or something okay quick freebrook come on the video where you're wearing the same thing as jkl so we can make a quick joke about it morons i mean you guys are so predictably dumb the two of you it's so itchy do you have a rash jason made me buy this outfit and i put it on and i'm like itching i'm about to take this thing off polyester wool polyurethane what's that made out of [Music] rain man david [Music] okay everybody welcome back to the all in pod episode 87. here we go tons of news going on thanks for all the great feedback on episode 86. uh we're going to start with emerging markets oh again welcome to the program david freeburg sultan of science the dictator himself from his palace in sri lanka uh his new pal is in sri lanka he'll be taking over over there we'll get into that and sax is in a in witness protection right now apparently where are you sacks in this white nondescript room can you say where you are this is my soundproof padded room yeah oh is that what if that's what a biden's done your vitamin derangements in them they they put you in an asylum what do you do you rock back and forth and say inflation ukraine inflation ukraine no we just had the room soundproof for you know better podcasting oh look at you taking the taking the job seriously i don't think it looks bad i think it looks good yeah you could put a little art behind you or something just put one of your monets behind you you know the ones you have in storage downstairs okay emerging markets are facing uh some huge challenges right now quick more quick primer on three types of markets developed emerging and the frontier market if you don't know developed markets are considered u.s japan europe their gdp growth is lower single digits typically in the emerging market it's roughly defined as developing but not fully developed that includes countries like the brics which is brazil russia india china and recently added south africa many other markets are included in that they were previously called the third world in the 80s people didn't like that term investors will bet on them having uh higher gdp growth typically two times or three times what the developed world has china for example 2019 six percent growth u.s in 2019 2.1 growth and of course there's frontier markets these are viewed as small unstable illiquid generally risky if you look at something like kenya vietnam those would fall into that category uh vietnam seven percent gdp growth in 2019 to the us is two percent sometimes people like to make bets on them here's a nice little chart for y'all to look at and you can just see china versus vietnam in the united states uh since the 80s and so why is this all important well the wall street journal reported last week that ems the emerging markets have been feeling massive pressure we'll get to sri lanka in a moment that's a frontier market to be clear but three things well we've got probably a half dozen things going on let me just highlight maybe the top five and then i'll hand it off to the besties you have high bond in loan yields the debts debt rates are increasing in the emerging markets and frontier markets think what happens when you got a variable mortgage or you try to get a new market a new mortgage in the developing markets the developing market investors have stopped investing in emerging markets and frontier markets as you might suspect during a downturn and they're even pulling money out then you have surging inflation we all know about that and we're going to talk about inflation here in the u.s because we got the print this morning and slowing growth we've also talked about this for the last six months on the program all these problems get exacerbated when economic growth slows and it's slowing globally and then finally we have the potential issue of contagion we don't know exactly what's going to happen when various countries are facing these challenges although we did tell you here what would happen with the ukraine shout out to uh sax and free bird fertilizer wheat oil all that good stuff and it's becoming very acute perhaps to carry canary canary in the coal mine is sri lanka breaking news president uh rajapaksa fled for the maldives and it's a state of emergency curfews were to clear declared i think that's been canceled as of the taping of this we can get into the state of sri lanka your thoughts freedberg i know you've been chomping at the bit to discuss this yeah that was a good long intro i think um you know the the high level for me if you look kind of at debt markets around the world there's about 300 trillion dollars of global debt and i put this uh chart in the chat here nick you can put it on the on the video and about a hundred trillion of that debt globally is in um emerging markets and so these countries generally have you know much more kind of variable gdp growth as well as challenges ultimately with their currencies most of this debt recently and and this has been a trend for a number of years lately has been issued in their local currency rather than in u.s dollars and so as the currency devalues it becomes more challenging for an investor to make a return if they're investing from a us dollar denominated base or some other dollar denominated base so um look the em the emerging markets are are heavily saddled i mean some of these countries have over you know 300 percent or 250 percent uh debt to gdp and what's really gone on recently is that many of them as net importers of energy and food are going to struggle to make the stuff they need to make at home or to feed their people at home because of the rising inflation that's been happening around the world from the producers of those goods and services of those goods and so to import those goods is more expensive that makes it more challenging for people to be able to afford food to be able to afford energy this is part of what we're seeing happening in um in sri lanka what's compounding this is we have rising inflation in the u.s so as we've been talking about a lot the fed's been raising interest rates here in the us which means that you can now buy treasuries that yield three percent if you're an investor around the world where else are you going to put your money except u.s treasuries in a market like this you want to buy three percent yield in u.s dollars versus you know getting 10 yield in you know some currency denominated account some currency denominated bond in a country you don't really know well or trust as much as the united states and so as a result a lot of dollars are moving out of emerging market debt into u.s debt and the price of that debt has collapsed and so we've seen in the last couple of months a decline of emerging market debt of about 20 this makes it harder for those countries to issue new debt to fund things and it's creating this really challenging spiral that may ultimately lead to defaults those defaults absolutely have a trickling effect because if one country starts to default and you're an investor in emerging market debt you're going to say hey wait a second this this this i just took a huge loss in this position you're going to start to sell off other emerging market debt and then it becomes harder for those countries to raise more debt and fund themselves and it can cause a cataclysmic spiral so you know it's a really scary scenario we're wading into now and i think we really hope that the us starts to taper interest rates and we find some stability in these markets over the next couple of months because it's not just a food and energy crisis it's also a humanitarian crisis and ultimately could lead to a global financial crisis in fact it's highly complex but it's something that folks are tracking very closely here what's happening also is the companies that were already at risk are going to start feeling this impact we could jump into sri lanka if we want sri lanka has i think a bunch of short-term issues and a couple of very long-term issues um let me set the backdrop because i think this is really interesting let's take um let's study sri lanka through the lens of two other countries jamaica and singapore if you go all the way back to 1960 so you know roughly when singapore became a nation the jamaican population in 1960 was 1.6 million people the singaporean population was 1.6 million people sri lanka's population was 9.8 million [Music] jamaica's gdp was 700 million singapore's gdp was 700 million sri lanka's was 1.4 billion now you fast forward to 2022 jamaica's gdp is about 13 billion singapore's gdp has grown to about 360 billion um and sri lanka's gdp is 80 billion so like what did singapore do right what did jamaica kind of get right because one of the things that they kept in check was their population even though their gdp didn't expand that much so per capita income was still quite healthy and then what did sri lanka get right and what did sri lanka get wrong well some of the things when you look at singapore is that they found a way to embrace despite a very heterogeneous culture and sets of religions inside of that entity inside that city-state they found a way to promote multiculturalism yet also promote english as the lingua franca why was that small thing so important because it allowed them to be a hub for the rest of the world in a way that many many other countries couldn't do the second thing that they had was a very low level of corruption because they had a leader in that case lee kuan yew and again some people in the west will paint it as slightly authoritarian you know he would paint it as asian values but the net result of it was very low levels of corruption a small but highly effective public service and meaningful investments in education and health care to make that country grow over decades and within a generation that country completely you know exceeded all expectations sri lanka struggled through a civil war i was a byproduct of that civil war it was partly religious it was partly ethnic and it was 20 plus years in the making and in the happening and it took a very right-wing autocratic leader the brother of the current deposed president to basically root it out now in order to root it out there were enormous amounts of war crimes and all kinds of things that i don't think anybody would support except it brought some amount of stability and so then you would have thought okay maybe this is the point at which you can now really start to grow but these guys yet again found a way to naval gaze and just to infuse so much corruption and graft inside of how the government was run by the way and it wasn't just the right it was also the left they spent two and a half times more on defense as of last year than they did when they were in wartime it doesn't make much sense the public service grew to the largest it ever did in a moment where you know you really should have prioritized private enterprise so all of these things sort of created a situation where they fundamentally didn't know what they were doing so the other two issues there i think and that's a great summary of like really those frontier countries and what made them emerge singapore also has a great strategic location which sri lanka kind of shares they're both island countries strategically located for trade and then i guess the policies right singapore went on a very very aggressive uh tax and business policy effort did sri lanka do that as well and then maybe could speak to just how important those are as islands you know uh and their and their geography because jamaica doesn't obviously have that i mean sri lanka has this massive growing importance as china has emerged the problem in these last few years is that they did everything possible to not just alienate china but to alienate everybody on every dimension possible you know they alienated china the the coup de grace was that there was an enormous shipment of fertilizer chemical fertilizer that was sent to the ports and it was summarily rejected and turned around because somewhere along the way the leadership in sri lanka decided that they uh were woke and so they enforced every farmer oh no to go organic the problem with going organic and organic fertilizer was all the small farms shut down all of the large farms had 20 to 30 crop yield reductions the prices of food went crazy they reversed policies two or three times and really what they found as the you know they tried to go woke instead they went broke and all of a sudden all these other countries who were there trying to help said wait what is going on here so they offended china they offended the middle easterners uh they offended the japanese by cutting a light rail project that japan wanted to fund i mean in every step of the way they de-industrialized this country found they didn't de-industrialize they tried to follow this woke agenda that is de-industrialization i mean reversing from like the modern techniques of industrial production like fertilizer and modern systems of farming is the industrialization it's it's um you know it's going to be a curse ultimately sacks to your point we we just discussed this last week with the farmers you know if you're in a frontier market trying to adopt the regulations and the strategic goals for the environment of the emerging market is like two giant hops it's it's it's probably insurmountable well look there's a strong analogy between the populist uprising that's happening in the netherlands with the dutch farmers and the populist uprising that's happening in sri lanka basically they're implementing the same policies this is that sri lanka is a further down the road and it's a poor country to begin with so you know like jammoth mentioned in april of last year the sri lankan government banned the importation of chemical fertilizers and pesticides used in farming they again went with this idea they thought they could encourage organic farming so the result of that was that overall production agricultural production fell by a third and rice production fell by 43 and rice is you know the biggest staple in the country so now you got people there starving or going hungry you've got massive food insecurity as well as the whole economy basically has been crippled and the result of that is society has essentially collapsed so you know now the question is why did the sri lankan government feel compelled to adopt these policies a lot of it has to do with the fact they're getting these massive loans from the world bank and the imf and the world bank and so forth are imposing these esg requirements so sri lanka has something like a 98 esg rating even as their economy and society is collapsing how is that possible well they're doing a great job following the prescriptions of the global elites of davos i mean this sort of global elite flies into davos from brussels and washington on their private planes they have panels on esg and then they prescribe these policies for countries like sri lanka and this is the result i mean it's crazy they've been telling us for years that somehow there's no trade-off between their environmentalist policies and creating a healthy growing economy and this is an example of that's not true there are real trade-offs here and the crazy thing is that the elites expect poor people in sri lanka to make up for their environmental emissions and it's not really fair at all here's another example in march of 2020 sri lanka enforced one of the world's strictest china-esque 9 lockdowns covered 19 knockdowns despite one of the lowest death rates and infection rates in the world and so for nearly three months it literally crippled the economy and the livelihood of citizens there but here's where it gets crazy then they actually go against global best practice and they banned the burial of covet 19 victims claiming that it could lead to groundwater contamination i don't even know how they came up with this but you know what this did was it significantly undermined the small minority of the country that is muslim because a religious practice there you know is you bury your dead and then that caused great pain to them and then it as in turn it hurt all these international relationships with all these gulf nations so then you you come all the way around and then you go back to those same gulf nations a few months later and you're like can i have subsidized oil and they're like no not so much and just to give paint a picture what's happening there right now as i mentioned before it's it's pretty much a state of emergency you can see various videos trending on social media and you always take those with some caution because sometimes people will take clips out of context or label them incorrectly or use clips from other moments in time but what's really happening there right now and you shared a video in our group chat is everything is now uh being sold out in very small amounts so there there are lines for basic goods and inflation is is crippling there and as freeberg mentioned they started to pin um their exchange rate and their currency to i guess the world's exchange rate and now everything is super expensive and essential imports uh like food and medicine and fuel they don't have the money to pay for it so this is going to be a complete societal collapse it seems and they're going to need to get bailed out there was a bill that was introduced in the government that said the central bank would be forced to have a discipline on money printing sound familiar in march of 2020 the central bank of sri lanka began printing money in order to finance a growing budget deficit again happens in many countries and they did that in part to fulfill an election promise that they made that they would maintain single-digit interest rates again sounds really familiar so uh they've printed about a hundred billion rupees in march in the next two years the central bank printed 1.65 trillion rupees right so 16 and a half times that first number and then as a result what they saw was the highest inflation in post-independence history so time after time what you're actually seeing in sri lanka is not a microcosm of something that's endemic to whatever you want to call it jason a developing country a third world country a frontier country a southeast asian country in fact it actually resembles many of the policies that exist in so many countries all around the world and what's really important here is that as goes sri lanka so goes ghana so goes pakistan so goes a whole bunch of countries where you're already starting to see food riots food insecurity energy and security rampant inflation uh sovereign defaults and you have to ask yourself like how are we going to really tourniquet this whole thing and prevent a much bigger contagion like freebird just talked about i think it's a we might be out of the work because uh you mentioned kovid it turns out a lot of these frontier countries were already on debt relief and being given a moratorium on making their debt payments since they got so walloped during kovid and then now the other shoe drops and here we are there's no relief you can give them if they're already not paying their loans in some cases by the way here's another thing that happens in a lot of these developing countries so in the middle of all of this chaos what do you think happened the parliament got together they passed an amendment to the constitution and it enforced and it gave incremental power to one individual the president and typically in most of these countries that run by a parliamentary system the president is a figurehead right the person shows up you know shakes hand kisses babies that's it right maybe convenes the senate but that is it now all of a sudden the person has control over defense control over budget control over the central bank and this person cannot be you know voted out in a no confidence build the same way that a prime minister can that happened here as well so yet another example of if you start to see a bunch of autocrats in some of these developing markets feel like the answer is more power it's been tried here it didn't work so i think that there's a there's a lot of lessons i i am a little concerned and skeptical that many of these other developing countries that are teetering on insolvency will actually learn well i mean what they need to do we are the definition of the developed world reportedly and we have a president who tried to stay in power still an election so it uh it literally is happening here in the united states as well the parallels are truly terrifying all right the cpi uh i'm sorry it's actually said something this is rolling my eyes that's no noise that's what you're a noise from an eye roll ah that's what it was it sounded like a boulder going down a hill wait sorry can i ask your mother a question yep tomorrow by the way if people don't know chamath is of sri lankan descent just to make that clear if you didn't hear his little mention didn't you go there a couple years ago i mean here's another great example of in this case this was the left who managed to things up so it's not just the right that screws things up in that country it's the left as well so in this example um i went there and i offered to bring google loon myself and google um we offered to bring internet access to the entire country like guaranteed internet access um this was like five years ago um and we set up an entity and the government um tried to do the right thing and grant some spectrum and instead of sort of like um fast tracking this and allowing you know this project to become a reality there was an enormous amount of infighting that essentially said that you know we were trying to steal the license or we stole the license or we were trying to monetize a license and both me and google were just like forget this this is not worth it and we abandoned the project and walked away instead google ends up servicing a whole bunch of other countries and the reason why sri lanka was part of it is because the balloons follow a certain uh orbit and it would have it cop it would go over sri lanka no matter what so it's kind of like we can light it up for free all we need is spectrum in this country google's already doing that work so you know i've i've gone there a few times i found it very difficult to try to do the right thing i think people there's a level of infighting that i hope this crisis changes i also think that it's an opportunity for people to reset writ large the gerontocracy that runs many of these countries including the united states quite honestly um there is an opportunity there are some you know of my friends who i think may emerge in the next few weeks who are very well known people in that country who literally want to step one remove most of the executive power from the presidency make it a true you know parliamentary style system with an empowered prime minister and empowered elect elected officials and let the country run and fix itself you know de-prioritize some defense spending de-prioritize the growth of the public sector re-prioritize the growth of the private sector i hope they're successful i've would love to invest if given the opportunity under those kinds of market conditions and i would love to go back at some point but my history with the country has been very fraught because as i've gone to try to do the work freedberg people are just haters and they basically they will cut their nose off despite the you know they they'll just do the worst things possible chamath there's i think you have a second swing at bat here uh only 50 or so of people in sri lanka have internet access and maybe we could uh talk to our friend over at starlink and that could be an incredible mitzvah and changing thing there if you get 100 of the country on internet my god that could change everything and it seems completely doable by the way and this is the most literate country in the world you have to understand like the people in that country the human potential in that country is incredible okay there are not developing countries like this that have this type of literacy the and the kindness of the people these are incredible hard-working people but the elected class is some of the most inward naval gazing corrupt people and this is the opportunity for the young people of that country to wipe the slate clean with all of them and start over with some i think um yeah the literacy rate is 92 or something crazy there it's very high it's a highly educated literate group of people the truth is the number of people living in extreme poverty has plummeted uh thanks to globalization we we went from almost yeah two billion people living in extreme poverty now it's gonna be that's gonna end in our lifetimes we have maybe 500 600 million people living in extreme poverty that's because of globalization that's the great thing that's happened now what's also happened at the same time is people have gotten out of sync we have elites to sax's point who think they know better and they're trying to enforce on in a merging market or a frontier market god forbid the things that we have the luxury of doing in the development we don't even do wait hold on well yes we don't have a green we haven't banned chemical fertilizers in the western world well we do have in europe has standards for gas mileages but one example we have emission standards we have the accords that we've been working on all of these things are starting in the developed world and now exactly to what dave was just saying is we're taking them from the developed world we are imposing them and sri lanka apparently embraced it i guess they get points when they're at davos sri lanka is not rich enough to resist that's the issue so the u.s has an esg rating of 51 sri lanka has 98 why is that because in our country we're not going to impose these crazy mandates there's enough resistance to it but if you're in sri lanka and you have these massive loans and debt service you have to do what the imf and the world bank and all these internationals what your creditors tell you to do yes exactly they're the ones who imposed all this stuff so great so sri lanka ends up with a 98 near perfect esg rating even as the country is completely collapsing read the schellenberger article here he says the underlying reason for the fall of sri lanka is as leaders fell under the spell of western green elites peddling organic old agriculture and esg and then he mentioned that sri lanka has a near perfect score of 98 higher than sweden which is 96 us is 51. what is having such a high esg score mean in short it means that sri lanka's two million farmers were forced to stop using fertilizers and pesticides laying waste to its critical agricultural sector and then it goes on from there so it was the imposition of it's not that sri lanka's politicians implemented sri lankan ideas that caused the collapse of their country they implemented western ideas they implemented they were also corrupt so it was a combination sure enough corruption they implemented the ideas they learned at davos it's almost perverse you've got all these you know western elites again like john kerry and so forth they fly in their private jets to davos they come up with these esg rules they coerce countries like sri lanka to obey them and it's the people of sri lanka who end up paying the price i mean this doesn't make any sense what's your reaction to that jkl you're somehow going to blame this on trump no uh i don't know how trump has anything to do with this well i mean i'm just thinking about it from first principles you know we we should as a you know species humanity should be trying to trend towards taking care of the planet and lowering emissions and being in renewables and then how we go about doing it perhaps there was good intent here but obviously if the country is corrupt and they're teetering already and they don't have the bankroll to do it forcing them to do it can lead to collapse nobody forced anybody but what did the score give you it's not as if it all of a sudden they force them by nature of you get your loans if you do these esg requirements so that is forcing them de facto okay fair enough but i'm saying like you know now that you have this score it's not as if you issued green bonds and you could stave off this default no they do anything do what you said before it's like look at the sri lanka should be looking at what singapore did and just copy the playbook right i mean it's so obvious that you know country it requires a level of long-term leadership and and a lack of and a lack of corruption and i think those those two things are very hard to come by and i think a third which is a very controversial statement to make is it required singapore to adopt english as a lingua franca now in fairness to singapore they also embraced multiculturalism right so you had forced you know enough force but you had bilingualism in the school so hindi malay or sorry tamil malay chinese right you could you would learn all of those and so you know you you kept an ethnocentricity to where you came from but they they allowed you to understand the lingua franca that allowed you to merchandise your skills to the rest of the world exactly are you saying they adopted the melting pot playbook and they allowed everybody from around the world to have their culture but yet participate in a common uh goal oh my god literally if you say melting pot to young people today and everybody should try to adopt you know a new culture but keep some of their own people find great offense to that and that's what we were all taught the melting pot is what made this country great i think lee kuan yew just called it multiculturalism uh but my point is that you know i think the english decision by singapore was important i think steady predictable leadership by lee kuan yew was really critical um and the lack of corruption you know the way in which they they they promoted their public sector meaning you know some of the best paying jobs in singapore was a public sector job right like you you would aspire to work for the government of singapore and so as a result you had policies and movements and and the movement of capital and progress and rules that were just um it's an example for for so many countries and you look where they are today for such a small population they have the same gdp by the way you showed vietnam they have a larger gdp in the vietnam which is an incredible statement you know a testament to singapore's ingenuity so could that have been sri lanka i think so knowing that the you know the the levels of literacy and intelligence and frankly like look the the religious stability that can come from buddhism yet we're not there we're where we are today which is a shame yeah and and this is the canary in the coal mine i think we're going to see freeburg i i don't know what you think is going to happen over the next six months but there's going to be other dominoes certainly yes i mean i watch for arab spring type behavior right i mean you saw the protests and people storming the presidential palace in sri lanka um you know if i would imagine if we had a report uh from the intelligence advisors to the president of the united states there's probably a long list and a growing list of these nations you want to keep an eye on right now where there is food insecurity energy and security declining currency uh you know rising debt burden and um you know there's a breaking point for all of these and as you start to hit that breaking point you start to see more of what happened in sri lanka now when destabilization like this happens it's scary because what happens um is there's a new power that emerges and those powers may or may not be aligned with the interests of the united states with the interests of allies with the interests of the world with the interest of western democracy and so there are kind of scary moments that can emerge over the next couple of quarters and years as these camels back start to break as one straw after another is put on the back of these camels so yeah and who's the white knight who's going to come in and save yeah and then these frontier markets are going to be china india russia or the united states we're plowing 40 billion dollars into supporting the ukraine conflict um you know we're busy kind of protecting our energy interests and our interests with nato as as the united states and as you point out china will likely end up becoming the savior and supporter particularly where they have infrastructure investments and interests i mean i don't know if you guys have followed this china has been building presidential palaces for african leaders throughout the continent and these people they're incredible you guys should put photos of them on the video um oh sorry wait that's the wrong one that's sax's house sorry guys sorry hold on next one believe it or not they might put sexist half to shame some of these things but they're they're really they brought the they brought the president oh yeah oh sorry that's uh next one so anyway but yeah this is a um you know uh a moment to watch yeah because there's a very you know unfortunate confluence of circumstances that may lead to destabilization that may lead to influence and power being gained by folks that aren't direct allies of the united states so and this is why we want to build up a great cash reserve and have a really stable economy so that when these moments do happen uh you know the good actors of the world can take advantage of i suppose the bad ones and the united states is not in great position for this every society as they say is three meal three missed meals away from chaos there are now a record 19 developing countries with sovereign debt trading at distress levels 19 and two that have already defaulted yeah just to start i mean pakistan has nukes right i mean that's problematic well and pakistan who's famous for enabling other countries iran north korea reportedly they look at their nukes as an export and they are more than willing to sell you right now i just sent you guys a link from forbes you know there are currently as of today inflation protests going on across sri lanka albania argentina panama kenya ghana um and if you look at the videos and you look at the images of some of these protests and again there's like you know in the african continent there are um you know very radical militant groups that will try and seize power if there's destabilization at the top um and you know there are there are risks in in south america i mean all over the world uh you know these sorts of moments um can catalyze a real shift in power and influence um and uh and there's a lot of it going on so you better believe that folks in the u.s state department and the cia are very busy right now if you uh if you look at bond prices the three countries that are the next closest to defaulting so russia has defaulted but that was more a vagary of you know foreign currency controls that that didn't allow them to pay but sri lanka has officially defaulted and the next three are el salvador ghana and pakistan yeah and by the way argentina just you guys know the argentinian print on inflation uh oh yeah these things are double 61 yeah yeah yeah it's if we think that 9.1 i know they had a structural default a few years ago renegotiation they've been back at the table over and over negotiating for years um and now they're facing this uh this inflationary crisis yet again uh it's a it's a scary moment um in argentina but yeah this is exactly like the european crisis with the portugal italy greece and spain uh we're going to see a lot of negotiations occurring i really believe in this country and i think the people are incredible and i hope that um whoever is the president basically takes as much power away from that role and puts it in the prime minister and gets out of the way all right well we're hoping for the best uh okay cpi as uh everybody who listens to this show knows is a basket of goods and services and how it changes over time you can slice and dice the cpi uh based on food energy shelter your house et cetera last two months have been just extraordinary to watch driven obviously by energy which has been driven by uh the russia ukrainian conflict cue the sax rant on biden's administration the core index doesn't include energy and so if you were to look at the core and index uh it and here's the chart 5.9 in june and uh it peaked actually with 6.5 percent in march so that's been trending down if you take energy out of it uh we haven't experienced energy and food i think are excluded from core yeah and if we haven't uh we haven't experienced core inflation like this since the 70s or 80s here's another chart just to zoom out and you'll see exactly how jarring this has been uh for basically our generation we haven't experienced this since if you were born in the 70s or so that's when it was higher than it is today and we've had obviously goods and services plummet in our lifetime because of globalization and low interest rates uh energy hasn't seen inflation like this uh since this is what is this chart is this cpi what is that that is the core so that's inflation that's core so and then here's the energy one coming up next so when you look at energy obviously energy uh has been volatile in our lifetime uh because a lot of the oil in the world is controlled by dictators middle east russia venezuela yada yada but the 40 year of a year uh increase in cost of gas and oil and energy has put us back to the mid 70s 80s in terms of pain that's this chart so you see it's spiking all over the place but generally it was uh under 20 percent and now we're back above 20 percent it's all about the oil chamber you were we were talking in the group chat before you were kind of satisfied with 9.1 do you think the 9.1 we're seeing in the inflation print today which was higher than expectations what is that going to lead to in terms of the interest rate hike 75 basis points or you think they just go right to one you know we talked about this that this was going to be a big print right i think we all expected this to be a big print um yeah i actually also kind of put myself on a limb there and i said you know i wouldn't be surprised if at some point we print a mid to high nines maybe even a 10 handle at some point we're getting there and the reason is because uh you know rents are a little you know uh they lag in how they're reported inside of cpi so we have a couple more months to go of of rents and rents are moving or budging a bit that's number one um we do see a little bit of fall off in in energy prices but i'm not so sure that it's it's enough frankly to to move the needle so i think that we could be in a sustained period for a while the more interesting thing i thought today was that canada surprised everybody and raised uh their benchmark interest rate by a hundred basis points okay so they just came one full point 100 pips and they just said we're going for it we need to tame this we need to break the back of inflation they ripped the band-aid off yep yeah and uh you know and i think if you read the fed minutes more carefully i think jerome powell is basically ready to do the same thing yep after this inflation print the expectation for july went to 80 basis points from 75 which means a small percentage of people actually think it's going to be a hundred and september i think moved to 75. so the question is is that enough i just don't know i uh i don't know and to be clear this is for june the data we got on today july 13th is for june what we did see in july because we can track oil prices that's down 20 percent month over month and the cpi has been driven largely by oil so speak to that chemoth what do you think it's going to be in july when we get it in august no but yes and no because the again the owner equivalent rents are up so much that they may actually you know break even right meaning rents go up by so much oil goes down by so much they cancel and we're still at nine okay that's your prediction for july which we'll get in august you think nine yeah i'm worried that we're in a sustained inflationary environment i'm worried about that i i hope that we're not um but then the question jason secondarily is then what do the markets do and what's so interesting today is like the markets shook it all off i mean like you could not have had a worse inflation print everything was up well 10 meaning meaning like it was beyond the number that was expected every component of it was up everything looked horrible and people were like meh tell them is that because the market is future looking uh sacks the market is basically pricing will get through this in six to 12 months is that what you're saying the markets are down right now to be clear the the print was definitely worse than expected they were expecting yeah they were expecting 8.8 it was 9.1 last month's number was 8.6 i remember us talking about inflation a couple of months ago saying that we thought it had peaked you know maybe in april or may at the latest simply because inflation is measured on a year-over-year basis and we were starting to lap much bigger comps last year remember this conversation yes well the lapping effect turned out not to be enough and inflation is still rising so we have not yet peaked on cpi i understand that core we have peaked but deciding to exclude energy and food i mean that's a pretty arbitrary decision those are two really important variables that matter to the ordinary american for sure so we solve this problem and to chamas point we don't know when it's going to be when it's going to subside and i think the big question now is when does inflation finally peak and start going down back to where it should be and then how much how severe recession do we have to have in order for the fed to solve this problem it feels like things are turning over in real estate we talked about that last week the number of homes being listed is skyrocketing the number of mortgages being originated is plummeting while the rate goes up so we're gonna see mortgage rates probably go six seven percent towards the end of the year that's going to put a huge kibosh the um high-end real estate is also starting to get hit massively uh the number of listings is going up in the high end and the number of sales is plummeting so that was one of the cards we wanted to see turn over and it looks like that's turning over just so one small clarification is you look we obsess over cpi right now because we're all kind of these fake macro want to be traders but i just want to remind you because the fed has been pretty clear about this they don't focus on cpi they focus on something else instead called pce which is the personal consumption expenditure price index and i don't know what the flow through from cpi to pc epi is exactly but that is the broadest measure of goods and services which does include food and energy so it stands to reason that pce may stay elevated for a while which may give the fed enough of the motivation they need to go 100 to go another 100 or maybe go 170 and then a 75 i think that david's point is right like all this taming that we've been expecting to see we haven't seen it and so every month it's like oh it's coming next month every month it's been oh it's happening next month at some point you may just have to say maybe we're in like a sustained period for a while and i have to believe it's going up before i believe it's going to stay stable or go down well we did see energy go down housing we are seeing now uh starting to contract the number of um price cuts has been surging according to redfin so i think we're starting and the layoffs obviously happened two months ago so don't we think that we're starting to see the headwinds and then we were talking to a buddy of ours who's big in the airline space he said god and i think you were pointing out this statistic that heathrow is now capping the number of people who can fly because it's been so crazy so overloaded with with traffic of passengers that they today came out and said we are capping the number of passengers to one hundred thousand a day no more and this is after the cost of those flights was skyrocketing you know six seven thousand i really go back go back to what sack said before he this the nugget for me of this entire summer was what he said about his take away from the co2 conference right just to remind people you know that the person said something to the effect of oh well look all these other people will be saving money and cutting jobs i intend to hire and you know nothing has changed for me and the comment that i made in our group chat is well maybe that's the psychology of everybody it's not just the ceo of a just yeah just just to be clear what what kochu did is they they polled all the founders in the audience the poll results showed that on the one hand everyone in the audience understood that we were headed for a big downturn and economic conditions and fundraising will be much tougher on the other hand all the founders or two-thirds of them said that they were going to use this downturn to accelerate their business as opposed to cut my one-on-one conversation with the various founders basically are in line with that which is it's all not me you know i know everybody else is going to be impacted it's going to have to cut but i'm going to be the one exception and there will be exceptions absolutely but everybody can't be the exception so consumers are saying i'm going to still buy my car i'm still going on my summer vacation everybody else has to make cuts well it doesn't matter what they say consumers are behaving that way you know american airlines basically put out what they where they thought they were going to be their stock was up 10 percent you know heathrow says we have too much traffic we're going to cap it at 100k there was an article about you know u.s home prices and rents and there were these two uh housing companies in the wall street journal that were profiled and both of them served middle-income neighborhoods in houston and these other places they're like we've never done better business and you know there are fewer and fewer people buying homes because of mortgage rates they all want to rent we you know our complete have we have complete ball control and so where where is the stopping and the slowing down of spending it just may be reflexively this thing where everybody feels like to be you know to have the polite dinner conversation they have to talk about how they're pulling back it doesn't seem like anybody's pulling back austerity measures have not hit yet yeah well i think i think they are in the process of working but it just takes a while i mean what i would say is look we are 100 gonna solve this inflation problem why do i say that because price levels are fully within the power of the fed they just have to raise interest rates high enough paul volkl proved that in the early 1980s he had to raise interest rates as high as 20 percent but he crushed the inflation 1970s but that's what it took so i have no doubt that the fed can stop inflation i think the question is how much pain are they gonna have to inflict how high do rates have to go and how long do we live through this sort of stagflationary period and that's the unsettling thing is we're just it doesn't seem like we're anywhere near the end of this yet i wrote this i wrote this last week in a little note but this is why if you look at the tailor rate again and you know people have abandoned the tailor rate it's not what it used to be i guess but you know it's still pretty directionally accurate which is what is the true equilibrium interest rate that allows us to basically manage and meet supply and demand together so that we have a calm stable economy and that uh that stable equilibrium rate is approaching five percent you know our target the the collective wisdom of the of the market believes that three percent is enough to get the job done we're right now at 1.5 to 1.75 so if there's any number between three and five that is the true price we have a lot of work to do to get there yeah i think that's a really good point because the ten year t bill has been kind of floating around three percent so that is the long-term expectation of the interest rates that's required to have sort of normal inflation but what if it's four percent if it's five percent if that ends up being the case it'd be a huge downside surprise to the stock market well how would you define that 10 pullback 20 pullback from here well you have a bunch of things like we we talked about this other issue before as well which is if you believe the stock market is fairly valued you have to believe that prices are right and that the earnings are right right so because it's effectually if it all boils down to the price earnings ratio of the s p 500 and i'm going to still maintain that the e is wrong the earnings are wrong for most of these companies so let why well one is that when these companies start to report their quarterly earnings starting in the next few days the year-over-year comparison is going to be to the numbers that they posted in q2 of 2021 which by all accounts was a blowout number why because the number before that was 2020 where their business was zero right so you have these incredibly tough comps in terms of growth percentages that you have to reach which i don't think are achievable second is everybody's costs of making and selling things is going up which stands to reason that unless you raise prices quickly enough your profits will go down if you actually do business outside of the united states the u.s dollar has rallied so much that you actually have less income that you're making in these other countries when you convert them and bring them back to the united states now most people look through that last issue but the point is if you add this all up there is a reasonable probability that the all the e's are wrong in which case we have to reassess what the right e should be in which case what is the right p e yes and earnings are a function of what you spend and what you make so that's why we see so many companies doing layoffs cutting people uh microsoft google everybody is now putting people on notifications they're they they're firing white-collar labor but they're hiring you know blue-collar labor faster and so you know we're actually going to see a downtick in productivity right you're replacing a person that you know may sit down at a desk and use a computer eight to ten hours a day to do something but you are hiring a lot of people that you know may get paid by the hour or make it pay to you know fix salary if you do the right kind of work but uh that qualifies as as more contractual blue collar labor the difference in that is a productivity difference ultimately and just so everybody knows p for p e is price earning ratios over time here's a quick chart for you currently uh and this is for the s p 500 we're currently at 20 or so and we have twice in our lifetime kind of hit that you know 13 14 15 level so we could have a 25 correction from here in the stock market um if you look at the highs our recent high in december of 2020 we're at 38 price earnings ratio so uh we've fallen from 38 down to 20 you know almost in half and we could still go down 25 from here and that would basically not even set a new record that would just hit the last two crises we had the thing that the the thing that i think will work against this happening jason so yeah you're right the the maybe it goes to 3000 or 3200 but if you look again today you know and what what i mean by like the market has roughly shaken this off like the fact that the markets right now as we as we talk are you know are essentially down half a point uh you know the the s p is down you know 12 points uh it means that they are looking for any and all reasons to say this is a solved problem move on nothing to see here now that is a psychological reaction most of that if you actually i called a friend today and i said where are the flows and he said you know retail right now is where all the flows are meaning it's retail that's buying they're in the 30th 35th percentile of where they normally buy which is a pretty healthy signal wait explain what you mean who's buying so the way the market works basically is your buyers and sellers and uh you know to to make it really really simple you have hedge funds as one class of buyer sure you have etfs but they're they're not really big yeah but they have fixed strategies and so you know they're hedging they're moving but whatever and then you have retail okay so it's retail and hedge funds those are the two main pockets of of where the flows come into the stock market from and you can get a real sense of what's happening what the psychology of the market is if you see what those flows are and right now what we see is that hedge funds are largely on the sidelines but what it means is they are well they've been so battered and bruised in some ways i think they're licking their wounds but they're mostly waiting they're they do not find a compelling reason to buy right but they have to buy at some point right chamoth this is their business no well uh find other opportunities their business is to make money relative to their index and so if their index gets torched they doing nothing makes them look like geniuses um so they don't necessarily have to buy at any point they just need to make money at in the end so right now we're in a situation where the markets are looking for a direction retail seems to think that direction should be up hedge funds don't have an opinion are saying we're just going to wait this thing out okay meanwhile the data at best is a question mark and i think that's the that's the tension we have right now in the stock market is the psychological desires for this thing to be over meaning i think people want to hear inflation is done we're starting the recession give us three or four quarters we'll be out here's a steady state interest rate let's go tech people want to accept the reality freeberg does that mean that we're bouncing along the bottom for the next year and then this is the time or the opportunity to buy it i want to give financial advice but what are your thoughts if hedge funds in retail are kind of waiting in the way asking me if the stock market is at the bottom are we bouncing along the bottom yes or what would you how would you describe the next year if you were to look at it what do you think i'll tell you guys some stories i i went to a conference in march with a lot of uh fund managers probably managed several trillion dollars in total people were like in shock and awe at that conference because they had taken such significant write downs and they were still getting written down so all their investments were off they were off 40 from the peak they were freaking out things were collapsing no one was doing anything they were all sitting on the sidelines hanging out waiting i went to a conference last week and so the tone and the demeanor was just like morose last week i went to a conference with a lot of managers also probably managing trillions of dollars across the pool and people were just kind of they had accepted this new reality and they were kind of willing to look at new things and you know they were no longer engaged in trying to shore up just their portfolio and a lot of the stuff we talk about which i think is tactical on the ground how do we deal with our businesses and our portfolio of investments that we actively work with in the private markets they were much more interested in kind of starting to explore and think about new things and i hadn't seen that three months ago so that's a positive sign from a market participant point of view i think that folks have kind of call it accepted a new normal an inflationary normal a high volatility uh normal uh you know a normal of uncertainty a normal of kind of recession and as people have started to kind of um internalize that new normal i think they're now starting to say okay what should my action plan be and that action plan is i've got trillions of dollars of capital sitting on the sidelines what should i start to do with it so you know my my very very very anecdotal experience has been that significant market participants i think are going to start to perk their head up this quarter and start to think about doing new things what that translates into in terms of you know stock price movements and indices i don't know i've always said that there's going to be a huge variation in outcome during this big this year and some industries some sectors some types of businesses will outperform others and so i don't want to create generalized statements about indices but i do think that capital activity is going to start to come back this quarter where people are going to start to think about what to do rather than pull everything out because of the massive shift that's happened in the past couple of quarters sax what are you as a market participant thinking you're looking at series a's maybe doing some opportunistic flat rounds are you looking at the startup market mid-stage market and saying hey this is an opportunity maybe i should start looking to put some money to work in the next six to 12 months or are you we're still investing you're still investing yeah so as a market participant you're investing what are you investing but we see that the pace of deal making has slowed way down because founders know that valuations have gone down the fundraising environment is tougher so last year they're raising every nine months now they know they should probably be raising it once every two years so the pace has slowed way down that's a good thing yeah i think it's happening it's more it's healthier yeah it's more normalized you know last year the companies that could race did raise they have big war chests so i think there's going to be a delay it's definitely a slower period we've done a couple of growth deals recently i think the fact that tiger and the other kind of crossover investors the fact they've pulled back way back from venture markets gives smaller firms like us an opportunity to do growth deals so how did you make the decision to invest in those companies they're both companies we've known for a long time have wanted to honest for a while so you know the the opportunity arose to invest and it was way less competitive than it would have been so this is what you call opportunistic yeah we've basically done two deals in the last like four months and that's what was your pace let's say 18 months ago it was a little faster than that for sure there's just more deals happening so interesting if you want to think about tail risk where there's some event that can massively shift the market you know the indices south right make them go negative and everyone pulls money out of equities or out of bonds further there are some of those events brewing right we've talked about the consumer credit i want risk we talked maybe taiwan maybe um this emerging market crisis that that may kind of be emerging these are like little turtles putting their heads out they may not come out but there's enough of these turtles now you know kind of circling you that you know there's still reason to be wary whereas let alone a black swan event which would be these are just like significant known risks yes no known but significant risks right yeah and if any of them do kind of take off um you know we're already in a very shaky kind of period right now where we're trying to manage inflation and recession and you know businesses are trying to raise capital and again this is why a lot of biotech companies are trading below cash because the expectation is they're not going to be able to raise capital i mean anything will go out of business boom you know you start to see things go so i think that's the reason people investors portfolio managers are not going to kind of rush back into putting more money into equities is just you know sitting around waiting to see how a few of these things resolve um you know before kind of taking action but there are companies that do not face the risk of ruin they just are sitting on so much cash they have so much revenue that there's no chance of that yeah i've always said it doesn't matter if you find a great business and you believe in that business over the very long run you don't need to worry about timing the markets you put money in that business as long as you get a fair valuation for it today relative to what it should be priced at based on what markets are telling you well 20 pe would be more than fair history who knows but like whatever that whatever that is but if you find a great business that you think is going to compound value for you over the very long run market cycles don't matter and long run you mean a decade yeah call it a decade and you know saks is business that he's invested in these are tech companies that i don't think they're planning to go public next year he's making an investment in a business that he considers to be a great business that can compound value not compound valuation but compound business value meaning they can do something more valuable next year than they were doing this year and continue to accrue an advantage in their business that allows them to accumulate earnings over time or accumulate revenue that ultimately translates into earnings over time and there are many businesses that are public that that operate like that that regardless of any of these turtles popping their head out those businesses will perform well over the next decade and i think you know that's always a great place to invest so so we basically went from d-day saving private ryan and seen you know in the first quarter to now people have accepted we're in wartime and we're not shell-shocked and some people are looking for opportunities chemoth you found an opportunity maybe you could talk about the deal you did this week um you know i tend to agree with fredberg i mean you find these businesses that you like and if they appeal to you and you do your work that's the most important thing you shouldn't be afraid to write a check can you stop right there and just say define what you mean by do the work because everybody here should say that what does that mean for an investor for somebody like yourself what is doing the work mean it really depends on the sector so for example when you know when when we were uh when i was trying to underwrite open door what i really wanted to understand was you know what do take rates look like in all these various markets how do i think take rates will evolve here how do value-added services work what kind of margins can you sustain what is the sensitivity of different parts of the real estate economy to interest rates you know that's an example of work when i was underwriting so far you know what you're trying to understand is you know how do banks generate net inc net increased income you know nim um how does that change over time how does bank charters change that um you know how do loss rates change in in you know times of um economic expansion versus recessions how do you price all of that into a fair fair value of a business it's just a lot of really detailed diligence to understand all the facets or as many of the facets as possible of a business that allow you to have a clear eyed sense of what's possible then there are others which are pure technology bets where you try to understand either the biology or the technology so in the case of the deal that i did you know today or this past week myself um a bunch of family offices around the world um led by a great chairman pablo lagaretta who started a phenomenal business called royalty pharma which is public carlos slim a bunch of folks we put in about half a billion dollars to to help advance into you know uh clinical trials this business that's trying to provide a solution to chronic kidney disease so in that example it was a lot of scientific diligence on what are the existing solutions how do they work what is the mechanism of action inside the body how is this the same or different um what is the early data say um how are the clinical trials structured and then you come to an answer um in this case i decided the bet was worth taking and you know like free tell us the name of the company uh and what they do the company is called pro kidney and basically the idea is that it uses your own body to help heal your kidneys if you are on the verge of chronic kidney disease or you are getting dialysis etc and essentially how it works is it removes cells from your body from your kidney actually and then it does basically puts it into a centrifuge does some specific things to it grows and amplifies certain cell lines from your kidney and then re-injects those back into your kidney and tries to improve what's called your egfr which is your estimated glomular filtration rate which is essentially a number that we can use to estimate how efficient your kidneys are and essentially when you are you know a type 2 diabetic or you have chronic kidney disease or kidney failure or you're on dialysis it's because that filtration capability has failed and so all these toxins are getting pushed back into your body and so yeah we took a you know half a billion dollar shot i wrote 125 million dollar check i hope it works that's amazing freeberg we saw some satellite images this week uh biden i guess announced them they looked pretty trippy explain to us what the downstream effect of what is i think the the most clear picture we're seeing of the cosmos ever created and what that could actually do for humanity well this is short and this has nothing they specifically had him share it which i think maybe they were looking for a mini win or something good for him um it hasn't he has nothing to do with this program um i i don't mean i just mean that like the scientists and the engineers that worked on this for many years deserve all the freaking credit the james webb telescope is a space telescope just like the hubble right remember the hubble space telescope and this is a massive improvement over the hubble so imagine you're you're in a boat and you're trying to look at the bottom of the ocean you take a bunch of inocu pair of binoculars you look into the ocean and you try and see what's at the bottom of the ocean how hard that would be right there's all this murky stuff in the water it's going to be really hard to see it the the reason that we create a space telescope is so that the same problem that we would have looking at a telescope through the earth's atmosphere doesn't impact the light coming into the telescope and so there's so much stuff in the atmosphere right there's miles of molecules and dirt and dust moving around so by putting a telescope in space we get rid of all that murkiness and now we can really capture the light that is coming from far far away concentrate that light onto really sensitive photo detectors these are photo detectors that operate at nearly the coldest point in the universe negative 263 kelvin and that photo detector makes it extremely sensitive and using a 20 foot wide mirror we can capture all the light that's coming in concentrate onto the photo detector and and read that light um and so why is this important why is this interesting well people get really excited by and flip out over the cool imagery that they see these images these colorful images of galaxies and stars far far away what we're really doing is we're not just looking far away we're looking back in time so these um these images come to us from galaxies that are 4.6 billion light years away so it took 4.6 billion years for that light to reach our planet and we're actually seeing what happened in the earlier part of the universe and we're seeing how these uh galaxies uh formed how they're moving how they interact with one another how the plants planets interact with one another but what a lot of people miss that i think is the most important thing to highlight as an astrophysicist when you're looking through telescopes and gathering telescope data you're not looking for imagery like we looked at today that's really good to sell the story and get biden to do a press conference what they're really looking at is spectrographs and a spectrograph is uh you know uh it shows for every wavelength of light across some spectrum what the intensity is of that that amount of light that wavelength of light and particularly the james webb telescope has incredible micro shutter arrays an incredible sensitivity that allows us to go from near infrared to infrared and some visible light and look at that spectrograph why is that important because if you can capture the spectrograph in a very high resolution way for a sun or for a planet far away it can tell you very specifically what the movement is and what the chemical composition is of that object and from that we can start to do incredible research and infer very important things about how planets form how stars form how many places like earth might be out there how things are moving how much mass or matter there is in the universe and there are two very very big question questionable phenomenons in astrophysics right now one is called dark energy one's called dark matter turns out the majority of matter in the universe is undetectable and there also is this really weird energy force pushing on everything in the universe causing the universe to accelerate its expansion so the universe is expanding everything's moving away from itself but it's not just expanding and slowing down it's expanding and speeding up and so having this sort of instrument in space that allows us to capture in a very high resolution way using spectroscopy and other tools that astrophysicists use and better map out how this is happening in different parts of the universe starts to give us a better sense and allows us to kind of inquire and start to develop theories around what's really going on and i want to say one more thing because because a lot of people think that this stuff is just so esoteric and it's like super interesting why are we spending 10 billion dollars in this most applied engineering and the technologies that we've developed as a species started out initially as pure research with no freaking clue where it was going to go to imaging dna penicillin electronics mri machines so many of these capabilities evolved from scientists just querying the universe and asking questions and gathering data and all of a sudden they came across something developed a theory built an application of that theory and a technology emerged that changed the course of our history as a species and that's the reason to do pure research and that's the reason it's so important for us to put 10 billion dollars into a program like this we're going to discover amazing things with this tool and it will ultimately hopefully yield advances for humankind that we cannot even contemplate today so it could be energy right i mean understanding dark matter energy totally and then maybe has changed everything in energy right jkl think about it one day there might be a capability where we say there's a new class of matter and a new understanding of energy that we can then apply in some form of physics on earth that we can do something interesting with and we have to be able to query and understand the universe to do that could we measure there we go could we measure the matter from uranus yes okay no it's coming i mean the hubble telescope actually if correct me if i'm wrong here it actually told us the age of the universe how much dark matter is in uranus a lot a lot you're full of it um but we now know i mean hubble told us the rate of expansion of the universe and it also told us the age of the universe and we found all these other planets totally to freeberg's point about you know looking you know through the through the muddy water here's a great visualization on the left you have hubble on the right you totally web and if you slide this you can just see like just how crystal clear and these images are and from my understanding we found some number of universes already that we didn't know just from the first images by the way i want to just give everyone a heads up this imagery looks beautiful and i'm going to print out a big one i'll put it behind my friggin desk here because i think it's so fantastic astrophotography is one of my kind of all-time you know favorite forms of art but um remember this is imagery that was actually captured in near infrared and infrared spectra and then they converted it to visible light to make it look cool so remember that these images you know that these clouds if you were actually there don't actually look at like that color but it's a very cool way to visualize the density and the the spectral changes where does this sit for you in terms of your excitement between the new season of doctor who yeah and the foundation series let me give you let me let me just give you guys one more kind of yeah really interesting if if you start at our sun and you look at the sun it's super bright if you go at the speed of light for four minutes you reach the earth or a couple of minutes you reach the earth look backwards six minutes or seven minutes whatever it is look back and now the sun looks like it does in our sky if you go for another couple minutes you end up looking back from saturn and the sun starts to look like a star i mean that's how how dim it gets now imagine continuing to go at the speed of light for another hour you look back you'll hardly be able to differentiate the sun from the rest of the universe now do that for 4.6 billion years and you're shooting away for 4.6 billion years now look back how freaking hard would it be to see anything that's the technical capability we just put into space we've built a 20 foot wide mirror to concentrate the light the photons that traveled for 4.6 billion years lost all of their density lost all of the you know completely dimmed out completely diffused and we're capturing a few of them run that concentrated way onto a detector for minutes at a time and generate this image it's really profound how technically complex this is and again that technical complexity can ultimately yield other technological tools that we could use in all sorts of industry so i just i just want to highlight that i posted it for you guys uh it's an incredible story but basically this program was riddled with delays and things that weren't working and then they put this quiet very assuming engineer in charge of it and he completely turned the whole thing around and it's one of the most incredible quotes what's his name let's give him a shout out his name is greg robinson and he turned a 10 billion dollar debacle into a groundbreaking scientific mission this is the quote from the wall street journal the the quote from the nasa uh the head of nasa's science mission directorate thomas zurburkin says it all there's a huge distance between success and failure and only a few actions that move you from one to the other he said greg robinson worked such wonders that his boss calls him quote the most effective leader of a mission i have ever seen in the history of nasa unquote really incredible uh this project yeah the 11 billion big challenges robinson yeah and this has been going on for i guess 20 years now uh this process of getting this built in 10 years of really intense building what would the next and then we'll we'll switch over to politics for a quick second as we as we wrap up here freeberg what's the next telescope because obviously if we've gone hubble to web what would the next one conceivably look like and with the timeline for that is there another one that's going to come and then what would that enable because it does feel like if we accelerate this we're going to really get a deep understanding of the universe that this seems to be accelerating our understanding correct and our technology is obviously accelerating so it feels like we could you know send another one of these out in the next 10 years that would dwarf this one's capabilities yeah so a lot of um uh telescopes operate at different wavelengths and they're meant to kind of pursue different missions so you know there are there are some telescopes that are already operational and kind of the gamma ray spectra but really there's a we i don't know if we ever talked about this on the show but one of the really interesting areas of inquiry uh is these gravitational wave detectors and there are new more advanced versions of those systems starting to come online those are not space-based telescopes uh they're and we can talk about that another time um but uh they're creating new methods of inquiry where we're not capturing photons light coming from far away we're actually capturing the waves of gravity coming from um interactions of matter around the universe and it's a new way to kind of observe the universe those telescopes represent a new class of inquiry that was just kind of you know discovered a few years ago and proven out and now there's there's a lot of work going on into that area and freeberg you had something you wanted to give a shout out to yeah i just sent you guys a photo of a new dog i adopted last week her name is we flew daisy out from virginia daisy is one of 4 000 beagles that were rescued from a facility in virginia that was shut down by the doj this facility was investigated by peta and the humane society and they basically shut this facility down this is in the united states we only do animal testing on beagles they're the only dogs that we do animal testing on because they can put up with pain and they have a high tolerance and a high threshold for pain it's a really awful fact we need to change that in the united states the fda does not provide good guidance on this so pharma companies pesticide companies makeup companies very often test on beagles so this company um you know that was operating this beagle facility in virginia was shut down for um you know ethical issues at their facility and the humane society took control the company's called in vigo their parent company is publicly traded i think that the fact that we test on these beagles in this country is awful we adopted daisy uh there are 4 000 beagles like daisy available for adoption i'll put some links in the show notes here people feel free to go and grab them i'm sure there's a long list the dog is absolutely incredible i think that it's awful we test on dogs in this country and i think i urge anyone that has influence with the fda to get them to provide better guidance this is not the law it's not required and they don't provide good guidance um and so a lot of companies de facto and default testing on beagles when they really don't need to and shouldn't so brooke let me ask you let me ask you a question i think it's incredible that you adopted the dog i hope all four thousand get adopted um how should we do testing totally i look i think that there's a there's really important ethical lines here and we can debate those this is a good nuanced conversation we use mass models in biology to explore solutions for human disease we we use primate models right which means we use primates we use dogs we use cats we use mammals there are there are certain things that are obviously not necessary we don't need to take beagles and pour tons of kim kardashian's newest makeup line in their eyes to see what happens it's not required by law and it's not about getting some pharmaceutical drug approved this is in an area that i'm you know i'm not going to get into the debate on on exploring and resolving kind of pharmaceutical solutions and things that can actually treat human disease where i'm particularly sensitive to is when it's not needed and when we're taking these animals and just doing awful things to them uh when there's no law that requires it we're not putting stuff in our bodies and this isn't about you know protecting humans it's really about cover your ass behavior for makeup companies and pesticide companies that they don't need to be doing and that's really what i'm addressing 3999 beagles to go uh if you adopt one of these beagles send us a photo and we'll share it at the end of next week's program thanks for letting me say that guys it's really you know i think it's super important and how we treat uh dogs who are connected to humans in a very special way i think speaks volumes to us as individuals saks would you like to well on the biden administration talk about 2022 or give us an update on ukraine i give you the choices i mean it's like elder abuse at this point i mean i know you're trying to can i ask you a question i know you're trying to team me up here but like all i can say is 9.1 percent i don't want to beat a dead horse at this point can i read you guys something and you can tell me there were these uh there's a there's a group called committee to unleash prosperity but two researchers stephen moore and john decker this is in the wall street journal article i post in the group chat the pair studied the resumes of 68 top executive branch officials whose work shapes the economy from president biden and treasury secretary janet ellen to white house special assistants on economic policy quote average business experience of biden appointees is only 2.4 years what any fresh-faced 25-year-old on wall street has clocked more private business hours again i'm reading from the journal article than most of washington's top officials 62 percent have quote virtually no business experience unquote the average donald trump cabinet official had 13 years of experience in the private economy the author said what a disaster well somebody like sixty seventy percent of democrats wanna get rid of biden they don't want him to run again i've never seen a president been defected on been turned on by his own party so quickly into an administration he needs to take back ownership of the democratic party which means he has to pivot back to the center and he needs to have a wholesale replacement of the team that he works with on domestic policy it's not working and chamath that was his pitch we're gonna go back to normalcy he was going to be you know more of a centrist and that's not what we've gotten but of course he was handed the disastrous economy that trump created why do you say he was handed a disastrous economy well because of uh covet and because of the massive stimulus that we spent those two things that was like a setup i mean if trump won a second do you think it would be much different if trump was running the economy with the setup was there trump probably would have spent more money right trump wanted to spend more money that's a really good question actually i have to think through that that's a really good question let's move on what's the update on ukraine there's a really interesting chess game going on right now where the russians are slowing the flow of gas no no it's better than that it's better than that they shut down nordstream one for their annual uh maintenance it's supposed to be back up by july 21st and so the real question is what happens if uh putin hand checks europe and just takes an extra day or two to get that thing back up and going let me make a prediction right i think the western alliance is gonna fracture come this winter yeah germany's gonna be freezing the germans are not gonna take this well when they can't put their heat on listen a a foreign policy based on virtue signaling is one thing when your economy is good and you're not worried about your energy security and you can heat your homes it's another thing to have a foreign policy based on virtue signaling when your economy is in recession you got runaway inflation and you're in winner and you can't heat your homes your morals change real quick don't they yeah three or four months ago the liberal interventionists were triumphant about this ukraine war there are three big predictions one that ukraine was gonna win it looked like ukraine was winning the first couple weeks but now it looks like russia has won this donbass region number two they predicted that we would collapse the russian economy with all these sanctions the opposites happen we've collapsed our own economy and number three they predicted this would strengthen the western alliance that's the only card that hasn't you know basically turned yet and i think it will this this winter i think you're going to see serious opposition to the way the bible administration has led the western response i think it's well said that if germany has the gas lines that sri lanka had uh you would see a definite fracturing of how people look at it just like they flipped last week and they made natural gas and nukes nuclear power a green energy so yeah their morals and ethics and their virtue signaling go as far as their wallets and their heat and meals go as we all know this has been another amazing episode of the all-in podcast for the baron of beagles the dictator himself and the rain man yeah it's definitely biden's fault now there is no chance for any of us to pass free brook on the popularity he's just he just sealed the deal with his thing what do we do i'm going to save a whale next week i am going to bring a dog kill myself how about that oh you're going to prepare dolphin sashimi okay great that'll secure your part as the most hated bestie we'll see you all next time on episode 88 good luck 88 of the all-in podcast bye bye love you besties rain man david said we open source it to the fans and they've just gone crazy with it [Music] besties [Music] we need to get back [Music]








two days ago oh here we go in the piazza i got into a fight you got into a fight i got into a fight like a physical altercation the physical altercation really this chick shows up wearing a white wife beater talking all kinds of and i said listen lady you zip it and she just kept jawing and joining and here she is again she's back for more and so i was like listen have you ever seen ah this have you ever seen a one a onesie wife beater look at that little sweetie oh i'm just gonna look at you and you should sit there and then you just sit there and then look there's your cold open everybody that's the good stuff right everybody i know i'm not a beagle i know i'm not a beagle but i'm even better i have my own thoughts sax what you're seeing here is called affection between a parent and a child just let me know when it's over [Laughter] you're the worst human being in the world i don't need to watch jamal boost his q rating by using his kids as props okay [Laughter] oh freeburg where's your puppy that you saved from being tortured with kim kardashian's lip gloss we gotta get this guy in because he hasn't been in the show in a while there he is there he is oh monkey oh your belly rub get the props out of the shot your winners ride rain man [Music] david we open source it to the fans [Music] what's up with jd vance in ohio is he gonna pull this thing off or is he getting beat up i read an article about him getting beat up uh with the peter kiel connection being he got physically beat up no no like in the past no no no no no i think jd should win he's gonna win right yeah i think so and what about blake masters these are the two guys that tl was backing should we start the show we kind of did yeah can i just ask you a question if any of us entered porn wouldn't one of our names be blake masters like it's just wouldn't it be on the list like doesn't it sound like a gray isn't it a great name for porn it's a great name blake masters it's a great name and and jd steele i'm sorry vance yeah go ahead explain what's going on with this uh would you would you accuse him of without any evidence i'm not using anybody of anything i'm just saying tell us about your manchurian candidates go ahead [Music] [Laughter] well so jd's already won the primaries and i expect he will win i mean it's going to be i think a red wave in november and ohio is a pretty red state these days blake saw us to win the primary in arizona it's a little bit more of a toss-up but i think he'll do well all right well i had a follow-up question but i'm not allowed to mention the t-word so let's just get started why is it such a big deal that like peter supports candidates you got all these like crazy left-wing radicals it's interesting soros gives unlimited amounts of money to you know crazy progressives like gasco and la and a zillion others i mean why is this such an obsession that we have to focus on who peter supports no no i just think it's fascinating that he peters articulated his rationale for supporting these candidates and his objective for you know changing government in a way that he thinks would benefit the country and peter's been generally right what is the thesis free book i think part of if you watched his speech from the um rnc during the the last trump cycle i think he did a good job kind of articulating that there's a lot of inefficiencies in government and there's a lot of um call it accumulated fat and we need someone to go in and we need people to go in and really cut this up because so much of politics is driven by what else i'm going to give you not about what i'm going to fix that's already being spent in in an efficient way and as a result we see debt climb we see taxes climb we see efficiency continue to decline of every dollar invested by the government and i think that's a really important thesis to see someone actually try and execute against because very few people are in the position that he's in to actually be able to like make that sort of statement everyone wants something more from their government versus trying to fix the government i think his views are more extremely i think his views are more that orthodoxy is ruining in america and so you need forms of heterodoxy to basically reset totally affect the status quo and i think that's what he believes more than what you just said i think that you need a wholesale reset and in order to have a wholesale reset you need to have these very disruptive candidates that basically start to change the norms i mean if you think about what trump did in one election cycle is he's completely sucked an entire cohort of people hispanics and you know moderates and now um you know a lot of immigrants towards the right because the democrats have vacated all of that space in having this massive trump derangement syndrome and tacking extremely to the left and even if peter we'll never know believed in trump or didn't believe in trump it didn't matter but the process of him getting that candidate elected over the long arc of history may actually serve to pull america back to the center pretty good outcome yeah and look at the reason why i support jd and blake for that matter is they are they represent this more populist working-class wing of the republican party and they're dragging the republican party in a more working-class direction i think that's the future of the party i think that's the opportunity for the party to chamas point the democrats have ceded all the sort of this working-class territory by becoming this elite progressive party and the face of the party right now the democratic party is paul pelosi you know let's talk about this it's blatant out in the open he's trading on ship stocks like nvidia and intel and so forth like the week before the house is going to vote on a 52 billion dollar subsidy for chip no no be more precise the week before his wife decides when critical legislation goes to the floor of the house to be voted upon so you have the speaker of the house who's the third most important person in government introducing legislation on her timetable her husband trades in those specific equities days and maybe even the same day of that they make three times her annual salary just in one day and then she and her husband decide to then fly not ask by the united states government or the state department to taiwan to then talk about god knows what which would have created an international uproar the biden administration and tony blinken had to basically call her and say stand down you should not go we are not asking you to go it is not on the united states agenda for you to go and all that would have happened is an entire process and loop where she controls the legislative agenda her husband controls their private stock account and he trafficks in the names and then they go to taiwan to whip up the fuhrer which would have actually positively impacted those same names even more it's inexcusable that kind of behavior i mean after 40 years just she's so past the line and she doesn't realize it and by the way sorry let me just wait hold on and then on top of that jason the mainstream media doesn't say now by the way i'm not a trump supporter i think he's a complete goofball but if trump had tried to pull this stuff in 2016 or 2017 or 2018 could you imagine how much media coverage there would be and today how much of that is covered by the mainstream media zero was it mentioned on msnbc nope was it mentioned in any of the press nope let me just set the stage so people don't know we're talking about so uh on tuesday the senate advanced a slim down version of the original chips bill if you don't know what that is it's basically a bill that's going to provide 52 billion dollars in subsidies to move chip manufacturing here to the united states something we really need to do it's a bipartisan bill everybody kind of agrees on this but this is been kind of stuck in committee for a little bit uh it comes a year after the senate first approved the 250 billion dollar bill to reinforce u.s chip making to compete with china the reason why this is strategically important is because we have a huge chip dependency on taiwan which is under threat from china so if chips are the new oil you know taiwan is the new middle east or the new persian gulf and it is a very dangerous situation for us to be completely dependent on taiwan well not completely but like for over half our chip so on shoring advanced chip manufacturing makes sense but i think this is an example of how you you start with a legitimate objective in washington and very rapidly it turns into corporate welfare and graft by politicians i mean yeah it's gross yeah i mean just because we need to onshore manufacturing doesn't mean that you give intel and nvidia giant handouts and then you got paul pelosi making millions trading nvidia options yeah and this is something that is what you've done sex to support onshoring of semiconductor manufacturing who would you give the money to and how would it be kind of dull down what would the terms of it be i don't know that you just give these companies money i mean i think maybe what you do is you give them tax breaks or various kinds of breaks but um i you know i don't like the activities they need capital to support that investment because you know if you look at the um kind of roic on these companies i would even look but i'm guessing they're in the high teens or something mid to high teens and they're not going to be able to invest in some newfangled you know fab project that may or may not actually have customers at the end of the day their board would never approve that on an independent basis roic freiburg return on invested capital so if you're a big industrial business you know one of the key metrics that your shareholders look at is the the ultimate kind of profit profits that are generated from a big investment you might make and so you know you kind of look at that over time you look at the invested money over time and the cash return over time and you come up with this metric and so it's a key metric for particularly capital intensive businesses and so a business like intel or nvidia i would imagine is going to have a pretty tough time selling their board on some speculative onshoring fab project there really does need to be capital and acceleration of capital who feeds you this propaganda intel in 2020 approved a share purchase plan where these guys had a hold of 110 billion dollars and have spent all of it except for 7.2 billion they have 6 billion left on the balance sheet i get it but they're not going to put that money at risk right like like imagine you're on the board of intel and they're like you know the government okay so basically hold on i make a ton of money yeah this is where it all comes from right i make a ton of money i have no better ideas of how to do it including theoretically building a chip factory so i'm going to go to the government for a handout meanwhile i'm going to take all the money that i had which i could have used to fund this thing and i'm going to give it away to people who i don't know what they're going to do with it i would reframe it i would say that the government wants to see our industry onshore semiconductor manufacturing and they are going to the companies not the companies going to the government they're saying we want you to onshore semiconductor manufacturing do that for us now like in world war ii we went to the automobile manufacturers and said the government said we want you to make airplanes here's a bunch of money make airplanes and that's that's the question is but who doesn't david go who else would you give that money to besides the two best chip makers in the world david's right if you just give us a capex subsidy that's a one-time effect that helps you in a moment it doesn't help your business any reasonable investor who can actually use a simple calculator sees through that nonsense so what david's right is if you had given them sustained tax breaks for being able to build the business line that then supplies things for the duration you know tens of years you're absolutely right investors would lod it it would make a ton of sense they would be over earning over a long enough period of time where people would have to bake that into their cash flow estimates where when you discounted it back it would make the enterprise of intel and nvidia worth more and then people would then want to own that stock more giving a capex subsidy is a meaningless way in which you basically hand out good money to organizations who have otherwise misallocated the money that they've already had yeah there's a much simpler solution to sax's point of like how do you do this and uh giving free money is not the way to do it the best way to do is to give an incredibly low interest rate loan like a 30 40 50 year loan uh that maybe has some warrants in it just like a you know a silicon valley bank or a comerica might give in a venture debt loan where the government actually could make money from this and then you incent them with something that is just too good not to take a 50-year loan of 5 billion to build factories you have to use it for that so it's use it or lose it and then you slowly pay the government back and then maybe we get some warrants in intel or whoever we give the money to this is something that obama did with solandra solyndra which didn't work out but he also did it with tesla and tesla paid all that money back early so these loans that the department of energy did really did um and you gotta give barack obama a lot of credit for this it really did help drive even though it wasn't perfect by the way we did drive a lot of av adoption it did really help tesla become the company it is today sorry let me just respond because you know i don't know how much we've we've gone through the details of the bill but there are several components to this bill including and i just want to highlight if i'm on the board of intel i'm not going to make a 10 billion dollar fab investment um because you know there's there may or may not be you know profits down the road to justify that size of an investment so if the government comes along and says we will support we will cover x percent of that investment i can take on more risk and i'm more willing to make that investment and theoretically i can afford to pay people a higher wage or a higher salary because i now have more capital freed up to support to do that and so there is an effect that that arises by having the government come in put some money into these projects accelerate their outcomes and it gives the business more free should it be freeburg free money or in the form of a loan so what should the financial device be i think is the question that you ask saks if i'm interpreting correctly yeah i'm not sure that the loan because the loan doesn't resolve the fact that they're having to put up money right and so they're not necessarily going to make this onshoring investment the the rational capitalist decision is to offshore manufacturing for intel it is irrational for them from a business perspective from a board perspective from a fiduciary perspective to onshore manufacturing so the reason they're going to do it is not because they're getting a loan where the interest rate is low that doesn't really solve the problem it's the government saying we're going to put a 10 billion dollar facility we want you to build it and manage it for us and that's effectively what's happening and now by building this 10 billion facility we've created security for the rest of the u.s industry it's worth it to the government to put that money up and create security for our economy no it won't why wouldn't it create security if we if we have more onshoring of chips more security i'll say one more thing there's also an investment tax credit built into this bill sax which does provide over time a bunch of incentives to continue to support and drive the onshoring work that's proposed in the bill if you want the united states point of personal privilege cairo requests that your moth add just one button to his shirt yeah it's just is it too distracting for you you can't take your idea the glare you just walk here you're oh first i had to watch jason do the gun show now i gotta watch jamaat you know show us your guts come on pull up that sleeve and show us what you've got i want to say one more thing about the pelosi stuff so here's the data i don't know if you guys have looked at the full history of the pelosi trading data here's the link this is all the training that's happened over the last couple of years so and um over the past year he has bought nvidia four different times each time in the same kind of volume range so the timing certainly may appear suspect and it's certainly a terrible kind of thing to see he's also bought apple in the last month microsoft sorry he sold apple he bought microsoft um he bought alliance bernstein earlier in the year he's made a few trades this year but nvidia he's actually bought on four different occasions over the past 12 months um for whatever that's worth right i'm not not trying to defend it but i think we should be intellectually honest about the fact that this guy you know does take points of view in certain companies he trades in a handful of companies are we only to be intellectually honest enough to think that a husband talks to his wife and vice versa yeah or does that not happen anymore it depends on the husband and wife but yeah i think this is blatant and out in the open i mean it looks really at a minimum the appearance is of graft and corruption yeah the appearance of impropriety is impropriety they shouldn't be allowed to trade they should have to put their stuff into blind trusts or they should maybe trade once a year and they should have to announce their trades before the trades happen hey here's what i'm planning on doing just like a ceo is planning on doing this stuff it's ridiculous that they can do this and why does the mainstream media cover this they have jason and jason do you think they think that if trump if this had happened during trump it would have a lot more coverage than this police do you remember a lot of coverage on trump it really doesn't get covered i mean if you just search for it today you'll see basically the only media outlets covering it are like fox news and then uh zero hedge you know that's it i mean that's how i found out about it is like the zero hedge tweets about it me too so daily beast you know headline seven hours ago dems quietly tried to jam pelosi on stock trading ban but if you're asking me you asked me a question is the media largely biased against trump and gives a free pass to the dems yes i would say that that is the trend yes i think that is intellectually honest of you well no i i mean i think the media is bankrupt they're just going for clicks and i think you know we've talked about this before they saw trump as an existential risk and they just did whatever it took to get him out of office um even but in doing so they completely burned all of their credibility they lost a lot of credibility and now the dems are starting to become increasingly detached and out of touch and maybe hated but then the result is that the mainstream media is just no longer trusted the media and the democratic party both have the same problem which is they suffer from what the democratic political scientist roy tucheras called professional class hegemony i mean they are populated by college graduates with degrees who basically have this very elitist progressive agenda and that is what is causing the democratic the working class to defect from the democratic party their historical base in droves look at hispanics well first of all if you go to the latest biden polling numbers he's down to 31 approval 60 disapprove okay so the trends is getting worse there but you look at hispanics it's down to 19 approval 70 disapproval it's an even more intense version of the same problem you had myra flores get elected in that texas seat this is a district that went it's basically a predominantly mexican-american district they went for biden by 18 points just uh you know two years ago and now they're voting for her by over 10 points so your republicans winning that seat for the first time so you have these huge defections now why is that happening because the democrats are appealing to the donor class on issues like border on issues like crime and on issues like crt and schools i mean you know the working-class people in this country they don't want open borders they want crime to be prosecuted and crack down on and they do not want an ideological education for their kids okay it's very simple but that basically is why the iraqi party is losing losing votes now let me give you a couple other examples of the democrats cynically appealing to this sort of donor class so you recently there's an article about the democrats have spent 44 million dollars this election cycle basically running ads in favor of the crazy mega candidate in primaries there's been a bunch of reports of this where in competitive republican primaries the democrats will actually spend money on behalf of the sort of the more perceived crazy republican that matters the election denier and so forth yeah because of the perception they'll be easier to beat in the general but i think this is a case to be careful what you wish for because you know if we have a red wave in november you're going to end up with more of these candidates basically winning so it's a very cynical strategy the other example i think of a very cynical strategy is you saw there was a vote in the house this past week on gay marriage and the house voted to repeal doma the defense of marriage act in support basically codify obergefell right the supreme court's decision on on gay marriage something like you know 60 republicans voted for it look i would have liked to see more republicans vote for this i think it should be like you know majority of the republican party should be voting for this but the point is that is there any intention of the democrats to bring this up in the senate and pass it and codify obergefell when they have a chance i think the answer is no why because the democrats rather fundraise off this issue the same thing was true about roe the democrats had super majorities in the senate under obama they could have codified roe they never took the chance why because they would rather fundraise off this issue from progressive elites the donor class in california and new york so this is why they're not going to really think that's the case absolutely obama said it on the record obama was asked why will you not he campaigned on codifying roe v wade and then very quickly into it he was asked when he had the super majority and built the house in the senate will you act on roe v wade he goes no it is not a priority anymore that's a quote it absolutely could have been codified just like a burj fell could be codified tomorrow look there are there are ten republican votes there are ten republican votes at least for this in the senate you have a filibuster proof super majority in the senate who would support this the same republicans who supported the gun restriction bill that biden just signed and then supported the infrastructure bill do you think they could codify abortion rights in this country right now if they wanted no no that that moment has passed that moment's passed i'm not saying republicans would never give women the right no no look there's no super majority in the senate anymore for uh for a codifying road there is a super majority right now for codifying obergefell they could do that right now and they're not jamal you've been a donor to the democratic party do you believe that do you do you believe that the um the abortion issue drove you and others to put more money in and that maybe not no because because the leadership of the democratic party focused on uh trump in the last big cycle it was all trump trump trump trump trump do i think that more grassroots fundraising focuses on that or gun rights or do you mean what exactly is saying is true that they actually held off on trying to codify row so that they could continue to support candidates i'm just i'm just going to give you the quote because it there's there's no opinion needed okay april 29th of 2009 president barack obama says on wednesday he favored abortion rights for women but that passing a law guaranteeing these rights were not his top priority i believe that women should have the right to choose obama told a new conference marking his first 100 days in office again when he had super majorities in both houses of the senate but i think that the most important thing we can do to tamp down some of the anger surrounding this issue is to focus on those areas we can't agree on so you make a promise you get into the seat of power you have the decision on what your legislative agenda should be and he made that calculation and david is right sadly that it was in a moment where we had a clear line of sight to codifying many of these rights yeah but the question that's not the question that freeberg is asking he's saying do you think that they specifically did this to keep it as an open issue to raise money off it i don't think that's believable oh yeah absolutely no way no way absolutely to talk about cynicism sacks the truly cynical move was you know trump saying i am going to get this an evangelical vote to win the primaries to get those 20 who want to take away the right for women to have an abortion and i'm going to stack the supreme court to actually achieve that in terms of all of this political stuff okay let's let's define terms political and so hold on a second hold on a second let's define terms so you may be opposed to what trump did but there wasn't that wasn't cynical he stated what he was going to do when he ran for office and then he did it he lived up to us he did not he did not believe in that he did it specifically to get those votes we all know he didn't believe in it we all know he believes in a woman's right to choose jason he he created a platform to get elected yes he was elected he executed on that platform i think what david sachs is saying is obama had a platform to get him elected and when obama chose had the choice he chose to not execute on the platform and that is also true and all i'm just saying is we owe it to ourselves to be intellectually honest about what happened that is what happened okay both of these two guys made claims hold on one second both of these two guys made be acting in your own self-image i understand but please i want this on the record both of these two guys made claims to become president it turns out that trump actually did execute on most of his claims as abhorrent as they were to some yeah and obama on some of the most important issues of our time did not look what trump did was just simple coalition politics he thought it was important to win the religious right he basically appealed to them he said that if you vote for me i will nominate these judges what does it mean to have the principle of saying that he's going to he's going to pass and codify roe v wade and not do it what is that then i think he uh well listen i i the quote you gave doesn't give why he didn't do it he didn't make it a problem it could also hold on let me finish it could also be that he believed that it would not get overturned so he should spend his time on obamacare and other things i'm saying cynicism is when you believe one thing and then you do something to act in your own self-interest and that's what i think that's what i think trump did a second we don't need to go back all the way to the obama administration because the issue i'm talking about today is that in the past week they had a vote codifying obergefell on gay marriage and uh repealing doma okay right so now listen i actually think there were so many republican votes in the house even though i would have liked to see more there were enough that that this might shame schumer into bringing up the vote because it's gonna be so obvious if he doesn't that he is doing this for a reason right because they have the votes they can pass this just like they passed the gun bill a few weeks ago right just like they passed um the infrastructure bill so if he if schumer doesn't bring this up it's a very cynical move i think it's strategically to have that as an issue to phrase funding i i i guess of course and it's really proof listen do you think both sides are cynical of course both sides engage in politics however however what i'm talking about is the type of cynicism so i think that there's a lot of issues on which the democrats would rather appeal to the donor class basically that lives on the coast new york california and be able to keep fundraising on that issue and basically scare monger on that issue instead of just winning the issue they can just win this issue right now do you have less interest in supporting the democratic party based on the principle you stated that in the past there have been kind of promises and capital raised against you know codifying row and then it not happening well they never made those promises to me so i never felt like they lied to me um i want to be very clear so they nobody and i never asked for that to be a precondition of my donation again my capital was focused on one thing which is i thought that president trump was not the right person to lead this country and i thought very clearly that the bright democrat could do a much much better job and i am glad that biden won and i'm glad that the money that i put in maybe in no in any small way but hopefully in some reasonable non-trivial way helped and i'm glad that that money helped even out the senate i'm glad all of those things happened and so i want to be clear they've never made those kinds of promises to be nor have i ever asked i make a high level decision on who i think the best candidate should be and support the party that will get that best candidate affected what i was just trying to make clear to you guys is that sometimes even a democrat it's important for us to be intellectually honest about what has happened it's very easy to look at the other guy and find all the ways in which they screwed up or tried to screw you or you know is is you know lacks empathy or lack sympathy all of these things it's much harder oftentimes to look at your own team and say wait a minute why didn't x y and z happen and the reason i'm bringing up what happened in 2009 is i think david is right we have a moment in time where the leadership of the democratic party can codify rights that should be codified and they should have in hindsight they should have done it and just to be clear no it is still open we can i'm talking about roe v wade and yes and for the for the issue we're talking about now it should be codified absolutely and just to be clear i'm an independent i would vote for a republican who was socially progressive and fiscally conservative as long as they're for gay marriage as long as they're pro women's right to choose uh and they were fiscally conservative i would vote for a republican i'm a moderate independent i want to see less government and more efficient government and i want people i want the government out of people's personal lives and i think that's where sacks and i are exactly the same we both want i mean sacks do you want the government involved in people's personal lives you're a classic republican by the way according to the monmouth poll from a few weeks ago you represent four percent of the voting base i do that's an extreme yeah that's an extreme minority the the the lowest self-identifying quadrant of fiscal conservative versus kind of fiscal liberal social conservative social liberal is the fiscal conservative social liberal what are we all here we're i think we all fit this profile fiscally we want the government to be run conservatively you know and with less government and we want progressive social change right i mean i think we all feel that way don't put me in a quantity government out of people's personal i don't i don't know i'm just asking you guys if we were all insane i wouldn't define my cultural positions as progressive social change because the change that progressives are trying to enjoy right now is radical what i favor is social tolerance i think we need to be a tolerant i think we need to be a tolerant society america is a very broad diverse country we need to find ways to live together and find accommodation on issues that are very contentious so that includes tolerance for gay marriage so look i'm on board with that but you know this radical progressive agenda of social change which includes upending the uh the criminal justice system in favor of yeah no not prosecution yeah what's happening in the schools with crt and the sort of hyper ideologize education look they should be teaching the basics reading yeah leave it up to parents to do the other stuff yeah exactly and so on down the line well maybe progressive is the wrong term because that that now has been co-opted less government involved in your personal life and tolerance i think we all agree on that and i think tolerance is a great word everybody agrees with tolerance it's a privileged position to want to have less government involved in your life right i mean many people in the united states have been able to thrive and survive because of the role that government has played in their lives and there's obviously on one end of the spectrum extreme grift and on the other end of the spectrum extreme need that is being met uh by the wealthiest government in the world and it is uh that you know it is in that middle where all of where do you stand for your brother how would you describe your politics in these two dynamics right are you also in this four percent freebird yeah yeah yeah no i'm here um i'm trying to be thoughtful about this because i know i think it's the idea yeah i think that the government's role is to support those in need not those in want and i think that the government should be held accountable for performing that role and i think that those of us who can that are sitting in privileged positions and seats should enable the government to perform that role well and we should be positive actors meaning we should support we should pay taxes and we should help people and um and institutions in need and that are you know kind of for the greater good and then we should be holding ourselves our government and our politicians to account for inefficiencies and the biggest concern i have is less about are the people in need needs being met as much as are we holding our government to account for the performance of its services and duties to the american people and i really like this want i like this want need concept here can you give an example of where the government like people need something but then there's another group that wants something and maybe we're overstretching and you know giving into wants when we should be focused on needs and efficiency yeah i'll give you a pretty um example i know reasonably well which is the farm bill passes every four years and the farm bill in order to get it passed in both the house and the senate it has components that serve both farmers and um support the the food stamp program uh so the food stamp program obviously supports millions of americans that are in need of food can't afford food they get ebt cards they get support and buying food and there's a lot of programs and access that are enabled by that program but in order but that mostly services the needs of urban areas of cities so it passes that that element of the bill is attractive and appealing to the representatives of cities found in the house on the other side in order to get it passed in the senate where the majority of senators come from rural states which are have significant farming populations the farming subsidies are planted in that same bill and as a result because everyone's getting something that bill as a whole has now grown to a multi-hundred billion dollar bill that gets passed every few years because in order for the senate to pass it the house says okay we'll give you all these farm subsidies in order for the house to pass it the senate says well sorry and vice versa right we'll give you all these food stamps but but both of them now have incredible what do they call it pork or fat or whatever yeah the amount of money that's wasted that isn't actually servicing the original intention and need of either of the parties that are represented by that bill is extraordinary and i've spent a lot of time in the farmville i actually went with lobbyists years ago to dc and i actually met with the senate and house ad committees i've gone very deep into the bill and some of the programs in that bill and it's just shocking to me in the same way that palmer lucky shared in our all in summit how shocking it is how defense spending works in this country it's shocking to me how some of the the programs work in the farm bill uh how much money and how much waste there is and how much grif there is and so yes we are meeting the needs of populations in need in this country but so much more of the bill now is about people wanting more in order to pass the bill and it's and it's bloated all right so who's going to come in and fix it because where's the incentive for anybody to come in and cut that bill up where's the executive if both sides are barbelling the grift then there's no incentive they're they're they're in a dance to to maximize the grift so where do you stand now if we were to sort of look at politics without the biden and trump derangement syndrome without the the tribalism just in terms of first principles i think what we're seeing here is we all want to see radical competence in the government social issues fight you know and fiscally how we run the country where do you stand how would you describe yourself now look i mean i think of things in terms of risk here's what i see i see that there are a handful of issues that remain in terms of social policy that just need to get codified gay marriage is an example of one abortion rights is an example of the other then and and i think like those are like really to my perspective speak about human individual liberty which i think should trump everything so everybody should be allowed to kind of pursue the best version of themselves however that manifests in the person you married to in in the gender you express not these are like things where what you do to be happy you should be allowed to do period end of story then there are issues where i think are much thornier and as i get older i become increasingly ambivalent or confused actually is a better word and gun control is a perfect example of that where i don't know what my right is to go and adjudicate a change to the constitution that's been there since the founding of this country that's a much more complicated issue and so i think we have to basically devolve that right to the states where individual states will have very different laws and part of how you choose to express where you live will be defined by some of those rules so that's the social side extreme tolerance is really how i would sum it up economically so but but i think the the risk to america imploding quote unquote because of an issue in that surface area in my opinion is extremely limited if i look on the economic lens however i think there are enormous risks to american leadership and exceptionalism and we need a wholesale reset of how we create incentives of how government should work of how regulatory capture should work of how the capital markets work these rules are way too perverted and it's creating enormous stress in a system and again i go back to the example i used last episode the thing that if you look for example like you know in that example of sri lanka singapore jamaica and how there were these three completely different outcomes underneath the most successful outcome was an incredibly clear transparent and simple financial framework you cannot spend more than you have you need to invest in long-term programs like education and healthcare you need to make them broadly available and then you need to have an absolute free market that gets the best ideas to the top of the funnel and if you can just incorporate those things the tax law could be four pages you know the the the number of regulations could be 50 pages you know the simple rule that says to the federal reserve you can't just print free money ad hoc so i'm i'm much more concerned about the fiscal future i i think that there's so much movement and progress on the social side including the freedom of movement of people to different states it is an important set of issues but in terms of what drives the outcome and future success for our kids and our kids kids people should not sleep on the economy because if we get this wrong that will be the tinderbox that lights everything on fire saks when you hear you know everybody sort of explain their basic uh belief system how far apart do you think we all are on this podcast because i think that's been an issue we see a lot of the fans discussing you and i discussing it feels like on most of these issues and i think that's people ask me how i'm friends with you all the time and i'm sure you get that question as well yeah and i love you thinking about that i know i love sacks like a brother and any time we talk about basic issues we're very much in sync and then when we talk about politics it feels like we're super you know uh you know opposed you know in opposition to each other when you hear that we all have essentially the same stack of uh fundamental beliefs how do you interpret this in terms of politics and america writ large and how do we get consensus in this country to be more effective in running the country for the citizens i think the media drives a lot of polarization right because they're feeding us a bunch of bogus narratives you look at the polling around the trust in the traditional media has absolutely plummeted through the floor i mean they basically have instead of just reporting objectively the facts they i think the audience has recognized that they are activists they are basically pushing an agenda and they're pushing a bunch of bogus narratives and i think it does drive the polarization so that's part of it to go back to you know what what are the core issues that motivate me and like who i support look i think we could probably agree on a lot of stuff i want us to pursue more of an internationally cautious you know agenda uh less interventionist because it really hasn't worked out for us very well over the last 20 years with all these wars that failed i want us to be fiscally responsible and promote a healthy economy to what jamal said and then third i'd like us to be socially tolerant now why does that leave me in this current environment to support republicans well on international on international foreign policy neither party is really very good both parties are sort of pushing some version of book bush doctrine light where we're basically over involving ourselves in all these countries all over the world but the republicans at least have a faction that's in favor of realism and restraint so i'm trying to help kind of push that direction within the party the democrats just are still very much in this liberal interventionist mode on fiscal issues both parties are guilty of overspending and creating this ruinous federal debt and deficits that we have however there's no way to avoid the fact that the democrats are just worse i mean biden wanted an extra 4 trillion of spending on this whole build back better on top of the 4 trillion he had so listen i know the republicans don't have clean hands on this issue but the progressives are just worse and as long as the progressives are calling the shots the democratic party they're just worse on spending and then you got social tolerance listen on the issues on these sort of key rights issues that have been the kind of the old social issue the last 50 years by and large not on all these things by and large i'm with you guys that i'm in favor of sort of the the socially tolerant position but look at who is pushing social intolerance today i mean the progressives are the most intolerant group in america they're the ones pushing cancel culture they're the ones trying to shove their positions down the throats of ordinary americans this is what's creating the backlash you look at issues today like crt like the progressive approach on crime on borders the progressives are trying to promote i think a social policy that is fundamentally intolerant and doesn't accord any respect or room for traditional americans to live their lives the way they want to and you have to be tolerant of them as well we're not going to have peace in our society without some tolerance of trashless okay let's wrap on this and i sent you guys a um this was a quote by mike salana a tweet from mike salana the caption is i've been wondering how they were going to spin this and this builds exactly on david just said here when the quinnipiac quinnipiac poll came out and about approved disapprove about president biden you know the big outlier was the hispanic population nineteen percent approved seventy percent and the the article in the washington post which tries to kind of sort of like clean this all up and whitewash it says fake news speaks many languages but it's particularly fond of spanish essentially saying that you know the the fake news problem in in the spanish language has basically gotten so bad that you know this sort of explains why hispanics have have moved in droves and it's like a whole race-baiting cheap shot article but the point of all of this is just to show that uh the left this is what really does kind of bum me out they are they are probably more intolerant than they've ever been intellectual dishonesty like if rachel maddow really wanted to increase her standing and position she would just start the next program with nancy pelosi's trades and say listen we all know let's call this what it is it's not cool and here's how it should change she'll never do it i know and and i think that's the disappointing part about all this okay so let's shift now i think we just what can i say one final thing about this whole thing that we can move on is i think i think if you are sort of purple and centrist i think the first two years of the blind administration were really a missed opportunity because i think there's sort of this conventional wisdom that the parties are so polarized they can't get anything done i think we saw actually there's enough republican votes or there were in the in the previous congress this this current congress they got the infrastructure bill done they got the gun bill done you know with the red flag laws and so forth that we talked about they can get codification of gay marriage done if they want to they could have gotten uh the electoral count act reform so if bayden hadn't gone all the way with his progressive voting rights agenda and just focused on reforming the electoral count act then you could have prevented a situation like we had on january 6 that that what was happening inside the capitol not outside so there was a lot of stuff they could have passed and they didn't why because the in the in the first half of his administration brian's been completely captive to the progressives there's another thing as well you could get a child tax credit passed you could get romney would basically be the floor leader on that in the senate they could pass a child tax credit that's the most popular part of bbb why don't they peel that off and vote on it you know because they went to the whole thing that's right the progressives are holding it hostage saying that we're not going to give that to you unless you do the whole enchilada and of course there's no votes for that so i think there's and and so who ultimately is the culprit for allowing the staff and we'll partly bind but also ron clay and the chief of staff i mean they've made a instead of triangulating to the center they should have realized hey we're a 50 50 president right i mean we have a 50 50 senate we should be triangulating we should be building a census coalition wrong claim the train biden had a clear path to go right to the center pull everybody in pull the working class in that's been his supporting base who's the working class and so he is and and he blew it by going too far to the left if he wants to save this presidency he should go straight to the middle and get all the working class behind him that went to some elite you know uh east coast liberal arts school where he got a master's in you know fine arts and his 400 000 in debt that's not joe biden but he's let all these people run over the white house and it's too late now because they're i think what's going to happen well the republicans are going to win the house how much time how much time did we spend talking about canceling student debt for who yeah no for a bunch of elite uh rich graduate degrees from yeah it's likely listen there's grifters on both sides it's disgusting and we need to get to a version of politics that maybe is more like our conversations here but let's let's pivot to another society that we thought was going to roll over ours but um and that we were in we were behind on in terms of competition china is in chaos right now apparently um in terms of slowing economic growth bank protests mortgage protests exactly what i predicted last year when you guys were talking about china was going to dunk on us and i said you know it's very hard to run these authoritarian countries and the citizens like to protest when they get the short end of the stick and here we go chinese economy is is growing very slowly they were going to do five and a half percent this year they were only point four percent in q2 covert has a lot to do with this but there's been a series of bank protests and uh the media has been trying to figure out exactly what's going on here to just set the stage here rural banks in china uh in a couple of provinces froze a bunch of people's uh withdrawals in april okay sounds like the crypto uh contagion in many ways they had been offering unusually high interest rates also sounding like the d5 uh griff going on here no i think it's i think it's more like 2008 jason i think the financial i think it's more like the financial crisis in 2008 that was driven by the real estate bubble yes they've got their own real estate bubble which is collapsing there correct and so there's there's multiple things going on at once the authorities haven't said how much money is frozen uh protesters claim is billions of won but it's hundreds of millions in the u.s after weeks without a resolution customers have been begin protesting plainclothes thugs have been hitting and kicking the protesters and as of wednesday a video went viral of the ccp bringing in tanks to protect the banks very uh evocative of tiananmen swear i have a question so go ahead yeah so china has a very explicit zero tolerance policy on covet why do you guys think they are so extreme in that policy like any any ideas like have they explained why it has to be zero tolerance they have not explained that um and if you believe that they're the origin of covid maybe they have some insider information about long-haul covet and that was something i want to talk to fred berg about if he thinks this you know long-term covet stuff is a really acute issue but freeburg what do you think yeah i don't let me yeah this is a complex issue there's a lot more going on there so on on xero covid i think this is coming directly from xi this is his policy and i think that earlier in the pandemic they were hailing their response which they saw as orderly and effective at controlling kovit and they were contrasting that with a chaotic western response and so i think that the credibility of the ccp and g himself got tied up in this idea of stopping covet entirely of zero covet and so i think this is coming directly from the top and is having a huge impact on their economy and i think this is one of the dangerous aspects of a autocratic system is you got one guy at the top making the decisions and if he's wrong there's not really a great feedback and nobody can question him yeah yeah exactly the god king yeah you know it sort of recalls um a situation in china i think it's about 500 years ago there was a chinese emperor who banned shipbuilding and banning having a navy and because of that china shut itself off from global trade and it fell well behind the west which then explored and captured the new world there's this question about you know the chinese chinese culture and civilization was much more advanced than the west than europe a thousand years ago but basically it fell behind and a big reason is because this unilateral decision by one emperor to basically close themselves off from the rest of the world so you have to wonder does this autocratic move by g basically doom their economy to a recession it seems like they're not learning from our experience these lockdowns didn't work i mean you can't stop the virus it's eventually going to get out even i saw biden got the virus this week i mean it's out right it's endemic now everybody's going to get it is basically what's happening she's been making a bunch of heavy-handed decisions like this so you have besides lockdowns it was it's also the crackdowns it's the crackdown on the tech industry yeah funding has plummeted uh and so has so lps are no longer investing in funds there with the exception of sequoias which seems to be struggling but is still able to raise the money and then additionally uh founders can't raise money and founders are questioning when they meet with vcs if they can actually if the vcs are just meeting with them theatrically uh the story that came out this week in the ft if they're just meeting with them theatrically because they want to still hold out hope that they'll be a venture capital industry but there may not be a vc industry in china anymore let me just give you the housing stuff and then freeberg i know you want to chime in on this so there's also mortgage boycotts happening at the same time as this fugazi bank stuff happened the bank stuff seems to be not the national banks these are local banks that apparently could have been running some kind of uh grift where people deposited the money right away it looks a lot like the savings and loan kind of uh behavior in the 90s in the u.s and these are regional banks to be clear this isn't the national banks and so at the same time the mortgage boycotts are happening and three at 301 unfinished developments in 91 cities homeowners are accusing developers of failing to deliver the apartments they've already paid for according to bloomberg 70 of household wealth and china's tied up in property much higher than the u.s this is downstream of the whole evergrand thing right you got evergrand evergrand basically defaulted and there were a whole bunch of people who prepaid for their homes and so they're already paying mortgage but evergrand never finished the homes and now they're rising up because they're saying why should we pay for a home that was never delivered right i just want to like take a zoom out because i think it's worth you know we can focus on any one of these particular things that are happening and try and diagnose them and dissect them but if you zoom out a little bit i think it paints a more interesting picture over the last 30 years right the chinese economy grew from 318 billion to in 1990 to 10 and a half trillion in uh 2020 right incredible growth gdp per capita you know grew uh kind of in a similar ratio right now from 318 bucks per person to 12 500 and 30 years i mean really unprecedented in the history of humanity china now accounts for 20 of global gdp from less than 2 1990. now if you look at historically what drove that growth we all talk about manufacturing right manufacturing accounts for about a third of the economy and manufacturing as a sector was growing in china 25 year-over-year in 2008 and then um only grew six percent in 2022 it's like basically you know kind of reaching an all-time low in recent years so that's historically been the driver for growth of this economy and so much of the um you know the the the bargain between the people and the chinese communist party has been keep giving us a better life keep growing our economy keep giving us more housing more stuff more food more safety more security we'll support the ccp and the challenge that the ccp is having is that a lot of that growth the core growth engine is starting to slow so manufacturing is slowing then real estate was growing and so real estate accounts for seven percent of the chinese economy and i've got a good stat for you guys here in 2005 uh 250 million square meters of real estate was sold in china in 2021 1.5 billion was sold every year it's been incrementing so the amount of real estate that's being produced and sold was increasing like crazy this year it's collapsed so it's all it's down like you know forecast to be about 1.25 billion now so the first decline in real estate building and sales so that part of the driver of the economy in china is now collapsing and then the financial services sector accounts for eight percent of the economy and that's been growing because it's leveraged off manufacturing and real estate and all the capital that's flown in all of which is slowing down and stopping you know there's 58 trillion dollars of assets in china generating about 700 billion dollars of annual profits for the financial services industry insurance banking lending and so on so a lot of the conflict and the things that are starting to fall apart which may just be the tip of the iceberg is a function of a fundamentally slowing economy and the forecast and the outlook for an economy that doesn't have the drivers it's had historically and things are starting to come off the wheels are starting to come off a bit and so you know look the advantage they have is central planning long-term investments being able to kind of be thoughtful about this but in order to do that there's certainly going to be a need for the ccp to keep people in line as some of the long-term bets hopefully play out for them as they would say in order to do that they're going to have lockdowns and other sorts of mechanisms of regulatory control over the people but really this could be the beginning of some of the unwinding and real concern about you know is there a core economic growth engine in china that can save them and what will it be i think all of this if we look at what's happening in the economy writ large uh chamath you know the global slowdown plus inflation is now causing a stress test on every country sri lanka's stress test you know showed us what's happening with their farming issues and with corruption and here in china it the stress test i think you would agree is showing what's going on in terms of you know banking mortgages real estate and obviously this surging middle class and what their expectations of life are so what's your take on what's happening in china and are they you know how does this um add up in terms of our rivalry with them as our contemporary at a very macro level china has one massive massive massive problem which is one of population it's hard to get an accurate count but it is an aggressively aging population which was the result of the one giant the one child policy for a very long time china has sort of been on their heels trying to adapt that policy but really the the last data i saw i tweeted this out it was a little while ago nick so maybe hard for you to find in my twitter feed but it was a projection of china's population which essentially showed it contracting by almost 50 percent by 2100 so in the in the so it that's a really really bad situation now when you have a slowing population then the economy has to morph why is that when you have a young population so for example take what china was 20 years ago when it entered the wto or what india is today when you have lots of thoughts of young people you can on ramp them into economically productive activities like manufacturing the problem when those folks accumulate middle class income and wealth is that they age out of those kinds of jobs like they did in america and what we seek are services and service level jobs and you spend more money you spend it in a different way so as populations age your economy has to turn over unless you have a large bulwark of young people that is constantly growing to take up more of the slack the economic slack to pay for these folks who have different lifestyles more savings and different needs specifically healthcare that's china's enormously big problem so when you see them talking about six percent gdp targets and you think how does a country that big even grow at six percent it's because they're reverse engineering for what they need to create economic vibrancy in that country and so when you start to look at two percent which in america you'd say two percent's great we would like high-fiving each other for two percent uh that's not a sustainable level of growth for what's happening inside that country it does not create enough of expansion economically to cover all these folks that is a really really big issue so as that happens i think what we need to do is figure out how to be competitive now this goes all the way back to our first conversation subsidies don't make us more competitive things that governments can do to make us more competitive are long-term drawn out tax incentives that change the earnings capacity of companies why because in the capital markets reward those businesses jason you just mentioned it why is the chinese capital markets in difficulty nobody knows what the long-term earnings are how do you forecast it it's not simple anymore it's not a model it's not an interest rate it's not a discounted set of cash flows right and so that's how they need to refactor themselves they need to have a much larger population if you don't have that you have to figure out how to do it with immigration if you don't have that what china has done is they've tried to go to southeast asia and to africa and they've tried to create that synthetic form of a growing pyramid right now that can work as long as the balance sheet of the country supports that because ultimately you're still talking about moving money offshore okay so i think they're in a little bit of a they're in a pretty difficult spot the most difficult spot is the one they that she put them in if you get rid of entrepreneurship if you get rid of high growth companies that create the opportunity on a global scale and then you you know take dd off the public markets you don't let education companies become public or you basically get rid of their little co-opting of capitalism and venture capital their whole their whole society is going to become slow growth and slow growth in a country that doesn't have safety nuts is really dangerous sacks your thoughts in terms of competition versus america okay let me get to the the competition in a second just to build on what ma said the the birth rate or the fertility rate in china slipped to just 1.15 in 2021 so last year it takes 2.1 just to maintain your population at replacement level so and this is lower than even japan which is also shrinking as a chimpanzee but 1.3 the u.s and australia are at 1.6 but we get above 2.1 because of immigration and china doesn't have that so they've got a huge demographic problem point it's going to be something like well the population is shrinking by 40 with every generation that's what these numbers imply insane the numbers are it's going to be under 600 million by the year 2100 but i would i don't understand how it wouldn't even be less than that if it keeps going at this rate so there and the the commentator peter uh zeehan has or i don't know if that's the right way to pronounce the name peter zyhan or something anyway he's pointed out that china is facing demographic collapse in the next decade or so on top of that like you're saying jason that you've got xi emphasizing maoist economics he basically says he thinks that the chinese economy again he stresses the need for socialist characteristics and he seems to be bringing back that sort of communist ideology to their economy and they've basically really cracked down on entrepreneurship and venture capital it's really a self-owned i mean they've moved away from the policies that have made them so successful economically over the last 40 years and then on top of that you got this debt crisis and this housing crisis so it really looks like the deck is stacked against all of them and you're asking what does this mean for us well i think it depends on whether you look at it economically or geopolitically i think if you look at it economically you'd say that it's bad for us because our two economies are economically linked there's a lot of dependency they've evolved together for a long period of time and there if china has a collapse then that they're so big now that that's gonna have i think global repercussions there's gonna be contagion but the truth is if you look at it geopolitically and geopolitics is more of a zero the balance of power is a zero-sum game economics can be a positive some game but but the balance of power is a it's definitely not a positive sum game uh you'd have to say it's good for us because the reason why china has become such a threat is because of its growing economy over the last 40 years yep and look i mean what they've done and what they've been doing over the last decade or so is translating their economic might into military might and that has given them the capability to now threaten their neighbors to become more belligerent to basically rattle the saber against taiwan and if their growth if their impressive economic growth continues for the next couple of decades as it has until now there's no question that they will they will basically try to assert their hegemony over east asia and taiwan will be a huge flash point but there's also flash points in the east china sea with japan over the but they're going to need a bankroll to do that so if they don't if their economy is not growing they don't have the bankroll to do it they're going to have to look inward and say hey we got to fix these domestic problems we got to get people stopped protesting in these streets we need to this middle class is demanding of jobs the great news for what's happened in china and i think this is why the people there are very happy is the number of people living in poverty has plummeted you know when they started tracking this data in the 80s you know high 90 percent of people were living in extreme poverty or poverty 99 of people were in poverty on the global definition of it and now you know it's just plummeted to you know a couple of hundred million people so a couple of charts for you here but just and the data is obviously it's very hard to understand what's going in china because a lot of it is opaque but just the number of people on a percentage basis living in poverty has gone and now the number of people who are in the middle class has surged that creates another dynamic those people want to have a great life they want better jobs they don't want to work in factories they want to have a more information-based economy and a better job than 60 hours a week in a factory that's why they're moving their factories to africa and other places i mean i i don't know if that's absolutely true i think that china's manufacturing sector is um is aiming to evolve so you know china has about 3 million factories or manufacturing facilities throughout the country employing about 112 million people the u.s has about 300 000 factories and employing about 12 and a half million people the output of our factories is um about 70 of the output of um of china's factories uh in aggregate sorry the total production output of all the factories so we have very high value outputs coming out of our factories and high leverage china is observing and obviously recognizes that there's an opportunity probably to evolve their manufacturing capacity to be higher leverage higher value output and so there is going to be you know from the long range perspective planning an investment in technology that allows those factories to become much more sophisticated and create much more higher value products moving up from what is effectively just cheap labor putting things together in an assembly plant to being things like additive manufacturing 3d printing automated manufacturing biomanufacturing etc and i think this is particularly going to be realized because china announced that they're building 400 nuclear power plants that drops the cost of electricity to under 5 cents a kilowatt hour in the u.s manufacturing electricity typically cost around 11 cents per kilowatt hour 12 cents per kilowatt hour in that range so if factories become much more automated they start to become a function of the price of electricity in terms of what they can output china is going to have a huge advantage as these nuclear power plants come online over the next couple of decades and these facilities get upgraded so there is a plan right remember this they do have a plan in the reason they have that plan there is there is a question of do they get there fast enough to drive economic growth that actually supports all these other industries like real estate and finance that they become critically dependent on because those industries only work if there's a core economic driver core economic engine that's working here so this energy infrastructure this new manufacturing infrastructure these are things that by the way they can do um really effectively because they're not working on four year and six year political cycles they can take a five ten and thirty year outlook and make a make a plan and invest against it what they did from night so i wouldn't count them out but there's certainly a lot of challenges they're facing right now it's a big question mark right now what's gonna happen well and it to your point factories in china are you know factory workers getting paid over six bucks an hour now in vietnam three in india even less and that's why you're seeing a lot of folks i don't know if you're seeing it in your portfolios but we've seen a lot of folks looking at india vietnam and moving factories there and obviously japan has been uh incentivizing china's not gonna just lose their manufacturing edge they're not just gonna say hey we give up let's let everyone go to vietnam they're gonna try and upgrade the capability of those factories and say hey instead of just putting together you know parts for with six dollar an hour human labor let's start to do the more sophisticated so then free the next card that turns is well what happens to those factory workers if they've been automated out what do you do with hundreds of millions of people working in factories who now have been turned into robots and then if they're going to be an inf the answer is information economy if it's going to be an information economy you need venture capital and you need new companies to create those jobs and they just killed that so i don't know what strategy she is uh pursuing here but it seems like a bad one we could talk about this one at length but um we were gonna bring this up but you know generally speaking technology drives productivity gains but it's it's deflationary experience what that means in like a practical sense maybe uh you know that the technology so let's say let's say that you have to pay a bunch of people to make a t-shirt and then a machine is built that makes the t-shirt the cost of the t-shirt goes down because one machine can just print out 100 t-shirts an hour whereas it would take five people you know 10 hours to make those hundred t-shirts or whatever it is right so a technology kind of emerges and those people are now theoretically out of jobs but what ends up happening is those people transition into new jobs that didn't exist before and we end up seeing higher order work take place think about the the world 200 years ago do you think we would have had any concept of people being uber drivers or people um uh you know creating crafts and selling them on etsy um or youtube content people or dog walkers or all of these um these service businesses or you know industries that simply did not exist before and so the labor that those that that percentage of the population was involved in historically has gone away because it's been automated as that automation has happened it's allowed higher order services jobs to emerge and that will be the progression of humanity forever i will tell you guys um i was going to mention this have you guys played with dolly too yeah the other day um yeah sure i got the the login i was my brother-in-law was visiting we were playing with dolly too and making funny explain what it is so so dolly 2 is developed by openai um we all know sam altman he's been leading that organization to great effect over the last couple of years and um and what they're doing is they basically scan the web for images tag them and then apply you know uh machine learning uh to um you know to basically allow natural language creation of images from scratch so the ai can generate an image and you can go to you know uh the internet and look at a bunch of these but the imagery is incredible i mean the the creative output what feels like creative output from the system where you just say hey you know make me an image of four guys doing a podcast on zoom in the style of van gogh and it creates this image that is unique has never been created or seen on earth before and as a function of the um the learning that's been done in these neural networks to develop this ai that can that can create novel stuff is really amazing and i started to think about like what are the implications for this over time think about you know the original movie ben hur in today's dollars would have cost a billion dollars to make they had thousands of people i think tens of thousands of people on that set it took years to make they built giant sets they could only you know make one film it was an incredible feat and an effort that's what movie making is you know um still today there's there's teams of people now what if you could speak to the ai and say make photo realistic you know jason and chamoth having a battle on a field in the middle of nowhere and now an airplane flies over and you can instruct the ai and the ai can generate photorealistic visuals audio the ai can even generate scripts and narrative for you um it's really starts to change the role of the creator the director the director is no longer doing this thing where they have to get it just right make the perfect 90 minutes and then line up all the money and all the people to do that work on that plan on that program they can be much more iterative and they can be much more creative on the fly they create a two-hour movie by speaking to the ai and then edit the movie by speaking to the ai change the actors change the color change the voices change the music just speaking to ai to generate creative output and people will consume that output and i think it's amazing to think about what creators will end up doing 10 years from now as ai and these tools proliferate and you see version 12 of this which is version 2 and what version 12 might enable and so the role um the number of people that can do that job goes from steven spielberg and bob zemeckis and a few other people to suddenly thousands or tens of thousands of people around the world making incredible movies here's dolly's image let's pull it up of four guys doing a podcast so all right we have a ways to go but uh yeah that is for guys doing a podcast that's awesome yeah that's awesome i mean and to your point like you know this is gonna we're on fire yeah this is gonna so a lot of people are like oh is this gonna wipe out graphic designers is it gonna wipe out the creative industry but the reality is the roles that those people are in today will absolutely be gone but they will emerge and evolve into new roles that we never even thought imaginable that will really transform that industry and society and this is going to be true across everywhere that ai touches yeah and i think you'll see this in china china's as china steps up their technology in manufacturing you'll see those you know new markets involved sorry jamal go ahead designers will have less leverage to ask for all these stupid snacks and offices of startups well i mean you need only look at the designers are the worst my god oh they're the best i love them but anyway um in the 1940s i mean we there were literally hundreds of thousands of telephone operators and totally they're all gone now and not only that have you ever met a designer that didn't take themselves incredibly seriously that didn't have like you know tea that they would see the bad ones you know good ones they'd have like steel straws video game designer they're a little different i'm sorry what did you say about the steel straws that wasn't yeah oh there it is by the way eliminating waste in my life i mentioned to you guys last year this video game i played over christmas by annapurna pictures and the guy that um runs the studio sent me a dm he loves the pod oh that's nice and they just launched a new video game which i started playing a couple nights ago called stray and you literally at you you play the game as a cat lost in some crazy world you're literally a cat the imagery on this thing is unbelievable actually my favorite game right now saks is i play a cat at the strike hat and it's really amazing you know it's fine you should go it's really hard to go play the game yeah i'm going to take a hard pass on that i think i like to play a game where i'm a stray dog and i meet another dog and then we eat a bowl of pasta but this long string of pasta we each come closer and closer than we end up guessing let's uh move on to do we want to go blackrock has lost 1.7 trillion dollars in six months uh vc funding is down or amazon acquires one medical for 3.9 billion which one do we want to go to next anybody have a favorite here sax you've been a little quiet you got one you want to go to uh we can talk about the black clock thing this is the largest amount of money lost by a single firm over a six-month period in history blackrock uh is the world's largest asset manager and uh it was the first firm to break 10 trillion dollars in aum assets under management now right now they're at 8.4 trillion 2022 ranks as the worst start in 50 years for both stocks and bonds chairman and chief executive officer larry fink said on his earnings call at the end of june only about a quarter of its assets were actively managed to beat a benchmark rather than track it seamlessly as passive strategies are designed to do firm's passive equity holdings are now 10 times larger than its active holdings although it does operate some active multi-asset and alternative strategies that narrow the gap collapse in bond markets this year has shaken money out of active fixed income funds listen i think there's less than meets the eye here with this i think this was a headline that was trying to grab attention by saying biggest loss ever look the reason why it was the biggest loss ever is because blackrock is so big i mean and what is blackrock it's basically at this point they're index funds they're etfs they're indexed funds they just represent market indices so you know the reason why it went down 1.7 trillion is because it started with 10 trillion so the average index is down 17 that's all it means we know this the s p 500 is down 20 22 for the year the dow jones down 15 ish the nasdaq is down like 30. so this is just reflecting what we already know which is that the stock market is down this year do you think it's another um data point to support the idea that active managers generally speaking and maybe holistically speaking over time cannot beat the uh you know the market cannot beat indices i mean you have a point of view on that as an investor sex well i think you know you're talking about public market investors i think it's very hard i think it's very hard to beat the public markets over a long period of time consistently i just think it is now you know the contradiction though is if you have no active managers then the indices won't be efficient anymore so you need the participation of the active managers to help drive the the indices and make corrections to it so and the fewer active strategies you have the more inefficient the markets will become thereby inviting active strategies so you know i think it's a good question i i think there are some managers who are who can probably do it but i think it's a very tough thing to do jimoth what do you think you're a public investor active selector of here's what i here's what i hear i've been thinking a lot about this i think that i have disproportionately benefited from being at the right place at the right time backed by enormous amounts of central bank money and so i think we all have been i think it is very difficult to be a public market individual stock picker in a world where the central banks are constantly meddling because when they do the best thing that you can do is belong the market beta and the more concentrated you are the better returns you would have delivered since 2008 when the central bank started to get very aggressively involved when individual stock pickers reigned the the universe was when central banks were largely on the sidelines and so there was all kinds of dispersion right dispersion meaning good outcomes bad outcomes lots of alpha right meaning your performance was independent of the market but since 2008 it's largely been beta that's driven the market and the folks that have done exceedingly well were those in tech because we delivered the best beta and every time we confuse alpha and beta we get over our ski tips and there's always some big elk you know blow up so i think my my general takeaway is that uh if the central banks stay on the sidelines individual stock picking rains and active management can win if they continue to be involved and do quantitative easing and all of this other stuff index funds that are long concentrated market beta will always outperform in the long run i was watching warren buffett answer some questions and one of the questions and this goes to the law of big numbers like blackrock he was saying listen the reason i did better earlier in my career than later in my career on a percentage basis is because i was placing i had a smaller amount of capital and i was placing it on smaller bets smaller ideas and themes and then as i had a bigger chip sack i had to find bigger ideas to put more money to work and therefore more people were looking at those and so those assets were not undervalued and so i found that very like um uh insightful in terms of when you participate in the market if you're trying to pick between very large bats like kotu and tpg and tiger were doing in the growth space acts like now everybody knows that these company everybody knows stripes a winner everybody knew airbnb and uber were winners you know in the late stage of the private everybody knew facebook was a winner in the research prime market if you're battling that out you know yuri milner is going to come over the top and pay 2 billion more than you or masi yoshi-san is going to pay 5 or 10 billion more than you where is the alpha there you know where where is the gain the alpha's in the fees okay there you go and so they were playing a different game and i that's you know i started trading this past two weeks because i've never traded public stocks and i wanted to add it as a skill set so i put a couple million bucks into an account and i'm just trying to actively figure out how does value work there and you know i'm just starting to make trades that i want to hold for 10 or 20 years and we'll see if i can beat the market that's the other thing is what do you want to spend your life doing if the index if you can put money in a passive index and not do any work well you know that's attractive as well so sacks what do you think in terms of active management you know in these public markets and the size of the bets that have to be like i said i think it's very hard to beat the market consistently i think it's a very tough profession i'm i'm sure there are people who can do it but i don't know if it's easy to predict who those people are so look i you know i think it's something that can be done but i just think it's a tough tough game i mean what we do as private investors is a little different right because not everybody is in a position to buy shares right yeah so not available to you you don't even know the company access is limited and information is limited and in exchange for that sort of preferential access that we get we actually have to do work so when you're up when yeah when you're a public investor in a company disney or whatever you don't do any work you're not involved at all we do a lot of work for the companies and that's why they choose us and so it's not you know it's you're not competing against the whole world i think the public markets are just so competitive are you tempted though looking at these prices and because i was looking at a company that was trading at 50 times revenue last year they're racing again they double their revenue so now they're at 20 25 times revenue they're raising at last year's valuation and then i looked at the public market comps and they're trading at six times so now i'm like wait a second and obviously look at the growth rate you got to look at the growth the growth rate in this example was three times fat greater than the public market comp so how would you assess that then well what we're seeing right now is that pretty good sas companies that are growing you know maybe on a trailing basis they grew 3x and you know prospectively they're growing call it two and a half x um they're trading right now not trading but basically deals are getting done at 20 times arr 20. which are this year's current run rate yeah the current arr because you're not getting that like bonus like here's your projected next year we're going to give it based on that this is current no no current arr is about 20 22 23 times are um from what last year 100. it was like 100 times was the rule of thumb so now there are some where there are you know deals are getting done in the high 20s i'd say or even 30 if they're if you believe that by the end of the year it'll be more like 20. so but i i think the new levels are landing at 20 20 something times ar now why does that make sense relative to the public sas companies well like you said the sas index is trading at roughly six times but that's only percent average growth right and so you know if you're growing ten times the growth right right and the high growth sas companies are trading it like seven times um that's for like a forty percent grower we've talked about this before so listen if you're tripling year over year and you pay 20 times that'll be a seven times next year but if you're growing two two and a half three x next year that's way faster so yeah i think there's actually an arbitrage there i mean this is why we like doing private sas investing right now deals are getting done i will say that the people who i'm seeing who are really struggling uh freeberg are the people who didn't turn on i'm talking about the very early stage they didn't turn on revenue they were making progress in team building and culture and features but they just weren't focused on the revenue side and my lord people got a lot of credit i mean 50 million 100 million evaluations without the revenue turned on um and that now they're faced with not being able to raise money full stop what are you seeing on your side freeberg in terms of deal flow in the private markets yeah it's and raising money because you have to raise money for your company it's not easy unpack it what's not you know uh well what are the conversations like give us the anecdotal information i mean i've seen a number of term sheets get pulled so i think oh really yeah we've heard a lot about companies that kind of during the q1 early q2 time frame had term sheets weren't closing got delayed out and there's a number of kind of examples of repricing where the investors come back markets have changed let's reprice the thing or hey um we're not going to do this deal anymore we're going to sit on the sidelines and wait till the market settles or rlps actually aren't going to let us fund new stuff so there's a lot a lot of those unpack that last one for people what does that mean you know investor you know investors have lps they have investors themselves and their lp's are coming to them and saying do not put more money out right now we are telling you we are not going to wire our money to you we need you to wait until even though they're contractually obligated to they're telling you theoretically they don't or may not be contractually obligated to but obviously these are long-term partnerships and so when an lp you know or a group of lp says guys we're not comfortable with you deploying money right now you know you're in a 10-year partnership 15 year partnership with them you're going to as an investor as a fund you're going to say okay i'm going to kind of listen to that right now now the bigger issues in series b c and d where companies um you know have some traction have some performance have raised a bunch of capital have done a bunch of work and investors don't know what they're worth they're like hey is this thing worth 25 million or 125 million or 500 million last year you could have raised money at 500 million i mean look at what happened with uh one of those crypto things those crypto trading platforms they raised 500 million dollars last july and they just sold the business for a reported 25 million dollars after being valued at five billion a year ago yeah so the whole the truth might have been more like 275 million um yeah and and so but but series a people seem to be pretty active again and so active again but the price is now for seed yeah but it's a lot easier it's happening 6 to 15 series a is happening 15 to 25. it's a lot easier to get a deal done in a series a because people say hey look i'm going to give you this you say okay i'll take it i need the money series b c and d is where there's this whole fight because there's existing investors existing shareholders who are saying i don't want to take a 50 right down a 70 right down a 30 right down over the last round and fighting and then doing inside rounds and bridge notes and all sorts of other shenanigans to not have to take a negative book yeah well one thing one thing that's interesting here is that um you think about like where the opportunity is in the market right now and i think one of the things that happened in the boom is that everyone got pushed to go earlier and earlier because deals were so competitive and so you know in the sas business normally 1 million of ar was considered the rule of thumb for getting a series for basically graduating to a series a that you were ready to go from c to series a when you had a million of ar as we know during the boom last year that number kept going down you know 300 000 and then you would see crazy deals get done that were pre-revenue with price at 100 plus we never did any of those kinds of deals because we just thought they were too crazy but they definitely happen well think about the dynamic now which is let's say that that sas startup that has a million of ar they can do a series a at 50 or we can just wait until they get to 5 million of ar and then pay 20 times and do it at 100 free which of those is the better risk adjuster return let me tell you there's a lot of risk in going from 1 million arr to 5 million aaron it's hard as a sorry it's it's hard there's a lot of things that you call sales you're just you're not doing it through the founders so yeah you need to start scaling a team you need a real sales capacity but also a lot of startups that could sort of hack together and cobble together 1 million of are based on non-scalable techniques that various startup incubators teach like you know don't do stuff that don't scale it right it's okay to do that from zero to one but not one to ten right well or it's it's not that it's not okay it's just that it doesn't work right like you're not going to cobble together 5 million of ar you can cobble together 1 million of ar you can use the cheat code to get there so what i'm saying is there's a lot of risk and going from 1 to 5. you find out whether the product's really scalable so what is the better deal wait till 100. wait till it's priced at 100 or 120 million pre or doing the deal at 40 to 50. now if you love the if you love the company you want to get in as early as possible yeah but i think you're going to start seeing a dynamic where in the same way that last year everyone went earlier and earlier you're going to see vc start to sit back and go a little later and later prove it to us a dead man zone nobody should be putting money into deals right now what is it why what does it do unless unless you're in the business unless you're in the business of running a fee generating machine if you're really trying to generate alpha you have to have a sense of what's actually happening in the world right now if you're just trying to deliver the market beta and run an index then yeah you're right you should ignore this idea that there could be more price adjustments but if you look at the public markets which is again the ultimate terminal buyer they have more cash than they ever had since 2008 which means that there is no reason to buy you're talking about private companies it all ultimately ends up in the public markets and so if the public markets are saying there is no reason to buy this stuff it trickles down so then the crossover investor who has a public private business says you know what on the public side i'm completely de-risked and in cash and so on the private side i'll just be a little bit more circumspect and wait as david said i'll just wait six months and put even more money in later i'll actually have a better irr and i'll make the same profit dollars so then the series b and c firm who used to feed those deals to the crossover folks are like oh well if you're waiting i don't want to have to write a check to support these folks my whole point was to have you mark up the deal so i could raise a new fund they slow down and then that goes back to the series a person who's like well wait a minute you know the reason i paid at 50 pre was because i thought you'd step in and buy it at 100. and then they slow down so all i'm saying is i think that we are at the point of the cycle where constipation is setting it and this is why you're seeing such a downtick in deal velocity and dollars put to work this is uh great advice i want everybody to take i'm going to take the opposite advice and i'm going to do twice as many deals in the seed stage as everybody else but i encourage every venture capitalist and seed fund to take chemat's advice i'm doing the opposite because a five-person company this is an advice this is just a market observation i'm just gonna market observations i hope everybody takes that as the truth because what i'm seeing is the founders who are raising and who have real businesses are so sharp right now and so focused on costs and profits and what matters and they have eliminated all the that doesn't there's a whole contingent i don't know if you're seeing it saks i'd say it's one out of five one out of four that are like i understand what's happening here and i'm going to take advantage of this moment in time and i'm going to just drive revenue and profit what happens to the 250 billion dollars that's been put to work in the last two years that need to get up rounds yeah it doesn't matter to me all i care about is meeting young companies that are growing with revenue but i think they're they're i'm just trying to have i'm not trying to have a conversation if you want to yeah no i thought so that's a lot of indigestion yeah they're gonna have to cut their staffs by half and get to profitability ultimately the way that valuations matter or price levels matter is there's an entry price and an exit price and ideally if you can time it right you want to invest when valuation levels are low and you want to exit when valuation levels are high if you were a vc last year you should have been realizing as much as you can because valuation levels were really high there was a good uh tweet by one of uh brad gerson's colleagues at altimeter basically saying she was talking to lps and asking what they care about and what she reported lps is saying is that if you're a fund that's more than five years old and you didn't distribute during the best yep window ever which was 2018 or 2021 it's a hard no you know we're not going to be re-upping with you i'll say it even more if you're if you're a venture investor who took a longitudinal view on public market stocks and then have now seen 60 to 70 percent write downs of those same stocks that you could have distributed you should still have something to answer to that makes no sense it turns out that the skill of private market investing and the skill of public market investing are different even if all you're doing is delivering the market beta it's still different enough discussion remember i was saying should i distribute the shares of robin hood should i hold them what should i be doing we told you to distribute and i distributed it i distributed everything you know and uh and in terms of secondary i feel pretty you feel like a genius now because your lp should say thank you jason no what i feel smart about i'll be honest is uh we had i think let's just say i'm making up a number 4 out of 5 times we were offered the opportunity to trim our positions in secondary with our winners uh from people who wanted to buy secondary shares i did it probably four out of five times and i'm just kicking myself i didn't do it the fifth or i didn't ask if they would take more because my god we were able to clear some positions at very high valuations that are now lower than that in the private markets and send cash to our lps and get our you know get over our hurdles and our first two funds which you know i feel smart about i think that you should feel so so good about that that is that is really hard what you did and i think people underestimate how hard it is it is really hard to actually return more money than you have taken in yeah i mean that's just that's what i'm focusing on just that simple statement and and by the way it was hard in the last 10 years where we've had basically a massive up market and the four of us frankly benefited from the extraordinary luck of being in tech yeah no it's super lucky i think the big thing that's going to happen right now i'm seeing it all over the place is m a i think is going to start ticking up just today amazon acquired one medical for 3.9 billion one medical operates a network of clinics if you don't know 3.9 billion enterprise value for 182 franchises which is 21 million a franchise look at what happened to their um look what happened at their stock price no i know i went from 60 in the peak in february of 2021 to uh seven in may and they bought it they basically bought it on the same price it was trading out in january no my point is you could buy a mcdonald's franchise for two million or you could buy the company that fixes the people that needed mcdonald's for 21 million that's why they've got some chicken by the way at mcdonald's you can't make money selling pharmaceuticals and upselling you know other stuff that amazon's gonna certainly i think that's super interesting that i think it's super interesting that amazon's getting into this business wow i mean that is really i mean they clearly have a an economic model that shows um some significant footprint and retail footprint well there yeah and there may also be kind of a supplement pharmaceutical kind of upgrade opportunity there's synergy in this uh business and think about the synergy between i think about what they're getting is also not just the physical locations but a network of doctors that can do telehealth i don't know if you guys have ever used one medical but they do really um you know easy zoom telehealth services and so you could hop on get a prescription have it fulfilled by amazon it shows up at your doorstep in under an hour it'll be an incredible synergy for that business and probably a real value driver not just at the core units but with respect to other things they're going to sell through your one medical doctor will provision a blood test he or she will analyze those blood tests over a telehealth they will prescribe a better diet that will be sent to whole foods who will then no i'm sorry i'm serious it's like it's just and it's eating out hopefully amazon it makes so much sense for amazon to expand into built out retail footprints because that business model now gets more and more complete by the day where you become so ingrained and enmeshed in this this is loop this is really about at the end of the day really is the subscription business amazon prime is the driver of amazon that's going to be yet another amazon prime lock-in so you're i know it sounds silly but two days ago about your subscription but i would bet you got i'll bet you guys a dollar that within a year after closing the deal they're going to massively expand the telehealth footprint of what medical is doing because one medical had to go out and do customer acquisition to go and acquire customers to make money doing telehealth services and they're spending a thousand dollars probably cpa to acquire these customers amazon's wanted to do this why didn't google do this amazon's already got the customers they've been up with 70 million everybody by the way i think another thing another google doesn't know how to do messy things in the physical world they don't know how to do service i mean amazon's been working warehouses what about apple apple knows how to do stores apple knows how to do four products in a beautifully designed shop a billion dollar services business amazon knows how to get in the nitty gritty and the nuts and bolts of operations yeah real world stuff the other thing that's really interesting about this amazon deal is that it was done with bezos not at the helm and i think it really you know begs the question and begs an answer around are these guys going to continue to innovate like this and i think right now the jury's saying yes they are going to continue to push the um the synergies they can derive from this business by expanding into ancillary services and and industry uh and it's really impressive to see them doing this without um without bezos running the day to day as a shareholder i feel that um so uh really great to see i yeah i mean this is where like they could buy door dash uber lyft those kind of real world services they're buying it just like they did with whole foods they're buying an asset that they're going to get tremendous leverage and synergy out of very cheap they're buying this company at the same price it was trading at a few months ago yeah and they have a great they have a great ceo at one medical who's a friend of mine amir reuben congrats shout out congrats yeah all right everybody want your beak sacks no i never i never wet my beak in the steel dry beak syndrome no i would i would just say from dbs by the way i'll be taking a victory lap right now if i was in that company yeah i missed it i'm shocked we haven't seen the j cal victory lap he goes on some podcast tells bloomberg that vcs are going to get pinched for insider trading all these tokens and lo and behold on the wall street journal three guys i guess a guy at coinbase got pinched for basically insider trading these token sales uh front running it by buying them in his wallet and stuff and so but where's your victory laptop do you want to take your victory lap well no i mean i told everybody like if it's a if it smells like a security and people are buying it for that reason for it to appreciate don't be surprised if the sec you know starts having tips dropped on them that different vc firms in cahoots with law firms in cahoots with everybody were liquidating their positions we talked about liquidating positions as being the goal of venture capital they created a shadow economy next to securities law and said we're going to start liquidating these things but under what they made the rules up under which they could liquidate them i'm not picking on any firm or anybody we'll we'll see over time who gets pinched but you know if you decide you're going to talk yourself into this is not a security even though it kind of feels like one that's on you that's on you as the person buying the tokens issuing the tokens giving the legal briefs on the tokens i think people suspended disbelief and talked themselves into thinking that they weren't trading securities and i think the sec now that everybody's lost their money is going to just tick off one firm after another and it's going to be massive settlements it's going to be three or four years of litigation so it's not a victory lap it's just it was such an obvious observation we all saw it i mean how do you liquidate your shares in a company that has no product in the world like come on come on people knew what they were doing if they get the book thrown at them they deserve it all right everybody uh this has been another amazing episode even though saks is going to say it's the worst one i like it i do that's a lake is that real that's lake front is that a zoom background can i get that new zoom pack take a photo so we can all use it yeah love you boys love you besties all right we're back in the groove back at you let your winners ride rain man david sacks and it said we open source it to the fans and they've just gone crazy [Music] we should all just get a room and just have one big huge because they're all just useless it's like this like sexual tension that they just need to release [Music] your feet [Music] i'm going on [Music]










all right his monthly burn rate would make even bezos wince he's living the life of a sri lankan prince he drinks nothing but the absolute highest top shelf he's lifting italy's gdp by himself the dictator's back mouth polly hopper i'm back to the program thank you jake when uh you mentioned that burn rate i thought you could be talking about me sometimes these intros you're not sure which which way something is correct it's a misdirection it's a comedy a mystery it is inconceivable that my burn is higher than david's axe i have i own one house how is it possible and maybe one or two next week you're such an ass he's analyzing macroeconomic charts and grids while at the same time ignoring his kids he's the sultan of sass it's no surprise the only thing heavier than his pockets the bags under his eyes the rain man is back david sacks it's not bad oh here we go here we go the admiral of anxiety he's rife with strife he plays on his ps5 and he also plays one in real life meow the commander of the cat boys david freeman i mean i'm totally cool with that opening because you're gonna look like an it's all good i mean more of an i mean if you didn't ignore it every time freebrook spoke you would have heard that the guy from anaporna pictures reached out to him gave him a link to download a free game about cats which he downloaded and he's been playing it's now the most popular video game in the world you introduced the cat game it's on you by the way what shirt are you wearing it looks like a carpet yeah you really do look like one of the characters from goodfellas like one of the older guys in the kansas city yeah i have my cigars right off the screen here and i got my nice coffee i got from dunkin donuts you remind me one of the guys in kansas city from casino absolutely sit around the table in that restaurant it's like should we whack him why take a chance boom listen you give him you got my style icons joe pence is my style icon you look really bad thank you thank you [Music] let your winners ride [Music] rain man [Music] [Music] gdp fell by 0.9 in q2 marking two straight quarters of negative growth in q1 we all know gdp fell one point six percent here's the real gdp chart current dollar gdp increased seven point eight percent in annual rate or 465 billion in q2 to a level of 24.85 trillion home construction down 14 obstetrically because of the interest rates increasing inventories which helped boost gdp in 201 dragged down growth in q2 so supply chains easing taking away two percentage points uh chamath what's your take do these year-over-year comparisons work we were talking in the chat a little bit about the spike in 2021 versus the dip in 2020. what's your take on this i mean i think you just summarized it people are really fixated on these numbers without understanding uh basic statistics so just taking a step back if you go to the bureau of economic analysis which is an official website of the government of the united states that posts gdp the title makes it pretty self-obvious what we're dealing with here which it says nick you can put it up there real gdp the percent change from the preceding quarter so things can still go up positively but still be negative if it doesn't go up by the same or more than the quarter before it the thing that we really have going on is that over the last eight quarters we've had all kinds of very turbulent data that's made the trend line unpredictable and the most obvious way to see this is actually in one specific sub sector which we'll get to in a second which is around us e-commerce adoption you see this one huge spike coming out of nowhere and then eventually everything has settled back to trend the same way i think what we're waiting to figure out is how many quarters does it take for us to get back to on-trend growth in the economy we had a massive shortfall in q2 of 2020. we had a massive surplus in q3 of 2020. we've had a country that's been getting back to finding equilibrium over the last five quarters so we don't really know what the steady state growth should be this is why i specifically had such an issue with the tone the white house took which was trying to explain away this that this isn't a recession by trying to create doubt in the definition instead i think it would have been much better off just repeating what i just said and explaining basic statistics and actually showing that the country is headed in the right direction largely speaking from a really crazy one-time externality that nobody could have predicted that it's going to take some number of quarters and so really what you should look at and jason you've pointed to this is employment and wages and try to be a little bit more circumspect in overreacting to any one quarter of data by the way the fed exactly just said the same thing yesterday when they raised 75 basis points they said we are not going to give guidance anymore because things are too turbulent we're going to remain vigilant on inflation but mostly we're going to be very near term data dependent so i would boil all of this in saying let's not overreact to a quarter's print here or there and specifically the label i think the white house made a mistake in trying to basically think you know we all didn't understand what our technical recession was i think instead we should just focus on what we have to do to get back to solid-state equilibrium yeah and just to put a pin in the definitions we all know the common definition two successive quarters of uh negative gdp however people have said it's a a temporary economic decline during which trade and industry activity are reduced so there's a sort of debate in splitting hairs going on sax which was kind of stupid the big news this morning is that we no longer know what a recession is this is such a vast and complicated question you might as well be asking what is the meaning of life now i remember in the days of republican presidents we had a very simple definition of recession which was two quarters of negative gdp growth but now that we have a democrat in the white house we just can't know these things why even ask such difficult questions right i mean that's basically the media coverage today and it's absurd i mean and you saw for the last week the administration and spokespeople have been trying to muddy the waters on the definition of recession and it was laughable as they were doing it but now you see the media coverage today and you realize like they've bought into this nonsense and they're carrying so much water for the administration look the headlines should be the biden recession has begun that's it if you had three minutes and 45 seconds for your biden over under with sacks you took the under you won you're in a recession he's the president and if we had a republican in the white house it would be republican president recession has begun yeah so the media here is carrying so much water to try and avoid the obvious headline i just explained it instead of reporting the obvious headline they're now saying that we're approaching recession or we might be in recession we have all these difficult technical issues look listen we're in a recession it started it might be a shallower session we don't know yet yeah um it's it's uh it's a recession in which the unemployment rate as of today is low although the labor participation rate's also low so listen we're at the beginning of a recession it might turn out we might have a bounce in q3 this might be more of a double dip i suspect that's what it'll be but we know the cause of this the cause of this recession is inflation if you look at the economy's growth on in nominal terms it grew at seven point something percent but because inflation was at nine percent you have to subtract them in real terms the economy is shrinking and who is to blame for reset uh for inflation well j pal at the fed because he reacted way too slowly but also the buying administration for all the spending they did how much sooner do you think they could have reacted two quarters no like nine months earlier so three quarters we got that we got that first surprise inflation print last summer it was may i believe that 5.1 percent we started to talk about 10-year break-evens uh tips in may of last year yeah so they could have gone quarter to quarter nine months and they continued not only did they not raise rates um or or signal any desire to raise rates for six months they continue to quantitative easing for nine months which just makes no sense but they should have taken their foot off the the accelerator right not nine months they only start they only stopped in june of this past year so we've only been quantitatively tightening for two months i thought they stopped the bond buying program in march maybe that's right yeah yeah but they saw quantitative easing in march but you're right that tightening is just something they're getting started with but the point is they should have stopped easing right like why would you need to keep intervening in in the in the markets to buy more and to basically push out more money is the reason for this that powell and yellen just haven't lived through highly inflationary times i just read that they're older than i am they haven't been in office and doing fed policy like i just read volcker's book if you haven't read it it's pretty great his biography i mean what he had to do in 81 82 was super severe uh but we just haven't lived through this in her life so i guess people are just not used to having to tap the brakes no no look what happened is that the administration reacted in a political way to the inflation print they invented this well the word transitory existed but they applied it you heard this word used relentlessly for about six months so the administration went into denial mode yeah and then by the end of the year it became clear that it was persistent and i think the issue with powell is that he is basically responding to headline risk right so he didn't respond to you know the inflation problem last summer he waits until the end the headlines tell him he has to react and so now the the thing that he's worried about is his recession obviously he knew no he's worried about inflation mostly right he wants he's worried about inflation but if you look at yesterday's right but if you look at his comments yesterday it was more dovish comments they did a 75-point rate hike but the comments were more dovish and i think it's because he knows that today we have this second consecutive quarter of negative gdp growth so now he's trying to balance recession risk against inflation risk but the point is that the fed's been very slow to react and the administration basically just tries to relabel and rebrand problems instead of confronting them head-on hmoth when we look at this chart you pulled up four and we see this massive spike q3 q4 q1 q2 a little bit in q3 and then q4 i mean this massive uh one two three four five six just extraordinary quarters or five out of six in terms of gdp that's all stimulus in your mind right this is the money drop so that was lockdown it's in q2 2020 jason they lock the economy down yeah so people are spending online and we'll get to the chama chamat story about spotify but it's not all of it but the the point is it's some combination of blockchain and access money right access excess money because because of loose financial conditions distort what true supply and demand should be got it right and excess money can come from the government but in this case excess government money went from the government into the hands of individuals who then participated in the public markets and they distorted what it what it all looked like and so there was a lot of purchasing activity that was propped up by what seemed like an endless supply of free money right so yeah good and so now that that money is getting taken out we don't yet know what the real equilibrium economic growth rate should be because you have to remember we have not seen an era without federally introduced spending without federally introduced forms of quantitative easing since the great financial crisis so we have been propping up our economy for 14 years straight now so we have distorted the prices of bonds and fixed income we've distorted the prices of equities we've we've created an asset bubble in crypto out of nowhere and now we have to do the hard work of figuring out what the real supply demand is in the economy and we took six quarters here there's six quarters of just massive gdp spike there from the preceding quarters and we have two down quarters is it going to take six quarters to wash us out or longer i guess no longer because what david said is now making the problem even worse so because powell was catering to whatever pressure he's been getting and he must be getting some severe pressure from the white house those were really dovish comments but what is the problem when he is dovish well the practical reality is a couple of things number one is typically the yields of long-dated bonds go down okay that essentially tells everybody else to reprice assets what does that practically do it makes the cost of borrowing roughly cheaper okay it makes the price of equities particularly ones that are far out on the risk spectrum so specifically let's focus on nasdaq and crypto right tech stocks biotech stocks and and crypto stocks go up much more aggressively so what has powell effectively done he has synthetically created a form of easing again right like his job at the federal reserve if you think about the money supply as a pipe it's to shrink the pipe to close off demand to get things in equilibrium so even though he's doing this by the language that he's doing he's effectively allowing market participants to basically guess that the worst is over and now we're going to start to expand the pipe again and so they go to the end state so what he effectively did in one speech is basically put a pin at the end of this year and is telling the markets i'm mostly going to be done and if anything i'm probably going to be cutting in the back half of 23 go on your merry way and there is no c the problem jason is yeah it's now pushing the problem out another eight quarters like we need to stop this nonsense he needs to be definitive and he needs to fundamentally break the back of inflation so that you find out what the true demand is in the economy yeah and it we did .75 yesterday the markets rallied on his sort of uh the assumption that he would do a couple of more of these rate hikes and then he'd be done at the second half of the year and then hey maybe we can get back to growth uh or some normalcy uh in re related to all of this uh and by the way there's an interesting story uh saks would be interested in did you read paul volcker's biography at sacs no i've not read it yeah it's i'm not familiar with this record but yeah like at one point baker and ray took reagan and volcker into a room off of the white house so it wasn't recorded and just said volcker to volcker the president does not want you to raise rates going into the 84 election full stop and volcker's like well i wasn't planning on raising them so there's a lot of politics in this even though people claim they've already done enough i mean volcker raised rates all the way up to like 20 he broke the back of inflation it created a very severe recession in i think 1981-82 but by 1983 the economy was rocketing back yeah with lower interest rates and and they basically solved the inflation problem hopefully we're not in that situation where powell has to jack up rates so much to break the back of inflation because it means that we'd be in an even more serious recession so i hope we're not in a volcker type situation just think about that spread sacks 20 versus like three or four percent we're trying to get to we've never in the history of america ever had cpi print above four and a half or five percent without inflation being brought down by having fed funds not also be greater than four and a half or five percent so at some point inflation will turn over and we'll print six and seven percent but that's still not below four and a half or five and right now our target fed funds rate is between 2.25 and 2.5 percent so we could still be only 50 percent of the way there if inflation remains at four to four to five percent and this is what i think market participants don't want to hear they don't want to hear that there has to be a meaningful form of tightening and politicians don't want to hear that the white house for sure doesn't want me here the problem is that if powell caters to too much of that feedback he's not going to do what he's supposed to do and why he's put in that job his job is to get it to two percent and keep price stability uh and full employment do you think there is um a balance here i mean the reality is we do not want pal tightening more than he should or more than is necessary to solve inflation because it will cause a serious recession so i think we're we're caught between two pretty bad options here and it's because i think that what happened last year contributed to this i mean look if you go back to that chart that you just showed what happened in q2 of 2020 we had a very healthy economy going into 2020 in 2019 right and then in q2 of 2020 we had covid but we made the situation even worse with lockdowns and which basically shut down the whole economy brought it back at least in most states in q3 and then the feds started printing and congress started printing 10 trillion dollars well still by last year the economy was back we had something like 5.7 percent annualized growth this year it's negative why why is that i mean this may be the lingering effect of all that stimulus but i think that it is but i do think that the administration made it worse by sending checks into an overheated economy they also created energy scarcity and they just kept you know spending more money so i'm not saying the white house isn't without fault david but i do think that if all of these geniuses could have actually just taken a simple econ and stats 101 class and explained how year-over-year measurements work to the american people i think they're smart enough to understand it we didn't have to go down this convoluted route we could have just explained we put a lot of excess money in the economy we don't yet know what the full effect of that is we need to let that wash through in the meantime you're going to see some crazy numbers from time to time and we just have to be patient and the other crazy things you're going to have looking at second and third order effects is all these downstream effects people are making business decisions going into these economies shopify just laid off 10 of its workforce about a thousand people on tuesday their stock is down 10 past five days overall 70 year-to-date um and if you look at this chart and and toby uh took blame for this he basically said listen we thought that this was going to be a uh you know fast forward into the future that people would adopt e-commerce in a major way and that would stick here's u.s e-commerce adoption growth rate massive spike when people were forced to buy all their goods online and now it is regressing to the mean i mean mean reversion is a if you look at shopify stock if you look at peloton stock if you look at a firm stock if you look at arc you know a lot of these things were trending in a great direction they had this short-term crazy behavior in the middle of all of this free money and now they've mean reverted and you know we're in the midst of finding out what the real price is i got to give toby a huge um you know round of applause because he is such a great ceo and i'll tell you why last year in the middle of all of this wokism he wrote this incredible memo which was you know we're not um a family we're a team which i thought was exceptionally well written and really got the point across this time around he just owned it he's like you know i made a huge bet that all of this behavior changed was going to be discontinuous and permanent and it turned out i was wrong i'm sorry for that and here's how we're gonna have to course correct in both cases he kind of just put it all out there and he owned it and i think that that's all you can do when you make a bet and it's wrong and here's what he said uh it's now clear that bet didn't pay off ultimately placing this bet was my call to make and i got this wrong now we have to adjust as a consequence we have to say goodbye to some of you today and i'm pretty sorry for that i mean everybody made that mistake right so you know it is it's just you're right just own it everyone was thinking the same thing we all were talking about how covet was this accelerationist virus and it was going to accelerate all these trends and well that's the acceleration rude awakening is going to be for all these people who made all these bets assuming that it's permanent and specifically i mean you know especially around real estate and work from home and all of the stuff benefits and it's all going to change now and the reason i say that is the combination of reversion to the mean will impact a company's bottom line and those boards of directors and ceos will say okay we're just going to have to reset expectations and that's going to touch the employees i don't know if you saw this leaked transcript but you know zuck was asked the question from this one that was unbelievable he was asking about his like emotional support days or something i think in the in the middle of like zuck having like a really serious you know heart to heart with the company about how we're gonna have to buckle down and you know get this company back individual performance one dude one dude you know schmenke from the back raises and goes what about the covet extra vacation days of those days zuckerberg almost like he literally his head almost exploded he's like did you not just listen to what i said i just said if people are not performing at a high level maybe they shouldn't be here and you're asking me about more days just fire that person to say like you obviously you don't get it you didn't listen anything i said you're not right for this team at this time goodbye he said a version of that he's like there's a lot basically it may not be the right thing freeburg when we look at these uh trends okay uh commerce seems like people are going back to shopping but i want to ask you about two specific ones healthcare it does seem like telemedicine was one of those things that got accelerated during covent do you think that's going to revert to the mean or do you think that you know doing doctor's visits over you know facetime and text and all these consultations going to stick with us and then what about work from home because that does not seem to be uh shifting all that much free the work the work from home is not shifting well i mean it's people are still staying home uh and you know uh amazon just put a hold on six buildings where they said you can finish the outsides but let's not do the insides because we don't even know what we're gonna do with these buildings and what hybrid's gonna look like and zuckerberg hasn't been able to get people to come back to the office and apple seems to be getting people two or three days a week so it seems like it's still been a struggle and downtown san francisco is empty so we're getting mixed we're getting mixed results back now i would say is the best way to to describe it so work from home and telemedicine what do you think free berg i mean certainly the knowledge economy seems to prefer work from home i mean you're working on a computer and you don't need to interact with people and you got kids or family you're inclined to stay home so that seems to be a sticking point um you know younger people probably have their own motivations but there was a good stat on telehealth i'm just trying to find it and i think telehealth surged during covid and 36 of patients used a telehealth service in 2021 420 increase over 2019 and so despite some reversion post covid post lockdowns there's a significant sticking point that and i think 60 of telehealth patients are women so there's particularly female services that are being rendered through telehealth at an increasing rate than pre-covert and so there's a lot of stuff i mean look we've all had to go sit in the doctor's office for two hours to get some prescription or get a doctor to give us some advice on something they don't need to physically check us out for so you know it certainly seems to be a acceleration in that department offices what's the amazon like was working on 15 warehouses they shut down as well right i mean if you guys remember at the start of kovid when you place something on amazon it was like a two-week delay because they didn't have enough capacity to fulfill the order volume you know you looked at toby's chart it's nearly a doubling in e-commerce volume in a week when that happens amazon's you know plus or minus five percent supply chain has to revert to servicing twice as many customers it's just not going to happen so they over built tried to get ahead of the curve remember they hired like you know 100 000 workers and you know they they had to make a pipeline for quarters ahead to build warehouses now they're realizing the demand is not going to be there and they're cutting back on 15 warehouses around the country and not going to build them they were buying up so many warehouses i had a couple of companies that were looking for warehouses in los angeles northern california and amazon just bought an option on every single warehouse they could find and now they're putting them back on the market so they they definitely um went too heavy and then everybody started betting on peloton and teledoc and if you look at teledoc i mean it's off 90 from the peak i would show the um i would show the peloton chart as well but that would just be gratuitous some of the stuff to note like at the end of the day whatever product is better for the consumer they're going to pick you know what's the better way to buy shirts you know what's the better way to get well define better yeah i mean for the consumer it's like you want to try them on or do you know your size right you're buying a brand that you know and a size you know you're gonna buy it online at this point i mean the one thing kova did is it basically created a trial by fire my parents never used doordash before kovid so then they were forced to use doordash during cove but now they know what it's like and so you know there are now people that never trialled a lot of these services that have trialed them and are now making decisions based on that experience but that's a beautiful example so just use your parents why do you think let's assume they did why do you think they mean reverted to now using doordash only in the same percentage as they would have otherwise i think the quality of the food the time to wait the experience of going out to dinner there's a lot of motivating factors that are different by different demos and so whatever the consumer wants they're gonna pick if i wanna go have a dining experience in person with my friends i'm gonna go do that instead of sitting at home ordering doordash and having everyone come sit on the couch and eat dinner together so i think that there's this um you know this call it mean reversion but we have seen call it a broader exposure and we're really going to see the true market dynamics play out i don't think everyone wants to buy shoes online i don't think everyone wants to buy every piece of clothing online i think people want to go to the store and try stuff on i think it's that and i think that there's a lot of ancillary social benefits that come with a lot of these activities that you lose if you just optimize for efficiency so to your point like yeah you can get a burrito but even going to chipotle with your friend is more fun totally get out of the house get out of the house shooting the you know yep um it's just it's and the serendipity yeah you may run into somebody nothing beats that i will tell you by the way i i do believe that there is a counter narrative to the idea of work from home and e-commerce moving together i think as people work from home they want to go be in person for other activities more yeah so the more you're working from home the more you want to go to dinner with people or lunch to people yeah the more you want to go shop in person because you're stuck in the house all day and you want to go do other stuff and so if you're working in the office you're going to do more e-commerce and if you're working at home you're probably going to do less e-commerce so there's probably some net-net balance we saw both of them rise together during covid but now there's more of an equilibrium being reached well i mean if you don't by the way i think change your behavior may stay home for three days straight and obviously remember and just remember 60 of the us population lives in urban areas where this is kind of an effective kind of conversation we're having i think outside of that it's a very different world and so for forty percent of americans this is not like the conversation that you know in in deeply suburban and rural areas do you guys know what shadow or ghost quitting is you know what ghost quitting is go to science i saw it on tick tock you stopped you stopped working i saw it on tick tock but you're still getting paid it's when you decide to quit mentally but don't actually quit and so you basically get out get off the corporate rat race by doing the bare minimum to not get fired at a company oh like saks during the science segment and so i uh you know i i think that there's all of these like invented things that people do that they think they can get away with which they generally can in a moment of prosperity where in a moment of actually like buckling down when earnings matter and profits matter and investor pressure matters all of this stuff i think is going to mean revert so this is sort of my my opinion on all of this which is i think that most of these behaviors will eventually take over but it's still many years away and right now we have to go through the process of just getting back to where we were meant to be in the first place i think one area with significant disequilibrium right now i mean to your point is is productivity i think it's very hard uh to assess um and qualify productivity uh for knowledge workers in this environment and this is for employed base right remember we talked about last time like a large percentage of the u.s workforce has moved to more of an independent contractor sole service provider kind of model for how they're interacting and working in the world but i'm talking about knowledge workers in an employed environment and it is becoming difficult for managers and for companies to assess you know the quality and the level of work being produced relative to its potential it's not the same as it used to be when you'd be able to have in-person monitoring and interaction and so you know i saw a stat the other day where it was like most companies are asking workers to come home most of the workers are to come to the office most of the workers are saying no and then most of the bosses don't know what to say in response and they're still sitting on the sidelines like okay okay don't come to work uh i'll get fired yeah and so there is this signa and by the way this may yield a competitive advantage for businesses in the marketplace that figure out how to assess productivity and how to assess performance in their organization right now in this rapidly shifted totally different workforce than what we had a few years ago because it's so easy to take four hours off in the afternoon go to lunch hang out have beers come back get back online get back on slack do stuff and so there's this real challenge um i think for organizations and a real disequilibrium of productivity and output right now i've had to do it you guys looked at the tick tocks of these people that are like in the life of like a google engineer or day in life they work for thirty years and then they're like four hours at the gym they don't work they don't work they're literally smoking weed and playing video games and everyone knows cats managers know what's talking about managers know it senior vps know it the ceos know it it's this is my point people just don't know how to manage it it's a real i figured it out it's a real disequilibrium in the workforce because the way you managed it before is everyone would choke to work or they wouldn't someone's not in the office they're not working they get fired now what do you do period you know and no one wants to be monitored no one wants to manage keystrokes through a freaking remote computer and figure out how much you're typing actually uh it's interesting you mentioned what do you do jkl to your employees no no no no no there there are people doing that call centers actually do that so call central they have monitoring software customer service and call centers totally sales people you can totally track productivity i'm talking about creators producers right like yeah i actually have come up with some strategies for this so we have a lot of writers uh doing newsletters and stuff like that and so we did was we created a block in the afternoon we've been testing where three writers will get together in a pod and they work on a newsletter together so instead of three writers writing three different newsletters you have three writers collaborate on three different newsletters they do one for two hours one for two hours one for 90 minutes one for 99. and then a total of three people read the newsletters uh well it's doing four or five million dollars i'm advertising it's hundreds of thousands of people a day but okay but anyway the point is um i didn't mention the name of the company there's no plug in here but by the way you're going into a zoom yeah no no you put people in a zoom or a huddle on slack which is like an audio only and then they have to deliver work to each other it's kind of how developers work or sales teams work with leads and then in things like programming like peer processing like peer program exactly and then with and it also makes people less lonely and it builds social fabrics so there are techniques that are emerging the other one i've looked at is i tell anybody if you're doing any type of knowledge work you need to create a notion or a coda page depending on what you use and update us on that and then send it to the group chat you know to the general channel hey i was working on the strategy for this so when people say they're working on strategy i have them documented and i say share us share with us the google doc and i use the amazon six page you know uh philosophy of a right first culture and now people have to write it down so i've been teaching people how to write use grammarly or hemingway app to be better writers and then what you can do is as a manager you can just look at your notion or your coda and see the change log and when i see people in a change log and i see they've made no commits i'm like what is this person doing they said they did all the strategy stuff where is it where is the strategy stuff write it down so if you switch to a right first culture and then train people how to write and become more confident writers all that knowledge gets captured on your knowledge base and you can actually see people getting done it's not perfect but i think it's actually intellectually better than being in office if you know how to do it because in an office people are also performative they're doing like meetings they're pretending they're working they they're they're actually reading the news or you know or whatever so sax what are you doing to uh monitor your employees covertly and keep them uh productive we don't need to monitor our employees that way because we're a small team of yeah and they're highly motivated you know but look it it it is an issue i don't i think where work from home is beneficial is on the hiring side right it's so much easier to hire for a job when your potential pool is anyone in the world you're not just geographically limited to the city in which your office is so that was the temptation for all these companies to go remote as it made hiring so much easier but there's no question that it makes management much harder and scaling the company much harder and building culture much harder and so there's some real trade-offs there i don't think companies have totally wrapped their heads around it but look in addition to productivity there's one other aspect of this economy that i think is really broken so the the chamber of commerce says that 3.25 million fewer americans are working today than they were in february of 2020. so basically if you go back to the month before covid we had over three million more americans in jobs than we do today and yet the unemployment rate is still in the three percent range and the reason is because that if somebody drops out of the labor force and isn't looking for work they don't get counted on the unemployment rate so we do have a if you define unemployment as a large number of people who aren't working we have a huge unemployment problem but the problem is they're not they're not counted because they're supposedly not not looking for work so i don't think this economy is that healthy and and i think that there's a lot of distortions that have been created by governments the suspect is what you're saying right like labor participation is there all this data the data is suspect the labels are suspect i mean like we talked about all of a sudden we can't know what a recession is and let's just bring up one other thing that just happened today so mansion cut a deal with schumer to bring back to bring back a slimmed down version of bbb thankfully it's not 4 trillion like biden wanted 750 trillion okay but what are they calling billy billion right okay so you know thankfully it's it's a slim down bill but what are they calling this they're all of a sudden calling it the inflation reduction act wait what of 2022. what was like are you kidding this isn't possible are they trolling us with the names of these bills the bills are never what's in the bill why don't they just call it the green energy bill and the screw private equity bill i mean that's basically what it is yeah well inflation reduction sells to everyone right but jason the media the media is not holding the administration accountable if we had if we had an honest media they the the headline today would be you know recession basically sacks we you can only get it on this pod or other podcast yeah what did president manchin get for this deal he agreed to it what did president mansion get well he he secured some bag right did you see what i said during the group shop why did he agree he's like i got a pipeline there's gonna be huge uh handouts and pork for the state of west virginia there's no question about it i mean if you look at this bill okay the i mean we just we should just look at what's in it and yeah more and more is going to come out over the next few weeks right it's only one day so we're going to learn a lot more about what's in this but the largest republicans feel like can you explain the dynamic as well after you get through this of why the republicans felt like now that he double-crossed them because the democrats felt double-crossed by manch president manchin and now the republicans are feeling double-crossed by president manchin well i i don't know that you can use the word double cross because he's not a republican and he had no obligation but look the the but there's no question that manchin went back on what he said just a few weeks ago he was saying that build back better was unacceptable because it would contribute to the inflation problem in fact he's been doing that since last summer he's been saying that we have a growing inflation problem we can't contribute to it with a lot more government spending now he's agreed to a 750 750 billion of of which something like 450 is new spending so yeah it's it's uh it's a smaller package than we had before but if your concern was inflation a few weeks ago you can't justify this you certainly can't call it an inflation reduction act i mean that's just patently dishonest how do they come up with it being inflation reduction is it because their the health care stuff is theoretically going to help consumers have more money to spend because i think it's a 10 it's a tenuous argument but if you want to if you want to make the argument there's some cap on what seniors pay for prescription drugs and then there are subsidies for people are in the market for an electric vehicle however those are small adjustments those are small rebates to a small segment of the population i don't think you can argue in good faith that this bill will reduce cpi i just you know that's just not a plausible argument and the vast majority of the bill like you said are subsidies for clean energy which are basically handouts to special interests in the donor class in the democratic party just itemize some of these things so the largest single outlay 60 billion is for quote environmental justice initiatives to address the unequal effects of pollution on low-income communities and communities of color this includes 3 billion to invest in community-led projects in disadvantaged communities and another 3 billion to support neighborhood equity safety and affordable transportation access another 30 billion shovels of states in the form of grant and loan programs for states electric utilities to advance the green energy transition 30 billion for additional production tax credits to accelerate domestic manufacturing of solar panels wind turbines batteries and critical minerals processing that's basically going to companies right 20 billion in loans to build new clean vehicle manufacturing facilities across the u.s and 2 billion to revamp existing auto plants to make clean vehicles 20 billion for the agricultural sector to quote curb emissions 3 billion to reduce air pollution at ports 10 billion investment tax credit to manufacturing facilities for things like electric vehicles wind turbines and solar panels it seems redundant to the 30 billion dollar outlay i just mentioned but it's another giveaway to democratic donors and wouldn't that be good chamoth wouldn't that spending be good for energy independence in addition to climate because we've been talking about being energy independent if we have more evs more batteries more solar that's a good thing right we want to be energy independent so this seems like we get two wins we're possibly three one we we get economic activity two we reduce our dependence on foreign oil and three we stop burning a hole in the ozone and increasing the temperature of the planet it seems like three good things we have to i think we have to see the force in the trees here and there's a there's one good part of this build and then there's the kind of more ugly reality that it avoids the ugly reality is unfortunately or fortunately or maybe without taking emotion of it we are dependent on fossil fuels for a very long time it is a necessary bridge fuel and so we need to if we're talking about energy independence it can't happen without us frankly drilling more and subsidizing the capital incentives of private companies to go and do this exploration work which they have stopped jason and the reason they've stopped is that they don't trust that these oil prices will stay this high and so they don't want to make these outlays and investments for the next five to ten years because they're worried that it's going to be a rug pull which did happen to them in the back half of uh last decade and the early parts of this decade so they're like once bit and twice shy they're not they're not going to touch this you're saying oil companies that would do some exploration it would cost them whatever amount two dollars to get the gasoline out to get the gasoline out of the earth and then process it but they're afraid it's going to be negative they're not going to be able to sell that gasoline i think they're a ferry that you know the united states government may impinge on their ability to actually process it that it may there may be tariffs and costs and taxes that they don't they'll be upside down forecast they'll be upside down so they just don't want to be and right now and you saw this i don't know if you guys saw it but like shell and exxon and these guys are printing enormous record profits so their incentives to change the status quo right now is zero they want less supply because then they can raise prices they have the perfect situation right now which is it's an incredibly energy-intensive world we live in and we don't have nearly enough energy to do the work that needs to get done and and by the way and you saw this this week already where you know putin cut north stream by another 50 it was already running at 40 capacity he he cut it down to 20 percent it's only getting worse so i don't know i mean i think this bill could be good i haven't looked at the specifics to give you a very well the specifics aren't even fine i did see the ev credits uh freedberg and i thought that these were particularly well constructed 7 500 bucks off of a new car but you have to uh be in the 150k salary or less on your taxes so rich people can't get these and it can only be for an eighty thousand dollar new car a fifty thousand dollar or twenty five thousand dollar used and so they did seem to be started pretty well and i do know that those incentives did work in the early days of tesla because when you went to the website you would look at the price and you know this would be 10 off of a new car and they did drive sales and it it was uh pretty significant what are your thoughts on the ev tax credit is that something that's a wise thing and then what do you think overall about spending a couple of hundred billion dollars on uh reducing emissions and becoming more energy independent at the same time seems like a laudable strategy to you nope seems like a total waste of money okay unpack it please the eevee tax credit is just giving away money to ev car manufacturers there's already enough demand the prices are low enough there's enough consumer interest there's enough consumer intent i don't think you need to put this money out there distorts a market that's already functioning well and this goes back to my point about the role of you know government and how we create you know create incentives or spend money uh this is not a place we need to be spending money because there isn't an absolute need there's no data that indicates that this will accelerate a transition to a carbon-free economy or that it's even needed uh it really is a point of view that people hold and they believe that evs are good they're good for climate change we should accelerate it therefore we should spend money on it without any accountability or proof that these tax credits will actually motivate a market to move faster or quicker than it is already moving and so it is just spending taxpayer dollars that could theoretically not be spent or be spent in a more effective way to improve the lives of people broadly um in this country so yeah i don't i don't fully agree that i haven't seen any data that tells me this makes sense anecdotally 7 500 off of 75 thousand dollar ev is attractive i think the ev's are 75 000 gm and others have great low price tvs and there's a ton of market demand and they can't keep up with production and you know giving people 7 500 off a car that manufacturers are still struggling to keep up with making because there's so much demand already you don't need to do it it is so much cheaper to drive an electric vehicle now um by plugging this thing in and spending money on gas that people already want to buy these things they pay for themselves super fast every consumer wants to save money on transportation and you will save money by buying an electric vehicle so you will already buy an electric vehicle you don't need government money to get you to buy an electric vehicle for free bricks point there was a lot of um analysis that's been done on consumer adoption patterns and typically for a new good or service the tipping point is around five percent mass-market adoption from when it goes from early adopters to the mass market and evs just crossed five percent so to his point the historical data would tell you that we're now past the critical point where it's no longer questionable and now it's just going to happen so it's not early adopters we're getting to the the map now it's mass market i mean i'll tell you like the best the best thing about ev adoption or for me for having an eevee is never having to go to the gas station amazing amazing yeah i mean just just that one thing it's like i'll just give you guys currently it's about um 34.6 kilowatt hours per 100 miles okay i'll just get let's just do some math together let's say a kilowatt hour in the us costs about 10 cents okay so that's about 3.50 to drive a hundred miles in an electric car that's a lot cheaper than paying fifteen dollars for gas to drive the same distance in a gas car you don't need the tax credit to get people to buy these things these cars are financiable there's a very liquid very active lending market you you get paid back on these cars within a federal team if you're better or would you direct if you were going to direct some stimulus to i would not say anything right now we don't we just talked about how we don't need to stimulate the economy i would not do anything i'm not talking about the economy i'm talking about to you you believe global warming's happening fredberg yes look you want my point of view on climate change and industry i i think i think humans i think humans are on a driven naturally market driven path to resolving um carbon output in our industrial systems and i don't think that government intervention with tax credits and specific consumer products is actually going to accelerate or resolve um you know these changes that are needed we need to not change consumer behavior consumers always want to have cheaper faster better what we need and you know at the end of the day what we need to do is change the way that we're producing and making things because that's ultimately what's going to drive this transition and guess what consumers are demanding things that are you know more efficient that are more effective and efficiency ultimately resolves to less carbon ultimately resolves to less land less energy and industry has always resolved to greater efficiency natural market forces improve the efficiency of every industrial system so stimulus not necessary mankind has ever created and i think it doesn't it is a matter of um time and a matter of natural evolution that we will resolve all of the factors that are driving climate change from animal agriculture to transportation systems to energy systems these are all going to get completely will we do it in time technical tools we absolutely will and at the end of the day we can pull carbon out of the atmosphere and resolve it into products we have tools to do that as well so i am an eternal optimist but in this particular case i think that this century much of what we're throwing our hands about and you remember at the beginning of the 20th century we thought we were going to run out of food then suddenly we invented the haber bosch process and created fertilizer out of air it was an incredible incredible invention that saved mankind we have had time and time again in the history of humanity these thoughts that we're in an exorcistic crisis we thought we would have peak oil and we've had these and we've had these points of view that we're in an existential crisis and humanity's about to end and every single time we figured out a way out of it and we didn't figure out a way out of it because the government came along and said here's a tax credit and we've gotten sick and we've gotten drunk on government spending and we think that it is the solution to every problem we have as a species you know the biggest solution to our problems is our ingenuity and then they let the markets figured out consumers are smart businesses are smart they will figure out ways to resolve these solutions they don't need to have these handouts and i think that that's um that's a really important point that we've kind of missed and i'll say we were talking earlier about the economy this stimulus we've been giving ourselves caffeine since 2008 when the fed started to build up this balance sheet and we got used to the idea remember before this it was like oh my god multi-million dollar bills and then it became multi-billion dollar bills then we had an 800 billion dollar bailout in 2008 and suddenly it was the multiple of 100 billion and the multiple of a trillion and this expectation now we've kind of reset the clock and everything now is in what multiple 100 billion or what multiple of trillion we're going to spend on stuff and no one's even batting an eye at the size of these um the the the bills anymore freeburg what is a bigger existential threat to the united states is it climate or is it overspending by our government i think it's over um i i think the biggest threat is uh is productivity um i think that as as a society we've gotten to the point that we are so well off that um we have so many things that we don't realize we didn't have 50 years ago and you know read pinkner's book or enlightenment now and just go through those 200 charts he puts in there it will blow your mind and if you actually sit down and think about it and have a broader perspective on where we sit in this country today versus where we were 100 years 50 years even 30 years ago you will say oh my god we live in an absolute luxurious state in this country golden again golden era and it is a condition that unfortunately reaps um you know a decline in productivity because at that point we're entitled to some degree some people are entitled there are many people in this country that are still very hungry there are many people in this country that still want to progress and frankly i think a lot of the um the lacks behavior from government entities actually holds us back from accelerating our productivity out things because it gives people many incentives and many reasons and industry many incentives and many reasons to not solve problems and i think that we solve problems and we're left to our own shabbat there was an article i posted nick you can put it in about the congo and that they've decided to auction a bunch of land to oil companies and um i think before they tried to heed sort of you know the west's directives and they said okay well let's build a land bank and we'll put a bunch of money in and so then the you know people in the in the congo will have money for things and you won't have to sell off the oil rights and only tens of millions of dollars showed up and then the congolese were like they threw up their hand i'll just read the quote because i think it's interesting congo's sole goal for the auction said the government official is to earn enough revenue to help the struggling nation finance programs to reduce poverty and generate badly needed economic growth that is our priority he said our priority is not to save the planet that's quite a stark statement when you read it but but the reality is in one generation what will happen is they will feed the world's desire for fossil fuels that will generate a lot of revenue hopefully it doesn't get pilfered and so it gets invested in health care and education and within a generation this country could be in a completely different situation [Music] allowing the productivity of that entire population of that country to do what they think is right so i'm generally of the belief that that that freeberg's right on this do you think though we should subsidize evs to increase the percentage and then also for solar just give me those two chamath solar and evs do you think they should be subsidized or not in the united states it depends on how and at what point of the market cycle the government's job is to create economic incentives that tip the balance of power towards investment so if you are sitting here 15 years ago the price of solar panels was sky high it was incomprehensible that we could make solar equivalent to any other form of energy the only way that we were able to close the gap was through government subsidies but what that did was allow a bunch of companies to build businesses to make revenues and then also to make profits that then the public markets valued those public markets then put pressure on those companies to take those profits to become more efficient to make the panels cheaper and 15 years later we're now at parity so that was a really great example of the government stepping in to smooth out an imbalance in the investment incentive of the private markets that is where they are exceptional so in any market they should be able to do this but i think what freebrook is saying is when then they do do it successfully and a market starts to germinate on its own where supply and demand happens naturally between the private markets the worst thing a government can do is step in because it completely perturbs what true supply or true demand is and that is what causes all of this crazy stuff that we deal with jkl fast forward assume that there's a 7 500 tax credit for evs that artificially makes ev's cheaper and then a better technology than evs comes along let's assume it's some nuclear fusion cold fusion mr fusion car like from back to the future and that car inevitably has to fight against the cheaper car because the cheaper car is subsidized by the government we see this in a lot of markets that already exist in food in energy in infrastructure where government subsidies that are embedded in the operating model of that industry and that industry becomes kind of reliant and dependent on it totally distorts the ability for the market to naturally transition to a more productive more efficient state and that more productive more efficient state ultimately is cheaper better for consumers and better for the planet and we're we hold ourselves back when we insert government dollars into well-functioning markets i do think the government has an important role as i mentioned last time in pure science in seeding new markets and seeding these opportunities in identifying paths that are quantum leap efficiency improvements in production systems in industrial systems in ways of living once those have been identified those breakthroughs have been kind of catalyzed boom let the market take off because it's going to take off but we shouldn't be in this so you believe evs and solar are there already absolutely they're cheaper and so let me point let me just give you one one point of reference let's use chimoff's congolese example let's assume that there's someone that lives in the congo and i said to this person who's probably subsisting on less than three thousand dollars a year of income and they're probably living you know day to day on finding food and you said to this person in the united states they have these cars they're called electric cars and they're cheaper than gas cars and they're um you you make more money or you save money by buying one of these cars and they're cheaper now and we're giving people 7 500 to buy one this person who's making three grand a year would say what it is a state of luxury that allows us to do this and frankly i think it's it's a state of uh excess abundance and that's what i'm most worried about sax what are your thoughts on the government giving these type of subsidies to accelerate solar and evs the whole bill seems anachronistic you know first of all it's raising taxes by 739 billion at a time when we're entering a recession i don't know any economist who thinks that tax increases help the economy we just talked about how the economy is in a really tenuous position so this is not the right medicine right now then you've got the fact that the vast majority of the spending this bill goes to these you know energy subsidies which are to see they're not going to help the average person there's very little money in this bill that helps the average working class person these are basically handouts there's basically pork barrel spending for democratic party donors and special interests and like freeberg i think just articulated very well they're not necessary right now the what's driving demand for electric vehicles and solar panels and so on is first of all the products just keep getting better and better and second they keep moving down the cost curve as technology and innovation gets better these products get cheaper that's what's fundamentally driving the demand we don't need the government now again we need to accelerate it in an anachronistic way to shovel out all this money at a time we can't afford it you know look i'm glad that 300 billion of the bill is supposedly going to deficit reduction i hope those numbers actually materialize but we're still 30 trillion in debt and now that interest rates have gone from basically zero to around three percent the imputed debt service on our debts basically gone has increased by almost a trillion dollars that is a lot of money so just like somebody who had a variable mortgage the united states is on a variable mortgage with our debt and so when interest rates go up we're going to have to pay exactly so if interest rates stay at this call at 3 level which is roughly where the 10-year t-bill's been you know bouncing around at that is a lot of debt service a trillion dollars a year of debt service so i think we're probably entering an era an overall era of austerity that lasts more than just this year or even this presidency and i think we'll look back at all this wasteful spending this last 10 20 trillion of spending as money we didn't need to spend they're gonna be paying for for a long time so to be shoveling out another 300 billion plus of these programs and again once again going to corporations and special interests not to the average you know person who needs it it's just so irresponsible i have a question for fredberg one of the one of your exceptions there was investments in science you want to talk about your opinion on the quality of the grant process at the nih and whether we are doing the real work necessary to get the right things funded yeah i mean i think it's a good transition to what happened this week which was that there was a major potential fraud uncovered in alzheimer's research which has led to over a billion and a half dollars of funding and grants being given out to follow on alzheimer's research programs in the years that follow this initial paper so you know in 2006 there was a paper published in the journal nature um about amyloid beta proteins that impaired memory and brains which then became kind of the leading theory for the cause and the driver of alzheimer's disease and much of the research and funding that followed from there which is now up to nine several billion dollars uh in in total funding in private and public uh institutions last year alone the nih funded 287 million dollars in research into amyloid beta and it turns out that the initial paper was shown to be fraudulent and so you know just recently the journal science published in detail an analysis of the photos of the western blot measurements the protein recognition images that the scientists used in this initial paper were forged and that many papers of his were then forged years later and this paper is one of the most cited papers in alzheimer's research and much of the work that's been done on alzheimer's came out of this and if you guys remember last year we talked about that biogen drug that biogen drug is meant to stop amyloid beta plaque and you know the projection is that alzheimer's drug and and remember there was a panel of scientists that looked at the data for that drug that biogen got approval for from the fda and they all said this does not show conclusively in any way that it improves alzheimer's and the fda still approved the drug because so much of the nih funding went into the research for amyloid beta and so the assumption has always been this is the cause of alzheimer's this is the way to resolve it and everyone gets so strongly held in that core belief and there's so much money behind it that we can't turn away and say maybe we're wrong and this is the problem when science meets money once you go from funding something and then suddenly a whole bunch more money pours into it everyone's gonna look bad and everything's gonna fall apart and everyone fears that the system fails if you realize that something you didn't said was so totally wrong we can even argue this is what happened recently with kovid the masks the vaccines all of the statements that were made that you have to keep doubling down every system has bad actors you know people plagiarize fraud whatever is this like a systematic thing and doesn't science protect against this because people then do double-blind studies and try to replicate studies do things because like jason blair eventually got caught right at the new york times it was only a matter of time before somebody said like his description of my back porch was not accurate i never talked to this journal let's say that you're a smart up-and-coming scientist your job is to is to publish research that gets attention and that you can then go raise grants from the nih and others from on so you want to get some good papers out you want to get attention and then you want to forward the research that's already being done it is to no one's incentive to go out and try and retest something that someone's already published on even though that's what you're supposed to do in science there's no motivation there's no dollars to do this it's um it's a disincentive to your career it's a disincentive to your ability as a scientist to source funding and to source grants to go back and retest assumptions that are already strongly held beliefs in the industry i'll give you another strong example that just came out um two weeks ago you know um you guys heard of ssri antidepressant drugs right 37 million americans are on these drugs the market is is projected to be at about 25 billion in the next few years that's how much um americans uh are spending on these on these antidepressant drugs half a sex but yes go on right um so there was a paper published in nature a few weeks ago and the nature journal pulled all the research and all the data from 17 other studies that was across several hundred thousand patients and their conclusion was that there is effectively no proof that these ssri drugs have an effect on depression have a positive effect on depression that um you know serotonin and the idea that you know serotonin uptake should kind of have a driving effect on depression and this has been the assumption that's been held now for you know for many years i mean you know i think the original paper on this was published uh probably north of 20 years ago but the industry is so big right the drug companies are making 20 25 billion a year on this drug on these drugs and scientists are incentivized to further that research that supports that research and so they can go out and get nih grants because it's already an accepted proven belief that this is is there a solution to this like for every dollar that's spent on primary you know a dollar needs to be sent on double-blind testing it and making sure that it's accurate should there be because we have this issue in journalism right everybody is a content creator re-blogger an opinion journalist but there's very few now investigative journalists left the actual problem his peer review systems entirely in my opinion like the the problem with this study is that this was done by an up-and-coming researcher in 2006 at the university of minnesota under a researcher who is well known and so there was zero incentive as friberg said to really push back when well-credentialed scientists tried to find this amyloid beta star 56 they couldn't find it and you know lo and behold those articles don't get published because they don't get accepted why because it unravels the entire game that folks will play so you know if you're a well-educated phd with postdoc in the right places supporting other people it's just a loop that goes on forever the article goes on to talk about how that person who wrote that initial article eventually got this very prestigious multi-year grant from the nih by a person who was his reviewer who worked on the 2006 paper with him i mean these are some pretty blatant conflicts of interest but the reason they don't get uncovered is like who is who's going to step in and all of a sudden become the let me strike an analogy here you know there's a seedling of fraud here obviously some guy took some freaking photos and photoshopped him and doctored him or whatever but we then tell ourselves stories and those stories get us access to money which allows us to pursue more science which is meant to forward the market and then eventually the market gets forwarded so much and you spend a billion and a half dollars and it turns out the whole thing doesn't work just like stock markets it starts out as a voting machine in the beginning and it's a weighing machine over time the same is true in science you will have a voting machine in the beginning where everyone has some belief some theory some hypothesis and they all want to believe it and they forward it and they fund it they fund it but ultimately if it's not true and it doesn't actually resolve in real world change the market will collapse the stock will collapse and that's what just happened with amyloid beta and alzheimer's to a large degree there's a billion and a half dollar market cap you can think about it or billion and a half dollars of funding that's gone into this no that's probably the idea that's pretty well no there was a billion half of nih funding over time this is just the nih money no what i'm saying is the nih budget per year for alzheimer's and dementia is 1.9 billion yeah yeah and half of it if you look at the tags if you just search the tags half the money has gone into alzheimer's disease amyloid beta so the point is you could orient the terms you used and the way in which you wrote your grants to disproportionately affect the likelihood of getting money separately there's a whole body of researchers that have felt for a very long time that specific forms of infection viruses um lyme disease could actually be a precursor to alzheimer's and it has been poorly researched because the funding dollars weren't there so the there's a lot of other theory mitochondrial dysfunction yeah yeah so freeberg when we look at this a bad actor committing fraud can send the entire uh deployment of capital in science on a multi-billion trajectory of the human race come on like it's not just about like we didn't get the dollars in it's if you don't take the path the drug doesn't get discovered that's a really big deal and now and now the drug is in the market biogen gets approval and people start taking it and we're seeing the data it doesn't work and no one wants to use it so the market has collapsed and you kind of go back to the origin it's like the market collapses ultimately the weighing machine happens because the science doesn't work it's not there and there was no incentive no one got paid along the way imagine if there was a bounty program to go and disprove papers i mean imagine if there was a system that's what i was talking about what is the safeguard and we do have that in public markets it's called shorting no there is short stocks it's called pub here the problem is if you go to pup here and all of a sudden put your name out there as someone calling it out your professional career inside a research institution is finished right if your job there are no heroes no if your job is to disprove other people's stuff you don't you don't forward your career right i mean there's a it's a role those people should be heroes those are like bug bounty programs they have to look at it like bug bounty programs in tech or shorting stocks and the problem is that this community is extremely small highly specialized and their impacts are enormous on all of society but you can't replace them with somebody else very easily because it takes an enormous amount of expertise like if you read that science article the amount of work science took six months of due diligence before they even had the courage to put this thing out there they had all kinds of different teams trying to prove what this guy had found before they were willing to put ink to this thing yeah when things are starting to feel like they're altering moving to market or getting to market the more money starts to flow in another good example of this is zymergen and genko okay so in the past week zymergen was acquired for 300 million it was announced that they're going to be acquired by ginkgo buyer works both of whom are public companies ginkgo went public at i think a 20 billion dollar market cap as a spec a few months ago zymergen went public at you know four billion or whatever they went public at zymogen being acquired for 300 million dollars comes off of them having raised a total of one and a half billion dollars of capital from many investors including softbank and in their ipo since they were founded in 2013. both of these businesses do exactly the same thing or similar things which is pursue the industrialization of synthetic biology synthetic biology has been talked about you know or pursued for 20 years in an industrial setting the kind of gen 1 of synthetic bio companies was amorous gevo keor solazyme these companies were all engineering cells you change the genome or the dna of the cells you get those cells to make a product you want them to make you put them in what's called a bioreactor and they make the product you can make bioplastics you can make animal proteins you can make fuel and so these um and you put sugar water in the tank so you're programming the organism to make stuff for you and there's a lot of technical challenges right how do you change the genome how do you get it to be more productive what are the environmental conditions of the bioreactor how do you scale this thing up and so on and so many of them had early stage proof points and then extrapolated out that this is going to work at scale so all the gen 1 companies largely failed gevo key or solazyme they were all trying to compete with the price of oil and they lost and so they could never actually the science worked in the lab but getting it to a big scale there was a million things that went that suddenly were kind of proven or disproven along the way and they all kind of pivoted and became cosmetics companies and kind of did high-end food and other stuff and then genko and zymogen were kind of gen 2 they were like we're going to reduce the cost improve the time scale of these synthetic biology programs and they started using industrial robots and arms zymogen made a bunch of kind of strategic errors where they were like we're going to make the product and design the organisms so it took a lot more money a lot more time and as they kind of stepped up and tried to scale up turns out a lot of the things that they believed to be true weren't quite true but the ceo did a great job selling the story josh hoffman he went out for years and he told everyone you know we're going to kind of create this this factory and we're going to make everything in the world using biology it's going to transform uh the world and we've talked about this is it a true story yeah and so look there's so much of the fundamentals are true but the industrialization the amount of capital these guys raised and what they promised they would deliver on when turned out not to quite beep the economics not to quite get there and the market decisions they made about what products to go after how quickly to scale up building their own facilities there was just a lot of strategic errors and i think the storytelling got ahead of where the business was you know we saw this a lot in other businesses in the past years we've talked about crypto and other markets but these were really key examples because the science is so compelling and the narrative is so compelling and if it's right and if it works it changes the world and i think the same was true of amyloid beta and alzheimer's everyone wanted it to be true ssris everyone wants there to be a cure for depression that you take a pill and you solve depression everyone wants to you know have a drug that you take and it ends alzheimer's everyone wants to print all the world's products in a factory using cells but there's a lot more to it and as you kind of get through the nuanced 10 to 20 year cycle of science moves to technology moves to industry those stages are wrought with errors and issues and ultimately may not actually yield what we expected it to yield and those stories start to fall apart and that's what happened with zymogen they're getting potential well we look back on this fredberg in 20 years and say hey yeah these things were total train wrecks they flipped the car but it was a step in the right direction and yeah that was a hundred percent capital but you know something will be built on top of it just like mainframes or mini computers to smartphones the first system of calling synthetic biology a recombinant dna where we took dna from one organism and we put it in a in a in a microbe to make stuff for us was genentech in 1978. prior to 1978 the way we got insulin is we actually processed pig parts so it would take like you know hundreds of kilograms of pig parts to make just a few grams of insulin and um genentech took the dna for human insulin and they put it in a bacterial cell and they made human insulin in a bioreactor and that really kind of ushered in this this era of you know industrial synthetic biology that all of these companies kind of followed suit to do in different markets but remember biologics the entire pharma industry and biologic drugs it's all made this way we take the um the dna to code for certain antibodies or proteins we put it in microbes and those microbes make those products for us that biologics drug industry is a 350 billion dollar annual revenue industry today and so it works it's just a matter of when and what the right products are industrial enzymes 25 billion annual revenue today so there are markets that are working it is working but this whole like we're going to change the world overnight isn't really you know true and so these stories catch up to us and i think we've seen this where i call it science meets money you know money usually wins um and the science isn't quite there yet and so we've seen this kind of the genentech story is amazing i mean tom perkins from kleiner perkins fame like willed that company into being and they yeah it's pretty amazing how in the old days eventually i don't know if they basically built these companies like you're doing today freeburg in like a production board model he he basically incubated genentech and then surprised the world with like hey we have synthetic insulin here um it was like true yeah look i mean the potential for silicon valley there isn't a single material or food or a fuel or product that we ultimately won't be able to make using synthetic biology it's just a matter of how do we get from here to there and the storytelling kind of gets you a bunch of money and then you get ahead of your skis and then boom you fall down same happened in alzheimer's same happen with ssris and i think we'll see this happen a lot but like when science gets exciting a lot of money gets behind it and sometimes it can kind of you know get ahead of its skis and fall down but and exactly our sex how excited are you for this revolution to instead of with us in one of our companies in synthetic biology he may not remember but he's got some money here oh i won't name the company but he's got some money oh yeah how's that doing did you fall asleep in the board meeting no i'm not we're not on the board we're we're passive we didn't is that the one we brought to you freeburg yeah well three people brought me but i've known them since they were small but yeah no there was a deal that came in that looked interesting but it was a little bit out of our area so we went to freeburg but it is an interesting business because these guys provide a tooling service to other sin bio companies and so it's a recurring response yeah yeah it's picks and shovels exactly yeah yeah it was very sass-like in that regard of nerds yeah okay so we're talking about an area where you know i'm not going to be able to contribute a lot to the discussion of ssris i'm not going to pretend to know i'm just a consumer i'm not i am uh these ssris helps you in any way with your depression about biden no okay the story that i think kind of fits with everything we're talking about this week um uh there was more there were more stories this week about this cynical ploy by the democratic party to fund the candidates no hold on we talked we talked a little bit about this last week but they spent you should be up really opposed to this j kell i uh yeah listen as an independent i think it's gross i am an independent you're an independent only votes for democrats so not true not true i'm going to vote for liz cheney for president i think liz cheney or bezos those are my favorites have you ever voted for a republican candidate for any office ever i yeah i have you have really yeah yeah people i i'm a moderate and i don't feel like when i voted for um 1904 he was a democrat it's been a long life but i did i did vote i remember for a republican and when i lived in new york david sachs has a look on his face that says finish your stupid banter so i can go on my monologue okay go go hold on henry bell caster in three two go no i don't i don't really have a monologue on it but i just think that this is this is a pretty amazing story that you've got democrats spending almost 50 million dollars this primary season boosting mega candidates yes um at the expense of moderate gop candidates perfect so let's get the crazies in there yeah i mean they're easier to beat right and that's the theory if you get a theory but in a year crazy in a year in which you get a red wave it's really dangerous and it totally undermines what the democrats are saying in their january 6th at least it's completely cynical i agree yeah you can't you can't on the one side cynical is backing trump you can't on the one hand say that we're facing an unprecedented existential crisis for our democracy and on the other hand be giving money to the very same people you're saying are the threat to democracy it makes no sense it just shows that both sides are completely cynical backing anything that is talking about no no no no you're what you're saying you're trying to both you're trying to both sides it you're trying to engage both sides no but the difference here is that there is this is i'd say partisan political gamesmanship but the point is you can't on the one hand be engaging in ordinary partisan gamesmanship while you're saying that democracy faces an unprecedented threat that's the disconnect no no i get it you're trying to get too cute what do you think about liz cheney i'm curious would you think for her if she was a nominee she's a warmonger just like her father she's like she's basically darth vader 2.0 so that's my biggest problem with her is no i would not i would not vote for her there's not there's not a war she doesn't want to get us involved in and there's not a country she wouldn't try and impose democracy at the end of a barrel okay so that's why i don't like her but to your point democrats say they want to work with more republicans like liz cheney but if you look at who they're donating money to they're donating money to support the maga election denier against every single republican who voted for impeachment okay so you look at like the specific races um it's completely cynical and it's just about winning just like there were just to give you one one example uh democrats they gave they launched 450 000 of ads to take out a grand rapids congressman peter uh major who also voted for trump's impeachment they did this with a dem with a republican in california david uh valadel and just on and on so you've got on the one hand you've got democrats saying that this is an unprecedented threat to democracy they want to work with more reasonable republicans who aren't denying the election while at the same time trying to basically fund the campaigns of the maga candidate yeah the reason they're doing it obviously is if you fund one of these maniacs then they're easy to repeat so they're trying to serve up somebody who's an easy candidate to be getting this strategy but it's an i think it's a very dangerous strategy because it's effective it was my question no i don't think so because this year i think this november is likely to be a wave election and when you get a wave election the specific candidate matters less and party matters more so you could get some of these crazies swept into office so i think it's a cynical and counterproductive strategy and you say that republicans do it too i can't remember any example i think trump itself is like supporting trump is that i can't i can't remember it i can't remember a single time ever where republicans have basically funded have funded the soros i just think this is very stupid and dangerous but let me ask you listen it's of a peace okay it's of a piece with the administration claiming we're not in recession trying to redefine recession now that we're in one it's of a piece with joe manchin all of a sudden calling the slim down bbb the deficit reduction act after saying that it would increase the the deficit and the media is not holding these guys accountable that's why they're doing it politicians hold on a second politicians are going to be as dishonest as the media allows them to be and the media is not holding it brian conan o'brien kept the white house honest he tweets out the white house now says it's only a recession if you see a salamander wearing a top hat about the comments the comments are the best one guys like but let me ask you a serious question seriously going beyond just the specifics of the political issue i think we really have a problem with the media class i mean the media is carrying water for these democrats because they agree with the ideological agenda we do not have an honest media who's willing to hold the party in power accountable given what you've said about being disgusted by like the um you know uh denying uh you know this voter fraud conspiracy stuff by trump or whatever if trump wins the nomination which i think he will how are you going to be able to when we're on the show a year from now and trump has the nomination or you know 18 months from now whenever it is that it he locks it up and he will lock it up if he runs i don't think so so if he does though i don't think so you'll conceivably be able to back trump for a second term would you be able to come on this program and say i back trump as a republican because you don't want to vote for a democrat what would you do just not vote because you don't like trump you said you would not support him listen politics is always a choice of the lesser of two evils there are a lot so you would vote for trump so i hope i'm not in that situation listen i i what would you do listen the the election that america does not want in 24 is biden versus trump i think the race that they want i think the choice they want to make is actually desantis versus newsom that's the choice i'd like to make so look i'm on the desantis train that's what i'm supporting for 24. you know if it ends up being something different we can talk bezos desantis what would you do would you vote for a samples really baby what about you chamoth would you go bezos or desantis who would you vote for bezos or desantis i i bezos are descent this wow that's a tough one probably desantis okay freeburg bezos i'm good i'm going to sit this question out let's keep going okay all right everybody there you have it everybody it's a it's a dumb question j-cal because bezos is not running i mean and honestly the the fact that people were even discussing that is he supported no but his thought the thought experience the reason why i would go desantis is at least he knows how to play the game of politics bezos would just in a matter of a week be like why did i do this i had the best life in the world exactly there's just no way it's the stupidest living my best life listen jacob bezos had two tweets criticizing the administration on inflation and you're like he's running for president he's running no no no there's two there's other reasons come on zombies he bought the washington post he bought the biggest house in dc uh and he gave that 10 billion dollar climate page i think those are all little cards that you could check boxes and if he writes a biography bezos probably has houses all over the world doesn't mean he's running for president of those countries come on uh i'm just saying you're just scared you're scared of the bezos presidency you know that he would roll over desantis he would roll desantis even if bezos were dumb enough to run for president i think he's too smart to do that the democratic party would never nominate him that's not why he would have that's like some purity don't get me wrong i'd love to see a candidate like bloomberg or bezos nominated by the democratic party because they clearly understand economics right would it be a master stroke by the democratic party to embrace a model i would like to i would love to see canada but look at look what happened in bloomberg bloomberg spent 100 million dollars and he lasted to the first question of the first debate yeah they knocked him out the first course of the first debate and then you know uh elizabeth warren knocked him out by just basically calling him a billionaire and he's there stunned he had no answer terrible yeah he did terrible terrible but i mean it would be a master stroke if they went with a moderate you know it all right everybody for david sachs chamoth and friedberg i'm j cal we'll see you next time on episode love you i'll catch you bye-bye love you sexy poo let your winners ride rain man david it said we open source it to the fans and they've just gone crazy with it [Music] we need to get back [Music] i'm going on [Music]










just a couple questions before we kick off okay look it's what I told you before it's bad o'clock okay it's thick 30. I've been through a lot sacks right now but I'm still flirty okay is everybody back up in the building socks it's been a minute tell me how you're healing I'm about to get into my feelings how you feeling sax how you feel right now what language are you speaking right now the language called hip-hop sacks you might remember when you had at your 50th oh yeah when you had side yeah and she's saying and you're was dancing too delete that delete that let's start executing the insta strike with J Calvin why insta-strike when he says something that we just insta strikes we have to edit it later it's just instascribe it's because um I am uh taking back my power I was in therapy the other day and they told me I need to take back my power insta strike but he apparently reads the comment section because he knew Friedberg that you won the episode last week oh big time it was big freedberg energy finally I honestly do not like the competitive nature of the show I think it makes us all hate each other and it's not a good Dynamic we should just do the show with each other I know but the point is your performance after I threatened to fire off the show has gone up you know who also doesn't like the competitive nature Jake out because he's losing yeah totally the fact that I'm even still here is winning I love how Jacob thinks he can threaten the fire freeberg it's like the gender at Staples Center I think he's gonna fire LeBron because he played poorly in a game this is a motivational technique I got the best out of him I'm like Michael Jordan he's my Dennis Rod you're like the hot dog dealer okay pal he's like LeBron James you're the hot dog deal I do not insta-strike these comments [Music] let your winners ride man dancing [Music] all right everybody uh welcome to the all in pod uh with us again uh David Friedberg took a break from playing his stray video cat game uh sax is here in his deposition apparently by the way do you guys want to see this look at the size of this Jacob's apparently playing no comment today so I will open the show I will open the show by asking David Sachs would you like to tell us about what you're holding in your hand yeah okay so I got this subpoena from Twitter this is a non-party subpoena for didn't Twitter subpoena your tweets yes let me get into that is this a peanut I thought they're public they are these nitwits have walkedel lift and billing them are probably two thousand dollars an hour to subpoena tweets that are public I mean brilliant brilliant strategy but this is called a subpoena for production of business records in an action petting outside California so I'm not a party to the loss at least they're not suing me because I have no involvement in this thing but they sent me the broadest ever subpoena it's like 30 pages of requests and now I gotta hire a lawyer to go watch this thing because they basically want any of my communications with any of my friends over the last six months it's insane sax can you just explain to the audience and to us like is this is a court sanctioned subpoena the court is basically allowing the lawyers to demand that you hand over these communications is that right yeah but I haven't had a chance to fight it yet so now at my own expense I gotta hire a lawyer and go send them to fight it because this is a ridiculous over broad subpoena and by the way I'm not even involved in this thing I'm just a commenter on Twitter I don't have any let me just save walk till Lipton a lot of time right now I'm not in possession of non-public information about this and you know the craziest thing is yeah like you mentioned they cite my tweets as a as an exhibit here and they say they want all documents and Communications concerning your statement in a tweet dated April 16th that the quote new Twitter CEO checklist includes eliminate all Bots and fire useless employees 50 question mark so obviously they didn't like that uh your statement in a tweet dated April 25th crazy thought what if Jack masterminded this whole thing your statement in a tweet dated July 18th that quote randomly sampling 100 accounts a day is not a serious effort uh and or your statements and any other tweet concerning the merger blah blah let me just save them time right now I don't have documents and Communications concerning my tweets now I know to a lawyer at Wachtel Lipton that looking at my tweets and how brilliant they are you may think that I have extensive documentation and Source material for them but let me tell you what happened I went to go take a and I basically tweeted off the cuff and that's how that tweet ended up in the public record there are no documents and Communications concerning my tweets and this idea that somehow I guess what they're trying to get at is that somehow I was tweeting on behalf of someone or at someone's behest not true go look well before this year at my public tweets and blogs about the topic of free speech I've been a Critic of twitters for a long time on the issue of free speech I've written a um a Content moderation I've written about what I think a Content moderation policy for a social network that cares about Free Speech should be you know I've written all these uh posts on medium going back years now you know I was a Critic of Twitter throwing Donald Trump off the platform so these views that I've publicly stated are the reason I've stated them is they're just My Views and there's just nothing more nefarious or something behind them other than that and they're just I think they're just trying to chase it there that's there is no there there right so let me just say a lot of time you and I can talk because our our friends have no comment on this matter one question I have a five question wait during this movement that you had and you composed the Tweet is there any documentation of the movement no but you know next time that I compose a tweet on the can I will document it thoroughly and I will send it to the lawyers that will tell Lipton Zach what happens if you don't respond in 20 days I don't know I mean I gotta I mean now I've hired a lawyer but by the way just so people understand you may think that because of my position in business or something that these things happen all the time they don't I've been maybe subpoenaed like three times in my entire career and I've never been subpoenaed in my capacity as an individual it's always been in connection with a company and I don't think I've got one of these in over five years so this just does not happen that often these guys are totally chasing at straws and it leads me to believe they're they're wasting my time and Twitter's money and they're trying to somebody on Twitter should just rein in their lawyers because they're I'm sure racking up a fortune in legal fees it sounds like um sex the case is that they're trying to make that Elon used his network of friends to help wash away the deal because he didn't like the price anymore and had his friends you know kind of tweet about Bots and other stuff to support his case for killing the deal because he didn't like the price and they're trying to see if there's any Communications that he specifically said he didn't like the price yeah I mean look they all in addition to my tweets they want all my documents and correspondence related to my appearance on Megan Kelly my parents on the will Kane podcast and you know other media appearances I've done look you know I had no coordination with Elon before appearing on any of those shows I just went on those shows and said what I think I mean look it's not like I'm a guy who doesn't have hot takes every single week on various issues you know right we do that we've been doing this podcast for years I've been tweeting for years I'm just a commentator on this I have I've never been in possession of non-public information and I've tweeted my takes based on the public information that's been available about this dispute now you know after I appeared for example on Wilkin I remember Elon tweeted in support of my appearance but there was no coordination before I appeared or after for that matter he just liked the appearance yeah so it's just me spouting off doing what I've been doing on this pod and tweeting for years now I can understand if maybe they're trying to read something into it they're on a fishing Expedition but I'm just talking I just think the whole thing is just such an enormous waste of time just get into court adjudicate the thing and move on I was reading um yesterday this guy who follows the Delaware courts pretty closely he had a bunch of commentary and it he mimicked some of the stuff or or the judge apparently on the case said some stuff about preserving the Integrity of the Court meaning that the interpretation people are making is that ultimately they don't wanna the court is unlikely to try and force the merger because if the merger then doesn't get consummated it damages the reputation of the Court's ability uh to make enforcement action therefore it's more likely that they just impose a fine but what is the enforcement action if I don't I don't know we should ask somebody who's a force them what does that mean Force I don't know about that okay all I know is that this discovery request is overly broad it's a fishing Expedition it's harassment of me it's gonna cost me time and money to get rid of this thing I didn't do anything to deserve it or prompt this I wasn't part of the transaction I just wasn't um and I've never I've never and I've never said anything in real guards to the transaction that should lead anyone to believe that I'm in possession of non-public information yeah so this is harassment as punitive and the fact that they're citing my tweets in which I criticize Twitter's management it's as Petty and vindictive yeah I agree reimbursed probably not good luck no five five or six years ago I approached Twitter about what I would have called a friendly activist myself in a and another large fund and the reality is there's a lot of data that sits uh in the public domain that you can use to get a very clear view of Twitter's advantages and disadvantages and so you know all of these issues that Twitter is dealing with has been known for a long time to people that spent any time analyzing this stock comparing it to other social media stocks so I just don't understand what all of this is about at the end of the day a person that had a point of view has changed their mind get to the bottom of what that person thinks but going on these broad fishing Expedition I think is just really stupid and then what was Joe Lonsdale subpoenaed for I mean he just appeared for being at the all-in summit for being a guest at the all in Summit so so that that just shows you how silly this is too because Elon we did an interview the four of us interviewed Elon at the all in Summit uh in Miami back in was it may is when do we do that yeah um so Elon appeared but he dialed in by Zoom it's not like he was walking around the hallways bumping into people and talking like there was he did not communicate with anybody else at the summit yeah he was a guess by Zoom so if you want to know the communications that we had just go watch that public recording of us interviewing Elon there's just again this there's no need for this fishing Expedition guys this is the this is the record for the longest amount of time in his life jaycal has not spoken so I wanna I wanna acknowledge this moment and we can move forward um sax did you do any prep work for the interview with Elon while you were wow good question there's no prep work I showed up barely I barely showed up oh my gosh see and you guys don't want to do all in Summit 2022. come on 23. come on we're good we're good yeah exactly why do I need another one of these I actually want to have Friedberg stands create an event honoring him and I'm going to appear there as the keynote speed absolutely Sultan of science con actually I should really thank you jaycal yeah first I blame Twitter's Executives then I blame you I think you could listen if we do another all in Summit maybe it's profitable and as a user just as a user okay commentary the the bot issue is really real like how many accounts are there which have like 20 or 30 followers that just spew vitriol either positive or negative constantly every time you tweet anything it makes tweeting impossible I used to be an Ardent user of Twitter and I think in the last year it has become exceptionally unusable wow and so they should just fix it they should fix that product quality problem In fairness to sax he did pay ten dollars per account to have those created and to troll your replies but it is true if you I always screenshot it I look at who's like trolling man replies and inevitably it is uh a six-month-old account with that's following a hundred people and has no followers or five followers and it has like some you know every time you say something every time I say something it's like every other comment is about a stock it's about a crypto thing that they want you to click on and so you know this last month I've started to experiment with turning comments off and it's been the best because I can still communicate out it gets the same reach millions of people will see what I have to say but I don't have to deal and all of the other people that follow me theoretically for useful information don't have to deal with all the that comes with it now yeah but you can also pick there's a real problem on that platform that needs to get fixed here's the thing it's easily fixable because if you go to LinkedIn or Facebook or Instagram you don't see this so if it if the other platforms can figure it out across many different companies it's not like there's some Secret Sauce here you just have to put up you know a couple of reasonable Gates and have some reasonable reporting uh and you take a little friction out and people will not be able to create bots on mass yeah I noticed that problem you know in the early days of the Ukrainian War when I would tweet out my opinion my non-con my contrarian opinions my non-consensus opinions on the Ukraine war you get attacked I saw I remember you were getting it was ruthless and those are not real people those are not real people those are algorithms yeah when you would go click on those accounts you would see that they were accounts created that month with zero followers zero following and uh there are brand new accounts without any history and they were all tweeting the same thing accusing me of being devil Chamberlain it was all just you know Putin talking points or whatever so there you know I think particularly when you speak out against the current thing there's yeah you know an organized effort to try and drown you out and but look The Washington Post had a story about this that Ukraine was really good at what they called strategic Communications yeah we used to call that propaganda but in any event yeah I mean look there's absolutely a problem it's now A playbook um if you I don't know if you guys saw the Zack Snyder uh recut of Justice League supposedly there were bought armies that put the pressure on Warner Brothers to release his cut of that movie and that he might have in some way been involved was the insinuation and it actually drove Commerce they gave him the whatever 30 40 million dollars to recut the film uh all right let's talk about Market since that's what everybody um really comes here for uh looks like inflation is uh finally maybe uh getting a little pushback gas and oil is way down a big win for Americans and obviously the administration there clearly is an upper bound to how much people will pay for a gallon of gasoline consumption is actually going down which is interesting human's pretty adaptable there jobs and we've talked about this every month as we watch it uh finally dipped under 11 million as Saks uh predicted you know we're going to shed three or four hundred thousand jobs it seems every month uh which should take this uh you know 10 11 million number over the next year down to maybe five or six which would still be an unbelievable number still put us that very robust full employment which has been a big question so there's a number of of open job the the number of job wrecks it went down by something like half a million in one month yeah and it's been going down three or four hundred so it's it's kind of been pretty consistent but there's clearly something going on here and the stock market interestingly we've started to see a little bump here even crypto um which the most speculative of all assets I guess Bitcoin bounced as well you know hitting 22 23 now so what do you think chamoth about markets we you you may have called the bottom uh here on the program a couple of months ago and uh I started J trading three weeks ago based on our discussions here thinking we're bouncing along the bottom is it a head fake right now I think at the time initially I think I said you know it rallies to around 4 000 I was a little off rallies what rallies to four thousand the s p yeah probably gets to forty two hundred forty three hundred look it's always important I'm trying to have 21.50 today just so people know yeah yeah it's always important from my perspective to just take the other side and just intellectually debate with oneself why the other side could be right so at this point right now what people would say is okay the fed's going to capitulate at the beginning part of 2023 we have a pretty clear forecast for all the rate increases that have to happen everybody's doing the work that's necessary either raising prices cutting costs or doing both letting people go Etc et cetera so maybe we're we're there okay so what's the other side of that well I think again as I've stated before the other side starts with energy and the reason why I think it's important is that it really is the conflation of an economic system and a political system using an instrument and if you look inside of what's happening in Europe there's a lot of complexities here that I think need to get unpacked so for example a couple days ago the French government basically said that they're going to start producing less nuclear energy and you'd say well why would they do that well it turns out because you know the temperatures are so high you cannot use the water to cool these nuclear reactors because the the exiting water is then so hot that would actually destroy the ecosystem of the lakes and rivers that they use to feed natural fresh water in to cool the nuclear reactor second because it's so hot all the rivers are below their natural level barges that carry coal and that gas are getting stuck on the Danube the PO which is the longest river in Italy that feeds all the fields actually can't is below the level where it can actually off you know offload the water so farmers can't basically do what they need to do to produce a food supply so if you play all of that out you start to see an issue where by you know October November of this year we're back into the same complexity where energy is the tip of the spear around which everybody starts to debate all of the National Security issues that we have to deal with the Ukraine war et cetera et cetera so I don't know I mean you know you've made a lot of money this year by basically doing the following which is the exact opposite of everybody else when everybody else was freaking out had you bought you would have made a ton of money now everybody's like it's over and you can tell that by looking at the vix which is the volatility index we're about to get into the high teens you have systematically it has been true that when the the vix is in the teens you tend to basically buy volatility which is essentially you get short stocks and when the vix is in the 30s you tend to basically sell volatility and you buy equities because we've hit the body if you've been doing that for the last year you've made a ton of money so there you have it I really don't know what's going to happen from here but I tend to think things still have to get a lot worse to flush everything through the system and for people don't know the vix is the ticker symbol that you can look up yourself uh for the cboes volatility index which measures the stock market's expectation of volatility based on the S P indexes options trading if you look at oil sacs we are now down to uh 87 bucks for a barrel uh haven't been here since uh uh gosh looks like yeah February maybe and so and gas prices plummeting something going well in this regard what are your thoughts yeah I mean it's uh that particular commodity is coming down I still think we have a big inflation problem um why do you think it's going down I guess production's stepping up I mean the response higher prices people increase production and the price comes down no no no no no no there's less demand the the the crazy sad thing about this whole thing with Biden was that OPEC came back and they basically said we can increase like 600 000 barrels a day but the only two countries that are able to do it were I think Kuwait and Saudi and the total number of barrels was about a hundred thousand so with all the blusters you're right actually there's no it's because the interest rate increases are actually having an effect correct you know these rate increases are like chemotherapy you know it's um on the economy the gas demand is lower than the summer of 2020 in the middle of the pandemic yeah you know yeah you're right so the the commodity prices are reflecting expectations that the economy is slowing down and and you know maybe in a recession Supply modestly up demand massively down equals hey we want to get people to buy this commodity it will lower the prices low and behold same thing is happening a little bit with groceries uh and we'll see what happens with travel homes also spectacularly falling down in price and the inventory spiking as well so what's your yeah your take here unpack the 75 basis point increase in the chemotherapy that you were going down that road well let me just speak to this this um this rally in the market for a second because I think there was a really interesting chart that Philippe Lafont showed at that kotu Summit that we talked about on this pod a few months ago and I'll just put it on the screen I put in the chat uh what it basically shows is that uh is that during you know protracted bear markets you can still get substantial bear Market rallies and so during the 2000-2001 uh.com crash you had these plus 32 plus 41 plus 45 rallies uh but even while the market as a whole was going down and so they ended up being sort of Sucker rallies now I don't know if that is what's happening here but it is a possibility um one interpretation sex of this could be people are picking the winning stocks while the losers continue to lose and that's what's causing this you know Jagged Edge or the the dead count dead cat bouncing as they say which is what we're seeing in a lot of these public companies right I don't know if you're watching but Uber you know obviously I'm still a big shareholder had a massive print and other companies have been doing equally as well Apple included I think two things happened last week one is there were a number of companies that reported uh good earnings and I think even more currently has strong forecasts so that helped and I think it was just there was so much pessimism and negativity that just companies reporting decreases that weren't as bad as people were expecting created some room to move up but the other thing that that drove the rally is that the FED made these comments on the heels of that 75 base Point rate increase that we were close to neutral and so the market seemed to get really optimistic that we wouldn't get much more in the in the way of rate increases maybe there'd be a 50 base Point rate increase towards the end of the year which would bring the FED funds rate up to about the two-year bond rate so the idea was we're close to neutral and Marcus really reacted to that the thing about that is though that I think what the pal what Powell and what the FED says today about rates is way less important than what the inflation data will actually show in a few months if we still have nine percent inflation three months from now then I don't think the rate increases are done so at the end of the day I think that the data here is going to be a lot more important than what the FED says because certainly the FED has said a lot of things over the past couple years that turned out not to be true you would agree they seem to be doing something correct here with the 75 bips you know and taking it a little more seriously it's having an impact I'll say it again I've said it now five pods in a row we've never seen a moment in history in American history where when CPI has printed successively above five percent that it got under five percent without fed funds getting to that same number so we should all hope that this is the exception that proves the rule but there's an enormous amount of data that would tell you that we have to take rates to double what the equilibrium rate is thought to be right now there was no print in August I take the month of August off they could do an emergency print and then they're expecting 50 or 75 bips in September if they do that saxophone 50 I think 50 is the expectation for September but look I think it's appropriate now after all the rate increase they've done to take a pause they're going to get two full months now of inflation Data before the September fed meeting I think it's appropriate to let the economy digest these rate increases and see where we're at and let's see where the next two months inflation print is and then that'll determine what happens next freeberg based on all this uh what's your outlook for the economy I think there's more we all try and be predictive based on the current set of conditions in the world and there are a number of conditions in the world that the switch could flip very quickly and there's enough of those triggering events right now that um the probability of any one or any set of them happening in the next couple of months is probably pretty high uh you know I kind of talked about it on the show a few weeks ago that it's like a bunch of tortoises sticking their head out of the shell and you know there's a few that might pop out here there's obviously a massive problem with getting gas to Western Europe for this winter there's an emerging problem with food insecurity in Africa South Asia around the world there is obviously continuing escalating conflict in Eastern Europe this NATO situation may or may not help the Taiwan visit may or may not help is it escalating yeah well I mean I think you know Sweden and and whatnot joining NATO is okay it's going to be viewed as provocatory and you know it it could not make things cooler and calmer over there but make them more tense I mean we view it as a security issue but it really is a conflict escalation issue and um and then I think that there are Emerging Markets problems you know Argentina is facing 60 inflation Brazil has a criminal as their president right now and he has said publicly in the last couple of days that he will not leave office if he loses the election because the election is fraudulent and if that happens then you could see massive civil unrest he's been encouraging the population in Brazil to go to the streets and fight back and there are a number of these flash points and by the way that's a massive uh you know food supplier as well as a massive uh holding in EM credit portfolios around the world um U.S consumer credit is a problem uh you know we just had the largest number of new credit card accounts opened since 2008 in Q2 from the New York fed report yesterday all of these things I'm painting as pictures of potential flash points for what would could quickly become wildfires or brush fires that spread very quickly in markets and could escalate some of the considerations so I don't feel like I look around and say everything is good we're in a good place there are some indications that some of the stagflationary considerations and concerns we may have had in the way that markets are behaving right now gives us a pause gives us a respite makes us feel okay but there are also a lot of things that could go wrong and any one of those things could be a triggering point so I always think in terms of probabilities there's a whole bunch of low probability things but when you have enough low probability things the probability that something in the set is triggered becomes High that's where I kind of say look the probability of something being a flash point for us this year is high I also still think that globally we are very primed for conflict right now and we feel like and are hoping that the Russia Ukraine thing resolves but there are other points of escalation look at what's happening with Pelosi visiting Taiwan everyone that's you know even well informed is scratching their head saying what the heck is going on here there is currently an Indulgence in conflict and I think that that Indulgence will um you know cause more harm than good uh particularly for these financial markets that we're commenting on right now uh in the months ahead so um look uh you know like I've always said I'm not going to be one to time markets it's like trying to time social behavior like who's gonna say some word first I don't know the answer in a population of people you know you can kind of guess how people are going to behave but markets are the output the manifestation of social behavior and so timing markets is very difficult I think you can do a good job analyzing businesses and the quality of businesses and how they will perform over time I don't think that anyone over time can do a good job timing markets and I think that there's a lot of these things that could really shift anyone's perspective on what you believe right now very rapidly in another Direction based on any one of these uh things happening do you feel the world is as Dr Doom here is you know setting up by the way I'm not being negative I'm just pointing out that there are a set of things that could flip things the other way right absolutely I'm being slightly facetious here but you picked a pretty Stark picture of hey there's all these tipping points around the world chamaki you feel like this is how the world works there's always a bunch of potential tipping points there's always going to be Wars uh sadly and there's always going to be countries uh that are dealing with dictators or insolvency especially in Frontier markets and Emerging Markets or is this chaos you know really acute and and people should be uh you know anxious and in a panic I think both of you guys are right like there's always stuff going on in markets and markets represent the collective sum of our wishes and expectations and also the realities this is why I think for me at least the way that I process this information is not trying to have an opinion on any one of those things because I just I find it too hard and I don't have enough depth of understanding of any of those things for me I'd rather go back to the historical Trends because those I find a little bit easier to parse and whether any of those things are true to inflation right now can they turn that right Jason we're just docking something oh okay no problem it's just a little we can't hear it no problem the second helicopter is replacing the first helicopter because swapping out yeah no that's important helicopters are switching on the helicopter I mean it takes a team to park this boat I'll just be honest with it so they're they're trying to get it done no but listen so so the the real problem is that like if I go back to the historical artifacts have there been issues in the past the way that you know um Freeburg described absolutely so this is why I think you can look at the fact that whenever there's inflation and whenever it's spiked this what has had to happen by the FED is you have to take rates above that key five percent threshold when CPI is above five percent to break enough demand so that the economy is reset and God I think that's where we are so instead of trying to figure out whether you know I mean the the Brazil thing as an example that that Friedberg said is crazy like he's basically you know he said publicly in a press release the Army's on my side and it's ready to help me you know keep and staying just the crazy thing so what are you supposed to do the fighters need to take to the streets so what are you supposed to do in my opinion I'm like you know what a version of Brazil has happened before I don't know enough history quite honestly to know the specifics of what happened then and how that could translate to now and I don't want to spend the time understanding what's going to happen in Brazil right now I'd rather just say there are 20 or 30 things that could very much complicate the world economy I think the reality is that governments need to flush all this excess money out of the system so that we can really find out what equilibrium demand is and get back to normal there's also by the way a really important Trend chamoth unlike that I think is playing out and will play out for the next decade on de-globalization so as the U.S tries to build its own semiconductor manufacturing capacity as China loses key trade Partners as all of these markets stop trading with each other and start to build redundancy there is a massive longer range economic effect of de-globalization globalization enables efficient pricing it enables labor and energy and everything to be done you know to go to the cheapest source that's the way globalization has benefited us we've been able to get cheap energy and cheap labor in overseas markets to do work for us and as a result we've gotten access to cheap products so when you de-globalize you end up having to pay more for labor more for energy you have to build infrastructure and the price for everything goes up we've said this on the Pod for two years now that era of cheaper faster better is over and what comes with that is better National Security but the cost of that better National Security is higher prices higher prices less growth and there's nothing that we can do to avoid that I'm not sure I agree with the less growth I actually think that there's enough access to slack to be absorbed by all of this free money that I think you can still have sustained growth but it will come with higher interest rates and higher inflation and higher input costs everybody will have to do their part to absorb some of this but that's what's going to happen and I think we should just deal with the medicine as quickly as possible this is why the people that actually think that the FED should just be very aggressive and get this over with quickly I suspect on the margins are right the problem is they don't want to look at the Historical artifact because historical artifact would say wait I need to raise interest rates by another 250 basis points that's just way too disruptive for what the world is ready to to hear right now so we're going to incrementally plot along and I think what Friedberg says is Right which is that there's going to be a whack-a-mole that emerges that's going gonna tilt the markets then the consumer credit thing will implode that's going to tilt the markets enjoy your Bolson Arrow will try to take over Brazil that'll tilt the markets and we'll go back to this you know inflationary fragmented de-globalized view of the world that just frankly takes higher interest rates to normalize all right and sax I'll bring you on this I mean counter to freeburg's point the the counter obviously would be hey we will have less dependency on dictators like Putin Xi Jinping MBS Etc and that would be great for Humanity and we'd have resiliency in our supply chain uh and you know the West now becoming Unified say what you will about the NATO membership and the timing of it it's probably a great thing that the West is saying hey we're going to get together as a group I think you would agree and stand against dictators invading other countries and if everybody pays their fair share to be part of NATO well that's not that's not what they said that's not what it is well I mean no that is not but be intellectually honest we all said the first part and just nobody talked about that second part and the only person who you know which is Josh Hawley who's you know not exactly my favorite person in the world but maybe sax wants to comment was the only one that actually said which is probably the fair thing which Jason you are saying is part of the deal that is not part of the deal no no should be part of the deal I'm saying it should be part of the deal and for people who miss what we said there United States spends three and a half percent of our GDP on uh military other places in NATO might be spending one or two percent and we're trying to get them all to two percent to be a little closer to us and then this obviously trip to Taiwan strengthening our relationship with that country but at what cost and why are we doing it now uh all come into play here so do you actually think that this trip to Taiwan actually strengthened our relationship with Taiwan did we come up with a deal all of a sudden say in what way I'm curious well because they are I mean did you not see their statements and giving Pelosi Awards and they Taiwan very much wants to strengthen their relationship with the West that that is their goal they want to strengthen the West they want the protection of the West so yes it does strengthen our relationship with Taiwan the question is does it provoke China and was it necessary at this point in time in history when the world does feel like it's a little bit of a powder attack no but so so six months from now when all the fruits and vegetables that have been embargoed and not sent to Taiwan and then the sand that allows them to make chips continues to now flow do you think that they'll still be positive about the trip we'll see I mean I I let's go to sax he likes to comment on these things so all right well I'm gonna bring some mental everything you just said I know that's why I set you up for it I mean look once it came out that Pelosi was going to Taiwan and China threatened her and the U.S saying you can't go obviously we couldn't back down from that because we can't let China dictate which of our officials can go to Taiwan so at that point we had to back her play and you saw that everybody from Fox News to 25 Republican Senators gone on board okay but here's the issue the real issue is should she even have been going I think this trip was self-indulgent it was Reckless she was told by the Biden Administration don't go this is not the right time this is a sensitive time the uh the ccps got their Party Conference in the next couple of months there was no reason to basically provoke this showdown right now and she just dismissed what the administration with a Biden and what the Pentagon told her to do because she wanted to make some sort of valedictory tour to Taiwan so look Nancy Pelosi does not deserve any credit for this trip did we have to defend her once you know once China threatened her yes of course we had to like I said back her play but this was Reckless and it was self-indulgent and it didn't need to happen and you know it really makes you wonder who is calling the shots in this Administration when Pelosi won't even respect the wishes of a president and her own party and what is she doing going over there she's not the Secretary of State I had the same question president had the same questions like why why now why not Thomas Freeman well because it's all about her making this valedictory tour before she's going to hand over the gavel look the Democrats are going to lose the house in November once she passes the gavel to a new Republican speaker of the house I think she'll be announcing her retirement shortly after that so this is all part of her farewell tour but it didn't need to happen and the fact that she did it in violation of The Wishes of a president of her own party makes you wonder who's calling the shots over there and it kind of reminded me you know a few weeks ago Gavin Newsom was over at the White House when bind was over in Europe and everyone was speculating what's he doing over there is he measuring drapes yeah he's measuring the drapes so you know it just goes to show this is this Administration have control over anything over the members of their own party over 60 percent of Democrats say they want someone different to run in 24. so yes there was a surface level of consensus and packing of Pelosi but if you scratch beneath the surface you see that the trip was unnecessary and re and reveals a president who doesn't seem completely in control of our foreign policy so in a statement um almost universally uh the leadership of the Republican Party said for decades members of the U.S United States Congress including previous speakers of the house have traveled to Taiwan this travel is consistent with the United States One China policy to which we are committed we are also committed now more than ever to all elements of the Taiwan relations act so one China if you don't know is that Taiwan and China are all part of one uh unified uh entity so we're the Republicans seem to be supporting this in a cynical way you're saying or it is consistent that other members of the United States Congress have gone including other speakers of the house I think there is bipartisan support now to defend Taiwan I actually think that that is in the cards I think there's a very high probability that we actually end up in a war with China really this Century oh yeah I don't think so I think too much has the biggest Flashpoint in the world uh I would agree with that but explain why you think there's going to be a war because I think a lot of people think there's way too much at stake here for there to be a war so there is going to be some sort of negotiate settlement in the South China Sea so why would you think you think the majority of cases there's going to be a war really you you have to look at it first of all from the Chinese point of view they view Taiwan as sacred territory and for decades now they have said in every single meeting diplomatic meeting with the U.S Taiwan is always their number one issue they are hell-bent in recent unification of mainland China with Taiwan and they would like to do it peacefully through coercion if they can but I think they will do it militarily if they must and the only question is when they feel that they will be strong enough to basically take the island by force so that's I think the Chinese point of view and I think America is increasingly committed to the defense of Taiwan so you know we have contradictory statements on this the the one China policy says that we respect that there's one China but on the other hand the Taiwan Relations Act commits us to help in the defense of Taiwan so we have a contradictory policy on this but if you really don't understand you would agree China has flip-flopped on this I mean it's only the last hundred years that they've really considered Taiwan strategic they didn't care about it two or three hundred years ago they were kind of like this is worthless you guys do what you want Taiwan was part of China until 1895 when Japan took it from them yeah they they didn't want it at that time that's that's the other thing they were like this is worthless real estate we don't care well Taiwan Taiwan is extremely important strategically and if you want to understand why I think you need to look at this map yes it was really interesting to pull that up actually yeah it's a really interesting discussion because 200 years ago they didn't care and then all of a sudden they're like wait a second if we're going to be in wars with the west and Japan's going to be a democracy we do actually have something at stake here we'd like that Island back the island chain strategy was originally created by John Foster Dallas Justice one of the of Secretary of State I think under Eisenhower who was one of the initial architects of our containment policy against the Soviet Union but also came with this idea of how we would contain China and East Asia and the basic idea is that China is surrounded by a series of Island chains the first island chain goes down from the southern tip of Japan to Okinawa to Taiwan to I think there's some islands in the South China Sea the sproutly islands it's got the North West tip of the Philippines that's the first island chain second island chain goes out to Vietnam eastern part of the Philippines no Vietnam's all the way down I think the second island chain includes you know it goes down to Indonesia and then I think there's even a third island chain that includes Guam although Guam actually might be in the second somewhere it's somewhere around there it's a heavily fortified American base so the idea is if you want to bottle up and contain China you do it by controlling these Island chains and Taiwan is really the central one it sort of divides this East China Sea uh where you've got South Korea and Japan from the South China Sea where you've got Vietnam and Malaysia between Vietnam and Japan it's literally if you were to draw a center line of China's Coastal access that is it yeah so so the bottom line is this if you want to pursue a policy of containment against China you really want to control these Island chains another way to think about it is that these islands are Unsinkable aircraft carriers they allow America to project power six thousand miles away into the Pacific that's how we saw during war two is we had all these island hopping battles and as we took these islands they would then become a runway for the next stage of to project American power to get all the way to Japan so you know if you believe that we're headed for or we already are in Cold War II with China and I think we are I think China is really I think we'd all geopolitical threat not Russia the way that you would contain China and keep them bottled up is to have these islands in the American Alliance it's gonna be very hard for China which is now building a huge blue water Navy has actually more ships to the United States it's gonna be very hard for them to project their power all over the world if they are contained a balled up and have to watch their own backs one note on the number of ships though in East Asia is you know they they have a lot of small ships the tonnage wise we have much more tonnage and if you were to look you know even uh the the the perfect setup as you explained through these islands is very similar to Nato and the um what's happening with Russia you know we have Korea we have Japan uh we have Vietnam the Philippines we have an incredible Alliance in this area and that's a great thing for America and Taiwan obviously is a jump ball here uh but this is a setup for China you know having Jason what do you think about the repercussions of her visit so catl which is Tesla's biggest battery supplier basically you know delayed the announcement of a of a factory it's not clear whether they're going to put it into the United States they may actually pick a city in Mexico but what the decision that was supposed to happen now has now been delayed until September October there's a bunch of you know there's all of these crazy military drills that happened was it all worth it I mean that is the question and and I'm asking why now was it worth it we don't have enough information I think to know what why this was done now it was it a freelance he asked me a question let me finish is is it a freelance and Nancy Pelosi is completely freelance or is there a bigger strategy here is the question is China weak now are we trying to send a message to them and one could equally take the side of the argument that the United States supporting Finland uh supporting Sweden supporting NATO you know supporting the Ukraine and supporting the Pacific is actually the right move here to contain the dictators I agree but we have a I agree but we have two people to do that so president and the Secretary of State well that would be a much bigger provocation I think is the issue so if you sent the president that would be a very big provocation the Thomas Friedman article that sax mentioned was pretty explicit that you know Lincoln and Biden both told her please stand down yeah the NSC and the joint Chief said please stand down you are way over your ski tips here and she's so great I agree I I I've been very public what is the point of doing this now is the question and we don't have information once China tried to dictate to Pelosi that she couldn't go of course we had to back her play but you have to be kind of a fool to fall for this in the first place this was self-indulgent by Pelosi she didn't need to pick this battle the administration asked or not to and look let me give Brian some credit here Biden has the right policy on Taiwan which was stated this way he says that we support the status quo and we are against unilateral changes to the status quo we want the United States to be a status quo power with respect to Taiwan and force China to be the revisionist power and we need to be very careful that we do not come across as the revisionist power that would give China an excuse so we want to just maintain the status quo that should be our policy all right everybody we'll see you next time on the rain man [Music] we open source it to the fans and they've just gone crazy [Music] somehow [Music] we need to get Mercies [Music] I'm going all in








how mad is saks going to get when he sees my button situation today i'm going to join you how you doing oh my god look at the collar situation look at the button situation look at that oh this is fantastic oh hey besties so just got off the lake where the lake it's got the lake yeah i was just on the lake the boat lake cuomo where where were you i was doing a little wakeboarding tahoe yeah still wakeboarding me and suck me and that took all five kids and we navigated the entire island of sardinia for eight days amazing and by when you say we navigated you mean the crew navigated and you ate seafood yeah it took a village [Music] [Music] all right everybody welcome to episode 91 episode 91 of the all-in podcast yeah we're still here uh lots of news to discuss this week with me of course to chop it up from his deposition room uh the war room the rain man himself david sacks how you doing brother big week for you they're all big weeks we're all big weeks yeah you look tired well we're recording pretty early today it's a little exhausting you actually look really tired what are you talking about just got off the lake i feel fresh i was just wakeboarding this morning on lake tahoe i feel refreshed i'm refreshed uh and of course in front of his uh nine dollar clip art uh that he blew up on easyprince.org the sultan of science himself david freeburg how are you sir always great to be with you jay cal are you working it boosts my self-esteem and my morale to be with you every morning that we get to connect over zoom well i'm glad that your performance has been stratospheric the last three weeks you're going on a hot streak let's see if you can continue it on episode 91. and missing many buttons this week we've got at least a three or four button august going how are you doing uh dictator uh from your island the remote island did you you invaded an island markets go up another five percent and one more button comes undone oh i love it so this is 20 percent up and we could go to 25. that's a [ __ ] daddy's back the more bullish he gets on the market the more he unbuttons daddy's back so all the low rise jeans on right now or are you wearing shorts what are you wearing show us those sticklers i'm wearing these beautiful linen shorts can you stand up and show us yeah come on give us a 360. come on let's see but these are the most beautiful inner thigh inner thigh that's a little too much thigh yeah that's like a chicken wing you guys like this it looks tight too very tight are you yeah those are definitely yours are you wearing like a children's size or something is that a junior sign i like you know i like the tighter sizes you do i do like the tighter sizes i think they uh they they personal body type accentuate all the little bumps and nodules too much information all right let's start with um there's a lot to talk about this week i think one of the most interesting things last week we were talking about it in the group chat that doesn't exist uh vision funds 21 billion dollar investment loss for the quarter masayoshi-san did a really great youtube video i sent it roger any of you guys watch the video yes no okay it's it's really interesting to watch we'll put it in the show notes it's like a six minute interview he put on his earnings page right like right when they put out quarterly earnings he's like here's my interview yeah you know he comes to a podium and basically talks about uh the vision fund obviously if people don't know the vision fund one was a hundred billion dollars the largest venture fund ever raised um and softbank's current market cap is 66 billion here's the quote from the ft article sun said on monday that softbank would now subject itself to dramatic cost-cutting exercise uh after a 59 billion dollar investment gain at the two vision funds almost completely reverse over the past six months they were up almost 60 billion dollars at the peak and it came crashing down masa kicked off the presentation showing portraits of togugawa tokugawa gawa yasu this is the founding shogun of japan's uh tokugawa suganat and uh you rule japan for six i mean i'm killing this such a long intro god it's so hard yeah i mean but it was just so great let me just play a clip for you here here's a 68 second clip and we'll talk about it right after and then we'll get into what all this means this is a portrait of tokugawa he actually made a big loss against takeda shingen and came back in the background of that tokugawa yes which is much much larger army than theirs and most of the allies actually said this is gonna be the losing battle so that they should not go for it but actually it's better to stay at the castle however tokugawa didn't want to lose his face so that he get out from the castle had a battle made a complete loss and suffered and came back and actually learned lesson he tried to remember and remind his own learnings and put it into this drawing so since the foundation of softbank group i made two consecutive quotas loss so previous quota in this time quota consecutively we made three trillion yen develop the loss so in total six trillion yen those was made in the past six months so i believe i need to remind that myself pretty spectacular loss and then he he goes on to take some q a and this is the i guess the killer quote when we were turning out big profits i became somewhat delirious and looking back at myself i am quite embarrassed and remorseful you remember of course and he complained a little bit in the in this whole thing about how there was a giant bubble without ever recognizing that he kind of created the bubble with a four billion dollar check uh to we work at a 47 billion dollar evaluation after a 20-minute meeting with adam newman this chart is pretty incredible this is the net income quarterly essentially you can think of softbank as like a holding company of a bunch of different assets including alibaba previously uber and all of this vision fun stuff 97 decrease in terms of deployment of capital so if you look at capital deployment as well nobody ever put this much money to work especially in privates this second chart if you look in q1 of 2021 they put 20 billion into work and then q1 this year they're putting 600 million to work just quick reflections on this what we saw here with masayoshi-san deploying 100 billion at the top of the market into and it's basically creating the market tops are there lessons here uh or takeaways for you i mean i think that people don't seem to understand that if you're gonna attempt to be great there are going to be moments where you look the exact opposite of great you know the guy that takes the final shot is the same guy that can miss the final shot and here is a guy over his you know 50-year career has had some huge ups and downs this is also the same guy that found a way to rip in 25 or 30 million dollars and made 125 billion off of alibaba that's the same kind of person who has that kind of risk tolerance he was for seven minutes or something the richest person in the world and then lost 99 of his wealth in the dot-com bubble i have enormous respect for a person like this because i feel like it takes enormous amounts of courage i've said this before most people jibber jabber about investing and all of this stuff and when push comes to shove they crumble like little [ __ ] and run into mommy's coattails it's hard to put lots of money to work and this is a guy that's done it so the same person that can make 125 billion turns out is the same person that can lose 30 billion and so one thing is i would just keep in mind that this is a resilient guy who seems to land on his feet and the second thing that nobody talks about is how smart saudi arabia and abu dhabi were in how they structured the investment into the vision fund because half more than half their investment is in preferred equity which is effectively debt that pays a coupon and you see it now where softbank by the way who has been pretty smart in how they've managed their alibaba position have been using these derivatives and forward swaps to be able to sell and manage their liquidity so it turns out that you know even if the vision fund breaks even saudi arabia and abu dhabi will have made money because i think they get paid a six percent coupon on you know 50 billion dollars is a lot of money over six seven eight nine years it's a lot softbank has found a way to sell down 25 of alibaba which is no trivial feat for a half a trillion dollar company and this guy gets to keep swinging and if he you know hits it one more time he'll end up with half a trillion this chart is pretty great um saks if you look at this this is the gain and loss on investments at the vision fund uh you can see the first vision fund raising up uh then coming down i think after that summer of ipos that we had in the airbnb uber days and then a huge peak run up in 2021 and then coming crashing down apparently he wasn't selling uh any portion of this that to me was a big lesson of like maybe pairing some of these winners if it sold 10 or 20 percent on the way up this could look like a completely different outcome uh but i agree with him off he he swung for the fences and there was downside protection built in for the lps into some of these sacks what are your thoughts any lessons here in terms of the impact on our overall ecosystem or that you can take as a capital allocator yourself well uh jason i think mossa did something you could never do which is admit a mistake oh here we go wow personal quick well would i have my first mistake i'm certainly willing to admit it i'm waiting imagine that you ran 100 billion for sovereigns instead of a hundred thousand for doctors and kind dentists you can kind of put yourself you can put yourself in moss's position yeah oh i love saks in the morning saks in the morning's like a hot cup of coffee he's up early that's the big lesson here you make sex go to a 9 a.m wow you know look i think that softbank obviously made some decisions that were you know they were they were sort of peak decisions um they were they were a little bit bubbly they didn't take chips off the table and they probably should have it's easy to fall into these bubbles because the psychology of it is so powerful and as you know bill gurley's pointed out these bull markets are more like a sawtooth which is they gradually go up for 9 10 11 12 years and then when they end they just you know it's like an elevator going down so you know if the market had continued for another couple of years mazda probably would have made a lot of money but in any event look he took responsibility for the losses this was a very you sort of culturally japanese speech i mean he didn't commit supoku at the end but it was kind of the direction they might move the camera off oh my god what is he doing with that sword it was the verbal equivalent basically and uh look he took responsibility what else can you do now one thing i would quibble about is the idea that that softbank caused this bubble um you know it wasn't just softbank we had tons of tigers tiger had huge funds they were deploying very quickly but there was a lot of so-called tourist money basically money from crossover funds investors who are not primarily vcs came into the ecosystem over the last few years and a lot of that was driven by sovereigns and by liquidity so you know you can't forget that we had 10 trillion dollars of liquidity pumped into the system over the last couple of years and many billions of that found its way into the tech ecosystem and fundamentally you know vc is not that scalable there there was an attempt to make it scalable there's an attempt to push more money into vc why isn't it scalable why isn't it scalable because people have tried right this is it is scalable it's just that if you try to scale it your returns will go to zero yeah that's kind of the same thing right like i wanna i wanna just critique the strategy for a second because um you know we're talking about as if market conditions cause these massive write downs and that is the only reason that these funds have suffered but you know if you read a lot of the stories of masa's investments in a number of these companies and the full list is available and how much he invested there are many many stories and i've heard many of them personally from ceos that have met with masa and raise money from him you go into masa you tell some the bigger the story you tell the more excited he gets the more of the world you can capture and you go and you're raising 100 million dollars he's like i'll invest 400 million you say you're raising 25 million he's like i want to give you 150 million and um his his motivation was always give you more capital so you can go capture the market and the problem in that model is that by giving you so much money capital becomes your primary asset as a business and capital needs to be the fuel that enables your assets as a business to accelerate but as soon as capital itself becomes your primary asset the business is doomed to fail and that's a really key point if you let's say and let me let me be very specific about what i mean let's say you have a direct to consumer business that requires online marketing and your your business grows well you spend 100 to acquire a customer suddenly someone says here's a billion dollars to spend on acquiring customers as soon as you have to start deploying a billion dollars your cost of acquisition goes up the number of customers per dollar spent goes down and the business itself starts to look upside down and fail and that's what happened with a number of these businesses that masa put in and he put oversized checks in wework is a really well documented example in terms of what happened when they started to accelerate their growth beyond the natural course of the business because of the amount of capital that they took it really started to hurt the fundamental profitability in unit economics of the core assets of the business and um this strategy theoretically can work to a degree but masa took it to a level that had not been seen before i think i i highlighted for you guys like back in 2011 i think when andres and horowitz they pitched me on this idea i was trying to raise 25 million dollars in my company mark was like we'll give you 40 million dollars you can accelerate your growth and he's like we want you to go capture the market and peter thiel always use these terms go capture the market and these um and blitz scaling and blitz scale again reid hoffman with blitz scaling and the motivation is look we'll give you more money because the the core asset of the business works the core assets to the business work so the money should be more fuel for the fire the problem is if you over indulge if you put too much money in and the the asset cannot handle that much capital the whole thing collapses yeah i would say so many documented examples of this in his portfolio and i think that the strategy is worth highlighting that there are some issues with that strategy across all these business categories it doesn't always work right the core issue here i think is and then i'll i'll go to you saxon the core issue here that you're describing is exactly correct and it really is up to the founder to decide what they're going to do with that capital the wework example is so instructive because they were buying under market uh buildings in the in the tenderloin and then marking them up to you know class a office space and getting those prices once they got the masa money he started buying class a and offering it at class b prices and flipped the whole business upside down rate at which you can deploy capital does not flex right and so in all businesses understanding the rate at which you can deploy capital to grow is critical to understand how much capital you can raise and then if you raise too much money and you and you flex beyond what the natural condition of the business is in terms of capital deployment the economics fall apart and the business itself looks terrible and eventually you will have a right down and the distraction on the founder is the key i mean look what adam newman he was easily distracted he started buying surf machines and companies and starting kindergarten because you can't naturally deploy that much capital so you find unnatural ways to deploy let me build on that point i think there was a belief on the part of softbank that they did publicly espouse which is that they could be the king maker totally and in fact you know we had some startups that were in competitive markets and softbank would basically announce that we're going to be anointing we're going to be picking a winner anointing a winner and writing them a huge check and everyone kind of had to play along because if your competitor got that 100 or 500 million dollar check then you would be presumably way behind so there was this belief that they could be a king maker and make the difference and i think that what we saw is that for whatever reason partly because of the dynamics that freebie's talking about that that strategy just didn't really work that well and what it really goes down to is that vcs can be helpful but they don't ultimately uh cause the the the winning companies to be the winner um so this idea that you could be a king maker i think was a little bit flawed i think one way that tiger actually improved on this model was that they never tried to be a king maker they just they actually went the other direction which is we're going to own less your company they tried to be passive non-dilutive capital and they would do high price rounds but you know with with reasonably sized checks but they didn't try to go for 25 30 ownership at a late stage and founders did like that model better now as it turned out they both had the market timing wrong but i think this king maker aspect was was a problem and one other aspect of that i think is that and i don't want to beat up on softbank too much i'll see something nice about them in a second but i think one of the mistakes they made is you'd see them writing multi-hundred million dollar checks into companies that were at a very very early stage free product market fed pre-product market for companies frankly that we thought were like seed investments brandless was the perfect example they were it was a it was a company that made like soaps and dishwashers and cereal but they had no brand on it was like uniqlo of this and they gave them i think 200 million dollars and i was like this is a seed stage company makes no sense right right they were i mean look they wrote like 500 million dollar seat checks into robotics companies effectively and it's because that you know the softbank had a thesis and i think sometimes if again this goes back to kingmaker if if you're a vc and you think you're the one with the thesis and you're the one who's going to make the difference it's actually a seductive fallacy to fall into it's the founder who has the thesis and you can't you can only do so much to help and you can't really force it and so i think they ended up making some cutting some really big checks into some companies that were really risky and you know the way that we do growth investing is that you know it's milestone based we're writing that the size of the check is proportional to the amount of proof that the company has and and look the nice thing i'll say about softbank is recently we've actually done some sas deals with them that i think are some really good deals and they've written checks that i think are appropriate to the size of the of the company and the amount of proof they have and they've been really easy to work with and i look forward to doing more deals with them but i think it would behoove them to do more deals like that where again check size is related to proof i think that softbank in hindsight made one critical critical error and only one and everything else was sort of affected complete with that one error which is that in their fund documents they made this a 10-year fund now let me explain why is that an error that is the status quo for all these funds and the more nuanced part of that decision to make it a 10-year fund is that your investment period is only five years so you're only allowed to put the money in for the first five and then you have to basically manage the portfolio because there's an expectation that you raise a new fund so if all of a sudden you have a hundred billion dollars in a five-year investing life the math says oh my gosh okay well i need to put 20 billion out per year and then you try to look for i don't know let's say 50 companies a year while the mean check size now all of a sudden balloons to 400 million that was the error you see afterwards the very very smart private equity folks who saw that that was the error fixed it so blackstone silver lake when they came on the heels of softbank what they did was they raised funds with a 15 and 20 year life and what that allows them to do and what what it would have allowed masa to do in this situation was just slow it way way down pace yourself and do fewer deals with much more capital and then be patient and say i'm going to have a 10-year investing life and i think that that would have saved them and they would have looked incredible right now because they would be the king maker in a moment where there is no money flowing into venture an early stage tech so in my opinion i think it was just that it was such an ambitious feat that when it came time to execute whoever was really in charge of those details kind of [ __ ] it up and they should have realized the math didn't work for a five-year fund life and they should have made it a 10-year frontline or 10-year investment life which would have put a 20-year fund life on the thing and i think they would have been fun yeah i mean if you look at it as 60 months maybe you take out august and like the holidays you got basically 50 months to deploy 100 100 billion it's 2 billion a month 500 million a week i mean how do you even process that many deals it's impossible the quality of the diligence by by necessity has to go to zero yeah it's it was a crazy strategy if you can breathe you get money if you can get a meeting you get the money i mean basically i mean and and if they had just i i'll say if there's there was one sorry this one would be good no and it forces you to have a team that is so broad and large and diffuse that is not this game this is another thing i would love to you know for us to talk about correct correct investing has never will never and is not ever a team sport okay it is like basketball you can be on a team but you are steph curry or you are not steph curry you are draymond green or you're not draymond green you are lebron james or you're not there are j.r smith's on a team they're tristan thompson's on a team and you come together and the team can win a championship but there are these exceptional individuals yes and the firms that have really done well consistently over decades embrace that philosophy benchmark sequoia you know these guys don't try to create this team-oriented glad-handing approach but they also don't allow the teams to get so diffused that there's 500 people running around ripping money in because you basically then return the beta of the market and if the market doesn't look good in that vintage then all of your returns look pretty crappy the lesson for me in all of this is i think we talk about writing your winners on the show that came from just so people understand when we said ride your winners and it's famously in the in the opening song here what we were talking about was like don't sell your entire position like when sequoia sold their entire apple position or other people have done but pairing your position would have changed this whole story if he had paired 10 20 percent of some of these names that were breaking out i disagree with that too along the way oh why go ahead because that's the dumb i think that's the world i think the opposite he would have had it up a year ago sequoia just put out an entire document and a roadmap for becoming an evergreen fund but and i read that document and what i thought to myself is all of this looks incredible unless the market goes down and then a market and then the market went way way down why because their whole thesis is we're going to park and hold money well okay but they also allowed a revolving liquidity mechanism for their lps every year you know you're a cancer foundation and you want to fund cancer research and you expect sequoia to give you back money you fill out a form and sequoia basically fronts you the money well excuse me but you can see how all of a sudden this can very quickly get out of control because then where does sequoia get that money they'll have to borrow it or liquidate some positions but the whole point is to not liquidate positions this is what they said yeah so my point is i really think and david said this before i think that vc's job is to be a vc it's hard enough to do that job well and if you think that you're going to cascade across all asset classes and do better than the market it's an extremely high bar that creates tremendous pressure and forces you to bring things on like debt and all of these leverage lines which when markets go up will work in your favor but can very quickly turn against you yeah i disagree completely because when if you look at when you're in a private company and you're you own some private shares you know the revenue you know the velocity you know the management team you have more insights than everybody you got a massive information edge because it's all based on insider information before it's public and pairing your positions in privates uh can be amazing because you have some overvalued company because someone like masa or tiger comes along that overvalues it so for venture funds i think when you start hitting these 50 100 x's pairing 10 pairing 20 along the way which masa could have done and these private names especially would have been brilliant you're saying don't distribute and just hold on and use data and give people give your lps them on liquidity no no no i'm saying if you have the opportunity to sell in secondary you should pair your position in your winners 10 or 20 two or three times i'm not saying that i'm saying that this would be a different position but like you're using soft you're using apple and sequoia as an example you do remember the trajectory of apple basically went to a 4 billion market cap for years languishing i mean the idea that sequoia would have held those shares because they had some proprietary views ludicrous why is you can see the youtube videos when steve jobs came back he said uh we may not make it yes but chamath that in that that is part of the opportunity but putting that aside that's exactly what sequoia is doing is they're saying we want to hold the legendary companies the legendary brands with the great founders before it's all easy in hindsight how do you do it today well is unity a legendary company or should you have distributed 165 dollars a share well i'm such an extremely hard question and i'm saying you can mitigate that question by pairing your position 10 20 percent so you have the best of both worlds what do you think well i think it's it's hard to pair down a position while the company's still private because the companies don't don't want you to by and large but but once they do become public then the question is when you distribute and we talked about this i think it sounds like sophing was sitting on quite a few large public positions and could have distributed i'm not fully familiar with their structure but given that they had all this debt seems like you'd want to pay off all the debt uh as soon as you could and missing every year i think it's like three or four billion dollars it's well it's documented but that's the six percent that they that they were owed on their 50 billion dollars but did they pay it off well you have to get paid every year yeah so they did it i mean look i would just say these bubble it's it's easy you know hindsight's 20 20. it's really easy to point out these mistakes after the markets cratered you know my experience with these bubbles whether you go back to 1999 or 2021 is when you're in them they're very powerful psychologically you know everyone's talking about how everything's going up and we i think actually had some really good commentary on the show about back in november about how it could be the peak how it could be all liquidity fueled uh we didn't know for sure but there were some pretty good predictions on this pod but by and large it's it's pretty hard to to know whether you're you know whether is there a grounding metric that you use i'll open up to freeberg and then everybody else when to know that the market is overheated free burgers there's something you look at and go okay we've disconnected from reality price to earnings price the sales some valuation metrics are the things you look for so you know that this is overheated and maybe it is time to pair positions uh what what have you learned over now our third collective uh down market valuation trophy hunting i would say is a pretty good indicator of things being things being um explain what that is in a heated market like if the the businesses the ceo the founder the venture firms everyone is all about how much you can mark up your investment as opposed to talking about the quality of the business and the quality of the earnings and then you revert back as we just recently did to now people talking about okay uh how strong are the gross margins of this business how effectively can they deploy capital what's the return on invested capital key metrics around the fundamentals of the business versus the value that the market is willing to pay for the business and the more heated the market gets the more everyone focuses on terms like unicorn decacorn you know and that becomes the key metric as opposed to saying this business is so good for every dollar they spend they make three dollars in gross profit in 12 months that's what fundamentally says that's a high quality grow you know a valuable business over time as opposed to here's what the market is telling me it's worth today and if the market is telling you it's worth that much today and you're and that's what you focus on you inevitably end up in these kind of bubbly moments where you miss out on focusing on core value creation which will actually pay off much much more over time jamaf you pointed out another signal um hey when smart people who have the largest amount of capital in the markets are clearing positions uh maybe that's a signal of a top and then i think it's a really good insight by freeberg when the conversation the narrative is about the valuation and the status and vanity metrics as opposed to the quality of the earnings hey that's a really good indicator we're in a bubble maybe you should start clearing positions what are indications for you that we're either in a bubble or the market is undervalued because we're really talking about this timing right timing is very important it's not possible this is why i think that you have to define what game you want to play before you start playing the game okay this is why i think it's kind of nonsensical for example i believe that at best i am an equity investor in technology companies or things that have a technology bias because i can generally understand them maybe you know a few seconds faster than everybody else which allows me to make a decision a little bit quicker but if all of a sudden i started investing in debt you should expect that i'll lose my money because i don't know what i'm doing and that's not the game where i have any advantage so i think the most important thing to do is to not try to do all of this crazy stuff because this is what happens in moments where either things are very very good or things are very very bad people try to create all these stupid rules and the rule their only rule is there are no rules so i don't know i just think it's like stick to your knitting if you're a product builder build products if you're an early stage investor just do that it's hard enough to do any one of those things really really really well but this idea that you know you're going to come up with like some mosaic in a system i think it's just highly suspect and i think the market returns have showed that everybody that tries has failed except for maybe one or two seconds i mean it's just not gonna work what's the point so i don't know if you're an early stage investor make good deals and then give the shares and book the win that's what i do yeah that's my philosophy um saks what are your thoughts there's a couple of metrics that i'll be looking at from now on that i wasn't paying a huge amount of attention to before one is the price to arr of the median public sas company and so like brad gerstner has these great charts where you saw that historically that number was around six you know the median sas company was was trading at about six times the next 12 months revenue and it went all the way to 15 during this sort of covet bubble in 2021 and for the high-growth sas companies which are the ones growing forty percent said twenty percent it went from you know like eight to thirty five so um so i'll definitely be looking at that and you know what you're looking for is just how off the historical mean are we positively or negatively because these public valuations are the exit comps for you know the private markets and those valuations do eventually trickle down and so if there is a bubble in the public markets it will trickle down to the private market so that would be like one metric i mean again it's not something that like affects me daily but it's something i'd want to periodically keep tabs on the other is just interest rate policy i mean i've never spent so much time in my entire career like looking at inflation and interest rates that i have this year because who knew how much this stuff was affecting us i thought i was a micro investor i thought i was just picking companies on a micro level as it turns out we were all massively impacted by macroeconomic policy and you know it got so we didn't even notice it the zero the zero interest rate policy the zerp along with the quantitative easing these are supposed to be exceptional measures that started back in 2008 but we stopped noticing them they continued for years and years and years they continued until last year and we again we just stopped noticing because we got used to it we kind of got hooked on hooked on drugs so the market did um so i'm just gonna have to pay a little bit more attention to what the fed is doing now and you know if you go all the way back to the dot com bubble what's interesting is that the fed funds rate back in 1999 wasn't low it was like four percent um it wasn't like it was even today and we still had a bubble but what popped the bubble was that interest rates went from four to six percent in from 1999 to 2000 that's what popped the bubble so you know i i don't i don't know if we'll ever have a situation again like we had over the last years with the zerp but um i mean that probably looking for that next time is fighting the last battle instead of the next one but you do probably have to be a little bit more aware of monetary policy and what the fed is doing yeah this chart um exhibit six from the vision fund benchmarking against pure funds that chamath just put into the group chat is absolutely spectacular it puts sequoia insight and softbank you know large large funds uh against each other fund size 100 billion for softbank eight billion for sequoia 6.3 billion for insight and 2 months point earlier the pace is yeah really crazy 130 deals meals per month but then the average check size is 620 million versus 130 and 70. and the deals per month 3.5 versus 0.6 versus 4.2 so insight going pretty fast with small checks soft bank going very fast data here huge tax is really you know sequoia has the benefit of being able to back test against 40 years of returns and so if essentially what they're saying is there's really no more than five or six companies a year that are worth investing in that's a really big signal that's worth thinking about and so you know five or six companies maybe they can absorb even 600 million dollars each you know it still puts you at three and a half four billion dollars doesn't put you back twenty which is what you need to put a hundred into the ground and two billion a month i mean my lord it's like brewster's millions or something it's it's like some crazy i think in fairness to in fairness to softbank again you know these are the same guys that invested in yahoo they invested in all of these you know com companies and brought them into japan including great businesses like cisco you know these guys have been big time serial winners i think the tactical mistake was not having a 10-year investment life i mean and we could be sitting here next year alibaba could double in value a couple of their other positions could recover 50 percent okay but we could be sitting there and they could be they could have closed the gap massively anything's possible i think actually a good jump off point here uh great discussion gentlemen do we want to talk about the markets and we got the inflation print uh sax i guess depending on what political party you're in it's either 8.5 or zero zero percent month over month uh if you're a democrat if you're republican it's eight point five percent in our uh polarized times uh but what does this tell us uh saks just at least about maybe inflation is tipped over and we're going to be flat for a little bit that obviously caused the market to rip a little bit and we had this incredible jobs report we're now at 3.5 percent unemployment and we have twice as many jobs as we predicted i mean it's pretty extraordinary what happened in the last 30 days to the to these uh prints yeah look i think that overall the economic data is mixed uh but we got a couple of good data points in the last month so inflation did decrease from 9.1 to 8.5 percent inflation was until now measured on a year-over-year basis not a month-over-month basis but since we got the first good month-over-month reading all of a sudden now it's been redefined to be on a month-over-month basis just this is the same thing that happened with the definition of recession where recession used to mean two quarters of negative gdp growth of course that happened and so all of a sudden the definition became unknowable we have to defer to this this economic board that won't render a decision until next year by the way if that were true how can we ever contemporaneously talk about a recession you know if if you had to wait until this economic support declares a recession a year from now the press could never have ever reported for one recession yeah i'm shocked politics politicians of this are obvious which is they keep redefining terms rather than admit that there's any bad data at all now look i don't i don't think the data is catastrophic i don't i don't think i don't think it's in anyone's interest to catastrophize the data but there's a lot of negative data out here i mean look inflation is still very high eight and a half percent if you had told any of us that in august that inflation would still be a half eight and a half percent the beginning of this year we would have said that is horrible because remember the investment banks were all saying it's gonna come down to three percent by the end of the year so inflation is still high the jobs picture is good um we're technically in a recession i if i were to predict i think what's gonna happen now i think you know look for a double dip i wouldn't be surprised at all if in q3 or q4 we're back to positive gdp growth but i don't think we're actually out of the woods because i think there's a pretty good chance that next year these and these rate hikes really kick in it takes six to nine months for them to ripple through the economy so if you look at the construction industry the construction industry's just been devastated new housing starts you talk to the builders they tell you that the construction industry has just been clobbered by these rate hikes the inventories are piling up and the affordability of there's a chart today about the affordability of home prices at a 40-year low and so the construction industry it's really the bellwether when a recession starts they're the ones who are first impacted but it's probably going to take six to nine months because the loans are so expensive and cost of capital is expensive right you can't start new projects yeah so look i if i had to i think we're in a shallow technical recession right now i bet that we probably bounce out of it in q3 or q4 but i think there's a significant risk that we're back in we're back in it next year just my guess free break we've been talking about consumer credit a whole bunch buy now pay later um household debt now totals more than 16 trillion credit card balances uh make up 890 billion of that obviously student loans mortgages other things are in there and the number of credit cards uh is now at a massive high 550 million of them issued here in the united states uh we added a massive amount of debt uh it's still lower the the credit card debt just to be clear is still lower than the free pandemic level of 930 billion but consumers seem to be taking out credit i guess to deal with inflation or to enjoy their lives because they're not stopping their spending uh and we see that in some of the stocks and the earnings reports that are coming out as well so what's your what's your take on this you know conflicting data we have or is or have you made some sense of it and and what is your prediction of q4 sorry are you asking what my take is on the consumer credit well basically the overall macro situation here we've got consumer credit you know people taking on a lot of debt while jobs look great while inflation is still high what does that look like you know as we go into q4 and next year what what is this telling you is there some signaling you can take from this sac said shallow recession thinks we might double dip i'm kind of getting to your prediction of q4 i mean this is a little bit repetitive i mean i've said this i first said it in may at the all in summit and i said it again on the show twice great which is i think that the definition of a recession of negative gdp growth when you're coming off of inflated gdp is you know it's not a binary catch-all term i mean the fact is we had uh inflated assets and as a result of inflated assets we had inflated earnings and we had inflated valuation and we inflated income and you know now the capital's coming out and things are going to go down inevitably but i don't think that this should be deemed that there's something fundamentally negative about the u.s economy the biggest risk i still see is this rising consumer credit balance particularly in a rising rate environment people are taking on more debt if you look at the new york fed here i'll just give you the latest this is the household debt and credit report they put out household debt rises to 16 trillion dollars amid growth in housing and on housing balances and so there are variable rate loans in there in the auto home and credit card markets those variable rates mean that as interest rates climb the amount to service existing debt will go up each month and the amount of debt that's being taken on is also going up each month and so the key economic question is does the income gain that's being experienced or the asset value gain that's being experienced outpace the increase in um monthly debt service needed for a large number of consumers student loans are also in here by the way and so when you put that all together um it's a it's a very technical question which is technically where do you start to see defaults rise and when you have defaults rise then the money that's owed and the services that are the service payments that are owed on that debt trickles through the economy because bonds start to default um equities start to decline and so on so um you know i this is why i can speak at a high level from a macro point of view that the rate at which debt is going up and consumer credit is going up and the rate at which rates are climbing that affect the revolving and variable rate um debt that consumers hold could outpace the income and the asset value gain particularly when equities are down 401ks are down housing prices are down and so there's a tipping point and when that starts to happen then you start to really hit um an economic crunch and i've mentioned this multiple times now that it's the thing you know i would kind of watch most closely while there are core elements of the current economy that look strong um there are uh real uh concerns around whether consumers can keep up with their debt payments uh in the monthly quarters ahead yeah chamath are you following this consumer credit uh surge and do you think that this could be a black swan type event this could be you know um because it's right here in front of us so you know okay yeah yeah i would say like a massive contagion where there's massive number of defaults creating a black swan contagion-like event but yes so it's it's not it's maybe hidden in plain sight what do you think jamaat is this important data uh or impacting your view on things yeah i think it's important it's part of a mosaic and i i don't i don't really know look what are we trying to get from this discussion i don't understand like like are we trying to predict what's going to happen i mean i think david basically said it best like if you actually just take a step back and stop overlaying what we want to happen look the reality is all four of us want things to go up and we like it when there's money in the system and everything's flush but if we had said last year that we would open an envelope and you know we would show these inflation prints we would be shocked and we would have been scared and quite honestly you know in the process in november when i started selling i would have sold even more violently than i sold and all i can say is i saved my ass in november of last year looking at what's happened in the last six eight months so i don't know i just think that if you look at the cpi print and you look at the components we were saved because energy basically fell off a cliff and for whatever reason a bunch of people decided not to travel and you know we didn't import as much oil and we were able to keep cost contained and that kept cpi from being really out of control but again we're in the summer where we don't have the pressure on energy that we're going to have in october november this year so i i really don't know i mean i just think that there is like freeberg has his pet issue i have my pet issue saks has his pet issue you ask a hundred economists they'll have their own pet issue housing affordability whatever it is the point is we have a hundred whack-a-mole problems and the question is which mouse trap sets off the rest of the mousetraps i have no idea um and so you know i just think that right now things are a little bit too calm and that makes me feel very unsettled another shoe might drop i mean the point of the conversation is to try to understand and make better decisions in capital allocation company formation and placing bets in the next year so that i think that's the point of the discussion we now have the spectacle of the president saying he's going to pass an inflation reduction act to solve a zero percent inflation problem to get us out of a recession that he says doesn't exist you guys know this but the the politics and the political commentary on this are absurd i think what we're describing here is to simply more honest which is to say that the data is mixed so we don't exactly know what's going to happen yeah i mean the thing that i think is encouraging is when you look at this jobs data and you look at the debt that consumers are putting on my theory is and i could be wrong that people want to keep spending uh they want to keep living their lives they're taking on a little bit of debt to deal with inflation and to keep spending but they're also going back to work and i'm seeing that anecdotally a lot more people going back to work and the numbers show that that feels to me and i said this on previous episodes that that feels like a possible you know very helpful path out here and i think you brought it up saks as well which is hey if we have increased participation that's great increases monetary velocity increases participation in the economy that's a possible path out do you do you feel like that's still holding strong secular decline on that trend for 25 years so maybe maybe on the margins a few folks um run out of stimulus and decide to go and get a job but i don't think again it's it's kind of like you know when you're at you're when you're at the blackjack table in vegas and clapping there's a strategy happening i feel like all the like what we're talking about right now is clapping as a strategy maybe this can happen maybe that cap you know what maybe it'll start raining gold [ __ ] coins that we can use and just worry about i mean yeah i mean i feel like the last 15 minutes have been like not a good conversation because look the structure of the problem i think is very well defined which is we have an inflation problem great it went down from nine point one eight point five percent it's still really high two to three percent would be would be normal okay so that's half the problem is how fast is inflation going to go back down to normal based on interest rate cuts the other side of the problem is increases is sorry interest rate increases not cuts the other side of the problem is how much will the economy be hurt by these rising rates and those are the two variables and we see that there is a slowdown there's still a lot of jobs being filled which is good but there is unquestionably an economic slowdown and those are the two sides of this equation and we just need to see some economic data it's going to play out over the next seven years we've been asking the same question for three [ __ ] weeks if you guys don't want to talk about the new data that's fine we don't have an opinion other than we don't know how many ways can we say i don't want to talk about inflation or recession or jobs or any of that [ __ ] anymore unless there's something really for us all to say like something news come out well like some [ __ ] economic report was really important i mean that was a that was a massive print but it's not that it's it's oh yeah it is twice as many to keep track of what we've all read data point it's one day there were some bad jobs reports before that print yeah i think we should stop doing the recession inflation chat every week it honestly is like repeating a better job moderating can you not dial it in you got no you guys asked to talk about it you guys put some of these things on i don't want to talk about it anymore i think we should congratulate you let's move on what are you okay what do you want i think softbank was a great chat i think you know that was a good talk we should do that kind of [ __ ] we should talk about i don't know what you guys think about the sequoia evergreen fun tell me what you guys think about that come on geniuses the sequoia like when they restructured are you joking i love i love when these two go silent no no i i always didn't want to interrupt anybody i don't understand what you're saying i don't understand why you guys are trying so hard to avoid the the obvious news of this week is there something else in the news this week zach's um if trump actually had some material in mar-a-lago that was related to the nuclear program and um you know there was an attempt to try and get recover those documents through normal means and they were not recoverable what would your course have been if you were the director of the fbi or the president of the u.s in that condition because i think that seems to be the party line of what's going on here well the democratic kind of spin on what's going on here but like you know honestly in that circumstance what do you think would have been appropriate so there's some sort of confidential material related to our nuclear program or nuclear weapons something something there in those materials that were attempted to be recovered or were taken without approval and then they tried to recover it for you know assume there's no nefarious intent what would be the right kind of course here well i i so i i don't know exactly what's going on i just think that um you can't necessarily give the f sadly i don't think you can necessarily give the fbi the benefit of the doubt here in light of their history um but let's back up i mean first you had this this raid on mar-a-lago where you got 30 fbi agents they're not wearing suits with holstered sidearms they're carrying ar-15s you know weapons of war fingers just outside the trigger guard they're wearing body armor it looks like a para military raid on mar-a-lago it's utterly unprecedented and you look at tweets by andrew cuomo for example or uh andrew yang i mean these guys actually turn out to be pretty i think intellectually honest democrats on this point saying this is unprecedented and it's really going to here i want to read this by why aren't you andrew why don't you answer a free bird's question i'm getting there i know you're going to cut me off so i'd like to just read these tweets so maybe you because you know maybe you'll give more credence to andrew yang he said i'm no trump fan i want him as far away from the white house as possible but a fundamental part of his appeal has been that it's him against a corrupt government establishment this race strengthens that case for millions of americans who will see this as unjust persecution you have andrew cuomo saying doj must immediately explain the reason for its rate it must be more than a search for inconsequential archives or be viewed as a political tactic and undermine any future credible investigation and legitimacy of january 6 investigations and let me read one other tweet by elon that's not directly about this but he tweeted this on july 11 so a month ago and he said i don't hate the man but it's time for trump to hang up his hat and steal at the sunset that was the part that was widely reported but he also said dems should also call off the attack don't make it so that trump's only way to survive is to regain the presidency i think there was a lot of wisdom in that and you know i'm old enough to remember when the case for biden getting elected is we have to move past this partisan warfare this extreme rancor and derangement and we were told that the media you know all these people who had tds that that their psychosis was due to trump and if we could just move past trump this all this sort of partisan warfare would end and now and and i was certainly hoping that would be true and now sadly it seems like we're right back in this thing um where we're right back with the media being obsessed with tds portraying this narrative that somehow he's a traitor and what does this whole thing hang on just these two words nuclear documents well listen until they actually produce those documents i'm going to suspend judgment because the fbi the last time they did this remember they manufactured a falsified warrant to the fisa court for this type of investigation they have that history so i'm just gonna suspend judgment on what's going on here until they actually produce the documents they're talking about can i ask him right now he stinks do you honestly question the integrity of leadership and agents uh at the fbi are you serious like you don't think yeah all right let me read you this tweet from michael burris i don't hear the tweet i want to hear your point well no well i i i agree with what michael berry is saying so i think sometimes there's a lot of thoughtful commentary about this and what barry says is jager hoover led the fbi for five decades denied the mafia existed fought the civil rights movement shielded the kkk multiple presidents acknowledged fear of him so what he's saying is that the fbi since its inception has political origins uh and and basically meddled politically in the affairs of the country then he says the fbi lied to the fisa court this is back in 2016. totally true altered emails leaked lies to the press to get trump nothing shocking so freeberg listen i don't know whether the fbi is telling the truth but are you honestly going to say that the fbi's leadership has never been political that has never harbored or pursued their own agenda and that has never had a desire to go after i'm trump i'm not making it all happen we saw we saw the text messages from comey strzok mccabe i mean these guys basically took it upon themselves when trump was elected to be the quote-unquote insurance policy yeah and an fbi lawyer pled guilty to falsifying documents to seek a warrant from the fisa court so i just think anything's possible here now i'm not saying the fbi is lying about this i don't know but the idea that the fbi is automatically entitled to the benefit of the doubt in light of their proven history of basically pursuing trump like ahab pursued the white whale i mean yeah these guys have been after him i'm just going to zoom out for a second the reason i'm interrogating sax on this is like it's just so telling to me that a guy like like you sacks in your position are actually questioning the integrity of like the highest justice authority and institution in the united states um really says a lot about kind of the state of of the us citizenry the state of our society today i i think it speaks a lot at least a third of americans i know it's incredible and what ray dalio said in his book about how during these periods when the empires begin their decline and you know when you're challenged with kind of the economic conditions that the u.s is challenged by printing lots of money lots of debt very hard to service all that debt and we have a ton of obligations over the next decade or two that are going to be very hard to meet given our economic growth and inflation conditions right now that you start to see these sorts of behaviors historically it's happened six times in the last 500 years where large empires like the united states are large you know economic powerhouses like the united states start to decline that the civil war begins that the institutions get challenged by a minority and then a majority of the citizenry and it really starts to crumble and and challenge the uh the integrity of the institution and its ability to hold itself together well i'm not hold on a second i'm not challenging hold on a second i'm not well you're questioning the integrity you're you're questioning the integrity of the department of justice right listen by the way i'm not i'm not arguing i'm just pointing out like it's it's an incredible condition for us to find ourselves in yeah but i but but but my questioning did not create that condition there this lack of trust is earned it's earned by the fbi in light of behaviors they took just a few years ago now listen i'm not defending trump per se i don't know what he did or didn't do okay but i think that it you can't just accept at face value without further proof these leaked what are basically leaked comments by the fbi yeah i mean look i'm not listen i'm not a naive child i mean the fact of the matter is that power can be corrupt and power corrupts okay and we have seen that the fbi from his earliest days did engage in corruption and more recently against trump himself had a vendetta against trump so i'm simply so hold on so all i'm doing is i'm not going to automatically accept at face value what they're saying until i see some proof now i'm not saying that they're wrong or they're lying about this i'm simply saying i'm not going to accept it at face value yeah and remember trump trump was elected on on on the platform that there is this deep state that there is institutional corruption that there is um malaise and lethargy in these institutions of the government that are funded on the order of trillions of dollars a year and that that's what he was intended to you know to go and and blow up and repair and there there's there's a very strong and potentially close to majority percentage of voting americans that that feel that there is this core deep state corruption uh institutional lethargy that is challenging our ability to give everyone the freedom and liberties that they deserve freebird these agencies are supposed to be nonpartisan they're not supposed to have a horse in the race and what we saw is that when trump was in office and these texts came out clearly the the top levels of the fbi these top agents i'm not talking about the rank and file i'm not talking about the field agents i understand that a lot of them are law and order types to vote republican i get it but i'm talking about the leadership the highly political leadership in washington and it was pretty clear that they had a horse in the race they did not like trump and they were out to get trump and you know again trump is not my preferred candidate for 2024 but what the fbi has done with this raid quite frankly i think has polarized the outcomes they are basically gonna send trump to the big house or the white house i mean because now the republicans have rallied around trump i think he's gonna be very very hard to beat for as the nominee in 2024 unless the fbi comes up with iron-clad evidence to show that he did something significantly wrong i care less about who did what and what was done wrong i care more about the fact that this conflict is escalating and it's creating a real condition of continuing uh polarization and it really is the the conditioning that you know biden had some historians in the white house there was a report on this last week and these historians spoke about how the conditions in the united states are just as they were right before the civil war and um and that there's real concerns that yeah well i mean you know they you can go read the the anecdotal reporting that was done on this thing but that was the general theme of the conversation and um you know it really it really kind of um concerns me more that this level of discourse is escalating to a point of uh you know there's corruption uh this person is a criminal and that sort of discussion happens um you know in more dire circumstances and more and economic circumstances than has ever been seen you know the u.s is the largest economy in history and we're now having these sorts of conversations that typically lead to some degree of conflict and it's really concerning well i just think listen i i think that trump was out of office we were told that this partisan ranker would stop once he was out and it's you know they're pulling him back in and all i can say is that when the i think we know maybe one percent of the story okay i think this leak around nuclear documents is it feels like a selective leak it's not certainly all sides are inflammatory both sides are cantankerous and i'm suspending judgment what i'm saying is though that when all the information comes out there better be a very significant there there no no no we've made that impossible too because he trump came out and he basically said uh hey listen if you if these guys find something it was planted and now you're going to have at least a you know 10 or 15 of the population that believes okay this was planted it wasn't actually there and you know so whatever the outcome is um will not be good nobody will be satisfied and both both of the extremes in the united states will be even more angry further inflamed yeah further well that's what i'm saying that's inflammatory index has now has now skyrocketed yeah by the way this is why i think at some level maybe the lack of faith in these institutions is well deserved because where is the the you know the prudence of all of this like where is the the circumspect thoughtful methodical thinking about all of the different outcomes that could be possible so that you exhaust every option and this is the only option left and then even then if merrick garland was open to basically saying unseal the warrant why didn't you do it before and say we're going to have to serve this guy unless he actually gives us these things there's all kinds of things you could have done oh clearly they did keep the hold on a second to keep the temperature of this thing way way down and that's what to your point jamal they could have let trump's lawyers watch them do the search so that nobody could claim anything about anything being planted yeah so the inflammatory index is spiking i think that's my key takeaway on all of this i i care less about what trump did and what the doj did and what the fbi did like i'm more concerned about where this takes us because the next step regardless of where it takes us you know where it takes us when you're on tilt at the poker table what do you do you cannot think properly that's right that's where everyone's at right now when people are so inflamed with emotion they start to make very poor decisions i don't know whether the doj and main justice made a poor decision or not i think this is where we have to hold our breath and hope they didn't i don't know whether the white house knew anything or not but the whole point of all of this is that we pulled this guy right back in to the to the to the main stage absolutely i mean you're like i said you've polarized the outcomes you're either going to basically send this guy to jail or you're going to summon the white house no i think there's very likely no i think there's very likely a middle path where nothing happens right but it will further erode what freeberg says which is it's just a little bit less trust in the institutional integrity is eroding and when institutional integrity erodes the the fabric of what keeps everything working starts to fall apart and i'm not saying this is some cataclysmic civil war happening just to be clear i'm not saying there's some cataclysmic civil war happening next year but it's an unfortunate decline in everyone's faith and and the stability of the institutions that we all rely on to support and service us because the inflammatory index is going to go up and everyone's going to be criticizing everything and that's enough this is why i think we really have to ask was this really necessary i mean why did the doj and the fbi think this was necessary yeah these boxes were just sitting there i think that's a reasonable question is like if these things were actually sitting in the box with a lot that they changed there must have been something more that was so grievous where you had to do something like this now by the way david i just wanna i read so i don't know if it's true or not i think maybe it was in barry weiss's upset or matt tybee's upset these folks weren't armed to the teeth they came in jeans and shorts and t-shirts in fact maine justice told them like do it as well i've seen the photos they i've seen the photos they had outside i'm saying the people inside were there for six or seven hours and only a few people knew about it they were there for nine hours they basically told trump's people they couldn't be there they had to leave they told him to turn the cameras off and they had like highly militarized guys they were something like 40 people and something like 30 of them were heavily armed the optics were terrible if there was some nuclear confidential nuclear material in mar-a-lago and through normal means of communication they had asked several times to have it returned and identified this for him and he had refused which i think is a very reasonable kind of you know conditioning for what may have happened here and then they said okay we gotta go get it there's no choice this is like super confidential nuclear material we gotta get this stuff the only way to get it is to serve a warrant and go in there and get it you know under those circumstances you know do you think that this would have been kind of inappropriate like assume all other kind of communication means were exhausted like you know what would you have done if you were president listen i think there is information that could still come out to convince me that this raid was warranted um i just haven't seen that information yet and i think the optics of it were terrible i'd like right the point i was making i don't know why it wouldn't have been good enough to send in the fbi agents with holstered sidearms you know not ar-15 weapons of war you know where the fingers were just outside the trigger guard it looked like a paramilitary raid so whoever was thinking about the political ramifications this clearly didn't do a very good job i also don't know yeah yeah i also don't know why you wouldn't give the courtesy to a former president united states to give them either more of a heads up or to let his lawyers attend so that just for their own protection so they can't be accused of planning anything that would have been smart and i don't know why they would have said to trump's people that they couldn't record it and i don't know why there's been reports that the fbi went through melania's closet i mean seriously they're like going through melania's clothes it's just weird it's weird so there's a lot about this that we don't know i'm not conclusively rendering judgment about it because there are things that absolutely could come out to convince me that it was warranted but i haven't heard them yet okay everybody we'll see on the next episode of the all-in podcast love you [Music] and it besties we open source it to the fans and they've just gone crazy [Music] we need to get these [Music] i'm going on [Music]








jacob what's it feel like to be a guest on your own podcast today i'm excited oh good so delightful you did a great job by the way really like um the punch up to the formatting where you actually put the questions in yeah i think it's because i want us to all agree on the stuff we want to grok on you know in a professional tv show they would have pre-interviews with everybody get all their positions then they put the positions into the document and they you know they basically do what was called a pre-interview or here's another idea you could do your job well i mean how about that how about you try that yeah or you know or how about i turned you three miserable [ __ ] into actual likable people in 91 episodes which nobody thought was possible i actually think i'm becoming less likable the longer i'm on this show i think that's i think that correlates with all of us all of our like abilities [Music] [Music] hello and welcome to the all in pod i am your moderator for today out of the hot seat doing the easy beat dave friedberg i'm joined today by our esteemed panel back from his european shopping spree our national treasure america's favorite dictator paulie apatia jamal how are you feeling i'm feeling great you're okay you're recovered yeah i'm a little i've got i got a little head cold though oh well sorry to hear that hope it's not covet 2.0 no i test it i'm covered negative thank god okay also with us as usual from his emergency bunker ahead of the u.s civil war the rain man david sacks how are you david good happy with the late start this morning i'm sure and of course everyone's favorite ski bum producer of the woodstock of tech conferences the one and done all in summit in miami jason calif jason what's it like to be a guestie today oh it's so delightful when you said you wanted to moderate that to me was chef's kiss i get to i get to comment and not be the moderator i love it yeah so we're mixing it up a little bit today i'm going to take the lead jkl's going to sit back i'll say a couple of words before we start because i think last week we got a little nasty uh definitely heard that from listeners um you know i know and so i want to kind of just address it real quick and then we can uh kick off the show i think it's important to say that none of us really started out doing this pod as a job or thinking that it would become a real regular thing right we started doing it for fun ad hoc from time to time and then it became this thing that people listened to and it became this thing that we started doing every week and people actually cared about it and suddenly became this real obligation it's almost like we got pregnant and had a baby and now it's like four men and a baby and so you know i think we all feel this like you know challenging obligation that we never expected to take on of like taking care of the show taking care of the pod and we all have like different points of view on what we want the pod to be and what we want it to become jcal cares about you know getting up in the rankings and listening to the audience and ultimately has shared that he wants to monetize but you know at points we've not always agreed on different points about that you know chamath has the things he wants to bring to the table saks says things he wants to talk about and so you know it's really difficult kind of running the pod managing the pod with four very different points of view very different perspectives on what it is we all want to kind of get out of this over time and i think it causes us to get really frustrated with each other we end up having real fights you know you have the biggest fights with your best friends uh you know you really let loose and lash out i think last week i listened back i was pretty contemptuous in my kind of retort to jaycal about hitting up on the inflation topic and i want to apologize to j cal for doing that i think it was uh you know i think yeah i think it was a little rough but at the same time i just want to point out like you know we're going to keep doing the show because i think you know as much as we all disagree as much as we fight and as much as we may even start to dislike each other uh and not get along i think it's really important that we keep doing this and i think restating that commitment and trying to do better is really important so you know we're gonna try different stuff out try and find ways to find common ground and keep doing the show productively with each other uh as one experiment this week i'm gonna moderate and we're gonna you know try and take it that way but you know i just wanted to say those few words before we kick this off guys because i thought it was important especially after the last couple of weeks i think it's been a bit of a struggle we've been having a tough time and i just want to be open about it and you know highlight that you know as an example you can fight with people you can disagree with them and you can still keep trying and i want to set that example i want to keep doing that so anyway just i would just like to say apology accepted and uh i thought that was a lovely opening one thing i would just punch up there is the real reason we did this was because we missed each other we missed hanging out with each other and then this is you know something that's become more successful than any of us ever imagined uh it's got an audience size that is just you know hard to imagine how many people are listening to this which then does put a little bit of pressure on it we want it to be great for the audience and i just want to say like i don't take it personally when we when we battle on stuff even with politics and sacks and stuff like that i respect each of you you are each brothers to me i love each of you deeply uh and when we fight and things don't work out i look at it as like personal growth or progress towards some other goals that we each have the amount of support i've gotten in my career from david sacks and chamath uh has been unparalleled david sachs was my first uh lp he encouraged me to create my first venture fund chamath s'more supported me relentlessly in my career uh showed up for me every event i ever did and i tried to do those same things for them uh you and i haven't done much business together freeberg but i'm enjoying uh the business that we've started yeah and i showed up for both of your uh events when you needed me yeah doing some syndicates with you and uh i i love doing this each week i love doing this each week yeah it's like like i think my point was it's a lot easier to be friends and have wine together and play poker together than it is to do a job together and this has become really a job and so you know you can have really good friends and then you try and start a company together or do a job together and you can hate each other i think it doesn't mean that you guys stopped being friends or that we should stop doing the work i think we should still keep trying to do the work figure out a way to make it work so anyway that was the point i wanted to make of this and that's the end of my my statements okay those weren't prepared those are just a reaction to yours i don't know if that's nice to say anything but i doubt it okay you have any emotions right now sacked what are you feeling yeah i mean chamoth do you think grass fed is better or the regular uh built up sax and i were texting while you guys were we're hugging it out talking about different kinds of jerky beef jerky well we were jerking each other off you guys were researching jerky great i was recommending uh bill talk to him oh great awesome speaking of jerky let's get into adam newman okay so now hey hello okay so uh first uh thing to talk about today and i kind of wanted to take it in a little bit of a different direction than i think all the other tech media have kind of addressed this you know adam newman is back he raised 350 million dollars from andreessen horowitz there was announcement this week for his new company called flow which as we understand it is trying to develop residential apartments you know in the same sort of vibe quality and attention to experience as maybe was intended with wework and flow you know seems to have started originated with adam doing a bunch of acquisitions of real estate with his own capital and now he seems to have turned this into a real business and raised money from andreessen so there's all the commentary and joking about andreessen putting this money in are they crazy as well as all the you know commentary about adam newman how could anyone back him the guy was so awful the first time around let me just do a quick round the horn with you guys you know initial reactions to the to the adam newman deal and then i'd love to talk about founders having a second act because you know adam happens to be high profile so his failure was high profile but a lot of founders have a failed low profile first experience and come back and kick ass the second time around and investors have taken notice of that and so i'd love to to go there but maybe we just do a quick reaction jkl i know you've talked about this on your other show maybe you can kind of give us your your quick commentary on on the opportunity of the transaction and what are people talking about with respect to this this deal happening you know people are wondering why he's able to raise money and what i always tell founders is when you see these like weird fundings and you can't get your heads around them it typically has to do with track record and credible audacity trump's prior blunders so say what you will about uh adam newman he is audacious and he has credibility people forget his origin story they only remember the masa yoshi-san four billion dollars and what happened and what he did with that and that was a complete [ __ ] it went off the rails he did all kinds of inside dealing and and it was it was madness but before that he did green desk he was a bootstrapped entrepreneur and then he created the category defining co-working space which to this day when you say i need to get an office the first thing people say is get a we work just like they say take an uber just like they say google it just like you know any other verb that we talk about and so it's very easy to dismiss him and say the tech industry has no morals they just they'll back anybody he has a publicly traded company that's in the market right now he defined the category and he also put 300 million dollars apparently of his own money at stake to buy these apartments uh so i think it's uh i i would say the bet makes sense to me and i think it will make sense if we go into the bet which i'd love to hear everybody else's thoughts on it's an audacious bet because housing is one of the hardest industries to tackle and he already did it for commercial so why wouldn't he be able to do it for residential saks did you see this opportunity in the market didn't did you guys take a look at it or have any points of view on it no i mean we we don't write 350 million dollar size check so it's just not something that we're going to take a look at for that matter we don't really do non-software investments we don't do you know in the you know physical role type investments and i've kind of learned that doing anything in the physical world with atoms is 10 times harder than doing anything with bits so you know one of my takeaways over the last few years is you know we tend to like pure software models not even hybrid or tech enabled models because it really does take a 10x entrepreneur to do anything in the physical world so yeah we you know we software is kind of our knitting and we we like to stick to that uh in terms of you know andreessen horowitz making this investment here's right or your larger topic of repeat founders look most startups fail and most founders or good founders have an entrepreneurial streak in them and so you combine those two things and there's going to be a lot of repeat second time founders people who are fundamentally entrepreneurial and their first thing doesn't work out i think that that can be a positive thing to invest in because they've gotten some of their mistakes out of the way and they've learned from that experience so i think the question we would just ask is what were the learnings and did they conduct their failed startup honorably you know like if they lie to investors or misled investors then obviously we don't want any part of that but i don't think most failures are like that and um and so as long as the founder i think conducted themselves honorably had some good learnings it's certainly not a disqualifier for their next startup i mean chamoth you've been open in the past about startups that waste money and do the kind bars and red brick you know offices and you know easy living at the office there's no better example of over-the-top exuberance as there was at wework right i mean does that indicate to you that this guy doesn't have a clue in terms of how to be prudent with investors capital and it's not backable or how do you think about it i have a couple thoughts the first is that wework is a really interesting business but that business had been built many times before and it's called the reit and i think what adam was able to arbitrage was a period of time where he pitched a non-real estate investor a technology company that was really just a real estate investment trust and that's why he was able to get these incredibly heady valuations i think the peak valuation of wework was like 45 or 50 billion dollars but what happened which is that when wework ultimately went public the collective intelligence of the public markets imposed a reit based valuation model on wework and it is now a 3.6 billion dollar public company and i don't think you can dunk on adam for that it's hard to build any kind of company let alone a 3.6 billion dollar company and he was instrumental in that so he should get some amount of credit but the reality was that he was pitching people that didn't want to hear about a business that was a real estate investment trust they wanted to hear about some technology and all of these other things but ultimately when you stripped it away it was a read now you started again and from the outside in not knowing anything because we don't know anything what it looks like is the beginnings of another reit except focused on residential right so when you buy hundreds or thousands of apartments but again same pig different lipstick the the the issue at hand though is that again he has found a technology investor to buy a technology story and again time will tell whether there is a technology business here but if it ultimately is an amalgamation of a bunch of apartments with some sort of you know interconnected technology that helps enable a better community or what have you those kinds of reits have also been built before and reits are valued in a very structured way on this thing called ffo funds from operations and you know what the upper bound evaluation is which is if you go and you know look in the stock market the most valuable reit in the world is a company called prologis they have about a billion square feet under management they're about a hundred billion dollar company wework has about 45 million square feet under management they're a 3.6 billion dollar company so if you just interpolate from those two data points on the residential side adam's gonna have to buy you know if you think an average apartment is 1500 square feet he has to buy you know 665 000 more apartments in order for that to be pro lodge of scale you know i don't know to invest in a billion dollar valuation or 1.5 or two whatever the number turns out to be makes sense if you think the upper bound is unlimited but if you think the upper bound is three or four billion the only reason to do it by the way it still makes sense for end reason to do it and this is why i think people get tilted because now this comes to my second point which is that what adam newman is able to take advantage of is a very obvious powerful understanding of the venture capital business model that other founders don't especially the ones that dunk on him and let me just explain this we talked about this last week the only mistake i think that softbank really made was a velocity of money mistake which is not setting the investment cycle of their vision fund to be 10 years instead of five well every other fund has a five year investment cycle too including ahs and so when you have tens of billions of dollars under management guys guess what they have the same problem softbank did except with just a different quantum of capital they want velocity of money and so if a founder comes and asks for 350 million dollars it actually in a perverse way makes your life easier because now that's saying yes once versus saying five or six times to people asking for 50 million dollars or heaven forbid 350 times for people asking for a million dollars and so if you're if you're in that seat chemok if you're the in the investor seat are you putting all that capital once with the one guy who's managed that money before or do you want to find the guy who has it or the gal who hasn't you have to understand the and recent business model and recent horowitz business model is to become blackstone but for technology they have like 30 billion aom now right right which is still you know a drop in the bucket something like that so if you look at blackstone right a trillion blackstone is a 100 plus billion dollar market cap company right built on three pillars credit private equity and real estate you can make the argument that technology is near is as important as those three categories and so you know if i think it's pretty obvious that andreessen is trying to build a publicly ownable security that represents all things in technology so again i don't think that they're necessarily out to generate massive returns for lps they want to become a credible reliable institution for to absorb hundreds of billions of dollars and so ultimately the objective you think is to increase to monetize their own their their ultimate goal is to mod is for andreessen and horowitz to monetize the equity of andres and horowitz of the management company yeah that's the goal and that's a that's a by the way that's a laudable goal it's really hard to build a business they've built an incredible business and then they should get credit for that zach's do you agree well i mean they are they i think jamaat is right that their stated goal is to build like a larger institutional vc type investor i mean doesn't andreessen have a portrait of jp morgan hanging on his wall or something i mean they want to turn vc from being like a little craft business and something larger or more institutional so yeah i'm sure they jump at the chance to write a 350 million dollar check if they believe in the company but can i shift this conversation for a second so i've done a lot of commercial real estate investing i think there are reasons to think that flow this new company could actually be better than we work and let me just explain so with wework you know if you talk to commercial office space owners landlords about wework like 10 years ago what they would have told you is yeah look that model is great but we want tenants who are high credit and sign long-term leases why because they're not worried about what happens in a bull market they're worried about what happens in a recession and they want to make sure they can cover their bank debt so landlords have always cared not just about rents but also about having high credit long term leases what wework basically did is arbitrage that of course it was a much better deal for startups because if you're a startup you don't have to go through a complicated process inside a lease you could just go month to month at a wework and you'd be willing to pay a premium for that so weworks business worked great during an up market because they would rent space for say 50 bucks a foot lease it for 100 and they would capture the spread the problem is the business was highly levered to a boom cycle and at the first recession or bus cycle all of a sudden they're gonna have massive vacancy because everyone can leave and all of a sudden their rents go below their the rents are collecting go below the rent they're paying and the arbitrage goes away they magnified that problem by making two mistakes number one they signed a lot of top and market leases right they were signing leases at 100 plus per foot in hot markets and the other thing is they didn't seem to have a lot of financial discipline you know i guess that show kind of makes fun of these sort of bacchanalian parties they had and so forth like that you can get away with a lack of spending discipline if you're a 90 gross margin business like a google but when you're a real estate business who's got real cogs not having spending discipline is actually a problem so for all those reasons i think we were kind of contained the seeds of its own implosion inside of their model and they needed to manage or mitigate those risks a lot better that's not to say though that it wasn't a great product i mean for everyone it was an amazing product yeah i mean in the early days sex so to your point they were taking under market like really low uh cost per square foot space like in the tenderloin and then selling it for you know bryant and third street rents right i mean that was the arbitrage and it worked it's only they lost that discipline it sounds like in the second half of the company's history right what i think is interesting about flow is that it's sort of multi-family these apartment type buildings those tend to be you know let's call it one year leases anyway and they're owning them they're not leasing from a landlord they're basically so chamas right it's basically a standard apartment replay where newman is going to create a consistent experience and brand across the country i'm not sure that's really been done before where there's like a brand for apartment living it's never been done yeah and so actually it's pretty simple in terms of measuring if it's going to work or not which is simply can adam newman deliver lower vacancy rates and higher rents and then you know buy apartment buildings at market prices so in other words that's the arbitrage is can he extract more rent and less vacancy from apartment units by creating this national brand and this experience but this is simply to do with financial aid but this is my point everything you talked about is how we would actually do a tear down of any other reit that was looking for money david you know we would look at what is the ffo ultimately it's like you know what's the implied cap rate what's the ffo can you get paid for owning this how much do you have to spend and can you get paid and this is where this is where i think like you know trying to then you know so if if if on the if on the inside of it what what instead it was not that but it was pitched as some you know convoluted technology play it's a little bit harder to believe again we don't know the details so right sure what i would say building on uh sacks and champs if they are going to do 700 000 apartments you can actually put some numbers on this you know seven hundred thousand apartments you think they can get an extra 100 maybe 150 bucks out of a renter i think they could for like that experience right people pay a little bit they're not going to pay 300 more 400 more because then they would just get a larger apartment and you know they could spend that money because it would be better spent if they have 700 000 of those you're talking about a billion dollars in revenue a year that's with 700 000 apartments okay 10 times profits you know whatever 10 billion evaluation if andreessen hurts is buying in at one point five or two like chamoth saying is probably correct somewhere in that range they want twenty percent okay yeah maybe they get a six or seven bagger out of this but it's a six or seven bagger on a big number 350. it's not like a 20x or a 50x and you also get the branding which i would not under value here of being the firm that backs bad boy entrepreneurs and is like willing to go there and support i think it's a real positive friend reason it's like look yeah i do you know you you just raised a ton of money well guess what you got to put that money out because it's not as if they're going to think to themselves oh i really only want to run this fund over three years instead of two they're not thinking that they're like i want to keep going out because i think their business model works by taking as much oxygen in the room as possible which means to be actively fundraising always that's it's tied it's true of blackstone it's true of apollo it's true of carlyle it's true of kkr any of these publicly traded investment managers they live and die by their ability to constantly be raising funds which implicitly means you have to constantly be writing funds the returns decay but that's okay because now you're feeding you're you're taking money from pension funds and other institutional limited partners who are fine because their hurdle is like six or seven percent so if you deliver eleven you still look like a genius because you can absorb so much money so andreessen wins by showing that adam newman goes and picks him and driesen wins because they have the ability to write a 350 million dollar check and recent wins because they have 350 million dollars less that they have to actually put into the hands of other entrepreneurs now they can do it with just one check so it's a multi-faceted win for them and it's a multi-faceted win for newman i think there's also brand value for the entrepreneurs that have had failed startups or issues with their first startup imploding and knowing that there's still a second bite at the apple i remember a survey and i just tried to pull it up but i couldn't find it so i may be wrong on this but first around capital years ago surveyed or did an analysis of all the investments they had made and i think one of the biggest predictors of success in a startup was that it was the founders second startup and so if you've had failings the first time around you're more likely to have learned from those failings to improve your performance the second time around and so as an entrepreneur i look to andreessen horowitz after this investment and think you know these guys will still back you know great entrepreneurs even if things went sideways or there was an issue the first time and you've got you know the ultimate kind of case for that okay speaking of andreessen i'm going to move us along you guys wanted to cover this topic not my favorite topic just because i want to be careful uh about i mean you guys decide what you want to say but um i'm going to bring up the uh the andreessa nimbyism thing in atherton you guys wanted to cover this right yeah thumbs up sure i mean i mean it's like okay well i mean everybody's talking about why wouldn't everyone's talking about it okay so during covet marc andreessen wrote a um an essay uh uh called build and i i'm gonna read an excerpt he says you don't just see the smug complacency the satisfaction with the status quo and the unwillingness to build in the pandemic or in healthcare generally you see it throughout western life and specifically throughout american life you see it in housing and the physical footprint of our cities we can't build nearly enough housing in our cities with surging economic potential which results in crazily skyrocketing housing prices in places like san francisco making it nearly impossible for regular people to move in and take the jobs of the future and then last week mark and his wife laura submitted a letter to the town of atherton to fight against multi-family housing saying i'm writing this letter to communicate our immense objection to the creation of multi-family overlay zones in atherton please immediately remove all multi-family overlay zoning projects from the housing element which will be submitted to the state in july they will massively decrease our home values the quality of life ourselves and our neighbors and immensely increase the noise pollution and traffic sex i'm just going to hand the mic over well i mean i'm happy to defend the residents of atherton on this i'm going to take the contrarian standpoint but does anyone i i was going to do the same i thought you guys were gonna match them so go ahead well look i mean do we have a problem where housing is too hard to construct in the state of california yes and there's a bunch of reasons for that the permitting process is byzantine it takes years all those delays cost money the tenant rights movement has gone so far that landlords basically can't um you know it's almost impossible to evict anybody and that makes it so no one wants to be a landlord so no one wants to build these um multi-family uh buildings uh or or buy them and then you know you've got like all these uh taxes so you're just in calif in san francisco for example they just passed a six percent transfer tax where we talked about the show on they basically just took six percent of my home and there's like nothing you can do about it so there's a lot of reasons why people don't want to invest in more housing in california and i think that this athlete example is sort of cherry picked because what this is is really zoning you know um there are these suburbs and it's not just atherton i mean you got the east bay as well where people live in these areas that are zoned for single-family residences as opposed to multifamily and that determines the character of the neighborhood now if you go buy a house in one of those neighborhoods with that zoning then that's what you expect to be the case i mean you have to spend more money buying a house in that neighborhood because you're investing in the character of that neighborhood so it is unfair to the residents of that neighborhood for a developer to come along and say hey i'm going to change the character of this place so i can make money i'm going to take a bunch of single-family lots turn them into multi-family apartment complexes or something like that so i can understand why the residents would be against that so i would differentiate between legitimate reasons for zoning and then things that the state or cities have done to undermine the market for housing basically creating frictions are impediments to the market for housing now it is the case that as cities get bigger and need to free up land that you might need to rezone but the areas that you should look at for that should make sense right i mean i don't think you go off to atherton and change the character of that neighborhood so that you can buy five more units yeah i mean you should you should look at like why not look at the areas around say public transit like the bart's and so forth where you could basically go up around there and it would make sense for the neighborhood i mean the example i would give to kind of paint an extreme picture is let's say you own a farm in the countryside someone buys the farm next to you and then decides they want to build a 50-story tall skyscraper next to your farm you would have a serious objection because i think that the i mean look look at the town of venice in italy i mean chamath you you've been there recently but um you know communities local communities can define the character of their community by by making zoning laws that you know allow a small city to remain like a small city i've also always been against this notion that we should allow any developer to build any size building anywhere they want in san francisco which has been an ardent cry from silicon valley progressives for years that we need to let them build let them build but at the end of the day i moved to san francisco 22 years ago and it was a small quaint city it felt like a small city and building skyscrapers made it more congested made it less inviting made it feel more industrial and it wasn't appealing to me as a resident and i think that residents need to have the right to define what they want their community to be the question it brings up then is where do you build because all residents everywhere would want to block family housing multi-family housing skyscrapers so i mean i don't know if you have a point of view to counter what we're saying but you know how do we think about solving this problem at scale if everyone wants their local communities to remain quaint and interesting and not be built out well i i think i think that's true for people who can afford really nice homes in the suburbs right but there are a lot of people that live in highly dense housing in urban environments and i think that's where we need to focus first if you look at the data california needs to build three and a half million extra homes by 2025. that's a rule right that's like a so david's right like focusing on a town with a population of seven thousand people is not going to solve the three and a half million homes we need to build and it brings up a bigger question which is then who is going to pay for all the physical infrastructure that's going to be required let's just say you're able to actually double the population of atherton to 14 000. well you know i live near that area so what i'll tell you is atherton has uh bad flooding dave you know sax actually used to live near there too so sacks can confirm this you know depending on when it rains huge pockets of water just collect everywhere that infrastructure is bad there are no sidewalks right so you kind of walk just on the road some cars whipping by uh you know could pick you off at any moment now those were decisions that as david said the residents of that town made decades ago because of the lifestyle that it created and they traded away a highly dense urban environment whereas if you just moved a mile you know south there are parts of menlo park and parts of palo alto that are already in a situation to absorb very dense housing where you could put that extra seven or eight thousand people pretty easily what do you do when those people in that neighborhood in menlo park say i don't want another apartment building here i want it to be down the road in atherton right how do you resolve this conflict and i just want to remind everyone in september cal governor signed these bills right he signed 31 affordable housing bills which mandate by zip code and by city and by town the building of affordable housing to create equity in this problem uh or uh which basically means all these cities and all these towns are now scrambling to figure out how do we meet our state mandated objectives of new affordable housing in our zip code or in our town and by the way yeah i mean look the and i think exactly as you said what will happen now is it goes to some state commission and i think that state commission can issue some sort of penalty or something so you know it's it's i think the the the residents will pay for that freedom if you will to to not have that building happen but again i just go back to it doesn't solve the crux of the problem the crux of the problem is we need to solve this housing crisis in the order of magnitude of millions of homes okay and so millions of homes can only be absorbed mostly in cities so the real conversation and you know is i have more sympathy for the residents of atherton than i do for residents of the city of san francisco okay because there is dense housing in san francisco there already is an infrastructure social services that were designed and built there are sidewalks again simple example there are stoplights you know in san francisco that a lot of these towns don't actually have now again that was a decision they made 50 years ago and they would have to change that decision but my point is like there are there are places that are already shovel ready and the real question is why can't we build hundreds of thousands of units and so this is a good article to write because it's a tony neighborhood and you know there's a few thousand folks but i think the real issue won't get solved until we figure out how to green light hundreds of thousands and millions because we are three and a half million homes short jkl what do you think i mean are you well i you know the the truth here is that this is not about atherton this is every town every city in california is fighting all development because if you fight the development well yeah you would obviously have less traffic and supply and demand your homes become more valuable the place that's fought at most of all is san francisco in the city where you cannot convert homes you cannot take your victorian and make it into a a town home and then if you look at what's actually happening here what they're fighting against and you know this the hypocrisy of it is you know these are town homes this isn't like a 20-story you know giant apartment building they're townhomes and they're going to be three million dollars each and they're not going to be for scary people and criminals and ruining people's quality of life it's going to be the venture partner or the receptionist not even the reception it's gonna be a venture partner it's gonna be a cto at a tech company who's gonna be able to buy this and then be that much closer to work and so it does reek of hypocrisy and there's a really simple solution here which is you know there are cal train stations up and down the peninsula there are you know in some places uh you have other municipal transportation along those corridors they should build up and they should build ten-story apartments et cetera redwood city did this recently we've all been there and seen the apartments they're sick you're talking about you're talking about the exact kind of solution we need because instead of trying to solve a hundred units here or there redwood city did an incredible job they solved it in the scale of tens of thousands of units and it completely changed the downtown of redwood city it is it's awesome and it's awesome incredible and sort of what is that afraid of so what it's incredibly afraid of this is nimbyism at its worst in my mind i'm not going to specifically make it about mark andreas and i think everybody you know has the right to live in the neighborhood they want they they get to state their feelings i think what we need to do is convince people and i think there's two really good arguments here number one do you want your chef convince people to let their neighborhoods change to let them evolve modestly to have homes that their own children or their own chefs and housekeepers and associates we all know people in the in the area who have bought apartment buildings for their nannies because you couldn't get a nanny well you couldn't get a chef so you you bought some unit in redwood city and you rented it for your nannies or whatever like we don't literally i know people that have not everyone i do i know multiple um or who have considered it and so that's the way you would convince nimby people to to evolve here and then there's a second one this has to do with work from home when you commute you know the issues of domestic violence depression drug abuse substance abuse alcohol abuse all of that goes way up and it's it's somewhere between 30 and 40 minutes of a commute you start to see people's quality of life seriously deteriorates and so if we want people to come back to offices which apple just mandated last week everybody's coming back three days a week like it or not tuesday thursdays and you pick the other wednesday you want to come to work i guess if we want people to come back to work well yeah we're gonna have to build some taller homes the ceos the founders of the companies the founders of the venture firms it's not about market reasons it's about everybody they don't have to commute the office is within walking distance or a bike ride of their office people need to start thinking about their nanny their chef their firefighter and their employees jason i i may have misread it but it wouldn't have solved the problem for the nanny the chef the teacher it should be three million dollar units no they wouldn't even be that because the way that it read because i read it said that it you would have qualified it by building what's called an adu on your property yes so people so people would have built it for their grandmother or their in-law a lot of people are doing that so my point is the law as proposed was already hacked and so it would never have accomplished what you were saying i think the answer to what you're saying is what redwood city did it's what towns all around the country should be doing which is like in and around particularly like transportation hubs you should be green lighting a lot of dense housing but jason those are not adus that sit on a product those are those are 500 and by the way those also require not just the infrastructure but it also requires the financing and all of the you know the banks and construction markets there to construct it that's not a problem in california the opposition is the problem which is why the federal i'm sorry the state government's getting involved and superseding or trying to supersede what happens on a local level that's why gavin newsom is passing these things is because each town is refusing to do it but another possible solution is if atherton is so good at blocking this stuff and they have so much money let them pay a penalty and have redwood city or san carlos or another neighborhood millbrae yeah that wants money and they want to build up millbrae is building because that's where the bart station ends is it millbrae they're building up there where you're describing like are all these contortions and what should be a more free market for housing construction i mean the reality is we've done so many things to distort the market agreed with these labyrinthine permit process processes that delay projects for years and years to um you know to all the taxes and other well they fight it they fight with all these environmental stuff zoning is a little different yeah so the nemesis factors into the permitting process but but i would again i would differentiate zoning but my point is just we've like so broken the free market for housing that we then come along and say see the free market's not working we need more government mandates and look is this happening in miami no go to miami there are cranes everywhere there are buildings they're building multi-family or exactly so in these frankly red cities red states which are much more lightly regulated they're building a lot more but at the same time it's not like and in new york which is constrained so you have to build up yeah but houston has no zoning yeah new york city has always had a very non-sentimental view towards construction the city has always said okay if you want to build something bigger and better you can tear it down and start over i mean they have like air rights and so on that you have to respect but but new york city has never they by and large they don't constantly um label buildings as historic and say you can't touch them and things like that it's new york city has always wanted to keep being dynamic and growing um so there are other places that just don't have this problem and they're able to achieve this growth without building an apartment complex like in the lot next to you if you live in the suburbs and have a single family residence i mean right so i i just think like you know the the politicians in california have so thoroughly broken the market for housing and now what happens is you get an article like this that's basically scapegoating the resonance of a suburb as being the source of the problem when they didn't create this problem they're just fighting to keep the status quo so they're perpetuating it i would say but you know like so first of all i have no special love for athens toronto i lived there for a couple years and it's kind of like a step for community i mean i had to move back to well i'm like you know somehow i'm just more comfortable stepping over dirty needles and excrement you're voting with your dollar i moved back to san francisco but massachusetts yeah but look at it's like a really weird place because this is like al pacino and the devil's advocate go ahead sex in addition to there being no sidewalks there's literally no offices there's no grocery store there's no commercial real estate of any kind there is no downtown there is there you know so i don't know like where the hook is that you would all of a sudden put an apartment complex i mean you're literally gonna be building it in someone's backyard so the character of that neighborhood just doesn't support it and i think you know people coming together to form their own cities you know under the principle of subsidiarity should be allowed reasonable freedom to basically construct a city as they in the way that they want to live and there are other cities that competition freedberg there's other cities like competition houston has no zoning essentially so you can if you have a lot and you want to make it into a school or a hotel or a restaurant you can do it and then outside of austin you you kind of have that same thing people build all kinds of weird compounds and stuff out there are you guys following so it's a competition between those cities and i think san francisco is losing yeah are you guys following any of the startup cities that are being built where there's like a new city being built from the ground up and any of those seem like pole to sac you mean i don't know the names of any of them but cul-de-sac is one yeah i mean are these real or these real projects are we gonna see these emerging like next-gen cities that you know could be viable places to move to and live or is it really just about you know transforming some of these cities that are less regulatory and that's ultimately what will win in the market you know part of why the the regulation has gotten so perverted in a lot of these towns is because you've been able to gerrymander how you know these public school districts get funded yeah and so you know why folks are so protective of of it is is again and and you know to to underscore one of sax's points this is much more prevalent in democratic states and democratic cities where you know coastal elites have really gerrymandered these school districts and that's a large reason why they uh they don't want a lot of building they want to protect the tax base and they want to be able to funnel those specific tax dollars into a few schools for their kids and that's it yeah and so it's it's that it's actually a really good point people don't know this undercurrent which is oh it is down the peninsula by the way this is the dirtiest little secret in these democratic states again mostly democratic but if you look inside of california and a couple of other states how horrendously gerrymandered it is so that you can basically redistrict in a way to cordon off tax dollars to only then send to one or two public schools that sit inside of your area your zip code because that's what the law says it's a zip code oriented scheme it's perverse it's created incredibly horrible incentives for people so i think david is right which is that there's a there's a contortion of laws that come together that underlie some of these decisions that then manifest in a petition like this and etc they all need to get cleaned up and chamath it's it's even worse than that because the same people who have rigged it so that all their tax dollars stay in their non-development community then they're over funding their public schools they could easily afford private but they're using all that money for just their private school and the one in the town next to it east palo alto whatever they have no money and then these people have the audacity to fight against school choice so that those poor people can take tax dollars and then pick up a better school so it's hypocrisy all the way up and down and you know i think this is why people are are largely moving to different places around the country and it's a competition between states and cities okay we're gonna go from super local to global um you know this is a topic i wanted to talk about today because i want to bring together a couple of threads and get your guys's take on you know all of these things kind of coming together and what it means for foreign policy and um how things might play out on the global stage in the next um you know call it years to decades xi jinping it's been reported this week is taking a trip to saudi arabia you know this is just a few weeks after uh joe biden made his trip uh to saudi arabia i'll read a just an excerpt um he's gonna end his more than two years of self-imposed in-person diplomatic isolation and his first trip is gonna be to saudi arabia uh you know this is uh from unnamed saudi sources so it's unclear this isn't an official statement uh this is just reporting you know the wall street journal reported in march that after six years of negotiations china and saudi arabia are getting close uh for china to start pay uh um uh paying yuan for oil that they would be buying from the saudis um so there's an important kind of economic tie-up that may be emerging that could affect the u.s dollar and the the importance of the us dollar on the global economic stage and meanwhile this week as well it's been reported that china is doing military exercises with russia inside russia so there is um an extension of china and their influence and their economic tie-ups and their military activity with both china sorry with both russia and saudi i also want to highlight another important point that came out this week saudi aramco reported their earnings the largest earnings ever for a company 48 billion dollars of net profit in a quarter that is more profit than microsoft apple facebook and tesla combined in a single quarter it is the most profitable business and saudis have been very public about their intention of divesting their interest in saudi aramco which is their state-owned and state-run oil company and moving into other businesses over the past couple of months it's been reported that they've accumulated a nearly 100 billion dollar equity portfolio owning stocks like alphabet zoom microsoft and others it's also been reported that they own over 160 billion dollars of u.s treasuries so the us is very dependent in the private equity community in the vc community and in the public markets on saudi dollars saudis have been large holders of u.s dollars and now through china it looks like the saudis may be having a tie up that brings them closer to china through this trade relationship with the yuan and the visit from xi jinping while china is actively exercising um you know their military inside of russia is the future a china russia saudi access and should we be concerned and should we be changing any of our tactics on foreign policy david sacks as this um you know set of threads plays out uh over the next couple of months and and you know going in yes i think we do need to make some changes brian's backing away from this now but in his first year he declared the saudis be pariahs and he did push them into china's arms what was the point of that bain recently had to go to the middle east to basically beg saudi arabia to increase their production of oil so he's already acknowledged that policy didn't work and one of the reasons it didn't work is because simultaneously with declaring these allies to be enemies he basically restricted us to energy production which is you know strategically undermined and the us has military bases in saudi arabia very strategic assets for the u.s military yeah let's listen and we sell them weapons the u.s relationship with saudi arabia is always going to be complex they're a complicated friend to have but it's much better to have them as a friend than basically drive them into china's arms and the reality is whatever you think about the regime there and how oppressive it is first of all we don't get to choose the people running these countries that's the lesson we should have learned over and over again from all these failed regime change operations second do we have any reason to believe that if that regime got toppled it would get replaced with something better i think we all know that if the regime there fell it would probably be replaced with something fundamentalist that we would like even less and certainly if another nation were to basically dominate the region like iran that would be worse for us as well so our relationship with them is complicated but ultimately they should be i think allies of the united states and we should not be working overtime to push them into china's arms and i think similarly with russia we've basically declared ourselves to be engaged in this proxy war with russia which strategically there's just nothing in it for us you can sympathize with the people of ukraine all you want yeah i mean it's dangerous you've said that in the past and i think the question is does this china military exercise in russia indicate an escalation of our conflict with china to you um you know or is this something that you know just kind of par for the course in terms of you know neighbors you know conducting mirsheimer just said an article in foreign affairs talking about uh the ukraine war reminding us that it's still going on i think people somehow think that this war is just stable and it'll settle into forever war status kind of like like afghanistan these conflicts in the middle east went on forever it's actually very dangerous it could always escalate out of control and as long as it's going on i think we just have to remember that it's going on it poses a huge global risk and i would say that one of the things that again we should be aware of is this idea that even though we have problems and conflicts with multiple nations we still don't actually want to push them into each other's arms again the soviet union and china during the cold war being the key example i mean this principle of geopolitics goes back thousands of years the romans right davide at impera divide and rule you do not want to unite your enemies and what we've done here is we keep pushing them together you know china and russia historically have not been friends they share long borders together neighbors generally have problems with each other these are nations with serious conflicts or differences of interest and we've made it really easy for china to to turn russia into the junior partner in that relationship jamaat do you think u.s foreign policy needs to change and that we're setting up this you know axis of conflict um this access of allies that we don't want to have the allies and you know would you kind of advise and also you know do you get concerned about this oil yuan trade where there may be some you know economic tie-ups that that really could affect uh uh you know the the dollar as a reserve currency look couple things i i think it's really dramatic to kind of paint it in these dark kind of like bipolar terms i think we are post all of that so i i understand how in the cold war it was easy to fall into binary definitions of good and evil one and zero us versus them team a versus team b but in 2022 i don't think that's how things work anymore we're in a highly interconnected highly global world it's very complicated uh dollar flows are real time they're massive cooperation is real time it's all over the world it's with every country so it allows every country actually the first chance that they've ever really had to maximize their own potential for their own citizens and that's really what every country's goal is right and so in that lens look what just happened today gasprom said they're going to shut off nordstrom one just for you know a few days right but as a result of that eu nat gas has just gone absolutely nuclear and just closed at all time highest teen x 14 x where it was pandemic right uh you know price per unit for a year ahead so if you so if you take a step back we are at max energy production with all of the capacity all around the world 100 plus odd million barrels a day okay global productivity absorbs that there is very little room right now to expand that without pushing the date in which that capacity is available out until you know 2028 to 2030 so effectively a decade from now so if you're in this situation and you're a country with vast natural resources of which i'll just remind us america is one i think the most important thing you can do for your own citizens is to monetize these petrochemicals now get it out of the ground in a reasonable way sell them in the marketplace because there's demand for it take that money and reinvest it in your people and i think if you look at it that way the best run countries are responding to this moment in time like any company would how do you maximize demand and sell the product you have to the most number of customers globally and so i think the middle east is doing an incredible job the us by the way by passing the ira finally i think is on the right footing because we can talk about this in a moment but the path to permitting and the path to clean up and by the way it puts fossil fuels on a level playing field with with clean energy alternatives emerging alternatives yeah the best thing that could have happened okay so i think we're all behaving in a very rational market-focused way and so i would focus less on trying to dramatically kind of resolve these things as a few countries versus everybody else i don't think that's what's happening yeah much more complex much more complicated than that but i think the simple explanation is people with resources in the ground of the country in which they rule have a responsibility if they believe that there's market demand to absorb that so that they can take the revenue that comes from it and reinvest it in their people that is true for the united states it's true for saudi arabia it's true for every country in the world saudi arabia is clearly making these investments right not just on yeah and by the way i mean like but also housing and new industry and education and then by the way saudi arabia and saudi arabia is becoming much more liberal as a result too right the education standards yeah and if you look at the investment like you know you didn't you you didn't need to go to dave swenson and understand portfolio allocation although i think the guys in saudi are smart enough to have probably done it but if you're if you have a lot of money coming from one kind of business and you need to make sure that you can diversify so that you can reinvest over a long period of time if you look at countries that had huge petrochemical related revenue flows the nordics what did they do they stood up these huge sovereign wealth funds and those sovereign wealth funds went abroad and they bought all kinds of non-correlated assets to those petrochemicals that is the same thing that saudi is doing that financial security for their people but it's like it's like what is the furthest uncorrelated asset from oil it turns out it's apple facebook meta and google and uf us treasuries yeah yeah uber yeah hey so jk let me let me ask this contrarian question for you because you you often talk about the authoritarianism uh of these states saudi china russia you know it seems to me as we observe what's going on in saudi and maybe the case could be made in china to some degree although there are steps taken back but also in russia that the u.s influence the the economic and the political influence associated with these these foreign policy conversions could they maybe be driving these business these countries to be more liberal you know we're seeing in in saudi arabia that women can drive that there's new industry that there's education that there's a technology industry booming that the you don't need to have a turnover of government and a turnover of what is often classified as authoritarian regime for the operating model to be influenced by the west in such a way that change happens more slowly and you do see liberalism emerge in these countries with better educational standards more equality more more human rights and so do you think we're because you often kind of paint a picture that it's bad guys versus us you know do you not think that we're making an influence on these places locally and that we're seeing well i would take exception to like it's bad guys versus us i don't i don't think we want to create a legion of dictators and nor do i think that's what this is i would actually agree with sacks we should be embracing these folks and having strong relationships with them even though we are fundamentally different uh operating systems for our countries democracy do you think we should be embracing you so you think we should have a relationship with putin just 100 i mean and we did right i mean obama was making some progress on that and we we did some great work um when and obviously trump has a very very long standing very deep we don't exactly have deep relationship with uh putin and we did great work with we did i mean they did the he did his pageant over there i'm making some jokes they bought a lot of apartments yeah that was that was a joke okay just a little joke there but who knows i suppose okay but we did great work with china in terms of containing north korea's nuclear ambitions right and so there are things we can collaborate on i think the most important thing though is that while we're embracing them building fabric between them communication trade whatever it is we are not relying on them and that's really what we have to look at when it comes to the kingdom because if not for the fact that the kingdom won the you know born on top of you know oil fields uh lottery we would not be uh in a deep relationship with this country they're living under a 10th century you know rule uh in terms of how they treat women gay people et cetera and the human rights is an important issue and we wouldn't have a deep relationship with them if we didn't have to deal with the oil but we do and so what i think we really need to be focusing on here is maintaining great relationships with them yeah we don't want to drive them to each other's arms but to chamat's point i i don't think they're creating the legion of doom to take on the us i think they're just doing what's in their economic interest and we need to do what's in our economic interest which really is investing in nuclear investing in solar batteries wind and even britain and bridge fuels in the interest of the free world and europe exactly and if we are independent of them then we don't have to go over there and kiss the ring like biden had to do we don't have to you know deal with excuses uh when they do horrible things like murder khashoggi or you know just this past week they put uh sama al-shahab in jail she's a phd student from the university of leeds she's now going to go to jail for decades because uh when she went back to saudi arabia on vacation this happened last week um gentlemen because she retweeted people and so these human rights violations the murder of khashoggi all these things add up the uyghurs et cetera and and we'll have a better ability to negotiate and lead them as the shining city on the hill when we work on being that shining city on the hill and we're not dependent on them and that's really what i think we have to focus on is reducing the dependency on these countries i think we all agree whether it's medical devices ppe drugs making our iphones or or oil to keep us right and then so does europe and that's where nuclear comes in speaking of reducing dependency you know joe biden signed the inflation reduction act some people have said this is the most important bill signed in years if not decades by uh you know passed by a u.s congress signed by a president because it touches on so many points um that folks believe will really move the needle with respect to climate change jamal i think you made an interesting point in our group chat and i think maybe we should start there which is you know at the end of the day the systems of industrial production on planet earth were made in such a way that we never accounted for the costs of the external output of these systems meaning we can burn fuel put co2 into the atmosphere or put methane into the atmosphere in the case of animal agriculture and we get a low-cost product that we consume and ultimately no one specifically pays for the cost of the carbon going into the atmosphere which i and you know many scientists would argue is having an anthropogenic effect on um the warming of the planet and more catastrophic weather and and all these other risks that we're now facing and so the idea was you know first principles you should tax people for tax industry tax businesses for the production of atmospheric carbon that causes an effect that we're all going to have to pay to repair over time so you know is that a point of view that you hold chamoth because you know you kind of brought this up in our group text but that's the that would be the the ideal scenario to resolve climate change is if you just tax carbon we kind of you know have our have a real solution here and that this whole bill is ultimately uh you know meant to kind of resolve the fact that we simply cannot find a way to a carbon tax i actually think that what this bill did was kill the idea of a carbon tax i think it makes it completely unimportant and it'll never see the light of day why i think it's because in the absence of what we did in the ira there wasn't a clear way of doing exactly what you said which is letting people figure out what the equivalent trading price would be for burning a pound of coal versus you know generating the energy needed to run something off of nuclear there was no market clearing function for that and the reason is because you couldn't get an equivalent amount of capacity effectively available online so that they could compete one for one what we did through this ira was essentially use money to create so many subsidies and then to also green light the way that incremental fossil fuel projects would come to market so that now they actually going to be put on a level playing field in the broad open market so they can compete when that happens i think you will make those trade-offs better yourself and as a result i don't think that there will be a necessary offset mechanism that will be required because this plan will still get us to about 40 percent of the way there where we wanted to be by 2030 which is still a pretty decent leap forward there is no plan that gets us to where we all need to be anyways and i think that the appetite to go from this plan to where we need to be doesn't really exist so i think that we're just going to have to kind of grit our teeth get through the implementation of the ira and realize that this is the beginning of a probably a hundred plus year project nothing's going to get solved by 2050 maybe you'll see something done by 2100 probably not it'll probably be a 2150 2200 kind of an objective and in that lens i think like a whole bunch of business models got turned upside down so i think carbon markets and carbon trading are not going to be the thing that we thought it was going to be i think stuff like direct air capture again are going to be toy projects off to the side i don't think that those are toads are not those are not going to be credible businesses totally like we thought they were going to be instead the raw tonnage of dollars will do what america was able to do for solar and pv over 2000 to 2022 which is just crush the cost per watt into the pennies so that it can be equivalent to hydro coal and nuclear and put everything on a level playing field and then allow the market to figure it out yeah i mean there's a lot of other stuff in this bill i want to highlight for you guys i don't know if any of you looked at the cbo so the cbo the congressional budget office anytime a bill is being voted on they do an accounting analysis on how much spending and how much revenue there will be as a result of this bill for attendance is actually awesome yeah i checked it out so yeah if you look at every year for the next 10 years the cbo score for this bill is that we're going to spend an incremental we're going to increase the deficit by 330 billion dollars for the next five years and then we're going to decrease the deficit by 320 billion in the five years after that so the net effect over 10 years is we're only spending 17 billion dollars on the on the bill and then on the revenue basis the expectation is we're going to generate 67 billion in revenue in the first five years and then another 20 billion in the in the back five years so this is actually being accounted for and presented as deficit reduction and that's because there's 87 000 new irs agents being hired to go out and audit people and find new revenue and there's a 15 corporate minimum tax being imposed on all companies and what this means is that companies public companies private companies doing over a billion in revenue historically pay taxes on a book basis now they're paying taxes on a financial statement basis meaning the actual accounting that they present to their shareholders can i can i ask you guys a question how much was given to the irs 87 billion yeah yeah tens of billions yeah 80 billion how much do you think it would cost i don't know pick your pick to pick the most excruciatingly expensive third-party outsourcing firm you could okay to build an entire system to basically automatically review every single tax return and throw exceptions and machine learn and machine learning what fraud looked like or what misrepresentation let's say five billion dollars it'd be the most expensive it'd be the most expensive piece of software ever written and this is what was so kind of like that was the only part of the bill that made not a less sense to me i think like if you put really smart computers on the case or gave it to deepmind at google and said can you guys build this this system or machine learning and ai you'd be tax and a simpler tax which i guess this is trying to do but you know freebird when i looked at this and you sent it my initial reaction was you know this old adage it'll be impossible for these guys to find 87 000 humans that want to work at the irs number one by the way there's a funny video on the recruiting that's been going on for that but yeah go ahead yeah it's pretty good i mean you know because they were they were asking for people who were ready to like have guns and like be put their body in harm and i was like that's crazy i was like that can't be real anyway the greatest this is what i got from this excel spreadsheet the greatest tool for writing fiction is not microsoft word it's excel like there is no way this thing is netting out to zero like this thing's gonna cost us a fortune government is in shambles we don't know what we're doing i thought that the links you sent for the podcast with the pros and cons of the carbon tax was really interesting because it is so complicated when i heard these tax experts explaining how you would implement a carbon tax and the import and export and then how often it would have to be tweaked and then who decides what your corporate footprint of your watch is and and where did the minerals come from to make the watch and who gets paid on carbon it just seemed to me there's a fool's errand it would be much better to just what if your watch is made from diamond and not carbon well in that case you should just pay a million dollars because you are the latest coastal elite and we should just start with yachts and watches what i realized was what we really need to focus on and you tell me if what you think um freedberg instead of doing this carbon tax which seems incredibly elegant but we all know it's impossible to get consensus across hundreds of governments and locales to to to negotiate this it'll never happen at least not effectively and in real time wouldn't it be a much better technique to do what we do in venture which is here are the biggest problems in the world here are the which in this case would be the biggest emitters here are the best solutions here are the teams working on the best solutions let's give the teams working on the best solutions to work down that list and if it happens to be you know ships coming from china you know with a bunch of containers arm and container ships we we measure that and you know the the thing i've learned after the first six months of investing in carbon because we have a syndicate now at mollywood who's working with me on um this climate syndicate we couldn't find a lot of great investments you know that made sense that weren't you know asset heavy but then we started to find uh we found two great monitoring companies and they're monitoring air pollution and they're monitoring ship pollution and we made investments in both of those and that seems to be where we're at is we should be monitoring and figuring out where the carbon is and then trying to solve it based on which ones are the easiest to solve let me just say two things on that bill gates has done a great job of this you can read his latest book or go to gates notes and he's done exactly what you described which is break it all down show what we should do and that's actually how he's investing his own money he's putting his money where his mouth is so there's a really good blueprint for this he's done the best job of anyone i've seen the issue with the carbon tax is you have to come up with a consistent reliable way of measuring the carbon and then you have to do it consistently and broadly how do you miss you know if you miss one factory or another then you have to ratchet up the price over time so first thing is the challenge of how do you agree on measuring second is how do you agree on broad accountability third thing is how do you ratchet the pricing over time fourth thing is how do you deal with the offshoring problem as soon as you start taxing companies in the u.s for carbon emissions all the production is going to go offshore where they're not taxing for carbon emissions and there's no way to account for what they're doing offshore and this has been the challenge with china there is so one there is because it's part of your first project yeah sorry let me just hit the final one we'll come back to it but the final big one is just the equity in carbon tax people have said that the ultimate increment in cost of production is going to adversely affect lower income people because they cannot afford the price of some stuff going up by 25 to 50 and it's really you know a luxury good a luxury um kind of privilege to be able to pay for the incremental cost of stuff uh to account for the carbon offset needed so that that's that's the set of issues that have been pushed back against the carbon tax and it's why it's been impossible to get implemented and to really get into markets all right chemo go ahead i was just going to say part of the the problem in in in all of those issues if you offshore is still that there's people pushing for what's called the scope 3 accounting which is like you know you got to go back to your supplier and your supplier supplier and your supplier supplier supplier and what is it it's impossible where does it end it's it's not credible so you know i think that the bill has actually cleaned up a lot of future question marks about what we have to do as a country to go about doing our part for climate change and i think it probably creates a reasonable blueprint for everybody else and now they're going to have to do some version of the same thing and what's amazing is that if we actually pass this framework which is still yet to be written around how to make permitting more seamless and efficient for these hydrocarbon projects it will really unleash a massive torrent of both revenues back to the united states um it'll increase our national security and it'll allow us to really kind of put a dent in this thing because it'll pull forward the amount of competition that it creates to actually get off those hydrocarbons which is a i'll tell you i got i i got a notice from someone who's an investor so there's a lot of climate tech funds now a lot of funds jkl you said you got a syndicate and carbon but there's a lot of funds and a lot of investors that are putting a lot of capital just into early stage climate technologies um which travels everything from energy to materials to food to industrial and manufacturing and so on and i got a note from one of these these companies a startup that highlighted that the dollar 25 per gallon credit uh tax credit uh for uh you know clean production of fuel which ca which has to demonstrate a 50 emissions reduction in the manufacturing process will now make this startup profitable and by the way you get an extra penny per gallon for every one percent reduction in emissions below that 50 threshold and so there's a lot of startups that i'm hearing about that their unit economic models were questionable before now because of this bill they are flipping profitable and so i personally think we are going to see a significant influx of venture capital and support for a lot of these climate tech and you know new energy material and manufacturing projects that otherwise may have been held back because the subsidy will kick-start the question for me that i still don't have a good answer to is are they sustainable over the long run if this bill gets shut down or repealed and the funding sources stop and the subsidy stop do these businesses survive or are we simply creating regulatory capture models like we did with other energy products in the past and with food if you're not contribution margin positive today free this bill in climate change and the bill is the only way that you get there your doa you just don't know great point yep sax the biggest line in this bill is the corporate minimum tax i don't know if you saw this but 15 minimum tax applied to the accounting profit reported by any company over a billion dollars and they're estimating it'll generate 313 billion of incremental tax revenue over the next 10 years do you have a point of view on whether this corporate minimum tax is going to cause an issue with startups and companies going public or the valuation in the public markets or is this just you know hey this should happen it doesn't matter i mean i don't know if you spend much time on this well no i mean i think the the issue here is that why is it that these companies are able to pay so little taxes well the reason is because there's a zillion loopholes and incentives and tax breaks in the existing code that they're taking advantage of i mean these large companies have lots of accountants and lawyers they're not deliberately violating the law they're scrupulously adhering to it and taking advantage of it so it's all these tax breaks that they're able to use to pay no taxes well what does this bill do you talk about the the spending on climate you know the 386 billion most of it is tax incentives and some block grants so this is now the preferred form of you know quote unquote spending in these bills are tax credits and incentives this is the way they're going to change people's behavior so in other words the bill on the one hand is complaining that corporations don't pay enough taxes because there's too many tax breaks while on the other hand creating a whole slew of new tax breaks so there's a little bit of a contradiction there again why do al why are companies paying no taxes because of the last 10 bills tax breaks that we're supposed to move the behavior of businesses and consumers in a certain direction so just recognize that that's the case i think you also made a really good point about the phantom deficit reduction here so like you mentioned and we see this in lots of bills all the excess spending all the deficit spending occurs in the first five years and all the deficit reduction occurs in the last five years something always intervenes to prevent the the uh savings from starting places it's like startup projections right sex yeah it's like we're i lost my sales guy we'll cut the budget next year you know and so just to give one example of this so this aca subsidy extension so this is the obamacare subsidy it's about 60 something billion a year they're extending it for three years but they're assuming it's going to die at that point as opposed to keeping extended and no one's going to want to vote to make that go away in three years just like they don't want to vote to make it go away now so if you extend that subsidy three years from now just that one item alone makes the deficit reduction of this bill go from 305 billion over the 10-year period to negative 155 billion so just that one item if you continue it and don't sunset it just that one thing makes this a hugely deficit not reducing bill but deficit increasing bill and so you wonder what problem is this bill really solving and they can't seem to agree on that i mean first they're telling us it's a deficit reduction bill then they're telling us it's a climate bill then they're telling us it's an inflation reduction bill it seems to me that if they're really proud of this and believe in it they would choose a name for the bill that actually reflected what it was well all bills would be named something for everyone sex i mean like that's how all these bills get in order to pass a bill a bipartisan bill you got to give something to everyone i mean but this is mostly you know this is mostly a climate related bill you know this is mostly this is mostly tax breaks and block grants related i mean there's a huge tax issue with the the the irs agents yeah corporate minimum tax but there's also a huge component on prescription drugs jamath i don't know if you spent any time looking at this but sorry just on the irs agent i kind of say add one detail on that yeah so the claim of the administration and the sponsors of the bill is that this would not increase taxes on any one sort of middle class and so the republicans i think is one of the few politically smart things they did they introduced an amendment basically prohibiting these new 87 000 irs agents from conducting audits of anyone making less than 400 000 a year which was what biden said you know he wouldn't increase taxes anyone below 400 000. that amendment was rejected on straight party lines so this idea yes it's called the krepo amendment it was 50 50 and vice president harris had to come in and make the tie-breaking vote so obviously they know that there's gonna be a lot of net new audits on people making lessons yes exactly so my understanding of this is it's like small business owners people who run a small business and a service business and are they really accounting for their books correctly are they really expensing the right things et cetera are they accounting for course they're going to get win yeah they're going to get whammy by this because look let's face it billionaire is already getting audited you know elon had a tweet saying listen i get audited as a matter of course every year you know these people already have say yeah dude i use a big four accounting firm yeah i mean i mean the amount of crazy i have a partner at like anderson that is literally like you know covered being like a fortune 500 [ __ ] company might as well be in ridiculousness put them in your eye your your uh put them in your unit i mean by the way sax is right like if if you look at the you know the ultra wealthy i i think it would be i would be shocked if any of those folks were actually evading taxes at all because it's impossible the way that this infrastructure runs like you know you're getting k1s from blackstone what are you going to do you're going to change that like totally you know like do you guys even know the pin number of your bank card i have no idea so complicated yeah okay so so my point is i don't think that if there is if there is cheating of taxes that's happening at that level what's happening at that level are much more structural issues like carried interest which they decided not to touch or state law in history those are those no i don't think that's my point it's not mistakes there's nobody with a pencil really filling out a k1 for bill gates dummy that's my point no i know but people can make mistakes what if a k1 gets left off that's what i'm saying is when they find something it's usually easily found it doesn't happen it doesn't happen when i get my tax return it's it's done by an accounting firm and i just signed it i don't know i know that what i'm talking about is what are the irs people going to find is you know i'll tell you what they're going to find they're going to fly they're going to find a lot of middle class and upper middle class folks and they're going to have to focus on them because individually it may not represent a lot but when you multiply it by the number of people inside the united states and this is what the wall street journal and a bunch of other folks have been saying now when you apply 87 000 people and task them incrementally with doing a job it's not going to touch these folks that are already audited it's going to touch the folks that are not audited and by and large a much much larger majority of middle income and upper middle income people are not audited which is why i think you could spend a lot less than 80 billion dollars and just build software that guarantees only those that should be audited are and uses machines to help figure out these leaks or start simplifying the tax code because when you add this 15 minimum freedberg what is that going to do to the strategy of a public company okay so we should show less earnings put more to work oh we're not going to be able to depreciate this or you know whatever i mean it's going to create all these second and third order impact impacts that we don't know well i think sax's point is important which is one that we don't yet have insight into which is what is this gonna cannibalize because ultimately if there is a minimum tax it doesn't make sense to pursue um incentives that create a tax break today and therefore those incentives won't be invested in whatever those incentives are i don't know what they are you know low-income uh manufacturing zone development or whatever who knows um you know what they are you know come and build your business here and get tax breaks et cetera et cetera local state and federal tax breaks um if those start to um get written over then there's going to be really adverse effects and i think that that's something to watch i don't understand it well enough certainly i'm not an accountant but i i would be kind of uh worried about and keeping an eye on that front i do think the bigger question which is a biotech one the prescription drug price cap minimizes the profits that a number of pharmaceutical companies will be making it gives the authority to go and negotiate prices this is the second largest line in the bill and there was a survey done by healthaffairs.org on an r d survey which said will you guys reduce your your investment in new drug development and i think that they ca based on this bill and i think that they came up with some estimate that there would be um two uh the number two fewer drugs that would be kind of you know made available per year because of reduced spending as a result of the price cap which basically reduces revenue which will in essence reduce r d investment you know guys like bernie sanders will say hey that's not true all that money is going to share buybacks and dividends uh and so on but it is a fact that those share buybacks and those dividends will still continue and if they are reduced so will the r d expense and if the r d expense is reduced fewer drugs will come to market and so you know there's also a question mark and people will debate this for the next decade which is how much will this prescription drug price cap actually have an effect on r d investment and ultimately on new drugs that come to market sorry let me just say my personal opinion is i don't think that this will have a huge effect i think this is an excellent part of the bill i think that the government should have authority to go and negotiate they're the largest buyer of these drugs and typically when the us government the federal government steps in to be the largest spender on a particular line the cost of that line balloons like we've seen in health care like we've seen in education and like we've seen in military and defense spending and so i i'm hopeful that this will actually provide a more effective market force in allowing the biggest customer in the market to negotiate prices and that the the vcs instead of making 48 irr they'll ultimately make 28 irr on the investments that they're making in biotech startups what exactly does it mean for the government to negotiate prices as opposed to the government just to fix prices i mean is this just price fixing well in this example in this example is the right answer if they're the largest single largest customer sacks right i mean you know and they are the market i mean what's the right thing to do well i mean you're you're saying that these drug companies are going to make a lot less money well obviously that's going to have a downstream impact in the willingness to fund new drugs new investment you are indeed yeah yeah now no one likes pharma companies i'm not defending exorbitant profits or whatever but i don't really know what it means for the government to say they're negotiating i mean the government just tells you what it's going to be that's price fixing and these companies are going to adjust yes the government will pay less money in the near term in the long term there could be reduced investment in r d i think there'll be a balance of you know do you don't all governments don't all governments i know that you're close to some of these uh drug companies don't all governments negotiate um the purchase of these drugs and then if they don't like the price there are alternative drugs and they'll say hey listen your drug is too expensive compared to these other two solutions so we're going to buy this one primarily for our universal health care there's an interesting thing that happens which is that there's a there's these drugs that are proprietary and under patent okay these could be chemical drugs or they could be biologics okay and eventually what happens is when they go generic then folks will step in and make lower-cost versions of those generics like you know i mean i'm on a statin i think a couple of you guys are on a statin like i don't it it it's it's lipitor but it's not lipitor right it's a torvastatin it's like some generic drug that i just take okay as an example um and uh there's a lot of folks that make that and the cost of those pills basically go to zero but there's a bunch of categories particularly for biologic drugs where it's very different it's very difficult to make a what's called a biosimilar this is a generic drug so long and short of it is there's all these classes of drugs that kind of like stand alone without enough competition and i think there are two ways to solve this problem one is where the government steps in which i think is is good but the better way has already is already been happening in the united states so you know there's a non-profit which is a collective between a bunch of hospitals called civica and i think that's a really interesting example and what those guys do was they said we're just going to create our own generic drug manufacturer and we're going to make the drugs we want we're just going to make them super cheap and you know they're they're in the midst right now of completing a massive facility i think it's in virginia where they'll be able to make as much insulin as is needed for the entirety of america for no more than 35 bucks a dose that's gangster that's gangster it's just super gangster we'll make our own and by the way when california said they're gonna make their own what they really meant was that they're gonna go and rfp it out and my hope is that they end up going with somebody like civica who has the experience of actually building it otherwise it's just gonna california's just gonna waste hundreds of millions of dollars proposal if you don't know what rfb is request for yeah but there are these emerging non-profits that are basically doing the work of the government i think that's a better solution to what sacs is actually competition right yeah it kind of creates competition yeah competition we got to move along because i think you're doing a great job freedberg right just one moderator to another exceptional job you know i appreciate it i think one of the interesting things sitting in your seat j-cal is you see everyone else's face and you see the boredom and the annoyance that people experience during the the podcast watch the island right leave for a drink i think i think chamoth is eating funyuns uh saxons no jerky jerky i've been eating jerky you shouldn't be don't tube in on the podcast please yeah i know and i think that the um don't what the don't do a jeffrey twoubin on this podcast no that's jeffy was a cnn anchor who on zoom accidentally no he masturbated on a zoom call with his what the [ __ ] does that have to do with beef jerky you said jerking and i just thought i said i was eating jerky dummy you said you were jerking something that's all i heard i'm sorry oh by the way so i am no longer fighting with phil hellmuth i oh my god guys i'm still blocked no so i was so mad at him okay so you know i finished i finished this transition i finished i finished the [ __ ] transaction to sell the warriors you know this is a this is a six-month ordeal okay i started in november right i'm starting to sell things i decide i'm gonna sell the warriors i sell it to a large private equity fund in november december and then we had to wait for them to close the second fund and then we sold the rest of it and it closed in june or july and then i put out this tweet right like thanking everybody and thanking hellmuth the same line in which i i i'm like i thanked peter thiel and i thank joe laker everybody is happy except for hellmuth who calls me and is angry and he's like i i you know he had this issue with how it was characterized at how he had introduced me or something where he wanted credit for wasn't it of the tweet storm he should have been higher up or you know and i was like well phil what if it hadn't made me money would you have just made me whole like what would you have done like it's like you were like the architect of this thing anyways i was so mad i just said i'm not talking to this [ __ ] anymore i'm done with him i'm done i'm breaking up with him and he would call me when i was in europe and i would ignore and i would get this incredible enjoyment from just pressing to voicemail he would send me text messages ignore and then i i mean this is always happens this way i did it once and that caught me she's like why did you ignore his phone call and i said i hate phil i'm done with hellmuth i told her the story she got so [ __ ] mad at me and then i had to send this text i'll just read you the text because i think it's just so [ __ ] hilarious i was going to ignore you for the rest of my life based on your tantrum with me earlier this year but nat has convinced me to see where you are coming from in part anyways we're good call me later he called me one second later he was waiting he had your deck for me to open i just pictured that mia he's your friend you gotta be you're such a jerk he's your friend you have no friends all your friends are going away before we wrap sax is going to give us instead of doing science corner mar-a-lago corner oh tell us what it's like yeah what is mar-a-lago like you've had your membership now for eighteen years never been there never been there but no i wanna i wanted to um i wanted to give a shout out to this article because last week i took some heat because somehow i guess you're not allowed to question anymore the rectitude of the fbi the j edgar hoover's fbi we're not allowed to question anymore or a lot of people feel that way there was an article that came out in real clear investigations just i think yesterday and what it exposed is pretty amazing the group the unit within the fbi that conducted the raid on mar-a-lago is the the same group that conducted the investigation into trump back in 2016 that lied to the fisa court that had its members as leaders peter strzok were fired for basically wrongdoing whose members are actually under investigation right now by the special counsel john durham and you've got people who are on probation right now so this is the same unit that basically conducted the raid on mar-a-lago so i think there's still more to come out about this but it's just amazing to me actually that christopher wray the head of the fbi and merrick garland the head of the doj thought that this wouldn't create the appearance of a conflict of interest or impropriety the fact that you've got the same unit that previously was disciplined for wrongdoing in an investigation of trump can is the one conducting the raid on mar-a-lago so pretty amazing cacao retort i'm sorry what we're talking about um no i i'll i'll tell you it's so brutal no i i just want to make sure i have a couple of child actors oh look at these problems they're on camera look at these props amazing good work nice props and that's what you're seeing there hold on sex before you get back to trump what you're seeing there is a family unit this is when a family gets together and expresses love towards each other but continue about mar-a-lago that's wonderful that's wonderful that's wonderful you could take a picture of this and you could send it to your friends on christmas all right jason you you are um you do not accept the real clear investigation report that maybe there is some long-term i i'll um here i have actually some feedback it's nothing to do with saks i just think a lot of times i get positioned as sometimes when i'm moderating i like to challenge sex last week i chose to stay out of it i let him go and i think one of the reasons people didn't like your comments last week saks was other than you know j.r hoover being dead for 50 years putting that aside and it being irrelevant i think the reason people didn't like it was because i didn't come back at you and question some of the things you were saying and so i think they felt it was an unbalanced discussion they expect me to do that but i don't want to be pinned as the adversary to sax's positions in every case because i'm an independent i'm a moderate i've voted for probably i voted uh democrat my whole life i voted for both of those parties but i do think that what's happening here is you know trump is under five different investigations he's got a career of doing disgraceful criminal fraudulent things and i feel very bad for gop friends i feel bad for republicans because they have to carry water for him and it's they put themselves in this really difficult position of defending him and you know we've talked on this podcast about january 6th we talked about voter fraud my good friend one of my besties david sacks has said he doesn't believe that the election was there was election fraud and he doesn't he thought january 6 was disgusting i'm not speaking for you that's what you said and so i think you know the fact that the republicans feel the need to defend him constantly is one of the big problems here and i think on the other side the fact that the media is forcing republicans to defend him and creating this narrative and this hysterics like oh my god csb espionage act he's doing espionage this might be very simple trump lied cheated stole his whole career from trump university to what's happening with you know the trump corporation now with the cfo and his non-profit this is his life is a history of griffs and crimes and unethical behavior what the gop needs to do is stop defending him and just let him go off into the sunset as sacks pointed out last week and that's what this podcast needs to do because there's no reason for me to sit here and do the left-wing talking points or for you know sacks to do the right-wing talking points the fact is first principles trump's a grifter he's a democrat the gop that's it my point is not to defend every shady deal that trump's ever done or even to defend trump at all my interest is having a doj and fbi that's not politicized it is not used as a political weapon or to pursue political targeting or vendettas and the reality is at some point we're going to move past trump as a country but the precedents that are created now are going to stick with us for a long time and the reality is we should not have an fbi and a unit within the fbi that is pursuing these political vendettas and in this article by real clear politics the amazing thing yeah the amazing thing is christopher wray prohibited this unit from seeking warrants from the fisa court so he knew there was enough misbehavior last time to basically prohibit them but it seems to me that's a very narrow takeaway it seems to me that the takeaway should be we don't allow this unit to pursue trump again because they committed so much wrongdoing yeah it'll be cleaner to have a clean unit right why wouldn't they do that yeah so let's see if that's if it's true because that is from a biased source and if it is true i mean real clear policy is kind of like a politico look guys this has been a lot of fun jkl thank you for letting me sit in your seat today yeah you did great awesome i appreciate that it was it was a lot of fun maybe saks would like to have a run in the seat at some point here he doesn't want to but uh for your as your guest uh moderator for uh today i'm dave friedberg and this is your all-in-pot thank you bye-bye we'll let your winners ride rain man david and it said we open source it to the fans and they've just gone crazy with it [Music] besties [Music] we need to get [Music] i'm back in




i want to play the theme music for this episode okay hold on a second here we go [Applause] if you let the indian government plant spies in your office give a little whistle [Music] if you have too many bots you can come up with your own metric mdaus fda use when you want to incent your staff to not look at the bots give them bonuses based on dows based on taos [Music] always let your bonus be your guide when you're on the board and you see metrics that you don't like turn a blind eye turn a blind eye i'm sorry sorry i just got subpoenaed [ __ ] everybody's getting subpoenaed again this is j cal at his best we gotta stop he's getting ourselves [Music] your winners troubles rain man [Music] david source it to the fans and they've just gone crazy [Music] is going to be the story of 2022 for sure right before i guess the big case between elon and twitter is about to happen i guess in october at some point a twitter whistleblower has come forward and dropped a nuke into the middle of what was basically the story of the year in business i think the former head of security hired by jack himself and incredibly well respected uh peter mudge zat co he's referred to as mudge one of the most respected people in uh the security industry again recruited by jack in 2020 after a team of hackers you may remember took over all these verified accounts obama biden and and elon's account as well and he was um head of security until january of this year eight months ago and he claims through explosive documents a huge document dump that twitter execs ignored these twitter executives ignored multiple security vulnerabilities now why is this important well obviously if obama biden and other heads of state have their twitter handles they could say something that could cause an international incident and that's actually happened with hacks before he also says they were not following even the most basic security protocols like safeguarding staff access to core software of course all this comes after there were saudi infiltrator spies essentially inside of twitter i mean the list of things here that he is alleging is truly colossal he dumped these documents to the department of justice the sec congress and the washington post he alleges that the vulnerabilities make twitter extremely vulnerable to foreign spies hacking and disinformation campaigns and perhaps most importantly to the acquisition the complaint also adds that twitter's policy towards fake accounts incentivize quote deliberate ignorance by undercounting spam accounts and giving bonuses to execs for increasing users but not finding bots saks your thoughts i mean on this we you talked about your uh subpoena or whatever that was uh i don't know it's a subpoena i'm being depositioned it's so you're you're having a deposition yeah they want they want to depot me too which is kind of amazing but let's let's save that because i think this is um more more newsworthy so you'll recall on a previous show we talked about this idea that if twitter sues elon to go after the kill fee or to go after damages the question will very rapidly become about whether twitter has a bot problem and will discovery reveal documents that show that twitter executives knew or should have known there was a problem and so i said you know the question will very rapidly become what did twitter executives know and when did they know it now i couldn't have predicted that this whistleblower would come forward but what he's basically saying is not only is there a bot problem there is a cover-up of the bot problem he's accusing the company of positively nixonian uh tactics here so just to build on what you said j-cal he said that twitter executives don't have the resources to fully understand the true number of bots in the platform and their executives are disincentivized to count them properly because doing so would negatively affect their bonuses so i didn't know that their bonuses were in any way tied to uh to this bot issue so he's basically he's making the upton sinclair argument that it's hard to get a man to understand a problem when his salary depends on not understanding it so that's part of what he's saying he's also saying that he's a he's accusing twitter ceo prague agarwal directly let's just say these are allegations right these are not proven yet uh but here's what he's saying basically he's saying that perag and his lieutenants repeatedly discourage him from providing a full accounting of twitter security problems to the company's board of directors they basically prevented him from producing a written report he also says that the company's executives ordered him to knowingly present cherry-picked and misrepresented data to create the false perception of progress on urgent cyber security issues he also alleges that they went behind his back to have a third party consulting firm their report scrubbed to hide the true extent of the company's problems and as a result of this he's basically saying that twitter executives committed securities law violations by making material misrepresentations and omissions and sec filings and this is what got elon to to sort of commemorate zacco's revelations with one of his trademark memes which was the meme of jiminy cricket singing give a little whistle from the film pinocchio which i think becomes a called open here which just became our cold open so yeah look these are very serious allegations they're not proven yet he's working with the same group who worked with francis hogan and i certainly questioned some of the things she was saying so i'm not going to automatically accept on faith everything he's saying but i think by the same token because he's working with groups that backed francis hogan who was very much not on the free speech side of this debate i'd also think you can't just accuse this guy being an elon stooge this guy is a respected cyber security authority he's one of these like white hat hackers he's somebody who was an early actor literally if you were to ask before all of this before we worked on twitter like who would you want as your chief security officer you know give me a short list he'd be on it for any company right one of the most respected people who points out vulnerabilities like chemotherapy burger i have a question about corporate governance and what seems to be a dysfunctional relationship here you have jack hires somebody to solve the security problems then when presenting to the board he's not allowed to tell the truth and they the board has given incentives to the management team he's a top five top seven member of the management team so what's going on here with this dysfunction where he's hired to tell the truth to fix the problems the board is turning a blind eye to it and maybe the management team is not giving the board the data they need to make better decisions who how do you game theory this yeah i'm not sure that it's you can come to all those conclusions yeah i'm not coming to the conclusion i'm just my mind is wandering of how this i read this function comes up i read parts of of his whistleblower i can't claim to have read at all it actually isn't super supportive of elon's case the most problematic thing that he points out is the following and this is a quote from his complaint he said twitter quote already doing a decent job excluding spambots and other worthless accounts from its calculation of mdow at best he's alleging that twitter omitted details not that it lied directly so if you kind of take that i think what he's really pointing his sights on are as you said disclosures that have nothing to do with the spam issue but have a lot to do with security and that is something that typically in a in a public company board filters up through the audit committee typically that gets a readout right once a quarter from the rep from the right people who talk about here's our cyber security threats and vulnerabilities and then there is a readout from that committee chair to the board and then those are noted in your quarterly in your quarterly reports that the secretary writes down so i think part of why this guy may not have had the audience is it was also written that he was a pretty terrible manager and there were hundreds of people in his organization who were just kind of running here and there and so you know you guys have all been in the situation where we hire somebody who is an exceptional performer and then we miscast that person by putting them in a point of leadership and and being a team manager versus um you know a single kind of like um product or engineering expert and it seems that there was a part of that at play as well which decayed the ability for management to actually have enough faith and trust in this guy to put him in front of the board so and that's all that's just come out in the last few days so i don't know my my reading of the whistleblower claim is really that this is the kind of thing that companies like facebook and google and others have had issues with the ftc in the past they typically settle those claims they pay a fine snap but those things take three to five years to play out so i suspect that this body of content more leads to that outcome than is a smoking gun that really helps elon in fact this the the fact that he's actually affirmatively stating that their calculation of mdow is actually pretty decent actually hurts the claim that elon is making i don't know if i agree with that actually okay go ahead sex so i agree with with chamath that the claims he's making are far broader than the bot issue um and far broader than the issues that elon's raised so i agree with you about that chamath however i don't agree that what he's saying isn't specifically helpful to elon's case so what he said is so this is from a cnn business article he said zacco's disclosure argues that by reporting bots only as a percentage of m dao rather than as a percentage of total number of accounts on the platform twitter obscures the true scale of fake and spam accounts on the service a move zacho alleges is deliberately misleading and then uh cnn what you're saying here just to do the math the denominator matters here if the denominator was all accounts the percentage of bots would be much higher if the denominator is monthly m dows whatever they created it would be a much lower denominator and the percentage would change i think as well i'm just i'm just reporting what yeah what cnn is reporting in terms of what zacco is alleging i just want to get out on the table cnn broke the story along with um what other news was washington post yeah basically what happened is this guy got fired in january and started working with these whistleblower lawyers they put together a big report and then that report got leaked to the washington post and cnn as well as people on capitol hill so that's kind of what happened here so cnn goes on to say zacco says he began asking about the prevalence of bot accounts on twitter in early 2021 and was told by twitter's head of site integrity that the company didn't know how many total bots are on its platform he alleges that he came away from conversations with the integrity team with the understanding that the company had quote no appetite to properly measure the prevalence of bots end quote in part because if the true number became public it could harm the company's value and image so this is again the options to clear problem that they're i mean david you have to agree this guy is basically speaking on both sides of his mouth i mean these are both direct quotes from his complaint so his complaint at best is very confusing and a little schizophrenic well it's also just coming out so there'll be more data that that comes from by the way i don't i'm not saying that i believe him or disbelieve him but i'm saying if you if you look at the quotes the quotes aren't the smoking gun one would want if one was trying to look i think we have to remember the the lawsuit has really nothing to do with this problem the lawsuit really boils down to one very specific clause which is the pinnacle question at hand which is there is a specific performance clause that elon signed up to right which you know his lawyers could have struck out and either chose not to or you know couldn't get the deal done without and that specific performance clause says that twitter can't force him to close at 54.20 a share and i think the the issue at hand at the delaware business court is going to be that because twitter's going to point to all of these you know gotchas and disclaimers that they have around this bot issue as their cover story and i think that really you know this kind of again builds more and more momentum in my mind that the most likely outcome here is a settlement where you have to pay the economic difference between where the stock is now and 54 20 which is more than a billion dollars or you close at some number below 54 dollars and 20 cents a share and i think that that is like you know if you had to be a betting person that's probably and if you look at the the way the stock is traded and if you also look at the way the options market trades that's what people are assuming that there's a 7 to 10 billion dollar swing and if you impute that into the stock price you kind of get into the 51 a share kind of a an acquisition price again i'm not saying that that is right or should be right that's just sort of what the market says friedberg what's your take on this do you find this person credible highly credible and how damaging do you think this is to twitter independent of the uh deal to sell the company i think there's two tests one is the materiality of what they've reported so and really that comes down to just the um the endow reported numbers so if there really is some misstatement knowing this statement based on what he's saying that's an issue the other one is the the duty of care responsibility of the board meaning um did the information that he's providing actually find its way to the board if it was blocked by management you know it's it's a judgment call on you know whether or not management was trying to deceive or whether they were trying to investigate and identify more if the information was brought to the board and the board did not act then there's an issue with the boards meeting their duty of care responsibility as fiduciaries of the company and that's really what he did pitch the board at some point or explain this but not in writing yeah if what he's claiming did not make its way to the board then it's hard to say that the board was in breach of their duty of care if the ceo and if the ceo blocked it then there's a question on what then the ceo can be fired right then there's a good case for the ceo to be fired i see so i see you know probably one of three scenarios here one is you know nothing happens two is that the board is actually violating the which i doubt knowing this board i mean knowing who's on this board it's probably more likely that the ceo or some executives that block this information from getting to the board the board then has to act now that they have the information and they say hey you blocked this information from getting to us we need to act and maybe they removed the the leadership that was responsible for that sex in terms of board governance how much of this has to do with the fact that nobody really owned on the board any significant equity in twitter is that true yeah i mean i think i mean on the board was the highest right he owned two or three percent how much did silver lake on jack owned silver lake egon's on the board i mean they're they're they're owners on the board right this is board yeah we're low to be clear zacco doesn't seem to be pointing his finger at the board in fact quite the contrary he's saying he wasn't allowed to present to the board in the amount of detail that he wanted in written form like he wanted so in a way he seems to be exonerating the board he is pointing the finger at twitter executives and the timeline here is instructive basically what happened is he was hired by jack dorsey back when jack was ceo this is in i think um november of 2020 and at that time jack had zacco report directly to him he actually took responsibility away from these issues away from prague who was running engineering gave it to zacco zacco reported directly to him now fast forward about a year later and jack steps down prague's becomes ceo and then two months later perrog fires uh zacco and it's in that time period that couple of months where zacco alleges that he's prevented from providing a written report to the board that twitter executives instruct him to cherry pick that they basically um try to amend this third-party consulting firm's report in order to make the situation look better in order to hide the extent of the company's problems so i think this is i think the allegations as far as they go are mainly a problem for twitter executives and and look i you know i don't know the truth these things they're just allegations uh i think this guy is a respected super sort of white hat hacker in the cyber community at the same time i don't know maybe is a bad manager or maybe there are other reasons for removing him could be a bad man yeah and you can't ignore the fact that under whistleblower laws if twitter gets fined as a result of these allegations he could get 30 so listen we don't know the truth of it however i do think that this whole thing is a windfall for elon's case because it does seem to provide substantiation for elon's assertion that there's a bot prom at twitter now and a cover-up about it and a cover-up about it exactly yes and a cover-up that would basically potentially invalidate the company's sec disclosures on the subject there's a question there's a question of law and a question of fact with regard to elon's case so in other words at the end of the day what they're going to be litigating in delaware is a contract dispute is elon contractually required to close and elon's assertion is i'm not because this bot issue so there's a question of law where if if everything elon says about the bots is true is he required to close and i don't know what the legal ramifications that are but i think with respect to the question of fact which is is elon right about the bot issue there's no question that this is a bombshell that can only help his case by the way to your point the the the stock was kind of pricing in a 70 likelihood of this thing closing if you looked at just how all this stuff was trading and it went down to 60 once that whistleblower report came out and people had a chance to digest it so to your point it definitely moved the goal posts a little bit towards to elon's favor there is uh you know an important thing to point out here which stacks just uh touched on there was a whistleblower program that was created in 2012 and uh by the sec uh as part of dodd-frank i believe or in part of the evolution of dodd-frank uh and they've given out now over one billion dollars in whistleblower awards these awards come out of the sec fine so you often wonder like hey they give this huge se c fine who got it well it turns out whistleblowers now are massively incented because if you're a whistleblower it's a career ending potentially jason you're not you're not saying the other part which is when you go to these organizations to now help develop a whistleblower lawsuit what has actually happened is you're not whistleblowing moral or ethical breaches you're whistleblowing things that can come back to an issue that the sec and the ftc can make an issue of because that's where the financial fines come and that's where the remuneration and motivation so for example like you could have a company that's illegally um i don't know killing dogs horrible but you know the whistleblower claim will be about you know their disclosures in a 10k of how many dogs they killed to the sec right in this case you know how many what did they tell the yeah uh and that's why he gave this to the sec doj the other interesting wrinkle here and by the way there's been two the whistleblower program i did a bunch of reading on it this week they also don't disclose who the whistleblowers are so this isn't a case where you have to come out like francis did uh or mudge did you a lot of these awards are being given quietly so and there's been two rewards over a hundred million dollars and they don't say what the award was based on you know who did who who the whistleblower is or who the company is they've been doing this in a very stealthy way and it seems to be highly uh effective the big difference i think with francis compared to this one is francis just a pm you know who was not a top five or 10 employee not even close to that this is a top five top seven employee who had access to the board and was giving reports to the board at least orally the final point on this i would like to get everybody's um commentary on if it is true that they essentially um were forced twitter was forced by the indian government to put a government agent on the payroll i think agent means spy how explosive is that and then how many that to me is the most important thing that is not getting nearly enough coverage it's like you had a government come to a company that's based in america and it's not it's not the united states government that did it and basically said we need you to place an agent of our intelligence services inside of your company and it seems like they were like okay where do you want them to sit now sacks if that's true would i wonder if they would be required to tell the cia and our government that their arms being twisted like this seems unprecedented to me and if they didn't well this is all alleged so but if true sacks what i think the bigger button over jason you should also ask the next one which is if they did it to twitter which is kind of small what about the big honeypots of users google apple google facebook tick tock snap and what about countries outside of just india what about the united states no i mean what about the united states uh well yeah we have access to the stuff you know through the courts there's supposed to be a process the process is you go to court and you get a warrant not that it's a high bar but a prosecutor has to go show probable cause and get a search warrant present it to the company and then they turn over the data this you're right it's explosive in the sense that what they're saying is that these government agents this is what zacco says according to time magazine the purported agents had direct unsupervised access to internal information which i think means dms when the accounts are created who owned which account the ip addresses that's what i'm guessing they had access to which is you you do not want to trust me i'm guessing i'm guessing don't put anything in your dms folks i'm guessing what it doesn't mean is the twitter menu in the cafeteria yeah no yeah not that i mean not that anybody's been to that cafeteria in three years anyway i mean there's literally forty seven dollars olive oil they had direct unsupervised access to the salad bar i think i think you can basically i think you could you have to make an assumption that if if governments are doing this to one company they're doing it to all companies yeah but you would think right that you know because would put up a fight or apple would put up a fight but who knows you think they probably fight when they went into china the opposite don't you think they do the opposite well actually what they did what there's actually an even sneaker way to do it what apple did when they went there is they said we're not providing cloud services in china uh but all the cloud services are provided by this third-party company so then they could have plausible data that's not what this is about this is just giving an example of how you this is understand but i'm asking you a question do you think that uh foreign governments have put pressure on the largest american tech companies to place agents and do you think they exist in there they've definitely put to the first part they've definitely put pressure we see that obviously then the question is would arg would the would apple or google do this and not inform the government or not put up a fight i don't know well i think it's fair to say that the the senate intelligence committee is going to halt twitter and have like a closed-door meeting and then the question is you know will they haul everybody else in and it's just is i i think what what is what what is an important question is is this a duriger kind of business tactic at the highest levels of every company and we just don't know it and are typically not read into it and we would never know in the absence of this whistleblower thing and my question is do does our government know that our companies are acquiescing to these governments well that's been a problem for a long time actually so there was a op-ed by a microsoft executive talking about this a number of months back where the argument was well the government has to go get a search warrant to get your data from these companies but these companies don't put up a fight like they don't it's they don't challenge the warrant at all and why because they don't have an interest they have an interest in being cooperative right the article is basically saying that if you're the subject of a search warrant meaning they're going to google to get information about jason the government should have a duty to inform jason so that your lawyers can go challenge it and that was the legal change that needed to be made we had this conversation i think last year that is a change that should be made because in the old days when the government would present you with a search warrant they'd have to go to you because all of your documents were in your possession they would be at your office they'd be at your house so they would come knocking in your door give you the search warrant you could give it to your lawyer they could challenge it that doesn't happen anymore now the government just goes and gives a search warrant to a big tech company because your data is in the cloud but their argument is you don't own that data the big tech company does the big tech company has no incentive to fight the government and they just get access to all of your data and you don't even know well you're not an investigator it's not an argument you agree to that when you sign their terms of service yeah the current situation is bad enough that essentially you have very little protection and rights over your data but what's happening here the allegation is even worse which is that government operatives are working with the company in a way that provides them access without them even getting a search warrant yeah they can just spy on their ex-girlfriend their you know brother-in-law whoever they can just spy on a celebrity do whatever they want i'd always assumed that this was happening covertly meaning like look if you're a tech company and you know you have a very bright i don't know phd on a visa and you hire that person to work in computer vision i'm just making this up how do you really know that that person is not an agent of another foreign country and obviously the overwhelming majority are not but once you have hundreds or thousands of people you know that that you brought into your company all it takes is one person you know for example we just saw i think in apple there were two people that were just recently arrested for stealing all of apple's autonomous um auto data and documents and design schematics and all of that stuff and one of the guys was um arrested right before he was trying to fly back to china and so somehow they figured it out they were able to get him he was not a us citizen but then another guy that did it was a u.s citizen but both were of chinese origin it just goes to show you that the covert nature of industrial espionage is probably at an all-time high right and i think that's that's a risk that every company has to manage and do the best that they can but this is different this is an overt risk this is just a literature and saying open the door give us a badge we're coming in and this is why i think you have to deal with this case very delicately and in a different way yeah uh and for people who don't know google does what's called the transparency report twitter also has one so they they do try to put out by category search warrants subpoenas etc exactly how many warrants they're getting and the the tech companies are at least trying to be transparent about it to the extent they can but this is going to lead to a lot of people moving off of the cloud i predict we're seeing and in fact apple is now storing your data uh and a lot of your privacy information locally on your phone and if it's encrypted they can't hand it over as we saw with the um the terrorist shooting it was at san bernardino uh where they couldn't unlock the phone and they went to the israeli spy company to do it so you know i think i think the companies here at least in the united states want to defend their users but this is could be uh make people rethink the cloud and i've seen a couple of pitches from startups i think you're confusing issues of course they're going to try to defend their users in the united states but what if you have if you let somebody into a different country and that's not as if it's not as if those servers are not accessible yeah and i'm not confusing this year i'm just talking about the united states here for a minute i do think you're going to see people buy many servers to put uh or rent their own cloud services that are encrypted and impossible to unlock and so look for that trend to come or more companies to encrypt it and say we don't have the keys to mop so isn't it crazy that like you know we spent the last 20 years pushing the cloud and the thing that may actually unwind the cloud is just the utter lack of privacy that we all have now i've just had like we've just created these massive honey pots where you know any state or non-state actor can essentially just have an incredibly detailed understanding of who you are yep and why because we weren't willing to pay five bucks a month for storage everything needed to be free i think it's part of isn't this part of the philosophy behind decentralized services that you know it gets crypto yeah i mean i i don't like using that term but just decentralized services where the data doesn't sit on some centralized enterprise controlled servers but the data is distributed either on a chain or in your phone or in some way you know your identity your information your content isn't uh isn't centrally controlled and that that fundamental principle may actually come to kind of bear over the next couple of years and decades that yeah that model is more appropriate for us for me and therefore the services that are built that way are gonna win in the market the challenge is ultimately how do you finance those because those services right i mean they they they don't have as much of it you have to pay you have to pay for them you know if you're willing to pay five or ten dollars a month for your privacy consumers are doing it for you i i use the brave browser in vpns and these are becoming a major category uh you hear it on podcast advertising all the time uh duckduckgo brave vpns are like vpns aren't just for hackers anymore they're like real like um something that i think that's really important which is that you know over the last 20 years for all of us we've been building these products on the internet we've actually done a little bit of a disservice because we've basically created these expectations of consumer surplus and we've never given people true sets of trade-offs we've always said oh you'll get more and it's essentially free because we'll back into an advertising model that that supports us being able to give you more and more for free but it turns out that it has some real consequences and i do think that not enough of us actually understand why privacy is important but when you start to hear these examples and it'll be important to see what what the true details of this twitter situation are i think that the pendulum starts to swing in the other direction where we say okay you know what i'll eat out at chipotle one night a week less and instead i'm going to reallocate that money to making sure that i have you know some amount of privacy you can do it for 25 bucks a month you know two or three hundred bucks a year which is a big number for you know maybe the average joe but it's it's it's it's being packaged and bundled right now so that you're seeing the vpns the anonymous search engines the browsers all starting to bundle they're bundling a set a suite of services and so i i think this is upon us now and consumers get it and they want to protect their privacy so and apple has said this is going to be our reason for you to choose our cloud is that we're going to put the local settings we're gonna put your data on your phone encrypt it we don't have access to it use use apple for this reason of course they're also building a multi-billion dollar ad business at the same time in apple news and their app store so there's that i guess we should move on here we'll we'll see what happens with this the other big news story that people are talking about this week and we talked about i guess last year was student loan debt relief interestingly uh about 85 days before the midterms joe biden has decided to unilaterally give 10 to 20k of debt relief to people who have student loans you have to have under 125 k in yearly income as an individual 250 as a household and the student loan pause program which happened during covet has been extended to the end of this year i'm not sure why there's they explained why apparently it takes four months for them to turn on their cobol written software that runs these loan services mighty so i'm supposed to change takes more questions it's gonna take it's gonna take four months to restart the software that that calculates your loan balance and is able to print a bill we're so incompetent okay anyway you have to apply for this um and as we know student loan is student loan debt is 1.75 trillion uh this is going to cost us another 300 billion can't imagine what's going to happen with this 1020k people buying nfts and stocks and housing and we're going to hit the uh i guess bloomberg had a report that said that look we we we passed the inflation reduction act we talked about it last week but one of the key pillars of that is that there's a 300 billion of expected revenues coming in and we essentially turned around and just gave that back to a very very small segment of the american population bloomberg's analysis was that it's going to create somewhere between 0.1 and 0.3 percent extra inflation on top of all of that and so you know you really have to ask yourself like what what was the white house trying to accomplish i think number one they made a campaign promise and so you know i think biden needed to make sure that he fulfilled that but nobody was really happy right the progressives wanted something extreme everybody else said you know this is not really the right thing to do because it doesn't really solve the sim the the root cause of what we're dealing with you know if it would have been much better if you said hey listen um you know we're going to make this stuff expungeable on bankruptcy that would have been really useful um what happens if you actually tried to i don't know you were from the inner city and you worked your ass off you became a doctor you have 300 000 in debt but now you're uh you know a resident and you make 120 6 000. well you know you're you know you're kind of sol here so there's a lot of folks that they probably wanted wanted to help that they didn't help then there's all the blue collar folks who are like why why this giveaway only to these folks then there are the people that paid off their loans thinking why did i pay my loans off then there's the incentives that it creates for colleges which is well i'm just going to keep jacking up tuition because if they did it once they may do it again so all of these things i think are sort of a little bit of you know uh it's a little bit of a head scratcher and then the last thing which we can talk about at the end is i don't think this is what gets people out to vote and i don't think it's what people care about ultimately at the polls which if there is a political calculation to make that's important and specifically when you look at what happened last night in a bunch of these districts every progressive candidate got absolutely shellacked they lost across the board and so the progressive talking points around this stuff fundamentally when push comes to shove doesn't work for democratic voters and then second is there was a really hotly contested seat which was a democrat versus a republican i think it's pat ryan versus this guy mark molinaro the republican he was leading the entire way and then this guy won 51-49 and this is a very centrist down the middle dem so all the signs are like this may not have been the smartest thing to do but i don't think joe biden had a choice because he made the promise and he had to live up to it freeburg is this a fair thing to do a smart thing to do a cynical thing to do to buy votes where do you fall down on this issue this is absolutely moronic i think that the fact that eight million households are eligible for this relief and ten to twenty thousand dollars is relief uh is provided to a a minority of americans is uh exactly what jamal said which is kind of distorted politics at its worst there this is a 300 billion dollar bill to the u.s taxpayer and the ultimate beneficiary of that bill while we all might want to say it's the people that are getting debt relief that have taken out these student loans that money was transferred to somewhere and you know where it was transferred to university endowments and the profit and the pockets of for-profit educational institutions if there were a free market for education in the united states and the government was not involved in the process of funding and supporting the educational infrastructure in this country individual citizens would have the right and the obligation to make decisions about whether or not the money that they're spending on tuition actually has a positive roi for them by spending ten thousand or a hundred thousand dollars am i going to make more than that much money back when i graduate and unfortunately we've lulled our citizenry we've lulled our country into complacency where that decision and that calculus is no longer required because uncle sam is there to give you all the money you want to go to college and the hungry money-hungry institutions that are there to educate you are taking that money putting it in their endowments or in the pockets of their shareholders and at the end of the day it turns out that that decision may not have been the best decision and we're no longer holding ourselves individually to take responsibility for the decisions that we've made and we're creating misincentives because of the government programs that have been created by telling people you need to get a higher education the government is going to pay for it for you and it doesn't matter if it does or doesn't work because at the end of the day if it doesn't work we're just going to pay it back for you anyway we'll bail you out and there's a middle class in the united states of america that is going to end up paying the tax bill primarily because that's where most tax dollars come from for the minority of people that made a bad decision and it's not necessarily their fault they made that decision because the infrastructure in the system was set up to tell they were duped yeah go to college get a good degree it'll always work having a good life you'll make more money and the and the reality is that they aren't and that they don't the roi for many of these degrees has been negative you make less money than you would have if you were actually in the workforce earning an on-the-ground experience and progressing your career you do not need a degree in philosophy or history or german studies to be able to go and be effective in the technology workforce or in the services workforce and i think that we're seeing that play out the biggest challenge now is if we're going to provide this loan relief and not reform the educational infrastructure and the and the requirements for whether or not an educational system is eligible for support from the federal loan program we are not actually solving the fundamental problem we are keeping this gravy train running and we're not actually getting to the root cause of where this money is flowing and this is exactly what happens i will rehash my point that i've made a hundred times at the end of empires everyone sees that the money train is leaving the station and everyone jumps and grabs what they can and that's exactly what's going on we think that we're a rich nation but we're becoming complacent and this is unfortunate and it's a really sad sign i think we need to fix this educational infrastructure we need to make eligibility requirements for whether or not loans are actually going to have a positive roi for students and then individuals ultimately need to be educated on that and made held accountable to whether or not they're making the right decisions for themselves sachs should each american pay a thousand dollars to let these eight million people off the hook because that's what this is going to cost no of course not i agree with everything if people say i don't like you i just gave you the softball of all softballs no i mean look i think this is an issue where all four of us are on the same page i agree with everything that jamasa and what freeberg said i mean this bill is unfair or it rewards relatively well-off college grads over working class people it's going to add 300 billion to the deficit i mean joe manchin should feel like a sucker right now because they just spent the 300 billion of supposed savings that he just agreed to i just add it's it's unconstitutional i mean that the constitution expressly says no money shall be drawn from the treasury but in consequence of appropriations made by law so i don't understand how biden can even do this by an executive order i expect this to be challenged and taken to the supreme court and i think there's a very good chance it'll end up like biden's other executive orders that were ruled unconstitutional remember there was the vaccine mandate that he tried to do and there was the eviction moratorium that he tried to do and they're both ruled unconstitutional i think there's a good chance that this will also be ruled unconstitutional and like like you guys mentioned it's inflationary i mean these are basically stimmy checks which we don't need right now and it's going to make tuition go up because the more government subsidizes something the more those providers have an incentive to raise the cost so this is just a jump the shark moment i think for policy making the question is why are they doing it and i think it really speaks to the nature of the democratic party today which is the democratic party has shifted from being a blue collar sort of more economically populist party economically left party to being a professional class that is college educated culturally left more woke party and this is the ultimate example of that where the democratic party is basically passing this payoff and giveaway to their sort of woke college graduates at the expense of their blue-collar the blue-collar part of their coalition and you know a democratic political scientist that i like to read roy tuchera just today he had a blog post called the democrat shifting coalition where he pointed out that if you look at polling if you look at the generic ballot among white college graduates they favor democrats by 12 points whereas the white working class which is say non-college voters they favor republicans by 25 points so one of the biggest gaps in the electorate is college versus non-college that is the fundamental gap it's bigger than even you know than any other gap than racial gaps or anything like that this is really the key gap in the electorate and this is a payoff to the basically to the foot the new foot soldiers of the democratic party if you think about it the old stereotype of a foot soldier of the democratic party would be a union representative they were the ones getting out the vote that person's been replaced with sort of a woke college graduate who joins the democratic socialist of america and they go out and they're the ones pounding the pavement and doing the ballot harvesting so there's been a real change in what this party is about and i think that's the explanation for why they're passing this legislation and then we'll go to your freebird the mfas from sarah lawrence college have taken over the democratic party well let me ask you guys let me ask you guys a question yeah when you guys graduated uh everyone went to undergrads tomorrow you went to undergrad in canada right i have no grad degree right but when you guys graduated college what do you think the ratio 80 20 90 10 50 50 00 100 was the first two years of experience you guys had in the workforce versus um the education and knowledge you you garnered in college how important 90 percent workforce 90 percent offers first time i went to school at night so i was working while i was at school right i went to high school a hundred and zero i i went to school university of waterloo that has a program called co-op where you have to alternate school and work it takes an extra year to graduate but you end up getting 24 months of full-time work experience so it was the same and you graduate with a lot less debt i graduated with half the debt i would have otherwise sacks i mean do you feel the same i mean you wouldn't got a law degree that's different i mean look i think that it used to be the case that people would go get these degrees and they would take out these loans because there was a perceived roi of getting this education and i think one of the deeper issues we have today is it's very unclear what the roi is i mean what is the return on getting a degree in you know social studies or art history or frankly some woke studies at one of these prestigious universities their graduates go out and they're not especially qualified for a higher paying job and actually i think one of the really revealing parts of this executive order is not just the debt forgiveness part we haven't really touched on there's another provision that caps repayment levels so basically it says that the monthly payments on undergraduate loans be limited to five percent of monthly income now who is that the payoff to that is the payoff to the art history major from amherst who ends up being a barista at starbucks you know or the democratic political operative who works for the dsa gathering votes i mean that is who this would be or the let me give the let me give the counter argument to you saxon i want to hear your response to this so the counter argument is hey listen the airlines got bailed out for a trillion dollars you know cumulatively um 2008 financial crisis 700 billion or something to that number i'm going to respond there is a caveat to that which is we actually made money on that bill i'm going to respond okay great and then number three hold on and number three um me too airlines banks and then the trump tax break 1.5 billion so why can't a bunch of students get but 300 billion that is the counter argument everybody we don't complain when you know the rich people get bailouts and the rich corporations and airlines do but now we're suddenly complaining about this little pittance here what's your best response to that free bird well i'm not saying that's my position former uh treasury secretary of the united states had a tweet storm about this and he said you know the student loan issue arises arouses passion um here are some observations and some responses there is no analogy with bank bailouts student loans are grants that cost the government money the bank bailouts were loans at premium interest in which the government actually turned a profit and it's important to think about all government services being infrastructure funding where you are funding some underlying tubing or mechanism that allows society and the economy to progress versus making up for the dollar mistakes or decisions that were made in the past i also have issues not just with this but with the issues of people buying homes in coastal cities that they get bailed out at the price of that home at the fair market price when a hurricane hits because they paid a premium taking on the risk of a hurricane or a flooding event hitting their home why should the u.s government and the u.s taxpayer come in and say you know what i'm going to reimburse you for the full value of your home which frankly should have been 50 of what you paid for it because it's sitting on a coastline and that's a big problem that we generally have is we try and use the government as a system for providing bailouts to make up for past investment mistakes made by individuals and businesses and i think that there's a very clear distinction that you can make when you decide whether or not a and we use the term bailout anytime we're spending money but the reality is if you're making an investment that has some payoff for economic growth and for people and for this country to progress in some measurable way that is a good way to assess whether or not that is a reasonable investment versus saying you know what i'm covering someone else's liability and when you do that we're actually burning money and we're putting ourselves deeper in a hole as a nation and making it harder to do the former to make the infrastructure investments and make the investments that allow us to move forward and i think that that's a really good way to clarify these things and frankly the list of things that people say this is fair this this is not fair yada yada go down that list and ask yourself that question is it a positive roi to progress our country forward or is it a bailout for people that had some liability they took on that they can't cover and i think for all those things that are unfair a really important point we cannot get caught up in the endless cycle of making up for other people's unfair uh um benefits that they got from this from this government because at the end of the day that's a road to nowhere we will burn through everything we have and everyone will scramble for money and that's the state that we're in right now where everyone's raising their hand and they're seeing 800 billion dollar bills 600 billion bills coveted relief pandemic relief ppp loan relief and everyone says well what about me and at the end of the day everyone's what about me is going to drive us into an infinite black hole that we will never get out of and we have to change our mindset and take individual responsibility and recognize that the dollars that we're spending have to have an roi for progression of us as a whole and this is a really dangerous place that we're in right now if the education comments okay can i make can i make it i'm sure you're making something last question to sex am i am i too monologue today i feel like i'm very passionate no no you're doing great i mean the fact that you have passion about something maybe it was an extreme video game yeah that almond milk gave you a little bit those cashews maybe four cashews going forward mean this is definitely bug this guys this stuff really bugs me i'll be honest take it easy on the dates yeah i'm like dude like this stuff just it makes me feel like what are we doing it's just uh did you put chia seeds in your see yeah that's it was it was it the goji berries the goji version go easy on the goji berries that's a super food right there if you if you have if you have chia seeds in the morning it's a huge bm that's about to hit it's just you're just waiting for the wave to yeah yes i mean for sure i have two comments comment number one is i think the thing that shows that this could have been better is that it was completely silent on the ability to expunge your student loans in bankruptcy the ability to discharge that is the single biggest change you could make to the system to be fair to everybody and introduce a better roi risk scoring calculation mechanism okay so great so this is in all direct agreement but go ahead and i'll explain it okay in all debt markets right whenever you lend money there is an assumption of risk that you're taking and that fits on a curve of highly likely to default zero likelihood of default and that manifests in a risk scoring so a fico score but in the debt markets right and there's these companies that provide that moody's and s p they say you're an investment grade debt you know you're a triple a plus you're a junk debt so you're you know you're a triple b minus or whatever and depending on where you are you pay different rates this is the same in car insurance it's the same in home insurance it's the same in health insurance but in all of those cases if you go upside down you can declare bankruptcy and you can discharge those nets here we don't have that idea so if you go bankrupt for whatever reason this debt will stay with you forever which is deeply unfair second is if you actually flipped it and you could allow it to be discharged then the companies that provided these loans would be forced to risk score you and the reason why that would be so powerful is that that would then create the forcing function for universities to actually deliver what they promise and so who do you think is really against the ability to discharge in bankruptcy it's the universities and the university endowments so you know if i were progressives the thing that i would have pushed more than a handout to a few people which by the way didn't even you know really scratch the surface of the debt that they have anyways and it also served to piss off everybody else i would have focused on this bankruptcy issue because that is a meaningful lasting change and the second is why don't you go and actually get a large portion of this money from all these university endowments because the longer that these folks run what is effectively a multi-trillion dollar asset management business they're always going to treat education and the roi that comes from it as a second-class citizen okay and that is what i think is wrong and if you were to just fix this one thing and then even the threat of actually confiscating some of the 50 billion dollars that harvard has or the 49 billion dollars that utimco has you would start or the ut system has you would start to see the seeds of change where administrators would think to themselves i have to deliver something of value because these kids are getting loans they're going to be risk scored and i don't want to be the person that's like a low end borrower right i'm not serving junk paper to the market i want to serve people that are going to go and really drive a huge roi so then saks you'd have an alignment between the people giving the loan and perhaps the value of the degree and so you could say hey we'll give loans to stem degrees at a different rate uh or a different number of them or a different amount of cash or a different interest rate than we would for i don't know getting a degree in philosophy or like i did psychology right you just give a different one based on the outcome that makes total sense to you yes yeah i i've said well for a long time that we should be allowing student debt to be discharged in bankruptcy just like any other type of debt just like credit card debt just like other types of debt jamal's right that would create some risk to the underwriter so that they would have to actually assess whether this person getting that degree would be able to repay the debt but you have to ask the question is it a bug or a feature that they're trying to remove market forces and i would argue that this is deliberate that progressives in the democratic party don't want there to be accountability for what you learn in college why because as i mentioned it's these colleges that are putting out the foot soldiers of the democratic party i mean listen there's a 37 point gap in party preference just based on one variable which is whether you are professional class or working class meaning college degree or no college degree and that spans across different racial groups and other party lines so the fact of the matter is that if you go to college and get a degree you are much much more likely to become progressive now why is that i think it's because a lot of these colleges have basically become re-education camps i mean these are the woke madrasas of uh yes but look these places are worth madrasas and what do they do they graduate these people clerics of our woke theocracy these people go on and then they go enforcers become suicide bombers yes it's not it's not like violent like that but listen we we look down on some of these theocratic societies and we don't realize how like them we are i mean look these kids who graduate from these woke madrassas they go off to become the speech police i mean they go enforce community moderation at social networks they become the foot soldiers all right let me just wake up no no this is the check out let me say one thing it's true right how did you explain it 37 point gap okay so if you're in the democratic party listen if you're the democratic party which is run by woke progressive political operatives why would you want to defund the factories that are brainwashing more young students to basically join your ranks okay i want to say two things i want to say two things one is um i think that the the university in the college degree has been used as um a heuristic uh for progression out of um blue collar to white collar it says if you get a hollow and j cal you i know you can speak to this because you know you come from a family that uh that works blue collar and you know you got a college degree but i think there is this um uh you know kind of assertion in the united states and and it has now become one could argue a meme that if you get a college degree you're no longer blue collar you're now white collar and the reality is that the quality of that degree varies greatly based on where you go the major and the experience you get to accompany that degree and as a result you may not necessarily transfer from blue collar to white collar but you have the degree you say you're now white collar and then you're working a blue collar job with a hundred and twenty thousand dollars of debt um and so that heuristic isn't true and what we need to examine is why that heuristic is no longer true and what we can do about it yeah i mean secondly secondly i do want to make a defense for college i think that there there is a incredible benefit to broadening individuals exposure to topics research um and areas that they may not have naturally been interested in or that they will not necessarily get trained in and there is an important role that that educational infrastructure has in allowing us to be a more enlightened populace meaning we can understand history we can understand philosophy we can understand the things that shaped our our world and our livelihoods and what makes us who we are today and we can understand the sciences and the maps that affect us so we can better understand the world and the people around us so there is a role but the real question is how do you integrate that educational role into a technical training program or into a real world development program skills that that basically make an educational system more than just a checkbox that doesn't actually do anything for you but gives you that exposure accompanied by and maybe that's the requirement with you know with federal loans is that there should be some skill or some i think i think the minute i think the minute i don't want to lose the important breadth of exposure that college is meant to bring to people yeah yes and that's valid go ahead chip off and then i'll wrap up my final account no i was just going to say i i really think people do not understand how how meaningful of a change it would be if you were able to discharge your student debt in bankruptcy it is the most powerful market function we could create to make these universities more accountable and i think if you guys look at my annual letter i put a chart in there but you know part of the problem that we have in these universities these leading universities is that these have become graveyards okay there is a geruntocracy that runs these things with an iron fist and as these folks have stayed in these jobs for enormous amounts of time now 40 50 plus years the average person is in their mid to late 70s now who are the administrators of our leading institutions they are focused on running up endowments and they are focused on the power and the influence that comes with their position so i i implore anybody who has any ability to to actually achieve this change there should not be a single logical person that should not support the ability to discharge student debt in bankruptcy and you will identify the insider establishment by those that try to stop you you will expose them 100 and i just want to put a closing thing here for the people listening who have young people making these decisions when we all went to college as gen xers college was 9 10 11 000 a year in tuition and if you came out with 10 or 20k and you had an average job or a salary of double or triple that when you graduated it seemed like a good deal the roi broke now market forces are at work here i just want to point out two of them number one there is a website grow with google you can just look up right now they're allowing people to get professional certificates and this is free and if you could pull up grow with google they've identified five different paths to jobs one of them is digital marketing and e-commerce one's it support data analytics project management and ux design they have essentially looked at what's needed in the world and aligned a three to six months online course for [ __ ] free that'll get you a job and you if you have executive function the ability to sit down shut up and learn can do this first before you make the decision to go a hundred thousand dollars in debt and then get a 50 000 a year job here at these jobs average you know 60 70 80k a year and you can do it for free the next piece that the private market is doing you and i looked into this chamath actually together isas income sharing agreements uh we were lucky enough to invest in a company called maritos they are providing isas for a college colorado mountain college for nursing what this means is they will give you your tuition for free it's educate now pay later you if you go to one of these colleges for nursing you get educated and then you pay it back and you're capped at paying back like two times whatever the loan is one and a half whatever the college decides but they take the risk as opposed to harvard with 40 billion that takes no [ __ ] risk and so the free market i think can also solve this but you have to sit down with your kids and say let's have an roi calculation at 20k in debt you know okay fine you got a philosophy degree by the way sign off saks final question for you uh i posted this thing in the group chat but what do you guys think about this you know uh republican tidal wave becoming a republican ripple that's what uh yeah that's that's what that's it was it was an odd set of outcomes don't you think i mean biden look biden has had a good run over the last few weeks um i'm sorry my audio cut out one more time sex can you say it again i'll say it again the second political report says that the red wave looks more like a red ripple no i think i think it's right well look i i think a couple of things happened so first biden has got some wins legislatively i don't think it's good policy i don't think this executive order is good policy i don't think the 750 billion of climate that pretends to be an inflation reduction act i don't think that's good policy but nonetheless he has delivered some goodies for his his base for his donors and that has basically ameliorated this story in the press that democrats are in disarray so you're not hearing that in addition i think bain's got two things going for him jobs and jobs i mean dobbs there's no question dobbs has helped the democrats quite a bit it certainly has motivated their base and then the jobs report has been strong look i think overall the economic data is mixed real wages are not keeping up with inflation but jobs have so far been strong so yeah there's no question that democrats are in a materially better position they were in june when it looked like a tsunami that being said the election's still 10 weeks away and i think we'll have to see what happens and i think the economy is still in a pretty fragile state so 10 weeks is still a long time but yes you're right yeah for what's more things are looking right now things are a lot better for biden and by the way i do think the republicans have some issues with candidate quality and so there's a couple of races that you know should have been more slam dunks and that are not but what was the first word you used there you said dobbs and jobs what was the first jobs abortion ah the dobbs case yeah got it got it okay okay that i just didn't hear it perfectly weren't a lot of these wins for biden uh bipartisan well no the inflation reduction act was passed on straight party lines this this uh college loan forgiveness is something they can't even get through the senate it's being done as an executive order the the things that were bipartisan hold on the things that were bipartisan there was that chips act where they got some votes that's great and um and then there was the guns bill so um yeah look he did get some bipartisan wins there's no question about it i think the republicans i think the republicans got hoodwinked basically the republicans foolishly went along with infrastructure and with the chips act they should have forced biden to use up reconciliation on one of those bills and then they wouldn't be able to get through the 750 billion inflation reduction act so republicans you know as much of a sort of master strategist as mcconnell is reputed to be they really got snowed on this one if it's possible for somebody to um masturbate themselves from the inside out jason's doing it right now there's a reason why we do this from the chest up okay i think what's likely to happen in november is still that the republicans win one of the chambers probably the house i think the senate is still up for grabs i don't think it's over i think that'll be important because biden won't be able to pass some of this legislation that's i think destructive from a deficit standpoint from an economic standpoint and we've talked about in this pod and i don't think you guys are too excited about most of the legislation he's passing so quite frankly i'm just hoping for gridlock i'd like to get back to a situation of gridlock less spending would be certainly great at this point i mean well if we're trying to fight inflation here while we keep spending money over here it's it's challenging yeah if you want to get back to uh fiscal responsibility you you got to vote for gridlock or hopefully moderates come all right we'll uh we'll let sachs go anyway we're going to go to science anyway and zach's checks his email during that segment so by the way there's there's an article now you know when we talked about quiet quitting it's now become this huge thing that everybody's talking about yes and and what's so funny about quiet quitting is just yet another example of gen z again co-opting something we've already done when we used to do it it was called coasting and you just be like rest invest yeah but but now it's called quiet quitting yeah they're all up in their feelings do we want to talk about guy bio uh want to hear about the gut bio so there was a there was a paper published in um so the journal cell the paper was done by a research team out of herzelia so i'll take a step back the human body is made up of roughly 10 trillion cells um and there are also somewhere between 10 and 40 trillion bacterial cells that live in your body primarily in your small intestine in your and what people call the gut biome and so this is a population of microbes bacteria that are basically chemical factors they eat stuff up and they spit out chemicals and those chemicals end up in our body and it turns out that the gut biome the bacteria in our gut can actually regulate our health in a very significant way and this was the basis of our company unique you guys can bleep that out if you want which is now called supergut and jkl i know you've tried the product which is awesome thank you sent me i bought munique that helped me with my weight loss and then i just got super gut bar the principle of that business is that there is a known product a molecule amylose that you can feed the gut biome it doesn't get absorbed by the human body it sits in the gut biome and the bacteria in your gut certain types of bacteria will eat it their population will grow and other population of bad bacteria will shrink and the good bacteria release chemicals called short chain fatty acids that go into your blood and reduce your blood sugar and have a profound effect on on your metabolism and there are also known gut bacteria that can regulate your sleep your mood your anxiety your energy levels and your glycemic control the control of blood sugar so it's an incredible are you telling me are you telling me that cialis is a natural compound is it bacteria are you saying we have to cancel our cialis prescriptions oh no yeah so guys there's there's a known um there's a known principle that's really deeply studied now in neurology uh in neuroscience um uh called the gut brain axis that you can actually profoundly affect um disease and the condition of the brain and neural conditions by changing the gut biome and so this is this is something that's just being studied the reason it's all coming to light in the last few years is because of the cost of dna sequencing we it used to be very very expensive to sequence the dna from your gut biome which you do by looking at your poop and then you know looking at all the dna that's in the poop and that tells you what you're good by what bacteria in your gut that used to cost a thousand bucks now it costs five bucks and so in the last couple of years there is this absolute explosion in research into the gut microbiome and more importantly how the gut microbiome affects human health so this particular paper looked at the effect that eating artificial sweeteners had on the gut biome and on human health and so what these researchers did is they um they took 120 people they gave them nothing or gave them sugar or gave them saccharin or sucralose or aspartame or stevia the four most popular artificial sweeteners and then they looked at how their gut biome changed and importantly they looked at how their glycemic control or ability to control blood glucose changed blood glucose as you guys may recall you know you always have glucose in your blood the more if you have over you know a level of 100 you know you can and it persists you can actually have really bad health effects and it causes high a1c over time which is diabetes um and so hot and it stores more fat when you're spiking and so you get yeah when when you have high blood glucose it's actually damaging to organs it's damaging to cells and over time it can cause very significant deleterious effects to the human body that's what the disease of diabetes is and does is it's about high blood high blood sugar blood glucose so what these guys did is they gave people uh saccharin sucralose aspartame and stevia and then measured their blood glucose and their ability to convert sugar in the blood and absorb it and use it and that's called glycemic control the way you guys you guys have probably done this in the doctor you take a glycemic control test you drink a bunch of sugar water and they measure your blood sugar every couple of minutes and then they show the curve on how effectively your body can metabolize that glucose and if it cannot metabolize that glucose well you have bad glycemic control and ultimately that is diabetes and what they found was that if you eat saccharin and sucralose which we always assumed were better than sugar they actually adversely affect your ability to control um blood glucose saccharin and sucralose in particular drive up your blood glucose and makes it harder for your body to metabolize glucose out of your blood aspartame and stevia were relatively benign oh really because that's what's in coke zero that's what i drink there you go and so so that was kind of the realization and then they went deep and they actually analyzed the microbiome and they showed that there were profound differences in how these compounds affected the microbiome it turns out that sucralose for example is more likely not being absorbed by your intestines so it's sitting in the intestinal walls and the bad bacteria are eating it and the the good bacteria that are supposed to be making short chain fatty acids and all these chemicals that regulate blood sugar um have a lower population and so we actually see a profoundly negative effect from eating certain compounds have you shipped your poop to test these like yeah we just did a clinical trial at supergut by the way and we found uh and we published it so it's it's public but wait ha just the audience doesn't even know the stuff exists in all likelihood you basically take a poop and you put it in a vial and you send it and they analyze your poop i don't mean to be graphic here but have you done this before how does this work i i i do it everywhere i've done it yeah and and i think it's um look here's here's the issue jason i think and i want to i want to say two things that i think are really important to say number one is um we know very little about what bacteria do what in your gut how which we're starting to understand which ones are beneficial which ones make good chemicals that your body use and regulate your cells and regulate your health and and remember we have a symbiotic relationship with the bacteria in our gut they're making chemicals and they're eating chemicals the chemicals they make affect our cells the chemicals they eat affect our body so the way that we um evolve our health is actually profoundly affected by our gut biome so we don't know enough yet to say definitively this bacteria is good this bacteria is bad we're starting to have a good sense of that the second way just yeah just so you know just to double down on this like there's a form of therapy it's experimental but it's called fecal microbiome uh transplantation fmt you heard about us but you know we are finding now that you can take feces from healthy individuals that have good you know gut biome and good bacterial counts and if you put it you know injected into people that are suffering from a bunch of different diseases it actually is looking like it's curative so parkinson's ms ibs colitis so it just goes to show you that this that somebody would put a good gut by but there's bacteria into another person's intestines where do you put the poop it's no you don't walk through the bum no no yeah you can do it there or you can take a pill uh so there's a little tilt and it's got the the fecal stuff in it you swallow it and it and it no no you want to eat somebody else's poop you give you a picture i said i said it in a way so that we could see his reaction to in the bum and jason was like this how does this impact your anus that's what everything the audience wants to know freyberg how actually your reign is here's the other point i wanted to make which ties to what jamal said this is really important jkl yeah so the gut biome is an ecosystem like a rainforest there are trees that grow monkeys climb the trees they poop there's jaguars jaguars eat the monkeys the trees grow because of the monkey poop there's a whole ecosystem all these organisms all these microbes regulate one another and feed one another and this is why probiotics do not work probiotics are single microbes single bacterial strains or fungal strains that we put into a pill and we swallow it and just because that microbe happens to have some beneficial effect you know on its own in a petri dish it does not survive in your gut biome because it's like putting a house cat in a rain forest the jaguar will eat the house cat the house cat has nothing to eat etc it doesn't inoculate inoculate means that it survives thrives and the population grows so when we take probiotics it's just passing right through our gut it doesn't stay there and doesn't matter and it turns out that the reason fecal microbiome fecal transplants work is because you're taking the whole microbiome from someone else's gut and you're putting it in your gut that's the rain forest the whole rain forest and so all the organisms that are needed that self that regulate one another all of the small molecules that that regulate that cross regulate each other they all go in your gut and then they actually change your entire gut and your gut becomes the rainforest of someone else's gut and so if someone else has a healthy gut meaning my anus can be uranus jason wait there it is so we put our anuses together and then a monkey goes between them and then the rain forest is well let me ask you questions the fda has not approved any of this yet when will the fda be approving these treatments there are a lot of there are a lot of clinical trials going on for fecal transplant ucsf has a huge clinical trial for ms as chamath pointed out right now where they are actually doing fecal transplants on patients without ms into people with ms and significant you know the early data of these sorts of treatments as indicated that there can be a very profound effect on the frequency of lesions appearing on the brain uh which is one of the primary symptoms of ms and so these organisms we don't yet know why but some of them will it's already coming out there's no it's not like a binary switch we're discovering new things there's a cup there's a set of companies that are discovering what are called small molecules so they're finding what are the little chemicals that those good bacteria are making in your gut and what can we turn those chemicals into drugs and so they're trying to turn those into drugs other companies are saying you know what this is a set of good bacteria let's just put them in your body and figure out a way to get them to inoculate and stay other companies are saying let's do fecal transplants and other companies are basically just saying let's change this is what we do at supergut let's just change the feedstock for your gut biome and you can actually evolve the rainforest into a different state by changing what you're feeding the bacteria in your gut and there's certain molecules you can feed the gut bacteria and then the populations will change into a more beneficial state why are people saying like eating drinking kombucha and fermented um vegetables pickles whatever uh apples are like great at fixing your biome and then taking sugar out is good for your biome this is another thing i keep hearing like people are sick are making single-point claims like that because they have invested in a lifestyle and they want to defend their choices it's not the same it's not to say that those things are bad those are all good but i think what we know and the fecal transplantation is the most simple way of pointing this out is that it's a broad scale holistic approach that gets the best results so as you know like if you if you had if you've had a kid that's had you know diarrhea for example right you know sometimes what we'll do now is instead of giving the kid some sort of diuretic suppressant what you actually give them is a probiotic right and what you're trying to do is to reintroduce healthy bacteria into that child's stomach in a way that allows them to self-manage and self-heal while the bad you know uh diarrhea-causing stuff kind of gets washed away as an example so will one thing be a cure-all for you no i think that you should be very skeptical of those claims that's why everybody says a healthy well-balanced diet is really important because we do not know conclusively this is why you know i i tend to believe that the broad holistic diet works the best in moderation yep because you just don't know what you're not getting we don't know that you know we don't know you can't say conclusively that there isn't a form of bacteria that is created specifically when you consume animal protein that is extremely helpful to you we don't know that that's not true not now we don't know that that is true either right and there's a ton of research going on to try and figure that out right now have we figured out any of it though like yeah yeah this whole genetic ginger movement yeah we could we could do 12 episodes on this there is so much amazing discovery happening this is a good paper to highlight that which is like hey maybe avoid products that have saccharine and sucralose in them but my my big thing is there is no diet whether it's keto whether it's the south beach diet whether it's specific vegetarianism whether it's veganism nothing is a cure-all for what ails you there is nothing and by the way one important point in this paper one of the points that these guys highlighted which we see all the time in microbiome research is that there are what are called responders and non-responders that within a population it's not like everyone that eats sucralose has the same negative effect some people have a really negative effect and some people have a mild to moderate to neutral effect and so there's a range of your particular physiology your particular gut biome that will respond differently to different inputs into your body and that's the most important thing to figure out because people need to spend time eating and sampling to understand what makes you feel better or worse this is why i i have an issue with you know the broad-based claims of this path will solve all your problems it's just not true you have to solve it for yourself and it's it's through iteration and then the the the yeah anyways it does seem like non-processed foods whole foods things that exist in nature that seems to me directionally correct as the way to go and then the fake stuff and the processed stuff may be less good for you you agree with that this is why i think that there there is a little bit of a scam being run on people who want to be healthy like for example have you guys looked at the ingredient list on oatley you know everybody loves oat milk but have you looked at the ingredient list are you really telling me conclusively that that is healthier than milk it's insane i mean i could tell i could argue both ways but yeah i mean look at the chemicals look at the chemicals in a box of oatly i mean just drink water guys i can also tell you the chemical name for every chemical that's in milk which is all chemical like all everything around us is chemicals so i understand i understand natural chemicals but you understand synthetically made man-made chemicals that are explicit that have to be put on an ingredient list because of its danger in high quantities should be treated slightly differently in my opinion all right yeah i mean olis just gave us three subpoenas we're all [ __ ] we're being deposed by holy now all right everybody we'll see you next time on the all-in-pot love you boys [Music] and they've just gone crazy with it [Music] besties [Music] we should all just get a room and just have one big huge orgy because they're all just useless it's like this like sexual tension that they just need to release somehow we need to get back [Music] i'm going on 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all right everybody welcome to episode 94 of all in this is a summer unprepared episode there's not much news we're gonna wing it with me again in his uh golfing cap the rain man himself david sachs you do okay buddy yeah that's good yeah all right i'm kind of annoyed that we're taping on a wednesday you know this is a slow news week it's a slow news well that's not why we're taping on wednesdays because you have to want to go to burning man well whatever i mean listen everybody has to get their burn on sex have you ever been to burning man yeah i've been before did you like this was that burning man really he was there on threesome thursday i've been a couple of times i think it's uh it's a cool experience doing worth doing you know once or twice in your life it's not something i want to do every year but um i know a lot of people do like doing it every year they're like really into it i'm not really into it that way but i think it was a worthwhile experience to go at least once have you been uh no freeburg have you been i've not been now i have no desire no i don't like driving in the car for a long period of time and well by the way i'll tell you i'll tell you why i don't really have a huge desire to go i uh i don't really have a huge desire at this point in my life to want to do a ton of drugs that's not that's not just about that really no really exactly what it's really about is art are we joking right now it's if you like art and you like music it's amazing it's amazing i really i really like art i think i actually collect phenomenal art in fact i like to go to like freeze the biennale it would blow your music no you have no idea the scale of the art there is tremendous it is extraordinary and if you're into music can we just can we just call it what it is it started out as a festival that did celebrate art and creativity yeah and over time became mass market and in order to become mass market there is still an element of that but it's a huge party and i think people should just be more honest that it's super fun you can really rage for a weekend or for an entire week and people should enjoy themselves but let's not like have to put all these labels about how like intellectually superior it is and how you feel like [ __ ] i don't think it's just people doing really it's okay it's okay to go and do drugs the thing that's interesting about it is it's really about community a large number of people get together they build cancer do drugs no in a community no you've never been you would literally that's not the vibe there the vibe is really dancing and creativity and art and community but anyway so it's like a rave it's where everybody is on drugs are the best when you're sober best best you have to understand that they're going to be going to edc sober i've never been to edc but this there's a great filter here which is you've got to drive six seven hours into the desert and you have to survive you have to bring everything with you and bring everything out you know whatever it is a bathroom water food and it is harsh i mean it's a hundred plus degrees in a day and it's 40 degrees at night it's not easy to survive it's hard it used to be that way when i went home when i went i went with a bunch of guys who had the whole thing like wired in and they had like these yurts and it was like a whole community and they had like running water and a kitchen and it was basically glamping it was glamping there are people how's that hard to survive no they're i mean it's hard to do there are people who glam it is hard to do that because you have to you have to go yes they spent the whole year whatever setting it up and it was really elaborate and then there was an article like in the new york times basically saying that you know that they were ruining burning man because they were making it too nice that was part of the problem you remember this that's when i went i went to the two nice experiences so they wrote that about you yeah yeah basically great you ruined burning man great time saks thanks for ruining birdie man [Music] [Music] i don't know if you've been following the nft story we'll cue that up as our next story uh open c the marketplace the ebay of nfts if you will the volume has dropped 99 since they first peak of 406 million dollars in a single day on august 28th volume dropped to around 5 million dollars down 99 according to decentralized app tracker dap radar on a monthly basis open seas volume has dropped ninety percent according to dune analytics the floor price of a board ape has now dropped by 53 percent uh if you remember openc raised 300 million at a 13.3 billion dollar valuation december 2021 in a round led by kotu in paradigm to put that in perspective that was nine whole months ago my how the world has changed fredbear what's your take on nfts and this whole boondoggle i don't know how to how will we look back on it yeah i don't know i mean we've had a lot of bubbles as a species this is just another one i thought we're going to stop doing stock market crashing stories well this is different this is a different market what do you think did you invest in any of these nfc month of this story which is fill in the blank asset class crashed yeah this one scene the question i have here sax is do you think that this is the end of the category though do you think that's like category ending do you think there was ever anything interesting here because you took you heard a lot of pitches like i did for how nfts were going to change everything you know what i'll i'll say something because i liken this to the point um just to tie it back to what we just talked about at the end of the day you know i think i've said this in the past but like what differentiates humans from all other species on earth is our ability to tell to communicate and tell stories a story is like a narrative about something that doesn't exist and by telling that narrative you can create collective belief in something and then that collective belief drives behavioral change and action in the world right i mean everything from religion to government to money to art is all kind of driven all markets are driven by this notion of narrative and collective belief that arises from that narrative so when you go to an art dealer and you have a sit down with an art dealer you might appreciate the art but then the narrative begins and the narrative is this artist did this and they came from this and the artist that looks like this created at 6.8 million and this artist is only trading for 3.2 million and the whole narrative takes you away into okay i should pay 3.2 million for this piece of art and ultimately it'll be worth more and that's the fundamental premise of markets is you're buying into something not necessarily always and this is such a minority now it's scary used to be that you own a piece of a business or a productive asset you pull cash out of it hopefully you get more cash out than you put in when you buy it nowadays markets allow you to trade therefore the majority of market-based decisions are driven by if i buy something for x i'm going to be able to sell it to someone else for y and so the narrative is driven around i'm paying this someone else will pay y down the road i'll make money from that and this has been repeated a thousand times over it's been repeated in the ico tokens it's been repeated in the tulip bubble it's been repeated in every art market and subsidiary of every art market since the dawn of time since the dawn of of markets and i think the nfts are really just one more kind of example where this beautiful narrative has formed the the digitization of art but it is no different than any other form of assets that we tell ourselves the story around and we convince ourselves that i'm paying something today and someone else will pay something more for me tomorrow and i will also say that in the last year with the liquidity that we saw the last two years it leached into the stock market where there's supposed to be more rational behavior that ultimately the cash flows of an asset you're buying should generate more for you than the money you're spending to buy that that asset and ultimately you can maybe trade out of it early but still so much of it became about well the stock is going up therefore if i spend x someone else will spend y and i'll make money on the stock with no underlying assertion of what's the productivity of that business what's the return on cash gonna be based on the cash flows coming out of that business over time or any of the fundamentals around it and so so much of our discussion and distortion has really been driven by this narrative fueling and i think the nfts are an example but there are many others and we're going to see many more as long as humans have the ability to communicate with each other any do you have any take on it jamal i think freeberg's mostly right like i do think that there's this thing the the burning man coachella example is the best way to describe this a lot of these things are the same but when a few people approach something early they're too insecure to admit that it's the same as something else and so they spend a lot of time trying to tell you a narrative about why it's totally different the buffett example you know would be the quote you know whenever somebody tells you that this time is different it's probably not that different or the other quote that's well worn in history is like you know things don't necessarily repeat in history but they rhyme all of this is trying to say that other than like fundamental leaps of science there's not a lot of stuff that's new in the world you know we are repeating things over and over and one of the things we repeat is the social capital that you get from having certain choices and then getting other people to validate those choices because you want to feel like you're you know worthwhile and this happened in nfts and i'm sure in the first phase of different movements in art that also happened it's probably happened in a bunch of other markets as well so these things are more similar than they are different coachella and burning man the same nfts and part of the art market the same everybody that runs to you with why it's so different i would just have a grain of salt and say you don't need to be different just enjoy it because you think it's cool all right we can go either to this california fast food wages story or we can go to goldman sachs workers are quitting on mass because goldman sachs is saying you got to come back to the office five days a week where do you want to go boys i think the california thing is really interesting just the the three things that california did in the last week i don't know if you guys saw but number one is they basically uh said that you know you have they're going to ban ice combustion engines i think by 2035. so you have to be battery ev um and then you have the new sales you can still have sales sorry yeah new sales um which is the first in the country to do it and just to go back to a second california is the largest auto market in the united states and effectively you know trump and california got into a huge spat because california had certain emission standards that were tougher than the rest of the united states and you know the federal government tried to sue california and back and forth all of this rigmarole so california's always sort of led on climate that was one thing then the second thing is they said we're going to create you know a state sponsored organization to set the minimum wage rates for fast food workers pause what we think about that and then the third thing is that um this congresswoman i think or this assembly person buffy wicks passed the law um through the senate and through the the house that essentially holds social media companies liable for the mental well-being and the mental health of kids um and depending on where you're lying on all these issues it's like an interesting kind of lens in which where like california is really becoming extremely extremely um legislatively active and basically imposing their will on free markets in the economy there yeah and for people who don't know the fact the fast food issue was they want to move to a more european style where instead of unions debating with individual corporations mcdonald's burger king whoever what they're going to pay their employees uh or employees uh having that discussion one-on-one they want the state some state authority to pick the amount per hour fast food companies pay and then i guess disintermediate the unions uh it's kind of confusing but interestingly uh of uh our friend uh lorena gonzalez if you remember she's the one who told elon to you know f off um and was a former uh democratic legislator she introduced the bill when she was in the assembly and so it's kind of a weird approach uh i'm not sure why the government no it's not about it's not it's not discriminating the unions she lorena gonzalez fletcher i guess now she's the former democratic legislature who drove elon out of the state remember when she said sure you know f elon now she works message received yes and he left uh great great move for for the state so she is now running one of the biggest unions and what she said is that this bill will move california closer to the labor model used in europe where unions negotiate the unions are still negotiating for wages and work conditions but in an entire sector with some sort of government board rather than company by company so in other words it's too slow to unionize you know company by company they would just want to unionize entire sectors of the economy now the thing that's really crazy about this minimum wage proposal is that like you said jason it isn't just that they set a minimum wage they created a 10 person panel so there's a new government agency that's going to regulate fast food the fast food industry you know they're not going to stop at minimum wage it's going to be work conditions so now you're turning fast food restaurants into a highly regulated part of the economy and the weird thing is it's not even just all fast food it's basically chains that have more than 100 fast food restaurants nationally so in other words if you're a local operator of two mcdonald's you'd be subject to this 10 person board but if you own 20 restaurants that aren't part of a national chain in california then you're not and so the weird thing is that some workers in the fast food industry could get this new minimum wage of 22 where other or as other workers who work for you know they're not part of a major chain would get the statewide minimum wage at 15. so it's it's um it's kind of unfair in that some parts of the restaurant industry are being regulated and others aren't is there any justification here that you can think of to not let the free market do its thing frudberg well if you represent the workers you're saying hey pay him 22 and you can and here's what that points out it actually points out that there's probably a pretty big business flaw in a business that's so reliant on commodity labor and that business in and of itself is not as valuable as you might have thought it was before think about it this way there's a company called mcdonald's and then there's another company called mcdonald's labor and what happened before is mcdonald's employed people to do work at mcdonald's and maybe what happens in the future is all those people are looking left and looking right and they're like you know what mcdonald's has nothing without us we are the business we deserve the value so in terms of how much of the value of the business flows to the shareholders of mcdonald's versus the employees that work at mcdonald's the employees that work at mcdonald's are saying let's go do a startup and our startup is called union and our business that's called union is now going to provide a bunch of services to mcdonald's and those services we're going to start to value capture what they're doing and it indicates that maybe there's something inherently disadvantaged in that model and it could be that the argument could be made that that business in the early 20th century in the late 19th century yeah the 19th century early 20th century and beyond that you could build a good advantaged business because there was such an eager hungry workforce people looking for work you people would come and work for nickel an hour or whatever and so you as a business owner could make a lot of money doing that you could sell a product for a dollar pay people five cents to make it for you but nowadays those people are looking left they're looking right they're like wait a second we are the business or we're 90 of the value of this business and so couple things will happen number one is the inherent business model of a company that's so dependent on commodity service is going to be flawed and challenged in the 21st century and fast food restaurants aren't going to be as valuable businesses that rely on commodity service are not going to be as valuable number two businesses are going to automate so new businesses will emerge that actually do the fast food work or do the car building work or do the dock loading and unloading work that are automated and they'll have an inherent advantage in the economy and they'll win and i think number three is that in the near term consumers will suffer because prices will go up because someone has to pay for the incremental cost of running this unionized business and that will ultimately be the customer of that business i'll say the fourth point is i am concerned about this sort of behavior in regulated spaces where the government has actually control over the market itself so this a good example of this is the you know we had um our friend ryan from flexport on a few times but you can't just start up a shipping company and have a dock the docks are run by the cities and they're run by the state and so those docks access to those docks access to that market is regulated by the government so then what happens is the union right the the labor company can actually have regulatory capture through the government of a segment of the economy and that's where things start to get dangerous so look i'm all for unions if they want to show that a business is reliant on a commodity labor force and commodity service and they all band together and start a startup i mean that's what we do we all start a company yeah and go and compete but the issue is then when the government creates regulatory capture over a segment of the economy and make it difficult for the free market to ultimately do its job of either automating or creating a newly advantaged business model or all those things that allow us to progress automating's coming a couple of us made a bet on a crazy idea of like automated uh robotic coffee called cafe x uh not to talk our own book here and the company really struggled during the pandemic but they have two units at sfo jamal they're doing 73 000 in two units last month and i'm like wow the the company figured it out and there's another company doing french fries this is the this is the sad thing that california doesn't realize is like i think that the folks writing these laws have just an extremely poor understanding of economics and capitalism because the first thing that it does effectively and everybody can understand this is it caps the profitability of a company right because it effectively says if you look at an industry that is over earning then this council will essentially see money that should be reappropriated to employees now that idea is not necessarily a bad thing for example you see that all the time in technology right if you look at the ebitda margins of like big tech and how they've changed they've actually eroded over time as the companies have had to generate more revenue because employees demand more and more of those gains that's an implicit part of how the free market economy works in technology so you know if you don't feel like you're getting paid well at you know google you go to meta and you get paid more and vice versa so there's a natural effect of people being able to do that in certain markets but when you impose a margin and essentially say you can only make 10 because the rest of these profits i'm giving to these folks because i've imputed their new wage to be something that's much greater than what they were paying before the unfortunate thing is what freebrook said which is that you will rebuild that business without those people because it is the rational thing to do and so unfortunately what you'll do is you'll take a bunch of people that should be in the economy right think about like new immigrants or young people that are first getting on their feet they'll take these jobs you know i mean i worked at burger king when i was fourteen that's how i got somebody first you you those jobs won't be there to be had and that has ripple effects as these folks get older or try to get more ingrained in the economy and this is what i wish california would understand is that these things aren't free and even though they seem like you're coming to someone's rescue there's all kinds of unintended consequences and very obvious consequences that you're ignoring by not really understanding how the economy works i'll just say like look these people can i'll start a sec but i mean you know the people that are elected are elected by the people to represent the people they're not elected to govern over the long term plan necessarily for the state and while you think that those two may be the same the near-term incentive and the near-term motivation of someone who's voting is i want to get a benefit for myself sooner rather than later not necessarily i want to make an investment for 30 or 40 years down the road and if you're an individual that's struggling in some way you're going to prioritize the former over the latter and you're going to elect someone who's going to go put in place public policy that's going to benefit you so i don't necessarily raise my hand and say i blame the people that have been elected i raise my hand and i say look this is the natural evolution of what happens in a democracy where there is a struggling class and there were where there is some sort of view disparity or considered disparity that this is what's going to happen in a democracy under this condition is that you're going to elect individuals who are going to go and govern and they're going to make decisions they're going to benefit those individuals that got them elected over the short term and there may be some real long-term damage that results saks is a part of this problem is that uh people are now looking to the government to solve their problems in life versus maybe looking internally to solve their problems and you know negotiate better salaries and hold on i think you have to give people a little bit more credit nobody was asking for them to step in like this look this is as much for the politicians as it is for any of the workers um what's happening right now the national restaurant association and all these restaurant lobbying groups are flooding the state the legislators the governor with lobbying money because they want to get this bill modified tempered or thrown out and so this is basically a racket like look as a public policy matter it makes zero sense for the same worker if they go work at say jiffy lube or something outside the wrestling industry they get the california minimum wage of 15 if they go to a mom-and-pop restaurant they get the minimum wage of fifteen dollars but if they go to mcdonald's they now get a new minimum wage specifically for chain restaurants of twenty two dollars that simply makes no sense there's no public policy rationale but the real question you have to ask and trump is kind of getting at this is why shouldn't it be fifty dollars why shouldn't it be a hundred dollars well the reason is because if you raise the minimum wage too much then these um employers have a huge incentive to replace that labor with automation and so the unintended consequence that your mouth is talking about is that these big chain restaurants are gonna rely even more heavily on automation now and they're gonna basically employ less of this labor where the price has been artificially erased for that sub-sector of the economy from 15 to 22 for reasons that no one can really explain so again this is not for the benefit of workers it's for the benefit of the politicians look what's happening right now there's all these articles talking about the lobbyists coming in they're going to nav gavin newsom begging him to be their savior right now and this is the game that the california democratic party plays it's a one-party state where they where basically business loves gavin newsom because he's their protector he's a protection end of the extortion racket lorena gonzalez gets this bill passed which is basically incredibly damaging to these chain restaurants and they have to go running to gavin newsom and beg him to either veto it or modify it temper the bill so it's not as destructive to their business he's a protection in the extortion racket but it's the same racket this is a one-party state and what they're doing with chain restaurants they would do with every sector of the economy if they could it's just a matter of time and what is the purpose of the california government like are there things they could be focusing on other than this like maybe the free market settles this issue and they can extract benefits from the private sector from basically the wealth producing part of the economy and to line their pockets in the pockets of their supporters you know that the typical government worker in california makes 53 percent more than their private sector or counterpart and if you factor in all the pensions that have been promised it's a hundred percent more okay so basically there's a huge wealth transfer that's taking place where the where basically the legislatures the party they are transferring wealth from the private sector to their supporters their backers and friedrich you talk about democracy listen i mean california is a one-party state and ballot harvesting is legal here i'm not saying the votes are fake or anything like that but there's a giant party machinery and apparatus that literally just goes door-to-door and collects the ballots from their supporters they literally know who their supporters are on a door-by-door household by household level it has gotten to the point now where the party machine is so powerful they can pretty much run anybody for any post and get them elected it's very hard for an outsider candidate it does feel like people are getting tired of it no but guys that's exactly how it works i mean like if you look at gavin newsom's run to the governorship um he paid his dues he did the right jobs he waited in line he didn't you know rock the boat independent of any of the things he did right or wrong and he had some pretty big moral transgressions it didn't matter because it is about paying your dues and waiting in line because there aren't any meaningful challenges here none i'll tell you so in l.a l.a in l.a right now there's a mayoral race going on and the two there's a runoff between rick caruso and and karen bass it karen bass is basically a product of the political machine she's basically worked her way up in the democratic party forever sort of uninspiring candidate she's just basically a puppet of the machine caruso is actually he's a real estate developer who's built some of the most landmark you know spots in la like the grove like the pacific palisades development he's made incredible he's created incredible amenities for the la area he's also been on a bunch of civic boards um you know i had lunch with him at the grove and people were coming up to him he's like a celebrity they were taking photos with him he's the best possible candidate that you could have in a place like la he actually understands business i think he would restore law and order i mean all this kind of stuff right he's spoken out about the homeless problem being out of control and on election night he had the most votes but five days later when they counted all the the basically the collected ballots through ballot harvesting karen bass was up by like five points that is the power of the ballot harvesting and i still hope that he wins but the party machine is so powerful they can basically get almost anyone elected in the state can't the battle what's that just devil's advocate here the the ballot harvesting can work both ways like you could go collect republican votes no but you have to have the party infrastructure to literally go back okay so the republican hasn't the republicans haven't done that think about it this way okay so you know like your phone there's a platform and there's an app think about the party as the platform and the candidate as the app okay the platform can drive a ton of traffic to whatever app they want a guy like caruso doesn't have the party behind him so he has to build his own operating system exactly so he has to build his own platform then he has to build his own candidacy so when you think about the amount of money that's required to do something like that about how hard it is to do it it's it's very very hard so he spent something like 100 million of his own money hopefully he wins but if he doesn't all the infrastructure all the platform that he created just goes away and then the next candidate has to start from scratch this is why outsiders is almost impossible why isn't the gop invested in california they just don't think they have any shot because it seems like the the democrats are investing heavily in trying to flip you know um look there's a two to one party affiliation there's a two to one party affiliation in california towards democrats so look i mean the republican party here is a mess and that's part of the problem is the republican party in california needs to move to the center it's a plus 30 blue state unless they're willing to do that they're not going to make progress but that could take you know generations to fix and with roe v wade and that kind of stuff it's going to be really hard to look there are pro-choice republicans in california but all newsom has to do is point to what's happening in texas and you know all of a sudden people kind of revert to their tribal political affiliations i'll make i'll make one more simple point the average voter in california probably knows more people that work at mcdonald's than our shareholders of mcdonald's and i think in any time that there's policy that gets voted or gets suggested or ultimately gets passed there's a side that benefits and there's a side that doesn't and if you know more people that benefit on one side than are hurt you're probably going to be supportive of that policy and i think that's probably a pretty simple rubric for thinking about how these things over time evolve that's true nationally why is that only true for california i mean like in florida yeah first person in florida knows more people who work at mcdonald's than shareholders mcdonald's and they're not engaged in a systematic takeover of the private sector philosophically they're they believe in independence and businesses not being interfered by the government right that's a core tenant of the republican party also the sad reality is that within a few years unfortunately you'll know a lot fewer people that work at mcdonald's because the number of jobs for humans will be dramatically lower they got rid of the cashiers that's gone already or what people will be more acutely aware of in a number of years is how expensive mcdonald's has gotten because if the price doesn't know that that won't be because like again mcdonald's has a very simple no not not even the market mcdonald's is not stupid they understand how to use excel and so they'll think well i can amortize a robot versus actually jacking up um prices because what mcdonald's understands is the sensitivity of pricing to demand for their product yeah that's right right i mean they are the most intelligent about how they price every anything at the sort of the lower end where you're capturing you know nickels and dimes they are the most sophisticated and understanding supply demand and and and the curves and so to think that they're not going to just invest heavily now at the corporate level the next franchisee of mcdonald's will still pay a million dollars for franchise fee but will give will be given a bevy of robots that they rent for mcdonald's and they'll have to hire half or a third less that's that's the real shame of this which is the number of people that should actually be gainfully employed in the economy will then shrink again but in this case it was because legislators just completely don't understand how incentives work and how the economy works and people are not clued into exactly how well narrow ai machine learning is doing right now by the way i'll say like it's really moving quickly one general way to think about this is is technology is introduced and the technology creator captures roughly a third to a half of the value increment because of the delivery of that technology the productivity increment so let's say that it costs 12 15 an hour to employ a mcdonald's labor today and let's say that you can build technology that the amortized robotic cost is ten dollars an hour there will be a technology company that will make 250 an hour off of that so net net what ends up happening is productivity has to be gained and prices will reduce and so you know there are moments like this where there could be an acceleration of technology and also an opportunity for new industries to emerge and when that happens new jobs emerge too so it's you know maybe look i mean at the end of the day it seems luddite-ish but you know there's going to be a mark a market opportunity that will arise i think we need to like just step back and and ask what is the type of economy that california is creating here with this fast food law with these other laws we're talking about this is a state in which you have a disappearing middle class the middle class has been moving out of the state by the hundreds of thousands in fact last year we had for the first time net migration out of the state this has basically become a state where the only middle class are basically the government workers who like we talked about are making twice as much as their private sector counterparts it's a state where you have the very rich and very poor and the only middle class are government workers that is what we're creating the rich in the state have done really well over the last few decades why because of globalization so you take the two big industries in the state tech and hollywood entertainment they have benefited enormously through globalization because now you can sell software or you can sell movies or music exactly so now these these industries have become you know massive global exports and so if you're in those industries in california you've done really well because now your market is the whole world so the super rich have done really well that's funded the state that's allowed the state it's almost like a resource course to have all these bad policies that really hurt small business owners they've been moving out of the state and so again you've got the very rich and very poor this is not an economic model for the entire nation this is what you know gavin newsom says he wants to take to all of america this is not a model for all of america in order for democracy to function we need a thriving middle class and this is not a recipe for delivering a thriving middle class to america and the i just want to show you guys a quick video um we'll just play for five seconds here we had invested in this company and got sold i'm not going to say the name of it but if you watch this quick robot this is a computer vision company out of boston and like they're doing high-speed picking of tomatoes and berries like this is a two-year-old video when we invested and wound up getting bought by another company and they're doing vertical farming but and there's companies doing this now for french fries it's over like we are within you know i think five ten years of a lot of these jobs and we're talking tens of millions of manual labor jobs being gone and and we're going to look at this moment in time where we try to squeeze an extra 10 or 20 percent out of these you know uh employers and then you're going to see these employers say you know what 24-hour day robot yeah it's a little bit upfront cost i'll put it on a lease and they're just going to move to these robots it's it's really very close to being game over for manual labor and you can see it also with cyber truck and you know what elon's doing with ai and these things are getting so close and it's been i don't know when did you invest in your first robotics or ai company saks or chama do you remember the first robotic or ai company you invested in and how long ago was 2014 [Music] it's a company called relativity space which is 3d printing rockets and engines and basically they're able to use machines to learn how to actually fix the morphology of all the materials that they use to print better and cheaper and more useful rocketry that's an example but then that led me down the garden path i was just going to say something more generic instead of talking her book which is i think people misunderstand that moore's law has actually not ended um and this is something that a friend of mine adam deangelo characterized to me a beautiful human being from work together he well he was a cto facebook when i worked there so we this is you know we we've known each other for 15 16 years and now he's a ceo and founder of quora but you know the the way that he described it to me which is so true the minute he said it i was like my gosh it's like moore's law never ended it just shifted to gpus you know because the inherent lack of parallelization that cpus have you solve the gpus and so that's why the the surface area of compute of innovation has actually shifted json to what you're saying which is you know all of these new kinds of machine learned models because you can just now brute force and create such a tonnage of compute capabilities and resources to solve these problems that weren't possible before so you know you see this thing you know fun things like wall-e or you know dally sorry and more sophisticated things like gpt3 but he's right which is that you know we are at a point now where all kinds of expert systems which is sort of like v1 simple forms of ai are going to be completely next level well you think about the data sets adding to that and so when gov exactly and so when governments don't understand this and they try to it you know step in they're going to be shocked at how much faster they're pulling forward the actual future they actually are trying to prevent yeah the the data sets is the other issue fredberg you look at you know the the data sets that are available to train so you have the gpus still escalating massively the amount of compute power can do you have cloud computing at the same time and then you have these data sets one of the most interesting things about you know dolly and a lot of these is the corpus of data they're able to absorb and a second factor issue that is starting to come up is who owns the derivative work in copyright so if you train your data set on a bunch of images and those images are owned by disney or whoever you know photographer getty and then the ai makes you a new photo so here's another here's another example of this here's another here's another example of this in a law that just passed so in the ira uh the inflation reduction act you know we granted cms and medicare the ability to negotiate drug prices and we actually also capped um the total prescription costs that any american can pay at two thousand dollars now it turns out that overwhelmingly most americans will never spend two thousand dollars a year on prescription medications but there will be a few and they bump up against drugs that cost billions of dollars so there was a you know there's a drug for you know uh sma um that's like you know 2.4 million and like you know beta thalassemia like 2.8 million and you're and and we will all bear the cost of that now if cms and medicare go and really crunch those costs what is pharma going to do well pharma is going to do what is the obvious thing which is like if you're going to cap what i can make i have to completely change my r d model and they're just going to use alpha fold you know and what it's really going to do is potentially put a bunch of research scientists out of work and those are folks that should probably in the you know for our general future be gainfully employed but the nature of their job is going to change completely because the economic capitalist incentive of big pharma is going to move towards technology which is you know an alpha fold and their protein library is the equivalent of ai and automation for mcdonald's so this is where again governments have to be super careful that they understand what's actually happening because they're creating incentives i think that they don't completely understand all right we can go to raw meet for sax zuckerberg's uh admission of fbi meddling truth social uh well you guys disputed me and like how dare you imply that j edgar hoover and jim comey's fbi is politicized remember you guys were debating against that was about the investigation you didn't but some of you were saying i can't believe saksa you're part of the 35 of americans who don't believe fully in the rectitude and integrity of the fbi i don't know if this is fbi oh man comes this bombshell i mean you gotta admit this was a bombshell what was the bombshell okay so i'll okay okay so joe uh joe rogan had zuck on and he asked him about this very specific thing remember the new york post story on hunter biden's laptop in like the week or two before the election was censored right and it was a very controversial thing because the fbi was dealing with known uh russian interference and hacks and all this stuff uh part of which trump was like asking people to hack other candidates okay you're not even setting this up correctly well okay i'm gonna keep going and then so this is what zuckerberg said hey look let's see let's moderate this segment well i mean i'm just gonna read the federalist which is you know right wing but he says i'll just read you what zuck said because that's says it all he says hey look if the fbi which i still view as a legitimate institution in this country i'm quoting from the federalists which is quoting him from joe rogan um it's a very professional law enforcement they come to us and tell us we need to be on guard about something i want to take it seriously so uh when the new york post broke the hunter by the laptop story on october 14th 2020 facebook treated the story as potentially misinformation important misinformation for five to seven days while the tech giants team could determine whether it was false or not during that time uh this is federal speaking decreased its facebook decreased distribution of the story by making the story rank lower in the news feed and this is his quote zuckerberg's you could still share it you could still consume it zuckerberg explained but quote fewer people saw it than would have otherwise and while he would not quantify the impact the facebook founder said the decreased distribution was quote unquote meaningful in a follow-up rogan asked if the fbi had specifically said quote to be on guard about that story meaning the laptop story after originally responding no zuckerberg corrective says i don't remember if it was that specifically but it was basically the pattern so basically i guess you would agree sax zuck didn't know exactly what to do here with this information um and if it was real or not which you know it turned out to be very real and it probably could have swayed the election i mean i do think if people thought there was a connection between hunter bind maybe it could have i don't know if we want people being hacked to do that so what's your take on it sexy you know just hacking in general and this specific thing what should the fbi do if these kind of hacks are getting released of people's families okay so yeah here's the complicated issue right there's many vectors yeah what zuck basically says the fbi came to to them and encouraged them to suppress this story or to suppress a story that they described that would be just like this okay so now look a lot of conservatives are dragging zuckerberg and facebook for doing for doing the fbi's bidding but i think a lot of people i think most people in zuckerberg's position would have believed the fbi when the fbi comes to you and says you're about to be targeted by russian's information you need to do something about it you would have listened to the fbi he believed the fbi my point and so i don't blame facebook too much for that i think it's understandable that he would have believed them the issue here is the politicization of the fbi look let's back up what was happening so the new york post gets this story about the leak contents of hunter biden's hard drive in response to that you had 50 former security state officials many of whom were democratic partisans like clapper like brennan they signed a letter saying that this story has all the hallmarks of russian disinformation now the truth is they had not inspected the hard drive they simply said this is the hallmarks of it and as a result of that we thought that the social networks and so forth censored the story okay now it turns out that the fbi by the way the fbi had the hard drive they had the hard drive for over a year it was an image of the hard drive or the actual hard drive they had the actual hard drive the leak of the story was was likely prompted because the fbi didn't appear to be doing anything with the hard drive so somebody leaked the story to you know to rudy giuliani and then he leaked and so forth the new york post but the point is that the fbi had the hard drive so they knew it was authentic okay so they knew that this hallmarks of russian information was not the truth because again they had the authenticated hard drive in their possession and yet they still went to zuckerberg and basically played into this narrative this phony narrative that you know democratic partisans like clapper and like brennan had created was there anything meaningful by the way about what was on the laptop in your mind like do you think it's relevant do you think we want people's laptops being hacked like this who are in people's political families yeah i don't think the laptop was hacked i mean there's a weird convoluted story about how the laptop ended up but but look the the point of people's personal pictures you know and stuff like that be released i never liked the part where they were showing uh hunter biden's you know drug use and the other personal stuff i thought that was scarce and i didn't i didn't like it and i didn't think that was uh particularly germaine so i think and i think it was an invasion of his privacy however there were materials on there related to his business dealings in ukraine and i don't say see how you can say those weren't relevant oh i think they're trying to relational he's being investigated for them too now i mean a lot of this has to do with timing too you know it's like how do you deal with something like this seven days before an election when you know the russians are hacking it if it has been or not it's a really difficult situation for everybody i think so so look my point my point is this that um i i can agree with you about the personal stuff about hunter buy and shouldn't come out but but with respect to the ukraine stuff that was legitimate it was fair game and the in most importantly i don't know whether it would have sworn the election not probably not probably by itself it's not but the real point here is that the fbi went to facebook to censor a story that they must have known was true because they had the laptop in their possession they should not be intervening in elections that way that is the bombshell here that's unbelievable i i think they didn't know the providence of this but i guess we'll find out where are you landing in the providence of a hard drive that's in their possession i didn't have an nft exactly um where do you how are you uh i think you always start culture exactly that's exactly audience wants to know saks audience really wants to know where you were going to reserve judgment on the mar-a-lago search where do you and or republicans come out on all this now when you see [ __ ] he did in fact have a ton of really sensitive stuff like it'll define a ton and of defined terms of really sensitive stuff yeah i mean listen like what's your what do you have 300 pages of documents mark classified if you were to go to the 30 000 boxes of documents that obama took are you telling me you really couldn't find 300 pages that have classified markings on them well the fact that he wouldn't give it back by the way i never disputed it hold on a second i never disputed that they would find documents with classified markings in trump's basement i still think that the approach was heavy-handed and we don't know enough because we don't know what those documents are yeah every document they stick in front of the president or not every but many of them are more classified but okay so let me ask you this aside from these like kind of details what is what is trump's deal that he just wouldn't give them back do you think what do you think his motivation was i mean i have my own theory which he likes memorabilia he's always liked to show off i think that's it i think you got it i mean honestly if i had to guess what this whole thing was about it's probably that the archivist at the national archives wants the original copy of those letters with little rocket man and he doesn't want to give him up right yeah i really think that's what this is about i think it's about something as silly as memorable memorabilia i think it's about memorabilia i do not think these documents pose a threat trump just give it all back it's so dumb but why would the fbi feel the need to do a race by the way remember when we first discussed this one second when we first discussed this issue we were told it was nuclear it was nuclear secrets could be yeah no they've backed off that completely it was not in the affidavit it's not about nuclear that was something they leaked to get them through a tough press cycle so but look my point about all this stuff just to wrap it up so people are clear was never to defend trump per se my real concern is the politicization of the fbi our law enforcement agencies should not be weaponized by either party to pursue their you believe they are at this point and we just saw with the zuckerberg thing what business did the fbi have going to zuckerberg to get them to censor a new york post story that turned out to be completely true hold on a second that is election interference they should not be doing that yeah that is a tough job if they don't know if it's been stolen or not yeah it's a tough job by the way the government of the united states has no business censoring a free press that is a violation of the first amendment when the government instructs a private company to censor a press story that the government itself does not have the authority to censor that is a violation of the first amendment we thought remember when jack dorsey said that he regretted the censorship that twitter did and he came out with that apology we thought it was just twitter's decision now we find out from zuck that he was leaned on by the fbi and i think that these big tech companies like twitter like facebook they're gonna have to have a new policy which is when the government says we want you to censor something their response needs to be show us a court order they do not just censor now based on the say-so of some operative framework i would agree with you i agree with you on that i think it was a bad decision obviously the one big tech company that really nailed this i think was apple you know very early on they drew a really hard line in the sand with the san bernardino shooter because they said if we allow the fbi to get into this person's phone even though you know what he did was completely heinous we are going to create a back door that will become an exploit for everybody and we are drawing the line on privacy and security now different set of issues but it just goes to show you there have been a few examples where some of these companies have drawn a hard line and then in that example and i think jason you mentioned this they went to israel and had that company hacked the phone okay whatever but it didn't come with um they were able to stand up to the pressure so i think there are some example stats where you you can say no i mean the the idea that twitter would block a new york post url it's like ah such a jump ball like if it was the sex material i could understand them saying like you can't hack it that's against our terms of service for and we agree on that sex but in this case like i i don't know let's go to something more interesting cause well heat wave i think and the drowning i know this is interesting to sacks but i think it's interesting to everybody else in the audience uh heat waves and droughts are uh just flash is hot in summer yeah i think this might have to do with global warming and be a little unique just i'm kidding i'm kidding before all the esg people get into sex and say you know you're a globe and then we'll come back around and give you your raw meaning what's your what's your what's your point of view on climate change the impact it will have on the planet and whether like urgent action is needed listen i'm not an expert in that area i'm not going to pretend to be i do think that um that we can't save the planet by destroying the economy and it seems to me that too many of these save the planet people like want to take reckless extreme actions that would wreck our economy you just saw actually elon just gave a talk this and made news this past week from norway where he said that we still need oil and gas he's the leading innovator in basically moving i don't disagree and he said listen unfortunately we got to rely on oil and gas because it's too important for civilization if we cut the stuff off too quickly we end civilization yeah so look i mean i think this is a long-term problem but and i think we need to have long-term global warming just full stop the planet is warming you agree with this it's not just about warming just just to use a different term that there are more frequent extreme events that can severely uh hurt people hurt the economy hurt the food supply hurt the energy supply all the things that you know i think were like all the way on the bottom of maslow's hierarchy like these are the things that are most critical that they're starting to get disrupted in a pretty severe way you know i think that that's that's i mean that's the big question so sax it's i think it's becoming and this is where the transition starts to happen that a lot of people kind of say hey over the long run the temperature is going to go up by one degree celsius over a century you know who cares but there are the problem the problem is this is that you know and by the way whenever somebody like me points out how insane some of these policies are the topic has shifted to are you a denier of some science or other no listen my point is not about the science my point is look at the collapse of the sri lankan economy because they implemented these esg rules on fertilizer look at what's happening to the dutch farmers who are being put out of work because of esg california california today governor governor newsom today said please don't use your electric power to charge your electric cars a week after they said uh gas cars are now going to be banned in the state and so there's a grid is going to go yeah there's a deep irony underway today in california because and fox news has obviously latched on to this story that that has to do with the grid though i mean look suspicious whenever whenever politicians invoke some crisis as the r as the reason i'm talking about some political arguments i'm not talking about the political shock i've learned to distrust it that's the point and so i'm talking about you know what's happening in europe right now is obviously gas is through the roof because of the ukraine war the you know the price has basically gone through the roof and so because of that they're not able to produce fertilizer and one of the byproducts of the production fertilizer is co2 which gets added to the production of beer to make it fizzy well guess what the germans are not only about to run out of gas they're about to run out of beer you think you think they're going to keep supporting the ukraine war when they find out that there's no beer for oktoberfest not not be able to eat they heat their homes they can't drink beer in october yeah this is the west sit down we got we need to sit down just taking up just taking apart just taking a beat for a minute like taking taking off the table the political response are you as an individual concerned uh about the the impact of a changing climate on people and on the economy and and are you interested as an investor in the private market solutions to resolve some of those things that are obviously going to become market driven problems take the government out of the equation i i think there there may be a long-term problem here i'm not sure like how long it takes i definitely think i'm skeptical of this claim that you know the world's going to end in the next 10 years because frankly we've been hearing that since the 1990s i mean 1988 there's a great headline article by the way in new york times where it was like scientists in 1988 said that all the oceans all the ice caps will melt the oceans will flood the land by the year 2000. so there is a credibility challenge associated with predicting you know kind of long-term outcomes like this that that continues to kind of foment unfortunately right yeah all my beachfront property would be underwater right now if all that came true um no i'm just kidding but no but but look it hasn't escaped my attention that many of the political leaders who are claiming that were facing an imminent threat of being under water in 10 years own beachfront property and fly on private jets so obviously you know i'm not saying this isn't a long-term problem but i do think they try to create an imminent crisis so they can shove through a bunch of bad policies that are very destructive to them would you define what's happening with temperature and extreme weather as a crisis or not um yeah i mean there's there's a i would say there's a critical impact in um and will continue to be a critical impact in the food supply chain in um the quarters and years ahead because of what we're seeing so severe drought and heat wave in china right now um and by the way food is not the only one there's there's also the manufacturing supply chain so in the province of shechem in china they actually lost power because so much of the power is driven by hydroelectric pet plants so uh streams and water flow has slowed down and stopped as a result there's less power as a result the factories are being shut down as a result key components for manufacturing in the computing industry and um and in kind of mechanical goods are not being produced at the rate that they were being produced before that has a ripple effect in the supply chain similar to what we saw in covent and then in the food supply chain we're seeing a drought and a heat wave right now we're coming out of it in the midwest in the united states where we grow corn and soybeans throughout europe and also in china and in china they had 70 days in a row of record-setting temperatures no water high temperatures the they're just starting to assess the crop damage it looks pretty severe there was massive crop damage in the midwest uh in the corner the corn belt this year um and then obviously european farmers are having issues and combine that with the geopolitical issues of the ukraine crisis and the natural gas pricing being so high one-third of uh fertilizer of ammonia plants have been shut down in europe and they think that ammonia and fertilizer production may drop by as much as one half in europe because of the crisis so energy prices are so high you can't make fertilizer so that energy is being also redirected into other industry and support homes so you believe it's a crisis so i guess the question yeah people are turning on their acs in california this week you know you see that governor newsome just said our grid in california cannot support excess electricity consumption therefore one of the biggest variables is electric cars he's saying don't plug in your electric cars this week and that's because of record high temperatures they're about to hit california in two days so look everyone says hey these are kind of um anecdotal stories but no it's exactly statistically the frequency of extreme things happening is continuing to climb and then the impact is in the food supply chain the energy supply chain and the manufacturing supply chain and there are follow-on effects now i'm optimistic that private market solutions will resolve these issues yeah that was my next question yeah of course i mean look we've had crises since the dawn of humanity i mean we were a starving you know we need a crisis to solve some of these problems these are pretty economically obvious yeah and that's that's my point the the private market will resolve because people want to have electricity they want to have food they want to have not want to need they need and so so so the market will pay for those things and therefore producers and technologists will resolve to solutions to make that happen so we just have to have the pain and suffering and see it firsthand the market to kick in our friend in the group chat that shall not be named posted this meme you guys saw it right which said like an autistic school girl takes what was it i have it here quit school this is the dominoes you you can show the dominoes but basically it said an autistic swedish girl decides to skip school is the little domino and seven dominoes later this huge domino it says the collapse of europe's energy grid and without commenting on the language used in the meme for a second what is the point the point is these conversations can so quickly go off the rails and are not about national security and economics and quickly become about moral virtue signaling that you miss the point the point in the united states just to be very blunt is that the cost of electricity has gone up by 46 percent in the last decade it will go up by another 40 odd percent through 2030 so between 2010 and 2030 the cost of electricity for every single american will have effectively doubled even though the ability to generate particularly from wind and solar have been reduced by 90 percent now why is that well it turns out that if you look inside the p l's of these utilities it actually gives you the answer so over the next 10 years we have to spend as a nation just just on upgrading power lines two trillion dollars this is all cap this is all like crazy crazy opex right capex improvements for sunk cost investments our power line infrastructure in america is 20 plus years old 30 years old our generation infrastructure is pretty poor um we have all of these failures we don't have enough peakers we don't have ability to store energy when we need it so if you add this all up i do think that there's a huge economic incentive to solve it and there are practical ways to solve it and that's what we have to stay focused on because if we allow the moral virtue signaling to get in the way we're going to make some really stupid decisions we're going to keep trying to turn off nuclear another thing that elon said you know we're we're not going to green light uh shale and that gas we don't have time for this if you actually believe this is a cataclysmic issue you need to basically be okay with hydrocarbons because it is the only credible bridge fuel we have to keep the world working properly because otherwise what david said is right we are going to economically destroy parts of the world by trying to race towards this net zero goal by the way guys i just want to take the you know rip the band aid off net zero by 20 50 26 it is not possible there is zero credible plans that the world has to do it so we have to take small incremental steps and many of them yeah this is that we should stay focused on that yeah the interesting thing and you cannot let people guilt-trip you because this is when you make these stupid mistakes like the entire continent of europe made yeah it really does which is now going to [ __ ] here's the economies of that of that entire continent unnecessarily here's the good news all this virtue signaling and people wanting to be green and and for whatever reason all of that now economics and geopolitical is forcing people to rethink nuclear the diablo canyon nuclear power plant which is the last one in california that's operational it's being voted on today as we're taping this and it's expected that they're going to keep it online the governor with the great hair wants to keep it going and the fascinating part about this is how choice does he have exactly and so now the awareness is so high about power and us losing it and asking people to turn off their air conditioners turn on don't plug in your cars but people people don't understand how nuclear energy even works and they're like get rid of it they went to a no nukes concert in 1978 and they haven't changed their position since but this is interesting this guy gene nilsson who's been a champion of this stuff he said i thought our chances were zero of keeping this thing open um and he said what's you know and he said he told this conference of attendees nuclear conference that the effort to maintain it he said what's happened since you know the last six months has been like a snowball that everybody has changed their position just in the last year on shutting these things down and we saw obviously germany is re you know thinking the the three remaining of their six that they were gonna turn off they're putting back on and i think we're gonna see new ground broken and japan came out just in the last week and said they're gonna build more nuclear power uh and nuclear power plants now think about that that's awesome that's unbelievable they had fukushima the germans shut off their nuclear because of fukushima but guys the japanese are saying we're building more guys fukushima didn't happen by accident there was a like an incredible tsunami which was triggered by once at 100 earthquake you're talking about these extremely long tail events yes the retaining walls could have been built better but these are things we find we iterate and we solve it was not the reason to shut down an entire mechanism of energy generation stupid mistakes where they put it just too low in the wrong place if they just put it up the hill a couple of miles it would have been fine but also if you look inside of what happened there was enormous pressure inside of these companies to basically you know take take actual direct blame and responsibility i get all of that but these organizations were shamed into turning these things off that is not the way to make good smart decisions okay so uh gorbachev the last ruler of the ussr uh passed away this week saks robots yeah i mean i think this was a real milestone you go back to the 1980s and ronald reagan the who had spent his entire career being a cold warrior saw the opportunity to basically do business with with gorbachev margaret thatcher had told him that this is a man we can do business with gorbachev had come to power in 1985 he had initiated reforms of the soviet system he was a communist to be sure but he introduced political reforms called glasnost and economic reforms called perestroika and reagan sees the opportunity to go meet with him and they signed arms control treaty after arms control treaty and ended the threat of mutually assured destruction that the world had been living with since the beginning of the cold war you got to remember that you know the cold war began shortly after world war ii and we had this doctrine of mutually assured destruction or mad and the whole world was living under the shadow of nuclear annihilation this was showed repeatedly when i was a kid there was a tv movie called um the day after the day after it was serious it was really scary they terrorized us that america were all gonna die we had did you ever have nuclear uh bomb drills we had to get under your desk yeah i mean so yeah so if you're like our age you remember this that that movie by the way that that was a tv event movie that was one of the most widely watched movies but there were others you know jim cameron used this concept in the terminator movies um you know it was something that people were really afraid of and reagan sees the opportunity he thought fundamentally that uh nuclear deterrence was immoral that yeah better to have deterrence than a nuclear war but that he if he could he seized the opportunity to negotiate the end of the cold war and by the way there were hardliners in his administration who did not want him to negotiate with gorbachev but they ended up doing a series of uh meetings uh it culminated in 1986 at the reykjavik summit and they signed uh deals to remove uh you know these these inf system deals now and that ended the cold war and then basically what happened is in 1989 the berlin walk came down gorbachev allowed the wester the warsaw pac countries to leave and then in 1991 the soviet union collapsed so you know he gets a lot of credit for being willing to reform that system now the sad thing is if we were fast forward 30 years later where are we today we're back in a new cold war with russia i mean that we've been spending a good part of this year talking about the threat of a nuclear use and you know this was a problem that we thought was solved 30 years ago um and now we're back with it today and you've got to ask have the successors of you know reagan and and and george herbert walker bush the people who inherited our foreign policy over the last 30 years have they done as good a job um as reagan did reagan ended the cold war we are back in a new cold war why what is the reason for this there's been a a a series of stupid policies that now have put the risk of nuclear war back on the table my interest in gorbachev is slightly different um he is an incredibly important character of the second half of the 20th century undeniable you know won the nobel prize as you said david kind of ended the cold war but the most important thing in my opinion was the precursor to praero strika and why he did it and as you said like you know this is a fairly art and communist although he had really interesting views like he ran a very kind of like open um kind of politburo where folks could debate and he you know promoted a lot of young people from within all of these interesting things but the most important thing and he's written about this a lot is the reason that he embarked on perestroika was because ussr at the time had an incredibly poor work ethic terrible productivity and horrible quality goods and i think that there's something to be learned by that because at the tail end of communism essentially where you had central planning central imposed economic principles what happened people did not feel that they had any ownership in the outcome no agency no agency whatsoever and i think that there's a really important lesson to observe there which is that if governments get too actively involved this doesn't just happen in russia it happens everywhere it's happening in california we just talked about it it's happening where we live right now and if you look at then what happened afterwards it became the aristocracy that basically ruled the ussr before and then fighting against all these folks that wanted reforms and that created the schism which then perverted capitalism for you know seven or eight years through yeltsin until putin got there and that's what created the oligarch class and you know really exacerbated a bunch of wealth capture by a handful of folks that may or may not have deserved it and i'm not going to judge that but i just think it's really important to understand that he was forced to embark on this because of all of these state central planning policies and so it's just an important lesson for americans in democracy which is be careful if you want more government you might need start work guys the soviet union their economy used to run on what they called five year plans it was incredibly centralized it was all run by the government and you know this was communism and the 20th century the second half of it especially was a giant battle of systems not just of countries not just the western bloc um you know led by the u.s the free world versus the soviet union the warsaw pact it was also a battle of philosophies and systems it was the philosophy of state control versus freedom and uh in a free economy and freedom won you know the free economy won in that battle and the crazy thing is 30 years later we're talking about socialism being a viable doctrine you have politicians basically saying that they are socialists but 30 years ago you would have been like that was unelectable and the point is example after example empirical evidence well documented of just how it doesn't work and i guess the thing is you know we all say like you just have to learn it for yourself you know like you'll tell your kids to do to not do something add inside i gotta touch the stove yeah they gotta touch the stove themselves and get burned we are about to go do that in california can you imagine if like people who want to be social is here who bind us if they had to be in a food line or have rations literally russia had food lines and they were rationing food in the 1980s like well yeah that's how dysfunctional it got yeah a large driver of gorbachev basically negotiating these peace settlements with you know with reagan and this nuclear you know uh demilitarization was in part because he knew he couldn't fight right it was this was collapsing yeah they could not keep up reagan began an arms buildup and there was an arms race and they were losing they were losing they were releasing and this is and this is why like people should not misunderstand what gorbachev was he was not necessarily some democratic freedom fighter he was a person who was observing the on the ground conditions of a socialist system decay their ability to compete and so he had to capitulate before it was forced upon him right right this is why i don't think he deserves as much credit as ronald reagan is because at the end of the day gorbachev would have kept communism going if he could have if he could have if he could he wanted the soviet union to stick together i mean that's right but his but but i think to his credit when the things start to collapse he didn't silence and repression to try and hold it together so you know he was a he was a reformer he was a liberalizer maybe and a pragmatism didn't use violence but and ultimately he was a partner for ronald reagan remember ronald reagan began this gigantic arms buildup he was denounced as a cowboy who would get us in world war three but when he had the chance to negotiate a deal with gorbachev he took it and they basically got arms control and it was because reagan was able to sit on top of an extremely productive capitalist system that allowed him to make those investments that made that capitulation basically a fata complete and i think that that's another thing for a lot of us to to understand which is free market capitalism removing these degrees of decision making give us degrees of freedom and i've said this before on the last part the great thing about the ira and what chuck schumer did is actually will be written in 10 or 15 years from now because when we get to energy independence when every home is resilient the national security calculus in america changes wholeheartedly overnight yeah i mean think about it years ago right but i didn't cancel it okay wow listen uh no it's true if you're willing to use natural gas and fracking america is one of the richest energy countries in the world oh we produce a lot of oil too yeah i mean listen it it will change everything if we can really go all in on all of the categories nuclear uh if you let the capital markets do and the free markets do what they're meant to do they will empower the government to do great things for all of you all citizens yes i agree with that hundred percent and the reason we want to stop it is because we have a couple of examples of you know extreme wealth and i think that's something we have to think about is like are the extreme is the extreme wealth created for a certain class enough to stop the prosperity train that we actually have in america listen jason the politicians in california think they can run fast food businesses better than the people who own those those restaurants these people have never worked in their lives no i mean we have they could work they wouldn't yeah the great thing is we have a running a b test which will show whether this state central planning can work or not and again if we refuse to want to listen to the examples of russia or all of these other countries that have tried this then so be it we will know in the next three to five years that these policies actually don't work and actually that it actually accelerates the exact hellscape that they think they're trying to avoid but you know not only to my point about foreign policy not only are we forgetting the lessons of this cold war the economic lessons that a free enterprise system generates more wealth and prosperity and more national greatness more ability to fund a defense budget create a better economy not only does it do all those things we forgot not only have we forgotten that but also we have abrogated we have ended every single defense control and arms control treaty with the russians that reagan and gorbachev signed why why why did we do that now our nuclear missiles are pointing each other again and you know what russia's a much poorer country in the us we're actually 15 times richer than them during the cold war at their peak we were only three times richer than them but we're 15 times richer but they still got over 6 000 nukes why did we get rid of all those arms control treaties why have we basically alienated them yeah you we talked we said it before like you're dealing with a pragmatist uh and putin's a kgb maybe you feel like putin isn't someone we can deal with now but he was someone we could have dealt with 10 years ago 20 years ago we missed the opportunity to deal with him jason if he was a rational actor if he was a rational actor we would be able to deal with him i think the only way he's actually going to be really the only way we'll be able to deal with him is if he doesn't have the oil uh market he has like he just has too much power from that oil and over time that's the solution we have to be energy independent you know i think europe has learned that he was a communist he was an heir to stalin and yet reagan's could still do business with him and sign an arms control treaty so that we could end the risk of mutually assured destruction you do not have to believe that putin is a good guy in order for us to avoid getting back into a cold war which is the situation we find ourselves in now how does it benefit us to have russian nukes once again pointed at our heads yeah i mean and the reason why the reason why we alienated him jason has nothing to do with him being a madman or whatever it is because we brought nato which he views as a hostile military alliance right up to his border and and by the way listen to this video from gorbachev gorbachev was asked about nato expansion in front of the us congress he was giving a talk to them and they asked him gorbachev what do you think about nato and what did he say he said that you cannot humiliate a country this way and expect there to be no consequences gorbachev was against nato expansion when when basically george herbert walker bush and the secretary of state james baker went to gorbachev to argue on behalf of german reunification this is basically in 1990. baker made the promise to gorbachev not one inch eastward gorbachev said yes okay they can reunify but we do not want nato moving up to our border baker made that promise we have brought nato up to their border that is why putin regards us with hostility yeah and i think europe regards him with hostility and they're scared of him because he keeps invading countries so yeah there's takes two to tango but hey this has been episode 94. it does it does take two to tango but you have to ask has the u.s foreign policy over the last 30 years that's gotten us in a new cold war with russia has that been a successful par foreign policy they have undermined all the good work that ronald reagan and gorbachev did together to end the cold war we are back in a new cold war and you need to find reagan in hollister you need to find a new right some blame putin has some blame but so does the us state department so does the u.s state department and europe europe has a big part of the blame to here because he's their neighbor yeah for the sultan of science the rain man and uh reagan library chairman are you the chairman of the reagan library let me ask you this when you were a kid did you have a reagan poster in your room have you ever owned a reagan poster i'm sure i'm sure i've definitely owned a picture of of reagan and um ronald reagan listen jason wrong do you ever hang around reagan poster or a picture in your dorm at stanford yes or no listen ronald reagan that's a yes hold on a second ronald reagan won the cold war without firing a shot he gave us the greatest economy the us has ever had he ended the inflation and stagflation in the 1970s and again he he avoided getting us into any of these major wars tell me the politician who if you could have lunch with anybody who is the historian who you revere who has a track record like that um yeah i mean i i guess one would say bill clinton you know would be the closest you know great president of our lifetimes right you would agree with that i think he's a good good president especially number two behind reagan in our lives remember he benefited from the economy that whatever reason you would agree with me clinton is right behind reagan reagan and clinton in since like 1950 something easily top two yeah right easily easily it's hard for their sacks to say hour was very good listen i mean but head and shoulders i think like for practically what they dealt with at their point of time amazing all right listen saks i know you love reagan and uh reagan i think that's what you should put you should be bringing nixon reagan and bill clinton one on each side of you for next week will you do that for us i gotta go guys i gotta go too all right love you sexy poop i love you all next time bye love you too happy birthday thanks bro we'll let your winners ride rain man david and they've just gone crazy with it [Music] we should all just get a room and just have one big huge all just useless it's like this like sexual tension that they just need to release [Music] your feet [Music] i'm going on [Music]








point of privilege saks wore this hat last week what what's this brand is this a montclair hat yeah and actually did you see that that tweet people it started trending it started trending after i wore it so it's sold out dude you sold out the montclair hat so we have no advertising we i feel like if we're not going to do any advertising on the show we should at least get free clothes we get to pick through them where would we like i know where's my cut where's my cut as an influencer the tweet basically said that i named dropped laura piana and sent it through the roof and inside steve dropped eau claire both brands obviously are italian both entrepreneurs we know very well and so i asked that i said matt can you basically send this tweet over to them so maybe they can give us free clothes let's get the griff going boys now we're talking now we got some bestie grits no you're speaking my language this is his cup of tea speaking of griffs i do like montclair the way that chamoth likes laura piano just so you guys know at the birthday jason that you missed are we going to lots to do we played poker we had a birthday we had a surprise birthday party for me that threw it sack showed up free brook showed up their wives showed up it was incredible j-cal basically stiff-armed me i'm very sorry it was a by the way that came together four days before your birthday so just show you uh-huh well you know what kevin hart showed up give us the best one-liner which one landed oh no jacob you have no idea these guys roasted me it was [ __ ] incredible but the best of it was at the end k hart gets up with no preparation and skewers everybody free bird i mean d what do you think of like kevin's rest it was carter he was so funny he's like my wife walked in here and she looks at me and she's like these these guys it was so funny complete my [ __ ] out nick but it was so funny he dropped line after well he's a ringer he's a professional well he's maybe the funniest person in the world and then sax had to come after it yeah exactly xander i don't know why xander was the emcee but because i should have saved kevin hart for last but instead he calls up k hart in the middle sax was so tilted okay so wait so i i couldn't make it because i had burning man the xander does the emceeing then kevin hart you were saying is just to fill in the audience here so they can understand it kevin hart comes in he gives this incredible ad-lib roast and then sax has to go after him yeah first of all sanders is xander's as funny as a root canal he should not have been the emcee so yes we did miss you j kyle you should have been the mc second k heart should have been left for last obviously of course but xander you know xander being a good liberal couldn't censor me outright so he had me go after k hart that's like the next best thing did you steal his documents did you steal all his jokes and put them in your i just threw i had all these like jokes written i just threw them out the window because i can't what am i gonna do i'm not gonna deliver jokes after kevin hart so i just told a story you know kevin hart like killed i mean the room was i mean that's like that's like getting punched by mike tyson and being like oh my god that hurt he's like yeah it's mike tyson yeah [Music] [Music] we were at the the code conference we had the poker game it was the last one after twenty big shout out to cara swisher picture just i wanna say uh to walt mossberg and kara swisher because they did the conference many years together congratulations on a 20-year run uh they're not going to do it o'cara is not going to do it next year but my friend jim bankoff who runs vox is going to run it next year uh so congratulations to him and cara for a great run and all things d they you know they they they had steve jobs at the first one first speaker and um you can look it up i got to ask him a question if you remember this but you and i were there when uh gates and jobs uh did that speech together unbelievable what what what an incredible legacy that she documented remember this code is incredible like i mean the number of the amount of memories i have from that place is incredible that's great and so we'll see where the poker game goes next year probably the only time i think the all in summit could have been that it's it's heartbreaking it's heartbreaking i'm not saying that i'll be hosting the code conference next year but you know they're looking for an impresario this is the problem with this pod is we're drawing too many high-profile people in now but uh interestingly freeberg and i we now have uh the press wants the the the press are trying to do a profile of the pod and so we had three or four different press outlets now i won't say which ones but i've all asked us to do like a sit for a profile we've said no uh but uh just because i said why don't we do a profile of them who's to make them the media you know well i mean that's what's great our competitors our competitors want to do a a piece on us why would we cross the audience you know it's gonna be a hit a hit piece it'd probably be hippies yeah of course because we're we're stealing influence and clicks and views away from them and besides they're ideologically motivated anyway so they're they're message police sex you don't think you're ideologically motivated listen if you contract the official narrative then they write a hit piece about you that's how they try to enforce discipline it's true actually but not i like the independent ones i do i have to say like this whole you know sub stack movement in independent artists or independent journalists becoming even more indie in fact kara swisher is more indian now she left the new york times uh specifically because they were you know giving her a hard time about certain guests or certain conversations and now she's you know doing her podcast independently uh with vox publishing it for her so you're seeing more and more of the voices go independent new republic is doing a hit piece on me right now i have no idea why it's the same thing emo me and see them and i was like here's my official comment i can't wait to visit sax when he's in the white house in 20 years and the guy's like so you're saying sax is writing for a president i'm saying no i'm saying that you don't understand a joke that was a joke yeah and then and then after you copied me then they're like oh yeah we were reaching out to david too to get in no yeah and they hadn't reached out to you yet right they hadn't reached out anyway yeah so they were going a little sneaky sneak they were trying to get me something i don't know i don't have time to talk to them you know it looks a nice that would be a nice profile i think nobody reads it uh if it were if it were michael kinsley running the new republic i'd be happy to you know take the time but it's not that anymore it's just another left-wing rag that's into policing speech um you know they asked they sent us a bunch of questions like you know why well i don't i don't have them in front of me but they're like they're basically like why did you support the recall of chase and booty and stuff like that and my you know pr person got back to him and said have you seen the all in pod have you read david's like twitter because he explained this like abundantly for the two years he was advocating every week every week we talked about this and the guy was like right he's like oh he talked about in the pod he the guy didn't listen to the pod he's like he tweeted about this no he just thinks i'm like some right-wing donor who was like trying to get it kicked out that kind of narrative you know so i'm like this is a total waste of my time go read all my tweets go watch the all in pod and then come back with any questions that haven't been answered it's just lazy reporting on the new republic's part why would you do a profile if you didn't actually i got better two of you are having a serious conversation about free bird he's [ __ ] around with his backgrounds enough what is his background what is that it's a future city in saudi arabia who else is planning on doing a hit piece about us okay so the information uh reached out and we said no are you going are you saying this actually on the show right now i guess i think this way we should deal with all inbound press inquiries is we'll tell them no and then discuss it on the pod yeah because they want a quote if they want to quote listen to our pod and then transcribe what we say on this pod or reverse it my quote for the new republic is that if michael kinsley were still the editor i'd be happy to spend my valuable time talking to you but you feel they will not they of course it's not going to be fair there are the speech police now and the fact that he didn't even know the fact he didn't even know that i wasn't just a donor on the chase of boudin thing i was the first person that i'm aware of at least within silicon valley who called out chase abu deen for the horrible job he was i mean that was bipartisan by the way it's not like david sacks is one of the three percent of san franciscans who are republican like he's not able to vote for the 69 percent of people who voted chesaputin out so like you can't spend that one you're categorizing me as like just a partisan that's not really how i come at these issues can we go back to your quotes so uh that was your comment for new republic jkl do you have a comment for new york times and then uh it started with eric i got to be a fair eric newcomer who's awesome who worked at the information started his own sub stack um which is really good by the way and uh he comes on my other pod um he's awesome and so i'm going to be a guest on his pod because i promised him and he does my part but i'm not going to be a guest my philosophy is i told him i said you can have me as a guest but it can't be more than 10 all in because i don't want it to become an all-in profile we agree it as a group we're not doing it all in profile right now so up to 10 can be about all in but the other 90 has got to be my other projects and he said totally fine um he understands but he asked first and actually i would be inclined to do with him because he's if we were going to do it but then um what do they need i mean like we create like hours and hours of content and the drama is out here for everybody to i mean like i don't understand like what is what do you need our cooperation i think you wanna no you wanna maybe frame uh and get a couple of sleep no you want you just wanna get a couple of quotes that are unique so that's worth reading these two guys have shoved their heads up each other's asses it's like a serpent a never-ending serpent you're clear up here clean bill of health sacks uh so anyway eric newcomber asked and then the information asked him and then kevin rush no the new york times just asked right okay what was the nice thing about your comment my comment in new york times is uh yeah enjoy the pod while it lasts we're trying to keep it together i mean i'll say the other big issue is i got approached by a couple of um by two different people who wanna who want to represent the pod they say there's seven and a half million dollars in advertising we're leaving on the table by the way 150 a week good work okay and literally that was i want that number to grow to 10 million 20 million guys are killing me you realize i would have a plane if you guys just let me sell the [ __ ] heads on this thing i could get like a million and a half dollars in jet stream yeah you would have a plane if you just did one other thing you're doing a hundred different things just do one thing i'll tell you what it is you'd have a plane if you're smarter that's not that's not nice sex that's not nice i would have a plan if i got luckier i will say whoever said this is going to help our our core businesses and that's the reason i think it might have been youtube i am raising my fourth fund i am doing at 506c which is public i tweeted about it i had 1200 people sign up for the webinar and this means i might have to increase the size of my fourth venture fund because so many people listen to this pod and want to hang out so thank you to everybody who listens to the pot i think for you bro well i mean it's just nice you know i you know i struggled to raise the first couple funds you guys backed me but like i couldn't break through as a solo gp with the with the big lps but i'm hoping to get one big lp this time and you know it's i'm going to be oversubscribed with all the high net worth individuals and everything but i'd like to get like a memorial sloan kettering or somebody doing cancer research just to feel good about it you know i just want to say that i supported j cal as a friend in fact i was the first lp check in your fund but that does not mean that i tore this in any way in any way or that anybody else should come in i mean whatever you're i don't want to say the performance but um you're doing okay let's leave it at that yeah and i would like to say that i was not the first but i was the biggest yeah you did you did pretty big yeah absolutely and i will say that i'm still waiting for that moment to join you guys in jake yeah exactly uh yeah and i'll just keep coming to your lp meetings and entertaining your mps thanks pal entertaining wait is jkl an investor in production board no uh we do we have done we've done a syndicate you are my smallest investor you're in the don't know how that bill but yeah but let's get to work guys do you guys want to talk about the queen the passing of the queen real quick before we start or is that i would like to yeah i was born in sri lanka i was raised in canada so and now i live in the united states obviously i've been a citizen of all three countries so two of the three countries i've been a subject to the queen i mean i'm part of the commonwealth and i just want to say it was really sad for me like these last couple days when i saw that she was sick and then she had passed i got to be honest with you like it really touched me she is an incred i can't describe to you guys for someone who is part of that realm how important she is as a person and then you know if you've seen you know the the show on netflix it kind of romanticizes a little bit but you know she has seen 17 prime ministers she's seen so many presidents she has seen the history of the world uh the modern world being made in front of her so yeah i'm a little sad and i think she's an incredible person and even if you don't agree necessarily with monarchies in general i think you have to be super positive or the history of imperialism there's a lot of people that are kind of using this as a moment to be negative right in jamaica wants to become a republic australia wants to become a republic they'll prosecute that in due time but for right now i just think that we have to celebrate this incredible woman who lived to an incredible age who saw incredible things and who dedicated her entire life to the public service and lived it totally neutrally which in today's world nobody else does everybody else takes the point what's the point everybody else everybody else tries to basically like you know create a schism she never did that in 70 years as the queen yeah like very stoic very stoic and a symbol of service not a symbol of dictatorship right i mean there seems to be a very different role that she's taken as a monarch than i think what yeah has maybe historically been the role which is incredible pretty profound right it's extraordinary that somebody would put 70 years of service and be that diligent i think stoic and and there for her people and to the people who are you know suffering and and grieving you know that word you said really resonated with me like diligent is such a great word because it's like you're disciplined you put in hard work you're focused on the long-term goal and then you're selfless yes not many people not many people jacob you know this exhibit that at all but then definitely don't exhibit it over 70 years it's it's extraordinary and yeah it's i i know a lot of people are grieving right now so you you have ourselves somebody as a citizen of the monarchy i am of the commonwealth rather i am pro queen elizabeth and it deeply saddens me to see that she passed possibly all right listen we got to talk about uh winter is coming i'm not talking about game of thrones let's talk about something serious that's going on here um and we you know we don't like to be too repetitive here but i think we correctly um predicted that you know this if this ukraine i think maybe saks you pointed this out this year what do you mean weak kimo sabe all right listen i'm trying to give you [ __ ] credit and you're interrupting me can you just take the [ __ ] win you're such a miserable bastard i try to give you one [ __ ] game finish what you're saying and you cut me off all right listen we've been talking about this ukraine thing stacks correctly predicted if this goes to winter this is going to get acute and of course uh right on cue here we have it russia has essentially cut off uh gas to europe right now by claiming that the north stream one the north pipeline that russia built that goes under the baltic sea they basically say a turbine's broken in it magically at this point in time right before winter this turbine broke according to putin and he needs a turbine um and if they give him a turbine he said he's going to turn it back on uh this in the face of europe saying they were going to cap the price of russian gas i don't know how that works exactly that you tell people what they can charge for gas but russian gas shipments uh which germany is particularly uh dependent on have fallen 89 since last year and the price of liquefied natural gas in europe is four times level a year ago uh in eight times uh the level of the us obviously we are have gotten incredibly lucky to find all this uh natural gas here and we are a huge exporter of natural gas and oil in the united states so we're good uh this is the highest power prices have been in three decades and the perfect storm is not limited to oil in the russia and the ukraine war france's 56 nuclear power plants are running at half strength because of shutdowns over corrosion problems and as we talked about maybe two episodes droughts have undermined hydroelectric power uh because of these that's not the main issue here the main issue is the cause this is there is a perfect storm here it's not just that 40 percent of europe's uh energy consumption comes from russia and natural gas forty percent and so you could see variants there's a base load requirement for lighting and electricity and then there's industrial production and then there's heating and cooling heating and cooling demand is linearly tied to the number of degrees above or below 65 fahrenheit on average and so as the temperature goes up people turn air conditioners on as the temperature goes below 65 they turn their heaters on so there's a linear demand for power consumption at those so number one is you could kind of you could either cut base load which is lighting and basic kind of operations number two is cut industrial production which is already happening a lot of fertilizer plants are shutting down in the country that are dependent on natural in the in the continent that are dependent on natural gas and number three is the scooting heating and cooling and that really ends up being kind of a market-driven function which is how pricey is this stuff because there's limited supply so you could normally in a normal year see fluctuations around five ten fifteen percent maybe with good kind of action and behavior forty percent of energy being cut is a massive massive problem there will be significant price climbs for the kind of variable demand and heating and cooling and so on but for the price to go up by 6x 7x 8x 10x 15x over normal prices for someone is unbearable by the average household unbearable by the average small business unbearable by the average small building um and so it's causing critical failure uh across the economy across the currencies across debt markets and there's real concern that ultimately the shutting off of 40 of the energy supply to the continent leading into winter winter is coming where energy demand spikes because of the need for heating is going to cause real kind of problems so there's the cataclysmic problem of people actually being able to keep their homes there's the industrial problem of parts of the economy shutting down and then there's the currency problem of the governments needing to step in and bail out industry buy super expensive gas give it to their citizens and their businesses at a discounted price and seeing their national and sovereign debts skyrocket which is now expected to happen and as a result the british pound is trading at its lowest level since 1985. and as a result people are rushing to the street from prague to cologne germany even in london proclaiming that the governments aren't doing enough number one to stall the uh the rate of inflation to make energy prices cheaper through action by having the government subsidize and number three which i think was inevitable and is now becoming kind of the surprise factor to the ukraine crisis citizens are saying end this war now get to the table with russia come up with a settlement and get the heck out of ukraine by the way that's not everyone saying it just to be clear but there is this rising rioting protesting behavior happening across europe particularly in eastern europe um as a result of the ukraine war and so we're seeing you know i think a big shift in attitude and a big shift in kind of the societal perception of this war particularly in europe because they're so acutely feeling the effects and we are not in the u.s they're acutely feeling the effects and they're saying we need to stop this war now we need to get out of the way we need to let russia turn the gas pipeline back on and we need to figure out a resolution stop supporting ukraine and that's what it is that's a voice that was that's a voice that did not exist very loudly yeah at the beginning and it's and it's starting to swell running out of food or you know running out of heat to keep your kids warm i mean these are pretty acute situations traumatic what's the vibe in the middle east about this are they looking at it and seeing it as an opportunity are they looking at it and seeing it as you know a manageable crisis and or and what do they consider their participation in this to be there's a very structured framework for energy production which is opec and opec plus and you know they have done not just the middle east but frankly the middle east plus um united states the best job possible to basically get the maximum demand so that there's as much energy as possible the reasons that europe are in an energy crisis really should be discussed honestly so number one an entire continent essentially allowed a 16 year old girl to dictate their energy policy and when greta thumbberg was able to shame an entire continent into basically walking away from nuclear and not really evaluating how you can actually have energy independence what they did was they put europe in an incredibly fragile position and at the beginning of this war it wasn't clear how much damage the lack of russian energy would do to the european economy but now it's absolutely clear how does that see that we said it on the board we said it on the pod in february i mean trump said it years ago i mean the first thing we said how is it not obvious the problem is you had these look to be honest you had these two goofballs you had a goofball on the left which was a 16 year old girl who knew nothing and you had a goofball on the right which is a president whose language turned people off even though the message that he was delivering was a hundred percent right when when trump went to the united nations he was clear he was precise and in hindsight and i'm saying this as a democrat he was right oh about obviously the german reliance on russian gas and and the european reliance on gas what did they think would happen the important thing was was the reaction remember the german delegation snickering while he was they were laughing they were laughing but but we're but we're missing the real lesson the real lesson is that in all of our haste to basically overtly judge trump because of his delivery and his you know his personal style or whatever we ran towards a 16 year old person who has no rooting in science or technology to dictate the energy policy of an entire continent i mean the she was nominated for a nobel prize just to remind you guys this is how insane all of these people were so in an effort to virtue signal to the hilt and beyond what we essentially did what the entire world did was turn a blind eye to science and turn a blind eye to mathematics and simple understanding of supply and demand and so now you have a situation where the entire continent of europe is probably on the precipice of the minimum a recession but frankly there's a lot of scenarios where it could be meaningfully worse and i think what it does is ultimately it has forced the russian endgame and that russian endgame is essentially the following which is that germany will probably be the first to capitulate but it'll be the combination of the united states and europe who negotiate some kind of a settlement they have to follow and and the reason well without calling it folding i would just say there's a settlement and the reason the settlement is necessary is you're going to start to impact tens of millions of people's lives in an incredibly arduous way and those people are asking their leaders to tell them why it's worth it that's why you're seeing protests all around europe people have decided that this war has gotten two or three steps beyond what they thought they were getting into and that it was shining light on a whole set of decisions that never should have been made sax what's i i i think what people most want to know and i'll go to freebird after sex freeberg i think people are going to want to know how do they close this gap in terms of the 40 dependency so you can start thinking about that but saks how do we resolve this issue with russia without enabling them because nobody wants to enable them and reward them for evading countries but here we are they didn't settle this thing in the whatever nine months we're in now and they don't have any more cards to play they they need heat they need people can't freeze to death in germany so they're gonna have to fold in some way and it doesn't seem like there's any gap that can be closed here in terms there's not enough firewood to go around it's all these stories about stockpiling firewood that doesn't seem practical sure you could reduce consumption by 10 20 maybe 25 that does seem reasonable but there's still a huge gap here so so what's the end game saks i mean well first just just to put some numbers on this there's a good report by goldman sachs called europe's energy crisis is at a tipping point this came out on september 8th and it says here that the price of natural gas in europe it used to just be 20 euros per megawatt hour it's now above 200 per megawatt hour so we're at 10 times the 10-year average in the market and winter isn't even here so you know europe is the titanic winter is the iceberg the main difference between this and the titanic story is that everyone can see the iceberg and yet no one is really changing course so liz trust the new prime minister of the uk said that ukraine can depend on uk for support in the long term olaf schultz said that germany will support ukraine as long as it takes macron you know from france so that nato will stand together and prevent russia from winning the war so you know leader after leader is doing the opposite of what you and and chamath have just said which is try to figure out a compromise in fact in the last week or so new information came out about actions boris johnson took back in march or april when they remember when there was discussion about a peace deal about a month into the war it turns out that boris johnson went to ukraine and said no deal do not take the deal we need to weaken putin and russia not compromise with them so the fact of the matter is that the european leaders are increasingly out of touch with their own people the agenda they are serving is not the agenda of or the desire of their people to basically stay warm in the winter or pay reasonable energy bills they are serving this larger foreign policy agenda this is why you're seeing people in the streets in czech slovakia and these other countries and this is why the crisis will only grow in winter i think you guys are just assuming there's going to be a compromise i'm not sure that's true these leaders are stubborn so this is why for example we've already now seen in the uk boris johnson lost power although list trust basically has the same policy mario draghi has basically lost in italy if bulgaria replaced their pm so the leaders the dominoes are starting to fall in europe and i think there's going to be a lot more of this and who knows what governments we're going to end up with in europe what's the end game then i mean what do you what do you predict will happen you think they're going to hold their ground and not have a conference so jamal pointed out the mistakes that these leaders made following greta thunderberg i think there's another mistake they've made which is i think all of these leaders have pulled a tony blair do you remember tony blair tony blair was the bill clinton of the uk after margaret thatcher he was the first labor pm to get elected he was incredibly talented as a politician and he was very popular in the uk until he did one thing you know what that one thing was he went along with george w bush's iraq war the people of the uk did not want to get involved in that war and blair acted as w's lap dog and went along with it and bought into all of the lies about that war and today he has zero credibility in the uk it's really actually a sad story i think that these european leaders are making a similar kind of mistake with respect to biden's proxy war against russia now let's go back i want to go back to a point you made jason just now let's turn to freebird which is you talked about the fig leaf that the russians are blaming this on our turbine i don't think that's even really true anymore i mean the russians have basically said he's lying of course yeah yeah but but i think the russians have basically said that um that listen this is also because of sanctions it's sanctions and a turbine it's like pick one right you can't listen but but the point i'm trying to make it look obviously this is retaliation by the russians the problem is the stupidity of western leaders in not thinking there's going to be retaliation i mean all you're hearing right now from western leaders is indignation that russia would play the only card they have the card that was obvious they were going to play you know meanwhile look at what we've done so you've got administration officials talking about the fact that we have commandos on the ground in ukraine you've got administration officials bragging about the fact that we are helping to paint targets on the backs of russian generals so they can be killed you have administration officials boasting about providing the um the artillery spotting so we could sink the mosfet the russian flagship i'll provide receipts for all these things okay you've got biden saying that putin cannot remain in power you've got lindsey graham saying okay we know all this what is the let's go forward how does it resolve you've got lindsey graham saying they need to be assassinated like caesar you've got um the u.s appropriated 40 billion hold on a second in weapons to ukraine so my point is this okay the us and the western alliance they are doing everything in ukraine except pulling the triggers okay they are doing the attack okay so the point is we are in a proxy war with russia what did you expect was going to happen these leaders are not even playing what should happen forward you're in the review forget about playing chess they're not even playing checkers meaning they cannot even anticipate what the russians are going to do next it was imminently predictable imminently predictable that the russians were going to turn off european gas and create this crisis so what should they have done what they should have done was work out a white steel i know that but we're kind of repeating the same position you have every week here i'm trying to get to going forward so uh freeburg what should we do going forward here both on an energy basis and a political basis that's the thing i i get the sort of breakdown of what occurred here in your position sex but what do you think freeburg should happen going forward how do you remember there's an acute energy shortfall you can't just make that up you can't convert oil into natural gas to heat people's homes it's impossible structurally right now in the time frame that it's needed so what should the should the eu be doing now that they're not doing yeah i think that there's gonna be this inevitability that we're gonna need to broker a deal with russia and there's and what i think you'll see over the next couple of months particularly because winter is coming is you need to uh there's going to be a lot of saving face and so i think i've always said from the beginning i think that putin's calculus is to go as far and as deep as he can go so that he could eventually negotiate himself back out in a way that leaves him with what he originally wanted in the first place and i think that there are certain strategic regions and certain strategic assets that it's pretty clear and evident he wanted and if he's gotten enough in addition to that he can give up the additional part and he can get sanctions lifted and he can turn gas back on and be left with what he actually wanted and ultimately get out of this thing and then the the face saving will be from the west will be hey we got him to give up this we got him to give up this we got him to agree to non-incursion and there'll be some sort of you know hey we got putin knocked down a bit and you know we got him out of there we did it we won high five meanwhile putin's smiling because he got exactly what he wanted i think that's where this is all going to end up over the next several months i think that's that's if it doesn't there's going to be significant writing and civil unrest in europe and um and there will be a significant significant economic effect because so much of germany and so much of the broader continent is dependent on a stable low-cost energy or lower enough cost energy supply for the production of things that are produced in europe and if those things can't be produced profitably because the end market won't pay for it the economy will be shattered economies will be shattered and people will be really unhappy food will climb and the currency will will be destroyed and you know what happens when currencies get destroyed all imports become inflated in price and then you have inflation if there isn't a resolution in the next few weeks there will be civil unrest there will be a really cataclysmic concerning economic effect and you think that forces the governments to just fold to putin and give him some yeah and i think the thing that we don't know for sure is what are they going to do from a face-saving move perspective what are they going to say that the ukraine or the the western ukraine we are gonna have to plow so much money into the ukraine uh to make them feel okay about what we're gonna ask them to do in order to remove um or to end the crisis and so there's gonna be this huge check this huge investment in ukraine the western investment in ukraine the the support mechanism for the country for the people left behind in order to get this thing resolved and so my guess is huge amount of money from the west and eu going into ukraine ukraine agrees to let putin keep some region some assets putin agrees to remove himself from certain regions and give up certain assets sanctions are partially lifted but they're partially lifted enough to get the flow of gas going and to get the economy turning again jamath any final thoughts here as we turn uh around uh third base here on this uh of lessons learned and how to avoid this you may you may want to find the clip nick from july where i said the tip of the spear in the fall was going to be the european energy crisis oil is at 105 bucks a barrel russia is basically trying to break the back of europe by now messing with their nat gas supplies the german energy minister yesterday said that if that happens it could be a contagion equivalent to lehman brothers with respect to energy you're already starting to see food riots food insecurity energy and security rampant inflation uh sovereign defaults and you have to ask yourself like how are we going to really tourniquet this whole thing and prevent a much bigger contagion like freebird just talked about if russia decides to play hardball against europe or america we better hope that it's a mild winter because very quickly you can go from plus one million barrels to minus two in a heartbeat yeah my final thought to the following which is that i think that the european system is going to be put under stress because there are really a bunch of different countries with very different incentives right now um where some countries are in desperate need of energy some countries can probably stave it off for a little bit longer other countries are so adamantly focused on their position on russia over and above any source of energy that they may need or don't have so i just think like this is a really good point to take a step back and realize that in all of these conflicts sadly whenever you have like all of these very complicated countries fighting very complicated wars it's really important to understand what these tradeoffs are because ultimately what we're learning in europe is that irrespective of what you morally and ethically believe is right in the ukraine the minute that it affects you and jason you've said this what is it like you're only one meal away from a revolution so yeah it's three meals away yeah and i think it would be you're only like five days away from having no heat before people ride on the street it's probably going to be applied but but that but that's the lesson which is that at the end of the day it is when you're in a position of comfort you can focus on forward and outlooking moral attributes and ethical perspectives that matter but the minute that you are affected at home where you cannot take care of your children or heat your house all bets are off and i think this just goes to show you that if you're going to sort of engage in proactive foreign policy you need to make sure that domestically you don't have any achilles heels and europe had a massive achilles heel which is energy and then you know the minute that they were stress tested basically they're gonna have to take this much more seriously uh going into next year because they've enabled a madman that is the dominant narrative there is a simplistic binary that has been set up that this is a war between autocracy and democracy and that's all there is to it and my point is that this conflict has always been more complicated than that okay and if you really want to understand this conflict you have to go back and understand the history of it and you know the american media and the british media they basically act as if this whole thing began on february 24th for a good example of this there was an excellent piece by william perry who is bill clinton's defense secretary okay he said how the u.s lost russia and how he can restore relations and he talks about how we can chart away ford for peace which i think is your question what perry points out remember again he was clinton's defense secretary in the 1990s he almost resigned in protest over nato expansion eastward this was basically a contradiction of the verbal assurances that james baker and and president george herbert walker bush had given gorbachev that we would not expand nato one inch eastward in any event that's when nato expansion began was the late 90s perry was against it because like george kennan like former ambassador to the server union james matlock he understood that it would be provocative it would be seen as a provocative move by russia okay he was against that policy the other thing he points out is that in the 1990s the russian economy collapsed because they moved off of the soviet system and we did absolutely nothing to help them as a result of that we bred the conditions for a strong man to emerge who basically prioritize the restoration of russian pride dignity and strength okay so he points out the ways that our policies helped create putin i think what he basically suggests in terms of the way forward is look we have to realize that the security architecture of europe was crafted in the late 90s and early 2000s at a time when russia was flat on its back okay what are the russians basically demanding what were their demands prior to this war there were two things they really didn't like okay number one was they did nato at their doorstep we've been on this yes they didn't want ukraine admitted to nato and then number two is they didn't want american missiles right on their border that could hit moscow in five minutes okay those were their two demands the fact of the matter is we never were willing to negotiate at all on those two demands at all and instead we basically just claimed they were a pretext by the russians for an invasion well look we never earned the right to call those a pretext if you want to call them a pretext you take those issues off the table then if the russians invade you know they're liars the truth of the matter is we were refused to negotiate anyway we never played that move and so we'll never know i i i don't disagree with you about that point okay the biggest thing the i want to keep going with this because i think this issue is so much deeper okay listen one of the problems we have in this country is that when a war doesn't work out we just ghost it we never talk about afghanistan anymore we never talk about iraq anymore we understand they were gigantic mistakes but who is analyzing why they happened who's responsible for the failure the fact that matters there's been no accountability the same people who drove our disastrous foreign policy in the middle east are the same people who have driven our ukraine policy in eastern europe there is no accountability military contact not just that it's the foreign policy elite in this country okay so my point my point is that there's my points yeah okay so my point is this and you're it sounds to me like you're willing to now say what compromise can we find to get out of this war okay my point is since i'm trying to avoid war from the beginning i i do think we did not play the piece of hey if nato is not here if we don't let them in nato and we take that off the table will you move these troops back from the border and who we don't know if they ever offer that or not but we do know actually there was there was new information that came out the last couple of weeks okay obviously they should have offered that i mean the the real issue here is dependency on dictators for energy because if he if he did not have the ability to yank that gas chain if he didn't have that nord he would be neutered right now yeah but we knew that we knew that so so if you're playing you're not even saying it accurately it's not that if he didn't have nord it's that doesn't exist without an entire other counterparty agreeing to it i agree if germany had kept their nukes going and if they had made other plans perhaps with them okay but or the united states i mean don't forget biden canceled our energy independence the first day he was in office it doesn't matter that it's a dictator on the other side there is a dependency on the other side and that is an issue for energy independence since the beginning i've been talking about nuclear since the beginning for decades i've been talking but jake one of the challenges is if everyone creates independency on all of their supply then there is no export market for countries that benefit from exports because they have a surplus and so we see this around the world with food with energy with manufacturing would you know maintain anything with oil that would be a good thing with oil wouldn't it china there was no market for it if there was no market for oil then a lot of countries a lot of countries that do not have energy stocks locally would not be able to acquire energy stocks and so a more free more does it make sense if you if you're saying if we lowered our use of oil that would make it cheaper which means that developing countries would pay less jacob just just let me finish with my point for one second in every country you are either an importer or an exporter you're an importer of manufactured goods or an exporter of manufactured goods you're an importer of energy you're an exporter of energy an importer of food and exporter of food it doesn't matter and we often use this as a way to characterize the leadership at these countries as being bad when we end up in conflict with them it doesn't matter that this person is that there's an autocracy in the other side or if there's a democracy on the other side at the end of the day if there's a global trade agreement if there's a supply agreement and that supply agreement gets broken it's both parties faults for being dependent on the supply agreement and then allowing conflict don't think what you're saying is accurate and i'll explain why reasonable parties who are democracies if they get into a trade dispute generally do not invade each other's countries so that's where your argument breaks down it would be absolutely fantastic if the lesson the european union learned here was let's not be dependent what did the united states hold on what did the united states do to iraq okay did we not invade those countries i'm not talking about that i'm talking about the department that's what you just said you said that democracies do not invade and libya no i said we shouldn't invade democracies two democracies that are in a trade war are generally not going to invade each other we invaded afghanistan actually this is 9 11. okay and the the first iraq war we invade we protected um kuwait right and so you know i'm not here to justify every war the united states has been in i'm just talking about in this situation the eu lowering their dependency and if you were going to lower your dependency on any country you'd start with the autocratic ones you'd start with the dictatorships it's not not logical to you freedberg there's a there is a neo-liberal view they become more democratic that hasn't worked out so well i'd say economic interdependence theory hasn't worked out so well either so this is a core failing now you're modifying the theory to say well only economic interdependence among democracies fine but that was not the view that was not the view for the last 20 years it was a quartet if we make ourselves dependent on these other countries then somehow it's going to lead to peace no it actually has just led to dependency it was a foolish policy we should have been energy independent europe should have been energy independent they should not have made them i do agree that it was foolishness we're in agreement yes you're disagreeing with vibrant okay no no i'm not disagreeing with february i think but by the way i'm not i'm not a proponent of people not being energy independent the reason i think people can be energy independent today is because of technology like nuclear and i think that all these every country in the world should find a way to get energy independent i'm also an advocate of global trade i am an advocate because i think that global trade enables economic progress it allows the consumer to get the cheapest product possible and for the producer to find a market for the products that they make and that there's an element of this which is energy but energy doesn't need to be a trade traded market as much anymore because of technology manufactured goods food we still haven't cracked the nuts we are then in agreement freeburg yeah i mean this is sort of an ancillary point but i just want to say that historically there's been no basis for believing in economic interdependence theory if you go back to world war one germany and the uk were each other's largest trading partners before war one didn't stop them from getting into war war ii i think russia's biggest trading partner was germany up until the moment when hitler invaded them so listen economic interdependence has never has never bad man theory it doesn't yeah but the point is there's very little historical basis for believing that economic interdependence prevents wars which by by the way that really speaks to the foolishness of our china policy but look this is sort of a science question with it with the china policy because i think this is a very important discussion we've discovered which is energy independence is one thing and then you have trade which is another and does this actually push off wars do we actually know that we we might have actually pushed off a war with china because we make iphones together could we have been in a conflict earlier if we weren't so independent and have we actually pushed out a potential conflict with taiwan etc with the benefit of hindsight yeah with the benefit of hindsight what we can see is that our chinese policy of interdependency really was called constructive engagement was a complete and unmitigated disaster why it was because we made china rich you go back to the beginning of deng xiaoping began getting his economic reforms the average chinese made two dollars a day now their economy is roughly the same size as ours and how are they using their newfound economic wealth to build up their military their navy they're basically militarizing the south china sea they're basically being aggressive towards their neighbors we fed that chinese tiger until it became a dragon that was capable of challenging us for global preeminence that was a foolish foolish strategy the fact of the matter is that and listen this is a mistake that economists make is that they only look at whether trade creates surplus as opposed to the distribution of those benefits and the fact of the matter is that china benefited disproportionately far more than we did from the china trade over the last counter argument we've made on this podcast is i think freeburg made it is that we lifted 500 million people i think i made it as well out of abject poverty in china but as to your point what yeah it's like it's going to work we have created we have created the return of a we've created the return of great power rivalry we have created a competitor to the us who has roughly almost our same size economy and that is going to challenge us for privacy and we need diplomacy we need very sophisticated diplomacy because this situation with china it's it's not a clear path why is it that you think that we need diplomacy with china when we didn't need it with russia no i i do think we did i i fully conceded that we should have avoided we should have taken it off the table i said that from day one listen it's really important to not just say that oh we failed to play chess here that this policy isn't working like let's not forget how we got into this conflict we got into this conflict because the administration said i think there are four main pillars to our current ukraine strategy number one that ukraine could basically defeat russia if we basically just gave them weapons that has not happened yet number two the administration said that sanctions would weaken russia maybe even destabilize its leadership and collapse this economy that has not happened the ruble's at an all-time high and because gas prices have gone up so much their economy has suffered but on the whole it's still doing pretty well the third contention that was made by advocates of this proxy war is that the sanctions would hurt russia more than europe that has not happened europe is already hurting more than russia and it's about with winter coming it's going to hurt even more and then the last thing the last contention that was made our support for ukraine would rally the world around us and would strengthen the western alliance and i think what we're starting to see is that the western alliance is fracturing and you see these gigantic protests in prague and these other countries so listen these were the pillars of our ukraine policy and they have all turned out to be flawed and wrong and they're becoming more wrong by the day and yet there is no reappraisal of our policy that's coming out of washington or london or paris none of these leaders are saying that there's a problem so i think we're headed for not just an economic crisis but a political crisis in europe because the fundamental tension between the needs of these people which is to basically preserve their economy and to stay warm in their homes and the ideology of their leaders who are financially committed to waging a proxy war against russia instead of finding a diplomatic outcome that was available last year it was available in january it was even available in march or april that disconnect is the fundamental problem all right let's go come on let's talk about kim k come on there's no word on how much money she's raised for her private equity from from russian oligarchs but kim will serve as co-founder and co-managing partner uh the firm was co-founded with 16-year carlisle veteran jay salmons uh who run day-to-day ops and uh people may not know this but kim founded skims that's her undergarment company in 2019 it was last valued at 3.2 billion dollars um she is obviously got the largest following and is the biggest influencer in the world 329 million followers on instagram alone our friend gavin baker uh responding to mr beast actually mr beast actually just passed okay so those are two examples of people who can put a consumer package good in the world and make it number one instantly gavin uh baker a friend of ours uh tweeted uh that she adds massive value uh in this exact regard uh what do you think boys is she gonna have here's why i think here's why i think this is so important go i i have a really strong belief that in the next 30 years or so all traditional brands are going to die and i think that what we're seeing happening right now with the with the power of um democratized media like us creating a podcast there are hundreds and now thousands of individuals who have stood up and created their own brand and their own presence because of the content that they create on twitch on twitter on youtube etc on podcasting and as a result they become the trusted sources of influence and it's why they're called influencers and ultimately these influencers are becoming the brands they can like mr beast launched a chocolate bar became like the number one chocolate bar in the country he just opened up a burger restaurant last week tell me when people showed up number one no more than that like a hundred thousand or something it was insane it was like the number one burger restaurant uh opening or number one restaurant opening in history um kylie jenner launches a makeup brand takes off becomes this billion dollar brand kim kardashian launches a clothing brand becomes a three billion dollar brand these are not just brands they're businesses and here's what i think is the most prescient m a transaction of 2022 and you guys can tell me i'm crazy i think the most important m a deal of 2022 was when pen gaming bought barstool sports because it shows that every consumer package good or every consumer services business ultimately needs to be a content business and if you don't naturally have content creation in your blood you have to go and buy a content business or you are going to die and that's why i think all traditional brands that aren't oriented and built around content creation as their primary differentiating foundation will not survive and will not be able to compete effectively and instead what we're going to see is influencers and individuals that create content build and distribute consumer goods and consumer services in a more efficient way because guess what they've got distribution built in distribution is the number one problem with all consumer services and all consumer goods so i think in the future advertising all advertising and marketing gets replaced by content creation and content creation direct to consumers through the the social media platforms becomes the mechanism by which people are aware of and buy goods and services so that's why i think this deal is so important and i think it's a it's another one of what we're seeing in 2022 which is the stacking away towards the end of nameless faceless brands and the evolution of the influencer i think kim kardashian is incredible she is an incredible businesswoman and the fact that she can stand up what will probably be like a multi-billion dollar private equity fund and frankly the companies that she invests in has a really compelling chance of being successful because she can basically pour so much visibility and notoriety and awareness of a brand into that company that that cap table if i was a director i would say of course give her whatever she wants so that's the first thing and the second thing i would say is that i think what threeburg says is completely right i think we're at a point in time where the biggest thing that if you want to build a consumer business my advice to you as an entrepreneur is you need to build direct distribution and scale because what that translates into what kim kardashian proves what mr beast is proving is it's all about subsidized cac where you don't custer cost of customer acquisition where you are not paying dollars to facebook and google but instead because you have direct distribution and a relationship with tens or hundreds of millions of users you can pour them into different experiences and when you can do that it's basically virtually zero cost your entire margin structure of how you build a consumer business has changed overnight so that's what they've proven they've proven that you need to first build a brand and then you can put you convert that brand into a distribution funnel and then to basically pour all kinds of services into it and one of the services as it turns out is now a private equity fund so i think it's incredible and i hope she's super successful saks do you think this um influencer uh [Applause] strategy is here for and going to have a major impact on the venture business i think that's pretty interesting but i think it's pretty interesting in the consumer space for the reason freeberg said which is distribution is so hard so creating a great product is hard distribution's even harder and this is a realization i had you know many years ago and which is when i started doing yammer and then you know craft started focusing on sas which is at least when you do a b2b product you know a software as a service you can charge enough money for it that you can get a sales team to pencil so in other words you charge an enterprise enough money for the software that you can then pay a salesperson to go out and sell it so there was always a distribution model built in for b2b and that's why i've always liked that is there's a playbook there where if you just build a good enough piece of enterprise software good enough product there's always going to be distribution for it however that's not true with consumer because consumer products are usually ad based you can't generally charge that much if you can charge it all they have high churn rates and so therefore b2c only works if you can find a very low cost scalable distribution channel and i think that's what to free books point i think that's what the kardashians are offering it's clearly worked for their own products i guess we'll see how extensible it is but this is really the key challenge with all consumer stuff is just how do you find a very cheap way of distributing it in the past the consumer products i've been involved in like paypal or investing in social networks like facebook they were viral then they were exponentially viral so they were able to basically grow virally for free so you either have to have you know extraordinary virality to the product or some other distribution trick that allows you to scale at low cost because you can't afford a sales team and what we're seeing is the base of doing that is to create content mr beast created content for years before he built a big enough audience to do that kim kardashian did content for years before she had a distribution to do that dave portnoy and barstool sports i mean the guy dave portnoy and this is incredibles jason calacanis yeah seriously i mean portnoy was out uh raiding pizza and you know now he has all these other kind of you know media and content kind of um branches of his platform but it's all content creation and on top of that content not everybody's good at it freeburg that's the pro of the product i get it but that's not what i'm saying and that's my point so let's say coca-cola tried to build a content business today how good would they be not very good that's why they're gonna end up dying or they're to end up needing to that's a really interesting concept i mean do you think mr beastberger could beat mcdonald's yes and that's what i'm saying that's my point that's why i opened it it's kind of insane when you think about it if mr beast had 5 000 franchisees yeah but this is exactly my point that i said at the beginning every traditional brand will get destroyed in 30 years and they will get destroyed by the influencers that have built an audience through content creation and now creating businesses on top of that that compete with the traditional incumbents not technology advantage businesses i'm talking about core consumer goods and services they also have to be good pen gaming pen gaming does betting you know there's no real advantage in betting you build a sports book that's it the reason pen gaming bought barstool is they now have an audience that they can drive to their sports books right and so the same will happen we still have to make a great product though i mean that's the other challenge here is can you also be a product savant can you be a virtuoso in building a product in addition to being an influencer yeah i mean i think that's what kim gets right she makes great product and mr beast his first burger was not good but now this new burger from what i understand is awesome so you have to have both things switched on think about think about what's easier and what's harder what's easier building an audience of two billion or a billion people that listen or watch you every week or building a great burger it's a lot harder to build the audience if it's a car it's really hard yeah it's not i'm not talking about complicated cars and stuff or electronics i'm talking about basic consumer goods cereal beverages food why not um commodities music audio like like all the stuff that's commodity uh you know betting i mean this is not chocolate bar betting is not a differentiated service offering to consumers so ultimately how do you differentiate it's the it's the audience that you've now built the brand that you've built through the audience because of content creation and so this is why i just want to point out distributed content creation i think represents one of the most profound investing opportunities over the next decade because if you can give individuals the ability to make high quality content they can scale an audience that that that now can be monetized in a thousand ways not just putting freaking ad spots on youtube but there's a thousand products you as an as an influencer can build on top of your audience or sell to your audience boom it really changes the whole landscape for cpg and services um and not to bring everything back to mr beast but a large number of his videos he told us um he lost money on so the videos at some point started losing him money and it was an investment in that brand and you know it's it's clearly going to pay off now i i saw alexis ohanian from um uh you know reddit fame and capitalist 776 he went to go see the burger place and he's like what like there were at that point in time ten thousand people online mr beast had to tell people please do not show up which of course then dwight about some people show up anybody have plugs or anything that they uh want to get off their chest sacks anything else okay we gotta plug i do there is a an epidemic right now of the over prescription of amphetamines to children who are diagnosed with adhd it is an enormously important issue that doesn't just touch kids anymore but now also touches adults you've seen a lot of really kind of bad companies that are over prescribing this stuff get shut down and get sanctioned so i just wanted to let anybody who's listening know and this is me talking my book so take this with a grain of salt but there's a company that i'm involved in that has a video game that has been approved by the fda to be a useful treatment for kids who have been diagnosed with adhd so if you have an 8 to 11 year old you can go and talk to your pediatrician to find out about the solution it's called achilles and it will allow you to prescribe to them the video game that they play 30 minutes a day you want to make sure people hear the name it's achille a-k-i-l-i so if you do a google search for achilles go and read the label have the doctor decide okay so i'm not telling you to go do this but i'm asking you look into it you just look into it but the idea is that there are drugs that affect your brain and now we are increasingly able to design software that exquisitely targets certain aspects of your brain and are able to train them and this is really the first example of such a thing that the fda who has reviewed all kinds of clinical data has decided to approve and so it's launching in the next few weeks we've already written prescriptions to kids in every single state of the united states and so to the extent that you're deciding what to do or you have a child or you have somebody in your family that is of age 8 to 11 years old that's dealing with this i would just encourage you to learn about it that is a plug and you know all the disclaimers i know it's a great plug i think we should at the end just talk about some things we're working on and this is an incredible one the number of kids on this you know adhd drugs attention drugs depression drugs anxiety drugs millions it is out of control there is an act listen i don't want to tell parents how to parent um but i will say this is becoming a dependency and the number of drugs i interviewed saw that new york times story where they put this one girl on 10 drugs they're prescribing multiple drugs and we don't know exactly what the long-term effects of children using these are and there are other solutions i'm not judging any parent i'm not judging any teachers who's advising this but this country and a society needs to really look deeply at this issue and say should children because we didn't go on these drugs when we were kids they didn't exist and they haven't existed for all of humanity and we need to think what kind of experiment are we running on 10 20 30 percent kids in some schools you're stating something so incredibly important you know when you have kids that are pre-teens and teenagers their physiology is changing dramatically and all of a sudden when you introduce a secondary chemical compound into all of that you're exactly right we don't really know what the outcomes are and right now i think a lot of people are worried that the over prescription of drugs in this kind of condition is going to create a next version of an opioid pandemic or epidemic and i think that that's the thing that's exactly the analogy chamath right now this statistic is crazy this is in the new york times express scripts a mail order pharmacy recently reported that prescriptions of antidepressants for teenagers rose 38 from 2015 to 29 we are prescribing these at an alarming rate i have many parents in my circle who have kids who had what i would consider modest behavioral issues or modest attention issues and they talk to me about this and they felt in multiple cases like they were being bullied or pressured by teachers to put their kids on behavioral drugs because their kids were behaving 10 as badly as i did in middle school or or high school this is being used i believe this is my personal belief i know there are some kids who need these drugs or i assume that there are but i think this is being used to keep kids in their seats and to make it easier for parents to have to deal with what are normally the hardships of teenager you know teenagers and just be very careful parents about the extent to which you know you might be being pressured perhaps parents have told me they felt bullied into giving their kids these drugs it really is infuriating to me and i think it's really great that you investment people should look into it exercise talking to your kids these things also work we have guidance counselors we had a guidance counselor at uh at our school tell me that they thought that one of my children should just get put on these drugs and i was like it was the most random statement and all i could get from her was that she just didn't want to deal with the fact that every now and then this kid would just you know be exuberant to your point i want to kill their spirit i had the same conversation i don't want to get into it too much but you know i think that these teachers now and i'm not saying it's all teachers they are like it's just easier to manage kids who are on focused energy drugs and then there are some parents who want their kids to do really good on standardized testing i would have done better on standardized testing if i was on adderall or whatever these attention drugs are we everybody would score 10 better but what does it do to the quality of your life long term that's the question we need to ask about this stuff and we don't have answers for it i don't want to be tom cruise on this podcast but there are other ways to keep you know kids healthy and to deal with these issues and i think these things are to say they're over prescribed it's going to be a huge understatement we're going to look at this like the opioid crisis i guarantee it i think that's exactly if you you start dope sick right and people thought they were doing the right thing oh these people have pain this drug manages pain and then they found out like oh yeah you know what this drug also could make you an addict and could ruin your life uh great job on that investment um and and i hope it works yeah thank you uh saks anything else uh any companies your portfolio want to give a shout out to we might as well get something out of this [ __ ] pod since we're leaving seven and a half million dollars on the [ __ ] table and you guys won't even let me run on summit two so i can get a half milli i don't have anything to plug right now but no company you invested in you need to plug for how about you super gut can we get some supergut.com in here these bars taste great fredberg i love this thank you thank you i literally just ordered another pack of them i'm glad thank you super got do you have supergut.com by the way this is where i'm having yeah super cut.com but i'm this is actually one of my lists of ddc companies where i'm having a lot of these conversations about how do you actually avoid just buying ads on facebook and uh google and how do you actually build an audience right how do you ultimately convert your customers by creating content and so this was originally unique right and then you changed the brand yeah yeah based on the science around um uh around resistance starch and how it changes the gut biome and so um but this is general i'm on the board of a couple of d to c companies and it is universally the conversation right now because in the last year the cost of d2c uh direct-to-consumer marketing on facebook and google is brutal double tripled and a lot of the unit economics are falling apart on d2c businesses because of it uh you know costs a lot more to acquire the customer than you make from them and so everyone's scrambling to figure out okay how do i acquire customers and that's where this content creation strategy is becoming a critical linchpin for most consumer businesses now it's a really important part i think a couple of us are investors in eight sleep and they were like please let us advertise on all and i'm like sorry no ads but i'll shout you out here hate sleep it's a great product i have a plug but i want to save it so what [ __ ] drop a plug for one no no the product hasn't launched yet give me like a month all right yo and if anybody wants to be a venture investor jason calacanist.com to come to one of my webinars and see my latest fun since we all started allowing all of these plugs i thought we had no idea it was just a setup it was a setup i just wanted to round up a plug so i could get mine in so i was being generous worked plan worked i got you on the hook for yours what was your what was your plug what were you doing your your venture fund i'm doing watchful well if you're plugging stuff over subscribe plug i'll plug this calm if you want to call in app we're all involved everybody's calling up let's you know we should do a call-in we should all do like an after hours where we take questions from the audience that would be great i would do that yeah i would do that can i get a point all right let's go everybody this has been all in episode 95. wait wait wait wait should we just create more places that was that that was another deal you turned down just like the ukraine deal this is a theme here is that you turn down deals you later regret that later you admit i should be registered i was right you should have taken the deal i should have taken the volunteer look how hard chamoth is crashing right now look at him look at him what time is it there it's like 11 30 right midnight it's 11 30. it's 11 30. i'm losing my life i lost my voice i lost people send us an invite for uh uh ama for the four of us on calling colleen hold on everybody download quality do that okay yeah just remember maybe yeah live ama live ama with the best i'm gonna show a car i'll show yeah i'll show up i'll be happy to do it uh i'm back in the united states tomorrow all right well let me play poker in 14 hours two hours after you get here you're gonna we'll ask everybody to come airport we'll pick you up from the airport we'll pick up the airport we'll play chinese poker in the back of the car all right everybody better than we thought it would be suck a lozenge you need something a little honey i i i need a lozenge i have some tea over there i love [Music] and they've just gone crazy with it [Music] besties [Music] we need to get these [Music] going on [Music]






i literally don't want to talk about getting guys though only because it's getting crazy and i had to like mod my stuff so start the recording please start the recording i'm going to strike it by brigades do you mean like maga brigades all right listen it no i'm serious do you think because i can call him off hold on hey donny hey donny yeah jkl said he's being brigaded by magga yeah yeah yeah he can't handle it he's tapping out all right it's all good it's all good they're talking it's it's over they're not gonna they're not gonna bring anymore the psyop is over thank you thank you it was getting pretty it was getting pretty acute yeah it's done don't worry about it [Music] [Music] all right everybody welcome to episode 96 of the all-in podcast we had a bomb drop just yesterday uh with adobe agreeing to acquire figma the design tool we'll get into that in a minute what it actually does for 20 billion dollars this is just astounding for this to happen period full stop it's the largest private company purchase i believe in history this company if you don't know it helps you design web apps or user interfaces so if you're a designer we used to make mock-ups we'd send them around in the industry as images or pdfs and then like google docs where you can put comments on somebody else's words and you can collaborate in real time we call it multiplayer mode figma is multiplayer mode the company is just a juggernaut if you work in startups you get figma designs all day and [Music] adobe stock got crushed because of this was down as much as 18 on thursday figma's most recent valuation was 10 billion dollars in june of 2021 their series e so peak market they had raised 200 million at that time there's a lot of details to get into here but you know listen let's uh ask the sultan of sas here what you think of this because it's double what was an incredible uh market last year that was overheated so what does this say about the market figma you know figma itself or maybe adobe's you know jumping the fence or being skittish how do we reconcile this sax well if you judge adobe stock price the other day the market hated the deal i mean the uh adobe stock price went down like 15 percent and it's 150 billion dollar company roughly so they lost almost the entire purchase price in the market capitalization of figma i think that's that's basically an overreaction i you know i know all the news is basically on how adobe is paying 50 times and that's no longer the multiple the multiple is more like you know eight nine ten times for high growth sas companies there is truth to that but but i think it misses some important details about how fast figma is growing can we actually throw up on the the screen the ar history of this company so and for people who know the multiple is the multiple times top line revenue so really so okay so explain that to folks yeah well arr is just the annually recurring revenue it's subscription revenue sometimes people will look at next 12 months revenue which is a similar concept not quite the same but sort of in the ballpark so you know what's interesting about this company i think it was founded 2011 2012. it had a very long wilderness period that's when i call the period where the founders are trying to figure out what the product's going to be uh really for almost five years they finally launched a private beta in 2015 they then opened it up to public launch in 2016 and they didn't turn on monetization until 2017 so five years into the company they hadn't made a dime so you know it's roughly a ten-year-old company and for the first five years didn't make any money and then they started to make money five years ago and then in 2018 i think they turned on the enterprise tier uh and then it's been kind of off to the races that's incredible look at this yeah what i can tell you looking at these numbers by the way so i don't know if these numbers are perfectly correct this is sort of i would call the scuttlebutt numbers these are numbers that um i believe to be true but it's not like these are numbers that the company's confirmed or anything like that this is just me gathering you know intelligence from talking to people in silicon valley so this is what i believe can you read the numbers for people that aren't on youtube watching this yeah so in 2017 again the first year they monetized they did 700 000 they ended the year 700 000 of ar remember that arr is kind of a point in time metric it's the amount of subscription revenue your annual run rate subscription revenue at that time so they ended 2017 with 700 000 2018 they ended with 4 million 2019 they ended with 23 million 2020 they ended with 77 million 2021 210 million and then the estimated number for this year is 450. so you've seen in the press i think it has been publicly reported a 400 million dollar ar number is currently where they're at i've heard that they're going to end with something more like 450 this year and then the their forecast for next year is or was at some point in time when somebody heard this 800 million you know forecast for 2023. so my point is i've seen a lot of sas metrics and i can tell you this ar ramp is phenomenal you know i'm sure people have kind of heard about the triple triple double double that's kind of what vc's want you to do they want you to triple two years in a row then they want you to double two years in a row and so forth this company did way better than that i mean 700k to 4 million is a really fast ramp and then 4 million to 23 million is incredible that's like you know over a 5x and then they did over a 3x going from 23 to 77 million i can tell you that is super hard i think most companies even the ones that hit you know low 20s tripling year over year they tend to decelerate to two and a half times or something like that this company was still growing over 3x then they roughly tripled again to get to 210 and then since they got a question yeah so now they're double that do you think the triple in 2020 was a coveted pull forward or do you think that that was a natural like a zoom or not that's what i was going to i mean it's possible but um if people were collaborating i'm not i don't see i mean so far in the numbers i don't see a huge slowdown here i mean look once the numbers get into the hundreds of millions it's really hard to maintain the same growth rate you're compounding off such a large base that it's just inevitable you can't keep growing 3x year over year once you're at you know 200 million of ar but the fact they got first from 23 to 77 and then 77 to 210 and now 210 they're at let's say they're at 400 now and they're gonna be at 450 by the end of the year plus it's um it's pretty amazing and so okay so yeah so adobe's paying 50 times current arr but if you believe this they're only paying divide by two they're paying 25 times end of next year so like 18 months from now and then you figure you know within say two years after that they're gonna be you know at somewhere between one and a half and two billion yeah of arr and then as you guys know there just aren't that many sas companies that even get to a billion of ar so so i i don't think adobe's making a bad deal here i think there's a question about is there any point at which this product hits some sort of market saturation but adobe's in a good position to know that because they understand this market they are in this market it feels to me like i don't know i've been using adobe photoshop right around when it first came out like 1992. and this product i've used it was built web first it was built for collaborative use and photoshop over the years they've really tried to take what is a desktop installed software application and then try and create cloud-based features and it's a terrible terrible user experience at least from my perspective having grown up on using adobe photoshop but what's most important i think is a lot of people think about this on is it the right price to pay for the company but at the end of the day the right price to pay for the company is what adobe views to be the risk and reward for their business and they effectively paid roughly 12 dilution of their company to do this deal so they're saying let's take 12 percent of our company and effectively de-risk the biggest risk to our business take out the biggest threat to our business for 12 percent of our company not 12 was it 12 you have to factor in the actual drawdown of the stock as well so it's about 33 they they effectively well i'm talking about like assume take take the price of the stock aside the number of shares they're they're issuing because this by the way the deal value went down with the stock so i read the the merger terms last night and there's a couple billion of cash and then a good chunk of it is in stock and it's a it's 10 billion of cash and it's 10 billion of shares at the price when the deal was announced and to your point so it's a fixed number of shares the stock it's a fixed number of shares it's not a fixed it's not a fixed monetary value so it's down 20 from the deal announcement so that 10 billion of stock is now actually 8 billion of stock so no the whole deal is now 18 billion not was it 10 billion of cash to month the 10 billion cash yeah and then there's two billion there's two billion of deferred uh rsus and stock-based compensation but they're but i mean if you think about it at the time of the merger they're they're either you know i think they have they're gonna use some term loan that they have to get the cash but they're effectively issuing you know 10 divided by their total share count which is roughly six percent of their total shares outstanding so you know they're kind of taking six percent or let's just aggregate the two together and say they're taking roughly 12 dilution sure that the value of the stock goes down so look i think like this deal is really interesting so first let's just give huge kudos to the ceo and the team and the investors what an enormous win for all those folks that's awesome it keeps silicon valley kind of going right and that's just awesome to see these kind of big wins i read this incredible profile about the founder and he sounded like such a fascinating person he basically and it with the profile basically said that he was spending months and months going from office to office all around the world meeting customers sitting with customers reading trouble tickets that's what he would do you know reading help desk tickets about the product on vacation whenever you see a a ceo that is so customer obsessed typically there's good outcomes and so this is just another validating point on that theme now let's just put figma aside and let's just talk about adobe for a second what is so incredible is you have a company yes they spent 20 billion or whatever 18 billion now but the way that they did it is really interesting if you go back to zendesk and surveymonkey when those guys announced that merger it was above a threshold of stock where you had to go to a shareholder vote and because there was so much turbulence in the market whether the industrial logic of that deal made sense or not didn't matter as much to shareholders when it came time to vote and they voted it down right so interestingly adobe was very clever they said i'm going to do half cash half stock so that i'm below the threshold we are below the threshold where it goes to a shareholder vote okay interesting but then you have to factor in the dilution uh not just the dilution of the stock but then the re-rating of the stock and this is where you know you lose 20 of your market cap and then you tack on this you're talking about you know a 40 30 40 billion dollar price tag to get the deal done and i think that's where the head scratcher was in the public markets where folks basically rebuilt their model and said hold on a second you know you've been telling me that this problem is a solved problem but when you pay such a premium not only does it mean that this product is clearly materially growing and disrupting but the existing revenue base that i was counting on in my model must be wrong as well and that's the actual flywheel that now adobe is in where people are trying to really figure out how under pressure are those existing cash flows and then if you compound that with something else which is nothing specific to adobe but to the whole market which is now interest rates are going up behind the scenes you have this sort of parade of terribles for adobe that they're going to have to navigate right they have a very large portion of cash they have a large portion of stock they have decaying earnings in their core business that they now have to explain and then they don't really have a lot of earnings i think chantinew said that it's going to be year three before it's secretive which is is typically a way of saying we're going to lose money and then in year three we'll make at least a penny that's what a creative means doesn't mean you're going to make billions necessarily and so these guys have to find a way for figma to drop about a billion and a half dollars of free cash flow into the business for this to kind of make sense in the short term so i think those are all the mechanics that's sort of putting a lot of pressure on the adobe stock but it just goes to show you the amount of disruption that happens this movement to the cloud or the movement to collaboration oh yeah monolithic products are just sort of very much you know that is the key i think you guys did a great job of summering it summarizing it this is an absolutely great deal for adobe it's a transformative deal in the same way the whatsapp deal was for facebook it removes one of the two existential threats to adobe and it turns adobe i guess into a growth story now as pointed out adobe's product was single player mode and adobe grows at about 12 or 13 quarter right now and now you have a company that doubles and they really have been facing three paradigm shifts in the last five or so years obviously you pointed out one desktop software downloading it versus cloud-based uh software well here they go now they've got experts in cloud and then the second one yeah but they have a thing called creative cloud and you know they are slowly trying to figure that out it's a paradigm shift inside the company they've really struggled so now they have somebody who's cloud first trim off do you guys ever use those products but hold on let me finish here there's three paradigm shifts here for feature if they look very similar no so these these three paradigm shifts the one is the desktop versus the the web the other one is subscription so adobe was charging a thousand dollars a year for the creative cloud now they charge 25 bucks a month for it they successfully did that now they've successfully i think have figured out collaboration software what are they one thing that they have not done which i think is the real reason they had to buy figma adobe see this is the problem with these big public companies adobe and all of their investors got very addicted to the free cash flow generation of that stock and it's been an incredible performer and let's just be honest shantanu is one of the best ceos of the last few decades in the public markets period end of story okay since 2007 he has just run a masterful playbook at the tail end of that though you know in 2022 this is a company that has i think six or seven maybe i think maybe eight billion dollars of free cash flow it is a gargantuan money-making business and so they refused in creative cloud to go to that free tier that figma has and if you look at all of the stories around figma one of the most powerful things they did was basically allow people to use this for free effectively forever yeah bottom up sass yeah and and the problem with adobe is like that's a business model disruption that they could not afford in the public markets because if you condition a set of institutional investors to be expecting seven to eight billion dollars of annual free cash flow and all of a sudden you're willing to torch it to take a quarter of that and make it free that is probably the biggest reason why they had to buy this thing which was that they needed to tuck it in and they're like how can i do it well i just have to do it by diluting the stock one time that was one time stock insurance yeah it was a one but you know twelve percent diluted they're still and then they're it's it's one and done it's one more by the way the point the point you guys are making is more broad which is it's not just about adobe this is the classic innovator's dilemma right like any big company that reaches maturity in their market and has scale and has cash flows you have a different shareholder base you move over from growth to value and once you've got value shareholders i mean i've been to these institutional meetings when i was on the exec team at monsanto and you know they wanted dividends and they wanted stock buybacks and they they're like it's nice to see growth but at the end of the day i want to know where is my dividend going to be and what's my stock buyback target going to be and then to say hey i got to go invest in innovating my way out of my corner because you know in this case cloud is reinventing my marketplace it is a very hard place for a manager of a business of that scale to be by the way every industry by the way i think there's another takeaway that's really interesting here which is that if you look at big tech companies i think you almost have to sort them into two buckets at least in the enterprise and sacks you can tell me if you disagree but there's one type of enterprise company which makes basically a single linear monolithic product or a handful of those monolithic products right think workday think adobe et cetera but then there's this other type of company which are more platform level businesses that have this you know mixture of things that they do relatively well integrated maybe each product is not so great but together they're pretty decent and you have distribution leverage and you have pricing power think microsoft and the totality of those products so what's interesting to me is you cannot effectively compete as it turns out against microsoft at any point product and slack i think is the best example where you know microsoft teams was fundamentally cannibalizing this business which is what drove slack into the arms of salesforce and you know you could say that teams was not as great of a product i would have i would make that claim but what microsoft had was distribution scale and pricing power where you could discount and effectively give it away for free adobe isn't in that situation right they can't do that kind of stuff and so when you compete against those kinds of businesses you have a better chance of winning the takeaway i think for the entrepreneur is when you're thinking about the next enterprise business to start i would try to bucket these companies that you want to compete with and say if i'm going to build a newer version of x make sure that version of x is going after a company like adobe versus a company like microsoft because it's much much much easier to build value when you're competing against a monolithic product company versus an entangled platform company sacs would you bundle if you were the ceo of figma which you now i'm sorry ceo of adobe would you bundle figma into the creative cloud and then just make it one subscription would you microsoft teams it yeah maybe i don't know i'm not sure about that i i do think that microsoft is a little bit unique in its ability to bundle so what so tremendous right about the power of the bundling what they do is i think it's called the e5 bundle they have all these products that virtually all enterprises use from office to you know active directory to you know there's like a whole long list of them and so what they've done is they've created one price for all of those products they sell as a bundle under a wall-to-wall enterprise license and what they do is when they see a new competitor come along whether it's slack or zoom or or octa is they'll basically just clone it create a worse version of that product and throw it into the bundle and so now every single enterprise is getting the slack clone or the zoom clone or whatever for free and that has a huge material impact on you know it pulls the rug out from under those startups so now that's not to say that microsoft's product is anywhere near as good as those those competitors but you know now all of a sudden the the microsoft product is on a marginal basis free but then what microsoft does is you know every year or two they go raise the price of the bundle so basically you know they get you hooked on the bundle they then use it to systematically kill or undermine a competitor and then they know you're stuck and then they raise the price they basically have inflation of the price of the whole bundle i think it's very anti-competitive actually i think it's um it's akin to dumping um i'm not sure what the logical stopping point of it is like i don't know if we can have a healthy sas market if microsoft is allowed to keep doing this forever because think about it i mean they will just every year they will take the hot sas company du jour clone it it'll be a shitty version they'll throw it into their bundle and now they're dumping they're dumping the product in the market it's basically free it's free until they basically drive they drive out the competitor or destroy it or basically undermine its market cap to the point where it can no longer make the kinds of investments it needs to pose a real threat to the microsoft larger entity right so think about how any competitiveness is and you don't hear a word about this from lena khan or washington they're only focused on social networks no it's it's so funny it's like she's more focused on you know making sure amazon doesn't buy roomba that you know this stuff doesn't buy one vr app it's not very sophisticated approach you're right this is the kind of stuff that actually really matters i really think you nailed it on the headsacks it's a it's an impossible strategy to defend against the the other thing that is interesting by the way about all of this is you know if you think that the valuation the takeout premium was basically 2x post to post what that means is that if figma was last valued at 10 is now worth 20. you know does that mean that canva which was last priced at 40 is worth 80. well potentially two well potentially to adobe right and if you add those two together now you know what you really have is basically the the entire totality of the creative cloud for adobe is basically embedded now in these two businesses at in an extreme premium and so it makes it very difficult now i think as well for adobe to execute a strategy here without it being forced to do some more expensive um dilutive m a well and the other problem chamoth is this is going to ring bell so when i said before there were two existential threats canva is the other one and that is the other paradigm shift that's occurred in computing is that making things radically simple you talked about a freeberg photoshop is complex and it's single player canva is how people create you know any kind of marketing materials today and they don't hire a designer anymore the job of graphic designer is now everybody's job everybody can make something on canva but then i think saks or or freiburg maybe you have thoughts on this if you're a lena khan and they do make a run at canva adobe now are you saying like hey wait a second you now run the table on all design tools you can't buy it it's a weird classification it's only called design tools because it was sold to someone that was called a designer before and that's not the case anymore now it's a tool that anyone can use in the enterprise setting or in a small small business setting or in an individual setting to create stuff and that wasn't the case with photoshop and i think that's what makes this arguably a very different business a bigger business a more transformative business and a farther reaching business and i don't think that there's necessarily a speaking of the figma deal right um a case to be made here that they're preventing the uh extinction of their monopoly they're buying what looks like a very different business and and it's really additive it's uh it's a business that can turn anyone into a creator it's really cool yeah but you're kind of you're kind of speaking out of both sides of your mouth now because on the one hand you're saying it's a different business but on the other hand you said that this is basically protecting them against an existential disruption to their core business so if it's an existential disruption to their core business how could it not be in the same market of course it's in the same market well there are new entrants competitors there are new entrants and there are you know different underlying you know technology trends this is all about cloud but nonetheless i don't see how these things aren't competitors with each other to some degree so i don't know how this doesn't get seriously reviewed yeah by antitrust authorities it feels so similar to facebook instagram and google youtube and by the way it's similar in both those examples in a number of ways both um facebook instagram was not competing in the same product as facebook at the time with the news feed or whatever it was a photo sharing service that clearly created a broader addressable market that got more people to use a social network and um youtube people thought they were overpaying right and then youtube everyone thought it was crazy they paid a billion six for that business and it's probably the greatest acquisition of all time it's been the greatest managed acquisition of all time i should say um and that business similarly i think google recognized that people were going to move to video content as an alternative to text-based web content and that it was a bigger picture opportunity than what they were pursuing and in the lane that they operated in at that time and they were right and in both cases it was more about paying whatever it took to get the deal done then you know hey how many users do you have how much revenue how much ebitda what's your arr all that stuff goes out the window when you're sitting in that strategic driver seat at that big company and you're saying this is a bigger market these guys are transforming the market and ultimately over time that will eclipse us and you can say hey you're protecting your business but really you're protecting your market i mean the market is going to go away is what the vision is like the market that you exist in today isn't going to exist in the same way in 5-10 years and that's what you're trying to buy your way into i have a question and a statement the statement is i think canva should absolutely go public versus sell because it seems like they'll have a much easier time competing against whomever that they compete with i do think that david you're right that there is a lot here for regulatory review because if you go back and think about visa plaid you know it's not dissimilar meaning you have a young startup that has this really credible and viable technology potentially being acquired by in that case it was you know one of a duopoly but here you could make a very credible claim that it's in a market where it's roughly a monopoly because there aren't really that that many meaningful alternatives so i think saks is right that there's that there's some you know oh there's a case here yeah there's a case here where it just depends whether that was how about how about that uh vr game that facebook before like that was a tiny acquisition that maybe had a million users look and see they're just exactly they are being computer but i think i think it's taking favorites well it seems like what the antitrust authorities are doing right now in washington is they've got a list of companies that they think are putatively suspect and our job is to stop these companies from accumulating more power and it's really about seeing everything through this lens of power but that's not what the competition authorities are supposed to do they're supposed to ensure competition it's about anticipation right and the problem with just approaching things in this way of of the punitive way we just have to stop these companies is it creates a chilling effect on on reasonable exits in silicon valley there aren't that many great exits and we want them to go through now i think if monopolies need to be reined in there are other tools to use besides just saying that those companies can't acquire other companies no matter how unobjectionable they are i mean let's do things like allow side loading let's basically what explain what that is well that's that's basically a way to say that i think google the android already does it but ios does not where you would be able to basically install an app or download an app without going through the apple app store you could enable competitive app stores basically you know i think i think it's a real issue that you have operating system monopolies i mean google android and ios with apple and then amazon with sort of you know white label products those are all operating systems that are competing with apps on their own platform and there have to be some constraints and rules around that otherwise the operating system will eventually dominate and replace any app they want to on the platform we saw that's what the whole microsoft thing was about microsoft netscape was a 100 about that so i think if you can show that somebody has an operating system monopoly there absolutely should be rules of constraints around that does it mean the company should never be able to buy anything no i mean i think all that does stifle innovation without really getting to the crux of what the issue is i think you nailed it a good first step would be allow other app stores so google's app store could be on ios ios app store could be on another platform et cetera and i mean the other issue here is lena kahn's been pretty clear her entire thesis in taking the job was well i want to prevent uh downstream competitive issues so future competition there's no better example of a future competitive issue and future consumer harm i think is how she phrases it then this acquisition if you're going to do it through the lens of future consumer harm this creates future cons consumer harm because figma is not going to compete with adobe you're saying that it does it does massively massively i mean it this is the the the the dissonance here it is great for consumers because they will bundle it they'll bundle the two things together and it'll it'll make it more valuable and reduce churn and it'll make it simple to buy so that's good for consumers right you get more free stuff but future harm and a future competitive harm here is the marketplace will be less competitive if there's one less independent strong company in it that's and if you if they buy canva that's the definition of downstream competitive harm it'll be a less competitive marketplace with these two companies together full stop so jacob do you if you're lena kahn [Music] you actually pay attention to this adobe figma thing in like a serious way or are you still more focused on amazon and you know uh facebook i would hope that they would do multiple things you should say what would you do if i was her i would create a a rule book and apply the rule book evenly and fairly and this is the problem this feels very political it feels like they're going after facebook because of the downstream political issues facebook causes and they're ignoring the microsoft issue and they're ignoring issues like this it just feels like they have their thumb on the scale if you look at what happened to the visa plat thing it was an enormous blessing in disguise because you know the the thing went away and that was i think like a five billion dollar acquisition and then platt turned around and raised money and it's like a you know multiple teens billion and it's going to be a wonderful independent company to your point jason that will now you know uh create more competition in a space that desperately needed now in that case that was sort of like financial payments and rails and visa mastercard blah blah blah but that that that could also be you know if there is a lot of attention paid to the deal and it doesn't end up being consummated that could be the positive outcome but uh if you wanted future competition i if you asked me if i was a betting man i think this thing is going to close i think it closes yeah yeah but i mean it closes it closes because it doesn't intrude on the hot buttons of washington not because the merits of the antitrust or superior to the roomba deal or to that vr deal that facebook wants to have this is all about political and cultural hot buttons so it's it's so weird yeah but i think we all understand what's really going on it's all political but hey jason i go back to your question i think it was a really good question i've had more chance to think about about should adobe change the pricing of figma should they basically bundle it i've spoken about the merits of what microsoft does i don't think that figma should do that here now that i've had a chance to think about it the reason is this that you have to think of pricing as not an element by itself but as sort of the most important element of a go-to-market strategy and there's no way that you can basically reprice figma completely as part of some other bundle and expect not to create massive disruption to your go-to-market organization so for example you've got now a whole huge sales team at figma including enterprise sales they are commissioned based on their the quotas that they close and that's based on the ecv of the deals and so on if all of a sudden you price this as being free because as part of some bundle that enterprises get because they're buying old adobe now all of a sudden those sales people can't earn commission on that sale they can't be incentivized to take that product to market the same way the marketing team is tasked with feeding the sales team so now all of a sudden they're like wait a second can we spend money to basically promote this product when it's going to lead to a deal that's priced at zero because the enterprise already has an ela with adobe so you can't just look at a pricing change in isolation you have to look at it as the tip of the spear of the whole go to market i can tell you what's going to happen because i kind of experienced this with with yammer when microsoft bought my company 10 years ago and by the way i'm not critical of microsoft at all they were an extremely high quality acquirer that lived up to all their promises and did everything they said they were going to do i think if you ever get an offer from microsoft you should take it really seriously i think like i said i think they're a great company great acquirer but i can tell you what happened is that once yammer was folded in to the office suite and didn't have its own independent pricing it didn't have its own independent sales team it just disappeared i mean the promotion of it to stop because nobody had an incentive to basically go sell it and nobody incentive to go market and promote it and it just kind of disappeared and that is why you remember a couple of years after we sold it slack kind of came out of nowhere and there was no one to really oppose them because you know all the promotional activity we had done around yammer just ended because again we weren't we we didn't have the incentive that was created by the sales organization just to explain um the pricing thing david i think that the way this decision will get made and i'm not saying it's right or wrong but it will get made not by the sales teams and not by the product teams but it will get made by the ceo and the cfo in talking to their largest shareholders and the reason is because there is an implied cost of capital that adobe has in fact right now if you look at like all of the models that all the analysts use is roughly around nine percent and so you know they're going to have to achieve a return on top of that cost of capital what that means is that they're going to be forced to find a way in short order to make this accretive and to start generating incremental cash flow and i think that they will be hard pressed not to bundle and not to do these creative packaging strategies because otherwise i think that there's a risk that this free cash flow machine that folks have become very addicted to at adobe starts to shrink and that will have huge ramifications i think to the stock and to the executives and to the morale and so i think that they're going to do whatever it takes and by the way you've seen that you've seen that in other companies who've gone into this phase of their growth oracle being the best example you know they have consistently found ways to package to bundle to cross-sell to upsell and they have incrementally walked free cash flow generation up if they do that they're taking a huge risk because here's what's going to happen is so i agree with you about what may happen this may be decided by the ceo and the board but i think if they do this they could blow it i mean the the um you know dylan field the founder in his blog post on this said that adobe's committed to letting them run independently well you can't run independently if you don't have your own independent pricing you just can't because how long is the question how long does it look like two years four years and if all of a sudden adobe sales people can sell this product and include it in their bundle and the marginal price is basically free because it's part of some bundle that means the sale has been taken away from whoever the dedicated sales people are on the figma side of the house i can tell you that will create irrationality in the sales organization and very soon there'll be pressure to consolidate the figma sales organization with the larger adobe sales organization they'll be moved in they may become product specialists or experts but the go to market efforts will be consolidated and then dylan's going to end up running a a quote standalone version of figma that doesn't have its own go to market organization and then you don't get the feedback into product from your sales and marketing team so all of a sudden you're running a product and engineering team but you don't have eyes and ears in the market i hear all of that i think that the facebook whatsapp merger is probably pretty instructive which is jan had two years roughly where he was left alone to kind of like run independently and then slowly and slowly it was absorbed back into the mothership and you know that was a product with zero monetization um but there was a lot of strategic touch points within whatsapp and and you know core facebook app and everything else that they were doing and i think that you have to do that because when you're spending tens of billions of dollars on something there needs to be an industrial logic that is beyond just let me just buy this thing and stick it on the shelf and let it be on its own so i i think that you know that dye is sort of cast i think we're just debating the timeline in which it happens let's talk about it yeah you know you're probably right and that's what usually happens is is when they promise the founder that you'll be left alone that usually lasts two years coincidentally that's coincidentally usually the length of the the earn out or the the golden handcuffs that's how long my golden handcuffs were yeah and they left us alone for one year by the way our er tripled that year but then once they got serious about integration the organization started emerging and really i was just running a product organization which is fine but that's not running an independent company because like i said you lose your eyes and ears you lose the pulse of the market when you're not selling into the market fredberg how did youtube do it so well it was a very different situation they were yes google basically took a team of you know two dozen people and their infrastructure was terrible and they basically rebuilt the entire company so it was the complete opposite they think about them taking the the front end shell of youtube and then they rebuilt everything underneath it ran it and then they actually put their own people in to optimize the front end they put their own ad sales team on top of it i mean they just bought a skeleton of a growth engine and they built everything um and so it was a very different story and the one thing that youtube the one thing that google did so well with that acquisition was the conviction bet that they made on the business and they made billions and billions of dollars of investments into that business for years before it started to make money um and that is a very hard thing to do because the chimops point you often have this question of where your free cash flows where's your dividends where's your buybacks as the business gets to a certain point of maturity but what google had that many businesses of that scale have never had before is their extraordinary growth rate that continued even as they were of that scale so the um the leeway that google's executives and board were given by shareholders was extraordinary not to mention the dual voting where larry and sergey could decide to do whatever the heck they wanted but they really were able to take advantage of their high growth rate to take all this cash they were generating and reinvest it into this youtube platform as well as many other things many of which haven't worked out but when they do work out you have a business that i think youtube's probably worth what 300 400 500 billion dollars at this point and and it's really paid back multiple so youtube's really a one-off because it's a one-off acquirer and it was a one-off kind of acquisition integration scenario that we haven't seen before what google in effect got when they acquired youtube was a flywheel i mean it was a brand and it was a network effect yeah the network effect was massive it was off to the races and i remember google had google videos but they just couldn't come close to catching youtube because the flywheel of creators wanted to be where all the viewers were and viewers wanting to be where the most content was it was just impossible to catch but that organization was relatively tiny at the time it was acquired and it didn't have any monetization and it was being deluged it was being deluged by legal problems that that google legal could solve very unique situation yeah that was one of the bold acquisitions of all time but what was incredible is right after the acquisition and google started to scale this thing most of the content being watched on youtube was copyright content and i was at a conference and i remember philippe damon the ceo of viacom stood up and larry page and eric or larry and sergey or someone was on stage with and he yelled at them and he was like you guys are making all this money and growing this youtube business off of the back of our content and you know the dmca the digital millennium copyright act says that um someone can file a takedown notice and then the platform has a period of time to respond and to deal with it and the amount of time it was taking them to deal with it new content was being uploaded and then they'd have to file another takedown notice so it created this insurmountable you know copyright copyright thing and um and then what did google do that youtube would have never been able to do to sax's point they built an engine that could automatically recognize copyright content and pull it down before it was made publicly available without ruining the user experience of instant upload and availability of content from the fingerprint system was even more nuanced than that the fingerprint system not only told them hey this is an snl skit or this is a music video from prince it said what would you like to do and it put the power in their hands and said turn it off claim it and we get the money from it and then it was like well we're telling you before you even know about it and what all these people did was they say okay yeah you can make a remix of my prince song or this episode of a tv show we'll collect the money and that was just yeah the revenue share was the brilliant part about it because it put the power in the copyright holders names this just speaks to how singularly how singular and unique that deal was because i don't think any other company at that time maybe microsoft would have been able to develop technology to do this and do it at the scale and do it with this low latency and high speed for users and so on uh it really was a singular transaction which free break i think speaks to their accumulation of talent especially in their early years where they were just like hire smart people we'll figure out what to do with them later they actually had those people sitting around who could just go jump on the youtube channel oh my god solar common gar went and ran youtube and absolutely crushed it probably one of the best ceo runs that's never talked about in the history of tech he stepped in and he ran youtube and now susan runs it you know another incredible run of monetizing that thing since but i mean and these are people by the way both solar and susan were um sub 30 employee people at google so yeah good point nick can we throw up the slide contrasting valuation to ar this is actually more interesting than just who made all the money so i actually created a plot arr is the red chart and the it's the right access so as we talked about they're at around 400 450 million of ar right now and then the left access is expected value basically this was their uh valuation and it's it's in purple and it obviously it goes up to the 20 billion or 22 billion that adobe just paid you could see e was the last round they did in 2021 where they were valued at 10 billion before that they were valued at 2 billion in 2020 and then you know the series c i think they were valued at like 440 million or something like that and then i think the b they were valued at like 125 million and then the a they were valued at like 50-ish million you know and then there was seed and so forth i think what you see here is that is how um efficient in a way venture capital is where it's tracking just slightly ahead of arr it is predicting where the hockey stick is going so first of all look at arr it is as close to a pure hockey stick as i've ever seen in sas kudos to them i mean the crazy thing is just how long it took for the hockey stick to get going normally why didn't you invest in this company did you see it well no we didn't see it also look at what a late bloomer this thing is you know like that you have to kind of see it like look look like hockey stick didn't really start inflecting until 2018 2019 right so it's more that you're your table is more striking where these guys for yours were toiling away and then all of a sudden this thing just took off right it's really this was such a late bloomer and for anyone who's doing a sas company and you're in it five years and you still have zero revenue and like that doesn't mean you're dead i mean they basically were a zero crying for five years exactly absolutely nothing and now it's a 20 billion dollar exit five years later i think the only hard round to invest in this company would have been if you were going to invest in i think the 2014 time period 2015 because you were investing in a company that hadn't even launched yet that had been grinding for three or four years with by the way the founder was like 19 when he started this he was a teal fellow he was one of the first you know 20 under 20 teal fellows yeah yeah yeah and he dropped out of school to do this and you know and they spent several years in the wilderness i think that's when it would have been hard to invest this maybe not the first seed round because you could tell this guy was brilliant he had a really specific idea moving design tools to the cloud was i think like a very clear and um sensible vision clear you know why now underlying trend i always say my my three biggest traits for entrepreneurial success one of them is grit i mean you you know if you have a high index on grit you're you're able to to to grind your way there it's really that's a really incredible this chart is brilliant because you know what we see in the seed stage is right before that series a is where most people give up sacks you know you get three or four years in people aren't paying for the products you're under resourced and they don't get the a and they got you know that 2013 14 15 period they were probably trying to get an a it might have taken him two years to get the a uh and then somebody finally did it so easy for a young person to give up and go get a freaking job at google or go back to school and to to grind it out to have the grit and the persistence and commit to your vision he didn't pivot away he persisted and he executed he clarified he clarified right yeah but he but he didn't he didn't go five steps away and say i'm gonna do a new startup and you know there was no rate in his business right and there's no pivot here yeah dylan field by the way is the founder i had him on the pod back in the day and really the you know ultimate customer focus customer like you said yeah you need to just have your pulse on what your customers are saying constantly because the answer is there you just have to develop it and give it to them by the way also in this chart that's i think very interesting sax i'm interested in your position on this if you look at this chart one more time they could have turned on monetization i think a year or two before they did so they purposely didn't charge for it to get the network effects going i would love to see in here the number of users as a third vector you know um as a third line on here because i think they started getting a lot of users in 2014 2015 2016. that's when that's why they got the seed but they purposely did not charge to let the network refer yeah 2015 was a private beta i don't think they were even had a product in 2014 that was usable yet 2015 was private beta 2016 was public launch and then they turned on monetization in 2017 and then they turned on enterprise pricing in 2018 so i think that's a pretty sound progression i i'm not i mean to be honest i'm not a big fan of taking three or four years in the wilderness to build your product i think you need to get to market sooner but i do think it is a little different in a existing industry where the table stakes are high so you know adobe is not a cloud-based product but those were very rich client products and so to get to the point where you could even compete with them with the classic clay christensen innovators dilemma lightweight version of the product there were significant table stakes there and it was a significant technical challenge to move design tools into the browser they had to do a lot of cutting edge browser tech the browser wasn't ready for it yeah this chart is going to be call in in a few years now that i'm doing after all in 48 hours after it i think that's correct uh come join me with your questions spax are back i don't know if you saw in the news but freeburg launched a spec no no he he he announced a target and a merger agreement incredible so now he goes into the dspac process now we have two out of four besties have spacked uh freeburg you want to tell us about uh what you expect well i mean we announced that we're merging uh the production board spec which is uh tpb acquisition corp with lavoro which is the largest agricultural inputs retailer in brazil and operates across latin america you know we've got a good slide in the presentation that i think echoes some of the points i've talked about on our podcast here about the importance of having resiliency and redundancy in global food supply chains and increasing famine risk so we've got a slide that shows for about 30 years you know we've reduced the number of people globally that have been undernourished down to about 600 million as of about three or four years ago and in the last three years we've seen that number spike back up to 800 million which we thought we were done with global famine and now here we are facing these issues again climate change the lockdown supply chain disruption the ukraine war and all the other geopolitical tension issues so that's been a big thesis of mine individually you guys know we've talked offline about some investments i've made and my strong interests in the area brazil and latin america is the largest ag export market in the world so they produce calories for the rest of the world and farmers there largely lag in terms of technology adoption i've got a nice brazilian farm as my background today but technology adoption doesn't look like it does in the u.s there's a huge opportunity to influence and drive productivity up in that region and so we partnered with the largest ag retailer ag retail is the local locations that work with farmers they have these teams called agronomists they meet with the farmers typically weekly help them make decisions about what products to use what to do how to do it and so with the footprint and the reach that they have i think we can really drive up productivity per acre across the region increase total global calorie production and that's why i'm so excited about it fundamentally it's also a great business it's all the financials are presented in the um in the investor presentation and will be published with the sec here in the next couple days but uh it's a it's a scaled business it's a profitable business and it's growing pretty significantly so it's got great tailwinds it's a great base business but for me there's huge opportunity to continue to drive with their drive technology through the platform that they've built uh and that's why um you know we're also making a hundred million dollar investment off our balance sheet into the company so that's big skin in the game we put two thirds of our these founder promote shares they're you know they only vest if we can hit the stock price of 1250 and 15 over the next three years otherwise we lose them so we've really tried to align ourselves with shareholders and really put our money where our mouth is on this and show people that you know that this is a real strategic partnership for us it's not just you know an investment that we intend to kind of you know hold for a short period of time this is a key platform for me for our for our tpb business and for many of the companies that we operate at tpb so i'm super excited it's been a long time coming it's been a very hard process as uh chamath can attest and as we all talk about capital markets are very difficult right now uh getting a transaction announced is is the first step now there's a bigger step of getting it closed but uh yeah a lot of work but i'm i'm i'm super excited about this yeah thanks for letting me talk about it yeah well and the other thing i just want to double click on there chamoth this idea that two there's of this the sponsor promote have to hit certain hurdles i think that's probably a pretty good thing for folks who maybe want to invest to just say hey yeah this is great we're the there's some alignment in how these shares get distributed yes i mean i think it's a good feature um i think that the thing with spax in general in a moment like this is that it's um it actually performs better in periods of high volatility and the reason is because you know you have this uh redemption feature which essentially allows you to get back your your basis and so meanwhile while you know freedberg was hunting for a deal or whatever that cash you know that you've contributed into this back sits in a savings account that then actually is generating some you know reasonable interest as rates go up so the whole combination of all of this stuff actually makes back a pretty good risk-adjusted vehicle when the markets are highly volatile because if at any point you don't like how you feel even if you love the deal you just vote to redeem get your ten dollars back and effectively win the market right let's say the market goes down thirty percent from here to march of next year when freedberg's deal closes well an investor could theoretically just say you know what i just want my ten dollars back now all of a sudden they've gotten zero they've felt zero percentage of that drawdown and that's what's so interesting about this structure in a moment like this so i think there's a lot of really interesting features that that spax in the future i think will have to incorporate in order to in order to be a successful tool in the toolbox one thing i learned from i guess the pattern ag company that i think you incubated as well or was that yeah a cup yeah you're incompetent as well yeah and you you guys invested through the through your launch platform yeah right so we invested in the syndicate is that the way this retail works is you have farmers but then there are these retailers or these sales reps i guess they call them in the industry that service the farmers and so that's where yeah yeah that's exactly don't have this technology yeah that's right they don't they don't know how else is a farmer supposed to know what to buy and what to do so ag retail the local retail store the people that work there are called agronomists and so the agronomists are like technical sales people they understand the science and the technology of farming they understand what the farmers have done in the past and then they partner with them to help them decide what to do going forward what products to buy how to use them how to get the most out of their land and so when new technology when new ag technology comes to market it's the retailer that can influence the farmer to make a decision on making a switch or using a new tool or using some software uh you know to drive that decision and so that's why ag retail is so important and why it's critical for any new technology to get adopted in farming it has to go through retail you know there's the big ag input companies they're the seed companies and the chemistry companies and the protection companies and the software companies they all don't sell direct to farmers typically they're going through these retailers and so yeah is there a version of lavoro that's been that's an american company that's public or not yeah it's called nutrient and so nutrient uh owns cps which is the largest retail chain in the u.s ag retail chain in the u.s um about i think uh 70 80 of nutrients business is actually fertilizer production and then the rest is the retail business you know that's the key comp that we actually show in our financial presentation that we published yesterday how is nutrient done just as a public market do people understand sort of the value that it creates in the marketplace yeah um so in the last year as we've talked about on the show companies that are in the fertilizer business are making money hand over fist because of the um the issues with the supply chain for natural gas potash and phosphates and so if you have access to supply like nutrient does and and various other fertilizer companies do you are absolutely minting money this year and so they're having record earnings right now and uh you know people are kind of estimating that the fertilizer market will kind of reset and as a result these companies are over earning right now which means that they're getting low forward multiples but generally speaking uh yeah these businesses have done very well and one of the you know i would say the us is about 15 years ahead of latin america and remember latin america produces and exports more calories than the u.s um and they're all and corn farmers in brazil for example are only getting half the yield of corn farmers in america or a little more than half per acre yield per acre and the reason is the retailers in the us are so sophisticated that they're introducing services and they make a bunch of money selling services now that wasn't the case 20 years ago so now they're offering farmers advice using software and and other kind of custom you know soil testing services and whatnot and that's really changed agriculture it's given farmers data that they didn't have before and helped them make better decisions using that data that didn't exist before and that's really you know i would say concentrated in the u.s that kind of sophisticated behavior i think it's really important we see it happen around the world now um because we need to grow more food and we need to do it without expanding land and acreage and so on and we need to do it more sustainably which is another kind of key part of this did you worry a lot about like the fx risk of you know all these inputs coming into brazil having to deal in local currency then having to kind of get the revenues out in into u.s dollars and all of that stuff how did you think about that yeah it's a good question so when um all ag commodities around the world most commodities right they trade in dollars and so um you know if the dollar strengthens against the local currency the rei the farmers actually make more money and the input companies charge more money in local currency so basically the entire ag market and around the world commodity markets generally speaking inputs and outputs trade in dollars and so if you're a a local business you actually make more money when your local currency goes down and you're willing to spend more money and so businesses in a commodity cyclical business generally are are currency hedged because of that because they're they're selling stuff in dollars and then as a result the places that they're buying stuff from charge them more in their local currency and they can still make a good spread so you know there may be fluctuations in fx risk but generally speaking i think we see um and i'm just speaking generally here not about this particular transaction we generally see and we saw this at monsanto so that's a good example all ag input companies uh when the local currencies devalue in a market that they're selling into they charge more and the farmers can afford to pay more because they're making more selling their product into the markets i am i think this company is super interesting so i'm i'm i'm rooting for you it looks it looks really really cool and it seems like a very good entry valuation good margin to safety too yeah 1.2 billion 1.2 billion valuation if i'm reading correctly here so yeah congratulations it's hard to get a deal done at this time for people don't know fx foreign exchange just trading one dollar or one currency for another did you guys see that there was a title vi lawsuit filed against pfizer for some um you know in the in the civil rights act there's something called title vi which means that if you take federal funds of any kind you can't discriminate and pfizer has a program to recruit african-american and latino people into the company and they're not being sued because you know pfizer takes nih grants they you know work with the us government they work with medicare they work with medicaid and so as a result of that um it's it's really happening one month before something else that we talked about which is there's the affirmative action case uh that's going to the supreme court where i think it's harvard actually you know push people pushing back on harvard's ability to have some form of race-based admissions so i just don't know if you guys were monitoring this for me i just took a step back and i thought look at what has happened legislatively in 2022 we basically repealed roe v wade the supreme court also went after a concealed carry in new york and said that new york cannot legislate against concealed carry which had pretty big ramifications with respect to gun laws the consensus opinion is that we're going to repeal affirmative action in the next month or the supreme court is going to do that these are three pieces of an enormous change in the united states civil society that that has happened in a really small condensed period of time so i have these thoughts on affirmative action but my other thought is like it's incredible how conservatives have been able to organize and how disorganized you know progressive have been in order to create a counter maneuver against them because this has been a systematic effort since karl rove literally wrote about it in the mid-2000s said here's what we're going to do we're going to raise a bunch of money we're going to redistrict everything we're going to get the state legislators on our side we're going to basically you know fund the federalist society we're going to and they did it uh and in 20 years they've created an enormous amount of change that i'm not sure all americans agree with meanwhile the progressives are just kind of like naval gazing at each other i mean and then you left off this past week uh chamath that um it seems like the gay marriage bill is going to be put to a vote and that they're not going to be able to find i didn't see that what yeah yeah and ted cruz said he's not going to vote for it because it's attacking religious freedom so we had talked on a previous episode and i think zach you said you didn't think gay marriage would come up and well no if i had to guess what the political gamesmanship is here because they think it's not going to pass they want to bring it up for a vote because it preserves the issue it intensifies the wedge issue when it looked like they had enough votes they weren't going to put it up for a vote so i don't know i think it's a lot of gamesmanship here look i think enough republicans should vote for this just to pass it i don't why wouldn't they yeah well i think there i think there's some issues with the way the bill is written in terms of maybe requiring religious organizations to perform gay marriages i think that somebody should just make an amendment to clarify that's not the case to solve this religious freedom issue i think if that happened then you get more republicans on board or at least they wouldn't have an excuse but yeah look i would like to see enough republicans vote for this to take it off the issue i don't think gay marriage is in at any risk of being overturned by the supreme court remember it was gorsuch who wrote that opinion so i think this is a scare tactic that progressives are able to use to fundraise off you know their their base nonetheless it'd be nice if enough republicans would vote to canonize you know marriage equality so that they wouldn't be able to do that that's the smart play here for republicans yeah it looks like by the way breaking news um in the washington post democrats have postponed the same sex marriage vote until after the midterms so but i mean you can understand why people are going to be nervous about this after um maybe they're doing that because they want to they want to run on it that's an issue they want to have that as an issue yeah i mean force it the 70 of people are in favor right 80 percent look if republicans want to be smart find 10 republicans in the senate who can support this announce now that you're going to support it come on republicans have a brain don't let them change the issue from this economy that's spiraling out of control i mean the republicans are clueless what do you guys think is going on there oh right yeah so fedex stock has dropped 25 as much as 25 as we're taping this this friday after the ceo um after a little i don't know if you saw the video i sent to the group chat but kramer jim cramer was kind of pushing him do you think there's a recession during the session he finally said yes i think there's a global recession they missed on uh revenue and they have cut their predictions for next year severely uh and the stocks weigh down i think based on what i heard on cnbc from and reading some stories right before this breaking news is happening some people think this is 60 40 market versus management but either way i think the fed's interest rates are doing their job and less packages are being shipped because people are chamath you would think spending less money and that was the whole point of this exercise was to slow the economy down freeburg i think this was a little bit of a head scratcher this is a new ceo so i think the game theory on this is that it made a lot of sense for him to reset expectations i get that and i think that that's a that's a reasonably smart thing to do when you're incoming you know leader of a very complicated organization that really is at the end of the bullwhip so to speak on on consumer demand the problem is there's just so much conflicting data um you know retail sales was pretty reasonable you know china actually looked a little bit stronger than people expected just this past week on some data that came out there it looks like europe is going to really draw a hard line and make sure that they spend whatever it takes to have enough energy so that their productivity doesn't fall off a cliff all of those signals would say that you know we're not at the precipice of this kind of like cratering of demand and then you have powell basically saying yeah we're going to go another 75 and you know we're going to take rates to probably somewhere between four and five percent so the the fedex data point was pretty starkly in contrast with at least some of the data that we've seen over the last few weeks so i don't know it was a bit of a head scratcher they got three things working against them number one amazon just continues to build out local delivery infrastructure at an incredible pace at the end of 2020 amazon was already up to 25 market share um which put them ahead of both fedex and ups and fedex has seen their market share decline for the past eight or nine years now um so that's kind of you know a key point number two is people are just shipping less stuff doing more stuff digitally and number three is this recession impact where they obviously have key economic indicators that allow them to do a better job forecasting deliveries than most companies i would imagine and so they can see order volume and trading volume and use that as a predictor for um you know for what volume for shipping is going to be in the future and i would guess that all three continue to work against them it's not like they have a lot of diversified diversification in the business and other ways to expand out into so you've got a key vertically integrated player namely amazon that is investing heavily to replace whatever they use you for i think as of a few years ago amazon was only like two percent or three percent of fedex's revenue anyway but still i would imagine amazon is playing a key role here your first your first comment to me is is now that sounds like the most credible explanation and you know to blame a recession is sort of a little bit of hiding the cheese it's probably fair to say that their lunch is getting eaten by amazon so i can understand why fedex is under a lot of pressure because of that but if you just compare it to just all the other data it doesn't seem like this whole thing makes any sense what you just said about competition makes to me a lot more sense and yeah competition with digital and amazon i mean digital like how much do you guys sign letters today versus e-sign i mean there's just a lot and you know i'm giving an example maybe that's a one percent impact and there's probably a few more things and these things all layer up well they could be losing market share while still growing because e-commerce is growing so violently in the world but saks what do you think i think what's going on here is that whatever the issues of fedex and no matter how overstated these warnings may have been i think they're directly correct he's saying that the world's headed for a global recession and directionally he appears to be right i mean things look really grim we just had this inflation report that was much worse than what people were expecting it was inflation was supposed to go down to uh 8.0 percent and actually it was 8.3 that's why the stock market cratered uh a few days ago it's like the worst day in the stock market i think maybe all year or certainly since june we're almost towards the june lows uh now this uh fedex executive is saying we're headed for global recession so it seems to me that that the economic news is just pretty grim here and we're in a we're in stagflation the fed has to keep raising interest rates at the same time that we have persistent high chronic inflation and you have to wonder you know i tweeted a few months ago that the white house economic advisor brian deese he said that in this interview with cnn that the buying administration was willing to endure a global recession in order to keep russia from controlling the donbass region ukraine well mission accomplished it looks like it's getting its wish the administration has made some progress in the dawn pass but we are also having a global recession so what percentage of this what percent of the recession and inflation has to do with the russian invasion of ukraine i think it's meaningful it's not useful we know it's a huge exacerbator of all these listen i don't think the economy is going to get better with the risk of war three hanging over our heads how does that work yeah but what percent of the economic issue do you think is percentage-wise impacting i don't think we're going to work maybe you answer yeah i don't think we're in a recession yet um you know retail sales is still quite strong there's just a lot of signals that tell us that people are still consuming a lot of things and and that gdp is pretty reasonable and that jobs and wages you know are pretty much you know quite full so i think saks you are right that we will be there because you can only bring rates up so high until you break things do you see there's a tweet by i think a charles schwab analyst today about that issue of wages and she was tweeting off to find it that for the second year in a row we now have uh because of inflation we now have uh real wage decreases so you may be right about like where things stand today but this is about the trajectory right now of the economy and the trajectory is not good inflation is not coming down as fast as people were anticipating it's worse than expected um you have the situation in ukraine where listen we can all cheer on the ukrainians for this counter-offensive that appear to be successful but we are playing with fire over there i mean i i don't recall a time during the cold war where we did anything remotely this risky you have america listen we have american generals american generals we're taking credit for this counter-offensive do you see this new york times story where they talk about the inside moment of this ukraine counter-offensive so you now have america america is now giving ukraine more and more advanced weapons okay this sort of the the long-range artillery they're telling them where to point the weapons they're giving them the intelligence for it um they're training them on how to use it they've got commanders on the ground there and um and they actually are hand correcting the battle plans the ukrainians had a counter-offensive plan the americans said that's not good enough and they rewrote it so the americans are now doing everything in this war except pulling the triggers and taking the bullets and i don't want to minimize the sacrifice the ukrainians are making because they are dying in huge numbers and you know we can all respect and admire the sacrifice they're making for their own country but this is a very risky strategy for the united states america to be pursuing i mean we are we are basically playing with fire and we are you know this close to being at war with a nuclear armed russia and we never came close to this type of behavior during the cold war and i don't understand what's changed so much that we have to take this kind of risk now at the beginning of this conflict i said that i was open to arming the ukrainians under cold war rules cold war rules meaning covertly like we did in afghanistan we now have multiple examples the administration boasting and taking credit taking credit for the counter-offensive for the sinking of the mosfet for killing russian generals this seems very risky to me so sex um a court premise of the discussions we've had here is that the united states screwed up the negotiation uh with putin by not taking nato off the table reuters reported that putin rejected a ukrainian peace deal at the start of the war uh at the start of the war russian chief envoy on ukraine told putin that a provisional deal with uh kiev had been struck dale would have satisfied russia's demand that ukraine stay out of nato uh two of three sources said the push to get a deal finalized occurred immediately after russia's february 24th invasion does that change any of your thinking on uh what's happened here and putin's culpability i think it's a data point you know but then let me explain why i don't think it's this positive and by the way i saw the article every neocon on twitter was basically tweeting this trying to prove that this yeah i would see it on everybody's food shimer analysis let me tell you why it doesn't okay first of all if you read the article closely this offer did not come until after the invasion started okay and we already knew zelinski was publicly saying in the early weeks of the war that they were willing to take ukraine off the nato off the table so this isn't that much news it happened after the other key point here is that not only did it happen too late but also the offer did not come from the americans this is a really important point to understand about the russian position on this and i'm just saying this based on all their public pronouncements the russians made an ultimatum in december and then lavrov negotiated with lincoln in january they were absolutely insistent that they would accept nothing less but a written guarantee from washington why is that well the written guarantee was necessary because they've always claimed that james baker eukard gorbachev over you know german reunification and not one inch eastward so they've always demanded a written assurance from the americans and the reason they wanted from america and not europe is because they know that europe are america's poodles and ukraine is a client state of america so listen they wanted a written guarantee from america before the war started they never got that now if your point is did putin do everything he could to avoid this war absolutely not i will absolutely grant you that but we already knew that the question is did the u.s state department do everything they could to avoid this war and my point is absolutely not they should have taken this ukraine issue off the table in writing before the invasion got it okay and afraid broken about ukraine no no i just uh it was major news and we have an obligation i think too i'm glad yeah that people take this one article and they're like see there's nothing to this this is giving you the opportunity sex now let me ask you a question for free burke freeburg the other follow-up people would like us to have made here is we predicted famine uh and massive disruption in food we debated that here you were pretty clear that this was going to be or could be disastrous it hasn't turned out to be disastrous yet what's the update on you know fertilizer is shipping not shipping are we gonna have global famine are we not gonna have global family what's the update there based on this conflict yeah we have a massive starvation problem the un told um told everyone i mean no one writes about this stuff because it's seemingly not interesting in mainstream media which i don't freaking understand but the un thinks that 345 million people now are incrementally marching towards starvation and so i think they did this at their meeting yesterday because of the war in the ukraine um so david beasley whom who i know well he's the executive director of the un world food program he told the u.n security council yesterday that 345 million people are now facing acute food insecurity in 82 countries where the u.n operates which is two and a half times the number of acutely food insecure people that existed before the pandemic hit and so this is creating like we talked about these rippling effects in terms of initially it was fertilizer cost which means less food is being produced locally then there was the acute crisis of getting food out of the ukraine and now it's less planted acres and less yield getting out of those acres which i you know we said was going to start to happen in the back half of this year and if you look at the price you know a good proxy for this is the price for corn uh we're at near record highs um you know for the last couple of years in terms of corn pricing the 2023 futures pricing for next december for corn is at 620 a bushel you know and it kind of peaked out right around the middle part of the the ukraine crisis in um april at 673 so we're getting right back to that high point and so this is a major problem that's brewing and as i highlighted at the beginning of our talk today which i show in the presentation for the the levoro transaction i talked about earlier we have done an incredible job building a resilient food supply and excellent global supply chains to feed people around the world going back 30 years and we've been able to steadily decrease the number of people that are food insecure or facing famine and famine in the u.n definition is less than 1200 calories per day on average for a year and so we went from like a billion people around the world facing famine about 30 years ago and got that number all the way down to 600 million and then in the last two and a half three years it's shot back up to 800 million and now the un thinks it's going to shoot up even more so we may even be retracing our way all the way back 30 years because of the crises that have enveloped the the region around ukraine and the resulting impact on fertilizer availability fertilizer pricing and so on and as i mentioned a few weeks ago many ammonia fertilizer plants which is nitrogen fertilizer the main kind of component of fertilizer in europe are being shut down because they run on natural gas and so government agencies and the local producers are turning those plants off to make more natural gas available for heating would you describe this freeberg as because we we are seeing uh the eu you know they remember they made that uh this is why this is why south america is so important but sorry go ahead yeah no it makes real sense would you describe this though because the eu was also at the same time the un was uh you know highlighting these concerns the eu was also praising the massive progress we made from the the russia and the ukraine and russia and ukraine uh allowing fertilizer allowing exports and this resiliency so we got wheat moving and then we got some fertilizer exports moving right so two steps forward one step back would be how you describe this maybe yeah that gas prices are still elevated right and and that gas availability in europe is obviously significantly restricted we get through it will we get through it do you think we can we can manage this yeah look i don't know how many look there's some number of people some number of tens of millions maybe hundreds of millions of people who are going to starve between here and there that otherwise weren't going to be starving by the way there's always you know some hundreds of millions as i mentioned of people around the world that are starving under 1200 calories a day and that number climbing some incremental amount that's an incremental 300 400 million people that didn't need to starve and that's a condition we're now going to be facing and so people like hey yeah people are still eating you know there's still food around the world we don't pay much attention to these third world countries we don't pay much attention to these underdeveloped nations because we don't have press coverage there and and when people are on the streets and unable to eat it doesn't seem to make everyday mainstream media coverage but it is happening and statistically it is a massive problem yeah we're doing we're doing a great job of covering kanye and kim but yeah we maybe get some reporters to to cover the people we've covered and i appreciate you guys giving me a chance to talk about it because i think it's super important so yeah i mean you know i think when this show is at its best i think we're highlighting things that other people are ignoring i just want to say on this ukraine situation and this applies to this episode as well as all the previous ones i don't want to be right about this issue just like i'm sure freeberg doesn't want to be right about famine coming true we don't want these things to happen okay if i could choose an outcome right now i would say be great if the russian army collapsed because of its morale problem tucked its tail between its legs went back to moscow and then the ukrainians had the good sense to respect the rights of the russian speakers living in the donbass and crimea and this whole thing basically tamped down and basically was over okay but look i think there's an equal and opposite chance that that doesn't happen that certainly could happen okay but i think there's an equal and opposite chance that instead what happens is that we climb the escalatory ladder that putin i think we are backing him into a corner everybody says that he cannot survive the loss of this war and yet we're not willing to give him an off-ramp so what choice does he have but to escalate so what does that mean it could mean a full mobilization of that country it could mean they resort they if they can't achieve their aims by conventional weapons maybe they resort to unconventional weapons we don't know this seems like a highly volatile risky situation and i just think that you know we the united states of america need to be thinking very clearly about what is in our interest because all i see is a identification we're so interested in helping and identifying with ukrainians that we've lost sight of an american interest that's separate and independent of ukraine's desire for self-determination i can understand and respect their nationalism and their patriotism but we are a different nation we better think really carefully about our interests here i i yeah and i think david sometimes you're misinterpreted as this is a partisan issue for you you're a duff you're david the dove david not a hawk you want peace listen i believe that if america is going to risk war with a nuclear armed power there better be a vital interest at stake otherwise we should find every diplomatic off-ramp we can so do you feel uh optimistic about our ability to navigate chamath the ukraine situation uh the war in ukraine famine supply disruption energy do you think we'll get through all this are you optimistic i think that rates are going to go somewhere between four and a half to five percent i think stan drucker miller is right um and i've said this i i don't know i now at nauseam so i'll just keep saying it but i think everybody has consistently been wrong and they have wanted inflation to be a transitory phenomenon that goes away and they've been consistently wrong even in our group chat we see these forecasts they've been utterly consistently wrong so rates are going to go higher than people expect it'll stay around longer than people want this will have an impact to the economy uh that that impact in 2024 2025 will not be that great so that's one thing if you want to focus on ukraine for a second there's something that i think we should focus on which i read this interesting article about russian mothers and you know in the 1980s when russia was at war with afghanistan there were these uh bodies that were sent home to russia and these mothers got very very upset and they protested and then um in uh you know 2000 early 2000s i think there was um there was a nuclear submarine that basically sank got shot and sank and then russian mothers protested in the chechen war they are a group of individuals in russia that have enormous organizing power it turns out and they um you know they they really can tell um what the real temperature is on the ground what putin has done so far is that he's largely recruited people from you know the spartan communities inside of central russia and used third-party contractors so he's minimized the risk of the real cohort of the russian population who will really stand you know fervently against what's going on so until you see that happening those guys have a long way to go and i think that this thing is going to drag on for a really long time so it's a paid army therefore it's obscuring the impact on actual citizens in russia it's half paid but the other half are from places where their organizing power is limited and i think that that was putin's you know calculation seeing what has happened before again sort of like the tip of the spear these russian mothers and we're not seeing that so um that means that the ability for him to manage perception inside of russia is pretty definitely pretty um greater than people expected yeah greater than people expected so this is going to go on for as long uh for much longer than people think so uh i would just prepare for this inevitable outcome and just kind of you know manage another year of slogging it through a choppy waters might be one way to look at this and i think that's a very good way i think we're in a very volley choppy market for the foreseeable future yeah and that therein lies some opportunities um and also maybe some discipline in various markets one thing to just keep in mind where most people feel these rate hikes is in the 30-year fixed mortgage right this is where most americans are going to feel it and if you look at the chart you know like this is a big jump up from our absolutely free money environment that most americans were feeling uh doing you know um you know what what do they call it when you take out equity on your mortgage like a second mortgage or a credit line credit line yeah most people have credit yeah people were you know experiencing a lot of free money and upgrading their kitchens and taking money out of their homes yada yada but when you look at it historically uh you know even at six percent or even if it goes to seven percent for mortgages um it's a lot less than we our parents experienced and we experienced for the first half of our adult lives so i think it's surmountable and this number you don't think is going to get up to above 10 right the 30 year fixed you don't see that happening so i think it's manageable which is going to be choppy all right listen sax didn't get to promote it but he has a wonderful film at the toronto toronto film festival about dolly and he is doing an awesome dolly experience with the ai that paints pictures and so we're just going to insert into the end of the program the beautiful work he's doing there and his dolly film is supposed to be excellent it's the second film david is producing after thank you for smoking so congratulations to our own little scorsese uh for the sultan of science the dictator and uh the david the dove i'm the world's greatest moderator jason calacanis and we'll see you next time bye bye love you guys bye-bye all right so i'm at the dali land exhibit here at the saint regis the st regis hotel was a very important hotel in dali's life he actually lived in the penthouse of the same regions of new york and the st regis hotel has very graciously agreed to host this exhibition for us and this exhibition is it's basically a rendering of uh dolly studio or what dolly studio might have looked like and those works of art are actually generated by gpt-3 the so-called dial e engine so thanks to the open ai team and sam altman for giving us access to doll e d-a-l-l-e and so fans can just come here and they can use these tablets to enter you know what art they want to create they can just enter terms and the you know the engine will spit out art that is made not obviously by salvador dali but it's in the style of salvador dali so i thought it's a very cool way to commemorate the film we are premiering at the toronto international film festival this weekend this is an independent movie i've had in development for something like over a decade and uh the great actor academy award-winning actor ben kingsley plays dolly and gives a phenomenal performance so we're excited to premiere this movie show it to the world for the first time this weekend all right thanks for watching bye let your [Music] and they've just gone crazy with it [Music] besties [Music] your feet we need to get mercy's [Music]








I'm in a very Daniel Plainview mood this week the there will be I have a competition in me I don't want to see other people succeed that's right best scene ever you are the furthest from that character like that is not your spirit animal oh There Will Be Blood that guy Daniel Day-Lewis is nothing to do with you I've watched it about 100 times incredible you must be so stormy and roiled on the inside oh my gosh I mean like did you not see my roast at Sax's birthday it's just did I not see it I lived it it was the most off-color disgusting egregious mean diatribe I've ever heard my Lord I have a competition in me I don't like to see others succeed I can't stand that Jake house [Laughter] [Music] [Music] I guess everybody wants to know chamoth you've wound down two spacks thank you for doing this for uh ipof specifically because people are replying to me every day asking what are you going to spack but IPO D and F the money has been returned to investors no it's going to be returned going to be returned to investors thank you and Bill Ackman uh of course he wound down his spack returning 4 billion there's over 500 specs out there looking for deals uh tell us why this decision look I've raised tense back six six in technology and foreign biotechnology and I've done uh six deals two in Tech and two in biotech [Music] so the the the reason to shut it down is pretty straightforward it's like you know when we launched these things the stock market was in a much different place than it is today and so over the last two years it looking at deals um it's gotten harder and harder to find a good risk reward now why is that well the thing with this pack is you do a deal today but it doesn't usually close for six or seven months in the future and so you have to do a deal where you have a really good sense that in six or seven months when the deal is comes to close that the price will be the same or even higher than what it is today and if it isn't all of the investors that you've brought along in this back have a right to redeem which is to say they file a notice that says you can complete the deal but I want my money back and what they get back is the initial ten dollars that they use to buy the stock in the first place because when we sold when we started this back we sold stock at ten dollars and so from my perspective I was looking at this and I'm like you know this is a super volatile ugly point in the market this last year has been really problematic I and I and I kind of said this last November and Nick we can we can play the clip after and we can come back to it but basically my decision was that at this point to do a deal would probably you know put a lot of capital at risk and in all of these deals I'm typically investing a hundred million dollars at least in each of them and so I couldn't justify that I couldn't see a good risk reward and I thought the right thing to do the responsible thing to do was just to wind these things down you know I'll I'll lose I don't know 10 15 20 million bucks for having set these things up but we give everybody their money back that ten dollars and I think that's actually better over the next five or six months than what it'll otherwise do if you're invested in the market now that's a belief that I have but hopefully when people get the ten dollars back in the next few weeks if they want they can go and put that money back in the market and hopefully they'll do well but uh you know from my perspective the risk reward was not good is part of the issue the inventory that's available of great companies as well that's one of the things I heard speculated on CNBC it's hard to convince a private company to go public here's my experience you know when I when I was talking to all of these CEOs of these Silicon Valley companies initially there was a lot of misunderstanding about what spax were and I think we were able to dispel that because we had some really successful transactions then there was a lot of interest in being a part of it in this phase we were suffering from two very important things one was that valuations were just completely up in the air people had a huge question mark on late stage valuations because we would come in we would do the work and we would say the company is worth X and that number typically was 50 or 60 percent lower than their last private valuation and so when it came time for us to negotiate you know doing the deal even if the founder was roughly on board the rest of the board was not because a lot of them would have seen some pretty meaningful markdowns in their private assets and when the company had enough money to kind of like you know at least stay private for another year or so without having to raise money on balance those investors felt it was more prudent for them to not take the mark and to not take the deal at such a lower discount so that was a big issue that we ran into because every time we would price a deal again we're trying to create a margin of safety for us and our investors again because it's going to take six to nine months to close a deal and so ideally you want continuation indigestion and then sorry the second thing was just volatility so when you see volatility in the public markets you know for a CEO and I can understand this it's much easier to go public in a point where the markets are generally going in One Direction because it gives them the confidence to be able to learn the ropes because it is a complicated process being public and when you introduce tremendous market-based volatility independent of your company I think a lot of CEOs and CFOs and IR people were a little nervous yeah why take the risk and that was this that was the second piece but by in a way the first one was valuation we could not find market clearing prices make sense for assets and by the way and I'll talk about one company in specific which just this week had a pretty public blow up around this whole issue and look I've been pretty clear about this since November the marginal trade should have been to be trimming risk and Nick maybe you can play the clip because I really want to make sure that it's it's very clear and on the record what I said almost an entire year ago let me put crypto in the context of the markets and where we are today at the end of the week after you know Q3 earnings in November of of 2021. we have the stock market at Absolute all-time highs ripping we have crypto and absolute all-time highs ripping we have the art markets I don't know if you guys saw Phillips and Christie's and Sotheby's this past week at Absolute all-time highs sold another people for 25 million we have inflation at a 30-year High we have 10-year break-evens at a 25-year High we have you know one point somewhat trillion dollars that we just approved last week and we're still horse trading on another three you know 1.8 trillion dollars of stimulus that we're going to put in and I think the the most important thing which is the two most important founders of Our Generation the two smartest people who have really consistently won Elon Musk and Jeff Bezos have collectively sold more than 11 billion dollars of their Holdings this year alone and if you can't take all of that and decide for yourself what's right for you and your family you're doing yourself a disservice I think it's important for me to never sort of like you know be forced to tell folks whether I'm buying or selling although I'm willing to do it in moments where I think it's important but I think it's really important to understand the context and so I think like these folks that like think derisively about individuals who are managing risk I think it's really naive and I think it's it creates a lot of missed opportunity for them as well if the smartest people in the world are now selling their core Holdings that they told you they would never sell and you are not reconsidering your position on things you're either much smarter than them or you're being really really Reckless the reason I I said all of those things was because I was getting really worried about where we were um and then and then I think on the heels of that I published a tweet and I and I said I'm starting to sell you know and I sold like a hundred million dollars of Sofi but then I was a systematic seller um through the end of last year and and through this year to try to manage my own liquidity because it changed profoundly as I saw what was happening in the markets so you know I think that it's just an important thing to call out that um things don't always go up and uh you have to pay attention to a mosaic of information and you have to do the work yourself because you know your situation is unique to you nobody else understands it and so you can't Outsource that decision to somebody else obviously you can use it as a guide you know it's fair to say you know when the 13 apps have important hedge funds come out do I read them of course because I'm trying to figure out you know what don't I know what may I be missing maybe there's a great company in there that I that I should be taking a look at so you know I'm not dissimilar to everybody else in that I use other people that I look up to or respect as a leading indicator of what to buy but I still take responsibility for my own decisions and I manage my liquidity as best as I can based on my conditions and those are always changing and so I think this is just a good reminder that everybody else has to do the same so chamoth what do you think happens to the remaining 500 every SPAC sponsor friend of mine that I know is not seeking targets anymore they're all expecting to wind up and return Capital how many of the 500 you think will actually find a Target and how many do you think all of remaining specs how many of them will um wind up and return capital I mean I I think that there's still some really good deals to do they're not necessarily in Tech per se so you know I think you did a really great deal in ag Tech I think that that's that's really interesting so time will tell how that does I think there's some really interesting deals and energy in fact we spent a lot of time actually pivoting and spending time and energy looking at you know everything from you know uh producers of nat gas and oil to you know folks that were building terminals to LNG facilities and the but it's just a very different return profile than what we were used to so I think if you can understand some of these other markets and you can underwrite to a different rate of return some decent deals will get done the overwhelming majority of the text backs I think probably will just wind up some folks will be really focused on trying to uh you know monetize their founder promote so they'll do any kind of deal the problem as you see is even whether you do a good deal or a bad deal with the kind of volatility we're seeing in the market the likelihood is that it's going to trade down pretty significantly so I think most will not find a home I think some will find some really interesting Targets in areas like energy I think are really interesting agriculture like what you did Freeburg I think is really interesting deal and then you know what it'll be an opportunity for us to retool this back I don't think it's going to go away I think that it is a useful tool in a toolbox of many tools so there's IPOs there's direct listings there are specs there's obviously private fundraising there's convertible there's structured deals so it is a tool and I think when used properly it can be really helpful you know for the companies that we work with uh it would have been impossible for them to raise the quantums of capital that they did primary capital from sophisticated hedge funds and mutual funds you know we raised billions and billions of dollars for companies like Sofi and Open Door and I think that that's going to go a long way for them to achieve their goals so I think it's going to be a good tool but we're going to go through a washout of most of these folks who are not going to be able to successfully find Targets sax when we look at private companies especially the late stage ones you and I are involved in a number of them they're doing riffs they've got headwinds and their valuations are underwater in many cases how are they thinking about the public market Windows spax Direct listings or just a traditional IPO I don't know that they are thinking about it I just think I think like going public seems like a fantasy at this point I think the whole public markets exit idea is Frozen for two years two years I think that's yeah I think that's probably what people are thinking what are these late stage companies that raised Mega rounds doing to work out valuation issues because as chamoth just pointed out with spax one of the problems was clearing Market the late stage investors who came in maybe they you know don't want to accept the haircut in valuation even if they have productive probably not enough I mean what they're doing is using their War chest to grow into their valuations which is the Smart strategy and if they're really smart they'll be slashing their burn while they do that but yeah it's no different than what we've talked about before I think the the main significance of this past week is that you had the FED meeting it raised another 75 basis points there's no surprise to that that was predicted what was new was the forecast they were now saying that they expect to raise another one and a half percent just two months ago at the last meeting they were saying 75 at this meeting plus 50 after that now they're saying 150 after this so you know in just two months they've they've they're now revised their forecasts for an extra 100 basis points of rate increases why because inflation is worse than they thought so things are worse than we thought two months ago the the last inflation print didn't get better as fast as people wanted we talked about that last week now the FED is revising its forecast the trajectory is bad and getting worse and you finally had pal kind of throw in the towel on his rhetoric around soft Landing I mean first it was well we can raise rates and we won't have a recession then it was we might have like a mild recession now he's basically saying hard Landing if you if you read these fomc comments so I think this was a really bad week for the economy and you're seeing it in the markets this week I mean we are retracing almost within five percent of the June lows with the growth stocks being the ones that are hardest hit by the way speaking of growth stocks have you guys been following this um trials and tribulations with baijus which is like the one of the largest valued private companies but it's a private Indian edtech company essentially I think like you know there was this delayed audit and Deloitte couldn't certify a bunch of things and then finally they were able to come up with a report that essentially showed instead of like breaking even or making money they lost almost 600 million dollars this year and that a lot of the revenue that they were booking were actually loans to millions of uh Indian families who had basically zero probability of paying them back so a lot of the revenue was not real as well and this is like a who's who of investors it's everybody from you know Sequoia tiger UBS BlackRock uh Chan Zuckerberg it's incredible I think when the tide goes out we find out right and this is what's happening the Tide's out and you're going to find all the weakness in the system it's all going to get flushed I think this is a bit of an outlier obviously like I don't think that you know all these companies that are worth tens of billions of dollars are running so close to the Sun but it just goes to show you that you know how how does how does this happen like how uh how do you not get it you saw this on the seed uh stage uh in series a we would ask for a data room the person would say you're the only investor asking for it and you're putting in you know 10 of the round these other people aren't even asking for it we said okay can we still see the data room and turned out there wasn't one people were just making bets they were making blind bets they were betting without even looking at their cards or thinking about the other people's cards but this goes back to what Friedberg was saying before you know I think I think there's a there's a a sliver of the retail investor base that is not dissimilar to a sliver of the private equity and hedge fund and Venture Capital space which is these folks are not willing to do the work I think most people are and most people want to come to their own conclusions but some people want to just take the easy momentum driven decision and they typically always get punished over time there's this concept of adverse selection which is that the negative actors will find them will seek them out and it will be a match and so they'll ultimately get adversely selected into the deals that blow them up so the bad deals what you're saying is the bad deals would find the bad investors who don't do the work and then they spiral and crash together that's a really brilliant observation yeah yeah I think I think the other that's what I'm hearing I think the other thing is like you you have the situation where if it wasn't that it's folks Outsourcing their diligence to the person that did the round before it totally you know oh Silver Lake did it bro same problem tiger did it okay these guys are very sophisticated investors I don't need to do the work it turned out you did because you know it's it was a very Cavalier way of recognizing revenue and there was a specific Playbook here too that I don't know if you saw this ax in the early stage where people would get their friends to invest in the company or some you know High net worth individuals and then you look at the deal and the valuation didn't make sense and then you say well we would always ask how much money is each person putting in and we like well they're normal bet size in the seat is 750 or 1.5 million but they're putting 50k into this or 100K what's going on here and it was oh they're friends with them they worked at a previous company together they were in the same they went to the same college and so people were using social proof but manipulating it to get some other sucker at the table to pay full price and not due diligence really strange Behavior I um I was in Singapore this week there was a I I had a great meeting with this young investor really Dynamic guy and he was telling me about a company in Indonesia that he didn't invest in but it turned out that the in that this founder was literally running two parallel sets of accounting systems and so he was you know showing a business and fundraising from this set but the the real books were over here and it looked a completely different system and it was basically like a Ponzi scheme and you know he was telling me it's like impossible to root these things out so what he said he relies on is like you have to have a network when you're doing these Frontier country deals where you know he says I need to find at least 10 people that know this person so that there is sort of like a moral social proof and moral diligence that happens because that person will never try to commit something that egregious in the face of all of their friends and so you know that's a mechanism of filtering this stuff out but I thought that was a really interesting way of of Designing a diligence process um in at least in a frontier Market here I don't think you have that much time to do these really you know fast-paced deals and the social proof matters less because you theoretically um you know are looking for signals of traction but there has to be a better systematic way of getting this diligence done because these things should be pretty obviously well before it's a multi-deca billion dollar company sax last year when people were moving really fast saying they don't have time for diligence you're going to lose the deal yada yada how did you approach diligence during those Peak periods and did you have those experiences where people were trying to push you to close without talking to customers or looking at bank statements yada yada no we wouldn't play that game because we always run SAS metrics that's always the starting point for us but you know most SAS companies they have SAS metrics I mean they it's so standardized that it would be such a red flag if they didn't yeah I think it might be companies that are you know have unusual business models or maybe they would say something like that but no we could never do a SAS investment without SAS metrics all right well this is a good segue because right now U.S Venture capitalists are sitting on 290 billion dollars in dry powder we had talked about this last year how much dry powder was there the market is obviously collapsed but here's a chart uh from our friends over at pitchbook it's just extraordinary how much has built up and how much has been raised usvc funds raised 121 billion dollars during the first half of this year 2022 so LPS uh still have an appetite which kind of makes sense that investing into the down market for private companies means you're going to get better deals uh and you have a 10-year Horizon usvc's raised 139 billion in all of 2021 so if you put those two numbers together yeah you're looking at 260 billion dollars in the last 18 months and this is all record numbers being put up on the board what does it say for private companies sex I um dispute this analysis a little bit um I think there's a couple of things going on that need to be taken into consideration first of all new funds don't get announced till after the process completes and then you know it may even be some time after that when the VC firm feels like they want to make the announcement you can't announce a fund until the process is completely over you get subject to all sorts of additional SEC rules so you know these funds might be announced in 2022 but they may have actually been raised in 2021 so that I think is a really important Point moreover a lot of the funds may have already deployed Capital before the crash so there was that I think remarkable story that we talked about months ago in TechCrunch on how the latest tiger fund which wasn't even announced till March or April of 2022 but have already been two-thirds deployed by the time they even announced it and so that was pretty stunning so I I think that we don't really have a great sense of how much of this so-called dry powder has already been deployed how much of it was really raised before the crash it is true that LP relationships with VC firms that have done well are sticky and good LPS stick with their Partners during a downturn so look I mean the VC world's not going on a business or anything like that but I would tend to think that this is an overly optimistic overly Rosy scenario do VCS have new funds that they're going to be ready to deploy in great companies yes but does this mean it's going to be easy no I think that the bar has gone up valuations have gone down Founders looking at this tweet storm I would not get lulled into a false sense of security yeah I I agree with just to explain that there's probably a six-month lag on when these funds are announced the reason is there's 506 B and C designations most people raise under five or six B which means you cannot even say that you're fundraising therefore pitchbook can never have that data so there's a lag and people were deploying at a very high velocity therefore this number could be off 35 well if people were deploying at a pace where they thought they were going to go back for a new fund every year which is what it was looking like in 2020 2021. you know if that six month period might mean you've deployed half the fund right so um but look if if you just go back to a two and a half or three year pace of deployment and before in 2021 we're at a one-year pace of deployment divide the availability of capital by two-thirds I mean you know only one-third as much will be deployed in any given year that's a you know significant reduction so um yeah I think Founders should just be aware that the Market's going to be a lot tighter and I think given what we're seeing in the public markets this week it doesn't look to me like it's gonna get any better right it looks to me like we're headed for I mean I called a double dip recession I think a couple of months ago that's exactly what it's looking like in fact the FED basically said as much the FED said that would be just marginally positive next quarter so would bounce back to slightly positive growth on a real basis but then you know expect it to go negative again and you know recession once all these interest rates kick in and by the way I mean Kudos set your mouth for basically calling that you know when the FED just a couple months ago was saying that so-called neutral would be three to three and a half percent jamath was saying no it's gonna be four and a half five percent plus now the FED just in two months is revised to saying that neutral is 4.6 or something like that and um and they don't think there's going to be any rate reductions in 2023 so this is not looking good how much of the issue here is we don't the the data that we're seeing the ground truth we're seeing as you would often say uh might be very different than like the reports that are coming out people are talking about inflation from you know 60 days ago job reports that are 30 days old 60 days old we don't really have live data it seems like our government doesn't use live data when they make these decisions is that unfortunately well they unfortunately don't have access to it really you know they are they have empirical sampling but to say that you know the the US economy is automated in a way where you know they can sit in front of some dashboard and you know see in real time what the true on the ground data is is that really accurate unfortunately maybe there's a Manhattan Project type you know effort to do that at some point for the United States but it's not now um I'll give you uh a bit of bad news and a bit of good news uh and this is just me kind of you know again looking at the Mosaic and and kind of judging where we are today the bad news is I think that it's going to be a really tough sticky time for the U.S consumer probably over the next 18 months and so I tend to think that you know through the course of this year and through 2023 and possibly even a little bit of 24 it's going to be a grind unemployment will go back up inflation will be sticky real earnings will shrink consumption will ebb and earnings will not be that great but the Silver Lining is I think that we are starting a bottoming process for the equity markets and I think that by the end of this year or the early part of next year most of that will be done and the reason is that you know the equity markets I think do a reasonable job of one looking at the bond market and then two looking six to nine months into the future and pricing in that future today and so by the end of this year beginning of next year I think that we will have kind of bottomed and we'll start to build the base the thing to remind us though is that you know let's just say a stock goes down 20 50 percent even if it rallies 50 from there it's still 25 off from where yeah people don't understand that and people don't understand that they climb back up the mountain so I would just you know um tell people that you know I think that David is right I think that it's gonna uh we're gonna feel this for a while um it's this inflation as I've said for a long time is going to be sticky and persistent I think you're going to see Fed funds at or breaching five percent and uh but I think that in terms of you know risk assets will bottom out by the end of this year beginning of next year what are your thoughts you think we're in the process of bottoming them out and it's going to be a year of this kind of schlog through the muck and what signs are you looking for that maybe we're getting out of it or turning a corner I mean Larry Summers had some good tweets this week the weird you know the weird thing is Larry Summers seems to be like almost trying to make the case and make certain points because he's not being listened to I mean uh it's it's it's so ironic and sad to watch uh because he's such a thoughtful Economist and has such a a great point of view and experience that uh to leverage here and clearly you know he was banging the drums last year and no one was listening and then he got public about it and now he's more repeatedly public about things the point that he's made which I think plays into the the political cycle question which is where the tension arises is in order to resolve ultimately uh the inflation problem you're gonna have to see a significant increment in unemployment and and so when you raise interest rates uh you know generally purchasing goes down demand goes down Revenue goes down layoffs happen uh some businesses go bankrupt Etc so then there's this trickle in the economy of of less people being employed and when that happens It ultimately drives a political response which is hey we're losing our jobs people start asking their representatives do something about this in Congress and then these programs and these things get passed which themselves are inflationary and that's why it's very hard to predict ultimately when and how this all gets resolved because we seem to have an Administration that is enacting and um embracing uh inflationary policies to support what they consider to be economic growth and improved employment conditions in this country and the unfortunate effect of many of those policies is inflation and then it forces this difficult Central Bank decision-making cycle and so there's attention right now that doesn't seem to have a clear path to resolution that is why it's very hard to to have a clear prediction here we also have a very significant question overhanging all of these markets related to the price of energy which is a key input to so many Industries and and drives cost as well as food and also the military conflict in Eastern Europe and you know we've and and then there's in the financial markets this big overhand question on what's going to happen with various countries that make default on their debt as well as China's real estate bubble bursting so I made this point I think a few episodes ago but there's no easy answer that I can just say deterministically here's my prediction of what's going to happen as chamoth uses the term I think it's a great term there's this Mosaic of things that are under under consideration right now and there's a tension between them all uh and um and that's what makes it difficult I'm sorry I didn't really answer the question but that's that's kind of how I think a lot of there's a lot of geopolitical risk I mean we're kind of you know ignoring what happened this week where Putin basically is putting nukes back on the table now I'm not saying that's likely to happen but I don't know how again I don't know how this Market gets a lot better with the risk of War 3 handing over our heads I mean who wants to enter the market with that and by the way the nukes just just to be clear you know um you can hear certain military commanders speaking publicly about this uh but in the Russian military playbooks uh there is specifically defined actions that can lead to tactical nuclear weapon use in the field there's no direct indication that these things are going to be used right away but the as as Sac says there's like this weird like turning up the volume happening on hey maybe we're getting closer to a point where if Putin is having tactical failure in this conflict there's more Weaponry you can use that has greater impact and unfortunately there are these tactical nukes in his Arsenal and you know a guy that maybe has a certain psychology that has as our friends have said is back against the wall he's not a person who in his career uh or in his history has ever acquiesced to defeat Alex carp was on CNBC he was really really sharp and concise about this which is that you know in the west When leaders fail in their objectives they just get elected out and somebody else takes their place yeah but for somebody like Putin there is nobody to take his place because it's a very zero-sum situation and so his actions will as a result also be Zero Sum and I think folks he's never acquiesced in his life and yeah yeah we've never we've never really kind of like we don't understand well what zero-sum decision making looks like when it comes to stuff like this he needs the Golden Bridge right give him the goal he does yeah but I'll just say two things one is that I think it's been made pretty clear that both India and China will not stand beside Russia if they do something like this and I think that that is important because they still are the two biggest purchasers of of Russian oil and so I think that matters a lot because you're talking about a lot of Revenue that would that would go away and then the second is I mentioned this last week and this may sound dumb to some of you but um don't sleep on the Russian mothers and what happened oh you're 100 right on that thing what happened this week was really interesting which is that he calls up all these reservists these reservists are not coming from the major cities of Russia you're starting to see protests you're starting to see young people saying I don't want to do this yeah and who's that really activating it's activating the moms yep you know to basically go fight and I actually think David's right oh sorry sorry go ahead the question I have for you is do you think that I know you don't agree with this but do you think the strategy is to back him into a corner um and then have this like rhetoric Spike to then force a resolution I know it's a danger strategy it's a crazy chess move but do you think that's actually what the West is thinking I see no evidence that we have any uh intentions of seeking a diplomatic off-ramp I see no evidence that they're looking for to give him a golden bridge like you said then do you think they're trying to break him and have regime I think Biden stated at the policy which is this man cannot remain in power I think he blurted out the truth of his policy this is a regime change policy that's what they're going for they are backing me into a corner I thought that you were right this whole time which is we're going to build a golden bridge we're going to find a way to egress this guy and I'm now sort of in the David Camp which is I think that the the stated strategy of the Western Alliance is essentially to cause him to make such a categorically catastrophic mistake so as to become a pariah so as to either get overthrown or you know something so I I do think that on balance the risk is now for things to escalate maybe not in quantity and I'll use this word in the wrong way but you know quote unquote like the intensity of of it so um I I think David's right it's a lot of pressure to the economy and to to high risk assets there's a high-risk strategy we got a good thing going over here I don't see the need for all this risk so look and part of the risk would be the reward what would you see the reward if Putin was removed oh my Lord well it depends who replaces him what if we get a hardliner you gotta remember Putin's taking out all the liberal reformers all that's left are hard so I know I know there's moms protesting in the streets but he's also under intense pressure from his his right wing you know he's got Hawks on his side who basically have been criticizing him for making this a special limited Military operation instead of a war they're like why did you try to do this with 200 000 troops we should have gone into heavy with a million is that right there's criticism there's a New York Times article about this he has his own you know military hardliners in his Security State his Hawks so so he's not just under pressure from peacenix who are protesting in the streets he's also under pressure from hardliners in his own government who think he's been too soft yeah it's a challenging situation he said he said he's going to be 70 years old how many years does he have left we just need to contain him for a decade was on our side I don't contain him for one more decade that's my best idea contain him for a decade the thing I have the most trouble with is if you look at the media portrayal of this so I said last week when you know we had this successful counter-offensive that maybe we'll get what we want which is Russian moral collapses they just tuck their tail between their legs and go back to Moscow or maybe you know the Russians really do see this war as existential for them Putin sees it as existential for himself and he escalates well what happened this week we went up or wrong on the escalatory ladder basically Putin Drew down 300 000 more troops and he's basically indicated his his willingness to use tackle nukes and he's basically said I'm not bluffing so now what is the reaction in the American Press he must be bluffing I mean that basically is the reaction and look I don't know how you know that you know in poker what you in poker what do we do when someone might be we put them on a range it's called a hand range right yes you can't possibly know exactly what they're going to do or what carts are holding so you put them on a range of possible hands and then you evaluate the story in light of their past actions what do they do before the Flop on the Flop and you you basically come to a assessment of what is likely based on their story now take Putin's story like Friedberg said he's never backed down in his life from anything um he has said this war is existential you know he basically threatened to invade and so he did I mean like I don't know how you can immediately jump to the conclusion this is just a bluff maybe it is but well it could still be it could still be a bluff but then to your point the range of outcomes does include uh shoving on the river moving all in I mean he's a king GB agent do you want to play the poker with a KGB agent with nukes it's right and so Jason you said throughout this guy's a Madman well exactly I mean personally I think he's more like uh ruthless mafia boss than a Madman but but let's say you're right that he is a Madman what is the story about what we're doing that makes sense if he is a Madman why would we want to basically back him into a corner like that why wouldn't we give him the the golden off ramp and by the way just on this idea that no one would ever use tactical nukes let me just give you three data points first of all we use them we drop two atomic bombs on Japan and to end World War II we could have won that war without doing it but we didn't want to lose the troops those are just they were tactical nuke size atomic bombs number two MacArthur wanted to use 20 to 30 atomic bombs to end the Korean War he had a whole plan Truman fired him he thought he basically had jumped the shark but MacArthur was the most respected and admired American in 1950 and the reason why Truman could not run for your elections because he fired MacArthur MacArthur would have used basically the equivalent of tactical nukes to win the Korean War and his plan to prevent China from reinvading from the north was to irradiate the border so completely that Chinese troops could not go through it keep in mind there wasn't as many nukes at the time so we weren't up against nine different nuclear enabled countries but we had an American Commander ahead of our military who was willing to use nukes to win a war so this idea that he wouldn't I mean we you've been willing to do that and the third example is obviously the Cuban Missile Crisis all of Kennedy's military advisors were willing to get to use nukes I mean and the best thing Kennedy did was not listen to his military advisors they were all super hawkish and Kennedy what did he do he looked for a way out he looked for a compromise he sent Bobby Kennedy to go cut a secret deal with the Russians were Kennedy agreed to pull the r Jupiter missiles out of turkey if the Russians would pull their missiles out of Cuba and then he lied to the American public about it because he didn't want to be perceived as backing down but that's the kind of you know flexibility and mental acuity that I think you would need in a nuclear Showdown to avoid a catastrophe if things do escalate to the point of a nuclear Showdown do we believe that we have leadership on the level of a Jack Kennedy or Bobby Kennedy who can basically show the flexibility and adaptability to cut a deal to basically pull us back from the brink yeah it doesn't seem like that what was bind's response it was he gave this um speech to the United Nations in response to Putin and it's more of the same as more of this as I call it the Abe Simpson speech it's old man you know yelling at the cloud I mean he's basically just yelling at a teleprompter now I think the the strategically smart play would have been to say listen Putin you said that you want the people of Ukraine to decide where these territories go okay we can hold a referendum but we want to administer by the United Nations so it'll have so it'll have some credibility behind it I mean why not throw that out there as a potential way to get diplomacy started it felt like at the end of last year you guys remember I thought like conflict was likely this year I don't think that the conditions that I was referencing have really gotten better I think they've gotten worse and that's why I think we all talk about this in a rational way meaning like how the conscious mind would you know debate the merits and and challenges and risks of having a golden bridge or continuing conflict if you look historically the U.S has often been in the middle of or at the tail end of some either recessionary cycle or inflationary cycle when conflict escalated externally Wag the Dog you're referring to I don't know if I would call it that but I think that there is a an innate human anxiety when things aren't going well you feel like you have to do something about it and you're either going to have internal conflict or external conflict as a result to try and resolve when when things are going great the economy is booming you don't enter a war you don't start a conflict with a nation when when people are happy at home when your constituents and um and you know the the unemployment rate is low and job uh wage growth is high the economy is growing are you referring to the United States or Russia in this case I'm referring to the U.S and I think you know curious if you're coming out of covid and coming out of uh the the big question marks that loomed over our economy at the end of last year around inflation uh economic growth uh interest rates and the effect and now we're in the middle of the turmoil markets are down 30 percent and in some cases 70 to 80 for high growth markets there's a there's an inevitability now that unemployment is going to rise there is an inevitability now that the economy is going to contract leadership is more likely in that scenario to find uh an outlet to find a place of conflict in this theory explain why I don't think it's a conscious decision I don't think that it's like hey let's go start a war with Russia because the economy is bad I think it's this anxiety the economy is bad and there's not a lot we can do about it and over here on the other hand there's a problem and there's something we can do about it we can build strength and we can build Integrity um and we can build support and we can get people to get behind something together and we can get something to to create a driving mechanism to achieve something big like a distraction you're saying yeah yeah and I I don't think that psychology is as simple as a distraction or a Wag the Dog or hey it's not even as simple as the military-industrial complex we'll see Revenue growth and wage growth and that'll drive the economy but I think all those things together are true and I think in in whole we're we are more likely to want to pursue conflict right now than we were even a year ago you buy any of that your mouth I think he's more right than wrong I think that when um things aren't easy you need to find sort of distractions essentially to yeah get people to focus on other things so that the core problem isn't as obvious we have in the United States I think yeah let's go create another problem that's solvable yeah I like the best I think the best way that I can describe this is I see it as institutional rot and the more that we're left to our own devices that amount of institutional Decay becomes more and more obvious our governments don't work the way that they should you know our state assemblies are basically co-opted by special interests the federal institutions we rely on to make rules are not that great enormous amounts of money get wasted every day and as more and more people become aware of these things it just the trend is just so bad you know Civic engagement goes down everything just gets worse and so when you take that and then on top of that you sit it on a on a poor economy that is a real Powder Keg I think and so folks like to I think if you're a politician it's easier to kind of go and point to Taiwan and say you know we're going to go and defend these folks if there's a war point to Russia and say this point to all these other things it's a whether it's implicit as free Brook says or it's more explicit of a strategy I don't know but the underlying cause is the same which is that if the foundation of the house is not strong and you're not sure what to do to fix it or you don't have the courage to fix it the better strategic alternative is to distract and talk about your neighbor's house coming out of contribute to Afghanistan early 2009 when he took office we entered the Persian Gulf with the Gulf War in 1991 coming out of the Great Recession or the the the the the mild recession 1990 to 1991 2000 2001.com crash uh we um uh you know we obviously entered um entered Iraq yeah well that was post nine post nine eleven that's 9 11 but it was almost no choice but it was also in the midst of a recession and coming out of the game but that was cool that one was clearly a reaction he stacked You by this do you think this is a Wag the Dog or and by the way you can do the same you can do the same analysis on the time we entered the Korean War and the time we entered the Vietnam War they were both tied to recessions and um and so I don't know I don't know how explicit this this action and behavior is but I I just think there's some data to it there was a study that just came out by uh Tufts University on American Military interventions throughout American history and what they found was that we had the least in the period before the Cold War then the second most was from the during the Cold War but actually the most hyperactive period of American Military interventions was post-cold war so since the unipolar moment even though it's been the safest period for America right we haven't explained unipolar for people don't know but there's only one great power in the system uh before during the Cold War it was a bipolar World whereas basically America versus the Soviet Union and the obviously had the um you know NATO and the Western Alliance the so-called free world and then receive check and balance you have the Warsaw Pact on on the other now we have unipolar moving to Bible well it was it was yeah we were unipolar for a couple of decades but now we're moving towards multipolar or at least bipolar with China yeah multi-polar would be maybe including India maybe including India Brazil China in the future in the future but but so the the irony is that the safer America has become the more we've gotten militarily involved overseas and part of that is because there's no great power in the system to oppose us um but it's also gotten us in a lot of trouble I mean all of these wars in the Middle East that cost us something like eight trillion dollars another survey caused a war study uh the direct number of deaths from these wars from the war on terror was over a million lives lost eight trillion dollars and that doesn't even include the excess mortality caused by the destruction of infrastructure wastewater treatment you know fam and all that kind of stuff which could be as high as five million you know the crazy part about that sex that 8 trillion dollars if we had deployed that in energy Independence solar nuclear whatever the whole reason to be in the Middle East was oil and energy and we could have just deployed that to be energy independent in the west and not had all of this pain not the whole I mean not the whole reason I think the reason to be in Afghanistan was to kill someone with the exception of 9 11 and maybe we could have done that without taking over the whole country and gone on this 20-yard that could have been very strategic I mean actually that was really proven when well first of all we did Kill we did kill Bin Laden in Pakistan with just a raid by the seals you know infiltration so we didn't need to occupy that country and then more recently we finally got so we're here in Afghanistan using a drone after we left the country so what the hell do we need to be there for 20 years when we could kill these guys using drones and you know a helicopter team yeah this is where we needed to have an adversary who could check our power it would have been healthier as I guess the premise to the tough study right but but look I think to freeburg's point is it do we become more militaristic when things aren't going well at home I I don't know but it feels to me like just in general over the last 30 years we've become hyper militaristic it's the use of military force is typically the first option and we resort to it too quickly and we don't use diplomacy enough and you can see that in just the number of lives lost the failure of these wars and the enormous deficit we're running as you know sex I can't stand Trump the two things he got right no Wars and he was the dictator Whisperer that guy knew how to talk to a dictator you know whether it was North Korea China Russia he just knew how to bond with them it was like a superpower for him okay we have three directions that keeps us out of War it's great you know I mean it's literally his only saving grace all right gentlemen we have to talk about what's going on in Iran we have to talk about the Wall Street editorial boards California talk about talk about Newsome because there's a bunch of energy stuff happening in the United States which I think is important all right so the Wall Street Journal editorial board uh which obviously has a side wrote an op-ed on California's grid issues some of the quotes from the op-ed California can barely keep the lights on as its climate policies uh bite the electric grid but Gavin Newsom is undaunted on Friday he signed no fewer than 40 new climate bills to amp up California's green Energy stock shock experiment even as gasoline prices Nationwide have fallen to an average of 368 a gallon Californians are still paying 5 45 a gallon California's electric rates are already more than double those in neighboring states this is what happens when politicians try to eliminate fossil fuels with a Molotov cocktail of Regulation taxes and renewable mandates and subsidies the coda to this is um I'll send it to you Nick but can you please play the clip as well of Rashida claib trying to skewer Jamie Diamond where he just destroys her God that's embarrassing that was embarrassing I mean we should play it I mean it's she made no sense Nick can you play that clip please you have all committed as you all know to transition the emissions from lending and investment activity to line with Pathways to Net Zero in 2050. do you know what the international energy energy agency has said is required to meet our goal Global 2015 Federal targets of limiting Global temperature rise to 2.7 degrees Fahrenheit or 1.5 degrees Celsius so no new fossil fuel production starting today that's so that's like zero so I would like to ask all of you and go down the list because again you all are agreed to doing this please answer with a simple yes or no does your bank have a policy against funding new oil and gas products Mr Diamond absolutely not and that would be the road to hell for America yeah [Applause] yeah bake out their account and close their account the fact that you're not even there to help relieve many of the folks that are in debt extreme debt because of student loan debt and you're out there criticizing it my favorite was when she said cellaces that was yeah I was like okay it's just so much theatrics the Rashida Talib represents the 13th District congressional district in Michigan the the median age in that district is 35.9 years old the 2020 poverty rate is 28.2 so more than almost one in three people and uh the 2020 median household income is 37 601 so you know she represents a a group of people that you know I think at best his lower middle class and the idea that she doesn't even basically understand what would happen in her District if you actually did not have cheap LNG again just kind of speaks to the institutional kind of decay in Washington she is not the person that should be advocating for this like you know it's districts like this more than any other that don't have the money to spend on you know very expensive solar installations that cost Thirty and forty thousand dollars these are the districts that need coal coal-fired plants LNG oil to keep going to sort of minimize the impacts of inflation and so you know that was just like a grandstanding moment moving to California's hearings because these are important discussions and they've become theatrics and this is a chance to educate the public with some charts and data she's either so hungry for power that she actually doesn't care about her constituents or she's scientifically and numerically illiterate that's I think the latter is probably the issue here and so this is this is what's such a shame on the on the on the other side you know at the end at the other end of the coast in California the cost of power generation just so you guys know has fallen by 90 when you look at Renewables and that is because of a good job that the federal government did in introducing subsidies that essentially gave the the right sets of incentives for people to build this infrastructure but while the cost of generating Renewable Power has fallen by 90 to you know virtually it's on par and it's cheaper than any other form of generation your electricity costs have doubled and are probably going to double again in a state like California so you know we're catering our our utility rates by you know seven to eleven percent um every year that is unsustainable in California and what do you have you have again a different version of the same flu that Rashida Talib has which is you run forward to kind of virtue signal and to try to do all of these things you don't spend enough time to really understand what's happening on the ground and you make it impossible for people to make the decisions to actually uh be resilient for themselves at the end of the day there are tens of Utilities in America but there are a hundred million households and the only path to energy Independence is to get every single hundred million household to be resilient which means they need their own solar panels they need battery storage they need their own potable water and all of these systems are now affordable and available and now the federal government with the IRA has created the financial incentives to pull it forward so I don't know I just think like this is a hugely Stark reminder about how poorly our energy policy has been managed and if you leave it to the hands of the progressive left they will do things that don't map to what people on the ground actually need people in California most people in California cannot pay utility rates that are going to double every six and seven years just like people in the Congressional 13th District of Michigan cannot afford to pay for solar if Rashida Talib is able to get you know all these Banks to not Finance LNG colon and and other forms of hydrocarbons as a bridge fueled um 40 of these bills independently and you have to think about how many bills I mean who's reading these things what is in these things I mean each one has to be addressed individually like one of them could be to help people put solar panels on top of schools and batteries in there that could be a good bill um but there definitely needs to we have that mechanism at the federal level the IRA passed an incredible set of incentives both for the producers of these things and for the for the end companies that actually deploy them yep and so we've solved that problem you know so I I just think like it just goes to show you a ton of Regulation does not actually add and get to the solution that we want the government will not solve your problems I hate to be the bearer of bad news but they are going to make things more complicated and more expensive and the result resilience that you expect out of your utility infrastructure by the way we saw just what happened last week there was a massive fire and a massive battery installation that California installed 182 gigawatt system megawatt system could you imagine if that had actually lit on fire two weeks earlier in the middle of this crazy heat wave that we had so even even utility scale Renewables are very complicated projects to undertake look at Texas I mean people are dying there because the grid keeps going down it is much safer and more reliable if is if if every homeowner in the United States took responsibility and and used these incentives to basically become your own little virtual power plant and you will technology is there I mean getting generators for natural gases backups so we're going to have to figure out how to take the load off the grid and build resiliency into it I don't know if you guys saw in a related story all this ESG stuff is kind of coming to a head but uh Dilbert got canceled this week in like 200 newspapers did you see this what yeah how is it possible well because he's been going after ESG uh in his cartoon and so uh I'm interested in your take on this but here uh I don't know the characters in Dilbert except for Dilbert but he says uh this person who's in charge says our ESG squirrel will drop if we open a new Factory that adds CO2 to the atmosphere but we can balance that out by adding more diversity to our board and I guess the cat says how much CO2 do you plan to add and he said one nine binary board members were showing the es and the g being put together makes no sense but that that panel obviously got him canceled what what does it mean he's canceled like he was fired from National newspapers I think one of the 177 newspapers because they're all part of chains now and I guess because because of that cartoon that cartoon plus it's like a series going after the social governance part of you know environmental and pointing out he stated on his podcast that he wants to kill ESG so this whole ESG debate he's trying to further it but I guess but yeah I mean the the concept of ESG makes a ton of sets I think the problem is that it does implement this yeah this version 1.0 implementation was financialized by people that have no care about ESG at all and so all it's done is create complexity and consultants and you know studies make sense or it doesn't make sense no the words E S and G make right a lot if they have commas or periods between them I guess is the question that's fine too but my point is saying that you want you know diversity and you want sustainability and you want better governance all good all of these things are really great ideas it's just that in this first implementation it got financially perverted and so what you have are folks that are you know probably not the best positioned or should not really have an opinion about ESG opining about things that they never were given the authority to a pine on and then as a result what it's really created is the cottage industry of Consultants that can basically make you know hundreds of millions of dollars writing all of these reports and I think that that's why this implementation doesn't work so ESG today is broken and I think it's largely meaningless the concept of what people want is is a very good idea we just need a better way to implement I agree with that you can't connect these things so the we're going to put social and governance with environment it's all that's going to do is hold back the environment rights we're having all of fed beef tonight oh this is you need to try it I'll see what I can do no you have to do it you have to do exactly okay once you have to say sax commit no you cannot imagine what does a beef look like that has been only fed green olives pitted green olives I can tell you I can tell you how it looks delicious is it green it's the most delicious steak you've had in your life it's the most delicious all right I'll come for that okay it's incredible awesome it's actually gonna drive me with your driver text me your address so I know where to get you oh I love it oh this is gonna be great game on listen to this lineup me J Cal Friedberg sacks uh he's flying it this thing this is gonna chop up this game is no more flips the flips are ridiculous okay you know what now now that sax is coming I'm gonna tell him to break out the early white truffles I'm just kidding truffle pigs not not just walk to my office she looked at me when I said white truffle she's like four bestie dinner it's happening everybody oh it's happening it's happening you know what I saw was helmute the other day um on one of his heads up matches where he got in that huge fight with that guy did you guys see that and he couldn't think that's every match you just described every match he's ever this was like some heads up thing and the guy um had flopped some insane I think it was like quads or something or and helmet have had like top pair except yeah yeah yeah yeah and help me fold it on this guy it was incredible to watch the play like the read from helmuth was unbelievable he is incredible he's a freaking scene on that guy he's pretty great he's got unbelievable there's a reason he's the greatest poker player in the world he really he his reads are unbelievable do you think that what percentage of it is obviously he is an incredible player but there's another piece of this that we all see which is people play into him they want to be in a hand with him they want to bust him so in those tournaments what do you think no I think I think what's happening is at the highest level there's like all these people that have gone in This One Direction and by the way this is probably a good we could talk about Chess in the same way which is that you have these solvers right there's poker solvers and now they're they're these chess solvers and the Young Generation spends all this time training on the solvers so that they know every permutation of every move and what is what people call Game Theory optimal or GTO the problem with GTO is that you can actually be very exploitative against somebody that's actually playing perfectly because the AI is perfected around what is the rational set of decisions in every spot and so you can set people up to make a lot of really bad mistakes and I think helmuth understands that and so because he is one of like this dying breed of people that plays live he's able to just be so exploitative and these folks that are basically playing from rote memory right um what is the GTO move in every spot they end up making a bunch of mistakes and um and feeding chips into him and so I think like it's uh it's probably the same as as sort of this Magnus Carlson he kind of knew what to expect from people and the minute this get deviated into this realm where you were like how could you make that decision probably because you know the the computer AI is able to calculate make a slightly losing move now three moves later you're gonna actually be ahead it caught him off guard where he was basically like I think this guy's cheating really really crazy but I I think like if you if you have a bunch of GTO kids folks that are a little bit older that have been playing in a live situation can be hyper exploitative by the way this is a good point generally about about this gaming is that computation has played um and computers have played such an incredible role it almost becomes questionable on how much can the human really differentiate anymore uh in these uh in these games and in these systems you guys watch the the chess players on YouTube and they'll have solvers live and they'll be getting live scoring as they kind of walk through a match or uh walk by the way free bird area that's that's the same with poker you have these Huds these heads-up displays and a lot of the poker sites have basically given up they try to spot the cheating and you can it could because you have this basically layer that's helping you and it's effectively impossible because you know the these things run locally they're screen scraping locally and you just have no idea except when they make moves that are just so unpredictable from a human and could only come from a from a from a machine yeah all games maybe become obsolete because there is no real way to qualify the performance of one human against another when the AI itself or the technology or the Computing itself you know over Shadows human potential and human capability you guys may not know this story but when I met Demas the the founder of deepmind I got introduced by Teal like in 2011 or 12 so like a decade ago and I met him in London I'll never forget this at the we were having breakfast at the Conant hotel and he explained to me Deep Mind in the context of a game because at that time how they were building the first versions of the AI was perfecting how to play certain video games and I can't remember the name of the video game but it was one of the famous first person shooter games and the whole idea there was like you know if you can perfect an AI that that basically plays GTO and can win the game what you've effectively solved for is is like a layer of AI that can then solve other generalized problems I was blown away I thought this is the craziest thing I've ever heard a decade ago so it's it's pretty natural that they've taken this stuff and adapted to meet every game it's a little sad though too no don't you think yeah I mean yeah but I mean maybe there's a different model of performance for humans that really changes what the gaming is right well I don't know what it is I mean I think that these games themselves completely um uh you know the the intent of a game which is to measure one's kind of decision-making abilities gets obsoleted because the software ultimately is a better decision maker than the human so the question then is what is the human going to rise to that creates a new playing field um and I think there's probably elements of creativity and actually using the software to become part of the game it opens up a whole new opportunity for what gaming is I mean we've been talking about a little bit about video games but you could see um artificial constructs in gaming that arise from the human interacting with the computer and then creating a new sort of playing field in gaming yeah sax what do you what do you think about all this you're a big chess player yeah I've been following it for the last couple of weeks it's obviously been the big story in the Chess World what basically happened is that a couple weeks ago you might as Carlson lost that game to Hans uh what's his last name I think nimon yeah exactly and the next day he pulled out of the tournament this is the sinkfield cup and he's never pulled out of a tournament before everyone was sort of speculating is he sick or have covet or something like that and then he tweeted out a video from some soccer coach saying I can't get in trouble yeah yeah so clearly he was in a passive aggressive way of making an accusation and then he doubled down a few days ago he was in another tournament and he had to play Hans um I keep forgetting the guy's name um yeah he had to play him and he resigned on move two so basically he doubled down in his accusation and he won't specifically say what leads him to believe that this guy is cheating but he thinks he is he's uh he's a young player he's something like 18. and he's had a pretty meteoric rise in the trust world I think his ratings gone up a couple hundred points over the last two years it's the fastest rise in chess rating that anyone's ever had before it's been the case that players have and young players especially have risen quickly but this is uh it's a pretty it's it's the biggest how is he cheating that's happened well that's the thing so the the issue is that it's easy to cheat in online chess but in over the board you would either need to have a device or to be signaled by somebody in the crowd you need Human Assistance or the assistance of a device it'd almost be like you know a casino or something where they're using the contraption yeah on the guy's leg to Signal you know to information to him so nobody really knows how he would have done it and of course he wasn't caught doing it so he can never prove that he wasn't so there's just a real question here but they did make some changes after after Magnus Carlson resigned they put the feed on a 15-minute delay you know I think like at some point you're going to have to start wanding people and having them go through a metal detector yeah they're gonna have to toughen up all of the anti-cheating standards one of the grand Masters was like we should play naked in a locker room it was an online site that basically offered a pay Neiman a lot of money to play basically naked to prove that he could you know really um do what he what he's been doing the theory on why he's not cheating and and the rise is Justified is that in theory this is the argument is that he's grown up learning from all these neural Nets these not just chess engines the first generation of Chess engines were like stockfish they were just computational machines that were programmed by humans with thousands of rules on how to play chess and then they could just crunch the lines better than a human could more recently thanks to deepmind it's a whole different type of machine it's basically these neural networks where all they're programmed with are the rules of Chess and then they it plays thousands of games or millions of games against itself and it learns the best way to play chess and the the neural Nets play in a whole different way than the than stockfish than the pure engines the the engines display like a human that's able to calculate really well whereas the neural Nets do things like um they're sacrifices a human would never make yeah they'll make they'll make sacrifices for disrupees activity so you know normally when a human makes a sacrifice they they'll recapture the material within a few moves whereas um Deep Mind will sacrifice a pawn and you know just for the positional advantage or for the piece the increases which doesn't show up for many many moves right exactly it's exactly and so the ability to model like 12 moves out is is really but that you know that's where I think people thought that Magnus picked up on something because it's like those sorts of moves are rare in the absence of some layer of intervention because typically it's like you know and sacs you know this much better than I but it's like you know the opening and the closings of all of these chess matches are sort of tightly regulated there's not a lot of creativity it's sort of in the mid game that you have these slight positional advantages and disadvant manages and so I think it was Amplified that one of these positional sacrifices made no sense in the context of that game unless you had the ability to you know think really conclusively about six seven moves from now by the way it's the same it's the same thing in poker so there's a thing if you guys want to download it it's called I think it's called poker snowy that was like the first layer of a pretty basic AI but it's gotten better and better and really what it allows you to do is in every situational spot whether it's heads up all the way to a six-handed ring game you can really understand you know what to do now poker is meaningfully more complicated than chess um as it turns out because again you have you're not playing against one player you're playing against some umpty number of players you know we don't know when each of them is going to step into a pod and then there's all of those elements so it's a little bit more complicated to build a true kind of like neural net around it but even still you can kind of get a sense of um of what you should be doing in different spots and what you see is that there's literally like trillions of actions and so it really is impossible for a human being to really memorize in every single situation what the true you know probability probabilistically weighted GTO optimized move is going to be and and so this is why I think a lot of people I guess led by Magnus was saying how could you have known this unless you were aided by something it's pretty clear that this guy cheated it's pretty it's I mean it's what's what's profound is that Mastery of the game may not be achievable by a human but Mastery of any one of these games may actually be achievable by neural Nets and I think that's what's really frustrating to Magnus and to other top tier players in the world that are the best humans at a particular game is they're now realizing you know that they really aren't the true Masters that the true Masters are the neural Nets and more than just the guy cheating which may feel like bad sportsmanship or whatever fundamentally one's ego being built entirely on one's Mastery of the game and being the best at the game is fundamentally challenged because a computer is better at the game than you it's a really profound moment I think that that ship sailed a long time ago yeah I mean I know the Chester right yeah well no it was so it was way back when remember when Kasparov played deep blue deep blue which is the IBM yeah that was the first which wasn't even a sophisticated neural net that was just a almost holistically modeled yeah it was a deterministically modeled system it was like stockfish it was just a number cruncher and it that was when computer intelligence and chess tip to be able to beat the world champion since then there's no looking back I think every human who plays in The Chess World understands that computers are better and there's no way for a human to be better than a computer so it's certainly not a neural net I mean Magnus certainly knows that I don't think anyone's bothered by that I think that everyone understands that humans play in a certain way and their goal is to be the best human I think the concern is just obviously if a human it gets aided during a game by computers but the way that chess works now the preparation is all about working with computers these top players spend huge amounts of time researching openings and looking for Novelties in openings using computers to help them do their research so you know working with computers has now become an integral part of the game it's kind of like you know in many sports where the technology has enabled the athlete to get better you know and um and as really technology becomes the key Vector of competition this actually happens in the NBS this happened in the NBA where there's a special technology for three-point shooting in your form Etc and the Knicks actually and a couple of other teams implemented it a couple of years ago and you saw the entire team became better at three-point shooting so people who were you know 200 300 you know moved up 10 20 each but this kid is clearly cheating because he's cheated in the past and people who cheat in the past cheat in the future is my basic belief so this guy Neiman publicly admitted that he used electronic devices to cheat when he was just a kid on online games when it was 12 to 16 years old so the question is like no but Jason it's worse than that I think because then chess.com came out and said actually the cheating was more rampant than just those two incidents their algorithm determined it yeah yeah so why are people playing with him well because he said that yeah he said that was those games were not for money and um he was just wonderful he was raiding fast and he's like the poker guys who cheat you and what if you're a poker guy and you've cheated before you never play with those players again they're cheaters it's obviously well the issue here is that this was an over-the-board tournament where um the one that Magnus pulled out of in order to protest so the question is how could he have been cheating right now I think what what adds to the complexity of it is that you have to remember that when you're dealing with a player look if it was us playing Magnus we'd need to cheat on every single move but if you're a 26 or 2700 player and you know Magnus is at 28 60 or something the higher the rating the better in chess called the ELO but anyway if you're like a 26 2700 player like Neiman you only need help with a few moves in the game in other words if you could get a tip at a critical moment of the game that might be all you need to put you over the top you wouldn't need to in other words to beat Magnus you wouldn't need to cheat on every move you could just if you just cheat on two or three moves at the right time that could put you over the top so something could vibrate on your leg four times and then two times over to tell you which piece to move that's what they were saying Jayco like he had like a vibrator in his like where was the vibration in his shoe there was a meme that became like a whole thing where it was like he had something in his butt or something and anal chest computer is what you're saying okay look that's not real somebody's special someone made it yeah and then it became somebody did a Reddit post saying that he was being communicated with through vibrating anal beads and then that went viral Elon tweeted it although I think he deleted it look it's absurd but the point is there is a question of how would he have done it if he did it yeah there have been cases and caught yeah people getting caught going to the bathroom and then you know checking their phone yeah there's a there's a grand Bulgarian Grandmaster you got caught in the bathroom checking his phone and oh God metal detectors on the way in and they have RF detectors in the room right so they look for any sort of communication do you remember that going into this event you just kind of Justice the the singfield cup added a 15-minute delay after these accusations so yeah I think there's going to be they're going to be more precautions basically but we still haven't heard from Magnus what made him think that there was Foul Play here in this particular game and he's been very reluctant to he won't say anything it's it's sort of um passive aggressive now the full side of it is that Magnus Carlsen has been the number one player in chess for over a decade and he's a very classy player I mean I don't you know everyone's never heard a word said about him that you know was uh now he can be cocky he can definitely be cocky but uh he is a very classy player so I just don't see him doing something like this lightly so that's what's so dramatically to understand about it dramatic is yeah it's really hard to understand how Neiman Could Have Cheated but also Magnus doesn't seem like the kind of player to just make a wild impulsive allegation so this is why the chess world's just been really roiled by this all right is there like a any kind of equivalent of like ped Scandal here like people taking Adderall or provigil or any other kind of nootropics to to get an edge there's a good documentary I think it was on Vice on how a lot of the top chess players actually get ready for matches and um they're incredibly diligent about their sleep their workout routine alcohol they do take supplements I forgot who made the documentary but it's actually incredibly intense how physical these people are uh well like one game of classical chess can burn like over 2 000 calories or something like that like the amount of calories that get burned just by using your brain so intensely Adderall is rampant in the poker Community especially in tournaments so when you play the the higher tournaments and I've played them and I just kind of step in and and it's I felt very underpowered relative to the to the kids I was playing with because they were all on Adderall well these are 12 hours but 10 hour sessions over 12 hours session right it's exhausting it's really really physically exhausting to put that's why I stopped playing tournaments about a decade ago I just couldn't sit there for that long it could justify the time suck of it too it's like it's just so it's just so physically and emotionally demanding to be able to play that well and make no mistakes over 10 hours um and so you know the only solution that all these kids would turn to was um was Adderall and I was like this is not worth it for me so I stopped I stopped playing in tournaments and which was too bad because I I thought like I could have a real chance of actually doing reasonably well in some of these things and I just gave up by the way the other thing I wanted to mention is there's there's been like cheating in all these other kind of sports and it always gets exposed like whether it's you know the Tour de France it turned out that everybody was using Peds or you know the Russian Olympic team everybody was using Peds New England Patriots stealing signals yeah all right listen let's just talk about the Iran protest for a moment um Iran has shut off internet access internet access in parts of Tehran and blocked access to Instagram and WhatsApp to try to stop these protests the protests started after the death of a 22 year old Kurdish woman um while in place custody Masa amini was detained on September 16th for allegedly wearing uh hijab head scarf in an improper way she later died in police custody and activists are saying she suffered a fatal blow to her head and now you have 15 cities with very large crowds women are burning their hijabs and it seems to be escalating at a pretty uh fast-paced Iranian authorities uh are denying that they had any part in her death thoughts on this it's horrible yeah I wish them well if you look at the demographics of Iran it's pretty amazing how many young people there are here this feels like a country that could turn over that'd be great and you want to know why it has a chance of working because we're not the ones behind it I mean absolutely yeah we cannot yeah run the revolution the revolution has to be done but to the women and young people of Iran protesting you have our support and we're rooting for you and don't let the bastards grind you down all right everybody four uh David forgot our names did you forget our names no I'm just I was gonna try to come up with a new name for uh rageberg like Friedberg I think David Plainview rage Burger rage for rage Burger Plainview the uh David the dove and the host with the most tremath polyhapatia I'm the world's greatest moderator I'm so excited to see all three of you honestly uh socks don't flake I love you guys I really want to play sacks we should roll down together let's roll baby big game all right we'll tell you guys in that game love you besties bye your Winner's ride Rain Man Davis and they've just gone crazy [Music] besties [Music] it's like this like sexual tension that they just need to release [Music] we need to get Mercies [Music]








hey everybody Welcome to episode 98 of the all in podcast with us again the Sultan of science the queen of quinoa looks like he brought a trucker hat what what are you getting jealous of the Montclair hat or are you just not bathing anymore I haven't had a haircut in like six weeks I'm getting my hair cut this afternoon it's not gonna make a difference I think what Friedberg is trying to tell us is that he is the Zodiac Killer it's long been known all right there he is the unibar uh all right uh and Montclair sax is here with his 400 Montclair hat and of course the dictator himself I asked Ron I asked Ron to cut my hair so that the white patch is more prominent I think he did a good job do you add the white patch with coloring or is it uh no it's natural it's just there it's just there make it look so odd if you were doing it on purpose it's super random I like the way it looks I like the way it looks Jay Leno had a look like that I'm about to go by the way you know this in the fall it truffle season I like to grow it so that it's more wavy white for white truffle season got it I needed to have a reset cut so then we could grow it wavy for the fall for truffle season listen sir moth the only thing less relevant to us than your cashmere sweaters is your haircut [Music] [Music] I believe all right second now it's the hiring freeze and a reorg at meta he also said meta will reduce head count for the first time in its history medicine count in 2023 will be smaller than it was this year he called it the end of an era of rapid growth this on top of uh Apple reporting and apple got walloped in the market for the first time in forever uh Apple pullback iPhone production for the 14 after slower that anticipated demand as I mentioned on previous episodes they've kind of done a gentleman's layoff similar to I think meta in that Apple said you have to be back in the office three days a week a bunch of people quit so uh you don't have to pay them I guess huge packages when they quit that way Google CEO Sundar pichai also called out employees in July as you guys all read and he wrote there are real concerns that our productivity as a whole is not where it needs to be for the head count we have Google of course 174 000 employees so I guess the question I have for you is are these the last Towers to fall chamoth in this uh pullback that we've seen these are companies that don't need to do the layoffs they have tons of cash so they're obviously doing that to maintain earnings uh one would and to maybe send a signal to employees that they need to work harder what's your read on these this past week's shoes to drop well it definitely is the end of an era I think it is sort of like the the end of this phase of big Tech where you had this you know unfettered growth where these business models were largely unassailable and they you know we're really just fighting to grow into their valuation and just generate more Revenue to justify where they um where they traded at and now it's this next phase where they have to operate more like a cash cow business and so you know it's an acknowledgment that the growth is tapering it's an acknowledgment that they're going to trade on a pretty tight band in terms of multiple which means that they have to manage expenses much more tightly which means that they can't have a really broad-based surface area in which to operate an experiment you have to keep the experiments small you have to manage your expenses you can't have employees basically you know run over the place management has to have a firm hand in in dictating strategy and what people work on so I think all of that signals that I actually Jason I don't think this is the end I actually think it's the beginning because these companies Apple Facebook Google maybe a little bit Microsoft are the most sensitive to valuation because they are the most widely held right these are the these are the you know the equivalent of U.S treasuries in the equity markets the safest most predictable Safe Haven in times of stress if you want to own big chunky cash flow generating businesses that you know are relatively unassailable you couldn't pick four better businesses than those and so the fact that they see enough in the Horizon to say that we need to batten down the hatches should be a warning to everybody else uh Freeburg is it as simple as this that the they're moving from Top Line growth to bottom line and they're going to need to look at the expenses what's your read on this for Silicon Valley well I just want to zoom out for a second because I remember I started working in Silicon Valley in 2001 you guys are a little older than me I think but like we were right at the kind of year one of the.com implosion and all the Fallout that happened from all the funding that happened from 97 to 99 and 2000. and so from 01 to O3 it was super like deflationary everyone was cutting costs and all the money that had been raised was kind of being pissed away or companies were liquidating and you know so on and then starting in 2004 which is actually when I joined Google but there was also this big movement starting 0304 of like what people called Web 2 then kind of new business models and new businesses started to emerge that seemed to have real traction and real legs and it was a different story and a much more rational story than what you saw leading up to kind of 2000 2001. and it was around that time when Google started offering these crazy benefits right it was like there's a gym and free food and all these amazing workplace and suddenly everyone had to do that to keep up right Facebook obviously mimicked it all the other big companies mimicked it and then it became Mainstay and they also raised compensation in the valley significantly because Google had really cracked a nut on how to extract value from the internet and it really changed everything in Silicon Valley and changed everything in Tech because suddenly every tech company whether you were Enterprise software or Hardware or an internet eCommerce site to be competitive and hire great talent you have to have the same sort of environment High wages great salaries really share the value with your employees you know gyms and free food and all this sort of stuff so it's the first time I think in a generation since like 2003 2004 that we're seeing things start to turn the other way where instead of adding more benefits you know making things more attractive giving more value to employees we're really seeing the recession hit these kind of leading indicators of how things are going to be in the valley and as a result I think we should expect to see a similar impact on compensation on benefits on value share and on kind of proclivity to hire an opportunity to kind of jump jobs and you know opportunities that we've all kind of taken for granted over the past 18 years and this is going to be a real shock to a lot of people that work in Tech and a lot of people that have gotten used to the idea that every company offers great benefits there's always another job to jump to that'll pay you more and that that as that engine of growth that was really driven by these big companies by Google Facebook Apple starts to slow no one needs to compete with them anymore as much and the compensation bands get tighter and the option value gets Tighter and the free stuff gets tighter so it's the end of an era and I think it's a new world for tech and and Silicon Valley sex what are your thoughts here in terms of startups in relation to Big Tech maybe having these austerity measures kick in and a refocusing on profitability the big takeaway here is just that nobody is safe and it's not just starts to have to you know tighten their belts it's these big companies too and I think we're headed for a broad-based recession that's what it seems like you saw druckenmiller's comments this week predicting a hard Landing in 2023 no one's talking about soft Landing anymore in fact I think we're all wondering who's flying the plane so I think we're headed for a pretty big recession and I just take it in a slightly different direction I'm down here in La had dinner the other night with a friend who's a showrunner in Hollywood and so a showrunner basically is like the head writer and they basically put together the writing team and the you know the content for a show and then they sell them to networks he said that like no one is buying anything anymore here that last year you had there was tremendous you know activity and you saw like the The Game of Thrones guys you know uh DND they got like a 300 million dollar deal from Netflix and Shonda Rhimes yes they did yeah they got like these they were massive multi-hundred Million Dollar Deals being made last year and that was just for like future writing deals like Netflix wasn't even buying libraries when they did those deals they were locking down talent for the next day yeah exactly so all of that has stopped and the reason is that Netflix's stock has been hammered right and only so they not have the capital to do those kinds of crazy deals anymore but they know that Wall Street is watching them and so fundamentally they're questioning whether a business model even works if they have to spend that much money on content so then all of Netflix's competitors basically have stopped so this whole like frothy environment that you had for in Hollywood last year that's just over the faucet's been turned off and it's not even turned off to a trickle it's just stopped so you think that this like massive asset bubble that we had last year was just in crypto and growth stocks it's not I think it actually trickled down into the real economy because Netflix is one of those gross stocks the money then flowed into writers in Hollywood and then lots of other places this is one small example right that that this asset bubble wasn't purely just something that's going to be localized to crypto it affects real people in the real economy and we are just beginning to see the unwind of that yeah what's absolutely correct I think is people were more risk taking they had free Capital they wanted to place more bets and sure why wouldn't you bet on the Game of Thrones writers for the next decade but looking at this is going to be fantastic for startups I mean the startups I've worked with over the last five years have been they always come to me oh I got a developer but this person's got three offers from you know Facebook Google and they're like how do I land this person they got 300 000 a year offering a million dollars in rsus and basically Founders had to say no I can't get that person and so they had to get creative and they would hire people Ukraine Uruguay everywhere in between to try to find developer talent and they had to get creative now all of those people are not going to have four job offers they're going to have no job offer so they may have gotten laid off uh and those crazy unrealistic out of school deals are going to be gone and this means massive consolidation of talent you look at the startups uh Community right now tons of companies are just going out of business they're packing it in those people are going to go work at the other startups that are stronger so whoever makes it out of this as a startup this is how the cycle restarts is Talent then consolidates on the winners it would be like taking the NBA and getting rid of the bottom you know 10 teams and just telling the best players there move up to the other teams and uh everybody else you're out of the league so I I think this is incredible setup for 2023 for startups to consolidate Talent so I'm I'm actually excited yes it's another data point that again I said it last week I'll go out on a limb and predict my equivalent November fall predictions last fall it was at the markets were going to Coop the bed my prediction now is that I think the markets are bottoming and consolidating yep 100 and this is the time I think to start nibbling and start getting ready to really rip the money in and I think there's enough signals every day that kind of like tell me at least that on the margin it's time because I think the markets do a reasonably good job of digesting news and then pricing the forward reality right like today's price is really everything we already know and so the real guess is what's about to happen in the future and from my perspective I'm actually pretty starting to get a little constructive here I think that um when when companies like Facebook really do this and you know like if you think about it one way the financial markets have always had this thing that we have called the fed put what does that mean a put is essentially the right to sell something and what Market participants have always known for the last decade is that if things got very hairy if there was uncertainty in the market the Federal Reserve would and they have consistently stepped in to create a buyer of Last Resort and so it always eliminated that last part of true you know Supply demand balance because they would just come and say don't worry in many ways in Tech what the big tech companies were were that you know you could never really find what the true market clearing price for an engineer was or what the true amount of expenses you should spend on office space or you know free services because you always always had these companies which was an escalating arms race you know if one company had a massage the next company had gyms in massage and physical therapists and the other company would have buses to take you to the gyms in massage and therapists in the next company would have protein shakes that were freshly made you know and it just kept escalating and escalating because the costs didn't matter and they wanted if nothing else to get that marginal engineer or product manager or business person to work at their company which eliminated the risk that they would actually start something to disrupt them blocker strategy is very real you should on the blocker strategies is very real so when you take this big Tech put out of the market you will get true price Discovery and you will find out what the real price should be for this kind of an engineer that kind of a product manager you'll find out what are the real expenses you need to bear in order to build a real lasting business and you'll be able to sort through all of that stuff out so I think it's a really good moment and again it's yet another indication to me that I think broadly speaking the markets are now starting to stabilize all the irrational Behavior is starting to exit the system the party is in the last few hours volumes going down the alcohol has been taken away people are hanging around with a little bit lights are coming on they're like I've been here a little too long and I think that that's a very healthy process for an economy and I think that that's what's happening right now so I'm constructive I'm a little bullish I'll go I'll go out on a limb I think you know we could be three to five percent from the lows but we're more near the lows than the highs it certainly feels like the double bottoming out process was the The Bouncing along the bottom and yeah who knows how hard the landing uh is but I think it's a great setup for startups and people who want to start companies I don't know if you saw a girl who did a great interview that trended on the Twitter and you're just saying this is the best time to start a company and I have to agree with him like you're going to have talent available and like who are you competing against for buying ads like there's so many marketing opportunities available the first thing to go in a down market like this is advertising and marketing so and by the way we will we will also relive what we have empirically known to be true and it's been it's been pretty well proven the Investments that one makes in this period will probably be the best for many many years to come because they'll have the most asymmetric upside and that was true in 2008 and 9 and 10. it was true in you know 2002 three and four you I mean you're talking incredible companies just in those two periods think about this atlassian Tesla Uber Google Airbnb Uber Instagram WhatsApp incredible businesses that have created tremendous value and so there are businesses that have been invested in for the first time in 2022 and will be invested in for the first time in 2023 and 24 which will be the leading winners of this next phase and this next leg up and so the real opportunity is to find out who those companies are and get behind them I think 100 as I always tell people fortunes are made in the down Market they're collected in the up Market Freeburg what are your thoughts here in terms of the startup Community or company Builder uh and talent because that that seems to be the piece that uh could be a silver lining on all of this uh Maelstrom that we're going through I mean technology always marches forward so there's always you know there's always progress to be to be had and to be made that's one universal truth about it's weird that we call it an industry because a lot of technology companies in Silicon Valley today don't sell technology to other companies which is how Silicon Valley started nowadays Silicon Valley is Reinventing other industries by being technology LED and that is certainly still true because there are so many I hate using the term but undisrupted Industries to pursue efficiency gains across and Technology built in Silicon Valley can can drive that now when I say Silicon Valley I don't mean the physical location anymore and that's the confounding Factor here which is that there does seem to be this distribution opportunity that's also emerged at the same time where people are doing remote work and work from home and distributed Workforce models that seem to be highly effective you guys talked about atlassian I don't think they ever had an office right I mean don't most of the people work from home there and I think that the success that's been seen in software companies that have operated that model also changes the calculus because not only are are wages lower and therefore the cost of operating is lower not needing a fancy expensive office in San Francisco is needed but you can also access far more Talent than you ever could before you don't just need people to live in the Bay Area or New York or LA or wherever you're operating from so from a software perspective this is an amazing time I'll tell you there's a flip side to this like in life sciences real estate is more expensive than it's ever been right now in the Bay Area to get lab space there's a total dearth of space so there's certain segments that I think uh lab space like a specific a specific designation I mean there's a revolution and genomics that's totally transforming all of biology and human health and what I'm saying is like do you need a certain type of location that's sanctioned for that yeah yeah lab space is a certain kind of build out and it's not you know and so there's a certain amount of square footage and it's being built out a lot around the bay area but um the thing about life sciences companies is you do have to operate physically because you're doing some you're building something physical and so that is an industry that continues to remain very well funded and very competitive and I think you know there's still tremendous value and by the way there's a lot of public companies to invest in not on the primary basis but that are tools companies that are benefiting greatly from the continued demand and and growth in spending in that category sex let's talk about competition you know a lot of talk you know of these large companies pursuing many different verticals we talked about anti-competitive stuff Lena Khan the bundling in the suite of products at Microsoft other firms now you have uh all these being cut death to the Roomba death of the room by the way did you see the letter to the FTC about I guess she sent a letter about the Roomba I mean Senator Karen is just too much man I mean there's a lot of other stuff going on but you can let the Roomba slide that's not important oh you know all the things that are going on right now in 2022 it's the Roomba that gets on the that gets that's above the line at this point believable oh my points actually is sleepwalking oh my God what is going on no there's a there's a famous history of world war one called The Sleepwalkers because that's basically what it felt like is they just slept walked their way to World War One basically what should have been a minor Regional War the third Balkans war that nobody should have cared about nobody should have cared about this Franz Ferdinand guy except for you know the austrians and yeah exactly but the whole world basically got themselves invested in this thing and it feel and this is what we're worried about we're worried about the Roomba when the administration is sleepwalking its way into the next World War well I do not want Amazon okay to control my vacuum cleaner I'm just gonna put that on the record okay because you know where the dirt is they know which rooms are dirty what happens if they get a hold of the Roomba I'll tell you what happened happens the next thing is they're going to go after Dyson okay and then once they do that they're going to put chips in these things and all of a sudden they're going to know exactly what Jason said what are you eating where your dust bunnies are yeah all of this stuff it's This Must Be Stopped Lena Khan now no but to the point of competition you you you're seeing cuts to you know all the uh non-core projects at these big companies this is going to be great for startups right like the idea that Facebook could focus on you know a fourth fifth sixth thing is going to go away yeah well look you're right that great companies are built during downturns uh PayPal was built largely during the downturn the starter pack created Yammer was built largely during a downturn so listen there's going to be opportunities Innovation doesn't stop just because we're in a recession or depression but I gotta tell you I unlike tremath I'm having a hard time finding a silver lining right now uh part of it is the comments that druckenmiller just made which and he's been right about this stuff we've been talking about his predictions for over for a year on this podcast and he famously shorted the pound uh for George Soros that was one of his first things started but yeah since then um he's one of the most successful macro traders in the world and and you know universally respected and I think deservedly so remember he said that that this was in mid-2021 he said that the Fed was engaged in a radical uh monetary policy because even though we were starting to get inflation it was around five percent then that they were so engaged in this Bond buying program they're still bought like 160 billion of bonds and he is the first one waving the alarm bell saying what are they doing and now his predictions have come true I mean we're in a inflationary spiral and his prediction now is his Central Outlook is that the Dow Jones will be in the same place where it is today in 10 years and he made the point that yes Equity markets do go up in the long term but how long term are you talking about from night from roughly 1966 to 1982 the stock market was sideways Japan had a lost decade as well like this is not unprecedented after an asset bubble right and then from the Great Depression it took until 1955 for the stock market to recover so in the long run the stock market will go up but it could be you know we could have um a flat decade this is his prediction right but he's very smart guy and and then on top of that that's not to say that you can't be one of the ones who make money during that period because lots of people do but we're in for I think a very tough economic period because of just this radical uh expansionary fiscal monetary policy we've had basically the fed and the administration printed the last two administrations but especially this one printed 10 trillion dollars over the last couple of years most of that was under Trump but continue no it's not 100 I'll pull it up in a second but anyway keep going we had Biden basically kept digging this hole we had the two trillion dollars of American Rescue plan which we didn't need we just had uh another two trillion of the infrastructure Bill the inflation reduction act 500 billion for student debt yeah exactly so Jason what are you talking about and this was all after the emergency was over but I think I think that you guys are debating the wrong thing I think that what drucken Miller I think by the way just to be clear both drucken Miller and I can be right which is he's commenting on the real world economy going into a recession what I'm saying is that the stock market tends to be 9 to 12 months ahead of where we are Nick throw up that chart please that I asked you guys to share just to give you guys a sense of what I mean by this by the way while you're doing that jamas Jason look I will agree with you that a lot of this is 7.8 trillions more than Biden but fine a lot of the stimulus happened under Trump you're right because that's when basically covet happened remember in the in that Q2 of 2020 quarter the economy shrank at a 30 percent annualized rate everyone thought we're going to a great depression and that's why they passed all the stimulus by huge bipartisan margins director Miller's best point is that this is all post-vaccine right yeah yeah so look and I think we can definitely go back and second guess what happened during the Trump Administration there's an old saying that many of the worst ideas are bipartisan but and so you know the spending that happened in 2020 was clearly bipartisan and maybe it went way too far but in the last two years like drug said it was post-vaccine post-emergency and they kept spending and it's not just Administration it was the bond buying program of the FED where the economy was already fully back and they bought another 160 billion of bonds yeah I think I think the thing is that you know I think Stan is a proven Republican so maybe he is speaking a little bit of his book as well I think it's fair to say that both Trump and Biden did not help but overwhelmingly I think where the where the problem stands is a central bank that was the same through both of those administrations and I think we should probably focus on them because you're right what they did was excessive and what they essentially said is that if there is volatility Beyond a certain amount and people cry Uncle we will not allow the markets to sort themselves out in an orderly way we will step in and that's what you know again what we just talked about the Central Bank put in this case the FED interventions yeah and these interventions really uh pervert a market because you don't know what's going on and that has huge ramifications in the real economy so Nick if you just throw up this chart the the thing that is really important here and what this chart shows is essentially all of the hiking cycles that we've gone through since 1983 so 83 87 89 94 9904-15 in the current one and here's what I just want to call out for you guys what's incredible is that other than the one in 83 so this is sort of like you know that last big one what we've seen is that the stock market has a tendency to immediately go to the conclusion very early on in a rate hiking cycle and now why is that important for normal folks listening to this thing well the reason why that's important is right now we're in month seven of a cycle we obviously don't know how long it's going to be but the odds are improving every day that we're near the end versus the beginning and why that's important is again if you're thinking about when to you know buy equities for example this is a really instructive guide because what it tells you is the closer we get to the end or more importantly the closer we psychologically know that the end is coming we start buying and that and that's just a broad-based statement that has been true so you know what you see right now I think is really interesting which is that despite all the bad information oh my gosh the nordstream pipeline blew up could it have been sabotaged was it the CIA was it the Russians oh my gosh big Tech is slowing spending and firing people China's in a coup I don't know if you saw that rumor yeah how about something more benign you know the the US you know us yuan is really trading in a crazy way the U.S euro is trading in a crazy way the U.S pound is going crazy despite all of that every time we trade down the market consolidates very quickly and we sort of like so I think we're forming a bottom I do think that Stan is right we are going to see a hard Landing recession something will break in 2023. I hope it doesn't I hope it doesn't affect a lot of normal people but it's likely but at the same time to find hard Landing us so I'll tell you in a second but at the same time I think what's happening is in the equity and financial markets we are consolidating a bottom because we're seeing through to that end state and this is where cheap Equity gets bought so why is there a reason to sell now I think a lot of the people that are selling the smart money sellers that I talk to are essentially right now selling to book in capital losses to offset other capital gains from this year a term that's called tax loss harvesting and so if you have gains through this year which some of us do this is the great moment to just sell the losers to book the loss to net it out so that you can minimize your taxes for next year that's probably I think where we are at and I think that's why they're still Consolidated by so what is the hard Landing Jason if I had to predict I think what David said is absolutely right you're going to see unemployment get to an awkward and uncomfortable number five six percent I think could be something that we see and I think you're going to see a lot more companies pull way back on their spend because demand is going to really modulate uh you know I'll give you a crazy example you know what happens to all the people in the United States that are on armed mortgages right adjustable rate mortgages when those things reset they're going to reset two 300 basis points higher their monthly payments are going are going to go nuclear it's already happened I've literally had a family member call me about this and they were like what do I do so in the UK in the UK 40 percent of all mortgage dollars are interest only arms that will reset in January to around four percent forty percent can you imagine how upside down the UK economy is going to be when people have to spend three and four times more together and then people have to go to work so people who have not been participating are going to have those bills come in and they're going to have to go to work they're going to have to go to work yeah so free bird what do you what do you think uh hard Landing here and then what do you think 2023 looks like in that regard uh looking pretty bleak do you buy that we're bottoming out now as chamatha's sort of hypothesizing I mean I'll tell you I was running some back of the envelope math you know how much debt there is in the world take a guess 200 couple hundred trillion 200 trillion about 300 trillion yeah that's um debt owed by governments businesses and households and if in response to the inflation which is response to fiscal stimulus which is a response to the entire economy of the world shutting down for a couple of months we end up raising rates from zero to five percent that's uh 15 trillion dollars of annual Debt Service which is like 18 of global GDP like that The Debt Service alone but what does that mean that means that for every dollar transacted no it means nothing tax it no it means what does it mean like so so what so I'm saying that there's a massive squeeze hap that's gonna happen right and so what ends up happening ultimately is because you could run this across local governments I think it means demand destruction I mean if you're in debt households yeah thick no no I'll tell you I'll tell you about what it means but it means nothing and I'll tell you why these people keep because you can print more money you print more money I'm sorry to be the bearer of bad news but like it is not as if we have a law a constitutional law or it's not as if governments have collectively decided that you cannot have debt to GDP uh above a certain number that doesn't happen guys we passed 100 under Obama and we've just kept printing money so whether we like it or not and I'm not saying I'm a fan of this or it's right we are kicking the can down the road and what we're doing is we're extending the maturities you know you'll eventually have 100 Year government bonds okay just like you have like now you know multi-decade long corporate bonds we missed a chance for that we missed it because brilliant Yellen actually said no to that when when rates were like near zero and we had the opportunity to refinance the U.S government debt using long-term rates basically long-term bonds and actually was Trump who you know crazy Trump who suggested let's basically shift the debt to 100 Year bonds and she said no you have a dollar right so the the problem is that we have all the short-term debt and look at what just happened in the UK when Liz trust tried to prop up the uh Bond rates by basically intervening she was basically an inflationary policy to fight an inflation the markets puked all over that and that's when their the pound hit you know exactly there's only so you have to have a buyer of the debt right I think the list trusting is really actually a microcosm of how unfortunately Western governments are working but I think there's a silver lining like she basically came in a day after she got elected and said okay guess what guys at the same time I'm going to massively cut taxes and I'm going to give you fiscal stimulus I'm going to cap your energy bills and I'm going to have these huge transfer payments from the government into the hands of uh of uh British citizens I'm not going to comment on whether that's right or right right or wrong but the financial markets to your point David absolutely hated it and within a few days you basically saw the pound get crushed but then what did you see you saw the bank of England decide that Financial stability was more important than financial viability meaning the things that she wanted to do were not viable so you could have let the financial Market sort this out which would have forced the prime minister to basically abandon the policy but instead the Boe said now we're on the unlimited buyer of UK guilts which is the name of the UK Bond and everything snap back we're back to where we were before her speech and before the chancellor of the exchequer speech and so it's as if nothing happened and that's what's so insane to me which is that even though the bank of England by the way in the next week or two are going to raise rates 140 basis points 140 basis points almost double what the FED is that is they're doing both at the same time they're both raising rates and they're acting as a backstop for bad policy and this is what's wrong right now in the world we do not have a real check and balance so my point to Friedberg is just that I'm like emotionally on your side but the problem is with these folks keep getting bailed out David they're just going to keep doing this stuff and there's no end in sight well and the the consumer doesn't get bailed out so that if you look at it on a micro basis instead of a macro basis you're correct these governments will just bail people out even if they make bad decisions as we're seeing but then the person whose uh variable interest mortgage just kicked in has 500 less a month in savings so they're now not going to buy an iPhone 14. they're not gonna upgrade their car every six years they're gonna do it every eight years so the demand destruction that's happening is going to be quite severe and that's going to reduce money then monetary velocity and then we mark my words the Federal Reserve will intervene this is why I think we're in a bottoming process I think the the bleeding edge of the Smart Financial actors are actually on Sax's side and friedberg's side but then they're taking that next intellectual leap and saying okay well what happens when Apple basically says hey guys I'm gonna have to fire 15 of my employees I think what happens is the fed intervenes and I'm just using apple as an example but there there is a threshold of demand destruction Jason I think you're right where we have the fed put come back on the table and the markets just go Bonkers so they instead of doing 75 basis points two or three times they're just gonna be like yeah I'll do 50. we'll throw it down no no no no no no no no they're gonna they're gonna get to four and a half very quickly and then this Something's Gonna Break like all these guys are saying I think they're right and then the fed put comes back on the table and we'll have this we'll have the UK you know the UK thing happened in what six days bars will play out over six or nine months but it's going to play out the exact same way and freeburg's right you know we should have capped debt at you know 100 of GDP or less and sax is right we should have issued 100 Year bonds at zero rates when we had the chance we didn't do either of those things that's so incompetent sex I mean there was no need to have rates this low for that long and it maybe they could just keep them at some average number instead of going down to zero or that's spiking back up and just steering you know spitting the steering wheel uh you know so violently why don't we have some basic uh concept of maybe not having zero rates and keeping them at two percent or something reasonable so you have some dry powder well if you go back and and listen to what the FED said and Drug makes this point they were all worried that they got there was an inflation print a few years ago where I was at 1.7 percent and they all started panicking about not being at two percent so for a point three percent move that they try to engineer they opened the floodgates okay and that's basically what happened and that's why he's so critical of it the other thing is the federal remember the FED said we're going to be data driven but then the data came in last summer we got that surprise 5.1 print and they dismissed it as transitory so they said they're going to be data driven but they weren't they they were dismissive now on what basis did they conclude transitory like what was the proof for that there was no proof that was a political consideration the administration and Yellen is a big part of that immediately reacted to basically downplay the news I mean they PR did I mean they didn't want to admit that there was a problem they went from transitory to this is permanent to next six months but during and now we're at hard Landing like right these people are not competent are they just not competent no I think they're really I think they are competent but I think that they're a little bit fighting with one hand type behind their back I think if you had to take the other side sacks you know the problem is they have a very specific strain of data that they focus on and that data has all these weird anomalies to it like you know they should look at rent data but the way that the rent data works is that you know you bleed it in one-sixth a month over six months just as an odd example or like use card data only comes in a certain way so I think they're driving in the review mirror I think there is something to that I think it's simpler than this which is listen I think all politicians do this which is when they get bad news they want to spin it and they're going to delay acknowledging the bad news as long as possible so what happened last summer when this inflation started they all dismissed it it was all a talking point I mean every single one of them and here's the crazy thing is Jay Powell he's the only Trump official who got reappointed by Biden by a huge majority how do you think that happened and when did it happen it happened at the end of May last summer so just when this inflation print came out and yell into the administration were saying it was transitory that's when Powell was up for renomination and he swept through the only Trump appointment to basically be renominated without even a question by Biden why because he got on board the talking points he wasn't gonna basically Buck them at that time so he waited six months he bought into the talking points that was a hundred percent political 100 I told you I read Paul it's a very compelling argument I read them there it's really compelling it's really it's sad but compelling sax you should read the Paul volcker uh book keeping at it he basically says Reagan came to him off site where they knew they wouldn't be recorded and told them do not raise rights uh so this idea that the FED is independent like history now has shown us it is not like the the there is massive uh political pressure on them I I think especially at the time driving in the review mirror clearly the data they have is not great and then all this data is nuanced you know jobs and this massive amount of jobs we've had in this country is because of you we have a new immigration policy we don't let people into this country we kick out phds that we trained and then housing we have eye buyers buying this so to your point jamoff I think a lot of the data has changed and they're they've got a bad data set they have a bad dashboard and they're driving with bad information they don't know their Direction they don't know their speed perfectly if you want more Fidelity on the data you're right if you went to a board of directors meeting for your company and said how's the business doing and the CEO says well you know well we're going to have data from six months ago and it's like okay I got that but what about like last week uh you would fire that CEO to your point Jason um and these things are knowable today like there are businesses for example that are selling billions of dollars worth of like iot sensors here and there energy sensors here everything is connected to the internet everything is automated everything is running in code um you would think that the government would say there's a national level directive here to get this into some kind of a system that we can use because these decisions are becoming more and more important I think that would be a wonderful idea and a project and what had huge value a Manhattan project for understanding the economy on a very granular level we you invested in a startup at one point I remember I heard the pitch where they had people around the world taking pictures of food prices Africa India the United States anywhere and then putting them into a database normalizing them so you could know the price of tomatoes or potatoes on a global basis you know and normalizing all that data they don't seem to have this data there they're talking about August data and it's you know we're now in October it's a really odd situation I think you know our friend Brad grosser made this point which was that look in this last fomc meeting the FED raised their forecast for what the neutral interest rate would be from three and a half to four point six percent so in two months they raised their forecast by over 100 basis points what is that based on like is there a model I assume there is a model I assume there's data so why don't they just open source that why don't they let the markets like see the model they're using so we have a little more predictability of course they always have the discretion to bucket or not follow it or whatever or change it but like you know wouldn't that be a better approach is to like let us see the data and the models in real time as it's happening and then the community like like an open source project could actually like Fork the model and actually create like better ones well to your point to your point like there's the the FED is actually known as the gold standard of transparency so the IMF has kind of like a a view in how all these central banks act last week they actually explore created and this is good this hurts me to say Canada because of their lack of transparency apparently Canada doesn't even put out minutes and so they're like hey Canada you uh you guys like yeah and you know well Canadians are I mean the Canadian government at least like total moral virtue signalers but they don't value transparency apparently but to your point David there is a lot of opacity in these things that really determine how the real world works and the impacts the individual people are going to go and get ratcheted way up and nobody really knows what to expect even though the data is there sitting in plain sight I think two things can be true I think the Fed the process of setting Central Bank rates by the Federal Reserve should be reset I also think that it could be true that the FED is not responsible fully for a lot of the conditions we're now facing we did have a bunch of policy decisions that the whole world got swept up in and seemed to accept as appropriate at the time when we shut the global economy down and there was some weird assumption or belief that fiscal policy would allow us to soft land or recover out of that and at the end of the day all that fiscal policy did and I remember I was speaking with a smart person at the time and he said all the fed's going to do is they're just going to inflate everything and it's going to take a while and everything will inflate and that way everyone will feel good for a while but you can't just stop the spigot of capital moving Goods moving and services moving for months on end and assume that the repercussions will not actually be felt extremely harshly and at some point things are going to come home to roost and that is what's happening there was no winning solution for the fed or for any Central Banker in light of the policy decisions that were made to shut the global economy down when covid began not to argue whether or not that was appropriate but that was simply a statement of fact I said it before and I don't understand if you were to take a first principle's point of view on this today and say hey let's create a central bank and how should it operate you would take all the data from into it from PayPal from visa from MasterCard from the internet you would take all of that data you would let the algorithms or the AI or the software figure out what is most predictive of certain inflationary recessionary totally and growth indicators totally and you would basically say look X percent growth X percent inflation solve for what the the central bank's interest rate should be and it should vary at a hundredths of a percent or a basis point every day and every day the rate is reset and the software resets it and to have you know some degree of human logic or oversight seems appropriate but to have a decision made in quarter percent increments once every couple of weeks uh seems seems kind of Arcane so I think both things are true the FED isn't necessarily fully responsible we all want to point fingers you know we can point fingers at at the the Mania that swept over the entire world when we started our podcast and everyone was like what the hell is going on why are we locking down the world and this is nuts and it felt nuts and the response may or may not have been appropriate but at the end of the day there was a cost and the cost is going to be born for very likely a decade or more if we are able to get through it all a lost decade is a possibility handset central banks can be Rewritten so yeah well I think there's actually two original sins of the economic crisis we're in one is lockdowns you're right like that was a fiasco it didn't do anything to stop kovid it was an economic disaster and then we overreacted to lockdowns by them printing all of this money both fiscally and through expansionist monetary policy so freberg's right about that I but I think the other original sin here is the the QE and the zerp right the zero interest rate policy that began in 2008 2009 we broke the glasses emergency totally yeah and then it just became standard like it was on autopilot why did we keep printing why did the government keep buying it was a long tail event that became the mean problem is that every time government is a bad idea I mean it's just yeah Milton Friedman once said there's nothing quite so permanent as a temporary government program how many times have we seen this every time the government's supposed to do something on a one-off emergency basis like zurp it ends up becoming institutionalized we still have kids in schools in California wearing masks I mean that it's the same crazy thing that people cannot get off these programs the the thing about zurp which if you look back what really happened if you think about like how people live their lives every day what what if what has happened in our view of government and politicians it's really eroded since 2007-2008 right there's huge amounts of rancor nobody gets along everything tends to happen on partisan lines and the reason I think that that was allowed to happen or that accelerated is actually because of zurp because if you think about it if you had failed policy right and the economy was completely broken politicians would actually have to get together and try to solve the problem themselves and the last time they really did that was actually in the great financial crisis if you look at tarp and if you look at how all of these smart people actually had to get together in a bipartisan way to figure out how do we bail out America and prevent a banking crisis that was the last real effort that touched a lot of people but then David as you said on the heels of that we broke the glass and we've been fighting ever since and the peak of that fighting was basically Donald Trump getting elected and so I think like what it shows is that if you have these irrational Central bankers that will or that are willing to constantly bail people out you will never get a high functioning government because policy is irrelevant good policy doesn't matter I think our policy doesn't matter if any of it goes wrong the central Banker will come in and bail us out well and the the second and third order impact of these is can become quite acute and just for people who heard the word zurp like three times zero interest rate policy basically keeping interest rates very low very dangerous to do because you get like this like look at the number of unemployed people per job opening and if you just look at this like ratio this is the number of jobs per unemployed person it gets way out of whack and then if you look at this other chart just in terms of the total number of job openings you know we started we talked about this earlier in the Pod hitting 11 million to burn that office crazy then what happens if you have too many jobs you don't let immigration you you don't have a functioning immigration policy well then you get this great um you know people quitting their jobs quiet quitting and then the Boomers saw their net worth go up so high because of their retirement accounts because of the stock market boom and because of the housing boom you had all these rich parents now who are bailing out their kids who refused to go to work and labor participation goes from 70 down to 62 these are the unintended consequences of zurp that you know now how do you get a generation to go back to work if their parents have you know a two million dollar home and 3 million in stocks or a million dollar homes yeah and that's what they're doing now they're like we're going to break this we're gonna we're gonna get Google and apple who have unlimited cash to do a riff those companies don't need to do a riff they're doing it because they have no choice now because they want to break the economy so hard Boomers have 71 trillion in assets over March I mean the wealth transfer that's going to occur between these two generations is crazy why would any U.S except for Millennial with a boomer parent even go to work if they've got a million U.S Boomers have 71 trillion dollars in assets is that what you said no yeah that's the number I have here so an entire turn of global GDP in savings that's about one-seventh of the world's total assets it's just a lot of Locked Up well and this monetary policy was done by Boomer 70 trillion controlled by 76.4 million people yeah so if you want to really talk about the you know the rich in a global context the Richer very specifically U.S Boomers yeah that's one-seventh of the world one seventh of the world's assets is controlled by 76 million people how much of it is their homes I mean they were they were at Woodstock they you know they lived the best life in the best times they enjoyed the most of the peace dividend in the 80s and the 90s and the 2000s they are the ones that control everything it's pretty crazy it's I think it's less like Jeff Bezos and Gates and musk it's Boomers that if you want to go and really zoom out and get it right it is Boomers it's one percent of the global population that controls one seventh of the global wealth and they're all in the united U.S Boomers hiding in plain sight U.S Boomers there you are well once these housing prices decline and the stock market declines that number is going to shift and that really is what's fundamentally happening with the fiscal policy and the effects that's happening today it's happening today which is a redistribution of that value because we're basically deflating all those assets now we're deflecting the average Boomer is and we're going to deflate real estate assets I mean if you just do the math on that back of the envelope these boomers are worth a billion a million dollars each like think about that like every Boomer is worth 900k a million something in that range 1.2 million I mean it's bonkers that's the average that's how much wealth they have Bonkers you you two are a boomer Jacob no we're Gen X we're Gen X can we get the worst we had the we had like we got really shafted it's like you know we grew up with flannel Alanis Morissette Alanis Morissette no hold on hold on Smashing Pumpkins 93 was probably the best year Smashing Pumpkins ever did it for me Billy corgan's voice was always like ah yeah really annoying Rage Against the Machine can we do a quick shout out for um Julio sad to hear that he passed we're here for you yeah I mean it was really sad the guy was uh how old was he 50. were you a big fan of Coolio's I love cool in the 90s his Coolio story from the Pod when he said Gangster's Paradise I feel you yeah and then when I saw him at Sax's birthday last year I was like dude I love Coolio I mean I cannot tell you what a big fan I am what was the line you said to him you said I feel you I said I appreciate you I appreciate you I appreciate you we fly down for the birthday they you know they shuttle you on the cars from the plane to the to the house we get to the house and you know we're all waiting of course sax is late two and a half hours to his own party we're all hanging out starving but then we go into the party and then they have like uh Coolio shows up so we're like sitting down to dinner for course two all of a sudden pop comes out of the the woodwork Coolio I lose my I run up on the uh so dance before I grew up Coolio like it's like high school jams man I mean that's like in the car cruising and at this point I'm like seven tequila watermelon Tequilas in so I'm playing oh my God on the Dance Floor you know jamming up to Coolio I think Kaleo thought I was sex you know because he's like yeah he's like oh two South African Jews you guys all look the same Coolio comes up starts high-fiving me and hugging me and I'm like What's Up Coolio my God this is like a dream come true he's like hugging me his face is right next to my face I didn't know what to say and I like I'm I'm I've had a little bit of tequila and I and I whisper in Coolio's ear I'm like oh no I appreciate I appreciate you I appreciate you wow oh my God I think I saw Freeburg throw his panties on stage 201 yeah know what to say I mean what do you say clearly clearly you don't know what to say yeah my team my my team and TPB they had a they had a cameo made for me of that Coolio sent in it was super heartfelt and awesome sax posted it on the internet I think yeah retweeted it yeah retweeted it and it was uh I don't know man it was uh he was he was actually a super nice guy great guy and uh it was super sad yo Dave it's your friendly neighborhood Coolio bro I'm out here on the golf course thinking about you I appreciate you man so I want to wish you a very very very happy birthday man you feel me I want you to drink it I want you to smoke good I want you to eat good I want you to have some fun bro go big do it right yo Dave happy birthday man from Coolio Shaka Zulu man well all the stories are coming out now and not your experience was not unique he touched everybody he met literally these college kids were like genuine very kind like yeah he was a real super friendly and like you know and and like wanted to ask about you I mean it's like a very like I could have been a politician if you didn't become a music a music Superstar he looked incredible he looked like he was 25. I mean he literally went to these college kids met him he went back to their like you know uh frat house he cooked them dinner and then he got a guitar out with them and he sang gangster paradise with them and he like orchestrated it with the crowd singing whatever he was then there was a video of him in Dublin on the bar singing can I just say something to I I've given the message uh before yeah before but like you know take care of your health yeah take care like there there are these incredible drugs I just want to call out Health as wealth if Lipitor for example or Crestor or these statins are not working for you there's this next Generation kind of drug called the pcsk9 inhibitor which essentially is uh effectively a gene therapy that's modeled after this very specific group of folks in the nordics I believe who actually have effectively immunity against heart disease and so it's taken 20 years to refine this drug but this drug is a wonder drug and you know there are versions of it now that are injectable you know once every six months or whatever so go and ask your doctor if you're not if statins don't work for you look at the pcsk9 inhibitor and then separately after you're 45 or so you should again a CT angiogram because these things are really important or you know a heart flow where they actually inject a die they characterize all your veins they give you a calcium score may not prevent this but at least if it's if it's something cardiac related you can get to the bottom of it and it's a knowable thing nowadays yeah rest in power to um our friend and uh yeah take care of yourselves your health and uh speaking of Health shout out to Gwyneth Paltrow uh G pal uh who in her group newsletter pointed out that she loves the all in pod and has to be honest she's obsessed with the personalities a little bit anybody want to handicap that listen let's be honest uh what doctors say not you if that's what you're trying to say I've met her actually doctors say she's a delightful if you want if you want to live in health after a meal the best thing to eat is a little dark chocolate hmm do you get your dark chocolate from goop do you have goop dark chocolate Jason I was trying to make a story where I am the dark chocolate where I'm saying that I am her favorite personality you so you're handicapping that you're her favorite she said she's obsessed with the personalities plural I'm gonna I'm gonna where did she rank her besties I need to know I'm gonna rank as rebirth oh really you think she's a free person that makes that's on yeah okay then me then you okay I'll take it the fact that Gwyneth Paltrow even understands like who we are is a win in my book so I'll I'll be number four on her list but uh G pal if you could rank the besties in your next newsletter that would be appreciated and we'll we'll take rank your besties all right if sakshi wants some red meat you'll I I saw you wrote a piece you want your red meat should we throw it to you yeah yeah all right I think we we need a Ukraine update because I mean we're talking about all the reasons that there could be a silver lining or the Market's bottomed out I don't think you can know for sure that the markets are going to bottom out unless you know that there's going to be successful resolution of this Ukraine war at least a non-escalation of it and all the things that have happened in the last couple weeks have been on the road towards escalation exactly so in the last like just few days you've had zelinski saying that they want to be admitted to Nato you've got Putin basically annexing or saying he's going to Annex the Don bass and somebody we don't know who but according to radic Sikorsky who's the Polish foreign minister he think the U.S somebody blew up the Nord pipeline so what is the common denominator did they say was blown up was it one or two was this so it was the one that was actually like working what is the common denominator of all these things they're all eliminating key elements of what a peace deal would look like so everyone understands that a peace deal would require uh zielinski to give up on NATO it would require Putin to make some compromises likely in the Don bass and it would require the sanctions to be lifted and the energy flows to be turned back on well so now those things basically have been removed from the table or at least potentially that's what's happening so I don't see how you're going to get a peace deal now and so if you remove all the off ramps what's left escalation wow so it seems to me this thing's just going to keep escalating I thought you wrote a good piece in the American conservative should America go all in on Ukraine if you haven't read it it is 80 of rehash of what we've talked about here for the last year but there's 20 new in it I think and I thought what was interesting uh in terms of new stuff you put in the piece and it's a good summary of you know poker strategy versus what's going on here is that we've already proven you know if you did want to prove that Russia is not a threat with the exception of their nuclear we now have proven that they're really not going to be able to do a domino and go into all these different countries with the exception of obviously the threat of nuclear power so I thought that was well that was really a point yeah yeah what I was really responding to in that piece is the assertion by the media that Putin is bluffing how do they know that you know how do they know that like you know I think all of us understand poker pretty well and none of us ever would have the confidence to assert that we know exactly what cards our opponent holds in any given hand and how exactly they'll play them what do we do what do smart players do we put our opponent on a range a range of possible hands of possibilities and then we evaluate what did their previous actions tell us what story are they telling through their previous actions well what story has Putin been telling this is not a guy who Bluffs in my opinion or at least that is not the story there's a chance he he would pop off a tactical nuke it's a non-zero chance if that if his life is on the line he is incentivized to use every weapon at his disposal to try and prevent his violence his life isn't on the line here he can he can back out oh yeah but where's this thing headed if there's no compromise I I think they you know I I I'm gonna stick with my original prediction that we wanted to you ankle Putin we wanted to prove he didn't have you know as much strength as he did and we wanted to exhaust his resources so we could finally basically get him out of office at some point so I do think regime change via exhausting him and I think it seems to have worked we have exhausted you're agreeing with me I agree that we have exhausted his I mean he's proven he can't fight a ground war right I mean that that's a pretty oh he's escalating now he's escalating you think he's just gonna roll over he's not going to roll over I think he but I think what we've proven haven't we is that he can't fight a ground war effectively he doesn't have the Army he doesn't have the weapons uh compared to the west and he's been exhausted you know and I think his he's spent now the only thing he has left is what you're talking about is the new corruption literally no no well no there's there's more intermediate options first of all he's just called for the the mobilization of 300 000 more troops so that's going for step one people are coming into the country yeah exactly look there's gonna be very high yeah they're gonna be very high costs on the Russian side I would not assume that means that there's something in it for us even with this um you know the the conscription he's doing this draft he's doing forced draft I mean he is kind of redundant but um this conscription or draft whatever you want to call it has proven that he doesn't even actually have the standing inside his own country people are leaving they're breaking they're looking up how to break their arms like it's it's pretty dark I think you're making a lot of assumptions there just like the media who are saying that he is definitely bluffing what I'm saying is we cannot know that he's definitely bluffing no the United States of America is blessed with being the most safe and secure country in the world and really in human history and the history is full of humans constantly being at war with each other so that is a really valuable thing that we have why are we so secure we're surrounded by gigantic oceans we have these gigantic moats in addition thanks to the wisdom of the Monroe Doctrine for 200 years we have prevented any great powers from getting a foothold in the western hemis Fleet we are completely dominant here and no one could ever stage an invasion of the United States we only have one one vulnerability just one icbms that's really it so what are we doing we are basically engaging in a proxy war with the person in the world who has the most icbms and we are basically putting ourselves on an escalatory path with him this would be like if Achilles had gone in front of the walls of Troy and basically taken off his armor and stuck his foot in the air and drawn a little Bullseye around his his heel that's what we're doing the other side in the world why would we do that why would we do that if they are the last real um threat and they are the Achilles heel if we can uh they're not the last threat they're not the last threat we're never going to be out of threats okay well we got two major ones with icbms but anyway it looks like we're in the end game now what do you think happens here we're not in the end game we're on a path towards escalation because all the off-ramps have been removed that's my point and instead of saying instead of trying to find a diplomatic solution first of all we keep removing off-ramps and then we we blithely disregard the threat to ourselves by saying he must be bluffing this is incredibly stupid questions hold on a second the better question to ask is what's in it for us what's in it for the United States of America what is the vital interest that compels us to risk our security there isn't one this Don bass region hold on this donbass region is the Franz Ferdinand of this situation it is not historically important to us we have invested in it all of this importance and we are potentially turning a regional War into a World War we are sleepwalking towards this unless somebody finds an off-ramp we are escalating our way into a much larger conflict that is my point and I don't see how anyone I don't see anyone should re-enter the markets with this geopolitical risk hanging over our heads yeah this is kind of like what I said a few weeks ago and JP Morgan put out a analyst report today saying that they were shifting from being you know call it roughly positive sort of like chamoth's Point earlier about being a little bit constructive in the markets right now and coming in and finding opportunities to buy to realizing that the sum of the portfolio of tail risks right now you know outweighs the upside that may arise from finding these low priced opportunities in the market and that seems to be the prevailing Market sentiment right now is that there are too many of these moments that while each one of them is low probability the impact is of such high severity that the aggregate value expected value or expected loss of all of them is actually quite significant and that is heavily Weighing on the market and so huge amount of point I think and to the question earlier about market conditions one Catalyst for upside in the market while there is fiscal strain and economic strain and growth strain there is also this geopolitical strain in the market if one or more of these things starts to resolve I think that weight starts to come off the markets and you can see look I can see the market taking off like a rocket if Ukraine gets resolved and I do think you're right it's all fat tail risk that's about to get resolved I think that can potentially be the political motivation here which is that enough people like chamoth and you start making the calls to your representatives pointing out how strained the market is because of this tension in the region right now that maybe there is some path to resolution that becomes more active rather than passive because of that this may be a little controversial so we can talk about it but I um think that the markets would have reacted much much more negatively to a nuclear incident three months ago then now and may not even react as much as we may think it would three months from now but what do you mean by nuclear incident you may not goes off or just a threat you're saying if Putin blows up a new the markets may not react that much I think that the markets are basically um ring fencing Russia Ukraine risk in terms of currency and stability but that's sort of now gone away we've ring fenced the energy risk because it looks like energy reserves in Europe are actually going to be pretty meaningful they're going to spend whatever it takes so all of the second and third order effects it would be a humanitarian crisis which would be horrendous okay but the markets don't whether we like it or not react to humanitarian crises they react to the second and third order economic impacts of those things and if you actually try to think about what the second and third order economic impacts are you're seeing many of those things get solved and so what it would be it would be a highly isolating effect it would be a humanitarian atrocity he would be completely cornered from a from a worldwide perspective um the the the monetary and fiscal implications of that um may not be as meaningfully disruptive today as they would have been three months ago that's what I'm saying well it's one thing I should clarify I like friedberg's analysis of the fat tail risk because I'm not saying it's likely that this conflict goes nuclear but I don't need there to be a high likelihood in order for me to be very concerned about it because of how disastrous an outcome that would be so if you're doing an expected value analysis it's really hard to analyze the expected value or negative value of a of a low probability disastrous event right that's the classic fat tail risk I do think that if the markets think they have priced in the effect of this war then I think that's an argument for a lot of downside to this Market because it seems to me that we're on a one-way ratchet here all the off ramps for us a piece or a diplomatic solution have been systematically taken away and all that's left are potential escalations so no I hear you but how do those translate those escalations to outside of those two countries and into economic terms for the rest of the world oh my gosh well I mean if the war spreads here I'll give you a couple of scenarios I mean well here's one I think we're just assuming that China is going to stay out of it imagine if you're China and you're watching what's happening and you're worried that actually Russia could lose this war so badly that it emboldens Hawks in America who want to Target China next you know who are basically on This Global struggle against autocracy you're going to look at that and go wait a second is it really in our interests for Putin and Russia to be completely toppled by This Global struggle against autocracy it seems to me they could enter the Russian side not militarily but in terms of support so they would have an incentive again not to lose an ally and then by the same token I think the Russians could lash out I don't think they're going to go nuclear right away but I think they could pull a grozny I mean don't you think that is well when you know in the Chechen War when Russia was losing they just rubbled Grazie I mean they basically level it to the ground so I mean Putin hasn't done anything like that yet but if he's facing defeat isn't that something that would be on the escalatory ladder is to basically start leveling Ukrainian cities destroyed infrastructure and then what is the response to the West yeah I know I know because the West may say you know what that's unacceptable to us I agree no no I I look I'm not debating how bad all of these things are I'm just asking the question what are the second and third order economic impacts because the market doesn't reflect human atrocities we may want it to but it just doesn't do a good job of that it does do a reasonable job of reflecting a discounted set of events in the future related to economic events and impacts and all I'm saying is that you know the most obvious impacts of this war have been to currencies to Commodities and to energy and the world has had six or seven months to reroute what they've needed to roughly solve a large percentage of those problems it doesn't take the fact that this is a bad war and it should end I'm not saying any of it right right no I look you make you make a good point which is that look the Market discounts cash flow so how do the cash flows get impacted you maybe write that valuation multiples have gotten close to correction but I think the thing that we don't really know is what earnings and profits and revenues are going to look like next year and part of that is about the hard Landing right like how inflated are all these companies revenues and earnings because of what are you I hear you but this is why that chart is so important every other time except in 1983 in modern history so the modern history that we have all lived says that the stock market Bottoms in the first third of a process and so if you think that this process ends in 24 that's a roughly 24 month process 21-month process we're in month seven we're in the power rally of what would map to the last six or seven patterns of behavior yeah I mean I I guess you may end up being right about this prediction I guess what I'm saying is that I personally would not want to enter the market until some of these fat tail risks are taken off the table oh yeah well talking about nibbling in the market for a second I'm not saying they're likely I'm just saying that yeah I understand obviously none of us want this to happen I'm just asking a very specific question which is and making an observation which is I wonder how the markets would react and I I I don't see it being down a thousand points and that may be wrong but by the way it could certainly be shocking to to see that yeah the diversity of views that you guys all share I think really represents the market what view do you have you too you have a view dude I I'm like what the wow what is your hand no but what is your view here's your view that we're okay we're about to just go through the toilet like what is your view from an equity Market's point of view oh just in general yeah like Equity markets your temperature how do you feel like how do you feel yeah I'm worried about money not moving what does it mean money not moving I'm really anxious about invested dollars everyone seems I think I mentioned a while ago that dollars were kind of locked up in March and then I went to this conference and people were like yeah we're loosening up and making a plan again in July because the market was kind of turning back up and now Equity markets are turning down Bond markets have turned down interest rates have spiked and there's a bunch of these currency problems so I'm very nervous about the flow of capital which I remember happening in 08 and I remember happening when we were all joking over text when covet happened and we're like hey the market can only go down 10 a day for so many days in a row and everyone was kind of like you know Jamal was talking about wearing jeans instead of he's like I could just wear the same pair of jeans for the rest of my life or something that's true demand destruction yeah yeah he's like I don't need fancy clothes I can just wear the same clothes I have let's go into a storage locker to pull those clothes out right on sale rent the rent tomorrow the CEO of Laura Piana did send me a note after that podcast he's like is everything okay [Applause] indicator of economic health is the rate of rotation of chamat's closet because that is he's like you know what I can take this season off I'll just wear last Summer's season I would guess that the rate of rotation of chemov's closet is probably predictive of IPO Market you know what I was I was there last one rotating it I'm rotating it so maybe that's a good sign the economy is about to read it again I'm ready to take some companies public no no I'm buying I'm buying stocks because I was at chamat last week and it was supposed to be black truffles and then he jumped the fence all of a sudden white truffles over my shoulder I was like chef chef chef all right Lesson Four The Dictator uh the prince of panic attacks the Sultan of science the queen of quinoa himself so see the Kevin Hart show if you're in San Francisco or San Francisco he's hilarious and uh for Montclair Ambassador David sacks the dictator himself it's moderate and we'll see you on episode 99. love you guys love you guys we'll let your winners [Music] somehow [Music] we need to get Mercies [Music]








we're seven minutes in and we've produced absolutely nothing that will go in the show hey burgers ax I'm actually angry at sax for not publishing my AMA from the other day crashed we had such a crowded room we had some people in the room for like four hours it was crazy it was like the original days of Clubhouse everyone I know that was trying to get in was texting saying they couldn't get in so it definitely capped out right I know well we hit we hit some scalability you may want to buy an extra server sax cheap weren't you the same guy who was responsible for scaring PayPal no that was somebody else that was eBay they sold it before it's killed no no that's not true we had huge scalability challenges at PayPal too it seems like a theme yeah the theme is when you have an app that's breaking out you hit scalability challenges it's called a high class problem 2 000 people is not a high class problem it's a trickle it's 2022. 2 000 people participate in the conversation is a child I haven't written code in 20 years here's what you do when you get to a thousand people coming to the room that's a lot everybody else is in passive for you've never written code ever of course I of course I drive that's a lie come on be honest oh yeah it's actually been 25. the last time I wrote code was Lotus Notes it's true and let your winners ride [Music] we open source it to the fans and they've just gone crazy [Music] so there have been three cheating scandals across poker chess and even competitive uh fishing I don't know if you guys saw the fishing one but they found weights and fillets during a fish uh way and that everybody wants us to check in on the chess and the poker scandals chess.com just released their report that this Grand Master has been suspended they have evidence he cheated basically in a bunch of uh tournaments that were in fact for money he denied that he had done that but he had previously cheated as a kid they now have the statistical proof that he was playing essentially perfect chess and uh they've outlined this in like hundreds of pages in a report Saxy what are your thoughts on this uh scandal in chess Magnus Carlson finally came out and explained why he thought Hans Neiman was cheating basically he got the strong perception during the game that Hans wasn't really putting in a lot of effort that he wasn't under a lot of stress and he's he it's his experience that when he's playing you know the top players they're intensely concentrating and the Hans demon didn't seem to be exerting himself at all so his you know hackles were raised and got suspicious and then you know he has had this meteoric rise the fastest rise in classical chess rating ever and I guess there were he had gotten suspended from chess.com in the past for cheating so on this basis and maybe other things that Magnus isn't telling us Magnus basically said that this guy is cheating I think the maybe the interesting part of this is that there's been a lot of analysis now of Hans Neiman's games and I just think the methodology is kind of interesting so what they do is they run all of his games uh through a computer and they compare his moves to the best computer move and they basically assign a percentage that correlation matches the correlation matches the computer move and what they found is there were a handful of games where it was literally a hundred percent that's basically impossible without cheating I mean you look at the top players who through an entire career have never had 100 game that you know chess is so subtle that the computer can now see so many moves into the future that nailing the best move every single time for 40 50 100 moves is just and and and in chess which a human really can't do that well is that there are positional sacrifices that you will make in short lines that pay off much much later in the future which is impossible for a human to calculate and so you know and you saw this by the way when uh I think it was the it it was the Google AI the deepmind AI that also play chess so the idea that this guy could pay could play absolutely perfectly according to those lines is only possible if you're cheating right exactly so so there were a handful of games at 100 and then there were tournaments where his percentages were in the 70s something plus and so just to give you some basic comparison Bobby Fischer during his legendary 20-game winning streak uh was at 72 percent so he only matched the computer so for best move 72 of the time Magnus Carlson playing at his best is 70 percent uh Gary Kasparov in his career was 69 and then the you know the the super GM's category are typically in the 64 to 68 range so I think it's really interesting actually how you can now quantify by comparing the human move to the best computer move and it's multiple computers training the best they actually have it provides a way to assess who the greatest player ever is um I actually thought that it was Magnus but now maybe there's a basis for believing it was Bobby Fischer because he was at 72 and Max is only at 70. however look the idea that Hans Neiman is in the 70s 80s or 90s during tournaments would be you know just an off the charts level of play and if if he's not cheating then we should expect over the next couple of years that he should rapidly become the world's number one player over the board uh you know now that they have all this anti-cheating stuff right so it'll be interesting to see what happens in his career now that they've really cracked down on you know on with with anti-anti Gene technology I have a general observation which is these people are complete losers the people that cheat in any of these games don't understand this basic simple idea which is that trying is a huge part of The Human Experience the whole point is to be out there in the field of play trying and it's basically taking the wins and the losses and getting better that is the path that's what's fun once you actually win it's actually not that much fun because then you have this pressure of maintaining Excellence that's a lot less enjoyable than the path to getting there and so the fact that these people don't understand that makes them slightly broken in my opinion and then the other thing is like why is it that we have this strain of people now that are just so devoid of any personal responsibility that they'll just so brazenly take advantage of this stuff it's really ridiculous to be they don't it's really sad these people are pathetic it's really pathetic this but it is really interesting how they caught him and running this against the computer here's a chart of um his scores in these tournaments oh well here is this first chart is how quickly he Advanced which was off the charts and then the second chart that's really interesting is um his chest.com strength so if you don't know chess.com it has become like a juggernaut in the Chess World especially after that HBO series came out a lot of people subscribe to it I subscribed to it I like to play chess there and man you look at the chest strength score there he was just like perfect and then the number of games he likely cheated in you can see the last two columns he's basically cheating in every game you know Queen's Gambit yeah great show on Netflix and he he said he didn't cheat in any uh of the uh games where they were live streaming but they've proven that wrong sax how does he cheat in person then well that's the thing no one really knows and I don't want to overly judge it until they have hard proof that he was cheating I mean look here's the thing he was never caught in the act it's just that the computer evidence you know seems pretty damning and I mean here's the thing is I don't know how they prove I don't know how they prove that he was cheating over the board without actually catching him doing it and I don't I still don't think anyone really has a good theory in terms of how he was able to do that well it's not just him though like look the the fishing thing Jason which was crazy I think Friedberg shared the video this guy was in a fishing competition and they basically caught these fish and then they put these big weighted pellets inside the fish's body they even put like a you know chicken breast and chicken fillets inside of the things yeah you know uh then there's no crossover now in poker everybody's afraid that there are ways in which you can read the RFID and some of the cards and some of these you know televised situations and and front run what the what the playing situation is so that you know whether you're winning or losing and again I just asked the question like is it is it is this are things that bad that this is what it gets to like we all play poker the idea that we would play against somebody that would take that edge yeah it's gross yeah it's really makes me really it's sad so disappointing yeah it's horrible one one observation might be that across all three because I'm trying to find some common thread across these but it could be that there was a lot of cheating going on for a long time and maybe the fact that we do have so much digital imagery that's live on these things now and so much coverage and everyone's got a cell phone that suddenly our perception of the cheating in competitive events is becoming more tuned whereas maybe there's been a lot of cheating for a long time and it's just kind of coming to light I mean we didn't have a lot of live streaming in poker who knows I mean we could probably ask Phil this we're kidding but like for how many years well there was Visions yeah well there were tons of cheating and online poker yeah remember like people are using these like software programs that would uh track the hand history yeah of your opposition yeah exactly so so it helped you assess whether the person might be bluffing in that particular situation yeah like he has superhuman memory so I don't know if you guys I don't know if you guys watch Twitch like video games like fortnite or whatever but there are like players that have been accused of using the screen overlay systems that basically more accurately show you and drive the mouse to where an individual is on the screen so you can more accurately shoot them and so there's software overlays that make you a better you know competitive video I'll tell you what the through line is and then this the stuff basically became like so now what's interesting is now there's eye tracking software that people are using on Twitch streams to see if the individual is actually spotting the target when they shoot or if the software is spotting the target yeah they're called reverse team Bots they're aimbots yeah yeah and like reverse cheap the whole thing and I think what's interesting is just that there's so much you know Insight now so much more video streams so much more I mean think about all those guys yeah and there's cell phones and they all videoed this thing happening yeah I think 10 years ago that wouldn't have been the case and there wouldn't have been a big story about it and so you said there was a theme you wanted to uh there was a threat I I think the theme is is pretty obvious which is that there's been an absolute decay of personal responsibility people don't feel like there's any downside to cheating anymore and they're not willing to take it upon themselves to take a journey of wins and losses to get better at something they want the easy solution the easy solve the quick answer you know that gets them to some sort of finish line that they've imagined for themselves will solve all their problems the problem is it doesn't solve any problems and it just makes them a wholly corrupt individual yeah okay so let's talk about this Hustler Casino Live uh cash game play there's this woman Robbie who is a new player apparently she's being staked in a very high stakes game she's playing as a guy Garrett who is a very very um known winning cash game player and it was a very strange hand on the turn all the money gets in she says she has a bluff catcher then she claims that she had a thought she misread her hand now people are saying that the poker world seems to be 70 30 that she cheated but people keep vacillating back and forth there was a lot of weird word salad that she said that she had a bluff catcher which would normally be an ace then she said she thought she had a pair of Threes And then she immediately said afterwards that he was giving her too much credit they confronted her in the hallway she gave the money back because she supposedly loves production so all this stuff sounds very weird one side says okay while this is happening because she's a new player the other side is saying somebody was signaling her that she was good and giving her just a binary you're good because if you were gonna cheat cheating with Jack high in a situation where you just put all in for a 200 quarter million dollar pot seems very suspect uh I don't know if you guys watched the hand breakdown where does everybody stand on a percentage basis I guess if they think she was cheating or not because we this is not definitive obviously it's not like they cut it open and found the ball bearings it's not it's not so obvious in that situation but I think the way that that line played made no sense and I guess in her previous hand she had a jack three and there was a three on the board so if she misread her hand was ten ten nine three no but you would have but you would have you would have had to call the Flop so I'm thinking what yeah no I get it the hand makes no sense but I'm just trying to find a logical explanation and that Jack three explanation somebody kind of fed that to her and then she changed her story to that so this changing of the story is the thing I was sort of keyed on Friedberg is why does she keep changing her story is it because she's embarrassed maybe she's had a couple of beverages or whatever or she's just a new player and she's embarrassed by her play and can't explain it she can't explain the hand history all of the things you're saying are probable I don't think that yeah I don't think there's any data for us to have a strongly held point of view on this I'm just looking forward to us all playing live yeah HCL Poker Live October 21st minus David Sachs unfortunately to mop J Cal gerthner Stanley Tang Phil Hellmuth so we're going to be playing on the same stream we're gonna be playing on the same screen same table I figured out how to hack into the video stream for the camera I just got my RFID sunglasses as well I'm gonna read all your shitty hands jaycal I'm gonna take your money and I'm gonna buy your kids for my 40th birthday Sky organized poker in Tahoe okay and and we we brought in the team from CBS that was the present and they they taped it as if it was being broadcast with whole cards and commentators and we edited it into a two-day show it was an incredible birthday present I I it was it's one of the greatest things that that anybody's ever given me I appreciate there was a one hour block where somebody at the table said okay guys how about we do a cheating free-for-all yes where you could look at each other's cards and you know you could sort of help somebody else switch cards whatever in that one hour our beautiful home game of friendship became Lord of the Flies I have never seen so much hatred Angling Behavior oh my God it was incredible all that humans are capable of so I I hope that we never uh we never we never see cheating in our game yeah well we'll see how it goes on October 21st at HCL Poker Live I'm excited I can't wait it should be a lot of fun it should be a lot of fun oh and uh we're not having any official 100 stuff but the fans uh some of the fans who were at the um all in Summit 2022 are doing uh their own 100 episode 100 meetups on October 15th I think all in meetups.io so there are fan meetups happening in Zurich in a bunch of other places I'm going to FaceTime into some of them and just say hi to the fans you know it might be like 10 people in a bar somewhere um I think the largest one is like Miami or San Francisco are going to be like 50 people or something we should all FaceTime it that'd actually be kind of fun I I'm basically I told them to send me an invite and I'll FaceTime in any time this is next week when is this the 15th I think is this occurring the October 15th it's a Saturday the Saturday after the 100th episode people are doing these all in meetups.io what's next earlier this week it was reported that Elon contacted Twitter's board and suggested that they move forward with closing the transaction at the original terms and the original purchase price of 54.20 cents a share in the couple of days since then and even as of right now with some news reports coming out here on Thursday morning um it's it appears that there are still some question marks around whether or not the deal is actually going to move forward at 5420 a share because Elon as of right now the report said is still asking for a financing contingency in order to close and there's a lot of back and forth on what the terms are meanwhile the court case in Delaware is continuing forward on whether or not Elon breached his terms of the original agreement to close and buy Twitter at 54.20 as we know leading up to the signed deal or a post signing the deal Elon put together a financing Syndicate a combination of debt investors as well as Equity co-investors with him to do the purchase of Twitter at 54.20 a share so the 40 some odd billion dollars of capital that's needed was committed by a set of investors that were going to invest debt and equity and there's a big question mark now on whether or not those investors want to or would still consummate the transaction with Elon given how the markets have turned and given how debt markets are trading and Equity markets are trading so chimath I'd love to hear your point of view on what um hurdles Does Elon still have in front of him does he still want to get this done and is there still a financing Syndicate that's standing behind him at the original purchase price to get it done that's a great question um maybe the best way to start is Nick do you want to queue up what I said in August 25th the lawsuit really boils down to one very specific clause which is the Pinnacle question at hand which is there is a specific performance Clause that Elon signed up to right which you know his lawyers could have struck out and either chose not to or you know couldn't get the deal done without and that specific performance Clause says that Twitter can't force him to close at 5420 a share and I think the the issue at hand at the Delaware business court is going to be that because Twitter is going to point to all of these you know gotchas and disclaimers that they have around this bot issue as their cover story and I think that really you know this kind of again builds more and more momentum in my mind that the most likely outcome here is a settlement where you have to pay the economic difference between where the stock is now and 5420 which is more than a billion dollars or you close at some number below 54.20 cents a share and I think that that is like you know if you had to be a betting person that's probably and if you look at the the way the stock is traded and if you also look at the way the options Market trades that's what people are assuming that there's a seven to ten billion dollar swing and if you impute that into the stock price you kind of get into the fifty one dollars a share kind of a an acquisition price again I'm not saying that that is right or should be right that's just sort of what the market says yeah so so I it turns out that you know sort of like that kind of guessed him it turned out to be pretty accurate because the stock today is at 51 this year so I think that the specific performance thing is exactly what this thing has always hinged on and I think that there was a realization that there were very few outs around how that contractual term was written and agreed to so there is an out in the contract and that out says that I think it's by April if um if the deal doesn't get done by April then the banks can walk away from their commitment to fund the debt and if the banks walk away then Elon does have a financing contingency that allows him to walk away so the actual set of events that have to happen is those two things specifically get to April so the banks can pass and say we've changed our mind market conditions are different and then Elon is able to say well you know the banks just walked away right now the banks if you look at all of the debt that they've committed to while they committed at a point in time when the debt markets were much better than they are today in the last you know six or seven months since they agreed to do this the debt markets have been clobbered and specifically junk bonds and a bunch of junk bond debt the yields that you have to pay so the price to get that kind of debt has skyrocketed so roughly back of the envelope math would tell me that right now the banks are offside between one and two billion dollars because they're not going to be able to sell this debt to anybody else so I think the banks obviously want to weigh out the problem is their only way out is to run the shot clock off until April so I think that's the dance that they're in right now elon's trying to find a way to solve you know for the merger I think Twitter is going to say we're not going to give you a financing contingency you have to bring the banks in and close right now and then we will not go to court otherwise we're going to court and so I think it's a very delicate predicament that they're all in but my estimate is that the equity is probably 20 percent offside so it's not a huge thing he can make that up because he can create Equity value like nobody's business the debt is way offside by a couple billion dollars which is hard to make back but I think in the end you know given enough time they can probably make that back the best off in all of this are the Twitter shareholders they're getting an enormous premium to what that company is worth today in the open market and so I think this deal is going to close it's probably going to close in the next few weeks and had you bought Twitter when we were talking about it in August you would have made 25 in six weeks and you know if the deal closes at 54 you would have made it you know a third of your money in eight weeks which is you know very hard to do in a market if you're a GP at one of the funds like Andreessen or Sequoia and you had made this commitment to Elon or even Larry Ellison a couple months ago do you fight against closing at 5420 do you stick with the deal and support him I mean what do you do given that the premium is so much higher than where the market would trade it at today some people are saying the stock should be at like 20 bucks a share or something the average premium in an m a transaction in the public markets is about 30 percent so um and I think the fair value of Twitter is around 32 to 35 bucks this year so you know it's not like he is massively massively overpaying and so you know I would just sort of keep that in the realm of the possible so like if you take 35 as the midpoint fair value is really 45.50 so yeah he paid 20 more than he should have but he didn't pay a hundred percent more so it's not as if you can't make that Equity back as a private company particularly because there's probably ten dollars of fat in the stock if you think about just Opex right in terms of all the buildings they have maybe they don't need as many employees maybe they revisit salaries you know one thing is when I looked at doing an activist play at Twitter I think I mentioned this five or six years ago one of the things that I found was at that time Twitter was running their own data centers and you know the most obvious thing for me at that time was like we're going to move everything to AWS now I don't know if that happened but I'm sure that if it hasn't just bidding that out to Azure gcp and AWS can raise you know three or four billion dollars because I'm sure those companies would want this kind of an app on their cloud so there's all kinds of things that I think Elon can do as a private company to make back maybe the small bit that he overpaid and then he can get to the core job of rebuilding this company to be usable uh this product to be usable because look I'll just speak as a user right now it has been decaying at a very very rapid clip and I think that his trepidation in closing the merger in part also even though he hasn't said it has to do with the quality of the experience it's just degraded it's not as fun to use as it was during the pandemic um or even before the pandemic so something is happening inside that app that needs to get fixed and if he does it he'll make a ton of money sort of like what happened with Friendster and Myspace and any social networking app over time the quality degrades if it's not growing it's shrinking and it gets if it if it's if it's not growing and also if the product hygiene isn't enforced in code and product hygiene in this case are this you know the spam Bots you know the trolling it can really take away from the experience yeah I mean interestingly like if you think back to the original the the starting Days the original days of Twitter I don't know if you guys remember you would send in an SMS to do your Tweet and then it would post up and other people would get the SMS notification and um it would crash all the time and the apps were the app was notoriously crashing it was poorly architected at the beginning and some people have argued that Twitter has had a cultural technical incompetence from the earliest days I think that's a little harsh so I do think look Twitter was known for what's called a fail whale you know they used to have these fail whales constantly and they did hire people that attempted to try to fix it I remember the the funniest part of when I went in there and said hey here's my plan and here's what I want to do is literally a day or two later the head of engineering quit I can't remember who his name was but he was just out the door uh but it is a I think it is a team that has tried its best that probably at the edges definitely made some technical miscalculations like I said at that time the idea that any app of that scale would use their own data centers made note technical sense whatsoever it made the app laggy it made it hard to use it made it more prone to downtime to your point but that being said I would be shocked if they haven't made meaningful improvements because the stack of the internet has gotten so much better over the last seven years and so to your point David if they didn't take advantage of all these new abstractions and mechanisms mechanisms to rebuild the app or to rebuild search or to rebuild you know how you know all these infrastructure elements of the app work I would be really surprised because then what are they doing over there yeah well look I mean to the point earlier besides the product points there was a a really good a tweet I liked that said for what it's worth I think Elon will show us just how lean the Silicon Valley Advertising companies can be run at the very least it'll be an interesting thought experiment for spectators um because if he does go in and actually does significantly reduce Opex and head count and the company does turn profitable and he can grow it well look it'll really by the way it'll really be a beacon from the financial big companies yeah from a financial perspective there is ten dollars a share in Opex cuts that he should make right away just so that he is economically break even and he looks like every other m a transaction you know you paid a 30 premium and you bought a company there is a lot of margin of safety there if Elon does that so to your point there probably is and there probably needs to be a meaningful riff at Twitter I'm not saying it's right I'm not saying it's you know and I feel for the people that may go through it but from a financial perspective the math makes sense for him to do that because then he is a break even proposition on a go in m a transaction and I think that there's there's a lot of intelligent Financial sense so that all the debt holders feel like he's doing the right thing and all the equity holders particularly see a chance for them to make a decent return here all right well let's move on conversation a great conversation between Dave Friedberg uh about the Twitter transaction and now we're being rejoined by our besties yeah how was your cappuccino Jayco that was great I have a I have a nice cold brew here a nice iced Cobra and a nice drip coffee I'm working but I'd love to talk about topics that I'm not uh being subpoenaed or depositioned about we will have a lot to say in the coming weeks I'd love to talk about topics that my lawyers have advised me not to talk about how Eerie was our prediction 51 bucks a sharing it is exactly where the stock is right now that's Yuri yeah uh all right lots of advances let's keep going yeah speaking of Elon uh Tesla AI day was last week I actually went it was great uh this is a recruiting event where what did you do after Fel helmuth and I went and uh I drove Phil home youth home uh the end uh no it's a great event and it uh is essentially a giant recruiting event hundreds of AI sorry sorry I'm sorry I'm sorry can we just talk about Phil hamley's non-sequitur in the group chat about Ken Griffin I mean oh yeah where he's just like I made a joke about his net worth and what he's going on what is going on we were talking about the most serious of topics and he just comes seven seconds to fill it's what's going on seven seconds to fill by the way I uh I I was uh texting with uh Daniel negranu he did an incredible podcast if you guys with Lex Friedman if you haven't listened to it the Daniel negronu uh pod with Lex is incredible but I I was joking with Daniel that there's a section where he's talking about the greatest poker players of all time and if you look in the bar of YouTube it shows where the most viewership was and it was exactly the 30 seconds he talks about helmuth and I said to Daniel this must have been Phil re-watching it over so anyway the event was um uh super impressive Elon only spoke when he showed The Optimist the new robot he's building a a general purpose robot that will work in the factories it's very early days but they showed two versions of it and um he said he thinks they could get it down to twenty thousand dollars it's going to work in the factory so it's actually got a purpose and obviously the factors already have a ton of robots but this is more of a robot that uh will benefit from the general or the the computer vision and the AI the narrow AI being pursued by the self-driving team this is like two and a half hours of really intense presentations um the most interesting part for me was uh they're building their own super computer and their chips and the dojo supercomputer was really impressive um at how much they can get through uh scenarios so they're building every scenario of every self-driving I actually have the full self-driving beta on my car I've been using it it's pretty impressive I have to say if you haven't used it yet I feel like AI is moving at a pretty Advanced clip the past year if you haven't also seen meta announced a text to video generator so this is even more impressive than dolly dolly you put in a couple of words Friedberg and you get a painting or whatever this is put in a couple of words and you get a short video so they had one of a teddy bear painting a teddy bear so it looks like you're going to be able to essentially create a whole movie by just talking to a computer really impressive where do you think we are Freeburg in terms of the compounding nature of these narrow AI efforts you know obviously we saw poker chess go Dolly gpt3 self-driving it feels like this is all compounding at a faster rate or am I just you imagining that yeah look I mean it's interesting when when people saw the first computer playing chess they said the same thing I think any time that you see progress with a computer that starts to mimic the predictive capabilities of a human it it it's uh it's impressive but I will argue and I just I'll say a few words on this it's I think this is part of a 60-year cycle that we've been going through um fundamentally what humans and human brains do is we can sense our external environment then we generate Knowledge from that sensing and then our brains build a model that predicts an outcome and then that that predicted outcome is what drives our actions and our Behavior we observe the sunrise every morning then we observe that it sets and you see that enough times and you build a predictive model from that data that's been generated in your brain that I predict that the sun has risen it will therefore set it has said it will therefore rise and I think that the Computing approach is very similar it's all about sensing or generating data and then creating a predictive model and then you can drive action and initially the first approach was just basic algorithms and these are deterministic models that are built it's a piece of code that says here's an input here's an output and that that model is really built by a human and a human designed to design that algorithmic model and said this is what the uh the predictive potential of the software is then there was this term called data science so as data generation began to proliferate meaning there was far more sensors in the world it was really cheap to to create Digital Data from the physical world really cheap to transmit it really cheap to store it and really cheap to compute with it data science became the hot term in Silicon Valley for a while and these models were not just a basic algorithm written by a human but it became an algorithm that was a similar deterministic model that had parameters and the parameters were ultimately resolved by the data that was being generated and so these models became much more complex and much more predictive finer granularities uh finer range then we used this term machine learning and in the data science era it was still like hey there's a model and you would solve it statically you would get a bunch of data you would statically solve for the parameters and that would be your model and it would run machine learning then allowed those parameters to become Dynamic so the model was static but generally speaking the parameters that drove the model became dynamic as more data came into the system and they were dynamically updated and then this era of AI became and that's the new catch word and what AI is realizing is that there's so much data that rather than just resolve the parameters of the model you can actually resolve a model itself the algorithm can be written by the data the algorithm can be written by the software and so with a with AI example so poker plug an Adaptive model so people uh so you're playing poker and the software begins to recognize behavior and it builds a predictive model that says here's how you're playing and then over time it actually changes not just the parameters of the model but the model itself the algorithm itself and so Ai and then it eventually gets to a point where the algorithm is so much more complex that a human would have never written it and suddenly the AI has built its own intelligence its own ability to be predictive in a way that a human algorithmic programmer would have never done and and this is all driven by statistics so none of this is new science person say there's new techniques that all on their underlying use statistics as their basis and then there's these techniques that allow us to build these new systems of model development like neural Nets and so on and those statistics build those neural Nets they they solve those parameters and so on but fundamentally there is an um geometric increase in data and a geometric decline in the cost to generate data from sensors because the cost of sensors is coming down with Moore's Law transmit that data because the cost of moving data has come down with Broadband Communications the cost of storing data because the cost of dram and and solid-state hard drives has come down with Moore's Law and now the ability to actually have enough data to do this AI driven where people are calling AI but it really is the same it's part of the spectrum of things that have been going on for 60 years to actually drive predictions in the in the world is really being realized in a bunch of areas that we would have historically been really challenged and surprised to see and so my argument is at this point Big Data played a big role yeah yeah we've over the last decade we've reached this Tipping Point in terms of data generation storage and computation that's allowed these statistical models to resolve dynamically and as a result they are far more predictive and as a result we see far more human-like behavior in the predictive systems both physics both those that are you know like a like a robot is the same as one that existed 20 years ago but the way that it's run is using the software that is driven by this Dynamic model and that data is for a better answer okay I have two things to say but one the first one is a total non-sequitur so use the term data scientist do you know where the term data scientist came from as classically used in Silicon Valley it came from Facebook and it came from my team in a critical moment this was in 2007 I was trying to 2008 I was trying to build the growth team this is the team that became very famous for getting 2 billion users and you know building a lot of these algorithmic insights and I was trying to recruit a person from Google and he was like a PhD in some crazy thing like astrophysics or particle physics or something and we gave him an offer has a data analyst because this is what I needed at the time this is what I thought I needed an analyst you know to analyze data and he said absolutely not I'm offended by the job title and I remember talking to my my HR you know business process partner and I asked her like I don't understand what is this where is this coming from and she said he Fashions himself a scientist and I said well then call him a data scientist so we wrote in the offer for the first time data scientist and at the time people internally were like this is a dumb title what does this mean anyways we hired the guy he was a star and uh and that title just took off internally so Rob it's funny because parallel we started climate Corp in 2006 and the original the first guy I hired was a buddy of mine who was a 4.0 for in applied math from Cal and then everyone we hired on with him we called them the math team and they were all applied math and statistics phds and we called them the math team and it was really cool to be part of the math team but then we switched the team name to data scientist and then it obviously created this much more kind of impressive role impressive title Central function to the organization that was more than just a math person or data analyst as I think it may have been classically treated because they really were building the algorithms that drove the models that made the product work right Peter Thiel is a very funny observation not funny but you know observation which is you should always be wary of any science that actually has science in the name political science social science I guess maybe data scientists you know because the real Sciences don't need to qualify themselves physics chemistry biology anyways that's so here's what I wanted to talk about with respect to AI two very important observations that I think is useful for people to know the first one Nick if you throw it up here is just a baselining of you know when we have thought about intelligence and compute capability we've always talked about Moore's Law and Moore's Law essentially this idea that there is a fixed amount of time where the density of transistors inside of a chip would double and roughly that period for many many years was around two years and it was largely led by Intel and we used to equate this to intelligence meaning the more density there was in a chip the more things could be learned and understood and we used to think about that as the progression of how Computing intelligence would grow and eventually Ai and artificial intelligence would would get to mass Market well what we are now at is a place where many people have said Moore's law has broken why it's because we cannot cram any more transistors into a fixed amount of area we are at the boundaries of physics and so people think well does that mean that our ability to compute will essentially come to an end and stop and the answer is no and that's what's demonstrated on this next chart just to make it simple which is that what you really see is that if you think about you know super computing power so the ability to get to an answer that has actually continued unabated and if you look at this chart the reason why this is possible is entirely because we've shifted from CPUs to these things called gpus so you may have heard companies like Nvidia why is companies like Nvidia done so well it's because they said they raised their hand and said we can take on the work and by taking on the work away from a traditional CPU you were able to do a lot of what Freeburg said is get into these very complicated models so this is just an observation that I think that we are continuing to compound knowledge and intelligence effectively at the same rate as Moore's Law and we will continue to be able to do that because this makes it a problem of power and a problem of money so as long as you can buy enough gpus from Nvidia or build your own and as long as you can get access to enough power to run those computers there really isn't many problems you can't solve and that's what's so fascinating and interesting and this is what companies like open AI are really proving you know when they raise the billion dollars what they did was they attacked this problem because they realize that by Shifting the problem to gpus it left all these amazing opportunities for them to uncover and that's effectively what they have the second thing that I'll say very quickly is that it's been really hard for us as a society to build intelligence in a multi-modal way like our brain works so think about how our brain works our brain works in a multimodal way we can process imagery we can process words and sounds we can process all of these different modes text into one system and then Intuit some intelligence from it and make a decision right so you know we could be watching this YouTube video there's going to be transcription there's video voice audio everything all at once and we are moving to a place very quickly where computers will have that same ability as well today we go to very specific models and kind of balkanized silos correct to solve different kinds of problems but those are now quickly merging again because of what I just said about gpus so I think what's really important about AI for everybody to understand is the marginal cost of intelligence is going to go to zero and this is where I'm just going to put out another prediction of my own when that happens it's going to be incredibly important for humans to differentiate themselves from computers and I think the best way for humans to differentiate ourselves is to be more human it's to be less compute intensive it's to be more empathetic it's to be more emotional a lot less emotional because those differentiators are very difficult for Brute Force compute to solve be careful the replicants on this call are getting a little nervous here they're not processing that that was an emotional statement do not want to process that one well I to your point uh during this AI day um they were showing in self-driving as you're talking about this balkanization and trying to um make decisions across many different uh decision trees you know they're looking at Lane changes they're looking at other cars and pedestrians they're looking at road conditions like fog and rain and then they're using all this big data to your point Freeburg to run uh tons of different simulations so they're building like this virtual uh World on Market Street and then they will throw people dogs cars people about that into the simulation it's such a wonderful example imagine that system hears a horn yeah well you hear a horn so clearly there's some auditory expression of risk right there's something risky and now you have to scan your visual field you have to probabilistically decide what it could be what the evasive maneuver if anything should be so that's a multimodal set of intelligence that today isn't really available yeah but we have to get there if we're going to have real full self-driving so that's a perfect example Jason a real world example of how hard the problem is but it'll get solved because we can brute force it now with with chips and with compute I think that's going to be the very interesting thing with the robots as well is all of these decisions they're making moving cars through roads all of a sudden we're going to see that with vetoles vertical takeoff and Landing you know aircraft and we're going to see it with this General robot and everybody wanted to ask Elon about General AI you know the Terminator kind of stuff and his position is I think if we solve enough of these problems Friedberg it'll be an emergent Behavior or an emergent phenomenon I guess would be a better word based on each of these cities crumbling you know each of these tasks getting solved by groups of people you have any thoughts as we wrap up here on the discussion about a general Ai and the timeline for that because obviously we're going to solve every vertical AI problem in short order I spoke about this a little bit on um the ask AMA on call in on Tuesday night um once sax gets it out you can listen to it but I really have this strong belief that the servers crashes this episode drops okay yeah you guys can try to download the app but it might crash so just be careful so so here's here's my my course that you were 10 times more popular than jaycal so it's unexpected levels of traffic well you had you did have an account with 11 000 followers I mean it might look like you're right we'll put you on that account next time yeah please yeah I'm starting from zero yeah that's fair that's fair yeah look my core thesis is I think humans transition from being um let's call it you know passive in this system on Earth to being laborers and then we transition from being laborers to being creators and I think our next transition with AI is to transition from being creators to being narrators and what I mean by that is as as we started to do work on Earth and engineer the world around us we did labor to do that we literally plowed the fields we walked distances we built things and over time we built machines that automated a lot of that labor you know everything from a plow to a tractor to a caterpillar equipment to a microwave that cooks for US Labor became less we became less dependent on our labor abilities and then we got to switch our time and spend our time as creators as knowledge workers and a vast majority of the developed world now primarily spends their time as knowledge workers creating and we create stuff on computers we do stuff on computers but we're not doing physical labor anymore as a lot of the knowledge work gets supplanted by AI as it's being termed now but really gets supplanted by software the role of the human I think transitions to being one of a narrator where instead of having to create the the blueprint for a house you narrate the house you want and the software creates the blueprint for you dictate and instead of yeah and instead of creating the movie and not spending 100 million dollars producing a movie you dictate or you narrate the movie you want to see and you iterate with the computer and the computer renders the entire film for you because those films are shown digitally anyway so you can have a computer render it instead of creating a new piece of content you narrate the content you want to experience you create your own video game you create your own Movie experience and I think that there's a whole Evolution that happens and if you look Steve pinker's book Enlightenment now has a great statistic a set of statistics on this but the amount of time that humans are spending on leisure activities per week has climbed extraordinarily over the past couple of decades we spend more time enjoying ourselves and exploring our creative interests than we ever did in the in the past in human history because we were burdened by all the labor and all the creative and knowledge work we had to do and now things are much more accessible to us and I think that AI allows us to transition into an era that we never really thought possible or realized where the limits are really our imagination of what we can do with the world around us and the software resolves to the um and automation resolves to make those things possible and that's making a really exciting kind of vision for the future that I think AI enables Star Trek had this right people didn't have to work and they could pursue things in the Holodeck or whatever that they felt was rewarding to them but speaking of jobs uh the job reports for August came in we we talked about this we were trimming 300 000 jobs a month and we're wondering if the other shoe would drop but boy did it drop 100 over a million jobs burned off in August so without getting into the macro talk it does feel like what the FED is doing and companies doing hiring freezes and cuts is finally finally having an impact if we start losing a million as we predicted could happen here on the show people might actually go back to work and lift and Uber are reporting that the driver shortages are over they no longer have to pay people spiffs and stuff like that to get people to come back to work so at least here in America feels like we're turning a corner do we want to go can we let's talk about the marijuana yeah yeah I was about to say we got a couple of things we really want to get to here uh Ukraine section 230 and then this breaking news uh we'll pull it up here on the screen while we're recording the show President Biden says and I'm just going to quote here first I'm pardoning all prior Federal offenses of simple marijuana possession there are thousands of people who are were previously convicted of simple possession who may be denied employment housing or educational opportunities there's not my pardon will remove this burden that's big news second I'm calling on Governors to part in simple State marijuana possession offenses just as no one should be in a federal prison solely for possessing marijuana nobody should be in a local jail or state prison for that reason either finally this is happening third and this is an important one we classify the marijuana at the same level as heroin and even and more serious than fentanyl makes no sense I'm asking secretary bakara and the Attorney General to initiate the process of reviewing how marijuana is scheduled under federal law I'd also like to note that as federal and state Regulators change we still need important limitations on trafficking marketing and under eight hours of marijuana thoughts on this breaking news is this giving the the timing on this is kind of midterm related it just seems is this is this I guess is this a politically popular decision to do I think so I mean look I support it so buying finally did something I like great I mean I thought that we should decriminalize marijuana for a long time or specifically you know I agree with this idea of descheduling it it does not make sense to treat marijuana the same as heroin as a schedule one narcotic just doesn't make any sense it should be regulated separately and differently obviously you want to keep it out of the hands of minors but no one should be going to jail I think for simple possession so I do agree with this and I think the thing they need to do I don't see it mentioned here is they should pass a federal law that would allow for the normalization of let's call it legal legal um you know cannabis companies so so companies that are allowed to operate under state laws like in California should have access to the banking system should have access to payment rails because right now the reason why the legal cannabis industry isn't working at all in California is because they can't bank they can't take payments so so it's this weird all-cash business that makes no sense so so listen if we're not going to criminalize it as a drug like heroin if we're going to allow states to make it legal then allow it to be a more normal business where the state can tax it and it can operate in a more above board way is what you're saying the federal medic I think it could still be regulated on a state-by-state basis but I think you need the feds to bless the idea that Banks and payment companies can take on those clients which states have already said are legally operating companies and right now they can't and it's a huge gap in the laws so maybe that's the one thing I would add to this but I don't have any complaints about this right now based on what we know from this tweet storm and I would say this by the way was an about face this was an about faced by Biden yeah do you know what the polling data says I mean is is there I'm assuming there's big support in kind of the independence and the middle uh for this it was 70 at one point yeah yeah so so look this to me this is the kind of thing that Biden should be doing with the 50 50 Senate finding these sorts of bipartisan compromises right so yeah I look this is good news for us why hasn't this happened in the past like what's been the political reason that other presidents Obama even didn't that that have there was a similar ideology like why why but why does anyone know why this hasn't been done in the past there was rumors he was going to do in the second term they just didn't have the political Capital why to do it why I don't I don't well it's hard ones doesn't require yeah the pardon doesn't require political capital I think it's probably the perception that this is soft on crime in some way or there wasn't enough broad-based support as David said I mean I think the the United States population has moved pretty meaningfully in the last 20 years look at the chart here um you know we were talking about 2000 it was only 31 percent uh and then you look at 2018 it's up at 60 plus percent so when people saw the states doing it and they saw absolutely no problem you know in every state and I think what people will see next I think that's a Gallup poll that's a Gallup pollution yeah yeah so I mean it's increased dramatically MDMA psilocybum and some of these other plant-based medicines Ayahuasca are next and they're doing studies on them now I don't want to take away from how important this is for uh all the people for whom this will positively impact I just want to talk about the schedule change for marijuana as a parent one of the things that I'm really really concerned about is that through this process of legalization getting access to marijuana has frankly become too easy particularly for kids at the same time I saw a lot of really alarming evidence that the the intensity of these marijuana-based products have gone you know I think it's like five or six times more intense than I don't know 50 or 100 tomorrow much higher right so so it's no longer you know this kind of like you know Do no harm drug that it was 20 years ago this is this could be actually David the way that it's productized today as bad as some of these other you know uh narcotics so in June of this year the Biden Administration basically made this press release that said the FDA is going to come out with regulations that would cap the amount of nicotine in cigarettes and I think that was a really smart move because it basically set the stage to taper nicotine out of uh out of cigarettes which would essentially you know decapitate it as a an addictive product and I think by thinking about how it's how it's dealt with what I really hope the administration does is it empowers the FDA if you're going to legalize it you need to have expectations around what the intensity of these drugs are because if you're delivering drugs OTC and now any kid can go in at 18 years old and buy them which means that 18 year olds are going to buy them for 16 year olds 16 year olds are going to get fake IDs to buy them for themselves you need to do a better job so the parents you're helping parents do our job here's what you need one like alcohol if alcohol is 21 then of course yeah fine but even alcohol David you know that there are there are we know what the intensity of these are their labels and there's warnings and you know the difference between they're they're getting wine versus hard alcohol but let me just give you some statistics here chamoth if you think about the the Cannabis in the 90s uh and prior to that uh they've been very you've been a ton of studies on this in Colorado it was uh the THC content was less than two percent and then in 2017 we were talking about you know things going up to uh 17 to 28 for a specific strain so they have been building strains like Girl Scout cookies Etc that have just increased and increased and then there are things like shards and obviously Edibles you can create whatever intensity you want so you have this incredible there you know variation you could have an edible that's you know got one milligram of THC one that has a hundred or you could have a pack of Edibles and you see this happen in the news all the time some kid gets their parents pack or somebody gives one and the kids don't know um and this dabbing phenomenon combined with dabbing is like the shards like this really intense uh stuff combined with the Edibles is really the issue and the labeling of them so you got to be incredibly careful with this it's not good for kids it screws up their brains and so yeah be very careful I have a I have a zero tolerance policy on this stuff I don't care if it's legal illegal like I don't want my kids touching any of this stuff until it's not for kids obviously yeah but we also should not be over there until they're 35 or 40 and even then I hope they never do it but but I need some help and I'm not sure I'm the only parent that's asking you can't have this stuff be available effectively sold like in a convenience store no no that's not going to happen where there isn't even labeling at least like cigarettes are labeled it's very clear how bad this stuff is for you oh do you guys have any feedback on the job report or anything they're all going away when when the when the AI wins well that's why I brought it up it's like we're now going to see a potential you know a situation where Jobs go away and a lot of the stuff like even developers right don't you think Freiburg developers are going to start development tasks everyone assumes a static lump of work I think what happens particularly in things like developer tools is the developer can do so much more and then we generate so much more output and so the overall productivity goes up not down um so it's pretty exciting as these and remember like like we were talking on the AMA the other night Adobe Photoshop was a tool for photographers so you didn't have to take the perfect photograph and then print it you could you know you could use the software to improve the quality of your photograph and I think that that's what we see happening with all software um in the creative process is it helps people do more than they realized they could do before and that's pretty powerful and it opens up all these new avenues of interest and things we're not even imagining today all right so scotus is going to hear two uh cases for Section 230 the family of nohima Gonzalez a 23 year old American college student who was killed in an Isis terrorist attack in Paris back in 2015. you remember those horrible attacks is claiming that YouTube helped and aided and abetted Isis uh the family's argument is YouTube's algorithm was recommending videos that make it that makes it a publisher of content as you know it's section 230 common carrier now if you make editorial decisions if you promote certain content you lose your 230 protections uh in court papers filed in 2016 they said the company quote knowingly permitted Isis to post on YouTube hundreds of radicalizing videos inciting violence which helped the group recruit including some who were actually involved in the terrorist attack so they have made that connection well look let's let's be honest we can we can we can put a pin in this thing because I think it would be shocking to me if this current scotus uh all of a sudden founded in the cockles of their heart to protect big Tech I mean they've dismantled um a lot of other stuff that I think is a lot more controversial than this um and so you know we've we've basically looked at gun laws we've looked at affirmative action we've looked at abortion rights sorry well I mean I think as as we've said I think we all know where that dye is unfortunately going to get cast um so to me it just seems like this could be an interesting case where it's actually nine zero in favor for complete for completely different sets of reasons I mean if you think of the liberal left part of the Court they have their own reasons for saying that there aren't 230 protections for big Tech and if you look at the the far right or the right-leaning Parts members of this of scotus they have they have another set of different do you think you're gonna make a political decision not illegal no but even even in their politics they actually end up in the same place they have protections but for different reasons so there there's a reasonable outcome here where you know uh Roberts is going to have a really interesting time trying to pick who writes the majority opinion there was a related case in the fifth circuit in Texas where do you guys see this fist circuit decision where Texas passed a law imposing common carrier restrictions on social media companies the idea being that social media companies need to operate like phone companies and they can't just arbitrarily deny you service or deny you access to the platform and the argument why previously that had been viewed actually is unconstitutional was this idea of compelled speech that you can't compel a corporation to support speech that they don't want to because that was a violation of their own First Amendment rights and with the first the fifth circuit said is no that doesn't make any sense Facebook or Twitter can still advocate for whatever speech they want as a corporation but as a platform they if Texas requires them to not discriminate against people on the base of their Viewpoint then Texas has the right to to impose that because that doesn't it their quote was that does not chill speech if anything it chills censorship so what's the right legal decision here in your mind putting aside politics if you can for a moment but on your legal hat what is the right thing for society what is the right legal issue around section 230 specifically in the YouTube case and just generally should we look at YouTube should we look at a blogging platform like medium or blogger Twitter should we look at those as common carrier and they're not responsible for what you publish on them obviously they have to take stuff down if it breaks their terms of service Etc or if it's illegal I've made the case before that I I do think that common carrier requirements should apply on some level of the stack to protect the rights of ordinary Americans to have their speech in the face of these giant monopolies which could otherwise de-platform them for arbitrary reasons just to you know just explain this a little bit so historically there was always a debate between so-called positive rights and negative rights so where the United States start off as a country was with this idea of negative rights that what a right meant is that you'd be protected from the government taking some action against you and if you look at the Bill of Rights you know the original rights are all about protecting the citizen against intrusion on their Liberty by by a state or by the federal government in other words Congress shall make no law it was always a restriction so the right was negative it wasn't sort of positively a force and then with the Progressive Era you started seeing you know more uh Progressive rights like for example uh American citizens should have the right to health care right that's not protecting you from the government that's saying that the government can be used to give you a right that you didn't otherwise have and so that was sort of the big Progressive Revolution my take on it is I actually think that the problem we have in our society right now is that free speech is only a negative right it's not a positive right I think it actually needs to be a positive right I'm embracing a more Progressive version of Rights but on behalf of sort of this original negative right so and the reason is because the Town Square got privatized right I mean you used to be able to go anywhere in this country there'd be a multiplicity of town squares anyone could pull out their soapbox draw a crowd they could listen that's not how speech occurs anymore it's not on public land or public spaces the way that speech political speech especially occurs today is in these giant social networks that are that have giant Network effects and are basically monopolies so if you don't protect the right to free speech in a positive way it no longer exists so you not only believe wow that YouTube should keep it section 230 you believe they YouTube shouldn't be able to de-platform as a private company you know uh Alex Jones as but one example they should have their free speech rights and we should lean on that side of forcing YouTube to put Alex Jones or Twitter to put Trump back on the platform besides your position I'm not saying that the constitution requires YouTube to do anything uh what I'm saying is that if a state like Texas or if the federal government wants to pass a law saying that YouTube If you are say of a certain size you're a social network of a certain size you have Monopoly Network effects I wouldn't necessarily apply this to all the little guys but for those big monopolies we know who they are if the if the federal government or state wanted to say that they are required to be a common carrier and they cannot discriminate against certain viewpoints I think the government should be allowed to do that because it furthers a positive right historically they have not been able to do that because of this idea because this idea of compelled speech meaning that it would infringe on YouTube's speech rights I don't think it would I mean Google and YouTube can advocate for whatever positions they want they can produce whatever content they want yeah but but the point that and I think section 230 kind of makes this point as well is that they are platforms they're distribution platforms they're not Publishers so if they don't once so especially if they want section 230 protection they should not be engaging in Viewpoint discrimination okay so now there is a rub here wait can I just say can I just say go ahead your explanation David your explanation that you just gave before was so excellent thank you that it allows me to understand it even more clearly that was really so tremoff do you think the algorithm is an act of editorialization yes yes yes and so then should YouTube look at the end of the day let me let me break down an algorithm for you okay effectively it is a mathematical equation of variables and weights an editor 50 years ago was somebody who had that equation of variables and weights in his or her mind okay and so all we did was we translated again this multimodal model that was in somebody's brain into a model that's mathematical that sits in code you're talking about the front page and the New York Times yeah and I think it's a fig Leaf to say that because there is not an individual person who writes 0.2 in front of this one variable and 0.8 in front of the other that all of a sudden that this isn't editorial decision making is wrong we need to understand the current moment in which we live which is that these computers are thinking actively for us they're providing this you know computationally intensive decision making and reasoning and I think it's it's pretty ridiculous to assume that that isn't true that's why when you go to Google and you search for you know Michael Jordan we know what the right Michael Jordan is because it's reasoned there is an algorithm that is doing that it's making an editorial decision around what the right answer is they have deemed it to be right and that is just true and so I think we need to acknowledge that because I think it allows us at least to be in a position to rewrite these laws through the lens of the 21st century we need to update our understanding for how the world works today and you know jamaat there's such an easy way to do this if you're Tick Tock if you're YouTube if you want section 230 if you want to have common carrier and not be responsible if it's there when a user signs up it should give them the option would you like to turn on an algorithm here are a series of algorithms which you could turn on you could bring your own algorithm you could write your own algorithm with a bunch of Sliders or here are ones that other users and services provide like like an App Store so YouTube moth could pick one for your family your kids that would be I want one that's leaning towards education and takes out conspiracy theories takes out cannabis use takes out this one it's a wonderful what you're saying is so wonderful because for example like you know this organization Common Sense Media yes I love that website every time I put in a movie I put Common Sense Media decide if we should watch it or like an I use it a lot for apps because they're pretty good at just telling you which which apps are reasonable and unreasonable but you know if Common Sense Media could raise a little bit more money and and create an algorithm that would help filter stories in Tick Tock for my kids I'd be more likely to give my kids tick tock when they turn 14. right now I know that they're going to sneak it by going to YouTube and looking at YouTube shorts and all these other things because I cannot control that algorithm and it does worry me what kind of content that they're getting access to and you could do this by the way chamath on the operating system level or on the router level in your house you could say I want the common sense algorithm I will pay 25 a month a hundred dollars a year and then any IP that goes through it would be programmed properly I want less violence I want less sex you know whatever I think we are as a society sophisticated enough now yes um to have these controls and so I think we need them and so I think we do need to have the right observation of the current state of play Friedberg where do you sit on this do you think the algorithm should be I don't I don't I don't know right out of 230. yeah I I don't fully agree with Saks on um the monopolistic assumption I I think that there are I think there are other places to access content and I think that there is still a free market to compete and it is possible to compete I think that we saw this happen with Tick Tock we saw it happen with Instagram we saw it happen with YouTube uh competing against Google video and Microsoft video prior to that there has been a very significant battle for the attention of kind of being the next gen of media businesses and we have seen Spotify compete and we're seeing Spotify continue to be challenged by emerging competitors so I don't buy the assumption that these are built-in monopolies and therefore it allows some regulatory process to come in and say hey Free Speech needs to be actively enforced because they're monopolies this isn't like when utilities laid power lines and Sewer lines and and trains across the country and they had a physical Monopoly on being able to access and move goods and services the internet is still thank God knock on wood open and the ability for anyone to build a competing service is still possible and there is a lot of money that would love to disrupt these businesses that is actively doing it and I think every day look at how big Tick Tock has gotten it is bigger than YouTube almost or will be soon and there is a competition that happens and because of that competition I think that the the market will ultimately choose where they want to get their content from and how they want to consume it and I don't think that the government should play a role Zach's rebuttal to that you buy that well so not all these companies are monopolies but I think they act in a monopolistic way with respect to restricting Free Speech which is they act as a cartel they all share like best practices with each other on how to restrict speech and we saw the The Watershed here was remember when Trump was thrown off first Twitter made the decision you know Jack I don't even know if it was Jack but basically the company Jack said it wasn't him actually he said it was the woman who was running it specifically that's it for that yeah yeah Jack actually said it was a mistake but any event Twitter did it first and then all the other companies followed suit I mean even like Pinterest and OCTA and Snapchat like officially YouTube everybody yeah but Trump was actually on Facebook he wasn't on all these other companies they still threw him off so they all copy each other and Jack actually said that in his comments where he said it was a mistake he said he didn't realize the way in which Twitter's action would actually Cascade he said that he thought originally that the action was okay because it was just Twitter deciding to take away Trump's right to free speech but he could still go to all these other companies and then all these other companies basically you know they are all subject to the same political forces the the leadership of these companies are all sort of they all drink from the same monocultural found they all have the same political biases the polls show this so the problem of Freeburg is yeah I agree a bunch of these companies aren't quite monopolies but they all act the same way but I agree with you I'm a pretty Collective effect is of a speech cartel so the question is how do you protect the rights of Americans to free speech in the face of a speech cartel that wants to basically block them go ahead Freeburg respond here's my argument my argument is that these are not public service providers they're private service providers and the market is telling them what to do the market is saying and I think I don't think so I think that the pressure that was felt by these folks was that so many consumers were pissed off that they were letting Trump rail on or they were pissed off about Jam 6 or pissed off about whatever whatever the current fat is the trend is they respond to the market and they say you know what this has crossed the line and this was the case on public television when nudity came out and they're like okay you know what we need to take that off the TV we need to because the market is telling us they're going to boycott us and I think that there's a market pressure here that we're ignoring that is actually pretty pretty relevant that as a private service provider if they're going to lose half Their audience because people are pissed about one or two pieces of content showing up that they're acting in the best interest of their shareholders and in the best interest of their platform they're not acting as a public service look I love Market forces as much as the next libertarian but I just think that fundamentally that's just not what's going on here this has nothing to do with Market forces has everything to do with political forces that's what's driving this look do you think the average consumer the average user of PayPal is demanding that they engage in all these restrictive policies throwing off all these accounts who have the wrong viewpoints no that's nothing to do with it it has to do with the vocal mind who work at these companies and create pressure from below it's also the you know the the people from outside the actors who create these boycott campaigns and pressure from outside and then it's basically people on Capitol Hill who have the same ideology who basically create threats from above so these companies are under enormous pressure from above below and sideways that and it's 100 political hold on it's not it's not about maximizing profits I think it's about maximizing you know political outcomes yeah I don't know that is that is what the American people need to be protected from now I will I will add one Nuance to my theory though which is I'm not sure what level of the stack we should declare to be common carrier so in other words you may be right actually that at the level of YouTube or Twitter or Facebook maybe we shouldn't make them commentary and I'll tell you why because just to take the other side of the argument for a second which is you know if you don't because those companies do have legitimate reasons to take down some content I don't like the way they do it but I do not want to see bots on there I do not want to see fake accounts and I actually don't want to see like truly hateful speech or harassment and the problem is I do worry that if you subject them to common carrier they won't actually be able to engage in let's say legitimate curation of their social networks yeah right however so so there's a real debate to be had there and it's going to be messy but I think there's one level of the stack below that which is at the level of pipes like in AWS like a cloud flare like a PayPal like the the isps like the banks they are not doing any content moderation or they have no legitimate reason to be doing content moderation none of those companies should be able allow to engage in Viewpoint discrimination we have a problem right now where American citizens are being denied access to payment rails into the banking system you're saying because of their view AWS shouldn't be able to deny service to the Ku Klux Klan or some hate speech group I think that they should be under the same requirements the phone companies under okay you know the question is like look I could frame the same question to you should you know something such a horrible group should such and such horrible group be able to get a phone a phone account right yeah no no and you'd say no they shouldn't get anything but they have that right that has been litigated and that's been pretty much protected by the Supreme Court you know even if it's a government-conferred monopoly the Supreme Court has said okay listen like it's not violating one's constitutional right for example if your water bill gets terminated without you getting due process and the the inverse is also true so for what whether we like it or not that Jason that issue has been litigated I think I think I think for me again just like practically speaking for the functioning of Civil Society I think it's very important for us to now introduce this idea of algorithmic choice and I don't think that that will happen in the absence of us rewriting section 230 in a more intelligent way I don't know I don't know whether this specific case create an upstanding for us to do all of that but I think it's an important thing that we have to revisit as a society because Jason what you described as having a breadth of algorithmic choices over time where there are purveyors and sellers could you imagine that's not a job or a company that the four of us would ever have imagined could be possible five years ago but maybe there should be an economy of algorithms and there are these really great algorithms that one would want to pay a subscription for because One Believes In the quality of what it gives you we should have that choice and I think it's an important set of choices that will allow actually YouTube as an example to operate more safely as a platform because it can say listen I've created this set of abstractions you can plug in all sorts of algorithms there's a default algorithm that works but then there's a Marketplace of algorithms just like there's a Marketplace of ideas I don't discriminate and let people choose this is the key thing with this model like if if it was on a blockchain if all the videos all the video content was uploaded to a public blockchain and then distributed on distributed computing system then your ability to search and use that media would be a function of a service provider you're willing to pay for that provides the best service experience and by the way this is also why I think over time to sax to to kind of sax and I are both arguing both sides a little bit but I think that what will happen I don't think that the government should come in and regulate these guys and tell them that they can't take stuff down and whatnot I really don't like the precedent it sets period I also think that it's a terrible idea for YouTube and Twitter to take stuff down um and I think that there's an incredibly difficult uh balance that they're gonna have to find because if they do this as we're seeing right now the quality of the experience for a set of users declines and they will find somewhere else any Market will develop for something else to compete effectively against them and so I that's why I don't like the government intervening because I want to see a better product emerge when the big company makes some stupid mistake and does a bad job and then the market will find a better outcome and it just it's messy in the middle and as soon as you do government intervention on these things and tell them what they can and can't take down I really do think that over time you will limit the user experience to what is possible if you allow the free market and this is where the the industry needs to police itself if you look at the movie industry with the MPAA and Indiana Jones and the the Temple of Doom they came out with the PG-13 rating specifically for things that were a little too edgy for PG this is where our industry could get ahead of this they could give algorithmic Choice an algorithmic app store and if you look at the original sin it was these lifetime bands like Trump should not have been given a lifetime van they should have given them a one-year ban they should have had a process they overreached we wouldn't be in this position when you talk about like having a industry Consortium like the MPAA what you're doing is formalizing the communication that's already taking place is already happening between these companies and what is the result of that communication they all standardize on overly restrictive policies because they all know there is no free the same political bias no but if they did it correctly it's all in the execution sacks it has to be executed properly like the movie industry it doesn't matter you'll end up with the same problem as having the government intervene if you have the government intervene or private body intervene any sort of set standard intervention that prevents the market from company I just I disagree with you I think you can create more competition if the government says um okay folks you can have the standard algorithm but you need to make a a simple abstracted way for somebody else to write some other filtering mechanism and to basically you so that users can pick the power users yes what the mpia did was I don't know why isn't that more choice because that's a product that's a product company I don't want to be told how to make my product right if you're not on YouTube you have you have an algo you're now saying that there is this distinction of the algo from the ux from the data and my choice might be to create different content libraries for example YouTube has YouTube kids and it's a different Content Library and it's a different user interface and it's a different algorithm and you're trying to create an abstraction that may not necessarily be natural for the evolution of the product set of that company I would much rather see them figure it out that's not a good argument that again if you were not a monopoly I would be more sympathetic but because like somebody somebody's feelings would get hurt a product manager's feelings will get hurt inside of Google feelings reason to not protect free speech I think you're unnaturally disrupting the product Evolution and I tough luck that's what that's what happens when you're worth two trillion dollars when you impact a billion people on the planet when you start having massive impact in society you have to take some responsibility those companies are not taking responsibility if you're not super super successful if this is not going to affect you so you don't have nothing to worry about you'll see you'll see apps offshore and you'll see Tick Tock and other things compete because they'll have a better product experience no no nobody's going to create a new Google because they're downranking one to ten percent of the search results agreed some accountability hold on in the ideal World Companies like Google and so forth would not take sides in political debates to be politically neutral but they're not you look at all the data around the political leanings the people running these companies and then you look at the actual actions of these companies and they have become fully political and they've waded into all these political debates with the result that the American people's rights to speech into earn have been reduced you have companies like PayPal which are just engaging in retaliation basically Financial retaliation purely on based on what political viewpoints they have why it's not like face it's not like PayPal needs to be in the business content creation let's continue this conversation call in ama uh if they can get some servers over that I don't know maybe so you got to raise some money stacks for this app and get some more service all right listen for the dictator who needs to hit the Lou to do a number two yes I am the world's greatest moderator Friedberg is the Sultan of Science and David Sachs is the prince of peace see you all next week on the episode wait wait is this 98 or 99 no it's 99 it's 99. only one episode left Wayne Gretzky get it well less enjoy it well less that we're wrapping it up here all right we'll see you all next time have a great movement bye bye we'll let your winners ride [Music] we open source it to the fans and they've just gone crazy with it [Music] somehow [Music] we need to get Mercies foreign [Music]