SPEAKER_01: Can I tell you a funny story? So I was in I was in and then I when I landed, there was an assistant message on the plane. And then the pilot text me like, Hey, bad news. We're not gonna be able to take you tomorrow. There's an error message. And if we can't resolve it, we can't fly. I think, okay. So I text sacks. I'm like, Hey, dude, I'm in a really tough spot. Is there any way that I you know, I could catch a flight, you know, with you tomorrow. Absolute dead silence. Three hours later. Paul pilot Paul text me and says, Good news. cleared us. We're going tomorrow. I text sacks right away. Hey, no worries. It's all resolved. In eight seconds. He responds awesome with an exclamation.
SPEAKER_03: He had zero intention of bringing me and my family with
SPEAKER_01: it. Zero. I filibustered he fell about. No, the truth is the
SPEAKER_05: plane was with me I was using I'd be happy to let you borrow the plane if I'm not using it. Here's sacks the last time we
SPEAKER_02: went to dinner ready. The check comes Miller locks lands on the table here sacks. What you're seeing see that? You know what that is sacks going for his wallet. You can just count it. It's ironic because I can't remember the last time he's
SPEAKER_05: over the last time you picked up a check J cal what do you every
SPEAKER_00: time I pick it up on the way in maybe for a slice of pizza. Come
SPEAKER_03: sacks is one of the most generous people I know. I remember we went to a bar once we barely had time to get a
SPEAKER_01: glass of still water a Diet Coke and some of the free nuts. And then Jake I was like guys it's on me.
SPEAKER_02: My turn. I got my turn. You got the white truffles. Last week, I think
SPEAKER_05: these bar nuts are on me. It's only fair. Yeah, throw in some cashews to throw in the cashews and raisins a trail mix. I'll get the trail mix because you got the truffles last time Jamal. All right, everybody. Welcome to the all in podcast.
SPEAKER_02: We're still here. Episode 105. I don't know if you saw boys last week, the pot hit a new high watermark 16 overall in the world. So congratulations.
SPEAKER_05: I thought we picked up 14 actually was it 1414 people
SPEAKER_01: listen to this pod. When I was in DC this week at a bunch of meetings, and so many of the of the staffers listened to the pod. And they came up to me. They're like, Hey, love you guys listen every week. It's really great. It's really crazy, actually, the reach of this thing. It's really cool. Now when you were in DC, how gleeful were they about Sax's
SPEAKER_02: absolute shellacking last week that must have been high fives all over the dams like they won twice, Trump announced and sacks lost. Listen, we we talked about
SPEAKER_01: us are they about SPF and how much money he gave them in order
SPEAKER_05: to stop that red wave.
SPEAKER_04: I talked to a lot of folks, folks. And what I would say is
SPEAKER_01: we talked a lot about energy policy. Life's life sciences, obviously two areas that I invest a lot of money in, and foreign policy. And actually, David, you'd be surprised but how many fans you have there? Cool. Well, I mean, like General Milley, like we talked about
SPEAKER_05: last week, he's come around Jake Sullivan just this week, said that he told the Ukrainians it was reported that they can't have Crimea back get realistic. So Jake Sullivan and Millie are like the voices of reason now, the administration on this, and they're just saying the same thing I've been saying, for which I was excoriated by the foreign policy establishment. And I got into a little Twitter spat with Ian Bremner this week, because all of a sudden he posts that Oh, everybody has been privately saying that we need to negotiate. No, no, you haven't. You were criticizing you were denouncing Elon as a Kremlin agent when he posted that Twitter poll suggesting that the Ukrainians should negotiate. So you were publicly denouncing those of us who were calling for negotiations. And now all of a sudden, you're saying, well, this has always been the position. But I think what's significant about that is the guy's just a weather vane for the blob and the foreign policy establishment. And so the weather vane is now pointing towards negotiation. So that's the good news here. Do you think that if DeSantis wins the presidency, you will be
SPEAKER_01: nominated as Secretary of State?
SPEAKER_02: Treasury, what would you take Treasury State? So if you were offered a cabinet position, would you take you
SPEAKER_01: should you should take what you what you have to understand is
SPEAKER_05: that my position on foreign policy or Ukraine specifically is not it's not it's not adopted by either party. I mean, McConnell, and the Senate Republican leadership are very much on board with the Biden administration's policy on this. They are very, very hawkish. It's really the unit party on this issue. There's really just one consolidated blob. Okay, but back to the question, would you would it be a dream of
SPEAKER_02: yours? Would you find great joy in having a White House position to serve DeSantis goes in to serve your country? Would you serve? Would I serve? If if if the President of the United
SPEAKER_05: States calls you up and asks you to do something, obviously, you have to serve your country, but it's not something I'm looking for. That's a yes.
SPEAKER_02:
SPEAKER_03: What if he asked you to serve as the US ambassador to Burkina Faso?
SPEAKER_00: Where?
SPEAKER_03: The ambassador roles are so funny. It's like you have to compete for the good ones. And then some people get stuck with the bad ones. Those are those are available for purchase.
SPEAKER_05: Yeah, yeah, exactly. You know, there's like a there's like a menu of these things like these ambassadorships. Like, I don't think it's like written down anywhere, but it's kind of like unspoken. It's like if you want the ambassadorship to the UK, that's like $10 million. And then, you know, like,
SPEAKER_01: the thing was, but UK and France, it's every every embassy, every ambassadorship comes with an annual budget. But the cost of actually running that embassy and really throwing the parties is much more so for the UK and France, the gap is 10 million a year that you have to fund out of pocket. So you got to be really willing, you know, to put the money up. But apparently, we got to pay for the parties. My friend, my friend was was the ambassador to the UK under Obama, and I went to a party there. It's unbelievable. And he has the best life because like, you know, he was meeting everybody in the world, you can imagine goes through the UK and then wants to meet the US ambassador. It was a great job for him. Right, but the money I'm talking about is the cost of buying one
SPEAKER_05: of these syndicures, you have to typically raise that. You bundle that much money for whoever this is what I've heard. I mean, I don't know this what I've heard is that does that mean that SPF parents if Elizabeth Ward wins the
SPEAKER_01: presidency, it's like an against
SPEAKER_02: right now the Illuminati right now just revoked all of our Illuminati cards. We're not supposed to talk about this guys, that you can buy an ambassadorship. But speaking of buying politicians and coverage, let's get an update on FTX. So we're best Trump. Speaking of politics, I mean, you bring it
SPEAKER_03: up, because if I bring it up, I didn't want to tell you in the
SPEAKER_02: first five minutes, the only thing I want to bring up is, I think I'm entitled to and I told you so on this, there was a
SPEAKER_05: story where the FBI said that the reason why Trump kept the boxes in his basement they've now the FBI has definitively said it's because he was just trying to preserve mementos not try to sell state secrets to the Saudis or something like that, like some people were making wild conspiracy theories about so Jake out looks like I was I was right about that. In fact, I think we had that very discussion on this pod.
SPEAKER_02: Yeah, I mean, we I said I thought he was keeping it for like keepsakes like mementos. That was my position too, because he's really you didn't you didn't support the Saudi conspiracy
SPEAKER_05: theory. Ask a question because I put it past him. He's a maniac.
SPEAKER_02: I think if you believe that this was about mementos, which the
SPEAKER_05: FBI has now said it was I think you also have to say that the FBI is approaching rating his home with armed, you know, soldiers was heavy handed. Now I'm not saying that in the legal right to do it, I'm sure they checked all the right boxes, but it was heavy handed. But look, that brings me to another point. Why do they do it? I actually suspect now that what the Biden administration is trying to do is keep Trump in the news. I think they actually want to provoke him to run. They want to do the exact, it's the exact same thing. Remember the the 50 million that went into Republican primaries to support the you know, the election denier candidate. Turns out that was a successful strategy for them as much as I hate to admit it. It's as reckless as I think that was. And hypocritical because I don't think you can be out there claiming that these candidates are a threat to democracy at the very same time you're funding them. So I think it was completely hypocritical and sort of Machiavellian, but it worked. And I think in a similar way, what the Democrats are going to try to do over the next year is is keep Trump in the news as much as possible. And in fact, CNN ran his entire speech announcing last Tuesday, I think for this reason, if Trump wins the Republican nomination, he's going to, then
SPEAKER_01: he will lose the presidency. Because if you look at all of these exit polls that came out of these midterms, he's just so massively unfavorable. But that's not what's going to be, you know, litigated in the primaries. And the primaries, it's just Republican on Republican. And there are a non trivial number of paths where Trump actually beats DeSantis. And I think that's very scary to the Republicans who want to just move on and have a chance of actually consolidating power. And it's gleefully blissful for the Democrats, because if again, and we saw this, look, if the Democrats weren't able to fund and field maga candidates in the Republican primaries that then lost in the general election, well, the best maga candidate of all is Trump. So it David Sachs is completely right now, like the balance of power here should be if you're the Democrats, whatever you can do to keep him in the news, whatever you can do to induce him to run, makes a lot of sense because he will he'll cripple the Republican Party. Let's split he'll split him. Look at how Jake House got a big grid. He's admitting to the
SPEAKER_05: hypocrisy, which is for years. He's screaming about what is your boy? Hold on a second. You've been screaming about what a threat to democracy is how he's secretly on the payroll of the Kremlin or foreign governments and yet and yet you want to keep them in the news. You want it to be the nominee and you Republicans don't have the common sense to kick him out of the party. No, I do. Come on. I was on the DeSantis train
SPEAKER_02:
SPEAKER_05: before the midterms election. You will kick Trump out. You on
SPEAKER_02: this pod will never kick him out of the party. You should say how much you think we disavow him publicly disavow him how
SPEAKER_05: I've already said I support DeSantis I said it before the midterms. What else do you want me to do? But by the way, large rio, I think I think you're I think you and many other people on the Democratic side in the media are being very hypocritical about this because you want to claim that he's this unique threat to democracy while playing this game where you want to keep him in the news you want to basically provide with as much oxygen as possible because you think he's more beatable. And by the way, I agree that he's less electable than DeSantis, which is why part of the reason why I'm on the DeSantis train. I also think DeSantis would get more done. But look, I don't think it's a foregone conclusion that he's gonna be the nominee. Did you see the new polling that came out after the midterms? DeSantis is now the favorite in among Republican primary voters among every different slicing that you want to do, of whether it's likely Republican voters, primary voters, whether it's Fox News viewers, and on and on and on to senses is now ahead of Trump by about Okay, wait, hold on, I need to be able to state my position because Saxon directed me seven times, I just would like to get
SPEAKER_02: my position on here. Number one, you all backed somebody who is a horrible human being who made terrible decisions. And now you guys keep supporting him at some point, you have to put your foot down and say, Listen, we don't want this guy, you have to publicly say, January 6, you know, and this guy's approach that election denial, you guys have to come out and just say, we don't want this person to run. I think you've been hedging too much. I think that's the problem. Now, who has not? Republican Party? Yeah, no, you always were a little bit like because I did. Hold on. And this very part I asked you, if he run, would you support him? Would you ever vote for him again? And you were like, wow, and you would vote for him again, if he wins the nomination, you'll vote for him. That's the truth. Republicans will still vote for him. Look, you know that before it was popular before the midterms,
SPEAKER_05: I was on the DeSantis train. I was saying so on this pod for over a year when it was very unpopular, certainly in the area in which I live. And so you know, and there are a lot of Republicans now most Republicans now agree with me on this issue according to the polling that just took place. But if he wins the nomination, you will vote for Jason is that you want us to buy into every bullshit narrative that you've ever told about this issue. You're a six and bullshit. No, it was bullshit. Let me finish. Let him finish. Let him finish.
SPEAKER_03: Let him finish. Let him finish. He's interrupting me every two
SPEAKER_02: seconds. Stay out of it. I just want you guys to speak and then
SPEAKER_03: let the other person speak. That's it. I don't
SPEAKER_05: my point is, here we go again. I don't I don't want to rehash every single thing in the past. But but look, the point is that I think we have more electable candidates. I think we have candidates that would get more done in office. But and I've already said so but I you know, but I don't that doesn't mean I believe this whole like threat to democracy thing. I think that is massive inflation of the actual threat. But But look, if you want me to say that we have more electable candidates, we have candidates who will get more done, who frankly would be less alienating to moderates and independents and could even win over some moderate Democrats the way that DeSantis didn't Florida to win by 19 points. Yes, happy to say that. And I've been saying that, I will just say if I if I'm if I'm if freeburg allows me to
SPEAKER_02: make a point, I would like to say it is a threat to democracy January 6 and election denial. Those two things are acute. Why do you want to party fund over $50 million to those candidates?
SPEAKER_02: cynical because they want it to win cynicism, pure cynicism. Okay, we're on the same page about that. Yeah, it's pure
SPEAKER_02: cynicism. But do you let me ask you a question. And then we'll wrap on this because I know it's uncomfortable for freeburg to watch mommy and daddy fight. Some childhood trauma. Freeburg has to do some childhood trauma. It's okay. Mommy and daddy still love each other even if we fight
SPEAKER_03: sometimes. It just makes me want to turn the volume down. Go ahead. We're almost done. Anyway. I do think fielding
SPEAKER_02: moderate candidates is the path. And I think you brought this up a ton of times. It's the race to whoever can get that moderate middle. And I hope that they feel better candidates. But do you think sacks he's running. This is one of the cynical takes is that he's running because it will help all the legal cases against him. Do you think there's anything to that? My guess is that that they see him as an easier candidate to beat
SPEAKER_05: and they're going to do everything they can to try and keep them in the news. And I don't, I actually I don't think that's your position. I actually think that you're being sincere that you don't want him to win a second term. I mean, remember, like we don't know, I think we all believe that we're gonna have a pretty severe recession next year. So just because the Democrats cynical strategy in the midterms are promoting, you know, what they call election deniers in the primary that happened to work. But just because it worked last time doesn't mean it's gonna work next time, and abortion, absolutist and a whole bunch of other things. I
SPEAKER_01: think I think the point is pretty much this, which is that people gave Trump a lot of credit for being an idiot savant. But it looks like he's more of an idiot savant minus the savant. Okay, this is a this is kind of a goofball, who has a brilliant media strategy, and he had his finger on the pulse in a moment. And then he just couldn't execute, couldn't put two and two together, couldn't put one foot in front of the other. And he was way too divisive, and he got booted out and he lost fair and square. And now what the Republicans have to realize is if they don't figure out how to field somebody out of the primaries, that is different than Trump, the Democrats will win. Because if it is Trump, whoever the Democratic candidate is, I don't think it really matters will crush Trump. Yeah, look, I think that's likely correct. I mean, I think
SPEAKER_05: I think that we talked about it last week, you cannot win the presidency with call it 45% of the vote. I mean, Trump has capped at that amount. And the scary thing for Republicans, by the way, is Trump does a much better job than anybody else in
SPEAKER_01: getting his base activated. So the thing that all these polls get wrong, and I think they've consistently gotten wrong and as a result have underestimated him, is they don't give him the credit he deserves duly, for being able to curate a fervent base of that 30 or 40% of America that will show up for him. And even if they didn't show up as much in the midterms, they sure as hell showed up in the primaries for his candidates oftentimes. So I just think it's a very dangerous cocktail that you can't sleep on. So the Republicans have to take this really serious moderate Republicans want to have a chance of winning. You guys have to figure out how to beat Trump in a ground game. Because if his base shows up, you're going to lose. And if his base shows up, he has a decent chance of winning the nomination. But then you will lose the general.
SPEAKER_05: Yeah, I think that's, I think that's pretty much spot on. I think Republicans really have to be smart and disciplined and think about, we have to nominate the the most electable candidate. But here's the thing is, we're not even debating policy right now. No one. No one really says that, hey, on a policy basis, there's a huge difference between, say, Trump and to see answers to some other folks. It's all about personal and is it really worth it to the Republicans to potentially lose the next election? Based on personal space on style points? It's a silly reason to lose. You know, William F. Buckley a long time ago said that he would always support the most electable conservative candidate. He didn't always go with the most conservative candidate. He wanted to go with the most electable candidate who met a basic policy bar. And he sometimes got in trouble for that. For example, he supported Bush 41 over jack camp. I know I'm going back a long way. But but in any event, you know, having thinking about electability is just really important. There's one simple
SPEAKER_02: lining here, the head of the Republican Party, Rupert Murdoch has absolutely dissed Trump. I don't know if you saw the New York Post, but he put on the cover. A little lower like 10 Florida man makes an announcement on page 26. He had the announcement of Trump running for president. And the
SPEAKER_01: funny thing was the last Rupert Murdoch, he didn't even name Trump as the president of the absolute last line of that column. And he said, Oh, and he also happened to be the 45th President of the United States. Yeah, it was very funny. You're seeing a lot of Republicans saying, I think
SPEAKER_05: correctly is that if you want to win elections, you have to look out the windshield, you know, not in the rearview mirror. And what we saw in the midterms is that even talking about 2020 was at minimum, a giant waste of time and a distraction and at maximum potentially cause these candidates to lose. I mean, the fact of the matter is that a lot of candidates, including some I supported in battleground states who got lured into trying to re litigate 2020. They all got vaporized. And I just think it's stupid to be talking about the past. Voters want you to focus on the future. And especially when there's no policy outcome that matters. That's at stake for you to be talking about a past election instead of the future and the question is, it's politically stupid freeburg. If I may bring you into
SPEAKER_02: this discussion uncomfortably as it might as uncomfortable as it might be. Would you vote for Biden? incredibly old? I don't know, it's gonna be 81 or 82. And the next election, you vote for Biden, or dissenters, as I go through the list of things
SPEAKER_03: I'm most concerned about in the world today. Number one is the debt and spending cycle of the federal government in the US. I'm, I think it's the most kind of scary set of facts and conditions that we're getting set up for kind of a major crisis 10 to 15 years from now, because you can't afford all the debt that we've taken on as a country, as well as the entitlement as well as defense. And so something's got to give. And there's a bunch of paths that could emerge from that set of conditions that are all really scary paths and not good. I'm more concerned about that than I am about nuclear war, or climate change. Just to be clear, because I think that the social effects and the global geopolitical effects that arise from the US kind of destructuring because of our debt and spending cycle that we're in right now, are far more significant than what we'll experience over the same period of time. And again, I do think that technology is going to resolve a lot of our issues with climate change. And I think nuclear war, cool heads will prevail, everyone's got a family. So that's what I'm most concerned about. So any kind of voting decision I make is made with that lens, which is what's the best path to supporting some some sort of responsibility, setback or step back to resolve those issues, as Charlie Munger said so well in this interview that was published this week. And I said it a few times on the show, but he did. He's a much better speaker than I uses far fewer words. But you know, in democracy, eventually the populace realizes they can vote themselves all the money. And, you know, that's what we see happen in an accelerated way in Latin America. We've seen that with a lot of these democracies and ultimately resolve to kind of socialism. And in the US, we're seeing a lot of this
SPEAKER_03: behavior where we're kind of voting ourselves all the money we're putting in place politicians and the populace is saying I want I want I want, and more money comes out. And it it it totally decreases the strength and the resiliency of our nation and our economy. And it's the most concerning thing to me, because the incredible innovation and economic engine that is the United States is threatened. And it really threatens a lot of stability in the world today.
SPEAKER_02: Chumath, any any final thoughts here as we wrap up the political discussion? You're obviously a Democrat, so you're voting for Biden, but you also care about fiscal responsibility. So where are you at with your vote for 2024? I don't think that we know who's actually running on either
SPEAKER_01: ticket yet, just to be completely honest. So that's my perspective. My other comment is I think what David said is so spot on the single biggest issue that we have is that we have made a huge decision to de globalize. And that de globalization has the risk of introducing a hyperinflation loop. And we won't know how bad that is for another year or two.
SPEAKER_02: Why would it do that? Why would it? Well, think about globalization costs. So today, let's just say you buy a chip to make the iPhone, you
SPEAKER_01: buy that chip from, you know, tsmc that makes it in Taiwan ships it to China, and the entire world is serviced with that supply chain that keeps that chip as cheap as possible. Now, with the chip sacked, as an example, we will build resilient supply chains where now instead of one place, it'll come from six places. Five of those six will be in allied territories, the United States, Western Europe, potentially Mexico. The thing with that is that that now is six x more equipment that you're buying. Right? Instead of one machine, you now have six machines. Instead of one person operating the machine in one country, you have six people in six countries. As you can imagine, when you layer up all these costs, there is no world in which that chip is as cheap as it was before. And so the cost of that has to be borne either by the consumer who pays a higher price, that's measured as inflation, or by the government who subsidizes it at the point of import, that'll be measured by debt. And so one way or the other, in our path now towards more resiliency, and national security, which by the way, I think is the absolute right decision, okay? Energy independence, all of this stuff we have to do today, we are at risk of a hyper inflationary loop, if not managed well. And so you have to be really on the levers of the economy, and you have to understand it deeply. The person that deserves the most credit of preventing this hyper inflationary loop right now is Joe Manchin. And hopefully the history books, whatever Jay Powell does, I think has been good. But the fact that Manchin prevented 6 trillion more dollars of being pumped into the economy in the last two years, is probably the single thing that prevented inflation instead of being peaking at nine from peaking at 15 or 16. I think it would have been a national disaster without that. Chamath is right, that extra 6 trillion that Manchester would
SPEAKER_05: have been a national disaster. But let's also give credit to every republican because they also voted against it. I mean, the fact that the pressure was on Manchin to do the thing and
SPEAKER_01: see the forest from the trees and he did that. Yeah, no, look,
SPEAKER_05: I agree. I agree that. I agree that he was in the hot seat. Well, so cinema, by the way, cinema didn't go for the three and a half trillion build back better. But then mansion, you went along with the 750 billion dollar version of BBB, which they renamed the inflation reduction act. That was kind of a disappointment. So, frankly, like I give more credit to the Republicans here against all of it, and the Democrats jammed it
SPEAKER_05: through. So if you're worried about all of this trillions and trillions of unnecessary spending, why don't you give the Republicans a chance? I'm talking about the delta between what was spent and what
SPEAKER_01: could have been the entirety of the gap is really was prevented by Joe Manchin.
SPEAKER_05: I know, but it was Joe Manchin siding with the Republicans. My point is, look, perfect on spending. They both want to spend too much money. But at this particular moment in time, the Republicans are more restrained about spending than the Democrats.
SPEAKER_02: Let's go to number one issue for each person. Hold on. Number one issue for freeburg is fiscal responsibility. I was going to say the same thing. It is my number one issue in this next election. I want to see austerity fiscal responsibility and get this spending under control so that our kids do not inherit, you know, stagflation, hyperinflation or whatever cocktail of disastrous economic policies we are handing to them. What is your number one issue? sacks for 2024? If you had to pick a number one issue, what would it be for David sacks? Look, I think it's simple. The President's job is to ensure
SPEAKER_05: peace and prosperity. So you guys are talking about the prosperity side, I think we do need fiscal responsibility, we need to have a good economy, there's like a bundle of policies that go into that starting with, I think, greater fiscal restraint. And then on the peace side, I think we need to adjust America's foreign policy to be less intervention ist. We're, you know, we're involving ourselves here, there and everywhere all over the world. And I, I'm hopeful that what I'm hearing out of the administration in the last couple of weeks from Jake Sullivan for Millie, these are some good things that I'm hearing. But, you know, I would like to see us dial back on the foreign interventionism. If you had to 6040 that or whatever is one more important
SPEAKER_02: the other or they both equal and then we'll go to tomorrow. Both equal for you, which one's more important? They're both I mean, look, how can you have a successful United
SPEAKER_05: States if we're either in a recession or at war? You don't want any either of those situations. So those are your
SPEAKER_02: top two equally? What is it for you? Chamath? What are the solutions? There's also a third one, which is culture, J. Cal.
SPEAKER_05: So this one's a little bit harder to categorize. But I do think culture matters. And, you know, I want us to have a culture of excellence I want in the schools, for example, I think schools should have grades, they should have advanced math, we should hold our kids to a high standard. I think that we want to have safe cities, we want to, you know, have cities where crimes are not out of control. We need to have, you know, a sound border policy. So I think there's like a collection of policies there under, you know, schools, crime border that are sort of broadly cultural, I guess. But or maybe you could call them quality of life issues. So you know, yeah, we need to have a good economy, we need to stay out of foreign wars, but also we need to have a high quality of life. Can I
SPEAKER_01: can I steal man something for you? Because I, I really agree with those three things, David, that you said, but I've, I've spent a lot of time thinking about this in my formation is
SPEAKER_01: that there's one thing that allows us to solve all three, if you bear with me for a second. And I think that that is the energy independence of the United States. If you look inside of what's happening in the US today, the cost of generating energy is effectively as cheap as it's ever been, and as close to zero as it ever has been, and it's only going to get cheaper. The problem that we have is that we have all of these decrepit laws and infrastructure and regulatory capture, that causes us to always be in an imbalance. And as a result, we do all kinds of crazy things. We borrow enormous amounts of money to create subsidies, we go and we fight all of these, you know, foreign wars that don't make any sense. We wrap the energy problem and setting climate change language which causes this cultural division. But my belief, quite honestly, is that the reason the IRA was so important is it is the most clarified piece of legislation we've seen, that essentially puts all forms of energy on a level playing field and has the chance to get America to permanent energy independence. And if the cost of energy is zero, and we can abundantly create it in the United States, what I think happens, David is we have energy to rebuild our supply chain much cheaper. So inflation gets under control, we don't borrow as much. We have a completely different lens on foreign policy so that this interventionism and fighting over resources is much harder to justify. And we put the climate change language aside, and we use energy independence as a form of national security, which gives us the courage to battle all these other cultural taboos that we otherwise have to say we agree with, even if they don't necessarily make any sense. And there's a bunch of them. So I don't know my answer to your question, Jason, is that one thing, if we accomplish in the next five to 10 years, has a chance to really change the course of the United States.
SPEAKER_02: Right. And then, so I'm guessing then Biden's your vote, because if it is in fact, Biden, because Biden is the one who pushed for these clean energy tax credits and this policy and it free. What do you think cancel, you also cancel our energy independence? I mean,
SPEAKER_05: look, we were energy independent based on fracking, you may not like fracking, but it did get us energy independent, you may think that there's environmental consequences to it that you don't like and that has to be balanced. But we did have energy against fracking. I believe in that gas. I believe
SPEAKER_01: in coal, actually, as a bridge fuel. I believe in all of these things. I believe that these are all more important than going off to all of these foreign lands, and trying to justify spending trillions of dollars and putting 10s of 1000s of American lives at risk, essentially for resources that we can actually create for ourselves at home.
SPEAKER_05: Well, I agree with you on that 100%. I'm fine with, I mean, I'll tell you, like clean fracking as a
SPEAKER_02: way as a bridge, go ahead to getting to you know, more independence through nuclear and renewables. Go ahead, freeburg. Like I said before, China's declared that they're building
SPEAKER_03: 450 nuclear power plants, the net cost effective cost of electricity production out of a nuclear power plant is somewhere between one and five cents per kilowatt hour. The US on average is paying 11 to 15 cents per kilowatt hour. Nuclear is just through utilities. So freeburg, that's with all the regulatory
SPEAKER_01: capture and all that trash that you have to spend. For example, we have to spend $220 billion a year to replace the power lines in America by law. That's $2.2 trillion just there. Right. And
SPEAKER_03: so the cost for solar and wind off grid, I think is around three to seven cents a kilowatt hour in that range, right? So it gets nowadays it's gotten much more competitive. But I think that the nuclear solution is just not even being engaged in the conversation. Now, I want to go back to the previous point, which is because I didn't state the numbers before. So I just want to state them because they're so shocking. And this is what what shocks me. The current federal debt is $30 trillion. Our GDP is around 23 trillion. 5% interest rates on $30 trillion is one and a half trillion dollars in interest payments alone every year. And our social security so one and a half trillion dollars. I mean, that alone is about 6%, 7% of GDP. So you have to tax every transaction in the country by six or 7% just to pay the interest payments on the debt. And then we have Medicare and Social Security, which I have said that math is wrong, because you have maturities of all
SPEAKER_01: different types with different yield to maturities and different coupons. So that's not today's numbers. It's what's
SPEAKER_03: happening over time. So as you look out, and you look at the yield on treasuries, and you apply that to the current debt level and the increment in the debt level, you'll get to that level, right, you'll get to a trillion five a year in interest payments that need to be made, plus another call it three, four or $5 trillion a year in mandatory spending. And so that's where the country starts to run into a problem. Because at some point when you have to tax so much to cover the cash payments that need to be made by the federal government, the economy really gets hurt, and things start to cripple. And then if you were to take those entitlements away, Social Security, Medicare, you have a real problem with people's ability to support themselves in an economy where they're not working. These are elderly retired people. So there is a mate at work to pay these expensive medical bills. So there's a major crash coming, if we don't figure out how to bridge our way to this gap. So if someone wants my vote, and they're going to run for president, they would put up a simple chart like Bill Clinton used to do, and show me a 10 to 30 year plan and just say, here's where we're headed. And here's what we're going to do to make sure that doesn't happen. And that chart alone, I think can win the vote. Okay, let's
SPEAKER_02: pull up the chart then. So here is the federal debt total public debt as a percentage of gross domestic product. As you can see, in the 70s and 80s, we were at under 50%. The 90s, we started, you know, growing. I don't think this matters. I
SPEAKER_01: think everybody, every self proclaimed intellectual looks at this chart and says, Oh, my God, we've exceeded 100%. You know, the the Empire is going to go to ruin. That's not why the Empire goes to ruin, we have the reserve currency of the of the world. And there's an enormous amount of power that comes from that position. So what the right number is, is TBD. That's the most honest way to think about it. It was 100. It's at 150. It could go to 200. Many countries operate at levels above us and still haven't imploded per se. The real thing is what part of what feedberg said is, look, if you really want to look at what we pay, today, we pay $400 billion this year. That's the interest payments. Okay, that's when you calculate all of the different maturities we have, with all of the different coupons we have. That's what we owe today. And David is right mathematically that if interest rates go to 5%, and stay there forever, but we know that that's not how economies work, they ebb and flow. Okay. So the real problem that we have to understand is how do you actually create enough growth, and then the next time that we have a meaningful fall in interest rates, like every other person does, you know, look, a lot of people in America know how to refi their credit cards, refi their home loans, refi their mortgages, the United States could have had a much more aggressive and thoughtful strategy of refi by pushing out these maturities way into the future. And again, Trump actually suggested that but because he sounded like a goofball, everybody said absolutely no way. But in hindsight, that one move would have saved us trillions of dollars over the next decade if we had done it. And this time around, we have to have politicians who are smart enough and have the werewolf file to say, it doesn't matter where this idea came from. It's really smart. Rates are now back to 2% or one and a half percent, let's now issue 50 and 100 year bonds. And let's refi this problem out into the future. That makes a ton of sense. And we have to do it. The refi makes a ton of sense just to pull up a chart
SPEAKER_02: here. And to counter your position there that it doesn't matter to mouth. Maybe you can respond to if you look at GDP ratios here. Number one, two and three, Japan, Venezuela, Greece, Sudan, and you know, you know, some smaller countries there, but United States currently these countries, none of these
SPEAKER_01: countries look, this entire world runs on the US dollar complex. Whenever we raise rates. Yes, it is true that on the one hand, our interest payments go up, but
SPEAKER_01: proportionately and on a relative basis. He I think I think maybe let me take a step back. Look, one of the most important things in investing, which is appropriate here is that people ask, what is the price of a stock? Well, before you go public, you're calculating what the intrinsic value of a company is, okay, all the things that they do all the money that they make. Here's what we think it's theoretically worth, but the minute it goes public, the intrinsic value no longer matters. It's what is it valued relative to everything else. Okay. The United States is a relative, if it's a stock, if all these countries are stocks, we are valued relatively to others, not not intrinsically. And the reason why we have so much power is because everybody else is actually valued relative to us. So this is why I think the right thing to look at Jason is the rate of change of debt to GDP for the entire g8, or g 20, or the rest of the world. And what you'll see is something that goes up into the right. Nobody in the world has been rewarded for not investing in their populations and and basically borrowing from tomorrow to invest in today's human capital. Okay, so we have a disagreement here. freeburg,
SPEAKER_02: you think this is a major issue? Yeah, because I think it's manageable freeburg. Yeah. For I think there's two things that
SPEAKER_03: are missing. One is the inflationary effect. So you look at that list of countries that are there. They're paying higher interest, and they're paying in the form of inflation. So they have less that they can spend on their people. And ultimately, what ends up happening, it's just simple arithmetic. It's not about relative value of a currency. It's the arithmetic that we have a check we have to write every month to pay for Medicare and Social Security. And it is written into law, what that check needs to be. And the rate at which we're having to write those checks, the increment of those checks is going up so significantly that when you add on the interest payments, and you look at those checks, and then you add on defense, something's got to give because you cannot raise taxes in the amount that's needed to fund all of that outlay without this causing either number one, massive inflation, if you just take on more debt, or number two, you know, significant loss of services, either Social Security, Medicare or defense. And so something's going to give and the distribution I think is not being discussed. Sorry, just one just one point the
SPEAKER_01: president's Okay. Anybody who is a president of the United States gets hold of their annual budget. It's about five and a half trillion dollars this year. So you're talking about
SPEAKER_01: interest payments that are still less than 10% of their total budget. Now that includes the entitlement payments. Okay, so about $3 billion, three trillion, sorry, three and a half trillion is what you have to pay for 20%. No $3 trillion is
SPEAKER_01: the sum of Medicare and Social Security. Okay, so the president still has one and a half to $2 trillion of leeway, of which a quarter are debt payments. So my perspective, quite honestly, is mathematically, there's a lot of room to run here before these things get really out of control. And even if they do, I think the relative problem is for the rest of the world will be so egregious, that the ability for the United States to go to those banks and those economies and basically sell in more US debt is quite high because they cannot afford to own debt in their own country. So if you think that if the United States is bad, go back to that list. Guess what those central banks in those countries are going to be buying US dollars faster than they can go out of stock unless we see some
SPEAKER_03: union of India, China, Saudi Arabia, Russia, Japan, Brazil, obviously not Japan, but some some of that consortia will become a closer trading partner, and perhaps could cause a shift in the balance of the dominance of the US dollar. And that's one path to to consider. Sax, what do you think of the balance sheet here? Obviously,
SPEAKER_02: we have two opposing opinions here from Trump and freeburg. Where do you stand on the United States balance sheet? Are we over our skis? Yes, the balance sheets a disaster.
SPEAKER_05: What are we at? Like 130% of debt to GDP? I mean, we have like 30 trillion of Yeah, it's not even stable. I mean, we can't spend 27% of GDP right now. 27% It should be 15%.
SPEAKER_03: Right. So the spending where does that number come from? Why? There's a there's a bunch of economists who have shared these papers. morons, morons, morons, fake experts, fake experts.
SPEAKER_01: Hold on, hold on. If you look at sex, if you look at government
SPEAKER_05: tax receipts over time, with all different kinds of tax rates, including very, very different top marginal tax rates, what you see is that a federal tax receipts as a percentage of GDP is in the 17 to 19% range. And like the best years you make 19% it's usually in a good economy, and in a bad economy, it's like 17%. And it really it doesn't matter whether Reagan was president or Clint Bill Clinton, and so on. So there's only so much blood you can get from a stone. And historically spending was around 90% of GDP. And so you would have a one or 2% you know, deficit every year. And that
SPEAKER_05: really accelerated first you had the financial crisis of 2008. And then you had COVID. And free works right, you know, we we went from call it your 20% of GDP spending to roughly 30% or more during COVID as kind of this emergency measure. But like everything else in government, you know, the emergency measure becomes a permanent program. So now we're at 27%. It doesn't seem to be going down. And the democrats want a lot more. I mean, we talked about it build back better would have been three and a half trillion instead of 750 billion if they just had one or two more votes. So hold on. So so freeburg is right. There's like nothing stable about the point we're at it's the point we're at is bad on its own terms. Having 30 trillion of debt, let's say that interest rates stabilize at 3%. That's still a trillion a year of debt service, which is more than if interest rates stabilize at 3%, which is optimistic, and
SPEAKER_05: we're servicing a trillion sorry, 30 trillion of debt, that's roughly a billion dollars a year of debt service payments really could be spent on other things guys keep saying billion when it's a trillion.
SPEAKER_02: The average yield to maturity needs to be factored in there.
SPEAKER_01: So over a 15 year period, David, you would be right mathematically, if all matured, but that's not what this is, because you really are, you'd have to refi and reissue a bunch of debt that is at lower yield right now at these interest rates. I want to be clear. I'm not any of this is good. I mean, remember, I understand. Let your mouth say why I'm good or not. I'm not saying that this is a good or it's a trend. What I'm saying is I have this issue that all of a sudden people make up and you guys are doing it now. An arbitrary number with no rooting in history or fact and say this is bad. And all I'm saying is I know it feels bad to us. And I think we would all run this country differently. If we could control the balance sheet, I would as well. I would try to get debt way way down, I would try to get deficits way way down. But all I'm saying is using this justification of an arbitrary number always falls flat. So I'm encouraging us all. Let's find a better model of reasoning. Because every time we point to some randos book and say 127% is bad. Nobody listens. And I think the message that you should take away is is because it's imprecise and it's not rooted in any actual logic. And if there's a better building, the reason I believe that this is concerning is I look at the
SPEAKER_02: top 10 countries that have, you know, debt ratios that seem out of whack. And I think, wow, what is their fortune been for the last 10 years, visa v, Japan and Venezuela, the right comparison, the right comparison. Okay, why am I
SPEAKER_01: wrong? Look at the British Empire. And when and what was the debt to GDP when it started to actually follow? I know lapsed No, I'm saying okay, was it triggered? Was it triggered by debt to GDP? And I think your answer will be in part, I can't run us they took on ruinous debt and they
SPEAKER_05: couldn't maintain their empire anymore and the whole thing collapsed. I'm just asking for some miracle specificity.
SPEAKER_02: Right. The last time there was a lot of numerical specificity, there is a
SPEAKER_03: ton of work that's been done on the work pulling shit out of their ass. So tell us that it's historically the best way to manage the growth in a in a in a country is to have deficit spending be equal to or less than the growth rate of the economy of that country. So for example, if your income, the tax revenue that's being generated by the government is equal to say 15% of GDP, you do not want your spending to be more than 17 or 18%. If the economic growth rate is two to 3%. That's it. If you do anything more than what happens, you know, if you do anything more than that you're borrowing from the future to pay for today. That's the simple truth. Okay, so what happens? And when you do that the rates go up and the prices go up and eventually your currency doesn't work. So you're making a bet. Read the book that I talked about last year, the real the most recent radio book, he goes through six stories with the economic data to prove it the factual data, the history of what's happened with six empires over the last 500 years where this exact same scenario has played out. This isn't some random arbitrary story. I read that book. And everyone in that everyone had the exact same perspective that you have when they were living in those days. And they said, You know what, we're gonna be okay, because we're the reserve currency. And the world loves us. And we're the Empire, we have influence everywhere. And they all lost primacy, and their currencies collapsed, and they all broke apart. And I'm not saying that
SPEAKER_01: that can't happen in America. What I'm saying is, you get so full throated. I read that book. It's great narrative, but the numbers are brittle. Okay, they're fragile, and they're mostly made up. Everyone can read it. So all I'm saying is, in the absence in the absence of numerical specificity, I agree with you that this trend is alarming, and it's bad, I agree with you. And I agree that we should spend a lot less. What I'm saying is, when you say to the world, stop spending, because XYZ number is bad, you have no credibility, because it's not something that you can actually back up. And all I'm saying is, if you could find a better logical argument, you would probably get a lot more people to you. You're just being ignorant. You're ignoring it. You're
SPEAKER_03: saying you don't want to actually believe it. The numbers are there. I'm not saying ignorant and disparaging way. I'm saying you're literally just ignoring the show. Show me the
SPEAKER_04: numbers. Show them to me. They get upset at us for fighting.
SPEAKER_02: I'll make you a PDF. I'll send it to you tonight. I promise.
SPEAKER_03: And I'll post it on our friggin things that people can watch it all right. Listen, the group chats gonna be on fire this
SPEAKER_02: weekend. Sacks final word for you. Okay, final word. Okay, final, please. Before like this, but
SPEAKER_03: opposite sides. I think it's great. I still respect and love
SPEAKER_03: each other.
SPEAKER_05: If you if you go back in history and look at debt to GDP levels, the only other time we're anything remotely like the level we're at right now is right after World War Two, when we had just saved the world from Nazism. Okay, that was worth going into debt for you look today, what is it that we've gotten into this 130% debt to GDP? What is this $30 trillion of debt for what have we bought with all that money? Huge amounts of it have been squandered. You're right. And Biden wanted more if the courts didn't stop him. He was going to truly you're forgiving, forgiving a bunch of student loans for basket. degrees or liberal studies or what graduate degrees that brown
SPEAKER_02: we finished the best point number one is that this money is
SPEAKER_05: being squandered at levels we've never seen before. And the squandary is continuing. It's not like we've reached a steady state. It just keeps going and going. And I can't precisely solve it. I can't precisely say when it's gonna break, but I do know it's gonna break. The other thing point number two is about consequences today. There is a phenomenon economists call crowding out, where when interest rates go up, more and more money flows into the risk free rate of return. And then that crowds out investment capital. And we've talked about it on the last pod where if the risk free rate is 5%, and then like high quality corporate bonds are offering eight to 10%. Now equity investments must generate 15%. And VC must generate 20%. And there are very few VC investments that can generate that kind of IRR. So what happens, the money flows out of VC, and there's less money for risk capital, what drives our economy risk taking day off for North ship. So hold on a second. So this massive debt service that we have, which drives up interest rates will crowd out the very kind of economic activity that the United States needs to stay on the cutting edge.
SPEAKER_02: rebuttal to the rebuttal to the rebuttal. No, you're so right.
SPEAKER_01: So why don't you just bookend the argument exactly the way you just did. My point is not that you said it just before that we don't know at what upper bound these things break or don't break. And all I'm saying is every time you throw up a random number, you guys sound like the boy who cries wolf, okay, and you're shouting into a vacuum is is just the advice that I'm trying to give you guys, I agree with you. I spend my entire days investing in and trying to figure out what is the risk adjusted rate of return of the things that I'm doing. And I'm trying to tell you as somebody with some reasonable financial numeracy, every time I hear you or Ray Dalio or somebody else say, this number is where it all breaks, and it doesn't, you lose a little bit of credibility, then you go to this number, and you're like, Oh, at 127% of your point, you're making up No, let
SPEAKER_02: me put it back. How much is too much? How much debt can we
SPEAKER_03: handle? And how much spending as a percentage GDP should we handle? What is the limit in your mind? And how do you decide what that limit can or should be? I think the honest answer is
SPEAKER_01: every time that I have been alarmed that we had hit a threshold that was meaningful. So for example, like I think under Obama, we passed 100. And it felt very scary, because I was like, wow, that seems like a demarcation. It turned out to not be a demarcation at all. Because it's relative to every other country and what they're going through. And I understand that you don't want to believe that. But I do think that America's economic fatality is not an independent function. It is a dependent function on everybody else. We are relative to everybody else. If there's a different cosmos and a different planet somewhere, maybe this will all reset. But right now, it's not. And so we all trade relative to the United States. And in as much, I would like to just say, I don't know enough to guess what this number is. And I'd rather focus on what David said, which is, there are things that we need to do, that we need to incentivize people to invest in extreme risk taking that create new businesses that move the world forward. You can have that conversation without bellyaching and crying to mommy about a GD debt to GDP number, because every time you throw it out there, nobody knows what you're talking about. Nobody knows what reaction to have. And everybody feels over time, David Friedberg, that you're crying wolf. So all I'm saying is, I get that it's concerning to you and it creates anxiety. But every time you and you probably this is not the first time you've had anxiety, you probably had anxiety at 5075 100 125. Guess what, I bet you'll have anxiety at 150. I don't know what it means. I do know what SACS means. So which is that right now we have a risk free rate that's going to five, we have corporate bonds, it'll be a 10. We have equity investing at the most risk taking, which is the early stage venture that has to return 25. And that is an incredibly high bar. But we need to do it. And we need to do maybe fewer investments, quite honestly, with fewer participants with less dollars that are more effectively put to work. Okay, maybe this is a good jumping off point to talk about all the waste in Silicon Valley. And that stuff can happen without debating incessantly this debt to GDP number.
SPEAKER_03: All right, freeburg, SACS, and then we're gonna move. Go. I
SPEAKER_02: agree. I've never had anxiety about debt to GDP. It's never
SPEAKER_03: been anything on my radar. The conversation I'm trying to have today is the amount of spending the federal spending, including interest payments, as a percent of the GDP as a percent of how much we can tax to pay all those to make all those payments every year. And so what I'm concerned about is the ballooning cost of paying out all the obligations the federal government has to pay out of it different than what you were just saying.
SPEAKER_01: That's if you were cared about only that, then refinancing the debt is an equally valid proposition and changing the duration expense. It's not the only expense. So interest
SPEAKER_03: payments are ballooning. In addition to interest payments, Social Security and Medicare payments are also ballooning and defense and of control spending. Everybody has their hand
SPEAKER_02: out. Everybody wants an air drop out of those four big
SPEAKER_03: categories together. You don't have any room left over. You're talking about you're talking about discipline in
SPEAKER_01: spending in defense. Great. I agree. You're talking about discipline and capping health care costs. Great. I agree. What does that have to do with this other orthogonal thing you've been talking about, which is this random number debt to GDP? It doesn't mean we let's move on from that discussion.
SPEAKER_02: Can we make one final point that we can move on? So so look,
SPEAKER_05: take time for the final point. Go. It's important discussion
SPEAKER_02: apparently. Look in the in the interest of bestie harmony. I
SPEAKER_05: will partially agree with the point that your mouth is making, which is that for a long time in American politics, people have sort of cried wolf about debt to GDP. For example, if you remember way back in 1992, Ross Perot, basically basis candidacy on the idea that the US was racking up way too much debt. You know what debt to GDP was in 1992 41%? Yeah. Okay. So people people used to care a lot about this. I remember when Reagan was president and jet to GP was 30%. People were saying that he was this like, you know, wild spender. Okay. But I think that precisely because nothing broke at 3040 80% 100%. You then had the rise of this theory called MMT or modern monetary theory, which said that the debt to G debts don't matter. If you're the reserve currency, you can print as much money as you want. And so people started indulging in this. And so now I actually think we are at a point, I can't say precisely where it breaks. But I do think that because debt to GDP didn't seem to matter for so long, I actually think we got carried away. And now we're at levels which are just going to be ruinous, if for no other reason than our debt service is going to crowd out. Whether you want more guns or more butter in our federal budget. If you want more defense spending, you want more entitlements, you want more discretionary spending. There's no question that debt service is getting bigger and bigger is going to crowd out those programs. There's no question we need to spend less I
SPEAKER_01: 100% agree with you. Okay. But all I'm saying is, we should spend less on defense because we have different ways of defending ourselves. That should be the logical argument for less than your energy independence is defense and a balanced budget
SPEAKER_02: could be defense as well. If you look at the IRA, that was less
SPEAKER_01: than a trillion dollars over a decade. Okay. That has the potential to shift trillions of dollars a year in defense spending. Yes. Okay. Okay. So let me wrap. Okay, let me wrap
SPEAKER_02: here for a second. Thank you. You can look at these bills in
SPEAKER_01: and of themselves and try to actually do the right thing. Without wrapping up all of these random arguments and I by the way, just be clear. I don't believe in the
SPEAKER_02:
SPEAKER_00: Don't do it. Don't do it. The world's worst moderator. Come
SPEAKER_03: on. I want to go back to actually during the Obama presidency, we
SPEAKER_05: had a thing called the sequester. I don't know if you guys remember this. Yeah, Republicans and Democrats agreed that basically that because we had just had like these trillion dollar deficits because of the 2008 the global financial crisis, they got together and said, Listen, we're going to hold the line on spending. And there'll be no increase on defense spending in exchange for no increase in discretionary spending social programs. And for a few years, we held the line on spending actually. And then of course, both Democrats Republicans didn't want that for different reasons. And the sequester went away. We need to go back to something like that. There are two things.
SPEAKER_01: One one detail, like when you go and send a bill. So look, the way you pass a bill, right, you have to send it to the CBO to get scored. One of the things that I learned this week is that sometimes the CBO and they're not really empowered to actually tell you how things get offset. So for example, like if you have a medicine, what they will do is say, well, we'll look
SPEAKER_01: at at the population level, how much would this medicine cost if it's taken by the population. But if that medicine then all of a sudden has the potential to actually offer amp you over here, those savings are not really factored in as well. So David, to your point, another way that we can refine how we build budgets to make sure that we're not overspending is to actually improve the toolkit and the data that like the CBO is given so that when they score things, they can actually look at the total impact. Like for example, like the IRA, again, one of the biggest benefits will be to defense spending. If we choose to make those cuts, you will be able to do it differently once we have, you know, no reliance on foreign energy. Okay, to wrap this segment, the first segment,
SPEAKER_02: which took 57 minutes, obviously, really, well, I think it's an important discussion. Hey, Jake, how would you vote
SPEAKER_05: for DeSantis to be promised his fiscal responsibility? Well,
SPEAKER_02: here's the thing, I am going to take a look at the candidates, I'm going to make the best decision in terms of what I think is the country. I'm giving no answer is this. Yeah. It
SPEAKER_05: depends on if DeSantis gives you everything you want a fiscal policy. Why wouldn't you vote for him? If he stays out if he
SPEAKER_02: if he's in favor of a woman's right to choose for the first 15 weeks, that's Florida policy. Are you Yes. You know, I would
SPEAKER_02: take a look, I would take a look. I would not to vote for
SPEAKER_05: him 15 weeks right to choose, combined with fiscal responsibility. I I'm voting for a moderate this time to
SPEAKER_02: end tax cuts. Okay, but to wrap up here, the two things that matter, I believe, and based on our panel's discussion, austerity and excellence are what are going to get us out of this mess. Here's what the platform seems to be shaping up our 2024 platform control spending. Everybody here thinks that's important energy independence. Everybody here thinks that's super important. Stop fighting unnecessary wars, and maybe rethinking our foreign policy. I think we all agree on that. And the cultural focus on excellence, not excess. This is shaping up to be a little bit of an all in platform here. Great discussion, everybody. Speaking of austerity measures, I think, you know, we should just talk right, right up top here about what's going on at Google Chris hone, I believe is how you pronounce his name. Chris own, he sent a letter to Google and Amazon Amazon today, after already announcing 10,000 lay offs. They just said again, and he said, prepare for more lay offs in 2023. And these are not factory workers. These are white collar high paying jobs that are being laid off here. They're surplus elites. surplus elites. It is definitely a part
SPEAKER_02: of the zeitgeist right now. So they're going to reduce head count massively. But in this letter to shareholders, he points out, notably, not just hey, Google needs to do a riff or reduction in force. But he points out a more granular point that I want the panel to talk about here, which is, he says, hey, you need to reduce the actual salaries at Google, the average salary being $296,000 67% higher than an incredibly well paying workforce, Microsoft quote, we acknowledge that alphabet employs some of the most talented and brightest computer scientists and engineers. But these represent only a fraction of the employee base, many employees are performing general sales, marketing and administrative jobs, who should be compensated in line with other technology companies. And he says, we need to establish an EBITDA margin target, as you can see in this chart, and reduce the losses on other bets, perhaps increasing share buybacks as well. So what we're looking at here, now after what an incredible business, my
SPEAKER_01: God, I mean, the business is nuts. Freeburg, you worked
SPEAKER_02: there, what in this rings true to you, or not? And then how many people does Google need to employ to operate the business and invest in the future of the business in your mind, they have 187,000 employees at Google, it's grown 24.5%, rounded up 25%, year over year, they grew 25%, year over year, in their business, how many people need to run this business to have it aggressively grow? Look, I think there are two main drivers of
SPEAKER_03: the issue that Google maybe meta, maybe Twitter, prior to Elon's involvement, and really Silicon Valley as a whole, the bigger companies have faced the first is the war for talent. The war for talent started, I mentioned this last time around 2004 2005. Because prior to that, there weren't as many grads coming out of undergrad with computer science degrees, right, I think 10% of grads in the Bay Area schools were finishing with computer science degrees. Today, the number is like 60%. So you know, around that time, the war for talent led organizations, particularly Google down a path of offering more perks and benefits to their employees to create a workplace that was more competitive. And that ends up being a slippery slope, because then other organizations try and find parity, and then other organizations try and overdo it and push it even further. So this leads to both wage inflation across the the ecosystem. But it's also led to almost like the acceptance or the allowance
SPEAKER_03: for degrees of complacency. And so I'm not saying that the workforce is all complacent. But I do think that complacency is forgiven some amount of complacency, I'm going to take a Friday off, I'm going to take two Fridays off, all of a sudden, I'm not working any Fridays. The other thing that's happened is as this workforce has aged, I worked at Google 20 years ago. And a lot of the folks I work with almost all of them now have families. At the time, everyone was young. And as the demographics of Silicon Valley has matured, you have more people that are less about killing themselves and giving everything that they have to their organization. And they're more interested in being with their families and now spending less time at work, especially in light of the fact that compensation has ballooned to a point that you can now live a very, very comfortable lifestyle. And you don't need to have a big payday in order to be able to take really good care of your family, which was the case as a startup. And then the other issue is just one of innovation. At Google, if you work on a new project, and it doesn't work, there's no loss, you still have your job. And they've started programs, or they'll give you equity and new startup ideas, or they'll give you all the stuff. So they'll give you upside if you win, they'll give you bonuses if it succeeds, but there's no downside. And so the pain and the burn that you would feel as a startup founder, or as someone building a new business isn't experienced or realized. And I cannot I don't need to tell you guys this. But for anyone else that's listening that may not really be fully aware, the lack of pain, the lack of risk, the lack of downside, the lack of having no safety net and, and falling through the pits, removes all so much of the incentive to succeed, and to drive and to innovate. And I think that's become part of the complacency problem. That's caused larger organizations to simply say, let's throw more heads at the problem. And when you just throw more heads at the problem, you have more of kind of talent war problem that I mentioned number one, what is the average salary? 280,000
SPEAKER_02: 300,000 rounded up. That doesn't class I don't know if that includes benefits, whatever. Let's just call it 300,000. Yeah. And by the way, that doesn't mean that those people should
SPEAKER_03: all get fired. But I know it speak it speaks to the fact I think they're wonderful people. They're some of my best friends work at Google. It's a great organization. People do incredible work there. But in terms of return of dollars invested as a shareholder, that's the question. That's the that's the analysis. That's the scope that the shareholder is looking at is do I want to spend $1 to make $1 five? Or do I only want to spend $1 where I know I'm gonna get $1 80 back. And so if you just bucketed where the dollars are going, you would end up saying, you know what, I'd rather just focus on the places where I spend $1 and I get $2 back or $1 80 back. And I don't want to do any of the stuff where I spend $1 make $1 five back. And that's called ROIC, or return on invested capital. And that includes return on invested human capital. And so the analyst in the stock that that's an investor in the stock will look at it through that lens. Whereas everyone that's working there is still contributing meaningfully, they're still doing valuable work. But in terms of return on invested capital, a good chunk of the projects are not driving the majority of the value, a minority of the project, a minority of the headcount is driving almost all the value. I
SPEAKER_01: mean, if you sensitize that to what you said, David, a, if it was just 75, or a half that number, then you know, the stock goes up 35% overnight. And if it goes up to the full number, yep, the stock goes up 65% overnight. I think that's totally feasible. And then and then I think what
SPEAKER_03: you do is you take $10 billion a year, and you have a high accountability model that you speak to the street about. And you say, here's how we're going to hold ourselves accountable to investing this $10 billion every year, and not just have everything be a nebulous 15 year project. And then it's always a 15 year project. And you're always just burning cash to go after those projects that are highly nebulous. If you had to steel man the other side, I think the argument
SPEAKER_01: would be, if you were to invest $10 billion a year, you would spend $10 billion. I would say they would make probably three arguments. argument number one is like, look, don't get overly distracted by other bets, because it's a small category of spend. And we've contained that cost, pretty rationally, relative to the rest of the core business. The second thing that they would probably say is, there's an enormous amount of work that is never seen by Wall Street, that explains how good our services, whether that's, you know, in early iterations of, you know, technical capability, like GFS, and big table to things like TPU to things like TensorFlow. And all of that builds up all the things that DeepMind does all the compute, we have to throw against search to support that. So I think they would probably say, well, people probably don't have a great sense of today, that it's not just 25% of the team that's required. And then the third thing is, what they would probably say is, it's very hard to explain, but Google has all other things that they do for free, to create the ecosystem so that the internet works well. You know, I heard this one thing where somebody was explaining that Google is like, you know, the DNS server, right? Google is the time server, and all of this stuff they do for free. And all of it is just about making the internet work more efficiently. And that has some costs. So that's probably how they would steel man how to build back up to some number. But it's probably there's still a gap between that number, David, and what the prevailing headcount is. Yeah, I think I think that's that's totally true. Because the
SPEAKER_03: infrastructure team led by hers is the most remarkable engineering organization on planet Earth, in my opinion. And they have laid fiber lines across the Atlantic, they have built their own data center infrastructure, their own switches, their own silicon, like everything is built by this team from the ground up from first principles, and it gives extraordinary moats and advantages to the business. It makes the internet a better place. It allows, you know, ultra fast, super cheap YouTube video viewing across the internet. I mean, there's just so much of these core advantages in the business. But if you look at the headcount over time, you have to ask yourself the question, you know, how many of these investments that are core are really, you know, captured in the headcount that blossomed from 2013 47,000 people said the business has gone up in headcount by four x in the last nine years. One of the things that Jeff Bezos was always so incredible at, and I saw him give a speech on this at one point, Bezos gave a speech that I saw, and he said, we are really good at failing. And he showed all these projects that Amazon tried. And he said, we tried a nine, we tried to do our own search, we tried to build our own cell phone, the fire phone, we tried to do this, we tried to do that. When they don't work, we kill them. And when they did work, they became 100 multi hundred billion dollar enterprise value creators for them, like AWS, which was one of these projects. And so Amazon was so good at taking the stuff that wasn't working, knowing when it wasn't working and ending it. And they were still able to drive an innovation engine. One of the challenges I see with alphabet is that they are so good at bringing the best talent to work on these innovation problems. But where they're not good is saying, you know what, this isn't working, it's time to move on. And if they did just that, if they added that one disciplinary capability, then I think this, as you said, the market cap would go up by $600 billion. What about this? I just
SPEAKER_01: want your reaction to this thing that a lot of people whisper in Silicon Valley, which is part of what the big companies should do, it's part of the positive game theory, is to not let these talented people actually leave, it's better to pay them 300,000 or 200,000 or whatever, and stay at Microsoft and meta, and Google or whatnot, then go off and start up, build a startup that could actually then disrupt them. And so you know, it's a cost worth bearing, because it's actually a strategy. Yes, it's a blocker strategy. Yeah. But what do you think about that? Super interesting idea. I think that the people that are likely
SPEAKER_03: going to actually be able to execute on that are going to leave and do it anyway. Right? They're surely aggressive
SPEAKER_04: entrepreneurs are not going to be. Look, I was not super I had
SPEAKER_03: made a little money when I worked at Google. But I was not super wealthy. And I left the blast the vast majority of my stock options and RS use on the table when I left Google in 2006. Here's our climate core, because I could not help but do that. I could not help myself. I had to go do that saying, of course, I think the kinds of people that are going to succeed in entrepreneurism cannot help themselves. It doesn't matter how much money is being thrown at them. Here's the chart. Basically, these companies have been correlating their spend and
SPEAKER_02: their headcount to their revenue, not what's necessary. You look at alphabet total employee change since 2018 95.36% I mean, I don't know that looks pretty good to revenue 132%.
SPEAKER_02: It's pretty good. It doesn't look like they were massively
SPEAKER_01: overhiring. If you're asking, totally, totally. So what are you guys talking about? So maybe I'm wrong. I will say look, a big part of Larry pages
SPEAKER_03: decision to shift the company from Google to alphabet was he believed that the core business at some point would ultimately be disrupted that the core advertising engine was going to be disrupted. And there wasn't going to be the sustaining long term growth advantage in that business. Maybe he's been disproven. Or maybe the it hasn't been just it hasn't been proven yet. But the concept was we need to find the next Google, and we need to build the next Google. And so we want to allocate capital within a portfolio of bets, and have some number of those things, maybe not all of them, maybe not even a lot of them, maybe just one or two of them turn into the next hundred billion dollar revenue line for us. Now, he always said that that's going to take a long time, he definitely underestimated the quality of Google search and the
SPEAKER_01: the dominance of it. Now, it's probably it probably stands to reason that if we have enough innovation at the fundamental model level in AI, particularly like a bunch of really powerful multimodal models, the new form of search can disrupt Google. But the problem is, they are so ahead of everybody else with respect to those models as well. So the real question is, even that next big leapfrog isn't going to happen without billions of dollars of capital invested. And you know, the most likely folks that are able to do it, I think open AI at some level, but again, they're going to always have to raise money from other folks. Google can self fund it, and it makes an enormous amount of sense to drive that technical moat. So it just seems like Larry may have just been wrong. What do we think is going to happen here? Any? Are they going
SPEAKER_02: to make the cuts or not? You think they'll make do they have the ability to not make cuts and just ignore a 6% shareholder chamath? Or are they just going to make them and then we're going to go on to your I'll tell you the dynamic, the dynamic will be how much Ruth is
SPEAKER_03: able to convey. Ruth Porat is the CFO. And she's hardcore. She's hardcore. She's incredibly everyone on that leadership team is incredibly impressive. But she has a very particular lens, a Wall Street lens, and she understands what the shareholders are thinking and looking at. And she will convey these points to the board. And, and there will be engineers and Sundar is an engineer and he will, and he's a very good, he's very good at gathering and the different points of view and having balance around this. And he will share his points of view at the board. And I think ultimately, it will come down to my guess is like we just talked about some portfolio allocation decisions, which is how much risk and how much beta how much alpha? And do we have the right mix in our portfolio, and it is inevitable there's going to be some cutting. So I think that there will likely be some reduction 5% 10% 10,000
SPEAKER_02: employees, that seems like the number that people are going with. Yeah, yeah, let's see. Okay, sacks, what's your take on austerity measures, and moving to an age of excellence and efficiency, which is happening inside of the tech industry as we speak, I think freeburg's right that these companies could
SPEAKER_05: operate a lot more efficiently. I think there's an economic argument there. But I want to up level it and talk about the cultural aspect of this for a second and also bring in to the huge stories this week, the the SPF story, the interviews he did with the New York Times and Vox, and then this hysteria around what you know, what's happening at Twitter. Look, I think that there's something clearly has hit a nerve here in this last week, where you have all of these employees who have voluntarily left creating all of this drama. And, you know, Antonio Garcia Martinez had a good quote about this. He said, what you want is doing is a revolt by entrepreneurial capital against the professional managerial class regime that otherwise everywhere dominates. And that same PMC, which includes the media is treason as an act of Les Majeste. There's another version of this that came out a couple of weeks ago. And by the way, Les Majeste just means like
SPEAKER_02: you're insulting the monarch. You're insulting the crown.
SPEAKER_05: There's a good one here. There's an article on compact magazine a couple weeks ago, where the editor Jeff Schulenberger tweeted the layoffs at Twitter are no different than what's happening across Silicon Valley. But because the ideological antagonism of the professional left must they make clear what's at stake the collapse of a jobs program for surplus elites. And then and then there's a great quote from this article, which again, that's that's so hard hitting. I know it's no it's
SPEAKER_05: different. It's a deep nerve. I'll get differently. Yeah, exactly. So a quote from this article said one of the biggest and least talked about social questions in the West is how to economically provide for our own modern version of Francis impecunious nobles. That is how to prop up high status people who can't really do much economically productive work.
SPEAKER_05: Wow, I mean, like, this was really brutal. Yeah. Yeah. So I
SPEAKER_00: think this is really hitting a nerve because the fundamental
SPEAKER_05: quid pro quo of our civilization is that in order to achieve economic and social advancement, you go to college and get a degree and you submit to voluntary reeducation of yourself at one of these woke madrasas one of these reeducation camps. That's a quid pro quo. You get now some people did your punch up guy right that intro? No, no. This is this is what I believe for a while now. There are some number of people who get useful degrees like computer science or engineering, but huge numbers of people get degrees in like we talked about the basket weaving or whatever the politically correct degree is. And they graduate with a quarter million dollars in debt and no marketable skills, right? And right. And what was popping up all of these people were these fantastically wealthy monopolies, tech companies that were hiring huge numbers of these people. Now all of a sudden, we get to a point where we're in an economic recession. And these companies are starting to do layoffs. And they're starting to do a little bit more soul searching about who's really adding value. And people are starting to get laid off. And I think there this hysteria is coming from a place of deep insecurity. You had all these people go to college, they did not learn critical thinking skills. What they learned was that listen, if we pay lip service to the right platitudes, then we will have career advancement. And now they're learning that that may not be true. And actually, the person who's pulled the mask off this entire regime is not other than SPF. And he did it in an interview with Vox. And we have to go to this. Okay. This was deranged. He's the devil, but he basically pulled the mask off this whole civilizational quip pro quo. That is a sham. Okay. And here's what he said, that the Vox reporter said you were really good about talking about ethics for someone who kind of saw it all as a game with winners and losers. What did SPF said? Yeah, he he, I had to be it's what reputations are made of to some extent. I feel bad for those who get fucked by it. Basically, all these people who incurred a quarter million dollars in debt and think they can just spouse the right platitudes. He says, by this dumb game we woke Westerners play where we say all the right chibbles. So everyone likes us. How stupid does the New York Times feel right now? How stupid do all these nonprofits and foundations who received all this money from SPF he played them, all he had to do was say the right words that say the magic woke words, and they would basically cover for the most enormous grift that's ever been perpetrated. That is basically the quip pro quo of our civilization is be woke and you will have indefinite career opportunities no matter how how virtual signaling would be another way to say it. I mean,
SPEAKER_02: it doesn't necessarily have to be the work woke ideology, but virtue signal and give donations to people. This has been a playbook of grifters for a long time. Bernie Madoff gave a ton of, you know, donations and he used the same donations that he
SPEAKER_05: gives the Republican Party. None. They're not part of the regime. How many how many conservative? Yeah, I'm not sure this is a political point. I'm not making a political point. I'm making a cultural point. Okay, good. Yeah. Who are the charities that he donated to? It was all the right what causes not, you know, it was not a pandemic one was not woke. He was
SPEAKER_02: passionate about the pandemic stuff. Are you kidding me?
SPEAKER_05: freaking out about the pandemic? No, no, he wanted to pandemic preventions. Has he explained it to me the neurosis it was the No, no, no, that was not what he was funding. Sax. I actually
SPEAKER_02: talked to him about this when I interviewed him. He said he wanted to do pandemic prevention and early warning systems and wanted to invest in strategies to fight the next lesson and definitely freaking out about COVID is was a central
SPEAKER_05: neurosis of the professional managerial class for the last couple of years. It is not what he was finding. I just want to
SPEAKER_02: make that point. Yeah. Whatever. I mean, he wanted to prevention.
SPEAKER_02: I mean, you can frame it as not but I actually literally talked to him about it. He wanted to do pandemic prevention in the future. What is your point? He wants to steal money from
SPEAKER_05: California taxpayers via ballot initiative to fund his brother's organization, which would have dispersed the money in who knows what ways, probably not legitimate, out of a professed concern about the next pandemic. Why? Because the PMC is neurotic about the last pandemic. Come on. This is pandering to them. I just said, Of course. Yes, thank you. It's pandering. I understand it's absolutely pandering. Now listen, why? Well, hold on a second. Why did this work? Why did this work? virtue signaling work? And again, why were they only charities and causes that appeal to the sort of the left is because they're the ones with the power in our society and in our culture to define what virtue is. When you're virtue signaling, who are you signaling
SPEAKER_05: to the people with the power to decide what is virtue? And what is vice, right? That is why people go to work at The New York Times. That is why they basically go into, you know, all these influential jobs, nonprofits and foundations. They're the ones deciding what virtue is. They're the dupes, the ones who are fooled. And now what's happening is there's an economic consequence to it, which is, it is coming out, these people have no marketable skills, and companies are tightening their belts. And now all of a sudden, they're starting to become deeply insecure about their own future. My comment is that, you know, when you look at Twitter, as an
SPEAKER_01: example, Bill Gurley had a really powerful quote as well, which is when companies cut, you know, they don't cut nearly enough and they and they miss estimate and underestimate how resilient a company is back in, you know, Twitter had 200 million mau, they had only 1000 employees. And so clearly, at that point, they knew what they were doing. And now the business has, you know, increased in mau by call it 50% to 300 million. But the employee base increased by seven and a half x. So clearly, something is misaligned. And I think the thing that you know, people are going to find out is with contractors, probably 12 x, right. So I think that, well,
SPEAKER_01: there you go. So I think that the thing that frustrates a lot of folks that are leaving or that are trying to throw bombs is they don't want Elon to be right. Because I think to David's point, if Elon is successful, he has uncovered this very uncomfortable truth that was frankly hiding in plain sight, which is that many of these technology companies using technology get so much operational leverage, that they have some enormous efficiencies. And then it's only a decision by the professional managerial class to reward themselves with fiefdoms, and kingdoms of employees and you know, the the surfs that work for them. I mean, it's really quite crazy if you think about it.
SPEAKER_02: Well, freeburg made this, you know, early on in the history of this podcast. Well, hold on, I want to add to your position. freeburg said something that adds to your position, which is early in this podcast, he said the nature of organizations is they want to grow. And that's government or even these departments you're talking about. Anybody who runs a department is never going to say my department needs to be 20% less so we can hit the bottom line. They're gonna say give me 20% more because everybody else is getting 20%. Go ahead. So the and then if you if you if you layer in the Charlie
SPEAKER_01: monger, quote, show me the incentive, and I'll show you the outcome. You can understand why because the professional managerial class is rewarded by compensation that is actually independent of dilution. Right? Because if you look at these compensation plans, all of these professional stock owners, they complain all the time about stock based comp. Right? And these companies have budgets between two and 5% a year that they give away. And so you have this situation where an engineer or an engineering manager or a sales manager or a marketing manager, in success at 1000 people can grow to 5000 or 10,000. Their compensation doesn't change in any other organization, their compensation would change because let's say that it's a percentage of the profits that are distributed, unless the company is phenomenally growing. Eventually, you'll see it in the bottom line of what you take home. And so these folks are incentivized to have these status signals of value, I have a 50 you know, you guys have heard this, I have 50 person team, I have a 100 person team, I oversee 3500 employees, and you and everybody is conditioned to think, Oh, my god, that's incredible. You must be really important. And so we're going to sort of now see in real time, a questioning of that belief system. And if Elon proves to be right, it's a really important decision point for a lot of other technology companies, because if you are an 80 to 90% gross margin business, built on software, maybe you have a bigger responsibility
SPEAKER_01: than you've discovered to date to your shareholders and to the existing employees to find the efficient rate of return, right? What is the efficient frontier of headcount? The other thing is, it now allows, let's just say that now, Twitter goes to making up a number 2000 employees after this whole Google form thing. The great thing about the 2000 and first employee for the 2000 employees and for the shareholders, is that that 2000 and first new employee is 100% aligned, because they're coming into something eyes wide open. And I think that that's also an interesting thing that isn't getting enough recognition is, he's putting out there what he stands for this hardcore culture, irrespective of whether we think it's right or wrong, all the people that stay are voting that it's right. And you know, as long as it's not breaking any laws, he's allowed to do that. And so if people now want to join that organization, they should be allowed to do that, too, just like the people who don't want to should be allowed to leave sacks, you and I came up and we talked about
SPEAKER_02: this, I think on last week's show, or maybe it was two weeks ago, we talked about what the expectation was in Silicon Valley at a startup, what startup culture was, in terms of just the effort that was required to build a winning company. And we all said 60 hours a week was the baseline. That's something that, you know, has been I think a lot of people, you mentioned this trim off people working two jobs for 30 hours a week and taking two salaries from two of the fan companies. So go into TikTok and search for, you know, engineering
SPEAKER_01: salaries, you'll see some of the craziest Tiktoks kids are making 350k working 30 hours a week, it's nuts. Yeah. And so I think
SPEAKER_02: we're going to have is a I think we're gonna have a cultural divide here, there are going to be a series of companies that say this is classic Silicon Valley, we're gonna we're gonna crush it, we're gonna work aggressively, we're gonna put in 50 6070 hours a week, and we're all going to benefit from that. And then there'll be another class of companies that says, hey, no, we want to have a more lifestyle business. And if people want to work 3040 hours a week, and they contribute, we don't need to be perfectly efficient. And you know what the playing field of the playing field of capitalism will show who is right sex. Yeah, I mean, look, I actually went out of
SPEAKER_05: town a few days ago. So I wasn't keeping up with, you know, every detail of what was happening at Twitter. And I started getting all these text messages about how Twitter was dead or dying or whatever, like the site had been unplugged, or what have you. And I'm like, what is going on? And you know, you tweeted this morning, hey, is this working? And I'm like, yeah, like, like, yes, it's working. Like, and this morning, is this working today? And so what we went through? Yeah, so I came to learn what they're talking about is that all Elon did was give a voluntary offer that if you didn't want to stay, you could take three months severance. Now, remember, last week, they had a riff, you know, which was basically economically required, in which they gave employees three months severance, which is 50%, more than what he had to it was generous. Now, it seems to me that what if you're one of the employees in the other half that made the cut, but yet you're not really motivated to stay. And maybe you don't really want to operate like a startup. I mean, Elon's basically saying we're going to go back to working and operating like a startup. That means that you might have to work nights and weekends, like a startup. What if that's not what you signed up for? You may be sitting there at Twitter, saying, Oh, man, I wish I got in Riff. Well, now, Elon is offering you the opportunity to take the same package. So I'm like, how can this possibly be a bad thing? It's actually the great management technique that
SPEAKER_02: Tony Shay, rest in peace from Zappos created, he would say, when people went through their first couple of months of training, he'd say, Now, if you don't want this job, I will pay you a month salary. This is on their first day after they went through training, their first like day on the job, he said, Okay, now that you've gone through the training, I'll pay you I think it was $5,000 or $3,000 to not take the job. And something like one out of five people would do it. And so he said, Listen, I don't have to fire them later on, this is going to make my management easier. It was it's actually a kind thing to do to give people the opportunity to leave, giving
SPEAKER_05: employees an option to you know, it's because the reason people
SPEAKER_02: are upset, let's be honest, acts is some people, you know, live to work and some people work to live and the people who are working to live, find it crazy that hustle culture even exists and people who are part of hustle culture, like the four people in this podcast, it's just working. hustle culture is working above the
SPEAKER_02: hours you're being paid for. That's that's basically what hustle culture that's how most people would define it. A salary
SPEAKER_01: is actually not you work for 40 hours a salary means you get your job done. Okay, that's how we look at it. That is not how
SPEAKER_02: other people look at it. And those who Oh my god,
SPEAKER_01: there's no question that Elon is gonna raise the bar. If we lose
SPEAKER_01: American primacy, it's because of that. Not because I agree with you. I'm just kidding. The other side, I'm still made on
SPEAKER_02: the other side. People look at their salary. And they look at themselves as getting compensated for 40 hours and every hour above that. But do you know this generation's mind looks as hustle culture, there are people that are working with it. There are people that are working 6070 80 hours a week as
SPEAKER_01: a teacher to make 3040 K firefighters, you know, working on oil rigs and to hear somebody like hustle culture at a startup where you're making 350 grand and you're upset because like the macho lot ran out or whatever. It's just so out of touch. I'm not disagreeing. Yeah, look, my view on it is
SPEAKER_05: that people need to love their jobs and love what they're working on. Because I think the only way to be successful is to work hard. But the only way to work hard and be happy is to really love what you're doing. And if there's a lot of people at this company or others who don't really love it, and they are just there to pay the bills or whatever, then I actually think it's extremely generous for Elon to be offering them a package the right thing to do. I don't understand how giving
SPEAKER_05: them an option was anything but positive and yet the media has gone berserk on it. Meanwhile, while giving SBS a virtual pass on the largest one of the largest frauds in history and made off level fraud. You read the New York Times alleged. No, there's no alleged dude. It's come out. He loaned himself like this is just one data point. He loaned himself a billion dollars. And he learned the head of engineering $500 million off the balance sheet. Nothing to see here. What possible
SPEAKER_05: justification and you know, and SPF. The reason to say the
SPEAKER_01: words to say the hard part out loud. The reason why the same publications are not covering this is because they were complicit in his reputation laundering. Yes, the New York Times before that article put out this other puff piece where they talked to him. And they were excoriated on Twitter because it was like not a single question about the fraud or alleged fraud. Alleged, allegedly allegedly, allegedly
SPEAKER_02: slash, obviously, billion dollars suddenly goes missing
SPEAKER_05: and no one knows where it is. I'm willing just to call that a fraud. Are you willing to jump the fence? They're busy
SPEAKER_01: scrambling to sort of save their own reputations, which is why they are trying to like, hide the cheese effectively and point over here and say, Hey, look at what's happening. Elon sent an email with only one button. Yes.
SPEAKER_02: I mean, let's be intelligent. I love that meme that Elon tweeted out. Do you
SPEAKER_05: see that? The two rhinos? No, no, please. No, please. No.
SPEAKER_02: Oh, God. I mean, you know, this is all gonna get reblogged.
SPEAKER_05: It's too funny. It's just too funny. It's too good. It's too
SPEAKER_02: good to not put up on the screen. That nature photographer
SPEAKER_05: is the New York Times. It's okay. Yeah, people who don't see it. There are two rhinos. They're fornicating copy and
SPEAKER_02: copy. But right now it's like it's two 2000 pound animals copulating doggy style 10 feet behind a nature. Behind I'm trying to be the world's great photographer, a nature photographer with a $6,000 telephoto lens that can shoot the entire Serengeti. But he's 10 feet behind him are the two rhinos. The two rhinos it says FTX losing over a billion dollars of client funds. And the the photographer is centers calling for the FTC to investigate. The important thing
SPEAKER_01:
SPEAKER_05: is the photographer is pointing in completely the wrong direction. The wrong direction is totally missing the thing that is obviously right in front of his face, right that he should be photographing. Yes, he's using that long telephone
SPEAKER_02: lines. And that is that is the New York Times that one or a
SPEAKER_05: warren. That's the point. See, it's the arrow in the right
SPEAKER_02: direction. Yes. Point the camera in the right direction is the point. I just want to point out my one biology tweet on this in
SPEAKER_05: this regard. Oh god. He's not capable of one free that's going
SPEAKER_02: to be 76 tweets in a store. You're right. It's a really good
SPEAKER_05: one. Of course. It's a tweet service biology says think of a
SPEAKER_05: regulator as a binary classifier. What's their false positive and false negative rate? BTF Bitcoin ETF block for years. FTX ignored for years. The actual filter is not Is this a scam? The actual filter is is this I am who's not consumer protection. It's reelection. Oh, that's an alliteration. It rhymes. Young Spielberg make a banger out of that. It is a
SPEAKER_02: banger. It's not consumer protection. It's reelection. Listen, if you are part of these interlocking power structures
SPEAKER_05: that we call the regime, it's the New York Times, it's the regulatory state. It's a Democratic Party. You get a big public in your your team now controls the house. And so whose
SPEAKER_01: team David? Yeah, I David's him. David. Yeah. I understand. But
SPEAKER_01: starting in January, you know, there's any amount of congressional oversight. investigation. No, no, hold on a
SPEAKER_05: second. Let me say this right now. The first investigation by the House of Representatives needs to be SPF and FTX, not Hunter Biden, SPF makes Hunter Biden look like a piker. I mean, yeah, you know, Hunter Biden was what a couple million dollars of grift. This is $10 billion plus a grift. So I know it also
SPEAKER_01: touches regulators, it could touch, you know, it's a big, it's a big failure. It's a knows how to party. So let's be honest here. I mean, that is the
SPEAKER_02: issue. I just think the quote of the week goes to john j ray. He's FTX is new CEO, he famously oversaw the liquidation of Enron and he says I have over 40 years of legal and restructuring experience. I have been the chief restructuring officer and or chief executive officer in several of the largest corporate failures in history. I have supervised situations involving allegations of criminal activity and malfeasance and run. Nearly every situation in which I have been involved has been characterized by deficits of some sort in internal controls, regulatory compliance, human resources and system integrity. Never in my career, have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. This is the person who oversaw Enron saying this is unprecedented. Enron was the previous unprecedented situation, which is now being framed as manageable by none other than john j ray. What a great name. Congratulations on being the chief restructuring officer of FTX. There was an article that showed Nick, if you could please throw
SPEAKER_01: the picture up on the screen of all the people that invested the universe of SPF. And oh my god, what and they and the article headline was it's a who's who of VC and my comment is actually no this list is a who's who of people who did no diligence. Yeah, so ever. And I just want to call one person Nick, if you look at the alameda research, this this firm called one inch J Cal invested in a firm named after the length of his penis.
SPEAKER_02: Maybe coming out of the cold pledge. Okay, but you're that cold pledge this shrinkage. Shama, you know, this shrinkage was that it? Listen, I'm a shower. Not I'm a grower. Not a shower. All right, listen, you guys coming out. Everybody knows coming out of the cold plunge. It's it's not going to be the best performance for any of us. What is that? We've lost the script on the show. Please, we
SPEAKER_02: got to wrap. I mean, it's just too much. Do you guys not think
SPEAKER_03: that all these investors receive audited financials and no, they got they had a lawyer a legal firm that represented these
SPEAKER_05: financials. Did you guys see who FTX is auditing firm was? It's called Traeger medicine that says it's based in the metaverse. This is like the Hollywood Upstairs Medical College of the auditing world. Their address is in decentralized
SPEAKER_01: Bernie Madoff. I think his brother in law ran the
SPEAKER_03: accounting firm that did their audits, right? It was like it was a dead floor in the lipstick building. It was in the same building, right? And the lipstick building they have like
SPEAKER_02: a secret floor with nobody. Look, I mean, even in that case, people relied on an audit from a CPA that said, here are the
SPEAKER_03: numbers. And those numbers were fraudulently conveyed. And I think that there's probably some, you know, some forgiveness necessary here that there was maybe there may have been serious fraud that took place. I don't want to be too disparaging of all the people that we work on this work at these investment firms made an investment and they all got duped and the LPs got duped. And so I don't think this is just fundamentally a failure of diligence. So we we we we were part of the process
SPEAKER_01: where they tried to show and I have to be careful my lawyers reminded me that we're still under NDA actually with FDX. So but what I can tell you is we did not get any financials. So we were verbally when you asked for it when you sent to we sent a two pager of stuff. Anyways, I can't say more than that. Okay, yeah, don't get yourself in trouble. Oh, I want to I want to
SPEAKER_01: say something else. By the way. Last Friday, David and I were at your email nurse birthday party, and there was a chess tournament. And Magnus Carlsen was there. And anyways, David was in the finals. Okay, it was David and his partner look at the smile on David versus versus Matt. Hold on. Wait, I'm getting to a great punch line versus Magnus Carlsen and his partner. David one.
SPEAKER_01: Wow. My partner was was, should I say, Yuri's daughter, who I
SPEAKER_05: think is probably what like 10 years old. She's incredible. Yeah, she's like second in America. Yeah, she's good. She's she's incredible. Anyway, yeah, thank you to Yuri. That was a really unique partner chess. My partner was prognodonda. Who's an Indian Grandmaster who's like a superstar. Yeah, and look playing, you know, with Magnus Carlsen was obviously that was a real thrill. Yeah, that's with the birth of your children, your marriage. And this, where
SPEAKER_02: would that rank on the scale of one through five? This is your pork kids. But you know what, speaking of the smile, Zach is
SPEAKER_05: happy. Oh my god. I haven't seen him that happy since since Trump
SPEAKER_04: was look at look at that document. I just before before
SPEAKER_03: we got around, but I want to show you this. Basically, I pulled all IPO since 2020. So this excludes all SPAC mergers, and real estate finance, material energy utility. So kind of the big bulky private equity type stuff. So it's mostly tech consumer 627 IPO since 2020. More than half of them are
SPEAKER_03: basically half of them are trading at less at point two times the total cash they've burnt. So there, you know, you can kind of look at total lifetime capital burnt by these companies in the retained earnings line on the balance sheet. And so when you pull out the retained earnings, it shows you right how much money they've burnt over their lifetime. And so the total money burnt by half of these companies is about $107 billion. And the market cap of those companies is only $26 billion in aggregate. So a point two times return on capital invested to date in terms of enterprise value, divided by total capital. Invested in, let me let me say, let me say it in English, and
SPEAKER_01: you tell me if I said it right. So 627 non SPAC, non real estate, non finance companies went public. So basically 627 start companies went public since 2020. So two years. Yep. And of those 627 tech companies, almost half or 300 of them 48% of them are today worth about point two times all the money that went into them. Yep. My gosh, wow. Yep. It's tough. And
SPEAKER_03: then on the other half, the other half is, is the ones that have worked. So this kind of goes back to a power law point. But like as a venture industry, you think once you get a company public, it's successful. And the reality is that many of these companies from a from an economic perspective, are still not successful. It looks like half, and perhaps much more if you include all the SPAC mergers, which is another couple hundred, and I would guess the vast majority of those meet this criteria are trading at less than the total cash that's been invested in them. Freeburg, this speaks to the age of excess that we just went
SPEAKER_02: through. We just weren't as efficient as we needed to be in running these companies. And now we're in the age of efficiency, austerity, excellence. But these concepts is great setup for a rebound, isn't it freeburg? Like I don't know. Look, I mean, one
SPEAKER_03: way to read this, I was speaking with someone who I you can bleep him out. I was talking with two weeks ago, three weeks ago, and he showed me in there. How much should I say here? This is a big investment firm and they have a big growth portfolio. Less than they have about 160 investments 180 investments in their growth portfolio. 85% of the returns are generated by 10 companies of the 180. And that's in the growth portfolio. These are supposedly D risk businesses, power law exists, even in the world exists in growth. And as you can see here, the power law exists quite dramatically post IPO, as well. So you know, as you can see here, only 9% of these businesses have generated positive earnings over time. 43% or about half of them are worth more than the total cash that's been invested in them. And that multiple is a production board study here, by the way, this is
SPEAKER_02: your done by your firm. Yeah, yeah, yeah, it's all public
SPEAKER_03: data. So the, the multiple on the value of the companies that are worth more than their cash invested is 5.5 times. So in aggregate IPO since 2020, are worth 4.3 times the total cash that's been invested in them over their lifetime. But the crazy statistic is half of them are worth significantly less than the cash that's been invested in them only point two times. So the power law dominates both early growth and clearly being public. But I think to your point, Jake, how it also seriously speaks to the amount of excess and it's really going to rationalize probably based on the conversations we had today about Twitter, meta, Google, Amazon, Amazon, and this as well. So certainly, also, the good news is freeburg. And
SPEAKER_02: correct me if I'm wrong here, tomorrow, we want more companies to go public and have that discipline of being a public company. This was the big critique of this quiet era of companies taking 10 1214 years to go public. This is going to be a strength for these entrepreneurs to have to fight it out in the public market under scrutiny. Correct. You're 100% I think like the Chris home letter. I think that
SPEAKER_01: there are a lot of VCs on boards of companies who would love to say the equivalent thing to their private private company. And part of the the dynamics as as freeburg just said, because it's such a power law, and people believe that, you know, you being with other VCs are really important. It turns out that most of these VCs abandoned their role on these boards and don't really hold people accountable because they're worried about the fact their deal flow. So the problem is, it's a negative reflexive loop. It's but so these companies do poorly. And then as a result, they're viewed as not an effective board member. And so the next deal they get is a poor and poor quality. So the highly correlated portfolios in Silicon Valley are the ones that will get torched because most of those companies will receive very poor or no advice. And then the few that will get to the end is because they have hard nosed people on the board that will force them to make really hard decisions. Yeah, that's it.
SPEAKER_02: sacks any thoughts here on the public markets? Oh, sorry, wait, last thing. And by the way, Sequoia, who has had
SPEAKER_01: exceptional returns has always been known to be hard nosed. You know, a lot of people that critique against Sequoia from founders, which would be that, oh, if I take Sequoia as money, they may fire me. Well, yeah, because if you're not good, it's the mission of the business is bigger than your ability to be the CEO. And so, you know, you just have to remember, like, there is no free lunch, we were not giving out free money here. For you to go swung one direction too far. They used to
SPEAKER_02: the tradition Silicon Valley used to be you always replace the CEOs, the found the founders with a professional CEO, and Google being the turning point there, or maybe the last one. And then it became founders will control their companies with super voting shares forever. Hopefully the pendulum now swings to some equilibrium sex. What are you seeing in private markets? The program for surplus elites is going away.
SPEAKER_01: managerial classes under pressure. Yes, that's for sure.
SPEAKER_05: If you went woke, you may go broke because you have no marketable skills.
SPEAKER_01: Man, you're a bunch of guys. Somebody in the room with a bunch of guy. Dean's
SPEAKER_00: I think he's got somebody myself up. Whoa, Jackie the joke,
SPEAKER_04: like Jackie the joke man Marley handing you a little note.
SPEAKER_02: Alright, for the Sultan of Science, David Friedberg, and
SPEAKER_02: also the executive producer of all in summit 2023. And the rain man himself, chess master and champion, David Sachs, as well as the dictator. We're gonna go on a little road trip. Are we dictator a little road trip? dictator in J Cal? Yeah, it's gonna be fun. I am the world's greatest moderator who couldn't control the panel today. I'll do better next week. And we'll see you next time. Happy Thanksgiving. Happy Thanksgiving.
SPEAKER_02: Let your winners ride. Rain Man David Sachs. We open source it to the fans and they've
SPEAKER_05: just gone crazy with it. Queen of Kenoah.
SPEAKER_00: Besties are gone. That is my dog taking a nice near driveway. You're gonna notice your driveway. Oh, man. We should all just get a room and just have one big huge door because they're all just like this like sexual tension that they just need to release. What you're about be what you're being
SPEAKER_05: what we need to get merges are
