SPEAKER_01: two days ago, here we go. In the Piazza, I got into a fight. You got into a fight. I got into a fight like a physical
SPEAKER_03: altercation, the physical altercation, really, this chick
SPEAKER_01: shows up wearing a white wife beater talking all kinds of shit. And I said, Listen, lady, you zip it. And she just kept jogging and jogging. And here she is, again, she's back for more. And so I was like, Listen, now, have you ever seen? Have
SPEAKER_03: you ever seen a one a onesie wife, Peter? Look at that little
SPEAKER_03: sweetie. Oh, and then you just sit there. And then look, there's
SPEAKER_01: your cold open. Everybody. That's the good stuff. Hi,
SPEAKER_03: everybody. I know I'm not a beagle. I know I'm not a beagle.
SPEAKER_01: But I'm even better. I have my own thoughts. Sax. What you're seeing here is called affection between a parent and a child.
SPEAKER_03: Just let me know when it's over.
SPEAKER_01: In the world, I don't need to watch. She must boost his Q
SPEAKER_00: rating by using his kids as props.
SPEAKER_03: Freeburg, where's your puppy that you say for being tortured with Kim Kardashian's lip gloss?
SPEAKER_02: We got to get this guy because he hasn't been in the show in a while. There he is. There is a monchi. Oh, your belly rub. Get
SPEAKER_04: the props out of the shot.
SPEAKER_02: Sax, what's up with JD Vance in Ohio? Is he gonna pull this thing off? Or is he getting beat up? I read an article in an article about him getting beat up with the Peter Thiel connection being he got physically beat up. No, no, no, like in the past. No, no, no, no, no, I think JD should win.
SPEAKER_00: He's gonna win, right? Yeah, I think so. And what about Blake
SPEAKER_03: Masters? These are the two guys that to is backing. Should we start the show? We kind of did. Yeah. Can I just ask you a
SPEAKER_01: question? If any of us entered porn, wouldn't one of our names be Blake Masters? Like it's just wouldn't it be on the list? Like doesn't it sound like a great? Isn't it a great name for porn? It's a great name. Blake Masters. It's a great
SPEAKER_03: name. And JD Steele. I'm sorry, Vance. Yeah, go ahead. Explain what's going on with this measuring. Would you would you
SPEAKER_00: accuse him of without any evidence? What would you see
SPEAKER_03: anybody have anything I'm just saying tell us about your mentoring candidates. Go ahead.
SPEAKER_00: Also, JD's already won the primaries and I expect he will win. I mean, it's gonna be I think a red wave in November. And Ohio is a pretty red state these days. Blake's also won the primary in Arizona. It's a little bit more of a toss up, but I think he'll do well. All right. Well, I had a follow up
SPEAKER_03: question, but I'm not allowed to mention the T word. So let's just get started. Why is it such a big deal that like Peter
SPEAKER_00: supports candidates, you got all these crazy left wing radicals, like interesting Soros gives unlimited amounts of money to you know, crazy progressives, like Gascona, la and a zillion others. I mean, why is it such an obsession that we have to focus on who Peter supports? No, no, I just think it's
SPEAKER_03: fascinating that he has articulated his rationale for
SPEAKER_02: supporting these candidates and his objective for, you know, changing government in a way that he thinks would benefit the country. And Peter's been generally right. What is the thesis? Rayburg? I think part of if you watch his speech from the RNC during the last Trump cycle, I think he did a good job kind of articulating that there's a lot of inefficiencies in government and there's a lot of call it accumulated fat. And we need someone to go in and we need people to go in and really cut this up because so much of politics is driven by what else I'm going to give you not about what I'm going to fix that's already being spent in an efficient way. And as a result, we see debt climb, we see taxes climb, we see efficiency continue to decline of every dollar invested by the government. And I think that's a really important thesis to see someone actually try and execute against because more precisely, very few people are in the position that he's in, to actually be able to like make that sort of statement. Everyone wants something more from their government versus trying to fix the government. I think his views are more
SPEAKER_01: extremely I think his views are more that orthodoxy is ruining in America. And so you need forms of heterodoxy to basically reset totally status quo. And I think that's what he believes more than what you just said. I think that you need a wholesale reset. And in order to have a wholesale reset, you need to have these very disruptive candidates that basically start to change the norms. I mean, if you think about what Trump did in one election cycle, is he's completely sucked an entire cohort of people, Hispanics, and, you know, moderates, and now, you know, a lot of immigrants towards the right, because the democrats have vacated all of that space in having this massive Trump derangement syndrome and tacking extremely to the left. And even if Peter, we'll never know,
SPEAKER_01: believed in Trump or didn't believe in Trump, it didn't matter. But the process of him getting that candidate elected over the long arc of history may actually serve to pull America back to the center. Pretty good outcome.
SPEAKER_00: Yeah. And look at the reason why I support JD and Blake for that matter is they are they represent this more populist working class wing of the Republican Party, and they're dragging the Republican Party in a more working class direction. I think that's the future of the party. I think that's the opportunity for the party to chamase point, the Democrats have seeded all the sort of this working class territory by becoming this elite, progressive party. And the face of the party right now, the Democratic Party is Paul Pelosi. You know, let's talk about this. It's blatant and out in the open. He's trading on chip stocks, like Nvidia and Intel and so forth. Like the week before, the house is going to vote on a $52 billion subsidy for chip. No, no, no, be more precise. The week before his wife decides,
SPEAKER_01: when critical legislation goes to the floor of the house to be voted upon. So you have the Speaker of the House, who's the third most important person in government, introducing legislation on her timetable, her husband trades in those specific equities, days, and maybe even the same day of that. They make three times her annual salary just in one day. And then she and her husband decide to then fly, not asked by
SPEAKER_01: the United States government or the State Department to Taiwan, to then talk about God knows what, which would have created an international uproar. The Biden administration and Tony Blinken had to basically call her and say, stand down, you should not go, we are not asking you to go, it is not on the United States agenda for you to go. And all that would have happened is an entire process and loop where she controls the legislative agenda, her husband controls their private stock account, and he is such a in the names, and then they go to Taiwan to whip up the Fuhrer, which would have actually positively impacted those same names even more. It's inexcusable that kind of behavior. I mean, after 40 years, just she's so past the line, and she doesn't realize it. And by the way, sorry, let me just wait, hold on. And then on top of that, Jason, she doesn't say shit. Now, by the way, I'm not a Trump supporter. I think he's a complete goofball. But if Trump had tried to pull this stuff in 2016, or 2017, or 2018, could you imagine how much media coverage there would be? And today, how much of that is covered by the mainstream media zero? Was it mentioned on MSNBC? Nope. Was any of the press? Nope.
SPEAKER_01: Let me just set the stage so people don't know what we're
SPEAKER_03: talking about. So, um, I think that's a good thing. I think that's a good thing. On Tuesday, the Senate advanced a slim down version of the original chips bill. If you don't know what that is, it's basically a bill that's going to provide $52 billion in subsidies to move chip manufacturing here to the United States something we really need to do. It's a bipartisan bill. Everybody kind of agrees on this. But this is being kind of stuck in committee for a little bit. It comes a year after the Senate first approved the $250 billion bill to reinforce US chip making to compete with China. The reason
SPEAKER_00: why it's strategically important is because we have a huge chip dependency on Taiwan, which is a threat from China. So if chips are the new oil, you know, Taiwan is the new Middle East or the new Persian Gulf. And it is a very dangerous situation for us to be completely dependent on Taiwan. Well, not completely, but like for over half our chips. So on shoring, advanced chip manufacturing makes sense. But I think this is an example of how you start with a legitimate chip in Washington, and very rapidly, it turns into corporate welfare and graph by politicians. I mean, that's gross. Yeah, I mean, just because we need to answer manufacturing doesn't mean that you give Intel and Nvidia giant handouts. And then you got Paul Pelosi making millions trading Nvidia options. Yeah, it's something that is what you've
SPEAKER_02: done sucks to support on shoring of semiconductor manufacturing. Who would you give the money to? And how would it be kind of dulled out? What would the terms of it be? I
SPEAKER_00: don't know that you just give these companies money. I mean, maybe what you do is you give them tax breaks or various kinds of breaks. But I you know, I don't like that. They need
SPEAKER_02: capital to support that investment. Because, you know, if you look at the kind of ROIC on these companies, I would I haven't looked but I'm guessing they're in the high teams or something that tie teams, and they're not going to be able to invest in some newfangled, you know, fab project that may or may not actually have customers at the end of the day, their board would never approve that on an independent basis. They define ROIC, Freiburg, return on invested capital. So if you're a big industrial business, you know, one of the key metrics that your shareholders look at is the the ultimate kind of profit profits that are generated from a big investment you might make. And so you know, you kind of look at that over time, you look at the invested money over time, and the cash and return over time, and you come up with this metric. And so it's a key metric for particularly capital intensive businesses. And so a business like Intel or Nvidia, I would
SPEAKER_02: imagine is going to have a pretty tough time selling their board on some speculative onshoring fab project, that there really does need to be capital and acceleration of capital. Who feeds you this bullshit propaganda Intel in
SPEAKER_01: 2020 approved a share purchase plan where these guys had a hold of $110 billion and have spent all of it except for 7.2 billion. They have 6 billion left on the balance sheet. I
SPEAKER_02: get it, but they're not going to put that money at risk, right? Like like, Chumath, imagine you're on the board of Intel, and they're like, hey, we want to offer... So the government... Okay, so basically, hold on. I make a ton of money.
SPEAKER_02: Yeah, this is where it all comes from, right? I make a ton of money. I have no better ideas of how to do it,
SPEAKER_01: including theoretically building a chip factory. So I'm going to go to the government for a handout. Meanwhile, I'm going to take all the money that I had, which I could have used to fund this thing, and I'm going to give it away to people who I don't know what they're going to do with it. I would reframe it. I would say that the government wants
SPEAKER_02: to see our industry onshore semiconductor manufacturing, and they are going to the companies, not the companies going to the government. They're saying, we want you to onshore semiconductor manufacturing. Do that for us now. Like in World War II, we went to the automobile manufacturers and the government said, we want you to make airplanes. Here's a bunch of money. Make airplanes. And that's the question. But who does that money go to? Who else would you give that money to besides the two best chip makers in the world? David's right. If you just give us a CapEx
SPEAKER_01: subsidy, that's a one-time effect that helps you in a moment. It doesn't help your business. Any reasonable investor who can actually use a simple calculator sees through that nonsense. So what David's right is if you had given them sustained tax breaks for being able to build the business line that then supplies things for the duration, you know, tens of years, you're absolutely right. Investors would lot it. It would make a ton of sense. They would be over earning over a long enough period of time where people would have to bake that into their cash flow estimates where when you discounted it back, it would make the enterprise of Intel and Nvidia worth more and then people would then want to own that stock more. Giving a CapEx subsidy is a meaningless way in which you basically hand out good money to organizations who have otherwise misallocated the money that they've already had.
SPEAKER_03: Yeah, there's a much simpler solution to to Saks's point of like how do you do this and giving free money is not the best way to do it. The best way to do is to give an incredibly low interest rate loan like a 30 4050 year loan that maybe has some warrants in it just like you know, a Silicon Valley bank or a co America might give an adventure debt loan where the government actually could make money from this and then you incent them with something that is just too good not to take a 50 year loan of $5 billion to build factories, you have to use it for that. So it's use it or lose it. And then you slowly pay the government back. And then maybe we get some warrants that we can tell or whoever we give the money to this is something that Obama did with Cylindra, which didn't work out, but he also did it with Tesla and Tesla paid all that money back early. So these loans that the Department of Energy did really did. And you got to give Barack Obama a lot of credit for this. It really did help drive even though it wasn't perfect. By the way, when did drive a lot of AV adoption, it did really help Tesla become the company it is today. Sorry, let me just
SPEAKER_02: go on because I don't know how much we've gone through the details of the bill. But there are several components to this bill, including and I just want to highlight if I'm on the board of Intel, I'm not going to make a $10 billion fab investment. Because, you know, there's there may or may not be you know, profits down the road to justify that size of an investment. So if the government comes along and says we will support we will cover x percent of that investment, I can take more risk. And I'm more willing to make that investment and theoretically I can afford to pay people a higher wage or a higher salary because I now have more capital freed up to support to do that. And so there is an effect that that arises by having the government come in, put some money into these projects, accelerate their outcomes. And it gives the business more freedom. Should it be freeburg free money or in
SPEAKER_03: the form of a loan? So what should the financial device be? I think is the question that you asked sacks if I'm interpreting correctly. Yeah, I'm not sure that the loan
SPEAKER_02: doesn't resolve the fact that they're having to put up money, right? And so they're not necessarily going to make this onshoring investment. The rational capitalist decision is to offshore manufacturing for Intel. It is irrational for them from a business perspective, from a board perspective, from a fiduciary perspective to onshore manufacturing. So the reason they're going to do it is not because they're getting a loan where the interest rate is low. That doesn't really solve the problem. It's the government saying we're going to put a $10 billion facility. We want you to build it and manage it for us. And that's effectively what's happening. And now by building this $10 billion facility, we've created security for the rest of the US industry. It's worth it to the government to put that money up and create security for our economy. No, it won't. Why wouldn't it create
SPEAKER_03: security if we, if we have more onshoring of chips? I'll say one
SPEAKER_02: more thing. There's also an investment tax credit built into this bill sacks, which does provide over time, a bunch of incentives to continue to support and drive the onshoring work that's proposed in the bill. If you want the United
SPEAKER_01: States point of personal privilege, can I request that
SPEAKER_00: your mouth? I just one button to a shirt. Yeah.
SPEAKER_03:
SPEAKER_04: Geez. First I had to watch Jason do the gun show. Now I
SPEAKER_00: gotta watch to mom. Show us your guns. Come on, pull up that
SPEAKER_03: sleeve and show us what you got. Let's move on. Let's move on. I
SPEAKER_02: want to say one more thing about the Pelosi stuff. So here's the data. I don't know if you guys have looked at the full history of the Pelosi trading data. Here's the link. She's all the trading that's happened over the last couple of years. So, and, um, over the past year, he has bought Nvidia for different times each time in the same kind of volume range. So the timing certainly may appear suspect, and it's certainly a terrible kind of thing to see. He's also bought Apple in the last month, Microsoft, sorry, he sold Apple. He bought Microsoft. Um, he bought Alliance Bernstein earlier in the year. He's made a few trades this year, but Nvidia, he's actually bought on four different occasions over the past 12 months. Um, for whatever that's worth, right. I'm not trying to defend it, but I think we should be intellectually honest about the fact that this guy, you know, does take points of view in certain companies. He trades in a handful of companies. Are we willing to be intellectually
SPEAKER_01: honest enough to think that a husband talks to his wife and vice versa? Yeah. Or does that not happen anymore? Depends on
SPEAKER_02: the husband and wife, but yeah, I think this is blatant and out
SPEAKER_00: in the open. I mean, it looks really at a minimum. The appearance is of graft and corruption. Yeah. The appearance of impropriety is impropriety. They shouldn't be allowed to
SPEAKER_03: trade. They should have to put their stuff into blind trusts, or they should maybe trade once a year and they should have to announce their trades before the trades happen. Hey, here's what I'm planning on doing. Just like a CEO is planning on doing this stuff. It's ridiculous that they can do this. And if you want to the mainstream media cover this, they have Jason, do you
SPEAKER_01: think they have that if Trump, if it, this had happened during Trump, we would have a lot more coverage than this. I do remember a lot of coverage on Trump. It really doesn't get covered. I
SPEAKER_00: mean, if you just search for it today, you'll see basically the only media outlets covering it are like Fox News and then Zero Hedge. You know, that's it. I mean, that's how I found out about it is like the Zero Hedge tweets about it. Me too. So
SPEAKER_03: Daily Beast, you know, headline seven hours ago, Dems quietly tried to jam Pelosi on stock trading ban. But if you're asking me, you asked me a question. Chamath is the media largely biased against Trump and gives a free pass to the Dems? Yes, I would say that that is the trend. Yes. I think that is
SPEAKER_01: intellectually honest of you. Well, no, I mean, I think the
SPEAKER_03: media is bankrupt. They're just going for clicks. And I think, you know, we've talked about this before. They saw Trump as an existential risk, and they just did whatever it took to get him out of office, even putting up. So they completely burned
SPEAKER_01: all of their credibility. They lost a lot of credibility. Now the Dems are starting to become increasingly detached and out of touch and maybe hated. But then the result is that the mainstream media is just no longer trusted. The media and
SPEAKER_00: the Democratic Party both have the same problem, which is they suffer from what the Democratic political scientist Roy Tushar has called professional class hegemony. I mean, they are populated by college graduates with degrees who basically have this very elitist progressive agenda. And that is what is causing the Democratic, the working class to defect from the Democratic Party, their historical base in droves. Look at Hispanics. Well, first of all, if you go to the latest Biden polling numbers, he's down to 31% approval, 60% disapprove. Okay, so the trends is getting worse there. But you look at Hispanics, it's down to 19% approval, 70% disapproval. It's an even more intense version of the same problem. You had Mayra Flores get elected in that Texas seat. This is a district that went, it's basically a predominantly Mexican-American district. They went for Biden by 18 points just, you know, two years ago, and now they're voting for her by over 10 points. So your Republicans winning that seat for the first time. So you have these huge defections. Now, why is that happening? Because the Democrats are appealing to the donor class on issues like border, on issues like crime, and on issues like CRT in schools. I mean, you know, the working class people in this country, they don't want to open borders. They want crime to be prosecuted and cracked down on. And they do not want an ideological education for their kids. Okay. It's very simple. But that basically is why the Democratic Party is losing votes. Now, let me give you a couple other examples of the Democrats cynically appealing to this sort of donor class. So recently, there's an article about the Democrats have spent $44 million this election cycle, basically running ads in favor of the crazy MAGA candidate in primaries. There's been a bunch of reports of this where in competitive Republican primaries, the Democrats will actually spend money on behalf of the sort of the more perceived crazy Republican, the MAGA candidate, the election denier and so forth. Because of the perception that they'll be easier to beat in the general. But I think this is a case of be careful what you wish for because, you know, if we have a red wave in November, you're going to end up with more of these candidates basically winning. So it's a very cynical
SPEAKER_00: strategy. The other example, I think, of a very cynical strategy is you saw there was a vote in the House this past week on gay marriage. And the House voted to repeal DOMA, the Defense of Marriage Act, and support basically codify Obergefell, right? The Supreme Court's decision on gay marriage. Something like, you know, 60 Republicans voted for it. Look, I would have liked to have seen more Republicans vote for this. I think it should be like, you know, majority of the Republican party should be voting for this. But the point is that is there any intention of the Democrats to bring this up in the Senate and pass it and codify Obergefell when they have a chance? I think the answer is no. Why? Because the Democrats would rather fundraise off this issue. The same thing was true about Roe. The Democrats had super majorities in the Senate under Obama. They could have codified Roe. They never took the chance. Why? Because they would rather fundraise off this issue from progressive elites, the donor class in California and New York. So this is why they're not going to codify Obergefell. You really think that's the case? Absolutely. Obama said it on the record. Obama was asked,
SPEAKER_01: why will you not? He campaigned on codifying Roe v. Wade. And then very quickly into it, he was asked when he had the supermajority and built the House and the Senate, will you act on Roe v. Wade? He goes, no, it is not a priority anymore.
SPEAKER_00: That's a quote. It absolutely could have been codified just like Obergefell could be codified tomorrow. The Senate could have been. Look, there are there are ten Republican votes. There are ten Republican votes at least for this in the Senate. You have a filibuster-proof supermajority in the Senate who would support this. The same Republicans who supported the gun restriction bill that Biden just signed and that supported the infrastructure bill. You think
SPEAKER_02: they could codify abortion rights in this country right now if they wanted to? No, no, no, no, no, no. That that moment
SPEAKER_00: has passed. That moment's passed. I'm not saying. Republicans would never give women the right. No, no, no,
SPEAKER_00: look. There's not a supermajority in the Senate anymore for for codifying Roe. There is a supermajority right now for codifying Obergefell. They could do that right now and they're not. Chamath, you've been a donor to the Democratic
SPEAKER_02: Party. Do you believe that? Millions. Do you believe that the the abortion issue drove you and others to put more money in and that maybe not because because the leadership of the
SPEAKER_01: Democratic Party focused on Trump in the last big cycle. It was all Trump, Trump, Trump, Trump, Trump. Do I think that more grassroots fundraising focuses on that or gun rights or abortion? What you think what Zach's saying is true that they actually held off on
SPEAKER_02: trying to codify Roe so that they could continue to support fundraising? Again, I'm just I'm just going to give you the
SPEAKER_01: quote because it there's there's no opinion needed. Okay. April 29th of 2009, President Barack Obama says on Wednesday he favored abortion rights for women, but that passing a law guaranteeing these rights were not as top priority. I believe that women should have the right to choose, Obama told a new conference marking his first 100 days in office again when he had super majorities in both the House and the Senate. But I think that the most important thing we can do to tamp down some of the anger surrounding this issue is to focus on those areas we can't agree on. So you make a promise you get into the seat of power. You have the decision on what your legislative agenda should be and he made that calculation and David is right. Sadly that it was in a moment where we had a clear line of sight to codifying many of these rights. Yeah, but the question for you. That's not
SPEAKER_03: the question that freeburg is asking. He's saying, do you think that they specifically did this to keep it as an open issue to raise money off it? I don't think that's believable. Oh yeah, absolutely. No way. No way. Absolutely. If you want to talk about cynicism, the truly cynical move was, you know, Trump saying I am going to get this an evangelical vote to win the primaries to get those 20% who want to take away the right for women to have an abortion and I'm going to stack the Supreme Court to actually achieve that goal. That's the most cynical of all of this political stuff. Okay, let's let's let's define terms. Political and hold on a second. Hold on a second. Let's let's
SPEAKER_00: define terms. So you may be opposed to what Trump did, but there wasn't that wasn't cynical. He stated what he was going to do when he ran for office and then he did it. He lived up to his promise. He did not believe in that. He did not
SPEAKER_03: believe in that. He did it specifically to get those votes. We all know he didn't believe in it. We all know he believes in a woman's right to choose. Jason, he he created a
SPEAKER_01: platform to get elected. Yes, that's what I'm saying. That's cynicism. When he was elected, he executed on that platform. I think what David Sacks is saying is Obama had a platform to get him elected. And when Obama chose had to choice, he chose to not execute on the platform. And that is also true. And all I'm just saying is we owe it to ourselves to be intellectually honest about what happened. That is what happened. Okay, both of these two guys made claims. Hold on one second. Both of these guys made claims acting in your own self-interest. I understand. Please, I want this on the record. Both of these two guys made claims to become president. It turns out that Trump actually did execute on most of his claims as abhorrent as they were to some. Yeah. And Obama on some of the most important issues of our time did not. Look, what Trump did was just simple coalition
SPEAKER_00: politics. He thought it was important to win the religious right. He basically appealed to them. He said that if you vote for me, I will nominate these judges. He gets into office. He delivered. He delivered. He didn't believe in it himself, right? So that's what I'm talking about. At a certain point, it doesn't matter. That's not sad. I believe people should
SPEAKER_03: have principles. Okay, look, you're you're you're you're you're not saying that he doesn't have principles but it matters to me that people have principles. Okay, but Jason, what does it mean to have the principle of saying that he's
SPEAKER_01: going to he's going to pass and codify Roe v Wade and not do it? What is that then? I think he well, listen II. The quote
SPEAKER_03: you gave doesn't give why he didn't do it. He didn't make it a priority. It could also hold on. Let me finish. It could also be that he believed that it would not get overturned. So he should spend his time on Obamacare and other things. I'm saying cynicism is when you believe one thing and then you have to do something to act in your own self interest and that's what I think. That's what I think you did. Hold on a
SPEAKER_00: second. We don't need to go back all the way to the Obama administration because the issue I'm talking about today is that in the past week, they had a vote codifying Obergefell on gay marriage and repealing DOMA. Okay. Right. So now, listen, I actually think there are so many Republican votes in the house even though I would have liked to have seen more. There were enough that that this might shame Schumer into bringing up the vote because it's going to be so obvious if it wasn't that he is doing this for a reason, right? Because they have the votes. They can pass this just like they passed the gun bill a few weeks ago, right? Just like they passed the infrastructure bill. So if he if Schumer doesn't bring this up, it's a very cynical move. You think it's strategically to
SPEAKER_03: have that issue to phrase funding II get it. Of course, and it's really proof. Listen. Do you think both sides are
SPEAKER_03: cynical? Of course, both sides engage in politics. However,
SPEAKER_00: what I'm talking about is the type of cynicism. So, I think that there's a lot of issues on which the Democrats would rather appeal to the donor class basically that lives on the coast in New York, California and be able to keep fundraising on that issue and basically scare monger on that issue instead of just winning the issue. They can just win this issue right now. Chamath, do you have less interest in
SPEAKER_02: supporting the Democratic Party based on the principle you stated that in the past, there have been kind of promises and capital raised against, you know, codifying Roe and then it not happening. Well, they never made those promises to me. So I
SPEAKER_01: never felt like they lied to me. I want to be very clear. So then nobody and I never asked for that to be a precondition of my donation. Again, my capital was focused on one thing, which is I thought that President Trump was not the right person to lead this country and I thought very clearly that the bright Democrat could do a much, much better job and I am glad that Biden won and I'm glad that the money that I put in maybe in no in any small way, but hopefully in some reasonable non-trivial way helped and I'm glad that that money helped even out the Senate. I'm glad all of those things happened and so I want to be clear. They've never made those kinds of promises to be nor have I ever asked. I make a high-level decision on who I think the best candidate should be and support the party that will get that best candidate effective. What I was just trying to make clear to you guys is that sometimes even a Democrat, it's important for us to be intellectually honest about what has happened. It's very easy to look at the other guy and find all the ways in which they screwed up or tried to screw you or you know is in a lax empathy or lax sympathy. All of these things. It's much harder oftentimes to look at your own team and say, wait a minute. Why didn't X, Y, and Z happen? And the reason I'm bringing up what happened in 2009 is I think David is right. We have a moment in time where the leadership of the Democratic Party can codify rights that should be codified and they should have in
SPEAKER_03: hindsight. They should have done it and just to be clear. No, it is still open. We can do it. I'm talking about Roe V. Wade
SPEAKER_03: and yes, and for the for the issue we're talking about now, it should be codified. Absolutely and just to be clear, I'm an independent. I would vote for a Republican who was socially progressive and fiscally conservative as long as they're for gay marriage as long as they're pro women's right to choose and they were fiscally conservative. I would vote for a Republican. I'm a moderate independent. I want to see less government and more efficient government and I want people. I want the government out of people's personal lives and I think that's where Sax and I are exactly the same. We both want. I mean, Sax, do you want the government involved in people's personal lives? You're a classic Republican. By the way, according to the Monmouth poll from a few weeks ago, you
SPEAKER_02: represent 4% of the voting base. I do. That's an extreme. Yeah, that's an extreme minority that the the the lowest
SPEAKER_02: self-identifying quadrant of fiscal conservative versus kind of fiscal liberal social conservative social liberal is the fiscal conservative social liberal. What are we all here?
SPEAKER_03: We're I think we all fit this profile fiscally. We want the government to be run conservatively, you know, and with less government and we want progressive social change, right? I mean, I think we all feel that way. Don't put me in a quadrant. Government out of people's personal. I don't know.
SPEAKER_00: I'm just asking you guys if we're all in sync. I wouldn't define my cultural positions as progressive social change because the change that progressives are trying to engineer right now is radical. What I favor is social tolerance. I think we need to be a tolerant. I think we need to be a tolerant society. America is a very broad diverse country. We need to find ways to live together and find accommodation on issues that are very contentious. So that includes tolerance for gay marriage. So look, I'm on board with that. But you know this radical progressive agenda of social change, which includes upending the the criminal
SPEAKER_00: justice system in favor of not prosecution. Yeah, I know. Neither of us favor that. Yeah. What's happening in the schools with CRT and the sort of hyper ideologized education. Look, they should just be teaching the basics reading. Yeah, leave it up to parents to do the other stuff. I agree. Yeah, exactly. I agree. And so on down the line. Well, maybe progressive is the
SPEAKER_03: wrong term because that that now has been co-opted. Less government involved in your personal life and tolerance. I think we all agree on that and I think we're tolerance is a great word. Everybody agrees with tolerance. It's a
SPEAKER_02: privileged position to want to have less government involved in your life, right? I mean, many people in the United States have been able to thrive and and survive because of the role that government has played in their lives and there's obviously on one end of the spectrum extreme grift and on
SPEAKER_02: the other end of the spectrum extreme need that is being met by the wealthiest government in the world and it is a you know it is in that middle where all of that. Where do you stand for how would you describe your politics in these two dynamics
SPEAKER_03: right? Are you also in this 4%?
SPEAKER_04: Freeburg yeah, yeah, yeah, I'm I'm here. I'm trying to be
SPEAKER_02: thoughtful about this because you know I think it's the idea.
SPEAKER_03: Yeah. I think that the government's role is to support
SPEAKER_02: those in need not those in want and I think that the government should be held accountable for performing that role and I think that those of us who can that are sitting in privileged positions and seats should enable the government to perform that role well and we should be positive actors meaning we should support we should pay taxes and we should help people and and institutions in need and that are you know kind of for the greater good and then we should be holding ourselves our government and our our politicians to account for inefficiencies and the biggest concern I have is less about are the people in need needs being met as much as are we holding our government to account for the performance of its services and duties to the American people and I really like this want I like this want need concept here. Can you give
SPEAKER_03: an example of where the government like people need something, but then there's another group that wants something and maybe we're over stretching and and you know giving into wants when we should be focused on needs and efficiency. Yeah, I'll give you a pretty. An example I know
SPEAKER_02: reasonably well, which is the farm bill passes every 4 years and the farm bill in order to get it passed in both the House and the Senate. It has components that serve both farmers and support the the food stamp program. So the food stamp program obviously supports millions of Americans that are in need of food can't afford food. They get EVD cards. They get support and buying food and there's a lot of programs and access that are enabled by that program, but in order, but that mostly services the needs of urban areas of cities. So it passes that that that element of the bill is attractive and appealing to the representatives of cities found in the House on the other side in order to get it passed in the Senate, where the majority of senators come from rural states, which are have significant farming populations. The farming subsidies are planted in that same bill and as a result because everyone's getting something that bill as a whole has now grown to a multi hundred billion dollar bill that gets passed every few years because in order for the Senate to pass it, the House says, okay, we'll give you all these farm subsidies in order for the House to pass it. The Senate says well, sorry it's and vice versa right. We'll give you all these food stamps, but but both of them now have incredible. What do they call it pork or fat or whatever? Yeah, the amount of money that's wasted that isn't actually servicing the original intention and need of either of the parties that are represented by that bill is extraordinary and I've spent a lot of time in the farm bill. I actually went with lobbyists years ago to DC and I actually met with the Senate and House Ag committees. I've gotten very deep into the bill and some of the programs in that bill and it's just shocking to me in the same way that Palmer Lucky shared in our all in summit. How shocking it is how defense spending works in this country. It's shocking to me how some of the the programs work in the farm bill. How much money and how much waste there is and how much grift there is and so yes we are meeting the needs of populations in need in this country, but so much more of the bill now is about people wanting more in order to pass the bill and it's and it's bloated. Alright, so he's going to come in and fix it because where's the incentive for anyone to come in and cut that bill up. Where's the incentive to fix it? If both sides are
SPEAKER_03: barbelling the grift, then there's no incentive. They're they're they're in a dance to to maximize the grift. So where do you stand now if we if we were to sort of look at politics without the Biden and Trump arrangement syndrome without the the the tribalism just in terms of first principles. I think what we're seeing here is we all want to see radical competence in the government social issues, you know and fiscally how we run the country. Where do you stand? How would you describe yourself now? Look, I mean I think of
SPEAKER_01: things in terms of risk. Here's what I see I see that there are a handful of issues that remain in terms of social policy that just need to get codified. Gay marriage is an example of one abortion rights is an example of the other then and and I think like those are like really to my to my perspective speak about human individual liberty, which I think should trump everything so everybody should be allowed to kind of pursue the best version of themselves. However that manifests in the person you married to in in the gender you express not these are like things where what you do to be happy you should be allowed to do period end of story. Then there are issues where I think are much thornier and as I get older, I become increasingly ambivalent or confused actually is a better word and gun control is a perfect example of that where I don't know what my right is to go and adjudicate a change to the Constitution that's been there since the founding of this country. That's a much more complicated issue and so I think we have to basically devolve that right to the states where individual states will have very different laws and part of how you choose to express where you live will be defined by some of those rules. So that's the social side extreme tolerance is really how I would sum it up. Economically so, but but I think that the risk to America imploding quote unquote because of an issue in that surface area in my opinion is extremely limited. If I look on the economic lens, however, I think there are enormous risks to American leadership and exceptionalism and we need a wholesale reset of how we create incentives of how government should work of how regulatory capture should work of how the capital markets work. These rules are way too perverted and it's creating enormous stress in a system and again, I go back to the example I used last episode. The thing that if you look for example, like you know in that example of Sri Lanka, Singapore, Jamaica and how there were these three completely different outcomes underneath the most successful outcome was an incredibly clear transparent and simple financial framework. You cannot spend more than you have you need to invest in long-term programs like education and health care. You need to make them broadly available and then you need to have an absolute free market that gets the best ideas to the top of the funnel and if you can just incorporate those things, the tax law could be four pages. You know the the number of regulations could be 50 pages. You know the simple rule that says to the Federal Reserve, you can't just print free money ad hoc. So I'm I'm much more concerned about the fiscal future of America. II think that there's so much movement and progress on the social side, including the freedom of movement of people to different states. It is an important set of issues, but in terms of what drives the outcome and future success for our kids and our kids as kids, people should not sleep on the economy because if we get this wrong, that will be the tinderbox that lights everything on fire. Sax when you hear you know everybody sort of explain
SPEAKER_03: their basic belief system, how far apart do you think we all are on this podcast because I think that's been a an issue. We see a lot of the fans discussing you and I discussing it feels like on most of these issues and I think that's people ask me how I'm friends with you all the time and I'm sure you get that question as well. Yeah. And I love you like a brother and I know II love sacks like a brother and and anytime we talk about basic issues, we're very much in sync and then when we talk about politics, it feels like we're super you know. You know opposed you know and in opposition to each other when you hear that we all have essentially the same stack of fundamental beliefs. How do you interpret this in terms of politics and in America writ large and and and how do we get consensus in this country to be more effective in running the country for the citizens? I
SPEAKER_00: think the media drives a lot of polarization right because they're feeding us a bunch of bogus narratives. You look at the polling around the trust in the traditional media has absolutely plummeted through the floor. I mean they basically have instead of just reporting objectively the facts they I think the audience is recognized that they are activists. They are basically pushing an agenda and they're pushing a bunch of bogus narratives and I think it does drive the polarization. So that's part of it to go back to you know what what are the core issues that motivate me and like who I support look. I think we could probably agree on a lot of stuff. I want us to pursue more of an internationally cautious. You know agenda less interventionist because it really hasn't worked out for us very well over the last 20 years with all these wars that failed. I want us to be fiscally responsible and promote a healthy economy to what Jamal said and then third I'd like us to be socially tolerant. Now why does that leave me in this current environment to support Republicans? Well on international on foreign policy, neither party is really very good. Both parties are sort of pushing some version of Bush doctrine light where we're basically over involving ourselves in all these countries all over the world, but the Republicans at least have a faction that's in favor of realism and restraint. So I'm trying to help kind of push that direction within the party. The Democrats just are still very much in this liberal interventionist mode on fiscal issues. Both parties are guilty of overspending and creating this ruinous federal debt and deficits that we have. However, there's no way to avoid the fact that the Democrats are just worse. I mean Biden wanted an extra four trillion of spending on this whole build back better on top of the four trillion he had. So listen, I know the Republicans don't have clean hands on this issue, but the progressives are just worse. As long as the progressives are calling the shots, the Democratic Party, they're just worse on spending and then you got social tolerance. Listen on the issues on these sort of key rights issues that have been the kind of the old social issues last 50 years by and large not on all these things by and large. I'm with you guys that I'm in favor of sort of the the socially tolerant position, but look at who is pushing social intolerance today. I mean the progressives are the most intolerant group in America. They're the ones pushing cancel culture. They're the ones trying to shove their positions down the throats of ordinary Americans. This is what's creating the backlash. You look at issues today like CRT like the progressive approach on crime on borders. The progressives are trying to promote. I think a social policy that is fundamentally intolerant and and doesn't accord any respect or room for traditional Americans to live their lives the way they want to and you have to be tolerant of them as well. We're not going to have peace in our society without some tolerance of. Okay, let's wrap on this and then move to China II sent
SPEAKER_01: you guys. This is a quote by Mike Solana, a tweet from Mike Solana. The caption is I've been wondering how they were going to spin this and this builds exactly on David just said here when the Quinnipiac Quinnipiac poll came out and about approved disapprove about President Biden, you know the big outlier was the Hispanic population. 19% approved 70% disapproved and the the article in the Washington Post, which tries to kind of. Sort of like clean this all up and whitewash. It says fake news speaks many languages, but it's particularly fond of Spanish, essentially saying that you know the the fake news problem in in the Spanish language has basically gotten so bad that you know this sort of explains why Hispanics have have moved in droves and it's like a whole race baiting cheap shot article. But the point of all of this is just to show that the left. This is what really does kind of bum me out. They are they are probably more intolerant than they've ever been. They are intellectual people with honesty like if Rachel matter really wanted to
SPEAKER_03: increase her standing and position. She would just start the next program with Nancy Pelosi's trades and say listen, we all know let's call this what it is. It's not cool and here's how it should change. She'll never do it. I know and and I think that's the disappointing part about all this. Okay. So let's shift now. I think we will just just what can I say one
SPEAKER_00: final thing about this whole thing that we can move on is I think I think if you are sort of purple and centrist, I think the first two years of the Biden administration were really a huge opportunity because I think there's sort of this conventional wisdom that the party's so polarized. I can't get anything done. I think we saw actually there's enough Republican votes or there were in the in the previous Congress. This this current Congress. They got the infrastructure bill done. They got the gun bill done. You know with the red flag laws and so forth that we talked about they can get codification of gay marriage done if they want to. They could have done the Electoral Count Act reform. So if you could have gone all the way with this progressive voting rights agenda and just focused on reforming the Electoral Count Act, then you could have prevented a situation like we had on January 6th that that what was happening inside the Capitol not outside. So there was a lot of stuff they could have passed and they didn't. Why? Because the in the in the first half of his administration, Biden's been completely captive to the progressives. There's another thing as well. You could get a child tax credit passed. You could get Romney would basically be the floor leader in the Senate. They could pass a child tax credit. That's the most popular part of BBB. Why don't they peel that off and vote on it? You know because they went to the whole thing. That's right. The progressives are holding it hostage saying that we're not going to give that to you unless you do the whole enchilada and of course there's no votes for that. So I think there's and and and so who ultimately is the culprit for allowing the staff and will partly bind but also Ron Clay and the chief of staff. I mean they've made a instead of triangulating to the center. They should have realized. Hey, we're a 5050 president, right? I mean we have a 5050 Senate. We should be triangulating. We should be building a centrist coalition. Ron Clay has been going moderate. The progress of the train. Biden had a clear path to go right to the center,
SPEAKER_03: pull everybody in, pull the working class in. That's been his supporting base. He's the working class and it's who he is and and he blew it by going too far to the left. If he wants to save this presidency, he should go straight to the middle and get all the working class behind him and be responsible for the guy that went to some elite, you know,
SPEAKER_01: East Coast liberal arts school where he got a masters in you know, fine arts and his 400,000 in debt. That's not Joe Biden, but he's let all these people run over the White House. And
SPEAKER_00: it's too late now because I think what's going to happen is it too late. Yeah. Well, the Republicans are going to win the
SPEAKER_01: house. How much time how much time did we spend talking about that? For who? Yeah, no, for a bunch of elite people with
SPEAKER_03: graduate degrees from. Yeah, it's it's it's it's it's there's characters on both sides. It's disgusting and we need to get to a version of politics that maybe it's more like our conversations here. But let's let's pivot to another society that we thought was going to roll over ours but and that we were in we were behind on in terms of competition. China's in chaos right now. Apparently, in terms of slowing economic growth, bank protests, mortgage protests, exactly what I predicted last year when you guys were talking about China was going to dunk on us. And I said, you know, it's very hard to run these authoritarian countries and the citizens like to protest when they get the short end of the stick. And here we go. Chinese economy is growing very slowly, they were going to do five and a half percent this year. They were only point four percent in Q2. COVID has a lot to do with this. But there's been a series of bank protests and the media has been trying to figure out exactly what's going on here to just set the stage here. Rural banks in China in a couple of provinces froze a bunch of people's withdrawals in April. Okay, sounds like the crypto contagion in many ways. They had been offering unusually high interest rates, also sounding like the DeFi grift going on here. No, I think it's
SPEAKER_00: I think it's more like 2008 Jason, I think the financial I think it's more like the financial crisis in 2008 that was driven by the real estate bubble. Yes, they've got their own real estate bubble, which is collapsing there. Correct. And
SPEAKER_03: there's there's multiple things going on at once. The authorities haven't said how much money is frozen. Protesters claim it's billions of won, but it's hundreds of millions in the US. After weeks without a resolution, customers have been began protesting. Plainclothes thugs have been hitting and kicking the protesters. And as of Wednesday, a video and viral of the CCP bringing in tanks to protect the banks. Very evocative of Tiananmen Square. I have a question. So go ahead. Yeah. So China has a very explicit zero
SPEAKER_01: tolerance policy on COVID. Why do you guys think they are so extreme in that policy? Like, any any ideas like had they explained why it has to be zero tolerance? They have not
SPEAKER_03: explained that. And if you believe that they are the origin of COVID, maybe they have some insider information about long haul COVID. And that was something I want to talk to Friedberg about if he thinks this, you know, long term COVID stuff is a really acute issue. But Friedberg, what do you think? Yeah, I don't. Let me I don't want to answer. Can I
SPEAKER_00: answer that? If you don't want to? Yeah, I think the answer is very simple. But I do want to talk about the Chinese economy.
SPEAKER_02: I Oh, yeah, there's a lot to turn over to Yeah, this is a
SPEAKER_03: complex issue. There's a lot more going on there. So on on
SPEAKER_00: zero COVID, I think this is coming directly from Xi. This is his policy. And I think that earlier in the pandemic, they were hailing their response, which they saw as orderly and effective at controlling COVID. And they were contrasting that with a chaotic Western response. And so I think that the credibility of the CCP and Xi himself got tied up in this idea of stopping COVID entirely of zero COVID. And so I think this is coming directly from the top. And it's having a huge impact on their economy. And I think this is one of the dangerous aspects of a autocratic system is you got one guy at the top making the decisions. And if he's wrong, there's not really a great feedback. Nobody can question him. Yeah, there's no questioning the God King. Yeah,
SPEAKER_03: you know, it sort of recalls a situation in China. I think
SPEAKER_00: it's about 500 years ago, there was a Chinese emperor who banned shipbuilding and banning having a navy. And because of that, China shut itself off from global trade, and it fell well behind the West, which then explored and captured the new world. There's this question about, you know, the Chinese, Chinese culture and civilization was much more advanced than the West than Europe 1000 years ago. But basically, it fell behind. And a big reason is because this unilateral decision by one emperor to basically close themselves off from the rest of the world. So you have to wonder, does this autocratic move by Xi basically doomed their economy to a recession? It seems like they're not learning from our experience, these lockdowns didn't work. I mean, you can't stop the virus, it's eventually going to get out. Even I saw Biden got the virus this week. I mean, it's out, right? It's endemic now. Everybody's gonna get it is basically what's happening.
SPEAKER_03: You've been making a bunch of heavy handed decisions like
SPEAKER_00: this. So you got besides lockdowns, it was it's also the crackdowns. It's the crackdown on the tech industry. Yeah, venture funding has plummeted. And so has so LPS are no longer
SPEAKER_03: investing in funds there with the exception of sequoias, which seems to be struggling but is still able to raise some money. And then additionally, founders can't raise money and founders are questioning when they meet with VCs if they can actually if the VCs are just meeting with them theatrically. The story that came out this week in the FT, if they're just meeting with them theatrically because they want to still hold out hope that there'll be a venture capital industry, but there may not be a VC industry in China anymore. Let me just give you the housing stuff and then freeburg I know you want to chime in on this. So there's also mortgage boycotts happening at the same time as this fugazi bank stuff happened. The bank stuff seems to be not the national banks. These are local banks that apparently could have been running some kind of grift where people deposited the money. It looks a lot like the savings and loan
SPEAKER_02: kind of behavior in the 90s. And these are regional banks to
SPEAKER_03: be clear, this isn't the national banks. And so at the same time, the mortgage boycotts are happening in three at 301 unfinished developments in 91 cities, homeowners are accusing developers of failing to deliver the apartments they've already paid for. According to Bloomberg, 70% of household wealth in China's tied up in property much higher than the US. This is downstream of the whole Evergrande thing, right?
SPEAKER_00: You got Evergrande Evergrande basically defaulted and there were a whole bunch of people who prepaid for their homes. And so they're already paying mortgage, but Evergrande never finished the homes. And now they're rising up because they're saying, why should we pay for a home that was never delivered? Right.
SPEAKER_02: I just want to like take a zoom out because I think it's worth, you know, we can focus on any one of these particular things that are happening and try and diagnose them and dissect them. But if you zoom out a little bit, I think it paints a more interesting picture. Over the last 30 years, right, the Chinese economy grew from 318 billion to in 1990 to 10 and a half trillion in 2020, right? Incredible growth GDP per capita, you know, grew kind of in a similar ratio, right? Now, from 318 bucks per person to $12,500 in 30 years. I mean, really, unprecedented in the history of humanity. China now accounts for 20% of global GDP from less than 2% in 1990. Now, if you look at historically what drove that growth, we all talk about manufacturing, right? Manufacturing accounts for about a third of the economy. And manufacturing as a sector was growing in China 25% year over year in 2008. And then only grew 6% in 2022. It's like basically, you know, kind of reaching an all time low in recent years. So that's historically been the driver for growth of this economy. And so much of the, you know, the bargain between the people and the Chinese Communist Party has been keep giving us a better life, keep growing our economy, keep giving us more housing, more stuff, more food, more safety, more security, will support the CCP. And the challenge that the CCP is having is that a lot of that growth, the core growth engine is starting to slow. So manufacturing is slowing, then real estate was growing. And so real estate accounts for 7% of the Chinese economy, and I've got a good stat for you guys here. In 2005, 250 million square meters of real estate was sold in China. In 2021, 1.5 billion was sold every year it's been incrementing. So the amount of real estate that's being produced and sold was increasing like crazy. This year, it's collapsed. So it's all it's down like, you know, forecast to be about 1.25 billion now. So the first decline in real estate building and sales. So that part of the driver of the of the economy in China is now collapsing. And then the financial services sector accounts for 8% of the economy. And that's been growing because it's leveraged off manufacturing and real estate, and all the capital that's flown in all of which is slowing down and stopping, you know, this $58 trillion of assets in China, generating about $700 billion of annual profits for the financial service industry, insurance, banking, lending, and so on. So a lot of the conflict and the things that are starting to fall apart, which may just be the tip of the iceberg, is a function of a fundamentally slowing economy, and the forecast and the outlook for an economy that doesn't have the drivers it's had historically, and things are starting to come off, the wheels are starting to come off a bit. And so, you know, look, the advantage they have is central planning, long term investments, being able to kind of be thoughtful about this. But in order to do that, there's certainly going to be a need for the CCP to keep people in line, as some of the long term bets hopefully play out for them, as they would say, in order to do that, they're going to have lockdowns and other sorts of mechanisms of regulatory control over the people. But really, this could be the beginning of some of the unwinding and real concern about, you know, is there a core economic growth engine in China that can save them? And what will it be? I think all of this
SPEAKER_03: if we look at what's happening in the economy writ large, Chamath, you know, the global slowdown plus inflation is now causing a stress test on every country. Sri Lanka's stress test, you know, showed us what's happening with their farming issues and with corruption. And here in China, the stress test, I think you would agree is showing what's going on in terms of, you know, banking, mortgages, real estate, and obviously this surging middle class and what their expectations of life are. So what's your take on what's happening in China? And are they, you know, how does this add up in terms of our rivalry with them as our contemporary?
SPEAKER_01: At a very macro level, China has one massive, massive, massive problem, which is one of population. It's hard to get an accurate count, but it is an aggressively aging population, which was the result of the one child policy for a very long time. China has sort of been on their heels trying to adapt that policy. But really, the last data I saw, I tweeted this out. It was a little while ago, Nick, so maybe hard for you to find in my Twitter feed, but it was a projection of China's population, which essentially showed a contracting by almost 50% by 2100. So that's a really, really bad situation. Now, when you have a slowing population, then the economy has to morph. Why is that? When you have a young population, so, for example, take what China was 20 years ago when it entered the WTO or what India is today, when you have lots of thoughts of young people, you can on-ramp them into economically productive activities like manufacturing. The problem in those folks accumulate middle-class income and wealth is that they age out of those kinds of jobs like they did in America. And what we seek are services and service-level jobs. And you spend more money, you spend it in a different way. So as populations age, your economy has to turn over unless you have a large bulwark of young people that is constantly growing to take up more of the slack, the economic slack, to pay for these folks who have different lifestyles, more savings, and different needs, specifically healthcare. That's China's enormously big problem. So when you see them talking about 6% GDP targets and you think, how does a country that big even grow at 6%? It's because they're reverse engineering for what they need to create economic vibrancy in that country. And so when you start to look at 2%, which in America you'd say, 2% is great. We would like high-fiving each other for 2%. That's not a sustainable level of growth for what's happening inside that country. It does not create enough of expansion economically to cover all these folks. That is a really, really big issue. So as that happens, I think what we need to do is figure out how to be competitive. Now this goes all the way back to our first conversation. Subsidies don't make us more competitive. Things that governments can do to make us more competitive are long-term, drawn-out tax incentives that change the earnings capacity of companies. Why? Because in the capital markets, reward those businesses. Jason, you just mentioned it. Why is the Chinese capital markets in difficulty? Nobody knows what the long-term earnings are. How do you forecast it? It's not simple anymore. It's not a model. It's not an interest rate. It's not a discounted set of cash flows. Right? And so that's how they need to refactor themselves. They need to have a much larger population. If you don't have that, you have to figure out how to do it with immigration. If you don't have that, what China has done is they've tried to go to Southeast Asia and to Africa and they've tried to create that synthetic form of a growing pyramid. Right? Now that can work as long as the balance sheet of the country supports that because ultimately you're still talking about moving money offshore. Okay? So I think they're in a little bit of a... they're in a pretty difficult spot. The most difficult spot is the one
SPEAKER_03: that Xi put them in. If you get rid of entrepreneurship, if you get rid of high-growth companies that create the opportunity on a global scale and then you take DD off the public markets, you don't let education companies become public or you basically get rid of their little co-opting of capitalism and venture capital, their whole society is going to become slow growth and slow growth in a country that doesn't have safety nets is really dangerous. Sax, your thoughts in terms of competition versus America?
SPEAKER_00: Okay, let me get to the competition in a second just to build on what Chima said. The birth rate or the fertility rate in China slipped to just 1.15 in 2021. So last year. It takes 2.1 just to maintain your population or replacement level. So and this is lower than even Japan, which is also shrinking as a... Japan's at about 1.3. The US and Australia are at 1.6, but we get above 2.1 because of immigration and China doesn't have that. So they've got a huge demographic problem. To Chima's point, it's going to be something like, well, the population is shrinking by 40% with every generation. That's what these numbers imply. The numbers are, it's going to be under 600 million by the year 2100, but I would, I don't understand how it wouldn't even be less than that if it keeps going at this rate. So there and the commentator, Peter Zihan has, or I don't know if that's the right way to pronounce the name, Peter Zihan or something. Anyway, he's pointed out that China is facing demographic collapse in the next decade or so. On top of that, like you're saying, Jason, you've got Xi emphasizing Maoist economics. He basically says he thinks that the Chinese economy, again, he stresses the need for socialist characteristics and he seems to be bringing back that sort of communist ideology to their economy and they've basically really cracked down on entrepreneurship and venture capital. It's really a self-owned. I mean, they've moved away from the policies that have made them so successful economically over the last 40 years and then on top of that, you got this debt crisis and this housing crisis. So it really looks like the deck is stacked against all of them and you're asking what does this mean for us? Well, I think it depends on whether you look at it economically or geopolitically. I think if you look at it economically, you'd say that it's bad for us because our two economies are economically linked. There's a lot of dependency. They've evolved together for a long period of time and they're if China has a collapse, then that they're so big now that that's going to have, I think global repercussions. There's going to be contagion. But the truth is if you look at it geopolitically and geopolitics is more of a zero, the balance of power is a zero sum game. Economics can be a positive sum game, but the balance of powers is definitely not positive sum game. You'd have to say it's good for us because the reason why China has become such a threat is because of its growing economy over the last 40 years. And look, I mean, what they've done and what they've been doing over the last decade or so is translating their economic might into military might. And that has given them the capability to now threaten their neighbors to become more belligerent, to basically rattle the saber against Taiwan. And if their growth, if their impressive economic growth continues for the next couple of decades as it has until now, there's no question that they will, they will basically try to assert their hegemony over East Asia and Taiwan will be a huge flashpoint, but there's also flashpoints in the East China Sea with Japan over the Saitaku Islands. But they're going to need a bankroll to do that. So if they don't, if their
SPEAKER_03: economy is not growing, they don't have the bankroll to do it. They're going to have to look inward and say, hey, we got to fix these domestic problems. We got to get people stop protesting in the streets. We need to, this middle class is demanding of jobs. The great news for what's happened in China, and I think this is why the people there are very happy, is the number of people living in poverty has plummeted. When they started tracking this data in the 80s, high 90% of people were living in extreme poverty or poverty. 99% of people were in poverty on the global definition of it. And now it's just plummeted to a couple of hundred million people. So, a couple of charts for you here, but just, and the data is obviously, it's very hard to understand what's going in China because a lot of it is opaque, but just the number of people on a percentage basis living in poverty has gone. And now the number of people who are in the middle class has surged. That creates another dynamic. Those people want to have a great life, they want better jobs, they don't want to work in factories, they want to have a more information-based economy and a better job than 60 hours a week in a factory. That's why they're moving their factories to Africa and other places. I mean, I don't know if that's absolutely true. I think that China's
SPEAKER_02: manufacturing sector is aiming to evolve. So, you know, China has about 3 million factories or manufacturing facilities throughout the country, employing about 112 million people. The U.S. has about 300,000 factories, employing about 12 and a half million people. The output of our factories is about 70% of the output of China's factories in aggregate, sorry, the total production output of all the factories. So, we have very high value outputs coming out of our factories and high leverage. China is observing and obviously recognizes that there's an opportunity probably to evolve their manufacturing capacity to be higher leverage, higher value output. And so there is going to be, you know, from the long range perspective, planning and investment in technology that allows those factories to become much more sophisticated and create much more higher value products moving up from what is effectively just cheap labor putting things together in an assembly plant to being things like additive manufacturing, 3D printing, automated manufacturing, biomanufacturing, etc. And I think this is particularly going to be realized because China announced that they're building 400 nuclear power plants. That drops the cost of electricity to under five cents a kilowatt hour. In the US, manufacturing electricity typically cost around 11 cents per kilowatt hour, 12 cents per kilowatt hour in that range. So, if factories become much more automated, they start to become a function of the price of electricity in terms of what they can output. China's going to have a huge advantage as these nuclear power plants come online over the next couple of decades and these facilities get upgraded. So, there is a plan, right? Remember, they say you have a plan and in the reason they have that plan, there is a question of do they get there fast enough to drive economic growth that actually supports all these other industries like real estate and finance that they've become critically dependent on because those industries only work if there's a core economic driver, core economic engine that's working here. So, this energy infrastructure, this new manufacturing infrastructure, these are things that, by the way, they can do really effectively because they're not working on four-year and six-year political cycles. They can take a five, 10, and 30-year outlook and make a plan and invest against it. It's what they did from night, so I wouldn't count them out, but there's certainly a lot of challenges they're facing right now. It's a big question mark right now what's going to happen. Well, and to your point,
SPEAKER_03: factories in China are, you know, factory workers getting paid over six bucks an hour now. In Vietnam, three. In India, even less, and that's why you're seeing a lot of folks, I don't know if you're seeing it in your portfolios, but we've seen a lot of folks looking at India, Vietnam, and moving factories there, and obviously Japan has been incentivizing. China's not going to just lose their manufacturing
SPEAKER_02: edge. They're not just going to say, hey, we give up, let everyone go to Vietnam. They're going to try and upgrade the capability of those factories and say, hey, instead of just putting together, you know, parts with six dollar an hour human labor, let's start to do the more sophisticated stuff. So then, the next card that turns is, well, what
SPEAKER_03: happens to those factory workers if they've been automated out? What do you do with hundreds of millions of people working in factories who now have been turned into robots? And then, if they're going to be in an info, the answer is information economy. If it's going to be an information economy, you need venture capital, and you need new companies to create those jobs, and they just killed that. So, I don't know what strategy she is pursuing here, but it seems like a bad one. We could talk about this one at length, but
SPEAKER_02: we were going to bring this up, but you know, generally speaking, technology drives productivity gains, but it's deflationary. Explain what that means in like a practical sense, maybe,
SPEAKER_03: you know, that the technology... So, let's say that you have to pay a bunch of people to make a t-shirt, and then a machine is built that makes
SPEAKER_02: the t-shirt. The cost of the t-shirt goes down, because one machine can just print out 100 t-shirts an hour, whereas it would take five people, you know, 10 hours to make those 100 t-shirts or whatever it is, right? So, a technology kind of emerges, and those people are now theoretically out of jobs, but what ends up happening is those people transition into new jobs that didn't exist before, and we end up seeing higher order work take place. Think about the the world 200 years ago. Do you think we would have had any concept of people being Uber drivers or people, you know, creating crafts and selling them on Etsy or YouTubers, content creators, people being yoga teachers or yoga, or yeah, yoga teachers or psychotherapists, only fans, or dog walkers, or all of these service businesses or, you know, industries that simply did not exist before, and so the labor that those, that that percentage of the population was involved in historically has gone away, because it's been automated. As that automation has happened, it's allowed higher order services jobs to emerge, and that will be the progression of humanity forever. I will tell you guys, I was going to mention this, have you guys played with Dolly 2? Yeah. The other day? Yeah, sure. I got the login, my brother-in-law was visiting, we were playing with Dolly 2 and making funny kind of, so Dolly 2 is developed by OpenAI. We all know Sam Altman, he's been leading that organization to great effect over the last couple of years, and what they're doing is they've basically scanned the web for images, tagged them, and then applied, you know, machine learning to, you know, to basically allow natural language creation of images from scratch, so the AI can generate an image, and you can go to, you know, the internet and look at a bunch of these, but the imagery is incredible. I mean, the creative output, what feels like creative output from the system, where you just say, hey, you know, make me an image of four guys doing a podcast on Zoom in the style of Van Gogh, and it creates this image that is unique, has never been created or seen on earth before, and is a function of the learning that's been done in these neural networks to develop this AI that can create novel stuff, is really amazing, and I started to think about, like, what are the implications for this over time? Think about, you know, the original movie Ben Hur in today's dollars would have cost a billion dollars to make. They had thousands of people, I think, tens of thousands of people on that set. It took years to make. They built giant sets. They could only, you know, make one film. It was an incredible feat and an effort. That's what movie making is, you know, still today. There's teams of people. Now, what if you could speak to the AI and say, make photo realistic, you know, Jason and Chamath having a battle on a field in the middle of nowhere, and now an airplane flies over, and you can instruct the AI, and the AI can generate photo realistic visuals, audio. The AI can even generate scripts and narrative for you. It really starts to change the role of the creator, the director. The director is no longer doing this thing where they have to get it just right, make the perfect 90 minutes, and then line up all the money and all the people to do that work on that plan, on that program. They can be much more iterative, and they can be much more creative on the fly. They can create a two-hour movie by speaking to the AI, and then edit the movie by speaking to the AI, change the actors, change the color, change the voices, change the music, just speaking to AI to generate creative output, and people will consume that output. And I think it's amazing to think about what creators will end up doing 10 years from now as AI and these tools proliferate, and you see version 12 of this, which is version 2, and what version 12 might enable. And so the role, the number of people that can do that job goes from Steven Spielberg and Bob Zemeckis and a few other people to suddenly thousands or tens of thousands of people around the world making incredible movies. Here's Dali's image, let's pull it up, of four guys doing a podcast. So
SPEAKER_03: we have a ways to go, but yeah, that is four guys doing a podcast. That's awesome. Yeah, that's awesome. I mean, and to your point, like, you know, this is gonna, we're on version two of this. So yeah, this is gonna, so a lot of people are like, oh, is
SPEAKER_02: this gonna wipe out graphic designers? Is it gonna wipe out the creative industry? But the reality is, the roles that those people are in today will absolutely be gone, but they will emerge and evolve into new roles that we never even thought imaginable, that will really transform that industry and society. And this is going to be true across everywhere that AI touches. Yeah. And I think you'll see this in China. As China steps up their technology in manufacturing, you'll see those, you know, new markets evolve. Sorry, Jamath, go ahead. Designers will have less leverage to ask for
SPEAKER_01: all these stupid snacks in offices of startups. Well, I mean, you need only look at
SPEAKER_03: designers are the worst. My God. They're the best. I love them. But anyway, in the 1940s, I mean,
SPEAKER_03: there were literally hundreds of thousands of telephone operators. It was totally and totally they're all gone now. And not only that, have you ever met a designer that didn't take themselves
SPEAKER_01: incredibly seriously that didn't have like, you know, tea that they would only have a bad one. The good ones. They'd have like steel straws. Video game designers are a little different. I'm
SPEAKER_02: sorry. What did you say about the steel straws? That was there. I have eliminated waste in my
SPEAKER_03: life. I mentioned to you guys last year, this video game I played over Christmas
SPEAKER_02: by Annapurna pictures and the guy that runs the studio sent me a DM. He loves the pod. Oh,
SPEAKER_03: that's nice. And they just launched a new video game, which I started playing a couple of nights
SPEAKER_02: ago called stray. And you literally you play the game as a cat lost in some crazy world. You're literally a cat. That's awesome. The imagery on this thing is unbelievable. Actually, my favorite game right now, Sax is I play a cat and I'm a stray cat. And it's really amazing.
SPEAKER_04: And the AI, you know, it's really hard to go play the game. Yeah, I'm gonna take a hard pass on that.
SPEAKER_03: Game where I'm a stray dog and I meet another dog, and then we eat a bowl of pasta. But there's
SPEAKER_01: long string of pasta, we each come closer and closer, then we end up kissing. Let's move on to
SPEAKER_03: do we want to go BlackRock has lost $1.7 trillion in six months. VC funding is down, or Amazon acquires one medical for 3.9 billion, which which one do we want to go to next? Anybody have a favorite here? Sax, you've been a little quiet. You got one you want to go to? We can talk about
SPEAKER_00: the BlackRock thing. This is the largest amount of money lost by a single farm over six month period
SPEAKER_03: in history. BlackRock is the world's largest asset manager. And it was the first firm to break $10 trillion in aum assets under management not right now they're at 8.4 trillion 2022 ranks as the worst start in 50 years for both stocks and bonds. Chairman and Chief Executive Officer Larry Fink said on his earnings call at the end of June, only about a quarter of its assets were actively managed to beat a benchmark rather than track it seamlessly, as passive strategies are designed to do. Firms passive equity holdings are now 10 times larger than its active holdings, although it does operate some active multi asset and alternative strategies that narrow the gap. collapse in bond markets this year has shaken money out of active fixed income funds. Listen, I think there's less
SPEAKER_00: than meets the eye here with this. I think this was a headline that was trying to grab attention by saying biggest loss ever. Look, the reason why it was the biggest loss ever is because BlackRock is so big. I mean, and what is BlackRock is basically at this point, their index funds, their ETFs, their index funds, they just represent market indices. So you know, the reason why it went down 1.7 trillion is because it started with 10 trillion. The average index is down 17%. That's all it means. We know this, the S&P 500 is down 20%, 22% for the year, the Dow Jones down 15 ish, the NASDAQ is down like 30. So this is just reflecting what we already know, which is that the stock market is down this year. Do you think it's another data point to support the idea that
SPEAKER_02: active managers generally speaking, and maybe holistically speaking over time, cannot beat the, you know, the market cannot beat indices? I mean, you have a point of view on that as an investor sex? Well, I think, you know, you're talking about public market investors. I think it's very hard.
SPEAKER_00: I think it's very hard to beat the public markets over a long period of time consistently.
SPEAKER_00: I just think it is now. You know, the contradiction though, is that if you have no active managers, then the indices won't be efficient anymore. So you need the participation of the active managers to help drive the indices and make corrections to it. So, and the fewer active strategies you have, the more inefficient the markets will become thereby inviting active strategies. So, you know, I think it's a good question. I think there are some managers who are, who can probably do it, but I think it's a very tough thing to do.
SPEAKER_02: Timoth, what do you think? You're a public investor, active selector of investments. Here's what I, I've been thinking a lot about this. I think that I have disproportionately
SPEAKER_01: benefited from being at the right place at the right time, backed by enormous amounts of central bank money. And so I think we all have been. I think it is very difficult to be a public market individual stock picker in a world where the central banks are constantly meddling. Because when they do, the best thing that you can do is belong the market beta. And the more concentrated you are, the better returns you would have delivered since 2008, when the central banks started to get very aggressively involved. When individual stock pickers reigned the universe, was when central banks were largely on the sidelines. And so there was all kinds of dispersion, right? Dispersion, meaning good outcomes, bad outcomes, lots of alpha, right? Meaning your performance was independent of the market. But since 2008, it's largely been beta that's driven the market. And the folks that have done exceedingly well were those in tech, because we delivered the best beta. And every time we confuse alpha and beta, we get over our ski tips and there's always some big blow up. So I think my general takeaway is that if the central banks stay on the sidelines, individual stock picking reigns and active management can win. If they continue to be involved and do quantitative easing and all of this other stuff, index funds that are long concentrated market beta will always outperform in the long run. I was watching Warren Buffett answer some questions and one of the questions,
SPEAKER_03: and this goes to the law of big numbers like BlackRock, he was saying, listen, the reason I did better earlier in my career than later in my career on a percentage basis is because I was placing at a smaller amount of capital, and I was placing it on smaller bets, smaller bets, smaller ideas and themes. And then as I had a bigger chip sack, I had to find bigger ideas to put more money to work. And therefore more people were looking at those. And so those assets were not undervalued. And so I found that very like, insightful in terms of when you participate in the market, if you're trying to pick between very large bets, like koto and TPG and tiger were doing in the growth space acts. Like, now everybody knows that these companies, everybody knows stripes a winner, everybody knew Airbnb and Uber were winners, you know, in the late stage of the private, everybody knew Facebook was a winner, least as private market, if you're battling that out, you know, Yuri Milner is going to come over the top and pay 2 billion more than you or Masayoshi San is going to pay five or $10 billion more than you. Where is the alpha there? You know, where where is the gain? The alpha is in the fees. Okay, there you go. And so they were playing a different game. And that's, you know, I started trading this past two weeks, because I've never traded public stocks, and I wanted to add it as a skill set. So I put a couple million bucks into an account, and I'm just trying to actively figure out how does value work there. And, you know, I'm just starting
SPEAKER_03: to make trades that I want to hold for 10 or 20 years, and we'll see if I can beat the market. That's the other thing is what do you want to spend your life doing if the index, if you can put money in a passive index, and not do any work? Well, you know, that's attractive as well. So Sachs, what do you think in terms of active management, you know, in these public markets and the size of the bets that have to be said, I think it's very hard to beat the market consistently.
SPEAKER_00: I think it's a very tough profession. I'm sure there are people who can do it. But I don't know if it's easy to predict who those people are. So look, I, you know, I think it's something that can be done. But I just think it's a tough, tough game. I mean, what we do as private investors is a little different, right? Because not everybody is in a position to buy shares, right? So not available to you don't even know the company. Access is limited and information is limited.
SPEAKER_00: And in exchange for that sort of preferential access that we get, we actually have to do work. When you're a public investor in a company, Disney or whatever, you don't do any work, you're not involved at all. We do a lot of work for the companies, and that's why they choose us. And so it's not you know, it's you're not competing against the whole world. I think the public markets are just so competitive. Are you tempted though, looking at these prices and because
SPEAKER_03: I was looking at a company that was trading at 50 times revenue last year, they're raising again, they double their revenue. So now they're at 2025 times revenue, they're raising at last year's valuation. And then I looked at the public market comps, and they're trading at six times. So now I'm like, wait a second. And obviously, you know, look at the growth rate. You gotta look at the growth rate. So was three, the growth rate in this example was three times fat greater than the public market comp. So how would you assess that then? Well, what we're seeing right now is that
SPEAKER_00: pretty good SaaS companies that are growing, you know, maybe on a trailing basis, they grew three x and you know, prospectively, they're growing call it two and a half x. They're trading right now not trading, but basically deals are getting done at 20 times ARR 20, which are this year's
SPEAKER_03: current run rate. Yeah, the current ARR. You're not getting that like bonus, like here's your projected
SPEAKER_03: next year, we're going to give it based on that this is current No, no current ARR is about 2022
SPEAKER_00: 23 times ARR. What last year 100 it was like 100 times was the rule of thumb. So now there are some
SPEAKER_00: where they're, you know, deals are getting done in the high 20s, I'd say you're even 30 if they're if you believe that by the end of the year, it'll be more like 20. So but I think the new levels are landing at 2020 something times ARR. Now, why does that make sense relative to the public SaaS companies? Well, like you said, the SaaS index is trading at roughly six times, but that's only 20% average growth. Right. And so you know, if you're talking about 10 times the growth, right, and the
SPEAKER_00: high growth SaaS companies are trading at like seven times. That's for like a 40% grower. We've talked about this before. So listen, if you're tripling year over year, and you pay 20 times, that'll be a seven times next year. But if you're growing to two and a half, three x next year, that's way faster. So yeah, I think there's actually an arbitrage there. I mean, this is why we'd like doing private SaaS investing right now. Deals are getting done, I will say that the people
SPEAKER_03: who I'm seeing who are really struggling, freeburg are the people who didn't turn on I'm talking about the very early stage, they didn't turn on revenue. They were making progress in team building and culture and features, but they just weren't focused on the revenue side. And my Lord, people got a lot of credit. I mean, 50 million, $100 million valuations without the revenue turned on. And that now they're faced with not being able to raise money full stop. What are you seeing on your side freeburg in terms of deal flow in the private markets? Yeah, it's and raising money.
SPEAKER_02: Yeah. Because you have to raise money for your company. It's not easy. Unpack it. What's not,
SPEAKER_03: you know? Well, what are the conversations like? Give us the anecdotal information.
SPEAKER_02: I mean, I've seen a number of term sheets get pulled. So I think really, yeah, we've heard a lot about companies that kind of during the q1 early q2 timeframe had term sheets weren't closing got delayed out. And there's a number of kind of examples of repricing, where the investors come back markets have changed, let's reprice the thing. Or, hey, we're not going to do this deal anymore. We're going to sit on the sidelines and wait till the market settles. Or our LPS actually aren't going to let us fund new stuff. So there's a lot of those last one for people. What does that
SPEAKER_03: mean? You know, investor, you know, investors have LPS, they have investors themselves, and their
SPEAKER_02: LPS are coming to them and saying, do not put more money out right now, we are telling you, we are not going to wire our money to you, we need you to wait until even though they're contractually
SPEAKER_03: obligated to they're telling you, theoretically, they don't, it may not be contractually obligated
SPEAKER_02: to but obviously, these are long term partnerships. And so when an LP, you know, or a group of LPS says, guys, we're not comfortable with you deploying money right now. You know, you're in a 10 year partnership, 15 year partnership with them, you're gonna as an as an investor as a fund, you're gonna say, Okay, I'm gonna kind of listen to that right now. Now, the bigger issues in series B, C and D, where companies, you know, have some traction, have some performance, have raised a bunch of capital, have done a bunch of work, investors don't know what they're worth. They're like, hey, is this thing worth 25 million or 125 million or 500 million? Last year, you could have raised money at 500 million. I mean, look at what happened with one of those crypto things. Those crypto trading platforms, they raised $500 million last July, and they just sold the business for a reported $25 million after being valued at 5 billion a year ago. Yeah. So the whole truth might have been more like 275 million. Just some news out.
SPEAKER_03: Yeah. And, and so but but series A people seem to be pretty active again.
SPEAKER_02: And so active again, but the prices now for seed lowers. Yeah. But it's happening six to 15 series
SPEAKER_03: A is happening 15 to 25. It's a lot easier to get a deal done in a series A because people say,
SPEAKER_02: hey, look, I'm gonna give you this. You say, okay, I'll take it. I need the money. Series B, C and D is where there's this whole fight because there's existing investors, existing shareholders who are saying I don't want to take a 50% right down to 70% right down a 30% right down over the last round and fighting and then doing inside rounds and bridge notes and all sorts of other shenanigans to not have to take a negative. Yeah. Well, one thing, one thing that's interesting here
SPEAKER_00: is that you think about like where the opportunity is in the market right now. And I think one of the things that happened in the boom is that everyone got pushed to go earlier and earlier because deals were so competitive. And so, you know, in the SaaS business, normally 1 million of ARR was considered the rule of thumb for getting a series for basically graduating to a series A that you're ready to go from C to series A when you had a million of ARR. As we know, during the boom last year, that number kept going down, you know, 300,000. And then you would see crazy deals get done that were pre-revenue with price at 100 plus. We never did any of those kinds of deals because we just thought they were too crazy, but they definitely happened. Well, think about the dynamic now, which is let's say that that SaaS startup that has a million of ARR, they can do a series A at 50 or we can just wait until they get to 5 million of ARR and then pay 20 times and do it at 100 free. Which of those is the better risk adjusted return? Let me tell you, there's a lot of risk in going from 1 million ARR to 5 million ARR. It's hard. There's a lot of things. You need a sales team. You're not doing it through the founders selling the product.
SPEAKER_03: Yeah, you need to start scaling a team. You need a real sales capacity, but also
SPEAKER_00: a lot of startups that could sort of hack together and cobble together 1 million of ARR based on non-scalable techniques that various startup incubators teach. Like, don't be scalable. Do things that don't scale. Poor Brad said it. It's okay to do that from 0 to 1, but not 1 to 10.
SPEAKER_00: Right. Well, or it's not that it's not okay. It's just that it doesn't work. You're not going to be able to cobble together 5 million of ARR. You can cobble together 1 million of ARR. You can use the cheat code to get there. So what I'm saying is there's a lot of risk in going from 1 to 5. You find out whether the product's really scalable. So what is the better deal? Wait till 100. Wait till
SPEAKER_00: it's priced at 100 or 120 million pre or doing the deal at 40 to 50. Now, if you love the company, you want to get in as early as possible. But I think you're going to start seeing a dynamic where in the same way that last year everyone went earlier and earlier, you're going to see VC start to sit back and go a little later and later. Prove it to us. A dead man's own. Nobody should
SPEAKER_01: be putting money into deals right now. What is it? Why? What does it do? Unless you're in the business of running a fee generating machine, if you're really trying to generate alpha, you have to have a sense of what's actually happening in the world right now. If you're just trying to deliver the market beta and run an index, then yeah, you're right. You should ignore this idea that there could be more price adjustments. But if you look at the public markets, which is again, the ultimate terminal buyer, they have more cash than they ever had since 2008. Which means that there is no reason to buy. You're talking about private companies. It all ultimately ends up in the public markets. And so if the public markets are saying there is no reason to buy this stuff, it trickles down. So then the crossover investor who has a public private business says, you know what, on the public side, I'm completely de-risked and in cash. And so on the private side, I'll just be a little bit more circumspect and wait. As David said, I'll just wait six months and put even more money in later. I'll actually have a better IRR and I'll make the same profit dollars. So then the series B and C firm who used to feed those deals to the crossover folks are like, oh, well, if you're waiting, I don't want to have to write a check to support these folks. My whole point was to have you mark up the deal so I could raise a new fund. They slow down. And then that goes back to the series A person who's like, well, wait a minute. You know, the reason I paid it at 50 pre was because I thought you'd step in and buy it at 100. And then they slow down. So all I'm saying is I think that we are at the point of the cycle where
SPEAKER_01: constipation is setting it. And this is why you're seeing such a downtick in deal velocity and dollars put to work. This is great advice I want everybody to take. I'm going to take the
SPEAKER_03: opposite advice and I'm going to do twice as many deals in the seed stage as everybody else. But I encourage every venture capitalist and seed fund to take from its advice. I'm doing the opposite because a five person company, this is an advice. This is just a market observation. I'm just
SPEAKER_01: observation. I hope everybody takes that as the truth because what I'm seeing is the founders who
SPEAKER_03: are raising and who have real businesses are so sharp right now and so focused on costs and profits and what matters and they have eliminated all the shit that doesn't there's a whole contingent I don't know if you're seeing it sacks I'd say it's one out of five one out of four that are like I understand what's happening here and I'm going to take advantage of this moment in time and I'm going to just drive revenue and profit what happens to the $250 billion that's been put
SPEAKER_01: to work in the last two years that need to get up rounds Yeah, it doesn't matter to me. All I care
SPEAKER_03: about is meeting young companies that are growing with revenue but I think they're they're trying to have a conversation. Yeah, no, I think that's a lot of indigestion. Yeah, they're gonna have to
SPEAKER_03: cut their staffs by half and get to profitability. Ultimately, the way that valuations matter, or
SPEAKER_00: price levels matter is there's an entry price and an exit price. And ideally, if you can time it right, you want to invest when valuation levels are low. And you want to exit when valuation levels are high. If you were a VC last year, you should have been realizing as much as you can, because valuation levels are really high. There was a good tweet by one of Brad Gerstner's colleagues at Altimeter, basically saying she was talking to LPs and asking what they care about. And what she reported LPs is saying is that if you're a fund that's more than five years old, and you didn't distribute during the best window ever, which was 2018 to 2021, it's a hard no, you know, we're not going to be re upping with you. I'll say it even more. If you're if you're
SPEAKER_01: if you're a venture investor who took a longitudinal view on public market stocks, and then have now seen 60 to 70% write downs of those same stocks that you could have distributed, you should still have something to answer to that makes no sense. It turns out that the skill of private market investing and the skill of public market investing are different. Even if all you're doing is delivering the market beta. It's still different. Remember, I was saying should I
SPEAKER_03: distribute the shares of Robin Hood? Should I hold them? What should I be doing? We told you to distribute and I distributed I distributed everything, you know, and, and in terms of secondary, I feel particularly like a genius now because your LP should say thank you, Jason.
SPEAKER_03: What I feel smart about, I'll be honest is, we had, I think, let's just say, I'm making up a number of four to five times, we were offered the opportunity to trim our positions in secondary, with our winners, from people who wanted to buy secondary shares, I did it probably four to five times. And I'm just kicking myself, I didn't do it the fifth, or I didn't ask if they would take more. Because my God, we were able to clear some positions at very high valuations that are now lower than that in the private markets and send cash to our LPS and get our, you know, get over our hurdles and our first two funds, which, you know, I feel smart about. I think that you should
SPEAKER_01: feel so so good about that. That is that is really hard what you did. And I think people underestimate how hard it is, it is really hard to actually return more money than you have taken it. Yeah, I mean, that's what I'm focused on. Just that simple statement.
SPEAKER_01: And, and by the way, it was hard in the last 10 years where we've had basically a massive upmarket and the four of us, frankly benefited from the extraordinary luck of being in tech. Yeah, no, it's super lucky. I think the big thing that's going to happen right now,
SPEAKER_03: I'm seeing it all over the place is M&A, I think is going to start ticking up just today, Amazon acquired one medical for 3.9 billion one medical operates a network of clinics, if you don't know, $3.9 billion enterprise value for 182 franchises, which is 21 million a
SPEAKER_01: franchise. Look at what happened to their look what happened to their stock price. No, I know
SPEAKER_01: I went from 60 in the peak in February of 2021 to seven in May, and they bought it, they basically bought the same price it was trading out in January. No, my point is you could buy a McDonald's
SPEAKER_01: franchise for 2 million or you could buy the company that fixes the people that needed McDonald's for 21 million. That's why they got by the way, at McDonald's, you can't make money
SPEAKER_02: selling pharmaceuticals and upselling, you know, other stuff that Amazon's gonna certainly super interesting. I think it's super interesting that Amazon is getting into this business.
SPEAKER_00: Wow. I mean, they clearly have a an economic model that shows some significant
SPEAKER_02: footprint, retail footprint. Well, there Yeah, and there may also be kind of a supplement, pharmaceutical kind of upgrade opportunity, there's synergy in this business. And think about the synergy between what they're getting is also not just the physical locations, but a network of doctors that can do telehealth. I don't know if you guys have ever used one medical, but they do really, you know, easy zoom telehealth services. And so you could hop on, get a prescription, have it fulfilled by Amazon, it shows up at your doorstep at under an hour, genius, it'll be an incredible synergy for that business, and probably a real value driver, not just at the core units, but with respect to other things they're going to sell through your one medical doctor will provision a blood test, he or she will analyze those blood tests
SPEAKER_01:
SPEAKER_01: over a telehealth, they will prescribe a better diet that will be sent to Whole Foods, who will then I'm sorry, I'm serious. And then it's like, it's eating out hopefully, Amazon, it makes so much sense for Amazon to expand into built out retail footprints, because that business model now gets more and more complete by the day where you become so ingrained and enmeshed in this really about at the end of the day is the description business. Amazon Prime is the
SPEAKER_03: driver of Amazon. That's yet another Amazon Prime lock in. So you're I know it sounds silly, but today, it'll be an entry point your subscription. But I will bet you guys I will bet you guys a
SPEAKER_02: dollar that within a year after closing the deal, they're going to massively expand the telehealth footprint of what medical is doing. Because one medical had to go out and do customer acquisition to go and acquire customers to make money doing telehealth services. And they're spending $1,000 probably CPA to acquire these customers. Amazon's wanted to do this. Why didn't Google do this? This was the Amazon's already got the customers. They've got 70 million everybody to some by the way. Another thing. Another thing doesn't know how to do
SPEAKER_00: messy things in the physical world. They don't know how to do service. I mean, Amazon's been working warehouses. Apple knows how to do stores.
SPEAKER_03: Do four products in a beautifully designed show. $40 billion services business. Amazon knows how
SPEAKER_00: to get in the nitty gritty and the nuts and bolts. Yeah. Yeah, real world stuff. The other
SPEAKER_02: thing that's really interesting about this Amazon deal is that it was done with Bezos not at the helm. And I think it really, you know, begs the question and begs an answer around, are these guys going to continue to innovate like this? And I think right now the jury's saying yes, they are going to continue to push the synergies they can derive from this business by expanding into ancillary services and industry. And it's really impressive to see them doing this without without Bezos running the day to day as a shareholder. I feel that. So really great to see. All right. Yeah. I mean, this is where like they could buy DoorDash, Uber, Lyft, those kind of real
SPEAKER_03: world services. They're buying it just like they did with Whole Foods. They're buying an asset
SPEAKER_02: that they're gonna get tremendous leverage and synergy out of very cheap. They're buying this company at the same price. It was trading out a few months ago. Yeah, no, no. It's a great deal. They have a great CEO at One Medical who's a friend of mine, Amir Rubin. Congrats. Shout out.
SPEAKER_00: Congrats. Yeah. All right, everybody. You want your big socks? No, I never, I never went my
SPEAKER_02: beak in this deal. syndrome. I would I would just think from DBS. By the way, I'd be taking a
SPEAKER_04: victory lap right now if I was in that company. Yeah, I missed it. I'm shocked we haven't seen
SPEAKER_01: the J Cal victory lap. He goes on some podcast tells Bloomberg that VCs are going to get pinched for insider trading all these tokens and lo and behold on the Wall Street Journal. Three guys, I guess a guy at Coinbase got pinched for basically insider trading these token sales. Front running it by buying them in his wallet and stuff. And so where's your victory?
SPEAKER_01: That would be a recurring joke. Take your victory lap. Do you want to take your victory lap?
SPEAKER_03: Well, no, I mean, I told everybody like if it's a if it smells like a security and people are buying it for that reason for it to appreciate don't be surprised if the SEC, you know, starts having tips dropped on them that different VC firms in cahoots with law firms in cahoots with everybody. We're liquidating their positions. We talked about liquidating positions as being the goal of venture capital. They created a shadow economy next to securities law and said, we're going to just start liquidating these things. But under what they made the rules up under which they could liquidate them. I'm not picking on a firm or anybody we'll see over time who gets pinched. But, you know, if you decide you're going to talk yourself into this is not a security, even though it kind of feels like one that's on you. That's on you as the person buying the tokens, issuing the tokens, giving the legal briefs on the tokens, I think people suspended disbelief and talk themselves into thinking that they weren't trading securities. And I think the SEC now that everybody's lost their money, is going to just tick off one firm after another. And it's going to be massive settlements, it's going to be three or four years of litigation. So it's not a victory lap. It's just it was such an obvious observation. We all saw it. I mean, how do you liquidate up your shares in a company that has no product in the world? Like, come on. Come on, people knew what they were doing. If they get the book thrown out, and they deserve it. All right, everybody. This has been another amazing episode, even though Sax is gonna say it's the worst one. I like it. I do. That's a lake. Is
SPEAKER_03: that real? That's Lakefront. Is that a zoom background? Can I get that new zoom pack?
SPEAKER_00: So you have photos so we can all use it. Love you boys. Love you besties. All right,
SPEAKER_03: we're back in the groove. Back at you. Rain Man David Saks. We open source it to the fans.
SPEAKER_00: Oh, man. We should all just get a room and just have one big huge door because they're all like this like sexual tension that they just need to release.
