SPEAKER_02: All right, his monthly burn rate would make even Bezos wins. He's living the life of a Sri Lankan prince. He drinks nothing but the absolute highest top shelf. He's lifting Italy's GDP by himself. The dictator's back to mouth polyopathy. I'm back to the program. Thank you, Jake.
SPEAKER_04: When you mentioned that burn rate, I thought you could be talking about me. These intros, you're not sure which which way to misdirect. It's a misdirect comedy.
SPEAKER_02: It is inconceivable that my burn is higher than David's. I own
SPEAKER_03: one house. How is it possible?
SPEAKER_02: And maybe one or two next. He's analyzing macroeconomic charts and grids, while at the same time ignoring his kids. He's the Sultan of sass. It's no surprise. The only thing heavier than his pockets, the bags under his eyes. The rain man is back David Sachs.
SPEAKER_04: It's not bad. Oh, here we go. Here we go.
SPEAKER_02: The admiral of anxiety. He's rife with strife. He plays on his PS five. And he also plays one in real life. Meow, the commander of the catboys. David. I mean, I'm totally cool with that opening because you're
SPEAKER_01: gonna look like an asshole. It's all good. I mean more of an
SPEAKER_03: asshole. If you didn't ignore it, every time freeberg spoke, you would
SPEAKER_00: have heard that the guy from an important pictures reached out to him, gave him a link to download a free game about cats which he downloaded and he's been playing. It's now the most popular video game in the world. You introduce the cat game. It's
SPEAKER_03: on you. By the way, what shirt are you wearing? It looks like a
SPEAKER_00: carpet. Yeah, you really do look like one of the characters from
SPEAKER_01: Goodfellas like one of the older guys in the Kansas City. Oh, yeah, I have my cigars right off screen here and I got my ass coffee. I got from Duncan. One of the guys in Kansas City from
SPEAKER_01: casino. Absolutely. I sit around the table in that restaurant. It's like should we walk him? Why take a chance?
SPEAKER_04: Why take a chance? Boom.
SPEAKER_03: You get my you got my style icons. Joe she's my style icon.
SPEAKER_00: You look really bad. Thank you. Thank you.
SPEAKER_02: Rain Man David side. We open source it to the fans and they've just gone
SPEAKER_03: crazy.
SPEAKER_02: GDP fell by point 9% in Q2 marking two straight quarters of negative growth. In q1 we all know GDP fell 1.6%. Here's the real GDP chart. Current dollar GDP increased 7.8% in annual rate or 465 billion in q2 to a level of 24.85 trillion home construction down 14% obstentially because of the interest rates increasing. inventories which helped boost GDP and 2121 drag down growth in q2. So supply chains easing, taking away two percentage points. Chamath what's your take to these year over year comparisons work? We were talking in the chat a little bit about the spike in 2021 versus the dip in 2020. What's your take on this? I mean, I think you just
SPEAKER_00: summarize that people are really fixated on these numbers without understanding basic statistics. So just taking a step back, if you go to the Bureau of Economic Analysis, which is an official website of the government of the United States that posts GDP, the title makes it pretty self obvious what we're dealing with here, which is says, Nick, you can put it up there, real GDP, the percent change from the preceding quarter. So things can still go up positively, but still be negative if it doesn't go up by the same or more than the quarter before it. The thing that we really have going on is that over the last eight quarters, we've had all kinds of very turbulent data that's made the trend line unpredictable. And the most obvious way to see this is actually in one specific sub sector, which we'll get to in a second, which is around US ecommerce adoption. You see this one huge spike coming out of nowhere. And then eventually, everything has settled back to trend. The same way, I think what we're waiting to figure out is how many quarters does it take for us to get back to on trend growth in the economy. We had a massive shortfall in Q2 of 2020. We had a massive surplus in Q3 of 2020. We've had a country that's been getting back to finding equilibrium over the last five quarters. So we don't really know what the steady state growth should be. This is why I specifically had such an issue with the tone the White House took, which was trying to explain away this, that this isn't a recession, by trying to create doubt in the definition. Instead, I think it would have been much better off just repeating what I just said and explaining basic statistics, and actually showing that the country is headed in the right direction, largely speaking from a really crazy one time externality that nobody could have predicted, that it's going to take some number of quarters. And so really what you should look at, and Jason, you've pointed to this, is employment and wages, and try to be a little bit more circumspect and overreacting to any one quarter of data. By the way, the Fed exactly just said the same thing yesterday when they raised 75 basis points. They said, we are not going to give guidance anymore because things are too turbulent. We're going to remain vigilant on inflation, but mostly we're going to be very near term data dependent. So I would boil all of this in saying, let's not overreact to a quarter's print here or there, and specifically the label. I think the White House made a mistake in trying to basically think we all didn't understand what our technical recession was. I think instead, we should just focus on what we have to do to get back to solid state equilibrium. Yeah, and just to put a pin in the definitions, we all know the
SPEAKER_02: common definition to successive quarters of negative GDP. However, people have said it's a temporary economic decline during which trade and industry activity are reduced. So there's a sort of debate and splitting hairs going on sacks, which was kind of stupid. The big news this morning is that we no longer know what a
SPEAKER_04: recession is. This is such a vast and complicated question. You might as well be asking what is the meaning of life? Now I remember in the days of Republican presidents, we had a very simple definition of recession, which was two quarters of negative GDP growth. But now that we have a Democrat in the White House, we just can't know these things. Why even ask such difficult questions? Right? I mean, that's basically the media coverage today. And that's absurd. I mean, and you saw for the last week, the administration and spokespeople have been trying to muddy the waters on the definition of recession. And it was laughable as they're doing it. But now you see the media coverage today and you realize like they've bought into this nonsense. And they're carrying so much water for the administration. Look, the headlines should be the Biden recession has begun. That's it.
SPEAKER_02: If you had three minutes and 45 seconds for your Biden over under with sacks, you took the under you won. You're in a recession. He's the president. And if we had a
SPEAKER_04: Republican in the White House, it would be Republican president recession has begun. Yeah. So the media here is carrying so much water to try and avoid the obvious headline. I just explained it. Instead of reporting the obvious headline, they're now saying that we're approaching recession or we might be in recession. We have all these difficult technical issues. Listen, listen, we're in a recession. It started it might be a shallow recession. We don't know yet. Yeah. The it's it's, it's a recession in which the unemployment rate, as of today is low, although the labor participation rates also low. So listen, we're at the beginning of a recession, it might turn out we might have a bouncing q3, this might be more of a double dip, I suspect that's what it will be. But we know the cause of this the cause of this recession is inflation. If you look at the economy's growth in nominal terms, it grew at seven point something percent, but because inflation was at 9%, you have to subtract them in real terms, the economy is shrinking. And who is to blame for reset for inflation? Well, Jay Powell, the Fed, because he reacted way too slowly, but also the Biden administration for all the spending they did. How much sooner do you think they could have reacted two
SPEAKER_02: quarters? No, like nine months earlier. So three, we got that we got that
SPEAKER_04: first surprise inflation print last summer. It was May, I believe that 5.1%. We started to talk about 10 year break evens tips in May of last
SPEAKER_00: year. Yeah, so they could have gone to quarter to nine months,
SPEAKER_04: and they continue not only do they not raise rates, or signal any desire to raise rates for six months, they continue to quantitative easing for nine months, which just makes no sense. But they should have taken their foot off the accelerator right nine months, they only start they only stopped
SPEAKER_00: in June of this past year. So we've only been quantitatively tightening for two months, they stopped the bond buying program
SPEAKER_04: in March. Maybe that's right. Yeah, yeah. But they stopped
SPEAKER_04: quantitative easing in March. But you're right, that tightening is just something they're getting started with. But the point is, they should have stopped easing, right? Like, why would you need to keep intervening in in the in the markets to buy more to basically push out more money? Is the reason for this that Powell and Yellen just haven't
SPEAKER_02: lived through highly inflationary times I just read they're older than I am. Well, I'm just saying they haven't been in office and doing Fed policy. Like I just read Volkow's book, if you haven't read it, it's pretty great his biography. I mean, what he had to do in 8182 was super severe. But we just haven't lived through this in our life. So I guess people are just not used to having to tap the brakes in No, no, look, what happened is that the administration reacted in a
SPEAKER_04: political way to the inflation print, they invented this word while the word transitory existed, but they applied it, you heard this word used relentlessly for about six months. So the administration went into denial mode. Yeah. And then by the end of the year, it became clear that it was persistent. And I think the issue with Powell is that he is basically responding to headline risk. Right? So he didn't respond to, you know, the inflation problem last summer, he waits until the the headlines tell him he has to react. And so now the the thing that he's worried about is is recession. Obviously, he knew, no, he's worried about inflation, mostly,
SPEAKER_02: right? He was worried about inflation. But if you look at yesterday's, right, but if you look at his comments yesterday,
SPEAKER_04: it was more dovish comments, they did 75 point rate hike, but the comments were more dovish. And I think it's because he knows that today we have this second consecutive quarter of negative GDP growth. So now he's trying to balance recession risk against inflation risk. But the point is that the Fed's been very slow to react and the administration basically just tries to relabel and rebrand problems instead of confronting them head on. Hey, Jim off. When we look at this chart, you pulled up for and we see this massive spike in the inflation
SPEAKER_02: rate. Q3 q4 q1 q2, a little bit in q3 and then q4. I mean, this massive 123456, just extraordinary quarters are five out of six. In terms of GDP. That's all stimulus in your mind, right? This is the money drop. That was locked down. So in q2 2020, Jason, they locked the
SPEAKER_04: economy down.
SPEAKER_02: Yeah, but so people were spending online and we'll get to the chamat chamat story about Spotify, but it's not all of it.
SPEAKER_00: But the point is, it's some combination of lockdown and
SPEAKER_02: excess money, right? Excess money because because of loose
SPEAKER_00: financial conditions, distort what true supply and demand should be got right. And excess money can come from the government. But in this case, excess money went from the government into the hands of individuals who then participated in the public markets, and they distorted what it what it all looked like. And so there was a lot of purchasing activity that was propped up by what seemed like an endless supply of free money. Right. So we know that. Yeah,
SPEAKER_00: good. And so now that that money is getting taken out, we don't yet know what the real equilibrium economic growth rate should be. Because you have to remember, we have not seen an era without federally introduced spending without federally introduced forms of quantitative easing since the great financial crisis. So we have been propping up our economy for 14 years right now. So we have distorted the prices of bonds and fixed income. We've distorted the prices of equities. We've we've created an asset bubble in crypto out of nowhere. And now we have to do the hard work of figuring out what the real supply demand is in the economy. And we don't know six quarters
SPEAKER_02: here. There's six quarters of just massive GDP spike there from the preceding quarters. And we have two down quarters, is it gonna take six quarters to wash this out or longer, I guess, longer because what David said is now making the problem even
SPEAKER_00: worse. So because Powell was catering to whatever pressure he's been getting, and he must be getting some severe pressure from the White House. Those were really dubbish comments. But what is the problem when he is dubbish? Well, the practical reality is a couple of things. Number one is typically the yields of long dated bonds go down. Okay. That essentially tells everybody else to reprice assets. What does that practically do? It makes the cost of borrowing roughly cheaper. Okay. It makes the price of equities, particularly ones that are far out on the risk spectrum. So specifically, let's focus on NASDAQ and crypto, right tech stocks, and crypto stocks go up much more aggressively. So what is Powell effectively done? He has synthetically created a form of easing again, right? Like his job at the Federal Reserve, if you think about the money supply as a pipe, it's to shrink the pipe to close off demand to get things in equilibrium. So even though he's doing this, by the language that he's doing, he's effectively allowing market participants to basically guess that the worst is over. And now we're going to start to expand the pipe again. And so they go to the end state. So what he effectively did in one speech, is basically put a pin at the end of this year, and is telling the markets are mostly going to be done. And if anything, I'm probably going to be cutting in the back half of 23. Go on your merry way. And there is no see
SPEAKER_02: the problem that Jason is, it's now pushing the problem out
SPEAKER_00: another eight quarters. Like we need to stop this nonsense, he needs to be definitive. And he needs to fundamentally break the back of inflation so that you find out what the true demand is in the economy. Yeah, and it did point seven five yesterday, the markets
SPEAKER_02: rallied on his sort of the assumption that he would do a couple of more of these rate hikes, and then he'd be done at the second half of the year. And then hey, maybe we can get back to growth, or some normalcy in in relate related to all of this. And by the way, there was an interesting story. The sacks would be interested in. Did you read Paul Volcker's biography at sex? No, I've not read it. It's familiar with his record. But
SPEAKER_04: yeah, like at one point, Baker and Ray took Reagan and Volcker
SPEAKER_02: into a room off of the White House. So it wasn't recorded and just said, Volcker to Volcker, the President does not want you to raise rates going into the 84 election, full stop. And Volcker is like, well, I wasn't planning on raising them. So there's a lot of politics in this, even though people claim it already done enough. I mean, Volcker raised rates all the way up to
SPEAKER_04: like 20%. He broke the back of inflation, it created a very severe recession, and I think 1981 82. But by 1983, the economy was rocketing back. Yeah, with lower interest rates, and they basically solved the inflation problem. Hopefully, we're not in that situation where power is going to be where Powell has to jack up rates so much to break the back of inflation, because it means that we'd be in an even more serious recession. So I hope we're not in a Volcker type situation. Just think about that spread sacks 20% versus like
SPEAKER_02: three or 4% we're trying to get to. We've never in the history
SPEAKER_00: of America ever had CPI print above four and a half or 5% without inflation being brought down by having fed funds not also be greater than four and a half or 5%. So at some point, inflation will turn over and will print six and 7%. But that's still not below four and a half or five. And right now, our target fed funds rate is between 2.25 and 2.5%. So we could still be only 50% of the way there, if inflation remains at four to four to 5%. And this is what I think market participants don't want to hear. They don't want to hear that there has to be a meaningful form of tightening. And politicians don't want to hear that the White House for sure doesn't want to hear. The problem is that if Powell caters to too much of that feedback, he's not going to do what he's supposed to do and why he's put in that job.
SPEAKER_02: His job is to get it to 2% and keep price stability and full employment. There is a balance here. I mean, the reality is we do not want
SPEAKER_04: Powell tightening more than he should or more than is necessary to solve inflation because it will cause a serious recession. So I think we're caught between two pretty bad options here. And it's because I think that what happened last year contributes to this. I mean, look, if you go back to that chart that you just showed, what happened in Q2 of 2020, we had a very healthy economy going into 2020 in 2019. Right. And then in Q2 of 2020, we had COVID but we made the situation even worse with lockdowns. And we basically shut down the whole economy, brought it back, at least in most states in Q3. And then the Fed started printing and Congress started printing $10 trillion. Well, still by last year, the economy was back, we had something like 5.7% annualized growth. This year is negative. Why is that? I mean, this may be the lingering effect of all that stimulus. But I think that it is but I do think that the administration made it worse by sending checks into an overheated economy. They also created energy scarcity, and they just kept, you know, spending more money. I'm not saying the White House isn't without fault, David. But
SPEAKER_00: I do think that if all of these geniuses could have actually just taken a simple econ and stats 101 class and explained how year over year measurements work to the American people, I think they're smart enough to understand it. We didn't have to go down this convoluted route, we could have just explained, we put a lot of excess money in the economy. We don't yet know what the full effect of that is, we need to let that wash through. In the meantime, you're going to see some crazy numbers from time to time, and we just have to be patient. And the other crazy things you're going to have looking at
SPEAKER_02: second and third order effects is all these downstream effects, people are making business decisions going into these economies, Shopify just laid off 10% of its workforce, about 1000 people on Tuesday, their stock is down 10% past five days overall 70% year to date. And if you look at this chart, and Toby took blame for this, he basically said, Listen, we thought that this was going to be a, you know, fast forward into the future that people would adopt ecommerce in a major way. And that would stick. Here's us ecommerce adoption growth rate massive spike when people are forced to buy all their goods online. And now it is regressing to the mean.
SPEAKER_00: I mean, mean reversion is a bitch. If you look at Shopify stock, if you look at Peloton stock, if you look at a firm stock, if you look at ARK, you know, a lot of these things were trending in a great direction. They had this short term, crazy behavior in the middle of all of this free money. And now they've mean reverted. And, you know, we're in the midst of finding out what the real price is, I got to give Toby a huge, you know, round of applause, because he is such a great CEO. And I'll tell you why. Last year in the middle of all of this wokeism, he wrote this incredible memo, which was, you know, we're not a family, we're a team, which I thought was exceptionally well written and really got the point across. This time around, he just owned it. He's like, you know, I made a huge bet that all of this behavior change was going to be discontinuous and permanent. And it turned out I was wrong. I'm sorry for that. And here's how we're going to have to course correct. In both cases, he kind of just put it all out there, and he owned it. And I think that that's all you can do when you make a bet. And it's wrong. And here's what he said, it's now clear that that
SPEAKER_02: didn't pay off ultimately placed in this bet was my call to make and I got this wrong. Now we have to adjust as a consequence, we have to say goodbye to some of you today. And I'm sorry for that. I mean, everybody made that mistake, right? So you
SPEAKER_04: know, it is, it's just you're right, just own it. Everyone was thinking the same thing. We're all we're talking about how COVID was this acceleration as virus, and it was going to accelerate all these trends. And well, that's the acceleration awakening is going to be for all these people who
SPEAKER_00: made all these bets, assuming that it's permanent. And specifically, I mean, you know, especially around real estate and work from home and all of this stuff, benefits, and it's all going to change now. And the reason I say that is the combination of reversion to the mean will impact a company's bottom line. And those boards of directors and CEOs will say, Okay, we're just gonna have to reset expectations. And that's going to touch the employees. I don't know if you saw this leaked transcript, but you know, Zuck was asked the question from this. That was unbelievable. He was asking about his like
SPEAKER_03: emotional support days or something. I think in the in the
SPEAKER_00: middle of like Zuck having like a really serious, you know, heart to heart with the company about how we're gonna have to buckle down and, you know, performance, individual performance, one dude, one dude, you know, Schmenke from the back raises his hand and goes, What about the COVID extra vacation days?
SPEAKER_03: Like, he literally his head almost exposed. He's like, Did you not just listen to what I said, I just said, people are
SPEAKER_02: not performing at a high level, maybe they shouldn't be here. And you're asking me about more days off fire that person to say
SPEAKER_04: like, you obviously you don't get it. You didn't listen to anything I said, you're not right for this team at this time. Goodbye. I'm set a version of that. He's like, there's a lot of people
SPEAKER_00: here that may not be the right thing. Right. Freeburg, when we look at these trends, okay. Commerce
SPEAKER_02: seems like people are going back to shopping. But I want to give out two specific ones. Healthcare. It does seem like telemedicine was one of those things that got got accelerated during COVID. Do you think that's going to revert to the mean? Or do you think that, you know, doing doctors visits over, you know, FaceTime and text and all these consultations going to stick with us? And then what about work from home? Because that does not seem to be shifting all that much.
SPEAKER_01: Freeburg, the work from home is not shifting. Well, I mean, it's
SPEAKER_02: people are still staying home. And you know, Amazon just put a hold on six buildings where they said you can finish the outsides but let's not do the insides because we don't even know what we're going to do with these buildings and what hybrids going to look like. And Zuckerberg hasn't been able to get people to come back to the office and Apple seems to be getting people two or three days a week. So it seems like it's still been a struggle and downtown San Francisco is empty. So we're getting mixed. We're getting mixed results back now I would say is the best way to describe it. So work from home and telemedicine. What do you think freeburg?
SPEAKER_01: I mean, certainly the knowledge economy seems to prefer work from home. I mean, you're working on a computer and you don't need to interact with people. And you got kids, or family, you're inclined to stay home. So that seems to be a sticking point. You know, younger people probably have their own motivations, but there was a good stat on telehealth. I'm just trying to find it. And I think telehealth surged during COVID. And 36% of patients used a telehealth service in 2021. 420% increase over 2019. And so despite some reversion post COVID, post lockdowns, there's a significant sticking point that and I think 60% of telehealth patients are women. So there's particularly female services that are being rendered through telehealth at an increasing rate than pre COVID. And so there's a lot of stuff. I mean, look, we've all had to go sit in the doctor's office for two hours to get some prescription or get a doctor to give us some advice on something they don't need to physically check us out for. So you know, it certainly seems to be a acceleration in that department offices. What was the Amazon like was working on 15 warehouses they shut down as well, right? I mean, if you guys remember at the start of COVID, when you place something on Amazon, it was like a two week delay, because they didn't have enough capacity to fulfill the order volume. You know, you looked at Toby's chart, it's nearly a doubling in ecommerce volume in a week. When that happens, Amazon's, you know, plus or minus 5% supply chain has to revert to servicing twice as many customers, it's just not going to happen. So they overbuilt tried to get ahead of the curve. Remember, they hired like, you know, 100,000 workers. And you know, they they had to make a pipeline for quarters ahead to build warehouses. Now they're realizing that demand is not going to be there. And they're cutting back on 15 warehouses around the country and not going to build them. They were buying up so many warehouses at a couple of
SPEAKER_02: companies that were looking for warehouses in Los Angeles, Northern California, and Amazon just bought an option on every single warehouse they could find. And now they're putting them back on the market. So they they definitely went too heavy. And then everybody started betting on Peloton and Teladoc. And if you look at Teladoc, I mean, it's off 90% from the peak, I would show the I would show the Peloton chart as well. But that would just be gratuitous. Some of this stuff
SPEAKER_01: to note is like at the end of the day, whatever product is better for the consumer, they're going to pick, you know, what's the better way to buy shirts? You know, what's the better way to get well defined, defined better? Yeah, I mean, for the consumer, it's like, do you want to try them on? Or do you know what your size right? Are you buying a brand that you know, in a size, you know, you're gonna buy it online at this point? I mean, the one thing COVID did is it basically created a trial by fire. My parents never used DoorDash before COVID. So then they were forced to use DoorDash during COVID. Now they know what it's like. And so you know, there are now people that never trialed a lot of these services that have trialed them and are now making decisions based on that experience.
SPEAKER_00: But that's a beautiful example. So just use your parents parents, why do you think? Let's assume they did? Why do you think they mean reverted to now using DoorDash only in the same percentage as they would have otherwise X of a little bit of I think the quality of the food, the time to wait, the experience
SPEAKER_01: of going out to dinner, there's a lot of motivating factors that are different by different demos. And so whatever the consumer wants, they're going to pick, if I want to go have a dining experience in person with my friends, I'm going to go do that instead of sitting at home ordering DoorDash and having everyone come sit on the couch and eat dinner together. So I think that there's this, you know, this call it mean reversion, but we have seen call it a broader exposure. And we're really going to see the true market dynamics play out. I don't think everyone wants to buy shoes online. I don't think everyone wants to buy every piece of clothing online. I think people want to go to the store and try stuff on.
SPEAKER_00: I think it's that and I think that there's a lot of ancillary social benefits that come with a lot of these activities that you lose, if you just optimize for efficiency. So to your point, like, yeah, you can get a burrito but even going to Chipotle with your friend is more fun. Totally get out of the house. Get out of the house shooting the shit, you know? Yep. It's just it's the serendipity. Yeah, you may run into somebody that you nothing beats that. I will tell you, by
SPEAKER_01: the way, I do believe that there is a counter narrative to the idea of work from home and e commerce moving together. I think as people work from home, they want to go be in person for other activities more. Yes. The more you're working from home, the more you want to go to dinner with people or lunch to people. Yeah, you want to go shop in person, because you're stuck in the house all day, and you want to go do other stuff. And so if you're working in the office, you're going to do more e commerce. And if you're working at home, you're probably going to do less e commerce. So there's probably some net net balance. We saw both of them rise together during COVID. But now there's more of an equilibrium being reached. Well, I mean, if you don't, by the way, I think we're changing your behavior may stay home for three days straight.
SPEAKER_02: And all of a sudden, remember, whoa, and just remember 60% of
SPEAKER_01: the US population lives in urban areas where this is kind of an effective kind of conversation we're having. I think outside of that, it's a very different world. And so for 40% of Americans, this is not like the conversation that you know, in deeply suburban and rural areas. Do you guys know what shadow or
SPEAKER_00: ghost quitting is? You know, a ghost quitting is? Go. I saw it
SPEAKER_02: on just stop you stop working. I saw it on tik tok, but you're
SPEAKER_00: still getting paid. It's when you decide to quit mentally, but don't actually quit. And so you basically get out get off the corporate rat race by doing the bare minimum to not get fired at a company. Oh, like sacks during the science segment. And so I,
SPEAKER_00: you know, I think that there's all of these like invented things that people do, that they think they can get away with, which they generally can in a moment of prosperity, where in a moment of actually like buckling down when earnings matter, and profits matter, and investor pressure matters, all of this stuff, I think is going to mean revert. So this is sort of my my opinion on all of this, which is I think that most of these behaviors will eventually take over. But it's still many years away. And right now, we have to go through the process of just getting back to where we were meant to be in the first place. I think one area with significant distance equilibrium
SPEAKER_01: right now, I mean, to your point is productivity, I think it's very hard to assess and qualify productivity for knowledge workers in this environment. And this is for employed base, right? Remember, we talked about last time, like a large percentage of the US workforce has moved to more of an independent contractor, sole service provider kind of model for how they're interacting and working in the world. But I'm talking about knowledge workers in an employed environment. And it is becoming difficult for managers and for companies to assess, you know, the quality and the level of work being produced relative to its potential. It's not the same as it used to be when you'd be able to have in person monitoring and interaction. And so, you know, I saw a stat the other day, where
SPEAKER_01: it was like, most companies are asking workers to come home, most of the workers are to come to the office, most of the workers are saying no. And then most of the bosses don't know what to say in response. And they're still sitting on the sidelines like, okay, okay, don't come to work. Okay, fired. Yeah. And so there is this signal. And by the way, this this may yield a competitive advantage for businesses in the marketplace that figure out how to assess productivity and how to assess performance in their organization right now, in this rapidly shifted, totally different workforce than what we had a few years ago, because it's so easy to take four hours off in the afternoon, go to lunch, hang out, have beers, come back, get back online, get back on slack, do stuff. And so there's this real challenge, I think, for organizations and a real disequilibrium of productivity and output right now. I've had to do it. You
SPEAKER_00: guys looked at the Tiktoks of these people that are like, yes, in the life of like a Google engineer or day in the life, they work for 30 minutes, and then they're like, four hours
SPEAKER_03: at the gym. They don't work. They're literally smoking weed and playing video games. And everyone knows that. manager's know, talking about managers know it, senior VPS know it.
SPEAKER_01: The CEOs know it. It's this is my point. People just don't know how to manage it. It's a real I figured out it's a real disequilibrium in the workforce, because the way you manage it before is everyone would show up to work or they wouldn't. Someone's not in the office. They're not working, they get fired. Now what do you do? You know, we and no one wants to be monitored. No one wants to manage keystrokes through a friggin remote computer and figure out how much you're typing. Actually, it's interesting. You mentioned what
SPEAKER_02: you do JKL to your employees. No, no, no, no, no, there are
SPEAKER_02: people doing that call centers actually do that. So call teams, they have monitoring software, customer service and
SPEAKER_01: call centers, totally. Yeah, salespeople, you can totally track productivity. I'm talking about creators, producers, right? Like, yeah, I actually have come up with some
SPEAKER_02: strategies for this. So we have a lot of writers doing newsletters and stuff like that. And so we did was we created a block in the afternoon, we've been testing where three writers will get together in a pod and they work on a newsletter together. So instead of three writers writing three different newsletters, you have three writers collaborate on three different newsletters, they do one for two hours, one for two hours, one for 90 minutes, one for 90 minutes, and then a total of three people read the newsletters. Well, it's doing
SPEAKER_02: four or $5 million. I think it's hundreds of 1000s of people a day. But okay. But anyway, the point is, I didn't mention the name of the company's no plug in here. But by putting people into a zoom, yeah, no, no, you put people in a zoom or a huddle on slack, which is like an audio only. And then they have to deliver work to each other. It's kind of how developers work or sales teams work with leads. And then in like, like, like peer program, exactly. And then with and it also makes people less lonely, and it builds social fabric. So there are techniques that are emerging. The other one I've looked at is, I tell anybody, if you're doing any type of knowledge work, you need to create a notion or a coda page, depending on what you use, and update us on that and then send it to the group chat, you know, to the general channel, hey, I was working on the strategy for this. So when people say they're working on strategy, I have them document it. And I say share us share with us the Google Doc, and I use the Amazon six page, you know, philosophy of a right first culture. And now people have to write it down. So I've been teaching people how to write use Grammarly or Hemingway app to be better writers. And then what you can do is as a manager, you can just look at your notion or your coda and see the change log. And when I see people in a change log, and I see they made no commits, I'm like, what is this person doing? They said they did all the strategy stuff. Where is it? Where is the strategy stuff, write it down. So if you switch to a right first culture, and then train people how to write and become more confident writers, all that knowledge gets captured on your knowledge base. And you can actually see people getting done. It's not perfect. But I think it's actually intellectually better than being in office if you know how to do it. Because in an office, people are also performative. They're doing like bullshit meetings. They're pretending they're working they they're they're actually reading the news or you know, whatever. So sex, what are you doing to monitor your employees covertly and keep them productive? We don't need to monitor our employees that way because we're
SPEAKER_04: a small team of Yeah, they're highly motivated, you know, but look, it is an issue. I don't, I think we're work from home is beneficial is on the hiring side, right? It's so much easier to hire for a job. When your potential pool is anyone in the world, you're not just geographically limited to the city in which your office is. So that was the temptation for all these companies to go remote is it made hiring so much easier. But there's no question that it makes management much harder and scaling the company much harder and building culture much harder. And so there's some real trade offs there. I don't think companies totally wrap their heads around it. But look, in addition to productivity, there's one other aspect of this economy that I think is really broken. So the Chamber of Commerce says that 3.25 million fewer Americans are working today than they were in February 2020. So basically, if you go back to the month before COVID, we had over 3 million people working today. And we have over 3 million more Americans in jobs than we do today. And yet the unemployment rate is still on the 3% range. And the reason is because that if somebody drops out of the labor force and isn't looking for work, they don't get counted on the unemployment rate. So we do have a if you define unemployment as a large number of people who aren't working, we have a huge unemployment problem. But the problem is they're not they're not counted because they're supposedly not not looking for work. So I don't think this economy is going to be a problem. And I think that there's a lot of distortions that have been created by government.
SPEAKER_02: Job data is suspect is what you're saying, right? Like labor
SPEAKER_04: participation is down. The data is suspect the labels are suspect. I mean, like we talked about all of a sudden, we can't know what a recession is. And let's just bring up one other thing that just happened today. So Manchin cut a deal with Schumer to bring back to bring back a slimmed down version of $4 trillion like Biden won it 750 trillion. Okay. But what do they call it? Billy Billy? Right. Okay. So you know, thankfully, it's it's a slimmed down bill. But what are they calling this? They're all of a sudden calling it the inflation reduction act of 2022. What was like, Are you kidding? This doesn't pass. Why? Why are they trolling us with the names of
SPEAKER_02: these bills? The bills are never what's in the bill? Why don't they just call it the green energy bill and the screw private equity bill? I mean, that's basically what it is. Yeah, well, inflation reduction sells to everyone, right? But
SPEAKER_01: just the media, the media is not holding the administration
SPEAKER_04: accountable. If we had if we had an honest media, they the headline today would be not a recession begins left the station sacks. We can only get it on this pod or other
SPEAKER_02: podcasts. Yeah. What did President Manchin get for this deal? He agreed to it. What did President Manchin get? Well, he secured some bag, right? Did you see what I got the group shot?
SPEAKER_03: There are gonna be he agreed. He's like, I got a pipeline. There's gonna be huge handouts and pork for the state of West
SPEAKER_04: Virginia. There's no question about it. I mean, if you look at this bill, okay, the I mean, we just, we should just look at what's in it. And yeah, more and more is gonna come out over the next few weeks, right? It's only one day. So we're gonna learn a lot more about what's in this. But the largest Republicans feel like can you explain the dynamic as well
SPEAKER_02: after you get through this, of why the Republicans felt like now that he double crossed them because the democrats felt double crossed by managed President Manchin. And now the Republicans are feeling double crossed by President Manchin.
SPEAKER_04: Well, I don't know that you can use the word double cross because he's not a republican and he had no obligation. But look, there's no question that mansion went back on what he said just a few weeks ago, he was saying that build back better was unacceptable because it would contribute to the inflation problem. In fact, he's reasonable since last summer, he's been saying that we have a growing inflation problem, we can't contribute to it with a lot more government spending. Now, he's agreed to a $750 750 billion, of of which something like 450 is new spending. So yeah, it's it's, it's a smaller package than we had before. But if your concern was inflation a few weeks ago, you can't justify this. You certainly can't call it an inflation reduction act. I mean, that's just patently dishonest. Well, how do they come up with it? Being inflation reduction?
SPEAKER_02: Is it because the healthcare stuff is theoretically going to help consumers have more money to spend? Because I think it's a 10. It's a tenuous argument. But if you want to if you want
SPEAKER_04: to make the argument, there's some cap on what seniors pay for prescription drugs. And then there are subsidies for people are in the market for an electric vehicle. However, those are small adjustments. Those are small rebates to a small segment of the population. I don't think you can argue in good faith that this bill will reduce CPI. Just, you know, that's just not a plausible argument. And the vast majority of the bill, like you said, are subsidies for clean energy, which are basically handouts to special interest in the donor class and the Democratic Party. Just to itemize some of these things. So the largest single outlay 60 billion is for quote, environmental justice initiatives to address the unequal effects of pollution on low income communities and communities of color. This includes 3 billion to invest in community led projects and disadvantaged communities and another 3 billion to support neighborhood equity, safety and affordable transportation access. Another 30 billion shovels estates in the form of grant and loan programs for states electric utilities to advance the green energy transition 30 billion for additional production tax credits to accelerate domestic manufacturing of solar panels, wind turbines, batteries and critical minerals processing. That's basically going to companies right 20 billion in loans to build new clean vehicle manufacturing facilities across the US and 2 billion to revamp existing auto plants to make clean vehicles 20 billion for the agricultural sector to quote curb emissions 3 billion to reduce air pollution at ports 10 billion investment tax credit to manufacturing facilities for things like electric vehicles, wind turbines, and solar panels that seems redundant the $30 billion outlay I just mentioned, but it's another giveaway to Democratic donors. And wouldn't that be good for us? Chamath wouldn't that spending be good for energy and
SPEAKER_02: dependence in addition to climate because we've been talking about being energy independent if we have more EVs more batteries, more solar, that's a good thing, right? We want to be energy independent. So this seems like we get two wins, or possibly three, one, we get economic activity to we reduce our dependence on foreign oil. And three, we stop burning a hole in the ozone and increasing the temperature of the planet seems like three good things. We have to I think we have to see the forest in the trees.
SPEAKER_00: And there's a, there's one good part of this bill. And then there's the kind of more ugly reality that it avoids the ugly reality is unfortunately, or fortunately, or maybe without taking emotion of it. We are dependent on fossil fuels for a very long time. It is a necessary bridge fuel. And so we need to if we're talking about energy independence, it can't happen without us, frankly, drilling more, and subsidizing the capital incentives of private companies to go and do this exploration work, which they have stopped Jason. And the reason they've stopped is that they don't trust that these oil prices will stay this high. And so they don't want to make these outlays and investments for the next five to 10 years because they're worried that it's going to be a rug pull, which did happen to them in the back half of the year. And so they're worried that it's going to happen in the back half of last decade and the early parts of this decade. So they're like once bitten, twice shy, they're not they're not going to touch
SPEAKER_02: this. So you're saying oil companies that would do some exploration, it would cost them whatever amount $2 to get the gasoline out to get the gasoline out of the earth and then process it, but they're afraid it's going to be negative. They're not gonna be able to sell that gasoline. I think I
SPEAKER_00: think they're afraid that you know, the United States government may impinge on their ability to actually process it, but they're afraid that there will be tariffs and costs and taxes that they don't. They'll be upside down forecast, they'll be upside down. So they just don't want to be in right now. And you saw this. I don't know if you guys saw but like Shell and Exxon and these guys are printing enormous record profits. So their incentives to change the status quo right now
SPEAKER_02: is zero. They want less supply because then they can raise
SPEAKER_00: prices, they have the perfect situation right now, which is it's an incredibly energy intensive world we live in. And we don't have nearly enough energy to do the work that we're doing. And by the way, and you saw this this week already where, you know, Putin cut Nord Stream by another 50%. It was already running at 40% capacity, he he cut it down to 20%. It's only getting worse. So I don't know, I mean, I think this bill could be good. I haven't looked at the specifics to give you a very well, the specifics aren't even out. I did see the EV
SPEAKER_02: credits, Friedberg and I thought that these were particularly well directed 7500 bucks off of a new car, but you have to be in the 150k salary or less on your taxes of rich people can't get these. And it can only be for an $80,000 new car, a $50,000 or $25,000 used. And so they did seem to be started pretty well. And I do know that those incentives did work in the early days of Tesla, because when you went to the website, you would look at the price and you know, this would be 10% off of a new car. And they did drive sales and it was pretty significant. What are your thoughts on the EV tax credits? That's something that's a wise thing. And then what do you think overall about spending a couple $100 billion on reducing emissions and becoming more energy independent at the same time? It seems like a laudable strategy to you? Nope, seems like a total waste
SPEAKER_01: of money. Okay, unpack it, please. So the EV tax credit is just giving away money to EV car manufacturers, there's not enough demand, the prices are low enough, there's enough consumer interest, there's enough consumer intent. I don't think you need to put this money out there distorts a market that's already functioning well. And this goes back to my point about the role of, you know, government and how we create, you know, create incentives or spend money. This is not a place we need to be spending money because there isn't an absolute need. There's no data that indicates that this will accelerate a transition to a carbon free economy or that it's even needed. It really is a point of view that people hold and they believe that EVs are good, they're good for climate change, we should accelerate it, therefore we should spend money on it without any accountability or proof that these tax credits will actually motivate a market to move faster or quicker than it is already moving. And so it is just spending taxpayer dollars that could theoretically not be spent, or be spent in a more effective way to improve the lives of people broadly in this period. So yeah, I don't, I don't fully agree with that. I haven't seen any data that tells me this makes sense.
SPEAKER_02: Anecdotally, I think $7,500 off of $75,000 EV is attractive. The $7,000 GM and others have great low priced EVs and there's
SPEAKER_01: a ton of market demand and they can't keep up with production. And you know, giving people $7,500 off a car that manufacturers are still struggling to keep up with making because there's so much demand already. You don't need to do it. It is so much cheaper to drive an electric vehicle than you do to buy a car by plugging this thing in and spending money on gas that people already want to buy these things they pay for themselves super fast. Every consumer wants to save money on transportation and you will save money by buying an electric vehicle. So you will already buy an electric vehicle. You don't need government money to get you
SPEAKER_00: to buy an electric vehicle. To freeberg's point, there was a lot of analysis that's been done on consumer adoption patterns. And typically for a new good or service, the tipping point is around 5% mass market goes from early adopters to the mass market and EVs just cross 5%. So to his point, the historical data would tell you that we're now past the critical point where it's no longer questionable and now it's just going to happen. So it's not early adopters. We're getting to the mass
SPEAKER_02: now it's mass market. I mean, I'll tell you like the best the
SPEAKER_00: best thing about EV adoption, but for me for having an EV is never having to go to the gas station. Amazing. Amazing. Yeah.
SPEAKER_02: I just just that one thing is I'll just give you guys
SPEAKER_01: currently it's about 34.6 kilowatt hours per 100 miles. Okay, I'll just let's just do some math together. Let's say a kilowatt hour in the US cost about 10 cents. Okay, so that's about $3.50 to drive 100 miles in an electric car. That's a lot cheaper than paying $15 for gas to drive the same distance in a gas car. You don't need the tax credit to get people to buy these things. These cars are financeable. There's a very liquid, very active lending market. You get paid back on these cars within a few months. If you're better, would you direct if you were going to direct some stimulus to I would
SPEAKER_02: not say anything right now. We don't we just talked about how
SPEAKER_01: we don't need to stimulate the economy. I would not know where the economy I'm talking about to you believe global warming is
SPEAKER_02: happening. Friedberg Yes. Look, you want my point of view on
SPEAKER_01: climate change and industry. I think humans are on a driven, naturally market driven path to resolving carbon output in our industrial systems. And I don't think that government intervention with tax credits and specific consumer products is actually going to accelerate or resolve, you know, these changes that are needed. We need to not change consumer behavior. Consumers always want to have cheaper, faster, better. What we need, you know, at the end of the day, what we need to do is change the way that we're producing and making things, because that's ultimately what's going to drive this transition. And guess what consumers are demanding things that are, you know, more efficient that are more effective and efficiency ultimately resolves to less carbon ultimately resolves to less land, less energy, and industry has always resolved to greater efficiency, natural market forces improve the efficiency of every industrial system. So stimulus not necessary. Mankind has ever created and I think it is a matter of time and a matter of natural evolution that we will resolve all of the factors that are driving climate change from animal agriculture to transportation systems to energy systems. These are all going to get completely rewritten. Will we do it in time though? We absolutely will. And at the end of the day, we can pull carbon out of the atmosphere and resolve it into products. We have tools to do that as well. So I am an eternal optimist. But in this particular case, I think that this century, much of what we're throwing our hands about, and you remember at the beginning of the 20th century, we thought we were going to run out of food. Then suddenly we invented the Haber-Bosch process and created fertilizer out of air. It was an incredible, incredible invention that saved mankind. We have had time and time again in the history of humanity, these thoughts that we're in an existential crisis. We thought we would have peak oil. And we have had these
SPEAKER_02: and we have had these points of view that we're in an
SPEAKER_01: existential crisis and humanity is about to end. And every single time we figured out a way out of it. And we didn't figure out a way out of it because the government came along and said, here's a tax credit. And we've gotten sick and we've gotten drunk on government spending. And we think that it is the solution to every problem we have as a species. You know what the biggest solution to our problems is? Our ingenuity. And then they'll let the markets figure it out. Consumers are smart. Businesses are smart. They will figure out ways to resolve these solutions. They don't need to have these handouts. And I think that that's a really important point that we've kind of missed. And I'll say, we were talking earlier about the economy. This stimulus, we've been giving ourselves caffeine since 2008 when the Fed started to build up this balance sheet. And we got used to the idea. Remember before this, it was like, oh my God, multi-million dollar bills. And then it became multi-billion dollar bills. Then we had an $800 billion payout in 2008. And suddenly it was the multiple of $100 billion and the multiple of a trillion. And this expectation now, we've kind of reset the clock and everything now is in what multiple of $100 billion or what multiple of trillion we're going to spend on stuff. And no one's even batting an eye at the sides of these, the bills anymore. Freeburg, what is a bigger existential threat to the
SPEAKER_02: United States? Is it climate or is it overspending by our government? I think it's over. I think the biggest threat is
SPEAKER_01: productivity. I think that as a society, we've gotten to the point that we are so well off that we have so many things that we don't realize we didn't have 50 years ago. And you know, read Pinkner's book on enlightenment now and just go through those 200 charts he puts in there. It will blow your mind. And then if you actually sit down and think about it and have a broader perspective on where we sit in this country today versus where we were 100 years, 50 years, even 30 years ago, you will say, Oh my God, we live in an absolute luxurious state in this country. Golden era. And it is a condition that unfortunately reaps, you know, a decline in productivity,
SPEAKER_01: because at that point, we're entitled to some degree, some people are entitled. There are many people in this country that are still very hungry. There are many people in this country that still want to progress. And frankly, I think a lot of the lax behavior from government entities actually holds us back from accelerating our productivity out because it gives people many incentives and many reasons and industry many incentives and many reasons to not solve problems. And I think that we solve problems and we're left to our own. There was an article I posted, Nick, you can put it in
SPEAKER_00: the chat about the Congo, and that they've decided to auction a bunch of land to oil companies. And I think before they tried to heed sort of, you know, the West's directives, and they said, Okay, well, let's build a land bank, and we'll put a bunch of money in. And so then the, you know, people in the Congo will have money for things. And you won't have to sell off the oil rights. And only 10s of millions of dollars were paid. And then the Congolese were like, they threw up their hand, I'll just read the quote, because I think it's interesting. Congo's sole goal for the auction, said the government official is to earn enough revenue to help the struggling nation finance programs to reduce poverty and generate badly needed economic growth. That is our priority, he said. Our priority is not to save the planet. And it's quite a stark statement when you read it. But the reality is, in one generation, what will happen is they will feed the world's fuel fuels that will generate a lot of revenue. Hopefully, it doesn't get pilfered. And so it gets invested in health care and education. And within a generation, this country could be in a completely different situation, allowing the productivity of that entire population of that country to do what they think is right. So I'm generally of the belief that that that freeburg's right on this. Do you think that we
SPEAKER_02: should subsidize EVs to increase the percentage and then also solar? Just give me those two, Chamath. Solar and EVs, do you think they should be subsidized or not in the United States?
SPEAKER_00: It depends on how and at what point of the market cycle. The government's job is to create economic incentives that tip the balance of power towards investment. So if you are sitting here 15 years ago, the price of solar panels was sky high. It was incomprehensible that we could make solar equivalent to any other form of energy. The only way that we were able to close the gap was through government subsidies. But what that did was allow a bunch of companies to build businesses, to make revenues, and then also to make profits that then the public markets valued. Those public markets then put pressure on those companies to take those profits to become more efficient, to make the panels cheaper, and 15 years later, we're now at parity. That was a really great example of the government stepping in to smooth out an imbalance in the investment incentive of the private markets. That is where they are exceptional. In any market, they should be able to do this. But I think what freeburg is saying is when then they do do it successfully and a market starts to germinate on its own, where supply and demand happens naturally between the private markets, the worst thing a government can do is step in, because it completely perturbs what true supply or true demand is. And that is what causes all of this crazy stuff that we deal with. Jake, how fast forward assume that there's a $7,500 tax credit
SPEAKER_01: for EVs that artificially makes EVs cheaper and then a better technology than EVs comes along. Let's assume it's some nuclear fusion, cold fusion, Mr. Fusion car, like from Back to the Future. And that car inevitably has to fight against the cheaper car, because the cheaper car is subsidized by the government. We see this in a lot of markets that already exist in food, in energy, in infrastructure, where government subsidies that are embedded in the operating model of that industry, and that industry becomes kind of reliant and dependent on it, totally distorts the ability for the market to naturally transition to a more productive, more efficient state. And that more productive, more efficient state ultimately is cheaper, better for consumers, and better for the planet. And we hold ourselves back when we insert government dollars into well-functioning markets. I do think the government has an important role, as I mentioned last time, in pure science, in seeding new markets, in seeding these opportunities, in identifying paths that are quantum leap efficiency improvements in production systems, in industrial systems, in ways of living. Once those have been identified, those breakthroughs have been kind of catalyzed, boom, let the market take off, because it's going to take off. But we shouldn't be in this business. So you believe EVs and solar are there already?
SPEAKER_01: Absolutely. They're cheaper. And so let me point, let me just give you one point of reference. Let's use Chamoff's Congolese example. Let's assume that there's someone that lives in the Congo. And I said to this person, who's probably subsisting on less than $3,000 a year of income, and they're probably living, you know, day to day on finding food. And you said to this person, in the United States, they have these cars, they're called electric cars, and they're cheaper than gas cars. And they're, you make more money, or you save money by buying one of these cars, and they're cheaper now. And we're giving people $7,500 to buy one. This person who's making three grand a year would say, what? It is a state of luxury that allows us to do this. And frankly, I think it's, it's a state of excess abundance. And that's what I'm most worried about. Sax, what are your thoughts on the government giving these
SPEAKER_02: type of subsidies to accelerate solar and EVs? The whole bill seems anachronistic. You know, first
SPEAKER_04: of all, it's raising taxes by 739 billion at a time when we're entering a recession. I don't know any economist who thinks that tax increases help the economy. We just talked about how the economy is in a really tenuous position. So this is not the right medicine right now. Then you've got the fact that the vast majority of the spending this bill goes to these, you know, energy subsidies, which are just, they're not going to help the average person. There's very little money in this bill that helps the average working class person. These are basically handouts. There's basically pork barrel spending for Democratic Party donors and special interests. And like Freeburg, I think, just articulated very well, they're not necessary right now. The, what's driving demand for electric vehicles and solar panels and so on, is first of all, the prices keep getting better and better. And second, they keep moving down the cost curve as technology and innovation gets better, these prices get cheaper. That's what's fundamentally driving the demand. We don't need the government now. We need to accelerate it in an anachronistic way to shovel out all this money at a time we can't afford it. And look, I'm glad that 300 billion of the bill is supposedly going to deficit reduction. I hope those numbers actually materialize, but we're still 30 trillion in debt. And now that interest rates have gone from basically zero to around 3%. The imputed debt service on our debts basically gone has increased by almost a trillion dollars. That is a lot of money, just like
SPEAKER_02: somebody who had a variable mortgage, the United States is on a variable mortgage with our debt. And so when interest rates go up, we're gonna have to pay interest rates stay at this,
SPEAKER_04: call it 3% level, which is roughly where the 10 year t bills been, you know, bouncing around at. That is a lot of debt service, a trillion dollars a year of debt service. So I think we're probably entering an era, an overall era of austerity that lasts more than just this year or even this presidency. And I think we'll look back at all this wasteful spending this last 10, 20 trillion of spending as money we didn't need to spend that we've been paying for for a long time. So to be shoveling out another 300 billion plus of these programs and again, once again, going to corporations and special interests, not to the average, you know, person who needs it. It's just so irresponsible. I have a question for Friedberg. One of your exceptions there
SPEAKER_00: was investments in science. You want to talk about your opinion on the quality of the grant process at the NIH and whether we are doing the real work necessary to get the right things funded? Yeah, I mean, I think it's a good transition to what happened
SPEAKER_01: this week, which was that there was a major potential fraud uncovered in Alzheimer's research, which has led to over a billion and a half dollars of funding and grants being given out to follow on Alzheimer's research programs in the years that followed this initial paper. So, you know, in 2006, there was a paper published in the journal Nature about amyloid beta proteins that impaired memory and brains, which then became kind of the leading theory for the cause and the driver of Alzheimer's disease. And much of the research and funding that followed from there, which is now up to several billion dollars in total funding in private and public institutions. Last year alone, the NIH funded 287 million dollars in research into amyloid beta. And it turns out that the initial paper was shown to be fraudulent. And so, just recently, the journal Science published in detail an analysis of the photos of the Western blot measurements, the protein recognition images that the scientists used in this initial paper were forged, and that many papers of his were then forged years later. And this paper is one of the most cited papers in Alzheimer's research, and much of the work that's been done on Alzheimer's came out of this. And if you guys remember last year, we talked about that Biogen drug. That Biogen drug is meant to stop amyloid beta plaque. And, you know, the projection is that Alzheimer's drug. And remember, there was a panel of scientists that looked at the data for that drug that Biogen got approval for from the FDA. And they all said this does not show conclusively in any way that it improves Alzheimer's. And the FDA still approved the drug because so much of the NIH funding went into the research for amyloid beta. And so the assumption has always been this is the cause of Alzheimer's. This is the way to resolve it. And everyone gets so strongly held in that core belief, and there's so much money behind it, that we can't turn away and say maybe we're wrong. And this is the problem when science meets money. Once you go from funding something, and then suddenly a whole bunch more money pours into it, everyone's going to look bad, and everything's going to fall apart and everyone fears that the system fails. If you realize that something you did and said was so totally wrong. We can even argue this is what happened recently with COVID, the masks, the vaccines, all of the statements that were made that you have to keep doubling down. Every system has bad actors, you know, people
SPEAKER_02: plagiarize, fraud, whatever. Is this like a systematic thing? And doesn't science protect against this because people then do double blind studies and try to replicate studies? Two things. Because like Jason Blair eventually got caught, right, at the New York Times. It was only a matter of time before somebody said like, his description of my back porch was not accurate. I never left his journal. Let's say that you're
SPEAKER_01: a smart up and coming scientist. Your job is to is to publish research that gets attention, and that you can then go raise grants from the NIH and others from on. So you want to get some good papers out, you want to get attention, and then you want to forward the research that's already being done. It is to no one's incentive to go out and try and retest something that someone's already published on, even though that's what you're supposed to do in science. There's no motivation. There's no dollars to do this. It's it's a disincentive to your career. It's a disincentive to your ability as a scientist to source funding and to source grants to go back and retest assumptions that are already strongly held beliefs in the industry. I'll give you another strong example that just came out two weeks ago. You know, you guys heard of SSRI antidepressant drugs, right? 37 million Americans are on these drugs. The market is projected to be at about 25 billion in the next few years. That's how much Americans are spending on these on these antidepressant drugs. Half a sex, but yes, go on. Right. So
SPEAKER_01: there was a paper published in Nature a few weeks ago, and the Nature journal pulled all the research and all the data from 17 other studies that was across several hundred thousand patients. And their conclusion was that there is effectively no proof that these SSRI drugs have an effect on depression, have a positive effect on depression. That, you know, serotonin and the idea that, you know, serotonin uptake should kind of have a driving effect on depression. And this has been the assumption that's been held now for, you know, for many years. I mean, you know, I think the original paper on this was published probably north of 20 years ago. But the industry is so big, right? The drug companies are making 20, 25 billion dollars a year on this drug on these drugs. And scientists are incentivized to further that research that supports that research. And so they can go out and get NIH grants because it's already an accepted proven belief that this is there a solution to this, like for every dollar
SPEAKER_02: that's spent on primary, you know, $1 needs to be sent on double blind testing it and making sure that it's accurate should there because we have this issue in journalism, right? Everybody is a content creator reblogger and opinion journalist. But there's very few now investigative journalists left. The actual problem is the pure is peer review systems
SPEAKER_00: entirely in my opinion, like the the problem with this study is that this was done by an up and coming researcher in 2006 at the University of Minnesota, under a researcher who is well known. And so there was zero incentive, as freeberg said, to really push back when well credentialed scientists tried to find this amyloid beta star 56. They couldn't find it. And, you know, lo and behold, those articles don't get published because they don't get accepted. Why? Because it unravels the entire game that folks will play. So, you know, if you're a well educated PhD with postdoc in the right places, supporting other people, it's just the loop that goes on forever. The article goes on to talk about how that person who wrote that initial article, eventually got this very prestigious multiyear grant from the NIH by a person who was his reviewer who worked on the 2006 paper with him. I mean, these are some pretty blatant conflicts of interest. But the reason they don't get uncovered is like, who's who's going to step in and all of a sudden become the let me strike an analogy here. You know,
SPEAKER_01: there's a seedling of fraud here, obviously, some guy took some friggin photos and photoshopped them and doctored him or whatever. But we then tell ourselves stories. And those stories get us access to money, which allows us to pursue more science, which is meant to forward the market. And then eventually the market gets forwarded so much and you spend a billion and a half dollars and it turns out the whole thing doesn't work. Just like stock markets. It starts out as a voting machine in the beginning and it's a weighing machine over time. The same is true in science, you will have a voting machine in the beginning where everyone has some belief, some theory, some hypothesis, and they all want to believe it. And they forward it and they fund it, they fund it. But ultimately, if it's not true, and it doesn't actually resolve in real world change, the market will collapse, the stock will collapse. And that's what just happened with amyloid beta in Alzheimer's to a large degree. There's a billion and a half dollar market cap, you can think about it or billion and a half dollars of funding that's gone into this product idea. That's pretty well known. There was a billion and a half of NIH funding over time. This is just the NIH money.
SPEAKER_00: Now what I'm saying is the NIH budget per year for Alzheimer's and dementia is 1.9 billion. Yeah, yeah. And half of it, if
SPEAKER_00: you look at the tags, if you just search the tags, half the money has gone into Alzheimer's disease, amyloid beta. So the point is, you could orient the terms you used and the way in which you wrote your grants to disproportionately affect the likelihood of getting money separately, there's a whole body of researchers that have felt for a very long time, that specific forms of infection viruses, Lyme disease could actually be a precursor to Alzheimer's. And it has been poorly researched because the funding dollars weren't there. So there's a lot of other theory, mitochondrial
SPEAKER_01: dysfunction. Yeah, yeah. So freeburg, when we look at this,
SPEAKER_02: a bad actor, committing fraud, can send the entire deployment of capital in science on a multi billion dollar of the
SPEAKER_00: human race. Come on, like it's not just about like we didn't get the dollars in it's if you don't take the path, the drug doesn't get discovered. That's a really big deal. And now the
SPEAKER_01: just and now the drug is in the market, Biogen gets approval, and people start taking it and we're seeing the data doesn't work. And no one wants to use it. So the market has collapsed. And you kind of go back to the origin. It's like the market collapses. Ultimately, the weighing machine happens, because the science doesn't work. It's not there. And there was no incentive. No one got paid along the way. Imagine if there was a bounty program to go and disprove papers. So you know, imagine if there was a system that's what I was talking about what is the safeguard and we do have that in
SPEAKER_02: public markets. It's called shorting. No, there is short stocks. It's called pub peer. The problem is if you go to pub
SPEAKER_00: peer and all of a sudden put your name out there. Yeah, as someone calling it out your professional career inside a research institution is finished, right? If your job
SPEAKER_01: is to go and heroes know if your job is to dis other people stuff you don't you don't forward your career, right? I mean, there's a it's a those people should be heroes. There's
SPEAKER_02: those are like bug bounty programs. They have to look at it like bug bounty programs in tech, or shorting stocks in
SPEAKER_00: problem is that this community is extremely small, highly specialized, and their impacts are enormous on all of society. But you can't replace them with somebody else very easily because it takes an enormous amount of expertise. Like if you read that science article, the amount of work science took six months of due diligence before they even had the courage to put this thing out there. They had all kinds of different teams trying to prove what this guy had found before they were willing to put ink to this thing. Yeah, when things are
SPEAKER_01: starting to feel like they're moving to market or getting to market, the more money starts to flow in. Another good example of this is Zimurgin and Genco. Okay, so in the past week, Zimurgin was acquired for $300 million, it was announced that they're going to be acquired by Genco buyer works, both of whom are public companies. Genco went public, and I think a $20 billion market cap as a SPAC a few months ago, Zimurgin went public at, you know, 4 billion or whatever they went public at. Zimurgin being acquired for $300 million comes off of them having raised a total of one and a half billion dollars of capital from many investors, including SoftBank, and in their IPO since they were founded in 2013. Both of these businesses do exactly the same thing or similar things, which is pursue the industrialization of synthetic biology. Synthetic biology has been talked about, you know, or pursued for 20 years in an industrial setting, the kind of Gen one of synthetic bio companies was Amaris, Jeevo, Keor, Solizime, these companies were all engineering cells, you change the genome or the DNA of the cells, you get those cells to make a product you want them to make, you put them in what's called a bioreactor, and they make the product, you can make bioplastics, you can make animal proteins, you can make fuel and so these, and you put sugar water in the tank, so you're programming the organism to make stuff for you. And there's a lot of technical challenges, right? How do you change the genome? How do you get it to be more productive? What are the environmental conditions of the bioreactor? How do you scale this thing up and so on? And so many of them had early stage proof points and then extrapolated out that this is going to work at scale. So all the Gen one companies largely failed Jeevo, Keor, Solizime, they were all trying to compete with the price of oil, and they lost. And so they could never actually, the science worked in the lab, but getting it to a big scale, there was a million things that went that suddenly were kind of proven or disproven along the way. And they all kind of pivoted and became cosmetics companies and kind of did high end food and other stuff. And then Ginkgo and Zymogen were kind of Gen two, they were like, we're going to reduce the cost, improve the timescale of the synthetic biology programs. And they started using industrial robots and arms. Zymogen made a bunch of kind of strategic errors where they were like, we're going to make the product and design the organisms. So it took a lot more money, a lot more time. And as they kind of stepped up and tried to scale up, turns out a lot of the things that they believe to be true weren't quite true. But the CEO did a great job selling the story. Josh Hoffman, he went out for years and he told everyone, you know, we're going to kind of create this factory and we're going to make everything in the world using biology, it's going to transform the world. You've talked about this, is it a true story? Yeah. And so look, there's so much of the fundamentals are true. But the industrialization, the amount of capital these guys raised and what they promised they would deliver on when turned out not to quite beat the economics, not to quite get there. And the market decisions they made about what products to go after, how quickly to scale up, building their own facilities, there was just a lot of strategic errors. And I think the storytelling got ahead of where the business was. You know, we saw this a lot in other businesses in the past year, as we've talked about crypto and other markets. But these were really key examples, because the science is so compelling. And the narrative is so compelling. And if it's right, and if it works, it changes the world. And I think the same was true of amyloid beta and Alzheimer's, everyone wanted it to be true. SSRIs, everyone wants there to be a cure for depression that you take a pill, and you solve depression, everyone wants to, you know, have a drug that you take and it ends Alzheimer's, everyone wants to print all the world's products in a factory using cells. But there's a lot more to it. And as you kind of get through the nuanced 10 to 20 year cycle of science, moves to technology moves to industry, those stages are wrought with errors and issues, and ultimately may not actually yield what we expected it to yield. And those stories start to fall apart. And that's what happened with dimerogen. They're getting bought back on this freeburg in 20 years and say, Hey, yeah, these things
SPEAKER_02: were total train wrecks, they flipped the car, but it was a step in the right direction. And yeah, that was 100% capital, but you know, it's something will be built on top of it, just like mainframes or mini computers to smartphones, the first system of calling synthetic biology, a recombinant
SPEAKER_01: DNA, where we took DNA from one organism, and we put it in a microbe to make stuff for us was Genentech in 1978. Prior to 1978, the way we got insulin is we actually processed pig parts. So it would take like, you know, hundreds of kilograms of pig parts to make just a few grams of insulin. And Genentech took the DNA for human insulin, and they put it in a bacterial cell, and they made human insulin in a bioreactor. And that really kind of ushered in this this era of, you know, industrial synthetic biology that all of these companies kind of followed suit to do in different markets. But remember, biologics, the entire pharma industry and biologic drugs is all made this way. We take the the DNA to code for certain antibodies or proteins, we put it in microbes, and those microbes make those products for us. That biologics drug industry is a 350 billion dollar annual revenue industry today. And so it works. It's just a matter of when and what the right products are industrial enzymes, $25 billion annual revenue today. So there are markets that are working, it is working, but this whole like, we're going to change the world overnight, isn't really, you know, true. And so these stories catch up to us. And I think we've seen this where I call it science meets money. You know, money usually wins. And the science isn't quite there yet. And so we've seen it in kind of Genentech. The Genentech story
SPEAKER_02: is amazing. I mean, Tom Perkins from Kleiner Perkins fame, like will that company into being and they Yeah, it's pretty amazing how in the old days of venture capital, they basically built these companies like you're doing today for your work in, like a production board model. He basically incubated Genentech and then surprised the world with like, hey, we have synthetic insulin here. It was like, yeah, look, I mean, the potential is extraordinary Silicon Valley, yeah, there
SPEAKER_01: isn't a single material or food, or a fuel or product that we ultimately won't be able to make using synthetic biology. It's just a matter of how do we get from here to there. And the storytelling kind of gets you a bunch of money and then you get ahead of your skis and then boom, you fall down. Same happened in Alzheimer's. Same happened with SSRIs. And I think we'll see this happen a lot. But like when science gets exciting, a lot of money gets behind it. And sometimes it can kind of, you know, get ahead of its skis and fall down. But and
SPEAKER_02: it will. It is our sex. How excited are you for this revolution? Instead of biology,
SPEAKER_01: it's actually an investor with us in one of our companies in synthetic biology. He may not remember, but he's got some money. I won't name the company, but he's got some money. Oh, yeah. How's that doing? Yeah.
SPEAKER_03: Did you fall asleep in the board meeting? No, we're not on the
SPEAKER_04: board. We're we're passive. We didn't. It's not the one we brought to you, Freeburg. Yeah. Well, I know three people brought
SPEAKER_01: but I've known him since they were small. But yeah, I know
SPEAKER_04: there was a deal that came in that looked interesting, but it was a little bit out of our area. So we went to Freeburg with it. It is an interesting business because these guys
SPEAKER_01: provide a tooling service to other symbiocompanies. And so it's a recurring. Yeah, it's a PICs and shovels. Exactly. Yeah. Yeah, it was very sass like in that regard, though, booshka
SPEAKER_00: doll of nerds. Unbelievable. So we've broken sacks is awake.
SPEAKER_02: Okay, so we're talking about an area where you know, I'm not
SPEAKER_04: going to be able to contribute a lot to the discussion of SSRIs. I'm not going to pretend to know. I'm just a consumer. I'm
SPEAKER_00: not.
SPEAKER_03: Sax. These SSRIs helps you in any way with your depression about Biden. No. Okay. The story that I think kind of fits with
SPEAKER_04: everything we're talking about this week, even when Freeburg is in, yeah, is there was more there were more stories this week about this cynical ploy by the Democratic Party to fund the candidates. No, hold on. We talked a little bit about this last week, but they spent you should be really opposed to
SPEAKER_04: this J Cal. I yeah, listen, as an independent, I think it's
SPEAKER_02: gross. I am an independent. You're an independent only
SPEAKER_04: votes for Democrats. So not true. Not true. I'm gonna vote
SPEAKER_02: for Liz Cheney for president. I think Liz Cheney or Bezos. Those are my two. Have you ever voted for a Republican
SPEAKER_01: candidate for any office ever? I have. You have really? Yeah.
SPEAKER_02: Yeah. People I am a moderate. What I don't feel like when I voted for, um, I vote for you. Let's say Reagan. We must say
SPEAKER_04: wrong. We were too young. He was a Democrat. It's been a long
SPEAKER_02: life. But I did. I did vote. I remember for Republican and when I lived in New York, David Sachs has a look on his face
SPEAKER_00: that says finish your stupid banter so I can go on my model. Oh, we go go back. Hold on Henry bell caster in three, two, go.
SPEAKER_04: No, I don't really have a monologue on it. But I just think that this is this is a pretty amazing story that you've got Democrats spending almost $50 million this primary season boosting maga candidates. Yes. At the expense of moderate GOP candidates. Perfect. So let's get the crazies in there. Yeah, I
SPEAKER_04: mean, right. And that's the theory if you get us crazy.
SPEAKER_02: But in a crazy in a year in which you get a red wave, it's
SPEAKER_04: really dangerous. And it totally undermines what the Democrats are saying in their January 6 completely. It's completely
SPEAKER_02: cynical. I agree. You can't you can't on the one hand backing Trump. You can't on the one hand say that we're facing an
SPEAKER_04: unprecedented existential crisis for our democracy. And on the other hand, be giving money to the very same people you're saying are the threat to democracy. It makes no sense. It just shows that both sides are completely cynical backing
SPEAKER_02: anything that is talking about your no no no no no you're what
SPEAKER_04: you're saying you're trying to both you're trying to both sides it you're trying to both sides. No, but the difference here is that there is this is I'd say partisan political gamesmanship. But the point is you can't on the one hand be engaging in ordinary partisan gamesmanship while you're saying that democracy faces an unprecedented threat. That's the disconnect. No, no, I get it. You're trying to get to cute.
SPEAKER_02: What do you think about Liz Cheney? I'm curious. Well, I think for her if she was a nominee, she's a warmonger just
SPEAKER_04: like her father. She's like she's basically Darth Vader 2.0. So that's my biggest problem with her is no, I would not. I would not vote for her. There's not there's not there's not a war she doesn't want to get us involved in. And there's not a country she wouldn't try and impose democracy at the end of a barrel. Okay, so that's why I don't like her. But to your point, Democrats say they want to work with more Republicans like Liz Cheney. But if you look at who they're donating money to, they're donating money to support credit maga election denier against every single Republican who voted for impeachment. Okay, so you look at like the specific races.
SPEAKER_02: It's completely cynical. And it's just about winning just like the Republicans to give you one example, Democrats, they
SPEAKER_04: gave they launched $450,000 of ads to take out a Grand Rapids Congressman Peter Major, who also voted for Trump's impeachment. They did this with a Democrat with a Republican in California, David Valadao, and just on and on. So you've got on the one hand, you've got Democrats saying that this is an unprecedented threat to democracy, they want to work with more reasonable Republicans who are denying the election, while at the same time trying to basically fund the campaigns of the maga candidate. Yeah, the reason they're doing it
SPEAKER_02: obviously, is if you fund one of these maniacs, then they're easy to beat. So they're trying to serve up somebody who's an easy candidate to be right. But in a year of strategy, I think
SPEAKER_04: it's a very dangerous strategy, because it was my question. No, I don't. I don't think so. Because this year, I think this
SPEAKER_04: November is likely to be a wave election. And when you get a wave election, the specific candidate matters less, and party matters more. So you could get some of these crazy swept into office. So I think it's a cynical and counterproductive strategy. And you say that Republicans do it too. I can't remember any example. I think Trump itself is like supporting
SPEAKER_02: Trump is that I can't I can't remember. I can't remember a
SPEAKER_04: single time ever where Republicans have basically funded, funded the source loves it. I just think this is very
SPEAKER_04: stupid and dangerous. But let me ask you a piece. Listen, it's of a piece. Okay, it's of a piece with the administration claiming we're not in a recession, trying to redefine recession now that we're in one. It's of a piece with Joe Manchin, all of a sudden calling the slim down BBB, the deficit reduction act after saying that it would increase the deficit. And the media is not holding these guys accountable. That's why politicians, politicians are going to be as dishonest as the media allows them to be. And the media is not holding on Brian.
SPEAKER_00: Conan O'Brien kept the White House on this he tweets out. The White House now says it's only a recession if you see a salamander wearing a top hat. The comments are the best one guys. What about a what about a rabbit? Let me ask you a serious question.
SPEAKER_02: Jake, Jake out seriously going beyond just the specifics of
SPEAKER_04: the political issue. I think we really have a problem with the media class. I mean, the media is carrying water for these Democrats because they agree with the ideological agenda. We do not have an honest media who's willing to hold the party in power accountable, given what you've said about being
SPEAKER_02: disgusted by like the, you know, denying of, you know, this voter fraud conspiracy stuff by Trump or whatever, if Trump wins the nomination, which I think he will, how are you going to be able to when we're on the show a year from now, and Trump has the nomination, or you know, 18 months from now, whenever it is that he locks it up, and he will lock it up if he runs, I don't
SPEAKER_04: think so. So if he does, though, I don't think so. I don't
SPEAKER_04: conceivably be able to back Trump for a second term. Would
SPEAKER_02: you be able to come on this program and say I backed Trump as a Republican because you don't want to vote for a Democrat? What would you do? Just not vote because you don't like Trump. You said you would not support him. Listen,
SPEAKER_04: politics is always a choice of the lesser of two evils are a lot of you would vote. So I hope I'm not in that situation. Listen, I what would you do? Listen, the the election that America does not want in 24 is Biden versus Trump. I think the race that they want. I think the choice they want to make is actually DeSantis versus Newsom. That's the choice I'd like to make. So look, I'm on the DeSantis train. That's what
SPEAKER_04: I'm supporting for 24. You know, if it ends up being something different, we can talk about it. If it was Bezos DeSantis, what would you do?
SPEAKER_02: Would you vote for DeSantis? DeSantis. You go DeSantis? Really? Yeah. What about you, Chamath? Would you go Bezos or DeSantis? Who would you vote for? Bezos or DeSantis? Bezos or DeSantis?
SPEAKER_00: Well, that's a tough one. Probably DeSantis. Okay,
SPEAKER_02: Freeburg, Bezos, DeSantis. I'm good. I'm gonna sit this question out. Let's
SPEAKER_01: keep going. Okay, all right, everybody. There you have it, everybody. It's a dumb question, J. Cal, because Bezos is not running. I
SPEAKER_04: mean, and honestly, the fact that people were even discussing that. It's a thought experiment. No, but his thought, the
SPEAKER_00: thought experiment, the reason why I would go DeSantis is at least he knows how to play the game of politics. Bezos would just in a matter of a week be like, why did I do this? I have the best life in the world.
SPEAKER_01: Exactly. There's just no way. He is living his best life.
SPEAKER_04: Listen, J. Cal, Bezos had two tweets criticizing the administration on inflation. And you're like, he's running for
SPEAKER_02: president. He's running. No, no, no, no, there's two. There's other reasons. Come on. He bought the Washington Post. He bought the biggest house in DC. And he gave that $10 billion climate page. I think those are all little cards that you could check boxes. And if he writes a biography, Bezos probably has
SPEAKER_04: houses all over the world. Doesn't mean he's running for president of those countries. Come on. I'm just saying you're
SPEAKER_02: just scared. You're scared of the Bezos presidency. You know
SPEAKER_03: that he would roll over DeSantis. He would roll DeSantis.
SPEAKER_04: Even if Bezos were dumb enough to run for president, I think he's too smart to do that. The Democratic Party would never nominate him. That's not why he would pass like some purity
SPEAKER_02: test because it's what happened to Bloomberg. I mean, listen,
SPEAKER_04: don't get me wrong. I'd love to see a candidate like Bloomberg or Bezos nominated by the Democratic Party because they clearly understand economics, right? Would it be a master
SPEAKER_02: stroke by the Democratic Party to embrace a model? I would like to I would love to see a candidate like that. But look
SPEAKER_04: at look what happened in Bloomberg. Bloomberg spent 100 million dollars and he lasted to the first question of the first debate. They knocked him out. The first question of the first debate and then you know, Elizabeth Warren knocked him out by just basically calling him a billionaire and he's there stunned. He had no answer. Terrible. Yeah, he did
SPEAKER_02: terrible. Terrible. But I mean it would be a master stroke if they went with a moderate. You know it. Alright everybody for David Sachs, Chamath and Freeburg. I'm Jay Cow. We'll see you next time on episode 90. Love you. Bye. Catch you. Bye. Love you.
SPEAKER_04: We'll let your winners ride. Rain Man David Sachs. And it said we open source it to the fans and they've just gone crazy with it. Love you. Besties are gone. That's my dog taking a nice in your driveway. We should all just get a room and just have one big huge because they're all just it's like it's like sexual tension and they just need to release them.
