SPEAKER_01: Just a couple questions before we kick off. Okay. Look, it's what I told you before. It's bad bitch o'clock. Okay, it's thick 30. I've been through a lot of sacks right now, but I'm still flirty. Okay. Is everybody back up in the building sacks? It's been a minute. Tell me how you're healing. Because I'm about to get into my feelings. How you feel on sacks? How you feel right now? What language are you speaking right now?
SPEAKER_00: Hip hop sacks. You're right. Remember when you had at your
SPEAKER_03: 50th? Oh, yeah. When you had and she's saying, and she's saying
SPEAKER_01: and your
SPEAKER_03: dancing to delete that delete. Let's start executing the insta
SPEAKER_02: strike with Jake. How is this strike? When he says something that we just insta strikes, we don't have to edit it later. Just insta strike. It's because I am taking back my power. I was
SPEAKER_03: in therapy the other day and they told me I need to take back my power interest, right. But he apparently reads the comment
SPEAKER_00: section because he knew freeburg that you won the episode last week. Oh, big time. It was big. It was big freeburg energy.
SPEAKER_02: Finally, I honestly do not like the competitive nature of the show. I think it makes us all hate each other. And it's not a good dynamic. We should just fucking do the show with each
SPEAKER_03: other. I know. But the point is, your performance after I threatened to fire if the show has gone up, you know who also
SPEAKER_01: doesn't like the competitive nature Jake out because he's losing. Yeah, totally. The fact that I'm even still here is
SPEAKER_03: winning. Jake out thinks he can threaten to fire freeburg. It's
SPEAKER_00: like the janitor at Staples Center think he's gonna fire LeBron because he played poorly in a game. This is a motivational
SPEAKER_03: technique. I got the best out of him. I'm like Michael Jordan. He's my Dennis rod. You're like the hot dog dealer. Okay, pal.
SPEAKER_00: He's like LeBron James. You're the hot dog. I do not insta
SPEAKER_02: strike these comments. Everybody, welcome to the all in
SPEAKER_03: pod with us again. David freeburg took a break from playing his stray video cat game. Sax is here in his deposition. Apparently, Chama see this. Look at the size of this.
SPEAKER_00: J cows apparently playing no comment today on the comments.
SPEAKER_02: So I will open the show. I will open the show by asking David Sachs, would you like to tell us about what you're holding in your hand?
SPEAKER_00: Yeah, okay. So I got this subpoena from Twitter. This is a non party subpoena for didn't Twitter subpoena your tweets? Yes. Let me get into that. Wait, this is subpoena. I thought
SPEAKER_03: they're public. They are. These nitwits have walked out, lived
SPEAKER_00: in billing them apply $2,000 an hour to subpoena tweets that are public. Brilliant strategy. But this is called a subpoena for production of business records in an action pending outside California. So I'm not a party to the loss. At least they're not suing me because I have no involvement in this thing. But they sent me the broadest ever. subpoena. It's like 30 pages of requests. And now I got to hire a lawyer to go quash this thing because they basically want any of my communications with any of my friends over the last six months. It's insane.
SPEAKER_02: Sax, can you just explain to the audience and to us like is this is a court sanctioned subpoena. The court is basically allowing the lawyers to demand that you hand over these communications. Is that right?
SPEAKER_00: Yeah, but I haven't had a chance to fight it yet. So now at my own expense, I got to hire a lawyer and go send them to fight it because this is a ridiculous overbroad subpoena. And by the way, I'm not even involved in this thing. I'm just a commenter on Twitter. I don't have any let me just save walk till lifting a lot of time right now. I'm not in possession of non public information about this. And you know, the craziest thing is, yeah, like you mentioned, they cite my tweets as a as an exhibit here. And they say they want all documents and communications concerning your statement in a tweet dated April 16. That the quote new Twitter CEO checklist includes eliminate all bots and fire useless employees. 50% question mark. So obviously they didn't like that. Your statement in a tweet dated April 25. Crazy thought what if jack mastermind this whole thing, your statement in a tweet dated July 18. That quote, randomly sampling 100 accounts a day is not a serious effort. And or your statements in any other tweet concerning the merger, blah, blah. Let me just save them time right now. I don't have documents and communications concerning my tweets. Now I know to a lawyer at Wachtell Lipton, that looking at my tweets and how brilliant they are, you may think that I have extensive documentation and source material for them. Let me tell you what happened. I wanted to go take a shit and I basically tweeted off the cuff. And that's how that tweet ended up in the public record. There are no documents and communications concerning my tweets. And this idea that somehow I guess what they're trying to get at is that somehow I was tweeting on behalf of someone or at someone's behest. Not true. Go look well before this year at my public tweets and blogs about the topic of free speech. I've been a critic of Twitter's for a long time on the issue of free speech. I've written a content moderation policy. I've written about what I think a content moderation policy for a social network that cares about free speech should be, you know, I've written all these posts on medium going back years now, you know, I was a critic of Twitter throwing Donald Trump off the platform. So these views that I've publicly stated are the reason I've stated them is they're just my views. And there's nothing more nefarious or something behind them. Other than that, and they're just I think they're just trying to chase a there that's there is no there there. Right. Let me just say a lot of time you and I can talk because our our friends have no comment
SPEAKER_02: on this matter. One question I have a follow up. During this
SPEAKER_03: movement that you had and you compose the tweet, is there any documentation of the movement? No, but you know, next time that
SPEAKER_00: I compose a tweet on the can I will document it thoroughly and I will send the lawyers that walked out Lipton. What happens
SPEAKER_02: if you don't respond in 20 days? I don't know. I mean, I got a I
SPEAKER_00: mean, now I've hired a lawyer. But by the way, just so people understand, you may think that because of my position in business or something that these things happen all the time. They don't. I've been maybe subpoenaed like three times in my entire career and and I've never been subpoenaed in my capacity as an individual. It's always been in connection with a company. And I don't think I've gotten one of these and over five years. So this just does not happen that often. These guys are totally chasing at straws. And it leads me to believe they're wasting my time and Twitter's money. And they're so somebody at Twitter should just rein in their lawyers because they're I'm sure racking up a fortune legal fees. It sounds like sacks the case is that they're trying to make that
SPEAKER_02: Elon used his network of friends to help wash away the deal because he didn't like the price anymore. And had his friends, you know, kind of tweet about bots and other stuff to support his case for killing the deal because he didn't like the price. And they're trying to see if there's any communications that he specifically said he didn't like the price. Yeah, I mean, look, they all in addition to my tweets, they want
SPEAKER_00: all my documents and correspondence related to my appearance on Megyn Kelly, my appearance on the Wil Kane podcast, and you know, other media appearances I've done. Look, you know, I had no coordination with Elon before appearing on any of those shows. I just went on those shows and said what I think I mean, look, it's not like I'm a guy who doesn't have hot takes every single week on various issues. You know, we do that we've been doing this podcast for years. I've been tweeting for years. I'm just a commentator on this. I have I've never been in possession of non public information. And I've tweeted my takes based on the public information that's been available about this dispute. Now, you know, after I appeared, for example, on Wil Kane, I remember Elon tweeted in support of my appearance, but there was no coordination before I appeared or after for that matter. He just liked the appearance. Yeah. So it's just me spouting off doing what I've been doing on this pod and tweeting for years. Now I can understand if maybe they're trying to read something into it. They're on a fishing expedition. But I've just told you, I just think the truth is, the whole thing is just such an enormous waste of
SPEAKER_01: time. Just get into court, adjudicate the thing and move on. I was reading yesterday, this guy who follows the Delaware
SPEAKER_02: courts pretty closely, he had a bunch of commentary. And it he mimicked some of the stuff or the judge apparently on the case, said some stuff about preserving the integrity of the court, meaning that the interpretation people are making is that ultimately, they don't want to the court is unlikely to try and force the merger. Because if the merger then doesn't get consummated, it damages the reputation of the court's ability to make enforcement action. And therefore, it's more likely that they just impose a fine. But what is the enforcement action? If I don't, I don't
SPEAKER_01: know, we should ask somebody who's a force the merge. No, but for you want to buy Twitter. But what does that mean? Force? I don't know about that. Okay. All I know is that this discovery
SPEAKER_00: request is overly broad. It's a fishing expedition. It's a harassment of me, it's going to cost me time and money to get rid of this thing. I didn't do anything to deserve it or prompt this. I wasn't part of the transaction. I just wasn't. And I've never I've never and I've never said anything in regards to the transaction. That should lead anyone to believe that I'm in possession of non public information. Yeah. So this is harassment is punitive. And the fact that they're citing my tweets in which I criticize Twitter's management. It's just petty and vindictive. Yeah, I agree. I mean, look at your
SPEAKER_01: legal fees reimbursed. Right? Probably not. Good luck. No.
SPEAKER_01: Five, five or six years ago, I approached Twitter about what I would have called a friendly activist, myself and a, and another large fund. And the reality is, there's a lot of data that sits in the public domain that you can use to get a very clear view of Twitter's advantages and disadvantages. And so, you know, all of these issues that Twitter is dealing with has been known for a long time to people that spent any time analyzing this stock, comparing it to other social media stocks. So I just don't understand what all of this is about. At the end of the day, a person that had a point of view has changed their mind, get to the bottom of what that point of view has changed their mind, get to the bottom of what that person thinks. But going on these broad fishing expedition, I think is
SPEAKER_00: just really stupid. And then what was Joe Lonsdale subpoenaed for? I mean, he just appeared for being at the All In Summit for being a guest at the All In Summit. So that just shows you how silly this is too. Because Elon, we did an interview, the four of us interviewed Elon at the All In Summit in Miami back in was it May is when did we do that? Yeah. So, Elon appeared, he was a guest by zoom. It's not like he was walking around the hallways, bumping into people and talking like there was he did not communicate with anybody else at the summit. He was a guest by zoom. So if you want to know the communications that we had, just go watch that public recording of us interviewing Elon. There's just, again, this there's no need for this fishing
SPEAKER_02: expedition. Guys, this is the this is the record for the longest amount of time in his life. J. Cal has not spoken. So I want to I want to take a moment and we can move forward.
SPEAKER_03: Sax, did you do any prep work for the interview with Elon? While you were? Wow. In the commode? No, in the commode?
SPEAKER_00: There's no prep work. I showed up barely. I barely showed up. Barely. You guys are like, man. Oh, my guys. See, and you guys don't
SPEAKER_01:
SPEAKER_03: want to do all in summit 2022. Come on. 23. Come on. We're good.
SPEAKER_00: We're good. Yeah, exactly. Why do I need another one of these?
SPEAKER_01: I actually want to have free bird stands create an event honoring him and I'm going to appear there as the keynote speaker. Absolutely. Sultan of Science Con. Actually, I should
SPEAKER_00: really thank you, Jay Cal. For throwing the summit. Thanks. First, I blame Twitter's executives that I blame you. I
SPEAKER_03: think you could put Listen, if we do another all in summit, maybe it's profitable. And I can say legal bills. Can I can I
SPEAKER_01: just say like, as a user, just as a user, okay, commentary that the bot issue is really real. Like, how many accounts are there, which have like 20 or 30 followers that just spew vitriol, either positive or negative constantly, every time you tweet anything, it makes tweeting impossible. I used to be an ardent user of Twitter. And I think in the last year, it has become exceptionally unusual. Wow. And so they should
SPEAKER_03: just fix it. They should fix that product quality problem.
SPEAKER_03: In fairness to sacks, he did pay $10 per account to have those created and to control your replies. But it is true. If you I always screenshot it, I look at who's like trolling me and replies. And inevitably, it is a six month old account with that's following 100 people and has no followers or five followers and has like, some, you know, large, I mean, it's like, it's like, at the end of the name, every time you say
SPEAKER_01: something, every time I say something, it's like, every other comment is about a stock. It's about a crypto thing that they want you to click on. And so, you know, this last month, I've started to experiment with turning comments off. And it's been the best, because I can still communicate out, it gets the same reach, millions of people will see what I have to say. But I don't have to deal and all of the other people that follow me theoretically, for useful information don't have to deal with all of the bullshit that comes with it. Yeah, but
SPEAKER_03: you don't. So there's a there's a real problem on that platform
SPEAKER_01: that needs to get fixed. Here's the thing. It's easily fixable.
SPEAKER_03: Because if you go to LinkedIn, or Facebook, or Instagram, you don't see this. So if it if the other platforms can figure it out across many different companies, it's not like there's some secret sauce here. You just have to put up, you know, a couple of reasonable gates and have some reasonable reporting. And you take a little friction out and people will not be able to create bots on mass. Yeah, I notice that
SPEAKER_00: problem. You know, in the early days of the Ukrainian war, when I would tweet out my opinion, my non can my contrarian opinions, my non consensus opinions on the Ukraine, we'll get attacked. I
SPEAKER_01: saw I remember you were getting it was ruthless. And those are not real people. Those are not real. Yeah, when you would go
SPEAKER_00: click on those accounts, you would see that they were accounts created that month. Yeah, zero followers, zero following. And they're brand new accounts without any history. And they were all tweeting the same thing, accusing me of being devil Chamberlain. It was all just, you know, Putin talking points or whatever. So there, you know, I think particularly when you speak out against the current thing. There's, yeah, you know, an organized effort to try and drown you out. And but look, the Washington Post had a story about this, that Ukraine was really good at what they called strategic communications. Yeah. Mr. Call that propaganda. But in
SPEAKER_00: any event, yeah, I mean, look, there's absolutely a problem. It's now a playbook. If you don't know if you guys saw the
SPEAKER_03: Zack Snyder recut of Justice League, supposedly there were bot armies that put the pressure on Warner Brothers to release his cut of that movie. And that he might have in some way been involved was the insinuation. And it actually drove commerce, they gave him the whatever 30 $40 million to recut the film. All right, let's talk about markets. And so that's what everybody really comes here for. Looks like inflation is finally maybe getting a little pushback gas and oil is way down. Big win for Americans. And obviously the administration, there clearly is an upper bound to how much people will pay for a gallon of gasoline consumption is actually going down, which is interesting. Humans pretty adaptable their jobs. And we've talked about this every month as we watch it, finally dipped under 11 million as sex predicted, you know, we're going to shed three or 400,000 jobs, it seems every month, which should take this, you know, 10 11 million number over the next year down to maybe five or six, which would still be an unbelievable number. So put us up very robust full employment, which has been a big also, there's a number of open job, the number of job
SPEAKER_00: wrecks, it went down by something like half a million in one month.
SPEAKER_03: Yeah, and it's been going down three or 400. So it's, it's kind of been pretty consistent, but there's clearly something going on here. And the stock market, interestingly, we've started to see a little bump here, even crypto, which the most speculative of all assets, I guess. Bitcoin bounced as well, you know, hitting 2223 now. So what do you think, chumath about markets, we you may have called the bottom here on the program a couple of months ago, and I started J trading three weeks ago, based on our discussions here, thinking we're bouncing a little bit, but we were thinking we're bouncing along the bottom. Is it a head fake right now?
SPEAKER_01: I think at the time, initially, I think I said, you know, it rallies to around 4000. I was a little off rallies, what rallies
SPEAKER_03: to 4000? The S&P? Yeah. Probably gets to 4200 4300. Look, it's
SPEAKER_01: always important for me. 4150 today, just so people know.
SPEAKER_01: Yeah, it's always important from my perspective, just take the other side and just intellectually debate with oneself, why the other side could be right. So at this point, right now, what people would say is, okay, the Fed's going to capitulate at the beginning part of 2023. We have a pretty clear forecast for all the rate increases that have to happen. Everybody's doing the work that's necessary, either raising prices, cutting costs, or doing both, letting people go, etc, etc. So maybe we're there. Okay, so what's the other side of that? Well, I think, again, as I've stated before, the other side starts with energy. The reason why I think it's important is that it really is the conflation of an economic system and a political system using an instrument. If you look inside of what's happening in Europe, there's a lot of complexities here that I think need to get unpacked. So for example, a couple days ago, the French government basically said that they're going to start producing less nuclear energy. And you'd say, well, why would they do that? Well, it turns out because the temperatures are so high, you cannot use the water to cool these nuclear reactors because the exiting water is then so hot that would actually destroy the ecosystem of the lakes and rivers that they use to feed natural fresh water in to cool the nuclear reactor. Second, because it's so hot, all the rivers are below their natural level. Barges that carry coal and that gas are getting stuck on the Danube. Bappo, which is the longest river in Italy that feeds all the fields, actually is below the level where it can actually offload the water. So farmers can't basically do what they need to do to produce a food supply. So if you play all of that out, you start to see an issue where by October, November of this year, we're back into the same complexity where energy is the tip of the spear around which everybody starts to debate all of the national security issues that we have to deal with, the Ukraine war, etc. So I don't know. I mean, you've made a lot of money this year by basically doing the following, which is the exact opposite of everybody else. When everybody else was freaking out, had you bought, you would have made a ton of money. Now everybody's like, it's over. And you can tell that by looking at the VIX, which is the volatility index, we're about to get into the high teens. You have systematically, it has been true that when the VIX is in the teens, you tend to basically buy volatility, which is essentially you get short stocks. And when the VIX is in the 30s, you tend to basically sell volatility and you buy equities because we've hit the bottom. If you've been doing that for the last year, you've made a ton of money. So there you have it. I really don't know what's going to happen from here. But I tend to think things still have to get a lot worse to flush everything through the system.
SPEAKER_03: And for people who don't know the VIX is the ticker symbol that you can look up yourself for the CBOE's volatility index just measures the stock market's expectation of volatility based on the S&P indexes options trading. If you look at oil sacks, we are now down to 87 bucks for a barrel. Haven't been here since. Gosh, looks like Yeah, February, maybe. And so and gas prices plummeting. Something going well in this regard. What are your thoughts? Yeah, I mean, it's that particular commodities coming
SPEAKER_00: down. I still think we have a big inflation problem. I guess production stepping up. I mean, in response to higher prices, people increase production, and the price comes down. No, no, no, no, no, there's less demand. The crazy sad thing
SPEAKER_01: about this whole thing with Biden was that OPEC came back and they basically said we can increase like 600,000 barrels a day. But the only two countries that are able to do it were I think, Kuwait and Saudi. And the total number of barrels is about 100,000. So with all the bluster, all of this stuff, you're right, actually, there's no supply. It's because the
SPEAKER_00: interest rate increases are actually having an effect. Correct. You know, these rate increases are like chemotherapy. You know, it's on the economy. The gas demand is lower than the
SPEAKER_01: summer of 2020 in the middle of the pandemic. Yeah, you know,
SPEAKER_00: so yeah, you're right. So the commodity prices are reflecting expectations that the economy is slowing down and and you know, maybe in a recession. So supply, supply modestly up demand
SPEAKER_03: massively down equals, hey, we want to get people to buy this commodity that will lower the prices. But lo and behold, the same thing is happening a little bit with groceries. And we'll see what happens with travel homes also spectacularly falling down in price, and the inventory spiking as well. So what's your Yeah, your take here you unpack the 75 basis point increase in the chemotherapy that you were going down that road. Well, let me just speak to this this this rally in the market
SPEAKER_00: for a second because I think there was a really interesting chart that Philippe Lafont showed at that co2 summit that we talked about on this pot a few months ago. And let's put it on the screen I put in the chat. What it basically shows is that is that during you know, protracted bear markets, you can still get substantial bear market rallies. And so during the 2000 2001.com crash, you had these plus 32% plus 41% plus 45% rallies. But even while the market as a whole was going down, and so they ended up being sort of sucker rallies. Now, I don't know if that is what's happening here, but it is a possibility. One interpretation sex of this could be people are picking the
SPEAKER_03: winning stocks while the losers continue to lose. And that's what's causing this, you know, jagged edge or the dead count bounce dead cat bouncing, as they say, which is what we're seeing in a lot of public companies, right? I don't know if you're watching, but Uber, you know, obviously, I'm still a big shareholder, had a massive print, and other companies have been doing equally as well, Apple included, I think two things happened last week. One is, there were a number
SPEAKER_00: of companies that reported good earnings, and I think even more importantly, has strong forecasts. So that helped. And I think it was just there was so much pessimism and negativity that just companies reporting decreases that weren't as bad as people were expecting, created some room to move up. But the other thing that that drove the rally is that the Fed made these comments on the heels of that 75 base point rate increase, that we were close to neutral. And so the market seemed to get really optimistic that we wouldn't get much more in the in the way of rate increases, maybe there'd be a 50 base point rate increase towards the end of the year, which would bring the Fed funds rate up to about the two year bond rate. So the idea was we're close to neutral and markets really reacted to that. The thing about that is, though, that I think what the what Powell and what the Fed says today about rates is way less important than what the inflation data will actually show in a few months, if we still have 9% inflation, three months from now, then I don't think the rate increases are done. So at the end of the day, I think that the data here is gonna be a lot more important than what the Fed says, because certainly the Fed has said a lot of things over the past couple of years that turned out not to be true. You would agree they seem to be doing something correct here
SPEAKER_03: with the 75 bps, you know, and taking it a little more seriously. It's having an impact. I'll say it again, I've said it now five pods in a row, we've
SPEAKER_01: never seen a moment in history in American history, where when CPI has printed successively above 5%, that it got under 5% without Fed funds getting to that same number. So we should all hope that this is the exception that proves the rule. But there's an enormous amount of data that would tell you that we have to take rates to double what the equilibrium rate is thought to be right now.
SPEAKER_03: There was no print in August, they take the month of August off, they could do an emergency print. And then they're expecting 50 or 75 bps in September, if they do that, sacks, chamath freebird, 50. I think 50 is the expectation for September. But
SPEAKER_00: look, I think it's appropriate now after all the rate increase they've done to take a pause, they're going to get two full months now of inflation data before the September Fed meeting. I think it's appropriate to digest, let the economy digest these rate increases and see where we're at. And let's see where the next two months inflation print is. And then that'll determine what happens next. Freeburg based on all this. What's your outlook for the
SPEAKER_03: economy? I think there's more. We all try and be predictive based on the
SPEAKER_02: current set of conditions in the world. And there are a number of conditions in the world that the switch could flip very quickly. And there's enough of those triggering events right now, that the probability of any one or any set of them happening in the next couple of months is probably pretty high. You know, I kind of talked about it on the show a few weeks ago that it's like a bunch of tortoises sticking their head out of the shell. And, you know, there's a few that might pop out here. There's obviously a massive problem with getting gas to Western Europe for this winter. There is an emerging problem with food insecurity in Africa, South Asia around the world. There is obviously continuing escalating conflict in Eastern Europe. This NATO situation may or may not help, the Taiwan visit may or may not help. Is it escalating? Yeah. I mean, I think, you know, Sweden and whatnot, joining NATO is, okay, is going to be viewed as provocateur. And, you know, it
SPEAKER_02: could not make things cooler and calmer over there, but make them more tense. I mean, we view it as a security issue. But it really is a conflict escalation issue. And, and then I think that there are emerging markets problems, you know, Argentina is facing 60% inflation. Brazil has a criminal as their president right now. And he has said publicly in the last couple of days, that he will not leave office if he loses the election because the election is fraudulent. And if that happens, then you could see massive civil unrest, he's been encouraging the population of Brazil to go to the streets and fight back. And there are a number of these flashpoints. And by the way, that's a massive, you know, food supplier, as well as a massive holding in EM credit portfolios around the world. US consumer credit is a problem. You know, we just had the largest number of new credit card accounts open since 2008 in Q2 from the New York Fed report yesterday. All of these things I'm painting as pictures of potential flashpoints for what could quickly become wildfires or brush fires that spread very quickly in markets, and could escalate some of the considerations. So I don't feel like I look around and say, you know, everything is good, we're in a good place, there are some indications that some of the stagflationary considerations and concerns we may have had in the way that markets are behaving right now, gives us a pause gives us a respite makes us feel okay. But there are also a lot of things that could go wrong. And any one of those things could be a triggering point. So I always think in terms of probability, there's a whole bunch of low probability things. But when you have enough low probability things, the probability that something in the set is triggered becomes high. That's where I kind of say, look, the probability of something being a flashpoint for us this year is high. I also still think that globally, we are very primed for conflict right now. And we feel like and are hoping that the Russia Ukraine thing resolves, but there are other points of escalation. Look at what's happening with Pelosi visiting Taiwan, everyone that's, you know, even well informed, scratching their head saying what the heck is going on here. There is currently an indulgence in conflict. And I think that that indulgence is that that indulgence will, you know, cause more harm than good, particularly for these financial markets that we're commenting on right now, in the months ahead. So look, you know, like I've always said, I'm not going to be one to time markets. It's like trying to time social behavior, like, who's going to say some word first, I don't know the answer. In a population of people, you know, you can kind of guess how people are gonna behave, but markets are the output, the manifestation of social behavior. And so timing markets is very difficult. I think you can do a good job analyzing businesses and the quality of businesses and how they will perform over time. I don't think that anyone over time can do a good job timing markets. And I think that there's a lot of these things that could really shift anyone's perspective on what you believe right now, very rapidly in another direction, based on any one of these things happening.
SPEAKER_03: She must you feel the world is as Dr. Doom here is, you know, setting it up.
SPEAKER_02: By the way, I'm not being negative. I'm just pointing out that there are a set of things that could flip things the other way. Right? I'm being slightly facetious here. But you paint a
SPEAKER_03: pretty stark picture of, hey, there's all these tipping points around the world. Shemata, you feel like this is how the world works. There's always a bunch of potential tipping points, there's always going to be worse, sadly, and there's always going to be countries that are dealing with dictators or insolvency, especially in frontier markets and emerging markets, or is this chaos? You know, really acute, and people
SPEAKER_03: should be anxious and in a panic.
SPEAKER_01: I think both of you guys are right. There's always stuff going on in markets, and markets represent the collective sum of our wishes and expectations and also the realities. This is why I think, for me, at least the way that I process this information is not trying to have an opinion on any one of those things, because I find it too hard. And I don't have enough depth of understanding of any of those things. For me, I'd rather go back to the historical trends, because those I find a little bit easier to parse. And whether any of those things are true, and they turn that can they turn that race
SPEAKER_03: down, Jason? We're just talking some.
SPEAKER_03: Oh, okay, no problem. I just a little we can't hear you. No problem. The second helicopter is replacing the first
SPEAKER_02: helicopter because of the helicopter swapping out. Yeah, no, that's a helicopter. They're switching on the helicopter. So I mean, it takes a team to part this boat. I'll just be
SPEAKER_01: honest with it. So they're, they're trying to get it done. No, but listen. So the real problem is that like, if I go back to the historical artifacts, have there been issues in the past, the way that you know, free bird describe? Absolutely. So this is why I think you can look at the fact that whenever there's inflation, and whenever it spiked, this what has had to happen by the Fed is you have to take rates above that key 5% threshold when CPI is above 5% to break enough demand, so that the economy's reset. And I think that's where we are. So instead of trying to figure out whether you know, I mean, the Brazil thing as an example that that free bird set is crazy, like he's basically, you know, he said publicly in a press release, the army's on my side, and it's ready to help me you know, keep in staying just the crazy thing. So what are you supposed to do the fighters need to take to the streets? So what are you? What are you supposed to do? In my opinion, I'm like, you know, a version of Brazil has happened before. I don't
SPEAKER_01: know enough history, quite honest, you know, the specifics of what happened then and how that could translate to now. And I don't want to spend the time understanding what's going to happen in Brazil right now. I'd rather just say there are 20 or 30 things that could very much complicate the world economy. I think the reality is that governments need to flush all this excess money out of the system, so that we can really find out what equilibrium demand is, and get back to normal. There's also, by the way, a really important trend, Chamath,
SPEAKER_02: unlike that, I think is playing out, and will play out for the next decade on globalization. So as the US tries to build its own semiconductor manufacturing capacity, as China loses key trade partners, as all of these markets stop trading with each other, and start to build redundancy, there is a massive, longer range economic effect of globalization. Globalization enables efficient pricing, it enables labor, and energy and everything to be done, you know, to go to the cheapest source, that's the way globalization has benefited us. We've been able to get cheap energy and cheap labor in overseas markets to do work for us. And as a result, we've gotten access to cheap products. So when you de-globalize, you end up having to pay more for labor, more for energy, you have to build infrastructure, and the price for everything goes up. We've said this on the pod for two years now, that era of
SPEAKER_01: cheaper, faster, better is over. And what comes with that is better national security. But the cost of that better national security is higher prices, higher prices, less growth, and
SPEAKER_01: there's nothing that we can do to avoid that. I'm not sure I agree with the less growth, I actually think that there's enough access slack to be absorbed by all of this free money, that I think you can still have sustained growth, but it will come with higher interest rates, and higher inflation and higher input costs. Everybody will have to do their part to absorb some of this. But that's what's going to happen. And I think we should just deal with the medicine as quickly as possible. This is why the people that actually think that the Fed should just be very aggressive and get this over with quickly, I suspect on the margins are right. The problem is they don't want to look at the historical artifact, because the sort of artifact would say, wait, I need to raise interest rates by another 250 basis points. That's just way too disruptive for what the world is ready to hear right now. So we're going to incrementally plot along. And I think what Friedberg says is right, which is that there's going to be a whack-a-mole that emerges, that's going to tilt the markets, then the consumer credit thing will implode, that's going to tilt the markets. And Jair Bolsonaro will try to take over Brazil, that'll tilt the markets, and we'll go back to this inflationary, fragmented, deglobalized view of the world that just, frankly, takes higher interest rates to normalize. All right, and Sax, I'll bring you on this. I mean, counter to
SPEAKER_03: Friedberg's point, the the counter obviously would be, hey, we will have less dependency on dictators, like Putin, Xi Jinping, MBS, etc. And that would be great for humanity. And we'd have resiliency in our supply chain. And, you know, the West now becoming unified, say what you will about the NATO membership and the timing of it. It's probably a great thing that the West is saying, hey, we're going to get together as a group, I think you would agree, and stand against dictators invading other countries. And if everybody pays their fair share to be part of NATO, that's not that's not what they said. That's not what it is a
SPEAKER_01: fair. Well, I mean, no, that is not but look, be intellectually honest. We all said the first part. And just nobody talked about that second part. And the only person who was just Josh Hawley, who's, you know, not exactly my favorite person in the world, but maybe sax wants to comment was the only one that actually said, which is probably the fair thing with Jason, you are saying is part of the deal. It is not part of the deal. No,
SPEAKER_03: no, it should be part of the deal. I'm saying it should be part of the deal. And for people who've missed what we said there, United States spends three and a half percent of our GDP on military other places in NATO might be spending one or 2%. And we're trying to get them all to 2% to be a little closer to us. And then this obviously trip to Taiwan, strengthening our relationship with that country, but at what cost and why are we doing it now? All come into play here. So do you actually think that this trip to Taiwan actually strengthened our
SPEAKER_01: relationship with Taiwan? Did we come up with a deal? Did it? He all of a sudden say, in what way? I'm curious. Well, because
SPEAKER_03: they are I mean, did you not see their statements and giving Pelosi awards and they want very much wants to strengthen their relationship with the West? That that is their goal. They want to strengthen the West. They want the protection of the West. So yes, it's holding that this was a coordinated hold on limited, it does strengthen our relationship with Taiwan. The question is, does it provoke China? And was it necessary at this point in time in history, when the world does feel like it's a little bit of a powder keg? No, but so so six months from now, when all
SPEAKER_01: the fruits and vegetables that have been embargoed and not sent to Taiwan, and then the sand that allows them to make chips continues to now flow, do you think that they'll still be positive about the trip?
SPEAKER_03: We'll see. I mean, I let's go to sacks. He likes to comment on these things. So all right, well, I'm gonna dismantle everything you just
SPEAKER_00: said, I know, I that's why I set you up for Pelosi. I mean, look,
SPEAKER_00: once it came out that Pelosi was going to Taiwan, and China threatened her and the US saying you can't go. Obviously, we couldn't back down from that, because we can't let China dictate which of our officials can go to Taiwan. So at that point, we had to back her play. And you saw that everybody from Fox News to 25 Republican senators got on board. Okay. But here's the issue. The real issue is, should she even have been going? I think this trip was self indulgent. It was reckless. She was told by the Biden administration, don't go. This is not the right time. This is a sensitive time. The CCP has got their party conference in the next couple of months, there was no reason to basically provoke this showdown right now. And she just dismissed what the administration with Biden and what the Pentagon told her to do, because she wanted to make some sort of valedictory tour to Taiwan. So look, Nancy Pelosi does not deserve any credit for this trip. Did we have to defend her once? You know, once China threatened her? Yes, of course, we had to, like I said, back her play, but this was reckless. And it was self indulgent, and it didn't need to happen. And you know, it really makes you wonder who is calling the shots in this administration when Pelosi won't even respect the wishes of a president in her own party. And what is she doing going over there? She's not the Secretary of State. I had the same president had same questions like why now? Why now
SPEAKER_03: was Freeman had? Well, because it's all about her making this
SPEAKER_00: valedictory tour before she's going to hand over the gavel. Look, the Democrats are gonna lose the house in November. Once she passes the gavel to a new republican speaker of the house, I think she'll be announcing her retirement shortly after that. So this is all part of her farewell tour. But it didn't need to happen. And the fact that she did it in violation of the wishes of a president of her own party, makes you wonder who's calling the shots over there. And it kind of reminded me, you know, a few weeks ago, Gavin Newsom was over at the White House when Biden was over in Europe. And everyone was speculating, what's he doing over there? Is he moving in drapes? Yes, he's measuring the drapes. So you know, it just goes to show this this administration have control over anything over the members of their own party. Over 60% of Democrats say they want someone different to run in 24. So yes, there was a surface level of consensus and backing of Pelosi. But if you scratch beneath the surface, you see that the trip was unnecessary and real and reveals a president who doesn't seem completely in control of our foreign policy. So in a statement, almost universally, the leadership of the Republican
SPEAKER_03: Party said for decades, members of the US, United States Congress, including previous speakers of the house have traveled to Taiwan. This travel is consistent with the United States one China policy to which we are committed. We are also committed now, more than ever to all elements of the Taiwan Relations Act. So one China, if you don't know is that Taiwan and China are all part of one unified entity. So we're the Republicans seem to be supporting this in a cynical way you're saying or it is consistent that other members of the United States Congress have gone to the house. I think there
SPEAKER_00: is bipartisan support now to defend Taiwan. I actually think that that is in the cards. I think there's a very high probability that we actually end up in a war with China. Really? This century? Oh, yeah. I don't think so. I think today is flashpoint in the world. I would agree with that. But explain why
SPEAKER_03: you think there's going to be a war because I think a lot of people think there's way too much at stake here for there to be a war. So there is going to be some sort of negotiated settlement in the South China Sea. So why would you think you think the majority cases there's going to be a war really? You
SPEAKER_00: have to look at it. First of all, from the Chinese point of view, they view Taiwan as sacred territory. And for decades now, they have said, in every single meeting, diplomatic meeting with the US, Taiwan is always their number one issue. They are hell bent on recent unification of mainland China with Taiwan. And they would like to do it peacefully through coercion if they can, but I think they will do it militarily, if they must. And the only question is when they feel that they will be strong enough to basically take the island by force. So that's, I think, the Chinese point of view. And I think America is increasingly committed to the defense of Taiwan. So, you know, we have contradictory statements on this, though, the one China policy says that we respect that there's one China, but on the
SPEAKER_00: other hand, the Taiwan Relations Act commits us to help in the defense of Taiwan. So we have a contradictory policy on this. But if you really want to see as does sacks, you would agree,
SPEAKER_03: China has flip flop on this. I mean, it's only the last hundred years that they've really considered Taiwan strategic. They didn't care about it two or 300 years ago, they were kind of like, this is worthless. You guys do what you want Taiwan, Taiwan, Taiwan was part of China until 1895, when Japan took it
SPEAKER_00: from them. Yeah. They didn't want it at that time. That's
SPEAKER_03: that's the other thing. They were like, this is worthless real estate. We don't care. It's true. Well, Taiwan, Taiwan is
SPEAKER_00: extremely important strategically. And if you want to understand why, I think you need to look at this map. Yes. No, I read up. It was really interesting to pull that up. Actually, it's a really interesting discussion because
SPEAKER_03: 200 years ago, they didn't care. And then all of a sudden, they're like, wait a second, if we're going to be worse with the West, and Japan's going to be a democracy, we do actually have something at stake here. We'd like that island back.
SPEAKER_00: The island chain strategy was originally created by Jon Foster Dulles, this one of the secretary of state, I think, under Eisenhower, who was one of the initial architects of our containment policy against Soviet Union, but also came with this idea of how we would contain China in East Asia. And the basic idea is that China is surrounded by a series of island chains. The first island chain goes down from the southern tip of Japan to Okinawa, to Taiwan, to I think there's some islands in the South China Sea, the Spratly Islands. It's got the north west tip of the Philippines. That's the first island chain. Second Island chain goes out to Vietnam, eastern part of the Philippines, no Vietnam's all the way down. I think it's second island chain includes, you know, goes down to Indonesia. And then I think there's even a third island chain that includes Guam, although Guam actually might be in the second somewhere, it's somewhere around there. It's a heavily fortified American base. So the idea is, if you want to bottle up and contain China, you do it by controlling these island chains. And Taiwan is really the central one, it sort of divides this East China Sea, where you've got South Korea and Japan from the South China Sea, where you've got Vietnam and Malaysia, if we distant between Vietnam and Japan, it's literally if you
SPEAKER_03: were to draw a center line of China's coastal access, that is it. Yeah. So
SPEAKER_00: so the bottom line is this, if you want to pursue a policy of containment against China, you really want to control these island chains. Another way to think about it is that these islands are unsinkable aircraft carriers. They allow America to project power 6000 miles away into the Pacific. That's how we saw during World War Two is we had all these island hopping battles. And as we took these islands, they would then become a runway for the next stage of to protect American power to get all the way to Japan. So, you know, if you believe that we're headed for or we already are in Cold War Two, with China, and I think we are I think China is really, I think we don't know political threat, not Russia. The way that you would contain
SPEAKER_00: China and keep them bottled up is to have these islands in the American Alliance, it's gonna be very hard for China, which is now building a huge blue water Navy has actually more ships in the United States. So it's very hard for them to project their power all over the world, if they are contained a ball up and have to watch their own back. One note on the number of ships though, Asia is, you know, they
SPEAKER_03: they have a lot of small ships, the tonnage wise, we have much more tonnage. And if you were to look, you know, even the the the perfect setup, as you explained through these islands is very similar to NATO and the what's happening with Russia. You know, we have Korea, we have Japan, we have Vietnam, the Philippines, we have an incredible alliance in this area. And that's a great thing for America. And Taiwan, obviously, is a jump ball here. But this is a setup for China, you know, having Jason, what do you think about the repercussions of her visit?
SPEAKER_01: So see ATL, which is Tesla's biggest battery supplier basically, you know, delayed the announcement of a, of a factory, it's not clear whether they're going to put it into the United States, they may actually pick a city in Mexico. But what the decision that was supposed to happen now has now been delayed until September, October. There's a bunch of you know, there's all of these crazy military drills that happened. Was it all worth it?
SPEAKER_03: I mean, that is the question. And I'm asking why now was it worth it? We don't have enough information, I think to know what why this was done now. It was it a freelance. He asked me a question, let me finish. Is it a freelance and Nancy Pelosi is completely freelance? Or is there a bigger strategy here is the question is China weak now? Are we trying to send a message to them? And one could equally take the side of the argument that the United States supporting Finland, supporting Sweden, supporting NATO, you know, supporting the Ukraine and
SPEAKER_03: supporting the Pacific is actually the right move here to contain the dictators. I agree, but we have I agree, but we have
SPEAKER_01: two people to do that. So President and Secretary of State. Well, that would be a much bigger provocation, I think
SPEAKER_03: is the issue. So if you sent the President, that would be a very big provocation. The Thomas Friedman article that Sachs
SPEAKER_01: mentions, it was pretty explicit that, you know, Lincoln and Biden both told her please stand down. Yeah, the NSC and the joint chief said, please stand down. You are way over your ski tips here. And she's great. I agree. I've been very public.
SPEAKER_03: What is the point of doing this now? Is the question and we don't have information. Once China tried to dictate to
SPEAKER_00: Pelosi that she couldn't go Of course, we had to back her play. But you have to be kind of a fool to fall for this in the first place. This was self indulgent by Pelosi. She didn't need to pick this battle. The administration asked her not to and look, let me give Biden some credit here. Biden has the right policy on Taiwan, which was stated this way. He says that we support the status quo. And we are against unilateral changes to the status quo. We want the United States to be a status quo power with respect to Taiwan and force China to be the revisionist power and we need to be very careful that we do not come across as the revisionist power that would give China an excuse. So we want to just maintain the status quo. That should be our policy.
SPEAKER_03: All right, everybody. We'll see you next time on the all in pod. Bye bye. Let your winners ride. Rain Man David Sasse. We open source it to the fans and they've just gone crazy with
SPEAKER_00: it. Love you. I'm the queen of K'nwa. Besties are gone. My dog taking a nice new driveway. Just get a room and just have one big huge or because they're all just like this like sexual tension that they just need to release.
