SPEAKER_02: I'm in a very Daniel plain view mood this week. The there will be more competition in me. I don't want to see other people
SPEAKER_03: succeed. That's right. Best scene ever. You are the furthest from that character. Like that is not your spirit animal. Oh,
SPEAKER_04: there will be blood that guy Daniel Day Lewis is nothing to do with you. I've watched it 100 times. Incredible. You must be
SPEAKER_04: so stormy and roiled on the inside. Oh my gosh. I mean, like, did you not see my roast at Sax's birthday? It's just I
SPEAKER_02: not see it. I lived it. It was the most off color, disgusting,
SPEAKER_04: egregious mean diatribe I've ever heard. My Lord, I have a
SPEAKER_03: competition in me. I don't like to see others succeed. I can't stand that Jake cows. Rain Man David. I guess everybody wants
SPEAKER_03: to know Chamath you've wound down to specs. Thank you for doing this for IPLF specifically because people are replying to me every day asking what are you going to SPAC but IPO DNF the money has been returned to investors know it's going going to be returned going to be returned to investors. Thank you. And Bill Ackman. Of course, he wound down his SPAC returning 4 billion this over 500 SPACs out there looking for deals. Tell us why this decision.
SPEAKER_04: Well, I've raised 10 SPAC six six in technology and foreign biotechnology. And I've done six deals to in tech and to in biotech. For foreign tech, sorry, foreign tech, foreign tech, thank you into and biotech. So the the reason to shut it down is pretty
SPEAKER_04: straightforward. It's like, you know, when we launched these things, the stock market was in a much different place than it is today. And so over the last two years at looking at deals, it's gotten harder and harder to find a good risk reward. Now, why is that? Well, the thing with the SPAC is you do a deal today, but it doesn't usually close for six or seven months in the future. And so you have to do a deal where you have a really good sense that in six or seven months when the deal is comes to close, that the price will be the same, or even higher than what it is today. And if it isn't, all of the investors that you've brought along in the SPAC have a right to redeem, which is to say they file a notice that says you can complete the deal, but I want my money back. And what they get back is the initial $10 that they use to buy the stock in the first place, because when we sold when we started this back, we sold stock at $10. And so from my perspective, I was looking at this, and I'm like, you know, this is a super volatile, ugly point in the market, this last year has been really problematic. I and I, and I kind of said this last November, and Nick, we can we can play the clip after and we can come back to it. But basically, my decision was that, at this point to do a deal would probably, you know, put a lot of capital at risk. And in all of these deals, I'm typically investing $100 million, at least in each of them. And so I couldn't justify that I couldn't see a good risk reward. And I thought the right thing to do the responsible thing to do was just to wind these things down, you know, I'll lose 10, 15, 20 million bucks for having set these things up. But we give everybody their money back that $10. And I think that's actually better over the next five or six months than what it'll otherwise do if you're invested in the market. Now, that's a belief that I have. But hopefully, when people get the $10 back in the next few weeks, if they want, they can go and put that money back in the market. And hopefully, they'll do well. But, you know, from my perspective, the risk reward was not good, is part of the issue, the inventory that's available
SPEAKER_03: of great companies as well. That's one of the things I heard speculated on CNBC, it's hard to convince a private company to go public. Here's my experience. You know, when I when I was
SPEAKER_04: talking to all of these CEOs of the Silicon Valley companies, initially, there was a lot of misunderstanding about what SPACs were. And I think we were able to dispel that because we had some really successful transactions. Then there was a lot of interest in being a part of it. In this phase, we were suffering from two very important things. One was that valuations were just completely up in the air, people had a huge question mark on late stage valuations, because we would come in, we would do the work, and we would say the company's worth x. And that number typically was 50 or 60% lower than their last private valuation. And so when it came time for us to negotiate, you know, doing the deal, even if the founder was roughly on board, the rest of the board was not because a lot of them would have seen some pretty meaningful markdowns in their private assets. And when the company had enough money to kind of like, you know, at least stay private for another year or so without having to raise money. On balance, those investors felt it was more prudent for them to not take the mark and to not take the deal at such a lower discount. So that was a big issue that we ran into because every time we would price a deal, again, we're trying to create a margin of safety for us and our investors, again, because it's going to take six to nine months to close a deal. And so ideally, valuation indigestion, and then sorry, the second thing was just volatility. So when you see volatility in the public markets, you know, for a CEO, and I can understand this, it's much easier to go public in a point where the markets are generally going in one direction, because it gives them the confidence to be able to learn the ropes, because it is a complicated process being public. And when you introduce tremendous market based volatility, independent of your company, I think a lot of CEOs and CFOs and IR people were a little nervous. You want to take the risk. And that was this. That was the second piece. But by in a way, the first one was valuation, we could not find market clearing prices, make sense for assets. And by the way, and I'll talk about one company in specific, which just this week had a pretty public blow up around this whole issue. And look, I've been pretty clear about this since November, the marginal trade should have been to be trimming risk. And Nick, maybe you can play the clip because I really want to make sure that it's it's very clear and on the record what I said almost an entire year ago. Let me put crypto in the context of the markets and where we are today at the end of the week, after you know, Q3 earnings in November of 2021. We have the stock market at absolute all time highs, ripping, we have crypto at absolute all time highs, ripping, we have the art markets, I don't know if you guys saw Phillips and Christie's and Sotheby's this past week, at absolute all time highs sold another people for 25 million, we have inflation at a 30 year high, we have 10 year break evens at a 25 year high. We have
SPEAKER_04: you know, one point, some odd trillion dollars that we just approved last week, and we're still horse trading on another three, you know, $1.8 trillion of stimulus that we're going to put in. And I think the the most important thing, which is the two most important founders of our generation, the two smartest people who have really consistently won, Elon Musk and Jeff Bezos have collectively sold more than $11 billion of their holdings this year alone. And if you can't take all of that, and decide for yourself what's right for you and your family, you're doing yourself a disservice. I think it's important for me to never sort of like, you know, be forced to tell folks whether I'm buying or selling, although I'm willing to do it in moments where I think it's important. But I think it's really important to understand the context. And so I think like these folks that like think derisively about individuals who are managing risk, I think it's really naive. And I think it's it creates a lot of missed opportunity for them as well. If the smartest people in the world are now selling their core holdings that they told you they would never sell, and you are not reconsidering your position on things, you're either much smarter than them, or you're being really, really reckless. The reason I said all of those things was because I was getting really worried about where we were. And then and then I think on the heels of that I published a tweet and I and I said, I'm starting to sell, you know, and I sold like $100 million of SoFi, but then I was a systematic seller through the end of last year and through this year, to try to manage my own liquidity, because it changed profoundly as I saw what was happening in the markets. So, you know, I think that it's just an important thing to call out that things don't always go up. And you have to pay attention to a mosaic of information. And you have to do the work yourself because, you know, your situation is unique to you, nobody else understands it. And so you can't outsource that decision to somebody else. Obviously, you can use it as a guide. You know, it's fair to say, you know, when the 13 F's of important hedge funds come out, do I read them? Of course, because I'm trying to figure out, you know, what don't I know, what may I be missing? Maybe there's a great company in there that I that I should be taking a look at. So, you know, I'm not dissimilar to everybody else in that I use other people that I look up to or respect as a leading indicator of what to buy. But I still take responsibility for my own decisions. And I manage my liquidity as best as I can based on my conditions. And those are always changing. And so I think this is just a good reminder that everybody else has to do the same.
SPEAKER_02: So Chamath, what do you think happens to the remaining 500? Every SPAC sponsor friend of mine that I know, is not seeking targets anymore. They're all expecting to wind up and return capital. How many of the 500 do you think will actually find a target? And how many do you think of remaining SPACs? How many of them will wind up and return capital?
SPEAKER_04: I mean, I think that there's still some really good deals to do. They're not necessarily in tech per se. So you know, I think you did a really great deal in ag tech. I think that that's that's really interesting. So time will tell how that does. I think there's some really interesting deals in energy. In fact, we spent a lot of time actually pivoting and spending time in energy looking at, you know, everything from, you know, producers of Nat gas and oil to, you know, folks that were building terminals to LNG facilities and the, but it's just a very different return profile than what we were used to. So I think if you can understand some of these other markets, and you can underwrite to a different rate of return, some decent deals will get done, the overwhelming majority of the tech SPACs, I think probably will just wind up. Some folks will be really focused on trying to, you know, monetize their founder promote, so they'll do any kind of deal. The problem as you see is even whether you do a good deal or bad deal, with the kind of volatility we're seeing in the market, the likelihood is that it's going to trade down pretty significantly. So I think most will not find a home. I think some will find some really interesting targets in areas like energy, I think are really interesting. Agriculture, like what you did, freeburg, I think is really interesting deal. And then you know what, it'll be an opportunity for us to retool the SPAC. I don't think it's going to go away. I think that it is a useful tool in a toolbox of many tools. So there's IPOs, there's direct listings, there's SPACs, there's obviously private fundraising, there's convertible, there's structured deals. So it is a tool. And I think when used properly, it can be really helpful, you know, for the companies that we worked with, it would have been impossible for them to raise the quantum of capital that they did primary capital from sophisticated hedge funds and mutual funds. You know, we raised billions and billions of dollars for companies like sofia and Opendoor. And I think that that's going to go a long way for them to achieve their goals. So I think it's going to be a good tool. But we're going to go through a washout of most of these folks who are not going to be able to successfully find targets.
SPEAKER_03: Sax when we look at private companies, especially the late stage ones, you and I are involved in a number of them. They're doing rifts, they've got headwinds, and their valuations are underwater in many cases. How are they thinking about the public market windows, SPACs, direct listings, or just a traditional IPO?
SPEAKER_00: I don't know that they are thinking about it. I just think I think like going public seems like a fantasy at this point. I think the whole public markets exit idea is frozen for two years. Two years. Yeah, I think that's probably what people are thinking.
SPEAKER_03: What are these late stage companies that raised mega rounds doing to work out valuation issues? Because as Chamath just pointed out with SPACs, one of the problems was clearing market the late stage investors who came in, maybe they, you know, don't want to accept the haircut in valuation even if they have productive,
SPEAKER_00: probably not enough. I mean, what they're doing is good is using their war chest to grow into their valuations, which is the smart strategy. And if they're really smart, they'll be slashing their burn while they do that. But yeah, it's no different than we've talked about before. I think that the main significance of this past week is that you had the Fed meeting, it raised another 75 basis points, there's no surprise to that that was predicted, what was new was the forecast, they're now saying that they expect to raise another one and a half percent just two months ago at the last meeting, they were saying 75 at this meeting plus 50 after that now they're saying 150 after this. So you know, in just two months, they've they're now revised their forecast for an extra 100 basis points of rate increases. Why because inflation is worse than they thought. So things are worse than we thought two months ago, the last inflation print didn't get better, as fast as people wanted. We talked about that last week. Now the Fed is revising its forecast, the trajectory is bad and getting worse. And you finally had pal kind of throw in the towel on his rhetoric around soft landing. I mean, first it was, well, we can raise rates and we won't have a recession than it was, we might have like a mild recession. Now, he's basically saying hard landing if you if you read these FOMC comments. So I think this was a really bad week for the economy. And you're seeing it in the markets this week. I mean, we are retracing almost within 5% of the June lows, with the growth stocks being the ones that are hard to stand. By the way, speaking of growth stocks, have you guys
SPEAKER_04: been following this trials and tribulations with by Jews, which is like the one of the largest valued private companies, but it's a private Indian EdTech company. Essentially, I think like, you know, there was this delayed audit. And Deloitte couldn't certify a bunch of things. And then finally, they were able to come up with a report that essentially showed instead of like, breaking even or making money, they lost almost $600 million this year, and that a lot of the revenue that they were booking were actually loans to millions of Indian families who had basically zero probability of paying them back. So a lot of the revenue was not real as well. And this is like a who's who of investors. It's everybody from, you know, Sequoia, Tiger, UBS, BlackRock, Chan Zuckerberg, it's incredible. I think when the tide goes out, we find out right. And this is
SPEAKER_03: what's happening, the tides out and you're gonna find all the weakness in the system, it's all going to get flushed. I think this is a bit of an outlier, obviously, like, I
SPEAKER_04: don't think that, you know, all these companies that are worth 10s of billions of dollars are running so close to the sun. But it just goes to show you that, you know, how does how does this happen? Like, how, how do you not get a deal? This on the seed stage, and series A, we would ask for a
SPEAKER_03: data room, the person would say, you're the only investor asking for it, and you're putting in, you know, 10% of the round, these other people aren't even asking for it was, was that okay, can we still see the data room and turned out there wasn't one, people were just making bets, they were making blind bets, they were betting without even looking at their cards or thinking about the other people's cards. This goes, this goes back to what freebird was saying before,
SPEAKER_04: you know, I think I think there's a there's a sliver of the retail investor base that is not dissimilar to a sliver of the private equity and hedge fund and venture capital space, which is, these folks are not willing to do the work. I think most people are, and most people want to come to their own conclusions, but some people want to just take the easy momentum driven decision. And they typically always get punished over time, there's this concept of adverse selection,
SPEAKER_02: which is that the negative actors will find them will seek them out, and it will be a match. And so they'll ultimately get adversely selected into the deals that blow them up. So the bad deals, what you're saying is the bad deals would
SPEAKER_03: find the bad investors who don't do the work, and then they spiral and crash together. That's a really brilliant observation. Yeah, yeah, I think I think the other that's
SPEAKER_04: what I'm here. I think the other thing is like you have the situation where if it wasn't that it's folks outsourcing their diligence to the person that did the round before it totally, you know, oh, Silver Lake did it wrong. Same problem. You know, Tiger did it. Okay, they're these guys are very sophisticated investors. I don't need to do the work. It turned out you did. Because you know, it was a very cavalier way of
SPEAKER_04: recognizing revenue. There was a specific playbook here to that.
SPEAKER_03: I don't know if you saw this x in the early stage, where people would get their friends to invest in the company, or some, you know, high net worth individuals. And then you look at the deal, and the valuation didn't make sense. And then you say, well, we would always ask how much money is each person put again? And we like well, their normal bet size in the seed is 750 or 1.5 million. But they're putting 50k into this or 100k. What's going on here? And it was, oh, they're friends with them. They worked at a previous company together, they were in the same, they went to the same college. And so people were using social proof, but manipulating it to get some other sucker at the table to pay full price and not due diligence. Really strange behavior. I was in Singapore
SPEAKER_04: this week, there was a I had this great meeting with this young investor, really dynamic guy. And he was telling me about a company in Indonesia, that he didn't invest in. But it turned out that the that this founder was literally running two parallel sets of accounting systems. And so he was, you know, showing a business and fundraising from this set. But the the real books were over here, and it looked a completely different system. And it was basically like a Ponzi scheme. And, you know, he was telling me, it's like, it's like impossible to route these things out. So what he said he relies on is like, you have to have a network, when you're doing these frontier country deals, where, you know, he says, I need to find at least 10 people that know this person. So that there is sort of like a moral social proof, and moral diligence that happens because that person will never try to commit something that egregious in the face of all of their friends. And so you know, that's a mechanism of filtering this stuff out. But I thought that was a really interesting way of designing a diligence process, in at least in a frontier market here, I don't think you have that much time to do these really, you know, fast paced deals. And the social proof matters less because you theoretically, you know, are looking for signals of traction. But there has to be a better systematic way of getting this diligence done, because these things should be pretty obvious. Well before it's a well before it's a multi deca billion dollar company. Sachs last year, when people were moving really fast, saying
SPEAKER_03: they don't have time for diligence, you're gonna lose the deal, yada yada. How did you approach diligence during those peak periods? And did you have those experiences where people were trying to push you to close without talking to customers or looking at bank statements, yada yada? No, we wouldn't play that
SPEAKER_00: game because we always run SaaS metrics. That's always the starting point for us. But you know, most SaaS companies, they have SaaS metrics. I mean, they it's so standardized that it would be such a red flag if they didn't. Yeah, I think it might be companies that are, you know, have unusual business models, or maybe they would say something like that. But no, we could never do a SaaS investor without SaaS metrics. All right, well, this is a good segue because right now, US venture
SPEAKER_03: capitalists are sitting on $290 billion in dry powder. We had talked about this last year, how much dry powder was there. The market is obviously collapsed. But here's a chart from our friends over at pitch book. It's just extraordinary how much has built up and how much has been raised. US VC funds raised $121 billion during the first half of this year 2022. So LPS still have an appetite, which kind of makes sense that investing into the down market for private companies means you're going to get better deals. And you have a 10 year horizon. US VCs raised 139 billion in all of 2021. So if you put those two numbers together, yeah, you're looking at $260 billion in the last 18 months. And this is all record numbers being put up on the board. What does this say for private companies?
SPEAKER_00: I dispute this analysis a little bit. I think there's a couple of things going on that needs to be taken into consideration. First of all, new funds don't get announced till after the process completes. And then, you know, it may even be some time after that, when the VC firm feels like they want to make the announcement, you can't announce a fund until the process is completely over, you get subject to all sorts of additional SEC rules. So, you know, these funds might be announced in 2022. But they may have actually been raised in 2021. So that I think is a really important point. Moreover, a lot of the funds may have already deployed capital before the crash. So there was that, I think, remarkable story that we talked about months ago in TechCrunch on how the latest Tiger Fund, which wasn't even announced till March or April of 2022, but it had already been two thirds deployed by the time they even announced it. And so that was pretty stunning. So I think that we don't really have a great sense of how much of this so-called dry powder has already been deployed, how much of it was really raised before the crash. It is true that LP relationships with VC firms that have done well are sticky, and good LPs stick with their partners during a downturn. So look, I mean, the VC world's not going out of business or anything like that. But I would tend to think that this is an overly optimistic, overly rosy scenario. Do VCs have new funds that they're going to be ready to deploy in great companies? Yes. But does this mean it's going to be easy? No, I think that the bar has gone up, valuations have gone down founders looking at this tweet storm, I would not get lulled into a false sense of security.
SPEAKER_04: Yeah, I agree with just to explain that. There's probably a
SPEAKER_03: six month lag on when these funds are announced. The reason is there's 506 B and C designations most people raise under five or six B, which means you cannot even say that you're fundraising therefore pitch book can never have that data. So there's a lag and people were deploying at a very high velocity. Therefore, this number could be off 35% people were
SPEAKER_00: deploying at a pace where they thought they were to go back for a new fund every year, which is what it was looking like in 2020 2021. You know, if that six month period might mean you've deployed half the fund. So but look, if if you just go back to a two and a half or three year pace of deployment, and before in 2021, we're at a one year pace of deployment, divide the availability of capital by two thirds. I mean, you know, only one third as much will be deployed in any given year. That's a, you know, significant reduction. So yeah, I think founders should just be aware that the market's going to be a lot tighter. And I think given what we're seeing in the public markets this week, it doesn't look to me like it's gonna get any better. It looks to me like we're headed for. I mean, I called a double dip recession, I think a couple of months ago, that's exactly what it's looking like. In fact, the Fed basically said as much the Fed said that would be just marginally positive next quarter, so would bounce back to slightly positive growth on a real basis, but then, you know, expect it to go negative again, and, you know, recession, once all these interest rates kick in. And by the way, I mean, kudos to Chumath for basically calling that, you know, when the Fed just a couple months ago was saying that so called neutral would be three to three and a half percent. Chumath was saying no, it's gonna be four and a half, five percent plus. Now the Fed just in two months is revised to saying that neutral is 4.6% or something like that. And, and they don't think there's going to be any rate reductions in 2023. So this is not looking good.
SPEAKER_03: How much Chumath of the issue here is we don't the data that we're seeing the ground truth we're seeing, as you would often say, might be very different than like, the reports that are coming out, people are talking about inflation from, you know, 60 days ago, job reports that are 30 days old 60 days old, we don't really have live data. It seems like our government doesn't use live data when they make these decisions is that they unfortunately, well, they unfortunately don't
SPEAKER_04: have access to it really, you know, they're, they have empirical sampling. But to say that, you know, the the US economy is automated in a way where, you know, they can sit in front of some dashboard and, you know, see in real time what the true on the ground data is, is, is not really accurate. Unfortunately, maybe there's a Manhattan project type, you know, effort to do that at some point for the United States, but it's not now. I'll give you a bit of bad news and a bit of good news. And this is just me kind of, you know, again, looking at the mosaic and, and kind of judging where we are today. The bad news is I think that it's going to be a really tough, sticky time for the US consumer probably over the next 18 months. And so I tend to think that, you know, through the course of this year and through 2023, and possibly even a little bit of 24, it's going to be a grind. Unemployment will go back up. Inflation will be sticky. Real earnings will shrink. Consumption will ebb. And earnings will not be that great. But the silver lining is I think that we are starting a bottoming process for the equity markets. And I think that by the end of this year or the early part of next year, most of that will be done. And the reason is that, you know, the equity markets, I think, do a reasonable job of one, looking at the bond market, and then two, looking six to nine months into the future and pricing in that future today. And so by the end of this year, beginning of next year, I think that we will have kind of bottomed and we'll start to build a base. The thing to remind us, though, is that, you know, let's just say a stock goes down 50%. Even if it rallies 50% from there, it's still 25% off from where it was. Yeah, people don't understand that.
SPEAKER_03: And people don't understand that. How hard it is to climb back up the mountain.
SPEAKER_04: So I would just, you know, tell people that, you know, I think that David is right. I think that we're going to feel this for a while. This inflation, as I've said for a long time, is going to be sticky and persistent. I think you're going to see Fed funds at or breaching 5%. And but I think that in terms of, you know, risk assets will bottom out by the end of this year, beginning of next year.
SPEAKER_03: Freebird, what are your thoughts? Do you think we're in the process of bottoming out and it's going to be a year of this kind of slog through the muck? And what signs are you looking for that maybe we're getting out of it or turning a corner?
SPEAKER_02: I mean, Larry Summers had some good tweets this week. The weird, you know, the weird thing is Larry Summers seems to be like almost trying to make the case and make certain points because he's not being listened to. It's so ironic and sad to watch because he's such a thoughtful economist and has such a great point of view and experience to leverage here. And clearly, you know, he was banging the drums last year and no one was listening. And then he got public about it. And now he's more repeatedly public about things. The point that he's made, which I think plays into the political cycle question, which is where the tension arises, is in order to resolve ultimately the inflation problem, you're going to have to see a significant increment in unemployment. And so when you raise interest rates, you know, generally, purchasing goes down, demand goes down, revenue goes down, layoffs happen, some businesses go bankrupt, etc. So then there's this trickle in the economy of less people being employed. And when that happens, it ultimately drives a political response, which is, hey, we're losing our jobs. People start asking their representatives, do something about this in Congress. And then these programs and these things get passed, which themselves are inflationary. And that's why it's very hard to predict, ultimately, when and how this all gets resolved, because we seem to have an administration that is enacting and embracing inflationary policies to support what they consider to be economic growth and improved employment conditions in this country. And the unfortunate effect of many of those policies is inflation. And then it forces this difficult central bank decision making cycle. And so there's a tension right now that doesn't seem to have a clear path to resolution. That is why it's very hard to have a clear prediction here. We also have a very significant question overhanging all of these markets related to the price of energy, which is a key input to so many industries and drives cost, as well as food, and also the military conflict in Eastern Europe. And then there's in the financial markets, this big overhang question on what's going to happen with various countries that may default on their debt, as well as China's real estate bubble bursting. So I made this point, I think, a few episodes ago, but there's no easy answer that I can just say deterministically. Here's my prediction on what's going to happen. As Chamath uses the term, I think it's a great term. There's this mosaic of things that are under consideration right now. And there's a tension between them all. And that's what makes it difficult. I'm sorry, I didn't really answer the question. But that's kind of how I think about it. There's a lot of geopolitical risk. I mean, we're kind of, you
SPEAKER_00: know, ignoring what happened this week, where Putin basically is putting nukes back on the table. Now, I'm not saying that's likely to happen. But I don't know how, again, I don't know how this market gets a lot better with the risk of a war three hanging over our heads. I mean, who wants to enter the market with that on the table? And by the way, the nukes, just
SPEAKER_02: to be clear, you know, you can hear certain military commanders speaking publicly about this. But in the Russian military playbooks, there is specifically defined actions that can lead to tactical nuclear weapon use in the field. There's no direct indication that these things are going to be used right away. But as Sax says, there's like this weird like turning up the volume happening on, hey, maybe we're getting closer to a point where if Putin is having tactical failure in this conflict, there's more weaponry he can use that has greater impact. And unfortunately, there are these tactical nukes in his arsenal. And, you know, a guy that maybe has a certain psychology that has, as our friends have said, his back against the wall. He's not a person who in his career, or in his history, has ever acquiesced to defeat. Alex Karp was on CNBC. He was really, really sharp and concise about
SPEAKER_04: this, which is that, you know, in the West, when leaders fail in their objectives, they just get elected out and somebody else takes their place. Yeah. But for somebody like Putin, there is nobody to take his place because it's a very zero sum situation. And so his actions will, as a result, also be zero sum. And I think folks, he's never acquiesced. If he
SPEAKER_02: never acquiesced in his life. And yeah, yeah, we've never
SPEAKER_04: we've never really kind of like, we don't understand well, what zero sum decision making looks like when it comes to stuff like this. He needs the Golden Bridge, right? You're
SPEAKER_03: gonna give him the job. But I'll just say two things. One is
SPEAKER_04: that I think it's been made pretty clear that both India and China will not stand beside Russia if they do something like this. And I think that that is important because they still are the two biggest purchasers of of Russian oil. And so I think that matters a lot because you're talking about a lot of revenue that would that would go away. And then the second is I mentioned this last week, and this may sound dumb to some of you, but don't sleep on the Russian mothers. And what happened this year? Oh, you're 100% right on that. Well, what happened this week was really interesting, which is that he calls up all these reservists. These reservists are not coming from the major cities of Russia. You're starting to see protests, you're starting to see young people saying, I don't want to do this. Yeah. And who's that really activating? It's activating the moms. Yep. And
SPEAKER_04: so what I lose on the Russian moms, 300 people are being
SPEAKER_03: drafted, you know, to basically go fight and I actually think David's right. Oh, sorry. Sorry, go ahead. The question I have for you is, do you think I know you don't agree with this, but do you think the strategy is to back him into a corner, and then have this like rhetoric spike to then force a resolution? I know it's a dangerous strategy. It's a crazy chess move. But do you think that's actually what the West is thinking? I see no
SPEAKER_00: evidence that we have any intentions of seeking a diplomatic off ramp. I see no evidence that they're looking for to give him a golden bridge, like you said, then do
SPEAKER_03: you think they're trying to break him and have regime change? I think Biden stated the policy, which is this man
SPEAKER_00: cannot remain in power. I think he blurted out the truth of his policy. This is a regime change policy. That's what they're going for. They're they are back into a corner. Jake, I
SPEAKER_04: thought that you were right this whole time, which is we're going to build a golden bridge. We're going to find a way to egress this guy and I'm now sort of in the David camp, which is I think that the the stated strategy of the Western alliance is essentially to cause him to make such a categorically catastrophic mistake so as to become a pariah so as to either get overthrown or or you know something. So I do think that on balance the risk is now for things to escalate, maybe not in quantity and and I'll use this word in the wrong way, but you know, quote unquote like the intensity of of it. So I think David's right. It's a lot of pressure to the economy and to to the high risk strategy.
SPEAKER_03: There's a high risk strategy. We got a good thing going over
SPEAKER_00: here. I don't see the need for all this risk. So look at the
SPEAKER_00: risk would be the reward. What would you see the reward if
SPEAKER_03: Putin was removed? Oh my lord. Well, it depends who replaces
SPEAKER_00: him. What if we get a hard liner? You gotta remember Putin's taken out all the liberal reformers. All that's left are hard lines. So I know I know there's moms protesting in the streets, but he's also under intense pressure from his his right wing. The you know, he's got hawks on his side who basically have been criticizing him for making this a special limited military operations that of a war. They're like, why did you try to do this with 200,000 troops? We should have gone in heavy with a million. Is that right? There's criticism internally. There's a New York Times article about this. He has his own, you know, military hardliners in his security state, his hawks. So that so he's not just under pressure from peacenix who are protesting in the streets. He's also under pressure from hardliners in his own government who think he's been too soft. Yeah, it's a challenging
SPEAKER_03: situation. He said he said he's gonna be 70 years old. How many years does he have left? We just need to contain him for a decade was on our side. I don't contain him for more and more
SPEAKER_03: decade. That's my best idea. contain him for a decade. The
SPEAKER_00: thing I have the most trouble with is if you look at the media portrayal of this. So I said last week when you know we had this successful counter offensive that maybe we'll get what we want which is Russian morale collapses. They just tuck their tail between their legs and go back to Moscow or maybe you know the Russians really do see this war as existential for them. Putin sees it as existential for himself and he escalates. Well, what happened this week? We went up a rung on the escalatory ladder. Basically, Putin drew down 300,000 more troops and he's basically indicated his his willingness to use tackle nukes and he's basically said I'm not bluffing. So now what is the reaction in the American press? He must be bluffing. I mean, that basically is the reaction and look, I don't know how you know that. You know, in poker, what you in poker, what do we do when someone might be we put them on a range? It's called a hand range, right? Yes. You can't possibly know exactly what they're going to do or what cards are holding. So you put them on a range of possible hands and then you evaluate the story in light of their past actions. What do they do before the flop on the flop? And you you basically come to a assessment of what is likely based on their story. Now, take Putin's story like Freiburg said, he's never backed down in his life from anything. He has said this war is existential. You know, he basically threatened to invade and so he did. I mean, like I don't know how you can immediately jump to the conclusion this is just a bluff. Maybe it is but well, it could still be it could still be a bluff. But then to your
SPEAKER_04: point, the range of outcomes does include shoving on the river moving all in. He can move all I mean, he's a KGB agent.
SPEAKER_03: Do you want to play poker with a KGB agent with nukes? It's
SPEAKER_00: right. And so Jason, you said throughout this guy's a madman. Well, exactly. I mean, personally, I think he's more like Ruthless Mafia boss than a madman. But but let's say you're right that he is a madman. What is the story about what we're doing? That makes sense. If he is a madman? Why would we want to basically back him into a corner like that? Why wouldn't we give him the golden off ramp? And by the way, just on this idea that no one would ever use tactical nukes, let me just give you three data points. First of all, we use them, we dropped two atomic bombs on Japan, and to end World War Two, we could have won that war without doing it, but we didn't want to lose the troops. Those are just they were tactical nuke size atomic bombs. Number two, MacArthur wanted to use 20 to 30 atomic bombs and the Korean War he had a whole plan. Truman fired him. He thought he basically jumped the shark. But MacArthur was the most respected and admired American in 1950. And the reason why Truman could not run for your elections because he fired MacArthur MacArthur would have used basically the equivalent of tactical nukes to win the Korean War. And his plan to prevent China from re invading from the north was to irradiate the border so completely that Chinese troops cannot go through it. Keep in mind, there wasn't as many nukes at the
SPEAKER_03: time. So we weren't up against nine different nuclear enabled countries. I understand that we had an American commander, a head of
SPEAKER_00: our military who was willing to use nukes to win a war. So this idea that he wouldn't I mean, we've been willing to do that. And the third example is obviously the Cuban Missile Crisis, all of Kennedy's military advisor were willing to use nukes. I mean, and the best thing Kennedy did was not listen to his military advisors. They were all super hawkish. And Kennedy, what did he do? He looked for a way out. He looked for a compromise. He said Bobby Kennedy to go cut a secret deal with the Russians where Kennedy agreed to pull the R Jupiter missiles out of Turkey if the Russians would pull their missiles out of Cuba, and then he lied to the American public about it because he didn't want to be perceived as backing down. But that's the kind of, you know, flexibility and mental acuity that I think you would need in a nuclear showdown to avoid a catastrophe. If things do escalate to the point of a nuclear showdown, do we believe that we have leadership on the level of a Jack Kennedy or Bobby Kennedy who can basically show the flexibility and adaptability to cut a deal to basically pull us back from the brink? Yeah, it doesn't seem like that. What was Biden's response? It was he gave this speech to the United Nations in response to Putin. And it's more of the same. It's more of this, as I call it, the Abe Simpson speech, this old man, you know, yelling at the cloud. I mean, he's basically just yelling at a teleprompter. Now, I think the strategically smart play would have been to say, listen, Putin, you said that you want the people of Ukraine to decide where these territories go. Okay, we can hold a referendum, but we want to administer by the United Nations. So it'll have so it'll have some credibility behind it. I mean, why not throw that out there as a potential way to get diplomacy started? It felt like at the end of last year. You
SPEAKER_02: guys remember I thought like conflict was likely this year. I don't think that the conditions that I was referencing have really gotten better. I think they've gotten worse. And that's why I think we all talk about this in a rational way, meaning like how the conscious mind would, you know, debate the merits and challenges and risks of having a golden bridge or continuing conflict. But if you look historically, the US has often been in the middle of or at the tail end of some either recessionary cycle or inflationary cycle when conflict escalated externally. Wag the dog you're referring to? I don't
SPEAKER_02: know if I would call it that, but I think that there is an innate human anxiety. When things aren't going well, you feel like you have to do something about it. And you're either going to have internal conflict or external conflict as a result to try and resolve when when things are going great, the economy is booming. You don't enter a war. You don't start a conflict with the nation when people are happy at home, when your constituents and, you know, the unemployment rate is low and job wage growth is high. The economy is growing. Are you referring to the United States or Russia in this case?
SPEAKER_02: I'm referring to the US. And I think I know I'm just curious if you are coming out of COVID and coming out of the big question marks that loomed over our economy at the end of last year around inflation, economic growth, interest rates and the
SPEAKER_02: effect and now we're in the middle of the turmoil. Markets are down 30% and in some cases 70 to 80% for high growth markets. There's a there's an inevitability now that unemployment is going to rise. There is an inevitability now that the economy is going to contract. Leadership is more likely in that scenario to find an outlet to find a place of conflict. And I don't think it's a conscious decision. Explain why in this theory. Explain why.
SPEAKER_03: Is that what you're saying, Freiburg? Wag the dog?
SPEAKER_04: Yeah, I don't I don't think it's a conscious decision. I don't
SPEAKER_02: think that it's like, hey, let's go start a war with Russia because the economy is bad. I think it's this anxiety. The economy is bad. And there's not a lot we can do about it. And over here, on the other hand, there's a problem and there's something we can do about it. We can build strength and we can build integrity and we can build support and we can get people to get behind something together. And we can get something to create a driving mechanism to achieve something big. Like a distraction, you're saying? Yeah. Yeah. And I don't
SPEAKER_02: think that psychology is as simple as a distraction or a wag the dog or hey, it's not even as simple as the military industrial complex will see revenue growth and wage growth and that'll drive the economy. But I think all those things together are true. And I think in in whole, we're we are more likely to want to pursue conflict right now than we were even a year ago. You buy that your mouth? I think he's more
SPEAKER_04: right than wrong. I think that when things aren't easy, you need to find sort of distractions essentially to get people to focus on other things so that the core problem isn't as obvious. We have in the United States, I think. Yeah,
SPEAKER_02: let's go create another problem that's solvable. Yeah, I like
SPEAKER_04: the best. I think the best way that I can describe this is I see it as institutional rot and the more that we're left to our own devices, that amount of institutional decay becomes more and more obvious. Our governments don't work the way that they should. You know, our state assemblies are basically co-opted by special interests. The federal institutions we rely on to make rules are not that great. Enormous amounts of money get wasted every day. And as more and more people become aware of these things, it's just the trend is just so bad. You know, civic engagement goes down. Everything just gets worse. And so when you take that and then on top of that, you sit it on a on a poor economy. That is a real powder keg, I think. And so folks like to, I think if you're a politician, it's easier to kind of go and point to Taiwan and say, you know, we're going to go and defend these folks if there's a war. Point to Russia and say this. Point to all these other things. It's a whether it's implicit as Freebrik says, or it's more explicit of a strategy, I don't know. But the underlying cause is the same, which is that if the foundation of the house is not strong and you're not sure what to do to fix it or you don't have the courage to fix it, the better strategic alternative is to distract and talk about your neighbor's house. Coming out of coming out of the financial
SPEAKER_02: crisis in 2008, 2009, Obama recommitted to Afghanistan and sent 17,000 troops to Afghanistan in early 2009. When he took office, we entered the Persian Gulf with the Gulf War in 1991 coming out of the Great Recession or the the the the mild recession, 1990 to 1991 2000 2001.com crash. We you know, we obviously entered entered Iraq. Yeah, that was
SPEAKER_03: post 9 post 911 911, but it was also choice of risk, but it was
SPEAKER_02: also in the midst of a recession and coming out of the that was that one was clearly a reaction. He sacked you by this.
SPEAKER_03: You think this is a Wag the dog or and by the way, you can do the same. You can do the same analysis on the time we entered
SPEAKER_02: the Korean War and the time we entered the Vietnam War. They were both tied to to recessions and and so I don't know. I don't know how explicit this this action and behavior is, but I just think there's some data to it. There was a study
SPEAKER_00: that just came out by Tufts University on American military interventions throughout American history and what they found was that we had the least in the period before the Cold War, then the second most was from the during the Cold War, but actually the most hyperactive period of American military interventions was post Cold War. So since the Unipolar moment, even though it's been the safest period for America, right? We haven't explained Unipolar for people
SPEAKER_03: don't know just that there's only one great power in the
SPEAKER_00: system before during the Cold War is a bipolar world where it's basically America versus the Soviet Union and the UN basically had the you know NATO and the Western Alliance the so called free world and then proceed check and balance proceed. You'd have the Warsaw Pact on on the other side. Now we have Unipolar moving to buy. Well, it was it was Yeah, we
SPEAKER_00: were Unipolar for a couple of decades, but now we're moving towards multipolar or at least bipolar with China. Yeah.
SPEAKER_03: multipolar would be maybe including India, maybe including India, Brazil, China in the future in the future.
SPEAKER_00: But but so the irony is that the safer America has become the more we've gotten militarily involved overseas. And part of that is because there's no great power in the system to oppose us. But it's also gotten us in a lot of trouble. I mean, all of these wars in the Middle East, that cost us something like $8 trillion. Another survey cost a war study, the direct number of deaths from these wars from the war on terror was over a million lives lost $8 trillion. And that doesn't even include the excess mortality caused by the destruction of infrastructure, wastewater treatment, you know, famine, all that kind of stuff, which could be as high as 5 million, you know, the crazy part about that sex, that $8
SPEAKER_03: trillion, if we had deployed that in energy independence, solar, nuclear, whatever, the whole reason to be in the Middle East was oil and energy. And we could have just deployed that to be energy independent in the West and not had all of this pain, not the whole, I mean, not the whole reason. I think the
SPEAKER_04: reason to be in Afghanistan was to kill some with the exception of 911. And maybe we could have done that without taking over
SPEAKER_00: the whole country and gone on this 20 or that could have been done very strategic. I mean, actually, that was really proven when Well, first of all, we did kill. We did kill bin
SPEAKER_00: Laden in Pakistan, with just a raid by the seals in infiltration to occupy that country. And then more recently, we finally got so hairy in Afghanistan, roan, using a drone after we left the country. So what the hell do we need to be there for? We don't 20 years when we could kill these guys so drones and you know, a helicopter team. Yeah, this is
SPEAKER_03: where we needed to have an adversary who could check our power, it would have been healthier as I guess the premise right to the top study. Right. But But look, I think to
SPEAKER_00: freeberg's point, is it? Do we become more militaristic when things aren't going well at home? I don't know. But it feels to me, like just in general, over the last 30 years, we've become hyper militaristic. It's the use of military force is typically the first option. And we resort to it too quickly. And we don't use diplomacy enough. And you can see that in just the number of lives lost the failure of these wars, and the enormous deficit we're running. As you know, sex, I can't stand Trump.
SPEAKER_03: The two things he got right. No wars. And he was the dictator whisperer. That guy knew how to talk to a dictator. You know, whether it was North Korea, China, Russia, he just knew how to bond with them. It was like a superpower for him. Okay, we have three directions. That keeps us out of wars. Great. You
SPEAKER_00: know, I mean, it's literally his only saving grace. All right.
SPEAKER_03: Gentlemen, we have to talk about what's going on in Iran. We have to talk about the Wall Street editorial boards, California, talk about talk about talk about Newsom, because there's a bunch
SPEAKER_04: of energy stuff happening in the United States really think is important. All right. So the Wall Street Journal editorial
SPEAKER_03: board, which obviously has a side wrote an op ed on California's grid issues, some of the quotes from the op ed, California can barely keep the lights on as its climate policies. By the electric grid, but Gavin Newsom is undaunted on Friday, he signed no fewer than 40 new climate bills to amp up California's green energy stock shock experiment, even as gasoline prices nationwide have fallen to an average of 368 a gallon. Californians are still paying 545 a gallon California's electric rates are already more than double those in neighboring states. This is what happens when politicians try to eliminate fossil fuels with a Molotov cocktail of regulation taxes and renewable mandates and subsidies. The coda to this is I'll send it to you, Nick, but can you please
SPEAKER_04: play the clip as well of Rashida Tlaib trying to skewer Jamie Diamond where he just destroys her. Oh my god, that's embarrassing. That was embarrassing. I mean, we should play it. I mean, it's she made no sense.
SPEAKER_03: Nick, can you play that clip, please?
SPEAKER_04: You have all committed, as you all know, to transition the
SPEAKER_01: emissions from lending and investment activities to line with pathways to net zero in 2050. Do you know what the International Energy Agency has said is required to meet our global 2050 net zero targets of limiting global temperature rise to 2.7 degrees Fahrenheit or 1.5 degrees Celsius? So no new fossil fuel production starting today. So that's like zero. So I would like to ask all of you and go down the list, because again, you all have agreed to doing this. Please answer with a simple yes or no. Does your bank have a policy against funding new oil and gas products? Mr. Diamond? Absolutely not. And that would be the road to hell for
SPEAKER_02: America. Yeah, that's fine. That's fine. Sir, you know what, everybody
SPEAKER_01: that got relief from student loans has a bank account with your bank should probably take out their account and close their account. The fact that you're not even there to help relieve many of the folks that are in debt, extreme debt, because of student loan debt, and you're out there criticizing it. My favorite was when she said sell assist. That was the I was
SPEAKER_03: like, okay. It's just so much theatrics. Rashida Tlaib represents the 13th District congressional
SPEAKER_04: district in Michigan. The median age in that district is 35.9 years old. The 2020 poverty rate is 28.2%. So more than almost one in three people. And the 2020 median household income is $37,601. So, you know, she represents a group of people that, you know, I think at best is lower middle class. And the idea that she doesn't even basically understand what would happen in her district, if you actually did not have cheap LNG, again, just kind of speaks to the institutional kind of decay in Washington. She is not the person that should be advocating for this. Like, you know, it's districts like this more than any other that don't have the money to spend on, you know, very expensive solar installations that cost 30 and $40,000. These are the districts that need coal, coal fired plants, LNG, oil, to keep going to sort of minimize the impacts of inflation. And so you know, that was just like a grandstanding moment moving to California hearings, because, Jamath, these are important discussions, and
SPEAKER_03: they've become theatrics. And this is a chance to educate the public with some charts and data. She's either so hungry for
SPEAKER_04: power that she actually doesn't care about her constituents, or she's scientifically and numerically illiterate. That's, I think, the latter is probably the issue here. And so this is
SPEAKER_03: this is what's such a shame on the on the on the other side,
SPEAKER_04: you know, at the end at the other end of the coast in California. The cost of power generation, just so you guys know, has fallen by 90%. When you look at renewables, and that is because of a good job that the federal government did in introducing subsidies that essentially gave the right sets of incentives for people to build this infrastructure. But while the cost of generating renewable power has fallen by 90%, you know, virtually, it's on par, and it's cheaper than any other form of generation, your electricity costs have doubled and are probably going to double again, in a state like California. So you know, we're cagering our, our utility rates by, you know, seven to 11%. Every year, that is unsustainable in California. And what do you have, you have, again, a different version of the same flu that Rashida Tlaib has, which is, you run forward to kind of virtue signal and to try to do all of these things, you don't spend enough time to really understand what's happening on the ground, and you make it impossible for people to make the decisions to actually be resilient for themselves. At least, there are tens of utilities in America, but there are 100 million households. And the only path to energy independence is to get every single 100 million household to be resilient, which means they need their own solar panels, they need battery storage, they need their own potable water, and all of these systems are now affordable and available. And now the federal government with the IRA has created the financial incentives to pull it forward. So, I don't just think like this is a hugely stark reminder about how poorly our energy policy has been managed. And if you leave it to the hands of the progressive left, they will do things that don't map to what people on the ground actually need. People in California, most people in California, cannot pay utility rates that are going to double every six and seven years. Just like people in the Congressional 13th District of Michigan cannot afford to pay for solar power. If Rashida Tlaib is able to get, you know, all these banks to not finance LNG, coal, and other forms of hydrocarbons as a bridge fuel. You have to look at all 40 of
SPEAKER_03: these bills independently, and you have to think about... 40
SPEAKER_04: bills? I mean, who's reading these things? What is in these
SPEAKER_03: things? I mean, each one has to be addressed individually. Like one of them could be to help people put solar panels on top of schools and batteries in there. That could be a good bill. But there definitely needs to be... We have that mechanism at the
SPEAKER_04: end of the era. The IRA passed an incredible set of incentives, both for the producers of these things and for the end companies that actually deploy them. And so we've solved that problem, you know? So I just think like it just goes to show you a ton of regulation does not actually add and get to the solution that we want. The government will not solve your problems. I hate to be the bearer of bad news, but they are going to make things more complicated and more expensive than the unions that you expect out of your utility infrastructure. By the way, we saw just what happened last week. There was a massive fire and a massive battery installation that California installed. A 182 gigawatt system, megawatt system. Could you imagine if that had actually lit on fire two weeks earlier in the middle of this crazy heat wave that we had? So even utility scale renewables are very complicated projects to undertake. Look at Texas. I
SPEAKER_03: mean, people are dying there because the grid keeps going
SPEAKER_04: through. What is much safer and more reliable if is if every homeowner in the United States took responsibility and and use these incentives to basically become your own little virtual power plant and you will technologies there. I mean, the people are getting generators for natural gases backup. So
SPEAKER_03: we're going to have to figure out how to take the load off the grid and build resiliency into it. I don't know if you guys saw in a related story that all this ESG stuff is kind of coming to a head but Dilbert got canceled this week and like 200 papers. Did you see this? What? Yeah, so well, because he's been going after ESG in his cartoon and so I'm interested in your take on this. But here, I don't know the characters in Dilbert except for Dilbert. But he says, this person who's in charge says our ESG score will drop if we open a new factory that add co2 to the atmosphere. But we can balance that out by adding more diversity to our board. And I guess the cat says how much co2 do you plan to add? And he said one on nine binary board members were showing the ES and the G being put together makes no sense. But that that panel obviously got him canceled.
SPEAKER_04: What does it mean? He's canceled like he was fired from national newspapers. I think one of the 177 newspapers because they're
SPEAKER_03: all part of chains now. And I guess some of those because of that because of that cartoon, that cartoon plus it's like a series going after the social governance part of you know, environmental and pointing out he stated on his podcast that he wants to kill a ESG. So this whole ESG debate, he's trying to further it but I guess that yeah, well, I mean, the the
SPEAKER_04: concept of ESG makes a ton of sense. I think the problem is that it does implement this. Yeah, this version 1.0 implementation was financialized by people that have no care about ESG at all. And so all it's done is create complexity and consultants and, you know, make sense or it
SPEAKER_03: doesn't make sense. No, the words, ES and G make right a lot
SPEAKER_04: of they have commas or periods between them, I guess is the
SPEAKER_03: question. That's fine, too. But my point is, saying that you
SPEAKER_04: want, you know, diversity, and you want sustainability, and you want better governance, all good. All of these things are really great ideas. It's just that in this first implementation, it got financially perverted. And so what you have are folks that are, you know, probably not the best positioned or should not really have an opinion about ESG opining about things that they never were given the authority to opine on. And then as a result, what it's really created is a cottage industry of consultants that can basically make, you know, hundreds of millions of dollars writing all of these reports. And I think that that's why this implementation doesn't work. So ESG today is broken, and I think it's largely meaningless. The concept of what people want is is a very good idea. We just need a better way to implement. I agree with that. You can't connect these
SPEAKER_03: things. We're going to put social and governance with environment. It's all that's going to do is hold back the environment right? Sacks sacks. We're having all of fed beef
SPEAKER_04: tonight. Oh, this is the greatest. You need to try it. I'll see what I can do. No, you have to do it. You have to do
SPEAKER_04: it. Okay. Once you have to say sacks, commit no bullshit. You cannot imagine what is a beef look like that has been only fed green olives pitted green olives. I can tell you. I can tell you how it looks delicious. Is it green? It's the
SPEAKER_03: most delicious steak you've had in your life. It's the most delicious. Alright, I'll come for that. Okay, it's
SPEAKER_00: incredible. Oh, so you're going to drive me with your driver.
SPEAKER_00: Text me your address so I know where to get you. Oh, I love it.
SPEAKER_03: Oh, this is going to be great game on. Listen to this lineup.
SPEAKER_04: Me, J Cal, Friedberg, sacks. It's flying it. This thing. This is going to jump up. This game is going to no more flips. The flips are ridiculous. Okay. You know what now now that sacks coming, I'm going to tell him to break out the early white troubles. I'm just kidding. You're sending the trouble pigs
SPEAKER_03: out. Not not just walked to my office. She looked at me when I
SPEAKER_04: said white trouble. She's like for bestie dinner. It's
SPEAKER_03: happening. Everybody is happening. It's happening. You
SPEAKER_02: know what I saw was hell mute the other day on one of his heads up matches where he got in that huge fight with that guy. Did you guys see that? And he called the guy every match. You just described every match. He's like some heads up thing and the guy had flopped some insane I think it was like quads or something or and hell you've had like top pair except top pair. Yeah, and help me fold it on this guy. It was incredible to watch the play like the read from hell. It was unbelievable. He is incredible. He's a freaking phenom that guy. He's pretty great. He's got unbelievable. He's the greatest poker player in the world. He really he has reads are unbelievable. Do you think that what percentage of it is
SPEAKER_03: obviously he is incredible player. But there's another piece of this that we all see which is people play into him. They want to be in a hand with him. They want to bust him. So in those tournaments, what do you think? No, I think I think
SPEAKER_04: what's happening is at the highest level. There's like all these people that have gone in this one direction and by the way, this is probably a good we could talk about chess in the same way, which is that you have these solvers right? There's poker solvers and now they're they're these chess solvers and the young generation spends all this time training on the solvers so that they know every permutation of every move and what is what people call game theory optimal or GTO. The problem with GTO is that you can actually be very exploitative against somebody that's actually playing perfectly because the AI is perfected around what is the rational set of decisions in every spot and so you can set people up to make a lot of really bad mistakes and I think how you understand that and so because he is one of like this dying breed of people that plays live. He's able to just be so exploitative and these folks that are basically playing from rope memory right? What is the GTO move in every spot? They end up making a bunch of mistakes and and feeding chips into him and so I think like it's it's probably the same as it's sort of this Magnus Carlsen. He kind of knew what to expect from people and the minute this get deviated into this realm where you're like, how could you make that decision? Probably because you know the the computer AI is able to calculate make a slightly losing move. Now three moves later, you're going to actually be ahead. It caught him off guard where he was basically like I think this guy's cheating. Really, really crazy, but I think like if you if you have a bunch of GTO kids folks that are a little bit older that have been playing in a live situation can be hyper exploitative. By the way, this
SPEAKER_02: is a good point generally about about this gaming is that computation has played and computers have played such an incredible role. It almost becomes questionable on how much can the human really differentiate anymore in these in these games and in these systems. You guys watch the chess players on YouTube and they'll have solvers live and they'll be getting live scoring as they kind of walk through a match or walk by the way free burn area. That's that's the
SPEAKER_04: same with poker. You have these HUD heads up displays and a lot of the poker sites have basically given up they try to spot the cheating and you can't because you have this basically layer that's helping you and it's effectively impossible because you know these things run locally. They're screen scraping locally and you just have no idea except when they make moves that are just so unpredictable from a human and could only come from a from a from a machine. They're able to be all games maybe become obsolete
SPEAKER_02: because there is no real way to qualify the performance of one human against another when the AI itself or the technology or the computing itself, you know, overshadows human potential and human capability. You guys may not know this
SPEAKER_04: story, but when I met Demus, the the the founder of Deep Mind, I got introduced by Teal like in 2011 or 12. So like a decade ago and I met him in London. I'll never forget this at the we were having breakfast at the Conant Hotel and he explained to me deep mind in the context of the game because at that time how they were building the first versions of the AI. Was perfecting how to play certain video games and I can't remember the name of the video game, but it was one of the famous first person shooter games and the whole idea there was like you know if you can perfect an AI that that basically plays GTO and can win the game. What you've effectively solved for is is like a layer of AI that can then solve other generalized problems. I was blown away. I thought this is the craziest thing I've ever heard a decade ago. So it's it's pretty natural that they've taken this stuff and adapted it to meet every game. It's a little sad though too. No don't you think yeah, I mean, yeah, but I mean,
SPEAKER_02: maybe there's a different model of performance for humans that really changes what the gaming is right. Well, like I mentioned it. I don't know what it is. I mean, I think that these games
SPEAKER_02: themselves completely you know that the intent of a game, which is to measure one's kind of decision making abilities gets obsoleted because the software ultimately is a better decision maker than the human. So the question then is what is the human going to rise to that creates a new playing field and I think there's probably elements of creativity and actually using the software to become part of the game that opens up a whole new opportunity for what gaming is. I mean, we've been talking about a little bit about video games, but you could see artificial constructs in gaming that arise from the human interacting with the computer and then creating a new sort of playing field in gaming. Yeah,
SPEAKER_04: Sax. What do you what do you think about all this? You're a big chess player. Yeah. I've been following it for the last
SPEAKER_00: couple of weeks. It's obviously been the big story in the chess world. What basically happened is that a couple of weeks ago, Magnus Carlsen lost that game to Hans. What's his last name? I think Neman. Yeah, exactly. And the next day he pulled out of the tournament. This is the sink field cup and he's never pulled out of a tournament before everyone was sort of speculating is he sick or have COVID or something like that and then he tweeted out a video from some soccer coach saying I can't get in trouble. Yeah. Yeah. So clearly he was in a passive aggressive way of making an accusation and then he doubled down a few days ago. He was in another tournament and he had to play Hans. I keep forgetting the guy's name.
SPEAKER_00: Hans Neman. Neman. Yeah. He had to play him and he resigned on move two. So basically he doubled down in his accusation and he won't specifically say what leads him to believe that this guy is cheating but he thinks he is. He's he's a young player. He's something like eighteen and he's had a pretty meteoric rise in the chess world. I think his ratings gone up a couple hundred points over the last two years. It's the fastest rise in chess rating that anyone's ever had before. It's been the case that players have and young players especially have risen quickly but this is it's a pretty it's it's the biggest. How is he cheating? That's happened. Well, that's the thing. So, the the issue is that it's easy to
SPEAKER_00: cheat in online chess but in over the board, you would either need to have a device or to be signaled by somebody in the crowd. You'd need human assistance or the assistance of a device. It almost be like, you know, a casino or something where they're using the contraption. Yeah. On the guy's leg to signal, you know, to information to him. So, nobody really knows how he would have done it and of course, he wasn't caught doing it. So, he can never prove that he wasn't. So, there's just a real question here. But they did make some changes after
SPEAKER_04: after Magnus Carlsen resigned. They put the feed on a 15 minute delay. You know, I think like at some point, you're gonna have to start wanding people and having them go through a metal detector. Yeah, they're gonna have to toughen
SPEAKER_00: up all of the anti-cheating standards. One of the
SPEAKER_04: grandmasters was like, we should play naked in a locker room. So. Yeah, there was an online site that basically
SPEAKER_00: offered to pay Neman a lot of money to play basically naked to prove that he could, you know, really do what he what he's been doing. The the theory on why he's not cheating and and the rise is justified is that in theory, this is the argument is that he's grown up learning from all these neural nets. These not just chess engines. The first generation of chess engines were like stockfish. They were just computational machines that were programmed by humans with thousands of rules on how to play chess and then they could just crunch the lines better than a human could. More recently, thanks to Deep Mind, it's a whole different type of machine. It's basically these neural networks where all they're programmed with are the rules of chess and then they it plays thousands of games or millions of games against itself and it learns the best way to play chess and the the neural nets play in a whole different way than the than Stockfish than the pure engines. The the engines is played like a human that's able to calculate really well, whereas the neural nets do things like there's. I mean there's sacrifices for a human would never make. Yeah, they'll
SPEAKER_00: make they'll make sacrifices for just for peace activity. So you know normally when a human makes a sacrifice, they they'll recapture the material within a few moves, whereas Deep Mind will sacrifice a pawn and you know just for the positional advantage or for the peace, the increase in which doesn't show up for many many moves right exactly is exactly. Yeah. And
SPEAKER_02: so the ability to model like twelve moves out is is really but that you know that's where I think people thought that
SPEAKER_04: Magnus picked up on something because it's like those sorts of moves are rare in the absence of some layer of intervention because typically it's like you know and you know this much better than I, but it's like you know the opening and the closings of all of these chess matches are so tightly regulated. There's not a lot of creativity. It's sort of in the mid game that you have the slight positional advantages and disadvantages and so I think it was amplified that one of these positional sacrifices made no sense in the context of that game unless you had the ability to you know think really conclusively about six seven moves from now. By the way, it's the same. It's the same thing in poker. So there's a thing if you guys want to download it. It's called I think it's called Poker Snowy. It was like the first layer of a pretty basic AI, but it's gotten better and better and really what it allows you to do is in every situational spot, whether it's heads up all the way to a six-handed ring game, you can really understand you know what to do now. Poker is meaningfully more complicated than chess as it turns out because again you have you're not playing against one player. You're playing against some umpteen number of players. You know we don't know when each of them is going to step into a pot and there's a pot and then there's all of those elements. So it's a little bit more complicated to build a true kind of like neural net around it, but even still you can kind of get a sense of of what you should be doing in different spots and what you see is that there's literally like trillions of actions and so it really is impossible for a human being to really memorize in every single situation what the true you know probabilistically weighted GTO optimized move is going to be and so this is why I think a lot of people I guess led by Magnus was saying how could you have known this unless you were aided by something? It's pretty clear that this guy cheated. It's
SPEAKER_02: pretty it's I think it's what's what's profound is that mastery of the game may not be achievable by a human, but mastery of any one of these games may actually be achievable by neural nets and I think that's what's really frustrating to Magnus and to other top tier players in the world that are the best humans at a particular game is they're now realizing you know that they really aren't the true Masters that the true Masters are the neural nets and more than just the guy cheating, which may feel like bad sportsmanship or whatever fundamentally one's ego being built entirely on one's mastery of the game and being the best at the game is fundamentally challenged because a computer is better at the game than you. It's a really profound moment for humans. I think that that ship sailed a long time ago.
SPEAKER_00: Yeah. I mean I know that he's experiencing it right. Yeah. Well, no it was so it was way back when remember when Kasparov played Deep Blue, which is the IBM. Yeah. That was the first which wasn't even a sophisticated neural net. That
SPEAKER_02: was just a almost deterministically modeled. Yeah. It was deterministically modeled system. It was like
SPEAKER_00: Stockfish. It was just a number cruncher and it that was when computer intelligence and chess tip to be able to beat the world champion since then, there's no looking back. I think every human who plays in the chess world understands that computers are better and there's no way for a human to be better than a computer. So it's certainly not a neural net. I mean Magnus certainly knows that I don't think anyone's bothered by that. I think that everyone understands that humans play in a certain way and their goal is to be the best human. I think the concern is just obviously if a human it gets aided during a game by computers, but the way that chess works now, the preparation is all about working with computers. These top players spend huge amounts of time researching openings and looking for novelties in openings using computers to help them do their research. So you know, working with computers has now become an integral part of the game. It's kind of like you know in many sports where the technology has enabled the athlete to get better, you know and and it's really technology becomes the key vector of competition. This actually happened in the NBA. This
SPEAKER_03: happened in the NBA where there's a special technology for three point shooting and your form etc. And the Knicks actually and a couple of other teams implemented it a couple of years ago and you saw the entire team became better at three point shooting. So people who were you know, 200% 300% you know moved up 10 20% each, but this kid is clearly cheating because he's cheated in the past and people who cheat in the past cheat in the future is my basic belief. So this guy Neiman publicly admitted that he'd use electronic devices to cheat when he was just a kid on online games when it was 12 to 16 years old. So the question is like no but Jason it's worse
SPEAKER_04: than that I think because then chess.com came out and said actually the cheating was more rampant than just those two incidents. Their algorithm determined it. Yeah. Yeah. He's
SPEAKER_02: definitely cheating. So why are people playing with him? Well
SPEAKER_00: because he said that yeah, he said that was those games were not for money and he was just rating fast and it's like the poker guys who cheat you and if you're a poker guy and you've
SPEAKER_03: cheated before you never play with those players again. They're cheaters. It's obvious and they can just issue. Well,
SPEAKER_00: the issue here is that this was an over the board tournament where the the one that Magnus pulled out of in order to protest. So the question is how could he have been cheating
SPEAKER_02: right now? I think what what adds to the complexity of it is
SPEAKER_00: that you have to remember that when you're dealing with a player look if it was us playing Magnus, we need to cheat on every single move. But if you're a 26 or 2700 player and you know Magnus is a 2860 or something the higher the rating the better in chess called the elo. But in any event if you're like a 26 2700 player like Neiman you only need help with a few moves in the game. In other words, if you could get a tip at a critical moment of the game, that might be all you need to put you over the top. You wouldn't need to in other words to beat Magnus. You wouldn't need to cheat on every move. You could just if you just cheat on two or three moves at the right time that could put you over the top. So something
SPEAKER_03: could vibrate on your leg four times and then two times over and tell you which piece to move. That's what they were
SPEAKER_04: saying. Jake. I like he had like a vibrator in his like what were the shoes? Where was the vibrator in his shoe? There was
SPEAKER_02: a meme that became like a whole thing where it was like he had something in his butt or something. He had a chest computer
SPEAKER_03: and anal chest computer is what you're saying. Okay. No look
SPEAKER_00: that's not real. Somebody speculated on Reddit. Yeah. And then it became a Reddit post saying that he was being communicated with through vibrating anal beads and then that went viral. Elon tweeted it. Although I think he deleted
SPEAKER_00: it. Look it's absurd but the point is there is a question of how would he have done it if he did it? Yeah. There have been cases before though of people getting caught. Yeah people getting caught going to the bathroom and then you know checking their phone. Yeah. There's a there's a grand
SPEAKER_04: Bulgarian grandmaster. He got caught in the bathroom checking his phone and oh god metal detectors on the way in
SPEAKER_02: and they have RF detectors in the room right. So they look for any sort of communication. I think I mean didn't they do remember that going into this event? You just gonna have
SPEAKER_03: somebody watching. No they did it after a half hour delay. The
SPEAKER_00: the St. Phil cup added a 15 minute delay after these accusations. So yeah I think there's gonna be there's gonna be more precautions basically but we still haven't heard from Magnus what made him think that there was foul play here in this particular game and he's been very reluctant to he won't say anything. It's it's sort of passive aggressive. Now the first side of it is that Magnus Carlsen has been the number one guest for over a decade and he's a very classy player. I mean I don't you know everyone's never heard a word said about him that you know was now he can be cocky. He can definitely be cocky but he's a very classy player. So I just don't see him doing something like this lightly. So that's what's so. Dramatic about to understand about it. Dramatic is yeah. It's really hard to understand how Neman could have cheated but also Magnus doesn't seem like the kind of player to just make a wild impulsive allegation. So this is why the chess world has been really roiled by this. Is there like
SPEAKER_03: any kind of equivalent of like PED scandal here like people taking Adderall or Provigil or any other kind of nootropics to to get an edge. No one's there's a good documentary. I
SPEAKER_02: think it was on vice on how a lot of the top chess players actually get ready for matches and they're incredibly diligent about their sleep, their workout routine, alcohol. They take supplements. I forgot who made the documentary, but it's actually incredibly intense how physical these people are. Well like one game of classical chess can burn like over 2000
SPEAKER_00: calories or something like that like the amount of of calories that get burned just by using your brain so intensely.
SPEAKER_04: Adderall is rampant in the poker community, especially in tournaments. So when you play the the higher tournaments and I played them and I just kind of step in and and it's I felt very underpowered relative to the to the kids I was playing with because they were all on Adderall. Well, they're 12 hours. Well, it's 10 hour sessions over 12 hours.
SPEAKER_03: It's it's exhausting. It's really really physically
SPEAKER_04: exhausting to play. That's why I stopped playing tournaments about a decade ago. I just couldn't sit there for that long. It can't justify the time suck of it too. It's like it's
SPEAKER_04: just so it's just so physically and emotionally demanding to be able to play that well and make no mistakes over 10 hours. And so you know the only solution that all these kids would turn into was was Adderall and I was like this is not worth it for me. So I stopped. I stopped playing in tournaments and which is too bad because II thought like I could have a real chance of actually doing reasonably well in some of these things and I just gave up. By the way, the other thing I wanted to mention is there's there's been like cheating in all these other kind of sports and it always gets exposed like whether it's you know the Tour de France. It turned out that everybody was using PEDs or you know the Russian Olympic team. Everybody was using PEDs. New England Patriots stealing
SPEAKER_03: signals. Yeah. Alright. Listen, let's just talk about the Iran for a moment. Iran has shut off internet access internet access in parts of Tehran and blocked access to Instagram and WhatsApp to try to stop these protests. The protests started after the death of a 22 year old Kurdish woman while in police custody. Masa Amini was detained on September 16th for allegedly wearing hijab headscarf in an improper way. She later died in police custody. And activists are saying she suffered a fatal blow to her head. And now you have 15 cities with very large crowds. Women are burning their hijabs and it seems to be escalating at a pretty fast pace. Iranian authorities are denying that they had any part in her death. Thoughts on this? It's horrible. Yeah, I wish
SPEAKER_00: them well. If you look at the demographics of Iran, it's
SPEAKER_03: pretty amazing how many young people there are here. This feels like a country that could turn over. That'd be great. And
SPEAKER_00: you want to know why it has a chance of working because we're not the ones behind it. I mean, absolutely. Yeah, we we cannot
SPEAKER_03: yeah. Run the revolution. The revolution has to be done but to the women and young people of Iran protesting you have our support and we're rooting for you and don't let the bastards grind you down. Alright, everybody for David got her name. Did you forget her name? No, I'm just I was gonna try to come up with a new name for rage Berg like free bird. David playing view rage burger rage for rage burger playing view.
SPEAKER_03: It's the David the dove and the host with the most chamath polyhappity. I'm the world's greatest moderator. I'm so
SPEAKER_04: excited to see all three of you. Honestly, big huh? Sax, don't flake. I love you guys. I really want to see this. Don't throw up in a ball. We got it. We should roll down together.
SPEAKER_03: Let's roll baby. Big game. Alright, we'll tell you guys. See you tonight. Love you besties. Bye.
SPEAKER_00: Oh, man. We should all just get a room and just have one big huge because they're all just useless. It's like this like sexual tension but they just need to release them out.
