Markets turn Trump, Long rates spike, Election home stretch, Influencer mania, Saving Starbucks

00:00:00.000 | - Jason, do you wanna go up to the bedroom,

00:00:01.680 | knock on the door and wake Chamath up?

00:00:03.040 | - Where is he?

00:00:04.360 | - You're in his house, go get him.

00:00:06.040 | Let's go. - He's at the office.

00:00:07.080 | He went to the office.

00:00:07.920 | He's not here. - Oh, he went to the office.

00:00:09.600 | - We're trying to find Chamath at the moment.

00:00:11.600 | Oh, here's Chamath, okay.

00:00:13.240 | - Are you wearing my goddamn sweater?

00:00:14.920 | What is, what is?

00:00:16.820 | Is that my, you're in my house.

00:00:17.660 | - Chamath, Chamath. - Is that my sweater?

00:00:18.760 | No, I am so tilted.

00:00:20.080 | Where is my wife?

00:00:21.040 | What the (beep)?

00:00:22.680 | - Don't worry about your wife.

00:00:24.120 | - Oh, oh my God. - Amore.

00:00:25.880 | Amore, this part is great.

00:00:28.040 | - Where is Nat? - Hold on,

00:00:29.520 | hold on, Nat. - I didn't get anything else.

00:00:30.880 | - Take off my sweater. - Oh, Amore.

00:00:32.360 | - It's okay. - Amore.

00:00:33.200 | - Don't touch my wife. - Amore.

00:00:34.560 | - Oh my God. - There she is.

00:00:35.380 | - Oh my Lord. - I didn't get

00:00:36.220 | anything else.

00:00:37.060 | - Oh my Lord, she's tainted. - Oh my God, no.

00:00:38.560 | I'm so tilted, I thought I was tainted.

00:00:40.400 | - Amore. - Hey, don't you worry,

00:00:41.800 | Amore.

00:00:42.640 | - You know your cashmere sweater, it's so, so soft.

00:00:45.720 | - Take my sweater off. - It's so soft, Amore.

00:00:47.680 | - It's great. - This is so tilting.

00:00:48.920 | Get out of my house. - I hope you have

00:00:49.760 | everything you need. - I have everything.

00:00:50.600 | - Take my sweater. - Good Lord.

00:00:51.540 | - We've done at one o'clock, so I'll see you then.

00:00:53.220 | - Please let me know if-- - Should we have lunch

00:00:54.640 | in the garden? - Yes, please.

00:00:56.420 | - Lunch in the garden.

00:00:57.260 | Wear something simple.

00:00:58.100 | Don't get all, something simple is great.

00:01:01.220 | - Is that the cashmere sweater with the rhino horn buttons?

00:01:05.020 | - It is, you know what?

00:01:06.320 | I did some shopping while I was here.

00:01:08.060 | I did a little shopping, so I just, I filled up.

00:01:12.420 | You know, I just, these Aesop's are great,

00:01:15.460 | 'cause I don't have these at my house.

00:01:16.740 | I have ivory soap, so I got a couple of these

00:01:19.420 | from the guest room. - Put it back, it's sticky.

00:01:21.260 | - But you know what, I agree.

00:01:22.140 | This sweater's not so great.

00:01:23.220 | I think I'm gonna switch to this one.

00:01:24.040 | - Oh my God, don't touch that sweater, Jason.

00:01:26.380 | - This one's incredible. - I cannot.

00:01:27.940 | - You're actually tilting him, J.K.L.

00:01:29.800 | - Don't, don't, don't. - He's actually tilting.

00:01:30.640 | - I think I'm gonna switch sweaters.

00:01:31.460 | - Don't put it on, please, don't.

00:01:32.300 | - All right, I won't put it on, but you know what?

00:01:34.380 | This port, I'm not so sure.

00:01:36.140 | Sean?

00:01:37.300 | Sean, yes.

00:01:38.140 | - Oh my God, the port's in. - Don't do it, Sean.

00:01:41.620 | - Sean, the port's great, but any other options?

00:01:45.500 | - We do have a delicious ice wine for you.

00:01:47.380 | - Come around here, let's present.

00:01:48.780 | Let's present, so we just put them away.

00:01:51.260 | - Disloyal people. - So what do we have?

00:01:52.080 | Come on, you're not on camera.

00:01:52.920 | - My wife, my chef, Sean. - Don't, don't, don't.

00:01:55.980 | - Yeah, Sean. - There's Sean.

00:01:58.320 | - This is, it looks like a deep pull.

00:01:59.620 | 1986 Chateau Coutet Balsak?

00:02:04.140 | I mean, this looks like it's worth opening.

00:02:06.340 | I mean, it was in the rack that said don't open,

00:02:08.860 | right, Sean? - Yes, sir.

00:02:09.980 | - All right, so let's put this on ice.

00:02:10.820 | - Well, that's no good, just pour it out.

00:02:13.020 | - But you know what, pour half out,

00:02:14.460 | 'cause I like the bottom half, the texture.

00:02:16.420 | So just pour half into the garden here with the spinach,

00:02:19.580 | and then I'll take the bottom half.

00:02:20.660 | Thank you. - Please take off my sweater.

00:02:23.540 | Oh my God, this is so brutal.

00:02:25.480 | ♪ I'm goin' all in ♪

00:02:27.140 | - Don't let your winners ride.

00:02:29.860 | - Rain Man, David Satterthwaite.

00:02:32.100 | ♪ I'm goin' all in ♪

00:02:34.140 | - And instead, we open-sourced it to the fans,

00:02:36.380 | and they've just gone crazy with it.

00:02:38.100 | - Love you guys. - Ice Queen of Quinoa.

00:02:40.300 | ♪ I'm goin' all in ♪

00:02:42.460 | - Did you have a good night's sleep at Chamath's house?

00:02:44.340 | How did you sleep last night?

00:02:45.620 | - I slept so good.

00:02:46.900 | Let me tell you something.

00:02:48.220 | I will compare my sleep here tonight.

00:02:50.180 | The lady of Sax Manor just texted me,

00:02:52.740 | and she would like me to stay there tonight.

00:02:54.100 | So you know, when I'm in the valley,

00:02:55.780 | I get a lot of different invites.

00:02:56.980 | I have to spread the wealth.

00:02:58.620 | So I'll be dining with the Saxes tonight,

00:03:00.860 | and I may be staying at Sax's,

00:03:02.660 | so that will help me with the wardrobe.

00:03:03.500 | - Put your silverware away, Sax.

00:03:04.700 | Hide the Aesop soap from the bathroom.

00:03:07.140 | - I'm hoping he doesn't have Aesop.

00:03:08.540 | I'm hoping he has something else.

00:03:09.380 | - Keep the closet locked.

00:03:10.220 | - This is like when he stole the Papi van Winkle

00:03:12.020 | from my plane, remember that?

00:03:13.340 | (laughing)

00:03:14.340 | - No, that was good.

00:03:15.420 | - Yeah, I mean, it was three quarters of a bottle.

00:03:18.980 | It's just sitting there.

00:03:20.020 | I mean, when are you gonna drink it?

00:03:21.820 | - Sax, how do you prepare

00:03:23.260 | for J. Cal coming over to your house

00:03:24.660 | to visit and spend the night?

00:03:26.020 | I mean, what do you do?

00:03:27.020 | - He thinks that anything that's not bolted down

00:03:28.980 | is basically, it's like a gift.

00:03:31.740 | It's like a freebie.

00:03:33.140 | (laughing)

00:03:34.300 | - How do you think I got that love seat in my kitchen?

00:03:37.180 | I got that love seat off the kitchen?

00:03:39.140 | That came from Sax's designer, yeah.

00:03:41.340 | Yeah, I just had two guys.

00:03:42.780 | My brother Josh came, we took it out the back.

00:03:44.900 | It was fun.

00:03:45.740 | (laughing)

00:03:46.580 | - We took it out the back.

00:03:47.420 | - If I'm a guest, I'm leaving with something.

00:03:49.540 | - Why don't you wanna moderate today?

00:03:50.780 | You're on fire.

00:03:51.660 | Just moderate the show.

00:03:53.060 | - Well, no, I was gonna be traveling

00:03:54.660 | and I wanted to do a good job

00:03:55.820 | and I thought maybe you would love

00:03:58.940 | to get your chance at moderation, so.

00:04:01.380 | Lead us off here, fearless Dave Friedberg.

00:04:03.980 | - Okay, well, so that is the announcement

00:04:06.260 | to start the show.

00:04:07.100 | Jason, taking a week off from moderating.

00:04:10.220 | - Yes.

00:04:11.060 | - Gonna be a bestie guestie.

00:04:12.100 | Gonna be a participant on the panel this week

00:04:14.340 | as we kick this off.

00:04:15.740 | So I'll be moderating this week.

00:04:17.500 | We're gonna do a couple housekeeping points.

00:04:20.740 | First off, very excited to announce

00:04:23.860 | that we are doing another live event

00:04:26.140 | after the success of the summit during September.

00:04:29.380 | We had great content, we had great parties,

00:04:31.300 | everyone had a great time,

00:04:32.140 | but a lot of people said they wish

00:04:33.740 | they could have been a part of it.

00:04:34.580 | So we are gonna try and do more live events.

00:04:36.660 | So we have pulled one together, very last minute,

00:04:39.100 | but we are gonna make it incredible.

00:04:41.500 | Saturday, December 7th in San Francisco, around 5 p.m.,

00:04:46.500 | we are gonna do the All In Holiday Spectacular

00:04:49.540 | at the Palace of Fine Arts in San Francisco.

00:04:51.980 | It's gonna be incredible.

00:04:52.940 | Tickets are going on sale today at allin.com/events.

00:04:56.620 | Not gonna wanna miss it.

00:04:58.540 | There's gonna be a really fun show on stage

00:05:00.740 | with us and some guests,

00:05:02.740 | followed by open bar, food trucks, DJ, casino party.

00:05:07.260 | It should be a really great time,

00:05:08.460 | a real fun winter wonderland after party

00:05:10.260 | after the stage show.

00:05:11.740 | And so we're really excited to have folks come and join us

00:05:14.500 | at the Palace of Fine Arts on December 7th.

00:05:16.940 | It's gonna be awesome.

00:05:17.780 | You guys excited?

00:05:18.940 | - Yeah.

00:05:19.940 | - Really excited, yeah.

00:05:20.780 | - All right, so I have a question.

00:05:22.620 | - Yeah.

00:05:23.700 | - Is our attendance required at this thing?

00:05:25.580 | (laughing)

00:05:26.420 | - I knew that was coming.

00:05:27.620 | - I have no desire to participate in this.

00:05:30.660 | - You don't wanna be able to hold a party at SACS.

00:05:33.140 | - Everybody in the world wants to do something except SACS.

00:05:36.260 | - I thought I was signing up for a podcast.

00:05:38.700 | I don't know why I need to do all these events.

00:05:41.060 | - This is literally a two minute drive

00:05:43.580 | from your house in San Francisco.

00:05:45.060 | We are gonna load you in a van.

00:05:47.020 | J. Cal and his brothers are gonna come and grab you,

00:05:49.060 | throw you in the back, drag you down there.

00:05:51.860 | We're gonna prop you up on stage for a couple hours

00:05:54.540 | and then we'll put you back in the van and you can go home.

00:05:56.580 | - The good news is we might drink some tequila, SACS.

00:05:59.500 | - That's true.

00:06:00.340 | - We might have some tequila,

00:06:01.180 | so we have something to look forward to.

00:06:03.540 | And you get to see your friends.

00:06:05.420 | You get to see your friends.

00:06:06.620 | That's worth it, right?

00:06:08.260 | - Say yes, Dave.

00:06:09.100 | That's what you say once.

00:06:10.700 | - No comment, he says.

00:06:12.540 | - For those of you listening.

00:06:14.060 | - I'm happy seeing you guys through Zoom.

00:06:16.220 | You know, we can minimize the in-person stuff.

00:06:19.980 | - Pandemic was his favorite holiday of all time.

00:06:22.940 | What's your favorite holiday, SACS?

00:06:24.420 | Pandemic.

00:06:25.660 | Can we have that back?

00:06:27.300 | - Pandemic.

00:06:28.140 | - He celebrates the pandemic for six months every year.

00:06:30.820 | It's part of his new ritual

00:06:33.580 | to not see anybody for six months.

00:06:36.380 | Bring back the pandemic.

00:06:38.020 | SACS, are you serving wagyu tonight?

00:06:40.300 | - I mean, that's possible.

00:06:42.420 | I'm gonna tell him not to do anything

00:06:43.540 | that nice, though, for J. Cal.

00:06:45.780 | - Keep it simple.

00:06:47.500 | Burgers and dogs.

00:06:49.020 | - Have you put your order in, J. Cal?

00:06:50.500 | J. Cal, what did you put your order in at?

00:06:51.340 | - Well, you know, I talked to Chef,

00:06:53.620 | and he said morels, not in season,

00:06:56.540 | but we are on the tail end of black truffle,

00:06:59.900 | so we have that locked in,

00:07:00.940 | but we're too early for morels, obviously.

00:07:02.460 | That's a spring.

00:07:03.300 | - Okay, Jason, Jason, let's give feedback

00:07:06.140 | about last night's dinner.

00:07:07.420 | Sean's--

00:07:08.260 | - I mean, let's be honest.

00:07:10.500 | Picanha is an underrated cut of meat.

00:07:13.260 | It's a very, people say it's like a serviceable meat,

00:07:15.820 | but when cooked properly, with proper technique,

00:07:18.660 | it will stand right up there

00:07:20.260 | with a ribeye or a New York strip.

00:07:22.420 | - It's the best.

00:07:23.260 | - But people don't believe that.

00:07:24.100 | - What's a picanha?

00:07:24.940 | I've never even heard of that.

00:07:25.780 | - It's like the shoulder.

00:07:27.620 | - It's like, it's the Brazilian word for it,

00:07:29.860 | but it's like a specific kind of meat.

00:07:31.220 | Sean did it last night.

00:07:32.700 | Honestly, David, I'm telling you,

00:07:33.940 | it's better than any other cut of meat you could get.

00:07:36.340 | If it's properly made, Sean crushed it yesterday,

00:07:39.620 | but it is bananas.

00:07:42.260 | It's so good.

00:07:44.100 | - You call this--

00:07:44.940 | - I think I like--

00:07:45.780 | - It's a sirloin.

00:07:46.620 | - Oh, it's a rump steak.

00:07:47.940 | It's like a rump steak.

00:07:48.780 | - I like it more than ribeye.

00:07:49.620 | - Yeah.

00:07:50.460 | - I like it more than ribeye, 100%.

00:07:51.340 | I like it more than the New York strip.

00:07:53.660 | That's terrible.

00:07:54.540 | Filet, terrible.

00:07:56.380 | No fat.

00:07:57.620 | - It's got a fat cap on it,

00:08:00.940 | which can sometimes be a little overwhelming for people,

00:08:04.100 | but Sean did a great job of kind of meeting us halfway.

00:08:07.820 | So it wasn't so fatty, just a nice layer of fat,

00:08:10.700 | crisped perfectly, cooked to perfection.

00:08:13.260 | Carrots were great.

00:08:14.540 | - I would eat that every day if I could.

00:08:16.620 | Every day.

00:08:17.460 | - I had no notes.

00:08:18.300 | I talked to Sean after, I had no notes.

00:08:19.900 | - Okay.

00:08:20.740 | - What about the apple tart?

00:08:21.580 | - The apple tart was ridiculous, too.

00:08:23.220 | - Oh my God.

00:08:24.060 | - I only like New York.

00:08:24.900 | - The burnt sugar apple.

00:08:25.720 | - The burnt sugar apple tart.

00:08:26.620 | What the fuck?

00:08:27.460 | - You're a New York steak guy?

00:08:28.460 | - I'm a New York steak guy.

00:08:29.580 | Well done.

00:08:30.420 | - Oh my God.

00:08:31.260 | - Oh my God.

00:08:32.080 | - What?

00:08:32.920 | - Oh.

00:08:33.760 | - Oh.

00:08:34.580 | - Oh, that's disgusting.

00:08:35.420 | - You guys are savages.

00:08:36.260 | I think you just lost, like,

00:08:37.620 | I think you just lost three swing states

00:08:39.380 | by saying you want to overcook a shrimp steak.

00:08:41.820 | - If you're going to do something au poivre,

00:08:43.700 | I would go to the New York.

00:08:44.860 | I'm fine to deal with the New York in an au poivre,

00:08:46.900 | but well done, David Sacks.

00:08:49.060 | That is unacceptable.

00:08:50.860 | - Shout out to Raul's and Balthazar,

00:08:54.140 | two best steak au poivres in Manhattan, in my estimation.

00:08:57.900 | - All right, everybody.

00:08:59.140 | - Let's get started.

00:09:00.060 | - Welcome to--

00:09:00.980 | - Why don't we call an audible tonight

00:09:02.540 | and go for steak au poivre, yeah.

00:09:04.060 | Just throw out the miso cod and the wagyu

00:09:06.540 | and let's just redo it.

00:09:08.220 | - Boys, welcome to the All In Pod.

00:09:10.100 | This is episode 201,

00:09:13.020 | and we're going to kick it off

00:09:14.100 | by talking about what's going on in markets,

00:09:16.540 | which is one of the kind of most interesting,

00:09:20.220 | challenging enigmas of the day,

00:09:23.300 | or maybe it's not, maybe it's pretty simple.

00:09:26.020 | But there seems to be a diversion in assets

00:09:28.620 | that is pretty unusual that hasn't been seen in some time,

00:09:31.900 | and a lot of market commentators, analysts, economists

00:09:34.540 | are kind of trying to figure out what's going on and why.

00:09:38.300 | The first is that bonds are falling.

00:09:39.980 | So U.S. treasury yields,

00:09:42.420 | as a result of bonds declining in price, have spiked up.

00:09:46.380 | We nearly hit the 10-year yield,

00:09:48.740 | dropping as low as 3.5 in September,

00:09:53.060 | obviously leading up to the big 50-bit rate cut.

00:09:57.340 | And as of this morning,

00:09:59.220 | we're seeing the 10-year yield over 4.25.

00:10:02.460 | At the same time, we're seeing gold prices spike.

00:10:06.340 | So gold is typically a safe asset,

00:10:08.380 | and gold has moved considerably, as you all can see here,

00:10:11.260 | from the start of the year,

00:10:12.180 | where it was around 2,000 an ounce, up to 2,750 an ounce,

00:10:15.020 | an incredible run-up,

00:10:16.620 | one of the best-performing assets of the year.

00:10:20.100 | And then finally, in a market like this,

00:10:22.100 | you would typically see pain in equities,

00:10:24.580 | but we've seen the opposite.

00:10:25.980 | The S&P 500 is up considerably,

00:10:29.100 | has been on this endless run-up,

00:10:30.540 | all-time high, it's closing at all-time high.

00:10:32.620 | - Where's your Bitcoin chart, buddy?

00:10:33.900 | - And let's pull up Bitcoin.

00:10:35.340 | - Why are you showing gold?

00:10:37.100 | Nobody cares about gold, show Bitcoin.

00:10:39.620 | - Well, there's a lot more assets

00:10:41.460 | that have moved into gold than Bitcoin,

00:10:42.660 | but here's Bitcoin at, today, this morning, 68,000.

00:10:46.500 | - Who picked that at the beginning of the year?

00:10:48.820 | So was it me?

00:10:51.060 | - Hold on one second.

00:10:52.060 | - Boop, boop, boop, boop, boop.

00:10:53.860 | (laughing)

00:10:54.700 | Hold you up, give us your read on what's going on.

00:10:57.500 | - There's another couple of nuances here

00:10:59.580 | that I think are important.

00:11:00.940 | The US dollar complex is thriving,

00:11:06.140 | which means the US dollar is strong.

00:11:08.340 | Back-end yields are rising.

00:11:12.660 | And then another thing that I look at

00:11:16.300 | is this thing called put-call skews,

00:11:17.820 | so basically, on balance,

00:11:19.820 | how are people hedging in the short-term?

00:11:22.940 | And in the bond market,

00:11:24.540 | they own a lot more puts than they do calls.

00:11:27.580 | I think that this is the entire

00:11:31.220 | financial infrastructure of the world

00:11:33.820 | repositioning itself from what was a toss-up election

00:11:38.580 | to a Trump win.

00:11:40.060 | And when you look at why,

00:11:45.100 | it's because when you,

00:11:46.420 | forget the candidates themselves for a second,

00:11:48.580 | but if you think about the actual policies

00:11:50.780 | and where the spending will occur,

00:11:52.540 | I think that there has been a very clear decision

00:11:56.060 | that the Trump economic plan

00:11:59.340 | will drive better growth than the Harris plan.

00:12:01.780 | And if you think that there is more growth coming,

00:12:06.060 | typically what will come with that

00:12:09.860 | is a little bit more inflation.

00:12:11.940 | The risk premium that you're going to need

00:12:16.220 | in a high-growth environment is higher.

00:12:18.060 | What is risk premium?

00:12:19.020 | That is, how much do I want to invest

00:12:22.180 | for a risky asset versus a safe asset?

00:12:24.340 | And so all of these things are coalescing.

00:12:29.020 | So I think that the short-term takeaway that I have

00:12:33.340 | just looking at all of this data

00:12:35.740 | is that in the economic distribution of outcomes,

00:12:40.740 | this is now tilted overwhelmingly to a Trump win.

00:12:44.700 | And this is not an emotional statement

00:12:46.500 | or what I want to happen,

00:12:48.140 | but this is just an observation

00:12:49.660 | of how tens of trillions of dollars

00:12:52.100 | of self-interested financial actors

00:12:57.060 | have now repositioned their risk.

00:12:59.500 | And if Trump wins,

00:13:01.060 | which it looks like he's increasingly going to do,

00:13:04.460 | and if he wins by the margins

00:13:06.740 | that it looks like it's going to do,

00:13:08.700 | you're gonna see a lot of these things exacerbate.

00:13:11.540 | Gold's gonna go up more probably.

00:13:13.980 | Bitcoin will probably go up.

00:13:16.380 | The short-term economic upside for the economy

00:13:19.540 | will probably get reflected in higher equity prices,

00:13:22.260 | but it'll also push out long-term rates.

00:13:25.860 | The inflation picture becomes a little bit murkier,

00:13:29.020 | but I think that that's what's happening.

00:13:31.980 | I think that the financial markets

00:13:33.580 | are pricing in a Trump win.

00:13:35.100 | - Sorry, just to understand better,

00:13:36.740 | why does gold go up in a Trump win?

00:13:38.780 | - I think in the short-term what happens

00:13:41.180 | is that you see more economic growth,

00:13:42.900 | but in the medium-term inflation goes up,

00:13:44.700 | and so you want to hedge.

00:13:45.860 | - Right.

00:13:46.700 | - So it's more about a durational balance of assets.

00:13:49.340 | So in the short-term,

00:13:50.300 | you'll be long the things that will generate earnings,

00:13:53.060 | but in the medium to long-term,

00:13:54.540 | you want to hedge yourself.

00:13:55.820 | So Bitcoin and gold, I think, will trade that way.

00:13:58.540 | - Well, let's pull up the video clip

00:13:59.980 | from Paul Tudor Jones, Nick.

00:14:01.460 | - Given all of the things you're saying,

00:14:03.140 | are you off buying gold and Bitcoin

00:14:05.740 | and hiding somewhere?

00:14:06.580 | - I think all roads lead to inflation.

00:14:09.460 | We're gonna end up, if you, so--

00:14:11.980 | - But does all roads lead to inflation,

00:14:13.220 | therefore gold is a good investment?

00:14:14.460 | Is Bitcoin a good investment to you?

00:14:15.820 | - I'm long gold, I'm long Bitcoin.

00:14:18.180 | I think commodities are so ridiculously under-owned,

00:14:21.140 | so I'm long commodities.

00:14:23.260 | I think most young people find their inflation hedges

00:14:25.780 | via the NASDAQ, that's also been great.

00:14:28.340 | It's probably some combination.

00:14:30.460 | I probably have some basket of gold, Bitcoin,

00:14:33.420 | commodities, NASDAQ, something like that,

00:14:35.460 | and I would own zero fixed income.

00:14:37.540 | If I had my cash, it'd be very short-term.

00:14:40.300 | - Sax?

00:14:41.420 | - Well, I think, as you heard right there,

00:14:43.620 | the key line that Paul Tudor Jones said

00:14:45.700 | was all roads lead to inflation.

00:14:47.140 | I mean, that's what's basically happening right now

00:14:49.180 | is that the market is afraid that inflation is not whipped

00:14:54.180 | and is gonna resurface,

00:14:56.100 | and the Fed may have to pivot from the pivot

00:14:59.140 | and raise interest rates.

00:15:00.380 | That's why he doesn't wanna own any treasuries.

00:15:03.220 | Separately, another financial legend, Stan Druckenmiller,

00:15:07.380 | gave an interview where he has something

00:15:10.620 | like a 20% short position,

00:15:13.140 | meaning 20% of his holdings

00:15:15.740 | are short U.S. treasuries right now.

00:15:17.740 | So he's betting that there are long-term inflation pressures

00:15:21.940 | and that rates are gonna have to rise,

00:15:23.940 | and you're seeing, again,

00:15:26.340 | that since the Fed cut rates on September 18th

00:15:28.940 | by 50 basis points, that the 10-year T-bills yield

00:15:33.060 | has risen by 60 basis points.

00:15:35.820 | So I think my interpretation

00:15:38.740 | is that this is less about the election

00:15:40.500 | and more about the markets

00:15:43.380 | not liking the Fed's rate cut on September 18th.

00:15:47.340 | I think that in hindsight, it was too big.

00:15:50.580 | We discussed it on the show,

00:15:52.100 | and I pointed out that the 50 basis point cut

00:15:54.420 | was contradictory in the sense

00:15:56.660 | that the only two times in recent history

00:16:01.660 | where the Fed began a rate-cutting cycle

00:16:04.860 | with a 50 basis point cut was in 2001 and 2008,

00:16:08.740 | which were on the verge of pretty big recessions.

00:16:12.100 | And so the Fed felt like it needed to cut dramatically

00:16:16.500 | in order to help stave off those recessions.

00:16:20.060 | But that was not Powell's rhetoric.

00:16:21.860 | What Powell said is the economy was doing very well.

00:16:24.580 | So what I said a month ago was,

00:16:26.060 | if the economy's doing really well,

00:16:27.140 | why wouldn't you just tiptoe into the rate-cutting cycle

00:16:30.220 | with, say, a 25 basis point cut

00:16:32.620 | and then see how the market absorbs it

00:16:34.660 | and get another month's inflation data?

00:16:37.380 | Well, we've gotten another month of inflation data,

00:16:39.300 | and it's showing that, these are not huge moves,

00:16:42.740 | but it's showing that inflation in,

00:16:45.580 | was it core CPI was just a little bit higher than expected.

00:16:48.500 | So again, the market is concerned

00:16:50.300 | that inflation is not whipped,

00:16:52.500 | that the Fed may have been overly precipitous

00:16:55.020 | in how it cut rates.

00:16:57.220 | And then the other thing is they just do not like

00:16:59.460 | the long-term fiscal picture of the US.

00:17:01.180 | One other chart we should bring up

00:17:03.060 | is interest on the national debt.

00:17:05.220 | What you can see here is that it has gone

00:17:07.460 | absolutely parabolic in the last couple of years.

00:17:10.860 | Our interest on the debt's something like what,

00:17:12.100 | like 1.3, 1.4 trillion a year?

00:17:14.660 | - 1.35 trillion run rate, yep.

00:17:16.540 | - $3,500 per American, per year.

00:17:20.460 | - And it's something like 20 to 25% of federal revenue now

00:17:23.940 | is going to debt service.

00:17:25.980 | And this continues to increase.

00:17:27.300 | Now, I think there was an expectation

00:17:30.020 | that we'd be able to get this line to go back down

00:17:32.460 | once we had rate cuts, right?

00:17:34.340 | Because if inflation's licked

00:17:36.140 | and the Fed can lower interest rates again

00:17:38.580 | and we can get back to a 2% 10-year bond,

00:17:42.500 | which is where we were a few years ago,

00:17:44.620 | then all of a sudden that national debt service

00:17:46.900 | becomes a little bit more reasonable, right?

00:17:48.660 | I mean, you could service that debt at half the cost.

00:17:52.460 | But now it looks like that may not happen.

00:17:55.540 | So just to wrap this up,

00:17:57.780 | I just think that the market doesn't like

00:18:00.060 | these fundamentals of the US fiscal picture.

00:18:02.620 | You've got rapidly increasing debt service costs.

00:18:06.580 | You've got an inflation picture that is murky

00:18:09.300 | and may not be going away.

00:18:11.420 | And the bond markets are starting to price in

00:18:14.100 | higher interest rates for longer.

00:18:16.260 | And this is why Paul Tudor Jones is saying,

00:18:19.260 | "All roads lead to inflation."

00:18:20.380 | And this is why Druckenmiller is shorting US treasuries.

00:18:23.700 | - J. Cal, do you think either party

00:18:27.180 | or either candidate in this presidential election

00:18:31.220 | is gonna drive a different outcome

00:18:32.940 | in terms of federal spending

00:18:34.060 | and the long-term impact on deficit and as a result rates?

00:18:38.740 | - Well, if we look at previous performance

00:18:42.620 | as an indicator of future success,

00:18:45.020 | the answer is no, they're not going to cut spending.

00:18:48.900 | Most of the reports out say they're gonna spend

00:18:52.260 | another 10 trillion in the next administration

00:18:54.260 | independent of who you vote for.

00:18:56.140 | And I think that's actually what you have to think about

00:18:58.500 | here is where does all that money wind up, right?

00:19:01.380 | It's certainly not gonna trickle down.

00:19:03.620 | And what's probably gonna happen

00:19:05.380 | is it's gonna find its way into equities.

00:19:07.700 | And that's why these equities are so high

00:19:09.620 | is because people are recognizing correctly

00:19:12.740 | that if we do spend another 10 trillion

00:19:15.980 | and go another 10 trillion into debt,

00:19:18.100 | that money winds up somewhere.

00:19:19.300 | Where does it wind up?

00:19:20.420 | Government salaries, contracts.

00:19:24.180 | And if we get a tax cut as well, that's going to goose.

00:19:27.620 | And I think one party will do a tax cut

00:19:29.940 | and spend eight, nine, 10 trillion.

00:19:31.780 | The other party will spend 10 trillion

00:19:33.140 | and maybe raise taxes a little bit.

00:19:34.900 | It's gonna net that into the same place.

00:19:37.300 | And then I think what we'll see on top of that

00:19:40.220 | is what I think could be cataclysmic contraction

00:19:45.220 | in white collar employment in the United States

00:19:49.180 | over the next four to 10 years next to administrations.

00:19:52.580 | And that's gonna exacerbate this problem

00:19:54.500 | and create, I think, some social tension

00:19:57.140 | because we've had record low unemployment.

00:20:00.020 | And so even though people feel bad

00:20:01.700 | about the economy generally,

00:20:03.300 | and some of that is related to which parties,

00:20:05.860 | which party you're a part of

00:20:08.020 | and how you perceive the economy and all this data.

00:20:10.740 | But just brass tacks, we had the lowest unemployment

00:20:13.300 | of our lifetime for the past five, 10 years.

00:20:16.340 | And it's been absolutely fabulous.

00:20:17.940 | The salaries have gone up.

00:20:19.140 | And this is going to result in, I think,

00:20:23.300 | a little bit of austerity measures coming at some point.

00:20:26.420 | It probably won't come in this next administration,

00:20:28.100 | but certainly the one after that

00:20:29.860 | is gonna have to do some belt tightening.

00:20:31.780 | And we're gonna have to address this issue

00:20:33.540 | because spending, everybody in America

00:20:36.340 | having to pay their share of that interest alone is $3,500.

00:20:40.340 | I mean, let that sink in.

00:20:42.020 | You're gonna spend, for every member of your family,

00:20:44.980 | $3,500 a year in interest.

00:20:46.740 | That's your part of it.

00:20:47.780 | Take the 1.3 trillion.

00:20:49.460 | It's just a lot of money.

00:20:51.460 | And if that is the case,

00:20:54.980 | it's gonna create a massive bubble in equities again.

00:20:58.500 | And then if you look inside of the big companies,

00:21:00.740 | three or four years ago, Uber, Airbnb, Google,

00:21:05.460 | and Facebook had more employees

00:21:07.300 | or the same number of employees they have now while growing.

00:21:09.860 | Those companies are all growing 20% year over year.

00:21:12.580 | So the earnings and the top line

00:21:15.380 | of these companies continue to grow

00:21:17.220 | while they have a static team size.

00:21:18.980 | This is like an extraordinary thing we haven't seen.

00:21:21.060 | So the two pieces here that we haven't seen before

00:21:23.860 | is what happens when you put another,

00:21:25.780 | I don't know, $20 trillion of debt into the US economy.

00:21:29.700 | And what happens when companies, the big ones, stop hiring

00:21:34.260 | and they just become wildly efficient

00:21:36.420 | and become wildly profitable.

00:21:38.420 | And this will be a renters, rentiers, you know,

00:21:42.340 | story where people who have equities

00:21:45.780 | and people who own property are gonna do fabulous

00:21:48.100 | over the next five to 10 years.

00:21:49.380 | And then the 40%, 50% of people who don't

00:21:52.820 | are gonna really be feeling a pinch.

00:21:54.980 | - Well, it does depend also on how levered they are.

00:21:57.620 | So just to give you guys a sense,

00:21:59.220 | total US household, corporate, and government debt,

00:22:02.180 | which includes state and local and federal.

00:22:03.860 | So household debt in the US is about 18 trillion.

00:22:06.820 | Corporate debt's about 11 trillion.

00:22:09.140 | State and local government debt's 3 trillion.

00:22:11.540 | Obviously the federal debt, 36 trillion.

00:22:13.540 | That adds up to a whopping $68 trillion

00:22:16.820 | of total debt across the US.

00:22:20.420 | Which if you assume a 6% average interest rate,

00:22:23.380 | you know, you got corporate debt and household debt,

00:22:25.220 | so it's a little more risky, so it carries a higher rate.

00:22:27.220 | That means we're spending about $4 trillion a year

00:22:31.060 | of an economy that's only 29 trillion a year

00:22:34.820 | to service the debt, just to pay the interest on the debt.

00:22:37.780 | So 15% of every dollar that trades hands

00:22:40.420 | is going towards interest payments

00:22:42.900 | on existing leverage, on existing debt.

00:22:44.580 | It's a highly levered system.

00:22:46.580 | And if you look around the world,

00:22:47.700 | this problem is not just a US challenge.

00:22:49.620 | Global leverage is a problem

00:22:51.460 | that's now becoming a crisis for countries everywhere.

00:22:54.900 | The UK is waiting on a big budget proposal this week.

00:22:57.380 | Higher taxes is what's going to be in there

00:22:59.060 | to make up for a budget deficit,

00:23:00.340 | which is currently 4.4% of GDP.

00:23:03.780 | The UK economy is only growing at 0.9% a year.

00:23:07.140 | France has a major budget crisis underway right now.

00:23:09.860 | They're struggling to reduce their deficit

00:23:11.540 | from 6% down to 5% of GDP.

00:23:14.180 | And they've got skyrocketing bankruptcies.

00:23:16.900 | 74% of people that can work in that country are working.

00:23:19.940 | And that's because of large social programs

00:23:22.660 | that support the balance.

00:23:23.700 | 7.3% technical unemployment.

00:23:25.700 | And they're raising taxes on 440 firms,

00:23:30.260 | 440 companies in the country

00:23:31.860 | that make a billion or more in revenue

00:23:33.140 | with a "temporary tax."

00:23:34.580 | There's a 4% surcharge on income over 500K

00:23:38.100 | that's going into effect,

00:23:39.140 | second home real estate taxes, and so on.

00:23:41.620 | France is struggling to figure out a way

00:23:42.980 | to generate revenue to make up for the shortfall.

00:23:45.780 | In Brazil, there's a major budget crisis.

00:23:47.780 | States owe $130 billion to the federal government there.

00:23:51.220 | Inflation is accelerating at 4.6%.

00:23:53.140 | Rates are going to go higher and longer,

00:23:55.700 | complicating other economic growth opportunities

00:23:57.700 | in the country.

00:23:58.260 | So this is becoming kind of a global leverage problem,

00:24:02.660 | which might explain the flight to safety

00:24:04.740 | in assets like gold and Bitcoin.

00:24:07.220 | And it's going to present a lot of real struggles

00:24:10.740 | for every global economy.

00:24:12.020 | Now, the question is,

00:24:13.940 | does the U.S. dollar maintain its reserve status?

00:24:16.500 | Because ultimately, I think it is inevitable

00:24:19.220 | that the Federal Reserve in the United States

00:24:21.300 | is going to need to buy the debt.

00:24:23.300 | They're going to need to monetize the debt,

00:24:25.220 | which means printing money.

00:24:26.420 | There is no one else to buy the debt.

00:24:28.260 | So pull up the China chart, Nick.

00:24:30.020 | China's historically been the biggest buyer

00:24:31.780 | and owner of U.S. treasuries.

00:24:32.980 | But here's what's happened in the last couple of years.

00:24:35.460 | It peaked at about $1.3 trillion about 10 years ago.

00:24:38.580 | And then recently, particularly starting around COVID,

00:24:42.020 | they began selling down

00:24:43.140 | and have been selling down at an accelerated pace.

00:24:45.300 | Today, China is back to the level they were at

00:24:48.580 | nearly 15 years ago,

00:24:50.420 | in terms of their treasury holdings.

00:24:51.860 | And they have publicly declared

00:24:53.620 | that they are selling off U.S. treasuries

00:24:55.220 | and buying gold instead.

00:24:57.060 | So the biggest buyer of U.S. treasuries

00:25:00.180 | has kind of left the market

00:25:01.540 | or is leaving the market.

00:25:02.580 | Who does that leave?

00:25:04.660 | Well, at the end of the day,

00:25:05.620 | the Federal Reserve has been

00:25:07.220 | the kind of buyer of last resort.

00:25:08.900 | And if they end up buying treasuries,

00:25:11.460 | that's where we have a problem

00:25:12.580 | with too many dollars and inflation kicking up.

00:25:14.820 | And so it feels like a lot of the trades in assets

00:25:17.700 | are what's going to benefit from the inflation.

00:25:21.940 | And it's going to be gold.

00:25:23.220 | It's going to be Bitcoin.

00:25:24.180 | And in some cases,

00:25:25.780 | because you're pumping more money in the system,

00:25:27.380 | it's going to be equities.

00:25:28.500 | And that might explain why

00:25:30.740 | equities are moving up as well.

00:25:31.940 | Where do you guys invest here?

00:25:34.260 | I mean, Chamath,

00:25:35.060 | do you care about how the market's positioned

00:25:38.180 | or how you're positioned in this election right now?

00:25:41.060 | And based on how we're seeing markets trade

00:25:43.220 | and what these kind of macro indicators are telling us,

00:25:45.300 | are you just business as usual,

00:25:47.060 | heads down, invest and build as you always have?

00:25:50.180 | Yeah, I think that you can't trade these things.

00:25:53.300 | And any attempt to do it

00:25:56.660 | is probably a level of false precision

00:25:58.500 | where you're going to lose more money.

00:26:00.340 | And there's a lot of slippage

00:26:01.540 | and even just trying to execute it.

00:26:03.060 | I mean, at the beginning of the year,

00:26:04.500 | I said the breakout asset was going to be Bitcoin.

00:26:10.020 | I think it looks like it's going to be

00:26:11.700 | the resounding inflation hedge asset

00:26:14.340 | for the next 50 or 100 years.

00:26:15.940 | So that die has been cast.

00:26:18.980 | I think you're seeing the last vestiges

00:26:21.460 | of people using gold

00:26:22.900 | as a rational economic insurance policy.

00:26:27.380 | But I think the future

00:26:29.540 | is specifically Bitcoin on that dimension.

00:26:33.220 | So I guess you could trade that,

00:26:35.860 | you could speculate on that.

00:26:38.180 | I think the question that I've been grappling with is,

00:26:40.180 | in my scenarios,

00:26:41.780 | what happens if Kamal Harris wins?

00:26:43.460 | What do the markets do?

00:26:44.580 | And I actually think it would

00:26:46.500 | reverse a lot of these trends

00:26:48.340 | over the last month and a half.

00:26:49.780 | Like I said, I really do think

00:26:50.900 | that there's a repositioning,

00:26:52.260 | rebalance component to everything

00:26:53.540 | that's happening right now.

00:26:54.500 | So I don't think there's much to do,

00:26:57.060 | unless you have a very specific bet

00:26:59.940 | that you want to make.

00:27:00.740 | That would just keep my head down and keep building.

00:27:03.700 | Are you in the same place, Axe?

00:27:05.380 | Are you, Jekyll, are you guys trading at all?

00:27:07.700 | I mean, I think trading is a mistake.

00:27:09.620 | Time in market is better

00:27:11.140 | than trying to time the market.

00:27:12.420 | And as I said before,

00:27:13.540 | where is all this money going to flow,

00:27:15.060 | all this spending?

00:27:15.860 | But asset class, right?

00:27:17.060 | I mean, that's the key question, right?

00:27:18.660 | Like, do you change what assets you own?

00:27:20.740 | I don't think so.

00:27:21.860 | And I do think there's another thing

00:27:25.060 | that's worth sort of unpacking here.

00:27:27.540 | Because when you do see people feel

00:27:30.580 | like the economy is working against them,

00:27:33.300 | all kinds of interesting movements start,

00:27:35.460 | cultural movements, et cetera.

00:27:36.900 | And I think that's what we're seeing

00:27:38.420 | in this election is people who believe

00:27:40.020 | in capitalism and free markets

00:27:41.540 | and people who don't,

00:27:42.340 | people who believe in free speech,

00:27:43.540 | people who don't,

00:27:44.260 | people who see themselves as victims,

00:27:48.100 | and then other people who see them as creators.

00:27:49.940 | And I really study a lot of like,

00:27:53.140 | what young people are doing.

00:27:54.500 | And I don't know if you guys are watching

00:27:56.340 | sort of the anti-work movement

00:27:58.180 | or the fire movement,

00:27:59.780 | which is financial independence, retire early.

00:28:02.580 | A lot of young people now

00:28:04.580 | are looking at financial markets,

00:28:07.700 | whether it's Robinhood or Coinbase

00:28:09.860 | or price picks,

00:28:11.540 | whatever market it is,

00:28:12.900 | young men, especially.

00:28:14.340 | And they're saying,

00:28:14.980 | I need to control my destiny.

00:28:16.420 | I need to,

00:28:17.380 | this capitalism is not working for me.

00:28:19.220 | I need to own equities.

00:28:20.260 | I need to make trades.

00:28:21.780 | And I need to retire early

00:28:24.420 | and have experiences

00:28:25.540 | because the capitalist system

00:28:26.660 | is broken to some extent.

00:28:27.860 | And then there's another group of people

00:28:29.300 | who are just anti-work.

00:28:30.580 | And there was this term

00:28:31.540 | back in the day called NEET,

00:28:33.940 | not employed,

00:28:35.220 | not being educated

00:28:37.300 | and not in training.

00:28:38.420 | Basically the people

00:28:39.860 | who are called the unproductives.

00:28:41.860 | And if you look at the peak

00:28:43.300 | engagement and employment

00:28:45.140 | in our country,

00:28:45.860 | and Japan has similar trends,

00:28:48.100 | although they are probably

00:28:49.220 | 10 years ahead of us.

00:28:50.020 | - Sounds anything but NEET.

00:28:51.860 | - Yeah, it's not NEET.

00:28:53.300 | - Sounds terrible.

00:28:54.660 | - But we peaked at 68, 69% labor participation.

00:28:58.260 | And we're 10% off that, maybe more.

00:29:00.260 | We were at 61 or 62.

00:29:02.340 | I think a lot of people

00:29:03.140 | are gonna give up

00:29:03.860 | because the debt

00:29:04.660 | is gonna be so crushing

00:29:05.780 | that the logical thing to do,

00:29:07.140 | if you don't think

00:29:07.700 | you can get out from under it,

00:29:09.140 | might be to move in with your parents

00:29:10.340 | or two or three other people,

00:29:11.460 | tighten your belts and enjoy life

00:29:12.820 | and go skiing

00:29:13.380 | and go have experiences.

00:29:15.860 | And a lot of young people

00:29:16.900 | are electing to do that.

00:29:17.860 | In other words,

00:29:18.340 | they're opting out of the American dream.

00:29:19.940 | - Sorry, to your point,

00:29:21.300 | the one thing that I realized

00:29:23.220 | with a lot of young men

00:29:24.660 | that Jason,

00:29:26.020 | I think you're really hitting

00:29:27.460 | the nail on the head

00:29:28.260 | is a lot of them now

00:29:29.780 | do not view the job that they do

00:29:32.740 | as their only path

00:29:34.900 | to economic independence.

00:29:36.820 | And if anything,

00:29:37.780 | they may do a job,

00:29:40.180 | but then they're actively trading

00:29:41.860 | on the side,

00:29:43.220 | something, crypto, options, whatever.

00:29:46.980 | They're on Robinhood.

00:29:47.940 | They're using Coinbase

00:29:48.900 | because it's almost like

00:29:50.580 | they've separated in their mind

00:29:52.180 | that the job they do

00:29:53.140 | will never give them

00:29:53.940 | the financial independence they want.

00:29:55.620 | And so instead,

00:29:56.420 | they're gonna do that job

00:29:58.020 | because they like it.

00:29:58.820 | Hopefully they love it.

00:30:01.140 | But then separately,

00:30:01.860 | they're gonna go and speculate

00:30:03.060 | to try to make money.

00:30:04.020 | It's a really interesting thing

00:30:05.300 | because I had always been taught

00:30:06.980 | you earn your wealth

00:30:07.940 | through the job you have.

00:30:09.060 | And so if you wanted to make more money,

00:30:10.580 | you have to ladder up

00:30:11.460 | and do something different.

00:30:12.500 | Yeah, I think that that's not true.

00:30:14.900 | That idea has been sort of decoupled now.

00:30:16.660 | That's a really interesting change

00:30:18.100 | in how people approach work.

00:30:19.300 | - I call them gen bet.

00:30:21.700 | Like they're the generation

00:30:22.820 | that believes on,

00:30:23.620 | there's just like subset of them.

00:30:24.740 | It's not all of them.

00:30:25.860 | A number of them are just quiet quitting

00:30:28.020 | and they just don't believe in capitalism.

00:30:29.620 | And then there's this other group,

00:30:30.420 | which are like trying to get control.

00:30:32.340 | I call them gen bet

00:30:33.860 | 'cause they just want to bet on themselves.

00:30:35.700 | And if they don't get wrecked

00:30:38.500 | by the financial markets,

00:30:40.100 | trading options,

00:30:40.980 | and doing price picks.

00:30:42.780 | - Sorry, the other thing I'll say

00:30:44.340 | just in recruiting a bunch of people

00:30:46.420 | at 80, 90 over the last three or four months

00:30:49.780 | is there is an enormous difference

00:30:51.460 | that I have seen psychologically

00:30:53.140 | in the people that are 25 and older

00:30:55.700 | versus the people that are 25 and under.

00:30:59.220 | And I'm calling 25 as a rough number,

00:31:01.540 | but there are kids

00:31:02.980 | that are 18, 19, 20, 21 years old

00:31:05.540 | that are off the charts good.

00:31:09.060 | They're motivated, they're hungry.

00:31:11.300 | They're like, let's get after it.

00:31:12.820 | And they are honestly different

00:31:15.380 | in the way they approach their job

00:31:17.380 | than folks that are in their late 20s

00:31:18.820 | and early 30s.

00:31:19.460 | - I think they're the first generation

00:31:21.380 | who didn't go into debt in college

00:31:23.300 | and didn't buy into that.

00:31:24.740 | Like, so they might,

00:31:25.780 | the millennials ahead of them

00:31:27.140 | might have like taken the bullets

00:31:29.140 | - Yeah, the folks that are in their late 20s,

00:31:31.540 | early 30s,

00:31:32.100 | and I'm not trying to generalize or disparage,

00:31:34.820 | but they lack a level of motivation.

00:31:36.740 | Again, generally speaking,

00:31:38.500 | that the youngest folks in the workforce have.

00:31:41.460 | And that also that people

00:31:43.060 | in our generation sort of have.

00:31:44.580 | So they're sort of sandwiched in between

00:31:46.580 | a very different way of approaching work.

00:31:49.380 | And as a result, they stand out.

00:31:51.860 | And I don't think they're standing out

00:31:53.220 | for all the right reasons.

00:31:54.180 | - Well, the majority now of young people

00:31:59.460 | the number I believe,

00:32:00.580 | and Nick, if you could pull this up,

00:32:02.020 | 57% of Gen Zers want to be influencers

00:32:06.740 | as their primary career now.

00:32:09.140 | That the idea of working a job

00:32:12.180 | is almost like a secondary option.

00:32:14.580 | The primary option that everyone would strive for

00:32:17.460 | is to be an influencer.

00:32:20.660 | And this number has grown considerably,

00:32:24.260 | continues to grow.

00:32:25.380 | And in fact, if you look at the rest of this report,

00:32:27.780 | this was out of a mining console.

00:32:28.740 | - Did you say 50% of Gen Zers aspire to be influencers?

00:32:34.100 | - Correct, 57%.

00:32:36.500 | - As their career,

00:32:38.420 | or just they want to be influential

00:32:39.940 | and build a brand around themselves, I wonder.

00:32:42.020 | - That's what they want to do for a living.

00:32:44.100 | That's what they would like to do.

00:32:44.900 | - That's what they want their paycheck to be, interesting.

00:32:46.660 | - That's what they want their paycheck to be.

00:32:47.700 | - They want to be independent.

00:32:48.900 | And I don't think they believe this.

00:32:50.180 | They believe the system's rigged against them.

00:32:52.020 | And why wouldn't you think

00:32:52.820 | the system's rigged against you

00:32:53.940 | if you went 150 or 250K in debt

00:32:56.740 | and you couldn't get a good job?

00:32:57.940 | - Sax, as a successful influencer,

00:33:00.260 | how would you advise the youth on their career choices?

00:33:03.140 | - I'll put it.

00:33:04.820 | - Yeah, look, I think that

00:33:06.820 | believing you're going to be an influencer

00:33:08.420 | is like believing that you're going to be

00:33:10.020 | like a rock star or movie actor or something like that.

00:33:14.020 | - Pro-athlete, yeah.

00:33:14.820 | - Pro-athlete, yeah.

00:33:15.860 | It's like a one in a million shot.

00:33:17.300 | It's just not a great thing

00:33:20.820 | to want to design your career around

00:33:22.980 | because it's just very unlikely to happen.

00:33:26.340 | So I think you're better off finding a career

00:33:29.460 | that you're passionate about,

00:33:30.740 | but where you're actually adding value.

00:33:32.500 | The world doesn't need 50 something percent

00:33:34.660 | of the population to become influencers.

00:33:37.060 | That's kind of crazy.

00:33:38.100 | It reminds me of a line from "Fight Club"

00:33:40.100 | where Tyler Durden says,

00:33:42.500 | "We've all been raised on television

00:33:43.940 | to believe that one day we'd all be millionaires

00:33:46.020 | and movie gods and rock stars, but we won't."

00:33:48.980 | And we're slowly learning that fact.

00:33:50.660 | And we're very, very pissed off.

00:33:52.260 | - And that was Gen X.

00:33:53.700 | - That was Gen X, yeah.

00:33:55.060 | So they're headed for a Fight Club-like realization

00:34:00.580 | about this.

00:34:01.060 | - Sax, how do you advise a young person

00:34:03.060 | on, there's this temptation to go

00:34:06.980 | and spend all this time making content

00:34:08.660 | and pursue that as your career

00:34:09.940 | and that's a life opportunity for you now.

00:34:11.620 | It's more free and open, they would think,

00:34:13.460 | than perhaps being a movie star

00:34:16.100 | or a basketball player used to be.

00:34:17.700 | - So I think it's just important to recognize

00:34:20.900 | that if we ourselves are influencers,

00:34:23.620 | the reason why we're not being hypocritical

00:34:25.620 | is that none of us here,

00:34:27.940 | with the possible exception of J. Cal,

00:34:29.380 | ever set out to be influencers, right?

00:34:30.900 | We did something different.

00:34:33.140 | We actually had a career

00:34:34.180 | and we did something interesting.

00:34:36.260 | And then as a result of that,

00:34:37.460 | maybe people wanna listen to our pod.

00:34:39.460 | The idea that you can just go be an influencer

00:34:41.540 | without having actually done anything interesting,

00:34:44.580 | what's your credential for that?

00:34:46.180 | So what I would advise

00:34:47.940 | is just people should go do something productive.

00:34:50.900 | And then if it leads to other people

00:34:53.460 | wanting to hear from them,

00:34:55.300 | then that's good.

00:34:56.500 | But setting out to be someone

00:34:59.060 | that other people should listen to

00:35:00.260 | without having any experience

00:35:02.580 | or having done anything productive in your life,

00:35:04.260 | it's like, why should we listen to you?

00:35:05.540 | - Yeah, one thing, I did build and sell

00:35:07.700 | two out of my three businesses over the years,

00:35:09.700 | but there are tens of millions of people

00:35:12.820 | making money in the long tail as a content creator

00:35:15.620 | and it's low thousands of dollars

00:35:17.220 | in some cases per month.

00:35:18.340 | But if you combine that with people

00:35:20.420 | who are gig economy workers

00:35:22.260 | and they don't believe in the system

00:35:23.620 | because they worked really hard,

00:35:25.700 | they got this job at Google,

00:35:27.300 | they went to the office,

00:35:28.820 | then they got laid off and nobody cares about them.

00:35:30.740 | Now they're getting dragged back into the office.

00:35:32.260 | They still have these payments.

00:35:33.700 | And then they look at this other system where,

00:35:35.540 | hey, they started to get 10,000 followers.

00:35:37.380 | They started to make $1,000 a month

00:35:39.300 | and $3,000 a month.

00:35:41.060 | They actually see a path

00:35:42.100 | to being independent of a system

00:35:45.780 | that has no loyalty to me.

00:35:47.140 | And that's what I hear from folks.

00:35:48.420 | And I think it's great.

00:35:49.700 | If we're not going to be loyal

00:35:51.380 | as like corporations to individuals,

00:35:53.460 | those individuals are now responding

00:35:56.980 | and the antidote to that poison

00:35:59.140 | of just being laid off randomly

00:36:00.820 | or being dragged back to the office

00:36:02.100 | after you told you to work from home,

00:36:03.380 | all that stuff,

00:36:04.020 | they now believe,

00:36:06.180 | hey, I can be independent

00:36:07.940 | and then you have to fight to get my services.

00:36:10.660 | And I think that's what this is about.

00:36:12.260 | If we're going to talk about Starbucks later,

00:36:15.140 | and I think that's a big part

00:36:16.580 | of the Starbucks problem,

00:36:18.420 | having a side hustle makes you anti-fragile.

00:36:20.500 | You have other sources of income

00:36:22.900 | and you can tell your boss to F off.

00:36:24.980 | And that's what young people are doing.

00:36:26.420 | I've seen it.

00:36:27.300 | I've seen people just quit jobs

00:36:28.820 | and just say, you know what?

00:36:29.780 | I've got other ways to make money

00:36:31.460 | and I don't have a big burn rate.

00:36:32.900 | And so that's smart for young people to do that.

00:36:35.140 | And I think my advice would be

00:36:36.580 | to build your brand,

00:36:37.460 | be as independent as possible

00:36:39.140 | and to make things in the world

00:36:40.500 | and show people what you mean.

00:36:42.100 | That's the best thing you can do.

00:36:43.220 | - Can I give you the other side of this

00:36:45.140 | before we go back to macro?

00:36:46.500 | - Yeah.

00:36:47.140 | - Imagine that Tom Brady,

00:36:49.140 | who really respected Bill Belichick,

00:36:51.860 | but I wouldn't say is super fond of him.

00:36:54.740 | They're not super close,

00:36:55.780 | but imagine that Tom Brady had a side hustle

00:36:58.580 | and let's just say he drove an Uber

00:37:01.940 | and he made enough money

00:37:03.620 | where when things got hard

00:37:04.820 | and he didn't get enough playing time,

00:37:06.740 | he opted out.

00:37:07.460 | Would that have made Brady the person he was?

00:37:09.380 | I think the answer is no.

00:37:11.140 | I think there are a lot of people

00:37:13.540 | who started companies

00:37:15.220 | after being in very difficult

00:37:17.300 | and challenging environments

00:37:18.500 | that stretched and pushed them

00:37:21.060 | beyond their comfort zone

00:37:22.580 | and they lived in that world for years

00:37:24.820 | before they started something.

00:37:25.940 | If all of a sudden the answer is

00:37:30.420 | let me have an escape hatch

00:37:32.260 | so that I can egress off

00:37:34.100 | whenever things get hard,

00:37:35.380 | I don't think you're going to accomplish

00:37:37.140 | much of anything

00:37:38.020 | because I'm not sure that that is

00:37:39.700 | the kind of boundary conditions

00:37:42.420 | that push greatness upon people.

00:37:44.580 | So I would just keep that in mind as well.

00:37:46.420 | I'm not sure the side hustle solves anything.

00:37:48.660 | It may actually allow you to quit

00:37:50.340 | before you actually get

00:37:51.860 | to the other side of something

00:37:52.900 | and realize what you're capable of.

00:37:54.260 | Yeah, I think that's a great point.

00:37:57.300 | You kind of have to mentally burn the boats

00:37:59.140 | when you do a startup.

00:38:00.500 | It's Cortez.

00:38:01.220 | You got to burn the boats.

00:38:02.580 | Yeah, I agree with that.

00:38:03.460 | Your life needs to be like Cortez.

00:38:06.420 | You got to burn the boats.

00:38:07.620 | If you keep the safety net with you

00:38:10.580 | as you move through life all the time

00:38:12.820 | and you never put yourself at risk,

00:38:14.420 | you're never going to figure out

00:38:16.260 | what you're capable of.

00:38:17.220 | And then you're going to look back at some point

00:38:19.700 | and the odds that you're going to be disappointed

00:38:21.860 | are higher than if you actually just tried

00:38:24.420 | and lived it and just said,

00:38:25.860 | "Okay, you know what?

00:38:26.500 | I'm really glad I'm betting on myself here."

00:38:28.420 | To wrap up the conversation

00:38:30.500 | about where markets are headed,

00:38:31.940 | Sax, I think we were going to just do

00:38:33.620 | a quick round the horn.

00:38:34.420 | Anything that you've repositioned

00:38:35.780 | in your portfolio around investing

00:38:37.780 | or asset classes that you shift

00:38:39.940 | as we face looming budget crises,

00:38:43.620 | the election cycle?

00:38:45.940 | I'm trying to sell every single SaaS startup

00:38:48.900 | I have in secondary markets.

00:38:50.340 | And you know how many bids there are

00:38:52.660 | for these SaaS companies?

00:38:54.100 | Negative one bid.

00:38:55.060 | That's interesting.

00:38:56.980 | I had a couple of my startups get offers.

00:39:00.980 | I've had three or four secondary offers

00:39:03.060 | in the last two weeks

00:39:03.860 | I've had to deeply consider

00:39:05.460 | and they weren't like 75.

00:39:06.900 | What kind of companies?

00:39:08.180 | Let's say two are SaaS

00:39:10.260 | and then one I can't say

00:39:11.300 | because it would be too easy to guess.

00:39:12.420 | But the bottom feeders went from offering

00:39:14.420 | like an 80% discount

00:39:15.860 | to now a 25% discount.

00:39:17.540 | So you know you're not allowed

00:39:18.420 | to sell your shares in all in, right?

00:39:20.900 | I'm trying.

00:39:21.540 | I'm trying.

00:39:22.100 | Brad Gerstner's bought 7% so far.

00:39:24.100 | So I'm quickly offloading to Gerstner

00:39:27.140 | as much as I can.

00:39:27.780 | You just super tilted Friberg there.

00:39:30.740 | Look at him, he's laughing

00:39:31.700 | but inside he's just about to explode.

00:39:33.780 | You're going to have the fifth best guy here.

00:39:34.900 | He's going to own 7%.

00:39:36.260 | He gets 16 minutes per episode.

00:39:37.620 | You know what?

00:39:38.340 | If he'll moderate, I'll have him.

00:39:39.700 | I mean, this is moderation going OK

00:39:42.020 | or should I jump in and save the show?

00:39:43.620 | He should write all in a get fit memo.

00:39:45.540 | Just on the question of

00:39:48.020 | how do you reposition?

00:39:48.900 | So first of all, the easy one to avoid

00:39:50.980 | is treasuries, right?

00:39:52.340 | I mean, do you really want to accept

00:39:53.700 | a 4.2% yield for 10 years

00:39:56.820 | to own a US bond

00:39:59.780 | and with the looming inflation

00:40:02.740 | that is still out there

00:40:04.100 | or the looming debt crisis

00:40:05.620 | that might be out there?

00:40:06.740 | So that's probably the easy one.

00:40:08.340 | I think the hard one is around equities

00:40:10.820 | because equities are at an all-time high.

00:40:12.900 | Part of the reason why they're an all-time high

00:40:15.540 | is because the Fed telegraphed

00:40:17.620 | that we'd have big rate cuts this year.

00:40:19.300 | Remember at the beginning of this year,

00:40:21.540 | they said there would be seven rate cuts.

00:40:22.980 | Those expectations have kept coming down.

00:40:26.100 | I think we had one,

00:40:27.300 | I guess we had a double rate cut last month

00:40:29.860 | and we were supposed to have

00:40:30.580 | one more 50-bit rate cut this year.

00:40:32.820 | I have to wonder if that's still going to happen.

00:40:35.300 | And more to the point,

00:40:36.660 | if you believe Druckenmiller and Paul Tudor Jones,

00:40:39.060 | we might be in for a extended period

00:40:42.260 | of higher interest rates for longer

00:40:45.780 | and that will be bad for equities.

00:40:47.380 | Equities normally are inflation protected

00:40:50.420 | in the sense that those companies

00:40:51.540 | can just raise prices over time

00:40:52.740 | and keep up with inflation.

00:40:53.700 | And so equities are generally

00:40:55.940 | a pretty good thing to own

00:40:57.460 | in the face of inflation.

00:40:59.780 | But if we're in for a period

00:41:02.180 | of high interest rates

00:41:03.300 | longer than anyone thinks,

00:41:04.980 | that's going to be bad for equities.

00:41:06.340 | Well, I would just argue one thing,

00:41:07.620 | which is except in the scenario

00:41:10.420 | where you believe the only inevitable path

00:41:12.660 | is for the central banks to monetize the debt,

00:41:15.700 | meaning the central banks step in

00:41:18.020 | to buy the outstanding treasuries

00:41:19.700 | that need to be issued,

00:41:21.060 | which both supports inflation,

00:41:22.900 | but also introduces capital into the system.

00:41:25.220 | And that's where both equities,

00:41:26.980 | that's where you could see a scenario

00:41:28.020 | where equities and gold go up

00:41:29.620 | while fixed income goes down to have higher rates.

00:41:33.060 | So it's effectively a money printing indicator or signal.

00:41:36.340 | Now, my personal position on this

00:41:38.500 | going into this new era,

00:41:40.820 | if it manifests as the markets are telling us it will,

00:41:43.700 | is kind of where Paul Tudor Jones is.

00:41:46.260 | I think that commodities have,

00:41:47.700 | and gold is a commodity.

00:41:49.300 | Everyone talks about it as being the safe haven asset,

00:41:52.500 | but there are other commodities out there

00:41:54.420 | that are much more fungible

00:41:56.260 | and used in production cycles

00:41:58.260 | to make food, to make energy, to make goods.

00:42:01.780 | And a commodity-linked businesses,

00:42:04.180 | meaning businesses whose revenue or profit grows

00:42:06.900 | with the underlying commodity price growing,

00:42:09.060 | will outperform other businesses.

00:42:10.420 | They're going to struggle to raise prices

00:42:11.780 | or struggle to pay higher labor costs

00:42:14.020 | or struggle to deal with higher cogs.

00:42:17.140 | Whereas commodity-linked businesses

00:42:18.580 | that effectively just make a margin on the commodity--

00:42:20.180 | - What's an example?

00:42:20.900 | - A mining business.

00:42:23.300 | So businesses that do mining of natural resources,

00:42:27.300 | businesses that trade agricultural commodities.

00:42:30.820 | So those businesses usually make kind of a fixed margin

00:42:32.980 | on the underlying commodity price,

00:42:34.260 | and they do well in these cycles.

00:42:36.820 | So anyway, I think that Paul Tudor Jones--

00:42:39.220 | 'Cause if you own a commodity,

00:42:40.100 | it's not a productive asset.

00:42:41.060 | It's not generating yield for you.

00:42:42.580 | But if you own a business that's making a profit--

00:42:44.580 | - It just seems like it's easier to own Bitcoin.

00:42:47.140 | - That's one asset,

00:42:48.820 | but Bitcoin isn't a productive asset, right?

00:42:50.740 | I mean, so that's one way to kind of build a portfolio.

00:42:53.780 | But I personally like owning businesses

00:42:55.700 | where they're doing something and making value,

00:42:57.380 | and in the process, they earn a profit,

00:42:59.060 | especially if the profit grows

00:43:00.420 | with an underlying inflationary pressure.

00:43:03.300 | - On Sax's point about the equity markets,

00:43:05.300 | there is this thing that people look at

00:43:06.900 | called the Buffett indicator,

00:43:08.100 | which is the total value of the Wilshire 5,000

00:43:11.700 | divided by GDP.

00:43:13.060 | He mentioned it in 2000 and said

00:43:15.700 | it's probably the most reliable measure

00:43:17.940 | of where equities are and where they're about to go.

00:43:21.780 | And there is this long-run mean

00:43:25.780 | when you calculate it going back 50, 60 years,

00:43:29.300 | and every time it's had a short-term high,

00:43:31.780 | there's been a pretty meaningful retrade.

00:43:34.580 | So in 2000 in the dot-com bubble,

00:43:36.420 | in 2007 during the great financial crisis,

00:43:38.820 | during COVID,

00:43:40.820 | and now we've actually set an absolute new high

00:43:44.420 | in this thing,

00:43:45.380 | which, again, to the extent that you believe in

00:43:47.860 | indicators like this,

00:43:48.820 | would kind of tell you that at some point here,

00:43:52.660 | equities are probably going to be cheaper

00:43:56.180 | before they're going to get more expensive.

00:43:57.700 | - This is definitely the high end of normal.

00:44:01.060 | Nick, if you pull up the PE chart,

00:44:02.980 | this is the obvious one to look at,

00:44:04.580 | is not just how dramatic the stock market peaks are,

00:44:09.140 | but the price-to-earnings ratio.

00:44:11.220 | And it's at the high end of normal

00:44:13.540 | at like, I don't know, for a 25 PE ratio on average.

00:44:18.340 | - David's right.

00:44:19.460 | How can you get 4.25%

00:44:21.140 | when you have all of these risks looming

00:44:24.420 | over the next 10 years?

00:44:25.540 | Because Howard Marks, his letter,

00:44:28.180 | he had an investment letter that he published this week,

00:44:31.780 | and it was so great because it was so elegant

00:44:35.460 | in its simplicity,

00:44:36.260 | which is investing in an equity

00:44:38.500 | and investing in a bond

00:44:39.700 | are just completely opposite to each other,

00:44:42.660 | even though they're treated and spoken

00:44:44.500 | as if they're the same thing.

00:44:46.820 | And his concept is like,

00:44:48.340 | people need to understand exactly

00:44:49.940 | what the term's fixed income means.

00:44:52.900 | It means that you will get something reliably

00:44:55.860 | over a long period of time.

00:44:57.060 | And so the question is whether,

00:44:58.660 | is that fair knowing everything you know today?

00:45:01.860 | And I mean, all of you guys have said this now

00:45:04.740 | for it feels like years.

00:45:06.660 | And when you show these charts

00:45:08.660 | of like ballooning debts and deficits,

00:45:12.100 | is it reasonable that the market clearing price

00:45:16.260 | for government-issued debt over the next decade is 4%?

00:45:19.940 | I mean, my gosh, it could easily be 6%.

00:45:22.900 | It could easily be 7% or 8%.

00:45:25.380 | That is very scary.

00:45:26.500 | Totally.

00:45:26.900 | The big difference between a bond and a stock

00:45:28.660 | is that the bond provides you with,

00:45:30.420 | like you said, fixed income payments,

00:45:32.340 | and those would be horribly debased

00:45:35.780 | if you have high inflation.

00:45:36.980 | A stock gives you earnings

00:45:39.060 | and a company can always raise its prices.

00:45:41.380 | And so in theory, it should be hedged against inflation.

00:45:44.420 | But both a stock and a bond are similar

00:45:48.180 | in the sense that they're both hurt badly

00:45:51.700 | by rising interest rates, right?

00:45:53.060 | Because the discount rate is higher.

00:45:54.740 | So this is where I'm just not sure about equities

00:45:56.900 | is if we do head into a new regime of higher rates longer,

00:46:01.140 | does that hurt equities

00:46:03.140 | even though equities normally are pretty good inflation hedge?

00:46:06.820 | So I just don't know the answer to that.

00:46:08.340 | I do think we're headed for a period of constraints.

00:46:12.980 | I think that since 2008,

00:46:15.780 | we basically were living in sort of a consequence-free environment

00:46:19.380 | where the Fed could keep interest rates at or near zero.

00:46:24.100 | The federal government could spend as much as it wanted.

00:46:26.740 | We sort of normalized emergency conditions.

00:46:30.260 | First, we had trillion-dollar deficits

00:46:32.580 | as a result of the 2008 GFC,

00:46:35.540 | and then those got normalized.

00:46:36.980 | Then we had $2 trillion deficits as a result of COVID,

00:46:40.260 | and those got normalized.

00:46:41.540 | And then the Fed was also doing QE,

00:46:44.020 | which means that it's buying the US government's own bonds,

00:46:47.460 | thereby propping up US bonds and the bond market.

00:46:52.500 | - So now that's normalized. That's normalized.

00:46:54.660 | - Yeah, keeping interest rates lower

00:46:56.580 | than they otherwise would need to be

00:46:58.340 | to attract those bondholders.

00:47:00.820 | So for about 15 years,

00:47:02.980 | we kind of normalized emergency conditions

00:47:05.300 | and consequence-free spending by the US government.

00:47:08.580 | I think now we may be entering an era of consequences.

00:47:12.660 | And what that means is that you can't push on one aspect

00:47:16.420 | of the federal government's balance sheet

00:47:18.580 | without giving up on something else.

00:47:19.940 | So in other words, if you're going to allow higher inflation,

00:47:24.260 | basically monetizing the debt,

00:47:26.020 | the bond markets are going to make the government pay

00:47:28.100 | higher interest rates on its debt, right?

00:47:29.860 | Because they're not dumb.

00:47:31.060 | So we're going to be in a world of higher interest rates,

00:47:33.140 | which means that equities get clobbered,

00:47:34.980 | real estate gets clobbered,

00:47:36.980 | the value of people's homes gets clobbered.

00:47:39.300 | So there's real consequences from that.

00:47:41.220 | Or you can tackle inflation,

00:47:43.700 | which means that the Fed's going to have to tighten.

00:47:46.660 | But then I think what that means

00:47:49.140 | is the federal government's going to have to get religion

00:47:50.900 | around spending.

00:47:52.100 | They're not just going to be able to spend all of this money.

00:47:54.660 | - We've seen this, austerity measures in Europe, right?

00:47:57.940 | Were pretty hard for people in Greece and Spain

00:48:01.540 | and to get their heads around.

00:48:02.580 | And I think Americans are going to have to get used to,

00:48:04.340 | we can't just spend and give handouts constantly.

00:48:07.140 | On the equity side, though,

00:48:08.580 | there's also the concept, Sachs,

00:48:09.940 | that you can cut spending and increase earnings

00:48:13.060 | and that that's well within your control

00:48:16.100 | as a CEO and board.

00:48:17.380 | And that's exactly what we've seen coming out of COVID.

00:48:19.620 | And I said it here a couple of years ago,

00:48:21.300 | I think the earnings are going to do well

00:48:22.660 | because people have this other lever

00:48:25.140 | and they can just turn the dial and reduce spending

00:48:27.780 | and increase earnings.

00:48:28.740 | And it's like, oh, that's painful,

00:48:30.180 | but it's not so painful that it's not worth doing.

00:48:34.260 | And so corporations have gotten religion

00:48:36.980 | around cost-cutting and austerity and increasing earnings.

00:48:40.180 | The question is, and individuals have to,

00:48:43.620 | so they're pushing out buying new cars

00:48:45.460 | and spending on travel.

00:48:48.020 | - Well, let me just give you guys-

00:48:49.540 | - When does the government get that austerity

00:48:51.460 | that companies and individuals are forced to do?

00:48:53.940 | And that's the problem you keep talking about, Freeberg,

00:48:56.340 | is this entire election cycle

00:48:58.900 | is about who can give more free (beep)

00:49:00.980 | enough with the free (beep)

00:49:02.020 | like somebody has got to be an adult in the room

00:49:03.620 | and say, we don't have any more free (beep) left.

00:49:06.180 | - I think this is what the market is saying

00:49:08.580 | is that regardless of who gets elected here,

00:49:10.580 | they've both kind of shown that the deficit will increase,

00:49:13.780 | not decrease under their presidency.

00:49:16.580 | And look, maybe that is positioning to get elected.

00:49:19.460 | And maybe there is a kind of more rational

00:49:22.340 | underlying economic advisory group

00:49:25.060 | that is counseling a different path

00:49:26.980 | than what they are presenting.

00:49:28.180 | And I hope to whoever is listening

00:49:31.300 | that that is the case for both candidates,

00:49:35.460 | very deeply hope.

00:49:36.740 | If you look at what happened in Argentina,

00:49:38.500 | so we've talked a lot about Javier Mele,

00:49:40.260 | he came in as president.

00:49:41.380 | And his austerity measures

00:49:44.420 | by absolutely slashing government spending

00:49:47.220 | has reduced monthly inflation from 25%

00:49:50.500 | to around three and a half percent.

00:49:52.260 | So he's really kind of brought inflation under control.

00:49:54.820 | But the consequence of that

00:49:56.100 | is that the economy has now shrunk

00:49:58.260 | because the government is spending less.

00:49:59.620 | That means there's less revenue for certain businesses.

00:50:01.540 | There's less income for individuals.

00:50:03.460 | So they spend less.

00:50:04.740 | So the economy has shrunk by 1.7% in the last quarter.

00:50:08.100 | And unemployment has spiked.

00:50:11.060 | So now unemployment is at 8% in Argentina

00:50:13.620 | and it's rising fast.

00:50:14.740 | So for the US to actually execute this policy,

00:50:18.500 | when we have a fundamental mandate

00:50:20.500 | for the Federal Reserve to keep unemployment low,

00:50:24.340 | means that something is gonna have to break.

00:50:27.220 | You can't keep unemployment low and inflation low

00:50:30.420 | if federal spending gets too high

00:50:32.980 | and federal debt gets too high.

00:50:34.820 | So we are in a condition now

00:50:36.020 | where federal debt is too high.

00:50:37.860 | And if we cut federal spending too fast,

00:50:40.420 | we end up seeing unemployment spike.

00:50:42.660 | And if we don't, we're gonna have inflation spike.

00:50:44.580 | - Just one-- - Those are the two paths

00:50:46.100 | we could walk.

00:50:46.660 | - Just one thing to challenge what you say,

00:50:50.500 | 'cause I actually, I disagree with it,

00:50:52.100 | is that I don't think that people view

00:50:54.820 | the spending packages of both candidates the same

00:50:58.100 | because the dollar is not created equal.

00:51:00.820 | So there are certain programs

00:51:03.460 | that the Republicans have proposed

00:51:05.060 | that are markedly different

00:51:07.860 | than the programs that the Democrats have proposed,

00:51:10.740 | even if the numbers look the same.

00:51:12.340 | And so this is why I think you have to look

00:51:14.500 | at how the short-term markets,

00:51:16.180 | when they thought Kamala was winning,

00:51:18.180 | behaved versus now the short-term markets,

00:51:20.420 | short-term mean, how do you hedge this risk?

00:51:22.580 | And that has completely changed.

00:51:24.180 | And this is why I mean, over the last 30 days,

00:51:27.700 | you've had a complete and absolute repositioning

00:51:31.780 | of the front end of the yield curve

00:51:32.980 | in terms of risk and who's making the bets.

00:51:35.860 | And I think why is because the Trump package,

00:51:38.900 | whether we agree with him or not,

00:51:42.660 | is viewed as more stimulative

00:51:45.460 | to long-term economic growth,

00:51:47.140 | which is why the inflation risk is being hedged out

00:51:49.780 | versus the Kamala risk,

00:51:51.780 | which is they're just gonna spend money.

00:51:53.700 | Now, on top of that, what I would say is

00:51:57.380 | this may be where Elon Musk being able to

00:52:02.820 | streamline the government

00:52:05.540 | could be an incredible gift for us,

00:52:08.740 | as well as our children and our children's children.

00:52:11.300 | And why is that?

00:52:12.260 | It's because if there's this sort of Damocles

00:52:16.100 | hanging over us constantly of billions

00:52:18.420 | and trillions of dollars of wasteful spending,

00:52:20.580 | he is probably in a position to show us

00:52:25.540 | that we have spent decades spending more

00:52:28.660 | and getting less.

00:52:30.260 | And now we can run the A/B test

00:52:34.020 | where we spend meaningfully, meaningfully less,

00:52:36.900 | cut regulation.

00:52:38.900 | And if we actually get more,

00:52:40.500 | you will have the proof.

00:52:42.180 | And that could set us on a long-term path

00:52:45.860 | of being more judicious in how we spend money.

00:52:48.980 | And I think that we deserve

00:52:51.060 | to run that experiment somehow.

00:52:52.500 | To just go back to your definition of GDP,

00:52:54.980 | it's true that if you cut government,

00:52:56.580 | that might cut GDP

00:52:58.660 | because GDP includes government spending.

00:53:01.060 | However, one could argue that,

00:53:04.420 | although technically that is how the definitions work,

00:53:06.660 | that by cutting government,

00:53:09.700 | you actually unlock resources

00:53:11.860 | that could be used by the private sector

00:53:13.700 | and that ultimately it would lead to more efficiency,

00:53:16.580 | but also stimulate the private sector.

00:53:18.980 | And I think that argument is particularly true

00:53:21.460 | when you've got an economy running at full employment.

00:53:24.020 | So if we had lots of unemployment,

00:53:26.340 | then cutting all these government workers

00:53:27.620 | would be very painful.

00:53:28.500 | But if you've got an economy that's doing quite well

00:53:32.500 | and there's a lot of job creation going on,

00:53:35.140 | then it's a good time to actually cut government

00:53:37.300 | because the private sector can reabsorb these people.

00:53:39.780 | We should use the fact that we still have that,

00:53:42.420 | we have a good employment picture,

00:53:44.020 | to make these painful cuts now,

00:53:46.180 | as opposed to waiting until it would be far more difficult.

00:53:49.300 | - Best point I've heard in a long time.

00:53:50.900 | That's a great point, Sax.

00:53:52.100 | Give us the election update.

00:53:53.140 | What's going on?

00:53:53.620 | Are we gonna get your guy in office?

00:53:56.900 | Is it gonna be Vice President Harris?

00:53:59.620 | What's the sense of what the polls are telling you,

00:54:01.940 | of what the markets are telling us?

00:54:05.140 | What's your read on where we're at?

00:54:06.260 | - All the data is basically pointing one direction,

00:54:08.820 | which is a Trump victory.

00:54:10.740 | And by data, I mean the polling,

00:54:12.260 | I mean the prediction markets

00:54:13.540 | and then the early voting numbers.

00:54:14.980 | So if you look at the polls,

00:54:17.380 | there were two new polls by mainstream media.

00:54:20.260 | One, the Wall Street Journal yesterday

00:54:22.820 | said that Trump was up three nationally.

00:54:26.020 | And I think CNBC had a poll this morning

00:54:29.220 | saying that Trump was up two nationally.

00:54:31.860 | That's very good because...

00:54:33.620 | - That's the popular vote.

00:54:34.740 | - That's the popular vote.

00:54:36.100 | So if Trump is winning the popular vote, it's a landslide.

00:54:38.820 | Most prognosticators say that

00:54:41.220 | because Republicans have a slight electoral college advantage,

00:54:44.180 | that Harris would need to win the popular vote

00:54:47.220 | by more than 2% to have a chance

00:54:49.780 | at winning the electoral college.

00:54:50.980 | So if Trump is winning the popular vote,

00:54:54.340 | then it's a landslide.

00:54:55.380 | Second area is if you look at the state-by-state polling,

00:54:59.540 | Trump has been advancing

00:55:01.220 | pretty much in every battleground state

00:55:04.500 | for the last couple of weeks.

00:55:05.860 | If you use RCP, Trump is now ahead slightly

00:55:09.460 | in every battleground state

00:55:10.660 | and the momentum is all towards Trump.

00:55:12.660 | And then the final data point is around early voting

00:55:15.140 | in states where they have this early voting

00:55:17.540 | and put out the numbers.

00:55:18.660 | The Republicans are tracking well ahead

00:55:21.060 | of where they were in 2020.

00:55:22.900 | Now, there's still a question of,

00:55:24.340 | does this mean that Republicans

00:55:27.140 | are just shifting their votes to voting earlier

00:55:29.620 | and then they'll do less well on election day?

00:55:32.180 | There's always that chance.

00:55:33.380 | But right now, if you're a Republican,

00:55:36.420 | it's what you wanna see.

00:55:37.860 | And if you're a Democrat,

00:55:38.820 | it's definitely not what you wanna see.

00:55:40.580 | - Yeah, and the essay that Nate Silver wrote

00:55:43.460 | that was published by the New York Times yesterday said,

00:55:46.500 | "It's a 50/50 toss-up.

00:55:48.020 | "Either candidate could win,

00:55:49.140 | "but my gut tells me it's gonna be Trump."

00:55:51.220 | He's kind of indicated that's where,

00:55:52.740 | as a guy who's obviously been a big prognosticator,

00:55:56.020 | it says the market's headed.

00:55:58.020 | J. Cal, do you think Sachs is right on this?

00:56:00.900 | Anything you're picking up for me?

00:56:01.540 | - Oh, I'm sorry, I forgot to mention prediction markets.

00:56:02.900 | Prediction markets have moved

00:56:04.020 | very, very sharply in favor of Trump.

00:56:06.180 | It's almost two-thirds, one-third now in favor of Trump.

00:56:09.620 | So there's been a huge move among bettors

00:56:12.340 | that Trump is gonna win.

00:56:13.460 | - On polymarket.

00:56:14.980 | - Yeah, polymarket and then Cal-she as well.

00:56:16.900 | - Do you think it's over, J. Cal?

00:56:18.260 | - I'll go with Nate.

00:56:19.380 | I mean, I think Nate's probably the best thinker on this

00:56:23.940 | who I think puts a lot of effort into it.

00:56:26.660 | And if he says it's 50/50 with a slight advantage to Trump,

00:56:29.540 | I think I would go with his gut.

00:56:31.300 | But he's saying don't trust anybody.

00:56:34.100 | I don't trust the prediction markets.

00:56:35.780 | And I think the prediction markets are closing that gap

00:56:39.780 | as we get closer

00:56:40.820 | 'cause they are easily manipulated.

00:56:42.180 | Polymarket is only offshore, right?

00:56:44.180 | The U.S. market is not allowed to participate in polymarket.

00:56:47.620 | So it's all foreign investors.

00:56:49.460 | Now, of course, Americans could be putting money overseas

00:56:52.340 | somehow and using foreign accounts to place these bets.

00:56:56.020 | I'm guessing if you were a sharp

00:56:57.620 | and you really wanna make money, that's what you would do.

00:57:00.260 | So I don't know what percentage of it-

00:57:01.700 | - By the way, it was reported this morning

00:57:04.260 | that a French trader has bet $45 million on Trump

00:57:09.140 | on polymarket, that he is the whale.

00:57:10.740 | He's a French national

00:57:11.780 | with "extensive trading experience."

00:57:13.940 | He's not "manipulating the market."

00:57:15.780 | He just really is trying to build a big position.

00:57:17.620 | So he sounds like he's a pretty active trader

00:57:19.300 | that's made the big move.

00:57:20.740 | - I mean, it's a crypto-based site.

00:57:22.260 | So you get the benefit of like,

00:57:24.260 | you can track some amount of this on blockchains

00:57:27.140 | and then eventually find the person.

00:57:28.900 | But because it's crypto as well,

00:57:30.660 | you can also hide yourself pretty well

00:57:32.180 | with tumblers and other systems.

00:57:34.100 | So I would discount polymarket a bit.

00:57:37.460 | It's probably not as extreme as it seems,

00:57:39.540 | but it does seem like Kamala has not helped herself

00:57:44.340 | with the interviews.

00:57:45.300 | They haven't been great.

00:57:46.260 | And it is a toss-up.

00:57:51.700 | And so-

00:57:52.180 | - Jamal, any surprise?

00:57:54.180 | - Yeah.

00:57:54.660 | - Any October surprise still coming?

00:57:56.340 | I mean, there've been a few attempts

00:57:57.460 | the last couple of days.

00:57:58.260 | I mean, it seems like the rhetoric-

00:57:59.300 | - The last 24 hours, there've been some really gnarly ones

00:58:01.540 | that we shouldn't give it.

00:58:02.900 | I don't think we should give any credence to,

00:58:04.740 | but some Republicans have been coming out

00:58:07.940 | talking about like a really gnarly one

00:58:09.860 | about the Republican side.

00:58:11.940 | And I mean, it's not much more gnarly

00:58:15.300 | than other things that have been said about Trump already

00:58:17.620 | and judgments that Trump is against him already

00:58:19.940 | for a hundred million dollars.

00:58:20.900 | So it's in that vein.

00:58:22.260 | But I do think that that looks to me like it's cap.

00:58:25.620 | And I think there's gonna be a lot of fake news,

00:58:28.740 | maybe even deep fakes that come out,

00:58:30.580 | you know, in the last week or two.

00:58:32.180 | So I think people should not trust anything

00:58:34.260 | they see on social media.

00:58:36.500 | Be very careful with that information.

00:58:38.100 | - I'll tell you guys, my kind of view is like,

00:58:42.500 | things seem to be getting more inflammatory

00:58:44.500 | leading up to the election here.

00:58:46.100 | It's like, we've got 12 days left or whatever it is.

00:58:48.740 | And the rhetoric and the tonality of the stuff

00:58:53.060 | that's being said is getting so nasty on both sides.

00:58:56.100 | And I just worry more about the reconciliation,

00:59:02.260 | reconstruction phase that needs to happen in America.

00:59:04.740 | - Do you actually see it on both sides?

00:59:06.100 | Is it equal on both sides?

00:59:07.700 | That's your observation.

00:59:10.100 | - I think like Trump leaning out the window of McDonald's

00:59:16.740 | and it was, I mean, I laughed pretty hard

00:59:18.340 | when he was like, someone said to him

00:59:20.100 | when they interviewed Trump

00:59:20.900 | when he was serving French fries.

00:59:22.260 | And he said something like,

00:59:24.260 | "I've now worked in McDonald's 15 minutes longer

00:59:26.580 | than Kamala has."

00:59:27.540 | And then one of the reporters said,

00:59:28.900 | "Well, why do you think she would lie about that?"

00:59:30.580 | And he leans out the window.

00:59:31.460 | He said, "Because she's lying Kamala."

00:59:33.460 | And you know, it's a funny joke.

00:59:35.460 | That's his quip.

00:59:36.100 | He makes fun of everyone.

00:59:37.060 | But I think the whole thing about making fun of everyone,

00:59:39.300 | it's such a different tone and a different rhetoric

00:59:42.340 | than I think what's gonna be needed.

00:59:43.620 | 'Cause imagine if she wins

00:59:45.460 | and he's painted her as being a liar

00:59:48.340 | and crooked and deep state.

00:59:50.020 | I mean, look, I'm not gonna try and-

00:59:51.220 | - I don't know how you can possibly compare that

00:59:53.060 | to what the Democrats are saying right now,

00:59:54.420 | which is that Trump is literally Hitler.

00:59:56.180 | - Literally Hitler.

00:59:57.220 | - They're calling him a fascist.

00:59:57.940 | She called him a fascist.

00:59:58.820 | - And now she said, "It's democracy's on the line."

01:00:01.300 | And obviously when you say something like that,

01:00:03.940 | when you say that the fundamental system

01:00:06.180 | of the electoral process is on the line,

01:00:09.940 | it implies that if he wins, we've ended democracy.

01:00:14.180 | That will inevitably lead people to feel

01:00:16.260 | like we are in a place of civil chaos.

01:00:20.260 | And I don't think that anyone's gonna feel good

01:00:21.940 | coming out of this.

01:00:23.140 | How do you guys think we kind of deal

01:00:26.340 | with the election outcome here?

01:00:28.660 | One side or the other?

01:00:29.620 | - I mean-

01:00:30.100 | - Half the country's gonna hate the president

01:00:31.860 | and half the country is gonna hate where we are

01:00:34.180 | and how we sit as a country.

01:00:35.300 | And half the country is gonna think

01:00:36.340 | that democracy is over.

01:00:37.700 | I mean, one half is gonna feel like this is the end.

01:00:40.500 | And is it just a temporary thing

01:00:42.820 | and everyone reconciled and we all get back to work

01:00:44.980 | and the election's over and whoever wins, wins?

01:00:47.380 | - I think, unfortunately, the mainstream media

01:00:50.740 | is responsible for giving roughly half the country

01:00:53.220 | a psychosis about Trump because they are pushing out

01:00:55.940 | this rhetoric nonstop that he's a fascist,

01:00:57.860 | that he's Hitler.

01:00:58.980 | They keep putting out all these fake stories.

01:01:01.540 | And they are basically training people

01:01:04.180 | or indoctrinating them that he's a threat to democracy.

01:01:07.460 | I was having dinner last night with someone

01:01:08.820 | who's a Democrat who pretty much gets all their information

01:01:10.900 | from mainstream media and she's terrified of this.

01:01:13.780 | It's just not who Donald Trump is.

01:01:16.500 | It's ridiculous hyperbole.

01:01:17.860 | But if you're locked in that media ecosystem

01:01:21.060 | and that's all you hear,

01:01:21.860 | you really are frightened by this.

01:01:23.380 | So I think that the media's irresponsibility,

01:01:27.380 | the way that they don't report honestly

01:01:29.940 | and that they gin up these threats

01:01:31.700 | has really terrified half the country.

01:01:33.860 | - Do you think that the Trump is Hitler rhetoric

01:01:37.140 | indicates that the Democrats feel--

01:01:38.740 | - Well, look, it's usually a part of lying.

01:01:40.900 | I mean, that's like pretty par for the course.

01:01:42.980 | What's so horrible about that?

01:01:44.340 | I mean, you could make the argument

01:01:46.180 | that she's lied about a lot of things.

01:01:47.860 | As Anderson Cooper interrogated her quite well

01:01:51.060 | just yesterday on that town hall,

01:01:52.980 | he pointed out that she had said 50 times

01:01:55.060 | that Trump's wall was a stupid idea

01:01:57.220 | and now she appears to be in favor of it.

01:01:59.220 | So I think that accusing your opponent of lying

01:02:01.620 | is pretty par for the course for a politician.

01:02:03.700 | What's not par for the course

01:02:05.140 | is saying that your opponent is literally Hitler

01:02:07.780 | and a fascist.

01:02:08.500 | That's just going to a whole different level of rhetoric.

01:02:11.140 | - Okay.

01:02:13.620 | Chamath, do you think we're in a nasty state

01:02:16.020 | and we're gonna be able to get out of it

01:02:17.060 | after the election?

01:02:17.700 | - I think we're gonna be fine.

01:02:19.860 | - Okay.

01:02:20.660 | - I'm actually pretty optimistic

01:02:22.420 | 'cause I actually don't think it's gonna be that close.

01:02:24.260 | I mean, right now it's looking like

01:02:26.820 | maybe landslide's too strong a word,

01:02:28.980 | but a solid victory for Trump.

01:02:31.060 | That's what the polls are showing.

01:02:32.500 | That's what the prediction markets are showing.

01:02:33.860 | That's what the early voting is showing.

01:02:35.380 | And if you look at all the other data points right now,

01:02:38.020 | it's showing Trump winning pretty handily.

01:02:41.060 | The other data point that we haven't talked about

01:02:43.380 | is just how these campaigns are acting

01:02:45.140 | in the final stretch.

01:02:46.260 | If you look at the Trump campaign,

01:02:48.580 | it's pretty much steady as she goes.

01:02:50.260 | You look at the Kamala campaign

01:02:52.180 | and they're in this throwing spaghetti

01:02:53.860 | against the wall mode.

01:02:55.140 | They're back to kind of the dark Brandon type messaging

01:02:59.140 | where the reason to vote for us is Trump's a fascist.

01:03:01.780 | This is very different than their messaging

01:03:04.500 | when they made the switcheroo from Biden to Kamala, right?

01:03:07.860 | When they first made that switch,

01:03:09.700 | they said, okay, let's get away from this dark Brandon

01:03:12.580 | threat to democracy type messaging.

01:03:14.180 | It doesn't seem to be working.

01:03:15.220 | Let's emphasize Kamala Harris as a change agent,

01:03:19.220 | as a transformational candidate,

01:03:21.060 | as a candidate of joy and positive vibes.

01:03:24.180 | And they did get a big bounce in the polls because of that.

01:03:26.500 | The problem is that over the last couple of months,

01:03:30.100 | that sort of bounce in the polls has worn off

01:03:33.460 | as Harris has not been able to explain

01:03:35.540 | what she would change.

01:03:37.700 | She keeps getting asked in all these interviews,

01:03:39.380 | what would you do differently than Joe Biden?

01:03:41.060 | Anderson Cooper just asked her that yesterday

01:03:44.260 | for like the 19th time.

01:03:45.700 | And she still does not have an answer to that question.

01:03:47.700 | And so the problem she has is that

01:03:50.340 | this sort of veneer they gave her as this change agent

01:03:53.780 | has kind of worn off

01:03:55.220 | and she's seen as a continuation of Biden

01:03:58.580 | and the public does not want a continuation of Biden.

01:04:00.980 | And so now it feels like they're frantically

01:04:04.100 | trying to figure out how to reposition.

01:04:06.100 | They're back to the anti-Trump sort of hysterical messaging,

01:04:11.380 | which didn't work.

01:04:12.180 | It wasn't working three months ago

01:04:13.300 | when they made the switcheroo.

01:04:15.140 | So I tend to think that if you look at the behavior

01:04:17.220 | of these campaigns, it's pretty easy to see

01:04:19.940 | which one feels confident and which one is in a panic.

01:04:23.540 | - Okay, Jake, if you could go back in time

01:04:25.460 | and you were Kamala's advisor when she became the nominee,

01:04:30.020 | what would you have advised her to do differently

01:04:33.540 | than she has done in this campaign today?

01:04:35.700 | - I would have had a speed run primary

01:04:37.220 | and I would have let democracy play out.

01:04:39.460 | That was the big mistake.

01:04:40.500 | If the Democrats lose, I think they'll look back on it and say--

01:04:43.860 | - 100% agree with you, 100%.

01:04:44.900 | - And then in terms of thinking about

01:04:47.780 | why people believe that Trump is an existential threat

01:04:53.220 | to democracy, I encourage everybody who's a fan

01:04:56.020 | of this podcast to go back to episode 16

01:04:58.820 | of the "All In" podcast.

01:05:00.580 | And that's the episode where we all reacted

01:05:02.660 | the week of January 6th.

01:05:05.540 | And we all had great consensus amongst us

01:05:09.700 | that we thought this was one of the most disgusting,

01:05:11.700 | horrific days in the history of the country

01:05:14.340 | and that Trump was trying to overthrow the election results

01:05:19.620 | and that he was doing so in a non-democratic fashion.

01:05:22.740 | Now I know some people have re-underrided

01:05:24.420 | or changed their positions,

01:05:25.380 | but I encourage you all to pause this episode

01:05:28.340 | and go back and listen to our very thoughtful discussion

01:05:31.060 | on episode 16 of the "All In" podcast,

01:05:33.460 | 'cause we were scared as well.

01:05:34.740 | - I think that things happen in a moment

01:05:36.980 | and you have to have enough compassion

01:05:38.900 | to say you react in a moment,

01:05:40.500 | but then you also have to have the intellect

01:05:43.380 | to separate yourself from the things that happen,

01:05:45.300 | learn more, and possibly and potentially change your mind.

01:05:48.420 | I don't want to be defined by a thing

01:05:51.380 | that I said in a moment.

01:05:53.460 | And I won't do that to other people.

01:05:55.220 | In that moment, I thought what happened was really terrible.

01:05:58.420 | And then since then, I've got to know the person

01:06:01.060 | and I don't think that he actually incited much of anything.

01:06:03.460 | That's my belief.

01:06:05.380 | - Yeah, and that's fine, that's your belief,

01:06:07.380 | but I do think there's another group of people

01:06:08.900 | who agree with your original assessment, yeah.

01:06:11.620 | - Well, I think that those people

01:06:13.300 | need to also re-underwrite the way I did

01:06:15.060 | because I'm not really want to flip for random reasons.

01:06:18.740 | But that's not the point.

01:06:20.420 | The point is, I think that if you still believe

01:06:22.980 | what you believed then,

01:06:23.940 | then you should tell people to listen to what you said.

01:06:26.020 | - Yeah, listen to what I said.

01:06:27.540 | - Okay, but there are a lot of-

01:06:29.060 | - And listen to what Zack said

01:06:29.860 | and listen to what Freeberg said.

01:06:30.740 | I thought we had a very productive discussion

01:06:32.340 | when it happened.

01:06:32.900 | I think people have memory hold it.

01:06:34.180 | - What you're trying to say,

01:06:35.540 | which I partially disagree with,

01:06:37.780 | is those beliefs have changed over time.

01:06:40.900 | And I think it's more balanced for you to say

01:06:42.980 | that that's a point in time.

01:06:45.780 | And if you believe that that point in time still exists,

01:06:49.220 | that's fine for you to say that.

01:06:50.900 | But I think that's the way that you should say it.

01:06:52.660 | The other thing that I would like to say

01:06:54.020 | about this election, which I find really interesting,

01:06:57.060 | is we are in the part of the cycle now

01:06:59.700 | where the side that's losing is going to panic.

01:07:04.260 | And I think it's happened a couple of times,

01:07:07.460 | but I would just remind everybody,

01:07:09.140 | we have run the A/B test.

01:07:10.820 | We know what the presidency

01:07:13.300 | is going to look like under Trump,

01:07:14.740 | except you get the real vice president

01:07:18.500 | plus RFK plus Elon Musk,

01:07:20.260 | whether you like them or not.

01:07:21.540 | But my point is, I think you need to consider

01:07:23.540 | that you're getting four for the price of one.

01:07:25.700 | And if the other side, if Harris wins,

01:07:29.780 | you mostly know what the trend will be,

01:07:34.820 | because you've seen the trend

01:07:36.340 | under four years of Biden.

01:07:37.620 | The second thing is,

01:07:40.100 | I think it's interesting to see

01:07:42.820 | that when you get into the home stretch,

01:07:46.100 | the losing side tends to turn on itself

01:07:48.500 | because they start to play protectionism

01:07:50.740 | for their own careers.

01:07:51.700 | And there's a lot of stuff

01:07:54.180 | that I think you can consume

01:07:55.860 | that starts to show that.

01:07:56.980 | And I think that's just an interesting observation.

01:07:59.140 | A lot of the tried and true,

01:08:01.540 | most reliable media sources

01:08:04.260 | that I think we're trying to navigate

01:08:07.220 | as much as possible for a pro-Harris presidency

01:08:10.180 | are starting to push back in a way

01:08:12.900 | that I find a little surprising.

01:08:15.300 | I think the CNN town hall yesterday

01:08:17.300 | was one of those moments for me

01:08:18.740 | where even people like David Axelrod,

01:08:21.380 | a little bit throwing Kamala Harris under the bus.

01:08:23.940 | I didn't expect that at all.

01:08:25.140 | So I think it's just important to observe

01:08:27.540 | that these things are happening.

01:08:28.580 | - I would agree with that.

01:08:30.180 | We're going to make it through whatever.

01:08:32.340 | Hold on, let me just give one thing to your point, Chamath,

01:08:34.580 | since I am challenging you

01:08:36.820 | with that episode 16 call out.

01:08:38.740 | I do hope that whoever wins,

01:08:42.420 | we all support that person

01:08:44.100 | to do the best they can for all Americans.

01:08:46.020 | And that's always been my commitment.

01:08:47.700 | And I did it the last two times

01:08:48.980 | and we will survive this one.

01:08:50.900 | I don't think we'll survive two or three of these cycles

01:08:53.220 | if we spend 10 trillion each time.

01:08:54.500 | - Just to add, since Jake,

01:08:58.180 | how you're referencing an episode

01:08:59.140 | that I participated in and said things.

01:09:01.380 | I mean, look, I think that the goal

01:09:03.700 | of the mainstream media has been to try and keep us

01:09:06.820 | in the heat of that moment for four years.

01:09:09.700 | I mean, if you've watched MSNBC for the last four years,

01:09:13.460 | it's like J6 is occurring every single day.

01:09:15.860 | I mean, this is all that they talk about.

01:09:18.020 | But I think like Chamath said,

01:09:19.140 | we have learned a lot of things since that day.

01:09:21.860 | I didn't know, for example,

01:09:23.380 | that Twitter had censored President Trump's tweets

01:09:27.380 | telling all of these people to go home,

01:09:29.620 | that basically he said to protest peacefully.

01:09:32.180 | And then when they rioted,

01:09:33.940 | that he actually published tweets

01:09:35.220 | to try and tell them to go home.

01:09:36.900 | So that was new information.

01:09:38.740 | And what that came out,

01:09:40.740 | remember at the beginning of the whole primary cycle,

01:09:43.300 | Trump did that town hall on CNN with Caitlyn Collins,

01:09:47.220 | where he dramatically pulled the piece of paper

01:09:49.060 | out of his pocket with the tweets

01:09:50.820 | and started reading them.

01:09:52.100 | That was a lot of new information for people.

01:09:54.020 | And I think that gave him a different picture.

01:09:55.780 | And then I think one other point

01:09:57.060 | that I think is important is that,

01:09:58.500 | imagine if the press had tried to keep us

01:10:00.260 | in the heat of the moment of the summer of 2020 riots,

01:10:04.100 | the George Floyd riots,

01:10:05.860 | then we'd have a very different perception

01:10:08.260 | of which party was in favor of riots.

01:10:12.020 | Because Tim Walz was the governor of Minnesota

01:10:14.020 | when those riots occurred.

01:10:15.140 | He did not want to send in the National Guard,

01:10:17.700 | Trump did.

01:10:18.580 | And then Kamala Harris tried to raise money for bail

01:10:22.580 | for an organization that was bailing out

01:10:24.420 | some of these protesters and rioters out of prison.

01:10:27.060 | So if the media was so inclined,

01:10:29.300 | they could portray Kamala Harris and Tim Walz

01:10:31.460 | as the party of the riots of the summer of 2020.

01:10:35.140 | I think at the end of the day,

01:10:37.300 | that both those takes are propagandistic

01:10:40.900 | and they happened four years ago.

01:10:43.060 | And it's certainly a piece of information

01:10:45.540 | that voters can take into account,

01:10:47.540 | but it's only one piece of information.

01:10:49.300 | And there's a whole lot of other issues

01:10:51.540 | and policies in this election.

01:10:53.620 | And I think at this point,

01:10:54.740 | everything that happened four years ago

01:10:56.100 | is kind of priced into the stock.

01:10:57.620 | And what voters want to know about now

01:10:59.460 | is what would you do on the issues?

01:11:02.500 | What would you do about immigration?

01:11:03.940 | What would you do about inflation?

01:11:05.460 | What would you do about the economy?

01:11:06.900 | And when you look at the polling on those issues

01:11:10.180 | that voters say matter to them,

01:11:11.700 | Trump has a decisive advantage

01:11:13.540 | and Kamala Harris cannot explain

01:11:15.140 | what she would do differently than Joe Biden.

01:11:16.740 | - David Axelrod, word salad city.

01:11:18.740 | That's what he said last night,

01:11:19.780 | which was very shocking that he would say that.

01:11:21.620 | - Totally, that is throwing her under the bus,

01:11:23.940 | but it's also just preserving his own credibility

01:11:26.420 | because it's hard to look.

01:11:27.460 | - But this is my point.

01:11:28.900 | Anderson Cooper now has to preserve his own credibility.

01:11:31.860 | You can only prop up a candidate so long

01:11:33.940 | and then at some point

01:11:34.980 | you have to prioritize your own media career.

01:11:37.060 | And I think Anderson Cooper last night

01:11:39.300 | had to start to push back.

01:11:40.420 | - That's what, it's like when everyone turned on Biden.

01:11:42.660 | - Yeah, it's like he started-

01:11:43.700 | - Remember that one night

01:11:44.660 | when everyone turned on Biden after the debate,

01:11:46.820 | all the journalists who had been covering Biden for so long

01:11:50.420 | that it was obvious in their face the whole time,

01:11:52.260 | they suddenly had to be like,

01:11:53.620 | okay, I guess we got to admit now he's not really there.

01:11:56.500 | - Yeah, look, and I think in one important way,

01:12:00.020 | Kamala Harris has been set up to fail here

01:12:01.780 | because on the one hand,

01:12:03.380 | she wants to distance herself from Joe Biden's record.

01:12:06.820 | But on the other hand,

01:12:07.620 | she won't say what she would do differently.

01:12:09.540 | So she's in this kind of like never, neverland,

01:12:11.780 | this limbo.

01:12:12.340 | - Yeah, that's right.

01:12:13.220 | - But that's also not her fault.

01:12:14.900 | That's the position the Democratic Party put her in.

01:12:17.380 | And this goes back to what J-Cal said,

01:12:19.460 | we should have run a primary.

01:12:20.900 | - They should have run a primary for sure.

01:12:22.500 | I think they could have had a better candidate.

01:12:23.860 | But also I think to go back to Freeberg's question,

01:12:26.020 | this is a little bit of a pre-mortem,

01:12:27.780 | what should they have done differently?

01:12:28.980 | I think you either defend Joe Biden's record

01:12:31.700 | or say what you would do differently.

01:12:33.300 | You can't be in this limbo state.

01:12:36.580 | And Joe Biden's gotta be in the White House there

01:12:39.220 | and gritting his teeth,

01:12:40.100 | like wanting to get out on the campaign trail

01:12:42.820 | and defending his record.

01:12:44.100 | 'Cause I think Joe Biden thinks he has a good record.

01:12:46.500 | And there are things you could say

01:12:47.780 | in favor of that record.

01:12:48.740 | I mean, I personally don't think it's great,

01:12:50.740 | but you could talk about the full employment picture.

01:12:53.380 | You could talk about the fact that yes,

01:12:54.820 | we had 9% inflation,

01:12:56.660 | but now it's down to 3%.

01:12:57.780 | I mean, there are things you could say.

01:12:59.540 | - Equity markets.

01:13:00.660 | - Equity markets are an all time high.

01:13:02.580 | I mean, he signed a lot of legislation

01:13:04.180 | that he obviously believed in.

01:13:06.260 | So the Democrats do have a record to run on.

01:13:08.820 | It's not a record that I personally believe in,

01:13:10.900 | but it's certainly one that I think

01:13:12.980 | you could make an effort to defend.

01:13:14.900 | And I think Biden, if he was the candidate,

01:13:17.060 | would be defending that record.

01:13:18.740 | And it's very awkward to have a candidate

01:13:21.300 | who was part of this administration

01:13:22.900 | who will not defend that record,

01:13:24.420 | who distances herself from that record,

01:13:27.460 | but won't really say with any detail or conviction

01:13:30.340 | what she would do differently.

01:13:31.780 | That is just a losing proposition.

01:13:33.620 | And I think Anderson Cooper exposed it

01:13:35.380 | more than Bret Baier last night,

01:13:36.980 | because Anderson Cooper had the time.

01:13:38.660 | Bret Baier only had 26 minutes

01:13:40.500 | and Bret Baier was seen as adversarial,

01:13:42.180 | whereas Anderson Cooper

01:13:43.300 | is fundamentally a friendly interviewer.

01:13:46.020 | And when she can't answer those questions

01:13:48.420 | for Anderson Cooper,

01:13:49.620 | that's when you know you're done.

01:13:50.660 | - By the way, we've said this now consistently,

01:13:53.060 | almost monotonously now

01:13:56.500 | for about two or three months.

01:13:58.500 | She has to go into these swing states

01:14:01.300 | and answer about four or five critical questions.

01:14:05.140 | And I would just say,

01:14:06.580 | this is still the problem.

01:14:09.460 | So if she wants to try to close this gap

01:14:12.020 | in the next 12 days

01:14:13.060 | and have a legitimate chance of winning,

01:14:15.140 | I think there's still 12 days.

01:14:17.700 | - I mean, it's a very simple way to do it.

01:14:21.060 | Number one, the border got out of control.

01:14:23.780 | We've shut it down already

01:14:25.060 | and we're gonna tighten it even more.

01:14:26.500 | Number two, the stock market's at a record for a reason.

01:14:29.780 | Number three, the employment is at the lowest

01:14:32.900 | it's ever been in our lifetimes.

01:14:35.300 | This is as good as it gets, folks.

01:14:37.460 | And if you go with the other guy-

01:14:38.900 | - Honestly, Jake, you're a better campaign manager

01:14:43.140 | than the person that's running the campaign right now.

01:14:45.140 | They're not doing a good job.

01:14:48.180 | And I think that Sachs is right.

01:14:49.620 | They're afraid of their own shadow

01:14:51.540 | and they're going to walk into

01:14:53.060 | a meaningful reset of the Democratic Party.

01:14:56.740 | - And let me even finish.

01:14:58.100 | Number four, this person overturned Roe v. Wade.

01:15:00.980 | - That's what they're doing.

01:15:01.700 | - And his VP candidate has said he wanted a national ban.

01:15:04.340 | They walked that back.

01:15:05.220 | But if you're a woman, you shouldn't trust them.

01:15:07.300 | And number five, obviously,

01:15:08.820 | you saw what happened on January 6th.

01:15:10.340 | He'll do it again.

01:15:11.060 | - You got the job, Jason.

01:15:11.300 | - And they just said that over and over.

01:15:13.220 | And listen, I'm not Biden.

01:15:14.260 | Biden obviously needs to retire.

01:15:16.660 | He was a great president.

01:15:17.620 | He was a great vice president.

01:15:18.580 | We thank him for his service.

01:15:19.620 | I'm completely different.

01:15:20.420 | I have a different approach to all of this.

01:15:22.340 | And Trump is a wild card

01:15:24.340 | that this country doesn't need at this time.

01:15:26.100 | The end.

01:15:26.500 | And they would win, but I don't know who's advising her.

01:15:30.900 | It's the same thing with Trump.

01:15:31.860 | I think Trump could have just gone right to the middle.

01:15:34.180 | And when he was Trump 2.0,

01:15:35.780 | he should be up 20 points on her.

01:15:37.220 | The fact that he's not up 20 points or 15 points

01:15:39.860 | on Kamala and that this is a dead heat,

01:15:42.020 | I think is crazy.

01:15:43.060 | Trump's the easiest candidate to beat.

01:15:45.060 | Kamala's the easiest candidate to beat.

01:15:46.420 | I wonder who's running both of these campaigns.

01:15:48.340 | - Well, it's hard to be up 20 points

01:15:50.100 | when the entire mainstream media is against you.

01:15:51.940 | There's only reporting positive things

01:15:54.260 | about the other candidates,

01:15:55.620 | only reporting negative things about you.

01:15:57.060 | And you have a three to one money disadvantage.

01:16:00.500 | One thing you could say for Kamala Harris

01:16:02.340 | is she has been a good fundraiser.

01:16:03.940 | There's plenty of billionaires

01:16:05.060 | who are funding her campaign.

01:16:06.420 | They literally have three times more money

01:16:08.100 | than the Trump campaign.

01:16:10.020 | And even in California, which is a safe state for them,

01:16:13.060 | you're seeing Kamala campaign ads everywhere.

01:16:15.380 | That just tells you they're so flush with cash

01:16:17.460 | that they can afford to spread the money around

01:16:19.140 | even in California.

01:16:20.420 | So look, the reality is that Trump

01:16:22.980 | has the entire establishment against him.

01:16:25.700 | And I think for him to be ahead in the polls

01:16:28.660 | and the prediction markets

01:16:29.860 | and the early voting fairly decisively

01:16:31.860 | is an extraordinary achievement.

01:16:33.940 | I think he's probably the only candidate

01:16:36.660 | who could have done that.

01:16:37.540 | In any event, and I do think, J. Cal,

01:16:41.220 | that Kamala has tried to make some of the arguments

01:16:43.860 | that you just said, not very crisply,

01:16:46.100 | but she's trying to walk back on the border.

01:16:48.180 | The problem is they have no credibility on that

01:16:50.260 | because the Democrats for the last eight years

01:16:52.660 | have fought Trump on the border wall.

01:16:54.820 | It's his signature issue.

01:16:56.500 | And if you don't think Republicans

01:16:57.780 | should be believed on abortion,

01:16:59.060 | there's absolutely no reason

01:17:00.500 | to believe Democrats on the border.

01:17:02.820 | They fought Trump's wall.

01:17:04.180 | Yeah, I think that's fair.

01:17:05.060 | They sold parts of it all for scrap metal.

01:17:07.940 | She was supposed to be the border czar,

01:17:09.300 | didn't even visit the border,

01:17:10.660 | which shows that she never thought it was important.

01:17:12.500 | Now she wants to pretend that she's Trump on the border.

01:17:14.900 | Public's not buying it.

01:17:15.860 | To handle the border is just so simple.

01:17:17.220 | She could just say,

01:17:18.100 | "What worked then is not going to work now.

01:17:19.700 | We've filled up."

01:17:21.620 | And Trudeau just did a tweet.

01:17:23.780 | "Hey, we're taking a pause for two years."

01:17:25.540 | That's all she's got to do.

01:17:26.420 | "We're taking a pause for two years on the border.

01:17:28.100 | We obviously, it got out of control."

01:17:29.940 | The end.

01:17:30.660 | We'll move on to the next issue.

01:17:31.860 | All right.

01:17:33.060 | If the Harris campaign is listening,

01:17:34.900 | Jekyll's advice is out there.

01:17:36.420 | You may come on the pod.

01:17:38.020 | You're always welcome.

01:17:38.980 | Everyone that's running for president

01:17:41.460 | is welcome on the pod.

01:17:42.260 | Sorry, did you guys hear this rumor that Barstool Sports--

01:17:44.020 | She's not my candidate, by the way.

01:17:45.380 | She's not my candidate.

01:17:46.340 | Did you guys hear this rumor that Barstool Sports

01:17:48.500 | was asked if they would interview her

01:17:51.300 | and they turned her down?

01:17:52.420 | Is that, is this rumor true?

01:17:54.100 | Apparently.

01:17:54.820 | I don't know.

01:17:55.700 | Why wouldn't they take it?

01:17:56.820 | No, they would take the interview.

01:17:58.180 | So Portnoy claims that the Harris campaign

01:18:00.900 | reached out and asked to be on

01:18:02.260 | two or three of their shows

01:18:03.460 | and Barstool declined having her on,

01:18:07.220 | which is pretty unbelievable.

01:18:09.700 | Well, they just waited way too late.

01:18:11.300 | I mean, there's no question that last month,

01:18:13.060 | they radically pivoted their media strategy.

01:18:15.380 | She became the candidate roughly three months ago.

01:18:17.300 | For the first two months,

01:18:18.580 | they didn't let her do any press interviews.

01:18:20.260 | Then they realized that their internals were bad.

01:18:22.100 | They're behind in the polls.

01:18:23.220 | So now they're having her go out

01:18:24.420 | and do a lot of media.

01:18:26.260 | And like I said, a couple of weeks ago,

01:18:27.860 | that started to create a doom loop

01:18:29.300 | because she is not a great media performer.

01:18:32.020 | So her polls started getting even worse.

01:18:34.100 | So then they got to put her out on more media

01:18:36.500 | to try and, you know, rebut that.

01:18:38.500 | Your doom loop was a good call.

01:18:39.860 | I'll give you credit.

01:18:41.780 | If the Kamala campaign were a startup,

01:18:43.220 | we'd be saying it's in a death spiral right now.

01:18:44.980 | Okay, got it.

01:18:46.740 | You got here long.

01:18:47.460 | Let's move on.

01:18:48.820 | It's a dead heat.

01:18:49.780 | We got it.

01:18:50.180 | Let's go.

01:18:50.820 | So we're going to wrap up with Starbees.

01:18:53.700 | What I think is a pretty...

01:18:54.980 | Yeah, Starbees, super interesting topic

01:18:56.980 | because it's a real question around

01:18:58.980 | traditional shifting to digital.

01:19:01.620 | Is that why Starbucks is having challenges?

01:19:03.780 | Or is it just maturity?

01:19:05.620 | Or is it what happens when a brand

01:19:07.380 | that's successful as a luxury brand gets too big?

01:19:09.700 | And the kind of, you know,

01:19:12.900 | premium experience commoditizes.

01:19:14.820 | So as you guys know,

01:19:16.100 | we covered the Starbucks CEO,

01:19:18.100 | Brian Nickel joining a few months ago.

01:19:20.900 | This was after the prior CEO had been

01:19:22.660 | in the office for just 16 months.

01:19:25.460 | And there were a lot of problems

01:19:27.860 | that were plaguing Starbucks.

01:19:29.460 | But just this Tuesday,

01:19:31.220 | Brian Nickel came on and said

01:19:32.820 | that we're suspending guidance for 2025

01:19:36.020 | after reporting preliminary earnings

01:19:38.580 | that showed another drop in sales at Starbucks.

01:19:41.860 | Same store sales,

01:19:42.900 | which is the key metric in the QSR

01:19:46.180 | or food and beverage retail business.

01:19:50.100 | It tracks what your revenue is year over year.

01:19:52.340 | Same store sales declined 7% year over year.

01:19:56.260 | Earnings per share dropped 25% year over year.

01:20:00.260 | So Nickel said,

01:20:00.820 | "We're getting the bad news out of the way.

01:20:02.500 | Now we're going to this back to Starbucks plan,

01:20:05.140 | focus on experience,

01:20:06.420 | improve the throughput experience and quality,

01:20:08.340 | make baristas choose Starbucks as a career."

01:20:10.660 | And then he went through a whole plan.

01:20:11.700 | He put out a six, seven minute video

01:20:13.620 | on this whole thing.

01:20:14.820 | So clearly customers are frustrated

01:20:17.380 | with the Starbucks product,

01:20:18.740 | the Starbucks experience,

01:20:20.420 | the employees are frustrated working there.

01:20:22.980 | And a lot of the system seems to be breaking down.

01:20:26.180 | I guess I wanted to kind of talk about

01:20:28.100 | what is the core driver

01:20:29.220 | and is there a business lesson in all of this

01:20:31.700 | about premium brands

01:20:32.900 | or about scale and maturity in markets

01:20:35.380 | to be learned from the Starbucks story?

01:20:37.780 | So I don't know if any of you guys

01:20:38.980 | have gone through this earnings report

01:20:40.180 | or looked at the Nickel video.

01:20:41.300 | I go to Starbucks on regular

01:20:44.660 | and I think this really is just

01:20:46.180 | a case of founder versus bean counter.

01:20:48.420 | It reminds me of Boeing

01:20:49.940 | or even Apple with their inability

01:20:52.420 | to produce new products

01:20:53.780 | post the Steve Jobs pipeline of products.

01:20:57.140 | And if you have anybody read

01:20:58.980 | "Pour Your Heart Into It,"

01:21:00.340 | Schultz's biography,

01:21:01.700 | it's absolutely fantastic.

01:21:03.700 | And he really had an obsession

01:21:05.220 | with user experience,

01:21:06.420 | like writing people's names on the cups

01:21:09.140 | was a Starbucks innovation.

01:21:10.900 | Remembering people's names,

01:21:12.660 | empowering the green aprons

01:21:14.260 | was like a big part of this.

01:21:15.940 | And then once he was at it

01:21:17.140 | and the bean counters came in

01:21:18.740 | and they just got all about efficiency.

01:21:20.420 | The much smaller number of baristas

01:21:23.220 | at the store,

01:21:23.780 | ordering your drink through the app

01:21:26.500 | and just trying to make these

01:21:28.100 | grind it efficiency decisions

01:21:30.100 | as opposed to the experience ones.

01:21:31.780 | And I think the Starbucks experience

01:21:34.340 | starts and begins with the baristas

01:21:35.780 | and that's the main problem.

01:21:36.900 | If you've gone to a Starbucks

01:21:38.260 | over the last couple of years,

01:21:39.300 | sometimes you go in

01:21:40.180 | and there are literally 50 drinks from the,

01:21:43.060 | like, I'm not kidding,

01:21:44.420 | like 50 drinks on the pickup counter.

01:21:47.700 | And then this huge line,

01:21:49.220 | if you come in person,

01:21:50.340 | and it's the most impersonal thing

01:21:52.340 | and the stores are a wreck.

01:21:54.100 | They're disgusting.

01:21:54.820 | They look like a truck stop.

01:21:56.420 | And the whole point of Starbucks

01:21:57.940 | was to create this third space,

01:21:59.300 | this beautiful place that was welcoming

01:22:01.140 | with gorgeous lighting.

01:22:02.660 | And the baristas was supposed to make you hang out

01:22:05.060 | and enjoy yourself there.

01:22:06.820 | And they lost that.

01:22:08.260 | And all you have to do is read Schultz's book

01:22:10.900 | and do exactly what he did.

01:22:12.100 | Now, there are a lot of other issues there.

01:22:14.660 | Around the competition for Starbucks employees

01:22:17.940 | that I think are super important.

01:22:19.220 | - Do you think that's really true Jake Alp?

01:22:21.060 | Because like Nickel came on

01:22:22.500 | and he said, we're going back to the core,

01:22:24.180 | flat whites, espressos, nice espressos,

01:22:27.300 | delicious coffee.

01:22:28.500 | But the reality is

01:22:29.780 | in order for them to have grown revenue

01:22:31.380 | over the last 20 years,

01:22:32.900 | Starbucks has expanded their menu

01:22:34.740 | as Chamath has pointed out

01:22:36.260 | to becoming a seller of sugar.

01:22:38.100 | They've become a seller of milkshakes

01:22:40.020 | and flavored beverages

01:22:41.300 | and high sugar cocktails, mocktails

01:22:43.780 | that people run into the store

01:22:45.540 | to buy two, three times a day.

01:22:46.820 | That's how they were able to get the pickup

01:22:48.660 | not selling what they started out doing,

01:22:50.420 | which was fine Italian roast at espresso.

01:22:52.900 | It's now become a very different product

01:22:55.780 | and a very different experience.

01:22:57.540 | And so can you really go back to the core

01:22:59.380 | and not lose all the customers

01:23:01.220 | that I would say aren't looking

01:23:02.340 | for a flat white and an espresso.

01:23:03.860 | They're looking for a milkshake in the middle of the day.

01:23:05.300 | - I think you want to maintain the core is the key.

01:23:07.300 | You don't want to give up the core.

01:23:08.580 | And the core was having a great in-store experience.

01:23:11.300 | And I think that is not what you get

01:23:13.700 | when you go there.

01:23:14.500 | Putting the sugar aside,

01:23:15.620 | it is, I think like going for ice cream for kids.

01:23:19.460 | So my kids will pick

01:23:20.980 | if they want to go for ice cream or Starbucks.

01:23:23.060 | And to your point about the sugar Chamath,

01:23:24.820 | it's basically the same profile.

01:23:26.260 | And it's a great place to get breakfast.

01:23:29.140 | I'll tell you that, you know,

01:23:30.020 | the egg bites and the scones.

01:23:31.140 | - Let's watch Nichols clip and then Chamath,

01:23:33.780 | you can give us your take on this.

01:23:35.620 | This is a 30 second clip from Nichols,

01:23:37.620 | six minutes that he put out on Twitter.

01:23:39.620 | - To succeed, we need to address staffing in our stores,

01:23:43.300 | remove bottlenecks and simplify things for our baristas.

01:23:46.820 | We need to refine mobile order and pay

01:23:48.820 | so it doesn't overwhelm the cafe experience.

01:23:50.980 | We're fundamentally changing our marketing.

01:23:52.900 | We've been focusing on Starbucks rewards customers

01:23:55.700 | rather than talking to all our customers.

01:23:57.780 | And we're changing that quickly.

01:23:59.300 | We will simplify our overly complex menu,

01:24:01.860 | fix our pricing architecture

01:24:03.620 | and ensure that every customer feels Starbucks

01:24:05.700 | is worth it every single time.

01:24:07.460 | They visit.

01:24:08.260 | We must reestablish ourselves as the community coffee house.

01:24:12.180 | - By the way, this is one of the things

01:24:13.380 | that Nichols did at Taco Bell when he was the CEO there.

01:24:17.140 | You guys remember the Taco Bell menu?

01:24:18.660 | There was always like really interesting hidden things

01:24:21.140 | on that menu.

01:24:21.620 | He simplified the menu, made it very small,

01:24:23.860 | did the same at Chipotle.

01:24:25.540 | He takes this approach of finding the best product,

01:24:28.100 | simplifying the experience, simplifying the operations

01:24:30.580 | and giving the customers fewer choices

01:24:33.300 | that ultimately leads to faster turnaround,

01:24:35.940 | better experience.

01:24:36.820 | But the trade-off is you have less variety

01:24:42.100 | that people have come to know and love.

01:24:43.780 | And at Starbucks in particular,

01:24:45.220 | where there is just so much variety to choose from now,

01:24:48.100 | if your favorite beverage got pulled off the menu,

01:24:50.660 | are you gonna start to go there less frequently?

01:24:52.420 | Chamath, I don't know if you have a take

01:24:54.580 | on what's going on at Starbucks

01:24:55.700 | and whether it tells you something about the maturity

01:24:58.100 | about one of the most iconic consumer brands in America.

01:25:00.420 | - This business is in trouble.

01:25:03.380 | Nick, please show the chart.

01:25:06.020 | This is Eli Lilly versus Starbucks.

01:25:08.500 | If you look at it over a year,

01:25:09.780 | you could look at it over the year to date.

01:25:12.820 | You could look at it over two years.

01:25:14.420 | - Five years.

01:25:15.380 | - Five years.

01:25:16.900 | - Look at that.

01:25:17.860 | - But what does this show?

01:25:19.140 | This shows sugar versus anti-sugar.

01:25:22.900 | And anti-sugar is winning.

01:25:26.340 | Say it differently.

01:25:28.340 | GLP-1s versus things that cause you to need GLP-1s.

01:25:35.620 | GLP-1s are winning.

01:25:36.820 | And so I think this existential issue for Starbucks

01:25:41.220 | is about resetting to a much smaller footprint

01:25:44.820 | and a different product portfolio

01:25:46.660 | that tries to see where the puck is going.

01:25:50.180 | Where the puck is going

01:25:51.300 | is where a large percentage of the people

01:25:53.300 | that probably were buying Starbucks products

01:25:59.460 | and were very loyal Starbucks customers

01:26:01.540 | will have very different consumption habits

01:26:04.820 | as they more pervasively use these GLP-1s.

01:26:09.300 | And this in a nutshell is not something

01:26:12.500 | that Starbucks can fix with their current product mix.

01:26:14.900 | And so I think that they're fighting into a headwind

01:26:19.060 | and these other companies are deeply incentivized

01:26:24.660 | to get American taste buds to be different.

01:26:28.900 | And so Jason, the things that you talked about

01:26:32.020 | are exactly the things that I think

01:26:33.460 | start to fall off the menu or just don't sell as much.

01:26:36.500 | Because whatever the population of Americans

01:26:38.420 | are that are on GLP-1s, let's say it's single digits,

01:26:41.620 | the real question is what percentage

01:26:42.980 | of Starbucks customers are on these things.

01:26:45.060 | And I think it's probably much more than single digits.

01:26:47.220 | And this is why I think you see

01:26:48.500 | the continuous decline in same store sales.

01:26:51.220 | And I think if you start to graph

01:26:54.580 | the adoption of GLP-1s pervasively in America

01:26:57.380 | to the drop in same store sales,

01:26:59.620 | I think as GLP-1 adoption goes up,

01:27:02.180 | same store sales will continue to go down.

01:27:03.860 | - But doesn't it argue towards

01:27:05.620 | the original business, Freeberg,

01:27:07.220 | that going there and having a cup of coffee

01:27:09.380 | and hanging out leisurely with your friends

01:27:11.460 | and having a conversation and it being a third space

01:27:14.020 | is the core value prop and maybe the sugary drinks

01:27:16.980 | maybe will fall out of fashion.

01:27:18.980 | - So it may be true, but I think that

01:27:21.460 | the core objective of any corporation

01:27:26.980 | is to maximize shareholder value

01:27:29.140 | driven by growing profits over time.

01:27:31.540 | So growing profits over time

01:27:32.980 | requires increasing your revenue.

01:27:34.740 | And there are three levers for doing this.

01:27:37.860 | Maximize brand, which is to get more customers.

01:27:40.580 | And I don't know if you can get the brand

01:27:43.380 | to be any more maximal than Starbucks.

01:27:45.540 | Maximize coverage, which is how many products

01:27:47.860 | can you get those customers to buy,

01:27:49.860 | whether it's on a daily basis,

01:27:51.060 | weekly basis or monthly basis.

01:27:52.340 | How much of their meals and wallet share are you getting?

01:27:55.700 | And I don't know how many more times

01:27:56.820 | you can get people to go back into Starbucks each week

01:27:58.820 | than they've done with their rewards program,

01:28:00.340 | with their digital, with their high throughput tools

01:28:02.420 | that they've built over the last decade and so on.

01:28:04.340 | And then finally maximize price.

01:28:05.780 | There's a limit to how much you can charge people.

01:28:07.940 | When you put those three together,

01:28:09.140 | you got more customers, you're selling them more stuff

01:28:11.300 | at the highest price possible.

01:28:12.980 | At some point you reach a revenue maximum.

01:28:15.220 | That has happened also at Apple.

01:28:17.940 | I think that Apple has faced a similar dilemma

01:28:20.180 | in the last couple of years,

01:28:21.140 | which is how do we get more customers?

01:28:22.500 | It's the most recognized brand on earth.

01:28:24.580 | You can only buy so many Apple products now.

01:28:26.820 | They tried to launch the Vision Pro, it didn't go well.

01:28:28.980 | Today they announced that they're, this week

01:28:30.340 | they announced they're discontinuing production

01:28:32.340 | or reducing production on the Vision Pro.

01:28:33.860 | And you can only charge so much for these products.

01:28:36.900 | And I would argue that Starbucks is a victim

01:28:39.540 | of the same maximization effect.

01:28:41.700 | That at some point you get all the customers,

01:28:43.940 | you get them to come in and spend,

01:28:45.540 | buy as many products from you as they can,

01:28:47.380 | and you charge them the highest price possible.

01:28:49.540 | And then you reach this kind of maximum point

01:28:51.460 | on the business.

01:28:52.660 | And I think Starbucks has just reached

01:28:54.100 | that point of maturity.

01:28:55.620 | So to your point, it doesn't mean

01:28:57.540 | that it's a bad business at all.

01:28:59.140 | It could be a great business,

01:29:00.340 | a nicely profitable business,

01:29:02.020 | but the growth ahead of it is limited.

01:29:04.180 | It cannot keep growing same store sales

01:29:06.100 | as it has historically because they've maximized

01:29:08.500 | all three of those levers.

01:29:09.940 | So fewer costs might be a way to drive more profits,

01:29:13.140 | more efficient operations.

01:29:14.740 | I think that's the natural next state

01:29:16.500 | for Nickel to tackle at this company.

01:29:18.260 | - The sad thing for Starbucks is that the only road

01:29:20.820 | that they have is to actually double down on sugar.

01:29:23.300 | And the reason is because the ARPUs

01:29:26.420 | are meaningfully higher than traditional coffee.

01:29:28.340 | And so the economic pressure

01:29:31.060 | that shareholders will put on it

01:29:32.500 | is to actually stay in the business that they're in

01:29:34.500 | and try to do it as long as possible,

01:29:37.300 | as you say, Freeberg,

01:29:38.260 | and just strip out as much cash as possible.

01:29:40.100 | - And then you just, you grow profit

01:29:41.700 | by reducing costs and getting more efficient

01:29:43.540 | versus trying to add more products

01:29:45.700 | to get more customers.

01:29:46.340 | - Which degrades the experience.

01:29:47.540 | - But the structural problem is Starbucks

01:29:49.540 | should be probably a $20 billion asset.

01:29:51.540 | - Yeah, and so what happens when a company

01:29:53.140 | gets to this level of maturity,

01:29:54.420 | much like has happened with Apple,

01:29:55.860 | is the multiples compress.

01:29:56.900 | - No, the difference is though

01:29:58.100 | that Apple has not had the competitive pressure

01:30:00.100 | that Starbucks has,

01:30:00.900 | because Starbucks competes on a level playing field

01:30:03.700 | with the Dunkin' Donuts of the world

01:30:05.300 | or the Pete's Coffees of the world,

01:30:06.980 | but they compete in a completely orthogonal plane

01:30:10.340 | with GLP-1s.

01:30:11.380 | And I think that is not something that Apple deals with.

01:30:14.420 | So Apple can still be at the point

01:30:16.740 | that you described earlier,

01:30:17.860 | which is let me just maximize free cash for generation,

01:30:20.180 | which is what they do.

01:30:21.380 | And then let me allocate that back to shareholders

01:30:23.460 | via buybacks, which is also what they do.

01:30:25.860 | So there could be another decade or so

01:30:27.940 | where Apple can continue to run this play

01:30:29.540 | with very little impact to them or to the company.

01:30:32.820 | Now, I'll say something else about Apple though,

01:30:35.380 | which is I actually upgraded my phone.

01:30:37.620 | I think this was three years in and I finally did it.

01:30:40.980 | My gosh, this phone is, sucks.

01:30:43.220 | - iOS 18 software is janky.

01:30:47.700 | - iOS 18 is just terrible.

01:30:49.860 | I'll show you one example of just like terrible design

01:30:52.100 | where if a designer that worked on my team showed me this,

01:30:54.980 | I would have fired them.

01:30:55.780 | Look at this.

01:30:56.500 | Can you see this?

01:30:57.540 | Is it possible to understand why you have two images

01:31:00.740 | for the do not disturb thing?

01:31:02.580 | One above the other.

01:31:04.020 | - I had a broken one of those too.

01:31:05.960 | - No, but it's a level of sloppiness and not taking care,

01:31:10.180 | which just shows you that it's like,

01:31:12.820 | we make so much money.

01:31:14.420 | It just doesn't matter anymore.

01:31:15.780 | That's what I feel like they're telling me.

01:31:17.380 | And then I'm like, well, wait a minute.

01:31:19.620 | Why did I just spend $1,200 of my hard earned money

01:31:22.420 | to upgrade to this thing if you don't care?

01:31:24.740 | - How much was it to upgrade?

01:31:26.180 | - I think it was like 1200 bucks for this new phone.

01:31:28.580 | The other thing is that the actual upgrade itself,

01:31:32.660 | and I'm not exactly sure why,

01:31:33.940 | 'cause I didn't take the time to unpack it.

01:31:35.700 | It took four hours.

01:31:36.740 | The actual migration of like from an old phone

01:31:40.580 | to a new phone and I thought, my gosh,

01:31:43.380 | this is such monopolistic behavior, right?

01:31:46.420 | So if it takes you an entire day

01:31:50.020 | to basically upgrade your phone,

01:31:52.180 | at some point, you're just gonna stay

01:31:53.620 | with the platform you're on and never upgrade,

01:31:56.420 | or you're just gonna stay on the exact same device

01:31:59.220 | because it's just too complicated.

01:32:01.220 | Imagine going from an Apple to an Android.

01:32:03.220 | - In some ways, both of these businesses

01:32:06.340 | are victims of their own success.

01:32:07.940 | They reach like market saturation.

01:32:10.420 | They reach their natural audience and then some,

01:32:12.420 | and they've just got to figure out what to do next.

01:32:14.340 | And the adjacencies are hard to find.

01:32:16.020 | - Also, also, also photos.

01:32:19.460 | - Oh, they destroyed the app. - It's terrible, it's terrible.

01:32:22.100 | - Stop changing the interface, Apple.

01:32:23.860 | - This is basically a camera and you made it terrible.

01:32:27.540 | It was good.

01:32:28.740 | Why did you do that?

01:32:29.620 | - I think they're trying to change things for change sake.

01:32:32.900 | One of the things Amazon's gotten correct

01:32:34.980 | and other services like eBay and Craigslist

01:32:37.540 | is when you have an interface that works

01:32:39.300 | and billions of people rely on it,

01:32:42.900 | you have to be very, very subtle in making changes to it.

01:32:46.580 | And they made a wholesale change to the photos app

01:32:48.820 | and it did not work.

01:32:50.100 | - It did not work. - It is garbage.

01:32:51.140 | - How do I get rid of the second silent thing on my thing?

01:32:54.740 | How can I just go back to the old thing?

01:32:57.380 | - Yeah. - Totally.

01:32:58.340 | - That's when you know you failed as a product manager

01:33:02.020 | when people want the old thing.

01:33:03.300 | - But isn't this just so lazy?

01:33:05.300 | - Something's not right, yeah.

01:33:07.940 | - I know there's a lot of Apple people, this is,

01:33:10.580 | come on guys, can you just take this?

01:33:11.540 | - The control center is what he's showing

01:33:13.140 | and the control center is massively confusing.

01:33:16.340 | It's like changing where the lights are in your bedroom

01:33:18.820 | and like, yeah. - Okay, all right.

01:33:21.220 | Troubleshooting part of the All In podcast is over.

01:33:24.580 | I really wanna say thanks to Saks

01:33:27.060 | for participating headily in our Starbucks discussion.

01:33:29.700 | Saks, anything you wanna say on the maturity of Starbucks

01:33:32.420 | or other mature tech businesses

01:33:34.180 | or value luxury businesses as they get big?

01:33:36.820 | Too big to keep growing, anything else?

01:33:39.620 | - I mean, yeah, I'm just not an expert on Starbucks.

01:33:43.700 | I mean, I do like their product, but--

01:33:45.140 | - What do you get, what's your order?

01:33:47.220 | Tell us your order. - Yeah, what's your order?

01:33:48.660 | - I just get an Americano with a splash of oat milk.

01:33:51.300 | - Oh, it's like my order, Saks.

01:33:53.780 | - Oat milk! - That's a great order.

01:33:55.460 | - What happened to you? - I'm with you.

01:33:57.220 | Yeah, that's great, good for you.

01:33:59.220 | - How about I just send you some specialty chemicals

01:34:01.460 | that you can just pour down your throat?

01:34:02.820 | Some xanthan gum. - Colberg is oat milk bad?

01:34:04.740 | - Some cargegan. - Do it again

01:34:07.220 | and say you put in heavy cream,

01:34:08.660 | you're gonna get kicked out of MAGA.

01:34:10.020 | - This is horrible, Saks. - You cannot be ordering

01:34:11.700 | oat milk and be MAGA.

01:34:13.540 | They don't have nut milks at Mar-a-Lago.

01:34:15.940 | - I'm gonna find out in a couple of weeks,

01:34:17.300 | I'll let you know. - Don't put that stuff

01:34:18.900 | in your body, dude. - I bet they do.

01:34:20.260 | - You should take that sweater that you just took from Chamath

01:34:22.980 | and wear that to Mar-a-Lago when you go.

01:34:24.420 | It's like a perfect sweater for your Mar-a-Lago visit.

01:34:26.660 | - Oh, yeah. - Oh, my God, don't touch it.

01:34:28.580 | - The pink one, the pink one. - I'm still mad at Nat.

01:34:30.580 | I'm gonna talk to her about this.

01:34:31.940 | Don't touch it. - I'll talk to her at lunch.

01:34:33.300 | I'll talk to her at lunch.

01:34:34.100 | She's putting a sundress on.

01:34:35.060 | - I'm not having lunch with her. - Before you came on Zoom, Chamath,

01:34:37.060 | - Hey, sweetie. - she was actually,

01:34:38.580 | she was just sitting on his lap and they were just chatting.

01:34:40.500 | And I'm like, what is going on here?

01:34:41.860 | - How outrageous, how outrageous. - I'm all day.

01:34:44.180 | What do you want for lunch?

01:34:45.300 | I said, what do I want for lunch?

01:34:46.580 | Your company, that's what I told her.

01:34:48.180 | - Oh, sweetheart. - That's what I said.

01:34:50.900 | She said, oh, you're born English.

01:34:53.460 | - She's like, you speak to me so much more kindly than Chamath does.

01:34:56.580 | - Oh, my God. - Amazing.

01:34:57.940 | - Oh, my God. - All right.

01:34:59.220 | This has been another amazing episode of "The All-In Pod."

01:35:01.940 | As a team player, I have been here to pinch hit for J-Cal.

01:35:04.660 | He did not want to moderate this week,

01:35:06.020 | so I stepped in to fill the shoes. - I'll come back next week.

01:35:09.140 | - You did a good job. - One of the world's,

01:35:09.860 | - Solid job, solid job. - one of this show's greatest moderators.

01:35:13.060 | For your sultan of science, for the rain man,

01:35:19.540 | for the chairman dictator, and for the world's most absentee moderator,

01:35:24.580 | I want to thank you all. - I'm living a great life

01:35:28.900 | - and we will see you all next time. - right now in two months.

01:35:30.260 | He's stealing anything that's not nailed down.

01:35:32.900 | I'm the world's greatest house guest.

01:35:35.380 | He's putting together his own gift bag.

01:35:36.820 | - Love you, besties. - Love you, boys.

01:35:38.420 | - Bye-bye. - Bye-bye.

01:35:40.020 | I'll be there in a couple of hours, Sax.

01:35:41.860 | - I'm going all in. - We'll let your winners ride.

01:35:45.620 | - Rain man David Saxon. - I'm going all in.

01:35:51.540 | And instead, we open-sourced it to the fans,

01:35:53.860 | and they've just gone crazy with it.

01:35:55.620 | - Love you, Wesley. - I'm the queen of quinoa.

01:35:57.620 | - I'm going all in. - Let your winners ride.

01:35:59.940 | - Let your winners ride. - I'm going all in.

01:36:04.500 | - Besties are back. - This is my dog taking a notice

01:36:08.660 | - in your driveway, Sax. - Wait a minute.

01:36:10.340 | - Oh, man. - My avatar will meet me at once.

01:36:14.900 | We should all just get a room and just have one big huge orgy

01:36:17.620 | because they're all just useless.

01:36:18.820 | It's like this, like, sexual tension

01:36:20.260 | that they just need to release somehow.

01:36:21.700 | - What the beep? - What the beep?

01:36:24.740 | - What the beep? - What the beep?

01:36:27.220 | - What the beep? - We need to get merch.

01:36:29.220 | - Besties are back. - I'm going all in.

01:36:31.140 | I'm going all in.

01:36:40.980 | [BLANK_AUDIO]

Markets turn Trump, Long rates spike, Election home stretch, Influencer mania, Saving Starbucks

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