E151: WW3 risk, War with Iran?, 4.9% GDP, startup failures growing, new Speaker & more

00:00:00.000 | What are the next steps in your interview process for your

00:00:02.360 | cabinet position? Secretary of Treasury to my Secretary of

00:00:07.320 | State sacks. J. Cal Press Secretary, I'm a press

00:00:12.120 | secretary. Oh my god, my secretary. Can you imagine me in

00:00:15.280 | the press briefing room? Whoever wins the presidency, I just want

00:00:19.600 | you guys to know I would I would be a great Secretary of

00:00:22.000 | sweaters. I will source incredible only cashmere.

00:00:25.200 | Vacuna I will redesign the outfits of the entire military

00:00:30.680 | industrial complex in the Navy SEALs will be in Laura Piana

00:00:34.960 | from head to toe. They're gonna go whack Osama bin Laden next

00:00:39.160 | time with Laura Piana.

00:00:40.200 | French shoes. Could you imagine SEAL Team six?

00:00:43.480 | Those Apaches and the Blackhawks. You're gonna want

00:00:51.240 | like a pashmina rap or something.

00:00:53.240 | Gosh, have you been to Afghanistan at night?

00:00:57.040 | All right, everybody, welcome to Episode 151 of the all in

00:01:20.960 | podcast with me again today. The Sultan of science, the Queen of

00:01:25.560 | Kenwa, the Prince of panic attacks, David Friedberg, the

00:01:29.440 | dictator himself, Chamath Palihapitiya, and your crazy

00:01:33.600 | angry history uncle David Sachs is here. Welcome to the program,

00:01:37.520 | everybody. We got a very full docket. I guess we'll start it

00:01:42.040 | off with how the war and the conflict in the Middle East is

00:01:45.560 | going here. Sachs you hosted a Twitter space with the vague

00:01:50.840 | and Elon on preventing World War Three. What was the premise

00:01:57.040 | and the reason for setting up this trio to talk about World

00:02:02.720 | War Three?

00:02:03.280 | Well, I think Vivek actually had the idea to do it. We had a

00:02:07.480 | couple other folks on the panel as well. We had Colonel Daniel

00:02:10.480 | Davis, who has a podcast called deep dive. He's a military

00:02:13.320 | expert. We had Alexander Mercurius from the Duran, which

00:02:16.400 | is a top geopolitics podcast. And so we were talking about the

00:02:20.320 | risk of a series of chain reactions that could happen in

00:02:25.000 | the next few weeks here over what's happening in the Middle

00:02:27.360 | East, Elon wanted to do it, because of what he said, which

00:02:31.760 | is that he's talking to a lot of world leaders, he's talking to a

00:02:34.640 | lot of different people. And they tell him that the risk of

00:02:38.880 | some major war happening or some greater catastrophe is higher

00:02:43.240 | than they've ever seen. So he was quite concerned about that.

00:02:48.040 | And, you know, I think a few things came out of it. The first

00:02:51.440 | is, and I think Elon took this position most strongly, we

00:02:55.200 | really need to end the war in Ukraine, the combination of

00:02:58.960 | having a war in Ukraine, that involves the United States, and

00:03:02.680 | then a war in the Middle East that could also involve the

00:03:04.680 | United States and Russia has troops in Syria, there's a lot

00:03:08.200 | of ways for this to spiral out of control, there's a lot of

00:03:11.680 | room for unintended consequences. His view was,

00:03:15.760 | look, we've just had five months of counter offensive here, it

00:03:18.640 | didn't go anywhere. On net, the Ukrainians didn't take back any

00:03:22.680 | territory. In fact, the Russians slightly gained territory. So

00:03:26.200 | this war is going nowhere. It has failed, it is time for the

00:03:30.080 | administration to work towards a ceasefire and a resolution.

00:03:34.040 | Because having

00:03:35.000 | all the Ukrainians have not

00:03:37.160 | they had a completely failed counter offensive.

00:03:40.600 | Okay, but you said the worst found. So I'm just curious,

00:03:43.400 | which the counter offensive has failed.

00:03:45.640 | Okay, got it.

00:03:46.280 | We're now the counter offensive started on June 4, or fifth.

00:03:49.880 | It's now October 26. And if you look at the map that the New

00:03:54.240 | York Times provided, Ukraine has not taken back any meaningful

00:03:57.400 | amount of territory. In fact, Russia on net has gained

00:04:01.040 | territory, even when it was supposed to be Ukraine on

00:04:03.880 | offense. So there is no prospect of Ukraine achieving its

00:04:08.240 | objective of evicting Russia from their territory. So what is

00:04:12.960 | the point of

00:04:13.600 | have defended themselves from an invasion from Putin? Yeah. You

00:04:17.320 | would say that they've ended up six hundreds. What's successful

00:04:21.800 | about it? Several hundred thousand didn't get taken over

00:04:24.880 | as a country when they were in. That was that was Russia's goal.

00:04:28.360 | Okay. So when they sent the troops in there, their goal

00:04:31.440 | wasn't to invade. What was our goal, then? Honestly, you don't

00:04:37.160 | really understand the history of the conflict.

00:04:38.720 | No, no, I mean, we've we've talked about his problem. I'm

00:04:40.920 | just saying the way you're framing it is that Ukraine

00:04:43.280 | found it seems to me they've also the argument could be that

00:04:45.720 | they defended themselves successfully.

00:04:47.120 | If you look at what's happened this year. So let's just put a

00:04:51.440 | pin and what happened last year, because I think there's

00:04:53.240 | different ways of interpreting it. But if you look at what's

00:04:55.240 | happened this year, and certainly over the last five

00:04:58.080 | months, Ukraine has made no progress in evicting the

00:05:00.840 | Russians, nor is there any prospect of them evicting the

00:05:03.960 | Russians. So the continuation of that war doesn't achieve

00:05:06.920 | anything except kill the flower of Ukrainian youth, and

00:05:11.200 | continue to use the Ukrainians are dying in much higher

00:05:15.800 | numbers. And Russia is a much bigger country. They've got

00:05:18.160 | something like five times the population. So moreover, with

00:05:21.600 | this new conflict in the Middle East, you create all these

00:05:23.920 | unintended consequences and all this risk of escalation, being

00:05:27.200 | in a proxy war with Russia. So that was the first thing to come

00:05:30.080 | out of the Twitter space was a consensus among the people who

00:05:34.680 | were there that it's time to resolve this conflict with

00:05:38.040 | Russia, the United States is not need to be in a proxy war with

00:05:40.320 | Russia, we need to normalize relations, it's way too

00:05:43.280 | dangerous to be continuing this with what's going on in the

00:05:45.840 | Middle East. The second half of the the Twitter space, I think

00:05:50.800 | was about the scenarios here for what could come in the Middle

00:05:55.280 | East. And just briefly, I think that there's three scenarios

00:05:59.720 | here for what could happen, assuming Israel goes into Gaza,

00:06:03.080 | this is what everyone's waiting for is will there be a ground

00:06:05.800 | invasion of Gaza Netanyahu says they're going to do it. The

00:06:09.320 | theory on why they haven't right now is the US is actually moving

00:06:12.480 | a bunch of assets into military assets into place, they're

00:06:15.480 | putting air defense batteries around military bases in the

00:06:18.400 | Middle East. So there's been a lot of reporting that the US has

00:06:21.200 | told Israel to wait until the US military is ready for any

00:06:25.000 | blowback that could happen. But Netanyahu has been very clear

00:06:27.440 | that they are going in no matter what anybody else says. Three

00:06:30.880 | scenarios could arise from that number one is what Israel and I

00:06:34.840 | think the administration want, which is that they have a

00:06:38.600 | successful military operation and the US is threats deter

00:06:43.040 | Hezbollah or Iran from getting in. So that would be like

00:06:45.680 | scenario number one. Scenario number two would be that the

00:06:50.360 | Israelis go in, it's guerrilla fighting, it's much tougher than

00:06:53.080 | anybody expects, they start to take casualties. At the same

00:06:56.080 | time, you get massive public uproar, you get a lot of

00:06:59.520 | protests, the Arab street erupts, more and more leaders

00:07:03.040 | across the world denounce Israel. And so you kind of muddle

00:07:06.440 | your way eventually towards a ceasefire in a couple of months.

00:07:09.280 | So that would be scenario number two. Scenario number three is

00:07:12.520 | that this thing spirals out of control very quickly where you

00:07:15.180 | get Hezbollah in the north invade. So you have a second

00:07:18.640 | front, the West Bank could erupt in protests that could

00:07:22.040 | potentially create a third front. Iran could get involved

00:07:25.680 | either because they feel the need to defend Hezbollah or

00:07:28.360 | because you have people like Lindsey Graham are basically

00:07:31.000 | already calling for war with Iran. So either side could

00:07:34.640 | basically escalate into that. So

00:07:36.360 | I think what happened with Lindsey Graham, because he was

00:07:39.680 | telling them if Iran if they got involved, that we would strike

00:07:43.760 | back. Yeah, yeah. But I wasn't saying invade.

00:07:46.240 | I think he's saying pretty clearly that if Hezbollah gets

00:07:50.080 | involved, we're blaming Iran for that. Got it. Okay. So he's

00:07:53.080 | chomping at the bit to basically invade Iran. Now, how could

00:07:57.480 | that happen? Well, you're saying you think he's chopping at the

00:07:59.920 | bit to invade Iran? Oh, yeah, he just he gave them the warning to

00:08:03.320 | not this about the neocon. I'm curious about that point. Yeah.

00:08:06.800 | Explain that piece. This has been on the neocon agenda for a

00:08:09.560 | long time. They wanted to have a war with Iran, they basically

00:08:12.080 | see the Iranian regime as an enemy, and they want to knock it

00:08:14.560 | off. Even if you go back to 2003, the beginning of the Iraq

00:08:18.800 | War, there was serious conversation about whether Iraq

00:08:22.400 | was the right country to invade. A lot of people thought that we

00:08:25.680 | should go after Iran, not Iraq. And the Bush administration's

00:08:30.440 | view on that was, don't worry, we're gonna get them all. The

00:08:33.720 | question is, which one to do first, we're going to knock off

00:08:35.840 | Saddam first. In fact, what's going to happen is we're gonna

00:08:38.440 | be greeted as liberators. The invasion is gonna be so

00:08:40.920 | successful, that the rest of these tyrannical Middle Eastern

00:08:43.960 | regimes are just going to throw up their arms. And they're

00:08:47.040 | going to basically, you know, surrender and become

00:08:49.280 | democracies that this was the Bush administration's claim back

00:08:52.480 | in 2003, obviously didn't work out like that. But there has

00:08:56.240 | been a desire to go into a lot of these countries for a long

00:08:58.700 | time. And I think there are a lot of these neocons who see

00:09:02.280 | Iran is unfinished business. And if they get the chance to do

00:09:06.820 | that, they will.

00:09:08.400 | So yeah, that and see, that's the piece of your analysis there

00:09:12.960 | that I thought was most interesting. You think Lindsey

00:09:14.860 | Graham wants to invade Iran. So when he gave that warning in his

00:09:18.000 | speech, which I think came out today, or did it come out

00:09:19.920 | yesterday? You think when he gave him the warning, hey, don't

00:09:23.720 | get involved, or that's going to be the third front, you'd

00:09:25.920 | actually think it's he wants to invade. The United States has

00:09:29.300 | that agenda.

00:09:30.040 | I think there's a lot of neocons who have that agenda. And you

00:09:33.760 | see this in the Wall Street Journal, which is sort of the

00:09:35.840 | lead leading neocon publication.

00:09:37.560 | Got it. Okay, so let's explain what the Wall Street Journal

00:09:41.080 | obviously, has been talking about Hamas militants being

00:09:46.200 | trained in Iran a few weeks before the 1070 tax. And it says

00:09:50.560 | about 500 militants from Hamas

00:09:52.000 | even when 10 seven happened, remember, there was that Wall

00:09:54.520 | Street Journal story claiming that Iran had directed the whole

00:09:58.240 | thing. Yeah. And then that was knocked down by Israeli

00:10:02.640 | officials who said we haven't seen evidence of that as well as

00:10:05.880 | Washington officials, you know, kind of the usual unnamed, knock

00:10:10.040 | that down. So the Wall Street Journal has been kind of pushing

00:10:14.040 | the the edge here trying to I'd say, rattle the saber and gin

00:10:18.160 | up some sort of action against Iran. The latest thing was a

00:10:21.440 | story claiming that 500 militants had just been trained

00:10:25.880 | by Iran. So they keep trying to put this idea in play that we

00:10:30.440 | need a war against Iran is my point.

00:10:32.560 | Okay, so just let me reflect that back to you're saying

00:10:34.680 | Lindsey Graham wants to invade Iran, and he's part of the

00:10:37.560 | neocon agenda. And the Wall Street Journal is not just

00:10:41.680 | straight reporting this, the Wall Street Journal is in trying

00:10:44.760 | to incite an incident here and start a war with Iran.

00:10:47.720 | Well, the Wall Street Journal reflects the agenda of the

00:10:51.880 | people who own it, and then the people who are their sources.

00:10:55.680 | And clearly, somebody is leaking the stories to the journal,

00:11:00.360 | somebody leaked the idea on day one of this crisis that Iran was

00:11:05.080 | secretly directing the whole thing, even though Israel itself

00:11:08.080 | said that was not true. So yeah, look, they have an agenda. They

00:11:11.280 | have an agenda.

00:11:11.920 | So the Wall Street Journal's agenda is to sabre rattle and

00:11:15.120 | incite a global war with Iran. Or are you saying that they're

00:11:20.640 | just useful idiots and that they're being manipulated by the

00:11:23.360 | military global complex and the neocons?

00:11:26.600 | I'm just saying,

00:11:27.160 | you said the Wall Street Journal sabre rattling. So that's as if

00:11:30.400 | the Wall Street Journal wants to start a conflict.

00:11:32.640 | The Wall Street Journal is beating the drums of war.

00:11:35.000 | That's what's going on.

00:11:35.840 | Okay, so you believe the journalists at the Wall Street

00:11:39.360 | Journal are trying to start a war with Iran.

00:11:41.160 | They are beating the drums of war.

00:11:43.520 | That's what drums of war means to you. Okay. Chamath. Friberg,

00:11:47.800 | you think that the Wall Street Journal here is trying to start

00:11:49.880 | a war with Iran?

00:11:50.600 | I'll give you a little bit of history here. I'm going to

00:11:52.800 | presume you know, it's it'll be repetitive. But it used to be

00:11:55.320 | that Iran was a bastion of economic growth and cultural

00:11:59.480 | vitality, right. But if you go even further back, there was a

00:12:02.600 | duly elected Prime Minister that was overthrown Muhammad Mossadegh.

00:12:07.400 | Because he tried to nationalize the oil industry in the 50s in

00:12:10.360 | Iran, and that coup d'etat, which was run by the army, was

00:12:15.600 | sponsored by the UK and US government. So we've had a long

00:12:19.800 | kind of sordid history with Iran for a very long time post World

00:12:25.040 | War Two. A lot of it has been intertwined with petrodollars and

00:12:30.400 | oil. So you know, we had the Shah, then there was this duly

00:12:35.320 | elected Prime Minister, he tried to nationalize the oil

00:12:38.560 | industry. He was overthrown in a coup d'etat supported by America

00:12:42.840 | and Britain, they brought back the foreign oil companies,

00:12:47.280 | including American oil companies. Then the Shah ran for

00:12:51.440 | 30 years, but then he was overthrown for a whole bunch of

00:12:54.240 | cultural issues. And so it's gone back and forth and back and

00:12:57.280 | forth. So I think it's important to keep in mind that a lot of

00:13:01.680 | that generation, it's not clear to me where their views come

00:13:06.040 | from. And what I mean by that generation is folks of Lindsey

00:13:08.920 | Graham's generation and older have this multi layered view of

00:13:12.840 | Iran, because they've seen two or three of these regime changes,

00:13:15.760 | and they've seen the changing incentives that America has had

00:13:18.440 | towards dealing with them. So instead of just kind of kind of

00:13:22.040 | putting it out there, like we just want to go to war, I think

00:13:24.320 | it's important to remember that these guys have a historical

00:13:27.920 | context that younger folks may not. Okay, that's number one.

00:13:32.360 | Number two, I think it's David is right, that there are certain

00:13:36.720 | publications that are beating the drums of war, the first time

00:13:40.000 | that the Wall Street Journal did it, it was that Iran was the one

00:13:45.440 | that essentially was the trigger puller on the October 7 attacks.

00:13:50.440 | And that was immediately refuted. Interestingly, not by

00:13:54.960 | Iran, which did it later, but actually by the United States in

00:13:59.040 | Israel. So I do think that there is some questionable incentives

00:14:04.880 | that drove the publication of that article at a very critical

00:14:09.120 | point at the beginning of this Israel, Hamas, Gaza,

00:14:14.160 | you're an idea of what that incentive would be.

00:14:16.960 | No, I don't I don't know, except to say that the facts are that

00:14:22.280 | there was an article that pointed the finger. It was

00:14:25.440 | written as an exclusive, it was written in a moment where things

00:14:28.840 | were very heightened, and little was known. And that these

00:14:32.280 | governments had to come out and explicitly disavow and de

00:14:36.040 | escalate it. And so I think that's just an important thing

00:14:38.600 | to observe. Now we're in this second wave, where there's a

00:14:42.200 | second attempt to now point the finger directly back to Iran as

00:14:45.520 | having trained these Hamas terrorists, as now engaging in

00:14:49.760 | and it's not to say that they're not. But it's just that this

00:14:52.280 | escalation is definitely happening on a continuous basis.

00:14:55.280 | And so it's important to, frankly, understand the

00:14:58.280 | historical context and de escalate so that we don't I

00:15:01.520 | think Ilan is right, this is how you sleepwalk into war is you

00:15:05.480 | read a headline, you believe it, and then you run with it. And

00:15:11.320 | the opposite of sleepwalking is underwriting from first

00:15:13.800 | principles, I think it's important to go and read the

00:15:17.200 | historical context of how we've been engaged in Iran since World

00:15:20.960 | War Two, particularly the back and forth, the complicated issue

00:15:25.920 | of all the petro dollars. And then you can view Lindsey

00:15:29.760 | Graham's comments in two veins, I think vein number one is he

00:15:36.200 | was there with a bipartisan delegation of I think it was 10

00:15:40.080 | US senators and five of each five Republicans, five

00:15:42.880 | Democrats. So I think it's fair to say that he is not just

00:15:47.080 | speaking off the top of his head. I think that there's some

00:15:49.960 | understanding of what he intended to say. And so I do

00:15:52.720 | think that this is sort of a back channel way of getting on

00:15:55.000 | the record that they really need to de escalate. If they are given

00:15:59.080 | an opportunity to engage, they should not. I think that's the

00:16:02.800 | way you say you're talking about Iran. Yeah, Iran should be

00:16:06.360 | escalated. And frankly, hopefully they listen and they

00:16:08.720 | do and they do it. Lindsey Graham's quote, just to put it

00:16:11.720 | out there. When he was visiting Tel Aviv. We're here today to

00:16:14.720 | tell Iran, we're watching you if this war grows, it's coming to

00:16:17.960 | your backyard. The idea that this happened without Iranian

00:16:21.040 | involvement is laughable. Freeberg, what are your thoughts?

00:16:23.960 | Do you think the journalists at the Wall Street Journal are

00:16:27.640 | complicit in trying to incite something here? Do you think

00:16:32.280 | they're just reporting the facts straight? What's your take on

00:16:35.240 | this?

00:16:35.600 | Can I answer that? Because I actually have a data point.

00:16:41.080 | Yeah, no, I mean, and the reason I'm pushing you on it sacks,

00:16:43.920 | you're using the language of conspiracy, like complicit, to

00:16:47.520 | make it sound like I'm leveling an accusation at them when what

00:16:50.720 | I'm saying is, this is their editorial policy. And you can

00:16:54.080 | see that by actually reading their editorial. So therefore,

00:16:56.680 | look at an op ed that came from their editorial board two days

00:17:01.080 | ago, called Biden's redline moment with Iran. And what it

00:17:04.720 | says is here that Secretary of State Antony Blinken warned

00:17:07.840 | Tuesday, that the US would respond swiftly and decisively

00:17:10.920 | to any attack on American forces from Iran or its proxies. And

00:17:14.360 | then it says, that's a welcome message aimed at deterring the

00:17:16.840 | mullahs in Tehran and their agents. But will the President

00:17:19.760 | enforce the redline he appears to be drawn? He hasn't so far.

00:17:23.960 | So in other words, the journal editorial board is saying that

00:17:27.320 | Biden has not been tough enough on Iran. Okay, now go to the

00:17:31.120 | last paragraph. It also says here, Iran is using his proxies

00:17:34.280 | to test us resolve. The more they attack without Iran paying

00:17:38.400 | a price, the more likely that Iran will raise the stakes. The

00:17:42.320 | paradox Mr. Biden has to appreciate the most stabilizing

00:17:45.800 | move for the region would be restoring America as a deterrent

00:17:49.120 | power. So what does that mean? You take these things together,

00:17:52.240 | they're saying that in order to stabilize the region, we need to

00:17:56.000 | deter Iran, but they say that just making threats of

00:17:59.040 | deterrence is not enough, you actually have to do something.

00:18:01.120 | So in other words, like attacking Iran is the

00:18:04.400 | stabilizing move, which is war is peace. It's right out of

00:18:07.400 | George Orwell. So this is what I mean beating the drums. And by

00:18:11.160 | the way, the reason I'm not saying you're conspiracy,

00:18:12.880 | there's your there are there is editorials, then there's news,

00:18:16.880 | and then there's your imprecise language that I'm just

00:18:19.520 | challenging you on because I want you to be precise here. If

00:18:22.200 | you're saying the journalists are trying to provoke a war here,

00:18:25.960 | or, you know, in the banging the drum and saber rattling, I'm

00:18:29.600 | not sounds like I think you're well, saber rattling and banging

00:18:32.520 | the drums are a bit imprecise.

00:18:34.000 | You're going down a weird rabbit hole of what, what the Wall

00:18:37.120 | Street Journal believes, I think it's pretty clear that their

00:18:40.160 | editorial policy is they are super hawkish on Iran, they

00:18:43.520 | don't think Biden's been tough enough on Iran. They also have

00:18:46.280 | published two stories that have been either knocked down or

00:18:49.960 | questioned since October 7, that clearly want to lay all the

00:18:54.360 | blame for this on Iran. And so they are ginning up both in

00:18:57.960 | their news and their editorial pages. They're beating the

00:19:00.400 | drums of war. They're trying to basically prime the

00:19:03.840 | administration to go to war.

00:19:05.320 | Got it. They're trying to go the administration, but I don't

00:19:09.360 | think I don't understand why. Honestly, I feel like we're

00:19:12.760 | going down a rabbit hole. Look,

00:19:14.240 | no, I'm just trying to understand your position. And

00:19:16.480 | if you're talking about the editorial page, you're talking

00:19:18.840 | about the reporting. That's all I'm trying to get you to be more

00:19:21.240 | precise. That's all.

00:19:21.880 | I think both in this case, remember, if you go back to the

00:19:25.640 | reporting on the Ukraine war, and I followed a lot of it by

00:19:28.240 | all the major publications, in my opinion, the Wall Street

00:19:32.760 | Journal's news coverage of Ukraine was some of the most

00:19:36.160 | biased and inaccurate of any publication, any major Western

00:19:40.560 | publication. And I'll just give you one example here. The

00:19:43.920 | Wall Street Journal, which is on August 31, the Wall Street

00:19:49.040 | Journal claimed that Ukraine had a major success in its

00:19:52.720 | counteroffensive, claiming that it had pierced the main Russian

00:19:56.840 | defensive line. Okay, we are now what is it? Basically, two

00:20:01.600 | months since then. And it's very clear that that did not happen.

00:20:05.800 | Okay, that was all nonsense. And again, read the first

00:20:09.800 | paragraphs here. Not only do they claim to penetrate the

00:20:12.160 | line, it said it raised hopes of a breakthrough that would

00:20:15.160 | reinvigorate the slow moving counteroffensive. Was there a

00:20:18.160 | subsequent breakthrough? Did hopes get raised? No, this was

00:20:21.560 | total nonsense.

00:20:22.280 | So your position here is the journalists who wrote this

00:20:25.280 | story, are in some way, trying to benefit the neocons in the

00:20:32.160 | military industrial companies.

00:20:34.000 | Wall Street Journal as a, you know, an active participant in

00:20:39.880 | the war, and as a reporter, it's just kind of an explosive. It's

00:20:43.600 | not kind of it is it's an explosive claim. And so I'm just

00:20:45.760 | trying to be

00:20:46.160 | really, I'm just saying that their reporting on Ukraine was

00:20:51.320 | highly inaccurate. And it was all inaccurate in the same way.

00:20:54.800 | Which is it always overstated the Ukrainian successes in this

00:20:59.680 | war. So I call that bias, I think it's easy to prove. I

00:21:03.680 | think they have a similar bias, which is stated explicitly by

00:21:06.680 | the report, which is they don't think that Biden and DC has been

00:21:11.240 | hawkish enough on Iran. And they would like to see, they think

00:21:15.920 | the stabilizing move is for Biden to basically take action

00:21:20.680 | against Iran, whatever that means.

00:21:22.360 | Yeah, okay. Freeberg, any thoughts on this one before we

00:21:27.560 | move on to the next up? Nothing on the war on the situation?

00:21:33.360 | We can pivot off of that. Yeah, that's why I'm bringing him in.

00:21:38.400 | I mean, I feel like we're debating the wrong thing, which

00:21:40.920 | is you're, you're actually questioning whether there are

00:21:44.520 | war drums beating for Iran, when I think it's like abundantly

00:21:49.280 | clear what we should be discussing is whether that's a

00:21:51.800 | wise move for the US.

00:21:54.040 | I think it's clear that these drums are being beaten. I think

00:21:56.440 | the question is, why? Why would we allow that to be the default

00:22:02.000 | plan of action?

00:22:02.800 | My concern, it's, everyone's gonna think it's crazy, but it's

00:22:08.200 | that there's a very, very low probability, but now probably

00:22:14.360 | much higher than it was, that the world marches towards using

00:22:19.520 | a nuclear weapon for the first time in a long time. And the

00:22:22.520 | reason is, as Saks has pointed out so many times, there's

00:22:26.000 | significant material and industrial production shortages,

00:22:29.120 | not just in the US, but around the world to support rising

00:22:32.960 | conventional wars that seem to be scaling all over and there's

00:22:37.480 | going to be multiple fronts. And to feed those wars with

00:22:41.320 | conventional weaponry. There's, there's a breaking point, our

00:22:45.080 | cost of weaponry is 10x Russia's cost of weaponry, supposedly, I

00:22:48.600 | mean, I'm just quoting Saks on this point. But if all that is

00:22:52.760 | true, at some point, these conflicts become really

00:22:58.640 | difficult to maintain. And if we're in the midst of a

00:23:00.600 | conflict, you may not be able to simply retreat or recede. At

00:23:05.680 | some point, the question is, well, how do we gain superiority

00:23:10.880 | again? And whether that's us or Russia backed into a corner, or

00:23:15.560 | Israel backed into a corner who also has a nuclear arsenal,

00:23:18.680 | there's a couple of scenarios, there's like a million scenarios

00:23:21.880 | from here, there's a million realities we could live in from

00:23:24.440 | here from today. But there's some number of them that end up

00:23:28.520 | with someone saying, I got to press the button. And there's

00:23:31.880 | remember, not all nuclear weapons are these things that

00:23:35.560 | wipe out a million people instantly, some of them are

00:23:38.000 | small, low tactical weapons, that is still very low

00:23:41.960 | probability, but much higher than it was a few weeks ago,

00:23:44.640 | that we find ourselves walking, because of the fact that we're

00:23:48.320 | gonna have multiple conflicts and burn through all this

00:23:50.680 | conventional weaponry not have industrial production systems to

00:23:53.760 | support all these conflicts. But every bunch of countries that

00:23:57.200 | have a trump card, and once you start talking about it, it'll

00:23:59.600 | seem scary at first, then it'll get normalized. And then it'll

00:24:03.200 | become a question of when and where and how. And then all of

00:24:06.480 | a sudden, it's like, holy shit, this is a different world we're

00:24:08.560 | living in. That's a scary place I don't want to be in anything

00:24:11.440 | we can do to eliminate those paths from being walked. I'm in

00:24:15.480 | favor of even if that means seeding strategic advantages

00:24:18.960 | today, I just don't think that that's a place we want to go.

00:24:21.480 | There's like, nine nuclear powers, who do you think is

00:24:26.680 | going to be the one who would actually use a nuclear bomb

00:24:30.440 | freeberg? I have some speculation there. You just

00:24:33.280 | think everybody runs out of bullets and tanks and missiles,

00:24:35.520 | and then they go to nuclear because they have nothing left.

00:24:37.640 | I don't look, I tend to think in terms of like, there are

00:24:41.400 | multiple parallel scenarios that can play out. So I don't have a

00:24:44.040 | point if you're not going to say deterministically, I think this

00:24:46.160 | thing is going to happen. Again, I think this is very low

00:24:47.920 | probability. Sure, I could see a bunch of scenarios emerging,

00:24:51.440 | like, let's say that Russia's got their back against the wall

00:24:53.840 | and Putin's feeling lost and desperate, and he needs to use a

00:24:57.680 | tactical weapon to, you know, get some regional victory. Again,

00:25:03.560 | these tactical nuclear weapons, they're not necessarily the

00:25:08.960 | kinds of things that you would use to level Manhattan. Those

00:25:12.640 | exist. But there are other weapons in the arsenal that I

00:25:16.480 | get worried that someone says, we're backed in a corner, we

00:25:20.000 | have nowhere else to go. We can't win this thing

00:25:22.360 | conventionally, and we cannot lose. And that's the moment when

00:25:26.120 | someone says this is the let's start talking about this. And

00:25:29.000 | that conversation happens before it gets used, then that

00:25:32.200 | conversation becomes normalized. And then suddenly, it's not this

00:25:34.640 | thing. We all grew up in a world where this was never a real

00:25:37.880 | threat or risk or conversation. There was the Cold War and the

00:25:40.760 | dismantling and we were kind of headed in a good direction for

00:25:43.080 | the last 40 some odd years. But now it's like, I don't see it

00:25:46.840 | going in that good direction anymore. So I'm just really

00:25:48.800 | nervous about that.

00:25:49.560 | Yeah, I think you should be nervous about that. Let me give

00:25:51.560 | you a couple of examples. So first of all, I agree with

00:25:53.720 | freebirds point that humans who are convinced of the

00:25:56.040 | righteousness, their cause have a tremendous ability to wave

00:26:00.120 | away or justify any sort of tactical implications. So, for

00:26:05.480 | example, we did use two atomic bombs to end World War Two. That

00:26:10.120 | wasn't the only time it was advocated. If you go back to I

00:26:12.800 | think it was around 1950. MacArthur wanted to win the

00:26:16.920 | Korean War by using 20 to 30 atomic bombs. And his plan was

00:26:22.520 | to so thoroughly irradiate the border between China and North

00:26:27.360 | Korea, that China would never be able to invade through invading

00:26:31.080 | army for something like 50 years. Truman had to fire him

00:26:34.520 | because Truman didn't agree with the strategy. And by the way,

00:26:37.960 | MacArthur was not some crazy, you know, he was not some like

00:26:41.600 | wacko. He was the most respected man in America in 1950. And

00:26:46.400 | Truman paid a huge political price for having to fire him. It

00:26:49.440 | was one of the reasons why Truman couldn't run for

00:26:51.400 | reelection again. So this idea that like rational people would

00:26:54.920 | never use these things not true. The generals in 1962, during the

00:26:58.520 | Cuban Missile Crisis, were all ready to take the nukes off the

00:27:01.920 | chain if the Soviets were willing to break the the naval

00:27:06.040 | blockade. So, you know, it's not just foreign powers who have

00:27:10.120 | rattled the saber on nukes. We've done it at various points

00:27:13.720 | through our history to let me give you a more mundane example.

00:27:17.360 | Just earlier this year, Biden said that we were out of 155

00:27:22.040 | millimeter artillery ammunition. And so we had to give Ukraine

00:27:27.640 | cluster bombs. Remember this, just a year before that same

00:27:31.840 | administration had said the use of cluster bombs was a war

00:27:34.120 | crime. So in other words, they were able to change the morality

00:27:37.120 | on the use of cluster bombs because tactically they were out

00:27:41.080 | of the type of ammunition they want to use, they had nothing

00:27:44.520 | left. So, you know, I think this kind of reinforces freebirds

00:27:48.240 | point now, look at our inventory replacement times for key

00:27:52.880 | systems. This was a report by CSIS. That is a military think

00:27:58.080 | tank in Washington, what they show is that our industrial

00:28:00.960 | capacity is so hollowed out that it's going to take us five plus

00:28:04.080 | years to replace our stockpiles of artillery ammunition of

00:28:10.080 | javelins of stingers of gimlers as another type of rocket system.

00:28:16.480 | And so we are like dangerously low on key types of ammunition.

00:28:22.240 | And yet, remember when 60 minutes to that interview with

00:28:25.200 | Biden, they said to him, well, gee, if we're in a war, both on

00:28:30.040 | behalf of Ukraine and behalf of Israel, doesn't that pose any

00:28:33.480 | trade offs? And by his response was no, we're the most powerful

00:28:36.280 | nation in the world. For good measure, he said, we're the most

00:28:39.440 | powerful nation in the history of the world. So he doesn't see

00:28:42.320 | any trade offs, he doesn't see any limits on American power.

00:28:45.880 | Quite frankly, I think this is why he's dangerous is because he

00:28:49.520 | still thinks that the US is living in 1991. He's been in

00:28:53.080 | Washington for 50 years, and he only remembers the unipolar

00:28:56.840 | moment, all of his instincts and experience have been shaped by

00:29:00.200 | that period of time, when the US was the only superpower, that we

00:29:05.160 | were the global hegemon. We're no longer in that position

00:29:08.000 | anymore. You know, first of all, Russia and China are strong,

00:29:11.720 | they are great powers, too. And Iran is much stronger than Iraq.

00:29:15.640 | Iran is four times the size of California and has roughly 90

00:29:19.320 | million people. And they got a lot of engineers. And even if we

00:29:22.600 | didn't want to attack them, it's not exactly clear how you would

00:29:24.680 | stage that attack. Just getting to Iran would require flying

00:29:28.920 | over some very dangerous territory. It's not clear we

00:29:31.360 | have the we have the bases or the air clearance rights from

00:29:35.840 | allies to be able to even get to Iran. Moreover, Iran apparently

00:29:39.880 | has a very strong missile program. So they may even have

00:29:43.600 | the ability to fire missiles or hypersonic missiles that are

00:29:47.800 | aircraft carriers that are sitting in the Mediterranean

00:29:50.800 | Sea. So if we get in a war with Iran, it's no joke, this is not

00:29:55.720 | going to be shock and awe, this could be a very, very dangerous

00:29:58.480 | situation for the United States. Which is why when people are

00:30:01.800 | just kind of making these idle threats, they should be very

00:30:06.000 | careful about that, because Iran is hearing that too, and they're

00:30:08.440 | getting ready. And one last point on that, thanks to our

00:30:13.800 | destabilizing the Middle East with the Iraq war and the Syria

00:30:16.840 | regime change operation. Iran now has proxies in both Iraq and

00:30:23.280 | Syria. They've got Iraqi Hezbollah. They also have

00:30:26.840 | proxies in Yemen with the Houthis. And all of those groups

00:30:31.540 | could stage attacks on American military bases there.

00:30:33.840 | We've gone down the worst case scenario here, use of a nuclear

00:30:37.840 | bomb, the United States invading Iran, here's just a list of the

00:30:40.780 | nine countries that are nuclear powered, and that have nuclear

00:30:43.440 | bombs rather than nuclear powered. And as you can see,

00:30:45.760 | Russia, US, China, France, UK, Pakistan, India, Israel, and

00:30:50.920 | North Korea, Israel denies they actually have them. And

00:30:54.120 | Pakistan has been the one who has been proliferating them,

00:30:59.260 | getting bombs to North Korea and helping Iran with their program.

00:31:05.260 | Ron obviously does not yet have a nuclear bomb. But we don't

00:31:09.640 | know how far they are, because intelligence is sparse on that

00:31:12.760 | topic. Based on my cursory research.

00:31:15.480 | What's the best

00:31:17.360 | sorry, Jake, I'll be clear. I just want to be clear that I

00:31:20.800 | don't see nuclear use as likely as that was free birds point.

00:31:24.200 | Yeah.

00:31:24.360 | Sorry, I did not say it was likely at all, either. Not at

00:31:28.420 | all. No, no, you said it's a small possibility. And we just

00:31:30.600 | spent 10 minutes talking about that small possibility.

00:31:32.480 | Like, let's say something goes from 2% chance to 8% chance.

00:31:38.320 | It's now four x in the next 20 years. That's right, a

00:31:42.760 | significant shift in risk. And I think there have been others,

00:31:45.520 | like Ray Dalio, I think, or Warren Buffett, some people have

00:31:49.300 | said that the chance of us using a nuclear weapon over a long

00:31:51.520 | enough period of time, approximates 50 to 100%. It

00:31:54.680 | starts to get very high, because, you know, at some

00:31:57.200 | point, these things proliferate, the intelligence, the

00:32:01.640 | capabilities proliferate, they get into the wrong hands, but

00:32:04.960 | there's all these different scenarios that emerge. So the

00:32:06.400 | probability might be low on any given period of time. But over a

00:32:09.520 | long enough period of time, these things become a real kind

00:32:13.040 | of concern. The nukes that were dropped on Hiroshima and

00:32:15.560 | Nagasaki are like 20 kiloton yields. I mean, we have massive,

00:32:19.960 | massive, massive warhead multi warhead missiles that have

00:32:23.920 | many, many, many megatons of yield, but there are some 20

00:32:26.960 | sub 10 kiloton yield nukes that can be deployed in a

00:32:32.120 | conventional in what people would call a tactical setting.

00:32:35.360 | So you're not trying to

00:32:36.360 | this new, they're not literally suitcases that they're on

00:32:39.640 | trucks, but tactical nukes are have been produced by Russia,

00:32:44.320 | China and the United States are the known tactical nuclear

00:32:47.200 | powers.

00:32:47.920 | Well, they're also they're, they're in different forms of

00:32:50.840 | delivery, but they're not, you know, you don't take a bomber up

00:32:53.560 | and put it over a city and blast.

00:32:55.080 | No, he's driving in a van is the idea.

00:32:57.600 | No, it's not necessarily about being on a van. It's like they

00:33:01.000 | can be on short range tactical systems. So the point is, like,

00:33:04.760 | hey, you're caught in a corner, you have nowhere to go and you

00:33:09.360 | can't lose. And if you have one of these things, I mean, just

00:33:11.960 | take all human history aside. And all convention aside, if

00:33:16.480 | you've got this thing, you're trapped in a corner, you got

00:33:20.200 | nowhere to go. And you can press this button and when you might

00:33:25.400 | press the button.

00:33:26.120 | And so let's do the other side. What's the best case scenario

00:33:29.640 | here? Obviously, we haven't had the ground invasion. We've had

00:33:33.160 | Qatar and Saudi and a number in the United States, obviously

00:33:38.640 | doing some pretty hardcore diplomacy. And we've had some

00:33:42.600 | hostages released. So, you know, I've been spending some time

00:33:46.640 | here in the Middle East, there is a theory that people have

00:33:48.760 | brought up multiple times here that there's a deal going on

00:33:52.160 | right now, to get the hostages a larger number of them. And that

00:33:57.240 | the ground invasion may not occur. This is just a theory

00:33:59.960 | that a number of people have been talking here, and maybe

00:34:02.440 | they're just optimists. But is there an optimistic scenario

00:34:05.160 | here to Martha? Is there a golden bridge out of here? Is

00:34:09.160 | there a possible path to, you know, the peace process getting

00:34:13.680 | back on track? Or does it all just seem hopeless? And if there

00:34:17.160 | is, and if there is a possible path, what would that look like?

00:34:19.600 | Let's just see if we can come up with any optimistic framing or

00:34:23.840 | theory here.

00:34:24.480 | Why it's just as bad as the other side. Okay, so you don't

00:34:29.160 | see one. Yeah. How about we just look at the facts on the

00:34:31.320 | ground. The facts are that we have this long simmering war

00:34:35.120 | between Russia and Ukraine that doesn't seem to have an end. And

00:34:40.120 | there doesn't seem to be a loss of life at which they're willing

00:34:44.760 | to stop or whether the international community is

00:34:48.400 | willing to force a ceasefire. And then now you have this one,

00:34:52.080 | which is in 1000s and will escalate into defense of

00:34:56.320 | 1000s. But it seems like it's on a path to be slow and simmering.

00:34:59.280 | So I don't know what to say except that it does not seem to

00:35:03.080 | be escalated. And the reason it isn't escalating is that there

00:35:11.800 | isn't enough emotional impact. That's causing people to

00:35:17.120 | understand that the stakes are high. And so when the actual

00:35:21.920 | actions are relatively de escalatory, I find that the

00:35:28.040 | rhetoric ratchets up, right? It's almost inversely

00:35:31.160 | proportional. You know, it's kind of like, what was the

00:35:34.560 | phrase and World War Two about Churchill iron fist wrapped in a

00:35:39.400 | velvet glove? Is that is that the phrase something like that.

00:35:41.840 | But the idea is that when you act decisively, you say little.

00:35:45.600 | And when you have no plan of really escalating, you say a

00:35:49.000 | lot. So I think that right now we're saying a lot, which

00:35:53.280 | actually, counterintuitively, to me says we're not planning to do

00:35:56.320 | much of anything. And I think that that's good. So I'm all for

00:36:00.400 | Lindsey Graham, braying as long as we don't take it too

00:36:04.280 | seriously and sleepwalk into some escalation.

00:36:07.400 | sacks any chance that this gets de escalated? And what might that

00:36:10.960 | look like?

00:36:11.640 | Sure, I think there's a chance. I think like, yeah, well, what

00:36:18.000 | it looks like, I think is that the ground invasion keeps

00:36:22.480 | getting paused, either because the US needs more time to get

00:36:26.920 | its military in place, or because the Israeli military

00:36:32.080 | realizes this is going to be a very difficult operation, and

00:36:34.280 | they need more time to plan. And while that's happening, there's

00:36:38.000 | a serious diplomatic effort going on. And while that's

00:36:41.320 | happening, there's also more pressure being brought to bear

00:36:44.480 | against Israel to not go in. So for example, you saw her to one

00:36:47.720 | this week, make some statements, I actually thought they were

00:36:50.640 | pretty outrageous, where he described Hamas as basically

00:36:52.720 | being freedom fighters, but warning Israel not to go in.

00:36:56.120 | There were much more reasonable remarks by King Abdullah of

00:37:00.000 | Jordan, basically, at least recognizing the atrocity that

00:37:03.200 | had taken place against Israel, but also trying to advocate for

00:37:08.080 | the lives of Palestinian civilians in Gaza, and telling

00:37:13.760 | them that it would be a mistake to go in. So you're seeing like

00:37:16.360 | a wide range of opinions across, I'd say, major players in the

00:37:20.600 | Middle East. But all of it, the gist of it is basically telling

00:37:23.960 | the Israelis not to go in. So you've got all these delays and

00:37:27.720 | pressures going on. And so maybe there's some chance it could

00:37:30.400 | deescalate. I personally think that that's still unlikely. And

00:37:36.600 | the main reason for that is I think Israel is determined to go

00:37:39.920 | in, I think Netanyahu has made that clear, I think from the

00:37:42.680 | Israeli point of view, they don't feel like they have a

00:37:45.880 | choice. They've suffered the biggest massacre of of Jews

00:37:50.880 | since the Holocaust. And they can't be perceived as simply

00:37:55.000 | standing by and doing nothing that would make them look

00:37:58.320 | extremely weak in a region of the world, where you don't want

00:38:02.160 | to look weak, they have to

00:38:03.360 | annihilate Hamas, I guess is the thinking.

00:38:06.240 | Well, they say that their objective is to destroy Hamas.

00:38:08.840 | But I think that probably from their standpoint, that

00:38:11.600 | considered a success if they could significantly degrade

00:38:14.440 | Hamas, set them back 10 years, destroy hostages back, destroy

00:38:19.280 | their capability to wage war against Israel to undermine

00:38:22.600 | their tunnel networks, and so forth. So I think Israel still

00:38:25.360 | feels like this is something they have to do. And so I kind

00:38:28.160 | of think that the most realistic good case scenario is that if

00:38:33.400 | they do go in, that the military operation for various reasons,

00:38:37.760 | is not a long one, and eventually a ceasefire can be

00:38:41.040 | agreed to, before this can escalate out of control. And so

00:38:45.320 | there's a bunch of like very delicate red lines there for a

00:38:49.680 | lot of different players. And so in order for that scenario to

00:38:53.120 | work out, I think it's going to take some very deft behind the

00:38:56.280 | scenes diplomacy from the Biden administration, really, and I'm

00:38:59.920 | not sure they're capable. I'm not sure they're up to that

00:39:01.880 | task. So this is why I think it's such a dangerous situation.

00:39:05.640 | But can I ask you a question, by the way, is Graham speaking on

00:39:08.320 | behalf of the United States officially with the President's

00:39:11.880 | approval? He can't possibly be freelancing that I didn't have

00:39:16.440 | any. I tried to research it online, I couldn't find any.

00:39:21.120 | Well, why don't you fill in the blanks? sanctioned or not?

00:39:25.800 | Yeah, well, Jason, think about this. David texted this into the

00:39:28.760 | group chat and then tweeted it as well. Do you think Mohammed

00:39:31.880 | bin Salman is meeting with a group of 10 senators that's just

00:39:34.920 | off on an adventure? No. Okay, well, there's your answer. Yeah.

00:39:41.640 | Yeah. No, no, I'm just look at this photo. I think this picture

00:39:44.680 | says 1000 words. So you have a delegation of senators, but I

00:39:50.360 | count about 10 centers there. Yeah, yeah, they're meeting with

00:39:54.480 | Mohammed bin Salman, Republicans and five Democrats, and who has

00:39:58.400 | the seat of honor right next to MBS in the front of the room. So

00:40:02.040 | I personally would like to believe that Lindsey Graham is

00:40:04.400 | just an outlier and he doesn't speak for anybody. But

00:40:06.720 | unfortunately, this delegation saw fit to put them in the front

00:40:10.760 | of the room. I consider that very scary.

00:40:12.960 | Well, I think it's also fair to say that the office of MBS would

00:40:18.120 | have coordinated that decision with the White House before

00:40:20.400 | receiving them. That's typical political protocol. Yeah.

00:40:24.560 | It just was never explicitly said he didn't say on behalf of

00:40:27.320 | the President or the President has sent us here. It just seemed

00:40:30.360 | like a disjoint. I hadn't never seen that before. All right, I

00:40:35.400 | guess we'll move on to some business issues here. The macro

00:40:39.600 | picture is quite confounding GDP, as we were talking about in

00:40:43.800 | our group chat grew 4.9% year over year in q3, higher than the

00:40:48.360 | 4.3% expectations and much higher than the 2.1% growth in

00:40:51.840 | q2. highest year over year GDP since q4 2021. And we thought we

00:40:58.320 | were going into a recession, we have a couple of quarters of

00:41:01.320 | contraction that hasn't happened. CPI in September is

00:41:04.400 | 3.7, slightly above the 3.6 estimates. And Chamath, what do

00:41:08.800 | you take from all of this? This crazy, high growth GDP? Is this

00:41:13.840 | because of stimulus in government spending? What what

00:41:17.000 | is this confounding? You know, inflation coming down and

00:41:21.080 | getting somewhat under control and then crazy GDP growth? I

00:41:25.600 | don't know. I don't think anybody knows. But it's really

00:41:30.600 | confounding for the markets. I think it's really bad for

00:41:35.080 | markets in general. It's probably the worst for private

00:41:39.080 | companies, because you have this effect now where everybody's

00:41:43.040 | been wanting to price in a recession, right? Everybody

00:41:46.880 | wants to see that shoe drop where they say, Oh, okay, here

00:41:50.440 | it is. Something softening demand is softening. And then

00:41:54.640 | when you see a print like this, where the economy is expanding,

00:41:58.280 | you're kind of confused. And you're like, well, where is the

00:42:01.480 | softening going to come from? And so what happens is people

00:42:04.920 | become very overreactive to small amounts of data. And that

00:42:09.920 | actually started to come out. I think basically, since August,

00:42:14.680 | and what's been happening since August is that every time a

00:42:17.760 | company reports, the sector that's gotten the most attention

00:42:21.200 | has been fintechs. And the reason is that fintechs tend to

00:42:23.840 | be on the bleeding edge of capturing consumer demand. And

00:42:27.720 | if consumer demand shrinks, that's probably the first sign

00:42:32.120 | that there's going to be a recession, right? Because

00:42:34.080 | consumption is about almost 70% of the US economy. And so since

00:42:38.760 | August, what you've seen are the large leading edge, public

00:42:43.240 | fintech companies just get absolutely murdered. And

00:42:46.480 | yesterday was an even worse day. Because what happened

00:42:48.920 | yesterday was a company was basically world line started to

00:42:52.920 | report softness and spending. Now that spending was not even

00:42:56.920 | in America, that spending actually happened to be within a

00:42:59.960 | segment of their customer base in Germany. And that was enough

00:43:04.480 | to just literally sink the stock, I think 60% in a day. So

00:43:09.240 | we have on the surface, a healthy growing economy. But

00:43:14.720 | underneath the surface, what we what we are betting on,

00:43:18.520 | increasingly, is that consumer demand has basically stopped. So

00:43:25.440 | you can see here, odn is down 50% since the beginning of the

00:43:28.840 | year. But again, most of this was since August, block is down

00:43:32.120 | another 35%. PayPal is down 30%. So. So that's one thing,

00:43:36.560 | which is this is a big bet, that consumption is slowing and

00:43:40.400 | shrinking, the economy will be in a recession over these next

00:43:44.080 | two or three quarters, which will give the Fed the motivation

00:43:48.520 | and the justification to lower rates starting in the middle of

00:43:52.400 | next year. That's the big bet in the market. But separately, if

00:43:56.280 | you take a different lens and look at this data, we all have a

00:44:00.080 | bigger problem in Silicon Valley land, which is how do the

00:44:03.760 | capital markets take companies public when this is happening.

00:44:08.000 | And the reason why this data is so important is, we've said this

00:44:11.800 | 1000 times, there are only two companies that can structurally

00:44:16.320 | open the capital markets for all startups. One is SpaceX Starlink,

00:44:21.720 | but that's on its own path, and not going public soon. And the

00:44:26.800 | other stripe. And you're probably a tick tock to that as

00:44:29.880 | well. No, because that's a Chinese company with all kinds

00:44:33.000 | of overhang. So no, I would disagree with 30 or 40% US

00:44:35.720 | ownership. I would disagree with that. But no. So I think it's

00:44:39.680 | Starlink and stripe. And the the problem now for stripe is that

00:44:46.040 | the public comps dollar for dollar are off 50%, which from

00:44:50.440 | the beginning of the year, which then says that if you apply that

00:44:54.080 | rateably to its valuation, they did around at 55 billion, then

00:44:57.600 | the market clearing trade may be 25 to 30 billion now. Now 25 to

00:45:03.160 | 30 billion for stripe, you're incinerating $70 billion of

00:45:06.920 | equity value, right, and about five to $10 billion of actually

00:45:10.600 | paid in capital. So what does that do for Silicon Valley and

00:45:14.720 | for VCs? I think it's going to put a lot of pressure on

00:45:17.600 | companies and valuations. So yeah, we're in for a real slog.

00:45:23.840 | So on the surface for the real economy, I think it's generally

00:45:27.800 | decent news. For startup land, I think it's not good. And then

00:45:33.920 | specifically within startup land sectors like FinTech are in

00:45:37.120 | pretty bad trouble, I think.

00:45:38.360 | And the late stage, obviously still very much in trouble.

00:45:41.400 | freeberg. Any thoughts on the startup economy? You had some

00:45:43.720 | thoughts on this, I think, too.

00:45:45.120 | I'd like to hear your guys's experiences. But there's

00:45:47.320 | definitely been a big hold up in series BCD later rounds, because

00:45:53.160 | so much of the market questioning is, you know, when

00:45:57.960 | when is the next round going to get done, which is based on when

00:46:01.080 | can the companies potentially go public. And ultimately, if you

00:46:05.440 | don't see a path to a window opening up, you don't fund the

00:46:09.520 | pre IPO round, you don't fund the late stage around the growth

00:46:12.080 | stage around everything gets held up. And a lot of rounds

00:46:15.040 | that are getting done lately have been these kind of convert

00:46:18.240 | or bridge rounds where existing investors are funding the

00:46:20.840 | company to give it another year or two of runway. That was

00:46:23.360 | definitely the case for most of this year coming out of 22. I

00:46:27.000 | think post the summer, it seems like a lot of folks I'm talking

00:46:31.000 | to are starting to wake up there's even more series B at

00:46:34.680 | lower prices, and everyone's kind of capitulating and

00:46:36.840 | accepting that there are still great businesses out there. It's

00:46:39.720 | just that they got overpriced in their A or their B. And let's

00:46:42.760 | price them at a lower valuation and then rounds are sort of

00:46:46.040 | starting to get done in the fall here.

00:46:47.560 | I'll have you react to this data sacks. Carta manages cap tables

00:46:52.400 | for folks, but they have produced this chart. And this is

00:46:55.960 | Carta companies only. So this is a subsection who knows Carta may

00:47:00.560 | power the cap tables of 10% 20% of Silicon Valley, the rest are

00:47:04.880 | done on other pieces of software or even in Google Sheets or

00:47:09.120 | literally in an Excel sheet by an attorney who is working with

00:47:14.080 | the company. If you look at this chart in 2020 and 2021, you had

00:47:19.960 | about 70 startups shutting down per quarter in 2022. You see

00:47:24.840 | that number double and we start seeing 129 141 a quarter.

00:47:30.880 | And then in 2023, this last quarter, Q3, rocketing up to

00:47:35.320 | 2020. So roughly three times what we see in the boom markets

00:47:39.440 | sacks and any thoughts on this data. I have a couple of

00:47:41.760 | observations, but I wanted to go to you first.

00:47:43.640 | Well, this is not surprising to me at all. This is the bubble of

00:47:47.920 | 2021 working its way through the system. We know that there were

00:47:52.280 | these gigantic rounds that were funded in 2021, especially in

00:47:56.120 | the second half where you had this asset super bubble. It

00:47:59.280 | wasn't just in tech, it was like all growth stocks, crypto

00:48:03.120 | everything. And so there were a lot of startups that raised huge

00:48:06.360 | funding rounds at the peak of the market, and they haven't had

00:48:09.200 | to raise for a couple of years. Well, now they're starting to

00:48:12.840 | run out of cash. And they do have to raise they're finally

00:48:15.640 | being forced to go back into market and a lot of them are

00:48:18.920 | either burning too much money or they don't have the numbers to

00:48:20.920 | justify another round or if they do, it's a structured round

00:48:24.200 | down round. Or again, they just are unable to raise they have a

00:48:28.480 | broken process and they eventually start winding down.

00:48:31.720 | So I think you're going to see this dynamic for the next 18

00:48:34.760 | months or so. But this is not a new dynamic. This is the lagging

00:48:37.880 | indicator of what we've been talking about since the regime

00:48:40.920 | change of the first half of 2022 is that the markets started

00:48:46.440 | looking for different things instead of growth at all costs

00:48:49.320 | been about growth with unique economics and efficiency. And

00:48:54.120 | the valuations went way down. And there's a lot of companies

00:48:56.560 | that no longer qualify and they're getting weeded out. So

00:48:59.280 | this is just a delayed reaction to things we already knew.

00:49:02.520 | That's the key part, the delayed reaction as well. Just note when

00:49:05.920 | a company does shut down, that process typically takes two or

00:49:09.400 | three quarters. And for a founder to accept the shutdown,

00:49:12.480 | that might take one, two, three quarters as well. So anything

00:49:15.400 | you're seeing in 2023, that might be a shutdown, where the

00:49:18.560 | employees were all laid off in late 2022. But I mean, I see

00:49:21.720 | that. I have a question for you guys. What what turns this

00:49:24.480 | around? I'll tell you what I'm seeing in the early stage. We

00:49:27.320 | are seeing many companies come to Founder University, and two

00:49:31.120 | or three people who want to build a company who can't get

00:49:33.880 | jobs at Google or Stripe, they're not hiring. So we'll see

00:49:37.840 | two or three developer teams working on a project and then

00:49:40.600 | raising 250 500 k at a five to $12 million valuation, and then

00:49:46.160 | very quickly getting to 10 to 50 k monthly revenue, all this

00:49:50.280 | money that we need to return so that we can recycle and keep

00:49:53.480 | doing this job. What what needs to happen? Saks, Friedberg, what

00:49:58.040 | do you guys think needs to happen to get to crack? Because

00:50:00.520 | like the three IPOs we've had have not fared particularly

00:50:04.520 | well. And the market just seems to get harder and harder for

00:50:09.920 | tech companies, even profitable ones, right?

00:50:13.240 | Yeah, I mean, I think I think profitability is key. I think

00:50:15.880 | that's the great evolutionary forcing function here. It's like

00:50:18.800 | a tale of two world of two startups. The one startup needs

00:50:22.840 | cash for a long period of time, and the other one's found a path

00:50:26.240 | to profitability, the one that's found a path to

00:50:27.880 | profitability, they have an infinite number of options

00:50:30.600 | available to them, it might take longer to get public or

00:50:32.840 | whatever. But they can wait it out because they don't need

00:50:35.760 | money. The one that needs cash continuously and will for a long

00:50:38.880 | period of time. It's really screwed.

00:50:41.160 | What about the multiple of these profitable companies that

00:50:43.560 | seems to have changed materially?

00:50:45.080 | That's starting to happen as well. Chumaf is that the public

00:50:48.800 | markets are looking at their stocks if they're undervalued,

00:50:51.320 | and then Dara, Uber is reportedly planning like buying

00:50:55.840 | back upwards of 20% of the Uber shares in the next five years.

00:50:59.280 | And then you look at a company like snap, which is majority

00:51:01.520 | control with super voting shares, they're still losing

00:51:03.800 | three or 400 million a quarter. So I think freebergs exactly

00:51:07.920 | right, tell it to cities, some people refuse. And then if the

00:51:11.600 | stock is so cheap, people start buying it back. And the freezing

00:51:16.120 | of employees and the expenses going down while revenue goes up

00:51:19.440 | and earnings increase. I think that's the setup. If you're

00:51:22.240 | looking for the setup, I think it's the public market company

00:51:24.440 | showing the path profitability buying back stock. And then

00:51:27.080 | these small companies, how does that how does that help private

00:51:30.760 | companies go public? If the private companies follow suit,

00:51:34.320 | and they're profitable, and they control costs, and they people

00:51:37.880 | get greedy looking at how profitable they are, as opposed

00:51:40.480 | to their 50% growth rate, they start looking at their

00:51:43.280 | increasing earnings and how much cash they're throwing off. And I

00:51:46.200 | think that's starting to trickle down through the startup

00:51:48.200 | ecosystem, people are trying to get to profit profitability

00:51:50.960 | quickly. I don't know. The question was, can we turn it

00:51:55.000 | around? I think if they do, that's what it's going to be is

00:51:57.680 | profitability.

00:51:58.400 | Yeah, I mean, I think you guys are kind of talking about two

00:52:00.400 | different things. Sure, any particular company can still get

00:52:03.560 | its house in order and create a great business. And they'll

00:52:06.160 | eventually get, you know, liquidity, they'll go public.

00:52:09.240 | The question is, I think what Smith is getting at is that the

00:52:12.320 | exit comps have changed. If you were a tech investor, or let's

00:52:16.600 | say a real estate investor, before the regime change, you

00:52:19.920 | were underwriting to completely different exit comp. And now

00:52:23.560 | those exit comps have totally changed. And so it's gonna be

00:52:26.120 | very hard for those investors to make a good return.

00:52:29.520 | They're gonna lose their money like Instacart. Yeah, I'll give

00:52:32.000 | you a mathematical example, just to illustrate what David just

00:52:34.880 | said. If you have a company with 300 million of ARR, you are in a

00:52:41.160 | rare group of say, 30 or 40 companies period, okay. So very,

00:52:46.760 | very, very few companies get to that level of scale. But if you

00:52:49.920 | are at 100%, net dollar retention, okay, which means

00:52:54.360 | that you're kind of treading water, essentially, your

00:52:58.440 | customers may grow, but the value of each customer isn't

00:53:01.120 | particularly growing. So you know, you have you have pretty

00:53:03.840 | nominal growth. That company now comps to roughly three to five

00:53:10.300 | times ARR. Now, the problem is, if you go and look back through

00:53:15.040 | crunchbase, or any of these other serve a pitch book, the

00:53:19.400 | number of companies that traded above $1.5 billion valuation as

00:53:25.320 | a SaaS business, there's like 70 of them, but there's only seven

00:53:29.040 | of them that have 300 million of it. So what do you what happens

00:53:33.880 | guys like the jig is up? Okay. What's going on here?

00:53:38.420 | consolidation, I guess, and some of them will flame out. I mean,

00:53:43.780 | look at Instacart, the last the people who were the last four

00:53:46.860 | rounds, they either lost money or broke even so and that means

00:53:50.700 | time adjusted versus what they could have made in the markets.

00:53:53.700 | They lost money. So what happens if stripe is only worth 30? I

00:53:57.140 | mean, how much has been invested into that company? What's the

00:54:00.760 | total paid in capital?

00:54:01.820 | Again, I think we all want stripe to be worth 100. We want

00:54:06.840 | it to be worth 200 billion, because it would help. Frankly,

00:54:10.880 | it is the rising tide that lifts all boats. But if if unit level

00:54:14.560 | profitability is scrutinized, and then comped appropriately to

00:54:17.360 | the public markets, as Zack said, we're gonna have to take

00:54:22.080 | that signal and apply it to our entire portfolio. And so it goes

00:54:27.860 | all the way back to eventually the seed in the series A as

00:54:30.620 | well, which is really good. Jason, as you've said many times

00:54:33.480 | just getting the inflation under control and in check, but it

00:54:36.440 | will mean not just changing valuations, but it will mean

00:54:39.400 | changing salaries, right? It will mean totally different

00:54:43.840 | equity packages, a lot of hard work. I almost think that maybe

00:54:48.000 | none of the hard work has actually yet started. So I don't

00:54:52.320 | know, I'm just putting that out there, guys. Do you think that

00:54:54.120 | we've all just kind of been hoping maybe that all of this

00:54:58.340 | would pass? And now we're getting more and more signals

00:55:02.680 | that we actually have to do a pretty hard valuation reset?

00:55:05.720 | Yeah, I mean, if you look at the altimeter charts that jam on

00:55:09.120 | balls put out, I mean, the valuation levels are returning

00:55:12.720 | to let's call it the pre COVID mean. In fact, they're slightly

00:55:16.120 | below the pre COVID mean because the 10 year Treasury has a

00:55:20.320 | higher rate. So yeah, we're going back to something that was

00:55:24.280 | more like I don't know, 2015 levels of valuation, and maybe

00:55:28.740 | even slightly worse again, because long term rates are

00:55:32.340 | higher. So cost of capital and hurdle rate are higher.

00:55:35.380 | That's what I'm saying. I'm seeing 2012 valuations,

00:55:38.060 | valuation of Uber when I invest was 5 million.

00:55:40.260 | Yeah, let me just tell you, it's a lot harder for people to make

00:55:43.100 | money when the money supply is shrinking, than when the money

00:55:46.240 | supply is growing. For obvious, when the money supply is

00:55:51.300 | shrinking, it's like you're playing a game of musical

00:55:53.160 | chairs. And you're just hoping that you still have a seat.

00:55:56.640 | Whereas when the pie is increasing, it's a lot easier to

00:55:59.400 | get like a piece of it. But when the pie is just hard to get a

00:56:02.600 | piece,

00:56:03.000 | musical chairs, as you're describing is where you're is

00:56:06.800 | literally the description of the venture capital industry and

00:56:09.240 | GPS right now. A lot of people are losing their seats. Yeah.

00:56:13.020 | And I think a lot of shutdowns of venture firms, I think a lot

00:56:15.960 | of venture firms are going to shut down. This could be zombie

00:56:18.640 | funds. I think we got to believe the extraordinary outcomes make

00:56:25.640 | up the bulk of returns in venture from, you know, the

00:56:29.440 | singular companies, and there's a few of them. Right, there's

00:56:33.200 | $15 billion exits created every year. I don't know if it's

00:56:37.440 | unicorns as valued in private markets or actual exits. But as

00:56:42.200 | we know, every couple of years, there's a company that comes

00:56:44.400 | along that's worth 10 billion. And every once a decade, there's

00:56:47.480 | a company that comes along that ends up being worth 100 billion.

00:56:49.560 | And the bulk of the returns in the entire venture landscape

00:56:53.200 | comes from those handful of companies. I think we end up

00:56:57.680 | focusing a lot on market metrics as the performance driver for

00:57:03.480 | venture returns. But the truth is, it's the performance driver

00:57:06.280 | for the mid tier of venture returns. And that mid tier

00:57:09.960 | venture returns is skating along at two x multiple after 10 years

00:57:15.640 | or three x after 10 to two to two and a half x after 10 years,

00:57:18.840 | that's the top quarter, right. And so whatever it is 1.8 x, and

00:57:21.800 | now those guys are all underwater. So instead of being

00:57:23.600 | 1.8 x, they're all going to return point seven x, or point

00:57:26.320 | five x, and they're gonna lose money.

00:57:28.000 | Now, I think the I think the 50th percentile returns money.

00:57:31.040 | Okay, but the truth is, so now they're gonna lose money. But

00:57:34.160 | the truth is, whichever funds get the tiger by the tail,

00:57:39.800 | whoever gets the Uber at 5 million, whoever gets the slack

00:57:43.840 | at whatever you got in at whoever got to the SpaceX or

00:57:46.200 | whatever sacks got in at, you're going to be fine, because like

00:57:49.800 | the multiples in markets don't matter as much if you're

00:57:52.120 | generating

00:57:52.840 | 9000. I don't think that's true. Because if it happens in a fund,

00:57:57.040 | and that all of those deals, except SpaceX happened in a

00:58:02.880 | different valuation framework where rates were zero. So I

00:58:06.680 | think the question the more intellectually honest question is

00:58:09.200 | what would slack and Uber have gone public at today, with a 5%

00:58:13.760 | 10 year? And I think the answer if you're going to be

00:58:16.560 | intellectually honest is a very different valuation than when it

00:58:20.040 | went out when the 10 year was zero,

00:58:21.520 | it's going to be hard to make outsized returns on less than

00:58:25.000 | until the entry price is completely correct. And I think

00:58:28.360 | they've partially corrected, but they may not have fully corrected

00:58:31.200 | because people, I think always want to believe that there's

00:58:34.520 | going to be a bounce back. Yeah, and it takes time to kill that

00:58:38.040 | hope.

00:58:38.440 | I think I think that

00:58:41.560 | capitulation is, I think that capitulation is starting to

00:58:46.200 | happen, to be honest. I mean, that was my observation. I feel

00:58:49.360 | like everything was so shut down. Last year, the start of

00:58:54.200 | this year through the summer. And then in the fall, like just

00:58:58.360 | the last couple of months, it feels like there's this

00:59:00.480 | capitulation where it's like, okay, we're worth 80% less, but

00:59:03.960 | we need money. Let's do the deal. Okay, we'll put money in.

00:59:06.920 | I don't think the reset can happen until stripe goes public.

00:59:10.560 | I'll be very specific. I think that is the company that sets

00:59:13.760 | the cascading valuation framework for every other

00:59:17.080 | company. So I think all of this is a bunch of people, us

00:59:21.600 | blathering on and making stuff up. I think the true numerical

00:59:25.960 | forcing function, the clearing event happens when they go

00:59:28.480 | public, because it will it will be you won't be able to hide

00:59:31.600 | like I think we all would say it's the best run company that's

00:59:34.800 | private. It's the most technical, it's gotten the most

00:59:38.880 | people it's gotten the most pristine cap table, it's raised

00:59:41.680 | the most money at the like, it's done everything right. It's the

00:59:44.560 | gold standard. Yes. And what their valuation is, is then what

00:59:49.560 | you can expect if you are of that caliber. Or you can expect

00:59:54.440 | a lower valuation if you are not of their caliber. And I think

00:59:58.200 | that until we know what that is, we're all going to be hoping.

01:00:02.520 | And but we know that hope is in a strategy. So my takeaway from

01:00:07.400 | all of this is just more that people have to really right size

01:00:11.680 | the portfolio, sell what you can find liquidity where there are

01:00:15.960 | people that want to buy at different entry prices, they may

01:00:18.520 | not be the price that you thought originally, but you

01:00:21.920 | know, make sense for them and their risk profile in this

01:00:24.200 | moment in time, all of this stuff has to happen to actively

01:00:26.560 | manage to exits, I think,

01:00:27.720 | well, and there's a new phenomenon that's going on, that

01:00:30.160 | I've been seeing a lot of I've been approached by a number of

01:00:32.360 | people who are doing buying strips of GP interest and strips

01:00:36.720 | of LP interest in venture funds. From the last 10 years, I got

01:00:40.080 | offered for a five x on paper fund, like three point whatever

01:00:44.320 | x you know, and you could clear out like you're saying some of

01:00:48.840 | your shares, I got offered, you know, half price basically, by

01:00:52.520 | some people who I think I don't want to say the bottom feeders,

01:00:54.840 | but I think they're maybe optimistic about certain names.

01:00:58.320 | And yeah,

01:00:58.920 | I've noticed that the amount of activity from secondary brokers

01:01:02.720 | seems to have increased. And, yeah, and, and specifically that

01:01:07.280 | the emails that I get that are interesting are the ones where

01:01:09.720 | they're asking me to sell shares. So when someone's

01:01:13.400 | offering you that doesn't mean anything, because there may not

01:01:16.040 | be any transactions clearing, but when they have definite

01:01:18.800 | buyer interest at a certain price, that tells you that the

01:01:22.920 | market now has found or is in the process of finding the

01:01:26.120 | market. Yeah, so I think I think we do actually know, from the

01:01:32.280 | secondary market, kind of where a lot of these unicorns are at.

01:01:35.200 | My guess,

01:01:37.080 | what would you say on average half?

01:01:38.600 | Yeah, there's

01:01:40.800 | that's what I see. I see a lot of half price action.

01:01:43.480 | That's not I'm not trying to be a wet blanket guys. But the

01:01:46.240 | average SaaS company that's public is down 75%. If you look

01:01:50.920 | at the fintech space, these companies are down 80 to 90%. So

01:01:54.280 | how can half be reasonable? Well, just for certain names.

01:01:56.840 | Yeah,

01:01:57.120 | because I think the really bad names don't get any liquidity,

01:02:00.600 | like there's just no buyers. So you're talking about names where

01:02:03.680 | there's already a buyer. So that's going to bias it towards

01:02:06.400 | the better companies.

01:02:07.360 | And when square and odd, and these are great companies, right

01:02:10.640 | that are down 80 90%. How can a private liquid company be only

01:02:16.880 | down 50%?

01:02:17.880 | Maybe it's not priced correctly. But maybe also there's been two

01:02:20.800 | or three years of growth since that last private valuation. So

01:02:25.280 | maybe there's some selection bias, maybe it's there's 20 30%

01:02:28.920 | growth.

01:02:29.720 | Yeah, but but add Jen and stripe of all I mean, square have also

01:02:33.480 | grown by 50%.

01:02:34.280 | I mean, you also have let me we have a comp on this, which is

01:02:36.520 | Instacart 39 billion peak profit market valuation is trading at

01:02:40.440 | like, six and a half billion, which I think is exactly what

01:02:44.000 | you said, Jamal, when we were pricing it, we looked at that

01:02:47.240 | 800. I think what I know, but I had said 800 million, and I just

01:02:51.720 | put it out like, there was 800 million in advertising revenue.

01:02:54.880 | And I said, Okay, you know, seven, eight, nine times that

01:02:57.920 | that top line, or if I said if it was, if it was 50%, margin,

01:03:01.480 | you can give it 20x. So I think that's how I came up with my

01:03:04.280 | number. And I think we came up with eight based on that. And

01:03:08.200 | you're sure enough, that's basically where it's trading 6.8

01:03:11.600 | billion. Yeah,

01:03:12.440 | it's amazing. It's on 26%. Since it IPO. Now, I will say that

01:03:17.680 | Instacart is an example of a company that has historically

01:03:22.200 | had very high burn, and it's a very capital intensive business

01:03:25.720 | relatively, whereas a good software business, like take a

01:03:28.880 | Clavio, for example, is much more capital efficient, and

01:03:33.680 | should be doing better. Clavio is down 16%. Since this IPO,

01:03:37.160 | market cap about 7 billion. So yeah, it's an ugly story. I

01:03:40.440 | mean, even for the names that just IPO, it's not looking too

01:03:43.520 | good. Yeah, I mean, revenue profits that that clears it

01:03:46.840 | out. I do think there's going to be a lot of GPS or arm down 21%.

01:03:52.960 | So that's a lot of money. Yeah. Look, I think the market has

01:03:56.680 | just turned very negative very recently. It comes back to this

01:04:01.240 | GDP report. You know, when I saw the 4.9% number, I mean, the

01:04:05.440 | thing that occurred to me, the larger theme is that there's

01:04:08.200 | such a divergence right now between Main Street and Wall

01:04:11.400 | Street.

01:04:11.880 | Explain why the GDP is so strong right now. And that would

01:04:15.440 | indicate that the economy is strong. Therefore, stocks should

01:04:19.600 | go up, right? Why? Why is that not happening? I think this is

01:04:22.800 | the next maybe confusing for people.

01:04:24.480 | Well, I mean, I'm not sure I can fully explain it. So I think

01:04:27.920 | there's a lot of contradictory data. But if you look at Main

01:04:31.080 | Street, you're seeing whatever 4.9% GDP growth, you're seeing

01:04:34.680 | pretty robust employment numbers, the consumer seems to

01:04:38.480 | be holding up. But if you look at Wall Street, and the

01:04:41.360 | investment side of things, it's pretty miserable. The whole

01:04:44.200 | stock market this year is being held up by seven stocks, the so

01:04:48.240 | called magnificent seven is the top seven tech names in the

01:04:51.920 | S&P 500. If you look at the overall S&P 500, excluding those

01:04:56.640 | names, it's flat for the year. And it's basically given back

01:05:00.800 | all the gains. And now those seven names are starting to

01:05:03.320 | crack. So just in the last week or so, Tesla went down a bit.

01:05:06.760 | Yeah, we're seeing them go down. And so, yeah, and Facebook. So

01:05:11.240 | we're seeing then you know, Microsoft had a great quarter,

01:05:14.160 | but it's now down, it's given back that that pop. So you're

01:05:19.320 | seeing that on the investment side of things, it's still

01:05:23.640 | pretty grim out there, because people are now pricing in higher

01:05:28.120 | rates for longer. That's basically what's happening. And

01:05:31.440 | the thing I wonder about the I mean, here's the disconnect is

01:05:35.120 | that ultimately, what happens on Wall Street affects the consumer,

01:05:41.040 | their 401ks go down in value, the value of their houses go

01:05:45.800 | down, because now, you can't, if you if you sell your house, you

01:05:49.400 | lose your 3% mortgage, now you have to get a new one at 8%. So

01:05:52.480 | everyone stopped trying to sell their house, the number of real

01:05:55.240 | estate transactions gone down a lot, that's gradually working

01:05:58.320 | its way through the system. So at some point, the consumer

01:06:01.040 | realizes that they're just not as wealthy as they thought they

01:06:03.600 | were. That's the wealth effect, and they just stopped spending

01:06:06.520 | as freely. And we already know that credit card debt, and

01:06:10.120 | especially credit card servicing costs are at all time highs

01:06:13.760 | because of these high interest rates. So at some point, you

01:06:16.680 | just wonder if the consumer is like Wile E. Coyote, and has

01:06:21.600 | gone off a cliff, but just hasn't looked down yet.

01:06:23.440 | Yeah, just like the country, just like our government, it's

01:06:26.480 | like we're just, everybody's just spending, and nobody's

01:06:30.040 | actually paying attention to the balance sheet, whether it's the

01:06:32.320 | government or individuals, apparently, because credit card

01:06:34.680 | debts now at its highest, and people are still yellow, I

01:06:38.000 | don't mean is because the only possible explanation with the

01:06:41.560 | consumer is that consumers wages, and the unemployment, the

01:06:47.360 | low unemployment, persistent low unemployment, the number of jobs

01:06:49.840 | available, is just making everybody super confident. But

01:06:52.720 | that's got to end at some point, right? Doesn't it? I think

01:06:55.160 | companies keep cutting their belts.

01:06:56.680 | I don't think Wall Street and Main Street can be disconnected

01:06:59.480 | forever. I think it's got to reconcile one way or another.

01:07:01.800 | Yeah, I agree.

01:07:03.400 | So I would describe our economic situation as as fragile. I mean,

01:07:06.960 | I think most commentators, like Bill Ackman, still thinks that

01:07:11.600 | things are going to turn south that this this GDP number is

01:07:15.320 | sort of a number. I don't know, it's just things still seem kind

01:07:18.400 | of shaky to me. And not exactly the recipe that you want, when

01:07:24.360 | you have this massive geopolitical instability.

01:07:26.400 | Yeah, exactly. That double whammy and then plus the

01:07:29.880 | election coming up and the chaos that that could cause in the

01:07:33.320 | country. It's kind of like that quote about going bankrupt, how

01:07:37.520 | did it happen slowly, and then all at once. I think that's kind

01:07:40.840 | of what we're heading towards. This has been happening slowly.

01:07:43.120 | And then everybody's gonna wake up with a heck of a credit card

01:07:46.520 | bill at 15 or 20%. And they're not gonna be able to pay it.

01:07:49.600 | Although just like the government will have to

01:07:51.960 | intervene there. They can't be in a situation where I agree with

01:07:56.720 | tomorrow, a large percentage of the US consumers just can't.

01:08:00.920 | This is my point of view on Yeah, on consumer and all this

01:08:04.320 | commercial real estate and the bank loans. Eventually, the Fed

01:08:07.000 | monetizes all this stuff. It's the only path, which by the way,

01:08:10.640 | will inflate a lot of financial assets. And if that actually

01:08:15.760 | you bring up another data point we haven't discussed, which is

01:08:18.160 | there's a major storm cloud out there, which is major US banks

01:08:21.560 | are facing large unrealized losses. So Bank of America had

01:08:26.080 | unrealized losses of 131 billion on securities in q3. JP

01:08:30.760 | Morgan Chase had a realized loss of 40 billion in its health and

01:08:34.960 | maturity portfolio in q3. And Citigroup did not disclose its

01:08:40.320 | losses for q3. But it had 24 billion of losses at the end of

01:08:43.960 | q2. So remember this dynamic that we had with SVB and all

01:08:48.040 | these banks back in was like March, where all these regional

01:08:51.560 | banks were basically had these large and realized losses and

01:08:54.080 | then it created a run on a few of them. Well, now the biggest

01:08:57.480 | banks are starting to face that unrealized losses problem. Now,

01:09:01.000 | I don't think like Bank of America, JP Morgan or Citigroup

01:09:03.840 | are going to have a run on the bank, but they're clearly not

01:09:07.560 | doing that great. And at some point, there's gonna have to be

01:09:10.880 | a reconciliation of that.

01:09:12.040 | Unless they hold it to maturity, I guess we should do just a

01:09:15.160 | quick hit here on this cruise follow up story. We talked

01:09:18.280 | earlier about the cruise accident and self driving. Well,

01:09:23.240 | a lot of news has come out about this gentleman that is

01:09:27.320 | potentially explosive. As we all know, just to catch everybody

01:09:31.480 | up on October 2, there was a hit and run accident. And this

01:09:35.600 | tangentially included that cruise vehicle, the cruise

01:09:39.840 | vehicle, a woman tragically got hit by a car driven by a human

01:09:44.360 | that that car ran off. The woman got knocked into in front of a

01:09:49.520 | cruise self driving car, which then ran her over. Okay,

01:09:55.040 | California's DMV has suspended cruise and their permit. Because

01:10:00.080 | allegedly, the company withheld footage of the incident. If you

01:10:04.200 | remember, we had a little discussion here about the taxi

01:10:06.880 | had rolled over the person. And then we talked about, hey, you

01:10:09.560 | know, you're not supposed to move off of the person when we

01:10:11.720 | did our whole joke about EMT J Cal. Well, it turns out, after

01:10:17.360 | the AV collision, the cruise vehicle apparently pulled the

01:10:22.120 | woman for 20 feet. And this has been confirmed now by cruise.

01:10:25.880 | But when cruise gave that information to the regulatory

01:10:31.760 | agency, the California DMV, they didn't show that footage. In

01:10:36.040 | other words, they showed just the first half of the footage.

01:10:38.520 | And that has gotten their license suspended. So we have

01:10:42.840 | we're left to interpret why did cruise not tell the full truth

01:10:47.160 | to the DMV. And now freeberg to your point about society taking

01:10:52.040 | risk. Now we have allegedly cruise. I don't know what the

01:10:59.200 | most generous way to say this is, but they either omitted or

01:11:02.960 | they straight up lied to the California D DMV DMV. I mean,

01:11:08.400 | J Cal, if it's true that they lied and were deceptive about

01:11:11.440 | the video, then yeah, that's like do not pass go go directly

01:11:14.920 | to jail time. I mean, that's really bad. Yeah. One point I

01:11:18.880 | made last time was I didn't think cruise was sophisticated

01:11:22.840 | enough tech or really GM, who's their backer was sophisticated

01:11:26.480 | enough technologically to get this right. And I still

01:11:29.840 | maintain that. And so if on top of that, they were deceptive

01:11:34.480 | about what happened, then that's like the kill shot. One

01:11:37.680 | question I have J Cal is there was an NBC reporter who was on

01:11:41.980 | the scene just happened to be on the scene. And I remember her

01:11:45.160 | reporting that cruise was not responsible. So I'm just

01:11:48.120 | wondering, like where the disconnect here is between all

01:11:52.240 | these various reports.

01:11:53.240 | I have a theory, I have a theory, which is not responsible

01:11:56.680 | for the accident, but then responsible potentially for the

01:12:00.320 | subsequent the dragging of the body. So I think that's the the

01:12:04.920 | issue here is that they may be able to claim, hey, we had

01:12:07.860 | nothing to do with the accident. But then in what happened after

01:12:11.240 | the accident, yes, the technology failed, apparently,

01:12:14.400 | or maybe the technology never took into account what happens

01:12:17.520 | if you run somebody over that was rocketed under your car. And

01:12:21.280 | maybe that's just a freak accident that we have to get

01:12:23.040 | used to that possibility happening. And that could

01:12:26.080 | happen with obviously human drivers. So it's just a

01:12:28.480 | possibility that that could happen.

01:12:29.960 | You don't think that that case is hard coded?

01:12:32.880 | I mean, the edge case of how would the car know there's a

01:12:38.760 | person underneath it? I don't know.

01:12:40.480 | No, but I'm saying you're you're bringing up something so

01:12:42.680 | obvious as to be comical, which is like, of course, there has to

01:12:46.760 | be some emergency cut off when there's like some obstruction.

01:12:51.840 | Anyway, sure. Let's let all the facts. I think we'll wait for

01:12:55.840 | the rest of the facts to come out. We've got I think 80% of

01:12:58.600 | them here 90% of them. But freeberg, you had told us in the

01:13:01.480 | group chat that Hurricane Otis would potentially be disastrous

01:13:06.320 | for Mexico. And turns out you are correct. 27 people are dead

01:13:12.640 | in Mexico. And maybe you can explain to us why this storm is

01:13:17.480 | unique. And why, if you think this, that we're seeing more of

01:13:22.000 | these? Or are we seeing more of these? Or is the coverage in the

01:13:25.200 | media? Yeah, you know, in the reaction to it? Getting

01:13:28.760 | distorted?

01:13:29.240 | I don't know about the media coverage. The big story with

01:13:31.800 | Hurricane Otis is that it went from being kind of a tropical

01:13:36.240 | storm to being a category five hurricane in about six hours.

01:13:41.080 | And then it made landfall in Acapulco and a category five

01:13:44.080 | hurricane. And no hurricane forecasting models had

01:13:48.400 | predicted this and hurricane forecasting models are what are

01:13:52.560 | you know, typically run off of ensemble models, meaning that

01:13:55.120 | there are multiple things that may happen. And that those

01:13:58.400 | simulations are run on very compute intensive systems. And

01:14:02.920 | there are many, many simulations being run all the time, every

01:14:06.800 | six hours, the simulation runs are done. And then you look at

01:14:09.760 | these and you create a probability of things that may

01:14:11.840 | happen. And none of the forecasts had any probability

01:14:15.400 | associated with this event happening. It was so out of the

01:14:18.560 | bounds of anything we have seen historically, that none of the

01:14:22.120 | models had any chance ascribed to this tropical storm suddenly

01:14:26.680 | evolving into a category five hurricane in six hours, and then

01:14:30.600 | making landfall on a city with a million people. We can look at

01:14:33.720 | pictures if you guys want and what happened in Acapulco. It's

01:14:36.280 | obviously pretty devastating. There's apparently no powerline

01:14:39.280 | standing in the entire region. Here's some photos. I mean, look

01:14:41.840 | at this like, wow, 165 mile an hour sustained winds. The

01:14:46.040 | eyewall went through the town. So a million people, by the way,

01:14:48.920 | many of whom live in not concrete reinforced buildings up

01:14:52.920 | against the mountain there. And so the devastation is really

01:14:55.880 | extraordinary. But the shocking thing is that there was no prep.

01:14:58.680 | There was no warnings, there was no alerts. There were a ton of

01:15:01.520 | tourists sitting in these hotels. Look at that. I don't

01:15:03.840 | know if you have any of the hotel photos, Nick. But it's

01:15:06.000 | insane. There are zero windows left in any of the hotels, any

01:15:08.800 | of the condos, any of the resorts, they are gone. So

01:15:11.680 | imagine you're like, in Acapulco, you're drinking beer

01:15:14.760 | and tequila. And then you go to sleep. And this thing hits at 1am

01:15:19.280 | as a category five hurricane and destroys everything. There's no

01:15:24.000 | power, there's nothing. So if you pull up the first chart,

01:15:27.120 | most of the energy that is absorbed from the sun ends up in

01:15:32.240 | our oceans. So you know, we talked about atmospheric carbon

01:15:34.800 | increasing energy retention. And people can debate that all they

01:15:39.160 | want where the carbon comes from, etc, etc. At the end of

01:15:41.480 | the day, there is energy coming into the earth from the sun. And

01:15:47.120 | that energy is being retained. The vast majority of that energy

01:15:51.240 | is retained by the oceans. So the first couple 100 meters of

01:15:55.080 | the oceans retain north of 90% of the energy absorbed by Earth

01:16:00.800 | to go to the next slide. So that results in water temperatures

01:16:03.840 | going up. So if you look at this is compared to the 1955 to 2006

01:16:09.560 | average, and you can measure ocean heat content, but ocean

01:16:12.320 | heat content has risen fairly linearly since the 90s. And you

01:16:17.440 | can kind of see, you know, how much excess is actually related

01:16:21.120 | to temperature perfectly or no. So this is ocean temperatures

01:16:23.920 | over time. So here you can see 2023. And so this shows you the

01:16:29.760 | average sea surface temperature. So 2023 has been such an

01:16:33.640 | outlier. And this is also because of these El Nino

01:16:36.800 | phenomena. But there's obviously over time, if you were to look

01:16:40.200 | at the average sea surface temperature trend, it's rising

01:16:43.440 | linearly with heat content over time. And in particular, in

01:16:45.920 | 2023, there's an extraordinary rise in temperature. So off the

01:16:49.720 | coast of Acapulco, the sea surface temperature was 88

01:16:52.240 | degrees Fahrenheit. I mean, it was so hot, the water like

01:16:55.120 | imagine an 80. That's like a David Sack swimming pool. It's

01:16:58.280 | so you know, going down many meters in the ocean. So when a

01:17:02.720 | storm goes over that level of heat, it takes heat out of the

01:17:06.080 | ocean. And that heat coming out of the ocean increases the wind

01:17:08.880 | speed. And then the wind speed pulls more heat out of the

01:17:11.480 | ocean. And that's how these things become escalatory until

01:17:14.040 | they hit something cold, like a mountain or the land, the land

01:17:18.080 | is much cooler. And then these things start to dissipate and

01:17:20.440 | break apart. And that's why these things form over the

01:17:21.960 | ocean. So the point is, no models predicted this. And

01:17:27.320 | that's because we've never seen this level of energy stored in

01:17:30.160 | the oceans before. And the model training has never really

01:17:33.080 | accounted for this sort of extreme condition. This extreme

01:17:36.400 | condition, obviously, is what some folks are arguing is

01:17:38.840 | becoming more frequent. So it brings into question, you know,

01:17:42.120 | the this, this, this ability for us to actually forecast the

01:17:46.280 | rise in the temperature over time is driving this. And then,

01:17:50.600 | oh, from an economic perspective, this is one of the

01:17:53.480 | key points I wanted to make. When an event like this happens,

01:17:57.760 | there's a market called the reinsurance market. And the

01:18:00.360 | reinsurance market sets the price for covering insurance

01:18:04.040 | companies against a big loss, where you can lose a ton of

01:18:07.000 | stuff at once. Insurance companies like to write

01:18:09.680 | insurance policies like car insurance is a great business.

01:18:12.240 | Because there's never one big event that causes everyone to

01:18:15.000 | get in an accident on the same day. But with property

01:18:17.680 | insurance, a hurricane can cause everyone to lose on the same

01:18:20.680 | day. So insurance companies need to buy reinsurance. And then

01:18:24.160 | there's these big reinsurance companies and they have pools of

01:18:26.120 | capital and there's capital markets involved in bonds that

01:18:28.520 | are sold to protect reinsurance. So there's, you know, hundreds

01:18:32.200 | of billions of dollars trillion dollar plus in reinsurance. When

01:18:36.680 | an event like this happens, those reinsurance markets take a

01:18:39.120 | loss. And the loss causes them to raise rates significantly.

01:18:43.160 | And it's and when that happens, the reinsurance markets harden

01:18:46.320 | is what they say. And then rates go up next year for

01:18:49.000 | reinsurance. And then the insurance companies pass those

01:18:51.560 | rates on to consumers, and to property developers and to the

01:18:55.120 | people that have mortgages. And the more of these events happen,

01:18:58.880 | even though it just happened in Acapulco, it impacts insurance

01:19:01.920 | rates everywhere. So as we see the events like what happened in

01:19:04.760 | Maui, what happened in Acapulco, what happened in Miami, you can

01:19:08.720 | start to see more of these things start to happen at the

01:19:10.720 | same time, the cost for insuring property goes up. And that

01:19:15.040 | starts to make this whole system very difficult to maintain

01:19:17.480 | because if the cost for insurance doubles or triples,

01:19:20.360 | and people can't really afford it, but the mortgages require

01:19:23.400 | that they have it in all of these high risk coastal cities

01:19:25.880 | and coastal areas. That's where an economic hit either has to be

01:19:28.720 | absorbed by the federal government, or

01:19:31.280 | we end up taking a mask or we can't get insurance, right? Or

01:19:36.440 | we take a massive economic loss. And so I just want to say like,

01:19:39.560 | this seems like an outlier event. And oh, my gosh, we

01:19:41.480 | should be sorry and sad. But the truth is, the frequency of these

01:19:44.520 | events and the risk factors, which is this ocean heat

01:19:46.920 | temperature, rising continuously for a long period of time, are

01:19:50.120 | going to drive that frequency of events. And there's going to be

01:19:52.640 | a real economic cost to bear on the order of several trillion

01:19:55.280 | dollars over time, because someone has to underwrite that

01:19:58.960 | real estate and someone has to underwrite the insurance to

01:20:01.200 | support that real estate. So it may seem like a one off and oh,

01:20:03.880 | you know, this won't be a big deal. But it actually translates

01:20:06.200 | economically through the reinsurance and insurance

01:20:07.920 | markets into the real estate markets fairly quickly. And so I

01:20:11.320 | just wanted to kind of point out one of the second order

01:20:13.720 | consequences of this article in the Wall Street Journal a few

01:20:17.560 | weeks ago, Nick, you can probably find it about this

01:20:20.320 | exact issue where they profiled the handful of homeowners, I

01:20:23.120 | think it was in Palm Beach or West Palm Beach. And they

01:20:26.480 | essentially had to sell and leave because they couldn't

01:20:29.920 | afford the home insurance or for those that own their home

01:20:33.400 | outright, they just stopped insuring it because they

01:20:35.360 | realized the land value would be fine. And so they said, if a

01:20:39.040 | storm there it is, if a storm, you know, if a storm hits, you

01:20:44.040 | know, West Palm and destroys my home, you know, hopefully I'll

01:20:47.880 | be fine. And then I'll just leave and I'll just sell it for

01:20:50.880 | the dirt. But to your point, it's become economically

01:20:54.920 | untenable in a lot of places for these folks to be able to

01:20:57.240 | ensure, ensure their home. Look at this on this example $121,000

01:21:03.000 | a year for home insurance. Right? What?

01:21:05.560 | How's my way, by the way, so add up the value. Well, that's

01:21:09.480 | because there's a one in 10 chance that a hurricane is

01:21:11.400 | going to hit them on any given year, right? And then they lose

01:21:13.360 | their whole value. So do the math on what the total real

01:21:16.120 | estate value in that region is. And think about what it gets

01:21:19.120 | written gets written down to as everyone starts to sell. And

01:21:22.040 | then you do that across all these regions where there's now

01:21:24.280 | high risk and lack of insurance available. And you have a real

01:21:27.480 | economic question on who's going to step in to support and buoy

01:21:31.080 | those asset values.

01:21:32.400 | Now, but aren't there state actors now that step in and act

01:21:36.080 | as a reinsurer?

01:21:36.960 | Great question. In Florida, they have a reinsurance pool that is

01:21:40.520 | largely assumed to be completely underfunded. And so everyone

01:21:43.880 | says like Florida's got this reinsurance pool, the right

01:21:45.760 | your stuff. But Florida if people if you ask people in the

01:21:48.720 | reinsurance industry, they're like, this thing's basically

01:21:50.960 | bankrupt, it's completely insolvent, this isn't real. So

01:21:53.640 | the federal government's going to be asked to step in and cover

01:21:56.040 | that thing at some point. And then someone's got to write a

01:21:58.560 | trillion dollar check. I mean, you know, you want to complain

01:22:00.600 | about sending 100 billion to Ukraine, Israel, wait until most

01:22:03.480 | of the country has to underwrite coastal communities real estate

01:22:05.760 | values.

01:22:06.280 | So Silicon Valley actually needs to be pro climate change so that

01:22:11.200 | you can reinflate the money supply.

01:22:14.840 | Wow, I mean, and then the other the other I mean,

01:22:17.200 | I'm being facetious, but I'm kind of not it's really crazy

01:22:21.480 | that so many industries it I think SAC said it really, really

01:22:25.720 | quite perfectly. When the money supply is shrinking, there's

01:22:28.840 | just a lot less money to go around when the money supply is

01:22:31.480 | growing. It's much easier for all of us to grab a share of it.

01:22:34.040 | And now that it's shrinking, you have this weird effect where you

01:22:37.480 | actually want government intervention, which

01:22:39.880 | unfortunately only happens in acute tragedies and calamities.

01:22:45.320 | And so what are we hoping for now as a society? That's a very

01:22:48.120 | scary idea.

01:22:48.920 | The second one, in fact, is who's going to buy these homes

01:22:51.400 | if they can't be insured, right? It's not going to crash home

01:22:53.360 | prices, Freiburg.

01:22:54.360 | That's my point is that these assets aren't worth what they're

01:22:57.840 | currently marked at. And if you add up all of the real estate

01:23:02.040 | assets in all of these different regions, that you know, everyone

01:23:05.480 | assumes are worth x. But the only reason they're worth x is

01:23:08.520 | because they're insured. And if they're not insured, people are

01:23:10.840 | gonna have to start to sell them. If they can't afford the

01:23:12.480 | insurance, they're gonna start some, then the real value starts

01:23:14.920 | to come out. These sorts of events like Acapulco are

01:23:17.560 | catalyzing events for forcing the market to rewrite this.

01:23:20.920 | That's, that's, this is the beginning of a cascading effect.

01:23:23.320 | I saw a really interesting study about the the risk of the rising

01:23:27.640 | oceans and just the salinity of the oceans to all the real

01:23:32.000 | estate in Malibu. And the reason is that, you know, if you look

01:23:34.400 | at the Malibu coastline, there's a small number of homes, but

01:23:37.480 | they trade at an extreme amount of economic value. But what

01:23:42.120 | underpins all of that stuff are that these homes are viable, and

01:23:46.360 | that you can live in them and that you don't have to replace

01:23:48.280 | them. And if you can sufficiently drill far into the

01:23:50.920 | bedrock, you can keep these homes safe. And this study was

01:23:54.000 | just talking about how the corrosive effects of the ocean

01:23:56.560 | are such now that you can't actually do that to the same

01:24:00.240 | rate when you when you actually initially buy these homes. So

01:24:03.400 | now you have these 50 and $100 million homes that are really at

01:24:06.840 | risk of just corroding and falling into the sea.

01:24:09.640 | Interesting.

01:24:10.200 | Yeah, that's always been an issue there. And you're right on

01:24:13.560 | the PCH highway. And there's a small amount of land between you

01:24:16.520 | and the water. So if it starts rising, or it's corrosive, you

01:24:19.320 | know, I've rented those homes before friends of ours have as

01:24:22.600 | well. And the water just goes right underneath the homes. And

01:24:25.960 | every year, it goes a little bit further onto the home. Right?

01:24:29.080 | Yeah. And you can't in some of the homes now, when they when

01:24:32.640 | they rent them to you for the summer, they say, Hey, listen,

01:24:34.360 | during high tides, you can't get to the beach. safely, you can

01:24:37.640 | like jump off your back porch and jump into a wave. But you

01:24:40.720 | know, low tide, you can get down and use the beach. If not, you

01:24:43.760 | have to walk down the street and go down like, you know, another

01:24:45.920 | person's alley to get to the water.

01:24:47.320 | Take out where are you now?

01:24:48.320 | So I have been in the Middle East, I got to go to Riyadh for

01:24:51.200 | the first time and in the UAE for the second time. I don't

01:24:54.760 | have any business interests here. But I have been taking a

01:24:57.440 | bunch of meetings. And the reason I went is I'm actually

01:25:00.920 | and I'll pre announce it here. I'm going to be bringing this

01:25:03.840 | week and startups, I'm going to do a series from the Middle

01:25:07.120 | East and feature the capital allocators and the startups

01:25:10.120 | that are growing here at the startup scene here is

01:25:11.920 | extraordinary. And I'm going to bring my founder university to

01:25:15.640 | the region as well. And I'm going to start teaching

01:25:18.560 | entrepreneurs here in the region, Egypt, Saudi, UAE,

01:25:22.880 | Qatar, anybody Jordan who wants to learn how to build a company,

01:25:26.240 | I'm going to be teaching startups in the region. And so

01:25:28.720 | pretty exciting. And I think startups, you know, at their

01:25:31.920 | core is hope and personal freedom to change the world.

01:25:35.840 | And I think if we build deep relationships between these

01:25:39.600 | important countries that are playing a bigger and bigger role

01:25:42.200 | in the global stage, and we we build companies together, that's

01:25:45.760 | going to be great for America, American interests. So what I'm

01:25:48.800 | doing here since people have been asking, yeah.

01:25:50.360 | What if anything has changed between what you thought of the

01:25:53.640 | Middle East versus what you think of it now? Has anything

01:25:56.040 | changed? Did you have a different view of Saudi? Let's

01:25:58.840 | take Saudi, for example, what did you think of Saudi and MBS

01:26:01.240 | before you went? And what do you think now after you've been

01:26:03.440 | there?

01:26:04.160 | Well, there, there was very little change in that society

01:26:08.000 | over the last 30 or 40 years. And based on what they've told

01:26:10.800 | me, you know, spending a lot of time with a lot of people there,

01:26:15.000 | I maybe had, I don't know, 30 individual meetings, or coffees,

01:26:20.080 | dinners, literally 30 different people. And they've told me

01:26:24.520 | everything's changed. So personal freedoms have changed

01:26:27.560 | radically, economic freedoms have changed radically, the

01:26:30.680 | political political system hasn't changed. Nor do I think

01:26:33.640 | that's going to change radically. But yes, my opinion

01:26:35.840 | of it. The reality of it is it's changed massively. And then on

01:26:40.520 | top of that, yeah, I have learned a lot. I've never been

01:26:45.440 | there. The entrepreneurial excitement in the region,

01:26:48.920 | Saturday, you were do you think you were too judgmental before?

01:26:52.200 | I have some core principles that I believe in. And what I will

01:26:57.960 | say is from doing this podcast with the three of you, and then

01:27:01.120 | being thrust into, like geopolitics, which, you know, I

01:27:05.560 | really haven't been in my life, I felt I needed to get more

01:27:08.560 | educated. I feel I am more educated now, after doing all

01:27:12.360 | these meetings. And I think the big education is the people here

01:27:15.680 | are not much different than the folks in our country. And they

01:27:20.360 | all want peace, prosperity, personal freedoms, they want to

01:27:24.800 | have a great life for their families. So to that extent, I

01:27:28.880 | think and each of the countries is very different, you know, and

01:27:31.720 | so you can't paint with a wide brush. Now, of course, I know

01:27:33.800 | that. But there's no substitute for being here and spending time

01:27:37.440 | with people. So

01:27:38.440 | so do you think that you just had a misconception? Or do you

01:27:41.880 | think you just fell for what the media tried to portray these

01:27:44.680 | countries when there were incidents? Like, how do you how

01:27:49.280 | do you reconcile that as you change your mind about them?

01:27:52.120 | Well, I, I think things have actually changed here more than

01:27:56.120 | I've changed my mind. I still feel the same way I feel about

01:27:58.680 | human rights and, you know, personal freedoms and everything

01:28:01.440 | like that. But what I've learned is that this area is changing so

01:28:04.840 | quickly. And that change is hard. And David said something

01:28:08.240 | really important, you know, it's like, you need strong people to

01:28:10.560 | make these changes here. And they're going to make the

01:28:13.160 | changes on their time. So the other thing, I think, if there's

01:28:16.320 | anything that has influenced me, it's probably what David said,

01:28:20.040 | you know, it's like, this is gonna be hard to make the

01:28:23.040 | changes here. And another thing you said, you know, there was

01:28:25.080 | one point you've said on this pod, like, hey, do you think

01:28:27.720 | they care what you think, right? They actually do care, they

01:28:30.880 | listen to the pod. But the truth is, the changes are going to

01:28:33.960 | occur here, Chamath, whether we're involved or not. And so I

01:28:36.920 | think as Americans, what we have to decide, and as business

01:28:39.920 | leaders, how involved do we want to be in that change? And how

01:28:42.720 | deep of those relationships do we want to build? Because if we

01:28:46.140 | don't build those relationships, there are other people who would

01:28:48.840 | like to forge relationships, right? Russia, China, etc. So I

01:28:53.160 | think just in terms of the chessboard that we see playing

01:28:57.240 | out right now, the more America can engage with this region,

01:29:02.080 | build companies with them, I think it's going to be better

01:29:04.680 | for humanity and society. And I think if you look at China, we

01:29:07.740 | disengaged, and how's that going for us? Yeah, it's going

01:29:12.360 | terrible. So I want to build companies here. And that's the

01:29:14.800 | thing is people are having big talks about all of these issues,

01:29:17.640 | human rights, changes. And so I, the thing I want to make sure

01:29:24.000 | people understand is, I want to see positive change in the

01:29:27.120 | world, including our country here everywhere. And so, you

01:29:30.960 | know, it's never coming from a place of trying to be preachy to

01:29:33.800 | people, I just want to see positive change in the world.

01:29:36.320 | And, you know, now with this podcast being so popular, people

01:29:39.520 | have expectations of us. And one of the expectations is we we

01:29:42.560 | know what we're talking about. And I did not know what I was

01:29:46.360 | talking about in this region, because I never spent time here,

01:29:48.040 | just like Saks has never been to Ukraine, what does he know about

01:29:50.080 | Ukraine and Russia, he's never been to either. So, you know,

01:29:52.760 | just like Saks is going to go to Russia and Ukraine and get

01:29:55.160 | educated, you know, I came here to get educated so that I can

01:29:57.520 | represent the pod better.

01:29:58.520 | I've been to the United States. And so I know that the US

01:30:01.680 | shouldn't be involved there.

01:30:02.760 | I'm joking with you, my friend. I'm joking. But we you know, I

01:30:06.080 | think we should go, you know, do more travel. And it's really

01:30:09.200 | inspiring to see what's going on here. On a very pragmatic basis,

01:30:13.000 | I will say, this is going to be the number two region, region

01:30:16.160 | and venture capital. And it's going to be that in 10 years,

01:30:19.400 | because I met with a lot of the family offices. And the family

01:30:22.440 | offices here are extraordinary. Like they built these businesses

01:30:25.120 | like really hard fought businesses 50 years ago.

01:30:27.640 | Welcome to being a capitalist, Jason, I love it. The water's

01:30:30.440 | warm in this bathtub. Join us.

01:30:31.920 | Well, no, the thing with these, these individuals is they're

01:30:36.240 | they're coming to the United States to invest in companies

01:30:38.600 | here. They're not just like the dough money at the table.

01:30:40.880 | They are, of course, because they're smart business people.

01:30:43.440 | We're all smart business people. We've always wanted to be in

01:30:45.680 | business. Nobody. It's what you said. Nobody was sitting here

01:30:48.640 | wanting to be some preachy know it all.

01:30:50.440 | Yeah. So anyway, I'm learning a lot. I'm having a great time

01:30:53.360 | here. I don't have currently have any business business

01:30:55.200 | interests here. But I would say, you know, a year from now,

01:30:57.520 | there'll be, you know, a 12 episode run of this week and

01:31:00.840 | startups featuring folks here and then founding university to

01:31:03.080 | be here building companies with people in the region. So I'll be

01:31:06.240 | investing in some companies here and helping founders start

01:31:08.920 | companies. All right.

01:31:09.920 | Saks, I

01:31:11.720 | get tell us about the speaker socks.

01:31:13.840 | And let's not call it because he's third in charge. He's third

01:31:19.120 | in line for the presidency. So Saks, who is he?

01:31:21.360 | Okay, his name is Mike Johnson. He's from Louisiana's fourth

01:31:24.240 | district. He's been in Congress for since 2016. So his fourth

01:31:27.680 | term, he is in relative terms, a backbencher. Apparently, he's

01:31:32.040 | never met with Mitch McConnell, that may be a good thing. But

01:31:34.600 | several members had to Google him to find out who he was.

01:31:37.600 | Really?

01:31:39.000 | Here we are. The good news, in my view, is that he did vote

01:31:43.080 | against more funding for Ukraine. However, as much as I

01:31:47.680 | like him on that issue, there are other issues where I think

01:31:50.240 | his previously stated views could be problematic for the

01:31:53.600 | Republican caucus. So he's very socially conservative. He voted

01:31:57.400 | to ban abortion at the federal level. He's called gay marriage

01:32:02.680 | a dark harbinger of chaos and sexual anarchy that could do

01:32:07.360 | even the strongest Republic. On the issue of entitlements, he

01:32:12.440 | has expressed support for cutting Medicare and Social

01:32:14.320 | Security. I think Trump has rightly figured out that that

01:32:16.800 | would be death to the Republican Party, where he is aligned with

01:32:20.480 | Trump is that he bought into the election denial theories. And

01:32:25.800 | particularly, he bought into the Dominion scam that was pushed by

01:32:28.680 | Cindy Powell.

01:32:29.480 | Shout out Cindy Powell, who is pleading guilty this week. Yeah.

01:32:32.960 | The crack in the other crack. Yeah.

01:32:34.520 | So was lunatic to muted of a word to describe this guy's

01:32:40.360 | facts? Would you say or would you?

01:32:41.760 | I don't think he I wouldn't say

01:32:43.520 | David, David, how did he get elected? Because I thought there

01:32:45.960 | was like more moderates that were like emers and even

01:32:50.440 | Scalise is more to the left of this guy. So how? How did how

01:32:54.000 | did is it that all of that ended up with the far, far, far right

01:32:58.280 | person getting elected?

01:32:59.280 | This is the crazy thing is that they had better choices. So for

01:33:03.960 | example, Jim Jordan is the guy who I think should have gotten

01:33:06.720 | it. Jim Jordan is always supremely prepared for any

01:33:10.400 | hearing. He's one of the only Republicans who knows how to ask

01:33:12.640 | tough questions. I think he would have run the house with

01:33:15.160 | tremendous discipline. This is a case where you're plucking a guy

01:33:18.560 | out of obscurity, he may not even have the experience to run

01:33:22.000 | the house with the necessary discipline. Moreover, he's

01:33:25.840 | somebody who the Democrats are going to write campaign ads

01:33:28.640 | against very easily. Now, you asked the question, how did this

01:33:31.160 | happen? I think that the GOP just kind of ran out of gas. I

01:33:34.680 | mean, they went through so many candidates that they exhausted

01:33:38.120 | all the options. And there were three weeks of chaos. And the

01:33:42.240 | New York Times summed up the feelings of the GOP caucus by

01:33:45.000 | saying, they view Johnson as someone who's sufficiently

01:33:47.460 | conservative, who they do not personally despise. So that's

01:33:50.760 | really the reason at the end of the day is they just perceive as

01:33:53.960 | a nice guy. But as you know, nice guys don't always get the

01:33:58.360 | job done. I think they were what is happening, they kind of ran

01:34:01.760 | out of candidates. And they chose this guy because he's a

01:34:05.040 | nice guy. Now Jim Jordan, this guy's a nice guy. He's a nice

01:34:08.960 | guy. He's a guy who believes gay people are evil. I don't I

01:34:14.160 | certainly don't approve of that message. But it comes from his

01:34:17.040 | religious views. Well done Republican Party. But look, Jim

01:34:21.520 | Jordan was the right guy here. But Jim Jordan sometimes has

01:34:23.840 | sharp elbows. And so he's rubbed people the wrong way. Mike

01:34:26.920 | Johnson, on a personal level, has not rubbed people the wrong

01:34:31.920 | way. But I agree that the campaign ads are going to write

01:34:35.920 | themselves here. He apparently hasn't rubbed anyone.

01:34:39.760 | And then the crazy thing is that the one social issue gets

01:34:45.840 | crazier. Well, from my point of view, the one social issue or

01:34:50.120 | cultural issue where he's not that conservative, apparently is

01:34:53.320 | on CRT. He said a bunch of things that indicate that he

01:34:58.040 | views the US as being systemically racist and doesn't

01:35:01.600 | think Republicans should should be attacking CRT, which I think

01:35:06.560 | is the one cultural issue where Republicans should be on

01:35:09.880 | offense, they should be opposing the woke mind virus, I would

01:35:13.120 | like to see them go after that issue, and not be trying to

01:35:16.760 | re litigate gay marriage or abortion at the federal level.

01:35:20.280 | So in my view, this, this guy is the wrong mix of cultural

01:35:24.520 | issues. And then of course, his views on entitlements are a

01:35:27.440 | surefire loser for the Republicans. So the Republicans

01:35:30.320 | are all like slapping each other's backs and sucking each

01:35:33.720 | other's so we're getting this done.

01:35:35.080 | But I think it's a disaster.

01:35:39.400 | Whoa, yeah, it's a disaster. How long does this last? How many

01:35:44.320 | days give me how many moochies? How many sacrilegious? Yeah, you

01:35:49.600 | give them seven.

01:35:50.320 | Well, again, the Republicans now are so burned by the chaos is

01:35:55.800 | went through that I don't think they want to go back into it too

01:35:58.600 | easily. Wow. So I could last. Look, you're right. I don't

01:36:03.680 | think I don't think he's gonna last long term. But But it may

01:36:07.680 | be more than a few scare moochies. Yeah. Shad scare

01:36:11.560 | moochie. 11 days. So yeah, that's 100 days. The scare

01:36:16.320 | moochie is a is a unit that equals 11 days. Yes. So you

01:36:20.400 | think like 10 scare?

01:36:21.360 | Yeah, I think you could get to you if you have to get to like

01:36:25.240 | January 20 of 2025, which is the inauguration. What are you

01:36:28.640 | talking about? 365 days? Right? Plus another? We're talking like

01:36:34.280 | 70 days here. No, we're talking about 41 scare moochies to get

01:36:38.920 | to 1020. I mean, 40 scare moochies. 2540 and a wake up. Oh

01:36:46.000 | my lord.

01:36:46.840 | So what you're gonna see is now that the media this already

01:36:50.240 | started, there's gonna be a drip drip drip of all the things that

01:36:53.720 | he's ever said when he was kind of a backbencher and almost

01:36:57.080 | paying attention. All these sermons that he's given and so

01:37:00.040 | forth. They're gonna be, you know, writing stories about

01:37:03.440 | that. And they're gonna make the guy seem like a wacko

01:37:05.880 | or expose that he is a wacko. I mean,

01:37:07.840 | well, I think that I would say that he's just somebody who's

01:37:12.600 | got very socially conservative views based on being

01:37:15.600 | evangelical, and

01:37:17.200 | might be wildly out of touch with Americans. Yeah,

01:37:20.520 | I don't want to like offend people in that group by saying

01:37:24.240 | he's a wacko. But I think you are right that it is not in tune

01:37:28.320 | with most voters. Let's say that

01:37:31.400 | hey, before we go, it's actually gonna ask you about the about

01:37:35.760 | the Trump cases. I mean, as a lawyer, what what do you think

01:37:40.280 | is gonna happen here? We have all of the cracking people have

01:37:43.120 | to answer the audience what happened?

01:37:44.520 | Well, I mean, I think everybody's following a Jenna

01:37:47.080 | Alice, Kenneth, she chez bro, it's spelled cheese, bro, but

01:37:51.240 | it's chess, bro. And Sidney Powell have all now pleaded

01:37:54.240 | guilty, some of them for felonies, in fact, but the

01:37:58.160 | others misdemeanors, and they're all really apologetic about

01:38:02.320 | basically this fake electorates scam they were running to try to

01:38:07.160 | overturn the election. And they say there's six more of these

01:38:10.880 | 19 people in the Rico case, we're gonna flip next week. At

01:38:14.600 | the same time, Trump was doing his case in New York and was

01:38:18.560 | fined 10k for violating this, the gag order the second time,

01:38:22.120 | third time, they think he's actually potentially put be put

01:38:25.920 | in jail, which seems to be something he's trying to do. So

01:38:31.360 | what's your day here, Saks? Is it all deep deep state

01:38:34.680 | conspiracy still January 6 up? Or were these lunatics actually

01:38:37.840 | trying to overthrow the government?

01:38:39.040 | To be honest, when you mentioned the name Jenna Ellis, all I can

01:38:42.080 | really think of is that election hearing in Michigan, where she

01:38:46.320 | made a face because Rudy Giuliani audibly farted. And

01:38:52.240 | then it turned out that that she got COVID a few days later, and

01:38:56.000 | that we think that Giuliani had it at the hearing. So he may

01:38:58.800 | have farted the COVID into her.

01:39:00.360 | That's what we learned after all of this with COVID is that it's

01:39:03.080 | not it's actually is just

01:39:06.200 | flat. You could you could fart COVID onto somebody.

01:39:10.560 | We got to go to a second science corner here, Freedberg.

01:39:14.400 | We need an emergency science corner. Can you fart COVID into

01:39:18.000 | somebody's face? Please, Freedberg.

01:39:19.840 | Can I come out your bum as well as your mouth? Come on.

01:39:26.480 | We should we have put masks or diapers when we were on

01:39:29.280 | airplanes to block the COVID from we should have masked and

01:39:32.760 | we were masking the wrong place. Yes, Friedberg. I got him to

01:39:37.800 | smile. He almost left.

01:39:39.480 | Hold on. Put this on the screen. Yeah.

01:39:41.480 | No, but she said she says the TLTR is unlikely, but that's not

01:39:52.640 | a no. It's not a no.

01:39:54.680 | That's all the same as impossible.

01:39:56.360 | Yeah. I mean, I can we get Fauci to come back? Shout out

01:40:01.720 | Anthony Fauci. He's got the answer for us. In all

01:40:05.480 | seriousness, this is they're gonna flip all these folks. I

01:40:08.840 | mean, this is like the end of Goodfellas here. Everybody's

01:40:12.000 | getting pinched. You think Giuliani's gonna get go to jail

01:40:15.400 | here? What do you think? How does this end, Zach?

01:40:18.040 | I think what's likely happening is that they're flipping these

01:40:23.320 | lower level figures in order to flip the next higher level,

01:40:26.480 | which would be Giuliani and Johnny Smith, because I don't

01:40:31.120 | think these people have anything on Trump. So they're going to

01:40:33.320 | try and, you know, use Jenna Ellis to flip Rudy, and then

01:40:38.560 | they're going to try and see if Rudy will flip on Trump. But

01:40:41.560 | this all begs the question of like, was there ever a crime

01:40:44.880 | here?

01:40:45.280 | Well, yeah, I mean, they admit and yeah.

01:40:48.240 | Who's admitted to it?

01:40:50.720 | The three people who pleaded guilty.

01:40:53.040 | And the closure because they don't have their lives ruined by

01:40:56.680 | spending their lives in criminal prosecutions that could send

01:40:59.720 | the jail. So obviously, they're going to cut a deal. But that

01:41:02.880 | doesn't necessarily mean that like, they're going to get the

01:41:05.080 | big guy here on some on some crime. And in fact, I remember

01:41:09.120 | when the TDS crowd was orgasmic over Trump's CFO flipping

01:41:15.360 | remember when Wesselheim

01:41:16.600 | Yeah, he's going to jail for six months.

01:41:19.000 | Yeah, but remember when he supposedly flipped on Trump, and

01:41:21.640 | it turned out to be a big nothing burger, they couldn't

01:41:23.440 | get from

01:41:23.840 | Trump knows how to say stuff. He's just like, hey, maybe you

01:41:28.680 | guys could do something over here with the election.

01:41:30.840 | Sex. I read that he walked out of the courthouse yesterday, and

01:41:33.520 | he got like a $10,000 fine for violating a gag order by

01:41:37.200 | second time reporter. It's so incredible. This whole thing.

01:41:40.560 | How does a president of the United States who's running

01:41:42.600 | again for president of the right to say what he wants? That's

01:41:45.160 | crazy to me.

01:41:45.840 | Well, no, they said it's the security of these individuals

01:41:48.760 | who's going after like the like, court reporter, like he's going

01:41:51.600 | in like the second person. What happens if he gets convicted?

01:41:56.320 | Does he miss the election? Is there some rule that says he

01:41:59.520 | can't run? What is the law?

01:42:01.440 | They don't know. That literally is unknown territory, uncharted

01:42:04.840 | territory, uncharted territory, just like the foreign Okay,

01:42:07.440 | everybody, just like the hot water in the ocean.

01:42:09.600 | I think I was gonna get payback on Rudy for that fart. That

01:42:13.400 | COVID.

01:42:13.800 | She flipped it and the fart.

01:42:17.160 | All right, everybody. God, I mean, at least there's something

01:42:23.000 | to laugh about in this horrible, terrible. End of 2023. It's so

01:42:28.600 | depressing right now. I mean, it's just so depressing

01:42:31.600 | everywhere, isn't it? Let's pray for peace. And listen, this has

01:42:35.400 | been another amazing episode of the All In podcast, episode 151.

01:42:40.720 | Let your winners ride.

01:42:43.600 | Rain Man, David Sass.

01:42:46.440 | We open source it to the fans and they've just gone crazy with

01:42:53.040 | it.

01:42:53.240 | Love you.

01:42:53.880 | I see no

01:42:54.800 | King.

01:42:55.160 | Why?

01:42:55.680 | Besties are gone.

01:43:03.560 | That is my dog taking a notice in your driveway.

01:43:07.120 | You should all just get a room and just have one big huge orgy

01:43:15.480 | because they're all just like this like sexual tension that

01:43:18.320 | they just need to release somehow.

01:43:20.760 | What? You're a B. What? You're a B. We need to get merch. Besties are gone.

01:43:27.600 | I'm going all in. I'm going all in.

01:43:37.320 | [Music]

E151: WW3 risk, War with Iran?, 4.9% GDP, startup failures growing, new Speaker & more

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