E105: Tech culture wars: Elon vs. SBF, Sabotaging Republicans with Trump

00:00:00.000 | Can I tell you a funny story? So I was in I was in and then I

00:00:05.400 | when I landed, there was an assistant message on the plane.

00:00:09.800 | And then the pilot text me like, Hey, bad news. We're not going

00:00:13.480 | to be able to take you tomorrow. There's an error message. And if

00:00:18.160 | we can't resolve it, we can't fly. I said, Okay. So I text

00:00:22.400 | sax. I'm like, Hey, dude, I'm in a really tough spot. Is there

00:00:25.040 | any way that I you know, I could catch a flight, you know, with

00:00:29.040 | you tomorrow? Absolute dead silence. Three hours later, Paul

00:00:35.800 | pilot Paul text me and says, Good news. cleared us we're

00:00:39.240 | going tomorrow. I text sacks right away. Hey, no worries.

00:00:42.000 | It's all resolved. In eight seconds. He responds awesome

00:00:44.920 | with an exclamation.

00:00:45.720 | He had zero intention of bringing me and my family with

00:00:52.400 | it. Zero.

00:00:53.440 | I filibustered he filibustered.

00:00:56.840 | No, the truth is the plane was with me I was using I'd be happy

00:00:59.920 | to let you borrow the plane if I'm not using it. Here's sacks

00:01:01.960 | the last time we went to dinner ready? The check comes Miller

00:01:04.440 | locks lands on the table here sacks. What you're seeing see

00:01:07.920 | that? You know what that is? sacks going for his wallet. You

00:01:10.640 | can just count it.

00:01:11.280 | Because I can't remember the last time. He's the last time you

00:01:15.960 | picked up a check. J. Cal. What do you every time I pick it up

00:01:18.960 | on the way in maybe for a slice of pizza.

00:01:21.360 | sacks is one of the most generous people I know. I

00:01:24.840 | remember we went to a bar once we barely had time to get a

00:01:28.680 | glass of still water a diet coke and some of the free nuts. And

00:01:32.360 | then J. Cal was like guys, it's on me.

00:01:33.760 | gave it right to the bartender. That's true. My turn. My turn. I

00:01:39.800 | got

00:01:40.040 | to you got the the white truffles and the flamin young last week.

00:01:48.880 | I think these bar nuts are on me. It's only fair. Yeah,

00:01:52.360 | throwing some cashews to throw in the cashews and raisins the

00:01:55.360 | trail. I'll get the trail mix. Because you got the truffles

00:01:58.840 | last time to month.

00:01:59.720 | All right, everybody, welcome to the all in podcast. We're still

00:02:21.760 | here. Episode 105. I don't know if you saw boys last week. The

00:02:26.280 | pod hit a new high watermark 16th overall in the world. So

00:02:32.360 | congratulations.

00:02:33.040 | I thought we peaked at 14. Actually, was it 1414 people

00:02:37.200 | listen to this pod

00:02:38.200 | when I was in DC this week at a bunch of meetings and so many of

00:02:42.200 | the of the staffers listen to the pod. And they came up to me

00:02:46.000 | they're like, Hey, love you guys listen every week. It's really

00:02:48.880 | great. It's really crazy. Actually, the reach of this

00:02:50.760 | thing. It's really cool. Now when you're in DC, how gleeful

00:02:55.240 | were they about saxes absolute shellacking last week that must

00:02:59.720 | have been high fives all over the dams like they won twice.

00:03:03.600 | Trump announced and sacks lost. Listen, we, we talked a lot of

00:03:07.520 | that.

00:03:07.680 | Are they about SPF and how much money he gave them in order to

00:03:11.320 | stop that red wave?

00:03:12.320 | I talked to a lot of folks, folks. And what I would say is

00:03:17.720 | we talked a lot about energy policy, life, life sciences,

00:03:21.600 | obviously, two areas that I invest a lot of money in, and

00:03:24.560 | foreign policy. And actually, David, you'd be surprised by how

00:03:28.000 | many fans you have there.

00:03:28.840 | Cool. Well, I mean, like General Milley, like we talked about

00:03:31.520 | last week, he's come around Jake Sullivan just this week, said

00:03:34.800 | that he told the Ukrainians it was reported that they can't

00:03:37.240 | have Crimea back get realistic. So Jake Sullivan and Milley are

00:03:42.080 | like the voices of reason now, the administration on this, and

00:03:45.480 | they're just saying the same thing I've been saying, for

00:03:47.640 | which I was excoriated by the foreign policy establishment.

00:03:50.320 | And I got into a little Twitter spat with Ian Bremner this week,

00:03:53.600 | because all of a sudden he posted Oh, everybody has been

00:03:56.800 | privately saying that we need to negotiate. No, no, you haven't.

00:04:00.320 | You were criticizing you were denouncing Elon as a Kremlin

00:04:04.000 | agent when he posted that Twitter poll suggesting that

00:04:08.280 | the Ukrainians should negotiate. So you were publicly denouncing

00:04:11.680 | those of us who are calling for negotiations. And now all of a

00:04:14.280 | sudden, you're saying, well, this has always been the

00:04:15.880 | position. But I think what's significant about that is the

00:04:18.920 | guy is just a weather vane for the blob and the foreign policy

00:04:23.240 | establishment. And so the weather vane is now pointing

00:04:25.920 | towards negotiation. So that's the good news here.

00:04:28.320 | Do you think that if DeSantis wins the presidency, you will be

00:04:31.840 | nominated as Secretary of State? Treasury? What would you take

00:04:35.960 | Treasury? State?

00:04:38.000 | So if you were offered a cabinet position, would you take you

00:04:40.200 | should you should take what you what you have to understand is

00:04:43.400 | that my position on foreign policy or Ukraine specifically

00:04:47.480 | is not it's not, it's not adopted by either party. I mean,

00:04:51.080 | McConnell, and the center Republican leadership are very

00:04:54.920 | much on board with the Biden administration's policy on this.

00:04:57.640 | They are very, very hawkish. It's really the unit party on

00:05:01.240 | this issue. There's really just one consolidated blob.

00:05:04.520 | Okay, but back to the question, would you? Would it be a dream

00:05:07.640 | of yours? Would you find great joy in having a White House

00:05:11.840 | position? DeSantis goes in to serve your country? Would you

00:05:16.080 | serve?

00:05:16.360 | Would I serve if if if the president of the United States

00:05:20.840 | calls you up and asks you to do something, obviously, you have

00:05:23.760 | to serve your country, but it's not something I'm looking for.

00:05:28.040 | That's a yes.

00:05:29.360 | What if he asked you to serve as the US ambassador to Burkina

00:05:34.080 | Faso?

00:05:34.520 | Where?

00:05:40.640 | The ambassador roles are so funny. It's like you have to

00:05:42.880 | compete for the good ones. And then some people get stuck with

00:05:45.040 | the bad ones.

00:05:45.680 | Those are those are available for purchase.

00:05:48.600 | Yeah, yeah, exactly. You know, there's like, there's like a

00:05:51.840 | menu of these things like these ambassadorships. Like, I don't

00:05:55.520 | think it's like written down anywhere, but it's kind of like

00:05:57.480 | unspoken. It's like if you want the ambassadorship to the UK,

00:06:01.920 | that's like $10 million. And then, you know, like,

00:06:05.240 | the thing was, but UK and France, it's every every embassy

00:06:10.760 | every ambassadorship comes with an annual budget. But the cost

00:06:14.800 | of actually running that embassy and really throwing the parties

00:06:17.440 | is much more so for the UK and France. The gap is 10 million a

00:06:22.000 | year that you have to fund out of pocket. So you got to be

00:06:24.160 | really willing, you know, to put the money up. But apparently I

00:06:27.600 | mean, you got to pay for the parties. My friend, my friend

00:06:29.880 | was was the ambassador to the UK under Obama, and I went to a

00:06:33.560 | party there. It's unbelievable. And he has the best life because

00:06:37.320 | like, you know, he was meeting everybody in the world, you can

00:06:39.360 | imagine goes through the UK and then wants to meet the US

00:06:41.680 | ambassador. It was a great job for him.

00:06:43.960 | Right. But the money I'm talking about is the cost of buying one

00:06:46.840 | of these secures. You have to typically raise that bundle.

00:06:49.960 | Yeah, you bundle that much money for whoever. This is what I've

00:06:53.720 | heard. I mean, I don't know. This is what I've heard is that

00:06:55.960 | does that mean that SPF parents if Elizabeth Ward wins the

00:06:58.800 | presidency,

00:06:59.400 | right now the Illuminati right now just revoked all of our

00:07:05.640 | Illuminati cards. We're not supposed to talk about this

00:07:07.640 | guys, that you can buy an ambassadorship. But speaking of

00:07:11.280 | buying politicians and coverage, let's get an update on FT x. So

00:07:16.560 | I'm

00:07:16.760 | talking about Trump. Speaking of politics, I mean, you know, you

00:07:20.440 | bring it up because if I bring it up, I didn't want to tell

00:07:22.960 | somebody in the first five minutes, the only thing I want

00:07:24.920 | to bring up is, I think I'm entitled to and I told you so on

00:07:28.280 | this, there was a story where the FBI said that the reason why

00:07:33.320 | Trump kept the boxes in his basement, they've now the FBI

00:07:37.240 | has definitively said, it's because he was just trying to

00:07:39.600 | preserve mementos, not try to sell state secrets to the

00:07:42.880 | Saudis or something like that, like some people were making

00:07:47.120 | wild conspiracy theories about so Jake, it looks like I was I

00:07:50.600 | was right about that. In fact, I think we had that very

00:07:53.040 | discussion on this pod.

00:07:54.120 | Yeah, I mean, we I said I thought he was keeping it for

00:07:57.960 | like keepsakes like mementos. That was my position too,

00:08:00.800 | because he's

00:08:01.160 | a warrior. You didn't support this?

00:08:02.880 | Let me ask a question, because I'm gonna put it past him. He's

00:08:06.600 | a maniac. I think if you believe that this was about mementos,

00:08:09.560 | which the FBI is now said it was, I think you also have to

00:08:12.240 | say that the FBI's approach and rating his home with armed, you

00:08:16.160 | know, soldiers was heavy handed. Now, I'm not saying they didn't

00:08:19.040 | have the legal right to do it. I'm sure they checked all the

00:08:21.200 | right boxes. But it was heavy handed. But look, that brings me

00:08:24.320 | to another point. Why do they do it? I actually suspect now that

00:08:28.200 | what the Biden administration is trying to do is keep Trump in

00:08:31.160 | the news. I think they actually want to provoke him to run. They

00:08:34.720 | want to see exact, it's the exact same thing. Remember the

00:08:38.080 | 50 million that went into Republican primaries to support

00:08:41.200 | the you know, the election denier candidate. Turns out that

00:08:44.440 | was a successful strategy for them as much as I hate to admit

00:08:47.240 | it as as reckless as I think that was, and hypocritical,

00:08:51.000 | because I don't think you can be out there claiming that these

00:08:53.800 | candidates are a threat to democracy at the very same time

00:08:56.000 | you're funding them. So I think it was completely hypocritical

00:08:59.600 | and sort of Machiavellian, but it worked. And I think in a

00:09:02.360 | similar way, what the democrats are going to try to do over the

00:09:05.720 | next year is, is keep Trump in the news as much as possible.

00:09:09.240 | And in fact, CNN ran his entire speech announcing last Tuesday,

00:09:13.880 | I think for this reason,

00:09:14.960 | if Trump wins the Republican nomination, he's going to, then

00:09:19.520 | he will lose the presidency. Because if you look at all of

00:09:22.480 | these exit polls that came out of these midterms, he's just so

00:09:26.000 | massively unfavorable, but that's not what's going to be,

00:09:30.000 | you know, litigated in the primaries and the primaries,

00:09:32.880 | it's just Republican on Republican. And there are a

00:09:36.240 | non trivial number of paths where Trump actually beats to

00:09:39.520 | Santos. And I think that's very scary to the republicans who

00:09:43.080 | want to just move on and have a chance of actually consolidating

00:09:46.120 | power. And it's gleefully blissful for the democrats.

00:09:50.240 | Because if again, and we saw this, look, if the democrats

00:09:53.680 | weren't able to fund and field MAGA candidates in the

00:09:57.520 | Republican primaries that then lost in the general election,

00:10:00.320 | well, the best MAGA candidate of all is Trump. So it David Sacks

00:10:05.840 | is completely right now, like the balance of power here should

00:10:09.280 | be if you're the democrats, whatever you can do to keep him

00:10:12.400 | in the news, whatever you can do to induce him to run, makes a

00:10:16.880 | lot of sense because he will kill cripple the Republican

00:10:20.120 | Party. He'll split he'll split.

00:10:22.320 | Look at how Jake has got a big red. He's admitting to the

00:10:26.040 | hypocrisy, which is for years, he's screaming about what is

00:10:29.600 | your life? Hold on a second. You've been screaming about what

00:10:32.120 | a threat to democracy is how he's secretly on the payroll of

00:10:35.280 | the Kremlin or foreign governments and yet, and yet you

00:10:38.320 | want to keep him in the news. You want to be the nominee and

00:10:40.240 | you

00:10:40.560 | Republicans don't have the common sense to kick him out of the

00:10:43.800 | party. Oh, I do. Come on, I was on the DeSantis train before the

00:10:49.000 | midterms election. You will kick Trump out. You on this pod will

00:10:52.640 | never kick him out of the party. You should say how much

00:10:55.880 | we disavow him.

00:10:58.360 | Publicly disavow him. How I've already said I support to

00:11:02.120 | Santa's. I said it before the midterms. What else do you want

00:11:04.440 | me to do? But by the way, I don't think large. I think I

00:11:08.760 | think you're I think you and many other people on the

00:11:11.640 | democratic side in the media are being very hypocritical about

00:11:14.360 | this because you want to claim that he's this unique threat to

00:11:17.560 | democracy while playing this game where you want to keep him

00:11:21.200 | in the news. You want to basically provide him with as

00:11:23.000 | much oxygen as possible because you think he's more beatable.

00:11:26.280 | And by the way, I agree that he's less electable than

00:11:29.320 | DeSantis, which is why part of the reason why I'm on the

00:11:32.280 | DeSantis train. I also think DeSantis would get more done.

00:11:36.080 | But look, I don't think it's a foregone conclusion. He's gonna

00:11:38.760 | be the nominee. Did you see the new polling that came out after

00:11:41.760 | the midterms? DeSantis is now the favorite in among Republican

00:11:46.240 | primary voters among every different slicing that you want

00:11:49.600 | to do, of whether it's likely Republican voters, primary

00:11:52.840 | voters, whether it's Fox News viewers, and on and on and on.

00:11:56.000 | DeSantis is now ahead of Trump by about

00:11:58.080 | Okay, wait, hold on, I need to be able to state my position

00:12:00.160 | because Saxton interrupted me seven times. I just would like

00:12:02.080 | to get my position on here. Number one, you all backed

00:12:05.000 | somebody who is a horrible human being who made terrible

00:12:07.640 | decisions. And now you guys keep supporting him at some point,

00:12:11.320 | you have to put your foot down and say, Listen, we don't want

00:12:13.360 | this guy. You have to publicly say, January 6, you know, and

00:12:17.680 | this guy's approach, the election denial, you guys have

00:12:20.680 | to come out and just say, we don't want this person to run. I

00:12:24.000 | think you've been hedging too much. I think that's the

00:12:25.760 | problem. Now, who am not? How can I get the Republican Party?

00:12:29.440 | Yeah, now you always were a little bit like, because I did

00:12:32.400 | know. Hold on, hold on. And this very pot, I asked you, if he

00:12:36.120 | run, would you support him? Would you ever vote for him

00:12:37.960 | again? And you were like, well, and you would vote for him

00:12:40.320 | again. If he wins the nomination, you'll vote for him.

00:12:42.120 | That's the truth. Republicans will still vote for him.

00:12:44.440 | Look, you know that before was popular before the midterms

00:12:47.640 | I was on the descents of strain. I was saying so on this pod for

00:12:50.160 | over a year when it was very unpopular, certainly in the area

00:12:53.000 | in which I live. And so you know, and there are a lot of

00:12:56.640 | Republicans now most Republicans now agree with me on this issue,

00:13:00.440 | according to the polling that just took place. But if he wins

00:13:03.080 | the nomination, you will Jason is that you want us to buy into

00:13:07.480 | every bullshit narrative that you've ever told about this

00:13:10.880 | issue. January six and bullshit. No, it was a bullshit. Let him

00:13:15.840 | finish. Let him finish. He's interrupting me every two

00:13:17.880 | seconds. Stay out of it. freeberg. I just want you guys

00:13:19.760 | to guys, I just want you guys to speak and then let the other

00:13:21.920 | person speak. That's it.

00:13:22.800 | My point is, here we go again. I don't I don't want to rehash

00:13:28.360 | every single thing in the past. But But look, the point is that

00:13:31.960 | I think we have more electable candidates. I think we have

00:13:34.960 | candidates that would get more done in office. But and I've

00:13:39.240 | already said so but I you know, but I don't that doesn't mean I

00:13:42.120 | believe this whole like threat to democracy thing. I think that

00:13:45.360 | is massive inflation of the actual threat. But But look, if

00:13:49.920 | you want me to say that we have more electable candidates, we

00:13:53.240 | have candidates who will get more done, who frankly would be

00:13:55.880 | less alienating to moderates and independents and could even win

00:13:59.240 | over some moderate Democrats the way that the Santa's didn't

00:14:01.880 | Florida to win by 19 points. Yes, happy to say that. And I've

00:14:06.160 | been saying that.

00:14:06.880 | I will just say, if I if I'm if I'm if freeberg allows me to

00:14:10.400 | make a point, I would like to say, it is a threat to democracy

00:14:13.760 | January six and election denial. Those two things are acute.

00:14:16.600 | Why party fund over $50 million to those candidates?

00:14:20.240 | cynical because they want to win cynicism, pure cynicism.

00:14:24.560 | Okay, we're on the same page about that. Yeah, yeah, it's

00:14:26.880 | pure cynicism. But do you let me ask you a question. And then

00:14:29.400 | we'll wrap on this because I know it's uncomfortable for

00:14:30.960 | freeberg to watch mommy and daddy fight.

00:14:32.360 | Some childhood trauma.

00:14:40.920 | Drama is okay. Mommy daddy still love each other. Even if we

00:14:45.120 | fight sometimes, it just makes me want to turn the volume down.

00:14:47.720 | Go ahead. Almost done. Anyway. I do think fielding moderate

00:14:52.120 | candidates is the path. And I think you brought this up a ton

00:14:55.080 | of times who it's the race to whoever can get that moderate

00:14:59.600 | middle and I hope that they feel better candidates. But do you

00:15:03.000 | think sacks he's running? This is one of the cynical takes is

00:15:07.640 | that he's running because it will help all the legal cases

00:15:09.720 | against him. Do you think there's anything to that?

00:15:11.280 | My guess is that that they see him as an easier candidate to

00:15:14.280 | beat and they're going to do everything they can to try and

00:15:16.560 | keep him in the news. And I don't, I actually I don't think

00:15:19.400 | that's your position. I actually think that you're being sincere

00:15:22.560 | that you don't want him to win a second term. I mean, remember,

00:15:25.680 | like we don't know, I think we all believe that we're gonna

00:15:28.000 | have a pretty severe recession next year. So just because the

00:15:31.200 | democrats cynical strategy in the midterms of promoting, you

00:15:34.840 | know, what they call it election deniers in the primary that

00:15:37.360 | happened to work, but just because it worked last time

00:15:40.120 | doesn't mean it's going to work next time.

00:15:41.440 | And abortion absolutists and a whole bunch of other things. I

00:15:43.840 | think I think the point is pretty much this, which is that

00:15:47.880 | people gave Trump a lot of credit for being an idiot

00:15:51.360 | savant. But it looks like he's more of an idiot savant minus

00:15:54.680 | the savant. Okay, this is a, this is kind of a goofball, who

00:15:58.840 | has a brilliant media strategy, and he had his finger on the

00:16:01.840 | pulse in a moment. And then he just couldn't execute couldn't

00:16:05.960 | put two and two together couldn't put one foot in front

00:16:08.160 | of the other. And he was way too divisive, and he got booted out

00:16:11.640 | and he lost fair and square. And now what the republicans have to

00:16:15.760 | realize is if they don't figure out how to field somebody out of

00:16:20.680 | the primaries, that is different than Trump, the democrats will

00:16:24.560 | win. Because if it is Trump, whoever the democratic candidate

00:16:27.880 | is, I don't think it really matters. We'll crush Trump.

00:16:29.920 | Yeah, look, I think that's likely correct. I mean, I think

00:16:34.520 | that we talked about it last week, you cannot win the

00:16:36.800 | presidency with call it 45% of the vote. I mean, Trump is capped

00:16:40.240 | at that amount.

00:16:40.840 | And the scary thing for republicans, by the way, is

00:16:42.560 | Trump does a much better job than anybody else in getting his

00:16:45.320 | base activated. So the thing that all these polls get wrong,

00:16:48.640 | and I think they've consistently gotten wrong, and as a result,

00:16:51.880 | have underestimated him, is they don't give him the credit he

00:16:55.360 | deserves duly for being able to curate a fervent base of that 30

00:17:00.000 | or 40% of America that will show up for him. And even if they

00:17:03.840 | didn't show up as much in the midterms, they sure as hell

00:17:07.640 | showed up in the primaries for his candidates oftentimes. So I

00:17:12.560 | just think it's a very dangerous cocktail that you can't sleep

00:17:15.760 | on. So the republicans have to take this really serious moderate

00:17:18.160 | republicans want to have a chance of winning. You guys have

00:17:21.040 | to figure out how to beat Trump in a ground game. Because if his

00:17:25.920 | base shows up, he has a decent chance of winning the

00:17:28.720 | nomination. But then you will lose the general.

00:17:32.560 | Yeah, I think that's, I think that's pretty much spot on. I

00:17:35.360 | think republicans really have to be smart and disciplined and

00:17:38.160 | think about, we have to nominate the the most electable

00:17:41.920 | candidate. But here's the thing is, we're not even debating

00:17:44.760 | policy right now. No one, no one really says that, hey, on a

00:17:48.520 | policy basis, there's a huge difference between, say, Trump

00:17:51.520 | and DeSantis or some other folks. It's all about personal

00:17:53.960 | style. And is it really worth it to the republicans to

00:17:57.640 | potentially lose the next election, based on personal

00:18:01.320 | based on style points, it's a silly reason to lose, you know,

00:18:05.200 | William F. Buckley, a long time ago said that he would always

00:18:08.720 | support the most electable, conservative candidate, he

00:18:12.360 | didn't always go with the most conservative candidate, he

00:18:14.800 | wanted to go with the most electable candidate who met a

00:18:18.120 | basic policy bar. And he sometimes got in trouble for

00:18:21.680 | that. For example, he supported Bush 41 over jack Kemp. I know

00:18:24.840 | I'm going back a long way. But But in any event, you know,

00:18:28.920 | having thinking about electability is just really

00:18:31.640 | important.

00:18:32.160 | There's one civil lining here, the head of the Republican Party,

00:18:34.840 | Rupert Murdoch has absolutely dissed Trump. I don't know if

00:18:39.400 | you saw the New York Post, but he put on the cover of the

00:18:41.280 | New York Post a little lower, like 10 Florida man makes

00:18:44.520 | announcement and on page 26, he had the announcement of Trump

00:18:48.640 | running for president. And the funny thing was the last

00:18:51.080 | Rupert Murdoch, he didn't even name Trump as the president of

00:18:55.320 | the absolute last line of that column. And he said, Oh, and he

00:18:59.000 | also happened to be the 45th president of the United States.

00:19:01.320 | Yeah, it was very funny.

00:19:02.480 | You're seeing a lot of Republicans saying, I think

00:19:04.760 | correctly, is that if you want to win elections, you have to

00:19:07.240 | look out the windshield, you know, not in the rearview

00:19:09.640 | mirror. And what we saw in the midterms is that even talking

00:19:13.280 | about 2020 was at minimum, a giant waste of time and a

00:19:17.040 | distraction and at maximum potentially cause these

00:19:20.280 | candidates to lose. I mean, the fact of the matter is that that

00:19:23.080 | a lot of candidates, including some I supported in

00:19:25.440 | battleground states who got lured into trying to

00:19:28.840 | relitigate 2020, they all got vaporized. And I just think

00:19:32.640 | it's stupid to be talking about the past. voters want you to

00:19:37.640 | focus on the future. And especially when there's no

00:19:40.880 | policy outcome that matters. That's at stake for you to be

00:19:44.840 | talking about a past election, instead of the future and

00:19:47.720 | let me ask you a question. It's just politically stupid.

00:19:50.680 | freeberg. If I may bring you into this discussion

00:19:52.480 | uncomfortably, as it might as uncomfortable as it might be,

00:19:55.200 | would you vote for Biden? Incredibly old? I don't know,

00:20:00.560 | it's gonna be at one or 82. And the next election, you vote for

00:20:03.520 | Biden, or DeSantis,

00:20:05.640 | as I go through the list of things I'm most concerned about

00:20:08.560 | in the world today. Number one is the debt and spending cycle

00:20:13.560 | of the federal government. In the US. I'm I think it's the

00:20:18.080 | most kind of scary set of facts and conditions that we're

00:20:22.080 | getting set up for kind of a major crisis 10 to 15 years from

00:20:25.880 | now. Because you can't afford all the debt that we've taken on

00:20:29.200 | as a country, as well as the entitlement as well as defense.

00:20:32.240 | And so something's got to give and there's a bunch of paths

00:20:36.000 | that could emerge from that set of conditions that are all

00:20:40.080 | really scary paths and not good. I'm more concerned about that

00:20:43.080 | than I am about nuclear war, or climate change. Just to be

00:20:46.680 | clear, because I think that the social effects and the global

00:20:50.360 | geopolitical effects that arise from the US kind of

00:20:53.800 | destructuring because of our debt and spending cycle that

00:20:57.600 | we're in right now, are far more significant than what we'll

00:21:00.680 | experience over the same period of time. And again, I do think

00:21:03.640 | that technology is going to resolve a lot of our issues with

00:21:06.080 | climate change. And I think nuclear war, cool heads will

00:21:08.600 | prevail, everyone's got a family. So that's what I'm most

00:21:10.920 | concerned about. So any kind of voting decision I make is made

00:21:13.960 | with that lens, which is what's the best path to supporting

00:21:17.600 | some some sort of responsibility, setback or

00:21:20.360 | stepback to resolve those issues, as Charlie Munger said

00:21:23.040 | so well in this interview that was published this week. And I

00:21:26.000 | said it a few times on the show, but he did. He's a much better

00:21:29.440 | speaker than I use as far fewer words. But you know, in

00:21:33.360 | democracy, eventually, the populace realizes they can vote

00:21:35.880 | themselves all the money. And, you know, that's what we see

00:21:39.360 | happen in an accelerated way. In Latin America, we've seen that

00:21:42.200 | with a lot of these democracies that ultimately resolved to kind

00:21:44.480 | of socialism. And in the US, we're seeing a lot of this

00:21:48.440 | behavior where we're kind of voting ourselves all the money

00:21:50.560 | we're putting in place politicians and the populace is

00:21:53.320 | saying I want I want I want, and more money comes out. And it it

00:21:58.120 | totally decreases the strength and the resiliency of our nation

00:22:02.000 | and our economy. And it's the most concerning thing to me,

00:22:04.680 | because the incredible innovation and economic engine

00:22:08.080 | that is the United States is threatened. And it really

00:22:10.200 | threatens a lot of stability in the world today.

00:22:13.080 | Chama. Any any final thoughts here as we wrap up the political

00:22:15.960 | discussion? Obviously, a democrat, so you're voting for

00:22:19.840 | Biden, but you also care about fiscal responsibility. So where

00:22:22.480 | are you at? With your vote for 2024?

00:22:25.080 | I don't think that we know who's actually running on either

00:22:27.440 | ticket yet, just to be completely honest. So that's my

00:22:30.040 | perspective. My other comment is, I think what David said is

00:22:33.360 | so spot on the single biggest issue that we have is that we

00:22:37.000 | have made a huge decision to de globalize. And that de

00:22:42.040 | globalization has the risk of introducing a hyperinflation

00:22:46.960 | loop. And we won't know how bad that is for another year or two.

00:22:52.120 | Why would it do that? Why would it? Well, think about it this

00:22:55.080 | way.

00:22:55.240 | So today, let's just say you buy a chip to make the iPhone, you

00:23:01.040 | buy that chip from, you know, TSMC that makes it in Taiwan

00:23:05.640 | ships it to China. And the entire world is serviced with

00:23:09.760 | that supply chain that keeps that chip as cheap as possible.

00:23:14.120 | Now, with the chip sacked, as an example, we will build resilient

00:23:18.640 | supply chains, where now instead of one place, it'll come from

00:23:21.480 | six places, five of those six will be in allied territories,

00:23:25.520 | the United States, Western Europe, potentially Mexico. The

00:23:30.800 | thing with that is that that now is six x more equipment that

00:23:34.000 | you're buying. Right? Instead of one machine, you now have six

00:23:37.400 | machines. Instead of one person operating the machine in one

00:23:40.600 | country, you have six people in six countries. As you can

00:23:43.600 | imagine, when you layer up all these costs, there is no world

00:23:48.440 | in which that chip is as cheap as it was before. And so the

00:23:53.440 | cost of that has to be born either by the consumer who pays

00:23:57.680 | a higher price, that's measured as inflation, or by the

00:24:01.760 | government who subsidizes it at the point of import, that'll be

00:24:05.160 | measured by debt. And so one way or the other, in our in our path

00:24:11.240 | now towards more resiliency, and national security, which by the

00:24:14.600 | way, I think is the absolute right decision. Okay. Energy

00:24:18.840 | independence, all of this stuff we have to do today, we are at

00:24:23.040 | risk of a hyper inflationary loop, if not managed well. And

00:24:27.120 | so you have to be really on the levers of the economy, and you

00:24:31.600 | have to understand it deeply, the person that deserves the

00:24:34.360 | most credit of preventing this hyper inflationary loop right

00:24:37.400 | now is Joe Manchin. And hopefully the history books,

00:24:40.960 | whatever Jay Powell does, I think has been good. But the

00:24:45.240 | fact that mansion prevented 6 trillion more dollars of being

00:24:48.640 | pumped into the economy in the last two years, is probably the

00:24:52.120 | single thing that prevented inflation instead of being

00:24:54.760 | peaking at nine from peaking at 15 or 16. I think it would have

00:24:58.560 | been a national disaster without that

00:25:00.760 | Chamath is right that extra 6 trillion that Manchester would

00:25:03.440 | have been a national disaster. But let's also give credit to

00:25:05.640 | every Republican because they also voted against it. I mean,

00:25:08.440 | the fact that the pressure was on mansion to do the thing and

00:25:11.760 | see the forest from the trees and he did that.

00:25:13.200 | Yeah, no, look, I agree. I agree that I encourage I agree that he

00:25:18.240 | was in the hot seat. Well, so a cinema, by the way, cinema

00:25:21.400 | didn't go for the three and a half trillion build back better.

00:25:23.880 | But then mansion, you went along with the $750 billion version of

00:25:29.200 | BBB, which they renamed the inflation Reduction Act. That

00:25:32.120 | was kind of a disappointment. So frankly, like I give more

00:25:35.760 | credit to the Republicans, they were against all of it. And the

00:25:39.200 | Democrats jammed it through. So if you're worried about all of

00:25:41.960 | this trillions and trillions of unnecessary spending, once you

00:25:44.640 | give the chance,

00:25:45.800 | I'm talking about the delta between what was spent and what

00:25:48.400 | could have been the entirety of the gap is really was prevented

00:25:52.240 | by Joe mansion.

00:25:52.960 | I know, but it was Joe mansion siding with the Republicans. My

00:25:56.680 | point is, look, we got your point perfect on spending. They

00:26:00.280 | both want to spend too much money. But at this particular

00:26:03.160 | moment in time, the Republicans are more restrained about

00:26:06.280 | spending than the Democrats.

00:26:07.560 | Let's go to number one issue for each person. Hold on. Number

00:26:10.080 | one issue for freeberg is fiscal responsibility. I was going to

00:26:13.400 | say the same thing. It is my number one issue in this next

00:26:15.440 | election. I want to see austerity fiscal responsibility

00:26:17.800 | and get this spending under control so that our kids do not

00:26:21.840 | inherit, you know, stagflation, hyperinflation, or whatever

00:26:24.960 | cocktail of disastrous economic policies we are handing to them.

00:26:28.880 | What is your number one issue? sacks for 2024? If you had to

00:26:32.720 | pick a number one issue, what would it be for David Sachs?

00:26:35.680 | Look, I think it's simple. The President's job is to ensure

00:26:37.840 | peace and prosperity. So you guys are talking about the

00:26:40.120 | prosperity side, I think we do need fiscal responsibility, we

00:26:42.880 | need to have a good economy, there's like a bundle of

00:26:44.680 | policies that go into that starting with, I think, greater

00:26:48.200 | fiscal restraint. And then on the peace side, I think we need

00:26:51.960 | to adjust America's foreign policy to be less

00:26:54.680 | interventionist. We're, you know, we're involving ourselves

00:26:58.040 | here, there and everywhere all over the world. And I, I'm

00:27:01.680 | hopeful that what I'm hearing out of the administration in the

00:27:03.720 | last couple weeks, from Jake Sullivan, from Millie, these are

00:27:06.680 | some good things that I'm hearing. But, you know, I would

00:27:11.280 | like to see us dial back on the foreign interventionism.

00:27:14.040 | If you had to 6040 that or whatever, is one more important

00:27:16.960 | the other or they both equal and then we'll go to both equal for

00:27:19.680 | you, which one's more important?

00:27:20.640 | Both. I mean, look, how can you have a successful United States

00:27:24.320 | if we're either in a recession or at war, you don't want any

00:27:28.760 | either of those situations.

00:27:29.920 | So those are your top two equally, what is it for you,

00:27:31.920 | Chamath? What are you there?

00:27:33.240 | There's also a third one, which is culture, J Cal. So this one's

00:27:36.920 | a little bit hard to categorize. But I do think culture matters.

00:27:40.320 | And, you know, I want us to have a culture of excellence. I want

00:27:43.400 | in the schools, for example, I think schools should have

00:27:46.160 | grades, they should have advanced math, we should hold

00:27:49.560 | our kids to a high standard. I think that we want to have safe

00:27:52.480 | cities, we want to, you know, have cities where crime's not

00:27:54.680 | out of control. We need to have, you know, a sound border policy.

00:27:58.640 | So I think there's like a collection of policies there

00:28:01.560 | under, you know, schools, crime border that are sort of broadly

00:28:05.880 | cultural, I guess. But or maybe you could call them quality of

00:28:09.200 | life issues. So you know, yeah, we need to have a good economy,

00:28:12.600 | we need to stay out of foreign wars, but also we need to have

00:28:15.040 | a high quality of life.

00:28:16.680 | Can I steel man something for you? Because I, I really agree

00:28:19.920 | with those three things, David, that you said, but I've, I've

00:28:22.720 | spent a lot of time thinking about this. And my formation is

00:28:27.000 | that there's one thing that allows us to solve all three, if

00:28:29.800 | you bear with me for a second. And I think that that is the

00:28:32.320 | energy independence of the United States. If you look

00:28:35.880 | inside of what's happening in the US today, the cost of

00:28:38.960 | generating energy is effectively as cheap as it's ever been, and

00:28:42.720 | as close to zero as it ever has been, and it's only going to get

00:28:46.320 | cheaper. The problem that we have is that we have all of

00:28:49.800 | these decrepit laws and infrastructure and regulatory

00:28:52.400 | capture, that causes us to always be in an imbalance. And

00:28:56.600 | as a result, we do all kinds of crazy things. We borrow enormous

00:29:00.240 | amounts of money to create subsidies, we go and we fight

00:29:03.200 | all of these, you know, foreign wars that don't make any sense.

00:29:06.880 | We wrap the energy problem and set in climate change language

00:29:10.560 | would cause us this cultural division. But my belief, quite

00:29:14.120 | honestly, is that the reason the IRA was so important is as it is

00:29:18.040 | the most clarified piece of legislation we've seen, that

00:29:23.480 | essentially puts all forms of energy on a level playing field

00:29:26.120 | and has the chance to get America to permanent energy

00:29:29.320 | independence. And if the cost of energy is zero, and we can

00:29:32.920 | abundantly create it in the United States, what I think

00:29:35.800 | happens, David is we have energy to rebuild our supply chain much

00:29:39.160 | cheaper. So inflation gets under control, we don't borrow as

00:29:41.520 | much, we have a completely different lens on foreign

00:29:45.440 | policy, so that this interventionism and fighting over

00:29:48.480 | resources is much harder to justify. And we put the climate

00:29:53.720 | change language aside, and we use energy independence as a

00:29:57.600 | form of national security, which gives us the courage to battle

00:30:01.080 | all these other cultural taboos that we otherwise have to say we

00:30:04.560 | agree with, even if they don't necessarily make any sense. And

00:30:07.080 | there's a bunch of them. So I don't know my, my answer to your

00:30:11.040 | question, Jason, is that one thing, if we accomplish in the

00:30:14.960 | next five to 10 years, has a chance to really change the

00:30:18.680 | course of the United States.

00:30:19.880 | Right, and then so I'm guessing then Biden's your vote, because

00:30:23.640 | if it is in fact, Biden, because Biden is the one who pushed for

00:30:26.720 | these clean energy tax credits and this policy in it.

00:30:30.280 | Free, but you also cancel, you also cancel our energy

00:30:32.840 | independence. I mean, look, we were energy independent based on

00:30:35.640 | fracking, you may not like fracking, but it did get us

00:30:38.240 | energy independent. And you may think that there's environmental

00:30:41.320 | consequences to it that you don't like, and that has to be

00:30:44.160 | balanced. But we did have

00:30:45.840 | an against fracking, I believe in that gas, I believe in coal,

00:30:48.960 | actually, as a bridge fuel, I believe in all of these things.

00:30:51.360 | I believe that these are all more important than going off to

00:30:55.880 | all of these foreign lands, and trying to justify spending

00:30:59.040 | trillions of dollars and putting 10s of 1000s of American lives

00:31:02.120 | at risk, essentially for resources that we can actually

00:31:04.880 | create for ourselves at home.

00:31:06.480 | Well, I agree with you on that 100%.

00:31:08.200 | I'm fine with I mean, I'll tell you like clean fracking as a way

00:31:11.160 | as a bridge, go ahead to getting to, you know, more independence

00:31:14.600 | through nuclear and renewable scratch free birth,

00:31:16.840 | like I said before, China's declared that they're building

00:31:19.400 | 450 nuclear power plants, the net cost, effective cost of

00:31:23.120 | electricity production out of a nuclear power plant is somewhere

00:31:26.480 | between one and five cents per kilowatt hour, the US on average

00:31:29.840 | is paying 11 to 15 cents per kilowatt hour. Nuclear is just

00:31:34.240 | through utilities. So free bird that's with all the regulatory

00:31:36.880 | capture and all that crash that you have to spend, for example,

00:31:39.880 | we have to spend $220 billion a year to replace the power lines

00:31:43.920 | in America by law. That's $2.2 trillion just there.

00:31:47.000 | Right. And so the cost for solar and wind off grid, I think is

00:31:52.040 | around three to seven cents a kilowatt hour in that range,

00:31:54.480 | right. So it gets nowadays, it's gotten much more competitive.

00:31:57.440 | But I think that the nuclear solution is just not even being

00:32:03.240 | engaged in the conversation. Now, I want to go back to the

00:32:05.160 | previous point, which is because I didn't state the numbers

00:32:09.040 | before. So I just want to state them because they're so shocking.

00:32:11.640 | And this is what what shocks me. The current federal debt is $30

00:32:15.840 | trillion, our GDP is around 23 trillion 5% interest rates on

00:32:20.600 | $30 trillion is one and a half trillion dollars in interest

00:32:23.480 | payments alone every year. And our social security so one and a

00:32:28.280 | half trillion dollars. I mean, that alone is about 6% 7% of

00:32:33.480 | GDP. So you have to tax every transaction in the country by

00:32:37.000 | six or 7% just to pay the interest payments on the debt.

00:32:39.920 | And then we have Medicare and Social Security.

00:32:43.600 | That math is wrong. Because you have maturities of all different

00:32:47.680 | types with different yield to maturities and different coupons.

00:32:49.840 | That's it's not today's numbers. It's what's happening over time.

00:32:54.920 | So as you look out, and you look at the yield on treasuries, and

00:32:58.320 | you apply that to the current debt level, and the increment in

00:33:00.360 | the debt level, you'll get to that level, right, you'll get to

00:33:03.000 | a trillion five a year in interest payments that need to

00:33:06.080 | be made, plus another call it three, four or $5 trillion a

00:33:10.920 | year in mandatory spending. And so that's where the country

00:33:14.240 | starts to run into a problem. Because at some point when you

00:33:16.960 | have to tax so much to cover the cash payments that need to be

00:33:20.400 | made by the federal government, the economy really gets hurt,

00:33:23.600 | and things start to cripple. And then if you were to take those

00:33:26.080 | entitlements away, Social Security, Medicare, you have a

00:33:29.840 | real problem with people's ability to support themselves in

00:33:32.560 | an economy where they're not working. These are elderly

00:33:34.680 | retired people. So there is a need at work to pay these

00:33:37.880 | expensive medical bills. So there's a major crash coming if

00:33:41.800 | we don't figure out how to bridge our way to this gap. So

00:33:44.640 | if someone wants my vote, and they're going to run for

00:33:46.840 | president, they would put up a simple chart like Bill Clinton

00:33:49.560 | used to do, and show me a 10 to 30 year plan and just say,

00:33:52.440 | here's where we're headed. And here's what we're going to do to

00:33:54.600 | make sure that doesn't happen. And that chart alone, I think

00:33:57.880 | can win the vote.

00:33:58.560 | Okay, let's pull up the chart then. So here is the federal

00:34:01.200 | debt total public debt as a percentage of gross domestic

00:34:03.800 | product. As you can see, in the 70s and 80s, we were at under

00:34:08.000 | 50%. The 90s, we started, you know, growing, I don't think

00:34:11.480 | this matters. I think everybody, every self proclaimed

00:34:14.320 | intellectual looks at this chart and says, Oh, my God, we've

00:34:16.520 | exceeded 100%. You know, the the Empire is going to go to ruin.

00:34:21.120 | That's not why the Empire goes to ruin, we have the reserve

00:34:24.640 | currency of the of the world. And there's an enormous amount

00:34:28.040 | of power that comes from that position. So what the right

00:34:30.920 | number is, is TBD. That's the most honest way to think about

00:34:34.280 | it. It was 100. It's at 150. It could go to 200. Many countries

00:34:39.080 | operate at levels above us and still haven't imploded per se.

00:34:42.640 | The real thing is what part of what Friedberg said is, look, if

00:34:46.200 | you really want to look at what we pay, today, we pay $400

00:34:49.960 | billion this year, that's the interest payments, okay, that's

00:34:52.920 | when you calculate all of the different maturities we have,

00:34:55.720 | with all of the different coupons we have, that's what we

00:34:58.600 | owe today. And David is right, mathematically, that if interest

00:35:02.320 | rates go to 5%, and stay there forever, but we know that that's

00:35:05.680 | not how economies work, they ebb and flow. Okay. So the real

00:35:09.880 | problem that we have to understand is how do you

00:35:12.680 | actually create enough growth. And then the next time that we

00:35:16.120 | have a meaningful fall in interest rates, like every other

00:35:19.520 | person does, you know, look, a lot of people in America know

00:35:22.320 | how to refi their credit cards, refi their home loans, refi their

00:35:26.160 | mortgages, the United States could have had a much more

00:35:29.840 | aggressive and thoughtful strategy of refi by pushing out

00:35:32.640 | these maturities way into the future. And again, Trump

00:35:36.120 | actually suggested that but because he sounded like a

00:35:38.280 | goofball, everybody said absolutely no way. But in

00:35:41.960 | hindsight, that one move would have saved us trillions of

00:35:46.040 | dollars over the next decade if we had done it and this time

00:35:48.560 | around, we have to have politicians who are smart enough

00:35:51.520 | and have the wherewithal to say, it doesn't matter where this

00:35:54.120 | idea came from. It's really smart. rates are now back to 2%

00:35:58.360 | or one and a half percent. Let's now issue 50 and 100 year bonds.

00:36:01.760 | And let's refi this problem out into the future. That makes a

00:36:05.400 | ton of sense. And we have to do it.

00:36:06.640 | The refi makes a ton of sense. Just to pull up a chart here.

00:36:09.760 | And to counter your position there that it doesn't matter

00:36:15.240 | much a month. Maybe you can respond to if you look at GDP

00:36:19.760 | ratios here. Number one, two and three, Japan, Venezuela, Greece,

00:36:24.360 | Sudan. And, you know, you know, some smaller countries there,

00:36:28.720 | but United States currently, none of these countries, look,

00:36:32.240 | how would you respond to this entire world runs on the US

00:36:35.120 | dollar complex? Whenever we raise rates? Yes, it is true

00:36:38.880 | that on the one hand, our interest payments go up, but

00:36:43.080 | proportionately and on a relative basis, he I think maybe

00:36:46.080 | let me take a step back. Look, what are the most important

00:36:48.520 | things in investing, which is appropriate here is that people

00:36:53.120 | ask, what is the price of a stock? Well, before you go

00:36:56.000 | public, you're calculating what the intrinsic value of a company

00:36:59.720 | is, okay, all the things that they do all the money that they

00:37:02.400 | make, here's what we think it's theoretically work worth. But

00:37:06.360 | the minute it goes public, the intrinsic value no longer

00:37:09.720 | matters. It's what is it valued relative to everything else?

00:37:13.040 | Okay. The United States is a relative, if it's a stock, if

00:37:17.360 | all these countries are stocks, we are valued relatively to

00:37:20.840 | others, not not intrinsically. And the reason why we have so

00:37:25.560 | much power is because everybody else is actually valued relative

00:37:29.120 | to us. So this is why I think the right thing to look at Jason

00:37:33.640 | is the rate of change of debt to GDP for the entire g eight, or

00:37:38.480 | g 20, or the rest of the world. And what you'll see is something

00:37:41.240 | that goes up into the right, nobody in the world has been

00:37:45.360 | rewarded for not investing in their populations and bought and

00:37:48.480 | basically borrowing from tomorrow to invest in today's

00:37:51.680 | human capital. Okay, so we have a disagreement here. Freeberg,

00:37:54.160 | you think this is a major issue? Yeah, because I think it's

00:37:56.840 | manageable. Freeberg. Yeah. For I think there's two things that

00:38:00.040 | are missing. One is the inflationary effect. So you look

00:38:02.440 | at that list of countries that are there, they're paying higher

00:38:05.120 | interest, and they're paying in the form of inflation. So they

00:38:08.560 | have less that they can spend on their people. And ultimately,

00:38:11.440 | what ends up happening, it's just simple arithmetic, it's not

00:38:14.320 | about relative value of a currency. It's the arithmetic

00:38:17.560 | that we have a check we have to write every month to pay for

00:38:20.760 | Medicare and Social Security, and it is written into law, what

00:38:24.600 | that check needs to be. And the rate at which we're having to

00:38:27.480 | write those checks, the increment of those checks is

00:38:30.380 | going up so significantly that when you add on the interest

00:38:32.840 | payments, and you look at those checks, and then you add on

00:38:35.680 | defense, something's got to give because you cannot raise taxes

00:38:39.480 | in the amount that's needed to fund all of that outlay without

00:38:42.880 | this causing either number one, massive inflation, if you just

00:38:46.640 | take on more debt, or number two, you know, significant loss

00:38:50.720 | of services, either Social Security, Medicare or defense,

00:38:54.040 | and so something's going to give and the distribution I think is

00:38:56.920 | not being discussed.

00:38:57.680 | Sorry, just one just one point the President's budget, anybody

00:39:01.440 | who is a president of the United States gets hold of their annual

00:39:04.080 | budget, it's about five and a half trillion dollars this year.

00:39:06.720 | So you're talking about interest payments that are still less than

00:39:10.400 | 10% of their total budget. Now that includes the entitlement

00:39:12.720 | payments, okay, so about $3 billion, $3 trillion, sorry,

00:39:15.600 | three and a half trillion is what you have to pay for 20%. No,

00:39:19.840 | $3 trillion is the sum of Medicare and Social Security.

00:39:23.120 | Okay, so the President still has one and a half to $2 trillion

00:39:27.120 | of leeway, of which a quarter are debt payments. So my

00:39:31.480 | perspective, quite honestly, is mathematically, there's a lot of

00:39:33.640 | room to run here, before these things get really out of control.

00:39:36.960 | And even if they do, I think the relative problem is for the rest

00:39:40.720 | of the world will be so egregious, that the ability for

00:39:43.840 | the United States to go to those banks and those economies, and

00:39:47.440 | basically sell in more us debt is quite high, because they

00:39:51.560 | cannot afford to own debt in their own country. So if you

00:39:54.160 | think that the United States is bad, go back to that list. Guess

00:39:57.160 | what those central banks in those countries are going to be

00:39:59.080 | buying us dollars faster than they can go out of style,

00:40:02.040 | unless we see some union of India, China, Saudi Arabia,

00:40:07.920 | Russia, Japan, Brazil, obviously not Japan, but some some of that

00:40:12.680 | consortia will become a closer trading partner, and perhaps

00:40:16.680 | could cause a shift in the balance of the dominance of the

00:40:19.840 | US dollar. And that's one path to to consider.

00:40:22.720 | Saks, what do you think of the balance sheet here? Obviously,

00:40:25.320 | we have two opposing opinions here from Chamath and Freeberg.

00:40:27.920 | Where do you stand on the United States balance sheet? Are we

00:40:30.120 | over our skis?

00:40:31.120 | Yes, the balance sheet is a disaster. What are we at like

00:40:33.760 | 130% of debt to GDP? I mean, we have like 30. Yeah, it's not

00:40:39.960 | even stable. I mean, we can't spend 27% of GDP right now. 27%

00:40:44.560 | it should be 15%. Right. So the spending where does that number

00:40:47.680 | come from? Why? There's a there's a bunch of economists

00:40:50.560 | who have shared these papers. Morons, morons, morons, fake,

00:40:53.880 | fake.

00:40:54.880 | If you look at if you look at government tax receipts over

00:40:59.920 | time, with all different kinds of tax rates, including very,

00:41:03.000 | very different top marginal tax rates, what you see is that a

00:41:07.440 | federal tax receipts as a percentage of GDP is in the 17

00:41:10.760 | to 19% range. And like the best years you make 19% it's usually

00:41:15.040 | in a good economy. And in a bad economy, it's like 17%. And it

00:41:18.920 | really it doesn't matter whether Reagan was president or Clint

00:41:22.280 | Bill Clinton, and so on. So there's only so much blood you

00:41:25.400 | can get from a stone. And historically spending was around

00:41:29.160 | 19% of GDP. And so you would have a one or 2% you know,

00:41:35.680 | deficit every year. And that really accelerated first you had

00:41:39.160 | the financial crisis of 2008. And then you had COVID. And

00:41:42.760 | free works, right, you know, we we went from call it your 20% of

00:41:46.120 | GDP spending to roughly 30% or more during COVID as kind of

00:41:50.840 | this emergency measure. But like everything else in government,

00:41:53.840 | you know, the emergency measure becomes a permanent program. So

00:41:56.920 | now we're at 27%. It doesn't seem to be going down. And the

00:42:00.640 | Democrats want a lot more. I mean, we talked about it build

00:42:03.000 | back better would have been three and a half trillion,

00:42:05.120 | instead of 750 billion, if they just had one or two more votes.

00:42:08.920 | So hold on. So so free burgers, right? There's like nothing

00:42:13.840 | stable about the point we're at. It's the point we're at is bad

00:42:17.240 | on its own terms, having 30 trillion of debt, let's say that

00:42:20.800 | interest rates stabilize at 3%. That's still a trillion a year

00:42:25.080 | of debt service, which is more than not a trillion. If interest

00:42:29.840 | rates stabilize at 3%, which is optimistic, and we're servicing

00:42:32.960 | a trillion, sorry, 30 trillion of debt, that's roughly a

00:42:36.200 | billion dollars a year of debt service payments. That could be

00:42:38.720 | spent on other things. Guys keep saying billion when it's a

00:42:42.080 | trillion.

00:42:42.440 | The average yield to maturity needs to be factored in there.

00:42:45.840 | So over a 15 year period, David, you would be right

00:42:48.880 | mathematically, if all matured, but that's not what this is,

00:42:52.080 | because you rear you'd have to refi and reissue a bunch of debt

00:42:55.600 | that is at lower yield right now at these interest rates. I want

00:42:58.880 | to be clear.

00:42:59.400 | I'm not sure how any of this is good. I mean, remember,

00:43:01.880 | I understand.

00:43:03.400 | Let your mouth say why I'm good or not.

00:43:06.080 | I'm not saying that this is a good or it's a trend. What I'm

00:43:09.480 | saying is I have this issue that all of a sudden people make up

00:43:13.640 | and you guys are doing it now. An arbitrary number with no

00:43:17.960 | rooting in history or fact and say this is bad. And all I'm

00:43:21.560 | saying is, I know it feels bad to us. And I think we would all

00:43:24.080 | run this country differently. If we could control the balance

00:43:26.760 | sheet, I would as well. I would try to get debt way way down, I

00:43:30.040 | would try to get deficits way way down. But all I'm saying is

00:43:33.080 | using this justification of an arbitrary number always falls

00:43:36.880 | flat. So I'm encouraging us all. Let's find a better model of

00:43:40.720 | reasoning. Because every time we point to some Randall's book

00:43:43.880 | and say 127% is bad. Nobody listens. And I think the

00:43:47.960 | message that you should take away is is because it's

00:43:49.800 | imprecise, and it's not rooted in any actual logic. And if

00:43:53.240 | there's a better building, the reason I believe that this is

00:43:55.760 | concerning is, I look at the top 10 countries that have, you

00:43:59.960 | know, debt ratios that seem out of whack. And I think, wow, what

00:44:02.760 | is their fortune been for the last 10 years vis a vis Japan

00:44:05.800 | and Venezuela, the right comparison, the right comparison.

00:44:08.040 | Okay, well, I can say, look at the British Empire. And when and

00:44:12.560 | what was the debt to GDP when it started to actually fall off?

00:44:15.040 | Does anybody know?

00:44:16.880 | I know. No, I'm saying okay, was it triggered? Was it triggered

00:44:20.760 | by debt to GDP? And I think your answer will be in part. I can

00:44:25.520 | ruin us. They took on ruinous debt, and they couldn't maintain

00:44:28.920 | their empire anymore. And the whole thing collapsed. I'm just

00:44:30.960 | asking for some numerical specificity.

00:44:33.400 | Right?

00:44:34.960 | The last time there was a lot of numerical specificity. There is

00:44:41.080 | a ton of work that's been done on why does the word pulling

00:44:43.480 | shit out of their ass? So tell us that it's historically the

00:44:47.200 | best way to manage the growth in a in a in a country is to have

00:44:51.520 | deficit spending be equal to or less than the growth rate of the

00:44:55.200 | economy of that country. So for example, if your income, the tax

00:44:59.600 | revenue that's being generated by the government is equal to

00:45:02.080 | say 15% of GDP, you do not want your spending to be more than

00:45:06.520 | 17 or 18%. If the economic growth rate is two to 3%. That's

00:45:10.400 | it. If you do anything more than what happens? No, if you

00:45:13.400 | do anything more than that you're borrowing from the

00:45:15.200 | future to pay for today. That's the simple truth. Okay, so what

00:45:18.600 | happens? And when you do that, the rates go up and the prices

00:45:21.560 | go up and eventually your currency doesn't work. So you're

00:45:26.080 | making a bet. Read the book that I talked about last year, the

00:45:29.200 | most recent Ray Dalio book, he goes through six stories with

00:45:33.080 | the economic data to prove it the factual data, the history of

00:45:36.560 | what's happened with six empires over the last 500 years, where

00:45:39.640 | this exact same scenario has played out. This isn't some

00:45:42.360 | random arbitrary story. I read that book. And everyone in that

00:45:45.640 | everyone had the exact same perspective that you have when

00:45:48.320 | they were living in those days. And they said, You know what,

00:45:50.440 | we're gonna be okay, because we're the reserve currency can

00:45:52.600 | and the world loves us. And we're the empire and we have

00:45:54.360 | influence everywhere. And they all lost primacy and their

00:45:57.120 | currencies collapsed. And they all broke apart. And I'm not

00:45:59.840 | saying that that can't happen in America. What I'm saying is, you

00:46:02.720 | get so full throated. I read that book. It's great narrative,

00:46:05.960 | but the numbers are brittle. Okay, they're fragile, and

00:46:09.120 | they're mostly made up. Okay, so read it. So all I'm saying is,

00:46:14.600 | in the absence in the absence of numerical specificity, I agree

00:46:18.760 | with you that this trend is alarming, and it's bad. I agree

00:46:21.600 | with you. And I agree that we should spend a lot less. What

00:46:24.400 | I'm saying is when you say to the world, stop spending because

00:46:28.520 | XYZ number is bad. You have no credibility because it's not

00:46:32.640 | something that you can actually back up. And all I'm saying is,

00:46:36.720 | if you could find a better logical argument, you would

00:46:39.560 | probably get a lot more people to you can show it to you're

00:46:42.920 | just being ignorant. You're ignoring it. You're saying you

00:46:44.720 | don't want to actually believe it. The numbers are there. I'm

00:46:48.680 | not saying ignorant a disparaging way. I'm saying

00:46:50.400 | you're literally just ignoring the show. Show me the numbers.

00:46:53.600 | Show it to me.

00:46:54.600 | They get upset at us for fighting.

00:46:57.600 | I'll make you a PDF. I'll send it to you tonight. I promise.

00:47:00.680 | And I'll post it on our friggin things that people can watch it.

00:47:03.280 | All right. Listen, the the group chat is going to be on fire this

00:47:05.760 | weekend. Sacks final word for you.

00:47:07.200 | Okay, final word. Okay,

00:47:08.400 | final, please.

00:47:09.240 | do it before like this, but

00:47:12.000 | opposite sides. I think it's great. I still respect and love

00:47:16.680 | each other.

00:47:17.080 | If you go back in history and look at jet debt to GDP levels,

00:47:21.000 | the only other time where anything remotely like the level

00:47:24.200 | we're at right now is right after World War Two, when we had

00:47:27.240 | just saved the world from Nazism. Okay, that was worth

00:47:30.720 | going into debt for you look today, what is it that we've

00:47:33.840 | gotten into this 130% debt to GDP? What is this $30 trillion

00:47:37.720 | of debt for? What have we bought with all that money? Huge

00:47:40.760 | amounts of it have been squandered. You're right. And

00:47:43.000 | Biden wanted more if the courts didn't stop him. He would have

00:47:46.000 | spent a trillion.

00:47:46.840 | For giving a bunch of student loans for basket. Your degrees

00:47:51.480 | are liberal studies or whatever.

00:47:52.600 | Graduate degrees at Brown.

00:47:56.720 | Let me finish the point number one is that this money is being

00:48:00.080 | squandered at levels we've never seen before. And the

00:48:03.520 | squandering is continuing. It's not like we've reached a steady

00:48:05.720 | state. It just keeps going and going. And it goes on. I can't

00:48:09.840 | precisely saw it. So again, I can't precisely say when it's

00:48:12.680 | going to break, but I do know it's going to break. The other

00:48:15.480 | thing, point number two, is about consequences today, there

00:48:19.640 | is a phenomenon economists call crowding out, where when

00:48:24.200 | interest rates go up, more and more money flows into the risk

00:48:28.320 | free rate of return. And then that crowds out investment

00:48:31.880 | capital. And we've talked about it on the last pod where if the

00:48:35.680 | risk free rate is 5%, and then like high quality corporate

00:48:39.160 | bonds are offering eight to 10%. Now equity investments must

00:48:42.640 | generate 15%. And VC must generate 20%. And there are very

00:48:47.560 | few VC investments that can generate that kind of IRR. So

00:48:50.760 | what happens, the money flows out of VC, and there's less

00:48:53.640 | money for risk capital, what drives our economy risk taking

00:48:56.960 | data on for North ship. So hold on a second. So this massive

00:49:00.920 | debt service that we have, which drives up interest rates will

00:49:03.880 | crowd out the very kind of economic activity that the

00:49:07.080 | United States needs to stay on the cutting edge.

00:49:09.920 | Chama rebuttal, rebuttal to the rebuttal to the rebuttal. No,

00:49:12.960 | you're so right. So why don't you just bookend the argument

00:49:16.240 | exactly the way you just did. My point is not that you said it

00:49:19.560 | just before that we don't know at what upper bound these things

00:49:22.880 | break or don't break. And all I'm saying is every time you

00:49:24.800 | throw up a random number, you guys sound like the boy who

00:49:27.560 | cries wolf, okay, and you're shouting into a vacuum is, is

00:49:30.800 | just the as the advice that I'm trying to give you guys, I agree

00:49:33.560 | with you. I spend my entire days investing in and trying to

00:49:37.880 | figure out what is the risk adjusted rate of return of the

00:49:40.600 | things that I'm doing. And I'm trying to tell you as somebody

00:49:43.080 | with some reasonable financial numeracy, every time I hear you

00:49:46.440 | or Ray Dalio or somebody else say, this number is where it

00:49:49.680 | all breaks, and it doesn't, you lose a little bit of

00:49:52.120 | credibility, then you go to this number, and you're like, Oh, at

00:49:54.560 | 127. We get your point.

00:49:56.280 | No, let me put it back. How much is too much? How much debt can

00:50:03.680 | we handle? And how much spending as a percentage GDP? Should we

00:50:06.240 | handle? What is the limit in your mind? And how do you decide

00:50:11.600 | what that limit can or should be?

00:50:12.960 | I think the honest answer is every time that I have been

00:50:16.000 | alarmed that we had hit a threshold that was meaningful.

00:50:19.320 | So for example, like I think under Obama, we passed 100. And

00:50:22.760 | it felt very scary, because I was like, wow, that seems like a

00:50:25.840 | demarcation. It turned out to not be a demarcation at all.

00:50:29.440 | Because it's relative to every other country and what they're

00:50:33.200 | going through. And I understand that you don't want to believe

00:50:35.640 | that. But I do think that America's economic vitality is

00:50:39.680 | not an independent function, it is a dependent function on

00:50:43.120 | everybody else, we are relative to everybody else, if there's a

00:50:46.280 | different cosmos and a different planet somewhere, maybe this

00:50:49.840 | will all reset. But right now it's not. And so we all trade

00:50:52.840 | relative to the United States. And in as much, I would like to

00:50:57.160 | just say, I don't know enough to guess what this number is. And

00:51:00.120 | I'd rather focus on what David said, which is, there are things

00:51:04.080 | that we need to do that we need to incentivize people to invest

00:51:08.760 | in extreme risk taking that create new businesses that move

00:51:12.360 | the world forward. You can have that conversation without belly

00:51:16.560 | aching and crying to mommy about a GD debt to GDP number because

00:51:19.600 | every time you throw it out there, nobody knows what you're

00:51:22.320 | talking about. Nobody knows what reaction to have. And everybody

00:51:25.720 | feels over time, David Friedberg that you're crying wolf. So all

00:51:29.000 | I'm saying is, I get that it's concerning to you. And it

00:51:31.520 | creates anxiety. But every time you and you probably this is not

00:51:34.560 | the first time you've had anxiety, you probably had

00:51:36.120 | anxiety at 5075 100125. Guess what, I bet you'll have anxiety

00:51:41.000 | at 150. I don't know what it means. I do know what sacks

00:51:44.400 | means, though, which is that right now we have a risk free

00:51:47.000 | rate that's going to five, we have corporate bonds, it'll be

00:51:50.120 | a 10. We have equity investing, the most risk taking, which is

00:51:54.920 | the early stage venture that has to return 25. And that is an

00:51:58.320 | incredibly high bar. But we need to do it. And we need to do

00:52:02.480 | maybe fewer investments, quite honestly, with fewer

00:52:06.080 | participants, with less dollars that are more effectively put to

00:52:09.680 | work, okay, maybe this is a good jumping off point to talk about

00:52:12.320 | all the waste in Silicon Valley. And that stuff can happen

00:52:15.720 | without debating incessantly, this debt to GDP number.

00:52:19.000 | All right, freeberg sacks, and then we're gonna move. Go. I

00:52:25.640 | agree. I've never had anxiety about debt to GDP. It's never

00:52:29.320 | been anything on my radar. The conversation I'm trying to have

00:52:32.120 | today is the amount of spending the federal spending, including

00:52:36.160 | interest payments, as a percent of the GDP as a percent of how

00:52:39.480 | much we can tax to pay all those to make all those payments every

00:52:42.760 | year. And so what I'm concerned about is the ballooning cost of

00:52:46.600 | paying out all the obligations the federal government has to say

00:52:49.440 | something different than what you were just saying that if you

00:52:51.680 | were cared about only that, then refinancing the debt is an

00:52:54.720 | equally valid proposition and changing the duration expense.

00:52:57.800 | It's not the only expense. So interest payments are ballooning.

00:53:00.760 | In addition to interest payments, Social Security and

00:53:03.000 | Medicare payments are also ballooning and defense out of

00:53:05.800 | control spending. Everybody has their hand out. Everybody wants

00:53:09.080 | an air drop those four big categories together. You don't

00:53:12.240 | have any room left.

00:53:13.160 | You're talking about discipline in spending in defense. Great. I

00:53:18.600 | agree. You're talking about discipline and capping health

00:53:21.080 | care costs. Great. I agree. What does that have to do with this

00:53:24.280 | other orthogonal thing you've been talking about, which is

00:53:26.840 | this random number that the GDP it doesn't

00:53:29.960 | let's move on from that discussion.

00:53:32.520 | One final point that we can move on. So so look, I think time for

00:53:35.920 | the final point. Go. It's important discussion. Apparently

00:53:39.160 | luck in the in the interest of bestie harmony. I will partially

00:53:43.080 | agree with the point that your mouth is making, which is that

00:53:45.960 | for a long time in American politics, people have sort of

00:53:49.040 | cried wolf about debt to GDP. For example, if you remember way

00:53:53.080 | back in 1992, Ross Perot, basically based his candidacy on

00:53:57.800 | the idea that the US was racking up way too much debt. You know

00:54:01.880 | what debt to GDP was in 1992? 41%. Okay, so people used to care

00:54:07.720 | a lot about this. I remember when Reagan was president and

00:54:09.960 | jet to GP was 30%. People were saying that he was this like,

00:54:13.360 | you know, wild spender, okay. But I think that precisely

00:54:17.360 | because nothing broke at 3040 80% 100%, you then had the rise

00:54:23.400 | of this theory called MMT or modern monetary theory, which

00:54:26.840 | said that the debt to GDP debts don't matter. If you're the

00:54:29.720 | reserve currency, you can print as much money as you want. And

00:54:32.800 | so people started indulging in this. And so now I actually

00:54:35.920 | think we are at a point I can't say precisely where it breaks.

00:54:39.080 | But I do think that because debt to GDP didn't seem to matter for

00:54:44.560 | so long, I actually think we got carried away. And now we're at

00:54:48.160 | levels which are just going to be ruinous, if for no other

00:54:52.280 | reason than our debt service is going to crowd out. Whether you

00:54:56.760 | want more guns or more butter in our federal budget, if you want

00:54:59.920 | more defense spending, you want more entitlements, you want more

00:55:02.320 | discretionary spending, there's no question that debt service is

00:55:06.160 | getting bigger and bigger is going to crowd out those

00:55:07.960 | programs. There's no question we need to spend less. I 100% agree

00:55:11.440 | with you. Okay. But all I'm saying is, we should spend less

00:55:14.680 | on defense because we have different ways of defending

00:55:17.360 | ourselves. That should be the logical argument for less

00:55:20.120 | energy independence is defense and a balanced budget could be

00:55:23.840 | defense as well. If you look at the IRA, that was less than a

00:55:26.960 | trillion dollars over a decade. Okay, that has the potential to

00:55:31.240 | shift trillions of dollars a year in defense spending. Yes.

00:55:35.400 | Okay, okay. So let me wrap. Okay, let me wrap here for a

00:55:38.560 | second. Thank you. You can look at these bills in and of

00:55:42.200 | themselves, and try to actually do the right thing. Without

00:55:46.840 | wrapping up all of these random arguments. And I by the way,

00:55:49.840 | just be clear. I don't believe in it. Don't do it. Don't do it.

00:55:53.440 | The world's worst moderator. Come on.

00:55:55.400 | Actually, during the Obama presidency, we had a thing

00:56:00.720 | called the sequester. I don't know if you guys remember this.

00:56:02.920 | Yeah, Republicans and Democrats agreed that basically that

00:56:08.120 | because we had just had like these trillion dollar deficits

00:56:11.880 | because of the 2008 global financial crisis, they got

00:56:15.360 | together and said, Listen, we're going to hold the line on

00:56:17.640 | spending. And there'll be no increase on defense spending in

00:56:21.160 | exchange for no increase in discretionary spending social

00:56:25.120 | programs. And for a few years, we held the line on spending

00:56:29.280 | actually. And then of course, both Democrats, Republicans

00:56:31.680 | didn't want that for different reasons. And the sequester went

00:56:34.600 | away. We need to go back to something like that.

00:56:36.920 | There are two things.

00:56:37.840 | One one detail, like when you go and send a bill, so look, the

00:56:42.040 | way you pass a bill, right, you have to send it to the CBO to

00:56:44.240 | get scored. One of the things that I learned this week is that

00:56:47.360 | sometimes the CBO and they're not really empowered to actually

00:56:50.840 | tell you how things get offset. So for example, like if you have

00:56:54.320 | a medicine, what they will do is say, well, we'll look at at the

00:56:58.480 | population level, how much would this medicine cost if it's taken

00:57:02.560 | by the population. But if that medicine then all of a sudden

00:57:05.680 | has the potential to actually off ramp you over here, those

00:57:10.160 | savings are not really factored in as well. So David, to your

00:57:14.040 | point, another way that we can refine how we build budgets to

00:57:17.160 | make sure that we're not overspending is to actually

00:57:19.840 | improve the toolkit and the data that like the CBO is given so

00:57:23.240 | that when they score things, they can actually look at the

00:57:25.760 | total impact like for example, like the IRA. Again, one of the

00:57:29.640 | biggest benefits will be to defend spending. If we choose to

00:57:32.120 | make those cuts, you will be able to do it differently once

00:57:35.560 | we have, you know, no reliance on foreign energy.

00:57:38.120 | Okay, to wrap this segment, the first segment, which took 57

00:57:41.920 | minutes, it's obviously really well, I think it's an important

00:57:45.120 | discussion. Hey, Jake, how would you vote for a dissenters to be

00:57:47.440 | promises fiscal responsibility? Well, here's the thing, I am

00:57:50.840 | going to take a look at the candidates, I'm going to make

00:57:52.960 | the best decision in terms of what I think is that I'm

00:57:56.280 | answering like you're giving no answer is this. Yeah, it depends

00:58:01.760 | on if the Santa's gives you everything you want a fiscal

00:58:04.000 | policy. Why wouldn't you vote for him? If he stays out if he

00:58:07.680 | if he's in favor of a woman's right to choose for the first 15

00:58:10.880 | weeks, that's Florida policy. Are you Yes. You know, I would

00:58:14.720 | take a look. I would take a look. I honestly would like not

00:58:17.640 | to vote for him 15 weeks right to choose, combined with fiscal

00:58:21.560 | responsibility. I I'm voting for a moderate this time. And tax

00:58:28.800 | cuts. Okay, but to wrap up here, the two things that matter, I

00:58:32.520 | believe, and based on our panels discussion, austerity and

00:58:35.760 | excellence are what are going to get us out of this mess. Here's

00:58:38.480 | what the platform seems to be shaping up our 2024 platform

00:58:41.760 | control spending. Everybody here thinks that's important. Energy

00:58:45.040 | independence, everybody here thinks that's super important.

00:58:47.440 | Stop fighting unnecessary wars, and maybe rethinking our foreign

00:58:51.520 | policy. I think we all agree on that. And the cultural focus on

00:58:55.920 | excellence, not excess. This is shaping up to be a little bit of

00:59:00.120 | an all in platform here. Great discussion, everybody. Speaking

00:59:04.000 | of austerity measures, I think, you know, we should just talk

00:59:07.160 | right, right up top here about what's going on at Google. Chris

00:59:10.520 | hone, I believe is how you pronounce his name. Chris own,

00:59:13.960 | he sent a letter to Google and Amazon, Amazon today, after

00:59:18.080 | already announcing 10,000 layoffs. They just said again,

00:59:21.360 | and he said, prepare for more layoffs in 2023. And these are

00:59:25.120 | not factory workers. These are white collar, high paying jobs

00:59:29.840 | that are being laid off here. There's surplus elites, plus

00:59:34.360 | elites. It is definitely a part of the zeitgeist right now. So

00:59:38.800 | they're going to reduce headcount massively. But in this

00:59:41.600 | letter to shareholders, he points out, notably, not just

00:59:45.920 | hey, Google needs to do a riff a reduction in force. But he

00:59:49.040 | points out a more granular point that I want the panel to talk

00:59:52.440 | about here, which is, he says, Hey, you need to reduce the

00:59:55.480 | actual salaries at Google, the average salary being $296,000 67%

01:00:02.680 | higher than an incredibly well paying workforce, Microsoft

01:00:07.520 | quote, we acknowledge that alphabet employs some of the

01:00:10.120 | most talented and brightest computer scientists and

01:00:12.000 | engineers. But these represent only a fraction of the employee

01:00:15.240 | base, many employees are performing general sales

01:00:17.720 | marketing and administrative jobs, who should be compensated

01:00:20.400 | in line with other technology companies. And he says we need

01:00:24.400 | to establish an EBITDA margin target, as you can see in this

01:00:28.960 | chart, and reduce the losses on other bets, perhaps increasing

01:00:33.320 | share buybacks as well. So what we're looking at here. Now after

01:00:37.840 | what an incredible business, my god, I mean, the business is

01:00:40.880 | nuts. freeberg, you worked there, what in this rings true

01:00:45.160 | to you? Or not? And then how many people does Google need to

01:00:52.040 | employ to operate the business and invest in the future of the

01:00:56.640 | business in your mind, they have 187,000 employees at Google.

01:01:02.560 | It's grown 24.5% rounded up 25% year over year, they grew 25%

01:01:10.240 | year over year in their business. How many people need

01:01:13.920 | to run this business to have it aggressively grow?

01:01:16.160 | Look, I think there are two main drivers of the issue that

01:01:23.200 | Google maybe meta, maybe Twitter, prior to Elon's

01:01:27.760 | involvement, and really Silicon Valley as a whole, the bigger

01:01:32.280 | companies have faced the first is the war for talent. The war

01:01:36.400 | for talent started, I mentioned this last time around 2004 2005.

01:01:41.200 | Because prior to that, there weren't as many grads coming out

01:01:44.600 | of undergrad with computer science degrees, right? I think

01:01:47.880 | 10% of grads in the Bay Area schools were finishing with

01:01:51.280 | computer science degrees. Today, the numbers like 60%. So you

01:01:55.360 | know, around that time, the war for talent led organizations,

01:01:58.520 | particularly Google down a path of offering more perks and

01:02:02.600 | benefits to their employees to create a workplace that was more

01:02:05.480 | competitive. And that ends up being a slippery slope, because

01:02:09.400 | then other organizations try and find parity, and then other

01:02:12.160 | organizations try and overdo it and push it even further. So

01:02:15.080 | this leads to both wage inflation across the, the

01:02:19.760 | but it's also led to almost like the acceptance or the allowance

01:02:28.040 | for degrees of complacency. And so I'm not saying that the

01:02:31.640 | workforce is all complacent. But I do think that complacency is

01:02:35.800 | forgiven some amount of complacency, I'm going to take a

01:02:38.520 | Friday off, I'm going to take two Fridays off, all of a sudden

01:02:41.360 | I'm not working any Fridays. The other thing that's happened is

01:02:43.920 | as this workforce has aged. I worked at Google 20 years ago.

01:02:48.160 | And a lot of the folks I work with almost all of them now have

01:02:52.000 | families at the time, everyone was young. And as the

01:02:55.120 | demographics of Silicon Valley has matured, you have more

01:02:58.720 | people that are less about killing themselves and giving

01:03:01.800 | everything that they have to their organization. And they're

01:03:04.320 | more interested in being with their families and now spending

01:03:07.320 | less time at work, especially in light of the fact that

01:03:10.440 | compensation has ballooned to a point that you can now live a

01:03:13.000 | very, very comfortable lifestyle. And you don't need to

01:03:15.360 | have a big payday in order to be able to take really good care of

01:03:18.160 | your family, which was the case as a startup. And then the other

01:03:20.880 | issue is just one of innovation. At Google, if you work on a new

01:03:24.720 | project, and it doesn't work, there's no loss, you still have

01:03:28.360 | your job. And they've started programs, or they'll give you

01:03:30.960 | equity and new startup ideas, or they'll give you all this stuff.

01:03:33.520 | So they'll give you upside if you win, they'll give you bonuses

01:03:36.160 | if it succeeds, but there's no downside. And so the pain and the

01:03:39.680 | burn that you would feel as a startup founder, or as someone

01:03:42.320 | building a new business isn't experienced or realized. And I

01:03:45.400 | cannot I don't need to tell you guys this. But for anyone else

01:03:48.120 | that's listening that may not really be fully aware, the lack

01:03:51.120 | of pain, the lack of risk, the lack of downside, the lack of

01:03:54.360 | having no safety net and, and falling through the pits removes

01:03:59.200 | all so much of the incentive to succeed, and to drive and to

01:04:03.040 | innovate. And I think that's become part of the complacency

01:04:05.820 | problem. That's caused larger organizations to simply say,

01:04:09.360 | let's throw more heads at the problem. And when you just throw

01:04:11.600 | more heads at the problem, you have more of kind of talent war

01:04:14.400 | problem that I mentioned number one,

01:04:16.160 | what is the average salary? 280,000 300,000 rounded up.

01:04:19.840 | That doesn't cloud I don't know if that includes benefits,

01:04:23.200 | whatever, let's just call it 300,000. Yeah.

01:04:24.720 | And by the way, that doesn't mean that those people should

01:04:27.680 | all get fired. But I know it speak it speaks to the fact I

01:04:30.940 | think they're wonderful people. They're some of my best friends

01:04:33.020 | work at Google. It's a great organization. People do

01:04:35.600 | incredible work there. But in terms of return of dollars

01:04:38.780 | invested as a shareholder, that's the question. That's the

01:04:42.040 | that's the analysis. That's the scope that the shareholder is

01:04:44.800 | looking at is do I want to spend $1 to make $1 five? Or do I only

01:04:49.560 | want to spend $1 where I know I'm going to get $1 80 back. And

01:04:52.520 | so if you just bucketed where the dollars are going, you would

01:04:55.760 | end up saying you know what, I'd rather just focus on the places

01:04:58.800 | where I spend $1 and I get $2 back or $1 80 back. And I don't

01:05:01.720 | want to do any of the stuff where I spend $1 make $1 five

01:05:03.720 | back. And that's called ROIC or return on invested capital. And

01:05:07.600 | that includes return on invested human capital. And so the

01:05:10.780 | analyst in the stock that that's an investor in the stock will

01:05:13.760 | look at it through that lens. Whereas everyone that's working

01:05:16.760 | there is still contributing meaningfully, they're still

01:05:18.880 | doing valuable work. But in terms of return on invested

01:05:21.600 | capital, a good chunk of the projects are not driving the

01:05:25.240 | majority of the value a minority of the projects and minority of

01:05:27.920 | the headcount is driving almost all the value.

01:05:30.000 | I mean, if you sensitize that to what you said, David, a, if it

01:05:35.320 | was just 75, or a half that number, then you know, the stock

01:05:39.840 | goes up 35% overnight. And if it goes up to the full number,

01:05:43.320 | yep, the stock goes up 65% overnight.

01:05:48.520 | I think that's totally feasible. And then and then I think what

01:05:52.000 | you do is you take $10 billion a year, and you have a high

01:05:55.280 | accountability model that you speak to the street about. And

01:05:57.960 | you say, here's how we're going to hold ourselves accountable to

01:06:00.080 | investing this $10 billion every year, and not just have

01:06:02.760 | everything be a nebulous 15 year project. And then it's always a

01:06:06.080 | 15 year project. And you're always just burning cash to go

01:06:09.000 | after those projects that are highly nebulous.

01:06:10.720 | If you had to steel man the other side, I think the

01:06:13.520 | argument would be I would say they would make probably three

01:06:18.440 | arguments. argument number one is like, Look, don't get overly

01:06:21.920 | distracted by other bets, because it's a small category of

01:06:24.840 | spend. And we've contained that cost pretty rationally, relative

01:06:29.400 | to the rest of the core business. The second thing that

01:06:32.120 | they would probably say is, there's an enormous amount of

01:06:35.040 | work that is never seen by Wall Street that explains how good

01:06:39.280 | our services, whether that's, you know, in early iterations of,

01:06:43.640 | you know, technical capability, like GFS and Big Table to things

01:06:47.200 | like TPU, two things like TensorFlow. And all of that

01:06:50.800 | builds up all the things that DeepMind does all the compute we

01:06:54.640 | have to throw against search to support that. So I think they

01:06:57.880 | would probably say, well, people probably don't have a great

01:07:00.000 | sense of today, that it's not just 25% of the team that's

01:07:04.120 | required. And then the third thing is what they would

01:07:06.400 | probably say is, it's very hard to explain, but Google has all

01:07:10.320 | kinds of other things that they do for free, to create the

01:07:14.120 | ecosystem so that the internet works well. You know, I heard

01:07:17.280 | this one thing where somebody was explaining that Google is

01:07:20.880 | like, you know, the DNS server, right? Google is the time server

01:07:24.280 | and all of this stuff they do for free. And all of it is just

01:07:27.320 | about making the internet work more efficiently. And that has

01:07:29.520 | some cost. So that's probably how they would steel man how to

01:07:33.240 | build back up to some number. But it's probably there's still

01:07:36.560 | a gap between that number, David and what the prevailing head

01:07:38.800 | count is.

01:07:39.320 | Yeah, I think I think that's, that's totally true. Because the

01:07:42.560 | infrastructure team led by ours is the most remarkable

01:07:45.640 | engineering organization on planet Earth, in my opinion. And

01:07:48.800 | they have laid fiber lines across the Atlantic, they have

01:07:52.560 | built their own data center infrastructure, their own

01:07:55.160 | switches, their own silicon, like everything is built by this

01:07:59.160 | team from the ground up from first principles, and it gives

01:08:01.560 | extraordinary moats and advantages to the business, it

01:08:04.240 | makes the internet a better place, it allows, you know,

01:08:06.560 | ultra fast, super cheap YouTube video viewing across the

01:08:09.440 | internet. I mean, there's just so much of these core advantages

01:08:12.520 | in the business. But if you look at the headcount over time, you

01:08:15.680 | have to ask yourself the question, you know, how many of

01:08:18.720 | these investments that are core are really, you know, captured

01:08:22.920 | in the headcount that blossomed from 2013 47,000 people so that

01:08:28.080 | the business has gone up in headcount by Forex. In the last

01:08:32.120 | nine years, one of the things that Jeff Bezos was always so

01:08:34.720 | incredible at, and I saw him give a speech on this at one

01:08:37.320 | point, Bezos gave a speech that I saw and he said, we are really

01:08:40.840 | good at failing. And he showed all these projects that Amazon

01:08:44.480 | tried. And he said, we tried a nine, we tried to do our own

01:08:47.400 | search, we tried to build our own cell phone, the fire phone,

01:08:50.040 | we tried to do this, we tried to do that. When they don't work,

01:08:53.640 | we kill them. And when they did work, they became 100 multi

01:08:57.040 | hundred billion dollar enterprise value creators for

01:08:58.960 | them, like AWS, which was one of these projects. And so Amazon

01:09:03.040 | was so good at taking the stuff that wasn't working, knowing

01:09:06.760 | when it wasn't working and ending it, and they were still

01:09:09.080 | able to drive an innovation engine. One of the challenges I

01:09:11.960 | see with alphabet is that they are so good at bringing the best

01:09:15.240 | talent to work on these innovation problems. But where

01:09:17.480 | they're not good is saying, you know what, this isn't working,

01:09:20.080 | it's time to move on. And if they did just that, if they

01:09:23.040 | added that one disciplinary capability, then I think this,

01:09:26.280 | as you said, the market cap would go up by $600 billion.

01:09:28.920 | What about this? I just want your reaction to this thing that

01:09:32.720 | a lot of people whisper in Silicon Valley, which is part of

01:09:35.800 | what the big companies should do. It's part of the positive

01:09:38.600 | game theory is to not let these talented people actually leave,

01:09:42.920 | it's better to pay them 300,000 or 200,000 or whatever, and stay

01:09:46.360 | at Microsoft and meta. And Google or whatnot, then go off

01:09:51.080 | and start up, build a startup that could actually then disrupt

01:09:54.440 | them. And so you know, it's it's a cost worth bearing, because

01:09:57.960 | it's actually mitigating strategy as it's called

01:09:59.960 | strategy. Yeah. But you think about that super, super

01:10:02.520 | interesting idea. I think that the people that are likely going

01:10:07.320 | to actually be able to execute on that are going to leave and

01:10:09.920 | do it anyway. Right? They're surely aggressive

01:10:13.520 | entrepreneurs are not going to be

01:10:14.840 | look, I was not super I had made a little money when I worked at

01:10:18.160 | Google. But I was not super wealthy. And I left the last the

01:10:21.440 | vast majority of my stock options and RSUs on the table

01:10:25.160 | when I left Google in 2006. Here's our climate core, because

01:10:28.120 | I could not help but do that. I could not help myself. I had to

01:10:31.520 | go do that thing. Of course, I think the kinds of people that

01:10:33.840 | are going to succeed in entrepreneurism cannot help

01:10:36.880 | themselves. It doesn't matter how much money is being thrown

01:10:39.520 | at them. Here's the chart. Basically, these companies have

01:10:42.200 | been correlating their spend and their headcount to their

01:10:45.720 | revenue, not what's necessary. You look at alphabet total

01:10:49.280 | employee change since 2018 95.36%. I mean, I don't know that

01:10:54.120 | looks pretty good to revenue. 132%. It doesn't look like they

01:11:00.560 | were massively overhiring if you ask me. Totally. Totally. So

01:11:03.920 | what are you guys talking about? So maybe I'm wrong. I will say

01:11:07.080 | look, a big part of Larry pages decision to shift the company

01:11:11.520 | from Google to alphabet was he believed that the core business

01:11:14.560 | at some point would ultimately be disrupted that the core

01:11:16.920 | advertising engine was going to be disrupted. And there wasn't

01:11:20.160 | going to be the sustaining long term growth advantage in that

01:11:22.480 | business. Maybe he's been disproven. Or maybe the it

01:11:25.000 | hasn't been just it hasn't been proven yet. But the concept was

01:11:28.280 | we need to find the next Google. And we need to build the next

01:11:31.000 | Google. And so we want to allocate capital within a

01:11:33.360 | portfolio of bets, and have some number of those things, maybe

01:11:36.840 | not all of them, maybe not even a lot of them, maybe just one or

01:11:40.040 | two of them turn into the next $100 billion revenue line for

01:11:42.920 | us. Now, he always said that that's going to take a long

01:11:47.200 | time, he definitely

01:11:48.400 | underestimated the quality of Google search and the dominance

01:11:52.720 | of it. Now, it's probably it probably stands to reason that

01:11:57.960 | if we have enough innovation at the fundamental model level in

01:12:01.160 | AI, particularly like a bunch of really powerful multimodal

01:12:04.520 | models, the new form of search can disrupt Google. But the

01:12:08.240 | problem is, they are so ahead of everybody else with respect to

01:12:12.400 | those models as well. So the real question is, even that next

01:12:16.440 | big leapfrog isn't going to happen without billions of

01:12:19.320 | dollars of capital invested. And you know, the most likely folks

01:12:22.600 | that are able to do it, I think open AI at some level, but

01:12:25.880 | again, they're going to always have to raise money from other

01:12:28.120 | folks. Google can self fund it, and it makes an enormous amount

01:12:31.800 | of sense to drive that technical mode. So it just seems like

01:12:35.600 | Larry, what are we going to happen here? Any? Are they going

01:12:38.320 | to make the cuts or not? You think they'll make do they have

01:12:40.600 | the ability to not make cuts and just ignore a 6% shareholder

01:12:45.880 | Chamath? Or are they just going to make them and then we're

01:12:47.480 | going to go on to you?

01:12:48.080 | I'll tell you the dynamic, the dynamic will be how much Ruth is

01:12:51.880 | able to convey report is the CFO. And she's hardcore.

01:12:56.080 | She's hardcore. She's incredibly everyone on that leadership

01:12:58.720 | team is incredibly impressive. But she has a very particular

01:13:02.680 | lens, a Wall Street lens, and she understands what the

01:13:06.120 | shareholders are thinking and looking at. And she will convey

01:13:08.720 | these points to the board. And, and there will be engineers and

01:13:12.360 | Sundar is an engineer and he will and he's a very good. He's

01:13:15.600 | very good at gathering and the different points of view and

01:13:17.840 | having balance around this. And he will share his points of view

01:13:20.400 | with the board. And I think ultimately, it will come down to

01:13:24.560 | my guess is like we just talked about some portfolio allocation

01:13:28.160 | decisions, which is how much risk and how much beta how much

01:13:31.400 | alpha and do we have the right mix in our portfolio, and it is

01:13:34.640 | inevitable, there's going to be some cutting. So I think that

01:13:37.080 | there will likely be some reduction.

01:13:38.840 | 5% 10% tank 10,000 employees. That seems like the number that

01:13:43.640 | people are going with.

01:13:44.480 | Yeah, yeah, let's see.

01:13:46.080 | I guess. Okay, sacks. What's your take on austerity measures

01:13:50.240 | and moving to an age of excellence and efficiency, which

01:13:54.120 | is happening inside of the tech industry as we speak?

01:13:58.440 | I think freeberg's right that these companies could operate a

01:14:00.760 | lot more efficiently. I think there's an economic argument

01:14:03.400 | there. But I want to up level it and talk about the cultural

01:14:05.920 | aspect of this for a second and also bring in to the huge

01:14:09.880 | stories this week, the the SBF story, the interviews he did

01:14:13.520 | with the New York Times and Vox, and then this hysteria around

01:14:18.160 | well, you know, what's happening at Twitter. Look, I think that

01:14:22.440 | there's something clearly has hit a nerve here in this last

01:14:25.680 | week, where you have all of these employees who have

01:14:30.800 | voluntarily left, creating all of this drama. And, you know,

01:14:35.920 | Antonio Garcia Martinez had a good quote about this. He said,

01:14:38.760 | What Yolanda is doing is a revolt by entrepreneurial capital

01:14:40.920 | against the professional managerial class regime that

01:14:42.840 | otherwise everywhere dominates. And that same PMC, which includes

01:14:46.440 | the media is treating it as an act of last measure state.

01:14:49.200 | There's another version of this that came out a couple weeks

01:14:51.440 | ago. And by the way, let's mess just a just means like you're

01:14:53.920 | insulting the monarch, the

01:14:55.560 | insulting the crown. There was a good one here. There's an

01:15:00.240 | article on compact magazine a couple weeks ago, where the

01:15:04.880 | editor Jeff Schellenberger tweeted, the layoffs at Twitter

01:15:07.560 | are no different than what's happening across Silicon Valley.

01:15:09.640 | But because the ideological antagonism of the professional

01:15:12.120 | left to Musk, they make clear what's at stake, the collapse of

01:15:15.600 | a jobs program for surplus elites. And then and then

01:15:20.560 | there's a great quote from this article, which again,

01:15:23.000 | that's so hard hitting.

01:15:25.120 | I know it's no, it's a deep nerve. I'll get into one

01:15:28.800 | differently. Yeah, exactly. So a quote from this article said,

01:15:32.240 | one of the biggest and least talked about social questions in

01:15:34.200 | the West is how to economically provide for our own modern

01:15:37.200 | version of Francis impecunious nobles. That is how to prop up

01:15:41.280 | high status people who can't really do much economically

01:15:44.280 | productive work. Wow. I mean, like, this was brutal. Yeah,

01:15:50.440 | for now. So I think this is really hitting a nerve because

01:15:53.760 | the fundamental quid pro quo of our civilization is that in

01:15:59.000 | order to achieve economic and social advancement, you go to

01:16:03.040 | college and get a degree and you submit to voluntary re

01:16:07.480 | education of yourself at one of these woke madrasas, one of

01:16:11.520 | these re education camps, that's a good pro quo. You get some

01:16:16.920 | people did your punch up guy right that intro? No,

01:16:20.320 | this is this is what I believe for a while now. There are some

01:16:24.480 | number of people who get useful degrees like computer science or

01:16:28.080 | engineering, but huge numbers of people get degrees in like we

01:16:32.040 | talked about the basket weaving or whatever the politically

01:16:35.120 | correct degree is. And they graduate with a million dollars

01:16:39.480 | in debt and no marketable skills, right? And right. And

01:16:42.880 | what was propping up all of these people were these

01:16:46.080 | fantastically wealthy monopolies, tech companies that

01:16:49.800 | were hiring huge numbers of these people. Now all of a

01:16:52.800 | sudden, we get to a point where we're in an economic recession.

01:16:56.320 | And these companies are starting to do layoffs, and they're

01:16:58.960 | starting to do a little bit more soul searching about who's

01:17:01.960 | really adding value. And people are starting to get laid off.

01:17:05.480 | And I think this hysteria is coming from a place of deep

01:17:08.880 | insecurity. You had all these people go to college, they did

01:17:12.560 | not learn critical thinking skills. What they learned was

01:17:15.240 | that, listen, if we pay lip service to the right platitudes,

01:17:19.320 | then we will have career advancement. And now they're

01:17:22.080 | learning that that may not be true. And actually, the person

01:17:25.040 | who's pulled the mask off this entire regime is not other than

01:17:29.120 | SPF. And he did it in an interview with Vox, and we have

01:17:32.840 | to go to this, okay. He's the devil, but he basically pulled

01:17:38.200 | the mask off this whole civilizational quiproquo. That

01:17:42.120 | is a sham. Okay. And here's what he said, that the Vox reporter

01:17:45.840 | said, you were really good about talking about ethics for someone

01:17:49.120 | who kind of saw it all as a game with winners and losers. What

01:17:52.120 | did SPF said? Yeah, he he, I had to be. It's what reputations are

01:17:56.680 | made of to some extent. I feel bad for those who get fucked by

01:18:01.000 | it. Basically all these people who incurred a quarter million

01:18:03.040 | dollars in debt and think they can just spouse the right

01:18:05.800 | platitudes. He says, by this dumb game, we woke Westerners

01:18:10.240 | play where we say all the right shibboleths, so everyone likes

01:18:13.160 | us. How stupid does the New York Times feel right now? How

01:18:17.960 | stupid do all these nonprofits and foundations who received all

01:18:22.120 | this money from SPF, he played them, all he had to do was say

01:18:27.320 | the right words that say the magic woke words, and they would

01:18:31.720 | basically cover for the most enormous grift that's ever been

01:18:35.200 | perpetrated. That is basically the quiproquo of our

01:18:38.360 | civilization is be woke and you will have indefinite career

01:18:43.160 | opportunities no matter how, how

01:18:45.040 | virtuous signaling would be another way to say it. I mean,

01:18:47.680 | it doesn't necessarily have to be the work woke ideology, but

01:18:49.960 | virtue signal and give donations to people. This has been a

01:18:53.120 | playbook of grifters for a long time. Bernie Madoff gave a ton

01:18:55.920 | of, you know, donations, and he used the same donations that he

01:19:00.680 | gives the Republican Party. None. They're not part of the

01:19:03.520 | regime. How many how many conservative? Yeah, I'm not sure

01:19:06.240 | this is a lot. I'm not making a political point. I'm making a

01:19:10.840 | cultural point. Okay, who were the charities that he donated to

01:19:14.600 | it was all the right what causes not, you know, it was not

01:19:17.880 | demic one was not woke. He was passionate about the pandemic

01:19:20.960 | stuff. Are you kidding me? freaking out about the pandemic?

01:19:24.360 | No, no, he wanted to have a pandemic.

01:19:25.600 | As he explained it to me, the neurosis it was the No, no, no,

01:19:29.520 | that was not what he was funding. Sax. He I actually

01:19:31.960 | talked to him about this when I interviewed him. He said he

01:19:33.920 | wanted to do pandemic prevention and early warning systems and

01:19:38.320 | wanted to invest in strategies to fight the next.

01:19:41.280 | And definitely freaking out about COVID is was a central

01:19:44.880 | neurosis of the professional managerial class for the last

01:19:47.680 | couple of years. It is not what he was funding. I just want to

01:19:50.280 | make that point. Yeah. Whatever. I mean, you want to do

01:19:52.880 | prevention. I mean, you can frame it as not but I actually

01:19:55.000 | literally talked to him about it. He wanted to do pandemic

01:19:56.920 | prevention in the future.

01:19:57.680 | He wants to steal money from California taxpayers via ballot

01:20:03.160 | initiative to fund his brother's organization, which would have

01:20:07.800 | disbursed the money in who knows what ways, probably not

01:20:11.240 | legitimate, out of a professed concern about the next pandemic.

01:20:16.120 | Why? Because the PMC is neurotic about the last pandemic. Come

01:20:20.080 | on. This is

01:20:20.800 | you're saying to them I understand. Of course. Yes,

01:20:23.440 | thank you. It's pandering. I understand. It's absolutely

01:20:25.480 | pandering. Now listen, why? Well, hold on. Why did this

01:20:28.200 | work? Why did this work virtue signaling work? And again, why

01:20:31.080 | were they only charities and causes that appeal to the sort

01:20:35.360 | of the left is because they're the ones with the power in our

01:20:38.520 | society and in our culture to define what virtue is. When

01:20:43.480 | you're virtue signaling, who are you signaling to the people with

01:20:46.920 | the power to decide what is virtue? And what is vice, right?

01:20:50.440 | That is why people go to work at the New York Times. That is why

01:20:53.000 | they basically go into, you know, all these influential jobs

01:20:56.120 | at nonprofits and foundations. They're the ones deciding what

01:20:59.160 | virtue is. They're the dupes, the ones who are fooled. And now

01:21:02.440 | what's happening is there's an economic consequence to it,

01:21:05.000 | which is, it is coming out, these people have no marketable

01:21:07.920 | skills, and companies are tightening their belts. And now

01:21:11.080 | all of a sudden, they're starting to become deeply

01:21:12.680 | insecure about their own future.

01:21:13.880 | My comment is that, you know, when you look at Twitter, as an

01:21:16.360 | example, Bill Gurley had a really powerful quote as well,

01:21:20.240 | which is when companies cut, you know, they don't cut nearly

01:21:23.040 | enough, and they and they miss estimate and underestimate how

01:21:26.080 | resilient a company is back in, you know, Twitter had 200

01:21:29.520 | million ma you, they had only 1000 employees. And so clearly,

01:21:33.400 | at that point, they knew what they were doing. And now the

01:21:36.360 | business has, you know, increased in ma you by call it

01:21:39.640 | 50% to 300 million. But the employee base increased by seven

01:21:45.480 | and a half x. So clearly, something is misaligned. And I

01:21:49.560 | think the thing that you know, people are going to find out is

01:21:52.520 | by the way, with contractors, probably 12 x, right. So I think

01:21:56.000 | that, well, there you go. So I think that the thing that

01:21:58.360 | frustrates a lot of folks that are leaving or that are trying

01:22:03.360 | to throw bombs is they don't want Elon to be right. Because I

01:22:08.000 | think to David's point, if Elon is successful, he has uncovered

01:22:12.640 | this very uncomfortable truth that was frankly hiding in plain

01:22:16.640 | sight, which is that many of these technology companies using

01:22:20.680 | technology, get so much operational leverage, that they

01:22:24.880 | have some enormous efficiencies. And then it's only a decision by

01:22:29.520 | the professional managerial class to reward themselves with

01:22:33.600 | fiefdoms, and kingdoms of employees and you know, the

01:22:37.000 | surfs that work for them. I mean, it's really quite crazy if

01:22:40.000 | you think about it.

01:22:40.680 | Well, freeberg made this, you know, early on in the history of

01:22:45.000 | this podcast. Well, hold on, I'm going to add to your position.

01:22:48.680 | freeberg said something that adds to your position, which is

01:22:50.920 | early in this podcast, he said the nature of organizations is

01:22:54.000 | they want to grow. And that's government or even these

01:22:56.600 | departments you're talking about. Anybody who runs a

01:22:58.640 | department is never going to say my department needs to be 20%

01:23:01.440 | less. So we can hit the bottom line, they're gonna say give me

01:23:03.320 | 20% more because everybody else is getting 20%. Go ahead.

01:23:05.640 | And then if you if you if you layer in the Charlie monger

01:23:09.400 | quote, show me the incentive, and I'll show you the outcome.

01:23:12.280 | You can understand why because the professional managerial

01:23:15.840 | class is rewarded by compensation that is actually

01:23:21.000 | independent of dilution. Right? Because if you look at these

01:23:24.200 | compensation plans, all of these professional stock owners, they

01:23:27.880 | complain all the time about stock based comp, right. And

01:23:30.760 | these companies have budgets between two and 5% a year that

01:23:34.400 | they give away. And so you have this situation where an

01:23:38.360 | engineer or an engineering manager or a sales manager or a

01:23:41.520 | marketing manager, in success at 1000 people can grow to 5000 or

01:23:46.920 | 10,000, their compensation doesn't change in any other

01:23:49.960 | organization, their compensation would change. Because let's say

01:23:53.240 | that it's a percentage of the profits that are distributed

01:23:55.400 | unless the company is phenomenally growing. Eventually,

01:23:58.640 | you'll see it in the bottom line of what you take home. And so

01:24:02.160 | these folks are incentivized to have these status signals of

01:24:06.280 | value. I have a 50 you know, you guys have heard this. I have 50

01:24:09.680 | person team. I have 100% I oversee 3500 employees and you

01:24:14.240 | and everybody is conditioned to think, Oh my god, that's

01:24:17.640 | incredible. You must be really important. And so we're going to

01:24:21.120 | sort of now see in real time, a questioning of that belief

01:24:25.720 | system. And if Elon proves to be right, it's a really important

01:24:29.920 | decision point for a lot of other technology companies.

01:24:32.080 | Because if you are an 80 to 90% gross margin business, built on

01:24:36.680 | software, maybe you have a bigger responsibility than

01:24:40.640 | you've discovered to date to your shareholders and to the

01:24:44.000 | existing employees to find the efficient rate of return, right?

01:24:47.640 | What is the efficient frontier of headcount? The other thing

01:24:51.240 | is, it now allows let's just say that now, Twitter goes to a

01:24:55.320 | making up a number 2000 employees after this whole

01:24:58.480 | Google Form thing. The great thing about the 2001st employee

01:25:03.520 | for the 2000 employees and for the shareholders is that that

01:25:08.480 | 2001st new employee is 100% aligned because they're coming

01:25:11.720 | into something eyes wide open. And I think that that's also an

01:25:15.200 | interesting thing that isn't getting enough recognition is

01:25:17.960 | he's putting out there what he stands for this hardcore culture,

01:25:22.400 | irrespective of whether we think it's right or wrong, all the

01:25:25.640 | people that stay are voting that it's right. And you know, as

01:25:29.240 | long as it's not breaking any laws, he's allowed to do that.

01:25:32.040 | And so if people now want to join that organization, they

01:25:34.920 | should be allowed to do that too, just like the people who

01:25:37.000 | don't want to should be allowed to leave

01:25:38.320 | sacks, you and I came up and we talked about this, I think on

01:25:41.440 | last week's show, or maybe it was two weeks ago, we talked

01:25:43.520 | about what the expectation was in Silicon Valley at a startup

01:25:46.840 | what startup culture was, in terms of just the effort that

01:25:50.280 | was required to build a winning company. And we all said 60

01:25:53.560 | hours a week was the baseline. That's something that, you know,

01:25:56.520 | has been I think a lot of people you mentioned this trim off

01:25:59.160 | people working two jobs for 30 hours a week and taking two

01:26:02.760 | salaries from two of the fine companies.

01:26:04.720 | 10 episodes, go into tik tok, and search for you know,

01:26:08.680 | engineering salaries, you'll see some of the craziest tiktok

01:26:11.600 | videos kids are making 350 k, working 30 hours a week. It's

01:26:16.040 | nuts. Yeah.

01:26:16.760 | And so I think we're gonna have is a I think we're gonna have a

01:26:19.600 | cultural divide here, there are going to be a series of

01:26:21.440 | companies that say this is classic Silicon Valley, we're

01:26:24.160 | gonna we're gonna crush it, we're gonna work aggressively,

01:26:26.160 | we're gonna put in 50 6070 hours a week, and we're all going to

01:26:29.120 | benefit from that. And then there'll be another class of

01:26:30.960 | companies that says, Hey, no, we want to have a more lifestyle

01:26:34.280 | business. And if people want to work 3040 hours a week, and they

01:26:36.960 | contribute, we don't need to be perfectly efficient. And you

01:26:39.600 | know, the playing field of the playing field of capitalism will

01:26:43.560 | show who is right, sex.

01:26:45.680 | Yeah, I mean, look, I actually went out of town a few days ago.

01:26:48.680 | So I wasn't keeping up with, you know, every detail of what was

01:26:51.520 | happening at Twitter. And I started getting all these text

01:26:54.360 | messages about how Twitter was dead or dying or whatever, like

01:26:57.080 | the site had been unplugged, or what have you. And I'm like,

01:27:00.080 | what is going on? And you know, you tweeted this morning, hey,

01:27:02.720 | is this working? And I'm like, yeah, like, like, yes, it's

01:27:05.360 | working. Like, and

01:27:07.360 | it's working. And so what we went through?

01:27:10.920 | Yeah, so I came to learn what they're talking about is that

01:27:14.040 | all Ilan did was give a voluntary offer that if you

01:27:17.400 | didn't want to stay, you could take three months severance. Now,

01:27:19.600 | remember, last week, they had a riff, you know, which was

01:27:23.640 | basically economically required, in which they gave employees

01:27:26.920 | three months severance, which is 50% more than what he had to it

01:27:30.720 | was generous. Now, it seems to me that what if you're one of

01:27:34.520 | the employees in the other half that made the cut, but yet

01:27:37.600 | you're not really motivated to stay. And maybe you don't really

01:27:42.200 | want to operate like a startup. I mean, Elon's basically saying

01:27:45.240 | we're going to go back to working and operating like a

01:27:47.960 | startup. That means that you might have to work nights and

01:27:50.480 | weekends, like a startup. What if that's not what you signed up

01:27:53.680 | for? You may be sitting there at Twitter, saying, Oh, man, I wish

01:27:57.440 | I gotten riff. Well, now Elon is offering you the opportunity to

01:28:01.040 | take the same package. So I'm like, how can this possibly be a

01:28:05.840 | bad thing? It's actually the great management technique that

01:28:08.880 | Tony Shay rest in peace from Zappos created, he would say

01:28:12.000 | when people went through their first couple of months of

01:28:13.640 | training, he'd say, Now, if you don't want this job, I will pay

01:28:17.680 | you a month's salary. This is on their first day after they went

01:28:20.960 | through training their first like day on the job. He said,

01:28:23.400 | Okay, now that you've gone through the training, I'll pay

01:28:25.640 | you I think it was $5,000 or $3,000 to not take the job. And

01:28:29.520 | something like one out of five people would do it. And so he

01:28:32.140 | said, Listen, I don't have to fire them later on, this is

01:28:34.920 | going to make my management easier. It was it's it is

01:28:37.440 | actually a kind thing to do to give people the opportunity to

01:28:39.960 | leave

01:28:40.320 | how giving employees an option to

01:28:43.320 | opt out.

01:28:44.040 | The reason people are upset, let's be honest, sex is some

01:28:49.960 | people, you know, live to work and some people work to live and

01:28:54.800 | the people who are working to live, find it crazy that hustle

01:28:58.560 | culture even exists. And people who are part of hustle culture,

01:29:01.160 | like the four people in this podcast,

01:29:02.560 | find it crazy, it's just working. hustle culture is

01:29:06.200 | working above the hours you're being paid for. That's that's

01:29:08.920 | basically what hustle culture. That's how you're getting paid.

01:29:11.800 | That's how most people would define it.

01:29:13.280 | A salary is actually not you work for 40 hours. A salary

01:29:16.280 | means you get your job done.

01:29:17.720 | Okay, that's how we look at it. That is not how other people

01:29:21.560 | look at it. And you'll say, Oh, my God,

01:29:23.520 | there's no question that Elon is going to raise

01:29:26.400 | the bar. If we lose American primacy, it's because of that.

01:29:29.720 | Not because of

01:29:30.280 | I agree with you. I'm just give me the other side. I'm still

01:29:33.880 | meeting the other side. People look at their salary. And they

01:29:36.640 | look at themselves as getting compensated for 40 hours and

01:29:39.400 | every hour above that. But do you know this generation's mind

01:29:42.480 | looks as hustle culture. There are people that are not agreeing

01:29:45.680 | with it. There are people that are working 6070 80 hours a

01:29:48.720 | week as a teacher to make 3040 k firefighters, you know, working

01:29:52.880 | on oil rigs and to hear somebody like hustle culture at a

01:29:56.800 | startup where you're making 350 grand and you're upset because

01:29:59.800 | like the matcha lot ran out or whatever. It's just so out of

01:30:03.160 | touch. I'm not disagreeing. Yeah, look,

01:30:05.360 | my view on it is that people need to love their jobs and love

01:30:10.480 | what they're working on. Because I think the only way to be

01:30:12.520 | successful is to work hard. But the only way to work hard and be

01:30:15.120 | happy is to really love what you're doing. And if there's a

01:30:18.160 | lot of people at this company or others who don't really love it,

01:30:22.320 | and they are just there to pay the bills or whatever, then I

01:30:25.320 | actually think it's extremely generous for Elon to be

01:30:27.600 | offering them a package the right thing to do. I don't

01:30:31.120 | understand how giving them an option was anything but

01:30:33.440 | positive. And yet the media has gone berserk on it. Meanwhile,

01:30:36.800 | while giving SBS a virtual pass on the largest one of the

01:30:41.240 | largest frauds in history and made off level fraud. You read

01:30:43.840 | the New York Times legend. No, there's no alleged dude. It's

01:30:47.720 | come out he loaned himself like this is just one data point. He

01:30:50.680 | loaned himself a billion dollars. And he loaned the head

01:30:53.000 | of engineering $500 million off the balance sheet, nothing to

01:30:55.840 | see here, what possible justification. And you know, an

01:30:58.480 | SPF.

01:30:58.960 | And the reason just say the word to say the hard part out loud.

01:31:02.160 | The reason why these same publications are not covering

01:31:05.480 | this is because they were complicit in his reputation

01:31:08.720 | laundering. Yes, the New York Times before that article put

01:31:11.760 | out this other puff piece where they talked to him. And they

01:31:14.560 | were excoriated on Twitter, because it was like not a single

01:31:17.800 | question about the fraud, or alleged fraud, alleged,

01:31:21.400 | allegedly,

01:31:22.320 | a fraud,

01:31:22.680 | billion dollars suddenly goes missing and no one knows where

01:31:28.600 | it is. I'm willing just to call that a fraud.

01:31:30.920 | You're willing to jump the fence. They're busy scrambling

01:31:34.400 | to sort of save their own reputations, which is why they

01:31:36.880 | are trying to like, hide the cheese effectively and point

01:31:39.920 | over here and say, Hey, look at what's happening. Elon sent an

01:31:42.720 | email worth only one button. Yes.

01:31:47.160 | I mean, let's be

01:31:47.880 | intellectually. I love that meme that Elon tweeted out. Do you

01:31:51.040 | see that the two rhinos?

01:31:52.080 | No, no, please. No, it cracked me up.

01:31:54.000 | You know, this is all gonna get reblogged.

01:32:00.440 | It's too funny. It's just too funny. It's too good.

01:32:04.560 | It's too good to not put up on the screen.

01:32:06.280 | I mean, that's that nature photographer is the New York

01:32:08.760 | Times. It's

01:32:09.960 | okay. Yeah, people who don't see it. There are two rhinos.

01:32:14.880 | They're fornicating copy. Yeah, they're copying. But right now

01:32:18.880 | for calculating is like it's to 2000 pound animals. populating

01:32:23.640 | doggy style 10 feet behind a nature.

01:32:26.080 | Behind I'm trying to be the world's major photographer, a

01:32:32.480 | nature photographer with a $6,000 telephoto lens that

01:32:36.840 | like to like the entire set again. But he's 10 feet behind

01:32:40.960 | him are the two rhinos. The two rhinos that says FT x losing

01:32:44.800 | over a billion dollars in client funds. And the the photographer

01:32:49.000 | is senators calling for the FTC to investigate.

01:32:51.360 | But the important thing is the photographer is pointing in

01:32:53.080 | completely the wrong direction.

01:32:54.280 | The thing that is obviously right in front of his face,

01:32:59.680 | right that he should be photographing. Yes, he's using

01:33:02.520 | that long telephone. And that is that is the New York Times that

01:33:06.000 | one or Warren that's the point C.

01:33:09.360 | It's the arrow in the right direction. Yes, point the camera

01:33:12.440 | in the right direction is the point. I just want to point out

01:33:15.000 | my one Bology tweet on this in this regard. Oh, God.

01:33:17.600 | Bology is not capable of one tweet. That's gonna be 76 tweets

01:33:21.120 | in a store.

01:33:21.520 | You're right.

01:33:23.120 | Of course, it's a treat service. Bology says, think of a regulator

01:33:27.680 | as a binary classifier. What's their false positive and false

01:33:30.320 | negative rate? BTF, Bitcoin ETF block for years, FT x ignored

01:33:36.600 | for years. The actual filter is not. Is this a scam? The actual

01:33:41.440 | filter is, is this a scam? Who's spicy? It's not consumer

01:33:45.040 | protection. It's reelection.

01:33:46.840 | It rhymes.

01:33:49.360 | Young Spielberg make a banger out of that. It is a banger.

01:33:52.280 | It's not consumer protection. It's reelected. And if you are

01:33:55.720 | part of these interlocking power structures that we call the

01:33:59.280 | regime, it's the New York Times, it's the regulatory state, it's

01:34:02.840 | a democratic party, you get a big

01:34:05.560 | public and hold on, let's be clear, your, your team now

01:34:09.120 | controls the house. And so, whose team? David? Oh, David

01:34:13.520 | Sim. David, I understand. But starting in January, you know,

01:34:17.440 | there's any amount of congressional oversight.

01:34:20.400 | How's your Hunter Biden investigation?

01:34:21.840 | Such a month.

01:34:22.680 | No, no, hold on a second. Let me say this right now. The first

01:34:27.920 | investigation by the House of Representatives needs to be SPF

01:34:31.880 | and FTX, not honor Biden. SPF makes underbind look like a

01:34:35.000 | piker. I mean, yeah, you know, 100 by and was what a couple

01:34:38.920 | million dollars of grift. This is $10 billion plus a grift. So I

01:34:42.160 | think

01:34:42.320 | it also touches regulators, it could touch, you know, it's a

01:34:45.960 | big it's a big failure. It's a system.

01:34:48.480 | Biden knows how to party. So let's be honest here. I mean,

01:34:51.120 | that is the issue. I just think the quote of the week goes to

01:34:55.840 | john j. Ray. He's FTX his new CEO, he famously oversaw the

01:35:00.560 | liquidation of Enron. And he says I have over 40 years of

01:35:05.200 | legal and restructuring experience. I have been the

01:35:07.160 | chief restructuring officer and or chief executive officer in

01:35:10.760 | several of the largest corporate failures in history. I have

01:35:13.000 | supervised situations involving allegations of criminal activity

01:35:16.080 | and malfeasance and run. Nearly every situation in which I have

01:35:19.840 | been involved has been characterized by deficits of

01:35:22.040 | some sort in internal controls, regulatory compliance, human

01:35:24.600 | resources, systematic. Never in my career. Have I seen such a

01:35:29.440 | complete failure of corporate controls and such a complete

01:35:32.400 | absence of trustworthy financial information has occurred here.

01:35:36.000 | This is the person who oversaw Enron saying this is

01:35:40.240 | unprecedented. And Ron was the previous unprecedented situation,

01:35:45.520 | which is now being framed as manageable by none other than

01:35:50.920 | john j. Ray, what a great name. Congratulations on being the

01:35:53.920 | chief restructuring officer of FTX. There was an article that

01:35:57.720 | showed Nick, if you could please throw the picture up on the

01:36:01.120 | screen of, of all the people that invested the universe of

01:36:05.440 | SPF. And my god, what and they and the article headline was

01:36:10.400 | it's a who's who of VC and my comment is actually no this list

01:36:15.160 | is a who's who of people who did no diligence. Yeah. So ever. And

01:36:21.000 | I just want to call one person Nick, if you look at the

01:36:23.400 | alimeter research, this, this firm called one inch, J Cal

01:36:27.760 | invested in a firm named after the length of his penis.

01:36:31.840 | Maybe coming out of the cold plunge. Okay, but you're that

01:36:38.400 | cold plunge the shrinkage. You know, the shrinkage was that an

01:36:42.440 | SPV. Listen, I'm a shower. Not I'm a grower. Not a shower.

01:36:46.840 | Alright, listen, you guys coming out. Everybody knows coming out

01:36:50.400 | of the cold plunge. It's it's not going to be the best

01:36:53.560 | performance for any of us.

01:36:54.600 | We've lost the script on the show. Jesus, please. We got a

01:37:02.120 | wrap. I mean, it's just too much.

01:37:03.800 | Do you guys not think that all these investors receive audited

01:37:07.120 | financials? And no, you know, they got they had a lawyer, a

01:37:10.320 | legal firm.

01:37:10.920 | Did you guys see who FTX is auditing firm was it's called

01:37:15.760 | Frager medicine that says it's based in the metaverse. This is

01:37:18.680 | like the Hollywood upstairs Medical College of the auditing

01:37:22.000 | world. Their address is in decentral land. Bernie Madoff. I

01:37:25.240 | think his brother in law ran the accounting firm that did their

01:37:27.880 | audits, right? It was like, and it was a dead floor in the

01:37:30.480 | lipstick. It was in the same building, right?

01:37:32.520 | On the list. So building to have like a secret floor with no

01:37:34.920 | priority.

01:37:35.440 | Look, I mean, even in that case, people relied on an audit from a

01:37:39.000 | CPA that said, Here are the numbers. And those numbers were

01:37:41.840 | fraudulently conveyed. And I think that there's probably some

01:37:45.840 | you know, some forgiveness necessary here that there was

01:37:48.160 | maybe there may have been serious fraud that took place.

01:37:51.040 | And I don't want to be too disparaging of all the people

01:37:53.240 | that we work on this work at these investment firms made an

01:37:56.240 | investment and they all got duped and the LPS got duped. And

01:37:59.160 | so I don't think this is just fundamentally like a failure of

01:38:01.520 | diligence. So we we we were part of the process where they tried

01:38:05.080 | to show I have to be careful. My lawyers remind me that we're

01:38:07.720 | still under NDA actually with FTX. So but what I can tell you

01:38:10.840 | is we did not get any financials. So we were verbally

01:38:15.160 | when you ask for it when you

01:38:16.160 | we sent a two pager of stuff. Anyways, I can't say more than

01:38:20.200 | that. But don't get yourself in trouble. Oh, I want to I want to

01:38:22.600 | say something else, by the way. Last Friday, David and I were at

01:38:27.480 | URI Milner's birthday party. And there was a chess tournament.

01:38:30.440 | And Magnus Carlsen was there. And anyways, David was in the

01:38:35.120 | finals. Okay, it was David and his partner look at the smile on

01:38:38.880 | David versus versus Matt. Hold on. Wait, I'm getting to a great

01:38:41.600 | punch line versus Magnus Carlsen and his partner. David one.

01:38:46.000 | Wow. partner was was should I say Yuri's daughter who I think

01:38:51.600 | is probably what like 10 years old. She's incredible. Yeah,

01:38:53.640 | she's like second in America. Yeah, she's good. She's good.

01:38:56.080 | He's incredible. Anyway, yeah, thank you to Yuri. That was a

01:38:58.200 | really unique in front of a partner chess. My partner was

01:39:01.360 | Pragnananda who's an Indian Grandmaster who's like a

01:39:04.320 | superstar. Yeah, and look playing, you know, with Magnus

01:39:08.160 | Carlsen was obviously that was a real thrill. Yeah, there you

01:39:10.680 | go. So when you rank this with the birth of your children, your

01:39:15.160 | marriage, and this, where would that rank on the scale of one

01:39:19.800 | through five? This is for your kids. But you know what,

01:39:23.960 | speaking of the pot is happy. Oh my god, I haven't seen him that

01:39:28.120 | happy since. Since Trump was look at look at that document I

01:39:31.880 | just say a lot before before we got to wrap up but I want to

01:39:34.920 | show you this basically I pulled all IPO since 2020. So this

01:39:38.120 | excludes all SPAC mergers, and real estate finance material

01:39:41.960 | energy utilities are kind of the big bulky private equity type

01:39:44.520 | stuff. So it's mostly tech consumer 627 IPO since 2020.

01:39:49.320 | More than half of them are basically half of them are

01:39:53.640 | trading at less at point two times the total cash they've

01:39:58.040 | burned. So there you know, you can kind of look at total

01:40:01.440 | lifetime capital burned by these companies in the retained

01:40:04.240 | earnings line on the balance sheet. And so when you pull out

01:40:06.720 | the retained earnings, it shows you right how much money they

01:40:08.880 | burnt over their lifetime. And so the total money burnt by half

01:40:12.520 | of these companies is about $107 billion. And the market cap of

01:40:17.280 | those companies is only $26 billion in aggregate. So a point

01:40:21.280 | two times return on capital invested to date in terms of

01:40:25.520 | enterprise value, divided by total capital invested in. Let

01:40:30.440 | me say let me say it in English. And you tell me if I said it

01:40:32.600 | right. So 627 non SPAC non real estate non finance companies

01:40:39.480 | went public. So basically 627 start companies went public

01:40:43.640 | since 2020. So two years. Yep. And of those 627 tech companies,

01:40:49.760 | almost half or 300 of them 48% of them are today worth about

01:40:56.920 | point two times all the money that went into them. Yep. My

01:41:02.400 | gosh, wow. Yeah, it's tough. And then on the other half, the

01:41:05.840 | other half is, is the ones that have worked. So this kind of

01:41:09.320 | goes back to a power law point. But like as a venture industry,

01:41:13.240 | you think once you get a company public, it's successful. And the

01:41:16.760 | reality is that many of these companies from a from an

01:41:19.760 | economic perspective, are still not successful. It looks like

01:41:24.520 | half and perhaps much more if you include all the SPAC

01:41:27.640 | mergers, which is another couple 100. And I would guess the vast

01:41:31.800 | majority of those meet this criteria are trading at less

01:41:35.360 | than the total cash that's been invested in them.

01:41:37.480 | freeberg. This speaks to the age of excess that we just went

01:41:40.800 | through. We just weren't as efficient as we needed to be in

01:41:44.020 | running these companies. And now we're in the age of efficiency,

01:41:46.520 | austerity, excellence. But it's this great setup for a rebound,

01:41:50.880 | isn't it freeberg? Like I don't know.

01:41:53.080 | Look, I mean, one way to read this, I was speaking with

01:41:55.040 | someone who I, you can bleep him out. I was talking with two

01:41:59.200 | weeks ago, three weeks ago, and he showed me in there. How much

01:42:02.880 | should I say here? This is a big investment firm, and they have a

01:42:05.680 | big growth portfolio, less than they have about 160 investments,

01:42:11.000 | 180 investments in their growth portfolio. 85% of the returns

01:42:16.720 | are generated by 10 companies of the 180. And that's in the growth

01:42:21.520 | portfolio. These are supposedly de risk businesses power exists

01:42:24.920 | even in our law exists in growth. And as you can see here,

01:42:27.880 | the power law exists quite dramatically post IPO as well.

01:42:32.360 | So you know, as you can see here, only 9% of these

01:42:36.240 | businesses have generated positive earnings over time. 43%

01:42:40.520 | about half of them are worth more than the total cash that's

01:42:44.880 | been invested in them. And that multiple production board study

01:42:48.720 | here, by the way, this is your done by your family. Yeah, yeah,

01:42:51.880 | yeah, it's all public data. So the, the multiple on the value

01:42:58.160 | of the companies that are worth more than their cash invested is

01:43:00.680 | 5.5 times. So in aggregate, IPO since 2020, are worth 4.3 times

01:43:06.280 | the total cash that's been invested in them over their

01:43:08.920 | lifetime. But the crazy statistic is half of them are

01:43:12.360 | worth significantly less than the cash that's been invested in

01:43:14.400 | them only point two times. So the power law dominates both

01:43:18.200 | early growth and clearly being public. But I think to your

01:43:22.000 | point, Jake, how it also seriously speaks to the amount

01:43:26.040 | of excess and it's really going to rationalize probably based on

01:43:28.440 | the conversations we had today about Twitter, meta, Google,

01:43:31.560 | Amazon, Amazon, and this as well. So certainly,

01:43:35.080 | also the good news. Freeberg and correct me if I'm wrong here,

01:43:39.200 | tomorrow, we want more companies to go public and have that

01:43:41.920 | discipline of being a public company. This was the big

01:43:44.100 | critique of this quiet era of companies taking 1012 14 years

01:43:48.680 | to go public. This is going to be a strength for these

01:43:51.960 | entrepreneurs to have to fight it out in the public market

01:43:54.360 | under scrutiny. Correct?

01:43:55.520 | 100% I think like the Chris own letter, I think that there are a

01:43:59.920 | lot of VCs on boards of companies who would love to say

01:44:03.360 | the equivalent thing to their private private company. And

01:44:07.560 | part of the the dynamics as as freebird just said, because

01:44:11.000 | it's such a power law and people believe that, you know, you

01:44:13.760 | being with other VCs are really important. It turns out that

01:44:16.660 | most of these VCs abandoned their role on these boards and

01:44:19.280 | don't really hold people accountable because they're

01:44:20.960 | worried that affect their deal flow. So the problem is, it's a

01:44:24.200 | negative reflexive loop. It's but so these companies do

01:44:27.160 | poorly. And then as a result, they're viewed as not an

01:44:29.240 | effective board member. And so the next deal they get is a poor

01:44:32.120 | and poor quality. So the highly correlated portfolios in Silicon

01:44:35.640 | Valley are the ones that will get torched because most of

01:44:38.560 | those companies will receive very poor or no advice. And then

01:44:43.000 | the few that will get to the end is because they have hard nosed

01:44:47.760 | people on the board that will force them to make really hard

01:44:50.840 | decisions. Yeah, that's it.

01:44:53.440 | sacks any thoughts here on the public markets?

01:44:56.000 | I'm sorry, wait, last thing. And by the way, Sequoia, who has had

01:44:58.440 | exceptional returns has always been known to be hard nosed. You

01:45:01.560 | know, a lot of people that critique against Sequoia from

01:45:03.880 | founders, which would be that, oh, if I take Sequoia's money,

01:45:06.640 | they may fire me. Well, yeah, because if you're not good,

01:45:10.000 | it's the mission of the business is bigger than your ability to

01:45:12.960 | be the CEO. And so you know, you just have to remember, like,

01:45:16.880 | there is no free lunch, we were not giving out free money here.

01:45:20.040 | For you pendulum swung one direction too far. They used to

01:45:23.840 | the tradition Silicon Valley used to be you always replace

01:45:26.320 | the CEOs, the founders, the founders with a professional CEO

01:45:29.400 | and Google being the turning point there, or maybe the last

01:45:32.280 | one. And then it became founders will control their companies

01:45:35.400 | with super voting shares forever. Hopefully, the pendulum

01:45:37.840 | now swings to some equilibrium sex. What are you seeing in

01:45:40.480 | private markets?

01:45:41.400 | The program for surplus elites is going away.

01:45:45.480 | managerial classes under pressure. Yes, that's for sure.

01:45:54.000 | If you went woke, you may go broke because you have no

01:45:57.680 | marketable skills.

01:45:58.880 | Man, you're a bunch of

01:46:00.360 | these one liners.

01:46:03.320 | Somebody in the room with

01:46:05.040 | Dean's

01:46:06.960 | myself up.

01:46:09.720 | Who Jackie joke, like Jackie the joke man Marling handing you a

01:46:12.640 | little note.

01:46:13.480 | All right for the Sultan of science, David Friedberg and

01:46:20.440 | also the executive producer of all in summit 2023.

01:46:24.520 | And

01:46:26.280 | the rain man himself, chess master and champion, David Sacks,

01:46:33.000 | as well as the dictator, we're gonna go on a little road trip,

01:46:36.320 | aren't we dictator a little road trip for the dictator and Jake

01:46:38.960 | out. It's gonna be fun. I am the world's greatest moderator who

01:46:43.520 | couldn't control the panel today. I'll do better next week.

01:46:46.320 | And we'll see you next time.

01:46:47.320 | In podcast. Happy Thanksgiving.

01:46:49.640 | Rain Man David

01:46:56.160 | we open source it to the fans and they've just gone crazy.

01:47:02.880 | Love us.

01:47:04.080 | I'm the queen of Kinwani

01:47:05.760 | besties are gone.

01:47:13.640 | That's my dog taking a notice in your driveway.

01:47:17.160 | We should all just get a room and just have one big huge orgy

01:47:25.520 | because they're all just useless. It's like this like

01:47:27.400 | sexual tension that they just need to release somehow.

01:47:30.840 | What your B? Your B?

01:47:35.320 | We need to get murky.

01:47:37.240 | I'm going ALL IN!

01:47:39.560 | I'm going ALL IN!

01:47:47.560 | (music fades)

01:47:48.400 | [inaudible].

E105: Tech culture wars: Elon vs. SBF, Sabotaging Republicans with Trump

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