Elon gets paid, Apple's AI pop, OpenAI revenue rip, Macro debate & Inside Trump Fundraiser

00:00:00.000 | Nick, these guys are low energy today. You notice that? You know what we need to do? We

00:00:03.200 | need to gamble. Let's do it, Nick. Let's play a hand of blackjack. Let's get these guys.

00:00:07.120 | Gentlemen, what an absolute pleasure to walk amongst some goddamn greats. Let me see if I

00:00:12.880 | can put a bit of pip in your step with a one time blackjack hand to kickstart one of the greatest

00:00:18.080 | podcasts on earth. It is I can't confirm this is not a lie. You did this. We're going to rock and

00:00:23.280 | roll proper today. Let's go. All right. This guy on right now. Mate, you are going you I'm actually

00:00:31.600 | breaking my own rules for you guys. I filmed today's hand day 14. But I'm going to film

00:00:36.800 | tomorrow's hand for you guys right now. It'll roll out this week. Hold on. Hold on. Wait a

00:00:43.760 | minute, Tim. You are a Kiwi living in Calgary. Is that right? Yeah, correct. Yep. Kiwi living

00:00:50.000 | in Calgary. Been here since September 2022. The missus and I. Oh, my God, this is awesome.

00:00:55.200 | Welcome to my country. Welcome to the party. I don't know how I stumbled across you somewhere.

00:01:01.840 | And I started watching all your videos on Instagram. They were off the hook, man. Congrats.

00:01:06.640 | They're awesome. Thank you. So much fun. Where where in New Zealand are you from?

00:01:10.320 | From Taranaki. So West Coast, North Island, certainly not somewhere. It's not a holiday

00:01:15.600 | destination for certain if you're going it's like dairy farming country. It's it's beautiful, but

00:01:19.920 | it's off the beaten path. So, yeah. And how did you how did you choose Calgary of all places in

00:01:24.560 | Canada? Do you know what the missus we holiday here? My fiance and I may 2022. And we thought

00:01:31.200 | it was just gonna be a holiday then back to the farm. But I guess we had that COVID cabin fever

00:01:36.640 | like the rest of the world and loved our time here so much that we just decided before we even

00:01:41.120 | finished the holiday that we cracked on to get now visas and go back, sold up my livestock and

00:01:46.960 | leased the farm back to me parents and and made the move and we haven't looked back. I don't think

00:01:51.840 | they'll be seeing me pulling tits on the dairy farm anytime soon. I'll call it real for by the

00:01:56.480 | way. So lads, what do we want to do here? We want to put 10k and then give it to one of Tim's mates

00:02:04.560 | who's stuck or something. How do we do this? We Mr. Beast this we give 10k to the next time you

00:02:09.280 | get coffee if we win? When you give it to the barista or something? What should we do? Yeah,

00:02:13.120 | let's do it. Let's do it. Let's do a 10k free roll for Tim and his fans. Okay, okay. So now

00:02:18.400 | do you want me to add that to my bit for this? Yes, absolutely. We want to be one in 10k sweat

00:02:24.160 | with you. One and done is absolutely the the way to go. There we go. First part we've got to do

00:02:30.720 | here is pick out these real dealers. Are these AI? No, these definitely are real dealers that

00:02:36.400 | certainly Eastern European as far as I know, I don't know what the quality of life is like.

00:02:40.320 | I imagine that warehouse somewhere and put on the tools. Now I had a I went with a with a young

00:02:45.840 | lassie today and she roll ball and asked me so I'm going back to the point because they've been

00:02:49.760 | good to me. Yeah. Somebody who feels blue collar who wants to work for us. We need somebody who's

00:02:56.240 | a worker. And you have over a million followers now watching this. Yeah. 15,000 to 1.3 million

00:03:03.200 | in this entire journey. So yeah, a little bit nonsensical. But okay, this this looks like a good

00:03:08.480 | he looks like he's gonna work for us. You're gonna you're gonna copy it live as I do it.

00:03:13.840 | Alrighty. It is day 15. Got a blackjack committee once in three or I've got we have a $14,000 bit

00:03:21.840 | going on for me personally, but I actually have some absolute legends with me today. I'm bidding

00:03:27.840 | for the besties from the oil and podcasts as well. They're going to bring the luck. I think

00:03:31.280 | been rolled bold enough by a young lessee yesterday with $34,000 goes on the line.

00:03:38.480 | You guys want 10,000. All right. Oh, 20. Geez, I better not not take it. Put a stop for 10%.

00:03:43.280 | 24,000 is going on the line. Our dealer looks like the kind of bloke who stops at red lights

00:03:50.320 | playing GTA. We won't hold that again. If you will, I need to see good God.

00:03:55.840 | Jackie

00:03:56.320 | I know he's doing for us. I can't believe we've just pulled that off.

00:04:21.920 | Oh, did that? Gentlemen, that is really just happened. You've just turned 10 at the 25.

00:04:28.640 | Holy, holy cow.

00:04:31.920 | Look, it's like doing this for the whole tape. That's amazing for another round.

00:04:41.200 | We turned 10 to 25. All right. So are we gonna have a separate all in balance? We just keep

00:04:46.000 | rolling it every week. Yeah. Can you come back next week? And can we just keep

00:04:51.920 | rolling it every week? We might have to. That is, I cannot believe we've just blackjacked.

00:04:57.760 | That is unbelievable. Well, Tim, have a good day. All right, Tim, you are a legend. Everybody

00:05:05.440 | follow Tim on Instagram. Let's get him to 10 million. Let's get, I mean, you have a future

00:05:10.640 | in broadcasting. You are going to make millions. You went from the farmhouse. Oh yeah, literally.

00:05:17.200 | And here we go. Now you're going to be running a casino. I think you should have Tim's

00:05:21.600 | blackjack. You should have your own brand. We could build a whole brand on this. Tim.Naki on

00:05:27.120 | Insta. Tim.Naki. I wouldn't have to run anything if I can just play one-handed blackjack with you

00:05:32.800 | guys and I'd land Jack Ace every week. That is unbelievable. And like we said, that 15K we won.

00:05:38.560 | That's yours for you and the misses. Go on vacation. No, no, no, no. We said it. We said it.

00:05:44.480 | We want you to do something. Go with it. We're already cashed up. You take that 15K. You take

00:05:50.080 | the misses out. You get some first class tickets. You meet Chamath in Italy and then let's go.

00:05:55.680 | That's it. How about I go first class to the Orland Summit now that now these are done.

00:06:00.160 | We could play some. Oh, we could have a whole session. We may or may not have a,

00:06:05.120 | have a fun casino night there. So this will be fun. Yeah. You got to come to the Orland Summit

00:06:08.960 | for sure. Yeah. Get the misses, take the 15K, two first class tickets, get yourself set up in a nice

00:06:14.320 | hotel and we will see you there. All right, everybody, let's get to the docket. Well done.

00:06:19.360 | Tim. Thank you, Tim. See you later. I can't believe they have live dealers standing in a

00:06:26.320 | warehouse in front of a webcam. I don't. That, that is such a like, imagine walking into that

00:06:31.280 | facility. You're surprised that facility only has what dealers. I think there's a lot of webcams

00:06:37.600 | there. I think you can choose a door of what you want to do. Or whatever else you want. Whatever

00:06:44.640 | else you want to be on a webcam. You'll be doing jewelry, probably making a porno in the next room.

00:06:48.720 | Above the table and below the table. There's two different tapings occurring.

00:06:54.400 | Oh my God. Well, that's rough. That was so awesome. So what happened? You DM'd him?

00:07:04.000 | That was so good. Yeah, we, he, you know what, no, what happened was somebody emailed me and

00:07:07.680 | they're like, Hey, that's my mate that you talked about. He's a big fan of the show. It turns out,

00:07:12.080 | you know, this is the thing about influencers. Now this is the thing about this micro celebrity

00:07:16.720 | stuff. We all, we all know each other by default. Right? So he was just slid into the DMs.

00:07:23.920 | There's definitely camaraderie. Yeah, that was awesome. That's awesome. I'm so glad he won.

00:07:28.160 | And, uh, you know, he, he basically got smashed in his DMs. Like 1000 people DM'd him. Oh,

00:07:33.200 | you're on all in. They're bugging out to you on all in. And, uh, so yeah, I just said, Hey,

00:07:37.520 | would you do a hand? Would you do your live hand with us? And then I didn't,

00:07:40.720 | I didn't, I want it to clear with you guys before I put our money on it or whatever,

00:07:44.160 | but I couldn't do that. Cause I wanted to surprise you. Yeah, but here we are.

00:07:47.680 | I did not think that was real when he popped up. I thought it was like a recording tech.

00:07:50.880 | Yeah. All I could think of was, do I look like an ass by saying more so that I just stay quiet?

00:07:57.040 | I was like, well, you know, I start with 50 K let's just see what happens.

00:08:03.280 | I know you're a feel like when you like tiptoe into the bat with like a small amount, but you're,

00:08:08.320 | you want to do more and then you win and you feel like you actually lost money because

00:08:12.560 | I lost 60 K. I would have put 50. I would have won 75 instead. We put 10, we won 15.

00:08:25.920 | I lost 60. I don't know what's going on. Anything going on in your life? Anybody

00:08:52.800 | been busy having some adventure sacks? Seems like you were busy last week. Any,

00:08:58.560 | anything to report from your side of the world?

00:09:00.720 | Well, should we take you, take you guys behind the scenes of a presidential fundraiser? I admit,

00:09:05.200 | I've never done one before. So it was, it was a new experience for me. When you host a president,

00:09:09.920 | it's just a whole different level of preparation. The secret service was out like a week before the

00:09:14.640 | president has an amazing advanced team. They work out every detail. They make a map of your house.

00:09:19.360 | So they really have to think through everything. The police shut down the street.

00:09:23.200 | It's really a very involved process.

00:09:27.280 | By the way, I went to dinner in the city that night and you know, I was right by your house.

00:09:34.240 | So I drove up the street and they had everything blocked off on like three blocks on both streets,

00:09:38.800 | like on both sides of your house. But there were all these protesters, like all throughout San

00:09:43.520 | Francisco, like pro Trump people had driven in from all over NorCal must've been, cause these

00:09:48.720 | were not supporters supporters. Yeah. And they came in with these like cars and the streets were

00:09:53.520 | blocked. It was a total zoo in the city for hours before and after your, I actually stayed in the

00:09:59.600 | city that night and I heard the people going nuts for hours afterwards, but it definitely like took

00:10:05.760 | over. It took over the city. Yeah. So what's really interesting is that all week, the San Francisco

00:10:10.160 | publications had been trying to gin up protesters by writing about that, you know, the president's

00:10:14.880 | coming to town and protesters are going to show up. And in fact, there was almost no anti-Trump

00:10:20.720 | protesters. And then a huge number of pro Trump demonstrators came out and they were waving flags

00:10:26.160 | and cheering along his motorcade as he was coming to the house. So the whole protest thing backfired.

00:10:32.640 | Why do you think anti-Trump protesters did not show up? What happened?

00:10:38.560 | I think there's just a big enthusiasm gap. I mean, I think that the pro Trump people are

00:10:43.120 | very enthusiastic and the let's call pro Biden or anti-Trump people are just not very motivated

00:10:49.120 | right now. So it's exhausting to be against Trump for eight years. Like this has been exhausting.

00:10:54.560 | People are wiped out. I think they've exhausted folks. It's a losing proposition.

00:10:58.000 | So anyway, so Owen McCabe, who's the founder of Intercom, he was there. And I think this was

00:11:03.520 | actually a good summary because he said that he spoke with a bunch of people and none of

00:11:08.800 | them identifies Republican, all voted or donated Democrat in the past. That's true for me too.

00:11:13.520 | Now they're backing this guy for his policies on war, immigration, crypto, and more.

00:11:18.160 | This election is referendum on those issues. So Owen came out, appreciate his support. But it's

00:11:23.360 | true. The campaign told us that they had more first-time donors at this event than they've

00:11:28.000 | seen before. And that's because a lot of these people hadn't supported Republicans or hadn't

00:11:33.760 | supported Trump and they came out. So we have a few photos and videos here to take you behind

00:11:37.760 | the scenes. I think that might be interesting for people. So the first thing to say is that

00:11:42.720 | President Trump is extremely charming. He connects with people in like five seconds. I mean,

00:11:47.040 | he meets you and find something interesting or funny to say. And he's hilarious. I mean,

00:11:54.160 | when he spoke in the living room and he talked extemporaneously for an hour, he's speaking off

00:12:01.120 | the cuff. Every speech he gives is different. This is him coming into the living room. He had made

00:12:07.920 | just a few notes about topics he wanted to talk about on a piece of paper, but that was it. It

00:12:12.640 | was all completely extemporaneous. No teleprompter, obviously. And he's hilarious. I mean, people

00:12:17.840 | don't realize how entertaining he is. What were some of the greatest hits? What did he hit on?

00:12:23.440 | Did he hit on low pressure from showers? Did he? Because I know he's got like some things he hits

00:12:30.480 | on that are relatable. Was it all like, specific crypto topics, tech topics? Or did he go?

00:12:36.160 | Well, he did, you know, he did talk crypto. And it was really interesting. At one point,

00:12:41.520 | in his speech, he called on the Winklevoss brothers who were there. And I'm only mentioning

00:12:46.400 | this because it was already reported that they were there. So I don't want to speak out of school.

00:12:50.480 | But he said to them, he says, I know you guys created Facebook. He was giving them credit for

00:12:56.640 | creating Facebook. And he said, but but it's okay. I mean, you guys look like models. You were dealt

00:13:02.880 | a lot of cards, you know, a lot of cards. I mean, they're very good looking, huge IQ. And I mean,

00:13:10.240 | looking great. And so I thought, okay, wow, like, he must know the Winklevoss brothers. He must have

00:13:15.600 | met them previously. And I found out this the first time that he had ever met them. So think

00:13:20.720 | about the awareness that he has to know that they're in the audience to see them, point them

00:13:25.360 | out and then have this kind of hilarious routine with them. So he's someone who's very sharp,

00:13:29.760 | very on the ball, very funny. And then his energy levels incredible. So he had started his day at

00:13:37.040 | Mar-a-Lago at 3.30am pacific time, 6.30am his time, then he flew to Arizona, did a Trump rally in

00:13:44.400 | Arizona. Then he flew to San Francisco for our event. He spent four hours at our event, he could

00:13:50.800 | have left an hour earlier if you wanted to, then he flew to LA for more events the next day there.

00:13:56.400 | So think about his day. And his energy level was just amazing the whole time.

00:14:01.520 | Chamath your thoughts before this goes on for an hour.

00:14:04.160 | Yeah, I'll give you two observations. The first is that I think that there is a huge gap

00:14:15.680 | between how the media tries to portray Donald Trump and what he's like when you meet him in

00:14:24.720 | person. And that gap is really wide. And so I would say specifically to Democrats and independents,

00:14:32.880 | you really do need to sit in the room and feel what it's like. He David, David is right. He is

00:14:41.680 | charismatic, he's intellectually sharp, and he's funny. And when you put that together,

00:14:47.040 | he can engage an audience for a long time and be totally extemporaneous. The other thing I would

00:14:52.240 | say that is that he is very polite. And he's kind in a way that was disarming and was not what I

00:14:59.600 | expected. And so I felt that I had misjudged him many years in the past. And so I was very glad

00:15:09.040 | that I had an opportunity to sit beside him and to actually interact with him one on one.

00:15:15.280 | It was really, really engaging. And so that's that's more about the style. And then about the

00:15:23.120 | substance, what I would say is, it was not just a pro America agenda. But it was, it's very clear

00:15:31.280 | that he was pro innovation. So he was really supportive of AI in the details that he talked

00:15:36.480 | about. He was very supportive of crypto in those details. And he's very much low regulation,

00:15:43.600 | low taxation. And so when you put that together, it does stand very much in contrast with what

00:15:49.680 | the alternative is. And so I think that both of those things are reason why even if you aren't

00:15:58.800 | willing to vote for him, I would encourage everybody to experience what it's like to hear

00:16:07.040 | freeberg, your thoughts on all this go to this. I didn't go to the event. I don't know. No,

00:16:13.520 | I know. Just big picture. I'm hosting this. I want to know why I came up didn't wear a tie.

00:16:18.160 | For analysis. You don't want the tie?

00:16:21.120 | Try doesn't need a tie is a baller. All right, say what what Trump said to you when he

00:16:27.040 | met Natalie. So it's us talking and he says, You guys are really beautiful couple.

00:16:31.360 | And I said, Well, thank you. And then he turns to me and he goes, Well, you must be really rich.

00:16:39.360 | And I started laughing out loud. Not thought he was hilarious.

00:16:47.200 | So because of the disparity in the looks between you and Nat is sort of implying

00:16:52.000 | you guys sat next to him at dinner. Yeah. And was that like an hour just

00:16:56.160 | private conversation between the three of you. This is the other thing that he does. He actually

00:17:00.240 | sits there and he says, you know, folks, I'm happy to continue to talk about whatever you want me to

00:17:04.720 | you feel free to ask me questions, or feel free to just go around the room and just tell me what you

00:17:09.840 | think. And what would happen is people would say different things. And then he would start asking

00:17:14.160 | questions of other people. And the thing becomes almost like this roundtable discussion of topics

00:17:18.880 | from we talked about Iran, we talked about foreign policy, we talked about deficits,

00:17:24.960 | regulation, everything. What did he say about deficit and debt?

00:17:30.080 | Well, he's very much he's very much on your side of, we have to really figure out how to get

00:17:37.600 | spending in order and get the deficit under control.

00:17:41.600 | Well, congrats on a sounds like a successful for you guys.

00:17:44.640 | Sounds like you guys are in the halls of power now. And

00:17:47.920 | Trump has flipped his positions on EVs, abortion and taking away a woman's right to choose

00:17:53.520 | slipped his position on Tick Tock and flipped his position on crypto. I give him a ton of credit

00:17:58.720 | for flips in a month. And he just sweeps all those votes. It's pretty smart. And for the

00:18:05.280 | Democrats who are listening, he's also pro losers, and you're not listening to people.

00:18:10.640 | So you're going to lose the election, and he's buying is going to get demolished.

00:18:14.480 | Nobody wants to vote for somebody who they think

00:18:16.720 | by Biden's getting demolished, right? That's your thought.

00:18:21.040 | I mean, did you see the video that came out this week where he was at some event? And

00:18:24.960 | yeah, it looks it looked like a moment, right? Where he was kind of frozen. He was like, I don't

00:18:30.960 | want to make it like elder abuse. And I know, like, elder abuse to sit to say, to be honest

00:18:38.320 | about what you're observing, especially when it comes to the most powerful role in America.

00:18:42.960 | Yeah, he's got a he's got a bow out 538 just put out their election forecast showing 51%

00:18:50.480 | chance of Biden winning 48% chance of Trump winning. As of two minutes ago.

00:18:56.080 | Yeah, who knows? I think it's all going to be determined by the deliveries,

00:18:59.520 | sacks, you were gonna say?

00:19:00.720 | Well, I just think what other job in America could Biden even be qualified for? Like, what

00:19:05.600 | would you hire him to do? Is there any? Is there any job you would hire him to do? Is there any

00:19:10.880 | physical job you would hire him to do? No, I'm to be your babysitter. I mean, I don't think there's

00:19:14.880 | any job in America that anybody would hire him to do. Except for maybe president. It's kind of kind

00:19:20.640 | of crazy. And this is where like the Democratic Party is in shambles. We should have the highest

00:19:25.360 | standards for the mental acuity, sharpness and energy level of our president. It's the most

00:19:31.280 | demanding job. We need a cognitive test. But the democrats need to just look deeply in the mirror

00:19:35.440 | and say, hey, you're fielding a candidate that nobody's going to vote for. That's the problem

00:19:40.960 | here. And there's not enough anti Trump sentiment. And Trump's a genius at flipping his position to

00:19:46.080 | get huge swaths of voters. And so you're going to get demolished if you don't hot swap them,

00:19:50.560 | I guarantee you hot swap is coming. I predicted the Trump flip. And I predict it now.

00:19:56.960 | I think I think you're right about maybe some of the issues where folks will get much more precise

00:20:01.920 | on these issues. But I actually think what's happening is that this is really going to be

00:20:07.920 | about Trump versus Kamala Harris. I don't think Biden is going to step down at all. But I do think

00:20:12.800 | there's a chance, a non trivial chance that Biden wins. And if he does, I don't think he's going to

00:20:19.840 | make it four years. And so then the real question is, do folks want Kamala? And have they had a

00:20:25.760 | chance to really figure out whether they want to vote for her or not? I think that's really where

00:20:29.840 | it's going to come down to. It's really Trump versus Kamala Harris. And if you if you frame

00:20:34.000 | it as that shemoth, then it's even a bigger trouncing, right? Like if you put Biden if you put

00:20:39.440 | Kamala against Trump, then what would the it would be a even bigger shellacking? Yeah.

00:20:45.440 | In your mind? I just think that without saying anything bad about Kamala, because I don't know

00:20:51.120 | much about her is really what I would say is I don't know much about her. And so you can't

00:20:55.520 | have somebody who gets into that role accidentally. I think there, we have to give

00:21:03.280 | both President Trump and President Biden a lot of credit, which is they stood in the eye of the

00:21:09.760 | hurricane, and which stood all the pressure and one and he who wins that way deserves to be the

00:21:18.480 | President of the United States. She hasn't withstood that. And so I think that it's pretty

00:21:26.800 | unfair for a lot of voters, if there is a bait and switch. And so I think that you have to look at

00:21:36.240 | both of these two candidates and assign a reasonable probability that both of them make it

00:21:42.080 | to the finish line. And from at least what I saw up close, I think it's a much higher probability

00:21:47.520 | that Donald Trump does than President Biden. And listen, Biden hasn't made it to the finish line

00:21:51.920 | of his first term. It's obvious to everybody who's in cognitive decline, you put up a candidate who's

00:21:56.160 | in cognitive decline, you're going to lose. Even against, you know, Trump, who people really don't

00:22:02.880 | like these are the two most unpopular candidates of our lifetime. I'm not sure about that. I don't

00:22:06.800 | think it's true that people don't like Trump. I think that he's got a core but yeah, no people,

00:22:11.360 | the Republicans, including yourself, we're looking for a different candidate just months ago,

00:22:17.280 | you said Trump was not your preferred candidate, and you were all in on DeSantis. So let's not

00:22:22.080 | pretend like he was your preferred candidate. He's the remaining can. So you're Yeah, I think it's

00:22:27.200 | wrong to say that there's not enthusiasm and love for Trump. We saw it on the streets. We saw it in

00:22:31.680 | that room. There's some do you see Logan Paul? Yes. Trump four years ago, he was for Biden.

00:22:37.120 | Now he's for Trump. Have you ever seen Trump walk into a UFC event? They go nuts for him.

00:22:41.280 | I'm just saying there's a lot of there's a lot of enthusiasm and a lot of love out there

00:22:45.680 | for Trump a lot of excitement. I don't see any of that for Biden. There are people who don't

00:22:50.000 | like Trump and that drives some support for Biden. But if you look at enthusiasm and excitement,

00:22:55.520 | it's all on the Trump side. In this we are in total agreement. Yes. There is no enthusiasm

00:23:01.200 | to put somebody in cognitive decline in the White House. All right, listen, we got to get to the

00:23:06.160 | docket. We could talk for hours about Biden, Biden, Biden, Trump, Trump, Trump, and we will

00:23:10.640 | it's going to be a continuing topic. But let's get to a very full docket here. Breaking news

00:23:17.120 | last night. Tesla shareholders have backed their guy. Yes, there was two important votes measures

00:23:24.720 | that Tesla just had taken with their shareholders. The first was approving

00:23:32.400 | Elon's pay package, the $56 billion pay package that was voided by a Delaware judge.

00:23:37.200 | We talked about that on episode 164 back in February. And then moving Tesla's incorporation

00:23:44.000 | from Delaware to Texas. This is also major. Remember we talked last week about the Texas

00:23:49.760 | stock exchange. Here's the two charts. Massive overwhelming support. There were some notable

00:23:55.280 | people who dissented I think Norway's sovereign wealth fund and helpers were two of the ones who

00:24:01.040 | were voting against it. Tesla share price popped 6% on the news. You don't want to lose

00:24:06.880 | Elon a Tesla that would be really bad. So your thoughts Chamath on this vote,

00:24:13.680 | and maybe the move and what that represents. It's kind of odd that we're in this crazy place.

00:24:21.280 | Same. When that original package was unveiled. There was a lot of people including me,

00:24:31.360 | who thought there's no way he's going to hit this. It's just way too aggressive. And it requires

00:24:38.880 | so many things to go right. And so I think in part, that's why three quarters of the Tesla

00:24:47.040 | shareholders approved it that 73% is not squeaking over the line. It's not 50% plus a vote. It's,

00:24:55.280 | it's a super majority. And that excluded Kimball and Elon shares. So, and then I think you have

00:25:01.760 | this very dangerous form of judicial activism, which essentially ignored the will of the

00:25:09.200 | shareholders and fight to create some administrative ruling that threw up this big question mark. So

00:25:18.480 | then in in typical Elon style, he's like, great, we're just going to get them to vote it again.

00:25:25.040 | And then yet again, it passes, and it looks like it's going to pass by around 73%.

00:25:28.720 | But the problem now is that it's still not clear what happens. I think that there's still some

00:25:33.440 | question marks where this may not nullify the judge's decision, it may actually create more

00:25:42.160 | question marks. So hopefully, this gets sorted out, he should get this stock, he never should

00:25:47.120 | have or these options, he never should have had them taken away. And so I just hope this thing,

00:25:52.240 | yeah, it becomes a nothing burger. Sachs, you have thoughts on this outcome?

00:25:57.440 | Is it surprising to you? Not surprising. And then I think the jurisdiction thing is bigger than

00:26:02.240 | maybe people are thinking because Delaware has been the standard for incorporating companies,

00:26:10.400 | but Elon is putting his companies in Nevada. And Texas, we saw the stock exchange last week,

00:26:16.560 | getting back to move to Texas. This does seem like there's something about jurisdiction

00:26:22.000 | in the water. What are your thoughts, Sachs? Well, I think it's ironic that the winning margin,

00:26:26.960 | 73%, is the same margin by which shareholders approved his comp package back in 2018. So again,

00:26:34.000 | they got 73% voted for this 2018. Now they voted to reapprove it by the same margin.

00:26:40.320 | And the reason why they had to do it is because this activist judge in Delaware avoided it

00:26:45.840 | on the grounds that somehow the original shareholder vote wasn't valid. And I think

00:26:50.160 | this is interesting that the margin didn't change because it shows that shareholders aren't in

00:26:55.680 | grades. Elon delivered what he promised, and now shareholders are upholding their end of the

00:27:01.360 | bargain. And certainly they didn't have to take that position. There were different groups like

00:27:05.920 | CalSTRS who basically took the position, "What have you done for me lately?" Yeah, you delivered,

00:27:11.600 | but we don't have to pay you because of the judge, so we're not going to pay you. And I think

00:27:15.680 | shareholders wisely approved the package because I think there was some chance that if they were

00:27:20.800 | nagged that Elon could leave the company. And I still think he's absolutely vital to all the

00:27:25.360 | innovation that's going to come in the future from Tesla. And you see this, the stock is ripping on

00:27:31.120 | the news. It's up about 3% today in a down market. So clearly the market thinks that securing Elon's

00:27:38.720 | future at the company was the right decision and shareholders did the right thing. In terms of the

00:27:45.120 | downstream effect on this, like you said, it raises the specter of Delaware being an activist

00:27:53.040 | state. That's not why anyone incorporates in Delaware. The reason why you incorporated in

00:27:57.360 | Delaware is because you think it makes you subject to an extremely predictable body of

00:28:03.040 | corporate law that's been tested and become bulletproof over many, many decades. And now

00:28:09.280 | all of a sudden you have to worry that maybe a judge will set aside a shareholder vote for reasons

00:28:16.640 | that seem incredibly specious, especially in light of the fact that the shareholders just re-approved

00:28:21.760 | it. So obviously the shareholders didn't think they needed your protection and they voted to

00:28:27.680 | reverse you. And moreover, Tesla could still be subject to paying the legal fees of these trial

00:28:34.240 | lawyers who've asked for literally billions of dollars in legal fees that the judge still has

00:28:39.840 | to rule on. So imagine this. Imagine that the shareholder vote gets set aside by the judge,

00:28:45.680 | it then gets re-approved by shareholders, but the trial lawyers who brought this nuisance suit

00:28:50.320 | can now get billions of dollars. If that happens, I mean, Delaware can kind of kiss its status as

00:28:56.000 | the premier corporate law state away. - Friedberg, is this a John Galt moment?

00:29:01.840 | Is this where capitalism, socialism, and the state collide and people now start thinking,

00:29:08.640 | hmm, maybe we need to create a new jurisdiction, a new framework?

00:29:14.240 | - That's a good question. I think it's a good example for capitalism.

00:29:17.520 | And I think it should shine the light on how other CEOs are getting compensated

00:29:22.960 | at public companies where there's typically a multi-million dollar or multi-deca-million

00:29:28.080 | dollar pay package that has no dependency on the performance of the business. You can make

00:29:33.440 | tens of millions of dollars a year and not drive shareholder value. And I think that the way that

00:29:39.920 | this deal was structured, where Elon effectively got 10% of the company for 10X-ing the stock,

00:29:46.960 | should be an example that other boards should actively consider when considering both candidates

00:29:54.560 | and their appetite for this sort of a package and their compensation packages themselves.

00:30:00.800 | The way executive comp typically works at the board level at public companies

00:30:04.880 | is you hire these comp consultants. And the comp consultants come in and they use comparables,

00:30:10.240 | which basically means let's do what everyone else does. And so you have this self-reinforcing system

00:30:16.080 | of compensation and benefits for CEOs that bumps up a little bit every year

00:30:21.120 | that ultimately has some degree of ownership in the stock, but fundamentally has very little

00:30:26.320 | downside. And Elon had no guarantees in his pay package when he got this comp package originally

00:30:32.880 | in 2018. And he got 10% of the company if he 10X-ed the stock, which is what he did.

00:30:39.600 | I really think that it is worth having this become the kind of beacon for all boards to consider.

00:30:46.880 | And it seems like shareholders in aggregate are applauding the concept. And look, Elon is a

00:30:52.080 | special guy. And he gets special treatment. But I think that it moves the needle and should move

00:30:57.120 | the needle a little bit for other CEOs and other boards to stand up and say we should think about

00:31:02.400 | something that looks a lot more like this than what we typically do. And I think you would find

00:31:07.040 | a very different cast of people showing up to become CEOs and to drive performance out of

00:31:11.680 | these businesses and a lot more risky and aggressive behavior than what I think you

00:31:15.040 | would typically see in big companies that are in maintenance mode.

00:31:18.640 | What do you guys think of the organizations that initially voted yes and now voted no?

00:31:25.600 | They basically are saying, look, I mean, if you think about it, you're a big public company. I

00:31:28.640 | don't know what ISS recommended. This is institutional shareholder services.

00:31:31.520 | They recommended no both times.

00:31:33.920 | Right. And so ISS basically is what a lot of big public fund managers will follow when they make

00:31:39.840 | their votes. And so if I'm a shareholder, that's not what I'm saying. But like, let's say let's say

00:31:45.360 | that I'm BlackRock or I'm a shareholder, I'm not gonna put BlackRock as some big shareholder Tesla

00:31:49.200 | stock. Why would I vote to give away 10% of the company when I don't have to?

00:31:55.760 | Yeah, very simple, because he would leave, he would morals and ethics

00:31:59.680 | matter. And you want to do the right thing. And you want to incentivize capitalism to operate

00:32:06.160 | properly and want to incentivize the people who take on the burden of running these companies.

00:32:10.800 | And the people who voted against it, I think people should just make a list of those individuals,

00:32:15.280 | Jamal. And they should not do business with that. Because if somebody is going to double cross you,

00:32:20.320 | they've shown you who they are. These are people who double cross them. They got the benefit,

00:32:24.880 | and then they stabbed him in the back. Make a list.

00:32:26.960 | That's exactly what they did. That's exactly what they did.

00:32:29.520 | It's worse if they voted yes, the first time and then they voted no.

00:32:32.960 | No, I'm saying and then

00:32:33.840 | there's a no, no, then maybe you're just against the deal. But if you're yes, no,

00:32:38.160 | then that's a renege.

00:32:40.320 | Then you're a true scumbag. You're a scumbag. Is that public anywhere who did that?

00:32:44.640 | Yeah, there are a bunch of folks that said that they you know, I think it was CalPERS that voted

00:32:48.000 | yes. And then when they were on trying to explain they were like, tap dancing and like corporate

00:32:53.040 | jargon. But really what they are scumbags. Jason, you're right. They are morally and ethically void

00:32:58.320 | and they're reneging. And this is the one rule in business you're not allowed to do. And the

00:33:02.720 | people that do that are these penny pinching scumbags. I'm not saying a blacklist. But I would

00:33:08.240 | say making a list of people who maybe you want to consider not doing business with is how I would

00:33:12.720 | frame it. These are public market investors that are private investors, they buy the stock on the

00:33:17.760 | open market. So they don't have to worry. I mean, I think the question is, what are the chances that

00:33:21.040 | Elon leaves the company? If he doesn't didn't get the pay package, the chances that was a risk. And

00:33:25.760 | I think that was a non zero possibility about it. Yeah, non zero possibility.

00:33:30.080 | You made an agreement with somebody and you shook their hand.

00:33:32.400 | Yeah, well, I don't care whether he would have left or not left. This is I have to do the right

00:33:38.240 | thing. You have to do the right thing. You promised the guy X amount of money for doing Y amount of

00:33:43.040 | things. He did the Y things and then you had a judge come over the top because of somebody who

00:33:48.880 | owned 10 shares. And all I'm saying is if you if you don't have the intellectual intelligence to

00:33:54.560 | look past that and say, Wait a minute, we just paid the guy to do this work. And now we're going

00:33:58.400 | to rename their gaming the system. I just think that like, how can anyone who is capable of doing

00:34:04.160 | a job sign up for a pay package? How could anyone and the people that will sign up are these like

00:34:10.480 | middling corpo people who will accomplish nothing and will run these companies in ways that then

00:34:17.920 | speaks to organizations that have just proven themselves to be totally unreliable.

00:34:23.920 | The irony of the thing is that these folks thought that they were getting a 10% free roll

00:34:29.600 | when they voted no. And the reality is that by him getting the pay package,

00:34:34.480 | the certainty of him sticking around at the company caused the stock to go up by 10%.

00:34:38.320 | So they actually had the calculus wrong, that if they had gotten their way,

00:34:43.280 | the stock would have declined by more than the 10% free roll they thought they were getting.

00:34:46.960 | This is I think that the main point 10% being the ownership of the company that he gets. Yeah.

00:34:51.520 | The pay package was laughed at on CNBC by all the experts, there's no way for him to hit this stuff.

00:34:58.000 | If he does hit it, he's getting a fraction of the value of it. And this is why stock is

00:35:02.480 | such a valuable device. If employees get stock, and the CEO gets stock and everybody in between

00:35:08.480 | and retail investors get it and endowments get it and your retirement account gets it.

00:35:12.880 | Everybody rose in the right direction. Is it perfect? No, people can buy back their stock,

00:35:16.800 | they can do a little gaming on the margins. But it is the most pure system we have. Everybody

00:35:21.680 | has a share of the company. So if you're a socialist, you know, like you should actually

00:35:26.720 | kind of appreciate how stock works that everybody has a chance to buy, everybody has a chance to

00:35:32.080 | participate. This is the model we should be using for all CEOs, they should all get a massive

00:35:38.480 | package. If the stock goes up into the right. It's so obvious. And this was so unfair. Let's

00:35:43.920 | see this flipper. I want to see their explanation. Compensation is commensurate with the performance

00:35:49.520 | of the company. Did you vote for it in 2018? I believe we did vote for it in 2018. This is

00:35:55.920 | about long term value. But do you believe you were duped in 2018? No, I believe we use the

00:36:02.000 | information we had available and made the best choice. Okay, so here's what I find so interesting

00:36:06.480 | about this particular choice. 73% I believe of shareholders voted in favor of in 2018.

00:36:13.600 | A judge has said that shareholders were not informed properly. If you talk to most shareholders,

00:36:18.720 | by the way, especially big shareholders, they say we were not duped, we understood completely

00:36:21.920 | what we're doing. And we were on board with this. Now that this opportunity, almost opportunity has

00:36:28.080 | arrived on your doorstep, to say to actually rethink this, if you will. There's a view that,

00:36:35.040 | oh, maybe maybe we're not getting the value. We thought we thought we should. You thought you

00:36:40.000 | should get it. But he's worked by the way, under the assumption that he was hitting the numbers,

00:36:46.240 | right, and dealing with the contract. If I told you that you were being paid a certain amount of

00:36:52.560 | money in 2018, and then I called you and said, actually, you know what, we're not going to give

00:36:56.560 | you that money anymore. What would you do? That's a great question. I would, I would go to my board,

00:37:03.280 | you know, I would talk with my board is so smug. What is her name? Karen Frost. I don't think she's

00:37:10.240 | smug. Sorry, Marshy Frost. I'm sorry. That was Karen Frost. I think like this is emblematic

00:37:15.520 | of the kind of person who is incapable of actually doing the right thing. And there's a lot of these

00:37:22.000 | people that run a lot of these organizations that I mean, what what kind of an answer is?

00:37:27.440 | I mean, it was a non answer. That's why I said it was smug. Let me just ask each of you. You've all

00:37:32.960 | started companies. Some of you are still running companies. Would you take money from her and

00:37:36.880 | CalPERS? After that statement? Hard no for me. But remember, she's not investing in private

00:37:42.400 | companies. She's buying stock on the open market. So CalPERS announced that CalPERS announced that

00:37:48.080 | they're an LP and they're starting to do directs. Okay, I didn't know that. Yeah, they're trying to

00:37:52.640 | catch up. They've been behind on venture. Let's call this whole thing what it is. It was a heist.

00:37:59.360 | You had these trial lawyers, they find a name plaintiff who's got nine shares.

00:38:04.000 | And on a contingency fee basis, they go after Elon's pay package. What are they looking for?

00:38:10.160 | $5.6 billion. How does a lawyer make $5 billion? How motivated this whole thing? They don't care

00:38:17.520 | about Tesla. They don't care about the company. They don't care about shareholders. They're

00:38:21.840 | looking for a giant multi billion dollar contingency fee payment. And they took their

00:38:27.520 | shot and they found a Delaware judge to basically agree with them, even though shareholders approved

00:38:33.200 | it. And then shareholders re-approved it. So my question is, how much are these trial lawyers

00:38:38.240 | going to get? Is a judge going to award them billions of dollars for what was clearly now

00:38:42.960 | a mistake to avoid a pay package that shareholders wanted to stick with? If they award these lawyers

00:38:50.160 | billions of dollars, which is what they're seeking, no one's going to want to do business in Delaware

00:38:54.240 | anymore, because it subjects you to the stick up heist by trial lawyers. So I think that's

00:39:01.600 | going to be the next big shooter drop is what are these trial lawyers get awarded?

00:39:06.000 | Because they also wanted to get paid in Tesla shares.

00:39:09.360 | No, I'm serious. Here's an idea by the shares yourself.

00:39:13.920 | Yeah, they said we don't like your management of the company, but we will take your shares.

00:39:17.600 | Yeah, by the way, they got their shares, and then they voted to give you the next pay package.

00:39:23.120 | So it's just a full on grip.

00:39:24.560 | But Delaware is supposed to protect corporations against this grift.

00:39:30.080 | That's why people incorporate there.

00:39:31.520 | When people ask why does Delaware have this special place that everybody decided Delaware

00:39:36.560 | would be where we incorporate it was because it was predictable. Lawyers felt this was the

00:39:40.640 | most predictable jurisdiction that would be the most shareholder, friendly, most shareholder,

00:39:47.520 | thoughtful, whatever word you want to use, they would defend the shareholders. And here we are.

00:39:52.560 | The last company I started 8090 we incorporated in Nevada, and I just read domiciled a couple of

00:39:59.280 | other companies that I own into Nevada as well. It's becoming a trend. We're having very big

00:40:05.040 | discussions about this in the startup community of where to domicile your company and more to

00:40:10.480 | come on this one. Okay, let's keep moving. Apple had a huge announcement this week, Apple has

00:40:15.600 | entered the chat, they announced Apple intelligence, get it AI. And they have included a chat GPT

00:40:22.400 | integration from open AI. This was really, I think, impressive in many ways, because people

00:40:28.960 | thought Apple was far behind. It was a banger of a demo, a lot of un Apple like future looking

00:40:34.640 | demos. So none of these demos that we're going to show are coming to your phone this week.

00:40:38.880 | They were really, I think, playing catch up with Microsoft. And it worked stock is up 10%.

00:40:46.720 | They added about 300 billion in market cap. Now the top three market cap companies are all driven

00:40:52.320 | specifically by the perception that AI is going to be the next technological wave.

00:40:58.640 | Microsoft, Apple and Nvidia all cruising around about $3.2 trillion. And this top three keeps

00:41:07.760 | flipping back and forth Apple had passed Microsoft and market cap. Here's the features. I'll just

00:41:13.760 | give you a quick overview of what we're seeing. It's added grammarly like features, great product

00:41:19.200 | grammarly, I'm not an investor, but they added the ability to proof get grammar help AI will

00:41:23.840 | transcribe and summarize phone calls with permission, obviously double opt in, it will

00:41:28.880 | prioritize notifications and I message an email that are super important. You can do smart replies,

00:41:33.600 | and company where an investor in superhuman already does this kind of stuff. And they're

00:41:38.480 | bringing AI to Siri and this is going to be the big win in my mind, you're going to be able to

00:41:45.440 | say things like you want to order something in DoorDash or Uber Eats or Instacart. And it's the

00:41:51.440 | AI Siri will be able to dip down into apps, they're building a whole app AI interface, much like the

00:41:57.920 | rabbit device CEO talked about doing. And I think this means that Apple is going to win the AI

00:42:03.760 | consumer. There is a deal with chat GPT that I'll get your feedback on gentlemen in a moment.

00:42:08.720 | According to sources, Apple is not paying open AI. It's a non exclusive deal chat GPT can be

00:42:14.160 | swapped out. Apple is also talking to Google about a similar deal. Obviously, it doesn't take a

00:42:19.600 | genius to predict that Apple is going to auction off the LLM integration, I think to the highest

00:42:24.160 | bidder they did that with the search deal. Google pays Apple 20 billion to be the default search

00:42:28.720 | engine. That's about 5% of Apple's annual revenue, if you didn't know. And it's all profit, right? So

00:42:34.960 | this is a huge profit moment. I'm going to pause there for a second before I get into more of this

00:42:40.880 | and just get your general reaction, Chamath. I think you nailed it right at the beginning.

00:42:46.960 | The thing that I was struck by the most in this is we went from a phase where in the Steve Jobs era,

00:42:56.320 | these events were because you're about to unveil a product that was done and shipping as of that day.

00:43:06.160 | And then at some point, we transitioned to they are talking about products that they intend to

00:43:13.200 | release within a year. Now we've shifted to the part where they're talking about software

00:43:18.480 | integrations from a third party that will happen in a year. So if you just look at it sequentially,

00:43:24.640 | it's a little disappointing in that sense, because for a company this big,

00:43:28.560 | it's really not much of anything. You can't really touch it and feel it. And it's going to take a

00:43:35.760 | year before we really know what the totality of all of this is. Meanwhile, the economics of the

00:43:44.560 | chat GPT deal were leaked, and there's no money on either side. So I don't know, it's a little

00:43:51.280 | bit of like, it's really not much of anything, to be honest, because there's nothing we can

00:43:56.080 | actually play with and experience for your thoughts on the vision here, at least. And

00:44:01.840 | to Chamat's point, Apple used to release dope stuff, fully baked, ready to go. And now we

00:44:10.560 | are increasingly see them talking about what's coming next year, or at some point, do you think

00:44:15.840 | Apple's going to win the consumer? Do you think Apple's falling behind? Should they have built

00:44:18.720 | their own LLM by this point? I'm not sure I think what they have shown is more of a glimpse into the

00:44:25.680 | future of hardware, where for the last two decades or so, hardware has mostly been a portal to access

00:44:34.160 | the internet and use the internet through apps or through the browser. And hardware has done a good

00:44:38.560 | job of enabling that. But I think we're now going to see a much more tighter coupling, where the

00:44:43.200 | hardware becomes more valuable, and it's less of this kind of funnel for apps to flow through and

00:44:49.440 | data to flow through, but the hardware actually becomes the value creator. And you see a much more

00:44:53.600 | tighter integration in the hardware OS, and the AI or the software that enables you to do lots of

00:44:59.040 | things, you're no longer just going to use the hardware to access an app to do something. So a

00:45:03.360 | lot of the companies that are app developers are likely going to end up becoming services developers

00:45:08.320 | that enable that hardware AI to do something for you. And this coupling between hardware and

00:45:13.120 | software because of the way AI works, is I think, becoming more apparent, not just in consumer

00:45:18.000 | devices, but we see it in the data center and in the enterprise stack, as well. You know, we've

00:45:22.960 | seen that, obviously, there's this tight integration between the chip and the software stack that Grok

00:45:27.760 | built, there's a tight integration between Google's TPU stack, and then the ML instances and the and

00:45:33.520 | the tools that you can use in Google Cloud, that are optimized for use on that TPU hardware,

00:45:39.360 | Nvidia has got a big effort, obviously, in continuing to build out their software stack

00:45:43.200 | that sits on top of their hardware and works in a more coupled way. And then Google has this

00:45:47.360 | ability to kind of realize, I think, a similar outcome with pixel phones, which is a pretty

00:45:52.400 | sizable opportunity for them. And then all of the hardware manufacturers can probably grab more value

00:45:57.120 | now, as they build their own AI into their OS, and you start to see more of this value realized by

00:46:02.400 | the hardware companies. So I think that there's this really interesting shift, where we've all

00:46:07.120 | thought about hardware as being this like commodity, where there's some degree of like,

00:46:11.120 | improvement or innovation made over time. But now it seems like a lot of value might actually get

00:46:16.800 | captured by hardware companies in all points in the value stack. So it's an interesting moment.

00:46:21.680 | And I think that this just shines a light on that trend that I think is going to play out over the

00:46:26.080 | next couple of years. It's clear sacks that right now, to enable these features, you're going to

00:46:32.400 | have to have a pretty solid device. They announced here at the keynote at WWDC that you need to have

00:46:39.760 | an M one chip or better iPhone 15 or better. So and having all this local data is a huge advantage

00:46:47.760 | for Apple, they've got your messages, your phone, your calendar, your photos, your app behavior,

00:46:53.440 | the data inside of your wallet, all of this gives them a huge, huge advantage. So I guess the

00:46:59.280 | question is, do you think this renews the Apple franchise and people start upgrading their phones

00:47:05.920 | again to get all these new features, David sacks? Well, the market definitely thinks so because

00:47:10.560 | Apple was up big on this news. And even if it was largely vaporware, at this point, the market

00:47:15.600 | definitely liked where they were going. And frankly, Apple did exactly what I said they

00:47:20.080 | should do last week, which was to reinvent Siri as an LLM with the ability with the capability to

00:47:25.600 | reach into apps as an agent and take actions on the user's behalf. That's what they effectively

00:47:30.720 | announced. However, Apple took a shortcut to get here. They partnered with open AI. And this is

00:47:37.440 | something that I don't think they've ever really done before at the operating system level. Apple

00:47:42.720 | is famous for being vertically integrated for being a walled garden for being end to end,

00:47:46.960 | they control everything from the chips to the hardware to the operating system, and they don't

00:47:52.640 | let anybody else in until you're at the app store layer. This is allowing somebody in beneath the

00:47:58.800 | level of the app store. This is allowing someone open AI to get access to your data and to control

00:48:04.240 | your apps at the operating system level. And I think, you know, Elon pointed out, wait a second,

00:48:08.800 | what are the privacy implications here. And I think there are major privacy implications,

00:48:12.800 | there's simply no way that you're going to allow an AI on your phone to take all these actions on

00:48:18.080 | your behalf without giving that model substantial amounts of user data. And that is a huge change

00:48:26.080 | for Apple. Remember, Apple in the past has been the advocate for consumer privacy. There's a whole

00:48:33.360 | issue of the San Bernardino terrorist, where the FBI went to Apple and said, we want you to give

00:48:38.640 | us backdoor access to their phone, and Apple refused to do it and went to court to defend

00:48:43.280 | user privacy. And furthermore, one of Apple's defenses to the arguments, the antitrust arguments

00:48:49.680 | for allowing side loading, and allowing, you know, other apps to get access to parts of the operating

00:48:55.120 | system, as they've always said, we can't do this because it would jeopardize user privacy and user

00:49:00.080 | security. Well, here they are opening themselves up to open AI in a very deep and fundamental way,

00:49:07.360 | in order to accelerate the development of these features. In other words, they took the shortcut,

00:49:11.520 | they could have developed the LM themselves, they could have developed the AI themselves,

00:49:15.440 | but they chose not to do that. And I think this is going to open Pandora's box for Apple. Because

00:49:20.560 | again, they've proven that they can open up the operating system to a third party now. And who

00:49:25.520 | knows what the privacy implications of this are going to be. It turns out Apple has addressed

00:49:30.000 | this head on, they hear the concerns and much like when you share a photo, or you share your location,

00:49:36.640 | it's going to ask you over and over again, do you want to let this app do this? So they're aware that

00:49:41.600 | this is an issue, they brought up privacy every single time, but people don't trust open AI.

00:49:46.400 | And they do trust Apple. So this is strange bedfellows, to be short, your thoughts.

00:49:51.360 | I think that Apple really cares about privacy when they're trying to hurt a company they don't like,

00:49:58.160 | ie meta. They're willing to figure out a way to work around it when

00:50:04.720 | there's a company that they clearly support open AI.

00:50:08.640 | Yeah, well, you're behind, you know, you behave differently than when you're ahead and you have

00:50:12.560 | your monopoly. Freeberg, you wanted to add anything here before we move on to the next story. Okay,

00:50:16.880 | in related news, open AI has hit a run rate. And this is kind of stunning $3.4 billion.

00:50:25.040 | That means they've roughly doubled their monthly revenue in the past six months or so.

00:50:32.240 | These are not official numbers, open AI is denying them. But here's a chart

00:50:35.920 | that somebody put together based on all the different leaks and approximations of

00:50:40.320 | what open AI is making. The reason this makes no sense to chart and it shows a year,

00:50:46.800 | and then it shows a month, a month, a month, a month, is because there's been different leaks

00:50:50.320 | at different points in time. But just to normalize this in 2022, for all of 2022,

00:50:55.120 | before, they really had a lot of customers 28 million, and now on a $3.4 billion run rate.

00:51:02.080 | Again, it's pretty stunning number, if it's true, you can do apples to apples here, because like

00:51:07.360 | 2023, Jan is 200 million. That means that June is 300 million, if they're on a $3.6 billion run rate.

00:51:14.480 | Yeah. And so if we were to even look at, you know, the number of people who work there 770,

00:51:20.720 | if you put that at 500,000, a person, some engineers getting a couple of million,

00:51:24.240 | some people may be getting less, they're probably only got a half billion dollars in salaries a year,

00:51:29.200 | who knows what they're spending on the infrastructure for this. If you were to do

00:51:34.880 | a valuation on this, everybody knows they sold a bunch of shares in secondary at around 80 billion,

00:51:40.400 | which means they're trading at, if these numbers are true, 25 times for revenue,

00:51:46.000 | which is close to what Nvidia is trading at right now. Obviously, they're two very different

00:51:50.720 | businesses. So your thoughts on this as a SaaS company, obviously, the majority of this revenue

00:51:56.960 | is consumption based, some portion of it is SaaS space reoccurring, like subscriptions, we pay for

00:52:02.320 | at launch my venture fund, we pay for 6000 a year to have all 2025 people on chat GPT,

00:52:09.760 | as a corporate account, maybe it's 250 300 a year per person. So what do you think of this business

00:52:14.080 | sacks and how fast it's growing? Obviously, some of its API consumption based, not reoccurring,

00:52:19.440 | some of it is reoccurring. First of all, let me say that, you know, we've talked about AI

00:52:23.200 | General Hospital and all the soap opera issues around open AI. Yeah. And, you know, judge tax

00:52:28.160 | had opinions on that. Yes. But putting that aside, I mean, everyone acknowledges that their products

00:52:33.200 | are awesome. I mean, open AI makes really great products with chat GPT 4.0 being at the top of

00:52:39.440 | the list. And I talked about how, when we moved from chat GPT 4.0 turbo to 4.0 at glue, the speed

00:52:48.080 | and quality went up, you know, at least two x and it felt like 10x. So they have the best language

00:52:54.960 | model as of this point in time. And they also have other products that are really great, like the

00:52:59.040 | whisper API, which does transcription. I mean, there's a whole bunch of tools they have that

00:53:03.440 | are great for developers. So nobody's taking anything away from them on the product side.

00:53:08.720 | And I think you're seeing that in this revenue number. Now, if I was to try and take apart this

00:53:15.200 | business as an investor, I would separate the b2c business from the b2b business. The b2c is a

00:53:21.840 | consumer subscription plan, people paying $20 a month. I'm one of them, I paid the 20 bucks a

00:53:27.040 | month is probably the only LLM that I would pay 20 bucks a month for how often you use it daily,

00:53:34.400 | weekly, monthly, I'd say a handful of times. It's not to be honest, it's not like a daily use for

00:53:40.400 | me. But I probably use it every week, I would say at least once. Yeah, so I still use it. I have to

00:53:46.000 | say, though, that the other LLMs are catching up. And if Gemini ever gets good enough, or you know,

00:53:52.240 | when Brock gets to the next level, am I going to stick with that $20 a month plan? I'm not sure it

00:53:56.960 | depends whether open AI can really maintain the the leadership it has or the perception of

00:54:03.040 | leadership. Okay, so that's half the business. And then the other part of the business is the b2b,

00:54:08.480 | which is the API products that effectively they're selling to developers. And that's where I would

00:54:14.320 | place the future value of this company. I mean, as somebody who invests in SAS, when we see a

00:54:19.520 | business that has b2c subscriptions and b2b, we place all the value on b2b. And the reason is

00:54:25.280 | because historically, the churn rates and b2c are too high. Yeah, five to 10% churn rates are common

00:54:31.680 | 50% a year per month or month 50% churn a year very common. Open AI may not be experiencing that

00:54:40.080 | yet. But it's very hard to avoid the downdraft of consumer churn. And and, you know, on the other

00:54:47.120 | hand, on the b2b side, a good b2b business has expansion 120% 150% expansion year over year from

00:54:54.400 | same customers. In other words, they're ordering more. So you compare this business to Amazon Web

00:54:59.520 | Services, Google Cloud, Azure, that's really the business here. Yeah, the first thing I'd

00:55:04.160 | want to know is how much of the 3.4 billion is consumer and how much of it is is developers

00:55:09.280 | will find out eventually Chamath your thoughts on opening eyes surging revenue.

00:55:14.000 | I'm kind of in David's camp, which is I think, to the extent that the

00:55:16.720 | business has a large terminal value, it's going to be because of the enterprise cash flows.

00:55:24.800 | The thing to keep in mind is that I still haven't seen enterprises building

00:55:32.320 | production level products using AI.

00:55:36.240 | It's all experimentational, right? It's all experiments now.

00:55:38.960 | That's nothing against open AI. It's just a commentary on the fact that we are

00:55:43.280 | at a very, very early part of the cycle, where, when you use this term blast radius,

00:55:50.560 | right, what are you referring to, you're referring to this idea that you're stringing together

00:55:55.040 | elements of a model or multiple models that each have some non trivial error rate. And by multiplying

00:56:03.040 | all these error rates together, you get your final product. But the unfortunate reality in most AI

00:56:09.120 | workloads is that you end up with something that's not very good. And that's not the fault of open

00:56:15.360 | AI, nor is it the fault of llama. It's just the nature of how these bottles work. And the fact

00:56:19.840 | that you know, you've gone from something very, you know, deterministic to something that's very

00:56:24.080 | probabilistic. And we have not found a way to create extremely high quality experiences, we as

00:56:31.360 | an industry that make this cost justifiable. So right now, as you said, Jason, most of that is

00:56:37.840 | toy apps and a lot of experimentation. Will we get there? I absolutely think so. But we're not

00:56:44.560 | there yet. So I suspect that most of the revenue then is on the consumer side right now, actually.

00:56:51.920 | And so I just looked at Google Trends. And I first looked at the United States. And I just wanted to

00:56:55.760 | understand how is the traction. And what's interesting is, is that the traffic in the

00:57:01.680 | United States is down about 2526% since the end of the school year, which I think reinforces this

00:57:10.000 | belief that chat GPT has definitely over indexed in that young people's cohort where they rely on

00:57:16.800 | it to write essays or what have you. But then I looked outside the United States and worldwide.

00:57:22.080 | And what's interesting about that is that's actually still growing up into the right. So

00:57:26.720 | I think you have then an ARPU problem, which is the same thing that we had to deal with at Facebook,

00:57:31.920 | which is we have these extremely valuable users in America, they asymptote at some point, and

00:57:36.880 | then we have to grow in other markets, but those markets aren't nearly as lucrative. Right.

00:57:41.280 | They just use their ARPU per year is single digits, maybe it hits double digits, as opposed

00:57:49.120 | to states where it could be triple digits, right. So then I don't know, I would just wrap up by

00:57:52.480 | saying that I think that it's just if this number is right, it's just an incredible testament to

00:57:58.000 | what they've been able to uncover and create in a short amount of time. That is legendary stuff.

00:58:05.920 | Yep. But what I can tell you, in working with enterprises around these AI experiences through

00:58:12.400 | 8090, we have not yet seen production quality models being deployed in the wild that are

00:58:22.640 | dealing with very, very important business processes, which means that most of the revenue

00:58:28.960 | right now is probably consumer oriented. Okay, Freiburg, you I don't know if you got to see

00:58:33.440 | Sonny's talk at liquidity last week, but he talked about how many of the CIOs CEOs are looking for

00:58:39.520 | open source solutions here. 80% of them want to go open source, they don't want a proprietary model

00:58:44.960 | to invest in. But the best model right now is a proprietary model. So what do you think about

00:58:51.200 | open AI's revenue surge? Is it sustainable? Or are there 20 better open source projects that

00:58:58.320 | are going to be death by 20 open source project cuts? And Tramont's general feeling here that Hey,

00:59:04.880 | it's not ready for primetime yet. It will be but we're in the AI dial up era to use an analogy

00:59:10.720 | here. Hey, you can see the promise, but it kind of sucks in terms of reliability.

00:59:14.400 | Maybe open AI is AOL. Right? Like, I think that there's going to be a Google that'll show up

00:59:20.320 | that'll maybe it's Google, it'll grab a large part of the value here. Or, you know, ultimately,

00:59:27.680 | the cost comes down so much with the open source tools. I do believe that these open source tools

00:59:33.360 | are incredible. I mean, the the open source llama instances are like they get you 85 to 90%

00:59:39.600 | of what you're looking for. So if you're an enterprise user, why would you pay 1000s of

00:59:44.000 | dollars for the open AI platform when you can use llama, and you can tune it and you can build your

00:59:49.120 | own front end to it, your own integration with your own data, etc, etc. It's just early days

00:59:54.080 | for enterprises figuring out how to do that. But I do really believe that the future is enterprises,

01:00:01.440 | companies building their own LLM driven tools for both internal and external products that leverage

01:00:10.240 | smaller open source models. And that we're kind of in this, you know, dearth of people's

01:00:16.640 | understanding and ability on how to actually execute against that, which makes the default to

01:00:20.720 | be go to the chat GPT interface, I will also provide a counter. I just did a big project at

01:00:26.640 | work this week, we had a like a big offsite with 20 people involved. And everyone use chat GPT to

01:00:31.440 | get ready for it. So there was a ton of analysis, a ton of data gathering a ton of reporting needed

01:00:36.320 | for the offsite. And rather than hire a third party or have people go out and source data

01:00:42.320 | themselves. A lot of us including myself, I prepared like maybe a quarter of the material,

01:00:47.360 | just use chat GPT and pull the sources to make sure it was all

01:00:50.320 | did you did pull sources and check facts, right? You do have to

01:00:53.520 | yeah, so we pulled the sort and there was a lot of wrong stuff, just to be clear.

01:00:56.800 | But for a ballpark percent, I would say 25% of it was like wrong. And then you had to clarify.

01:01:02.960 | But the truth is for this particular application, it didn't matter. We were making some

01:01:06.880 | approximations on markets and sizes and, and various facts that we were kind of using to

01:01:11.840 | do some strategy stuff, but some product development stuff. So I would say like,

01:01:16.080 | it wasn't useful, you found 100%. And I would say it saved us hundreds of hours,

01:01:20.240 | hundreds of hours. And were you paying them an enterprise license or a consumer license?

01:01:24.720 | 20 bucks a month. What is that? It's the same thing for the enterprise, Jamal, you can

01:01:29.520 | just sign up and for 20 bucks a month, you can have your whole free bird. Yeah, no free bird,

01:01:36.080 | like you're just paying it yourself. Or you pay for everybody at Guadalajara.

01:01:39.200 | I think everyone has the right to pay for I think other people at the company pay for it too. I pay

01:01:42.960 | like I, I have my I don't have like a corporate thing set up. So everyone basically took the time

01:01:48.080 | to set up the corporate, it's really easy. And then anybody with your domain can sign up and

01:01:51.920 | let you track it, but it doesn't consolidate. That's what I'm looking for. Chamath is the

01:01:55.600 | ability to consolidate all the searches in one place. And everybody can share their searches.

01:01:59.840 | But like I said, we application is what you're doing, right? In some ways, x collaborative AI,

01:02:04.960 | it's an application today, meaning like, we go to the app, we ask questions, we get answers,

01:02:08.960 | and we use that. And I actually had to pull tables down. And I dropped those tables in,

01:02:12.880 | like all sorts of great stuff that could do, you know, do some analysis, pull out the stuff,

01:02:16.880 | what the analysis showed, understanding unit economics and various businesses,

01:02:20.960 | all this sort of stuff that it consolidates. Definitely makes everybody bionic. I agree.

01:02:25.920 | But what it's what it doesn't do yet, is take all of our internal data and all of our internal

01:02:30.640 | tooling and kind of reconfigure how we use that. So we're still paying for a whole bunch of

01:02:36.560 | enterprise software and SAS licenses for things that we know we don't want to be paying for in

01:02:41.440 | the future. And we're now starting to figure out how can we build our own AI based software

01:02:46.960 | to replace a lot of the dependency we have on third party software that uses our internal data

01:02:51.440 | for our internal consumption. So there's a lot of that still ahead of us. And that's why I know and

01:02:55.920 | we're pretty progressive. So that's why I know it's early innings, because I see the way we're

01:03:00.240 | going to use it. And I know that we're probably well ahead of a big enterprise companies that are

01:03:04.320 | more traditional. And so I can see like a couple years from now, all these big enterprises are

01:03:08.960 | going to figure the same thing out. And then you're not necessarily going to need to pay for

01:03:12.880 | this chat GPT stuff. If there's an internal tool and an internal LLM that young people are really

01:03:20.800 | getting dependent on this, and they use it constantly. We're on our investment team meeting,

01:03:24.960 | we're evaluating a company for real estate brokers, we're evaluating a company

01:03:28.560 | for therapists and like tools and SAS products for those type of people. And when I asked them,

01:03:34.240 | well, how many what's the total addressable market? Boom, three or four researchers and

01:03:38.000 | analysts on my team are doing that search, finding sources and saying there are this

01:03:42.080 | many therapists, this many social workers, this many real estate brokers as many buyers.

01:03:45.840 | And then I'm saying, Well, did you source them? Like, yeah, of course I asked. And like,

01:03:49.600 | one of them was like, Well, I asked Claude, I asked Gemini, I asked chat GPT, I asked them all

01:03:54.560 | for sources, I cross reference them. So they're like, have three of these things open. And so

01:03:58.720 | just everybody's knowledge level goes up. But you do have to check it because one out of four facts

01:04:03.040 | is probably wrong, or cited wrong. And so it's going to be, I think one out of four is about

01:04:08.320 | the right number. Yeah. And so it's interesting. So you use multiple LMS to find the hallucinations.

01:04:14.640 | Yeah, basically, you cross reference, actually, pretty interesting.

01:04:17.520 | I jump on Gemini, too. So I use Gemini dot Google, and I use chat GPT.

01:04:21.200 | And I just make sure that stuff lines up just sanity check things. Because I'm

01:04:25.120 | sure you're not going to pay for these, right? How many would you be willing to pay for?

01:04:28.880 | I mean, five, you'd pay for five different elements. Well, think about it. If somebody's

01:04:33.840 | salary is 100,000. And these costs $1,000 to have five of them, of course, I pay for five,

01:04:38.800 | because it's 1% of their size as a work tool, you know, I guess, I guess there's three categories

01:04:43.360 | to their business. Now that you're raising this, there's sort of the consumer subscriptions.

01:04:47.920 | Yeah, then there's the business descriptions, which are basically the consumer product,

01:04:51.520 | but a company's paying for it. Correct. And then there's the developers paying for

01:04:55.120 | metered consumption. Yeah, yeah, this that that enterprise is really powerful.

01:05:00.720 | Yeah, it's kind of like Microsoft Office or Google Docs, where consumers use them for,

01:05:06.080 | for free or want to use them for free. And companies will pay for it. And that's where

01:05:09.680 | the real money is. Anyway, this is going to make people bionic, I think all organizations will have

01:05:15.040 | the same number of people for the next couple of years. And then just individuals will get better

01:05:19.760 | and better at their jobs. And so efficiency is going to go way up. Speaking of efficiency,

01:05:24.640 | the market is ripping. We're going to get a little macro here in three acts inflation has

01:05:31.040 | been broken. I think it's safe to say we're down at three point x 3.3 lower than expected. And

01:05:37.840 | hiring wages are surging and stocks are surging. So let's go through it here and get the besties

01:05:44.960 | take on the vibe session. I actually disagree with that framing. Jason. Yeah, I agree. I

01:05:49.920 | disagree as well disagree with it. Let me go through the numbers. And then you can all disagree.

01:05:52.960 | That's how that's how this works, folks. Inflation print came at 3.3% lower than expected.

01:05:58.800 | Here's your 10 year chart. Super easy to explain what's happening here rates were low for a long

01:06:02.320 | time, inflation cruising at about 2%. And then lunatic spending during COVID. And we added a

01:06:09.360 | trillion to the national debt. And then Biden added a bunch everybody getting those STEMI checks and

01:06:13.920 | PPP loans. And so if you look at inflation here, we were just cruising along at 2%

01:06:18.800 | massive spike up to 9% year over year inflation and now coming back down to three point x. And

01:06:25.280 | the question is, can we get to a to handle and the rates went up faster than in ever in history.

01:06:31.760 | Here's the Fred chart you can see there in the and this goes from the 80s. So you see that massive

01:06:36.960 | spike when they try to break the back of inflation previously. So this is the fastest ever gone up.

01:06:44.080 | And here we go. The common sentiment here is that savings has been burned off and people are starting

01:06:49.520 | to have debt. And so now we are in act to the lowest unemployment rate of our lifetime continues.

01:06:57.280 | If you believe those numbers, some people do some people don't. Labor Department reported 272,000

01:07:04.000 | new jobs in May, smashing crushing the hundred 90,000 estimate. And then act three, average hourly

01:07:13.280 | wages up a massive 4% from last year at $35 an hour that also topped estimates. So if inflation

01:07:21.200 | is at three point x and hourly earnings are at four point x, maybe consumers will start feeling

01:07:25.200 | better about the economy eventually. They obviously been pretty shocked by that 9% inflation, and only

01:07:31.360 | 4% growth. Here's your chart from Fred, and the hourly earnings of all employees. And you can feel

01:07:38.480 | pretty good about that where everybody's wages keep going up. The question is, do they go up

01:07:41.920 | faster than inflation? Okay, so there's my framing of the situation. Freeberg, tell me what I got

01:07:47.520 | right. Tell me what I got wrong. I think there are three numbers that matter. Okay, inflation rate,

01:07:52.080 | the growth in GDP, and the cost to borrow. The growth in GDP in the first quarter of 2024

01:08:00.560 | was a lousy 1.3% on an annualized basis. And even if the rate of inflation came down,

01:08:09.280 | we are still inflating the cost of everything by north of 3%. So the economy is only growing

01:08:15.440 | by 1.3%. And it costs more than 3% more each year to buy stuff. So that means everyone's spending

01:08:22.720 | power is reducing. And our ability and our government's ability to tax is declining because

01:08:28.880 | the economy is only growing by 1.3%. And the most important fact is that the interest rates

01:08:34.320 | are still between four and 5%, four and 4.7%. That means that to borrow money costs 4.7%.

01:08:41.360 | But the businesses the economy on average is only growing 1.3%. So just think about that for a

01:08:47.680 | second. We have a tremendous amount of leverage on businesses on the economy on on the federal

01:08:54.320 | government, that leverage the cost to pay for that debt is more than four to five, four to 5%.

01:09:00.400 | But you're only growing your revenue by 1.3%. So at some point, you cannot make your payments.

01:09:06.960 | And the rate and the goal was that is true for consumers. That is true for enterprises. And it

01:09:13.120 | is true for the federal government. Just to point out here, what you're saying the goal was to in

01:09:17.680 | fact, increase the interest rate just to cool the economy, right, which they got too late. But that

01:09:23.600 | was the goal. That was the explicit goal was to cool the economy. Yeah, the whole purpose of

01:09:27.120 | raising rates is to slow the flow of money through the economy. And by slowing the flow of money

01:09:32.240 | through the economy, there is less spending, which means that there is you're reducing the demand

01:09:36.960 | relative to the supply. So the cost of things should come down, you should reduce the rate of

01:09:41.600 | the increase in the cost of things. Now, if you click on this link, Nick that I just sent you,

01:09:46.320 | in response to the condition in the economy today, Elizabeth Warren sent this note to Jerome Powell,

01:09:52.960 | three days ago, saying, Dear Mr. Powell, or dear Chair Powell, we right today to urge the

01:09:58.880 | Federal Reserve to cut the federal funds rate from its current two decade high of 5.5%. The sustained

01:10:05.840 | period of high interest rates is already slowing the economy and is failing to address the remaining

01:10:11.120 | key drivers of inflation. She goes on to point out the fact that consumers are suffering, businesses

01:10:16.800 | are suffering. And the strain of these three numbers is really starting to show on individuals

01:10:22.640 | on businesses and obviously on the power of the dollar. But the dollar is a different story. So

01:10:27.040 | yeah, the condition of the economy and the rest of the world. And we're in a very unique position.

01:10:31.840 | But I think that things are not as rosy. Now, there's a certainly a shift in the market,

01:10:36.080 | because what this tells us is that the timeline at which the Fed will cut rates is coming in a

01:10:39.760 | little bit, relatively speaking. And so the market is saying, Okay, let's adjust to lower

01:10:44.320 | rates, the 10 year Treasury yield has come down a bit. But we are still in a difficult situation

01:10:49.280 | for people and for the for businesses. And you have Elizabeth Warren, who I think is the voice

01:10:53.920 | of small businesses and consumers. She's cut. She's trying to be the voice of those.

01:10:58.480 | This is very hard on people to mop. What's your take on this? We have a slowing GDP growth.

01:11:07.040 | We have inflation going from nine down to three. We have wages going up 4%. How do you make sense

01:11:15.520 | of all this? Do you feel like sorry, Friedberg? Are you saying we're going to have stagflation?

01:11:20.000 | Or we have stagflation right now? Definitely. But I what I'm saying is that it's not a rosy picture,

01:11:26.800 | just because labor rates are going up. If the labor rates aren't going up, you can see this

01:11:33.360 | ultimately the best number for this is the sum of GDP growth. So in aggregate, if the revenue of

01:11:37.760 | everything combined, which is GDP isn't going up faster than the increase in the cost of everything,

01:11:43.280 | people, businesses and the government can't afford their stuff. And that's fundamentally what's going

01:11:48.240 | on right now, what we need to see is a normalization, where GDP growth is greater than

01:11:53.280 | inflation rate. And as soon as that happens, then we have a more normalized and stable economy. So

01:11:59.280 | right now, things are not stable. There's a lot of difficulty and strain in the system.

01:12:03.040 | I will put myself on the other side of that trade. If there was one, if I had to simplify the United

01:12:10.960 | States economy, remember, GDP is 70% spending by individual people. And so people can spend two

01:12:22.000 | things savings that they have, or credit that they have. And what's interesting is that we have

01:12:29.840 | finally burned through and this is what this shows all of the money that folks had in their bank

01:12:37.040 | accounts. And so what does that force people to do it actually forces people to re enter the

01:12:44.800 | workforce so that they can start to make money. But the problem is that companies have been

01:12:51.120 | shrinking and have been on a defensive posture. And so as a result, which you started to see this

01:12:57.520 | past unemployment report, unemployment is now taking up because when these people re enter

01:13:02.560 | the workforce, there are no jobs for them to have people are filing incremental unemployment

01:13:07.520 | insurance claims, states like California, in fact, the state of California was the worst off

01:13:12.880 | this past month. So I think what we're starting to see is that for the large portion of the economy,

01:13:18.560 | we've run out of cash to spend. And as a result, I do think that we are going to see an economic

01:13:27.040 | slowing. And I think that that will create not just enormous, empirical justification for Jerome

01:13:35.840 | Powell, it'll be exacerbated by what Friedberg just showed, which is the political pressure

01:13:41.200 | that he's going to be under to cut. Will it cause him to cut more aggressively than he would have

01:13:46.720 | otherwise? On the margins, I actually think yes. But my perspective is that I think that we've run

01:13:54.160 | out of money, individual people. So I think unemployment is going back up. I think GDP

01:13:59.120 | is going to shrink. Yeah. And so I kind of tend to be in this camp that we're going to see more

01:14:04.080 | than one rate cut. So here is total job openings. To your point, Shamath, they're getting burned

01:14:08.880 | off. We peaked at 12 million. Again, if you believe the numbers are not there, they obviously

01:14:13.120 | have some value. And we've burned off a ton of those. So sex, what's your non political,

01:14:19.680 | non partisan take first principles of what's going on with the economy?

01:14:23.440 | Well, look, we just had this inflation report, CPI was 3.3%. The market was expecting 3.4%. So

01:14:29.280 | that's a teeny bit better than expected. But it's still persistently sticky, inflation is. And

01:14:35.520 | furthermore, Powell's comments were very hawkish. He basically said he could not commit to when

01:14:44.240 | rate cuts might begin. And we're ready. Remember, at the beginning of the year, we entered the year

01:14:49.200 | with expectations for seven rate cuts this year. Now we're down to an expectation of one rate cut.

01:14:55.760 | And we can't say for sure when that's going to happen. So honestly, I think your introduction

01:15:00.400 | overstated how positive this news was. And that's why I think if you look at the markets right now,

01:15:06.160 | it's very mixed. Most tech stocks that I'm seeing are actually in the red. And a few of them like

01:15:12.400 | Tesla and Apple and Nvidia are up. But the vast majority are in the red. So I think the market is

01:15:18.240 | taking this in stride. I think the big picture here is just we don't know when rate cuts are

01:15:22.400 | going to begin. And I think that Vinnie Lingham had a really interesting take on this, actually,

01:15:27.760 | where he said, look, could Powell cut by a quarter point? Would that matter that much? No,

01:15:33.280 | it wouldn't matter that much. But the point is, Powell doesn't want to say that the rate

01:15:37.840 | height cycle is over, right? If he were to cut by a quarter point, that by itself wouldn't do much,

01:15:44.160 | but it would be a huge statement that we're out of the woods on inflation, there's not going to be

01:15:48.160 | any more hikes coming. And we're beginning a new rate cut cycle. And Powell is clearly unwilling

01:15:53.360 | to say that. We're still in this like limbo where he is saying that we don't know when rate cuts are

01:15:58.480 | going to begin. Betting markets had to a 70% chance of two rate cuts before Powell spoke

01:16:03.600 | afterwards. Now it's one rate cut Dow record high again, this past week, and NASDAQ record highs

01:16:11.680 | each of the last like, month for the last four months of the market. Putting aside individual

01:16:17.440 | stocks has broken records almost every month for the last three free bird on the back of like two

01:16:23.440 | stocks. I mean, Nvidia is holding up the whole market. There's a lot of funny memes about this

01:16:28.320 | Nvidia, Microsoft, and stocks have are holding up the whole market.

01:16:34.640 | Correct. Yes, record stock market. What is Jerome Powell have to gain or lose

01:16:40.000 | by bowing to political pressure? So a lot of folks mentioned and references kind of

01:16:45.600 | there's political pressure for him to do something. But why would he bow? What does

01:16:50.640 | he care? What do you think the motivation is for Powell individually? And what is the political

01:16:57.440 | process that will ensue future? He doesn't bow to political pressure.

01:17:01.360 | I think it's the legacy and the perception that he leaves behind. I think, had he not

01:17:06.880 | over promised and under delivered at the end of last year, remember, he was promising a sack set

01:17:11.200 | six or seven rate cuts, and he's delivered bupkis. And the markets were none too pleased. And so now

01:17:18.320 | I think he's just swung the pendulum to the other side, which is he's going to massively under

01:17:22.480 | promise, and then over deliver if he can. And so as a result, I think he's being much more measured

01:17:28.720 | and guarded. I don't think he wants to be wrong here. So I think he's thinking about what most

01:17:32.960 | folks think about when they're at the tail end of their of a job like this. He's not going to

01:17:36.960 | get reappointed, he's going to go off into the sunset. It's roughly about how history will write

01:17:41.760 | how he handled the transition from that to the next phase, whatever that is. So I think he's

01:17:46.160 | probably very interested in making sure he doesn't break the economy. And also that he doesn't seem

01:17:50.720 | like he's constantly waffling and unpredictable. But isn't he just an autonomous agent that is

01:17:55.040 | meant to respond to the data? I guess I'm not quite understanding the degree of judgment and

01:17:59.280 | discretion that everyone seems to have a free bird. They have a mandate. But if you're asking

01:18:04.800 | what his incentives are, I think his main incentive at this point is concerned for his historical

01:18:10.640 | legacy. And specifically, he wants to be thought of like Volcker, not like Arthur Burns in the 70s.

01:18:16.880 | Volcker basically crushed inflation even at the cost of recession. And he is worshiped today as

01:18:23.440 | the best Fed chair ever. Whereas Burns let inflation slip the leash in the 1970s. And

01:18:29.760 | he's not thought of very highly. So I think that Powell's main concern here is with his historical

01:18:34.560 | legacy. At this point, I don't think he's expecting to be reappointed. He's wrapping up

01:18:38.160 | his second term already. Now, I think if you go back to 2021, the incentives were a little bit

01:18:44.160 | different. Powell wanted to be reappointed by Biden. And remember that in the summer of 2021,

01:18:49.840 | that's when the inflation began. We had that surprise 5.1% inflation Brent. Powell was up for

01:18:56.080 | renomination and confirmation in November of 2021. And I think what happened back in that year is the

01:19:02.880 | administration downplayed the inflation report. They called it transitory. Yellen did, Biden did.

01:19:08.080 | And so Powell had to get on board with that message if he wanted to get confirmed by the

01:19:12.720 | Democrats. And he did get on board with that message. He repeated the whole transitory point.

01:19:16.880 | And for that reason, they didn't begin the rate hike cycle until March of the following year.

01:19:21.120 | And from that May inflation Brent to November, they kept doing QE, even though we had inflation

01:19:27.520 | back in the system. So I think that Powell was actually intensely political in 2021. He knew

01:19:35.040 | who was going to reappoint him and who was going to have to confirm him. And he got on board with

01:19:39.200 | that message. And that's why they were so slow to react to the inflation. And I think it was

01:19:43.920 | disastrous. And that's one of the reasons why the rate tightening cycle was so steep is because he

01:19:48.240 | had to catch up with all this inflation that he had allowed for nine months longer than he should

01:19:53.040 | have. But if you ask me what's his incentive now, I think it's purely about legacy. And he does not

01:19:59.200 | want to let inflation come back after cutting rates a little too soon. So his incentive,

01:20:05.680 | I think at this point is to make sure that he's not wrong again about inflation.

01:20:11.360 | And to remind everybody, maximum employment, stable prices, moderate long-term interest

01:20:16.400 | rates is the mandate for the Federal Reserve. They're supposed to be independent,

01:20:20.720 | famously Reagan pushed Volcker to get rate cuts. And there is a lot of politics involved in this.

01:20:29.040 | And so legacy does seem like the organizing principle here. I would agree with Chamath and

01:20:36.240 | Sachs that it's legacy, but there's always political pressure here. As you can see,

01:20:40.320 | Elizabeth Warren is trying to push him to make cuts for obvious reasons.

01:20:45.040 | Well, no, there's politics when they're up for appointment or for reappointment

01:20:51.440 | for confirmation, basically, because they want to get that vote.

01:20:55.840 | Yes, but there's also subtle pressure. And then there's letter writing like Elizabeth

01:20:59.840 | Warren's doing here, right? So the pressure can be there. The question is, do they bow to it?

01:21:03.840 | Right, Sachs?

01:21:04.480 | Yeah, they don't have to. I mean, the Fed is independent.

01:21:06.480 | What do they stand to gain or lose by the pressure is my question. And I'm not sure I

01:21:10.720 | really like this concept. Exactly. And I think that's really where there's a important point

01:21:15.520 | to note here that you can identify the guy's motivation and how he's going to operate

01:21:20.080 | this year, because there is no political pressure. There wasn't in 2021. And I think that's why he

01:21:24.880 | was slow to react. Listen, if Powell can stick the landing here, then his legacy comes out intact.

01:21:33.280 | But if he screws this up, and then he was slow to react to the inflation back in 2021 and 2022,

01:21:39.840 | his legacy is going to be mud. So I think he's going to be more concerned about erring on the

01:21:46.720 | side of tamping down inflation than erring on the side of the economy not doing as well.

01:21:52.560 | I think those are the incentives.

01:21:54.960 | My position is I think he might have already stuck the landing. I think the fact that we've

01:21:59.920 | burned off all that savings to your point, Chamath, that people are going back to work,

01:22:03.840 | and that these businesses are doing fantastic and efficient because of AI and other gains.

01:22:09.200 | It feels like all the record that he I think he's already talks that are no, no, they're,

01:22:15.920 | they're trying to go back to work, but the jobs don't exist.

01:22:18.560 | I think they're going to take jobs, they just might get the job they want. And that's what

01:22:23.760 | I think people have to recognize is they have to take a job. And they may not be the one that they

01:22:29.520 | want working from home.

01:22:30.960 | We could have a negative recessionary print going into the election cycle. I think that's very

01:22:35.760 | possible. Yeah, exactly.

01:22:38.160 | I don't know, Jason, look, I'm hearing a lot of happy talk right now. And I agree with you. You

01:22:44.560 | had 1.3% GDP growth rate with a 6% of GDP deficit by the government. If the government wasn't

01:22:51.600 | printing so much money wasn't overspending. That's right. If you were to have a balanced budget,

01:22:56.240 | it would be a recession.

01:22:57.440 | Yeah. Think about that just to try to be negative, it would be negative GDP growth,

01:23:02.160 | if not for the government's program stimulating the economy.

01:23:04.960 | And a lot of the jobs you're talking about are government jobs, the government is creating jobs

01:23:10.320 | like crazy, not in the private sector, but in the public sector, because it is an election year. So

01:23:15.520 | there's a lot of political forces propping things up. And I wonder what happens after the election.

01:23:22.480 | Find out. All right, everybody, this has been another amazing episode of the all in podcast.

01:23:29.440 | Just one last thing, guys, this is really important. So friend of the pod, Peter Fenton,

01:23:33.280 | who's a famous VC in Silicon Valley tweeted that his sister has been diagnosed with a rare sarcoma.

01:23:40.400 | And they are searching for lookalike cases to do a study at Dana Farber. And if this works,

01:23:49.280 | it will change the future of cancer. But they are seeking this researcher William Gibson,

01:23:54.000 | who he's retweeting, is seeking patients with myoxoid myosarcoma, featuring a PLAG1 fusion.

01:24:02.240 | So if you are somebody out there who has a case like this, then please reach out and let us know

01:24:10.960 | or let Peter Fenton know this could save a life or many lives. His sister is also the wife of

01:24:18.800 | a good friend of ours, Peter Brigger. So our thoughts are definitely with you. And if there's

01:24:24.080 | anybody out there who has this type of rare sarcoma, please let us know. And we can refer

01:24:30.480 | you to Dana Farber. And this is a very important study that may save some lives. Pete and Peter

01:24:37.280 | are great guys. And our thoughts with Devin. I hope you guys find a cure. Okay, best wishes to

01:24:41.680 | Peter and his sister. Help out if you can. And you're in our thoughts and our prayers.

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