E20: Robinhood wrap up, Insiders vs. Outsiders, California's failing report card & how to fix it

00:00:00.000 | i'm going all in with your beak with your beak with your beak

00:00:07.520 | let your winners ride brain man david sacks

00:00:15.160 | and it said we open sourced it to the fans and they've just gone crazy

00:00:21.520 | love you guys

00:00:22.480 | all right everybody welcome it is the podcast you've been waiting for the all-in pod emergency

00:00:31.200 | episode 20 the number 11 podcast in the world number one in tech number 11 overall

00:00:39.700 | joe rogan sway pivot npr rachel maddow left in the dust welcome to the number 11 podcast

00:00:50.180 | in the world can you believe it

00:00:52.400 | you're going to be the queen of kinwad

00:00:52.460 | you're going to be the queen of kinwad

00:00:52.460 | besties with us the queen of kinwad himself david friedberg rain man david sacks

00:00:58.000 | hot off the banger by young spielberg closing up episode 19 and of course

00:01:04.820 | the dictator chamath palihapitiya how we doing boys lovely how are you jayka lovely friedberg

00:01:13.640 | lovely lovely it's a lovely tuesday emergency pod and sacks with you guys um retired from craft

00:01:22.440 | to pursue his dream of being a fox news host how's that going for sacks now that you've got full media

00:01:29.720 | blitz well yeah i've been i've been invited i was on bloomberg i've been invited on cnbc tomorrow i

00:01:35.880 | might even be on fox on thursday so everybody maybe tucker everybody wants a piece of the besties

00:01:42.520 | everybody wants a piece unbelievable we were pariahs in our own industry and now we've

00:01:48.520 | transcended tech and taken our rightful position i got invited to the show today and i'm going to

00:01:52.420 | it on cnn which is crazy uh on what show on which the guy with the british accent he kind of does um

00:01:59.460 | pierce morgan no there's another guy who does cnn international and they were doing like a whole

00:02:04.980 | oh that guy yeah yeah yeah you know the guy with the glasses he's funny he's pretty funny yeah

00:02:10.020 | i didn't do it i really do not want to speak for robin hood but uh we do need to

00:02:16.580 | pick up where we left off in episode 19 which a lot of people were wondering

00:02:22.100 | are we still friends are we still we are um but i do want to say one thing um jason and i talked

00:02:30.980 | this weekend and he said something to me which i actually thought about a lot which is that hey

00:02:36.820 | chamath when you get that emotional you know i think the the point of what you're saying gets

00:02:41.220 | lost and um i had i had a lot of time to think about that um so one i wanted to say jk out if

00:02:47.700 | if anything i said um you know hurt your feelings uh

00:02:51.940 | i want to say i'm sorry i think you are the most incredibly loyal person and that you know spans

00:02:57.300 | friendship to being an investor too so i just wanted to say i'm sorry to you and to be quite

00:03:02.500 | honest with you when i when i listened to a couple of my comments i was like wow you know i was a

00:03:07.140 | little emotional um and i think uh it didn't need to be that super extreme i think you know the

00:03:14.020 | thing that it touches for me is like i forget sometimes maybe where i'm at today and i go back to

00:03:19.700 | where i was 20 years ago or how i felt as a 16 year old and i channeled that a little bit so

00:03:26.100 | anyways jake i just want to say i love you with all my heart and i'm sorry i love you too chamath

00:03:29.540 | and you know it did get a little bit personal and we were all passionate about you know

00:03:35.140 | our positions and you know it was a little difficult for me because i'm trying to give my guys

00:03:42.900 | my team robin hood the benefit of the doubt and it wasn't an easy week obviously to do that but just

00:03:48.420 | to to recap here sunday vlad was on clubhouse with elon musk our pal who almost blew up clubhouse

00:03:57.860 | and uh there were so many people trying to get into that room and i think it tops out at 5 000

00:04:02.260 | on clubhouse that people were holding their phones up to their youtube accounts i think that's

00:04:06.340 | probably how most of us listened to it was the youtube people were just syndicating it live to

00:04:10.820 | youtube but uh elon did a tremendous job interviewing vlad uh which is leads to a really

00:04:17.700 | interesting topic

00:04:18.340 | david about subjects just routing around the press and going directly i mean elon is now

00:04:24.740 | the best interviewer in the business um and he basically said listen did you have a gun to your

00:04:29.780 | head and i think it was pretty much that uh according to the reports that have come out

00:04:34.740 | the depository and trust and clearing corporation which is wall street's main clearinghouse for stock

00:04:38.660 | trades demanded three billion dollars in additional collateral from robin hood which

00:04:42.500 | they said was an order of magnitude more than usually required we all know they um

00:04:48.180 | raised 2.4 billion this week on top of the 1 billion from wednesday on top of the 600 million

00:04:53.620 | dollar credit line that's 4 billion in cash apparently the requirement for them went from

00:04:58.820 | 3 billion to 700 million so it seems like that's there's some equaling out of uh what they have to

00:05:04.580 | cover and uh the gme short interest dropped in half today it's monday i'm sorry it's tuesday but

00:05:10.900 | yesterday it had dropped in half the squeeze seems to have settled down wall street bets has clearly

00:05:15.460 | won and of course um

00:05:17.300 | episode did uh jason did supernova i i didn't listen to it but did um

00:05:23.140 | do you guys think that uh elon and vlad got to the truth like was it clear sax well let's get an

00:05:29.620 | independent party here sex yeah so um i i thought that the interview was was a bit curious um because

00:05:38.260 | uh it it took elon several tries to get vlad to say the the quite frankly the obvious answer

00:05:46.180 | um elon set it up saying you know what i think all of us were thinking which is look were you

00:05:53.460 | either forced to do this or is it an action that you decided to take and if so why and you know and

00:06:01.140 | and elon kept trying to get him to say yeah we were forced to do this and vlad wouldn't quite

00:06:05.860 | say that he gave these very vague ambiguous answers which is why elon finally said listen

00:06:10.660 | did you have a gun to your head or not blink twice you know yeah um and so it was i don't i don't know

00:06:12.100 | whether it was um a function of miscommunication or whether we just don't know all the facts yet

00:06:21.700 | but i don't feel like the interview put everything to rest the way that it easily could have

00:06:27.300 | um and and look i don't want to be i don't want to pile on to the situation i you know i'm i'm

00:06:34.100 | pro-founder i'm going to give vlad and robin hood the benefit of the doubt here i think probably

00:06:39.060 | they were compelled in some way to do this i don't think they want to be compelled to do this i don't

00:06:41.620 | think they want to be compelled to do this i don't think they want to be compelled to do this i don't

00:06:41.940 | think they want to be compelled to do this i don't think they want to be compelled to do this i don't

00:06:42.040 | think they want to be compelled to do this i don't think they want to be compelled to do this i don't

00:06:42.080 | to do it but you know if we're going to make this a teaching moment what i would say is

00:06:45.920 | like to any founder if you're ever in the position of having to take an action that is inimical to

00:06:52.000 | your stated mission right and their stated mission is freedom to trade what was the word you used

00:06:57.840 | sure yeah if you're going to basically violate your stated mission you either need to post the

00:07:06.800 | government order that required you to do that or you need to post a very well-reasoned blog

00:07:11.920 | explaining why you're doing that and you know if i were robin hood and i got a call in the middle

00:07:17.200 | of the night saying that you have to basically take this trade offline i would say well give

00:07:22.480 | that to me in writing because i'm gonna have to post that on my website right if i don't have a

00:07:26.240 | choice about that i you know i need to be able to refer back to this industry order that i'm

00:07:30.560 | receiving and the fact they didn't do that and the fact that they didn't post a blog explaining

00:07:35.360 | the reasons behind the

00:07:36.800 | choice and in fact vlad's now had to go back three times to explain it i think that's created this

00:07:42.320 | world of problems for them there's a difference between this being a regulatory requirement and

00:07:47.680 | a commercial requirement correct like if you think about the you know the the the law um the

00:07:54.240 | regulatory body um that oversees the law that that that kind of um uh oversees what they're doing

00:08:01.280 | business-wise the sec or whomever could have come in and said here's the here's what i'm telling you

00:08:05.200 | you have to do i'm your regulator

00:08:06.640 | um but what happened was there there are these clearing firms that they partner with that said

00:08:11.280 | i need you to post more capital and rather than post more capital or take the risk of going

00:08:17.040 | bankrupt they said we are going to restrict trading to minimize the capital requirements

00:08:21.520 | that we have on our book and so if you think about what that decision comes down to it's

00:08:26.000 | a decision of either our customers are going to lose money or we're going to lose money and

00:08:30.960 | and i know that it's not that black and white but you know it's very difficult to kind of

00:08:36.480 | explain the nuance of what took place there um but it really was a point of like we are going to

00:08:41.840 | lose money or we are going to go bankrupt or our customers are going to have to lose money

00:08:45.840 | and that's such a tough decision i can't imagine any executive any of us being in that situation

00:08:50.480 | and deciding do you protect your shareholders or do you protect your customers and how much do you

00:08:54.080 | let your shareholders lose how much do you let your customers lose and it was a very complicated

00:08:58.640 | situation that they found themselves in because their business model was predicated on this

00:09:03.920 | clearing you know on this model that they ran

00:09:06.160 | ran that uh when suddenly a lot of risk came on the book they didn't have the capital to cover it

00:09:11.440 | and uh and they had to basically uh you know limit their their customers as a result it was a pretty

00:09:16.560 | ugly situation but david well to kind of say one thing i actually think that if the choice is

00:09:21.360 | simply between you losing money you the company or your customers or your users losing money i think

00:09:27.840 | that's an easy choice i think the company eats it look what airbnb did during covet right when they

00:09:34.560 | had a whole ton of cancellations because of covet they ate the they ate all those deposits they

00:09:40.400 | made good on that and i actually think if that's all that was involved that was a big mistake i

00:09:44.880 | think robin hood should have eaten it chamatha you want to chime in here as we go around the

00:09:48.880 | horn look i think um here's what we've learned which is that there's all kinds of ways in which

00:09:54.720 | this financial infrastructure works that none of us really understand

00:09:58.080 | it turns out that it may have also included the people running robin hood to be quite honest

00:10:04.880 | and so you know we know what payment for order flow is now we know that you know some companies

00:10:10.320 | like public have completely issued it um you know folks like robin hood make a ton of money from it

00:10:15.520 | i think it's clear that you know elizabeth warren to aoc to whomever are going to now spend a bunch

00:10:21.680 | of time talking about it it may or may not change but before the problem with the whole situation

00:10:27.920 | of gamestop actually doesn't really surround that because it's more of a symptom the real problem

00:10:33.840 | was what led up to it and what led up to it was you know the insistence that a bunch of

00:10:40.640 | organizations needed access to a preferential set of data so that they could theoretically

00:10:45.280 | participate in that order flow before and the second was that the rules for you know certain

00:10:51.280 | organizations are different than those for banks and so you know hedge funds can lever themselves

00:10:56.240 | up to such a massive degree that you create that you know ltcm type of issue where you know you take

00:11:02.880 | 5 billion and all of a sudden you have 1.5 trillion so that that shouldn't happen right

00:11:08.720 | so we need to figure out how we can actually deal with those systemic issues upstream and

00:11:13.840 | then we need to have better disclosure downstream so that consumers could choose

00:11:17.200 | hey listen if you want you know pfof by the way as i've learned in the last couple days

00:11:22.000 | payment for order flow is actually not necessarily such a bad thing in certain

00:11:25.840 | cases because it actually guarantees better price execution in some cases but that's not always true

00:11:32.720 | for options i think it's somewhat more true for stocks there are you know for example like jason

00:11:37.680 | when you ask me you know i asked the team at sofi like you know what's the how much how much is uh

00:11:43.600 | how much is made on payment for order flow and the answer was 1.5 million dollars

00:11:47.360 | and the forecast for next year was like 400k so that's materially different than 400 million

00:11:54.400 | dollars right so you start to figure out like okay how should we think about these problems

00:11:58.880 | and i think that's what we have to face we have to get answers to these questions now

00:12:02.080 | yeah there's definitely going to be a lot of investigations into this and

00:12:06.160 | thinking it through i think there are kind of three possibilities here

00:12:09.920 | when you when we analyze this now that we're a week out from it i think uh all going down which

00:12:16.720 | is was there poor communications or other non-disclosures in place right we're trying

00:12:21.040 | to figure that out with robin hood it feels like there's both right there there could very well be

00:12:25.840 | non-disclosures with this private company the dtcc um and obviously they could have optimized

00:12:31.360 | communications and then was this a black swan event or to your point is it poor preparedness

00:12:35.440 | chamath we have to figure that out how prepared are these companies to deal with this kind of stuff

00:12:39.360 | and then is it really bad optics that citadel and all these people are involved

00:12:45.520 | or is it a conspiracy a grand conspiracy and then if there's going to be an investigation

00:12:48.960 | it's going to be pretty hard to cover up any conspiracy right can i offer one idea i think

00:12:54.240 | that there are certain there are certain parts of the economy or you know the way in which the world

00:13:01.200 | works where you you can't distinguish you know bad operational capability and black swan events

00:13:10.560 | i'll give you an example airplanes there is just no situation where you can say a plane crash was

00:13:16.800 | a black swan event and you move on right and we we decided that a long time ago and so as a result

00:13:23.440 | just the amount of risk management and compliance is so high that every time something like that

00:13:28.320 | happens it's it's an enormous process and we've seen that in the 737 thing for boeing yeah 737 max

00:13:34.880 | by the way they just got settled too for just 2.5 billion which is kind of crazy those planes are

00:13:39.760 | back on and nobody went to jail right so that's an example at the other end of the example you know

00:13:45.120 | we have things that have happened like on facebook and twitter and instagram and snapchat which is

00:13:49.360 | like hey all of a sudden like you know certain kinds of content or certain things happened like

00:13:54.000 | the christ church mass shooting the the societal judgment

00:13:58.320 | there was that that was a black swan event you know we don't need rules and regulations

00:14:02.480 | and so i think that another important question that we have to ask is is the financial plumbing

00:14:06.720 | that you know sort of allows the capital markets to work and specifically the financial plumbing

00:14:12.160 | that allows retail normal folks to participate in order to try to make money and get ahead

00:14:17.120 | should that be deemed more like what you said jason black swan like infrastructure where it's

00:14:23.280 | like sometimes happens and we just move on or is it more like an airplane crashing where you say

00:14:27.920 | none of this stuff should be allowed to happen can i can i add one one more point to that which is

00:14:32.560 | i i think that um it's frankly spin to be trying to characterize uh concerns about what happened

00:14:41.840 | as a conspiracy theory you know i heard uh vlad use that word and jason now you're you're echoing

00:14:47.360 | the company's talking points uh the reason this is not a conspiracy is because citadel

00:14:53.360 | is on both sides of the trade it's a conflict of interest we should be using the word

00:14:57.520 | conflict not conspiracy now the question is how do we interpret that conflict of interest you have

00:15:03.600 | company you have citadel providing payment for order flow so they're basically executing uh

00:15:09.600 | robin hood's trades they're their biggest customer and at the same time they're moving in um and

00:15:15.680 | they're backing up citron and melvin so they're on both sides of this trade how does that work how

00:15:22.320 | can we not have questions about that and to then characterize that oh it's a conspiracy theory if

00:15:27.120 | you have questions about it really no no i'm totally fine with people having investigating

00:15:32.880 | if there is a conspiracy right and the conspiracy that people were floating is robin hood was told

00:15:39.040 | to stop trading these stocks by citadel that did not happen if that did happen that would be

00:15:44.160 | explosive and impossible to cover up what it was is does this dtcc have some influence or does citadel

00:15:50.800 | have influence on the dtcc you know that those are the questions that i think remain unanswered the

00:15:56.720 | question is is that the dtcc or the dcc is a cooperative so it's a collection of its member

00:16:01.520 | organizations so by so i think but we'll we'll find out which organizations were part of dtcc

00:16:08.240 | who made the decision who then told robin hood you know we'll also find out by the way who put in the

00:16:13.920 | money to robin hood you know did they have a direct beneficial interest in them having these

00:16:19.920 | dtcc make that decision and so i think where david's right is like imagine this conflict of

00:16:24.640 | interest i now let's just use me as an example i as social capital i have a social capital i have

00:16:26.320 | a social capital i am buying their order flow i am also a member of the cooperative i'm also

00:16:33.920 | backstopping their investment and now all of a sudden you would say whoa your hands are way

00:16:39.520 | too messy here right like your your fingers are in a lot of pots and how do i know what you know

00:16:45.280 | exploding message on signal wasn't sent you don't know you don't know um yeah all all we do know

00:16:53.520 | is that you had all these insiders right you had all these insiders right you had all these insiders

00:16:55.920 | right you had you had citadel you had you know this industry consortium whether it's the

00:17:02.240 | collective or citadel individually they were under pressure by the industry and at the same time you

00:17:08.160 | had these outsiders you had these reddit kids who had basically taken them for 20 billion dollars

00:17:14.400 | right they had finally figured out a way to beat the insiders at their own game and just at the

00:17:19.120 | moment that these outsiders were winning and about to deliver the coup de grace and bust these guys

00:17:24.080 | out of the business for good some of them were going to be the insiders and some of them were

00:17:25.680 | somehow the insiders managed to tip the board over and start a new game that is what people

00:17:30.160 | are reacting to and look i mean you know i i'm not saying that i i don't know why vlad

00:17:36.560 | would have done it unless he was frankly forced to do it right because why would he um so i'm not

00:17:41.840 | blaming him but there is something fundamentally very corrupt at the way that the system and these

00:17:47.040 | insiders who have all the power and all the money when they finally got threatened they

00:17:51.280 | basically figured out a way to turn the board over and prevent the outsiders by the way the

00:17:55.120 | the other thing that isn't getting covered and this is going to be the tragedy of this is none

00:17:59.440 | of us really knows the cost of the 3.4 billion dollars that they took in i'll tell you the only

00:18:05.520 | group of people that are for sure going to get completely creamed in this which are employees

00:18:10.000 | right i mean we know that you think they're going to get too much preference stack because

00:18:15.120 | they got they got diluted oh my gosh i mean how do you not put three do you put 3.4 billion dollars

00:18:20.640 | in at par who would do that yeah i think that's what's exactly happened i don't have inside

00:18:24.720 | information but i think that's exactly what happened yeah that's my house i mean i think

00:18:28.640 | that or perhaps a discount to the ipo which is imminent from what i've been reading online yeah

00:18:34.160 | talk about terrible timing too right i mean they were trying to go public this year mike

00:18:37.360 | or they'd be like this terrible timing or maybe perfect timing i mean it may be that

00:18:41.360 | jason if it turns out that they were able to i mean then it then it creates a whole

00:18:45.840 | host of issues which is how stupid are these investors but um if if that is in fact what

00:18:50.640 | happened because you look at the for example the the pound of flesh that you know silver like got

00:18:54.320 | out of airbnb what a brilliant trade i mean so like if there was one organization that came out

00:18:59.040 | looking that was my deal of the year from last year from our from our bestie awards yeah go ahead

00:19:03.200 | explain it freeberg yeah they put in debt and then they got warrants and the warrants ended up making

00:19:08.080 | them silver lake forex it's insane they made they made like three four billion dollars right but the

00:19:13.280 | company's worth over 100 billion now so as downside protection during a pandemic that could have gone

00:19:18.720 | on for three years no no but that's the whole point if you think about if you think about the

00:19:22.720 | trade of the great financial crisis it was warren buffett putting capital into goldman sachs which

00:19:26.560 | was and swiss three he did the same deal yeah he did five billion into each of them the same weekend

00:19:32.000 | exactly and he said hey guys everything is fine these guys are going to be fine they're backed by

00:19:36.400 | by berkshire and it turned out everything was fine and you know he made he made an incredible fortune

00:19:42.240 | and i think i mean on top of his already fortune so the point is he made a great trade uh i think

00:19:46.560 | that in the in the silver lake example they did the exact same thing they were like hey guys we

00:19:51.200 | believe in this everything's going to be fine they're going to be fine they're going to be fine

00:19:52.320 | it's going to be fine and when all of us were literally losing our mind because we were stuck

00:19:56.880 | in our apartments and houses thinking the world was going to end silver lake saw they had clarity

00:20:02.480 | they did a deal which was the trade of the year david's right and so similarly you would have

00:20:07.280 | thought that this moment was the opportunity for the trade of the year of 2021 i mean we're

00:20:12.400 | early on but all i know is i've been getting increasing offers for my robin hood shares in

00:20:17.440 | the secondary market you know throughout two questions here we have been having a lot of

00:20:21.920 | time understanding who's short what the short interest is there's a bunch of like data companies

00:20:28.400 | that are providing estimates and maybe the data is only clear best you're right the best source

00:20:34.160 | of data that i have access to is a company called market m-a-r-k-i-t they're they're

00:20:39.520 | they're they're quite large um but as of this friday the short interest was still i think about

00:20:45.040 | 50 percent um in gamestop and so it's been it's been ebbing down i didn't check today

00:20:51.520 | well the report was it got cut in half um again uh and that there was a very small short interest now

00:20:58.080 | but the stock dropped another 60 percent today so obviously if you're short the stock you may

00:21:02.720 | start buying and taking your profit and your gains and going home at this point and moving on so

00:21:07.760 | do we need to is this going to start a discussion of transparency and shorting

00:21:14.080 | and should all that information be short should you be allowed to short more than

00:21:17.200 | the shares that are available or that are available in the float i think and should we

00:21:21.120 | shorting in general no there's a simp there's an even i think shorting is a healthy component of

00:21:25.440 | the market and i wouldn't i would leave it alone because there i think there are some legitimate

00:21:30.160 | organizations that short for three reasons reason number one is that they are developing a market

00:21:35.840 | neutral strategy for their clients and people are should be allowed to pay for that right number two

00:21:40.880 | is people are directionally betting on a trend or investing on a trend and they are trading that

00:21:46.160 | against potentially some other position where they are long so that's an explicit view less about

00:21:50.720 | the market neutral and then the third is that some people see outright frauds and they're trying to

00:21:54.800 | vote loudly that hey listen there's something untoward happening here so i think shorting is

00:22:00.160 | really good i actually think the simpler solution and listen and tell me if you guys agree is just

00:22:04.800 | go to t plus zero settlement why all these margin requirements go away altogether the pro the reason

00:22:10.160 | why we have all these margin requirements is all of a sudden you have this weird 48 hour period

00:22:15.280 | that you know it's like oh wait who's got the shares do i have the shares no do you have the

00:22:18.880 | shares so they did i lend them to you did you lend them to me did you lend them to me did you lend them

00:22:20.320 | you did you lend them to me are you going to pay me first am i going to pay you first and instead

00:22:24.480 | you know this is the kind of thing where it's like in 2021 this should be real time and automatic

00:22:29.040 | every share should be ideed right and then you should know exactly where it is you know by the

00:22:35.440 | way there's another point that there's another point that chamath didn't make which is that there

00:22:39.120 | is a benefit to the long holders and equities um when there is shorting of that equity in the market

00:22:45.120 | which is that they're getting paid borrow on those shares so for folks that don't realize or their

00:22:49.920 | market is a bit different from what the market is like in the market you can borrow shares from a

00:22:53.120 | broker or a shareholder or a shareholder or whatever the broker is but you can access that

00:22:57.920 | borrow if you own shares in a company that you're going to keep holding let's say you own some shares

00:23:02.560 | in amazon and someone else wants to short amazon they have to borrow those shares from someone and

00:23:07.760 | they're paying a fee an interest rate to borrow those shares and so the cost to short a stock is

00:23:13.520 | actually not zero you have to pay a borrow to borrow someone else's shares so if you're holding

00:23:17.760 | those shares in amazon you can actually make money

00:23:19.520 | and you can sell them to someone else and so this isn't just a people are coming in the market and

00:23:23.840 | slamming down stocks they are paying the people that are long the stock for the right to borrow

00:23:28.160 | their shares and and sell them ahead of you know buying them back later um and so in the case of

00:23:34.000 | gamestop i think the cost of borrow got so high uh that you're basically paying 30 40 50 60 percent

00:23:40.880 | you know interest rate to borrow gamestop shares to sell them short because there was

00:23:44.800 | so much interest in selling short but there you know there is a market dynamic in

00:23:49.120 | in the cost to sell short that um you know that doesn't uh come at a at a kind of negligible or

00:23:55.360 | free cost the my initial my introduction to shorting uh in that example was when i first

00:24:00.960 | bought tesla um that you know my broker said you know chamath if you lend your shares out you can

00:24:07.120 | make 24 i remember this conversation 24 a year interest right and i thought oh my god and then

00:24:13.440 | i said well what what am i really doing and he's like well you're allowing people to bet against

00:24:18.240 | tesla and i said no and i just kept the shares and i was like i'm never going to allow people

00:24:22.640 | to really and since then to be clear i've never i've never ever ever allowed my shares to be

00:24:28.080 | borrowed ever and it's just a philosophical decision i don't like shorting um but i believe

00:24:34.080 | that you should be allowed to do it i mean if you're going to be a long holder anyway you're

00:24:37.680 | saying i'm going to hold these shares for five years ten years whatever i just you know it's

00:24:41.680 | a way to juice your returns it's true it's how a lot of people think about it especially mutual

00:24:45.440 | funds that own large positions and stocks they'll they'll make really good juice returns because

00:24:50.320 | they're getting paid to borrow david it gets even better if you're if you're running a levered book

00:24:54.640 | because then you know you take a buck you spin it up to six bucks you buy six bucks at tesla now all

00:24:59.120 | of a sudden you're earning 24 on six shares even though you've notionally bought one share right i've

00:25:04.000 | still never done it i can't i can't bring myself to do it i just feel like it's just so uh i just

00:25:09.520 | can't do it i just like it's like how can you be long and then bet against your own company i guess

00:25:14.160 | well yeah it doesn't make sense but i'm sorry sax should we limit the amount of shares that

00:25:19.360 | can go short against a company in some way and should we add a transparency where if you short

00:25:24.720 | more than x percentage of those shares we know your short position because that seems to be

00:25:28.640 | also very confusing here there are people speculating on twitter

00:25:32.800 | that the wall street bets crew and i have no knowledge of this or other hedge funds came in

00:25:37.840 | and saw this mess and that what we've seen the last couple of days were other people shorting

00:25:42.880 | at 300 or it could have even been the same traders or some portion of the traders who ran this up with

00:25:49.440 | the short squeeze then flipped their position from long to short yeah i look i clearly we need more

00:25:55.280 | transparency we need to resolve some of these conflicts of interest prevent them from happening

00:25:59.680 | i think a lot of the the users of robin hood didn't understand that they were the product not

00:26:05.440 | the customer that that is a real issue but let me let me kind of up level this and speak to the

00:26:10.800 | politics of this because something really interesting happened you had everybody from

00:26:14.640 | aoc to ted cruz basically denouncing what happened here taking the side of wall street bets against

00:26:21.360 | these wall street moguls and so what you're seeing now is a new fault line in american politics in

00:26:27.920 | the post-trump era it's not just about left and right anymore it's about insider versus outsider

00:26:34.400 | and i think this is going to be a major major theme that we see and let me actually i want to i

00:26:40.640 | want to share something you know i i just wrote a a blog post called the insider's game about this

00:26:45.040 | idea and uh i found a passage in elizabeth's warren elizabeth warren's book which is really interesting

00:26:50.880 | because it describes how the insider's game works and the person who described it to to warren is um

00:26:58.160 | no yeah none other than larry summers who was uh the former treasury secretary under obama he was

00:27:05.040 | president of harvard he's the consummate insider and he taught the insider's game to generate

00:27:10.560 | a lot of money to the generations of harvard students so here's what he said he presented

00:27:15.840 | warren with a choice he said to uh to her well she said i could be an insider or i could be an

00:27:22.400 | outsider this is from her memoir in 2014 a fighting chance she wrote outsider quoting larry

00:27:29.440 | summers outsiders can say whatever they want but people on the inside don't listen to them

00:27:34.720 | insiders however get lots of access and a chance to push their ideas people powerful people listen to what they want

00:27:40.480 | they have to say but insiders also understand one unbreakable rule they don't criticize other

00:27:48.080 | insiders that is the insider's game it's a protection racket where these powerful insiders

00:27:54.560 | these powerful elites of wall street of uh big business big media and politics they get together

00:28:01.840 | and they protect each other no matter how incompetent they are how corrupt they are

00:28:05.920 | silicon valley silicon valley they're involved in this too but big tech

00:28:10.160 | and this is the revolution i think that's going to happen i think trump was kind of a

00:28:15.280 | forerunner of that is that we are going to see a movement of people across this country who are sick

00:28:20.880 | and tired of the insider's game and they're going to rise up and vote these insiders out of office

00:28:26.640 | and put in some new people who aren't beholden to these powerful special interests what you're

00:28:31.680 | speaking to is populism right sax you can call it populism i call it insiders versus outsiders

00:28:37.680 | i think it's uh

00:28:39.840 | it's going to be very important for folks to not be a career anything meaning career executive

00:28:47.440 | career politician um career regulator career what if if ever you're in sort of like if you can put

00:28:55.120 | that word in front of your sort of existence i think what people will see is someone who

00:29:00.240 | as you said thrives on being an insider and i think that there's just going to be a ton of

00:29:04.000 | distrust career school administration official you know career admissions person career anything is a

00:29:08.640 | career

00:29:09.840 | you know career leadership person career leader and so on and so forth i think that's going to be a

00:29:13.520 | very important thing to think about and i think it's important to think about what you're going to

00:29:17.280 | be and what you're going to be and what you're not going to be and i think that's going to be a

00:29:19.760 | very important thing for us to look at and i think that's going to be a very important thing for us to

00:29:21.840 | think about because i think that's going to be a very important thing for us to think about because

00:29:24.640 | you know i think that's going to be a very important thing for us to think about because

00:29:26.880 | i think that's going to be a very important thing for us to think about because i think that's going to

00:29:28.160 | be a very important thing for us to think about because i think that's going to be a very important thing

00:29:28.960 | for us to think about because i think that's going to be a very important thing for us to think about because

00:29:31.040 | in performance over time. You know, a lot of Trump's rhetoric, and I, you know, I know that

00:29:36.960 | we're, we're past the Trump era at this point. But there was a lot of conversation about this

00:29:42.440 | notion of a deep state, because there was frustration with how some or many of these

00:29:46.640 | institutions, government institutions were operating. But if not for that deep state,

00:29:51.120 | we may have found ourselves in a lot of very ugly situations over the last four years,

00:29:55.180 | that there really were layers and layers of career public servants that did incredible

00:30:01.500 | and incredibly heroic things to preserve democracy to preserve the rights that we all hold dear in

00:30:07.360 | the Constitution. And those were, you know, really important roles. And the institution

00:30:13.480 | played a really important role in providing continuity and providing trust and security.

00:30:19.620 | And so I think it's easy to bash institutions when things aren't working perfectly. But we

00:30:24.700 | also have to be careful about the way in which we're operating. And I think that's a really

00:30:25.160 | important part to keep in mind that it's not that all institutions are always bad. It is

00:30:29.060 | absolutely true that there is corruption, but there's certainly benefits that we have to kind

00:30:32.960 | of not not allow populism to become a runaway framework for how we deal with everything we're

00:30:36.860 | frustrated with. I'm not saying that I think I think what I'm saying is institutions are

00:30:40.460 | critically important. But now I think we have to change the rules for how

00:30:45.020 | you can be a part of them, and then how long you can stay. So for example, like if the rule was,

00:30:50.900 | you know, you can only be a two term politician. Wow, that would be

00:30:55.140 | a cleansing effect that would have on anybody that chose to serve in politics, up and down the board,

00:31:00.180 | you know, at the federal level at the state level, two terms in and out,

00:31:03.720 | California, California has it, you know, we have a 12 year limit, right, in the state assembly and

00:31:09.000 | Senate. And so, you know, I think we're seeing that happen in progressive places like California.

00:31:14.760 | You know, obviously a good segue, but very, I think very much agree that that the notion that

00:31:22.440 | there needs to be, you know, we talked about this last time, you know, we talked about this last

00:31:25.120 | time, we need to ensure that the institutions don't become beholden to special interests. And,

00:31:29.920 | and that there isn't accountability, because because the failure, the lack of accountability

00:31:34.780 | is really where things bloat over time, because you just add stuff on, you don't ever take stuff

00:31:40.420 | apart. And, and ultimately, you have kind of an inept, non functioning institution.

00:31:45.700 | So let me give you the report card on California. And then we can figure out

00:31:49.660 | if term limits can't fix it, what can fix it. So here's just some some data points.

00:31:54.580 | First, I'll do one section for section number one, economy and jobs, nearly the highest

00:31:59.860 | unemployment rate in the US at 8%, plus highest poverty rate in the US 18 and a half percent of

00:32:04.600 | all Californians highest income taxes in the US 13.3%, $30 billion of potential fraudulent

00:32:10.900 | unemployment benefits from 2020 11 billion already determined fraudulent doubled the oil doubled the

00:32:17.500 | oil and gas drilling permits instead of incentivizing, you know, maybe climate or biotech

00:32:23.020 | or tech jobs, but 220 billion unemployment benefits from 2020.

00:32:24.560 | $27 billion spending pan spending plan for 2021. In terms of quality of life, highest homelessness

00:32:31.820 | in the country, worst graduation rate in the country around 17% of students in California

00:32:36.680 | don't graduate the worst slash highest cost of living in the country and the worst wildfires

00:32:41.840 | in the country 1.8 million plus acres burned on COVID-19. Third highest rate of COVID-19 infections

00:32:48.500 | in the world 658 cases per 100,000 people, and then the worst vaccination deployment in the US

00:32:53.960 | around 50%.

00:32:54.540 | And then culturally, I didn't know this, I don't know if you guys know this, but

00:32:57.900 | here are the number of companies, this is just a subset that have left California,

00:33:01.920 | Toyota, Charles Schwab, Tesla, and Oracle, in some way, shape or form, which is estimated now

00:33:08.120 | to have cost California $77 billion of future revenues and 300,000 jobs.

00:33:14.840 | Over the past few years, nearly 3 million people have left the state 53% of Californians want to

00:33:24.520 | leave the state. And that's a lot of money. And that's a lot of money. And that's a lot of money.

00:33:24.880 | And that's a lot of money. And that's a lot of money. And that's a lot of money. And that's a lot of

00:33:25.180 | money. And that's a lot of money. And that's a lot of money. And that's a lot of money. And that's

00:33:25.520 | a lot of money. And that's a lot of money. And that's a lot of money. And that's a lot of money.

00:33:25.780 | Okay, so if let's, let's go and figure out, okay, so if, if, if term limits at 12 years don't work,

00:33:32.880 | what do we do?

00:33:33.540 | Well, I think I think we have to have politicians who stand up to special interests aren't in the

00:33:38.220 | pocket of special interests. I mean, the problem we have in California, the biggest problem,

00:33:41.820 | the reason why California is such a mess is that we have government of the special interest by the

00:33:49.240 | special interest for the special interest. I mean, the politicians in Sacramento that we have a one

00:33:54.500 | party state effectively, and they are beholden completely to these special interests. Look at

00:34:00.340 | the deals they make. I mean, so example, in California, we have over 340,000 public employees

00:34:07.140 | who make over $100,000 a year that cost taxpayers over $400,000 a year. And that's a lot of money.

00:34:11.800 | 45 billion. Okay. And, you know, we have lifeguards making a quarter million dollars a

00:34:17.260 | year. It's crazy, right? I mean, because the people making these deals are, are in the pocket

00:34:24.380 | of these of these government unions, they're the biggest contributors to California politicians.

00:34:28.240 | And, you know, this is my fundamental, I guess, concern or beef with, with Gavin Newsom,

00:34:36.060 | is that, you know, fundamentally, you know, he's worked his way up the the

00:34:41.780 | ladder of California politics, by, you know, by basically benefiting from these special interests

00:34:47.860 | throughout his rise, you know, you step by step, he's never challenged the insiders,

00:34:52.900 | or any special interests. He just kind of caters to this political class. And so that's why I think

00:34:59.360 | fundamentally, he's not going to be part of the solution. It just feels like every job he's had

00:35:05.180 | in politics is just a stepping stone to get to the next step. And even the governorship now is just

00:35:11.760 | a stepping stone to get to whatever's next. And I think, you know, Californians are tired of being

00:35:17.140 | stepped on in this way.

00:35:18.960 | There's I mean, there are some structural challenges in the state, right, guys, I mean, like,

00:35:23.520 | we should not forget the fact that there are some voter mandated, supported propositions that have

00:35:32.900 | passed over the last couple of decades, that really create a structural challenge in terms of

00:35:38.260 | how do you allocate resources and capital and how can you effectively govern

00:35:41.740 | the state. You know, the three that are often highlighted is prop 13, which passed in 1978,

00:35:48.860 | which is the state property tax limits. And we've talked about that one, I believe in the past,

00:35:54.860 | there was a proposition for in 1979, that limits the amount of money that states

00:35:59.180 | can appropriate that the state can appropriate and then prop 98, which passed in 1988. And this

00:36:06.700 | is the big one. Prop 98 has been challenged in courts, and there have been, you know,

00:36:11.720 | many, many kind of efforts at finding loopholes and getting around it and litigating it. But it

00:36:19.800 | mandates funding levels in the state from pre K through community colleges. And it creates a

00:36:25.560 | structure that is really difficult to navigate around and really difficult to operate or manage.

00:36:30.520 | It's almost as if you guys were running a private company. And your board said, here's how much you

00:36:36.440 | as the CEO have to spend this year. And here's how you have to spend it. It is such a difficult

00:36:41.160 | decision. And it's a very difficult decision to make. And it's a very difficult decision to make. And

00:36:41.700 | it's a very difficult decision, you know, for the for the governor to have to kind of say,

00:36:46.920 | well, you know, I'm going to make some changes to that, because he'll end up in court. And so,

00:36:51.080 | you know, I want to just kind of highlight that there are structural challenges to the way the

00:36:54.680 | state operates. And obviously, to get a lot of things done, you still have to pass through the

00:36:57.920 | state assembly in the state senate. And it's not as simple as making, you know, better decisions in

00:37:03.200 | the governor's mansion. I think there's, there's a lot that we have to kind of resolve structurally

00:37:07.640 | in the state, that's going to take a long friggin time. And a lot of cooperating

00:37:11.680 | parties to get there. And so, you know, I know, for those of us who are very much about making

00:37:16.560 | fast, quick, and accurate decisions, you know, good decisions, this is a really difficult place

00:37:22.440 | to do that, this state, the way the way the laws have been set up and the way that that the

00:37:27.140 | legislature has oversight.

00:37:28.180 | Well, I mean, look, you're right. But this is why we need real leadership, we need somebody who's

00:37:32.960 | going to come forward and say, Listen, we need to change this proposition. Another one we need to

00:37:36.420 | change is Prop 47, that decriminalized a whole bunch of behavior. I mean, crime is exploding in

00:37:41.660 | the state, that proposition needs to be looked at as well, right? I mean, we we need somebody who's

00:37:46.460 | going to come at government from a completely different perspective, which is to think about

00:37:52.140 | the citizens of California, first of all, to pay attention to the middle class of California. And

00:37:57.560 | to think about us as consumers of government services, who need to be satisfied. And right now

00:38:04.140 | we have, if you were to think about the services governments providing, people are churning off of

00:38:09.460 | it, we had net immigration of

00:38:11.640 | 135,000 people, net left the state, right? You know, 40,000 families in California pay about half

00:38:18.240 | the taxes. If say 10,000 of them leave, we've got a giant hole in the budget that no one knows how to

00:38:24.280 | replace. And we have no idea how many people have even left how many families have left the state.

00:38:29.480 | So we really need leadership here to not just go along with the special interests who are in power

00:38:36.440 | and who are willing to stand up and, and push for some of these these reforms.

00:38:40.260 | By the way, I think it's worth

00:38:41.620 | just highlighting some of these numbers, because they also speak to the structural challenge in the

00:38:45.860 | state. The state of California generates about $140 billion in revenue. 70% of that comes from

00:38:52.240 | personal income tax. And as Zach's pointed out, half of that comes from the top 1%, or 40,000

00:38:57.500 | households. It is a it is a, you know, a heavy weighting. And by the way, that that top tax rate

00:39:05.620 | of 13.3% applies to households over a million dollars of income. And for those that don't know,

00:39:11.600 | there's income strata that are defined by the state. And depending on what strata you and you pay a

00:39:17.120 | different tax rate, the highest strata is making over a million dollars a year where you pay 13.3%.

00:39:21.360 | And that's where these 40,000 households cover most of that budget. And 20% to sales and use tax

00:39:28.960 | and 10% is corporate tax. To speak to the corporate tax rate for a second, you know, that's 10% of our

00:39:33.440 | revenue as a state, we charge a 9% average corporate tax rate in the state to operate.

00:39:38.080 | That's incredibly high. And it's one of the reasons, you know, that's one of the reasons that we're

00:39:41.580 | in this position, besides kind of the challenge that that Elon and others kind of made very public

00:39:45.180 | here over the past year. But that corporate tax rate makes it very difficult to operate in the

00:39:51.740 | state relative to other states that are offering no tax rate, lower employment, lower cost of

00:39:56.860 | labor, and less of a regulatory burden to operate. And it's why we're seeing an exodus,

00:40:02.380 | not just of people from the state, because the services are obviously not being well managed,

00:40:06.060 | but also of businesses, you know, finding a better place to operate.

00:40:09.980 | In Canada,

00:40:11.560 | there's an approach that I think is really useful here, which is that,

00:40:15.080 | you know, the Canadian government offers credits called shred credits. I can't remember if it's at

00:40:23.480 | the federal level, but it's definitely in the state of Ontario, because I've used this for

00:40:27.080 | some of our companies. You hire engineers, and you can basically capitalize their salary,

00:40:32.840 | and you can offset their costs so that when you're a young company, you're effectively paying

00:40:37.160 | zero tax, or if you're a small company, you effectively pay zero tax. And that seems

00:40:41.540 | really right, you know, where you're a small business person, and you know, you're holding,

00:40:46.180 | you know, 510 employees, and you're making, you know, a million bucks a year in revenue,

00:40:50.500 | whether you're a restaurant or a software company, you basically pay nothing. But then at the other

00:40:54.820 | end of the spectrum, you know, when those credits, when those credits burn off,

00:40:58.580 | theoretically, if you're a Facebook or a Google or an Amazon, now all of a sudden,

00:41:03.860 | you know, you can pay a much larger percentage of what to do. And I think that there's all kinds of

00:41:11.060 | progressive tax schemes that work on the corporate side, there's a bunch of tax credits that you can

00:41:16.100 | use to sort of incentivize certain kinds of jobs. And I think you're just much better off because

00:41:20.900 | then, you know, these companies can't leave if all the people want to stay in one place.

00:41:24.340 | I want to highlight one more structural problem. So even if you do resolve that,

00:41:27.940 | even if you do resolve these propositions that have passed that have passed in the past,

00:41:31.860 | and are causing us problems in terms of budgeting and ability to budget adequately going forward,

00:41:36.340 | one of the other challenges and even if you do resolve the tax structure to generate a more

00:41:41.040 | balanced revenue model that allows for innovation and allows for employment allows for opportunity,

00:41:46.140 | we have a, this is an interesting stat I found this week.

00:41:50.380 | What, what? How many Americans I'll just say the number one out of nine Californians are

00:41:58.540 | a member of a public pension fund in the state of California, one out of nine. And the public

00:42:04.020 | pension funds in California, as of the last reporting, are roughly $250 billion underfunded.

00:42:11.020 | Relative to the payment obligations they have to their members. Think about that for a second. So

00:42:14.920 | not only does the state have a lot of debt, we've got a $250 billion hole for paying people money

00:42:20.120 | that they believe they're owed in the future. And that is creating a massive problem where the state

00:42:25.640 | needs to figure out how do we fill that hole? How do we meet these obligations to our citizens who

00:42:30.160 | worked who earned what they believe to be a fair income stream for the rest of their lives that they

00:42:34.760 | may not ever get, you know, and so so we've got both the legislative problem in terms of how the

00:42:40.400 | state is structured. We've got these propositions that have passed that kind of, you know, buckle down

00:42:46.240 | the governor and buckle down the decision makers in terms of what they can and can't do legally.

00:42:50.160 | We've got an income generation problem with respect to concentration. And we've got some of

00:42:55.280 | these, you know, heavy burdens on us like health services, but also this underfunded pension

00:42:59.600 | liability that is almost like such a priority. And no one's really paying attention to it because the

00:43:04.080 | sirens are going off. And meanwhile, the service providers in the state are completely effing up the

00:43:09.900 | service. And so, you know, we've got a lot of problems with the state. And so, you know,

00:43:10.380 | we've got a lot of problems with the state. And so, you know, we've got a lot of problems with the

00:43:10.400 | state. And so, you know, we've got a lot of problems with the state. And so, you know, we've

00:43:10.880 | got a lot of problems with the state. And so, you know, we've got a lot of problems with the state.

00:43:11.760 | You know, to my highlighted a bunch of great ones in terms of fire response and whatnot at the

00:43:15.360 | beginning, and obviously the vaccine rollout we know is just completely flawed. But, you know,

00:43:21.240 | here's another interesting stat, the California EDD, this is the link I just sent out, by the way,

00:43:25.800 | on our on our zoom chat, but there's $114 billion in unemployment claims paid since COVID. This is

00:43:32.200 | an insane statistic, but it looks like roughly 27% or $30 billion of fraudulent claims were paid by

00:43:39.480 | the EDD on those unemployment claims. So the folks that are actually running these institutions

00:43:44.880 | themselves aren't even operating well, you know, not to mention the actual huge liabilities the

00:43:49.920 | state has accrued over the years and the structural deficiencies. So as much as I would love to,

00:43:54.480 | you know, kind of propose that we could all come up with a simple solution, this is a complex friggin

00:43:59.320 | set of problems that probably require several books to resolve. And I just want us to be honest

00:44:04.240 | and real about that, that this is, you know, this is going to be a challenging issue probably for

00:44:08.320 | decades to come. But I think it's going to be a challenging issue probably for decades to come.

00:44:09.460 | for this state to get itself out of the holes it's dug itself into you know one thing i'll say is as

00:44:13.700 | goes california so goes every other state and so goes america because if there's one state that

00:44:18.900 | theoretically you'd think would have been positioned from a human capital perspective

00:44:22.100 | to figure these out and political will it's this state and if this state can't figure it out we're

00:44:27.220 | in a whole down of trouble well we're we're not doing a very good job figuring it out

00:44:32.260 | right now that's why we need to make a change i mean david you're right about the magnitude of

00:44:36.020 | the problems the challenges but it all starts with some sort of you know outsider rebellion

00:44:41.700 | and that's what's going on with this recall that's why we have to support it

00:44:44.980 | that's why i support it it's not going to be the end of the the it's not the it's the beginning of

00:44:49.700 | the solution not the beginning of the beginning it's the beginning it's the beginning of the

00:44:52.420 | beginning but we need to create an institution to solve the problems over time right it's it's

00:44:56.660 | going to be it's going to be the coalescence of what you're pointing out zacks which is the the

00:45:01.300 | you know the the will of the strong the will of the the rebellion uh to figure this out and

00:45:05.700 | resolve it and you know that's what we're doing right now and we're going to be able to do that

00:45:05.940 | right now and we're going to be able to do that right now and we're going to be able to do that

00:45:05.940 | well the the institution may be the all-in pod but um but uh but let me let me build already

00:45:13.060 | yeah but let me let me build on yeah i would actually jay cal you posted a tweet saying what

00:45:17.380 | should we call our party and uh anyway my suggestion was the outside surprise party yeah

00:45:23.140 | but let me let me build let me build on on freeberg's point about the pensions okay where

00:45:30.420 | did these giant underfunded uh pension obligations come from because i think this is a really important

00:45:35.860 | point to explain so here's what basically happens if you're a government worker in california you

00:45:41.620 | could typically retire after 20 years with all of your benefits and um and not just 100 of your

00:45:49.620 | salary but the the salary you made in your last year and so what happens is uh when people get to

00:45:54.980 | that 20-year mark they get a lot of overtime so that's why we've seen articles about people

00:45:59.540 | retiring you know after you know if you're retiring after 20 years you could be in your 40s

00:46:04.420 | okay well wait don't you get here in the next 20 years you're going to be in your 40s okay well

00:46:05.780 | half pay for your pension so they double up their over time they get to 250k then they get a pension

00:46:11.300 | of 125. you don't get your full salary every time you get right yeah there's a there's a complicated

00:46:15.620 | formula but the point is you can stuff it with overtime and it's very generous and then they can

00:46:19.380 | go because they're all still in their 40s they can go get a another government job somewhere

00:46:23.060 | else and then stack that pension on top and then by the way it doesn't just last until they die

00:46:28.020 | but it lasts until their spouse dies so um now there was a proposal years ago to move this whole

00:46:35.540 | system to like a 401k type of system and it was squashed by who the unions and newsom opposed it

00:46:43.460 | because you know he doesn't do anything that the unions don't want and so we have these completely

00:46:48.420 | unsustainable pension liabilities everybody can see this train wreck coming but nobody has the

00:46:53.780 | guts to stand up the unions and do something yeah i mean there's very few careers that still offer

00:46:57.940 | people that are not going to be able to get a pension and they're not going to be able to get

00:46:58.000 | pensions even the new york times you know over a decade ago got rid of their pension because people

00:47:02.540 | live too long they retire too early and then the cost of health care is just so ginormous here

00:47:08.380 | that it's going to crush any pension fund so you have to move to a 401k and we're we're

00:47:14.380 | it's kind of hard to say to a cop or a firefighter who's running into a burning

00:47:19.740 | building or putting themselves in the in harm's way that they don't get one because it's such

00:47:23.220 | a high-risk job but we really do need to think of something more reasonable like a 401k and

00:47:27.980 | that's coming from my entire family is you know um cops and firefighters and of service in new york

00:47:34.480 | city and they all have pensions and you are right david there is uh a tradition of trying to get a

00:47:40.160 | little extra overtime because they average out usually your last three or four years to give

00:47:43.480 | your average salary the to base your pension off of and then of course you can do another job or go

00:47:48.880 | work go from a firefighter to a cop vice versa garbage sanitation worker to get those things

00:47:54.320 | we didn't talk about the nimbyism and how extraordinarily important it is to be able to

00:47:57.960 | get a job and how extraordinarily hard it is to build homes here and how extremely expensive it

00:48:03.460 | is a lot of the young people who are thinking of coming to california are looking at the housing

00:48:09.460 | prices they want to come here to start companies they love the california vibe but the housing is

00:48:14.460 | a non-starter you can't live in the peninsula or anywhere in the the wider bay area unless you are

00:48:21.460 | you know a dual household income with what 400 500 600 000 minimum minimum minimum minimum and

00:48:27.940 | you're not going to be able to get a job at school but you're talking about where are there sub one

00:48:30.760 | million dollar homes within the proximity of the bay area they don't exist you go to austin and i've

00:48:36.440 | been looking at austin real estate just coincidentally and there are many homes that are

00:48:40.600 | three hundred thousand dollars that are four hundred dollars a square foot everywhere within

00:48:44.960 | 30 40 minutes of downtown austin and that's where young people are going and then finally if we look

00:48:51.840 | at our to to law and order david we are not treating fentanyl like the super drug

00:48:57.920 | it is you know it's one thing to have drug reform and to have prison reform we we know these are

00:49:04.140 | important but you can keep that in your mind that we want to make a more just legal system

00:49:11.700 | while at the same time not allowing people to deal fentanyl and if you just type into google

00:49:18.020 | fentanyl versus heroin lethal dose and click on the image search you will see two vials and

00:49:23.820 | it's a very famous photo where there's like you know a pinch of you know a pinch of you know a

00:49:27.900 | heroin that's the lethal dose and then in the other vial there are like seven grains of fentanyl

00:49:34.280 | and that's the lethal dose and we are conflating a homeless problem with a super drug yeah can i can

00:49:44.040 | i add to that so yes please so so you know i was on the side of decriminalizing cannabis and i think

00:49:50.480 | that there were and i think that there were we we overcharged too many people for drug crimes when

00:49:55.880 | they were just users and should have been in treatment and they were just drug users and should

00:49:57.880 | have been in treatment and that's why i think there's been a reaction against over incarceration

00:50:02.700 | and i understand that but i agree with you that fentanyl is in a separate category it is the super

00:50:08.260 | drug and here's the problem it is so powerful it is so addictive it is so destructive nobody can

00:50:14.580 | hold down a job and get off that drug once they start once they start taking it i mean it's just

00:50:19.580 | game over so they end up living in the streets and turning to crime and petty theft to support

00:50:24.740 | their habit and that's the situation we're in today and we're going to have to deal with that

00:50:27.860 | we have this growing mass this massive numbers of people living in the streets addicted to this

00:50:33.920 | super drug and we got to stop it we got to get tough on this um because it's just you know right

00:50:39.400 | now the the the solution that our da seems to be pushing whether it's gas going in la or chase a

00:50:45.560 | booty in san francisco is they're just not prosecuting anything you know we had prop 47

00:50:50.880 | downgrade a whole bunch of property felonies to misdemeanors and now the da's aren't prosecuting

00:50:56.200 | the misdemeanors so they basically are prosecuting the misdemeanors and they're prosecuting the misdemeanors

00:50:57.840 | and they're prosecuting the misdemeanors and they're basically just decriminalized burglary and

00:50:59.340 | basically just decriminalized burglary and so you've got all these you know uh drug addicts um

00:51:03.660 | so you've got all these you know uh drug addicts um living on the streets committing these crimes

00:51:05.340 | living on the streets committing these crimes and they need to be in treatment so i think part of

00:51:07.540 | and they need to be in treatment so i think part of what we need to do here i actually think this

00:51:09.100 | what we need to do here i actually think this is a big investment california needs to make

00:51:11.060 | is a big investment california needs to make we need giant treatment centers to address this

00:51:14.220 | we need giant treatment centers to address this problem and if somebody gets caught committing a

00:51:17.020 | problem and if somebody gets caught committing a crime and they're they're addicted to drugs i i

00:51:20.460 | crime and they're addicted to drugs i i don't want to send them to jail but i would make him

00:51:22.140 | don't want to send them to jail but i would make him go to treatment we have to think about true

00:51:24.220 | go to treatment we have to think about true compassion true compassion for somebody who is

00:51:27.420 | compassion true compassion for somebody who is addicted to fentanyl is getting them off the

00:51:30.380 | addicted to fentanyl is getting them off the street and getting them into a rehab program or

00:51:34.300 | street and getting them into a rehab program or giving them the choice of going to jail for the

00:51:35.900 | giving them the choice of going to jail for the crimes they may have committed so that there is

00:51:37.500 | crimes they may have committed so that there is this pressure to go into treatment just to give

00:51:40.620 | this pressure to go into treatment just to give you a stat in 1999 we had like 18 000 overdoses

00:51:44.620 | you a stat in 1999 we had like 18 000 overdoses we're now over 70 000 um and if you look just in

00:51:47.980 | we're now over 70 000 um and if you look just in san francisco we're talking four or five times

00:51:49.740 | san francisco we're talking four or five times a number of overdose overdose deaths to cova

00:51:52.460 | a number of overdose overdose deaths to cova deaths this is a level of human suffering that

00:51:55.100 | deaths this is a level of human suffering that just makes no sense and it's such a nuanced

00:51:56.780 | just makes no sense and it's such a nuanced discussion right you can't you can you have to

00:51:59.340 | discussion right you can't you can you have to be able to hold into your brain that cannabis you

00:52:03.100 | be able to hold into your brain that cannabis you know psychedelics mdma psilocybin or one class of

00:52:06.700 | know psychedelics mdma psilocybin or one class of drugs you have a long list jason i have a long

00:52:08.940 | drugs you have a long list jason i have a long list here of the drugs that you want to be

00:52:11.660 | here of the drugs i'm a fan of good here are the drugs that i don't take bad no fentanyl i think

00:52:17.900 | you just have to look at the the chance of recovery and the chance of addiction and fentanyl

00:52:23.180 | and heroin are just tragedies tragedy we also have to like have the courage to actually not look at

00:52:29.900 | just the symptom like i think treatment centers are a great idea i think not sending people to

00:52:35.100 | jail is like an obvious idea i also think if you take two or three steps back and you think about

00:52:41.180 | what are the two things that send people off the rails number one i think is lack of a job

00:52:47.340 | and then number two is a lack of mental health resources you put those two things together it's

00:52:51.980 | you're done it's like it's like kindling and it's like kerosene and a match all in one and boom it

00:52:57.180 | goes and you know we didn't need to know that answer because you saw that over the last decade

00:53:01.820 | building up in the rust bill so we knew that that was the those are the boundary conditions for this

00:53:06.700 | so how do you get people back to work how do you actually give some men you know

00:53:10.700 | the crazy thing about reagan i mean we all forget but reagan was the one that defunded all of the

00:53:14.540 | uh mental health institutions you know when he was governor of california and sent all these folks

00:53:19.340 | spilling into the streets well think about how many jobs that would create if we brought back

00:53:22.860 | you know psychiatric facilities and made them free this is where if we look at health care not having

00:53:28.860 | a national health care program especially for mental health is costing us more on the other side

00:53:34.940 | when it comes to suicide if we're going to spend money and if we're going to be in debt be in debt

00:53:40.620 | for the right reasons like sure find a way to be accountable and transparently spend money

00:53:45.740 | that's fine spending money is fine government should not be for profit you know government

00:53:50.140 | should i don't even think government should be breaking even i think that government should be

00:53:53.740 | generally running at a loss and then the net gdp as long as that's positive and accretive

00:53:59.260 | we're doing right as a society right so government should be doing the things that they need to do for

00:54:04.060 | people to have an even starting line but i just want to yeah go ahead sorry jamal no i was just

00:54:08.620 | going to say that that's where we get it wrong because like we you know we we like pat ourselves

00:54:12.460 | on the back when a government turns a surplus and then you know we like explode when a government

00:54:16.780 | runs a deficit instead they're managing to the political theater of a number instead of really

00:54:22.460 | understand how to run a business but i just want to be clear like the entire um premise

00:54:28.700 | of how that is run and how we think about this from an economic point of view

00:54:34.140 | is that we have to have gdp growth and if you don't have gdp growth the whole formula fails

00:54:40.860 | so let's just break this down in a simple way if i'm um working and i'm making 60 grand a year i

00:54:47.180 | can take out some credit card debt knowing that i'm going to make an extra 10 next year an extra

00:54:51.740 | 10 the year after if i know my income is going to climb i can afford to take on some debt which

00:54:56.380 | means spending more than i'm making right now because i know that in the future i'll be making

00:55:00.460 | more than i am today and i'll be able to pay down that debt so i'm going to be able to make more than

00:55:02.700 | i am today and i'll be able to pay down that debt so i'm going to be able to make more than i am today

00:55:02.780 | debt and so the whole premise of how we run government is we should run at a deficit we

00:55:08.700 | should accrue debt we should build infrastructure but in order for that work to work i have to

00:55:14.060 | increase my tax revenue in the future and there's two ways to do that raise taxes

00:55:19.500 | or see significant gdp growth and if you raise taxes you suffer the problem that

00:55:24.700 | california may be suffering now which is very high net worth people leaving the state

00:55:28.620 | which is going to cause a collapse in the revenue stream and the whole system fails

00:55:31.820 | so the problem is that people are going to have to pay more than they need to pay for their

00:55:35.420 | income and that's why i'm saying that we need to have more than we need to have in the state

00:55:39.500 | and that's why i'm saying that we need to have more than we need to have in the state

00:55:42.700 | and that's why i'm saying that we need to have more than we need to have in the state

00:55:45.500 | and that's why i'm saying that we need to have more than we need to have in the state

00:55:48.940 | and that's why i'm saying that we need to have more than we need to have in the state

00:55:52.060 | and that's why i'm saying that we need to have more than we need to have in the state

00:55:56.700 | and that's why i'm saying that we need to have more than we need to have in the state

00:55:59.340 | and that's why i'm saying that we need to have more than we need to have in the state

00:56:00.940 | and that's why i'm saying that we need to have more than we need to have in the state

00:56:03.500 | and that's why i'm saying that we need to have more than we need to have in the state

00:56:06.460 | and that's why i'm saying that we need to have more than we need to have in the state

00:56:08.780 | and that's why i'm saying that we need to have more than we need to have in the state

00:56:11.820 | and that's why i'm saying that we need to have more than we need to have in the state

00:56:13.980 | and that's why i'm saying that we need to have more than we need to have in the state

00:56:15.980 | and that's why i'm saying that we need to have more than we need to have in the state

00:56:18.060 | and that's why i'm saying that we need to have more than we need to have in the state

00:56:20.460 | and that's why i'm saying that we need to have more than we need to have in the state

00:56:23.500 | i grew up in a place where everybody was really really poor i now live in a place where everybody

00:56:27.900 | is really really rich and the monoculture sucks and instead what you want is you want transitions

00:56:33.180 | you want people moving up you want people moving down you want the hard luck story you want the

00:56:36.780 | got lucky story you want it all and this is this is where we've lost it i'm going to ask you a

00:56:41.420 | question freebird are you saying that if 40 000 people left california we would blow a 70 billion

00:56:51.500 | dollar hole in the budget no we would blow a 70 billion dollar hole in the budget no we would blow

00:56:52.620 | a 70 billion dollar hole in the budget no we would blow a 70 billion dollar hole in the budget no we

00:56:53.420 | would we would blow a um yeah about 40 000 count for half the income tax so it's about 35 of 140

00:57:01.900 | yeah so we would we would blow a 50 60 billion dollar hole in the budget 40 000 people 40 000

00:57:08.300 | yeah out of 60 million 40 000 homes 40 000 homes out of 60 million 40 million out of 40 million

00:57:14.380 | yeah yeah forty thousand similar thing happened to new jersey and connecticut

00:57:18.300 | when they had everybody moving down to florida and so this is not unprecedented um

00:57:23.340 | especially with hedge funds and really high taxpayers you know but what yeah what i'm asking

00:57:28.220 | is is there a better way where you don't have to depend on gdp growth to balance your budget and

00:57:32.380 | to provide the social services you want to provide to the state no of course of course not you it all

00:57:37.100 | it all starts with having a healthy economy i mean always right because that's what generates the um

00:57:43.580 | the prosperity to pay for all the social programs and it's to pay ahead of the curve right that's

00:57:48.220 | my point is like we're always paying ahead of the curve which forces us to find gdp growth which is

00:57:53.260 | how we get stuck in these cycles and these problems and this is true not just of the state

00:57:57.500 | but of nations as well the us faces this and others but by spending ahead of the curve by

00:58:03.100 | creating infrastructure by creating social services by setting up these pension obligations

00:58:07.740 | the only way to get out of the debt you've just taken on is to grow and that creates all of the

00:58:12.540 | systemic problems that ultimately lead to populism and all of these kind of frameworks for failure

00:58:17.180 | that are going to ultimately end here no no no hold on can i disagree with that look yeah growth is a pretty big problem

00:58:23.180 | and i think that's the precondition for everything else that's good okay growth growth needs to be

00:58:29.100 | managed okay but it doesn't growth is not the problem here the problem is a set of policies

00:58:33.820 | that are actually killing growth and driving entrepreneurs and innovators out of the state we

00:58:38.460 | saw elon musk leave the state why he said that california was starting to take its success for

00:58:43.980 | granted and had been winning too long okay california needs to realize it's in a highly

00:58:49.260 | competitive situation now and because of covid you can work from anywhere

00:58:53.100 | austin has become a tech hub and miami's become a tech hub and those states have no income tax and

00:58:57.980 | we have politicians in california just keep raising taxes as if we're not competing against these other

00:59:03.180 | states well we are and people are leaving we're seeing a mass exodus here we've got to realize

00:59:07.820 | that we can't raise tax rates beyond the point where people are willing to bear them this is the

00:59:13.660 | this is your i think your best point david is that what the great pause did was it let people

00:59:18.940 | reassess their lives how many people do we know who either left the state or left the

00:59:23.020 | state changed job you know broke up with the spouse whatever it is people reassessed everything

00:59:29.660 | in their life and what people uniformly came to was why am i paying this much and getting this

00:59:36.060 | little in the bay area in california when i could get twice as much three basically three times as

00:59:42.700 | much in austin or miami and not pay this amount of taxes and be happier and that is an existential

00:59:51.500 | problem for the bay area if you're not paying this amount of taxes and you're not paying this amount of taxes and be happier and that is an existential problem for the bay area if

00:59:53.440 | you know, this is not just Elon Musk, or Larry Ellison, in

00:59:56.780 | Oracle, it's also rank and file developers, and the developers

00:59:59.520 | don't need to be in the office. So you could have this massive

01:00:03.120 | middle leave to that nobody anticipates. And if all the

01:00:06.180 | developers said, You know what, I want to be on the Reno side of

01:00:09.500 | Lake Tahoe. You know, I want to be in Austin or wherever, I'm

01:00:13.160 | paying less taxes, and I'm making the same money and I got

01:00:15.540 | a better quality of life.

01:00:16.620 | What do you guys think happened? So J Cal, what what happens to

01:00:20.100 | California or Connecticut or New Jersey? And what happens to

01:00:25.080 | Florida? Just tell me what

01:00:26.120 | I think it's a death spiral for New York and for California

01:00:29.080 | where it unless the representatives in government

01:00:33.840 | start to represent the people who are voting and living there

01:00:37.480 | and voting their interests as opposed to the special interest

01:00:40.260 | to David's point about the insiders, we have disconnected

01:00:42.900 | what the citizens of California want from what the government

01:00:47.020 | officials are providing. They're just not in sync.

01:00:49.680 | They're basically kowtowing to teachers unions or special

01:00:55.560 | interests and not the people who are building companies or just

01:00:58.940 | people living here. People want to build housing and they won't

01:01:01.500 | let them. You can't build apartments in Palo Alto or you

01:01:05.040 | know, any city. I mean, this is crazy.

01:01:08.520 | You're right. And the only middle class is going to be left

01:01:11.040 | in California pretty soon. It are government workers. I mean,

01:01:14.700 | that's it. That's the only people can be making over $100,000

01:01:17.400 | a year in California are the government workers.

01:01:19.660 | Because everyone who's middle class who's running a business

01:01:22.960 | is just is finding it too difficult and too difficult to

01:01:27.520 | earn with the level of taxation that's run their business and

01:01:30.620 | their regulation, regulation and they're leaving.

01:01:33.220 | I mean, just think about the regulation issues of doing any

01:01:36.760 | real world. I mean, you've done construction in San Francisco.

01:01:39.540 | We've had businesses that are real world businesses with

01:01:42.220 | storefronts. It's it's jumping over hurdle after hurdle after

01:01:45.860 | hurdle. I have an idea down. It's brutal.

01:01:48.160 | What if

01:01:49.480 | whenever you started a company in California, you got, you know,

01:01:52.840 | three or four years worth of tax credits for engineers in return

01:01:55.960 | for 1% of the equity that California was not allowed to

01:01:58.720 | sell?

01:01:59.220 | Sure. I mean, some equity upside would be great.

01:02:03.280 | I have an idea. Chamath, how about you run for governor?

01:02:06.640 | Yeah, Chamath. There's an idea. Why don't you?

01:02:09.640 | Isn't that why we're doing the emergency pod?

01:02:11.800 | Sacks, sacks, sacks. I think you should run.

01:02:13.720 | We'll be right behind you.

01:02:14.560 | Have we disparaged you too much? Or has this been too difficult?

01:02:17.840 | I

01:02:18.340 | I

01:02:18.840 | , let me let speaking of politics, though, I do I do need to tell the story. This is a complete,

01:02:24.480 | complete non sequitur. In 2012, 12 or 13. I can't remember which year Mike Bloomberg invites a bunch

01:02:31.800 | of us from technology to, to the White House Correspondents that were like, yes, the White House

01:02:37.260 | Correspondents that are broke. You go. That's awesome. Of course, I went once here. So you know,

01:02:41.880 | myself, Ian Osborne, Jose Ramon, the founder of jawbone. And I have two amazing stories about the

01:02:43.680 | White House Correspondents that are broke. I went once here. So you know, myself, Ian Osborne,

01:02:44.080 | Jose Ramon, the founder of jawbone. And I have two amazing stories about the White House Correspondents

01:02:44.200 | that are broke. And I have two amazing stories about the White House Correspondents

01:02:44.680 | that are broke. And I have two amazing stories about the White House Correspondents

01:02:44.780 | about the White House Correspondents number one, three, number one is like the dinner itself is kind

01:02:54.940 | of like a problem, just because there's just so many people, right. And so, you know, you have to

01:02:59.260 | have a rubber chicken dinner because there's like 1000 people in the room. But the second was that

01:03:03.900 | Ella Macpherson was there. And I've never seen more incredible hair in my life. Just

01:03:09.500 | I have this image of this person's hair. And it was like the thickest,

01:03:15.020 | like it was like, curly, but like it looks so soft. And this is the most incredible hair I've

01:03:21.500 | ever seen. I think those are called extensions or a wig, but go ahead.

01:03:23.820 | It didn't look like that. It looked like real hair, but it just looked like a lion,

01:03:30.220 | like the mane of a lion. And then the third story is I were in a reception,

01:03:35.980 | there's an after party at the French ambassador's place, I start talking to this person randomly.

01:03:39.900 | And there's like all these stars everywhere. But I just start talking to this to this person. And,

01:03:43.660 | you know,

01:03:43.900 | she's very chatty, and I'm chatty, chatty, chatty, blah, blah, blah, blah, blah, blah,

01:03:47.340 | we're talking, talking, talking. And then at the end of this, like, sort of like five minute

01:03:50.460 | conversation, and we had not really introduced each other. She just kind of said, Hey, and I said,

01:03:55.740 | Hi. And so we started talking. She says to me, Do you mind if we take a picture? And I'm like,

01:04:01.660 | Yeah, of course. And I had no idea what was coming. So I was like, so we take a picture.

01:04:06.140 | And she says to me, and she says, you know, I think you're really fantastic in parks and recreation.

01:04:11.260 | And I thought, I was Aziz Ansari. Jesus Christ, how does this happen?

01:04:24.460 | At least she didn't call you Urkel. That was her second choice.

01:04:30.140 | Oh, my gosh. I love you in parks and recreation. Anyways, that's my that's my interaction with

01:04:34.380 | politics.

01:04:35.180 | I think you're ready for politics because you just avoided the question.

01:04:37.740 | Let's be really honest, like, I'm not ready to do any of that I what I need to do is,

01:04:46.460 | I need to figure out, you know, a my business and where it's going. And then B,

01:04:50.380 | I do think it's worth figuring out what are the conflict of interest laws? And what do you have

01:04:54.460 | to do if all of this were to come to pass, because I could not make a credible decision unless I knew

01:05:00.140 | that. Because I just have things that I want to do. And that to me are the most important things.

01:05:05.260 | Like, I'll just be really honest with you. Like I'm working on something in battery,

01:05:07.660 | that I think is it's important for a lot of places much, you know, more than just California.

01:05:12.780 | And so like, if I have to abandon this battery project, I wouldn't do it, you know, just that

01:05:18.220 | simple. So I got to figure that out. And you got to write down all the illegal

01:05:21.500 | things you've done on a piece of paper and all the illegal things you're doing on a daily basis.

01:05:25.100 | And then we got to make sure that you have a case of moleskins because

01:05:28.540 | I can start filling that in.

01:05:30.620 | They're never gonna get uncovered.

01:05:32.780 | The oppo research has begun.

01:05:35.900 | Right.

01:05:36.140 | That's what the dinner on Thursday should be about, should start the oppo research program.

01:05:41.100 | Oh my gosh. That's a long program.

01:05:44.620 | But there's certainly a groundswell and interest, right Saxon? There's certainly...

01:05:49.740 | Oh yeah, it's crazy.

01:05:50.780 | Like, I think Chamath has a lot of folks that love his passion and the way he speaks to them and that,

01:05:58.060 | you know, he has a real sense for what I think people are feeling and can speak to that and

01:06:03.820 | obviously has experience in kind of making decisions.

01:06:06.060 | Yeah.

01:06:06.300 | And allocating resources, right? So, you know, I think there's a lot of interest, Chamath,

01:06:09.820 | and a lot of drive to see you, you know, shit or get off the pot.

01:06:14.140 | Here's what I'll say. Here's what I'll say. I've grown up with nothing. And getting to the other

01:06:22.300 | side, I'm completely convinced that poverty is a disease. That it is, except in this disease,

01:06:32.140 | it is systematically, um,

01:06:34.060 | reinforced. You know what I mean? So, Jason, stop that, Jason.

01:06:41.180 | I'm not talking to you, Chamath. It's good.

01:06:43.660 | Yeah.

01:06:44.220 | And I would like to say, all Americans and the citizens of California.

01:06:48.540 | I came from nothing.

01:06:49.820 | I came from nothing.

01:06:50.860 | And here I am.

01:06:51.420 | I would eat rice three days a week, and then I would eat the plate the other four.

01:06:55.980 | By the way, the reality is that if I were to do it, if like all the checks came back and it

01:07:01.340 | seemed like it was a plausible thing, I would only do it for the 18-year-old.

01:07:03.820 | Yeah.

01:07:04.060 | And I would do it for the 18 months and just kind of, you know, but you'd have to get elected on a

01:07:07.100 | mandate where it was so clear that it's like all of California wanted these five or six laws to

01:07:12.060 | pass. Like, I think it's like, you're not running a candidate, you're running a platform.

01:07:15.580 | That's right.

01:07:15.740 | So, it doesn't matter who it is. You know, whoever goes in, it could be me, but it could be,

01:07:20.300 | frankly, Kim Kardashian or The Rock or David Sachs. I think what's really important is we

01:07:24.780 | should get alignment on a handful of laws that change the trajectory of the state.

01:07:29.500 | And the reason why that's important is if those laws can pass and the state turns around,

01:07:33.820 | then that's the roadmap for the other 49 states. And I think that's a big deal. That's a really big

01:07:38.540 | deal.

01:07:38.940 | I think it's about getting adoption of a playbook, a playbook to fix California. And if that playbook

01:07:45.100 | is something that a group of people from different parties and different backgrounds can coalesce

01:07:48.860 | around and, you know, publish that playbook in a way that's easily understood and-

01:07:52.860 | And you can take it and run it.

01:07:54.860 | Let's each pick what our top item would be. For me, it's the building of

01:07:58.780 | multifamily unit housing, I think would be in my

01:08:03.580 | top three. What's in your top three, Sachs?

01:08:05.500 | Well, if I were to write a sort of catchphrase for a campaign,

01:08:14.700 | it would not be make California great again, but it would be something more like tough and tolerant,

01:08:21.420 | because that's what I think California wants. So, tolerant on LGBTQ rights,

01:08:26.940 | you know, tolerant towards people of different nationalities, towards immigration,

01:08:33.340 | you know, tolerant on social issues. But I think what California is really want now is tough

01:08:38.860 | on crime, tough on hard drugs, negotiate tougher deals with these unions and special interests who

01:08:45.500 | are just pillaging the state. And then, you know, and frankly, tougher on the politicians, because

01:08:51.260 | they're making it too tough on the people to, you know, to live and to run their businesses.

01:08:56.220 | And, you know, we need to make it easier on the people and tougher on the politicians.

01:09:00.060 | Freebird, what do you got in your top five?

01:09:03.100 | I think, you know, I think the top three items, if we if we could only put three items on the docket,

01:09:07.100 | you know, one, two, and three, I think, from creating much more affordable housing,

01:09:12.700 | through multifamily, you know, going up as opposed to building out,

01:09:16.700 | and just allowing, you know, anybody who wants to add a couple of stories, add a couple of stories,

01:09:21.020 | and just more housing would lower the price of housing. And maybe we have to change, you know,

01:09:26.460 | the taxation and maybe re evaluate the value of homes, because right now you buy a home in 1970,

01:09:32.860 | for 50k, you're paying 1% of that for the rest of your life, right? Which then makes it impossible

01:09:37.660 | to move. And you got two people living in 5000 five bedroom square foot home, because they can't

01:09:43.260 | move because their tax basis is so low on it, right? What do you got, Freeberg?

01:09:47.500 | I mean, I look the challenges with any one of these things, you have to balance it. It's like

01:09:52.300 | we talked about last time, you know, we talked about adding a transaction tax to

01:09:57.020 | trading on markets, but you also have to get rid of the capital gains tax. Right? If you're

01:10:02.620 | going to get rid of that, you know, that that proposition that locks in the property tax rate,

01:10:09.100 | I think it's prop 13. Right, sex, if you're going to get rid of prop 13, you've got to phase it out

01:10:13.420 | over time. But to create the opportunity on the other side, which means how do you create more

01:10:17.820 | affordable housing at the same time that you get rid of prop 13, you've got to enable as you pointed

01:10:22.380 | out, the ability for more rapid housing to be developed and dropping regulatory constraints,

01:10:27.740 | and maybe removing some of the union pricing and some of the work that gets done in the supply chain

01:10:32.380 | and so on. And so, you know, I think it's about the balance trade off amongst these things, you

01:10:38.460 | know, if we're going to talk about trying to keep the top 40,000 households in California,

01:10:42.540 | and you're going to drop the tax rate on them to keep them here, which is an extremely controversial

01:10:47.260 | anti populist movement, and you know, right now, you'd have to find another way to kind of resolve

01:10:52.300 | resolve that gap, or at the same time kind of reduce the cost of our top cost is education.

01:10:58.620 | So you need education reform. Our second top cost is healthcare.

01:11:02.620 | And other related services and how you resolve that, that there's a lot of structural things

01:11:07.820 | in there, it's probably a checklist of 10 things that you would say, let's go negotiate better

01:11:11.740 | prescription drug prices. Let's make you know, the services more efficient, meaning how many

01:11:16.620 | patients does a doctor get to see per hour per day per year per week, whatever, there's all these

01:11:21.180 | things that you kind of go through, and you can make each one of those dollars that are being

01:11:24.220 | spent more efficient. So as much as I'd love to kind of rattle it up to three different things,

01:11:28.540 | this is a management problem. And you know,

01:11:31.900 | as those of us who have run businesses that are struggling or challenged have experienced,

01:11:35.900 | there isn't one thing to do to fix a problem when something is not operating well.

01:11:40.220 | But you really, it really does come down to talent. And so you know, I would think that the people

01:11:45.260 | that are sitting in those assembly and Senate seats need to be the right people.

01:11:49.100 | And the person sitting in the governor's mansion needs to be the right person who will surround

01:11:52.940 | him or herself with the right people who are operators and managers and leaders who know

01:11:56.540 | how to resolve these problems and go through and do just like that guy did and Dave with the napkin,

01:12:01.660 | and, you know, write out, look, here's the 10 simple things we can do to fix HHS. And here's

01:12:06.060 | the 10 simple things we can do to fix higher education, and go in and cut half the expense.

01:12:10.780 | And if you cut half the expense, you have a lot of things you can start to do.

01:12:13.500 | And so yeah, I don't have a simple answer for you, J. Cal, but I think it comes down to balance.

01:12:18.860 | Would you say school vouchers since you brought up education are the quickest solution there to

01:12:23.180 | create more competition quickly, by giving parents the ability to take their voucher and go to

01:12:27.580 | whatever school they want? I'll be honest, I haven't read enough on school vouchers to know the

01:12:31.420 | ramifications of the program programs that have been proposed. So I'm not going to be very well,

01:12:35.660 | very thoughtful on that. Well, I'll speak in favor of the idea of giving parents more choice. I mean,

01:12:42.220 | these schools are being are they being run for the students or for the special interest? Because

01:12:47.340 | right now, the parents don't really get any choice. I mean, look, if we can recall the

01:12:51.740 | governor, why can't we? Why can't the parents of a school recall the headmaster? I mean,

01:12:56.860 | why don't we give them the ability to circulate a petition if they're unhappy?

01:13:01.180 | I think in the case of the governor recall, if we get 12% of voters to sign the recall petition,

01:13:08.060 | then you get a recall election. So what if you had a system where the parents of a school

01:13:12.860 | could sign a petition, and then they vote? And if the majority of the parents,

01:13:16.780 | yeah, I mean, majority of the parents vote to recall a school,

01:13:20.780 | then they can basically replace the headmaster and run it in a different way.

01:13:23.980 | Why shouldn't they have that choice? It's crazy to me.

01:13:26.140 | Well, they're paying for it.

01:13:27.420 | That's why.

01:13:28.140 | Yeah. Yeah. But let me give you,

01:13:30.940 | let me give you a little math I just did on my calculator here. So the average student

01:13:35.500 | in California costs $18,000 a year, roughly. Okay. And we have a classroom size on average

01:13:43.340 | of about 25 students. It's actually higher than the national average. So you multiply 18,000 by

01:13:48.460 | 25. That's $450,000 per classroom. Okay. Now how much does a teacher cost? I mean, okay.

01:13:55.420 | No, that's the average in California for teachers.

01:14:00.700 | Let's say that we paid teachers extremely well. Let's say we paid the teachers 100,000 a year

01:14:06.460 | because we all believe in having great teachers. Okay. That would still leave $350,000 left over.

01:14:12.220 | And remember, you don't have the real estate cost, right? The state already owns all these schools.

01:14:16.700 | So where is the money going?

01:14:18.140 | We've systematically entrenched poverty.

01:14:20.380 | I think that what happened to you, Friedberg or Sachs or me or J-Cal, I don't think it's possible

01:14:25.500 | anymore. And I think that we are aberrations. And I think that folks that are younger than us would look at our money and say, "Oh, we're going to pay $150,000."

01:14:26.560 | And I think that we are aberrations. And I think that folks that are younger than us would look at our money and say, "Oh, we're going to pay $150,000."

01:14:26.640 | And I think that we are aberrations. And I think that folks that are younger than us would look at us.

01:14:30.800 | And they look at us, I think, in part because they're like, "God, I would love to have that

01:14:36.000 | shot." And I don't think they know where to start. And I think they also see a system that feels very

01:14:40.720 | much rigged against them.

01:14:41.840 | Just buy Bitcoin. I mean, this is why they were attracted to buying Bitcoin

01:14:45.120 | or doing what they did with GameStop and why Wall Street–

01:14:47.680 | Insiders versus outsiders.

01:14:49.360 | They feel like they have this opportunity to show the man. And they don't– this is why they don't

01:14:53.760 | want to take on school debt. I mean, I don't blame millennials.

01:14:56.400 | I don't blame millennials for being disgruntled if they got $100,000 or $200,000 in debt,

01:15:01.280 | and they were told this degree would get them– this would be their ticket.

01:15:05.680 | It's a lie.

01:15:06.160 | It's totally been disconnected. It's a lie.

01:15:08.160 | It's a great lie. It's a great lie.

01:15:09.840 | That's the big lie.

01:15:10.800 | That's one of the big lies. And I think we're sacrificing it now because

01:15:14.400 | we're making this great sacrifice because we're exposing these lies to be exactly as they are.

01:15:21.680 | So, I mean, if I had to pick a couple of things, Jekyll, I would say the most important thing,

01:15:26.160 | for me, is school vouchers tied to– I would increase public school salaries. You pick your

01:15:31.920 | number. I don't really care what it is. 100 grand, 125 grand. But you need to tie it to school

01:15:38.960 | vouchers so that any parent can put their kid into the best school that is for them.

01:15:43.440 | Or start their own school. There needs to be competition.

01:15:46.480 | Or start their own school.

01:15:47.040 | If five parents get together and they each get an 18K voucher,

01:15:50.320 | they can spend $100,000 on a teacher to teach five students.

01:15:55.920 | Amazing.

01:15:56.320 | And if they hit their goals, they're going to do better. What five parents, even the

01:16:00.800 | most disadvantaged parents, would take advantage of this?

01:16:03.920 | To me, that's the first above all else because I think it creates accountability.

01:16:09.040 | And it allows our kids to have a decent shot.

01:16:11.840 | The second thing I would probably do is I would actually just cut all taxes to zero on the

01:16:16.640 | personal side, but I would introduce a progressive taxation system for corporations. And I would try

01:16:20.400 | some of these novel things like getting equity in turn for credits and allowing folks to capitalize

01:16:25.680 | certain expenses. I know people think that's all so stupid, but if all we did was just own 1% of

01:16:31.760 | Apple, Google, Facebook, you'd have $3 trillion, $4 trillion. Trillion with a T. You know what I

01:16:38.880 | mean? Well, that's $4 trillion in market cap, but you know what I'm trying to say. If you control 1%

01:16:44.080 | of that, it goes a long way. So there's that. And then I do think that there's something that

01:16:51.280 | we need to do for people to be able to live. I remember interviewing somebody,

01:16:55.440 | and what he said to me just made me so sad. He's like, he drives an hour and a half into work every

01:17:01.760 | day and then drives an hour and a half home. And I was like, how is this possible? And I just thought

01:17:07.760 | to myself, what does that do to you and your family? He goes, I don't see my family. And I'm

01:17:13.040 | like, well, can't we just increase your salary? And that's not possible because of the job that

01:17:17.760 | he had. And then he couldn't afford to live. And so all these things just build up in the system.

01:17:22.080 | So those would be my three things. It sounds

01:17:25.200 | like we have a bestie platform. We need to figure out who the bestie candidate is going to be.

01:17:32.080 | Hopefully we can convince Chamath to do it. But the first thing we got to do is we got to make

01:17:37.360 | sure this recall happens. There's another five weeks or so to gather signatures. So everybody

01:17:42.960 | should check out the website. It's rescuecalifornia.org. It's rescuecalifornia.org.

01:17:48.160 | If you have the means to donate, please do. I donated $50,000 to it. They are taking donations.

01:17:54.960 | And even if you're out of state but believe in this cause, like Chamath said, what happens in

01:18:00.240 | California or as California goes, so goes the nation. It would be a really good thing to send

01:18:06.320 | a message, even if you're out of state, to these special interests who are ruining the state,

01:18:11.760 | that this isn't going to be tolerated because every politician in the country is going to hear

01:18:16.240 | that. And they're going to start realizing, oh, I can't just pay attention to the insiders.

01:18:20.320 | I need to start paying attention to the outsiders, to the majority of citizens who've never

01:18:24.720 | been organized before. But now they are getting organized. And so we need to send this message.

01:18:30.000 | That is the first step. We're not going to get any positive change in this state until the

01:18:34.640 | politicians are held accountable. And this recall is the starting point for that.

01:18:38.560 | And if you take a picture with the form and CC your besties, we'll follow you back or

01:18:44.880 | retweet you or like you, some combination of that. I saw a couple of people did it after the last pod.

01:18:49.360 | So print out the form and go ahead and take a picture with them and see if they're good.

01:18:54.480 | podcast, just for everybody to know, episode 21. We are going to start by reading mean tweets.

01:19:04.360 | There have been some unbelievably vicious tweets targeted, typically at Jason and then at me,

01:19:12.640 | a little bit at David Sachs. But finally- Really? They went after the queen?

01:19:17.560 | We've broken the seal and the queen has been targeted.

01:19:19.800 | Really? What could you say?

01:19:21.440 | Wow. He was called sanctimonious. He was called sanctimonious on Twitter. We are going to make him

01:19:27.280 | read his mean tweet to kick off episode 21. And we will see you all next time on the All In Podcast.

01:19:33.520 | Love you guys. We'll let your winners ride. Rain Man, David Sachs.

01:19:39.920 | And instead, we open sourced it to the fans and they've just gone crazy with it.

01:19:46.960 | Love you, West. I'm queen of Kinwa.

01:19:48.960 | I'm going all in.

01:19:50.720 | West, your winners ride. West, your winners ride. West, your winners ride.

01:19:55.840 | Besties are gone.

01:19:56.960 | Go 13.

01:19:58.480 | That's my dog taking a drive away.

01:20:00.560 | Wait, no, no.

01:20:01.680 | Oh, man.

01:20:04.320 | My avid basher will meet me at .

01:20:06.240 | We should all just get a room and just have one big huge orgy because they're all just useless.

01:20:10.080 | It's like this sexual tension that they just need to release somehow.

01:20:13.040 | Wet your feet.

01:20:14.800 | Wet your feet.

01:20:15.920 | Wet your feet.

01:20:17.040 | Wet your feet.

01:20:17.840 | Feet.

01:20:18.400 | What?

01:20:18.800 | We need to get merch.

01:20:20.560 | Besties are back.

01:20:21.520 | I'm going all in.

01:20:23.520 | I'm going all in.

01:20:30.960 | you

E20: Robinhood wrap up, Insiders vs. Outsiders, California's failing report card & how to fix it

Chapters