Next up, Larry Summers. Larry is an absolutely incredible human being. He was the president of Harvard. He was Treasury Secretary under Clinton. He was Obama's head of the NEC. He's been on the board of some very well-known tech startups like Square, now Block. He's been a great friend of mine for 12 or 13 years.

He taught my son calculus. But I want to start with one very quick story. Larry was staying at my house, and he runs into the kitchen, and he says, "Jamal, the internet is not working. I have an extremely important Zoom." And I said, "Oh, yeah, no problem. You can just use this thing over here." And he goes, "Oh, I need you to help me get on the Zoom." So I'm like this IT guy helping him get on the Zoom.

And up pops a picture of the governor of the DOJ, the Bank of Japan. And I was like, "What's going on?" And he says, "Jamal, if I'm a little peckish, could I just get anything you have over here to eat?" So I go outside, and my mom's like, "What is going on?" And I said, "Oh, Larry Summers has a meeting with the head of the BOJ." She goes, "The head of the BOJ?" And she stops me on the head and she goes, "We must make him something to eat." And so we made scrambled eggs and orange juice.

And then at the end of it, she's like, "Who is he, this person talking to the head of the BOJ?" And I said, "It's Larry Summers, blah, blah, blah." And then once she heard that it was Clinton, she hit me on the top of the head again, and she worked for Clinton.

And she said, "We should have given him fresh-squeezed orange juice." Okay. He is literally one of the most stimulating intellectual people that I know. So let's start with the most pressing question. CPI is going to come out tomorrow, Larry. You have basically become the shadow secretary of the Treasury and the shadow Fed governor.

Where are we going? Where are we in the cycle? What is happening to the consumer? Give us just the five-minute redux on the economy. We have a thing in politics, Shamath, it's called the management of expectations. And you have just failed me completely in that regard. Look, there are two kinds of economists.

There's those who know they don't know and those who don't know they don't know. I'm in the first category, so I'll give you my best guesses, but that's what they are. What Samuel Johnson said about second marriage is true of soft landings. They represent the triumph of hope over experience.

There's never been a time when inflation was above 4 and unemployment was below 4 and the U.S. economy didn't go into recession before that situation was resolved. That's why I've been kind of a Cassandra on inflation and the cyclical outlook for the last couple of years. Here's the way I think about soft landing.

You've got this plane. It's ultimately aspiring to fly very fast and then land on an aircraft carrier. It was way off course and seemingly out of control. The pilot figured out that it was all screwed up, and now the pilot's got the plane on a reasonable course, and that's good.

But it's still 300 yards above the deck of the aircraft carrier, and it's still going very fast, and it's still an open question whether it's going to hit the aircraft carrier rather than land on the aircraft carrier or whether it's going to overfly the aircraft carrier and have to turn around and achieve a soft landing.

And I think all of that is still very much at risk. The people who say it's all okay, we never need to worry about inflation, inflation was 9, inflation's now 3.5, it's all under control, we're all done, don't know what they're talking about. It could turn out to be right, but inflation was never on an underlying basis anything like 8 or 9.

It was like 5, artificially pushed up by used cars and airline fares and a bunch of stuff like that, gasoline. And the thing about stuff that mean reverts is that it mean reverts. And so when that stuff was going up real fast, we had 8% inflation with an underlying inflation rate of 5%.

When that stuff collapses, we have an underlying rate of inflation of 4 or 5%, and we see inflation below that. And so that's what happened. So if you try to measure what's happened to the actual underlying rate of inflation, it's down a little, maybe it's down half a percent, maybe it's down a percent.

That's more than I would have expected, and that is genuinely good news. But it's a long way from where we are now to a soft landing. And I think you've got risks on both sides. I think you've got risks that the consumer is going to slow down hard, that monetary policy operated with a lag, that credit is going to be crunched, and that you're going to see the economy have a bit the Wiley-Coyote aspect, a bit the ball rolling off a table aspect.

I think that risk is there. I think there's a larger probably risk that we don't really have inflation on a secure path down below 3.5% and that the Fed thinks it's got it under control and it doesn't, and that it's going to have to go back to raising rates.

So Larry, if you were-- I'm nervous. Okay, you're nervous. So if you're Jay Powell, if you had Jay Powell's job right now, what is the delta from what he's doing, what would you do differently do you think? I thought Jay Powell was a million miles off course two years ago.

I thought he was talking about zero interest rates until 2024. He was talking about inflation being transitory. It was all on a different planet than the one that I thought I was seeing. Starting about a year ago, he has recognized that the principal problem is inflation, that the Fed was way behind the curve, that he needed to focus on getting inflation back to target, and so my differences would be small and on tactics rather than large and fundamental.

I think the Fed probably needs to be investing a bit more in its credibility by emphasizing that it's prepared to raise rates again if it doesn't see inflation decline. I think the Fed should be recognizing that the extraordinary size of the U.S. budget deficit and where it is in prospect is going to complicate the macro policy task and should be more willing to call that out than it is.

I think the Fed on matters relating to financial regulation should be giving more attention to market prices and the market values of assets and less to a variety of book value regulatory concepts than it tends to emphasize. But again, I think that what we did in 2021 when the government basically infused $2.9 trillion into a rapidly recovering economy and when the Fed promised it was going to keep interest rates at zero till 2024 and when the Fed bought bonds on a massive scale, that put us way off course.

Since then, we've been working our way on the monetary policy side back to course in basically reasonable ways. But that doesn't mean if you get all the wrong answers on the first third of the exam, you can do great on the second two parts, the second two thirds of the exam, and you still won't get a very good grade for the overall experience.

So it's a hard problem. My interpretation of what happened in 2021 is in Q1, they passed that $2 trillion American Rescue Plan, that last COVID relief bill. You absolutely nailed it by warning that this could set off inflation. And the politics of that was that the administration, everyone who wanted the bill basically said, "Oh, no, Larry doesn't know what he's talking about." They sort of poo-pooed your warnings.

And then sure enough, the inflation came that summer. And that's when they almost, I think for political reasons, had to say it was transitory because they didn't want to admit that you had been right and they had been wrong three months before. And as a result of that, the Fed waited another nine months to start raising interest rates.

And so everything got delayed. They should have reacted back in the summer of 2021. I don't know. That's my interpretation of the politics. - Is the Fed political like that? In terms of how they behave, to Sax's point, are they thinking about the politics in the current administration? Or are they acting independently like they're supposed to?

- First of all, I think I'm a spectator and commentator, not the dominant actor by any stretch. I'll leave it to others to speculate about everybody's motives. It's not only people in political situations who, when they develop a strong view, change it only slowly in response to evidence. I'm basically someone who mostly goes to Washington and explains when I'm in Washington that there are limits to our knowledge and limits to our competence.

And so it's often true that the best thing we can do is get out of the way. So I believe that. But I also think that it's a mistake to think that whenever anybody makes a judgment that doesn't turn out right in Washington, that it's because they had some bad political motive and were playing politics, rather than they were using their best judgment and they turned out to be wrong.

And like human beings in public environments, they change their mind slowly in the face of evidence. There's a very broad thing. You all who work in companies experience it. You experience it in your personal lives. We experience it in our relationships. When something isn't going great, you always have to decide, is it that we need to give it time, persevere with what we think is right, double down and keep going, or do we need to say we got this all screwed up, you need to suddenly change course.

And that's a decision we all are always making. And it's not that it's always the right thing to change course at the first hint of failure. And so I think people obviously made bad decisions and they kept making them and they made them too long and I was on the other side.

But I think that it's a mistake, really a serious mistake, to go quite so quickly to motive. And I want to say one other thing, just because I was struck by what came before. Look, I really do worry a lot about regulation. But it's important to understand that the largest part of the good that cops do is not that they catch people breaking into houses or that they pull people away when they're trying to murder somebody.

The large reason why cops are good is because everybody knows that there are cops around and they commit far fewer crimes than they otherwise would. And therefore, evaluating the police only by the incidents where the police are actively involved gets a judgment about crime wrong. And the same thing is true with respect to regulation.

And we do need to recognize that all the things that we take for granted that make this place a very different place to do business than Argentina and a much greater place to do business than it was 100 years ago have to do with institutions and regulations. And so I think that's a perspective you all need to keep in mind.

If there had not been major regulation that was regarded as oppressive, totalitarian, wrong, and anti-market beginning in the late 1940s, it would be impossible for this gathering to exist because the smog in Los Angeles would be so profoundly serious. Were there excesses? Was there craziness? Of course there was.

But let's also keep in mind that you need frameworks in which freedom can flourish. Let me ask you a basic question. We had Ray Dalio yesterday, and he was going over the arcs of history and maybe America being past its peak in decline. And I'm curious what you think about the perhaps existential crisis for America in terms of our spending.

Trump added a trillion to the deficit. Biden already four trillion. We've had this debate on the pod. Are we in an existential crisis in terms of how much we're spending, debt-to-GDP ratio? Is that the most acute issue for America? And then what are your thoughts about America on the global stage versus other emerging powers, China and India?

There are a lot of parts to that question. I think the most important theme in American history is resilience. I'm old enough--I'm not that old-- but I'm old enough--I'm old compared to the people in this room, I guess-- but I'm old enough to remember when Jimmy Carter declared a crisis of the national spirit and a pervasive malaise.

I'm old enough to remember when the country was being torn apart by the Vietnam War and the President of the United States couldn't go speak anywhere in the country, pretty much, except on a military base and where there was gunfire on college campuses. I'm old enough to remember when-- I'm not old enough to remember, but I've read about-- when Joe McCarthy had the country in his thrall and people on university campuses were afraid to express progressive beliefs.

If you read the history, almost everyone advised FDR in 1932 that he needed to use his inaugural address to declare dictatorial powers to take the country over, to deal with the Depression because democracy wasn't up to it. Patrick Henry said in 1792--1792-- that the spirit of the Revolution had already been lost.

And so I think the theme in American history is the capacity for self-denying prophecy. It is the capacity for the Jeremiahs that generate all this alarm, that set in motion the processes which lead to renewal. And it won't be that way always. There'll come the end, there comes--there's come the end for everything great historically.

But I'd rather be playing the hand of the United States than the hand that Xi Jinping is playing, than the hand that India is playing, certainly than the hand that societies in Asia, where there are only going to be half as many people a century from now, are playing, certainly than the societies of Western Europe.

That doesn't mean that those of us who are financially minded don't need to be terribly, terribly concerned that the government's finances are not on a sustainable path and won't be on a sustainable path until we figure out how to raise the revenue that a society facing grave national security threats, an aging population, and a rising price of medical care and education relative to flat screen TVs and houses needs to finance its government.

That doesn't mean that there aren't huge challenges as well as opportunities associated with everything that's coming out of information technology. That doesn't mean that I'm not fearful of so much that's happening in our educational system. I think that we have in our educational system, and this is true of our great universities and it's true of our unionized elementary schools, we have gone from thinking that self-esteem comes from achievement to thinking that achievement comes from self-esteem.

And that is a... embarrassment that the grade point average of the average student at Harvard University is above 3.7. That by far the most common grade is A. And that the big education reform idea of the moment is to eliminate standardized tests that actually measure what people know. And so this kind of moves away from traditional values of excellence, achievement, the importance of learning, is something that I think is very much a problem.

So yeah, I'm worried about the national sociology problem, represented by the fact that we used to be a country 60 years ago where 4% of men between 25 and 54 were not working, and now we're a country where 14% are not working at any point in time, and a quarter of them don't work for more than three months within a two-year period.

Am I worried about that? Yeah, I absolutely am. Am I worried about the finances? Yes. Am I worried about our inadequate investment in technology leadership? Am I worried about a kind of broad constipation? Many of you have probably been to Harvard Square. There's a bridge. The bridge goes over the Charles River.

It's 362 feet long. It had been around for 100 years. It needed to be fixed. It did need to be fixed. 62 months, five years and two months, with one lane of traffic closed, in order to renovate a 362-foot bridge. To put that in perspective, Patton built a bridge over the Rhine 3,000 feet in one day.

But there are better things about spending your life hanging around in a university. And so I wandered over to the classics department one day, and I learned that Julius Caesar, Julius Caesar, built his bridge over the Rhine 3,000 feet, not 300 feet, in nine days. And this is what it took us.

So do we have huge problems? Yes. Is this the first time we've had huge problems? Hell no. Is there the prospect that we can solve those problems? Yes, I think there is. Do I think we, all things considered, have a more solvable set of problems and a more dynamic society for solving them?

Yeah, I do, than the other places. And never forget this, even though we always forget it when we make policy in the relevant area. -Larry, but before-- -The best-- -Let it come. -The best test is, we are the place that people from every part of the world want to come to.

That is 100% true. I want to ask you a question. Let's just actually go to that quickly, which is, you were the president of Harvard. There was a very, let's call it, important, divisive, foundational case that just went through the Supreme Court on affirmative action. You wrote, actually, a pretty interesting op-ed about all of this.

Give us your thoughts about what is working inside of higher education, what you think about that ruling, just society in general as a reflection of that. I wish that ruling hadn't happened. I wish that great universities were in a position to set their course and to compete with each other and to admit students as they saw fit.

But I think after that ruling, it is clear what the right theme should be. And that theme is opportunity. The great strength of our universities should be that they make it certain that everyone has an opportunity to succeed and get to the top, no matter where and in what circumstances that they were born.

And I think there's much more that our great universities can do, and there are things that are much more important than arguing about diversity policies that could get us there. Here are some of them. Whatever the right way to think about this was 40 years ago, the time for legacy admissions is over.

Problem solved. If there are scarce spots in our great universities, having your father hire a fantastic coach to teach you to play a country club sport at an extraordinary level should not be a path to admission to our leading intellectual institutions. Let's end athletic recruiting for aristocratic sports. It's really a nice thing.

It's a nice thing. It's a good thing. It has a lot of good things for most of the people in this room that there exists early decision and early action. But it basically works to help the privileged, and it basically prevents the underprivileged, less privileged, from shopping their financial aid offers and getting the deals they should.

We would not permit Goldman Sachs to make exploding offers to our MBA students. Why should great colleges make exploding offers to admitted students? You guys, it's like the word. Like, I didn't really know until I got involved with Silicon Valley that scale was a verb as distinct from a noun.

I thought it was something you kind of stepped on in the bathroom. If you think about it, any institution, almost any other institution in the society, nearly a tenth as successful as Stanford or Harvard, would have far more customers today than it did 50 years ago. And yet, our universities have not grown their size of their students on campus, and they have moved only glacially to use the incredible opportunities that technology presents to provide education, which--and this is what's remarkable about educational technology, if you think about it.

It can be much vaster scale and at the same time be much more personalized. You can go at your own pace. You can hit, you can hyperlink, you can go deeper in the things that you're interested in. And so scale plus personalization creates incredible possibility. And our great universities have only scratched the surface of what's possible.

So there's an immense amount they can do. - Last question, because we're running out of time. I just want to make sure you touch free speech on campuses and how it's actually affecting the rest of society as well. - Look, vigorous argument in which all ideas can be put forward and in which no idea gains its authority from who said it or some fashion rather than its merit in open debate.

That is the essence of liberal society. That is the essence of great universities at their best. It is the essence of a great university at its best that when I was president of Harvard and I was teaching a freshman seminar, some freshman could come in and read my paper and explain how it was kind of an interesting paper by President Summers, but it was really pretty completely confused.

That was a fantastic thing. He wasn't right, but it was a fantastic thing. It was a fantastic thing. And yet so much of what we should be able to argue about and discuss is off limits. Some of that is the speakers who get disinvited, and that's terrible, but much more of it is a culture that there are only certain views you're allowed to have on questions about identity, that there are only certain views you're allowed to have on questions about markets and redistribution, that there are only certain views you're allowed to have about how children should be raised.

There shouldn't be any views you're not allowed to have. Let that happen. Academic freedom should be an absolute, but academic freedom does not mean freedom from criticism, freedom from debate, freedom from challenge. That is the essence of the most successful human institutions, and our universities should be modeling and demonstrating that rather than leading a charge, as it too often seems they are, towards an orgy of mutual self-regard, respect, and care, rather than getting closer to the truth in the most excellent way.

Ladies and gentlemen, Larry Summers. Wow, another standing ovation well deserved. Thank you, Mr. Summers. That was extraordinary. The besties are back. Rain Man David Sacks. And it said we open sourced it to the fans, and they've just gone crazy with it. Love you, West Coast. The Queen of Kinwam.

Besties are back. Go 13th. That's my dog taking a piss in your driveway. Oh, man. One big huge orgy because they're all just useless. It's like this sexual tension, but they just need to release it now. Let your bee-- Let your bee-- Let your bee-- Bee. We need to get merch.

Besties are back. I'm going all in. I'm going all in. (upbeat music)