Let me get everything queued up here. How does J. Cal open the show? What does he say? Hey, everybody. Do it, Chamath. Hey, everybody. Hey, everybody. I'm Jason Calacanis. I am the grifter with the mostest. The mostest, that's the shortest. The shortest, that's the fattest. And the fattest, that's the dumbest.

He's not even here. You can't do that. It's awful. Great open, Chamath. Where is J. Cal? He wanted the week off. And any time any of us take the week off, J. Cal says, "The show must go on." And he rings up Brad Gerstner and says, "Hey, we need a sub.

Come on in this week." This week, when J. Cal wanted the week off, he said, "Guys, we're all taking the week off." And Sac said, "The show must go on." J. Cal refused to show up. His producer/editor refused to show up. So we are here solo hacking our way to All In Pod, episode 136.

As your moderator today, Dave Friedberg, I am extraordinarily joyous and happy to bring you the first episode of the All In Podcast without the hostess with the mostess, Jason Calacanis. Joining me today, Il Duce from Elba Island, Chamath Palihapitiya. Chamath firing up tweet storms lately, taking over the Twitter, soon to take the threads by storm, I'm sure.

Rain Man, David Sacks, joining us from a curtain showroom in the south of wherever. And from an attic in an old house, the man who manages $10 billion to generate 50% plus returns year to date, the one and only Brad Gerstner. Brad, welcome to the show. Great to have you.

- Good to be here. Appreciate the call, half hour ago. - Yeah, great. - Are we even gonna be able to drop this episode? How are we gonna actually upload it to Apple Podcasts and all the rest? - Okay, so here's the deal. I have the email login. I think I can get into the accounts.

(laughing) I'm gonna like do the request for password reset on all the accounts. - Oh my God. - I also have iMovie on my computer. So I'm gonna use iMovie to edit it. It's gonna be fantastic. I'll send you guys a little link before. I'm gonna create a Descript account so we can edit our show and comment on it.

I'll see how that works. - So the show is just magically gonna appear on YouTube and Apple Podcasts and J Cal's gonna be like, "What happened?" - Exactly. So let's not tell what Freeberg is. Freeberg is Bernard Arnault during the takeover of LVMH, which is a great story if you've never heard about it.

- I'd love to hear it. - He basically is like, he says he's gonna partner with this Irish entrepreneur to basically buy LVMH. And they're going through, and at the 11th hour, he pulls a rug out from him, stabs him in the back, basically does the deal himself, gets to own LVMH, and the rest is history.

But this is you, Freeberg. You're pulling a Bernard Arnault at the last minute. - No, no, I would never stab J Cal in the back. I would just steal his passwords. - Oh, you would stab him in the front. You'd stab him in the front. - Yeah, I would stab him in the front.

I'd call him, tell him you should show up to work, stab him in the front, and steal the passwords. - It's not stabbing in the front. We showed up, he didn't. - Yeah. - He's trying to exercise passive-aggressive control over the pod. He's been outvoted. He does not control the pod.

- We've done 135 episodes, and every time we've suggested taking a week off as a group, and he doesn't want to, he says, "The show must go on," and he calls up a guest, and he keeps the show going at his whim and his discretion. So this week, we are doing the same.

The show must go on. J Cal is enjoying a summer break, wherever he is. I think we're all on vacation this week, right? - I know why he didn't want the show to go on is he has a deep insecurity that he might get replaced at some point. - Yeah.

- By someone smarter than him. - Oh. - So. - Oh. Oh. - Gerstner, you were supposed to replace me, but you might end up replacing J Cal. - No, no, no. - The fans will just have to let us know. - No, Friedrich, the truth is, the truth is last year, remember, the fateful morning when I get a call from Chema, and he said, "Hey, we need you to come in.

J Cal's out. We got and we need you in as the fourth." And as I'm talking to Chema, my phone rings, and it's J Cal. And he said, "Friedberg's out. We need you to replace him." I had both guys going at the same time. And it's been that way for the last 12 months.

- So can I just say-- - It's literally like billions. - Yeah, I was in Vegas with when I had to sort this out. It burned an entire day. A year ago. It was a year ago. - Well, at least we got our-- At least we got our LLC docs signed.

That's what came out of it. - It's literally like the show "Billions." You know? With all the intrigue or whatever. But that's why J Cal wanted to sabotage the show rather than have it go on without him, 'cause he's afraid that the audience might like the show better without him.

There's certainly been a lot of commenters saying that sort of thing. So I guess we're gonna find out. The fans need to let us know what they think of this episode. - All right, well, let's kick it off. First topic on the docket today, which I think is a great one, and Chema, if you've been tweeting a lot lately as we just talked about, I think that'll end up probably being our cold open.

But Zuck announced-- Facebook, Meta, announced the launch of Threads. Gerstner, big shareholder of Meta, I think, right? Reasonably-sized shareholder. This--Zuck this morning announced 30 million downloads of the app overnight. Threads is Instagram/Facebook/Meta's competitor to Twitter. Looks almost like a clone. I mean, it is so similar in features, in interaction, in everything.

Brad, maybe you can kick us off and talk a little bit about the importance of Threads and how this is important to Meta, and then we can talk a little bit about the app itself. - Well, I mean, the first thing is, if rumors are true, they developed this over a period of six to nine months with 20 people, okay?

And so the extraordinary pace that's now occurring with inside--or inside Meta-- we've heard from several people inside that said people are pumped. They're actually updating real-time user counts. There are over 30 million users already on Instagram. And it just gets back to this culture of flattening the organization, speeding up the organization.

I think everybody's excited. You know, the best engineers in the world want to see their products set free. And so, you know, I think Threads is really interesting for a couple reasons. Number one, if we flash back to what went on in China with Toutiao and Douyuan, remember that text-based social networks were where kind of it started there.

And so it's a bit anomalous. Douyuan, which is the TikTok equivalent in China, was started based on Toutiao, which was a text-based news feed. And so it doesn't surprise me to see the social graph being leveraged into a text-based feed. I think initially they're seeding it, obviously, with all your friends.

So it looks more like celebs and entertainment. And my team is like, "It's easier to use. It's faster. It feels more free." I think, you know, Adam Asari, he posted on Threads that he stayed up all night last night, so excited with a product launch. He and Zuck are responding to people actually live on Threads.

And so part of this just goes to the pulse of the company. Over the next four to six weeks, they're going to have massive launches out of the AI side of the business. I expect a lot more support for their OpenAI model or for their OpenLLM. I also think they're going to launch a bunch of agents on WhatsApp and Instagram.

So what I see is just velocity and cycle time within the business improving. And then one final thing, in the age of AI, right, you want to collect as much data as you can from your users. And we know that Facebook is very heavy on video and pictures. But what they're light on is text.

And so in a world where the most important thing on the internet to train your model is the word, right, now they're going to collect a lot of words, a lot of conversations, a lot of sentiment among the users. And, you know, maybe we'll come back to this. You know, I just want to kick it back and get people's thoughts on the product.

But already, by my estimate, if these guys get to 100 million, which it looks like they may be able to get to tonight, based upon the monetization that Twitter has, that's already a business that's doing something like $2.5 billion in revenue if they chose to monetize it, $1.2 or $1.5 billion in EBIT, apply their current multiple to that, that's about a $20 billion increase in enterprise value built by, if rumors are true, 20 people over a course of six months.

- Yeah, it's pretty impressive. I remember in the early days of Friendster and MySpace and then even Facebook, these social networks launched and everyone thought it was going to be a conversational system. And so much of the usage and the page views and the minutes spent ultimately accrued to photos and over time video.

And now it's almost like this interesting reversion back to the origin that it's back to this conversational system. But these systems always seem to kind of evolve to, hey, just images are what win and what kind of gather up all the mind space. I mean, Shamma, having worked at Facebook, maybe you can share a little bit about your point of view on threads as a product and as an evolution away from social network on Facebook to Instagram and now to threads.

- I think what people don't understand is that the successful category winner in each of these categories needed to invent something de novo that nobody else had. In the case of Facebook, we invented photo tagging when it didn't exist. And then we invented the newsfeed when it didn't exist.

And then there was a bunch of people that copied it, but it didn't matter because we had refined and owned that use case already. So I think the real challenge for Facebook isn't can 20 people copy Twitter? I mean, you know, Mastodon is a copy of Twitter. There's a bunch of parlors, a copy of Twitter.

Truth Social is a copy of Twitter. The challenge is going to be, can you invent some de novo feature that makes people actually want to use this? And, you know, rage quitting Twitter because you're not a fan of the product right now or Elon isn't a successful long-term use case because all of those people will eventually come back.

So I don't know. I'm a little bit more skeptical of the whole thing. I think that right now what you see is not even a full copy of the system. It's, you know, a 50, 60% copy with a lot less usage. And so as a result, a lot less traffic.

But I think you need something new. You know, TikTok, the reason why it became successful was it was a fundamentally new use case relative to the alternatives. And I think that that captures people's imagination and mindshare. So this is not what Threads does. And so in as much as it's a copy of something that is already an established behavior, I don't think it has very high chances of success.

- But don't Stories and Reels undermine that argument? I mean, Reels was a copy of TikTok and Stories was a copy of Snapchat and they're both giant products today. - I think that you can definitely copy features into an existing product with new distribution, but to invent a new product fully from scratch, that's a carbon copy of something.

But again, Reels attaches onto Instagram, which is a unique use case, right? And so I think that, again, it goes back to, you have these five or six established modes of social media that essentially are from large pieces of content to small pieces. That's probably the best organizing principle that we have.

And then that's one axis. And the other axis is text, video, audio. And along that spectrum, you can basically compartmentalize all these things. And then there are about four of them that have real scale. And so in as much as you have established distribution, yes, you can copy a feature from somebody else and it will get used, but that's not what this is.

So if this instead gets integrated into Instagram, I think it's much more dangerous to Twitter than as a standalone product. As a standalone product, I tend to think it's DOA for the most part. Unless again, it invents something totally new that we're missing. - Sax, you're an advisor to Twitter.

What do you advise Elon? And how do you think about this as a competitive threat? - Yeah, I'm not a formal advisor to Twitter. I was just a guy hanging around during the transition. Now, look, I mean, I tend to agree with Chamath. The thing that Facebook did really well here is there's a one-click signup flow from Instagram where you just click to download threads and then you can log in with your Instagram account and port over your bio and all of your data and your social graph.

So it's super easy to get set up, but by the same token, if they have 10 million or even 30 million signups, that's really just a 3% conversion rate on the billion users that Instagram has. So a lot of people are just gonna make that click because they're curious.

They wanna find out what threads is. I wouldn't be surprised if they got 100 million users or 200 million users that way, just people clicking over from Instagram to see what this new thing is. The question is, what's gonna be the habit-forming behavior here? And the people who use Twitter are really addicted to using Twitter.

It's where the conversation is. There is a strong network effect there, not just around the users and the social graph, but like the habit of daily usage. So how many of these people who are signing up are actually gonna go use it every day? Are they gonna take the time to copy over, to kind of copy paste all of their Twitter posts over to this new medium?

And then what about all the comments, replies? So I wouldn't just look at the signups here. I think you have to look at the amount of posting and the actual usage before you know that Twitter has a threat. - Right. Did any of you guys use it this morning or last night?

- Yes. - No. - I mean, what'd you think about the UX? - We had our team playing with it all morning and I started sharing with you. It feels to our team like common words being used were snappier, faster, lower hurdle. Like it felt more fun and social.

Therefore, it wasn't as considered a post, right? Because most of the posts, at least that our team engages in on Twitter are for mostly business purposes, right? And so there's politics and business and more serious topics, right? Instagram's the home for fun. It's for frivolity. It's showing pictures of your friends.

And so I think it's going to orient more in that direction. And again, there's probably room in the world for a text-based social network around entertainment and culture and food and the fun stuff. And there's probably room for one that's more about politics and business and more serious topics.

And perhaps they'll converge more over time. I think it's an interesting thing. Yes, it's one click, but you have to download a new app. I mean, this isn't just open up your Instagram and all of a sudden click on a new tab, right? And by my account, I think it's just in the US that they launched this.

So their conversion rate's probably over 10% already in 24 hours. And you got to download an app to get there. That feels to me like a little bit more of a hurdle, but I agree with both of you. At the end of the day, it's going to be about engagement, not about how many people you got to download the app.

And if they get high engagement, and I think there's plenty of surface area for these guys to monetize, that combined with, Chamath pointed out, as much as we love Elon, certainly there are people, Chamath, you brought up with respect to Tesla, that are orienting away because of the brand.

Like it may make sense or not, but we know it's happening. And so I do think that there's a natural momentum. I think this was, like if this was the cage match, right? If this was the MMA between the two of them, this is certainly an offensive blow that Meta just landed here.

And I expect that it's going to amp up the heat. - So it's interesting because at the same time as Threads is launching to compete with Twitter, there's some really interesting data coming out showing declining usage of chat GPT and interest level in BARD. So both if you look at Google Trends, as well as data coming out of SimilarWeb, which tracks usage across sites, chat GPT usage seems to be falling from a peak in May.

And it had a modest increase from March to April, and then an even less modest increase from April to May. And May to June, we're actually seeing a decline in usage. The question is, is this driven by educational usage? So a lot of kids were using chat GPT to write essays and to use it in school, and that seems to be a primary use case.

Or does it speak to a more broad kind of challenge with chat GPT really disrupting search and disrupting other ways that people are kind of accessing and browsing the internet that as an interface, maybe it's a little bit too challenged. And it doesn't replace the simple two word keyword click and click on the result.

I'd love your guys' point of view on the product and the experience, as well as why do we think that there's declining usage in chat GPT? - Well, you had these products launch in a moment where there was in many ways a usage vacuum. What I mean by that is if you look back over like the last 15 or 20 years, there were these waves that would create these layers of innovation that consumers would get infatuated with and try.

It actually came right on the heels of a pretty massive head fake, which was around VR. And that was supposed to be this next big tidal wave of consumer innovation, which turned out to be just a total fart in the wind. And so I think that there was a setup here where consumers were hankering for something really interesting and unique and new and novel.

A lot of people wrap those labels around the chat versions of these LLMs. And so you had, again, this explosion of usage, but I think what we're going to find there is that there's some pretty useful use cases, but narrow where these chat interfaces are very useful and the usage will decay to that number.

And that number is probably a fraction of what the peak was. So then people will get disillusioned and the press will say, this was another fad from Silicon Valley. But then I think the reality is that the real stuff, which is around enterprise software, healthcare, the physical sciences, that's where the real AI leaps, I think will have really momentous value.

Those are still 18 to 24 to 36 months away from seeing the light of day in terms of real products that actually work. So yeah, again, it's part of the hype cycle and we all kind of fell for it. The only winner here is Nvidia. I think the loser here are most of the VCs who pumped in hundreds of millions to billions of dollars and rando stuff too early.

And the consumers, they tried it, they didn't like it, they moved on, they're waiting for the next thing. - Zach, agree, disagree? - Well, I think that's going a little bit too far. I mean, I think that there may be a couple of things going on here. One is that the curiosity factor may have been played out.

I mean, the novelty has worn off a little bit. I think there was a lot of people using it initially just to see what it could do and hearing about it and wanting to test it out. So I think people have sort of scratched that itch. Also school is now out of session.

So for all the people who are using it to do some kind of academic research, there's not a need to do that right now. I do agree that the use cases that are most exciting to me are enterprise uses. And I agree with Chamath about that. And I think that is all still to come.

I think in terms of the consumer, I don't think it's going away, but I think that they're gonna have to improve the accuracy, they're gonna have to improve the performance, the speed of it, maybe improve the interface, add some more features if they wanna get to the next level of usage.

- I mean, think about the product today. You know, 100 million downloads. The whole downtick here is explained by kids being out of school. I mean, it's down 10% and like kids have to be more than 20% of the usage of this thing, I would think. So I think you set that aside, but just think about how hard it is to use this product.

Right? Most people, you have 4 million people paying 20 bucks a month. Could you imagine people paying 20 bucks a month to use Google? Then on top of that, try downloading plugins. It's still a pain in the ass. And if you don't have a plugin, I think there are only 500,000 people using plugin.

If you don't have a plugin, you have no new data past 2021, which makes it dead on arrival as a product. So I don't even think, I think we're so early in this that to judge the chat interface based upon the product that exists today, I think it's a huge mistake.

I think that what we're going to see is kids come back to school, you're going to see the normal uptick in traffic. It probably hangs out around this 100 million, 150 million level in terms of usage. I think the next 10X for a chat-based interface, at least as it, insofar as it concerns the consumer, is when we move from information retrieval to action.

And you've heard Zuckerberg talk about this on the Lex Friedman podcast. You've heard Meta talk about this outside of that context. And then you've heard Mustafa talk about it from Pi, which is this idea that I say, hey, show me the five best hotels in Milan. It shows you five hotels, and then you say, book me, the Cipriani for these dates.

And it actually will book it directly with the hotel, engaging with an agent there. Now, Mustafa from Pi says this is months away. Zuckerberg alludes to the fact that they're going to have action bots on WhatsApp and Instagram in the not-too-distant future. I think all of the links exist in the world to do this today.

So I would say look for that as the next 10X feature for consumer-facing chatbots. And then finally, I'd just say, I was at the Snowflake Summit last week. There were 600 applications, so new startups, that applied for their startup contest. They were each using an application of ChatGPT built on top of Snowflake data.

600 new companies, and they just launched their application layer. So there's a tremendous appetite for people to help enterprises access that information and build much more seamless discovery on top of it. I tried to use ChatGPT, the mobile app, on July 4th. I was just trying to find a good quote to use by an American patriot or founder, or framer of the Constitution, something like that, to tweet out for July 4th, and it just errored out on me.

And it was one of these error messages that you can tell an engineer wrote. It's this totally non-anticipated error. And I tried it two or three different ways, a couple of different chat threads. It just didn't work. It's completely inexplicable. So when you have those kinds of experiences, it makes you just want to go to Google, which is what I did.

I actually went to Google to find what I was looking for. I thought ChatGPT could do a better job because I thought it could help me find things that would be specifically appropriate for July 4th. So I was curious to see what opinion it might have. But Google is just much more performant.

So they have to work out those kinks. I mean, that's pretty clear. I think natural language prediction as a capability is certainly here to stay, along with the agents and the action bots that can integrate behind the scenes to do things for you. The real question for me is, is this a winner interface?

If I think back to user interfaces, user experience in the history of computing, we can kind of go back to the original terminal interface on DOS, and you would have lines that you would type, and you would kind of program the computer to do stuff. That was almost like the first real computing interface that people could use.

And then there was Windows. And when Windows came along, it was a new type of interface, a new type of interaction model. And then we had the icons that arose with the iPad/iPhone revolution. And obviously the internet, the browser, was a new UX. And the browser provided hyperlinks. And in one window, you would click through and go to lots of different things.

And then that browser interface eventually integrated images and video. And then the interface that we're almost used to lately that we all probably spend most of our time on is the scrolling interface, where there's infinite personalized content created for you, and you just keep scrolling, whether that's on Facebook or Twitter or Instagram or what have you.

And that's where we spend a lot of our time now. And if you think about the transition, you're getting more for less, meaning you're getting more content, you're getting more output with less input. The challenge with the chat interface is that you're getting almost today, in its current iteration, a little bit less output because it's mostly textual, and it's requiring more input.

You're having to write sentences and ask it stuff. And so I think if you think about the evolution of user interfaces in computing, chat as an interface faces quite a bit of friction. The output of it, however, is so compelling in certain use cases, as Chamath points out, that there's certainly going to be places where it's absolutely going to replace the current modality.

And then the backend of it can do incredible things that no other computing interface can do, but it needs to have kind of a revision or rebuild on the front end for it to really work. That's my point of view and how I think about kind of the long trajectory of where we've all been trained mentally with respect to computing interfaces and how this might kind of be challenged.

- I think that's the key, how four older guys have been trained. Watch how kids interact with their phones. First, they're never on a computer. They're always on their phones and they're always talking to their phones and it's always chat-based. And so I think we have a whole new generation that like it's so native to the way that they interact with the world.

And to be honest, I was sitting there this morning prepping for the pod and I had a brilliant conversation with ChatGPT about what happened with rates and inflation, et cetera, in 2000, 2001, 2002, it was interactive. I was using my voice, I wasn't typing anything. I thought it was terrific, way better than the experience I would have on Google.

So again, I think we're early in the evolution of this, but I think that for my kids, this is completely native. - Yeah, I mean, I think for kids, it's amazing. I just don't think kids will have 20, 30, 40 bucks a month to spend on this. I mean, some kids will, but that'll just further exacerbate the divide of the kids that can versus the kids that can't.

But I don't think that that's what's gonna create a valuation framework for a multi-decabillion dollar company. If you wanna see a well-used education product, you know, Chegg's got something probably, you know, that's probably as good, and that's a three or $4 billion market cap company last time I checked.

- Yeah, well, Brad, you mentioned that you were doing a little research for the pod talking about rates. Obviously, that was in anticipation of the discussion on the Federal Reserve meeting minutes that came out a couple days ago. I'll read a few excerpts from the published minutes where obviously the Federal Reserve meets to discuss overnight rates, whether to raise rates and their outlook for rates, driven in part by current economic data, including their view on inflation, their view on economic activity, et cetera.

Reading from the notes directly, participants agreed that inflation was unacceptably high and noted that the data, including the CPI for May, indicated that declines in inflation had been slower than they had expected. Participants observed that although core goods inflation had moderated since the middle of last year, it had slowed less rapidly than expected in recent months, despite data and reports from business contacts indicating that supply chain constraints had continued to ease.

In their discussion on the household sector, they noted that consumer spending so far this year has been stronger than expected and that aggregate household wealth remained high as equity and home prices had not declined much from the recent highs. And a few participants mentioned that while overall the household sector still retained much of the excess savings it had accumulated during the pandemic, there were signs that consumers were facing increasingly tighter budgets given high inflation, especially for low-income households, despite savings.

So Brad, maybe you can give us your quick read on the minutes. And they did say that they're not raising rates, but they do expect two more 25 basis point rate hikes later this year. Maybe you can tell us what market data is indicating, is that actually the case?

And is the Fed not giving a clean reading on economic activity and inflation as it's being published in other places than what the Fed is currently reading? - Well, I mean, I think the most interesting thing here, and perhaps the most non-consensus thing here, is the Fed kind of seems to be orchestrating a pretty soft landing, right?

Nobody wants to hear it. The market fought it for the first half of the year. The NASDAQ was just up 39% in the first half, and most people didn't participate. So everybody wants to talk this down and say that inflation's still out of control. Chamath's been talking about inflation higher for longer, but notice he doesn't say that's a problem or the economy therefore is going to crash.

It's just like inflation's going to be a little stickier on the way down. Rates are gonna be a little bit higher for longer. I think when you look at this in totality, the reason they hit pause is because they've come a long way quickly. They know that things are starting to trend in the right direction.

So their own forecast for CPI is that it comes down a lot by the end of the year. Goldman Sachs is now at 3.3%. And I know we have readings like true inflation that say the inflation today is actually lower than that, but you don't even need to get to the debate between true inflation and CPI.

They're both trending a lot lower. But we got a really interesting reading this morning because like, why do we want to raise rates? Well, we want to cool off the economy. And so everybody's looking for that indication that the economy is cooling. The leading indicator for this is jobs.

So we had a really hot ADP jobs report this morning, right? Over 450,000 new jobs created and everybody got nervous. The 10-year shot up to over 4%. The market turned down at the start of the day. And then we got the JOLTS report. Now, Larry Summers has described JOLTS as a much more, that's job openings, okay?

So this is more of a leading indicator, like how many of the job openings are we consuming? And that actually came in better than expected. So what it suggested is that more people took jobs than we had anticipated. And remember, JOLTS peaked closer to 12 million and now we're at about 9.8 million.

And so when I look at that, you know, and then look at the jobs report, ADP jobs report, over half of the new jobs created were in hospitality and leisure. So think about what was happening a year ago. Airlines were trying to hire people. Restaurants were trying to hire people.

Hotels were trying to hire people. And nobody took the job for two reasons. Number one, they were afraid of COVID. But number two, they were getting STEMI checks from the government they didn't need to work. Now what we see is people are starting to take jobs. Those show up as higher employment numbers in ADP, but in lower JOLTS, right?

So fewer job openings. To me, again, that probably speaks to a, you know, healthy trend in the economy. But clearly the economy is not crashing. We had a lot of people who said that the economy was going to hit the skids in Q1 or Q2 of this year due to these higher rates.

The economy is incredibly resilient. But if I had to describe, you know, the rate trajectory, the Fed has said, "Listen, we may have two more rate hikes." That's basically priced in. And if you look at real rates, so this is the interest rate that really acts as the brake on the economy.

So this is effectively the 10-year versus future expected inflation. It's now at one of the highest levels we've had since 2008, 2009, back closing in on 2%. So, you know, it seems to me that the Fed's got its foot pretty strong on the brake. It's jawboning the economy, saying we'll do more if we have to.

But the things that they're looking at, job openings are coming down, inflation is coming down. So I don't know. I think you have to leave open the possibility that the fat part of the distribution curve looks like a softer landing than most people want to admit. Yeah, so, Chamath, Gerstner's predicting a soft landing.

Do you agree? I mean, you've said we're going to see rates stay high for a very long period of time. Yeah, I mean, I think I've said this for the last few weeks, so I'll just say it again. But I think that there's no hard landing, right? That's the hard landing was sort of the Druckenmiller thing that I think that, you know, I said, I think it was a few weeks ago.

It's very difficult to see a hard landing when China stimulates just because of their natural gravitational pull in the world economy. And, you know, we can talk about that again because it just looks like China's in super, super, super trouble. Meanwhile, I sent this little image to you, and, Freeberg, you may just want to throw it up here just to look at it.

But, you know, when you look at inflation, we've done the best job of the developed nations in getting this thing under control. And so I think now it's just about making sure that we adequately contract the money supply and making sure that we have bullets in the chamber in case things get bad.

What do I mean? When you look at this chart, the thing that I think about is I'm glad rates are almost at 6%. Why? Because when you look at the UK, Italy, Germany, most of the euro area, France, Japan, and then, you know, China, it's nonexistent, but China has a different issue.

The reality is that, you know, a pretty bad set of economic circumstances could actually touch the Western developed nations if you start to see some of these countries rip rates higher to like 7%, 8%, 9%. The UK, it seems like, I don't know what you guys think, it's definitely going to 7%.

And it could go to 8%. I mean, it could be a very bad situation for the UK. They're in a lot of trouble. And so I think it's important that the Federal Reserve have tools. So by continuing to constrict the money supply, have rates that are relatively elevated, maybe a quarter or two longer than they need to, it gives them a lot of positive optionality if they need to step in if something bad really happens.

And so I generally think they've done a very good job. And I think, go ahead. - Chamath, not to interrupt, to your point, what's really interesting is the symmetry with what happened in 2000. So I think we had all agreed that the last time we saw the zaniness that we saw in 2021 in the ZURP environment was probably like 1999, 2000 era.

Well, in 2000, remember, we had this huge asset bubble and the Fed raised rates from 5.5% to 6% in 2000, okay, in the first half of 2000. And they were saying that they're going to stay high for long. And remember, in 2001, we entered a recession and we ended 2001 with rates all the way down at 1.75%.

Those are the bullets in the chamber that you're talking about. That then pulled us out of the recession. And some people blame them that they caused that recession. But when you look back from a historical perspective-- - No, in this case, it looks like the recession is really not of our making.

But we may actually have a soft landing, but the economy could actually contract because when you look at these Western economies turning over, it's not a good situation. I think the Eurozone, quite honestly, is probably a quarter into a recession already. So we have six or seven of the really important countries probably in a recession, the UK in really big trouble, the US relatively keeping things in a pretty good place, China economically, I don't know where the demand is going to come from.

On the same time that their internal demand is imploding, they're creating all these export controls that I think are not going to actually help them solve the problem because it just accelerates Western economies' desire to delever from China. So the whole setup, I think, is a very complicated one, but the US looks really good, frankly.

- Yeah, look, I don't think we're out of the woods quite yet. So Druckenmiller, by the way, said that he was predicting a hard landing in the second half of the year. We're just starting the second half of the year. So he's still got six months to be proven correct.

I find his analysis compelling, or I did at the time I heard it. But think about our situation. We still have an inverted yield curve. It's the most inverted it's been. I think this is the longest it's been inverted. Now the Fed is signaling that we're going to get two or three more quarter-point rate hikes, so it's about to become even more inverted.

And what that does is it puts incredible pressure on the banking system because the whole banking business model is to borrow short, which is from depositors, and lend long. And if short rates are higher than long rates, that whole business model doesn't work. So either they can't engage in lending activities, meaning there's a credit crunch, or depositors leave the system, and that's happening too.

So any business out there that's dependent on credit, the real estate industry or auto industry, I mean, any industry that depends on loans and credit, they're going to continue to be hammered by this. - Yeah, I mean, to your point, Sax, I'll just read the minute commentary on this.

The meeting did include a discussion on the stress on the banking sector and economic activity in general because of decreased lending. Participants generally noted that banking stresses had receded and conditions in the banking sector were much improved since March. Participants generally continue to judge that a tightening in credit conditions spurred by banking sector stress earlier in the year would likely weigh further on economic activity, but the extent remained uncertain.

So obviously a wait and see. And that they mentioned that credit conditions had not appeared to have tightened significantly beyond what would be expected in response to the monetary policy actions taken since early last year. So at this point, saying it's a wait and see does not seem to have overstretched in terms of credit tightening at this stage.

- Well, yeah, I mean, so here's the thing, is that the Fed engaged in an extraordinary intervention a few months ago to save the banking system with the bank term funding program, right? Where they basically said to all the banks that if you have US treasuries, and I think it also applied to mortgage-backed securities as well, we will basically take all of those assets and give you par value.

We'll give you 100 cents on the dollar in exchange for, I guess you have to pay, you the bank would have to pay the one year, I think it was the 12-month interest rate with like 10 basic points or something like that. So if you're sitting on bonds that have gone down 20 or 30% in value, you can go get all that money back by presenting them to the Fed.

And then you just have to, you have to then take the 100 cents on the dollar that you get and make sure you loan it out at higher than the one year interest rate, which is around, I guess, 5%. Which you can still do in residential, right? Because mortgages are still something like, they're over 7%.

So the Fed has provided a lot of liquidity to the banks through this BTFP. It hasn't helped the commercial real estate guys, I don't think, that's why they're still, I think, huge problems in the commercial real estate sector. But the Fed did engage in a huge intervention to save the banking system, and they may not be done with that yet.

So I just wonder, you know, I just wonder if you didn't have all of these distortions, what would the real shape of the economy be? You know, another one on the fiscal side, on the fiscal side was the whole Biden's energy bill, which was supposed to be 350 billion.

But as our energy investor friends are saying, it's probably gonna be more like a trillion when they add it all up. - No, but that's honestly, hold on. Those guys are being hyperbolic, and they're just stupid and wrong. 'Cause I know which friends they are, and I know them to be mostly stupid and mostly wrong most of the time.

Look, the good thing to know about- - Oh my God, I'm gonna get a text after this. - Well, yeah, you should, because he doesn't know what the fuck he's talking about, and he keeps saying it. - But there's a lot of stimulus is the point, whether it's half a billion, sorry, half a trillion or a trillion.

- Whatever, he's just talking his book. But where, can I just go back to where you're fundamentally right, and where I think both of us can be in unison on this, which is there is a looming credit crisis in the United States. And we've talked about this before. I tweeted something a few weeks ago, but the debt wall that corporate America is about to hit is pretty meaningful.

And to your point, David, a lot of these companies will have to thread a needle because if rates don't go down materially in the next 18 to 24 months, these folks are gonna be paying rates that they cannot bear. And they'll probably go into still breach a covenant of some of the debt.

So, one thing that's important here is that there's some very strict guidelines and covenants that debt issuers sign up for. And one of them is, how much debt can I have as a percentage and or as a multiple of my EBITDA? And so that's the way that bondholders govern the risk that you don't overborrow.

Now, the problem is if you have a ratings, an earnings recession and or rates go up, you can get one of these two things to go wrong and all of a sudden now you have seven or eight times your EBITDA and you're in a very, very bad state. So, I do think that that's possible.

But at the same time, I don't think that that's a calamity that touches the entire economy. I think there are a whole portfolio of overleveraged companies in real estate and there's a whole portfolio of overleveraged companies in private equity. Those folks will have to get recapped. And that will probably cost trillions of dollars of capital impairment.

But I do think that that can relatively be done without impairing the economy at large. I'll make a prediction right now. My prediction is the federal government is going to help to monetize that debt and they're going to help to support that commercial real estate sector through some sort of structured lending program.

I don't see how... Why do you think that? Because of the donors. Because I think that there's a significant amount of capital that gets donated to political campaigns. So, you think there's going to be a TARP-like program? For real estate private equity. A real estate private equity in debt.

You think there's going to be a TARP-like program for real estate assets and for private... I'll take the other side of that. Yeah, I'll say real estate assets. I don't know about the private equity assets, but I think for the real estate assets, just because so much of it is held...

Let's bet 5,000 to the SPCA. Yeah, I'll do that. Wait, what's the time frame? Maybe... Why don't you tell me? You want infinite? No, we'll do it until the Fed starts... No, until the Fed starts reducing rates. So, once the Fed does their first rate cut, that's the end of our bet.

Oh, wow, that's an easy one. I'm in for 25. No, you can take 5. I'd take 100. Okay. For the SPCA. Can I take it for myself? For the SPCA. For the SPCA for a second. Can I just take the action for myself? No, come on. I'm doing it for the dogs.

I'm doing it for the dogs. Yeah. You know, Friedberg on that... I'm sorry, let me just tell you why. Sorry. Okay, okay. In addition to the significant donor dollars that come from real estate to politicians, campaigns. But so many of those assets are held in life insurance companies, on banks' balance sheets.

I mean, you guys may have seen this report this week that because of the rise in interest rates, there are several insurance companies that now may be technically insolvent, according to DOI, Department of Insurance regs, in their respective states. Because the impairment on the bond portfolio has declined, has caused them to now not have enough capital reserves to pay out the claims they have.

So the same, I think, ultimately will come true once you have to do a mark to market on all these real estate assets, that there's a significant number of those real estate assets that are held in pension funds, that are held in life insurance companies, that are held as securities in large pools of capital that are meant to support people's long-term needs.

And the government isn't going to let... The federal government isn't going to let that, you know, just get written down and have people's future pensions or insurance claims, you know, get hampered. So that's why I think there's going to be a moment or two where there's going to be some step in and some structured program to support this debt.

- I just don't think it's that draconian. Rates are not that high. You know, we're still talking about a 10-year that's flirting with 4%. And the fact of the matter is... - I'm just talking about commercial real estate, 'cause there's also a demand problem, right? Yeah. - I know, but the other side of this is the trend, again, there is no doubt oversupply and a problem, particularly in a place like San Francisco, where we're going to see some blowups because nobody wants to, you know, to enter a long-term lease in a city that's under siege.

I understand that. But the fact is that the market is telling you that rates are going to start going down, right? The Fed's going to come in, battle until the edge, right? And then they're going, you know, rates are going to come down a little bit. Why is that?

Because if they have two more quarter point rate increases, now you have restrictive rates. That's something like 200 basis points. That's higher than the Fed wants. That's the foot really hard on the brake. So it's not like the market's crazy and thinking that we're going to have a couple of rate cuts next year.

I just told you, in 2000, we went from 6% to 2001, ending the year at 1.75%. And the Fed was doing the exact same jawboning in the summer of 2000, okay? So they do evolve rate policy based upon what's happening in the economy. All of the things are rolling over.

CPI is rolling over, JOLTS is rolling over, et cetera. So again, I just don't see the heightened concern. I think to the bank issue, Sax, to me, that was, you know, that was the much scarier concern. Druckenmiller actually pulled forward his hard landing expectation to Q2 of this year as a result of the bank crisis and now has pushed it back out to Q4 of this year.

I think if we had another, you know, black swan like banks or something that I can't foresee today, then, you know, that could certainly be the thing that would be the catalyst to toss us into a hard landing. Barring that, I think that-- By the way, you know, you would have said-- I think the distribution of probabilities, the fat part of the curve, is that we have a softish, medium, you know, sort of landing here.

I think you're right. I think you're right. And by the way, like, if the UK had not left Europe, then the whole contagion of Europe could be one of those black swan events that we would all be talking about as theoretically possible. But it looks like the UK is probably going to-- It's really bad, I think.

Britain is now the only major economy where inflation is still rising. The OECD said Tuesday that year-on-year inflation in the G7 fell to 4.6% in May, down from, you know, 5% in April. So inflation is tempering a bit. But UK consumer prices rose to 7.9% in May, which is up from 7.8% in April.

So an acceleration in the UK. It seems like it's a pretty nasty spiral problem. This is where, you know, the benefit of being part of a larger economy really pays dividends, right? Obviously, there's a lot to do with, you know, language and currency, and there's a whole bunch of issues rolled up into why the UK left the European Union.

But, my gosh, one of the real obvious advantages is, you know, you're smoothing out the variance, right? And smoothing out variance is really valuable. So if you think about, like, all of these economies in Europe, you know, like, PMs in a hedge fund, right? Brad, you can--you know, you know this.

It's like, sometimes some guy crushes it. You know, look how Millennium or SAC or Citadel makes the real money. It's by smoothing out variance, and that's a great thing about being part of an economic union like the EU offers. And in the absence of that, in times like this, it really exposes the weaknesses of a small, subscale economic system, which, unfortunately, the UK has.

- Right. - Europe is going into a recession, too. I mean, Germany has huge problems. Again, it stems from the cutoff of cheap Russian gas. Economies in the EU, they're going into recession as well. So it's not just the UK. - Yes, but not with the same levels of inflation.

My point is, like, you know, it's one thing for an economy to start to recede, but here, it's--you don't have the benefit of balance sheet borrowing of the scale of the EU, nor do you have the disinflation of the EU, and I think that's problematic, much more for the UK than it is for any individual country in Europe.

That's just my point. That's all. - Can I--you know, one just philosophical thought, you know, because if we rewind the clock to the beginning of the year, you know, there was absolute consensus in the markets, right, and you can go back and look at all the headlines. Mike Wilson's consensus was that we were gonna have a hard landing in Q1.

Hedge funds, long-only funds, had their exposure super low. Everybody had post-traumatic stress from last year. It is a sure strategy to lose a lot of money or not make money. If you're trying to always call the market as though you know, you have no idea, right? Q1 and Q2, sure, there was a possibility we could have a hard landing, right?

And the bank crisis made that look as though it was a possibility. What we try to do is look at that distribution of possibilities, right? It's a distribution curve, and so I put up on the screen here what the market's implied Fed fund rate changes are from today. So what the market is betting on, which from my perspective is better than any one of us trying to forecast, right, what's gonna happen with future rate increases, it's saying, yeah, we're going to go from 5.08% today to something like peaking at 5.45% in November of this year.

And then at some point beyond November, could be December, could be Q1 of next year, right? We'll see enough turning over of CPI, enough turning over of jolts that now we'll say the balance of risk has shifted to being too punitive on the economy. So we're gonna reel back in one of those rate increases, okay?

And I think that, you know, so Friedberg, just to clarify on the bet we just made, which I'm excited about, you have to have this TARP, you know, commercial real estate rescue program before they reel back one of those rate increases, which the market's telling you could be as early as December.

But I encourage everybody who listens, you know, like don't listen, you know, it's not like go all in because Druckenmiller says hard landing or don't go all in soft landing because we say soft landing. Our net exposure has come down over the course of the year at altimeter because we've moved, the markets have moved up a lot.

They're pricing in more of a soft landing today. So the idea is to have high exposures when the world's panicked and then to reel in your exposures a little bit, but never be all or none. I mean, the fascination with calling the big short, the big hard landing, soft landing, it's just a sure way not to make much money.

Today, there was a red hot U.S. jobs report, Brad. U.S. job openings dropped below 10 million in May, but the labor market remains piping hot. Like I said, you know, the market, I think, is, you know, it's reading way too much. I mean, it's wasn't even a, I mean, we'll get the official jobs numbers out of the federal government tomorrow.

This was an ADP report, which have been not particularly good, but I already explained there's a rationale. Look, peel behind the ADP report. 250,000 of the 400,000 odd jobs that were created were in hospitality and leisure. I mean, these were desperately needed because we have a peak summer travel season going on.

So you have hotels that hire a bunch of people. Those show up in the ADP job numbers, right? But the great news is the Jolts job openings go down. And, you know, Summers was complaining last year that Jolts wasn't going down fast enough. He also said something that was really interesting.

When Jolts, he said, when Jolts goes down by over 10%, so think, we've had a move from 12 million to 9.8 million. He said, when Jolts goes down by over 10%, we have a reduction or an increase in the unemployment rate by 2.5% in the subsequent 12 months. So Jolts is a leading indicator.

You got to reel in those job openings, and then you start seeing unemployment bump up. So with a tight economy, you know, the Fed's foot on rates, some of the contraction that SAXE has been pointing out, and then we start to see these early indicators in Jolts. People need the job, clearly, or they wouldn't have taken them.

Their STEMI has run out. All of these things are what the Fed is trying to manufacture. So I don't look at that jobs number. In fact, we were doing just the opposite, you know, in the market this morning to, you know, what the market was giving us. I don't think that was a very good read-through at all.

Okay, I want to talk a little bit about jobs. The Florida State Senate bill 1718 was passed in the Senate on July 1st. This bill now requires that any company with more than 25 employees use the e-verify system to verify the legal immigration status of their workers, of their employees.

And this will create a real impact on businesses that employ more than 800,000 illegal immigrants in the state of Florida to do a lot of work and a lot of labor. And it's unclear how many of those 800,000 illegal immigrants that are working in Florida today are working at a firm with more than 25 employees.

But the impact is going to range from the construction industry to farm labor and a lot of other manual labor sectors in a state that has 2.3% unemployment. DeSantis has made this, you know, an important speaking topic. When he's spoken publicly, he's made a lot of comments around the passage of this bill as a way to counter Biden's "open immigration policy." Sax, I know that you've talked about DeSantis in the past.

Do you have a read on the impact that this immigration policy will have? Do you agree with it? Would love your thoughts. I mean, I don't think this is a jobs bill. This is an immigration bill, or it's an immigration issue. And look, I don't know what the impact on Florida is going to be based on this.

I don't trust a single story that's out of-- I guess there's just a story in The Wall Street Journal about it. I mean, this feels like a campaign story. So I want to see more stories before I reach a determination on what the impact's going to be. But politically, do I think this is smart?

Yeah, because the border is the number one issue in the country right now. I don't think you guys are as clued in to, like, how on fire the country is about what's going on at the border. At our fundraiser, RFK talked about the border because he went there. There's a bunch of really good clips online.

I don't care who you are. You can't listen to that accounting. It's just an accounting, right? So anybody could do it. So it doesn't matter what your political perspective is on RFK. Anybody who listens to that accounting can't be anything but shocked. What he described is-- what RFK described is he went to the border at Yuma, and there are literally holes in the wall, you know, from Trump's wall.

And literally, the building materials to finish the wall and plug those holes are sitting there on the ground, and the Biden administration refuses to use them and to plug the hole because they don't want to give any credit to Trump, presumably. I mean, literally, that's how petty it is.

Or it's actually their policy. They actually like having an open border. So something like 7 million illegals have come in through the southern border since Biden's been in office. And they're not from Central America, it turns out. These folks are from Eastern Europe and Africa predominantly, many men of military age.

And it's an entire business that's run by the cartels. And as he describes it, it's really just plainly shocking. If one of our enemies wanted to get thousands of sleeper agents into the country, it would have been very easy for them to do this. Think about that for a second.

Yeah, can I pivot away from the border policy question to one of labor? We obviously, as evidenced by the jobs report from ADP this morning, remain in a very tight labor market in the U.S. And we as a group often talk about H-1Bs and the importance of allowing educated immigrants into this country to meet our knowledge workforce needs.

But there obviously is a pretty sizable manual labor workforce need in this country and a very tight labor market to fulfill that need, ranging from construction, where we have deep and significant aspirations as a country to improve infrastructure, to farm labor, where we have the largest agricultural export market in the world.

And many of these industries rely on low-cost labor for those businesses to meet their economic objective, to be able to be profitable. And we simply may not have enough of a labor force of legal immigrants or legal citizens or residents of the U.S. to meet those obligations. What is the answer, Sax?

Is it that we are supposed to take anyone that's illegal in the country and make it impossible for them to work here? And is that not going to have a very adverse effect on these important segments of our economy that today rely on that labor force that is here illegally?

And I'm not stating an opinion. I'm asking the important-- I get what you're saying. I think we can start to resolve that issue when you solve the border crisis. The problem is the average American doesn't want to hear anything about "comprehensive solutions" to the border crisis or immigration-- But what do you want?

I'm not talking about politics. I'm talking about your personal point of view. My personal point of view is we need to seal the borders so we stop having this problem. Okay, but what about the work? What about the labor? Yeah. I'll take a crack at it for you, Bert.

Okay, I'm just trying to diagnose the difference between the border policy question and the real economic question. I know the California ag sector very well. There's an important migrant visa that the entire farming economy depends on in California. And these are illegal immigrants that are legally allowed to work in the farming sector, and it allows farms to be able to do the work they need to do because there is absolutely no labor to do that work without this immigrant population.

And there's other elements of this that are critical across the economy. Sorry, Brad, go ahead. So why can't we have a common-sense migrant worker program, worker visa, predicated on that? The problem is, I think, where most people are in agreement that if you have a relatively secure border, then you design good policies.

We should have a policy for people who want to come and work and earn some money. We have job openings in this country. And then return home or go through a normal process to get in line to citizenship. But the problem is people cutting the line, skipping the system, and given the social safety nets that states on the border have lined up, and we as a nation have lined up, that's just unsustainable in a world where we're already, whatever, $35 trillion in debt.

So I think these things can coexist. You can treat labor humanely. You can create a safe harbor for labor to come to the country. But that doesn't mean that you should just have holes in the wall and anybody who wants to come here can come here in whatever capacity they want.

Chamath, assuming that the border is closed and we fix that problem, what do you think the right solution is to the millions of illegal immigrants that are residing in this country? I'll answer that, but let me ask you a question. Do you think we should seal the border? Yeah, for sure.

And why do you think we should seal the border? So that we have a system that we can use to manage the flow of labor and decide what's appropriate for our country. And we can actually have a conversation about what qualifies someone to come across the border and to immigrate into the U.S.

I totally agree with you. I agree. But look, saying that, assume that the border was sealed, what would you do about low-skill immigration? That's kind of like asking, other than that, how is the play Mrs. Lincoln? I mean, this is the hair-on-fire political issue, is that we can't get the border sealed.

That you've had 7 million-plus illegals come across it during the Biden administration, and the administration obviously doesn't have the will to do anything about it. So you're kind of assuming away the central issue. This is the issue, one of the main, main issues that got Trump elected in 2016, was building the wall.

No, but I think we're all saying this. It hasn't gone away. We need to seal the border. We're all saying that, right? Does anybody think we shouldn't seal the border? No, I agree. But then why isn't the analysis on why that doesn't happen when everyone in the country agrees that should happen, or just about everybody?

But I do think that there's a low-skill labor market need that's not met in this country. There isn't a public restaurant company that doesn't talk about the challenges that they're having with labor. They cannot fill the jobs that they need to fill. All right, if you want to talk about that issue, I want to flag a report that was presented to Congress, and this is about 15 years old, it's back in 2007, by Heritage.

But I don't think the numbers have changed much in the interim. In fact, they've probably gotten worse. The point that this researcher made is that if you look at the cost of low-skill immigration, the average low-skill immigrant household receives approximately $30,000 in direct benefits from the government. By contrast, these households only pay about $10,000 in taxes.

So even though those low-skill immigrant households, let's assume that they're working and do contribute to the economy in the way that you're saying, there's still a $20,000 gap between what they contribute and what they receive from the government. And that is a big problem for the country. My guess is that the counterargument would be that more than $20,000 of economic benefit accrues to the businesses that employ that labor because they can now be profitable, they can now get the work done that they need to do, they can grow their revenue, they can expand their footprint, they can service their customers, all the things that otherwise they might not be able to do without having access to that lower-cost labor force.

I think that's a big assumption. I think that's a big assumption. One of the problems with the system that we have is that there's a lot of government benefits. And so if you want to have a more open immigration policy, that's sort of inconsistent with the idea of having a super generous benefits policy.

No, I think there are three distinct things. One is, is it open or closed? And second, if it's closed, what are the qualification criteria and how many-- and I think that's totally reasonable. The third is what government benefits are provided. And you could reduce the government benefits if it's too costly.

You could improve the qualification criteria and increase the number of folks that are coming in. I know this may sound crazy, but I think that tying together immigration and jobs is the best way to ensure that nothing actually happens on immigration. And what I mean by that is that when you go to a restaurant, for example, and the service has decayed because they can't get enough staff, you don't walk out of that restaurant thinking, "Wow, we need comprehensive immigration reform." You say, "Thumbs down on Yelp.

I'm never going back here again." And so unfortunately, if it's service sector jobs in particular, by the way, there is no closed loop way where you actually tie these two issues together. And so the issue becomes stranded, which is what it has, which is why I think what Brad said and Sak said is right, which is there's an order of operations here where the American people probably want an immigration system that says something like, "Here's a point-based approach where we try to attract the world's best.

Think about it like a draft, right? And we want to attract the world's best athletes to come play on our team, Team America, Team USA." We have all of the capabilities to do that, but before we do that, we have to kind of close the border. And I think that that's the only way it's ever going to get done.

Meanwhile, the problem with the jobs thing is it's a bit of a red herring towards immigration because people just don't tie the two things together, practically speaking. Well, I was going to say one final point on this is that when you admit lots of low-skill immigration or labor into the country, you're creating wage pressure for Americans at the lowest end of the totem pole.

And that is why they are so resistant to it. This is why average working-class Americans are very upset about the border. It's also a security issue, and there's drugs pouring across as well, the fentanyl crisis that we see. But it creates a lot of wage pressure for Americans who are at the lowest end of the ladder.

I mean, what's wrong with just paying them a little bit more? So here's some statistics for you guys. The total population of unauthorized immigrants in the U.S. peaked in 2007 and has declined slightly since. California felt it first. From 2010 to 2018, the unauthorized immigrant population in the state declined by 10% to 2.6 million, mostly impacting the farm economy.

So the state, California state reports that from 2010 to 2020, the average number of workers hired by California farms for crop production declined to 150,000 from 170,000. I talk with a lot of people in the farm economy, as you guys know, and this is an endemic problem in California agriculture, is that the lack of a labor force that allows the farms to be profitable is really impacting folks' ability to operate and to grow, and that ultimately translates into consumer price and so on.

So there are huge consequences to having effectively an open border policy that go beyond just farms or vineyards not being able to hire enough cheap labor. I mean, look at what's going on in France right now. You've basically got riots. You've got a civil war going on. There's a large, unassimilated, poor immigrant population in that country.

That's where open borders gets you. That's the end result. So there are huge consequences to allowing in huge numbers of low-skilled immigrants, especially illegal ones. I don't think there's a lot--this is where we get to. Last week we had the Canada H-1B announcement about their Techno-Matic visa program, and I sent it to two members of Congress.

I sent a tweet that-- Sorry, just recap for us what happened, Brett. Okay, so in Canada last week the government announced an aggressive push to recruit technology workers from around the world to Canada. So they made it easier for tech workers to get what they are calling a digital nomad visa, so you can now go and work in Canada if you have a job offer.

And then they also, in kind of a gangster move, said if you already have an H-1B visa in the United States and it's starting to run out, just bring you and your family to Canada and work from here. So it was like we've been talking about. We need H-1B visa reform.

We need to recruit the world's best and brightest in artificial intelligence, etc., to the United States. And they were doing it quite aggressively. Now the point is I sent that to two members of Congress, a Democrat member of the House, a Republican member of the Senate, and I got back nearly identical answers from both of them.

They said no chance that happens here, dead on arrival, because nothing's going to move until we have a comprehensive immigration policy in this country. And then I said, well, why isn't that happening? They said elections, right? Show me the incentives and I'll show you the outcome. The problem is all four of us agree we should have sealed borders, but at the same time immigration is what makes this country great.

We want to treat people humanely. We need migrant workers. This is not that hard a problem to solve in this country, but there's not even a conversation. The farce that is Washington, D.C., on this topic is there's not even an honest conversation or attempt to get to a solution here.

So with a presidential election less than a year and a half away, we're just back to the same old tribal war that we've had before. Now, I understand Saks' point is like, listen, nothing happens until we have closed borders, and maybe sequentially that's what we have to do, but it doesn't stop there.

I think we all agree that what makes this country special is that we, you know, Fourth of July, you know, we throw open the doors and we welcome, you know, folks from around the world to contribute to this great experiment. Some of them are on a path to citizenship and some of them are not.

What doesn't sit right with anybody is breaking the rules and skipping the line. I understand the desperation and the motivation of some people to do that, but that is not ever going to be a system that works for the majority. So it sounds like the-- Why is that happening?

The reason that's happening is-- Well, it's being used for leverage, right, Saks? Yes, yes, the way I interpret-- Listen, when you say that we can't do anything until we have comprehensive immigration reform-- By the way, I heard future Democratic nominee Gavin Newsom say the same thing on Hannity. What the party in power is doing is holding the country hostage and saying that we're not going to close the border.

We're going to use the border as a bargaining chip until you give us the immigration package that we want. But that really shouldn't be allowed because, really, it's the obligation of the federal government to have a secure border. That's not something you trade. That's something that we should already have.

Well, it's what we pay for. That's what we pay for. So when they talk about comprehensive immigration reform, that's basically what they're saying is we're not going to give you a secure border until you give us enough policies that we want. Just to give you guys the-- And Freeberg and Saks are immigrants, but you guys got your citizenship through your parents.

I actually did the process myself as a TN visa holder who then went to an H-1B, who then I think went to EB-1. So I've had to go through this, and I've literally had to wait in line. And I can't describe to you the anxiety you have when you know your visa is running out.

You're waiting for customs and integration to basically give you the meeting so that they can actually approve or tell you that your H-1B is approved or your EB-1 is approved. And you go to this website. It's arcane. You refresh it every day. You do it for six months straight every day a few times a day.

You go into the forums where all these other immigrants are talking about how frustrated they are and how scared they are. But we all stood in line. And I think what people don't understand who think that the southern border should be totally open is the anxiety that those of us who actually played by the rules went through for months, and in some cases if you come from countries like India and China, years.

Right. By the way, what you're saying is exactly why the Hispanic population, the Hispanic citizens of the United States are increasingly voting Republican because they have gone through the process. They have suffered the rigmarole, and they don't want to see an open border policy that isn't fair and doesn't feel right.

We're first-generation Americans, and I remember when my parents went through the process. I think my dad got a green card based on being a doctor before we came here, and then after five years we became citizens. It seemed a lot more orderly back then, by the way. Totally. The process just seemed to work.

I've seen all the statistics showing the insane percentage of Silicon Valley startups that had at least one immigrant co-founder. It's something like 40% to 50% of unicorn companies in Silicon Valley have at least one co-founder who's first-generation American or an immigrant. So I understand full well the benefits to the country and our economy by being able to have immigrants come to America, but generally speaking, those are high-skill immigrants, and we should be able to have that as a feature of our system without having an open border.

And the problem is all these things get conflated right now. And I think what's happening is it shouldn't be so hard to get extensions to H-1Bs. It is really crazy that we're giving Canada this opportunity and that we're potentially driving out really talented high-skill workers. But the problem right now is that the southern border is such a mess that the average American doesn't want to hear anything about H-1Bs or-- Any immigration.

They don't want to hear about any of it. They're just like, "Shut the whole thing down." I would encourage people to listen to that RFK clip where he describes-- and he's one of the rare presidential candidates that has taken the time and gone down there, and he just describes it very plainly.

So irrespective of what you think of him, listen to it because it's pretty factual, and it's very scary. This seems to me to be of such significant strategic national interest, similar to the national debt, that there really should be a commission of centrist folks appointed by whatever president-- this president, the next president-- that tries to craft something we can pass, break it down into two or three bills.

But this is really undermining our ability to compete in the world, and we need to solve this problem. I think we've been discussing this for as long as we've been in Silicon Valley, but certainly it's become an incredible problem in the age of AI, et cetera, and having the tit-for-tat of what's going on, these news articles, shipping off illegal immigrants to Martha's Vineyard-- I happen to be on Martha's Vineyard right now.

I think they sent 49 folks here, Venezuelan, most of them Central American, and I'll tell you, this island is made better because it has a tremendous number of Portuguese and Central American workers who are active members of the community, go to the school here, et cetera. So maybe that is part of the solution, Sax, that when we do have people who want to immigrate to this country, the burden is not just on the border states, but that folks have an opportunity to locate anywhere in the country.

Well, yeah, and what happened with the Martha's Vineyard thing is-- I have seen some articles like the New York Times has articles saying how wonderfully it's all worked out, but when it first happened, the people living in Martha's Vineyard were up in arms, and there were a bunch of angry press conferences, and they were almost hysterical that the census had sent them there.

But what that did is it exposed the hypocrisy because there's a lot of people in the country who are just fine with having an open border when they don't think it affects them. Totally. But when it does affect them, then all of a sudden they're holding press conferences denouncing it.

Tid for tat never works. Tid for tat never works. You can have me at tid. You don't need the tat. Well, can we-- Speaking of-- By the way, sorry, wait, wait, wait, wait, hold on. Lightening round. Who left the cocaine in the White House? What's the answer, Chema? I actually don't think it was Hunter Biden.

It was probably some young kid who was working long hours and was like, "I need a little upper here to stay up," and was like, "I need a bump," and so the kid brought some nose candy. I mean, how stupid is this kid? And by the way, they said that there's no security footage.

It was in a cubby. It was in a cubby. He put it in the cubby, whoever did it, which is so stupid. Why would you take it off your person? Yeah, I mean-- Well, speaking of-- Clearly a conservative reporter who snuck in there to frame Hunter. And by the way, it was in the cubby where you're supposed to put your cell phone when you go into classified meetings.

Sax, have you been to the White House lately? No. Have any of you guys been in the Oval Office? I have, yeah. I'll tell you a very funny story about my meeting in the-- It was in the Roosevelt Room where I had a funny meeting where it was me, Andreessen-- Me, Andreessen-- I can't remember who else it was.

This was years ago, a decade ago. This was during Obama's administration. And something-- We were meeting with-- I don't know, the chairman of the Joint Chiefs and all these big muckety-mucks. And I remember the military guys because there was four of them. And at the time, there was like-- Oh, my God, no, this was right when the first Ukraine thing was going on.

Okay, so what was that, Sax? 2014, maybe? 2013, 2014? The first Ukraine thing, which-- Anyways-- Oh, yeah, 2014, yeah. 2014, okay. So we're there, and we're talking about new technologies, whatever. And I said, "Guys, I mean, this is insane. Why are you guys not dropping small sats so that you can get internet service into places like the Ukraine so that people can get the message out, whatever's happening?" And I said, "These things are really small.

You can bring them anywhere." And I said, "I could have smuggled one in here right now." One of the guys says, "No, we've been watching you since you got here." Oh, wow. It was so very funny. I thought it was hilarious. Well, speaking of political farces-- Here we go.

Red meat. No, it's not red meat. I want to just do a quick recap on the whole Chinese spy balloon thing. I actually think there's a serious statement here about how our political system works. But do you want to tee this up, Freeburger? No, go for it. Yeah, lead in.

Yeah, go for it. All right, so basically you guys remember a few months ago that we had this whole Chinese spy balloon thing that went on for a week. We had 24/7 wall-to-wall cable news coverage of this thing, and the administration was accused of being soft on China and allowing the spy balloon to traverse across the United States, and people were posting photos and videos of it online.

People were trying to shoot it down. Yeah, then finally the White House deployed some F-16s to shoot down some $16 hobbyist balloons with $400,000 Sidewinder missiles to show that they were really tough. Anyway, it was this whole farce. It turns out that the Pentagon just released a statement. So Pentagon Press Secretary Brigadier General Pat Ryder said the balloon not only did not transmit data back to China, it never collected any.

And he said, "We're aware that it had intelligence collection capabilities, but it has been our assessment now that it did not collect while it was transiting the United States." So if it wasn't collecting any data, it wasn't transmitting back to China, and then I've also heard that it didn't contain any special equipment at all.

I've read articles saying that it was just standard equipment that you could buy. How is it still a spy balloon? Yeah. Everybody got worked up about this thing that turned out to be-- But is it Chinese? Was it actually Chinese? I think it was Chinese, but-- With American technology.

So now all the reporting-- --is standard off-the-shelf equipment. Yeah, now all the reporting is covering the fact that it had, quote, "American technology" on it. Like, Sachs' point is you could just buy this stuff off the shelf. And if you guys remember around the time that it was discovered, we talked about this, but it wasn't widely covered in the media that there was an upgrade to the domestic radar system where they increased the resolution and the frequency of capture of these radar images.

So they were starting to pick up more fine-tuned, smaller objects that were otherwise being missed, including things like little weather balloons or stuff that otherwise wasn't getting paid attention to. And that this balloon may have been the sort of thing that could have been a blip and ignored in the prior system, but then when they upgraded the system, it became a thing.

And to Sachs' point, what's interesting is how it got spun into a domestic threat by the Chinese. Well, we had this debate on the pod months ago where I was like, "Look, this cannot be true. It makes no sense." I mean, the Chinese have spy satellites. So if they wanted to spy on us, they would just use imaging from space.

So then people started speculating, "Well, this spy balloon must have new kinds of equipment, new sensors or sound maybe." They're trying to collect sound patterns, make recordings. So in other words-- Over farmland, over northern Canada and then farmland. And yeah, like there's a lot of interesting stuff to pick up there.

Instead of recognizing that the story was completely far-fetched, they had to invent a narrative about why it made sense. And then if you basically raise any questions whatsoever about this narrative, you were looked on as if you were like Chinese spokesmen, like a spy or something. And Sachs, this Pentagon statement came right after Tony Blinken's visit to China, right?

He just got back from China, and there was a lot of closed-door meetings, and then they gave the usual hoopla about what was discussed, and there was nothing new that was introduced in the public statement about what was discussed behind the closed doors. But do you think that maybe there was something that was negotiated behind closed doors where they said, "This balloon was not a domestic threat.

You guys made it out to be--you need to make a statement to correct the record"? Yes. I actually think that's exactly what happened. As we know, Blinken went to China. He had seven hours of meetings. The readout from those meetings said that they were very candid conversations. That's usually diplomatic code for a row, a fight.

What the fuck are you doing? Yes, exactly. And I think the Chinese were very upset that this story was relentlessly pumped for days and days that they were spying on America, and I think they demanded a correction. And I think that that is exactly what the Pentagon did, is they put out this press release, they put out this statement.

But the way that the media covered it, it's like the back-page correction of a front-page story. I mean, this Chinese spy balloon story went on for days and days and days, and the correction gets no coverage. Now, look, it's also possible that somehow the statement is not true now.

I mean, look, either they were hoaxing us then or they're hoaxing us now because the statement they're saying now is incompatible with what they were saying three months ago. But I believe the statement now and not what they were saying three months ago because it just makes a lot more sense.

But remember, a few months ago, we had mids on Twitter. It's become a thing. Remember when mids on Twitter-- I invented that. I came up with that. My take was, "Errant balloon, major provocation, could incite war, blown-up pipeline," referring to Nord Stream, which also got blown up around that time.

"Not a provocation, could never incite war, get it straight." And then the mids on Twitter were, you know, you think it was errant, really? And he learned a new vocabulary word. But in his view, errant was not a strong enough word to describe this unprecedented national security threat. By the way, for those of you listening, the mid that responded to Saks was Jason Calacanis, formerly of the All-In Pod.

So funny. So funny. It shows how farcical our political system is because, you know, here's what I think actually happened is that the story just picked up steam because it's too good not to, right? So cable news starts picking it up. And everyone's always trying to pump up the threat that China represents because they're our central global competitor now.

And the White House, I think, very early on had a decision to make, which is do you try and fight the story or do you just roll with it? And I think they just decided to roll with it because they would be seen as being soft on China if they try to fight it and say it wasn't true.

And so then you had this whole farce of them shooting down all these balloons and so forth. This is the whole course and trajectory right now of the United States, Democrats and Republicans, both sides of the aisle have this vested belief that we are on a collision course with China and, you know, whoever kind of steps it up first ends up having the better footing.

And so every opportunity that exists, whether it's on chips or Taiwan or human rights or the spy balloon, is going to be levered and amplified in some way to paint China as this conflicting force against the United States in some way. And it's not going to get toned down anytime soon.

Clearly, this is part of a continuous escalation cycle that may take years, may take a decade or two, but ultimately there's going to be a point where this all comes to a head. And it's really unfortunate to see that rather than have this, you know, deeply cooperative relationship and try and -- So you think this thing with China is going to come to a head?

At some point, I think we're just going to continue to escalate the tension. I'll take the other side of that, too. What do you mean? Do you think it's going to be peace and prosperity forever? No, I mean, I think I've talked about this a little bit, but I think China has just got so many internal issues.

They're not going to be fighting wars, Babran. They're not going to be. No, look, I mean -- Sorry, Chamath, hold on. My point is more around the orientation of the politicians, and the orientation is we have this escalating force in China, and we need to kind of be ahead of the game.

I'm not sure who's doing that. Well, I think the point Freeberg is making is that the domestic politics, the politics inside the United States, leads to a cycle of Republicans and Democrats constantly trying to one-up each other in terms of who's hawkish towards China. Right, exactly. That's what I think is going on, regardless of what happens on the Chinese side.

And by the way, I mean, their domestic politics probably have the same tendencies. I'm sure that Xi's got hardliners and hawks around him who don't want to back down. I think in a few years from now, we won't be talking about this. We talked about Japan for eight, nine years.

We were worried they were the boogeyman. They turned out not to be, and we all moved on. Yeah, it's a good data point. So, yeah, I mean, you're referring to a period, I think, it was like the 1980s where Japan was seen as a giant economic threat. Yeah, '82 to '88.

Yeah, but it was never seen as a security threat to the United States. And China is a different kind of geopolitical competitor, right? There's a very vigorous security competition. They have a nuclear arsenal. They have a nuclear arsenal. They have more people. But we have military bases in Japan.

It's a client of the United States. It was never a security threat to the United States. That was resolved a long time ago. No, I think that that's fair. I just think that dollars tend to lead these things, and I think that in the next five to six years, five to 10 years, we're not going to be talking about China the same way we are today.

Okay, prediction made. We'll come back on episode 1,247. Brad, do our outro. I got to fly in three hours. I'm flying. Hold on, Brad's going to do a really quick. Have a great time. Brad's going to do a quick science corner for us, and then we're going to wrap.

Brad, go ahead. Well, you know, one of the things I love about this pod is we cover everything from science to politics. And Chamath, last year, you know, in his biohacking series, told us all to get pre-nuvo scans, which I did, which is interesting. And I think, I don't know, Chamath, maybe 10 people have sent you notes and said, "Hey, you helped me discover a tumor." You know, really amazing.

Well, so this year, and I did that, you know, this year you've been talking a lot about heart flow. So I said to my general practitioner at my annual checkup, "Hey, I want to do this heart flow." And she said, "Oh, you don't need to do a heart flow.

Your LDLs, all your stuff looks really good." Wait, wait, wait, wait, wait, wait. You have a female GP? She's fantastic. Fantastic. Stanford educated, really terrific. I don't care where she went, but who does the prostate test? He does? Hey, listen, it's the perks that come along with the female GP.

Checking the PSAs. I mean, no, but seriously, you have a... Really? I do. I do. That's a level of intimacy I didn't expect from you. Wow. And so, you know, but what I found interesting is when I suggested I get the heart flow, she said, "Oh, you don't need it, et cetera.

Your LDLs are low. You're very fit." And she said, "But on second, you know, maybe you could go get this calcium score test, right?" I didn't know anything about this, but, you know, I did a little quick research and it turns out a big JAMA study in 2017, over 50% of men and women over the age of 40 carry plaque.

Plaque's the number one killer. It's a source of heart disease and heart attacks. And as JAMA's been talking about, there's, you know, a prophylactic called statin, which is basically like a supplement, very little downside, no long-term downside effects, but it immediately starts cutting down the amount of fatty cells and plaque that's carried in your blood.

So I thought it was interesting. I went and I had JAMA, as you know, the coronary calcium scan. It takes five minutes. It costs between $100 and $400. The fact that we don't have every person taking this over 40 is crazy and frontline doctors should all be prescribing it, but particularly if there's family history.

Sorry, but did you also do a contrast CT with heart fluid? Yeah. So I started with the calcium score, 150 box over at Stanford, took five minutes. And, you know, it told me, you know, which wasn't terribly surprising. I was one of the 50% that did carry some level of calcium.

So it was called a non-zero score. And then what they suggest is because you have a non-zero score, you get this, you know, Chamath, you told me, go do the contrast CT, which then will image what this looks like actually in your artery. So this past week in Boston, I did the contrast CT again.

This took 10 minutes, non-invasive, like, you know, it just, they run you into it too. Well, no, invasive, because you have to put the dye. So they put the, yes, so a tiny bit, I suppose they shoot a little dye into you, but, you know, didn't feel like anything.

I was in and out of the place in 40 minutes. And what it found is, you know, fortunately that very little of this calcium had turned into what they call stenosis, any narrowing of the arteries. Okay. But then it gave you just a very clear picture that if you are one of the 50% who carry plaque over the age of 40, you should be on a prophylactic statin.

So as Chamath knows, I signed up to 10 milligrams of Crestar, which I'm taking daily, has had zero, you know, zero adverse consequences. And in two or three months, they'll test the amount of, you know, we'll revisit this calcium score. But when I talked to the head of cardiology, what was so interesting, he said, every one of his friends over the age of 40, he has them do this calcium coronary scan.

It's so cheap. And if they're zero on their calcium reading, that that's the end of the line. But if they have a non-zero reading, then he'll do the CT coronary scan, which is again, very cheap, more expensive than the calcium test, but very cheap. And when you think about the cost of the patients in this country, right, in our healthcare system due to heart disease, and when you think about the needless lives cut short, I was shocked how easy all of this was and how empowered I feel by the data and how fortunate I feel that I'm actually taking a supplement.

I call it a supplement instead of statins because I think statin has some spooky name. It sounds to me like a better supplement than any vitamins I can take. And you know, it's reducing the LDLs or these fatties in your, you know, in your blood. And I'll keep you posted.

But I was very grateful. And, you know, as you know, I posted it in our thread. And I think all the besties, you know, we saw responses out of a bunch of folks in the thread this week are going to go get their calcium, you know, coronary scan. And I think it should be common sense on the front lines for people over 40, particularly if there's any family history, go get this calcium test done this summer while you have a little extra time.

There you have it, folks. $100 to $400 could save your life. Calcium coronary scan. Brad Gerstner, thanks so much for Science Corner this week. This has been great. How did you guys enjoy the show with our new foursome? Zach? Zachary Reality Love it. Dr. Justin Marchegiani Love it. Zachary Reality I gotta go, boys.

I really love you guys. Dr. Justin Marchegiani Okay. Zachary Reality I gotta go to Vegas. Dr. Justin Marchegiani Stuff your face with some truffles. No, no truffles until the fall. Dr. Justin Marchegiani Alright, bye-bye. Zachary Reality Love you guys. love you guys bye bye (outro music) (outro music) Rain Man David Sack and it said we open sourced it to the fans and they've just gone crazy with it I'm the queen of King Kong besties are gone that's my dog taking a notice in your driveway where did it go?

oh man we should all just get a room and just have one big huge orgy cause they're all just useless it's like this sexual tension that we just need to release somehow wet your b-b wet your b-b we need to get merch besties are back (outro music) (outro music) (outro music) (outro music) (outro music) you