E2: Rebooting economy, understanding corporate debt, avoiding a depression & more with David Sacks

All right, everybody, welcome to episode two of the All In podcast with Jason and Chamath, some basic ground rules here. If you're not into speculation, you don't like to debate, you don't like to question authority, and you don't like to get a shit ton of inside information, I'm going to actually turn the podcast off right now and go download the daily from the New York Times or All Things Considered or some other bullshit.

But we're here to do speculating and talking about inside information and the real deal. With me, as always, He's my co-host, Chamath Palihapitiya, if you don't know how to pronounce it. Palihapitiya. Chamath, how are you doing? You holding up okay? I am doing fabulously well. We are in week four of our lockdown sheltering in place here.

You losing your mind? I'm not because I'm fortunate to be in the suburbs. I think if I was cooped up in an apartment in the city, I would feel a lot worse than I do right now. But there's a lot of fresh air. The weather's finally turned. It's not raining as much.

So we get to see the sun a little bit. Makes a big difference. Yeah. Can you imagine 15, 20 years ago, holed up in an apartment with three kids who are home from school? These people who are in a city, they must be going insane. I mean, there's so much value to visiting New York.

But if you're stuck there in a quarantine lockdown, I don't know what I'd do. All right. Well, we got a great guest today. Why don't you introduce our guest, Chamath? Well, we are really lucky here. This is a person who I've known. I've known him now for, I don't know, maybe 15, 20 years.

What I would call him is one of my best show ponies. I have ridden this motherfucker up and down in everything he's done. He has made me so much money. It's like owning the publishing rights to the YouTube back catalog. This is how prolific this guy is. It's like owning the Beatles back catalog, right?

You're like Michael Jackson. It's like owning the Beatles backlog. You bought the- So David Sachs, though. No, all kidding aside. David Sachs is one of the most- One of the most incredible people that we know. One of our closest friends. Big bit of a background on David. He almost became a lawyer, but dropped out of law school after going to Stanford and worked with Peter Thiel at PayPal and was a chief operating officer there.

Left PayPal, moved to Los Angeles, unsuccessfully kept his virginity. way to not get laid as a movie producer in Hollywood, which it seems to be impossible, but David found a way of doing it. Produced a movie, one of the best known movies of that generation called Thank You for Smoking.

Then moved back up here, started Genie, pivoted, started Yammer, sold that for more than a billion dollars to Microsoft, and became, during that time, frankly, one of the most unsung heroes of company founders and was a prolific investor in some of the most well-known iconic businesses of this last generation.

Airbnb, Uber, Slack, the list goes on and on. Now is the co-founder of Craft Ventures, which is essentially David's early stage venture business where he helps a lot of really great companies get to the next level and, frankly, the level that he's been playing at for a while. Despite all of that, again, I just see him as a show pony.

Yeah, some money printing machine. If you can get in on that fund, if you can get in on those companies, you're going to do well. Saks is an operating machine. Welcome to the program. David Saks. David Saks. Welcome to the pod. Thanks for having me. How are you holding up, Saks, just personally, family, everything, companies, just generally, psychologically?

How is this impacting you? I think we're all fortunate to be safe. We started paying attention to the virus, I guess, in February because of Twitter tech. There are a bunch of people in the tech ecosystem who started tweeting very alarming things. In February, we were able to get a lot of people to come to the pod.

We were even going as far back as January 30th. I didn't know for sure if they were right, but some of them were friends of mine. We were taking it seriously. We started doing work from home, I think, on March 1st. We've all been self-isolated since then. Fortunately, everyone has been safe and holding up pretty well.

Saksiput, tell everybody on the pod our group chat. And basically, what it is, what we do on that group chat, and what you think about it. Yeah. Basically, our poker group and extended poker group, which is about, I don't know, it's probably about 20 players who rotate in and out of our poker game.

We have a chat group. We used to just talk about cards and stuff like that, but very rapidly, it became a place to share information about the virus and the response and what was going to happen. The remarkable thing is that whatever we talk about ends up becoming, it's like everyone else just figures it out about a week or two later.

I think it has helped us stay about a week or two ahead of the curve on this thing. Has it generally been mentally reassuring or has it amplified your anxiety talking about it all the time in that chat? Well, the interesting thing is that we have people in that chat who are very optimistic.

We have people who are very pessimistic. We have people in between, and then, we have people who swing around quite a bit. I think you get all the perspectives. I guess my view of the future is that very hard to try and figure out what's going to happen. You have to think about it in terms of scenarios.

The chat group helps understand what those scenarios might look like. Where would you describe each of us, then, on the positive, negative, and then swingy? You're in which camp? Are you swinging? I think the three basic scenarios are V, U, and L. Jason, I would describe you as a V.

I think Chamath is closer to the U, which is the most pessimistic. Sorry, the L is the most pessimistic, and then the U is sort of somewhere in between. I sort of swing between the U and the L, but I also understand the case for the V. Those initials really refer to the shape of the recovery to come and how quickly we'll come out of this.

David, before we drill down into your beliefs on the future, let's talk about the past. What do you think this entire episode has shown us, whether it's from a public health perspective or an economic perspective? How would you summarize your view of the world as it's been revealed to you in the past two months?

Yeah. I think that what it really shows—we live most of our lives during these relatively calm periods, and then our lives get redefined by these apocalyptic events. We're not really wired for this rate of change. We're not wired for this rate of change. We're not wired for this rate of change.

I think it was Lennon who said something like, "There are some decades when nothing happens, and there are some weeks where decades happen." I think that's basically what's happening here. The last thing that was like this was 9/11, where you woke up that morning, saw the Twin Towers coming down on TV, and you realized that we were now in a different era.

Something like that's happening here as well, just in slower motion. Yeah. I think that's a really good point. I think that's a really good point. What do you think the government did right, and what do you think that the government did wrong? Limiting the flights in for Wuhan or China was a good initial step, but after that, it seemed like the response was very slow and disbelieving and incredulous.

We've seen this basically everywhere. The initial response of, "Oh, we're going to be in a different era," is, "We're going to be in a different era." We've seen this basically everywhere. We've seen this basically everywhere. Just about every country, with a few notable exceptions in Asia that had previous experience with SARS.

What we've seen in just about every country is that nobody believes it's going to happen to them until it happens to them. Then even in the United States, it's like no one believes it's going to happen in their city until someone on their social network gets the virus, and then all of a sudden they take it seriously.

There's always been this like, it's like this slow, moving train wreck where you see it coming and people are just a little bit too slow to react. And the problem is, it's all about the doubling time. So if the virus doubles every two or three days in the absence of any action at all, maybe even doubles every day in a very dense city like New York City, just waiting two or three weeks can make a thousand X difference in somewhere between, I guess, 10 X and a thousand X difference, depending on the doubling time.

Whether if you wait two weeks or three weeks. I saw an article on, there's a bunch of articles now talking about why has New York been hit so hard and California has been relatively mild. And the articles were saying, you know, California only declared shelter in place one week ahead of New York.

How can it be doing so much better? And they're looking for all these different causes and explanations. And, you know, even one week makes a huge difference. If in New York, New York's been hit about 12 times harder than California. But if the doubling time is just two days, one week is a 12 X difference.

That's how the exponentiality works. And so, like being at a week, you know, or two weeks or three weeks behind the curve is incredibly costly. How do you break down local government versus federal government and the action there? And is America's architecture with states, rights and powers, a benefit in this case?

Or is it a negative? Because we did see the blue states take it very seriously. The red states take it less seriously. The red states have a lot more distance between individuals. The blue states tend to be coastal cities. They're more dense. Maybe you could handicap for us the spread of the virus with the layer on top of it of local governments and the political climate we're in.

Yeah, I think, you know, the decentralized nature of the American system is both, both a blessing and a curse in this, in this type of situation. The curse is that it's been very hard to create a unified national strategy where we're doing lockdowns piecemeal. And so the lockdowns get forwarded as people move around between areas that are not locked down and start new outbreaks.

very hard to control the virus. That way, you know, we're also, you know, we're also not able to act in the authoritarian way that we saw trying to act and move on to control the virus very early on. But the blessing of decentralization is that it's allowed, you know, the governors of states to react, and it's allowed private companies to react, and it's allowed entrepreneurs to react, and you see a lot of people helping in different ways.

And that can be, that can make up for having kind of a more ineffectual centralized response, which isn't likely to work completely in a country this size anyway. Do you think that the health apparatus of the United States did its job? And where do you think the areas of opportunity are to improve?

Well, if you're talking about the health system, it seems like the health system has done a great job in reacting to the virus in terms of hospitalizations, you know, hospital, adding hospital beds, adding ICU capacity. Even in New York, it looks like, I think Cuomo just said today that they've got, you know, ICU capacity, they've got hospital beds.

I think the hospital system has done a great job. And I think the health system has done a great job rapidly creating more capacity. We haven't seen a situation like in Italy, or even the UK, where they're literally rationing ventilators and making horrible triage decisions about who's going to get a ventilator and who's not, you know, we haven't seen those types of horrors in the US.

But if by health system, we mean the FDA, the CDC, the WHO, which is part of the US system, but we do rely on them to some extent. You've just seen, I think, you know, amazing, really malpractice or negligence. If they were a pharma company, I think they'd be sued.

You have that, you know, you have on the CDC website, things that I haven't checked it today, but as of a few days ago, were just blatantly not true. I mean, saying that you only needed a mask, if you were actually taking care of a person with COVID-19, that standing, say, a three foot distance was sufficient.

That was sort of an acceptable amount of social distancing, even if the other person is coughing or sneezing. And that's not true. They're just saying things that weren't true. And then, you know, on the, you know, the CDC and the Surgeon General until basically the last few days, were telling us that masks didn't work, weren't effective, didn't, and then now they've flipped to recommending them, but they're still not required.

And I just wrote a blog today that I published about half an hour ago that- I thought the best part of that blog post, by the way, it's up on Medium and Saks has tweeted and I retweeted it, David, is what you said at the end, which is we're taking the most draconian measure, quarantining people, which we use this softer term, shelter in place, but it's a quarantine, call it what it is.

You're not allowed to leave your house except under rare circumstances. But we won't do the basic thing of wearing the mask. It makes no sense. And Chamath, I think you had a really interesting question early on here, which I think we should all circle back on one more time, which is what is this reveal, right?

Like in this kind of a crisis, and I love the statement of Saks where, you know, some decades nothing happens, and then a week you have a decade happen. The thing that I am, I think is the big takeaway for me is handicapping who you can trust and what people's agendas are and how they can be trusted.

And I think that's the key to this. I think that's the key to this. I think that's the key to this. And I think that's the key to this. I think that's the key to this. I think that's the key to this. Because there are a group of people building models.

And what is the motivation of somebody who builds a model? We think about, we all get pitched as investors or when we worked inside of companies, we build models and we know the models mean nothing. They're made by humans. And what's the motivation of somebody building a model in today's climate that then people adopt that model and there's life or death?

What would you handicap? Would you go conservative? Would you go aggressive? Would you lean into people dying in the case of- Yeah. ... supporting the economy? And so there's the model makers, there's the government, local and federal. You have the media who are trying to get clicks in some cases.

You have capitalists who are trying to protect their book and their bets. How do we all look at and think about people's agendas and the CDC having an agenda, the local government and the model makers having agenda? Chamath, maybe you could take that one. Yeah. I think that the masks issue is actually, the most instructive thing in this whole debacle.

And the reason is that there was pretty obvious data very early on that it was something that had unknown but pretty useful upside and absolutely zero deleterious downside. So if you were thinking about risk management, and I gave you some options. Option one is do nothing. Option two is here's some drugs that you can take prophylactically and I don't really know either the efficacy or the long-term damage to a broad base population of people taking them.

And option three was a piece of cloth over your nose and mouth. And- For 10 cents. And apparently at a minimum, it prevents other people from smelling your bad breath, but at a maximum- It prevents projectiles of disease-laden spit getting into your- Death vapor. ... causing you to die.

Yes. And we couldn't agree that that was a- Why? Why? Why? Was the agenda here because they didn't want people buying up the masks and not going to healthcare workers? Why couldn't we agree on something this simple? Because it was never about the N95 masks. You could have worn a cloth mask, a tea cloth could have covered it.

it up and giving you 70% efficacy. This has everything to do with incentives and everything to do with your other question as well, which is why do modelers behave the way that they do? All of this is about being taken seriously. And so to be taken seriously, you have to understand the incentives in the game that you're playing.

So for a modeler and a forecaster, the incentive is all around being conservative because that's how you're taken seriously. There's nobody that has any upside in showing a model that shows 10,000 people dying. All of the attention and the gravity with which you're taken and the attention that you get is when you first put out a model that shows that 2 million people could die, which is what Imperial College did.

And then eventually you walk it back and you walk it back. And after the actuals exceed the forecast, then the data converges on what actually happens. And you see that these models were woefully inaccurate. It's the same with why the CDC or the WHO are just so completely incompetent because the incentives in those organizations are essentially to play their game.

And that game is not one of public health, but it's one of politics. And so you have these people fighting each other over political territory and the right to basically make decisions versus the actual substance and the validity of the decision. David, does that correlate with your thinking and then superimpose the media on top of that?

Yeah. I mean, so I think there's a couple of things going on. One is that there is a huge culture clash going on between the people who need conclusive scientific proof before they're willing to recommend, and any course of action. And then between other people who are willing to take a more experimental approach to try things to iterate the way that we do in startup land when confronted with kind of company existential issues.

And the latter approach is smart when there's a lot of upside in trying something and not much downside. And the other approach is that there's a lot of upside in trying something and not much downside. And the other approach is that there's a lot of upside in trying something and not much downside.

And the other approach is that there's a lot of this scientific, the pseudo-scientific sounding approach where you're constantly demanding conclusive evidence. It's actually people pretending to be smart. It's people who want to sound smart, but it's actually a pretty dumb approach. And so we've seen this culture clash playing out over and over again.

So, Shereeta, I'll repeat it back to you, David. Experts are afraid to do something experimental with low downside because they have reputations, they have a reputation, they have a reputation, and they're afraid to do something experimental with low downside because they have reputations, they have a reputation, and they're afraid to do something experimental with low downside because they have reputations, they have a reputation, and they want to sound smart.

Whereas entrepreneurs or maybe capitalists or other problem solvers or perhaps even gamblers are going to say, there's no downside here. What's the downside to putting a mask on? Nothing. Let's try it. The same thing with chloroquine and the Z-Pak. Very early on, people were saying, like Elon and other folks in our circle, why not just do it?

Hold on a second. Hold on a second. Chloroquine, let's not put that in the same category. This is the point. Because it's a drug, Jason. It's a drug for malaria. You have zero evidence of taking it if you're sick already. No, we still don't know. Let's be clear. So masks is a wholly different thing.

This is why I said it that way. The minute you start to add drugs, you come off as an armchair epidemiologist and anybody reasonably smart can poke holes in your theory and you sound like a fucking moron. You cannot sound like a moron by telling people to wear cloth over their nose and their mouth.

Okay, but the next step, if you were in the hospital and you've been diagnosed and they said, hey, the doctor says, you might want to try this. There were people who were saying, don't even try it. And there was a direct correlation when Trump said he was behind it.

It seemed like the media and everybody were like, this is the worst idea ever. But this is your point, which is that the incentives of that game are to politicize things versus think about what's in the best interest in the public health interests of either the United States or the world.

But aren't we in agreement to try it if you were if you were in the ICU and they said, hey, you want to try this? You wouldn't try it? No, but this is the problem. The posture of the American political infrastructure is broken. And moments like this shine a light on how broken it is.

Because as David said, all of the testing and iteration, all of those things are must-haves in peacetime. They are nice-to-haves in wartime. You don't have a time to walk around and test fire a gun and make sure this works and that works. Shoot and you fire and you aim later.

And in that posture, we have to have a set of rules that contemplate giving people at the ground floor, on the border of where their life is at risk, the right to make a decision as well-informed as it can be about what they can try to do to save their life.

And doctors need to be equally empowered. And we've effectively done that, but we just did it in fits and starts. And in that, there is all of this noise that delays the right decision, which is not that hydrochloroquine is good or bad, but it's that here's all the published data into the hands of the doctor who can actually read and understand it so that he or she and the patient can make a decision together.

Yeah, agreed. Sax, what are your thoughts on chloroquine and the Z-Pak and that whole sort of unraveling of this is the miracle, it's not the miracle, it's worth looking at, and how that debate occurred, let's say, on the Twitter, and then also in our stream when we were talking?

Well, Trump was not the first to embrace the potential of hydroxychloroquine. In fact, we were talking about it in our chat group before it became national news. Of course, once he did embrace it, it became political football, and a lot of people wanted to prove him wrong. And so now it's hard to have a conversation about it without it becoming political.

But the argument for hydroxychloroquine really started with some research papers that showed that it worked in vitro, basically in test tubes against the virus. And it worked against SARS, which is a related sort of category of virus. I'm not an expert or anything. This is just sort of me telling you what I know as a consumer of information.

And so it was not crazy to think this is something that should be tried in the context of COVID-19. Now, we don't know if it's going to work or not. I saw an interesting presentation by UCSF, and their working theory on it is that hydroxychloroquine plus Z-Pak might have some impact in the first week of the virus before peak viral replication takes place.

And this might help interfere with the virus replicating. Once you're in respiratory distress, though, and it's in your lungs, you're into a lot of things. And so it's a little bit of a mystery. But I think it's a good thing that we're seeing that the virus is going to be in the first week of the virus.

And I think it's a good thing that we're seeing that the virus is going to be in the first week of the virus. And I think it's a good thing that we're seeing that the virus is going to be in the first week of the virus. And I think it's a good thing that we're seeing that the virus is going to be in the first week of the virus.

And, and so, you know, I think the FDA did the right thing giving emergency trial authorization to doctors to be able to try this with their their patients. And, and what I think is happening is, is that there's your sort of rapid decentralized information sharing happening among doctors and hospitals.

And, you know, I think they're, they're getting to the right answer here. Okay, do we do we feel comfortable moving on to financial implications of this? Or are there things about the modeling? On upside downside, I agree with Jamaat that I don't see chloroquine is a little bit more complicated.

Mass are sort of the really unambiguous one. Because it's just so easy. There's so it's just cloth, it's cotton, right? You literally could put a bandana on your underwear. Yeah, you could use your own underwear and just put it across your face. I mean, this is what's so insane.

That David's right. I remember having this argument with someone because on the CDC website, as David said, he would only recommend it not as a preventative measure for you. But if you were old, you should use a mask only if you were treating somebody with COVID-19. And there's an element of these authorities trying to manage us, you know, I can, you know, I really hate that, that.

I mean, I do think that they thought about, will we create a run on mass? Well, you know, that that that they don't want to tell us the truth, because they're afraid of some of the consequences of telling us the truth. And, you know, I hate that feeling of being lied to by public officials, because they're trying to manage, I I'm willing to be infantile by people that are smarter than me.

Yeah, so can you give us a list of the four people you think are smarter than you go ahead, Jamaat? I am not sure who are those four people infantile by nameless bureaucracies. And I think that Americans deserve to not be infantile. I mean, for the amount of money that we pay and the amount in taxes, and the amount of power that we give folks.

The one thing that I'm realizing through this whole thing is like, you know, the it's it is true in some respect that the countries that had some level of authoritarian management did well. But it's also true that the countries that had robust civil services filled with people who are at the top of their class also did well.

Singapore, South Korea, where it is a stature, where it's a point of pride to work for the government, where it's some of the best paying jobs, Japan. And so you know, one of the things that I realized is like, career bureaucrats really do infantile Americans in a way that's really unproductive and unhealthy.

I mean, you know, it doesn't surprise you and kind of like perturb you that the ex head of the FDA is way more prominent and out front with his point of view than the current head of the FDA. I mean, what the hell is going on? I think what we know is going on is I mean, Trump was elected and he he dismantled some of this and the system was broken.

I think now I think that that's unfair. And you know, I'm not I'm not a big Trump supporter. But I think it's unfair to pin it on him. The reality is maybe he defunded or underfunded a bunch of things. But the hollowing out of our institutions have been happening for 40 years.

And it started with Reagan, to be clear, because we tilted the scales towards free market trickle down economics where government was viewed as a stop for really smart people to inject themselves into industry at higher levels. Or it was a place that's, you know, capable people would never go.

Because capitalism, the way that it was structured was set up in such an aggressive tilted manner for those that were capable. And unfortunately, it hollowed out the government from people that were really strong of character in a broadly speaking kind of way. And so what happens is that then bureaucracies form the incentives change.

And you get what you've gotten right now, which is again, it is a it is a point of argument on something as simple, and frankly, idiotic as a mask. Okay, let's move on to talking about the economy. And David, you've been quite a heretic on Twitter, because you decided to engage in the one conversation you're not allowed to have, which is talking about people's livelihoods, as opposed to their lives.

You can only keep one thought in your mind as far as the kind of woke far left is concerned. And the Twitter mobs, you could only talk about people in life and death, you can't talk about their livelihoods. But you've been talking and starting a dialogue on how you would structure teams in a startup for how do we deal with the crisis versus how do we go back to work.

So explain how you would do this if this was a startup company, if you were doing it on an entrepreneurial level. And what you think the road looks like, let's start with San Francisco Bay Area, and then we'll extrapolate to the most acute area in America, New York. Yeah, well, the big question that everyone's going to be asking by the end of April is what now?

Because I do think you're already seeing this in the New York data that quarantines work. But that shouldn't be a total surprise to us. Historically, quarantines have always worked to be quarantines were the way that people dealt with plagues when they didn't have any technology. It's the problem is just they're incredibly costly.

And if the quarantine goes on for months as our only way of dealing with the virus, then we could be looking at the depression. So the question really is, once we've arrested the exponentiality of the virus, and I think we have to do that first. But once we've arrested the exponentiality, the big question is going to be, well, now how do we get out of this?

And what I worry about is that the daily update mentality. I think it's great that our leaders are giving us these daily updates showing that they yes, they're showing a bias for action, which I think is good. But I worry that we're not going to be ready, that this precious time that we're buying with quarantine is not going to lead to a better plan in May because no one's really working on that plan.

They're just working on sort of the triage, the immediate response, the making sure that hospitals around the country have the ventilators and beds they need. And we put in the orders. Why is it, Dave, that we're not going to be able to get out of this? I think the answer is, David, that people can't keep these two parallel processes in their mind at once.

You've been attacked viciously on Twitter. The media attacks anybody who brings this up as like only caring about capitalism when in fact, you need to do both plans. You need to figure out how people get back to their livelihoods and we avoid a depression, which would kill more people ultimately, right?

I mean, I think there's consensus about that, whether it's depression or suicide, et cetera, or people not being able to feed themselves or, you know, have nutritious food and health care. So why can't people put these two things in their mind at once? And then let's talk about the actual plan.

If you were planning and you were the mayor of San Francisco or you were in Trump's cabinet and they said, "Okay, David, you make the plan for the Bay Area to go back to work. Take us through your one, two, three, and then we'll throw it to Chuma." What I would do is, like, I would do what I would do in a company for a product release is I'd have, you know, in a company, I'd have a product manager for the 1.0 release and I have a different product manager for the two-time product release.

And I would have a product manager for the two-time 2.0 release because it's very hard for, you know, somebody to be all in on two different releases, which have two different schedules. So, you know, I think the team that we have right now that's basically concerned with the immediate response, the triage, they should keep doing what they're doing, make sure that, you know, the country's reacting the right way, that it has all the supplies they need, that, you know, they're berating 3M into giving us more PPE or whatever it is.

But I think that there should be a separate team, kind of a, you know, a czar for the 2.0 response, which should be focused on how do we create a new system that gets us out of lockdown, but doesn't re-trigger the exponentiality of the virus. And I think that person, that team should be ready to slide the new system into place in May.

I don't know if it's beginning of May, end of May or whatever, but sometime in May, they should be ready to slide that new system into place so that this precious time we're buying isn't wasted. Give us your one, two, three. One is masks, obviously, I would think. Masks are a total no-brainer.

So that's number one. Give us your two, three, four, if you want to riff here a little bit. Yeah, I mean, the other elements of the plan that people keep talking about, it's, you know, rapid, ubiquitous testing. I mean, and you have to have same-day results. This business of it taking two, three, four days in the lab.

The problem is, if someone is infected, they could be passing it on during that time. You don't, you don't isolate them in time. So we have to have massive, ubiquitous same-day testing, along with contact tracing so that when you do find out that somebody's got it, you can not isolate not just them, but all their contacts.

That's the system that seems to have worked in South Korea. And, I mean, those seem to be the pillars. And is quarantining the high risk during this first phase of the rollout with testing and social distancing and masks, that seems to be the no-brainer, I would add, fourth bullet point, which is if you're obese, diabetic, asthma, or some combination of those and over 60 and or over 60, you got to stay home now.

And you cannot be in touch with anybody who's out and about and part of that first wave to go back to society. Right. We know that certain segments of the population are at much higher risk than others. And so part of having a more fine-tuned response to the virus, other than just shutting everything down, would say, well, let the people who are at very, very low risk go back out still wearing masks and having the right protocols and hygiene, all that stuff.

But you keep the high-risk population isolated rather than shutting down the entire economy. All right, Chamath, if you're on the board of directors and David was the SAR of the May plan to go back, how would you, what questions would you have for him and how critical can you be of his plan?

Let's take this as if we were actually in charge. Chamath, savage David's plan. Well, I probably would push David to consider a more aggressive approach here. And this is something that I've talked about before. Jason, you and I have talked about this on the podcast before, but we need a biological Patriot Act.

I know that it's unpalatable for people on the left for certain reasons and people on the right for other reasons. But it just doesn't matter what they think. It was reported today, by the way, that the CDC and the task force at the White House is considering immunity cards, but a much more beefed up version of them.

These need to be cards that have some kind of chip inside them that are non-hackable and issued by the government. But what I would push David to think about if he was the PR of getting back to work is the following, which is I agree with the broad-based testing.

I think that you need to have some kind of wristband that allows you to be inside of certain green zones in every single city or town in the country that allow you to some way be back to normal. But there also needs to be red zones where you cannot.

We need to have a very, very quick way of restarting a quarantine if there are hotspots that develop. But all of it needs to be supported by broad-based testing and a biological Patriot Act. We do need to have immunity cards. The simple basic reason is that it is the only way that one can prioritize the economic salvation of the US economy.

Because I think once we have paid the cost from the public health perspective, which we are doing at the end of this quarantine in, flattening the curve or crushing the curve, our immediate focus has to be in resuscitating the GDP of this country. Because otherwise, the number of deaths and the amount of pain that is caused by economic destruction will far outnumber the number of people that die from this, which is tragic already.

The only way that I can see for us to do that in a scalable way is with an immunity card. David Stemmel: Yeah, yeah. I would also push you on thinking about quarantining not just at home, but maybe by region and hot zone. So if we know the New York corridor or the Northeast corridor is severely infected, nobody in or out of that corridor without a visa, without, and I know this is a very touchy issue, well, in terms of civil liberties, but until we're through this, I don't see why people are going to get vaccinated.

David Stemmel: Yeah. David Stemmel: Yeah, yeah. David Stemmel: People from New York need to go to Florida without maybe a rare exception or something to that effect. So if we know we got California out of it, or if SoCal is still in the thick of it but NorCal isn't, maybe we have some level of testing required to get on a flight to come to San Francisco or to go to leave New York.

So those are two punch-ups. How would you look at those, David, as the new czar of getting back to work? David Stemmel: I think it's all on the table. I mean, I like the green zone, red zone idea. I like using immunity information. We've been talking in our chat group for, I think, a month about these blood serology tests.

I tweeted, I took one of those tests weeks ago, I think like three weeks ago before the FDA had even approved it, and I tweeted about it. So yeah, I think all that, I think the immunity cards, I think we should use all that information. I mean, it would all be on the table for sure.

But I think most of all, these ideas need to be tied together, into a coherent system. And I'm worried that our approach to date has been so ad hoc that we're not going to have a coherent system ready to go as a replacement to shutdowns in May when we need it.

David Stemmel: Is part of this, you talked before about how you didn't like to be managed. I think we all agree we're being managed and massaged because they really do not want to even talk to us about going back to work in May or what happens. David Stemmel: Yeah.

David Stemmel: Because they're afraid that we're going to jump the gun and we're all going to just go to Crissy Field or whatever park or Central Park and just throw a giant party. But people are not stupid. There is a certain self-preservation here that should be inherent in all these discussions, which is any reasonable person watching the death toll in New York does not want to leave their house.

And so why can't, how much of the lack of discussion about this issue do you think, David, is because people are afraid to treat people like adults because they think they're going to just go out to Crissy Field or Dolores Park? David Stemmel: No, I think you're right that there was this long period of time where the authorities were just trying to get everyone to buy into the idea that the virus was dangerous, they needed to shelter in place.

And they didn't want to hear any views that appear to be contradicting. I don't think they were contradicting it. David Stemmel: Yeah. And I think that's true. And I think that's true in a situation in which we're relying on everyone's voluntary compliance to engage in a quarantine or to wear masks.

And I guess part of the response here is to figure out what action items should not be voluntary that we just need to do in order to get past this. David Stemmel: Chamath, you have thoughts? Chamath Nani: I think that getting back to work is going to be much, much more difficult than people think.

I think that in the absence of a vaccine, which looks like at best 18 to 24 months from now, we will be able to get back to work. And I think that's a very important thing. And I think that we will never get to 100% of where we were before, or at least the potential to be at 100%.

And so I just think that over the next two years, we're in for a tremendous amount of difficulty. And this is sort of where I'd like to shift the conversation. I think that we've now poured between the United States government and the Fed almost $10 trillion. We smeared it into the economy.

David Stemmel: And only $0.03 of every dollar has gone into people's pockets. And I think we're hoping that the other $0.97 somehow trickles down into their pockets in some way, shape, or form. Now, when you look at that $0.97, half of it was things like propping up the commercial paper market, propping up the repo market.

But it's also been things like propping up investment grade debt, propping up high yield debt. And I have a real issue with this because I think that, I think, that the market is going to be a little bit more volatile. David Stemmel: Yeah, I think that's a good point.

I think that's a good point. I think that's a good point. David Stemmel: And I think that's a real issue with this because I think that if we're going to take two years to get back to normal, and I really do think it's two years because, Jason, a lot of the fears that you expressed, people will have as lingering doubts and will prevent them from being at 100%, which means businesses will not be at 100% until you can get an injection and know that you're protected.

We're doing an enormous amount of damage because we're taking trillions of dollars and flooding it into the economy in a way that's just not going to be effective. And I don't think that we're taking enough time to really think through these things. So, on the one hand, while I appreciate the- Jason Lowery: Velocity.

David Stemmel: Or not the velocity, the intention. I think Jerome Powell's commentary, I applaud, which is he's saying all the right things, which is we will do everything possible. But the lending program to companies has been haphazard and difficult. Jason Lowery: But it did get started in three weeks, and some people have gotten money in week four of this.

I mean, it's pretty incredible. David Stemmel: No. The numbers that I've read is that on average, the loans are turning out to be sort of like in the tens of thousands. And on top of that, David and I talked about this in the group chat, but the math makes it so that you're better off furloughing or letting people go than you are taking PPP, which means that a lot of this money may never get taken.

But again, all of that is still a small rounding error. We're talking about less than $0.10 a month. We're talking about less than $0.10 on the dollar. $0.90 of the dollar have gone into areas that will not really touch an average American citizen. And I think that's just fundamentally wrong because the trickle-down theory of all of this was started 40 years ago, and we can see now that it doesn't work.

Jason Lowery: David, any thoughts on the stimulus? David Stemmel: Well, I think what's happened is that we have a 30% hole in our economy right now. You've got like a 15% unemployment rate. David Stemmel: Yeah. David Stemmel: Going to 25 or 30, maybe as high as that. We don't know yet.

We think that GDP is going to contract in the next quarter by a quarter to a third. And so you've got this giant hole in the economy. And what the Fed and Treasury are trying to do is plug that hole for a period of time until we can get through this health crisis.

And if the crisis only lasts a few months, maybe they can hold it all together. But I do worry that if it lasts longer, it's going to slip out of their hands. And the result is going to be a cascade of defaults and bankruptcies and effectively a great unraveling of our economy.

Jason Lowery: Yeah. I think that though, in fairness, this is where I think bankruptcy, it's almost viewed as a four-letter word, but it's not. And in many ways, the bankruptcy process could actually be the saving grace of American business in this moment. And the reason I say that is that it allows in a bankruptcy, these companies to discharge a lot of the debt.

And we could set up a mechanism where these bankruptcies could be done in a way where, again, similar to taking PPP, you don't let people go. A percentage of the cap table must go to the pensions if they have them. A certain percentage of the cap table must go to employees.

David Stemmel: Yeah. Jason Lowery: Yeah. And then the remaining percentage goes to the secured bondholders. And so the existing equity holders and the unsecured bondholders would effectively not be made whole, but in that all the employees would be. And if you combine that with a UBI program where you put, look, in the United States economy, only $8 trillion is wages.

So we could do so much. If we had given every United States citizen their absolute salary of 2019 right now, we'd still have $2 trillion left to bail out companies. David Stemmel: And everybody could take a year and get paid, like literally have a year sabbatical and be paid.

Jason Lowery: Well, I think what it really does is it guarantees the chances or it maximizes, sorry, the chances of a consumer-led recovery. The United States has never been an economic system that's been vibrant because of government spending or other things. We've always been vibrant because we've been consumer-led.

Jason Lowery: Yeah. David Stemmel: It's consumer consumption and it's customers of companies buying products that they need or want that drive the economy forward. And if you think about our largest customer base, they are the US population. And by guaranteeing their revenue, so to speak, you actually allow them to then spend once they get out of quarantine and you'll see them spend even in fits and starts.

In this way, you could spend $500 billion buying a bunch of junk debt. I really don't see, as a reasonably savvy participant in the markets, how it actually helps anything. I think all it does is it saddles you and me and all of our listeners with a bunch of toxic junk debt that eventually has to get sold by the Fed, as David said, in the grand unraveling.

Jason Lowery: And it would be more healthy. Wouldn't it be more healthy, David, to allow a certain percentage of these companies, the weaker ones, to fail so that the stronger ones could then pick up those employees and there'd be some stability? And I'm curious if you'd think that we're going to be living in a world where, and people have speculated about this, maybe the individual consumer changes their perspective and maybe people come out of this crises with a different worldview.

I don't necessarily subscribe to this, but Chamath, you do. We've had this conversation. So I'm curious, David, if you think the American consumer will forever change and maybe they upgrade their phone half as much, they spend less and they basically live a more modest rural lifestyle and people maybe stay out in Tahoe or Colorado or wherever they went during this crises.

What are your thoughts? David Schawel: Well, you're really talking about depression era values. And the problem is if we acquire those values via depression, that would be a pretty bad outcome here. But yes, that could happen. I think where I agree with Chamath is that I think that, you know, even though the federal government, the Fed, the Treasury have a tremendous amount of firepower in a situation like this, it may not be an exhaustible and we have to kind of pick and choose and prioritize who's going to get aid and who's going to get bailouts.

And right now it feels a little bit willy nilly, you know, and it feels like under those circumstances, the bailouts default to the people who are, you know, the people who are the most vulnerable. David Schawel: Right. David Schawel: And I think that's a real challenge because I think that's the real challenge.

I think that's the real challenge for a lot of the people who are politically connected and powerful as opposed to the workers, the pension funds, you know, the Main Street small business owner who's worked their whole life on a business now all of a sudden is underwater. And I think, you know, it's, it's going to be very hard to get the aid to the right people.

David Schawel: Look, in the last four weeks, in the last four weeks. David Schawel: The amount of distressed debt in the US has quadrupled in one week to a trillion dollars. David Schawel: Right. David Schawel: So as an example, to David's point, that's much more visible to Jay Powell or to Steve Mnuchin in the Fed and at the Treasury than it is that, you know, thousands and thousands of nameless anonymous small business owners.

David Schawel: Who owns that debt? Can you give an example of what that debt would be for the listeners? David Schawel: Sure. I mean, I mean, so, you know, I mean, a fallen angel today is Ford. David Schawel: So we were not, we're not going to pick on Ford, but we're just going to point to it as a well-known company.

David Schawel: So this is a car manufacturer. David Schawel: They employ hundreds and hundreds of thousands of people in very important political states, you know, Michigan, Ohio, I think, Tennessee, probably. David Schawel: But Ohio and Michigan, obviously critical states. David Schawel: And they, you know, issue debt into the market to fund, you know, building factories or buying equipment.

David Schawel: Who buys that debt? David Schawel: Pension funds by the debt, family offices by the debt, hedge funds by the debt. David Schawel: Now, those guys were giving out a coupon and they were paying, let's just say, four or five or 6% a year on this interest. David Schawel: But now, because of all this economic uncertainty, they're paying, you know, $1.5 million.

David Schawel: And so, you know, the economic uncertainty, people think that their ability to pay that back has gone way down. David Schawel: And so now they have to issue debt at much higher interest rates. David Schawel: And the existing debt has a much lower credit quality. David Schawel: It's effectively like you having a credit card and, you know, American Express calling you and saying, Jason, I think the odds of you paying your credit card balance have gone way down.

David Schawel: So I'm increasing your interest rate to 24% from 17%. Jason Lowery: Yeah. Jason Lowery: And then I get another credit card to pay it off. David Schawel: So essentially what's happened is the Federal Reserve has decided to become that next credit card issuer. Jason Lowery: What could go wrong?

David Schawel: Instead of doing it for you, they're doing it for companies, but not for you. David Schawel: And the question is, is that okay? David Schawel: Well, at some level, companies like Ford should be saved because I think these are iconic businesses that employ hundreds of thousands of people.

David Schawel: And they're critical linchpins in the economy, right? David Schawel: Because they have a massive supply chain network and, you know, they're really important for me. David Schawel: And they're important for many other things beyond just the economics that they themselves represent. David Schawel: But there are better ways to help Ford.

David Schawel: You could lend Ford as much money as they needed to meet their short-term obligations, similarly to the way that the Federal Reserve would allow a bank to borrow from their window. David Schawel: And I think that that's a very reasonable approach. David Schawel: The question is really when the Fed then basically acts as a buyer of last resort and obfuscates the Federal Reserve, David Schawel: obfuscates the price of these bonds and essentially is saying the American taxpayer will own these bonds for the foreseeable future.

David Schawel: If you think that at some point those bonds that you bought for, you know, 90 cents on the dollar are worth 90 cents on the dollar, then everything is okay. David Schawel: But if there's a chance that 90 cents goes to 70 cents, the people that really eat that cost are us in the short term and our children in the medium and long term.

David Schawel: So, you know, I think that's a really good question. David Schawel: It's obviously not my wheelhouse corporate debt like this. David Schawel: Why wouldn't there be a clause that if they didn't pay back that 90 cents on the dollar that the American government bought it for, it converts into equity in the company?

David Morgan: It's a great question because the Federal Reserve has chosen to go and essentially the equivalent of open an E-Trade account and step into the markets by themselves and just buy. David Morgan: So they're buying bonds and they're buying. David Schawel: Individual bonds and they're buying indices that control or that have exposure to certain bonds.

David Morgan: What they are not doing is going directly to these companies and negotiating, essentially saying, I will give you four or five billion dollars. David Morgan: And what I want you to do is retire that old debt and replace it with this new instrument. David Morgan: And here are the terms of this new instrument.

David Morgan: The United States taxpayer gets, you know, 3% or 4% warrant coverage of the company. David Schawel: Yum yum. David Morgan: You know, you must make sure that the pension holders are made whole. David Morgan: Wouldn't we have those clauses? David Morgan: It's a basic blocking and tackling that, you know, seed funds have.

David Morgan: David Sachs, what do you, why is this not like a no brainer? David Sachs: Well, I mean, I think we've got to get a good deal for taxpayers. David Sachs: I mean, Chamath has said it. David Sachs: I've heard Mark Cuban say it pretty eloquently. David Sachs: I even heard Trump say that we have to get a good deal for taxpayers.

David Sachs: I just think that they're in such an emergency. David Sachs: They're not really taking the time to do that. David Sachs: They're, you know, they're trying to do things they can do immediately. David Morgan: Yeah. David Morgan: And the forgivableness of these, of this money to me is the thing I don't understand.

David Morgan: Why is any of it forgivable? David Morgan: Why isn't any, all of it just, you know, a 10 year long or 20 year long loan that converts into equity over some tranches? David Sachs: But Jason, this is why if you're, if you're going to haphazardly fire trillions of dollars out of a bazooka, why not give more than three cents on the dollar to average Americans?

David Sachs: Why not put it into the pockets of every single bank account? David Sachs: You know, you know, who knows how much money they're going to make. David Sachs: You know, how much everybody made? David Sachs: The IRS does. David Sachs: And you know, the IRS has a mailing address for everybody and the IRS either gets a check or mails a check to every single taxpayer in the United States, which also touches- David Morgan: And they also have direct deposit for half of the people.

David Sachs: And so, you know, there's nothing stopping us from saying, well, you know what, why don't we do 10%, 10 cents of every dollar? David Sachs: Why don't we do 15 cents of every dollar to Americans? David Sachs: I really think this is the way that you limit the amount of waste that's going to happen.

David Sachs: And the intention isn't wrong. And we shouldn't castigate people for wanting to put money in the system, as David said, to plug the hole. But we can't be so haphazard as to not think about the moral hazards we're creating and try to fix them in real time.

And so this 10 trillion has already gone out the door. But if the next trillion or two don't touch Americans, I think it's going to create an enormous amount of damage. David Sachs: We've only given people a few weeks of… David Sachs: …a lifetime. And they need more. And you can't tell companies that they can have effectively a limitless lifeline, but not the individuals.

Because I do think at some point, companies will find a way to get out of these loans and/or break the covenants with not much repercussion. David Sachs: Okay, I want to wrap with two sort of not doomsday scenarios, but I want to touch on politics, and I also want to know, in the chance that this quarantine goes on, for May and June, in other words, San Francisco says, "You know what?

We're going to keep going," and New York says, "We're keeping going." And we're talking about not just April being in quarantine, but May and/or June, and we're looking at June 1st or July 1st. What are the chances, David, that people say, "You know what? I am a free person.

I want to take my life into my own hands. I want to make my own decision. I'm going out. I'm going to go surfing. I'm going to do this." David Sachs: Yeah. David Sachs: And how do politicians handicap that in this new world? David Sachs: I think that could happen.

I mean, particularly among young populations who are not at risk as much, you know, for the relatively younger, healthier people who don't have comorbidity factors could say, "Look, I've got a one in a thousand chance or less of dying, even if I do get this." And I'm just going to take that chance.

But it's all the more reason why I think we need a strategy to get out of lockdown that already includes the idea of letting out these people who are at much lower risk and isolates the people who are at higher risk. David Sachs: And against the... You have anything to add to that, Chamath, that kind of doomsday scenario or that eventuality?

Chamath Nani: Well, I think that you're very right, Jason, that I don't think we're going to get out of lockdown. I think we're going to get out of lockdown. I think we're going to get out of lockdown. I think we're going to get out of lockdown. I think we're going to get out of lockdown.

I think we're going to get out of lockdown. I think we're going to get out of lockdown. I think we're going to get out of lockdown. I think we're going to get out of lockdown. I think we're going to get out of lockdown. I think we're going to get out of lockdown.

I think we're going to get out of lockdown.

E2: Rebooting economy, understanding corporate debt, avoiding a depression & more with David Sacks

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