Sorry, everybody. I wasn't here last week. So what's your bit Jake? I'll jump into your bit. No, there's no bit. I'm just I'm You know triple vax. I take the packs a little bit and I'm back everybody. I know everybody was very concerned about me Thank you to everybody, but I can take my mask off right free bird.

Do I need a mask in 2024? You're good. You're clear Okay, so let me take one of these off Okay, you know what I'll take the third mascot totally free no mask free I hope I don't get you this easy says we can treat kovat like the flu now I mean you see that finally a minute after two years of shutting down schools the economy everything like oh, it's just the flu Well, it's interesting, you know, I got the coded just to explain to everybody I went to Billy Joel's Final concert with my daughter.

She we had a great time It was his final MSG Nick time stamp the end of it. So everybody can just skip to the end of the gun Sorry, go ahead Jason. There's no bit here I'm just saying I'm letting people know that I think I got covered at the last Billy Joel shows a great show Shout out Billy Joel But it was 48 hours that were very intense and then I took that pack slow of it and I came right out of it But so apologies to everybody but man, it was no joke Yeah, great story.

Great story. Great story Earlier today, did you guys? Oh my god. Yeah, the Olympics happened I know you guys taking the Olympics at all free bird You seem like a guy who would watch obscure Olympic sports. I think there's a lot of sports. That should be regular It's like the pistol shooting guy.

Anyway, it's all moot because you know The paparazzi were there and they took poke pictures trim off Do you know this big paparazzi in Paris this year because of all the celebrities there and the pops are all over the place in Europe they're everywhere. They're everywhere. I'm sure you saw them in Italy.

It's it's getting crazy. But um They got you when you were getting your gold medal Nick pull it up. This is this was I think in a sweetly here It is here. Here's Chamath getting his gold medal. Okay. Oops Whoa, now this this is in the category of being the biggest prick now just let people know Chamath has Other people were there too, by the way, it wasn't it wasn't just Chamath free bird was also there.

Here's his free bird Yeah, most likely to fight a girl. Yeah, there it is. He was in the am I the Syrian? I Yes, that's you in the women's category of boxing the women's boxing, right? Thank you. Yeah, he's out June. Thank you Jacob Sachs was there too, though.

By the way, here he is. He he won silver for the Very least the ozempic and we'll go but you lost the weight, but you didn't get any muscle definition That's a known that's known right free bird. It's known you lose the muscle, right? That's right. You didn't fat and the muscle I was there too, by the way, and I'm very very proud to say I in a photo finish you can see me there Guys know this one, right?

This is the hundred meter virtue signal. So you see there Edge me out and I'm right ahead of Paul Graham. So we signaling 100 meter - it was pretty great. It's pretty grand But congrats to read Hoffman also coming on the pod to debate you sex hard to beat them in virtue signaling I know I felt like hard.

I felt like sober in this case was a goal, you know Given the competition, right? You just if you meddle in that group of her All right, everybody welcome back to the all-in podcast, of course the number one podcast in the world and I'm back. Daddy's home and we've got a very full docket Saks will get his red meat at the end for all the maga lunatics in the comments.

Don't worry He's gonna get his red meat, but we got bigger fish to fry in the markets markets We're down big on Monday due to something called the yen carry trade The Dow is down 700 points now. It was down like 6% It was unsettling social media went crazy on Sunday night that it was gonna be the end of the world the beginning of a recession Maybe a depression and this all happened because Japan's Central Bank raised their interest rates by a whopping 15 to 25 basis points and we'll explain why that's important in just a moment We'll get you mop to give us a little overview here of the yen carry trade But this is a big deal because Japan has had its interest rates at near zero even negative since 1999 so this little blip on the chart is You know the interest rate going up Yeah, they're in Japan.

So quick explainer and then Chamath will have you go deeper. The yen carry trade is a pretty Basic concept investors borrow at 0% interest or close to it due to this 0% interest rate and then you convert your yen into another currency or perhaps a stock like Nvidia and you take the spread so You know, the goal is obviously to return a higher rate than the cost of borrowing the yen And so here's an example of it.

If you just want to look at the flow you borrow some yen at 0% you invest it in stocks, whatever You get some appreciation and then you liquidate the stocks and you pay back your bill. Of course this can all go horribly Yeah, but it's a safer way to do.

This is just to invest in a US T bill. That's paying 5% Yeah Yeah, so you have you borrow it you borrow yen at 0% invest in T bills at 5% and you pocket the difference Yeah, you just have to pay back the loan. Of course Chamath this can all go very wrong if a number of things happen So maybe you could give us an overview of this kind of trade.

Have you ever done something like this? What do you think of these type of trades these? What unquote free money trades, you know picking up free money off the ground trades I mean, I think These kinds of things so I've never done them and part of the reason why is I think these things Look genius and they work until one Moment in time where they stop working and it stops working so severely that it becomes almost impossible to unwind yourself And so you plan on hiding.

Yeah Yeah, so I think typically in these situations the thing you have to remember is you don't really make a lot of money in This trade the way you make a lot of money is by leveraging this trade up So meaning it's not like borrowing a million Dollars in yen and then swapping it to US dollars and then putting it in t-bills is a real money maker You're talking about 50k.

That's not really gonna move the needle So what people try to do in these situations is do it on a billion dollars and then lever it up 5 or 10 X the problem with that is that you're posting all kinds of collateral as Margin to these banks to give you that leverage because then all of a sudden capturing 150 basis points on 10 billion or 15 billion now, we're talking about real money and So when these things go wrong and they happen very suddenly what it does is it puts pressure on all other asset classes because people are scrambling to make sure that they don't get margined out and What you saw over the weekend was it mostly a lot of that happening, which was a lot of these folks Were putting this trade on to the tune of tens or probably even a hundred billion plus dollars Wow of which they had maybe five or ten billion of equity and Eighty to ninety billion dollars of just margin and that's what caused this very quick cycle Hmm, then it looked like it unraveled itself.

And so people thought oh, we're probably mostly past this I actually think we're not I've said this before I think one of the most interesting things I've learned in the last few years about the stock market is The stock market is owned By and large by these algos right meaning there is these large Kind of murky grayish hedge funds that have these computer trading algorithms That are allowed to be levered to the tune of you know, 13 15 20 times About 50 billion dollars.

So these folks are swinging around a trillion dollars each okay, and we all just live in their world because when these algorithms make a decision and They react to these kinds of events. That's when the real volatility Starts, so I think the most important thing was summarized by friends of ours From Goldman Sachs.

I just want to Nick if you want to just throw up the picture that they sent me so they sent they sent some really good market insights whenever these things kind of happened to a bunch of their clients and One of the interesting things that they observed is a couple of facts The first is the algorithms in the middle of all of this chaos sold about 41 billion dollars of global equities Okay, no big deal Except that it actually causes everybody else to have to react and then they sell billions and billions more The other thing that they noticed though, is that there we're in a moment in time Where you can see?

how these algorithms will behave over the next month and Right now if there's relatively minimal volatility and not much changes The algorithms will have to sell another hundred and sixty odd billion dollars of equity and That'll pull through many hundred billions more from everybody else. So I think we're in a little bit of a delicate moment where the preponderance of the market action will be to continue to sell and I think it's just going to be when we look back in hindsight another reason why getting levered on these things is very dangerous There's no free money, basically.

Yeah, there is no free money in this free money trade and just to Translate a little bit of this on the margins for the audience who's not familiar with it Margin is a loan fancy way of saying a loan margin call. You have some asset that backs it up You know in your case, it might be, you know, a civilian and it might be your house Whatever your bank account in these cases these big companies and these hedge funds might have cash or equities And if they come down and they have to pay the loan They are forced to liquidate it and in some cases Those assets are controlled by the person giving the loan and they will just starts Programmatically selling your shares and whatever Apple Google whatever you're in video you are you own to pay down that margin and this is called a margin called thus the name of the movie and so it's incredibly dangerous and the leverage is You and I can or like any civilian could borrow, you know $500,000 against their two million dollar house and home equity rich people and these big banks They can borrow 10 or 20 times the value of the assets which then could lead to Absolute chaos Friberg.

Let's go to you next and just talk a little bit about what's going on in Japan because They have had a rush of people buying their stocks the population declining. It's a very unique Economy, maybe you could talk a little bit about it One of the biggest challenges facing Japan is the level of debt that they've accrued their debt to GDP ratio is currently 263 percent they have about 1.3 quadrillion yen of public debt on an annual GDP of about five hundred ninety one trillion yen They're currently at the federal level Spending about 20% of GDP per year five percent of GDP is being spent per year just on servicing the existing debt and That's at interest rates set by the central bank of roughly zero percent So, you know or whatever the market is trading it at so slightly above zero percent But if the central bank had to start to raise rates because inflation started to run away because there's so much Yen in circulation.

There's so much debt outstanding. The federal government would not be able to actually service this debt so as of March of 2024 the Bank of Japan the central bank actually holds fifty three percent of Japan's outstanding government bonds Which is equal to about a hundred percent of Japan's GDP.

So their central bank has bought the debt that's being issued by the federal government to fund their budget a Large chunk of which right now is being spent just on paying the interest on the debt while interest rates are close to zero percent So imagine if interest rates bumped up to one two, three, four five percent as we're seeing with US Treasuries We were recently at a nearly five percent handle on the on the 10-year Treasury It would become an unsustainable debt burden for the Japanese government to be able to handle that and a large part of this is being driven by a number of crises that Japan has faced since the early 90s.

So there was the financial crisis in a way there was the nuclear Meltdown there was a couple of earthquakes tsunamis and a lot of debt has been taken on to support the country after those crises, but really importantly and Nick if you could just pull up this age chart is the aging of the Japanese population So this chart shows that and you can kind of see back to 1950 when the average age in Japan was 21 years old And today the average age in Japan is around 48 You know in the next decade, it'll be 50 then it'll be 52 So that means more and more people are relying on public pension today 80% of their government spending goes towards their social security programs in the US for comparison Social Security is about 20% of federal Spending so that number is only getting bigger and bigger as the population ages The Japanese government has to continue to service their older population and they've had to face several crises Their debt has ballooned to a level that is well beyond any other industrialized nation And the only way to continue to service that debt economically is to keep interest rates low and the problem with keeping interest rate low Inflation and that's the big driver that caused them to say let's uptake the interest by 15 bips or 25 bips is to try and tackle The inflation problem they're facing just like our central bank recently tried to do the same But clearly the market can't have it so Japan isn't a real pickle and I think that it shows how much having a large amount of federal debt can impact the ability for a nation to maneuver itself during difficult times and ultimately debt payments come due they come to you either in the form of economic contraction or Massive taxes or inflation and currently Japan is paying for it in terms of inflation Sorry, you're saying Japan has inflation Japan is no inflation the government raised rates to tackle inflation I'll pull up the inflation chart.

Japan's inflation hit a 40-year high and this just shot up in the last 18 months Inflation is running at close to 4% a year. And so they're setting Friedberg The interest rate in the country and they own the debt. So they are basically in control of or They're manipulating the economy and trying to control it, correct Friedberg Well, their central bank has to buy most of the debt and their central bank sets the rates So they have a large amount 50, you know, 53 percent of their federal of their public debt It's held by their central bank And if they don't pay a high interest rate, then people don't buy future bonds if they do raise it They have to pay that rate.

So this is the conundrum Friedberg if I were to summarize it Well, yeah while rates are low you see this, you know, particularly in a market like we're facing today where there's global inflation They need to raise rates in order to reduce inflation. The problem with raising rates is this this, you know, this currency problem But also buying the debt Chamath is you know, who's buying debt if you're not getting anything on the coupon, correct?

that's another challenge they face in Japan is that There's a famous quote from an economist. I mean Kuznets who said there's four kinds of countries in the world There's developed countries undeveloped countries Japan and Argentina And I think the reason he said that is that just Japan has been in this state since the 90s so they had a massive property and equity bubble collapse and They've not had to deal With anything that look like typical economic issues since then and part of it is because the government plays a very big hand in The Japanese economy.

There's a lot of price controls there. So, I don't know I'm not sure what it is that we can learn there that you can extrapolate to the rest of the world Yeah, it is a very unique sax Geography and economy so sacks your thoughts on this overall and what we can expect Maybe you could take the future looking forward looking and prediction crystal ball Good, so I think free burger is right that the reason why the Japanese Central Bank tried to raise rates I mean just by a tiny amount was because they are dealing with inflation if you look at that inflation chart and you go back To when their inflation was zero roughly in 2020 the exchange Ratio between the US dollar and the yen was about a hundred to one meaning one US dollar could buy a hundred yen now It's at roughly 150 yen to the dollar.

So their currency has massively depreciated over the last several years And a big part of the reason why is because again their central bank is offering roughly zero and you can earn 5% in UST bills so people are basically Moving their money to countries that pay a lot more on their bonds and they're even borrowing yen.

Like we talked about Selling the yen to then buy Australian dollars or US dollars to invest money there so there's huge downward pressure on the value of the yen and the way this creates inflation is that Japan is a is obviously an island that has very few natural resources and it has to import all of its oil so it has an advanced economy, but it needs to import a lot of resources and So as its currency depreciates the price of all those commodities goes up and this is why you're seeing inflation in Japan Now when the central bank tried to solve this it created huge jitters in the financial market because it was starting to unwind the whole Yen carry trade which is something like 20 trillion dollars And so the the Bank of Japan backed off and you heard the the Japanese central banker said we can't raise rates While it would create instability in the global markets We have to wait until it's stable But the problem is that raising the rates and unwinding the yen carry trade creates the instability So what they're saying is we're never gonna be able to raise rates And the result of this is going to be more inflation in Japan Their currency is going to continue to depreciate, you know, they've been unable to defend it And so what I would expect is that US dollars gonna keep buying more yen It's gonna go from I don't know hundred and forty seven hundred fifty.

There is one some bigger some bigger number It's one huge upside to the sacks and who's gonna pay the price here is the Japanese consumer? Because everything's gonna cost a lot more Yeah, and that was you know, obviously when the when you get a hundred and fifty eight yen to the dollar this is extraordinary I was talking with Tucker and we just took our Niseko ski trip this year from four days to seven because it is just such a great deal It'll be good for tourism because yeah, you'll be able to travel to Japan much more cheaply But if you're if you're actually Japanese and you live in that country, you're gonna see your purchasing power continue to erode So I would expect big domestic problems in Japan and eventually they may conclude that this system does not benefit them Now who does it benefit you could argue that it benefits the United States because it has subsidized the purchase of our debt right because again So do you have this yen carry trade of 20 trillion and a lot of that has gone into US bonds or US T bills?

Right, and so it basically is a huge subsidy to the US Treasury's Need to continuously issue more and more debt. We're issuing what a trillion dollars of net new debt every 100 days So having the Japanese consumer subsidize all of this by taking it on the chin you know in terms of inflation or to provide this yen carry trade you could argue has been very beneficial to the US Treasury and Chamath at some point the you know, the percentage of Your debt to GDP, you know, we've talked about it so much on this show You've said previously.

Hey, you know, we can have a little bit of this because we're a very strong dollar So when you look at Japan, is there some lesson here for the US or you know, maybe some Warning here that we we shouldn't necessarily follow them too far down this road Nope Okay, keep printing money got it, okay I don't know I mean, I tend to agree with Freeberg here that when you have massive amounts of debt, it definitely limits your flexibility It's just arithmetic.

You're gonna pay for it with either economic contraction higher taxes or inflation. Those are the three places it goes Yeah, I mean and they did test it. They've stressed it now. Yeah, one of the reasons why Japan can't raise rates is because Their debt will become even more expensive Right.

I mean free burgers in that part of the problem Yeah That's exactly right. And then their federal spending gets compressed because now they have to service that debt again They're already spending 25% of their federal budget on servicing existing debt with the low interest rates and they've got to support an aging population Okay, so so to analogize this the US what our our debt service costs or what?

What are they at now like well over a trillion? We're about a trillion a year with a proposed 7.3 trillion budget so we're at 13.6 percent and Japan also over the next 10 years isn't our debt service supposed to rise - yeah as all of the as all of the low interest bonds mature And we issue new debt at a higher interest rate.

Our debt service cost is going to continue to climb It's already higher than discretionary military spending it over a trillion a year Well just by Bitcoin and when it goes to a million dollars a coin we can just pay it all down So problem solved just one other point is I think it shows the fragility of the global financial system, I mean The market snapped back as soon as the the Bank of Japan backed off basically capitulated said, okay fine.

We can't We can't defend our currency. We're just gonna let it keep depreciating We're gonna let inflation keep raging as soon as they declared that then the market snapped back But it just showed in that 24 hours putting aside like all the panic porn that was on social media So I think that was overdone It still showed how fragile the global economy is the the yen carry trade Has injected roughly 20 trillion dollars of liquidity into the global economy and that is propping up all sorts of things right and that is subsidizing US government debt and you just wonder if The yen carry trade were to end because let's say for example that Japanese people don't want to experience hyperinflation Then what would that do to the global economy?

It just showed how rickety the whole system is I think it shows how much leverage there isn't this is totally that's what it is. It's all about leverage Okay, let's talk about leverage for a section trim up leverage on leverage on leverage so for example, like if you take something like Citadel runs about 50 billion dollars and they have Extremely precise risk management systems.

They're the best in the business but as a result of that they are so systematically important to make the Financial machinery run properly that as they're inspected and as they prove that they have very good risk management They're allowed to lever up to incredible levels, you know, 15 16 17 times So I think that Citadel with the 50 billion of capital that it investors have given them It's probably running a trillion dollars on a daily basis in the markets Renaissance technologies same situation Millennium same situation a bunch of these funds that sit inside of the large banks same situation So when you add it all up, you're probably talking about a few hundred billion dollars of notional capital That's enormously levered.

That's what causes the That sensation as SAC said that things are rich So should we have more increased regulation or increased scrutiny on this Chamath? You've talked about it before when we had some of these hedge funds flip and we talked about maybe some regulation. Yeah We have a lot of regulation on banks Essentially what happened is after all of the chaos of the great financial crisis The thing that we don't talk about is what we really did was keep running the same if not more risk We just took it off balance sheet.

So the banks were able to structure business lines to work with these hedge funds and these hedge funds in turn Were able to show over time that they're so tightly managed that there are no black swan events that could happen That they can run highly levered. So I think we are in this moment where They'll be these fissures from time to time.

So here's this bill Hwang That's an example. The carry trade is another example. There have been examples a couple times a year, but at some point these folks will have taken too much risk and We'll look back on it and we'll think that hedge funds should probably have been more regulated than they are with respect to their Leverage ratios not with respect to their strategies with this particular trade JP Morgan yesterday or a few hours ago said that they think about 75% of the yen carry trades have now been unwound and it was at 50% a little over a day ago so the market has moved to kind of unwind these trades it seems and we're pretty much at the end of the levered fallout of This particular activity.

So I put the link and so people at home understand when we move on to the to the next phase Of the financial markets all of those people had to cover those trades Which means they all have to sell assets at the same time as buying in or covering the end and that's what causes this acute Chaos in the markets where you saw the Nasdaq go down six percent or in some cases Maybe people wanted to take some chips off the table since things were That trade back on in fact now I mean better time to put that trade on because the Bank of Japan's basically just capitulated and said That they can't raise interest rates while things are so unstable So we know they're just gonna keep rates where they are.

So if I was one of these traders, I'd trade back on now So, let's talk about the landing here in the u.s Let's get you a centric now and it looks like maybe it's gonna be a bumpy landing rather than a soft Landing as one might suspect and as we talked about here that we think this could be bumpy to soft July's job reports was pretty bad, which is good in some ways when you're thinking about inflation so the new jobs added were way down growing 114,000 in July and a bunch of these estimates have been reported downward over the past year just so we make a note of that and this was below The Dow Jones estimate of 185,000.

There's your chart. It just keeps ticking down You know since the Fed started hiking rates and you hear anecdotally about all of your friends 88% of Millennials right now are actually preparing to be laid off according to a recent survey unemployment is way up In the short term here.

We're at 4.3 percent in July. That's the highest since October of 2021 up from 4.1 percent Last month and 3.5 percent in July. So you take that July number two now, it's pretty significant. Here's your chart On the jobs, obviously historically it's low, but it's ticking up pretty quickly Which is what you would expect with the rate hikes and we had this great moment of hourly earnings growth going up So how much people make on average?

Per hour was going up and I think that was causing a decent amount of the consumer enthusiasm in the economy here it is it's coming way down from almost six percent down to three and a half and So that means Fed rate cuts are coming Here's your chart from prediction market of the chances of how much the Fed cuts rates this year Looks like 75 to 100 basis points is the majority about 60% of people believe will be one of those two numbers I'll stop there There's a lot more to talk about here and we'll get into specific companies and the Nasdaq Yeah, let me pull up this last chart before I go to you Chamath It's been a strong year for the market S&P and Nasdaq both up 11% year to date as of Thursday morning but obviously a massive I Guess do we call it a correction when it's yeah, 20% is correction territory Chamath.

So Your thoughts on the wider US market and the sell-off. I think we're in a low-key recession so I think that we're gonna probably go through a couple of very Difficult revisions of old data the thing to remember about nonfarm payrolls isn't as much what the number is But if you actually look to the number of times it then gets revised The reality is that these things get revised constantly and right now we're in this trend where we are overestimating and revising down Saks mentioned this that that was the same with GDP So we are I think in a tough situation and then what you're seeing is folks that run very cyclical businesses are Telling us in very plain-spoken English that demand isn't there So the one that was interesting this past week Jason you mentioned Millennials But like Airbnb where you think all these young people are running around Yoloing what whatever cash they have Airbnb had a massive warning on demand So when I think the excess capital whether it's the steamy check or what-have-you has been exhausted You're now starting to see it bear out in these Cyclical businesses.

I don't think the demand is there. I think we're in a recession it probably becomes more obvious in q3 and q4 and so Powell's going to have to cut the question is will he overreact to the pressure and cut 75 to 100 versus 25 and take it slow Okay, Freeberg technical definition of a recession is two quarters in a row of negative GDP We haven't had that but we're sort of bouncing along that possibility is the recession baked in or if they cut rates at the extent the Prediction markets are predicting and they're signaling.

Do you think we have a nice rebound? How do you feel about the overall u.s. Economy? Obviously you have to account for Inflation and government spending how much of government spending is driving economic growth? Today the u.s. Is proposing to spend 7.3 trillion dollars next year out of 25 trillion dollar GDP so the u.s.

Federal Government is roughly 30 percent of GDP and We obviously still are tackling inflation The real question is how much of the economy is growing? because of productivity gains in the Sector of the economy where people are making things and doing things versus the government using its ability to tax and borrow To drive growth in the economy by inflating numbers by pushing revenue onto businesses by pushing capital into the markets by creating levered trades in the markets Using their borrowing capacity and their taxing capacity.

So that's the thing. I remain concerned about. I I mentioned this last week. I remain highly Concerned about many sectors of the economy that are deeply challenged right now particularly the industrial sectors manufacturing sectors the agricultural sectors But services and software sectors where you can raise prices and you have a nice high margin business you can continue to to grow and and look good, but there are many parts of the Global economy and the u.s.

Economy that are pretty challenged right now Saks, let's talk about this soft to bumpy landing Consumers are definitely weakening on the low-end Airbnb and Amazon are example of bargain hunting people who are looking for discounts who want to save money with those services higher end services that have a bigger price tag like uber and some of the High-end retailers are showing actual growth and they're saying that consumer strong.

So it was a tale of two cities During this earning season with a bunch of the high-end folks saying strong consumers on the high-end weak consumers on the low-end What are the chances we go into a recession and you know a second question for you? Elon was recently on Lex Friedman for I think eight days or something It was like a record podcast of how long he was on but one of the things he talked about was that he had discussed with Trump and Vivek has been very strong about this on our podcast and other places and he was a leading VP candidate of Making the government more efficient and radically cutting the amount of spending but there would be a reaction So does the potential GOP administration have a platform to cut costs massively or not?

And do you think that you know, that would have been maybe? Too unpopular to sort of unveil that plan now as a presidential candidate in either party I don't think they have that plan specifically because I just think that you would need You would need a supermajority in Congress to do something like that And I just think that this elections can be too close regardless of who wins to provide that kind of mandate I mean sadly, I think we do need to get a government spending under control But I think it's a long-term political problem and I just think our political system doesn't have the will to fix it I do believe Republicans would be better than Democrats on that But I think that's the truth of it to go back to your first question on the state of the economy I had lunch with a very prominent investor yesterday who's very plugged in with the hedge fund community and He said that the sentiment shift You know, I'd say again within hedge funds professional investors public market investors had been very sudden that people were now very worried about the risk of a recession and And I do think that the Airbnb revenue that Chema cited is a big factor Airbnb stock went down 15% in in one day on soft demand and what's driving all this is is consumer weakness or at least fear of consumer weakness You mentioned the rise in unemployment.

It went from four point one to four point three percent Month over month, so four point three is still a pretty low number by historical terms But to jump so much in one month, that's a pretty big increase and then of course, it's up from three point five percent A year ago, so we're seeing pretty big increases in Every year five percent month over month is very significant.

Yeah. Yeah, so these are big changes There's real evidence of consumer weakness and I think professional investors are getting quite worried about the risk of a recession and I guess this one last point on this is that if you were to Remove the impact of government spending. It's pretty clear.

The private sector is in a recession I mean like we've been talking about government's been going hog-wild with spending we have the government is running 6% of GDP deficits the the latest q2 growth number was something like 2% so if you force government to live within its means and To cut its way back to balance.

We would definitely be in a recession. We'd have a negative growth rate So I do think that the economy is looking pretty shaky all of a sudden Whether we actually tip over into recession in the next few months. I'm not sure. All right Well, listen, I want to corner everybody here with a question.

You got to answer the question You you can't avoid the hard questions here on the all-in podcast Chamath sitting here a year from now Market up or we experience a recession defined as two quarters of negative GDP Which one is the more likely scenario market up or a recession?

Give it a percentage or just which is more likely Free burger next those are not those are those are not opposing things. So you're saying a year from now I don't I don't honestly know Okay, but I do think that we'll probably be in a technical recession. Okay, so you lean towards logical recession No recession in the next year.

Um, but I also think that there's a pretty decent chance. The market will be up. Ah Got it. Okay, so we could have a recession but the market goes up so to unpack that I am with you on that same Prediction because I do think people are addicted to efficiency They're gonna lay people off and earnings are gonna keep ripping as these companies become managed So well, that's a small percentage of the economy Jake how that's a few tech companies But much of the manufacturing sector the industrial sector the AG markets Like there's a lot of markets where you don't have this option to just cut knowledge workers the knowledge worker economy The software economy has the ability to do that the tech economy can do that But much of the rest of the economy doesn't have a lot of maneuverability like we do in this in this fast.

Well High margin kind of industry we work in I think it's a good point But I do see McDonald's Starbucks and some of those consumer retailers are Taking steps right now to right-size their businesses and offer $5 meals or $3 coffee. So I do think there's a Chipped in management and how they run these companies.

That's about reduced forecast, right? So when their revenue decline when their revenue forecasts have to be cut they have to cut headcount That's different than creating more efficiency. Well, but they're also cutting stores and they're Projects that are inefficient. So I just think there's gonna be massive efficiency in all sectors That's gonna be the theme for the next year But I mean, it's obviously that's that's a lot of jobs and a loss of growth, right?

So just to be clear when you cut stores you have less growth when you cut jobs That's because you don't have as much revenue growth. So those are about but earnings can go up, right? They can be supported but you're still facing contraction and you know one of the challenges right now a lot of food companies a lot of Retail companies have been raising prices to try and keep earnings going up But there's hitting this natural inflection point where consumers no longer buy where you find this tipping point I don't know if you guys have been to the supermarket lately, but man, it is crazy expensive how like prices have gone up like 50 100 percent on like everything at the supermarket and This is like it's basically impossible.

We could deal with it. But like a large percentage of people this is a big deal in terms of like now you have to budget your life and you spend less that and I When we're here in Portofino, we go in the morning to the fishmonger and we'll buy, you know fish for the family It is unbelievably expensive and you know, we always think to ourselves How is it possible that folks can actually choose to eat healthy and local if they want to it's not was a brand You know, what was the whole fish tell us?

You know like if you want to have like locally caught soul it's like 48 euros a kilogram and like it's expensive and It's expensive for a restaurant So to feed a family of seven, which is what we are You'll have to spend you know, 150 200 dollars. It's not sustainable.

It's not Something that can that make sense for enough people anymore because that probably used to be 40 bucks or 30 bucks But freeberg is right like we're in a real serious problem because it's it's like these systems have remained the way that they had been for a very long time and While other industries like the tech industry have captured all these incredible efficiencies but the problem is that then these other industries are what supports everyday people's everyday lives and In the absence of a way to actually reduce cost and improve quality You end up where we are today, and I don't think that that's sustainable Freeberg greater chance of a recession in the next year or not a recession.

You have to give an answer Yeah, I think there's a great chance of a recession a majority chance of recession gun But I do think that there's gonna be Government programs to mitigate the effects meaning you could see the markets the equity markets continue to rally Okay on some of the government programs and government activity, which has become kind of like the learned behavior It's like Pavlovian It's like we have a we have an economic problem the government step the government steps in and spends money Let me get an answer from Sachs The reason why the markets could rally in the midst of a recession is because interest rates get cut We've already seen that the expectations of rate cuts have now grown substantially.

The markets are starting to price in a Hundred two hundred fifty basis points of rate cuts this year where before it was more like 25 to 50 basis points So obviously lower interest rates make stocks go up. So I think that's the the main driver of the rally You're seeing right now J Cal not the prospects for increased efficiency because I think you know, those prospects were already there So why are you majority case recession or majority case not recession in the next year?

I've been predicting recession for like three years now because I just think when you jack up interest rates so suddenly so violently you get recession, so I guess I if I if you put me down I'd say I Recession and I'll tell you one of the reasons one of the reasons why interestingly, I've just checked the notes sacks you predicted five of the Nine of the last five recessions.

I know I know it look it's the same recession that I've been predicting It's very simple when you jack up interest rates from near zero to five and a half percent That makes everything much more expensive Unless the government spends money, which is in the counterbalance, right? And that's a lot of why governments day and and by the way, I have a theory on this I think this is also why we have an open border policy or why the current administration has pushed an open border policy because that can also be deflationary to counteract the effects of The interest rate accrual because it lowers wages overall and fills wages.

It increases the workforce, etc Creates more competitive workforce, but no one's allowed to publicly say that and I do think that that's one of the primary motivating factors Of having an open border policy. Well people have been saying it. I think you just did It's well set if you look at job creation over the last four years There's been no net new job creation for native-born Americans.

All the job creation has been Foreign-born or native-born Americans have to have a wage expectation. That's the fundamental problem, right? Affluent I agree. I don't think it's too high right and I'm not making an argument one way or the other I'm just highlighting. I think that this is one of the motivators for the policy I think it'd be a lot better to let their wages rise But in any event, let's not get political on it just to the point about Recession Jason.

Oh, yeah. Look I've been predicting the same recession But I think one of the reasons why it might finally come now If first of all, you've got a lot of investors are suddenly worried about it. There's been a big sentiment shift I think the other thing is I don't think we know all the bad news yet.

Hmm. I'm known as yeah Well, none of us were tracking the end carry trade like very I mean it was something we may have heard of but it's not Like we were actively thinking about it until this past week and the question is how many more things are out there like that?

And I also think that the pattern with this administration has been to hide the ball. They hid by insanity for years Yeah, not to get political And you guys can decide if I'm just being partisan or whether I have a good point here Which is look, I think the mo of this administration has been to hide the ball and any good news They would have reported.

Do you think that they're reporting all the bad news? I don't I think there's more bad news It's gonna come out after the election because there's too many incentives for people to hide it and for people who don't know we're talking About the concept of black swans in order to have a black swan it has to be Something you're not aware of and it has to be have a dramatic impact the yen trade would not fall into this because people were well Aware of it, even if it wasn't front-page news and it didn't have a dramatic impact But there could be black swan sitting there.

Obviously the back swan that you can think of Recently would be in the great financial crisis the subprime mortgage that truly was massively impactful and it was not known dot-com was known and Was massively impacted you need both of those categories to define a black swan and there could be black swans, right?

Saks is what you're saying when you said that the yen carry trade didn't have a big impact That's because the Bank of Japan backed off So if they kept going with it, we don't know what the impact would have been Correct, but it didn't so just some people who are tracking the black swan tracker just the more, you know, let's talk about Apple Chamath I'll give you your flowers right now.

They're coming to you. Just look to your left. Here comes a huge bouquet because You predicted I didn't actually send you flowers. He looked to his left. But here's your virtual flowers you predicted I think absolutely Correctly that the less Berkshire Hathaway and Buffett talk in their documents and their letters and at their events about a trade the more they're falling out of love with it and I Understand Berkshire Hathaway has sold half of their largest position Which is Apple some people are saying because they don't have faith in the company Some people are saying because they're over Weighted other people saying because they Freeberg want to get more cash on the books to make other acquisitions So Chamath you're maybe just take your victory lap and then we'll I think Freeberg double-clicked on this and did a deep dive I don't have much to say I mean, I think it's been a trend in their letters when he stops mentioning a company in his letter It's because he's selling it's a great great read.

There it is. Yeah, and that's what happened here Okay, so Freeberg take us through this. Well, so it looks like since the start of the year They've sold 55% of their holdings in Apple And if you look at the end of the year Nick if you could pull up this image with the pie chart this is what Berkshire's stock holdings were in their non majority owned businesses so businesses that they don't own the business outright and 50% of their portfolio was in Apple at a hundred and seventy four billion dollars We obviously saw Apple's stock price peak Highest level ever just a few days ago But it has since come down as it was reported that since the start of the year now Berkshire's sold 55% of this position So some people are arguing that they've got a point of view on the company strategy and competent competitive kind of landscape Some folks have argued that the valuation multiple has gotten too high trading at nearly 30 times earnings The stock has risen nine hundred percent since Berkshire bought the stock in 2016 nine bagger Nicely done.

Yeah, and some people would argue that the percent of the portfolio is too high at over 50% as you can see here at the start of the year But you know, I'll kind of provide some of the counter arguments, you know Warren Buffett does not do much analysis on corporate strategy when he provides reviews of the stocks that he's picked he often finds and talks a lot about great managers that generate great returns and He sticks with them and he sticks with them sometimes for many many decades The management in this company has not changed the return profile on cash invested in cash returned has only improved since he put money in They're generating more cash flow.

They're offering more dividends They're doing more stock buybacks and he's happy to be concentrated over the years He's made large bets on single companies to the point that sometimes he just outright buys the entire company like he did with Geico in 1996 he always talks a lot about finding a company that is run by great managers It has a premium product with a nice high margin and a durable moat Strong brand value as I look at kind of what's really gone on here It feels to me like the difference between Apple and some of the other big holdings in his portfolio Is that many of those other businesses are regulated monopolies?

So BNSF railway is regulated by the Federal Railroad Administration Berkshire energy Which owns mid American is a regulated utility the prices that they charge consumers are set by the government So they have a market that's locked in the prices are set. They have locked in distribution They have locked in utility value and the same is true in the insurance business Geico's rates are approved and set effectively by state regulators Berkshire has a moat because they've got the largest capital base and they've got this machine that just keeps generating cash and the rates are publicly set by government Apple however is not regulated and it is very clear that Apple is facing very deep and severe financial Impact from the regulatory authorities that are overseeing the business.

So if you look at the Google antitrust, right? We're gonna get into the Google deal in a second Yeah, there's a real regulatory risk there because Google's paying Apple 20 billion dollars a year to be the default search engine Apple also has a very deep relationship with China They have a lot of manufacturing being done in China and they sell a lot of product into China So as regulators start to take a harder look as they've said they're going to at companies relationships with China.

That's a real risk to Apple Advertising tracking users and then the subscription fees that are charged to consumers and most importantly We've talked a lot about the 30% vig that Apple takes on their app store and how regulators are now stepping in and take a look At this so because this business is not yet a regulated monopoly.

It may be a monopoly in many senses of the word It's not regulated yet And that transition could be financially painful for Apple once they get to the other side It starts to look a lot more like a large-scale Berkshire type business So that that's my kind of summary take on what's going on with Apple.

Awesome. Yeah, I don't know I think it's pretty deft sacks your thoughts on this massive increase in cash and what Berkshire Hathaway Is thinking what is Warren Buffett thinking here? Is it this became he became overweight Apple or that he's building up cash because the recession is coming in wants to buy things on the cheap Well or regulation to free Berks point when we had this global sell-off on Sunday Monday a lot of people were sharing this chart online and pointing out that Buffett was sitting on this gigantic cash pile by far the biggest cash pile that he's ever sat on we then had a market recovery so people aren't really talking about this, but it does stand to reason that Buffett is building up a war chest here and he's somewhat defensively positioned you can see that You know, it wasn't like 20 21 22 the cash pile went down because he started making a bunch of investments Now the cash pile is really high.

So It seems logical to infer That he thinks that the risk reward right now is it's not great on public equities and he is Again, he's just a little bit more risk off. What do you think of the regulatory risk argument? Freeberg is floating here, Chema I think that David is right that freeberg is right that to China thing could have impacted it but Because he also sold a lot of BYD which They've owned since 2008.

I think so. No, that's a Chinese EV company And so it could be just that that could have played a part To be honest, I don't know. So what you're saying China dependency both of those have a China dependency So he maybe felt the overall portfolio. I had too much China dependency.

Maybe yeah, I could buy that that seems like reasonably logical I think the thing to remember though is that these decisions I Think have been stewing for at least a couple quarters Remember like, you know that letter that he writes was not written yesterday, right? That was being drafted Months and months ago.

So these decisions were made or even longer So I think these decisions were made a while back another reason if we're gonna play kind of Conspiracy theorists is like, you know after the death of Charlie Munger Maybe what he's starting to do is Consolidate the book so that it can transition elegantly to Greg Abel when Buffett passes away And so that could be another When you say that you're saying he wants to hand it off with less risk in it So a dependency on one stock would be risk a dependency on China would be risk He wants to make it really clean.

So the handoff is smoother. He wants to hand off a very organized Book or maybe he and Abel in Greg Abel have already talked about the kind of risk book that they want Over these next five to ten years and it reflects it a discussion about what the incoming CEO wants It could so there could be all kinds of reasons why I don't I don't really know I just think that Apple just back to free Berks core thesis.

I agree with many of his general points I'm not sure that they affected the Berkshire strategy, but Apple is sort of a little bit wayward. It is a Company with an effective and unregulated monopoly or duopoly. That doesn't really know what to do And I think that that's the biggest problem with that company and that's Independent of Buffett selling now or selling a year from now or having not sold a year before Once you're regulated, you know what the prices are, you know what you can do, you know where you can go And all that risk is off the table That's what is a feature of all of those other monopolies He owns is that the government has a role in it by the way highly predictable business by the way, and you mentioned the Google thing, but This clearly was not part of his calculus.

I think he just got very lucky But if you're holding Apple today, I think you have to take the 20 billion dollars that Google Paves you every year which comes in at 99% margin and you should probably sensitize the value of Apple We're not having that 20 billion if this antitrust ruling against Google stands Yeah, that alone could be worth upwards of half a trillion to a trillion dollars depending on what multiple you want to put on that 20 well, I mean what's crazy is the Apple Apple still up to 214 which is 11 12 percent higher than it was at the start of this year at 185 the stock is just coming off of its all-time highs at 230 a share.

So it's just barely off the all-time highs I mean, this is just an extraordinary amount of cash to be held by both Apple apples You know also has over a hundred billion in cash now Warren Buffett has close to three hundred billion Allocators want to make trades and they got a better obviously he's got a better trade I think he can make on this whether that's the 5% he's gonna get on the 300 billion or maybe there's something he wants To buy that's another possibility.

So a great job wrapping this all up and let's pivot to the federal judge that ruled that Google has a legal monopoly in search and Advertising this is huge news. Perhaps This is the biggest news in the tech industry for a couple years on Monday a judge ruled that Google had acted Illegally to maintain its monopoly in online search if you remember this was filed under the Trump administration in 2020 by the DOG the 277 page ruling agrees That Google abused its search business monopoly by paying billions of dollars to third-party platforms like Apple and Samsung In order to be their default search engine, so it's not just that you have the monopoly.

It's how you maintain the monopoly This is called tack traffic acquisition cost. We've talked about it here many times according to the suit Google conducts around 90% of web searches. I think we all know that companies disputing that claim The ruling doesn't contain remedies yet for Google's behavior They're going to decide that in a subsequent ruling.

Obviously Google is going to fight this it could Result in a change in business practices i.e. They cannot pay Firefox Samsung Apple to be the default search engine anymore that will lead to many interesting possibilities Chamath and I were discussing them on X and so This is huge news.

This is going to be great. I think for the search engine market. I know Apple from my time doing Mahalo a human powered search engine over ten years ago when I sent it to Steve Jobs He opened it up in the middle of the night and started playing with it and there were many reviews of Or many rumors of Apple wanting to be in the search business because they had a contentious relationship with Google obviously when Google competed with Android that upset Steve Jobs greatly and Also Google created Chrome which also Safari and Chrome competing with each other.

It's not out of the question. I think Chamath that You could see Apple When they lose this twenty thirty billion dollar deal for tack to start their own search engine by DuckDuckGo brave has an amazing search engine and a search API And they've obviously they've got a crawler. So people don't know this but Apple has a crawler my prediction is Apple buys a search engine and they go it alone and expand their advertising network like Amazon uber and other companies have what's your take on this?

And what we're gonna see in the future. Will this ruling stand up and then what are the downtree market impacts? I think that this Google thing is The most important thing that's happened in tech since the Microsoft DOJ Decision in 2000 Internet Explorer. Yeah. Yeah, because if you if you go back to that consent decree in 2000 It essentially handcuffed this incredibly foreboding company For more than a decade while all kinds of innovations happen So they missed out on two huge waves right Microsoft essentially missed out on Social and then they missed out on mobile Largely as a result of that consent decree and then they were able to catch up and embrace SAS and the cloud is amazing, but there is this small Oh Outcome here which is essentially a consent decree where Google gets handcuffed for some number of years and it creates a couple of big waves of innovation of new companies that can succeed that may not have otherwise been able to succeed in the absence of such a consent decree and a good example of this would be the AI powered search experiences that you're starting to see whether it's from Open AI or perplexity or a few of these other folks the big Oh Outcome though is more if you go back to the Ma Bell kind of thing where the company gets broken up Hmm, I think that the odds of that are extremely unlikely So I think the big Oh outcome Is probably something that you can pretty safely take off the table.

I think it's going to be a little low outcome but the point is that there's a distribution here between these two things that this judge will be in control of and I think that Again, again, I'm just guessing. I think both the Democrats and the Republicans will really support whatever happens here And that's not necessarily because I don't think that's necessarily because they have a bone to pick with Google I think that you know, they have bones to pick with other companies more than Google But I think that it it starts to set the tone for Being able to check big tech in a very meaningful and productive way and I think that that has important ramifications for Washington Okay, sax not to make it political, but this is the government stopping corporate America So it can't not be political what's your take here?

And what will we see in the future more regulation more rulings like this slap on the wrist breakup? Is this more to come or this is peak regulation in your mind of big tech? Well, I think this is a good decision. I mean Google clearly is a monopoly In fact, it's at least two or three monopolies They have monopoly in search their monopoly in advertising and they at least have a dominant position in video with YouTube And I think that it would be great if the government broke up this company I mean, it should be it should be at least three or four companies I mean there should be search should be its own company advertising should be its own company YouTube should be spun out And then I don't know if g-suite should be a separate company or should get lumped in with search I I don't know but I think this should be at least three or four companies and I think Republicans will be on board with that because frankly Google's a threat to democracy If you go to Google and search for search results of anything related to the election, it is clearly so biased Explain that.

Yeah, give an example. You want to get the latest info on Kamala Harris just search for Donald Trump I mean compare the search results and I've done this and I post the results online If you search for Trump, you'll get a bunch of negative articles on Trump and you'll get positive articles about Harris And then conversely if you search for Kamala Harris, you'll get positive articles about her and it's like Trump doesn't exist.

It's clearly They have put their thumb on the scale here in favor of the candidate They prefer as 90 something percent of their donations indicate. Here's a real-time search I just did Donald Trump as you can see the first one that came up was a Harris story about Trump and Harris Google has actually addressed this issue The issue is actually I think I'll take a little bit the other side of it not bias in the algorithm but bias in media the over majority of media is left-leaning and there's a very small amount of Republican right-leaning media when compared to the left Obviously, and so when you do a search for Donald Trump, you know You've got the first three choices New York Times left-leaning Washington Post left-leaning Newsweek left-leaning CNN left-leaning Daily Beast super left-leaning five of five are left-leaning.

That really is. The issue is that there isn't enough GOP or right-leaning media to actually make this work. That's at least my Take well That's their explanation. Yeah, okay fine, but the problem isn't yeah. Yeah, they're waiting the publications. They want to wait Why is Daily Beast like some authority on the election?

They're the most partisan Ridiculous untrustworthy publication when it comes to the election. So why should they be top four? I mean, why isn't Fox News in there? Why isn't New York Post in there? Why isn't substack in there? There's a lot of great Publications on substack. So they are very selectively choosing the publications who you're right are in the tank for the Democrats so that they are reflecting the bias of the mainstream media, but they are Being very selective about what media they show and even so Kamala Harris and Let me just give some statistics here here.

Hold on Kamala Harris I just did a search first five New York Times NBC the Hill CNN is the hill right or left. I Don't know left. Would you say sex? It's left. Yeah left and then Forbes Which I think would be considered right and then Fox obviously, right?

So, I mean, it's just the percentage of new sources here often. Yeah, the Guardians often rank, right? So there's another two Yeah I want you to put on the screen this yeah, glad you can do it. I tweeted some receipts Please click on the screenshot so I can show you the side-by-side and you'll see what I'm talking about.

Okay, I search for Donald Trump What do I get news about Harris the first this on my phone? So this is mobile the articles are all basically about Harris criticizing Trump Okay, then the second carousel is about the project 2025 director stepping down which is pretty tangential Of Trump but is a major democratic line of attack on Trump So this whole thing seems rigged to support the DNC point of view on Trump Same thing you search Donald Trump latest news same thing.

There's some weird story about Donald Trump's nephew I didn't even know he about this person But somehow they're elevating it to be a major story. And again, the first carousel is all about Harris now Keep going, please Yes, ma'am. Okay. Now we look at Kamala Harris top stories. Just Harris no news about Trump.

Got it. Next one Same thing. Okay So the point is that when you search for Trump you get news about Harris and criticism of Trump when you search for Harris you get positive news about Harris There's no way you can tell me that this is fair or this is the result of an algorithm that hasn't been tampered with This is very clearly programmed.

I mean you okay, I'm gonna take these cells depending on which candidate you search for I'm gonna take the complete or the side of this but Freeberg I want to give you a chance because you worked at Google. I think you know a lot about the algorithm What is there an explanation for this that makes?

Technical logical sense given what you know about the algorithm and then I'll give my position then sure Matthew Yeah There's very little kind of editorialization going on with respect to showing the rankings of the new sources The ranking of the new sources is typically set by some ranking algorithm.

The algorithm is usually around click throughs Views popularity of the sites how many visitors there are so there are other metrics that drive the order so for example if NBC CNN Fox News all have kind of higher rankings than some smaller publication They're gonna end up higher in the the ranking algorithm because they have a higher call it quality score There's also measures on how often people click through and come back the bounce back rate so if they click through an article and then come back that can actually Reduce the ranking versus if they click through and stay on the site So there's a lot of factors that go into the ranking algorithm The thing that probably upsets people is that there isn't any transparency into this So there's no understanding on how these things are ranked how they're set and it's probably very good guidance and feedback that there should be More transparency and openness and I'm not necessarily trying to defend anyone's product or behavior I'm just saying that there's a certainly a lack of understanding on why one thing is being shown versus another I'll also say sacks.

It is probably the case or there might be the case that there's many more sites potentially putting out pro-harris Articles and there are putting out pro-trump articles which can start to overweight the algorithm as you know Or overweight the rankings that are showing up. So that might also be feeding into this that the general News media bias is what you're actually seeing versus a Google bias, correct?

I I don't okay. Let me get you my hold on. Let me get you moth involved Here on this issue and then I'll give my Generally speaking, I do want to come back to the antitrust ruling in a minute okay, absolutely sacks thinks the the fixes in free bird thinks this is explained algorithmic me, but That Google could do a better job explaining and being more transparent and about the algorithm.

I agree with that I look at the media companies don't always consider it a black box. Go look and I agree Yeah, the number of independent journalists why left-leaning publications is like 30 to 1 and Places like Fox News, which is largely we talked about this So many there needs to be more investment in journalists by Republicans There are so many more liberal journalists and there's so many more liberal media outlets out there When it was a big at least it's probably 20 to 1.

Yeah. Yeah, of course I understand the mainstream media is hopelessly biased. Please remember you said that when we discuss it. No, no Sacks I got to stop you there. He didn't say biased what we said was it's 20 or 30 to 1 it's Outnumbering. So if the pool of things the search and come up with is 30 to 1 It's of course going to appear bias Which is what they need to do is they need to show who's in the ranking?

What percentage are left what percentage are right? What percentage are committed middle of the road show that at the top? The mainstream media is biased. We all know that you can defend it. However, you want to defend it. You can nobody's appointed Okay, fine. So we agree on that.

I don't know why you're making agree with you five times making you know points Okay My point about Google is they're reinforcing the bias because they up rank The mainstream media sources and they down rank the sources that provided just an opinion or an alternative opinion again Why is Vanity Fair up ranked above the New York Post?

Is that because of their journalistic quality? I don't think so Why is it that that Kamala Harris search result? Does not say anything about Trump, but the Trump search result has a carousel on Kamala Harris that look like to me Yeah, that looks broken. I'll tell you they also answer This was the week Kamala or this the last 10 days or so of Kamala taking the position raising tons of money hiring her VP and Trump disappearing from public life for 10 days.

So there's also a on top of the 30 to 1 ratio Let's say left-leaning journalist to right you also have this was Kamala's coronation week. So therefore it's going to be I don't think Google is in the bag with our algorithm. Anyway, I think it's the source material. They're indexing trim off.

What are your thoughts? one of the things that I like to do when I'm in Portofino is When you see these huge yachts in the bay, I like to figure out what they are Okay, and so I use Google for like a vessel finder and Two of the top three links Send me to spyware And I think to myself every time if every year this happens, how is it that in 2024?

Google hasn't figured out how to click these links in a sandbox Isolate the ones that send you to spyware and just take them out of the index And of course they can do it. They have you know, a hundred thousand people and two trillion a market cap So, I think that there's like just the level of Technical navel gazing at some level that I think besets every big company and so there are other Examples here that you can look at that are a lot less charged than politics I think Freeberg is right that it's largely algorithmic, but I think David is right in that there is a quality problem.

I Think the solution here is that for certain extremely important moments? There needs to be a little bit more intervention and there needs to be a little bit more curation So that it passes the smell test I mean the the version of this that I that I also experimented with and Nick you can find the tweet that I had Was when I was searching for the assassination of Donald Trump on Google It just that it didn't show up.

It does show up now. So I think they got the message and they fixed it so clearly somebody's listening and I think clearly then the index changes so I think that both things are possible, which is the algorithm can improve and also that certain things before people start to Complain loudly about this perceived bias there should be enough intervention to make sure that the algorithmic results pass a smell test and if they're not to add some amount of Reinforcement learning or something else some human correction allows That that allows you to get to a good answer.

That's unbiased before we leave this topic. Can I show this chart? Okay. Look, this is a All of tech is deeply biased towards the audience may not know okay. Okay employee donations take to party are Again, it's well over 90% of Democrats. This basically represents the constituency of Silicon Valley Okay inside these companies.

We also know that Google search results use more and more manual interventions Freeburg you agree with that, right? There's definitely again, there's there's meant to not be an editorial process, but there certainly is tweaking of rankings Okay, so all the people doing this stuff are Democrats they're liberal and you're telling me that this does not have an influence does not create bias Come on, you can see the bias in a common-sense search for Trump versus Harris I'm just saying like you've you've we've all made a huge leap in this Conversation from talking about an antitrust ruling which I will speak to very specifically in a minute - oh my god tech is biased That's what's driving the you know, the the sense of the nation I don't know if you've noticed sex but more than half the nation is gonna vote for Donald Trump More than half like nearly 60% I think it would be like I think it would be like 70 or 80 percent if it weren't for the bias of the mainstream Media being boosted by big tech.

Well call it balance in the force then I guess but like Maybe maybe not maybe not quite that percentage. But if you look if you look at if you look at issues polling on issues the Republican position on most issues is like a 60 to 70 percent winner and yet the elections are a nail-biter and I think a lot of it has to do with the influence the mainstream media and big tech.

Okay. Well, let's come back So I think that everyone has what sacks is speaking to is a deeply rooted feeling held by politicians Held by regulators on one side of the aisle or the other When Democrats feel shunned by the search engine or by Twitter or by Facebook They raise their hand and they say let's regulate these guys When Republicans feel shunned because they're not showing up in the news rankings or the algorithms They feel let's regulate these guys when it actually comes down to the court case Here is what is being described when you go to Apple and you type in a couple of words in the URL bar That you want to search for because we've all gotten used to this.

You guys may not remember this But nearly 20 years ago when browsers first came out on desktops and on mobile phones You would not be able to just search by typing into the URL bar You would have to type in a web search engine in the URL bar hit go and then you go to their search box and You type in your result what happened around the mid 2000s 2004 2005 is you suddenly were able to type in a couple of words into the URL bar of a browser and Hit go and it would give you search results The question is what search engine did it give you those results from and that's what this lawsuit is about Google started to pay companies like Apple To make Google the default search engine when you would type in a couple of words and hit go into the URL bar Because search became the primary way of surfing the internet not typing in a URL and going to it And then when they started doing that they started to see more search traffic.

Now the real question from an antitrust perspective is did Google leverage its monopoly to pay to continue to be the default search engine to lock in the search market and Prevent competition by doing this. Well, the judge the judge already said yes, the judge said yes Google is monopolizing Search because they're paying to lock in the ability to type in to get the default on the search bar By the way, you can go into the settings and change it But what would the other default be?

So now if Apple David, I think you're being you're being too narrow Hold on one second You're being too narrow the initial complaint in the Microsoft Internet Explorer thing that kicked off the whole DOJ thing Versus the consent decree were two totally different things. I think that you're Estimating the scope of the remedy.

I get it. Let me finish So like if they were to then say like let's get let's make sure Google can't do that again What's the search engine? Is it Bing? Is it Apple's search engine? Because then there would be an antitrust claim to say that if there is a default search engine without the consumer having to actively choose What their search engine is?

someone is Monopolizing the the install base that Apple has or the install base that whomever has where they are becoming the default search engine Now to your point like the ability for the judge to then say you know what? This is one action of many that you are taking to monopolize search Let's go ahead and figure out how we can prevent you from monopolizing search and this is really focused on search It becomes a very hard leap to say let's break up the company There's bias in the news feed that you guys are ranking.

This has nothing to do with search engine rankings It has nothing to do with owning YouTube. It has nothing to do with like owning cloud It has everything to do with Google monopolizing the search business, which is the biggest business on the Internet. I Do think they go that's where that consent.

I agree. It's narrowed to month and where there's a lot of paths, but I questioned I don't think that's a narrowing again the big Oh outcome of breaking up the company like what happened in my bell I don't think that's gonna happen you a Little Oh outcome that is a consent decree similar to the one that Microsoft had to sign is very likely But what I want you to understand is the way that that started which was literally around Internet Explorer and bundling versus the consent decree was meaningful orders of magnitude broader so what I'm saying is this little Oh outcome is going to be much bigger than the scope of this lawsuit and if they don't man, they have dodged an enormous bullet and all I'm saying is the I think If you had to be a betting person they settled on that right like with with Microsoft if I remember right?

It was an agreed settlement. Like ultimately they signed a bit. There was it was a consent decree Basically, what happened is for 10 years the DOJ became the became the product managers of all critical projects inside of Microsoft, right? The point is this which is that when Microsoft went through this The government and they had broad support Use that consent decree as a way to essentially hobble this company so that other competition could come I don't that competition was It wasn't just it wasn't just in the narrow scope of where that initial focus started I hear what I'm saying is this judge will read that for sure and I would and if and if Google gets away With just having to do something around tack and search Yeah, it they have dodged an enormous bullet No, I think you're look I think you're right and I think the reason you're right is because of how inflamed sacks is Because the way that sacks feels I think is the way that every no, I think I think no I think if I think if sacks gets its way, it'll be a big Oh outcome and they're gonna know I know I know I think that's where everyone wants it.

This actually wants actually one I don't know what I'm what I'm saying is the little Oh outcome is meaningfully worse than where this lawsuit is I'm gonna make my final statement. There's a strong I agree with you and I'm not trying to defend Google and I'm not trying to defend some outcome here I think you guys are correct I think that because of how inflamed people are at the influence that these companies have meta and Twitter and Google there is going to be a strong push to do a lot more than what the narrow focus of the ruling in this particular case to do something much more significant to hurt these companies and make them less influential and less powerful facts Anything to add I'm not Inflamed I have a point of view that I think is informed by facts and evidence the fact the matter is the vast vast majority well over 90% of the employees at Google are liberal Democrats and The Google search does rely on manual actions and the people performing those actions are again Overwhelmingly from one side of the political aisle Furthermore we can see in the search results that they do appear to be hopelessly biased in favor of one candidate at the expense of Another I mean you're asking me to deny the evidence my own eyes and ears.

I can see what's happening I think most people can see what's happening I do not think that Google should be putting its thumb on the scale on one side of the election here and Jason you may have a point that it's reflecting the bias of the mainstream media. I don't think that makes it Okay, I think that Google should have to work a little harder to be neutral And they could do that use they could do that easily by balancing their new sources Okay, I feel like sax and I got to the perfect place.

I agree. Google's filled with obviously left-leaning. Don't deny that I agree that the left the my the media is biased They all picked a side and then I just want to show you one chart because it's super important for you to understand the number of people in Journalism this is from 1971 to 2022 who say they are Republican has just absolutely plummeted.

I know this and this is what I'm trying to explain to you sax is a Incredible opportunity for your party since you know You're passionate about this is to invest in more journalism invest in more journalists because I don't buy this Independence the fact that they're claiming they're independent in journalism.

I believe that's cap. I believe they say that but the gap is 33% now between people who say they're Democrats and people who say they're Republican in journalism That is a key piece to this problem and layered on top of it I agree with you that Google is filled with liberal people and I agree with you Chamath That they need to intervene and put at the top of the search results in news These are the you know, this is what we're indexing.

This is the percentage that's left-leaning This is the percentage that's right-leaning and there are a lot of organizations that examine and rate Publications on their bias left and right and that's something that Google could do that's very unique and that could move the show Okay, you're sick, which is they could showcase that up top So to my friends at Google who are listening do a better job of just being more transparent So we don't have this tension in society.

Okay, it's time for saxes red meat sacks We have a VP candidate. You have been Absolutely waiting for this moment. The race is a dead heat. Here's your second course of red meat I brought you that giant this you know what this is. This is No, this is the state for two for one you ordered the state for two for one sacks Get in there medium-rare.

You got your cowboy cut. What did you think when you saw? Kamala Harris and her VP pick move ahead in almost universally all polls and prediction markets to the lead over your boys Trump and Vance. What did you think of the pick? Go ahead. Enjoy your seat. Well, I was very nice I was very happy with the pick I mean, so first of all, I think I said last week or two weeks ago that I thought the pick was would be Shapiro Josh Shapiro the governor of Pennsylvania it was such an obvious choice for Harris because this whole election could easily come down to 10,000 votes in Pennsylvania.

It is the tipping point state and Harris probably has to win that state in order to win the election and You have a very popular governor of that state. He's got something like 63% Popularity in that state. He's also perceived as a moderate So he would have helped Harris position the ticket more towards the center Which apparently is her goal since she's repudiated all of her far-left positions so it just seemed teed up to be so perfect and then what happened is there was a smear campaign by the Progressive left against Shapiro.

He was the only one of the VP shortlist candidates that seemed to get all this oppo dumped on him before the pick and that campaign against Shapiro seems to have spooked Harris who seems to be fairly risk averse and she went with this guy Tim Walz from Minnesota who is a darling of the Radical left and I think that he's already presented many opportunities for attack by the right There's three big issues that I think waltz is gonna have to address because Republicans are already landing blows on him number one Stolen valor.

He has clearly and on several occasions overstated the extent of his military record Look, obviously, I've never served but I know that among people who have this is a very big deal Have big issue campaigns have imploded over this. So that's number one. He's got the stolen valid problem number two on trans he seems to have bought into every aspect of the trans agenda and He's made Minnesota a sanctuary state for minors who want to come there for puberty blockers and sex reassignment surgeries Even without parental consent the law that Gavin Newsom just passed or signed that drove Elon out of the state Tim Walz got there first in Minnesota.

So he is he is not a centrist He is very far on the cultural left and then I'd say like a third issue that I don't even know if people have really Gotten to yet, but I think it will eventually come up is that Waltz was was insanely authoritarian on kovat I mean, this is a guy who told us that Minnesotans live by a motto of mind your own damn business But he set up a kovat stitch hotline so people could rat out their neighbors for leaving the house or having dinner parties or walking their dog without a mask and It was it was real.

I mean violators could be punished by 90 days in jail So again, this guy has been to the left of Gavin Newsom on Cultural issues and I think that's gonna be a big problem for the Harris campaign And I don't really understand why she went with him when there was such an obvious Alternative who was available who could have given her a swing state who could have positioned You want to speculate Your chance to bash the Democrats and speculate coachman.

No, I have no bashing to do I will say two things One is that I think his Stance on This trans stuff is a little problematic in these swing states I say a little only because I think it matters more what Kamala stance on all these topics are but I do think that where there's going to be a big judgment issue around her selecting him is if there is veracity to the stolen valor claims and so When Sean Ryan has an example incredible podcast if you guys don't listen to it, it's great But like, you know when he gets to the bottom of this and he will Tim waltz better hope that he told the entire truth Okay free berg your thoughts We're dancing on the issue here.

You had talked a couple of weeks ago about an organization That didn't want to put a Jewish person in the top position or in a top position Do you think that this is or there are any? concerns of Shapiro being Jewish that caused him not to be Selected or do you think maybe he bowed out because he wants to run for president as some people are saying and maybe he his Star shines a little too bright for the second position.

What are your thoughts? Let's go right to the anti-semitism claims I'm not gonna make that proclamation. I don't know what vice president Harris's Decision-making process was I don't know who should talk to what she cared about if she cared if she was even in charge I have no idea All I know is that there have been other conversations.

I've been privy to behind closed doors Where senior people have been passed over because they are Jewish and because of the concerns of someone Jewish Being viewed to be in a leadership position in an organization and the impact that that might have that there is a brewing Distrust as a result of the conflict in Gaza.

Let me say something about this issue, but frankly in defense of Kamala Harris I don't think she's anti-semitic and I don't think that accusation should ever be made without real evidence Okay, that being said Van Jones who is in a position to know because he's an important political pundit in the Democrat Party said that one of the reasons why Shapiro was passed over is because of this issue and he said that Anti-semitism had become Marbled into the Democrat Party.

I don't know exactly what he meant by that. I saw I saw that quote That was really jarring actually So marble is an interesting term. Yeah means it's like absolutely in the fabric of the yeah Yeah, so I don't know. I I don't think Harris is I think she's just risk averse and didn't want to alienate certain Factions within the Democrat Party agree with that statement, right?

But me too in the process of being risk averse She chose this guy Waltz who I think has got much bigger vulnerabilities Than Shapiro does and I think the question now is whether Waltz is even gonna make it to the convention I think he might have to drop out I don't understand by the way, I saw the dating process that Donald Trump had with his VP candidates right Saxon.

I saw some of it really close. Yeah, explain it Well, well, I can only speak to what I saw but it just seemed to me that there was this month-long Audition where I think they were just trying to figure out I'm guessing you completely guessing where these folks stood on things, but also he was trying to get a sense of The person and whether they got along and whatnot, but what I also suspected is that this person was being Highly highly scrutinized behind the scenes on everything that they've said or done Where the person who's going to make the pick in that case Donald Trump was deciding can I live with these issues or not?

what the articles about the VP process on the Democrat side was more painted along the lines of there was a meeting and she kind of liked him and so she went with him and I agree. I don't think there's a Antisemitic bone in her body to be totally honest with you.

I don't get that sense at all. No, no I yeah, that's not the issue but the calculus right but what I would say is this is the number two person I mean, maybe you should spend more than a day and then maybe people should be really vetting this person Behind Closed doors on all of the things that could go wrong.

And I mean you have to assume that that happened Yeah, let me make a couple of points there So it's number one is Trump had a lot more time to vet and get comfortable with his VP candidate Because he's been the presumptive nominee for many months whereas Harris Inherited the the nominee ship without a primary battle right Biden just abdicated less than three weeks ago So that's the reason why she didn't really have time to go through a courtship process for her VP Now as to the vetting process, I agree with you I think it's somewhat inexplicable because these stolen valor claims have been out there for a long time when waltz ran for governor There were former soldiers who came forward and said yeah, he was supposed to be the commander of our National Guard unit he was supposed to go with us and he quit right before we got deployed to Iraq and So these complaints have been out there for a while moreover.

He has many public statements saying that he was Deployed to Operation Enduring Freedom, which I think was Afghanistan and he simply wasn't I mean at least that's what I understand to be the case So or he was deployed during that time. I think this sounds like a lot of cat He was deployed during that time, but he wasn't in combat, right?

Is that he never saw combat and he said that he carried a weapon in combat in war So this isn't like a use of sloppy language once or twice This has been around circling him for many years now and there's been many examples of him saying these let me ask you a question On video.

So my point can I just say one thing the vetting was very poor I think the vetting was this is what I was gonna say. So there's there was a there was a great quote and I don't know if this ever made the light of day, but there was a moment where Was thought of as a potential VP nomination, he was like a real big Democrat stalwart and I don't exactly know the claims so and but I'm not gonna go there, but the phrase that I was told is Doesn't vet and What it was was a way of saying Look, we take our time.

We understand everybody's background. We know what skeletons are in folks's closets and in that example Whatever was going on was sufficient enough where he would never really get nominated for something very very big and I think that's sort of what comes up here, which is that in this Impassioned desire to make a decision quickly.

I still think the Democratic Party had an extra two or three weeks to make sure Tim waltz really vets now. I don't know if whether these claims are true or not again. Somebody will get to the bottom of it but it creates a pile over this campaign too early and Where I think Kamala probably wants all of that noise away so that she can define what she stands for It's sort of what we said last time Go after these five big issues that people care about go into the five states on these five issues and try to win this election She can't do that.

If this is like, oh What is your decision-making like? Why did you pick this person? Why did this person lie? So they have to nip this in the bud very quickly look in my view This was an easy choice Even if she didn't like Shapiro She could have gone with Bashir or she could have gone with Markelli remember the astronaut Markelli was one of the top two contenders You know, at least that was what was reported.

In other words, she could have gone with a moderate CNN CNN reported that Kamala thought that Shapiro was too ambitious. So okay. So why not Markelli? He would have outshined her for sure. Shapiro is really good at speaking and she's not Shapiro Shapiro is really sharp I mean that guy is unbelievable Okay I'm not saying it has to be Shapiro But the the remit here was really clear just strategically you want to choose a moderate from a swing state That's it because this whole election come down to one state and you want to basically portray yourself as a moderate So this is a very easy assignment find me a moderate from a swing state And what do they do?

They choose a radical from a safe state safe for Democrats. They got Minnesota locked up Why do they need to take on this baggage? There was no reason for it and Chamath I do think they rushed the vetting but I think it wasn't because of passion or something like that I think they're running out of time because remember Biden was supposed to be the nominee Harris was supposed to be on the ticket as VP They weren't supposed to do this process and then all of a sudden it happened three weeks ago because Biden abdicated Look, I think I think that a vice presidential pick matters but only so much and I think more than helping I Think what VPs do on balance is if you pick the wrong person, it can meaningfully hurt a campaign.

I Think the you know, Dan quail potato thing comes to mind you can become a little bit of a laughingstock which just becomes baggage that you have to overcome and So this is again where it's a little bit of a head-scratcher I would just that thought that this would have been a little bit more buttoned up Totally and let me tell you if if if Waltz doesn't drop that from the ticket I predict there'll be gold star families protesting all of their events and that's gonna be a real headache from now till the election Here is the quote in question Harris campaign and this is from The New York Times Had promoted this on social media just so we're clear when we're making all these claims that he did Steal valor that he has not been convicted of stealing valor, which is a natural crime Just so we get things right here on the pod.

Here's the quote That he said we can make sure that those weapons of war that I carried in war is the only place where those weapons are at and So mr. Walsh never served in combat and that quote that he made I Guess people are now weaponizing to say that he's saying Those here's a quote those weapons of war that I carried in war is the only place where those weapons are So he was not in war Technically he was a reserve And he is battalion was going to be Called he claims so that's a guess what we are questioning and Vance said I'd be ashamed if I was him and I lied about my military service like he did this I could see where people might Be a little bit I guess he both sides of this issue.

It's actually want to dunk on him Yeah I'm not gonna dunk because this is still an unfolding story and it's gonna play out over the next couple weeks and we'll see where It lands but it's pretty clear that he well at a minimum Exaggerated his service and he exaggerated his rank.

I would like to thank both JD Vance and waltz for their service I appreciate both of their service. I'll leave it at that from my perspective. Listen, whatever I meet a vet I always thank them for their service, but those vets will tell you you can never exaggerate what you of course not You can't say you were in war when you were not in war.

Of course. Yeah, so I guess we'll see how this plays out All right, everybody. This has been another amazing episode of the all-in podcast to recap Google's big news. The markets are in flux. The end trade is off and Kamala Harris leads the race. We've got eight weeks left We'll be here for you every single week and we will be seeing some of you at the I believe sold out all in summit Are we sold out right now in Friedberg?

Master of ceremonies Friedberg executive producer. We are sold out. We might do a little overflow Just because we know people don't show up. So we might do a little bit of a last-minute kind of overflow ticket sale, but We are sold out. People need to know about their party.

Everybody is asking me what party outfits do I need the first night's party? We're gonna have top-gun beach volleyball and we're gonna have back to the future All the scenes from back to the future for the second party. I can't wait to see what it is I'm gonna work on my biff.

Get your damn hands off her McFly All I know is trumpets wearing fly anybody Yes, get your damn heads off her. I love you guys. I gotta go. Love you. Okay, enjoy We'll see on the lake everybody for the Sultan of science the architect the dictator I am the executive producer and world's greatest moderator executive producer for life.

We'll see you next week. Bye. Bye. Love you, boys What your winners ride rain man David We open source it to the fans and they've just gone crazy I squeen up Besties our dog We should all just get a room and just have one big you Georgie cuz they're all It's like this like sexual tension, but they just need to release them And Now the plugs the all in summit is taking place in Los Angeles September 8 9th and 10th you can apply for tickets summit dot all in Podcast dot co and you can subscribe to this show on YouTube.

Yes, watch all the videos Our YouTube channel has passed 500,000 subscribers shout out to Donnie from Queens follow the show x.com slash the all-in pod Tick-tock the all-in pod Instagram the all-in pod LinkedIn search for all in podcast and to follow chamath He's x.com slash chamath sign up for his weekly email what I read this week at chamath dot substack calm and sign up for a developer account at Consol dot grok comm and see what all the excitement is about follow sacks at x.com slash David Sacks and sign up for glue I blew dot AI follow Friedberg x.com slash Friedberg and Oh hollow is hiring click on the careers page at Oh Hollow genetics calm.

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We'll see you all next time. Bye Bye pull up this clip of Helmuth because he loves when we talk about him on the show Even though he's banned from the show by Chamath for life. He took sacks the battery pack of the log he got This guy had pocket jacks to his ace queen.

I think he hits his queen or his ace and He loses his mind, but he's in good spirits for the first half of this play this clip Six what's the odds on that? Well, we've record Oh Jack look out Here we go Come on yes, buddy. I told you that.

All right. You want me to call the guy? I'm gonna More out of line to me than any other person's great. No, you've been Person has been out of line to me in a year and a half I don't know who you are You just lost a big boy No, I don't give a JRB.

Just say you just about I'm see if you I don't give No, I asked you not to do it. You've been Let's play oh I'm saying I have chips One of them is His net worth is 1.2 billion. One of them is David Sachs. The gate code to his house is one, two, three, four pound I want to thank Phil for the shout-out (both laughing)