00:00:00
Jason, you are the unique person that is
00:00:03
at the intersection of both the and the
00:00:05
SPLC files. Do you have a comment?
00:00:09
>> Do you have a comment?
00:00:09
>> I'm not in the SPLC file.
00:00:11
>> Yes, you are. You're
00:00:12
>> adjacent. SPLC adjacent. And you're
00:00:15
>> What does that mean in the ven diagram?
00:00:17
>> Thank you though for putting me in the
00:00:19
crosshairs of all the got a really good
00:00:22
way to select.
00:00:23
>> There's a reason why I'm carrying this
00:00:24
guys because the people
00:00:27
>> What the is going on? THERE'S A REASON
00:00:30
WHY I CARRY a stiletto and a P35.
00:00:33
>> What the [ __ ] are you doing?
00:00:35
>> There's a reason. If you want to jump
00:00:37
the fence, feel free.
00:00:40
Shake is ready.
00:00:47
>> Let your winners ride.
00:00:50
>> Rainman David.
00:00:55
>> We open source it to the fans and
00:00:56
they've just gone crazy with it. Love
00:00:58
you, Queen of
00:01:01
all.
00:01:02
>> All right, everybody. Welcome back to
00:01:04
the greatest podcast in the universe,
00:01:07
episode 270 of the All-In Podcast, your
00:01:10
podcasters's favorite podcast. With me
00:01:12
again, your Sultan of Science, David
00:01:14
Freeberg, the Dick Tater, Shamont Poly
00:01:18
Hopetia, and yeah, the Rainman is back.
00:01:22
Yeah, it's definitely David David Sachs.
00:01:24
He's definitely in DC with a with Pus.
00:01:27
Yeah, POTUS lets him drive in the
00:01:29
driveway. Uh, Sax, what's going on? You
00:01:32
you pushed back. You uh bigshotted the
00:01:34
entire crew and pushed the show back an
00:01:36
hour.
00:01:37
>> Simple text. He's like with POTUS
00:01:39
started.
00:01:39
>> It's unfelable.
00:01:41
>> Start later.
00:01:42
>> Okay, we'll just
00:01:43
>> Okay. Okay, Daddy. Look at him. All
00:01:45
right. All right. Big shot. What's going
00:01:47
on? No, look, I was in DC today and I
00:01:51
was at the White House and I just asked
00:01:53
if the president had time and he made
00:01:55
time and we we did have a little meeting
00:01:58
and so we did push back the pod for
00:01:59
that. One thing I just want to say is
00:02:02
just what a pleasure he is to deal with.
00:02:05
You know, when I read in the media,
00:02:07
they're always describing him in a
00:02:08
certain way that, you know, he's yelling
00:02:10
at people or he's moody or or something
00:02:12
like that. And that's never ever been my
00:02:14
experience with him. He's always
00:02:16
pleasant to be with. He's always genial.
00:02:19
>> He ask questions. He's interested in the
00:02:21
subject matter.
00:02:22
>> It's just a completely different
00:02:24
portrayal. I don't get where the media
00:02:25
is coming from at all on this.
00:02:27
>> He's charming AF. Let's just call it
00:02:29
what it is. He's
00:02:30
>> charming.
00:02:30
>> I mean, maybe if you double crossed him,
00:02:32
maybe. I don't know. But I've just never
00:02:34
seen any evidence of of how they
00:02:36
describe him at all. And I think on our
00:02:38
issues of AI, I think we're really lucky
00:02:40
that he's the president who's in the
00:02:42
White House when this AI revolution is
00:02:44
happening.
00:02:45
>> I mean, do an old history, Sax, what
00:02:46
would happen if Kamla Ding-Dong was in
00:02:49
right now and we'd have like no data
00:02:50
centers?
00:02:51
>> We'd have no data centers and they'd be
00:02:53
using AI to censor us and they'd be
00:02:55
promoting DEI values through AI. That
00:02:57
was in the Biden executive order.
00:03:00
President Trump just wants the country
00:03:01
to win and be successful and he doesn't
00:03:04
have these like doomer neurosis about
00:03:06
it. That's not to say we don't support
00:03:09
any regulation at all, but we should
00:03:11
have specific solutions for specific
00:03:14
problems as opposed to being cowering in
00:03:16
fear over this and just trying to halt
00:03:18
all progress. And I think a really good
00:03:21
example of that was his idea around data
00:03:22
centers where he said over a year ago
00:03:24
before data centers even became a hot
00:03:26
political topic that we should let our
00:03:28
AI companies stand up their own power
00:03:30
generation behind the meter. And that's
00:03:32
a much better approach than the Bernie
00:03:33
Sanders approach of just shutting
00:03:34
everything down. So I don't know I think
00:03:36
we're like very fortunate that he's the
00:03:38
president during this critical time and
00:03:40
development of this technology. And like
00:03:41
I said he's always been interested in
00:03:43
it. He talks to a lot of business
00:03:44
leaders. I'm always actually very
00:03:46
impressed with what he already knows. He
00:03:48
listens to like all the top guys in the
00:03:50
industry and he synthesizes what he
00:03:52
hears. I think he's very good at that.
00:03:54
>> He was talking about the anthropic guys
00:03:55
and he was like these are brilliant guys
00:03:57
and he was like giving the flowers to
00:03:58
them and how genius they were and that
00:04:00
they were working on a deal. Any
00:04:02
insights there about the relationship
00:04:04
between the White House and Anthropic.
00:04:08
>> I thought what he said was very balanced
00:04:10
and accurate. Like you said he said that
00:04:12
they were very smart guys. They do have
00:04:14
a great product. I've certainly
00:04:16
acknowledged that. He also said that
00:04:18
they were very leftwing, but that was
00:04:19
something we could work through.
00:04:21
>> Didn't have to be a deal killer. He said
00:04:23
they tried to tell the Pentagon what to
00:04:25
do, which the Pentagon didn't like. But
00:04:26
in any event, I mean, look, he wants
00:04:29
American companies to be successful. And
00:04:31
he he I think genuinely really does like
00:04:34
high IQ people. I mean, he says it all
00:04:36
the time and people think he's joking,
00:04:38
but I actually think it's like one of
00:04:39
his core convictions is he just really
00:04:41
likes smart people. He likes being
00:04:43
around smart people. Loyal people, smart
00:04:45
people, people who are good on camera
00:04:47
seem to be the three circles. And hey,
00:04:49
Sachs, you fall into two of the three.
00:04:51
Uh, all right. Let the audience figure
00:04:53
that out. Uh, topic one, SpaceX has
00:04:57
signed a huge deal with Cursor. You
00:04:59
know, Cursor, that's the AI coding
00:05:01
startup. Really, the the they defined
00:05:03
the category. XAI and Cursor are
00:05:05
building and collaborating on a new AI
00:05:08
coding model that would quote be the
00:05:11
world's best coding and knowledge work
00:05:13
AI. Here's the deal. As it's been
00:05:15
explained, SpaceX will either buy Cursor
00:05:18
by the end of 2026 for 60 billion,
00:05:20
that's 10 billion more than they were
00:05:22
rumored to be raising at, or they will
00:05:24
pay Cursor 10 billion for their
00:05:27
collaboration together. Bloomberg says
00:05:30
you can think of that $10 billion
00:05:31
essentially as a breakup fee. So I think
00:05:34
it's fate a calm plea that this deal is
00:05:36
going to get done. Curser's run rate 2
00:05:39
billion at the end of February. This is
00:05:40
a money printing machine. They expect to
00:05:42
end 2026 with a $6 billion run rate.
00:05:46
They're going to triple it. SpaceX
00:05:48
projected revenue between 22 and 24
00:05:51
billion in 2026. So this is quite
00:05:53
accretive to the revenue story at SpaceX
00:05:56
at the IPO of SpaceX which is now
00:05:59
targeting a valuation of 2 trillion
00:06:01
which would be trading at roughly 80
00:06:03
times topline revenue which is a you
00:06:06
know people would say it's a high
00:06:07
valuation but also measure it with the
00:06:09
opportunity cursor's valuation would be
00:06:11
30x so this is a good deal I think for
00:06:14
everybody at the end of the day cursor
00:06:16
started I think built off of uh
00:06:19
anthropics LLM you could use any LLM
00:06:22
previously on it, but in March, Curser
00:06:24
released the second version of their
00:06:25
proprietary model, Composer 2. And uh
00:06:29
here it is. It's it's ranked pretty high
00:06:31
right now. It's between uh GPT4 5.4 and
00:06:34
Opus 4.6 as you can see on the screen.
00:06:37
The key part of the story here is that
00:06:41
Elon has 550,000
00:06:44
GPUs in Colossus. He's scaling up to 1
00:06:46
million and then of course he's going to
00:06:48
bring it to space. So if you believe
00:06:50
that infrastructure matters and it's
00:06:52
pretty clear it does this is incredible
00:06:55
for cursor who has been compute
00:06:57
constrained. So this is peanut butter
00:06:58
and chocolate. If you put these two
00:07:00
together I predict that this is going to
00:07:04
move
00:07:05
space xxx
00:07:07
AI and cursor to the front of the coding
00:07:10
leaderboard within 12 months. That's my
00:07:12
prediction. Chimoth shareholder in
00:07:15
SpaceX via the acquisition of the
00:07:19
Starlink company that you were a backer
00:07:21
of. What are your thoughts?
00:07:22
>> The acquisition was essentially
00:07:24
negotiated and the way that it's
00:07:27
structured is so that the S1 doesn't go
00:07:29
stale. So I think the way that it was
00:07:31
announced has more to do with the fact
00:07:33
that they don't want to slow down and
00:07:35
have to rewrite parts of the S1, have to
00:07:39
redo the disclosures, um have to redo
00:07:41
the risks. And so I think what you're
00:07:44
going to see is that this will get done.
00:07:46
In fact, the deal is effectively done.
00:07:49
But what's so smart is that where is
00:07:51
SpaceX today? Let's call it a trillion.
00:07:56
Where could it be, just for the purpose
00:07:58
of this argument, let's say two
00:08:00
trillion? So when the deal gets done on
00:08:02
a stock- forstock basis, it's going to
00:08:03
be if again if it's 60 billion in
00:08:07
tomorrow dollars,
00:08:09
effectively Elon's gotten a 50%
00:08:11
discount. And what has he bought? He can
00:08:12
issue $60 billion of stock at a $2
00:08:15
trillion valuation and get a model and a
00:08:18
service that I think is extremely
00:08:20
compelling in coding, which is where we
00:08:22
know all of the immediate and short-term
00:08:25
revenue gains are. It's also patterns
00:08:27
that are hard fought and are really
00:08:30
valuable in reinforcement learning. He
00:08:32
gets all of that and then he gets a very
00:08:34
cracked team, which you know, we've
00:08:36
known for a while that the cursor team
00:08:37
is absolutely excellent. If you look at
00:08:39
the Grock usage, it shows why he had
00:08:42
this excess capacity. There was a moment
00:08:44
where Grock had a very steep and very
00:08:47
aggressive discount on their output
00:08:49
tokens and in that moment there was just
00:08:51
a lot of experimentation and usage and
00:08:54
over time that sort of went away. So
00:08:58
there was a lot of capacity and a
00:09:01
relatively low utilization I think
00:09:03
inside of Colossus that he was able to
00:09:05
turn around Jujitsu moved the whole
00:09:07
thing and basically acquire the most
00:09:09
interesting and valuable third party
00:09:12
rapper service in AI right now. So uh
00:09:15
and the fact is that they got it
00:09:16
effectively I think at this price for 30
00:09:18
billion. So I think it was a really good
00:09:20
deal really smart deal. sacks your
00:09:22
thoughts if you want to unpack it a bit
00:09:24
under the framing I think is be
00:09:26
interesting for you if we were sitting
00:09:28
here three years ago the uh Biden
00:09:31
administration didn't invite Elon to the
00:09:36
EV summit and the SEC and other
00:09:38
organizations Delaware they were
00:09:41
explicitly involved in lawfare they were
00:09:43
trying to put Elon in prison and here we
00:09:44
are the most important company in the
00:09:46
history of uh the United States Space
00:09:50
XXXAI and Tesla now on the verge of just
00:09:55
creating the greatest products in the
00:09:56
history of humanity between SpaceX
00:09:59
clusters in space and Optimus. Your
00:10:01
thoughts?
00:10:01
>> Well, you're right. I do remember a
00:10:03
press conference where Biden said, "We
00:10:04
got to look at this guy." And so on the
00:10:06
heels of that, the DOJ brought a a
00:10:08
lawsuit attacking the company for not
00:10:11
hiring enough.
00:10:13
Remember that?
00:10:14
>> Exactly. SpaceX, which they can't under
00:10:16
It Aar.
00:10:16
>> They couldn't exactly under It Aar.
00:10:18
Anyway, that's all ancient history. So
00:10:21
let's let's put that behind us. Look, I
00:10:23
I agree with your guys' analysis on
00:10:25
this. I think these two companies are
00:10:26
are very complimentary. Cursor obviously
00:10:29
is very strong in coding. That's what it
00:10:32
brings to XAI. XAI brings compute and
00:10:36
they bring a foundation model. And the
00:10:39
problem that cursor had is that even
00:10:41
though coding is kind of like the white
00:10:43
hot area of AI right now, when it got
00:10:46
started, it was really competing against
00:10:49
generalists in the form of open AI and
00:10:51
anthropic. But now those generalists
00:10:53
have decided to vertically integrate in
00:10:55
this area of coding, right? And so
00:10:57
cursor is now competing against cloud
00:10:59
code and open AAI's codeex. And so they
00:11:02
were dependent on foundation model
00:11:04
companies that were getting in the
00:11:05
business of competing with them which
00:11:07
was just not a good place to be. Right?
00:11:08
So now they have this new alliance with
00:11:10
a different foundation model company
00:11:12
which also brings the compute just makes
00:11:14
a lot of sense. And then they bring
00:11:16
cursor brings to XAI the training data a
00:11:20
lot of enterprise clients and the
00:11:23
experience in coding and I think this
00:11:25
will accelerate XAI in this area.
00:11:27
>> Sax you think they're going to dump
00:11:29
Kimmy K2.6
00:11:31
six cuz I think Herser composer 2 uses
00:11:35
the moonshot model. There's no
00:11:37
reasonable way that Elon's going to pay
00:11:38
$60 billion and not run on top of Grock.
00:11:40
I got to think
00:11:41
>> it seems like it.
00:11:42
>> Yeah,
00:11:42
>> likely, but I don't know.
00:11:44
>> I think it might be tough depending on
00:11:45
the the users. One of the things that
00:11:47
makes Cursor so good.
00:11:48
>> Wait, wait, say more on that. What do
00:11:49
you mean?
00:11:50
>> So, I think that the different
00:11:52
developers want to have choice in that
00:11:54
sense. There's a toggle. So one of the
00:11:56
things that's really good about cursor
00:11:57
is they've got this very well-built out
00:11:59
IDE this application layer that puts
00:12:03
them probably from a UX perspective
00:12:05
meaning developers are using the tool
00:12:07
above codecs above clawed above anything
00:12:11
else you can use a third party IDE and
00:12:15
integrate the models or integrate
00:12:17
whatever other third party service
00:12:18
you're using but I would imagine that
00:12:20
the developers are going to want to
00:12:23
continue to have at least some choice on
00:12:25
what's actually writing the code for
00:12:26
them. The thing that people are waking
00:12:28
up to in the last 120 days is just how
00:12:31
much of the value of AI is being
00:12:35
realized by writing software. And we've
00:12:38
kind of got this rapper term, we call it
00:12:40
agents. But agents are fundamentally
00:12:42
just quickly spun up applications. But
00:12:45
for all of them, as we're realizing very
00:12:47
quickly, you end up making too many
00:12:48
agents. They end up being super
00:12:50
inefficient. They need to be engineered.
00:12:52
And you still need to have a strong
00:12:53
software engineering. capability and
00:12:55
competency to fix all the agents to
00:12:58
build all the harnesses to make
00:12:59
everything work well together and that's
00:13:01
why having a strong developer
00:13:02
environment a strong IDE actually solves
00:13:05
that biggest problem. So eventually all
00:13:07
the enterprises that are getting hot and
00:13:08
heavy on agents are going to be like,
00:13:10
"Whoa, wait a second. We've actually got
00:13:12
to fix how this is all being done." As
00:13:13
we saw this week in that story with
00:13:15
Amazon where there's like a million
00:13:16
agents being spun up inside and
00:13:18
everything's wasting resources,
00:13:20
redundant data creation, redundant data
00:13:22
stores, redundant API calls, etc. Tons
00:13:25
of money being wasted. So you have to
00:13:26
centralize still. You have to have good
00:13:28
software engineering talent that's
00:13:30
making good infrastructure and good use
00:13:32
of these agents. And that ultimately
00:13:33
will require an integration of the AI
00:13:36
tooling with a standard software
00:13:38
engineering front end which is the IDE
00:13:40
that cursor has. So I think that that's
00:13:42
probably where everyone's waking up to
00:13:44
the fact that having the uh the software
00:13:46
engineers may end up winning you the
00:13:49
arms race here and seems pretty smart
00:13:51
for Elon to buy cursor.
00:13:53
>> One other piece of it you mentioned
00:13:54
Kimmy uh K2.6. Yeah.
00:13:56
>> Yeah. I mean, so I think that one of the
00:13:58
things that's going to become a priority
00:13:59
over the next several months is this
00:14:01
idea of optimizing because enterprises
00:14:05
token bills are going through the roof
00:14:06
right now. I mean, just month over
00:14:09
month, they're spending increasingly
00:14:11
large amounts because their employees
00:14:12
are just building more and more
00:14:14
software, but I'm not sure that anyone's
00:14:16
been incentivized yet to be efficient
00:14:17
about it. And it really only makes sense
00:14:20
to go to a frontier model for a frontier
00:14:23
task. But more mundane things could be
00:14:25
done using an open source model or a
00:14:27
less expensive model.
00:14:28
>> And I think like you're saying, whether
00:14:30
it's the IDE or something else, there
00:14:32
needs to be some sort of middleware that
00:14:34
determines which model you go to and how
00:14:36
much you're willing to spend and what
00:14:38
the most efficient way of getting the
00:14:40
tokens is going to be. I am deep in
00:14:42
playing with uh XAI's suite of products
00:14:45
and I would predict we're going to be
00:14:48
sitting here in 6 to 12 months and they
00:14:50
are going to be dramatically
00:14:52
dramatically improved.
00:14:53
>> Let me just flag one other area that I
00:14:56
think is maybe the white hot center
00:14:58
within this redot area of coding which
00:15:01
is cyber. And I think mythos has kind of
00:15:04
woken everybody up to the potential of
00:15:07
frontier models to be a weapon that can
00:15:12
be used by either cyber offense or cyber
00:15:14
defense. Now the issue with mythos is
00:15:17
that it's very large and expensive. It's
00:15:19
something like a 10 trillion perimeter
00:15:20
model. And there's a lot of reports that
00:15:22
Anthropic just doesn't have enough
00:15:24
compute to be able to serve it. I'm not
00:15:25
sure it was ever built to be a
00:15:27
commercial model to be honest because I
00:15:28
just think it's so big and expensive.
00:15:30
But I think what'll happen is these
00:15:33
companies will start training dedicated
00:15:35
cyber models.
00:15:36
>> Let's say mythos comparable models but
00:15:39
with a lower token cost. And I think
00:15:42
there's a real race on right now to get
00:15:45
those products to market because I think
00:15:46
IT departments and CISOs are very
00:15:48
worried about the risk of hacks right
00:15:51
now AI powered hackers. So this is
00:15:54
something I think over the next 3 to 6
00:15:56
months will be again this maybe the
00:15:58
hottest part of the market.
00:16:00
>> Poly market says all of this is faked
00:16:03
complete. SpaceX acquiring cursor 74%
00:16:06
chance SpaceX IPO by the end of August
00:16:10
80% chance. So this is happening folks.
00:16:13
All right let's keep
00:16:14
>> by the way I think that deal structure
00:16:16
is smart because I mean to point yeah it
00:16:18
prevents the IPO process from being
00:16:20
disrupted. Also, it kind of gives a huge
00:16:23
motivation to these cursor guys to bust
00:16:25
their ass and make it work over the
00:16:26
next, I don't know, 6 months. Yeah, they
00:16:28
have a $10 billion breakup fee, but I'm
00:16:29
sure they want the deal to be
00:16:30
successful.
00:16:31
>> Well, the $10 billion breakout fee will
00:16:33
go back to SpaceX anyways because if
00:16:35
they actually run the compute and
00:16:37
they're not owned by SpaceX, they're
00:16:39
going to have to pay for it. That is not
00:16:40
cheap.
00:16:40
>> I mean, we saw a bunch of these XAI
00:16:43
co-founders leave after the acquisition
00:16:45
by SpaceX. I don't know if that was the
00:16:47
reason why, but you all of a sudden
00:16:48
they're sitting on SpaceX stock and they
00:16:51
may have felt like they had it made, you
00:16:53
know.
00:16:53
>> Yeah.
00:16:53
>> Well, which is always a problem. It's
00:16:55
always a problem with with M&A.
00:16:57
>> This cursor thing came about pretty
00:16:59
quickly because
00:17:01
>> Okay, let's just say friends of ours who
00:17:03
were supposed to wire into that round
00:17:05
were like, "Where's the wiring
00:17:06
instructions?" It all just evaporated.
00:17:09
>> Here's a tweet from Elon. We don't have
00:17:11
to um speculate too much here. Sachs, he
00:17:14
was very clear that uh XAI wasn't uh
00:17:18
built right the first time around. The
00:17:20
quote XAI was not built right first time
00:17:22
around. So is being rebuilt from the
00:17:24
foundations up. Same thing happened with
00:17:27
Tesla. And uh that tweet is from about 5
00:17:30
weeks ago. How crazy is it that when he
00:17:32
tweets he gets 50.8 million views? It
00:17:36
takes the four of us 7 months to get 50.
00:17:39
>> I mean that's probably our collective.
00:17:42
It's unbelievable the distribution he
00:17:44
has.
00:17:44
>> Well, also, how many CEOs would just
00:17:46
fess up like that and say, "Yeah, that
00:17:47
we didn't do it right the first time.
00:17:48
Now we're rebuilding it." I mean, most
00:17:51
willing to say that.
00:17:52
>> He's a magnet for talent. He's a magnet
00:17:53
for the right kind of talent. And the
00:17:55
SpaceX talent has his philosophy. He
00:17:58
inherited, I think, uh, a lot of, you
00:18:01
know, maybe people for XAI or for
00:18:04
Twitter that were not in his mold and
00:18:06
they're clearly getting aligned. And
00:18:09
it's also going to make his day-to-day
00:18:10
life much easier when all of these
00:18:12
things are occurring in the same
00:18:14
building with the same team. The
00:18:15
continuity of not having to t switch
00:18:17
between companies is going to be great.
00:18:19
We talked a little bit about the
00:18:20
possibility of Tesla and SpaceX merging.
00:18:22
>> Even Walter Isacson now is on the Tesla
00:18:25
SpaceX merger train.
00:18:27
>> There you go.
00:18:28
>> He just did a pod. Everybody's confirmed
00:18:30
it. It's going to happen. We called it
00:18:31
here first.
00:18:32
>> Okay. Topic two. Is there a SAS debt
00:18:35
bomb in private equity?
00:18:37
Toma Bravo, we had Orlando Bravo at the
00:18:40
fourth all-in summit uh last year, is
00:18:43
nearing a deal to hand its portfolio
00:18:46
company Medallia over to its creditors.
00:18:49
This is a SAS for customer experience
00:18:52
company. TB acquired them in 2021 for
00:18:56
6.4 billion all cash at the top of the
00:18:59
market. As part of the deal, they
00:19:02
incurred 3 billion in debt. And for
00:19:04
background, in 2021, this company had
00:19:07
470 million in revenue, growing 20% a
00:19:10
year. Earlier this month, Bloomberg
00:19:12
reported that TB's debt servicing costs
00:19:15
for Medallia were about to triple from
00:19:18
100 million a year to 300 million a
00:19:21
year. Blackstone and other firms refused
00:19:23
to extend a lifeline to the company, to
00:19:26
the SAS company. So, it looks like Toma
00:19:28
Bravo just handed the keys back and
00:19:30
wiped out 5.1 billion in equity.
00:19:33
Shimath, your thoughts. We've been
00:19:34
talking about the SAS headwinds for a
00:19:36
bit. You've been quite vocal about it.
00:19:38
>> Well, first of all, I think Toma Bravo
00:19:40
is an unbelievably well-run
00:19:43
organization. Their returns are bonkers
00:19:45
and Orlando is uh really, really, really
00:19:48
good investor. So, what do I think
00:19:51
happened?
00:19:53
I suspect that they probably got enough
00:19:56
of their equity, if not all of their
00:19:58
equity. There's probably a decent chance
00:20:01
that they did at least one or two
00:20:02
dividend recaps in the last five years.
00:20:05
And if I had to guess, I suspect that
00:20:07
they are
00:20:09
positive return. It may not be the
00:20:11
return that they would want. And so
00:20:13
turning the keys over becomes easier
00:20:14
because you have to remember in private
00:20:17
equity, the entire playbook is for
00:20:20
transformations of assets that are at
00:20:22
some point not working, right? It's very
00:20:25
rarely that they're buying the same
00:20:27
kinds of businesses that the four of us
00:20:28
would buy, which is just sort of this,
00:20:30
you know, clean white sheet denovo grow
00:20:33
at all costs kind of business. So they
00:20:35
have operating partners and all of these
00:20:37
other people waiting in the wings to
00:20:39
unfuck [ __ ] situations. That's the whole
00:20:42
playbook. M
00:20:44
>> so to turn it over I suspect means that
00:20:46
there is a core rot that people couldn't
00:20:50
fix combined with the fact that they
00:20:53
have probably gotten enough downside
00:20:55
protection that it's not a huge thing
00:20:57
for them. Now this is an issue for the
00:20:59
bond holders and then that'll maybe flow
00:21:01
through to the borrowing cost that Tom
00:21:03
Bravo has to pay maybe for a subsequent
00:21:05
deal. I don't know but I doubt that they
00:21:08
would just walk away from a business. So
00:21:10
I suspect they probably got most of
00:21:12
their money out. I don't know if that's
00:21:13
true. There was someone that published
00:21:15
some internal data showing that the
00:21:18
sales team was like 18% a target at
00:21:20
Medallia. Do you guys know what this
00:21:22
company does? Medalia
00:21:24
>> customer support uh is the general arena
00:21:27
and customer
00:21:29
experience management. I don't know.
00:21:30
>> I don't know what that means.
00:21:32
>> Yeah. They'll basically send like you go
00:21:33
on Caribbean cruise ships and you get a
00:21:35
survey afterwards and then they use that
00:21:36
survey data to provide management
00:21:39
insights and operational insights to the
00:21:41
leadership team and the operating team
00:21:42
on how to improve the quality of their
00:21:44
product or their service. So it's sort
00:21:45
of like this feedback surveying loop. So
00:21:48
if I were to tell you guys, hey, you
00:21:49
want to build a feedback surveying loop
00:21:51
to run your business better, are you
00:21:53
gonna buy SAS today or are you gonna ask
00:21:55
your AI to spin up an agent for you to
00:21:57
do that? And I think that's a big part
00:21:59
of what's happened is all these sorts of
00:22:01
companies where the alternative to
00:22:04
buying a SAS product is to spin
00:22:05
something up internally and it's much
00:22:07
cheaper and easier to spin it up
00:22:08
internally. You get a custom workflow.
00:22:10
>> No, no, I agree with that. I'm just
00:22:11
saying in the last 5 years you think
00:22:13
they sat on their hands and didn't take
00:22:14
a dollar out. They're not that dumb.
00:22:17
>> Maybe they took cash out, maybe they
00:22:18
didn't. But there was still a big debt
00:22:19
overhang and the debt's clearly
00:22:21
>> um gotten impaired, which means equity.
00:22:24
>> The debt holders the debt holders are
00:22:26
clearly screwed here. Yeah,
00:22:27
>> the question is is TOMA Bravo screwed?
00:22:29
And I would say if you sat around for 5
00:22:31
years, they're that's not their style.
00:22:32
They generate too much money. They're
00:22:34
too good.
00:22:35
>> So they may have taken cash out and
00:22:36
covered some of their their costs, but
00:22:38
the equity got fully impaired and then
00:22:39
the debt is clearly impaired because you
00:22:41
can see how the debt and the CLOS's are
00:22:43
trading, which indicates that this
00:22:46
business is just not doing well. And
00:22:47
then someone else on Twitter posted some
00:22:49
internal information from Adalia saying
00:22:52
the sales team is just not hitting their
00:22:54
targets. they're like way way off their
00:22:55
sales targets which I think speaks to
00:22:58
the underlying problem here.
00:22:59
>> Yes.
00:23:00
>> Which is that
00:23:01
>> unpack that. Yeah. Please.
00:23:02
>> Yeah. So the underlying problem is that
00:23:04
these businesses in the SAS space where
00:23:06
you're driven by net new sales every
00:23:08
year. How many new customers are you
00:23:10
signing up and then you're trying to
00:23:11
manage retention and you're trying to
00:23:13
increase sell through and retain
00:23:14
customers? They're just having a really
00:23:16
hard time sourcing new customers and
00:23:18
there's probably higher than modeled
00:23:19
attrition. That's right. And when you
00:23:20
have a very kind of typically
00:23:22
historically predictable business where
00:23:24
you can say, "Hey, I've got a net
00:23:25
revenue retention of 118% or what have
00:23:28
you, meaning I'm I'm selling into my
00:23:30
install base by 18% over what I'm making
00:23:32
last year and then I'm signing up new
00:23:34
customers,
00:23:36
you can lever that business, right? You
00:23:37
can borrow money against those cash
00:23:39
flows because it becomes predictable."
00:23:41
And what's happened in the last year in
00:23:43
particular is agents have become so good
00:23:45
and so fast and so cheap that many
00:23:48
enterprises can simply spin up an
00:23:50
alternative to a vertical SAS solution
00:23:52
and that's crushing the sales team's
00:23:54
ability to sell in. That's who you're
00:23:55
competing against. Now I want to make
00:23:57
one point and just link this with
00:23:58
something else that happened this week
00:23:59
and that's Kevin Worsh's hearing for Fed
00:24:02
Reserve chair. Kevin Warch went and
00:24:05
talked a lot about the deflationary
00:24:06
effect of AI and I actually think we all
00:24:09
talk about the SAS apocalypse as if it's
00:24:11
this sort of like isolated business
00:24:14
phenomenon where these SAS companies are
00:24:15
getting blown up. I think another lens
00:24:17
to look at what's going on is the
00:24:19
incredible deflation of how much it
00:24:22
costs to successfully run a business and
00:24:25
you don't have to pay a premium price
00:24:27
for SAS products anymore. Meaning that
00:24:29
that piece of the business can suddenly
00:24:31
get much cheaper. that AI is delivering
00:24:34
on its deflationary promise. I'll just
00:24:36
say one thing about what WarCH said.
00:24:39
Warch spoke a lot about the deflationary
00:24:41
evolution promised by AI and that he
00:24:43
expects that it will drive productivity
00:24:45
growth like we've never seen before. But
00:24:47
he said I don't know what that's going
00:24:48
to do to the job market that there may
00:24:50
be a dislocation between that
00:24:52
productivity growth being realized and
00:24:54
how the labor markets are going to be
00:24:56
able to respond to those things. But
00:24:58
fundamentally, he's saying that we're
00:25:00
going to see economic deflation. The
00:25:03
problem with economic deflation is that
00:25:05
when it occurs, it means some business
00:25:07
is seeing their revenue go down. And if
00:25:10
that segment of the economy is levered,
00:25:12
if they have debt sitting on top of that
00:25:14
piece of the economy where it's supposed
00:25:15
to always, always grow like a SAS
00:25:18
company's top line is always supposed to
00:25:19
grow. Suddenly that debt gets impaired
00:25:21
and that can have an economic ripple
00:25:23
effect that is adverse. But what he's
00:25:25
pointing out is that as a result of
00:25:27
deflation because it's not coming from
00:25:30
some cost cutting or economic
00:25:32
contraction. What he's saying is that
00:25:34
the deflationary forces ultimately lead
00:25:35
to economic expansion because other
00:25:38
parts of the economy will now grow. So
00:25:40
if I can suddenly cut, you know, call it
00:25:42
50% of my SAS budget and I can reinvest
00:25:45
that capital in other ways of growing my
00:25:47
business instead of managing my expenses
00:25:50
all of a sudden my enterprise will grow
00:25:52
and the economy will grow. He also said,
00:25:55
just as an aside, and I want to make
00:25:56
sure I cover this so so that we're
00:25:58
really clear. He said, "The way that
00:25:59
we've been measuring inflation is wrong,
00:26:01
and that he doesn't agree with the way
00:26:02
the Fed has been measuring inflation
00:26:04
because you can do a survey of any
00:26:05
household and they'll tell you, my god,
00:26:07
everything's so expensive. So all of the
00:26:09
indices and [ __ ] that are being used
00:26:11
to calculate an inflation index is
00:26:13
completely misrepresenting what the
00:26:14
average American is actually feeling."
00:26:16
And so he wants to rethink how the Fed
00:26:18
is addressing inflation from an interest
00:26:20
rate perspective. But he does think that
00:26:22
the overall kind of economic picture is
00:26:24
one of deflationary pressure and
00:26:26
productivity gains coming out of AI.
00:26:28
>> Sax, I I'll drop this off to you. I
00:26:30
think it's pretty clear what's happening
00:26:32
here is that the loss SAS's loss is the
00:26:35
token dealers, right? And startups are
00:26:38
now and we always see the they're the
00:26:40
tip of the spear. They're writing their
00:26:42
own tools. They're making their own
00:26:43
dashboards. I see that every day. And if
00:26:46
you look at the SAS product index, here
00:26:48
it is. Salesforce down 32% uh in the
00:26:52
past six months. Shout out to Bestie
00:26:54
Beni off. Best guest we've had, huh?
00:26:56
Saxs at the summit. Service now down
00:26:58
54%, Snowflake down 43%, Adobe down 33%,
00:27:02
Figma, which had a huge IPO pop and is
00:27:06
now down 67%.
00:27:08
So what is the role of venture capital
00:27:11
and then private equity in addressing
00:27:14
the software market? Software was eating
00:27:16
the world. Now tokens are eating uh the
00:27:19
SAS business and the software business.
00:27:20
Yeah.
00:27:21
>> Well, I'm of two minds about this. I'm
00:27:23
going to talk about the opportunity for
00:27:25
private equity. Let me just say backing
00:27:28
up that historically we only had two
00:27:31
good exits for software businesses. One
00:27:33
was to IPO, the other was M&A. And then
00:27:36
these big private equity shops came
00:27:37
along and gave us a third potential
00:27:39
exit, which is you would sell to them
00:27:42
and then they would raise the capital
00:27:43
based on I don't know 1/3 equity and
00:27:45
2/3s debt. So it was debt finance
00:27:47
buyouts which is something that's been
00:27:49
around in let's call it the non- tech
00:27:51
part of the economy for a long time but
00:27:53
was a relatively new entrant into the
00:27:56
world of technology. And the reason for
00:27:57
that is that if you're going to debt
00:27:59
finance a purchase you need to have very
00:28:00
stable cash flows because if you miss if
00:28:03
your cash flows miss and you can't pay
00:28:05
your interest on the debt then you're
00:28:07
going to lose all your equity because
00:28:09
the debt holders will foreclose. So in
00:28:11
order to do a debt financing of any
00:28:13
kind, you have to have very predictable
00:28:14
cash flows. And it was believed for a
00:28:17
long time that software did have those
00:28:19
predictable cash flows, at least for the
00:28:21
mature businesses, the ones that were at
00:28:24
the stage where they could IPO as a
00:28:26
potential alternative. So it was a very
00:28:28
attractive thing. I like I said, I think
00:28:30
it was great to have that third option.
00:28:31
I I'm of two minds about where the
00:28:34
private equity business is today. On the
00:28:36
one hand, the pricing now has got to be
00:28:39
super attractive for them. I mean, we're
00:28:42
seeing public SAS companies that are
00:28:44
doing a billion
00:28:45
>> ARR
00:28:47
20% growth rates, 80% gross margins, and
00:28:51
they're trading at three times AR.
00:28:52
>> Yeah.
00:28:53
>> You know, you can buy a dollar for 50
00:28:55
cents.
00:28:56
>> So, is is that an opportunity, Saxs, you
00:28:58
think? Uh, hit rock bottom, you should
00:29:00
do a rollup. Well, on the one hand, I do
00:29:03
think that the pricing has never been
00:29:05
more attractive if you're a private
00:29:07
equity shop looking at a business like
00:29:08
that. I mean, those companies used to be
00:29:09
valued at 13 times ARR. Now, it's three.
00:29:12
Uh, I'm talking about like a category
00:29:14
leader. Now, the downside of that,
00:29:16
>> by the way, Salesforce is off 9% today.
00:29:19
I don't know if you guys saw this, but
00:29:20
the market's absolutely tanking today
00:29:22
after the Medallia uh announcement came
00:29:25
out.
00:29:25
>> Right. Okay. So, so that would be like
00:29:27
you I said I'm of two minds about it.
00:29:29
So, I would be bullish for private
00:29:31
equity just based on pricing. But the
00:29:32
bearish part is that in order for their
00:29:35
business model to work, you have to have
00:29:36
predictable cash flows. You can't have a
00:29:38
SAS company go from, I don't know, 120%
00:29:41
net dollar retention one quarter to 80%
00:29:44
net dollar retention 6 months or a year
00:29:47
later because a big part of their
00:29:48
customer base is attred to using tokens,
00:29:51
right? Or to basically creating some
00:29:53
bespoke software. You just said the
00:29:54
absolute critical thing in all of this,
00:29:56
which is you have to have predictable
00:29:58
cash flows. I think what happens is when
00:30:00
you're a startup, you typically have to
00:30:03
figure out how to disruptively price to
00:30:05
enter the market. So you're like, okay,
00:30:07
if I deliver $10 of value, I'm going to
00:30:09
charge a dollar. And that's that's the
00:30:11
normal playbook, like a 10% ratio,
00:30:13
right, of price to value. The problem is
00:30:16
when you start to stack venture capital
00:30:18
into it and you then you stack growth
00:30:19
equity into it, what you're effectively
00:30:23
creating in in the preference stack of
00:30:26
your company is that you are creating a
00:30:29
higher return hurdle, right? You got to
00:30:32
clear 300 million, 500 million, a
00:30:34
billion of pre and then you have to
00:30:36
return 15 or 20% on top of that. So what
00:30:39
do people do as they raise more money?
00:30:42
They increase price. But the problem is
00:30:45
at some point when you increase price
00:30:48
you engender a ton of competition and
00:30:50
you put a huge target on your back.
00:30:52
Private equity is the last stop because
00:30:54
when they come in and they layer in
00:30:58
billions and billions of dollars of not
00:31:00
just equity but also debt and that has
00:31:02
to then be completely predictable and
00:31:04
paid back. Their only lever is to raise
00:31:07
price. They can never cut price to take
00:31:09
share. They don't they can't underwrite
00:31:10
that to pay back their debt holders. And
00:31:12
so Saxs, part of the big problem here
00:31:15
and why nobody wants to touch these
00:31:17
companies is that they are overpriced.
00:31:19
Yes, they're making a billion dollars of
00:31:20
ARR, but the unit cost has gotten out of
00:31:23
control. It used to be 10% of value.
00:31:26
It's probably now 30% of value. And
00:31:29
everybody's looking at their contracts
00:31:31
thinking, well, when it comes time to a
00:31:33
renewal, I'm going to just cut this in
00:31:35
half, or I'm going to cut this by 2/3,
00:31:37
or I'm going to cut this by 75%. because
00:31:40
the value isn't there anymore
00:31:42
>> or they can threaten to and negotiate a
00:31:44
better deal.
00:31:45
>> And it becomes even worse because the
00:31:47
minute you make these products headless,
00:31:49
right, and you say, "I'm just going to
00:31:50
communicate with these products via MCP
00:31:52
and with agents, you can't charge on a
00:31:55
per seat basis." What do you do then?
00:31:57
Freeberg doesn't need 50 seats of, you
00:32:00
know, workday. He needs two seats
00:32:03
because the agents act as the way to
00:32:06
write in and out of workday. So, he
00:32:07
wants to pay for two seats, not 50. And
00:32:09
then if you multiply that by a million
00:32:11
companies, that's what gets us to this
00:32:13
place where it just feels like a falling
00:32:15
knife. And I think it comes down to
00:32:18
these unit costs. The unit costs and the
00:32:20
price to value of these products are out
00:32:22
of whack with what the market needs and
00:32:24
wants. And until they reset that or you
00:32:27
find new products that can do it
00:32:28
cheaper, we're not going to get a
00:32:29
cleansing and a clearing here.
00:32:31
>> Yeah. Yeah, I think
00:32:31
>> by the way, Salesforce today is down 9%.
00:32:35
>> 140 billion enterprise value on 15
00:32:38
billion of free cash flow. This thing is
00:32:40
trading at less than 10 times free cash
00:32:42
flow. It's unbelievable.
00:32:44
>> I think it might be a bargain to be
00:32:45
honest.
00:32:46
>> Yeah, it sounds like bargain hunting.
00:32:48
And what if Beni off the king of
00:32:50
acquisitions? What if he just starts
00:32:52
cleaning up?
00:32:53
>> Well, he's been buying his own stock.
00:32:55
>> Yeah. And we didn't put this on the
00:32:56
docket, but did you guys see his kind of
00:32:58
headless product announcement?
00:33:00
>> Yeah. Do you see this? It's actually
00:33:02
very
00:33:02
>> It's very smart.
00:33:03
>> Yeah. I mean,
00:33:04
>> I think it's very smart.
00:33:05
>> There's ways that that business can
00:33:06
maneuver, right? And I think they're
00:33:08
>> pretty unique. It may be that of all the
00:33:10
businesses in the scape like that you
00:33:13
know the ones that have that scale that
00:33:15
have that multi-product platform that
00:33:17
have a lot of your data there's a lot of
00:33:19
opportunity for them to you know
00:33:21
maneuver their way into an evolution the
00:33:24
first one and because like if you look
00:33:25
at it and you compare it for example to
00:33:27
other companies I think the workday
00:33:29
response was to say you can't have an AI
00:33:31
interact with us without paying some
00:33:33
kind of like toll
00:33:34
>> you're exactly right that's
00:33:35
>> whereas Ben was the exact opposite which
00:33:37
is he's like okay we're going to go
00:33:38
headless for the whole thing which is
00:33:40
brilliant.
00:33:40
>> You're exactly right. You're exactly
00:33:41
right. I think that's that's going to be
00:33:42
the distinction of the winners here and
00:33:44
the losers and are you on the wrong side
00:33:46
of this?
00:33:46
>> The problem is that we have to figure
00:33:49
out what is the bottom clearing price
00:33:52
and that has nothing to do with business
00:33:54
quality and so is Salesforce a goodbye
00:33:57
at 10 times free cash flow? Historical
00:34:00
artifacts would tell us a screaming yes.
00:34:03
The problem is that if you cut
00:34:04
everybody's cash flows off at year five
00:34:07
or six or seven, then all of a sudden I
00:34:10
think you see the natural compression to
00:34:12
between three and five times free cash
00:34:13
flow. And that has nothing,
00:34:15
>> dude. That's that's crazy.
00:34:16
>> That has nothing to do with business
00:34:17
quality. That just says you you
00:34:19
literally mathematically take years 7
00:34:21
through n of the future and you discount
00:34:24
it to zero.
00:34:25
>> And having free cash flow in a war chest
00:34:28
gives massive optionality. We've seen
00:34:30
this with Salesforce. We've seen it with
00:34:32
Apple. We've seen it with Meta, with
00:34:34
Google, with Uber. Just having massive
00:34:36
free cash flow when you've got tens of
00:34:37
billions of dollars. You can put it to
00:34:39
work and you can weather these stoms.
00:34:42
>> Jal, I think another way to think about
00:34:44
this is,
00:34:46
>> you know, to the question about
00:34:47
maneuverability and who has the gumption
00:34:49
to make the hard choices right now.
00:34:51
>> Yeah.
00:34:52
>> Look at Ben off. He's the founder of the
00:34:54
company. He's run this thing since its
00:34:56
founding decades ago. He is willing to
00:34:59
bet it all. He's willing to make the
00:35:00
change. And it may be that the index you
00:35:03
buy in this era of AI transformation is
00:35:05
the index of founders. That the founders
00:35:08
who are still running their businesses
00:35:09
are going to be the ones who are most
00:35:10
likely to see the future.
00:35:11
>> The boats.
00:35:12
>> They'll burn the boats. They'll
00:35:13
maneuver. They'll make the changes. And
00:35:15
all of the guys who have hired managers
00:35:17
to run the business are going to do the
00:35:18
things that Chim's talking about, which
00:35:20
is try and charge fees and try and
00:35:21
maintain the old way of doing things as
00:35:23
opposed to reinvent for the new future.
00:35:25
If you look at the 10ks, if we could
00:35:26
figure out what the unit price cost and
00:35:29
the trend and the inflation is of a per
00:35:32
seat license for these products, I will
00:35:35
point to the ones that are going to die
00:35:36
first.
00:35:37
>> Can I make two quick points? So,
00:35:38
>> yeah, wrap us up.
00:35:39
>> Yeah.
00:35:39
>> One is yes, I would like fully endorse
00:35:41
what what you said about Beni off. He's
00:35:42
made every previous wave work to his
00:35:45
benefit, whether it was social, whether
00:35:48
it was mobile, whether it was big data,
00:35:50
all that kind of stuff. What are the
00:35:52
odds he's going to make AI work to his
00:35:53
benefit? I'd say pretty good. So, his
00:35:56
stock might be a bargain right now. So,
00:35:57
that just be point number one. Just on I
00:36:00
want to say just a quick thing about
00:36:02
venture debt, which is I I look I think
00:36:04
it's fine when private equity guys use
00:36:06
it because they know what they're doing,
00:36:07
but I've always hated when founders take
00:36:09
on venture debt. And I know Jacob, you
00:36:11
agree with me. Part of it is that
00:36:12
founders forget that they have to pay it
00:36:14
back. They treat it like venture capital
00:36:15
and they forget about that and then they
00:36:17
get surprised. But the other thing I've
00:36:19
never liked about it is it makes you
00:36:21
more fragile. It basically subjects you
00:36:23
to a bunch of business covenants and it
00:36:26
makes it harder for you to do an abrupt
00:36:29
shift in your business because now
00:36:30
you've got a bank looking over your
00:36:32
shoulder and they want to make sure they
00:36:33
get paid and they have to review your
00:36:35
financials and all the rest of it. And
00:36:37
to your point, Jal, the companies that
00:36:38
have free cash flow right now are the
00:36:40
ones that have the most maneuverability.
00:36:42
I hate taking away maneuverability from
00:36:45
founders and that is what debt does
00:36:47
because it subjects you to a fixed
00:36:49
schedule of payments. And so this is
00:36:52
always a thing to remember whether
00:36:53
you're a business or you're an
00:36:56
individual. You know, when you put on
00:36:58
that debt, it makes you more vulnerable
00:37:01
to big disruptions in the market.
00:37:03
>> Yeah. It just you become incredibly
00:37:05
brittle. And founders who are listening,
00:37:07
when you get that in in peak markets,
00:37:09
peak zer, you're going to have venture
00:37:11
debt people offer you tons of cash. And
00:37:13
then the problem Dave and I saw up close
00:37:15
and personal, many different companies
00:37:17
where founders would look at it as like,
00:37:19
oh, I'm extending my runway. Well, if
00:37:20
you're a hot startup, there's always
00:37:22
more venture capital. There's always
00:37:23
more people who want to own equity. The
00:37:25
equity sale gives you optionality. And
00:37:27
you have more people on your team, more
00:37:29
people rooting for you and aligned with
00:37:32
equity interest as opposed to now you
00:37:34
have a debt instrument. They have a
00:37:36
different goal. They have different
00:37:39
downside. They're trying.
00:37:40
>> No bank wants to be your last 3 to six
00:37:42
months of runway because that means that
00:37:45
in a high percentage of cases, they're
00:37:47
going to lose their money.
00:37:48
>> Yeah.
00:37:48
>> So, they're I've never seen I have never
00:37:52
seen venture debt work well to improve
00:37:54
the quality of a business never only
00:37:58
only ever seen venture debt cracks that
00:38:01
damage companies and if you get the
00:38:02
venture debt you can never actually use
00:38:04
it. So the venture debt investors that
00:38:07
ultimately make money it's because they
00:38:09
put money in a company and the company
00:38:10
never actually used the money they gave
00:38:11
them. I hate this business. I think
00:38:13
venture debt's like the worst
00:38:15
vulture-like business in Silicon Valley.
00:38:17
It's terrible. If you get down, if if
00:38:19
the last money in the bank is the debt
00:38:21
you owe to the bank, they're going to
00:38:23
rug you. That's when you get rugged
00:38:25
>> 100%.
00:38:26
>> You think they can afford to lose 100%
00:38:29
of their money when they're getting an
00:38:31
8% return or something like that? No
00:38:33
way. That's not how it works. VCs can
00:38:36
afford that because we have the
00:38:38
opportunity for a 10x or 100x or,000x
00:38:41
for that moonshot. So, we can accept a
00:38:43
bunch of zeros. The bank can't accept a
00:38:44
bunch of zeros. Well, and then when they
00:38:46
when they do get scared and when they do
00:38:48
think they're going to lose their money,
00:38:50
wait till you see what they extract in
00:38:52
terms of value, what they ask for. They
00:38:54
will ask they'll double the interest
00:38:56
rate. They'll ask for warrants. It's
00:38:59
basically like being in debt in prison.
00:39:01
Chim, you can talk a little bit about
00:39:03
your experience when you were uh in
00:39:05
debt. In prison, it's not going to be
00:39:07
pleasant. I've been in debt. I mean,
00:39:09
I've had a $420 million credit line,
00:39:13
>> and I had a moment where it was
00:39:15
reflexively kind of collapsing inward
00:39:18
because the assets that I was using to
00:39:19
secure it shrank in value in a moment of
00:39:22
market disruption. I was scrambling and
00:39:25
then at the same time there was a risk.
00:39:28
It was the worst moment of my
00:39:30
professional working life. I had like a
00:39:32
couple hundred million dollars sitting
00:39:33
at Credit Swiss and they were about to
00:39:35
implode. And so on a weekend, I was
00:39:37
trying to figure out whether my money
00:39:38
was still there. I had always had this
00:39:41
rule, don't have debt, and then I
00:39:43
violated it to try to run the number up.
00:39:46
I almost got run over. I almost lost
00:39:48
everything. I will never do it again.
00:39:51
And if I ever do it again, if you guys
00:39:53
ever hear me do it again, please just
00:39:54
come and punch me in the face.
00:39:56
>> We will. We've been waiting for an
00:39:58
excuse.
00:39:58
>> Can we punch you in the face for other
00:40:00
things, too? Buffett has this line about
00:40:02
this is how smart guys go bankrupt is
00:40:04
they take on debt.
00:40:06
>> Debt equals prison [ __ ] Keep it in
00:40:08
your mind guys. You will be a [ __ ]
00:40:10
>> Unless you socialize the debt then
00:40:12
everyone thinks it's okay which is what
00:40:13
we do with governments. And that's the
00:40:15
problem with government. Don't get
00:40:16
>> start going off.
00:40:18
>> Don't push the button. All right.
00:40:19
Listen. We got to talk about
00:40:20
>> another just just a quick aside on that.
00:40:23
In the 1950s, all the corporations in
00:40:25
America had pension plans where you
00:40:27
would get some guaranteed payout at the
00:40:29
end when you retire. And they were all
00:40:30
like, "We're all going to go bankrupt
00:40:31
because a pension plan is either
00:40:33
significantly overfunded or underfunded.
00:40:35
If it's underfunded, you're bankrupt. If
00:40:36
it's overfunded, you've wasted all this
00:40:38
money. You can't do anything with it."
00:40:39
So, they all moved to 401ks and
00:40:41
everything got moved to defined
00:40:42
contribution plans except except
00:40:45
>> governments. And that's because the
00:40:47
government employees formed government
00:40:49
public employee unions and they're like,
00:40:51
"We want to keep the pension plans and
00:40:53
now the pension plans, it turns out 70
00:40:54
years later are going to bankrupt all
00:40:56
the governments in the United States."
00:40:59
>> By the way, a guy Spencer Pratt who's
00:41:00
running for mayor, he started uncovering
00:41:02
all of the salaries of the union folks
00:41:05
and their pensions in Southern
00:41:07
California. It's bonkers. They're making
00:41:10
$4500,000
00:41:11
a year right before they go on pension.
00:41:14
then they double their overtime and they
00:41:15
get two/3 or a half. The pension doesn't
00:41:18
work. You got to go super annutation
00:41:19
fund. I don't know how many times we've
00:41:20
talked about it here, but
00:41:22
>> you don't need autation fund. You just
00:41:24
need a 401k. Let people have a have an
00:41:26
account. They got their money in their
00:41:27
account.
00:41:27
>> Yeah. But it's just a way to force
00:41:29
people to contribute to it. So a forced
00:41:31
401k is different than a 401k. You got
00:41:33
to force people and it's you're not
00:41:34
allowed to force people into their 401k
00:41:37
as you know. Yeah.
00:41:38
>> As we've seen in California, everything
00:41:40
related to the government is a giant
00:41:41
grift. It's a giant scam. There's tons
00:41:43
of fraud going on. Uh we've talked about
00:41:46
the homeless industrial complex, 12
00:41:48
billion a year to homelessness, but the
00:41:49
number of homeless keeps going up.
00:41:51
There's a million examples like that.
00:41:52
>> The racism industrial complex. We'll get
00:41:55
>> a good time. Let's shift to SPLC because
00:41:57
I think it's a good example.
00:41:58
>> Well, we'll get to it. We'll get to it.
00:41:59
Um yeah, but you know what's even better
00:42:01
is you can just pass a law like the Nick
00:42:02
Shirley Act and you can put your fingers
00:42:04
in your ear, cover your eyes, and say la
00:42:06
and just pretend the fraud's not
00:42:07
happening, which is their reaction in
00:42:09
California. Hey,
00:42:10
>> how much fraud has Nick Shirley
00:42:12
uncovered? So far in California
00:42:16
where he should be a billionaire,
00:42:18
>> you know, he should be doing it
00:42:19
privately and then getting the
00:42:20
whistleblower awards. I think that
00:42:22
actually would be a better strategy for
00:42:24
him.
00:42:25
>> We told him that was the we told him
00:42:26
that business model, remember?
00:42:28
>> Yeah. No, he I think he's addicted to
00:42:29
the views, but I mean he could literally
00:42:31
raise money on
00:42:34
>> concept. He's making thousands when he
00:42:35
could be making billions to be free. No.
00:42:37
>> Well, but it's better it's better for
00:42:39
the public that he's doing what he's
00:42:41
doing. Thank God for Nick Shirley.
00:42:43
>> So thank you, Nick Shirley. Whether you
00:42:44
could be making more money or not, what
00:42:46
you're doing is
00:42:47
>> You know what he also did? He shamed the
00:42:50
mainstream media who's forgotten about
00:42:51
investigative journalism, who forgot the
00:42:54
ability to knock on a door and just ask
00:42:55
a basic question. And now Bari Weiss
00:42:59
with CBS has deputized one of her
00:43:01
reporters and she's doing the exact same
00:43:04
playbook and meeting him punch for
00:43:06
punch. Where's CNN? Anderson Cooper
00:43:09
should have a Nick Shirley on his team.
00:43:10
The New York Times should have a Nick
00:43:12
Shirley. The LA Times should have a Nick
00:43:14
Shirley. Why don't they? That should be
00:43:16
>> hide. You're talking You're talking
00:43:17
about old media that does things one
00:43:19
way. And the point about Nick Shirley is
00:43:21
it's new media. It's citizen journalism.
00:43:23
It's people on the street distributing
00:43:25
factf finding, distributing information
00:43:27
gathering. And old media in order to
00:43:29
survive became an opinion organization.
00:43:30
>> Didn't the media used to care that the
00:43:32
Pentagon was paying $900 for a hammer or
00:43:35
what have you? I mean, like 60 Minutes
00:43:36
used to do things. Now it's like the
00:43:38
media just wants to protect the waste
00:43:42
fraud abuse no matter how egregious it
00:43:45
is. Remember,
00:43:46
>> do you remember that guy Dennis
00:43:47
Kuzlowski, the CEO of Tao, who went to
00:43:49
jail and they like had just a field day
00:43:53
stand?
00:43:53
>> Umbrella stand the $6,000 umbrella stand
00:43:57
>> made out of like Ivory from like no
00:44:00
elephant. I know you bought that, didn't
00:44:02
you?
00:44:03
>> Sax, you're so right. People really used
00:44:05
to care except when it was their team
00:44:08
and then the minute that it was their
00:44:09
team, they're like, "Oh, no. Let's just
00:44:10
look the other way."
00:44:11
>> You're right. If it's a CEO, if a CEO
00:44:14
basically engages in some misbehavior,
00:44:15
and I'm not defending it, the press will
00:44:17
be all over that. But when the
00:44:19
government does it, they don't do
00:44:20
anything. And in fact, we had one of the
00:44:23
most successful, probably the most
00:44:24
successful entrepreneur of our
00:44:27
generation donating his time to the
00:44:28
government to find waste. And the media
00:44:32
basically drove him out.
00:44:34
>> They vilified him and drove him out.
00:44:35
Yeah. They made it untenable. Well, this
00:44:37
is whoever comes up with a way to
00:44:39
eliminate waste, fraud, and abuse like
00:44:41
Doge did and they productize that and
00:44:43
make them make that their platform.
00:44:46
That's the way to win in 2028 and going
00:44:49
forward is to convince the public that
00:44:51
they don't need to have their taxes
00:44:53
raised. They could have their taxes
00:44:55
reduced just by eliminating the minimum
00:44:57
of 20 or 30% of waste for abuse there is
00:45:00
in the system. Uh, we'll get to Tim Cook
00:45:03
stepping down in just a moment, but I
00:45:05
want to remind everybody liquidity sold
00:45:07
out. I'm sorry we added a couple of
00:45:09
tickets. We we we burned through them
00:45:11
immediately, but you can still get into
00:45:12
the All-InSummit. This is our fifth
00:45:14
edition in Los Angeles, September 13th,
00:45:16
14th, and 15th.
00:45:18
>> Allin.com/events to apply. Please apply
00:45:21
and then don't come to us 60 days out
00:45:23
and say, "I didn't get a ticket.
00:45:25
>> I'm a bestie. Get me in." Just buy your
00:45:27
damn ticket and don't get left out.
00:45:29
>> I have a liquidity announcement.
00:45:31
>> Oh, yum, yum. We are going to do one
00:45:34
political panel,
00:45:35
>> okay?
00:45:36
>> And it's going to be Dave McCormack and
00:45:40
John Federman, the two sitting senators
00:45:42
from Pennsylvania on stage with us
00:45:45
talking about all topics from a left and
00:45:48
right perspective.
00:45:50
>> Amazing. So Federman's coming, which
00:45:52
means the dress code is now sandals, uh,
00:45:55
shorts, and a t-shirt. That's great.
00:45:57
Construction sheet. Get your Timberlands
00:45:59
out. your trim in that one. I mean, is
00:46:02
he really going to show up looking like
00:46:04
a hobo? I love his hobo style. It's
00:46:06
great.
00:46:07
>> McCormack's very fit and handsome, so
00:46:08
like he he'll he'll balance him out. So,
00:46:10
>> we should that's what we should program
00:46:11
it as. Like, he should wear his best
00:46:14
Brion suit versus the Old Navy from
00:46:17
Betterman who wore it better. All right,
00:46:20
listen. Just rapid fire here on the Tim
00:46:22
Cook uh resignation and moving on. This
00:46:25
guy, John Turnis, is a 25-y year vet. He
00:46:30
did lots of hardware, worked on iPad,
00:46:32
AirPods, and he was the favorite on Poly
00:46:35
Market since day one. He's a bold
00:46:38
decision maker according to reports. And
00:46:41
unlike Tim Cook, Cook, Tim Cook did a
00:46:43
great job of squeezing every last nickel
00:46:45
out of Steve Jobs's product line, which
00:46:48
lasted for a decade. iPhone, Apple TV,
00:46:50
watch, I don't need to repeat them, but
00:46:52
here we are. We got a product person in
00:46:55
the seat which is what we all know they
00:46:57
needed because hey these tools are
00:46:59
getting a little bit stale. Siri
00:47:01
descriad Airpods discretad the whole uh
00:47:05
system is not built on innovation
00:47:07
anymore. It's built Freeberg I think you
00:47:10
would agree on just ringing more profits
00:47:14
more profits. What's your hope here?
00:47:16
Because man they missed so many great
00:47:18
swings at bat. They didn't get the
00:47:20
Oculus, you know, Ray-B bands that Meta
00:47:23
did. They cancelled their self-driving
00:47:25
car. What would you hope that this new
00:47:27
CEO of Apple focuses on Freeberg in
00:47:31
terms of innovation? They don't have a
00:47:32
problem selling phones still. They don't
00:47:34
have a problem selling laptops and
00:47:35
making a ton of money. But if you were
00:47:36
in the seat, if you were on the board of
00:47:38
Apple, which wouldn't be a bad idea for
00:47:39
them if I'm being honest, what would you
00:47:41
tell the new CEO to focus on? David
00:47:43
Freeber.
00:47:44
>> I mean, I don't know. The software layer
00:47:46
of the future is not the software layer
00:47:48
of the past. So,
00:47:49
>> okay,
00:47:51
>> it's pretty obvious. I don't know if how
00:47:52
much there is to talk about, but you
00:47:53
just need the Siri equivalent that's
00:47:55
ubiquitous in all of your devices. Knows
00:47:57
who you are, personalized to you, sees
00:47:59
your email, sees your calendar entries,
00:48:02
knows what kind of music you like, has
00:48:03
connection to your home, basically build
00:48:05
that AI layer for your life and make it
00:48:09
ubiquitous in all of your Apple devices
00:48:10
that no matter what device you're using,
00:48:12
it knows who you are. You can engage
00:48:13
with it using kind of a natural language
00:48:16
method. And it's, you know, it's it's
00:48:18
pretty obvious.
00:48:19
>> Yeah, they should buy Whisper Flow.
00:48:21
Yeah. I mean, that would be
00:48:22
>> I don't know how they're I don't know
00:48:23
how they're running the business, but
00:48:24
>> Well, they're running it for profits,
00:48:26
obviously. Sachs. Uh I would say buy
00:48:28
Whisper Flow and just replace the Siri
00:48:30
team with that because Siri has been
00:48:31
just The fact that Siri can't spell
00:48:33
Polyhapatia or Calacanis after 20 years
00:48:36
of us giving them $20,000 for iPhones is
00:48:39
just disgraceful. Sax, if you were on
00:48:42
the board of Apple, again, not a bad
00:48:43
idea. What would be your hope for the
00:48:46
company? What would be your sage advice
00:48:48
for the new CEO?
00:48:50
>> Well, I mean, everybody is going to be
00:48:52
asking the same question, which is what
00:48:54
are you going to do about AI? I don't
00:48:56
know that they needed to be on the
00:48:57
bleeding edge of it, but they are going
00:48:58
to need an answer at some point. And
00:49:00
Siri is going to need to be AI
00:49:02
empowered. Probably the way it should
00:49:04
work is that you get to choose your
00:49:06
model. I mean, I don't know that they
00:49:07
need to pick just one model provider. It
00:49:09
could be a setting where you go in and
00:49:11
you set up your account with whatever
00:49:13
chat GPT or Grock or Claude or what have
00:49:16
you and you can choose your own model
00:49:18
provider and then you'll have more
00:49:19
customization and more ability to
00:49:22
control your your storage. Let me just
00:49:24
say just on Tim Cook's retirement, he
00:49:28
had an incredible run as CEO of of
00:49:31
Apple, I mean he ran it very effectively
00:49:33
for 15 years. The market cap of the
00:49:36
company went up by over 10x. the revenue
00:49:38
grew from roughly 100 billion a year to
00:49:40
over 400 billion a year. He also
00:49:43
improved the quality of revenue by
00:49:45
moving the mix into services which is
00:49:47
partly why it got why it got a higher
00:49:50
valuation and you know people say that
00:49:53
well they never did any innovation under
00:49:55
Tim Cook but you know I've seen people
00:49:56
tweet lists of products that were
00:49:58
released under him and there were a lot
00:50:00
of them now it's true nothing as big as
00:50:03
the iPhone but they did release a lot of
00:50:05
products under Tim Cook and then just
00:50:07
finally I mean you you look back over
00:50:08
the last 15 years and there really
00:50:11
weren't any public snafuss or scandals
00:50:16
or brogleos with with Apple. It's one of
00:50:18
the few tech brands that is still I
00:50:21
think beloved by the population. I think
00:50:24
a major part of that was Tim Cook's
00:50:26
dedication to privacy and keeping the
00:50:28
company on the right side of that which
00:50:30
I think users do appreciate. And you
00:50:32
know he even Tim Cook even got praise
00:50:35
from the president. And I think it was
00:50:37
just unsolicited where the president
00:50:39
talked about how Tim Cook didn't call
00:50:41
him up that often, but when he did it
00:50:43
was something important and therefore
00:50:44
the president tried to help them out.
00:50:46
Seems like he nurtured a good
00:50:47
relationship with the president over
00:50:48
over the last decade or so. So you just
00:50:51
have to say that he navigated what could
00:50:53
have been a turbulent period with a
00:50:55
great deal of grace and appl. Clearly uh
00:50:59
Chimath he was a great steward of the
00:51:01
brand even though that list of products
00:51:05
were all developed under Steve Jobs and
00:51:08
they were just executed well but he
00:51:10
didn't bring in a lot of new products or
00:51:13
services. Any final take
00:51:15
>> actually let me ask you a question. What
00:51:17
do you think
00:51:18
>> other than AI you know AI powered Siri
00:51:21
let's say what do you think he missed? I
00:51:24
mean, what should Apple have done that
00:51:26
they didn't do?
00:51:28
>> They would have out by now a pair of
00:51:30
glasses that weren't 17 pounds like the
00:51:33
Apple Vision Pro. They would have gotten
00:51:36
glasses that pair perfectly with your
00:51:38
phone, take videos for kids, and they're
00:51:39
coming out with it. It's just on a
00:51:41
really broken timeline. They would have
00:51:43
had a killer Siri. They would have had a
00:51:46
search engineish perplexity-l like
00:51:48
product. They would have had a
00:51:50
self-driving car. When you went to the
00:51:51
Apple store, you would have been buying
00:51:53
two or three very important products.
00:51:55
Glasses, a car, and probably a
00:51:58
television set. If you look at actually
00:52:00
what they did innovative under Tim Cook,
00:52:02
I think the they have great taste and
00:52:04
Apple TV produced a lot of great
00:52:06
programming. I he was working on a
00:52:09
television set, not Apple TV clunked
00:52:11
onto the back. I think those three
00:52:13
products would have been four products,
00:52:15
Siri, glasses, car, television set.
00:52:18
Those would have been extraordinary. And
00:52:20
who knows what he would have come up
00:52:21
with when they lost Johnny IV uh and
00:52:23
obviously Steve Jobs passed away. They
00:52:25
lost the soul of the company. They lost
00:52:27
the innovative groundbreaking soul of
00:52:30
the company and they just went into
00:52:32
profit and iteration mode. But no
00:52:35
acquisitions of note, nothing important
00:52:38
was acquired and nothing important was
00:52:41
released. Vision Pro, you can give them
00:52:43
like maybe that's like the sixth best
00:52:45
product or something, but it obviously
00:52:47
hasn't hit the mainstream. Chimab, any
00:52:49
final thoughts from you?
00:52:50
>> Yeah, I have um
00:52:52
three specific things to say. The first
00:52:54
is that he had honestly like an
00:52:56
impossible job. It's sort of like you
00:53:00
play
00:53:02
basketball with Michael Jordan and then
00:53:04
you're asked to be Michael Jordan. And I
00:53:07
think that that's an impossible task.
00:53:08
And on that dimension, I think he has
00:53:10
done just an incredible job. He has been
00:53:13
an incredible steward of the business.
00:53:15
Sax is right. no major snafuss. I think
00:53:19
he did a really smart thing around
00:53:21
doubling down on privacy and just as a
00:53:24
practical matter of being a great CEO
00:53:27
like if you I think you can categorize
00:53:29
CEOs in two buckets. One is the
00:53:32
innovator, the person that's pushing the
00:53:35
envelope and then the second is just a
00:53:37
great steward. He's at the top of the
00:53:40
top of that second category. Um, I sent
00:53:43
you a couple of charts to to show this
00:53:46
and he found a lane that allowed him to
00:53:49
separate himself from Steve Jobs. So,
00:53:51
you know, as an example, like what does
00:53:53
it mean to be a steward? Well, when
00:53:56
you're a steward, you're allocating
00:53:57
resources. And the two most important
00:53:59
resources you control is capital and
00:54:02
people. And I think on that dimension,
00:54:05
what Tim did, if you just look at this,
00:54:07
is he was able to invest appropriately
00:54:10
in R&D. They completely divested their
00:54:13
need of Intel. They spun their entire
00:54:16
new line of silicon. That silicon, it
00:54:19
turns out, and this will be important in
00:54:20
the future, is very useful in AI with
00:54:24
all of this open cloth stuff. And you
00:54:26
know, some of you guys are completely
00:54:27
addicted to it. And they've kept the
00:54:30
acquisitions light. So, he was very
00:54:32
capital efficient. If you look at the
00:54:34
the next chart, what's so interesting is
00:54:36
like it is the exact opposite of what
00:54:38
Steve Jobs did. Look at the amount of
00:54:40
money that Steve Jobs returned to
00:54:42
shareholders in his tenure at Apple.
00:54:44
It's easy to count. It was zero. He
00:54:46
loved to keep that money on the balance
00:54:49
sheet and he probably or maybe I'm
00:54:51
guessing would have directed that at
00:54:53
some huge shot on goal. In the Tim Cook
00:54:56
era, it was very different. He shrank
00:54:57
the share count by almost 50%. I think
00:54:59
it's like 44%.
00:55:01
>> That's insane. Is there any correlary to
00:55:03
that, Chim? No, he's he's been a
00:55:06
prolific
00:55:07
shareholder friendly CEO, finding ways
00:55:10
to give us money back, which I think
00:55:11
everyone who's owned the stock has very
00:55:14
deeply appreciated. The last thing I'll
00:55:16
say though is what is the future for
00:55:18
John Turnis, and I think it's in this
00:55:19
final chart. We talked about
00:55:22
the problematic nature of increasing per
00:55:26
unit pricing in SAS
00:55:29
and what I would say is if you look at
00:55:31
the iPhone
00:55:33
the unit price has gone up and people
00:55:35
would say yes but the capabilities have
00:55:37
gone up in turn and I acknowledge that
00:55:40
but the problem with the per unit
00:55:42
pricing being as high as it is is what
00:55:45
Freeberg says is going to happen. AI
00:55:47
rips open the canvas of the devices that
00:55:50
we will use to interact with information
00:55:52
and knowledge.
00:55:54
We are going to live in a much more
00:55:56
heterogeneous world in the future. It's
00:55:58
not going to be two devices and two
00:56:00
different operating systems that get you
00:56:02
to knowledge. There's going to be all
00:56:04
kinds of stuff, pens, orbs, who knows,
00:56:08
Jason, your glasses, whatever.
00:56:10
And so the problem is if you get too
00:56:12
addicted to a single thing that has an
00:56:15
incredibly juicy profit margin and great
00:56:19
stickiness and the ability to raise
00:56:21
price, it's a hard drug to get off of.
00:56:24
So I think really what John Turnis has
00:56:26
to do is figure out how to move to this
00:56:29
world where everybody will be launching
00:56:32
devices via MCP or otherwise. All of
00:56:36
these services will be open. It'll be
00:56:39
aentically talking to everything. I
00:56:41
think the most decay
00:56:44
and I think if that happens that's
00:56:46
problematic if you're too reliant on a
00:56:48
single thing to kind of keep it going.
00:56:50
>> Yeah. And just expanding on what you
00:56:52
said like wearables is where they really
00:56:55
uh made some good inroads in terms of
00:56:57
getting people to use them whether it's
00:56:59
AirPods or the watch. And the next
00:57:01
wearable this is a plaude pin that I use
00:57:04
to record. You can put it here and put
00:57:05
it on your wrist. That AI synchronicity
00:57:09
of having your eyes, having your ears,
00:57:12
having your watch, having your phone,
00:57:13
your desktop all synced together with AI
00:57:16
could be a huge product line. I'll also
00:57:18
add a fifth robotics. You know, the I
00:57:21
think t I think Steve Jobs, if you were
00:57:24
alive today, would have been looking at
00:57:25
Roomba. He would have been looking at
00:57:26
Optimus and he would have said, hm,
00:57:29
consumer robotics in addition to a
00:57:31
consumer car. Those are two things I
00:57:34
think he would have absolutely
00:57:36
uh executed on at a high level. Okay,
00:57:39
let's keep moving here. Uh
00:57:40
>> just come come make one last
00:57:41
>> and we'd love to have you on the pod,
00:57:42
John. So, just come on the pod when
00:57:44
you're ready. Uh we'll have you come sit
00:57:45
in. Go ahead. S get the final word.
00:57:47
>> Just one last point on this is that I
00:57:49
think the succession at Apple is
00:57:53
reminiscent a little bit of the
00:57:54
succession at Disney. And apparently
00:57:58
Steve Jobs and Tim Cook had this
00:58:00
conversation back when Steve was alive.
00:58:01
and and Steve told Tim don't do what
00:58:05
Disney did where basically after Walt
00:58:06
Disney died the company kind of
00:58:09
languished because it felt so beholden
00:58:12
to Walt's vision that they never really
00:58:14
iterated. Now when Walt died his brother
00:58:18
Roy took over and Roy was already in the
00:58:20
business he was sort of like the
00:58:21
business co-founder. He was a COO type a
00:58:24
little bit like Tim Cook and he kept the
00:58:26
magic going for about 5 years and then
00:58:27
he himself died. I think it was around
00:58:29
1971 and then you had this string of
00:58:31
CEOs who took over kind of uninspired
00:58:33
and it wasn't until Eisner came in in
00:58:36
1984 that he sort of revitalized the
00:58:38
business and so as I understand it Steve
00:58:41
and Tim had this conversation and Steve
00:58:43
told him don't be too beholdened to my
00:58:45
vision you need to figure out your own
00:58:47
and extend it. I think that, you know,
00:58:49
you could argue that Tim in a way was
00:58:51
like the Roy figure here. Very effective
00:58:55
business partner of Steve. He got a
00:58:59
15-year run. Roy only got five. And I
00:59:02
think again, he added a zero to the
00:59:05
value of the company. The market cap
00:59:07
went up over 10x. So, you'd have to say
00:59:09
fantastically successful run
00:59:12
>> as CEO. I think the question now for
00:59:14
John Turnis is okay, you're now past,
00:59:17
let's say, the the Walt Disney and Roy
00:59:19
Disney part of the business. Is it going
00:59:21
to be like the 1970s
00:59:23
Disney or is it going to be more like
00:59:24
the 1980s? Do you figure out way to
00:59:26
revitalize it or do you have to go
00:59:28
through
00:59:30
kind of a funk first?
00:59:32
>> Yeah. And if I I think it's like really
00:59:34
illustrative of this discussion, Eisner
00:59:37
and Iger because Eisner's innovation was
00:59:40
he realized that Disney was uh I think
00:59:43
he called it the vault strategy. He
00:59:45
would and we probably remember this from
00:59:47
our childhoods. He would re-release all
00:59:50
into theaters all of their IP every
00:59:52
seven years. You couldn't get some of
00:59:54
those Bambies, whatever, Snow White and
00:59:57
the Seven Dwarfs. You couldn't get those
00:59:59
products except in theaters. and he
01:00:00
figured out a cadence to keep
01:00:02
publishing. But then I came in and said,
01:00:04
"Hey, what if we use this balance sheet
01:00:06
and we use this distribution at the
01:00:09
parks uh and you know with their brand
01:00:12
to buy Pixar, Marvel uh and Star Wars.
01:00:16
And so there's multiple ways to do it.
01:00:18
There might be something there in terms
01:00:19
of acquisitions. bold acquisitions with
01:00:23
the Apple balance sheet could be super
01:00:25
accreative to shareholders as opposed to
01:00:28
lowering the share count and just
01:00:30
distributing a ton of cash. All right,
01:00:32
listen. We're going to talk about the
01:00:33
Southern Poverty Law Center.
01:00:36
>> Racism Corner. Let's go to race fake
01:00:38
fake racism corner. I want to know how
01:00:40
the SPLC managed to accumulate $822
01:00:44
million in offshore bank accounts.
01:00:46
>> Yeah, this is incredible. These are big
01:00:48
numbers. Okay, SPLC. How is that
01:00:50
possible? What is going on? All right,
01:00:52
let me tee it up here for the team.
01:00:54
>> This is like one of the biggest griffs
01:00:55
of all time. Anyway, Jake,
01:00:57
>> this is a big one. SPLC has been
01:00:59
indicted. Indicted, not found guilty
01:01:01
yet, on 11 counts of wire fraud and
01:01:04
money laundering. Keep that in the back
01:01:06
of your head. Wire fraud and money
01:01:07
laundering. Here's the core allegation.
01:01:09
Between 2014 and 2023, the Southern
01:01:12
Poverty Law Center used hidden bank
01:01:14
accounts to funnel 3 million in donor
01:01:16
money to paid informants. Like these are
01:01:19
confidential informants like the police
01:01:21
or FBI might use. They use these as a
01:01:24
nonprofit NGO to infiltrate hate groups.
01:01:29
And so the official mission of the SPLC
01:01:33
is quote to be a catalyst for racial
01:01:35
justice in the South and beyond, working
01:01:37
in partnership with communities to
01:01:39
dismantle white supremacy, strengthen
01:01:41
intersectional movements, and advance
01:01:44
the human rights of all people. Okay,
01:01:45
sounds great on paper. Examples of
01:01:47
organizations they were trying to
01:01:49
infiltrate, KKK, Aryan Nation, neo-Nazi
01:01:52
groups, and the Unite the Right
01:01:54
organizers, Proud Boys, labeled as a
01:01:56
hate group by the SPLC. Oathkeepers, not
01:01:59
listed as a hate group, but part of the
01:02:01
militia movement. My friend Sam Harris,
01:02:04
he was not listed as a hate group, but
01:02:05
he was also pinned by the SPLC as like
01:02:09
hate adjacent in their hate watch
01:02:11
headlines. And this is something that I
01:02:13
had a major problem with this
01:02:14
organization on, which is they would
01:02:16
just very loosely label people as hate
01:02:19
speech and try to get them cancelled.
01:02:21
All of this kind of uh came to a head.
01:02:24
revenue before Charlottesville. You
01:02:26
remember the incorrectly clipped uh
01:02:29
Charlottesville hoax where they said
01:02:30
Trump said both good people on both
01:02:32
sides, but they didn't give his full
01:02:33
quote. Very unfair to President Trump.
01:02:36
Uh we found out later and that was the
01:02:38
reason Biden of course ran. He said the
01:02:40
Charlottesville both sides thing was his
01:02:42
inspiration. 58 million in 2026 to your
01:02:45
point Shimoth doubled and spiked to 136
01:02:48
million more than double and it's
01:02:50
remained elevated ever since. Here are
01:02:52
some, you know, images for the
01:02:54
indictment. And I'll wrap on this and
01:02:56
then get everybody's uh feedback. They
01:02:59
had F37 as one of their confidential
01:03:02
informants. He was a member, and this is
01:03:05
according to the indictment, quote,
01:03:06
member of the online leadership chat
01:03:09
group that planned the 2017 Unite the
01:03:11
Right event in Charlottesville,
01:03:14
Virginia, and attended the event at the
01:03:16
direction of the SPLC.
01:03:19
F-37 made racist postings under the
01:03:21
supervision of the SPLC and helped
01:03:23
coordinate transportation to the event
01:03:25
for several attendees between 2015 and
01:03:27
2023. The SPLC secretly paid F-37 more
01:03:31
than $270,000.
01:03:33
That's the legal case here. Let me pause
01:03:35
there.
01:03:36
>> Can I add one thing?
01:03:37
>> Sure. Keep adding. There's a lot of
01:03:38
detail to this case. Yeah.
01:03:39
>> Yeah. So, you're right that the SPLC
01:03:41
allegedly did fund $270,000 to help plan
01:03:45
Charlottesville. In addition to that,
01:03:47
they secretly funneled more than $3
01:03:49
million
01:03:51
to a bunch of violent racist extremist
01:03:53
groups, including the Ku Klux Clan, the
01:03:57
American Nazi Party, Aryan Nation,
01:04:01
United Clans of America, and it goes on
01:04:04
from there. So, I think don't forget
01:04:06
about the 3 million bucks. So this group
01:04:08
that was supposed to be fighting racism
01:04:09
in fact was fermenting racism by paying
01:04:13
these groups to basically organize
01:04:16
protests that SPLC could then point to
01:04:19
and say that America has a huge racism
01:04:21
problem donate to us. And that's
01:04:23
basically what happened after
01:04:24
Charlottesville. They increased the
01:04:27
amount of money that they were able to
01:04:29
fund raise by $81 million. So that
01:04:32
$270,000 investment led to an $81
01:04:35
million return. pretty good. But this is
01:04:37
kind of the whole point of the story is
01:04:38
that these guys are basically running a
01:04:39
grift. And one of the ways that you know
01:04:42
this is a grift is because according to
01:04:45
the indictment that they opened bank
01:04:48
accounts under fictitious entities to
01:04:51
conceal the payments that they were
01:04:53
making from their own donors because if
01:04:55
their donors knew that they were funding
01:04:58
the KKK,
01:05:00
they wouldn't be getting all these
01:05:02
contributions from Hollywood celebrities
01:05:04
and all the rest of it. So, it's really
01:05:06
just this unbelievable story.
01:05:09
>> Uh, it really boggles the mind.
01:05:11
>> And just to clean up a little bit there,
01:05:12
these are allegations. They haven't made
01:05:14
the jump from planning these events. And
01:05:17
the SPLC
01:05:20
claims they were not planning these
01:05:22
things. They were monitoring. So, that's
01:05:24
going to be their argument on the side.
01:05:25
I'm not saying I agree with that. I'm
01:05:26
not saying you're right that the SPLC's
01:05:29
cover story is that they were simply
01:05:31
paying informants. That's what they've
01:05:33
claimed. But there's two problems with
01:05:35
that story. Number one is they were
01:05:37
paying the actual leaders of these
01:05:39
groups, not just sort of moles who were
01:05:42
infiltrating the groups. And second,
01:05:44
these leaders, they weren't paid to
01:05:46
inform. They were paid to ferment the
01:05:49
activities. So I'm just saying that's
01:05:51
the the flaw. I understand they have
01:05:53
this cover story that they were just
01:05:54
paying informants. I'm just saying in my
01:05:56
view that does not hold up. And again,
01:05:59
if they were just paying informants, why
01:06:01
the extraordinary efforts to conceal the
01:06:02
payments from their own donors? If they
01:06:04
were proud of these efforts to
01:06:06
infiltrate these groups, they should
01:06:08
have basically informed their donors
01:06:09
what they were doing. In fact, they hid
01:06:11
it.
01:06:12
>> And well, here's the reason uh that it
01:06:14
was hidden according to them. Again, I'm
01:06:16
not taking this side. SPLC is not an
01:06:18
organization I'm endorsing in any way.
01:06:21
Their version of this is we didn't plan
01:06:23
any of this. If we put SPLC
01:06:27
bank accounts together for informants,
01:06:29
that would be like the FBI sending a
01:06:31
check to an informant from an FBI
01:06:33
account. That's their explanation of it.
01:06:34
>> They're not a law enforcement agency.
01:06:36
>> Well, that's actually the question I had
01:06:38
about all this is like what is a
01:06:39
nonprofit doing hiring confidential
01:06:42
informants, Chimoth, to infiltrate these
01:06:44
organizations? To what end? And then if
01:06:46
you show me an incentive, you're going
01:06:48
to you're going to see an outcome. And
01:06:49
the outcome here is, hey, we'll get more
01:06:51
donations if there's more racism.
01:06:54
uh your thoughts just generally speaking
01:06:55
here Chimath again all of this is
01:06:57
alleged
01:06:58
>> these NOS's have completely run a muck
01:07:01
they're are cosplaying as these
01:07:04
overlords and power brokers in our lives
01:07:06
and it needs to get stopped they should
01:07:09
all be dismantled the people that
01:07:11
donated to the SPLC should sue them rip
01:07:14
open all of the documentation get their
01:07:16
money back because just so you guys know
01:07:18
if you are listening or watching and you
01:07:20
have donated there is 822 million dollar
01:07:24
of your money sitting in an offshore
01:07:25
bank account waiting for you to get it
01:07:27
back. Okay? And then separately, if you
01:07:30
are thinking of donating to any of these
01:07:31
organizations in the future, unless
01:07:33
there is a full transparent auditing of
01:07:37
it, you actually may be doing the
01:07:39
opposite of what you thought. If you are
01:07:41
against racism, you may be supporting
01:07:43
racism. If you are against
01:07:45
discrimination for gays, this could be
01:07:48
actually promoting discrimination for
01:07:50
gays. If you are supportive of trans
01:07:51
rights, this may be pushing back against
01:07:53
trans rights because the playbook seems
01:07:55
to be do the opposite to create the
01:07:58
narrative, give it to your friends in
01:08:00
the media who will look the other way
01:08:01
and just amplify it, tell the lie,
01:08:03
create the craziness, and then raise a
01:08:07
bunch of money, make a bunch of stink,
01:08:08
and try to curate power. Freeberg, do
01:08:11
you think this is uh in your estimation
01:08:14
or your gut tell you this is arsonist
01:08:16
firefighters? are lighting things on
01:08:18
fire so that they can go put it out or
01:08:20
do you think this is like um lawfare as
01:08:24
some people are claiming because there
01:08:26
hasn't been to Chimat's point it's they
01:08:29
don't have donors taking this action
01:08:31
they're being accused of wire fraud on
01:08:33
behalf of donors who haven't shown up
01:08:34
yet to do you know a legal action what's
01:08:36
your take on all of this Freedberg
01:08:39
>> the IRS definition of what a 501c3
01:08:43
nonprofit organization is meant to be
01:08:45
doing is to engage engage in exempt
01:08:48
activities. The definition of exempt
01:08:50
activities is charitable,
01:08:53
religious, educational, scientific,
01:08:57
literacy,
01:08:58
public safety, or fostering amateur
01:09:02
sports competition or preventing cruelty
01:09:04
to children or animals. You tell me how
01:09:07
the 90% of what we call nonprofits today
01:09:12
fall under that definition. We have
01:09:14
completely closed our eyes to the fact
01:09:17
that organizations regardless of
01:09:19
political affiliation, social interest,
01:09:21
have fundamental commercial and probably
01:09:24
not aligned interests with the
01:09:26
definition of a 501c3. And we've allowed
01:09:29
them all to get away with it for far too
01:09:31
long. I don't think that this is a blue
01:09:33
or red thing. I think that this is a
01:09:35
thing where we let these organizations
01:09:37
make it easy to get money, to hide the
01:09:39
money, and to do whatever the hell they
01:09:40
want with the money. and we need to stop
01:09:42
it. And I think that it's an amazing
01:09:44
opportunity right now for everyone to
01:09:47
kind of reset the decks by cleaning all
01:09:49
this [ __ ] up and getting all of these
01:09:51
organizations flushed and make sure that
01:09:53
any organization that wants to do
01:09:54
whatever [ __ ] nefarious things they
01:09:56
want to do, by all means do it. But it's
01:09:59
not a nonprofit and you shouldn't get a
01:10:01
charitable donation deduction and the
01:10:03
government should not be putting money
01:10:05
into these sorts of things. This is an
01:10:07
entirely different sort of activity in
01:10:10
the social order. And as a libertarian,
01:10:12
I'm all for it. But I don't think that
01:10:14
they should be taxexempt. And I don't
01:10:15
think they should be getting government
01:10:17
money. And I don't think that
01:10:18
individuals should be benefiting from
01:10:19
giving them money. And if we could fix
01:10:21
all that [ __ ] up, I think a lot of these
01:10:22
problems are going to go away. And I
01:10:24
think this is a major problem. I think
01:10:25
the theme of this episode is audit
01:10:27
everything. Whether it's government
01:10:29
waste and abuse or it's these NOS's or
01:10:32
it's people like Dao making these
01:10:34
chemicals that 30 years later, you know,
01:10:37
perhaps are correlated with cancer. We
01:10:41
need to audit everything. We need to
01:10:42
take a fresh look at this because it's
01:10:43
not red versus green. Red, this is not
01:10:46
red versus blue, it's green. This is
01:10:47
clearly a monetary incentive and it is
01:10:50
incredibly disruptive for society to not
01:10:52
know the truth about what's going on
01:10:55
with race in this country. I got
01:10:58
absolutely, you guys might not know
01:11:00
this, but in this is part of the cancel
01:11:03
culture moment in time where they tried
01:11:05
to take people having reasonable
01:11:06
discussions about race in this country
01:11:08
and tried to cancel them. They tried to
01:11:10
do this to me in 2014 very famously. You
01:11:13
guys may not know this, but I have won a
01:11:14
couple of awards in my career. most
01:11:16
offensive tweet ever by Vice in 2014 was
01:11:20
my alleged racist tweet where I said,
01:11:23
"Hey, if you want to get into uh
01:11:25
blogging and journalism, there's no
01:11:27
racism in check journalism. All you have
01:11:28
to do is publish for a couple of years a
01:11:30
blog post. Nobody can stop you and
01:11:32
there'll be a ton of jobs available to
01:11:34
you." And then what they did was they
01:11:35
tried to cancel me and tried to cancel
01:11:37
all my media properties, my investing.
01:11:40
And this stuff had like a modest impact
01:11:41
on me maybe for a year. And then now
01:11:44
it's obviously all being
01:11:46
>> Wait, wait. I'm not sure I understand,
01:11:47
Jake. You're saying the SPLC put you on
01:11:49
a cancellation list?
01:11:50
>> No, they put Sam Harris on it. Vice put
01:11:52
me on a cancellation list. I It didn't
01:11:54
get picked up by the SPLC, but I
01:11:56
experienced the same thing, which was
01:11:58
they said because I said, you know, race
01:12:00
does race doesn't play a role in hiring.
01:12:04
>> You're so careful about your virtue
01:12:05
signaling. I'm just shocked that anyone
01:12:07
would try to cancel you.
01:12:08
>> Well, that's what's shocking about it is
01:12:09
like I know I was very clear. I said in
01:12:13
journalism like a very vertical thing
01:12:14
and I have a lot of experience.
01:12:16
>> You're a very skilled virtue signature.
01:12:17
So
01:12:18
>> I mean they tried to cancel me guys. I
01:12:20
don't you know it's they tried to cancel
01:12:22
you too.
01:12:23
>> Jason go ahead. You have a question for
01:12:24
me.
01:12:25
>> I'm uncancellable.
01:12:26
>> Yes.
01:12:27
>> We all are. That's what we found out
01:12:28
through all this.
01:12:30
>> You care about what all these idiots
01:12:31
think.
01:12:32
>> No, I don't. I never have.
01:12:34
>> Jason, I have a question for you. Go
01:12:35
ahead. What percentage odds now do you
01:12:37
keep in the back of your mind that your
01:12:39
petite little illustrious human rights
01:12:41
watch is actually creating human rights
01:12:44
abuses to try to
01:12:46
>> This is actually a very good point. You
01:12:47
know a lot of the human rights
01:12:49
organizations from back in the day.
01:12:50
>> What is the organization that you were
01:12:52
what is it called?
01:12:52
>> Amnesty International.
01:12:54
>> When I worked at Amnesty International,
01:12:55
a very fine
01:12:57
>> mandate. The mandate was human rights
01:12:59
abuses as described in the Universal
01:13:01
Declaration of Human Rights created by
01:13:03
Eleanor Roosevelt and the U.
01:13:06
>> This is like Science Corner. This is
01:13:07
done.
01:13:08
>> No, but it was torture. It was people
01:13:10
being put in jail and being tortured. It
01:13:12
was people being censored because of
01:13:15
freedom of speech and and that's what I
01:13:17
worked on when I was at Amnesty
01:13:18
International. These groups went a drift
01:13:21
in order to get money, Human Rights
01:13:23
Watch included. And then they started
01:13:25
taking on things like, you know, uh,
01:13:28
transgender rights, this rights, that
01:13:30
rights, and censoring people. They went
01:13:33
after Sam Harris because he had Charles
01:13:36
from the bell curve.
01:13:37
>> Stop with all this [ __ ] I'm asking
01:13:39
5050 chance that all these organizations
01:13:41
are involved in
01:13:42
>> So you think 50 5050 chance
01:13:43
>> depending on the organization, I'm going
01:13:45
to guess 95%. Yeah. Amnesty
01:13:48
International, you think is 50/50 that
01:13:50
they're engaging in nefarious [ __ ]
01:13:52
to try to whip up people's belief that
01:13:54
there are human rights abuses happening
01:13:56
that are not happening. You're saying
01:13:57
it's a coin flip?
01:13:58
>> I think it's probably a coin flip. Yeah,
01:14:00
that's what I would say today because
01:14:01
these organizations all got co-opted.
01:14:03
SPLC might have had a great origin
01:14:05
story, but now
01:14:07
>> I admire your intellectual honesty and I
01:14:09
appreciate you saying that.
01:14:10
>> Well, I mean, just based on facts. So,
01:14:12
let's see what this legal case brings
01:14:15
about.
01:14:15
>> Well, let's be clear. This is not them
01:14:17
investigating SPLC 100%.
01:14:20
>> When you bring a grand jury indictment,
01:14:22
you've already previewed the evidence.
01:14:24
This is not like some guy's trying to
01:14:25
whip up lawfare.
01:14:27
>> Okay.
01:14:27
>> Um, actually, you don't have to bring
01:14:29
all the evidence, but that's a side
01:14:31
thing. And and they're very frisky about
01:14:33
allowing you to indict somebody as we
01:14:35
experienced with Trump.
01:14:37
>> Grand juries are a whole different
01:14:38
animal.
01:14:39
>> Yeah, they they will indict a ham
01:14:40
sandwich is the line. Um, so we'll see.
01:14:42
Let's give them their day in court is
01:14:44
always my position. Well, I mean,
01:14:45
regardless of what happens in court, if
01:14:47
it's true that the SPLC is funding the
01:14:49
Klux Clan and the American Nazi, just so
01:14:52
we're clear, they stop using
01:14:54
confidential informants.
01:14:56
Say it out loud, it's insane.
01:14:58
>> It's good enough for me. Listen, here's
01:15:01
here's the systemic problem with
01:15:03
nonprofits and NOS's is, and let me just
01:15:06
contrast it with business. In business,
01:15:08
you set up a company. The company has to
01:15:10
make revenue. It has to make profits.
01:15:12
And if it doesn't, it's going to go out
01:15:13
of business, right? Because it'll lose
01:15:15
money. So, there's a feedback mechanism
01:15:17
from the market. The company has to
01:15:19
create products that people are willing
01:15:20
to buy, and those products have to make
01:15:22
money. With an NGO, nonprofit, what have
01:15:24
you, they raise money. They don't sell
01:15:27
things. They fund raise from donors in
01:15:30
order to engage in an activity. But what
01:15:32
happens over time is the actual
01:15:34
activities may stop mattering. And all
01:15:37
that really matters is they're able to
01:15:38
keep fundraising, right? Because they're
01:15:39
just trying to figure out a
01:15:41
justification to keep going back to
01:15:43
donors to get more and more money out of
01:15:44
them. That's what perpetuates the
01:15:45
organization
01:15:46
>> and they're trying to keep their job.
01:15:48
>> Exactly. And then if it's an NGO that
01:15:50
gets money from the government, then
01:15:52
it's even worse because all they do from
01:15:54
that point forward is try to lobby the
01:15:56
government to get more money. And it
01:15:59
doesn't really matter whether the
01:16:01
program is working or not. All that
01:16:03
matters is whether they can spin it as
01:16:05
working. Why wouldn't the Southern
01:16:06
Poverty Law Center focus on southern
01:16:09
poverty, which is an issue that actually
01:16:11
still exists? It's
01:16:12
>> got be a better thing. I mean, and why
01:16:15
do you call it one thing, focus on
01:16:17
racism, and then all of a sudden whip
01:16:20
up?
01:16:20
>> I'll tell you why. Here's my theory.
01:16:21
Here's my theory on it. Is I do think
01:16:23
that at one time in this country, civil
01:16:25
rights was a noble cause, a very
01:16:28
legitimate cause. We had the the legacy
01:16:31
of segregation and Jim Crow and there
01:16:33
were groups that were set up to
01:16:35
basically
01:16:36
>> change that and they succeeded.
01:16:39
>> But again, no one in an NGO or a
01:16:41
nonprofit ever declares victory.
01:16:44
>> Exactly.
01:16:44
>> They're never going to say, you know
01:16:45
what, like we we addressed this problem.
01:16:47
We solved it. You know, I always thought
01:16:49
that in 2008 when
01:16:50
>> fire me, fire me. My job's done.
01:16:52
>> Yeah. When when Obama got elected in
01:16:54
2008, I thought that regardless of
01:16:56
whether you liked Obama or not or agree
01:16:58
with his politics, I thought that at
01:17:00
that point most people could see that
01:17:01
this was not a racist country.
01:17:04
>> Whatever else you could say, the fact
01:17:06
that the highest office in the land was
01:17:08
not denied to anybody showed that this
01:17:12
country was not holding people back
01:17:13
based on their skin color. And instead
01:17:16
of just basically packing up shop and
01:17:17
saying, "Okay, we've achieved our goal,"
01:17:19
the goalposts all got moved. Remember
01:17:21
that's when the whole anti-racism thing
01:17:23
started was was around Obama's second
01:17:25
term. And what anti-racism was, it said
01:17:28
that it's not good enough not to be just
01:17:31
not to be racist. You actually had to be
01:17:33
anti-racist. But what anti-racism meant
01:17:36
was was basically that all the
01:17:38
distributions had to match the
01:17:40
population. Basically, it meant equality
01:17:42
of outcomes, not equality of
01:17:43
opportunity. So effectively, this whole
01:17:46
goalpost was moved from equality of
01:17:48
opportunity to equality of results. Once
01:17:50
you see it, you can't unsee it. It's
01:17:52
like they sat around and they said, "Now
01:17:54
what?"
01:17:54
>> And one person was like, "I got an
01:17:56
idea."
01:17:58
>> Well, and make racism again. Exactly.
01:18:01
>> Right. But if they just said, if they
01:18:02
just said at that time, you know what?
01:18:04
We're going to move the goalpost from
01:18:06
equality of opportunity to equality of
01:18:07
results. We're going to basically make
01:18:09
everyone equal at the finish line, which
01:18:11
is to say, I guess, communism or or some
01:18:13
sort of identity socialism. People would
01:18:16
have said, "Ah, no, we're not on board
01:18:17
for that." So instead, they created this
01:18:19
whole new terminology to justify it. And
01:18:22
it's taken us years to unpack that and
01:18:24
realize what's really going on.
01:18:26
>> Gosh, I don't want to put myself in a
01:18:27
position of defending the SPLC. They
01:18:29
were partners with the FBI for a long
01:18:31
time. To your point, Chamath, or or
01:18:32
Sax's point, rather, there was probably
01:18:35
a time when it was important to
01:18:37
infiltrate the KKK and the Nazi groups.
01:18:40
>> It's not 2025. It's not in 2026 like I
01:18:44
think necessary to be doing this work. I
01:18:46
think
01:18:47
can handle it uh in 20.
01:18:50
>> Okay, I'm going to give you guys a news
01:18:51
flash. I just got this just hit the
01:18:52
wire. Um this is really important.
01:18:54
>> Breaking news here.
01:18:56
>> America is profoundly less racist than
01:18:58
you think. Okay,
01:19:00
>> there we go. Okay, breaking news.
01:19:02
>> Wake up.
01:19:03
>> Freedberg wanted to do a surprise
01:19:06
science corner. This is the first. We
01:19:08
don't know what he's about to talk
01:19:09
about, but David looks like he's been
01:19:11
working really hard and he needs a nap.
01:19:12
So, Freeberg, you have the microphone.
01:19:14
Let's go. This was not science.
01:19:17
>> Yeah, this is not necessarily a big
01:19:19
surprise, but there was a really
01:19:21
interesting paper published this week on
01:19:24
trying to elucidate the underlying cause
01:19:27
or predictor of colorctal cancer. So, I
01:19:31
don't know if you guys know any young
01:19:33
friends, but colurectal cancer, Nick, if
01:19:35
you could just pull up this first image
01:19:37
or colon cancer has become now the third
01:19:40
leading cancer. Over the last 20 years
01:19:43
or so, there's been a scary rise in the
01:19:46
number of young people, people generally
01:19:48
under 50 years old that are getting
01:19:50
colon cancer. That number has climbed by
01:19:53
over 80% in just the last two decades.
01:19:57
Historically, it's been an age related
01:19:59
disease. So, as you get older, over 70
01:20:01
years old, your probability of getting
01:20:03
colon cancer shoots through the roof.
01:20:04
But this rise in young people getting
01:20:06
colon cancer has been pretty alarming.
01:20:08
And there's been a real question mark on
01:20:10
what is causing it. what's the
01:20:11
underlying trigger? So, this research
01:20:15
team out of Barcelona in Spain did an
01:20:18
amazing study where they looked at the
01:20:21
difference in the epiggenome or the gene
01:20:25
expression
01:20:26
in tumor cells of patients that are
01:20:30
under 50 years old and those that are
01:20:32
over 70 years old. the sort of data will
01:20:35
show you what different environmental
01:20:38
triggers are associated with those
01:20:40
changes in gene expression. So whenever
01:20:43
we're exposed to something in the
01:20:44
environment, whether it's some food or
01:20:47
some drink or whatever else it is, some
01:20:49
chemical in the environment, the cells
01:20:51
in our body that are exposed to that
01:20:54
chemistry or exposed to that
01:20:55
environmental trigger, have genes that
01:20:58
get switched on and off. And you can see
01:21:01
which genes are on and off by looking at
01:21:03
the RNA of those genes, which tells you
01:21:06
that those genes are expressing RNA to
01:21:08
make protein or not make protein. And
01:21:10
you can look at that gene expression to
01:21:13
determine what is changing when a cell
01:21:16
is exposed to a particular environmental
01:21:18
trigger. And so they were able to get
01:21:20
these samples of colon edinocinomas
01:21:23
from the cancer genome atlas, which is
01:21:26
funded by the federal government. And
01:21:28
they were then able to take a look at
01:21:30
these cancer cells from colon cancer in
01:21:33
patients that are under 50 and patients
01:21:35
that are over 70 and look at the
01:21:37
difference in the gene expression
01:21:39
profile and what um environmental
01:21:42
triggers are associated with that gene
01:21:45
expression profile. So that will tell
01:21:46
you, hey, these environmental triggers
01:21:48
are more likely the cause or an
01:21:51
underlying driver of the risk of getting
01:21:54
this colon cancer. And one thing rose to
01:21:56
the top. So they looked at a whole bunch
01:21:58
of things. They looked at lifestyle
01:21:59
factors. They look at eating index, how
01:22:02
much you ate, how overweight you were,
01:22:04
alcohol, birth weight. They adjusted for
01:22:06
gender. They adjusted for all these
01:22:08
different things. And as you look down
01:22:11
this list, you'll see this is the
01:22:12
difference between people that got colon
01:22:14
cancer that were over 70 when you
01:22:16
typically have a very high chance of
01:22:17
getting it and people that are under 50
01:22:19
when you don't. And what is going on
01:22:22
with people under 50. And you can see
01:22:24
there's this one row here that's all
01:22:26
orange. That row is a pesticide called
01:22:30
piclorum.
01:22:31
Plorum is a pesticide that was developed
01:22:34
by the DAO Chemical Company in 1963.
01:22:38
This is the chemical formula for that
01:22:41
pesticide. It's related to oxin, which
01:22:43
are these hormones that plants make. And
01:22:46
in the 1960s, there was this big rush to
01:22:48
try and make synthetic plant hormones
01:22:50
that you would then apply to a plant. It
01:22:52
would cause the plant to overgrow and
01:22:54
the plant would quickly die. And
01:22:56
piclorum became a very widely used
01:22:58
herbicide
01:23:00
in our environment. It's used to manage
01:23:03
weeds in rangeand and pasture land where
01:23:06
cattle graze. It's used to control weeds
01:23:08
near roads and near railroads on
01:23:11
industrial sites to clear weeds away
01:23:13
from highways and utility corridors. And
01:23:16
the problem with piclorum, one of the
01:23:17
the things that's been known about it is
01:23:18
it's very persistent. It doesn't
01:23:20
biodegrade very well. Plorum sticks
01:23:22
around for well over a year. It stays in
01:23:25
the water. It moves into groundwater and
01:23:28
it's persistently in the environment
01:23:29
after it's been used for some period of
01:23:31
time. I went back and looked at the EPA
01:23:34
data on this chemical. The last time
01:23:36
there was an EPA safety study done was
01:23:38
in 1995.
01:23:40
And so this was before we had this
01:23:41
capacity to do epigenomic studies like
01:23:44
what was just done to elucidate that
01:23:47
even though a chemical might not be
01:23:48
causing cancer immediately and you can't
01:23:50
apply it to a cell and see it trigger a
01:23:52
cancer, the long-term use or exposure to
01:23:56
certain chemicals in our environment
01:23:58
causes a change in the epiggenome, which
01:24:00
means that these genes are being turned
01:24:01
on and off. And when certain genes are
01:24:03
turned on or off in the wrong way, it
01:24:05
can trigger cells in the tissue to start
01:24:07
to malfunction and go haywire and
01:24:10
ultimately lead to cancer. And I think
01:24:12
that this paper shows a pretty strong
01:24:14
effect of piclorum in driving colon
01:24:17
cancer in young people. It will very
01:24:19
likely lead and it should lead to an EPA
01:24:21
review on whether this should be legally
01:24:23
allowed. But it should also lead to a
01:24:25
new mechanism by which we assess
01:24:27
chemistry that we're using in our food
01:24:29
supply, in our environment, in our
01:24:30
industrial applications because we can
01:24:33
now look at all of this sort of
01:24:34
epigenomic data to try and figure out
01:24:36
what are these chemicals doing to us
01:24:38
before we see them cause the problem. So
01:24:40
I thought this was like an amazing paper
01:24:42
done by this team. They did a lot of
01:24:43
work to try and make sure that the
01:24:45
statistics were sound in the studies
01:24:47
that they did. It really uh I think
01:24:50
elucidated something pretty scary. Is
01:24:51
this like a Monsanto thing where like
01:24:53
one company makes it or piclorum is
01:24:56
broadly available?
01:24:57
>> It's off patent now and so I'm pretty
01:25:00
sure my guess I haven't looked into this
01:25:01
but my guess is most of this is made
01:25:03
generically in China and then it's
01:25:05
probably packaged up with lots of
01:25:06
different brands in the US and all over
01:25:08
the world. So it's one of these
01:25:09
chemicals that's just become ubiquitous
01:25:11
in our use that just shows up
01:25:13
everywhere. But I think it really speaks
01:25:15
to the fact that historically, think
01:25:18
about 1995. You can look at what the
01:25:20
immediate chemical application of
01:25:22
something does to a rat or a human cell
01:25:25
and you can say like, "Oh, it didn't
01:25:26
cause cancer. It's good to go. Let's
01:25:28
go." You know, didn't didn't cause quote
01:25:30
toxicity.
01:25:31
>> Can I ask a question? In that study, are
01:25:33
you exposed to piclorum based on where
01:25:35
you live? Because like
01:25:36
>> Yeah. Sorry, that's a that's a great
01:25:37
question, Shimat. So, I was going to
01:25:38
talk about this. Thank you for asking
01:25:40
that. They then took that piclorum
01:25:42
exposure and then they looked at all the
01:25:44
counties across the United States. They
01:25:46
were able to gather data where there's
01:25:47
enough data in California, Connecticut,
01:25:49
Georgia, Iowa, New Mexico, Utah,
01:25:51
Washington and they were able to look at
01:25:53
pllorum use estimates from the pesticide
01:25:56
national synthesis project and try and
01:25:58
deduce in places where piclorum was
01:26:00
highly used and not highly used. And
01:26:02
once again it elucidated signal which is
01:26:04
that when pllorum was used in the
01:26:06
environment in the counties more
01:26:07
frequently there was a much higher
01:26:09
frequency of colon cancer in those
01:26:10
counties
01:26:11
>> and that R squar is weak or it's strong
01:26:13
>> reasonably strong the odds ratio is like
01:26:15
3x it's very strong this is accomplished
01:26:17
freeberg from a combination of big data
01:26:22
>> and this uh science to study these
01:26:26
increased testing as well right so you
01:26:28
have this confluence of increased
01:26:30
testing
01:26:31
increased data, you know, knowing where
01:26:34
these instances are occurring. And if
01:26:36
you add a layer of AI onto this
01:26:38
freeberg, this is like a really positive
01:26:40
use, going back and looking at all these
01:26:43
compounds and figuring out which ones we
01:26:44
need to eliminate. Yeah.
01:26:45
>> Yeah. So, I'll I'll put my PCAST hat on.
01:26:47
Thank you, David Saxs, for the role. And
01:26:50
I think this speaks to one of the
01:26:51
important roles that government has in
01:26:54
doing fundamental science and
01:26:55
fundamental research. So the the
01:26:57
National Cancer Institute and the
01:26:58
federal government stood up this genome
01:27:00
atlas with $100 million a couple years
01:27:02
ago. They spend only a few million
01:27:04
dollars a year now to maintain it to get
01:27:06
cancer tissue samples and then create
01:27:09
the availability to scientists to use
01:27:11
those cancer tissue samples to do the
01:27:13
sort of epigenomic analysis and study
01:27:16
supported by you know government grants
01:27:17
or in this case supported by a foreign
01:27:20
university getting funding to do it. And
01:27:23
so there's there's an important role
01:27:24
that fundamental science still has in
01:27:26
elucidating this that we would have
01:27:27
otherwise not been able to see if we
01:27:30
didn't have this resource available to
01:27:31
us from the federal government and
01:27:33
federal funding of scientific programs
01:27:34
like this. And that leads to this
01:27:36
discovery. You don't need fancy AI for
01:27:38
this. To be frank, JCL, there's an
01:27:40
incredible amount of data that's
01:27:41
available or or resources that are
01:27:43
available. What's happened in the last
01:27:45
couple years is what's called RNA
01:27:46
sequencing where you can actually look
01:27:48
at which genes are on or off. not just
01:27:50
what's the DNA but in the DNA. Remember
01:27:53
we've talked a lot about the epiggenome
01:27:54
what genes are on or off and how that
01:27:56
changes when you have different cancers
01:27:59
or when you have different chemicals and
01:28:00
when you have a certain chemical like
01:28:02
pllorum your colorctal cancer goes
01:28:05
through the roof and you can see that
01:28:06
relationship in those tissues and then
01:28:08
you can put all the data together and
01:28:10
say oh my gosh there's a lot of evidence
01:28:11
here that points to this connection very
01:28:13
powerful I think it's important that it
01:28:15
opens up the window that this shouldn't
01:28:16
just be a one-off research project
01:28:18
conducted by a team in Spain but maybe
01:28:21
should be a fundamental role that some
01:28:22
of the government agencies play, which
01:28:24
is to stop Americans and the world from
01:28:26
getting faking cancer. Let's figure out
01:28:28
the things that we got wrong in industry
01:28:31
and go back and delete them out of our
01:28:33
food supply and out of our industrial
01:28:34
supply. Um, and I think this is a really
01:28:36
good example of that.
01:28:37
>> So, Exa, how does Freberg's focus on
01:28:40
Uranus uh, you know, inform your
01:28:43
co-leading of PCAST here? Are you going
01:28:45
to go deep into this colon research? How
01:28:48
deep do you plan on going? And how will
01:28:49
you get through eight of these
01:28:51
presentations a day at Pest?
01:28:55
>> I It's all good. This is why we hired
01:28:56
Freeberg.
01:28:57
>> Yes. By the way, did you guys
01:28:58
>> He's going to handle uh Mars, Neptune,
01:29:01
and Uranus.
01:29:02
>> Absolutely. He's going to go deep into
01:29:04
Uranus and clean it up. We need to clean
01:29:07
up Uranus.
01:29:09
>> Uh great work, Freeberg. Great. Great
01:29:10
work.
01:29:11
>> Anyway, I think I think this is
01:29:12
important and I don't think there's any
01:29:13
news attention on this since it came out
01:29:15
a couple days ago. So, I thought it
01:29:16
would be worth bringing up on the show.
01:29:17
Absolutely. Making people aware.
01:29:19
>> All right.
01:29:19
>> But thank you guys for sitting through
01:29:20
it.
01:29:20
>> Well, no, I think it's it's great work
01:29:22
you're doing there.
01:29:23
>> I just read the paper, but
01:29:25
>> yeah.
01:29:25
>> All right, everybody. That's it for
01:29:27
episode 270 of the world's greatest
01:29:29
podcast. I am your world's greatest
01:29:32
moderator. Thank you, Chimoff Hatia,
01:29:34
David Saxs, and David Freeberg for the
01:29:36
episode. To your friends, your
01:29:37
neighbors, and we'll see you all next
01:29:39
time. Bye-bye.
01:29:40
>> Love you boys. Bye-bye.
01:29:43
>> Let your winners ride.
01:29:46
Rainman David
01:29:50
and it said
01:29:50
>> we open sourced it to the fans and
01:29:52
they've just gone crazy with it.
01:29:55
>> Queen of
01:30:03
besties are
01:30:06
my dog taking a notice in your driveway.
01:30:10
>> Oh man, my appetizer will meet me up. We
01:30:13
should all just get a room and just have
01:30:15
like one big huge orgy because they're
01:30:16
all just useless. It's like this like
01:30:18
sexual tension that they just need to
01:30:19
release somehow.
01:30:24
>> Your feet.
01:30:27
>> We need to get merch.
01:30:28
>> I'm going all
01:30:37
in.
