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all right everybody Welcome to 2023. everybody's well rested ready to take on 2023 yes Tremont how's your
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break amazing okay sexy poo I know you don't go to uh temperatures that are under 57 degrees anymore should have a
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nice break did you go somewhere warm yes okay that's a confirmation uh wow man of
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so many words and Freeburg I'm over cold weather vacations yeah that does happen at a certain point
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actually we went to Florida we went to the the free state of Florida oh really what what what's going on in Florida at
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the turn of the new year I wonder that Drew you down to the great state of Florida we're just freeing It Up In The
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Free State of Florida [Music] we [Music] have our 2023 predictions now uh play some music and all that kind of stuff
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producer Nick at this point let's get to it last year do you guys notice that every time we talk about something
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somewhere between sort of two months to a year later the Wall Street Journal ends up writing a
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big piece about it think peace about it yeah so I tweeted into the group chat like last year we all talked about
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Sequoia and distributing public equities and yeah how it's very fraught and difficult and then today they write this
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big article about how people have just burned enormous amounts of billions of dollars that they could have returned to
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LPS like these Venture investors by not Distributing that makes sense three weeks ago when we
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did our end of the year wrap up my big winner for 2022 were the pot shops right Citadel and today in the Wall Street
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Journal an article lands that these guys with 56 billion of AUM over the last two years have made almost
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45 billion dollars of revenues isn't that incredible and this is what happens usually uh they are these guys are just
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crushing and then Citadel Securities did like almost you know seven and a half billion in Revenue I mean it's
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unbelievable these businesses how good they are yes so let's get into uh and this is typical if you think about
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journalists they're trying to get into the conversations that are occurring at the bar after the event the late night
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conversation the group chat's well and that's what this podcast is it's the exposed back channel right and so if you
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listen to this pod you got the back channel of Silicon Valley politics Tech science Etc so let's do our predictions
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in 2020 we said our biggest political winner would be uh sax and I both said to Santa XI Japan and Friedberg said
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Putin who do we think is our biggest political winner uh going forward who do you pick sacks biggest point of
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winner for 2023 who will be your biggest political winner for 2023. well I went a
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little bit outside the box here because I think we're gonna have gridlock in Washington so not expecting a ton to be
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coming out of Washington over the next year my pick for biggest political winner is
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Asian American college applicants there are two Supreme Court decisions that the court heard on Halloween last
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year uh there was a lawsuit against Harvard and another lawsuit against UNC by a group called students for fair
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Admissions and that they maintain that Harvard and UNC violate title VI Civil Rights Act because Asian American
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applicants are far less likely to be admitted than similarly qualified applicants from other groups and the the
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federal courts in Boston and North Carolina rejected this argument but the Supreme Court took up the cases so they
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kind of went out of their way to hear this and I think that they are going to they're going to refuel affirmative
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action I think the majority will rule to strike down these policies that uh really discriminate against
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Asian Americans and I think they're the last uh group in America where it seems to be okay to discriminate against and
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uh really I think the Supreme Court is gonna is gonna find that unconstitutional
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belts there you have brought this up multiple times on the podcast over the last two years
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I have said that this was unfortunately affirmative action when it started I think had very very good intentions and
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I still think that there's a place for it the problem is that these very liberal institutions decided to play
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judge jury an executioner on which minorities counted in affirmative action and that's not what the intention was
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the intention was to look at the establishment and their ability to get their progeny
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into these incredible schools even when they didn't deserve to be there and so I think this was always an issue
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of classism that was disguised as racism and people who were in the upper classes
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of society have always had an edge you had the legacy admissions into Harvard you had people the Kushner is
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very famously right like the five million dollar check from the father that got the son into the school all of
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this stuff it's all it's been well written about and whether or not those things are right isn't the point I think
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the point is that there are folks in emerging lower middle classes who have the potential to crush
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and those kids should have a chance and you can't just decide who those kids are
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based on the color of their skin and in this case what happened was some blacks were still allowed in some Hispanics
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were allowed in but Asian Americans broadly were discriminated and that was a really stupid outcome
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you cannot punish kids for willing to work their ass off and I think that that was the
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unfortunate outcome of what affirmative action has become by 2022 so it is going
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to get repealed the reason it's going to get repealed is that you know we have case law that very
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clearly states that that any institution that accepts federal funds cannot have any form of discrimination and this is
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how these folks who have tried to repeal affirmative action have taken up this lawsuit and
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hopefully the outcome is a more meritocratic system that also tries to create a plurality of different
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people from different backgrounds freeberg any thoughts uh if not your biggest political winner
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for 2023. um my biggest political winner for 2023 is um MBS Mohammed bin Salman I
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think that Saudi Arabia will have the most important year in kind of the modern era in terms of
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their role I don't know if you guys saw this Reuters report from a few weeks ago but there's kind of
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a deepening discussion about the oil Yuan trade in that um Saudi would sell oil to China and they would
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get paid in Yuan Saudi Arabia sits at the intersection of the United States Russia and China they have relationships
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with all three nations and in the kind of conflict and power struggle that is underway I think that ultimately the
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direction of where Global Currency kind of reserves will be taken and the importance of
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these great Nations and who sits atop whom can actually be dictated and significantly influenced by MBS this
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year by some of the deals and trades he might put in place and the and the the kind of
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Partnerships he might Forge I think as a result you will see him kind of rise in
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terms of influence not in terms of you know hey the world has accolades for this for this guy but I think in terms
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of global influence uh he will rocket ship to kind of the top because of this this kind of uh jockeying he can now do
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between these three great nation states and defining you know what's going to happen with the US and what's going to
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happen with China and what's going to happen great collection of currency reserves great selection I mean
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the shitty thing by the way about your selection is that Biden are explicit stance is unfortunately
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quite confrontational with MBS and yeah you saw that play out in Q4 we asked them to ease up on OPEC Plus
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to introduce Supply cuts and they did some nominal hundred thousand Barrel per day cut
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didn't do much of anything there was an article to your point free bird just recently about Saudi really doubling
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down on getting the oil out of the ground and monetizing their petrochemicals so there's just going to be a glut of
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Supply in the market and we have the least amount of influence with Saudi Arabia than we've
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ever had and it seems like we could change that if we decided to but I think Biden has taken this very
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confrontational approach which doesn't seem to make and remember a lot of sense their stated intent is to diversify away
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from oil and into technology and other kind of emerging growth economies that's why they funded the vision fund that's
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why MBS made that big kind of visit to Silicon Valley a few years ago and there is technology that they want to import
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into Saudi Arabia and they want to have ownership in around the world and if the
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U.S is creating a barrier for them to import US tech into Saudi or for Saudi to kind of invest in the U.S but China
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and Russia have open arms and all they want is for Saudi to start doing trades in Yuan it's going to happen and I think
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that's where this guy has kind of a real opportunity to shift the global economic
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Dynamic say what you will about Trump he uh had open dialogue with North Korea China
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Russia if your enemies close sure you want to be able to talk to anybody and he was able to talk to anybody now you
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also want to be able to say Hey listen you can't dismember a journalist like khashoggi and you need to be able to
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have both of those ideas in your head you can't be rigid in foreign policy you have to be fluid and keep people at the
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table talking chamath who is your big political who do you predict will be the big political winner of 2023 shamots
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prediction everybody go ahead I really like spread trades right where you go long something and short another so I'd
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like to pair my biggest political winner with my biggest political loser for 2023. okay and I am going to focus on
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the Republican nomination and I am going to go long Nikki Haley and I'm going to go short
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Ron DeSantis now let me explain if you're watching if you're not watching sex right now he is ready to
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interject go to mother so I think that all of this nonsense for example in the house Speaker race
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all of the midterm results what it really speaks to are is people are getting exhausted with the lunatic
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fringes of both parties that's Point number one and point so that favors moderates as an
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emergent class and point number two is that if you look back through many many cycles of
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Republican and Democratic nominations it is a very negative thing to be in the lead so early going into the Iowa
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caucuses in January and so if you put those two things together the risk is that DeSantis
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decays things emerge people attack him because he's the clear FrontRunner and the
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opportunity just like it was for Trump in 16 or for Clinton or for George Bush not Herbert Walker but you know w
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is to emerge from the back and so if I think about a moderate person who can emerge from the back who
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can consolidate the ranks they should probably be from the south they will have a lot of these purple
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compromises that sax mentioned in their policy program and they will have a history of winning
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and a history of normalcy and so I think that of all of the places where you could ever elect a woman as
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president of the United States I think it will come from the Republicans before it comes from the Democrats I mean the
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Democrats are unfortunately increasingly judgmental and I think it's very difficult for a
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woman to emerge there but I do think that Nikki Haley has a shot so I'm going to go long Nikki Haley
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and I'm going to short Ron DeSantis okay I like a spread trade for his prediction
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well done before sax you interject let me just do mine and because then you'll have two to interject too uh I was
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looking uh at Biden and Trump and thinking Hmm which one of these is going to have the
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big win in 2023 so the two biggest I think uh players I have a prediction for Trump I think he's going to lose 50
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pounds on the ozempic everybody loves a weight loss story I think he is going to
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be indicted by Garland is he on wait a minute sorry he's on ozenpick no I'm predicting an ozempic run and he's gonna
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drop 40 50 pounds then we're gonna have a schvelt trump get indicted by Garland and the debates and the and the and the
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rigmarole with DeSantis I think he's gonna go after DeSantis based on weight and
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height and then he's going to win the nomination in 24 and we're going to have Trump versus Biden but this is a crazy
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prediction here I think we're gonna have a settlement I think he's going to agree to not run
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and get the pardon this is a crazy prediction I know but I think he loses the weight
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he wins the Nam he gets indicted and then he gets the Richard Nixon pardon Global pardon for all of the [ __ ] he's
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done sax you can reply now to these two crazy predictions this French random mine I
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mean this is like proof positive that everything you have to say about Trump is an act of projection I mean like
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asempic I mean like I mean are you talking about yourself or Trump I strike boom yeah
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and super good yes both of those things are fasting have you sacked on any of them yeah I've tried it yeah um I think
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everybody should be looking into this if you're uh have weight issues it's a it's
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a it's a great news I want to say it even more broadly I've been reading a lot about these glp ones and I I got to
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tell you statins are a clear wonder drug yes okay I think that the 50-year longitudinal data on its value
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is pretty unimpeachable metformin even taken prophylactically has shown incredible benefits for cell
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regeneration longevity and glucose management and the real look the reality is let's just take a step
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back the American diet we're all pre-diabetic okay so let's just let's just not beat around the bush the way
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that Americans eat and our food supply and also probably in Western Europe is pre-diabetic by definition it's [ __ ]
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it's trash so metformin makes a lot of sense and again its longitude data is incredible
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but I got to tell you the early data on these glp ones are unbelievable it's extraordinary firsthand experience
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I would lose half a pound a week when I would diet no but what I'm saying is it's beyond that um what I'm talking
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about is insulin response it's cardiac health and so if this data tracks like this man you're just going to want to
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put everybody on these gops well I just want to also put a disclaimer out here do your own research work with your
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doctors whether it's for metformin or zempic but I had great results on it I recommend if you're struggling with
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weight loss like I did for many years you talk to your doctor about it that's it it's not a commercial for a govier or
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something but I do think these things are going to change well and they're getting better and it seems like diab
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people with diabetes are on them for life so if your question is like if I could do this for a year to lose weight
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you know I think diabetics are on it for life so when I made my decision again work with their doctors not random
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podcast or Venture capitalists for your health advice I was like well if all of these people
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who have diabetes are gonna on it for years unless it's non-toxic go get a pre-nuvo scan just make sure absolutely
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you got that right so there you have it those are our uh predictions I wanna I want the sax to react to my
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spread Trader yeah okay so so look I think you know if you're going on a betting site I think that um you could
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place that bet that your mouth made pretty cheaply and probably it's like has some good upside to it so I don't
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criticize it as a bet do I think it's actually going to happen no and I I think the reason is is this that if you
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look at what's happening right now with the speaker's race there's two very clear Wings in the Republican Party
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there's establishment wing and then there's kind of this populist Maga wing and the candidate whoever it is in 24
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needs to unite those two wings and I think this is really the best argument for DeSantis is he's widely accepted by
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both I think Nikki Haley's problem is that she's very well regarded within the establishment wing of the Republican
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party but she has no meaningful support within the populist wing and so I don't think she's capable of bringing the
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party together at least at this point in time she would have to prove let's call
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it populist bona fide that she just doesn't have right now so this is why I think you
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know DeSantis even he does have front runner wrists you're right that people are going to keep taking shots of them
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as long as he's the front runner but all right let's use capable he's capable of
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uniting the party in a way that a desperately needs right now as we're seeing with the Kevin McCarthy thing
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playing out yeah okay let's go for our biggest losers uh we'll rip through this last year I said Biden and Trump in the
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extremes had the progressive laugh again the extreme sack said Pelosi who just wrapped up her tenure and Friedberg said
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U.S influence globally was the biggest political loser uh let's get our predictions for the biggest political
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loser of 2023 Freeburg who do you think would be the biggest political loser of 2023 the world wants to know Freiburg I
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would continue my U.S influence but I I am going to shift here's what I think is going to happen
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this year my big prediction is based on I think the world has too much debt I think that the economic
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slowdown coupled with Rising interest rates globally and a and a dearth of uh kind of asset uh Capital inflows means
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that there's going to be a lot of issues with a number of debt markets around the
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world particularly kind of emerging sovereign debt just to give you guys a sense Global
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debt is about 235 trillion dollars in public and private um you know that's somewhere
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between five and fifteen trillion dollars of interest payments a year depending on what the net rate is on 96
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trillion dollar Global GDP and there's another trillion and a half of unfunded liabilities in the U.S and pensions and
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Social Security and all that sort of stuff I think this is the year where a lot of the debt markets start to unravel
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the so freedberg is this ability that steps in or a political loser I'm going to tell
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it one second this is the political yeah so the political ramifications so the political ramifications for me I think
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that the um the entity that steps in to try and support these um unwinding moments is the IMF and I think that no
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matter what the IMF does they're going to look bad I think that the you know it's sort of like like Jerome Powell
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this this past year right like you you raised rates too late you raised rates too quickly no matter what you do it has
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some adverse effect and impact it's either inflationary or it impacts growth and so I think the IMF is going to get a
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lot of heat for either acting not too soon uh or sorry not fast enough or or acting too aggressively and causing
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inflation as a bunch of these markets face credit risk this year so My Big bet is the IMF is going to play a major role
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and we're going to be talking a lot about the IMF later this year I think as a result the IMF will get a lot of heat
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and you'll end up seeing a lot of pressure and political you know just like we blame NATO just like we
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blame Jerome Powell and the FED will end up blaming the IMF for a bunch of problems uh that'll arise but the
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natural physics of what's going on is the world has too much debt and not enough growth to cover the debt the cost
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of debt that's it okay and the IMF will be the political kind of you know hit that'll that'll result well you have a
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point of view but I think yeah and who do you have uh as your biggest political loser prediction for 2023 Mr
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Davis hacks well I mean Kevin McCarthy may not survive the week so let me go in a
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different direction I think California is my big political loser and I would say in particular the
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city of San Francisco both are going to have gigantic budget shortfalls you may remember that this is back in 2021 when
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we had that asset bubble California had a surplus of 76 billion and then insane and then 2022 happened and now the state
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is looking at a 24 billion dollar deficit well if we had taken say a third of that Surplus from 21 and put it in a
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rainy day fund we wouldn't have to worry about this deficit but that was never done Newsome started handing that money
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out like candy to the electorate to Goose's election his re-elect numbers and to get
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him past the that recall remember okay so the the state never got a Cisco Outlook in order and now I think it's
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going to be even worse in 2023 and San Francisco the city uh very similar kind of problem where it's uh tax base is
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heavily dependent on Commercial Real Estate which is really suffering so you know the city of San Francisco and the
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state of California they've moved their tax base to to highly volatile capital gains and with a really lousy stock
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market I don't know how these guys are going to meet their budgets so a lot of pain is going to be a lot of austerity
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and pain coming that's for sure and these people do not know how to manage a budget they're incompetent so you say
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California Freeburg says IMF jamoth who do you think the biggest political loser
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for 2023 will be already gave us your predictive sentence I'm in alignment with you I think
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descent has peaked a little too early and the forever trumpers and the in the chaos is going to be a little too much
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for him to handle okay now we get into what everybody wants business business biggest business winner for
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2023 who do you have chamoth for your biggest biggest business winner of 2023. I'm going to pick something out of my
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portfolio I think I'm the only non-trivially large investor in both SpaceX and relativity space
00:22:19
relativity space has a huge SpaceX is clearly just crushing on all cylinders and they're really the only game in town
00:22:28
with respect to launch capability and if you just Google it you'll see that the Europeans you know have a hit or miss
00:22:36
capability and launch the Russians are completely unable to do launch now because of all of these sanctions
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the private companies in New Zealand or the United States have also had fits and
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starts really incapable relativity which is really which is now the second most highly valued space
00:22:56
business is about to do a launch in the third week of January and the big difference between it and SpaceX which
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is sort of why we did it this is a early YC company I did the series a and kind of went along the whole way they have 3D
00:23:13
printed everything and the reason why 3D printing is interesting is you take a so
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if you if you think a rocket costs five billion dollars if built by NASA Elon was able to take that to a hundred
00:23:26
to 500 million and if you 3D print everything you can take that cost to like five to fifty million and so it
00:23:34
allows you to just have this repeatability and manufacturability now SpaceX also has a lot of 3D printed
00:23:38
Parts but relativity is entirely 3D printed it has a launch in three weeks at Cape Canaveral I think
00:23:49
and we have like a 10 billion dollar order book that gets unlocked so I don't know how to see beyond a lot
00:23:56
of these Market forecasts right now so I'd rather pick a company I'll pick something in my portfolio if the rocket
00:24:01
does not blow up there's a 10 billion dollar order book and this company is now on a trajectory
00:24:08
to be as valued as SpaceX all right talking his book times two and if it doesn't it goes to zero Freeburg go
00:24:16
ahead and talk your book times two or three let's see if you can one-up chamoth which one of your investments
00:24:21
will be the biggest business winner of 2023 Freeburg I'm not an investor my big bet is open
00:24:26
AI it's just way too obvious to be anything else this year as you guys know there are dozens of startups that are
00:24:32
being started right now based on an open ai's demonstration of Dolly and uh Chachi BT I think we're seeing this in
00:24:38
the Enterprise and consumer markets I think open AI will become to some degree maybe they could be as many paths they
00:24:45
could take the AWS providing tooling and infrastructure to all these startups that are building applications for
00:24:49
consumers and business users or they will end up doing a massive deal with Microsoft I think it's inevitable
00:24:55
they're going to get a billion dollar plus investment this year they could power you know AI driven Bing search and
00:25:00
Voice driven search they could build their own products and their own tools and they're becoming
00:25:05
great investors they invested in dscript which is a product company we use here for our podcast which is an incredible
00:25:11
product and I think that Sam Altman is a very smart and screwed investor as well
00:25:15
so for a lot of reasons I think openai could end up having an amazing year this year and a lot of different paths they
00:25:21
could walk and we're going to come out of this year and say they're one of the top tech companies in the valley
00:25:25
okay sax open AI has of course increased your ability to talk to other humans so you're seeing a lot of big wins there
00:25:34
I know um he's how do I talk to a child about their college hopes and aspirations
00:25:44
no no how do I talk to a child about their day hello it literally is hello hello
00:25:51
progeny of mine how are you faring today in this complicated write me a script of
00:25:58
talking to a 12 year old about their hopes and dreams say it's interesting using GPT for talking points on
00:26:05
different topics I should try that for the Pod you know oh okay we should have done the GPT predictions
00:26:12
or answer these categories sex as a person on the Spectrum uh yeah how delightful is uh this uh chat EBT and
00:26:21
you know your treatment of your condition that's great let me let me get to my answer here okay so um my answer
00:26:27
for the big business winner of the year is America's natural gas industry and I have to admit this is an aspect of the
00:26:35
Ukraine war that I didn't fully appreciate until I read this New York Times article the other day about how
00:26:41
natural gas prices in Europe have now fallen to the level they're at before the war and everyone thought that
00:26:48
there'd be this huge shortage and then we'll be able to heat their homes well what happened the the answer is that
00:26:55
Europe completely cut off their dependence on Russian gas and in fact the Nordstrom pipelines were blown up so
00:27:02
physically they separated but then on top of it they basically started importing
00:27:09
liquefied natural gas from the U.S and here's the key paragraph in this article from The New York Times is that
00:27:16
Europe rapidly built terminals to receive liquefied gas sweeping away many of the usual bureaucratic obstacles and
00:27:23
environmental objections so in other words what normally would have taken decades to get approvals now was all put
00:27:30
on a fast track and Europe is now completely dependent on American natural gas and I think this is again the thing
00:27:40
maybe I underestimated that cold hard American interest in this war is to basically turn Europe into a vassal of
00:27:49
America's natural gas industry previously they were about to be dependent on Russia and Nordstrom was
00:27:54
going to make that situation permanent we've you know somebody blew up nordstream now they're dependent on
00:28:00
American LNG they're going to pay higher prices for that but it's uh it's been a
00:28:06
pretty impressive win for the American natural gas industry and I think Biden has really pulled a 180 here because you
00:28:12
remember when he first came into office he canceled Keystone he canceled drilling he was very tough on the oil
00:28:18
and gas industry I think after he then delivered the hundreds of billions for the climate special interest and the
00:28:25
inflation reduction act now he is taking care of the oil and gas industry I love
00:28:30
it yeah not and so what you're saying is Biden dynamically changed course based on inputs like a great leader would okay
00:28:38
well done sex well I don't I don't listen I don't know well no listen I think Biden has done something
00:28:44
politically smart here there's no question about it I am giving him credit does it mean that this war was worth it
00:28:50
no I don't I don't think we should be engaging in oil Wars like we did in the Middle East we agree so I'm not
00:28:56
justifying this war but I am saying that there is a cold hard American interest undergirding the uh our position which
00:29:03
is it's about LNG it's not it's not just about moral platitudes yeah I mean the strong start to 2023 vassal and
00:29:11
undergirding uh my biggest predictions I'm working backwards from two here I think the door
00:29:17
dashes airbnbs Ubers etsy's of the world who need entrepreneurs they need workers
00:29:23
they need Supply they've always been Supply constrained as unemployment becomes let's call it
00:29:29
what it is sticky you're going to see a lot more people participating in Gig platforms or entrepreneurial platforms
00:29:34
that enable them to make money so I think they will be huge beneficiaries especially if they continue to lay off
00:29:39
employees like doordash and Airbnb did to right size their businesses but my first one
00:29:44
my number one is laid off Tech workers I think laid off Tech workers who get together in groups of two three or
00:29:53
four uh developers product managers people who actually build stuff and start companies together are going to
00:29:59
become extremely successful and they're going to make incredible lemonade from these lemons of these big Tech
00:30:06
layoffs so I think the startup space is again and these laid off Tech workers who choose to take control of the
00:30:11
destiny and starts companies are going to be the true Big Winners if you do it do it with two or three friends because
00:30:17
you're going to need developers you're going to need those those talented people in the startups that have three
00:30:22
founders get funded faster than the ones with one uh so those are my two winners
00:30:26
all right oh yeah and last year our biggest business winners were chamat said smbs Sac said rise of the rest uh
00:30:32
Freeburg set stripe and I said Disney Millennials and gen Z let's go on to biggest business loser for 2023
00:30:38
Friedberg who do you think will be the biggest business loser in 23 this year in fact okay so my Biggest Loser is the
00:30:46
general category of capital intensive series B through D growth businesses in the startup landscape private companies
00:30:54
um as you guys know there's been a big shift in capital allocation a lot of the folks who were writing big
00:31:00
checks into growth rounds are retreating back to writing smaller checks and seed
00:31:05
and a rounds they don't want to write the 20 million dollar series B they want to write the five million dollar seed in
00:31:10
a round uh no one wants to kind of follow the valuation no one wants to set the valuation for these growth
00:31:15
businesses particularly if after this round you know you need another big round of capital and no one's sure if
00:31:21
someone's going to be waiting on the other end as a result we're seeing tons of these businesses run into capital and
00:31:26
fusion walls they can't pivot I think we'll see what we saw in the.com bubble we're 99 and a half percent of these
00:31:33
companies actually die the half percent that we are going to emerge as the next hundred billion dollar Enterprise is the
00:31:38
Googles and the Amazons of the world so there will be light at the end of the tunnel for the winners but generally
00:31:42
there are hundreds of companies in Hardware in sinbio in biotech and high growth Enterprise software that require
00:31:49
significant sales investment expense a lot of these businesses where the capital intensive nature of the business
00:31:56
just doesn't have the market for it right now and there and and investors are are all retreating and they're going
00:32:01
to be selective so that that's where I think there's going to be more people intensity by the way see in a investing
00:32:07
hot as a button uh that's what that yeah that's it okay sax biggest business loser for 2023. well I just by the way
00:32:16
100 agree with what Friedberg said but my my Biggest Loser for business in 23 is the consumer I just don't understand
00:32:24
how the consumer isn't going to finally tap out in this economy I mean they they
00:32:29
have a mountain of personal debt credit card debts at all-time highs I think the
00:32:33
average credit card rate hit 19.6 last week and is expected to rise even further uh the mortgage rates are above
00:32:41
seven percent now so forget about trying to buy a new home or uh sell your home and your stock portfolio is down too and
00:32:48
now layoffs are starting to pile up so I just don't understand how we're going to
00:32:52
avoid a recession and you saw you know Kashkari saying that right the fed's gonna keep raising 5.4 his prediction
00:32:59
you know I don't understand how if if rates are at five and a half percent that doesn't finally break the back of
00:33:04
this economy and uh we go into a recession you think sax that the economy is actually broken right now we just
00:33:11
don't have the day data because the data lag 60 days in most people's minds because it does feel like the consumer
00:33:16
is just and real estate has just broken at this very moment it seems like I mean
00:33:20
the pain is very unequal right but in the tech industry we've been in a recession for a year I mean like the
00:33:25
growth stocks are down 80 percent but Freeburg said is true no one's going to fund these you know High burning
00:33:30
companies there's an enormous amount of retooling that has to happen look I think the recession is here it's just
00:33:36
very unequally distributed distributed exactly yeah well I mean if you look at it uh buy now pay later that's a
00:33:43
category starting to break credit card debt as you're saying hitting you know uh big um
00:33:50
a bad records in terms of how much we love spending also people's um savings are going down so the consumer's
00:33:57
back has been broken I think we're just going to feel it in the in the first and
00:34:00
second quarter chamath who's your biggest business loser prediction for 2023 the world wants to know let me just
00:34:05
build on what Freiburg and Sac said for a second before I give you my pick sure I this is the conversation you and I had
00:34:12
when we just got on guys what I was telling jaycal is at the end of Q4 I did five deals
00:34:19
and four were proratas one was a new deal and they were all clean markups so the four deals that other people put
00:34:27
money into and I was looking at them and I was trying to figure out okay what differentiates these things in Freebird
00:34:34
to your point these were super clean startups with very clean cap tables that had clear progress
00:34:40
and then conversely I had seven converts showed to me for companies whose valuations were
00:34:47
anywhere between three and I would say 12 billion and I did none of them and not only did
00:34:53
I do none of them nobody else did any of them and the problem was the real market
00:34:58
clearing price was 80 to 90 percent down and so I was like what is going on here
00:35:04
so fever to your point I don't even think it's just cash intensive startups I think it's like all growth companies
00:35:10
are in a really bad place I thought that this growth stuff would get sorted out in two to three months and now I'm
00:35:15
worried it's two to three years I think it's it's toxic toxic here's the definition of what I
00:35:22
think has happened and where I think the cutoff is is when the value the implied
00:35:26
Market valuation of the company based on where public comps are trading is less than the total Capital preference in the
00:35:32
company the total preferred stock now so many companies now that raised 400 million in a two billion valuation but
00:35:38
the company is actually worth 300 million now based on public market comps so they're worth less than their
00:35:43
preference stack so worth it no that this is why I think all these converts are getting done
00:35:51
that's where the rubber meets the road on all these deals yeah that's right who does the convert benefit the convert
00:35:56
benefits the VCS who want to maintain the illusory valuation that they had before
00:36:04
they do their work they do that to assuage The Limited partner who gave the money that the marks aren't as bad as
00:36:11
they thought but the people that really get screwed as Jason said are the common
00:36:16
shareholders because eventually those convert deals that do get done those people will end up owning the
00:36:22
company the cap table gets completely flushed and reset and the employees get wiped up yeah and then you gotta
00:36:29
basically take all the employees who were there previously who now hate the founder and give everybody all yeah
00:36:35
they're wiped the people to do all the work get [ __ ] and the people don't do none of the work and who just want to
00:36:40
maintain this shell game gets to basically Live Another Day basically people are investing as you gave in the
00:36:46
example earlier like if it's a three billion dollar company but it's actually worth 750 people instead of taking the
00:36:52
valuation from 3 billion to 750 will say okay buy one share at the three billion
00:36:55
dollar price and we'll give you three or four shares for free or for a penny warrants they're called typically or you
00:37:01
know just different ways to structure this and then all of a sudden Nobody Knows
00:37:05
the actual denominator they may own them 10 000 shares but they don't know how many shares are actually issued because
00:37:10
the warrants are not on the cap table they're in some side document in a folder in a lawyer or cfo's office so
00:37:15
let me let me tell you my biggest business loser yes please I think that the biggest potential business loser
00:37:24
this year is Google search who has measured by pure profitability and engagement
00:37:32
I think it's easier for me to see where the the usage comes from as opposed to picking open AI or chat GPT in terms of
00:37:43
where the usage goes to and the reason is because I think a lot of people don't still fully understand how machine
00:37:49
learning and AI work but just 30 second primer there's two big buckets of work there's what's called learning which is
00:37:57
how you learn how to make predictions and then there's what's called inference which is when you actually type
00:38:02
something into the search box you get the answer the thing with learning and what chat
00:38:07
GPT is showing is that they have learned by crawling the entirety of the web there are five or six other
00:38:14
organizations that are capable of crawling the entire web in terms of cost in terms of compute in
00:38:20
terms of the quality of the Transformers and the quality of the AI and so I find it easier to predict
00:38:29
the decay in the quality of Google search as that much better than everybody else then I find it is to
00:38:35
predict who will win because I think that with enough time and money Oracle Microsoft Google
00:38:42
the Chinese internet companies can all compete Facebook and so I think that you'll
00:38:50
Converge on the same training which will lead to the same inference and so I think consumers end up getting confused
00:38:55
and will end up being able to get high quality search results from many places versus today
00:39:01
you know you wouldn't only think that Google is the only game in town quite honestly for most people well so I think
00:39:06
the statistics you know that Google could lose 10 or 15 percent of usage to all these other sites
00:39:12
and that may not make any of those sites that relevant but it'll have a material
00:39:16
measurable impact to Google and Google fantastic prediction and I think you know Chachi potatoes other ones are
00:39:22
going to have a very interesting marketing attack that they can do on Google is why
00:39:27
search when you can get an answer right hey we'll just give you the answer you don't have to search I had so many
00:39:32
losers that I went through here I'm just going to run backwards to them number five I thought Founders who refused to
00:39:37
downsize in 2022 could be big losers in 2023. obviously have five and the rest of us are just I'm just going to tell
00:39:43
you my thought process this was the one I had a long time number four I thought VC funds founded in 2020 then I thought
00:39:50
crypto because Gary getzer says it's all a stock then I went with youth number four Google my God they got so many
00:39:55
headwinds against them with the shot GPT but I wound up on why collar workers with no hard skills
00:40:02
Twitter going down to I think you know Elon said a couple of hundred people is all you need to run Twitter and I think
00:40:08
he said he has two thousand employees or something like that he has shown everybody you know Hey listen these more
00:40:13
can be done with less uh or these things are overstaffed in a massive way I think
00:40:17
white collar workers now the idea that you're going to have four offers and you're gonna be able to play them off
00:40:22
each other is over you're saying Surplus Elites sure white collar workers AKA Surplus Elites people
00:40:29
who actually you know are mid managers who don't who don't actually code or don't
00:40:34
actually build a product or sell a product don't actually do real work as I think uh many people would frame it in
00:40:40
the managerial class or the CEO class man they're going to have a hard time and this week Andy Amazon Andy cut 18
00:40:49
000 white collar workers not the Blue Collar the white collar workers at Amazon that was a big turning point and
00:40:54
Benny off you know he's Ohana he is Mahalo he is uh Aloha he does not like to lay people
00:41:00
off he considers Salesforce or family he laid off 8 000. I predicted that yeah and I mean that is to tweet about that
00:41:08
well I mean the reason is pretty simple right they're gross slowed down by two-thirds in the most recent quarter
00:41:12
but they're still spending the same amount on sales and marketing so when that happens your CAC payback explodes
00:41:18
right you go from three years pay back to like 10 years so they have to cut costs in order to rationalize your unit
00:41:24
economics so and now it it Cascades right because all of salesforce's vendors are going to be getting less
00:41:32
money from Salesforce because they're tightening their belts so then those companies are gonna have to cut and the
00:41:37
cycle just keeps going and going right and everybody tightens their belts at the same time freezes the economy AKA
00:41:44
recession uh and and possibly were so that mine was a surplus Elite so that's a nice uh little quartet
00:41:50
in 2022 just so you know uh I picked crypto freeberg also picked crypto which must have Visa Mastercard and Sac said
00:41:56
assets classes that benefit from government uh dumps and publicity yeah all right
00:42:03
let's go to biggest business deal of 2023 it's a prediction what do we think could be the biggest business easy easy
00:42:08
this one okay let's go okay quickly starlink will go public oh SpaceX will cut and paste the cap table
00:42:16
and we will take yum it'll be yummy and delicious and my prediction is that the starlink valuation will be at least half
00:42:25
of spacex's current private Mark 75 Billy just 75 billion it will be phenomenal and I think the reason why is
00:42:33
that I think in order for Elon to have complete Financial flexibility and do what he
00:42:39
needs to do and you know he talked about this on our pod about the difficulties and the dangers of margin loans and all
00:42:44
of that stuff yes he's gonna create breathing room for himself ah this is the simplest and most obvious way for
00:42:51
him to do it it'll give him a ton of more dry powder sure so I think that this is
00:42:58
an obvious outcome in 2020. they already have a million subscribers in there better than nothing beta as they call it
00:43:03
I have two of them I think uh this is a great great uh I was the first one to get it for uh for the global 7 500. so
00:43:12
okay well I I got it for yeah Tahoe so yeah similar uh so uh they're my Clayton in your house in the same size yes
00:43:20
exactly so there you go uh there is a point here people are underestimating The Tam I think of this product
00:43:26
The Tam is not existing Broadband connections it's second connections it's connections where connections didn't
00:43:31
exist just so you know buses the Best in Class the Best in Class broadband connection for a plane is called Ka band
00:43:39
and it costs 500 Grand a year that's ridiculous and you can replace it for you know a tenth of the cost and
00:43:48
start a link on a plane is dramatically better bi-directionally so I think starlink is going to go
00:43:55
public and I think it's going to be it's going to be the best chance that we have
00:43:58
of opening up the capital markets in 2023. there's another way of saying people who own private jets if they are
00:44:04
flying 250 hours a year which would probably be a reasonable number to 300 hours a year they're paying two thousand
00:44:11
dollars an hour for their internet service that is Bonkers okay sax who is your uh big deal biggest business
00:44:17
deal prediction for 2012 steals 23 prediction is there will be a deal between uh Putin
00:44:25
and G and they met by satellite late last week to discuss ways to further help each
00:44:31
other in 2023 Putin characterized it as a no limits partnership you may remember
00:44:37
that the two of them Inked a 175 billion dollar gas deal in early February last year that was three weeks before Putin
00:44:46
invaded Ukraine I think now Russia is even more dependent on China we've really driven Russia into China's
00:44:53
arms and I think there will be a big deal not just on energy but on agricultural products mineral products
00:45:01
and rare earth minerals that you know chamoth likes to talk about I think there could be a trillion dollar deal
00:45:09
between Russia and China this year if I was going to go out and live and make prediction okay so there is your 2023
00:45:15
prediction of the biggest deal the Legion of dictators is Foreman I do think it's uh it is like uh you know
00:45:21
that the axis of Evil this is more Legion of dictators like hey let's do business together
00:45:26
treeberg he got a prediction for the biggest business deal of 2023 this is really going on a limb here I'll do two
00:45:31
real quick the first was the similar to what Zach said but it's kind of echoing what I said earlier
00:45:40
which is the Petro you on trade I think that's the Saudi China trade if this happens and oil is sold in Yuan
00:45:48
it marks the beginning of I think um the end of the assumption that the US dollar is the global reserve and the
00:45:59
risk-free currency in reserve for the world so I think the Petro you want to trade if you guys um
00:46:05
here's the Reuters article covering ji's visit uh to Saudi Arabia last month for
00:46:11
the second week of December once this gets Inked and signed it's a real shift uh globally I think the other
00:46:18
one that I'm that I'm going to point out that I think is a bit of a out of left field one maybe
00:46:24
and maybe I'm just gonna look like a total idiot at the end of the year about do a wild card I like it this is my wild
00:46:28
card so my wild card is I think Apple ends up buying something completely out of the ordinary and here's why I think
00:46:35
Apple's Core Business they're facing significant pressure with respect to their relationship and ties to China as
00:46:41
you guys may have seen last week Foxconn announced that they're actually going uh
00:46:45
further Downstream in terms of their production model and they're trying to diversify away from being kind of the
00:46:49
sole service provider to Apple apple as you know is under such pressure to get out of China
00:46:55
politically that they've started to try and invigorate activity in Vietnam and elsewhere so a lot of pressure on their
00:47:02
relationship with their low-cost producer and low cost production partner they're also under a lot of political
00:47:09
pressure because of the App Store revenues you guys know this 30 App Store that they take a lot of people are
00:47:15
calling it monopolistic and antitrust is getting involved so they're feeling that
00:47:18
pressure there's also the pressure with respect to the you know waning uh consumer demand for
00:47:24
high-end Electronics Samsung last yesterday or last week and or yesterday I think announced significant declines
00:47:30
in consumer demand for electronics or their forecast as such that has to impact apple as well so when you put all
00:47:36
of this together right they're they're they're being pressured to get out of their low-cost manufacturing center
00:47:41
they're being pressured to stop making money on the app store they're being pressured because the demand may be
00:47:46
waning they have to do something big to kind of diversify the business so I think they might end up doing something
00:47:51
like buying a real content company maybe they do something like buy a Disney maybe they do something like buy an
00:47:57
automotive company like Fiat Chrysler I think there are a number of these kind of like what may seem today outrageous
00:48:03
deals that Apple might end up kind of being pressured into doing so that they can get ahead of their forecast of the
00:48:09
impact that all these pressures are going to have on their Core Business and so I think this is something interesting
00:48:13
to kind of think may happen this year I certainly have no Insight or Intel on anything or I could be completely wrong
00:48:19
on this one but it feels like they've got to do something this year I'm necessarily to keep that business I
00:48:24
think this is I think I love your wild card because the MBS China trade and that relationship sure Legion of
00:48:31
dictators but this one is really good it's hard to buy Disney monopolistic issues but buying a car company pretty
00:48:37
easy because that's a fragmented Market I love this prediction I mean now with Tesla with this
00:48:44
depressed stock price Apple can make a run at Tesla they have they could almost buy it with cash
00:48:48
let alone BMW Volvo one of those Brands they could buy easily what a great prediction for me the prediction is
00:48:55
Amazon's three-legged stool grows into a sturdy chair chair with a fourth pillar
00:49:00
for those folks who are not familiar with how Amazon has built their businesses there are three
00:49:07
pillars in their stool e-commerce obviously when you buy stuff Prime memberships which is kind of considered
00:49:12
a separate Revenue stream and of course AWS cloud computing I think the fourth is going to be this
00:49:18
continuation of following the health stream not advertising because that's not a consumer-based product that's just
00:49:23
the way they make money health is going to be a big one for them uh they obviously acquired one medical which was
00:49:28
a small purchase I think they're going to buy Roman hymns they're going to buy Peloton they could buy a whoop and
00:49:35
they're going to go all in on health and you know that three-legged stool becomes
00:49:39
a very sturdy chair and my runner-up is Tick Tock is going to divest under duress I think that it's
00:49:46
going to have to go public and the Chinese are going to divest their interest in it uh and just take their
00:49:51
chips because they're going to be faced with the existential threat during the political debates over the next two
00:49:56
years there will be unanimous support from Democrats and Republicans to get Tick Tock out of the
00:50:02
U.S therefore they divest can I just test that which with you guys because we've talked about this a lot that hey
00:50:07
we're going to ban Tick Tock how many of your friends kids or your kids do you guys
00:50:14
know spend hours a week on Tick Tock it's a lot 90 how do you get over the political mountain of trying to ban Tick
00:50:23
Tock if you try and ban Tick Tock whoever raises their hand and says we should ban Tick Tock and actually gets
00:50:28
it done they're out of office there is going to be so much pressure and backlash because people are hooked and
00:50:33
love that app and use it all the time to take that away from people will feel like this kind of young kids that don't
00:50:39
have phones actually get everything that Tick Tock has on YouTube shorts so I don't think Tick Tock is that important
00:50:46
because it is not actually there is no sticky Network effect inside that app so there isn't usage that's dependent on
00:50:53
people you know or a graph that you build it's a lot of passively consumed content and so you know you're you're
00:50:58
getting pushed a lot of algebra algorithmically defined content you can do that on YouTube and so I actually
00:51:04
don't think it's that meaningfully important if tick tock goes away I think the content creator stayed
00:51:10
it's harder for them to build a business on YouTube shorts but if you look at the
00:51:15
and measure the density of content inside Tick Tock it exists almost one to one on YouTube
00:51:22
that's interesting it's an interesting even it'll you think it'll be okay if we if we cancel Tick Tock in the US and we
00:51:28
say that too you can't have taken everybody moves to YouTube and it's going to be disruptive but people will
00:51:31
just go to YouTube and Instagram it's not that big of a deal in fact a lot of the my favorites if there was a network
00:51:38
effect inside there then I think people would have a reason to complain to somebody whether it's your
00:51:43
representative or whether it's somebody else to say hey don't do this this would have a
00:51:48
deleterious impact on my quality of life or my quality of experience and you could make that clear claim on Instagram
00:51:54
Facebook you know Google YouTube but Tick Tock is is much more brittle that way and that's why they need to get
00:52:03
public sooner and monetize this bloody thing because I think that it's very easy actually to deconstruct tick tock's
00:52:12
value into these other places I can tell you my favorite Tick Tock is Chef's reactions and I consume him now on
00:52:18
Instagram because he posts he just copies one to the other and so Chef's reactions is a great example where he
00:52:24
actually got banned by Tick Tock and then Diversified on his own and now what he does is he publishes across multiple
00:52:30
streams and if you look at all the big creators they all do that because it makes no
00:52:34
sense to actually give the power to any one of these things why have a dependency well I have a dependency all
00:52:40
right let's keep the trains moving most contrarian belief this is the Peter Thiel award your chess partner sex who's
00:52:48
winning in 2022 in chess how many chess games do you have going with Peter Thiel
00:52:51
right now and who's higher rated you demolished me with your Queen's Gambit I played one game I got killed in seven
00:52:57
moves I'm I'm ranked at 800 900 right now sax is at 1800 he just walloped me who's higher rating right now you
00:53:04
accepted the Queen's Gambit well you know I just I don't even know what it was I was like what opening is this
00:53:09
you're like uh Queens Gambit you're dead I don't want to accept the Queen's Gambit okay very pleasant game for white
00:53:18
I'm gonna go on a linear you know and risk being wrong uh my my prediction or most contrarian belief is that the
00:53:26
Bromance between Biden and zielinski comes to an end at some point in 2023 and uh let me State the part that I
00:53:34
think is conventional wisdom and everyone agrees with which is there's going to be a massive Ukrainian
00:53:40
counteroffensive in the spring and I think that could go one of two ways either it could make limited gains
00:53:46
basically the Russians fight them to a stalemate or it could be successful and they could basically push the Russians
00:53:53
back to the February 23rd lines and then make a play for Crimea I predict that in
00:53:57
either one of those circumstances zelinski's interests and Biden's interest will start to diverge so in the
00:54:03
case of a stalemate which I think is probably 50 50 here Biden's gotta start going into election
00:54:11
mode for 2024 and I think we're saying that we're going to be in a recession so I think that if there's a stalemate I
00:54:17
think Biden's going to tell zelinski wrap this thing up it's time to negotiate we need to get this over with
00:54:22
by the same token if the counter offense is successful I think that the administration hopefully cooler heads
00:54:28
will prevail and not let them take Crimea that's basically what they're gunning for is they not only want to get
00:54:33
back to the February 23rd lines they want to go all the way back to the 2014 lines of retaking Crimea I think that's
00:54:40
extremely dangerous I think that could precipitate a nuclear war and I think that the cooler heads the administration
00:54:47
will tell zelinski to stand down and that's the right time to make a deal so I think in either one of these scenarios
00:54:52
I think you will start to see a Divergence between the Ukrainian and the American interests and that could create
00:54:57
a rift and I think no one's really predicting that I I think this is great this is kind of what I thought the plan
00:55:04
all along was which was to deplete Putin of resources distract him them and then
00:55:09
get the West off of his oil and and try to do regime change but do it by bleeding him this would be uh proof
00:55:17
positive of that strategy which is bleed him to the end and then sell zelinski out I think that's actually I know
00:55:23
that's I know it's cynical but I think that's what we're doing I think Ukraine is a tool to deplete Putin and then
00:55:28
maybe get to regime change uh I'm cynical as it gets with this chamoth what's your most contrarian belief of
00:55:34
2023 I will go and pick that inflation which people expect to fall off a cliff doesn't fall off a cliff as fast or as
00:55:47
meaningfully as people want and so I will explain inflation as three different chapters and we've seen
00:55:55
the first two chapters play out so 2021 chapter one was all about energy inflation and you know we all talked
00:56:02
about having almost ten dollar gas at the pump and what does it mean for everybody and
00:56:08
it caused that initial Spike in inflation and then we had it come off and sax called this he said you know we're going
00:56:17
to have this sort of double hump and 2022 was really the story of goods inflation right all these prices and all
00:56:24
of these things went up because the input costs went up and we all had to Bear the implications of that but then
00:56:31
that started to ebb and now if you looked at the tail end of 2022 what I found super interesting was
00:56:39
the number of articles I saw about wage inflation whether that was Biden using an 1800s era law to prevent a Railroad
00:56:50
Strike the number of states that increased minimum wage the trend around unionization so in general my thought is
00:56:58
that the pendulum is swinging very markedly away from capital and towards labor and as the labor
00:57:07
participation rate stays low and continues to go down and also it's compounded by an
00:57:13
unemployment rate that may go up right people are it's going to be harder and harder to get people to do the work you
00:57:19
need at the company you have unless you pay them more and if that gets exaggerated then inflation will
00:57:28
stay where it is it won't be as muted and it won't fall off a cliff as people want it'll be persistent
00:57:34
that's my big contrarian God wager for this year is that we that is equation we see wage inflation that keeps inflation
00:57:42
not going down as much as people want this is contrarian because everybody's saying hey it's over the consumer's back
00:57:48
has been broken the credit card debt is high and everybody's being laid off yada
00:57:53
yada therefore goods and services there'll be more Supply than demand and the prices will lower very contrarian
00:58:00
free break you have a contrarian belief for 2023. I think my it follows my earlier points
00:58:06
about the Saudi China Russian Russia trade this year exiting 2023 it may be the case that you know there's
00:58:20
historically been this belief and this continuing belief that the US dollar will always be the de facto Global
00:58:24
Reserve currency and the current Mantra is that it's better than the rest everyone else is
00:58:29
worse off than the US Western Europe is in trouble Japan is in trouble China is in trouble everyone's in trouble but if
00:58:35
there is a coalition an economic Coalition a scaled economic coalition that starts to shift the balance of
00:58:44
power a little bit and the US meanwhile is taking on extraordinary debt load sending 1.7 trillion dollars in an
00:58:51
Omnibus Bill you know has this massive unfunded social security problem coming down the
00:58:56
pipe and are trying to manage multiple funded conflicts around the world it could be that the US dollar coming
00:59:04
out of 2023 starts to trade more like a risk asset and less like a risk-free asset and so I think that that's my big
00:59:10
contrarian bet is that maybe this year marks the beginning of the end of the US dollar as the kind of global de facto
00:59:17
Reserve currency based on some of these big trades that I talked about happening unbelievable so
00:59:24
that would be my um my big kind of contrarian perfectly said uh that's your contrarian bet the accent the Legion of
00:59:31
dictators the mbs's ETC they become they form a new Global Currency yeah my term
00:59:37
not yours I'm not calling it yeah I wouldn't say a legion of dictators and I wouldn't say form a new Global Currency
00:59:41
but I do think that the fact that that large economic trading models start to be done in
00:59:50
non-dollar denominated form got it you know weekends the uh the kind of Reserve status of the dollar to some degree not
00:59:56
fully right it doesn't happen in a binary way and then the dollar starts to trade more like a risk asset like other
01:00:01
currencies do to some degree not fully so maybe once again here we start to see that shift once again I take the exact
01:00:08
opposite of your contrarian belief I believe American exceptionalism continues to soar as Russia China Saudi
01:00:15
Arabia to a lesser extent continue to self-sabotage themselves with insane Wars like Putin has done or cutting off
01:00:22
uh the heads of entrepreneurs in China figuratively uh I'm saying here I think you cannot have exceptionalism without
01:00:30
entrepreneurs without people having freedom and I think that means American exceptionalism based on freedom
01:00:37
is going to continue and the Legion of dictators I believe are going to stab each other in the back before they
01:00:44
change the world or move the currency you can't trust them they'll snip at each other and all their self-sabotages
01:00:52
yeah I think that America is really feeling its Wheaties right now I think that American power is immense I think
01:00:59
that the superiority of our weapons in Ukraine has been one of the big surprises of the war let's go Palma
01:01:05
lucky I don't see the world in the simplistic uh good guys versus bad guys frame that Jacob does however America is
01:01:13
on turbo right now and um yes it is true that the bricks would love to get off of
01:01:18
the dollar because we are now using the dollar and the financial system as Swift
01:01:23
as a as a geopolitical tool and a weapon and they would very much like to be off
01:01:28
of our dependence on our currency but I don't think they're anywhere close to being able to do that yet and
01:01:34
like I said America is on turbo right now now one thing one thing I want to mention this just came out White House
01:01:41
correspondent named Jennifer Jacobs just reported that the U.S has agreed to send
01:01:46
Bradley armored vehicles basically our best tanks to Ukraine previously U.S officials had balked at
01:01:53
sending armored vehicles saying heavier weapons be too difficult for Ukraine to operate and maintain but allies are
01:01:58
moving to provide such weapons so we keep providing ukrainians with more and more sophisticated weapons
01:02:05
more and more support like I said this is leading up to a huge Ukrainian counteroffensive in the spring and I
01:02:11
really don't know what's going to happen at that point I do think that the Russians will escalate I don't think
01:02:16
they can afford to lose this war they view it as existential and I like I said I hope cooler heads will prevail and if
01:02:23
the ukrainians are successful at breaking through I hope that the Bible Administration will shut this down
01:02:28
before they try to retake Crimea because you know we've discussed this before I think the Russians confronted with a
01:02:35
choice between a total defeat that includes losing Crimea and their Naval base sevastopol and sees the
01:02:42
Ukrainian flag flying over their base at sevastopol if that's a choice between that or potentially using a tactical
01:02:49
nuke maybe at the mouth of the Crimean Peninsula as a firewall I think they could choose the nuke option so it's a
01:02:57
very dangerous situation and um you know very very Dynamic there's a lot of possibilities all right let's go
01:03:04
on to best performing asset of 2023 I'm going with sea stage investing again I don't think people want to get into
01:03:11
these toxic cap tables at the late stage as chamoth pointed out so I go with seed
01:03:14
stage and you know and up to series a the people brave enough to place bets the founders brave enough to start
01:03:18
companies I believe it's the best performing asset class of 2023 tomorrow yeah I think that there's still a lot of
01:03:24
uncertainty in the world and in the markets and so I'm generally concerned that there's a lot of chop
01:03:32
and so I picked something that's pretty conservative but I would have a combination of cash
01:03:40
and the front end of the yield curve so t-bills all the way up to two year bonds
01:03:45
so you can generate four and a half probably by the end of this year five percent pretty safely
01:03:52
owning this stuff while you wait for things to become more certain and the way that I think about it is
01:03:59
that I would rather Miss the first 10 or 15 percent of a rally once we're really done this stuff then
01:04:08
try to over correct and try to pick a bottom just because I think that you could lose a lot of money so
01:04:16
I think the goal for this year is to stay resilient and in the game and so owning having a bunch of cash on the
01:04:23
sidelines ready to pound it in meanwhile a portion of it collecting five percent
01:04:27
is not such a bad thing while you wait for the bottom fantastic my answer was actually very very similar which is if
01:04:33
kaskar is right that rates are going to 5.4 percent in q1 why wouldn't you just put all your money in short-term t-bills
01:04:40
you earn five five and a half percent risk free yeah like set it and forget it yeah and that's why Capital flows are
01:04:47
moving hugely right now from equities into bonds especially if we're going to a recession
01:04:53
which is inherently deflationary what do you got Freeburg performing asset class of 2023. one of
01:05:01
the things so I think it's inevitable that we continue to have significant infrastructure spending from
01:05:08
both the stimulus and security point of view so you know we kind of want to continue to stimulate the economy and
01:05:13
and support growth we want to continue to create jobs and support this transition and the risk if this if the
01:05:19
recession predictions play out true and the job market does lucid it's very tight right now
01:05:24
um there's going to be even more of an impetus to continue to do infrastructure investment but I think there's also
01:05:28
these big economic transitions happening underway right now with Pharmaceuticals
01:05:34
with semiconductors with energy there's a lot that we've talked about where there's a security problem and a
01:05:42
redundancy problem and so you know there are a couple of ways to kind of play this infrastructure
01:05:47
is spending thesis in each of those areas I've kind of highlighted four of them one is in semiconductor Capital
01:05:53
equipments okay like 10 core Applied Materials that that range of businesses that provide and sell the equipment into
01:05:59
the uh the Fabs and the and the organizations that build semiconductor Manufacturing
01:06:08
facilities the second is kind of an oil and gas services so similar to what Saks
01:06:12
said earlier Schlumberger Baker Hughes that class of businesses I think benefit in this in this environment and this is
01:06:18
independent of kind of economic conditions certainly because these are Big multi-year spending projects
01:06:24
the third is in the equipment to support them so deer and caterpillar and then the fourth I think is an important one
01:06:29
I'll talk about this in a minute with respect to my biggest kind of anticipated thing for next year which is
01:06:34
in a pharmaceutical infrastructure so Thermo Fisher and there's some company and others like them because there's a
01:06:40
lot of build out happening to support these big transitions happening and the modalities that are being used in
01:06:45
pharmaceutical drugs and Diagnostics and then I think that there's also a couple of these businesses that are
01:06:51
Diversified like danaher Honeywell Thermo Fisher is a good example that play across multiple of these um these
01:06:57
opportunities so those are those are all great businesses to own and you don't need to worry about you know they're
01:07:01
they're growing cash flow positive dividend paying companies and you don't need to worry about you know am I
01:07:07
getting five percent or five and a half percent based on the equity price this year these are long-range businesses
01:07:12
that are building real value growing their Top Line and compounding value from within and
01:07:17
then they're acquiring a lot of smaller businesses very cheap I'll say well that's an important Trend I've seen
01:07:21
across these companies Dan and her Honeywell Thermo Fisher they buy small companies they pay very little and they
01:07:27
immediately get massive return on invested Capital like they're in the High Teens so why get five percent on
01:07:33
t-bills when you can get high teens roic uh on the management teams running these
01:07:38
incredible platforms so that's where I'm most excited for this year okay now let's move on that was like a
01:07:45
mad that was like my mad my Mad Money segment I've never done the Mad Money segment before but there you go worst
01:07:50
performing asset I I went with energy because not that I think it's not important but it just feels like
01:07:55
everybody rushed into it in 2022 so it feels like it's overheated and if we are in a recession people might lower
01:08:01
consumption uh in terms of energy and uh be looking for cheaper alternatives so it could be overheated so I went with
01:08:07
energy worst performing asset you got one I think that if we've learned anything
01:08:13
from the last three years you have to separate the valuation of a company and how it performs in the stock market
01:08:20
with its value in society so for example if you look at Zoom zoom's valuation has cratered but its
01:08:27
value in society has probably continued to go up it's still a massively relied upon tool
01:08:31
the point is that markets do not give you credit for the value in society they will give you credit when you are about
01:08:38
to over earn but then they'll pull it all back when they think that you're going to under
01:08:44
earn so in that lens I think that Tech will have a tough year I think energy will have a really [ __ ]
01:08:51
year and probably the biggest asset class that is going to get pressured is going
01:08:58
to be junk debt and the reason is a bunch of these variable rate loans when rates are at
01:09:04
five and six percent that all of a sudden are like 11 12 13 14 coupons a bunch of companies will have
01:09:13
trouble meeting their debt obligations and will have to restructure the debt or we'll have to file so tax energy first
01:09:20
performing asset for 2023. uh some category of what monster said I think office Towers in San Francisco are
01:09:27
that is some serious toxic debt 27 vacancy rates and growing as Lisa's role uh I think that a lot of these buildings
01:09:36
maybe virtually all of the San Francisco downtown is going to be owned by the bank soon because the real estate in San
01:09:43
Francisco the office tower specifically the office Towers because no one wants to be in those the skyscraper buildings
01:09:48
south of Market you know mired in homelessness so um yeah I mean I think that a lot of
01:09:54
those buildings can be owned by the Banks there's gonna be some major fire sales remember this was the hottest
01:09:59
commercial real estate market in the country a few years ago and now it's the worst well look what I think about it
01:10:05
look what happened to be reap what do you think about that crazy thing that happened with the Blackstone read I mean
01:10:10
that's nuts you know explain what happened yeah Blackstone has a product called b-read it's like a 70 billion
01:10:15
dollar exchange traded fund effectively and what it is is the ability for individual investors don't act access to
01:10:23
blackstone's you know commercial real estate portfolio and they had such a massive amount of
01:10:28
redemptions that they had to close redemptions at the end of Q4 and they were worried that the
01:10:33
redemptions were going to continue to go up these are individual investors who basically seized the writing on the wall
01:10:38
as David said and wants their money out and so they went to the University of California pension system and they
01:10:45
essentially got a huge infusion of capital I think it was about four billion dollars were they guaranteed 11
01:10:53
and a half percent interest to these guys for the four billion dollars and they also posted a billion dollars
01:10:59
of their own equity in in the actual Reit to backstop it so what does it show you I think what sax
01:11:06
is saying is really right it's it may not just be in San Francisco but you know with all of these people either
01:11:11
getting laid off with all of these people now working remotely we may finally start to see the
01:11:17
beginning of the Reckoning in commercial real estate which has been an unbelievably performant asset class up
01:11:22
until right about now and and on top of that you have to factor in these much higher rates and so
01:11:27
these building owners if they financed it which they invariably have always financed they have huge variable rate
01:11:33
payments that are due on these buildings the rent rolls are lower even people like Twitter is just refusing to pay the
01:11:39
rent so you have to take them to court so it elongates when they have to pay and so you could miss a bunch of
01:11:46
rent payments and all of a sudden the banks could just go crazy and take ownership of these things
01:11:51
okay do you have a worse performing asset class for 2023 prediction Sultan of science queen of quinoa David
01:11:59
Friedberg it's really simple I've mentioned it before it's Consumer Credit we assume
01:12:05
that raising Rising rates and inflation would taper down consumer demand meaning
01:12:12
consumers buying goods and stuff and that certainly hasn't happened I'm in Vegas right now
01:12:17
I was in the car yesterday and the driver grew up in Vegas uh he's like in all the I've lived my whole life in
01:12:23
Vegas he's like I've never seen a December like we just had it was packed the entire month he's like normally in
01:12:28
Vegas it's dead up until Christmas and then New Year's people come into town but it's normally dead he's like I've
01:12:33
never seen such a busy month and I think we see this in the numbers consumers are
01:12:37
still spending like it's 2021 they're still spending like interest rates are zero as we talked about
01:12:43
um consumer credit is skyrocketing while rates are skyrocketing um and so I think we're going to run
01:12:48
into a real wall with respect to Consumer Credit in um sometime this year and you're going
01:12:54
to see as you guys know this is such a complicated interwoven Market of assets that the way that this this can be
01:13:01
traded there's a lot of different ways to trade it but I think it's going to be in general consumers are not going to be
01:13:06
able to meet their debt obligations could be mortgages could be credit card debt defaults are coming yeah the
01:13:15
markets the market has priced in a bunch of this stuff obviously companies like a
01:13:18
firm and the um what are they called buy now pay later companies but credit card
01:13:23
companies mortgages there's a lot of assets that you can start to kind of pick apart where do you think this
01:13:28
unravels first how does it what gets hit hardest what's underpriced and overpriced probably a lot of good pair
01:13:33
trading to do is Jamal kind of loves to talk about uh with respect to which of these are more likely or less likely to
01:13:38
be sensitive to this Dynamic but there's I think it's going to be a pretty ugly scene consumers just have way too much
01:13:44
debt relative to their earnings right now and it's pretty nasty and they have some confidence that
01:13:49
they'll always have a job or some way to pay their four easy payments it's hard it's
01:13:55
muscle memory is serious you know you come out of 2021 when you had um it's not just stimulus checks it was the low
01:14:01
interest rate and easy credit availability everywhere and it's just easy to jump into getting new stuff and
01:14:06
cool stuff and then when you get used to getting these stuff every week or every
01:14:09
month you kind of stick with it and you're like I don't want to give it up just yet I just not just yet not just
01:14:13
yet you know and so it's hard to kind of step back from spending when you have a
01:14:18
new type of lifestyle and I think that's what's going on I think this is an incredible observation yeah there's a
01:14:23
great Tick Tock of this guy that runs car dealerships and he sent them out unlike how much incredible money like
01:14:29
what a significant percentage of people's income they are spending on their monthly car payments and people
01:14:33
buy these cars that are well beyond what should be kind of a reasonable budget if
01:14:38
you were to go to Susie Orman do not buy that freaking car they stretch and the stretching is gonna it's gonna snap this
01:14:44
year yeah absolutely which brings us to the most anticipated try I love it great
01:14:49
one most anticipated trend of 2023 related to yours I went with austerity I have a friend who sometimes flies
01:14:57
private often and I was talking to him about his Christmas vacation this friend of mine Shama
01:15:03
instead of flying private to his vacation he had to pick up his kids he had to go back and forth he was driving
01:15:08
his car that was three hours that was you oh okay I didn't want to die it was so great who would normally fight
01:15:19
private to Lake Tahoe and he's like no I can't go out with you skiing on Friday I
01:15:23
gotta pick up my kids and then I'm driving back I say wait a second how are you doing that he's like I'm driving a
01:15:27
car I said what who's driving the car he said I'm driving the car and that's why
01:15:32
I say austerity is my anticipated train of 23-3 I agree with you I actually think this is a really good opportunity
01:15:37
to pull back on so much waste I haven't really looked at my household budget in probably two or three years didn't even
01:15:45
bother why and then and then when I looked at it I was like wow this is really inflated to a level that I didn't
01:15:50
expect yes but it makes a lot of sense to live in a more heads down austere way I don't know yeah I well I mean look at
01:16:01
tonight's menu you went with duck I guess the olive fed wagu everything's off the menu now no black truffles we're
01:16:07
having duck we're down to poultry next week we're gonna have pasta it's okay oh austerity measures for everybody they
01:16:14
call it foul for a reason right oh God sax uh do you buy into austerity where shamath and I are austerity belt hiding
01:16:21
as our trans where are you what's your Trend first I think that's a pretty good Trend the trend that I am going to
01:16:28
suggest uh will be to your great disappointment J Cal which is Trump's influence in the GOP continues
01:16:35
to wane you're seeing it in real time right now the headline is Trump's endorsement
01:16:41
proves worthless to Kevin McCarthy and the speaker bid even the Maga faithful like Matt Gates like Lauren bobert they
01:16:49
are ignoring Trump's pleas to get behind my Kevin and in fact they're kind of not
01:16:56
just defying him but making fun of him Matt Gates had a repost Trump saying sad exclamation point and bobert was saying
01:17:04
that Trump needed to get behind her movement so we have now a level of of open Defiance to Trump and the GOP his
01:17:12
endorsements just not are not what they once were and even if somehow Kevin McCarthy pulls us off I think all
01:17:20
that means is that Trump gets blamed for every swampy Rhino compromise that McCarthy has to make to keep the
01:17:26
government running over the next two years so it's a lose-lose does that mean that populism is on
01:17:31
because the it's the electorate that got him elected in the first place he was not very popular with politicians the he
01:17:36
was kind of an outcast when he got elected the first time and that may be the case now but he still got elected
01:17:41
because the population loved him people loved him is that going to happen do you
01:17:45
think that means that the populism is kind of waning or the interest of the the voters is waiting on him or is it
01:17:50
just the political party's alignment Wilbur only won by a few thousand votes she didn't exactly crush it in Colorado
01:17:56
I think a lot of this has to do with Trump's personal standing after the midterms the candidates that he
01:18:03
personally picked that were all in tough Races they all basically lost it was about the distraction he caused by
01:18:08
making the 2020 election such a big deal constantly looking backwards so I think
01:18:13
the Republican party doesn't like the Antics it's not about the policies I don't think I think it's 100 about the
01:18:21
about Trump's electability and about his ability to get things done and it's not
01:18:26
really about the positions per se so I think Freiburg to answer your question I think that
01:18:31
the future that GOP will incorporate this populism but it's going to find a better integration with the establishing
01:18:38
wing of the Republican party and future candidates will have to basically satisfy both of those wings of the party
01:18:44
sex was it was a straw that were maybe the two shrouds that broke the camel's back for republicans and Trump in that
01:18:50
relationship was it January 6 and the election denial like for Republicans is it just like come on those are the two
01:18:57
things this constant focusing on the 2020 election first it costs them the cost Republicans that Georgia runoff's
01:19:04
seat with Purdue against Warnock Purdue won on Election night didn't clear 50 had to go to the runoff this was
01:19:11
happened the day before January 6th this happened on January 5th of 2021. that was the first race where Trump's Antics
01:19:18
cost them then you had this midterm election where you know all the candidates who had to appease Trump by
01:19:25
talking about again the last election instead of looking to the Future they got punished by the the voters I think
01:19:31
Republicans want to win I mean they're tired of losing that's simple it's that simple yeah the job of a politician is
01:19:37
to win freeberg you got an anticipated trend of 2023. I am excited about and want to share the
01:19:45
point of view that I think I'm selling Gene therapies are becoming more mainstream so these are
01:19:51
pharmaceutical modalities where we use a gene editing systems where you can actually go in and change or add a
01:19:58
genetic material to cells in your body to resolve things like genetic diseases or change protein deficiencies or
01:20:04
introduce new proteins and then cell therapies where we engineer cells put them in the body and those cells go and
01:20:10
do things like attack and Destroy cancer cells for example there are currently 27 FDA
01:20:16
approved cell and Gene therapies on the market there are over a thousand in clinical trials many of which are
01:20:22
already showing extraordinary efficacy and benefit today these therapies cost upwards of a million dollars so I think
01:20:28
there's a massive and talking about the infrastructure investment conversation earlier because of the number of
01:20:32
diseases and the number of conditions a number of people that these therapies can treat I think there's massive
01:20:38
infrastructure investment opportunity coming forward this year but also seeing these come to Market come out of the
01:20:43
clinical trials get FDA approved we have to ramp up and build up the infrastructure needed because it's not
01:20:48
traditional we make a drug in a factory and send it to people and they get it injected these are
01:20:53
much more complex they require much more complicated delivery mechanism you have
01:20:57
to have systems to engineer cells and edit them and put them back in your body those systems today take days or weeks
01:21:02
and cost you know as a result a Million Dollar Plus per treatment so I think that um the cell and gene therapy
01:21:08
opportunity you know the JPMorgan Healthcare conference starts this week uh it's the biggest biotech and
01:21:13
Healthcare conference in the world starts in San Francisco on Monday this is uh one of the biggest areas of
01:21:19
interest and one that everyone's investing against but as these come to Market there's you know we talked about
01:21:23
this last week genetic diseases types of cancer that are going to be addressed and I'm really excited about seeing more
01:21:29
of these products come to Market and seeing the whole kind of infrastructure and delivery system change all right
01:21:33
sorry to interrupt trying to keep the trains moving Gene editing very good choice all right we end with this it's a
01:21:39
little bit fun most anticipated media for 2023 these are things we like to talk about the media here sometimes we
01:21:45
talked about White Lotus season two uh amazing uh season and maybe what you're looking
01:21:52
forward to next year I am really looking forward to in film Oppenheimer Christopher Nolan's movie
01:21:58
about the Manhattan Project that should be extraordinary I loved uh it was Dunkirk his as well I love Dunkirk I
01:22:04
like everything he does and when he is this is him becoming like a history Uncle I'm here for it I'm here for Nolan
01:22:10
becoming our history Uncle instead of Batman what was the one after Inception though that was really confusing the one
01:22:16
with Denzel Washington's son with John Washington uh yes um it was um I couldn't finish it I tried twice I gotta
01:22:24
go the third shot on that one it was oh yeah it was it was his worst film uh what's the name of it I can't remember
01:22:30
it was called uh tenet tenant tenant yes about like time and reverse and this it
01:22:35
was impossible to follow did you guys see his original film which was incredible Memento of course it was
01:22:41
fantastic yeah it was enough mine mine yeah it was mind-bending enough that you're like oh
01:22:47
my God incredible and then I think they took it too far tenant I tried to watch it three times I'm generally pretty good
01:22:53
with these sorts of films and love them but oh my God it was impossible to follow he he took it too far okay so
01:22:59
hopefully he goes back to his roots in terms of TV series I'm looking forward to secession coming back Ashoka
01:23:06
who is uh Anakin Skywalker AKA Darth Vaders uh Padawan Ted lasso season three coming up those are for me incredible
01:23:13
and then on the book front man the Michael Lewis book about SBF is going to be next level I cannot wait for that sax
01:23:19
you're a media junkie what do you got on your list of things you're looking forward to or should say what is
01:23:23
Tucker's writers what do they put down for you I thought the for movie you're gonna
01:23:30
pick cocaine bear right extraordinary a bear is in the woods and a I guess people who are trafficking in
01:23:45
cocaine drop their or crashes and the bear eats the cocaine and then goes on a rampage it's kind of like a a genre film
01:23:52
like in the crocodile way by the way I'm listening to Quentin Tarantino's book by
01:23:55
the way of criticism get the audiobook you'll like it sax he talks about all the films in the 70s
01:24:01
very good shout out to Quentin what do you got what do you got on your short list
01:24:05
uh history uncle me yeah I just gave you one but the code and bear top of your list we'll watch it
01:24:13
again was on my list and I think uh Marvel is doing a good job developing a new villain to rival Thanos with this
01:24:21
with king I don't know what phase they're on now but Loki season two and then the new Ant-Man movie and
01:24:28
um you know I thought after Thanos who wouldn't really be able to top that but yeah they've come up with a really good
01:24:33
concept I think for the next you know 20 Marvel movies well and then it will eventually become Galactus yeah you guys
01:24:39
have completely [ __ ] up you have missed the most obvious slam here we go Sade's new album go
01:24:46
on part two oh I haven't watched number one yet wait what you know what's happening wasn't it my
01:24:55
wife wants to watch it it is so stylistically beautiful it is a little boring there's not a lot going on slow
01:25:01
but it's so well shot it's a fun it's visually just stunning I mean if you need to watch it on a big
01:25:09
screen with big speakers and uh but part two comes out in November this year absolutely that's okay great Freeburg
01:25:14
tell us what documentary on veganism do you recommend and you're anticipating for 2023 what vegan documentary or
01:25:21
animal abuse documentary I am excited about the generative AI based media that I think is going to start to kind of
01:25:29
Rocket this year we could see for example the first you know AI written Symphony
01:25:36
the first kind of AI written published novel how interesting would that be like a full novel published by AI
01:25:42
and and more maybe short films based on an AI driven script and maybe even what I'm really excited
01:25:49
about is these AI based interactive video games or um kind of experiences where you the
01:25:54
user kind of get to create and live your own world uh through some sort of video
01:25:58
game type modality so I think AI driven media all right there you have it folks there are speaking of Pop Culture chaos
01:26:05
I guess Prince Harry has a book coming out that's called spare when you're playing uh bowling no but
01:26:17
you know like in in the English Monarchy they there's the air and the spare uh so he's calling himself but to me
01:26:24
that's like a weird self-description yeah like that's that's how you see yourself is just being self-deprecating
01:26:30
he didn't pick that they paid him so much money I heard they have to sell 1.7 million books to break even but you know
01:26:36
what it reminds me of is uh when Leonard Nimoy wrote a book I think he wrote a book called I am Spock and then he wrote
01:26:43
a book called I am not Spock nice you can never get comfortable with the fact that he was just Spock yeah and
01:26:50
there's something weird about calling yourself spare like you know you're clearly not comfortable with it's like
01:26:57
everything yeah everything they taught you everything I learned at Harvard Business School and everything they
01:27:03
don't teach at Harvard Business School you can you can do both books all right listen this has been great uh breaking
01:27:07
news as we're talking here chat GPT uh open AI doing a tender offer 9 billion obviously you're losing three billion a
01:27:18
day oh my God who is buying a 29. it's Founders fund or reportedly according to the journal it's Founders fund Thrive
01:27:25
Capital so Founders fund does not generally do super overpriced deals yeah from here
01:27:40
I wouldn't I would not totally could be by the way you guys remember that the um
01:27:45
open AI I don't know what the current situation is but it was a non-profit where they said investors put money in
01:27:51
but the investors maximum return was 100 X on the dollar invested so it's a non-profit up to 100 no no that happened
01:27:58
afterwards it's when they converted the original model yeah no the original model was appearance
01:28:04
the original model was a pure non-profit where there was no cap because there was
01:28:08
no concept of equity yeah when they flipped they capped everybody to 100x on the return so the original money thanks
01:28:15
but not even more or still but no the original money which was like elon's money
01:28:26
so I don't know how it converted but that's when they or did it convert did those people who funded it originally
01:28:31
get any shares before profit we could we could find out probably they did I mean
01:28:35
it would make sense I mean wait if this is a tender office 27 billion you wouldn't buy shares at
01:28:42
27. so again like the the thing that I want to impress upon you is like there is an enormous amount of work that
01:28:48
they do that what their biggest Gap to monetizing this will be finding unique content that they
01:28:57
learn on that nobody else has access to and this is why I really think it's important to understand if you have
01:29:03
enough compute these all of these unsupervised learning models if you run them on the same
01:29:08
training set will converge to the same answer so you're just getting there first so in
01:29:15
order to be really defensible you have to get there in a unique way and so either you're going to hand tune
01:29:21
or you're going to have inputs that are different so I don't know I don't know the answer
01:29:26
that's why like they they have to answer that question in their fundraising and I'm sure that they did because these are
01:29:31
smart investors but that's the big idea that you have to overcome and again you have to think like you think Google is
01:29:36
sitting on their hands no 129 billion like what fundamentals is that based on like why not 5 billion why
01:29:44
not 3 billion I mean like why not 10 billion like what makes sense valuation that's what it is it's all
01:29:50
this is all momentum said nothing to do with reality right I mean it this would imply at a 30 the the
01:29:57
public comps of the Google trades at what 25 or 30 ebit times ebitda so this would imply a billion dollars in ebitda
01:30:05
a billion dollars in ebitda 3 million dollars a day they're losing three million dollars a day on computer report
01:30:11
at least three million dollars a day and profit on what product I don't know if they have a that's
01:30:16
probably the issue I think look I mean my point was if these guys open up a set of tools
01:30:21
that support all these applications and services to emerge on top of what they've built
01:30:26
and they're getting red share getting payments out of that it's going to very quickly turn into a real here's the
01:30:31
problem this is why that can't happen they don't have the rights to the data they built the training set on and the
01:30:37
second they commercialize it the second anybody pays them whoever they based this on conversation into Oblivion I
01:30:45
predict suit into Oblivion let's talk about let's let's actually let's talk about that in the next show because I
01:30:49
think that's like the the way that AI works and we should probably bring someone like Sam on to talk about it but
01:30:54
the way that AI works on trading data and now people are making claims that the training data is copyright therefore
01:31:00
model output is protects that copyright is I think worthy of a good conversation
01:31:05
what's interesting is you know the earlier the early version of the of the internet was very simple it's like you
01:31:11
had this file called robux.txt and you would basically be open to a crawl or not and that's what would allow Google
01:31:17
to basically Go and Spider your pages right and so we have to replace this concept of that with this ai.txt
01:31:25
well you could make a claim that this is no different than you know a spider crawling a web page except that in in
01:31:32
the search case it was much cleaner which is we're just going to index your page and redirect people to you
01:31:38
uh here it's we're actually going to create a derivative work because of you in part and I do think that that's going
01:31:44
to be a very interesting legal threshold that has to get figured out well here it
01:31:48
is chamoth you're you're nailing it exactly it's a derivative work and they did not have permission to use it and it
01:31:54
impedes upon the original authors whether it's a photo it's a song it's a piece of code it impedes upon their
01:32:01
ability to do Commerce in the world you are interfering with their ability to monetize their content and the
01:32:06
percentage you're using is a hundred percent so when you get to fair use non-commercial use is very protected
01:32:12
parodies protected education's protected but when you dip into using the entirety
01:32:17
of the work which they're doing and you impede upon the person's ability to Commerce and you confuse the public
01:32:24
well this is the test that they will fail fail fail this is why I think that most people don't understand what AI is
01:32:30
they don't even understand the difference between training and inference so hopefully there is some
01:32:35
more understanding of this but if you use the same data set you will eventually converge to the same outputs
01:32:41
absent of hand tuning weights which has its own issues and absent any asymmetrically different
01:32:50
data that you have that nobody else has absolutely yes so if you are Apple and you have the watch data or your Google
01:32:57
and you have the search data or you're a weather company you have the weather data and your proprietary of course
01:33:01
there's a very easy solution to this to mouth number one citations when the algorithm gives you an answer it should
01:33:08
say what were the top percentage sources of this information how did the AI look if you look inside of a transformer
01:33:16
the problem is okay that you're going to have trillions of ranks trillions of Weights trillions and so how are you
01:33:23
going to decide how to basically draw a line under a threshold this was actually
01:33:27
a useful input and this was not so again I I just think that it's hard a very few small class of people actually
01:33:34
understand this like the great person to actually bring in to talk about this would be Andre carpeth not and I think
01:33:40
because Andre was there sure and a Tesla and he but he can say it in a very dispassionate way to explain this to
01:33:46
people I think we should we should ask him to come on yeah for sure I mean I can ask him okay I mean this is brand is
01:33:52
this law Sachs you're an attorney you understand fair use copyright all this stuff the law correct me if I'm wrong
01:33:58
here sax does not anticipate this look this is a highly specialized area I don't want to pretend like I understand
01:34:04
the law in this area you know I'd want to talk to a specialist yeah okay so anybody let's have this conversation
01:34:10
because I think yeah the SE are great um work for us to talk about because all right this is probably why by the way
01:34:17
they started as open source because it was like a slam dunk thing to make this a non-profit and open source everything
01:34:23
be maybe in part because of these issues but if you just let the code Run free you probably don't have to even deal
01:34:32
with these issues right well they they closed it remember their claim the claim was this is too dangerous their original
01:34:39
claim was it's too dangerous for people to not see the code then Sam flipped on that and he said it's too dangerous for
01:34:44
people to see the code and it started out as a non-profit where the idea was the way to keep this safe is for
01:34:51
everybody to see the code but they didn't make any money whatever they went private and they flipped the decision so
01:34:56
keep that in mind as well he's a he's a very very very clever business person he's savvy
01:35:02
and you know Paul Graham when Paul Graham picked Sam to run YC Paul Graham said that this is the most impressive
01:35:09
person I've met since Steve Jobs yeah remember come on the pot I do remember that um well you said something similar
01:35:15
about Gary tan is now running YC starting this week yeah Sam Altman friend of the pot come on all in any
01:35:19
time and has played in our poker game several times makes sense yes we we had a tough situation there where you
01:35:26
interfered in the hand if you remember uh all right listen this is what happened there was a Sam and I were in a
01:35:33
hand of Poker he raised I had two pair and I'm trying to figure out does he have a set or is
01:35:38
he bluffing me I think he's got top pair and you were like oh look at this and you started commenting on the hand oh my
01:35:43
God I haven't made the call or not yet oh my God and I'm like for my La Bouche let's let's stop
01:35:49
talking here because I'm trying to I'm playing I'm like okay Sam would get and I basically came to the conclusion Sam
01:35:55
would get to like great Delight bluffing me off a hand he's a risk taker he knows
01:35:58
I'm conservative he knows he's a risk taker I'm gonna call here with my I had bottom two
01:36:03
how much does he have a set and there was also a stray on the board I'm like [ __ ] it I I I at best I'm
01:36:10
you know even money here uh but there was a lot in the pot so I was just doing the pot odds while I'm doing the pot
01:36:14
odds you were like hey which is usually I'm usually want to be reprimanded for talking right Dad but
01:36:21
it was notable all right listen love you besties why don't you tell people that there's no comments and uh just as a
01:36:27
programming note we turned off comments for a couple of weeks on the YouTube just to see how it psychologically
01:36:31
affects me and it's for jamaat to just f with all you brigadooners we love you uh
01:36:37
uh besties this has been a great episode two great uh and his uh Twitter is at chamoth and he does it read it just so
01:36:45
everyone listening no sax and I voted against turning off comments just just I voted in favor of whatever got uh
01:36:52
chamat's vote for the all assignment 23. so that's how I vote this is for horse trading now but the podcast has never
01:36:58
been better besties spending time together on the slopes is the cure to all evils we'll see you next time love
01:37:04
you back bye bye love you guys bye bye let your winners ride Rain Man [Music] we need to get Mercies
01:37:56
[Music]