00:00:00
I can't see what's on your hat what does it say super gut one of my most exciting
00:00:04
companies called oh Hollow oh Mahalo I still have mahalo.com no not Mahalo unrelated completely unrelated nothing
00:00:10
whatsoever to do with Mahalo I remember Mahalo great product sorry didn't work up against you know we were making
00:00:18
10 million dollars in Revenue uh at the peak yeah about 100 people writing like human curated search result Pages
00:00:26
look at chat she's doing so well you're a great guy to reference the chat GPT thing coming out of that well then what
00:00:32
happened was they did the panda update and we went from 10 million down to 500 000 in Revenue overnight what was
00:00:40
the panda update they looked at who the top sites were e Hao Mahalo yeah Etc and they just said nobody can get
00:00:48
any more than this amount of traffic and they literally throttled the number of unique users they would send to you
00:00:54
and that was it game over and um then everybody I knew at Google wouldn't return my emails and they were like we
00:01:01
don't have Partnerships with anybody that's what Matt cutts told me are you saying that mahalo's lack of
00:01:07
success had nothing to do with the poor product engine execution it was Google's
00:01:11
malfeasance it got really rave reviews it was backed by Sequoia so did the movie but it sucked you know when you
00:01:17
build a company that gets to 10 million in Revenue in 18 months you can talk for
00:01:21
a month but basically looking at your resume here I see that you've created nothing in your entire career
00:01:26
when you get in the arena the arena and you actually build a product then you can talk to me I had
00:01:33
the number one blog in the world one of the top five tech magazines in the world
00:01:36
and this is the number one Tech and business podcast oh good I touched the soft spot I got to the warm underbelly
00:01:42
there Jacob so rarely goes after chavoth when he does it's just gold it's like it's incredible you're talking to three
00:01:49
founders here chamoth you're the odd person now so when you want to talk about product then make one okay so
00:01:55
gross and yet I'm the richest it's so tilting it must tilt you totally fine so is Kim Jong-un so's Putin okay there's a
00:02:02
lot of rich people in the world but these are three products okay dictator there's your cold open let's go
00:02:14
[Music] quinoa [Music] all right let's get started everybody it's been a big week there's a lot to
00:02:29
talk about it might be a little bit of a controversial spicy agenda today here on
00:02:33
the all-in podcast with me again the Sultan of science who is tearing up the YouTube comments everybody asking the
00:02:42
Sultan of Silence to contribute more and to speak more but when he does speak my
00:02:46
Lord he drops those knowledge bombs how you doing Sultan of science I'm hanging in there you're hanging in there okay
00:02:52
wow I'm hanging in there man a few words I guess hanging in there okay great with
00:02:57
us again of course another Android David sacks sax how are you doing I am doing fine how are you thank you wait let me
00:03:06
ask GPT what's the question how are you doing uh let me ask it hold on let me see what it says I mean basically Chachi
00:03:13
T4 is the ultimate Asperger's equalizer you guys are gonna benefit most from this I asked it how are you it says as
00:03:20
an AI language model I don't have feelings or Consciousness so I don't experience emotions or states of being
00:03:25
like human does however I'm here and ready to help you with any questions or topics you'd like to discuss how can I
00:03:31
assist you today that's pretty similar to how you feel except you don't offer to help anybody okay also with us is the
00:03:38
dictator himself here to talk about topics looking forward to today's episode and with us the dictator with a
00:03:45
shockingly shockingly low cut there's only one button on this shirt only one button
00:03:50
okay made from a tiny albino baby right here they were like should we put buttons and they're like no why put
00:03:58
buttons conservation movement exactly no no no the one button is what counts that is a
00:04:04
baby albino rhinoceros that was killed fed to chamoth on his vacation and then attached to his linen shirt I guess
00:04:13
let's just get this out of the way Trump was a arraigned I guess is the term he was charged in New York
00:04:19
with 34 felony counts of falsifying business records Alvin Bragg alleged Trump orchestrated catching kill scheme
00:04:26
as well to suppress damaging information before the 2016 election of course Trump pleaded not guilty and
00:04:33
did a feisty press conference or speech rally uh Mar-A-Lago after that prosecutors say the scheme involve
00:04:40
falsifying business records to conceal payments to Stormy Daniels we know all that same thing Michael Cohen went to
00:04:46
jail for the indictment wasn't a speaking indictment where it explained all the details so Alvin Bragg hasn't
00:04:52
tipped his cards by explaining in detail what the legal theories are and which information he has and he was pretty
00:04:57
clear about that that he was not going to tip his cards which makes us even more
00:05:03
hard to understand what's going on and creates even more divisiveness predictably the ride is framing this as
00:05:08
a Witch Hunt but surprisingly many on the left including former sdny head preet bharara of the amazing podcast
00:05:15
stay tuned with preet which I love he felt this was the weakest of the four major investigations that trunk is under
00:05:21
and he expressed some concerns uh on his podcast that it was light and not detailed
00:05:27
and he might have not actually pursue this unless he had a 99 or something like that chance because it is the
00:05:34
president's sex I guess everybody's expecting us to fight over this but to just be a little
00:05:39
preemptive here as much as I think Trump is like the most unethical person to ever hold the
00:05:45
office this does seem a little light and I'm hoping brag has the goods on him because why bring a
00:05:53
Mr Mina case you know and these are all I guess misdemeanors that are being elevated to
00:05:58
felonies because of tax evasion possibly or election interference so what what are you Steel Man or just generally
00:06:06
speak about the the case here because I know that you're a man of Law and Order well many people on the left are
00:06:13
criticizing this case uh Jonathan Chate who's a liberal writer for the New York Magazine wrote a good column about it
00:06:19
and look here are the reasons why number one the underlying Behavior here is that
00:06:24
Trump engaged in a private settlement with Stormy Daniels that's not illegal even if it is you know so-called hush
00:06:31
money that is legal you're allowed to do that number two is that he used personal funds to do it
00:06:39
he did not use campaign funds and this is why Alvin Bragg has had to make this kind of distorted ridiculous claim that
00:06:46
he should have used campaign funds to do it but does anyone believe that if Trump
00:06:51
had used campaign funds that wouldn't be alleged as the crime so he's kind of damned if he does damned if he doesn't
00:06:58
here I think that you know what the law is trying to do with these rules around campaign funds is protect donors from
00:07:04
Canada's misappropriating them and Trump had every right to use personal funds to
00:07:08
engage in the settlement it's a major Distortion of campaign Finance rules third these campaign financials are
00:07:15
federal laws they're not state laws so it's not up to Alvin Bragg to enforce them and in fact the feds looked at this
00:07:23
and decided not to prosecute it because if they did they'd have to enforce similar laws against Hillary Clinton
00:07:29
recall that Hillary Clinton had a problem where she used campaign funds to fund the
00:07:36
payment to Christopher Steele to write the Steele dossier and that was a real problem and it was
00:07:41
miscategorized as legal fees and she had to pay a fine for that but no one talked
00:07:46
about locking her up over it and no one was talking about you know indicting her
00:07:49
and sending her to jail and so part of the reason why I think the feds didn't want to look at this is because they'd
00:07:55
have to look at similar cases that are even more egregious and then finally the last thing is that we're well past the
00:08:00
statute of limitations on this whole matter so Alvin Bragg is really out here on the
00:08:06
limb he's past the statue of limitations he's enforcing laws that are not his business to enforce they're distorted
00:08:12
interpretations of those laws and the underlying conduct here is fully legal so I think everybody is kind of like
00:08:18
wondering why he's doing this and I think there's two theories either Alvin Bragg is incredibly stupid which he's
00:08:24
not or he's incredibly smart yeah and the the sort of three-dimensional chess explanation that Ann Coulter has is that
00:08:30
this is all a giant Honeypot for Republicans because they're all rallying around Trump here because they perceive
00:08:37
I think correctly that he's being railroaded and he's being he is the victim of a political prosecution but in
00:08:42
rallying around him to defend him you see that Trump's poll ratings among Republicans in the primary are going
00:08:47
through the roof distances are going down and so what and culture fears is that this is all elaborate ruse to make
00:08:55
Trump the nominee because Biden would much rather face a re-election against Trump than against a
00:09:02
young youthful vigorous Governor like a DeSantis do you think Bragg has a bunch of more information and maybe that tax
00:09:08
evasion is the issue he'll go after because that seems to be the other Theory here is he's not going to do the
00:09:14
federal you know election stuff he's going to go after the tax evasion which is what they already got the Trump
00:09:20
organization on when weisel I guess the CFO is going to jail for six months it's
00:09:23
going to be hard to connect 1.6 million fine for that company these are misdemeanor crimes and to convert them
00:09:30
to a felony the crime needs to have been done in the process of aiding and abetting
00:09:36
another crime and tax evasion is the concept here when he listed the bullet point list of all of the reasons that or
00:09:45
all of his evidence it seemed to point to what David said which was just he's camping Finance
00:09:50
violations yeah this whole thing just seems like such an enormous waste of time just think about the amount of
00:09:58
money that will have to be spent on just securing New York City every time he shows up
00:10:06
the five-car motorcades the Secret Service the police the this that the disruption to people for what really
00:10:15
ultimately I think is right is kind of like you know it's a bit of like man this case should have been brought years
00:10:20
ago well not at all in relation to that they were told to stand down from doing that because of the you can't indict a
00:10:27
sitting president and that's paused so that's another legal Theory that's going to have to be tested Jason the feds
00:10:33
looked at this years ago and they decided not to press charges they were told to not do it because he was a city
00:10:38
president no they were no he's been kind of office now for a couple of years why
00:10:41
didn't they move forward they were that was the process they were doing so that takes two years the previous D.A said he
00:10:50
was told to stand down because decided not to prosecute on the same underlying offenses that was his
00:10:57
decision he decided not to who who told him to stand down no one could tell him to stand down yeah the office of Cyrus
00:11:03
Vance has decided not to move forward with this very same case when the statute of limitations had not expired
00:11:09
now it has and Alvin Braggs moved forward yeah I mean you really have to stretch here to come up with any kind of
00:11:15
plausibility to this to this case and I mean you have to wonder why he's doing it is it just
00:11:22
naked partisanship or are they trying to make Trump the Republican nominee well here's what Vance said on Meet the Press
00:11:29
this weekend I was asked by the U.S attorney's Office in the southern district to stand down on the
00:11:33
investigation and they were asked to stand down as well because of the you can't indict a
00:11:38
sitting president so anyway all this stuff's going to get done in the wash I don't think we have to spend too much
00:11:42
time on it because we'll find out I think in the coming weeks do the Democrats actually want him to get
00:11:49
convicted then what he's going to be under house arrest in Mar-A-Lago because he's not going to be sent to jail and
00:11:54
then what then DeSantis actually will win the nomination so what exactly is the perfect outcome which is to create
00:12:00
this theater waste taxpayer resources only to have Trump acquitted just so that he can win the nomination and then
00:12:07
he can go against Biden and lose this seems so far-fetched and idiotic move on right close this chapter and
00:12:14
move on totally this is ripping the country apart for no reason and such a stupid case such a stupid case even the
00:12:21
people who would like to prosecute Trump like you Jason I think have a problem with it and one of the reasons why this
00:12:26
is going to be counterproductive even to the the anti-trump forces is that by going first with this case yeah Alvin
00:12:34
Bragg is poisoning the well for any future case they might bring against Trump because now all future cases
00:12:40
against Trump are going to be seen as painted with the same brush which is a nakedly partisan sort of Witch Hunt
00:12:46
there may be other cases out there that have more validity to them but they're all going to be seen as of a piece with
00:12:54
this sort of Alvin Bragg uh yes that was preet's position I think it's a it's a logical one I don't disagree what do you
00:12:59
think of the other three cases January 6 the interference in Georgia where they recorded them on tape and then the
00:13:05
stolen documents in the obstruction of justice or do you think all four cases are politically motivated
00:13:11
and none of them have any validity to them sex I mean look the question you have to ask is if Donald Trump was a
00:13:16
private citizen who never ran for president would he be the target of any of these prosecutions I mean he was
00:13:22
you know high profile business figure for decades and he wasn't prosecuted like this and so that's really the
00:13:27
question you have to ask and yeah go to jail Cohen did go to jail for the same crime so the answer is yes what
00:13:34
Michael Cohen wasn't prosecuted until after Trump was president what I'm saying is you asked if
00:13:39
if he was not do you really believe if he would let me finish you you asked if if Trump was not a president if he would
00:13:46
have been prosecuted for this crime in fact another person Michael Cohen was prosecuted for this crime and did serve
00:13:51
jail time so the answer is yes he would have been and they've and they brought these cases
00:13:55
the spanking kind of cases and they brought the other one for the 1.6 million fine and weasel were going to
00:14:00
jail so I think they would actually but anyway do you think all four are politically
00:14:06
motivated is my question to you or you think anything I can't I don't want to comment on the other cases until
00:14:12
I see what case is actually made and what the merits of them are however I don't believe that all these prosecutors
00:14:18
all over the country be looking at Donald Trump this way if he was just a private citizen who never ran for office
00:14:22
and I think we have a big problem in our political system when political disagreements are
00:14:28
criminalized and this has been a nasty Trend that's been going on for many years it was usually I guess practice
00:14:35
against staffers you know here or there you'd have some you'd have some executive branch staffer would you know
00:14:42
find themselves on the wrong end of a prosecution and they'd end up going to jail maybe they get pardoned or not but
00:14:47
now it's reached all the way to the the top and you have presidential candidates
00:14:51
basically being prosecuted and I do not believe they'd be prosecuted if they were not major political figures and it
00:14:57
looks really bad for the political figure who is leading it right now in the Republican party to be Joe Biden's
00:15:05
opponent in the next election to be prosecuted by one of Joe Biden's political allies I mean if this were
00:15:11
happening in some other country the United States would be criticizing it as some sort of you know Banana Republic
00:15:16
Type move so this is not the direction we want our politics to go and and look I don't I I don't want to disagree Trump
00:15:23
to be the nominee I support a different candidate but I think that to be interfering in our elections for Alvin
00:15:32
Brock to be interfering in the political process this way is a reach and it's setting a horrible precedent for the
00:15:40
future I mean we're talking about major presidential candidates by local DA's I mean why would we want
00:15:46
this so let me ask a follow-up question then do you the doj is currently investigating Hunter Biden and then
00:15:52
obviously that goes up to the big guy with the 10 do you think the doj should be investigating Hunter Biden or do you
00:15:57
think we should be giving a pass to presidential presidents and their families well the hunter Biden case I mean this
00:16:05
is one where you've got foreign governments basically paying off Hunter Biden for political access now that may
00:16:12
ultimately be legal because I think influence peddling is kind of a business that takes place all over Washington but
00:16:20
that actually does speak to the Integrity of our political system at the end of the day would I send
00:16:26
Hunter by into jail no I don't think so like I said I don't like criminalizing political disagreements but what honor
00:16:32
Biden did was definitely pretty shady and for sure you know and I think Hunter Biden and Trump and his family are both
00:16:39
shady is my feeling on it we got to get better candidates in here Nikki Haley your candidate hmoth raised 11 million
00:16:44
dollars last week she's on fire Freeburg you want to jump into this and and touch the third rail you want us to
00:16:49
move on uh let's move on all right so there's been a lot of Twitter back and forth about the D dollarization
00:16:58
and if it's real if it's happening if it's not last week China and Brazil struck a deal to trade in their own
00:17:05
currencies uh the Brazilian government announced the two countries were no longer use the U.S dollar as an
00:17:10
intermediary I don't know if that's for everything they trade or for certain things they're trading it'll be a
00:17:16
straight one for Ray eyes trade China is the top us rival obviously and Brazil is
00:17:21
one of the largest economies in Latin America what are your thoughts generally speaking Freiburg I know that you have
00:17:27
some exposure here you know with your company that I think you spacked recently and you have some
00:17:35
knowledge of the space right well I mean China and Brazil are pretty sizable trade partners
00:17:41
I think it's around 150 billion dollars a year of bilateral trade so China historically has made a lot of
00:17:48
Investments through their companies in Railways infrastructure waterways ports and infrastructure to support
00:17:57
the agriculture manufacturing economies in Brazil and it's a very deep tie obviously the closeness of that
00:18:05
relationship China became a bigger trading partner for Brazil in 2009 surpassing the U.S by the way China has
00:18:13
had similar trading strategies in Africa in Australia they've bought several companies in Australia they've made
00:18:20
massive infrastructure Investments the currency of trade it's one element of a broader
00:18:29
intertwining that China has kind of enabled by using its resources to invest in infrastructure development and then
00:18:36
participating in the economic value and gain that arises from that it still also
00:18:40
supports the local country the local population the local economies in a meaningful way
00:18:46
I think it's worth noting that the anti-globalization moment that we're having in the U.S and it may be a longer
00:18:53
term Trend doesn't mean that globalization and global trade is going to slow down between China and other
00:19:00
really important well-resourced Nations around the world so the Brazil China Summit that happened a week ago
00:19:07
where a lot of Brazilian Executives went to China and had a very deep set of dialogues but they also signed a
00:19:15
ton of agreements on trade and also in some of those cases the trade being done in non-us dollar denominated currency
00:19:24
it's worth noting as being that if the U.S does continue to push for deglobalization
00:19:30
we can only leverage our side of those relationships China will continue to make investments continue to develop
00:19:37
trade and continue to develop really deep tie-ins with countries around the world
00:19:42
from a resource perspective from an economic perspective and ultimately The Leverage will sit with them on what
00:19:47
currency folks are going to trade in so you know what we're seeing with the China Saudi discussion around the Petro
00:19:53
Yuan which doesn't seem to be really a standard thing yet but we're starting to see inclines of
00:19:58
some deals happening in Yuan but it's more related to the depth of the Chinese trade relationship with all these
00:20:04
nations around the world so the more we kind of as the US think we want to de-globalize and reduce our trade
00:20:12
relationships with other nations the more you know we're out of the way in allowing China to do that I think it's
00:20:17
worth observing that the Chinese economy will grow the depth of their relationships will grow potentially the
00:20:22
strength and importance of their currency will continue to mount as they build these really deep infrastructure
00:20:28
and investment tie-ins around the world chamoth what does a party trading in one
00:20:32
do with the one do they buy a bunch of stuff from China what happens to the one yeah this whole thing is a huge nothing
00:20:39
Burger this is the third deal that that China has done the other two countries are Pakistan and Brazil
00:20:45
and the reason why is I've see like people on Twitter now breathlessly rambling on about D dollarization and
00:20:53
all of this stuff and I think if any of these people would think from first principles the first
00:20:59
thing that you would know is that the yuan is pegged to the US dollar and so as long as it's pegged whether
00:21:06
you trade through the US dollar or you don't and you directly go to Yuan your index to the US dollar and then you use
00:21:14
a dollar swap to convert it into the currency you need so I don't know I think this is kind of like a lot of
00:21:20
folks who don't really know what's going on what do you think about the the depth
00:21:24
of China's trade relationship so forget about the denomination of the currency but the fact that
00:21:30
um the statistics now is that you can't find the top trading partner with 120 countries you know they surpassed the US
00:21:37
with many of these countries over the last you know decade or two in particular and continue to increase the the scale
00:21:44
relative to the US where we're kind of decreasing our dependence on on Nations and reducing our trading the
00:21:50
reason why China has had so much dominance as a trading partner and the reason why China's central bank
00:21:58
has the largest amount of foreign US dollar reserves about three and a half trillion dollars is exactly because of
00:22:05
the thing that you want to ignore in order to have this highfaluting intellectual conversation
00:22:10
it is pegged to the US dollar and until it is unpacked in a free-floating currency we will never know
00:22:17
what the real market clearing price is and just so China has been able to hold on China has been very effectively able
00:22:23
to manipulate this currency since they were brought into the WTO in order to engender that trading partner status
00:22:32
they were able to artificially suppress the value of their currency so that exports from China
00:22:40
could gain Traction in countries all around the world you have to take into account this currency Peg and you have
00:22:47
to ask the question where would the currency be if it wasn't free-floating and then what would the
00:22:53
incentives be for folks to replace the dollar and I think that there's a lot of interesting questions there that are
00:23:00
worth asking but I think you have to be a little bit more intellectually honest to have the discussion and just for
00:23:04
clarity tremath you said they already have these deals with Pakistan and Pakistan she met Pakistan
00:23:10
and Russia I think they already have those deals with those two Pakistan and Russia
00:23:15
right okay good I just want to make sure it's clear there sax do you have any thoughts on this is is this an example
00:23:21
of people just maybe taking the ray dalio book and it fits a certain narrative and over hyping it or
00:23:27
do you think this is an actual real Trend in the world that to be concerned about I think the
00:23:32
dollarization hasn't happened yet but I think it's a risk and I think there's a bunch of reasons why the risk is growing
00:23:40
so first of all we have 32 trillion dollars in debt someone has to finance that debt and the bigger that number
00:23:47
gets the more unattractive our debt is because they're they have to be concerned that we're eventually going to
00:23:52
monetize The Debt Pay It Back by printing a bunch of new dollars so that's Point number one is we have these
00:23:58
massive deficits and debts number two is that we have I think in the last couple
00:24:05
of years really weaponized the dollar so if you look at like what we've done with Ukraine and and Russia we basically
00:24:13
seized hundreds of billions of dollars of Russian reserves that were held in dollars we've excluded them from the
00:24:21
Swift banking system we've imposed massive sanctions on them and in fact we now have sanctions on a huge number of
00:24:28
countries all over the world so we're very sanctioned happy all of which makes these countries
00:24:35
view the dollar as an unreliable store of value why would you store your money in something that can be taken away by
00:24:43
the US and specifically by the state department so I think this is a major change in the way that we view the
00:24:51
dollar the last couple years is we're going to use it as a weapon that again that makes it
00:24:56
view that's not the first time we've ever done that right we've done sanctions against many different we've
00:25:00
done sanctions but as far as I know we've never seized foreign currency reserves and excluded a country from
00:25:05
Swift which is the banking system so as as an instrument of U.S foreign policy so I mean I could be wrong about that
00:25:11
but this was a major event when it happened remember we also did stuff like Seas the the yachts and the the foreign
00:25:19
Holdings of Russian oligarchs remember there are ill-gotten gains we suddenly decided they were all gone let me tell
00:25:25
you we didn't think they were ill-gotten when those Russian billionaires were buying those Yachts or buying New York
00:25:30
real estate or London real estate or investing in Facebook or investing in companies here or buying sports teams or
00:25:38
what have you hold on we didn't think they were ill-gotten at the time that they were
00:25:44
actually made and spent but we decided subsequently we're just going to seize those things well again if you are
00:25:51
a foreign country or a wealthy person in a foreign country or decided to decide where you're going to keep your money
00:25:57
you may not want it to be liable to the vagaries of U.S foreign policy so I think all these things do matter
00:26:05
and when you're running the kind of debt and deficits we have and you're making the US dollar less attractive you are
00:26:11
running a risk I mean people we have disagreements with on the dollar standard because that's good in
00:26:17
terms of power for us which I think opens us up to a broader discussion okay just to clarify
00:26:24
this it's not even the dollar standard right like what this deal was is to use this thing called sips and sips is the
00:26:31
non-dollar competitor to Swift and so you settle right across let's just say you have two
00:26:39
trading partners in two completely different countries that use a bank in each of their local areas
00:26:45
they typically swap to Dollars and then they transfer right using this this backbone of the financial infrastructure
00:26:51
called Swift China has built a competitor to it called sips cips and China's been going
00:26:58
around and signing Folks up makes a ton of sense right Hey listen if we're trading between each other let's just
00:27:04
use that so I think it's important to not paint this with more of a brush than it should be I'm not saying that D
00:27:10
dollarization couldn't happen I just think that everybody tries to take one random data point and conflate
00:27:16
it all together to reinforce a ray dalio point from a book three years ago I do think there's a group of catastrophists
00:27:22
who maybe are maybe hoping this happens or it's a great Twitter fodder I think we are headed for some sort of
00:27:27
government debt crisis I said that there's gonna be three prongs to this financial crisis one was these
00:27:33
long-dated bonds having unrealized losses which is causing problems in Regional and Community Banks the second
00:27:39
piece of it's the commercial real estate crisis which I think is metastizing right now which is also going to be a
00:27:46
banking crisis once all those unrealized losses come to you and the third piece of it is government debt crisis we have
00:27:52
this 32 trillion dollar debt that we're now having to refinance at much higher interest rates I read somewhere that
00:27:59
half our government debt so 16 billion is going to come to you 16 sorry trillion yeah and it's going to have to
00:28:06
be refinanced in the next three years the average rate on that debt is 1.7 percent well if you want to refinance it
00:28:14
at 10-year rates you're going to be looking at somewhere between three and a half and four percent maybe more so
00:28:19
you're looking at a doubling of the interest costs and I also read that by 2030 we're going to have over a trillion
00:28:26
dollars of interest expense owed by the U.S government every year that is money that's not funding
00:28:32
anyone's Social Security it's not funding anyone's health care it's not funding one weapons program
00:28:37
we want it's this event it's going to be more than a quarter of our total federal
00:28:42
budget yeah and this is where you start gambling when you're chasing that big payment you start taking risks this is
00:28:47
also where you have to expect the FED will really want inflation to stay high that's sort of what we've said before
00:28:52
the only way out of this mathematically is to keep rates high but the other thing David that you when you mention
00:28:57
all of this is what about every other country if you think that's happening in the United States I think it's important
00:29:04
to make sure we at least consider every other major economy because it's not as if they're pristinely sitting on the
00:29:09
sidelines while this happens to the U.S this is my whole argument the whole time
00:29:13
which is if you're going to have this argument you need to do it thoughtfully and
00:29:18
relatively right because the euro is in the same amount of trouble if you look across it's not as if China
00:29:24
is actually sitting pretty and smelling like roses either every major economy or
00:29:30
trading block in the world is going to go through this at the same time so it becomes a relative trade argument and
00:29:35
there I just don't know enough to know whether the US is poorly positioned versus Europe or China but it just seems
00:29:42
like you get back to a place where it's like okay we need to find the flight to safety what is the canonical flight to
00:29:47
safety if it's not a commodity like gold it's probably the dollar until it's not
00:29:52
yeah okay Freebird obviously other countries have even more acute problems higher debt to GB GDP which means higher
00:30:00
debt payments just rounding third here on this issue any final thoughts on the dollarization
00:30:05
and servicing or debt look it's we're in trouble and it's uh it's unclear the timing and
00:30:15
the path but the arithmetic is pretty simple in addition to the point Sachs made you
00:30:21
guys saw the news the city of Chicago has a 44 billion dollar pension hole that's just the tip of the iceberg on
00:30:28
unfunded pension liabilities from both state government city government even private institutions this is again
00:30:37
hundreds of millions of people worldwide that are expecting money coming to them
00:30:41
from institutions that ultimately the federal government of the US is likely going to have to backstop to some degree
00:30:48
so that's another huge check that's going to need to be written that the federal government is inevitably going
00:30:53
to have to write because we're not going to just let all these people have no money and become starving
00:30:57
and Social Security right now is projected to go bankrupt sometime between 2030 and 2035. so we're gonna
00:31:04
have to write a check to cover the hole there plus the interest payment checks what
00:31:11
about your mocks Point Freeburg of like relatively on that uh relative to other societies other
00:31:18
countries yeah so the very likely case is that relative wealth will decline so in the near term I think it's
00:31:32
inevitable we have higher tax rates I've said this before because in order to kind of Meet The Gap even if we have
00:31:37
these austerity measures or reduce costs or reduce the budget as the Republicans
00:31:41
are going to push for is this debt ceiling debate reaches its apex in uh 60 days
00:31:47
from now which you better believe this is going to be pretty pretty damn dramatic
00:31:52
and there's going to be real questions of what happens if the U.S defaults on its treasuries if the U.S defaults on
00:31:58
obligations it has on treasuries there will be a real shift away from using those assets as the Baseline of
00:32:08
the risk-free rate worldwide what what the net what the other thing will be I don't know
00:32:13
I I I'll speak about the challenges I see with Bitcoin you know if we want to at some point oh did you hit it but did
00:32:19
it hit a million yet but if you put all of this together you're gonna have to Source income
00:32:27
somewhere you're gonna have to take a piece of the assets and a piece of the income away from the private citizenry
00:32:32
so you're going to have to tax and that tax will be used to kind of fill some of the hole and then more of
00:32:37
the hole will be filled by printing money and that will lead to this kind of inflation of asset values which
00:32:43
ultimately means that the relative cost of things go up and relative wealth goes
00:32:47
down and I think that's the point to take note is that anyone who's concentrated assets is going to have
00:32:53
them effectively went pretty quickly over a couple of those examples so just to take that that
00:33:06
Chicago case the numbers I saw in an article this week I think I was in the Wall Street Journal was that 80 percent
00:33:12
of the property taxes in Chicago are now going just to pay for pensions so 80 are
00:33:17
going to pay former workers not current city workers and moreover those uh pensions are only 25 percent funded
00:33:25
so they've already over promised by 75 percent benefits that they can't afford how is this going to work and you saw
00:33:33
that we just had an election there and rather than fix the problem they voted for a candidate Brandon Johnson who is
00:33:41
even softer on crime than Lori Lightfoot and the reason for that is because the the government workers unions basically
00:33:50
all supported him so you have a situation in these blue cities and states where there's a
00:33:56
massive Civil Service they are the strongest special interest in local and state politics they have already taken
00:34:04
huge Appropriations out of the state budget in the form of these pensions which aren't even adequately funded we
00:34:10
can barely afford them as they are should we have pension sacks what do you think
00:34:16
sure so what what happened in the 1980s when there was a lot of pension reform in the private sector As you move from
00:34:23
defined benefit to Define contribution so you start having more defined contribution like 401k
00:34:30
the way that these public pensions work is to find benefits so you know what they'll do is they'll say that we're
00:34:35
going to take your last year of employment with the city or state and whatever your whatever the amount of
00:34:43
money was you made that last year you're going to get 80 or 90 of it for the rest
00:34:46
of your not just your life but your spouse's life too and moreover any overtime you earned it becomes part of
00:34:53
that calculation so everyone knows this game and so what you see is in their final year state or city employees will
00:35:00
load up on the overtime they'll earn twice as much and then 90 of that yeah they get 90 of that for the rest of them
00:35:07
and their spouse's life we just can't afford to have rules like that that don't make any sense and so but the
00:35:13
point is that the benefit that's been defined Bears no relationship to the amount of money that's gone into these
00:35:21
pensions right and so you have there's a simple solution here you have a huge unfunded liability yeah but to
00:35:26
freeburg's point every blue city and state in the country is going to have this problem and who's going to pick up
00:35:32
these expenses you bring up great points but you just mash them all together in this mashed potato of random things like
00:35:39
unfunded pension liabilities you won remember Ray eyes trading and they're like the same thing they're not the same
00:35:47
thing they're driven by two different subjects here but we're talking about listening
00:35:53
amalgam soup an outcome the conversation classification so I'm just saying like if these are important topics but I'm
00:36:00
just saying I do think they're motivated by totally different things and they're not related as much as we
00:36:06
think they are related I think they're related let me walk you through how they're related okay I want to hear how
00:36:10
the real eyes you want trade is connected to the Chicago pension system the holes need to be filled so the money
00:36:18
is not going to just not get paid to the pensioners Social Security is not going
00:36:22
to go away just like we saw in France if you start to do that you have Revolutions in the street
00:36:28
there's literally bonfires at intersections in France in Paris today because people don't want to wait
00:36:35
another two years before they get their pension payments so ultimately that check has to be written when you add up
00:36:40
the column of how much money is not on the balance sheet today how much liability is not on the balance sheet
00:36:46
today that is ultimately gonna have to get paid out and the US government is going to print money to pay it out it
00:36:52
indicates that there is a higher degree of uncertainty on whether or not I'm actually going to get the value back for
00:36:57
the bonds that I'm buying in US dollar denominated form or that the US dollar is actually going to be strong enough to
00:37:03
cover the cost or it has enough kind of you know or has too much volatility because of this uncertainty and I think
00:37:10
that that's really where people start to say well maybe the US dollar isn't that
00:37:13
risk-free rate where it's a strong economy with a great balance sheet great economic growth there's certainly
00:37:18
extraordinary potential because of the freedoms that we have to operate in this country as individuals through the
00:37:24
Enterprise through the Innovation through the entrepreneurship through the attraction of talent from all over the
00:37:28
world to come here but at the end of the day we do seem to have a very big set of
00:37:32
checks that we're going to have to write and as those you know liabilities start
00:37:35
to mount there becomes a real question on do I really want to hold dollars maybe I want to hold something else and
00:37:41
maybe I diversify a little bit and maybe instead of holding just dollars I also hold other things and as that starts to
00:37:46
happen you see a little bit of a shift it's not an overnight thing it's all catastrophic one or the other but it
00:37:51
starts to bring into question whether the US dollar is the standard de facto system that's used for trade around the
00:37:57
world that's the point and sax there is a solution to this superannuation is done in the UK and in Australia where
00:38:05
you contribute you're forced to contribute to your 401k essentially but you get to learn how to put money away
00:38:12
and you become a little more you have a little more authority over your future with these pensions where
00:38:20
you're responsible for saving and you're kind of forced to save and it seems to have worked really well in Australia and
00:38:26
other places where people have great savings and you don't have this major debt load by the government doing it so
00:38:31
it's something for people to look into sex did you want to add anything to this yeah this one to the death just make it
00:38:36
quick yes I don't think we're just leaving it to death because I think it is a huge issue I mean look the part of
00:38:41
Chamas argument that I agree with is that you do have to evaluate the Dollar on relative terms and you know you can
00:38:49
argue that the US and the dollar it's it's still the you know let's let's call it the most eligible bachelor in the
00:38:56
leper colony um you know nothing started falling off on the man yet but um but that doesn't
00:39:01
mean that it won't that's really good that's really good by the way the first default might be the
00:39:08
nose is falling off you know the economist herb Stein once said that if something cannot go on forever it won't
00:39:14
what we're doing right now cannot go on forever we are running deficits and debts and unfunded liabilities that we
00:39:20
cannot afford and so it will stop and the only question is how it stops well I think there's yeah and it may stop in a
00:39:29
way that is not it's not a voluntary Choice by us basically you guys want to make a bet a friendly wager for charity
00:39:38
oh you know what happens in June I'll make a bet with you guys June you mean the debt ceiling yeah what what do
00:39:44
you guys think happens you think this is going to be a fractious chaotic thing where the markets get roiled no I think
00:39:49
it's going to be a pretty rubber straightforward deal where they're gonna it's gonna come down to
00:39:54
the wire but my guess is No One's Gonna Want to default on the debt yep and there's going to be some concessions on
00:39:59
spending and ultimately the debt ceiling will get extended and that those concessions on spending will
00:40:08
allow the Republican party to save face with their voters and say look we we got
00:40:13
some concessions here I'm not sure they're going to be enough to really address any of the major problems that
00:40:19
the US is facing over the longer term but you know certainly letting the debt ceiling hit and defaulting is
00:40:27
catastrophic I think the majority case is a bunch of hand ringing and then they make a concession people that are
00:40:33
interested in this topic I would go use the way back machine and go and read all
00:40:38
of the articles in the 80s where you could replace China with Japan and what happened with Japan is that
00:40:45
Japan just hit a demographic wall not dissimilar to what China is about to hit in the next 15 or 20 years right it's a
00:40:51
good counter argument yeah that's a really good point and I think that there is this element of you know China as the
00:40:57
primary threat but I think the the bigger problem chamat is that we have voted ourselves into a stupor we have
00:41:03
allowed ourselves to accrue these liabilities that are in many cases not on the balance sheet that we simply
00:41:11
cannot afford to pay and the social unrest that will arise what if and when we don't pay them or the economic cost
00:41:17
of us actually paying them either of those are going to be pretty significant but that's under that's water under the
00:41:23
bridge and it has nothing to do with China it has just everything to do with how the US is spending thank you for
00:41:28
being intellectually honest this is my point I agree with you about the importance of these unfunded liabilities
00:41:33
I just completely disagree with you that this argument about these things being so hyper-connected
00:41:40
or that all of a sudden we're at the Cliff of D dollarization I don't think it's rooted in facts and I think again
00:41:45
it ignores this unbelievably important piece of logic that all of you guys that say this tend to ignore and it's still
00:41:53
in it's not even well addressed in Dalia's book which is it is a pegged currency
00:42:00
and the minute you unpack it none of you know what happens to it except that it probably isn't where it's trading today
00:42:06
and if you actually didn't have to factor in dollar reserves that everybody holds that thing would Skyrocket in
00:42:12
value and it would crush the export value of the Yuan and it happens to all currencies and this is this funny thing
00:42:18
that has happened to the United States which is that it ran forward and it transitioned its economy to a
00:42:24
service-led economy faster than other countries and other economies and other currencies did
00:42:31
and nobody wants to just talk about that except we're talking about that's what sort of drives us good sex I don't think
00:42:38
the big risk is that all of a sudden the dollar gets replaced by the Yuan as world's Reserve currency I think
00:42:43
Freeburg lays out a more intermediate path which is people start to hedge their dollar exposure and decisions that
00:42:52
used to be automatic like trading oil and dollars you know the so-called Petro dollar now it becomes a little bit you
00:42:59
know more of a decision so you know the sounds that's what happened with the pound sterling it was a similar story
00:43:04
and it was not an overnight collapse I mean there were certainly these kind of punctuated moments where there were hits
00:43:09
but you know the history is that there was a slow devaluation over time and the you know as a result of obviously the
00:43:15
economic pressure and the uncertainty actually no what happened to pound sterling was that it was pegged to the
00:43:20
US dollar and then it became unpegged so exactly what I'm talking about no even post that even post that if it's a
00:43:25
free-floating currency yeah no dude you're proving my point when Soros broke the back of the US dollar
00:43:31
what he forced George Brown or when he forced the chancellor of the extractor could do was to basically depeg the
00:43:37
pound and then yes you're right it's been like this ever since yeah that was what I'm saying if you let
00:43:44
it be free-floating nobody wants to trade in that other currency everybody wants the dollar
00:43:51
the worst affected leper in the leper colony yes we're still in the colony this is
00:43:58
why you have to have if you're going to be intellectually honest just have a relative conversation about all of the
00:44:03
currencies and all the things that they're also going through which are also not not perfect the debt payments
00:44:08
for the emerging and the frontier markets are extraordinary and just realize that if you want to go and Peg
00:44:13
your economy to somebody else's back they also come with their own trials and tribulations that you have to risk
00:44:20
manage as well and now you have to decide on balance do you want to risk manage a centrally
00:44:25
governed economy right from a central Bureau or a freewheeling Democratic like these are
00:44:31
all the discussions yeah there's a lot of Trace is there just back to the the non-currency part of this for a second
00:44:38
there are a lot of like connections between these things I I actually think there is a strong connection between
00:44:44
what's happening for example in Chicago with the out of control civil service and the unfunded pensions all the way to
00:44:51
the dollar status but there's also a connection between commercial real estate and these pensions so on a
00:44:57
previous show we talked about the commercial real estate the looming crisis and a lot of people thought that you
00:45:05
know some of the comments we were just talking our book which is not true I don't own I don't have a dollar invested
00:45:11
in these office Towers but you know who does Pension funds yes who owns these office Towers so you're talking about
00:45:18
Pension funds that are three-quarters unfunded and they may have a lot less funds than they even think they do
00:45:24
because we're about to have a huge Reckoning where all of a sudden these office towers that were supposed to be
00:45:30
blue chip that were supposed to have the Best Collateral there was in major American cities now all of a sudden they
00:45:38
may not be nearly as valuable as they thought they were yeah and and if they don't own the building they definitely
00:45:43
own the debt a hundred percent for sure in the fixed income portfolios of all these pension systems are the debt that
00:45:49
was used to finance these buildings by the REITs and buy you know the big real estate funds that put those things
00:45:55
together so you're absolutely right they are a hundred percent impacted by what's
00:45:58
about to happen we're not we're not going to allow given the civil unrest and social unrest risk and obviously as
00:46:04
a democracy we're not going to allow that all to go to zero and we're not going to let
00:46:09
pensioners not get paid ultimately that's just a kiss of death maybe pension payments are reduced to some
00:46:15
degree but again Paris is a really great example of as you start to try and shift
00:46:20
the economic guarantees that have been made to pensioners even slightly yeah what was it two years in retirement
00:46:27
62.62 yeah and it was certainly like you know you could sit here and argue what people for years for their whole life
00:46:34
have this expectation set we have all for our whole careers invested in the Social Security
00:46:41
benefits that were owed as retirees through every paycheck that we've received and those Social Security
00:46:47
payments may not end up coming back to us if Social Security is a lot to go bankrupt so ultimately the government
00:46:53
has to set step in and issue new dollars to make that up then the economic question is what happens to the value of
00:47:00
the dollar what happens to the value of the economy and so on as you issue trillions of dollars to fill these holes
00:47:04
let me ask a um a question that's a little more positive here perhaps which is is there a path
00:47:12
out of this you know debt cycle we're in and what are the top ways in which we're going to
00:47:19
get ourselves out of this I I have three that come off the top of my increased productivity hold on I have three off
00:47:24
the top of my head number one is austerity measures number two is productivity through technology and
00:47:30
perhaps number three is maybe uh recruiting more entrepreneurs here to start more companies and you know fill
00:47:38
some of these jobs so intelligent immigration yeah number one is higher taxes yeah so look higher taxes because you
00:47:52
can go after assets you can go after wealth so there will be higher taxes okay so I still think I still think
00:47:57
we'll end up seeing 70 tax rates on the wealthiest uh people seventy percent I don't see I don't see it being like
00:48:05
unpopular I think it's going to be unpopular with the wealthy it's going to be popular elsewhere to fill the hole
00:48:10
second is cut back on spending but that's a really hard thing to do because you know as we've talked about in the
00:48:15
past people vote to get more stuff so you put the politician in is going to vote to get you more stuff you don't
00:48:21
vote people in to go cut spending so generally you know we're going to likely see uh number one happen first
00:48:28
maybe there'll be a Reckoning where you kind of reduce spending it's going to take extraordinary political will and an
00:48:33
extraordinary depth of education and diffusion of understanding of this this key critical economic problem amongst
00:48:40
the voting class uh which is a really hard thing to realize I think number three are you saying get the public to
00:48:48
understand to understand that we have to have austerity measures yeah and then number three and and basically people
00:48:54
are going to have to make sacrifices so the first sacrifice will be the wealthy they're gonna have to sacrifice through
00:48:59
higher taxes the second sacrifice will be everyone else by seeing reduced spending and reduce kind of surveys the
00:49:05
services Etc the third is the hopeful one but we don't have a guarantee on this which is do we see
00:49:12
economic growth through productivity gains can we create leverage with our resources and our people by using new
00:49:19
technologies to get more with less and so you know anytime yeah like again I gave the example last time but when a
00:49:25
tractor was introduced in agriculture all the people that were farming the ground didn't have a job anymore but
00:49:30
what happened is new jobs emerge in making tractors and servicing those tractors in uh you know gas pipelines to
00:49:35
get gas to the tractors all these economies emerged as a result of that economic technical Innovation so I think
00:49:41
as we see Ai and other Innovations hit the market you know new economies and new
00:49:46
Industries hopefully really Blossom and and we can benefit from that economic growth and also lower costs for people
00:49:52
on purchasing goods and services we've identified four things when Reagan came in wasn't wasn't the highest tax rate
00:49:59
like like 70 yes yeah that was the top marginal tax rate 70 and 70 is not unheard of it will happen again in this
00:50:06
uh in the U.S well and but Reagan unleash an economic boom by flattening the tax structure because marginal tax
00:50:12
rates created a disincentive for people to work and produce more and so there is
00:50:17
a big economic hit from this yeah and remember what this 1970s were like it was the malays days of Jimmy Carter we
00:50:24
had a horrible economy with high inflation and everybody was paying high tax rates and the government wasn't
00:50:30
making that much revenue because there wasn't as much economic activity going on and during the 1980s we had an
00:50:36
economic boom and the government actually collected more Revenue with lower tax rates because so much economic
00:50:42
progress was unlocked sex we identified four things so it's like we've learned nothing which one is the most important
00:50:49
here which ones are the most important we talked about austerity we talked about increasing taxes we talked about
00:50:53
Innovation and efficiency and then we talked about immigration recruiting more highly talented people when you look at
00:50:58
those Fords you have any to add to that list to get out of this and which ones do you think are the most important and
00:51:03
why when you look at Federal tax revenue over a 50-year period go look at the Fred charts what you see is
00:51:13
that quite independent of the top marginal tax rate the amount of Federal receipts that the government's
00:51:20
able to collect is roughly around 19 percent plus or minus two percent and so you can only get so much blood
00:51:28
from a stone you can try to raise the top marginal rates but then rich people have an incentive to
00:51:33
basically find more tax protected strategies so the history of this thing going back
00:51:39
to 50 years is you can only extract so much from taxes and what you're better off is a lower tax rate that is broader
00:51:47
based and you go for economic growth that produces more activity but look if you if you're spending too much there's
00:51:54
no way out of that so austerity critically important and Entrepreneurship I mean when Bill
00:51:59
Clinton left office and I I think Reagan through Clinton was the biggest 25-year
00:52:04
period of economic boom we've ever had federal spending as a percentage of GDP was 18 and a half
00:52:11
percent he got it down from like 22 percent and he did it through economic growth and he bragged about it yep so
00:52:17
you know look where you want to be is I think federal spending should be in the low 20s I think you
00:52:25
want tax revenue to be in the High Teens 19 you can have a small deficit those are the conditions for economic growth
00:52:33
chamoth any thoughts here on our way out I'm going to take the complete opposite of
00:52:38
all of this which is the um anti-chicken little version which is I think not much at all changes I think
00:52:45
that jet debt to GDP will continue to rise not just for us but for every other country in the world whose fate is worse
00:52:55
than the United States and I think that on a relative basis the United States will continue to be
00:53:03
exceptional and that this will not really be an issue in our lifetimes okay and I'm not saying that's a good
00:53:11
thing and I'm not saying that's a just thing and I'm not saying that's what I want to
00:53:16
happen but pragmatically I think that that's what will happen and I don't think that there is a magic number
00:53:24
where all of a sudden things start to break where there's some magic number for Jet debt to GDP where all of a
00:53:30
sudden everybody finds religion instead I think that it just creeps higher and by the way
00:53:35
if you look at where debt to GDP was at the turn of the 19th century and then what happened through the World War II
00:53:41
what we've really done is you know we've retraced a lot as well so there have been moments where we've been out over
00:53:47
our ski tips a lot and so I think it's just important to keep in mind that sometimes
00:53:54
what works just continues to work and I keep asking myself the relative question
00:53:59
which is what country what economy what group of human capital is better positioned in the United
00:54:07
States and despite all of the things that are screwed up with this country it's hard to find a better example
00:54:13
so yeah unless you happen to have the lucky mineral or oil club like Norway or Saudi
00:54:21
Arabia you're you're going to be hard-pressed to find a better place to plant your money and I think
00:54:25
entrepreneurship and immigration are the two most important things we can do as well as austerity and I think Joe
00:54:31
manchin is like or these moderate candidates in the middle who might actually be able to talk about cutting
00:54:36
but by the way you said something you said something really interesting which is if you look at the Norway Saudi Abu
00:54:42
Dhabi what are those countries effectively becoming by monetizing the oil they invest in all of the economies
00:54:48
that are working perfect segue thank you it's not as if the Saudis and Abu Dhabi
00:54:52
and the Norwegians aren't trying to invest in America they're trying to put as much money to
00:54:57
work as possible they're just trying to Pace it out so that they have time diversity and asset diversity so to your
00:55:03
point Jason so this is a it's sort of a bit of a self-fulfilling prophecy I think that what has worked continues to
00:55:09
work and then the burden for disruption gets higher and higher yeah that changes
00:55:13
there's two things that work in the world having those natural resources or having entrepreneurship let's make a
00:55:19
segue here this is the final point on that oh God we've been final pointing for 20 minutes here go ahead quick final
00:55:24
point this is an important discussion I think okay so Adam Smith once said that there's a great deal of Rune in a Nation
00:55:31
meaning it takes a lot of political bungling to screw up something as big as a nation especially a nation that's the
00:55:38
number one superpower in the world that has the world's Reserve currency so we are in some ways the beneficiary and
00:55:44
coasting on hundreds of years of Excellence of economic performance and great political leadership in this
00:55:50
country and the question to ask is not whether we can still post on that but whether the political leadership we have
00:55:59
today is living up to the standard we had in the past and I think it's clearly not and the only question is when it
00:56:05
breaks and it's hard to predict exactly when it's going to break but what I do believe is that if we keep going the way
00:56:11
we're going it it will have to stop well said we're definitely bending it right now and when you bend it sometimes it
00:56:17
breaks right and and by the way the reason why we are going to pursue AI at Breakneck speed
00:56:22
even though it may lead to some sort of weird dystopian future is because we need that productivity
00:56:29
boost we need a choice now 100 because we are so frankly better us than the next guy
00:56:34
whoever gets their first choice another perfect example Choice two major stories
00:56:39
this week that we need to discuss the first is Saudi Arabia's public investment VC arm
00:56:46
took a very interesting PR step of listing their funds that they have backed and
00:56:52
it's a significant list everybody from Andreessen Horowitz to go to not surprising there and Mark Andreessen and
00:57:01
Ben Horowitz and Adam Newman had a major keynote at a Saudi startup conference I was actually asked
00:57:12
to Keynote the next one in Riyadh which I'm debating doing and then in sync with that happening at
00:57:19
the same time there's been a debate of should LPS in America be backing firms like Sequoia China
00:57:28
Matrix China Etc because those firms are now backing open AI competitors and a if
00:57:36
we believe AI is the big race here uh should we as a country we don't we're not allowed to to back military stuff
00:57:43
obviously in these countries but how do we on this Global chess board decide should we be taking money from Saudi
00:57:51
should we be investing money in AI startups in China so I think tremath you've got a big perspective here
00:57:57
globally let's start with you two separate issues any surprises here by Saudi the kingdom actually releasing the
00:58:06
list of who they're backing and why would they do that at this point in time and then us investing in China because
00:58:11
we are at a moment here a Crossroads I think of should we be engaging or not engaging and Building Bridges with China
00:58:18
and Saudi you know for obvious reasons look Saudi Arabia Abu Dhabi all of the UAE these
00:58:25
are countries that are really important on the world stage and increasingly so because they manage peace and prosperity
00:58:31
regionally now right they have huge balance sheets that can accelerate all kinds of projects all around the world
00:58:40
and so they have to be taken seriously and so this is a very smart marketing move
00:58:45
by the pif which is to essentially say look we are an established Blue Chip LP of the Blue Chip organizations that
00:58:54
you're used to hearing about and celebrating and I think that's very smart of them
00:58:58
because what it does is it reinforces the feedback loop that other great firms should be going to them to raise Capital
00:59:05
when it comes time for them to raise their n plus first fund and so I suspect especially now it makes even more sense
00:59:13
because everything we've heard Friedberg mentioned in a couple of episodes ago the United States limited partner Market
00:59:20
is essentially closed for business they have huge misallocation problems the endowments are sort of closed the
00:59:26
universities are closed a lot of the family offices are licking their wounds and so this is
00:59:31
a perfect time for folks in Saudi Arabia and the UAE to basically put the foot on
00:59:36
the gas and basically tell everybody hey we are open for business so I think that that makes a lot of
00:59:42
sense and I think that it'll be successful it'll work especially in a moment now
00:59:47
where U.S dollar flows from US dollar limited partners are very difficult and harder to come by well and we're also
00:59:55
selling billions of dollars in weapons to the kingdom and we are a major part of ours are
01:00:01
valuable they're a valuable security partner of the United States they're valuable economic partnering the United
01:00:06
States it's no different than doing business with any other country I think it's smart by the pif on the other thing
01:00:10
though with U.S firms investing in China's AI it should not be allowed and I do think that
01:00:16
the folks that are responsible for sypheus need to get a handle on this look I've done a bunch of deals where I
01:00:23
have had to jump through a bunch of cipius Hoops where explain stuff yes please so basically cepheus is the
01:00:29
committee on foreign investment in the United States now what that means is if folks want to invest in certain things
01:00:35
that are on a list of things and I'll and I'll tell you the things that I've been involved with but that came under
01:00:39
cypius rocketry and certain chip Technologies are so Advanced that the United States has very
01:00:46
specific rules that limit the ability for foreign actors to invest in those businesses
01:00:54
and in those situations where a few folks invested beside me in some of these companies we had to go through a
01:01:00
process to get cypheus approval before that investment was allowed now what's interesting about that is that's about
01:01:06
money coming in but I do think that the reverse now becomes important because if U.S dollars
01:01:13
are going to go and see these extremely complicated Advanced Technologies abroad
01:01:19
especially into the hands of countries that are Frenemies at Best of the United States
01:01:25
I think we have a responsibility to have a point of view on that and so I think Keith were boy was the one that was very
01:01:31
definitive and said this should not be allowed I do think it is so early Jason we talked about this we're on this curve
01:01:36
of [ __ ] around and find out which means there will be some crazy examples of stuff that are very uncomfortable yep I
01:01:45
don't think we want U.S fingerprints on this stuff being perfected outside of U.S borders sex when we look at the
01:01:52
history of Engagement with China maybe we can take a multi-decade globalization perspective here
01:01:58
when you look back on it the engagement with China created so much Prosperity so
01:02:03
much intertwined dependency iPhones being the the best example possibly we're selling them in China we're making
01:02:09
them in China China loses apple as a customer that would be absolutely devastating for them and it would
01:02:17
obviously be devastating for apple as well so when we look back on that as a general rubric here do you think
01:02:24
we enabled a competitor or we avoided future conflict because of the interdependency and where do you sit in
01:02:32
terms of thinking about engagement versus maybe isolation or something in between those two for enemies best of
01:02:40
Frenemies Etc the policy of constructive engagement as it was called 20 something
01:02:44
years ago the the idea behind it was that if we engaged with China economically and help make them Rich
01:02:52
then that they would become more like us they would somehow turn into democracy and they would have tremendous gratitude
01:02:58
towards us and we'd become friends it's not the way it worked out there were people who warned that this was a
01:03:06
foolish approach so most notably the realist scholar John muirsheimer at the University of Chicago warned back in
01:03:13
2002 that that was not the way this is going to play out if we made China Rich they would seek to convert that wealth
01:03:20
into political power and then they would act the way that all other great Powers
01:03:25
have behaved throughout human history which is they want to dominate their region and they would seek to push the
01:03:32
United States out of Asia and the future that he predicted 20 years ago is the future that's come true
01:03:37
and I think the you know all the constructive engagers I think has some egg on their face now
01:03:43
I understand where they're coming from this is a fundamental difference between whether you see the world in economic
01:03:48
terms which is about creating positive sum games basically trade or whether you see the world fundamentally in
01:03:56
geopolitical terms which is about the balance of power which is more of a zero-sum game
01:04:00
and I think that both views they're both extremely important we want to engage in
01:04:06
positive some relationships that generate more trade and more wealth to the United States at the same time we
01:04:11
have to be aware and concerned about the balance of power we do not want a number
01:04:16
two country in the world who can rival the United States in terms of power who basically could win a security
01:04:23
competition with us and we certainly don't want a country in the world to be more powerful than us so I think this is
01:04:29
sort of the yin and the Yang is geopolitics versus economics and I think what's happened with China over the last
01:04:34
several years is it's flipped I think we used to see the relationship primarily in positive some economic terms and now
01:04:40
we see it in geopolitical terms and I think there's a lot of firms now in the United States you haven't
01:04:48
embraced this new reality and to go back to your question about you know when should a venture capital firm take money
01:04:55
from a foreign country when it should and I think there's a very simple rule for this which is if the country is a
01:05:00
U.S Ally I think it's fair game because the U.S has said this is a partner of ours so
01:05:05
why can't you do business with them but if the United States government has said
01:05:09
this is an adversary you're putting yourself in a really difficult precarious spot by doing business with
01:05:15
them because then you have to explain yourself to the US government yeah this is the very simple rule we would use is
01:05:20
I don't we would never consider taking money from Russia or North Korea any country that the US
01:05:27
government says is an adversary of ours but if the US government assistance is a
01:05:31
partner and an ally then I think you could consider it do you think there's a way Saks to salvage the the relationship
01:05:36
with China and make it productive or do you think it's a fargone conclusion at this point because one might argue and
01:05:42
I've heard people argue this maybe China would have invaded Taiwan already if it wasn't for the
01:05:48
interdependency so I know we're dealing with you know a lot of we're doing a lot
01:05:52
of predictions here but do you think it can be salvaged and do you think it would have been a worse relationship if
01:05:57
we hadn't had this interdependency that's been built up I'm not quite sure that the economic interdependence Theory
01:06:04
preventing War has been definitively proven if you go back to World War One For example it was the case that Britain
01:06:11
and Germany actually were each other's number one trading partners and they still got in World War one for reasons
01:06:18
that in hindsight seemed really silly so I'm not sure that economic interdependence can prevent it certainly
01:06:26
doesn't prevent security competitions from arising and and therefore I don't think it can necessarily prevent a war
01:06:31
although you know having business ties can lead to positive interactions yeah so I I'm just saying the jury's still
01:06:39
out on that theory but I think that like I said I think once you're in a security
01:06:44
competition the way that we are with China I think geopolitics rather than economics is in the driver's seat and
01:06:50
that's what's happening right now yeah Freeburg intellectually way I think to process this you would never invest in a
01:06:57
North Korean AI company a Russian AI company or an Iranian AI company how do you think about China and then just
01:07:05
generally this topic of when to engage when Venture capitalists when startups uh you know and trade Partners should
01:07:13
engage with various countries how do you think about a free bird in what role as an investor well we could
01:07:20
we could take multiple roles here founder investor would be the top two for this program I think
01:07:26
or taking money from yeah those three possibilities very few portfolio companies that don't benefit some way
01:07:33
from the trade relationship with China so you know to Sax's point I'm not sure you
01:07:41
can really say China is a true and complete adversary in the sense that we're on
01:07:47
opposite sides there's obviously deep interdependencies so you know it's hard to kind of say I draw the line at this
01:07:55
kind of Technology investing there but identified from their technology investing that's going on there in other
01:08:00
ways with some of my other businesses right I think that that's really where you kind of run into a a bit of a
01:08:06
conundrum that we do have a deep interdependency so you know like with respect to like
01:08:15
investing in China I don't know I think the investing in China I think is pretty
01:08:18
difficult given that there is a single power that gets to decide what does or doesn't happen I mean look at what
01:08:25
happened with Alibaba a lot of shareholders got pretty wiped out there these are these governments where you
01:08:33
have like the op the potential of getting completely wiped out by government action is a pretty scary place to invest
01:08:39
in general I'd be more oriented as an investor around those concerns than I am about
01:08:44
you know it's really hard to do the calculus on on am I helping or hurting America versus China you know you you
01:08:51
could argue 100 ways each of those sides what do you think of Sax's framework if we're
01:08:57
partners you know fair game if not Partners not a good idea to put your neck out
01:09:03
but we're part sorry are you asked are you saying like we're not partners with China
01:09:07
well it seems like the US government has said we're adversaries now and that we're in a in a pretty dogged
01:09:14
competition well Jake out just be specific I'm talking about a situation in which you're taking money from them
01:09:19
yes the situation we're taking money I do think that selling them products that are you know not like super
01:09:28
strategic like I think selling them our most advanced chips is dangerous but you
01:09:32
know look I think if you're selling them products that help restore the trade deficit and correct that movie I have a
01:09:38
problem with that yeah I don't have a problem with uh-selling movies or cars or something
01:09:43
like that to China the question is though I think if you're a venture capital firm do you take their money
01:09:47
that's what I'm specifically talking about and I think whether you're allowed to or not we don't because we just don't
01:09:54
have to think about what complications that could cause down the road also getting your money out of China
01:10:00
also a difficult task it seems these days cash app creator Bob Lee AKA crazy Bob on Twitter that was his Twitter
01:10:07
handle was stabbed to death The Tragically in San Francisco earlier this week he was squares for our CTO he worked at
01:10:13
Google on Android who is the chief product officer at mobile coin also an angel investor and a
01:10:20
ton of companies figma Space X Clubhouse well known in the industry officers responded at about 2 35 am to report a
01:10:27
stabbing on the 300 block of Main Street and arrive to find Lee who had maintained her hospital to come
01:10:35
to his injuries there no arrests has been made a lot of San Francisco politicians are sending their thoughts
01:10:45
and prayers but obviously San Francisco is still very dangerous place it seems any
01:10:51
thoughts on this and how it might act as some sort of uh Crossroads or not and thoughts and prayers obviously to his
01:11:00
family I think this um this was a pretty tragic event there's a lot of people who I knew that were
01:11:07
pretty close with him I got several messages on his passing he was I didn't know him uh personally I think we met
01:11:13
maybe once or twice he worked on Android at Google and obviously had a key role at Square in the early days and was a
01:11:20
pretty uh impactful and important person but also supposedly I didn't know him very well again but everyone says just
01:11:25
such an incredibly kind and generous person so uh tragic loss um I used to live two blocks from
01:11:32
uh where the the event happened I'll I'll zoom out where is it Freeburg is it a bad place in Soma at Rincon Center
01:11:40
right by the big condo Towers there and it's right where the Salesforce uh offices used to be
01:11:46
and you know block from the wall is it part of all that drug craziness it's not in the heart of the camping
01:11:55
District it's just a nice area and so I'm a quiet area right so at night there's no one there I went to San
01:12:01
Francisco a few weeks ago I told you guys I pulled up to a restaurant on the Embarcadero and I joked with my buddy in
01:12:06
the car I'm like Oh my car's gonna get broken into while we're at dinner because I'm parking on the street we
01:12:10
went to dinner 90 minutes later it came out of course my car had been broken into the trunk had been popped up and
01:12:14
it's just like this is very fancy area Soma look here's the thing if you park at a parking meter in
01:12:21
San Francisco for eight minutes too long you get a 60 to 100 parking ticket and San Francisco has become an upside down
01:12:28
town what I mean by that is I think that like so much of the response that we've had
01:12:34
in the last couple of years to power dynamics and concerns about the powerful having too much influence
01:12:41
over those who are less powerful who have less influence and who suffer as a result of their demeaned influence
01:12:49
the response has been to turn things upside down which is to give those who were lacking in the power structure
01:12:55
everything and to try and take everything away from those who are at the top of the power structure so if you
01:13:00
want to deal drugs in the open air if you want to walk into Walgreens and steal thousands of dollars of goods and
01:13:05
walk out nothing will happen to you because you were embedded with this powerless kind of position in life but
01:13:12
if you have a car and you park at a parking meter and you stay at the parking meter for more than 10 minutes
01:13:17
you get a ticket and the consequences of responding to power dynamics by flipping
01:13:22
the power structure upside down is obviously can be more negative as we're kind of
01:13:28
experiencing I think acutely in San Francisco but also around the nation and by the way I think that this applies in
01:13:33
a lot of other ways in terms of how we're doing College admissions in terms of how we're selecting people for jobs
01:13:38
in terms of you know recent applications for Pilots for doctors where the assessment is less about
01:13:46
did the person who was disadvantaged at the beginning of their life or career or
01:13:51
trajectory or educational path be given greater opportunity and greater resources to catch up and to get there
01:13:59
or did we just flip the power Dynamic upside down and just give them the end point and as a result there's a massive
01:14:05
kind of detriment that I think can arise and it's not necessarily always the case
01:14:10
that it will arise it is not necessarily the case that selecting someone based on
01:14:14
some demographic profiling to be an airline pilot necessarily means that that Airline is more likely to have
01:14:19
airplane crashes but in certain cases when you don't prosecute certain crimes like robberies or
01:14:27
people walking into stores or breaking windows or dealing drugs in the middle of the street or camping on the street
01:14:33
and you fast forward a couple of years that power Dynamic the flip of that power Dynamic causes the whole town to
01:14:39
go upside down and everyone who's sitting on the bottom ends up becoming a victim themselves and I think we're
01:14:44
starting to see inklings of this in San Francisco we certainly have for years Saks is ranted on about this with
01:14:49
respect to some of the non-prosecution that's happened historically and I totally agree with him
01:14:54
on those points and I think that it's come to a Breaking Point in San Francisco but that's really a beacon for
01:14:59
what else is going on and you know some people call it wokism I I think maybe this notion of wokism is one small
01:15:05
element or segment of the broader issue with how we are tackling with and dealing with embedded power structure
01:15:11
issues in this world today and the flipping of those power structures upside down doesn't necessarily yield
01:15:17
the outcome we all want and I think we're starting to see reasons why Zach's any thoughts here that's my rant I can't
01:15:23
disagree with you yeah so similar Freeburg I I didn't know bobbly but I I know many people who knew him and I was
01:15:29
getting texts and obviously we feel really bad for him his whole family his kids as a father his co-workers friends
01:15:37
we don't know exactly what happened yet but I think we suspect and I would bet dollars to dimes that the story is very
01:15:44
similar to a case we had in La recently the Brianna kupfer case where a young woman was basically stabbed for no
01:15:51
reason by a psychotic homeless person who had been through the revolving door of the jail and Criminal Justice System
01:15:57
who could have been locked up who was arrested multiple times but was not kept locked up because of this push for
01:16:03
decarceration and you can argue that maybe it'd be better for that person to be in mandatory treatment or in a even
01:16:10
maybe a mental Asylum but this idea of just releasing these people onto the street I just think is an outrageous
01:16:17
abdication of responsibility by our elected officials who run the criminal justice system who passed our laws and
01:16:24
the thing I just wish is that I could lock for 24 hours the the people alike are supervisors or
01:16:32
our governor or the people who basically make these laws or the people who are pushing for decarceration of these
01:16:38
violent offenders by these non-profits I wish I could lock them up in a room for
01:16:43
24 hours with the people that they think are safe to release on our streets let's see if they really would take that
01:16:52
test because it seems to me that these these elected leaders and these non-profits are pushing for these
01:16:59
outcomes they are setting loose on us a predatory criminal or psychotic element that jeopardizes our safety and makes
01:17:09
these cities unlivable and we should not tolerate that and quite frankly the responsibility goes beyond those elected
01:17:16
leaders it goes to all the voters as well because we keep putting up with this and where is our governor when this
01:17:21
happened he was in Florida doing some sing-along at some high school where he was trolling Ron DeSantis because
01:17:28
DeSantis has taken on di at that school so that's where Newsome was and he's extremely popular in California culture
01:17:35
wars instead of saying culture wars in a distant state instead of basically fixing the criminal justice system in
01:17:43
California it's even worse than that because he's actually shut down two prisons and released lots of people so
01:17:47
where is the push for Criminal Justice Reform in California and protecting the citizenry and until the voters in San
01:17:55
Francisco and California start demanding this there's never going to be a change
01:17:58
and at the same time listening to Gary tan you know just vote for who are the Gary tan tells you to vote for okay I
01:18:05
think it's probably a good guy I can't disagree and this the supervisor seemed to control a lot of this and
01:18:12
uh chamat shared just this week mayor Francis Suarez is talking about on his Twitter the reduction in homicide
01:18:19
shootings and they have literally counted the if you want to say a drug addicted
01:18:27
mentally ill homeless there's obviously three or four different things going on here when you look at the population
01:18:32
that's living on the street some number of them down on their lot some number mentally ill some number addicted to
01:18:38
drugs and some number a combination of those things he seems to be getting it done in Miami
01:18:43
and you know other states seem to and other cities seem to have gotten this under control is there any hope for San
01:18:50
Francisco tomorrow or is this just gonna take five or ten years to bottom out I mean it takes regime change
01:18:57
I think New York had a long period of lawlessness where people were afraid to walk down the
01:19:02
streets it took a handful of mirrors to draw a hard Line in the Sand to increase policing
01:19:09
sometimes to introduce some pretty controversial Concepts at the time or at the time that were supported which now
01:19:15
seemed controversial you're talking about stop asking Frisk I think it was called the broken windows theory of
01:19:19
policing yep take care of them take care of the little things so that the little things don't compound into
01:19:25
the big things but whatever you believe needs to get done I think it's pretty clear that what is
01:19:33
being done isn't working and so the real question is can people see through the naked partisanship to
01:19:42
agree that this is not working and sadly what I would tell you guys is that I don't think
01:19:49
they're there yet and the reason is because America is the most divided it's ever been
01:19:56
especially on issues of race and social justice and social norms and I think that crime has gotten caught
01:20:07
and painted with that brush which means that the idea of very aggressive policing and safety are now
01:20:18
viewed as opposite and antithetical to social justice and I don't know how that happened but
01:20:25
the result of it is this which is these folks will never agree that this is not working
01:20:29
and you'll have to go through recall election after recall election and even then it's not going to be enough because
01:20:36
the smart politicians will say what they want in terms of like safety matters but then a lot of Voters will vote the
01:20:47
opposite the example in Chicago that David brought up earlier is really interesting because it was essentially a
01:20:53
social justice candidate versus a Law and Order candidate through their Democratic ranks
01:20:58
and the social justice candidate won the progressive candidate one and the person that wanted to tax
01:21:06
businesses and individuals one and the person that wanted to sort of focus on Law and Order Lost
01:21:12
so what does that say it says that we are still in a moment where we can't agree on what is important yep that's
01:21:19
really scary and so I think you kind of have to unfortunately vote with your feet if you are lucky enough to do so I
01:21:26
think that's the key yeah who's left over or a lot of people who are not in a position to just up and
01:21:33
leave and then they are unfortunately left behind tragic situation all around and I will never host a conference or
01:21:43
any event in San Francisco until this is solved because I um when people ask us to do events I'm like people don't want
01:21:50
to come to San Francisco they're afraid so I do my events in Napa or in San Mateo Nat started a Bilingual School
01:21:57
Italian English that is on the IB system International Baccalaureate system and it's a sister school to a school in the
01:22:04
city we had a fundraiser which was literally right downtown in that encampment area
01:22:10
and when I pulled up I was like is this for real it's an open-air drug Market where
01:22:16
folks are doing drugs selling drugs right in front of you they're passed out completely incapacitated about a third
01:22:24
of the guys are wearing balaclavas so you can't identify them you have no idea what they look like I grew up in
01:22:30
Brooklyn in the 70s and 80s when it was legit dangerous and when I walk in San Francisco it feels much more dangerous
01:22:40
then though that crazy era it feels random it doesn't feel like there's organized crime gang crime like I grew
01:22:47
up in a pretty crappy neighborhood and you knew who the gangs were you knew who the tough guys were you knew how to
01:22:53
avoid trouble they didn't come and randomly come and stab you to death right and so yeah Jason you become
01:23:00
Street Smart growing up in a culture like that because you know how to avoid it you know how to be alert this doesn't
01:23:04
feel like that this is no it's just like a bad roll of the dice and you could get
01:23:09
stabbed to death just walking down the street not just not where where are the politicians to stop
01:23:16
this I mean they don't care there's a the level of corruption in San Francisco is unbelievable the incompetence amongst
01:23:23
those supervisors the mayor the DA's everybody it's just incompetence and nobody has the hood spa or the
01:23:31
wherewithal to say enough and I think the other group to blame are all the rich people and powerful people who just
01:23:38
haven't been active in politics and I know some of us have in different ways but I think it's going
01:23:44
to take a coordinated effort by people who really care to vote out all these supervisors and bring in
01:23:49
it's got to be regime change and I just don't know if there's the wherewithal to
01:23:52
do because every time as a person who has some means or is successful in some way that you stick your neck out there
01:23:59
like you have done sex the the attacks that you will get from this insane left I I don't want to even use the word woke
01:24:07
I think it's a different derangement I think it's actual corruption where they're making so much money offer this
01:24:13
homeless industrial complex they're getting paid so much money that the grift is so deep
01:24:18
that they are going to fight for this and it's going to take some really courageous people like Gary tan and
01:24:24
maybe David sacks and other folks to back a slate of people um to change this and we need people to
01:24:32
run for government who are brave and who want to put their neck out there and say
01:24:35
enough is enough we're going to police the city I just don't know if it uh it's gonna happen all right listen yeah I
01:24:40
mean the the issue is that it takes it takes more than one election so listen I think we made a positive change by
01:24:46
removing Chase of Boudin I think Brooke Jenkins has the right attitude she cares
01:24:50
about victims I think she wants to prosecute the issue is that you've got a police department that's 50 of the
01:24:58
number of officers that they want because they flirted with this whole defund the police movement you've got
01:25:03
the Board of Supervisors and you've got like an oversight board on the police that basically make their jobs harder
01:25:08
and it's not it's not one election because even the mayor doesn't control it because the Board of Supervisors
01:25:13
really has all the power in San Francisco so they take a job that really should be one or two people's jobs like
01:25:20
the D.A like the mayor and they break it up into this like Board of Supervisors where you've now got to be familiar with
01:25:28
a dozen different races in order to effectuate a change well the machine knows how to do that but the average
01:25:35
citizen doesn't so they make it really hard to effectuate change but there are groups that are springing up in San
01:25:42
Francisco like grow SF and you know people like Gary who are on top of it and that's why just follow them and and
01:25:48
vote for their recommendations because they're actually tracking how to make a difference
01:25:54
all right I think on that we will wrap for the dictator tramath polyhapatia the Rayman David sacks and the Sultan of
01:26:02
science I am the world's greatest moderator we'll see at the all in Summit 20. love
01:26:10
you boys [Music] and they've just gone crazy [Music] besties [Music] foreign [Music]
01:27:04
[Music]