00:00:00
I'm in a very Daniel Plainview mood this week the there will be I have a competition in me I don't want to see
00:00:06
other people succeed that's right best scene ever you are the furthest from that character like that is not
00:00:13
your spirit animal oh There Will Be Blood that guy Daniel Day-Lewis is nothing to do with you I've watched it
00:00:18
about 100 times incredible you must be so stormy and roiled on the inside oh my gosh I mean like did you not see my
00:00:27
roast at Sax's birthday it's just did I not see it I lived it it was the most off-color disgusting egregious mean
00:00:35
diatribe I've ever heard my Lord I have a competition in me I don't like to see others succeed I can't stand that Jake
00:00:42
house [Laughter] [Music] [Music] I guess everybody wants to know chamoth you've wound down two spacks
00:01:08
thank you for doing this for uh ipof specifically because people are replying to me every day asking what are you
00:01:15
going to spack but IPO D and F the money has been returned to investors no it's going to
00:01:21
be returned going to be returned to investors thank you and Bill Ackman uh of course he wound down his spack
00:01:27
returning 4 billion there's over 500 specs out there looking for deals uh tell us why this decision
00:01:34
look I've raised tense back six six in technology and foreign biotechnology and I've done uh six deals two in Tech and
00:01:42
two in biotech [Music] so the the the reason to shut it down is pretty straightforward it's like
00:01:53
you know when we launched these things the stock market was in a much different place than it is today and so over the
00:01:59
last two years it looking at deals um it's gotten harder and harder to find a good risk reward now why is that well
00:02:07
the thing with this pack is you do a deal today but it doesn't usually close for six or
00:02:13
seven months in the future and so you have to do a deal where you have a really good sense that in six or
00:02:20
seven months when the deal is comes to close that the price will be the same or even higher than what it is today
00:02:29
and if it isn't all of the investors that you've brought along in this back have a right to redeem which is to say
00:02:37
they file a notice that says you can complete the deal but I want my money back and what they get back is the initial
00:02:43
ten dollars that they use to buy the stock in the first place because when we sold when we started this back we sold
00:02:47
stock at ten dollars and so from my perspective I was looking at this and I'm like you know this is a
00:02:54
super volatile ugly point in the market this last year has been really problematic I and I and I kind of said
00:03:00
this last November and Nick we can we can play the clip after and we can come back to it but basically my decision was
00:03:06
that at this point to do a deal would probably you know put a lot of capital at risk and
00:03:15
in all of these deals I'm typically investing a hundred million dollars at least in each of them and so I couldn't
00:03:20
justify that I couldn't see a good risk reward and I thought the right thing to do the responsible thing to do was just
00:03:25
to wind these things down you know I'll I'll lose I don't know 10 15 20 million bucks for having set these things up
00:03:32
but we give everybody their money back that ten dollars and I think that's actually better over the next five or
00:03:37
six months than what it'll otherwise do if you're invested in the market now that's a belief that I have
00:03:43
but hopefully when people get the ten dollars back in the next few weeks if they want they can go and put that money
00:03:47
back in the market and hopefully they'll do well but uh you know from my perspective the risk reward
00:03:52
was not good is part of the issue the inventory that's available of great companies as well
00:03:58
that's one of the things I heard speculated on CNBC it's hard to convince a private company to go public here's my
00:04:03
experience you know when I when I was talking to all of these CEOs of these Silicon Valley companies
00:04:09
initially there was a lot of misunderstanding about what spax were and I think we were able to dispel that
00:04:14
because we had some really successful transactions then there was a lot of interest in
00:04:19
being a part of it in this phase we were suffering from two very important things one was that
00:04:26
valuations were just completely up in the air people had a huge question mark on late stage valuations because we
00:04:31
would come in we would do the work and we would say the company is worth X and that number typically was 50 or 60
00:04:39
percent lower than their last private valuation and so when it came time for us to
00:04:44
negotiate you know doing the deal even if the founder was roughly on board the rest of the board was not because a lot
00:04:52
of them would have seen some pretty meaningful markdowns in their private assets
00:04:58
and when the company had enough money to kind of like you know at least stay private for another year or so without
00:05:04
having to raise money on balance those investors felt it was more prudent for them
00:05:10
to not take the mark and to not take the deal at such a lower discount so that was a big issue that we ran into because
00:05:18
every time we would price a deal again we're trying to create a margin of safety for us and our investors again
00:05:24
because it's going to take six to nine months to close a deal and so ideally you want continuation indigestion and
00:05:30
then sorry the second thing was just volatility so when you see volatility in the public markets
00:05:35
you know for a CEO and I can understand this it's much easier to go public in a point
00:05:41
where the markets are generally going in One Direction because it gives them the confidence to be able to learn the
00:05:47
ropes because it is a complicated process being public and when you introduce tremendous
00:05:52
market-based volatility independent of your company I think a lot of CEOs and CFOs and IR
00:05:58
people were a little nervous yeah why take the risk and that was this that was the
00:06:03
second piece but by in a way the first one was valuation we could not find market clearing prices make sense for
00:06:10
assets and by the way and I'll talk about one company in specific which just this week had a pretty public blow up
00:06:15
around this whole issue and look I've been pretty clear about this since November the marginal trade should have
00:06:21
been to be trimming risk and Nick maybe you can play the clip because I really want to make sure that it's it's very
00:06:26
clear and on the record what I said almost an entire year ago let me put crypto in the context of the markets and
00:06:33
where we are today at the end of the week after you know Q3 earnings in November of of 2021. we have the stock
00:06:41
market at Absolute all-time highs ripping we have crypto and absolute all-time highs ripping we have the art
00:06:49
markets I don't know if you guys saw Phillips and Christie's and Sotheby's this past week at Absolute all-time
00:06:54
highs sold another people for 25 million we have inflation at a 30-year High we have 10-year break-evens at a 25-year
00:07:02
High we have you know one point somewhat trillion dollars that we just approved last week and we're still horse trading
00:07:10
on another three you know 1.8 trillion dollars of stimulus that we're going to put in and I think the the most
00:07:15
important thing which is the two most important founders of Our Generation the two smartest people who have really
00:07:22
consistently won Elon Musk and Jeff Bezos have collectively sold more than 11 billion dollars of their Holdings
00:07:28
this year alone and if you can't take all of that and decide for yourself what's right for you
00:07:34
and your family you're doing yourself a disservice I think it's important for me
00:07:38
to never sort of like you know be forced to tell folks whether I'm buying or selling although I'm willing to do it in
00:07:44
moments where I think it's important but I think it's really important to understand the context and so I think
00:07:50
like these folks that like think derisively about individuals who are managing risk I think it's really naive
00:07:57
and I think it's it creates a lot of missed opportunity for them as well if the smartest people in the world
00:08:04
are now selling their core Holdings that they told you they would never sell and
00:08:09
you are not reconsidering your position on things you're either much smarter than them or
00:08:18
you're being really really Reckless the reason I I said all of those things was because I was getting really worried
00:08:25
about where we were um and then and then I think on the heels of that I published a tweet and I
00:08:32
and I said I'm starting to sell you know and I sold like a hundred million dollars of Sofi but then I was a
00:08:38
systematic seller um through the end of last year and and through this year to try to manage my own liquidity
00:08:44
because it changed profoundly as I saw what was happening in the markets so you know I think that it's just an important
00:08:51
thing to call out that um things don't always go up and uh you have to pay attention to a
00:08:58
mosaic of information and you have to do the work yourself because you know your situation is
00:09:04
unique to you nobody else understands it and so you can't Outsource that decision
00:09:09
to somebody else obviously you can use it as a guide you know it's fair to say you know when the 13 apps have important
00:09:15
hedge funds come out do I read them of course because I'm trying to figure out you know what don't I know what may I be
00:09:21
missing maybe there's a great company in there that I that I should be taking a look at so you know I'm not dissimilar
00:09:26
to everybody else in that I use other people that I look up to or respect as a leading indicator of what to buy
00:09:33
but I still take responsibility for my own decisions and I manage my liquidity as best as I can based on my conditions
00:09:39
and those are always changing and so I think this is just a good reminder that everybody else has to do
00:09:44
the same so chamoth what do you think happens to the remaining 500 every SPAC sponsor friend of mine that I know is
00:09:50
not seeking targets anymore they're all expecting to wind up and return Capital how many of the 500 you think will
00:09:57
actually find a Target and how many do you think all of remaining specs how many of them will um wind up and return
00:10:03
capital I mean I I think that there's still some really good deals to do they're not necessarily in Tech per se
00:10:11
so you know I think you did a really great deal in ag Tech I think that that's that's really interesting so time
00:10:16
will tell how that does I think there's some really interesting deals and energy
00:10:19
in fact we spent a lot of time actually pivoting and spending time and energy looking at you know everything from you
00:10:26
know uh producers of nat gas and oil to you know folks that were building terminals to LNG facilities and the
00:10:33
but it's just a very different return profile than what we were used to so I think if you can understand some of
00:10:40
these other markets and you can underwrite to a different rate of return some decent deals will get done the
00:10:48
overwhelming majority of the text backs I think probably will just wind up some folks will be really focused on
00:10:55
trying to uh you know monetize their founder promote so they'll do any kind of deal
00:11:03
the problem as you see is even whether you do a good deal or a bad deal with the kind of volatility we're seeing
00:11:09
in the market the likelihood is that it's going to trade down pretty significantly so I think most will not
00:11:13
find a home I think some will find some really interesting Targets in areas like
00:11:18
energy I think are really interesting agriculture like what you did Freeburg I think is really interesting deal
00:11:24
and then you know what it'll be an opportunity for us to retool this back I don't think it's going to go away
00:11:31
I think that it is a useful tool in a toolbox of many tools so there's IPOs there's direct listings
00:11:40
there are specs there's obviously private fundraising there's convertible there's structured
00:11:47
deals so it is a tool and I think when used properly it can be really helpful you know for the companies that we work
00:11:53
with uh it would have been impossible for them to raise the quantums of capital that they did primary capital from
00:11:59
sophisticated hedge funds and mutual funds you know we raised billions and billions of dollars for companies like
00:12:04
Sofi and Open Door and I think that that's going to go a long way for them to achieve their goals
00:12:08
so I think it's going to be a good tool but we're going to go through a washout of most of these folks who are not going
00:12:15
to be able to successfully find Targets sax when we look at private companies especially the late stage ones you and I
00:12:20
are involved in a number of them they're doing riffs they've got headwinds and their valuations are
00:12:26
underwater in many cases how are they thinking about the public market Windows spax Direct listings or just a
00:12:33
traditional IPO I don't know that they are thinking about it I just think I think like going public seems like a
00:12:39
fantasy at this point I think the whole public markets exit idea is Frozen for two years two years I think that's yeah
00:12:46
I think that's probably what people are thinking what are these late stage companies that raised Mega rounds doing
00:12:51
to work out valuation issues because as chamoth just pointed out with spax one of the problems was clearing Market the
00:12:59
late stage investors who came in maybe they you know don't want to accept the haircut in valuation even if they have
00:13:05
productive probably not enough I mean what they're doing is using their War chest to grow into their valuations
00:13:11
which is the Smart strategy and if they're really smart they'll be slashing their burn while they do that
00:13:19
but yeah it's no different than what we've talked about before I think the the main significance of
00:13:24
this past week is that you had the FED meeting it raised another 75 basis points there's no surprise to that that
00:13:30
was predicted what was new was the forecast they were now saying that they expect to raise another one and a half
00:13:37
percent just two months ago at the last meeting they were saying 75 at this meeting plus 50 after that now they're
00:13:44
saying 150 after this so you know in just two months they've they've they're now revised their forecasts for an extra
00:13:53
100 basis points of rate increases why because inflation is worse than they thought so
00:13:59
things are worse than we thought two months ago the the last inflation print didn't get better as fast as people
00:14:05
wanted we talked about that last week now the FED is revising its forecast the trajectory is bad and getting worse and
00:14:13
you finally had pal kind of throw in the towel on his rhetoric around soft Landing I mean first it was well we can
00:14:21
raise rates and we won't have a recession then it was we might have like a mild recession now he's basically
00:14:27
saying hard Landing if you if you read these fomc comments so I think this was a really bad week for the economy and
00:14:36
you're seeing it in the markets this week I mean we are retracing almost within five percent of the June lows
00:14:42
with the growth stocks being the ones that are hardest hit by the way speaking of growth stocks have you guys been
00:14:47
following this um trials and tribulations with baijus which is like the one of the largest
00:14:53
valued private companies but it's a private Indian edtech company essentially I think like you know there
00:15:01
was this delayed audit and Deloitte couldn't certify a bunch of things and then finally they were able
00:15:06
to come up with a report that essentially showed instead of like breaking even or making money they lost
00:15:10
almost 600 million dollars this year and that a lot of the revenue that they were
00:15:15
booking were actually loans to millions of uh Indian families who had basically zero probability of paying them back so
00:15:24
a lot of the revenue was not real as well and this is like a who's who of investors it's everybody from you know
00:15:30
Sequoia tiger UBS BlackRock uh Chan Zuckerberg it's incredible I think when the tide goes out we find out right and
00:15:39
this is what's happening the Tide's out and you're going to find all the weakness in the system it's all going to
00:15:43
get flushed I think this is a bit of an outlier obviously like I don't think that you know all these companies that
00:15:49
are worth tens of billions of dollars are running so close to the Sun but it just goes to show you that you know how
00:15:56
how does how does this happen like how uh how do you not get it you saw this on the seed
00:16:03
uh stage uh in series a we would ask for a data room the person would say you're
00:16:07
the only investor asking for it and you're putting in you know 10 of the round these other people aren't even
00:16:12
asking for it we said okay can we still see the data room and turned out there wasn't one people were just making bets
00:16:18
they were making blind bets they were betting without even looking at their cards or thinking about the other
00:16:22
people's cards but this goes back to what Friedberg was saying before you know I think I think there's a there's a
00:16:29
a sliver of the retail investor base that is not dissimilar to a sliver of the private equity and hedge fund and
00:16:35
Venture Capital space which is these folks are not willing to do the work I think most people are and most people
00:16:41
want to come to their own conclusions but some people want to just take the easy momentum driven decision and they
00:16:47
typically always get punished over time there's this concept of adverse selection which is that the negative
00:16:54
actors will find them will seek them out and it will be a match and so they'll ultimately get adversely selected into
00:17:00
the deals that blow them up so the bad deals what you're saying is the bad deals would find the bad
00:17:06
investors who don't do the work and then they spiral and crash together that's a
00:17:10
really brilliant observation yeah yeah I think I think the other that's what I'm
00:17:13
hearing I think the other thing is like you you have the situation where if it wasn't that it's folks Outsourcing their
00:17:19
diligence to the person that did the round before it totally you know oh Silver Lake did it bro same problem
00:17:24
tiger did it okay these guys are very sophisticated investors I don't need to do the work it turned out you did
00:17:31
because you know it's it was a very Cavalier way of recognizing revenue and there was a specific Playbook here too
00:17:41
that I don't know if you saw this ax in the early stage where people would get their friends to invest in the company
00:17:47
or some you know High net worth individuals and then you look at the deal and the valuation didn't make sense
00:17:52
and then you say well we would always ask how much money is each person putting in and we like well they're
00:17:57
normal bet size in the seat is 750 or 1.5 million but they're putting 50k into this or 100K what's going on here and it
00:18:05
was oh they're friends with them they worked at a previous company together they were in the same they went to the
00:18:09
same college and so people were using social proof but manipulating it to get some other sucker at the table to pay
00:18:16
full price and not due diligence really strange Behavior I um I was in Singapore
00:18:21
this week there was a I I had a great meeting with this young investor really Dynamic guy and he was
00:18:28
telling me about a company in Indonesia that he didn't invest in but it turned out that
00:18:34
the in that this founder was literally running two parallel sets of accounting systems
00:18:40
and so he was you know showing a business and fundraising from this set but the the real books were over here
00:18:47
and it looked a completely different system and it was basically like a Ponzi scheme and you know he was telling me
00:18:52
it's like impossible to root these things out so what he said he relies on is like you have to have a network when
00:18:59
you're doing these Frontier country deals where you know he says I need to find at least 10 people that know this
00:19:06
person so that there is sort of like a moral social proof and moral diligence that
00:19:11
happens because that person will never try to commit something that egregious in the face of all of their friends
00:19:17
and so you know that's a mechanism of filtering this stuff out but I thought that was a really interesting way of of
00:19:22
Designing a diligence process um in at least in a frontier Market here I don't think you have that much time to do
00:19:28
these really you know fast-paced deals and the social proof matters less because you theoretically
00:19:36
um you know are looking for signals of traction but there has to be a better systematic
00:19:41
way of getting this diligence done because these things should be pretty obviously well before it's a multi-deca
00:19:47
billion dollar company sax last year when people were moving really fast saying they don't have time for
00:19:51
diligence you're going to lose the deal yada yada how did you approach diligence
00:19:54
during those Peak periods and did you have those experiences where people were trying to push you to close without
00:19:59
talking to customers or looking at bank statements yada yada no we wouldn't play
00:20:04
that game because we always run SAS metrics that's always the starting point for us but you know most SAS companies
00:20:10
they have SAS metrics I mean they it's so standardized that it would be such a red flag if they didn't yeah I think it
00:20:16
might be companies that are you know have unusual business models or maybe they would say something like that but
00:20:23
no we could never do a SAS investment without SAS metrics all right well this is a good segue because right now U.S
00:20:28
Venture capitalists are sitting on 290 billion dollars in dry powder we had talked about this last year how much dry
00:20:34
powder was there the market is obviously collapsed but here's a chart uh from our
00:20:39
friends over at pitchbook it's just extraordinary how much has built up and how much has been raised
00:20:45
usvc funds raised 121 billion dollars during the first half of this year 2022 so LPS uh still
00:20:53
have an appetite which kind of makes sense that investing into the down market for private companies means
00:20:58
you're going to get better deals uh and you have a 10-year Horizon usvc's raised
00:21:02
139 billion in all of 2021 so if you put those two numbers together yeah you're looking at 260 billion
00:21:09
dollars in the last 18 months and this is all record numbers being put up on the board what does it say for private
00:21:16
companies sex I um dispute this analysis a little bit um I think there's a couple of things
00:21:24
going on that need to be taken into consideration first of all new funds don't get announced till after
00:21:29
the process completes and then you know it may even be some time after that when
00:21:35
the VC firm feels like they want to make the announcement you can't announce a fund until the process is completely
00:21:40
over you get subject to all sorts of additional SEC rules so you know these funds might be announced in 2022 but
00:21:49
they may have actually been raised in 2021 so that I think is a really important Point moreover a lot of the
00:21:56
funds may have already deployed Capital before the crash so there was that I think remarkable story that we talked
00:22:02
about months ago in TechCrunch on how the latest tiger fund which wasn't even announced till March or April of 2022
00:22:10
but have already been two-thirds deployed by the time they even announced it and so that was pretty stunning so I
00:22:17
I think that we don't really have a great sense of how much of this so-called dry powder has already been
00:22:24
deployed how much of it was really raised before the crash it is true that LP relationships with VC firms that have
00:22:31
done well are sticky and good LPS stick with their Partners during a downturn so look I mean the VC world's not going
00:22:39
on a business or anything like that but I would tend to think that this is an overly optimistic overly Rosy scenario
00:22:47
do VCS have new funds that they're going to be ready to deploy in great companies
00:22:52
yes but does this mean it's going to be easy no I think that the bar has gone up
00:22:58
valuations have gone down Founders looking at this tweet storm I would not get lulled into a false sense of
00:23:04
security yeah I I agree with just to explain that there's probably a six-month lag on when
00:23:09
these funds are announced the reason is there's 506 B and C designations most people raise under five or six B which
00:23:15
means you cannot even say that you're fundraising therefore pitchbook can never have that data so there's a lag
00:23:20
and people were deploying at a very high velocity therefore this number could be
00:23:26
off 35 well if people were deploying at a pace where they thought they were going
00:23:30
to go back for a new fund every year which is what it was looking like in 2020 2021. you know if that six month
00:23:37
period might mean you've deployed half the fund right so um but look if if you just go back to a
00:23:44
two and a half or three year pace of deployment and before in 2021 we're at a one-year pace of deployment divide the
00:23:52
availability of capital by two-thirds I mean you know only one-third as much will be deployed in any given year
00:23:58
that's a you know significant reduction so um yeah I think Founders should just be
00:24:04
aware that the Market's going to be a lot tighter and I think given what we're seeing in the public markets this week
00:24:08
it doesn't look to me like it's gonna get any better right it looks to me like we're headed for I mean I called a
00:24:13
double dip recession I think a couple of months ago that's exactly what it's looking like in fact the FED basically
00:24:20
said as much the FED said that would be just marginally positive next quarter so
00:24:25
would bounce back to slightly positive growth on a real basis but then you know expect it to go negative again and you
00:24:34
know recession once all these interest rates kick in and by the way I mean Kudos set your mouth for basically
00:24:40
calling that you know when the FED just a couple months ago was saying that so-called neutral would be three to
00:24:46
three and a half percent jamath was saying no it's gonna be four and a half five percent plus now the FED just in
00:24:51
two months is revised to saying that neutral is 4.6 or something like that and um and they don't think there's
00:24:58
going to be any rate reductions in 2023 so this is not looking good how much of the issue here is
00:25:07
we don't the the data that we're seeing the ground truth we're seeing as you would often say uh might be very
00:25:13
different than like the reports that are coming out people are talking about inflation from you know 60 days ago job
00:25:19
reports that are 30 days old 60 days old we don't really have live data it seems
00:25:25
like our government doesn't use live data when they make these decisions is that unfortunately well they
00:25:30
unfortunately don't have access to it really you know they are they have empirical sampling but to say that you
00:25:36
know the the US economy is automated in a way where you know they can sit in front of some dashboard and you know see
00:25:43
in real time what the true on the ground data is is that really accurate unfortunately maybe there's a Manhattan
00:25:50
Project type you know effort to do that at some point for the United States but it's not now
00:25:56
um I'll give you uh a bit of bad news and a bit of good news uh and this is just me kind of you know again looking
00:26:03
at the Mosaic and and kind of judging where we are today the bad news is I think that it's going
00:26:10
to be a really tough sticky time for the U.S consumer probably over the next 18 months
00:26:18
and so I tend to think that you know through the course of this year and through 2023 and possibly even a little
00:26:26
bit of 24 it's going to be a grind unemployment will go back up inflation will be sticky real earnings
00:26:37
will shrink consumption will ebb and earnings will not be that great but the Silver Lining is I think that we
00:26:51
are starting a bottoming process for the equity markets and I think that by the end of this year or the early part of
00:26:57
next year most of that will be done and the reason is that you know the equity markets I think do a reasonable
00:27:06
job of one looking at the bond market and then two looking six to nine months into the future and pricing in that
00:27:15
future today and so by the end of this year beginning of next year I think that we will have
00:27:21
kind of bottomed and we'll start to build the base the thing to remind us though is that
00:27:26
you know let's just say a stock goes down 20 50 percent even if it rallies 50 from there it's
00:27:32
still 25 off from where yeah people don't understand that and people don't understand that they climb back up the
00:27:36
mountain so I would just you know um tell people that you know I think that David is right I think that it's gonna
00:27:44
uh we're gonna feel this for a while um it's this inflation as I've said for a long time is going to be sticky and
00:27:51
persistent I think you're going to see Fed funds at or breaching five percent and uh but I think that in terms of you
00:28:02
know risk assets will bottom out by the end of this year beginning of next year what are your thoughts you think we're
00:28:09
in the process of bottoming them out and it's going to be a year of this kind of
00:28:13
schlog through the muck and what signs are you looking for that maybe we're getting out of it or turning
00:28:20
a corner I mean Larry Summers had some good tweets this week the weird you know the
00:28:26
weird thing is Larry Summers seems to be like almost trying to make the case and
00:28:31
make certain points because he's not being listened to I mean uh it's it's it's so ironic and sad to watch uh
00:28:40
because he's such a thoughtful Economist and has such a a great point of view and
00:28:45
experience that uh to leverage here and clearly you know he was banging the drums last year and no one was listening
00:28:52
and then he got public about it and now he's more repeatedly public about things
00:28:57
the point that he's made which I think plays into the the political cycle question which is where the tension
00:29:03
arises is in order to resolve ultimately uh the inflation problem you're gonna have to see a significant increment in
00:29:10
unemployment and and so when you raise interest rates uh you know generally purchasing goes down
00:29:18
demand goes down Revenue goes down layoffs happen uh some businesses go bankrupt Etc so then there's this
00:29:26
trickle in the economy of of less people being employed and when that happens It
00:29:30
ultimately drives a political response which is hey we're losing our jobs people start asking
00:29:37
their representatives do something about this in Congress and then these programs and these things
00:29:42
get passed which themselves are inflationary and that's why it's very hard to predict
00:29:48
ultimately when and how this all gets resolved because we seem to have an Administration that is enacting and
00:29:58
um embracing uh inflationary policies to support what they consider to be economic growth and improved employment
00:30:06
conditions in this country and the unfortunate effect of many of those policies is inflation and then it forces
00:30:12
this difficult Central Bank decision-making cycle and so there's attention right now that doesn't seem to
00:30:17
have a clear path to resolution that is why it's very hard to to have a clear prediction here we also have a very
00:30:24
significant question overhanging all of these markets related to the price of energy which is a key input to so many
00:30:31
Industries and and drives cost as well as food and also the military conflict in Eastern Europe and you know we've and
00:30:39
and then there's in the financial markets this big overhand question on what's going to happen with various
00:30:45
countries that make default on their debt as well as China's real estate bubble bursting
00:30:50
so I made this point I think a few episodes ago but there's no easy answer that I can just say deterministically
00:30:55
here's my prediction of what's going to happen as chamoth uses the term I think it's a great term there's this Mosaic of
00:31:01
things that are under under consideration right now and there's a tension between them all uh and um
00:31:07
and that's what makes it difficult I'm sorry I didn't really answer the question but that's that's kind of how I
00:31:11
think a lot of there's a lot of geopolitical risk I mean we're kind of you know ignoring what happened this
00:31:17
week where Putin basically is putting nukes back on the table now I'm not saying that's likely to
00:31:22
happen but I don't know how again I don't know how this Market gets a lot better with the
00:31:28
risk of War 3 handing over our heads I mean who wants to enter the market with that and by the way the nukes just
00:31:34
just to be clear you know um you can hear certain military commanders speaking publicly about this uh but in
00:31:42
the Russian military playbooks uh there is specifically defined actions that can
00:31:49
lead to tactical nuclear weapon use in the field there's no direct indication that these things are going to be used
00:31:56
right away but the as as Sac says there's like this weird like turning up the volume happening on hey maybe we're
00:32:03
getting closer to a point where if Putin is having tactical failure in this conflict there's more Weaponry you can
00:32:10
use that has greater impact and unfortunately there are these tactical nukes in his Arsenal
00:32:15
and you know a guy that maybe has a certain psychology that has as our friends have said is back against the
00:32:22
wall he's not a person who in his career uh or in his history has ever acquiesced to
00:32:29
defeat Alex carp was on CNBC he was really really sharp and concise about this which is
00:32:34
that you know in the west When leaders fail in their objectives they just get elected out and somebody else takes
00:32:43
their place yeah but for somebody like Putin there is nobody to take his place because it's a very zero-sum situation
00:32:50
and so his actions will as a result also be Zero Sum and I think folks he's never
00:32:54
acquiesced in his life and yeah yeah we've never we've never really kind of like we don't understand well what
00:33:01
zero-sum decision making looks like when it comes to stuff like this he needs the
00:33:05
Golden Bridge right give him the goal he does yeah but I'll just say two things one is that
00:33:11
I think it's been made pretty clear that both India and China will not stand beside Russia if they do something like
00:33:18
this and I think that that is important because they still are the two biggest purchasers of of Russian oil and so I
00:33:25
think that matters a lot because you're talking about a lot of Revenue that would that would go away and then the
00:33:29
second is I mentioned this last week and this may sound dumb to some of you but um don't sleep on the Russian mothers
00:33:36
and what happened oh you're 100 right on that thing what happened this week was really interesting which is that he
00:33:41
calls up all these reservists these reservists are not coming from the major cities of Russia you're starting to see
00:33:46
protests you're starting to see young people saying I don't want to do this yeah and who's that really activating
00:33:51
it's activating the moms yep you know to basically go fight and I actually think David's right oh sorry
00:34:02
sorry go ahead the question I have for you is do you think that I know you don't agree with this but do you think
00:34:07
the strategy is to back him into a corner um and then have this like rhetoric Spike to then force a resolution I know
00:34:15
it's a danger strategy it's a crazy chess move but do you think that's actually what the West is thinking
00:34:21
I see no evidence that we have any uh intentions of seeking a diplomatic off-ramp I see no evidence that they're
00:34:29
looking for to give him a golden bridge like you said then do you think they're trying to break him and have regime I
00:34:35
think Biden stated at the policy which is this man cannot remain in power I think he blurted out the truth of his
00:34:40
policy this is a regime change policy that's what they're going for they are backing me into a corner I thought that
00:34:45
you were right this whole time which is we're going to build a golden bridge we're going to find a way to egress this
00:34:50
guy and I'm now sort of in the David Camp which is I think that the the stated strategy of the Western
00:34:58
Alliance is essentially to cause him to make such a categorically catastrophic mistake so as to become a pariah so as
00:35:05
to either get overthrown or you know something so I I do think that on balance the risk is now for things to escalate
00:35:14
maybe not in quantity and I'll use this word in the wrong way but you know quote unquote
00:35:19
like the intensity of of it so um I I think David's right it's a lot of pressure to the economy and to to high
00:35:28
risk assets there's a high-risk strategy we got a good thing going over here I don't see the need for all this risk
00:35:34
so look and part of the risk would be the reward what would you see the reward if Putin was removed oh my Lord
00:35:40
well it depends who replaces him what if we get a hardliner you gotta remember Putin's taking out all the liberal
00:35:45
reformers all that's left are hard so I know I know there's moms protesting in the streets but he's also under intense
00:35:51
pressure from his his right wing you know he's got Hawks on his side who basically have been criticizing him for
00:36:00
making this a special limited Military operation instead of a war they're like why did you try to do this with 200 000
00:36:05
troops we should have gone into heavy with a million is that right there's criticism there's a New York Times
00:36:10
article about this he has his own you know military hardliners in his Security State his Hawks so so he's not just
00:36:19
under pressure from peacenix who are protesting in the streets he's also under pressure from hardliners in his
00:36:24
own government who think he's been too soft yeah it's a challenging situation he said he said he's going to be 70
00:36:32
years old how many years does he have left we just need to contain him for a decade was on our side I don't contain
00:36:37
him for one more decade that's my best idea contain him for a decade the thing I have the most trouble with is if you
00:36:42
look at the media portrayal of this so I said last week when you know we had this
00:36:46
successful counter-offensive that maybe we'll get what we want which is Russian moral collapses they just tuck their
00:36:52
tail between their legs and go back to Moscow or maybe you know the Russians really do see this
00:36:57
war as existential for them Putin sees it as existential for himself and he escalates well what happened this week
00:37:03
we went up or wrong on the escalatory ladder basically Putin Drew down 300 000 more troops and he's basically indicated
00:37:10
his his willingness to use tackle nukes and he's basically said I'm not bluffing
00:37:15
so now what is the reaction in the American Press he must be bluffing I mean that basically is the reaction and
00:37:22
look I don't know how you know that you know in poker what you in poker what do we do when someone might be we put
00:37:29
them on a range it's called a hand range right yes you can't possibly know exactly what they're going to do or what
00:37:35
carts are holding so you put them on a range of possible hands and then you evaluate the story in light of their
00:37:41
past actions what do they do before the Flop on the Flop and you you basically come to a assessment of what is likely
00:37:48
based on their story now take Putin's story like Friedberg said he's never backed down in his life from anything
00:37:53
um he has said this war is existential you know he basically threatened to invade and so he did I mean like I don't
00:38:00
know how you can immediately jump to the conclusion this is just a bluff maybe it
00:38:03
is but well it could still be it could still be a bluff but then to your point the range of outcomes does include uh
00:38:09
shoving on the river moving all in I mean he's a king GB agent do you want to play the poker with a KGB agent with
00:38:16
nukes it's right and so Jason you said throughout this guy's a Madman well exactly I mean personally I think he's
00:38:22
more like uh ruthless mafia boss than a Madman but but let's say you're right that he is a Madman what is the story
00:38:28
about what we're doing that makes sense if he is a Madman why would we want to basically back him into
00:38:35
a corner like that why wouldn't we give him the the golden off ramp and by the way just on this idea that no one would
00:38:40
ever use tactical nukes let me just give you three data points first of all we use
00:38:45
them we drop two atomic bombs on Japan and to end World War II we could have won that war without doing it but we
00:38:51
didn't want to lose the troops those are just they were tactical nuke size atomic bombs number two
00:38:58
MacArthur wanted to use 20 to 30 atomic bombs to end the Korean War he had a whole plan Truman fired him he thought
00:39:06
he basically had jumped the shark but MacArthur was the most respected and admired American in 1950 and the reason
00:39:13
why Truman could not run for your elections because he fired MacArthur MacArthur would have used basically the
00:39:18
equivalent of tactical nukes to win the Korean War and his plan to prevent China
00:39:22
from reinvading from the north was to irradiate the border so completely that Chinese troops could not go through it
00:39:30
keep in mind there wasn't as many nukes at the time so we weren't up against nine different nuclear enabled countries
00:39:34
but we had an American Commander ahead of our military who was willing to use nukes to win a war so this idea that he
00:39:41
wouldn't I mean we you've been willing to do that and the third example is obviously the Cuban Missile Crisis all
00:39:45
of Kennedy's military advisors were willing to get to use nukes I mean and the best thing Kennedy did was not
00:39:51
listen to his military advisors they were all super hawkish and Kennedy what did he do he looked for a way out he
00:39:57
looked for a compromise he sent Bobby Kennedy to go cut a secret deal with the Russians were Kennedy agreed to pull the
00:40:05
r Jupiter missiles out of turkey if the Russians would pull their missiles out of Cuba and then he lied to the American
00:40:11
public about it because he didn't want to be perceived as backing down but that's the kind of you know flexibility
00:40:17
and mental acuity that I think you would need in a nuclear Showdown to avoid a catastrophe if things do escalate to the
00:40:24
point of a nuclear Showdown do we believe that we have leadership on the level of a Jack Kennedy or Bobby Kennedy
00:40:30
who can basically show the flexibility and adaptability to cut a deal to basically pull us back from the brink
00:40:36
yeah it doesn't seem like that what was bind's response it was he gave this um speech to the United Nations in response
00:40:42
to Putin and it's more of the same as more of this as I call it the Abe Simpson speech it's old man you know
00:40:48
yelling at the cloud I mean he's basically just yelling at a teleprompter now I think the the strategically smart
00:40:54
play would have been to say listen Putin you said that you want the people of Ukraine to decide where these
00:41:00
territories go okay we can hold a referendum but we want to administer by the United Nations so it'll have so
00:41:06
it'll have some credibility behind it I mean why not throw that out there as a potential way to get diplomacy started
00:41:14
it felt like at the end of last year you guys remember I thought like conflict was likely this year
00:41:21
I don't think that the conditions that I was referencing have really gotten better I think they've gotten worse and
00:41:31
that's why I think we all talk about this in a rational way meaning like how the conscious mind would you know debate
00:41:40
the merits and and challenges and risks of having a golden bridge or continuing conflict
00:41:47
if you look historically the U.S has often been in the middle of or at the tail end of
00:41:55
some either recessionary cycle or inflationary cycle when conflict escalated externally Wag the Dog you're
00:42:04
referring to I don't know if I would call it that but I think that there is a an innate human anxiety when things
00:42:13
aren't going well you feel like you have to do something about it and you're either going to have internal conflict
00:42:17
or external conflict as a result to try and resolve when when things are going great the economy is booming
00:42:24
you don't enter a war you don't start a conflict with a nation when when people are happy at home when your constituents
00:42:31
and um and you know the the unemployment rate is low and job uh wage growth is high the economy is growing are you
00:42:39
referring to the United States or Russia in this case I'm referring to the U.S and I think you
00:42:44
know curious if you're coming out of covid and coming out of uh the the big question marks that loomed over our
00:42:51
economy at the end of last year around inflation uh economic growth uh interest rates and the effect and now
00:42:59
we're in the middle of the turmoil markets are down 30 percent and in some cases 70 to 80 for high growth markets
00:43:08
there's a there's an inevitability now that unemployment is going to rise there is an inevitability now that the economy
00:43:13
is going to contract leadership is more likely in that scenario to find uh an outlet to find a
00:43:22
place of conflict in this theory explain why I don't think it's a conscious decision
00:43:31
I don't think that it's like hey let's go start a war with Russia because the economy is bad I think it's this anxiety
00:43:37
the economy is bad and there's not a lot we can do about it and over here on the
00:43:40
other hand there's a problem and there's something we can do about it we can build strength and we can build
00:43:44
Integrity um and we can build support and we can get people to get behind something
00:43:49
together and we can get something to to create a driving mechanism to achieve something
00:43:55
big like a distraction you're saying yeah yeah and I I don't think that psychology is as simple as a distraction
00:44:01
or a Wag the Dog or hey it's not even as simple as the military-industrial complex we'll see Revenue growth and
00:44:06
wage growth and that'll drive the economy but I think all those things together are true and I think in in
00:44:11
whole we're we are more likely to want to pursue conflict right now than we were even a year ago you buy any of that
00:44:19
your mouth I think he's more right than wrong I think that when um things aren't easy
00:44:28
you need to find sort of distractions essentially to yeah get people to focus on other things so
00:44:36
that the core problem isn't as obvious we have in the United States I think yeah let's go create another problem
00:44:41
that's solvable yeah I like the best I think the best way that I can describe this is I see it as
00:44:46
institutional rot and the more that we're left to our own devices that amount of institutional Decay
00:44:54
becomes more and more obvious our governments don't work the way that they should you know our state
00:45:00
assemblies are basically co-opted by special interests the federal institutions we rely on to
00:45:05
make rules are not that great enormous amounts of money get wasted every day and as more and more people become aware
00:45:12
of these things it just the trend is just so bad you know Civic engagement goes down
00:45:18
everything just gets worse and so when you take that and then on top of that you sit it on a on a poor
00:45:25
economy that is a real Powder Keg I think and so folks like to I think if you're a
00:45:31
politician it's easier to kind of go and point to Taiwan and say you know we're going to go and defend these folks if
00:45:37
there's a war point to Russia and say this point to all these other things it's a
00:45:42
whether it's implicit as free Brook says or it's more explicit of a strategy I don't know but the underlying cause is
00:45:48
the same which is that if the foundation of the house is not strong and you're not sure what to do to fix it or you
00:45:55
don't have the courage to fix it the better strategic alternative is to distract and talk about your neighbor's
00:46:01
house coming out of contribute to Afghanistan early 2009 when he took office we entered the
00:46:12
Persian Gulf with the Gulf War in 1991 coming out of the Great Recession or the the the the the mild recession 1990 to
00:46:18
1991 2000 2001.com crash uh we um uh you know we obviously entered um entered Iraq
00:46:28
yeah well that was post nine post nine eleven that's 9 11 but it was almost no choice but it was also in the midst of a
00:46:34
recession and coming out of the game but that was cool that one was clearly a reaction he stacked You by this do you
00:46:38
think this is a Wag the Dog or and by the way you can do the same you can do the same analysis on the time we entered
00:46:44
the Korean War and the time we entered the Vietnam War they were both tied to recessions and um and so I don't know I
00:46:50
don't know how explicit this this action and behavior is but I I just think there's some data to it there was a
00:46:55
study that just came out by uh Tufts University on American Military interventions throughout American
00:47:01
history and what they found was that we had the least in the period before the Cold War then the second most was
00:47:11
from the during the Cold War but actually the most hyperactive period of American Military interventions was
00:47:17
post-cold war so since the unipolar moment even though it's been the safest period for America right we haven't
00:47:24
explained unipolar for people don't know but there's only one great power in the
00:47:28
system uh before during the Cold War it was a bipolar World whereas basically America versus the Soviet Union and the
00:47:34
obviously had the um you know NATO and the Western Alliance the so-called free world and then receive check and balance
00:47:41
you have the Warsaw Pact on on the other now we have unipolar moving to Bible well it was it was yeah we were unipolar
00:47:47
for a couple of decades but now we're moving towards multipolar or at least bipolar with China yeah multi-polar
00:47:55
would be maybe including India maybe including India Brazil China in the future in the
00:48:01
future but but so the the irony is that the safer America has become the more we've gotten militarily involved
00:48:10
overseas and part of that is because there's no great power in the system to oppose us
00:48:15
um but it's also gotten us in a lot of trouble I mean all of these wars in the Middle East that cost us something like
00:48:21
eight trillion dollars another survey caused a war study uh the direct number of deaths from these wars from the war
00:48:27
on terror was over a million lives lost eight trillion dollars and that doesn't even include the excess mortality caused
00:48:34
by the destruction of infrastructure wastewater treatment you know fam and all that kind of stuff which could be as
00:48:40
high as five million you know the crazy part about that sex that 8 trillion dollars if we had deployed that in
00:48:45
energy Independence solar nuclear whatever the whole reason to be in the Middle East was oil and energy and we
00:48:52
could have just deployed that to be energy independent in the west and not had all of this pain not the whole I
00:48:58
mean not the whole reason I think the reason to be in Afghanistan was to kill someone with the exception of 9 11 and
00:49:02
maybe we could have done that without taking over the whole country and gone on this 20-yard that could have been
00:49:07
very strategic I mean actually that was really proven when well first of all we did Kill
00:49:12
we did kill Bin Laden in Pakistan with just a raid by the seals you know infiltration so we didn't need to occupy
00:49:19
that country and then more recently we finally got so we're here in Afghanistan using a drone after we left the country
00:49:26
so what the hell do we need to be there for 20 years when we could kill these guys using drones and you know a
00:49:33
helicopter team yeah this is where we needed to have an adversary who could check our power it would have been
00:49:39
healthier as I guess the premise to the tough study right but but look I think to freeburg's point is it do we become
00:49:46
more militaristic when things aren't going well at home I I don't know but it feels to me like just in general over
00:49:51
the last 30 years we've become hyper militaristic it's the use of military force is
00:49:57
typically the first option and we resort to it too quickly and we don't use diplomacy enough and you can see that in
00:50:03
just the number of lives lost the failure of these wars and the enormous deficit we're running as you know sex I
00:50:10
can't stand Trump the two things he got right no Wars and he was the dictator Whisperer that guy
00:50:17
knew how to talk to a dictator you know whether it was North Korea China Russia he just knew how to bond with
00:50:24
them it was like a superpower for him okay we have three directions that keeps us out of War it's great you know I mean
00:50:29
it's literally his only saving grace all right gentlemen we have to talk about what's
00:50:35
going on in Iran we have to talk about the Wall Street editorial boards California talk about talk about Newsome
00:50:41
because there's a bunch of energy stuff happening in the United States which I think is important all right so the Wall
00:50:46
Street Journal editorial board uh which obviously has a side wrote an op-ed on California's grid issues some of the
00:50:53
quotes from the op-ed California can barely keep the lights on as its climate policies uh bite the electric grid but
00:51:01
Gavin Newsom is undaunted on Friday he signed no fewer than 40 new climate bills to amp up California's green
00:51:08
Energy stock shock experiment even as gasoline prices Nationwide have fallen to an average of 368 a gallon
00:51:15
Californians are still paying 5 45 a gallon California's electric rates are already more than double those in
00:51:21
neighboring states this is what happens when politicians try to eliminate fossil
00:51:24
fuels with a Molotov cocktail of Regulation taxes and renewable mandates and subsidies the coda to this is um
00:51:35
I'll send it to you Nick but can you please play the clip as well of Rashida claib trying to skewer Jamie Diamond
00:51:41
where he just destroys her God that's embarrassing that was embarrassing I mean we should play it I mean it's
00:51:48
she made no sense Nick can you play that clip please you have all committed as you all know to transition the emissions
00:51:55
from lending and investment activity to line with Pathways to Net Zero in 2050. do you know what the international
00:52:02
energy energy agency has said is required to meet our goal Global 2015 Federal targets of limiting Global
00:52:10
temperature rise to 2.7 degrees Fahrenheit or 1.5 degrees Celsius so no new fossil fuel production starting
00:52:19
today that's so that's like zero so I would like to ask all of you and go down the list because again you all are
00:52:27
agreed to doing this please answer with a simple yes or no does your bank have a
00:52:31
policy against funding new oil and gas products Mr Diamond absolutely not and that would be the
00:52:37
road to hell for America yeah [Applause] yeah bake out their account and close their
00:52:48
account the fact that you're not even there to help relieve many of the folks that are in debt extreme debt because of
00:52:55
student loan debt and you're out there criticizing it my favorite was when she said cellaces
00:53:00
that was yeah I was like okay it's just so much theatrics the Rashida Talib represents the 13th District
00:53:07
congressional district in Michigan the the median age in that district is 35.9 years old
00:53:18
the 2020 poverty rate is 28.2 so more than almost one in three people and uh the 2020 median household income
00:53:27
is 37 601 so you know she represents a a group of people that you know I think at best his lower
00:53:38
middle class and the idea that she doesn't even basically understand what would happen
00:53:43
in her District if you actually did not have cheap LNG again just kind of speaks to the
00:53:51
institutional kind of decay in Washington she is not the person that should be advocating for this like you know it's
00:54:00
districts like this more than any other that don't have the money to spend on you know very expensive
00:54:06
solar installations that cost Thirty and forty thousand dollars these are the districts that need coal coal-fired
00:54:13
plants LNG oil to keep going to sort of minimize the impacts of inflation and so you know that was just like a
00:54:22
grandstanding moment moving to California's hearings because these are important discussions and they've become
00:54:28
theatrics and this is a chance to educate the public with some charts and data she's either
00:54:35
so hungry for power that she actually doesn't care about her constituents or she's scientifically and numerically
00:54:44
illiterate that's I think the latter is probably the issue here and so this is this is what's such a shame on the on
00:54:50
the on the other side you know at the end at the other end of the coast in California
00:54:56
the cost of power generation just so you guys know has fallen by 90 when you look
00:55:01
at Renewables and that is because of a good job that the federal government did in introducing subsidies that
00:55:08
essentially gave the the right sets of incentives for people to build this infrastructure but while the cost of
00:55:14
generating Renewable Power has fallen by 90 to you know virtually it's on par and
00:55:20
it's cheaper than any other form of generation your electricity costs have doubled and
00:55:24
are probably going to double again in a state like California so you know we're catering our our utility rates by you
00:55:31
know seven to eleven percent um every year that is unsustainable in California and what do you have you have
00:55:39
again a different version of the same flu that Rashida Talib has which is you run forward to kind of virtue signal and
00:55:46
to try to do all of these things you don't spend enough time to really understand what's happening on the
00:55:51
ground and you make it impossible for people to make the decisions to actually uh be resilient for themselves
00:55:57
at the end of the day there are tens of Utilities in America but there are a hundred million
00:56:03
households and the only path to energy Independence is to get every single hundred million household to be
00:56:10
resilient which means they need their own solar panels they need battery storage they need their own potable
00:56:15
water and all of these systems are now affordable and available and now the federal government with the IRA has
00:56:23
created the financial incentives to pull it forward so I don't know I just think like this
00:56:28
is a hugely Stark reminder about how poorly our energy policy has been managed and if you leave it to the hands
00:56:34
of the progressive left they will do things that don't map to what people on the ground actually need people in
00:56:41
California most people in California cannot pay utility rates that are going to double every six and seven years
00:56:48
just like people in the Congressional 13th District of Michigan cannot afford to pay for solar if
00:56:56
Rashida Talib is able to get you know all these Banks to not Finance LNG colon and and other forms of hydrocarbons as a
00:57:03
bridge fueled um 40 of these bills independently and you have to think about how many bills I
00:57:10
mean who's reading these things what is in these things I mean each one has to be addressed individually like one of
00:57:16
them could be to help people put solar panels on top of schools and batteries in there that could be a good bill
00:57:22
um but there definitely needs to we have that mechanism at the federal level the
00:57:25
IRA passed an incredible set of incentives both for the producers of these things and for the for the end
00:57:31
companies that actually deploy them yep and so we've solved that problem you know so I I just think like it just goes
00:57:38
to show you a ton of Regulation does not actually add and get to the solution that we want the government will not
00:57:44
solve your problems I hate to be the bearer of bad news but they are going to make things more complicated and more
00:57:51
expensive and the result resilience that you expect out of your utility infrastructure by the way we saw just
00:57:57
what happened last week there was a massive fire and a massive battery installation that California installed
00:58:03
182 gigawatt system megawatt system could you imagine if that had actually lit on fire two weeks earlier in the
00:58:09
middle of this crazy heat wave that we had so even even utility scale Renewables
00:58:15
are very complicated projects to undertake look at Texas I mean people are dying there because the grid keeps
00:58:21
going down it is much safer and more reliable if is if if every homeowner in the United States took responsibility
00:58:27
and and used these incentives to basically become your own little virtual power plant and you will
00:58:34
technology is there I mean getting generators for natural gases backups so we're going to have to figure out how to
00:58:40
take the load off the grid and build resiliency into it I don't know if you guys saw
00:58:44
in a related story all this ESG stuff is kind of coming to a head but uh Dilbert
00:58:48
got canceled this week in like 200 newspapers did you see this what yeah how is it possible well because
00:58:55
he's been going after ESG uh in his cartoon and so uh I'm interested in your take on this but
00:59:03
here uh I don't know the characters in Dilbert except for Dilbert but he says uh this person who's in charge says our
00:59:09
ESG squirrel will drop if we open a new Factory that adds CO2 to the atmosphere but we can balance that out by adding
00:59:15
more diversity to our board and I guess the cat says how much CO2 do you plan to add and he said one nine
00:59:21
binary board members were showing the es and the g being put together makes no sense
00:59:29
but that that panel obviously got him canceled what what does it mean he's canceled like he was fired from National
00:59:35
newspapers I think one of the 177 newspapers because they're all part of chains now and I guess because because
00:59:42
of that cartoon that cartoon plus it's like a series going after the social governance part of you know
00:59:49
environmental and pointing out he stated on his podcast that he wants to kill ESG
00:59:54
so this whole ESG debate he's trying to further it but I guess but yeah I mean the the concept of ESG
01:00:02
makes a ton of sets I think the problem is that it does implement this yeah this
01:00:06
version 1.0 implementation was financialized by people that have no care about ESG at all and so all it's
01:00:13
done is create complexity and consultants and you know studies make sense or it doesn't make sense no the
01:00:19
words E S and G make right a lot if they have commas or periods between them I guess
01:00:24
is the question that's fine too but my point is saying that you want you know diversity and you want sustainability
01:00:32
and you want better governance all good all of these things are really great ideas it's just that in this first
01:00:37
implementation it got financially perverted and so what you have are folks that are you know probably not the best
01:00:44
positioned or should not really have an opinion about ESG opining about things that they never were given the authority
01:00:50
to a pine on and then as a result what it's really created is the cottage industry of Consultants that can
01:00:56
basically make you know hundreds of millions of dollars writing all of these reports
01:01:01
and I think that that's why this implementation doesn't work so ESG today is broken and I think it's largely
01:01:07
meaningless the concept of what people want is is a very good idea we just need a better way
01:01:13
to implement I agree with that you can't connect these things so the we're going
01:01:16
to put social and governance with environment it's all that's going to do is hold back the environment rights
01:01:21
we're having all of fed beef tonight oh this is you need to try it I'll see what
01:01:26
I can do no you have to do it you have to do exactly okay once you have to say sax commit no you cannot
01:01:32
imagine what does a beef look like that has been only fed green olives pitted green olives I can tell you I can tell
01:01:38
you how it looks delicious is it green it's the most delicious steak you've had in your life it's the
01:01:44
most delicious all right I'll come for that okay it's incredible awesome it's actually gonna drive me with your driver
01:01:49
text me your address so I know where to get you oh I love it oh this is gonna be
01:01:53
great game on listen to this lineup me J Cal Friedberg sacks uh he's flying it this thing this is gonna chop up this
01:02:07
game is no more flips the flips are ridiculous okay you know what now now that sax is coming I'm gonna tell him to
01:02:12
break out the early white truffles I'm just kidding truffle pigs not not just walk to my office she looked at me
01:02:20
when I said white truffle she's like four bestie dinner it's happening everybody oh it's happening it's
01:02:28
happening you know what I saw was helmute the other day um on one of his heads up matches where he got in that
01:02:33
huge fight with that guy did you guys see that and he couldn't think that's every match you just described every
01:02:37
match he's ever this was like some heads up thing and the guy um had flopped some
01:02:42
insane I think it was like quads or something or and helmet have had like top pair except yeah yeah yeah yeah and
01:02:47
help me fold it on this guy it was incredible to watch the play like the read from helmuth was unbelievable he is
01:02:53
incredible he's a freaking scene on that guy he's pretty great he's got unbelievable there's a reason he's the
01:02:57
greatest poker player in the world he really he his reads are unbelievable do you think that what percentage of it is
01:03:03
obviously he is an incredible player but there's another piece of this that we all see which is people play into him
01:03:09
they want to be in a hand with him they want to bust him so in those tournaments
01:03:14
what do you think no I think I think what's happening is at the highest level there's like all these people that have
01:03:20
gone in This One Direction and by the way this is probably a good we could talk about Chess in the same way which
01:03:25
is that you have these solvers right there's poker solvers and now they're they're these chess solvers and the
01:03:30
Young Generation spends all this time training on the solvers so that they know every permutation of every move and
01:03:37
what is what people call Game Theory optimal or GTO the problem with GTO is that you can
01:03:42
actually be very exploitative against somebody that's actually playing perfectly because the AI is perfected
01:03:50
around what is the rational set of decisions in every spot and so you can set people up to make a lot of really
01:03:55
bad mistakes and I think helmuth understands that and so because he is one of like this dying breed of people
01:04:01
that plays live he's able to just be so exploitative and these folks that are basically playing
01:04:08
from rote memory right um what is the GTO move in every spot they end up making a bunch of mistakes
01:04:14
and um and feeding chips into him and so I think like it's uh it's probably the same as as sort of this
01:04:21
Magnus Carlson he kind of knew what to expect from people and the minute this get deviated into this realm where you
01:04:27
were like how could you make that decision probably because you know the the computer AI is able to calculate make a
01:04:35
slightly losing move now three moves later you're gonna actually be ahead it caught him off guard where he was
01:04:40
basically like I think this guy's cheating really really crazy but I I think like
01:04:45
if you if you have a bunch of GTO kids folks that are a little bit older that have been playing in a live situation
01:04:52
can be hyper exploitative by the way this is a good point generally about about this gaming is that computation
01:04:58
has played um and computers have played such an incredible role it almost becomes questionable on how much can the
01:05:06
human really differentiate anymore uh in these uh in these games and in these systems
01:05:11
you guys watch the the chess players on YouTube and they'll have solvers live and they'll be getting live scoring as
01:05:17
they kind of walk through a match or uh walk by the way free bird area that's that's the same with poker you have
01:05:22
these Huds these heads-up displays and a lot of the poker sites have basically given up they try to spot the
01:05:29
cheating and you can it could because you have this basically layer that's helping you and it's effectively
01:05:34
impossible because you know the these things run locally they're screen scraping locally and you just have no
01:05:40
idea except when they make moves that are just so unpredictable from a human and could only come from a from a from a
01:05:47
machine yeah all games maybe become obsolete because there is no real way to qualify the performance of one human
01:05:55
against another when the AI itself or the technology or the Computing itself you know over Shadows human potential
01:06:01
and human capability you guys may not know this story but when I met Demas the the founder of deepmind I got
01:06:09
introduced by Teal like in 2011 or 12 so like a decade ago and I met him in London I'll never forget this at the we
01:06:17
were having breakfast at the Conant hotel and he explained to me Deep Mind in the context of a game because at that
01:06:23
time how they were building the first versions of the AI was perfecting how to play certain video
01:06:29
games and I can't remember the name of the video game but it was one of the famous first person shooter games and
01:06:34
the whole idea there was like you know if you can perfect an AI that that basically plays GTO and can win the game
01:06:39
what you've effectively solved for is is like a layer of AI that can then solve other generalized problems I was blown
01:06:46
away I thought this is the craziest thing I've ever heard a decade ago so it's it's pretty natural that they've
01:06:52
taken this stuff and adapted to meet every game it's a little sad though too no don't you think yeah I mean yeah but
01:06:59
I mean maybe there's a different model of performance for humans that really changes what the gaming is right well
01:07:07
I don't know what it is I mean I think that these games themselves completely um uh you know the the intent of a game
01:07:14
which is to measure one's kind of decision-making abilities gets obsoleted because the software ultimately is a
01:07:21
better decision maker than the human so the question then is what is the human going to rise to that creates a
01:07:27
new playing field um and I think there's probably elements of creativity and actually using the
01:07:33
software to become part of the game it opens up a whole new opportunity for what gaming is I mean we've been talking
01:07:38
about a little bit about video games but you could see um artificial constructs in gaming that arise from the human
01:07:44
interacting with the computer and then creating a new sort of playing field in gaming yeah sax what do you what do you
01:07:49
think about all this you're a big chess player yeah I've been following it for the last couple of weeks it's obviously
01:07:53
been the big story in the Chess World what basically happened is that a couple weeks ago
01:07:59
you might as Carlson lost that game to Hans uh what's his last name I think nimon yeah exactly and the next day he
01:08:09
pulled out of the tournament this is the sinkfield cup and he's never pulled out
01:08:12
of a tournament before everyone was sort of speculating is he sick or have covet
01:08:16
or something like that and then he tweeted out a video from some soccer coach saying I can't
01:08:22
get in trouble yeah yeah so clearly he was in a passive aggressive way of making an accusation
01:08:30
and then he doubled down a few days ago he was in another tournament and he had to play
01:08:36
Hans um I keep forgetting the guy's name um yeah he had to play him and he resigned on
01:08:43
move two so basically he doubled down in his accusation and he won't specifically
01:08:47
say what leads him to believe that this guy is cheating but he thinks he is he's uh he's a young player he's
01:08:55
something like 18. and he's had a pretty meteoric rise in the trust world I think
01:09:01
his ratings gone up a couple hundred points over the last two years it's the fastest rise in chess rating that
01:09:08
anyone's ever had before it's been the case that players have and young players especially have risen quickly but this
01:09:17
is uh it's a pretty it's it's the biggest how is he cheating that's happened well that's the thing so the
01:09:23
the issue is that it's easy to cheat in online chess but in over the board you would either need
01:09:31
to have a device or to be signaled by somebody in the crowd you need Human Assistance or the assistance of a device
01:09:39
it'd almost be like you know a casino or something where they're using the contraption yeah on the guy's leg to
01:09:45
Signal you know to information to him so nobody really knows how he would have done it and of course he wasn't caught
01:09:53
doing it so he can never prove that he wasn't so there's just a real question here but they did make some changes
01:10:00
after after Magnus Carlson resigned they put the feed on a 15-minute delay you know I think like at some point
01:10:09
you're going to have to start wanding people and having them go through a metal detector
01:10:13
yeah they're gonna have to toughen up all of the anti-cheating standards one of the grand Masters was like we should
01:10:19
play naked in a locker room it was an online site that basically offered a pay Neiman a lot of money to
01:10:27
play basically naked to prove that he could you know really um do what he what he's been doing the
01:10:33
theory on why he's not cheating and and the rise is Justified is that in theory this is the argument is that he's grown
01:10:43
up learning from all these neural Nets these not just chess engines the first generation of Chess engines were like
01:10:51
stockfish they were just computational machines that were programmed by humans with thousands of rules on how to play
01:10:57
chess and then they could just crunch the lines better than a human could more recently thanks to deepmind it's a whole
01:11:03
different type of machine it's basically these neural networks where all they're
01:11:08
programmed with are the rules of Chess and then they it plays thousands of games or millions of games against
01:11:14
itself and it learns the best way to play chess and the the neural Nets play in a whole different way than the
01:11:23
than stockfish than the pure engines the the engines display like a human that's
01:11:27
able to calculate really well whereas the neural Nets do things like um they're sacrifices a human would
01:11:35
never make yeah they'll make they'll make sacrifices for disrupees activity so you know normally when a human makes
01:11:41
a sacrifice they they'll recapture the material within a few moves whereas um Deep Mind will sacrifice a pawn and
01:11:49
you know just for the positional advantage or for the piece the increases which doesn't show up for many many
01:11:54
moves right exactly it's exactly and so the ability to model like 12 moves out is is really but that you know that's
01:12:01
where I think people thought that Magnus picked up on something because it's like
01:12:04
those sorts of moves are rare in the absence of some layer of intervention because typically it's like you know and
01:12:11
sacs you know this much better than I but it's like you know the opening and the closings of all of these chess
01:12:15
matches are sort of tightly regulated there's not a lot of creativity it's sort of in the mid game that you have
01:12:21
these slight positional advantages and disadvant manages and so I think it was Amplified that one of these positional
01:12:27
sacrifices made no sense in the context of that game unless you had the ability to you know think
01:12:32
really conclusively about six seven moves from now by the way it's the same it's the same thing in poker so there's
01:12:37
a thing if you guys want to download it it's called I think it's called poker snowy that was like the first layer of a
01:12:43
pretty basic AI but it's gotten better and better and really what it allows you to do is in every situational spot
01:12:49
whether it's heads up all the way to a six-handed ring game you can really understand
01:12:55
you know what to do now poker is meaningfully more complicated than chess um as it turns out because again you
01:13:01
have you're not playing against one player you're playing against some umpty number of players you know we don't know
01:13:06
when each of them is going to step into a pod and then there's all of those elements
01:13:11
so it's a little bit more complicated to build a true kind of like neural net around it but even still you can kind of
01:13:17
get a sense of um of what you should be doing in different spots and what you see is that
01:13:22
there's literally like trillions of actions and so it really is impossible for a human being to really memorize in
01:13:31
every single situation what the true you know probability probabilistically weighted GTO optimized move is going to
01:13:38
be and and so this is why I think a lot of people I guess led by Magnus was saying how could you have known this
01:13:45
unless you were aided by something it's pretty clear that this guy cheated it's pretty it's I mean it's what's what's
01:13:50
profound is that Mastery of the game may not be achievable by a human but Mastery
01:13:56
of any one of these games may actually be achievable by neural Nets and I think that's what's really frustrating to
01:14:01
Magnus and to other top tier players in the world that are the best humans at a particular game is they're now realizing
01:14:09
you know that they really aren't the true Masters that the true Masters are the neural Nets and more than just the
01:14:15
guy cheating which may feel like bad sportsmanship or whatever fundamentally one's ego being built entirely on one's
01:14:21
Mastery of the game and being the best at the game is fundamentally challenged because a computer is better at the game
01:14:27
than you it's a really profound moment I think that that ship sailed a long time
01:14:33
ago yeah I mean I know the Chester right yeah well no it was so it was way back when remember when Kasparov played deep
01:14:41
blue deep blue which is the IBM yeah that was the first which wasn't even a sophisticated neural net that was just a
01:14:46
almost holistically modeled yeah it was a deterministically modeled system it was like stockfish it was just a number
01:14:51
cruncher and it that was when computer intelligence and chess tip to be able to beat the world champion since then
01:14:59
there's no looking back I think every human who plays in The Chess World understands that computers are better
01:15:05
and there's no way for a human to be better than a computer so it's certainly not a neural net I mean Magnus certainly
01:15:13
knows that I don't think anyone's bothered by that I think that everyone understands that humans play in a
01:15:17
certain way and their goal is to be the best human I think the concern is just obviously if
01:15:23
a human it gets aided during a game by computers but the way that chess works now the preparation is all about
01:15:32
working with computers these top players spend huge amounts of time researching openings and looking for Novelties in
01:15:39
openings using computers to help them do their research so you know working with
01:15:45
computers has now become an integral part of the game it's kind of like you know in many sports where the technology
01:15:50
has enabled the athlete to get better you know and um and as really technology becomes the key Vector of competition
01:15:57
this actually happens in the NBS this happened in the NBA where there's a special technology for three-point
01:16:03
shooting in your form Etc and the Knicks actually and a couple of other teams implemented it a couple of years ago and
01:16:09
you saw the entire team became better at three-point shooting so people who were
01:16:13
you know 200 300 you know moved up 10 20 each but this kid is clearly cheating because
01:16:20
he's cheated in the past and people who cheat in the past cheat in the future is
01:16:23
my basic belief so this guy Neiman publicly admitted that he used electronic devices to cheat when he was
01:16:28
just a kid on online games when it was 12 to 16 years old so the question is like no but Jason it's worse than that I
01:16:34
think because then chess.com came out and said actually the cheating was more rampant than just those two incidents
01:16:40
their algorithm determined it yeah yeah so why are people playing with him well because he said that yeah he said
01:16:49
that was those games were not for money and um he was just wonderful he was raiding
01:16:54
fast and he's like the poker guys who cheat you and what if you're a poker guy and you've cheated before you never play
01:16:59
with those players again they're cheaters it's obviously well the issue here is that this was an over-the-board
01:17:05
tournament where um the one that Magnus pulled out of in order to protest so the question is how
01:17:10
could he have been cheating right now I think what what adds to the complexity of it is that you have to remember that
01:17:18
when you're dealing with a player look if it was us playing Magnus we'd need to cheat on every single move but if you're
01:17:23
a 26 or 2700 player and you know Magnus is at 28 60 or something the higher the rating the
01:17:30
better in chess called the ELO but anyway if you're like a 26 2700 player like Neiman you only need help
01:17:38
with a few moves in the game in other words if you could get a tip at a critical moment of the game that might
01:17:45
be all you need to put you over the top you wouldn't need to in other words to beat Magnus you wouldn't need to cheat
01:17:50
on every move you could just if you just cheat on two or three moves at the right
01:17:54
time that could put you over the top so something could vibrate on your leg four
01:18:00
times and then two times over to tell you which piece to move that's what they were saying Jayco like he had like a
01:18:05
vibrator in his like where was the vibration in his shoe there was a meme that became like a whole thing where it
01:18:11
was like he had something in his butt or something and anal chest computer is what you're
01:18:17
saying okay look that's not real somebody's special someone made it yeah and then it became somebody did a Reddit
01:18:22
post saying that he was being communicated with through vibrating anal beads and then that went viral Elon
01:18:29
tweeted it although I think he deleted it look it's absurd but the point is there is a question of how would he have
01:18:36
done it if he did it yeah there have been cases and caught yeah people getting caught going to the bathroom and
01:18:44
then you know checking their phone yeah there's a there's a grand Bulgarian Grandmaster you got caught in the
01:18:48
bathroom checking his phone and oh God metal detectors on the way in and they have RF detectors in the room right so
01:18:54
they look for any sort of communication do you remember that going into this event you just kind of
01:19:00
Justice the the singfield cup added a 15-minute delay after these accusations so yeah I
01:19:08
think there's going to be they're going to be more precautions basically but we still
01:19:13
haven't heard from Magnus what made him think that there was Foul Play here in this particular game and he's been very
01:19:18
reluctant to he won't say anything it's it's sort of um passive aggressive now the full side of it is that Magnus
01:19:24
Carlsen has been the number one player in chess for over a decade and he's a very classy player I mean I don't you
01:19:31
know everyone's never heard a word said about him that you know was uh now he can be cocky he
01:19:36
can definitely be cocky but uh he is a very classy player so I just don't see him doing something like this lightly so
01:19:43
that's what's so dramatically to understand about it dramatic is yeah it's really hard to
01:19:49
understand how Neiman Could Have Cheated but also Magnus doesn't seem like the kind of player to just make a wild
01:19:55
impulsive allegation so this is why the chess world's just been really roiled by
01:19:59
this all right is there like a any kind of equivalent of like ped Scandal here like people taking Adderall or provigil
01:20:07
or any other kind of nootropics to to get an edge there's a good documentary I think it
01:20:14
was on Vice on how a lot of the top chess players actually get ready for matches and
01:20:19
um they're incredibly diligent about their sleep their workout routine alcohol they do take supplements I
01:20:25
forgot who made the documentary but it's actually incredibly intense how physical
01:20:28
these people are uh well like one game of classical chess can burn like over 2 000 calories or something like that like
01:20:34
the amount of calories that get burned just by using your brain so intensely Adderall is rampant in the poker
01:20:42
Community especially in tournaments so when you play the the higher tournaments and I've played them and I just kind of
01:20:48
step in and and it's I felt very underpowered relative to the to the kids I was playing with because they were all
01:20:54
on Adderall well these are 12 hours but 10 hour sessions over 12 hours session right it's exhausting it's really really
01:21:00
physically exhausting to put that's why I stopped playing tournaments about a decade ago I just couldn't sit there for
01:21:05
that long it could justify the time suck of it too it's like it's just so it's just so physically and emotionally
01:21:12
demanding to be able to play that well and make no mistakes over 10 hours um and so you know the only solution
01:21:19
that all these kids would turn to was um was Adderall and I was like this is not worth it for me so I stopped I
01:21:24
stopped playing in tournaments and which was too bad because I I thought like I could have a real chance of actually
01:21:28
doing reasonably well in some of these things and I just gave up by the way the other thing I wanted to mention is
01:21:33
there's there's been like cheating in all these other kind of sports and it always gets exposed like whether it's
01:21:37
you know the Tour de France it turned out that everybody was using Peds or you know the Russian Olympic team everybody
01:21:44
was using Peds New England Patriots stealing signals yeah all right listen let's just talk about the Iran protest
01:21:50
for a moment um Iran has shut off internet access internet access in parts of Tehran and
01:21:56
blocked access to Instagram and WhatsApp to try to stop these protests the protests started after the death of a 22
01:22:01
year old Kurdish woman um while in place custody Masa amini was detained on September 16th for allegedly
01:22:10
wearing uh hijab head scarf in an improper way she later died in police custody and activists are saying she suffered a
01:22:20
fatal blow to her head and now you have 15 cities with very large crowds women are burning
01:22:28
their hijabs and it seems to be escalating at a pretty uh fast-paced Iranian authorities uh are denying that
01:22:36
they had any part in her death thoughts on this it's horrible yeah I wish them well if you look at the
01:22:46
demographics of Iran it's pretty amazing how many young people there are here this feels like a country that could
01:22:52
turn over that'd be great and you want to know why it has a chance of working because we're not the ones behind it I
01:22:58
mean absolutely yeah we cannot yeah run the revolution the revolution has to be done but to the women and young
01:23:07
people of Iran protesting you have our support and we're rooting for you and don't let the bastards grind you down
01:23:13
all right everybody four uh David forgot our names did you forget our names no I'm just I was gonna try to
01:23:22
come up with a new name for uh rageberg like Friedberg I think David Plainview rage Burger rage for rage
01:23:30
Burger Plainview the uh David the dove and the host with the most tremath polyhapatia I'm the world's greatest
01:23:40
moderator I'm so excited to see all three of you honestly uh socks don't flake I love you guys I really want to
01:23:46
play sacks we should roll down together let's roll baby big game all right we'll
01:23:51
tell you guys in that game love you besties bye your Winner's ride Rain Man Davis
01:24:04
and they've just gone crazy [Music] besties [Music] it's like this like sexual tension that
01:24:31
they just need to release [Music] we need to get Mercies [Music]