00:00:00
do we have freeberg is he did he drop off oh here he is okay free Berg's back okay three two I just had to take a leak
00:00:05
I just I go outside my office and then I come back oh you like a nature PE you're
00:00:10
a nature PE guy me too I love a great nature I have this great office at home which is like a building outside of my
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house so I like to go in the garden take a breath of fresh air and just yeah you
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don't sit down to pee no I'm I'm serious I'm not joking around you guys I have so many jokes I'm
00:00:28
not going there that's a soy estr point joke is no we can cut this out but my pediatrician said hm I think it's really
00:00:34
important to teach your boys to pee sitting down and even for for you as you get older I what are you talking about
00:00:42
it's good for the it's good for the prostate and there's like a materially different percentage in terms of
00:00:48
prostate cancer rates when you pee sitting down because you expel all the pee that just kind of gets caught there
00:00:54
what the little the dribble swear to God bro I swear to God you about wait wait what about Shake Nick you can cut all of
00:01:02
this no the shake doesn't do this is great sitting while urinating AIDS and muscle relaxation benefiting men with
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tight pelvic floor muscles or symptoms of an enlarged prostate sitting to PE enhances stability rces the risk of
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Falls oh God and minimizes messiness especially sa SX has a urinal whenever sax gets a new home he puts urinal in
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that's how much of a man he is he how does your staff how does your staff hold your body while you pee like do they
00:01:29
hold you history of the world Mel Brooks this study is like the vasectomy truck at the
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DNC I mean it's meant to emasculate men that's the only interpretation of it it's total
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nonsense let your winners ride Ravid and in said we open source it to the fans and they've just gone crazy
00:01:56
[Music] with all right the labor department has revised down the job growth numbers as a
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number of members of this panel predicted the uh BLS updated its nonfarm payroll stats downgrading actual job
00:02:13
growth to around 30% versus what was originally reported this means the US economy created around 818 th000 fewer
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jobs over the 12 months leading up to March 2024 number was originally reported as
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2.9 Million new jobs created and it's more like 2.1 one uh the labor department updates and revises its stats
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frequently it gives disclaimers but this is the largest and most significant revision since 2009 after the great uh
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recession and so the biggest downgrade came in the field not surprisingly of professional and business services with
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358,000 jobs lost over the last year we see that in all the stats of different tech companies and businesses finance
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companies doing layoffs other fields that revise their numbers Leisure Hospitality manufacturing retail
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makes sense and a little bit in transportation here's a couple charts for you before we go and get some
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feedback civilian unemployment rate seasonally adjusted as you can see since the great financial crisis we went from
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10% all the way down to well below four and that's where we sit Today USA Today chart here of gains and losses since
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1980 obviously that massive drop you see there of minus 9.3 million jobs was covid with the big quick rebound of 7.3
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so overall the country is in great shape saak your thoughts on the revision you obviously made note of this when we
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went through the numbers well yeah I mean I predicted this this would happen and I didn't know exactly how we would
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get the correction but now it's come out by the way it's not just the this 88,000 jobs if you look at the last 12
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months and add up all the restatements it's been something like 1.2 million I can share the chart on that but this is
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quite remarkable about a year ago I tweeted really fairly casually that there was a hot jobs report this was
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around June of 2023 that I I didn't know where they're finding all these jobs I mean all I see
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is layoffs that was my reaction based on not just what what I was seeing in Tech
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and all of us you know especially last year we seeing nothing but layoffs in Tech it was also feedback from Real
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Estate Investors that I knew I mean all new real estate projects that basically stopped because the cost of borrowing
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was so high and there was a credit crunch so new construction projects had stopped refi were very hard to get it's
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just that everywhere I was looking in the economy and the feedback I was getting from people things looked pretty
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dismal and yet the media was continuously putting out stories about hot jobs reports and we've been getting
00:05:01
this now for roughly a year and then what happens is that there's a revision and the revisions have always gone in
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One Direction there always a revision down I mean if the revisions were completely sort of neutral and arbitrary
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you'd expect it to be like a coin flip you know you might have 10 revisions and five would be up and five would be down
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but they've all been down yeah so what I saw was a pattern of revisions down and now we've seen the biggest one so
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it's not altogether surprising to me and in hindsight you know when I tweeted that a year ago I got this like
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hysterical reaction I mean like it was one of these tweets that all of a sudden everyone was like quote tweeting and
00:05:45
telling me to stay in my Lane I'm a VC and I don't know the numbers and it was like I hit some sort of nerve and you
00:05:53
know whenever that happens you're usually over the Target in some way yeah and it's generating it's triggering
00:05:59
people is what you're saying yeah yeah so the question is like why were they so triggered and I think the reason is that
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on some level people were intuiting that the numbers didn't really make sense it
00:06:08
didn't really match up with what we're seeing in the economy and now a year later we have the proof of that so
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chamat let me go to you next because you you pointed out that these numbers seemed a little fugazi
00:06:20
fugazy but we have 162 million people record employed in the country this number if it's 162 you take out 800 it's
00:06:28
161 this is what the Fed was been trying to do to cool off inflation right we needed to see a little bit less
00:06:35
employment and that's part of it so I guess the Silver Lining here is if we are revising these numbers down that
00:06:43
would give more of an indication that we've slowed the economy correct yeah I mean I think the economy
00:06:49
is a lot slower than what people thought which to your point the Silver Lining is
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that it probably Now tips the balance of action in September to a cut and if it was 25 basis
00:07:04
points there's probably going to be a lot of folks lobbying the FED to cut 50 and I think that they probably have
00:07:15
enough numerical justification now to cut 50 I think the bigger problem though is
00:07:24
if you don't have an accurate sense of where employment really is and and sax did mention this you will also then have
00:07:32
an inaccurate sense of where GDP is and I think the one two punch could be very problematic I think what we're learning
00:07:41
more than anything else is we have a very sophisticated economy we have a very sophisticated Capital Market System
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we have very sophisticated actors in those markets all of us included who can react to realtime data and make the
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right decisions the problem is we have bad data and the bad data I think is something that is fixable but
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we need to make an effort to do it because it's insane that the largest and most sophisticated economy in the world
00:08:11
is this unpredictable and I think that's like the big question that I have which
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is how is it possible in 2024 that we haven't just made this a priority to fix this and with all of the systems that
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exist and all of the SAS tools that exist and everything that's used to like hire and fire and pay people we don't
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have an accurate sense of this number and it could easily Cham that's a real head scratcher to me this could easily
00:08:34
be crowdsourced or we could pull data from a lot of different places obviously they pull some data from employment
00:08:39
roles but I remember you had a startup I can't remember the name of it but you had crowdsource people were going around
00:08:46
and taking pictures of the price of tomatoes in different places and then putting it into a database and
00:08:51
organizing it I think funds and other folks yeah yeah so what that company did was it was an agent that you would
00:08:57
download on your phone and we would task you to go and collect certain kinds of information and yeah there was some
00:09:04
socioeconomic data that was collected a lot of it now is with three-letter agencies and the like so without getting
00:09:13
into details that company's doing quite well but it's just moved in a different direction if you just created some kind
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of like a a darp a challenge like equivalent to this give it to stripe give it to Gusto give it to a handful of
00:09:26
these Smart Companies to give it estimate and see who accurately predicts this number over the course of a year or
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two that's more reliable and frankly more useful to the market than what the BLS is doing my first job out of college
00:09:41
by the way was not in Tech but it was in finance I was a driva as Trader and what
00:09:47
was so incredible is I remember sitting at my desk in front of my terminal on the trading floor when non-farm payrolls
00:09:53
would hit and people would just go crazy there would just be literally tens or hundreds of billions of dollars that
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would start flying back and forth based on what that number was and now to think
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about that much velocity in a totally random way because those numbers are unreliable seems just
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crazy okay freeberg here's a chart for you to comment on maybe we open the aperture here total employment and
00:10:19
unemployment here in the United States as you can see you know since the 80s population has grown and the number of
00:10:27
people employed has continued to grow labor participation it kind of peaked in the '90s in the Clinton era and it's
00:10:33
come down a bit since then but overall what do you think of the health of the economy and
00:10:41
employment I mean I think the fed target is 4% which is kind of where we're at I
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think we're at 4.2 or 4.3 now and so the FED tries to balance inflation unemployment and rates
00:10:55
that's kind of the three things that they're looking at so they make adjustments to
00:11:02
rates obviously if you take rates too low too fast you have an increase in inflation so they're targeting
00:11:08
inflation's 2% they're targeting unemployment 4% so if you take rates too high you can certainly reduce inflation
00:11:14
but then the economy can contract or slow down and job Cuts start to come through so now with inflation kind of
00:11:22
supposedly approaching 2% and unemployment over 4% the market if you look at the the
00:11:30
trading markets are now estimating a 100% chance of a 3 quarter of a percent rate cut by the end
00:11:40
of 2024 and a 70% chance of a onepoint rate cut by the end of 2024 so the question is are they going
00:11:48
to do three quarter point cuts by the end of the year or are they going to do a 50 basis point cut and then a 25 or a
00:11:54
50 and a 50 the next couple of weeks will determine which direction and then obviously chairman pal has his big
00:12:01
speech happening on Friday freeberg what are the what do the betting Market say for specifically for September 50 or 75%
00:12:11
chance of a quarter point cut 20% chance of a 50 basis point cut and then 6% chance of no cut which is kind of
00:12:20
strange because the the trading markets this is a obviously a prediction Market but the trading markets are showing
00:12:26
effectively 100% chance of a three4 point cut by the end of 24 and uh saaks here is the dramatic fed
00:12:35
we always talked about them kind of getting on this a little bit late but you can see here man what a ramp up in
00:12:43
uh 2022 where we were basically at a quarter point and they just added a quarter point or 50 bips all the way up
00:12:50
to 5.33 where we've been flat inflation obviously we have the two- handle now so
00:12:56
now we start the process of going down and I think people generally believe 25 bips at a time will be their pattern
00:13:03
coming down you think that seems wise well I think the FED isn't sure that inflation is a solved problem I mean I
00:13:09
think that pal is a little bit reticent to start the rate cutting cycle because he doesn't know for sure if inflation
00:13:15
could tick back up this First Cut is in a way the most important one because it signals a regime change that we're
00:13:22
beginning the rate cut cycle and what he doesn't want to do is cut any amount and
00:13:27
then be proven wrong and we get a bad inflation report and then all of a sudden he has to raise it again so he
00:13:32
doesn't want to be caught in that position but I do think that the economy is obviously showing significant
00:13:38
weakness inflation is not completely solved but it's down to 2.9% at least it has a two handle on it now and so yeah I
00:13:46
think the the market is pricing in these rate cuts for a reason so either mission
00:13:51
accomplished or we'll see if we have a soft Landing or hard Landing or something in between most people feel
00:13:56
like it's going to be soft with a little bit of bumps seems direct I think we're already in I
00:14:01
mean now that we know that the jobs picture was inflated by 1.2 million jobs over the last call it roughly a year or
00:14:09
14 months I think we know that this is not like a perfectly soft Landing I mean I think that the economy is a little bit
00:14:18
shaky and it's being propped up by massive amounts of government spending like we talked about on a previous
00:14:23
episode we're running unsustainably high levels of deficit and debt we're running
00:14:27
what $2 trillion year Deb deficits right now and what are we getting for that we're not getting a super robust economy
00:14:33
we're getting an economy that's narrowly staying out of recession so it's a little bit of a scary picture I think
00:14:41
that the economy is is so shaky and we're spending so much money to profit up uh we'll just have to see what
00:14:47
happens yeah and it doesn't seem like either of the incoming administrations really cares about
00:14:53
spending seems like we're going to be in still big money spending mode independent of who wins
00:14:59
we'll see how long that can last as a country and then uh we talked a little bit about the Supreme Court decision
00:15:07
last year around affirmative action and it turns out now MIT has released their data it's getting a lot of Buzz
00:15:17
online here's a chart basically what you can take from this chart and this is people self-identifying at MIT and the
00:15:25
buzz uh is that asian-americans have gone from 41% to 47% and those gains came uh on a percentage basis from a
00:15:36
decline in the number of black and Latino students coming in here's the chart as you can see so people are
00:15:45
wondering about I guess the fairness of this and I guess you could have either one of two positions chth Asian students
00:15:55
were being penalized for a long time or now I guess you could believe that Latin
00:16:01
and black students are being impacted negatively about this so I'm not sure what your take is but it's obviously
00:16:07
moving to more of a meritocracy according to the people at MIT it's not even clear how they were making
00:16:15
decisions before nor now but you know I tweeted about this yesterday I think the thing that matters
00:16:23
more than anything else is to make sure that the people that they are letting in
00:16:30
are in love and obsessed with the things that MIT is supposed to be great at so if you are a
00:16:39
great creative thinker designer architect you should be at Ry I'm just I'm giving an example if you are a great
00:16:49
musician you should be a juliard you should not be going to MIT because you think it's a check mark you should be
00:16:55
going there because you think that there are professors in organic chemist istry
00:16:59
in physics in these disciplines that are really important who are experts in their fields that you can learn from and
00:17:08
become an expert yourself and I think the problem with all of this other stuff is once you make it a credential there
00:17:15
are some folks that are only going to MIT because they could get in and because it's a great credential in their
00:17:23
minds and they shouldn't go there either so I think the thing is you have to get
00:17:29
back to what matters which is there are all of these industries that have not progressed that much and in order for
00:17:36
those Industries to advance you need really talented young people who can learn an apprentice and then take over
00:17:42
and I think MIT is one of these rare places that focuses on this part of the physical world that hasn't had as much
00:17:50
progress and so I just want to make sure that the people that go there actually want to be there for that reason gender
00:17:56
race all that other stuff shouldn't matter and that is uh what the Supreme Court
00:18:02
decision did you cannot take race into account Harvard had some weird thing um freedberg where personality was one of
00:18:10
the vectors uh and hard I would say no no offense to everybody at Harvard but like Harvard is more of a pure
00:18:17
credential like MIT I buy more that you go there for certain kinds of specializations Caltech you go there for
00:18:23
certain specializations sure if you're really into wine you go to UC Davis my point is is these schools exist for
00:18:30
reasons other than just as a a collector coin that you put in your pocket H I'm not sure Harvard is really
00:18:38
known for anything other than for being quote unquote Elite but even that's questionable now but in the technical
00:18:47
areas I really do think that that MIT was an important place where people would go to train and I just want to
00:18:53
make sure whoever they're letting in actually cares about the thing they're studying what's your take on this you
00:18:58
know moving back to a meritocracy and a color blind application process not being able to use race in
00:19:07
admissions I don't think that someone's genetics should determine whether or not they go to a a
00:19:20
school and I think that their socioeconomic background experience set values uh successes failures are the
00:19:31
things that they could have affected or that I think probably better define whether we want to take a moral stance
00:19:39
on giving other people opportunity so I think that that's a a kind of good and reasonable place for us to end up sax
00:19:47
any thoughts for you from you on this well I mean I I support the idea of color blind meritocracy I mean I agree
00:19:54
with jamath and freeberg that the traits that you're born with are not skills or
00:19:59
qualifications they're just the accidents of your birth and what we should be trying to create is a is a
00:20:05
society where those things don't matter and everyone has the same ability and opportunities for advancement based on
00:20:12
how hard they work and their skills and this concept of Merit and I think that Supreme Court decision gets us closer to
00:20:19
that remember that the reason why that Supreme Court decision happened or or what the plaintiffs were arguing is that
00:20:27
the previous regime on College es was unfairly discriminating against asian-americans because whenever you try
00:20:33
to engineer the classes to a certain proportion of the population somebody has to win and somebody has to lose and
00:20:40
the students who were losing were asian-americans and in many cases the these asian-americans were first
00:20:49
generation immigrants or they were coming from disadvantaged backgrounds and yet their population was engineered
00:20:55
to a smaller number than Meritt would otherwise suggest and now you're seeing it in this new class at MIT the
00:21:02
percentage of asian-americans has increased somewhat so I think it's good I mean we're reducing um a form of
00:21:09
discrimination that discrimination may have originally started for good reasons to try and create a remedy against a
00:21:18
different kind of historical discrimination nonetheless it discriminated against talented Asian
00:21:23
students and I think now that that's been that's been fixed what do you guys think about
00:21:29
creating a leg up for people that came from a disadvantaged socioeconomic background so put race
00:21:39
aside but an you know an individual that grew up in a difficult circumstance that didn't have the
00:21:45
privilege of going to a good school or having a good education worked hard tried but didn't end up with the best
00:21:51
test scores or didn't end up with the best GPA because of the conditions they were born into do you think it's
00:21:56
appropriate to give those individuals a leg up in the application process putting race aside but just call it
00:22:03
socioeconomic disadvantages to some degree I do I mean look if you have a student who gets a
00:22:09
for let's call it a 1450 on the SAT but they've got tutors and classes yep and they're growing up in envir school in
00:22:16
they went to school in Atherton right they're getting the best teachers the best schools the best environment then
00:22:20
you take a kid who grew up in I don't know like a dangerous part of the inner city where there's shootings happening
00:22:26
or a rural district with no education appala both both are kind of equivalently disadv or different
00:22:32
differently but both disadvantaged y right they don't have access to the the best schools best or best funded schools
00:22:38
best teachers and let's say that person gets a400 on their sat which one is better I mean yeah if certainly if they
00:22:44
got a 1450 and you're comparing two equal scores it's really clear that the disadvantaged
00:22:51
student probably has more Raw Talent totally I 100% agree and I I feel like I feel like we've used race as heris for
00:22:59
that conditional background and that's what makes it hard because race is not necessarily it certainly there's a
00:23:06
correlation but it's not necessarily indicative of the socioeconomic disadvantage that someone may have faced
00:23:13
and had to overcome in order to perform and succeed at the level that they could
00:23:16
have given their conditions and so I I certainly think that the incorporation of one's socioeconomic background should
00:23:25
should be a critical part of the application process and certainly in the same in the job setting ultimately I
00:23:31
think I think what would be much more valuable than all of this is for companies to hire from a whole bunch of
00:23:38
different schools than they do today and to break the back of this elitist culture we have around
00:23:46
certain schools all of the things that you guys are talking about to me sound kind of
00:23:54
crazy and the reason is because you could go to Iowa State or you could go to Harvard and you could make a claim
00:24:04
and I would buy it that in some random social science maybe there's an advantage in the people that you meet
00:24:11
but there's not necessarily an advantage for studying physics at any of these two
00:24:15
schools it's not like one's teaching you that gravity goes up and the other teaches you that gravity goes down so I
00:24:22
think the bigger problem is that we don't value enough the fundamentally important skills that we need for
00:24:30
Humanity to evolve and then number two we have fallen to this trap of saying that these schools these highly
00:24:37
credentialed schools that cost 60 and 70 and $80,000 a year graduate the best kids and I don't
00:24:44
think that that's true either so the thing that we could all do because we're all hirers we hire thousands of people
00:24:52
is we should be going to all kinds of different schools today I just gave an offer to a guy that went to Virginia
00:24:57
Tech and this kid seems awesome kick ass and when we put out job postings for 8090 we Veer
00:25:07
towards these schools that are like hardcore technical places where none of all of this random credential nonsense
00:25:16
gets in the way and so they're hungrier as a result they're more Earnest and you
00:25:20
can cut through the BS the other thing I would say is that it's even more capable
00:25:26
now of getting through the filter of these credentials and knowing the quality of a person you can look at
00:25:31
GitHub reos if you're a developer you can look at all of these things that allow you to understand so I don't know
00:25:36
I disagree with your guys's thing of like let's go figure out all these other things how about we stop
00:25:41
hiring and valuing random non-specific degrees just because they come from a good school
00:25:49
well I think long way because we do still have a college application process jamat so there are still going to be a
00:25:55
set of criteria used to determine whether or not our kids end up getting into a specific school if
00:26:01
we and they all kind of say hey it makes sense if your son or daughter were to go
00:26:06
and study computer science at North Carolina State the biggest thing that that you could do is be okay with it
00:26:13
another example of a school that does a great job of recruiting from non-traditional places why would I not
00:26:18
be okay with it no no this is my point I think it's a decision I'm I'm saying that I'm not saying that you are but I'm
00:26:23
saying that if you make it a big deal that North Carolina state is somehow worse than some other credential school
00:26:30
because our social cohort says that those other schools are better we're part of the problem well in my work
00:26:36
cohort North Carolina State's a great school we hire a ton of people from there so that's a great school actually
00:26:42
to be honest I think schools like that are better I mean I think probably Virginia Tech is better than Harvard and
00:26:48
the reason is because they're less infected with the whole woke Dei ideology that now pervades these like
00:26:54
top schools so the students are more likely to learn something but you should stop saying top they're not top schools
00:27:00
they're not top schools anymore they're not the smartest kids they're not the hardest working kids so we should stop
00:27:06
saying top schools these Ivy League schools are not the top schools I agree with that yeah there might be the most
00:27:11
notable schools historically but they're not necessarily the ones that are they're the biggest brands and they're
00:27:16
not new brands they're old Brands and we've seen that these old Brands depreciate over time and people read way
00:27:23
too much into them I think the the the structure Monopoly is that they then get and have
00:27:33
the most Capital which they can then use to build and facilities and support staff that can come and do core research
00:27:40
and so you then get all these research staff in particularly in technical fields in science and medical fields and
00:27:46
so on that want to come and be on campus and that then creates the network effect
00:27:51
of undergrads getting a better uh education because they're getting exposed to the best talent in the kind
00:27:57
ofar I don't H think that benefits the undergrads I mean first of all these campuses tell us about your experience
00:28:03
at Stanford I think you're the only IV leager here wait Berkeley's ivy league you went to Berkeley that's St
00:28:09
technically is not in the ivy league the ivy league is like an East Coast Club whereas Stanford was kind of the West
00:28:14
Coast disruptor look did you get exposed I mean I know when I worked when I went
00:28:18
to Berkeley I worked at Lawrence Berkeley labs I got to be exposed to Nobel laurates it was actually like I
00:28:24
think a particularly my field like I majored in astrophysics and phys physics like that was a great school to get
00:28:31
exposure and you actually had that opportunity I think that's part of the challenge schools with really great
00:28:36
graduate programs and research uh that goes on on campus actually can give a better educational experience to the
00:28:43
undergrads it's almost like you're getting these internships and these fellowships uh and these Tas and
00:28:51
professors well that's that's a different thing I I actually think what America needs is what I benefited from
00:28:57
at the University waterl which is an active and vibrant Co-op program yeah that's great yeah I really disagree with
00:29:04
you I don't think that there is a incredibly better way to teach thermodynamics I think that's a bit of a
00:29:10
joke thermodynamics okay I think that that's that's a why tell our talking about applied work J so I'm talking
00:29:15
about you go up to Lawrence Berkeley lab and you work in an actual lab that does
00:29:19
really interesting research okay so my point is if we both agree science definitely yeah yeah yeah that's what
00:29:25
I'm pointing out yeah so then like the universities in America that have these co-op programs I think are incredible
00:29:30
institutions again they're not the typical ones they're places like Drexel and other places but now you allow these
00:29:36
kids to be in the trenches with people building things and I just think that that's an incredible gift for them but
00:29:44
it's also an incredible opportunity for these organizations to understand the quality of the person Beyond some
00:29:50
credential well I do think in a digital era core education has commoditized and I think most people can get most of the
00:29:57
way there without necessarily paying 60 to 80,000 a year and then being partnered in some way with that on the
00:30:04
ground internship or integrated kind of program where you get actual hands-on experience so I don't know like I mean
00:30:09
the university model maybe does not make sense for most Fields jcal what do you think yeah it's very interesting the
00:30:17
where did you go to school J I don't even know I went to forom University at night I got in three weeks before did
00:30:24
you get an undergrad degree from forom yeah forom I was going to either I had taken the New York what was your degree
00:30:31
in what did you uh psychology I was going to go into the NYPD I had was about to get accepted at 18 years old 17
00:30:41
years old 18 years old and then I decided the last minute to go to forom at night I had to work in order to pay
00:30:46
for it so it took me four and a half years but I did like almost a full credit load at night and then I was
00:30:50
going to go into John J for Criminal Justice and um get my forensic degree and then join the FBI so I was in the
00:30:59
process of applying to the FBI and then the internet happened and I started a magazine about the internet and it went
00:31:04
in a totally different direction but the co-op stuff I remember when we went to waterl uh we did a speaking gig there
00:31:10
years ago jamath and I was very taken with the students there and like their like drive and so I
00:31:19
think that's the key piece and what I did in Venture Capital because I needed to have a team of about eight people
00:31:25
screening all the companies we get and the application so I just made my own training program and I hire a lot of
00:31:31
people in Canada to do it and basically they do five meetings a day they write up coverage I made an entire framework
00:31:38
and I'm doing professional development because I found a lot of the top people from these brand name schools were
00:31:45
entitled they didn't want to do 25 35 meetings a week with Founders and I just found these other students from waterl
00:31:52
and other colleges like that and I've trained them in my framework for these are the 13 qualities we look for in
00:32:00
investing in a startup and these are the 25 red flags and I've now got seven people we did 110 120 meetings one week
00:32:08
recently and so it's just much better to train them ourselves and make your own training program I believe and so it's
00:32:13
even didn't Malcolm didn't Malcolm Gladwell write something which was roughly the equivalent of like you're
00:32:19
better off getting the top 10 student at a non- Ivy versus like the 50th student
00:32:26
at an ivy or something I don't know there was like something like maybe maybe it was like a chapter
00:32:31
and what was his reason because of motivation yeah it's like these kids are excellent when they're when they're
00:32:38
achieving and they're excelling in things that are not subjective you want to go get
00:32:44
those kids yeah you know well they've performed yeah I mean I think one of the one of the problems with the whole Dei
00:32:53
policy and whether you want to do it based on race or socio economics or or whatever it is that you're doing is it
00:32:59
keeps happening at every layer of the stack and at some point you just need to say look we've made up for whatever came
00:33:07
before and now it just has to be about that person's performance we need to stop putting our Thumb in the scale and
00:33:12
just hire the best person my view is you could probably do that after undergrad like there's no need to
00:33:17
keep artificially adjusting the weights of how you hire people after undergrad but yet you have all these like programs
00:33:27
that trying to make the decision based on something other than Merit and I think
00:33:32
that that's the part that needs to stop I mean we had Coleman Hughes on and you know I think he had a very good
00:33:37
perspective on it which is like maybe starting with earlier education is where you could probably solve some of these
00:33:43
problems a little bit more effectively I will say I I feel like my experience in
00:33:48
the workplace is that one's college or university is completely decoupled from one's performance or ability to succeed
00:33:55
in the workplace in an amerit workplace and when I say meritocratic I mean excluding nepotistic workplace settings
00:34:03
and excluding demographically biased workpl and if you if you exclude those two it honestly does not matter what
00:34:10
school someone went to they could be brilliant they could be hardworking they could be passionate they could be a
00:34:15
leader the school doesn't matter and in fact perhaps the coral are is true which
00:34:20
is the people that went to the schools that determin success generally have a very hard time succeeding in the
00:34:25
workplace because anytime they face failure it is a challenging circumstance for them that they are unable to
00:34:31
overcome and that's particularly true in entrepreneurship that's been my experience perhaps in the broader
00:34:36
workplace setting they could work well where they're told all the time if you do this then you get that they do this
00:34:42
they get that they feel good they succeed in that model but in the in the real world that's not the model and I
00:34:48
think that that's a like a really important fact that's colored my point of view on how the higher education
00:34:53
system actually does perform with respect to improving the quality of our Workforce the US separate of that I will
00:34:59
say that in technical Fields the research environment on certain college campuses can be incredibly to chim's
00:35:07
point opportunistic for getting exposure to to Hands-On work that you might not otherwise get in technical field so and
00:35:15
a lot of this comes down to motivation you know at a certain point a person has to be motivated to put in a lot of hours
00:35:22
and become excellent at whatever their chosen profession is I think I talked about it previously when we started
00:35:26
talking about macro economics here I took a macroeconomics course at MIT on their website or on YouTube rather right
00:35:33
like there's incredible that this stuff is all out there and anybody can take any of these courses for free that's
00:35:38
what I mean by like the Bas The Base education has been commoditized you know it's the hands-on experience that one
00:35:44
gets that makes a huge difference MIT 1401 principles in microeconomics uh supply and demand I mean it was like
00:35:51
incredible and you know this is stuff I just didn't ever get exposed to and I was able to do it for free I listen to
00:35:57
the course actually twice and I took notes on it I really got a lot out of it all right listen more stuff on the
00:36:02
docket anybody else have final thoughts here before we go into the election stuff and taxes let's all commit to
00:36:09
hiring as many people as possible from non-traditional schools absolutely I mean that's what I do already I mean
00:36:15
it's it's working all right decision 2024 uh get ready for a bit of chaos here folks the DNC is underway as we tape we
00:36:25
tape on Thursdays as you know I think kamla we'll give her acceptance speech tonight
00:36:30
DNC pulled out all of their All Stars Michelle Obama Barack Hillary Bill Clinton Oprah and uh Tim Walls spoke
00:36:39
last night most people felt he had a pretty strong showing our guy Nate silver friend of the Pod
00:36:45
has the election as essentially neck and neck we're in coin toss territory here I
00:36:52
think it's going to be come down to the debat so I'm interested to hear what my besties think here is the silver
00:36:57
bulletin his new publication he's not at 538 anymore just comma at 47 Trump at almost 45 and uh this all will come down
00:37:07
to the swing States I think as we all know he's got a really great interactive chart over there he's got Harris with
00:37:14
clear leads in Pennsylvania Michigan Wisconsin Arizona and Virginia I think those were about 68 Electoral College
00:37:21
votes votes Trump with clear leads in Georgia and Florida my Lord Florida is 29 or 30 electoral
00:37:27
votes that's a lot the toss up States Nevada with the Tipping and no tax there but that's only six North
00:37:36
Carolina is been flip-flopping back and forth from Harris to Trump those two are
00:37:42
worth 24 so we swung from many paths to Victory basically a certain victory for Trump with versus Biden to now a toss up
00:37:52
this is an interesting chart here sax I want to get your take on which is the polling averages I think you said last
00:37:59
week or the week before that we would see the Harris bump reverse and that's exactly what's happened the month over
00:38:04
Monon change is dramatic as you see in this table but the week over- week change so
00:38:10
in the month change you have Democrats from running the table in all the swing States then you look at the weekly
00:38:17
change the opposite in the last week the Republicans have not caught up but made
00:38:23
significant gains all between a half a percentage point and a point the exception of North Carolina which as I
00:38:29
stated earlier is a toss up your thoughts on the um on the election right now sax before we get into the uh issues
00:38:38
just on the numbers here well the the the election is going to be on nailbiter and it's going to
00:38:43
really come down to a few thousand votes or a few tens of thousands of votes in swing States I think we've we've known
00:38:49
that now for a while I would say since Biden abdicated and they did the hot swap I think the most interesting
00:38:58
poll numbers over the past week is if you look at Poly Market that it has swung back to Trump being in the lead
00:39:05
over the past week as opposed to Harris last week I think Harris was favored to win by quite a bit and you have to ask
00:39:12
the question well how does this happen during her own Democratic invention which is supposed to be you know nothing
00:39:18
but a 4-day infomercial for the Democrat candidate yeah it's a coronation yeah it's a coronation so she should be
00:39:25
getting nothing but a bump and instead it's to be the opposite and I think the reason is is because the more substance
00:39:32
her campaign puts out the more policies it reveals the wor she does first they had her give that economic speech last
00:39:41
Friday on price gouging and price controls and we spent a lot of time last week talking about why price controls
00:39:49
would be a disastrous Economic Policy subsequent to that there were stories that came out about her campaign
00:39:55
supporting these huge tax hikes that were in the the original Biden Harris budget including a 25%
00:40:03
unrealized gains tax which we can talk more about yeah but I think just to boil it down I think the more the public
00:40:10
learns the more we learn about what she would do as president the wor she does and they've now got to run out the clock
00:40:17
for another I don't know what 70 80 Days in terms of running a campaign that's substance free that's just completely on
00:40:24
Vibes that's about Joy without answering any question questions without doing any
00:40:28
press interviews and I think we predicted some time ago that that just was not going to be sustainable that at
00:40:33
some point they're going to have to tell us what they think and as they do that the more they do that I think the more
00:40:38
her polls will correct what do you think Cham you trust these betting markets because there's so much at stake at this
00:40:44
election right I mean people are pouring money into both campaigns it's really contentious people see it as existential
00:40:52
on both sides and then you have you know these prediction markets that you know have low tens of millions or hundreds of
00:41:00
millions of dollars being bet could these not be you know influence do you trust them because we are seeing this is
00:41:09
the first time these prediction markets have become a major discussion point because they're businesses
00:41:15
obviously but people are really getting into them and I wonder if they could be manipulated or if you think you trust
00:41:23
them I guess is the way I'm asking you because we've had this discussion a bit offline I mean I think these are really
00:41:30
good businesses but they are some combination of entertainment and gambling I don't think that these things
00:41:37
are as useful directional indicators as they are just really interesting businesses
00:41:45
that allow people to bet and wager on all kinds of random things so I would not look to these sites for that
00:41:54
necessarily okay I think that people like Nate silver do a pretty reasonable job in his specific case I think he does
00:42:02
a very good job of threading together and doing this meta analysis of polls but I think we've learned that the
00:42:10
that this polling is pretty brittle and not super reliable so the the betting markets are exactly that they're just
00:42:18
like it's like sports betting but just wasn't the betting Market we talked about this two weeks ago Shapiro was
00:42:22
like 80% or something so yeah it's fairly obvious freeberg maybe these betting markets are a little bit
00:42:29
entertainment but maybe directionally corrected because they also did start to predict the hot swap you know so what do
00:42:34
you think freeberg about these betting markets prediction markets you and we keep everyone keeps trying to reduce
00:42:39
this down to some deterministic binary system which is like it works or it doesn't and the truth is that the
00:42:46
conditions of the world are changing all the time the news is changing all the time people are taking action all the
00:42:53
time there's a shift in current events all the time as a result the forecast is changing all the time and so what a
00:43:01
betting Market or a poll does is provide a probabilistic forecast of the future there is a probability of something
00:43:09
happening it is not trying to say I as a poll or I as a market am right 100% of the time or not it is saying here's the
00:43:19
estimated distribution of outcomes in the future so there's a 20% chance or an 80% chance of Shapiro 20% chance of not
00:43:27
being the case turns out that that 20% is where Harris ended up going based on some meeting she had in some room with
00:43:34
some group of people that we aren't privy to and that the market in that case was not privy to what Nate silver
00:43:41
does and I think people need to understand this a little bit when you gather polling data that poll has some
00:43:48
predictive power based on how the pollers conduct their poll who they call how they screen candidates for the poll
00:43:55
etc etc so different polling companies it turns out are better or worse at making that directional probability bet
00:44:04
than others and what Nate's models do is they account for the historical performance of different pollsters and
00:44:12
weake them differently to create a basically a multi-pole prediction and so that's what his system is set up to do
00:44:19
and remember he similarly doesn't give you one outcome he gives you a distribution of outcomes I think his
00:44:25
simulation model has probably a thousand or 10,000 simulations that come out of it and those simulations he says look
00:44:32
there's a 29% chance of this happening 70% he's not trying to say here's what's going to happen he's trying to give
00:44:37
everyone a point of view on the distribution of things happening in the future just like weather forecasting is
00:44:42
not perfectly predictable it's very predictable for tomorrow it's less predictable for 3 days from now and it's
00:44:47
very unpredictable 12 days from now and that's how these polls also work out and
00:44:51
that's also how these massive Mega models of polls and it's also how prediction markets work and freeberg
00:44:57
people have a lot of emotion in these models when it comes to politics whereas if you were looking at gambling or the
00:45:04
odds of winning a poker hand we all would be like oh you have a 30% chance of winning or a 10% or an 8% you're
00:45:10
going to hit two ouers there's emotions both way jcal so basically when I read those polls or I read the summary of the
00:45:17
polls I have a bias based on my interest in the outcome that says that thing is BS that thing is right oh look at this
00:45:24
and everyone points to the stuff for confirmation bias of their opinion yeah and to denounce the other side and so it
00:45:31
all gets caught up as kind of a media angle when people use polling data and and also fundamentally when people kind
00:45:38
of get involved in polls and create polls there's also the risk of bias and part of what Nate silver and others try
00:45:44
and do is figure out does that bias come out in the polling performance historically and that's how they kind of
00:45:50
wait whether or not this poll is going to be a better or worse indicator than other polls of the distribution of
00:45:56
things that might happen the future and Sack if people were to lose you know a poker hand that they you know were 60%
00:46:04
to win or two thirs to win you know they would be like okay that makes total sense when Hillary Clinton lost to Trump
00:46:11
the first time people lost their mind and he was pretty clear right he was I think 65 35 and people are like wait you
00:46:17
said it's 65% yeah your thoughts on just the accuracy of polls generally and then
00:46:23
what you heard here in terms of the the betting markets how do you look at at these two things that are taking up a
00:46:29
lot of space right now so well I would consider prediction markets to be an additional tool that we should consider
00:46:35
side by side with polls and they both have their pluses and minuses the advantage of of polls is that you're
00:46:43
actually talking to real people as opposed to betters however they're very dependent on sampling and getting the
00:46:51
sampling correct I mean most of these polls talk to maybe a thousand respondents these are people who are
00:46:56
willing to pick up the phone from a unknown number that right there is probably a huge source of bias because I
00:47:01
don't do that and then based on that sample they're going to predict how millions and millions of people are
00:47:06
going to vote well everything depends on the composition of that sample which thousand voters do you talk to do you
00:47:13
wait them based on likelihood of voting or demographic characteristics and so on
00:47:18
so the polls can be notoriously inaccurate we've seen that many times and that's why there's a margin of error
00:47:25
sometimes a margin of error is is even wrong so in any event it's a tool but it's a tool that almost by definition is
00:47:32
going to be wrong because of sampling problems you look at prediction markets and it's a totally different type of
00:47:38
voting mechanism where betters are willing to put their money where their their mouth is and they've got real skin
00:47:44
in the game and they're able to make a prediction based on their willingness to lose money now there can be problems
00:47:50
with that too number one the betting Market can be very thin you know sometimes there's just not a lot of
00:47:54
money that's trading hands so I think with a lot of those VP picks you can move the VP Market by putting just a
00:48:01
very small amount of money because the market wasn't very liquid so you have to kind of look at how deep and liquid the
00:48:06
prediction Market is and then I'd say second the issue with prediction markets is they and this could be an advantage
00:48:13
is they move a lot based on small things because people are just constantly updating their forecast I would argue
00:48:20
that maybe that's an advantage is that you could see the the trend more easily in a prediction Market
00:48:27
so for example I have some numbers here too if you want to hear them $653 million in political bets are currently
00:48:34
being placed across the top 10 betting markets and all of the markets on poly Market which includes things outside of
00:48:41
politics are 320 million so they they are the big fish in this I think they're the leader but it's still a very thin
00:48:48
amount of money to your point sex yeah I would mostly use the betting markets as
00:48:53
a measure of how sentiment is shifting so for example on Election night the betting
00:49:00
Market is going to converge to 100% in favor of one candidate or another whereas the actual votes are not going
00:49:07
to converge to 100% you could have an election in say Pennsylvania where one candidate gets 50.1% of the vote the
00:49:14
other candidate gets 49.9 the betting Market's going to converge to 100 Z because it's predicting who's going to
00:49:20
win it's a binary yes or no as opposed to where the actual vote totals come out the polling is trying to approximate
00:49:28
where the votee tools are going to come out right with a huge margin of error so
00:49:32
the the polls are just are are never going to give you as crisen decisive an answer as the prediction markets but the
00:49:38
prediction markets can also be wrong as we've seen they're only as good as the people making the bets chamat where do
00:49:44
you put the third category here which would be the odds makers in Vegas because they're looking at everything
00:49:50
what do you think about the odds makers in Vegas would you give them any Credence I don't even know why any of
00:49:56
this matters why are we talking about this well I mean because people are looking at the Tea Leaves there there
00:50:01
are reasons it matters you know the these markets do have an impact on the voting public because the media covers
00:50:09
them donors cover them voter turnout is impacted by the polls and then there's these like you know various
00:50:17
psychological phenomenon like the the underdog impacts or bandwagon so you could have if people perceive at one
00:50:27
point Trump is the underdog maybe more people turn out and then people who you know if Trump was winning versus Biden
00:50:34
so much they might become complacent and you get some sort of surprise there so they do have actual impact on the voting
00:50:40
public I suspect though that I suspect that a lot of that is really at the edges the I read an article recently
00:50:48
that just talked about the enormity of the investment that both the Democrats and the Republicans are making to get to
00:50:55
these critical areas in these five critical States and if you live in one of these zip codes that really
00:51:04
matter I think that there is just no room for anything but what each side is saying I don't think you're looking at a
00:51:12
betting Market or a pole or any of this stuff and I think the reason why these places have become so critical is that
00:51:19
they are very balanced they are people that have a good way of making sense of the world
00:51:27
and they change their minds a lot right because otherwise they're they're people
00:51:32
that underwrite and rewrite their decisions and to me that's actually a really wonderful thing to know that
00:51:39
there are these call it million people in these ZIP codes in five states that are actually quite thoughtful and I'm
00:51:47
I'm I'm actually okay that in the end that those folks will decide I would be much more worried if it was
00:51:58
lies whoever tells them are uncovered the way that it's set up today all of the crazy ideas get run to the
00:52:07
ground all of the lies get uncovered and I think that that's a really healthy place and I think it's a
00:52:15
much better place so I'm I'm generally like really glad that things look like quote unquote a question mark because I
00:52:22
think it creates much more pressure for the candidates to be precise and I think
00:52:28
that that's very important so I'd love to talk about some of these crazy policy things as well yeah policy sxs I wanted
00:52:34
to get your take on this Trump's VP pick JD Vance is now the least popular VP pick in modern history people said the
00:52:40
same thing also about walls that that was a terrible pick here's your chart on JD and here's the historical chart John
00:52:48
Edwards man I remember him uh he was plus two in net rating Tim Waltz plus five Mike Pence plus five Camala when
00:52:56
she was VP plus three but JD Vance is absolutely uh he's below Sarah Palin which I guess takes ever what's your
00:53:03
take on the VP picks and the impact they're having here because it's it's a major topic of
00:53:09
discussion I think what history shows the VP pick doesn't matter that much people vote for what's happening at the
00:53:15
top of the ticket and I would argue the reason why JD has the polling he does is
00:53:19
because there's a couple of reasons number one is just media bias and there was an interesting report showing that
00:53:25
the media coverage of the Harris campaign was 84% positive whereas the coverage of the Trump campaign was 89%
00:53:31
negative that actually seems to understate the bias that I see out there but look this is the number one reason
00:53:36
why JD has a negative rating is because the media is defining him I would say furthermore JD is out there talking
00:53:43
about ideas and I give him credit for that but because he is an idea man and he's also a writer and he's said
00:53:50
interesting things in the past and Al sometimes occasionally a sarcastic thing or two in the past the media has been
00:53:56
been take able to take those things out of context and harp on them relentlessly
00:54:01
on the other hand you take someone like Tim Waltz and he's out there he's not really talking about ideas I mean every
00:54:07
time he goes up there and speaks it's like a pep talk I mean if I wanted to hire a guy to give the halftime speech
00:54:14
to my team he'd be the guy you know if I wanted him out there puffing up a team talking about we got to all give
00:54:21
110% he's he's the guy for that but he's not really talking about ideas he's not
00:54:25
going on the shows you look at JD I mean I've watched a couple of his campaign stops I mean the guy is really sharp and
00:54:34
when he goes on the Sunday show they are pitching nothing but fast balls at him and he's hitting it out of the park
00:54:38
every time and Harris and Walt are just not doing that they're not even appearing on those shows I don't think
00:54:45
they could survive 20 minutes of harsh questioning the way that the the media pitches at JD every time he goes on a
00:54:53
campaign stop and takes questions or he goes on a Sunday show I love the JD pick
00:54:58
you know Venture capitals business guy well written well spoken you're picking up on something that I think is really
00:55:04
important that I think has been under reported it really is a tale of two different
00:55:10
tickets the Republican ticket whether you like them or not are very financially astute
00:55:19
actors and if you look at the Democratic ticket they are underinvested to not in
00:55:26
invested at all in anything that would normally resemble the United States economy and I find that a very
00:55:34
odd distinction meaning the way that I would think people would want to see their
00:55:42
candidates is folks who have a very sophisticated understanding of the parts that they are going to govern and in
00:55:50
this case if you're going to sit a top the economy one would hope that you're invested in the economy in some way so
00:55:55
that you know how it works and it's a little surprising to me that nobody's really questions how how
00:56:00
underinvested the Democratic ticket is and it's almost as if the the Republican ticket for their financial
00:56:08
sophistication is looked down upon to unpack what you're saying here there was a report Tim Waltz has no Financial
00:56:15
Holdings he has no stocks no bonds no mutual funds no real estate nothing no cryptocurrency this is what you're
00:56:22
referring to yima yeah the level of like literally owning nothing and I guess freeberg to your I'll let you take it
00:56:30
from there so I think it's actually a step a little bit deeper than that kamla Harris and Tim Waltz have only ever work
00:56:43
for government Trump and Vance have worked in Private Industry it's not just their
00:56:51
perspective being colored by the the lack of participation in the private economy but the lack of employment in
00:56:59
the private economy they've never worked for a private business they've never been employees of a private business
00:57:05
they've never built a private business I'm not trying to be disparaging but I do think I'm just trying to underline
00:57:11
the point here chth which is the voter's choice is do you want candidates that are not typically government operatives
00:57:19
or do you want candidates that have spent their whole career as government operatives and that is effectively what
00:57:24
the voters are going to be voting for and they're going to make a decision they may want to have someone that's
00:57:29
going to lead the biggest government in history because they've spent their whole careers in government or they're
00:57:35
going to say you know what the biggest government in history needs to be significantly altered and we want to
00:57:39
bring someone in from the outside that's worked in Private Industry and that is the voter's Choice that's one way to
00:57:44
view the voter's Choice here that's an interesting Framing and another framing might be freeberg I love that framing I
00:57:50
love that it's an interesting framing here's another framing I don't you're a young person I
00:57:55
can't own a home they're too expensive I don't have any Equity I'm getting ground
00:58:00
down I own a I owe a bunch of student loans Tim Walls feels more like the experience I'm having as a millennial
00:58:08
where I can't afford a home where I don't have Equity where I'm constantly trying to pay off my bills and the finan
00:58:15
what we'll say is like hey this guy's not very financially astute he because he's
00:58:20
never it's because he's never maybe maybe it's because he's never had a private sector job well he's been a
00:58:26
teacher right so maybe people say you know what I feel I identify more with Tim Walls and I think that's actually
00:58:32
what might be happening here public school teacher right yeah but right which is a noble thing to be and I think
00:58:38
there's probably a large percentage of the country who feels like they're not part of the equity economy they don't
00:58:44
own a home they don't own equities and they have been shut out from this and all these rich people like Trump and JD
00:58:51
Vance and venture capitalist are running the table on them and I think that might
00:58:55
be why we're seeing even if the four of us disagree with it we might be seeing someone like Tim
00:59:00
Walls actually being a feature it might be a feature to to their and I think that there's a perception of experience
00:59:08
in government that is deemed to make a government leader more appropriately suited to be a government
00:59:16
leader politician yeah well not even a politician just career experience either being employed by or working within the
00:59:24
government within a government local state or Federal and remembera started her career at the DA's office in Alam
00:59:30
County before moving over to San Francisco DA's office and then she was Da of San Francisco and then attorney
00:59:35
general and so on and so forth sex what do you think of this framing you have two candidates who are career civil
00:59:42
servants who have dedicated their life to that but who in one case has doesn't own his home doesn't own any equities in
00:59:49
the other case comma does have a bunch of equity and and some private wealth um versus the capitalist it looks like this
00:59:56
actually is an interesting framing socialism versus capitalism what's your thought on that framing well I think
01:00:00
just because someone has served in Government doesn't mean that they truly even understand what the problems are or
01:00:06
that they're even the master of government I mean you saw this over the past week we talked about the
01:00:11
88,000 jobs that didn't exist they asked Gina rundo the Secretary of Commerce about this and she just said that's a
01:00:17
trump lie and they said no actually it's the Bureau of Labor Statistics report that like is under US Secretary of
01:00:23
Commerce she said I'm not familiar with that so you have people running the government who don't even know what
01:00:28
their own departments are doing now I think it's just a function of the fact that the government is so big and out of
01:00:32
control that no one even understands what it does I think it's more important to have someone who at least has some
01:00:38
experience in the private sector who truly understands how jobs are created how wealth is created what causes
01:00:45
inflation okay we've talked about this before yeah what causes inflation is the printing of too much money it's
01:00:50
government spending too much yeah shocking it is not corporate greed because corporate agreed as a constant
01:00:57
it's not price gouging and how the free market incentivizes the creation of improved productivity which over time
01:01:05
translates into improved prosperity for the society within which that is taking place that is so critical and we saw
01:01:13
that happen even in China in the last 30 years when the government allowed entrepreneurship to flourish in certain
01:01:20
parts of the country as a result there were significant productivity gains and they brought a billion people out of
01:01:26
poverty they created a middle class I mean M never had a middle class I think it's important to not color this as
01:01:34
because you worked in government you can't be invested or you can't own a home or you can't actually have built a
01:01:39
nest EG right because that's also not true and we have there's some extreme examples of people who've been
01:01:44
essentially yeah career civil servants essentially and it built multi hundred million dollar portfolio now we can we
01:01:51
can question in specifically in the case of all house Representatives whether they're getting access to a kind of
01:01:58
information that other people don't get access to but taking that off the table I think that there are people in
01:02:04
all kinds of jobs who are able to save and invest and then acquire things that they believe
01:02:14
will give them security for themselves and their children in the future and I don't think that it is
01:02:19
because of a kind of job that you do I think it's a kind of mindset that you have and I think it's very important to
01:02:25
make sure that whoever we pick we understand the mindset I really believe that like you know there are a
01:02:34
couple things that are really critical to thinking about the future and wanting to make the future better I think one
01:02:43
obvious one is when you have kids when you have kids you're making sacrifices every day you know you're you're
01:02:48
forgoing things today because whether it's saving for college saving for school saving for a class saving for a
01:02:55
sports thing that you want your kids to go to music whatever it is you're always
01:02:59
finding ways of thinking about what is better for in the future for that other person not me and the second is I think
01:03:08
being an investor actually makes you care about the future in a really productive way
01:03:14
because you're foregoing often cases when we all invest we're forgoing short-term gains on the hope that we can
01:03:22
help shape a much longer term outcome in the future that makes all of worthwhile and so I like it when I can
01:03:30
see people that have those things at play and that they even in whatever small way they can are manifesting
01:03:37
that and I always have a question mark like how is it possible that at no point you have tried to be invested in your
01:03:44
own and your children's future that way it's just a it's just a question mark for me yeah 58% of American own equities
01:03:51
and that includes like retirement accounts so it's not like they're actively day trading and so you know
01:03:56
that that does actually Sachs paint an interesting picture where maybe the Democratic party now which they referred
01:04:03
to themselves Bernie and Elizabeth Warren as a socialist as socialist Democrats maybe this is like part of
01:04:08
their feature is to appeal to that large swath of people who don't own their homes who don't have kids and you know
01:04:15
to jg's point about cat ladies and to um you know who don't own homes don't have
01:04:21
kids and don't have equities what are your thoughts on that sax is that maybe how these parties are starting to shape
01:04:26
up in the modern era actually I think I think that's right I mean I think that Elizabeth Warren and Bernie Sanders are
01:04:33
now the thought leaders and really the Beating Heart of the Democrat Party I think what's happened is the Republican
01:04:38
party has moved to right-wing populism and the Democrats in response to that have concluded that they need to
01:04:45
basically move to left-wing populism in order to compete with that and so both parties are becoming fairly populist now
01:04:52
what does what does left-wing populism mean it basically means soak the rich right right it's it's a strong element
01:04:57
of class Warfare to it we're going to make the rich pay for everything and the rich are the problem it's this
01:05:02
fundamental unfairness of the economy that's causing all these problems and I think you've heard that over and over
01:05:07
again at the DNC I mean just the clips that I've seen this has been a reoccurring theme is the the hatred
01:05:14
towards you know billionaires and and rich people tax the rich is a reoccurring theme and that that's
01:05:19
actually a great jump off point here because the big news in our circles this week and on social media was and some of
01:05:27
the group chats is that Harris has reportedly backed some of Biden's really out there tax plans which include a
01:05:35
proposed 25% wealth tax on people with over a $100 million in assets important to note that this would be very hard to
01:05:42
pass because getting these tax increases you'd have to get through Congress Etc but let's just talk about what the
01:05:48
proposal is because it's out there in Biden's 2025 tax plan which the campaign has said to semi for which is a a niche
01:05:57
publication like a newsletter company that uh and I'll just give the quote in a little notice portion of its Friday
01:06:03
analysis of Harris's New Economic plans the committee for a responsible federal budget wrote that her campaign said it
01:06:11
endorsed the suite of Revenue options included in president Joe's recent budget and that cfrb report said quote
01:06:19
the campaign has communicated to us that vice president Harris continues to support all of the revenue raising
01:06:26
Provisions in the president's 2025 budget so there is continuity confirmed between Harris and Biden's plans I'll
01:06:34
just explain as simply as I can what this uh extreme plan says and then I'll get chath your take on it Biden's
01:06:42
proposed 2025 tax plan includes the following 25% unrealized cap gain tax on those with over 100 million assets 28%
01:06:51
corporate tax rate right now it's 21 Trump had proposed a 15% rate and quadrupling the stock buyback tax to 4%
01:06:59
that's when a company uh buys their own shares as opposed to putting it to work in the market the stock buyback tax was
01:07:06
created as Biden's inflation reduction Act of 2022 it's just 1% if you want to buy back your shares like apple and some
01:07:12
other companies do but let's unpack the 25% unrealized cap gains because that seems to be you know the most let's say
01:07:22
I don't want to say triggering but the one that's triggered the most number of people there's 5,000 people who fit into
01:07:27
that category what do you think jamath of this proposal Fair unfair crazy socialist
01:07:35
anti-American it's less about fair or unfair but I think that we are in the part of the cycle where enough
01:07:44
people don't feel the positive aspects of capitalism that they want to push back against
01:07:50
it I just put a little image in here Nick if you want to just throw it up in the chat but when when you look from
01:07:58
1913 onto today the reality is we've had many different forms of political philosophy that have governed the
01:08:07
country and what you can see is that tax rates have varied wildly at the federal
01:08:14
level and I think it's because that at certain times there was the political will to go to
01:08:21
extremes and this may be a moment where we are going to explore the extremes that we had in the
01:08:30
40s and the 50s and I think the reality is that if that does happen you're going
01:08:36
to see people behave in ways that weren't possible in the 40s and 50s in the 40s and 50s everybody was more
01:08:42
geopolitically constrained I don't think that that's the case anymore and the way
01:08:47
that people start companies where they start companies the flexibility of citizenship have changed really
01:08:53
dramatically so if it's the will of the people that they want to explore these mechanisms I think other people will
01:09:01
react in kind and you know the die will be cast so um you know I don't have much
01:09:07
you're referring to removing you're I think you're implying people might be able to move to other places and create
01:09:13
companies there is is that what I'm reading let's put it this way we have we have a small microcosm of this going on
01:09:19
within the 50 states which is if you said California was the United States and Texas and Florida were I'll make up two
01:09:29
different countries Malta and Dubai well what happens when taxation goes beyond the pale and what
01:09:40
happens when budget deficits and spending go beyond the pill and when the government plays too large of a hand in
01:09:46
the economy people leave with their feet companies leave so we don't need to guess what's going to happen because if
01:09:53
if it can happen between Califoria and Texas it probably stands to reason it can happen between the United States and
01:10:00
the UAE as an example yeah you already have a bunch of hedge fund manners moving over there right Shaman they have
01:10:07
people are starting to buy apartments and there there's golden visas in some great countries Portugal has a golden
01:10:14
Visa the UAE has a golden Visa Italy has a golden Visa the UK had this great program what
01:10:21
was called non-doms for a long time so the um the point is that all of these took advantage of countries that went to
01:10:30
extremes and they lost citizens as a result and I suspect that if what the US voting population wants to do is explore
01:10:39
that extreme these policies will get enacted and then people will act in kind the only thing that I would just again
01:10:46
reinforce is unlike when taxes went to 90% in the 40s and 50s people are much much more mobile than they were then and
01:10:55
that was during World War II in the postwar era uh freeberg your thoughts on this proposal specifically which impacts
01:11:02
a very small number of people although maybe a high percentage here yeah so so just just to give a little more detail
01:11:07
to it jcal please and you can actually see it I think Nick if you want to pull up the page
01:11:13
8283 in the document so the wealth tax is 25% of your unrealized capital gains if
01:11:20
your net worth is above 100 million and the first time this happens you can split up the payments over n years you
01:11:26
have n years to kind of pay down the assets or sell the assets or borrow the money you need to make those tax
01:11:32
payments after that you can actually make those payments over five years those payments are ultimately treated as
01:11:38
prepayments on taxes that will be due when you realize the capital gains every year you have to report to the IRS
01:11:45
separated by asset class the cost basis and the estimated value of every asset you have you then have to determine your
01:11:52
tax that you owe because of the difference from last year you start out with tradable assets so stocks those are
01:11:58
just valued at the end of year illiquid assets like private companies or real estate you don't have
01:12:06
to get a valuation if there's a financing event or some other sort of major revaluation you have to use that
01:12:13
value and if there isn't the number goes up every year by some nominal rate that
01:12:18
will be set by the treasury so the treasury is basically going to tell you what they think the value of your
01:12:23
company has gone up on an annual BAS bis and that's the determination valuation you can file an appeal so for all the
01:12:29
entrepreneurs and startup people listening there's a process that they're proposing that is basically the
01:12:35
government saying if you didn't get a new financing round done the price goes up and if you disagree with the price
01:12:40
going up you go back and you appeal it let's pause there for a second freeberg because this is super important I think
01:12:45
to the audience here somebody has a startup company it becomes worth $10 billion it has a 100 million in Revenue
01:12:52
it's doing well it's losing money 409 valuation comes in founder owns 25% co-founders own 25% each they own2 or
01:13:00
three billion dollars in stock now you've got an a liquid founder who owns $3 billion in stock company's not going
01:13:08
public there's no secondary Market what would happen to that founder would so they've addressed this and that's the
01:13:14
final provision and what they said is that if a taxpayer is treated as what they're calling illiquid meaning that
01:13:22
their tradable assets the stocks that they own or the cash that they have is less than
01:13:28
20% of their total wealth then they may elect to include only the unrealized gain in their
01:13:37
tradable assets to determine their tax liability however if you do this you will actually have a deferral charge
01:13:44
which means you'll ultimately pay a higher tax on the capital gains on your illiquid asset when you do have a have a
01:13:50
realiz capital gain on it so they're trying to cover the fact that people might have all their assets up in real
01:13:55
estate or all their assets tied up in private Company stock and again I feel like we're we're kind of shouting into
01:14:01
an abyss here because this is only going to affect such a small number of people
01:14:04
but they've really tried to write this in a way that ultimately covers the kind of push back that you're highlighting
01:14:10
I'll say one other piece of push back that's been received and tested in the Supreme Court a lot of people have said
01:14:17
that the 16th Amendment prohibits this uh taxation a ruling from the Supreme Court was published June of this year
01:14:26
and in that particular case there was a repatriation tax for folks that left the
01:14:32
country it's the more versus United States Tax case and when people left the country the government under the tax and
01:14:39
jobs act which was passed under the Trump Administration the government had a right to go after people's assets and
01:14:45
tax them on their unrealized gains even after they give up their us citizenry this was challenged to the Supreme Court
01:14:50
and there was a number of amicus briefs filed on this case that said the government govern does not have the
01:14:55
authority and Congress doesn't have the authority to actually tax on unrealized capital gains and at the end of the day
01:15:03
the Supreme Court agreed to hear the case and they did not overturn on the position that the government actually
01:15:09
did not overstep their authority to be able to tax unrealized capital gains so there is some Supreme Court case
01:15:15
precedence here that indicates that this will not get thrown out on an unconstitutional ground basis so there
01:15:21
is a lot of conversation that this might actually become a real case I'll pause there and I actually have a theory I
01:15:26
want to talk about in a minute but it's a little bit of an extension from this point but that is this a seizure of
01:15:34
Assets in your mind is it constitutional in your mind two questions there it's certainly a confiscation I mean
01:15:42
basically this this tax is directed at C Millionaires and billionaires to basically take 25% of what they have I
01:15:48
mean that's basically what this is about there's a good reason why realization is one of the Core Concepts
01:15:56
of our tax code what real realization gives you two really important things number one you have a sale price right
01:16:02
realization means that you sell the asset so we know exactly how much you made number two you have the liquidity
01:16:09
to pay the tax bill because you've just sold the asset the problem with an unrealized gains tax is both those
01:16:14
issues number one we don't know what the asset's really worth you know it's easier to to put a value on a publicly
01:16:22
traded asset but a private asset it's very hard to know exactly how much it's worth the valuation is bouncing around
01:16:28
all the time what this bill would do is create I guess a whole new process and bureaucracy to try and put a value on
01:16:33
that but it's going to be really complicated to comply with all of us are going to need to hire a whole new Legion
01:16:40
of lawyers and accountants so I mean you're talking about a whole new essentially tax bureaucracy that's going
01:16:46
to spring up around this concept on the um liquidity part you're being taxed a huge amount without having the cash to
01:16:55
pay the tax bill and you know yes they've tried to mitigate that by creating this installment plan but
01:17:00
you're still going to need to go out and sell large trugs to your company every time you get an upu round in order to
01:17:06
pay the tax bill and that means that you're losing ownership of your your company all these assets are going to be
01:17:12
dumped on the market and you're basically starving the market of capital actually right because all these people
01:17:18
who who are owners of their company are going to have to go out and and sell a big chunk of them this is going to put
01:17:24
so much cold water on the entrepreneurial Market it's going to make people just have less liquidity to
01:17:29
invest in things I think this is going to be disastrous this caus a lot of people to retire early because they just
01:17:35
don't want to deal with all this well freeberg what's your theory okay I've got a theory oh Theory here we go good I
01:17:41
was trying to figure out why we seem to be like embracing socialist principles like why I keep seeing more
01:17:50
of this stuff become mainstream and almost become normalized and I was was looking at the
01:17:56
total GDP of the United States is $25 trillion the federal budget for next year is proposed to be 7.2 trillion and
01:18:06
state and local budgets combined is about four trillion so if you look at government spending it's about half of
01:18:13
GDP now State local and Federal which roughly equates to about half of people in the United States are employed
01:18:21
directly by government or indirectly because the government is the primary revenue source of their business um and
01:18:29
I think that that's why this this set of policies and I'm not talking about the tax on the senta millionaires as much as
01:18:37
a simple disregard for uh the fact that the United States over time the prosperity that we've realized has been
01:18:46
driven by a free market economy by enterprising individuals going out and saying there are people that are asking
01:18:52
for things I'm going to figure out a way to build those things and make it for them and sell it to them people will pay
01:18:57
for it they will work hard to do it and the incentive structure in a free market
01:19:01
has enabled productivity improvements and enabled ultimately Prosperity but we've reached a Tipping Point and the
01:19:07
Tipping Point is when half or more of the population begins to be employed by the government at which point that
01:19:14
concept is lost because now it is the government that is the employer not one's own individual liberties and
01:19:20
ability to go out and be enterprising and so I think that the budget of government tipping to 50% of GDP is the
01:19:28
reason why these policies become mainstream that's my theory and so it's a relationship of government spending as
01:19:34
a percent of total GDP which translates into employment you guys very reasonable
01:19:39
scary but reasonable well you know who said something similar back when Mitt Romney were in for president he was
01:19:45
caught on tape saying something to the effect that 47% of Americans were net government
01:19:53
recipients y and if that number ever got to 51% then basically the free market system would be finished because it' be
01:20:01
more where we are than makers more takers than makers and he was forced to apologize for that but there is a
01:20:07
fundamental logic to it I wouldn't use the term taker sax because there are hardworking people that work for the
01:20:14
government it so it's not necessarily about just taking a free check or there's certainly an aspect of that to
01:20:20
some degree but it is about the government becoming the prim supporter of individuals in this country
01:20:28
through employment or through subsidies or through checks or through through what have you yeah I think that's fair I
01:20:34
think that's totally fair I'm not disparaging the efforts of legitimate government workers because you do need a
01:20:40
government or private company workers that just happen to have the government as their only customer right but the
01:20:46
point the point is that when you become a government employee you have a vested interest in government you should have a
01:20:53
vested interest in the private sector as well because that's what generates the tax revenue to fund the government but
01:20:58
as a practical matter government workers vote massively in a block for the Democrat Party and in many ways the
01:21:04
Democrat Party is the the party of government workers you look in California for example the the various
01:21:11
government workers unions are the most powerful players in California what's the political affiliation of like has
01:21:17
there ever been surveys done of employees at the federal level and what their political affiliations are oh yeah
01:21:23
vastly vastly more Democrat I mean look the Democrats are the party of government
01:21:28
absolutely I'm surprised by that because I would think that within the ranks of the military if you look at the enlisted
01:21:34
military there's a lot of Republicans in there a lot of military families especially Republican but you look at
01:21:41
just government workers vastly more Democrat I think there's other things happening as well I
01:21:47
mean look American capitalism requires a robust middle class and in many ways I think globalization has hollowed out the
01:21:56
middle class there used to be a large middle class in this country of bluecollar workers who worked with their
01:22:03
hands they were not knowledge workers and they worked in factories and they did kind of blue collar work and they
01:22:08
could still make a middle class living and I think that over the last 20 to 30 years as a result of globalization
01:22:16
millions and millions of those jobs went away I mean millions of factories shut down so the middle class of America
01:22:22
that's not you know again that's not knowledge workers were really pressured by basically throwing open American
01:22:28
markets to foreign Goods now you could argue that that lowered prices and that created consumer surplus and the
01:22:34
benefits of trade do you support the Trump tariffs as a solution there Sachs because those are fundamentally going to
01:22:40
be inflationary which is going to make the cost go up for everyone well I don't know but I'm just I'm just pointing out
01:22:45
that there was a real price in terms of having this free trade that led to huge trade deficits which is this vast
01:22:53
American middle class people who worked with their hands got put out of work and I think that removes
01:23:00
a huge incentive for people to be invested in to have invested interest in the free market system sax let me ask
01:23:08
you one more question do you think that the Biden administration's bills the inflation reduction Act and the chips
01:23:14
act both of which were meant to revitalize that middle class kind of industrial economy through Government
01:23:22
funding of developing new facilities in the US to onshore manufacturing is that not a good reasonable solution to that
01:23:29
problem well those are two very different bills I mean the inflation reduction act just the name itself
01:23:34
should tell you that it doesn't do I was joking it should have been the inflation
01:23:38
maximization act the IM yeah look who benefited from that our friends who are energy investors who you know who I'm
01:23:45
talking about in our chat room easy easy stray bullets everywhere going to his take it easy
01:23:52
over there take not going to say his name taking a stke but his nickname is deep state but but he's an energy
01:23:59
investor he said that this bill was the biggest Bonanza that they've ever seen he said these these guys were running
01:24:06
around like uh you know it was like The Beverly Hillbillies where they struck a gusher and they they're running around
01:24:12
with pans trying to collect the oil that's where he basically said this was but it was a bunch of energy investors
01:24:18
at the Mana the Mana was coming down from from heaven and they're just going to collect as much of it that was a huge
01:24:24
boondoggle and payoff for these green energy investors that's who it went to it did not benefit at all what about the
01:24:31
chips act the chip Act is more complicated because it does create incentives for manufacturing in America
01:24:38
and moreover there is a National Security El because we need these Advanced chips
01:24:43
we can't be totally dependent on chip makers who are in foreign places within 100 miles of the Chinese Mainland right
01:24:51
so that that one's a little more complicated while Intel is imploding you know they can't manufacture so well just
01:24:58
to finish the thought I mean the the the issue with the chips Act is that there's
01:25:01
a lot of good reasons to believe that even if we incentivize this we're still hopelessly behind and the chip faps that
01:25:09
we're building are just they're still years behind what they have in Taiwan for example so it's not clear it's going
01:25:14
to work is my point but but I think the motivations make a lot more sense all right everybody this has been another
01:25:20
amazing episode of the Allin podcast socialism is garbage and it turns into communism no I'm exacerbated I mean if
01:25:32
Kamala doesn't get out there and start doing some interviews and explaining herself I'm out um I mean I'm
01:25:39
out making news at the end just I'm I'm just frustrated I'm I'm literally going to smash this
01:25:49
laptop right when jcal was about to become CTI millionaire she shut the door I mean I mean it may have already
01:25:56
happened anyway H my God that's so funny yeah u r to what's the what's the price now 80
01:26:05
bucks or something you're G to get a much different answer we need someone to generate we need someone to generate a
01:26:10
meme jcal at $40 a share demat $80 a share Republican no I mean I just we need to
01:26:19
get Hala on this program here face the music let's go you want to run for president come on all in and let's talk
01:26:25
about it if she's not going to answer basic questions it's disqualifying for me who's trying to get her is anyone
01:26:30
trying to SPS on it I mean on it but I mean we we'd love to have her on we'd love to have JD on we'd love to have
01:26:36
Waltz on let's go let's have some real conversations about this stuff by the way can can I make one final point of
01:26:41
that whole uniz gains tax is best case scenario what the um CBO estimated is that would raise about 400 billion a
01:26:48
year for all these tax hikes that's only 20% of the deficit we're running right now we don't get anywhere close to
01:26:56
closing the deficit with all these tax hikes what that means is you have to cut spending moreover she's got a bunch of
01:27:02
new programs to increase that deficit and we know that that 400 billion number is an optimistic scenario because like
01:27:08
jamath was saying the rich people are going to flee they're going to try and move their wealth into structures or
01:27:14
places where it's harder to tax I think it's actually more than that I think what'll happen is funds governments etc
01:27:21
for the right entrepreneurs with the right assets will help you pay the exit tax so that you can just leave the
01:27:27
United States and that's going to be an investment class that's going to emerge in my opinion which is these
01:27:33
organizations that will pool Capital Sovereign wealth funds specifically and when an entrepreneur shows up and they
01:27:38
have you know 50 hundred a billion dollar tax bill to expatriate from the United
01:27:45
States they will pay it for you and the reason is they'll bring the jobs and they'll bring the knoow and they'll
01:27:51
bring the future capital investment into that country it's it's a very easy investment to underwrite actually so I
01:27:57
would I I would just pay a lot of close attention to the fact that Capital flows
01:28:03
are very fungible in 2024 and they'll only become more fungible over time buenos era beautiful beautiful this
01:28:09
happened by the way this happened in France I mean they did they literally did this
01:28:14
they tried it a lot of French citizens all of a sudden became citizens I think I think it's important
01:28:21
though you have to now go to the logic if this is what people want I think it's important for people to see the impact
01:28:27
of it and then for them to have to change their mind or stay with what they're doing because it's working yeah
01:28:32
it's not going to work you're you're right Jal in France and Norway this was tried there every time wealth taxes get
01:28:36
tried it what happens is the wealth flees and you never raise as much as you think you're going to and then what
01:28:42
happens is in order to raise that money they have to apply it to more people Elizabeth Warren already wants to apply
01:28:48
it to Americans with a net worth of 50 million not 100 million so this whole idea that well this won't affect me
01:28:53
because I'm not of those rich people the IRS was created and they when they created the income tax it was originally
01:28:58
only supposed to apply to to less than the top 1% okay I got to go love you guys so everybody thanks for coming to
01:29:05
the all-in podcast episode 193 we'll see you next time bye-bye take care boys let your winners
01:29:13
ride Ravid and instead we open source it to the fans and they've just gone crazy
01:29:21
with it love you queen of [Music] going besties are that's my dog taking driveway oh
01:29:40
man we should all just get a room and just have one big huge orgy cuz they're all this useless it's like this like
01:29:46
sexual tension that they just need to [Music] release that's we need to get merch
01:29:57
[Music] our and now the plugs the all in Summit is taking place in Los Angeles September
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