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all right everybody Welcome to the
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number one podcast in the world I am
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your boy J Cal the world's greatest
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moderator executive producer for life
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with me again on the all-in podcast is
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the Rainman David Sachs yeah looking
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healthy looking good looking trim the
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hair is great how you feeling brother
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good good haircut good haircut looks
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good now do you go to the barber The
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Stylist they come to you everybody wants
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to know they come to me yeah course they
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do of course
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and then with us of course your sulan of
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science he loves those vegetables his
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name is David Friedberg uh from Burkle
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to the Bay our boy how you doing there
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brother are you living the lake
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lifestyle you have a nice restful August
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loving loving the outdoors good for you
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you look so healthy speaking of looking
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healthy celebrated birthday with Jason
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yesterday happy 39th Jason
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happy 39th Jason we did a long
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mountain bike ride with our other buddy
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Z and had a little family Barbecue last
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night everyone had a good time would you
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do a little portella mushrooms what did
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you do you put a little zucchini on the
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grill let's just say I show up with my
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own food to a barbecue absolutely you do
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all right and everybody's favorite the
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chairman dictator chamath poly haaa you
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love him you hate him but you can't
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ignore him how you do look at the number
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of buttons here you got the M collar on
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and I don't think any of those buttons
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are butt none of them are button none of
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them are but you became a meme once
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again once again the Allen Podcast
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creating memes you were swirling you
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were swirling a little white wine last
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week you were in the arena and uh I'm
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putting up all the numbers going macro
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and you're swirling wine the the
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audience loved it uh what's going on
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today do you have a bottle that was a
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2019 K
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Bosco really really great one can you
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tell us the uh flavor profile the notes
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what did you what did you get as you
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were swirling there was some Plum
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there's a little TR there oh the PO and
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Beres little poisonberry Fant little
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moth it was a a touch of inflation with
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a hint of
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unemployment there he goes I don't want
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to be
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political let your winners
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[Music]
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ride
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[Music]
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David we open source it to the fans and
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they've just gone crazy with Love Queen
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of
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well you know boys I had a big week I
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had a big week this week you know I'm at
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the lake still but uh I made a little
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trip to Silicon Valley I was uh hanging
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out with ruoff at seoa and as I'm prone
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to do I love to go to Bucks you guys
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been to Bucks before in Woodside yeah I
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went one a couple years and I and I've
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never been back since okay well it's my
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favorite place to get breakfast or get
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my little Tuna Melt I've been going
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there for ages it's a little bit of a
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legendary place where Steve jinson made
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the Hotmail investment the Tesla
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investment all kinds of famous stuff
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happens bucks well it's where PayPal got
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its first funding round where John
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Malloy from Nokia Ventures beamed the
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money to Peter and Max at at bucks on a
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Palm Pilot on a PM pilot way back in
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1999 yeah for those people who don't
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know PM pilot was the uh most Innovative
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and poorly designed product nickname in
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college my god well
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done good so good but you know I'm
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wearing my buck hat and I got my buck
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menu here boys it it was like a pinnacle
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of my
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career I've been waiting for this if you
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go to bucks and you look at the sides
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you can get your crispy brussels sprouts
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there freeberg get your sweet potato
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fries but there it is J Cal's onion
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rings are now on the menu at bucks I
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have hit the big leagues folks wait is
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that is that real did you really get
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that I did I'm the first person
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I I love a good tuna melt it's a weird
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sandwich but they do it so great there
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and I keep asking for onion rings for
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like a decade and then we don't do ons
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we don't do onion rings two yeah and so
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suddenly you know that the team there
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comes out they say Jal we have two
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different types of onion rinks please
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pick which one you like best I went with
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the panko crusted freeberg these are for
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you delicious panko crusted and uh they
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put them on the menu so I was so touched
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I just while we're on while we're on
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sandwiches sure you know what I love
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what do you a Reuben made with turkey
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breast instead of pamies have you guys
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ever had a turkey Reuben I haven't it's
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incredible because I think a pastrami
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Reuben is a little too much it just
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feels too sclerotic too fat like your
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arteries are yeah it's terrible but like
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you get a good Thousand Island sauce and
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like some SAU Crow and some cheese it's
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amazing I took my I took when I was in
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New York a couple weeks ago I took my
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daughter to cats's Deli I took her on a
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little tour of the Lowry side and we
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made a stop at cat's what's your
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favorite Sammy there Max's Deli by the
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way has a turkey mov Max
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why did you do a paid promo for bucks at
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Woodside I don't they gave you a hat
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every time they sell one of those uh
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onion rings they I get $1 on my account
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there t the gri Never Ends get us only
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podcast to sell onion rings perfect okay
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I mean you're selling potatoes and
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shamat is Laur
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Piana to sell onion rings onion rings
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and Laura Piana what we go high we go
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low they go high we go low they go low
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we go high all right listen Tat's big
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old outcome is on the table the doj is
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looking at breaking up Google this is
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huge news in our industry last week we
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talked about the ruling that Google had
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an illegal Monopoly in Search and
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advertising the case was brought by
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Trump's doj back in
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2020 shamat said two outcomes are
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possible little low Big O little low
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consent degree you know like Microsoft
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did back in 2000 with the Internet
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Explorer decision the Big
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O we didn't think that was a major
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possibility but here we are Google
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getting broken broken up doj is going
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Big O on Wednesday Bloomberg reported
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the doj is considering a breakup
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according to the article most likely
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breakup targets are Android OS Google
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Chrome and AdWords okay last time the
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Government tried to break up a monopoly
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was 20 years ago when they tried and
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fail to dismantle Microsoft we know how
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that's gone that company's doing great
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so let's talk about it aside from search
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and advertising there's kind of Five
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Pillars at Google and you're a former
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googler so we'll go to you first
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freeberg I think cloud 40 billion in
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Revenue grow 30 % YouTube 34 billion
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growing 15% little volatile because it's
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advertising that doesn't include like
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premium YouTube TV and that stuff but oh
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my Lord uh YouTube is up to 2.7 billion
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monthly active users World population's
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8.2 so quite significant Netflix has 38
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billion in Revenue they're worth almost
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300 billion so that's an interesting
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corollary you got weo doing 50,000 PID
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trips a week now 2.5 million a year and
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that's growing uh quite nicely
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you got Android right they don't
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disclose Revenue you got the G Suite so
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let's start with you freeberg and then
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I'll go to you chth because you made the
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prediction what do you think would
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be a creative or uh generally increase
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the market cap and be something that
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Google would be happy with and the
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government would be happy with if you
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had to like maybe shed one or two
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properties what what's a possible
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outcome here and your thoughts broadly
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on this I'll just start by commenting
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I'm not really
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sure what the improve movement to
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Consumer pricing or competition would
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be in different breakup scenarios i'
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really like to understand the doj's
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analysis on that how does breaking up
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one of these things improve the uh the
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consumer experience I could see the case
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for Android because Android defaults to
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Google search but again Android's an
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open sourced operating system and so
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everyone has their own fork or a lot of
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the handset manufacturers will have
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their own Fork of Android obviously the
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Google Fork defaults to Google search so
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it benefits Google services quite well I
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think that would be an analysis that the
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doj would really have to kind of prove
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out that there's real uh
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anti-competition associated with
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Google's influence over the open source
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Android operating system Fork that they
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manage and license out I think
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understanding that would be good I do
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think that there's a lot of value unlock
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in YouTube so if Google were to just
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generally spin out
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YouTube that is probably a business
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that on its own would attract an
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investor base that might otherwise not
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want to get into the conglomerate and
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you know there's always this notion of
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what's called a conglomerate discount
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when you put a lot of different
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businesses together the businesses in
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aggregate get valued less than the
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individual Parts would would be valued
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on their own because different investors
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interested in a business investment
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thesis would like to bet on cloud would
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like to bet on YouTube would like to bet
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on AI and so and and so each one of
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these kind of like segments if they can
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be unlocked can actually be value
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creating in terms of overall market cap
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the challenge is the way YouTube's
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infrastructure operates it operates on
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shared infrastructure with the rest of
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Google services so does cloud so does
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search so does AdWords so there's one
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common Cloud infrastructure that
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everything runs on and then there's um
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one common Advertiser pool there are
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dedicated advertising salespeople within
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YouTube but there's also dedicated
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shared infrastructure on Advertising
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between YouTube and search and AdSense
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and so on and there's ad sales teams
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that actually can sell across search and
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thirdparty publisher sites and YouTube
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and so you know breaking up those shared
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teams becomes a little more technically
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difficult but YouTube certainly seems
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like an unlock the question is what
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happens with all the infrastructure
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layer does that go with cloud and if it
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does then YouTube AdWords and search all
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become customers of cloud so that might
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be one way that this could work but I
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think netn net if were to happen there
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could be a lot of um upside in the
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market cap I'll also say it just feels
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like the tenor of all of this is anti
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success and not anti-competition and
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anything that's kind of successful or
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big is automatically deemed to be a
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monopoly and I think we really have to
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kind of understand how are consumers and
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the market for competition being
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affected by having all these things
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together and that's what should really
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be focused on and studied not just the
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fact that something is big and
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successful we'll see how that all plays
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out all right shath you predicted the
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possibility of a big O here we are your
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thoughts on what this might look like
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chances of it happening and then just
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maybe if you're interested in the uh
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anti- suuccess approach here or do you
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think this is more you know valid
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criticism of Google's massive search
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Monopoly well when I pain Ed that series
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of
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outcomes just kind of like looking
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forward I really didn't think that this
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big O outcome was a very large
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probability I was like you know I would
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have handicapped that at single digit
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percentages and I think the reason why
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the doj leaked this thing and floated
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this trial balloon essentially is in
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part I didn't weigh enough what saxs was
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talking about which is that there really
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is a massive bipartisan amount of
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support against Google Now it cuts on
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two different dimensions I think that
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there is one dimension which is more
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Republican oriented which is just about
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freedom of speech and putting your thumb
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on the scale but if you take the
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Democratic point of view it's more the
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anti successful vein that freeberg just
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mentioned the thing is though that it'll
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make strange bed fellows because it
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unites both sides against pushing for a
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big outcome if you go back to the last
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big outcome that we had in antitrust law
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which was
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AT&T in the 70s and
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80s that lawsuit was a decade long right
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and essentially what happened was
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when it looked like AT&T was going to
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lose the case they were the ones that
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proposed splitting itself up and so I
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think that it's this is going to start
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this really interesting chess game here
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where obviously Google has to appeal and
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fight this but if it looks like the
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political pressure is going to build and
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the courts aren't going to let them off
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the hook and have a little o
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outcome probably the best thing to do is
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for Google to initiate it themselves
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because they can answer a lot of the
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questions that freedberg just raised and
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they'll do it in a way
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where going back
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to the people that matter along with the
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customers and the employees are the sh
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shareholders you can do it in a way
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where the sum of the parts will be
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greater than the value today of Google
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so I think that there's a shareholder
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win it needs to be offered by Google and
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then
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negotiated but to be really honest with
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you Jason when I when I kind of was
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thinking about it last week I really
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thought this was a single digit
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probability I still don't think it's a
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single TI of probability and if it
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grows it's the most meaningful thing
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that's happened in technology quite
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honestly all right saaks from a business
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perspective cool saaks your thoughts I
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agree with chamath that Google has the
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opportunity to do something really
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interesting here which is get ahead of
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the curve and break itself up before the
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political system forces that onto it and
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the advantage of doing that is that it
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could partition the company in ways that
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are economically smart the big
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categories would be search advertising
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and YouTube and I think that would have
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two big economic benefits for
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shareholders one is you unlock value by
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deong glomera like freeberg was saying
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second once you break up the company
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into these pieces there's less places
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for employees who aren't doing anything
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to hide you know for all this
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bureaucracy to hide I mean look Google
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is famous for employees who don't do
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anything right the guys sitting on the
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roof suning themselves all day if you
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break up the company into three or four
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smaller companies right there's just way
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less room for people to hide and I think
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that they could all be leaner more
00:14:36
efficient operations and that would ACR
00:14:38
to the benefit of of shareholders so I
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think that would make a lot of sense and
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then furthermore I guess a third point
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is that you forall the possibility of
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the government doing something that
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could actually be very harmful and you
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know the the piece here is that I guess
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the doj is talking about spinning up
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Android and Chrome
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and I think it's worth pointing out that
00:15:01
those aren't really businesses in and of
00:15:03
themselves the reason why Google
00:15:06
developed Android and chrome was to
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prevent anybody from getting Upstream of
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them right they saw what Microsoft did
00:15:13
in terms of capturing the operating
00:15:14
system and then capturing the browser
00:15:16
and they didn't want to potentially
00:15:17
allow Microsoft or anyone else to
00:15:20
essentially win The High Ground capture
00:15:23
The High Ground Upstream of them and be
00:15:25
able to divert traffic away from search
00:15:27
to their own search engine or someone
00:15:29
else's search engin so they began the
00:15:31
strategy of commoditizing those layers
00:15:33
of the stack and it worked brilliantly I
00:15:36
mean Android and chrome have become very
00:15:39
popular and it guarantees that nobody
00:15:41
else can get Upstream of them and then
00:15:43
dis remediate them but the problem is if
00:15:46
those things get spun out and have to
00:15:49
become businesses on their own how would
00:15:51
they function as businesses it's not
00:15:52
clear to me that there's an obvious
00:15:54
strategy there I would like to ask
00:15:55
freeberg freeberg do you do you see a
00:15:57
way that Chrome and Android could be
00:16:01
spun out in and become viable businesses
00:16:05
on their own or do you agree that they
00:16:07
were essentially created to commoditize
00:16:10
layers of the stack rather than become
00:16:12
profitable businesses on their own yeah
00:16:13
so they they were both created to avoid
00:16:17
third parties blocking access to Google
00:16:20
search that's why they were both started
00:16:22
and remember Sundar was the product
00:16:24
manager on Chrome originally that was
00:16:25
his big kind of product that he ran for
00:16:28
quite some time
00:16:29
so Android was all about making sure
00:16:31
that the handset manufacturers didn't
00:16:34
basically default consumers to do search
00:16:36
and use the internet in a way that would
00:16:38
disadvantage Google so Google said you
00:16:40
know what just like Zuck is doing
00:16:42
currently with llama Google said let's
00:16:44
make an open-
00:16:46
sourced mobile operating system that's
00:16:48
better than any other mobile operating
00:16:49
system and we'll make sure that
00:16:51
consumers have choice and they have the
00:16:52
ability to go where they want to go and
00:16:53
it's not just defaulted by the Telos or
00:16:56
the handset manufacturers so that was
00:16:58
the reason and obviously they ended up
00:17:00
making their own Fork of Android which
00:17:01
is the most popular Fork of Android that
00:17:03
has Google as a default search engine so
00:17:06
yeah and and they get license fees from
00:17:07
that but fundamentally it's really just
00:17:09
in service of making sure that people go
00:17:11
to Google Search so where that ends up
00:17:14
sitting in a split up company I have no
00:17:17
idea and chrome similarly you know
00:17:21
Google originally supported Firefox and
00:17:23
gave a lot of money to Firefox and then
00:17:25
Firefox just wasn't moving fast enough
00:17:26
so Google started hiring Firefox engine
00:17:29
and built Chrome and house as a way to
00:17:31
keep Netscape and Internet Explorer from
00:17:34
blocking access to Google search and
00:17:35
defaulting uh and they built a default
00:17:37
to Google search obviously what do you
00:17:39
think jao you know I I I have a long
00:17:41
relationship with Google um as a content
00:17:43
creator and they they do have a massive
00:17:45
Monopoly in search that's absolutely
00:17:47
true and the justice department I think
00:17:49
is um well within their rights to to
00:17:52
take a deep dive on that they don't have
00:17:53
it in ads if you look at the competition
00:17:56
for Google in advertising you got met
00:17:58
Tik Tok and Amazon which have very very
00:18:00
significant advertising businesses and
00:18:02
then like a bunch of new players um
00:18:04
which are referred to basically as the
00:18:06
shopping cart ad networks that's Uber
00:18:08
instacart door Dash Etc and so when you
00:18:11
look at this it's it's kind of
00:18:13
paradoxical that it really does rhyme
00:18:16
with what happened with Microsoft
00:18:18
they're two decades late on this the the
00:18:20
search Monopoly has been squeezed for
00:18:23
every dollar and to build
00:18:26
every subcomponent of of Google's
00:18:29
Monopoly flights shopping all of these
00:18:32
things put into Google search and put at
00:18:34
the top above organic search has
00:18:37
basically killed hundreds hundreds of
00:18:39
startups over the decades and so I
00:18:43
actually don't think this is going to do
00:18:44
much if they do a breakup the easy
00:18:46
solution for Google and I agree with I
00:18:49
think people who said that here is to
00:18:50
just spin out YouTube and weo those who
00:18:53
are perfect Standalone businesses yeah
00:18:55
there's some backend stuff but like you
00:18:56
said freeberg they could become
00:18:58
customers of the ad network of the cloud
00:19:01
for some number of years but YouTube and
00:19:03
weo those would be like a $400 billion
00:19:05
company a $50 billion company and those
00:19:07
are right in the Zeitgeist of the future
00:19:10
and what advertisers want so I I think
00:19:11
offering those two up would unlock
00:19:14
massive shareholder value the most
00:19:16
damaging one would be Android if they
00:19:18
force them to sell Android that is going
00:19:20
to be massively damaging because an
00:19:22
independent Android company could then
00:19:24
you know give their search default to
00:19:26
bang and Microsoft would happily
00:19:29
not good not good they they must in
00:19:32
order to to capture maximum economic
00:19:34
value they auction it right and so I
00:19:37
mean Los go Fork of Android right
00:19:39
correct and so that is the dominant
00:19:41
player and then they have handsets so
00:19:43
that that worth how much is that worth
00:19:45
because maybe that does make Android a
00:19:47
viable business on its own you know it
00:19:49
would be it's probably 30 billion of
00:19:51
Revenue a year okay great so let's do it
00:19:53
I take back what I said it can survive
00:19:55
as an independent business Chrome can't
00:19:57
right Chrome can't but maybe Android and
00:19:59
Chrome go together that would be
00:20:01
incredibly damaging to Google that's the
00:20:04
most damaging the easiest is YouTube and
00:20:06
wayo in this whole mix but I'll give you
00:20:09
the wild card in all of this think about
00:20:10
the math sorry just real quick on think
00:20:12
about the math on that so let's say it
00:20:14
spins out and it generates 30 billion of
00:20:15
Revenue a year and Google owns the
00:20:17
majority of it and eventually they'll
00:20:19
sell it down but that business will be
00:20:21
valued on the money that Google's paying
00:20:23
so Google will make that Equity value
00:20:24
back if they own the shares and they
00:20:26
will lose onethird of their revenue to
00:20:28
that new company now of course they'll
00:20:29
get it back in the equity but then they
00:20:31
don't have it because about a third of
00:20:32
searches are mobile now and that's
00:20:34
increasing the big wild card and all
00:20:37
this is Apple um when I was doing Mahalo
00:20:40
which was a human powered search in over
00:20:41
10 years ago that's Theo back I emailed
00:20:44
it to Steve Jobs he opened it he played
00:20:47
with it a bunch I won't talk about
00:20:49
anything else in that regard but they
00:20:51
had a search Project in the works when
00:20:54
Steve Jobs was in charge over there they
00:20:55
were looking at search because he had
00:20:57
such an ax to grind
00:20:59
with Eric Schmidt because they launched
00:21:01
Android and he kicked Eric Schmidt off
00:21:03
the board and there was a lot of hand
00:21:05
ringing there I think apple is and i'
00:21:07
I've heard this from folks around Apple
00:21:10
that they're looking at search again and
00:21:11
there's duck. go and there's a company
00:21:14
called Brave that has their own search
00:21:16
engine and search API that's gotten very
00:21:17
popular I believe Apple's going to
00:21:19
launch their own search engine and
00:21:21
compete heads up with Google and so I
00:21:24
think that's going to be the very
00:21:25
interesting thing that happens in this
00:21:27
market the question then becomes
00:21:29
off does this distract management to a
00:21:32
level like it did Microsoft and you have
00:21:34
a lost decade and it takes their eyes
00:21:35
off the prize of well Ai
00:21:40
No and the reason I say no is that I
00:21:44
think that people's reaction to these
00:21:46
things become more sophisticated in time
00:21:50
because folks go back and actually study
00:21:53
what
00:21:54
happened in the Mell situation AT&T in
00:21:57
the rbox
00:21:59
what happened in Microsoft and so I
00:22:01
suspect that they know how to Shield the
00:22:04
rank and file employee from whatever is
00:22:07
going to happen so I I think that that's
00:22:10
less likely referring to management you
00:22:14
know like do you think it distur do you
00:22:16
think it distracts management from
00:22:18
running the business
00:22:19
Jamal I don't think so either because I
00:22:21
think that these things get put into a
00:22:23
very tight group of
00:22:26
people mostly lawyers who then go and
00:22:29
deal with this issue I think that
00:22:31
there's an acute moment where if they
00:22:34
think that they're going to lose an
00:22:36
appeal or that appeal is not going to
00:22:37
get heard then yeah I do think
00:22:40
management and the board are brought
00:22:41
together and the again if if if history
00:22:45
is a guide they should want to propose
00:22:48
the terms on which they break their own
00:22:50
company up because I think if the
00:22:52
government tries to decide there's going
00:22:56
to be so much imprecision that they'll
00:22:58
break the and I think that would be a
00:23:00
shame because I mean look take a step
00:23:03
back the breaking up of Google is great
00:23:06
for competition and for startups but
00:23:10
let's not forget Google is an incredible
00:23:12
company that has created enormous
00:23:15
amounts of good they have done way more
00:23:17
good than bad way more like three four
00:23:20
five orders of magnitude more good than
00:23:22
bad and to break a company like that I
00:23:26
think would be a really bad
00:23:30
outcome from a competitive Dynamics
00:23:32
perspective and Game Theory it's pretty
00:23:34
reasonable to hobble them that's why I
00:23:36
think the small o outcome is much more
00:23:39
palatable and seems more fair to me a
00:23:43
breakup is a really Draconian action and
00:23:46
I'm not sure that when you look at
00:23:47
Google versus AT&T and the and the baby
00:23:49
bells I don't think it's anywhere near
00:23:52
the
00:23:53
same but if there's the political
00:23:56
will they'll be able to craft and change
00:23:59
some of the laws that allow these folks
00:24:02
to just keep going after them and if
00:24:04
that happens I think it's going to be
00:24:07
really important for Google to define
00:24:08
the terms of their own breakup I want to
00:24:10
just underline what Cham said real quick
00:24:12
being big can be very good in the sense
00:24:16
that it can drive an ability to invest
00:24:18
in Innovation that is not possible
00:24:21
without the scale and the significant
00:24:23
cash flow that's being generated by
00:24:25
being that big and AT&T is a great
00:24:27
example Labs so the way AT&T was set up
00:24:31
is there was all the the local telephone
00:24:33
companies under this this Bell system
00:24:34
that AT&T owned and then Western
00:24:36
Electric was the company that
00:24:38
manufactured all the telephone equipment
00:24:40
that was put into the uh the telephone
00:24:42
system and then B Labs was the third
00:24:44
entity it was the research arm and all
00:24:46
that they did at Bell Labs was do
00:24:48
research and they were fully funded they
00:24:50
had all this cash flow pouring into them
00:24:52
so they could discover and work on and
00:24:54
invent whatever they wanted with that
00:24:56
capital B Labs is so insane if you go if
00:25:00
you guys haven't read any of the books
00:25:01
on Bell labs and what was discovered
00:25:02
there and how it operated it truly is
00:25:04
like the the most Innovative Center ever
00:25:07
in human history but they invented like
00:25:09
antenna arrays they invented microwaves
00:25:11
they invented radar they invented the
00:25:13
transistor they invented information
00:25:15
Theory which was the basis for
00:25:17
everything in the internet there was
00:25:19
even some efforts to try and invent a
00:25:22
nuclear bomb before the Manhattan
00:25:24
Project started they invented integrated
00:25:25
circuits and on and on and on and on on
00:25:28
and that's because they could invest all
00:25:29
this money in doing this research that
00:25:31
would have been very difficult for a
00:25:33
small startup or a company that's trying
00:25:35
to grow and is barely profitable to be
00:25:36
able to do at Google they've invested
00:25:38
billions of dollars in weo and I think
00:25:40
as we all know weo really was if not the
00:25:42
leader but the inspiration for a whole
00:25:44
generation of autonomous driving that
00:25:46
ultimately will come to Market and will
00:25:48
really transform our lives in a
00:25:50
meaningful way in the same way Amazon
00:25:53
and Microsoft and meta have all invested
00:25:55
tens of billions of dollars in
00:25:56
Innovation look at what Zuck is doing at
00:25:58
meta with the open sourcing of the Llama
00:26:00
models it's incredible that would have
00:26:02
never been possible if you had a small
00:26:04
company that was trying to get
00:26:06
profitable so I just want to highlight
00:26:08
like these businesses just because
00:26:09
they're big and successful doesn't
00:26:11
necessarily mean that they're stifling
00:26:13
innovation in fact they may be
00:26:15
accelerating Innovation and enabling
00:26:16
progress I'm just pointing out that the
00:26:18
cash flows that are being generated and
00:26:19
the way they're investing those cash
00:26:21
flows is pretty pretty impressive and we
00:26:24
lose that if we end up going after every
00:26:26
big company just because they're big and
00:26:28
saying hey we should take away their
00:26:29
ability to do this I'm going to take the
00:26:31
other side of that I think that what
00:26:33
they can do with their massive amount of
00:26:35
power is destructive to competition in
00:26:38
the marketplace if you look at
00:26:40
self-driving we have had tens of
00:26:43
billions of dollars invested without weo
00:26:45
it would have been just fine there have
00:26:46
been so much money Tesla Uber you know
00:26:50
uh Cruise GM there's plenty of people
00:26:52
out there there's plenty of capital out
00:26:54
there from around the world and I think
00:26:56
when these companies and Facebook Face's
00:26:58
one I think proves my point what you're
00:27:00
saying here is I think it would be
00:27:02
better that you didn't have these
00:27:04
companies that could put $20 billion
00:27:05
into something and you had 50 startups
00:27:08
go after it rather than these giant
00:27:10
companies just steal it and overpower
00:27:12
them flooding them with capital it makes
00:27:14
the world less Dynamic that Zuck can
00:27:15
just and Google can keep taking the next
00:27:18
category from the marketplace go ahead
00:27:21
saak you had a point if you break Google
00:27:23
up from a conglomerate of let's call it
00:27:25
for monopolies or duopolies or with
00:27:28
extraordinary Market power into four
00:27:30
separate companies they're still going
00:27:31
to be generating extraordinary profits
00:27:34
and those could still be invested in a
00:27:35
weo so I don't know that it stops The
00:27:37
Innovation our workshopping this issue
00:27:40
has pretty much convinced me that it
00:27:41
should be four companies search
00:27:43
advertising you YouTube and Android
00:27:46
because I think Android could be a stain
00:27:48
low business because of the value of the
00:27:51
search cloud is in search or
00:27:54
advertising that's got to be figured out
00:27:56
I don't know the answer to that yeah so
00:27:58
I mean I guess it's a negotiation now
00:28:00
maybe they put up one or two to be spun
00:28:01
out and and then the negotiation happens
00:28:03
and who knows you could have regime
00:28:04
change in Washington okay let's keep
00:28:07
moving through this
00:28:08
incredibly juicy docket Starbucks CEO is
00:28:11
out after a year and a half of
00:28:13
underperformance star B's CEO laxman
00:28:16
narim stepped down uh after just 16
00:28:19
months on the job uh I'll break down
00:28:21
what went wrong and get your reaction to
00:28:22
all this I know you have some strong
00:28:23
feelings on it freeberg as well earlier
00:28:26
this week Starbucks shares were down 20%
00:28:27
year to date compared to the S&P up 12%
00:28:31
companies are two straight quarters of
00:28:32
declining Revenue the definition of
00:28:34
recession in fact they've had to raise
00:28:36
prices massively due to inflation that
00:28:38
has annoyed customers and customers have
00:28:41
been IR about the weight which has been
00:28:44
caused by two things one they have a
00:28:46
broken Staffing algorithm that's led to
00:28:48
massive understaffing and then the app
00:28:50
has become the starbz app is incredibly
00:28:54
complex and you can order ridiculous
00:28:55
strengths that's causing a massive why
00:28:58
do you keep saying star bees it's what
00:29:00
the kids call it it's what the kids call
00:29:01
it stares oh that's part of the
00:29:04
problem to this
00:29:06
that's yeah and they've added like all
00:29:09
these like fruity drinks with and stuff
00:29:11
that would be like along the Boba lines
00:29:13
that have made have become incredibly
00:29:14
popular with Millennials and gen
00:29:16
Z so anyway laxman was the uh handpick
00:29:20
successor by Howard Schultz and Schultz
00:29:23
helped prep and train laxman but he's
00:29:25
been super critical of him recently kind
00:29:27
of like the Bob Bob chapek relationship
00:29:29
we saw play out in 2022 over at Disney
00:29:32
Brian nickoll the currency of chipot is
00:29:34
going to take over at the end of August
00:29:36
investors love this move shares jumped
00:29:38
25% on Tuesday what you sorry what what
00:29:40
did you call it it's called Chipotle
00:29:43
normal people call itan the current CEO
00:29:45
of chipot
00:29:47
Chipotle Chipotle CEO of Chipotle no
00:29:51
Chipotle Chipotle Chipotle chipot
00:29:57
Chipotle don't need it this place
00:29:59
anyway jump 25% on Tuesday lar sing day
00:30:03
increase y y meanwhile Chipotle dropped
00:30:06
8% Nicole is on a heater when he
00:30:08
switches teams the odds go with him and
00:30:10
Starbucks has a bunch of uh activist
00:30:12
investors who are winning massively as
00:30:15
part of putting pressure on this
00:30:16
freeberg Starbucks and Nike both iconic
00:30:19
Global Brands both have faltered what's
00:30:21
your
00:30:22
take well the one argument is there's a
00:30:25
Founder Le problem here which is when
00:30:28
the founder steps out and Professional
00:30:29
Management takes over and you have the
00:30:32
same expectations that you had when the
00:30:33
founder was leading things go um
00:30:37
sideways but Starbucks faces many more
00:30:40
kind of macroeconomic challenges Nick if
00:30:42
you pull up Starbucks financial report
00:30:45
so here you can see that their uh net
00:30:47
revenue growth was only 1%
00:30:49
year-over-year but their operating
00:30:51
margin's been on the decline so they
00:30:53
have not really been able to boost their
00:30:55
operating margin very much in the past 5
00:30:57
years so while they've raised prices
00:31:00
they've had a really hard time making
00:31:02
more money and that's because the cost
00:31:04
of food and the cost of Labor and the
00:31:06
cost of rent and the capital
00:31:08
expenditures needed to upgrade stores
00:31:11
has far exceeded the ability for them to
00:31:14
grow revenue and compete and now revenue
00:31:16
is flatlining because consumers are
00:31:18
getting tapped out with respect to how
00:31:20
much they can spend and there's only so
00:31:22
much Innovation you can really do to
00:31:24
charge more get people to come in the
00:31:26
store more and drive up Revenue Brian
00:31:29
nickel has an incredible
00:31:31
reputation prior to Chipotle he ran Taco
00:31:34
Bell and he ran Taco Bell for several
00:31:37
years and made it one of the most
00:31:39
profitable qsr Quick Serve restaurants
00:31:41
in the world he did this by focusing on
00:31:44
every nickel he is notorious for being a
00:31:47
Cost Cutter for being an efficiency
00:31:49
driver for being a productivity Hound he
00:31:52
goes into the business and he figures
00:31:53
out every step in the supply chain every
00:31:56
step of the operating activities of the
00:31:57
employee in the stores and figures out
00:31:59
ways to make sure did you say that Brian
00:32:02
nickel focuses on every nickel was that
00:32:05
say that want to say it he did say it he
00:32:09
say don't interrupt him he doesn't like
00:32:11
to be interrupted yeah no no it's good
00:32:13
sorry keep going that was good and um
00:32:16
and so he was recruited heavily I don't
00:32:18
know if you guys remember Chipotle's
00:32:19
founder was running Chipotle and at the
00:32:21
time there was a lot of investor
00:32:22
activism around Chipotle because they
00:32:25
were wasting money like no one's
00:32:26
business the guy had a private J he was
00:32:28
flying his management team back and
00:32:30
forth between Denver and New York they
00:32:32
were spending money on crazy projects
00:32:34
and the board fired the CEO founder of
00:32:36
Chipotle brought in nickel nickel came
00:32:38
in and made Chipotle an incredibly
00:32:40
profitable growing business and the
00:32:42
expectation is he'll come and do the
00:32:43
same here that maybe over the years
00:32:45
Starbucks's success has bred laziness
00:32:48
Starbucks's success has bred fat
00:32:52
slowness productivity Decline and that
00:32:55
this guy is the right guy to come in and
00:32:57
find all all the nickels and Brian
00:32:59
Nicholls is probably the right guy which
00:33:00
is why you're seeing the stock kind of
00:33:01
rally as hard as it has saaks or chamat
00:33:04
anybody have strong feelings here yeah I
00:33:06
would just add something here which is I
00:33:08
I do think that macroeconomic forces
00:33:10
played a huge role here we've seen that
00:33:12
we have had tremendous amount of
00:33:14
inflation over the last few years and
00:33:15
Starbucks has gotten more expensive and
00:33:18
if you're a worker whose wages have not
00:33:20
kept up with inflation do you really
00:33:21
want to spend 10 15 bucks on a cup of
00:33:25
coffee that I mean it's pretty fancy cup
00:33:27
of coffee I'm not saying it's it's not
00:33:29
but when you could just go to your
00:33:31
Commissary at work and pour yourself a
00:33:33
cup of coffee for free do you really
00:33:35
want to work roughly an hour every day
00:33:37
to pay for your coffee fix and I think
00:33:40
more and more consumers are just saying
00:33:42
that this is a luxury good I'm looking
00:33:45
at cut cost when I go to the grocery
00:33:47
store and buy groceries they're 30% more
00:33:50
expensive than they were a few years ago
00:33:52
I got a cut somewhere and a luxury cup
00:33:55
of coffee just seems like a really easy
00:33:56
place to cut so I think that's a huge
00:33:58
part of this and I don't know how Brian
00:34:00
Nichols going to fix that it's a
00:34:01
macroeconomic force
00:34:03
Jam I have a couple the first is that I
00:34:06
think Starbucks is actually an
00:34:08
incredible brand and it's actually a
00:34:10
really good
00:34:12
business and the mistakes here have
00:34:15
nothing to do with the product per se
00:34:18
meaning Chipotle if you remember someone
00:34:21
got poisoned there there was like
00:34:23
botulism the chicken was bad so there
00:34:25
was a core product problem but that's
00:34:28
not the case
00:34:30
here if you unpack what Starbucks is I
00:34:34
think that they are a premium product
00:34:37
and that's reinforced by what Sac said
00:34:40
which is they price in such a way
00:34:43
because they believe that they are a
00:34:44
premium product the problem is they are
00:34:47
not a premium brand and the difference
00:34:50
is Hermes as an example is a premium
00:34:53
brand they can charge whatever they want
00:34:55
under all weather conditions they have
00:34:58
pricing power so if their inputs go up
00:35:01
they can make sure they maintain margin
00:35:03
by changing the final price that the
00:35:05
customer paid Starbucks doesn't have
00:35:07
that power so they charge like a premium
00:35:10
product but they're not a premium brand
00:35:12
that has pricing power and that's why
00:35:14
you've seen this compression so very
00:35:17
specifically when the new CEO came in he
00:35:21
I think made one important mistake which
00:35:25
is he came in on the
00:35:28
of a very Rosy set of projections that
00:35:30
Howard Schultz and the board put out to
00:35:32
the
00:35:32
street and I think that he had an
00:35:35
opportunity then and there to just cut
00:35:37
it because they saw inflation they saw
00:35:41
what it was doing and if you just looked
00:35:43
around the corner you would have seen
00:35:45
that there would have been this
00:35:46
compression in the product and I think
00:35:49
what he should have done is just cut the
00:35:52
analyst projections in the forecast to
00:35:54
give him room and time he didn't do that
00:35:58
and by the way when you bring in
00:35:59
somebody who ran Taco
00:36:01
Bell that is proving that this is
00:36:03
neither a premium product nor a premium
00:36:05
brand anymore it is a mass Market
00:36:07
product that will EB and flow cyclically
00:36:11
with the vicissitudes of inflation that
00:36:13
doesn't mean it's a bad business I'm
00:36:15
just saying it's just an
00:36:16
observation I expect that Brian niichel
00:36:20
if he is smart will look at this
00:36:22
forecast and shred
00:36:25
it to give himself time so that's the
00:36:28
sort of the short-term thing the
00:36:30
longterm thing though is in the
00:36:32
following image which I just sent to
00:36:34
Nick I think there's a real question
00:36:37
mark on this company over the medium to
00:36:40
long term and I think it's best
00:36:41
represented in this graphic starbu is a
00:36:44
sugar
00:36:45
company so for example a caramel
00:36:48
macchiato 32 grams of sugar a mocha
00:36:52
Frappuccino 60 gr of sugar this is three
00:36:55
times what you're supposed to have as a
00:36:56
human in a day a frappuccino 53 g of
00:37:00
sugar a caramel ribbon crunch
00:37:02
frappuccino 62 g of sugar and these
00:37:06
products also average 4 to 500 calories
00:37:09
per
00:37:10
drink so the real issue is that more
00:37:13
consumers as they
00:37:16
question the repercussions of consuming
00:37:19
a lot of sugar what will they do as more
00:37:23
consumers get on gp1s what will they do
00:37:25
as more people think about about the
00:37:27
fact that fat was never an enemy in fact
00:37:31
fats are actually really good for you
00:37:33
the problem was that the sugar Lobby
00:37:34
convinced us that fat was bad and sugar
00:37:37
was okay what will consumers do and I
00:37:40
think that's a really big strategic
00:37:42
question mark because the company has to
00:37:44
embrace where the world is going the
00:37:47
world is going away from
00:37:49
sugar and I think become smarter they're
00:37:53
going to have to really figure out what
00:37:54
to do could Starbucks introduce uh line
00:37:57
of low calorie drinks that use sugar
00:38:00
substitutes to achieve the
00:38:02
same they already got that yeah the app
00:38:06
they have every single syrup comes in
00:38:09
sugar-free and regular so when I go
00:38:11
there now that I'm on glps and I've lost
00:38:13
all this weight and I drink less I just
00:38:15
get the Nitro cold brew it's got zero
00:38:17
calories or five calories I might throw
00:38:19
a little cold foam on it and then my
00:38:21
kids what the kids want that's not what
00:38:23
the kids with the kids is is critical
00:38:25
what I do with my kids is I do low sweet
00:38:28
or like one3 sweet I ordered one giant
00:38:30
one I pour it into three glasses at home
00:38:33
with ice and I cut it with water because
00:38:36
it is like
00:38:37
drinking an unbelievable amount of sugar
00:38:41
it is nuts um and they I'm I'm going to
00:38:44
go get an espresso after this this this
00:38:45
is the thing about coffee coffee
00:38:47
supposed to have zero calories and you
00:38:48
put a little half and half in it and you
00:38:50
get the fat and you're good but I mean
00:38:51
here's what here's what happened the
00:38:52
thing about Starbucks I I study
00:38:54
Starbucks and I've spent some time with
00:38:55
Howard Schultz actually um cou years
00:38:57
right maybe you could talk about your e
00:38:59
a little retail you did a little retail
00:39:01
side quest but the thing about Starbucks
00:39:03
is they realized early on that when you
00:39:05
can customize a consumer experience the
00:39:08
consumer comes back more frequently so
00:39:10
when you see your name written on that
00:39:12
cup you feel like you're getting your
00:39:14
product you're not buying an off
00:39:15
the-shelf product you're getting a
00:39:16
custom personalized experience what that
00:39:19
led to is people customizing their
00:39:20
drinks and what did they find that they
00:39:22
liked when they customized their drinks
00:39:24
sugary sweet add-ons and then that
00:39:26
became more and more of the standard
00:39:27
menu and then that just kept evolving
00:39:29
and that's just the consumer feedback
00:39:31
mechanism working which is to chat's
00:39:33
point led to 60 gram sugar drinks that
00:39:36
are now the standard product at
00:39:38
Starbucks not an espresso or a
00:39:40
cappuccino which is how they started and
00:39:42
it's really unfortunate I don't think
00:39:44
that Brian Nichols gonna focus on that
00:39:46
to be honest given his background with
00:39:47
Taco Bell and chipotle that that was
00:39:49
never anything to your point he'll be
00:39:51
able to plug the leaks my my question is
00:39:54
just more what does a company that's
00:39:56
selling product that people are learning
00:40:00
is worse and worse for them what do they
00:40:02
do they have to embrace a different
00:40:05
alternative but I think it can be very
00:40:07
hard because it may be so disruptive to
00:40:09
the core product that they sell yeah J
00:40:12
what do you think I mean what do you
00:40:13
think about Starbucks I mean guy I my
00:40:16
kids love Starbucks we are regular
00:40:18
consumers the app is
00:40:20
extraordinary uh and I think the key
00:40:22
issue here uh you know is obviously the
00:40:24
inputs in inflation that that's a major
00:40:26
driver but wage inflation is is a
00:40:28
critical piece of this here's a chart
00:40:31
for you you know just in terms of weekly
00:40:33
earnings of full-time worker since Q4
00:40:35
2019 Starbucks started having a lot of
00:40:38
Labor movements a lot of unionization a
00:40:40
lot of complaints from the green aprons
00:40:42
and they have massively raised salaries
00:40:45
they they were at you know $15 $16 17 a
00:40:49
lot of people were going into gig work
00:40:50
door dashing you know Uber and so this
00:40:53
competition for entry rung employees for
00:40:57
Starbucks and I know this from the the
00:40:59
Uber experience and then door Dash
00:41:01
people wanted to set their own schedules
00:41:02
not be like in a shift work and so you
00:41:07
could make 20 bucks working for Uber and
00:41:09
door Dash You're making 15 and you have
00:41:11
to drag your ass into Starbucks at 567
00:41:13
a.m and work a shift and not be able to
00:41:15
pick up your kids that led them to go to
00:41:17
like
00:41:19
2022 per hour for these
00:41:22
Baristas and and they continue to raise
00:41:24
those rates they've been very generous
00:41:26
with employees
00:41:27
and so I think that's a key piece of it
00:41:30
I think the big story here is going to
00:41:31
be automation I think you're going to
00:41:33
see a lot more
00:41:34
robotics in these if you look at I just
00:41:37
had the CEO of um what's the salad
00:41:39
company that people sweet greens I just
00:41:42
had the CEO of sweet Greens on this week
00:41:44
startups and he is all in on Automation
00:41:47
and they are making salad robots and
00:41:49
they've already got two or three stores
00:41:50
with them and his whole concept is it's
00:41:52
going to take $3 out of every salad we
00:41:54
have an investment in a company called
00:41:55
Cafe X Nick you can play a clip of it
00:41:58
these two machines in fso have broke a
00:41:59
million dollars a year in Revenue they
00:42:01
are serving a massive number of them and
00:42:03
they've sold a dozen of these to other
00:42:05
people so I think automation is what's
00:42:07
going to come to this I don't think you
00:42:08
can sustain it and the money has to come
00:42:11
out of somewhere and the two big cost it
00:42:13
can come out of is the real estate and
00:42:15
the employees and I think that's what's
00:42:17
gonna we're going to see in in the very
00:42:19
near future is dun I will also I will
00:42:21
predict yeah no doing it at right were
00:42:24
you doing um yeah we had automation I I
00:42:26
actually worked
00:42:28
with Jonathan at GRE and Starbucks and
00:42:30
chipot so I knew them all yeah and then
00:42:32
the Chipotle CEO got fired we were going
00:42:34
to roll out automation with
00:42:36
Chipotle and he got fired and nickel
00:42:38
came in and our deal blew up it killed
00:42:41
the deal so explain how that might work
00:42:43
and impact a business like that unpack
00:42:45
it for oh my God so it was going to take
00:42:47
out basically these businesses today are
00:42:49
running a call it 30% IIT margins at
00:42:52
Peak Performance that's like Chipotle's
00:42:54
best class by taking out labor you could
00:42:57
probably take out another 20 points of
00:42:59
cost which could translate into lower
00:43:00
prices for consumers higher throughput
00:43:03
lower weight times all of these kind of
00:43:05
experiential differentiators are going
00:43:07
to be significant certainly true for
00:43:09
Starbucks certainly true for sweet green
00:43:11
I would expect that with nickel coming
00:43:13
in you'll see some experimental stores
00:43:15
as you point out jcal that'll be more
00:43:17
highly automated but we'll also I think
00:43:19
one of the first things you're going to
00:43:20
see from nickel within the first year at
00:43:22
Starbucks is a reduction in the
00:43:24
complexity of the menu this is something
00:43:25
he he's done historically and he focuses
00:43:28
like he did at Taco Bell he creates a
00:43:30
couple of key highlight products and
00:43:32
creates these Innovative product ideas
00:43:34
and then those become the banners that
00:43:36
bring people into the store but it's a
00:43:37
simpler menu with kind of more
00:43:39
attractive interesting products that
00:43:41
bring people in and then if you couple
00:43:42
automation to reduce some of the cost
00:43:44
you can bring that labor cost down so
00:43:46
yeah and this is a key point you know
00:43:48
the order complexity is what's killing
00:43:50
the the the Barista there there's about
00:43:52
four there's four quintilian ordering
00:43:55
options at Starbucks today I and so the
00:43:58
expectation has always been that that is
00:44:00
what brings people coming back to the
00:44:02
store but what nickel has shown in the
00:44:04
past with Chipotle and with Taco Bells
00:44:05
you can actually have a simpler menu
00:44:07
with a few points of customization you
00:44:09
don't need to have infinite uh
00:44:11
customization around everything and is
00:44:13
what Steve Jobs did right with his four
00:44:15
quadrants when he took back over he was
00:44:16
like listen what's business what's
00:44:18
consumer what's highend what's low
00:44:20
what's portable what's desktop I forgot
00:44:22
what the four quadrants were but he did
00:44:23
it and and if you look freeberg to your
00:44:25
point of the cost savings right now the
00:44:27
majority of orders in Starbucks I
00:44:29
believe are coming in through the app
00:44:30
and what I was told you know and some of
00:44:32
the buzz I heard from
00:44:34
Baristas was that they are they are
00:44:37
prioritizing mobile orders to punish the
00:44:39
people online to get them to download
00:44:42
the app uh because that gets rid of
00:44:44
cashiers and McDonald's has no cashiers
00:44:46
in a lot of restaurants right now you
00:44:47
just order at a giant touchscreen so the
00:44:49
cashiers will be gone the cooks will be
00:44:51
gone and eventually the Baristas will be
00:44:53
gone and it'll just be the cashier the
00:44:55
cashier problem also creates a time
00:44:57
problem because it's a Serial ordering
00:44:58
process everyone stands in line they
00:45:00
order one at a time and there's only one
00:45:02
so the Barista
00:45:03
taking all of these are really good
00:45:05
points I just think that the CEO would
00:45:07
not have gotten fired had he just moved
00:45:09
the forecast down by 20% when he came in
00:45:12
also did you see this incredible clip of
00:45:14
him saying he doesn't want anybody
00:45:15
working past 6m Nick play this clip this
00:45:17
is
00:45:18
likeu CEO the previous Starbucks CEO I
00:45:22
mean this clip is so brutal we should
00:45:24
talk about this in the context of Eric
00:45:26
SCH smid and intervie as well J this a
00:45:28
show the clip and then let's talk let's
00:45:30
show Eric and talk about like work
00:45:32
culture in America I think this is a
00:45:34
really important Point yeah fantastic uh
00:45:36
side quest let's do it all right so now
00:45:37
there's a big culture thing going on
00:45:39
here freeberg of hard work in
00:45:41
corporations I don't know if you saw
00:45:43
Eric Schmidt at Stanford they took this
00:45:45
talk down and Eric Schmidt is walking
00:45:47
the comments back but here we go folks
00:45:49
this is the money clip from Eric Schmid
00:45:51
Google decided that work life balance
00:45:54
and going home early and working from
00:45:56
home was more important than
00:46:01
winning and the startups the reason
00:46:03
startups work is because the people work
00:46:06
like hell and I'm sorry to be so blunt
00:46:09
but the fact of the matter is if you all
00:46:11
leave the university and go found a
00:46:14
company you're not going to let people
00:46:16
work from home and only come in one day
00:46:18
a
00:46:20
week the Starbucks clip can you show the
00:46:22
Starbucks clip well it's self-evidently
00:46:24
true I mean he's basically making a a
00:46:26
point similar to what I said about
00:46:28
Google's so large that employees can
00:46:29
hide and not do very much and you know
00:46:32
they can kind of it's not just it's not
00:46:34
just Google oh it's pervasive yeah let's
00:46:37
pull up the um the Starbucks CEO I'm
00:46:41
very disciplined about balance if
00:46:43
there's anything after 6:00 p.m. and if
00:46:45
I'm in town it's got to be a pretty high
00:46:47
bar to keep me away from the family
00:46:49
anybody who gets a minute of time after
00:46:52
that better be sure that it's important
00:46:54
because if not it'll just wait for
00:46:56
another day makes me so uncomfortable
00:46:58
just hearing that I feel holy I mean
00:47:00
retire bro just retire what is America
00:47:03
value is the real question does America
00:47:05
value success performance or does
00:47:08
America value comfort and the problem is
00:47:11
American American work culture has
00:47:13
shifted to value and comfort and that is
00:47:16
the inevitable outcome of Decades of
00:47:19
extraordinary success and now the
00:47:21
performance culture is losing to the
00:47:24
Comfort culture and I think you guys
00:47:27
a lot of things together the problem is
00:47:30
that I don't think that that's his truth
00:47:32
actually I think that this guy's clip
00:47:35
sounds very inauthentic I think what
00:47:37
probably happened is the pr and policy
00:47:40
group of Starbucks says Hey listen
00:47:42
here's the average age of your employee
00:47:44
and here's what they value and he
00:47:46
probably spouted some politically
00:47:48
correct nonsense to try to inspire the
00:47:50
troops I think a lot of CEOs do this
00:47:53
like I think we're seeing in modern
00:47:55
media today that a lot of CEOs have
00:47:58
actually become the least version of
00:48:01
their authentic
00:48:02
self they are being packaged by people
00:48:06
to dress and act and say things in a
00:48:09
certain way and I think what happens as
00:48:12
a result of that is that you have a
00:48:13
wayward culture where nobody knows what
00:48:16
people stand for that's when the
00:48:18
corrosiveness of
00:48:20
folks not working at all or
00:48:23
having jobs at two different companies
00:48:26
comes in like that's a total moral and
00:48:28
ethical breach that happens because
00:48:31
people think it's acceptable and I think
00:48:34
people think it's acceptable because
00:48:36
it's not in the talking points of how
00:48:39
the CEOs are trying to package
00:48:41
themselves to tens of thousands of
00:48:43
employee so you think this was a PR
00:48:46
design genuflect I like that Insight
00:48:48
saaks your thoughts
00:48:50
overall well it could it could be a genu
00:48:52
reflect I don't know um look I would say
00:48:55
that there are a lot of Americans who do
00:48:58
feel that way about work but I think
00:49:00
it's not appropriate in in two cases
00:49:03
number one is if you're ambitious and
00:49:05
you really want to rise in your
00:49:08
organization then you got to have more
00:49:10
of the jcal attitude which is I'm going
00:49:12
to be the first to work and the last one
00:49:13
to leave and I'm G to show my boss I'm
00:49:15
gonna get promoted so if you want to be
00:49:17
ambitious in your career that's not a
00:49:19
good attitude to have and then on the
00:49:21
Other Extreme if you're the CEO of the
00:49:23
company your attitude has got to be I'm
00:49:25
247 with this you know it's like
00:49:27
I'm always online I'm always reachable
00:49:30
the buck stops with me now obviously
00:49:32
you're going to cut out time to be
00:49:35
protected that you can spend with your
00:49:36
family but your attitude's always got to
00:49:38
be that I'm available you know I don't
00:49:40
turn off my phone I don't do any of that
00:49:42
stuff I just think that if you're
00:49:44
running an organization you can't take
00:49:46
this attitude that oh at 6m I'm Switched
00:49:49
Off you know it just doesn't work that
00:49:51
way yeah especially if you're one I
00:49:54
don't think that's yeah yeah I mean an
00:49:57
appropriate thing for someone like that
00:49:58
to say when he's the CEO of a
00:49:59
multinational corporation yeah I think
00:50:02
that is the key Insight Saxon with you
00:50:05
on this which is leadership starts at
00:50:06
the Top If the leader says Hey listen
00:50:08
don't bother me after 6 I'll talk to you
00:50:10
at 9:00 am then that's just gonna go
00:50:13
through the entire organization and it's
00:50:15
already hard enough to run these
00:50:17
organizations now if you run a lifestyle
00:50:19
business as your local cafe and you want
00:50:21
to do that and you're running it at a
00:50:22
break even that's fine this is a
00:50:23
publicly traded company with
00:50:25
shareholders with massive compet I who
00:50:27
could get taken out by all these other
00:50:29
brands that are that are trying to
00:50:30
compete with it you have to have this is
00:50:33
a war we are at War we have to figure
00:50:35
out how to lower prices we need to grind
00:50:37
every nickel from you know the supply
00:50:39
chain rent we have to renegotiate
00:50:41
contracts and then you know just to
00:50:43
speak on the work ethic issue this
00:50:46
country is in a um a very significant
00:50:50
War about going back to work and work
00:50:52
ethic you mentioned overemployed and the
00:50:54
ethics around that chth and then there's
00:50:57
a group of Americans and I've been
00:50:58
studying this a bit that are opting out
00:51:01
of capitalism or hacking capitalism
00:51:03
there's a very interesting movement it's
00:51:04
called fire financial Independence
00:51:06
retire early and if you look at the two
00:51:09
subreddits overemployed and the fire
00:51:11
subreddit young people are saying H
00:51:14
capitalism is there to be hacked and my
00:51:16
way of hacking it is I'm going to have
00:51:18
two jobs and I had a startup come to me
00:51:19
and say we've got this great engineer
00:51:21
literally from Google who wants to work
00:51:23
from us and he's making 400k we can get
00:51:26
him for Buck 50 and I said oh wow that's
00:51:28
great why would he do that is he
00:51:29
independently wealthy they said no he's
00:51:30
keeping his job at Google he says it
00:51:32
takes 10 20 hours a week and he's going
00:51:34
to work 60 hours a week for us and I
00:51:36
said is that ethical or legal and
00:51:38
they're like I don't know that's why
00:51:39
we're asking you these are 20y old
00:51:41
Founders we had backed and I was like
00:51:43
this is incredibly unethical and you're
00:51:44
going to get us in a lawsuit don't do it
00:51:46
but that is what's you know the the give
00:51:49
and take and if you look at what
00:51:50
happened with Dell this past six months
00:51:52
have you been following that freeberg
00:51:53
the Dell story no it's pretty incredible
00:51:55
they told everybody coming back to
00:51:57
office people were like yeah I don't
00:51:59
want to come back to office okay
00:52:00
reasonable you think you do a better job
00:52:01
at home I get it what they said was if
00:52:03
you want to be work from home you can't
00:52:05
get a promotion and you can't get a
00:52:06
salary increase and you know what
00:52:08
employees said okay I don't want an
00:52:11
increase I don't I if my choice is stay
00:52:13
at home and and have no salary KS and I
00:52:15
don't care about a raise I don't care
00:52:17
about a promotion then they said you
00:52:19
know what we're cutting 12,000
00:52:21
people you have to come back to office
00:52:23
Jay Pensky and his company told
00:52:25
everybody have to come back to office so
00:52:27
now that you know you have this era of
00:52:29
Being Fit and you don't need as many
00:52:30
people from AI I think everybody's
00:52:33
coming back to the office unless you are
00:52:35
part of the 20% of truly Elite workers
00:52:39
thanks for coming to my TED Talk even
00:52:40
then though I I struggle to understand
00:52:43
why anybody who has any ambition would
00:52:47
think that they're going to achieve the
00:52:50
same amount of stuff working by
00:52:52
themselves than they will by working
00:52:54
with the group of colleagues that you
00:52:56
was back in a physical space together
00:52:59
well influence our culture no no but I'm
00:53:01
saying like when you when you look at
00:53:03
the the great things that the world
00:53:05
needs that we are building and should be
00:53:08
building I don't see many good examples
00:53:11
where those things are done in a remote
00:53:14
way I see the necessity of people to be
00:53:18
together whether it's to design
00:53:20
something together to talk about
00:53:21
something together to debate something
00:53:23
together to learn from each other to as
00:53:26
a person and you're robbing yourself of
00:53:29
all of
00:53:31
that and so I just think that it is a
00:53:34
shortterm optimization that a lot of
00:53:36
people will regret not necessarily in
00:53:38
the moment but when their career doesn't
00:53:40
go where they want to or the company
00:53:42
they work at doesn't go where it should
00:53:45
go to or is capable of going to they'll
00:53:47
start to look for a
00:53:49
scapegoat but the real reason is that
00:53:53
they've abandoned the idea that they
00:53:55
need to be together
00:53:57
and I just think that that's that's a
00:53:58
tragedy and as it turns out the best of
00:54:02
our companies like when I rank my
00:54:04
portfolio the ones that are doing the
00:54:07
best are in total different Industries
00:54:09
but the single consistent theme is we
00:54:12
are all back together in
00:54:14
person isn't that interesting makes
00:54:16
total sense it's much more productive
00:54:19
because I I think Innovation happens as
00:54:23
a team you need collaboration and it's
00:54:25
way EAS iier to do that when everyone is
00:54:27
together in the same place there's more
00:54:30
room for spontaneity more spontaneous
00:54:32
interactions the reason why Steve Jobs
00:54:34
designed the the spaceship uh campus in
00:54:37
that famous circle was because it
00:54:40
maximized the opportunity for
00:54:41
Serendipity right like there's nobs did
00:54:44
the same thing Bel Labs had a quad that
00:54:46
you had to walk through to go from
00:54:48
meeting to meeting so everyone
00:54:49
interacted inter the technical term for
00:54:51
that is um collisions and there's been a
00:54:53
lot of research on random collisions and
00:54:56
I agree wholeheartedly with it yeah and
00:54:58
look I just want to underscore this
00:55:00
point I think there's nothing wrong if
00:55:02
somebody says look my family is the most
00:55:05
important thing in my life I only want
00:55:06
to work 40 hours a week I'm going to do
00:55:08
a nine to6 job with an hour lunch break
00:55:10
that's 40 hours don't call me after 6 PM
00:55:13
you can design your career that way but
00:55:15
that is not a career that's going to
00:55:18
enable you to either run a company as a
00:55:21
CEO or be a founder of a startup or be
00:55:25
on a track to one day being a founder or
00:55:28
a CEO it's just not compatible I mean or
00:55:31
even just a senior executive right
00:55:33
exactly so you have to decide what track
00:55:35
you're going to be on and I think
00:55:36
there's a lot of millennial gen Z types
00:55:38
who are confused about this and they
00:55:40
have the entitlement of saying well I
00:55:42
want to just do the 40 hour a week thing
00:55:44
but then I also expect to rise rapidly
00:55:46
and be an executive and be a Founder be
00:55:48
a you know a CE both ways that's not
00:55:52
gonna work yeah it's not gonna work and
00:55:54
and you know In fairness I think a lot
00:55:56
of young people have not been mentored
00:55:58
because they came up in the co
00:55:59
generation and we're now four years
00:56:01
later and they just haven't had the
00:56:03
chance to be mentored or be in a in an
00:56:05
office and a lot of senior Executives
00:56:07
and CEOs are not coming to the office
00:56:09
you know a part of my move to Austin is
00:56:12
I'm building uh a theater to record the
00:56:14
podcast in and I'm building an incubator
00:56:17
space and we're moving back to iners I
00:56:19
grire the existing employees and I'm
00:56:20
only hiring people in person now because
00:56:22
I feel something very big has been lost
00:56:24
in terms of meeting Founders in person
00:56:27
and young people seeing me interact and
00:56:30
my other senior team members with those
00:56:32
Founders in person during a pitch
00:56:33
meeting during a product jam session
00:56:36
during a fundraising review go sh can I
00:56:39
just say something about mentoring I
00:56:42
also think mentoring can be described as
00:56:44
capital M mentoring and small M
00:56:46
mentoring capital M is where some person
00:56:48
is
00:56:49
assigned to you and they're going to
00:56:53
imuse some magical phrase or saying or
00:56:55
thing
00:56:57
and all of a sudden everything is going
00:56:58
to work out for
00:57:00
you that form of capital M mentoring
00:57:03
doesn't exists and has never worked for
00:57:07
those that have tried it the thing
00:57:08
that's really productive is small M
00:57:11
mentoring and that happens when you
00:57:13
model behaviors of really smart people
00:57:16
and really capable people really ethical
00:57:18
people and again that happens because
00:57:20
you're seeing them on a day-to-day basis
00:57:23
not just in a meeting but in the gap
00:57:26
between meetings and they'll include you
00:57:29
in certain things or you'll have lunch
00:57:31
with them and this is what I mean by all
00:57:33
of these people that are looking for an
00:57:36
accelerant in their
00:57:38
career they've robbed themselves of the
00:57:42
most powerful accelerant possible which
00:57:44
is capable people to surround themselves
00:57:47
with yeah I think it's so well said
00:57:49
they're going to look back on these
00:57:51
decisions and they're going to agret
00:57:53
them I agree 100% And my one of my first
00:57:56
jobs working at land systems my mentor
00:57:58
Mike Savino was always working late he
00:58:00
was trying to move up in the
00:58:01
organization and I wouldn't leave before
00:58:03
he left and then he would walk by and
00:58:05
he'd say it was in New York City hey
00:58:07
what are you working on I'm say oh I'm
00:58:08
reading these novel networking books I'm
00:58:10
trying to get my certification I'm
00:58:11
trying to learn more I want to get out
00:58:13
of hardware and get into software and
00:58:14
he'd say oh um I'm gonna get some dinner
00:58:16
you want to come now he was four levels
00:58:19
above me in the organization I was the
00:58:20
lowest he was second to the highest and
00:58:22
then I got to go to dinner with him and
00:58:24
then I got to hear about all the big
00:58:26
clients I got to hear how you know they
00:58:29
were doing the pitches and then he
00:58:30
started including me in pitches and all
00:58:31
of a sudden I went from four degrees
00:58:33
from him to reporting into him and
00:58:35
that's how I learned you know look at
00:58:37
the person on the left look at the
00:58:39
person on the
00:58:40
right I was uh I don't think I yeah I
00:58:43
was actually I was a certified network
00:58:44
engineer I was I was a certified novel
00:58:47
engineer as well I I did it when I was
00:58:49
like 16 shout out to Eric Schmid yeah
00:58:51
yeah I mean if you had that in the 90s
00:58:55
you could make
00:58:56
you know 50 75 100K well the person that
00:59:00
helped me little and mentored me he's
00:59:02
like listen man I'm not going to tell
00:59:04
you how to do pitches or whatever but
00:59:05
I'm going to teach you how to install
00:59:07
this I'm going to teach you how to
00:59:08
manage it and that was mentoring and
00:59:11
that was really valuable and I sat
00:59:13
beside this
00:59:16
guy difference in my care absolutely and
00:59:18
if you want to be a freelancer be a
00:59:19
freelancer okay let's go to our little
00:59:22
election update and some news about
00:59:24
kamla
00:59:26
and a little bit of socialism coming so
00:59:29
here's how I I set it up today we'll see
00:59:31
how this goes 2024 election update is
00:59:33
here I'm going to do two things
00:59:35
gentlemen I'm going to just te up the
00:59:36
latest polls um and then I ask our crack
00:59:39
Allin research team to just give me the
00:59:41
top you know a couple of issues in the
00:59:44
principal's own words uh the principles
00:59:46
being you know the Press on either side
00:59:48
and the four people who are running for
00:59:51
office so let's just go through the
00:59:52
numbers here Nate silver a friend of the
00:59:54
Pod now has come Harris at 57% favorite
00:59:58
to win the electoral college there's
01:00:00
your first chart you can compare this to
01:00:02
what happened with Biden before the hot
01:00:05
swap Trump had a 73% probability to win
01:00:08
the electoral college so that is the the
01:00:10
swing of all swings and obviously a lot
01:00:12
has happened since then as well as the
01:00:14
assassination attempt on Trump massive
01:00:17
swing for Harris as you can see in Nate
01:00:19
Silver's chart he's doing something
01:00:21
called Silver bulletin he's not a 538
01:00:23
anymore but this is the most telling
01:00:24
chart you can see Biden Trump there and
01:00:26
it's it's almost a clean sweep in red
01:00:29
and then you go to Harris Trump and the
01:00:31
shift has been 100%
01:00:33
blue pretty
01:00:36
dramatic Harris is flipped according to
01:00:38
Silver Pennsylvania Wisconsin Arizona
01:00:40
Michigan Nevada and Virginia here's a
01:00:42
couple of quotes and then we'll get into
01:00:44
it the big critique from Republicans
01:00:46
this past week is that Harris won't do
01:00:48
interviews God it's just ridiculous that
01:00:51
they have not sat for interviews and
01:00:53
meanwhile Trump is doing every podcast
01:00:55
and and Twitter spaces on the planet uh
01:00:58
but the big news is that this might have
01:01:00
changed by the time you listen to this
01:01:02
podcast everybody knows we tape on
01:01:03
Thursdays for the world's number one
01:01:04
podcast and it comes out on Fridays
01:01:07
Washington Post Jeff Stein reported that
01:01:09
Camala Harris will propose the first
01:01:12
ever Federal ban on corporate price
01:01:14
gouging for food and groceries on Friday
01:01:17
we'll get I'm gonna hand that off to you
01:01:19
freeberg toil oh I'm gonna throw up take
01:01:22
it easy just we're gonna get there
01:01:24
you're gonna get your um you're GNA get
01:01:26
your rare vegetables in a
01:01:27
[Laughter]
01:01:29
second so uh the other going to get
01:01:34
your get your V shimmy soon all right
01:01:38
from the JD Vance uh corner he is
01:01:41
questioning Tim waltz's
01:01:43
service here's the quote well I wonder
01:01:45
Tim Waltz when were you ever in War when
01:01:48
was this Harris campaign responding in
01:01:51
his 24 years of service the governor
01:01:52
carried fired and trained others to use
01:01:55
weapons in War inum innumerable times
01:01:59
yada yada yada a lot of back and forth
01:02:01
there about that issue but let's get to
01:02:05
um and there was an incredible uh twoh
01:02:07
hour spaces audio was a little rough but
01:02:11
the content was great Elon had a
01:02:12
conversation with uh Trump and they
01:02:15
talked about nuclear power Elon offered
01:02:18
his Services two or three times to Trump
01:02:20
saxs to uh do efficiency uh in the uh
01:02:24
government and maybe cut some
01:02:27
but that's what happened notably in the
01:02:28
last week freeberg what's your take on
01:02:33
this reported by The Washington Post and
01:02:36
I think confirmed by Politico uh move by
01:02:38
Kamala Harris thank you for asking thank
01:02:41
you for you have any feelings on it yes
01:02:43
yeah I unequivocally hate
01:02:48
socialism socialism destroys Innovation
01:02:51
destroys productivity and destroys
01:02:54
individual liberties
01:02:56
Agriculture and Food Markets have
01:02:58
insanely competitive Dynamics because
01:03:00
there are commodity markets there are
01:03:02
tons of competitors there is no Monopoly
01:03:04
in making food there is no Monopoly in
01:03:06
making cpg products there is no Monopoly
01:03:08
in retail there is no Monopoly in
01:03:10
grocery stores it is a small margin
01:03:13
highly competitive highly fragmented
01:03:15
free market and the free market Works in
01:03:18
that everyone is always competing with
01:03:20
each other creating new productivity
01:03:21
improvements and as a result over time
01:03:24
prices come down
01:03:26
except when the government intervenes
01:03:28
and gets involved so I would argue that
01:03:32
the real cause of price inflation in
01:03:34
food is not the supposed price gouging
01:03:37
by corporate players in the A and food
01:03:39
industry all of whom are deeply
01:03:41
competitive with one another but rather
01:03:43
is the result of the inflation
01:03:46
associated with government spending and
01:03:47
stimulus coming out of covid Nick
01:03:50
exhibit
01:03:51
one the FED balance sheet from Co to
01:03:54
today the Fed balance sheet Grew From
01:03:56
4.2 trillion to $7.2 trillion a growth
01:04:00
of
01:04:01
70% the Federal Reserve went out and
01:04:03
they bought assets and they issued debt
01:04:06
to Banks and introduced liquidity into
01:04:08
the system if you go to the next slide
01:04:10
as a result the M2 money supply
01:04:12
increased from 15 trillion to 20 21
01:04:15
trillion since covid a 40% increase okay
01:04:19
so now there is more money in the system
01:04:21
so the cost of everything should go up
01:04:23
which is exactly what we've seen we can
01:04:24
walk through a couple of the other
01:04:26
commodity price charts from the St Louis
01:04:28
fed here is the price of electricity as
01:04:31
an example the price of electricity has
01:04:33
gone up a little bit less than the M2
01:04:34
money supply but the truth is when you
01:04:36
start to actually look at a commodity
01:04:39
prices over time what's happened is
01:04:41
there were certainly a boost coming from
01:04:42
covid but the competition and the
01:04:44
challenges in over production in the a
01:04:46
markets has started to hit and started
01:04:48
to bring prices back down so here's the
01:04:50
price of strawberry strawberries today
01:04:52
are selling for less than they were
01:04:54
preco potatoes are now back to where
01:04:56
they were
01:04:58
pre-o now let me give you some
01:05:00
statistics on some of the supposed price
01:05:02
gouging companies in the industry craft
01:05:05
Hine stock preo was 29 bucks a share
01:05:09
today craft Hine stock is 34 bucks a
01:05:11
share 2019 revenue of 25 billion 2023
01:05:15
revenue of 26 billion EB on 2019 of 6.1
01:05:19
billion Eaton 2023 of 6.3 billion
01:05:22
there's not a lot of profit gouging in
01:05:24
fact craft hindes has not been a B to
01:05:25
keep up with the inflation Starbucks
01:05:28
which we just talked about their stock
01:05:30
was at $90 preo and today 93 bucks 2019
01:05:35
revenue of 26 billion operating income
01:05:37
of 4.1 billion 2023 revenue of 36
01:05:40
billion but operating income only 5.9
01:05:42
margins have come down in Starbucks Nick
01:05:45
if you pull up the McKenzie chart this
01:05:48
is a study of the grocery industry the
01:05:50
state of grocery in North America 2023
01:05:52
by McKenzie accelerating pressures on
01:05:55
profitability to cope with the
01:05:56
pandemic's upheaval grossers have had to
01:05:59
dramatically increase capex increase
01:06:01
supplies as a result they've seen a
01:06:03
significant impact on margins here's the
01:06:06
margin profile pre pandemic and today
01:06:09
gross margin has declined by two points
01:06:12
from 47.6 to 45.6 ebit margin has
01:06:15
declined by 1 and a half points and now
01:06:18
let's just go to the final chart which
01:06:19
is cpg companies the companies that make
01:06:21
food and sell it to Consumers as you can
01:06:23
see during the co era
01:06:27
the three-year rolling TSR has declined
01:06:30
since Co across the board so food
01:06:33
companies are seeing food prices come
01:06:34
down so farmers are really suffering
01:06:36
labor costs have tripled since the
01:06:38
pandemic but they're still having to
01:06:39
sell products at the same price cpg
01:06:42
companies have lower margins and
01:06:44
supermarkets have lower margins so there
01:06:46
is nowhere in the aggr food supply chain
01:06:48
that we are seeing fundamentally price
01:06:50
gouging or profit taking happening what
01:06:52
has happened is the cost of Labor the
01:06:55
cost of moving stuff around the cost of
01:06:57
fuel the cost of electricity the cost of
01:06:59
goods has all risen with inflation
01:07:01
because of the increase in the money
01:07:02
supply and federal spending and the
01:07:05
stimulus associated with the Federal
01:07:07
Reserve buying assets onto their balance
01:07:09
sheet so arguably I would say that
01:07:11
trying to step in and cap prices will
01:07:13
reduce competition and as a result will
01:07:15
reduce investment in improving
01:07:17
productivity and we have seen this
01:07:19
countless times with every socialist
01:07:21
experiment in human history has started
01:07:23
with caps on food and it has resulted in
01:07:25
spread lines like you see in the image
01:07:26
behind me today as we can see in Soviet
01:07:29
Russia this is a mistake it is a problem
01:07:32
it is anti-American it is anti-free
01:07:34
Market it is anti- innovation it is
01:07:36
anti- productivity and ultimately it's
01:07:37
anti- liberty and I cannot stand it
01:07:40
that's my rant okay thanks for coming to
01:07:43
freeberg Ted Talk sham so you're nodding
01:07:45
strongly in agreement this is just Dum
01:07:47
and pandering am I
01:07:49
correct there is no sustainable solution
01:07:52
to
01:07:53
inflation if you
01:07:56
cap what a company can charge because
01:07:58
what they'll do is they'll just stop
01:08:02
producing they'll manage to margin that
01:08:05
they'll just stop and the reason they
01:08:07
can stop is that they would rather
01:08:09
contract and maintain their
01:08:11
profitability than lose money and then
01:08:14
what happens is there's less products in
01:08:16
the market and so the prices go up so I
01:08:19
think it stands to reason that the
01:08:20
Harris campaign has access to some
01:08:24
reasonably smart people they also have
01:08:26
access to really smart people like Larry
01:08:29
Summers and so I think if they just make
01:08:31
a few phone calls they'll figure out
01:08:34
that this is a really terrible idea
01:08:36
saaks any
01:08:37
thoughts overall election and the
01:08:39
specific issue you take it either way
01:08:40
you like yeah so this story was reported
01:08:44
by The Washington Post and by Bloomberg
01:08:46
and others so it appears to be more than
01:08:50
just a rumor conjecture I mean these are
01:08:53
Publications that are apparently well
01:08:55
sorted within the Harris campaign so I
01:08:57
think it is fair game for us to comment
01:08:59
on this policy proposal that she
01:09:03
apparently will be coming out with look
01:09:05
I think freeberg is right about the
01:09:08
policy the idea of price controls is
01:09:10
widely discredited across the political
01:09:13
Spectrum I mean I think virtually all
01:09:15
economists agree on this this was
01:09:18
Pride extensively in the
01:09:20
1970s not just under Jimmy Carter but
01:09:23
Nixon tried wage and price controls and
01:09:26
Gerald Ford had this whole program
01:09:28
called whip inflation now where they
01:09:29
printed out these buttons called these
01:09:31
wind buttons and then Carter extended it
01:09:35
that's why we had huge lines to the gas
01:09:36
pumps is because we had price controls
01:09:39
on gas and those lines of the pump went
01:09:41
away almost overnight when Ron Reagan
01:09:44
came in and removed the price caps on on
01:09:46
gas so we've tried price controls before
01:09:50
it didn't work and it is remarkable that
01:09:54
she would be proposing here potentially
01:09:57
as her first major policy proposal on
01:10:00
the economy to go back to this 1970s era
01:10:03
failed policy and I think it's really
01:10:07
tipping her hand in terms of where her
01:10:10
economic proposals are going to come
01:10:11
from and what she really thinks keep in
01:10:14
mind that throughout the the Biden
01:10:17
presidency he rhetorically would blame
01:10:20
corporate Greed for the rise in
01:10:22
inflation we saw as like a scapegoat
01:10:24
because he didn't want to blame him self
01:10:25
for all the spending but she's going
01:10:27
further now and actually instituting
01:10:30
this as policy yeah and so just to be
01:10:32
clear with everybody we don't have the
01:10:34
actual policy here but it's been
01:10:35
reported seems like it's true maybe it's
01:10:38
not maybe they step it back we don't
01:10:40
know the details of this at all what we
01:10:42
do know is it's been tried before what
01:10:44
we do know is there are times when you
01:10:47
could like in an economic emergency like
01:10:50
during um what was the giant hurricane
01:10:53
or Wars you know you can your eye on
01:10:55
this um but the truth is as we just
01:10:58
talked about with Starbucks you know sax
01:11:01
is like I got a free cup of coffee or
01:11:02
close to free I make my own C Brew uh C
01:11:06
shout out Cafe dumon because I don't
01:11:07
want to pay $8 for an the market
01:11:10
responds and when you put your thumb on
01:11:12
capitalism or you put 12 thumbs on
01:11:14
capitalism and on the scale all kinds of
01:11:16
weird behaviors occur it does not work
01:11:19
and consumers can just simply opt out
01:11:21
they can make breakfast at home they can
01:11:23
Brown Bag their lunch and you know what
01:11:26
then companies are going to be like holy
01:11:28
sh people are not buying $8 coffees
01:11:31
let's make a cheaper Happy Meal to
01:11:33
support your point and what chamath was
01:11:35
messaging on our on our chat look at
01:11:37
Walmart stocks up 7% today because they
01:11:40
offer lower priced solutions to
01:11:42
Consumers and Dollar General and Dollar
01:11:44
Tree are rallying as well when the
01:11:46
market competes consumers benefit and
01:11:49
there are companies that will win and
01:11:51
the companies that try to price gouge
01:11:53
and the companies that try to charge too
01:11:54
much will lose Starbucks has been trying
01:11:57
to charge too much for sugar water they
01:12:00
have a real problem they are now
01:12:01
tackling Walmart is trying to bring
01:12:04
value to Consumers they are winning that
01:12:06
is how free markets work when the
01:12:08
government steps in and says here's how
01:12:09
much margin you can make or here's how
01:12:11
much prices should be it ruins
01:12:13
everything and the entire incentive
01:12:15
structure goes away and you end up with
01:12:17
breadlines Saxy poo what do you got well
01:12:20
there was a really interesting story in
01:12:22
the Wall Street Journal this week called
01:12:24
K Harris's economic team and agenda
01:12:26
start to take shape and it was
01:12:29
interesting because it said here in the
01:12:31
first paragraph that the challenge of
01:12:33
her economics team is quote
01:12:36
differentiating the candidate which is
01:12:38
Harris from her unpopular boss which is
01:12:41
Biden without abandoning his policies
01:12:44
and the problem that they have is that
01:12:46
for the last three and a half years
01:12:48
there has been no daylight between
01:12:50
Harris and Biden and in fact Ken Jean
01:12:52
Pierre said exactly that in the article
01:12:54
there's been no daylight they've been
01:12:55
highly aligned now in response to that
01:12:58
what the campaign has been trying to do
01:13:00
is a not say anything about policy to
01:13:03
try to redefine the candidate based on
01:13:05
biography she's done no interviews with
01:13:08
the media she's done no sort of
01:13:10
unscripted speaking appearances and the
01:13:13
media has cooperated with this so far
01:13:15
the most egregious example was that Time
01:13:17
Magazine cover story which was this
01:13:20
really Gauzy profile that was heg
01:13:22
geography even though she refused to
01:13:24
even do an interview with Time magazine
01:13:26
in that story so strategy number one has
01:13:29
been just to kind of hide from the media
01:13:31
in terms of what she would really do
01:13:33
strategy number two was adopting some of
01:13:36
Donald Trump's most popular policies so
01:13:38
she just announced no tax on tips she
01:13:41
was I think widely kind of criticized
01:13:43
for being a copycat on that and now we
01:13:45
finally have strategy number three which
01:13:47
is to tiptoe into the campaign with her
01:13:50
own original proposal on price controls
01:13:53
which I think is being criticized but it
01:13:56
shows where her policy instincts are
01:13:58
coming from I mean this is somebody who
01:14:00
has always been on the Progressive left
01:14:01
when she was a member of the Senate GV
01:14:04
track rated her as the most liberal
01:14:07
member of the Senate even to the left of
01:14:09
Bernie Sanders and Elizabeth Warren and
01:14:11
you're now seeing this come out in her
01:14:13
policy proposals so look I think she's
01:14:16
definitely gotten a bounce in the polls
01:14:17
over the last few weeks because of this
01:14:19
favorable media coverage but it's a
01:14:21
sugar high based on something that's not
01:14:24
substantive I mean she didn't put
01:14:26
forward any proposals and I think that
01:14:28
now that she finally is putting out
01:14:29
policy proposals that can be questioned
01:14:32
and analyzed and criticized I think this
01:14:34
is going to be the beginning of I would
01:14:37
say a big correction in in her campaign
01:14:40
J Kel do you agree do you think her
01:14:41
strategy is off at this point and is it
01:14:44
starting to hurt her to put out these
01:14:46
proposals I I am I remain undecided
01:14:48
moderate leftly moderate have voted
01:14:52
Republican 35% of the time Democrat 65%
01:14:54
of the time time and I've been studying
01:14:55
the strategy here her strategy is
01:14:57
crushing Trump so obviously it's working
01:15:01
now we I'm I don't like it I think
01:15:03
everybody should be doing debates I was
01:15:05
really upset that there wasn't a debate
01:15:07
or a speedrun primary I I don't like the
01:15:09
fact that Trump and Biden skipped out on
01:15:11
the primary debates I think they should
01:15:12
be forced to do debates forced to do
01:15:15
interviews and so I you know on that
01:15:18
front I hate what this is doing to
01:15:21
democracy now
01:15:23
pragmatically running at the clock as a
01:15:25
strategy and not defining your positions
01:15:29
too much and just you know selling The
01:15:32
Vibes is a brilliant strategy and it's
01:15:34
working and you know as Trump said the
01:15:38
VPS don't matter what she did as VP
01:15:40
doesn't really matter what JD Vance
01:15:42
thinks as VP doesn't matter VPS don't
01:15:43
matter you're voting for the president
01:15:45
the VPS get in line Trump Trump's
01:15:48
positions JD Vance flipped a bunch of
01:15:50
his positions to align with Trump and I
01:15:52
think Cala did the same when she worked
01:15:54
with Biden that's your job is to align
01:15:56
with the president now that she's her
01:15:58
own and Waltz is going to flip to her so
01:16:01
I think they're putting out moderate
01:16:02
Vibes I think they're kind of socialists
01:16:04
I think they're not as socialists as
01:16:06
Bernie and Elizabeth Warren but they're
01:16:08
not moderates but they're pretending to
01:16:10
be moderates and that is working as a
01:16:13
strategy they are demolishing Trump and
01:16:15
then Trump is you know getting bad
01:16:17
advice around him I think you know if I
01:16:19
to handicap this and I'll wrap up it
01:16:21
with just one more minute I think Trump
01:16:23
was so good on all in he was so good at
01:16:25
the RNC for the first half of his speech
01:16:27
when he is presidential when he has a
01:16:30
big open tent I love him I think he's
01:16:33
great and I think he's like World
01:16:35
positive when he goes into grievance
01:16:37
culture when he goes after the race
01:16:39
stuff like he did with the black
01:16:40
journalists when he goes after gender or
01:16:42
JD does the gender stuff and the cat
01:16:44
stuff I hate that stuff moderates hates
01:16:46
that stuff women hate that stuff and the
01:16:48
moderates and the women in the swing
01:16:50
States will decide the election and
01:16:52
Trump's campaign is lounder right now
01:16:55
they have to get they have to flip it
01:16:56
back to that Trump 2.0 I described many
01:16:58
times where he's serious presidential
01:17:01
not bullying people not doing the insult
01:17:03
comic thing this going after Walts going
01:17:05
after cat ladies it's just gross and not
01:17:07
necessary so I think you know maybe
01:17:10
Trump after the RNC after the DNC will
01:17:12
go back to Trump 2.0 that would be much
01:17:14
better and I think Trump has a chance of
01:17:16
winning if he does that if Kamala goes
01:17:18
moderate I think she's going to win so
01:17:20
that that's my that's my strategic take
01:17:22
I am UND I remain undecided as a voter
01:17:25
but you just said she's a socialist not
01:17:26
a moderate I think in her heart she's
01:17:30
between like if you had Clinton and a
01:17:32
great question if you had Clinton and
01:17:33
you had a you know Bernie Sanders I
01:17:35
think she kind of Falls between the two
01:17:37
but I think she's pretending to be a
01:17:38
moderate to get votes right you know
01:17:40
just like Trump will pretend to be super
01:17:41
right-wing to get the you know po acted
01:17:44
up but he's kind of a moderate too
01:17:46
socially I think Trump is a moderate in
01:17:48
this race and she's much more moderate
01:17:50
than than she is I think that actually
01:17:52
is true look I think that she's
01:17:55
pretending to be a lot of things she's
01:17:56
pretending to be a moderate when really
01:17:57
she was the most liberal member of the
01:17:59
Senate she's pretending to be a change
01:18:01
agent when really she's the incumbent
01:18:03
keep in mind that she has been in office
01:18:05
now for three and a half years as part
01:18:07
of the Biden Harris Administration and
01:18:09
she was perceived within that
01:18:10
Administration as their Emissary to the
01:18:12
left wi of the party I mean remember
01:18:14
that when she was put on the ticket
01:18:16
Biden was perceived as the moderate and
01:18:18
she was perceived as the person on the
01:18:19
left and she was going to basically help
01:18:21
consolidate those votes so she's
01:18:23
pretending to be a lot of things that
01:18:25
she isn't and the reason why it's
01:18:27
working is because the Press has fully
01:18:30
cooperated in letting her run a campaign
01:18:33
without doing press interviews without
01:18:34
doing unscripted appearances and the
01:18:37
Press frankly is embarrassing Itself by
01:18:40
revealing themselves to be effectively
01:18:43
DNC operatives and that Time Magazine
01:18:45
cover story was just the latest example
01:18:47
of that I do think that this strategy
01:18:50
can only work for so long I think that
01:18:52
the media is starting to feel a little
01:18:54
bit embarrassed they're starting to get
01:18:55
a little bit shamed about the fact
01:18:57
they're letting her just give them the
01:19:00
Heisman and I don't think she can run
01:19:01
out the clock for three months without
01:19:03
doing interviews I just think that I
01:19:05
think she can do this for another week
01:19:06
or so I think that they're going to run
01:19:08
this Playbook through the convention but
01:19:11
eventually she's going to have to start
01:19:12
doing interviews and she's gonna have to
01:19:14
start putting out more substantive
01:19:16
policy proposals and I think the fact
01:19:18
that this price control proposal is
01:19:20
their very first one that they've put
01:19:22
out I think this shows
01:19:25
that this is not going to be easy for
01:19:27
her it certainly jolted me awake Zach
01:19:29
I'll tell you that so yeah I mean this
01:19:31
this idea that she can pretend to be a
01:19:33
moderate and just run on Vibes with no
01:19:35
interviews and no substance proposals I
01:19:37
don't think it's going to work for three
01:19:38
months I think she's going to reveal
01:19:39
herself I think an educated voter base
01:19:41
is going to wake up to that and
01:19:43
particularly in that independent segment
01:19:45
there's going to be a lot of
01:19:46
acknowledgement that maybe these are not
01:19:47
going to be the right policies I think
01:19:50
they're preparing their policies and
01:19:51
they're going to drop them after the DNC
01:19:52
Cham what's your take on strategy and
01:19:54
then we'll move move on to science
01:19:56
Corner we're in the middle of the relief
01:19:59
rally that Biden isn't in the race I
01:20:02
think that we had a different version of
01:20:04
a relief rally when everybody realized
01:20:07
that President Trump hadn't been
01:20:10
assassinated
01:20:11
so these are the pendulum swings I think
01:20:16
of an electorate that still hasn't been
01:20:19
given a clear definition of a or b in
01:20:23
this case I think what's happening is
01:20:26
there's a lot of testing of language and
01:20:28
ideas and Concepts that both sides are
01:20:30
doing and I think we will not know where
01:20:33
this election is going to go until after
01:20:35
September the 10th in that first
01:20:36
presidential debate because I think that
01:20:39
these big issues will be put to the test
01:20:42
the journalists asking the questions
01:20:44
will Corner both candidates both of them
01:20:46
will have points of view and then I
01:20:48
think they'll have to go into these five
01:20:50
states that matter on these five issues
01:20:52
that matter and I do think that this
01:20:54
will will be one of those issues because
01:20:56
this is a very aggressive
01:20:59
proposal that has a lot of
01:21:02
implications and that has a lot of
01:21:04
historical context of never having work
01:21:06
literally never so it's dumb we we
01:21:10
haven't seen it but it it seems dumb on
01:21:13
its face and just to be clear there is
01:21:14
no proposal we're just commenting on
01:21:16
reports of a proposal proposal will
01:21:18
probably come out on Friday this weekend
01:21:20
so you can read it for yourselves and
01:21:22
and we'll talk about the actual proposal
01:21:23
if there is one who knows could be bad
01:21:25
reporting could all be Capp freeberg you
01:21:27
wanted to talk about
01:21:29
Boeing well I wanted to just highlight
01:21:32
the the the Starliner project and
01:21:35
unbeliev the issues unbelievable give us
01:21:37
an overview and then let's let's let's
01:21:39
let's chop it up as we wrap two NASA
01:21:40
astronauts flew on the Boeing
01:21:42
Starliner
01:21:44
capsule uh June 5th and they docked with
01:21:47
the ISS and they're now stuck on the ISS
01:21:49
and they might be stuck there until
01:21:52
February because the Starliner has a
01:21:54
number of technical issues the
01:21:56
astronauts cannot get back in the
01:21:58
Starliner and just fly back to Earth
01:21:59
NASA is kind of evaluating the options
01:22:02
here on what to do and whether to put
01:22:04
them on a SpaceX crew Dragon capsule in
01:22:06
February to get them back so I just want
01:22:09
to talk a little bit about the history
01:22:11
of this project and provide a little
01:22:14
context before we highlight the the
01:22:17
particularly acute story of two
01:22:19
astronauts being stuck in space right
01:22:20
now which is an incredible story so this
01:22:22
is a nextg Space Capsule that was
01:22:25
designed to take people to and from low
01:22:26
earth orbit basically to the ISS and
01:22:29
NASA if you guys remember in the 2000s
01:22:32
decided to stop making their own vessels
01:22:34
and they're going to start using
01:22:35
thirdparty contractors so they went out
01:22:37
and had a competitive bidding process
01:22:39
and ultimately in 2010 they gave both
01:22:43
SpaceX and Boeing the winning contracts
01:22:46
to develop these commercial crew
01:22:48
Transportation capabilities SpaceX
01:22:50
obviously developed the crew Dragon
01:22:52
capsule so it was unveiled in 10 is the
01:22:55
CST 100 Boeing's first commercially
01:22:57
developed Space Capsule the company
01:22:59
would take on all the financial risk for
01:23:01
developing it with a fixed price
01:23:03
contract from NASA of $4.2 billion to
01:23:07
date by the way Boeing has taken a $1.6
01:23:09
billion Financial hit on the development
01:23:12
of this program SpaceX by the way won a
01:23:14
$2.6 billion contract to develop the
01:23:16
crew Dragon capsule and just to give you
01:23:19
guys a sense the crew Dragon capsule has
01:23:22
flown 13 missions thus far to the ISS
01:23:26
and this was the first crude Mission
01:23:28
flown by Boeing both of which got
01:23:30
contracts at the same time so originally
01:23:33
it was going to be a 2017 launch
01:23:34
timeline and I just want to hit on some
01:23:36
of the history of the Starliner problems
01:23:38
2016 it was delay you said just to
01:23:40
confirm you said it was $4.2 billion
01:23:42
that contract that contract with Boeing
01:23:45
to develop this Starliner capsule so the
01:23:47
first issues arose in 2016 when there
01:23:49
were design problems the first crude
01:23:51
flight was then pushed back to be
01:23:53
scheduled for 2019 in 2018 they found
01:23:56
issues with propellant leaks which led
01:23:58
to more delays 2019 a test flight
01:24:01
parachute failed December of 2019 they
01:24:03
had their first uncrewed test flight and
01:24:06
there were software errors that would
01:24:07
have caused destruction of the
01:24:09
spacecraft this led to NASA and Boeing
01:24:12
submitting 80 different changes that
01:24:13
needed to happen before they did their
01:24:15
next uncrewed test flight so they then
01:24:18
pushed that all the way out to 2021
01:24:21
Boeing ended up saying it cost us half a
01:24:23
billion dollars to do that then in
01:24:24
August of 2021 13 propulsion system
01:24:28
valve issues were discovered on the
01:24:30
Launchpad the flight was aborted and the
01:24:33
capsule was returned they eventually got
01:24:35
it up again in space in May of 2022 and
01:24:38
it docked with the ISS and it returned
01:24:40
back to Earth even though one of the
01:24:42
parachutes failed when it returned to
01:24:44
Earth it still made it down this again
01:24:46
led to the
01:24:48
2023 first crude launch which means
01:24:51
people are in the capsule this was
01:24:53
originally supposed to be in
01:24:55
2017 and they kept pushing it back
01:24:57
because of more issues with the
01:24:58
parachute system and then they finally
01:25:00
got it launched in June 5th of 2024 with
01:25:04
two astronauts on board to go to ISS and
01:25:07
come back on the way they discovered
01:25:10
that five out of the 28 maneuvering
01:25:12
thrusters which is how they can move
01:25:14
this capsule through space to get it to
01:25:15
dock with the ISS and ultimately make
01:25:17
its way back to Earth were
01:25:19
malfunctioning they have now discovered
01:25:21
five helium leaks helium is stored in a
01:25:24
pressure ized system to actually control
01:25:26
those thrusters and make it move through
01:25:27
space and now they may not even be able
01:25:29
to get this capsule to fly off of the
01:25:32
ISS so on June 28th NASA announced that
01:25:35
while the Starliner is theoretically
01:25:37
capable of returning the astronauts to
01:25:39
Earth in an emergency on the ISS the
01:25:42
capsule is not approved to fly until
01:25:44
these Thruster issues and the leaking
01:25:46
helium are figured out or better
01:25:48
understood and they have now pushed the
01:25:50
decision to the end of August it would
01:25:52
be massively
01:25:54
embarrassing for Boeing if these two
01:25:57
astronauts had to be rescued by SpaceX
01:26:00
it's a crew Dragon capsule had to find
01:26:01
its way up to the ISS they hopped on and
01:26:03
they came back to Earth clearly a
01:26:05
massive problem but it's a certainly a
01:26:07
personal and a human story now with
01:26:09
these two astronauts stuck on the ISS I
01:26:12
you've had a lot of comments on Boeing
01:26:13
in the past but I mean does this feel
01:26:15
like like a continued underscoring of
01:26:17
the issues at Boeing and and just to be
01:26:20
clear chat the statistics are three four
01:26:23
Starliner two unman one Mann and then
01:26:26
for uh SpaceX with the dragon they did
01:26:29
11 eight with NASA 3 with commercial
01:26:32
commercially with like other passengers
01:26:34
yeah yeah so the NASA cargo Dragon which
01:26:37
only has a cargo on it not people has
01:26:39
completed nine successful missions to
01:26:40
and from the ISS there are six more
01:26:42
planned and they've obviously done 13
01:26:44
missions um with the crew dragon and by
01:26:47
the way I don't know if you guys know
01:26:49
this this is a surprise but exciting to
01:26:52
share that we are going to have a crew
01:26:53
Dragon C from SpaceX at The all-in
01:26:55
Summit in La parked on the lawn so you
01:26:57
can actually go inside and check it out
01:26:58
and take a little tour it's going be
01:26:59
amazing so thank you to the SpaceX team
01:27:02
for bringing the crew Dragon capsule
01:27:04
chamach my gosh I mean where do I begin
01:27:07
look Boeing is these three very
01:27:09
complicated businesses that try to live
01:27:12
as one so you have a commercial airline
01:27:14
business you have a defense business and
01:27:17
you have the space business I'll be the
01:27:20
first one to say that I think it's
01:27:22
extremely difficult to be good at one of
01:27:24
those three things and the probability
01:27:27
of getting all of those three things
01:27:29
right is basically next to
01:27:31
Impossible that's just a general comment
01:27:33
and I think that specialization is
01:27:36
better the second thing that I'll say is
01:27:39
that I observed this company about five
01:27:41
years ago and I wrote about it in my
01:27:44
annual letter and part of the reason why
01:27:46
I wrote about it was there was a quote
01:27:48
I'll never be able to judge what
01:27:50
motivated Dennis mullenberg whether it
01:27:52
was a stock price that was going to
01:27:53
continue to go up and up or whether it
01:27:55
was just beating the other guy to the
01:27:57
next rate increase he said he added
01:28:00
later if anybody ran over the rainbow
01:28:02
for a pot of gold on stock it would have
01:28:04
been him who do you think said this it
01:28:07
was the incoming CEO of Boeing and I was
01:28:11
so flabbergasted because I'd never seen
01:28:13
something like this so in a company
01:28:15
where safety has to be the number one
01:28:18
priority to have an individual that's
01:28:20
characterized by the incoming CEO as
01:28:22
solely focused on their Compensation
01:28:25
Plan sort of explains why there's all
01:28:28
these fissures in this company because
01:28:30
again back to that famous Charlie Monger
01:28:32
quote show me the incentive and I'll
01:28:35
show you the outcome if the incentive is
01:28:38
safety and worldclass Engineering that's
01:28:41
what you'll get but if the incentive is
01:28:44
earnings per share growth then that's
01:28:47
what you will also get and Boeing was a
01:28:49
darling of the stock market for a very
01:28:51
long time and now what happen is
01:28:54
underneath the other things that
01:28:56
actually should matter IE
01:28:58
safety are slightly
01:29:01
deprioritized and then you have these
01:29:03
issues I really hope these two people
01:29:05
get back safe it seems like they're
01:29:07
doing a lot of experiments and they love
01:29:09
being up there but it's a little bit
01:29:12
unacceptable that they have to be there
01:29:13
until
01:29:14
February but I do trust that if Elon has
01:29:17
to go and get them basx will do a great
01:29:20
job and they'll be home safe sack's one
01:29:22
of the great things about this thank God
01:29:24
NASA gave two contracts out if they had
01:29:26
given one you know oh my God could you
01:29:29
imagine if that was Lobby you would be
01:29:31
asking the Russians to go get them and
01:29:32
then like you know we're in a little I
01:29:34
don't know if you've been watching this
01:29:36
this is what I thought we could discuss
01:29:37
it's like you know is there benefit in
01:29:38
having being dependent on Putin at this
01:29:41
moment in time when Ukraine is making
01:29:43
massive gains into Russian territory I
01:29:45
know this hasn't come up all that much
01:29:47
but that would be really dangerous but
01:29:49
by the way just back to what freeberg
01:29:50
said before sorry to interrupt you
01:29:51
before you go suck but why is this even
01:29:55
possible it's exactly as you said jcal
01:29:56
we have competition but why is
01:29:58
competition possible it's because of
01:30:00
what fber talked about before we didn't
01:30:02
have a set price the government didn't
01:30:05
come and say you will build it for x and
01:30:08
I'm only doing it one time the free
01:30:10
market was able to solve this problem
01:30:12
and it turned out the more capable
01:30:14
solution was 40% cheaper than the one
01:30:18
that they thought was going to work and
01:30:20
the one that was 40% cheaper was also on
01:30:23
time
01:30:24
one was and reliable and this other one
01:30:27
seven eight n 10 years delayed it's 100%
01:30:31
that's a perfect examp examples every
01:30:33
day of the fact that these other ideas
01:30:36
just don't work yeah I I think we've
01:30:39
pretty much beaten that capitalism is
01:30:41
the greatest Force for Innovation and
01:30:43
lowering prices sxs your thoughts on
01:30:45
this Humanity yeah yeah God forbid
01:30:48
people will get air conditioning at a
01:30:50
lower price you know and smartphones Etc
01:30:55
saaks your thoughts here yeah I mean
01:30:58
look if we're talking about capitalism I
01:31:00
think about what the Austrian Economist
01:31:02
Joseph Schumer said which is capitalism
01:31:04
is a process of creative destruction and
01:31:07
the creativity happens in the early days
01:31:09
when you've got a Founder who's creating
01:31:11
a startup and the business gets big but
01:31:13
then it gets older and the founder goes
01:31:15
away and the company can drift and
01:31:18
become bureaucratic and sometimes it can
01:31:21
renew itself and maybe you get a Brian
01:31:23
nickel and maybe to save it and
01:31:25
sometimes it doesn't and the companies
01:31:28
that get old and don't renew themselves
01:31:31
eventually fade away and they get
01:31:33
destroyed and replaced by other startups
01:31:36
it's a system that has worked incredibly
01:31:38
well in America and it's the basis for
01:31:41
all of our prosperity and Innovation
01:31:44
when you compare that to the political
01:31:45
process it's very different I mean the
01:31:47
political process kind of has this
01:31:49
knee-jerk resistance to change and
01:31:51
Innovation and it has an pulse to
01:31:54
control things it wants to control
01:31:57
prices it thinks it can solve problems
01:31:59
with just top- down mandates and it
01:32:02
doesn't reform itself it creates new
01:32:05
bureaucracies and never gets rid of them
01:32:06
I mean we create new departments they
01:32:08
never go away they just keep getting
01:32:09
bigger and bigger there's never any
01:32:11
crate of Destruction it's just like a
01:32:13
blob it's a one-way ratchet of
01:32:14
bureaucratic growth so it's really clear
01:32:18
what creates prosperity and I do think
01:32:20
we have now reached a point where the
01:32:22
government has gotten so big
01:32:24
and so out of control and so expensive
01:32:27
that it actually is threatening this
01:32:30
engine of creative destruction and at
01:32:32
some point I think voters are going to
01:32:33
have to make a choice about whether
01:32:35
they're going to try and reign in the
01:32:38
government and create more room for
01:32:40
capitalism Innovation or they're going
01:32:41
to allow it to get overtaken I I love
01:32:44
your capitalism quote and reminds me of
01:32:46
the Winston Churchill one which I'm sure
01:32:48
you've heard the inherent Vice of
01:32:49
capitalism is the unequal sharing of
01:32:51
blessings the inherent virtue of
01:32:52
socialism is the the equal sharing of
01:32:55
miseries it's uh that's a great qu
01:32:58
Winston Churchill is strong man strong
01:33:01
he I'd like to hang with that dude
01:33:03
that's a guy I would like to hang out
01:33:05
with fun guy to hang out with Teddy
01:33:06
Roosevelt oh my gosh I love to go
01:33:09
drinking with Teddy guns wow I like to
01:33:14
took a bath every day freberg please
01:33:16
don't bring up this whole thing about
01:33:18
baths cuz then you're going to make me
01:33:19
pull out of my phone the three or four
01:33:21
times you called me from the bath and I
01:33:23
took a screenshot I literally free BG's
01:33:26
in the bath he lights candles he takes a
01:33:28
picture of his pale stems and he sends
01:33:31
it to me and calls me from the bath trth
01:33:34
you can't see anything always I have
01:33:36
PTSD he's called me from the bath I know
01:33:39
he's in the bath because you hear this
01:33:40
kind of like echoey kind
01:33:43
of you know so it does and it's like oh
01:33:45
my God you're in the bathtub yeah
01:33:47
calling he in the bathroom call from the
01:33:50
bath I'll call you later right it's so
01:33:52
dist by way I mean
01:33:54
that invasion of of Russia that you're
01:33:56
talking about is not what you think it
01:33:57
is here we go so yes we haven't had a
01:34:00
general fact update in a while I'm I
01:34:02
actually want to hear your take on this
01:34:03
sax like what is talk about the of Putin
01:34:06
yeah tell us yeah what is the real story
01:34:08
with the Ukraine counter Invasion into
01:34:10
Russia I think you're falling for a lot
01:34:12
of lot of hype I mean what's happening
01:34:14
is that the stage of the war is that the
01:34:17
the fighting is in the donbass and along
01:34:20
a 12200 kilometer front in Ukraine
01:34:24
where the Russians have just been
01:34:25
pounding the ukrainians the Russians
01:34:27
have more soldiers they have more
01:34:29
artillery they have more air power and
01:34:31
they have air superiority and they've
01:34:34
just been annihilating the ukrainians I
01:34:36
mean Ukrainian casualties According to
01:34:38
some sources are somewhere between
01:34:40
30,000 and 60,000 a month it's massive
01:34:43
and unsustainable so what zalinsky did
01:34:45
is he basically threw this Hail Mary
01:34:48
where he took some of their best forces
01:34:49
their best reserves and had them attack
01:34:51
this undefended part of Russia K and
01:34:55
yeah they took a few hundred miles of
01:34:57
undefended territory but there's nothing
01:34:59
strategically important there and now
01:35:02
Russian air power is basically creating
01:35:04
significant casualties among those
01:35:06
forces and the Ukrainian forces are now
01:35:09
trying to figure out what to do I mean
01:35:10
they're basically running around this
01:35:12
part of Russia like headless chickens
01:35:13
trying to figure out where they can dig
01:35:15
in and find some defensive
01:35:17
fortifications I don't know what zinski
01:35:19
is trying to accomplish I guess it's
01:35:21
kind of a PR offensive a lot of people
01:35:22
have been fooled into thinking that this
01:35:25
is somehow a GameChanger in the war it's
01:35:26
not all zalinsky has really done is take
01:35:29
some of his best troops away from where
01:35:31
the strategically important fighting is
01:35:33
have them attack this part of Russia and
01:35:36
over time Russia's just going to mop
01:35:38
them up did the Russians get caught with
01:35:40
their pants down yeah I guess they did
01:35:42
is that an embarrassment to Putin I
01:35:44
guess it can be spun that way does it
01:35:46
change the outcome of this war in any
01:35:47
way no it's not and what we're on track
01:35:50
for is at some point probably next year
01:35:54
Ukraine is going to collapse I mean
01:35:56
their position in this war is
01:35:58
unsustainable and taking some of their
01:36:00
top troops feeding them into curse where
01:36:03
they can be easily picked off by the
01:36:05
Russians is only going to accelerate
01:36:07
that process and then saaks what about
01:36:09
nordstream what we just found out about
01:36:12
nordstream well the the nordstream story
01:36:14
is is very strange because we're on our
01:36:15
third or fourth explanation here of what
01:36:17
what happened I mean it was pretty clear
01:36:20
that somehow the US was behind it and
01:36:25
they've been blaming you know first they
01:36:27
said that the Russians did it right
01:36:29
which makes no sense that'd be like the
01:36:31
Russians shooting their own legs off
01:36:35
that was the first cover story then they
01:36:37
kind of went with I guess delusion he
01:36:40
did it from a yacht I guess that's the
01:36:41
story they're on now yeah the Wall
01:36:43
Street Journal report just to give
01:36:44
people the background of why we're
01:36:45
talking about this the Wall Street
01:36:46
Journal reported that Germans
01:36:48
investigation into this uh you know the
01:36:50
people who were impacted by it here's
01:36:52
the quote the holding was born of a
01:36:53
night of heavy boosting and the iron
01:36:55
determination of a handful of people who
01:36:57
had the guts to risk their lives for the
01:36:58
country the Ukraine operation cost
01:37:00
around 300,000 according to people who
01:37:02
participated in it inv a small rented
01:37:04
yacht with a six-member crew including
01:37:07
trained civilian divers one was a woman
01:37:09
whose presence helped create the
01:37:11
illusion they were a group of friends on
01:37:13
a pleasure Cruise so you're saying you
01:37:16
don't believe that German report well no
01:37:19
so this report about that yacht being
01:37:21
used and and how zusy was is like The
01:37:24
Mastermind of this yeah that support is
01:37:27
not anything new this has been out for I
01:37:29
don't know at least six months I've
01:37:31
always been skeptical about this the
01:37:32
thing to understand about the
01:37:34
northstream pipeline is that it was a
01:37:36
massive structure surrounded by huge
01:37:39
amounts of concrete on the ocean floor
01:37:42
and blowing this thing up
01:37:45
required some significant expertise in
01:37:48
underwater demolition I'm just very
01:37:50
skeptical that it could be accomplished
01:37:52
by guys on a yacht under Zusi I mean the
01:37:56
ukrainians have never had a Navy this
01:37:58
just doesn't seem like something that's
01:38:01
in their wheelhouse of capabilities it
01:38:03
all it always made more sense to me that
01:38:05
the US was involved somehow but how do
01:38:07
how do you think an article this detail
01:38:10
that points
01:38:11
to the
01:38:13
Dutch intelligence Community the German
01:38:16
intelligence Community American int how
01:38:18
does an article like this with this much
01:38:21
detail then get written and put into the
01:38:24
Wall Street Journal how does that happen
01:38:26
I think intelligence sources want it to
01:38:28
happen I mean they have to get their
01:38:29
sources from somewhere right and I'm I'm
01:38:31
just saying that this story about
01:38:32
disillusioning The Yacht has this is not
01:38:34
new this has been out there for many
01:38:35
months look I mean it could be true I
01:38:38
mean I I guess I don't know for sure but
01:38:40
I I guess I'm also just saying that I'm
01:38:42
a little bit skeptical about this I mean
01:38:44
Seymour hsh had other reporting from
01:38:46
different sources who claimed that the
01:38:49
US was behind it and President Biden
01:38:52
himself at at a press conference said
01:38:55
that if Russia invades Ukraine we will
01:38:57
bring an end to the northstream 2
01:38:59
Pipeline and when a reporter asked him
01:39:01
how will you do that he said we have
01:39:02
ways we'll get it done and similarly
01:39:04
Victoria newand warned at a press
01:39:06
conference that northstream 2 will not
01:39:08
move forward if Russia invades and then
01:39:10
lo and behold the pipeline gets blown up
01:39:13
and if you're comparing which of these
01:39:15
two forces has the capability to do
01:39:17
something like this I know for sure that
01:39:19
the US does Ukraine I'm just a little
01:39:22
more skeptical of just give you some
01:39:23
facts to introduce some facts here it it
01:39:27
was only 260 feet or so down where they
01:39:30
blew it up I've Dove to 130 140 feet
01:39:33
many times you can easily dive three
01:39:37
four 500 feet this is not difficult I
01:39:39
could dive to 260 fet with you know one
01:39:42
day of training and I've I've done half
01:39:44
of that and I have only dived 25 times
01:39:48
in my life so this is easily
01:39:49
accomplished saxs and so this sounds
01:39:51
like it's dead on I mean I know you
01:39:53
don't
01:39:54
what about the explosives yeah it's very
01:39:56
simple I mean you're literally attaching
01:39:58
it to a pipe and you hit boom it I mean
01:40:00
these people
01:40:01
are the the Ukraine people are massive
01:40:04
amount of explosives to do something
01:40:06
like this no it does not in the face of
01:40:09
Ukraine defending itself against Russia
01:40:12
one of the greatest militaries on the
01:40:14
planet this idea that that same group of
01:40:16
people who have held Russian at Bay for
01:40:18
two years plus can't go down 260 blow it
01:40:22
up is ridiculous they could easily do
01:40:24
this this is not a difficult task super
01:40:27
easy for the Ukraine Army think you're
01:40:29
in position to know I don't think you're
01:40:31
because I have facts 260 feet down I've
01:40:34
Dove to 130 it's very easy to go 260 end
01:40:37
that's your facts I mean it's it's just
01:40:39
called reality chth I'm sorry sax is the
01:40:42
most biased person in the world when it
01:40:43
comes to this it's hysterical to hear
01:40:44
him it Jason Jason Jas said you what you
01:40:48
just said was it here are the facts it's
01:40:52
260 ft down
01:40:53
I've gone to half that so it's possible
01:40:55
so they did it no no he's saying it's
01:40:59
too sax is premise is this is too this
01:41:03
is beyond the capability of the Ukraine
01:41:05
Army that's ridiculous saxs easily well
01:41:11
a lot of people are dumb then it is the
01:41:13
stupidest concept you're also an
01:41:15
explosive expert as well as I'm an
01:41:16
expert
01:41:19
at he some firecrackers he knows what
01:41:22
he's talking about as well dude I bought
01:41:24
pineapples that's a quarter stick of
01:41:26
dynamite when I was think six guys on a
01:41:28
yacht did this easily easily six
01:41:32
ukrainians these are hardcore mofos you
01:41:35
you think these ukrainians are not
01:41:37
hardcore they were they probably did
01:41:38
drunk they did it drunk I bet you they
01:41:41
were half in the bag when they blew that
01:41:43
up that's why Russia can't beat
01:41:46
them I've also read the Seymour HS story
01:41:48
and it just makes a lot more sense to me
01:41:49
that's all I'm going to say is it just
01:41:50
makes a lot more sense to me and by the
01:41:52
way I've never taken away anything from
01:41:54
the ukrainians as a fighting force I
01:41:56
mean clearly they are fighting bravely
01:41:59
and they are hardcore I've never taken
01:42:01
that away from them and I'm certainly
01:42:03
not saying that they're incompetent or
01:42:05
anything like that and they've
01:42:06
definitely been massively plused up by
01:42:08
American weapons and you'd like to see
01:42:10
them win versus Russia and get Russia
01:42:11
out of their country right I would like
01:42:14
to see America stay out of other
01:42:16
people's Wars and I would have liked to
01:42:18
have seen them agree to a peace deal
01:42:19
that would have avoided this war okay
01:42:21
okay who would you rather win the war
01:42:23
Russia or Ukraine if you had to pick who
01:42:25
would you rather not my War I don't
01:42:26
think America should take sides in other
01:42:27
people's Wars I think we should stay out
01:42:29
of them and I think we should agree to
01:42:30
peace deal when we can and not sabotage
01:42:32
those peace deals yeah I'm for peace
01:42:34
deals too I'm also I'm also for
01:42:36
democracies beating autocracies okay
01:42:38
everybody this has been another amazing
01:42:41
episode let's canceled elections this
01:42:43
has been another amazing episode of the
01:42:45
Allin podcast for the Rainman yeah David
01:42:48
Sachs the one and only Sultan of science
01:42:52
David freeberg getting ready for the
01:42:54
all-in summit sold out great speakers
01:42:57
lots of surprises for y'all and our
01:43:01
chairman dictator so rested so
01:43:04
tan working 15 hours a day in Italy and
01:43:08
we'll talk about wi I have I have
01:43:11
something that I have something I have
01:43:13
something for around 8090 that I'll be
01:43:15
able to talk about hopefully Sooners oh
01:43:18
yum yum oh I SL a little bety in there
01:43:21
all right everybody I am world's
01:43:23
greatest moderator and the executive
01:43:25
producer for life love you boys see you
01:43:27
next time everybody
01:43:29
byebye let your winners
01:43:32
ride Rainman
01:43:36
David and instead we open source it to
01:43:39
the fans and they've just gone crazy
01:43:40
with it love queen
01:43:45
[Music]
01:43:49
of Besties
01:43:53
my dog taking
01:43:55
[Music]
01:43:57
driveway oh man myit will meet me we
01:44:00
should all just get a room and just have
01:44:02
one big huge orgy cuz they're all this
01:44:04
useless it's like this like sexual
01:44:05
tension that they just need to release
01:44:13
Som we need to get mer
01:44:17
[Music]
01:44:23
I'm going
01:44:25
all and now the plugs the all- in Summit
01:44:29
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