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all right everybody Welcome to the all in podcast and with me again this week the Sultan of science the prince of
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panic attacks the queen of quinoa David Friedberg the dictator tremath polyhapatia wearing a beautiful Mr B
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sweater and David sacks the Rain Man himself thanks for coming to my Laurel piano dinner on Tuesday Jayco that was
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wonderful thanks uh at least one bestie showed up for you wonderful wonderful dinner I sat as far away from the Laura
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piano people as possible in the arranged seating thank you for that I guess maybe
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you were like I'm gonna contain the damage Bernard Arnold said put put the all caps guy at the end and I said okay
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yeah he still hurt me I was like what's the amuse bouge at dinner every time he said something
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he yelled like he was in office he's like I want another butterscotch pudding the butterscotch pudding is
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delightful Shawn I'm four feet away from me Jay Cal you can take the caps lock Sean was so Ember Chef Sean crush the
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chef Sean crush it once again were you selling alarms when the restaurant like almost ran out of something alert alert
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alert restaurant is running low on coffee we're dangerously low on caviar on this one is
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[Music] [Music] all right everybody Welcome to the Pod where we uh you know try to inform you
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we try to make some jokes here I just want to make what is a little bit of an opening statement here it's not an
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apology and it's not a Victory lap in any way but there's been a lot of attention I
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think on the last episode of the Pod and perhaps some tweeting from two of the four besties this past weekend
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I saw and I you know I'll let you speak for yourself your sax and we're going to
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get into the timeline of what's occurred and then what are potential outcomes here in solutions to the banking issues
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that we've witnessed in what is a week since the bank run on Silicon Valley Bank in the shutdown on
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Friday but what I saw and again speaking only for myself here was absolutely terrifying up close and personally
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watching people pulling money out of Banks and watching people have to set up loans to hit their payroll and this was
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like one of those surreal moments in a in a movie where like a meteor is coming towards Earth and you see it in the
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telescope and nobody else sees it or only a small number of people in the observatory see it and I think part of
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the reason people listen to this podcast is because we are insiders and speaking
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again just for myself I'm always trying to be exceptionally candid and transparent with the audience
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additionally I make jokes uh so sometimes you might laugh during this podcast or you might laugh when you're
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reading my tweets and uh that's part of what I do now I also realize that we have an audience now that is larger than
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I think any of us expected for this podcast I certainly magnitude larger than I expected and frankly I don't know
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if this Pockets was going to make it past 50 or 100 episodes and my Twitter following count
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doubled since we started this podcast because you tried to ruin the putt I think it was because of the Caps locks
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but anyway putting all that aside what I would like to say as well is like we are
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living in a situation that is unprecedented I think the alarm Bell I sounded you know was because I saw a
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fire we'll get into the timeline here but I sounded that alarm Bell after Silicon
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Valley Bank was put into receivership and when I saw additional bank runs occurring I
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wouldn't change it I think these were the right the right thing to do was to inform folks now I did use all caps
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perhaps a little too much that was a little bit of a bit if people didn't understand that maybe I need to adjust
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my communication style now that this thing is so popular but I stand by my mode of operating in
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the world which is I always want to be candid with people I always want to tell the truth and yeah sometimes I make
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jokes about life and you know dealing with these stressful situations that's it it's not an apology it's more of an
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explainer and yeah maybe I need to adjust the caps lock or how I deliver stuff but I stand by the message of what
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I said and I think it's important for us to maybe look at the series of events and misinformation that has spread
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because there are people literally blaming Venture capitalists for the bank run that is now systematic and the the
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balance sheets of multiple banks around the world and I think sax would be great for you
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to maybe just comment on the week that was and the timeline of events yeah so as usual you're not apologizing no
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absolutely not apologizing but we'll recognize that this platform is bigger and that may be on the margins I could
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adjust my communication strategy but Chris there's a lot of people who don't know that I make jokes
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and maybe people don't understand what I'm joking and when I'm serious right and so right Jason what would you change
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was there anything you changed come on I think I might not have used a Mad Max image and GIF about the end of the world
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because people are too stupid to understand that's a joke and a fictional movie I see so you find yelling
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effective it depends well Jay Cal I agree that I don't think you have anything to apologize for in terms of
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the substance of what you're trying to get across I personally could have done without the all caps it was a bit oh
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yeah what you're basically saying is nobody should listen to you because you're not that important and I
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wholeheartedly agree with that I'm saying understand I might joke because of course category yeah all right let's
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go back let's go back and look at the Timeline because there are now serious accusations and I would call it really
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scapegoating uh and it wasn't just you it was me and Bill Ackman in fact the Wall Street Journal editorial board
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which I respect a lot mischaracterized what me and Ackman were trying to do in terms of drawing
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attention to a regional banking crisis in progress a run on the banks they called it spreading panic I don't know
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how you tweet or publicly discuss a run on the bank that's currently happening needs to be addressed with an immediate
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Federal intervention I don't know how you can discuss it without then having someone else mischaracterize it as
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trying to spread a panic but Jake how the The Wall Street Journal editorable didn't mention you so you're off there
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okay they didn't know who you are but thank you but no but seriously so I went back and
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looked at the timeline of all of this and so first of all we have to understand that this banking crisis now
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has uh swept in five banks Five bank failures first or a silver gate but everyone dismissed that because it was
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some weird crypto bank then it was svb but everyone sort of dismissed it because they said it was based on
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panicky VCS rather than a systemic problem in the banking system then it was Signature Bank which got seized on
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Sunday which I think utterly refuted the idea that this was just a Silicon Valley
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problem then you had the feds step in and backstop First Republic which would have been the next dominant of fall if
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it wasn't backstopped and then five you had Credit Suisse basically again avoid an outright failure because they got
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backstopped by the Swiss government so we now have five banks in roughly a week and these are not small Banks they're
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this Credit Suisse is a is a G7 but globally systemically important bank and the other ones are top 20 top 30 type
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Banks we're talking about hundreds of billions of dollars in deposits so clearly there's a larger phenomenon
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going on here and frankly it's being caused not by like anything VCS did because VCS are just depositors we're
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just one class of depositors and deposits are not to blame for what's going on here what's going on is that
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these banks have huge unrealized losses on their balance sheet and the losses have come from the sun's spike in
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interest rates that's what's going on the sun spike in interest rates is because we've had the most rapid fed
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tightening cycle in our lifetimes in the last year the FED funds race gone from roughly zero to almost five percent that
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has broken a lot of things and the banks which have broken first are the ones that had pre-existing problems
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and they had horrible risk management but that's who gets broken first in a stress test right is the most poorly run
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Banks the ones with pre-existing issues but just because they went first doesn't
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mean that others don't have similar kinds of issues now I'm not saying this in any way to be panicky maybe those
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banks will be fine but there are larger issues in the banking system that are worth talking about in
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to the point about whether VCS could have spread this J Cal you're absolutely right about the timeline I mean I went
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back and checked I personally never tweeted anything about sgb until Friday afternoon when svb was already in
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receivership and the run on the bank had already started with signature and First
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Republic and we could see it with our own eyes and then this pod didn't drop the one where we talked about this
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problem didn't drop until Saturday morning when the banks were already closed and by Sunday night the FED had
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acted and basically implemented our recommendations which was to basically intervene so I don't know how you can
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blame this search for scapegoats I think is getting out of control and it's just
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not factually accurate and you know that it's convenient to make Tech which is hated right now
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chamoth and Friedberg you know the scapegoat Venture capitals obviously the the part of tech that people might hate
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the most or the easiest Target but let's talk about the FED raised those rates because of inflation and inflation
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happened because of out of control spending due to covid and then the the second Administration so you had a
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republican Administration that spent a lot of money and then a democratic Administration shamata spent a lot of
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money so maybe we could even go backwards from fed fund rate going you know what looks like parabolic when you
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look at the chart maybe you could speak to what got us to the FED making those decisions chamoth
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or Friedberg maybe I can just do a little cleanup on what Sac said I think the issues that Credit Suisse are
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different than the issues at First Republic and the issues that first Republic are different than those other
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three Banks the other three Banks David that you mentioned signature Silicon Valley Bank
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and silvergate all had very traditional liquidity crises right we talked about this last
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week which is duration mismatching where you have depositors who want their money
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today but you have assets that mature in 10 years and as a result you have huge unrealized losses if you all of a sudden
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cash them out today versus waiting 10 years I think what's happening at First Republic is really just about making
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sure that that loan book and the depositors can get parked into a combination set of banks that can take
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care of the balance sheet so that there are no more liquidity issues at Credit Suisse they have an enormous
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amount of liquidity what that was was I think a lot of speculation around whether they would default on their
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bonds or whether they would theoretically need more liquidity but the balance sheet itself was not
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only liquid but also very solvent so I think that was just more of a panicky reaction to comments from a 9.9
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shareholder who just said that they can't put in any more Equity but even then I went back
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this is the chairman of the Saudi National Bank he was asked on Bloomberg would you give credit Suites more money
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and he had a very reasonable answer but it was snapshotted in a very awkward way
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the first sentence was under no circumstances would he do that okay now if you stop there you could be panicked
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but the rest of it made a lot of sense which is he said look in Saudi Arabia if we go above 10
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percent we have to go through regulatory approvals domestically and there are regulatory approvals abroad that's a big
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hill to climb and all of a sudden it no longer becomes a financial investment it
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becomes a somewhat political investment and so we're very happy at 9.9 that was the totality of a statement but if you
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just cherry pick the first 45 seconds and ran with it which people on the internet did
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this is sort of what caused that second level wave Panic at a g-sub and then the
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Swiss National Bank stepped in and I think that that Panic has largely gone okay so what is the real issue the issue
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again is I think we have had a bit of supervisory failure here right because we all know this in any industry if you
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let capitalism go totally unchecked shareholders will demand immediate profits today it happens in every
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industry except in ones where you can basically gamble on future profits and that's what tech does
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but every other shareholder in every other asset class demands money today and that's the same for banks the
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problem is the banks are a highly regulated business they are supposed to be supervised by The Regulators
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and this is a very clear example where why is there not a real-time spreadsheet I mean this is not complicated stuff
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where assets and liabilities and duration mismatching can be known on a real-time basis where the San Francisco
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fed Mary Daley should have a report that's escalated to her when svb got over their ski tips which they did in Q4
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of 2022 so I think the real question that has to be examined is where were these folks
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for the last four months when they could have done something not just about this
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but rules in general for all banks that are not the gcps and I think that's a very important question that politicians
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need to get to the root of Friedberg we discussed this article from Seeking Alpha which came out on let me get the
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exact date here December 19th title of this Seeking Alpha story is svb financial colon blow up risk and the
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summary in three bullet points says bullet point one potential losses in loan portfolios could severely impair
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book Equity number two unrealized losses in hold to maturity portfolio already equal to book Equity number three
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funding environment for startups will pressure deposit based adding even more pressure to the balance sheet in other
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words startups spending money to cover their burn rate Free Bird and obviously we had the Dodd-Frank
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rules lessened or loosened under the previous administration and that specifically was driven by Silicon
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Valley Bank they had a big part in that so looking back on this and and people do want to place blame let's talk about
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the effects that occurred because this was hiding in plain sight literally in December in an article that
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looks like it was written by somebody who went into a time machine and said how do I warn people in December about
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this maybe you could talk about the fed's interest rates the spending and what led up to this look issue with the
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banks you guys remember when we started this podcast three years ago we were like they're gonna shut down the economy
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there's gonna be crazy second and third order effects of doing that no one knows
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what they're gonna be here they are and I think that's like the root of what is a Rippling effect
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you can't shut down the global economy and stop trade and stop people and have the government step in to write a giant
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check and not expect that you're going to have to cash that check at some point that's effectively what I think we've
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been kicking down the the road here the way we initially tried to resolve the problem was to drop rates to zero and
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then spend our way you know back to a growing supported economy and then overshot ended up with you know too much
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stimulation too much stimulus two lower rates for too long responded too quickly
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whiplashed back at the end of the day there was a giant gaping hole blown into the global economy
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when we shut down the world from covet blame it's just what happened and when that happened there was a
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massive cost that had to be born at some point and it's gonna get born at some point
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and the Rippling in a pond you don't know where the Ripple is going to hit what part of the pond what leaves it's
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gonna hit that's what's going on still and it's such a dynamical system it's so hard to say with linear certainty this
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is what should be done and what could have been done and what they should have done at the time no one had that
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predictive capacity back then they did what they needed to do people thought that they should have drop rates they
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said we should have written all these big stimulus checks some people said you shouldn't some people said you did
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certainly some people are being proven right and some people are being proven wrong but
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at the end of the day the economic loss that was realized at that period of time
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we're still trying to get out of it and we're still recovering from it I think that's a big part of what's being eaten
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up right now and you're going to see it in the Wipeout of certain Equity you're going to see it in the Wipeout
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of these banks of the assets that they hold and these portfolios and the effects of
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that are obviously you know still being felt Saks do you agree that mistakes that this uh there isn't
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somebody to blame because it is clear that the FED said inflation is transitory that was wrong and then they
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went faster than in history to raise the rates those seem like two glaring mistakes and then the Todd the
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Dodd-Frank loosening under Trump and with Silicon Valley Bank pushing them that seemed like a really big mistake by
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the way I wasn't saying the feds not to blame for not raising rates fast enough okay that was because you guys remember
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I was the first person to talk about sure what Stan drucken Miller had said that they're not raising rates fast
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enough that we've got massive inflation we should have been raising rates I was the first person on this show to be you
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know barking that so don't don't forget like I was there okay like pretty early what I was pointing out was like we shut
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down the economy during covet that is the main yeah so that's the main cause that is the Cannonball that got blown
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through the ship got it and everything else is plumbing and patching and work to try and keep the ship afloat and
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we're still dealing with that and at the same time as you guys know we've we've been loading the ship up with debt the
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global ship the global economy with debt 360 Global debt to Global GDP ratio right now and as that ship has gotten
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heavier and heavier to have a giant hole blown in the side while you're trying to
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do all this Patchwork with all this debt Weighing on it it's a critical challenge
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we're feeling acutely here they're feeling it in Europe now and we're certainly going to see the global
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ramifications as we try and fix this economic catastrophe that was caused by covid at the same time that we've been
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spending our way into a happier future that it turns out we have to pay the bills for at some
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point sex your response the question of who you blame for this banking crisis has really become a political Rorschach
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test and I've seen that there are six different parties that people want to blame in this situation and there's some
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Merit to all of them but the degrees are very different number one okay number one the bank management of
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all these different banks clearly very poor risk management didn't do a good job they are to to blame however and
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tremath is right about these Banks they differ in the details but the point is that they're all operating under
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conditions of extreme stress where did that come from number two the fed's rapid rate tightening cycle clearly I
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think that the the combination of poor risk management with the spike in interest rates that basically has
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precipitated this larger problem number three is I think the Biden administration's spending which In
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fairness started with covid before Biden but Biden really intensified it and then
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I think it really compounded the problem in the summer of 2021 by claiming that inflation was Transit story when it
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wasn't that allowed them to keep spending and keep printing money and kept QE going for another six months
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that created the bubble of 2021 everything got super frothy and then that made the rate cycle even more
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vicious because you started six months later they could have started six months earlier and it could have been more
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gradual and I think that really was a disaster for the economy okay number four the d-reg in 2018 I think Elizabeth
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Warren and rokana have made what I would call a compelling case that the d-reg in
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2018 have contributed to this problem I think in hindsight creating a two-tier system of banks
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where one tier are the systemically important Banks who are completely guaranteed and backstop by the federal
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government and then a sort of lower tier a second tier of regional Banks was a poison chalice for the regional banking
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system because in the short term it meant they were more lightly regulated which may be appropriate for you know
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smaller banks that aren't these Mega Banks however it has also now I think created a situation where people are
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less confident about them and so the money flows are going from the regional Banks to the systemically important
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Banks the sibs so like I said it might be a double-edged sword and I think we're gonna have to look at those
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regulations and figure out what's the right regulatory regime to create confidence in the regional
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banking system we want a thriving Regional banking system and so the question is what's the right
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regulations that get us there and then the final two that we can talk about later are I'm hearing wokeness getting
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blamed which listen I think that wokeness was a distraction there was a lot of crazy programs happening at these
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Banks but listen if wokeness was the key factor the whole Fortune 500 would be out of business because because they all
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do this stuff they all do this stuff so I think I think we're going back to the well a little too often on that critique
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and I don't want to I don't want to burn that critique out because I I think that
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wokeness is bad but it's not the key reason why this stuff happened and then the last group that gets super wokeness
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we could also maybe frame it as ESG more broadly as the distraction because woke
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this is charged ESG is real yeah what I would say for sure is that if these banks have spent as much time
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on risk management as they did on ESG or on woke then this crisis wouldn't happen
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so definitely a distraction but not not the thing that like specifically caused it and then just the final thing is VCS
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and I just can't fathom at this point given the multiple bank failures given that we see the larger problem of
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unrealized losses on bank balance sheets that somehow any class of depositors would be blamed for this that just makes
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no sense to meth I think the VC the critique is specific to Silicon Valley Bank because I think and this article
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was in the Wall Street Journal but what it shows is a really complicated intertwined relationship between VCS and
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Silicon Valley Bank where you know VCS were given very cheap interest rate loans they were given GP call lines of
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credit they were given LP lines of credit and then those same VCS would be directing their companies to put their
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deposits inside of SPV who would then take those deposits and buy perhaps and buy risk and while the reality is all of
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this stuff will come to light because I think it will get exposed as we go through Congressional hearings on all of
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this but I think the I think pointing the finger at VCS in this specific case is
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somewhat warranted because there was a little bit of people working in lockstep together and there was a a lack of
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functional responsibility around how to be a true fiduciary so if you come to a board and your founder is 22 years old
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and you give that person 15 or 20 million dollars I think it makes a fair amount of sense that you are supposed to
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be the more sophisticated Financial person in that room and if you have incentives that aren't
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properly disclosed to that CEO and now a set of decisions are made I think that that there should be some
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accountability for that or at least some exploration of why that happened I just
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want to make sure the audience understands this because it is a bit in the weeds and it's a bit inside baseball
00:23:33
what you're saying shamoth is if I can summarize it there are people who are the adults in the room Venture
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capitalists they have deposits at Silicon Valley Bank they also might have loans that are fantastic with Silicon
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Valley Bank I have a mortgage for this office from Silicon Valley Bank and I talked about how on the last episode how
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great it is they come they open wine with you it's white glove service that you wouldn't get at another bank
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and then they might have loans against What's called the GP carry or the GP share or they might have mortgages and
00:24:05
so there's a conflict there if you're a venture capitalist and you're directing a 22 year old CEO to Silicon Valley Bank
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maybe you're doing that is explored no the biggest conflict of interest and in some cases Silicon
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Valley Bank is a limited partner in all of these funds my point is interesting okay hold on we have to
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explain that so imagine a situation you go and start a fund Silicon Valley Bank constituent says let me be a limited
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partner and invest with you let me give you some amount of money I don't know where that money comes from from Silicon
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yeah well let's be realistic more like 25 50 million 100 million okay that's a lot of
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okay so a million kind of is whitewashing this problem so you give them a reasonable amount of money
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they're like wow I'm I have tremendous loyalty for you thank you well do you need anything else do you need personal
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loans do you need lines of credit for your business sure why not I take those two
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and invariably on the back end now your loyalty obviously builds up again nothing none of this is wrong but this
00:25:05
is what's happening and then you tell your companies to keep your deposits there maybe the cash
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management program is not as strong as it would have been if you were more circumspect and you didn't have those
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incentives to direct people to one institution only in any other part of the market so in
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the public markets as an example there is such a bar for disclosure okay and I cannot stress this to you enough related
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party transactions all of this stuff we have to tell everything not just for us but even if our like sister or brother
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or mother may have a transaction with an entity that we're doing a deal with and it just isn't the case in private
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markets and so it's not to say that anything untoward happened but when people point the finger at VCS I think
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they are pointing to this whole set of issues and asking the question shouldn't there have been more disclosure and
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transparency around it and now that this has come to pass shouldn't we explore it
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and I think that's what the Wall Street Journal did they started pulling on this
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sweater thread and my guess is that you're going to find a whole ball of yarn at the end of it sax what do you
00:26:08
think of this I think tremath makes a fair point that if VCS have svb as an investor and then they're directing
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startups to use svb that is a conflict that should be disclosed by the way we never did either one of those things we
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never had sdb as a limited partner and we also never direct our starts to the bank at svb I don't know why we'd ever
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do that moreover I always try to talk Founders out of taking Venture debt whether from svb or elsewhere so listen
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can we be clear about that I've never directed anybody to a specific bank I know able to get two or three Banks and
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have redundancy yeah totally and look Founders have multiple VCS typically on their board so
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the idea that like anyone VC directs them which bank to use is this not that's not realistically what happens at
00:26:53
these startups but look I think chamoth is right that when there is a bank failure or any kind
00:27:00
of failure this big then all the practices are going to be under a microscope and there's going to be some
00:27:04
scrutiny there we go and maybe there should be but my larger point is we're now operating in an environment in which
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clearly there's a larger set of stresses on the banking system we've already had
00:27:15
now Five bank failures or near failures moreover do any of us believe that this is over or do we believe there are more
00:27:22
shoes to drop if we believe that there are more shoes to drop we may not know exactly what they are but but I think
00:27:27
all of us probably believe that we're not the end of this but but but just a thought if we believe there will be more
00:27:33
shoes to drop then clearly the issues cannot just be limited to Silicon Valley they have to be a larger set of issues I
00:27:41
think that it's important to understand the facility that the FED created so what the FED did this weekend
00:27:48
is essentially create a buyer of Last Resort again now how do they do this so all of these Banks basically have assets
00:27:55
that they bought for a dollar and are now worth 95 cents and that's what's creating this whole issue or 80 cents or
00:28:01
85 cents you you pick the number but they're not worth the dollar that they bought
00:28:05
what the FED basically said is okay give me that asset give me that Bond I will value it at a dollar and I will
00:28:13
give you a dollar as a loan and you will pay me interest and the interest rate I
00:28:18
think is what's called ois and they added 10 basis points on top so I think it's about 4.9 percent
00:28:24
so what it allows all of these Banks and if you take all of the banks that are not the top four in America so the top
00:28:31
four are JPMorgan B of A City and well so just ignore those for one second the other
00:28:37
end Banks if you look at all of the assets that are underwater because of all the rate hikes that sax talked about
00:28:44
and you add up all those losses that is about two trillion dollars and the FED didn't denounce that there
00:28:52
was a beginning and an end to this program other than saying these would be one-year loans
00:28:57
and so I think the exposure for the American banking system at a minimum is going to be this two trillion dollars
00:29:05
because now the incentive if you're a banker right now running one of these banks that has not gone under
00:29:12
is to immediately go to the Fed put all of those assets to them get a loan and now take that and buy different
00:29:21
assets different bonds different U.S treasuries that are yielding much more than what your old treasuries were
00:29:29
yielding and I think that's the Arbitrage that we've unfortunately created and the other question now though
00:29:36
however is what does that mean for the top four Banks right because if it's two trillion for everybody else but the top
00:29:42
four what's the gap for the top four that looks like it's somewhere between a trillion and 2 trillion so that's
00:29:49
another amount of money we're going to have to cover the FED will have to backstop and
00:29:54
then as Friedberg said these checks always come due what do we do in a year because in a year
00:30:03
the problem is the only way to make the banks in a position to repay this much money in one year
00:30:10
is to cut interest rates so massively that these assets massively inflate and now all of a sudden you're in a position
00:30:18
to cover this so this is Delta is because it's about they're down 15 10 and Book value these
00:30:26
longer terms of security again it depends on what they bought we don't really know enough details so I don't
00:30:31
want to guess but if you own these 10-year treasuries you could be off 10 or 15 if you own
00:30:36
mortgage-backed Securities it could be off a little bit more if you own short-term Securities they're off a
00:30:41
little bit less but these are with the government you get a loan collateralized by these assets so you're still holding
00:30:47
them right yes and they mature so if the FED takes an emergency posture and says
00:30:52
okay guys we want to avert a crisis in a year from now and we're going to cut rates these
00:30:57
assets that these Banks own will be worth more which will allow them to repay the loan
00:31:03
as far as I can tell all we've done is we've kicked the can down the road for a year
00:31:09
but I do think it's important for people to realize this doesn't solve the problem it just means that mark your
00:31:15
calendar for a year from now we have a problem on March 15 2024 because all perfect folks that took money what do we
00:31:24
do yeah and so a year to work it out Freeburg would seem like a good idea because
00:31:31
the FED is fighting inflation they seem to have gotten some portion of it under control it's not out of control right
00:31:37
inflation and maybe if they can slowly you know either start Ray Cuts or pause so let's shift the discussion to hey
00:31:46
what are the changes we need to make to the system and how do we think this plays out over the next year Freeburg
00:31:52
chamoth had one suggestion which was all of these Banks should have a disclosure
00:31:57
statement Mark to Market every day week month quarter whatever it is just like circles usdc their stablecoin has a page
00:32:06
with their disclosures of all their Holdings so that seems to be a very productive one we should have them Mark
00:32:11
to market the Dodd-Frank stuff as Sac said you know Elizabeth Warren probably correct we need to reverse that so those
00:32:18
are two very tangible suggestions real-time dashboard we need to have a real-time dashboard at every single fed
00:32:26
that allows them for every bank that they supervise to know in real time I'm not sure that should be true but
00:32:36
they are their supervisors they should see it they should choose to ignore it but they should not not have it
00:32:43
Freeburg what are your suggestions going forward as to how we can learn from this
00:32:47
situation forget about the Cannonball as you vividly expressed there I think very
00:32:53
well a great analogy but just going forward how do we keep the ship from taking on water if we do have a
00:33:01
cannibal hit it again now we got a hard that's a hard equation to solve it that's why I'm asking you that's why
00:33:09
I'm asking you suggestions a lot of Demands for money you guys see I I think there's a lot of
00:33:17
things that are seem unrelated that are all pretty related right now there's a massive protest underway by
00:33:24
labor in France there's a massive protest underway in the Netherlands there's strikes on the Underground in
00:33:33
London when we talk about global debt and U.S debt we often I don't think account for all
00:33:40
the debt which also includes promissory obligations made to a Workforce Global Workforce that's been working for
00:33:47
decades individuals that have spent their whole lives committed to some company or to some government
00:33:53
working with the expectation that they're going to retire and have some benefits paid to them
00:33:58
and there's this massive underfunding of those benefits and those pools of capital we very quickly talk about
00:34:04
unfunded pension liabilities but when you actually kind of account for the number of people and the amount
00:34:11
of capital that those people are expecting that the workforce the global Workforce is expecting to be paid to
00:34:16
them in retirement both public and private it's a massive amount of money that's
00:34:22
not funded today and you start to see the cracks in the system when that population
00:34:28
says my pension payments are not keeping up with interest with inflation or when
00:34:35
there's a threat that pension payments or retirement benefits are going to kick in at a later age well you're not going
00:34:41
to get them fast enough you're not going to get as many as you thought you were going to get we have that problem in the
00:34:44
United States in the form of Social Security and these underfunded pension liabilities
00:34:48
that is the critical macro tension in this equation that I think drives the real problem that's going to
00:34:57
come to a head at some point we blew a hole in the in the in the boat but we're also forgetting that there's like a
00:35:03
massive amount of weight that's going to drop on the boat and I think that it's a really hard
00:35:08
equation to solve we can talk about keeping Bank solvent and all this sort of stuff at the end of the day the
00:35:13
Central Bank it appears in the United States and probably globally it's going to be one big bank right they're
00:35:18
basically going to take on the whole balance sheet themselves and and at the same time you've got a lot of folks
00:35:24
saying I want to get paid more I have obligations due to me and guess what you know Jason here
00:35:32
important statements historically about the importance of democracies ultimately
00:35:37
you know the members of that democracy are going to say this this is a benefit that the majority are owed
00:35:43
and that's going to pull things out I think the only stop Gap I'll just say one thing the only stop Gap in the next
00:35:49
decade is going to be significantly higher tax rates in the United States I I don't see how you're going to
00:35:55
fulfill the tension Gap that's underway right now with respect to where productivity is going and where Capital
00:36:00
markets are going and where the demands are on the system from people requiring additional Capital to come out to them
00:36:06
without taxing assets away from the asset holders so this would be corporations and high net worth people
00:36:13
and I think that's why you see this Biden proposal we may not like it but at the end of the
00:36:19
day it's going to be the only way to create a stop Gap that's that's that's going to avoid massive inflation in the
00:36:23
near term reducing Supply proposal hold up hold on one second let me just say the only other way the only I'll just
00:36:29
say one more thing Jacob you can go the only other way besides you know a massive long-term tax regime
00:36:35
to fill the hole would be some extraordinary productivity gain and this is where we can all have a hope and a
00:36:40
dream and an investment and an effort around technology AI automation people think that their energy job energy but
00:36:48
if you can get energy down below uh three cents a kilowatt hour and you can scale its production by tenfold if you
00:36:54
can automate a lot of Labor if you can get AI to do a lot of stuff that we do today productivity will go through the
00:37:00
roof the economy will grow fast enough to get out of the debt bubble and meet all of these liability obligations so
00:37:05
there are three ways yeah I think I think to me to me that's the long term the medium term is going to be this tax
00:37:12
stop Gap it's very high tax top Gap and then the short term is going to be all the shenanigans that we're talking about
00:37:17
okay I'll go to you in a second sax so just to recap there it's actually a third way too there are three ways
00:37:22
productivity as you very astutely point out and we we just highlighted some of the
00:37:27
ways productivity could help whether it's energy AI Etc second is of course increasing taxation
00:37:34
on the people who are at the top of the pile uh would be the likely solution the
00:37:38
third is also austerity cutting spending in some way but let me also propose one thing here
00:37:43
as we look forward to what do people want out of a bank and how should startups or just individuals deal with
00:37:51
bank runs and their trust in Banks to tremont's point I've been I was thinking about this over the weekend and then
00:37:56
this discussion that we would have based on a lot of things you said Saks which was people just deposited their money
00:38:02
and they don't have the ability to assess if a bank is solvent because the FDIC can't do it and it's their
00:38:08
full-time job it's their mandate to make sure these Banks were solvent so how is
00:38:12
a consumer going to be able to do that or even a startup founder or even a sophisticated investor like Ackman or
00:38:17
any of us if we're in fact sophisticated so let me pause for a second here and posit something
00:38:23
we don't want a bank we want a bank vault consumers do not want their deposits to be used for shenanigans just
00:38:33
like many people would rather pay for a social network than have their privacy data sold so I think we should bifurcate
00:38:41
Banks into bank vaults and Banks Banks can do what they want with your deposits you get free checking but what I wanted
00:38:48
a bank what I want my startups to use what I want my Venture firm to use is I want to pay the bank for services
00:38:54
whether it's 10 basis points 25 basis points 500 a month I would rather see my startups pay a thousand dollars a month
00:39:02
in banking fees two thousand dollars a month on banking fees for two million dollars whatever it is and pay for each
00:39:09
check pay for wires pay for White Glove service whatever they choose but not allow the banks to take that
00:39:15
money and Loan it out or do things with it I just want a vault and I think a vault service is what the majority of
00:39:21
consumers want and given what we're seeing with two insane Bank Run bailouts in our lifetimes as adults for those of
00:39:28
us who are in Gen X 2008 and now we would rather pay for services and I leave it to you sax is this a potential
00:39:35
solution because I don't hear anybody saying give me a bank vault and why does that service not exist in the world
00:39:41
yeah look what people really want are they want a service provider who gives them the ability to make payments which
00:39:47
if you're a small business is payroll and payables things like that they want a money market fund to basically earn
00:39:54
interest and um and they want all that to be safe I mean it's it's very simple the idea that
00:40:01
when you go open a checking account at a bank that you are making an unsecured loan to that bank that is not something
00:40:09
that any consumer or small business understands that whole model I think is completely Obsolete and outdated and
00:40:16
what I heard so many people say and I think this is not sincere I think it's just because they hate Tech is that
00:40:22
depositors should take it on the chin because somehow they made a stupid decision when they opened a checking
00:40:29
account it's like are you kidding me listen what do you want the process to be you want consumers and small businesses
00:40:35
when they open a bank account have to review the financial statements of that bank try to figure out all their
00:40:41
disclosures where their assets are whether they have toxic assets on the books and if they don't do a good enough
00:40:46
job doing that if they're not smart enough to do that then you want them to be disciplined this is the word that I
00:40:52
kept her being used is we need to distributive the depositors the depositors are not in a position to
00:40:59
evaluate the balance sheet of these Banks that's what the feds are supposed to do that's what the Regulators are
00:41:05
supposed to do that's what movies is supposed to do and you're telling me that a bank that had an a rating from
00:41:10
Moody's the week before and had an FDIC seal of approval that somehow they got it wrong and the FEDS got it wrong but
00:41:17
the interested I mean come on that's ridiculous in related news chamoth I would like an
00:41:23
airbag in my cars to protect my family but I don't want to evaluate the airbag technology and unpack it and make sure
00:41:30
that it's got the right right let me finish the point it's about consumer protection here and I don't
00:41:38
care who the depositor is if the banking system is going down because the feds haven't done their job I mean pal two
00:41:45
days before the bank failures was testifying that he didn't see stress in the banking system so either he was
00:41:50
lying or asleep the feds had given the seal of approval to sgb and all these other Banks they
00:41:57
had all passed the regulatory exams and so to now put it on the deposit when the
00:42:03
FED screws up and The Regulators screw up and Washington screws up by printing all this money and creating this
00:42:09
inflation that we've had again out of all the six parties that you could blame I just think it's the the least culpable
00:42:15
chamoth should there be a service that provides no interest but is just a custodian of money that is absolutely
00:42:24
protected where is the bank vault product in the world does it exist because I can't seem to find it some
00:42:29
people seem to say I think Freeburg you alluded to this maybe in the group chat that if you have a brokerage account
00:42:33
that's kind of similar to what I'm saying but it doesn't have it I don't want any interest I don't need any
00:42:39
interest for putting this money in the bank for a startup they're not in the business of making one to five percent
00:42:45
and optimizing for that I have Founders who are now sending me five page memos if yeah if the bank can't use your money
00:42:52
they're going to charge you so remember I want to be charged that's the service I want but but I think this is an
00:42:58
important point a bank as a service provider they spend a lot of money Building Technology having people that
00:43:03
work there providing service and infrastructure so for the services that they're offering if you're not going to
00:43:09
let them use your money to make investments with your money and they can participate on that gain they have to
00:43:13
charge you they charge you and I think that's really worth it provider under the current laws you
00:43:20
understand how it works now is that what we're being told is that when you went to the bank thinking you were just
00:43:25
getting a service provider and frankly largely a commodity service provider you're getting yeah you're getting a
00:43:30
manager yes and you're being told that you actually made a risky investment decision think about that when you
00:43:36
opened a checking account you weren't just trying to you know again use a vendor you were actually making a risky
00:43:42
investment decision that's what they're trying to say and you deserve to lose your money if you chose poorly even
00:43:48
though nobody else could figure it out none of the experts could figure it out you should talk about the the challenges
00:43:53
of your system to someone who lives in Argentina it's far worse in other parts of the world and we've come a long way
00:43:58
in the last hundred years we talked about 500 600 bank failures on average per year in the 1920s so I'm not saying
00:44:04
that hey that's not the case but there's always been to some degree risk when people are giving their Capital over to
00:44:09
someone else and we've certainly made huge strides in progress but I think Jake out to your point you know there is
00:44:14
a point of privilege now that people are saying I want to have a position where I
00:44:18
know that my money's not going to get used not going to get moved gonna be completely safe why would you pay for
00:44:23
that what's the price free Burke what would you pay for that because right now we're basically giving every crypto
00:44:28
entrepreneur and sell it you know basically The High Ground because they could make this product I would pay 10
00:44:34
basis points literally 10 000 a year per million is that right yeah remember when
00:44:39
you thought Jeff Bezos was going to be president I still think it's a distinct possibility anyway what would you pay
00:44:45
for this product or like Bloomberg or Bezos I don't want to speculate on new products it's kind of a dumb tangent
00:44:54
I think the thing that you're bringing up though is Dom tangent okay why doesn't a product like this exist
00:45:02
and I think that it was very well explained it's that every for-profit business is in the business of making
00:45:08
money and there are physical costs that you have to bear in the case of a bank there's physical infrastructure
00:45:15
literally bricks and mortar that go into making the branches there are lots of people there is lots of software there's
00:45:22
lots of complex back office and middle office things that banks have to do in order to accept money that has a cost so
00:45:29
I don't see how it will be very easy for somebody to create a bank that just stores your money for you without you
00:45:37
being charged quite a lot of money unfortunately I think that there has to be a different way to solve this problem
00:45:45
and I think that what we did after the great financial crisis was The Regulators wrote down all kinds of new
00:45:52
rules but the crazy thing in 2008 where those rules were written on paper and now we're in 2023 and these rules
00:46:02
can be written in software and so I think what it requires is some amount of tactical real-time
00:46:10
intelligence that Regulators need to have over those that they regulate and I don't know why
00:46:17
we're so afraid of demanding that the next time some of these complicated real-time laws are written in law that
00:46:25
they also need to get written in code and I think that that's a practical solution it should be the case
00:46:32
that every bank that's supervised by the Fed has a dashboard that has all of the key
00:46:37
levers that allows what you said Jason to happen which is a real-time Mark to Market should those or should those be
00:46:43
just should or should they not be disclosed to shareholders that's a different discussion but The Regulators
00:46:48
should have a hundred percent transparency into how these organizations run because as Sac said
00:46:54
they are an enormously critical institution that at best case after this Fiasco what we've realized is very
00:47:01
poorly misunderstood by consumers and that at the worst case is being mismarketed to us
00:47:08
yeah and I think that that shouldn't be allowed we're also missing the other side of the balance sheet we haven't
00:47:13
talked about it at all but Banks play a really critical and important role as lenders
00:47:19
thanks act as the channel for Lending Capital to small businesses for Lending Capital to individuals to buy homes
00:47:26
it's the primary place where capital is provided to help fuel economic growth and prosperity uh particularly in the
00:47:34
United States where we have such a liquid fluid and available mortgage Market to support home buying in America
00:47:39
and the absence of you know Jason what you're talking about having the ability to use deposits to make loans
00:47:47
and have what banks have fundamentally been in this country for over 100 years which is taking short-term deposits to
00:47:53
make long-term loans and making sure that there's some degree of balance and availability of liquidity to support
00:47:58
transactions and ultimately mortgage Securities came out of the need to generate more liquidity by Banks to
00:48:03
support depositors and obviously there was all these inflationary things that happened in that market and Bubbles that
00:48:08
happened but it's an important role that Banks play and the lending aspect of banks if it gets stifled too much
00:48:13
because we swing too far the other way it can actually have a really adverse effect on economic growth and prosperity
00:48:19
and the ability for people to to afford homes in this country so that's the other side of the coin on where things
00:48:24
can go bad so this is where I find like the the current banking model to be sort
00:48:29
of like weird and maybe Obsolete and definitely not what consumers expect so for example if you go to a bank and you
00:48:36
put your money in a deposit account and then they loan it out to make mortgages do you realize that you're an investor
00:48:42
in those mortgages as the as the depositor I don't think you do I mean because what what they what they do is
00:48:48
they take those mortgage sacks they package them up they sell them and they get an origination fee and they get the
00:48:54
money back Wells Fargo do not exactly so B of A Wells Fargo for example they they do a
00:49:03
lot of that but if you look at First Republic they have a 90 billion dollar loan portfolio on their balance sheet
00:49:07
that they've not packaged up and sold so the packaging and selling of mortgages generated the liquidity that the banks
00:49:13
needed but there's a cost to that so a lot of banks will try and balance out their loan portfolio where they'll
00:49:18
package some of it up and sell it but when they do that they take a loss or they pay maybe they should be required
00:49:22
to do that because because yeah because I mean look to the point about Mark to Market assets it's very hard to mark an
00:49:29
asset to Market unless it's liquid and publicly traded let me give you an economic point I think that there's
00:49:33
about seven trillion dollars in deposits in Banks so if what you guys are saying
00:49:37
happened you're basically sucking seven trillion dollars out out of the system that's being used to fuel purchasing in
00:49:43
the form of loans and you're taking that step or call it a 10 discount to that so
00:49:47
about call it six trillion dollars and you're saying we got to go find a market for six trillion dollars of loans and
00:49:54
then we're going to have six trillion dollars of cash sitting in a bank account doing nothing and that that
00:49:59
challenge is the way that cash will go into money market funds so in other words like you'd package up all those
00:50:03
mortgage bonds you create a mortgage Bond security and then if consumers if depositors want that product they'll
00:50:09
just buy it on cash that's being used to make investments elsewhere so ultimately if
00:50:20
you want to earn interest on your cash it has to be loaned out somewhere to someone I understand but what I'm saying
00:50:26
is look I'm just brainstorming here I don't you know I don't have to say it I don't have spitballing yes exactly I'm
00:50:32
not saying this is what should be done I'm just kind of asking whether it might make more sense what if on the depositor
00:50:37
side all of the things you put your money in are money market funds and then when the bank goes out and does its
00:50:42
lending business it does ultimately at some point have to package those up and they get turned into Securities you know
00:50:48
sexy but money market funds you know where that cash goes so when you when you invest in a money market
00:50:53
fund you're you're giving like money to someone who's using it to make a loan like it is also I understand but then
00:50:58
the depository would be marked to Market as sex is never be at risk of bank failure I just
00:51:04
want to give you're Shifting the risk equation to the fund manager the money market instead of the advantage of the
00:51:09
bank and at the end of the day just the owner of that security that money market fund that would take the
00:51:16
hit okay just as we wrap here because I want to talk on some other issues as well there's two things that are super
00:51:21
tangible that Founders can do right now or people who want to mitigate against these kind of issues there's something
00:51:29
called ICS insured cash sweeps these are accounts that automatically you know will put your money into multiple FDI
00:51:37
insured institutions 250k at a time we talked about this previously there's a bunch of folks doing that in fintech I
00:51:45
won't give any of them free plugs here but you you can just go look and search for ICS there is a also maybe some
00:51:51
thought here that the FDIC 250k limit maybe that's outdated certainly for businesses it is so maybe that should
00:51:57
double or triple and obviously that cost would be spread out and then finally you
00:52:02
can go to treasury direct.gov right now and buy short-term government debt and I
00:52:05
literally have startups doing this who have major treasuries they're going there and buying short duration stuff
00:52:10
themselves holding it themselves so they don't have to worry this is part this is provided by the
00:52:16
government is my understanding and uh people are buying direct from the government I personally am not a fan of
00:52:24
startups buying t-bills because of the duration mismatch problem they always underestimate when they're going to need
00:52:30
their cash and so I don't like tying up accounts this is if you had a giant treasury yeah
00:52:38
always get it wrong I see this all the time whenever they try to let me just say when starts trying to create
00:52:43
laddered Bond portfolios they end up needing the money sooner than they thought what I'd much rather see startup
00:52:48
do is buy a hundred percent UST Bill backed money market fund run by the absolute biggest to the big
00:52:57
financial institutions because you can get in and out of it at any time you want and without paying a fee and that's
00:53:02
so much better than trying to manage your own Bond portfolio let a professional fund manager do it well
00:53:07
there are people who do provide these kind of bond ladders I'm just telling you what the best practice advice
00:53:13
through like a brokerage account sure or multiple ones right and but now this is
00:53:19
I think speaks to chamoth the fact that we have startup Founders and people having to measure manage a
00:53:27
treasury this granularly is this a failure or is this what should be happening should we
00:53:33
have to have treasuries in the 10 million or 20 million range be this granularly managed or should this just
00:53:40
be FDI FDIC rates you know should be just a 10x well in the absence of regular regulatory changes that protect
00:53:49
this money you need to have a financially sophisticated actor on the board and again I go back to that should be your
00:53:56
venture capitalist and that person should not have conflicts of interest with the banks
00:54:03
that they direct you to I mean I don't think that that's a very controversial statement
00:54:07
yeah it's just not happening and I I am just flabbergasted that people are not even doing the basic
00:54:14
blocking and tackling here of having three or four accounts I've always had three or four banking relationships
00:54:19
always had it uh split up should we move on to some of the other pressing issues
00:54:22
there was a really interesting Founders fun story about them breaking their latest
00:54:28
Fund in half and then there is stripe closing their funding which one would you gentlemen like to go to or a
00:54:33
different story on the docket I think there are there are four things that are very interrelated okay in startup land
00:54:39
so Founders fund took their just to make the math simple because I'm going to get
00:54:45
the numbers not exactly right but like a two billion dollar fund that they're gonna break into two one billion dollar
00:54:50
funds so I think that's one 1.8 billion dollar fund they're going to break it into two 900 million dollar funds it's
00:54:55
their eighth fund it's being cut in half and it'll become eight and nine I think
00:54:59
what that speaks to is valuations and the marks that we think we have for existing companies and the future value
00:55:07
that smart investors like this see all roads lead to it says we're in for a slog and so trying to put a two billion
00:55:16
dollar fund to work doesn't seem to make a lot of economic sense to some of the smartest people in the room so that's
00:55:21
that's that the second thing it's according to axios Peter Thiel LED this charge and he is uh the contrarians
00:55:28
contrarian he was the one according to access that led that cut of the fund size with
00:55:34
Summit uh Founders fund according to the reports about closing him I'll say the more important thing which in Peter and
00:55:40
I are in the same we're the largest LPS in our funds and so you know as the largest LPS in our funds I think this is
00:55:45
a no-brainer decision number two stripe basically takes a 50 haircut which is the single
00:55:53
best run most highly valued company in Silicon Valley again that's going to eviscerate private company yeah a lot of
00:56:02
tbpi and a lot of people's portfolios a lot of theoretical money that LPS were going to get
00:56:08
I think the third thing is there's a person that went and filed a foia request that UC Berkeley
00:56:17
to get sequoia's returns and it turns out that the best investor in the game quote unquote since 2018
00:56:26
has not really done that well and I think in the University of California invested over 800 million
00:56:34
dollars in Sequoia since 2018 and I think has returned what some 40 million bucks on that
00:56:39
number and then the fourth which just came out today is that tiger wrote down the value of their
00:56:45
private book by 33 percent for 2022 and so you know I think tigers and um basically has gone from 100
00:56:53
billion to 50 billion in a year there's one more note to add to that YC basically let go of their
00:56:59
growth team this week y combinator uh for people didn't know what was called the continuity fund they were doing late
00:57:04
stage investing and that got cut gosh which is a signal and the 17 employees are gone
00:57:11
now and Gary 10 I think is making the right decision you know they have to focus on what they're great at which is
00:57:16
the earliest stage of the company and they had conflict with this one look yeah this is the most interesting thing
00:57:22
for me in the following way I think the Y combinator unicorn hit rate is six percent right so every 100 companies
00:57:30
that come out of YC which costs only about 10 million dollars to seed right six of them become worth a billion
00:57:37
dollars or more and obviously some become worth much much more and so if you see how difficult it is
00:57:43
even for a growth fund that's attached to that funnel to be successful and make money because
00:57:51
obviously if this thing was ton in cash you would not have cut it I don't think anybody would do that
00:57:56
so I think it was a very challenging strategy at a challenging moment in time and so I applaud these guys for having
00:58:01
the discipline to do it but if you take them all in totality it is a complicated
00:58:06
place in venture capital and startup land holy mackerel like it's a reset a it's tough to make money b a lot of
00:58:12
folks may not know exactly what they're doing see a bunch of valuations are totally wrong
00:58:18
and D we're going to have to start doing the cleanup work now of resetting all of
00:58:22
it which just takes years as you guys remember it took us it took us five years to fix this
00:58:29
yeah it's a hard reset sax what do you when you look at these in totality what would you say well I agree with what
00:58:35
chamoth just said I mean it is gonna be a hard period with a lot of resets a lot
00:58:38
of restructuring a lot of cap tables there's a lot of mess to clean up all of that being said I think I'd rather be an
00:58:44
investor today than an investor two years ago or one year ago because at least the valuations have corrected to
00:58:54
some degree and then also we have this really interesting AI wave happening now and there's a lot of opportunities
00:59:00
to invest in that new you know cycle so at least there's like an interesting product cycle
00:59:06
it's getting me excited to go to work and see these new demos from all these different companies whereas you know you
00:59:11
go back a year or two and just the product Innovation just didn't seem as world changing as it does now so I think
00:59:17
that as bad as things are my guess is that the new vintages of VC are going to be better than you know call it 2021 for
00:59:27
sure that's not going to be a high bar it's not a high bar but still wow trash crash this is the contradiction is
00:59:39
that it felt better to be a VC in 2021 but in hindsight we know that the Vintage is gonna be not good whereas
00:59:47
David how many hold on but today it feels not great to be a VC but I think the vintages will be a lot better
00:59:53
but anybody would tell you that at some point you're going to have to divorce yourself from emotion to be a reasonably
00:59:58
good investor over long periods of time how many data points do we need to realize that too many people
01:00:04
were put into this game that may not have known what they were doing and we're going to have to go and work
01:00:10
through all of those excesses and I think it's just going to take a lot of time U.S
01:00:16
limited partners are in a really difficult spot European investors I think are probably
01:00:21
in a pretty difficult spot there are a couple of bright bright points around the world the folks that are still
01:00:27
optimistic and doing well I think Middle East is one southeast Asia is another but other than those it's just a whole
01:00:36
group of folks that just have to get completely re-underwritten from first principles even when you have an
01:00:42
incredible platform like Sequoia five years of no returns on 800 billion dollars for somebody like UC Berkeley
01:00:49
what it really means without commenting on sequoia's performance is that UC Berkeley is effectively out of business
01:00:54
in being a limited partner for the foreseeable future wow right and I think that that has that
01:01:00
has implications so even if you think these vintages are great I don't think they're open for business
01:01:05
and and frankly if even if they wanted to be open for business how do you go to an IC when they look at all of the
01:01:12
totality of those dollars that have not made anything how do you justify the next 800 million I just think it's very
01:01:17
hard while I agree that LPS are out of it I think the story was garbage because it all funds go through a J curve and
01:01:24
they're literally talking about the majority of the funds in that vintage 2008 2019 2000 2021 they're all in
01:01:31
literally the definition of the J curve the third fourth fifth year one of the most important things you need to be
01:01:35
able to do is measure how long does it take the delta T to 90 of calling committed capital and how
01:01:43
long does it take the delta T to return 1X DPI I can tell you Jason if you're a reasonably good fund those numbers
01:01:50
should be between five and seven years for both which none of those funds have hit the
01:01:55
average for a normal Venture fund is around five to seven years to call ninety percent of the capital
01:02:04
and around five to seven years to return one xdpi I'm just telling you that's what the average is and if you talk to
01:02:10
firms so all I'm saying is there was a period of time where in the absence of getting money
01:02:16
back again this is not a sequoia thing it just means that there was an entire cohort
01:02:23
and years of capital allocation that is not necessarily in a J curve it's impaired because if after five years if
01:02:30
after five years you've returned nothing sometimes you just have to see the writing on the wall sax explain the J
01:02:36
curve one more time for folks and then what is your analysis of that Sequoia story well the J curve the theory behind
01:02:42
it is that when you start deploying a new fund you're drawing fees down to pay for the firm and the Investments you've
01:02:49
made have not been marked up yet so the value of the fund is actually going down
01:02:53
because some of it's getting eaten up in fees and you haven't really had a chance
01:02:57
for any of those Investments to be successful and then what happens early right I don't even know I just think
01:03:04
it's they haven't had a chance to get marked up but then what happens is you start getting markups and now at least
01:03:08
on paper the value of the fund goes up and then hopefully those markups eventually turn into distributions or
01:03:14
DPI like jamath is talking about yeah we have a vintage 2017-2018 fund that's actually fully
01:03:21
returned at this point you exited some secondary or Acquisitions no we just had some we just had some exits but look I
01:03:27
think that is a little bit on the early slash lucky side but we haven't really seen much of the J because you know you
01:03:34
should be getting markups within two years I think on your Investments if the companies are looking good at least
01:03:41
historically that was the case freeberg any any thoughts on this collection of stories with Venture basically having
01:03:47
the great Venture reset the end of the super cycle the beginning of the next it's happening yeah okay we're in the
01:03:55
thick of it but by the way I would just I always go back to the point though with all the problems tramatha's is
01:04:00
talking about the reset and the Wipeout that needs to occur I think this is still that I think that's part of what
01:04:06
makes this a better time absolutely to be an investor this is what I'll say about that sex I think I agree with you
01:04:15
I disconnect asset values and asset prices from fundamental business value being created
01:04:22
so the market bid stuff up prices went up that doesn't really mean that businesses aren't fundamentally good
01:04:29
that there aren't amazing technology businesses being built today that are going to affect billions of lives
01:04:35
tomorrow if you are tracking a public company stock and you like the business you spend time
01:04:43
with management you see what they're building you see their revenues growing their profits are growing they're making
01:04:47
great products people are happy with what they're doing but the Stock's really expensive you don't want to buy
01:04:52
the stock suddenly the stock drops by 80 percent nothing about the business has changed
01:04:57
it's just that the market is paying less to own shares in that company that's a great time to buy that stock
01:05:03
I think that's the moment we're in in Silicon Valley everyone's like oh my God it's over there's uh things are terrible
01:05:08
just because the asset prices of the shares in companies has gone down does not mean that the quality of the
01:05:16
businesses has changed or that there isn't fundamental value being created in Silicon Valley in fact the contrary
01:05:22
point to Sax's comment is that it is a great time to be buying these shares and it is a great time to be investing and
01:05:30
it is a great time because as we've talked about countless times there are extraordinary Technologies from AI to
01:05:37
biotech becoming software to Fusion to novel applications with AI and SAS and on and on and on many of the amazing
01:05:44
things we've talked about that I think can and will affect many Industries and billions of lives are being built today
01:05:50
and they're not going to stop being built and you can now buy the stock at 80 off so you know if you're investing
01:05:56
today and if you're a builder today as long as the capital keeps flowing to support the building work which I think
01:06:02
to some degree it will because still enough of it sitting there you're not going to have a lot of these crazy
01:06:06
growthy rounds with high prices and all the nonsense that went on the last couple years but there's certainly a lot
01:06:11
of opportunity to greet real business value and right now an opportunity to buy shares pretty cheap and participate
01:06:17
meaningfully in that value creation I'll tell you the thing I'm seeing on the field and like playing the game on the
01:06:21
field is something we've been talking about for the last year we started a program called
01:06:25
founder.university and it's basically like a 12-week course on like how to build your MVP we had 350 people to join
01:06:32
the discount code people can use to there's no discount code it's it's free for Founders basically if they if it's
01:06:37
free for Founders if they come to the 12 weeks but anyway what I did was no it's founder dot University because
01:06:43
it's an extension but uh in the words of uh of sex let me finish please let me finish
01:06:52
what we did was we just said anybody who gets to an MVP and it's two or three Builder co-founders we'll give them a
01:06:58
25k check and I did 20 or 30 of these 25k checks in the last couple of months of just the
01:07:05
founders right now who have been laid off by other companies they're dogged pragmatic
01:07:11
absolutely customer-centric product-centric Founders whereas the last five years have been filled with
01:07:17
theatrics and white papers and icos and just nonsense and absurd valuations and people wanting credit for work not done
01:07:24
and now people are actually building MVPs and they're dogged product driven Founders customer Centric Mission driven
01:07:31
Founders and it feels to me that first part is so well said people wanted all this credit for work not done
01:07:39
and for Progress not achieved that game is over finished finished which means if you are
01:07:47
a product LED CEO and you're a mission-driven CEO who actually built something you stand out so much in this
01:07:52
ecosystem and have people begging for money sending me long emails and decks and total addressable Market I'm just
01:07:59
like can you just build a product and show me that you can actually deliver a product and then we'll start the process
01:08:05
of the rewards based system here you know the the the the reward-based system in Silicon Valley is so magical when it
01:08:12
works you get money from founder University or you know Tech Stars or Y combinator then go to a seed fund then
01:08:18
go to a serious a fund that milestone-based funding was so broken and now it's back and it's so functional
01:08:25
when it's working it's just a magic of Silicon Valley is when people work and get rewards work and get rewards and it
01:08:31
just creates this great pace and dynamic that I'm glad to see just as we wrap here everybody's been begging for a
01:08:38
science Corner enough about the chaos in the world everybody wants the Sultan of science
01:08:45
to tell us and educate us about something and sax needs to use the loo anyway so let's do a science corner here
01:08:52
room temperature superconductors you sent me a link I read the abstract of this paper and I I don't know which
01:09:00
language I need to put this into Google translate but I couldn't understand any of it
01:09:04
so please I literally read the abstract and I was like I couldn't get through the first two sentences without
01:09:10
having to start doing searches I'll start with just like the simple explainer on superconductors please
01:09:16
um you know materials that conduct electricity are called conductors so conductors electrons move through them
01:09:23
like a copper wire that's how electricity flows and all conductors have some amount of resistance meaning
01:09:31
not all the electrons kind of flow through at a perfect rate they bump into the atoms in the material in the wire
01:09:37
and they generate heat you know you've ever felt a wire while electricity is flowing through it gets hot right so
01:09:42
that's because the conductor has some resistance which means the electrons bump into the walls of the atoms in the
01:09:48
material they generate heat and you lose electricity you lose energy you lose power
01:09:53
and so in 1911 it was discovered when Mercury was reduced to a very very cold temperature that there was a point at
01:10:02
which the material conducted electricity with absolutely no resistance so the electrons flowed through the material
01:10:10
completely unbounding on you know not bouncing into the material not generating any heat and having no
01:10:18
resistance mean you're losing no power in transmission of that electricity but another number of other super
01:10:23
interesting effects occur number one is that magnetic fields now reflect off of that metal perfectly so if you put a
01:10:30
magnet you ever seen that image of a Nick we could probably pull one up in the YouTube video where you put a magnet
01:10:35
on top of a superconductor it actually floats because the magnetic field like the
01:10:40
North and the north push against each other and it floats up so superconducting materials kind of became
01:10:45
this Fascination in the early 20th century that oh my God if we can actually make materials that
01:10:50
superconduct there are all these amazing benefits one of the benefits is you could have no loss in electricity being
01:10:55
transmitted today 15 of power is lost in the transmission from the Power Station
01:11:00
to your home you could also do interesting things like create maglev or frictionless trains
01:11:05
that float you know like magnets floating off the ground on top of a superconducting track and by having no
01:11:11
friction you could push the Trap the train once and you wouldn't need to use any energy to move it along so you could
01:11:16
have basically powerless transportation you could have really powerful new microprocessors so a superconductor
01:11:26
microprocessor instead of a traditional semiconductor microprocessor would use just one percent of the energy of a
01:11:33
semiconductor microprocessor think about that all the AI stuff we're talking about all the chips that we're talking
01:11:37
about dropping the energy needs by 99 if those chips were made from a superconducting material and one of the
01:11:44
more interesting applications of superconducting materials could be infinite battery storage so you could
01:11:48
take a superconductor turn it into a coil and the electricity would just flow through it infinitely because it would
01:11:53
never turn into heat and then when you're ready for that power you just plug in and you get the power out the
01:11:57
actual loss of energy in a superconductor battery less than five percent and that's
01:12:02
compared with you know significantly more energy loss used in chemical systems and you wouldn't need to kind of
01:12:07
get all the materials that we're struggling to get now to generate batteries so the idea of generating like
01:12:12
superconductors in industrial scale has always been super interesting today the way that we generate superconducting
01:12:17
materials is we have to make a material super super cold in 1987 a physicist named Chu developed
01:12:25
one of the first ceramic superconductors where they discovered a new way of generating superconductivity it wasn't
01:12:30
just taking a metal and cooling it down very very cold because when you get it very very cold the atoms stopped moving
01:12:36
and the electrons inside pair up and it's called Cooper pairing and they flow through and he said we could actually do
01:12:41
this with a hotter temperature and he demonstrated this in a ceramic Atrium barium copper oxide super confusing name
01:12:48
but basically he took a bunch of materials and baked them in an oven and they turned into this really interesting
01:12:52
material that became superconducting and then the race was on because what he did
01:12:56
is he made a superconductor that could superconduct at the temperature of liquid nitrogen and liquid nitrogen is
01:13:01
really cheap so we can just use them that's actually how all MRI machines run today if you have superconductors that
01:13:06
reflect the magnetic fields in the super in the MRI machine and they're using liquid nitrogen to stay cool and so
01:13:12
there's a lot of industrial applications today that use superconducting materials
01:13:15
using liquid nitrogen but in order for us to do all the stuff I mentioned like maglev trains and Infinite Battery free
01:13:21
storage and superconducting microprocessors we have to get superconductors we have to discover a
01:13:27
material that can superconduct at room temperature so that we can sit with it in a computer on our desktop or we can
01:13:34
have it run on a railroad track or you know we can put it in our backyard to store energy and there's been this race
01:13:41
and there's all these different classes of materials that physicists and material scientists have spent decades
01:13:46
trying to figure out what can superconduct at room temperature we started with Metals you know copper and
01:13:52
we tried carbon nanotubes and fullerene tubes we had all these different Ceramics like like with like I talked
01:13:58
about and there have been literally tens of thousands of ceramics that people bake in ovens and Prime see how
01:14:04
superconducting they are basically you take the material and you cool the temperature and you measure the
01:14:09
resistance and as soon as it hits superconductivity boom there's this magic moment where it
01:14:14
drops to zero and it becomes super conducting and there's this big changeover effect so everyone's trying
01:14:19
to find that temperature which it can happen at room temperature and people have found superconductivity
01:14:24
on the surface of DNA and organic molecules but you can't scale that people have found you know
01:14:30
superconductivity and all these weird kind of material on the surface of things but no one's ever been able to
01:14:34
industrialize it in 2015 there was a new kind of material called a hydride which
01:14:39
is basically taking a thin metal and putting it in hydrogen gas and kind of baking it for
01:14:45
for a couple of days and the hydrogen sticks to the metal and then you would use this hydride as a new kind of um
01:14:51
conductor and hydrides that turned out had really good superconducting potential they would superconduct at
01:14:58
room temperature but they needed super high pressure so you'd actually have to leave them in like something that's like
01:15:04
hundreds of times the pressure of the atmosphere and so that that's not really technically an industrially feasible
01:15:09
either so this guy named ranga Diaz published a paper a couple weeks ago that got a ton of
01:15:15
press and a ton of controversy and basically he said look I've got this new hydride
01:15:21
and uh it's I've got this really you know weird metal that no one ever talks about
01:15:26
and I've baked it with this um with hydrogen gas and this hydride can actually superconduct at you know room
01:15:32
temperature and at only one gigapascal which is still greater pressure than room temperature but it basically starts
01:15:38
to show on the chart of are we getting there can we actually get there that maybe we are and so this paper was
01:15:44
published in nature a couple of weeks ago and it got a ton of a ton of coverage because everyone's like oh my
01:15:50
gosh the problem is this particular individual you know the the lead uh research of
01:15:58
ranga Diaz on the on the paper he's pretty controversial because he made a room temperature superconducting claim
01:16:04
back in 2020 in a paper he published in nature and after he made that that claim
01:16:09
a lot of scientists tried to replicate what he did and they were not able to and then the journal retracted his paper
01:16:16
and he had a method that he took data noise out of the measurement system he was using and the way that he took the
01:16:22
data noise out people said actually skewed the results and made it look like it was super conducting when maybe it
01:16:27
wasn't and he actually had a a talk that he did that was published on YouTube a year later where he said he raised 20
01:16:33
million dollars from Sam Altman and Daniel Eck and a bunch of other investors and it turns out that also
01:16:38
wasn't true and then he came back and said well I didn't actually raise the money I was talking with them about
01:16:42
raising the money so this guy's kind of a sketchy character in the space but the
01:16:47
temperature at which he was able to generate or claims to have generated and he did get peer review and did get
01:16:52
published a superconductors is at room temperature it's at slightly high pressure
01:16:59
but if it's real and it does get repeated it's one of the next steps that we're almost going to be getting to this
01:17:05
point of true room temperature superconducting materials and then this whole industry will blow up transmission
01:17:11
lines battery storage maglev trains superconducting microprocessors you know many new Industries can and
01:17:18
will emerge from this material Discovery if it's proven to be real so you know it's a super interesting storyline a lot
01:17:25
of people in the Material Science World and scientists chemists physicists are kind of going crazy about this and there
01:17:31
was a um a survey done by quanta magazine and half the scientists were like this is and the other half
01:17:37
was like this is going to change the world so we don't really know yet where this is all going to settle out but I
01:17:41
thought it was worth kind of talking about and bringing it up because if room temperature superconductivity is really
01:17:46
realized in the next decade it's another one of these kind of Black Swan technology discoveries that we none of
01:17:51
us are thinking about right now but it totally transforms all these markets and very quickly kind of increases like we
01:17:57
were talking about earlier productivity makes renewable energy super super cheap
01:18:01
makes computing power 99 less power intensive AI chips will explode using this technology so a lot of super
01:18:08
interesting applications if room temperature superconductivity comes to light super interesting story I thought
01:18:13
we should share it and talk about it yeah I would love to get your insights on it and then sax I would like to
01:18:19
understand how many emails and what you order from ubereats during that segment venkat vishwa Nathan who runs a battery
01:18:25
group at Carnegie Mellon introduced me to ranga two years ago me and my partner Jay we were like holy this is
01:18:32
outrageous and we tried to spin it out into a natural company but the University of Rochester blocked
01:18:40
it and so we've been following this guy for two years and all the trials and tribulations but
01:18:46
it's a really really exciting thing if it does come to you've got Capital blocked explain why you would get
01:18:52
Capital blocked in a situation like that why wouldn't they allow you to spin it up it is interesting because like
01:18:57
typically universities have a tech transfer office and you can do these deals pretty cleanly so you know when
01:19:02
you go to Stanford the tech transfer office is quite sophisticated at MIT it's quite sophisticated there are these
01:19:06
pretty standardized deals and and royalty percentages what's what is the standard deal how explain to the
01:19:12
audience how a tech transfer deal would work and how does the University make money from it if you're a Prof and you
01:19:17
invent something or even if you're a student it's technically owned by the school and so if you want to
01:19:22
commercialize it you go to them and you basically say here's a Capital Partner of mine and we want to go and start a
01:19:27
company around it and what they will normally say is okay great give us a piece of equity and give us some royalty
01:19:34
in some cases depending on what it is the equity tends to be in the mid single digit percentages the royalties tend to
01:19:41
be in the mid-single digit percentages it depends okay yeah call it five five six seven percent but it can be a lot
01:19:47
when you think about a you know a school like Stanford who's spinning out hundreds of these things a year
01:19:54
but if you're if you're a school that doesn't historically do a lot of tech transfer or has a lot of cutting edge r
01:20:01
d you wouldn't have that team and so Rochester didn't necessarily have it now look rank is probably getting bombarded
01:20:09
by 30 other people who'll pay 10 times more than what I was trying to pay 18 months ago it's a really interesting
01:20:13
thing and I think there'll be some there'll be something does anybody know what the top Tech transfers of all time
01:20:19
were like was Google a tech transfer or Freeburg you know like yeah because yeah
01:20:25
no yeah Larry and Larry and Sergey gave Stanford I think one think of Stanford yeah they give them a percent yeah
01:20:34
because back rub was written while Larry was a PhD there so technically they you
01:20:40
know they had some part of it Carnegie Mellon ranked as top Tech transfer University I'm just seeing here in terms
01:20:45
of the rankings University of Florida Columbia Stanford Harvard because everybody so much some of them are
01:20:51
terrible like and some of them are cronyism so like you go to some of the universities and the tech transfer
01:20:57
offices have deep relationships with certain VCS and investors that they'll only work with and they always get first
01:21:02
picks and first kids and they're super tight with them they don't run a real Market process and then some tech
01:21:07
transfer offices just give away the farm for nothing and then some tech transfer
01:21:11
offices think that they own it and they should get paid 60 royalties for the thing it's all over the map and some of
01:21:17
them are sophisticated and some of them are not um so it's it's actually quite surprising Jake how different all the
01:21:25
universities are in terms of their level of sophistication and the types of deals
01:21:29
they'll do but I will say this work in superconducting research it's another good example going up to going back to
01:21:35
the point a couple episodes ago about the importance of fundamental research and the importance of
01:21:41
um you know the support from academic institutions and governments and other aspects when you're still not sure what
01:21:48
the technology is that to do that fundamental Discovery work I think is a good Collective social benefit and then
01:21:55
to industrialize it and commercialize it requires I think a market-based approach
01:21:58
which is you take that capability you try and build a business find customers make money and that's really how you get
01:22:03
it to be funded to be scaled because you're never gonna you shouldn't have to put you know government and academic
01:22:08
money behind that sort of effort but private Market participants should and so you know it's interesting I mean
01:22:14
I think I'm not holding my breath I've been you know I did a science project in 1993 when I was probably 12 or 13
01:22:22
years old on superconductors and I got a Atrium barium copper oxide disk and I got some liquid nitrogen from UCLA and I
01:22:30
poured it on the disk and I floated a magnet above it I had a poster board and a computer presentation back then and I
01:22:35
was super enthralled about the future of superconductors and exactly what I said
01:22:38
today is what I said back in 1993. so you know 30 years ago it was so busy dating I didn't think you had time for
01:22:44
superconductor experiments yeah look I don't think I don't think that this stuff
01:22:48
that's really uh it's been a it's been like Fusion it's always been a promise around the corner physicists have always
01:22:54
had hope we've taken incremental steps towards it but it's always felt like one of those things where you're always
01:22:59
getting 50 closer to the wall it's like you're never actually reaching the wall and so
01:23:04
yeah by the way I will say one area that that a lot of people think holds a lot of promise for superconducting research
01:23:10
is in Quantum Computing because you can actually model on a molecular level what
01:23:15
might be going on right now the BCS theory is this theory on Cooper pairing that happens in Ceramics is the only way
01:23:21
that we really understand how superconducting actually works why it works why there's no resistance at
01:23:26
certain temperatures for certain types of materials for most materials we have no freaking clue why it happens we don't
01:23:31
understand the physics of it there's something going on on a quantum mechanical level that we just don't get
01:23:35
and so if we could understand it better through Quantum modeling using quantum computers all of a sudden we may be able
01:23:41
to actually start to come up with ideas for molecules and crystal structure that
01:23:46
would allow us to make super productive material that we simply don't have enough time in our lifetime to run all
01:23:51
the experiments in a lab today and we can simulate it and so that's why Quantum Computing could play a real role
01:23:55
in advancing our ability to do Discovery and superconducting materials and like I
01:23:59
talked about these are like not just one but like two or three order of magnitude
01:24:03
improvements in the efficiency of certain systems of Industry on Earth today so it shows how the compounding
01:24:08
benefits of technology and things you cannot see around the corner can suddenly cause these explosive growth
01:24:13
moments in technology in an industry I don't know what when Quantum Computing gets here when it gets here it might
01:24:19
discover superconducting and then when that gets discovered boom energy costs dropped by 99 Computing goes up by 100
01:24:24
fold so there's these amazing things that are still like in front of us that each one of which could be you know
01:24:30
really great exponential triggering events and we're seeing a little Milestone today but yeah I don't know
01:24:34
sax reaction sounds good sax uh how many moves did you play in your 12 chess games
01:24:47
how many points did you go up all right look I got shitzu come on let's go oh sucks all right listen this has been a
01:24:56
great episode thanks to the best comment on the Atlantic article that says Ron DeSantis has peaked already
01:25:02
oh oh yeah don't do it don't do it why you got to troll him let's see that but it's in
01:25:09
the Atlantic oh you want to know why the Atlantic suddenly has turned on him is because they're the biggest
01:25:14
backers of the war they those guys have all these like neocons over there and so
01:25:20
he gave a statement saying that you know our support for Ukraine shouldn't be a blank check and
01:25:26
some other comments expressing let's say skepticism of what we're doing over there and that was totally
01:25:32
inaccessible to them so all these neocons are registering disappointment but I would argue that's a electoral
01:25:38
asset not a liability I have a prediction given what's going on with these Banks and what's going on in this
01:25:43
kind of a I think we all agree the soft Landing concept is over we're going to be in a recession
01:25:48
the war is going to end there because we're not funding this an American the American public is not going to want to
01:25:55
see tens of billions of dollars go into Ukraine and to fight to fund this war in
01:25:59
year two or three hundreds of billions well I'm just saying every month yeah I know the spending run rate of this war
01:26:05
is actually greater than what we did in Afghanistan and Afghanistan ended up being a 20-year multi-trillion dollar
01:26:12
operation that just flushed all that money down the drain so yes we're in a greater run rate than Afghanistan yeah
01:26:20
do we know what the monthly run rate is for this oh my God how is it do they process back we've appropriated over 130
01:26:26
billion Tremors and Afghanistan we spent 2 trillion over 20 years so it's 100 billion a year run rate yeah this is
01:26:33
think about what a Monumental waste of money that was and now look at the financial crisis we're in can you
01:26:37
imagine if we could have 2 trillion back I mean all these trillions instantly we would take that it's
01:26:43
trillions and trillions we squandered on stuff that didn't matter and now we're paying the price for it that could be
01:26:49
education could be Universal Health Care it could be paying down the debt how about paying down the debts we don't
01:26:53
have all this inflation exactly let's think logically here the number one issue for this country in the next
01:26:58
election I am with Friedberg is great prediction uh from the year-end show is we need a president and we need an
01:27:05
Administration that is fiscally responsible and controls the balance sheet in a logical fashion like the last
01:27:12
two administrations have not seen capable of doing I am with Freeburg single issue voter balance the budget
01:27:18
get spending under control austerity measures hashtag all right for the Sultan of science sorry what's that can
01:27:25
you repeat that what I wanted to say Tremont is there are there any plugs for the remaining part of the episode Mr
01:27:31
Beast is curing blindness and buying people's shoes has he been canceled yet Jax aren't you excited about
01:27:37
superconductors and the benefit for AI and energy storage and energy costs and Humanity yeah what does it do to burn
01:27:44
rate of a Sasuke yeah but I'm not I'm not like an expert at assessing like hard science or hard tech I mean I'm a
01:27:51
software investor I'm just a simple man I'm just a software investor all right everybody for the Rain Man himself David
01:27:56
sacks the dictator trim off polyhapatia and the Sultan of science the prince of panic attacks No More Mr David Friedberg
01:28:05
I'm the world's greatest moderator Undisputed congratulations everybody on another successful episode and Freeburg
01:28:12
when are we locking in the date for all in Summit 2023 my replies my DMs are filled people want to know do you have
01:28:26
so now they've gone back to their committee to get approval for us doing it without parking and just doing
01:28:31
something or walking shut up Uber Uber Uber Uber hopefully if they accept it then we are
01:28:39
okay how many shuttles do we have to take to Uranus yeah exactly how am I the prince of panic attacks I think you're
01:28:45
the king of caps locks at this point they were calling me j-caps J caps was the best one I heard talking about panic
01:28:52
attacks Jake hell this weekend man panicking panicking I I was in sheer Terror sure I have literally gotten rid
01:29:00
of the caps lock everybody relax you can follow me twitter.com Jason we'll see you all next time
01:29:06
we'll let your winners ride [Music] and they've just gone crazy [Music] besties [Music]
01:29:40
it's like this like sexual tension that they just need to release them out where did you get Mercies
01:29:55
[Music]