E110: 2023 Bestie Predictions!

all right everybody Welcome to 2023. everybody's well rested ready to take on 2023 yes Tremont how's your break amazing okay sexy poo I know you don't go to uh temperatures that are under 57 degrees anymore should have a nice break did you go somewhere warm yes okay that's a confirmation uh wow man of so many words and Freeburg I'm over cold weather vacations yeah that does happen at a certain point actually we went to Florida we went to the the free state of Florida oh really what what what's going on in Florida at the turn of the new year I wonder that Drew you down to the great state of Florida we're just freeing It Up In The

Free State of Florida [Music] we [Music] have our 2023 predictions now uh play some music and all that kind of stuff producer Nick at this point let's get to it last year do you guys notice that every time we talk about something somewhere between sort of two months to a year later the Wall Street Journal ends up writing a big piece about it think peace about it yeah so I tweeted into the group chat like last year we all talked about Sequoia and distributing public equities and yeah how it's very fraught and difficult and then today they write this big article about how people have just burned enormous amounts of billions of dollars that they could have returned to

LPS like these Venture investors by not Distributing that makes sense three weeks ago when we did our end of the year wrap up my big winner for 2022 were the pot shops right Citadel and today in the Wall Street Journal an article lands that these guys with 56 billion of AUM over the last two years have made almost 45 billion dollars of revenues isn't that incredible and this is what happens usually uh they are these guys are just crushing and then Citadel Securities did like almost you know seven and a half billion in Revenue I mean it's unbelievable these businesses how good they are yes so let's get into uh and this is typical if you think about

journalists they're trying to get into the conversations that are occurring at the bar after the event the late night conversation the group chat's well and that's what this podcast is it's the exposed back channel right and so if you listen to this pod you got the back channel of Silicon Valley politics Tech science Etc so let's do our predictions in 2020 we said our biggest political winner would be uh sax and I both said to Santa XI Japan and Friedberg said Putin who do we think is our biggest political winner uh going forward who do you pick sacks biggest point of winner for 2023 who will be your biggest political winner for 2023. well I went a

little bit outside the box here because I think we're gonna have gridlock in Washington so not expecting a ton to be coming out of Washington over the next year my pick for biggest political winner is Asian American college applicants there are two Supreme Court decisions that the court heard on Halloween last year uh there was a lawsuit against Harvard and another lawsuit against UNC by a group called students for fair Admissions and that they maintain that Harvard and UNC violate title VI Civil Rights Act because Asian American applicants are far less likely to be admitted than similarly qualified applicants from other groups and the the

federal courts in Boston and North Carolina rejected this argument but the Supreme Court took up the cases so they kind of went out of their way to hear this and I think that they are going to they're going to refuel affirmative action I think the majority will rule to strike down these policies that uh really discriminate against Asian Americans and I think they're the last uh group in America where it seems to be okay to discriminate against and uh really I think the Supreme Court is gonna is gonna find that unconstitutional belts there you have brought this up multiple times on the podcast over the last two years

I have said that this was unfortunately affirmative action when it started I think had very very good intentions and I still think that there's a place for it the problem is that these very liberal institutions decided to play judge jury an executioner on which minorities counted in affirmative action and that's not what the intention was the intention was to look at the establishment and their ability to get their progeny into these incredible schools even when they didn't deserve to be there and so I think this was always an issue of classism that was disguised as racism and people who were in the upper classes

of society have always had an edge you had the legacy admissions into Harvard you had people the Kushner is very famously right like the five million dollar check from the father that got the son into the school all of this stuff it's all it's been well written about and whether or not those things are right isn't the point I think the point is that there are folks in emerging lower middle classes who have the potential to crush and those kids should have a chance and you can't just decide who those kids are based on the color of their skin and in this case what happened was some blacks were still allowed in some Hispanics

were allowed in but Asian Americans broadly were discriminated and that was a really stupid outcome you cannot punish kids for willing to work their ass off and I think that that was the unfortunate outcome of what affirmative action has become by 2022 so it is going to get repealed the reason it's going to get repealed is that you know we have case law that very clearly states that that any institution that accepts federal funds cannot have any form of discrimination and this is how these folks who have tried to repeal affirmative action have taken up this lawsuit and

hopefully the outcome is a more meritocratic system that also tries to create a plurality of different people from different backgrounds freeberg any thoughts uh if not your biggest political winner for 2023. um my biggest political winner for 2023 is um MBS Mohammed bin Salman I think that Saudi Arabia will have the most important year in kind of the modern era in terms of their role I don't know if you guys saw this Reuters report from a few weeks ago but there's kind of a deepening discussion about the oil Yuan trade in that um Saudi would sell oil to China and they would

get paid in Yuan Saudi Arabia sits at the intersection of the United States Russia and China they have relationships with all three nations and in the kind of conflict and power struggle that is underway I think that ultimately the direction of where Global Currency kind of reserves will be taken and the importance of these great Nations and who sits atop whom can actually be dictated and significantly influenced by MBS this year by some of the deals and trades he might put in place and the and the the kind of Partnerships he might Forge I think as a result you will see him kind of rise in

terms of influence not in terms of you know hey the world has accolades for this for this guy but I think in terms of global influence uh he will rocket ship to kind of the top because of this this kind of uh jockeying he can now do between these three great nation states and defining you know what's going to happen with the US and what's going to happen with China and what's going to happen great collection of currency reserves great selection I mean the shitty thing by the way about your selection is that Biden are explicit stance is unfortunately quite confrontational with MBS and yeah you saw that play out in Q4 we asked them to ease up on OPEC Plus

to introduce Supply cuts and they did some nominal hundred thousand Barrel per day cut didn't do much of anything there was an article to your point free bird just recently about Saudi really doubling down on getting the oil out of the ground and monetizing their petrochemicals so there's just going to be a glut of Supply in the market and we have the least amount of influence with Saudi Arabia than we've ever had and it seems like we could change that if we decided to but I think Biden has taken this very confrontational approach which doesn't seem to make and remember a lot of sense their stated intent is to diversify away

from oil and into technology and other kind of emerging growth economies that's why they funded the vision fund that's why MBS made that big kind of visit to Silicon Valley a few years ago and there is technology that they want to import into Saudi Arabia and they want to have ownership in around the world and if the U.S is creating a barrier for them to import US tech into Saudi or for Saudi to kind of invest in the U.S but China and Russia have open arms and all they want is for Saudi to start doing trades in Yuan it's going to happen and I think that's where this guy has kind of a real opportunity to shift the global economic

Dynamic say what you will about Trump he uh had open dialogue with North Korea China Russia if your enemies close sure you want to be able to talk to anybody and he was able to talk to anybody now you also want to be able to say Hey listen you can't dismember a journalist like khashoggi and you need to be able to have both of those ideas in your head you can't be rigid in foreign policy you have to be fluid and keep people at the table talking chamath who is your big political who do you predict will be the big political winner of 2023 shamots prediction everybody go ahead I really like spread trades right where you go long something and short another so I'd

like to pair my biggest political winner with my biggest political loser for 2023. okay and I am going to focus on the Republican nomination and I am going to go long Nikki Haley and I'm going to go short Ron DeSantis now let me explain if you're watching if you're not watching sex right now he is ready to interject go to mother so I think that all of this nonsense for example in the house Speaker race all of the midterm results what it really speaks to are is people are getting exhausted with the lunatic fringes of both parties that's Point number one and point so that favors moderates as an

emergent class and point number two is that if you look back through many many cycles of Republican and Democratic nominations it is a very negative thing to be in the lead so early going into the Iowa caucuses in January and so if you put those two things together the risk is that DeSantis decays things emerge people attack him because he's the clear FrontRunner and the opportunity just like it was for Trump in 16 or for Clinton or for George Bush not Herbert Walker but you know w is to emerge from the back and so if I think about a moderate person who can emerge from the back who

can consolidate the ranks they should probably be from the south they will have a lot of these purple compromises that sax mentioned in their policy program and they will have a history of winning and a history of normalcy and so I think that of all of the places where you could ever elect a woman as president of the United States I think it will come from the Republicans before it comes from the Democrats I mean the Democrats are unfortunately increasingly judgmental and I think it's very difficult for a woman to emerge there but I do think that Nikki Haley has a shot so I'm going to go long Nikki Haley

and I'm going to short Ron DeSantis okay I like a spread trade for his prediction well done before sax you interject let me just do mine and because then you'll have two to interject too uh I was looking uh at Biden and Trump and thinking Hmm which one of these is going to have the big win in 2023 so the two biggest I think uh players I have a prediction for Trump I think he's going to lose 50 pounds on the ozempic everybody loves a weight loss story I think he is going to be indicted by Garland is he on wait a minute sorry he's on ozenpick no I'm predicting an ozempic run and he's gonna

drop 40 50 pounds then we're gonna have a schvelt trump get indicted by Garland and the debates and the and the and the rigmarole with DeSantis I think he's gonna go after DeSantis based on weight and height and then he's going to win the nomination in 24 and we're going to have Trump versus Biden but this is a crazy prediction here I think we're gonna have a settlement I think he's going to agree to not run and get the pardon this is a crazy prediction I know but I think he loses the weight he wins the Nam he gets indicted and then he gets the Richard Nixon pardon Global pardon for all of the [ __ ] he's

done sax you can reply now to these two crazy predictions this French random mine I mean this is like proof positive that everything you have to say about Trump is an act of projection I mean like asempic I mean like I mean are you talking about yourself or Trump I strike boom yeah and super good yes both of those things are fasting have you sacked on any of them yeah I've tried it yeah um I think everybody should be looking into this if you're uh have weight issues it's a it's a it's a great news I want to say it even more broadly I've been reading a lot about these glp ones and I I got to

tell you statins are a clear wonder drug yes okay I think that the 50-year longitudinal data on its value is pretty unimpeachable metformin even taken prophylactically has shown incredible benefits for cell regeneration longevity and glucose management and the real look the reality is let's just take a step back the American diet we're all pre-diabetic okay so let's just let's just not beat around the bush the way that Americans eat and our food supply and also probably in Western Europe is pre-diabetic by definition it's [ __ ] it's trash so metformin makes a lot of sense and again its longitude data is incredible

but I got to tell you the early data on these glp ones are unbelievable it's extraordinary firsthand experience I would lose half a pound a week when I would diet no but what I'm saying is it's beyond that um what I'm talking about is insulin response it's cardiac health and so if this data tracks like this man you're just going to want to put everybody on these gops well I just want to also put a disclaimer out here do your own research work with your doctors whether it's for metformin or zempic but I had great results on it I recommend if you're struggling with weight loss like I did for many years you talk to your doctor about it that's it it's not a commercial for a govier or

something but I do think these things are going to change well and they're getting better and it seems like diab people with diabetes are on them for life so if your question is like if I could do this for a year to lose weight you know I think diabetics are on it for life so when I made my decision again work with their doctors not random podcast or Venture capitalists for your health advice I was like well if all of these people who have diabetes are gonna on it for years unless it's non-toxic go get a pre-nuvo scan just make sure absolutely you got that right so there you have it those are our uh predictions I wanna I want the sax to react to my

spread Trader yeah okay so so look I think you know if you're going on a betting site I think that um you could place that bet that your mouth made pretty cheaply and probably it's like has some good upside to it so I don't criticize it as a bet do I think it's actually going to happen no and I I think the reason is is this that if you look at what's happening right now with the speaker's race there's two very clear Wings in the Republican Party there's establishment wing and then there's kind of this populist Maga wing and the candidate whoever it is in 24 needs to unite those two wings and I think this is really the best argument for DeSantis is he's widely accepted by

both I think Nikki Haley's problem is that she's very well regarded within the establishment wing of the Republican party but she has no meaningful support within the populist wing and so I don't think she's capable of bringing the party together at least at this point in time she would have to prove let's call it populist bona fide that she just doesn't have right now so this is why I think you know DeSantis even he does have front runner wrists you're right that people are going to keep taking shots of them as long as he's the front runner but all right let's use capable he's capable of

uniting the party in a way that a desperately needs right now as we're seeing with the Kevin McCarthy thing playing out yeah okay let's go for our biggest losers uh we'll rip through this last year I said Biden and Trump in the extremes had the progressive laugh again the extreme sack said Pelosi who just wrapped up her tenure and Friedberg said U.S influence globally was the biggest political loser uh let's get our predictions for the biggest political loser of 2023 Freeburg who do you think would be the biggest political loser of 2023 the world wants to know Freiburg I would continue my U.S influence but I I am going to shift here's what I think is going to happen

this year my big prediction is based on I think the world has too much debt I think that the economic slowdown coupled with Rising interest rates globally and a and a dearth of uh kind of asset uh Capital inflows means that there's going to be a lot of issues with a number of debt markets around the world particularly kind of emerging sovereign debt just to give you guys a sense Global debt is about 235 trillion dollars in public and private um you know that's somewhere between five and fifteen trillion dollars of interest payments a year depending on what the net rate is on 96

trillion dollar Global GDP and there's another trillion and a half of unfunded liabilities in the U.S and pensions and Social Security and all that sort of stuff I think this is the year where a lot of the debt markets start to unravel the so freedberg is this ability that steps in or a political loser I'm going to tell it one second this is the political yeah so the political ramifications so the political ramifications for me I think that the um the entity that steps in to try and support these um unwinding moments is the IMF and I think that no matter what the IMF does they're going to look bad I think that the you know it's sort of like like Jerome Powell

this this past year right like you you raised rates too late you raised rates too quickly no matter what you do it has some adverse effect and impact it's either inflationary or it impacts growth and so I think the IMF is going to get a lot of heat for either acting not too soon uh or sorry not fast enough or or acting too aggressively and causing inflation as a bunch of these markets face credit risk this year so My Big bet is the IMF is going to play a major role and we're going to be talking a lot about the IMF later this year I think as a result the IMF will get a lot of heat and you'll end up seeing a lot of pressure and political you know just like we blame NATO just like we

blame Jerome Powell and the FED will end up blaming the IMF for a bunch of problems uh that'll arise but the natural physics of what's going on is the world has too much debt and not enough growth to cover the debt the cost of debt that's it okay and the IMF will be the political kind of you know hit that'll that'll result well you have a point of view but I think yeah and who do you have uh as your biggest political loser prediction for 2023 Mr Davis hacks well I mean Kevin McCarthy may not survive the week so let me go in a different direction I think California is my big political loser and I would say in particular the

city of San Francisco both are going to have gigantic budget shortfalls you may remember that this is back in 2021 when we had that asset bubble California had a surplus of 76 billion and then insane and then 2022 happened and now the state is looking at a 24 billion dollar deficit well if we had taken say a third of that Surplus from 21 and put it in a rainy day fund we wouldn't have to worry about this deficit but that was never done Newsome started handing that money out like candy to the electorate to Goose's election his re-elect numbers and to get him past the that recall remember okay so the the state never got a Cisco Outlook in order and now I think it's

going to be even worse in 2023 and San Francisco the city uh very similar kind of problem where it's uh tax base is heavily dependent on Commercial Real Estate which is really suffering so you know the city of San Francisco and the state of California they've moved their tax base to to highly volatile capital gains and with a really lousy stock market I don't know how these guys are going to meet their budgets so a lot of pain is going to be a lot of austerity and pain coming that's for sure and these people do not know how to manage a budget they're incompetent so you say California Freeburg says IMF jamoth who do you think the biggest political loser

for 2023 will be already gave us your predictive sentence I'm in alignment with you I think descent has peaked a little too early and the forever trumpers and the in the chaos is going to be a little too much for him to handle okay now we get into what everybody wants business business biggest business winner for 2023 who do you have chamoth for your biggest biggest business winner of 2023. I'm going to pick something out of my portfolio I think I'm the only non-trivially large investor in both SpaceX and relativity space relativity space has a huge SpaceX is clearly just crushing on all cylinders and they're really the only game in town

with respect to launch capability and if you just Google it you'll see that the Europeans you know have a hit or miss capability and launch the Russians are completely unable to do launch now because of all of these sanctions the private companies in New Zealand or the United States have also had fits and starts really incapable relativity which is really which is now the second most highly valued space business is about to do a launch in the third week of January and the big difference between it and SpaceX which is sort of why we did it this is a early YC company I did the series a and kind of went along the whole way they have 3D

printed everything and the reason why 3D printing is interesting is you take a so if you if you think a rocket costs five billion dollars if built by NASA Elon was able to take that to a hundred to 500 million and if you 3D print everything you can take that cost to like five to fifty million and so it allows you to just have this repeatability and manufacturability now SpaceX also has a lot of 3D printed Parts but relativity is entirely 3D printed it has a launch in three weeks at Cape Canaveral I think and we have like a 10 billion dollar order book that gets unlocked so I don't know how to see beyond a lot

of these Market forecasts right now so I'd rather pick a company I'll pick something in my portfolio if the rocket does not blow up there's a 10 billion dollar order book and this company is now on a trajectory to be as valued as SpaceX all right talking his book times two and if it doesn't it goes to zero Freeburg go ahead and talk your book times two or three let's see if you can one-up chamoth which one of your investments will be the biggest business winner of 2023 Freeburg I'm not an investor my big bet is open AI it's just way too obvious to be anything else this year as you guys know there are dozens of startups that are

being started right now based on an open ai's demonstration of Dolly and uh Chachi BT I think we're seeing this in the Enterprise and consumer markets I think open AI will become to some degree maybe they could be as many paths they could take the AWS providing tooling and infrastructure to all these startups that are building applications for consumers and business users or they will end up doing a massive deal with Microsoft I think it's inevitable they're going to get a billion dollar plus investment this year they could power you know AI driven Bing search and Voice driven search they could build their own products and their own tools and they're becoming

great investors they invested in dscript which is a product company we use here for our podcast which is an incredible product and I think that Sam Altman is a very smart and screwed investor as well so for a lot of reasons I think openai could end up having an amazing year this year and a lot of different paths they could walk and we're going to come out of this year and say they're one of the top tech companies in the valley okay sax open AI has of course increased your ability to talk to other humans so you're seeing a lot of big wins there I know um he's how do I talk to a child about their college hopes and aspirations

no no how do I talk to a child about their day hello it literally is hello hello progeny of mine how are you faring today in this complicated write me a script of talking to a 12 year old about their hopes and dreams say it's interesting using GPT for talking points on different topics I should try that for the Pod you know oh okay we should have done the GPT predictions or answer these categories sex as a person on the Spectrum uh yeah how delightful is uh this uh chat EBT and you know your treatment of your condition that's great let me let me get to my answer here okay so um my answer

for the big business winner of the year is America's natural gas industry and I have to admit this is an aspect of the Ukraine war that I didn't fully appreciate until I read this New York Times article the other day about how natural gas prices in Europe have now fallen to the level they're at before the war and everyone thought that there'd be this huge shortage and then we'll be able to heat their homes well what happened the the answer is that Europe completely cut off their dependence on Russian gas and in fact the Nordstrom pipelines were blown up so physically they separated but then on top of it they basically started importing

liquefied natural gas from the U.S and here's the key paragraph in this article from The New York Times is that Europe rapidly built terminals to receive liquefied gas sweeping away many of the usual bureaucratic obstacles and environmental objections so in other words what normally would have taken decades to get approvals now was all put on a fast track and Europe is now completely dependent on American natural gas and I think this is again the thing maybe I underestimated that cold hard American interest in this war is to basically turn Europe into a vassal of America's natural gas industry previously they were about to be dependent on Russia and Nordstrom was

going to make that situation permanent we've you know somebody blew up nordstream now they're dependent on American LNG they're going to pay higher prices for that but it's uh it's been a pretty impressive win for the American natural gas industry and I think Biden has really pulled a 180 here because you remember when he first came into office he canceled Keystone he canceled drilling he was very tough on the oil and gas industry I think after he then delivered the hundreds of billions for the climate special interest and the inflation reduction act now he is taking care of the oil and gas industry I love

it yeah not and so what you're saying is Biden dynamically changed course based on inputs like a great leader would okay well done sex well I don't I don't listen I don't know well no listen I think Biden has done something politically smart here there's no question about it I am giving him credit does it mean that this war was worth it no I don't I don't think we should be engaging in oil Wars like we did in the Middle East we agree so I'm not justifying this war but I am saying that there is a cold hard American interest undergirding the uh our position which is it's about LNG it's not it's not just about moral platitudes yeah I mean the strong start to 2023 vassal and

undergirding uh my biggest predictions I'm working backwards from two here I think the door dashes airbnbs Ubers etsy's of the world who need entrepreneurs they need workers they need Supply they've always been Supply constrained as unemployment becomes let's call it what it is sticky you're going to see a lot more people participating in Gig platforms or entrepreneurial platforms that enable them to make money so I think they will be huge beneficiaries especially if they continue to lay off employees like doordash and Airbnb did to right size their businesses but my first one

my number one is laid off Tech workers I think laid off Tech workers who get together in groups of two three or four uh developers product managers people who actually build stuff and start companies together are going to become extremely successful and they're going to make incredible lemonade from these lemons of these big Tech layoffs so I think the startup space is again and these laid off Tech workers who choose to take control of the destiny and starts companies are going to be the true Big Winners if you do it do it with two or three friends because you're going to need developers you're going to need those those talented people in the startups that have three

founders get funded faster than the ones with one uh so those are my two winners all right oh yeah and last year our biggest business winners were chamat said smbs Sac said rise of the rest uh Freeburg set stripe and I said Disney Millennials and gen Z let's go on to biggest business loser for 2023 Friedberg who do you think will be the biggest business loser in 23 this year in fact okay so my Biggest Loser is the general category of capital intensive series B through D growth businesses in the startup landscape private companies um as you guys know there's been a big shift in capital allocation a lot of the folks who were writing big

checks into growth rounds are retreating back to writing smaller checks and seed and a rounds they don't want to write the 20 million dollar series B they want to write the five million dollar seed in a round uh no one wants to kind of follow the valuation no one wants to set the valuation for these growth businesses particularly if after this round you know you need another big round of capital and no one's sure if someone's going to be waiting on the other end as a result we're seeing tons of these businesses run into capital and fusion walls they can't pivot I think we'll see what we saw in the.com bubble we're 99 and a half percent of these

companies actually die the half percent that we are going to emerge as the next hundred billion dollar Enterprise is the Googles and the Amazons of the world so there will be light at the end of the tunnel for the winners but generally there are hundreds of companies in Hardware in sinbio in biotech and high growth Enterprise software that require significant sales investment expense a lot of these businesses where the capital intensive nature of the business just doesn't have the market for it right now and there and and investors are are all retreating and they're going to be selective so that that's where I think there's going to be more people intensity by the way see in a investing

hot as a button uh that's what that yeah that's it okay sax biggest business loser for 2023. well I just by the way 100 agree with what Friedberg said but my my Biggest Loser for business in 23 is the consumer I just don't understand how the consumer isn't going to finally tap out in this economy I mean they they have a mountain of personal debt credit card debts at all-time highs I think the average credit card rate hit 19.6 last week and is expected to rise even further uh the mortgage rates are above seven percent now so forget about trying to buy a new home or uh sell your home and your stock portfolio is down too and

now layoffs are starting to pile up so I just don't understand how we're going to avoid a recession and you saw you know Kashkari saying that right the fed's gonna keep raising 5.4 his prediction you know I don't understand how if if rates are at five and a half percent that doesn't finally break the back of this economy and uh we go into a recession you think sax that the economy is actually broken right now we just don't have the day data because the data lag 60 days in most people's minds because it does feel like the consumer is just and real estate has just broken at this very moment it seems like I mean

the pain is very unequal right but in the tech industry we've been in a recession for a year I mean like the growth stocks are down 80 percent but Freeburg said is true no one's going to fund these you know High burning companies there's an enormous amount of retooling that has to happen look I think the recession is here it's just very unequally distributed distributed exactly yeah well I mean if you look at it uh buy now pay later that's a category starting to break credit card debt as you're saying hitting you know uh big um a bad records in terms of how much we love spending also people's um savings are going down so the consumer's

back has been broken I think we're just going to feel it in the in the first and second quarter chamath who's your biggest business loser prediction for 2023 the world wants to know let me just build on what Freiburg and Sac said for a second before I give you my pick sure I this is the conversation you and I had when we just got on guys what I was telling jaycal is at the end of Q4 I did five deals and four were proratas one was a new deal and they were all clean markups so the four deals that other people put money into and I was looking at them and I was trying to figure out okay what differentiates these things in Freebird

to your point these were super clean startups with very clean cap tables that had clear progress and then conversely I had seven converts showed to me for companies whose valuations were anywhere between three and I would say 12 billion and I did none of them and not only did I do none of them nobody else did any of them and the problem was the real market clearing price was 80 to 90 percent down and so I was like what is going on here so fever to your point I don't even think it's just cash intensive startups I think it's like all growth companies

are in a really bad place I thought that this growth stuff would get sorted out in two to three months and now I'm worried it's two to three years I think it's it's toxic toxic here's the definition of what I think has happened and where I think the cutoff is is when the value the implied Market valuation of the company based on where public comps are trading is less than the total Capital preference in the company the total preferred stock now so many companies now that raised 400 million in a two billion valuation but the company is actually worth 300 million now based on public market comps so they're worth less than their

preference stack so worth it no that this is why I think all these converts are getting done that's where the rubber meets the road on all these deals yeah that's right who does the convert benefit the convert benefits the VCS who want to maintain the illusory valuation that they had before they do their work they do that to assuage The Limited partner who gave the money that the marks aren't as bad as they thought but the people that really get screwed as Jason said are the common shareholders because eventually those convert deals that do get done those people will end up owning the

company the cap table gets completely flushed and reset and the employees get wiped up yeah and then you gotta basically take all the employees who were there previously who now hate the founder and give everybody all yeah they're wiped the people to do all the work get [ __ ] and the people don't do none of the work and who just want to maintain this shell game gets to basically Live Another Day basically people are investing as you gave in the example earlier like if it's a three billion dollar company but it's actually worth 750 people instead of taking the valuation from 3 billion to 750 will say okay buy one share at the three billion

dollar price and we'll give you three or four shares for free or for a penny warrants they're called typically or you know just different ways to structure this and then all of a sudden Nobody Knows the actual denominator they may own them 10 000 shares but they don't know how many shares are actually issued because the warrants are not on the cap table they're in some side document in a folder in a lawyer or cfo's office so let me let me tell you my biggest business loser yes please I think that the biggest potential business loser this year is Google search who has measured by pure profitability and engagement

I think it's easier for me to see where the the usage comes from as opposed to picking open AI or chat GPT in terms of where the usage goes to and the reason is because I think a lot of people don't still fully understand how machine learning and AI work but just 30 second primer there's two big buckets of work there's what's called learning which is how you learn how to make predictions and then there's what's called inference which is when you actually type something into the search box you get the answer the thing with learning and what chat GPT is showing is that they have learned by crawling the entirety of the web there are five or six other

organizations that are capable of crawling the entire web in terms of cost in terms of compute in terms of the quality of the Transformers and the quality of the AI and so I find it easier to predict the decay in the quality of Google search as that much better than everybody else then I find it is to predict who will win because I think that with enough time and money Oracle Microsoft Google the Chinese internet companies can all compete Facebook and so I think that you'll Converge on the same training which will lead to the same inference and so I think consumers end up getting confused

and will end up being able to get high quality search results from many places versus today you know you wouldn't only think that Google is the only game in town quite honestly for most people well so I think the statistics you know that Google could lose 10 or 15 percent of usage to all these other sites and that may not make any of those sites that relevant but it'll have a material measurable impact to Google and Google fantastic prediction and I think you know Chachi potatoes other ones are going to have a very interesting marketing attack that they can do on Google is why

search when you can get an answer right hey we'll just give you the answer you don't have to search I had so many losers that I went through here I'm just going to run backwards to them number five I thought Founders who refused to downsize in 2022 could be big losers in 2023. obviously have five and the rest of us are just I'm just going to tell you my thought process this was the one I had a long time number four I thought VC funds founded in 2020 then I thought crypto because Gary getzer says it's all a stock then I went with youth number four Google my God they got so many headwinds against them with the shot GPT but I wound up on why collar workers with no hard skills

Twitter going down to I think you know Elon said a couple of hundred people is all you need to run Twitter and I think he said he has two thousand employees or something like that he has shown everybody you know Hey listen these more can be done with less uh or these things are overstaffed in a massive way I think white collar workers now the idea that you're going to have four offers and you're gonna be able to play them off each other is over you're saying Surplus Elites sure white collar workers AKA Surplus Elites people who actually you know are mid managers who don't who don't actually code or don't

actually build a product or sell a product don't actually do real work as I think uh many people would frame it in the managerial class or the CEO class man they're going to have a hard time and this week Andy Amazon Andy cut 18 000 white collar workers not the Blue Collar the white collar workers at Amazon that was a big turning point and Benny off you know he's Ohana he is Mahalo he is uh Aloha he does not like to lay people off he considers Salesforce or family he laid off 8 000. I predicted that yeah and I mean that is to tweet about that well I mean the reason is pretty simple right they're gross slowed down by two-thirds in the most recent quarter

but they're still spending the same amount on sales and marketing so when that happens your CAC payback explodes right you go from three years pay back to like 10 years so they have to cut costs in order to rationalize your unit economics so and now it it Cascades right because all of salesforce's vendors are going to be getting less money from Salesforce because they're tightening their belts so then those companies are gonna have to cut and the cycle just keeps going and going right and everybody tightens their belts at the same time freezes the economy AKA recession uh and and possibly were so that mine was a surplus Elite so that's a nice uh little quartet

in 2022 just so you know uh I picked crypto freeberg also picked crypto which must have Visa Mastercard and Sac said assets classes that benefit from government uh dumps and publicity yeah all right let's go to biggest business deal of 2023 it's a prediction what do we think could be the biggest business easy easy this one okay let's go okay quickly starlink will go public oh SpaceX will cut and paste the cap table and we will take yum it'll be yummy and delicious and my prediction is that the starlink valuation will be at least half of spacex's current private Mark 75 Billy just 75 billion it will be phenomenal and I think the reason why is

that I think in order for Elon to have complete Financial flexibility and do what he needs to do and you know he talked about this on our pod about the difficulties and the dangers of margin loans and all of that stuff yes he's gonna create breathing room for himself ah this is the simplest and most obvious way for him to do it it'll give him a ton of more dry powder sure so I think that this is an obvious outcome in 2020. they already have a million subscribers in there better than nothing beta as they call it I have two of them I think uh this is a great great uh I was the first one to get it for uh for the global 7 500. so

okay well I I got it for yeah Tahoe so yeah similar uh so uh they're my Clayton in your house in the same size yes exactly so there you go uh there is a point here people are underestimating The Tam I think of this product The Tam is not existing Broadband connections it's second connections it's connections where connections didn't exist just so you know buses the Best in Class the Best in Class broadband connection for a plane is called Ka band and it costs 500 Grand a year that's ridiculous and you can replace it for you know a tenth of the cost and start a link on a plane is dramatically better bi-directionally so I think starlink is going to go

public and I think it's going to be it's going to be the best chance that we have of opening up the capital markets in 2023. there's another way of saying people who own private jets if they are flying 250 hours a year which would probably be a reasonable number to 300 hours a year they're paying two thousand dollars an hour for their internet service that is Bonkers okay sax who is your uh big deal biggest business deal prediction for 2012 steals 23 prediction is there will be a deal between uh Putin and G and they met by satellite late last week to discuss ways to further help each

other in 2023 Putin characterized it as a no limits partnership you may remember that the two of them Inked a 175 billion dollar gas deal in early February last year that was three weeks before Putin invaded Ukraine I think now Russia is even more dependent on China we've really driven Russia into China's arms and I think there will be a big deal not just on energy but on agricultural products mineral products and rare earth minerals that you know chamoth likes to talk about I think there could be a trillion dollar deal between Russia and China this year if I was going to go out and live and make prediction okay so there is your 2023

prediction of the biggest deal the Legion of dictators is Foreman I do think it's uh it is like uh you know that the axis of Evil this is more Legion of dictators like hey let's do business together treeberg he got a prediction for the biggest business deal of 2023 this is really going on a limb here I'll do two real quick the first was the similar to what Zach said but it's kind of echoing what I said earlier which is the Petro you on trade I think that's the Saudi China trade if this happens and oil is sold in Yuan it marks the beginning of I think um the end of the assumption that the US dollar is the global reserve and the

risk-free currency in reserve for the world so I think the Petro you want to trade if you guys um here's the Reuters article covering ji's visit uh to Saudi Arabia last month for the second week of December once this gets Inked and signed it's a real shift uh globally I think the other one that I'm that I'm going to point out that I think is a bit of a out of left field one maybe and maybe I'm just gonna look like a total idiot at the end of the year about do a wild card I like it this is my wild card so my wild card is I think Apple ends up buying something completely out of the ordinary and here's why I think

Apple's Core Business they're facing significant pressure with respect to their relationship and ties to China as you guys may have seen last week Foxconn announced that they're actually going uh further Downstream in terms of their production model and they're trying to diversify away from being kind of the sole service provider to Apple apple as you know is under such pressure to get out of China politically that they've started to try and invigorate activity in Vietnam and elsewhere so a lot of pressure on their relationship with their low-cost producer and low cost production partner they're also under a lot of political

pressure because of the App Store revenues you guys know this 30 App Store that they take a lot of people are calling it monopolistic and antitrust is getting involved so they're feeling that pressure there's also the pressure with respect to the you know waning uh consumer demand for high-end Electronics Samsung last yesterday or last week and or yesterday I think announced significant declines in consumer demand for electronics or their forecast as such that has to impact apple as well so when you put all of this together right they're they're they're being pressured to get out of their low-cost manufacturing center

they're being pressured to stop making money on the app store they're being pressured because the demand may be waning they have to do something big to kind of diversify the business so I think they might end up doing something like buying a real content company maybe they do something like buy a Disney maybe they do something like buy an automotive company like Fiat Chrysler I think there are a number of these kind of like what may seem today outrageous deals that Apple might end up kind of being pressured into doing so that they can get ahead of their forecast of the impact that all these pressures are going to have on their Core Business and so I think this is something interesting

to kind of think may happen this year I certainly have no Insight or Intel on anything or I could be completely wrong on this one but it feels like they've got to do something this year I'm necessarily to keep that business I think this is I think I love your wild card because the MBS China trade and that relationship sure Legion of dictators but this one is really good it's hard to buy Disney monopolistic issues but buying a car company pretty easy because that's a fragmented Market I love this prediction I mean now with Tesla with this depressed stock price Apple can make a run at Tesla they have they could almost buy it with cash

let alone BMW Volvo one of those Brands they could buy easily what a great prediction for me the prediction is Amazon's three-legged stool grows into a sturdy chair chair with a fourth pillar for those folks who are not familiar with how Amazon has built their businesses there are three pillars in their stool e-commerce obviously when you buy stuff Prime memberships which is kind of considered a separate Revenue stream and of course AWS cloud computing I think the fourth is going to be this continuation of following the health stream not advertising because that's not a consumer-based product that's just

the way they make money health is going to be a big one for them uh they obviously acquired one medical which was a small purchase I think they're going to buy Roman hymns they're going to buy Peloton they could buy a whoop and they're going to go all in on health and you know that three-legged stool becomes a very sturdy chair and my runner-up is Tick Tock is going to divest under duress I think that it's going to have to go public and the Chinese are going to divest their interest in it uh and just take their chips because they're going to be faced with the existential threat during the political debates over the next two

years there will be unanimous support from Democrats and Republicans to get Tick Tock out of the U.S therefore they divest can I just test that which with you guys because we've talked about this a lot that hey we're going to ban Tick Tock how many of your friends kids or your kids do you guys know spend hours a week on Tick Tock it's a lot 90 how do you get over the political mountain of trying to ban Tick Tock if you try and ban Tick Tock whoever raises their hand and says we should ban Tick Tock and actually gets it done they're out of office there is going to be so much pressure and backlash because people are hooked and

love that app and use it all the time to take that away from people will feel like this kind of young kids that don't have phones actually get everything that Tick Tock has on YouTube shorts so I don't think Tick Tock is that important because it is not actually there is no sticky Network effect inside that app so there isn't usage that's dependent on people you know or a graph that you build it's a lot of passively consumed content and so you know you're you're getting pushed a lot of algebra algorithmically defined content you can do that on YouTube and so I actually don't think it's that meaningfully important if tick tock goes away I think the content creator stayed

it's harder for them to build a business on YouTube shorts but if you look at the and measure the density of content inside Tick Tock it exists almost one to one on YouTube that's interesting it's an interesting even it'll you think it'll be okay if we if we cancel Tick Tock in the US and we say that too you can't have taken everybody moves to YouTube and it's going to be disruptive but people will just go to YouTube and Instagram it's not that big of a deal in fact a lot of the my favorites if there was a network effect inside there then I think people would have a reason to complain to somebody whether it's your

representative or whether it's somebody else to say hey don't do this this would have a deleterious impact on my quality of life or my quality of experience and you could make that clear claim on Instagram Facebook you know Google YouTube but Tick Tock is is much more brittle that way and that's why they need to get public sooner and monetize this bloody thing because I think that it's very easy actually to deconstruct tick tock's value into these other places I can tell you my favorite Tick Tock is Chef's reactions and I consume him now on Instagram because he posts he just copies one to the other and so Chef's reactions is a great example where he

actually got banned by Tick Tock and then Diversified on his own and now what he does is he publishes across multiple streams and if you look at all the big creators they all do that because it makes no sense to actually give the power to any one of these things why have a dependency well I have a dependency all right let's keep the trains moving most contrarian belief this is the Peter Thiel award your chess partner sex who's winning in 2022 in chess how many chess games do you have going with Peter Thiel right now and who's higher rated you demolished me with your Queen's Gambit I played one game I got killed in seven

moves I'm I'm ranked at 800 900 right now sax is at 1800 he just walloped me who's higher rating right now you accepted the Queen's Gambit well you know I just I don't even know what it was I was like what opening is this you're like uh Queens Gambit you're dead I don't want to accept the Queen's Gambit okay very pleasant game for white I'm gonna go on a linear you know and risk being wrong uh my my prediction or most contrarian belief is that the Bromance between Biden and zielinski comes to an end at some point in 2023 and uh let me State the part that I think is conventional wisdom and everyone agrees with which is there's going to be a massive Ukrainian

counteroffensive in the spring and I think that could go one of two ways either it could make limited gains basically the Russians fight them to a stalemate or it could be successful and they could basically push the Russians back to the February 23rd lines and then make a play for Crimea I predict that in either one of those circumstances zelinski's interests and Biden's interest will start to diverge so in the case of a stalemate which I think is probably 50 50 here Biden's gotta start going into election mode for 2024 and I think we're saying that we're going to be in a recession so I think that if there's a stalemate I

think Biden's going to tell zelinski wrap this thing up it's time to negotiate we need to get this over with by the same token if the counter offense is successful I think that the administration hopefully cooler heads will prevail and not let them take Crimea that's basically what they're gunning for is they not only want to get back to the February 23rd lines they want to go all the way back to the 2014 lines of retaking Crimea I think that's extremely dangerous I think that could precipitate a nuclear war and I think that the cooler heads the administration will tell zelinski to stand down and that's the right time to make a deal so I think in either one of these scenarios

I think you will start to see a Divergence between the Ukrainian and the American interests and that could create a rift and I think no one's really predicting that I I think this is great this is kind of what I thought the plan all along was which was to deplete Putin of resources distract him them and then get the West off of his oil and and try to do regime change but do it by bleeding him this would be uh proof positive of that strategy which is bleed him to the end and then sell zelinski out I think that's actually I know that's I know it's cynical but I think that's what we're doing I think Ukraine is a tool to deplete Putin and then

maybe get to regime change uh I'm cynical as it gets with this chamoth what's your most contrarian belief of 2023 I will go and pick that inflation which people expect to fall off a cliff doesn't fall off a cliff as fast or as meaningfully as people want and so I will explain inflation as three different chapters and we've seen the first two chapters play out so 2021 chapter one was all about energy inflation and you know we all talked about having almost ten dollar gas at the pump and what does it mean for everybody and it caused that initial Spike in inflation and then we had it come off and sax called this he said you know we're going

to have this sort of double hump and 2022 was really the story of goods inflation right all these prices and all of these things went up because the input costs went up and we all had to Bear the implications of that but then that started to ebb and now if you looked at the tail end of 2022 what I found super interesting was the number of articles I saw about wage inflation whether that was Biden using an 1800s era law to prevent a Railroad Strike the number of states that increased minimum wage the trend around unionization so in general my thought is that the pendulum is swinging very markedly away from capital and towards labor and as the labor

participation rate stays low and continues to go down and also it's compounded by an unemployment rate that may go up right people are it's going to be harder and harder to get people to do the work you need at the company you have unless you pay them more and if that gets exaggerated then inflation will stay where it is it won't be as muted and it won't fall off a cliff as people want it'll be persistent that's my big contrarian God wager for this year is that we that is equation we see wage inflation that keeps inflation not going down as much as people want this is contrarian because everybody's saying hey it's over the consumer's back

has been broken the credit card debt is high and everybody's being laid off yada yada therefore goods and services there'll be more Supply than demand and the prices will lower very contrarian free break you have a contrarian belief for 2023. I think my it follows my earlier points about the Saudi China Russian Russia trade this year exiting 2023 it may be the case that you know there's historically been this belief and this continuing belief that the US dollar will always be the de facto Global Reserve currency and the current Mantra is that it's better than the rest everyone else is

worse off than the US Western Europe is in trouble Japan is in trouble China is in trouble everyone's in trouble but if there is a coalition an economic Coalition a scaled economic coalition that starts to shift the balance of power a little bit and the US meanwhile is taking on extraordinary debt load sending 1.7 trillion dollars in an Omnibus Bill you know has this massive unfunded social security problem coming down the pipe and are trying to manage multiple funded conflicts around the world it could be that the US dollar coming out of 2023 starts to trade more like a risk asset and less like a risk-free asset and so I think that that's my big

contrarian bet is that maybe this year marks the beginning of the end of the US dollar as the kind of global de facto Reserve currency based on some of these big trades that I talked about happening unbelievable so that would be my um my big kind of contrarian perfectly said uh that's your contrarian bet the accent the Legion of dictators the mbs's ETC they become they form a new Global Currency yeah my term not yours I'm not calling it yeah I wouldn't say a legion of dictators and I wouldn't say form a new Global Currency but I do think that the fact that that large economic trading models start to be done in

non-dollar denominated form got it you know weekends the uh the kind of Reserve status of the dollar to some degree not fully right it doesn't happen in a binary way and then the dollar starts to trade more like a risk asset like other currencies do to some degree not fully so maybe once again here we start to see that shift once again I take the exact opposite of your contrarian belief I believe American exceptionalism continues to soar as Russia China Saudi Arabia to a lesser extent continue to self-sabotage themselves with insane Wars like Putin has done or cutting off uh the heads of entrepreneurs in China figuratively uh I'm saying here I think you cannot have exceptionalism without

entrepreneurs without people having freedom and I think that means American exceptionalism based on freedom is going to continue and the Legion of dictators I believe are going to stab each other in the back before they change the world or move the currency you can't trust them they'll snip at each other and all their self-sabotages yeah I think that America is really feeling its Wheaties right now I think that American power is immense I think that the superiority of our weapons in Ukraine has been one of the big surprises of the war let's go Palma lucky I don't see the world in the simplistic uh good guys versus bad guys frame that Jacob does however America is

on turbo right now and um yes it is true that the bricks would love to get off of the dollar because we are now using the dollar and the financial system as Swift as a as a geopolitical tool and a weapon and they would very much like to be off of our dependence on our currency but I don't think they're anywhere close to being able to do that yet and like I said America is on turbo right now now one thing one thing I want to mention this just came out White House correspondent named Jennifer Jacobs just reported that the U.S has agreed to send

Bradley armored vehicles basically our best tanks to Ukraine previously U.S officials had balked at sending armored vehicles saying heavier weapons be too difficult for Ukraine to operate and maintain but allies are moving to provide such weapons so we keep providing ukrainians with more and more sophisticated weapons more and more support like I said this is leading up to a huge Ukrainian counteroffensive in the spring and I really don't know what's going to happen at that point I do think that the Russians will escalate I don't think they can afford to lose this war they view it as existential and I like I said I hope cooler heads will prevail and if

the ukrainians are successful at breaking through I hope that the Bible Administration will shut this down before they try to retake Crimea because you know we've discussed this before I think the Russians confronted with a choice between a total defeat that includes losing Crimea and their Naval base sevastopol and sees the Ukrainian flag flying over their base at sevastopol if that's a choice between that or potentially using a tactical nuke maybe at the mouth of the Crimean Peninsula as a firewall I think they could choose the nuke option so it's a very dangerous situation and um you know very very Dynamic there's a lot of possibilities all right let's go

on to best performing asset of 2023 I'm going with sea stage investing again I don't think people want to get into these toxic cap tables at the late stage as chamoth pointed out so I go with seed stage and you know and up to series a the people brave enough to place bets the founders brave enough to start companies I believe it's the best performing asset class of 2023 tomorrow yeah I think that there's still a lot of uncertainty in the world and in the markets and so I'm generally concerned that there's a lot of chop and so I picked something that's pretty conservative but I would have a combination of cash

and the front end of the yield curve so t-bills all the way up to two year bonds so you can generate four and a half probably by the end of this year five percent pretty safely owning this stuff while you wait for things to become more certain and the way that I think about it is that I would rather Miss the first 10 or 15 percent of a rally once we're really done this stuff then try to over correct and try to pick a bottom just because I think that you could lose a lot of money so I think the goal for this year is to stay resilient and in the game and so owning having a bunch of cash on the

sidelines ready to pound it in meanwhile a portion of it collecting five percent is not such a bad thing while you wait for the bottom fantastic my answer was actually very very similar which is if kaskar is right that rates are going to 5.4 percent in q1 why wouldn't you just put all your money in short-term t-bills you earn five five and a half percent risk free yeah like set it and forget it yeah and that's why Capital flows are moving hugely right now from equities into bonds especially if we're going to a recession which is inherently deflationary what do you got Freeburg performing asset class of 2023. one of

the things so I think it's inevitable that we continue to have significant infrastructure spending from both the stimulus and security point of view so you know we kind of want to continue to stimulate the economy and and support growth we want to continue to create jobs and support this transition and the risk if this if the recession predictions play out true and the job market does lucid it's very tight right now um there's going to be even more of an impetus to continue to do infrastructure investment but I think there's also these big economic transitions happening underway right now with Pharmaceuticals

with semiconductors with energy there's a lot that we've talked about where there's a security problem and a redundancy problem and so you know there are a couple of ways to kind of play this infrastructure is spending thesis in each of those areas I've kind of highlighted four of them one is in semiconductor Capital equipments okay like 10 core Applied Materials that that range of businesses that provide and sell the equipment into the uh the Fabs and the and the organizations that build semiconductor Manufacturing facilities the second is kind of an oil and gas services so similar to what Saks

said earlier Schlumberger Baker Hughes that class of businesses I think benefit in this in this environment and this is independent of kind of economic conditions certainly because these are Big multi-year spending projects the third is in the equipment to support them so deer and caterpillar and then the fourth I think is an important one I'll talk about this in a minute with respect to my biggest kind of anticipated thing for next year which is in a pharmaceutical infrastructure so Thermo Fisher and there's some company and others like them because there's a lot of build out happening to support these big transitions happening and the modalities that are being used in

pharmaceutical drugs and Diagnostics and then I think that there's also a couple of these businesses that are Diversified like danaher Honeywell Thermo Fisher is a good example that play across multiple of these um these opportunities so those are those are all great businesses to own and you don't need to worry about you know they're they're growing cash flow positive dividend paying companies and you don't need to worry about you know am I getting five percent or five and a half percent based on the equity price this year these are long-range businesses that are building real value growing their Top Line and compounding value from within and

then they're acquiring a lot of smaller businesses very cheap I'll say well that's an important Trend I've seen across these companies Dan and her Honeywell Thermo Fisher they buy small companies they pay very little and they immediately get massive return on invested Capital like they're in the High Teens so why get five percent on t-bills when you can get high teens roic uh on the management teams running these incredible platforms so that's where I'm most excited for this year okay now let's move on that was like a mad that was like my mad my Mad Money segment I've never done the Mad Money segment before but there you go worst

performing asset I I went with energy because not that I think it's not important but it just feels like everybody rushed into it in 2022 so it feels like it's overheated and if we are in a recession people might lower consumption uh in terms of energy and uh be looking for cheaper alternatives so it could be overheated so I went with energy worst performing asset you got one I think that if we've learned anything from the last three years you have to separate the valuation of a company and how it performs in the stock market with its value in society so for example if you look at Zoom zoom's valuation has cratered but its

value in society has probably continued to go up it's still a massively relied upon tool the point is that markets do not give you credit for the value in society they will give you credit when you are about to over earn but then they'll pull it all back when they think that you're going to under earn so in that lens I think that Tech will have a tough year I think energy will have a really [ __ ] year and probably the biggest asset class that is going to get pressured is going to be junk debt and the reason is a bunch of these variable rate loans when rates are at

five and six percent that all of a sudden are like 11 12 13 14 coupons a bunch of companies will have trouble meeting their debt obligations and will have to restructure the debt or we'll have to file so tax energy first performing asset for 2023. uh some category of what monster said I think office Towers in San Francisco are that is some serious toxic debt 27 vacancy rates and growing as Lisa's role uh I think that a lot of these buildings maybe virtually all of the San Francisco downtown is going to be owned by the bank soon because the real estate in San Francisco the office tower specifically the office Towers because no one wants to be in those the skyscraper buildings

south of Market you know mired in homelessness so um yeah I mean I think that a lot of those buildings can be owned by the Banks there's gonna be some major fire sales remember this was the hottest commercial real estate market in the country a few years ago and now it's the worst well look what I think about it look what happened to be reap what do you think about that crazy thing that happened with the Blackstone read I mean that's nuts you know explain what happened yeah Blackstone has a product called b-read it's like a 70 billion dollar exchange traded fund effectively and what it is is the ability for individual investors don't act access to

blackstone's you know commercial real estate portfolio and they had such a massive amount of redemptions that they had to close redemptions at the end of Q4 and they were worried that the redemptions were going to continue to go up these are individual investors who basically seized the writing on the wall as David said and wants their money out and so they went to the University of California pension system and they essentially got a huge infusion of capital I think it was about four billion dollars were they guaranteed 11 and a half percent interest to these guys for the four billion dollars and they also posted a billion dollars

of their own equity in in the actual Reit to backstop it so what does it show you I think what sax is saying is really right it's it may not just be in San Francisco but you know with all of these people either getting laid off with all of these people now working remotely we may finally start to see the beginning of the Reckoning in commercial real estate which has been an unbelievably performant asset class up until right about now and and on top of that you have to factor in these much higher rates and so these building owners if they financed it which they invariably have always financed they have huge variable rate

payments that are due on these buildings the rent rolls are lower even people like Twitter is just refusing to pay the rent so you have to take them to court so it elongates when they have to pay and so you could miss a bunch of rent payments and all of a sudden the banks could just go crazy and take ownership of these things okay do you have a worse performing asset class for 2023 prediction Sultan of science queen of quinoa David Friedberg it's really simple I've mentioned it before it's Consumer Credit we assume that raising Rising rates and inflation would taper down consumer demand meaning

consumers buying goods and stuff and that certainly hasn't happened I'm in Vegas right now I was in the car yesterday and the driver grew up in Vegas uh he's like in all the I've lived my whole life in Vegas he's like I've never seen a December like we just had it was packed the entire month he's like normally in Vegas it's dead up until Christmas and then New Year's people come into town but it's normally dead he's like I've never seen such a busy month and I think we see this in the numbers consumers are still spending like it's 2021 they're still spending like interest rates are zero as we talked about

um consumer credit is skyrocketing while rates are skyrocketing um and so I think we're going to run into a real wall with respect to Consumer Credit in um sometime this year and you're going to see as you guys know this is such a complicated interwoven Market of assets that the way that this this can be traded there's a lot of different ways to trade it but I think it's going to be in general consumers are not going to be able to meet their debt obligations could be mortgages could be credit card debt defaults are coming yeah the markets the market has priced in a bunch of this stuff obviously companies like a

firm and the um what are they called buy now pay later companies but credit card companies mortgages there's a lot of assets that you can start to kind of pick apart where do you think this unravels first how does it what gets hit hardest what's underpriced and overpriced probably a lot of good pair trading to do is Jamal kind of loves to talk about uh with respect to which of these are more likely or less likely to be sensitive to this Dynamic but there's I think it's going to be a pretty ugly scene consumers just have way too much debt relative to their earnings right now and it's pretty nasty and they have some confidence that

they'll always have a job or some way to pay their four easy payments it's hard it's muscle memory is serious you know you come out of 2021 when you had um it's not just stimulus checks it was the low interest rate and easy credit availability everywhere and it's just easy to jump into getting new stuff and cool stuff and then when you get used to getting these stuff every week or every month you kind of stick with it and you're like I don't want to give it up just yet I just not just yet not just yet you know and so it's hard to kind of step back from spending when you have a

new type of lifestyle and I think that's what's going on I think this is an incredible observation yeah there's a great Tick Tock of this guy that runs car dealerships and he sent them out unlike how much incredible money like what a significant percentage of people's income they are spending on their monthly car payments and people buy these cars that are well beyond what should be kind of a reasonable budget if you were to go to Susie Orman do not buy that freaking car they stretch and the stretching is gonna it's gonna snap this year yeah absolutely which brings us to the most anticipated try I love it great

one most anticipated trend of 2023 related to yours I went with austerity I have a friend who sometimes flies private often and I was talking to him about his Christmas vacation this friend of mine Shama instead of flying private to his vacation he had to pick up his kids he had to go back and forth he was driving his car that was three hours that was you oh okay I didn't want to die it was so great who would normally fight private to Lake Tahoe and he's like no I can't go out with you skiing on Friday I gotta pick up my kids and then I'm driving back I say wait a second how are you doing that he's like I'm driving a

car I said what who's driving the car he said I'm driving the car and that's why I say austerity is my anticipated train of 23-3 I agree with you I actually think this is a really good opportunity to pull back on so much waste I haven't really looked at my household budget in probably two or three years didn't even bother why and then and then when I looked at it I was like wow this is really inflated to a level that I didn't expect yes but it makes a lot of sense to live in a more heads down austere way I don't know yeah I well I mean look at tonight's menu you went with duck I guess the olive fed wagu everything's off the menu now no black truffles we're

having duck we're down to poultry next week we're gonna have pasta it's okay oh austerity measures for everybody they call it foul for a reason right oh God sax uh do you buy into austerity where shamath and I are austerity belt hiding as our trans where are you what's your Trend first I think that's a pretty good Trend the trend that I am going to suggest uh will be to your great disappointment J Cal which is Trump's influence in the GOP continues to wane you're seeing it in real time right now the headline is Trump's endorsement proves worthless to Kevin McCarthy and the speaker bid even the Maga faithful like Matt Gates like Lauren bobert they

are ignoring Trump's pleas to get behind my Kevin and in fact they're kind of not just defying him but making fun of him Matt Gates had a repost Trump saying sad exclamation point and bobert was saying that Trump needed to get behind her movement so we have now a level of of open Defiance to Trump and the GOP his endorsements just not are not what they once were and even if somehow Kevin McCarthy pulls us off I think all that means is that Trump gets blamed for every swampy Rhino compromise that McCarthy has to make to keep the government running over the next two years so it's a lose-lose does that mean that populism is on

because the it's the electorate that got him elected in the first place he was not very popular with politicians the he was kind of an outcast when he got elected the first time and that may be the case now but he still got elected because the population loved him people loved him is that going to happen do you think that means that the populism is kind of waning or the interest of the the voters is waiting on him or is it just the political party's alignment Wilbur only won by a few thousand votes she didn't exactly crush it in Colorado I think a lot of this has to do with Trump's personal standing after the midterms the candidates that he

personally picked that were all in tough Races they all basically lost it was about the distraction he caused by making the 2020 election such a big deal constantly looking backwards so I think the Republican party doesn't like the Antics it's not about the policies I don't think I think it's 100 about the about Trump's electability and about his ability to get things done and it's not really about the positions per se so I think Freiburg to answer your question I think that the future that GOP will incorporate this populism but it's going to find a better integration with the establishing

wing of the Republican party and future candidates will have to basically satisfy both of those wings of the party sex was it was a straw that were maybe the two shrouds that broke the camel's back for republicans and Trump in that relationship was it January 6 and the election denial like for Republicans is it just like come on those are the two things this constant focusing on the 2020 election first it costs them the cost Republicans that Georgia runoff's seat with Purdue against Warnock Purdue won on Election night didn't clear 50 had to go to the runoff this was happened the day before January 6th this happened on January 5th of 2021. that was the first race where Trump's Antics

cost them then you had this midterm election where you know all the candidates who had to appease Trump by talking about again the last election instead of looking to the Future they got punished by the the voters I think Republicans want to win I mean they're tired of losing that's simple it's that simple yeah the job of a politician is to win freeberg you got an anticipated trend of 2023. I am excited about and want to share the point of view that I think I'm selling Gene therapies are becoming more mainstream so these are pharmaceutical modalities where we use a gene editing systems where you can actually go in and change or add a

genetic material to cells in your body to resolve things like genetic diseases or change protein deficiencies or introduce new proteins and then cell therapies where we engineer cells put them in the body and those cells go and do things like attack and Destroy cancer cells for example there are currently 27 FDA approved cell and Gene therapies on the market there are over a thousand in clinical trials many of which are already showing extraordinary efficacy and benefit today these therapies cost upwards of a million dollars so I think there's a massive and talking about the infrastructure investment conversation earlier because of the number of

diseases and the number of conditions a number of people that these therapies can treat I think there's massive infrastructure investment opportunity coming forward this year but also seeing these come to Market come out of the clinical trials get FDA approved we have to ramp up and build up the infrastructure needed because it's not traditional we make a drug in a factory and send it to people and they get it injected these are much more complex they require much more complicated delivery mechanism you have to have systems to engineer cells and edit them and put them back in your body those systems today take days or weeks

and cost you know as a result a Million Dollar Plus per treatment so I think that um the cell and gene therapy opportunity you know the JPMorgan Healthcare conference starts this week uh it's the biggest biotech and Healthcare conference in the world starts in San Francisco on Monday this is uh one of the biggest areas of interest and one that everyone's investing against but as these come to Market there's you know we talked about this last week genetic diseases types of cancer that are going to be addressed and I'm really excited about seeing more of these products come to Market and seeing the whole kind of infrastructure and delivery system change all right

sorry to interrupt trying to keep the trains moving Gene editing very good choice all right we end with this it's a little bit fun most anticipated media for 2023 these are things we like to talk about the media here sometimes we talked about White Lotus season two uh amazing uh season and maybe what you're looking forward to next year I am really looking forward to in film Oppenheimer Christopher Nolan's movie about the Manhattan Project that should be extraordinary I loved uh it was Dunkirk his as well I love Dunkirk I like everything he does and when he is this is him becoming like a history Uncle I'm here for it I'm here for Nolan

becoming our history Uncle instead of Batman what was the one after Inception though that was really confusing the one with Denzel Washington's son with John Washington uh yes um it was um I couldn't finish it I tried twice I gotta go the third shot on that one it was oh yeah it was it was his worst film uh what's the name of it I can't remember it was called uh tenet tenant tenant yes about like time and reverse and this it was impossible to follow did you guys see his original film which was incredible Memento of course it was fantastic yeah it was enough mine mine yeah it was mind-bending enough that you're like oh

my God incredible and then I think they took it too far tenant I tried to watch it three times I'm generally pretty good with these sorts of films and love them but oh my God it was impossible to follow he he took it too far okay so hopefully he goes back to his roots in terms of TV series I'm looking forward to secession coming back Ashoka who is uh Anakin Skywalker AKA Darth Vaders uh Padawan Ted lasso season three coming up those are for me incredible and then on the book front man the Michael Lewis book about SBF is going to be next level I cannot wait for that sax you're a media junkie what do you got on your list of things you're looking forward to or should say what is

Tucker's writers what do they put down for you I thought the for movie you're gonna pick cocaine bear right extraordinary a bear is in the woods and a I guess people who are trafficking in cocaine drop their or crashes and the bear eats the cocaine and then goes on a rampage it's kind of like a a genre film like in the crocodile way by the way I'm listening to Quentin Tarantino's book by the way of criticism get the audiobook you'll like it sax he talks about all the films in the 70s very good shout out to Quentin what do you got what do you got on your short list

uh history uncle me yeah I just gave you one but the code and bear top of your list we'll watch it again was on my list and I think uh Marvel is doing a good job developing a new villain to rival Thanos with this with king I don't know what phase they're on now but Loki season two and then the new Ant-Man movie and um you know I thought after Thanos who wouldn't really be able to top that but yeah they've come up with a really good concept I think for the next you know 20 Marvel movies well and then it will eventually become Galactus yeah you guys have completely [ __ ] up you have missed the most obvious slam here we go Sade's new album go

on part two oh I haven't watched number one yet wait what you know what's happening wasn't it my wife wants to watch it it is so stylistically beautiful it is a little boring there's not a lot going on slow but it's so well shot it's a fun it's visually just stunning I mean if you need to watch it on a big screen with big speakers and uh but part two comes out in November this year absolutely that's okay great Freeburg tell us what documentary on veganism do you recommend and you're anticipating for 2023 what vegan documentary or animal abuse documentary I am excited about the generative AI based media that I think is going to start to kind of

Rocket this year we could see for example the first you know AI written Symphony the first kind of AI written published novel how interesting would that be like a full novel published by AI and and more maybe short films based on an AI driven script and maybe even what I'm really excited about is these AI based interactive video games or um kind of experiences where you the user kind of get to create and live your own world uh through some sort of video game type modality so I think AI driven media all right there you have it folks there are speaking of Pop Culture chaos

I guess Prince Harry has a book coming out that's called spare when you're playing uh bowling no but you know like in in the English Monarchy they there's the air and the spare uh so he's calling himself but to me that's like a weird self-description yeah like that's that's how you see yourself is just being self-deprecating he didn't pick that they paid him so much money I heard they have to sell 1.7 million books to break even but you know what it reminds me of is uh when Leonard Nimoy wrote a book I think he wrote a book called I am Spock and then he wrote a book called I am not Spock nice you can never get comfortable with the fact that he was just Spock yeah and

there's something weird about calling yourself spare like you know you're clearly not comfortable with it's like everything yeah everything they taught you everything I learned at Harvard Business School and everything they don't teach at Harvard Business School you can you can do both books all right listen this has been great uh breaking news as we're talking here chat GPT uh open AI doing a tender offer 9 billion obviously you're losing three billion a day oh my God who is buying a 29. it's Founders fund or reportedly according to the journal it's Founders fund Thrive Capital so Founders fund does not generally do super overpriced deals yeah from here

I wouldn't I would not totally could be by the way you guys remember that the um open AI I don't know what the current situation is but it was a non-profit where they said investors put money in but the investors maximum return was 100 X on the dollar invested so it's a non-profit up to 100 no no that happened afterwards it's when they converted the original model yeah no the original model was appearance the original model was a pure non-profit where there was no cap because there was no concept of equity yeah when they flipped they capped everybody to 100x on the return so the original money thanks

but not even more or still but no the original money which was like elon's money so I don't know how it converted but that's when they or did it convert did those people who funded it originally get any shares before profit we could we could find out probably they did I mean it would make sense I mean wait if this is a tender office 27 billion you wouldn't buy shares at 27. so again like the the thing that I want to impress upon you is like there is an enormous amount of work that they do that what their biggest Gap to monetizing this will be finding unique content that they

learn on that nobody else has access to and this is why I really think it's important to understand if you have enough compute these all of these unsupervised learning models if you run them on the same training set will converge to the same answer so you're just getting there first so in order to be really defensible you have to get there in a unique way and so either you're going to hand tune or you're going to have inputs that are different so I don't know I don't know the answer that's why like they they have to answer that question in their fundraising and I'm sure that they did because these are

smart investors but that's the big idea that you have to overcome and again you have to think like you think Google is sitting on their hands no 129 billion like what fundamentals is that based on like why not 5 billion why not 3 billion I mean like why not 10 billion like what makes sense valuation that's what it is it's all this is all momentum said nothing to do with reality right I mean it this would imply at a 30 the the public comps of the Google trades at what 25 or 30 ebit times ebitda so this would imply a billion dollars in ebitda a billion dollars in ebitda 3 million dollars a day they're losing three million dollars a day on computer report

at least three million dollars a day and profit on what product I don't know if they have a that's probably the issue I think look I mean my point was if these guys open up a set of tools that support all these applications and services to emerge on top of what they've built and they're getting red share getting payments out of that it's going to very quickly turn into a real here's the problem this is why that can't happen they don't have the rights to the data they built the training set on and the second they commercialize it the second anybody pays them whoever they based this on conversation into Oblivion I

predict suit into Oblivion let's talk about let's let's actually let's talk about that in the next show because I think that's like the the way that AI works and we should probably bring someone like Sam on to talk about it but the way that AI works on trading data and now people are making claims that the training data is copyright therefore model output is protects that copyright is I think worthy of a good conversation what's interesting is you know the earlier the early version of the of the internet was very simple it's like you had this file called robux.txt and you would basically be open to a crawl or not and that's what would allow Google

to basically Go and Spider your pages right and so we have to replace this concept of that with this ai.txt well you could make a claim that this is no different than you know a spider crawling a web page except that in in the search case it was much cleaner which is we're just going to index your page and redirect people to you uh here it's we're actually going to create a derivative work because of you in part and I do think that that's going to be a very interesting legal threshold that has to get figured out well here it is chamoth you're you're nailing it exactly it's a derivative work and they did not have permission to use it and it

impedes upon the original authors whether it's a photo it's a song it's a piece of code it impedes upon their ability to do Commerce in the world you are interfering with their ability to monetize their content and the percentage you're using is a hundred percent so when you get to fair use non-commercial use is very protected parodies protected education's protected but when you dip into using the entirety of the work which they're doing and you impede upon the person's ability to Commerce and you confuse the public well this is the test that they will fail fail fail this is why I think that most people don't understand what AI is

they don't even understand the difference between training and inference so hopefully there is some more understanding of this but if you use the same data set you will eventually converge to the same outputs absent of hand tuning weights which has its own issues and absent any asymmetrically different data that you have that nobody else has absolutely yes so if you are Apple and you have the watch data or your Google and you have the search data or you're a weather company you have the weather data and your proprietary of course there's a very easy solution to this to mouth number one citations when the algorithm gives you an answer it should

say what were the top percentage sources of this information how did the AI look if you look inside of a transformer the problem is okay that you're going to have trillions of ranks trillions of Weights trillions and so how are you going to decide how to basically draw a line under a threshold this was actually a useful input and this was not so again I I just think that it's hard a very few small class of people actually understand this like the great person to actually bring in to talk about this would be Andre carpeth not and I think because Andre was there sure and a Tesla and he but he can say it in a very dispassionate way to explain this to

people I think we should we should ask him to come on yeah for sure I mean I can ask him okay I mean this is brand is this law Sachs you're an attorney you understand fair use copyright all this stuff the law correct me if I'm wrong here sax does not anticipate this look this is a highly specialized area I don't want to pretend like I understand the law in this area you know I'd want to talk to a specialist yeah okay so anybody let's have this conversation because I think yeah the SE are great um work for us to talk about because all right this is probably why by the way they started as open source because it was like a slam dunk thing to make this a non-profit and open source everything

be maybe in part because of these issues but if you just let the code Run free you probably don't have to even deal with these issues right well they they closed it remember their claim the claim was this is too dangerous their original claim was it's too dangerous for people to not see the code then Sam flipped on that and he said it's too dangerous for people to see the code and it started out as a non-profit where the idea was the way to keep this safe is for everybody to see the code but they didn't make any money whatever they went private and they flipped the decision so keep that in mind as well he's a he's a very very very clever business person he's savvy

and you know Paul Graham when Paul Graham picked Sam to run YC Paul Graham said that this is the most impressive person I've met since Steve Jobs yeah remember come on the pot I do remember that um well you said something similar about Gary tan is now running YC starting this week yeah Sam Altman friend of the pot come on all in any time and has played in our poker game several times makes sense yes we we had a tough situation there where you interfered in the hand if you remember uh all right listen this is what happened there was a Sam and I were in a hand of Poker he raised I had two pair and I'm trying to figure out does he have a set or is

he bluffing me I think he's got top pair and you were like oh look at this and you started commenting on the hand oh my God I haven't made the call or not yet oh my God and I'm like for my La Bouche let's let's stop talking here because I'm trying to I'm playing I'm like okay Sam would get and I basically came to the conclusion Sam would get to like great Delight bluffing me off a hand he's a risk taker he knows I'm conservative he knows he's a risk taker I'm gonna call here with my I had bottom two how much does he have a set and there was also a stray on the board I'm like [ __ ] it I I I at best I'm

you know even money here uh but there was a lot in the pot so I was just doing the pot odds while I'm doing the pot odds you were like hey which is usually I'm usually want to be reprimanded for talking right Dad but it was notable all right listen love you besties why don't you tell people that there's no comments and uh just as a programming note we turned off comments for a couple of weeks on the YouTube just to see how it psychologically affects me and it's for jamaat to just f with all you brigadooners we love you uh uh besties this has been a great episode two great uh and his uh Twitter is at chamoth and he does it read it just so

everyone listening no sax and I voted against turning off comments just just I voted in favor of whatever got uh chamat's vote for the all assignment 23. so that's how I vote this is for horse trading now but the podcast has never been better besties spending time together on the slopes is the cure to all evils we'll see you next time love you back bye bye love you guys bye bye let your winners ride Rain Man [Music] we need to get Mercies [Music]