E2: Rebooting economy, understanding corporate debt, avoiding a depression & more with David Sacks

all right everybody welcome to episode 2 of the all-in podcast with Jason and Chamath some basic ground rules here if you're not into speculation you don't like to debate you know like to question authority and you don't like to get a [ __ ] ton of inside information and I should turn the podcast off right now and go download the daily from the New York Times or all things consider or some other bullshit's but we're here to do speculating and talking about inside information and the real deal with me as always my co-host Jamal poly Hypatia if you don't know how to

pronounce it poly hapa Tia Jamaat how you doing you holding up okay I am doing fabulously well we're in week four of our lockdown sheltering in place here you're losing your mind I'm not because I'm fortunate to be in the suburbs I think if I was cooped up in an apartment in the city I would feel a lot worse than I do right now but there's a lot of fresh air the weather's fine I turned is not raining as much so we get to see the Sun a little bit makes a big difference yeah can you imagine 15 20 years ago holed up in an apartment with three kids who are home from school like

these people who are in a city they must be going insane I mean there's so much value to visiting New York but if you're stuck there in a quarantine lockdown I've I don't know what I do all right well we got a great guest today why don't you introduce our guest Gemma well we are really lucky here this is a person who I've known now for I don't know maybe 15 20 years what I would call him is one of my best show ponies I have ridden this [ __ ] up and down in everything he's done he has made me so much money it's like owning the publishing rights to the YouTube back catalogue

this is how prolific this guy is it's like owning the Beatles back catalogue right you're like Michael Jackson is backwards he's bought so David sacks though no all kidding aside David sacks is one of the most incredible people that we know one of our closest friends big bit of a background on David he almost became a lawyer but dropped out of law school after going to Stanford and worked with Peter teal at PayPal and was the chief operating officer there left PayPal moved to Los Angeles unsuccessfully kept his virginity found way to not get laid as a movie producer in

Hollywood seems to be impossible David found a way of doing it produced a movie one of the best known movies of that generation called thank you for smoking then move back up here started Jeannie pivoted started Yammer sold that for more than a billion dollars to Microsoft and became during that time frankly one of the most unsung heroes of company founders and was a prolific investor in some of the most well-known iconic businesses of this last generation Airbnb uber slack the list goes on and on and now is the co-founder of Kraft ventures which is essentially David's early-stage

venture business where he helps a lot of really great companies get to the next level and frankly the level that he's been playing it for a while despite all of that again I just see him as a show pony yeah some money printing machine if you if he can get in on that fund if you can get in on those companies you're gonna do well Sachs is an operating machine welcome to the program Sachs Davidson welcome to the pods thanks for having me how are you holding up Sachs just personally family everything companies just generally psychologically how is this impacting you you

know I think we're all fortunate to be safe and you know we we start paying attention to to the virus I guess on Infirmary because of Twitter tech you know there are a bunch of people on the tech ecosystem who started tweeting very alarming things and in February or even going this far back as like Jane xxx and I didn't know for sure if they're arrived but some of them were friends of mine so I your to get seriously and we started doing work from home I think I'm March first and we've all been kind of self isolated since then and fortunately everyone that's been safe and

you know holding it pretty well saxy boot tell tell everybody on the pod power group chat and basically what it is what we do on that group chat and now what you think about it yeah so I mean basically our poker group and sort of extended poker group which is about I don't know it's probably about 20 players who rotated and out of our poker game we have a chat group and we used to just talk about cards and stuff like that but they very rapidly became a place to share information about the virus and responsible was going to happen and the remarkable thing is that whatever

we talk about ends up becoming like it's like everyone else has figured it out about a week or two later and I think it has helped to stay about a week or two ahead of the curve on this thing has it has it generally been mentally reassuring or has it amplified your anxiety talking about it all the time in that chat well the usual thing is that we have people in that chat who are very optimistic that people are very pessimistic we have people in between and then we have people who swing around quite a bit and so I think you get like all the perspectives and I think I guess

my view of the future is that very hard to try to figure out what's going to happen you have to think about it in terms of scenarios and so the year the chat group helps you know understand like what those scenarios you know might look like so where would you describe each of us then on the positive negative and then swingy you're you're in which camp are you swingy so so I think three basic scenarios are vu and NL and Jason I would describe you as as a V I think Jim auth is closer to the you which is the most pessimistic sorry that the L is the most pessimistic and then the

us sorts or in between and I sort of swing between the U and the L but but I also understand the case for the V and and and and those initials really refer to the shape of the recovery to common how quickly will come out of this so David before we drill down into your beliefs on the future let's talk about the past what do you think this entire episode has shown us whether it's from a public health perspective or an economic perspective but how would you summarize your view of the world as it's been revealed to you in the past two months yeah I mean I think that what would

it really should you know we live most of our lives during you know these relatively calm periods and then our lives get redefined by these you know epochal events and and you know we're not really wired for this this rate of change I think it was Lenin who said something like there there's some decades when nothing happens and there's some weeks where decades happen and and I think that's that's basically what's happening here and it feels like me a little bit the last thing that was like this was was was 9/11 where you know you woke up that morning so all the the Twin Towers

coming down on TV and you realized that we were now in a different era and something like that's happening here as well just in slow motion what do you think the government did right and what do you think that the government did wrong well I mean you know limiting the flights in from through Wuhan or China was a good initial step but after that it seemed like the response was very slow and and and sort of disbelieving and kind of incredulous and and we've seen this basically everywhere the initial response of just about every country with a few notable exceptions in

in Asia that had previous experience with SARS but but what we've seen in just about every country is that nobody believes it's going to happen to them until it happens to them and then even in the United States you know it's it's it's it's like no one believes it's gonna happen in their city until so in their social network gets gets the virus and then all of a sudden they take it seriously and so there's almost been this like it's like this slow-moving train wreck where you see it coming and people are just a little bit too slow to react and you know the problem

is it's all about the doubling time so if the virus doubles you know every 2 or 3 days in the absence of any action at all maybe even doubles every day and in a very dense city like New York City just waiting two or three weeks can make a thousand ex difference in you know it's somewhere between I guess 10x of a thousand X difference depending on the doubling time whether if you wait two weeks or three weeks I saw an article on as much of articles now talking about well why has New York been hit so hard in California it has been relatively mild and and the articles were

saying you know California only declared shelter in place one week ahead of in New York how can it be doing so much better and they're looking for all these different causes and explanations and you know even one week makes a huge difference if in New York New York's been hit about twelve times harder than California but if the doubling time is just two days one week is a 12x difference that's how the extra now exponentially allottee works and so like being a week button at you know or two weeks or three weeks behind the curve is incredibly costly how do you break down

local government versus federal government in the action there and is America's architecture with states rights and powers a benefit in this case or is it a negative because we did see the blue states take it very seriously the red states to get less seriously the red states have a lot more distance between individuals the blue states tend to be coastal cities they're more dense maybe you could handicap for us the the spread of the virus with the layer on top of it of local governments and the political climate we're in yeah I think you know the decentralized nature of the American

system is both blessing and a curse in this in this type of situation the the curse is that it's been very hard to create a unified national strategy where we're doing lockdowns piecemeal and and so that the lockdowns get sorted as people move around between areas that are not locked down and start new outbreaks very hard to control a virus that way you know we're also you know we're also not able to act in the in the authoritarian way that that we sought tryna act and move on to control the buyers for early on but the blessing of decentralization is that it's allowed you know

the governors of states to react and its allow private companies to react and it's a lot of entrepreneurs to react and you see a lot of people helping in different ways and and and and that can be that can make up for having kind of a more ineffectual centralized response which isn't likely to work completely in a country the size anyway do you think that the health apparatus of the united states did its job and where do you think the areas of opportunity are to improve well the if you're talk about the health system it seems like the the health system has done

a great job in reacting to the virus in terms of hospitalizations you know hospital adding hospital beds adding ICU capacity even in New York it looks like I think Cuomo just said today that they've got you know ICU capacity they've got hospital beds I think the hospital system has done a great job rapidly creating more capacity we haven't seen the situation like in Italy or even the UK where they're literally rational rationing ventilators and making horrible triage decisions about who's gonna get a better later and who's not you know we haven't seen those types of Horrors and in the US

but but if my health system we mean the FDA the CDC the w-h-o which is part of the u.s. system but we do rely on them to some extent you've just seen I think you know amazing really malpractice or negligence if there are a pharma company I think that be sued you have to you know you have on the CDC website things that haven't checked it today but as of a few days ago or display ly not true I mean saying that you only needed a mask if you were actually taking care of a person with with with kovin 19 that that standing say a three foot distance was sufficient that was sort of an

acceptable amount of social distancing even if the other person is coughing or sneezing and that's not true they're just saying things that weren't true and then you know on the you know the the CDC and the Surgeon General until basically the last few days we're telling us that mask didn't work were ineffective didn't and then now they flipped to recommending them but they're still not required and I just wrote a blog today that I published about half an hour ago I thought the best part of that blog post by the way it's up on medium and saxes tweeted and I retweeted it David

is what you said at the end which is we're taking the most draconian measure quarantining people which we use this softer term shelter in place but it's a quarantine call it what it is you're not allowed to leave your house except under rare circumstances but we won't do the basic thing of wearing the mask it makes no sense in Jamaat I think you had a really interesting question early on here which I think we should all sort go back on one more time which is what what is this reveal right like in this kind of a crises and I love the statement of sacks where you know did some

decades nothing happens and then a week you have a decade happen the thing that I am I think is the big takeaway for me is handicapping who you can trust and what people's agendas are and how they behave in a crises because there are a group of people building models and what is the motivation of somebody who builds a model we think about we all get pitched as investors or when we worked inside a companies we build models and we know the models mean nothing they're made by humans and what's the motivation of somebody building a model in today's climate that then people adopt

that model and there's life or death what would you handicap which you go conservative would you go aggressive would you lean into people dying in the case of supporting the economy and so the mud is the model makers there's the government local and federal you have the media who are trying to get clicks in some cases you have a capitalists who are trying to you know protect their book and their bets how do we all look at and think about people's agendas and like the CDC having an agenda the local government and the model makers have an agenda sure mom maybe you could take that one

yeah I I think that the masks issue is actually the most instructive thing in this whole debacle and the reason is that there was pretty obvious data very early on that it was something that had unknown but pretty useful upside and absolutely zero deleterious downside right so if you were thinking about risk management and I gave you some options option one is do nothing option two is here's some drugs that you can take prophylactically and I don't really know the either the efficacy or the long-term damage to a broad-based population of people taking them an

option 3 was a piece of cloth over your nose and mouth yeah and for 10 cents and apparently at a minimum it prevents other people from smelling your bad breath but at a maximum it prevents projectiles of disease gladen spit getting in death earth-death vapor causing you to die yes and and we couldn't agree that that was a why he's why you know why is this and with the agenda here because they didn't want people buying up the masks and I'm not going to healthcare work no because I was never great at something this simple because it was never about the n95 masks you could

have worn a cloth mask in a tea cloth could have covered it up and given you 70% efficacy this has everything to do with incentives and everything to do with your other question as well which is like you know how why do modelers behave the way that they do all of this is about being taken seriously and so to be taken seriously you have to understand the incentives in the game that you're playing so for a modeler and a forecaster the incentive is all around being conservative because that's how you're taken seriously there's nobody that has any upside in showing a model that shows

10,000 people dying all of the attention and the the gravity with which are taken and the attention that you get is when you first put out a model that shows that two million people could die which is what Imperial College did and that eventually you walk it back and you walk it back and after the actuals exceed the forecasts then the data converges on what actually happens and you see that these models were woefully inaccurate it's the same with why the CDC or the whu-oh are just so completely incompetent because the incentives in those organizations are essentially to play

their game and that game is not one of public health but it's one of politics right and so you have these people fighting each other over political territory and the right to basically make decisions versus the actual substance and the validity of the decision David did that does that correlate with your thinking and then superimpose the media on top of that yeah I mean it's I think there's a couple of things going on one is that there is a huge culture clash going on between the people who need conclusive scientific proof before they're willing to recommend any course of

action and then between other people who are willing to take a more experimental approach to try things to iterate the way that we do in start-up land when confronted with kind of an X you know company existential issues and and the latter approach is smart when you know there's a lot of upside and trying something and not much downside you know and the and the the the other approach of this sort of this scientific the pseudo scientific sounding approach where you're constantly demanding conclusive evidence it's actually people pretending to be smart you

know as people who want to sound smart but it's actually a pretty dumb approach and so we've seen this like culture clash playing out over and over again you know and so experts should read it read it back to you David experts are afraid to do something experimental with low downside because they have reputations and they want to sound smart whereas entrepreneurs or maybe capitalists or other problem solvers or perhaps even gamblers are gonna say there's no downside here what's the downside to putting a mask on nothing let's try it the same thing with chloroquine and the z-pak

very early on people were saying like Elon and other folks in our circle why not just do hold on a second hold on a second chloroquine let's not put that in the same category because it's a drug Jesus yes it's a drug for malaria okay but you have an on Monsieur evidence some no no taking it if you were it's sick already no we still don't know right let's be clear okay so masks is a wholly different thing this is why I said it that way yeah usually if the minute you start to add drugs you come off as a armchair epidemiologist and anybody a reasonably smart can poke holes

in your theory and you sound like a [ __ ] [ __ ] you cannot sound like a [ __ ] by telling people to wear cloth over their nose in their mouths okay but the next step if you were in the hospital and you've been diagnosed and they said hey the doctor says you might want to try this there were people who were saying don't even try it and there was a direct correlation when Trump said he was behind it it seemed like the media and everybody were like this is the worst idea ever no but but but this is your point which is that the incentives of that game are to politicize things versus think

about what's in the best interests in the public health interests of either the United States or the world but aren't we in agreement to try it if you were if you were in the ICU and they said hey you want to try this you wouldn't try it no but this is the problem is like the posture of the American in a political infrastructure is broken and moments like this shine a light on how broken it is because as David said all of the testing and iteration all of those things are must-haves in peacetime they are nice to haves in wartime right you don't have a time to walk around and test-fire

a gun and make sure this works and that works the enemy is in front of you you shoot and you fire and you aim later yeah and in that posture we have to have a set of rules that contemplate giving people at the ground floor on the border of you know where their life is at risk the right to make a decision as well-informed as it can be about what they can try to do to save their life and doctors need to be equally empowered and you know we've effectively done that but we just did it in fits and starts and in that there is all of this noise that delays the right decision which is not

that hydro chloric wind is good or bad but it's that here's all the published data into the hands of the doctor who can act read and understand it so that he or she and the patient can make a decision together yeah agreed Sachs what are your thoughts on chloroquine and the z-pak and and that whole sort of unraveling of this is the miracle it's not the miracle it's worth looking at and how that debate occurred let's say on the Twitter and then also in our stream when we were talking well Trump was not the first to embrace the potential of hydroxychloroquine in fact we were

talking about in our chat group before you know became national news of course once he did embrace it it became a political football and a lot of people want to prove him wrong and so now it's hard to have a conversation about it without it becoming political but the you know the argument for hydroxychloroquine really started with some research papers that showed that it worked in vitro basically in test tubes against the virus and it worked against Soares you know which is a related sort of category virus I'm not I'm not an expert or anything this is just sort of you know

me tell you what I what I know as a consumer of information and so it was not crazy to think this is something that should be tried in the context of koban 19 now we don't know if it's going to work or not I saw an interesting presentation by UCSF and they're a working theory on it is that is a hydroxychloroquine plus CPAC might have some impact in the first week of the virus when before peak viral replication takes place and this might help interfere with the virus replicating once you're in respiratory distress distress though it's in your lungs you have to you're into a

different phase of this and they don't believe that they think you need to look at other things so so it sounded like this was a potentially valid treatment we one less affecting week two and you know by week three when you're at severe a RDS you know it's and you got to find other things so you know in terms of like what the right policy is you know this you know I be in favor of the right to I mean ultimately we should let patients and doctors make this decision together and and so you're not give the FDA did the right thing giving emergency trial authorization to doctors

to be able to try this with their patients and and what I think is happening is is that there's you sort of rapid decentralized information sharing happening among doctors and hospitals and you know I think they're getting to the right answer here okay do we do we feel comfortable moving on to financial implications of this or are there things about the modeling on upside downside I agree with Jamaa that hydroxychloroquine is a little bit more complicated masts are sort of the really unambiguous 1peter laws it's just so easy there's so cool down just cloth it's been cotton right you

literally could put a mat down our underwear yeah could use your own underwear and just put it across your face I mean this is what's so insane that David's right I remember having this argument with someone because on the CDC website as David said he would only recommend it not as a preventative measure for you but if you were old you should use a mask only if you were treating somebody with Kovac 90 then there's an element of these authorities trying to manage us you know I get you know I really hate that that I mean I do think that they thought about will we create a run

on mass well you know that that that they don't want to tell us the truth because they're afraid of some of the consequences of telling us the truth and you know I hate that feeling of being lied to by public officials because they're trying to manage I'm willing to be infantile by people that are smarter than me yeah so can you give us a list of the four people you think are smarter than you go ahead mouth command I am NOT one of those four people filed by nameless bureaucracies and I think that Americans deserve to not be infantile I mean for the amount of money that we pay and

the amount in taxes and the amount of power that we give folks the one thing that I'm realizing through this whole thing is like you know the it's it is true in some respect that the countries that had some level of authoritarian management did well but it's also true that the countries that had robust civil services filled with people who are at the top of their class also did well Singapore South Korea where it is a stature it's a point of pride to work for the government where it's some of the challenges Japan and so you know one of the things that I realize is like career

bureaucrats really do infantile Americans in a way that's really unproductive and unhealthy I mean you know it doesn't surprise you and kind of like perturb you that the ex-head of the FDA is way more prominent and out front with his point of view than the current head of the FDA I mean what the hell is going on I think what we know is going on is I mean Trump was elected and he dismantled some of this and the system was Brian I heard it I think no I think that that's unfair and you know I'm I'm not I'm not a big Trump supporter but I think it's unfair to pin it on him the reality

is maybe he defunded or under front of a bunch of things but the hollowing out of our institutions have been happening for 40 years and it's hot started with Reagan to be clear because we tilted the scales towards free market trickle-down economics where government was viewed as a stop for really smart people to inject themselves into industry at higher levels or it was a place that's you know capable people would never go because capitalism the way that it was structured was set up in such an aggressive tilted manner for those that were capable and unfortunately it

hollowed out the government from people that were really strong of character in a broadly speaking kind of way and so what happens is that then bureaucracies form the incentives change and you get what you have gotten right now which is again it is a it is a point of argument on something as simple and frankly idiotic as a mask okay let's move on to talking about the economy and David you've been quite a heretic on Twitter because you decided to engage in the one conversation you're not allowed to have which is talking about people's livelihoods as opposed to their lives

you can only keep one thought in your mind as far as the kind of woke far-left is concerned and the Twitter mobs you could only talk about people in life and death you can't talk about their livelihoods but you've been talking and starting a dialogue on how you would structure teams in a startup for how do we deal with the crisis versus how do we go back to work so explain how you would do this if this was a startup company if you were doing it on an entrepreneurial level and what you think the road looks like let's start with San Francisco Bay Area and then we'll extrapolate

to the most acute area in America New York yeah well the big question that everyone's gonna be asking by the end of April is what now because I do think you're already seeing this in the New York data that quarantines work but that shouldn't be a total surprise to us historically quarantines have always worked to be quarantines were the way that people dealt with plagues when they didn't have any technology it's the problem is just there are credibly costly and if the quarantine goes on for months is their only way of dealing with the virus then you know we could be looking at

the depression so that so the question really is you know once we've arrested the exponentially in the virus tonight I you know I think we have to do that first but once we've arrested the exponential 'ti the big questions going well now how do we get out of this and what I worry about is that the the daily update mentality you know I think it's great that our leaders are giving us these daily updates it's showing that they yes they're showing a bias for action which i think is good but I worry that we're not going to be ready it that this precious time that we're buying with quarantine is not

going to lead to a better plan in May because no one's really were on that plan they're just working on sort of the triage the the the media response the making sure that that you know hospitals around the country have the ventilators if that's they need and we put in the order why is it David that people can't keep these two parallel processes in their mind at once you've been attacked viciously on Twitter the media attacks anybody who brings us up as like only caring about capitalism when in fact you need to do both plans you need to figure out how people get back to

their livelihoods and we avoid a depression which would kill more people ultimately right I mean I think this consensus about that whether it's depression or suicide etc or people not be able to feed themselves or you know have nutritious food and healthcare so why can't people put these two things in their mind at once and then let's talk about the actual plan if you were planning and you were the mayor of San Francisco or you were in Trump's cabinet they said okay David you make the plan for the Bay Area to go back to work take us three or one two three and then we'll throw it to

Jamal what what I would do is like I would do what I would do in a company for our product releases that have you know in a company I'd have a product manager for the 1.0 release and I have a different product manager for the $2 police because it's very hard for you know somebody to be all in on two different leases which have two different schedules so you know I think the team that we have right now that's basically concerned with the immediate response the the triage that you keep doing what they're doing make sure that you know the country's reacting the right way that has

all the supplies they need that you know they're berating 3m into giving us more PPE or whatever it is but I think that there should be a separate team kind of a a you know as our for the 2.0 response which should be focused on how we create a new system that gets us out of lockdown but doesn't reach rigor the extranet reality of the virus and I think that look that person that team should be ready to slide the new system into place in May I don't know if it's beginning in May end of May or whatever but sometime in May they should be ready to slide that new system into place so

that this precious I'm relying isn't wasted give us your one two three one is masks obviously I would think masses will no brain so that's number one give us your two three four if you if you're one of riff here a little bit yeah I mean the other elements the plan that people keep talking about it's it's you know rapid ubiquitous testing I mean you have and you have to have same-day results okay this this business of it taking two three four days in the lab the problem is if someone is infected they be passing it on during that time you don't you don't you don't isolate

them in time so we have to have massive ubiquitous same-day testing along with contact tracing so that when you do find out that somebody's got it you can not isolate not just them but all their contacts that's the system that seems to have worked in South Korea and I mean that those seems to be the the pillars and and it's quarantining the high-risk during this first phase of the rollout with testing social distancing and masks that's that seems to be the no-brainer I would add fourth bullet point which is if you're obese diabetic asthma or some combination of those and

over sixty and or over sixty you got to stay home now and you cannot be in touch with anybody who's out and about and part of that first wave to go back to society right we know that certain segments of the population are a much higher risk than others and so part of having a more fine-tuned response to the virus other than just shutting everything down would say we'll let the people who are at very very low risk go back out still wearing mass and having the right protocols and hygiene all that all that stuff but but but you keep the high-risk population isolated rather

than shutting down the entire economy alright shabbath if you're on the board of directors and David was the star of the may plan to go back how would you what questions would you have for him and how critical can you be of his plan let's make this as if we were actually in charge to Moth Savage David plan well I I probably would push David to consider a more aggressive approach here and this is something that I've talked about before Jason you and I have talked about this on the podcast before but we need a biological patriot act I know that it's unpalatable for

people on the left for certain reasons and people on the right for other reasons but it just doesn't matter what they think it was reported today by the way that the CDC and the task force at the White House is considering immunity cards but a much more beefed-up version of them these need to be cards that have you know some kind of chip inside them that are non hackable and issued by the government but you know my what I would push David to think about if he was the Czar of getting back to work is the following which is I agree with the broad-based testing I

think that you need to have some kind of you know wristband that allows you to be inside of certain green zones inside in every single city or town in the country that allow you to you know someway be back to normal but there also needs to be red zones where you cannot we need to have a very very quick way of restarting a quarantine if there are hotspots that develop but all of it needs to be supported by broad-based testing and a biological Patriot Act we do need to have immunity cards and the simple basic reason is that it is the only way that one can prioritize the economic salvation of

the US economy because I think once we have paid the cost from a public health perspective which we are doing at the end of this quarantine in flattening the curve or crushing the curve our immediate focus has to be in resuscitating the GDP of this country because otherwise the number of deaths and the number and the amount of pain that it that is caused by economic destruction will far outnumber the number of people that die from this which is tragic already and the only way that I can see for us to do that in a scalable way is with an immunity card a biological Patriot

Act so I would be pushing David to think about that and rip the band-aid off and get that done and David I would also push you on thinking about quarantining not just at home but maybe by region and hot zone so if we know the New York corridor or the Northeast Corridor is severely infected nobody in or out of that corridor without a visa without and I know this is a very touchy issue well in terms of civil liberties but until we're through this I don't see why people from New York need to go to Florida without maybe a rare exception or you know something to that effect

right so if we know we got California out of it or if SoCal is still in the thick of it but NorCal isn't maybe we have some level of testing required to get on a flight to come to San Francisco or to go to leave New York so those are two two punch-ups how would you look at those David as the new Tsar of getting back to work I think it's all on the table I mean I like the green zone red zone idea like I like using immunity information we've been talking in our chat group for I think a month about these blood serology tests I tweeted I took one of those tests weeks ago I think like

three weeks ago before the FDA had even approved it and I tweeted about it so yeah I think all that I think the immunity cards I think we should use all that information I mean it would all be on the table for sure and I but but I think most of all these ideas that you tied together into a coherent system and I'm worried that our approach to date has been so ad hoc that we're not going to have a coherent system ready to go as a replacement to shut downs in May when we need it it's part of this you talked before about how you didn't like to be managed I think we all agree we're

being managed and massaged because they really do not want to even talk to us about going back to work in May or what happens because they're afraid that we're gonna jump the gun and we're all going to just go to Crissy Field or you know whatever Park or Central Park just throw a giant party but people are not stupid there's a there is a certain self-preservation here that should be inherent in all these discussions which is you know any reasonable person watching the death toll in New York does not want to leave their house and so why can't well how much of the lack of

discussion about this issue do you think David is because people are afraid to treat people like adults because they think they're gonna just go out to Crissy Field or you know Dolores Park no I think you're right that there was this long period of time where the authorities were just trying to get everyone to buy into the idea that the virus was dangerous they needed to shelter in place and and they didn't want to hear any views that that that appeared to be contradicting they were contradicting it you know I mean when the Imperial College study came model came out and

they said that 2.2 million people would die in the US and I tweeted that I thought that number was insane was fear-mongering and I think you know that's turn out to be the case but you know people responded well well good I mean even if it is fear mom we need to make people afraid because otherwise they won't do the right things I guess that's true in a situation in which we're relying on everyone's voluntary compliance to engage in a quarantine or to wear a mask and I guess part of the response here is to figure out what what what action items should not be voluntary that we

just need to do in order to get past this trip a few of that I think that getting back to work is going to be much much more difficult than people think I think that in the absence of a vaccine which looks like at best 18 to 24 months from now we will never get to a hundred percent of where we were before or at least the potential to be at a hundred percent and so I just think that over the next two years were in for a tremendous amount of difficulty and this is sort of where you know I'd like to shift the conversation I think that you know we've now poured between the United

States government and the and almost ten trillion dollars we smeared it into the economy and only three cents of every dollar has gone into people's pockets and I think we're hoping that the other 97 cents somehow trickles down into their pockets in some way shape or form now when you look at that 97 cents half of it was you know things like propping up the commercial paper market propping up the repo market but it's also been things like propping up investment grade debt propping up high-yield debt and I have a real issue with this because I think that if we're

gonna take two years to get back to normal and I really do think it's two years because Jason a lot of the fears that you expressed people will have as lingering doubts and will prevent them from being at a hundred percent which means businesses will not be at a hundred percent until you can get an injection and know that you're protected we're doing an enormous amount of damage because we're taking trillions of dollars and flooding it into the economy in a way that's just not going to be effective and I don't think that we're taking enough time to really think through these things

so you know on the one hand while I appreciate the velocity or not the velocity the intention you know like I think Jerome Powell's commentary I applaud which is like you know he's saying all the right things which is we will do everything possible but the lending program to companies has been haphazard and difficult but Adi gets started in three weeks and some people have gotten money in week four of this I mean it's pretty incredible now you know the the numbers that I've read is that you know on average the loans are turning out to be sort of like you know in the tens of

thousands and on top of that you know David and I talked about this in the group chat but the math makes it so that you're better off furloughing or letting people go then you are taking PPP which means that a lot of this money may never get taken and so you know but again all of that is still a small rounding error we're talking about less than ten cents on the dollar ninety cents of the dollar have gone into areas that will not really touch an average American citizen and I think that's just fundamentally wrong because the trickle-down theory of all of this you know was started 40

years ago and we can see now that it doesn't work David any thoughts on the stimulus well I think I think what's happened is that we have a 30% hole in our economy right now you've got you know like a 15 percent unemployment rate going to going to 25 or 30 maybe as high as that we don't know yet you've got a you know we think that GDP is gonna contract in the next quarter by a quarter to a third and so you've got this giant hole in the economy and what the Fed and Treasury are trying to do is plug that hole for a period of time until they we can get through this this health crisis

and and if the crisis only lasts a few months maybe they can hold it all together but I do worry that if it lasts longer if the it's gonna slip out of their hands and and the result is going to be a cascade of defaults and bankruptcies and and effectively a great unraveling of our economy yeah I think that I think that though in fairness it's like this is where I think bankruptcy it's almost viewed as a four-letter word but it's not and in many ways the bankruptcy process could actually be the saving grace of American business in this moment and the reason I say that is that

it allows in a bankruptcy these companies to discharge a lot of the debt and we could set up a mechanism where these bankruptcies could be done in a way where again similar to taking PPP you don't let people go you know a percentage of the of the cap table must go to the pensions if they have them a certain percentage of the cap table must go to employees and then the remaining percentage goes to the secured bondholders and so the existing equity holders and the unsecured bond holders would effectively you know not be made whole but in that all the employees would be and

if you combine that with a ubi program where you put look they're in in the United States economy only eight trillion dollars is wages so you know we could do so much if we had given every United States citizen their absolute salary of 2019 right now we'd still have two trillion left to bail out companies and everybody could take a year and get paid like literally have a year sabbatical and be poor I think what it really does is it guarantees the chances or it maximizes sorry the chances of a consumer-led recovery like the United States has never been an economic system that's been

vibrant because of government spending or other things we've always been vibrant because we've been consumer led its consumer consumption and its customers of companies buying products that they need or want that drive the economy forward and if you think about our largest customer base they are the US population and by guaranteeing their revenue so to speak you actually allow them to then spend once they get out of quarantine and you'll see them spend even in fits and starts in this way you know you could spend five hundred billion dollars buying a bunch of junk debt I

really don't see as a reasonably you know said IV participant in the markets how it actually helps anything um I think all it does is it saddles you and me and all of our listeners with a bunch of toxic junk debt that eventually has to get sold by the Fed as David said in the grand unraveling and it would be my housing market what wouldn't it be more healthy David to allow a certain percentage of these companies the weaker ones to fail so that the stronger ones could then pick up those employees and there be some stability and I'm curious if you'd think

that we're gonna be living in a world where when people have speculated about this maybe some the individual consumer changes their perspective and maybe people come out of this crises with a different worldview I don't necessarily subscribe to this but schmatta you do we've had this conversation and so I'm curious David if you think the American consumer will forever change and maybe they upgrade their phone half as much they you know spend less and and they basically live a more modest rural style and people maybe stay out in Tahoe or Colorado wherever they went

during this crises where you thought well you're really talking about Depression era values and the problem is if we acquire those values via a depression that that would be a pretty bad outcome here so but yes that could happen you know I think we're I agree with Jim off is that I think that even though the federal government the Fed the Treasury have a tremendous amount of firepower in a situation like this it may not be inexhaustible and we have to kind of pick and choose and prioritize who's gonna get aid and and who's going to get bailouts and right now

it feels a little bit willy-nilly you know and it feels like it under those circumstances the bailouts default to the people who are politically connected and powerful as opposed to the workers the pension funds you know the Main Street small business owner who's worked their whole life on a business and all of a sudden is underwater and I think you know it's it's it's gonna be very hard to get the VA to the right people look in the last four weeks in the last four weeks oh sorry in the last week this is an incredible set I apologize in the last week the amount of distressed debt in

the US has quadrupled in one week to a trillion dollars right so as an example to David's point that's much more visible to Jay Powell or to Steve minuchin in the Fed and at the Treasury then than it is that you know thousands and thousands of nameless anonymous small business who owns this is not can you give an example of what that debt would be for the listeners we sure like I mean I mean so you know I mean a fallen angel today is Ford so we were not to pit we're not going to pick on Ford but we're just gonna point to it as a well-known company so this is a car manufacturer

they employ hundreds and hundreds of thousands of people in very important political States you know Michigan Ohio I think Tennessee probably but Ohio and Michigan obviously critical states and they you know issued debt into the market to fund you know building factories or buying equipment who buys that debt pension funds by the dead family offices by the dead hedge funds by the dead now those guys were giving out a coupon and they were playing let's just say four or five or six percent a year on this interest but now because of all this economic uncertainty people think that their

ability to pay that back has gone way down and so now they have to issue debt at much higher interest rates and the existing debt has a much lower credit quality it's effectively like you having a credit card and you know American Express calling you and saying Jason I think the odds of you paying your credit card balances have gone way down so I'm increasing your interest rate to twenty four percent from seventeen percent yeah and then I get another credit card to pay it off and and so essentially what's happened is the Federal Reserve has decided to become that next

credit card issuer well cuz they were wrong and of doing it for you they're doing it for companies but not for you and the question is is that okay well at some level companies like Ford should be saved because I think these are iconic businesses that employ hundreds of thousands of people and there are critical linchpins in the economy right because they have a massive supply chain Network and you know they're really important for many other things beyond just the economics that they themselves represent but there are better ways to help Ford you could lend Ford as much money as

they needed to meet their short-term obligations similarly to the way that the Federal Reserve would allow a bank to borrow from the from their window and I think that that's a very reasonable approach the question is really when the Fed then basically acts as a buyer of last resort and obfuscates the price of these bonds and essentially is saying the Amer can tax payer will own these bonds for the foreseeable future if you think that at some point those bonds that you bought for you know ninety cents on the dollar are worth ninety cents on the dollar then everything

is okay but if there's a chance that ninety cents goes to 70 cents the people that really eat that cost are us in the short term and our children in the medium and I have a silly question it's obviously not my wheelhouse corporate debt like this why wouldn't there be a clause that if they didn't pay back that 90 cents on the dollar that the American government bought it for it converts into equity in the company it's a great question because the Federal Reserve has chosen to go and essentially the equivalent of open and etrade account and step into the markets by themselves

and just buy so they're buying bonds and they're buying individual bonds and they're buying indices that control or that have exposure to certain bonds what they are not doing is going directly to these companies and negotiating essentially saying I will give you four or five billion dollars and what I want you to do is retire that old debt and replace it with this new instrument and here are the terms of this new instrument the United States taxpayer gets you know 3% or 4% warrant coverage of the company yom-yom you know you must make sure that the pension holders are Nightrain or

why wouldn't we have those clauses it's a basic blocking and tackling that you know seed funds have david sacks woody why is this not like a no-brainer well I mean I think we've got to get a good deal for taxpayers I mean Jim office said I've heard Mark Cuban say it pretty eloquently I heard Trump say that we have to get a good deal for taxpayers I just think that they're in such an emergency they're not really taking the time to do that they're you know they're dirty they're trying to do things they can do immediately yeah the the forgivable 'no sub this money to me as the thing

i don't understand why is any of it forgivable why isn't any all of it just you know a ten year law or 20 year long loan that converts into equity over some tranches but jason this is why if you're if you're going to haphazardly fire trillions dollars out of a bazooka why not give more than three cents on the dollar to average Americans why not put it into the pockets of every single bank account you know you know who knows how much everybody made the IRS does and you know the IRS has a mailing address for everybody and the IRS either gets a check or mails a check every single

taxpayer in the United States which I may also have direct deposit for half of the people and so you know there's nothing stopping us from saying well you know what why don't we do 10 percent 10 cents of every dollar why don't we do 15 cents of every dollar to Americans I really think this is the way that you limit the amount of waste that's going to happen so the the intention isn't wrong and we shouldn't castigate people for wanting to put money in the system as David said to plug the hole but we can't be so haphazard as to not think about the moral hazards were creating and try to

fix them in real time and so this 10 trillion has already gone out the door but if the next trillion or - don't touch Americans I think it's going to create an enormous amount of damage we've only given people a few weeks of a lifeline and they need more and you you can't tell companies that they can have effectively a limitless lifeline but not the individuals because I do think at some point companies will find a way to get out of these loans and or break the covenants with not much repercussion ok I want to wrap with to sort of not doomsday scenarios but I want to touch

on politics and I also want to know in the chance that this quarantine goes on for May and June in other words San Francisco says you know what we're gonna keep going and we're gonna get New York says we're keeping going and we're talking about not just April being in quarantine but May and/or June and we're looking at June 1st of July 1st what are the chances David that people say you know what I am a free person I want to take my make take my life into my own hands I want to make my own decision I'm going out I'm gonna go surfing I'm gonna do this and we have this social unrest and

how do politicians handicap that in this new world I think that could happen I mean particularly among young populations who are not at risk as much you know for the relatively younger healthier people who don't have comorbidity factors could say look I've gotta one in a thousand chance or you know or less of dying if even if I do get this and I'm just gonna take that chance but it's all the more reason why I think we need a strategy to get out of lockdown that already includes the idea of letting out these these people who are a much lower risk and and isolates the people who are at

higher risk and against the you have anything to add to that shimoff that kind of doomed a scenario or that virtuality well I think that you're very right Jason that I don't think we're going to get out of lockdown until June 1st at the earliest and I think that's in California I think nuisance posture is basically that if April looks like the curves are decaying it's gonna be mid May to late May before he lifts this thing I don't know if I see analyst and but but it's it's also important that that we understand like you know we just talked about companies the only entity that's

in even worse shape than companies and people are states and cities and counties yeah they're dead is incredible they have no revenue and metal/rock massive costs and they're nonprofits and think of the you know the garbage collector the fireman the police officer the teacher these are like these are the backbones and the pillars of our community it's such a good thing that we were so resilient and we thought ahead and built up massive surpluses in our tax bases oh wait we didn't do that well they're they're worse there were some provisions to do that these rainy day

funds but those are going to get exhausted and you know we're gonna have to bail those guys out as well so this is what I'm saying which is that when you're pumping in trillions of dollars haphazardly into the capital markets before you think about people or you think about the states and cities and communities in America I just think it's a recipe for disaster let me ask this even more simply David under what circumstance would you be willing to go back to our poker game on a Monday night and have six seven of us around a table sharing a meal and playing cards for six hours

well if there was if there was a treatment for for the virus so that you knew that if you got it you weren't gonna die that would be a big deal okay that's actually there's a Russian roulette aspect to the virus right now or even if your odds are low you know you you still don't take the chance I think the next thing that would probably help would be that if we had this rapid ubiquitous testing so I could know that the people who are in the room with me are all tested we're all tested and we're all negative and you know they could repeat the tests on a frequent enough basis that

we can all trust the result that that would make a big difference I think all right let's wrap with politics all of this is occurring in an election year bernie is out of the race Biden is doing a daily webcast Trump's ratings are through the roof as he is more than willing to let us all know in his abhorrent narcissistic way that his ratings are just tremendous right now in the middle of thousands of Americans dying a day but we have to touch on this because elections are how we govern and make these decisions is by who we put into these positions so what do we think and let's just

make odds here odds that Trump wins again it's that Biden wins if you had to lay the odds if you had to give it a percentage or you want to set a line what what do you what are your thoughts David I always think that these things are basically a coin flip I mean this far out I mean right now it seems like you know Trump's ratings have never been higher he's polling relatively well and Biden just seems completely irrelevant but if we're still dealing with the virus by November if we've cycled in and out of lockdown if we have kind of an unresolved situation if the economy

is in a very very deep recession or depression I think you know it's it's up for grabs shimoff I think that if if there is a v-shaped recovery of any kind Trump will win in a landslide right now we are in a v-shape recovery the market has come back o or not no we're not well if you use the market as well right now the market is the market is completely decoupled from Main Street and so what Wall Street does is irrelevant right now what I mean by recovery is what happens on Main Street okay because if you have 16 17 20 22 percent unemployment I mean you could feel

the Prancing dog and he'll be Trump you know so I think that the president needs massive victory or so what does the game theory say the game theory probably says that he'll try to force people to go back to work as quickly as possible and if there is even a modicum a shred of evidence on some kind of you know therapeutic they'll you know drum it up like it's like it's secure and try to confuse people that there's a vaccine but I think he needs that because in the absence of that again I just go back to how difficult will it be to start real life I think it's going to be difficult

and I think in that people won't have a lot of patience for the fact that you know the debt will have ballooned deficits will have ballooned trillions of dollars will have gone out the door and people will be meaningfully struggling going into election day I don't think that that helps Trump at all and you know by the way and we'll talk about this in our next podcast because we should probably we get an economist to talk about it but you know what is putting ten trillion dollars or whatever the final number is it'll probably be 20 trillion you know 1 1 x US GDP

what does that do to the economy what does that do to long-term inflation like if you seen what's happened did not what Japan did and they went through a lost decade or two no I think the best better example is what happened in China which is a combination of fiscal and monetary stimulus in 2009 and 10 and the results are basically a lot of fake growth and massive inflation and so you know it's probably useful to debate that in the next in the next pod and what are the chances I hate creates a lot of risk for Trump what are the chances of a dark horse candidate you are

in on the 0 0 so it's Biden for sure yeah it's my chance barring a Biden health emergency I mean yeah he is yeah he's you know not a spring chicken so so either person either person gets the coronavirus it could be yeah well no I look if anything happened to you yeah yeah we should even talk about these possibilities I don't want to sound like you know it's all IQ no one wants this to happen but look I think Jim author's right they're not gonna replace the head of the ticket absent you know something health-wise happened what is your game theory then on how Trump will

play this because in Jamaat's mind getting back to work earlier makes it seem like we're getting back to normal and he did that but a politician might also say you know what I think there's a chance of the second wave so I want to keep it closed until June or July first and then time it and I know this sounds incredibly cynical that a elected official would make health and economic policy decisions on their reelection but that is the reality we live in is it not sure of course I think the next big political debate is is gonna be around this what now you know we yes

the quarantines of arrest is the extranet geology the the virus but now how do we get out of them and and you know Trump's gonna have to make it a decision about what and how we get out and he's gonna be eager to get out of lockdown - to restart the economy but on the other hand if he miss times it and we cycle you know the virus then takes off again and we cycle back into the other lockdown that's that's very dangerous for him politically - so he's got a needle to thread there I agree with Jim off that if if this ends up being v-shaped Trump is a shoo-in but if it ends up being a

recession deep recession or depression if we end up then I think the questions gonna be does he appear to be more in the isaiah hoover or is he more in boulder of an FDR you know and explained how people have been able listening well I mean so so Hoover took took the blame for the Great Depression FDR gets elected in 1932 we're still into the Great Depression in 1936 but he gets reelected you know and because he's seen as as a man of action he does these fireside chats and he's he's doing things and and I do think that you know Trump kind of pivoted from initially

being denied an iron a little bit flat-footed on the virus and now doing these daily briefings and I think the American public is giving him credit for action right now and so they obviously if those actions work I think he gets reelected and if they don't work the question is you know does he get blamed for that is it easy a Hoover or is he an FDR all right on that note encourage everybody to wear masks social distancing and for those people in the audience who are startups and investors keep keep the faith keep investing keep starting companies never a bad time to start a

great company in my mind and Chim off any final thoughts here we are it's what is today's date is it I know it's April I think it's somewhere around the 10th am I even close it's Friday right April 10th let's let's just make a decision to be all in masks all in masks all in on masks and take it into our own arms we don't need to be told that these things make sense they make sense you're an idiot if you think otherwise David closing keep on track they ever thought totally agree thought that was my blog today we shouldn't have to make it the law but I mean I think

we should because there's still people who aren't adopting it but it's the lowest-cost thing we can do and if you look at the Asian countries have controlled the virus every single person wears a mask when they go out in public every single person so simple no-brainer give people $4,000 fine if you're not wearing a mask give them a warning first in hand of a mask like literally the cops should have masks and they should hand them to stay put this mask on and if I see you again you get $1,000 fine the post office should put one or a number of these everyone's mailbox

this is the first step to having a more fine-tuned policy than just warranty and if we can't even get this right then you know I I fear for for what's coming next if you it's a great execution idea the mail carriers every mail carrier leaves them and then you could also get the private sector do you tell every UPS FedEx driver the government gives them those masks Amazon Amazon or they just all have it hey if Jeff Bay somebody clipped this and said it's Jeff Jeff if you want to do a mitzvah give all these masks to the drivers and just leave masks when everybody's doorstep and forget about

Trump and whatever government officials gonna drag their heels on it go ahead you do it Jeff Bezos and hey how great was Jack giving away a billion dollars I mean we saw him get barbecue straw social media but what a strong move huh and he's gonna be strong he put it in a Google sheet he's like here in the main dish you'd open I mean it's the strongest move ever it's like you know everybody you know I've always been very skeptical of philanthropy because I feel like it's you know a dalliance of the established rich in North America because they like to have their names

on things and here's a guy who just basically pwned all of that I don't need a hospital with my name on it I don't need a building with my name on it here's a billion dollars and here's a Google spreadsheet to track it which means I'm gonna have zero and you know overhead and running it I mean it's it's so straw it's literally like he the only thing that could be stronger as if he connected it to a stripe account and like as he just as he swiped his credit card it's just it's just so strong it's what as zapier that tweets it he has a Google Doc which is set so

that everybody could read it it off times I mean for a billion dollars it's just amazing he should start a slack instance with like each of those nonprofits having a 30 completely by the way he completely pwned The Giving Pledge in one fell swoop yes The Giving Pledge which nobody has any it's pretty opaque now it's like it's basically pretend you're gonna give your money away we don't need to know how much you don't really need to do it there's no accountability but we have this fun party once a year we can all hang out and you know parties each other I haven't cited spots

like The Giving Pledge yeah so stupid it's like the sign of insecurity saxy poo thanks for coming on the pod Rain Man we appreciate it love you sexy food we love you sexy poo lobby Jake L love you to chew my bestie see we love you and everybody stays safe seriously and now I just want to clothes wear a mask wear a mask and to those people on the front lines the janitors the Google the Amazon drivers instacart people in the food bus you are their best it's amazing that you're doing what a sacrifice get the money to that yeah and I seriously give the Amazon let us tip those drivers

in our get the money to them for sure double the pay okay we'll see you all next time bye bye