E20: Robinhood wrap up, Insiders vs. Outsiders, California's failing report card & how to fix it

rain man david all right everybody welcome it is the podcast you've been waiting for the all in pod emergency episode 20 the number 11 podcast in the world number one in tech number 11 overall joe rogan sway pivot npr rachel maddow left in the dust welcome to the number 11 podcast in the world can you believe it besties with us the queen of kenya himself david friedberg rainman david sacks hot off the banger by young spielberg closing up episode 19 and of course the dictator chamath polly hapatia how we doing boys lovely how are you lovely friedberg lovely lovely it's

a lovely tuesday emergency pod and so with you guys um retired from craft ventures to pursue his dream of being a fox news host how's that going for you now that you've got full media blitz well yeah i've been i've been invited i was on bloomberg i've been invited on cnbc tomorrow i might even be on fox on thursday so everybody maybe tucker everybody wants a piece of the besties everybody wants a piece unbelievable we're pariahs in our own industry and now we've transcended tech i've taken our rightful position i got invited on cnn which is crazy

uh on what show on which show the guy with the british accent he kind of does um piers morgan no there's another guy who does cnn international and they were doing like a whole oh that guy yeah yeah you know the guy with the glasses he's funny he's pretty funny yeah i i didn't do it um i really do not want to speak for robin hood but uh we do need to pick up where we left off in episode 19 which a lot of people were wondering chamath are we still friends are we still dusties we are um but i do want to say one thing um jason and i talked this weekend and he said something to me which i actually thought about a lot which is that hmoth

when you get that emotional you know i think the the point of what you're saying gets lost and um i had i had a lot of time to think about that um so one i wanted to say jkl if if anything i said um you know hurt your feelings uh i want to say i'm sorry i think you are the most incredibly loyal person and that you know spans friendship to being an investor too so i just wanted to say i'm sorry to you and to be quite honest with you when i when i listened to a couple of my comments i was like wow you know i was a little emotional um and i think uh it didn't need to

be that super extreme i think you know the thing that it touches for me is like i forget sometimes maybe where i'm at today and i go back to where i was 20 years ago or how i felt as a 16 year old and i channeled that a little bit so anyways jacob i just want to say i love you with all my heart and i'm sorry i love you too chamath and you know it it did get a little bit personal and we were all passionate about you know our positions and you know it was a little difficult for me because i'm trying to give my guys my team robin hood the benefit of the doubt and it wasn't

an easy week obviously to do that but just to to recap here sunday vlad was on clubhouse with elon musk our pal who almost blew up clubhouse and uh there were so many people trying to get into that room and i think it tops out at 5000 on clubhouse that people were holding their phones up to their youtube accounts i think that's probably how most of us listened to it was the youtube people were just syndicating it live to youtube but uh ilan did a tremendous job interviewing vlad uh which is leads to a really interesting topic david about subjects just routing around the

press and going directly i mean elon is now the best interviewer in the business um and he basically said listen did you have a gun to your head and i think it was pretty much that uh according to the reports that have come out the depository and trust and clearing corporation which is wall street's main clearinghouse for stock trades demanded 3 billion in addition to collateral from robin hood which they said was an order of magnitude more than usually required we all know they um raised 2.4 billion this week on top of the 1 billion from wednesday on top of

the 600 million credit line that's 4 billion in cash apparently the requirement for them went from 3 billion to 700 million so it seems like that's there's some equaling out of what they have to cover and uh the gme short interest dropped in half today it's monday i'm sorry it's tuesday but yesterday it had dropped in half the squeeze seems to have settled down wall street bets has clearly won and of course um episode did uh jason did supernova i i didn't listen to it but did um do you guys think that uh elon and vlad got to the truth like was it clear well let's get an

independent party here sex yeah so um i thought the the interview was was a bit curious um because uh it it took elon several tries to get vlad to say the the quite frankly the obvious answer um elon set it up saying you know what what i think all of us were thinking which is look were you either forced to do this or is it an action that you decided to take and if so why and you know and and elon kept trying to get him to say yeah we were forced to do this and vlad wouldn't quite say that he gave these very vague ambiguous answers which is why elon finally said

listen did you have a gun to your head or not blink twice you know and so it was i don't know whether it was a function of miscommunication or whether we just don't know all the facts yet but i don't feel like the interview put everything to rest the way that it easily could have um and and you look i don't want to be i don't want to pile on to the situation i you know i'm i'm pro-founder i'm going to give vlad and robin hood the benefit of the doubt here i think probably they were compelled in some way to do this i don't think they wanted to do it but

you know if we're going to make this a teaching moment what i would say is like to any founder if you're ever in the position of having to take an action that is inimical to your stated mission right and their stated mission is freedom to trade what was the word you used a nematode anathema sure yeah if you're going to basically violate your state admission you either need to post the government order that required you to do that or you need to post a very well-reasoned blog explaining why you're doing that and you know if i were robin hood and i got a call in the middle of the night saying that you have to basically take this trade offline

i would say well give that to me in writing because i'm gonna have to post that on my website right if i don't have a choice about that i you know i need to refer back to this industry order that i'm receiving and the fact they didn't do that and the fact that they didn't post a blog explaining the reasons behind the choice and in fact vlad's now had to go back three times to explain it i think that's created this world of problems for them there's a difference between this being a regulatory requirement and a commercial requirement correct like if you think about the you know the the the law um the regulatory body that oversees the law that

that kind of um uh oversees what they're doing business-wise the sec or whoever could have come in and said here's the here's what i'm telling you you have to do i'm your regulator um but what happened was there are these clearing firms that they partner with that said i need you to post more capital and rather than post more capital or take the risk of going bankrupt they said we are going to restrict trading to minimize the capital requirements that we have on our book and so if you think about what that decision comes down to it's a decision of either our customers

are going to lose money or we're going to lose money and um and i know that it's not that black and white but you know it's very difficult to kind of explain the nuance of what took place there but it really was a point of like we are going to lose money or we are going to go bankrupt or our customers are going to have to lose money and that's such a tough decision i can't imagine any executive any of us being in that situation and deciding do you protect your shareholders or do you protect your customers and how much do you let your shareholders lose how much do you let

your customers lose and it was a very complicated situation that they found themselves in because their business model was predicated on this clearing you know on this model that they ran that uh when suddenly a lot of risk came on the book they didn't have the capital to cover it and and they had to basically uh you know limit their their customers as a result it was a pretty ugly situation but but david well kind of say one thing i actually think that if the choice is simply between you losing money you the company or your customers or you lose your users losing money

i think that's an easy choice i think the company eats it look what airbnb did during covet right when they had a whole ton of cancellations because of covid they ate the they ate all those deposits they made good on that and i actually think if that's all that was involved that was a big mistake i think robin hood should have eaten it jamath you want to chime in here as we go around the horn look i think um here's what we've learned which is that there's all kinds of ways in which this financial infrastructure works that none of us really understand

it turns out that it may have also included the people running robinhood to be quite honest um and so you know we know what payment for order flow is now we know that you know some companies like public have completely issued it um you know folks like robin hood make a ton of money from it i think it's clear that you know elizabeth warren to aoc to whomever are going to now spend a bunch of time talking about it it may or may not change but before the problem with the whole situation of gamestop actually doesn't really

surround that because it's more of a symptom the real problem was what led up to it and what led up to it was you know the insistence that a bunch of organizations needed access to a preferential set of data so that they could theoretically participate in that order flow before and the second was that the rules for you know certain organizations are different than those for banks and so you know hedge funds can leverage themselves up to such a massive degree that you create that you know ltcm type of issue where you know you take 5 billion and all of a sudden you have 1.5 trillion so that that shouldn't happen right so we need to figure out

how we can actually deal with those systemic issues upstream and then we need to have better disclosure downstream so that consumers could choose hey listen if you want you know pfof by the way as i've learned in the last couple days payment for order flow is actually not necessarily such a bad thing in certain cases because it actually guarantees better price execution in some cases but that's not always true for options i think it's somewhat more true for stocks there are you know for example like jason when you ask me

you know i asked the team at so far like you know what's the how much how much is uh how much is made on payment for order flow and the answer was 1.5 million dollars and the forecast for next year was like 400k so that's materially different than 400 million dollars right so you start to figure out like okay how should we think about these problems and i think that's what we have to face we have to get answers to these questions now yeah there's definitely going to be a lot of investigations into this and thinking it through i think there are kind of three possibilities here

when you when we analyze this now that we're a week out from it i think uh all going down which is was there poor communications or other non-disclosures in place right we're trying to figure that out with robinhood it feels like there's both right there there could very well be non-disclosures with this private company the dt cc i mean obviously they could have optimized communications and then was this a black swan event or to your point is it poor preparedness jamath we have to figure that out how prepared are these companies to deal with this kind of stuff

and then is it really bad optics that citadel and all these people are involved or is it a conspiracy a grand conspiracy and then if there's going to be an investigation it's going to be pretty hard to cover up any conspiracy right can i offer one idea i think that there are certain there are certain parts of the economy or you know the way in which the world works where you you can't distinguish you know bad operational capability and black swan events i'll give you an example airplanes there is just no situation where you could say a plane crash was a black

swan event and you move on right and we we decided that a long time ago and so as a result just the amount of risk management and compliance is so high that every time something like that happens it's it's an enormous process and we've seen that in the 737 thing for boeing yeah 737 max by the way they just got settled too for just discussion which is kind of crazy those planes are back on and nobody went to jail right so that's an example at the other end of the example you know we have things that have happened like on facebook and twitter and instagram and snapchat which is like hey all of a sudden like you know certain kinds of content or

certain things happened like the christchurch mass shooting the the societal judgment there was that that was a black swan event you know we don't need rules and regulations and so i think that another important question that we have to ask is is the financial plumbing that you know sort of allows the capital markets to work and specifically the financial plumbing that allows retail normal folks to participate in order to try to make money and get ahead should that be deemed more like what use adjacent black swan like infrastructure where it's like

sometimes [ __ ] happens and we just move on or is it more like an airplane crashing where you say none of this stuff should be allowed to happen can i can i add one one more point to that which is i i think that um it's frankly spin to be trying to characterize uh concerns about what happened as a conspiracy theory you know i heard uh vlad used that word and jason now you're you're echoing the company's talking points the reason this is not a conspiracy is because citadel is on both sides of the trade it's a conflict of interest we should be using the word conflict

not conspiracy now the question is how do we interpret that conflict of interest you have company you have citadel providing payment for order flow so they're basically executing uh robin hood's trades they're their biggest customer and then at the same time they're moving in um and they're backing up citron and melvin so they're on both sides of this trade how does that work how can we not have questions about that and to then characterize that oh it's a conspiracy theory if you have questions about it really no no i'm totally fine with people having

investigating if there is a conspiracy right and the conspiracy that people were floating is robin hood was told to stop trading these stocks by citadel that did not happen if that did happen that would be explosive and impossible to cover up what it was is does this dtcc have some influence or does citadel have influence on the dtcc you know that those are the questions that i think remain unanswered the dtcc is a cooperative so it's a collection of its member organizations so by so i think what we'll we'll find out which organizations were part of dtcc

who made the decision who then told robin hood you know we'll also find out by the way who put in the money to robin hood you know did they have a direct beneficial interest in them having the dtcc make that decision and so i think where david's right is like imagine this conflict of interest i now let's just use me as an example i is social capital i am buying their order flow i am also a member of the cooperative i'm also backstopping their investment and now all of a sudden you would say welchmath your hands are way too messy here right like your your fingers

are in a lot of pots and how do i know what you know exploding message on signal wasn't sent you don't know you don't know um yeah all we do know is that you had all these insiders right you had uh you had citadel you had you know this industry consortium whether it's the collective or citadel individually they were under pressure by the industry and at the same time you had these outsiders you had these reddit kids who had basically taken them for 20 billion dollars right they had finally figured out a way to beat the insiders at their own game and just at the moment

that these outsiders were winning and about to deliver the coup de gras and bust these guys out of the business for good somehow the insiders managed to tip the board over and start a new game that is what people are reacting to and look i mean you know i i'm not saying that i i don't know why vlad would have done it unless he was frankly forced to do it right because why would he um so i'm not blaming him but there is something fundamentally very corrupt at the way that the system and these insiders who have all the power and all the money when they finally got threatened

they basically figured out a way to turn the board over and prevent the outsiders by the way the the other thing that isn't getting covered and this is going to be the tragedy of this is none of us really knows the cost of the 3.4 billion dollars that they took in i'll tell you the only group of people that are for sure going to get completely creamed in this which are employees right i mean we know you think they're going to get too much preference stack because they got they got diluted oh my gosh they i mean how do you not put three do you put 3.4 billion dollars

in at par who would do that i think that's what's exactly happened i don't have inside information but i think that's exactly what happened yeah that's my house i mean i think that or perhaps a discount to the ipo which is imminent from what i've been reading online yeah talk about terrible timing too right i mean they were trying to go public this year mike like this may be terrible timing or maybe perfect timing i mean it may be that jason if it turns out that they were able to i mean then it then it creates a whole host of issues which is how stupid are these investors but

um if if that is in fact what happened because you look at the for example the the pound of flesh that you know silverlight got out of airbnb what a brilliant trade i mean so like if there was one we're going to explain it to you that was my deal of the year from last year from our from our bestie awards you'll go ahead and explain it freeburg yeah they put in debt and then they got warrants and and the warrants ended up making them silverlake forex it's insane they made they made like three four billion dollars right but the company's worth over 100 billion now so as

downside protection during a pandemic that could have gone on for three years no no but that's the whole point if you think about that if you think about the trade of the great financial crisis it was warren buffett putting capital into goldman sachs which was 23. he did the same yeah he did 5 billion into each of them the same weekend exactly and he said hey guys everything is fine these guys are going to be fine they're backed by by berkshire and it turned out everything was fine and you know he made he made an incredible fortune and i think i mean on top of his already

fortune so the point is he made a great trade uh i think that in the in the silver lake example they did the exact same thing they were like hey guys we believe in this everything's going to be fine and when all of us were literally losing our mind because we were stuck in our apartments and houses thinking the world was going to end silver lake saw they had clarity they did a deal which was the trade of the year david's right and so similarly you would have thought that this moment was the opportunity for the trade of the year of 2021 i mean we're early

on but all i know is i've been getting increasing offers from my robin hood sharers in the secondary market you know throughout two questions here we have been having a hard time understanding who's short what the short interest is there's a bunch of like data companies that are providing estimates and maybe the data is only clear best you're right the best source of data that i have access to is a company called market m-a-r-k-i-t they're they're they're they're quite large um but as of this friday the short interest was still i think about 50 um in gamestop and so it's been

it's been ebbing down i didn't check today well the the report was it got cut in half um again uh and that there was a very small short interest now but the stock dropped another 60 today so obviously if you're short the stock you may start buying and cut and taking your profit and your gains and going home at this time and moving on so do we need to is this going to start a discussion of transparency and shorting and should all that information be short should you be allowed to short more than the shares that are available or that are available in the float

i think should we readdress shorting in general no there's a sim there's an even i think shorting is a healthy component of the market and i wouldn't i would leave it alone uh because there i think there are some legitimate organizations that short for three reasons reason number one is that they are developing a market neutral strategy for their clients and people are should be allowed to pay for that right number two is people are directionally betting on a trend or investing on a trend and they are trading that against potentially some other position where they

are long so that's an explicit view less about being market neutral and then the third is that some people see outright frauds and they're trying to vote loudly that hey listen there's something untoward happening here so i think shorting is really good i actually think the simpler solution and listen and tell me if you guys agree is just go to t plus zero settlement why all these margin requirements go away altogether the problem the reason why we have all these margin requirements is all of a sudden you have this weird 2 48-hour period that you know it's like oh wait who's got

the shares do i have the shares no do you have the shares so they did i lend them to you did you lend them to me are you going to pay me first am i going to pay you first and instead you know this is the kind of thing where it's like in 2021 this should be real time and automatic everything every share should be id'd right and then you should know exactly where it is you know by the way there's another point that there's another point that jamaat didn't make which is that there is a benefit to the long holders and equities um when there is shorting of that equity

in the market which is that they're getting paid borrow on those shares so for folks that don't realize or their broker is but you can access that borrow if you own shares in a company that you're gonna keep holding let's say you own some shares in amazon and someone else wants to short amazon they have to borrow those shares from someone and they're paying a fee an interest rate to borrow those shares and so the cost to short a stock is actually not zero you have to pay a borrowed to borrow someone else's shares so if you're holding those shares in amazon you can actually make money

if you have the appropriate broker relationship for those shares being sold short by someone else and so this isn't just a people are coming in the market and slamming down stocks they are paying the people that are along the stock for the right to borrow their shares and and sell them ahead of you know buying them back later um and so in the case of gamestop i think the cost to borrow got so high uh that you're basically paying 30 40 50 60 percent you know interest rate to borrow gamestop shares to sell them short because there was so much

interest in selling short but there you know there is a market dynamic in in the cost to sell short that um you know that doesn't uh come at a at a kind of negligible or free cost the my initial my introduction to shorting uh in that example was when i first bought tesla um that you know my broker said you know jamal if you lend your shares out you can make 24 i remember this conversation 24 to your interest right and i thought oh my god and then i said well what what am i really doing and he's like well you're allowing people to bet against tesla and

i said no and i just kept the shares and i was like i'm never going to allow people to really and since then to be clear i've never i've never ever ever allowed my shares to be borrowed ever and it's just a philosophical decision i don't like shorting um but i believe that you should be allowed to do it i mean if you're going to be a long holder anyway you're saying i'm going to hold these shares for five years ten years whatever i just you know it's a way to juice your returns it's true it's how a lot of people think about especially mutual funds that own large positions

and stocks they'll they'll make really good juice returns because they're getting straight to bars it gets even better if you're if you're running a levered book because then you know right you take a buck you spin it up to six bucks you buy six bucks a tesla now all of a sudden you're earning 24 on six shares even though you've notionally bought one share right i've still never done it i can't i can't bring myself to do it i just feel like it's just so uh i just can't do it i just like it's like how can you be long and then bet against your

own company i guess well yeah it doesn't make sense but sorry saks should we limit the amount of shares that can go short against a company in some way and should we add a transparency where if you short more than x percentage of those shares we know your short position because that seems to be also very confusing here there were people speculating on twitter that the wall street bets crew and i have no knowledge of this or other hedge funds came in and saw this mess and that what we've seen the last couple of days were other people shorting at 300 or it could have

been even been the same traders or some portion of the traders who ran this up with the short squeeze then flipped their position from long to short yeah i look i clearly need more transparency we need to resolve some of these conflicts of interest prevent them from happening i think a lot of the the users of robin hood didn't understand that they were the product not the customer that that is a real issue but let me let me kind of uplevel this and speak to the politics of this because something really interesting happened you had everybody from aoc to ted cruz basically

denouncing what happened here taking the side of wall street bets against these wall street moguls and so what you're seeing now is a new fault line in american politics in the post-trump era it's not just about left and right anymore it's about insider versus outsider and i think this is going to be a major major theme that we see and let me actually i wanna i wanna share something you know i just wrote a blog post called the insider's game about this idea and i found a passage in elizabeth warren elizabeth warren's book which is really interesting because it describes how the

insider's game works and the person who described it to to warren is um there is no yeah none other than larry summers who was uh the former treasury secretary under obama he was president of harvard he's the consummate insider and he taught the insider's game to generations of harvard students so here's what he said he presented warren with a choice he said to uh to her well she said i could be an insider or i could be an outsider this is from her memoir in 2014 a fighting chance she wrote outsider quoting larry summers outsiders can say whatever they want but people on the

inside don't listen to them insiders however get lots of access and a chance to push their ideas people powerful people listen to what they have to say but insiders also understand one unbreakable rule they don't criticize other insiders that is the insider's game it's a protection racket where these powerful insiders these powerful elites of wall street of uh big business big media and politics they get together and they protect each other no matter how incompetent they are how corrupt they are silicon valley at silicon valley they're involved in this too but big tech

and this is the revolution i think that's going to happen i think trump was kind of a a forerunner of that is that we are going to see a movement of people across this country who are sick and tired of the insiders game and they're going to rise up and vote these insiders out of office and put in some new people who aren't beholden to these powerful special interests what you're speaking to is populism right sex you can call it populism i call it insiders versus outsiders i think it's uh it's going to be very important for folks to not be a career anything

meaning career executive career politician um career regulator career what if if ever you're in sort of like if you can put that word in front of your sort of existence i think what people will see is someone who as you said thrives on being an insider and i think that there's just going to be a ton of distrust career school administration official you know career admissions person career anything now is not what you want to be you want to be sort of a little bit more dynamic because you can have multiple arcs to your life and you're not beholden to anybody i mean i think it's a it's

not as black and white as institutions are bad or institutions are good there are there are many examples where uh the institutional framework allows for continuity and performance over time you know a lot of trump's rhetoric uh and i you know i know that we're um we're past the trump era at this point but um there was a lot of conversation about this notion of a deep state because there was frustration with how some or many of these institutions government institutions were operating but if not for that deep state we may have found ourselves in a lot of very ugly

situations over the last four years that there really were layers and layers of career public servants that did incredible and incredibly heroic things to preserve democracy to preserve the rights that we all hold dear in the constitution and those were um you know really important roles and the institution played a really important role in in providing continuity and providing trust and and security um and so i i think it's easy to bash institutions when things aren't working perfectly but we also have to keep in mind that it's not that all institutions are always bad

it is absolutely true that there is corruption but there are certainly benefits that we have to kind of not not allow populism to become a runaway framework for how we deal with everything we're frustrated with i'm not saying that i think i think what i'm saying is institutions are critically important but now i think we have to change the rules for how you can be a part of them and then how long you can stay so for example like if the rule was you know you can only be a two-term politician wow that would be what a cleansing effect that would have on anybody that

chose to serve in politics up and down the board you know at the federal level at the state level two terms in and out california california has that you know we have a 12 year limit right um in the the state uh assembly and senate um and so you know i think we're seeing that happen in progressive places like california um you know obviously a good segue uh but uh very um i i think very much agreed that uh that the notion that there needs to be um you know we talked about this last time we need to ensure that the institutions don't become

beholden to special interests and um uh and that there isn't accountability because the failure the the lack of accountability is really um where things bloat over time because you just add stuff on you don't ever take stuff apart and uh and ultimately you have kind of an inept non-functioning institution so let me give you the report card on california and then we can figure out if term limits can't fix it what can fix it so here's just some some data points uh first i'll do one section first section number one economy and jobs nearly the highest unemployment rate in the

u.s at 8 plus highest poverty rate in the u.s 18 and a half percent of all californians highest income taxes in the us 13.3 30 billion dollars of potential fraudulent unemployment benefits from 2020 11 billion already determined fraudulent doubled the oi doubled the oil and gas drilling permits instead of incentivizing you know maybe uh climate or biotech or tech jobs a 227 billion dollar spending pan spending plan for 2021 in terms of quality of life highest homelessness in the country worst graduation rate in the country around 17 percent of students in california don't

graduate the worst slash highest cost of living in the country and the worst wildfires in the country 1.8 million plus acres burned on covet 19 third highest rate of covet 19 infections in the world 658 cases per 100 000 people and then the worst vaccination deployment in the us around 50 and then culturally i didn't know this i don't know if you guys know this but um here are the number of companies this is just a subset that have left california toyota charles schwab tesla and oracle in some way shape or form which is estimated now to have cost california 77 billion dollars of

future revenues and 300 000 jobs over the past few years nearly 3 million people have left the state 53 percent of californians want to leave the state and 63 percent of californians believe the american dream is dead okay so if let's let's go and figure out okay so if if if term limits at 12 years don't work what do we do well i think i think we have to have politicians who stand up to special interests aren't in the pocket of special interests i mean the problem we have in california the biggest problem the reason why uh california is such a mess is that

we have government of the special interests by the special interests for the special interests i mean the politicians in sacramento that we have a one-party state effectively and they are beholden completely to these special interests look at the deals uh they make i mean so example in california we have uh over 340 000 public employees who make over 100 000 uh dollars a year that cost taxpayers over 45 billion okay and you know we have lifeguards making a quarter million dollars a year it's crazy right i mean because the people making these deals um are are in the

pocket of these of these government unions they're the biggest contributors to california politicians and you know this is my uh fundamental i guess concern or or beef with with gavin newsom um is that you know fundamentally you know he's worked his way up the the latter of california politics by you know by basically benefiting from these special interests throughout his rise you know step by step he's never challenged the insiders or any special interests he just kind of caters to this political class and so that's why i think fundamentally he's not going to be part of the solution it just feels like every job he's had in politics is just a

stepping stone to get to the next step and even the governorship now is just his stepping stone to get to whatever's next and i think you know californians are tired of being stepped on in this way there's i mean there are some structural challenges in the state right guys i mean like we should not for forget the fact that there are some um voter mandated supported propositions that have passed over the last couple of decades that really create a structural challenge in terms of how do you allocate resources and capital and how can you effectively govern in this state

you know the the three that are often highlighted is prop 13 which passed in 1978 uh which is the state uh property tax limit so we've talked about that one uh i believe in the past there was a proposition for in 1979 that limits the amount of money that states uh can appropriate uh um that the state can appropriate and then prop 98 which passed in 1988 and this is the big one um prop 98 has been challenged in courts and there have been you know many many kind of um uh efforts at finding loopholes and getting around it and litigating it but it mandates

funding levels in the state from pre-k through community colleges and it creates a structure that is really difficult to navigate around and really difficult to operate or manage it's almost as if you guys were running a a private company and your board said here's how much you as the ceo have to spend this year and here's how you have to spend it it is such a difficult decision um uh you know for the uh for the governor to have to kind of say well you know i'm going to make some changes to that because he'll end up in court um and so you know i want to just kind of highlight that there

are structural challenges to the way the state operates and obviously to get a lot of things done you still have to pass through the state assembly in the state senate um and it's not as as simple as making you know better decisions in the governor's mansion i think there's uh there's a lot that we have to kind of resolve structurally in the state that's going to take a long freaking time and a lot of cooperating parties um to get there and so you know i know for those of us who are very much about making fast quick um and accurate decisions you know good decisions

this is a really difficult place to do that uh this state the way the way the laws have been set up and the way that uh that the legislature has oversight well i mean look you're right but this is why we need real leadership we need somebody who's gonna come forward and say listen we need to change this proposition another one we need to change is prop 47 that decriminalized a whole bunch of behavior i mean crime is exploding in the state that proposition needs to be looked at as well right i mean we we need somebody who's going to come at government from completely different

perspective which is to think about the citizens of california first of all to pay attention to the middle class of california and to think about us as consumers of government services who need to be satisfied and right now we have if you were to think about the services government's providing people are churning off of it we had net immigration of 135 000 people net left the state right you know 40 000 families in california pay about half the taxes if say 10 000 of them leave we've got a giant hole in the budget that no one knows how to

replace and we have no idea how many people have even left how many families have left the state so we really need leadership here to to not just go along with the special interests who are in power and who are willing to stand up and and push for some of these these reforms by the way i think it's worth just highlighting some of these numbers because they also speak to the structural challenge in the state the state of california generates about 140 billion dollars in revenue 70 of that comes from personal income tax and as sacs pointed out half of that comes from the top 1

or 40 000 households it is uh it is a you know a heavy weighting on and by the way that um that top tax rate of 13.3 applies to households over a million dollars of income and for those that don't know you know there's income strata that are defined by the state and depending on what strata you and you you pay a different tax rate the highest strata is making over a million dollars a year where you pay 13.3 and that's where these 40 000 households cover most of that budget um and 20 to sales and use tax and 10 is corporate tax to speak to the corporate tax rate for a second you

know that's 10 of our revenue as a state we charge a 9 average corporate tax rate in the state to operate that's um incredibly high and it's one of the reasons besides kind of a challenge that that elon and others kind of made very public here over the past year um but that corporate tax rate um makes it very difficult to operate in the state relative to other states that are offering no tax rate lower employ a lower cost of uh of labor um and less of a regulatory burden to operate and it's why we're seeing an exodus not just of people from the state because the

services are obviously not being well managed but also um of businesses you know finding a better place to operate in in canada there's an approach that i think is really useful here which is that um you know the canadian government um uh offers credits called shred credits i can't remember if it's at the federal level but it's definitely in the state of ontario because i've used this for for some of our companies you hire engineers and you can basically capitalize their salary and you can offset their costs so that when you're a young company you're effectively paying

zero tax or if you're a small company you effectively pay zero tax and that seems really right you know where you're a small business person and you know you're holding um you know 5-10 employees and you're making you know a million bucks a year in revenue whether you're a restaurant or a software company you basically pay nothing but then at the other end of the spectrum you know when those credit when those credits burn off theoretically if you're a facebook or a google or an amazon now all of a sudden you know you can pay a much larger percentage of uh of of

what's due and i think that there's all kinds of progressive tax schemes that work on the corporate side there's a bunch of tax credits that you can use to sort of incentivize certain kinds of jobs and i i think you're just much better off because then you know these companies can't leave if all the people want to stay in one place i want to highlight one more structural problem so even if you do resolve that even if you do resolve these propositions that have passed that have passed in the past and are causing us problems in terms of budgeting and ability to

budget adequately going forward one of the other challenges and even if you do resolve the tax structure to generate a more balanced um revenue model that allows for innovation and allows for employment allows for opportunity we have a uh this is an interesting stat i found this week um how what what how many americans i'll just say the number one out of nine californians are um a member of a public pension fund in the state of california one out of nine and the public pension funds in california as of the last reporting are roughly 250 billion dollars

underfunded relative to the payment obligations they have to their members think about that for a second so not only does the state have a lot of debt we've got a 250 billion dollar hole for paying people money that they believe they're owed in the future and that is creating a massive problem where the state needs to figure out how do we fill that hole how do we meet these obligations to our citizens who worked who earned what they believed to be a fair income stream for the rest of their lives that they may not ever get you know and so so we've got

both the the legislative problem in terms of how the state is structured we've got these propositions that have passed that kind of um you know buckle down the governor and buckle down the decision makers in terms of what they can and can't do legally we've got um an income generation problem with respect to concentration and we've got some of these you know heavy burdens on us like health services but also this underfunded attention liability that is almost like such a priority and no one's really paying attention to it because the sirens are going off and meanwhile

the service providers in the state are completely effing up the service that they're supposed to be providing you know chemoth highlighted a bunch of great ones in terms of fire response and whatnot at the beginning and obviously the vaccine rollout we know is is just completely flawed but um you know here's another interesting stat the california edd this is the the link i just sent out by the way on our on our zoom chat but there's 114 billion dollars in unemployment claims paid since covet this is an insane statistic but it looks like roughly 27

or 30 billion dollars of fraudulent claims were paid by the edd on those unemployment claims so the folks that are actually running these institutions themselves aren't even operating well you know not to mention the actual huge liabilities the state has accrued over the years and the structural deficiencies so as much as i would love to um you know kind of propose that we could all come up with a simple solution this is a complex freaking set of problems that probably require several books to resolve and i just want us to be honest and real about

that that this is um you know this is going to be a challenging issue probably for decades to come for this state to get itself out of the holes it's dug itself into you know one thing i'll say is as goes california so goes every other state and so goes america because if there is one state that theoretically you think would have been positioned from a human capital perspective to figure these out and political will it's this state and if this state can't figure it out we're in a whole [ __ ] ton of trouble well we're we're not doing a very good job figuring it out right now that's why

we need to make a change i mean david you're right about the magnitude of the problems the challenges but it all starts with some sort of you know outsider rebellion and that's what's going on with this recall that's why we have to support it it's why i support it it's not gonna be the end of the it's not the it's the beginning of the solution not the beginning of the beginning at the beginning it's the beginning of the beginning but we need to create an institution to solve the problems over time right it's going to be it's going to be the coalescence of what you're

pointing out zach which is the the you know the the will of the strong the will of the the rebellion uh to figure this out and resolve the time the institution may be the all-in pod but um but uh but let me let me build already yeah but let me let me build on yeah actually jacob you posted a tweet saying what should we call our party and uh anyway my suggestion was the outside surprise party yeah that's the surprise party but let me build let me build on on freiburg's point about the pensions okay where did these giant underfunded pension obligations come from

because i think that's a really important point to explain so here's what basically happens if you're a government worker in california you could typically retire after 20 years with all of your benefits and and not just 100 of your salary but the the salary you made in your last year and so what happens is uh when people get to that 20-year mark they get a lot of overtime so that's why we've seen articles about people retiring you know after you know if you're retiring after 20 years you could be in your 40s okay for your pensions so they double up their

overtime they get to 250k then they get a pension of 125. you don't get your full salary in retirement right right there there's a there's a complicated formula but the point is you can stuff it with over time and it's very generous and then they can go because they're still in their 40s they can go get a another government job somewhere else and then stack that pension on top and then by the way it doesn't just last until they die but it lasts until their spouse dies so now there was a proposal years ago to move this whole system to like a 401k type of system and it was squashed by who the unions and newsome opposed it because you know

he doesn't do anything that unions don't want and so we have these completely unsustainable pension liabilities everybody can see this train wreck coming but nobody has the guts to stand up the unions and do something yeah i mean there's very few careers that still offer pensions even the new york times you know over a decade ago got rid of their pension because people live too long they retire too early and then the cost of health care is just so ginormous here that it's going to crush any pension fund so you have to move to a 401k and we're it's kind of hard

to say to a cop or a firefighter who's running into a burning building or putting themselves in harm's way that they don't get one because it's such a high-risk job but we really do need to think of something more reasonable like a 401k and that's coming from my entire family is you know cops and firefighters and of service in new york city and they all have pensions and you are right david there is uh a tradition of trying to get a little extra overtime because they average out usually your last three or four years to give your average salary to base your pension off of and

then of course you can do another job or go work go from a firefighter to a cop vice versa garbage sanitation worker to get those things we didn't talk about the nimbyism and how extraordinarily hard it is to build homes here and how extremely expensive it is a lot of the young people who are thinking of coming to california are looking at the housing prices they want to come here to start companies they love the california vibe but the the housing is a non-starter you can't live in the peninsula or anywhere in the the wider bay area unless you are you know a dual household

income with what four hundred five hundred six hundred thousand dollars minimum minimum minimum and that's not even counting private school but you're talking about where are there sub one million dollar homes within the proximity of the bay area they don't exist you go to austin and i've been looking at austin real estate just coincidentally and there are many homes that are three hundred thousand dollars that are four hundred dollars a square foot everywhere within 30 40 minutes of downtown austin and that's where young people are going and then finally if we

look at our to to lower and order david we are not treating fentanyl like the super drug it is you know it's one thing to have drug reform and to have prison reform we we know these are important but you can keep that in your mind that we want to make a more just legal system while at the same time not allowing people to deal fentanyl and if you just type into google fentanyl versus heroin lethal dose and click on the image search you will see two vials and it's a very famous photo where there's like you know a pinch of you know uh heroin that's the lethal dose and then in

the other vial there are like seven grains of fentanyl and that's the lethal dose and we are conflating a homeless problem with a super drug yeah can i can i add to that so yes please so so you know i was on the side of decriminalizing cannabis and i think that and i think that there we we overcharged too many people for drug crimes when they were just users and should have been in treatment and that's why i think there's been a reaction against over-incarceration and i understand that but i agree with you that fentanyl is in a separate category it is this super drug

and here's the problem it is so powerful it is so addictive and it's so destructive nobody can hold down a job and get off that drug once they start once they start taking it i mean it's just game over so they end up living in the streets and turning to crime and petty theft to support their habit and that's the situation we're in today and we have this growing mass those massive numbers of people living in the streets addicted to this super drug and we got to stop it we got to get tough on this because it's just you know right now the the the the solution

that our our da seems to be pushing whether it's gas going in la or chase of booty in san francisco is they're just not prosecuting anything you know we had prop 47 downgrade a whole bunch of property felonies to misdemeanors and now the da's aren't prosecuting the misdemeanors so they basically just decriminalized burglary and so you've got all these you know drug addicts um living on the streets committing these crimes and they need to be in treatment so i think part of what we need to do here i actually think this is a big investment california needs to make we need giant treatment

centers to address this problem and if somebody gets caught committing a crime and they're they're addicted to drugs i don't want to send him to jail but i would make him go to treatment we have to think about true compassion true compassion for somebody who is addicted to fentanyl is getting them off the street and getting them into a rehab program or giving them the choice of going to jail for the crimes they may have committed so that there is this pressure to go into treatment just to give you a stat in 1999 we had like 18 000 overdoses we're now over 70 000

um and if you look just in san francisco we're talking four or five times the number of overdo overdose deaths to cover deaths this is a level of human suffering that just makes no sense and it's such a nuanced discussion right you can't you can you have to be able to hold into your brain that cannabis you know psychedelics mdma psilocybin you have a long list i have a long list here of the drugs of your own girl that you ought to be recreational here are the drugs i'm a fan of good here are the drugs that i don't take bad no fentanyl i think you just have to look at the the

chance of recovery and the chance of addiction and fentanyl and heroin are just tragedies tragedies we also have to like have the courage to actually not look at just the symptom like i think treatment centers are a great idea i think not sending people to jail is like an obvious idea i also think if you take two or three steps back and you think about what are the two things that send people off the rails number one i think is lack of a job and then number two is a lack of mental health resources you put those two things together it's you're done it's like it's like

kindling and it's like kerosene and a match all in one and boom it goes and you know we didn't need to know that answer because you saw that over the last decade building up in the rust belt so we knew that that was the those are the boundary conditions for this so how do you get people back to work how do you actually give cement you know the crazy thing about reagan i mean we all forget but reagan was the one that defunded all of the uh mental health institutions you know when he was governor of california and sent all these folks spilling into the streets well think about how

many jobs that would create if we brought back you know psychiatric facilities and made them free this is where if we look at health care not having a national health care program especially for mental health is costing us more on the other side when it comes to suicide if we're gonna spend money and if we're gonna be in debt be in debt for the right reasons like sure find a way to be accountable and transparently spend money that's fine spending money is fine government should not be for profit you know government should i don't even think government should be breaking

even i think that government should be generally running at a loss and then the net gdp as long as that's positive and accretive we're doing right as a society right so government should be doing the things that that they need to do for people to have an even starting line but i just want to yeah go ahead sorry no i was just going to say that that's where we get it wrong because like we you know we we like pat ourselves on the back when the government turns a surplus and then you know we like explode when a government runs a deficit instead they're managing to the political theater

of a number instead of really understand how to run a business but i just want to be clear like the entire um premise of how that is run and how we think about this from an economic point of view is that we have to have gdp growth and if you don't have gdp growth the whole formula fails so let's just break this down in a simple way if i'm um working and i'm making 60 grand a year i can take out some credit card debt knowing that i'm going to make an extra 10 percent next year or an extra 10 percent the year after if i know my income is going to climb

i can afford to take on some debt which means spending more than i'm making right now because i know that in the future i'll be making more than i am today and i'll be able to pay down that debt and so the whole premise of how we run government is we should run at a deficit we should accrue debt we should build infrastructure but in order for that work to work i have to increase my tax revenue in the future and there's two ways to do that raise taxes or see significant gdp growth and if you raise taxes you suffer the problem that california may be suffering now

which is very high net worth people leaving the state which is going to cause a collapse in the revenue stream and the whole system fails if you want gdp growth well you have to kind of enable the system to allow for gdp growth which means reducing taxes and growing housing but the problem is the life that people want to live doesn't necessarily mean that we need to have and so this goes back to the housing question do we need to have more business growth in the state therefore do we need to reduce tax rates to encourage business growth and by doing so we

have to also build more housing and the reason people want to build more housing it's because they want to see more business here and the whole premise is kind of flawed if at the end of the day getting more business here means you also have to lower tax rates and cause all those problems it's also how you have community and it's also how you have diversity like nobody wants to live in a model culture where everybody's really really poor or everybody's really really rich i grew up it's so sickening i grew up in a place where everybody was really really poor i now live in a place where everybody is really really rich and the mono culture sucks and instead

what you want is you want transitions you want people moving up you want people moving down you want the hard luck story you want the got lucky story you want it all and this is this is where we've lost it i'm going to ask you a question free book are you saying that if 40 000 people left california we would blow a 70 billion hole in the budget no we would we would blow a um yeah about 40 000 count for half the income tax so it's about 35 of 140. yeah so we would we would blow a 50 60 billion hole in the budget 40 000 people 40 000 yeah out of 60 million 40 000

homes forty thousand homes out of sixty million forty million out of forty million yeah yeah forty dollars a similar thing happened to new jersey and connecticut when they had everybody moving down to florida and so this is not unprecedented um especially with hedge funds and really high taxpayers you know but what yeah what i'm asking is is there a better way where you don't have to depend on gdp growth to balance your budget and to provide the social services you want to provide to the state no of course of course not yet all it all starts with having a healthy economy i mean

always right because that's what generates the um the prosperity to pay for all the social programs it's to pay ahead of the curve right that's my point is like we're always paying ahead of the curve which forces us to find gdp growth which is how we get stuck in these cycles and these problems and this is true not just of the state but of nations as well and the u.s faces this and others but by by spending ahead of the curve by creating infrastructure by creating social services by setting up these pension obligations the only way to get out of the debt you've just

taken on is to grow and that creates all of the systemic problems that ultimately lead to populism and all of these kind of frameworks for failure that are going to ultimately end here's no no no no no no hold on disagree with that look growth is a precondition for everything else that's good okay growth growth needs to be managed okay but it doesn't growth is not the problem here the problem is a set of policies that are actually killing growth and driving entrepreneurs and innovators out of the state we saw elon musk leave the state why he said that california was starting

to take its success for granted and had been winning too long okay california needs to realize it's not highly competitive situation now and because of covid you can work from anywhere and austin has become a tech hub and miami's become a tech hub and those states have no income tax and we have politicians in california just keep raising taxes as if we're not competing against these other states well we are and people are leaving we're seeing a mass exodus here we've got to realize that we can't raise tax rates beyond the point where people are willing to bear them

this is the this is your i think your best point david is that what the great pause did was it let people reassess their lives how many people do we know who either left the state change job you know broke up with the spouse whatever it is people reassessed everything in their life and what people uniformly came to was why am i paying this much and getting this little in the bay area in california when i could get twice as much three basically three times as much in austin or miami and not pay this amount of taxes and be happier and that is an existential problem for the bay

area if you know this is not just elon musk or larry ellison oracle it's also rank and file developers and the developers don't need to be in the office so you could have this massive middle leave too that nobody anticipates and if all the developers said you know what i want to be on the reno side of lake tahoe you know i want to be in austin or wherever i'm paying less taxes and i'm making the same money and i got a better quality of life what do you guys think happened so j-cal what what happens to california or connecticut or new jersey

and what happens to florida just tell me what i think it's a death spiral for new york and for california where unless the representatives in government start to represent the people who are voting and living there and voting their interests as opposed to the special interest to david's point about the insiders we have disconnected what the citizens of california want from what the government officials are providing they're just not in sync they're basically cow towing to teachers unions or special interests and not the people who are building companies or just people

are living here people want to build housing and they won't let them you can't build apartments in palo alto or you know anywhere in the city i mean this is crazy you're right the the only middle class that's going to be left in california pretty soon uh it are government workers i mean that's it that's the only people that can be making over a hundred thousand dollars a year in california are the government workers because everyone who's middle class who's running a business is just is finding it too difficult and um too difficult to earn with the level of taxation and to run

their business and their regulation regulation and they're leaving i mean just think about the regulation issues of doing any real world i mean you've done construction in san francisco we've had businesses that are real world businesses with storefronts it's it's jumping over hurdle after hurdle after hurdles shutdown it's brutal what if uh whenever you started a company in california you got you know three or four years worth of tax credits for engineers in return for one percent of the equity that california was not allowed to sell sure i mean some equity upside would be great

i have an idea chamoth how about you run for governor yeah jamal here's an idea why don't you isn't that why we're doing the emergency pod sacks i think you should run we'll be right behind you have we disparaged you too much or has this been too difficult yeah let me let's speaking of politics though i do i do need to tell the story um this is a complete complete non-sequitur in 2012 12 or 13 i can't remember which year mike bloomberg invites a bunch of us from technology to uh to the white house correspondence center we're like yes the white house correspondents

center did you go that's awesome of course i went once here so hilarious you know myself ian osborne hussein rama the founder of jawbone and i have two amazing stories about this my experience at the white house correspondent center number one well three number one it's like the dinner itself is kind of like a prom just because there's just so many people right and so you know you have to have a rubber chicken dinner because there's like a thousand people in the room but the second was that ella macpherson was there and i've never seen more incredible hair

in my life just i have this image of this person's hair and it was like the thickest like it was like curly but like it looks so soft this is the most incredible hair i've ever seen i think those are called extensions or a wig but go ahead it didn't look like that it looked like real hair but it just it looked incredible uh like like a lion like the main of a lion and then the third story is i we're in a reception there's an after party at the french ambassador's place i start talking to this person randomly and there's like all these stars everywhere but i just

start talking to this to this person and you know she she's very chatty and i'm chatty chatty chatty blah blah blah blah we're talking talking and then at the end of this like sort of like five minute conversation and we had not really introduced each other she just kind of said hey and i said hi and so we started talking and she says to me um you mind if we take a picture and i'm like yeah of course and i and i and i had no idea what was coming so i was like so we take a picture and she searched me and she says you know i think you're really fantastic in parks and recreation

oh my lord and i worked so hard thought i was a disease i'm sorry jesus christ how does this happen at least she didn't call you urkel i mean oh my god that was her second choice oh my gosh i love you and parks and rec anyways that's my that's my interaction with politics i think you're ready for politics because you just avoided the question let's be really honest like i i'm not ready to to do any of that i what i need to do is i need to figure out you know a my business and where it's going and then b i do think it's worth figuring out what are the conflict of interest laws and what do you have to do if all of this were to come to pass because i could not make a credible

decision unless i knew that uh because i i just have things that i want to do and that to me are the most important things like i'll just be really honest with you like i'm working on something in batteries that i think is it's important for a lot of places much you know more than just california and so like if i have to abandon this battery project uh i wouldn't do it you know just that simple so i got to figure that out and you got to write down all the illegal things you've done on a piece of paper and all the illegal things you're doing

on a daily basis and then we gotta make sure you have an extra you have a case of moleskins because i could start they're never going to get uncovered yeah the oppo research has begun right that's that's what the dinner on thursday should be about should start the oppo research program oh my gosh that's a that's a long time but there's certainly there's certainly a ground swell in interest right sex and there's certainly oh yeah it's crazy like i think i think chamoth has um a lot of folks that that love his passion and the way he speaks to them and that you know

he has a real um sense for what i think people are feeling and can speak to that and obviously has experience in kind of making decisions and allocating resources right so you know i think there's a lot of interest tomorrow and a lot of uh drive to see you here's here's you know [ __ ] or get off the park here's what i'll say here's what i'll say i've grown up with nothing and getting to the other side i'm completely convinced that poverty is a disease that it is except in this disease it is systematically um reinforced you know what i mean so jason stop that jason talking job is good and i would like to say all americans and the citizens

of california i came from nothing i came from i would eat rice three days a week and then i would eat the plate the other four by the way the the the reality is that if if i were to do it if like all the checks came back and it seemed like it was a plausible thing i would only do it for the 18 months and just kind of you know but you'd have to get elected on a mandate where it was so clear that it's like all of california wanted these five or six laws to pass like i think it's like you're not running a candidate you're running a platform so it doesn't matter who it is

you know whoever goes in it it could be me but it could be frankly kim kardashian or the rock or david sachs i think what's really important is we should get alignment on a handful of laws that change the trajectory of the state and the reason why that's important is if those laws can pass and the state turns around then that's the roadmap for the other 49 states and i think that's a big deal that's a really big deal i think it's about a getting adoption of a playbook a playbook a playbook to fix california and if that playbook is something

that a group of people from different parties and different backgrounds can coalesce around and you know publish that playbook in a way that's easily understood and um and you can take it and run it let's let's pick what our top item would be for me it's the building of uh multi-family unit housing i think would be in my top three what's in your top three sacks well if if if i were to uh write a a met a a sort of catchphrase for for a campaign uh it would it would not be make it make california great again but it would be something more like tough and

tolerant because that's what i think california wants so tolerant on lgbtq rights um you know tolerant towards people of different nationalities towards immigration um you know tolerant on social issues but i think what californians really want now is tough on crime tough on hard drugs negotiate tougher deals with these unions and special interests who are just pillaging the state and then you know and frankly tougher on the politicians because they're making it too tough on the people to you know to to live and to run their businesses and you know we need to make it easier on the people and tougher on the politicians

freeberry what do you got in your top three items if we if we could only put three items on the docket you know one two and three i think from creating much more affordable housing through multi-family you know going up as opposed to building out and just allowing you know anybody who wants to add a couple of stories they had a couple stories and just more housing would lower the price of housing and maybe we have to change you know the taxation and maybe re-evaluate the value of homes because right now you buy a home in 1970 for 50k you're paying

one percent of that for the rest of your life right which then makes it impossible to move and you got two people living in a five thousand five bedroom square foot home because they can't move because their tax bases are so low on it right what do you got freeberg i mean look the challenge is with any one of these things you have to balance it it's like we talked about last time um you know we talked about adding a transaction tax to trading on markets but you also have to get rid of the capital gains tax right if you're gonna get rid of that um uh you know that that proposition that locks in the property tax rate i think it's

prop 13 right sex if you're going to get rid of prop 13 you've got to phase it out over time but to create the opportunity on the other side which means how do you create more affordable housing at the same time that you get rid of prop 13 you've got to enable as you pointed out the ability for more rapid housing to be developed and dropping regulatory constraints and maybe removing some of the union pricing and some of the work that gets done in the supply chain and so on and so you know i think it's about the balance trade-off amongst these things you know if we're

going to talk about trying to keep the top 40 000 households in california and you're going to drop the tax rate on them to keep them here which is an extremely controversial anti-populist movement you know right now you'd have to find another way to kind of resolve um resolve that gap or at the same time kind of reduce the cost of our top cost is education so you need education reform our second top cost is health care um and and and other related services and how do you resolve that um that there's a lot of structural things in there it's probably a checklist of ten things that you would say let's go negotiate better prescription drug prices

let's make um you know the services more efficient meaning how many patients does a doctor get to see per hour per day per year per week whatever there's all these things that you kind of go through and you can make each one of those dollars that are being spent more efficient so as much as i'd love to kind of rattle it up to three different things this is a management problem and you know as as those of us who have run businesses that are struggling or challenged have experienced there isn't one thing to do to fix a problem when something is not operating

well but you really it really does come down to talent and so you know i would think that the people that are sitting in those assembly and senate seats need to be the right people and the person sitting in the governor's mansion needs to be the right person who will surround him or herself with the right people who are operators and managers and leaders who know how to resolve these problems and go through and do just like that guy did and dave with the napkin and you know write out look here's the 10 simple things we can do to fix hhs and here's the 10

simple things we can do to fix higher education and go in and cut half the expense and if you cut half the expense you have a lot of things you can start to do and so yeah i i i don't have a simple answer for you j-cal but i think it comes down to balance would you say school vouchers since you brought up education are the quickest solution there is to create more competition quickly by giving parents the ability to take their voucher and go to whatever school they want i'll be honest i haven't read enough on school vouchers to know the ramifications of the program uh

programs that have been proposed so i'm not going to be very well very thoughtful in that well i'll i'll i'll speak in favor of the idea of giving parents more choice i mean these schools are being are they being run for the students or for the special interest because right now the parents don't really get any choice i mean look if we can recall the governor why can't we why can't the parents of a school recall the headmaster i mean why don't we give them the ability to circulate a petition if they're unhappy i think in the case of the governor recall if we get 12 percent of

voters to sign the recall petition then you get a recall election so what if you had a system where the parents of a school could sign a petition and then they vote and if the majority of the parents yeah majority of the parents vote to recall a school then they can basically replace the headmaster and run it in a different way why shouldn't they have that choice it's crazy to me that's what yeah yeah yeah let me give you let me give you a little math i just did on my on my calculator here so the average student in california costs 18 000 a year roughly okay and we have a classroom size on average of about 25 students it's

actually higher than the national average so you multiply 18 000 by 25 that's 450 000 per classroom okay now how much does a teacher cost i mean okay no that's the average in california for teachers it's all right let's let's say let's say let's say that we paid teachers extremely well let's say we paid the teachers 100 000 a year because we all believe in having great teachers okay that would still leave 350 000 left over and remember you don't have the real estate cost right the state already owns all these schools so where is the money going we've systematically

entrenched poverty um i think that what happened to you friedberg or saks or me or j-cal i don't think it's possible anymore and i think that we are aberrations and i think that folks that are younger than us would look at us um and they look at us i think in part because they're like god i i would love to have that shot and i don't think they know where to start and i think they also see a system that feels very much rigged against them so just by bitcoin i mean this is why they're attracted to buying bitcoin we're doing what they did with gamestop and why wall street insiders

versus outsiders they feel like they have this opportunity to show the man and they don't that's why they don't want to take on school debt i mean i i don't blame millennials for being disgruntled if they got a hundred or 200k in debt and they were told this degree would get them you know uh this would be their ticket and it was it's been disconnected it's a great lie it's a great lie and so you know that's that's one of the big lies and and i think we're sacrificing it now because like you know we're we're we're we're making this great sacrifice because we're exposing these

lies to be exactly as they are so i mean if i had to pick a couple things jacal i would say the most important thing for me is school vouchers tied to like i would increase public school salaries you pick your number i don't really care what it is a hundred grand 125 grand but you need to tie it to school vouchers so that any parent can put their kid into the best school that is for them or start their own school like there needs to be competition five parents get together and they each get an 18k voucher they can spend a hundred thousand on a teacher

to teach five students and if they hit their goals like they're gonna do better what what five parents even the you know the most disadvantaged parents would take advantage of this to me that would be the that's like the first above all else because i think it creates accountability and it allows our kids to have a decent shot the second thing i would probably do is i would actually just cut all taxes to zero on the personal side but i would introduce a progressive taxation system for corporations and i would try some of these novel things like getting equity in turn for intern for

credits and allowing folks to capitalize certain expenses i mean these are like i know people think that's all so stupid but like you know if all we did was just own one percent of apple google facebook you'd have three trillion dollars four trillion dollars trillion with the t you know what i mean well not you that's four truly in the market cap but you know you know what i'm trying to say like if you control one percent of that it goes a long way um so there's that and then ah i do think that there's something that we need to do for people to be able to live i i remember

interviewing somebody and you know he's what he said to me just made me so sad he's like i you know he drives an hour and a half into work every day and then drives an hour and a half home and i was like how how is this possible and i just thought to myself like what does that do to you and your family he goes i don't see my family and i'm like well can't we just increase your salary and you know that's not possible because of the job that he had and then he couldn't afford to live and so all these things just build up in the system so um those would be my three things it sounds like we have a bestie platform

uh we we we uh need to figure out who the best candidate's going to be hopefully we can convince stramoth to do it but the next thing but the first thing we got to do is uh we got to make sure this recall happens there's another five weeks or so to gather signatures so everybody should check out the website it's rescuecalifornia.org it's rescue california.org if you have the means to donate please do i donated 50 000 to it they are taking donations and even if you're out of state but believe in this cause like tomas said what happens in california or as california goes so goes the

nation you know it would be a really good thing to send a message even if you're out of state to these special interests who are ruining the state that this isn't going to be tolerated because every politician in the country is going to hear that and they're going to start realizing oh i can't just pay attention to the insiders i need to start paying attention to the outsiders to the majority of citizens who've never been organized before but now they are getting organized and so we need to send this message that is the first step we're not going to get any positive change

in this state until the politicians are held accountable and this recalls the starting point for that and if you take a picture with the form and cc your besties will follow you back or retweet you or like you some combination of that i saw a couple of people did it after the last pod so print out the form and go ahead and take connections the next the next um podcast um just for everybody to know uh episode 21 we are going to start by reading mean tweets there have been some there have been some unbelievably vicious tweets targeted you typically at jason and then and then at me a little bit at david sacks but finally

really they went after the queen we've broken the seal and the queen has been targeted really he was called sanctimonious on twitter we are going to make him read his mean tweet to kick off episode 21 and we will see you all next time on the all-in podcast love you guys and they've just gone crazy with it besties we need to get mercy's