00:00:00
two days ago oh here we go in the piazza i got into a fight
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you got into a fight i got into a fight like a physical altercation the physical altercation really this chick shows up
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wearing a white wife beater talking all kinds of and i said listen lady you zip it
00:00:22
and she just kept jawing and joining and here she is again she's back for more and so i was like listen
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have you ever seen ah this have you ever seen a one a onesie wife beater look at that little sweetie oh i'm just
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gonna look at you and you should sit there and then you just sit there and then look there's your cold open
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everybody that's the good stuff right everybody i know i'm not a beagle i know i'm not a beagle but i'm even better i
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have my own thoughts sax what you're seeing here is called affection between a parent and a child just let me
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know when it's over [Laughter]
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you're the worst human being in the world i don't need to watch jamal boost
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his q rating by using his kids as props okay [Laughter] oh freeburg where's your puppy that you
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saved from being tortured with kim kardashian's lip gloss
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we gotta get this guy in because he hasn't been in the show in a while there he is there he is oh monkey oh
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your belly rub get the props out of the shot your winners ride
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rain man [Music] david we open source it to the fans
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[Music] what's up with jd vance in ohio is he
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gonna pull this thing off or is he getting beat up i read an article about him getting beat up uh with the peter kiel
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connection being he got physically beat up no no like in the past no no no no no i think jd should win he's gonna win
00:02:00
right yeah i think so and what about blake masters these are the two guys that tl was backing should we start the show
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we kind of did yeah can i just ask you a question if any of us entered porn
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wouldn't one of our names be blake masters like it's just wouldn't it be on the list like doesn't it sound like a
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gray isn't it a great name for porn it's a great name blake masters it's a great
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name and and jd steele i'm sorry vance yeah go ahead explain what's going on with this uh
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would you would you accuse him of without any evidence i'm not using anybody of anything i'm just saying tell
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us about your manchurian candidates go ahead [Music] [Laughter] well so jd's already won the primaries
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and i expect he will win i mean it's going to be i think a red wave in november and ohio is a pretty red state
00:02:49
these days blake saw us to win the primary in arizona it's a little bit more of a
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toss-up but i think he'll do well all right well i had a follow-up question but i'm not allowed to mention the t-word so let's just get started why is
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it such a big deal that like peter supports candidates you got all these like crazy left-wing radicals it's interesting soros gives unlimited
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amounts of money to you know crazy progressives like gasco and la and a zillion others i mean why is this such
00:03:14
an obsession that we have to focus on who peter supports no no i just think it's fascinating that he peters articulated his rationale for supporting
00:03:21
these candidates and his objective for you know changing government in a way that he thinks would benefit the country and
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peter's been generally right what is the thesis free book i think part of if you watched his speech from the um rnc
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during the the last trump cycle i think he did a good job kind of articulating that there's a lot of inefficiencies in
00:03:39
government and there's a lot of um call it accumulated fat and we need someone to go in and we need
00:03:45
people to go in and really cut this up because so much of politics is driven by what else i'm going to give you not about what i'm going to fix that's
00:03:51
already being spent in in an efficient way and as a result we see debt climb we see taxes climb we see efficiency
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continue to decline of every dollar invested by the government and i think that's a really important thesis to see
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someone actually try and execute against because very few people are in the position that he's in to actually be able to like make
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that sort of statement everyone wants something more from their government versus trying to fix the government i
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think his views are more extremely i think his views are more that orthodoxy is ruining in america and so you need
00:04:21
forms of heterodoxy to basically reset totally affect the status quo and i think that's what he believes more than
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what you just said i think that you need a wholesale reset and in order to have a wholesale reset you need to
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have these very disruptive candidates that basically start to change the norms i mean if you think about what trump did
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in one election cycle is he's completely sucked an entire cohort of people
00:04:48
hispanics and you know moderates and now um you
00:04:53
know a lot of immigrants towards the right because the democrats have vacated
00:04:58
all of that space in having this massive trump derangement syndrome and tacking extremely to the
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left and even if peter we'll never know believed in trump or didn't believe in
00:05:09
trump it didn't matter but the process of him getting that candidate elected over the long arc of history may
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actually serve to pull america back to the center pretty good outcome yeah and look at the
00:05:20
reason why i support jd and blake for that matter is they are they represent this more populist working-class wing of
00:05:27
the republican party and they're dragging the republican party in a more working-class direction i think that's the future of the party i think that's the opportunity for the party to chamas
00:05:34
point the democrats have ceded all the sort of this working-class territory by becoming this elite
00:05:41
progressive party and the face of the party right now the democratic party is paul pelosi you know let's talk about
00:05:46
this it's blatant out in the open he's trading on ship stocks like nvidia and
00:05:52
intel and so forth like the week before the house is going to vote on a 52 billion dollar subsidy for chip no no be
00:05:59
more precise the week before his wife decides when critical legislation goes to the floor
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of the house to be voted upon so you have the speaker of the house who's the third most important person in
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government introducing legislation on her timetable her husband trades in those specific
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equities days and maybe even the same day of that
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they make three times her annual salary just in one day
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and then she and her husband decide to then fly not ask by the united states government
00:06:38
or the state department to taiwan to then talk about god knows what
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which would have created an international uproar the biden administration and tony blinken had to
00:06:50
basically call her and say stand down you should not go we are not asking you to go it is not on the united states
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agenda for you to go and all that would have happened is an entire process and loop where
00:07:03
she controls the legislative agenda her husband controls their private stock account and
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he trafficks in the names and then they go to taiwan to whip up the fuhrer which would have actually positively impacted
00:07:15
those same names even more it's inexcusable that kind of behavior i mean after 40 years just she's so past
00:07:22
the line and she doesn't realize it and by the way sorry let me just wait hold on and then on top of that jason the
00:07:28
mainstream media doesn't say now by the way i'm not a trump supporter i think he's a complete goofball but
00:07:35
if trump had tried to pull this stuff in 2016 or 2017 or 2018 could you imagine how much media
00:07:42
coverage there would be and today how much of that is covered by the mainstream media zero was it mentioned
00:07:47
on msnbc nope was it mentioned in any of the press nope let me just set the stage so people
00:07:53
don't know we're talking about so uh on tuesday the senate advanced a slim down version of the original chips bill if
00:07:59
you don't know what that is it's basically a bill that's going to provide 52 billion dollars in subsidies to move
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chip manufacturing here to the united states something we really need to do it's a bipartisan bill everybody kind of
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agrees on this but this is been kind of stuck in committee for a
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little bit uh it comes a year after the senate first approved the 250 billion dollar
00:08:20
bill to reinforce u.s chip making to compete with china the reason why this is strategically important is because we
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have a huge chip dependency on taiwan which is under threat from china so if chips are the new oil
00:08:32
you know taiwan is the new middle east or the new persian gulf and it is a very
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dangerous situation for us to be completely dependent on taiwan well not completely but like for over half our chip so
00:08:44
on shoring advanced chip manufacturing makes sense but i think this is an example of how
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you you start with a legitimate objective in washington and very rapidly it turns into corporate welfare
00:08:56
and graft by politicians i mean yeah it's gross yeah i mean just because we need to onshore manufacturing doesn't mean that you give intel and nvidia
00:09:02
giant handouts and then you got paul pelosi making millions trading nvidia options
00:09:08
yeah and this is something that is what you've done sex to support onshoring of
00:09:13
semiconductor manufacturing who would you give the money to and how would it be kind of dull down what would the
00:09:18
terms of it be i don't know that you just give these companies money i mean i think maybe what you do is you give them tax breaks or various kinds of breaks
00:09:26
but um i you know i don't like the activities they need capital to support that investment because you know if you
00:09:31
look at the um kind of roic on these companies i would even look but i'm guessing they're in the
00:09:37
high teens or something mid to high teens and they're not going to be able to invest in some newfangled
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you know fab project that may or may not actually have customers at the end of the day their board would never approve that on an independent basis
00:09:50
roic freiburg return on invested capital so if you're a big industrial business you know one of the key metrics that
00:09:55
your shareholders look at is the the ultimate kind of profit profits that are generated from a big
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investment you might make and so you know you kind of look at that over time you look at the invested money over time
00:10:07
and the cash return over time and you come up with this metric and so it's a key metric for particularly capital
00:10:13
intensive businesses and so a business like intel or nvidia i would imagine is going to have a pretty
00:10:18
tough time selling their board on some speculative onshoring fab project there really does need to be capital and
00:10:25
acceleration of capital who feeds you this propaganda intel
00:10:30
in 2020 approved a share purchase plan where these guys had a hold of 110
00:10:36
billion dollars and have spent all of it except for 7.2 billion they have 6 billion left on the
00:10:42
balance sheet i get it but they're not going to put that money at risk right like like imagine you're on the board of intel and
00:10:49
they're like you know the government okay so basically hold on i make a ton of money yeah this is where it all comes
00:10:54
from right i make a ton of money i have no better ideas of how to do it including theoretically building a chip
00:11:01
factory so i'm going to go to the government for a handout meanwhile i'm going to take all the money that i had which i could
00:11:06
have used to fund this thing and i'm going to give it away to people who i don't know what they're going to do with it i would reframe it i would
00:11:13
say that the government wants to see our industry onshore semiconductor
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manufacturing and they are going to the companies not the companies going to the government they're saying we want you to onshore semiconductor manufacturing do
00:11:25
that for us now like in world war ii we went to the automobile manufacturers and said the government said we want you to
00:11:30
make airplanes here's a bunch of money make airplanes and that's that's the question is but who doesn't david go who
00:11:37
else would you give that money to besides the two best chip makers in the world david's right if you just give us a capex subsidy
00:11:44
that's a one-time effect that helps you in a moment it doesn't help your
00:11:49
business any reasonable investor who can actually use a simple calculator sees through that nonsense so what david's
00:11:56
right is if you had given them sustained tax breaks for being able to build the business line that then supplies things
00:12:03
for the duration you know tens of years you're absolutely right investors would lod it it would make a ton of sense they
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would be over earning over a long enough period of time where people would have to bake that into their cash flow
00:12:16
estimates where when you discounted it back it would make the enterprise of intel and nvidia worth more and then people
00:12:23
would then want to own that stock more giving a capex subsidy is a meaningless
00:12:28
way in which you basically hand out good money to organizations who have otherwise
00:12:34
misallocated the money that they've already had yeah there's a much simpler solution to sax's point of like how do
00:12:39
you do this and uh giving free money is not the way to do it the best way to do is to give an incredibly low
00:12:46
interest rate loan like a 30 40 50 year loan uh that maybe has some warrants in it just like a you
00:12:52
know a silicon valley bank or a comerica might give in a venture debt loan where the government actually could make money
00:12:57
from this and then you incent them with something that is just too good not to take a 50-year loan of 5 billion to
00:13:04
build factories you have to use it for that so it's use it or lose it and then you slowly pay the government back and
00:13:10
then maybe we get some warrants in intel or whoever we give the money to this is something that obama did with solandra
00:13:16
solyndra which didn't work out but he also did it with tesla and tesla paid all that money back early so these loans
00:13:22
that the department of energy did really did um and you gotta give barack obama a lot
00:13:27
of credit for this it really did help drive even though it wasn't perfect by the way we did drive a lot of av
00:13:35
adoption it did really help tesla become the company it is today sorry let me just respond because you know i don't
00:13:41
know how much we've we've gone through the details of the bill but there are several components to this bill
00:13:47
including and i just want to highlight if i'm on the board of intel i'm not going to make a 10 billion dollar fab investment
00:13:54
um because you know there's there may or may not be you know profits down the road to justify that size of an
00:14:00
investment so if the government comes along and says we will support we will cover x percent of that investment i can
00:14:06
take on more risk and i'm more willing to make that investment and theoretically i can afford to pay people
00:14:12
a higher wage or a higher salary because i now have more capital freed up to support to do that and so there is an
00:14:18
effect that that arises by having the government come in put some money into these projects accelerate their outcomes
00:14:24
and it gives the business more free should it be freeburg free money or in the form of a loan so what should the
00:14:29
financial device be i think is the question that you ask saks if i'm interpreting correctly yeah i'm not sure
00:14:35
that the loan because the loan doesn't resolve the fact that they're having to put up money right and so they're not
00:14:40
necessarily going to make this onshoring investment the the rational capitalist decision is to offshore manufacturing
00:14:46
for intel it is irrational for them from a business perspective from a board perspective from a fiduciary perspective
00:14:52
to onshore manufacturing so the reason they're going to do it is not because they're getting a loan where the interest rate is low that doesn't really
00:14:58
solve the problem it's the government saying we're going to put a 10 billion dollar facility we want you to build it
00:15:04
and manage it for us and that's effectively what's happening and now by building this 10 billion facility we've created security for the rest of the u.s
00:15:10
industry it's worth it to the government to put that money up and create security for our economy no it won't
00:15:17
why wouldn't it create security if we if we have more onshoring of chips more security i'll say one more thing there's also an investment tax credit
00:15:23
built into this bill sax which does provide over time a bunch of incentives to continue to support and drive the
00:15:29
onshoring work that's proposed in the bill if you want the united states point of personal privilege cairo requests
00:15:35
that your moth add just one button to his shirt yeah it's just
00:15:40
is it too distracting for you you can't take your idea the glare you
00:15:46
just walk here you're oh first i had to watch jason do the gun show now i gotta watch jamaat you know
00:15:52
show us your guts come on pull up that sleeve and show us what you've got
00:15:58
i want to say one more thing about the pelosi stuff so here's the data i don't know if you guys have looked at the full history of the pelosi trading data
00:16:04
here's the link this is all the training that's happened over the last couple of years so and um over the past year
00:16:11
he has bought nvidia four different times each time in the same kind of volume range so the timing certainly may
00:16:17
appear suspect and it's certainly a terrible kind of thing to see he's also bought apple in the last month microsoft
00:16:24
sorry he sold apple he bought microsoft um he bought alliance bernstein earlier in the year he's made a few trades this
00:16:30
year but nvidia he's actually bought on four different occasions over the past 12 months um for whatever that's worth right i'm
00:16:36
not not trying to defend it but i think we should be intellectually honest about the fact that this guy you know does take points of view in certain companies
00:16:42
he trades in a handful of companies are we only to be intellectually honest enough to think that
00:16:47
a husband talks to his wife and vice versa yeah or does that not happen anymore it
00:16:53
depends on the husband and wife but yeah i think this is blatant and out in the open i mean it
00:16:58
looks really at a minimum the appearance is of graft and corruption yeah the appearance of impropriety is impropriety
00:17:04
they shouldn't be allowed to trade they should have to put their stuff into blind trusts or they should maybe trade
00:17:09
once a year and they should have to announce their trades before the trades happen hey here's what i'm planning on doing just like a ceo is planning on
00:17:16
doing this stuff it's ridiculous that they can do this and why does the mainstream media cover this
00:17:21
they have jason and jason do you think they think that if trump if this had happened during trump
00:17:27
it would have a lot more coverage than this police do you remember a lot of coverage on trump it really doesn't get
00:17:32
covered i mean if you just search for it today you'll see basically the only media outlets covering it are like fox news and then uh zero hedge
00:17:39
you know that's it i mean that's how i found out about it is like the zero hedge tweets about it
00:17:45
me too so daily beast you know headline seven hours ago dems quietly tried to jam pelosi on stock trading ban but if
00:17:52
you're asking me you asked me a question is the media largely biased against
00:17:57
trump and gives a free pass to the dems yes i would say that that is the trend yes i think that is intellectually
00:18:04
honest of you well no i i mean i think the media is bankrupt they're just going for clicks and i think you know we've talked about this before
00:18:10
they saw trump as an existential risk and they just did whatever it took to get him out of office um even but in
00:18:16
doing so they completely burned all of their credibility they lost a lot of credibility and now the dems are
00:18:22
starting to become increasingly detached and out of touch and maybe hated but then the result is that the
00:18:28
mainstream media is just no longer trusted the media and the democratic party both have the same problem which is they suffer from what the democratic
00:18:35
political scientist roy tucheras called professional class hegemony i mean they
00:18:40
are populated by college graduates with degrees who basically have this very elitist
00:18:46
progressive agenda and that is what is causing the democratic the working class to
00:18:52
defect from the democratic party their historical base in droves look at hispanics well first of all if you go to
00:18:58
the latest biden polling numbers he's down to 31 approval 60 disapprove okay
00:19:05
so the trends is getting worse there but you look at hispanics it's down to 19 approval 70 disapproval it's an even
00:19:12
more intense version of the same problem you had myra flores get elected in that texas
00:19:18
seat this is a district that went it's basically a predominantly mexican-american district they went for
00:19:25
biden by 18 points just uh you know two years ago and now they're voting for her by over 10 points so your republicans
00:19:32
winning that seat for the first time so you have these huge defections now why is that happening because the democrats
00:19:38
are appealing to the donor class on issues like border on issues like crime
00:19:44
and on issues like crt and schools i mean you know the
00:19:50
working-class people in this country they don't want open borders they want crime to be prosecuted and crack down on
00:19:57
and they do not want an ideological education for their kids okay it's very simple but that basically is why the
00:20:02
iraqi party is losing losing votes now let me give you a couple other examples of the democrats
00:20:07
cynically appealing to this sort of donor class so you recently there's an article about
00:20:13
the democrats have spent 44 million dollars this election cycle
00:20:19
basically running ads in favor of the crazy mega candidate in primaries
00:20:24
there's been a bunch of reports of this where in competitive republican primaries the democrats will actually
00:20:30
spend money on behalf of the sort of the more perceived crazy republican that matters
00:20:36
the election denier and so forth yeah because of the perception they'll be easier to beat in the general but i think this is a
00:20:43
case to be careful what you wish for because you know if we have a red wave in november you're going to end up with
00:20:48
more of these candidates basically winning so it's a very cynical strategy the other
00:20:54
example i think of a very cynical strategy is you saw there was a vote in the house
00:21:00
this past week on gay marriage and the house voted to repeal doma the defense
00:21:05
of marriage act in support basically codify obergefell right the supreme court's decision on on gay marriage
00:21:14
something like you know 60 republicans voted for it look i would have liked to see more republicans vote for this i
00:21:20
think it should be like you know majority of the republican party should be voting for this but the point is that is there any
00:21:25
intention of the democrats to bring this up in the senate and pass it and codify obergefell when they have a chance i
00:21:31
think the answer is no why because the democrats rather fundraise off this issue the same thing was true about roe
00:21:36
the democrats had super majorities in the senate under obama they could have codified roe
00:21:42
they never took the chance why because they would rather fundraise off this issue from
00:21:48
progressive elites the donor class in california and new york so this is why they're not going to really think that's
00:21:53
the case absolutely obama said it on the record obama was asked why will you not
00:21:59
he campaigned on codifying roe v wade and then very quickly into it he was
00:22:04
asked when he had the super majority and built the house in the senate will you act on roe v wade he goes no it is not a
00:22:09
priority anymore that's a quote it absolutely could have been codified just like a burj fell
00:22:14
could be codified tomorrow look there are there are ten republican votes there are ten republican votes at
00:22:20
least for this in the senate you have a filibuster proof super majority in the senate who would
00:22:26
support this the same republicans who supported the gun restriction bill
00:22:31
that biden just signed and then supported the infrastructure bill do you think they could codify abortion rights in this country right now if they wanted
00:22:37
no no that that moment has passed that moment's passed i'm not saying republicans would never give women the right no no look there's no super
00:22:43
majority in the senate anymore for uh for a codifying road there is a super majority right now for codifying
00:22:48
obergefell they could do that right now and they're not jamal you've been a donor to the democratic party do you believe that
00:22:56
do you do you believe that the um the abortion issue drove you and others to put more money
00:23:02
in and that maybe not no because because the leadership of the democratic party
00:23:08
focused on uh trump in the last big cycle it was all trump trump trump trump trump
00:23:14
do i think that more grassroots fundraising focuses on that or gun rights
00:23:20
or do you mean what exactly is saying is true that they actually held off on trying to codify row so that they could continue to support candidates i'm just
00:23:27
i'm just going to give you the quote because it there's there's no opinion needed okay
00:23:32
april 29th of 2009 president barack obama says on wednesday he favored
00:23:38
abortion rights for women but that passing a law guaranteeing these rights were not his top priority
00:23:44
i believe that women should have the right to choose obama told a new conference marking his first 100 days in office again when he had super
00:23:50
majorities in both houses of the senate but i think that the most important thing we can do to tamp down some of the anger surrounding this issue is to focus
00:23:56
on those areas we can't agree on so you make a promise
00:24:01
you get into the seat of power you have the decision on what your legislative agenda should be
00:24:06
and he made that calculation and david is right sadly that it was in a moment where we
00:24:12
had a clear line of sight to codifying many of these rights yeah but the question
00:24:19
that's not the question that freeberg is asking he's saying do you think that they specifically did this to keep it as
00:24:25
an open issue to raise money off it i don't think that's believable oh yeah absolutely no way no way
00:24:30
absolutely to talk about cynicism sacks the truly cynical move was you know trump saying i am going to get this an
00:24:37
evangelical vote to win the primaries to get those 20 who want to take away the right for
00:24:43
women to have an abortion and i'm going to stack the supreme court to actually achieve that
00:24:48
in terms of all of this political stuff okay let's let's define terms political and so hold on a second hold on a second
00:24:54
let's define terms so you may be opposed to what trump did but there wasn't that wasn't cynical he stated what he was
00:25:00
going to do when he ran for office and then he did it he lived up to us he did not
00:25:06
he did not believe in that he did it specifically to get those votes we all know he didn't believe in it we all know he believes in a woman's right to choose
00:25:13
jason he he created a platform to get elected yes he was elected he executed on that
00:25:20
platform i think what david sachs is saying is obama had a platform to get him elected and when obama chose
00:25:26
had the choice he chose to not execute on the platform and that is also true and all i'm just saying is we owe it to
00:25:32
ourselves to be intellectually honest about what happened that is what happened okay both of these two guys
00:25:38
made claims hold on one second both of these two guys made be acting in your own self-image i understand but please i
00:25:44
want this on the record both of these two guys made claims to become president it turns out that trump actually did
00:25:50
execute on most of his claims as abhorrent as they were to some yeah and obama on some of the most important
00:25:56
issues of our time did not look what trump did was just simple coalition politics he thought it was important to
00:26:02
win the religious right he basically appealed to them he said that if you vote for me i will nominate these judges
00:26:22
what does it mean to have the principle of saying that he's going to he's going to pass and codify roe v wade and not do
00:26:27
it what is that then i think he uh well listen i i the quote you gave doesn't give why he didn't do
00:26:33
it he didn't make it a problem it could also hold on let me finish it could also be that he believed that
00:26:38
it would not get overturned so he should spend his time on obamacare and other things
00:26:43
i'm saying cynicism is when you believe one thing and then you do something to act in your own self-interest and that's what i think that's what i think trump
00:26:50
did a second we don't need to go back all the way to the obama administration because the issue i'm talking about today is that in the past week they had
00:26:57
a vote codifying obergefell on gay marriage and uh repealing doma okay
00:27:03
right so now listen i actually think there were so many republican votes in the house even though i would have liked to see more there were enough that that
00:27:09
this might shame schumer into bringing up the vote because it's gonna be so obvious if he doesn't
00:27:16
that he is doing this for a reason right because they have the votes they can pass this just like they passed the gun
00:27:22
bill a few weeks ago right just like they passed um the infrastructure bill so if he if schumer doesn't bring this
00:27:28
up it's a very cynical move i think it's strategically to have that as an issue to phrase funding i i i guess
00:27:34
of course and it's really proof listen do you think both sides are cynical of course both sides engage in politics
00:27:41
however however what i'm talking about is the type of cynicism so i think that there's a lot of issues on
00:27:47
which the democrats would rather appeal to the donor class basically that lives
00:27:52
on the coast new york california and be able to keep fundraising on that issue and basically scare monger on that issue
00:27:58
instead of just winning the issue they can just win this issue right now do you have
00:28:04
less interest in supporting the democratic party based on the principle you stated that
00:28:09
in the past there have been kind of promises and capital raised against you know codifying row and then it not
00:28:15
happening well they never made those promises to me so i never felt like they lied to me
00:28:20
um i want to be very clear so they nobody and i never asked for that to be a precondition of my donation again my
00:28:27
capital was focused on one thing which is i thought that president trump was not the right person to lead this
00:28:33
country and i thought very clearly that the bright democrat could do a much much better job and i am glad that biden won
00:28:41
and i'm glad that the money that i put in maybe in no in any small way but
00:28:46
hopefully in some reasonable non-trivial way helped and i'm glad that that money helped even out the senate i'm glad all
00:28:52
of those things happened and so i want to be clear they've never made those kinds of promises to be nor
00:28:57
have i ever asked i make a high level decision on who i think the best candidate should be and support the
00:29:03
party that will get that best candidate affected what i was just trying to make clear to you guys
00:29:08
is that sometimes even a democrat it's important for us to be intellectually honest about what has happened it's very
00:29:16
easy to look at the other guy and find all the ways in which they screwed up or tried to screw you or
00:29:22
you know is is you know lacks empathy or lack sympathy all of these things it's much harder oftentimes to look at
00:29:29
your own team and say wait a minute why didn't x y and z happen and the reason i'm bringing up what happened in 2009 is
00:29:35
i think david is right we have a moment in time where the leadership of the democratic
00:29:41
party can codify rights that should be codified and they should
00:29:47
have in hindsight they should have done it and just to be clear no it is still open we can i'm talking about roe v wade
00:29:53
and yes and for the for the issue we're talking about now it should be codified absolutely and just to be clear i'm an independent i would vote for a
00:29:59
republican who was socially progressive and fiscally conservative as long as they're for gay marriage as long as they're pro women's right to choose
00:30:06
uh and they were fiscally conservative i would vote for a republican i'm a moderate independent i want to see less
00:30:11
government and more efficient government and i want people i want the government out of people's personal lives and i think that's where sacks and i are
00:30:17
exactly the same we both want i mean sacks do you want the government involved in people's personal lives
00:30:22
you're a classic republican by the way according to the monmouth poll from a few weeks ago you represent four percent
00:30:29
of the voting base i do that's an extreme yeah that's an extreme minority the the the lowest
00:30:36
self-identifying quadrant of fiscal conservative versus kind of fiscal liberal social conservative social
00:30:42
liberal is the fiscal conservative social liberal what are we all here we're i think we all fit this profile fiscally
00:30:49
we want the government to be run conservatively you know and with less government and we want progressive social change right i
00:30:56
mean i think we all feel that way don't put me in a quantity government out of people's personal i don't i don't know i'm just asking you guys if we were all
00:31:02
insane i wouldn't define my cultural positions as progressive social change because the change that progressives are
00:31:07
trying to enjoy right now is radical what i favor is social tolerance i think we need to be a tolerant i think we need
00:31:13
to be a tolerant society america is a very broad diverse country we need to find ways to live together and find
00:31:19
accommodation on issues that are very contentious so that includes tolerance for gay marriage so look i'm on board
00:31:25
with that but you know this radical progressive agenda of social change which includes
00:31:31
upending the uh the criminal justice system in favor of yeah no not prosecution yeah what's happening in the schools
00:31:38
with crt and the sort of hyper ideologize education look they should be teaching the basics reading yeah leave
00:31:44
it up to parents to do the other stuff yeah exactly and so on down the line well maybe progressive is the wrong term
00:31:50
because that that now has been co-opted less government involved in your personal life and tolerance i think we
00:31:55
all agree on that and i think tolerance is a great word everybody agrees with tolerance it's a privileged position to want to have less government involved in
00:32:02
your life right i mean many people in the united states have been able to thrive and survive
00:32:08
because of the role that government has played in their lives and there's obviously on one end of the spectrum
00:32:14
extreme grift and on the other end of the spectrum extreme need that is being met uh by the
00:32:20
wealthiest government in the world and it is uh that you know it is in that middle where all of where do you stand
00:32:26
for your brother how would you describe your politics in these two dynamics right
00:32:33
are you also in this four percent
00:32:39
freebird yeah yeah yeah no i'm here um i'm trying to be thoughtful about this because i know i think it's the idea
00:32:46
yeah i think that the government's role is to support those in need not those in
00:32:52
want and i think that the government should be held accountable for performing that role
00:32:58
and i think that those of us who can that are sitting in privileged positions and seats should enable the government
00:33:04
to perform that role well and we should be positive actors meaning we should support we
00:33:12
should pay taxes and we should help people and um and institutions in need
00:33:18
and that are you know kind of for the greater good and then we should be holding ourselves our government and our
00:33:23
politicians to account for inefficiencies and the biggest concern i have is less about are the people in
00:33:29
need needs being met as much as are we holding our government to account for the performance of its services and
00:33:35
duties to the american people and i really like this want i like this want need concept here can you give an
00:33:40
example of where the government like people need something but then there's another group that wants something and maybe we're
00:33:46
overstretching and you know giving into wants when we should be focused on needs and efficiency yeah i'll give you
00:33:52
a pretty um example i know reasonably well which is the farm bill passes every four years
00:34:00
and the farm bill in order to get it passed in both the house and the senate it has components that serve both
00:34:06
farmers and um support the the food stamp program uh so the food stamp program obviously
00:34:13
supports millions of americans that are in need of food can't afford food they get ebt cards they get support and
00:34:18
buying food and there's a lot of programs and access that are enabled by that program but in order but that mostly services
00:34:24
the needs of urban areas of cities so it passes that that element of the bill is attractive and appealing to the
00:34:30
representatives of cities found in the house on the other side in order to get it passed in the senate where the
00:34:35
majority of senators come from rural states which are have significant farming populations the farming
00:34:42
subsidies are planted in that same bill and as a result because everyone's getting something that bill as a whole
00:34:49
has now grown to a multi-hundred billion dollar bill that gets passed every few years because in order for the senate to
00:34:55
pass it the house says okay we'll give you all these farm subsidies in order for the house to pass it the senate says
00:35:00
well sorry and vice versa right we'll give you all these food stamps but but both of them now have incredible what do
00:35:06
they call it pork or fat or whatever yeah the amount of money that's wasted that isn't actually servicing the
00:35:12
original intention and need of either of the parties that are represented by that bill is extraordinary and i've spent a lot of
00:35:19
time in the farmville i actually went with lobbyists years ago to dc and i actually met with the senate and house
00:35:25
ad committees i've gone very deep into the bill and some of the programs in that bill and it's just shocking to me
00:35:30
in the same way that palmer lucky shared in our all in summit how shocking it is how defense spending works in this country it's shocking to me how some of
00:35:36
the the programs work in the farm bill uh how much money and how much waste there is and how much grif there is and so yes
00:35:43
we are meeting the needs of populations in need in this country but so much more of the bill now is about people wanting
00:35:49
more in order to pass the bill and it's and it's bloated all right so who's going to come in and fix it because where's the incentive for anybody to
00:35:55
come in and cut that bill up where's the executive if both sides are barbelling the grift then there's no incentive they're they're they're in a dance to to
00:36:01
maximize the grift so where do you stand now if we were to sort of look at politics without the
00:36:08
biden and trump derangement syndrome without the the tribalism just in terms of first principles i
00:36:14
think what we're seeing here is we all want to see radical competence in the government social issues fight you know and
00:36:20
fiscally how we run the country where do you stand how would you describe yourself now
00:36:26
look i mean i think of things in terms of risk
00:36:31
here's what i see i see that there are a handful of issues that remain
00:36:39
in terms of social policy that just need to get codified
00:36:47
gay marriage is an example of one abortion rights is an example of the other
00:36:52
then and and i think like those are like really to my perspective
00:36:59
speak about human individual liberty which i think should trump everything so
00:37:05
everybody should be allowed to kind of pursue the best version of themselves however
00:37:10
that manifests in the person you married to in in the gender you express
00:37:16
not these are like things where what you do to be happy you should be allowed to do period end of story
00:37:22
then there are issues where i think are much thornier and as i get older i become increasingly
00:37:29
ambivalent or confused actually is a better word and gun control is a perfect example of
00:37:34
that where i don't know what my right is to go and adjudicate a
00:37:40
change to the constitution that's been there since the founding of this country that's a much more complicated issue
00:37:47
and so i think we have to basically devolve that right to the states where
00:37:52
individual states will have very different laws and part of how you choose to express where you live will be
00:37:58
defined by some of those rules so that's the social side extreme tolerance is really how i would sum it
00:38:04
up economically so but but i think the the risk to
00:38:09
america imploding quote unquote because of an issue in that surface area in my opinion
00:38:17
is extremely limited if i look on the economic lens however i think there are enormous risks
00:38:24
to american leadership and exceptionalism and we need a wholesale reset
00:38:30
of how we create incentives of how government should work of how
00:38:35
regulatory capture should work of how the capital markets work these rules are
00:38:41
way too perverted and it's creating enormous stress in a
00:38:47
system and again i go back to the example i used last episode
00:38:54
the thing that if you look for example like you know in that example of sri lanka singapore jamaica
00:39:00
and how there were these three completely different outcomes underneath the most successful outcome
00:39:06
was an incredibly clear transparent and simple financial framework
00:39:12
you cannot spend more than you have you need to invest in long-term programs like education and healthcare
00:39:19
you need to make them broadly available and then you need to have an absolute free market that gets the best ideas to
00:39:25
the top of the funnel and if you can just incorporate those things the tax law could be four pages
00:39:31
you know the the the number of regulations could be 50 pages you know the simple rule
00:39:39
that says to the federal reserve you can't just print free money ad hoc
00:39:45
so i'm i'm much more concerned about the fiscal future i i think that there's so much
00:39:51
movement and progress on the social side including the freedom of movement of
00:39:56
people to different states it is an important set of issues but in terms of what drives the outcome and
00:40:02
future success for our kids and our kids kids people should not sleep on the economy because if we get this wrong
00:40:09
that will be the tinderbox that lights everything on fire saks when you hear you know everybody
00:40:15
sort of explain their basic uh belief system how far apart do you think we all are on this podcast because i think
00:40:21
that's been an issue we see a lot of the fans discussing you and i discussing it feels like on most of these issues and i
00:40:28
think that's people ask me how i'm friends with you all the time and i'm sure you get that question as well
00:40:33
yeah and i love you thinking about that i know i love sacks like a brother and any time we talk about basic issues
00:40:39
we're very much in sync and then when we talk about politics it feels like we're super you know
00:40:44
uh you know opposed you know in opposition to each other when you hear that we all have essentially the same
00:40:50
stack of uh fundamental beliefs how do you interpret this in terms of
00:40:56
politics and america writ large and how do we get consensus in this country to be more effective in running the country
00:41:02
for the citizens i think the media drives a lot of polarization right because they're feeding us a bunch of bogus narratives
00:41:08
you look at the polling around the trust in the traditional media has absolutely
00:41:13
plummeted through the floor i mean they basically have instead of just reporting objectively the facts they i think the
00:41:20
audience has recognized that they are activists they are basically pushing an agenda and they're pushing a bunch of bogus narratives and i think it does
00:41:26
drive the polarization so that's part of it to go back to you know what what are the core issues
00:41:32
that motivate me and like who i support look i think we could probably agree on
00:41:37
a lot of stuff i want us to pursue more of an internationally cautious you know agenda
00:41:43
uh less interventionist because it really hasn't worked out for us very well over the last 20 years with all these wars that failed
00:41:49
i want us to be fiscally responsible and promote a healthy economy to what jamal said and then third i'd like
00:41:55
us to be socially tolerant now why does that leave me in this current environment to support republicans well
00:42:01
on international on international foreign policy neither party is really very good both parties are sort of
00:42:07
pushing some version of book bush doctrine light where we're basically over involving
00:42:12
ourselves in all these countries all over the world but the republicans at least have a faction that's in favor of
00:42:18
realism and restraint so i'm trying to help kind of push that direction within
00:42:23
the party the democrats just are still very much in this liberal interventionist mode
00:42:29
on fiscal issues both parties are guilty of overspending and creating this ruinous federal debt
00:42:35
and deficits that we have however there's no way to avoid the fact that the democrats are just worse i mean
00:42:41
biden wanted an extra 4 trillion of spending on this whole build back better on top of the 4
00:42:48
trillion he had so listen i know the republicans don't have clean hands on this issue but the progressives are just
00:42:53
worse and as long as the progressives are calling the shots the democratic party they're just worse on spending and
00:42:58
then you got social tolerance listen on the issues on these sort of key rights issues that have been the kind of the
00:43:04
old social issue the last 50 years by and large not on all these things by and large i'm with you guys that
00:43:11
i'm in favor of sort of the the socially tolerant position but look at who is pushing social intolerance today i mean
00:43:17
the progressives are the most intolerant group in america they're the ones pushing cancel culture they're the ones
00:43:22
trying to shove their positions down the throats of ordinary americans this is what's creating the backlash you look at
00:43:28
issues today like crt like the progressive approach on crime on borders the progressives are trying to promote
00:43:35
i think a social policy that is fundamentally intolerant and doesn't accord any respect or room for
00:43:42
traditional americans to live their lives the way they want to and you have to be tolerant of them as well we're not
00:43:47
going to have peace in our society without some tolerance of trashless okay let's wrap on this and
00:43:54
i sent you guys a um this was a quote by mike salana a tweet from mike salana
00:44:00
the caption is i've been wondering how they were going to spin this and this builds exactly on david just said here
00:44:06
when the quinnipiac quinnipiac poll came out and about approved disapprove
00:44:13
about president biden you know the big outlier was the hispanic population nineteen percent
00:44:19
approved seventy percent and the the article in the washington post which tries to kind of
00:44:27
sort of like clean this all up and whitewash it says fake news speaks many languages
00:44:32
but it's particularly fond of spanish essentially saying that you know the the
00:44:38
fake news problem in in the spanish language has basically gotten so bad that you know this sort of explains why
00:44:45
hispanics have have moved in droves and it's like a whole race-baiting cheap
00:44:50
shot article but the point of all of this is just to show that uh the left this is what really does kind
00:44:56
of bum me out they are they are probably more intolerant than they've ever been
00:45:03
intellectual dishonesty like if rachel maddow really wanted to increase her standing and position she would just
00:45:09
start the next program with nancy pelosi's trades and say listen we all know let's call this what it is it's not
00:45:15
cool and here's how it should change she'll never do it i know and and i think that's the disappointing part about all this okay so let's shift now i
00:45:22
think we just what can i say one final thing about this whole thing that we can move on is i think
00:45:27
i think if you are sort of purple and centrist i think the first two years of the blind administration were really a
00:45:32
missed opportunity because i think there's sort of this conventional wisdom that the parties are so polarized they can't get anything done i think we saw
00:45:39
actually there's enough republican votes or there were in the in the previous congress this this current congress they
00:45:44
got the infrastructure bill done they got the gun bill done you know with the red flag laws and so forth that we talked
00:45:50
about they can get codification of gay marriage done if they want to
00:45:57
they could have gotten uh the electoral count act reform so if bayden hadn't gone all the way with his progressive
00:46:03
voting rights agenda and just focused on reforming the electoral count act then you could have prevented a situation
00:46:08
like we had on january 6 that that what was happening inside the capitol not outside so there was a lot of stuff they
00:46:15
could have passed and they didn't why because the in the in the first half of his administration brian's been
00:46:21
completely captive to the progressives there's another thing as well you could get a child tax credit
00:46:27
passed you could get romney would basically be the floor leader on that in the senate they could pass a child tax
00:46:32
credit that's the most popular part of bbb why don't they peel that off and vote on it you know because they went to
00:46:38
the whole thing that's right the progressives are holding it hostage saying that we're not going to give that to you unless you do the whole enchilada
00:46:44
and of course there's no votes for that so i think there's and and so who ultimately is the culprit for allowing
00:46:50
the staff and we'll partly bind but also ron clay and the chief of staff i mean they've made a instead of triangulating
00:46:56
to the center they should have realized hey we're a 50 50 president right i mean we have a 50 50 senate we should be
00:47:02
triangulating we should be building a census coalition wrong claim
00:47:08
the train biden had a clear path to go right to the center pull everybody in pull the working class in that's been
00:47:13
his supporting base who's the working class and so he is and and he blew it by going
00:47:19
too far to the left if he wants to save this presidency he should go straight to the middle and get all the working class
00:47:24
behind him that went to some elite you know uh east coast liberal arts
00:47:32
school where he got a master's in you know fine arts and his 400 000 in debt that's not joe biden but he's let all
00:47:39
these people run over the white house and it's too late now because they're i
00:47:45
think what's going to happen well the republicans are going to win the house how much time how much time did we spend talking about canceling
00:47:51
student debt for who yeah no for a bunch of elite uh rich
00:47:56
graduate degrees from yeah it's likely listen there's grifters on both sides it's disgusting and we
00:48:02
need to get to a version of politics that maybe is more like our conversations here but let's let's pivot
00:48:07
to another society that we thought was going to roll over ours but um and that we were in
00:48:13
we were behind on in terms of competition china is in chaos right now apparently um
00:48:18
in terms of slowing economic growth bank protests mortgage protests exactly what i predicted last year when you guys were
00:48:25
talking about china was going to dunk on us and i said you know it's very hard to run these authoritarian countries and
00:48:31
the citizens like to protest when they get the short end of the stick and here we go chinese economy is is growing very
00:48:37
slowly they were going to do five and a half percent this year they were only point four percent in q2 covert has a lot to do with this but
00:48:44
there's been a series of bank protests and uh the media has been trying to figure out exactly what's going on here
00:48:50
to just set the stage here rural banks in china uh in a couple of provinces froze a bunch of people's uh withdrawals
00:48:57
in april okay sounds like the crypto uh contagion in many ways they had been
00:49:02
offering unusually high interest rates also sounding like the d5 uh griff going on here no i think it's i think it's
00:49:08
more like 2008 jason i think the financial i think it's more like the financial crisis in 2008 that was driven by the real estate bubble yes they've
00:49:15
got their own real estate bubble which is collapsing there correct and so there's there's multiple things going on at once
00:49:20
the authorities haven't said how much money is frozen uh protesters claim is billions of won but it's hundreds of
00:49:27
millions in the u.s after weeks without a resolution customers have been begin protesting
00:49:33
plainclothes thugs have been hitting and kicking the protesters and as of wednesday a video
00:49:38
went viral of the ccp bringing in tanks to protect the banks very uh evocative
00:49:45
of tiananmen swear i have a question so go ahead yeah so china has a very explicit zero tolerance policy on covet
00:49:52
why do you guys think they are so extreme in that policy like
00:49:59
any any ideas like have they explained why it has to be zero tolerance they
00:50:05
have not explained that um and if you believe that they're the origin of covid maybe they have some insider information
00:50:11
about long-haul covet and that was something i want to talk to fred berg about if he thinks this you know
00:50:18
long-term covet stuff is a really acute issue but freeburg what do you think yeah i don't
00:50:23
let me
00:50:35
yeah this is a complex issue there's a lot more going on there so on on xero covid i think this is coming directly
00:50:40
from xi this is his policy and i think that earlier in the pandemic
00:50:46
they were hailing their response which they saw as orderly and effective at
00:50:52
controlling kovit and they were contrasting that with a chaotic western response and so i think that
00:50:58
the credibility of the ccp and g himself got tied up in this idea of stopping covet
00:51:05
entirely of zero covet and so i think this is coming directly from the top and is having a huge impact on their economy
00:51:12
and i think this is one of the dangerous aspects of a autocratic system is you
00:51:17
got one guy at the top making the decisions and if he's wrong there's not really a great feedback and nobody can
00:51:22
question him yeah yeah exactly the god king yeah you know it sort of recalls um a situation in china i think
00:51:29
it's about 500 years ago there was a chinese emperor who banned shipbuilding and banning having a navy and because of
00:51:36
that china shut itself off from global trade and it fell well behind the west which then explored and captured the new
00:51:43
world there's this question about you know the chinese chinese culture and civilization was much more advanced than the west than
00:51:50
europe a thousand years ago but basically it fell behind and a big reason is because this unilateral
00:51:56
decision by one emperor to basically close themselves off from the rest of the world so you have to wonder does
00:52:02
this autocratic move by g basically doom their economy to a recession it seems
00:52:07
like they're not learning from our experience these lockdowns didn't work i mean you can't stop the virus it's
00:52:12
eventually going to get out even i saw biden got the virus this week i mean it's out
00:52:18
right it's endemic now everybody's going to get it is basically what's happening she's been making a bunch of heavy-handed decisions like this so you
00:52:23
have besides lockdowns it was it's also the crackdowns it's the crackdown on the tech industry yeah
00:52:30
funding has plummeted uh and so has so lps are no longer investing in funds
00:52:37
there with the exception of sequoias which seems to be struggling but is still able to raise the money and then
00:52:42
additionally uh founders can't raise money and founders are questioning when they meet with vcs if they can actually if the vcs
00:52:48
are just meeting with them theatrically uh the story that came out this week in the ft if they're just meeting with them
00:52:54
theatrically because they want to still hold out hope that they'll be a venture capital industry
00:52:59
but there may not be a vc industry in china anymore let me just give you the housing stuff and then freeberg i know
00:53:04
you want to chime in on this so there's also mortgage boycotts happening at the same time as this fugazi bank stuff
00:53:11
happened the bank stuff seems to be not the national banks these are local banks that apparently could have been running
00:53:17
some kind of uh grift where people deposited the money right away it looks a lot like the savings and loan
00:53:22
kind of uh behavior in the 90s in the u.s and these are regional banks to be clear this isn't the national banks and
00:53:28
so at the same time the mortgage boycotts are happening and three at 301 unfinished developments in 91 cities
00:53:34
homeowners are accusing developers of failing to deliver the apartments they've already paid for according to bloomberg 70 of household wealth and
00:53:39
china's tied up in property much higher than the u.s this is downstream of the whole evergrand thing right you got
00:53:44
evergrand evergrand basically defaulted and there were a whole bunch of people who prepaid for their homes and so
00:53:50
they're already paying mortgage but evergrand never finished the homes and now they're rising up because they're saying why should we pay for a home that
00:53:56
was never delivered right i just want to like take a zoom out because i think it's worth you know we can focus on any one of
00:54:02
these particular things that are happening and try and diagnose them and dissect them but if
00:54:07
you zoom out a little bit i think it paints a more interesting picture over the last 30 years right the chinese
00:54:13
economy grew from 318 billion to in 1990 to 10 and a half trillion
00:54:19
in uh 2020 right incredible growth gdp per capita
00:54:24
you know grew uh kind of in a similar ratio right now
00:54:29
from 318 bucks per person to 12 500 and 30 years i mean really unprecedented in
00:54:34
the history of humanity china now accounts for 20 of global gdp from less than 2 1990.
00:54:40
now if you look at historically what drove that growth we all talk about manufacturing right manufacturing accounts for about a third of the
00:54:46
economy and manufacturing as a sector was growing in china 25 year-over-year
00:54:52
in 2008 and then um only grew six percent in 2022 it's like basically you
00:54:58
know kind of reaching an all-time low in recent years so that's historically been the driver for growth of this economy
00:55:03
and so much of the um you know the the the bargain between the people and the chinese communist
00:55:09
party has been keep giving us a better life keep growing our economy keep giving us more housing more stuff more
00:55:15
food more safety more security we'll support the ccp and the challenge that the ccp is having is that a lot of that
00:55:21
growth the core growth engine is starting to slow so manufacturing is slowing then real estate was growing and
00:55:27
so real estate accounts for seven percent of the chinese economy and i've got a good stat for you guys here
00:55:33
in 2005 uh 250 million square meters of
00:55:38
real estate was sold in china in 2021 1.5 billion was sold every year it's
00:55:44
been incrementing so the amount of real estate that's being produced and sold was increasing like crazy this year it's
00:55:49
collapsed so it's all it's down like you know forecast to be about 1.25 billion now so the first decline in real estate
00:55:56
building and sales so that part of the driver of the economy in china is now collapsing and then the financial
00:56:01
services sector accounts for eight percent of the economy and that's been growing because it's leveraged off manufacturing and real estate and all
00:56:08
the capital that's flown in all of which is slowing down and stopping you know there's 58 trillion dollars of assets in
00:56:13
china generating about 700 billion dollars of annual profits for the financial services industry insurance
00:56:19
banking lending and so on so a lot of the conflict and the things that are starting to fall apart which may just be
00:56:25
the tip of the iceberg is a function of a fundamentally slowing economy and the forecast and the outlook for an economy
00:56:32
that doesn't have the drivers it's had historically and things are starting to come off the wheels are starting to come off a bit and so you know look the
00:56:39
advantage they have is central planning long-term investments being able to kind of be thoughtful about this but in order
00:56:45
to do that there's certainly going to be a need for the ccp to keep people in line as some of the long-term bets
00:56:51
hopefully play out for them as they would say in order to do that they're going to have lockdowns and other sorts of mechanisms of regulatory control over
00:56:59
the people but really this could be the beginning of some of the unwinding and real concern
00:57:04
about you know is there a core economic growth engine in china that can save them and what will it be i think all of
00:57:10
this if we look at what's happening in the economy writ large uh chamath you know the global slowdown plus
00:57:17
inflation is now causing a stress test on every country sri lanka's stress test you know
00:57:23
showed us what's happening with their farming issues and with corruption and here in china it the stress test
00:57:28
i think you would agree is showing what's going on in terms of you know banking mortgages real estate
00:57:35
and obviously this surging middle class and what their expectations of life are so
00:57:41
what's your take on what's happening in china and are they you know how does this
00:57:46
um add up in terms of our rivalry with them as our contemporary
00:57:52
at a very macro level china has one massive massive massive problem
00:57:58
which is one of population it's hard to get an accurate count
00:58:03
but it is an aggressively aging population which was the result of
00:58:09
the one giant the one child policy for a very long time china has sort of been on their heels
00:58:15
trying to adapt that policy but really the the last data i saw i tweeted this out it was a little while
00:58:21
ago nick so maybe hard for you to find in my twitter feed but it was a projection of china's population which essentially showed it contracting by
00:58:28
almost 50 percent by 2100 so in the in the so it that's a really really bad
00:58:34
situation now when you have a slowing population then the economy has to morph
00:58:40
why is that when you have a young population so for example take what china was 20 years ago
00:58:46
when it entered the wto or what india is today when you have lots of
00:58:51
thoughts of young people you can on ramp them into economically productive activities like manufacturing
00:58:58
the problem when those folks accumulate middle class income and wealth is that they age out of those kinds of jobs like
00:59:05
they did in america and what we seek are services and service level jobs
00:59:10
and you spend more money you spend it in a different way so as populations age
00:59:16
your economy has to turn over unless you have a large bulwark of young people
00:59:22
that is constantly growing to take up more of the slack the economic slack to
00:59:27
pay for these folks who have different lifestyles more savings and different
00:59:32
needs specifically healthcare that's china's enormously big problem so when you see them talking about six percent
00:59:39
gdp targets and you think how does a country that big even grow at six percent
00:59:45
it's because they're reverse engineering for what they need to create economic vibrancy in that country
00:59:51
and so when you start to look at two percent which in america you'd say two percent's great we would like high-fiving each other for
00:59:58
two percent uh that's not a sustainable level of growth for what's happening inside that country it does not create enough of
01:00:05
expansion economically to cover all these folks that is a really really big issue
01:00:11
so as that happens i think what we need to do is figure out how to be competitive now this goes all
01:00:17
the way back to our first conversation subsidies don't make us more competitive
01:00:23
things that governments can do to make us more competitive are long-term drawn out
01:00:29
tax incentives that change the earnings capacity of companies
01:00:34
why because in the capital markets reward those businesses jason you just mentioned it why is the chinese capital
01:00:41
markets in difficulty nobody knows what the long-term earnings are
01:00:46
how do you forecast it it's not simple anymore it's not a model it's not an interest rate it's not a discounted set
01:00:52
of cash flows right and so that's how they need to refactor
01:00:58
themselves they need to have a much larger population if you don't have that you have to figure out how to do it with
01:01:03
immigration if you don't have that what china has done is they've tried to go to southeast asia and to africa
01:01:10
and they've tried to create that synthetic form of a growing pyramid right
01:01:17
now that can work as long as the balance sheet of the country supports that because ultimately you're still talking
01:01:22
about moving money offshore okay so i think they're in a little bit of a they're in a pretty difficult spot the
01:01:29
most difficult spot is the one they that she put them in if you get rid of entrepreneurship if you get rid of high
01:01:35
growth companies that create the opportunity on a global scale and then you you know take dd off the public
01:01:41
markets you don't let education companies become public or you basically
01:01:46
get rid of their little co-opting of capitalism and venture capital their whole their whole society is going to
01:01:52
become slow growth and slow growth in a country that doesn't have safety nuts is really
01:01:57
dangerous sacks your thoughts in terms of competition versus america okay let me get to the the competition
01:02:02
in a second just to build on what ma said the the birth rate or the fertility rate in china slipped to just 1.15 in
01:02:10
2021 so last year it takes 2.1 just to maintain your population at replacement
01:02:16
level so and this is lower than even japan which is also shrinking as a chimpanzee but 1.3 the u.s and australia are at 1.6
01:02:23
but we get above 2.1 because of immigration and china doesn't have that so they've got a huge demographic
01:02:30
problem point it's going to be something like well the population is shrinking by 40
01:02:35
with every generation that's what these numbers imply insane the numbers are it's going to be under 600 million by
01:02:40
the year 2100 but i would i don't understand how it wouldn't even be less than that if it keeps going at this rate
01:02:47
so there and the the commentator peter uh zeehan has or i don't know if that's the right way
01:02:52
to pronounce the name peter zyhan or something anyway he's pointed out that china is facing demographic collapse in
01:02:59
the next decade or so on top of that like you're saying jason that you've got xi emphasizing maoist economics he
01:03:06
basically says he thinks that the chinese economy again he stresses the need for
01:03:12
socialist characteristics and he seems to be bringing back that sort of communist ideology to their economy and
01:03:18
they've basically really cracked down on entrepreneurship and venture capital it's really a
01:03:24
self-owned i mean they've moved away from the policies that have made them so successful economically over the last 40
01:03:29
years and then on top of that you got this debt crisis and this housing crisis so it really looks like the deck is
01:03:35
stacked against all of them and you're asking what does this mean for us well i think it depends on whether you
01:03:40
look at it economically or geopolitically i think if you look at it economically you'd say that it's bad for
01:03:46
us because our two economies are economically linked there's a lot of dependency they've evolved together for a long
01:03:52
period of time and there if china has a collapse then that they're so big now that that's
01:03:59
gonna have i think global repercussions there's gonna be contagion but the truth is if you look at it geopolitically and
01:04:06
geopolitics is more of a zero the balance of power is a zero-sum game economics can be a positive some game
01:04:11
but but the balance of power is a it's definitely not a positive sum game uh you'd have to say it's good for us because the reason why china has become
01:04:18
such a threat is because of its growing economy over the last 40 years yep and look i mean
01:04:24
what they've done and what they've been doing over the last decade or so is translating their economic might into
01:04:30
military might and that has given them the capability to now threaten their neighbors to
01:04:36
become more belligerent to basically rattle the saber against taiwan and if their growth if their impressive
01:04:44
economic growth continues for the next couple of decades as it has until now there's no question that they will
01:04:50
they will basically try to assert their hegemony over east asia and taiwan will be a huge flash point
01:04:57
but there's also flash points in the east china sea with japan over the but they're going to need a bankroll to do
01:05:03
that so if they don't if their economy is not growing they don't have the bankroll to do it they're going to have to look inward and say hey we got to fix
01:05:09
these domestic problems we got to get people stopped protesting in these streets we need to this middle class is demanding of jobs the great news for
01:05:17
what's happened in china and i think this is why the people there are very happy is the number of people living in
01:05:22
poverty has plummeted you know when they started tracking this data in the 80s you know high 90 percent of people were living in
01:05:28
extreme poverty or poverty 99 of people were in poverty on the global definition
01:05:34
of it and now you know it's just plummeted to you know a couple of hundred million people so a couple of
01:05:40
charts for you here but just and the data is obviously it's very hard to understand what's going in china because a lot of it is opaque but just the
01:05:47
number of people on a percentage basis living in poverty has gone and now the number of people who are in the middle class has surged that creates another
01:05:54
dynamic those people want to have a great life they want better jobs they don't want to work in factories they want to have a more information-based
01:06:00
economy and a better job than 60 hours a week in a factory that's why they're moving their
01:06:05
factories to africa and other places i mean i i don't know if that's absolutely true i think that china's manufacturing
01:06:11
sector is um is aiming to evolve so you know china has
01:06:17
about 3 million factories or manufacturing facilities throughout the country
01:06:22
employing about 112 million people the u.s has about 300 000 factories and
01:06:28
employing about 12 and a half million people the output of our factories is um
01:06:34
about 70 of the output of um of china's factories uh in aggregate
01:06:41
sorry the total production output of all the factories so we have very high value outputs coming out of our
01:06:48
factories and high leverage china is observing and obviously recognizes that there's an opportunity
01:06:54
probably to evolve their manufacturing capacity to be higher leverage higher value
01:07:00
output and so there is going to be you know from the long range perspective planning
01:07:05
an investment in technology that allows those factories to become much more sophisticated and create much
01:07:11
more higher value products moving up from what is effectively just cheap labor putting things together in an assembly plant to being things like
01:07:18
additive manufacturing 3d printing automated manufacturing biomanufacturing etc
01:07:24
and i think this is particularly going to be realized because china
01:07:30
announced that they're building 400 nuclear power plants that drops the cost of electricity to under 5 cents a
01:07:36
kilowatt hour in the u.s manufacturing electricity typically cost around 11
01:07:43
cents per kilowatt hour 12 cents per kilowatt hour in that range so if factories become much more automated
01:07:48
they start to become a function of the price of electricity in terms of what they can output china is going to have a huge advantage as these nuclear power
01:07:55
plants come online over the next couple of decades and these facilities get upgraded so there is a plan right
01:08:00
remember this they do have a plan in the reason they have that plan there is there is a question of
01:08:06
do they get there fast enough to drive economic growth that actually supports
01:08:11
all these other industries like real estate and finance that they become critically dependent on because those industries only work if there's a core
01:08:17
economic driver core economic engine that's working here so this energy infrastructure this new manufacturing
01:08:23
infrastructure these are things that by the way they can do um really effectively because they're
01:08:29
not working on four year and six year political cycles they can take a five ten and thirty year outlook and make a
01:08:35
make a plan and invest against it what they did from night so i wouldn't count them out but there's certainly a lot of
01:08:40
challenges they're facing right now it's a big question mark right now what's gonna happen well and it to your point
01:08:46
factories in china are you know factory workers getting paid over six bucks an hour now in vietnam three in india even
01:08:53
less and that's why you're seeing a lot of folks i don't know if you're seeing it in your portfolios but
01:08:58
we've seen a lot of folks looking at india vietnam and moving factories there and obviously japan has been uh
01:09:04
incentivizing china's not gonna just lose their manufacturing edge they're not just gonna say hey we give up let's let everyone go to vietnam they're gonna
01:09:10
try and upgrade the capability of those factories and say hey instead of just putting together you know parts for with
01:09:16
six dollar an hour human labor let's start to do the more sophisticated so then free the next card that turns is well what
01:09:22
happens to those factory workers if they've been automated out what do you do with hundreds of millions of people working in factories who now have been
01:09:28
turned into robots and then if they're going to be an inf the answer is information economy if it's going to be an information economy you need venture
01:09:34
capital and you need new companies to create those jobs and they just killed that so i don't know what strategy she
01:09:40
is uh pursuing here but it seems like a bad one we could talk about this one at length but um we were gonna bring this up but you know
01:09:47
generally speaking technology drives productivity gains but it's it's deflationary
01:09:53
experience what that means in like a practical sense maybe uh you know that the technology so let's
01:09:59
say let's say that you have to pay a bunch of people to make a t-shirt and then a machine is built that makes the
01:10:04
t-shirt the cost of the t-shirt goes down because one machine can just print out 100 t-shirts an hour whereas it
01:10:10
would take five people you know 10 hours to make those hundred t-shirts or whatever it is right so a technology
01:10:16
kind of emerges and those people are now theoretically out of jobs but what ends up happening is those people transition
01:10:23
into new jobs that didn't exist before and we end up seeing higher order work take place think about the the world 200
01:10:30
years ago do you think we would have had any concept of people being uber drivers
01:10:36
or people um uh you know creating crafts and selling them on etsy um or youtube content
01:10:42
people
01:10:50
or dog walkers or all of these um these service businesses or you know industries that simply did
01:10:57
not exist before and so the labor that those that that percentage of the population was involved in historically
01:11:04
has gone away because it's been automated as that automation has happened it's allowed higher order
01:11:09
services jobs to emerge and that will be the progression of humanity forever i will tell you guys um i was going to
01:11:15
mention this have you guys played with dolly too yeah the other day um yeah sure i got the the login i was my brother-in-law
01:11:22
was visiting we were playing with dolly too and making funny explain what it is so so dolly 2 is developed by openai
01:11:29
um we all know sam altman he's been leading that organization to great effect over the last couple of years and
01:11:34
um and what they're doing is they basically scan the web for images tag them and then apply you know uh
01:11:41
machine learning uh to um you know to basically allow natural language creation of images from
01:11:49
scratch so the ai can generate an image and you can go to you know uh the internet and look at a bunch of these
01:11:54
but the imagery is incredible i mean the the creative output what feels like creative output from the system where
01:12:01
you just say hey you know make me an image of four guys doing a podcast on zoom in the style of van gogh and it
01:12:08
creates this image that is unique has never been created or seen on earth before and as a function of the um the
01:12:14
learning that's been done in these neural networks to develop this ai that can that can create novel stuff is
01:12:20
really amazing and i started to think about like what are the implications for this over time think about you know
01:12:27
the original movie ben hur in today's dollars would have cost a billion dollars to make they had thousands of
01:12:32
people i think tens of thousands of people on that set it took years to make they built giant sets they could only
01:12:37
you know make one film it was an incredible feat and an effort that's what movie making is you know um
01:12:44
still today there's there's teams of people now what if you could speak to the ai and say make photo realistic you
01:12:49
know jason and chamoth having a battle on a field in the middle of nowhere and now an airplane flies over and you can
01:12:56
instruct the ai and the ai can generate photorealistic visuals audio the ai can
01:13:01
even generate scripts and narrative for you um it's really starts to change the role of the creator the director the
01:13:08
director is no longer doing this thing where they have to get it just right make the perfect 90 minutes and then line up all the money and all the people
01:13:14
to do that work on that plan on that program they can be much more iterative and they can be much more creative on the fly they create a two-hour movie by
01:13:21
speaking to the ai and then edit the movie by speaking to the ai change the actors change the color change the
01:13:26
voices change the music just speaking to ai to generate creative output and people will consume that output and i
01:13:33
think it's amazing to think about what creators will end up doing 10 years from now as ai and these tools proliferate
01:13:39
and you see version 12 of this which is version 2 and what version 12 might enable and so the role um the number of
01:13:46
people that can do that job goes from steven spielberg and bob zemeckis and a few other people to suddenly thousands
01:13:52
or tens of thousands of people around the world making incredible movies here's dolly's image let's pull it up of
01:13:58
four guys doing a podcast so all right we have a ways to go but uh yeah that is for guys doing a podcast that's awesome
01:14:05
yeah that's awesome i mean and to your point like you know this is gonna we're on fire yeah this is gonna so a lot of people are like oh is this gonna wipe
01:14:11
out graphic designers is it gonna wipe out the creative industry but the reality is the roles that those people
01:14:16
are in today will absolutely be gone but they will emerge and evolve into new roles that we never even thought imaginable that will really transform
01:14:23
that industry and society and this is going to be true across everywhere that ai touches yeah and i think you'll see this in china china's as china steps up
01:14:30
their technology in manufacturing you'll see those you know new markets involved sorry jamal go ahead designers will have
01:14:36
less leverage to ask for all these stupid snacks and offices of startups well i mean you need only look at the
01:14:43
designers are the worst my god oh they're the best i love them but anyway um in the 1940s i mean we there
01:14:49
were literally hundreds of thousands of telephone operators and totally they're all gone now and not
01:14:56
only that have you ever met a designer that didn't take themselves incredibly seriously that didn't have like you know
01:15:02
tea that they would see the bad ones you know good ones they'd have like steel straws
01:15:09
video game designer they're a little different i'm sorry what did you say about the steel straws that wasn't yeah oh there it is
01:15:15
by the way eliminating waste in my life i mentioned to you guys
01:15:21
last year this video game i played over christmas by annapurna pictures and the guy that um runs the studio sent me a dm
01:15:28
he loves the pod oh that's nice and they just launched a new video game which i started playing a couple nights
01:15:34
ago called stray and you literally at you you play the game as a cat lost in some crazy world you're literally a cat
01:15:43
the imagery on this thing is unbelievable actually my favorite game right now saks is i play a cat at
01:15:50
the strike hat and it's really amazing you know it's fine you should go it's really hard to go play the game yeah i'm
01:15:56
going to take a hard pass on that i think i like to play a game where i'm a stray dog and i meet another dog and
01:16:02
then we eat a bowl of pasta but this long string of pasta we each come closer and closer than we end up guessing
01:16:08
let's uh move on to do we want to go blackrock has lost
01:16:13
1.7 trillion dollars in six months uh vc funding is down
01:16:20
or amazon acquires one medical for 3.9 billion which one do we want to go to
01:16:25
next anybody have a favorite here sax you've been a little quiet you got one you want to go to uh we can talk about the black clock
01:16:31
thing this is the largest amount of money lost by a single firm over a six-month period in history blackrock uh
01:16:36
is the world's largest asset manager and uh it was the first firm to break 10 trillion dollars in aum assets under
01:16:43
management now right now they're at 8.4 trillion 2022 ranks as the worst start in 50 years for both stocks and bonds
01:16:50
chairman and chief executive officer larry fink said on his earnings call at the end of june only about a quarter of its assets were actively managed to beat
01:16:58
a benchmark rather than track it seamlessly as passive strategies are designed to do firm's passive equity
01:17:03
holdings are now 10 times larger than its active holdings although it does operate some active multi-asset and
01:17:08
alternative strategies that narrow the gap collapse in bond markets this year has shaken money out of active fixed income
01:17:15
funds listen i think there's less than meets the eye here with this i think this was a headline that was trying to
01:17:21
grab attention by saying biggest loss ever look the reason why it was the biggest loss ever is because blackrock
01:17:27
is so big i mean and what is blackrock it's basically at this point they're index funds they're etfs they're indexed
01:17:32
funds they just represent market indices so you know the reason why it went down 1.7
01:17:39
trillion is because it started with 10 trillion so the average index is down 17 that's all it means we know this the s p
01:17:46
500 is down 20 22 for the year the dow jones down 15 ish the nasdaq is down
01:17:52
like 30. so this is just reflecting what we already know which is that the stock market is down this year do you think
01:17:58
it's another um data point to support the idea that active managers generally speaking and
01:18:04
maybe holistically speaking over time cannot beat the uh you know the market cannot beat indices
01:18:11
i mean you have a point of view on that as an investor sex well i think you know you're talking
01:18:16
about public market investors i think it's very hard i think it's very hard to beat the
01:18:22
public markets over a long period of time consistently
01:18:27
i just think it is now you know the contradiction though is if you have no active managers
01:18:34
then the indices won't be efficient anymore so you need the participation of the active managers to help drive
01:18:40
the the indices and make corrections to it so and the fewer active strategies you have the more inefficient the
01:18:47
markets will become thereby inviting active strategies so you know i think it's a good question i
01:18:53
i think there are some managers who are who can probably do it but i think it's a very tough thing to do jimoth what do
01:18:59
you think you're a public investor active selector of
01:19:04
here's what i here's what i hear i've been thinking a lot about this i think that i have
01:19:10
disproportionately benefited from being at the right place at the right time
01:19:16
backed by enormous amounts of central bank money and so
01:19:21
i think we all have been i think it is very difficult to be a public market individual stock picker
01:19:29
in a world where the central banks are constantly meddling
01:19:35
because when they do the best thing that you can do is belong the market beta
01:19:42
and the more concentrated you are the better returns you would have delivered since 2008 when the central bank started
01:19:50
to get very aggressively involved when individual stock pickers reigned
01:19:55
the the universe was when central banks were largely on the sidelines
01:20:00
and so there was all kinds of dispersion right dispersion meaning good outcomes
01:20:06
bad outcomes lots of alpha right meaning your performance was independent of the
01:20:12
market but since 2008 it's largely been beta that's driven the market
01:20:18
and the folks that have done exceedingly well were those in tech because we delivered the best beta
01:20:24
and every time we confuse alpha and beta we get over our ski tips
01:20:30
and there's always some big elk you know blow up
01:20:35
so i think my my general takeaway is that uh if the central banks stay on the sidelines
01:20:42
individual stock picking rains and active management can win if they continue to be involved and do
01:20:49
quantitative easing and all of this other stuff index funds that are long concentrated
01:20:56
market beta will always outperform in the long run i was watching warren buffett answer
01:21:01
some questions and one of the questions and this goes to the law of big numbers like blackrock he was saying listen
01:21:08
the reason i did better earlier in my career than later in my career on a percentage basis is because i was
01:21:14
placing i had a smaller amount of capital and i was placing it on smaller bets
01:21:19
smaller ideas and themes and then as i had a bigger chip sack i had to find bigger ideas to put more money to work
01:21:26
and therefore more people were looking at those and so those assets were not undervalued and so i found that very
01:21:33
like um uh insightful in terms of when you participate in the market if you're
01:21:38
trying to pick between very large bats like kotu and tpg and tiger were doing
01:21:45
in the growth space acts like now everybody knows that these company everybody knows stripes a winner
01:21:51
everybody knew airbnb and uber were winners you know in the late stage of the private everybody knew facebook was a winner in the research prime market if
01:21:57
you're battling that out you know yuri milner is going to come over the top and pay 2 billion more than
01:22:02
you or masi yoshi-san is going to pay 5 or 10 billion more than you where is the alpha there you know where
01:22:08
where is the gain the alpha's in the fees okay there you go and so they were playing a different
01:22:14
game and i that's you know i started trading this past two weeks because i've never traded public stocks and i wanted
01:22:20
to add it as a skill set so i put a couple million bucks into an account and i'm just trying to actively figure out
01:22:27
how does value work there and you know i'm just starting to make trades that i want to hold for 10 or 20
01:22:32
years and we'll see if i can beat the market that's the other thing is what do you want to spend your life doing if the index if you can put money in a passive
01:22:39
index and not do any work well you know that's attractive as well so sacks what do you think in terms of
01:22:45
active management you know in these public markets and the size of the bets
01:22:50
that have to be like i said i think it's very hard to beat the market consistently i think it's a very tough profession i'm
01:22:56
i'm sure there are people who can do it but i don't know if it's easy to predict who those people are so
01:23:03
look i you know i think it's something that can be done but i just think it's a
01:23:08
tough tough game i mean what we do as private investors is a little different right because not everybody is in a
01:23:14
position to buy shares right yeah so not available to you you don't even know the company access is limited and
01:23:20
information is limited and in exchange for that sort of preferential access
01:23:25
that we get we actually have to do work so when you're up when yeah when you're a public investor in a company disney or
01:23:32
whatever you don't do any work you're not involved at all we do a lot of work for the companies and that's why they choose us and so it's not you know it's
01:23:39
you're not competing against the whole world i think the public markets are just so competitive are you tempted though looking at these prices and
01:23:46
because i was looking at a company that was trading at 50 times revenue last year they're racing again they double
01:23:51
their revenue so now they're at 20 25 times revenue they're raising at last year's valuation and then i looked at
01:23:57
the public market comps and they're trading at six times so now i'm like wait a second and obviously
01:24:02
look at the growth rate you got to look at the growth the growth rate in this example was three times fat greater than the public
01:24:09
market comp so how would you assess that then well what we're seeing right now is that pretty good sas companies that are
01:24:15
growing you know maybe on a trailing basis they grew 3x and you know prospectively they're growing call it
01:24:20
two and a half x um they're trading right now not trading but basically deals are getting done at 20
01:24:26
times arr 20. which are this year's current run rate yeah the current arr
01:24:31
because you're not getting that like bonus like here's your projected next year we're going to give it based on that this is current no no current arr
01:24:38
is about 20 22 23 times are um from what last year 100. it was like 100
01:24:44
times was the rule of thumb so now there are some where there are you know deals are getting done in the high 20s i'd say
01:24:50
or even 30 if they're if you believe that by the end of the year it'll be more like 20. so but i i think the new
01:24:57
levels are landing at 20 20 something times ar now why does that make sense relative
01:25:04
to the public sas companies well like you said the sas index is trading at roughly six
01:25:09
times but that's only percent average growth right and so you know if you're growing
01:25:15
ten times the growth right right and the high growth sas companies are trading it like seven times um
01:25:21
that's for like a forty percent grower we've talked about this before so listen if you're tripling year over year and
01:25:27
you pay 20 times that'll be a seven times next year but if you're growing two two and a half three x next year
01:25:33
that's way faster so yeah i think there's actually an arbitrage there i mean this is why we like doing private sas investing right now
01:25:40
deals are getting done i will say that the people who i'm seeing who are really struggling uh freeberg are the people
01:25:46
who didn't turn on i'm talking about the very early stage they didn't turn on revenue they were making progress
01:25:52
in team building and culture and features but they just weren't focused on the revenue side and my lord
01:25:59
people got a lot of credit i mean 50 million 100 million evaluations without the revenue turned on
01:26:05
um and that now they're faced with not being able to raise money full stop
01:26:11
what are you seeing on your side freeberg in terms of deal flow in the private markets yeah it's and raising money because you
01:26:18
have to raise money for your company it's not easy unpack it what's not you know uh well
01:26:25
what are the conversations like give us the anecdotal information i mean i've seen a number of term sheets
01:26:30
get pulled so i think oh really yeah we've heard a lot about companies that kind of during the q1
01:26:38
early q2 time frame had term sheets weren't closing got
01:26:44
delayed out and there's a number of kind of examples of repricing where the
01:26:51
investors come back markets have changed let's reprice the thing or hey um we're not going to do this
01:26:57
deal anymore we're going to sit on the sidelines and wait till the market settles or rlps actually aren't going to
01:27:03
let us fund new stuff so there's a lot a lot of those unpack that last one for people what does that
01:27:08
mean you know investor you know investors have lps they have investors themselves and their lp's are coming to
01:27:14
them and saying do not put more money out right now we are telling you we are not going to wire our money to
01:27:19
you we need you to wait until even though they're contractually obligated to they're telling you theoretically they don't or
01:27:25
may not be contractually obligated to but obviously these are long-term partnerships and so when an lp
01:27:30
you know or a group of lp says guys we're not comfortable with you deploying money right now you know you're in a 10-year partnership 15 year partnership
01:27:36
with them you're going to as an investor as a fund you're going to say okay i'm going to kind of listen to that right
01:27:42
now now the bigger issues in series b c and d where companies um
01:27:48
you know have some traction have some performance have raised a bunch of capital have done a bunch of work and
01:27:53
investors don't know what they're worth they're like hey is this thing worth 25 million or 125 million or 500 million
01:27:59
last year you could have raised money at 500 million i mean look at what happened with uh one of those crypto things those
01:28:05
crypto trading platforms they raised 500 million dollars last july and they just sold the business for a reported 25
01:28:11
million dollars after being valued at five billion a year ago yeah so the whole the truth might have been more
01:28:16
like 275 million um yeah and and so but but series a people
01:28:22
seem to be pretty active again and so active again but the price is now for seed yeah but it's a lot easier it's
01:28:29
happening 6 to 15 series a is happening 15 to 25. it's a lot easier to get a deal done in a series a because people
01:28:35
say hey look i'm going to give you this you say okay i'll take it i need the money series b c and d is where there's
01:28:40
this whole fight because there's existing investors existing shareholders who are saying i don't want to take a 50
01:28:46
right down a 70 right down a 30 right down over the last round and fighting and then doing inside rounds and bridge
01:28:52
notes and all sorts of other shenanigans to not have to take a negative book yeah
01:28:57
well one thing one thing that's interesting here is that um you think about like where the
01:29:02
opportunity is in the market right now and i think one of the things that happened in the boom is that everyone got pushed
01:29:07
to go earlier and earlier because deals were so competitive and so you know in the sas business normally 1 million of
01:29:14
ar was considered the rule of thumb for getting a series for basically graduating to a series a that you were
01:29:19
ready to go from c to series a when you had a million of ar as we know during the boom last year that number kept
01:29:26
going down you know 300 000 and then you would see crazy deals get done that were pre-revenue
01:29:32
with price at 100 plus we never did any of those kinds of deals because we just thought they were too crazy but they
01:29:37
definitely happen well think about the dynamic now which is let's say that that sas startup that has
01:29:43
a million of ar they can do a series a at 50 or we can just wait until they get
01:29:48
to 5 million of ar and then pay 20 times and do it at 100 free which of those is
01:29:54
the better risk adjuster return let me tell you there's a lot of risk in going from 1 million arr to 5 million aaron
01:30:00
it's hard as a sorry it's it's hard there's a lot of things that you call sales you're just you're not doing it through the founders so yeah you need to start
01:30:06
scaling a team you need a real sales capacity but also a lot of startups that
01:30:12
could sort of hack together and cobble together 1 million of are based on non-scalable techniques that various
01:30:18
startup incubators teach like you know don't do stuff that don't scale it right it's okay to do that from zero
01:30:25
to one but not one to ten right well or it's it's not that it's not okay it's just that it doesn't work
01:30:31
right like you're not going to cobble together 5 million of ar you can cobble together 1 million of ar you can use the
01:30:36
cheat code to get there so what i'm saying is there's a lot of risk and going from 1 to 5. you find out whether the product's really scalable so
01:30:43
what is the better deal wait till 100. wait till it's priced at 100 or 120 million pre or doing the deal at 40 to
01:30:50
50. now if you love the if you love the company you want to get in as early as possible yeah but i think you're going
01:30:56
to start seeing a dynamic where in the same way that last year everyone went earlier and earlier you're going to see
01:31:02
vc start to sit back and go a little later and later prove it to us a dead man zone nobody should be putting
01:31:08
money into deals right now what is it why what does it do unless unless you're in
01:31:13
the business unless you're in the business of running a fee generating machine if you're really trying to
01:31:18
generate alpha you have to have a sense of what's actually happening in the world right now if you're just trying to deliver the
01:31:25
market beta and run an index then yeah you're right you should ignore
01:31:30
this idea that there could be more price adjustments but if you look at the public markets which is again the
01:31:37
ultimate terminal buyer they have more cash than they ever had since 2008
01:31:43
which means that there is no reason to buy you're talking about private companies
01:31:48
it all ultimately ends up in the public markets and so if the public markets are saying there is no reason to buy this
01:31:54
stuff it trickles down so then the crossover investor who has a public private
01:32:00
business says you know what on the public side i'm completely de-risked and in cash
01:32:05
and so on the private side i'll just be a little bit more circumspect and wait as david said i'll just wait six months
01:32:11
and put even more money in later i'll actually have a better irr and i'll make the same profit dollars so
01:32:18
then the series b and c firm who used to feed those deals to the crossover folks
01:32:23
are like oh well if you're waiting i don't want to have to write a check to support these folks my whole point was
01:32:29
to have you mark up the deal so i could raise a new fund they slow down and then that goes back to the series a
01:32:35
person who's like well wait a minute you know the reason i paid at 50 pre was because i thought you'd step in and buy
01:32:42
it at 100. and then they slow down so all i'm saying is i think that we are
01:32:48
at the point of the cycle where constipation is setting it and this is why you're seeing such a
01:32:54
downtick in deal velocity and dollars put to work this is uh great advice i want everybody
01:32:59
to take i'm going to take the opposite advice and i'm going to do twice as many deals in the seed stage as everybody
01:33:05
else but i encourage every venture capitalist and seed fund to take chemat's advice i'm doing the opposite because a five-person company this is an
01:33:12
advice this is just a market observation i'm just gonna market observations i hope everybody takes that as the truth
01:33:18
because what i'm seeing is the founders who are raising and who have real businesses are so sharp right
01:33:23
now and so focused on costs and profits and what matters and they have
01:33:29
eliminated all the that doesn't there's a whole contingent i don't know if you're seeing it saks i'd say it's one out of five one out of four that are
01:33:36
like i understand what's happening here and i'm going to take advantage of this moment in time and i'm going to just drive revenue and profit what happens to
01:33:42
the 250 billion dollars that's been put to work in the last two years that need to get up rounds yeah it doesn't matter
01:33:48
to me all i care about is meeting young companies that are growing with revenue but i think they're they're i'm just trying to have i'm not trying to have a
01:33:53
conversation if you want to yeah no i thought so that's a lot of indigestion yeah they're
01:33:58
gonna have to cut their staffs by half and get to profitability ultimately the way that valuations
01:34:04
matter or price levels matter is there's an entry price and an exit price and ideally if you can time it right you
01:34:10
want to invest when valuation levels are low and you want to exit when valuation levels are high if you were a vc last
01:34:18
year you should have been realizing as much as you can because valuation levels were really high there was a good uh tweet by one of uh brad gerson's
01:34:25
colleagues at altimeter basically saying she was talking to lps and asking what they care about and what she reported
01:34:32
lps is saying is that if you're a fund that's more than five years old and you didn't distribute during the best yep
01:34:38
window ever which was 2018 or 2021 it's a hard no you know we're not going to be
01:34:43
re-upping with you i'll say it even more if you're if you're a venture investor who took a longitudinal view on public
01:34:49
market stocks and then have now seen 60 to 70 percent write downs of those same
01:34:55
stocks that you could have distributed you should still have something to answer to that makes
01:35:00
no sense it turns out that the skill of private market investing and the skill of public market investing
01:35:07
are different even if all you're doing is delivering the market beta it's still different enough discussion remember i was saying should
01:35:13
i distribute the shares of robin hood should i hold them what should i be doing we told you to distribute and i distributed it i distributed everything
01:35:19
you know and uh and in terms of secondary i feel pretty you feel like a genius now because your lp should say thank you jason no
01:35:28
what i feel smart about i'll be honest is uh we had i think let's just say i'm making up a number 4 out of 5 times we
01:35:33
were offered the opportunity to trim our positions in secondary with our winners uh from people who
01:35:39
wanted to buy secondary shares i did it probably four out of five times and i'm just kicking myself i didn't do it the fifth or i didn't ask if they
01:35:46
would take more because my god we were able to clear some positions at very high valuations that are now lower than
01:35:52
that in the private markets and send cash to our lps and get our you know get over our hurdles and our first two funds
01:35:59
which you know i feel smart about i think that you should feel so so good about that that is that is really hard
01:36:05
what you did and i think people underestimate how hard it is it is really hard to actually return more money than you
01:36:12
have taken in yeah i mean that's just that's what i'm focusing on just that simple statement
01:36:18
and and by the way it was hard in the last 10 years where we've had basically a massive up market
01:36:24
and the four of us frankly benefited from the extraordinary luck of being in tech
01:36:30
yeah no it's super lucky i think the big thing that's going to happen right now i'm seeing it all over the place is m a i think is going to start ticking up
01:36:36
just today amazon acquired one medical for 3.9 billion one medical operates a network of clinics if you don't know 3.9
01:36:42
billion enterprise value for 182 franchises which is 21 million a franchise look at what happened to their
01:36:48
um look what happened at their stock price no i know i went from 60 in the peak in february of 2021 to uh seven
01:36:56
in may and they bought it they basically bought it on the same price it was trading out in january no my point is you could buy a mcdonald's franchise for
01:37:02
two million or you could buy the company that fixes the people that needed mcdonald's for 21 million that's why they've got some chicken by the way at
01:37:09
mcdonald's you can't make money selling pharmaceuticals and upselling you know other stuff that amazon's gonna
01:37:15
certainly i think that's super interesting that i think it's super interesting that amazon's getting into this business
01:37:21
wow i mean that is really i mean they clearly have a an economic model that shows
01:37:27
um some significant footprint and retail footprint well there yeah and there may also be kind of a supplement
01:37:33
pharmaceutical kind of upgrade opportunity there's synergy in this uh business and think about the synergy between i think about
01:37:40
what they're getting is also not just the physical locations but a network of doctors that can do telehealth i don't
01:37:45
know if you guys have ever used one medical but they do really um you know easy zoom telehealth services and so you
01:37:51
could hop on get a prescription have it fulfilled by amazon it shows up at your doorstep in under an hour
01:37:57
it'll be an incredible synergy for that business and probably a real value driver not just at the core units but
01:38:03
with respect to other things they're going to sell through your one medical doctor will provision a blood test
01:38:09
he or she will analyze those blood tests over a telehealth they will prescribe a better diet
01:38:15
that will be sent to whole foods who will then no i'm sorry i'm serious
01:38:21
it's like it's just and it's eating out hopefully amazon it makes so much sense for amazon to expand into built out
01:38:27
retail footprints because that business model now gets more and more complete by the day
01:38:32
where you become so ingrained and enmeshed in this this is loop this is really about at the end of
01:38:39
the day really is the subscription business amazon prime is the driver of amazon that's going to be
01:38:45
yet another amazon prime lock-in so you're i know it sounds silly but two days ago
01:38:51
about your subscription but i would bet you got i'll bet you guys a dollar that within a year after closing the deal
01:38:57
they're going to massively expand the telehealth footprint of what medical is doing because one medical had to go out
01:39:03
and do customer acquisition to go and acquire customers to make money doing telehealth services and they're spending
01:39:09
a thousand dollars probably cpa to acquire these customers amazon's wanted to do this why didn't google do this
01:39:16
amazon's already got the customers they've been up with 70 million everybody by the way i think another thing another
01:39:22
google doesn't know how to do messy things in the physical world they don't know how to do service i mean amazon's been working warehouses what about apple
01:39:29
apple knows how to do stores apple knows how to do four products in a beautifully designed shop a billion
01:39:36
dollar services business amazon knows how to get in the nitty gritty and the nuts and bolts of operations
01:39:42
yeah real world stuff the other thing that's really interesting about this amazon deal is that it was done with bezos not at the helm and i think it
01:39:47
really you know begs the question and begs an answer around are these guys going to continue to innovate like this
01:39:52
and i think right now the jury's saying yes they are going to continue to push the um the synergies they can derive from
01:39:58
this business by expanding into ancillary services and and industry uh and it's really impressive to see them
01:40:03
doing this without um without bezos running the day to day as a shareholder i feel that um so uh
01:40:10
really great to see i yeah i mean this is where like they could buy door dash uber lyft those kind
01:40:16
of real world services they're buying it just like they did with whole foods they're buying an asset that they're going to get tremendous
01:40:22
leverage and synergy out of very cheap they're buying this company at the same price it was trading at a few months ago yeah and they have a great they have a
01:40:29
great ceo at one medical who's a friend of mine amir reuben congrats shout out congrats yeah all right
01:40:34
everybody want your beak sacks no i never i never wet my beak in the steel dry beak syndrome no i would i would
01:40:41
just say from dbs by the way i'll be taking a victory lap right now if i was in that company yeah i missed it
01:40:48
i'm shocked we haven't seen the j cal victory lap he goes on some podcast tells bloomberg that vcs are going to
01:40:54
get pinched for insider trading all these tokens and lo and behold on the wall street journal three guys i guess a
01:41:01
guy at coinbase got pinched for basically insider trading these token sales
01:41:07
uh front running it by buying them in his wallet and stuff and so but where's your victory laptop
01:41:22
do you want to take your victory lap well no i mean i told everybody like if it's a if it smells like a security and
01:41:28
people are buying it for that reason for it to appreciate don't be surprised if the sec you know starts having tips dropped on
01:41:34
them that different vc firms in cahoots with law firms in cahoots with everybody were liquidating their positions we
01:41:41
talked about liquidating positions as being the goal of venture capital they created a shadow economy next to
01:41:46
securities law and said we're going to start liquidating these things but under what they made the rules up under
01:41:52
which they could liquidate them i'm not picking on any firm or anybody we'll we'll see over time who gets pinched but
01:41:58
you know if you decide you're going to talk yourself into this is not a security
01:42:03
even though it kind of feels like one that's on you that's on you as the person buying the tokens
01:42:09
issuing the tokens giving the legal briefs on the tokens i think people suspended disbelief and talked themselves into thinking that they
01:42:15
weren't trading securities and i think the sec now that everybody's lost their money is going to just
01:42:21
tick off one firm after another and it's going to be massive settlements it's going to be three or four years of litigation so it's not a victory lap
01:42:27
it's just it was such an obvious observation we all saw it i mean how do you liquidate
01:42:33
your shares in a company that has no product in the world like come on
01:42:38
come on people knew what they were doing if they get the book thrown at them they deserve it all right everybody uh this
01:42:43
has been another amazing episode even though saks is going to say it's the worst one
01:42:49
i like it i do that's a lake is that real that's lake front is that a zoom background can
01:42:55
i get that new zoom pack take a photo so we can all use it yeah love you boys love you besties all right we're back in
01:43:00
the groove back at you let your winners ride
01:43:06
rain man david sacks and it said we open source it to the
01:43:12
fans and they've just gone crazy [Music]
01:43:34
we should all just get a room and just have one big huge because they're all just useless it's like this like sexual
01:43:39
tension that they just need to release [Music]
01:43:45
your feet
01:43:52
[Music] i'm going on
01:43:58
[Music]
