00:00:00
Nick can you cue the tape this is now
00:00:02
the worst form of a shot oh my
00:00:05
God I mean the fact that he hit the ri
00:00:08
is a miracle the most unath what is oh
00:00:12
my God I have wish we could get slow
00:00:14
motion down that oh like ball the ball
00:00:19
forward no look at his hand look at the
00:00:21
right hand look oh look at look at that
00:00:22
he what is that about
00:00:26
one-handed I mean that has nothing to do
00:00:29
with basketball was the most
00:00:31
unnatural basketball SL athletic
00:00:34
movement I've seen come on wasn't that
00:00:38
bad I mean the lean forward the lean
00:00:41
forward the kind of like sassy jump you
00:00:44
know the
00:00:46
sassy little Sach on the side there
00:00:52
nice let your winners
00:00:54
ride Rainman
00:00:58
David and instead we open sourced it to
00:01:01
the fans and they've just gone crazy
00:01:03
[Music]
00:01:07
with all right everybody Welcome to the
00:01:09
Allin podcast with me again the chairman
00:01:12
dictator chamal hatia David freeberg the
00:01:16
Sultan of Science and the Rain Man
00:01:19
himself David Sachs our first topic
00:01:22
we'll go to our war correspondent the US
00:01:24
and its allies have shuck houthi Targets
00:01:27
in Yemen sax well we talked about this
00:01:29
two we ago on the show and we talked
00:01:32
about it as a escalatory risk in the
00:01:34
Middle East back then and I think that
00:01:36
that is playing out
00:01:38
now we fired I don't know maybe a 100
00:01:41
rockets and
00:01:42
missiles at Yemen last night the purpose
00:01:46
of the strike is to restore
00:01:49
deterrents and I guess try and prevent
00:01:52
the hooes from attacking commercial
00:01:53
shipping in the Red Sea but that
00:01:57
deterrence is not working I mean there's
00:01:59
already a you attack by the houes this
00:02:01
morning of a commercial ship in the Red
00:02:05
Sea so I don't think this is going to
00:02:07
have any impact other than to escalate
00:02:09
the conflict in the Middle East and put
00:02:11
us on a path to war with Iran which is
00:02:15
really where the neocons want to take us
00:02:19
you've heard obviously the warmongers
00:02:21
like Lindsey Graham are calling for that
00:02:22
but even speaker Mike Johnson is talking
00:02:24
about that I think that's where this is
00:02:26
all headed is a larger war in the Middle
00:02:28
East that features the US and Israel go
00:02:30
to war with Iran I think we should all
00:02:32
be very concerned about that actually
00:02:34
but yeah I mean you have to be fair it's
00:02:36
not just it's not just the US right it's
00:02:39
now the US the UK Israel Qatar UAE and
00:02:43
Saudi against the hotti rebels that's a
00:02:46
big Alliance and you got to think that
00:02:51
Iran will think very carefully about how
00:02:53
close they want to get to the hooes in
00:02:55
the middle of all of this because that's
00:02:56
a that's a huge Armada if you will of
00:03:00
countries that I don't think you really
00:03:02
want to cross as a group well I think
00:03:04
Saudi Arabia and UAE are are playing
00:03:07
this very carefully I think they did not
00:03:09
participate in the strikes they did
00:03:11
allow the US to fly overhead or to use
00:03:15
its territory but they released a
00:03:17
statement calling for restraint and
00:03:20
deescalation so I think they're very
00:03:22
nervous about this blowing up into a
00:03:24
wider Regional War I don't think they
00:03:26
want that the Allies who participated in
00:03:29
the the campaign of air strikes were UK
00:03:32
Australia Canada Netherlands and Bahrain
00:03:36
but I don't think they actually did
00:03:37
anything I don't think they contributed
00:03:38
any assets they just provided their
00:03:39
names to this operation and provided
00:03:43
some diplomatic cover freeberg any
00:03:45
thoughts well sex you posted a comment
00:03:49
on Twitter which I wanted to respond to
00:03:51
where you said
00:03:53
China has the largest chipping volume
00:03:56
through the Red Sea and they're staying
00:03:58
out of this conflict letting the US do
00:04:00
do the dirty work but the houis didn't
00:04:03
attack Chinese ships they specifically
00:04:05
attacked Western ships isn't that
00:04:07
correct I mean this is a very targeted
00:04:09
disruptive event that the htis have been
00:04:11
undertaking for some time now and
00:04:13
they're using these very interesting
00:04:15
tactics with drones that can be very
00:04:17
destructive and very hard to block and
00:04:19
doing it not at Chinese ships but at a
00:04:21
very targeted enemy right well what the
00:04:23
hoodies have said is that they're only
00:04:24
attacking ships that are either Israeli
00:04:27
or going to Israel but in reality
00:04:31
they've attacked a much wider range than
00:04:33
that it may be true that they haven't
00:04:36
attacked ships that are declaring
00:04:39
themselves to be Chinese ships or
00:04:40
Russian ships
00:04:42
however there are more Chinese shipping
00:04:45
containers on all of the ships that are
00:04:48
going through the Red Sea and the Suz
00:04:49
Canal than any other country so there's
00:04:52
no question that if we're talking about
00:04:53
the disruption of global trade this is
00:04:55
going to have a big impact on Chinese
00:04:58
trade whe whether it's on Chinese ships
00:05:00
or not or it could benefit them because
00:05:03
they can get through that shipping Lane
00:05:04
and the W their ships can get through
00:05:06
but foreign ships European ships that
00:05:09
have Chinese shipping containers on them
00:05:11
are not getting through yeah so their
00:05:13
trade is still getting disrupted never
00:05:15
less they don't feel the need to engage
00:05:18
in this militaristic response or
00:05:20
participate so in terms of understanding
00:05:22
implications of the escalation in this
00:05:24
conflict let's just quickly talk about
00:05:27
number one I'm assuming chipping prices
00:05:29
are going to go up Freight prices are
00:05:31
going to go up but hold on a second we
00:05:33
talked about this with Ryan remember the
00:05:34
question that I asked him this is really
00:05:36
an issue for Europe it's not an issue
00:05:38
for the United States because there are
00:05:39
alternative routes you can go through
00:05:41
the Pacific and you can go down through
00:05:42
the bottom of of Africa right and all
00:05:46
that does is ADD like a five or 10%
00:05:47
increase so what we're really debating
00:05:50
is what is the risk of inflation and a
00:05:53
backup of goods and shipping rates into
00:05:56
Europe yeah and this is why I don't
00:05:58
understand why America needs to even get
00:06:00
involved I understand why the
00:06:02
Netherlands and the UK and France and
00:06:04
all these folks need to send resources
00:06:06
to unclog this that makes a lot of
00:06:09
sense but I don't see why the US needs
00:06:13
to be involved other than providing
00:06:14
moral support or logistical support what
00:06:17
what is the point wellam this is exactly
00:06:18
my point is the number one type of trade
00:06:22
that's going through the Red Sea are
00:06:24
shipping containers from China going to
00:06:27
European ports right and as a result of
00:06:31
what the hoodies are doing it's having
00:06:32
to go Around the Horn of Africa it's
00:06:34
adding two or three weeks to the trip
00:06:36
and it's raising the cost of a shipping
00:06:37
container from China from say $1,500 to
00:06:41
$3,000 it's Europe and China who are
00:06:43
impacted the most but for some reason
00:06:46
it's the US that decides it has to take
00:06:47
the lead in doing this and the problem
00:06:50
is that first of all the action is
00:06:53
futile I mean the hoochi have been at
00:06:55
War on and off with the Saudis for a
00:06:58
decade and the saud's been backed by
00:07:00
Western weapons and we have not been
00:07:03
able to defeat the htis so this missile
00:07:05
Strike last night is not going to deter
00:07:08
them it's not going to stop them they're
00:07:09
very determined very tough Fighters
00:07:12
second they are going to be looking for
00:07:14
retaliation they're going to be looking
00:07:15
for blowback and CH to Chas to your
00:07:18
point they're not goingon to be looking
00:07:19
for retaliation against China or Europe
00:07:22
they're going to be looking at it
00:07:23
against the United States so we're
00:07:25
incurring this cost and risk onto
00:07:28
ourselves so let put this question to
00:07:30
you then we have
00:07:32
no obvious economic incentive to get
00:07:35
involved because we can sustain our
00:07:38
economy through different shipping ports
00:07:40
that at best raise rates five or 10 per.
00:07:42
right we can absorb that in the economy
00:07:44
100% which could drive inflation is a
00:07:46
European problem so there's no economic
00:07:49
incentive necessarily to get involved so
00:07:52
what is the incentive it feels like not
00:07:54
to play conspiracy theorists but like a
00:07:57
Wag the Dog moment at another
00:08:00
distraction to add to the
00:08:03
plate what do you think about that line
00:08:05
of thinking I tweeted something just
00:08:06
like that this does feel it's a Wag the
00:08:10
Dog in the sense that the Biden
00:08:12
Administration was you want to explain
00:08:13
the reference for folks that me movie
00:08:15
called Wag the Dog that came out in the
00:08:17
early 90s where the president is up for
00:08:21
reelection and there's a horrible
00:08:23
Scandal that's about to come out like a
00:08:24
Monica Linsky type Scandal this is
00:08:27
before Monica Lewinsky by the way but um
00:08:29
really was sort of one of those movies
00:08:32
that kind of predicted the future but in
00:08:34
any event the President's trying to
00:08:35
avoid this Monica Linsky type Scandal
00:08:38
and so the political AIDS and advisers
00:08:42
decide the way to do that is to start a
00:08:44
war but they don't start a real war they
00:08:46
basically manufacture a fake war on a
00:08:48
sound stage and in a movie studio and
00:08:52
it's pretty hilarious how they keep the
00:08:53
whole thing going David Mammoth who's a
00:08:56
brilliant brilliant writer wrote that
00:08:57
script but this movie came out right
00:09:00
around the time of the Linsky scandal
00:09:02
with Clinton and so therefore it took on
00:09:04
this larger political and cultural
00:09:06
significance yeah it's been used so Wag
00:09:08
the Dog is you know you basically start
00:09:10
a war because of the political benefits
00:09:13
as opposed to the real necessity of
00:09:15
going to war and I think you can make
00:09:17
that accusation here chth because I
00:09:19
think that the bid Administration was
00:09:21
looking impotent I mean they were
00:09:22
basically telling the hoodis to stop
00:09:24
they were pleading with them to stop
00:09:25
interfering with international shipping
00:09:27
the htis weren't listening
00:09:30
by the way the reason why the hoodies
00:09:31
are doing this is they're doing it in
00:09:32
solidarity with the Palestinians in Gaza
00:09:35
they've demanded that the Israeli
00:09:36
invasion of Gaza stop and humanitarian
00:09:38
Aid be let in and they're not going to
00:09:41
stop interfering with global trade until
00:09:43
that happens so that's the hooie
00:09:44
position the bid Administration has been
00:09:46
telling them to stop and I think that
00:09:49
they were looking increasingly feckless
00:09:52
and impotent and that's why they did
00:09:54
this strike the problem the problem is
00:09:57
that the strike's not going to have any
00:09:58
impact and so so what what's the point
00:10:02
well is it that or is it that I think if
00:10:04
you take the Wag the Dog analogy to the
00:10:07
Limit I think maybe a different
00:10:09
interpretation I'm not saying that they
00:10:10
did this but a different interpretation
00:10:12
of that analogy would be that they are
00:10:15
struggling domestically and I think jcal
00:10:17
tweeted this but if you look at the
00:10:18
polls and you look at Dean Phillips all
00:10:20
of a sudden and you look at what's
00:10:22
happening on the Republican side there's
00:10:24
so much
00:10:27
activity and momentum Frank
00:10:29
for non Biden candidates all all across
00:10:33
the board that that would be the most
00:10:36
Wag the Dog explanation in my opinion
00:10:38
which is like to distract folks from the
00:10:41
domestic Mala by pointing someplace far
00:10:44
away and saying we're doing something
00:10:46
very righteous here let's all get on the
00:10:47
same page and support us how does that
00:10:50
logically make sense jamath if the US is
00:10:52
against Wars and people are tired of
00:10:54
Wars like what would be the this the
00:10:57
only problem I have with the logic of
00:10:58
the way dog theory is you America
00:11:01
against Wars who's against Wars Jason
00:11:04
the American people they've been very
00:11:06
much against starting forign Wars we'
00:11:08
talked about let's talk about the people
00:11:10
that run the country no I know so but if
00:11:13
you're saying they're doing it the logic
00:11:14
here is Wag the Dog is to Curry favor
00:11:17
Sak you said they're rallying this is to
00:11:20
Rally the American people around like a
00:11:21
patriotic cause but this isn't like a
00:11:24
you know 9111 situation where Bush got a
00:11:27
lot of credibility we saying hey we're
00:11:29
going to go get these terrorists
00:11:31
Americans don't want more Wars right now
00:11:33
the polling is very specific on that so
00:11:35
then I guess Sachs what is the the logic
00:11:38
there to Wag the Dog if this is
00:11:41
something American people don't want
00:11:43
well I I think you're right Jason in the
00:11:45
sense that the American people are
00:11:47
exhausted by Wars especially Middle
00:11:49
Eastern Wars we've just gotten out of
00:11:51
two decades of endless forever wars in
00:11:53
the Middle East and I don't think the
00:11:55
majority of the American people want to
00:11:57
get back in
00:11:59
so I think you're right on that level
00:12:01
and it's true that if you were to pull
00:12:03
the American people and ask them are you
00:12:04
in favor of getting in more Wars they
00:12:05
would say no the problem is that with
00:12:08
every war the mainstream media starts
00:12:11
propagandizing for the wars and they'll
00:12:13
basically demonize whoever it is that
00:12:15
we're going to go to war with and
00:12:16
explaining why they're a huge threat
00:12:19
they'll engage in threat inflation and
00:12:22
so the American people end up supporting
00:12:23
it so we're against war in the abstract
00:12:26
but in every particular case we end up
00:12:28
supporting it that's what happened with
00:12:29
Ukraine it's even happening right now if
00:12:31
you look at polling for this hoodi
00:12:33
conflict I think most Americans believe
00:12:35
it's a good thing to strike the hoodies
00:12:38
so yeah they're against it in the
00:12:39
abstract but in each particular case the
00:12:43
media is able to manufacture consent for
00:12:47
the US involvement so just to challenge
00:12:49
that yeah as well so now our theory is
00:12:53
or your theory is the media plus the
00:12:57
Biden Administration are in cahoots to
00:13:01
Wag the Dog create this support of a war
00:13:04
in order to distract from domestic
00:13:07
issues in order to Curry favor with the
00:13:09
American public that doesn't really want
00:13:11
more Wars that's where I'm saying like I
00:13:13
think Wag the Dog might have been
00:13:15
something 20 years ago like you're
00:13:16
saying that could work as a technique
00:13:19
but I can't imagine anybody would want
00:13:22
to do more military action at this point
00:13:26
in time when the American public is
00:13:28
exhausted from it well which what you
00:13:30
said for the last months on this pod
00:13:32
look I I I tweeted exactly that
00:13:34
sentiment is that I don't think wagging
00:13:35
the dog is going to work I think
00:13:37
there'll be a short-term rally around
00:13:39
the flag effect but I think that overall
00:13:43
if this conflict is still going on in
00:13:45
November is going to weaken Biden by
00:13:47
making him look like a president who's
00:13:49
lost control of events so I I agree with
00:13:53
you that ultimately the perpetuation of
00:13:55
this conflict is not ultimately in
00:13:57
Biden's interest
00:13:59
now nonetheless it may factor into their
00:14:01
political calculation that in the short
00:14:03
term they think this makes them look
00:14:05
good that would seem super incompetent
00:14:08
as like a a political strategy to me but
00:14:10
I'm political I mean despite the fact
00:14:12
that this Administration claimed to be
00:14:14
the the foreign policy grown-ups they
00:14:16
haven't shown a lot of competence they
00:14:17
couldn't even find Lloyd Austin who's
00:14:19
the Secretary of Defense for five days I
00:14:21
me no one knew where he was just not
00:14:23
what happened but no he checked into the
00:14:25
hospital for a procedure and no one
00:14:27
could find them for several days
00:14:29
and there was an article I think on CNN
00:14:30
talking about how he was managing this
00:14:32
hoochie strike from his hospital
00:14:35
bed yeah that was weird I hope I hope
00:14:38
the man's okay I don't want you know
00:14:39
he's got he's got prostate cancer I know
00:14:42
I it's that's sad he had a UTI he had a
00:14:44
UTI that's why he was in the hospital
00:14:46
but fair enough but no one in the white
00:14:47
house the White House couldn't find him
00:14:48
for a couple of days is that true they
00:14:50
couldn't find him yes I mean having a
00:14:52
UTI is a very benign well he had he had
00:14:56
a prostectomy and then he got discharged
00:14:59
from the hospital and somewhere along
00:15:01
the way he got a UTI which was severe
00:15:05
apparently went back to Walter read and
00:15:08
yeah in those three or four days the
00:15:09
handoff of power to
00:15:11
his
00:15:13
Deputy happened she was on vacation on a
00:15:16
beach somewhere and you're right the and
00:15:19
the problem was that the other person
00:15:21
the chief of staff had the flu so they
00:15:24
couldn't escalate to the white so it was
00:15:26
like a comedy of errors but I I don't
00:15:29
think it was anything but anyways I mean
00:15:31
imagine if you were like a a sea level
00:15:34
executive at a company and you're going
00:15:37
to be out of the office for a few days
00:15:38
and unreachable you would set up a clear
00:15:42
chain of command you'd have a deputy who
00:15:44
the CEO could get a hold of if if
00:15:46
necessary in this case you've got the
00:15:48
Secretary of Defense who if the United
00:15:50
States was attacked in some way is part
00:15:52
of the chain of command the president
00:15:54
would need that person in the situation
00:15:56
room so the fact that they couldn't find
00:15:58
him for a couple of days is really I
00:16:00
think unforgivable how does that even
00:16:02
happen is that really true that they
00:16:03
couldn't find him like they literally
00:16:06
for a couple of days this was widely
00:16:08
reported they but they couldn't call him
00:16:10
on his cell phone or his chief of staff
00:16:12
or the nobody knew where he was H wow
00:16:17
yeah okay all right very good haven't
00:16:20
kept up on on on the details of his UTI
00:16:22
and his cancer I hope he's okay so uh
00:16:24
segueing into markets the likelihood of
00:16:28
a q one rake cut is not looking good we
00:16:31
had a slightly hotter than expected
00:16:33
December CPI interest rates hit a
00:16:35
22-year high in July as everybody knows
00:16:38
when the FED raised the range from 5.25
00:16:40
to 5.5 but they've left rates unchanged
00:16:43
if you haven't been following it uh as
00:16:46
inflation has cooled but in December the
00:16:49
CPI rose 3.4% from a year earlier that
00:16:53
was just a slight tick above and of
00:16:55
course markets are wondering is this
00:16:58
going to going to be a Glide path
00:17:00
into a soft Landing or could it be
00:17:03
choppy going forward freeberg higher for
00:17:06
longer interest rates you think that's
00:17:09
still going to be the case and what are
00:17:11
your thoughts going into the new year
00:17:14
Well Larry Summers put out a note saying
00:17:16
that he thinks that the rates are going
00:17:19
to stay higher than the market is
00:17:21
predicting based on the yield curve
00:17:24
right now so I think the Market's
00:17:26
currently saying no Cuts in March and
00:17:29
high probability of cuts
00:17:31
in
00:17:33
June but some folks Like Larry are
00:17:37
saying might be longer because inflation
00:17:39
is very sticky and if you look at the
00:17:42
breakdown on the drivers of inflation
00:17:45
you start to think about what's the
00:17:47
underlying business activity that's
00:17:49
going on like car insurance went up by
00:17:52
20% Which was one of the key drivers and
00:17:56
car insurance has always been this
00:17:59
lagging indicator but it does ultimately
00:18:02
Drive costs up later the reason car
00:18:04
insurance rates go up is because the
00:18:06
cost to repair a car goes up and the
00:18:08
cost for medical care goes up when that
00:18:09
happens the insurance companies actually
00:18:11
have to file with State Regulators to
00:18:13
get approval to raise their rates and it
00:18:15
can take over a year for The Regulators
00:18:17
to then approve those raising of rates
00:18:20
so by the time the rates get raised the
00:18:23
other factors have maybe leveled out but
00:18:25
you're still going to have some elements
00:18:27
of uh costs they're going to continue to
00:18:30
climb for some period of time after you
00:18:32
get the core engine tuned down so these
00:18:35
are the sorts of things that I think
00:18:36
we're seeing in the the current CPI data
00:18:39
is that there are some of these lagging
00:18:41
effects of an overheated economy or over
00:18:43
stimulated economy that are now starting
00:18:46
to play through and so there's a number
00:18:48
of these it's not just car insurance but
00:18:49
there's a lot of things that are going
00:18:50
to linger for a while and they're going
00:18:51
to be very hard to work their way
00:18:53
through the system very quickly and as a
00:18:55
result it may be the case that rates are
00:18:57
going to need to stay higher for longer
00:18:58
I think the thing with inflation that is
00:19:00
worth noting is that a couple of things
00:19:03
are true at the same time which I think
00:19:04
is
00:19:05
interesting I think we were the ones in
00:19:09
May of 21 that started getting very ansy
00:19:12
around inflation and we started to look
00:19:14
at the five and 10 year break evens do
00:19:16
you guys remember that we would like
00:19:18
look at that chart a lot and I think it
00:19:20
was very
00:19:22
predictive we also used to look at the
00:19:24
future oil curve you know not that we're
00:19:27
macroeconomists but I think it's it's
00:19:29
useful if average everyday people can
00:19:32
have a few things to look at if you look
00:19:34
at those things
00:19:35
today it tells you the same picture
00:19:39
which is inflation has cooled we're
00:19:41
going through the last kind of like
00:19:44
throws of some of the random variables
00:19:48
still being a little sticky but the
00:19:51
broad trend is down I think it's
00:19:54
indisputable at the same time even with
00:19:57
the configurations in the Middle East if
00:20:00
you look at what people think about the
00:20:02
future price of oil it's also down oil
00:20:05
Futures are I think about 5 to
00:20:08
10% future prices are about 5 to 10%
00:20:10
lower than spot right now for whatever
00:20:12
that's worth but the third thing which I
00:20:14
think is important is we've now started
00:20:16
to see folks come back from the new year
00:20:19
and start to affect some pretty big
00:20:21
layoffs and they're across Industries
00:20:24
right City bank today just announced
00:20:26
20,000 layoffs that's a huge amount of
00:20:29
people that are going to lose their jobs
00:20:31
so what does all of this mean it's that
00:20:33
I think that people expect that as
00:20:35
inflation contracts the money supply
00:20:38
will expand but demand has yet to reset
00:20:43
properly so that's the last thing and I
00:20:45
think freeberg mentioned this a bunch
00:20:46
consumer spending has always been crazy
00:20:48
people living on credit all of this
00:20:50
stuff that is now finally I think the
00:20:54
last thing that has to get sorted out so
00:20:56
in the absence of demand back to the way
00:20:58
you started Jason companies will cut
00:21:00
expenses in order to maintain
00:21:02
profitability because they don't really
00:21:03
want to cut prices unless their product
00:21:04
really sucks yeah and just to note that
00:21:08
City group as you mentioned 20,000 cuts
00:21:10
by 2026 Google also laid off hundreds of
00:21:14
people Amazon hundreds of people Discord
00:21:16
laid off 17% and there's a viral video
00:21:19
going around of a woman laid off by
00:21:21
Cloud flare you know who was only on the
00:21:23
team for like six months or something or
00:21:26
five months and it does seem like yeah
00:21:29
firing people before the holidays laying
00:21:31
them off is considered yeah you don't do
00:21:33
it in the fourth quarter so maybe there
00:21:34
was some some uh backed up layoffs that
00:21:37
people decided to do into this year but
00:21:39
it certainly feels like sacks people are
00:21:43
and you said this I think in the
00:21:44
predictions episode or the recap episode
00:21:46
hey you know maybe it's still going to
00:21:48
be a little bit of turbulence and the
00:21:49
soft Landing isn't guaranteed maybe you
00:21:51
could expand on that yeah my prediction
00:21:54
for the year was bumpy Landing I thought
00:21:57
soft land in was a little too optimistic
00:21:59
and I also thought that this big stock
00:22:01
market rally that we had in November
00:22:02
December was too much too soon the
00:22:05
market starting in November started
00:22:07
pricing in about 1 and a half% of rate
00:22:09
Cuts this year believing that the
00:22:11
inflation problem had been licked and
00:22:13
now what we're seeing is first of all
00:22:15
you had a slightly hotter than expected
00:22:16
inflation report and now we have this
00:22:19
escalating situation in Yemen
00:22:23
where this war in the Middle East might
00:22:26
expand and just so you understand I mean
00:22:28
the hotis have already said that if the
00:22:31
United States attacks them and uses
00:22:34
Saudi or UAE airspace to do it that they
00:22:36
will consider themselves at war with
00:22:38
Saudi Arabia and UAE and that they will
00:22:40
try to do things like light the Saudi
00:22:42
oil fields on fire I don't think they
00:22:44
have the capability to do that
00:22:46
necessarily but it's an indication that
00:22:48
things are very volatile another thing I
00:22:50
think we're likely to see in the Middle
00:22:52
East is continued attacks on US military
00:22:55
bases in Iraq and Syria so that whole
00:22:59
region is a powder keg and if it
00:23:01
develops into a wider Regional War then
00:23:04
I think you can see an oil shock and if
00:23:06
there's an oil shock I think you can
00:23:08
kiss rate Cuts goodbye because that's
00:23:09
going to percolate through the whole
00:23:10
economy and have a big impact on
00:23:13
inflation so I just think that there's a
00:23:17
lot of downside to these very optimistic
00:23:20
projections that we're going to get
00:23:22
these huge rate cuts it might happen but
00:23:26
but I just see a lot of risk yeah
00:23:28
freeberg you think these oil shocks are
00:23:30
here for the long term or a possibility
00:23:32
you've been talking a lot
00:23:34
about Alternative Energy nuclear
00:23:38
obviously uh so is is and the US has
00:23:42
become a net exporter of oil so do you
00:23:44
think this risk of oil disruption from
00:23:48
the Middle East is with us for the long
00:23:50
term or do you think that's waning now
00:23:52
there's definitely structural risk
00:23:55
because you have a supply chain that can
00:24:01
get disrupted in a number of ways and
00:24:03
limited alternative options if you look
00:24:06
at the chart I just shared it's the US
00:24:10
strategic petroleum Reserve so we have
00:24:12
about 350 million barrels in the uh
00:24:15
strategic petroleum Reserve today that's
00:24:18
down
00:24:20
from call it early 21 when we were at
00:24:23
650 million barrels and you know it was
00:24:26
pretty much at that level for decades
00:24:30
after the buildup leading up to 1990 we
00:24:32
haven't been at a level this low in the
00:24:34
Strategic petroleum Reserve since
00:24:37
1983 and so there's not a lot of
00:24:40
levers for the government to intervene
00:24:44
uh to support the supply as there may
00:24:46
have been in the last couple of years in
00:24:49
the case of some Supply shock because of
00:24:51
a conflict that arises in a major oil
00:24:54
producing region it's a really
00:24:55
interesting chart isn't it because that
00:24:57
was after the oil crisis of the 70s and
00:24:59
you look at how long it took to build it
00:25:01
up and how large we built it it's a
00:25:03
really fast I've never seen that chart
00:25:05
before but if you look at the you know I
00:25:07
don't know if you guys remember the oil
00:25:09
lines did you have them in Canada chath
00:25:11
where and I remember in Brooklyn you had
00:25:13
an even number odd number license plate
00:25:15
thing if you wanted to get gas you know
00:25:18
some days was the even number some days
00:25:19
was the odd number I remember my parents
00:25:21
getting online for gas and waiting for
00:25:22
two hours or three hours to get gas yeah
00:25:24
by the way I'll say this is not a real
00:25:27
cost today that we're experiencing but
00:25:29
as Sak is pointing out there's a number
00:25:30
of ways that this can become a real cost
00:25:32
I was in Austin this week and the thing
00:25:35
that shocked me the most was how cheap
00:25:37
gas was the gas station you can get gas
00:25:39
for like two bucks and 25 cents a gallon
00:25:42
it's pretty awesome it's like $6 when
00:25:44
you're in leak Lake to yeah just so
00:25:47
everyone understands how the spr got
00:25:48
depleted last year when inflation was
00:25:52
the top story you know on the front page
00:25:54
of every newspaper and gas prices were
00:25:56
hitting what $7 or 8
00:25:58
the administration started releasing
00:26:01
crude from the spr to try and bring the
00:26:04
price down and they did that for about a
00:26:06
year and they were basically subsidizing
00:26:08
the price of oil now that's why our
00:26:10
stock p is low and that was a really
00:26:13
great political strategy but if we end
00:26:15
up in a real crisis we're going to have
00:26:18
less dry powder to deal with it so you
00:26:21
know we could have a perfect storm of
00:26:22
things coming together here where at
00:26:26
precisely the time we end up getting
00:26:28
involved in a big war in the Middle East
00:26:30
are tools to mitigate the oil shock that
00:26:33
would create have been reduced by what
00:26:37
the administration's done over the past
00:26:38
year now I don't know that that's going
00:26:40
to happen I mean I still think we're
00:26:41
several steps away from a regional War
00:26:44
but you look at how many fronts now we
00:26:47
have conflict in the Middle East there's
00:26:49
about five different fronts where
00:26:51
there's conflict you've obviously got
00:26:54
Israel's war in Gaza you've got
00:26:57
Hezbollah in the north basically firing
00:26:59
Rockets you've got us bases in Syria and
00:27:04
Iraq coming under attack and now we have
00:27:06
the US striking Yemen so there's just so
00:27:09
many ways that this could spiral out of
00:27:11
control isn't the spr designed so that
00:27:14
when we have an economic crisis like
00:27:15
this to use it like I mean it's yeah
00:27:17
you're the the Biden Administration just
00:27:18
allowed to dip in by the way you have to
00:27:20
give credit to the Biden Administration
00:27:21
in one in one form it's not necessarily
00:27:25
skilled per se but when you look at the
00:27:28
spr depletion they were selling at
00:27:31
incredible moments in the market and the
00:27:33
energy Department I actually I think
00:27:36
they they just announced that they're
00:27:38
buying another you know4 or eight
00:27:40
billion dollars U to replenish the spr
00:27:43
so they'll be doing that now but they
00:27:45
were selling if you look at these price
00:27:46
points here they were selling when
00:27:48
prices were 80 and 90 a barrel and now
00:27:51
they're buying it back at 70 so at least
00:27:54
the United States can take some solace
00:27:56
in the fact that we arbed out a few
00:27:58
billion dollars for treasury I wonder
00:28:00
how the spr relates to consumption you
00:28:03
know we see this chart but it's in the
00:28:05
number of barrels right 350 million
00:28:08
barrels or something like that is that
00:28:09
what the chart says and then it peaked
00:28:11
at 600 or 700,000 I wonder what it needs
00:28:13
to be chth or freeberg on a as a
00:28:16
percentage of our consumption as more
00:28:18
EVS hit the market right and as the
00:28:20
number of miles per gallon goes up so I
00:28:24
couldn't find a chart for that I tried
00:28:25
to find if anybody in the audience knows
00:28:27
the spr in relation to consumption that
00:28:29
would be a very important chart no I
00:28:31
think they're pretty independent Jason
00:28:34
how so like we just Build It Up
00:28:36
independent of what we need no the the
00:28:38
Strategic petroleum Reserve is is
00:28:40
essentially that it's it's not meant to
00:28:42
be something that's that's meant
00:28:46
to bookend usage you know if in a highly
00:28:49
functioning Market there's theoretically
00:28:51
an infinite amount of oil that's
00:28:53
available and so if there's more
00:28:54
consumption you'll be able to find more
00:28:56
oil you'll just have to pay a different
00:28:58
price for it this is meant to be used in
00:29:01
very different kinds of situations this
00:29:03
interesting yeah right like when there's
00:29:04
a disruption when when there's an acute
00:29:06
disruption it's supposed to be break
00:29:08
last in case of emergency exactly yeah
00:29:10
but how many days is supposed to last is
00:29:12
what I'm sort of getting at like that's
00:29:13
what I wonder because over time are we
00:29:15
consuming more oil now as a country or
00:29:18
are we consuming less I would think
00:29:19
consuming more but but the thing you
00:29:21
have to keep in mind is that even in an
00:29:22
acute shock what you can't just look at
00:29:25
the spr because we have now domestic oil
00:29:28
capability right and a lot of that
00:29:31
developed under two presidents Obama and
00:29:32
Trump and both of them deserve a lot of
00:29:34
credit because we have a capability
00:29:38
now to be self-sufficient and we are a
00:29:41
net exporter because of the work that
00:29:43
happened during that time yeah knas oh
00:29:46
my gosh did you guys see all of this
00:29:48
michiga with Carta this week crazy huh
00:29:51
absolutely uh actually it's on the
00:29:53
docket so those of you who don't know
00:29:55
Carta is Capt software if you don't know
00:29:57
what the cap and cap table is uh which
00:29:59
many of you might not stands for
00:30:01
capitalization what is it it's a Google
00:30:03
or an Excel sheet that says who owns the
00:30:06
number of shares in a company this gets
00:30:07
very complex in private companies and
00:30:09
they've made quite a business out of it
00:30:11
wait wait wait can I pause you there
00:30:13
there there was a lot of comments that
00:30:14
said exactly that it gets very
00:30:15
complicated I apologize I've I've owned
00:30:18
equity in companies for 20 years what
00:30:21
the hell is exactly complicated well I
00:30:24
don't understand that statement I'm not
00:30:25
I'm not directing it at you Jason I can
00:30:27
tell you yeah because I I feel like that
00:30:30
is like some BS statement yeah it's not
00:30:33
the thing is you as acting as a price
00:30:36
round individual in a lot of these cases
00:30:38
it was very simple to do a priced round
00:30:41
but when you inserted safes into this
00:30:44
you know a simple agreement for future
00:30:46
Equity that y combinator created and you
00:30:49
put Capital uh um convertible notes into
00:30:52
this Founders started doing like dozens
00:30:54
of these shth and at the early stages
00:30:56
the cleanup work and understanding how
00:30:59
many shares people owned especially with
00:31:01
no but jcal what I'm saying is what like
00:31:04
okay tell let me stop let me ask a
00:31:06
different way yeah sure we did this with
00:31:08
spreadsheets let me answer your question
00:31:10
okay so in a private company let's say a
00:31:13
company issues options to an employee
00:31:15
and they don't have a good record of
00:31:16
that the employee executes the options
00:31:18
they now believe that they own shares
00:31:21
unlike in a public company where there's
00:31:23
a broker of record every share is
00:31:25
registered in a public company you know
00:31:27
who owns the shares you know what broker
00:31:29
is holding those shares and every share
00:31:31
is traded through a public exchange so
00:31:33
there's a record of every transaction
00:31:34
that takes place with every share in a
00:31:37
public company in a private company
00:31:38
there's no independent legal regulator
00:31:42
that tracks all the shares so you could
00:31:44
issue options to an employee and forget
00:31:46
that you did that put the document in a
00:31:49
in a drawer and the employee shows up
00:31:51
five years later and they're like wait
00:31:52
or I've experienced this I've had
00:31:54
advisor show up be like look here's my
00:31:56
advisory agreement I was given options
00:31:59
I'm asking a different question you're
00:32:00
you're saying something great I get that
00:32:02
I'll tell you what I think the killer
00:32:04
feature was is that complicated to
00:32:06
implement in software I don't understand
00:32:08
tell I I I think the killer feature for
00:32:09
Carta it was called eshares back then
00:32:12
was getting the shareholder to sign for
00:32:14
their stock certificates so to freeberg
00:32:16
point in the old world where it was all
00:32:18
done by email and a spreadsheet they
00:32:20
would literally have to send you a paper
00:32:22
stock certificate you put in a file cap
00:32:24
if you lost it you have to sign a
00:32:25
document say with with a lawyer say oh I
00:32:27
lost my my certificate I promise you I
00:32:30
lost it all that of stff I think the
00:32:32
killer feature was digitizing the stock
00:32:34
certificates and then you would sign for
00:32:36
them using like a e signature you know
00:32:39
on Carta and they would just keep it for
00:32:42
you I get it I'm not saying that is I'm
00:32:43
I'm not debating the value guys you're
00:32:45
saying why is the software complicated
00:32:47
yeah why is the software complic this is
00:32:48
not complicated nothing you guys have
00:32:50
said complicated but but what happened
00:32:52
was cuz I remember when like the market
00:32:54
tipped right is I got one email from a
00:32:57
company that was using eshares back then
00:33:00
and I would just do the digital
00:33:02
signature and I started getting a few
00:33:03
more and a few more pretty soon there
00:33:06
was a network effect like I don't want
00:33:07
to have to wonder where my digital stock
00:33:11
certificates are I just know that
00:33:13
they're all at Carta that's very
00:33:15
convenient for me as an investor I think
00:33:16
it's very convenient for the company to
00:33:18
be able to manage all the stuff
00:33:19
digitally so look I mean DocuSign is not
00:33:22
a complicated technology either and that
00:33:24
is what a multi-billion dollar company
00:33:26
because there's a very strong Network
00:33:27
effect you don't want to have to have
00:33:29
all of your signatures at a whole bunch
00:33:30
of different
00:33:31
companies so I think that's how it kind
00:33:33
of got off to the races and then since
00:33:36
then they've been able to add more
00:33:38
workflows they've been able to add fund
00:33:39
management they've been able to add a
00:33:41
number of things to make it stickier and
00:33:44
more feature Rich and it's not that
00:33:46
expensive it's like 10 grand a year or
00:33:48
something like that it's kind of getting
00:33:50
very expensive for startups we're
00:33:52
talking 10 grand a year is is expensive
00:33:54
I mean for a seed stage shup it's a lot
00:33:57
and then we invested in a company called
00:33:58
cake Equity that's doing it for like
00:34:00
$1,000 a year to chat's point you
00:34:02
tweeted Why Can't This be $1,000 a year
00:34:04
go to cake Equity you'll see well can we
00:34:06
can we just go to my tweet like I was
00:34:07
confused by all of this stuff we haven't
00:34:10
even got other story yet oh just sorry
00:34:11
Jason go yeah yeah sorry so anyway what
00:34:13
you're hearing is this software is very
00:34:16
integrated into startup culture we all
00:34:19
have a lot of opinions on it because the
00:34:21
cap table is where all the value is
00:34:24
recorded the cap tables have gotten much
00:34:26
more complicated but this is not like
00:34:28
building the Tik Tok algorithm or chat
00:34:30
GPT to be clear to chamat point this is
00:34:33
not really hard software to build so
00:34:35
correct on that and saxs correct to your
00:34:38
point it's super convenient if everybody
00:34:40
uses the same platform and for a series
00:34:42
a VC company spending 10 $20,000 a year
00:34:45
on this is not that big of a deal uh
00:34:47
although there are cheaper options VCS
00:34:49
and investors use it too to track their
00:34:51
portfolios absolutely and so it grew
00:34:53
from one to the other just to be clear
00:34:55
so I mean first companies started using
00:34:57
it for their cap tables then they got
00:34:59
into the fund management business so if
00:35:00
you were a fund you were receiving all
00:35:03
of your stock certificates then you
00:35:04
started using to communicate with your
00:35:05
LPS so we've started doing that and it's
00:35:08
very convenient for that so it's a real
00:35:09
it's more of a network effect business
00:35:11
than a hard software business I think
00:35:13
it'sa
00:35:14
point this business has benefited from
00:35:17
the network effect so they had such
00:35:19
strong Network effects here's the
00:35:21
brewhaha the Donnie Brook that came up
00:35:24
uh this past week Donnie Brook so you
00:35:27
can look it
00:35:28
up I like that
00:35:31
word yeah so the company I bet you knew
00:35:34
a lot of Donnie's in Brooklyn we we I
00:35:37
was involved in a couple of Don Brooks
00:35:39
if I'm being honest and they they they
00:35:41
escalated from bruhaha typically not
00:35:44
unlike an average episode of this
00:35:46
podcast and so there are probably some
00:35:48
Donnie Brooks involving guys named
00:35:49
Donnie that yeah Donnie was typically
00:35:51
the guy start this episode is going to
00:35:53
be named the Donnie Brook episode please
00:35:55
so uh the company
00:35:57
had a massive violation of trust as they
00:36:00
were expanding to figure out other
00:36:02
businesses to come into they got into
00:36:05
What's called the secondary market for
00:36:06
those of you who don't know what the
00:36:07
secondary Market is people like to trade
00:36:09
stocks of private companies you may have
00:36:11
heard people buying and selling stripe
00:36:14
or SpaceX and so employees early
00:36:17
investors might sell their shares to
00:36:18
other people now this is not happening
00:36:20
as a primary offering from the company
00:36:22
where they raise money and and issue new
00:36:23
shares this is people who have shares
00:36:25
carda was in a great position to do this
00:36:27
because they had the cap table now on
00:36:29
your cap table might be a 100 investors
00:36:32
30 of them might be your friends family
00:36:35
very quiet you know it could be Jeff
00:36:36
Bezos who was a seed investor in
00:36:39
Google some folks at Carta who were in
00:36:42
the secondary business violated the
00:36:45
trust and the privacy of companies who
00:36:47
had Angel Investors or early stage
00:36:49
investors on their cap table and started
00:36:51
contacting them directly saying hey do
00:36:53
you want to sell your shares in company
00:36:55
a to this person we're trying to create
00:36:57
a market for it they got called out
00:37:00
publicly the CEO Henry Ward who is a
00:37:04
unique individual as uh as many CEOs are
00:37:09
tried to do some coms it was a disaster
00:37:11
of comms for a couple of days while they
00:37:13
tried to explain basically breaking
00:37:16
their own terms of service and it all
00:37:19
ended up with them selling the secondary
00:37:21
business which I understand was a tiny
00:37:23
business for them overall your thoughts
00:37:26
gentlemen I don't know if anybody why
00:37:27
you say he was an interesting individual
00:37:29
you mean um he communicates directly
00:37:32
uhhuh in a very
00:37:35
effervescent candid way okay like some
00:37:38
Founders do effervescent wow that's a
00:37:40
nice nice effervescent I me I'm just TR
00:37:44
saying's he's
00:37:45
sparkling I think he is bad at PR but
00:37:50
entertaining to listen to right like I
00:37:52
think maybe they should have had a
00:37:53
little bit of a slightly more thoughtful
00:37:56
approach to this but it all happened in
00:37:57
real time so it's very difficult to deal
00:37:58
with the crisis in real time I think I
00:38:00
have two comments go the the first is I
00:38:04
actually disagree with David Sachs I I
00:38:06
think that there's literally no concept
00:38:08
of network effects in this business and
00:38:10
it makes no sense
00:38:11
here and the reason is that when you
00:38:13
look at the public markets which are
00:38:15
infinitely
00:38:16
larger we have a vibrant public stock
00:38:18
market that has no concept of this and
00:38:20
it works where you have companies like
00:38:22
computer
00:38:23
shares you have companies like ssnc
00:38:27
there's just a a plethora of providers
00:38:29
that do fund Administration and frankly
00:38:32
I'm glad that there's a plethora of
00:38:33
providers I use some of them and I trade
00:38:35
one against the other to get a
00:38:37
constantly cheaper price we
00:38:40
use the distribution agents and
00:38:43
depending on which bank I'm working with
00:38:45
on whatever deal I have shares at
00:38:47
multiple different agents and they also
00:38:50
cost virtually nothing and I don't see a
00:38:53
world where that deflationary cost
00:38:56
reduction doesn't come to this Market
00:38:58
either because I don't see this as a as
00:39:00
a defensible area of software I think
00:39:02
it's a necessary piece of software so I
00:39:05
kind of like randomly tweeted out just
00:39:08
kind of like oh because I was just
00:39:09
watching from the sidelines now in full
00:39:11
disclosure I was a CA investor I sold
00:39:14
all my equity in a secondary transaction
00:39:16
actually speaking of secondary
00:39:17
transactions was that a good trade yeah
00:39:19
I sold yeah I sold it all two and a half
00:39:22
years ago so I I have no opinion one way
00:39:24
or the other on this company I
00:39:25
understand process automation but I
00:39:27
don't think process automation is
00:39:30
defensible so if you build software
00:39:32
around process automation you will be
00:39:35
competing in a race to the bottom on
00:39:37
price that is and I have not seen a
00:39:39
single example of a company that's
00:39:41
proven this otherwise there are
00:39:42
different companies that create real
00:39:44
locking because of what they build that
00:39:46
isn't one so I tweeted this out some
00:39:49
person sent me this and Jason to your
00:39:51
point the two most prevalent competitors
00:39:53
that they showed me were mantle and
00:39:57
I think one is a YC company and and one
00:39:59
is not but mantel and pulley I think
00:40:01
were the two that that came up the most
00:40:03
often and Jason to your point what they
00:40:05
both told me was carda is like 10K a
00:40:08
year 12K a year and these guys are 90%
00:40:11
discounted de a tenth of the price which
00:40:14
again proves there is not a lot of super
00:40:17
compelling software lock in here it's
00:40:20
useful stuff but that useful stuff is
00:40:22
eventually going to get as close to free
00:40:24
as possible these guys are proving and
00:40:26
then last night while we were at poker I
00:40:28
got this thing somebody in two days oh
00:40:32
built an open source competitor and just
00:40:35
put the code out there and said here you
00:40:36
go take it isn't that incredible exactly
00:40:40
guys that happened that happened in two
00:40:42
days from that tweet right and by the
00:40:46
way I don't know if I got how crazy is
00:40:48
that if I got a stock certificate from
00:40:50
what's the name of this
00:40:51
thing open source clone byby carta.com
00:40:55
I'd like grow gr I'd be like oh here we
00:40:58
go I've got to like bu first of all
00:41:00
that's totally myir in like five
00:41:02
different sites and this thing's
00:41:03
probably going to go out of business in
00:41:04
six months come on that's not true and
00:41:06
you know it you know it you don't know
00:41:07
where the CTS are I can actually there
00:41:09
be seriously annoying T to deal I can
00:41:11
actually tell you what's happening in
00:41:13
the market with startups startups are
00:41:15
looking at the Alternatives they want to
00:41:16
save money the bigger companies are
00:41:19
probably not as price sensitive chamat
00:41:21
so you know spending $20,000 as a Serius
00:41:24
B company nobody cares but for the start
00:41:26
s they tend to find the most efficient
00:41:29
software and you're exactly right shth
00:41:32
on that yeah my comment is less about
00:41:35
Carta itself and its price point my
00:41:38
observation is twofold one is software
00:41:41
that doesn't have a fundamental lock in
00:41:44
yeah does not have pricing Power number
00:41:47
one and number two we are almost at the
00:41:50
Tipping Point of a set of tools that
00:41:53
will allow competitors in a matter of
00:41:54
days to compete with an 80% feature
00:41:57
complete solution at a fraction of the
00:41:59
price that's my that's my generalized
00:42:01
observation as manifested in this CA
00:42:03
example in less than a week well what do
00:42:06
you do with some observation like this
00:42:07
if you have this 80% observation is
00:42:09
there anything so then I was like well
00:42:10
you know what I'm just G to go for it so
00:42:13
iing it up for you here so I I'm
00:42:15
starting this thing and I've been
00:42:17
working on this idea for a little bit
00:42:19
but and I've been experimenting with it
00:42:21
with some of my companies but then I was
00:42:22
like you know what we should just do
00:42:23
this so the concept here is we're going
00:42:26
to build this incubator it's called 8090
00:42:28
I have a team I have a bunch of
00:42:30
developers offshore and we are going
00:42:33
to basically create a hit list of
00:42:37
software that we think is relatively
00:42:39
straightforward and mispriced and could
00:42:42
be built much more efficiently in 2024
00:42:45
using all of these co-pilots and tools
00:42:47
and our our boundary conditions will be
00:42:50
can we deliver 80% of the functionality
00:42:53
at 10% of the price so at a 90% discount
00:42:56
H so 8090 is like is what is what the
00:43:00
name of the incubator is and what was
00:43:02
interesting is when I tweeted this out
00:43:04
we had 1,200 people essentially give us
00:43:06
a product road map they told us the
00:43:09
software that they would want they told
00:43:11
us the features that they need they told
00:43:12
us the things that they don't need and
00:43:13
so the idea here Jason I think is I'm
00:43:16
just going to build this in the in the
00:43:17
wild I'll create the list of companies
00:43:20
we'll publish that out let people vote
00:43:22
on it okay then we'll publish the prds
00:43:24
of what the 80% version is
00:43:26
and we're going to work backwards with
00:43:28
my
00:43:29
team in South Asia to try to build these
00:43:33
things at a temp price point so SX your
00:43:36
thoughts you're a SAS investor it's h
00:43:38
your vertical your thoughts on chat's
00:43:40
plan to be the most hated person in
00:43:42
Silicon Valley by underpricing every
00:43:46
piece of SAS offer by 90% in real time
00:43:50
well can he do it in your estimation
00:43:52
well I think there probably are
00:43:53
categories where you could do that but
00:43:56
but in general what I would say is that
00:44:00
it always looks easier from the outside
00:44:02
than from the inside meaning that you
00:44:05
look at any particular SAS category
00:44:07
leader and you're like this is easy like
00:44:10
I could do this and then when you
00:44:11
actually get into it you realize that
00:44:13
okay the product I'm seeing is kind of
00:44:15
an iceberg I'm just seeing the tip of
00:44:17
the iceberg below the waterline is all
00:44:19
the business logic that's been written
00:44:20
into the system there's like a much
00:44:22
deeper and longer list of features not
00:44:25
in every category you might be right
00:44:26
that in some categories you don't need
00:44:28
the product depth but in many other
00:44:30
categories there's just a lot of subtle
00:44:32
features usability issues that have been
00:44:34
figured out Integrations you know with
00:44:37
other ongoing support ongoing support
00:44:40
train and then you have the whole sales
00:44:41
and marketing component to it so what
00:44:43
ends up happening is you attack a
00:44:45
category saying oh this is going to be
00:44:47
easy you know a year or two into it
00:44:49
you're like wow like the category leader
00:44:52
we're not even close to where it is in
00:44:55
terms of table Stakes here and it ends
00:44:56
up being more of a slog than you thought
00:44:59
and then you find out the market doesn't
00:45:00
necessarily have as much of an incentive
00:45:02
to switch I'm not saying it can't be
00:45:04
done there are categories where I think
00:45:07
the category leaders has become stagnant
00:45:09
and has stopped innovating and I think
00:45:11
those are ripe for disruption I mean
00:45:14
look I'm kind of trying it in a way
00:45:15
we're going to be launching my S killer
00:45:18
soon I feel a lot better about that
00:45:20
because slack out acquir doesn't hasn't
00:45:22
really innovated in a few years and
00:45:24
Salesforce by the way just announced
00:45:26
zero hiring in 2024 and the slack teams
00:45:29
were like what how are we supposed to
00:45:30
hit our road map without more people
00:45:32
like what's going on here so there is
00:45:34
there is so look I definitely think it
00:45:35
can be done but I don't know I think you
00:45:38
got to choose carefully the categories
00:45:42
where the iceberg isn't bigger than you
00:45:44
think basically I want do you think that
00:45:46
there's a shift in the business model
00:45:47
for SAS companies that emerges from what
00:45:50
jamat is talking about where I think
00:45:52
right now sales and marketing cost as a
00:45:54
percent of Revenue on average average
00:45:56
for a scaling enterprise software
00:45:58
company around 55% of Revenue or
00:46:00
something in that range does that number
00:46:03
get compressed by bringing price down so
00:46:05
you bring price down but you need fewer
00:46:07
people to go in and do the selling fewer
00:46:11
F Mar that has not been the pattern I
00:46:12
mean look everyone was saying things
00:46:14
like this when enterprise software
00:46:16
shifted from on-prem to the cloud you
00:46:18
know we went from Oracle and seol to
00:46:22
salesforce.com people would say oh this
00:46:23
going to Fally change the business sales
00:46:26
won't become that important products
00:46:27
going to be all important it was true to
00:46:29
some degree I mean I do think you tried
00:46:31
to do it that was your what you
00:46:33
pioneered at yeah you you try to do
00:46:35
bottom up yeah so there was product Le
00:46:37
growth became a thing you know and a
00:46:39
very important thing and I still think
00:46:41
that's the best way to build a SAS
00:46:42
company is you let the users just try it
00:46:44
on a premium basis as opposed to having
00:46:46
sales knock on the cio's door let the
00:46:49
employees pull the product into the
00:46:51
company then go close the deal so it did
00:46:54
make important changes but it did not
00:46:56
get rid of sales I mean you know what I
00:46:58
believed doing this stuff way back in
00:47:00
2008 is to be able to get rid of sales
00:47:02
and just make Enterprise Products
00:47:04
completely self-distributing that never
00:47:06
happened people have been predicting the
00:47:08
the death of sales for a long time and
00:47:10
it's never happened I think your vision
00:47:12
is absolutely right and I think this in
00:47:14
a world of autog gpts it's going to
00:47:16
happen and I think the way that it's
00:47:18
roughly going to happen is as follows I
00:47:20
think what happens is that and Zoho is
00:47:22
is another good example of how you can
00:47:24
do this which is what you need are a
00:47:26
small set of tools that provide useful
00:47:29
capability for a company that work
00:47:31
elegantly together now when you work
00:47:33
elegantly together there's a bunch of
00:47:34
things that you need you need security
00:47:36
you need hand offs and handshakes you
00:47:38
need different ways of handling
00:47:40
exceptions you need a a common kind of
00:47:43
data model all of those things can
00:47:45
actually be configured on the Fly
00:47:48
dynamically by and between two sets of
00:47:50
software if you let the AI actually run
00:47:53
and auto configure itself and so I think
00:47:55
the experimentation is as follows you
00:47:58
have product a and product B you want to
00:47:59
adopt them both they have elements of an
00:48:02
agent that can go and autoconfigure
00:48:04
themselves to each other separately I
00:48:06
think what the CFO or the CEO does is
00:48:10
allocate a budget and that budget is an
00:48:13
agent and what that agent does is works
00:48:16
with these other agents to say okay
00:48:17
great I can spend money on these
00:48:19
features that is the thing we've not
00:48:21
explored we've always taken software
00:48:23
that we build and all of a sudden pause
00:48:26
Automation and hand it over to people to
00:48:29
run it through a relatively archaic go
00:48:31
to market process and I think what's
00:48:34
worth trying to figure out in 2024 and
00:48:36
Beyond is how to use these tools to
00:48:39
automate all of the low-level
00:48:40
negotiation that happens before you can
00:48:42
adopt software I just think it's totally
00:48:45
unnecessary and I think that this is
00:48:47
where software can do a very powerful
00:48:50
job on behalf of the salesperson does it
00:48:52
mean the salesperson is totally out of
00:48:53
the loop no but I do think that if these
00:48:57
tools are lightweight enough especially
00:48:59
the young Nimble companies will actually
00:49:02
Sayre my procurement person is actually
00:49:05
an AI agent with a budget and it's the
00:49:08
products that then figure out how to
00:49:09
negotiate for the share of that budget
00:49:11
and then configure how to work amongst
00:49:12
itself that is the key Innovation that I
00:49:16
think someone will figure out that is
00:49:18
the Zoho 2.0 right that is the
00:49:21
Salesforce 2.0 it's sort of this app App
00:49:24
Store common data bus kind of an idea
00:49:27
that that I think somebody will build I
00:49:29
would like to try to help well people
00:49:31
have started building a chth because
00:49:33
you're starting to see the features
00:49:35
overlap in many programs you're seeing
00:49:36
HubSpot Salesforce zenes they all kind
00:49:39
of getting into each other's businesses
00:49:40
those those are that's a great
00:49:42
observation but those are all closed
00:49:44
products what I mean is like there is
00:49:46
like a totally open protocol and set of
00:49:50
standards for how product a integrates
00:49:52
and interacts with product B on many
00:49:55
levels
00:49:56
right from security to data model and
00:49:58
everything in and I think that that is
00:50:00
what needs to get figured out and be
00:50:02
very much an open source idea the great
00:50:04
part about this is this is going to be
00:50:06
massive competition it will lower prices
00:50:08
it'll add features and uh the the the
00:50:11
team over at 37 signals is doing
00:50:13
something similar if you look at
00:50:14
once.com they are also going to go after
00:50:18
slack Sachs and they're going to just
00:50:19
charge one time for the software I think
00:50:21
I may have mentioned it on a previous
00:50:22
one but their concept yeah just
00:50:26
yeah can we can we take a moment
00:50:27
actually Nick can you throw up my tweet
00:50:29
can you take a moment to just say thank
00:50:31
you to steuart Butterfield and what he
00:50:34
pulled off thank you as a series a
00:50:37
investor I thank you sir yeah
00:50:39
27 times ARR is looking like a pretty
00:50:43
great exit multiple oh there's my reply
00:50:45
oh yeah look at my reply yeah I mean my
00:50:49
gosh what a deal and at the time it was
00:50:53
they were public and people were
00:50:54
wondering like hm was this a good deal
00:50:57
or not should they have stayed
00:50:58
independent but the product velocity
00:51:00
never seemed to get going how are
00:51:03
you thinking about what the critical go
00:51:07
to market MVP capability is for slack so
00:51:10
this here's what I'm curious
00:51:12
about
00:51:13
there's chat right but the problem with
00:51:18
chat in my opinion is that slack has
00:51:20
become totally overrun where you could
00:51:21
be a five person company and all of a
00:51:23
sudden you have 500 channels so there's
00:51:25
no scarcity and that scarcity is in my
00:51:27
opinion what makes what makes all
00:51:30
corporate chats in this modern version
00:51:32
teams included totally unusable so much
00:51:35
noise and distraction so how are you
00:51:38
thinking about that product problem yeah
00:51:40
I totally agree with that what you hear
00:51:42
from every single company that has more
00:51:44
than I don't know 50 employees is that
00:51:47
slack doesn't scale because what happens
00:51:50
is you have a channel get created and
00:51:54
there's a whole bunch of conversations
00:51:55
in there that are kind of munged
00:51:56
together and if anybody in the company
00:51:58
wants to participate in any one of those
00:51:59
conversations they have to join that
00:52:01
entire Channel and as a result every
00:52:04
single employee ends up in every single
00:52:05
Channel and it's just a giant mess and
00:52:07
there's way too much noise so I think
00:52:10
that the channel model was beautiful in
00:52:12
terms of letting people get started
00:52:14
really easily you just jump into a
00:52:15
channel and start posting that's why it
00:52:17
took off but it's not particular enough
00:52:20
in terms of of addressing conversations
00:52:24
to the right people so that's basically
00:52:26
one of the problems that we're fixing
00:52:28
the other thing I've heard from people
00:52:30
is that we love chat but we also really
00:52:32
like the feed that Yammer had as a way
00:52:35
to quickly scroll through new stuff top
00:52:38
level corporate feed people forget that
00:52:39
there was like this hey if you want to
00:52:41
get pulse of the entire organization go
00:52:43
to this one corporate Fe we were the
00:52:44
first ones to figure out that like a
00:52:46
feed should be used inside of an
00:52:48
Enterprise not just in a consumer social
00:52:50
network so in any event I i' say those
00:52:53
are like two of the main Concepts is
00:52:55
combining feed and chat in a way that
00:52:57
actually makes sense and solving the
00:52:59
noise the signal noise problem do you
00:53:01
have a name for it yet yeah it's gonna
00:53:03
be called glue oh I love that can I
00:53:06
remind you can I can I remind you that
00:53:09
as a as a humble investor sir I I I
00:53:12
think I was part of Yammer and slack so
00:53:15
iocation I can add value you're in
00:53:18
you're in there's just one requirement
00:53:19
for the early investors is you guys
00:53:22
actually have to use it you got to do a
00:53:23
rip and replace on your slack and what
00:53:26
sure sure if you're willing to do that
00:53:27
you're in perfect I'm in I'll take 250
00:53:30
500k yeah lock me in first
00:53:32
place I'll take yeah I mean so I think
00:53:34
what we're going to do is before launch
00:53:36
we'll do like a seed round nice right
00:53:38
now it's all been incubated by Craft so
00:53:40
we'll do a seed
00:53:43
round milon six million post six post
00:53:46
I'll put 50 in at six
00:53:48
pre 56 post that cheap but it won't be
00:53:52
it won't be a super expensive round
00:53:53
because what we want to do is
00:53:55
incentivize you know influencers to like
00:53:58
sport the product switch to the product
00:54:00
so it really is going to be do you have
00:54:02
glue.com uh we have glue. a oh wow nice
00:54:08
I was gonna get 8090 a but then I didn't
00:54:11
like it you know what I got instead tell
00:54:12
me if you like this 8090 in so it's just
00:54:16
8090 Inc yeah it's fine it doesn't
00:54:19
matter everybody searches I mean
00:54:20
eventually you fake it till you make it
00:54:22
if the 8090 domain happens you get it
00:54:25
you put get orgo 89.com so do that
00:54:28
before the show gets published what is
00:54:29
it get or go like if people have an app
00:54:32
get 890 get 890 or go 890 so you know if
00:54:36
it's a service you say go 8090 and if
00:54:38
it's whatever you say get if it's an app
00:54:40
or something right like you're just
00:54:41
gonna go get it here at this domain name
00:54:43
it's justas remember I also got VC sasco
00:54:46
boom.com oh excellent well I have wet
00:54:49
your people don't remember it's for a
00:54:50
call back I have wyou be.com I think it
00:54:53
just goes to wyou be. just goes to our
00:54:56
website so that I mean that was the
00:54:58
basic
00:54:59
Scandal Sachs they let the sales team
00:55:03
doing secondary apparently or somebody
00:55:05
broke a rule they weren't exactly clear
00:55:07
with it it sounded to me like you know
00:55:10
they didn't want to throw anybody under
00:55:11
the bus
00:55:13
exactly but how big of a violation is it
00:55:16
to let people go sell into the cap table
00:55:20
secondary shares without the CEO or your
00:55:22
customer even knowing that you access
00:55:24
that data where would you put that on a
00:55:26
violation of trust scale I think it was
00:55:28
a huge issue for them because the only
00:55:30
reason STS give their data to Carta is
00:55:33
because they trust them to keep it
00:55:35
private yes and I think a big part of
00:55:37
the problem with the Carta vision of
00:55:39
creating the secondary Marketplace is
00:55:41
that Founders don't want it
00:55:43
fundamentally that's the problem I mean
00:55:44
Carta is in the perfect position to
00:55:47
rationalize and make liquid the
00:55:49
secondary Market the vision was correct
00:55:52
in that sense and the reason for that is
00:55:55
is because carda not only has the cap
00:55:57
table and they know who all the
00:55:58
investors are they also have all the
00:56:00
documents they got all of your corporate
00:56:01
documents the buy laws all that kind of
00:56:03
stuff they can very easily execute these
00:56:06
transactions so CA was in a great
00:56:09
position to replace all these secondary
00:56:10
brokers who are running around creating
00:56:12
books on their own the problem they have
00:56:15
is that at the end of the day Founders
00:56:17
don't really want secondary markets to
00:56:19
take place in their company shares and I
00:56:23
think there's a few reasons for that one
00:56:24
is is price Discovery I think a lot of
00:56:27
these startups now if their shares were
00:56:29
to be freely traded would be trading
00:56:31
below bad timing below the last rounds
00:56:35
Mark so they don't want it second the
00:56:38
founders don't necessarily want their
00:56:40
investors getting out and then getting
00:56:41
new investors on the cap table that they
00:56:43
don't know so Founders are somewhat
00:56:45
particular about who their shareholders
00:56:47
are it's different than public companies
00:56:49
in that way I mean Apple doesn't really
00:56:51
care who it shareholders are private
00:56:53
companies do care do you think that
00:56:54
that's sustainable in a world where
00:56:55
companies take 14 or 15 years and
00:56:57
they're trying to retain
00:56:59
Talent well I think it would be better
00:57:01
for everybody if there was more
00:57:03
organized liquidity I mean one of the
00:57:05
things I love that SpaceX has done
00:57:08
perfect is that for the last number of
00:57:09
years now they've had a tender offer
00:57:12
every year and not even every year like
00:57:13
almost every quarter right it's every
00:57:14
six months I think was what my
00:57:16
understanding of it is but yeah I mean
00:57:18
it would be think about that example so
00:57:20
with SpaceX it's been up and to the
00:57:22
right on a pretty consistent basis so
00:57:24
every tender round has been a bump
00:57:27
sometimes it's been a small bump
00:57:28
sometimes it's been a larger bump the
00:57:30
company I don't think has gotten greedy
00:57:32
so they haven't tried to shoot the moon
00:57:35
and raise the valuation too much so
00:57:36
they've been able to keep a very
00:57:37
organized process and they they've had
00:57:39
this attitude from the beginning of
00:57:40
letting their employees and investors
00:57:43
get liquidity when they need to so it's
00:57:45
been great but that's very different by
00:57:47
the way that that sort of organized
00:57:49
tender process is very different than
00:57:51
the secondary Market that cardo is
00:57:53
organizing right because Carta was
00:57:56
trying to do what all these secondary
00:57:57
Brokers are doing which is they hit up
00:57:59
people one at a time and just say are
00:58:00
you looking to buy or sell and they're
00:58:02
trying to organize secondary
00:58:03
transactions that are not part of an
00:58:06
official process and I think that's a
00:58:09
huge part of the problem
00:58:10
here freeberg did you have thoughts on
00:58:12
it yeah well I mean there's an element
00:58:14
of secondary transactions in private
00:58:17
companies that are unstructured
00:58:18
generally being a problem the issue with
00:58:21
cardo was was there a violation of trust
00:58:23
with respect to the transparency to the
00:58:25
cap table that they have access to
00:58:26
because they have all the data in their
00:58:28
systems and when I was at Google in 04
00:58:32
or so
00:58:35
Sergey was kind of throwing around the
00:58:38
idea why don't we start a hedge fund
00:58:40
because we have all this data about what
00:58:41
people are searching for and we can see
00:58:43
all of this consumer behavior and we
00:58:45
could trade on that and have a huge data
00:58:47
advantage in the market place and
00:58:51
ultimately whether or not there was an
00:58:54
impro iety of the use of data and even
00:58:57
if we excluded personal data and search
00:58:58
data just using internet based traffic
00:59:00
and internet data the perception of the
00:59:02
problem would have damaged Google's
00:59:04
brand so much first of all is there an
00:59:06
actual conflict where you're taking
00:59:08
people's what they consider to be
00:59:09
private data and using that to make
00:59:11
money from their data without their
00:59:13
permission or acknowledgement or
00:59:15
explicit consent and secondly even if
00:59:18
you are doing this in a way that doesn't
00:59:20
use their data because you just
00:59:21
generally have knowledge about who
00:59:22
buyers and sellers are in the market
00:59:25
outside of your software The View that
00:59:27
you may be using the the data in
00:59:29
Conflict uh can damage your brand and
00:59:31
damage your customer relationship so
00:59:33
much so it seems in hindsight a little
00:59:36
silly but I think to Jam's Point earlier
00:59:38
it may indicate the necessity for them
00:59:40
to think about building another business
00:59:41
on top of this core software business
00:59:43
that is a more true Marketplace driven
00:59:45
business so they can make you know over
00:59:47
time more money and that's probably
00:59:48
where this all came from they saw a need
00:59:51
to build something that was more than
00:59:52
just monthly subscription fees they
00:59:54
weren't making money from it and they
00:59:56
shut it down it's true that Carta is
01:00:00
trying to become a multi-product
01:00:01
business they started with you know
01:00:03
startup cap tables then they added fund
01:00:05
management then they added this broker
01:00:07
business but if you read Henry's last
01:00:09
Blog the secondary Market is what he
01:00:12
originally wanted to disrupt is he
01:00:14
always wanted to create the secondary
01:00:16
market and he created the cap table
01:00:19
business the SAS software as a way to
01:00:21
get to that yeah I think what he's
01:00:23
realized is that the real value is in
01:00:25
the SAS software and this Marketplace is
01:00:27
not that valuable I mean the the SAS
01:00:29
business is doing something like 250
01:00:31
million a year of Revenue and the broker
01:00:33
business was only doing a few million
01:00:35
yeah three million so I think the value
01:00:37
has turned out to be in the SAS and
01:00:39
moreover this broker business was
01:00:41
compromising the trust and safety or the
01:00:45
perception of trust that the company has
01:00:47
from customers the problem with that SAS
01:00:49
revenue is if you look at mantle and
01:00:52
pulley that 250 million could could be
01:00:54
25 million and Cake my investment yeah
01:00:58
and Cake sorry yeah and cake but but the
01:01:01
point is the fact that there are there
01:01:03
are many competitors I think is a sign
01:01:05
of the of a low barrier to entry and a
01:01:09
lack of a true fundamental lock in let's
01:01:11
say you are an investor and you're
01:01:13
looking at pulley or mantle why would
01:01:15
you even think that's an attractive
01:01:17
company to invest in if success looks
01:01:20
like you're compressing a $250 million
01:01:22
Market down to 25 million like what's
01:01:24
the point
01:01:25
well I I think a lot of these
01:01:26
competitors got funded during the whole
01:01:27
Zer era where everything got funded I
01:01:30
mean if you were if you were to look at
01:01:32
that market today why would you even
01:01:33
fund a disruptor well so look I think
01:01:36
man there are other strategies too yeah
01:01:38
there's other strategies you could add
01:01:39
on to this in adjacencies my
01:01:41
understanding is mantle and pulley
01:01:42
raised in the low single digit millions
01:01:45
that gives them a lot of room to run a
01:01:47
25 and $50 million business profitably
01:01:50
and never raise any more money the
01:01:52
problem is on the opposite side if you
01:01:54
raise money at eight or N9 or 10 billion
01:01:56
dollar when companies trade at 20 times
01:01:59
and now companies trade it six times now
01:02:01
all of a sudden you have to have $1.3
01:02:03
billion of Revenue a year to break even
01:02:07
and I think that's the real problem so
01:02:09
it's not that Henry hasn't built a great
01:02:10
company I think he deserves a lot of
01:02:12
credit the question is entry point and
01:02:14
the question is upside and the upside is
01:02:17
governed by the difficulty of the things
01:02:19
that you're doing and how much pricing
01:02:22
power you have for those difficult
01:02:23
things and so I think what we're
01:02:25
realizing is that there are few
01:02:27
difficult things in software few I just
01:02:30
like it's just true and as a result
01:02:32
every product this is not a carda thing
01:02:35
every product will see a ton of
01:02:37
competitors so the only thing that you
01:02:39
can do is have an extremely leveraged
01:02:42
Opex and an extremely low cost to serve
01:02:47
that is the only predictive protective
01:02:49
mechanism one has it seems to me on the
01:02:51
outside looking in nwork effects are
01:02:53
also important unless you have an
01:02:56
Instagram you're right that product is
01:02:58
infinitely better with everybody or a
01:03:00
Tik Tok great now you can just you can
01:03:02
spend as much money as you
01:03:03
want but that's I think procedural
01:03:08
software
01:03:09
is yeah I don't I mean look we're we're
01:03:11
going to just have to agree to disagree
01:03:13
I think there is some pricing risk to
01:03:16
carda from these competitors but my
01:03:18
guesses it ends up being stickier than
01:03:20
that but in any event I mean I do think
01:03:23
that Henry at the end of they pulled off
01:03:24
a nice save by just getting rid of the
01:03:26
business agree altogether I think that
01:03:28
was a smart way to respond clearly the
01:03:30
First Response didn't work no the First
01:03:34
Response yeah yeah it was a very
01:03:36
confusing denial where he said this
01:03:38
isn't our policy but he also blamed he
01:03:41
also got into it and blamed the person
01:03:43
who called him out on it was like what
01:03:45
why are you calling us out on this and
01:03:47
then like every founder was like because
01:03:48
you violated our trust and he was like
01:03:50
oh yeah sorry yeah well showing people
01:03:53
are showing like email campaigns that
01:03:56
have been going on for months and it
01:03:57
seemed much more organized and it it was
01:03:59
very hard to believe that this was just
01:04:00
an accident instead of a deliberate
01:04:02
strategy and you could see the whole
01:04:04
starb Community was was you know
01:04:06
evaluating its options in real time on X
01:04:09
yeah and that's when he came out and hit
01:04:11
the whole thing with a sledgehammer and
01:04:12
just said we're going to get out of this
01:04:13
business smart and I think it was really
01:04:15
smart to do that it's kind of quell the
01:04:17
crisis like I said I don't think this is
01:04:19
a business that startup Founders want
01:04:22
their cap table software to be engaged
01:04:25
in no definitely not and just by the way
01:04:27
just a third point on that you know one
01:04:29
reason was price Discovery another
01:04:30
reason was having undesirable
01:04:32
shareholders the the third reason is
01:04:33
just Founders don't want to create a
01:04:35
competing fundraising process to primary
01:04:38
financing yeah I think this is actually
01:04:40
a really important point the reason why
01:04:43
Founders don't want there to be a
01:04:44
secondary Market is because their
01:04:46
company may need to raise money yeah you
01:04:48
want to go through the front door to the
01:04:50
CEO and the board not the side door to
01:04:52
get a get some uh yeah you know exposure
01:04:55
to the company well I think I think in
01:04:56
the Zer era where there was all this
01:04:58
excess funding flying around then it
01:05:01
kind of made sense to let secondaries
01:05:03
happen but in a world in which funding
01:05:04
is scarce you want that money to go into
01:05:07
the company not into the pockets of the
01:05:09
early shareholders and so I think like
01:05:11
the timing of this whole thing is like
01:05:12
really off it all feels like kind of a
01:05:14
function of Zer in its own way agree all
01:05:17
right sex you were in the group chat
01:05:19
talking about this viral clip about Star
01:05:22
Wars you wanted to chime in on it maybe
01:05:23
you could uh queue it up Nick I mean as
01:05:25
you may recall my pick for business
01:05:27
loser of 2023 was Disney and it seems
01:05:30
like they haven't learned anything from
01:05:32
the horrible year they've just had what
01:05:34
is the balance of activating a force for
01:05:39
change but also trying
01:05:42
to permeate that patriarchy that power
01:05:47
structure and is that a part of the
01:05:49
calculation of your art as well and and
01:05:52
what's been the reaction to that oh
01:05:55
absolutely um I like to make men
01:05:58
uncomfortable I enjoy making men
01:06:03
uncomfortable this is the new director
01:06:05
of Star Wars all right your thoughts
01:06:06
there well I saw the comment on that
01:06:09
tweet was this is going to be the
01:06:11
biggest Disney flop yet isn't that what
01:06:13
it said I mean look I I don't know what
01:06:15
Bob Iger is doing he seems to want to
01:06:18
burn Star Wars to the ground like the
01:06:19
rest of the Disney Brands by playing
01:06:23
politics this director doesn't seem to
01:06:26
have had a lifelong fandom for the
01:06:29
franchise and she didn't really talk
01:06:30
about how she had grown up marinating in
01:06:33
this universe loving its
01:06:35
characters her background is in
01:06:37
documentary film making and there's
01:06:38
nothing wrong with that but there's no
01:06:41
indication from her that she truly loves
01:06:43
Star Wars and in fact the comments that
01:06:45
she's making right now are indicating
01:06:47
that she's going to politicize it the
01:06:48
patriarchy is not why anybody is a fan
01:06:51
of Star Wars that goes to see its movies
01:06:53
so nobody wants to see that movie it's
01:06:56
the opposite it's the opposite they want
01:06:57
to avoid it they don't go to Star Wars
01:06:59
movies for the politics
01:07:02
and she's also trying to solve a problem
01:07:04
that doesn't really exist I mean science
01:07:07
fiction May skew mail in its fanbase but
01:07:10
it's not because sci-fi franchises don't
01:07:14
like strong female characters I mean
01:07:16
just stepping out to the larger world
01:07:18
for a second you've got Ripley and
01:07:19
Aliens you've got Sarah Connor and the
01:07:21
Terminator movies you've got Princess
01:07:23
Leia Trinity in The Matrix you got
01:07:25
Princess Leia
01:07:27
Padme Ahsoka in Star Wars you seem to
01:07:31
know a lot of these female Chara you're
01:07:32
deep in Stars Wars I'm AAR you got some
01:07:36
good PS here so not this idea that there
01:07:38
aren't Fe strong female characters in
01:07:40
Star Wars is that's just kind of a myth
01:07:43
right and yeah so it's not it's not like
01:07:45
the universe needs to be reset in this
01:07:47
way and you could just see the whole fan
01:07:50
Community kind of groaned at this
01:07:52
comment because they're just like oh
01:07:54
here we go again St Star Wars is going
01:07:56
to ruin another franchise by playing
01:07:59
politics and the amazing thing is that
01:08:01
is that you know iards doesn't seem to
01:08:03
learn from this at all but there's
01:08:05
nothing wrong with having a female
01:08:07
director either right SX I mean you're
01:08:09
not saying that you're saying that a
01:08:10
particular person who has a political
01:08:12
agenda in how they want to shape the
01:08:15
story of Star Wars is the issue right of
01:08:17
course I'll also say I think one of the
01:08:19
core driving narratives emotional
01:08:21
narratives of Star Wars is the oppressor
01:08:25
oppressed it's a highly political it's a
01:08:27
highly political story I've always said
01:08:29
I think Star Wars has been like the most
01:08:32
anti- technology affector in society
01:08:35
since the 70s because Star Wars is all
01:08:38
about the I've said this before but the
01:08:39
Ewoks destroying the Death Star and like
01:08:42
the no Tech overcoming the oppressor big
01:08:45
Tech and so we have to destroy big Tech
01:08:48
and anyone who has the better technology
01:08:50
is very likely the oppressor and uh they
01:08:53
have all the wealth and they have all
01:08:54
the power and they have all the control
01:08:56
and so those who do not have the power
01:08:58
do not have the wealth do not have the
01:08:59
control do not have the technology have
01:09:01
to go and destroy that whether it's the
01:09:04
Empire or that you know kind of evil
01:09:05
force and that's the core Narrative of
01:09:07
Star Wars so I do think that at its
01:09:09
heart Star Wars in and of itself is an
01:09:11
oppressor oppressed uh storyline that
01:09:14
relates very deeply to technology and
01:09:16
wealth and has helped shape the Western
01:09:19
psyche for a couple of decades in a very
01:09:21
meaningful way or has really reflected
01:09:23
Maybe perhaps the Western psyche you
01:09:25
think Andor I think you're super
01:09:28
imposing current day terminology on a
01:09:33
movie that was created in the first one
01:09:35
in the 1970s when intersectionality did
01:09:38
not exist yes there are political
01:09:40
overtones to Star Wars you've got the
01:09:42
rebel alliance against the empire that
01:09:45
is not diversity politics sorry it's
01:09:47
about I'm not saying diversity politics
01:09:49
I I it's really about the corruption of
01:09:52
power I mean you know the famous phrase
01:09:55
by Lord Acton which is power corrupts
01:09:57
and absolute power corrupts absolutely
01:09:59
to me those are the political overtones
01:10:01
of Star Wars it's not yeah so you always
01:10:03
diving the world into intersectional
01:10:05
categories it was about War I mean let's
01:10:07
be honest it was Lucas was a child of
01:10:09
the Vietnam War era and he was highly
01:10:11
influenced as was Francis for Copa and
01:10:14
uh yeah the Americans with all this
01:10:16
wealth and power came into the jungle to
01:10:17
try and destroy a peasant nation and
01:10:20
cause death upon a peasant nation and
01:10:22
the peasant Nation survived W and there
01:10:25
was a narrative to that that I think is
01:10:26
reflected in this and is reflected very
01:10:28
deeply in a lot of the stories that have
01:10:29
come since and I'm not saying Dei is as
01:10:32
a solution was the storyline out of the
01:10:35
original Star Wars but the original Star
01:10:36
Wars was very much driven by The
01:10:38
Leverage that technology provides to
01:10:40
those in power that gives them you know
01:10:43
extraordinary influence over those who
01:10:44
don't have power well if there were
01:10:46
political overtones to the original two
01:10:48
trilogies and actually I I think there
01:10:50
were some really interesting themes
01:10:51
especially in that second one where pal
01:10:53
not even not even not evenl by the way
01:10:55
not even political let me let me just be
01:10:57
clear social right so social systems
01:11:00
which I understand but my point is that
01:11:03
Lucas didn't hit anybody over the head
01:11:06
with those themes and his goal certainly
01:11:09
wasn't to make anyone feel uncomfortable
01:11:11
his goal was to entertain and whatever
01:11:15
political or social overtones there were
01:11:17
were very much in the background because
01:11:18
that's what good art does one of the
01:11:20
reasons why Hollywood produces so few
01:11:24
really interesting movies these days is
01:11:26
because the political overtones are
01:11:28
really in the Forefront and they really
01:11:30
hit you over the head with them and so
01:11:33
therefore they're just not very
01:11:34
entertaining it's just not very good art
01:11:36
and I think that's why the fan Community
01:11:38
was like oh here we go again let me just
01:11:40
set make sure people understand this is
01:11:42
a 9-year-old clip and for context this
01:11:44
is probably during like the you know
01:11:46
early days of the Dei movement just so
01:11:49
we're clear on that but you had another
01:11:50
point to make daavid go but Zach I think
01:11:52
that Hollywood has imposed upon itself a
01:11:56
certain degrees of restriction on the
01:11:58
Artistry of the artists in the community
01:12:00
because the standards now to be
01:12:02
nominated for Best Picture Define a
01:12:05
number of Dei representation and
01:12:07
inclusion standards and they're listed
01:12:09
here so in order to and I if you guys
01:12:11
will remember at our Summit uh in La I
01:12:14
asked GTH paltro about this and she
01:12:16
wasn't familiar with these changes that
01:12:18
had been put in place but in order to
01:12:20
qualify for a best picture nomination
01:12:23
you have to meet some of these standards
01:12:25
and these standards include onscreen
01:12:27
representation beams and narratives that
01:12:30
relate to having at least one of the
01:12:32
leag characters or significant
01:12:34
supporting actors come from Min minority
01:12:36
background including ethnic
01:12:40
background or by gender could get
01:12:42
nominated for an Oscar look I'm South
01:12:46
Asian look I'm in the paren here or at
01:12:50
least 30 or 30% of the actors in a
01:12:53
second secondary C in the secondary
01:12:55
group have to be women racial or ethnic
01:12:57
group lgbtq Plus or people with
01:13:00
cognitive or physical disabilities or
01:13:02
who are deaf or heart of hearing the
01:13:04
main storyline theme or Narrative of the
01:13:06
film is centered on an unrepresented
01:13:08
group either women racial or ethnic
01:13:10
group or lgbtq positive they can meet
01:13:12
the criteria if the creative leadership
01:13:14
team has at least two of the following
01:13:16
creative leadership positions met by one
01:13:18
of the underrepresented groups and so on
01:13:20
and so forth if you're an artist a
01:13:22
filmmaker and you wanted to make a film
01:13:24
a World War II biopic which uh was on
01:13:27
the front lines in World War II and was
01:13:29
entirely white males would you have been
01:13:31
able to be nominated for best picture or
01:13:34
would you have had to go and you know
01:13:36
take some actions that have would have
01:13:38
affected your Artistry and your freedom
01:13:40
of expression in making that film and as
01:13:42
a big fan of film and you guys I think
01:13:44
all of us are probably in the same boat
01:13:46
at least a couple of us are are three of
01:13:47
us are three of us are this would have
01:13:49
limited a lot of the best pictures of
01:13:51
all time I would say if you had to
01:13:53
impose standards on what the artists
01:13:56
were allowed to do or how they were
01:13:58
allowed to make their film and that's
01:13:59
really what's taken over Hollywood so I
01:14:01
sack I would say it's not just a bob
01:14:02
Iger Disney thing but this has become a
01:14:04
standard in Hollywood that the the Dei
01:14:07
movement has so deeply affected the
01:14:09
intentionality of what has historically
01:14:11
been a truly
01:14:13
creative talk Hollywood writers if you
01:14:15
talk to Hollywood writers they'll tell
01:14:17
you that things have become extremely
01:14:18
politicized and it's a mess Iger has
01:14:21
been a little bit contradictory about
01:14:22
this in April last year there's this
01:14:24
article saying that Iger was doubling
01:14:26
down on inclusivity and diversity and he
01:14:29
described that a shareholders meeting by
01:14:31
November he was saying that Disney
01:14:34
movies had become too focused on
01:14:35
messaging so it seemed like he was
01:14:38
finally getting it that after the
01:14:40
horrible year they had but then we had
01:14:42
this Star Wars news and it seems to
01:14:44
suggest that they were hiring a director
01:14:47
who really wasn't right for the material
01:14:49
so we'll just have to see my sense is
01:14:52
that they have not made the course
01:14:54
correction they need if you want to see
01:14:56
the peak of this there was a bunch of
01:14:58
blowback on Dunkirk an absolutely T to
01:15:02
force of a film if you haven't seen it
01:15:04
especially go see it in IMAX just
01:15:06
extraordinary Christopher Nolan film
01:15:08
that it lacked uh diversity and gender
01:15:10
diversity it's a war film uh
01:15:13
historically kind of hard to make it
01:15:15
about anything else if it was just on
01:15:17
narrowly focused on a couple of battles
01:15:20
and so yeah this is this has gotten to
01:15:22
the point of yeah a little bit of
01:15:23
absurdity I I relate this very much to
01:15:26
the point that we made a couple months
01:15:27
ago about standup Comics being
01:15:29
restricted and canceled based on the
01:15:30
things that they say that are offensive
01:15:33
to the the narratives of social
01:15:35
inclusion and Dei these are artists who
01:15:38
should have freedom of expression
01:15:40
creative freedom unlimited creative
01:15:42
freedom if we want to have a different
01:15:43
set of standards for how we value the
01:15:45
art that comes out of it fine but I
01:15:47
don't think that it ends up being true
01:15:50
to what the peer group would otherwise
01:15:51
recognize and say
01:15:53
you know is the greatest art of the year
01:15:56
is the the most impressive achievement
01:15:58
of the year in some particular artistic
01:16:00
discipline it's really sad there's also
01:16:03
been this change in live performances in
01:16:07
Symphonies used to be that to avoid
01:16:09
discrimination in auditions for symphony
01:16:12
orchestras auditions were conducted
01:16:14
behind a curtain so the director and
01:16:17
those who were making the election on
01:16:18
who would get to join the orchestra
01:16:20
would listen and they wouldn't see the
01:16:22
person and Performing because they were
01:16:24
behind a curtain recently that trend has
01:16:27
changed and now those artists are
01:16:29
required to perform not behind a curtain
01:16:31
but in front of the curtain so that we
01:16:33
can judge them not on their musicianship
01:16:35
and their Artistry but on their race on
01:16:37
their gender and on some other standards
01:16:40
so I think this is obviously part of a
01:16:42
very broad narrative but it's it's very
01:16:43
deeply affecting can I ask a question
01:16:45
the community of Arts I'm about to bring
01:16:47
you in on this Jal yeah is listenership
01:16:50
of the symphony gone up or down it's
01:16:53
been going down for a long time but Sy
01:16:56
around the world are seeing decline in
01:16:57
audience but it's it happened before the
01:16:59
changes yeah it's been happening yeah
01:17:02
has it accelerated or has it slowed the
01:17:04
negative Decay to zero I'm not sure I'm
01:17:07
not sure it's difference yeah yeah to be
01:17:09
honest well if it hasn't if it hasn't
01:17:10
made a difference then you're then it
01:17:13
hasn't made a difference I mean I think
01:17:14
this is part of a wider discussion of
01:17:16
Dei the goal of some of uh some forms of
01:17:19
art like these live Performing Arts may
01:17:21
not necessarily be audience growth the
01:17:23
goal may be you know finding the best
01:17:25
artist I suspect but I suspect it it
01:17:28
should be to sustain itself indefinitely
01:17:31
I mean that was by the way that's a big
01:17:32
Point I've had which I quality of Roads
01:17:35
as the quality of Roads fewer people
01:17:36
will care because there are other
01:17:38
options that you can go to that are high
01:17:40
quality and then these things will die
01:17:42
off and you know maybe that's what it's
01:17:44
supposed to happen I mean this is part
01:17:46
of a wider discussion about I think Dei
01:17:49
facing the reality of whether it's like
01:17:52
I guess this whole pilot thing with
01:17:54
Boeing and who's getting hired to be
01:17:55
pilots and training and what should the
01:17:58
focus of a company board be what should
01:18:00
the co focus of hiring be the problem I
01:18:03
think with the argument you guys are
01:18:04
having in my opinion is that it's a
01:18:07
little too premature and the reason is
01:18:09
that there are other people who will
01:18:11
make semi credible
01:18:13
claims while you guys make semi credible
01:18:16
claims and no progress is made on this
01:18:19
whole Dei discussion as it touches
01:18:21
Cinema and Hollywood or music
01:18:23
what's much easier if you want to
01:18:25
dismantle Dei which will eventually come
01:18:28
and cleanse Hollywood and the symphony
01:18:32
is if you go to the jobs where it's
01:18:33
irrefutable where even the most Ardent
01:18:37
defender of Dei says you know what I
01:18:39
can't take that risk with my own family
01:18:41
or with my own life and the lives of my
01:18:43
family and I think that we're we would
01:18:46
be better off if we just focus in a
01:18:48
really disciplin way on those and get
01:18:50
the criteria to be entirely based on
01:18:52
skill and then eventually it'll come
01:18:55
back in Hollywood and the symphony will
01:18:57
also get
01:18:58
cleansed so doctors Pilots I mean I I I
01:19:02
would say certain doctors I would just
01:19:04
say Pilots for sure I would say surgeons
01:19:07
I would say that you could probably go
01:19:10
through I haven't thought enough about
01:19:12
it to know but you could go through and
01:19:14
say systematically what are the
01:19:16
categories in the
01:19:19
professional world that we interact with
01:19:22
every day where
01:19:24
skill can be the only criteria must be
01:19:29
because otherwise innocent lives will be
01:19:31
lost that's an important question I I
01:19:34
agree with you that the fundamental
01:19:35
choice that we have as Society is
01:19:37
whether skills is going to be the
01:19:39
determinant of success skills and Merit
01:19:42
or whether it's going to be about
01:19:43
something else you know and as soon as
01:19:45
you tell somebody that they can't get
01:19:47
the job even though they're the most
01:19:49
qualified because of their race or
01:19:51
gender then I think that is
01:19:53
racism or sexism so it's doubly bad but
01:19:56
Jam I think the I think the reason why
01:19:58
this happens is because people don't
01:20:01
really have the right skin in the game
01:20:03
so the reason why the the recent
01:20:06
discussions about pilots and
01:20:09
whether cockpits should have this sort
01:20:11
of Dei program is that everyone can
01:20:13
relate everyone has skin in the game if
01:20:15
your kids are going to fly on a plane
01:20:19
the only determinant you want for who
01:20:21
the pilot is is skill
01:20:23
obviously because you have real skin in
01:20:25
the game the problem is people will will
01:20:27
falsify their preferences when they're
01:20:29
discussing other people flying on the
01:20:31
plane so people will start saying well
01:20:34
you know we need to have Dei programs
01:20:36
you know in other words when it doesn't
01:20:37
affect me you're willing to basically
01:20:40
virtue signal and genu flect towards
01:20:43
these programs and I think that that's
01:20:45
the fundamental problem is that people
01:20:47
will pretend to support something other
01:20:50
than skill in all these contexts where
01:20:53
they're not directly affected but as a
01:20:55
society we are with respect to Aviation
01:20:58
specifically my thought is
01:21:00
that this is a very easy skill to
01:21:04
determine who is high quality versus not
01:21:07
because you have such
01:21:09
sophisticated training apparatus and
01:21:12
schemes simulators simulators and all of
01:21:14
this stuff it's easy to know how to rank
01:21:16
people from one through n and I think
01:21:19
that as a society if you want an
01:21:21
efficient transportation infrastructure
01:21:23
and Aviation infrastructure where the
01:21:24
consequences are really bad if things go
01:21:26
wrong you just want the best period end
01:21:28
of story however I think it's also fair
01:21:30
to say that then the government owes the
01:21:33
people a responsibility to advance the
01:21:36
technology if they actually want to have
01:21:40
a multifaceted hiring criteria so what
01:21:42
do I
01:21:43
mean we can have a lot more Automation
01:21:46
in the cockpit the reason we don't is
01:21:50
because of how certain lobbies are able
01:21:54
to
01:21:55
affect rules inside the Federal
01:21:58
Transportation infrastructure and we
01:22:00
know this because our friend has been
01:22:01
trying to our friend Sky Dayton
01:22:03
wonderful
01:22:05
pilot has been trying to improve Airline
01:22:08
safety and he's talked about this a lot
01:22:10
and these things get blocked by the
01:22:11
pilots Union and otherwise because they
01:22:13
don't want to get disintermediate okay
01:22:15
fair enough that's the game well if
01:22:17
that's the game at some point we need to
01:22:18
have a conversation as a as a society
01:22:20
that says okay look if we're going to
01:22:22
higher in on a multifaceted basis for
01:22:25
Pilots let's also tell Boeing and Airbus
01:22:28
you need to build even better more
01:22:30
automated planes that's a fair tradeoff
01:22:33
the great irony of all this saxs is it's
01:22:35
illegal to hire based upon gender race
01:22:38
Etc and then at the same time people are
01:22:40
trying to hold this contract of hey we
01:22:42
want more diversity we want more
01:22:44
inclusion at the same time in their
01:22:46
heads and we're seeing lawsuits happen
01:22:49
so they're you know want tech companies
01:22:52
to report on their diversity they want
01:22:53
Venture firms to report on you know you
01:22:56
know diversity and investment but it's
01:22:58
illegal and you can be sued if you were
01:23:02
to give investment dollars based on race
01:23:05
gender Etc and fierce Founders I believe
01:23:08
it's the name of the firm that's being
01:23:09
sued for only investing in a certain
01:23:12
demographic of women yeah or to ask
01:23:14
people their sexual preference you're
01:23:15
not allowed to ask that in an employment
01:23:17
I don't know I've always had a problem
01:23:19
with how do you keep these two things in
01:23:21
your mind in our own Venture fir and I
01:23:23
just said to folks just this is
01:23:24
considered a diversity Target and now to
01:23:26
hire people whether it's on a Hollywood
01:23:28
film set or in your company you've got
01:23:30
to go ask them what their sexual
01:23:32
preferences that's I mean it's crazy
01:23:35
that we're being asked to do that and
01:23:37
what I did in our company was I said hey
01:23:38
if if we don't feel we're getting enough
01:23:40
applicants for the programs founder
01:23:42
University the accelerator we could have
01:23:44
you know uh efforts to increase the
01:23:47
number of applicants but we can't make
01:23:50
investment decisions based on anything
01:23:52
other than the Merit of the company or
01:23:54
we will get sued and so this is I think
01:23:56
the problem in Corporate America with
01:23:57
these issues is how do I try to help
01:24:00
this problem if we think there is a
01:24:01
diversity problem in our particular
01:24:02
industry which is noble and thoughtful
01:24:05
and I wouldn't criticize anybody for
01:24:06
that but then the rubber meets a road at
01:24:08
legal and then performance right and and
01:24:10
it's very hard for I think leaders to to
01:24:13
manage those two dichotomies I could see
01:24:16
a case for why Barbers and
01:24:18
Priests should be multifaceted good
01:24:21
bedside manner crack a few jokes be able
01:24:24
to listen Rel
01:24:27
relatability if a pilot but the first
01:24:30
time like the thing is now this thing is
01:24:32
so on the front burner of people's
01:24:35
minds that heaven
01:24:38
forbid if there is an incident or a near
01:24:41
incident you're going to see lawsuits
01:24:43
that are going to focus on this issue
01:24:45
show me the training records of the
01:24:47
pilots and show me show me how they
01:24:50
fared relative to alternative folks that
01:24:52
you either did hire or didn't hire and
01:24:56
you know why was this selection it's
01:24:57
going to be a mess we might even see
01:24:59
that with Harvard in their selection of
01:25:01
their president like why was this person
01:25:03
selected as President right and did we
01:25:05
check the new one or the past one like
01:25:07
was there did we know about the
01:25:09
plagiarism stuff you know did we not
01:25:10
know about it and this is I think the
01:25:13
race to Nowhere when you get into
01:25:15
identity politics and and I think this
01:25:17
is why everybody and I think Coleman
01:25:19
Hughes said it really brilliantly when
01:25:20
he was on this pod talking about his Ted
01:25:23
talk like we we at least want the
01:25:25
aspiration of having a colorblind
01:25:27
Society I think what Coleman said that
01:25:28
was really I think profound was well
01:25:31
well where can we actually affect change
01:25:33
that will be important and I think
01:25:35
that's Early Education it could be
01:25:37
providing prek it could be providing you
01:25:40
know support for people with child care
01:25:42
so that you know they could they could
01:25:44
get into you know more job training Etc
01:25:47
so like where do we where do we put our
01:25:49
efforts if we do want to see a more
01:25:51
inclusive diverse just world is I think
01:25:54
the question backing up a second I think
01:25:56
there's a fundamental dishonesty about
01:25:58
the Dei movement that's really coming to
01:26:00
the four right now on the one hand di
01:26:03
activists will explicitly say that their
01:26:05
goal is to engineer job categories to
01:26:10
explicit population
01:26:13
numbers but like you said that's
01:26:15
actually illegal to do so when they get
01:26:17
in a lawsuit like the Harvard
01:26:18
affirmative action case that went to the
01:26:20
Supreme Court they'll deny that they
01:26:22
discriminating against asian-americans
01:26:23
so when they're preaching for what they
01:26:26
want to do when they talk about say
01:26:27
kendi style anti-racism they will say
01:26:30
that the explicit goal here is
01:26:32
proportional representation but then
01:26:34
when that results in discrimination
01:26:36
against groups that are basically
01:26:37
selected against they'll deny that
01:26:39
that's what they're doing and I think
01:26:41
it's gotten to the point now where they
01:26:42
just can't maintain both things being
01:26:44
true and we I think we saw this in the
01:26:47
dust up that just happened between Elon
01:26:49
and Mark cubin where Elon was saying
01:26:52
saying look we should be a colorblind
01:26:55
meritorious Society we just shouldn't
01:26:57
discriminate for or against anybody on
01:27:00
the basis of race and then Cuban jumps
01:27:02
in says oh no no that's not what de is
01:27:04
doing de is just trying to expand the
01:27:05
pool of applicants and it's just not
01:27:08
true I mean I don't know if he's being
01:27:10
disingenuous I don't know if he's virt
01:27:12
signaling I think they were talking
01:27:14
through each other I mean you do want to
01:27:15
expand the pool if you're not getting a
01:27:18
pool of diverse applicants there's
01:27:19
nothing wrong with that expanding the
01:27:21
pool but what you are
01:27:22
there was a Dei Griff that occurred I
01:27:24
think that's kind of what you're
01:27:25
alluding to and I can tell you the
01:27:27
Inside Story you look at the de movement
01:27:29
it goes Way Way Beyond dis exping the
01:27:32
pool of applicants it it explicitly puts
01:27:35
its thumb on the scale in terms of what
01:27:37
it's looking for in terms
01:27:39
of hiring and promotion it turned into a
01:27:42
grift and I can tell you the Inside
01:27:44
Story on this and it's going to come out
01:27:45
eventually but there was a I don't know
01:27:48
if you experienced this in any of your
01:27:50
companies or if anybody's willing to
01:27:52
talk about it but company
01:27:54
has lack of diversity in their company
01:27:58
then diversity activists and this is I
01:28:01
think where it really started to build
01:28:03
up resentment diversity activist comes
01:28:05
in says hey you have problems they call
01:28:07
them out on social media there's a there
01:28:09
was a you know a Twitter Brigade comes
01:28:12
in oh my god look how horrible this
01:28:14
company is people go oh I'm sorry we
01:28:15
didn't want to be horrible and then they
01:28:16
say oh well hire us and we'll teach you
01:28:19
how to do Dei and let's build a de group
01:28:21
and we want be Consultants pay us to
01:28:23
come in pay us to speak at your
01:28:24
organization to tell you what you're
01:28:26
doing wrong and then rally a reverse
01:28:29
support of it after you've gotten paid
01:28:32
for solving the problem for them and I
01:28:34
saw this Shakedown occur and I had
01:28:37
people ask me for advice on like hey
01:28:38
what do we do here and you can just
01:28:40
imagine you know you're a person of good
01:28:42
faith who wants to do the right thing
01:28:44
and then these Dei folks come in and
01:28:47
then try to uh Brigade you basically
01:28:49
publicly shame you in order to get like
01:28:52
like Rich Dei contracts and and we saw
01:28:54
this with like the size of Dei groups at
01:28:56
companies and you're wondering well what
01:28:57
are these people actually doing are they
01:28:59
just what what does a DI Department
01:29:02
actually do inside of a company that is
01:29:04
a creative or valuable it creates more
01:29:06
bureaucracy to do more Dei right on
01:29:10
itself and that's why it keeps getting
01:29:11
bigger and bigger did you guys see the
01:29:11
size of the Michigan Dei group did you
01:29:14
see that tweet I thought that was a I
01:29:16
thought this was a Babylon B story when
01:29:17
I first saw it because there are 250
01:29:21
people
01:29:22
working 500 people at Michigan
01:29:25
what theator 500 out of how many people
01:29:28
I don't know but they're spending $3
01:29:30
million on payrolling benefits He Man I
01:29:33
mean look big companies can kind of
01:29:35
afford this stuff but startups cannot I
01:29:38
mean this is really the kiss of death
01:29:39
for startups um you just can't afford to
01:29:41
have these large
01:29:43
bureaucracies and then also you know
01:29:45
when you're a startup
01:29:47
founder if you have six months of Runway
01:29:49
12 months of Runway you might not have
01:29:51
the luxury to be looking at your
01:29:52
statistics and saying you know what
01:29:55
we've got 10 people who are of this
01:29:58
demographic statistically we should have
01:30:01
this so the next hire we need to make
01:30:04
our sales numbers has to be of this
01:30:06
composure and I I've have seen people do
01:30:08
this actually you've probably seen it
01:30:09
too on boards or whatever hey we need to
01:30:11
hire more of this type of person this
01:30:14
profile and uh you know then hiring gets
01:30:17
slowed and you know yeah it's it's
01:30:20
challenging and it's also illegal so I
01:30:23
don't know how you win in this
01:30:25
thing other than have a colorblind
01:30:27
society as a goal at least you know and
01:30:30
to are you familiar with um a Mot and
01:30:33
Bailey tactic no tell have you heard of
01:30:37
this this is a a
01:30:39
rhetorical technique or fallacy no I
01:30:42
haven heard this one yeah I love a good
01:30:44
so this comes from medieval times the
01:30:46
mod and Bailey was a type of Castle
01:30:48
where the Bailey was this wider area
01:30:51
that was just defended by a wooden wall
01:30:52
so it's not that secure the was
01:30:55
basically the you know Stone fortress on
01:30:58
the hill so a modern Bailey tactic is
01:31:01
when you go out and stake out a very
01:31:03
aggressive position you take the Bailey
01:31:05
basically but then when you get
01:31:06
challenged you Retreat into the mot and
01:31:09
pretend like you never took the Bailey
01:31:11
position ah the the Bailey position is
01:31:14
basically the kendi style anti-racism
01:31:16
where you say look we have to achieve
01:31:19
proportional representation in every job
01:31:21
category and that is what the DI
01:31:24
movement in the main advocates for but
01:31:27
then when they get challenged by
01:31:29
somebody like Elon or by somebody like
01:31:31
Supreme Court they were treat into the
01:31:32
mod and to say no no we weren't trying
01:31:33
to do that we're just trying to expand
01:31:35
the pool of of qualified applicants
01:31:38
because who could be against that and
01:31:40
they'll claim that they were never doing
01:31:42
the whole proportional representation
01:31:43
thing and then on top of it they'll say
01:31:45
well listen obviously increasing the the
01:31:47
pool of qualified applicants is so
01:31:50
unobjectionable
01:31:51
that if you're against that then you
01:31:53
must be racist and then you get all the
01:31:56
accusations and so this is basically the
01:31:58
rhetorical technique that the movement
01:32:00
uses to defend itself yeah but
01:32:03
eventually when this stuff gets
01:32:04
litigated as it just did at the Supreme
01:32:06
Court you start to pick this apart and
01:32:08
you see that there's a lot of evidence
01:32:10
that they are actually engaged in overt
01:32:13
discrimination against certain groups
01:32:15
like
01:32:17
asian-americans no easy answers here but
01:32:20
I for one think that that's bad yeah
01:32:23
there was something really nice about a
01:32:24
merit based society if there was
01:32:27
fairness at the starting line but you
01:32:29
know that's that's the thing I've
01:32:30
learned is not everybody starts at the
01:32:31
same place and so if you just look at it
01:32:34
seems to me and listen I'm no
01:32:36
expert but the starting line seems to
01:32:38
matter most so if we could focus on
01:32:40
making it as equal and fair and just
01:32:43
when it comes to
01:32:45
education that seems to me to be like
01:32:47
the quickest solution to feeling better
01:32:49
about all this I I I just think we
01:32:51
should have 7day 365 day a year school
01:32:54
available Public School available
01:32:56
competitive schools available to to to
01:32:59
to make the world more just and give
01:33:00
people more opportunity right skills
01:33:02
training Etc why do you think that
01:33:04
having school 365 days a year will make
01:33:07
the world more just well because I do
01:33:10
think that if you had more competition
01:33:12
in schools and you had Parents uh who
01:33:15
care or students who care and they could
01:33:17
get more education and there was more
01:33:19
available then you could say well how
01:33:22
many days a week did you go to school
01:33:24
how much effort did you put in and there
01:33:26
was just more highquality school
01:33:28
available and If you look at Public
01:33:29
Schools right now there's just it's very
01:33:30
unjust how poor the schools are and how
01:33:34
poorly run they are what the teachers
01:33:35
unions have done to these schools and
01:33:37
disadvantaged communities and and if I
01:33:40
look back on my life and I look at
01:33:42
people who did well they had engaged
01:33:44
parents and they had uh opportunities in
01:33:47
education that other people didn't uh
01:33:49
and that seems how does keeping the
01:33:51
school open all year round change that
01:33:54
you think about parents who maybe don't
01:33:55
have coverage for their kids after 2:30
01:33:58
or 3:00 and then those kids you know we
01:34:01
called them we were called latchy kids I
01:34:03
think uh in the 80s and 90s you know
01:34:05
having the ability for them to do more
01:34:07
enriching things to be in chess club to
01:34:08
be in Taekwondo Club to to do a little
01:34:11
extra math whatever it is that could be
01:34:13
something Society could do for a very
01:34:15
low cost or skills training even right
01:34:17
hey this is a a culinary school after
01:34:19
school this is a culinary school on the
01:34:20
weekends this is a coding school on the
01:34:22
weekends it doesn't have to be just them
01:34:23
it could be welding it could be like I
01:34:26
said you know could be design whatever
01:34:28
it is more opportunities for people to
01:34:30
learn more skills without you know
01:34:33
having the Benchmark be my parents can
01:34:35
afford Kuman my parents can afford a
01:34:37
chess tutor right we we live in a time
01:34:39
of incredible privilege and all of us
01:34:41
have unlimited resources and many of the
01:34:43
people who listen to this podcast have a
01:34:45
lot of resources to hire tutors for
01:34:46
their kids and give them more
01:34:47
opportunity I didn't have that
01:34:48
opportunity you know and if I had that
01:34:51
opportunity I would have learned chess
01:34:52
faster right I would I would have had
01:34:55
more opportunity for it just wasn't
01:34:56
available to me and then there's a lot
01:34:58
of people who started behind me who who
01:35:00
certainly didn't have it available
01:35:01
single parent you know uh in in a worse
01:35:04
School environment than Brooklyn where I
01:35:06
grew up grew up so I don't know do you
01:35:08
disagree jom would you have a better
01:35:10
idea of how to make the world more fair
01:35:12
and just than education and skills
01:35:14
training I think I I think education is
01:35:16
the probably the most important I do
01:35:19
think that we need to find it
01:35:20
fashionable
01:35:22
again to have nuclear
01:35:25
families I think that if you look at the
01:35:27
marriage rates of 20 and 30 year olds
01:35:31
it's meaningfully depressed relative to
01:35:33
older cohorts including ours we're the
01:35:36
last generation yeah where it's a
01:35:38
structural part of our identity is being
01:35:40
married and I think that that has
01:35:43
long-term implications because and when
01:35:45
you look at the success rates of how to
01:35:47
grow kids poverty matters a lot less
01:35:50
than having a structural nuclear family
01:35:52
meaning a two parent
01:35:54
household and so I think that there's a
01:35:56
lot of there's a lot of work we need to
01:35:58
do to figure out how to reinen
01:36:00
divize folks to want to commit to a
01:36:03
single person not this rampant
01:36:06
promiscuity but just kind of lock down
01:36:08
and find somebody and build a long-term
01:36:10
partnership with them I think that
01:36:11
that's really crucial for a functioning
01:36:13
Society do you think tax incentives is a
01:36:15
way to do that or just cultural norms I
01:36:19
I haven't studied the problem to have a
01:36:20
real I've heard this before I just don't
01:36:22
know how that gets implemented in
01:36:24
society right I and I can think of ways
01:36:27
that tutoring and having more education
01:36:29
available vouchers Etc I mean if you
01:36:32
gave every parent under a certain dollar
01:36:35
amount of income a year a voucher to
01:36:37
hire tutors man that could that could
01:36:38
change the world right um it could
01:36:41
change a lot of people's faith we need
01:36:42
more two parent
01:36:44
households that would certainly help
01:36:46
more all right well we got we we really
01:36:48
got into it here in the end man what a
01:36:50
what a great episode
01:36:51
all right
01:36:52
four the Rainman David Sachs with a
01:36:55
tight haircut now the dream is over I
01:36:58
mean it's just it's a new year I don't
01:37:00
know who got to you it's a new year it's
01:37:03
an election year it's a it's a big year
01:37:05
for you clean it clean it up for I think
01:37:08
it's just a huge critical mistake I
01:37:10
think you were you were going to a
01:37:11
certain iconic look and I think you've
01:37:14
blown it I I I'm going to take the other
01:37:16
side of that bet and for David freeberg
01:37:18
the CEO of ohal and ch poly hoaa the
01:37:22
founder of the new
01:37:23
8090 incubator and the chairman dictator
01:37:28
of the Allin LLC I am the world's
01:37:32
greatest moderator yes you are and angel
01:37:34
investor and we'll see you all next time
01:37:36
byebye love you boys byee
01:37:39
byee let your winners
01:37:46
ride and instead we open source it to
01:37:49
the fans and they've just gone crazy
01:37:51
with
01:37:51
Love You Queen
01:37:54
[Music]
01:37:59
of Besties
01:38:02
are that's my dog taking your
01:38:07
driveway oh man myit meet me we should
01:38:11
all just get a room and just have one
01:38:12
big huge orgy cuz they're all just
01:38:14
useless it's like this like sexual
01:38:16
tension that they just need to release
01:38:18
somehow
01:38:20
what
01:38:24
we need to get merch
01:38:29
[Music]
01:38:32
our I'm going
01:38:35
[Music]
01:38:37
in
