00:00:00
can I tell you a funny story so I I was
00:00:02
in
00:00:03
I was in
00:00:04
and then when I landed there was a an
00:00:07
assistant message
00:00:09
on the plane and then uh the pilot
00:00:10
texted me like hey bad news
00:00:13
We're not gonna be able to take you
00:00:14
tomorrow
00:00:16
there's an error message and if we can't
00:00:18
resolve it we can't fly that's it okay
00:00:21
so I text sax I'm like hey dude I'm in a
00:00:24
really tough spot is there any way that
00:00:26
you know I could catch a flight you know
00:00:28
with you
00:00:30
tomorrow
00:00:31
absolute dead silence oh three hours
00:00:34
later
00:00:35
Paul pilot Paul text me and says good
00:00:38
news cleared us we're going tomorrow I
00:00:40
text sax right away hey no worries it's
00:00:42
all resolved in eight seconds he
00:00:44
responds awesome with an exclamation
00:00:45
mark yeah
00:00:48
also he had zero intention of bringing
00:00:51
me and my family with him zero I
00:00:53
filibustered he fell about you
00:00:57
the truth is the plane was with me I was
00:00:59
using it I'd be happy to let you borrow
00:01:00
the plane if I'm not using it here's sax
00:01:02
the last time we went to dinner ready
00:01:03
the check comes Miller unlocks lands on
00:01:05
the table here sacks
00:01:06
what you're seeing see that you know
00:01:08
what that is sack's going for his wallet
00:01:10
you can just count it it's almost ironic
00:01:13
because I can't remember the last time
00:01:14
he's almost remember the last time you
00:01:16
picked up a check Jayco what do you
00:01:17
every time am I pick it up on the way in
00:01:19
maybe for a slice of pizza come on sax
00:01:22
is one of the most generous people I
00:01:24
know I remember we went to a bar once we
00:01:27
barely had time to get a glass of Still
00:01:29
Water a Diet Coke and some of the free
00:01:31
nuts and then Jake how was like guys
00:01:33
it's on me
00:01:34
I pulled out a 20 I gave it right to the
00:01:37
bartender that's true my turn my turn I
00:01:40
got it my turn
00:01:44
you got the the white truffles and the
00:01:47
filet mignon last week I think these bar
00:01:49
nuts are on me
00:01:51
fishes yeah throw in some cashews too
00:01:53
throw in the cashews and raisins the
00:01:55
trail mix I'll get the trail mix because
00:01:58
you got the truffles last time chamoth
00:02:02
[Music]
00:02:11
we open source it to the physics
00:02:15
[Music]
00:02:19
all right everybody Welcome to the all
00:02:20
in podcast we're still here episode 105.
00:02:24
I don't know if you saw boys last week
00:02:26
the pot hit a new high water mark 16.
00:02:30
overall in the world so congratulations
00:02:33
incredible I thought we peaked at 14
00:02:35
actually was it 14. people listened to
00:02:37
this pod when I was in DC this week I
00:02:39
had a bunch of meetings and so many of
00:02:42
the of the staffers listen to the Pod
00:02:44
and they came up to me they're like hey
00:02:46
love you guys listen every week it's
00:02:48
really great it's really crazy actually
00:02:50
the reach of this thing it's really cool
00:02:52
now when you were in DC
00:02:54
how gleeful were they about Sax's
00:02:57
absolute shellacking last week that must
00:02:59
have been high fives all over the Dems
00:03:02
like they won twice Trump announced and
00:03:04
sax lost listen we uh we talked a lot of
00:03:07
us are they about SBF and how much money
00:03:09
he gave them in order to stop that Red
00:03:12
Wave
00:03:13
take it easy I talked to it I talked to
00:03:15
a lot of folks folks and what I would
00:03:17
say is we talked a lot about energy
00:03:19
policy life's Life Sciences obviously
00:03:22
two areas that I invest a lot of money
00:03:23
in and foreign policy and um actually
00:03:27
David you'd be surprised by how many
00:03:28
fans you have there cool well I mean
00:03:30
like General Millie like we talked about
00:03:31
last week he's come around Jake Sullivan
00:03:33
just this week said that he told the
00:03:35
ukrainians it was reported that they
00:03:37
can't have Crimea back get realistic so
00:03:39
Jake Sullivan and Millie are like the
00:03:42
voices of reason now in the
00:03:44
administration on this and they're just
00:03:46
saying the same thing I've been saying
00:03:47
for which I was excoriated by the
00:03:49
foreign policy establishment and I got
00:03:51
into a little Twitter spout with Ian
00:03:52
Bremner this week because all the the
00:03:54
sudden he posts that oh everybody has
00:03:56
been privately saying that we need to
00:03:58
negotiate no no you haven't you were
00:04:01
criticizing you were denouncing Elon as
00:04:03
a Kremlin agent when he posted that
00:04:06
Twitter poll suggesting that the
00:04:08
ukrainians should negotiate so you were
00:04:11
publicly denouncing those of us who are
00:04:12
calling for negotiations and now all of
00:04:14
a sudden you're saying well this has
00:04:15
always been the position but I think
00:04:16
what's significant about that is the
00:04:19
guy's just a Weather Vein for the blob
00:04:21
and the the foreign policy establishment
00:04:24
and so the Weather Vein is now pointing
00:04:26
towards negotiations so that's the good
00:04:28
news here do you think that if DeSantis
00:04:30
wins the presidency you will be
00:04:32
nominated as a Secretary of State
00:04:34
Treasury what would you take treasury
00:04:36
state in fact if you were offered a
00:04:39
cabinet position would you take you
00:04:40
should you should take that what you
00:04:41
what you have to understand is that my
00:04:44
position on foreign policy or Ukraine
00:04:47
specifically is not it's not uh it's not
00:04:49
adopted by either party I mean McConnell
00:04:52
and the Senate Republican leadership are
00:04:54
very much on board with the bind
00:04:56
administration's policy on this they are
00:04:58
very very hawkish
00:04:59
it's really the unit party on this issue
00:05:01
there's really just one Consolidated
00:05:03
blob okay but back to the question would
00:05:06
you would it be a dream of yours would
00:05:09
you find great joy in having a White
00:05:11
House position to when DeSantis goes in
00:05:14
to serve your country would you sir
00:05:17
would I serve if if the president of the
00:05:20
United States calls you up and asks you
00:05:22
to do something obviously you have to
00:05:24
get to serve your country but it's not
00:05:25
something I'm obviously looking for
00:05:28
that's a yes what if he asked you to
00:05:31
serve as the U.S ambassador to Burkina
00:05:34
FASA
00:05:35
where
00:05:39
the Ambassador roles are so funny it's
00:05:42
like you have to compete for the good
00:05:43
ones and then some people get stuck with
00:05:45
the bad ones those are those are
00:05:47
available for purchase yeah yeah exactly
00:05:50
you know there's like a there's like a
00:05:52
menu of these things like these
00:05:53
ambassadorships like yeah I don't think
00:05:55
it's like written down anywhere but it's
00:05:57
kind of like unspoken it's like if you
00:05:59
want the ambassadorship to the UK that's
00:06:02
like 10 million dollars and then you
00:06:05
know
00:06:05
the the thing was with UK and France
00:06:08
it's every every Embassy every
00:06:11
ambassadorship comes with an annual
00:06:12
budget but the cost of actually running
00:06:15
that Embassy and really throwing the
00:06:17
parties is much more so for the UK and
00:06:19
France the Gap is 10 million a year that
00:06:22
you have to fund out of pocket so you
00:06:24
got to be really willing you know to put
00:06:26
the money up uh but apparently you've
00:06:28
got to pay for the parties my friend my
00:06:29
friend was was the ambassador to the UK
00:06:31
under Obama and I went to a party there
00:06:34
it's unbelievable and he has the best
00:06:37
life because like you know he was
00:06:38
meeting everybody in the world you can
00:06:39
imagine goes through the UK and then
00:06:41
wants to meet the U.S ambassador it was
00:06:43
a great job for him right but the money
00:06:44
I'm talking about is the cost of buying
00:06:46
one of these Snickers you have to
00:06:48
typically raise that much money yeah you
00:06:51
bundle that much money for whoever this
00:06:53
is what I've heard I mean I don't know
00:06:54
this is what I've heard is that but does
00:06:56
that mean that sbf's parents if
00:06:57
Elizabeth Ward wins the presidency
00:07:01
right now the Illuminati right now just
00:07:04
revoked all of our Illuminati cards
00:07:06
we're not supposed to talk about this
00:07:07
guys uh that you can buy an
00:07:09
ambassadorship but speaking of buying
00:07:11
politicians and coverage uh let's get an
00:07:14
update on FTX so Trump
00:07:18
speaking of politics I mean you know
00:07:20
because if I bring it up I didn't want
00:07:22
to tilt something in the first five
00:07:24
minutes the only thing I want to bring
00:07:25
up is yeah I think I'm entitled to and I
00:07:27
Told You So on this there was a story
00:07:29
where the FBI said that the reason why
00:07:33
Trump kept the boxes in his basement
00:07:35
they've now the FBI has definitively
00:07:38
said it's because he was just trying to
00:07:39
preserve mementos not try to sell State
00:07:42
secrets to the Saudis or something like
00:07:44
that that like some people were making
00:07:47
wild conspiracy theories about so Jake
00:07:49
how it looks like I was I was right
00:07:51
about that in fact I think we had that
00:07:53
very discussion on this pod
00:07:54
yeah I mean we I I said I thought he was
00:07:57
keeping it for like keepsakes like
00:07:59
mementos that was my position too
00:08:00
because you didn't you didn't support
00:08:02
the salary let me ask a question because
00:08:04
I mean I wouldn't put it past him he's a
00:08:06
maniac I think if you believe that this
00:08:08
was about mementos which the FBI has now
00:08:10
said it was I think you also have to say
00:08:12
that the FBI's approach in raiding his
00:08:15
home with armed you know soldiers was
00:08:17
heavy-handed now I'm not saying they
00:08:19
didn't have the legal right to do it I'm
00:08:20
sure they checked all the right boxes
00:08:22
but it was heavy-handed but look that
00:08:24
brings me to another Point why do they
00:08:25
do it I actually suspect now that what
00:08:29
the Bible ministration's trying to do is
00:08:30
keep Trump in the news I think they
00:08:32
actually want to provoke they want him
00:08:34
to run they want to run it's the exact
00:08:36
it's the exact same thing remember the
00:08:38
the 50 million that went into Republican
00:08:40
primaries to support the you know the
00:08:42
election denier candidate turns out that
00:08:44
was a successful strategy for them as
00:08:46
much as I hate to admit it it's as
00:08:48
Reckless as I think that was and
00:08:50
hypocritical because I don't think you
00:08:51
can be out there claiming that these
00:08:54
candidates are threat to democracy at
00:08:55
the very same time you're funding them
00:08:56
so I think it was completely
00:08:58
hypocritical and sort of Machiavellian
00:09:01
but it worked and I think in a similar
00:09:02
way what the Democrats are going to try
00:09:05
to do over the next years is is keep
00:09:07
Trump in the news as much as possible
00:09:09
and in fact CNN ran his entire speech
00:09:12
announcing last Tuesday I think for this
00:09:14
reason if Trump wins the Republican
00:09:16
nomination he's going to
00:09:18
then he will lose the presidency because
00:09:21
if you look at all of these exit polls
00:09:23
that came out of these midterms he's
00:09:25
just so massively unfavorable but that's
00:09:29
not what's going to be you know
00:09:30
litigated in the primaries in the
00:09:32
primaries it's just Republican
00:09:33
non-republican and there are a
00:09:36
non-trivial number of paths where Trump
00:09:38
actually beats DeSantis and I think
00:09:40
that's very scary to the Republicans who
00:09:43
want to just move on and have a chance
00:09:44
of actually consolidating power and it's
00:09:47
gleefully Blissful for the Democrats
00:09:50
because if again and we saw this look if
00:09:52
if the Democrats were able to fund and
00:09:56
field Maga candidates in the Republican
00:09:58
primaries that then lost in the general
00:09:59
election well the best mega candidate of
00:10:02
all is Trump
00:10:04
so it David Sachs is completely right
00:10:07
now like the balance of power here
00:10:09
should be if you're the Democrats
00:10:10
whatever you can do to keep him in the
00:10:12
news whatever you can do to induce him
00:10:15
to run makes a lot of sense because he
00:10:18
will he'll [ __ ] the Republican party
00:10:20
let's put he'll split look at how
00:10:24
Jacob's got a big writ he's admitting to
00:10:26
the hypocrisy which is for years he's
00:10:28
just screaming about this is your voice
00:10:30
hold on a second you've been screaming
00:10:31
about what a threat to democracy is how
00:10:33
he's secretly on the payroll of the
00:10:35
Kremlin or foreign governments and yet
00:10:37
and yet you want to keep him in the news
00:10:39
you want to be the nominee and you
00:10:40
Republicans
00:10:42
to kick him out of the party no I do
00:10:45
take him out come on I was on the
00:10:47
DeSantis train before the midterms
00:10:49
election
00:10:51
you on this pod will never kick him out
00:10:53
of the party you should say
00:10:57
disavow him publicly disavow him how
00:11:00
I've already said I support DeSantis I
00:11:02
said it before the midterms what else do
00:11:04
you want me to do but I'm talking about
00:11:06
the party at large I think I think
00:11:09
you're I think you and many other people
00:11:11
on the Democratic side in the media are
00:11:13
being very hypocritical about this
00:11:14
because you want to claim that he's this
00:11:17
unique threat to democracy while playing
00:11:19
this game where you want to keep him in
00:11:21
the news you want to basically provide
00:11:22
him with as much oxygen as possible
00:11:24
because you think he's more beatable and
00:11:26
by the way I agree that he's less
00:11:28
electable than DeSantis which is why
00:11:30
part of the reason why I'm on the
00:11:32
Santa's trainer
00:11:33
I also think DeSantis would get more
00:11:35
done but look um I don't think it's a
00:11:37
foregone conclusion that he's gonna be
00:11:39
the nominee did you see the new polling
00:11:40
that came out after the midterms
00:11:42
DeSantis is now the favorite in among
00:11:45
Republican primary voters among every
00:11:47
different slicing that you want to do of
00:11:50
whether it's likely a Republican voters
00:11:52
primary voters whether it's Fox News
00:11:54
viewers and on and on and on DeSantis is
00:11:57
now ahead of trump I about okay wait
00:11:58
hold on need to be able to stay at my
00:12:00
position because sax interrupted me
00:12:01
seven times I just would like to get my
00:12:02
position on here number one you all
00:12:04
backed somebody who is a horrible human
00:12:06
being who made terrible decisions and
00:12:08
now you guys keep supporting him at some
00:12:11
point you have to put your foot down and
00:12:12
say listen we don't want this guy you
00:12:14
have to publicly say January 6th you
00:12:17
know and this guy's approach the
00:12:19
election denial you guys have to come
00:12:20
out and just say we don't want this
00:12:22
person to run I think you've been
00:12:24
hedging too much I think that's the
00:12:25
problem now who has I am not how can I
00:12:28
get the Republican Party yeah now you
00:12:30
always were a little bit like because I
00:12:32
I did no yes hold on and this very pot I
00:12:35
asked you if he run would you support
00:12:36
him would you ever vote for him again
00:12:38
and you were like wow and you would vote
00:12:40
for him again if he wins the nomination
00:12:41
you'll vote for him that's the truth
00:12:43
Republicans will still vote for him look
00:12:44
you know that before it was popular
00:12:46
before the midterms I was on the
00:12:48
DeSantis train I was saying so on this
00:12:49
pod for over a year when it was very
00:12:51
unpopular certainly in the area in which
00:12:53
I live and so you know and there are a
00:12:56
lot of Republicans now most Republicans
00:12:58
now
00:12:59
agree with me on this issue according to
00:13:01
the polling that just took place but if
00:13:02
he wins the nomination you will vote for
00:13:04
Jason is that you want us to buy into
00:13:07
every [ __ ] narrative that you've
00:13:09
ever told about this issue January 6th
00:13:11
of [ __ ] no it was an election today
00:13:14
let him finish let him finish well he's
00:13:17
interrupting me every two seconds stay
00:13:18
out of a free bird oh I just want you
00:13:19
guys to guys I just want you guys to
00:13:21
speak and then let the other person
00:13:22
speak that's it I don't care
00:13:24
my point is just here we go again I
00:13:27
don't I don't want to rehash every
00:13:28
single thing in the past but but look
00:13:30
the point is that I think we have more
00:13:33
electable candidates I think we have
00:13:35
candidates that would get more done in
00:13:37
office but and I've already said so but
00:13:40
I you know but I don't that doesn't mean
00:13:41
I believe this whole like threat to
00:13:44
democracy thing I think that is massive
00:13:46
inflation of the actual threat but but
00:13:49
look if you want me to say that we have
00:13:52
more electable candidates we have cancer
00:13:53
will get more done who frankly would be
00:13:55
less alienating to moderates and
00:13:57
independents and could even win over
00:13:59
some moderate Democrats the way that
00:14:01
DeSantis did in Florida to win by 19
00:14:03
points yes happy to say that and I've
00:14:06
been saying that I will just say if I if
00:14:08
I'm if I'm if Freeburg allows me to make
00:14:10
a point I would like to say it is a
00:14:12
threat to democracy January 6 and
00:14:14
election denial those two things are
00:14:16
accused party fund over 50 million
00:14:19
dollars to those candidates
00:14:21
cynical because they wanted to win
00:14:23
cynicism pure cynicism okay we're on the
00:14:25
same page about that yeah yeah it's pure
00:14:27
cynicism um but do you let me ask you a
00:14:28
question and then we'll wrap on this
00:14:30
because I know it's uncomfortable for
00:14:31
free bird to watch Mommy and Daddy fight
00:14:33
um
00:14:40
it's okay Bobby dad used to love each
00:14:44
other even if we fight sometimes it just
00:14:46
makes me want to turn the volume down go
00:14:48
ahead
00:14:49
we're almost done anyway
00:14:50
I do think Fielding moderate candidates
00:14:52
is the path and I think Tremonti brought
00:14:54
this up a ton of times who it's the race
00:14:56
to whoever can get that moderate middle
00:15:00
and I hope that they feel better
00:15:02
candidates but do you think Sachs he's
00:15:04
running this is one of the cynical takes
00:15:07
is that he's running because it will
00:15:08
help all the legal cases against him do
00:15:10
you think there's anything to that my
00:15:11
guess is that that they see him as an
00:15:13
easier candidate to beat and they're
00:15:14
going to do everything they can to try
00:15:16
and keep them in the news and and I
00:15:18
don't I actually I don't think that's
00:15:19
your position I actually think that
00:15:21
you're being sincere that you don't want
00:15:23
him to win a second term I mean remember
00:15:25
like we don't know I think we all
00:15:27
believe that we're gonna have a pretty
00:15:28
severe recession next year so just
00:15:30
because the Democrat cynical strategy in
00:15:32
the midterms of promoting you know what
00:15:35
they called election deniers in the
00:15:36
primary that happened to work but just
00:15:39
because it worked last time doesn't mean
00:15:40
it's going to work next time and
00:15:41
abortion absolutists and a whole bunch
00:15:43
of other things I think I think the
00:15:44
point is pretty much this which is that
00:15:48
people gave Trump a lot of credit for
00:15:50
being an idiot savant but it looks like
00:15:53
he's more of an idiot savant minus the
00:15:55
Savant okay this is a this is kind of a
00:15:57
goofball who has a brilliant media
00:16:00
strategy and he had his finger on the
00:16:01
pulse in a moment
00:16:04
and then he just couldn't execute
00:16:05
couldn't put two and two together
00:16:06
couldn't put one foot in front of the
00:16:08
other
00:16:09
and he was way too divisive and he got
00:16:11
booted out and he lost fair and square
00:16:13
and now what the Republicans have to
00:16:15
realize is if they don't figure out how
00:16:19
to field somebody out of the primaries
00:16:21
that is different than Trump the
00:16:23
Democrats will win because if it is
00:16:25
Trump whoever the Democratic candidate
00:16:27
is I don't think it really matters will
00:16:29
crush Trump
00:16:31
yeah look I I think that's likely
00:16:33
correct I mean I think I think that we
00:16:35
talked about it last week you cannot win
00:16:37
the presidency with call it 45 of the
00:16:39
vote I mean Trump is capped at that
00:16:40
amount and the scary thing for
00:16:42
Republicans by the way is Trump does a
00:16:43
much better job than anybody else in
00:16:45
getting his base activated so the thing
00:16:47
that all these polls get wrong and I
00:16:49
think they've consistently gotten wrong
00:16:51
and and as a result have underestimated
00:16:53
him
00:16:54
is they don't give him the credit he
00:16:55
deserves duly for being able to curate a
00:16:59
fervent base of that 30 or 40 percent of
00:17:01
America that will show up for him and
00:17:03
even if they didn't show up as much
00:17:06
in the midterms they sure as hell showed
00:17:08
up in the primaries for his candidates
00:17:11
oftentimes so I just think it's a very
00:17:13
dangerous cocktail that that you can't
00:17:15
sleep on so the Republicans have to take
00:17:17
this really serious moderate Republicans
00:17:19
want to have a chance of winning you
00:17:21
guys have to figure out how to beat
00:17:23
Trump in a ground game because if his
00:17:26
base shows up he has a decent chance of
00:17:28
winning the nomination but then you will
00:17:31
lose the general
00:17:32
yeah I think that's I think that's
00:17:34
pretty much spot on I think Republicans
00:17:36
really have to be smart and disciplined
00:17:38
and think about we have to nominate the
00:17:40
the most electable candidate but here's
00:17:43
the thing is we're not even debating
00:17:44
policy right now no one no one really
00:17:47
says that hey on a policy basis there's
00:17:49
a huge difference between say Trump and
00:17:51
Desi answer to some other folks it's all
00:17:53
about personal style and is it really
00:17:55
worth it to the Republicans to
00:17:57
potentially lose the next election based
00:18:00
on personal based on style points it's a
00:18:03
silly reason to lose you know William F
00:18:05
Buckley a long time ago said that he
00:18:08
would always support the most electable
00:18:10
Conservative candidate he didn't always
00:18:12
go with the most Conservative candidate
00:18:14
he wanted to go with the most electable
00:18:16
candidate who met a basic policy bar and
00:18:20
he sometimes got in trouble for that for
00:18:22
example he supported Bush 41 over Jack
00:18:24
Kemp I know I'm going back a long way
00:18:25
but
00:18:26
but in any event you know having
00:18:29
thinking about electability is just
00:18:31
really important there's one silver
00:18:32
lining here the head of the Republican
00:18:34
Party Rupert Murdoch has uh absolutely
00:18:37
dissed Trump I don't know if you saw the
00:18:39
New York Post but he put on the cover
00:18:41
lower like 10. Florida man makes
00:18:44
announcement and on page 26 he had the
00:18:47
announcement of trump running for
00:18:49
president and the funny thing was Rupert
00:18:51
Murdoch if he didn't even name
00:18:53
Trump as the presidential the absolute
00:18:56
last line of that column and he said oh
00:18:58
and he also happened to be the 45th
00:19:00
president of the United States yeah it
00:19:02
was very funny well you're seeing a lot
00:19:03
of Republicans saying I think correctly
00:19:05
is that if you want to win elections you
00:19:07
have to look out the windshield you know
00:19:08
not in the rearview mirror and what we
00:19:11
saw in the midterms is that even talking
00:19:13
about 2020 was at minimum a giant waste
00:19:16
of time and a distraction and at maximum
00:19:18
potentially caused these candidates to
00:19:21
lose I mean the fact of the matter is
00:19:22
that that a lot of candidates including
00:19:24
semi-supported in Battleground States
00:19:26
who got lured into trying to relitigate
00:19:29
2020. they all got vaporized and I just
00:19:32
think it's stupid to be talking about
00:19:34
the past
00:19:36
voters want you to focus on the future
00:19:38
and especially when there's no policy
00:19:41
outcome that matters that's at stake for
00:19:44
you to be talking about a pass election
00:19:46
instead of the future
00:19:48
questions this is politically stupid
00:19:50
Freeburg if I may bring you into this
00:19:52
discussion uncomfortably as it might as
00:19:54
uncomfortable as it might be
00:19:55
would you vote for Biden incredibly old
00:20:00
I don't know he's gonna be 81 or 82 in
00:20:02
the next election but you vote for Biden
00:20:04
or DeSantis as I go through the list of
00:20:07
things I'm most concerned about in the
00:20:09
world today
00:20:10
number one is the debt and spending
00:20:13
cycle
00:20:14
of the federal government in the U.S I'm
00:20:17
I think it's the most kind of
00:20:19
scary set of facts and conditions that
00:20:22
we're getting set up for
00:20:23
kind of a major crisis 10 to 15 years
00:20:25
from now because you can't afford all
00:20:28
the debt that we've taken on as a
00:20:29
country as well as the entitlement as
00:20:31
well as defense
00:20:32
and so something's got to give and
00:20:35
there's a bunch of paths that could
00:20:37
emerge from that set of conditions that
00:20:39
are all really scary paths and not good
00:20:41
I'm more concerned about that than I am
00:20:43
about nuclear war or climate change uh
00:20:46
just to be clear because I think that
00:20:47
the social effects and the the global
00:20:50
geopolitical effects that arise from the
00:20:53
U.S kind of destructuring because of our
00:20:55
our debt and spending cycle that we're
00:20:57
in right now are far more significant
00:21:00
than what we'll experience over the same
00:21:01
period of time and again I do think that
00:21:03
technology is going to resolve a lot of
00:21:05
our issues with climate change and I
00:21:06
think nuclear war cool heads will
00:21:08
prevail everyone's got a family so
00:21:10
that's what I'm most concerned about so
00:21:11
any kind of voting decision I make is
00:21:13
made with that lens which is what's the
00:21:15
the best path to supporting some some
00:21:18
fiscal responsibility setback or step
00:21:20
back to resolve those issues as Charlie
00:21:22
Munger said so well in this interview
00:21:23
that was published this week and I've
00:21:26
said it a few times on the show but he
00:21:27
he did he's a much better speaker than I
00:21:30
uses far fewer words but you know in
00:21:33
democracy eventually the populist
00:21:35
realize that they can vote themselves
00:21:36
all the money
00:21:37
and you know that's what we see happen
00:21:39
in an accelerated way in Latin America
00:21:41
we've seen that with a lot of these
00:21:42
democracies and ultimately resolved to
00:21:44
kind of socialism
00:21:46
and in the U.S we're seeing a lot of
00:21:48
this Behavior where we're kind of voting
00:21:49
ourselves all the money we're putting in
00:21:51
place politicians and the populace is
00:21:53
saying I want I want I want and more
00:21:55
money comes out and it it um it totally
00:21:58
decreases the strength and the
00:22:00
resiliency of our nation and our economy
00:22:02
and it's the most concerning thing to me
00:22:04
because the the incredible Innovation
00:22:07
and economic engine that is the United
00:22:08
States has threatened and it really
00:22:10
threatens a lot of stability uh in the
00:22:12
world today any any final thoughts here
00:22:15
as we wrap up the political discussion I
00:22:17
think you're obviously a Democrat so
00:22:19
you're voting for Biden but you also
00:22:21
care about fiscal responsibility so
00:22:22
where are you at with your vote for
00:22:24
2024. I don't think that we know who's
00:22:26
actually running on either ticket yet
00:22:28
just to be completely honest so that's
00:22:30
my perspective my other comment is I
00:22:32
think what David said is so spot on the
00:22:34
single biggest issue that we have is
00:22:36
that we have made
00:22:38
a huge decision to de-globalize
00:22:41
and that deglobalization has the risk of
00:22:45
introducing a hyperinflation Loop
00:22:48
and we won't know how bad that is for
00:22:51
another year or two why would it do that
00:22:53
why would it well think about decisions
00:22:56
so today let's just say you buy a chip
00:22:59
to make the iPhone you buy that chip
00:23:01
from you know tsmc that makes it uh in
00:23:05
Taiwan ships it to China and the entire
00:23:08
world is serviced with that supply chain
00:23:10
that keeps that chip as cheap as
00:23:13
possible
00:23:14
now with the chips act as an example we
00:23:17
will build resilient Supply chains where
00:23:19
now instead of one place it'll come from
00:23:21
six places five of those six will be in
00:23:24
Allied territories the United States
00:23:26
western Europe potentially Mexico
00:23:30
the thing with that is that that now is
00:23:32
6X more equipment that you're buying
00:23:35
right instead of one machine you now
00:23:37
have six machines instead of one person
00:23:39
operating the machine in one country you
00:23:41
have six people in six countries as you
00:23:43
can imagine when you layer up all these
00:23:45
costs
00:23:47
there is no world in which that chip is
00:23:50
as cheap as it was before
00:23:52
and so the cost of that has to be born
00:23:55
either by the consumer who pays a higher
00:23:58
price
00:23:59
that's measured as inflation
00:24:01
or by the government who subsidizes it
00:24:03
at the point of import that'll be
00:24:05
measured by debt
00:24:06
and so one way or the other in our in
00:24:10
our path now towards more resiliency and
00:24:13
National Security which by the way I
00:24:15
think is the absolute right decision
00:24:16
okay
00:24:18
energy Independence all of this stuff we
00:24:20
have to do today
00:24:22
we are at risk of a hyperinflationary
00:24:24
loop if not managed well
00:24:26
and so you have to be really
00:24:29
on the levers of the economy and you
00:24:31
have to understand it deeply the person
00:24:33
that deserves the most credit of
00:24:35
preventing this hyperinflationary Loop
00:24:37
right now is Joe manchin and hopefully
00:24:40
the history books whatever Jay Powell
00:24:42
does I think has been good but the fact
00:24:45
that Mansion prevented Six Trillion more
00:24:47
dollars of being pumped into the economy
00:24:49
in the last two years is probably the
00:24:52
single thing that prevented inflation
00:24:53
instead of being peaking at nine from
00:24:56
peaking at 15 or 16. I think it would
00:24:58
have been a national disaster without
00:25:00
that charmath is right that extra Six
00:25:02
Trillion that Manchester would have been
00:25:03
a national disaster but let's also give
00:25:05
credit to every Republican because they
00:25:07
also voted against it I mean the fact
00:25:09
that the pressure was on Mansion to do
00:25:11
the thing and see the force from the
00:25:12
trees and he did that yeah no look I
00:25:14
agree I I agree that encouragement I
00:25:17
agree that he was in the hot seat well
00:25:19
so is cinema by the way Cinema didn't go
00:25:22
for the three and a half trillion build
00:25:23
back better but then Mansion you went
00:25:26
along with the 750 billion dollar
00:25:28
version of BBB which they renamed the
00:25:30
inflation reduction act that was kind of
00:25:32
a disappointment so frankly like I give
00:25:35
more credit to the Republicans there
00:25:36
against all of it and
00:25:38
the Democrats jammed it through so if
00:25:41
you're worried about all of this
00:25:42
trillions and trillions of unnecessary
00:25:43
spending why don't you give them a
00:25:45
chance I'm talking about the Delta
00:25:47
between what was spent and what could
00:25:48
have been the entirety of the Gap is
00:25:51
really was prevented by Joe manchin I
00:25:53
know but it was Joe manchin siding with
00:25:55
the Republicans
00:25:57
was perfect on spending they both want
00:26:01
to spend too much money but at this
00:26:02
particular Moment In Time the
00:26:04
Republicans are more restrained about
00:26:06
spending than the Democrats let's go to
00:26:08
number one issue for each person hold on
00:26:09
number one issue for Freeburg is fiscal
00:26:11
responsibility I was going to say the
00:26:13
same thing it is my number one issue in
00:26:15
this next election I want to see
00:26:16
austerity fiscal responsibility and get
00:26:18
this spending under control so that our
00:26:21
kids do not inherit you know stagflation
00:26:23
hyperinflation or whatever cocktail of
00:26:26
disastrous economic policies we are
00:26:28
handing to them what is your number one
00:26:29
issue sax for 2024 if you had to pick a
00:26:33
number one issue what would it be for
00:26:35
David sacks look I think it's simple the
00:26:36
president's job is to ensure peace and
00:26:38
prosperity so you guys are talking about
00:26:40
the prosperity side I think we do need
00:26:41
fiscal responsibility we need to have a
00:26:43
good economy there's like a bundle of
00:26:45
policies that go into that starting with
00:26:47
I think greater fiscal restraint and
00:26:50
then on the peace side I think we need
00:26:52
to adjust America's foreign policy to be
00:26:54
less interventionist where we're you
00:26:57
know we're involving ourselves Here
00:26:58
There and Everywhere all over the world
00:27:00
and I I'm hopeful that when I'm hearing
00:27:03
out of the administration in the last
00:27:04
couple weeks from Jake Sullivan from
00:27:06
Millie these are some good things that
00:27:07
I'm hearing but you know I would like to
00:27:11
see us dial back on the foreign
00:27:13
interventionism if you head to 60 40
00:27:15
that or whatever is is one more
00:27:16
important the other are they both equal
00:27:17
and then we'll go to chamoth both equal
00:27:19
for you which one's more important
00:27:20
they're both I mean look how can you
00:27:22
have a successful United States if we're
00:27:25
either in a recession or at War you
00:27:28
don't want any either of those
00:27:29
situations so those are your top two
00:27:30
equally what is it for youth what what
00:27:32
what do you think there's also a third
00:27:34
one which is culture jaycal so this
00:27:37
one's a little bit hard to categorize
00:27:38
but I do think culture matters and you
00:27:41
know I want us to have a culture of
00:27:42
Excellence I want in the schools for
00:27:44
example I think schools should have
00:27:46
grades they should have advanced math we
00:27:48
should hold our kids to a high standard
00:27:50
I think that we want to have safe cities
00:27:53
we want to you know have cities where
00:27:54
crime's not out of control we need to
00:27:56
have you know a sound border policy so I
00:27:59
think there's like a collection of
00:28:00
policies there under
00:28:02
you know schools crime border that are
00:28:05
sort of broadly cultural I guess
00:28:07
but or maybe you could call them quality
00:28:09
of life issues so you know yeah we need
00:28:12
to have a good economy we need to stay
00:28:13
out of Foreign Wars but also we need to
00:28:14
have a high quality of life can I still
00:28:17
man something for you because I I really
00:28:19
agree with those three things David that
00:28:21
you said but I've I've spent a lot of
00:28:23
time thinking about this in my
00:28:26
formation is that there's one thing that
00:28:28
allows us to solve all three if you bear
00:28:30
with me for a second and I think that
00:28:31
that is the energy independence of the
00:28:34
United States
00:28:35
if you look inside of what's happening
00:28:37
in the U.S today the cost of generating
00:28:39
energy is effectively as cheap as it's
00:28:42
ever been and as close to zero as it
00:28:44
ever has been and it's only going to get
00:28:46
cheaper the problem that we have is that
00:28:49
we have all of these decrepit laws and
00:28:51
infrastructure and Regulatory capture
00:28:52
that causes us to always be in an
00:28:55
imbalance and as a result we do all
00:28:57
kinds of crazy things we borrow enormous
00:29:00
amounts of money to create subsidies we
00:29:02
go and we fight all of these you know
00:29:04
Foreign Wars that don't make any sense
00:29:06
we wrap the energy problem and set in
00:29:09
climate change language which causes
00:29:11
this cultural division
00:29:13
but my belief quite honestly is that the
00:29:15
the reason the IRA was so important is
00:29:17
as it is the most clarified piece of
00:29:20
legislation we've seen
00:29:23
that essentially puts all forms of
00:29:24
energy on a Level Playing Field and has
00:29:26
the chance to get America to permanent
00:29:28
energy Independence
00:29:30
and if the cost of energy is zero and we
00:29:32
can abundantly create it in the United
00:29:34
States what I think happens David is we
00:29:36
have energy to rebuild our supply chain
00:29:39
much cheaper so inflation gets under
00:29:40
control we don't borrow as much
00:29:42
we have a completely different lens on
00:29:45
foreign policy so that this
00:29:46
interventionism and fighting over
00:29:48
resources
00:29:50
is much harder to justify and we put the
00:29:53
climate change language aside and we use
00:29:56
energy Independence as a form of
00:29:58
National Security which gives us the
00:30:00
courage to battle all these other
00:30:01
cultural taboos that we otherwise have
00:30:04
to say we agree with even if they don't
00:30:05
necessarily make any sense and there's a
00:30:07
bunch of them
00:30:08
so I don't know my my my answer to your
00:30:11
question Jason is that one thing if we
00:30:14
accomplish in the next five to ten years
00:30:16
has a chance to really change the course
00:30:19
of the United States
00:30:20
right and then but so I'm guessing then
00:30:22
Biden's your vote because if it is in
00:30:24
fact because Biden is the one who who
00:30:26
pushed for these
00:30:27
clean energy tax credits and this policy
00:30:30
in it what do you think cancel you also
00:30:32
cancel our energy Independence I mean
00:30:34
look we were energy independent based on
00:30:35
fracking you may not like fracking but
00:30:37
it did get us energy independent you may
00:30:39
think that there's environmental
00:30:41
consequences to it that you don't like
00:30:43
and and that has to be balanced but we
00:30:45
did everything against I believe in that
00:30:47
gas I believe in Coal actually as a
00:30:49
bridge fuel I believe in all of these
00:30:51
things
00:30:52
I believe that these are all more
00:30:54
important than going off to all of these
00:30:56
foreign lands and trying to justify
00:30:58
spending trillions of dollars and
00:31:00
putting tens of thousands of American
00:31:01
lives at risk essentially for resources
00:31:04
that we can actually create for
00:31:05
ourselves at home well I agree with you
00:31:07
on that 100 I'm fine with I mean I'll
00:31:09
tell you clean fracking as a way as a
00:31:11
bridge go ahead to getting to you know
00:31:14
more Independence through nuclear and
00:31:15
renewable like I said before China's
00:31:18
declared that they're building 450
00:31:20
nuclear power plants the net cost
00:31:22
effective cost of electricity production
00:31:24
out of a nuclear power plant
00:31:25
is somewhere between one and five cents
00:31:28
per kilowatt hour the US on average is
00:31:30
paying 11 to 15 cents per kilowatt hour
00:31:32
nuclear is just through utilities of
00:31:35
free perk that's with all the regulatory
00:31:37
capture and all that trash that you have
00:31:39
to spend for example we have to spend
00:31:40
220 billion dollars a year to replace
00:31:43
the power lines in America by law that's
00:31:45
2.2 trillion dollars just there right
00:31:47
and so the cost for solar and wind off
00:31:50
grid I think is around three to seven
00:31:53
cents a kilowatt hour in that range
00:31:54
right so it gets nowadays it's gotten
00:31:56
much more competitive
00:31:58
but I think that the nuclear solution
00:32:02
it's just not even being engaged in the
00:32:04
conversation now I want to go back to
00:32:05
the previous point which is
00:32:07
because I didn't State the numbers
00:32:09
before so I just want to State them
00:32:10
because they're so shocking and this is
00:32:12
what what shocks me
00:32:13
the current uh federal debt is 30
00:32:15
trillion dollars our GDP is around 23
00:32:18
trillion
00:32:19
five percent interest rates on 30
00:32:20
trillion dollars is one and a half
00:32:22
trillion dollars in interest payments
00:32:24
alone every year and our social security
00:32:27
so so one and a half trillion dollars I
00:32:29
mean that alone
00:32:30
is about six percent seven percent of
00:32:33
GDP so you have to tax every transaction
00:32:36
in the country by six or seven percent
00:32:37
just to pay the interest payments on the
00:32:39
debt and then we have Medicare
00:32:42
and Social Security that math is wrong
00:32:45
because you have maturities of all
00:32:47
different types with different yield to
00:32:48
maturities and different coupons
00:32:51
it's not today's numbers it's what's
00:32:53
happening on time so as you look out and
00:32:56
you look at the the yield on treasuries
00:32:58
and you apply that to the current debt
00:32:59
level and the increment in the debt
00:33:00
level you'll get to that level right
00:33:02
you'll get to a trillion five a year in
00:33:05
interest payments that need to be made
00:33:06
plus another call it three four five
00:33:10
trillion dollars a year in mandatory
00:33:12
spending and so that's where the country
00:33:14
starts to run into a problem because at
00:33:16
some point when you have to tax so much
00:33:18
to cover the cash payments that need to
00:33:20
be made by the federal government the
00:33:22
economy really gets hurt and things
00:33:24
start to [ __ ] and then if you were to
00:33:25
take those entitlements away Social
00:33:27
Security Medicare you have a real
00:33:30
problem with people's ability to support
00:33:31
themselves in an economy where they're
00:33:33
not working these are elderly retired
00:33:35
people so there is a mate at work to pay
00:33:37
these expensive medical bills so there's
00:33:39
a major crash coming if we don't figure
00:33:42
out how to bridge our way to this Gap so
00:33:44
if someone wants my vote and they're
00:33:46
going to run for president they would
00:33:48
put up a simple chart like Bill Clinton
00:33:49
used to do then show me a 10 to 30 year
00:33:51
plan and just say here's where we're
00:33:53
headed and here's what we're going to to
00:33:54
do to make sure that doesn't happen and
00:33:56
that chart alone I think can win the
00:33:58
vote okay let's pull up the chart then
00:34:00
so here is the federal debt total public
00:34:02
debt as a percentage of gross domestic
00:34:04
product as you can see in the 70s and
00:34:06
80s we were at under 50 the 90s we
00:34:09
started you know growing I don't think
00:34:11
this matters I think everybody every
00:34:13
self-proclaimed intellectual looks at
00:34:15
this chart and says oh my God we've
00:34:16
exceeded a hundred percent you know the
00:34:19
the Empire is going to go to ruin that's
00:34:21
not why the Empire goes to ruin we have
00:34:23
the reserve currency of the of the world
00:34:26
and there's an enormous amount of power
00:34:28
that comes from that position so what
00:34:30
the right number is is TBD that's the
00:34:33
most honest way to think about it it was
00:34:35
a hundred it's at 150 it could go to 200
00:34:38
many countries operate at the levels
00:34:40
above us and still haven't imploded per
00:34:42
se
00:34:43
the real thing is what part of what
00:34:45
Friedberg said is look if you really
00:34:46
want to look at what we pay today we pay
00:34:49
400 billion dollars this year that's the
00:34:51
interest payments okay that's when you
00:34:53
calculate all of the different
00:34:54
maturities we have with all of the
00:34:56
different coupons we have that's what we
00:34:58
owe today and David is Right
00:35:00
mathematically that if interest rates go
00:35:02
to five percent and stay there forever
00:35:04
but we know that that's not how
00:35:06
economies work they ebb and flow okay so
00:35:09
the real problem that we have to
00:35:11
understand is how do you actually create
00:35:13
enough growth and then the next time
00:35:15
that we have a meaningful fall in
00:35:17
interest rates like every other person
00:35:19
does you know look a lot of people in
00:35:21
America know how to refi their credit
00:35:23
cards refi their home loans refi their
00:35:26
mortgages
00:35:27
the United States could have had a much
00:35:29
more aggressive and thoughtful strategy
00:35:31
of refining by pushing out these
00:35:33
maturities way into the future
00:35:35
and again Trump actually suggested that
00:35:37
but because he sounded like a goofball
00:35:38
everybody said absolutely no way
00:35:41
but in hindsight that one move would
00:35:44
have saved us trillions of dollars over
00:35:46
the next decade if we had done it and
00:35:48
this time around we have to have
00:35:50
politicians who are smart enough and
00:35:51
have the werewolf fell to say it doesn't
00:35:53
matter where this idea came from it's
00:35:55
really smart rates are now back to two
00:35:58
percent or one and a half percent let's
00:35:59
now issue 50 and 100 Year bonds and
00:36:02
let's refi this problem out into the
00:36:04
future that makes a ton of sense and we
00:36:06
have to do it the refi makes a ton of
00:36:08
sense just to pull up a chart here and
00:36:10
to counter your
00:36:13
position there that it doesn't matter
00:36:15
maybe you can respond to if you look at
00:36:18
GDP ratios here
00:36:21
number one two and three Japan Venezuela
00:36:23
Greece Sudan
00:36:25
and you know
00:36:27
you know some smaller countries there
00:36:28
but United States currently these
00:36:30
countries none of these countries
00:36:32
this entire world runs on the US dollar
00:36:35
complex whenever we raise rates yes it
00:36:38
is true that on the one hand
00:36:40
our interest payments go up but
00:36:43
proportionately and on a relative basis
00:36:45
I think I think maybe let me take a step
00:36:46
back look one of the most important
00:36:48
things in investing which is appropriate
00:36:50
here is that people ask what is the
00:36:53
price of a stock well before you go
00:36:55
public you're calculating what the
00:36:58
intrinsic value of a company is okay all
00:37:00
the things that they do all the money
00:37:02
that they make here's what we think it's
00:37:04
theoretically work worth but the minute
00:37:06
it goes public the intrinsic value no
00:37:09
longer matters it's what is it valued
00:37:11
relative to everything else okay
00:37:14
the United States is a relative if it's
00:37:16
a stock if all these countries are
00:37:18
stocks we are valued relatively to
00:37:20
others not not intrinsically
00:37:23
and the reason why we have so much power
00:37:26
is because everybody else is actually
00:37:28
valued relative to us
00:37:30
so this is why I think the right thing
00:37:32
to look at Jason is the rate of change
00:37:34
of debt to GDP for the entire G8 or G20
00:37:38
or the rest of the world and what you'll
00:37:40
see is something that goes up and to the
00:37:42
right nobody in the world has been
00:37:45
rewarded for not investing in their
00:37:47
populations and basically borrowing from
00:37:50
tomorrow to invest in today's human
00:37:51
capital okay so we have a disagreement
00:37:53
here Freeburg do you think this is a
00:37:54
major issue yeah do you think it's
00:37:57
manageable Free Bird yeah I think
00:37:59
there's two things that are missing one
00:38:00
is the inflationary effect so you look
00:38:02
at that list of countries that are there
00:38:03
they're paying higher interest and
00:38:05
they're paying in the form of inflation
00:38:07
so they have less that they can spend on
00:38:09
their people and ultimately what ends up
00:38:12
happening it's just simple arithmetic
00:38:14
it's not about relative value of a
00:38:15
currency it's the arithmetic that we
00:38:18
have a check we have to write every
00:38:19
month to pay for Medicare and Social
00:38:22
Security and it is written into law what
00:38:24
that check needs to be and the rate of
00:38:26
which we're having to write those checks
00:38:28
the the increment of those checks is
00:38:30
going going up so significantly that
00:38:31
when you add on the interest payments
00:38:33
and you look at those checks and then
00:38:35
you add on defense something's got to
00:38:37
give because you cannot raise taxes in
00:38:40
the amount that's needed to fund all of
00:38:41
that outlay without this causing either
00:38:43
number one massive inflation if you just
00:38:46
take on more debt or number two
00:38:49
you know significant loss of services
00:38:51
either Social Security Medicare or
00:38:53
defense and so something's going to give
00:38:55
and the the distribution I think is not
00:38:57
being discussed so I just want just one
00:38:59
point the president's budget anybody who
00:39:01
is a president of the United States gets
00:39:03
hold of their annual budget it's about
00:39:04
five and a half trillion dollars this
00:39:06
year
00:39:07
so you're talking about interest
00:39:09
payments that are still less than 10 of
00:39:11
their total budget now that includes the
00:39:12
entitlement payments okay so about three
00:39:14
billion dollars three trillion sorry
00:39:15
three and a half trillion is what you
00:39:17
have to pay for twenty percent
00:39:19
no three trillion dollars is the sum of
00:39:21
Medicare and Social Security
00:39:24
okay so the president still has one and
00:39:26
a half to two trillion dollars of leeway
00:39:27
of which a quarter are debt payments so
00:39:30
my perspective quite honestly is
00:39:32
mathematically there's a lot of room to
00:39:34
run here before these things get really
00:39:36
out of control and even if they do
00:39:38
I think the relative problem is for the
00:39:40
rest of the world will be so egregious
00:39:42
that the ability for the United States
00:39:44
to go to those Banks and those economies
00:39:46
and basically sell in more U.S debt is
00:39:50
quite High because they cannot afford to
00:39:52
own debt in their own country so if you
00:39:54
think that if the United States is bad
00:39:55
go back to that list guess what those
00:39:57
central banks in those countries are
00:39:58
going to be buying US Dollars faster
00:40:01
than they can go out of stock unless we
00:40:02
see some
00:40:03
Union of India China Saudi Arabia Russia
00:40:08
Japan Brazil obviously not Japan but
00:40:11
some some of that consortia will become
00:40:14
a closer trading partner and perhaps
00:40:16
could cause a shift in the balance of
00:40:19
the dominance of the US dollar and
00:40:20
that's one path to to consider sax what
00:40:24
do you think of the balance you hear
00:40:25
obviously we have two opposing opinions
00:40:26
here from tremath and Freeburg where do
00:40:28
you stand on the United States balance
00:40:29
sheet are we over our skis balance
00:40:32
sheets of disaster what are we at like
00:40:33
130 percent of debt to GDP I mean we
00:40:36
have like 30.
00:40:39
yeah it's not even stable I mean we
00:40:41
can't spending is 27 of GDP right now 27
00:40:44
it should be 15 right so the spending
00:40:47
where does that number come from why
00:40:48
there's a there's a bunch of economists
00:40:50
who have shared these papers morons
00:40:53
morons
00:40:55
hold on hold on if you look at it if you
00:40:58
look at government tax receipts over
00:41:00
time with all different kinds of tax
00:41:01
rates including very very different top
00:41:04
marginal tax rates what you see is that
00:41:06
a federal tax receipts as a percentage
00:41:09
of GDP is in the 17 to 19 range and like
00:41:13
the best years you make 19 is usually in
00:41:15
a good economy and in a bad economy it's
00:41:17
like 17 and it really it doesn't matter
00:41:19
whether Reagan was President or Clint
00:41:22
Bill Clinton and so on so there's only
00:41:24
so much blood you can get from a stone
00:41:26
and historically spending was around 90
00:41:30
of GDP and so you would have a one or
00:41:33
two percent
00:41:35
you know deficit every year and that
00:41:38
really accelerated first you had the
00:41:39
financial crisis of 2008 and then you
00:41:41
had covid and freeburg's right you know
00:41:43
we we went from call it you know 20 of
00:41:46
GDP spending to roughly 30 or more
00:41:49
during covid as kind of this emergency
00:41:51
measure but like everything else in
00:41:53
government you know the emergency
00:41:54
measure becomes a permanent program so
00:41:57
now we're at 27 percent it doesn't seem
00:41:58
to be going down and the Democrats want
00:42:01
a lot more I mean we talked about it
00:42:02
build back better would have been three
00:42:04
and a half trillion instead of 750
00:42:06
billion if they just had one or two more
00:42:08
votes incentives they now have so so
00:42:10
hold on so so Freeburg is right there's
00:42:13
like nothing stable about the point
00:42:15
we're at it's the point we're at is bad
00:42:17
on its own terms having 30 trillion of
00:42:19
debt let's say that interest rates
00:42:21
stabilized at
00:42:23
three percent that's still a trillion a
00:42:25
year of Debt Service which is more than
00:42:26
the entire trillion
00:42:28
if interest rates stabilized at three
00:42:30
percent which is optimistic and we're
00:42:32
servicing a trillion sorry 30 trillion
00:42:35
of debt that's roughly a billion dollars
00:42:36
a year of Debt Service payments that
00:42:38
could be spent that should be spent on
00:42:40
other things you guys keep saying
00:42:41
billion when it's a trillion the average
00:42:44
yield to maturity needs to be factored
00:42:45
in there so over a 15-year period David
00:42:48
you would be right mathematically if all
00:42:50
matured but that's not what this is
00:42:52
because you rear you'd have to refi and
00:42:54
reissue a bunch of debt that is at lower
00:42:56
yield right now at these interest rates
00:42:58
I want to be clear I'm not sure if any
00:43:00
of this is good I mean remember I I
00:43:03
understand
00:43:06
I'm not saying that this is a good or
00:43:09
it's a trend what I'm saying is I have
00:43:10
this issue that all of a sudden people
00:43:12
make up and you guys are doing it now an
00:43:16
arbitrary number with no rooting in
00:43:18
history or fact and say this is bad and
00:43:21
all I'm saying is I know it feels bad to
00:43:23
us and I think we would all run this
00:43:24
country differently if we could get
00:43:26
control of the balance sheet I would as
00:43:27
well I would try to get debt way way
00:43:29
down I would try to get deficits way way
00:43:31
down but all I'm saying is using this
00:43:33
justification of an arbitrary number
00:43:35
always falls flat so I'm encouraging us
00:43:38
all let's find a better model of
00:43:40
reasoning because every time we point to
00:43:43
some rando's book and say 127 is bad
00:43:46
nobody listens and I think the message
00:43:48
that you should take away is it's
00:43:49
because it's imprecise and it's not
00:43:51
rooted in any actual logic and if
00:43:53
there's a better building the reason I
00:43:55
believe that this is concerning is I
00:43:57
look at the top 10 countries that have
00:43:59
you know debt ratios that see them out
00:44:01
of whack and I think wow what is their
00:44:03
Fortune been for the last 10 years
00:44:04
vis-a-vis Japan it's not the right
00:44:07
comparison the right comparison okay to
00:44:08
go back look at the British Empire and
00:44:12
when and what was the debt to GDP when
00:44:14
it started to actually fall off does
00:44:15
anybody ever collapsed I collapsed no
00:44:18
I'm saying okay was it triggered was it
00:44:20
triggered by debt to GDP and I think
00:44:22
your answer will be in part again
00:44:26
they took on runes debt and they
00:44:28
couldn't make maintain their empire
00:44:29
anymore and the whole thing collapsed
00:44:30
I'm just asking for some numerical
00:44:32
specificity
00:44:38
a lot of numerical specificity there is
00:44:41
a ton of work that's been done pulling
00:44:43
[ __ ] out of their ass so it shows that
00:44:46
it's historically the best way to manage
00:44:48
the growth in in a in a country is to
00:44:51
have deficit spending be equal to or
00:44:54
less than the growth rate of the economy
00:44:55
of that country so for example if your
00:44:58
income the the tax revenue that's being
00:45:00
generated by the government is equal to
00:45:02
say 15 of GDP you do not want your
00:45:05
spending to be more than 17 or 18 if the
00:45:08
economic growth rate is two to three
00:45:09
percent that's it if you do anything
00:45:11
more than what happens you know if you
00:45:13
do anything more than that you're
00:45:14
borrowing from the future to pay for
00:45:16
today that's the simple truth okay so
00:45:18
what happens and when you do that the
00:45:20
rates go up and the prices go up and
00:45:22
eventually your currency doesn't work
00:45:25
so you're making a bet read the book
00:45:27
that I talked about last year the the
00:45:29
most recent Ray dalio book he goes
00:45:31
through six stories with the economic
00:45:33
data to prove it the factual data the
00:45:36
history of what's happened with six
00:45:37
Empires over the last 500 years were
00:45:39
this exact same scenario has played out
00:45:41
this isn't some random arbitrary story I
00:45:44
read that book and everyone had the
00:45:46
exact same perspective that you have
00:45:48
when they were living in those days and
00:45:49
they said you know what we're going to
00:45:51
be okay because we're the reserve
00:45:52
currency and the world loves us and
00:45:53
we're the Empire and we have influence
00:45:54
everywhere and they all lost Primacy and
00:45:57
their currencies collapsed and they all
00:45:58
broke apart and that's not saying that
00:46:00
that can't happen in America what I'm
00:46:01
saying is you get so full-throated I
00:46:04
read that book it's great narrative but
00:46:06
the numbers are brittle okay they're
00:46:08
fragile and they're mostly made up
00:46:12
so all I'm saying is in the absence in
00:46:15
the absence of numerical specificity I
00:46:18
agree with you that this trend is
00:46:20
alarming and it's bad I agree with you
00:46:22
and I agree that we should spend a lot
00:46:23
less what I'm saying is when you say to
00:46:26
the world stop spending because XYZ
00:46:29
number is bad you have no credibility
00:46:31
because it's not it's something that you
00:46:33
can actually back up and all I'm saying
00:46:36
is if you could find a better logical
00:46:38
argument you would probably get a lot
00:46:40
more people to you you're just being
00:46:43
ignorant you're ignoring it you're
00:46:44
saying you don't want to actually
00:46:45
believe it the numbers are there show me
00:46:48
the numbers and I'm not saying ignorant
00:46:49
in a disparaging way I'm saying you're
00:46:50
literally just ignoring the data show me
00:46:53
the numbers
00:46:58
I'll send it to you tonight I promise
00:47:00
and I'll post it on our freaking things
00:47:02
so people can watch it all right okay
00:47:03
listen the the group chat's gonna be on
00:47:05
fire this weekend sax final word for you
00:47:07
okay final word okay final one please
00:47:12
obviously on opposite sides I think it's
00:47:15
great I still respect and love you if
00:47:18
you go back in history and look at debt
00:47:20
to GDP levels the only other time we're
00:47:22
anything remotely like the level we're
00:47:24
at right now is right after World War II
00:47:26
when we had just saved the world from
00:47:28
Nazism okay that was worth going into
00:47:31
debt for you look today what is it that
00:47:33
we've gotten into this 130 debt to GDP
00:47:36
what is this 30 trillion dollars of debt
00:47:38
for what if we bought with all that
00:47:40
money huge amounts of it have been
00:47:41
squandered you're right and Biden won
00:47:43
and more if if the courts didn't stop
00:47:45
him he would have spent a trillion
00:47:47
for giving a bunch of student loans to
00:47:50
for basketball degrees or liberal
00:47:52
studies or whatever
00:47:54
me graduate degrees that brown in my
00:47:57
heart will be finished that's Point
00:47:58
number one is that this money is being
00:48:00
squandered at levels we've never seen
00:48:02
before and the squandering is continuing
00:48:04
it's not like we've reached a steady
00:48:05
state it just keeps going and going and
00:48:08
it's great goes on I can't precisely saw
00:48:10
a second I can't precisely say when it's
00:48:12
gonna break but I do know it's gonna
00:48:14
break the other thing the point number
00:48:16
two is about consequences today there is
00:48:20
a phenomenon economists call crowding
00:48:22
out where when interest rates go up more
00:48:26
and more money flows into the risk-free
00:48:28
rate of return and then that crowds out
00:48:31
investment capital and we've talked
00:48:33
about it on the last pod where if the
00:48:35
risk-free rate is five percent and then
00:48:38
like high quality corporate bonds are
00:48:39
offering eight to ten percent now Equity
00:48:42
Investments must generate 15 and VC must
00:48:45
generate 20 and there are very few VC
00:48:48
Investments that can generate that kind
00:48:50
of irr so what happens the money flows
00:48:52
out of VC and there's less money for
00:48:54
risk capital what drives our economy
00:48:56
risk-taking data entrepreneurship so
00:48:59
hold on a second so this massive Debt
00:49:01
Service that we have which drives up
00:49:03
interest rates will crowd out the very
00:49:05
kind of economic activity that the
00:49:07
United States needs to stay on The
00:49:09
Cutting Edge
00:49:11
of the rebuttal to the rebuttal no
00:49:13
you're so right so why don't you just
00:49:15
bookend the argument exactly the way you
00:49:17
just did my point is not that you said
00:49:19
it just before that we don't know at
00:49:21
what upper bound these things break or
00:49:23
don't break and all I'm saying is every
00:49:24
time you throw up a random number you
00:49:26
guys sound like the boy who cries wolf
00:49:28
okay and you're shouting into a vacuum
00:49:30
is is just the is the advice that I'm
00:49:32
trying to give you guys I agree with you
00:49:34
I spend my entire days investing in and
00:49:37
trying to figure out what is the
00:49:39
risk-adjusted rate of return of the
00:49:40
things that I'm doing and I'm trying to
00:49:42
tell you as somebody with some
00:49:43
reasonable Financial numeracy every time
00:49:45
I hear you or Ray dalio or somebody else
00:49:47
say this number is where it all breaks
00:49:50
and it doesn't you lose a little bit of
00:49:52
credibility then you go to this number
00:49:53
and you're like oh at 100
00:50:00
how much is too much how much debt can
00:50:03
we handle and how much spending as a
00:50:05
percent of GDP should we handle what is
00:50:07
the limit in your mind
00:50:10
and how do you decide what that limit
00:50:12
can or should be I think the honest
00:50:13
answer is every time that I have been
00:50:16
alarmed that we had hit a threshold that
00:50:18
was meaningful so for example like I
00:50:20
think under Obama we passed a hundred
00:50:22
and it felt very scary because I was
00:50:24
like wow that seems like a demarcation
00:50:26
it turned out to not be a demarcation at
00:50:29
all because it's relative to every other
00:50:32
country and what they're going through
00:50:33
and I understand that you don't want to
00:50:35
believe that but I do think that
00:50:37
America's economic fatality is not an
00:50:40
independent uh function it is a
00:50:42
dependent function on everybody else we
00:50:43
are relative to everybody else if
00:50:46
there's a a different Cosmos and a
00:50:48
different planet somewhere maybe this
00:50:49
will all reset but right now it's not
00:50:51
and so we all trade relative to the
00:50:53
United States and in as much
00:50:56
I would like to just say I don't know
00:50:58
enough to guess what this number is and
00:51:00
I'd rather focus on what David said
00:51:01
which is there are things that we need
00:51:04
to do
00:51:06
that we need to incentivize people to
00:51:08
invest in extreme risk-taking that
00:51:10
create new businesses that move the
00:51:12
world forward
00:51:13
you can have that conversation without
00:51:16
bellyaching and crying to Mommy about a
00:51:18
GD debt to GDP number because every time
00:51:20
you throw it out there nobody knows what
00:51:22
you're talking about nobody knows what
00:51:24
reaction to have and everybody feels
00:51:26
over time David Friedberg that you're
00:51:27
crying wolf so all I'm saying is I get
00:51:30
that it's concerning to you and it
00:51:31
creates anxiety but every time you
00:51:34
probably this is not the first time
00:51:35
you've had anxiety you probably had
00:51:36
anxiety at 50 75 100 125 guess what I
00:51:40
bet you'll have anxiety at 150. I don't
00:51:42
know what it means I do know what sex
00:51:44
means though which is that right now we
00:51:46
have a risk-free rate that's going to
00:51:47
five we have corporate bonds that'll be
00:51:50
at 10. we have
00:51:52
Equity investing of the most risk-taking
00:51:54
which is the early stage Venture that
00:51:56
has to return 25
00:51:57
and that is an incredibly High bar but
00:52:00
we need to do it and we need to do maybe
00:52:03
fewer Investments quite honestly with
00:52:05
fewer participants with less dollars
00:52:08
that are more effectively put to work
00:52:10
okay maybe this is a good jumping off
00:52:11
point to talk about all the waste in
00:52:13
Silicon Valley
00:52:14
and that stuff can happen without
00:52:16
debating incessantly this debt to GDP
00:52:18
number which is awesome
00:52:22
all right Freeburg sacks and then we're
00:52:24
gonna move go I agree I've never had
00:52:27
anxiety about debt to GDP it's never
00:52:29
been anything on my radar the
00:52:31
conversation I'm trying to have today is
00:52:33
the amount of spending the federal
00:52:35
spending including interest payments as
00:52:37
a percent of the GDP as a percent of how
00:52:39
much we can tax to pay all those to make
00:52:42
all those payments every year and so
00:52:43
what I'm concerned about is the
00:52:45
ballooning cost of paying out all the
00:52:47
obligations the federal government have
00:52:49
you say something different than what
00:52:50
you were just saying that's if you were
00:52:51
cared about only that then refinancing
00:52:54
the debt is an equally valid proposition
00:52:56
and changing the duration expense it's
00:52:58
not the only expense so interest
00:52:59
payments are ballooning in addition to
00:53:01
interest payments Social Security and
00:53:03
Medicare payments are also ballooning
00:53:04
and defense out of control spending
00:53:06
everybody
00:53:09
add those four big categories together
00:53:11
you don't have any room left over
00:53:14
you're talking about discipline in
00:53:17
spending in defense great I agree you're
00:53:19
talking about discipline and capping
00:53:21
health care costs great I agree what
00:53:23
does that have to do with this other
00:53:24
orthogonal thing you've been talking
00:53:26
about which is this random number debt
00:53:28
to GDP it doesn't okay okay let's move
00:53:31
on from that discussion let me make one
00:53:33
final point we can move on so look it
00:53:35
takes time for the final Point go
00:53:37
it's important discussion apparently
00:53:39
look in the in the interests of bestie
00:53:41
Harmony I will partially agree with the
00:53:43
point that your mouth is making which is
00:53:45
that for a long time in American
00:53:47
politics people have sort of cried wolf
00:53:49
about debt to GDP for example if you
00:53:52
remember way back in 1992 Ross Perot
00:53:55
basically bases candidacy on the idea
00:53:58
that the US was racking up way too much
00:54:01
debt you know what debt to GDP was in
00:54:03
1992 41 okay so people used to care a
00:54:08
lot about this I remember when Reagan
00:54:09
was President and jets GDP was 30 people
00:54:12
were saying that he was just like you
00:54:13
know wild spender okay but I think that
00:54:16
precisely because nothing broke at 30 40
00:54:20
80 100 you then had the rise of this
00:54:23
Theory called mmt or modern monetary
00:54:26
Theory which said that the debts don't
00:54:28
matter if you're the reserve currency
00:54:30
you can print as much money as you want
00:54:32
and so people started indulging in this
00:54:34
and so now I actually think we are at a
00:54:37
point I can't say precisely where it
00:54:38
breaks but I do think that because debt
00:54:42
to GDP didn't seem to matter for so long
00:54:45
I actually think we got carried away and
00:54:47
now we're at levels which are just going
00:54:50
to be ruinous if for no other reason
00:54:52
than our debt service is going to crowd
00:54:55
out whether you want more guns or more
00:54:58
butter in our federal budget if you want
00:55:00
more defense spending you want more
00:55:01
entitlements you want more discouraging
00:55:02
spending there's no question that debt
00:55:05
service is getting bigger and bigger is
00:55:07
going to crowd out those programs
00:55:08
there's no question we need to spend
00:55:10
less I 100 agree with you okay but all
00:55:13
I'm saying is we should spend less on
00:55:14
defense because we have different ways
00:55:16
of Defending ourselves That Should Be
00:55:18
The Logical argument for Leicester
00:55:20
energy Independence is defense and a
00:55:22
balanced budget could be defense as well
00:55:24
if you look at the IRA that was less
00:55:26
than a trillion dollars over a decade
00:55:28
okay that has the potential to shift
00:55:31
trillions of dollars a year in defense
00:55:33
spending
00:55:34
yes okay okay so let me wrap okay let me
00:55:38
wrap here for a second thank you
00:55:39
everybody you can look at these bills in
00:55:42
and of themselves and try to actually do
00:55:44
the right thing for the country without
00:55:46
wrapping up all of these random
00:55:48
arguments and I by the way just be clear
00:55:50
I don't believe it
00:55:51
don't do it don't do it the world's
00:55:54
worth moderator come on
00:55:58
during the Obama presidency we had a
00:56:00
thing called the sequester I don't know
00:56:02
if you guys remember this yeah but
00:56:03
Republicans and Democrats agreed that
00:56:06
basically that because we had just had
00:56:09
like these trillion dollar uh deficits
00:56:12
because of the 2008 Global financial
00:56:14
crisis they got together and said listen
00:56:16
we're going to hold the line on spending
00:56:18
and there'll be no increase on defense
00:56:20
spending in exchange for no increase in
00:56:23
discretionary spending social programs
00:56:25
and for a few years we held the line on
00:56:29
spending actually and then of course
00:56:30
both Democrats Republicans didn't want
00:56:32
that for different reasons and the
00:56:34
sequester went away we need to go back
00:56:36
to something like that there are two
00:56:37
things one one detail like when you go
00:56:40
and send a bill so look the way you pass
00:56:42
a bill right you have to send it to the
00:56:43
CBO to get scored one of the things that
00:56:46
I learned this week is that sometimes
00:56:48
the CBO and they're not really empowered
00:56:50
to actually tell you how things get
00:56:52
offset so for example like if you have a
00:56:54
medicine
00:56:56
what they will do is say well we'll look
00:56:58
at at the population level
00:57:00
how much would this medicine cost if
00:57:02
it's taken by the population
00:57:04
but if that medicine then all of a
00:57:05
sudden has the potential to actually
00:57:07
off-ramp you over here those savings are
00:57:10
not really factored in as well
00:57:13
so David to your point another way that
00:57:15
we can refine how we build budgets to
00:57:17
make sure that we're not overspending is
00:57:19
to actually improve the toolkit and the
00:57:21
data that like the CBO is given so that
00:57:23
when they score things they can actually
00:57:25
look at the total impact like for
00:57:27
example like the IRA again one of the
00:57:29
biggest benefits will be to defense
00:57:31
spending if we choose to make those cuts
00:57:33
you will be able to do it differently
00:57:35
once we have you know no Reliance on
00:57:37
foreign energy okay to wrap this segment
00:57:40
the first segment which took 57 minutes
00:57:42
it's obviously wow really well I think
00:57:44
it's an important discussion Hey Jake
00:57:46
how would you vote for DeSantis if he
00:57:47
promises fiscal responsibility
00:57:49
well here's the thing I am going to take
00:57:51
a look at the candidates I'm going to
00:57:52
make the best decision in terms of what
00:57:54
I think is that that's for the
00:57:55
countryside
00:58:00
yeah
00:58:01
it depends on if DeSantis gives you
00:58:03
everything you want a fiscal policy why
00:58:05
wouldn't you vote for him if he stays
00:58:07
out if he if he's in favor of a woman's
00:58:09
right to choose for the first 15 weeks
00:58:11
that's Florida policy are you yes
00:58:13
you know I would take a look I would
00:58:15
take a look
00:58:16
not to vote for him 15 weeks right to
00:58:19
choose combined with fiscal
00:58:21
responsibility
00:58:29
okay but to wrap up here the two things
00:58:32
that matter I believe and based on our
00:58:34
panels discussion austerity and
00:58:35
Excellence are what are going to get us
00:58:37
out of this mess here is what the
00:58:39
platform seems to be shaping up our 2024
00:58:41
platform control spending everybody here
00:58:43
thinks that's important energy
00:58:45
Independence everybody here thinks
00:58:46
that's super important stop fighting
00:58:48
unnecessary Wars uh and maybe rethinking
00:58:51
our foreign policy I think we all agree
00:58:52
on that
00:58:53
and the cultural focus on Excellence not
00:58:57
excess this is shaping up to be a little
00:59:00
bit of an all-in platform here great
00:59:01
discussion everybody
00:59:03
speaking of austerity measures I think
00:59:05
you know we should just talk right right
00:59:08
up top here about what's going on at
00:59:09
Google Chris hone uh I believe is how
00:59:12
you pronounce his name chrisone he sent
00:59:14
a letter to Google and Amazon Amazon
00:59:16
today after already announcing 10 000
00:59:19
layoffs they just said again Andy said
00:59:22
prepare for more layoffs in 2023 and
00:59:24
these are not Factory workers these are
00:59:27
white collar high-paying jobs
00:59:30
that are being laid off here there's
00:59:32
Surplus Elites Surplus Elites uh it is
00:59:36
definitely a part of the Zeitgeist right
00:59:38
now so they're going to reduce headcount
00:59:40
massively but in this letter to
00:59:42
shareholders he points out
00:59:44
notably not just hey Google needs to do
00:59:47
a riff a reduction in force but he
00:59:49
points out a more granular point that I
00:59:51
want the panel to talk about here which
00:59:53
is he says hey you need to reduce the
00:59:55
actual salaries at Google the average
00:59:57
salary being 296
01:00:01
000.67 higher than an incredibly well
01:00:05
paying Workforce Microsoft quote we
01:00:08
acknowledge that alphabet employs some
01:00:10
of the most talented and brightest
01:00:11
computer scientists and Engineers but
01:00:13
these represent only a fraction of the
01:00:15
employee base many employees are
01:00:16
performing general sales marketing and
01:00:18
administrative jobs who should be
01:00:19
compensated in line with other
01:00:21
technology companies and he says we need
01:00:24
to establish an ebitda margin Target as
01:00:28
you can see in this chart and reduce the
01:00:30
losses on other bets perhaps increasing
01:00:33
share BuyBacks as well so what we're
01:00:35
looking at here now after Facebook
01:00:38
business my God I mean the business is
01:00:41
nuts Freeburg you worked there what in
01:00:44
this Rings true to you uh or not and
01:00:48
then how many people does Google need to
01:00:52
employ
01:00:53
to operate the business and invest in
01:00:56
the future of the business in your mind
01:00:58
they have a hundred eighty seven
01:01:00
thousand employees at Google it's grown
01:01:04
24.5 rounded up 25 year over year they
01:01:08
grew 25 percent year over year in their
01:01:12
business how many people need to run
01:01:14
this business to have it aggressively
01:01:15
grow look I think
01:01:17
there are um two main
01:01:21
drivers of the issue that Google maybe
01:01:24
meta maybe Twitter prior to elon's
01:01:28
involvement and and really Silicon
01:01:30
Valley as a whole
01:01:31
uh the bigger companies have faced the
01:01:33
first is the war for talent
01:01:35
the war for Talent started I mentioned
01:01:38
this last time around 2004 2005 because
01:01:42
prior to that there weren't as many
01:01:43
grads coming out of um undergrad with
01:01:46
computer science degrees right I think
01:01:47
10 of of grads in the Bay Area Schools
01:01:50
were finishing with computer science
01:01:51
degrees today the number is like 60 so
01:01:55
you know around that time the war for
01:01:56
talent LED organizations particularly
01:01:59
Google down a path of offering more
01:02:02
perks and benefits to their employees to
01:02:04
create a workplace that was more
01:02:05
competitive and that ends up being a
01:02:08
slippery slope because then other
01:02:10
organizations try and find parity and
01:02:11
then other organizations try and overdo
01:02:13
it and push it even further so this
01:02:15
leads to both wage inflation across the
01:02:18
um uh the uh ecosystem but it's also LED
01:02:24
to almost like the acceptance or the
01:02:27
allowance for degrees of complacency and
01:02:30
so I'm not saying that the workforce is
01:02:32
all complacent but I do think that
01:02:34
complacency is Forgiven some amount of
01:02:37
complacency I'm going to take a Friday
01:02:38
off I'm going to take two Fridays off
01:02:40
all of a sudden I'm not working any
01:02:42
Fridays the other thing that's happened
01:02:43
is as this Workforce has aged I worked
01:02:46
at Google 20 years ago
01:02:48
and a lot of the folks I work with
01:02:50
almost all of them now have families at
01:02:53
the time everyone was young and as the
01:02:55
demographics of Silicon Valley has
01:02:57
matured you have more people that are
01:02:59
less about killing themselves and giving
01:03:01
everything that they have to their
01:03:03
organization and they're more interested
01:03:05
in being with their families and now
01:03:06
spending less time at work especially in
01:03:09
light of the fact that compensation has
01:03:11
ballooned to a point that you can now
01:03:12
live a very very comfortable lifestyle
01:03:14
and you don't need to have a big payday
01:03:16
in order to be able to take really good
01:03:18
care of your family which was the case
01:03:19
as a startup and then the other issue is
01:03:21
just one of innovation at Google if you
01:03:24
work on a new project and it doesn't
01:03:25
work there's no loss you still have your
01:03:28
job and they've started programs where
01:03:30
they'll give you equity and new startup
01:03:32
ideas or they'll give you all the stuff
01:03:33
so they'll give you upside if you win
01:03:35
they'll give you bonuses if it succeeds
01:03:36
but there's no downside and so the pain
01:03:39
and the burn that you would feel as a
01:03:41
startup founder or as someone building a
01:03:42
new business isn't experience to realize
01:03:45
and I cannot I don't need to tell you
01:03:46
guys this but for anyone else that's
01:03:48
listening that many not really be fully
01:03:49
aware the lack of pain the lack of risk
01:03:52
the lack of downside the lack of having
01:03:54
no safety net and and falling through
01:03:57
the pits removes all of so much of the
01:04:00
incentive to succeed and to drive and to
01:04:03
innovate and I think that's become part
01:04:05
of the complacency problem
01:04:06
that's caused larger organizations to
01:04:09
Simply say let's throw more heads at the
01:04:10
problem and when you just throw more
01:04:11
heads at the problem you have more of
01:04:13
kind of talent War problem that I
01:04:15
mentioned number one what is the average
01:04:16
salary 280 000 300 000 rounded up yeah
01:04:20
that doesn't Cloud I don't know if that
01:04:22
includes benefits whatever let's just
01:04:23
call 300 000 yeah and by the way that
01:04:25
doesn't mean that those people should
01:04:27
all get
01:04:32
some of my best friends work at Google
01:04:33
it's a great organization people do
01:04:35
incredible work there but in terms of
01:04:37
Return of dollars invested as a
01:04:40
shareholder that's the question that's
01:04:41
the that's the analysis that's the scope
01:04:43
that the shareholder is looking at is do
01:04:45
I want to spend a dollar to make a
01:04:47
dollar five or do I only want to spend a
01:04:50
dollar where I know I'm gonna get a
01:04:51
dollar eighty back and so if you just
01:04:53
bucketed where the dollars are going you
01:04:55
would end up saying you know what I'd
01:04:57
rather just focus on the places where I
01:04:59
spend a dollar and I get two dollars
01:05:00
back or a dollar eighty back and I don't
01:05:01
want to do any of the stuff where I
01:05:02
spend a dollar I make a dollar five back
01:05:04
and that's called roic or return on
01:05:06
invested capital and that's includes
01:05:08
return on invested human capital and so
01:05:10
the analyst in the stock that that's an
01:05:12
investor in the stock will look at it
01:05:14
through that lens whereas everyone
01:05:16
that's working there is still
01:05:17
contributing meaningfully they're still
01:05:19
doing valuable work but in terms of
01:05:20
return on invested capital a good chunk
01:05:23
of the projects are not driving the
01:05:25
majority of the value a minority of the
01:05:27
projects a minority the ad count is
01:05:28
driving almost all the value
01:05:30
I mean if you sensitized it to what you
01:05:32
said David
01:05:33
a if it was just 75 or a half that
01:05:37
number then you know the stock goes up
01:05:40
35 overnight and if it goes up to the
01:05:42
full number yep the stock goes up 65
01:05:45
overnight
01:05:48
I think that's totally feasible
01:05:50
and then and then I think what you do is
01:05:52
you
01:05:55
take accountability model that you speak
01:05:56
to the street about and you say here's
01:05:58
how we're going to hold ourselves
01:05:59
accountable to investing this 10 billion
01:06:01
dollars every year and not just have
01:06:02
everything be a nebulous 50 in your
01:06:04
project and then it's always a 15-year
01:06:06
project and you're always just burning
01:06:07
cash to go after those projects that are
01:06:10
highly nebulous if you had to Steel Man
01:06:12
the other side I think the argument
01:06:14
would be
01:06:16
I I would say they they would make
01:06:17
probably three arguments
01:06:19
argument number one is like look don't
01:06:21
get overly distracted by other bets
01:06:23
because it's a small category of spend
01:06:25
and we've contained that cost
01:06:27
pretty rationally relative to the rest
01:06:29
of the Core Business
01:06:31
the second thing that they would
01:06:32
probably say is there's an enormous
01:06:34
amount of work that is never seen by
01:06:37
Wall Street that explains how good our
01:06:39
service is whether that's you know in
01:06:42
early iterations of you know technical
01:06:44
capability like GFS and bigtable to
01:06:46
things like TPU to things like
01:06:48
tensorflow and all of that builds up all
01:06:52
the things that deepmind does all the
01:06:54
compute we have to throw against search
01:06:55
to support that so I think they would
01:06:58
probably say well people probably don't
01:06:59
have a great sense of today
01:07:01
that it's not just 25 of the team that's
01:07:04
required and then the third thing is
01:07:06
what they would probably say is it's
01:07:07
very hard to explain but Google has all
01:07:10
kinds of other things that they do for
01:07:12
free
01:07:13
to create the ecosystem so that the
01:07:15
internet works well you know I I heard
01:07:17
this one thing where somebody was
01:07:18
explaining that Google
01:07:20
is like you know the the DNS server
01:07:22
right Google is the time server and all
01:07:24
of the stuff they do for free
01:07:26
and all of it is just about making the
01:07:28
internet work more efficiently and that
01:07:29
has some costs so
01:07:31
that's probably how they would steal man
01:07:33
how to build back up to some number
01:07:35
but it's probably there's still a gap
01:07:37
between that number of David and what
01:07:38
their prevailing headcount is yeah I
01:07:40
think that's that's totally true because
01:07:42
the infrastructure
01:07:43
struck Byers is the most
01:07:45
engineering organization on planet Earth
01:07:47
in my opinion and they have laid um
01:07:50
fiber lines across the Atlantic they
01:07:52
have built their own data center
01:07:54
infrastructure their own switches their
01:07:56
own silicon like everything is built by
01:07:59
this team from the ground up from first
01:08:00
principles and it gives extraordinary
01:08:02
modes and advantages to the business it
01:08:04
makes the internet a better place it
01:08:05
allows you know Ultra fast super cheap
01:08:07
YouTube video viewing across the
01:08:09
internet I mean there's just so much of
01:08:11
of these core advantages in the business
01:08:13
but if you look at the head count over
01:08:14
time you have to ask yourself the
01:08:17
question you know how many of these
01:08:19
Investments that are core are really you
01:08:22
know captured in the head count that
01:08:23
blossomed from 2013 47 000 people so
01:08:28
that the business has gone up in
01:08:29
headcount by Forex
01:08:31
in the last nine years one of the things
01:08:33
that Jeff Bezos was always so incredible
01:08:35
at and I saw him give a speech on this
01:08:37
at one point Bezos gave a speech that I
01:08:39
saw and he said we are really good at
01:08:41
failing and he showed all these projects
01:08:43
that Amazon tried and he said we tried
01:08:46
A9 we tried to do our own search we
01:08:48
tried to build our own cell phone a fire
01:08:49
phone we tried to do this we tried to do
01:08:51
that when they don't work we kill them
01:08:54
and when they did work they became 100
01:08:56
multi-hundred billion dollar Enterprise
01:08:58
Value creators for them like AWS which
01:09:01
was one of these projects and so Amazon
01:09:03
was so good at taking the stuff that
01:09:05
wasn't working knowing when it wasn't
01:09:07
working and ending it and they were
01:09:09
still able to drive an innovation engine
01:09:10
one of the challenges I see with
01:09:12
alphabet is that they are so good at
01:09:14
bringing the best talent to work on
01:09:16
these Innovation problems but where
01:09:17
they're not good is saying you know what
01:09:19
this isn't working it's time to move on
01:09:21
and if they did just that if they added
01:09:23
that one disciplinary capability then I
01:09:26
think this as you said the market cap
01:09:27
would go up by 600 billion dollars what
01:09:29
about this um I just want your reaction
01:09:31
to this thing that a lot of people
01:09:33
whisper in Silicon Valley which is part
01:09:35
of what the big companies should do it's
01:09:37
part of the positive Game Theory
01:09:39
is to not let these talented people
01:09:42
actually leave it's better to pay them
01:09:43
300 000 or 200 000 or whatever and stay
01:09:46
at Microsoft and meta
01:09:48
and Google or whatnot then go off and
01:09:51
start up build a startup that could
01:09:53
actually then disrupt them and so you
01:09:56
know it's it's a cost worth bearing
01:09:57
because it's actually mitigating
01:09:59
strategy yes it's a blocker strategy
01:10:00
yeah what do you think about that super
01:10:02
interesting idea
01:10:04
I think that the people that are likely
01:10:07
going to actually be able to execute on
01:10:09
that are going to leave and do it anyway
01:10:14
look I was not super I had made a little
01:10:17
money when I worked at Google but I was
01:10:19
not super wealthy and I left the last
01:10:21
the vast majority of my stock options
01:10:23
and rsus on the table when I left Google
01:10:25
in 2006. here's our climate Corps
01:10:28
because I could not help but do that I
01:10:30
could not help myself I had to go do
01:10:32
that thing of course and I think the
01:10:33
kinds of people that are going to
01:10:34
succeed in entrepreneurism cannot help
01:10:37
themselves it doesn't matter how much
01:10:39
money is being thrown at them here's the
01:10:40
chart basically these companies have
01:10:42
been correlating their spend
01:10:44
and their head count to their revenue
01:10:46
not what's necessary you look at
01:10:48
alphabet total employee change since
01:10:50
2018
01:10:52
95.36 I mean I don't know that looks
01:10:54
pretty good today Revenue 132 it's
01:10:57
pretty good
01:10:59
it doesn't look like they were massively
01:11:01
over hiring if you asked me totally
01:11:03
totally so what are you guys talking
01:11:05
about so maybe I'm wrong I will say look
01:11:07
a big part of um Larry Page's decision
01:11:09
to shift
01:11:10
the company from Google to alphabet was
01:11:13
he believed that the core business at
01:11:15
some point would ultimately be disrupted
01:11:16
that the core advertising engine was
01:11:18
going to be disrupted and there wasn't
01:11:20
going to be the sustaining long-term
01:11:21
growth advantage in that business maybe
01:11:23
he's been disproven or maybe that it
01:11:25
hasn't been just it hasn't been proven
01:11:26
yet but the concept was we need to find
01:11:28
the next Google and we need to build the
01:11:30
next Google and so we want to allocate
01:11:32
Capital within a portfolio of bets and
01:11:35
have some number of those things maybe
01:11:36
not all of them maybe not even a lot of
01:11:39
them maybe just one or two of them turn
01:11:41
into the next 100 billion dollar Revenue
01:11:42
line for us
01:11:44
now he always said that that's going to
01:11:47
take a long time he definitely
01:11:48
underestimated the quality of Google
01:11:50
search and the the dominance of it now
01:11:53
it's probably it probably stands to
01:11:56
reason that
01:11:57
if we have enough Innovation at the
01:12:00
fundamental model level in AI
01:12:01
particularly like a bunch of really
01:12:03
powerful multimodal models the new form
01:12:05
of search can disrupt Google but the
01:12:08
problem is they are so ahead of
01:12:11
everybody else with respect to those
01:12:12
models as well so the real question is
01:12:15
even that next big LeapFrog isn't going
01:12:18
to happen without billions of dollars of
01:12:19
capital invested and you know the most
01:12:22
likely folks that are able to do it I
01:12:23
think open AI at some level but again
01:12:26
they're going to always have to raise
01:12:27
money from other folks Google can
01:12:29
self-fund it and it makes an enormous
01:12:31
amount of sense to drive that technical
01:12:33
mode
01:12:34
so it just seems like Larry what do we
01:12:36
think is going to happen here and any
01:12:37
are they going to make the cuts or not
01:12:39
you think they'll make do they have the
01:12:41
ability to not make cuts and just ignore
01:12:44
a six percent shareholder Tremont or are
01:12:46
they just gonna make them and then we're
01:12:47
going to go on to you the dynamic will
01:12:50
be how much Ruth is able to convey Ruth
01:12:53
pour out is the CFO and she's hardcore
01:12:55
she's hardcore she's incredibly everyone
01:12:58
on that leadership team is incredibly
01:12:59
impressive but she um has a very
01:13:02
particular
01:13:03
lens uh a Wall Street lens and she
01:13:05
understands what the shareholders are
01:13:06
thinking and looking at and she will
01:13:08
convey these points to the board and um
01:13:11
and there will be engineers and Sundar
01:13:12
is an engineer and he will and he's a
01:13:14
very good he's very good at Gathering
01:13:16
and the different points of view and
01:13:18
having balance around this and he will
01:13:19
share his points of view at the board
01:13:20
and I think ultimately it will come down
01:13:23
to
01:13:24
my guess is like we just talked about
01:13:26
some portfolio allocation decisions
01:13:28
which is how much risk and how how much
01:13:31
beta how much Alpha and do we have the
01:13:32
right mix in our portfolio and it is
01:13:34
inevitable there's going to be some
01:13:35
cutting so I think that there will
01:13:37
likely be some reduction
01:13:39
um five percent ten percent ten thousand
01:13:42
employees that seems like the number
01:13:43
that people are going with yeah yeah
01:13:45
let's see my guess okay sax what's your
01:13:48
take on austerity measures uh and moving
01:13:51
to an age of excellence and efficiency
01:13:53
which is happening inside of
01:13:56
the tech industry as we speak I think
01:13:58
freeburg's right that these companies
01:14:00
could operate a lot more efficiently I
01:14:02
think there's an economic argument there
01:14:03
but I want to up level it and talk about
01:14:05
the cultural aspect of this for a second
01:14:07
and also bring in two of the huge
01:14:10
stories this week the um the SPF Story
01:14:12
the interviews he did with the New York
01:14:14
Times in Vox and then this Hysteria
01:14:17
around you know what's happening at at
01:14:19
Twitter look I think that
01:14:22
there something clearly has hit a nerve
01:14:24
here in this last week where you have
01:14:27
all of these employees who have
01:14:31
voluntarily left creating all of this
01:14:33
drama and you know Antonio Garcia
01:14:36
Martinez had a good quote about this he
01:14:38
said what Elon is doing is a Revolt by
01:14:40
entrepreneurial Capital against the
01:14:41
professional managerial class regime
01:14:42
that otherwise everywhere dominates and
01:14:45
that same PMC which includes the media
01:14:46
is treasing it as an act of last measure
01:14:49
State there's another version of this
01:14:50
that came out a couple weeks ago and by
01:14:52
the way let's match yesterday just means
01:14:53
like you're insulting the monarchy
01:14:56
resulting in the crown there was a good
01:14:59
one here uh there's an article on
01:15:00
Compact magazine a couple weeks ago
01:15:03
where the editor Jeff schallenberger
01:15:06
tweeted the layoffs at Twitter are no
01:15:08
different than what's happening across
01:15:09
Silicon Valley but because the
01:15:10
ideological antagonism of the
01:15:12
professional left uh musk they made
01:15:13
clear what's at stake the collapse of a
01:15:15
jobs program for Surplus Elites and then
01:15:19
um and then there's a great quote from
01:15:21
this article which again that's that's
01:15:23
so hard hitting I know it's different
01:15:27
it's a deep nerve I'll get into it
01:15:28
differently yeah exactly so the quote
01:15:31
from this article said one of the
01:15:32
biggest and least talked about social
01:15:33
questions in the west is how do
01:15:34
economically provide for our own modern
01:15:37
version of France's impecunious Nobles
01:15:39
that is how to prop up high status
01:15:41
people who can't really do much
01:15:43
economically productive work
01:15:51
I think this is really hitting a nerve
01:15:53
because
01:15:54
the fundamental quid pro quo of our
01:15:56
civilization is that in order to achieve
01:16:00
economic and social advancement you go
01:16:03
to college and get a degree and you
01:16:05
submit to voluntary re-education of
01:16:08
yourself at one of these woke madrasas
01:16:11
one of these re-education camps that's
01:16:13
the pro quo and you get a degree now
01:16:16
some people did your punch-up guy write
01:16:18
that intro no no look this is this is
01:16:21
where I believe for a while now there
01:16:24
are some number of people who get useful
01:16:26
degrees like computer science or
01:16:28
engineering but huge numbers of people
01:16:30
get degrees and like we talked about at
01:16:32
the basket weaving or whatever the you
01:16:34
know politically correct degree is for
01:16:36
sure and they graduate with a quarter
01:16:39
million dollars in debt and no
01:16:40
marketable skills right and right and
01:16:43
what was propping up all these people
01:16:44
were these fantastically wealthy
01:16:47
monopolies tech companies that were
01:16:50
hiring huge numbers of these people now
01:16:52
all of a sudden we get to a point where
01:16:54
we're in an economic recession and these
01:16:57
companies are starting to do layoffs and
01:16:59
they're starting to do a little bit more
01:17:00
soul searching about who's really adding
01:17:02
value
01:17:03
and people are starting to get laid off
01:17:05
and I think there this hysteria is
01:17:07
coming from a place of deep insecurity
01:17:09
you had all these people go to college
01:17:12
they did not learn critical thinking
01:17:13
skills what they learned was that listen
01:17:15
if we pay lip service to the right
01:17:18
platitudes then we will have career
01:17:20
advancement and now they're learning
01:17:22
that that may not be true and actually
01:17:24
the person who's pulled the mask off
01:17:26
this entire regime is another other than
01:17:29
SBF and he did it in an interview with
01:17:32
Vox and we have to go to this okay
01:17:35
he's the devil but he basically pulled
01:17:38
the mask off this whole civilizational
01:17:40
quid pro quo that is a sham okay and
01:17:43
here's what he said that the Vox
01:17:45
reporter said you were really good about
01:17:47
talking about ethics for someone who
01:17:49
kind of saw it all as a game with
01:17:51
winners and losers what did SBF said
01:17:53
yeah he he I had to be it's what
01:17:56
reputations are made of to some extent I
01:17:58
feel bad for those who get [ __ ] by it
01:18:01
basically all these people who incurred
01:18:02
a quarter million dollars in debt and
01:18:03
think they can just spouse the right you
01:18:06
know platitudes he says by this dumb
01:18:09
game we woke westerners play where we
01:18:11
say all the rightship will us so
01:18:12
Everyone likes us how stupid does the
01:18:16
New York Times feel right now how stupid
01:18:18
do all these non-profits and Foundations
01:18:21
who received all this money from SPF he
01:18:24
played them all he had to do was say the
01:18:27
right words that say the magic woke
01:18:30
words and they would basically cover for
01:18:32
the most enormous grift that's ever been
01:18:35
perpetrated
01:18:36
that is basically the quid pro quo of
01:18:38
our civilization is be woke and you will
01:18:41
have indefinite career opportunities no
01:18:44
matter how uncomfortable signaling would
01:18:46
be another way to say it I mean it
01:18:47
doesn't necessarily have to be the work
01:18:48
woke ideology but virtue signal and give
01:18:51
donations to people this has been a
01:18:53
Playbook of grifters for a long time
01:18:54
Bernie Madoff gave a ton of
01:18:57
you know donations and he used the same
01:18:59
place how many donations did he give to
01:19:01
the Republican Party
01:19:02
none they're not part of the regime how
01:19:04
many how many conservatives I'm not sure
01:19:06
this is a political I don't know
01:19:08
I'm not making a political point I'm
01:19:10
making a cultural Point okay good who
01:19:13
were the Charities that he donated to it
01:19:14
was all the right woe causes not you
01:19:17
know it was not endemic one was not woke
01:19:19
he was passionate about the pandemic
01:19:21
stuff are you kidding me freaking out
01:19:23
about the pandemic no no he
01:19:26
explained it to me the Neurosis it was
01:19:29
the news no no that was not what he was
01:19:30
funding sexy I actually talked to him
01:19:32
about this when I interviewed him he
01:19:33
said he wanted to do pandemic uh
01:19:35
prevention and early warning systems and
01:19:38
wanted to invest in strategies to fight
01:19:40
and definitely freaking out about covid
01:19:43
is was essential of the professional
01:19:46
managerial class for the last couple of
01:19:48
years it is but that's not what he was
01:19:49
funding I just want to make that point
01:19:50
yeah whatever he wanted to prevention I
01:19:53
mean you could frame it as not but I
01:19:54
actually literally talked to him about
01:19:55
it he wanted to do pandemic prevention
01:19:57
in the future
01:19:58
he wants to steal money from California
01:20:01
taxpayers via ballot initiative to fund
01:20:04
his brother's organization
01:20:07
which would have dispersed the money in
01:20:09
who knows what ways probably not
01:20:11
legitimate out of a professed concern
01:20:14
about the next pandemic why because the
01:20:17
PMC is neurotic about the last pandemic
01:20:20
come on this is what you're saying to
01:20:22
them I understand of course yes thank
01:20:23
you it's pandry I understand it's
01:20:25
absolutely now listen why well hold on a
01:20:27
second why did this work why did this
01:20:28
work virtue signaling work and again why
01:20:31
were they only uh Charities and causes
01:20:33
that appeal to the sort of the left is
01:20:36
because they're the ones with the power
01:20:38
in our society and in our culture to
01:20:40
Define what virtue is
01:20:43
when you're virtue signaling who are you
01:20:45
signaling to the people with the power
01:20:47
to decide what is virtue and what is
01:20:49
vice right that is why people go to work
01:20:51
at the New York Times that is why they
01:20:53
basically go into you know all these
01:20:55
influential jobs at non-profits and
01:20:57
Foundations they're the ones deciding
01:20:59
what virtue is they're the dupes they're
01:21:00
the ones who are fooled and now what's
01:21:02
happening is there's an economic
01:21:04
consequence to it which is it is coming
01:21:06
out these people have no marketable
01:21:08
skills and companies are tightening
01:21:10
their belts and now all of a sudden
01:21:11
they're starting to become deeply
01:21:12
insecure about their own future my
01:21:14
comment is that you know when you look
01:21:15
at Twitter as an example
01:21:18
Bill Gurley had a really powerful quote
01:21:20
as well which is when companies cut you
01:21:22
know they don't cut nearly enough and
01:21:23
they and they misestimate and
01:21:25
underestimate how resilient a company is
01:21:27
back in you know Twitter had 200 million
01:21:30
Mau they had only a thousand employees
01:21:32
and so clearly at that point they knew
01:21:34
what they were doing and now the
01:21:36
business has you know increased in Mau
01:21:38
by call it 50 to 300 million
01:21:42
but the employee base increased by seven
01:21:45
and a half X so clearly something is
01:21:48
misaligned and I think the thing that
01:21:50
you know people are going to find out is
01:21:52
by the way with contractors probably 12x
01:21:54
right so I think that well there you go
01:21:56
so I think that the the thing that
01:21:58
frustrates a lot of folks uh that are
01:22:01
leaving or that are trying to throw
01:22:03
bombs is they don't want Elon to be
01:22:06
right
01:22:07
because I think to David's point if Elon
01:22:09
is successful he has uncovered this very
01:22:13
uncomfortable truth that was frankly
01:22:15
hiding in plain sight which is that many
01:22:18
of these technology companies using
01:22:20
technology get so much operational
01:22:23
leverage that they have some enormous
01:22:25
efficiencies and then it's only a
01:22:28
decision by the professional managerial
01:22:30
class to reward themselves
01:22:33
with fiefdoms and kingdoms of employees
01:22:36
and you know the serfs that work for
01:22:38
them I mean it's really quite crazy if
01:22:40
you think about it well Freeburg made
01:22:42
this you know
01:22:43
early on in the history of this podcast
01:22:46
well hold on I want to add to your
01:22:48
position Freeburg said something that
01:22:49
adds to your position which is early in
01:22:51
this podcast he said the nature of
01:22:53
organizations is they want to grow and
01:22:55
that's government or even these
01:22:56
departments you're talking about anybody
01:22:58
who runs a department is never going to
01:22:59
say my department needs to be 20 less so
01:23:01
we can hit the bottom line they're going
01:23:03
to say give me 20 more because everybody
01:23:04
else is getting 20 go ahead and then if
01:23:07
you if you if you layer in the Charlie
01:23:09
Munger quote show me the incentive and
01:23:11
I'll show you the outcome
01:23:12
you can understand why because the
01:23:15
professional managerial class is
01:23:17
rewarded by compensation that is
01:23:20
actually independent of dilution right
01:23:23
because if you look at these
01:23:24
compensation plans all of these
01:23:26
professional stock owners they complain
01:23:28
all the time about stock base comp right
01:23:30
and these companies have budgets between
01:23:32
two and five percent a year that they
01:23:34
give away
01:23:35
and so you have this situation where an
01:23:38
engineer or an engineering manager or a
01:23:40
sales manager or a marketing manager in
01:23:43
success at a thousand people can grow to
01:23:46
five thousand or ten thousand their
01:23:48
compensation doesn't change in any other
01:23:50
organization their compensation would
01:23:52
change because let's say that it's a
01:23:53
percentage of the profits that are
01:23:55
distributed unless the company is
01:23:56
phenomenally growing
01:23:58
eventually you'll see it in the bottom
01:23:59
line of what you take home
01:24:01
and so these folks are incentivized to
01:24:03
have these status signals of value I
01:24:07
have a 50 you know you guys have heard
01:24:08
this I have a 50 percent
01:24:11
I oversee 3 500 employees and you've and
01:24:14
everybody is conditioned to fake oh my
01:24:17
God that's incredible you must be really
01:24:19
important
01:24:20
and so we're going to sort of now see in
01:24:22
real time
01:24:23
a questioning of that belief system and
01:24:26
if Elon proves to be right it's a really
01:24:29
important decision point for a lot of
01:24:31
other technology companies because if
01:24:32
you are an 80 to 90 gross margin
01:24:35
business
01:24:36
built on software
01:24:38
maybe you have a bigger responsibility
01:24:40
than you've discovered to date to your
01:24:42
shareholders and to the existing
01:24:44
employees
01:24:45
to find the efficient rate of return
01:24:47
right what is the efficient Frontier of
01:24:49
headcount the other thing is it now
01:24:52
allows let's just say that now Twitter
01:24:54
goes to making up a number 2 000
01:24:56
employees after this whole Google form
01:24:59
thing
01:25:00
the great thing about the 2001st
01:25:03
employee
01:25:04
for the 2000 employees and for the
01:25:06
shareholders is that that 2001st new
01:25:09
employee is a hundred percent aligned
01:25:11
because they're coming into something
01:25:12
Eyes Wide Open
01:25:13
and I think that that's also an
01:25:15
interesting thing that is isn't getting
01:25:16
enough recognition is he's putting out
01:25:19
there what he stands for this hardcore
01:25:21
culture
01:25:22
irrespective of whether we think it's
01:25:24
right or wrong all the people that stay
01:25:26
are voting that it's right
01:25:28
and you know as long as it's not
01:25:30
breaking any laws he's allowed to do
01:25:31
that and so if people now want to join
01:25:34
that organization they should be allowed
01:25:35
to do that too just like the people who
01:25:37
don't want to should be allowed to leave
01:25:38
sacks you and I came up and we talked
01:25:40
about this I think on last week's show
01:25:42
or maybe it was two weeks ago we talked
01:25:43
about what the expectation was in
01:25:45
Silicon Valley at a startup what startup
01:25:47
culture was in terms of just the effort
01:25:49
that was required to build a winning
01:25:51
company and we all said 60 hours a week
01:25:54
was the Baseline that's something that
01:25:56
you know has been I think a lot of
01:25:57
people you mentioned this trim off
01:25:59
people working two jobs for 30 hours a
01:26:02
week and taking two salaries from two of
01:26:03
the fan companies
01:26:05
go into Tick Tock and search for you
01:26:08
know engineering salaries you'll see
01:26:10
some of the craziest tick tocks kids are
01:26:12
making 350k working 30 hours a week it's
01:26:15
nuts
01:26:16
and so I think we're going to have is
01:26:18
that I think we're going to have a
01:26:19
cultural divide here they're going to be
01:26:20
a series of companies that say this is
01:26:22
classic Silicon Valley we're gonna we're
01:26:24
gonna crush it we're gonna work
01:26:25
aggressively we're gonna put in 50 60 70
01:26:27
hours a week and we're all going to
01:26:28
benefit from that and then there'll be
01:26:29
another class of companies that says hey
01:26:31
no we want to have a more lifestyle
01:26:33
business and if people want to work 30
01:26:35
40 hours a week and they contribute we
01:26:37
don't need to be perfectly efficient and
01:26:39
you know what the playing field of
01:26:40
entrepreneur the playing field of
01:26:42
capitalism will show who is Right sex
01:26:45
yeah I mean look I actually went out of
01:26:47
town a few days ago so I wasn't keeping
01:26:49
up with you know every detail of what
01:26:51
was happening at Twitter and I started
01:26:53
getting all these text messages about
01:26:54
how Twitter was dead or dying or
01:26:56
whatever like the site had been
01:26:57
unplugged or what have you and I'm like
01:26:59
what is going on and you know you
01:27:01
tweeted this morning hey is this working
01:27:02
and I'm like yeah like like yes it's
01:27:04
working like and yeah this morning is
01:27:07
this working today and so my tweet went
01:27:10
through yeah so I came to learn what
01:27:12
they're talking about is that all Elon
01:27:14
did was give a voluntary offer that if
01:27:17
you didn't want to stay you could take
01:27:18
three months Severance now remember last
01:27:21
week they had a riff you know which was
01:27:23
basically economically required in which
01:27:26
they gave employees three months
01:27:27
Severance which is 50 more than what he
01:27:30
had to it was generous now it seems to
01:27:33
me that what if you're one of the
01:27:34
employees in the other half that made
01:27:36
the cut but yet you're not really
01:27:38
motivated to stay and maybe you don't
01:27:42
really want to operate like a startup I
01:27:44
mean elon's basically saying we're gonna
01:27:45
go back to working and operating like a
01:27:48
startup that means that you might have
01:27:49
to work nights and weekends like a
01:27:51
startup what if that's not what you
01:27:53
signed up for you may be sitting there
01:27:55
at Twitter saying oh man I wish I'd
01:27:57
gotten Rift well now Elon is offering
01:27:59
you the opportunity to take the same
01:28:01
package yeah so I'm like how can this
01:28:04
possibly be a bad thing it's actually
01:28:06
the great management technique that Tony
01:28:09
Shea rest in peace from Zappos created
01:28:11
he would say when people went through
01:28:12
their first couple of months of training
01:28:14
he'd say now if you don't want this job
01:28:17
I will pay you a month's salary this is
01:28:19
on their first day after they went
01:28:21
through training their first like day on
01:28:22
the job he said okay now that you've
01:28:24
gone through the training I'll pay you I
01:28:26
think it was five thousand dollars or
01:28:27
three thousand dollars to not take the
01:28:28
job and something like one out of five
01:28:30
people would do it and so he said listen
01:28:32
I I don't have to fire them later on
01:28:34
this is going to make my management
01:28:35
easier it was it is actually a kind
01:28:38
thing to do to give people the
01:28:39
opportunity to understand how giving
01:28:41
employees an option because
01:28:46
the reason people are upset let's be on
01:28:48
to sex is some people
01:28:51
you know live to work and some people
01:28:54
work to live and the people who are
01:28:55
working to live find a crazy that hustle
01:28:58
culture even exists and people who are
01:29:00
part of hustle culture like the four
01:29:01
people on this podcast
01:29:03
it's just working
01:29:05
hustle culture is working above the
01:29:07
hours you're being paid for that's
01:29:08
that's basically what hustle culture is
01:29:10
when you're getting paid that's how most
01:29:12
people would Define it salary is
01:29:14
actually not you work for 40 hours a
01:29:16
salary means you get your job done
01:29:18
okay that's how we look at it that is
01:29:20
not how other people look at it oh my
01:29:23
God there's no question that Elon is
01:29:26
going to raise can I just say sorry if
01:29:27
we if we lose American Primacy it's
01:29:29
because of that not because I agree with
01:29:31
you I'm just I'm still meeting the other
01:29:33
side I'm still man on the other side
01:29:34
people look at their salary and they
01:29:36
look at themselves as getting
01:29:38
compensated for 40 hours and every hour
01:29:39
above that but do you know this
01:29:41
generation's mind looks just as hustle
01:29:43
culture there are people that are not
01:29:45
working with it there are people that
01:29:46
are working 60 70 80 hours a week as a
01:29:49
teacher to make 30 40K firefighters you
01:29:52
know working on oil rigs and to hear
01:29:54
somebody like hustle culture at a
01:29:57
startup where you're making 350 Grand
01:29:58
and you're upset because like the matcha
01:30:00
lot ran out or whatever
01:30:02
it's just so out of touch I'm not
01:30:04
disagreeing yeah look my my view on it
01:30:07
is that people need to love their jobs
01:30:10
and love what they're working on because
01:30:11
I think the only way to be successful is
01:30:13
to work hard but the only way to work
01:30:14
hard and be happy is to really love what
01:30:16
you're doing and if there's a lot of
01:30:18
people at this company or others who
01:30:21
don't really love it and they are just
01:30:23
there to pay the bills or whatever then
01:30:25
I actually think it's extremely generous
01:30:26
for Elon to be offering them a package
01:30:29
it's the right thing to do I don't
01:30:31
understand how giving them an option was
01:30:33
anything but positive and yet the media
01:30:35
has gone berserk on it meanwhile while
01:30:37
giving SBS a virtual pass on the largest
01:30:40
one of the largest frauds in history a
01:30:42
made-off level fraud you read the New
01:30:44
York Times alleged no there's no alleged
01:30:46
dude it's come out he loaned himself
01:30:49
like this is just one data point he
01:30:50
loaned himself a billion dollars and he
01:30:52
learned the head of engineering 500
01:30:54
million dollars off the balance sheet
01:30:55
nothing to see here what possible
01:30:57
justification and you know and SPF David
01:30:59
the reason just say the word to say the
01:31:01
hard part out loud the reason why these
01:31:03
same Publications are not covering this
01:31:05
is because they were complicit in his
01:31:08
reputation laundering yes the New York
01:31:10
Times before that article put out this
01:31:12
other puff piece where they talked to
01:31:13
him and they were excoriated on Twitter
01:31:15
because it was like not a single
01:31:17
question about the fraud for a legend
01:31:20
alleged
01:31:22
elections
01:31:24
obviously 10 billion dollars suddenly
01:31:27
goes missing and no one knows where it
01:31:28
is I'm willing just to call that a fraud
01:31:31
are you willing to jump defense they're
01:31:33
busy scrambling to sort of save their
01:31:35
own reputations which is why they are
01:31:37
trying to like hide the cheese
01:31:38
effectively and point over here and say
01:31:40
hey look at what's happening Elon sent
01:31:42
an email where it's only one button yes
01:31:47
I mean let's be intellectually honest I
01:31:49
love that Meme that Elon tweeted out do
01:31:51
you see that the two rhinos
01:31:55
oh God I mean
01:31:58
you know this is all gonna get reblogged
01:32:00
it's too funny it's just too funny it's
01:32:04
too good it's too good to not put up on
01:32:06
the screen that's that nature
01:32:07
photographer is the New York Times it's
01:32:09
okay yeah people who don't see it there
01:32:12
are two rhinos they're fornicating
01:32:15
complicated
01:32:18
calculating is like it's two 2 000 pound
01:32:21
animals populating doggy style ten feet
01:32:24
behind a nature police
01:32:28
behind I'm trying to be the world
01:32:31
photographer a nature photographer with
01:32:33
a six thousand dollar tele you know
01:32:36
photo lens Serengeti
01:32:39
but he's 10 feet behind him are the two
01:32:41
rhinos the two rhinos it says FTX losing
01:32:44
over a billion dollars of flying funds
01:32:46
and uh the the photographer is centers
01:32:49
calling for the FTC to investigate but
01:32:51
the important thing is the photographer
01:32:52
is pointing in completely the wrong
01:32:53
direction the wrong direction he's just
01:32:55
totally missing the thing that is
01:32:57
obviously right in front of his face
01:32:59
right that he should be photographing
01:33:01
yes he's using that long telephone lines
01:33:03
that is the New York Times that's
01:33:07
the point
01:33:09
the arrow in the right direction yes
01:33:11
point the camera in the right direction
01:33:13
is the point
01:33:14
um I just want to point out my one
01:33:15
biology tweet on this in this regard oh
01:33:17
God apology is not capable of one tweet
01:33:19
that's going to be 76 tweets
01:33:23
but it's a really good one of course
01:33:24
it's a trade service biology he says
01:33:26
think of a regulator as a binary
01:33:28
classifier what's their false positive
01:33:30
and false negative rate BTF Bitcoin ETF
01:33:33
blocked for years FTX ignored for years
01:33:37
the actual filter is not is this a scam
01:33:40
the actual filter is is this m ooh it's
01:33:44
not consumer protection it's re-election
01:33:47
that's an alliteration it Rhymes Can
01:33:49
young Spielberg make a banger out of
01:33:51
that it is a banger it's not consumer
01:33:53
protection it's re-election if you are
01:33:55
part of these interlocking power
01:33:58
structures that we call the regime it's
01:34:00
the New York Times it's the regulatory
01:34:02
State it's a Democratic party you get a
01:34:05
big Republican hold on let's be clear
01:34:07
your your team Now controls the house
01:34:10
and so who's team
01:34:14
I understand but starting in January you
01:34:17
know there's any amount of congressional
01:34:19
yeah
01:34:23
no no hold on a second let me say this
01:34:26
right now the first investigation by the
01:34:29
House of Representatives needs to be SPF
01:34:31
and FTX not hotter Biden SPF makes
01:34:34
Hunter buying look like a [ __ ] I mean
01:34:36
yeah you know Hunter Biden was what a
01:34:39
couple million dollars of grift this is
01:34:40
10 billion dollars plus a Griff so I
01:34:42
think it also it also touches Regulators
01:34:44
it could touch you know it's it's a big
01:34:46
it's a big it's a systemic failure that
01:34:49
knows how to party so let's be honest
01:34:50
here I mean that is the issue I just
01:34:52
think the quote of the week
01:34:54
goes to uh John J Ray he's FTX his new
01:34:58
CEO he famously oversaw the liquidation
01:35:01
of Enron
01:35:02
and he says I have over 40 years of
01:35:05
legal and restructuring experience I
01:35:06
have been the chief restructuring
01:35:08
officer and board chief executive
01:35:10
officer in several of the largest
01:35:11
corporate failures in history I have
01:35:13
supervised situations involving
01:35:14
allegations of criminal activity and
01:35:16
malfeasance Enron
01:35:18
nearly every situation in which I have
01:35:19
been involved has been characterized by
01:35:21
deficits of some sort in internal
01:35:23
controls regular implies human resources
01:35:25
and system Integrity never in my career
01:35:28
have I seen such a complete failure of
01:35:30
corporate controls and such a complete
01:35:32
absence of trustworthy financial
01:35:33
information has occurred here this is
01:35:36
the person
01:35:38
who oversaw Enron saying this is
01:35:40
unprecedented Enron was the previous
01:35:43
unprecedented situation which is now
01:35:46
being framed as manageable by none other
01:35:50
than John J Ray what a great name
01:35:52
congratulations on being the chief
01:35:54
restructuring officer of FTX there is an
01:35:57
article that showed
01:35:59
Nick if you could please throw the
01:36:00
picture up on the screen of of all the
01:36:03
people that invested uh the universe of
01:36:05
SBF
01:36:07
oh my God what and they and the article
01:36:09
headline was it's a who's who of VC and
01:36:13
my comment is actually no this list is a
01:36:15
who's who of people who did no diligence
01:36:19
yeah whatsoever and I just want to call
01:36:21
one person Nick if you look at the
01:36:23
Alameda research this uh this firm
01:36:26
called one inch jcal invested in a firm
01:36:29
named after the length of his penis
01:36:32
come on come on maybe coming out of the
01:36:36
cold pledge okay but you know that cold
01:36:38
plunge this shrinkage
01:36:43
listen I'm a show or not I'm a grower
01:36:46
not a shower all right listen you guys
01:36:48
coming at everybody knows coming out of
01:36:50
the coal plunge it's it's not going to
01:36:52
be the best performance for any of us
01:36:57
oh God what is that we've lost the
01:37:00
script on the show Jesus please we got a
01:37:02
rap I mean it's just too much do you
01:37:04
guys not think that all these investors
01:37:05
receive audited financials and no you
01:37:08
know they got they had a lawyer a legal
01:37:10
firm to represent these financials did
01:37:12
you guys see who ftx's auditing firm was
01:37:15
it's called Prager medicine that says
01:37:17
it's based in the metaverse this is like
01:37:19
the Hollywood upstairs Medical College
01:37:21
of the auditing World their address was
01:37:23
in decentraland Bernie Madoff I think
01:37:25
his brother-in-law ran the accounting
01:37:27
firm that did their audits right it was
01:37:28
like and it was on a dead floor in the
01:37:30
lipstick building it was in the same
01:37:31
building right on the lipstick building
01:37:33
they had like a secret floor with nobody
01:37:35
on it like look I mean even in that case
01:37:37
people relied on an audit from a CPA
01:37:39
that said here are the numbers and those
01:37:41
numbers were fraudulently conveyed and I
01:37:43
think that there's probably some
01:37:45
you know some forgiveness necessary here
01:37:47
that there was maybe there may have been
01:37:49
serious fraud that took place and I
01:37:51
don't want to be too disparaging of all
01:37:52
this stuff that work at these investment
01:37:55
firms made an investment and they all
01:37:57
got duped and the LPS got duped and so I
01:37:59
don't think this is just fundamental
01:38:00
like a failure of diligence so we but we
01:38:03
we we were part of the process where
01:38:04
they tried to show like and I have to be
01:38:06
careful my lawyers reminded me that
01:38:07
we're still under NDA actually with FDX
01:38:09
so but what I can tell you is we did not
01:38:11
get any financials so we were verbally
01:38:13
what was going on right when you asked
01:38:15
for it when you
01:38:16
said we sent a two-pager of stuff
01:38:19
anyways I can't say more than that but
01:38:20
yeah don't get yourself in trouble oh I
01:38:22
want to say something else by the way
01:38:24
last Friday David and I were at Yuri
01:38:27
Milner's birthday party and there was a
01:38:29
chess tournament and uh uh Magnus
01:38:32
Carlson was there and anyways David was
01:38:35
in the finals okay it was David and his
01:38:37
partner look at the smile on Davis
01:38:39
versus hold on wait I'm getting to a
01:38:41
great punchline versus Magnus Carlson
01:38:43
and his partner
01:38:44
David one oh wow amazing partner was was
01:38:49
uh should I say Yuri's daughter who I
01:38:51
think is probably what like 10 years
01:38:52
she's incredible yeah she's like second
01:38:54
in America yeah she's good she's
01:38:56
incredible anyway yeah thank you to Yuri
01:38:58
that was a really unique thing it was
01:38:59
partner chess my partner was uh
01:39:01
prognananda who's an Indian Grandmaster
01:39:04
who's like a superstar yeah and look
01:39:06
playing you know with Magnus Carlson was
01:39:09
obviously that was a real thrill yeah
01:39:10
there you go so when you ranked this
01:39:12
with the birth of your children your
01:39:15
marriage
01:39:16
and this where would that rank on the
01:39:19
scale of one through five this is uh
01:39:21
this is for your poor kids but you know
01:39:24
what speaking look at this model
01:39:26
oh my God I haven't seen him that happen
01:39:28
since since Trump won guys look at look
01:39:31
at that document I just said before
01:39:33
before but I want to show you this
01:39:35
basically I pulled all IPO since 2020 so
01:39:38
this excludes all SPAC mergers and real
01:39:40
estate Finance material energy utility
01:39:42
so kind of the big bulky private Equity
01:39:44
type stuff so it's mostly Tech consumer
01:39:47
627 IPO since 2020.
01:39:50
more than half of them are basically
01:39:52
half of them are trading at less at 0.2
01:39:56
times the total cash they've burnt so um
01:40:00
there you know you can kind of look at
01:40:01
total lifetime Capital burned by these
01:40:02
companies in the retained earnings line
01:40:04
on the balance sheet and so when you
01:40:06
pull out the retained earnings it shows
01:40:08
you right how much money they've earned
01:40:09
over their lifetime and so the total
01:40:11
money burnt by half of these companies
01:40:13
is about 107 billion dollars
01:40:16
um and the market cap of those companies
01:40:18
is only 26 billion dollars in aggregate
01:40:20
so a 0.2 times return on Capital
01:40:23
invested to date in terms of Enterprise
01:40:25
Value divided by total capital
01:40:28
uh investors let me say let me say it in
01:40:31
English and you tell me if I said it
01:40:32
right so
01:40:33
627
01:40:35
non-spack non-real estate non-finance
01:40:38
companies went public so basically 627
01:40:41
startup companies went public since 2020
01:40:45
so two years yep and of those 627 tech
01:40:49
companies almost half or three hundred
01:40:51
of them 48 of them
01:40:53
are today worth
01:40:55
about
01:40:56
0.2 times all the money that went into
01:41:00
them yep
01:41:02
oh my gosh wow yep it's tough and then
01:41:04
and then on the other half the other
01:41:06
half is
01:41:07
um is the ones that have worked so this
01:41:09
kind of goes back to a power law point
01:41:10
but like as a venture industry you think
01:41:13
once you get a company public it's
01:41:15
successful and the reality is that many
01:41:18
of these companies from a from an
01:41:19
economic perspective are still not
01:41:22
successful it looks like half
01:41:25
um and perhaps much more if you include
01:41:27
all the SPAC mergers uh which uh is
01:41:29
another couple hundred and I would guess
01:41:31
the vast majority of those meet this
01:41:33
criteria are trading at less than the
01:41:36
total cash that's been invested in them
01:41:37
Freeburg this speaks to the Age of
01:41:39
Excess that we just went through we just
01:41:42
weren't as efficient as we needed to be
01:41:43
in running these companies and now we're
01:41:45
in the age of efficiency austerity
01:41:47
Excellence
01:41:48
that's just great setup for a rebound
01:41:50
isn't it Freeburg like I was looking
01:41:52
through these look I mean one way to
01:41:54
read this I was speaking with someone
01:41:55
who I um you can bleep them out I was
01:41:57
talking with
01:41:58
two weeks ago three weeks ago and he
01:42:00
showed me in their um how much should I
01:42:03
say here this is a big investment firm
01:42:05
and they have a big growth portfolio
01:42:06
less than uh they have about 160 uh
01:42:10
Investments 180 investments in their
01:42:12
growth portfolio
01:42:13
85 of the returns are generated by 10
01:42:18
companies of the 180 and that's in the
01:42:21
growth portfolio these are supposedly
01:42:22
de-risk businesses also exists even in
01:42:25
exists in growth and as you can see here
01:42:27
the power law exists quite dramatically
01:42:30
post IPO as well so you know as you can
01:42:34
see here only nine percent of these
01:42:36
businesses have generated positive
01:42:37
earnings over time
01:42:39
um 43 or about half of them are worth
01:42:42
more than the total cash that's been
01:42:45
invested in them
01:42:46
um and that multiple this is a
01:42:47
production board study here by the way
01:42:49
this is your done by your firm yeah yeah
01:42:51
yeah it's off public data so the um the
01:42:55
multiple on the value of the companies
01:42:58
that are worth more than their the cash
01:43:00
invested is 5.5 times so in aggregate
01:43:03
IPO since 2020 are worth 4.3 times the
01:43:06
total cash that's been invested in them
01:43:08
over their lifetime
01:43:10
um but the crazy statistic is half of
01:43:12
them are worth significantly less than
01:43:13
cash that's been invested in them only
01:43:15
0.2 times so the power law dominates
01:43:17
both early growth and and clearly uh
01:43:21
being public but I think to your point J
01:43:22
Cal it also seriously speaks to the
01:43:25
amount of excess and it's really going
01:43:27
to rationalize probably based on the
01:43:28
conversations we had today about Twitter
01:43:30
meta Google Amazon Amazon and this as
01:43:33
well so um certainly also the big new
01:43:36
series
01:43:37
and correct me if I'm wrong here
01:43:39
tomorrow we want more companies to go
01:43:41
public and have that discipline of being
01:43:42
a public company this was the big
01:43:44
critique of this quiet era of companies
01:43:47
taking 10 12 14 years to go public this
01:43:50
is going to be a strength for these
01:43:52
entrepreneurs to have to fight it out in
01:43:53
the public market under scrutiny
01:43:55
correction 100 I think like the Chris
01:43:57
home letter uh I think that there are a
01:44:00
lot of VCS on Boards of companies who
01:44:02
would love to say the equivalent thing
01:44:04
to their private private company yeah
01:44:07
um and part of the the Dynamics as as
01:44:09
Freebird just said because it's such a
01:44:11
power law and people believe that you
01:44:13
know you being with other VCS are really
01:44:15
important it turns out that most of
01:44:17
these VCS abandoned their role on these
01:44:19
boards and don't really hold people
01:44:20
accountable because they're worried it
01:44:21
will affect their deal flow and so and
01:44:23
the problem is it's a negative reflexive
01:44:25
loop it's but so these companies do
01:44:27
poorly and then as a result their viewed
01:44:29
as not an effective board member and so
01:44:30
the next deal they get is a poorer and
01:44:32
poorer quality so the highly correlated
01:44:34
portfolios in Silicon Valley are the
01:44:36
ones that will get torched because most
01:44:38
of those companies will receive very
01:44:40
poor or no advice
01:44:42
and then the few that will get to the
01:44:44
end is because they have
01:44:47
hard-nosed people on the board that will
01:44:49
force them to make really hard decisions
01:44:52
yeah that's it uh sax any thoughts here
01:44:55
on the public markets I'm sorry last
01:44:56
thing and by the way Sequoia who has had
01:44:58
exceptional returns has always been
01:45:00
known to be hard-nosed you know a lot of
01:45:02
people the critique against Sequoia from
01:45:04
Founders which would be that oh if I
01:45:05
take sequoia's money they may fire me
01:45:07
well yeah because if you're not good
01:45:09
it's the mission of the business is
01:45:12
bigger than your ability to be the CEO
01:45:15
and so you know you just have to
01:45:16
remember like there is no free lunch we
01:45:18
were not giving out free money here
01:45:21
swung One Direction too far they used to
01:45:23
the tradition Silicon Valley Used to Be
01:45:25
You always replace the CEOs the found
01:45:27
the founders with the professional CEO
01:45:29
uh and Google being the turning point
01:45:31
there or maybe the last one and then it
01:45:33
became Founders will control their
01:45:35
companies with super voting shares
01:45:36
forever hopefully the pendulum now
01:45:38
swings to some equilibrium sex what are
01:45:40
you seeing in private markets
01:45:42
program for Surplus Elites is going away
01:45:45
the jobs
01:45:50
professional managerial classes under
01:45:52
pressure yes that's for sure if you went
01:45:55
woke you may go broke because you have
01:45:57
no marketable skills
01:46:14
all right four
01:46:17
the Sultan of science David Friedberg
01:46:20
and also the executive producer of all
01:46:23
in Summit 2023
01:46:25
and
01:46:27
the Rain Man himself chess master and
01:46:30
champion
01:46:31
David sacks as well as the dictator I'm
01:46:35
gonna go on a little road trip aren't we
01:46:36
dictator a little road trip for the
01:46:38
dictator and Jay cow we are it's gonna
01:46:40
be fun I am the world's greatest
01:46:42
moderator who couldn't control the panel
01:46:45
today I'll do better next week and we'll
01:46:46
see you next time love you guys Happy
01:46:48
Thanksgiving podcast Happy Thanksgiving
01:46:49
boys
01:46:52
[Music]
01:47:03
nice Queen
01:47:05
[Music]
01:47:08
besties
01:47:11
[Music]
01:47:26
it's like this like sexual tension that
01:47:28
we just need to release somehow
01:47:34
[Music]
01:47:35
we need to get Mercies
01:47:38
foreign
01:47:40
[Music]
