00:00:00
what the f what are you wearing Jason
00:00:02
what oh Uber had a big week so this is
00:00:05
the Uber Montclair crossover hat oh look
00:00:07
at that all right and I also bought a
00:00:08
Montclair shirt you bought that or I
00:00:10
sent it to you oh what oh you got the
00:00:12
watch in the mug oh you don't know about
00:00:14
the Apple Montclair
00:00:15
watch
00:00:18
or the commemorative mug
00:00:21
or the new tech you don't know about the
00:00:24
new neckties that are coming from
00:00:25
Montclair it's actually nettec oh my God
00:00:29
oh so good I'd just say somebody got
00:00:32
their be quiet I'm not saying that I got
00:00:35
a hundred thousand dollar sponsorship
00:00:37
but we don't have a rule in the
00:00:40
agreement about logo placement do we
00:00:43
listen Jay Cal if anyone was willing to
00:00:45
sponsor you every square inch your
00:00:47
clothing will be covered in ads like a
00:00:49
race car driver it is look you'd be like
00:00:52
wearing a jumpsuit every day you know
00:00:53
Montclair sponsorships are great this is
00:00:55
five five dollars plus 17 of shipping
00:00:58
from France on its Etsy I'm ready to go
00:01:02
[Music]
00:01:06
Rain Man David
00:01:10
said we open source it to the fans and
00:01:13
they've just gone crazy
00:01:15
[Music]
00:01:18
how was everyone's week what'd you guys
00:01:20
do this week ah just busy working
00:01:23
um trying to be helpful where I can and
00:01:25
that'll be the extent of my comments
00:01:27
today how is Market Street this time of
00:01:29
year look there's all sorts of wild
00:01:30
report I've gotten all sorts of inbound
00:01:32
from people asking me if I'm like
00:01:34
leaving craft Ventures to do something
00:01:35
at Twitter no it's not true we're just
00:01:37
Jason and I are just pitching in and
00:01:39
helping out while Elon establishes his
00:01:41
permanent team at that company elon's
00:01:44
the CEO he's running it he's the decider
00:01:46
he's making the decisions and that some
00:01:48
of us are just kind of helping out in
00:01:50
any way we can and that's really the
00:01:51
extent of it it's a
00:01:53
you know very much part-time thing we're
00:01:55
just helping a friend but it's been like
00:01:57
blown up in by the media into something
00:01:59
much more than it actually is it is a
00:02:02
hundred percent accurate I am still
00:02:03
doing my day job podcasting investing in
00:02:06
100 companies a year just helping out on
00:02:08
the margins uh that's it the end I do
00:02:10
want to try talking about one issue
00:02:12
that's already public because it's
00:02:13
already been tweeted so Elon had a tweet
00:02:16
this morning about how there's now like
00:02:17
an Advertiser boycott going on
00:02:21
and This falls on the heels of a bunch
00:02:23
of reports that came out over the last
00:02:24
couple of days that supposedly there's
00:02:26
been a big influx of like racist tweets
00:02:30
and Jason I actually saw what was really
00:02:33
going on which was it's all not true I
00:02:35
mean what happened is that within hours
00:02:37
of Elon taking over the company on
00:02:38
Friday there was a 4chan attack where
00:02:41
basically people from this message board
00:02:42
created Bots to post hundreds of
00:02:45
thousands of spam messages that
00:02:47
contained racist words and epithets and
00:02:50
within hours this has been detected and
00:02:53
Yol who runs the the trust and safety
00:02:55
implementation he met with
00:02:58
me and Jason and Elon directed him to
00:03:00
shut it down and he UL actually posted a
00:03:03
tweet story about it that's the only
00:03:04
reason I feel comfortable talking about
00:03:05
it is because you already
00:03:08
posted a tweet storm but maybe people
00:03:09
don't haven't seen it or they haven't
00:03:11
connected all the Dots here but what's
00:03:13
really I think unfair about this is that
00:03:17
as you've as you've seen it's not like
00:03:19
your feed was all of a sudden filled
00:03:20
with racist things these were spam
00:03:22
accounts or bot accounts that were
00:03:24
posting to zero followers they generally
00:03:26
have zero followers or if they do have
00:03:28
followers it's other bot accounts right
00:03:30
so they're posting racist tweets Into
00:03:32
The Ether so to speak it's not degrading
00:03:34
anyone's experience it was shut down
00:03:36
promptly but then what happens is these
00:03:39
activist groups they're monitoring the
00:03:41
fire hose right and so they publish a
00:03:43
report saying that racist tweets have
00:03:45
gone up 500 since Elon took over Twitter
00:03:48
the truth is Elon hasn't even had a
00:03:51
chance to change anything about the
00:03:53
content moderation policies he's posted
00:03:55
that like guys I haven't even I haven't
00:03:57
changed anything about content
00:03:58
moderation whatever the rules are
00:04:00
they're the same rules that existed
00:04:02
prior to him taking over and this is
00:04:05
just an organized operation by people
00:04:08
who want to create that report so then
00:04:11
these activist groups basically publish
00:04:13
this report they feed it to news outlets
00:04:14
and then somebody then takes those those
00:04:17
reports and then feeds them to
00:04:18
advertisers and you get a boycott but I
00:04:20
think the point here is that Elon didn't
00:04:23
do this this is being manufactured by
00:04:25
people who are not operating in good
00:04:27
faith they are trying to manufacture an
00:04:29
incident that they can then use to hurt
00:04:31
the company yeah and it was thwarted
00:04:33
immediately and fixed have you guys seen
00:04:35
episode 333 of the Lex Friedman podcast
00:04:38
he um he interviews Andre carpathy who
00:04:42
is really I mean one of the great minds
00:04:44
of our of our time particularly around
00:04:46
Ai and ML and the question that Lex
00:04:50
asked which Andre
00:04:51
expounded on which I think is really
00:04:53
interesting is
00:04:55
what is the next generation of bots look
00:04:57
like and
00:05:00
I think where the problem gets very hard
00:05:02
for all platforms so this is not a
00:05:04
Twitter Twitter specific discussion is
00:05:06
that you can now generate such real life
00:05:10
like human images that are unique and
00:05:13
you can also generate high quality text
00:05:16
to things like gpt3 that's also you know
00:05:19
that can offense essentially push the
00:05:21
boundaries of you know a low-level
00:05:24
Turing test
00:05:25
I think the real problem over time for
00:05:28
Bots
00:05:29
for spam for coordinated attacks on any
00:05:32
platform is that when you use these
00:05:35
tools you're going to have to become
00:05:36
very sophisticated in how you try to
00:05:39
detect them and then to block them it's
00:05:43
a really interesting discussion between
00:05:45
you know two pretty meaningfully smart
00:05:47
people carpathy was the head of uh
00:05:49
autopilot at Tesla right autopilot
00:05:52
Vision yeah so he's really smart yeah I
00:05:54
have no doubt that Elon is going to do a
00:05:57
much better job stopping bots on Twitter
00:05:59
once he has a chance to do it because
00:06:01
he's got this amazing team
00:06:03
of AI engineers and and he's just going
00:06:07
to be more focused on it you know what I
00:06:08
like the most about
00:06:10
what I heard this week is the idea that
00:06:12
you can do either micro payments or
00:06:14
subscription to third-party content
00:06:16
providers because I think so much of my
00:06:17
news feed is delivered to me through the
00:06:20
Twitter app and then I click on an
00:06:22
article and then it's like a paywall or
00:06:25
it's some sort of difficulty in kind of
00:06:27
accessing the content having some
00:06:29
integration there or some ability to
00:06:30
kind of make a micro purchase to read an
00:06:32
article it's going to be I think a super
00:06:35
feature the other thing that I would
00:06:36
love Twitter to experiment with is if
00:06:38
you have a micropayments model to
00:06:40
Publishers it would be great if you
00:06:42
could publish content without a byline
00:06:44
allow The Economist and see what that
00:06:46
does to information quality right you
00:06:49
know if you if you if you do not get any
00:06:51
credit to your individual name for
00:06:54
writing stuff but instead it goes to the
00:06:55
Masthead publication whatever it is the
00:06:57
times
00:06:58
the post I think it could have a really
00:07:01
important Behavior change in how
00:07:03
journalists cover the news it's worth
00:07:05
experimenting with at least and if
00:07:07
you're paying them enough money I think
00:07:08
that you could probably demand that
00:07:10
Facebook could probably demand that
00:07:11
today you know strip the byline away and
00:07:13
just it just says New York Times just
00:07:15
like today it just says The Economist
00:07:17
yeah it is a um The Economist is a very
00:07:20
polarizing gig in journalism for that
00:07:23
reason uh there are going to be actually
00:07:25
a lot of journalists who would prefer to
00:07:28
have their byline taken off one of the
00:07:30
problems with journalism today is even
00:07:32
if you're doing reporting in good faith
00:07:34
tramoth and you put your byline on there
00:07:36
harassment you know threats Etc can
00:07:39
become very acute if you're just
00:07:40
covering certain topics and so I
00:07:42
actually think a lot of you know writers
00:07:45
and journalists would opt into this they
00:07:46
might prefer it I think they should
00:07:48
because I think the two ends of the
00:07:49
spectrum are better than this you know
00:07:51
Gross Middle that we have the end of the
00:07:53
spec one end of the spectrum is you have
00:07:55
the New York Times The Washington Post
00:07:57
and the economists with no byline and no
00:07:59
attribution to reporters the other end
00:08:01
is if you want to build a brand that's
00:08:03
based on your name go start a sub stack
00:08:06
yeah and I think that there's a very
00:08:07
good balance there and the New York
00:08:08
Times could Syndicate that as well but
00:08:10
if you separate the two all of a sudden
00:08:12
the news becomes more likely to be
00:08:13
truthful news versus
00:08:15
you know well disguised opinion the the
00:08:19
other issue is you know for readers if
00:08:22
you do choose to do a no byline
00:08:23
publication you're really going to need
00:08:25
time to build trust and for people to
00:08:27
understand what you're doing because
00:08:28
they will think you're taking the byline
00:08:30
off in order to pursue a certain agenda
00:08:32
right so that is the the that is the
00:08:35
suspicion that can build up The
00:08:36
Economist has been able to do this over
00:08:37
decades with trusted reporting yeah and
00:08:40
sub stack proves that you can have no
00:08:42
reputation whatsoever and if you're
00:08:43
publishing great content you can build a
00:08:45
great business from scratch so yeah
00:08:48
you don't need to pay your dues quote
00:08:50
unquote by getting a byline at the New
00:08:52
York Times to be a clever writer
00:08:54
you can start that business today and
00:08:56
get paid so I think the New York Times
00:08:57
should just focus on being the New York
00:08:58
Times and sub Stacks should focus on
00:09:01
individual people and I think if you
00:09:03
could clean up the middle that would be
00:09:05
much better for all of us anyways I'm
00:09:07
excited for you guys to help out and
00:09:08
pitch in I hope you guys do some good
00:09:10
with it I'd love to come back and use
00:09:11
Twitter more often can we talk about the
00:09:14
reporting that happened
00:09:16
with the two guys that trolled the
00:09:18
journalists and pretended to be fired
00:09:20
employees because I actually thought
00:09:21
that was such an interesting moment this
00:09:24
week that all the journalists
00:09:25
immediately parroted it because it fed
00:09:27
their narrative Johnson checking done
00:09:30
there was no reporting done and then
00:09:32
several of them including I think
00:09:33
Deirdre Bosa from CNBC came out and
00:09:35
publicly apologized for that report and
00:09:38
if folks uh listening aren't familiar
00:09:41
with what happened these two guys came
00:09:43
out they pretended to be fired Twitter
00:09:44
employees on Monday walked out with a
00:09:46
box
00:09:48
up and they were like hey we just got
00:09:50
fired it's terrible life is awful no
00:09:51
it's even worse husband and wife you
00:09:53
know the guy's name was one guy's name
00:09:55
is Rahul ligma and the other guy's name
00:09:58
was like Mike Johnson so the whole thing
00:10:00
was ligma Johnson so I now here's what's
00:10:03
so funny about due diligence hold on I
00:10:06
read this story without giving away that
00:10:09
punch line to my kids
00:10:11
all of my kids immediately started
00:10:13
howling they're like Dad if you say
00:10:15
these two names are ligma Johnson and I
00:10:18
was like oh my God and so you know when
00:10:20
when like you know pre-teens can figure
00:10:22
this out but the journalism industry
00:10:25
could not that is kind of a very telling
00:10:27
sign Friedberg made the key observation
00:10:28
which is they didn't figure it out
00:10:30
because they didn't want to because it
00:10:31
fit their narrative so they don't they
00:10:32
don't fact check things that fit their
00:10:34
narrative this was my point about
00:10:36
journalism I it just it was so poignant
00:10:38
to me this week when this happened
00:10:40
particularly as it relates to Twitter
00:10:43
and the importance of call it open
00:10:45
journalism or citizen journalism and the
00:10:47
Integrity of kind of you know of the
00:10:50
voices that we all kind of trust as our
00:10:52
our kind of journalistic authorities
00:10:53
that these guys came out and they were
00:10:55
pawned right outside Twitter's offices
00:10:57
into telling a story that fit their
00:10:59
Sensational narrative and it was really
00:11:01
a kind of poignant moment for me well do
00:11:03
you remember that story I think it was
00:11:04
originally a rolling stone and then
00:11:06
Rachel maddowell Amplified it where it
00:11:08
was in Oklahoma City where supposedly
00:11:10
all these Mega Republicans were eating
00:11:11
horse Pace because Trump told them to
00:11:13
and they were and this is basically I
00:11:15
thought it was like a coveted therapy
00:11:16
and then they were going to the
00:11:18
emergency rooms of all the hospitals and
00:11:19
then they were turning away heart attack
00:11:21
victims because there are so many of
00:11:22
these these people going to the
00:11:23
emergency room anyway it all turned out
00:11:25
to be like a made-up story like a hoax
00:11:28
but the media reported it because the
00:11:30
story was too good right it just it fit
00:11:32
too many of their preconceptions there's
00:11:34
also one there's another Vector sex
00:11:36
which is live coverage is
00:11:39
um you know you really have to to be
00:11:41
careful because when doing live people
00:11:42
will call in and say oh they're at the
00:11:44
scene of an accident and then they will
00:11:46
do a baba buoy or whatever you know kind
00:11:48
of Charades and so without fact checking
00:11:51
and without saying hey we haven't
00:11:53
confirmed this yet but these two
00:11:55
employees are claiming this people want
00:11:57
to get real-time coverage it's fine to
00:11:59
do real-time coverage I think everybody
00:12:01
in the audience has to understand so
00:12:03
much credit what about the editor there
00:12:05
was a picture and it said ligma Johnson
00:12:12
why are you covering for these people
00:12:14
I'm not covering I'm just trying to
00:12:16
explain it no you're gonna even let me
00:12:18
unpack the whole point let me unpack the
00:12:19
whole point there's also you interrupted
00:12:21
me well here's the thing there is a
00:12:23
different standard for live news
00:12:24
coverage and then there we've ripped out
00:12:26
fact checking from a lot of these
00:12:27
Publications and basic fact checking and
00:12:29
a little bit of time I'm explaining why
00:12:31
they make this mistake I'm not
00:12:32
protecting them you want to know the
00:12:34
reason they make it that's part of it
00:12:36
but they've also ripped out fact
00:12:37
checking and then they are in such a
00:12:39
race to get the clicks on social media
00:12:41
no no here's what's going on if the
00:12:43
story fits their priors they run with it
00:12:46
immediately and they don't do any fact
00:12:47
checking because they don't want to know
00:12:49
that it's not true that's what's going
00:12:51
on there is an element let's check a
00:12:52
story if it's a narrative they don't
00:12:54
like because they're gonna they're gonna
00:12:56
try and make sure it's not true yeah
00:12:57
that's true of both sides and they'll
00:12:58
use proxies this thing there's only one
00:13:00
mainstream media this is the mainstream
00:13:03
media who's the alternative
00:13:06
Fox is uh the the number one network the
00:13:09
alternative to the number one network is
00:13:11
do you think journalists do this tell me
00:13:15
the writer tell me the writer on sub
00:13:16
stack wow there's a lot of different
00:13:18
ones there so I who got fooled what sub
00:13:20
stock writer got fooled by ligma Johnson
00:13:28
fooled by ligma Johnson I don't think so
00:13:31
I'm not defending don't make me just
00:13:33
defend ligma I'm not defending we are
00:13:37
both sidesing it I'm not both sizing it
00:13:38
I'm telling you what is happening in
00:13:40
journalism today they have ripped out
00:13:42
fact checking and they are in a race to
00:13:44
beat each other because the first person
00:13:45
to get the story up gets a clicks that's
00:13:47
the dysfunctional thing they try to
00:13:49
create a story when there was no story
00:13:50
there they agree with that as well they
00:13:53
went and camped out outside of an office
00:13:54
mid-market Street yes and they said hey
00:13:56
there's this Sensational thing happening
00:13:58
and there was no Sensational thing
00:14:00
happening correct and so the little drop
00:14:02
that fell into their laps the little
00:14:04
thing that fell into their laps became
00:14:06
the story because that's the story they
00:14:08
wanted to see created there was no story
00:14:09
beforehand that then that there were all
00:14:12
these people being fired walking out
00:14:13
with boxes and then they said let's go
00:14:14
send live TV producers down there they
00:14:16
sent the live TV producers down there
00:14:17
and then the same things
00:14:20
they did the same thing in New York at
00:14:23
Bears to read the cover when they had
00:14:25
other major layoffs at Bear Stearns and
00:14:27
stuff like that during the financial
00:14:28
crisis of course they sent people to do
00:14:29
live coverage there not defending it I'm
00:14:31
just explaining to you what's going on
00:14:32
in the background as well with live TV
00:14:34
and and the gutting of newsrooms and
00:14:36
having no fact checking a lot of these
00:14:37
stories go out but what about 20 years
00:14:39
ago my 11 year olds and 10 year olds
00:14:43
better copy editors than these adults at
00:14:46
these that's crazy incredible
00:14:48
Publications my kids started howling
00:14:50
they were like Dad do you understand
00:14:52
what you just said there's a league
00:14:54
budget yeah I mean awesome I mean come
00:14:56
on this is like prepubescent humor that
00:14:58
these people fell for it it's ridiculous
00:15:01
it's embarrassing it's certainly
00:15:02
embarrassing yeah it is embarrassing and
00:15:05
this connects with the 4chan board it's
00:15:06
the same problem this is a grievance
00:15:09
industrial complex right they're
00:15:11
manufacturing grievances it's funny in
00:15:14
the case of ligma Johnson it's not funny
00:15:16
in the case of the 4chan board but these
00:15:18
are people who are inventing stories
00:15:19
because
00:15:21
yeah to manipulate media because they
00:15:23
know it's so easy to manipulate the
00:15:25
media right anyways big shout out to
00:15:26
Rahul ligma that was a great stunt well
00:15:29
played sir it happens to be a huge fan
00:15:31
of the all-in podcast apparently sir
00:15:33
come on as the bestie guesty anytime he
00:15:35
wants oh no well no definitely not
00:15:37
please all right we should talk about
00:15:39
layoffs and Tack lift 13 riff 700
00:15:43
employees let go yesterday
00:15:45
stripe 14 riff a thousand employees open
00:15:48
door chime Dapper Labs all hundreds of
00:15:51
employees Open Door the most significant
00:15:53
they're 550 18 percent
00:15:56
Dapper 22 percent uh and Twitter we'll
00:15:59
see what the Riff winds up being but
00:16:01
that's occurring as we're taping here so
00:16:02
and then Jason Apple did a pause Amazon
00:16:05
did a pause
00:16:07
right and Google and Facebook
00:16:10
yeah maybe trying maybe signaling a
00:16:14
pause but haven't they've been hiring
00:16:15
like in absolutely uh at a crazy crazy
00:16:19
pace and we'll pull up the chart here
00:16:20
actually it's instructive to look at
00:16:22
Facebook and Google because they have
00:16:24
not slowed down by any stretch of the
00:16:26
imagination
00:16:28
just by the raw numbers uh this all
00:16:30
started to Peak in June and now it's
00:16:33
starting up again so there's a website
00:16:35
uh layoffs.fyi that's been tracking all
00:16:38
these layoffs you can see the number of
00:16:40
layoffs these are kind of major layoffs
00:16:42
and the number of employees impacted
00:16:44
been pretty consistent in the third
00:16:48
quarter it started to die down in
00:16:49
September
00:16:51
from the Peak in May and June and now
00:16:55
right yeah it feels like this is the
00:16:57
double dip we were talking about I think
00:16:59
this is the beginning this is not even
00:17:01
unpack it well I think that we had if
00:17:03
you take a very balanced view of what
00:17:04
happened this week
00:17:06
you have to start I think with the
00:17:08
Federal Reserve and really what they
00:17:10
said is rates will probably be higher
00:17:13
than all of you think
00:17:14
and they'll be higher for longer than
00:17:16
all of you want
00:17:18
and again without debating whether you
00:17:22
know that's going to come to pass or not
00:17:24
the thing that you can do is you can
00:17:26
build a little sensitivity model to
00:17:29
understand the mathematical implication
00:17:31
of it and basically what it means is
00:17:33
that the dollar that's right in front of
00:17:35
you
00:17:36
is now meaningfully more important than
00:17:38
the dollar that's far far away from you
00:17:40
so let's just assume
00:17:43
that you know the FED funds rate goes to
00:17:45
five and a half percent or so
00:17:47
even five let's let's go to the
00:17:49
optimists and say it's only going to go
00:17:51
to five
00:17:52
tech companies have to achieve 500 basis
00:17:54
points above that minimum
00:17:56
so we all have to generate 10 to 11
00:17:58
percent returns for us to be on a
00:18:00
risk-adjusted basis better than a
00:18:03
Government Bond
00:18:05
the problem with that is all of a sudden
00:18:06
you know if you're trying to generate
00:18:08
cash even three or four years from now
00:18:11
it's not worth that much you need to
00:18:13
generate dollars today and so you know
00:18:16
they are really re-prioritizing the
00:18:19
value of short-term profits and that's
00:18:21
going to affect how companies get money
00:18:24
the cost of capital so how much dilution
00:18:26
you have to take so I think this is what
00:18:29
companies are now bearing down for
00:18:31
they're realizing oh man I need to get
00:18:34
my cost structure way in line it is way
00:18:37
better now just to put think about this
00:18:39
contrast it's way better to grow at 20
00:18:41
and be profitable
00:18:43
than it is to grow at 100 and burn money
00:18:45
because it's not clear where that second
00:18:47
company is going to get the incremental
00:18:49
dollars they need for growth and that's
00:18:51
just a mathematical realization when
00:18:53
rates are five percent risk-free rates
00:18:55
are five percent so I think this is this
00:18:56
is that moment where you see that pivot
00:18:58
from pivot growth to profit yeah yep
00:19:01
we've been talking about it for six
00:19:03
months but this is this is this is how
00:19:06
it is Manifest in Silicon Valley
00:19:08
companies is of scale is through layoffs
00:19:11
and cost reductions and cost savings
00:19:14
so the investments in future growth are
00:19:17
reduced and the timeline to drive
00:19:20
greater profits
00:19:22
is improved I think what if what Elon is
00:19:25
going to do at Twitter
00:19:27
or what is reported so this is nothing
00:19:29
to do with anything anyone told me just
00:19:31
what I've read in the reporting
00:19:33
it's accurate that he's going to cut so
00:19:34
deep he's going to cut 30 40 50
00:19:36
potentially of the employee base
00:19:39
it really sets a new standard for how
00:19:42
profitable a tech company can get and
00:19:44
again I'll give credit to a Twitter
00:19:46
poster named post Market who I didn't
00:19:48
give credit to a few weeks ago when I
00:19:50
read this tweet
00:19:52
which I think was a good one which was
00:19:54
that elon's really going to show
00:19:55
everyone just how profitable these tech
00:19:58
companies can be just how lean they can
00:19:59
be run
00:20:01
and you know when you're doing a 10 riff
00:20:03
or a 13 riff you may or may not even be
00:20:06
getting to profitability with that riff
00:20:08
when you cut 30 40 50 deep and you can
00:20:12
actually turn a real profit on a
00:20:14
business an Enterprise scale business
00:20:15
like a Twitter or like many other
00:20:17
enterprise software companies that are
00:20:19
out there right now
00:20:20
it really kind of sets a new standard
00:20:22
that a lot of folks might then end up
00:20:23
saying you know what maybe we should go
00:20:25
deeper and there could be the case that
00:20:28
private Equity firms take a look at this
00:20:29
and there's a lot of these distressed
00:20:31
mid cap and small cap software companies
00:20:33
out there that private Equity firms now
00:20:35
realize wow you don't actually need 50
00:20:38
of the workforce in order to keep the
00:20:41
product running and to drive to
00:20:42
profitability and you could see a bit of
00:20:44
a flurry of buyout activity
00:20:46
as more folks come in and maybe try and
00:20:49
mimic the Elon Playbook so you know
00:20:52
that's one kind of prediction I think
00:20:54
may arise if Elon is successful in
00:20:56
making Twitter a much more profitable
00:20:58
Enterprise it could set a new model that
00:21:01
catalyzes a lot of other M A activity a
00:21:03
lot of other buyout activity of these
00:21:05
distressed small and mid-cap companies
00:21:06
uh by uh by other actors can I build on
00:21:09
what you're saying Nick could you please
00:21:10
just
00:21:12
throw up that tweet that I sent just for
00:21:14
all of these guys to look at because I
00:21:15
think it's incredible so to your point
00:21:16
this is an incredible uh slide just an
00:21:19
incredible slide and essentially what it
00:21:21
shows for those folks that are not
00:21:22
watching this on YouTube is it
00:21:25
essentially shows the private software
00:21:27
universe and then the public software
00:21:30
Universe at different levels of
00:21:32
valuation so as an example right now
00:21:35
there are 15 companies private companies
00:21:38
that are valued greater than 10 billion
00:21:40
dollars
00:21:41
and there are 40 public ones that are
00:21:43
valued greater than 10 billion there are
00:21:45
50 companies between you know
00:21:48
more than 5 billion but only 60 that are
00:21:52
public that are valued more than five
00:21:53
and here's what's crazy there are 400
00:21:56
companies
00:21:58
who have an average valuation of 3
00:22:00
billion
00:22:01
and then there are already 70 companies
00:22:04
in the public markets where they have a
00:22:06
billion dollars of next 12 months of
00:22:09
Revenue and it just goes to show you to
00:22:12
your point freeberg
00:22:13
if these folks have to generate an 11
00:22:16
hurdle rate their cost of capital is 11
00:22:19
percent
00:22:21
the companies on the left will have to
00:22:23
go through a lot of very difficult cost
00:22:26
cutting potentially head count
00:22:27
reductions
00:22:29
you know repricing of the product
00:22:32
all kinds of things
00:22:33
yeah no not none of them have oh of
00:22:37
these many of these are the left tracker
00:22:39
you're on the Left Right 400 there
00:22:41
there's almost 500 companies here that
00:22:43
have to do an enormous amount of work so
00:22:45
that they have a chance to be on the
00:22:46
right hand side of this chart the point
00:22:49
is that you didn't have to do this when
00:22:51
rates were zero there was just an
00:22:53
abundance of free money and risk seeking
00:22:55
and duration
00:22:56
that is now out of the market I think
00:22:59
there's also a story that of the 200
00:23:01
companies that are software public
00:23:03
software companies that you see on the
00:23:04
right
00:23:05
some number of them will need to go
00:23:07
private in order to do the restructuring
00:23:09
that the market is demanding that they
00:23:10
do in order to get rightly valued and to
00:23:13
your point it will happen at
00:23:14
meaningfully lower valuations than where
00:23:16
they probably went public or their last
00:23:18
drive around which will you guys as you
00:23:21
guys enormous instructions yeah if you
00:23:23
guys look at these 200 companies on the
00:23:24
right how many of them do you think go
00:23:26
private over the next 18 months to get
00:23:28
restructured Allah what Elon is showing
00:23:31
everyone is possible on Twitter 18 is 18
00:23:34
months is hard to predict but to your
00:23:35
point Freeburg I think if you look at
00:23:37
the number of them that are unprofitable
00:23:40
at least half of them will have
00:23:42
difficulty and about so I think about
00:23:44
two-thirds of these companies really
00:23:46
have no line of sight to profitability
00:23:48
in the next two to three years and again
00:23:50
if you if you layer in this cost of
00:23:52
capital argument
00:23:54
all of those companies David will have
00:23:56
to raise money at very egregious terms
00:24:01
in order to keep themselves going as a
00:24:03
public business in which case their
00:24:05
alternative is to go private in a PE
00:24:07
transaction so it's probably at least
00:24:10
half these businesses I mean it's a lot
00:24:12
there's 100 PE deals to be done yeah 100
00:24:15
wow Stacks what do you think
00:24:17
because you know these businesses and
00:24:19
the models I mean some of them it's hard
00:24:20
to get profitable if you're a scaling
00:24:22
SAS business right like you have to get
00:24:24
to a certain scale before it's possible
00:24:26
well I don't I don't that's like a very
00:24:28
specific question of like how many of
00:24:30
them are gonna get acquired by pe firms
00:24:32
versus going public or going private
00:24:35
after being public that's that's like a
00:24:37
very specific question I think the
00:24:38
larger point is just that it feels to me
00:24:41
like the economy is headed off a cliff
00:24:42
right now I mean I can tell you within
00:24:44
our larger portfolio of companies
00:24:48
like I can see the trajectory so after
00:24:50
q1 board meetings I would say about
00:24:53
two-thirds of portfolio companies were
00:24:55
hitting their numbers and one-third were
00:24:57
missing and it still appeared to be like
00:24:59
problems related to those specific
00:25:01
companies not a macro Trend I would say
00:25:04
after Q2 board meetings two-thirds were
00:25:06
missing and one-third were hitting their
00:25:08
numbers and it you could start to feel
00:25:09
okay maybe there's like a macro Trend
00:25:11
here and I would say after
00:25:13
Q3 board meetings like now
00:25:15
the entire portfolio is is reforcasting
00:25:18
uh maybe there's like a handful of
00:25:20
companies here or there that aren't if
00:25:22
you're one of those congratulations but
00:25:24
like even the best companies our
00:25:26
portfolio now are seeing major headwinds
00:25:28
and this is just I think an economy-wide
00:25:30
slowdown do you think there's
00:25:31
restructuring possible I mean can these
00:25:33
companies yeah because let me just ask
00:25:36
in the public markets do you think those
00:25:37
public companies can get restructured as
00:25:40
public companies in order to yeah it
00:25:42
just yes it will yes of course it is
00:25:44
extremely expensive well it's expensive
00:25:46
I don't even think it's will I think
00:25:48
it's just expensive
00:25:49
yeah I mean coinbase as an example like
00:25:51
look take coinbase versus carvana right
00:25:54
these are both businesses that issued
00:25:58
convertible debt sort of right before
00:26:00
things got very very hard and if you
00:26:02
look at where their convertible debt
00:26:04
trades it's trading basically at an
00:26:06
implied yield of about 12 or 13 both
00:26:08
companies now one is probably you know a
00:26:12
legitimate bankruptcy risk which is
00:26:14
carvana that's what the market would
00:26:15
think whereas the other one you know I
00:26:17
think it has a very fortified balance
00:26:19
sheet and could weather the storm
00:26:20
coinbase but unfortunately in a moment
00:26:23
where you know rates are again the
00:26:26
risk-free rate goes to five five and a
00:26:28
half our cost of capital to do business
00:26:30
goes to 10 or 11. these guys have to pay
00:26:33
12 or 13 my gosh it's really really
00:26:36
deluded to be in business right now so
00:26:39
it just goes to show you that you can
00:26:41
stay public but if you want to get
00:26:44
incremental money to cover your burn the
00:26:46
only way you can do it without really
00:26:48
you know blowing up your cap table and
00:26:50
doing a massive recap
00:26:52
will be through convertible debt but it
00:26:55
has a huge overhang and you risk turning
00:26:58
the keys over to the debt holders of the
00:27:00
company
00:27:01
so the alternative for that business is
00:27:03
to go into the hands of private equity
00:27:06
and get out of the spotlight of these
00:27:08
public markets but public private Equity
00:27:11
is very smart and the thing that's
00:27:14
happened to them is they can't raise
00:27:16
debt
00:27:17
right so what do you think they do they
00:27:18
just have to pay 50 less than what they
00:27:20
would be willing to pay before because
00:27:21
they have to write you know 100 Equity
00:27:24
check so right there is no free lunch
00:27:27
anymore I think is the big is the big
00:27:29
point to to point out anywhere in the
00:27:31
market right now I think one of the
00:27:33
things I'm most concerned about or would
00:27:35
be is I was talking with a friend who
00:27:37
works at a private you know unicorn
00:27:40
software company any we talked about the
00:27:43
numbers of the business and I was like
00:27:44
oh that company's probably worth X and I
00:27:46
gave him a number and then I asked him
00:27:48
how much money they've raised and
00:27:49
they've raised more than x so I was like
00:27:52
dude your options are worthless like you
00:27:54
know this is a real problem I think
00:27:56
that's probably going to become very
00:27:57
systemic
00:27:58
for scaled unicorn software companies
00:28:01
what happens to these businesses sacks
00:28:02
in the market
00:28:04
you know as they kind of need another
00:28:06
round but the value of the company is
00:28:08
now less than the total cash that
00:28:09
they've raised that all is sitting as
00:28:10
preferred stock
00:28:12
listen it's it's survival of the
00:28:14
quickest those who are most willing to
00:28:17
adapt the most quickly are going to
00:28:19
survive and the ones that are stubborn
00:28:20
and refuse to accept the new regime the
00:28:23
market regime are gonna die we showed
00:28:25
that chart remember that chart from
00:28:26
Sequoia months ago on this podcast
00:28:29
remember that where it basically showed
00:28:31
what happens if you're a company that
00:28:34
doesn't cut burn until the very end then
00:28:36
you're still going to run out of money
00:28:37
and die but if you make the cut right
00:28:39
away quickly you you have enough Runway
00:28:42
to weather the storm and I think that
00:28:44
what we've seen is you know at my firm
00:28:47
craft yeah this is exactly it yeah we
00:28:49
showed This months ago we've been
00:28:50
begging our Founders to embrace this we
00:28:52
did a portfolio a review with our entire
00:28:56
set of founders of our portfolio
00:28:58
companies we did one in February when we
00:29:00
felt the markets were changing and we
00:29:02
did another one in May and we showed the
00:29:04
slide and this is the most important
00:29:06
thing for Founders to internalize is you
00:29:08
have to make the changes quickly you
00:29:10
know one way for them to think about it
00:29:12
is let's say say you're a unicorn
00:29:13
company okay and you raised at the peak
00:29:16
let's say second half of 2021 you raise
00:29:18
100 million dollars at a billion dollar
00:29:20
valuation and let's say you've got 50
00:29:22
million left in the bank right so you've
00:29:23
burned 50 million a lot of these
00:29:25
Founders are thinking that 50 million
00:29:27
they've got left is only 5 dilution but
00:29:29
that's what it was historically if you
00:29:31
were to raise a new round today you
00:29:33
might only be valued at 250. so that 50
00:29:36
million you have left is actually 20
00:29:38
dilution and that's if you could even
00:29:40
raise which might be very very hard the
00:29:43
most important thing Founders can do is
00:29:44
forget about the historical terms on
00:29:47
which you raise that money forget about
00:29:49
how much money you were burning in the
00:29:51
past just think about how much money you
00:29:53
have in the bank today impute evaluation
00:29:56
to it so you really internalize how much
00:29:58
dilution that money represents and then
00:30:01
create a new plan moving forward to
00:30:03
preserve that cash as long as possible
00:30:04
can I say something else quickly on top
00:30:06
of this that's I think that's really
00:30:07
good advice
00:30:10
the thing that again people should do is
00:30:12
you should just build a little
00:30:14
spreadsheet for yourself to understand
00:30:16
what the alternative financing options
00:30:19
are for people who are in the business
00:30:21
of investing so David to your point the
00:30:23
current three-month t-bill rate is four
00:30:26
percent
00:30:26
you know you can buy munis now between
00:30:28
four and five percent that are that are
00:30:31
Triple Tax advantaged right you can buy
00:30:33
uh high quality corporate bonds that are
00:30:36
six seven eight percent
00:30:38
and so it's stocks that have a dividend
00:30:40
yield of five percent of growth growing
00:30:43
Market leading growing and so all of
00:30:45
them dividend yield exactly and so all
00:30:48
of a sudden like turning around and
00:30:49
giving it to a company where there is no
00:30:51
end in sight in terms of it doesn't get
00:30:53
you to profitability
00:30:55
is a really really hard thing to do I
00:30:57
was talking to an entrepreneur David
00:30:59
soloff just yesterday
00:31:01
and he said it really well he's like
00:31:04
listen you know I'm not a macro
00:31:06
Economist I'm not trying to forecast but
00:31:07
he's like what I
00:31:09
understood yesterday this is David
00:31:11
talking about the FED as an entrepreneur
00:31:13
the angle of attack has changed the FED
00:31:16
has said this is not going to be some
00:31:19
triangle Sawtooth it's not going to go
00:31:21
up sharply and then come back down
00:31:23
sharply which is what we would all want
00:31:26
if we wanted things to get back to
00:31:28
normal sooner
00:31:30
the angle of attack is now a little bit
00:31:32
slower which means it's going to take
00:31:34
longer to get where we need to be
00:31:36
and then we're going to stay there for a
00:31:37
lot longer than we want and when you
00:31:39
roll those two things together a lot of
00:31:42
companies may run out of money
00:31:44
and so if you can't get to default alive
00:31:46
you have to look at your cost structure
00:31:48
and figure out how to right size this
00:31:50
thing because
00:31:51
the cost of capital is just going to be
00:31:54
really really expensive and this was the
00:31:56
fed's goal right they wanted to take
00:31:57
away this free Capital they want to slow
00:31:59
the economy down and it seems like
00:32:01
they're making progress they did the 75
00:32:03
basis point
00:32:04
hike this week but
00:32:06
we're adding jobs to the economy we have
00:32:08
more job openings and we had 2.6 percent
00:32:11
GDP growth so I guess my question to the
00:32:13
to everybody here is
00:32:15
what is the Fed gonna have to do or can
00:32:18
they stop this consumer and this growth
00:32:22
it's very strange right Powell Powell
00:32:24
said he'd rather over correct
00:32:27
and break things because he has a
00:32:29
toolbox to fix the broken bones but he
00:32:32
doesn't have a toolbox to fix if they
00:32:34
under correct and they have rampant
00:32:36
inflation
00:32:38
I mean not more explicit you can't get
00:32:40
Jason so he's going to take rates until
00:32:42
demand is destroyed and enough demand is
00:32:45
destroyed such that inflation is tamed
00:32:48
but that has huge implications to all of
00:32:50
us because we all have to do our job
00:32:52
trying to build a company trying to
00:32:54
raise money trying to invest money
00:32:56
it's just getting much much much harder
00:32:59
than I even thought so like you know for
00:33:01
me I'm like wow I thought that we could
00:33:04
get through the worst of this by mid-23
00:33:06
but now you have to plan for the worst
00:33:08
which means okay now I'm thinking that
00:33:10
man rates could be higher for much
00:33:13
longer which means you know we could be
00:33:14
in this market until early 25 and you
00:33:17
may say hey that's way too conservative
00:33:20
yeah but you have to plan for
00:33:22
conservatism in this point so how do I
00:33:24
invest money right now honestly I'm like
00:33:27
hmm I should just put more into T bills
00:33:29
isn't that crazy if a company's like
00:33:31
hmoth can have another 10 15 20 million
00:33:33
bucks I'm like wow I mean I don't think
00:33:35
that that gets you anywhere and oh by
00:33:37
the way that 10 or 20 million dollars I
00:33:39
can generate four percent
00:33:40
what a what a tough trade-off right for
00:33:43
well for somebody who has access to
00:33:44
private markets which should be high
00:33:46
growth companies to take the guaranteed
00:33:48
four over the 50x 25x10x whatever we're
00:33:52
trying to bet on here yeah that's not
00:33:54
it's not just the guaranteed four but if
00:33:56
you want to take Tech risk then you
00:33:58
could go buy the corporate bonds of some
00:34:00
high quality companies for the 10 or 11
00:34:01
so you take moderate risk so you're also
00:34:03
competing with that not to zero risk can
00:34:05
you explain that for the listeners what
00:34:06
that corporate debt is and why it you
00:34:08
know pays more sure there are there are
00:34:10
you know high quality public companies
00:34:12
tech companies that have bonds and
00:34:14
that's corporate debt and they obviously
00:34:16
have to pay a higher rate than what the
00:34:18
treasury pays because the treasury is is
00:34:21
risk-free and corporations could default
00:34:23
so there is some risk to it it's not
00:34:25
zero risk but you know it's like if
00:34:27
you're willing to take Tech risk then
00:34:29
why wouldn't you buy a bond at 10
00:34:30
meaning the equity always has to beat
00:34:32
that threshold return but but hey can we
00:34:36
just go back to the jobs report for a
00:34:37
second I mean the U.S government could
00:34:39
default but it's considered the least
00:34:41
likely to default of all issuers of debt
00:34:44
in the world and that's right
00:34:47
yeah that's why people call it the
00:34:49
risk-free rate because it is the least
00:34:51
risky the U.S can always repay its debt
00:34:53
because the debt is denominated in
00:34:55
dollars and the treasury can always at
00:34:57
the end of the day print more money that
00:34:58
would just be monetizing the debt other
00:35:00
countries that owe money in dollars and
00:35:03
obviously don't control the U.S mint
00:35:05
they can't do that so they could
00:35:06
actually default but since we're the
00:35:08
world's Reserve currency we're never
00:35:10
going to default however the dollars
00:35:12
that you get paid back by the US
00:35:14
government might be worth a lot less in
00:35:16
the future because of inflation and
00:35:17
that's the real risk you have to think
00:35:19
about but there's no default risk right
00:35:21
whereas with corporate debt there is but
00:35:23
let's just go back to this the Jaws
00:35:25
picture for a second Jason you asked
00:35:27
about this so there is news this morning
00:35:30
that we added 261 000 jobs in October
00:35:32
and obviously given that there's an
00:35:33
election in a few days then you know the
00:35:36
administration is eager to point to this
00:35:38
but if you dig a little deeper in the
00:35:40
report I just posted the link there you
00:35:42
see in the Raw numbers that there's
00:35:43
actually 328 000 fewer employed
00:35:47
Americans and the number of unemployed
00:35:50
Americans actually increased 36 000. so
00:35:53
and the labor force participation rate
00:35:55
declined for the Third
00:35:56
consecutive month to 62.2 percent so
00:36:00
like I don't really understand like how
00:36:02
all these numbers add up but the point
00:36:03
is like the data is very mixed our new
00:36:06
and and this very definitely negativity
00:36:08
in there
00:36:09
and this feels to me like the last gasp
00:36:12
of the bull market where there's like
00:36:14
this residual job creation but you look
00:36:18
at like just what's happened in the last
00:36:19
week where it's stripe cutting I mean
00:36:21
Stripes probably the single highest
00:36:24
quality I think it's probably the most
00:36:25
valuable private company
00:36:29
okay but but like software pure software
00:36:31
company they had a 14 cut you're
00:36:33
starting to see now the riffs really
00:36:35
start to pile up so I think we're at the
00:36:38
beginning now of a long cycle of the
00:36:41
unemployment rate going up I mean it
00:36:42
just feels like the economy is slowing
00:36:45
so fast the markets are you know they've
00:36:48
been puking now for six months it just
00:36:51
feels like this is the beginning of a
00:36:53
like really serious recession yet we had
00:36:54
GDP growth yet we had job uh openings we
00:36:59
had two quarters we had two quarters of
00:37:00
net negative GDP growth this is when we
00:37:03
had the debate about what our recession
00:37:04
is it was true that if you looked at
00:37:07
growth in nominal terms that appear to
00:37:09
be strong and then it was net negative
00:37:11
once you subtracted the inflation rate
00:37:12
you know we said several months ago my
00:37:15
prediction was a double-dipper session
00:37:16
where you had this shallow technical
00:37:18
recession then it bounced back in Q3 but
00:37:21
now I think we're headed into the second
00:37:23
part of it which is the real recession a
00:37:24
recession characterized by joblessness
00:37:26
and you're starting to see economists
00:37:28
say we're going to go from three point
00:37:29
something percent unemployment rate to
00:37:31
say five or six percent unemployment
00:37:33
next year so I think we're just
00:37:36
beginning to see the the job Cuts start
00:37:38
to add up
00:37:39
this is I think this is what Powell met
00:37:42
which is you know he'll take it as far
00:37:44
as it takes and then he can fix it on
00:37:46
the back end by reintroducing
00:37:48
you know quantitative easing and
00:37:50
reintroducing lower interest rates to
00:37:52
stimulate demand
00:37:55
but there's what are the odds he gets
00:37:57
this right it seems to me that the FED
00:37:59
has a habit of reacting too slowly they
00:38:01
were too slow to react to inflation my
00:38:05
guess is that they'll be too slow to
00:38:06
react to the recession so we'll end up
00:38:09
with a period of rates being higher than
00:38:11
they should too long and then they will
00:38:13
correct they'll drop rates but that
00:38:15
could be two years from now and
00:38:16
meanwhile we could be in a pretty deep
00:38:17
recession two charts for you to look at
00:38:20
the GDP uh by quarter and then after
00:38:23
that the labor participation rate so
00:38:26
there's your GDP q1 Q2 being negative Q3
00:38:29
bouncing back we'll see what happens in
00:38:30
Q4 here's your fed Force participation
00:38:33
rate for labor as we discussed the thing
00:38:36
with the labor participation rate that
00:38:37
we're still not sort of like truly
00:38:39
factoring in is like you know we had a
00:38:40
million Americans die because of covid
00:38:42
and you know starting in that Trump
00:38:45
presidency we lost like seven or eight
00:38:47
million immigrants
00:38:48
so those eight million people have a
00:38:50
huge effect on this number yeah right
00:38:52
and it's not properly really factored in
00:38:54
because if if you see that at the start
00:38:56
of the Trump presidency it's just it's
00:38:58
it just fell off a cliff basically
00:39:00
and you also have people who retired
00:39:02
early that was a big Trend and this all
00:39:04
peaked in 2000 labor participation
00:39:06
hitting that like 67 68 I think it's the
00:39:09
peak
00:39:11
and just slowly going down as Boomers
00:39:13
retire early because they made so much
00:39:15
on their 401ks and homes
00:39:17
and then you're right your mouth we've
00:39:19
had negative we've really cut
00:39:21
immigration in the last whatever five
00:39:22
six years I think there's an element in
00:39:24
here that's missing on how much people
00:39:27
individually are finding other ways to
00:39:29
earn income that doesn't qualify and
00:39:31
show up in the labor force numbers
00:39:33
people
00:39:35
have set up Etsy stores Shopify stores
00:39:38
have tripled since covid
00:39:40
people are making more money on YouTube
00:39:42
on Instagram on Tick Tock than ever
00:39:45
before there's a whole new class of work
00:39:47
that revolves around the individual
00:39:50
creating their own business creating
00:39:53
their own income stream
00:39:54
that's simply taken off
00:39:56
and have taken off it was it was kind of
00:39:58
a trend pre-covered but it really took
00:40:00
off during covid and there's an element
00:40:02
of this that's really more about the
00:40:04
transition of how people work and how
00:40:05
they earn
00:40:06
that isn't reflected in these numbers I
00:40:08
don't think that the idea that everyone
00:40:09
should go be an employee at a company is
00:40:12
necessarily the right way to think about
00:40:13
Labor going forward the amount of money
00:40:16
that individuals are earning is probably
00:40:18
the better way to frame this up going
00:40:20
forward and as really thinking about the
00:40:22
earning power and the economic health of
00:40:24
this country
00:40:25
this is something important you're
00:40:26
bringing up here gig workers are about
00:40:28
nine percent of the uh Workforce and uh
00:40:31
Uber and Dara had um
00:40:33
they they grew over 70 this year but I
00:40:36
think the big number that I watched for
00:40:37
was drivers are making 36 dollars an
00:40:40
hour in the United States working for
00:40:42
Uber so you're exactly right people are
00:40:43
finding other options whether it's
00:40:45
doordash or Uber and that doesn't
00:40:46
qualify in labor force right because
00:40:48
they're no contract independent
00:40:51
contractors are counted yeah they are
00:40:52
counted I that's based on my preliminary
00:40:55
research if somebody wants to fact check
00:40:56
us that'd be great but my understanding
00:40:58
is independent contractors which is what
00:41:00
gig workers are classified under are
00:41:02
counted in labor participation I don't
00:41:04
know how they're counted so uh we'll
00:41:06
we'll look that up and figure that out
00:41:09
there was a story in BBC that the bank
00:41:12
of England has now warned that the UK is
00:41:14
facing its longest recession since uh
00:41:17
Records began some of this is getting to
00:41:19
be fear porn yeah but look here's what I
00:41:23
think is scary about going into a
00:41:24
recession is number one you don't really
00:41:26
know how long it's going to take to get
00:41:27
out we know the average recession lasts
00:41:29
about 18 months but the truth is once it
00:41:31
starts you just don't know and the
00:41:32
second thing is you don't really know
00:41:34
who's been stress tested people claim
00:41:36
that they can weather the storm but the
00:41:38
truth is that there's no there's no way
00:41:41
to simulate truly simulate a stress test
00:41:43
they claim they can but the only way is
00:41:46
to really subject you know an
00:41:48
institution to that pressure and that
00:41:49
stress and then you see if they come out
00:41:51
the other side so that's the issue is
00:41:53
you're just going into this it's there's
00:41:55
there's all there's a lot of unknown
00:41:57
unknowns and
00:41:58
and this is why I would just urge
00:42:00
Founders to be cautious is because if
00:42:03
the recession ends up being shallower
00:42:04
and shorter than people expect great
00:42:07
you'll be surprised to the upside but if
00:42:09
the recession ends up being deeper and
00:42:11
and longer than expected you don't want
00:42:13
to go out of business you want to be
00:42:14
protected against that so again you know
00:42:17
we've been saying this since February
00:42:18
and may but again I just reiterate I
00:42:20
think it really makes sense for Founders
00:42:22
to be conservative prioritize your
00:42:26
survival above all else you know this
00:42:29
recession probably will last about two
00:42:30
years you want to make sure you survive
00:42:32
it and to shama's point if you survive
00:42:34
it with lower growth that's fine you can
00:42:36
keep growing on the other end of this
00:42:37
thing but if you go out of business
00:42:39
because you grew too fast then you're
00:42:41
not going to get the chance to fix that
00:42:42
problem when the recession is over I
00:42:45
just don't see anybody rewarding hyper
00:42:48
growth that is burning a ton of cash
00:42:50
where you have to be back in Market
00:42:52
every year
00:42:53
because it's it's just very hard to feel
00:42:56
comfortable that the conditions on the
00:42:59
field aren't going to be drastically
00:43:01
different a year from now right it's not
00:43:02
like we know that it's going to be
00:43:04
better or worse and I think that that
00:43:07
uncertainty is actually really bad for
00:43:09
companies so to your point it's just
00:43:11
like
00:43:12
a lot of folks have tried to shy away
00:43:14
David from actually revisiting their
00:43:16
valuations they've done these
00:43:18
complicated converts and they've tried
00:43:20
to basically you know
00:43:23
it's I think it's sort of like managing
00:43:25
their ego or the board's ego and I think
00:43:28
like the next shooter drop has to be
00:43:30
these Founders and these boards just
00:43:33
saying okay let's just take the hard
00:43:34
medicine what's the real you know market
00:43:36
clearing price and valuation let's get a
00:43:38
third party to price it and let's get
00:43:40
new fresh equity and then move forward
00:43:41
because if you don't do that and you
00:43:44
wait until everybody's trying to do it
00:43:46
then it's going to be a really tough
00:43:47
scenario so better to your point you
00:43:50
know this is why I like stripe it's so
00:43:52
smart better to cut now
00:43:54
again it's always hard to let people go
00:43:56
but it's better to do that now than 18
00:43:59
months from now because you just have no
00:44:02
idea how much more expensive or hard
00:44:04
it's going to be then
00:44:06
and who's going to even be in the
00:44:07
business of lending money or investing
00:44:09
money in 18 months
00:44:10
and you know that that sounds pretty
00:44:12
crazy but it's it's like I think that
00:44:13
that's that's the moment that we're in
00:44:15
to your point uh Friedberg I did a
00:44:17
little research here and um
00:44:19
according to the FED of St Louis if you
00:44:22
accounted
00:44:24
uh casual workers informal workers
00:44:28
over doing over 20 hours a week of
00:44:31
informal work AKA gig work you would
00:44:33
increase labor participation between a
00:44:35
half point and a point if you counted
00:44:37
all of them maybe even uh slightly more
00:44:40
than two percentage points higher so
00:44:41
probably about a point uh seems like a
00:44:43
realistic way to look at Labor
00:44:45
participation and of the eight points or
00:44:48
maybe now the six or seven points the
00:44:50
ten percent
00:44:51
it would then account for 10 to 20 of
00:44:53
the 10 drop in labor participation it's
00:44:57
just alarming statistics because if most
00:44:59
people have most of their
00:45:02
personal net worth tied up in their home
00:45:04
asset and their home values are
00:45:06
declining are going to decline
00:45:09
and we're seeing this dramatic spike in
00:45:11
Consumer Credit in the U.S it paints a
00:45:14
really ugly picture for the next two
00:45:15
years wow guys I'm just looking at I'm
00:45:17
just looking at the markets today git
00:45:19
Labs down 15 snowflakes down 13
00:45:23
Mondays down 14 percent uh at least down
00:45:27
30 percent in one day a Yelp is down 17
00:45:30
percent
00:45:31
is down 16 percent
00:45:34
so it's just a horrible oh my gosh the
00:45:36
cloud computing index wcld has hit a new
00:45:40
low for the year it's down to 23 bucks I
00:45:43
think the previous low was 25 is down
00:45:45
almost eight percent today and this is
00:45:47
on a day in which the NASDAQ is down
00:45:48
less than one percent so the point is
00:45:51
they're rotating out of growth stocks
00:45:53
yeah it's just brutal and so listen if
00:45:56
you're a startup founder you got to
00:45:57
realize these are like some of the
00:45:58
highest quality public so Leo's down 40
00:46:01
today twilio is down 37 in a day today
00:46:05
whoa but guys this is this is just math
00:46:09
you know it's not a judgment on any of
00:46:12
these companies it's just pure math this
00:46:14
is why I think you have to be utterly
00:46:15
unemotional in this moment and if you're
00:46:18
if you're a CEO running a company
00:46:20
particularly a SAS business
00:46:23
you have to really figure out how to
00:46:26
how to right size your cost basis and
00:46:28
make this money last profitable
00:46:30
industrial companies are Bill Gurley had
00:46:32
a tweet a tweet about this a few months
00:46:34
ago about how the biggest mistake people
00:46:36
make in riffs is they just do like a
00:46:38
tepid riff like a 10 ish riff and they
00:46:41
have to come back and they do it again
00:46:42
and they do it again this is what I
00:46:44
think the the Elon action this week
00:46:46
really sets a standard he shows the
00:46:48
entirety of Silicon Valley that you can
00:46:50
cut deep and you can turn a profit and
00:46:52
you can do it fast and it could set a
00:46:54
new standard for how folks are managing
00:46:56
this Jack Welch used to in his
00:46:58
management principles recommend dropping
00:47:00
the bottom 10 of people every year and
00:47:02
so you know the 10 13 Cuts don't really
00:47:05
pass muster as a public market investor
00:47:07
kind of looks at the the management
00:47:09
across these different companies to turn
00:47:11
a profit they're going to say the folks
00:47:13
that are making the deepest cuts the
00:47:14
fastest are the ones that are going to
00:47:15
get valued it's unfortunate and it's a
00:47:17
difficult circumstance for everyone in
00:47:19
Silicon Valley to deal with from the
00:47:21
employees to the investors to the public
00:47:23
and private shareholders it's really
00:47:25
brutal one quick question for you guys
00:47:26
really it's really just this kind of
00:47:28
Market motivation that's underway right
00:47:29
now here's the chart uh and my question
00:47:31
for you is when do Google and Facebook
00:47:34
stop this I mean if you look at the
00:47:36
number of employees being added it is
00:47:39
truly extraordinary here's the chart and
00:47:40
this includes the latest quarter so they
00:47:43
are
00:47:45
not turning off hiring yet what do you
00:47:49
think hold on didn't they announce a
00:47:51
hiring freeze
00:47:52
they announced that they were at Google
00:47:54
they announced that they were going to
00:47:56
hold people accountable to better
00:47:57
performance and they were going to go do
00:47:59
more with less and then they added more
00:48:00
people Facebook said that they would do
00:48:03
a hiring three percent today yeah
00:48:04
Facebook said it would do a hiring
00:48:06
freeze
00:48:07
well whatever jobs last quarter yeah
00:48:11
well you're right they just announced
00:48:12
the hiring freeze you look at Apple
00:48:14
Apple just announced in non-r D
00:48:16
functions a hiring freeze this is Apple
00:48:18
like the most valuable most profitable
00:48:21
company in the world so if Apple
00:48:23
basically is putting the brakes on
00:48:25
non-engineering hiring that tells you
00:48:27
something about how fast the economy is
00:48:29
slowing down I think that was a huge
00:48:31
signal yeah the point Freebird makes is
00:48:33
so correct which is if you're doing a
00:48:36
riff obviously there's a reason why but
00:48:38
I think we we're seeing too many riffs
00:48:40
where the details of the Riff and the
00:48:43
magnitude of the Riff don't match up
00:48:44
with what the objective of the Riff is
00:48:46
the objective of the Riff for a lot of
00:48:48
these companies should be to get them
00:48:51
cash flow positive or at least to put
00:48:54
them on a Runway or a trajectory where
00:48:57
they can get cash flow positive with
00:48:58
their existing cash on the balance sheet
00:49:00
right they won't need to raise money
00:49:01
again and we're seeing a lot of
00:49:04
companies where they don't achieve that
00:49:05
and they have to come back again and
00:49:07
again and hit it again and that creates
00:49:10
more turmoil for the company and it's
00:49:12
more unfair for the employees by the way
00:49:15
sex to that point I'll just say
00:49:17
how deep these come these companies are
00:49:18
cutting and how you management is
00:49:20
expressing shareholders how they're
00:49:22
going to turn a profit becomes a signal
00:49:25
for those shareholders on whether or not
00:49:26
they want to stay in that stock and the
00:49:28
companies that are doing it fast and are
00:49:30
doing it deep the investors and the
00:49:32
shareholders say you do actually have a
00:49:33
path that makes sense here I'm going to
00:49:35
stay in the stock cash today versus cash
00:49:36
in the future sure off let me ask you a
00:49:38
question in terms of strategy for one of
00:49:40
these companies let's say the Facebook
00:49:42
Corporation or
00:49:44
perhaps even Google
00:49:46
or apple even if they were to cut their
00:49:49
expenses which might take obviously a
00:49:51
riff and then because their stock prices
00:49:54
are so depressed right now maybe even a
00:49:55
mid cap one like a twilio or an Uber or
00:49:58
an Airbnb if they were cut costs and
00:50:01
then start buying back their shares
00:50:02
which some companies have been doing
00:50:04
what would that do in terms of the
00:50:06
Market's appreciation of those stocks or
00:50:07
management teams I think it's hard to
00:50:09
tell I think that
00:50:11
the if you have not lost investor trust
00:50:15
I think it would be really well rewarded
00:50:18
if you have become unreliable
00:50:22
and undisciplined
00:50:25
even those cuts I think would be met
00:50:27
with some amount of excitement but
00:50:31
but probably not a broad base support so
00:50:33
you know it then it just goes to
00:50:35
narrative meaning if Google did it I
00:50:38
think that people really trust Sundar
00:50:40
and Ruth
00:50:42
and I think the stock would go Bonkers
00:50:44
they would they would probably move very
00:50:46
quickly into the echelon of apple and
00:50:49
apple is sort of
00:50:51
a first among equals like they're just
00:50:53
they're just in a different class unto
00:50:55
themselves
00:50:56
Facebook I think is a little bit harder
00:50:58
because I think folks have gotten burned
00:51:00
and you know they would have to make
00:51:02
some really really deep Cuts but then
00:51:04
you know where do you do it you can't
00:51:06
capitulate on this meta strategy
00:51:08
but then the other part is where you
00:51:09
make all the money
00:51:11
and so you have this huge morale issue
00:51:13
that you have to manage so it's just a
00:51:15
really hard game to play just one more
00:51:17
thought on on
00:51:19
um on the rift stuff I think one thought
00:51:22
experiment for Founders is to think
00:51:24
about what was your plan at the end of
00:51:26
2019 why do I say that because 2020 and
00:51:29
2021 were two of the most distorted
00:51:32
years ever in the history of financial
00:51:33
markets and the economy because we had
00:51:36
covet and then we had the reaction to
00:51:38
covid right and so you saw there was
00:51:40
this um you know zooms market cap hit
00:51:42
100 billion all the e-commerce companies
00:51:44
were doing extremely well you you know
00:51:46
you had all this money printing you know
00:51:48
you had zero interest rates and so on
00:51:50
you had SAS companies hitting all-time
00:51:52
Highs at the end of 2021 so we lived
00:51:55
through this incredibly distorted time
00:51:57
so as a thought experiment go look at
00:51:59
what your plan for 2020 was supposed to
00:52:02
be when you created it at the end of
00:52:04
2019 because that was the last time that
00:52:06
you were thinking without any
00:52:08
distortions you know that were then
00:52:10
created and I think if you were to go
00:52:12
back and look at your 2020 plan again
00:52:15
created it at the end of 2019 you'd
00:52:18
probably see that you could get by with
00:52:20
half the head count you have now because
00:52:22
probably you doubled your head count
00:52:23
during the last two years during these
00:52:25
heady heady times and yet I think
00:52:27
Founders start thinking oh I can't go
00:52:29
back to operating you know I can't
00:52:31
operate at half the level of head count
00:52:32
but you were you were operating with
00:52:34
half the level of head count by death
00:52:36
definition at some earlier point I also
00:52:39
think sometimes I think what Founders
00:52:40
say is what will people think if I cut
00:52:43
50 meaning all of a sudden the perceived
00:52:46
success of my business would be
00:52:47
different and I think that this is where
00:52:49
you have to realized no like there's a
00:52:51
lot of ego tied up in these things which
00:52:54
slows people down from doing the thing
00:52:55
that they need to do
00:52:57
yes it's a really it's a really it's
00:52:59
hard to do I mean look at Airbnb as an
00:53:02
example I mean they did this ginormous
00:53:04
riff
00:53:05
during covid because they had no choice
00:53:07
I mean they're they're Revenue went
00:53:09
essentially to zero and now the business
00:53:11
is incredibly strong it's throwing off
00:53:13
massive amounts of free cash flow and
00:53:15
the stock market seems to really love
00:53:16
what Airbnb has done uh and a similar
00:53:19
story over at Uber in terms of having
00:53:21
done significant riffs and probably
00:53:22
could
00:53:25
is still down almost 75 off its high
00:53:29
right so when you say the stock market
00:53:30
love it so they're they're up today
00:53:32
three percent so meaning they're not
00:53:34
down 30 in one day but they have gone
00:53:37
down with the rest of the market they
00:53:38
have gone down with the rest of the
00:53:39
market
00:53:40
but it feels like the business I'm
00:53:42
talking about the business fundamentals
00:53:43
when you're throwing off almost a
00:53:44
billion dollars yeah now you're going to
00:53:47
start people are going to perceive that
00:53:48
business maybe as uh of this cohort the
00:53:51
flight to safety right or same thing
00:53:53
with Uber throwing or free cash flow now
00:53:54
I think a lot of these names are gonna I
00:53:56
don't know Airbnb right now but they do
00:53:58
on Uber I think the people throwing off
00:53:59
the free cash flow are going to look
00:54:00
pretty attractive
00:54:02
and be able to buy their stock back
00:54:03
maybe all right let's talk about the
00:54:06
midterms
00:54:08
a lot of big uh Senate races and
00:54:11
obviously Governors uh Pennsylvania
00:54:13
Georgia Arizona Wisconsin Ohio all
00:54:16
really important races sex what do you
00:54:19
think
00:54:20
well it looks to me like there's going
00:54:22
to be a republican wave there was an
00:54:24
interesting article actually on CNN
00:54:25
where they it's called five scary
00:54:27
numbers for Democrats and what they
00:54:30
point to is that Biden right now has a
00:54:35
42 percent approval rating 61 percent of
00:54:38
the American people say he hasn't
00:54:39
focused on the key problems so this is
00:54:41
called the out of touch index 51 say the
00:54:44
economy is number one issue compared to
00:54:45
only 15 for abortion and then 78 say
00:54:48
we're on the wrong track I don't think
00:54:49
I've seen a right track wrong track
00:54:51
index that was so negative and 75
00:54:54
percent of the country says we're in a
00:54:56
recession so you know when you look at
00:54:58
polling numbers like that it must
00:55:00
translate I think into a republican wave
00:55:04
and you have now Real Clear Politics
00:55:05
currently has the GOP gaining four
00:55:08
Senate seats so winning in the Arizona
00:55:10
Nevada Georgia and New Hampshire that's
00:55:12
a big change from just a couple weeks
00:55:14
ago and winning 31 House Seats so
00:55:17
this is this is kind of what it's
00:55:19
looking like right now but look the the
00:55:21
margin is still within the
00:55:23
within the margin of error on the
00:55:25
polling so Nate silver has pointed out
00:55:27
that within one standard deviation you
00:55:30
could either have a republican wave or
00:55:32
you could have basically the Republicans
00:55:35
fizzle out so it's going to be very
00:55:37
close but ultimately I think this breaks
00:55:39
Republican yeah the to me the way that
00:55:43
I've I'm looking at it right now is that
00:55:45
it seems like most scenarios the
00:55:48
Republicans will have the majority in
00:55:50
the house
00:55:51
and the real question is what happens in
00:55:53
the Senate it's really really kind of a
00:55:55
coin flip
00:55:57
and that's going to be really
00:55:58
interesting to see so you know things
00:56:00
where I thought would break Republican
00:56:02
in the Senate like Pennsylvania are now
00:56:05
back to almost a you know a statistical
00:56:07
Dead Heat
00:56:08
so it's a really interesting moment
00:56:10
actually it's uh but most scenarios
00:56:13
David I think you'd agree is that the
00:56:15
Republicans win the house and then
00:56:17
there's a non there's a plurality of
00:56:19
scenarios where they also win the Senate
00:56:21
the house will almost certainly go
00:56:22
Republican but I think the Senate now
00:56:24
the the official percentages are 55
00:56:26
percent likely to tip Republican but I I
00:56:29
just think that in a wave year like this
00:56:31
where the wrong track sentiment is so
00:56:34
high I think all these races that are a
00:56:36
dead heat they're more likely to break
00:56:38
in One Direction as opposed to like a
00:56:40
random distribution which is why I think
00:56:42
you could just as easily end up with and
00:56:45
you know instead of it being a 5149
00:56:48
Senate it could be 55 45 because all
00:56:52
these things could break the same way so
00:56:53
right now so I I would slightly disagree
00:56:55
in Pennsylvania I think Oz has improved
00:56:58
as a candidate fetterman did that debate
00:57:00
and since he suffered that stroke he
00:57:02
kind of came across as somebody how do
00:57:04
we feel about that I I I had very very
00:57:07
hard to watch that happen and yeah I
00:57:10
mean the guy the guy has suffered a
00:57:11
stroke and is sad but he you know he
00:57:13
doesn't present as someone who can be a
00:57:15
senator right now I think what does the
00:57:17
science say about that like a re as a
00:57:20
society is this a good idea to have
00:57:22
somebody post-stroke be in office I'm
00:57:23
not picking any political side here I'm
00:57:24
just talking about the the medical issue
00:57:26
Alice is actually doing the right thing
00:57:28
right now which is he's not actually
00:57:29
focusing on that issue because it's so
00:57:31
obvious he doesn't want to be seen as
00:57:33
beating up on fetterman and instead he's
00:57:35
a human he's focusing on the issues and
00:57:38
actually fetterman's issues are very
00:57:40
unpopular in a state like Pennsylvania
00:57:42
so I actually think for both reasons Oz
00:57:45
is going to win that I think fetterman's
00:57:46
manifestly unqualified but also I think
00:57:49
his positions are fairly unpopular so I
00:57:52
think Pennsylvania will will almost
00:57:53
certainly tip so let me pull up the
00:57:55
chart here just so people can see Ohio
00:57:56
is going Republican and then Arizona I
00:57:59
think is really the interesting one
00:58:00
where Blake Masters is now tied after
00:58:03
being behind Mark Kelly throughout this
00:58:05
campaign he is now tied in New
00:58:09
is popular your guy is really unpopular
00:58:12
and now he's tied
00:58:16
interpretation it's the Peter too he was
00:58:18
he was doing really poorly I think
00:58:20
because
00:58:21
I think listen I think that I think that
00:58:23
Arizona is probably gonna be the closest
00:58:25
race in the country I think it's gonna
00:58:26
be a nail biter but I think Blake's
00:58:28
gonna pull that out
00:58:29
sex what do you think are the biggest
00:58:31
policy shifts that take place in this
00:58:34
country Host this predicted Red Wave is
00:58:38
there anything that changes so just you
00:58:40
know talk to folks about what's on the
00:58:42
docket from a legislative point of view
00:58:44
going into the next congress with all
00:58:48
these new candidates the reality is we
00:58:49
have a separation of powers in this
00:58:51
country and you're gonna have to divide
00:58:53
a government the Republicans will will
00:58:54
control Congress the Democrats will
00:58:56
control the presidency and so as a
00:58:58
result you're going to be largely in a
00:59:00
gridlock situation but gridlock may be a
00:59:03
lot better than what we've had over the
00:59:04
last couple of years so you know you've
00:59:06
had basically this orgy of spending and
00:59:09
money Printing and I think that's going
00:59:10
to stop obviously
00:59:12
the other thing that's going to happen
00:59:13
is Republicans may not be able to pass
00:59:15
much legislation but they're going to do
00:59:16
investigations and there's a lot of
00:59:18
questions that need to be answered I
00:59:19
think about still about covid you know
00:59:22
these lockdown policies that we had that
00:59:24
started at the top at NIH why did they
00:59:26
happen we need to start having
00:59:27
accountability for some of these
00:59:29
horrible decisions that were made during
00:59:30
covid and there's been no willingness in
00:59:33
Washington to hold anyone accountable at
00:59:34
a minimum they need to have some
00:59:36
Congressional investigations and find
00:59:38
out why we pursued such bad policies
00:59:40
over the last couple of years by the way
00:59:42
did you see did you see what happened
00:59:43
this week where the CDC
00:59:46
you know after this entire opioid
00:59:48
epidemic and all of these lawsuits the
00:59:50
CDC came out and actually said Hey
00:59:52
listen we need to really make sure that
00:59:54
we're getting access
00:59:57
putting opioids in the hands of
00:59:58
Americans who are really suffering with
01:00:00
pain management and whatnot and I didn't
01:00:03
read the article to really understand
01:00:04
the details but I just thought it was an
01:00:06
incredible headline where it's like it's
01:00:08
just it's so counter to The Narrative of
01:00:10
what we've been told is happening which
01:00:11
is like you know over prescription and
01:00:13
misprescription if we learned anything
01:00:15
during Covetous to question every
01:00:17
organization everybody and to really
01:00:19
collect your own information while you
01:00:22
know looking at these organizations we
01:00:25
trusted over time I know I look at the
01:00:26
world differently now that you couldn't
01:00:28
say covid was possibly a lab leak
01:00:31
without having your podcast taken down
01:00:32
or being banned on YouTube and now
01:00:35
propublica has done an investigation and
01:00:38
they're saying along with Vanity Fair
01:00:39
and they're going to win a Pulitzer for
01:00:40
this I bet
01:00:41
that this conspiracy theory from two
01:00:43
years ago is probably actually the
01:00:45
leading theory and that the the Wuhan
01:00:49
lab Lab was showing if you didn't see it
01:00:52
reporting an incident in late November
01:00:54
of last year uh before covet broke 2019.
01:00:58
it's really it's really incredible there
01:00:59
was an article in the Atlantic
01:01:01
that came out over the past week called
01:01:03
let's declare a pandemic amnesty no yeah
01:01:07
investigation right so basically at
01:01:10
everything yes all the experts who told
01:01:13
us Jason that we weren't allowed to have
01:01:14
an opinion because we weren't expert
01:01:16
enough that if we raise any questions
01:01:18
about the origin of the virus that it
01:01:20
might have come from a lab that that
01:01:21
basically needs to be censored the
01:01:23
people who said we had to do lockdowns
01:01:24
and implemented all these authoritarian
01:01:26
tactics now they're saying that they
01:01:29
need an amnesty that what that really
01:01:30
means no one's looking no one's looking
01:01:32
to criminally prosecute them what we're
01:01:34
looking to do is have some
01:01:35
accountability around the public policy
01:01:37
what they want is they want to pull the
01:01:39
expert card to say that they're the only
01:01:41
ones who get to have an opinion and make
01:01:42
a decision but then when it all goes
01:01:44
horribly awry they basically want to be
01:01:46
completely insulated and unaccountable
01:01:48
no account in their decisions no way no
01:01:50
way we're not going to give you full
01:01:52
investigations we're in alignment on
01:01:54
this side by the way can I just yes hold
01:01:55
on I just want to say sex we're in
01:01:57
alignment on this for a rare moment of
01:01:59
Peace on this podcast the same thing
01:02:01
after 9 11 shouldn't all Americans
01:02:03
understand what happened after 9 11 and
01:02:05
what the failures were in our
01:02:07
intelligence just so we can get better I
01:02:09
I'm not picking a political horse here
01:02:10
but it's kind of crazy that you could
01:02:13
people said to our podcast and other
01:02:15
people who were questioning it forget
01:02:17
about what political party you're in
01:02:19
just want to understand how the world
01:02:20
Works what are the chances that this
01:02:23
breaks out in the one or two places
01:02:24
where they're studying the coronavirus
01:02:26
that you have a lab leak it was so
01:02:28
obvious to everybody the other reason
01:02:30
why you need to have accountability for
01:02:31
this is that there are still a long tail
01:02:33
especially around the damage that we did
01:02:36
to our kids educationally yes and now
01:02:38
and now the over prescription of
01:02:40
stimulants and so if you don't
01:02:41
depression sensors you can't go after
01:02:43
these problems like there was a there
01:02:46
was like
01:02:48
stimulant prescription is now the single
01:02:51
biggest epidemic in children it is now
01:02:53
twice as prescribed as contraceptives
01:02:56
and Asthma drugs and why chamoth why are
01:02:59
we doing this to get them to score
01:03:01
higher on a test to be more attentive in
01:03:02
school well it's it's actually this
01:03:04
negative feedback loop where these
01:03:06
children were miseducated during covet
01:03:12
it had huge psychological and
01:03:15
academic damage to them
01:03:18
our test scores have fallen off of a
01:03:20
cliff relative to how we used to do
01:03:21
relative to other countries
01:03:24
I think the teachers unions have found a
01:03:26
way to try to explain it
01:03:29
to basically Shield themselves from any
01:03:31
sort of critique
01:03:33
and so the loot and then part of that
01:03:35
Loop is then to look at a bunch of kids
01:03:37
that are underperforming in school and
01:03:39
instead of saying well maybe these
01:03:41
lockdowns and masking and all of these
01:03:43
things that we implemented actually had
01:03:46
a huge impact they say uh you know
01:03:47
you're misbehaving so let's put you on a
01:03:49
stimulant yeah it's crazy we're in that
01:03:51
Loop right now just so you guys know the
01:03:53
data is outrageous twice as many
01:03:56
prescriptions for stimulants as the sum
01:03:59
of contraceptives and Asthma drugs for
01:04:02
All American Kids yeah it's not that
01:04:04
suddenly everybody's got ADHD so we
01:04:07
failed them we failed our children and
01:04:10
and we're going to use stimulants to
01:04:11
have them ketchup weeks but we should be
01:04:12
doing Summer Schools after school
01:04:14
programs
01:04:16
we failed them because of our response
01:04:18
to covet that is why we need answers to
01:04:20
all that stuff because you need to link
01:04:21
these things together to have some real
01:04:23
accountability absolutely here is the uh
01:04:26
just so we have the people see the
01:04:27
numbers here's the 538 poll of uh how
01:04:30
Joe Biden's popularity has switched this
01:04:32
is uh 654 days into
01:04:35
his presidency started out really strong
01:04:37
54 and now a little rebound since the
01:04:41
summer obviously that uh dip started uh
01:04:45
with the economy it's the economy stupid
01:04:46
and if we go down a little bit on the
01:04:49
same page and you zoom in on the left
01:04:50
there you can see compared to Donald
01:04:51
Trump
01:04:52
uh he started out much more popular than
01:04:54
Donald Trump day by day and now he's
01:04:56
just as unpopular as Donald Trump was at
01:04:58
this point in his presidency well look I
01:05:00
mean look the setup is really
01:05:01
interesting for 2024 because it's
01:05:03
probably going to be the case that we're
01:05:04
in the middle of a recession going into
01:05:06
that election cycle maybe we'll be sort
01:05:09
of like getting ourselves out of it but
01:05:11
there'll be a lot of economic damage
01:05:12
high unemployment
01:05:14
and you know typically
01:05:16
folks in power will have to sort of be
01:05:18
held accountable for that it's a really
01:05:20
interesting setup that both Gavin Newsom
01:05:22
and Ron DeSantis have to figure out now
01:05:25
and navigate if they're going to get the
01:05:27
nomination on each side and breaking
01:05:29
news today sax would love to get your
01:05:31
thoughts on this axio says uh and we'll
01:05:34
go to science Corner next that Trump's
01:05:36
going to announce on November 14th that
01:05:39
he is running for president look I I
01:05:41
kind of have the Joe Rogan philosophy on
01:05:43
this which is why I give it oxygen let's
01:05:45
just wait and see there's certainly no
01:05:46
needs to talk about it before it happens
01:05:48
you know we're not even past this
01:05:50
election yet but but hey I want to go
01:05:52
back to the the Biden popularity because
01:05:54
I think part of the issue here is what
01:05:57
are the arguments that Biden is making
01:05:59
to the country about why people should
01:06:01
vote Democratic and he gave another
01:06:04
speech on Wednesday night where he
01:06:07
basically claimed that if you vote for a
01:06:10
different party that that is a threat to
01:06:12
democracy in other words the
01:06:13
perpetuation of single party rule is
01:06:16
what you must do if you care about
01:06:17
democracy that is a sales pitch that's
01:06:20
not going to appeal to anybody outside
01:06:21
of the viewers of MSNBC it's just not
01:06:24
he's not talking about the issues that
01:06:25
really matter to the country you know
01:06:27
what the country wants to know is that
01:06:29
he's focused on the economy he's focused
01:06:31
on inflation he's focused on crime he's
01:06:33
focused on the schools and fixing this
01:06:36
learning loss that Jamal was just
01:06:37
talking about he's not doing those
01:06:39
things instead he's basically saying
01:06:41
that the Democrats should be kept in
01:06:42
power forever because there was a riot
01:06:45
at the Capitol on January 6 and look
01:06:46
that was a stain on the country okay it
01:06:49
was terrible that that happened
01:06:50
disgusting that is not a reason hold on
01:06:52
a second that is not a reason to keep
01:06:53
Democrats in power forever and actually
01:06:56
there's a
01:06:57
um a liberal guy a liberal Democrat
01:06:59
named Josh Barrow who wrote a pretty
01:07:00
good blog about this and what he said is
01:07:03
the message is that there's only one
01:07:05
party contesting this election that is
01:07:08
committed to democracy the Democrats and
01:07:10
therefore only one real Choice available
01:07:11
if voters reject Democrats agenda or
01:07:14
their record on issues including
01:07:16
inflation crime and immigration they
01:07:17
have no recourse to The Ballot Box they
01:07:19
simply must vote for Democrats anyway
01:07:21
and that argument is just not flying and
01:07:23
actually he's a a Democrat who is
01:07:26
pointing this out but I don't think that
01:07:28
Democrats are getting the message on
01:07:30
this but I think they will after this
01:07:32
election and they're gonna have to find
01:07:34
a new sales pitch to The Country well
01:07:35
you know and he does have a good sales
01:07:37
pitch doesn't each a month with these
01:07:39
major bipartisan uh wins he had the
01:07:41
infrastructure deal got done the
01:07:43
technology bill and the chips you got
01:07:45
gas prices going down yeah GDP growth
01:07:47
you got job growth the problem is that
01:07:50
those things happened frankly too early
01:07:52
in his presidency and things are getting
01:07:54
materially worse so I just sent you a
01:07:55
link can you just throw this up here for
01:07:57
a second you know Jason you mentioned
01:07:59
this cheaper gas thing yeah but the
01:08:01
reality is um if you look at this we
01:08:04
have now depleted our strategic goal
01:08:06
Reserve by almost 50 percent yep so we
01:08:09
are running out of
01:08:10
oil that we can introduce into the
01:08:12
market at effectively zero cost to bring
01:08:15
the price down and because we've lost
01:08:17
our relationships with folks like Saudi
01:08:19
Arabia there's no way to influence them
01:08:22
in order to produce more in fact they're
01:08:24
going to cut Supply so that they can
01:08:26
control the prices that they have which
01:08:29
that they can sell into the market and
01:08:32
so now what are we left with well the
01:08:34
only three places where you can have
01:08:35
incremental supply of energy which the
01:08:38
country still needs is from Russia Iran
01:08:41
and Venezuela
01:08:43
and so you know all of these things
01:08:45
Jason I think come back
01:08:47
and really put Biden in a tough place
01:08:48
because as as Sac says he does have to
01:08:51
answer to all of these things because
01:08:52
these are his decisions
01:08:54
look I still believe in the Democrats
01:08:56
you know I I'm hoping I gave a million
01:08:59
bucks uh to the Senate pact trying to
01:09:01
sort of tip the Senate I really think
01:09:03
it's important that we have a split
01:09:05
government because I've kind of I gave
01:09:06
up on the house I think it's clear that
01:09:08
the Republicans are going to win but the
01:09:10
Senate is still is still up for grabs
01:09:12
and the reason is because I think that
01:09:14
we need to sort of have stasis so that
01:09:17
nothing bad happens between now and 2024
01:09:20
because I think the economic conditions
01:09:22
on the ground are going to be bad in and
01:09:24
of themselves
01:09:27
and then just the one last thing I'll
01:09:29
say is
01:09:30
the instructive thing that I think we
01:09:32
should look at is what happened in
01:09:33
Germany
01:09:34
because what happened in Germany is
01:09:36
really interesting when the economy
01:09:37
turns and inflation is out of control
01:09:39
and energy is out of control
01:09:42
what they basically did was they
01:09:43
sidelined
01:09:45
the European Central Bank they stepped
01:09:48
in with their own balance sheet and said
01:09:49
you know what we're going to nationalize
01:09:51
assets and I know that this sounds crazy
01:09:53
to say but if it can happen in a place
01:09:55
like Germany I know most people would
01:09:57
say it'll never happen in America but
01:09:59
I'm not so sure and I think that you
01:10:02
want to make sure that there's a split
01:10:04
government so that these things are
01:10:06
never possible and so hopefully there's
01:10:09
some you know Common Ground in a
01:10:11
Democratic Senate and a republican house
01:10:13
and we just kind of get through 24 and
01:10:15
see where the chips land and I still
01:10:17
think it's going to be uh DeSantis
01:10:19
versus uh Newsome Freeburg any final
01:10:21
thoughts here on politics my first um
01:10:24
observation is that I think it's funny
01:10:25
that chamoth and sax are funding
01:10:27
opposite uh sides of the uh
01:10:30
yeah why don't you just guys just give
01:10:32
the money to me and Friedberg to get a
01:10:34
plan each other's money up yeah I could
01:10:37
think of other ways for you guys to use
01:10:38
that money but David and I may have
01:10:39
canceled each other out you're right I
01:10:41
mean yeah so far Peter Thiel made the
01:10:43
better trade he's it looks like the teal
01:10:44
wave in the Senate so look I would say
01:10:46
my very broad statement is
01:10:49
democracies evolve in a cyclical nature
01:10:52
over time right you often see swings
01:10:55
from one political party to the other
01:10:58
and um it's just the nature that once
01:11:00
someone's been in office they form the
01:11:02
new establishment and then folks in the
01:11:05
next election cycle want to vote against
01:11:06
that establishment because there are
01:11:08
things that they want that they aren't
01:11:09
being given today and therefore the
01:11:11
Democracy forces a change from what is
01:11:14
the current establishment back to the
01:11:16
other side and generally political
01:11:17
parties seem to kind of adopt whatever
01:11:19
the other side is and that's how the
01:11:21
cyclical evolution of democracy seems to
01:11:23
play out the recent Trend that has been
01:11:25
more alarming which I think we can kind
01:11:27
of take pause to notice is the rise of
01:11:30
populism where populism is this really
01:11:32
kind of vehement Die Hard opposition to
01:11:35
elitism and the establishments that
01:11:37
everyone feels kept down by and everyone
01:11:39
feels taken advantage of by
01:11:41
and um the the rise of trump the rise of
01:11:44
bolsonaro the rise of Boris Johnson and
01:11:47
I would argue even the rise of AOC
01:11:49
Bernie Sanders and Elizabeth Warren all
01:11:52
similarly speak to the the crying voice
01:11:56
of the the Democratic
01:11:59
populations that they want to see these
01:12:03
establishments taken apart they don't
01:12:06
feel like they're Fair they don't feel
01:12:07
like they're just they don't feel like
01:12:09
the institutions that oversee us and are
01:12:11
meant to service us are servicing us
01:12:14
um and so there was this big rise the
01:12:16
problem is like a normal pendulum would
01:12:18
swing back and forth between one side
01:12:19
and the other with the rise of populism
01:12:21
you get such a strong push of that
01:12:23
pendulum it can knock through a wall and
01:12:25
I think we saw that on January 6th and I
01:12:27
think it gave a lot of people pause we
01:12:29
saw the the motion of brexit knocking
01:12:33
through a wall and we saw these kind of
01:12:35
very radical outcomes and then the cost
01:12:38
of those outcomes
01:12:40
blow up in our face and as a result I
01:12:43
think we're seeing a bit of a receding
01:12:45
of the tides right now away from
01:12:46
populism during this current electoral
01:12:49
cycle where folks are saying you know
01:12:51
what maybe we just need to have some
01:12:52
sort of an establishment so I can feel
01:12:54
safe and secure less than the volatile
01:12:56
volatility that I've experienced of late
01:12:58
look I think you look at the economic
01:13:00
mess we're in okay populist did not
01:13:02
cause that okay populists did not cause
01:13:04
10 trillion dollars of money printing it
01:13:06
was Modern monetary Theory and the
01:13:08
experts the FED who did that it wasn't
01:13:10
populous who created the great financial
01:13:12
crisis of 2008 that caused the zurp and
01:13:14
we're still living with all the
01:13:16
downstream effects of that it was the
01:13:18
experts on Wall Street who said they
01:13:20
could manage all these derivatives and
01:13:22
the collateralized mortgage obligations
01:13:24
and all that stuff that they lost
01:13:26
control over I would argue hold on
01:13:32
it was not populous who caused the
01:13:36
horrible handling of that pandemic even
01:13:38
though they were blamed for remember we
01:13:39
were told it was a pandemic of the
01:13:41
unvaccinated then it turns out the
01:13:42
vaccine doesn't stop it it was not
01:13:45
populous who caused the reaction to the
01:13:46
pandemic it was the experts the CDC and
01:13:49
falching people like that who shut down
01:13:51
our economy who caused the learning loss
01:13:54
it was those experts so Freeburg listen
01:13:56
you may not like this populist waiver
01:13:58
that we have in the country and I get
01:13:59
that but it's in reaction to something
01:14:01
real which is the failure of this expert
01:14:04
class and if you want to stop having
01:14:07
this populist wave rise up we need to
01:14:10
start having experts in position of
01:14:12
power who actually know what they're
01:14:13
doing well one way to say that sorry
01:14:15
Jake out hang on a second I don't have
01:14:16
any opposition to the populist wave I'm
01:14:19
making the observation that the uh the
01:14:21
effects of some of the populist
01:14:23
movements have started to become too
01:14:25
volatile for people to feel like they
01:14:27
should continue forward with that
01:14:28
electoral path that was my observation
01:14:30
okay I'm not kind of criticizing the
01:14:32
populist movement I'm just saying that
01:14:34
events like January 6th and the
01:14:36
conditions in the UK for example are
01:14:38
making people say wait a second maybe I
01:14:40
need to take pause on the extreme the
01:14:42
bond market basically fired list trust I
01:14:44
mean she's not a populist and you know
01:14:46
in Bolson bolsonaro in Brazil he
01:14:49
actually just lost and there was this
01:14:51
big narrative that somehow he was gonna
01:14:53
not relinquish power and he just
01:14:55
announced that he will relinquish power
01:14:56
right so you know some of the stuff that
01:14:59
is about how populists pose this great
01:15:01
danger I think is threat inflation and
01:15:04
that the threat is magnified by Elites
01:15:06
who want to stay in power and the truth
01:15:08
of the matter is we need accountability
01:15:10
for the people in power and when they
01:15:12
set the wrong policies and decisions
01:15:13
they need to be replaced no more no more
01:15:16
unaccountability yeah I
01:15:19
just just to my personal belief 100
01:15:21
agree
01:15:23
that's all of these institutions
01:15:26
accountability maybe competence and also
01:15:28
transparency and accountability like I
01:15:30
think that's what the public wants I
01:15:31
mean competencies
01:15:35
there's no way to perfectly react to the
01:15:38
pandemic but in your mistakes owning
01:15:41
them and explaining them would it be
01:15:43
much better than trying to obscurify it
01:15:45
and asking for amnesty chamoth you're
01:15:47
not um if you want to hear an incredibly
01:15:49
interesting interview
01:15:52
because it's very thought-provoking of a
01:15:55
modern Progressive uh but with a very
01:15:57
different mindset or sorry you know
01:16:00
maybe you don't want to call him a
01:16:01
progressive but is the president of El
01:16:04
Salvador naive bouquelli and he did this
01:16:06
incredible interview with Tucker Carlson
01:16:08
on Fox News I encourage everybody to
01:16:10
watch it on both sides of the political
01:16:12
Spectrum
01:16:13
that man is impressive
01:16:15
did we just get an admission that your
01:16:17
mouth watches Tucker I watch I watched
01:16:19
that interview you watch the talker oh
01:16:21
my Lord Jason's head's explode you know
01:16:23
because I I try not to be against the
01:16:25
moment ignoramus it's an Entertainer I
01:16:27
like to watch things on both sides but
01:16:29
that interview is incredible He is
01:16:31
unbelievable impressive and it's a it
01:16:33
double clicks into you know the
01:16:35
skepticism that smart people like him
01:16:38
the outsider class has with The Insider
01:16:41
expert class in a nutshell if you want
01:16:43
to see it I would encourage you to watch
01:16:45
this interview because it's it's
01:16:46
incredible incredible really really
01:16:48
Jason The Peasants with pitchforks are
01:16:51
rising up against this Elite Class who
01:16:54
put themselves up they've set themselves
01:16:55
up as Lords they want exclusive control
01:16:58
over their blue checks and we're about
01:17:01
to overturn this establishment because
01:17:04
it is corrupt and it is incompetent
01:17:08
be great if the people who worked for us
01:17:09
were confident back on Megan Kelly owned
01:17:12
and we're transparent you know I think
01:17:14
that's why people are opting out of this
01:17:16
is they don't feel
01:17:18
that there's a level of competence in
01:17:20
these institutions nor ownership and
01:17:22
transparency and it really is
01:17:24
frustrating whether it's education or
01:17:26
it's health or
01:17:28
you know any of these topics we've
01:17:31
talked about here on the show let's go
01:17:32
to science corner and we can rap
01:17:34
what do you got free bark for us to mock
01:17:36
I think we were going to cover the
01:17:39
Facebook meta announcement that their AI
01:17:42
research team had generated the physical
01:17:45
structure of 617 million proteins
01:17:49
from these metagenomic data sets and so
01:17:52
remember Alpha fold made this big
01:17:53
announcement that they had highly
01:17:56
um accurate predictions of protein
01:17:58
structure the three-dimensional shape of
01:17:59
proteins and remember proteins are kind
01:18:01
of the Machines of biology that do
01:18:03
everything from catalysis to enzymes
01:18:05
where they break stuff down and they're
01:18:07
like you know they have all this
01:18:09
structure that allows them to do
01:18:10
specific physical things and proteins
01:18:12
are coded in DNA every three letters of
01:18:14
DNA codes for an amino acid a string of
01:18:16
amino acids makes a protein
01:18:19
and so you know we have about a million
01:18:21
species
01:18:23
where we've sequenced the entire Genome
01:18:25
of those species only about 3 000
01:18:27
Animals by the way including humans
01:18:29
half a million from bacterial species
01:18:31
and then a bunch of viruses and other
01:18:34
stuff but but call it about a million
01:18:35
species that we've sequenced and so
01:18:38
you know earlier this year
01:18:40
Google's Alpha fold project published
01:18:42
the 3D structure of 200 million proteins
01:18:45
that they had derived from the whole
01:18:47
genome databases that existed where
01:18:49
we've gone through and figured out
01:18:50
what's the full DNA sequence of all
01:18:52
these different species
01:18:53
now
01:18:55
when you look at the DNA in the
01:18:56
environment around us you were just to
01:18:59
take the DNA out it turns out that we
01:19:01
have seen very little of that DNA the
01:19:04
vast majority of DNA that you would find
01:19:07
in a teaspoon of soil for example we've
01:19:10
never classified it's not part of a
01:19:12
species that we've actually built the
01:19:13
whole genome around we may not even know
01:19:15
what species that DNA is from and so
01:19:18
when you take a teaspoon of soil you'll
01:19:20
get about 100 billion microorganisms in
01:19:22
that soil from about a million unique
01:19:24
species but you don't see those species
01:19:26
because the way DNA sequencing or
01:19:28
shotgun sequencing works is DNA is
01:19:30
chopped up into little 250 base pair of
01:19:33
Lights little 250 strands and those 250
01:19:36
letters are read at a time and then
01:19:38
statistically bioinformatics puts
01:19:41
together all of that little DNA segments
01:19:43
and tries to create long strands of DNA
01:19:45
to figure out what the genes are or what
01:19:47
the whole genome is and so shotgun
01:19:49
sequencing gives us kind of a snapshot
01:19:51
of the DNA but until we've done the hard
01:19:54
work of figuring out the whole whole
01:19:55
genome we don't know what species that
01:19:57
DNA comes from so when you take a sample
01:20:00
of soil or you take a sample of human
01:20:02
poop and you sequence it or even a
01:20:04
teaspoon of ocean water and you just
01:20:06
sequence the DNA in it you get all of
01:20:09
these little segments of DNA that we've
01:20:10
never seen before and you can string
01:20:12
them together statistically because you
01:20:13
get lots and lots of copies of them and
01:20:15
you can figure out the overlap and then
01:20:17
you can create these genes and a gene is
01:20:19
a segment of DNA that codes for a
01:20:20
protein and those genes make up the
01:20:23
metagenome or the combination of all the
01:20:25
genes that we find in a in a piece of of
01:20:28
the environment and that meta genome
01:20:31
comes from millions of species that
01:20:32
we've never seen before so what Alpha
01:20:35
what they did at meta is they took all
01:20:36
of those genes that we pull out of the
01:20:39
soil or we'd pull out of the ocean and
01:20:40
they picked a bunch of random samples
01:20:42
and they then predicted the physical
01:20:44
structure of the proteins from just
01:20:47
those genes without knowing what
01:20:50
organism they came from and this gives
01:20:52
us a whole new universe of proteins that
01:20:54
we've never classified before or never
01:20:57
seen before now I will just kind of
01:20:59
speak a little bit critically about it
01:21:01
number one they didn't do what Alpha
01:21:03
fall did what Alpha full did is they
01:21:04
took 3D structures from typically x-ray
01:21:07
crystallography then they took the the
01:21:09
DNA code and they built machine learned
01:21:11
models to figure out the 3D structure
01:21:13
from the DNA code what these guys did at
01:21:16
meta is they took the 3D structures and
01:21:19
the code and they basically did a fill
01:21:21
in the blank they found all the
01:21:23
metagenome data out of these samples and
01:21:25
a lot of it was missing and they filled
01:21:27
in the missing blanks using kind of
01:21:29
common protein structure that existed
01:21:32
out there in the wild that we already
01:21:33
knew from the alpha full data and so
01:21:35
they kind of did a fill in the blank and
01:21:37
as a result it allowed them to very
01:21:38
quickly build these 3D models versus
01:21:40
doing the hard and rigorous work that
01:21:42
Alpha fold had to do so they claimed
01:21:43
that it was 60 times faster but it's
01:21:45
actually an entirely different technique
01:21:47
and the second thing is that they
01:21:49
represent that only about a third of it
01:21:50
is high quality meaning only about a
01:21:52
third of the proteins that they've
01:21:54
created structure for are really useful
01:21:56
or or that could be kind of Applied uh
01:21:58
in terms of this is the real
01:21:59
representation now why is this
01:22:01
interesting and important proteins can
01:22:03
form the basis of new medicines so you
01:22:06
know we can find proteins in the soil a
01:22:08
genomes in the soil and proteins in the
01:22:10
soil that can kill certain fungal
01:22:12
pathogens that can kill bacteria and
01:22:14
those can be turned into fungicides they
01:22:16
can be turned into antibiotics we can
01:22:18
find proteins that bind to specific
01:22:20
things we can find proteins that fix
01:22:22
nitrogen from the atmosphere and those
01:22:24
proteins can be turned into new types of
01:22:25
fertilizer so you know searching through
01:22:28
this universe of proteins that exists in
01:22:31
the metagenome will allow us to find new
01:22:33
molecules to do new and interesting
01:22:35
things with in the applied engineering
01:22:38
world
01:22:38
and I will say like this is what would
01:22:40
the output of these be is what
01:22:41
everybody's going to be thinking
01:22:42
antibiotics fertilizers I mean the idea
01:22:45
of the metagenome is rather than start
01:22:47
with the species and then take the genes
01:22:49
out of it just go get the genes the
01:22:51
genes are already there they're in this
01:22:52
they're in the ocean they're in the soil
01:22:53
and there's millions of genes hundreds
01:22:55
of millions billions of genes that we've
01:22:57
never seen before therefore there's
01:22:58
billions of proteins now we could
01:23:00
randomly create proteins but the number
01:23:02
of proteins that could exist is more
01:23:04
than the number of atoms in the universe
01:23:05
because remember there's 20 amino acids
01:23:07
so 20 to the 200th power or 20 to the
01:23:10
300th power or 20 to the thousandth
01:23:12
power meaning how many different
01:23:13
combinations of amino acids can you make
01:23:15
that's more than there are atoms in the
01:23:16
universe so the best place to start is
01:23:19
what evolution has already given us all
01:23:21
the proteins that exist in the
01:23:22
environment so let's go find those
01:23:24
proteins in the environment and then
01:23:26
let's figure out what do we think they
01:23:27
can be used for can they be used in
01:23:28
industrial applications in medicine can
01:23:31
they be doing them in Material Science
01:23:33
you're saying Material Science and so
01:23:35
you know a lot of drug Discovery mines
01:23:38
proteins it tries to find proteins and
01:23:40
figure out what can these proteins be
01:23:42
used for and now we have all these new
01:23:44
data sets of proteins that are being
01:23:46
generated from these metagenomes and so
01:23:48
it's amazing I mean you know look at the
01:23:50
world around you look everywhere up and
01:23:52
down on the walls on the ground below
01:23:54
you there are billions of species of
01:23:57
organisms that we've never classified
01:23:58
before that are making billions of
01:24:00
unique proteins that we've never
01:24:01
classified before and any one of them
01:24:03
could unlock an amazing commercial
01:24:06
opportunity
01:24:07
for industry so and for medicine and for
01:24:09
human health that's what's really
01:24:11
exciting about this ability to kind of
01:24:13
mine the metagenome silly question for
01:24:15
you or maybe not silly uh we have gotten
01:24:19
the precursors to DNA for meteorites if
01:24:22
I understand correctly
01:24:24
what do they call them nucleobases
01:24:26
nucleic acids yeah yeah
01:24:30
um thymine Etc like things that exist in
01:24:33
DNA
01:24:34
that are precursors we've never had DNA
01:24:37
from space obviously but we could at
01:24:40
some point start to find DNA out there
01:24:42
in space and this could have an even
01:24:43
crazier impact on what we built here
01:24:46
is that the next card to turn over after
01:24:47
we every human gene home what's here no
01:24:50
I wouldn't say so I like I think look if
01:24:52
there's DNA that's coming to us for
01:24:54
meteorites call it a couple hundred
01:24:55
genes you could pick up a piece of uh
01:24:58
soil and find over a billion genes in
01:25:00
that teaspoon of soil right so uh we
01:25:03
have far more to mine here on Earth and
01:25:05
the low cost of DNA sequencing and
01:25:06
shotgun sequencing coupled with
01:25:08
bioinformatics where we take all that so
01:25:10
just to give you guys when you take a
01:25:12
teaspoon of soil and you get the DNA out
01:25:14
and you read the DNA out of it sequence
01:25:16
the DNA that's potentially tens of
01:25:18
gigabytes of data and then you could do
01:25:21
that millions of times over and then you
01:25:22
statistically can find genes and then
01:25:24
statistically estimate what they
01:25:26
physically look like what those proteins
01:25:28
look like and then you can start to
01:25:29
build models around which ones do we
01:25:31
want to try and use for drug
01:25:32
applications which ones do we want so
01:25:34
there's so much work to do
01:25:36
it just in terms of what we have here on
01:25:38
Earth and the tools are getting so cheap
01:25:40
and so available there are Labs that are
01:25:42
all over the world starting to kind of
01:25:44
spring up to do this work it's super
01:25:45
exciting
01:25:46
adults
01:25:48
it's kind of it you know just to put two
01:25:50
ideas together I've said before like the
01:25:52
two big investable themes that I'm
01:25:55
orienting my organization around is this
01:25:57
one is that the marginal cost of energy
01:25:59
goes to zero and the second is that the
01:26:01
marginal cost of compute goes to zero
01:26:03
and the second one is really about
01:26:04
shifting compute to more parallelism on
01:26:07
gpus and Asics and fpgas but that's why
01:26:10
all of this stuff is possible the fact
01:26:12
that you know meta can do this and
01:26:14
Google can do alpha fold is largely
01:26:17
because the cost of all of this stuff is
01:26:20
you know trivial for these kinds of
01:26:21
companies so it's really exciting it's
01:26:23
going to move science
01:26:25
in my opinion out of this in Vivo in
01:26:28
vitro experimentation model into silica
01:26:31
and so those who can actually build
01:26:33
learning machines will solve some of the
01:26:35
most important biological problems so I
01:26:37
I'm a real believer in this stuff I
01:26:39
think it's super exciting when do you
01:26:41
think this stuff actually hits Friedberg
01:26:43
our life that's always when people talk
01:26:46
about these discoveries yeah a lot of
01:26:47
people don't realize it but so many um
01:26:49
molecules that that are used in
01:26:51
agriculture like fungicides to to kill
01:26:53
fungus in the fields those are derived
01:26:56
from this sort of work a lot of
01:26:58
antibiotics a lot of medicines are
01:27:00
already derived from mining genomes
01:27:02
finding new proteins and seeing what
01:27:04
those proteins can do because these
01:27:06
proteins didn't evolve in the
01:27:07
environment randomly they evolved to do
01:27:09
something and in many cases we can take
01:27:11
that thing that they do and then harness
01:27:13
it into a product and that's what's so
01:27:16
exciting and this this affects
01:27:17
everything Material Science
01:27:19
you know agriculture human health
01:27:22
it's uh it's a food it's really profound
01:27:25
awesome all right everybody there you
01:27:27
have it that's another all in podcast in
01:27:29
the camera by the way so many so many of
01:27:32
Freeburg stands were afraid Jay Cal that
01:27:33
you and I were gonna make some joke and
01:27:35
we didn't no we didn't and so for all
01:27:37
these fans I just I hope you guys can
01:27:39
exhale
01:27:40
take a deep breath man have some you
01:27:42
know eggless mail and uh enjoy your
01:27:45
weekend
01:27:46
uh enjoy your week bye bye everybody see
01:27:48
you next time love you besties love you
01:27:49
guys
01:27:51
we'll let your winners ride
01:27:54
Rain Man David's side
01:27:59
we open source it to the fans and
01:28:01
they've just gone crazy with it
01:28:05
[Music]
01:28:08
besties
01:28:10
[Music]
01:28:30
is
01:28:34
[Music]
01:28:40
[Music]
