00:00:00
how mad is saks going to get when he
00:00:01
sees my button situation today i'm going
00:00:03
to join you how you doing oh my god look
00:00:06
at the collar situation look at the
00:00:09
button situation look at that oh this is
00:00:12
fantastic oh hey besties
00:00:14
so just got off the lake where the lake
00:00:16
it's got the lake yeah i was just on the
00:00:18
lake the boat lake cuomo where where
00:00:20
were you i was doing a little
00:00:21
wakeboarding tahoe yeah still
00:00:23
wakeboarding me and suck me and that
00:00:24
took all five kids and we
00:00:27
navigated the entire island of sardinia
00:00:30
for eight days amazing
00:00:32
and by when you say we navigated you
00:00:34
mean the crew navigated and you ate
00:00:36
seafood yeah it took a village
00:00:39
[Music]
00:00:52
[Music]
00:00:56
all right everybody welcome to episode
00:00:57
91 episode 91 of the all-in podcast yeah
00:01:00
we're still here uh lots of news to
00:01:02
discuss this week with me of course to
00:01:04
chop it up from his deposition room uh
00:01:07
the war room the rain man himself david
00:01:09
sacks how you doing brother big week for
00:01:11
you
00:01:13
they're all big weeks
00:01:14
we're all big weeks yeah you look tired
00:01:17
well we're recording pretty early today
00:01:19
it's a little exhausting you actually
00:01:20
look really tired
00:01:22
what are you talking about just got off
00:01:23
the lake i feel fresh i was just
00:01:25
wakeboarding this morning on lake tahoe
00:01:27
i feel refreshed i'm refreshed uh and of
00:01:29
course in front of his uh nine dollar
00:01:32
clip art uh that he blew up on
00:01:34
easyprince.org the sultan of science
00:01:36
himself david freeburg how are you sir
00:01:38
always great to be with you jay cal are
00:01:40
you working it boosts my self-esteem and
00:01:42
my morale to be with you every morning
00:01:44
that we get to connect over zoom well
00:01:47
i'm glad that your performance has been
00:01:48
stratospheric the last three weeks
00:01:50
you're going on a hot streak let's see
00:01:51
if you can continue it on episode 91.
00:01:53
and
00:01:54
missing many buttons this week
00:01:58
we've got at least a three or four
00:01:59
button august going how are you doing uh
00:02:01
dictator uh from your island the remote
00:02:04
island did you
00:02:06
you invaded an island markets go up
00:02:08
another five percent and one more button
00:02:10
comes undone oh i love it so this is 20
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percent up and we could go to 25. that's
00:02:15
a [ __ ]
00:02:16
daddy's back the more bullish he gets on
00:02:18
the market the more he unbuttons daddy's
00:02:19
back so all the low rise jeans on right
00:02:22
now or are you wearing shorts what are
00:02:23
you wearing show us those sticklers i'm
00:02:25
wearing these beautiful linen shorts can
00:02:27
you stand up and show us yeah come on
00:02:28
give us a 360. come on let's see
00:02:31
but these are the most beautiful
00:02:34
inner thigh inner thigh
00:02:36
that's a little too much thigh yeah
00:02:37
that's like a chicken wing you guys like
00:02:39
this it looks tight too
00:02:41
very tight are you yeah those are
00:02:43
definitely yours are you wearing like a
00:02:44
children's size or something is that a
00:02:46
junior sign i like you know i like the
00:02:48
tighter sizes you do
00:02:50
i do like the tighter sizes i think they
00:02:52
uh they they personal body type
00:02:54
accentuate all the little bumps and
00:02:57
nodules too much information all right
00:02:59
let's start with um there's a lot to
00:03:01
talk about this week
00:03:03
i think one of the most interesting
00:03:04
things last week we were talking about
00:03:05
it in the
00:03:07
group chat that doesn't exist
00:03:10
uh vision funds 21 billion dollar
00:03:12
investment loss for the quarter
00:03:14
masayoshi-san did a really great youtube
00:03:16
video i sent it roger any of you guys
00:03:18
watch the video yes no
00:03:21
okay it's it's really interesting to
00:03:22
watch we'll put it in the show notes
00:03:23
it's like a six minute interview he put
00:03:25
on his earnings page right like right
00:03:27
when they put out quarterly earnings
00:03:29
he's like here's my interview yeah
00:03:31
you know he comes to a podium and
00:03:32
basically talks about uh the vision fund
00:03:34
obviously if people don't know the
00:03:35
vision fund one was a hundred billion
00:03:37
dollars the largest venture fund ever
00:03:38
raised um and softbank's current market
00:03:41
cap is 66 billion
00:03:43
here's the quote from the ft article sun
00:03:45
said on monday that softbank would now
00:03:47
subject itself to dramatic cost-cutting
00:03:50
exercise
00:03:51
uh after a 59 billion dollar investment
00:03:54
gain at the two vision funds almost
00:03:56
completely reverse over the past six
00:03:57
months they were up almost 60 billion
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dollars at the peak and it came crashing
00:04:02
down masa kicked off the presentation
00:04:03
showing portraits of togugawa tokugawa
00:04:07
gawa
00:04:08
yasu this is the founding shogun of
00:04:11
japan's uh
00:04:12
tokugawa suganat and uh
00:04:16
you rule japan for six i mean i'm
00:04:17
killing this such a long intro
00:04:20
god it's so hard yeah i mean but it was
00:04:22
just so great
00:04:23
let me just play a clip for you
00:04:25
here here's a 68 second clip and we'll
00:04:27
talk about it right after and then we'll
00:04:28
get into what all this means
00:04:30
this is a portrait of tokugawa
00:04:33
he
00:04:34
actually made a big loss against takeda
00:04:37
shingen and came back in the background
00:04:39
of that tokugawa yes
00:04:43
which is much much larger army than
00:04:46
theirs and most of the allies actually
00:04:49
said this is gonna be the losing battle
00:04:52
so that they should not go for it but
00:04:54
actually it's better to stay at the
00:04:56
castle however tokugawa
00:04:59
didn't want to lose his face so that he
00:05:01
get out from the castle had a battle
00:05:04
made a complete loss and suffered and
00:05:06
came back and
00:05:08
actually learned lesson he tried to
00:05:10
remember and remind his own learnings
00:05:13
and put it into this drawing so since
00:05:15
the foundation of softbank group i made
00:05:18
two consecutive quotas loss
00:05:21
so previous quota in this time quota
00:05:24
consecutively
00:05:26
we made three trillion yen develop the
00:05:28
loss so in total
00:05:30
six trillion yen those
00:05:32
was made
00:05:34
in the past six months so i believe i
00:05:37
need to remind that myself
00:05:39
pretty spectacular loss and then he he
00:05:42
goes on to take some q a and this is the
00:05:44
i guess the killer quote when we were
00:05:45
turning out big profits i became
00:05:47
somewhat delirious and looking back at
00:05:48
myself i am quite embarrassed and
00:05:50
remorseful you remember
00:05:52
of course and he complained a little bit
00:05:54
in the in this whole thing about how
00:05:56
there was a giant bubble without ever
00:05:57
recognizing that he kind of created the
00:05:59
bubble with a four billion dollar check
00:06:01
uh to we work at a 47 billion dollar
00:06:03
evaluation after a 20-minute meeting
00:06:05
with adam newman
00:06:07
this chart is pretty incredible this is
00:06:09
the net income quarterly essentially you
00:06:11
can think of
00:06:12
softbank as like a holding company of a
00:06:14
bunch of
00:06:15
different assets including alibaba
00:06:17
previously uber and all of this vision
00:06:19
fun stuff 97 decrease in terms of
00:06:22
deployment of capital so if you look at
00:06:24
capital deployment as well nobody ever
00:06:26
put this much money to work especially
00:06:27
in privates
00:06:29
this second chart
00:06:31
if you look in q1 of 2021 they put 20
00:06:34
billion
00:06:35
into work and then q1 this year
00:06:38
they're putting 600 million to work
00:06:40
just quick reflections on this what we
00:06:43
saw here with masayoshi-san deploying
00:06:45
100 billion at the top of the market
00:06:47
into and it's basically creating the
00:06:49
market tops
00:06:50
are there lessons here
00:06:52
uh or takeaways for you i mean i think
00:06:54
that people don't seem to understand
00:06:56
that
00:06:59
if you're gonna
00:07:00
attempt to be great there are going to
00:07:01
be moments where
00:07:03
you look the exact opposite of great
00:07:06
you know the guy that takes the final
00:07:07
shot is the same guy that can miss the
00:07:09
final shot
00:07:11
and here is a guy
00:07:13
over his you know 50-year career
00:07:16
has had some huge ups and downs this is
00:07:18
also the same guy that found a way
00:07:21
to rip in 25 or 30 million dollars and
00:07:23
made 125 billion off of alibaba
00:07:27
that's the same kind of person who has
00:07:29
that kind of risk tolerance he was for
00:07:31
seven minutes or something the richest
00:07:33
person in the world and then lost 99 of
00:07:36
his wealth in the dot-com bubble
00:07:38
i have enormous respect for a person
00:07:40
like this because i feel like it takes
00:07:42
enormous amounts of courage i've said
00:07:43
this before
00:07:44
most people jibber jabber about
00:07:47
investing and all of this stuff and when
00:07:48
push comes to shove
00:07:50
they crumble like little [ __ ] and run
00:07:52
into mommy's coattails
00:07:54
it's hard to put lots of money to work
00:07:56
and this is a guy that's done it so the
00:07:58
same person that can make 125 billion
00:08:02
turns out is the same person that can
00:08:03
lose 30 billion
00:08:06
and so one thing is i would just keep in
00:08:08
mind that this is a resilient guy who
00:08:10
seems to land on his feet
00:08:12
and the second thing that nobody talks
00:08:14
about is how smart
00:08:15
saudi arabia and abu dhabi were in how
00:08:18
they structured the investment into the
00:08:19
vision fund because half more than half
00:08:21
their investment
00:08:22
is in preferred equity which is
00:08:24
effectively debt that pays a coupon
00:08:27
and you see it now where softbank
00:08:29
by the way who has been pretty smart in
00:08:31
how they've managed their alibaba
00:08:32
position
00:08:33
have been using these derivatives and
00:08:35
forward swaps to be able to sell and
00:08:37
manage their liquidity
00:08:38
so it turns out that you know even if
00:08:40
the vision fund breaks even
00:08:42
saudi arabia and abu dhabi will have
00:08:45
made money because i think they get paid
00:08:47
a six percent coupon
00:08:50
on you know 50 billion dollars is a lot
00:08:52
of money over six seven eight nine years
00:08:54
it's a lot
00:08:56
softbank has found a way to sell down 25
00:08:59
of alibaba which is no trivial feat
00:09:01
for a half a trillion dollar company
00:09:03
and this guy gets to keep swinging
00:09:06
and if he you know hits it one more time
00:09:08
he'll end up with half a trillion this
00:09:10
chart is pretty great um saks if you
00:09:12
look at this this is the gain and loss
00:09:13
on investments at the vision fund uh you
00:09:15
can see the first vision fund raising up
00:09:17
uh then coming down i think after that
00:09:19
summer of ipos
00:09:21
that we had in the airbnb
00:09:23
uber days
00:09:25
and then a huge peak run up in 2021 and
00:09:28
then coming crashing down apparently he
00:09:30
wasn't selling uh any portion of this
00:09:32
that to me was a big lesson of like
00:09:34
maybe pairing some of these winners if
00:09:36
it sold 10 or 20 percent on the way up
00:09:39
this could look like a completely
00:09:40
different outcome uh but i agree with
00:09:42
him off he he swung for the fences and
00:09:44
there was downside protection built in
00:09:46
for the lps into some of these sacks
00:09:48
what are your thoughts any lessons here
00:09:49
in terms of the impact on our overall
00:09:52
ecosystem or that you can take as a
00:09:54
capital allocator yourself
00:09:56
well uh jason i think mossa did
00:09:58
something you could never do which is
00:10:01
admit a mistake
00:10:02
oh here we go wow
00:10:04
personal quick
00:10:07
well would i have my first mistake i'm
00:10:09
certainly willing to admit it i'm
00:10:10
waiting imagine that you ran 100 billion
00:10:13
for sovereigns instead of a hundred
00:10:14
thousand for doctors and
00:10:17
kind dentists
00:10:17
you can kind of put yourself you can put
00:10:19
yourself in moss's position yeah
00:10:22
oh i love saks in the morning saks in
00:10:24
the morning's like a hot cup of coffee
00:10:26
he's up early that's the big lesson here
00:10:28
you make sex go to a 9 a.m
00:10:34
wow you know look i think that softbank
00:10:36
obviously made some decisions that were
00:10:38
you know they were they were sort of
00:10:40
peak decisions um they were they were a
00:10:42
little bit bubbly they didn't take chips
00:10:43
off the table and they probably should
00:10:44
have it's easy to fall into these
00:10:47
bubbles because the psychology of it is
00:10:49
so powerful and as you know bill
00:10:51
gurley's pointed out these bull markets
00:10:53
are more like a sawtooth which is they
00:10:55
gradually go up
00:10:56
for 9 10 11 12 years and then when they
00:10:59
end they just you know it's like an
00:11:01
elevator going down so you know if the
00:11:03
market had continued for another couple
00:11:05
of years mazda probably would have made
00:11:06
a lot of money
00:11:08
but in any event look he took
00:11:10
responsibility for the losses this was a
00:11:12
very
00:11:14
you sort of culturally
00:11:16
japanese speech i mean he didn't commit
00:11:18
supoku at the end but it was kind of the
00:11:22
direction they might move the camera off
00:11:24
oh my god what is he doing with that
00:11:26
sword it was the verbal equivalent
00:11:28
basically and uh look he took
00:11:30
responsibility what else can you do
00:11:32
now one thing i would quibble about is
00:11:34
the idea that
00:11:36
that softbank caused this bubble um you
00:11:38
know it wasn't just softbank we had tons
00:11:40
of tigers
00:11:42
tiger had huge funds they were deploying
00:11:44
very quickly but there was a lot of
00:11:46
so-called tourist money basically money
00:11:48
from crossover funds investors who are
00:11:50
not primarily vcs came into the
00:11:52
ecosystem over the last few years and a
00:11:54
lot of that was driven by sovereigns and
00:11:56
by liquidity so you know you can't
00:11:59
forget that we had 10 trillion dollars
00:12:01
of liquidity pumped into the system over
00:12:04
the last couple of years and many
00:12:06
billions of that found its way into the
00:12:08
tech ecosystem and fundamentally
00:12:10
you know vc is not that scalable there
00:12:12
there was an attempt to make it scalable
00:12:14
there's an attempt to push more money
00:12:17
into vc why isn't it scalable why isn't
00:12:20
it scalable because people have tried
00:12:22
right this is
00:12:26
it is scalable it's just that if you try
00:12:28
to scale it your returns will go to zero
00:12:31
yeah that's kind of the same thing right
00:12:33
like i wanna i wanna just critique the
00:12:35
strategy for a second because um you
00:12:37
know we're talking about as if market
00:12:39
conditions cause these massive write
00:12:40
downs
00:12:41
and that is the only reason that these
00:12:43
funds have suffered
00:12:46
but you know if you read a lot of the
00:12:48
stories of masa's investments in a
00:12:50
number of these companies and the full
00:12:52
list is available and how much he
00:12:53
invested there are many many stories and
00:12:56
i've heard many of them personally from
00:12:57
ceos that have met with masa and raise
00:12:58
money from him
00:13:00
you go into masa you tell some the
00:13:02
bigger the story you tell the more
00:13:03
excited he gets the more of the world
00:13:05
you can capture
00:13:06
and you go and you're raising 100
00:13:07
million dollars he's like i'll invest
00:13:08
400 million you say you're raising 25
00:13:11
million he's like i want to give you 150
00:13:12
million
00:13:13
and um his his motivation was always
00:13:17
give you more capital so you can go
00:13:18
capture the market and the problem in
00:13:21
that model is that by giving you so much
00:13:23
money
00:13:24
capital becomes your primary asset as a
00:13:27
business
00:13:28
and capital needs to be the fuel that
00:13:30
enables your assets as a business to
00:13:32
accelerate but as soon as capital itself
00:13:34
becomes your primary asset the business
00:13:37
is doomed to fail and that's a really
00:13:39
key point if you let's say and let me
00:13:41
let me be very specific about what i
00:13:42
mean let's say you have a
00:13:44
direct to consumer business that
00:13:45
requires online marketing and your your
00:13:48
business grows well you spend 100 to
00:13:50
acquire a customer suddenly someone says
00:13:52
here's a billion dollars to spend on
00:13:54
acquiring customers as soon as you have
00:13:55
to start deploying a billion dollars
00:13:57
your cost of acquisition goes up the
00:13:58
number of customers per dollar spent
00:14:00
goes down and the business itself starts
00:14:02
to look upside down and fail and that's
00:14:04
what happened with a number of these
00:14:05
businesses that masa put in and he put
00:14:07
oversized checks in wework is a really
00:14:09
well documented example in terms of what
00:14:11
happened when they started to accelerate
00:14:13
their growth beyond the natural course
00:14:15
of the business because of the amount of
00:14:17
capital that they took it really started
00:14:18
to hurt the fundamental profitability in
00:14:20
unit economics of the core assets of the
00:14:22
business
00:14:23
and um this strategy
00:14:26
theoretically can work to a degree but
00:14:28
masa took it to a level that had not
00:14:30
been seen before i think i i highlighted
00:14:31
for you guys like back in
00:14:34
2011 i think when andres and horowitz
00:14:36
they pitched me on this idea i was
00:14:37
trying to raise 25 million dollars in my
00:14:39
company mark was like we'll give you 40
00:14:41
million dollars you can accelerate your
00:14:42
growth and he's like we want you to go
00:14:44
capture the market and peter thiel
00:14:45
always use these terms go capture the
00:14:46
market and these um and blitz scaling
00:14:49
and blitz scale again reid hoffman with
00:14:51
blitz scaling and the motivation is look
00:14:53
we'll give you more money because the
00:14:55
the core asset of the business works the
00:14:57
core assets to the business work so the
00:14:59
money should be more fuel for the fire
00:15:01
the problem is if you over indulge if
00:15:03
you put too much money in and the the
00:15:05
asset cannot handle that much capital
00:15:07
the whole thing collapses yeah i would
00:15:09
say so many documented examples of this
00:15:11
in his portfolio
00:15:12
and i think that the strategy is worth
00:15:14
highlighting that there are some issues
00:15:16
with that strategy across all these
00:15:17
business categories it doesn't always
00:15:19
work right the core issue here i think
00:15:21
is and then i'll i'll go to you saxon
00:15:23
the core issue here that you're
00:15:24
describing is exactly correct and it
00:15:26
really is up to the founder to decide
00:15:27
what they're going to do with that
00:15:28
capital the wework example is so
00:15:29
instructive because they were buying
00:15:31
under market uh buildings in the in the
00:15:34
tenderloin and then marking them up to
00:15:36
you know class a office space and
00:15:38
getting those prices once they got the
00:15:40
masa money he started buying class a and
00:15:42
offering it at class b prices and
00:15:44
flipped the whole business upside down
00:15:46
rate at which you can deploy capital
00:15:48
does not flex right and so in all
00:15:50
businesses understanding the rate at
00:15:51
which you can deploy capital to grow is
00:15:54
critical to understand how much capital
00:15:56
you can raise and then if you raise too
00:15:58
much money and you and you flex beyond
00:16:00
what the natural condition of the
00:16:01
business is in terms of capital
00:16:03
deployment the economics fall apart and
00:16:04
the business itself looks terrible and
00:16:06
eventually you will have a right down
00:16:08
and the distraction on the founder is
00:16:10
the key i mean look what adam newman he
00:16:11
was easily distracted he started buying
00:16:13
surf machines and companies and
00:16:15
starting kindergarten because you can't
00:16:16
naturally deploy that much capital so
00:16:18
you find unnatural ways to deploy let me
00:16:19
build on that point i think there was a
00:16:21
belief on the part of softbank that they
00:16:22
did publicly espouse which is that they
00:16:24
could be the king maker totally and in
00:16:26
fact you know we had some startups that
00:16:28
were in competitive markets and softbank
00:16:30
would basically announce that we're
00:16:32
going to be anointing we're going to be
00:16:33
picking a winner anointing a winner and
00:16:35
writing them a huge check and everyone
00:16:37
kind of had to play along because if
00:16:38
your competitor got that 100 or 500
00:16:40
million dollar check then you would be
00:16:43
presumably way behind so there was this
00:16:45
belief that they could be a king maker
00:16:47
and make the difference and i think that
00:16:49
what we saw is that for whatever reason
00:16:52
partly because of the dynamics that
00:16:53
freebie's talking about that that
00:16:55
strategy just didn't really work that
00:16:57
well and what it really goes down to is
00:16:59
that vcs can be helpful but they don't
00:17:02
ultimately
00:17:03
uh cause the the the winning companies
00:17:06
to be the winner um so this idea that
00:17:08
you could be a king maker i think was a
00:17:10
little bit flawed i think one way that
00:17:11
tiger actually
00:17:13
improved on this model
00:17:15
was that they never tried to be a king
00:17:17
maker they just they actually went the
00:17:18
other direction which is we're going to
00:17:20
own less your company they tried to be
00:17:21
passive non-dilutive capital and they
00:17:25
would do high price rounds but you know
00:17:27
with with reasonably sized checks but
00:17:29
they didn't try to go for 25 30
00:17:31
ownership at a late stage and founders
00:17:33
did like that model better now as it
00:17:36
turned out they both had the market
00:17:37
timing wrong but i think this king maker
00:17:40
aspect was was a problem and
00:17:42
one other
00:17:44
aspect of that i think is that
00:17:46
and i don't want to beat up on softbank
00:17:48
too much i'll see something nice about
00:17:49
them in a second but i think one of the
00:17:51
mistakes they made is you'd see them
00:17:53
writing multi-hundred million dollar
00:17:55
checks into companies that were at a
00:17:57
very very early stage free product
00:17:59
market fed pre-product market for
00:18:01
companies frankly that we thought were
00:18:02
like seed investments brandless was the
00:18:04
perfect example they were it was a it
00:18:05
was a company that made like soaps and
00:18:07
dishwashers and cereal but they had no
00:18:09
brand on it was like uniqlo of this and
00:18:12
they gave them i think 200 million
00:18:13
dollars and i was like this is a seed
00:18:14
stage company makes no sense right right
00:18:16
they were i mean look they wrote like
00:18:18
500 million dollar seat checks into
00:18:19
robotics companies effectively
00:18:22
and it's because that you know the
00:18:24
softbank had a thesis and i think
00:18:26
sometimes if again this goes back to
00:18:28
kingmaker if
00:18:29
if you're a vc and you think you're the
00:18:31
one with the thesis and you're the one
00:18:33
who's going to make the difference it's
00:18:35
actually a seductive fallacy to fall
00:18:37
into it's the founder who has the thesis
00:18:40
and you can't you can only do so much to
00:18:41
help and you can't really force it and
00:18:44
so i think they ended up making some
00:18:46
cutting some really big checks into some
00:18:48
companies that were really risky
00:18:50
and you know the way that we do growth
00:18:52
investing is that you know it's
00:18:54
milestone based we're writing that the
00:18:56
size of the check is proportional to the
00:18:58
amount of proof
00:19:00
that the company has and and look the
00:19:02
nice thing i'll say about softbank is
00:19:04
recently we've actually done some sas
00:19:05
deals with them that i think are some
00:19:06
really good deals and they've written
00:19:08
checks that i think are appropriate to
00:19:10
the size of the of the company and the
00:19:12
amount of proof they have and they've
00:19:13
been really easy to work with and i look
00:19:15
forward to doing more deals with them
00:19:17
but i think it would behoove them to do
00:19:18
more deals like that where again check
00:19:21
size is related to proof i think that
00:19:23
softbank in hindsight
00:19:25
made one
00:19:27
critical critical error and only one
00:19:30
and everything else was sort of affected
00:19:31
complete with that one error
00:19:34
which is that in their fund documents
00:19:36
they made this a 10-year fund now let me
00:19:39
explain
00:19:40
why is that an error
00:19:41
that is the status quo
00:19:43
for all these funds
00:19:45
and the more nuanced part of that
00:19:47
decision to make it a 10-year fund is
00:19:49
that your investment period is only five
00:19:51
years
00:19:52
so you're only allowed to put the money
00:19:54
in for the first five
00:19:56
and then you have to basically manage
00:19:58
the portfolio because there's an
00:19:59
expectation that you raise a new fund
00:20:01
so if all of a sudden you have a hundred
00:20:03
billion dollars in a five-year investing
00:20:05
life the math says oh my gosh okay well
00:20:08
i need to put 20 billion out per year
00:20:10
and then you try to look for i don't
00:20:12
know let's say 50 companies a year while
00:20:14
the mean check size now all of a sudden
00:20:16
balloons to 400 million
00:20:18
that was the error
00:20:20
you see afterwards
00:20:22
the very very smart private equity folks
00:20:25
who saw that that was the error fixed it
00:20:29
so blackstone silver lake when they came
00:20:32
on the heels of softbank what they did
00:20:34
was they raised funds with a 15 and 20
00:20:36
year life
00:20:37
and what that allows them to do and what
00:20:40
what it would have allowed masa to do in
00:20:42
this situation was just
00:20:44
slow it way way down pace yourself and
00:20:47
do fewer deals with much more capital
00:20:50
and then be patient and say i'm going to
00:20:52
have a 10-year investing life
00:20:54
and i think that that would have saved
00:20:55
them and they would have looked
00:20:57
incredible right now because they would
00:20:58
be the king maker in a moment where
00:21:00
there is no money flowing into venture
00:21:02
an early stage tech so in my opinion i
00:21:04
think it was just that it was such an
00:21:06
ambitious feat that when it came time to
00:21:08
execute whoever was really in charge of
00:21:10
those details kind of [ __ ] it up and
00:21:12
they should have realized the math
00:21:14
didn't work
00:21:16
for a five-year fund life and they
00:21:18
should have made it a 10-year frontline
00:21:20
or 10-year investment life which would
00:21:22
have put a 20-year fund life on the
00:21:23
thing and i think they would have been
00:21:24
fun yeah i mean if you look at it as 60
00:21:26
months maybe you take out august and
00:21:27
like the holidays you got basically 50
00:21:29
months to deploy 100 100 billion it's 2
00:21:31
billion a month
00:21:32
500 million a week i mean how do you
00:21:34
even process that many deals it's
00:21:36
impossible the quality of the diligence
00:21:39
by by necessity has to go to zero
00:21:41
yeah it's it was a crazy strategy
00:21:44
if you can breathe you get money if you
00:21:46
can get a meeting you get the money i
00:21:48
mean basically i mean and and if they
00:21:50
had just i i'll say if there's there was
00:21:52
one sorry this one would be good
00:21:55
no and it forces you to have a team that
00:21:58
is so broad and large and diffuse
00:22:01
that is not this game this is another
00:22:02
thing i would love to you know for us to
00:22:04
talk about correct correct investing has
00:22:07
never
00:22:08
will never
00:22:10
and is not ever a team sport
00:22:14
okay
00:22:15
it is like basketball you can be on a
00:22:17
team but you are steph curry or you are
00:22:20
not steph curry you are draymond green
00:22:22
or you're not draymond green you are
00:22:23
lebron james or you're not there are j.r
00:22:26
smith's on a team they're tristan
00:22:28
thompson's on a team
00:22:29
and you come together and the team can
00:22:31
win a championship
00:22:33
but there are these exceptional
00:22:35
individuals yes and the firms that have
00:22:38
really done well consistently over
00:22:40
decades
00:22:42
embrace that philosophy benchmark
00:22:44
sequoia you know these guys don't try to
00:22:46
create this team-oriented glad-handing
00:22:49
approach
00:22:50
but they also don't allow the teams to
00:22:52
get so diffused that there's 500 people
00:22:54
running around ripping money in because
00:22:55
you basically then return the beta of
00:22:57
the market and if the market doesn't
00:22:59
look good in that vintage then all of
00:23:01
your returns look pretty crappy the
00:23:03
lesson for me in all of this is i think
00:23:05
we talk about writing your winners on
00:23:07
the show that came from just so people
00:23:08
understand when we said ride your
00:23:10
winners and it's famously in the in the
00:23:12
opening song here
00:23:13
what we were talking about was like
00:23:15
don't sell your entire position like
00:23:16
when sequoia sold their entire apple
00:23:18
position or other people have done but
00:23:20
pairing your position would have changed
00:23:22
this whole story if he had paired 10 20
00:23:24
percent of some of these names that were
00:23:25
breaking out i disagree with that too
00:23:26
along the way oh why go ahead because
00:23:29
that's the dumb i think that's the world
00:23:31
i think the opposite he would have had
00:23:32
it up a year ago sequoia just put out an
00:23:35
entire document and a roadmap for
00:23:38
becoming an evergreen fund but and i
00:23:40
read that document and what i thought to
00:23:42
myself is all of this looks incredible
00:23:44
unless the market goes down and then a
00:23:46
market
00:23:47
and then the market went way way down
00:23:49
why because their whole thesis is we're
00:23:51
going to park and hold money well okay
00:23:53
but they also allowed a revolving
00:23:55
liquidity mechanism for their lps every
00:23:58
year you know you're a cancer foundation
00:23:59
and you want to fund cancer research and
00:24:01
you expect sequoia to give you back
00:24:03
money you fill out a form and sequoia
00:24:05
basically fronts you the money
00:24:08
well excuse me but you can see how all
00:24:10
of a sudden this can very quickly get
00:24:11
out of control because then where does
00:24:13
sequoia get that money they'll have to
00:24:14
borrow it or liquidate some positions
00:24:16
but the whole point is to not liquidate
00:24:17
positions this is what they said yeah so
00:24:20
my point is i really think and david
00:24:21
said this before i think that vc's job
00:24:24
is to be a vc it's hard enough to do
00:24:26
that job well
00:24:27
and if you think that you're going to
00:24:29
cascade across all asset classes and do
00:24:31
better than the market
00:24:33
it's an extremely high bar that creates
00:24:35
tremendous pressure and forces you
00:24:38
to bring things on like debt and all of
00:24:41
these leverage lines which when markets
00:24:43
go up will work in your favor but can
00:24:45
very quickly turn against you yeah i
00:24:47
disagree completely because when if you
00:24:49
look at when you're in a private company
00:24:50
and you're you own some private shares
00:24:52
you know the revenue you know the
00:24:54
velocity you know the management team
00:24:55
you have more insights than everybody
00:24:56
you got a massive information edge
00:24:57
because it's all based on insider
00:24:59
information before it's public and
00:25:00
pairing your positions in privates uh
00:25:03
can be
00:25:04
amazing because you have some overvalued
00:25:06
company because someone like masa or
00:25:07
tiger comes along that overvalues it so
00:25:09
for venture funds i think when you start
00:25:11
hitting these 50 100 x's pairing 10
00:25:13
pairing 20 along the way which masa
00:25:16
could have done and these private names
00:25:17
especially would have been brilliant
00:25:19
you're saying don't distribute and just
00:25:20
hold on and
00:25:22
use data and give people give your lps
00:25:24
them on liquidity no no no
00:25:26
i'm saying if you have the opportunity
00:25:28
to sell in secondary
00:25:30
you should pair your position in your
00:25:31
winners 10 or 20 two or three times i'm
00:25:34
not saying that i'm saying
00:25:36
that this would be a different position
00:25:38
but like you're using soft you're using
00:25:40
apple and sequoia as an example you do
00:25:42
remember the trajectory of apple
00:25:44
basically went to a 4 billion market cap
00:25:47
for years languishing i mean
00:25:49
the idea that sequoia would have held
00:25:51
those shares because they had some
00:25:52
proprietary views ludicrous
00:25:54
why is
00:26:00
you can see the youtube videos when
00:26:01
steve jobs came back he said uh we may
00:26:03
not make it yes but chamath that in that
00:26:06
that is part of the opportunity but
00:26:08
putting that aside that's exactly what
00:26:10
sequoia is doing is they're saying we
00:26:11
want to hold the legendary companies the
00:26:13
legendary brands with the great founders
00:26:15
before it's all easy in hindsight how do
00:26:18
you do it today
00:26:19
well
00:26:21
is unity a legendary company or should
00:26:23
you have distributed 165 dollars a share
00:26:25
well i'm such an extremely hard question
00:26:28
and i'm saying you can mitigate that
00:26:30
question by pairing your position 10 20
00:26:32
percent so you have the best of both
00:26:33
worlds what do you think well i think
00:26:34
it's it's hard to pair down a position
00:26:37
while the company's still private
00:26:38
because the companies don't don't want
00:26:40
you to by and large
00:26:42
but but once they do become public then
00:26:45
the question is when you distribute and
00:26:47
we talked about this i think it sounds
00:26:49
like sophing was sitting on quite a few
00:26:51
large public positions
00:26:53
and could have distributed i'm not fully
00:26:55
familiar with their structure but given
00:26:56
that they had all this debt seems like
00:26:59
you'd want to pay off all the debt
00:27:01
uh as soon as you could
00:27:03
and
00:27:04
missing
00:27:10
every year i think it's like three or
00:27:11
four billion dollars it's well it's
00:27:12
documented but that's the six percent
00:27:14
that they that they were owed on their
00:27:16
50 billion dollars
00:27:18
but did they pay it off
00:27:20
well you have to get paid every year
00:27:22
yeah so they did it i mean look i would
00:27:23
just say these bubble it's it's easy you
00:27:25
know hindsight's 20 20. it's really easy
00:27:28
to point out these mistakes after the
00:27:29
markets cratered
00:27:31
you know my experience with these
00:27:32
bubbles whether you go back to 1999 or
00:27:35
2021
00:27:36
is when you're in them they're very
00:27:38
powerful psychologically you know
00:27:39
everyone's talking about how
00:27:41
everything's going up and we i think
00:27:43
actually had some really good commentary
00:27:44
on the show about back in november about
00:27:46
how it could be the peak how it could be
00:27:49
all liquidity fueled uh we didn't know
00:27:51
for sure but there were some pretty good
00:27:52
predictions on this pod but by and large
00:27:55
it's it's pretty hard to to know whether
00:27:58
you're you know whether is there a
00:27:59
grounding metric that you use i'll open
00:28:02
up to freeberg and then everybody else
00:28:04
when to know that the market is
00:28:07
overheated free burgers there's
00:28:08
something you look at and go okay we've
00:28:10
disconnected from reality price to
00:28:11
earnings price the sales
00:28:14
some valuation metrics are the things
00:28:17
you look for so you know that this is
00:28:18
overheated and maybe it is time to pair
00:28:20
positions uh what what have you learned
00:28:22
over now our third collective uh
00:28:25
down market valuation trophy hunting
00:28:29
i would say is a pretty good indicator
00:28:32
of things being
00:28:33
things being um explain what that is in
00:28:36
a heated market like if the
00:28:41
the businesses the ceo the founder the
00:28:44
venture firms everyone is all about how
00:28:48
much you can mark up your investment as
00:28:50
opposed to talking about the quality of
00:28:52
the business and the quality of the
00:28:53
earnings
00:28:55
and then you revert back as we just
00:28:57
recently did to now people talking about
00:28:59
okay
00:29:00
uh how strong are the gross margins of
00:29:02
this business how effectively can they
00:29:04
deploy capital what's the return on
00:29:05
invested capital
00:29:07
key metrics around
00:29:09
the fundamentals of the business versus
00:29:11
the value that the market is willing to
00:29:13
pay for the business
00:29:14
and the more heated the market gets the
00:29:17
more everyone focuses on terms like
00:29:19
unicorn decacorn
00:29:21
you know and that becomes the key metric
00:29:23
as opposed to saying this business is so
00:29:25
good
00:29:26
for every dollar they spend they make
00:29:28
three dollars in gross profit in 12
00:29:30
months that's what
00:29:33
fundamentally says that's a high quality
00:29:35
grow you know a valuable business over
00:29:38
time as opposed to here's what the
00:29:40
market is telling me it's worth today
00:29:42
and if the market is telling you it's
00:29:44
worth that much today
00:29:46
and you're and that's what you focus on
00:29:48
you inevitably end up in these kind of
00:29:49
bubbly moments where you miss out on
00:29:52
focusing on core value creation
00:29:54
which will actually pay off much much
00:29:56
more over time jamaf you pointed out
00:29:59
another signal um hey when smart people
00:30:02
who have the largest amount of capital
00:30:04
in the markets are clearing positions
00:30:06
uh maybe that's a signal of a top
00:30:09
and then i think it's a really good
00:30:10
insight by freeberg when the
00:30:11
conversation the narrative is about the
00:30:13
valuation and the status and vanity
00:30:15
metrics as opposed to the quality of the
00:30:16
earnings hey that's a really good
00:30:18
indicator we're in a bubble maybe you
00:30:19
should start clearing positions what are
00:30:20
indications for you that we're either in
00:30:22
a bubble or the market is undervalued
00:30:26
because we're really talking about this
00:30:27
timing right timing is very important
00:30:28
it's not possible this is why i think
00:30:31
that
00:30:33
you have to define what game you want to
00:30:35
play before you start playing the game
00:30:37
okay
00:30:39
this is why i think it's
00:30:41
kind of nonsensical
00:30:43
for example
00:30:45
i believe that at best
00:30:48
i am an equity investor
00:30:51
in technology companies or things that
00:30:54
have a technology bias because i can
00:30:56
generally understand them
00:30:58
maybe you know a few seconds faster than
00:31:01
everybody else which allows me to make a
00:31:03
decision a little bit quicker
00:31:06
but if all of a sudden i started
00:31:07
investing in debt you should expect that
00:31:09
i'll lose my money
00:31:11
because i don't know what i'm doing and
00:31:13
that's not the game where i have any
00:31:15
advantage
00:31:16
so i think the most important thing to
00:31:18
do is to not try to do all of this crazy
00:31:20
stuff because this is what happens
00:31:24
in moments where either things are very
00:31:25
very good or things are very very bad
00:31:27
people try to create all these stupid
00:31:29
rules
00:31:30
and the rule their only rule is there
00:31:33
are no rules
00:31:34
so i don't know i just think it's like
00:31:36
stick to your knitting if you're a
00:31:37
product builder build products if you're
00:31:40
an early stage investor just do that
00:31:42
it's hard enough to do any one of those
00:31:44
things really really really well
00:31:47
but this idea that you know you're going
00:31:49
to come up with like some mosaic in a
00:31:50
system i think it's just highly suspect
00:31:53
and i think the market returns have
00:31:55
showed that everybody that tries has
00:31:57
failed except for maybe one or two
00:31:58
seconds i mean it's just not gonna work
00:32:00
what's the point so i don't know if
00:32:02
you're an early stage investor make good
00:32:03
deals and then give the shares and book
00:32:06
the win that's what i do yeah that's my
00:32:07
philosophy um
00:32:09
saks what are your thoughts there's a
00:32:10
couple of metrics that i'll be looking
00:32:12
at from now on that i wasn't paying a
00:32:14
huge amount of attention to before
00:32:17
one is the price to arr of the median
00:32:20
public sas company
00:32:22
and so like brad gerstner has these
00:32:24
great charts where you saw that
00:32:27
historically
00:32:29
that number was around six you know the
00:32:30
median sas company was was trading at
00:32:32
about six times the next 12 months
00:32:34
revenue
00:32:35
and it went all the way to 15 during
00:32:37
this sort of covet bubble in 2021 and
00:32:40
for the high-growth sas companies which
00:32:41
are the ones growing forty percent said
00:32:43
twenty percent it went from you know
00:32:45
like eight to thirty five
00:32:48
so um so i'll definitely be looking at
00:32:50
that and you know what you're looking
00:32:51
for is just how off the historical mean
00:32:54
are we
00:32:54
positively or negatively because these
00:32:56
public valuations are the exit comps for
00:33:00
you know the private markets and those
00:33:01
valuations do eventually trickle down
00:33:03
and so if there is a bubble in the
00:33:05
public markets it will trickle down to
00:33:06
the private market so that would be like
00:33:08
one metric i mean again it's not
00:33:10
something that like affects me daily but
00:33:12
it's something i'd want to periodically
00:33:14
keep tabs on the other is just interest
00:33:16
rate policy i mean i've never spent so
00:33:18
much time in my entire career
00:33:21
like looking at inflation and interest
00:33:22
rates that i have this year because who
00:33:25
knew how much this stuff was affecting
00:33:27
us i thought i was a micro
00:33:29
investor i thought i was just picking
00:33:32
companies on a micro level as it turns
00:33:34
out we were all massively impacted by
00:33:36
macroeconomic policy
00:33:39
and
00:33:39
you know it got so we didn't even notice
00:33:41
it the zero the zero interest rate
00:33:43
policy the zerp along with the
00:33:44
quantitative easing these are supposed
00:33:46
to be exceptional measures that started
00:33:48
back in 2008 but we stopped noticing
00:33:51
them they continued for years and years
00:33:53
and years they continued until last year
00:33:56
and we again we just stopped noticing
00:33:58
because we got used to it we kind of got
00:33:59
hooked on
00:34:00
hooked on drugs so the market did um
00:34:03
so i'm just gonna have to pay a little
00:34:05
bit more attention to what the fed is
00:34:07
doing now
00:34:08
and you know if you go all the way back
00:34:10
to the dot com bubble what's interesting
00:34:12
is that the fed funds rate back in
00:34:15
1999 wasn't low it was like four percent
00:34:17
um it wasn't like it was even today and
00:34:20
we still had a bubble but what popped
00:34:22
the bubble was that interest rates went
00:34:24
from four to six percent in from 1999 to
00:34:27
2000 that's what popped the bubble so
00:34:30
you know
00:34:31
i i don't i don't know if we'll ever
00:34:33
have a situation again like we had over
00:34:35
the last years with the zerp
00:34:37
but um i mean that probably looking for
00:34:39
that next time is fighting the last
00:34:41
battle instead of the next one but you
00:34:43
do probably have to be a little bit more
00:34:45
aware of monetary policy and what the
00:34:47
fed is doing
00:34:48
yeah this chart um exhibit six from the
00:34:50
vision fund benchmarking against pure
00:34:53
funds that chamath just put into the
00:34:54
group chat is absolutely spectacular
00:34:57
it puts sequoia insight and softbank
00:35:00
you know large large funds
00:35:03
uh against each other fund size 100
00:35:05
billion for softbank eight billion for
00:35:06
sequoia 6.3 billion for insight and 2
00:35:09
months point earlier the pace is
00:35:12
yeah really crazy 130 deals meals per
00:35:15
month but then the average check size is
00:35:17
620 million
00:35:19
versus 130 and 70.
00:35:23
and the deals per month 3.5 versus 0.6
00:35:25
versus 4.2 so insight going pretty fast
00:35:28
with small checks
00:35:30
soft bank going very fast data here huge
00:35:32
tax is really you know sequoia
00:35:34
has the benefit of being able to back
00:35:36
test
00:35:37
against 40 years of returns and so if
00:35:40
essentially what they're saying is
00:35:42
there's really no more than five or six
00:35:43
companies a year that are worth
00:35:44
investing in that's a really big signal
00:35:47
that's worth thinking about and so
00:35:49
you know five or six companies maybe
00:35:51
they can absorb even 600 million dollars
00:35:53
each you know it still puts you at three
00:35:56
and a half four billion dollars doesn't
00:35:57
put you back twenty which is what you
00:35:59
need to put a hundred into the ground
00:36:01
and two billion a month i mean my lord
00:36:04
it's like brewster's millions or
00:36:05
something it's it's like some crazy
00:36:07
i think in fairness to in fairness to
00:36:09
softbank again
00:36:11
you know these are the same guys that
00:36:12
invested in yahoo they invested in all
00:36:15
of these you know com companies and
00:36:17
brought them into japan including great
00:36:18
businesses like cisco you know these
00:36:20
guys
00:36:21
have been big time serial winners
00:36:24
i think the tactical mistake was not
00:36:26
having a 10-year investment life i mean
00:36:28
and we could be sitting here next year
00:36:30
alibaba could double in value a couple
00:36:32
of their other positions could recover
00:36:34
50 percent
00:36:35
okay but we could be sitting there and
00:36:37
they could be they could have closed the
00:36:39
gap massively
00:36:40
anything's possible
00:36:42
i think actually a good jump off point
00:36:43
here uh great discussion gentlemen
00:36:46
do we want to talk about
00:36:49
the markets and we got the inflation
00:36:51
print uh sax
00:36:53
i guess depending on what political
00:36:54
party you're in it's either 8.5 or zero
00:36:57
zero percent month over month uh if
00:36:59
you're a democrat if you're republican
00:37:01
it's eight point five percent in our uh
00:37:03
polarized times uh but what does this
00:37:06
tell us uh saks just at least about
00:37:08
maybe inflation is tipped over and we're
00:37:11
going to be flat for a little bit that
00:37:12
obviously caused the market to rip a
00:37:14
little bit and we had this incredible
00:37:17
jobs report we're now at 3.5 percent
00:37:19
unemployment
00:37:22
and we have twice as many jobs as we
00:37:24
predicted i mean it's pretty
00:37:25
extraordinary what happened in the last
00:37:26
30 days to the to these uh prints yeah
00:37:29
look i think that overall the economic
00:37:32
data is mixed uh but we got a couple of
00:37:34
good data points in the last month so
00:37:37
inflation did decrease from 9.1 to 8.5
00:37:41
percent
00:37:42
inflation was until now measured on a
00:37:46
year-over-year basis not a
00:37:47
month-over-month basis but since we got
00:37:49
the first good month-over-month reading
00:37:51
all of a sudden now it's been redefined
00:37:53
to be on a month-over-month basis just
00:37:55
this is the same thing that happened
00:37:56
with the definition of recession where
00:37:59
recession used to mean two quarters of
00:38:01
negative gdp growth
00:38:04
of course that happened and so all of a
00:38:06
sudden the definition became unknowable
00:38:07
we have to defer
00:38:09
to this
00:38:10
this economic board that won't render a
00:38:12
decision until next year by the way if
00:38:14
that were true how can we ever
00:38:15
contemporaneously talk about a recession
00:38:18
you know if if you had to wait until
00:38:20
this economic support declares a
00:38:21
recession a year from now the press
00:38:23
could never have ever reported for one
00:38:25
recession yeah i'm shocked politics
00:38:27
politicians
00:38:28
of this are obvious which is they keep
00:38:29
redefining terms rather than admit
00:38:32
that there's any bad data at all
00:38:35
now look i don't i don't think the data
00:38:36
is
00:38:37
catastrophic i don't i don't think i
00:38:39
don't think it's in anyone's interest to
00:38:41
catastrophize the data but there's a lot
00:38:43
of negative data out here i mean look
00:38:45
inflation is still very high eight and a
00:38:47
half percent if you had told any of us
00:38:49
that in august
00:38:50
that inflation would still be a half
00:38:52
eight and a half percent the beginning
00:38:53
of this year we would have said that is
00:38:55
horrible because remember the investment
00:38:56
banks were all saying it's gonna come
00:38:58
down to three percent by the end of the
00:39:00
year
00:39:01
so inflation is still high the jobs
00:39:03
picture is good
00:39:04
um we're technically in a recession i if
00:39:07
i were to predict i think what's gonna
00:39:08
happen now i think you know look for a
00:39:10
double dip i wouldn't be surprised at
00:39:12
all if in q3 or q4 we're back to
00:39:15
positive gdp growth but i don't think
00:39:17
we're actually out of the woods because
00:39:20
i think there's a pretty good chance
00:39:21
that next year
00:39:23
these and these rate hikes really kick
00:39:25
in
00:39:26
it takes six to nine months for them to
00:39:27
ripple through the economy so if you
00:39:29
look at the construction industry the
00:39:31
construction industry's just been
00:39:32
devastated new housing starts you talk
00:39:34
to the builders they tell you that the
00:39:36
construction industry has just been
00:39:38
clobbered by these rate hikes the
00:39:41
inventories are piling up and the
00:39:43
affordability of there's a chart today
00:39:44
about the affordability
00:39:46
of home prices at a 40-year low and so
00:39:49
the construction industry it's really
00:39:51
the bellwether when a recession starts
00:39:53
they're the ones who are first impacted
00:39:56
but it's probably going to take six to
00:39:57
nine months because the loans are so
00:39:59
expensive
00:40:00
and cost of capital is expensive right
00:40:02
you can't start new projects yeah so
00:40:03
look i if i had to i think we're in a
00:40:06
shallow
00:40:07
technical recession right now i bet that
00:40:09
we probably bounce out of it in q3 or q4
00:40:12
but i think there's a significant risk
00:40:13
that we're back in
00:40:15
we're back in it next year just my guess
00:40:17
free break we've been talking about
00:40:18
consumer credit a whole bunch buy now
00:40:21
pay later um household debt now totals
00:40:23
more than 16 trillion credit card
00:40:25
balances uh make up 890 billion of that
00:40:28
obviously student loans mortgages other
00:40:29
things are in there
00:40:31
and the number of credit cards uh is now
00:40:34
at a massive high
00:40:36
550 million of them issued here in the
00:40:38
united states uh we added
00:40:40
a massive amount of debt uh it's still
00:40:43
lower the the credit card debt just to
00:40:44
be clear is still lower than the
00:40:46
free pandemic level of 930
00:40:49
billion but consumers seem to be taking
00:40:52
out credit i guess to deal with
00:40:54
inflation or to enjoy their lives
00:40:55
because they're not stopping their
00:40:56
spending
00:40:57
uh and we see that in some of the stocks
00:41:00
and the earnings reports that are coming
00:41:01
out as well so what's your what's your
00:41:03
take on this you know conflicting data
00:41:05
we have or is or have you made some
00:41:07
sense of it and and what is your
00:41:08
prediction of q4 sorry are you asking
00:41:10
what my take is on the consumer credit
00:41:13
well basically the overall macro
00:41:14
situation here we've got consumer credit
00:41:17
you know people taking on a lot of debt
00:41:19
while jobs look great
00:41:21
while inflation is still high what does
00:41:23
that look like you know as we go into q4
00:41:25
and next year what what is this telling
00:41:27
you is there some signaling you can take
00:41:29
from this
00:41:31
sac said shallow recession thinks we
00:41:33
might double dip i'm kind of getting to
00:41:35
your prediction of q4 i mean this is a
00:41:37
little bit repetitive i mean i've said
00:41:38
this i first said it in may at the all
00:41:41
in summit and i said it again on the
00:41:42
show twice
00:41:44
great which is i think that the
00:41:45
definition of a recession of negative
00:41:48
gdp growth when you're coming off of
00:41:49
inflated gdp is
00:41:52
you know
00:41:54
it's not a binary catch-all term i mean
00:41:56
the fact is we had
00:41:58
uh inflated assets and
00:42:00
as a result of inflated assets we had
00:42:02
inflated earnings and we had inflated
00:42:03
valuation and we inflated income and
00:42:06
you know now the capital's coming out
00:42:08
and things are going to go down
00:42:10
inevitably but i don't think that this
00:42:12
should be deemed that there's something
00:42:14
fundamentally
00:42:15
negative about the u.s economy the
00:42:17
biggest risk i still see
00:42:19
is this rising consumer credit balance
00:42:21
particularly in a rising rate
00:42:22
environment
00:42:23
people are taking on more debt if you
00:42:24
look at the new york
00:42:26
fed here i'll just give you the latest
00:42:29
this is the household debt and credit
00:42:30
report they put out household debt rises
00:42:32
to
00:42:34
16 trillion dollars amid growth in
00:42:35
housing and on housing balances and so
00:42:37
there are variable rate loans in there
00:42:39
in the auto
00:42:40
home and credit card markets those
00:42:43
variable rates mean that as interest
00:42:45
rates climb
00:42:46
the amount to service existing debt will
00:42:48
go up each month
00:42:50
and the amount of debt that's being
00:42:52
taken on is also going up each month and
00:42:54
so the key economic question is does the
00:42:57
income gain that's being experienced or
00:42:59
the asset value gain that's being
00:43:02
experienced outpace the increase
00:43:04
in um monthly debt service needed for a
00:43:07
large number of consumers student loans
00:43:09
are also in here by the way and so when
00:43:11
you put that all together
00:43:12
um it's a it's a very technical question
00:43:14
which is technically where do you start
00:43:16
to see defaults rise and when you have
00:43:18
defaults rise then the money that's owed
00:43:20
and the services that are the service
00:43:22
payments that are owed on that debt
00:43:23
trickles through the economy because
00:43:26
bonds start to default
00:43:28
um equities start to decline and so on
00:43:30
so um you know i this is why i can speak
00:43:33
at a high level from a macro point of
00:43:35
view that the rate at which debt is
00:43:37
going up and consumer credit is going up
00:43:40
and the rate at which rates are climbing
00:43:42
that affect the revolving
00:43:44
and variable rate um
00:43:46
debt that consumers hold
00:43:48
could outpace
00:43:50
the income and the asset value gain
00:43:51
particularly when equities are down
00:43:53
401ks are down
00:43:54
housing prices are down and so there's a
00:43:57
tipping point and
00:43:59
when that starts to happen then you
00:44:00
start to really hit um an economic
00:44:02
crunch and i've mentioned this multiple
00:44:05
times now that it's the thing you know i
00:44:06
would kind of watch most closely
00:44:09
while there are core
00:44:10
elements of the current economy that
00:44:12
look strong
00:44:13
um there are uh real uh concerns around
00:44:16
whether consumers can keep up with their
00:44:18
debt payments uh in the monthly quarters
00:44:20
ahead yeah chamath are you following
00:44:22
this consumer credit uh surge and do you
00:44:24
think that this could be a black swan
00:44:26
type event this could be
00:44:28
you know um
00:44:30
because it's right here in front of us
00:44:31
so you know okay
00:44:32
yeah yeah i would say like a massive
00:44:34
contagion where there's massive number
00:44:36
of defaults creating a black swan
00:44:38
contagion-like event but yes so it's
00:44:40
it's not it's maybe hidden in plain
00:44:41
sight what do you think jamaat is this
00:44:43
important data uh or impacting your view
00:44:45
on things yeah i think it's important
00:44:47
it's part of a mosaic and i i don't i
00:44:50
don't really know
00:44:52
look
00:44:53
what are we trying to get from this
00:44:54
discussion i don't understand like
00:44:57
like are we trying to predict what's
00:44:59
going to happen i mean
00:45:02
i think david basically said it best
00:45:03
like
00:45:04
if you actually just take a step back
00:45:06
and stop
00:45:07
overlaying what we want to happen look
00:45:10
the reality is all four of us want
00:45:12
things to go up
00:45:14
and we like it when there's money in the
00:45:15
system and everything's flush
00:45:18
but if we had said last year that we
00:45:20
would open an envelope and you know we
00:45:22
would show these inflation prints we
00:45:24
would be shocked and we would have been
00:45:26
scared and quite honestly you know in
00:45:28
the process in november
00:45:30
when i started selling i would have sold
00:45:32
even more violently than i sold and all
00:45:35
i can say is i saved my ass in november
00:45:38
of last year looking at what's happened
00:45:39
in the last six eight months
00:45:41
so i don't know i just think that
00:45:45
if you look at the cpi print
00:45:48
and you look at the components
00:45:50
we were saved
00:45:51
because energy basically fell off a
00:45:53
cliff
00:45:55
and for whatever reason a bunch of
00:45:56
people decided not to travel and
00:45:59
you know we didn't import as much oil
00:46:01
and we were able to keep cost contained
00:46:03
and that kept cpi from being really out
00:46:05
of control
00:46:07
but again we're in the summer where we
00:46:10
don't have the pressure on energy that
00:46:11
we're going to have in october november
00:46:13
this year
00:46:14
so i i really don't know i mean i just
00:46:17
think that there is like freeberg has
00:46:19
his pet issue i have my pet issue saks
00:46:21
has his pet issue you ask a hundred
00:46:23
economists they'll have their own pet
00:46:25
issue housing affordability whatever it
00:46:27
is the point is we have
00:46:30
a hundred whack-a-mole problems
00:46:33
and the question is which mouse trap
00:46:35
sets off the rest of the mousetraps
00:46:38
i have no idea um
00:46:40
and so you know i just think that right
00:46:43
now things are a little bit too calm
00:46:46
and that makes me feel very unsettled
00:46:48
another shoe might drop i mean the point
00:46:50
of the conversation is to try to
00:46:51
understand and make better decisions in
00:46:53
capital allocation company formation and
00:46:56
placing bets in the next year so that i
00:46:57
think that's the point of the discussion
00:46:59
we now have the spectacle
00:47:01
of
00:47:02
the president saying he's going to pass
00:47:05
an inflation reduction act
00:47:07
to solve a zero percent inflation
00:47:10
problem to get us out of a recession
00:47:12
that he says doesn't exist you guys know
00:47:14
this but the the politics and the
00:47:16
political commentary on this are absurd
00:47:18
i think what we're describing here is to
00:47:21
simply more honest which is to say that
00:47:23
the data is mixed so we don't exactly
00:47:24
know what's going to happen yeah i mean
00:47:27
the thing that i think is encouraging is
00:47:29
when you look at this jobs data
00:47:31
and you look at the
00:47:33
debt that consumers are putting on my
00:47:35
theory is and i could be wrong that
00:47:38
people want to keep spending uh they
00:47:40
want to keep living their lives they're
00:47:41
taking on a little bit of debt to deal
00:47:42
with inflation and to keep spending but
00:47:44
they're also going back to work and i'm
00:47:46
seeing that anecdotally a lot more
00:47:47
people going back to work and the
00:47:48
numbers show that that feels to me and i
00:47:50
said this on previous episodes that that
00:47:52
feels like a possible
00:47:54
you know very helpful path out here and
00:47:55
i think you brought it up saks as well
00:47:57
which is hey if we have increased
00:47:58
participation
00:47:59
that's great increases monetary velocity
00:48:01
increases participation in the economy
00:48:03
that's a possible path out do you do you
00:48:05
feel like that's still holding strong
00:48:08
secular decline on that trend for 25
00:48:10
years
00:48:11
so maybe maybe on the margins a few
00:48:14
folks
00:48:15
um run out of stimulus and decide to go
00:48:17
and get a job but i don't think again
00:48:20
it's it's kind of like
00:48:21
you know when you're at you're when
00:48:22
you're at the blackjack table in vegas
00:48:25
and clapping there's a strategy
00:48:26
happening
00:48:29
i feel like all the like what we're
00:48:30
talking about right now is clapping as a
00:48:32
strategy
00:48:33
maybe this can happen maybe that cap you
00:48:35
know what maybe it'll start raining gold
00:48:37
[ __ ] coins that we can use and just
00:48:40
worry about i mean yeah i mean
00:48:42
i feel like the last 15 minutes have
00:48:44
been like not a good conversation
00:48:50
because look the structure of the
00:48:52
problem i think is very well defined
00:48:55
which is we have an inflation problem
00:48:57
great it went down from nine point one
00:48:58
eight point five percent it's still
00:49:00
really high two to three percent would
00:49:02
be would be normal okay so that's half
00:49:04
the problem is how fast is inflation
00:49:07
going to go back down to normal based on
00:49:08
interest rate cuts the other side of the
00:49:10
problem is increases is sorry interest
00:49:12
rate increases not cuts the other side
00:49:14
of the problem is how much will the
00:49:16
economy be hurt by these rising rates
00:49:19
and those are the two variables and we
00:49:21
see that there is a slowdown there's
00:49:23
still a lot of jobs being filled which
00:49:25
is good but there is unquestionably an
00:49:27
economic slowdown and those are the two
00:49:29
sides of this equation
00:49:30
and we just need to see some economic
00:49:33
data it's going to play out over the
00:49:34
next seven years we've been asking the
00:49:35
same question for three [ __ ] weeks if
00:49:38
you guys don't want to talk about the
00:49:39
new data that's fine
00:49:44
we don't have an opinion other than we
00:49:45
don't know how many ways can we say i
00:49:47
don't want to talk about inflation or
00:49:49
recession or jobs or any of that [ __ ]
00:49:51
anymore unless there's something really
00:49:52
for us all to say like something news
00:49:54
come out well like some [ __ ] economic
00:49:56
report
00:49:57
was really important i mean that was a
00:49:58
that was a massive print but it's not
00:50:00
that it's it's oh yeah
00:50:01
it is twice as many to keep track of
00:50:03
what we've all read data point it's one
00:50:05
day
00:50:07
there were some bad jobs reports before
00:50:09
that print yeah i think we should stop
00:50:11
doing the recession inflation chat every
00:50:12
week it honestly is like repeating a
00:50:14
better job moderating can you not dial
00:50:16
it in you got no you guys asked to talk
00:50:19
about it you guys put some of these
00:50:20
things on i don't want to talk about it
00:50:21
anymore i think we should congratulate
00:50:22
you let's move on what are you okay what
00:50:24
do you want i think softbank was a great
00:50:26
chat i think you know that was a good
00:50:27
talk we should do that kind of [ __ ] we
00:50:28
should talk about i don't know what you
00:50:30
guys think about the sequoia evergreen
00:50:32
fun tell me what you guys think about
00:50:33
that come on geniuses the sequoia like
00:50:35
when they restructured
00:50:37
are you joking
00:50:39
i love i love when these two go silent
00:50:42
no no i i always didn't want to
00:50:43
interrupt anybody i don't understand
00:50:44
what you're saying i don't understand
00:50:45
why you guys are trying so hard to avoid
00:50:47
the the obvious news of this week is
00:50:50
there something else in the news this
00:50:51
week zach's um
00:50:53
if trump actually had some material in
00:50:57
mar-a-lago
00:50:58
that was related to the nuclear program
00:51:01
and um
00:51:03
you know there was an attempt to try and
00:51:05
get recover those documents through
00:51:06
normal means and they were not
00:51:08
recoverable what would your course have
00:51:10
been if you were the director of the fbi
00:51:11
or the president of the u.s in that
00:51:13
condition because i think that seems to
00:51:14
be the party line of what's going on
00:51:16
here
00:51:17
well
00:51:18
the democratic kind of
00:51:20
spin on what's going on here but like
00:51:22
you know honestly in that circumstance
00:51:24
what do you think would have been
00:51:24
appropriate so there's some sort of
00:51:26
confidential material related to our
00:51:27
nuclear program or nuclear weapons
00:51:29
something something there in those
00:51:31
materials that were attempted to be
00:51:33
recovered or were taken without approval
00:51:35
and then they tried to recover it
00:51:37
for you know assume there's no nefarious
00:51:39
intent
00:51:40
what would be the right kind of course
00:51:41
here
00:51:42
well i i so i i don't know exactly
00:51:45
what's going on i just think that um you
00:51:48
can't necessarily give the f sadly i
00:51:50
don't think you can necessarily give the
00:51:52
fbi the benefit of the doubt here in
00:51:53
light of their history um but let's back
00:51:55
up i mean first you had this this raid
00:51:57
on mar-a-lago where you got 30 fbi
00:51:59
agents they're not wearing suits with
00:52:01
holstered sidearms they're carrying
00:52:03
ar-15s you know weapons of war fingers
00:52:06
just outside the trigger guard they're
00:52:07
wearing body armor it looks like a para
00:52:09
military raid on mar-a-lago it's utterly
00:52:12
unprecedented and you look at tweets by
00:52:15
andrew cuomo for example or uh andrew
00:52:18
yang i mean these guys actually turn out
00:52:20
to be pretty i think intellectually
00:52:22
honest democrats on this point saying
00:52:24
this is unprecedented and it's really
00:52:26
going to here i want to read this
00:52:28
by why aren't you andrew
00:52:30
why don't you answer a free bird's
00:52:31
question i'm getting there i know you're
00:52:33
going to cut me off so i'd like to just
00:52:35
read these tweets so maybe you because
00:52:37
you know maybe you'll give more credence
00:52:38
to andrew yang he said i'm no trump fan
00:52:41
i want him as far away from the white
00:52:42
house as possible but a fundamental part
00:52:44
of his appeal has been that it's him
00:52:45
against a corrupt government
00:52:46
establishment this race strengthens that
00:52:49
case for millions of americans who will
00:52:50
see this as unjust persecution you have
00:52:53
andrew cuomo saying doj must immediately
00:52:55
explain the reason for its rate it must
00:52:56
be more than a search for
00:52:57
inconsequential archives or be viewed as
00:53:00
a political tactic and undermine any
00:53:01
future credible investigation and
00:53:03
legitimacy of january 6 investigations
00:53:05
and let me read one other tweet
00:53:08
by elon that's not directly about this
00:53:10
but he tweeted this on july 11 so a
00:53:12
month ago and he said i don't hate the
00:53:14
man but it's time for trump to hang up
00:53:17
his hat and steal at the sunset that was
00:53:18
the part that was widely reported but he
00:53:20
also said dems should also call off the
00:53:23
attack don't make it so that trump's
00:53:24
only way to survive is to regain the
00:53:26
presidency i think there was a lot of
00:53:29
wisdom in that and you know i'm old
00:53:31
enough to remember when the case for
00:53:33
biden getting elected is we have to move
00:53:36
past this partisan warfare
00:53:38
this extreme rancor
00:53:41
and derangement and we were told that
00:53:43
the media you know all these people who
00:53:45
had tds that that their psychosis was
00:53:48
due to trump and if we could just move
00:53:50
past trump this all this sort of
00:53:52
partisan warfare would end
00:53:54
and now and and i was certainly hoping
00:53:57
that would be true and now sadly it
00:53:59
seems like we're right back in this
00:54:01
thing
00:54:02
um where we're right back with the media
00:54:04
being obsessed with tds portraying this
00:54:06
narrative that somehow he's a traitor
00:54:08
and what does this whole thing hang on
00:54:10
just these two words nuclear documents
00:54:13
well listen until they actually produce
00:54:15
those documents i'm going to suspend
00:54:17
judgment because the fbi the last time
00:54:19
they did this remember they manufactured
00:54:22
a falsified warrant to the fisa court
00:54:25
for this type of
00:54:27
investigation they have that history so
00:54:30
i'm just gonna suspend judgment on
00:54:32
what's going on here until they actually
00:54:34
produce the documents they're talking
00:54:36
about can i ask him right now he stinks
00:54:39
do you honestly question the integrity
00:54:41
of leadership and agents uh at the fbi
00:54:46
are you serious like you don't think
00:54:47
yeah all right let me read you this
00:54:48
tweet from michael burris i don't hear
00:54:50
the tweet i want to hear your point well
00:54:51
no well i i i agree with what michael
00:54:53
berry is saying so i think sometimes
00:54:55
there's a lot of thoughtful commentary
00:54:57
about this and what barry says is jager
00:54:59
hoover led the fbi for five decades
00:55:02
denied the mafia existed fought the
00:55:04
civil rights movement shielded the kkk
00:55:06
multiple presidents acknowledged fear of
00:55:08
him so what he's saying is
00:55:09
that the fbi since its inception
00:55:12
has
00:55:13
political origins uh and and basically
00:55:15
meddled politically in the affairs of
00:55:17
the country then he says the fbi lied to
00:55:20
the fisa court this is back in 2016.
00:55:22
totally true altered emails leaked lies
00:55:25
to the press to get trump nothing
00:55:27
shocking so freeberg listen i don't know
00:55:29
whether the fbi is telling the truth but
00:55:31
are you honestly going to say that the
00:55:33
fbi's leadership has never been
00:55:35
political that has never harbored or
00:55:37
pursued their own agenda and that has
00:55:39
never had a desire to go after i'm trump
00:55:41
i'm not making it all happen
00:55:43
we saw we saw the text messages from
00:55:45
comey strzok
00:55:47
mccabe i mean these guys basically took
00:55:50
it upon themselves when trump was
00:55:51
elected to be the quote-unquote
00:55:53
insurance policy yeah and an fbi lawyer
00:55:57
pled guilty
00:55:58
to falsifying documents to seek a
00:56:01
warrant
00:56:02
from the fisa court
00:56:04
so i just think anything's possible here
00:56:06
now i'm not saying the fbi is lying
00:56:08
about this i don't know but the idea
00:56:10
that the fbi is automatically entitled
00:56:13
to the benefit of the doubt in light of
00:56:15
their proven history of basically
00:56:17
pursuing trump like ahab pursued the
00:56:19
white whale i mean yeah these guys have
00:56:22
been after him i'm just going to zoom
00:56:24
out for a second the reason i'm
00:56:25
interrogating sax on this is like it's
00:56:27
just so telling to me that a guy like
00:56:29
like you sacks in your position
00:56:33
are actually questioning the integrity
00:56:36
of like the highest justice authority
00:56:38
and institution in the united states
00:56:41
um really says a lot about kind of the
00:56:43
state
00:56:44
of of the us citizenry the state of our
00:56:47
society today i i think it speaks a lot
00:56:49
at least a third of americans i know
00:56:51
it's incredible and what ray dalio said
00:56:53
in his book
00:56:54
about how during these periods when the
00:56:56
empires begin their decline
00:56:59
and you know when you're challenged with
00:57:01
kind of the economic conditions that the
00:57:03
u.s is challenged by printing lots of
00:57:04
money lots of debt very hard to service
00:57:06
all that debt and we have a ton of
00:57:07
obligations over the next decade or two
00:57:09
that are going to be very hard to meet
00:57:11
given our economic growth and inflation
00:57:13
conditions right now that you start to
00:57:16
see these sorts of behaviors
00:57:17
historically it's happened six times in
00:57:19
the last 500 years where large empires
00:57:22
like the united states are large
00:57:24
you know economic powerhouses like the
00:57:26
united states start to decline that the
00:57:28
civil war begins that the institutions
00:57:31
get challenged by a minority and then a
00:57:34
majority of the citizenry and it really
00:57:36
starts to crumble and and challenge the
00:57:38
uh the integrity of the institution and
00:57:40
its ability to hold itself together well
00:57:42
i'm not hold on a second i'm not
00:57:44
challenging hold on a second i'm not
00:57:45
well you're questioning the integrity
00:57:47
you're you're questioning the integrity
00:57:48
of the department of justice right
00:57:49
listen by the way i'm not i'm not
00:57:50
arguing i'm just pointing out like it's
00:57:52
it's an incredible condition for us to
00:57:54
find ourselves in yeah but i but but but
00:57:56
my questioning did not create that
00:57:58
condition there this lack of trust is
00:58:00
earned it's earned by the fbi in light
00:58:03
of behaviors they took just a few years
00:58:05
ago now listen i'm not defending trump
00:58:08
per se i don't know what he did or
00:58:11
didn't do okay
00:58:13
but
00:58:13
i think that it you can't just accept at
00:58:17
face value
00:58:18
without further proof
00:58:20
these leaked what are basically leaked
00:58:22
comments by the fbi yeah i mean look i'm
00:58:26
not listen i'm not a naive child i mean
00:58:28
the fact of the matter is that power can
00:58:30
be corrupt
00:58:32
and power corrupts okay and we have seen
00:58:35
that the fbi from his earliest days did
00:58:37
engage in corruption and more recently
00:58:39
against trump himself had a vendetta
00:58:42
against trump so i'm simply so hold on
00:58:44
so all i'm doing is i'm not going to
00:58:46
automatically accept at face value what
00:58:49
they're saying until i see some proof
00:58:52
now i'm not saying that they're wrong or
00:58:53
they're lying about this i'm simply
00:58:55
saying i'm not going to accept it at
00:58:56
face value
00:58:57
yeah and remember trump trump was
00:58:59
elected on on
00:59:01
on the platform that there is this deep
00:59:03
state that there is institutional
00:59:05
corruption that there is um malaise and
00:59:08
lethargy in these institutions of the
00:59:10
government that are funded on the order
00:59:12
of trillions of dollars a year and that
00:59:14
that's what he was intended to you know
00:59:16
to go and and blow up and repair and
00:59:18
there there's there's a very strong and
00:59:20
potentially close to majority percentage
00:59:23
of voting americans that that feel that
00:59:25
there is this core deep state corruption
00:59:27
uh institutional lethargy that is
00:59:29
challenging our ability to give everyone
00:59:32
the freedom and liberties that they
00:59:33
deserve freebird these agencies are
00:59:35
supposed to be nonpartisan they're not
00:59:36
supposed to have a horse in the race and
00:59:38
what we saw is that when trump was in
00:59:40
office and these texts came out clearly
00:59:44
the the top levels of the fbi these top
00:59:46
agents i'm not talking about the rank
00:59:48
and file i'm not talking about the field
00:59:49
agents i understand that a lot of them
00:59:51
are law and order types to vote
00:59:53
republican i get it but i'm talking
00:59:54
about the leadership the highly
00:59:55
political leadership in washington and
00:59:57
it was pretty clear that they had a
00:59:58
horse in the race they did not like
01:00:00
trump and they were out to get trump
01:00:02
and
01:00:03
you know again
01:00:05
trump is not my preferred candidate for
01:00:07
2024 but what the fbi has done with this
01:00:10
raid quite frankly i think has polarized
01:00:12
the outcomes they are basically gonna
01:00:14
send trump to the big house or the white
01:00:16
house i mean because now the republicans
01:00:18
have rallied around trump i think he's
01:00:20
gonna be very very hard to beat
01:00:22
for as the nominee in 2024 unless the
01:00:26
fbi comes up with iron-clad evidence to
01:00:28
show that he did something significantly
01:00:30
wrong i care less about who did what and
01:00:32
what was done wrong i care more about
01:00:34
the fact that this conflict is
01:00:36
escalating and it's creating a real
01:00:37
condition of continuing uh polarization
01:00:40
and it really is the the conditioning
01:00:43
that you know biden had some historians
01:00:45
in the white house there was a report on
01:00:46
this last week and these historians
01:00:48
spoke about how the conditions in the
01:00:49
united states are just as they were
01:00:51
right before the civil war
01:00:52
and um and that there's real concerns
01:00:55
that
01:00:56
yeah well i mean you know they
01:00:58
you can go read the the anecdotal
01:01:00
reporting that was done on this thing
01:01:02
but that was the general theme of the
01:01:03
conversation and um you know it really
01:01:06
it really kind of um
01:01:08
concerns me more that this level of
01:01:10
discourse is escalating to a point of uh
01:01:14
you know there's corruption
01:01:16
uh this person is a criminal and that
01:01:18
sort of discussion happens um
01:01:20
you know in more dire circumstances and
01:01:22
more and economic
01:01:24
circumstances than has ever been seen
01:01:27
you know the u.s is the largest economy
01:01:29
in history
01:01:30
and we're now having these sorts of
01:01:31
conversations that typically lead to
01:01:33
some degree of conflict and it's really
01:01:34
concerning
01:01:35
well i just think listen i i think that
01:01:37
trump was out of office we were told
01:01:40
that this partisan ranker would stop
01:01:41
once he was out and it's you know
01:01:44
they're pulling him back in
01:01:46
and all i can say is that when the i
01:01:48
think we know maybe
01:01:49
one percent of the story okay i think
01:01:52
this
01:01:52
leak around nuclear documents is it
01:01:54
feels like a selective leak it's not
01:01:56
certainly all sides are inflammatory
01:01:58
both sides are cantankerous
01:02:00
and i'm suspending judgment what i'm
01:02:02
saying is though that when all the
01:02:03
information comes out there better be a
01:02:06
very significant there there no no no
01:02:08
we've made that impossible too because
01:02:10
he trump came out and he basically said
01:02:12
uh hey listen if you if these guys find
01:02:14
something it was planted
01:02:16
and now you're going to have at least a
01:02:18
you know 10 or 15 of the population that
01:02:20
believes okay this was planted it wasn't
01:02:22
actually there and you know so whatever
01:02:24
the outcome is um will not be good
01:02:27
nobody will be satisfied
01:02:29
and both both of the extremes in the
01:02:32
united states will be even more angry
01:02:35
further inflamed yeah further well
01:02:37
that's what i'm saying that's
01:02:38
inflammatory index has now has now
01:02:40
skyrocketed yeah by the way this is why
01:02:42
i think at some level maybe the lack of
01:02:44
faith in these institutions is well
01:02:46
deserved because
01:02:48
where is the
01:02:50
the you know the
01:02:52
prudence of all of this like where is
01:02:54
the
01:02:54
the circumspect thoughtful methodical
01:02:58
thinking
01:02:59
about all of the different outcomes that
01:03:01
could be possible so that you exhaust
01:03:04
every option and this is the only option
01:03:07
left
01:03:08
and then even then
01:03:10
if merrick garland was open to basically
01:03:12
saying unseal the warrant
01:03:14
why didn't you do it before and say
01:03:16
we're going to have to serve this guy
01:03:19
unless he actually gives us these things
01:03:21
there's all kinds of things you could
01:03:22
have done oh clearly they did keep the
01:03:24
hold on a second to keep the temperature
01:03:26
of this thing way way down
01:03:29
and that's what to your point jamal they
01:03:30
could have let trump's lawyers watch
01:03:32
them
01:03:33
do the search so that nobody could claim
01:03:35
anything about anything being planted
01:03:37
yeah so
01:03:39
the inflammatory index is spiking i
01:03:41
think that's my key takeaway on all of
01:03:43
this i i care less about what trump did
01:03:45
and what the doj did and what the fbi
01:03:47
did like i'm more concerned about where
01:03:49
this takes us because the next step
01:03:51
regardless of where it takes us you know
01:03:53
where it takes us when you're on tilt at
01:03:55
the poker table what do you do you
01:03:56
cannot think properly that's right
01:03:59
that's where everyone's at right now
01:04:00
when people are so inflamed with emotion
01:04:03
they start to make very poor decisions i
01:04:05
don't know whether the doj and main
01:04:07
justice made a poor decision or not i
01:04:09
think this is where we have to hold our
01:04:11
breath and hope they didn't
01:04:13
i don't know whether the white house
01:04:15
knew anything or not
01:04:16
but the whole point of all of this is
01:04:18
that
01:04:18
we pulled this guy right back in
01:04:22
to the to the to the main stage
01:04:24
absolutely i mean you're like i said
01:04:26
you've polarized the outcomes you're
01:04:28
either going to basically send this guy
01:04:29
to jail or you're going to summon the
01:04:31
white house no i think there's very
01:04:32
likely no i think there's very likely a
01:04:34
middle path where nothing happens right
01:04:36
but it will further erode what freeberg
01:04:38
says which is it's just a little bit
01:04:41
less trust in the institutional
01:04:43
integrity is eroding and when
01:04:45
institutional integrity erodes the the
01:04:48
fabric of what keeps everything working
01:04:50
starts to fall apart and i'm not saying
01:04:52
this is some cataclysmic civil war
01:04:54
happening just to be clear i'm not
01:04:55
saying there's some cataclysmic civil
01:04:56
war happening next year but it's an
01:04:58
unfortunate decline in everyone's faith
01:05:01
and and the stability of the
01:05:03
institutions that we all rely on to
01:05:05
support and service us because the
01:05:06
inflammatory index is going to go up and
01:05:08
everyone's going to be criticizing
01:05:09
everything and that's enough this is why
01:05:11
i think we really have to ask was this
01:05:12
really necessary i mean why did the doj
01:05:15
and the fbi think this was necessary
01:05:17
yeah these boxes were just sitting there
01:05:19
i think that's a reasonable question is
01:05:20
like if these things were actually
01:05:22
sitting in the box with a lot that they
01:05:25
changed
01:05:26
there must have been something more that
01:05:27
was so grievous
01:05:29
where you had to do something like this
01:05:30
now by the way david i just wanna i read
01:05:33
so i don't know if it's true or not i
01:05:34
think maybe it was in barry weiss's
01:05:36
upset or matt tybee's upset these folks
01:05:38
weren't armed to the teeth they came in
01:05:40
jeans and shorts and t-shirts in fact
01:05:43
maine justice told them like do it as
01:05:45
well i've seen the photos they i've seen
01:05:46
the photos they had
01:05:48
outside i'm saying the people inside
01:05:50
were there for six or seven hours and
01:05:52
only a few people knew about it they
01:05:53
were there for nine hours they basically
01:05:55
told
01:05:56
trump's people they couldn't be there
01:05:57
they had to leave they told him to turn
01:05:59
the cameras off and they had like highly
01:06:02
militarized guys they were something
01:06:03
like 40 people and something like 30 of
01:06:05
them were heavily armed the optics were
01:06:07
terrible if there was some nuclear
01:06:09
confidential nuclear material in
01:06:11
mar-a-lago and through normal means of
01:06:14
communication they had asked several
01:06:15
times to have it returned and identified
01:06:17
this for him and he had refused which i
01:06:19
think is a very reasonable kind of
01:06:21
you know conditioning for what may have
01:06:23
happened here and then they said okay we
01:06:24
gotta go get it there's no choice this
01:06:26
is like super confidential nuclear
01:06:28
material we gotta get this stuff the
01:06:30
only way to get it is to serve a warrant
01:06:32
and go in there and get it
01:06:33
you know under those circumstances you
01:06:36
know do you think that this would have
01:06:37
been kind of inappropriate like assume
01:06:39
all other kind of communication means
01:06:41
were exhausted like you know what would
01:06:43
you have done if you were president
01:06:44
listen i think there is information that
01:06:46
could still come out to convince me that
01:06:48
this raid was warranted um i just
01:06:51
haven't seen that information yet and i
01:06:53
think the optics of it were terrible i'd
01:06:55
like right the point i was making i
01:06:56
don't know why it wouldn't have been
01:06:57
good enough to send in the fbi agents
01:06:59
with holstered sidearms you know not
01:07:02
ar-15 weapons of war you know where the
01:07:05
fingers were just outside the trigger
01:07:07
guard it looked like a paramilitary raid
01:07:09
so whoever was thinking about the
01:07:10
political ramifications this clearly
01:07:12
didn't do a very good job i also don't
01:07:14
know
01:07:15
yeah yeah i also don't know why
01:07:17
you wouldn't give the courtesy to a
01:07:19
former president united states to give
01:07:21
them either more of a heads up or to let
01:07:23
his lawyers attend
01:07:25
so that
01:07:26
just for their own protection so they
01:07:28
can't be accused of planning anything
01:07:30
that would have been smart and i don't
01:07:32
know why they would have said to trump's
01:07:34
people that they couldn't record it and
01:07:36
i don't know why there's been reports
01:07:38
that the fbi went through melania's
01:07:39
closet i mean seriously they're like
01:07:41
going through melania's clothes it's
01:07:43
just weird it's weird so there's a lot
01:07:45
about this that we don't know i'm not
01:07:48
conclusively rendering judgment about it
01:07:50
because there are things that absolutely
01:07:52
could come out to convince me that it
01:07:54
was warranted but i haven't heard them
01:07:56
yet okay everybody we'll see on the next
01:07:57
episode of the all-in podcast love you
01:08:02
[Music]
01:08:09
and it besties we open source it to the
01:08:11
fans and they've just gone crazy
01:08:18
[Music]
01:08:46
we need to get these
01:08:50
[Music]
01:08:55
i'm going on
01:08:57
[Music]
