00:00:00
I'm in a very Daniel Plainview mood this
00:00:02
week the there will be I have a
00:00:04
competition in me I don't want to see
00:00:06
other people succeed that's right best
00:00:08
scene ever you are the furthest
00:00:10
from that character like that is not
00:00:13
your spirit animal oh There Will Be
00:00:14
Blood that guy Daniel Day-Lewis is
00:00:16
nothing to do with you I've watched it
00:00:18
about 100 times incredible you must be
00:00:20
so stormy and roiled on the inside oh my
00:00:25
gosh I mean like did you not see my
00:00:27
roast at Sax's birthday it's just did I
00:00:29
not see it I lived it it was the most
00:00:31
off-color disgusting egregious mean
00:00:35
diatribe I've ever heard my Lord I have
00:00:38
a competition in me I don't like to see
00:00:40
others succeed I can't stand that Jake
00:00:42
house
00:00:43
[Laughter]
00:00:46
[Music]
00:00:59
[Music]
00:01:02
I guess everybody wants to know chamoth
00:01:05
you've wound down two spacks
00:01:08
thank you for doing this for uh ipof
00:01:10
specifically because people are replying
00:01:13
to me every day asking what are you
00:01:15
going to spack
00:01:16
but IPO D and F the money has been
00:01:19
returned to investors no it's going to
00:01:21
be returned going to be returned to
00:01:23
investors thank you and Bill Ackman uh
00:01:25
of course he wound down his spack
00:01:27
returning 4 billion there's over 500
00:01:28
specs out there looking for deals uh
00:01:31
tell us why this decision
00:01:34
look I've raised tense back six six in
00:01:37
technology and foreign biotechnology and
00:01:39
I've done uh six deals two in Tech and
00:01:42
two in biotech
00:01:44
[Music]
00:01:49
so the the the reason to shut it down is
00:01:51
pretty straightforward it's like
00:01:53
you know when we launched these things
00:01:55
the stock market was in a much different
00:01:57
place than it is today and so over the
00:01:59
last two years it looking at deals
00:02:02
um it's gotten harder and harder to find
00:02:05
a good risk reward now why is that well
00:02:07
the thing with this pack is you do a
00:02:09
deal today
00:02:10
but it doesn't usually close for six or
00:02:13
seven months in the future
00:02:14
and so you have to do a deal where you
00:02:18
have a really good sense that in six or
00:02:20
seven months when the deal is comes to
00:02:22
close that the price will be the same or
00:02:26
even higher than what it is today
00:02:29
and if it isn't all of the investors
00:02:32
that you've brought along in this back
00:02:34
have a right to redeem which is to say
00:02:37
they file a notice that says you can
00:02:38
complete the deal but I want my money
00:02:40
back
00:02:41
and what they get back is the initial
00:02:43
ten dollars that they use to buy the
00:02:44
stock in the first place because when we
00:02:46
sold when we started this back we sold
00:02:47
stock at ten dollars
00:02:50
and so from my perspective I was looking
00:02:52
at this and I'm like you know this is a
00:02:54
super volatile ugly point in the market
00:02:56
this last year has been really
00:02:58
problematic I and I and I kind of said
00:03:00
this last November and Nick we can we
00:03:02
can play the clip after and we can come
00:03:04
back to it but basically my decision was
00:03:06
that at this point to do a deal would
00:03:10
probably you know put a lot of capital
00:03:12
at risk and
00:03:15
in all of these deals I'm typically
00:03:16
investing a hundred million dollars at
00:03:18
least in each of them and so I couldn't
00:03:20
justify that I couldn't see a good risk
00:03:22
reward and I thought the right thing to
00:03:23
do the responsible thing to do was just
00:03:25
to wind these things down you know I'll
00:03:27
I'll lose I don't know 10 15 20 million
00:03:30
bucks for having set these things up
00:03:32
but we give everybody their money back
00:03:33
that ten dollars and I think that's
00:03:35
actually better over the next five or
00:03:37
six months than what it'll otherwise do
00:03:39
if you're invested in the market now
00:03:40
that's a belief that I have
00:03:43
but hopefully when people get the ten
00:03:44
dollars back in the next few weeks if
00:03:45
they want they can go and put that money
00:03:47
back in the market
00:03:49
and hopefully they'll do well but uh you
00:03:51
know from my perspective the risk reward
00:03:52
was not good is part of the issue the
00:03:54
inventory that's available of great
00:03:56
companies as well
00:03:58
that's one of the things I heard
00:03:59
speculated on CNBC it's hard to convince
00:04:01
a private company to go public here's my
00:04:03
experience you know when I when I was
00:04:05
talking to all of these CEOs of these
00:04:07
Silicon Valley companies
00:04:09
initially there was a lot of
00:04:10
misunderstanding about what spax were
00:04:12
and I think we were able to dispel that
00:04:14
because we had some really successful
00:04:16
transactions
00:04:17
then there was a lot of interest in
00:04:19
being a part of it
00:04:21
in this phase we were suffering from two
00:04:23
very important things one was that
00:04:26
valuations were just completely up in
00:04:28
the air people had a huge question mark
00:04:30
on late stage valuations because we
00:04:31
would come in
00:04:33
we would do the work and we would say
00:04:34
the company is worth X
00:04:36
and that number typically was 50 or 60
00:04:39
percent lower
00:04:40
than their last private valuation
00:04:42
and so when it came time for us to
00:04:44
negotiate you know doing the deal even
00:04:47
if the founder was roughly on board the
00:04:50
rest of the board was not because a lot
00:04:52
of them would have seen some pretty
00:04:54
meaningful markdowns in their private
00:04:57
assets
00:04:58
and when the company had enough money to
00:05:00
kind of like you know at least stay
00:05:02
private for another year or so without
00:05:04
having to raise money
00:05:06
on balance those investors felt it was
00:05:08
more prudent for them
00:05:10
to not take the mark and to not take the
00:05:13
deal at such a lower discount so that
00:05:16
was a big issue that we ran into because
00:05:18
every time we would price a deal again
00:05:20
we're trying to create a margin of
00:05:21
safety for us and our investors again
00:05:24
because it's going to take six to nine
00:05:25
months to close a deal and so ideally
00:05:27
you want continuation indigestion and
00:05:30
then sorry the second thing was just
00:05:31
volatility so when you see volatility in
00:05:33
the public markets
00:05:35
you know for a CEO and I can understand
00:05:37
this
00:05:39
it's much easier to go public in a point
00:05:41
where the markets are generally going in
00:05:43
One Direction because it gives them
00:05:45
the confidence to be able to learn the
00:05:47
ropes because it is a complicated
00:05:49
process being public
00:05:50
and when you introduce tremendous
00:05:52
market-based volatility independent of
00:05:54
your company
00:05:55
I think a lot of CEOs and CFOs and IR
00:05:58
people
00:05:59
were a little nervous yeah why take the
00:06:02
risk and that was this that was the
00:06:03
second piece but by in a way the first
00:06:05
one was valuation we could not find
00:06:07
market clearing prices make sense for
00:06:10
assets and by the way and I'll talk
00:06:12
about one company in specific which just
00:06:14
this week had a pretty public blow up
00:06:15
around this whole issue and look I've
00:06:17
been pretty clear about this since
00:06:18
November the marginal trade should have
00:06:21
been to be trimming risk and Nick maybe
00:06:23
you can play the clip because I really
00:06:24
want to make sure that it's it's very
00:06:26
clear and on the record what I said
00:06:27
almost an entire year ago let me put
00:06:30
crypto in the context of the markets and
00:06:33
where we are today at the end of the
00:06:34
week after you know Q3 earnings in
00:06:37
November of of 2021. we have the stock
00:06:41
market at Absolute all-time highs
00:06:43
ripping we have crypto and absolute
00:06:46
all-time highs ripping we have the art
00:06:49
markets I don't know if you guys saw
00:06:50
Phillips and Christie's and Sotheby's
00:06:52
this past week at Absolute all-time
00:06:54
highs sold another people for 25 million
00:06:56
we have inflation at a 30-year High
00:06:59
we have 10-year break-evens at a 25-year
00:07:02
High
00:07:04
we have you know one point somewhat
00:07:06
trillion dollars that we just approved
00:07:07
last week and we're still horse trading
00:07:10
on another three you know 1.8 trillion
00:07:12
dollars of stimulus that we're going to
00:07:13
put in and I think the the most
00:07:15
important thing which is the two most
00:07:18
important founders of Our Generation the
00:07:21
two smartest people who have really
00:07:22
consistently won Elon Musk and Jeff
00:07:24
Bezos have collectively sold more than
00:07:26
11 billion dollars of their Holdings
00:07:28
this year alone
00:07:30
and if you can't take all of that and
00:07:33
decide for yourself what's right for you
00:07:34
and your family you're doing yourself a
00:07:36
disservice I think it's important for me
00:07:38
to never sort of like you know be forced
00:07:41
to tell folks whether I'm buying or
00:07:42
selling although I'm willing to do it in
00:07:44
moments where I think it's important
00:07:47
but I think it's really important to
00:07:49
understand the context and so I think
00:07:50
like these folks that like think
00:07:52
derisively about individuals who are
00:07:54
managing risk I think it's really naive
00:07:57
and I think it's it creates a lot of
00:07:59
missed opportunity for them as well if
00:08:01
the smartest people in the world
00:08:04
are now selling their core Holdings that
00:08:06
they told you they would never sell and
00:08:09
you are not reconsidering your position
00:08:12
on things
00:08:14
you're either much smarter than them or
00:08:18
you're being really really Reckless the
00:08:21
reason I I said all of those things
00:08:23
was because I was getting really worried
00:08:25
about where we were
00:08:28
um and then and then I think on the
00:08:29
heels of that I published a tweet and I
00:08:32
and I said I'm starting to sell
00:08:34
you know and I sold like a hundred
00:08:36
million dollars of Sofi but then I was a
00:08:38
systematic seller
00:08:39
um through the end of last year and and
00:08:41
through this year
00:08:43
to try to manage my own liquidity
00:08:44
because it changed profoundly as I saw
00:08:46
what was happening in the markets so you
00:08:49
know I think that it's just an important
00:08:51
thing to call out that
00:08:53
um things don't always go up
00:08:55
and uh you have to pay attention to a
00:08:58
mosaic of information
00:09:00
and you have to do the work yourself
00:09:02
because you know your situation is
00:09:04
unique to you nobody else understands it
00:09:06
and so you can't Outsource that decision
00:09:09
to somebody else obviously you can use
00:09:11
it as a guide you know it's fair to say
00:09:13
you know when the 13 apps have important
00:09:15
hedge funds come out do I read them of
00:09:17
course because I'm trying to figure out
00:09:18
you know what don't I know what may I be
00:09:21
missing maybe there's a great company in
00:09:22
there that I that I should be taking a
00:09:24
look at so you know I'm not dissimilar
00:09:26
to everybody else in that I use other
00:09:28
people that I look up to or respect as a
00:09:30
leading indicator of what to buy
00:09:33
but I still take responsibility for my
00:09:35
own decisions and I manage my liquidity
00:09:37
as best as I can based on my conditions
00:09:39
and those are always changing
00:09:41
and so I think this is just a good
00:09:43
reminder that everybody else has to do
00:09:44
the same so chamoth what do you think
00:09:46
happens to the remaining 500 every SPAC
00:09:48
sponsor friend of mine that I know is
00:09:50
not seeking targets anymore they're all
00:09:53
expecting to wind up and return Capital
00:09:55
how many of the 500 you think will
00:09:57
actually find a Target and how many do
00:09:58
you think all of remaining specs how
00:10:01
many of them will um wind up and return
00:10:03
capital
00:10:04
I mean I I think that there's still some
00:10:06
really good deals to do
00:10:08
they're not necessarily in Tech per se
00:10:11
so you know I think you did a really
00:10:13
great deal in ag Tech I think that
00:10:14
that's that's really interesting so time
00:10:16
will tell how that does I think there's
00:10:18
some really interesting deals and energy
00:10:19
in fact we spent a lot of time actually
00:10:21
pivoting and spending time and energy
00:10:23
looking at you know everything from you
00:10:26
know uh producers of nat gas and oil to
00:10:29
you know folks that were building
00:10:30
terminals to LNG facilities and the
00:10:33
but it's just a very different return
00:10:35
profile than what we were used to so I
00:10:38
think if you can understand some of
00:10:40
these other markets and you can
00:10:43
underwrite to a different rate of return
00:10:45
some decent deals will get done the
00:10:48
overwhelming majority of the text backs
00:10:50
I think probably will just wind up
00:10:52
some folks will be really focused on
00:10:55
trying to
00:10:57
uh you know monetize their founder
00:11:00
promote so they'll do any kind of deal
00:11:03
the problem as you see is even whether
00:11:05
you do a good deal or a bad deal
00:11:07
with the kind of volatility we're seeing
00:11:09
in the market the likelihood is that
00:11:10
it's going to trade down pretty
00:11:11
significantly so I think most will not
00:11:13
find a home I think some will find some
00:11:16
really interesting Targets in areas like
00:11:18
energy I think are really interesting
00:11:20
agriculture like what you did Freeburg I
00:11:22
think is really interesting deal
00:11:24
and then you know what it'll be an
00:11:27
opportunity for us to retool this back I
00:11:30
don't think it's going to go away
00:11:31
I think that it is a useful tool in a
00:11:34
toolbox of many tools so there's IPOs
00:11:37
there's direct listings
00:11:40
there are specs
00:11:43
there's obviously private fundraising
00:11:45
there's convertible there's structured
00:11:47
deals so it is a tool and I think when
00:11:50
used properly it can be really helpful
00:11:51
you know for the companies that we work
00:11:53
with
00:11:54
uh it would have been impossible for
00:11:56
them to raise the quantums of capital
00:11:57
that they did primary capital from
00:11:59
sophisticated hedge funds and mutual
00:12:00
funds you know we raised billions and
00:12:02
billions of dollars for companies like
00:12:04
Sofi and Open Door
00:12:05
and I think that that's going to go a
00:12:07
long way for them to achieve their goals
00:12:08
so I think it's going to be a good tool
00:12:10
but we're going to go through a washout
00:12:13
of most of these folks who are not going
00:12:15
to be able to successfully find Targets
00:12:16
sax when we look at private companies
00:12:18
especially the late stage ones you and I
00:12:20
are involved in a number of them
00:12:22
they're doing riffs they've got
00:12:24
headwinds and their valuations are
00:12:26
underwater in many cases how are they
00:12:28
thinking about the public market Windows
00:12:31
spax Direct listings or just a
00:12:33
traditional IPO I don't know that they
00:12:35
are thinking about it I just think I
00:12:37
think like going public seems like a
00:12:39
fantasy at this point I think the whole
00:12:40
public markets exit idea is Frozen for
00:12:44
two years two years I think that's yeah
00:12:46
I think that's probably what people are
00:12:47
thinking what are these late stage
00:12:49
companies that raised Mega rounds doing
00:12:51
to work out valuation issues because as
00:12:54
chamoth just pointed out with spax one
00:12:57
of the problems was clearing Market the
00:12:59
late stage investors who came in maybe
00:13:01
they you know don't want to accept the
00:13:03
haircut in valuation even if they have
00:13:05
productive probably not enough I mean
00:13:07
what they're doing is using their War
00:13:10
chest to grow into their valuations
00:13:11
which is the Smart strategy
00:13:14
and if they're really smart they'll be
00:13:16
slashing their burn while they do that
00:13:19
but yeah it's no different than what
00:13:20
we've talked about before
00:13:22
I think the the main significance of
00:13:24
this past week is that you had the FED
00:13:26
meeting it raised another 75 basis
00:13:29
points there's no surprise to that that
00:13:30
was predicted what was new was the
00:13:33
forecast they were now saying that they
00:13:35
expect to raise another one and a half
00:13:37
percent just two months ago at the last
00:13:39
meeting they were saying 75 at this
00:13:42
meeting plus 50 after that now they're
00:13:44
saying 150 after this so you know in
00:13:48
just two months they've they've they're
00:13:50
now revised their forecasts for an extra
00:13:53
100 basis points of rate increases why
00:13:56
because inflation is worse than they
00:13:57
thought so
00:13:59
things are worse than we thought two
00:14:01
months ago the the last inflation print
00:14:03
didn't get better as fast as people
00:14:05
wanted we talked about that last week
00:14:07
now the FED is revising its forecast the
00:14:09
trajectory is bad and getting worse and
00:14:13
you finally had pal kind of throw in the
00:14:16
towel on his rhetoric around soft
00:14:18
Landing I mean first it was well we can
00:14:21
raise rates and we won't have a
00:14:23
recession then it was we might have like
00:14:25
a mild recession now he's basically
00:14:27
saying hard Landing if you if you read
00:14:30
these fomc comments so I think this was
00:14:34
a really bad week for the economy and
00:14:36
you're seeing it in the markets this
00:14:37
week I mean we are retracing almost
00:14:40
within five percent of the June lows
00:14:42
with the growth stocks being the ones
00:14:44
that are hardest hit by the way speaking
00:14:46
of growth stocks have you guys been
00:14:47
following this um
00:14:49
trials and tribulations with baijus
00:14:51
which is like the one of the largest
00:14:53
valued private companies but it's a
00:14:55
private Indian edtech company
00:14:59
essentially I think like you know there
00:15:01
was this delayed audit
00:15:02
and Deloitte couldn't certify a bunch of
00:15:04
things and then finally they were able
00:15:06
to come up with a report that
00:15:07
essentially showed instead of like
00:15:08
breaking even or making money they lost
00:15:10
almost 600 million dollars this year and
00:15:13
that a lot of the revenue that they were
00:15:15
booking were actually loans to millions
00:15:18
of uh Indian families who had basically
00:15:21
zero probability of paying them back so
00:15:24
a lot of the revenue was not real as
00:15:26
well
00:15:27
and this is like a who's who of
00:15:28
investors it's everybody from you know
00:15:30
Sequoia tiger UBS BlackRock uh Chan
00:15:35
Zuckerberg it's incredible I think when
00:15:37
the tide goes out we find out right and
00:15:39
this is what's happening the Tide's out
00:15:40
and you're going to find all the
00:15:42
weakness in the system it's all going to
00:15:43
get flushed I think this is a bit of an
00:15:45
outlier obviously like I don't think
00:15:47
that you know all these companies that
00:15:49
are worth tens of billions of dollars
00:15:50
are running so close to the Sun but it
00:15:53
just goes to show you that you know how
00:15:56
how does
00:15:58
how does this happen like how uh how do
00:16:01
you not get it you saw this on the seed
00:16:03
uh stage uh in series a we would ask for
00:16:06
a data room the person would say you're
00:16:07
the only investor asking for it and
00:16:09
you're putting in you know 10 of the
00:16:11
round these other people aren't even
00:16:12
asking for it we said okay can we still
00:16:14
see the data room and turned out there
00:16:16
wasn't one people were just making bets
00:16:18
they were making blind bets they were
00:16:19
betting without even looking at their
00:16:21
cards or thinking about the other
00:16:22
people's cards but this goes back to
00:16:24
what Friedberg was saying before you
00:16:26
know
00:16:27
I think I think there's a there's a
00:16:29
a sliver of the retail investor base
00:16:31
that is not dissimilar to a sliver of
00:16:33
the private equity and hedge fund and
00:16:35
Venture Capital space which is these
00:16:37
folks are not willing to do the work I
00:16:39
think most people are and most people
00:16:41
want to come to their own conclusions
00:16:43
but some people want to just take the
00:16:44
easy momentum driven decision and they
00:16:47
typically always get punished over time
00:16:49
there's this concept of adverse
00:16:51
selection which is that the negative
00:16:54
actors will find them will seek them out
00:16:56
and it will be a match and so they'll
00:16:58
ultimately get adversely selected into
00:17:00
the deals that blow them up
00:17:02
so the bad deals what you're saying is
00:17:04
the bad deals would find the bad
00:17:06
investors who don't do the work and then
00:17:07
they spiral and crash together that's a
00:17:10
really brilliant observation yeah yeah I
00:17:12
think I think the other that's what I'm
00:17:13
hearing I think the other thing is like
00:17:14
you you have the situation where if it
00:17:17
wasn't that it's folks Outsourcing their
00:17:19
diligence to the person that did the
00:17:21
round before it totally you know oh
00:17:23
Silver Lake did it bro same problem
00:17:24
tiger did it okay these guys are very
00:17:27
sophisticated investors I don't need to
00:17:29
do the work it turned out you did
00:17:31
because you know it's it was a very
00:17:37
Cavalier way of recognizing revenue and
00:17:40
there was a specific Playbook here too
00:17:41
that I don't know if you saw this ax in
00:17:43
the early stage where people would get
00:17:45
their friends to invest in the company
00:17:47
or some you know High net worth
00:17:49
individuals and then you look at the
00:17:50
deal and the valuation didn't make sense
00:17:52
and then you say well we would always
00:17:54
ask how much money is each person
00:17:56
putting in and we like well they're
00:17:57
normal bet size in the seat is 750 or
00:18:00
1.5 million but they're putting 50k into
00:18:03
this or 100K what's going on here and it
00:18:05
was oh they're friends with them they
00:18:06
worked at a previous company together
00:18:07
they were in the same they went to the
00:18:09
same college and so people were using
00:18:11
social proof but manipulating it to get
00:18:14
some other sucker at the table to pay
00:18:16
full price and not due diligence really
00:18:18
strange Behavior I um I was in Singapore
00:18:21
this week there was a
00:18:23
I I had a great meeting with this young
00:18:26
investor really Dynamic guy and he was
00:18:28
telling me
00:18:29
about a company in Indonesia that he
00:18:32
didn't invest in but it turned out that
00:18:34
the in that this founder was literally
00:18:37
running two parallel sets of accounting
00:18:39
systems
00:18:40
and so he was you know showing a
00:18:42
business and fundraising from this set
00:18:44
but the the real books were over here
00:18:47
and it looked a completely different
00:18:48
system and it was basically like a Ponzi
00:18:50
scheme and you know he was telling me
00:18:52
it's like impossible to root these
00:18:54
things out so what he said he relies on
00:18:57
is like you have to have a network when
00:18:59
you're doing these Frontier country
00:19:01
deals where you know he says I need to
00:19:04
find at least 10 people that know this
00:19:06
person
00:19:06
so that there is sort of like a moral
00:19:09
social proof and moral diligence that
00:19:11
happens because that person will never
00:19:13
try to commit something that egregious
00:19:15
in the face of all of their friends
00:19:17
and so you know that's a mechanism of
00:19:19
filtering this stuff out but I thought
00:19:21
that was a really interesting way of of
00:19:22
Designing a diligence process um in at
00:19:25
least in a frontier Market here I don't
00:19:27
think you have that much time to do
00:19:28
these really you know fast-paced deals
00:19:31
and the social proof matters less
00:19:33
because you theoretically
00:19:36
um you know are looking for signals of
00:19:37
traction
00:19:39
but there has to be a better systematic
00:19:41
way of getting this diligence done
00:19:42
because these things should be pretty
00:19:44
obviously well before it's a multi-deca
00:19:47
billion dollar company sax last year
00:19:48
when people were moving really fast
00:19:50
saying they don't have time for
00:19:51
diligence you're going to lose the deal
00:19:52
yada yada how did you approach diligence
00:19:54
during those Peak periods and did you
00:19:55
have those experiences where people were
00:19:57
trying to push you to close without
00:19:59
talking to customers or looking at bank
00:20:02
statements yada yada no we wouldn't play
00:20:04
that game because we always run SAS
00:20:05
metrics that's always the starting point
00:20:07
for us but you know most SAS companies
00:20:10
they have SAS metrics I mean they it's
00:20:13
so standardized that it would be such a
00:20:14
red flag if they didn't yeah I think it
00:20:16
might be companies that are you know
00:20:18
have unusual business models or maybe
00:20:20
they would say something like that but
00:20:23
no we could never do a SAS investment
00:20:25
without SAS metrics all right well this
00:20:26
is a good segue because right now U.S
00:20:28
Venture capitalists are sitting on 290
00:20:31
billion dollars in dry powder we had
00:20:33
talked about this last year how much dry
00:20:34
powder was there the market is obviously
00:20:36
collapsed but here's a chart uh from our
00:20:39
friends over at pitchbook
00:20:41
it's just extraordinary how much has
00:20:43
built up and how much has been raised
00:20:45
usvc funds raised
00:20:47
121 billion dollars during the first
00:20:49
half of this year 2022 so LPS uh still
00:20:53
have an appetite which kind of makes
00:20:55
sense that investing into the down
00:20:56
market for private companies means
00:20:58
you're going to get better deals uh and
00:21:00
you have a 10-year Horizon usvc's raised
00:21:02
139 billion in all of 2021 so if you put
00:21:05
those two numbers together
00:21:07
yeah you're looking at 260 billion
00:21:09
dollars in the last 18 months and this
00:21:13
is all record numbers being put up on
00:21:15
the board what does it say for private
00:21:16
companies sex
00:21:19
I um dispute this analysis a little bit
00:21:22
um I think there's a couple of things
00:21:24
going on that need to be taken into
00:21:25
consideration first of all
00:21:27
new funds don't get announced till after
00:21:29
the process completes and then you know
00:21:33
it may even be some time after that when
00:21:35
the VC firm feels like they want to make
00:21:36
the announcement you can't announce a
00:21:38
fund until the process is completely
00:21:40
over you get subject to all sorts of
00:21:41
additional SEC rules so you know these
00:21:45
funds might be announced in 2022 but
00:21:49
they may have actually been raised in
00:21:51
2021 so that I think is a really
00:21:53
important Point moreover a lot of the
00:21:56
funds may have already deployed Capital
00:21:57
before the crash so there was that I
00:22:00
think remarkable story that we talked
00:22:02
about months ago in TechCrunch on how
00:22:05
the latest tiger fund which wasn't even
00:22:07
announced till March or April of 2022
00:22:10
but have already been two-thirds
00:22:11
deployed by the time they even announced
00:22:14
it and so that was pretty stunning so I
00:22:17
I think that we don't really have a
00:22:19
great sense of how much of this
00:22:23
so-called dry powder has already been
00:22:24
deployed how much of it was really
00:22:26
raised before the crash it is true that
00:22:28
LP relationships with VC firms that have
00:22:31
done well are sticky and good LPS stick
00:22:34
with their Partners during a downturn
00:22:37
so look I mean the VC world's not going
00:22:39
on a business or anything like that but
00:22:40
I would tend to think that this is an
00:22:43
overly optimistic overly Rosy scenario
00:22:47
do VCS have new funds that they're going
00:22:50
to be ready to deploy in great companies
00:22:52
yes but does this mean it's going to be
00:22:55
easy no I think that the bar has gone up
00:22:58
valuations have gone down Founders
00:23:00
looking at this tweet storm I would not
00:23:02
get lulled into a false sense of
00:23:04
security
00:23:05
yeah I I agree with just to explain that
00:23:07
there's probably a six-month lag on when
00:23:09
these funds are announced the reason is
00:23:11
there's 506 B and C designations most
00:23:14
people raise under five or six B which
00:23:15
means you cannot even say that you're
00:23:17
fundraising therefore pitchbook can
00:23:18
never have that data so there's a lag
00:23:20
and people were deploying at a very high
00:23:23
velocity therefore this number could be
00:23:26
off
00:23:27
35 well if people were deploying at a
00:23:29
pace where they thought they were going
00:23:30
to go back for a new fund every year
00:23:32
which is what it was looking like in
00:23:34
2020 2021. you know if that six month
00:23:37
period might mean you've deployed half
00:23:38
the fund right so
00:23:40
um but look if if you just go back to a
00:23:44
two and a half or three year pace of
00:23:46
deployment and before in 2021 we're at a
00:23:50
one-year pace of deployment divide the
00:23:52
availability of capital by two-thirds I
00:23:55
mean you know only one-third as much
00:23:57
will be deployed in any given year
00:23:58
that's a you know significant reduction
00:24:00
so
00:24:02
um yeah I think Founders should just be
00:24:04
aware that the Market's going to be a
00:24:05
lot tighter and I think given what we're
00:24:07
seeing in the public markets this week
00:24:08
it doesn't look to me like it's gonna
00:24:10
get any better right it looks to me like
00:24:12
we're headed for I mean I called a
00:24:13
double dip recession I think a couple of
00:24:16
months ago that's exactly what it's
00:24:18
looking like in fact the FED basically
00:24:20
said as much the FED said that would be
00:24:22
just marginally positive next quarter so
00:24:25
would bounce back to slightly positive
00:24:28
growth on a real basis but then you know
00:24:32
expect it to go negative again and you
00:24:34
know recession once all these interest
00:24:36
rates kick in and by the way I mean
00:24:38
Kudos set your mouth for basically
00:24:40
calling that you know when the FED just
00:24:42
a couple months ago was saying that
00:24:43
so-called neutral would be three to
00:24:46
three and a half percent jamath was
00:24:48
saying no it's gonna be four and a half
00:24:49
five percent plus now the FED just in
00:24:51
two months is revised to saying that
00:24:53
neutral is 4.6 or something like that
00:24:56
and um and they don't think there's
00:24:58
going to be any rate reductions in 2023
00:25:01
so this is not looking good how much of
00:25:05
the issue here is
00:25:07
we don't the the data that we're seeing
00:25:10
the ground truth we're seeing as you
00:25:11
would often say uh might be very
00:25:13
different than like the reports that are
00:25:15
coming out people are talking about
00:25:17
inflation from you know 60 days ago job
00:25:19
reports that are 30 days old 60 days old
00:25:21
we don't really have live data it seems
00:25:25
like our government doesn't use live
00:25:26
data when they make these decisions is
00:25:28
that unfortunately well they
00:25:30
unfortunately don't have access to it
00:25:32
really you know they are they have
00:25:34
empirical sampling but to say that you
00:25:36
know the the US economy is automated in
00:25:39
a way where you know they can sit in
00:25:41
front of some dashboard and you know see
00:25:43
in real time what the true on the ground
00:25:45
data is is that really accurate
00:25:47
unfortunately maybe there's a Manhattan
00:25:50
Project type you know effort to do that
00:25:53
at some point for the United States but
00:25:54
it's not now
00:25:56
um I'll give you uh a bit of bad news
00:25:59
and a bit of good news uh and this is
00:26:01
just me kind of you know again looking
00:26:03
at the Mosaic and and kind of judging
00:26:05
where we are today
00:26:07
the bad news is I think that it's going
00:26:10
to be a really tough sticky time for the
00:26:14
U.S consumer probably over the next 18
00:26:16
months
00:26:18
and so I tend to think that you know
00:26:21
through the course of this year and
00:26:22
through 2023 and possibly even a little
00:26:26
bit of 24 it's going to be a grind
00:26:30
unemployment will go back up
00:26:34
inflation will be sticky real earnings
00:26:37
will shrink
00:26:39
consumption will ebb
00:26:43
and earnings will not be that great
00:26:46
but the Silver Lining is I think that we
00:26:51
are starting a bottoming process for the
00:26:53
equity markets and I think that by the
00:26:55
end of this year or the early part of
00:26:57
next year
00:26:58
most of that will be done
00:27:01
and the reason is that you know the
00:27:03
equity markets I think do a reasonable
00:27:06
job of one looking at the bond market
00:27:09
and then two looking six to nine months
00:27:12
into the future and pricing in that
00:27:15
future today
00:27:16
and so by the end of this year beginning
00:27:19
of next year I think that we will have
00:27:21
kind of bottomed and we'll start to
00:27:23
build the base
00:27:24
the thing to remind us though is that
00:27:26
you know let's just say a stock goes
00:27:28
down 20 50 percent
00:27:30
even if it rallies 50 from there it's
00:27:32
still 25 off from where yeah people
00:27:34
don't understand that and people don't
00:27:35
understand that they climb back up the
00:27:36
mountain so I would just
00:27:38
you know um
00:27:40
tell people that you know I think that
00:27:42
David is right I think that it's gonna
00:27:44
uh we're gonna feel this for a while
00:27:48
um it's this inflation as I've said for
00:27:50
a long time is going to be sticky and
00:27:51
persistent I think you're going to see
00:27:53
Fed funds at or breaching five percent
00:27:58
and uh but I think that in terms of you
00:28:02
know risk assets
00:28:03
will bottom out by the end of this year
00:28:05
beginning of next year
00:28:07
what are your thoughts you think we're
00:28:09
in the process of bottoming them out and
00:28:10
it's going to be a year of this kind of
00:28:13
schlog through the muck
00:28:17
and what signs are you looking for that
00:28:18
maybe we're getting out of it or turning
00:28:20
a corner I mean Larry Summers had some
00:28:23
good
00:28:24
tweets this week the weird you know the
00:28:26
weird thing is Larry Summers seems to be
00:28:29
like almost trying to make the case and
00:28:31
make certain points because he's not
00:28:33
being listened to I mean uh it's it's
00:28:36
it's so ironic and sad to watch uh
00:28:40
because he's such a thoughtful Economist
00:28:42
and has such a a great point of view and
00:28:45
experience that uh to leverage here and
00:28:47
clearly you know he was banging the
00:28:51
drums last year and no one was listening
00:28:52
and then he got public about it and now
00:28:53
he's
00:28:54
more repeatedly public about things
00:28:57
the point that he's made which I think
00:28:59
plays into the the political cycle
00:29:01
question which is where the tension
00:29:03
arises is in order to resolve ultimately
00:29:06
uh the inflation problem you're gonna
00:29:08
have to see a significant increment in
00:29:10
unemployment
00:29:11
and
00:29:13
and so when you raise interest rates uh
00:29:16
you know generally purchasing goes down
00:29:18
demand goes down Revenue goes down
00:29:21
layoffs happen uh some businesses go
00:29:23
bankrupt Etc so then there's this
00:29:26
trickle in the economy of of less people
00:29:28
being employed and when that happens It
00:29:30
ultimately drives
00:29:32
a political response which is hey we're
00:29:35
losing our jobs people start asking
00:29:37
their representatives do something about
00:29:38
this in Congress
00:29:40
and then these programs and these things
00:29:42
get passed which themselves are
00:29:44
inflationary
00:29:45
and that's why it's very hard to predict
00:29:48
ultimately when and how this all gets
00:29:51
resolved because we seem to have an
00:29:54
Administration that is enacting and
00:29:58
um embracing uh inflationary policies to
00:30:02
support what they consider to be
00:30:03
economic growth and improved employment
00:30:06
conditions in this country and the
00:30:08
unfortunate effect of many of those
00:30:10
policies is inflation and then it forces
00:30:12
this difficult Central Bank
00:30:13
decision-making cycle and so there's
00:30:15
attention right now that doesn't seem to
00:30:17
have a clear path to resolution that is
00:30:20
why it's very hard to to have a clear
00:30:22
prediction here we also have a very
00:30:24
significant question overhanging all of
00:30:27
these markets related to the price of
00:30:29
energy which is a key input to so many
00:30:31
Industries and and drives cost as well
00:30:34
as food and also the military conflict
00:30:36
in Eastern Europe and you know we've and
00:30:39
and then there's in the financial
00:30:41
markets this big overhand question on
00:30:43
what's going to happen with various
00:30:45
countries that make default on their
00:30:46
debt as well as China's real estate
00:30:48
bubble bursting
00:30:50
so I made this point I think a few
00:30:52
episodes ago but there's no easy answer
00:30:54
that I can just say deterministically
00:30:55
here's my prediction of what's going to
00:30:57
happen as chamoth uses the term I think
00:30:59
it's a great term there's this Mosaic of
00:31:01
things that are under under
00:31:02
consideration right now and there's a
00:31:04
tension between them all uh and um
00:31:07
and that's what makes it difficult I'm
00:31:08
sorry I didn't really answer the
00:31:09
question but that's that's kind of how I
00:31:11
think a lot of there's a lot of
00:31:13
geopolitical risk I mean we're kind of
00:31:15
you know ignoring what happened this
00:31:17
week where Putin basically is putting
00:31:19
nukes back on the table
00:31:21
now I'm not saying that's likely to
00:31:22
happen but
00:31:24
I don't know how again I don't know how
00:31:26
this Market gets a lot better with the
00:31:28
risk of War 3 handing over our heads
00:31:30
I mean who wants to enter the market
00:31:32
with that and by the way the nukes just
00:31:34
just to be clear you know um you can
00:31:37
hear certain military commanders
00:31:38
speaking publicly about this uh but in
00:31:42
the Russian military playbooks uh there
00:31:46
is specifically defined actions that can
00:31:49
lead to tactical nuclear weapon use in
00:31:52
the field there's no direct indication
00:31:54
that these things are going to be used
00:31:56
right away but the as as Sac says
00:31:59
there's like this weird like turning up
00:32:01
the volume happening on hey maybe we're
00:32:03
getting closer to a point where if Putin
00:32:05
is having tactical failure in this
00:32:08
conflict there's more Weaponry you can
00:32:10
use that has greater impact and
00:32:12
unfortunately there are these tactical
00:32:13
nukes in his Arsenal
00:32:15
and you know a guy that maybe has a
00:32:18
certain psychology that has as our
00:32:21
friends have said is back against the
00:32:22
wall
00:32:23
he's not a person who in his career uh
00:32:26
or in his history has ever acquiesced to
00:32:29
defeat Alex carp was on CNBC he was
00:32:31
really really
00:32:32
sharp and concise about this which is
00:32:34
that you know in the west When leaders
00:32:38
fail in their objectives they just get
00:32:41
elected out and somebody else takes
00:32:43
their place yeah but for somebody like
00:32:45
Putin there is nobody to take his place
00:32:47
because it's a very zero-sum situation
00:32:50
and so his actions will as a result also
00:32:52
be Zero Sum and I think folks he's never
00:32:54
acquiesced in his life and yeah yeah
00:32:57
we've never we've never really kind of
00:32:59
like we don't understand well what
00:33:01
zero-sum decision making looks like when
00:33:03
it comes to stuff like this he needs the
00:33:05
Golden Bridge right give him the goal he
00:33:07
does yeah but I'll just say two things
00:33:09
one is that
00:33:11
I think it's been made pretty clear that
00:33:14
both India and China will not stand
00:33:16
beside Russia if they do something like
00:33:18
this and I think that that is important
00:33:20
because they still are the two biggest
00:33:22
purchasers of of Russian oil and so I
00:33:25
think that matters a lot because you're
00:33:26
talking about a lot of Revenue that
00:33:27
would that would go away and then the
00:33:29
second is I mentioned this last week and
00:33:31
this may sound dumb to some of you but
00:33:34
um don't sleep on the Russian mothers
00:33:36
and what happened oh you're 100 right on
00:33:38
that thing what happened this week was
00:33:40
really interesting which is that he
00:33:41
calls up all these reservists these
00:33:42
reservists are not coming from the major
00:33:44
cities of Russia you're starting to see
00:33:46
protests you're starting to see young
00:33:47
people saying I don't want to do this
00:33:49
yeah and who's that really activating
00:33:51
it's activating the moms yep
00:33:57
you know to basically go fight and I
00:34:01
actually think David's right oh sorry
00:34:02
sorry go ahead the question I have for
00:34:04
you is do you think that I know you
00:34:06
don't agree with this but do you think
00:34:07
the strategy is to back him into a
00:34:10
corner
00:34:11
um and then have this like rhetoric
00:34:13
Spike to then force a resolution I know
00:34:15
it's a danger strategy it's a crazy
00:34:16
chess move but do you think that's
00:34:18
actually what the West is thinking
00:34:21
I see no evidence that we have any uh
00:34:24
intentions of seeking a diplomatic
00:34:27
off-ramp I see no evidence that they're
00:34:29
looking for to give him a golden bridge
00:34:31
like you said then do you think they're
00:34:33
trying to break him and have regime I
00:34:35
think Biden stated at the policy which
00:34:37
is this man cannot remain in power I
00:34:38
think he blurted out the truth of his
00:34:40
policy this is a regime change policy
00:34:42
that's what they're going for they are
00:34:43
backing me into a corner I thought that
00:34:45
you were right this whole time which is
00:34:47
we're going to build a golden bridge
00:34:49
we're going to find a way to egress this
00:34:50
guy and I'm now sort of in the David
00:34:53
Camp which is I think that
00:34:55
the the stated strategy of the Western
00:34:58
Alliance is essentially to cause him to
00:35:00
make such a categorically catastrophic
00:35:02
mistake so as to become a pariah so as
00:35:05
to either get overthrown or you know
00:35:07
something so I I do think that on
00:35:09
balance
00:35:10
the risk is now for things to escalate
00:35:14
maybe not in
00:35:16
quantity and I'll use this word in the
00:35:18
wrong way but you know quote unquote
00:35:19
like the intensity of of it so
00:35:23
um I I think David's right it's a lot of
00:35:25
pressure to the economy and to to high
00:35:28
risk assets there's a high-risk strategy
00:35:30
we got a good thing going over here I
00:35:31
don't see the need for all this risk
00:35:34
so look and part of the risk would be
00:35:37
the reward what would you see the reward
00:35:38
if Putin was removed oh my Lord
00:35:40
well it depends who replaces him what if
00:35:42
we get a hardliner you gotta remember
00:35:43
Putin's taking out all the liberal
00:35:45
reformers all that's left are hard so I
00:35:47
know I know there's moms protesting in
00:35:49
the streets but he's also under intense
00:35:51
pressure from his his right wing you
00:35:55
know he's got Hawks on his side who
00:35:57
basically have been criticizing him for
00:36:00
making this a special limited Military
00:36:02
operation instead of a war they're like
00:36:03
why did you try to do this with 200 000
00:36:05
troops we should have gone into heavy
00:36:07
with a million is that right there's
00:36:08
criticism there's a New York Times
00:36:10
article about this he has his own you
00:36:14
know military hardliners in his Security
00:36:16
State his Hawks so so he's not just
00:36:19
under pressure from peacenix who are
00:36:21
protesting in the streets he's also
00:36:22
under pressure from hardliners in his
00:36:24
own government who think he's been too
00:36:26
soft yeah it's a challenging situation
00:36:30
he said he said he's going to be 70
00:36:32
years old how many years does he have
00:36:33
left we just need to contain him for a
00:36:35
decade was on our side I don't contain
00:36:37
him for one more decade that's my best
00:36:39
idea contain him for a decade the thing
00:36:41
I have the most trouble with is if you
00:36:42
look at the media portrayal of this so I
00:36:44
said last week when you know we had this
00:36:46
successful counter-offensive that maybe
00:36:49
we'll get what we want which is Russian
00:36:51
moral collapses they just tuck their
00:36:52
tail between their legs and go back to
00:36:54
Moscow or maybe
00:36:56
you know the Russians really do see this
00:36:57
war as existential for them Putin sees
00:37:00
it as existential for himself and he
00:37:02
escalates well what happened this week
00:37:03
we went up or wrong on the escalatory
00:37:05
ladder basically Putin Drew down 300 000
00:37:08
more troops and he's basically indicated
00:37:10
his his willingness to use tackle nukes
00:37:13
and he's basically said I'm not bluffing
00:37:15
so now what is the reaction in the
00:37:17
American Press he must be bluffing I
00:37:19
mean that basically is the reaction and
00:37:22
look I don't know how you know that
00:37:25
you know in poker what you in poker what
00:37:27
do we do when someone might be we put
00:37:29
them on a range it's called a hand range
00:37:31
right yes you can't possibly know
00:37:33
exactly what they're going to do or what
00:37:35
carts are holding so you put them on a
00:37:37
range of possible hands and then you
00:37:38
evaluate the story in light of their
00:37:41
past actions what do they do before the
00:37:42
Flop on the Flop and you you basically
00:37:44
come to a assessment of what is likely
00:37:48
based on their story now take Putin's
00:37:50
story like Friedberg said he's never
00:37:51
backed down in his life from anything
00:37:53
um he has said this war is existential
00:37:55
you know he basically threatened to
00:37:57
invade and so he did I mean like I don't
00:38:00
know how you can immediately jump to the
00:38:01
conclusion this is just a bluff maybe it
00:38:03
is but well it could still be it could
00:38:05
still be a bluff but then to your point
00:38:07
the range of outcomes does include uh
00:38:09
shoving on the river moving all in I
00:38:12
mean he's a king GB agent do you want to
00:38:14
play the poker with a KGB agent with
00:38:16
nukes it's right and so Jason you said
00:38:18
throughout this guy's a Madman well
00:38:20
exactly I mean personally I think he's
00:38:22
more like uh ruthless mafia boss than a
00:38:24
Madman but but let's say you're right
00:38:26
that he is a Madman what is the story
00:38:28
about what we're doing
00:38:31
that makes sense if he is a Madman why
00:38:34
would we want to basically back him into
00:38:35
a corner like that why wouldn't we give
00:38:37
him the the golden off ramp and by the
00:38:39
way just on this idea that no one would
00:38:40
ever use
00:38:42
tactical nukes let me just give you
00:38:43
three data points first of all we use
00:38:45
them we drop two atomic bombs on Japan
00:38:47
and to end World War II we could have
00:38:50
won that war without doing it but we
00:38:51
didn't want to lose the troops
00:38:53
those are just they were tactical nuke
00:38:55
size atomic bombs number two
00:38:58
MacArthur wanted to use 20 to 30 atomic
00:39:02
bombs to end the Korean War he had a
00:39:04
whole plan Truman fired him he thought
00:39:06
he basically had jumped the shark but
00:39:08
MacArthur was the most respected and
00:39:11
admired American in 1950 and the reason
00:39:13
why Truman could not run for your
00:39:14
elections because he fired MacArthur
00:39:16
MacArthur would have used basically the
00:39:18
equivalent of tactical nukes to win the
00:39:20
Korean War and his plan to prevent China
00:39:22
from reinvading from the north was to
00:39:25
irradiate the border so completely that
00:39:28
Chinese troops could not go through it
00:39:30
keep in mind there wasn't as many nukes
00:39:31
at the time so we weren't up against
00:39:33
nine different nuclear enabled countries
00:39:34
but we had an American Commander ahead
00:39:36
of our military who was willing to use
00:39:38
nukes to win a war so this idea that he
00:39:41
wouldn't I mean we you've been willing
00:39:42
to do that and the third example is
00:39:44
obviously the Cuban Missile Crisis all
00:39:45
of Kennedy's military advisors were
00:39:47
willing to get to use nukes I mean and
00:39:50
the best thing Kennedy did was not
00:39:51
listen to his military advisors they
00:39:53
were all super hawkish and Kennedy what
00:39:56
did he do he looked for a way out he
00:39:57
looked for a compromise he sent Bobby
00:40:00
Kennedy to go cut a secret deal with the
00:40:02
Russians were Kennedy agreed to pull the
00:40:05
r Jupiter missiles out of turkey if the
00:40:08
Russians would pull their missiles out
00:40:09
of Cuba and then he lied to the American
00:40:11
public about it because he didn't want
00:40:13
to be perceived as backing down but
00:40:15
that's the kind of you know flexibility
00:40:17
and mental acuity that I think you would
00:40:19
need in a nuclear Showdown to avoid a
00:40:22
catastrophe if things do escalate to the
00:40:24
point of a nuclear Showdown do we
00:40:26
believe that we have leadership on the
00:40:28
level of a Jack Kennedy or Bobby Kennedy
00:40:30
who can basically show the flexibility
00:40:32
and adaptability to cut a deal to
00:40:34
basically pull us back from the brink
00:40:36
yeah it doesn't seem like that what was
00:40:38
bind's response it was he gave this um
00:40:40
speech to the United Nations in response
00:40:42
to Putin and it's more of the same as
00:40:45
more of this as I call it the Abe
00:40:46
Simpson speech it's old man you know
00:40:48
yelling at the cloud I mean he's
00:40:49
basically just yelling at a teleprompter
00:40:51
now I think the the strategically smart
00:40:54
play would have been to say listen Putin
00:40:57
you said that you want the people of
00:40:59
Ukraine to decide where these
00:41:00
territories go okay we can hold a
00:41:02
referendum but we want to administer by
00:41:04
the United Nations so it'll have so
00:41:06
it'll have some credibility behind it I
00:41:09
mean why not throw that out there as a
00:41:11
potential way to get diplomacy started
00:41:14
it felt like at the end of last year
00:41:17
you guys remember I thought like
00:41:19
conflict was likely this year
00:41:21
I don't think that the conditions that
00:41:27
I was referencing have really gotten
00:41:29
better I think they've gotten worse and
00:41:31
that's why I think we all talk about
00:41:34
this in a rational way meaning like how
00:41:37
the conscious mind would you know debate
00:41:40
the merits and and challenges and risks
00:41:42
of having a golden bridge or continuing
00:41:45
conflict
00:41:47
if you look historically
00:41:50
the U.S has often been in the middle of
00:41:53
or at the tail end of
00:41:55
some either recessionary cycle or
00:41:58
inflationary cycle when conflict
00:42:00
escalated externally Wag the Dog you're
00:42:04
referring to
00:42:05
I don't know if I would call it that but
00:42:07
I think that there is
00:42:09
a an innate human anxiety when things
00:42:13
aren't going well you feel like you have
00:42:14
to do something about it and you're
00:42:16
either going to have internal conflict
00:42:17
or external conflict as a result to try
00:42:20
and resolve when when things are going
00:42:22
great the economy is booming
00:42:24
you don't enter a war you don't start a
00:42:27
conflict with a nation when when people
00:42:28
are happy at home when your constituents
00:42:31
and um and you know the the unemployment
00:42:34
rate is low and job uh wage growth is
00:42:37
high the economy is growing are you
00:42:39
referring to the United States or Russia
00:42:41
in this case
00:42:42
I'm referring to the U.S and I think you
00:42:44
know curious if you're coming out of
00:42:46
covid and coming out of uh the the big
00:42:49
question marks that loomed over our
00:42:51
economy at the end of last year around
00:42:53
inflation uh economic growth
00:42:57
uh interest rates and the effect and now
00:42:59
we're in the middle of the turmoil
00:43:01
markets are down 30 percent and in some
00:43:04
cases 70 to 80 for high growth markets
00:43:08
there's a there's an inevitability now
00:43:10
that unemployment is going to rise there
00:43:11
is an inevitability now that the economy
00:43:13
is going to contract
00:43:16
leadership is more likely in that
00:43:18
scenario to find uh an outlet to find a
00:43:22
place of conflict
00:43:24
in this theory explain why
00:43:29
I don't think it's a conscious decision
00:43:31
I don't think that it's like hey let's
00:43:33
go start a war with Russia because the
00:43:34
economy is bad I think it's this anxiety
00:43:37
the economy is bad and there's not a lot
00:43:39
we can do about it and over here on the
00:43:40
other hand there's a problem and there's
00:43:42
something we can do about it we can
00:43:43
build strength and we can build
00:43:44
Integrity
00:43:46
um and we can build support and we can
00:43:48
get people to get behind something
00:43:49
together
00:43:50
and we can get something to to create a
00:43:53
driving mechanism to achieve something
00:43:55
big like a distraction you're saying
00:43:57
yeah yeah and I I don't think that
00:43:59
psychology is as simple as a distraction
00:44:01
or a Wag the Dog or hey it's not even as
00:44:03
simple as the military-industrial
00:44:04
complex we'll see Revenue growth and
00:44:06
wage growth and that'll drive the
00:44:07
economy but I think all those things
00:44:09
together are true and I think in in
00:44:11
whole we're we are more likely to want
00:44:14
to pursue conflict right now than we
00:44:17
were even a year ago you buy any of that
00:44:19
your mouth I think he's more right than
00:44:21
wrong
00:44:21
I think that when um
00:44:25
things aren't easy
00:44:28
you need to find
00:44:31
sort of distractions essentially to yeah
00:44:33
get people to focus on other things so
00:44:36
that the core problem isn't as obvious
00:44:38
we have in the United States I think
00:44:40
yeah let's go create another problem
00:44:41
that's solvable yeah I like the best I
00:44:43
think the best way that I can describe
00:44:45
this is I see it as
00:44:46
institutional rot
00:44:49
and the more that we're left to our own
00:44:51
devices
00:44:52
that amount of institutional Decay
00:44:54
becomes more and more obvious
00:44:56
our governments don't work the way that
00:44:58
they should you know our state
00:45:00
assemblies are basically co-opted by
00:45:02
special interests
00:45:03
the federal institutions we rely on to
00:45:05
make rules are not that great enormous
00:45:07
amounts of money get wasted every day
00:45:09
and as more and more people become aware
00:45:12
of these things
00:45:13
it just the trend is just so bad you
00:45:16
know Civic engagement goes down
00:45:18
everything just gets worse
00:45:20
and so when you take that and then on
00:45:23
top of that you sit it on a on a poor
00:45:25
economy
00:45:26
that is a real Powder Keg I think and so
00:45:29
folks like to I think if you're a
00:45:31
politician it's easier to kind of go and
00:45:33
point to Taiwan and say you know we're
00:45:36
going to go and defend these folks if
00:45:37
there's a war point to Russia and say
00:45:39
this point to all these other things
00:45:41
it's a
00:45:42
whether it's implicit as free Brook says
00:45:44
or it's more explicit of a strategy I
00:45:46
don't know but the underlying cause is
00:45:48
the same which is that if the foundation
00:45:50
of the house is not strong and you're
00:45:54
not sure what to do to fix it or you
00:45:55
don't have the courage to fix it
00:45:57
the better strategic alternative is to
00:46:00
distract and talk about your neighbor's
00:46:01
house coming out of
00:46:08
contribute to Afghanistan early 2009
00:46:10
when he took office we entered the
00:46:12
Persian Gulf with the Gulf War in 1991
00:46:14
coming out of the Great Recession or the
00:46:16
the the the the mild recession 1990 to
00:46:18
1991 2000 2001.com crash uh we um uh you
00:46:24
know we obviously entered um entered
00:46:26
Iraq
00:46:28
yeah well that was post nine post nine
00:46:30
eleven that's 9 11 but it was almost no
00:46:32
choice but it was also in the midst of a
00:46:34
recession and coming out of the game but
00:46:36
that was cool that one was clearly a
00:46:37
reaction he stacked You by this do you
00:46:38
think this is a Wag the Dog or and by
00:46:41
the way you can do the same you can do
00:46:42
the same analysis on the time we entered
00:46:44
the Korean War and the time we entered
00:46:45
the Vietnam War they were both tied to
00:46:47
recessions and um and so I don't know I
00:46:50
don't know how explicit this this action
00:46:52
and behavior is but I I just think
00:46:54
there's some data to it there was a
00:46:55
study that just came out by uh Tufts
00:46:57
University on American Military
00:47:00
interventions throughout American
00:47:01
history and what they found was that
00:47:05
we had the least in the period before
00:47:08
the Cold War then the second most was
00:47:11
from the during the Cold War but
00:47:13
actually the most hyperactive period of
00:47:15
American Military interventions was
00:47:17
post-cold war so since the unipolar
00:47:19
moment even though it's been the safest
00:47:23
period for America right we haven't
00:47:24
explained unipolar for people don't know
00:47:27
but there's only one great power in the
00:47:28
system uh before during the Cold War it
00:47:31
was a bipolar World whereas basically
00:47:32
America versus the Soviet Union and the
00:47:34
obviously had the um you know NATO and
00:47:37
the Western Alliance the so-called free
00:47:39
world and then receive check and balance
00:47:41
you have the Warsaw Pact on on the other
00:47:43
now we have unipolar moving to Bible
00:47:45
well it was it was yeah we were unipolar
00:47:47
for a couple of decades but now we're
00:47:49
moving towards multipolar or at least
00:47:52
bipolar with China yeah multi-polar
00:47:55
would be
00:47:56
maybe including India maybe including
00:47:59
India Brazil China in the future in the
00:48:01
future but but so the the irony is that
00:48:05
the safer America has become the more
00:48:08
we've gotten militarily involved
00:48:10
overseas and part of that is because
00:48:12
there's no great power in the system to
00:48:13
oppose us
00:48:15
um but it's also gotten us in a lot of
00:48:16
trouble I mean all of these wars in the
00:48:19
Middle East that cost us something like
00:48:21
eight trillion dollars another survey
00:48:23
caused a war study uh the direct number
00:48:25
of deaths from these wars from the war
00:48:27
on terror was over a million lives lost
00:48:30
eight trillion dollars and that doesn't
00:48:32
even include the excess mortality caused
00:48:34
by the destruction of infrastructure
00:48:36
wastewater treatment you know fam and
00:48:39
all that kind of stuff which could be as
00:48:40
high as five million you know the crazy
00:48:41
part about that sex that 8 trillion
00:48:43
dollars if we had deployed that in
00:48:45
energy Independence solar nuclear
00:48:47
whatever the whole reason to be in the
00:48:49
Middle East was oil and energy and we
00:48:52
could have just deployed that to be
00:48:53
energy independent in the west and not
00:48:55
had all of this pain not the whole I
00:48:58
mean not the whole reason I think the
00:48:59
reason to be in Afghanistan was to kill
00:49:01
someone with the exception of 9 11 and
00:49:02
maybe we could have done that without
00:49:04
taking over the whole country and gone
00:49:05
on this 20-yard that could have been
00:49:07
very strategic I mean actually that was
00:49:08
really proven when well first of all we
00:49:10
did Kill
00:49:12
we did kill Bin Laden in Pakistan with
00:49:15
just a raid by the seals you know
00:49:17
infiltration so we didn't need to occupy
00:49:19
that country and then more recently we
00:49:21
finally got so we're here in Afghanistan
00:49:23
using a drone after we left the country
00:49:26
so what the hell do we need to be there
00:49:27
for 20 years when we could kill these
00:49:30
guys using drones and you know a
00:49:33
helicopter team yeah this is where we
00:49:35
needed to have an adversary who could
00:49:37
check our power it would have been
00:49:39
healthier as I guess the premise to the
00:49:41
tough study right but but look I think
00:49:43
to freeburg's point is it do we become
00:49:46
more militaristic when things aren't
00:49:48
going well at home I I don't know but it
00:49:49
feels to me like just in general over
00:49:51
the last 30 years we've become hyper
00:49:54
militaristic it's the use of military
00:49:55
force is
00:49:57
typically the first option and we resort
00:49:59
to it too quickly and we don't use
00:50:01
diplomacy enough and you can see that in
00:50:03
just the number of lives lost the
00:50:05
failure of these wars and the enormous
00:50:08
deficit we're running as you know sex I
00:50:10
can't stand Trump
00:50:12
the two things he got right no Wars and
00:50:15
he was the dictator Whisperer that guy
00:50:17
knew how to talk to a dictator you know
00:50:19
whether it was North Korea China
00:50:22
Russia he just knew how to bond with
00:50:24
them it was like a superpower for him
00:50:26
okay we have three directions that keeps
00:50:27
us out of War it's great you know I mean
00:50:29
it's literally his only saving grace all
00:50:32
right
00:50:33
gentlemen we have to talk about what's
00:50:35
going on in Iran we have to talk about
00:50:37
the Wall Street editorial boards
00:50:39
California talk about talk about Newsome
00:50:41
because there's a bunch of energy stuff
00:50:43
happening in the United States which I
00:50:44
think is important all right so the Wall
00:50:46
Street Journal editorial board uh which
00:50:49
obviously has a side wrote an op-ed on
00:50:51
California's grid issues some of the
00:50:53
quotes from the op-ed California can
00:50:55
barely keep the lights on as its climate
00:50:58
policies uh bite the electric grid but
00:51:01
Gavin Newsom is undaunted on Friday he
00:51:03
signed no fewer than 40 new climate
00:51:06
bills to amp up California's green
00:51:08
Energy stock shock experiment even as
00:51:11
gasoline prices Nationwide have fallen
00:51:13
to an average of 368 a gallon
00:51:15
Californians are still paying 5 45 a
00:51:18
gallon California's electric rates are
00:51:20
already more than double those in
00:51:21
neighboring states this is what happens
00:51:22
when politicians try to eliminate fossil
00:51:24
fuels with a Molotov cocktail of
00:51:27
Regulation taxes and renewable mandates
00:51:30
and subsidies the coda to this is um
00:51:35
I'll send it to you Nick but can you
00:51:36
please play the clip as well of Rashida
00:51:38
claib trying to skewer Jamie Diamond
00:51:41
where he just destroys her God that's
00:51:43
embarrassing that was embarrassing I
00:51:46
mean we should play it I mean it's
00:51:48
she made no sense Nick can you play that
00:51:51
clip please you have all committed as
00:51:53
you all know to transition the emissions
00:51:55
from lending and investment activity to
00:51:58
line with Pathways to Net Zero in 2050.
00:52:00
do you know what the international
00:52:02
energy energy agency has said is
00:52:05
required to meet our goal Global 2015
00:52:08
Federal targets of limiting Global
00:52:10
temperature rise to 2.7 degrees
00:52:12
Fahrenheit or 1.5 degrees Celsius so no
00:52:17
new fossil fuel production starting
00:52:19
today that's so that's like zero so I
00:52:22
would like to ask all of you and go down
00:52:24
the list because again you all are
00:52:27
agreed to doing this please answer with
00:52:28
a simple yes or no does your bank have a
00:52:31
policy against funding new oil and gas
00:52:33
products Mr Diamond
00:52:35
absolutely not and that would be the
00:52:37
road to hell for America yeah
00:52:41
[Applause]
00:52:44
yeah
00:52:47
bake out their account and close their
00:52:48
account the fact that you're not even
00:52:50
there to help relieve many of the folks
00:52:52
that are in debt extreme debt because of
00:52:55
student loan debt and you're out there
00:52:56
criticizing it
00:52:57
my favorite was when she said cellaces
00:53:00
that was yeah I was like okay
00:53:03
it's just so much theatrics the Rashida
00:53:06
Talib represents the 13th District
00:53:07
congressional district in Michigan
00:53:12
the the median age in that district is
00:53:15
35.9 years old
00:53:18
the 2020 poverty rate is 28.2 so more
00:53:22
than almost one in three people
00:53:24
and uh the 2020 median household income
00:53:27
is 37 601 so you know she represents a a
00:53:31
group of people
00:53:34
that you know I think at best his lower
00:53:38
middle class
00:53:39
and the idea that she doesn't even
00:53:42
basically understand what would happen
00:53:43
in her District if you actually did not
00:53:46
have cheap LNG
00:53:49
again just kind of speaks to the
00:53:51
institutional kind of decay in
00:53:54
Washington
00:53:55
she is not the person that should be
00:53:57
advocating for this like you know it's
00:54:00
districts like this more than any other
00:54:01
that don't have the money to spend on
00:54:04
you know very expensive
00:54:06
solar installations that cost Thirty and
00:54:08
forty thousand dollars these are the
00:54:10
districts that need coal coal-fired
00:54:13
plants LNG oil
00:54:16
to keep going
00:54:18
to sort of minimize the impacts of
00:54:20
inflation
00:54:21
and so you know that was just like a
00:54:22
grandstanding moment moving to
00:54:24
California's hearings because these are
00:54:26
important discussions and they've become
00:54:28
theatrics and
00:54:30
this is a chance to educate the public
00:54:32
with some charts and data she's either
00:54:35
so hungry for power that she actually
00:54:37
doesn't care about her constituents
00:54:40
or she's scientifically and numerically
00:54:44
illiterate that's I think the latter is
00:54:46
probably the issue here and so this is
00:54:48
this is what's such a shame on the on
00:54:50
the on the other side you know at the
00:54:52
end at the other end of the coast in
00:54:54
California
00:54:56
the cost of power generation just so you
00:54:58
guys know has fallen by 90 when you look
00:55:01
at Renewables and that is because of a
00:55:03
good job that the federal government did
00:55:06
in introducing subsidies that
00:55:08
essentially gave the the right sets of
00:55:10
incentives for people to build this
00:55:12
infrastructure but while the cost of
00:55:14
generating Renewable Power has fallen by
00:55:17
90 to you know virtually it's on par and
00:55:20
it's cheaper than any other form of
00:55:21
generation
00:55:22
your electricity costs have doubled and
00:55:24
are probably going to double again in a
00:55:26
state like California so you know we're
00:55:28
catering our our utility rates by you
00:55:31
know seven to eleven percent
00:55:34
um every year that is unsustainable in
00:55:36
California and what do you have you have
00:55:39
again a different version of the same
00:55:41
flu that Rashida Talib has which is you
00:55:44
run forward to kind of virtue signal and
00:55:46
to try to do all of these things you
00:55:48
don't spend enough time to really
00:55:50
understand what's happening on the
00:55:51
ground and you make it impossible
00:55:53
for people to make the decisions to
00:55:55
actually uh be resilient for themselves
00:55:57
at the end of the day there are tens of
00:56:00
Utilities in America
00:56:02
but there are a hundred million
00:56:03
households and the only path to energy
00:56:06
Independence is to get every single
00:56:08
hundred million household to be
00:56:10
resilient which means they need their
00:56:11
own solar panels they need battery
00:56:13
storage they need their own potable
00:56:15
water and all of these systems are now
00:56:18
affordable and available and now the
00:56:21
federal government with the IRA has
00:56:23
created the financial incentives to pull
00:56:25
it forward
00:56:26
so I don't know I just think like this
00:56:28
is a hugely Stark reminder about how
00:56:30
poorly our energy policy has been
00:56:32
managed and if you leave it to the hands
00:56:34
of the progressive left they will do
00:56:37
things that don't map to what people on
00:56:39
the ground actually need people in
00:56:41
California most people in California
00:56:44
cannot pay utility rates that are going
00:56:46
to double every six and seven years
00:56:48
just like people in the Congressional
00:56:51
13th District of Michigan
00:56:53
cannot afford to pay for solar if
00:56:56
Rashida Talib is able to get you know
00:56:58
all these Banks to not Finance LNG colon
00:57:00
and and other forms of hydrocarbons as a
00:57:03
bridge fueled
00:57:05
um 40 of these bills independently and
00:57:08
you have to think about how many bills I
00:57:10
mean who's reading these things what is
00:57:12
in these things I mean each one has to
00:57:14
be addressed individually like one of
00:57:16
them could be to help people put solar
00:57:18
panels on top of schools and batteries
00:57:19
in there that could be a good bill
00:57:22
um but there definitely needs to we have
00:57:24
that mechanism at the federal level the
00:57:25
IRA passed an incredible set of
00:57:27
incentives both for the producers of
00:57:29
these things and for the for the end
00:57:31
companies that actually deploy them yep
00:57:33
and so we've solved that problem you
00:57:36
know so I I just think like it just goes
00:57:38
to show you a ton of Regulation does not
00:57:41
actually add and get to the solution
00:57:42
that we want the government will not
00:57:44
solve your problems I hate to be the
00:57:46
bearer of bad news but they are going to
00:57:49
make things more complicated and more
00:57:51
expensive and the result resilience that
00:57:54
you expect out of your utility
00:57:55
infrastructure by the way we saw just
00:57:57
what happened last week there was a
00:57:59
massive fire and a massive battery
00:58:00
installation that California installed
00:58:03
182 gigawatt system megawatt system
00:58:05
could you imagine if that had actually
00:58:07
lit on fire two weeks earlier in the
00:58:09
middle of this crazy heat wave that we
00:58:11
had
00:58:12
so even even utility scale Renewables
00:58:15
are very complicated projects to
00:58:18
undertake look at Texas I mean people
00:58:20
are dying there because the grid keeps
00:58:21
going down it is much safer and more
00:58:23
reliable if is if if every homeowner in
00:58:26
the United States took responsibility
00:58:27
and and used these incentives
00:58:31
to basically become your own little
00:58:32
virtual power plant and you will
00:58:34
technology is there I mean getting
00:58:36
generators for natural gases backups so
00:58:39
we're going to have to figure out how to
00:58:40
take the load off the grid and build
00:58:42
resiliency into it I don't know if you
00:58:43
guys saw
00:58:44
in a related story all this ESG stuff is
00:58:46
kind of coming to a head but uh Dilbert
00:58:48
got canceled this week in like 200
00:58:50
newspapers did you see this what
00:58:53
yeah how is it possible well because
00:58:55
he's been going after ESG uh in his
00:58:58
cartoon and so uh
00:59:00
I'm interested in your take on this but
00:59:03
here uh I don't know the characters in
00:59:05
Dilbert except for Dilbert but he says
00:59:06
uh this person who's in charge says our
00:59:09
ESG squirrel will drop if we open a new
00:59:11
Factory that adds CO2 to the atmosphere
00:59:13
but we can balance that out by adding
00:59:15
more diversity to our board
00:59:17
and I guess the cat says how much CO2 do
00:59:20
you plan to add and he said one nine
00:59:21
binary board members were
00:59:25
showing the es and the g being put
00:59:27
together makes no sense
00:59:29
but that that panel obviously got him
00:59:31
canceled what what does it mean he's
00:59:33
canceled like he was fired from National
00:59:35
newspapers I think one of the 177
00:59:38
newspapers because they're all part of
00:59:39
chains now and I guess because because
00:59:42
of that cartoon that cartoon plus it's
00:59:44
like a series going after the social
00:59:47
governance part of you know
00:59:49
environmental and pointing out he stated
00:59:52
on his podcast that he wants to kill ESG
00:59:54
so this whole ESG debate he's trying to
00:59:57
further it but I guess
00:59:59
but yeah I mean the the concept of ESG
01:00:02
makes a ton of sets I think the problem
01:00:04
is that it does implement this yeah this
01:00:06
version 1.0 implementation
01:00:08
was financialized by people that have no
01:00:11
care about ESG at all and so all it's
01:00:13
done is create complexity and
01:00:15
consultants and you know studies make
01:00:18
sense or it doesn't make sense no the
01:00:19
words
01:00:21
E S and G make right a lot if they have
01:00:23
commas or periods between them I guess
01:00:24
is the question that's fine too but my
01:00:27
point is saying that you want you know
01:00:29
diversity and you want sustainability
01:00:32
and you want better governance all good
01:00:34
all of these things are really great
01:00:35
ideas it's just that in this first
01:00:37
implementation it got financially
01:00:39
perverted and so what you have are folks
01:00:42
that are you know probably not the best
01:00:44
positioned or should not really have an
01:00:46
opinion about ESG opining about things
01:00:49
that they never were given the authority
01:00:50
to a pine on and then as a result what
01:00:52
it's really created is the cottage
01:00:53
industry of Consultants that can
01:00:56
basically make you know
01:00:58
hundreds of millions of dollars writing
01:01:00
all of these reports
01:01:01
and I think that that's why this
01:01:03
implementation doesn't work so ESG today
01:01:05
is broken and I think it's largely
01:01:07
meaningless
01:01:09
the concept of what people want is is a
01:01:11
very good idea we just need a better way
01:01:13
to implement I agree with that you can't
01:01:14
connect these things so the we're going
01:01:16
to put social and governance with
01:01:18
environment it's all that's going to do
01:01:19
is hold back the environment rights
01:01:21
we're having all of fed beef tonight oh
01:01:23
this is you need to try it I'll see what
01:01:26
I can do no you have to do it you have
01:01:27
to do exactly okay once you have to say
01:01:29
sax commit no you cannot
01:01:32
imagine what does a beef look like that
01:01:33
has been only fed green olives pitted
01:01:36
green olives I can tell you I can tell
01:01:38
you how it looks delicious
01:01:40
is it green it's the most delicious
01:01:42
steak you've had in your life it's the
01:01:44
most delicious all right I'll come for
01:01:46
that okay it's incredible awesome it's
01:01:48
actually gonna drive me with your driver
01:01:49
text me your address so I know where to
01:01:51
get you oh I love it oh this is gonna be
01:01:53
great game on listen to this lineup me J
01:01:56
Cal
01:01:59
Friedberg sacks uh
01:02:02
he's flying it
01:02:04
this thing this is gonna chop up this
01:02:07
game is no more flips the flips are
01:02:09
ridiculous okay you know what now now
01:02:10
that sax is coming I'm gonna tell him to
01:02:12
break out the early white truffles
01:02:15
I'm just kidding truffle pigs not not
01:02:19
just walk to my office she looked at me
01:02:20
when I said white truffle she's like
01:02:24
four bestie dinner it's happening
01:02:26
everybody oh it's happening it's
01:02:28
happening you know what I saw was
01:02:29
helmute the other day um on one of his
01:02:31
heads up matches where he got in that
01:02:33
huge fight with that guy did you guys
01:02:34
see that and he couldn't think that's
01:02:35
every match you just described every
01:02:37
match he's ever this was like some heads
01:02:38
up thing and the guy um had flopped some
01:02:42
insane I think it was like quads or
01:02:43
something or and helmet have had like
01:02:45
top pair except yeah yeah yeah yeah and
01:02:47
help me fold it on this guy it was
01:02:49
incredible to watch the play like the
01:02:50
read from helmuth was unbelievable he is
01:02:53
incredible he's a freaking scene on that
01:02:54
guy he's pretty great he's got
01:02:56
unbelievable there's a reason he's the
01:02:57
greatest poker player in the world he
01:02:58
really he his reads are unbelievable do
01:03:01
you think that what percentage of it is
01:03:03
obviously he is an incredible player but
01:03:06
there's another piece of this that we
01:03:08
all see which is people play into him
01:03:09
they want to be in a hand with him they
01:03:11
want to bust him so in those tournaments
01:03:14
what do you think no I think I think
01:03:16
what's happening is at the highest level
01:03:17
there's like all these people that have
01:03:20
gone in This One Direction and by the
01:03:21
way this is probably a good we could
01:03:23
talk about Chess in the same way which
01:03:25
is that you have these solvers right
01:03:27
there's poker solvers and now they're
01:03:28
they're these chess solvers and the
01:03:30
Young Generation spends all this time
01:03:32
training on the solvers so that they
01:03:34
know every permutation of every move and
01:03:37
what is what people call Game Theory
01:03:39
optimal or GTO
01:03:40
the problem with GTO is that you can
01:03:42
actually be very exploitative against
01:03:45
somebody that's actually playing
01:03:46
perfectly because the AI is perfected
01:03:50
around what is the rational set of
01:03:51
decisions in every spot and so you can
01:03:53
set people up to make a lot of really
01:03:55
bad mistakes and I think helmuth
01:03:57
understands that and so because he is
01:03:59
one of like this dying breed of people
01:04:01
that plays live
01:04:03
he's able to just be so exploitative and
01:04:06
these folks that are basically playing
01:04:08
from rote memory right
01:04:11
um what is the GTO move in every spot
01:04:12
they end up making a bunch of mistakes
01:04:14
and
01:04:15
um and feeding chips into him
01:04:18
and so I think like it's uh it's
01:04:19
probably the same as as sort of this
01:04:21
Magnus Carlson he kind of knew what to
01:04:23
expect from people and the minute this
01:04:26
get deviated into this realm where you
01:04:27
were like how could you make that
01:04:28
decision
01:04:30
probably because you know the the
01:04:32
computer AI is able to calculate make a
01:04:35
slightly losing move now three moves
01:04:37
later you're gonna actually be ahead it
01:04:39
caught him off guard where he was
01:04:40
basically like I think this guy's
01:04:42
cheating
01:04:43
really really crazy but I I think like
01:04:45
if you if you have a bunch of GTO kids
01:04:48
folks that are a little bit older that
01:04:50
have been playing in a live situation
01:04:52
can be hyper exploitative by the way
01:04:54
this is a good point generally about
01:04:56
about this gaming is that computation
01:04:58
has played um and computers have played
01:05:00
such an incredible role it almost
01:05:02
becomes questionable on how much can the
01:05:06
human really differentiate anymore uh in
01:05:08
these uh in these games and in these
01:05:10
systems
01:05:11
you guys watch the the chess players on
01:05:13
YouTube and they'll have solvers live
01:05:15
and they'll be getting live scoring as
01:05:17
they kind of walk through a match or uh
01:05:19
walk by the way free bird area that's
01:05:21
that's the same with poker you have
01:05:22
these Huds these heads-up displays
01:05:25
and a lot of the poker sites have
01:05:27
basically given up they try to spot the
01:05:29
cheating and you can it could because
01:05:31
you have this basically layer that's
01:05:33
helping you and it's effectively
01:05:34
impossible because you know the these
01:05:36
things run locally they're screen
01:05:38
scraping locally and you just have no
01:05:40
idea except when they make moves that
01:05:43
are just so unpredictable from a human
01:05:45
and could only come from a from a from a
01:05:47
machine yeah all games maybe become
01:05:50
obsolete because there is no real way to
01:05:54
qualify the performance of one human
01:05:55
against another when the AI itself or
01:05:58
the technology or the Computing itself
01:05:59
you know over Shadows human potential
01:06:01
and human capability you guys may not
01:06:03
know this story but when I met Demas
01:06:06
the the founder of deepmind I got
01:06:09
introduced by Teal like in 2011 or 12 so
01:06:12
like a decade ago and I met him in
01:06:14
London I'll never forget this at the we
01:06:17
were having breakfast at the Conant
01:06:18
hotel and he explained to me Deep Mind
01:06:21
in the context of a game because at that
01:06:23
time how they were building the first
01:06:25
versions of the AI
01:06:27
was perfecting how to play certain video
01:06:29
games and I can't remember the name of
01:06:31
the video game but it was one of the
01:06:32
famous first person shooter games and
01:06:34
the whole idea there was like you know
01:06:36
if you can perfect an AI that that
01:06:37
basically plays GTO and can win the game
01:06:39
what you've effectively solved for is is
01:06:42
like a layer of AI that can then solve
01:06:44
other generalized problems I was blown
01:06:46
away I thought this is the craziest
01:06:48
thing I've ever heard a decade ago
01:06:51
so it's it's pretty natural that they've
01:06:52
taken this stuff and adapted to meet
01:06:55
every game it's a little sad though too
01:06:57
no don't you think yeah I mean yeah but
01:06:59
I mean maybe there's a different model
01:07:01
of performance for humans that really
01:07:03
changes what the gaming is right well
01:07:07
I don't know what it is I mean I think
01:07:09
that these games themselves completely
01:07:11
um uh you know the the intent of a game
01:07:14
which is to measure one's kind of
01:07:16
decision-making abilities gets obsoleted
01:07:19
because the software ultimately is a
01:07:21
better decision maker than the human
01:07:22
so the question then is what is the
01:07:24
human going to rise to that creates a
01:07:27
new playing field
01:07:29
um and I think there's probably elements
01:07:31
of creativity and actually using the
01:07:33
software to become part of the game it
01:07:34
opens up a whole new opportunity for
01:07:36
what gaming is I mean we've been talking
01:07:38
about a little bit about video games but
01:07:39
you could see um artificial constructs
01:07:42
in gaming that arise from the human
01:07:44
interacting with the computer and then
01:07:45
creating a new sort of playing field in
01:07:46
gaming yeah sax what do you what do you
01:07:49
think about all this you're a big chess
01:07:50
player yeah I've been following it for
01:07:52
the last couple of weeks it's obviously
01:07:53
been the big story in the Chess World
01:07:55
what basically happened is that a couple
01:07:58
weeks ago
01:07:59
you might as Carlson lost that game to
01:08:02
Hans uh what's his last name I think
01:08:05
nimon yeah exactly and the next day he
01:08:09
pulled out of the tournament this is the
01:08:10
sinkfield cup and he's never pulled out
01:08:12
of a tournament before everyone was sort
01:08:14
of speculating is he sick or have covet
01:08:16
or something like that and then he
01:08:17
tweeted out a video
01:08:20
from some soccer coach saying I can't
01:08:22
get in trouble yeah yeah
01:08:24
so clearly he was in a passive
01:08:28
aggressive way of making an accusation
01:08:30
and then he doubled down a few days ago
01:08:32
he was in another tournament and he had
01:08:34
to play
01:08:36
Hans um I keep forgetting the guy's name
01:08:39
um yeah
01:08:41
he had to play him and he resigned on
01:08:43
move two so basically he doubled down in
01:08:45
his accusation and he won't specifically
01:08:47
say what leads him to believe that this
01:08:49
guy is cheating but he thinks he is
01:08:53
he's uh he's a young player he's
01:08:55
something like 18. and he's had a pretty
01:08:59
meteoric rise in the trust world I think
01:09:01
his ratings gone up a couple hundred
01:09:03
points over the last two years it's the
01:09:06
fastest rise in chess rating that
01:09:08
anyone's ever had before it's been the
01:09:12
case that players have and young players
01:09:15
especially have risen quickly but this
01:09:17
is uh it's a pretty it's it's the
01:09:20
biggest how is he cheating that's
01:09:21
happened well that's the thing so the
01:09:23
the issue is that
01:09:25
it's easy to cheat in online chess but
01:09:29
in over the board you would either need
01:09:31
to have a device or to be signaled by
01:09:34
somebody in the crowd you need Human
01:09:36
Assistance or the assistance of a device
01:09:39
it'd almost be like you know a casino or
01:09:41
something where they're using the
01:09:42
contraption yeah on the guy's leg to
01:09:45
Signal you know to information to him so
01:09:48
nobody really knows how he would have
01:09:51
done it and of course he wasn't caught
01:09:53
doing it so he can never prove that he
01:09:56
wasn't so there's just a real question
01:09:58
here but they did make some changes
01:10:00
after after Magnus Carlson resigned they
01:10:03
put the feed on a 15-minute delay
01:10:07
you know I think like at some point
01:10:09
you're going to have to start wanding
01:10:10
people and having them go through a
01:10:12
metal detector
01:10:13
yeah they're gonna have to toughen up
01:10:14
all of the anti-cheating standards one
01:10:18
of the grand Masters was like we should
01:10:19
play naked in a locker room
01:10:23
it was an online site that basically
01:10:24
offered a pay Neiman a lot of money to
01:10:27
play basically naked to prove that he
01:10:29
could you know really
01:10:31
um do what he what he's been doing the
01:10:33
theory on why he's not cheating and and
01:10:37
the rise is Justified is that in theory
01:10:41
this is the argument is that he's grown
01:10:43
up learning from all these neural Nets
01:10:46
these not just chess engines the first
01:10:49
generation of Chess engines were like
01:10:51
stockfish they were just computational
01:10:52
machines that were programmed by humans
01:10:55
with thousands of rules on how to play
01:10:57
chess and then they could just crunch
01:10:59
the lines better than a human could more
01:11:01
recently thanks to deepmind it's a whole
01:11:03
different type of machine it's basically
01:11:06
these neural networks where all they're
01:11:08
programmed with are the rules of Chess
01:11:10
and then they it plays thousands of
01:11:13
games or millions of games against
01:11:14
itself and it learns the best way to
01:11:17
play chess and the the neural Nets play
01:11:20
in a whole different way than the
01:11:23
than stockfish than the pure engines the
01:11:25
the engines display like a human that's
01:11:27
able to calculate really well whereas
01:11:29
the neural Nets do things like
01:11:32
um they're sacrifices a human would
01:11:35
never make yeah they'll make they'll
01:11:37
make sacrifices for disrupees activity
01:11:39
so you know normally when a human makes
01:11:41
a sacrifice they they'll recapture the
01:11:43
material within a few moves whereas
01:11:46
um Deep Mind will sacrifice a pawn and
01:11:49
you know just for the positional
01:11:51
advantage or for the piece the increases
01:11:53
which doesn't show up for many many
01:11:54
moves right exactly it's exactly and so
01:11:57
the ability to model like 12 moves out
01:11:59
is is really but that you know that's
01:12:01
where I think people thought that Magnus
01:12:02
picked up on something because it's like
01:12:04
those sorts of moves are rare in the
01:12:07
absence of some layer of intervention
01:12:09
because typically it's like you know and
01:12:11
sacs you know this much better than I
01:12:12
but it's like you know the opening and
01:12:14
the closings of all of these chess
01:12:15
matches are sort of tightly regulated
01:12:17
there's not a lot of creativity it's
01:12:19
sort of in the mid game that you have
01:12:21
these slight positional advantages and
01:12:23
disadvant manages and so I think it was
01:12:25
Amplified that one of these positional
01:12:27
sacrifices made no sense in the context
01:12:29
of that game unless
01:12:30
you had the ability to you know think
01:12:32
really conclusively about six seven
01:12:34
moves from now by the way it's the same
01:12:36
it's the same thing in poker so there's
01:12:37
a thing if you guys want to download it
01:12:39
it's called I think it's called poker
01:12:41
snowy that was like the first layer of a
01:12:43
pretty basic AI but it's gotten better
01:12:45
and better and really what it allows you
01:12:47
to do is in every situational spot
01:12:49
whether it's heads up all the way to a
01:12:51
six-handed ring game
01:12:53
you can really understand
01:12:55
you know what to do now poker is
01:12:58
meaningfully more complicated than chess
01:13:00
um as it turns out because again you
01:13:01
have you're not playing against one
01:13:03
player you're playing against some umpty
01:13:05
number of players you know we don't know
01:13:06
when each of them is going to step into
01:13:08
a pod
01:13:09
and then there's all of those elements
01:13:11
so it's a little bit more complicated to
01:13:13
build a true kind of like neural net
01:13:15
around it but even still you can kind of
01:13:17
get a sense of um of what you should be
01:13:20
doing in different spots and what you
01:13:21
see is that
01:13:22
there's literally like trillions of
01:13:25
actions and so it really is impossible
01:13:28
for a human being to really memorize in
01:13:31
every single situation what the true you
01:13:34
know probability probabilistically
01:13:36
weighted GTO optimized move is going to
01:13:38
be and and so this is why I think a lot
01:13:40
of people I guess led by Magnus was
01:13:43
saying how could you have known this
01:13:45
unless you were aided by something it's
01:13:47
pretty clear that this guy cheated it's
01:13:49
pretty it's I mean it's what's what's
01:13:50
profound is that Mastery of the game may
01:13:53
not be achievable by a human but Mastery
01:13:56
of any one of these games may actually
01:13:57
be achievable by neural Nets and I think
01:14:00
that's what's really frustrating to
01:14:01
Magnus and to other top tier players in
01:14:04
the world that are the best humans at a
01:14:06
particular game is they're now realizing
01:14:09
you know that they really aren't the
01:14:11
true Masters that the true Masters are
01:14:13
the neural Nets and more than just the
01:14:15
guy cheating which may feel like bad
01:14:17
sportsmanship or whatever fundamentally
01:14:19
one's ego being built entirely on one's
01:14:21
Mastery of the game and being the best
01:14:23
at the game is fundamentally challenged
01:14:25
because a computer is better at the game
01:14:27
than you it's a really profound moment I
01:14:31
think that that ship sailed a long time
01:14:33
ago yeah I mean I know the Chester right
01:14:35
yeah well no it was so it was way back
01:14:38
when remember when Kasparov played deep
01:14:41
blue deep blue which is the IBM yeah
01:14:43
that was the first which wasn't even a
01:14:45
sophisticated neural net that was just a
01:14:46
almost holistically modeled yeah it was
01:14:48
a deterministically modeled system it
01:14:50
was like stockfish it was just a number
01:14:51
cruncher and it that was when computer
01:14:55
intelligence and chess tip to be able to
01:14:57
beat the world champion since then
01:14:59
there's no looking back I think every
01:15:01
human who plays in The Chess World
01:15:03
understands that computers are better
01:15:05
and there's no way for a human to be
01:15:08
better than a computer so it's certainly
01:15:11
not a neural net I mean Magnus certainly
01:15:13
knows that I don't think anyone's
01:15:14
bothered by that I think that everyone
01:15:16
understands that humans play in a
01:15:17
certain way and their goal is to be the
01:15:19
best human
01:15:21
I think the concern is just obviously if
01:15:23
a human it gets aided during a game by
01:15:26
computers but the way that chess
01:15:28
works now the preparation is all about
01:15:32
working with computers these top players
01:15:34
spend huge amounts of time researching
01:15:36
openings and looking for Novelties in
01:15:39
openings using computers to help them do
01:15:42
their research so you know working with
01:15:45
computers has now become an integral
01:15:46
part of the game it's kind of like you
01:15:48
know in many sports where the technology
01:15:50
has enabled the athlete to get better
01:15:52
you know and um and as really technology
01:15:55
becomes the key Vector of competition
01:15:57
this actually happens in the NBS this
01:15:59
happened in the NBA where there's a
01:16:01
special technology for three-point
01:16:03
shooting in your form Etc and the Knicks
01:16:06
actually and a couple of other teams
01:16:07
implemented it a couple of years ago and
01:16:09
you saw the entire team became better at
01:16:12
three-point shooting so people who were
01:16:13
you know 200 300 you know moved up 10 20
01:16:16
each but this kid is clearly cheating
01:16:19
because
01:16:20
he's cheated in the past and people who
01:16:21
cheat in the past cheat in the future is
01:16:23
my basic belief so this guy Neiman
01:16:25
publicly admitted that he used
01:16:27
electronic devices to cheat when he was
01:16:28
just a kid on online games when it was
01:16:30
12 to 16 years old so the question is
01:16:32
like no but Jason it's worse than that I
01:16:34
think because then chess.com came out
01:16:36
and said actually the cheating was more
01:16:38
rampant than just those two incidents
01:16:40
their algorithm determined it yeah yeah
01:16:42
so why are people playing with him
01:16:45
well because he said that yeah he said
01:16:49
that was those games were not for money
01:16:51
and
01:16:53
um he was just wonderful he was raiding
01:16:54
fast and he's like the poker guys who
01:16:56
cheat you and what if you're a poker guy
01:16:58
and you've cheated before you never play
01:16:59
with those players again they're
01:17:00
cheaters it's obviously well the issue
01:17:03
here is that this was an over-the-board
01:17:05
tournament where
01:17:07
um the one that Magnus pulled out of in
01:17:09
order to protest so the question is how
01:17:10
could he have been cheating right now I
01:17:14
think what what adds to the complexity
01:17:16
of it is that you have to remember that
01:17:18
when you're dealing with a player look
01:17:19
if it was us playing Magnus we'd need to
01:17:21
cheat on every single move but if you're
01:17:23
a 26 or 2700 player
01:17:26
and you know Magnus is at 28 60 or
01:17:29
something the higher the rating the
01:17:30
better in chess called the ELO
01:17:32
but anyway if you're like a 26 2700
01:17:35
player like Neiman you only need help
01:17:38
with a few moves in the game in other
01:17:40
words if you could get a tip at a
01:17:43
critical moment of the game that might
01:17:45
be all you need to put you over the top
01:17:47
you wouldn't need to in other words to
01:17:48
beat Magnus you wouldn't need to cheat
01:17:50
on every move you could just if you just
01:17:51
cheat on two or three moves at the right
01:17:54
time that could put you over the top so
01:17:57
something could vibrate on your leg four
01:18:00
times and then two times over to tell
01:18:02
you which piece to move that's what they
01:18:03
were saying Jayco like he had like a
01:18:05
vibrator in his like where was the
01:18:07
vibration in his shoe there was a meme
01:18:10
that became like a whole thing where it
01:18:11
was like he had something in his butt or
01:18:13
something
01:18:14
and anal chest computer is what you're
01:18:17
saying okay look that's not real
01:18:18
somebody's special someone made it yeah
01:18:21
and then it became somebody did a Reddit
01:18:22
post saying that he was being
01:18:24
communicated with through vibrating anal
01:18:26
beads and then that went viral Elon
01:18:29
tweeted it although I think he deleted
01:18:31
it look it's absurd but the point is
01:18:34
there is a question of how would he have
01:18:36
done it if he did it yeah there have
01:18:39
been cases and caught yeah people
01:18:42
getting caught going to the bathroom and
01:18:44
then you know checking their phone yeah
01:18:45
there's a there's a grand Bulgarian
01:18:47
Grandmaster you got caught in the
01:18:48
bathroom checking his phone and oh God
01:18:50
metal detectors on the way in and they
01:18:52
have RF detectors in the room right so
01:18:54
they look for any sort of communication
01:18:56
do you remember that going into this
01:18:59
event you just kind of
01:19:00
Justice
01:19:02
the the singfield cup added a 15-minute
01:19:05
delay after these accusations so yeah I
01:19:08
think
01:19:09
there's going to be they're going to be
01:19:10
more precautions basically but we still
01:19:13
haven't heard from Magnus what made him
01:19:15
think that there was Foul Play here in
01:19:17
this particular game and he's been very
01:19:18
reluctant to he won't say anything it's
01:19:20
it's sort of um passive aggressive now
01:19:22
the full side of it is that Magnus
01:19:24
Carlsen has been the number one player
01:19:26
in chess for over a decade and he's a
01:19:29
very classy player I mean I don't you
01:19:31
know everyone's
01:19:32
never heard a word said about him that
01:19:34
you know was uh now he can be cocky he
01:19:36
can definitely be cocky but uh he is a
01:19:39
very classy player so I just don't see
01:19:40
him doing something like this lightly so
01:19:43
that's what's so
01:19:45
dramatically to understand about it
01:19:47
dramatic is yeah it's really hard to
01:19:49
understand how Neiman Could Have Cheated
01:19:51
but also Magnus doesn't seem like the
01:19:53
kind of player to just make a wild
01:19:55
impulsive allegation so this is why the
01:19:57
chess world's just been really roiled by
01:19:59
this all right is there like a any kind
01:20:01
of equivalent of like ped Scandal here
01:20:04
like people taking Adderall or provigil
01:20:07
or any other kind of nootropics to to
01:20:09
get an edge
01:20:12
there's a good documentary I think it
01:20:14
was on Vice on how a lot of the top
01:20:16
chess players actually get ready for
01:20:17
matches and
01:20:19
um they're incredibly diligent about
01:20:21
their sleep their workout routine
01:20:22
alcohol they do take supplements I
01:20:25
forgot who made the documentary but it's
01:20:26
actually incredibly intense how physical
01:20:28
these people are uh well like one game
01:20:30
of classical chess can burn like over 2
01:20:33
000 calories or something like that like
01:20:34
the amount of calories that get burned
01:20:37
just by using your brain so intensely
01:20:40
Adderall is rampant in the poker
01:20:42
Community especially in tournaments so
01:20:44
when you play the the higher tournaments
01:20:46
and I've played them and I just kind of
01:20:48
step in and and it's I felt very
01:20:51
underpowered relative to the to the kids
01:20:53
I was playing with because they were all
01:20:54
on Adderall well these are 12 hours but
01:20:56
10 hour sessions over 12 hours session
01:20:58
right it's exhausting it's really really
01:21:00
physically exhausting to put that's why
01:21:02
I stopped playing tournaments about a
01:21:03
decade ago I just couldn't sit there for
01:21:05
that long it could justify the time suck
01:21:07
of it too it's like it's just so it's
01:21:09
just so physically and emotionally
01:21:12
demanding to be able to play that well
01:21:15
and make no mistakes over 10 hours
01:21:18
um and so you know the only solution
01:21:19
that all these kids would turn to was
01:21:22
um was Adderall and I was like this is
01:21:23
not worth it for me so I stopped I
01:21:24
stopped playing in tournaments and which
01:21:26
was too bad because I I thought like I
01:21:28
could have a real chance of actually
01:21:28
doing reasonably well in some of these
01:21:30
things and I just gave up by the way the
01:21:31
other thing I wanted to mention is
01:21:33
there's there's been like cheating in
01:21:34
all these other kind of sports and it
01:21:36
always gets exposed like whether it's
01:21:37
you know the Tour de France it turned
01:21:40
out that everybody was using Peds or you
01:21:42
know the Russian Olympic team everybody
01:21:44
was using Peds New England Patriots
01:21:46
stealing signals yeah all right listen
01:21:48
let's just talk about the Iran protest
01:21:50
for a moment
01:21:51
um Iran has shut off internet access
01:21:53
internet access in parts of Tehran and
01:21:56
blocked access to Instagram and WhatsApp
01:21:58
to try to stop these protests the
01:22:00
protests started after the death of a 22
01:22:01
year old Kurdish woman
01:22:04
um while in place custody Masa amini was
01:22:08
detained on September 16th for allegedly
01:22:10
wearing uh hijab head scarf in an
01:22:12
improper way she later died in police
01:22:16
custody
01:22:18
and activists are saying she suffered a
01:22:20
fatal blow to her head
01:22:23
and now you have 15 cities with very
01:22:26
large crowds women are burning
01:22:28
their hijabs and it seems to be
01:22:31
escalating at a pretty uh fast-paced
01:22:34
Iranian authorities uh are denying that
01:22:36
they had any
01:22:38
part in her death
01:22:40
thoughts on this it's horrible
01:22:43
yeah I wish them well if you look at the
01:22:46
demographics of Iran it's pretty amazing
01:22:49
how many young people there are here
01:22:50
this feels like a country that could
01:22:52
turn over that'd be great and you want
01:22:54
to know why it has a chance of working
01:22:55
because we're not the ones behind it I
01:22:58
mean absolutely yeah we cannot
01:23:01
yeah
01:23:02
run the revolution the revolution has to
01:23:04
be done but to the women and young
01:23:07
people of Iran protesting you have our
01:23:08
support and we're rooting for you and
01:23:11
don't let the bastards grind you down
01:23:13
all right everybody
01:23:15
four
01:23:16
uh
01:23:18
David forgot our names did you forget
01:23:20
our names no I'm just I was gonna try to
01:23:22
come up with a new name for
01:23:24
uh rageberg like Friedberg I think David
01:23:28
Plainview rage Burger rage for rage
01:23:30
Burger Plainview
01:23:33
the uh David the dove
01:23:35
and the host with the most tremath
01:23:39
polyhapatia I'm the world's greatest
01:23:40
moderator I'm so excited to see all
01:23:42
three of you honestly uh socks don't
01:23:44
flake I love you guys I really want to
01:23:46
play sacks we should roll down together
01:23:48
let's roll baby big game all right we'll
01:23:51
tell you guys in that game love you
01:23:53
besties bye
01:23:55
your Winner's ride
01:23:57
Rain Man Davis
01:24:04
and they've just gone crazy
01:24:06
[Music]
01:24:14
besties
01:24:16
[Music]
01:24:28
it's like this like sexual tension that
01:24:31
they just need to release
01:24:32
[Music]
01:24:38
we need to get Mercies
01:24:43
[Music]
