0:00

What are the next steps in your interview process

0:02

for your cabinet position? Secretary

0:04

of Treasury, Chamath, Secretary

0:07

of State sacks. J

0:09

Cal,

0:10

press secretary, obviously, press secretary. Oh

0:13

my god, press secretary. Can you imagine me

0:15

in the press briefing room? Whoever

0:17

wins the presidency, I just want you guys

0:20

to know I would I would be a great secretary of sweaters.

0:22

I will source incredible cashmere.

0:25

I will redesign

0:27

the outfits of the entire

0:30

military industrial complex. The

0:33

Navy SEALs will be in Laura Piana from head to toe.

0:35

They're gonna go whack

0:38

Osama bin Laden next time with Laura Piana

0:40

French shoes. Could you imagine SEAL

0:42

Team six? Absolutely.

0:46

It's gonna be great. It's chilly in those

0:48

Apaches in the Blackhawks. You're

0:50

gonna want like a pashmina wrap or a

0:53

pashmina wrap. Have

0:55

you been to Afghanistan at night? It's freezing.

1:16

All right, everybody, welcome to Episode 151 of

1:18

the All In podcast

1:21

with me again today. The Sultan

1:24

of science, the Queen of Kenwa, the Prince of Panic

1:27

Attacks, David Friedberg,

1:29

the dictator himself, Chamath Palihapitiya,

1:32

and your crazy angry history

1:34

uncle, David Sachs is here. Welcome

1:37

to the program, everybody. We got

1:39

a very full docket.

1:41

I guess we'll start it off with how

1:43

the war and the conflict in the Middle East

1:45

is going here. Sachs, you hosted a Twitter

1:48

space

1:49

with Vivek and Elon

1:52

on preventing World War

1:54

Three.

1:55

What was the premise and the reason

1:58

for setting up this?

1:59

trio to talk about

2:02

World War III. Well, I think

2:04

Vivek actually had the idea to do

2:06

it. We had a couple other folks on the panel

2:08

as well. We had Colonel Daniel Davis,

2:11

who has a podcast called Deep Dive. He's a military

2:13

expert. We had Alexander Mercuris

2:15

from the Duran, which is a top geopolitics

2:17

podcast. And so we were talking

2:20

about the risk of a series

2:22

of chain reactions that could happen

2:24

in the next few weeks here over what's happening

2:26

in the Middle East. Elon wanted to

2:29

do it because of what he

2:31

said, which is that he's talking to a lot of world

2:33

leaders. He's talking to a lot of different people.

2:35

And they tell him that the risk

2:38

of some major war happening

2:41

or some greater catastrophe is higher than

2:43

they've ever seen. So he was quite

2:45

concerned about that. And

2:49

I think a few things came out of it. The first

2:52

is, and I think Elon took this position

2:54

most strongly, we really need to end the war

2:56

in Ukraine. The combination

2:58

of having a war in Ukraine that involves

3:01

the United States and then a war in the

3:03

Middle East that could also involve the United States and

3:05

Russia has troops in Syria, there's

3:07

a lot of ways for this to spiral

3:10

out of control. There's a lot of room

3:12

for unintended consequences. His

3:14

view was, look, we've just had five

3:17

months of counteroffensive here. It didn't go anywhere.

3:20

On net, the Ukrainians didn't take back

3:22

any territory. In fact, the Russians

3:24

slightly gained territory. So this

3:26

war is going nowhere. It has failed.

3:29

It is time for the administration to

3:31

work towards a ceasefire and a resolution.

3:33

Tell for who? Well,

3:36

the Ukrainians. I'm not taking back. They

3:39

had a completely failed counteroffensive.

3:41

Okay. But you said the war is failed. So I'm just curious

3:43

which side of the counteroffensive. Sorry, the counteroffensive has failed. Okay,

3:46

got it. We're now, the counteroffensive

3:48

started on June 4th or 5th. It's

3:50

now October 26th.

3:52

And if you look at the map that the New York

3:54

Times provided, Ukraine has not taken

3:56

back any meaningful amount of territory. In fact,

3:58

Russia

3:59

on... net

4:00

has gained territory even when

4:02

it was supposed to be Ukraine on offense. So there is

4:05

no prospect of Ukraine

4:07

achieving its objective of evicting

4:10

Russia

4:10

from their territory. So what is the

4:12

point of continuing this war? What to have? To have defended themselves from

4:15

an invasion from Putin, yeah? You

4:16

would say that?

4:18

They've ended up successfully... Six thousand... ...hundreds...

4:21

What's successful about it? Several hundred thousand Ukrainian... Well, no,

4:23

they successfully didn't get taken over as a country

4:25

when they were invaded by Russia. That was

4:27

Russia's goal. Okay. So

4:30

when they sent the troops in there, their goal wasn't to invade? What

4:35

was their goal then? Honestly, you don't really

4:37

understand the history of the conflict. No,

4:39

no, I mean, we've talked about history of conflict. I'm just saying the way you're framing

4:42

it is that Ukraine found. It seems

4:44

to me they've also... The argument could be that they defended

4:46

themselves successfully. If you look at

4:48

what's happened this year...

4:50

So let's just put a pin in what happened

4:52

last year because I think there's different ways of interpreting it.

4:54

But if you look at what's happened this year, and

4:57

certainly over the last five months, Ukraine

4:59

has made no progress in evicting the Russians,

5:01

nor is there any prospect of them

5:03

evicting the Russians. So the continuation

5:05

of that war doesn't achieve anything except

5:07

kill the flower of Ukrainian youth

5:10

and continue

5:11

to... And Russian youth.

5:14

The Ukrainians are dying in much higher numbers. And

5:16

Russia is a much bigger country. They've got something like five times

5:18

the population. So moreover,

5:21

with this new conflict in the Middle East, you create

5:23

all these unintended consequences and all this risk

5:25

of escalation being in a proxy war with

5:28

Russia. So that was the first thing to come

5:30

out of the Twitter space was

5:32

a consensus among the people who

5:34

were there that it's time to resolve

5:37

this conflict with Russia. The United States does not need

5:39

to be in a proxy war with Russia. We need to normalize

5:41

relations. It's way too dangerous to

5:44

be continuing this with what's going on in the Middle East.

5:46

The second

5:48

half of the Twitter space, I think, was

5:51

about the scenarios here for

5:54

what could come in the Middle East. And

5:56

just briefly, I think that there's

5:59

three scenarios here. for what could happen. Assuming

6:02

Israel goes into Gaza, this is what everyone's waiting

6:04

for, is will there be a ground invasion

6:06

of Gaza? Netanyahu says they're going to do it. The

6:09

theory on why they haven't right now is the US

6:11

is actually moving a bunch of assets, military

6:14

assets into place. They're putting air defense

6:16

batteries around military bases in the Middle East. So

6:19

there's been a lot of reporting that the US has told Israel

6:21

to wait until the US military

6:23

is ready for any blowback that could happen.

6:26

But Netanyahu has been very clear that they are going

6:28

in no matter what anybody else says. Three

6:30

scenarios could arise from that. Number one is

6:33

what Israel and I think the administration want,

6:36

which is that they have

6:38

a successful military operation and the US's

6:41

threats deter Hezbollah

6:44

or Iran from getting in. So that would be scenario number

6:46

one. Scenario number two would

6:48

be that the Israelis go

6:51

in, it's guerrilla fighting, it's much tougher than

6:53

anybody expects, they start to take casualties. At

6:55

the same time, you get massive

6:58

public uproar, you get a lot of protests, the Arab

7:00

street erupts,

7:01

more and more

7:02

leaders across the world denounce Israel.

7:05

And so you kind of muddle your way eventually towards

7:07

a ceasefire in a couple of months. So that would

7:09

be scenario number two. Scenario

7:11

number three is that this thing spirals out of control very

7:14

quickly where you get Hezbollah in

7:16

the north invade, so you have a second

7:18

front, the West Bank could erupt

7:21

in protests that could potentially create a third

7:23

front. Iran could get involved

7:25

either because they feel the need to defend Hezbollah

7:28

or because you have people like Lindsey Graham

7:30

are basically already calling for war with

7:32

Iran. So either side could basically

7:35

escalate into that. So I

7:36

think what happened with Lindsey Graham because

7:39

he was telling them if Iran if they

7:41

got involved that we would strike

7:43

back. Yeah, yeah, but I wasn't saying

7:45

invade. I think he's saying pretty clearly that

7:49

if Hezbollah gets involved, we're blaming Iran

7:51

for that.

7:52

Got it. Okay, so he's chomping at the bit to

7:54

basically invade

7:55

Iran.

7:56

Now, how could that happen? Well, you're saying you

7:59

think he's chomping at the bit. to invade Iran? Oh,

8:01

yeah, for sure. Or he gave them the warning to not.

8:04

This has been on the neocon agenda. So I'm curious about that point.

8:06

Yeah. Explain that piece. This

8:08

has been on the neocon agenda for a long time. They wanted

8:10

to have a war with Iran. They basically see the Iranian

8:12

regime as an enemy and they want to knock it off. Even

8:15

if you go back to 2003,

8:17

the beginning of the Iraq war,

8:19

there was serious conversation about whether

8:21

Iraq was the right country to invade. A

8:24

lot of people thought that we should go

8:26

after Iran, not Iraq. The

8:29

Bush administration's view on that was, don't

8:31

worry, we're going to get them all. The question

8:34

is, which one to do first? We're going to knock off Saddam

8:36

first. In fact, what's going to happen is we're

8:38

going to be greeted as liberators. The invasion

8:40

is going to be so successful

8:41

that the rest of these tyrannical Middle Eastern regimes

8:44

are just going to throw up their arms

8:46

and they're going to basically surrender

8:48

and become democracies. This was the

8:51

Bush administration's claim back in 2003. Obviously

8:54

it didn't work out like that. There

8:56

has been a desire to go into a lot of these countries

8:58

for a long time. I think there are a lot

9:00

of these neocons who see Iran

9:03

as unfinished business. If they get the

9:05

chance to do that, they

9:08

will.

9:09

Yeah. See, that's a piece of your

9:11

analysis there that

9:13

was most interesting. You think Lindsey Graham wants

9:15

to invade Iran. When he gave that warning

9:17

in his speech, which I think came out today or did

9:19

it come out yesterday,

9:22

you think when he gave him the warning, hey, don't get involved

9:24

or that's going to be the third front. You need to actually think

9:26

he wants to invade. The United

9:28

States has that agenda. I think there's a lot

9:31

of neocons who have that agenda.

9:33

You see this in The Wall Street Journal, which is the

9:36

leading neocon publication.

9:38

Got it. Let's explain what The Wall

9:40

Street Journal obviously has

9:41

been talking about Hamas

9:44

militants being trained in Iran

9:47

a few weeks before the 10-7 attacks.

9:50

It says about 500 militants from Hamas. And

9:52

when 10-7 happened, remember there was that Wall Street

9:54

Journal story claiming that Iran

9:57

had directed the whole thing.

9:59

Yeah.

9:59

And then that was knocked down by

10:02

Israeli officials who said, we haven't seen evidence

10:04

of that, as well as Washington

10:07

officials, you know, kind of the usual unnamed

10:09

knock that down. So the Wall Street

10:12

Journal has been kind of pushing the

10:14

edge here, trying to, I'd say, rattle

10:17

the saber and gin up some sort of action

10:19

against Iran. The latest thing was a story

10:22

claiming that 500 militants

10:25

had just been trained by Iran. So they keep trying

10:27

to

10:28

put this idea in play that we

10:30

need a war against Iran, is my point.

10:32

Okay, so just let me reflect that back to you. You're saying

10:35

Lindsey Graham wants to invade Iran, and

10:37

he's part of the neocon agenda, and the Wall Street Journal

10:39

is not

10:41

just straight reporting this. The Wall Street

10:43

Journal is in trying to incite an incident

10:46

here and start a war with Iran.

10:48

Well, the Wall Street Journal reflects

10:50

the agenda of the people

10:52

who own it and then the people who are

10:54

their sources. But clearly, somebody

10:57

is leaking these stories

10:59

to the journal. Somebody leaked

11:01

the idea on day one of this crisis

11:04

that Iran was secretly directing

11:06

the whole thing, even though Israel itself said

11:08

that was not true. So yeah, look, they have

11:10

an agenda, live in agenda. So the Wall Street

11:12

Journal's agenda

11:14

is to saber rattle and incite

11:16

a global war with

11:18

Iran. Or are you saying that they're

11:20

just useful idiots and that they're being manipulated

11:23

by the military global complex

11:25

and the neocons? I'm just saying that the Wall Street Journal... You said

11:27

the Wall Street Journal is saber rattling. So

11:29

that said the Wall Street Journal wants to start

11:32

a conflict.

11:33

The Wall Street Journal is beating the drums of war. That's

11:35

what's going on.

11:37

Okay, so you believe the journalists at the Wall Street

11:39

Journal are trying to start a war with Iran?

11:41

They are beating the drums of war.

11:44

That's what beating the drums of war means to you.

11:46

Okay, Chamath Freiburg, you think that the Wall Street Journal

11:49

here is trying to start a war with Iran? I'll give you

11:51

a little bit of history here. I'm going to presume you

11:53

know it so it'll be repetitive. But it used to be

11:55

that Iran was

11:57

a bastion of economic growth and cultural

11:59

vitality. right? But if you go even further back, there

12:02

was a duly elected Prime Minister that was

12:04

overthrown, Mohammad Mossadeh, because

12:07

he tried to nationalize the oil industry in the 50s in

12:10

Iran. And that coup d'etat,

12:13

which was run by the army, was

12:15

sponsored by the UK and

12:17

US governments. So we've had a long kind

12:20

of sordid history with

12:22

Iran for a very long time, post World

12:25

War II. A lot of it has been

12:28

intertwined with petrodollars and

12:30

oil. So,

12:33

you know, we had the Shah, then there was this

12:35

duly elected Prime Minister, he tried

12:37

to nationalize the oil industry.

12:39

He was overthrown in a coup d'etat supported

12:42

by America and Britain. They brought back

12:44

the foreign oil

12:46

companies, including American oil

12:48

companies. Then the Shah

12:51

ran for 30 years, but then he was overthrown

12:53

for a whole bunch of cultural issues. And so

12:55

it's gone back and forth and back and forth. So I think

12:58

it's important to keep in mind that a

13:01

lot of that generation, it's

13:04

not clear to me where their views come

13:06

from. And what I mean by that generation is folks

13:08

of Lindsey Graham's generation and older, have

13:11

this multilayered view of Iran, because they've seen

13:14

two or three of these regime changes. And they've

13:16

seen the changing incentives that America has had

13:18

for dealing with them. So instead of just

13:21

kind of kind of putting it out there, like we

13:23

just want to go to war, I think it's important to

13:25

remember that these guys have a historical

13:28

context that younger folks may not. Okay,

13:30

that's number one. Number

13:33

two, I think it's, David is right,

13:35

that there are certain publications that are

13:37

beating the drums of war. The first time

13:40

that the Wall Street Journal did it, it

13:42

was that Iran was

13:45

the one that essentially was the trigger

13:47

puller on the October

13:49

7th attacks. And that was immediately

13:52

refuted, interestingly,

13:54

not by Iran, which did it later,

13:57

but actually by the United States and Israel. So,

14:01

I do think that there is some questionable

14:04

incentives that drove the

14:07

publication of that article at a very critical

14:09

point at the beginning of

14:11

this Israel-Amos-Gaza

14:15

war. An idea of what that incentive would be? No,

14:19

I don't know, except to say that the

14:21

facts are that there was an article that

14:23

pointed the finger. It was written

14:26

as an exclusive. It was written in a moment

14:28

where things were very heightened and little was

14:30

known, and that these governments

14:33

had to come out and explicitly disavow

14:35

and deescalate it. And so I think that's

14:37

just an important thing to observe. Now

14:40

we're in this second wave, where there's

14:42

a second attempt to now point the finger directly

14:44

back to Iran as having trained these Hamas

14:47

terrorists as now engaging

14:49

in—and it's not to say that they're not, but

14:51

it's just that this escalation is definitely

14:54

happening on a continuous basis. And so it's

14:56

important to, frankly, understand

14:58

the historical context and deescalate so

15:00

that we don't—I think Yvonne is right. This

15:02

is how you sleepwalk into war, is

15:05

you read a headline, you

15:07

believe it, and then you run with it.

15:11

And the opposite of sleepwalking is underwriting

15:13

from first principles. I think it's important

15:16

to go and read the historical

15:18

context of how we've been engaged

15:20

in Iran since World War II particularly,

15:22

the back and forth, the

15:25

complicated issue of all the petrodollars. And

15:28

then you can view Lindsey Graham's

15:31

comments in two veins,

15:33

I think. Vain number one is he

15:36

was there with a bipartisan delegation

15:38

of—I think it was 10 U.S. senators.

15:41

There's 10, five of each, yeah. Five Republicans, five Democrats. Five

15:43

Democrats, yeah. So I think it's fair to say

15:45

that he is not just

15:47

speaking off the top of his head. I think

15:49

that there's some understanding of what he intended

15:51

to say. And so I do think that this is sort

15:53

of a back-channel way of getting on the record that

15:56

they really need to deescalate. If

15:58

they are given an opportunity— to engage, they

16:01

should not. I think that's the

16:03

escalated message. And when you say they, you're talking about Iran. Yeah.

16:06

Iran should de-escalate. And

16:07

frankly, hopefully they listen and they do it.

16:09

Lindsey Graham's quote, just to

16:11

put it out there, when he was visiting Tel Aviv,

16:13

we're here today to tell Iran, we're

16:16

watching you, if this war grows, it's coming to your

16:18

backyard. The idea that this happened without

16:20

Iranian involvement is laughable.

16:22

Freiburg, what are your thoughts? Do you think the journalists

16:25

at the Wall Street Journal are

16:29

complicit in trying to incite

16:31

something here? Do you think they're just reporting

16:33

the facts straight? What's your take on this?

16:39

Okay. Can I answer that? Because I actually have a data

16:41

point. Yeah, no, I mean, and the reason I'm pushing

16:43

you on it, Sacks, you're using the language of conspiracy,

16:46

like complicit, to make it sound

16:48

like I'm leveling an accusation at them when

16:51

what I'm saying is this is their editorial

16:53

policy. And you can see that by actually

16:55

reading their editorial. So therefore,

16:57

look at an op-ed that came from their

16:59

editorial board two days ago, called

17:02

Biden's Red Line Moment with Iran. And

17:04

what it says is here that Secretary of State Antony

17:07

Blinken warned Tuesday that

17:09

the US would respond swiftly and decisively

17:11

to any attack on American forces from

17:13

Iran or its proxies. And then it says, that's

17:15

a welcome message aimed at deterring the mullows in Tehran

17:18

and their agents. But will the president enforce

17:20

the red line that he appears to be wrong? He

17:22

hasn't so far. So in other

17:25

words, the Journal-Editorial Board

17:27

is saying that Biden has not been tough enough

17:29

on Iran. Okay. Now go to the last

17:31

paragraph. It also says here Iran is using

17:34

its proxies to test US resolve. The

17:36

more they attack without Iran paying

17:38

a price, the more likely that Iran

17:41

will raise the stakes. The paradox

17:43

Mr. Biden has to appreciate, the most stabilizing

17:46

move for the region

17:47

would be restoring America as a deterrent power.

17:50

So what does that mean? You take these things together,

17:52

they're saying that in order to stabilize

17:55

the region, we

17:56

need to deter Iran, but they say that

17:58

just making threats of deterrence is the right thing. not enough,

18:00

you actually have to do something. So

18:02

in other words, like attacking Iran

18:04

is the stabilizing move, which is war is

18:06

peace. It's right out of Georgia Orwell.

18:09

So this is what I mean, beating the drums. And

18:11

by the way, the reason I'm not saying your conspiracy, there's

18:13

your there are there is editorials,

18:16

then there's news, and then there's your imprecise

18:18

language that I'm just challenging you

18:20

on, because I want you to be precise here. If you're

18:22

saying the journalists are trying

18:25

to provoke a war here, or, you know, in

18:27

the banging the drum and saber rattling, I'm

18:30

not like, I think your well saber

18:32

rattling and banging the drums are a bit imprecise.

18:34

You're going down a weird rabbit hole of what,

18:37

what the Wall Street Journal believes, I think it's pretty

18:39

clear that their federal policy

18:41

is they are super hawkish on Iran,

18:43

they don't think Biden's been tough enough on Iran. They

18:46

also have published two stories

18:48

that have been either knocked down or questioned

18:51

since October 7,

18:53

that clearly want to lay all the blame for this

18:55

on Iran. And so they are ginning up

18:58

both in their news and their editorial pages, they're

19:00

beating the drums of war, they're trying to basically prime

19:03

the administration to go to war.

19:07

Got it. They're trying to goat the administration,

19:09

but I don't think I don't understand why, honestly,

19:12

I feel like we're going down a rabbit hole. Look, no,

19:15

I'm just trying to understand your position. And if

19:17

you're talking about the editorial page, you're

19:19

talking about the reporting, that's all I'm just trying to get

19:21

you to be more precise. That's all.

19:22

I think both in this case. Remember,

19:25

if you go back to the reporting on the Ukraine

19:27

war, and I followed a lot of it by all the major

19:29

publications,

19:30

in my opinion,

19:32

the Wall Street Journal's news coverage

19:35

of Ukraine was some of the most biased

19:37

and inaccurate of any publication, any

19:40

major Western publication. And

19:42

I'll just give you one example here,

19:44

which is on August 31st,

19:46

the Wall Street Journal claimed

19:49

that Ukraine had a major success in its

19:51

counter offensive, claiming that it had pierced

19:54

the main Russian defensive line. Okay,

19:57

we are now, what is it? basically

20:00

two months since then, and

20:02

it's very clear that that did not happen.

20:05

Okay? That was all nonsense. And,

20:07

again, read the first paragraphs here. Not only did

20:09

they claim to penetrate the main Russian defensive

20:11

line, it said it raised hopes of a breakthrough

20:14

that would reinvigorate the slow-moving counteroffensive.

20:17

Was there a subsequent breakthrough?

20:19

Did hopes get raised? No. This

20:21

was total nonsense. So your position here is the journalists

20:24

who wrote this story are in

20:26

some way trying to benefit

20:30

the neocons in the

20:32

military industrial complex. I just want to be clear about

20:34

it. You think the World Street Journal as

20:37

an active participant

20:39

in this as a reporter, it's just kind of an explosive –

20:42

it's not kind of. It is. It's an explosive

20:44

claim. And so I'm just trying to be clear. Oh, really? I'm

20:47

just

20:47

saying that their reporting on Ukraine

20:50

was highly inaccurate, and it was all inaccurate

20:52

in the same way, which is

20:55

it always overstated Ukrainian

20:58

successes in this war.

20:59

So I call that bias. I think it's easy

21:01

to prove. I think they have a similar bias,

21:04

which is stated explicitly by their editorial board,

21:07

which is they don't think that Biden

21:09

and D.C. has been hawkish enough on

21:12

Iran,

21:13

and they would like to see – they

21:15

think the stabilizing move is

21:17

for Biden to basically take

21:19

action against Iran, whatever that means. Yeah,

21:22

okay.

21:25

If we bring any thoughts on this before we move on to the next

21:27

topic? Nothing

21:30

on the war, on the situation? No,

21:33

I'm good. We can pivot

21:35

off of Iran and Russia. Yeah, that's

21:37

why I'm bringing him in on that. I feel like we're debating

21:40

the wrong thing, which is you're actually

21:42

questioning whether there are war drums

21:45

beating for Iran when

21:48

I think it's abundantly clear, and what we should be discussing,

21:50

is whether that's a wise move for

21:53

the U.S. I think it's clear that these drums

21:55

are being beaten. I think the question is why would

21:58

we? allow

22:01

that to be the default plan of action. My

22:03

concern, everyone's

22:06

going to think it's crazy, but it's

22:08

that there's a very,

22:11

very low probability, but now

22:13

probably much higher than it was, that

22:17

the world marches towards using a nuclear

22:20

weapon for the first time in a long time. And

22:22

the reason is, as Sax has pointed out so many times,

22:25

there's significant material and industrial

22:28

production shortages, not just in the US,

22:30

but around the world, to support rising

22:33

conventional wars that seem

22:35

to be scaling all over, and

22:37

there's going to be multiple fronts. And

22:39

to feed those wars with conventional

22:42

weaponry, there's a breaking

22:44

point. Our cost of weaponry is 10x, Russia's

22:47

cost of weaponry, supposedly. I mean, I'm just

22:49

quoting Sax on this point. If

22:52

all that is true, at some point,

22:56

these conflicts become really difficult

22:59

to maintain. And if we're in the midst of a conflict, you

23:02

may not be able to simply retreat or

23:04

recede. At some point, the question

23:07

is, well, how do we gain

23:10

superiority again? And whether

23:12

that's us or Russia backed into a

23:14

corner, or Israel backed into

23:16

a corner who also has a nuclear arsenal,

23:18

there's a couple of scenarios. There's like a

23:21

million scenarios from here. There's a million

23:23

realities we could live in from here, from today.

23:25

But there's some number of them

23:28

that end up with someone saying, I got to press the

23:30

button. And remember,

23:32

not all nuclear weapons are these

23:35

things that wipe out a million people instantly.

23:37

Some of them are small, low tactical

23:40

weapons that is still very low probability,

23:42

but much higher than it was a few weeks ago, that

23:45

we find ourselves walking

23:47

because of the fact that we're going to have multiple conflicts

23:49

and burn through all this conventional weaponry, not

23:51

have industrial production systems to support

23:54

all these conflicts. But every other

23:56

bunch of countries that have a trump card, and once you start

23:58

talking about it, it'll seem... scary at first, then

24:01

it'll get normalized, and then it'll become

24:03

a question of when and where and how, and

24:06

then all of a sudden it's like, holy shit, this is a different

24:08

world we're living in. That's a scary place I don't want

24:10

to be in.

24:11

Anything we can do to eliminate those paths

24:13

from being walked,

24:15

I'm in favor of, even if that means ceding

24:17

strategic advantages today. I just

24:19

don't think that that's the place we want to go.

24:22

This

24:22

is like

24:23

nine nuclear powers. Who do

24:25

you think is going to be the one who would

24:27

actually use a nuclear

24:30

bomb for a bird? Do you have some

24:32

speculation there? You just think everybody runs out of bullets

24:34

and tanks and missiles and then they go to nuclear because

24:36

they have nothing left?

24:38

I don't know. Look, I tend to think in terms

24:40

of like there are multiple parallel

24:42

scenarios that can play out. So I don't

24:44

have a point if you're not going to say, deterministically, I think this thing is going to

24:46

happen. Again, I think this is very low probability.

24:49

I could see a bunch of scenarios emerging.

24:51

Like let's say that Russia has got their back against

24:53

the wall and Putin's feeling lost and

24:55

desperate and

24:57

he needs to use a tactical

24:58

weapon to

25:00

get some regional victory.

25:03

Again, these tactical nuclear weapons, they're

25:05

not

25:07

necessarily the kinds

25:09

of things that you would use to level Manhattan.

25:12

Those exist,

25:13

but there are other weapons in the arsenal

25:16

that I get worried that someone

25:18

says, we're back in a corner, we have nowhere

25:20

else to go, we can't win this thing conventionally

25:23

and we cannot lose. And

25:25

that's the moment when someone says, let's start

25:27

talking about this. And that conversation

25:29

happens before it gets used, then

25:32

that conversation becomes normalized and then suddenly

25:34

it's not this thing. We all grew up in a world

25:36

where this was never a real threat or risk

25:38

or conversation. There was the Cold War and the

25:40

dismantling and we were kind of headed in a good direction

25:43

for the last 40 some odd years. But

25:45

now it's like,

25:46

I don't see it going in that good direction anymore. So I'm

25:48

just really nervous about that. Yeah, I think you should

25:50

be nervous about that. Let me give you a couple of examples. So

25:52

first of all, I agree with Freiburg's point that humans

25:55

who are convinced of the righteousness of their cause

25:57

have a tremendous ability to weigh

25:59

in.

25:59

away or justify

26:02

any sort of tactical implications. So

26:05

for example, we did use two atomic bombs

26:07

to end World War II. That

26:10

wasn't the only time it was advocated. If you go

26:12

back to, I think it was around 1950, MacArthur

26:15

wanted to win the Korean War by

26:18

using 20 to 30 atomic bombs. And

26:21

his plan was to so thoroughly irradiate

26:24

the border

26:25

between China

26:26

and North Korea that China would never

26:29

be able to invade through an invading

26:31

army for something like 50 years. Truman

26:33

had to fire him because Truman didn't agree

26:35

with the strategy.

26:37

And by the way, MacArthur was not some crazy,

26:40

you know, he was not some like wacko. He

26:42

was the most respected man in America

26:44

in 1950.

26:44

And Truman paid

26:47

a huge political price for having to fire

26:49

him. It was one of the reasons why Truman couldn't run for

26:51

reelection again. So this idea

26:53

that like rational people would never use these things is not

26:55

true.

26:56

The generals in 1962, during the Cuban

26:58

Missile Crisis, were all ready to

27:00

take the nukes off the chain if the

27:03

Soviets were willing to break

27:05

the naval blockade. So you

27:07

know, it's not just foreign powers who

27:09

have rattled the saber on nukes. We've

27:12

done it at various points through our history

27:14

too. Let me give you a more

27:16

mundane example. Just earlier this

27:18

year, Biden said that we were out

27:21

of 155 millimeter artillery ammunition. And

27:25

so we had to give Ukraine cluster

27:28

bombs. Remember this?

27:29

Just a year before, that same

27:31

administration had said the use of cluster bombs was

27:33

a war crime. So in other words, they were

27:36

able to change the morality on the use of cluster bombs

27:38

because practically they

27:40

were out of

27:42

the type of ammunition they want to use. They

27:44

had nothing left. So you

27:46

know, I think this kind of reinforces Freiburg's point. Now

27:49

look at our inventory replacement

27:51

times for key systems. This

27:54

is a report by CSIS

27:56

that is a military think tank in Washington.

27:59

What they show is...

27:59

is that our industrial capacity is so hollowed

28:02

out that it's going to take us five plus years

28:05

to replace

28:06

our stockpiles of artillery

28:09

ammunition, of javelins, of

28:11

stingers,

28:12

of gimlers, as

28:14

another type of rocket system. And

28:16

so we are like dangerously low

28:19

on key types of ammunition.

28:22

And yet, remember when 60 Minutes did that

28:24

interview with Biden, they said to him, well, if

28:27

we're in a war both on

28:30

behalf of Ukraine and on behalf of Israel,

28:32

doesn't that pose any trade-offs? And Biden's response

28:34

was no, we're the most powerful nation in

28:36

the world. For good measure, he said, we're

28:39

the most powerful nation in the history of the world.

28:41

So he doesn't see any trade-offs. He doesn't see

28:43

any limits on American power.

28:46

Quite frankly, I

28:47

think this is why he's dangerous, is because he still

28:49

thinks that the US is living in 1991. He's been in Washington

28:51

for 50 years,

28:54

and he only remembers the unipolar

28:56

moment. All of his instincts and experience

28:59

have been shaped by that period of time when

29:01

the US was the only superpower,

29:04

that we were the global hegemon.

29:06

We're no longer in that position anymore.

29:09

First of all, Russia and China are

29:11

strong. They are great powers too. And

29:13

Iran is much stronger than Iraq. Iran

29:16

is four times the size of California and has roughly 90

29:19

million people. And they got a lot of engineers.

29:22

And even if we did want to attack them, it's not exactly

29:24

clear how you would stage that attack.

29:25

Just getting to Iran would

29:28

require flying over some very dangerous territory.

29:30

It's not clear we have the bases or the

29:32

air clearance rights

29:35

from allies to be able to even get

29:37

to Iran.

29:38

Moreover, Iran apparently has a very strong missile

29:40

program.

29:41

So they may even have the

29:43

ability to fire

29:46

missiles or hypersonic missiles at our aircraft carriers

29:49

that are sitting in the Mediterranean Sea. So

29:52

if we get an award with Iran, it's no

29:54

joke. This is not going to be shock and awe. This

29:57

could be a very, very dangerous situation for the

29:59

United States.

30:00

Which is why when people are just kind of

30:02

making these idle threats,

30:05

they should be very careful about that because Iran

30:07

is hearing that too and they're getting ready. And

30:11

one last point on that,

30:12

thanks to our destabilizing the Middle East

30:15

with the Iraq War and the Syria

30:17

regime change operation,

30:19

Iran now has proxies in both

30:21

Iraq

30:23

and Syria. They've got Iraqi

30:25

Hezbollah. They also have proxies

30:28

in Yemen with the Houthis

30:30

and all of those groups could stage attacks

30:32

on American military bases there. We've

30:34

gone down the worst case scenario here, use

30:37

of a nuclear bomb. The United States invading Iran.

30:40

Here's just a list of the nine countries that are nuclear

30:42

powered and that have nuclear bombs rather than

30:44

nuclear powered. And as you can see,

30:46

Russia, US, China, France, UK, Pakistan,

30:49

India, Israel, and North Korea,

30:51

Israel denies they actually have them. And

30:54

Pakistan has been the one

30:56

who has been proliferating

30:58

them,

30:59

getting

31:00

bombs to North Korea and

31:03

helping Iran with their program. Iran

31:05

obviously does not yet have a nuclear

31:08

bomb,

31:09

but we don't know how far they are because intelligence

31:11

is sparse on that topic based on

31:13

my cursory research. What's

31:17

the best case scenario here? Sorry,

31:19

Jacob. I just want to be clear that I don't see

31:21

nuclear use as likely. Yes,

31:23

that was free, Bergs point. Sorry,

31:26

I did not say it was likely at all either. Not at

31:28

all. No, no, you said it's a small possibility. And we

31:30

just spent 10 minutes talking about that small possibility.

31:32

I just want everyone like let's say something goes

31:35

from 2% chance

31:36

to 8% chance. It's

31:38

now 4x in the next 20 years.

31:41

That's

31:42

a significant shift in risk. And I think

31:44

there have been others like Ray Dalio,

31:46

I think, or Warren Buffett. Some

31:48

people have said that the chance of us using a nuclear weapon

31:51

over a long enough period of time approximates 50%

31:53

to 100%. It starts to get very high because

31:56

at some point, these

31:59

things proliferate. the intelligence, the

32:01

capabilities proliferate, they get

32:03

into the wrong hands. There's all these different scenarios

32:05

that emerge. So the probability might be low on any given

32:08

period of time, but over a long enough period

32:10

of time, these things become

32:12

a real kind of concern. The nukes that were

32:14

dropped on Hiroshima and Nagasaki are like 20 kiloton

32:17

yields. I mean, we have massive,

32:20

massive, massive warhead, multi-warhead

32:22

missiles that have many, many, many

32:24

megatons of yield, but there are sub 20, sub 10

32:27

kiloton yield nukes. That

32:31

can be deployed in a conventional, in what

32:33

people would call a tactical setting. So you're

32:35

not trying to... Yeah, the suitcase nuke, they're

32:38

not literally suitcases, they're on trucks, but tactical

32:40

nukes have been produced

32:43

by Russia, China, and the United

32:45

States are the known tactical nuclear powers.

32:48

Well, they're also, they're in different

32:50

forms of delivery, but they're not, you know, you

32:52

don't take a bomber up and put it over a city and

32:54

blast the whole city. No, you can drive them into a city in a van,

32:57

is the idea.

32:58

No, it's not necessarily about being on a van, it's

33:00

like they can be on short range tactical

33:03

systems. So the point is, like, yeah,

33:05

you're caught

33:06

in a corner, you have nowhere

33:08

to go, and you can't lose. And if you

33:10

have one of these things, I mean, just take all human

33:13

history aside, and all convention

33:15

aside, if you've got this

33:17

thing, you're trapped in a corner,

33:19

you got nowhere to go, and

33:22

you can press this button and win, you

33:25

might press the button.

33:26

So let's look to the other side, what's the

33:28

best case scenario here? Obviously, we haven't

33:31

had the ground invasion, we've had

33:34

Qatar and Saudi

33:37

and a number in the United States obviously doing some

33:39

pretty hardcore diplomacy. And

33:42

we've had some hostages released.

33:44

So, you

33:45

know, and I've been spending some time here in the Middle East,

33:47

there is a theory that people have brought up multiple

33:49

times here that there's a deal

33:51

going on right now to

33:53

get the hostages a larger number of them, and

33:57

that the ground invasion may not occur. This

33:59

is just a theory of the world. that a number of people have been talking

34:01

here, maybe they're just optimists, but is

34:03

there an optimistic scenario here, Tromoth? Is

34:06

there a golden

34:08

bridge out of here? Is there a possible

34:10

path to the peace process getting

34:13

back on track, or does it all just seem

34:15

hopeless? And if there is a

34:17

possible path, what would that look like? Let's just

34:20

see if we can come up with any optimistic

34:22

framing or theory here. Why?

34:26

It's just as bad as the other side. Okay,

34:28

so you don't see one, you know? How about we just look at the facts

34:31

on the ground? The facts are that we have this

34:33

long-simmering war between

34:35

Russia and Ukraine that doesn't seem to have an end, and

34:40

there doesn't seem to be a loss of life at

34:42

which they're

34:44

willing to stop, or whether the international

34:47

community is willing to force a ceasefire. And

34:50

then now you have this one, which

34:52

is in the thousands, and will

34:55

escalate into the defense of thousands, but it seems

34:57

like it's on a path to be slow and simmering. So

35:00

I don't know what to say, except that it does not

35:02

seem to be

35:04

escalated.

35:07

And the reason it isn't escalating is that

35:09

there

35:11

is enough emotional impact

35:15

that's causing people to understand

35:18

that the stakes are high.

35:19

And so when

35:21

the actual actions are relatively

35:24

de-escalatory, I

35:26

find that the rhetoric

35:28

ratchets up,

35:29

right? It's almost inversely proportional. You

35:31

know, it's kind of like, what was the phrase in World

35:33

War II about Churchill,

35:36

iron fist wrapped in a velvet glove?

35:39

Is that the phrase, something

35:41

like that? But the idea is that

35:43

when you act decisively, you say little. And

35:46

when you have no plan of really escalating, you say

35:48

a lot.

35:50

So I think that right now we're saying

35:51

a lot, which actually counterintuitively to me says, we're

35:54

not planning to do much of anything. And I think that

35:56

that's good. So I'm all for that.

35:59

for Lindsey Graham

36:02

braying as long as we don't take it too seriously

36:05

and sleepwalk into some escalation.

36:07

Sacks, any chance that this gets de-escalated

36:10

and what might that look like?

36:12

Sure, I think there's a chance.

36:14

I think like to watch that. What would it look like?

36:17

Yeah. Well, what it looks like, I think,

36:19

is that the ground invasion

36:22

keeps getting paused either because

36:24

the US needs more time to get

36:27

its military in place or

36:29

because the Israeli military

36:32

realizes this is going to be a very difficult operation and

36:34

they need more time to plan. And

36:36

while that's happening, there's a serious diplomatic

36:39

effort going on. And while

36:41

that's happening, there's also more pressure being

36:43

brought to bear against Israel to not

36:45

go in. So for example, you saw Erdogan this

36:48

week make some statements. I actually

36:50

thought they were pretty outrageous where he described Hamas

36:52

as basically being freedom fighters, but warning

36:54

Israel not to go in. There

36:57

were much more reasonable remarks

36:59

by King Abdullah of Jordan, basically

37:01

at least recognizing the atrocity that had taken

37:03

place against Israel, but also

37:06

trying to advocate for the

37:08

lives of Palestinian

37:11

civilians in Gaza and

37:13

telling them that it would be a mistake to go in. So

37:15

you're seeing like a wide range of

37:17

opinions across, I'd say,

37:19

major players in the Middle East. And

37:22

all of it, the gist of it is basically telling Israelis

37:24

not to go in. So

37:25

you've got all these

37:27

delays and pressures going on. And so

37:29

maybe there's some chance it could de-escalate. I

37:31

personally think that that's still unlikely.

37:36

And the main reason for that is I think Israel

37:38

is determined to go in. I think

37:40

Netanyahu has made that clear. I think from the Israeli

37:43

point of view, they don't feel like they have

37:45

a choice. They've suffered the biggest

37:48

massacre of Jews

37:50

since the Holocaust, and they

37:53

can't be perceived as simply standing

37:55

by and doing nothing. That would make them look

37:58

extremely weak in a region.

37:59

of the world

38:01

where you don't want to look weak. They have to annihilate

38:04

Hamas, I guess, is the thinking.

38:06

Well, they say that their objective is to destroy Hamas,

38:08

but I think that

38:10

probably from their standpoint, they'd consider it a success

38:12

if they could significantly degrade Hamas,

38:15

set them back 10 years. And get

38:17

the hostages back. Destroy their capability

38:20

to wage war against Israel, to undermine

38:22

their tunnel networks and so forth. So I

38:24

think Israel still feels like this is something they have

38:26

to do. And so I kind of think that the

38:29

most realistic good case

38:31

scenario is that if

38:33

they do go in, that the

38:35

military operation for various reasons is

38:38

not a long one. And eventually, a ceasefire

38:40

can be agreed to

38:42

before this can escalate out of control.

38:44

And so there's a bunch of like very delicate

38:47

red lines there for

38:49

a lot of different players. And so

38:52

in order for that scenario to work out, I

38:54

think it's going to take some very deft behind the scenes

38:56

diplomacy

38:57

from

38:58

the Biden administration, really. And I'm not sure they're capable.

39:00

I'm not sure they're up to that task.

39:02

So this is why I think it's such a dangerous situation.

39:05

Can I ask you a question, by the way? Is Nancy Graham

39:07

speaking on behalf of the United States officially

39:10

with the President's approval?

39:12

He can't possibly

39:14

be freelancing that. I didn't have any... I

39:19

tried to research it online. I couldn't find any... Well,

39:22

why don't you fill in the blank, Jason? That was sanctioned

39:25

or not. Well, Jason, think about this. David

39:27

texted this into the group chat and then tweeted

39:29

it as well. Do you think Mohammed

39:31

bin Salman is meeting with a group of 10 senators

39:34

that's just off on an adventure?

39:36

No. Okay.

39:40

Well, there's your answer. Yeah. Yeah. No, no, I'm

39:42

just... Look at this photo. I think this picture says

39:44

a thousand words. So

39:47

you have a delegation of senators.

39:50

I count about 10 senators there. Yeah.

39:53

Yeah. They're meeting with Mohammed bin Salman. Five

39:55

Republicans and five Democrats. And

39:58

who has the seat of honor right next to them?

39:59

MBS in the front of the room. So

40:02

I personally would like to believe that Lindsey Graham is

40:04

just an outlier and he doesn't speak for anybody, but

40:06

unfortunately this

40:09

delegation saw fit to put him in the front of the room.

40:11

I consider that very scary.

40:13

Well, I think it's also fair to say that

40:16

the office of MBS would have coordinated

40:18

that decision with the White House before receiving them.

40:21

That's typical political protocol.

40:23

Yeah. It just was never explicitly

40:26

said. He didn't say on behalf of the president or the

40:28

president has sent us here. It just seemed

40:30

like a disjoint. I hadn't never seen that before.

40:34

All right. I guess we'll

40:37

move on to some business issues here. The

40:39

macro picture is quite confounding.

40:42

GDP, as we were talking about in our group

40:44

chat, grew 4.9% year over year

40:46

in Q3, higher than the 4.3%

40:49

expectations and much higher than the 2.1% growth in Q2. 6 year

40:56

over year GDP since Q4 2021. We thought

40:58

we were going into a recession. We'd have a couple of

41:00

quarters of contraction

41:02

that hasn't happened. CPI in September was 3.7, slightly above

41:06

the 3.6 estimates. Trimath,

41:08

what do you take from all of this,

41:10

this crazy high growth

41:13

GDP? Is this because of stimulus, government

41:15

spending? What is this confounding

41:19

inflation coming down and getting somewhat

41:22

under control and then crazy

41:24

GDP growth?

41:25

I don't know.

41:26

I don't think anybody knows.

41:30

But it's really confounding for the markets. I

41:32

think it's really bad

41:34

for markets in general. It's

41:36

probably the worst for private

41:39

companies because you have

41:41

this effect now where everybody's been wanting

41:44

to price in a recession. Everybody

41:47

wants to see that shoe drop where

41:49

they say, oh, okay, here it is. Something's

41:52

softening. Demand is softening. And

41:54

then when you see a print like this where the

41:56

economy is expanding, you're kind of confused.

41:59

And you're like, well, I'm not going to do that.

42:00

where is the softening going to come from?

42:04

And so what happens is people become very overreactive

42:07

to small amounts of data.

42:09

And that actually started to come out,

42:13

I think basically since August. And

42:15

what's been happening since August is that every

42:17

time a company reports, the

42:19

sector that's gotten the most attention has been fintechs,

42:22

and the reason is that fintechs tend to be on the bleeding

42:24

edge of capturing consumer demand. And

42:27

if consumer demand shrinks, that's

42:30

probably the first sign that there's going

42:32

to be a recession, right, because consumption is

42:34

about almost 70% of the U.S.

42:36

economy.

42:38

And so since August, what you've seen are the

42:40

large leading edge

42:42

public fintech companies just get absolutely

42:45

murdered. And yesterday was an even worse

42:48

day, because what happened yesterday was a company

42:50

was basically world-line,

42:52

started to report softness in spending. Now, that spending was

42:54

not even in America.

42:56

That spending actually

42:58

happened to be within a segment

43:00

of their customer base in Germany,

43:03

and that was enough

43:04

to just literally sink the stock, I think, 60% in a day.

43:08

So

43:09

we have

43:10

on the surface a healthy growing economy,

43:13

but underneath the

43:15

surface what we are betting on increasingly

43:19

is that consumer

43:22

demand has basically stopped.

43:25

So you can see here, Adián is down 50%

43:28

since the beginning of the year, but again, most of this

43:30

was since August.

43:31

Block is down another 35%, PayPal is down 30%.

43:35

So that's one thing, which is this is a big bet that

43:38

consumption is slowing and shrinking,

43:41

the economy will be in a recession over

43:43

these next two or three quarters, which will give

43:45

the Fed the motivation and

43:48

the justification to lower

43:50

rates starting in the middle of next year. That's

43:53

the big bet in the market.

43:55

But separately, if you take a different lens

43:57

and look at this data, we

43:59

all have a big bet. a bigger problem in Silicon Valley

44:01

land, which is

44:03

how do the capital markets take

44:05

companies public when this is happening?

44:08

And the reason why this data is so important

44:10

is

44:11

we've said this a thousand times, there are only

44:13

two companies

44:15

that can structurally open the capital markets

44:17

for all startups. One

44:20

is SpaceX Starlink, but that's

44:22

on its own path and not going

44:24

public soon.

44:26

And the other is Stripe. And you could

44:28

probably add TikTok to that as well. No,

44:31

because that's a Chinese company with all kinds

44:33

of overhangs. So no, I would disagree with that. But with 30% or 40%

44:35

US owners. I would disagree with that. But

44:37

no.

44:39

So I think it's Starlink and Stripe. And

44:41

the problem now for

44:45

Stripe is that the public

44:47

comps dollar for dollar are off 50%, which

44:50

from the beginning of the year, which then says that

44:53

if you apply that rateably to its valuation,

44:55

they did around a 55 billion, then the

44:58

market clearing trade may be 25

45:00

to 30 billion now. Now, 25

45:03

to 30 billion for Stripe,

45:04

you're incinerating $70 billion

45:06

of equity value, right? And about $5

45:09

to $10 billion of actually paid in capital. So

45:12

what does that do for Silicon Valley

45:14

and for VCs? I think it's going to put a lot

45:16

of pressure on companies and valuations.

45:20

So

45:22

yeah, we're in for a real slog. So on

45:24

the surface for the real economy, I

45:26

think it's generally decent news

45:29

for startup land, I

45:32

think it's not good.

45:33

And then specifically within startup land sectors

45:35

like FinTech are in pretty bad trouble,

45:38

I think. And the late stage, obviously still

45:40

very much in trouble. Freiburg, any thoughts on the startup

45:42

economy? You had some thoughts on this, too.

45:45

I'd like to hear your guys' experiences, but there's

45:47

definitely been a big holdup

45:49

in series BCD later

45:52

rounds, because so much of

45:55

the market questioning is, you know,

45:58

when is the next round going to get done? which

46:00

is based on when can the companies potentially go

46:02

public. And ultimately,

46:05

if you don't see a path to a window

46:07

opening up, you don't fund the

46:09

pre IPO round, you don't fund the late stage round,

46:11

the growth stage round, everything gets held up. And

46:14

a lot of rounds that are getting done lately

46:16

have been these kind of convert or bridge rounds

46:19

where existing investors are funding the company

46:21

to give it another year or two of runway. That was

46:23

definitely the case for most of this year coming out

46:25

of 2022. I think post

46:27

the summer, it seems like

46:30

a lot of folks I'm talking to are starting to wake up,

46:32

there's even more series

46:34

B at lower prices and everyone's kind of capitulating

46:36

and accepting that there are still great

46:38

businesses out there. It's just that they got overpriced in

46:40

their A or their B. And let's price

46:43

them at a lower valuation and then rounds

46:45

are

46:45

sort of starting to get done in the fall here. I'll

46:47

have you react to this data Saks. Carta

46:50

manages cap tables for folks, but

46:53

they have produced this chart. And

46:55

this is Carta companies only.

46:57

So this is a subsection, who knows Carta

47:00

may power the cap tables of 10%, 20%. Silicon

47:04

Valley, the rest are done on other pieces of software

47:06

or even in Google sheets

47:08

or literally in an Excel sheet by

47:11

an attorney who

47:13

is working with the company. If

47:15

you look at this chart in 2020 and 2021, you

47:17

had about 70 startups shutting down

47:19

per quarter. In 2022,

47:24

you see that number double and

47:27

we start seeing 129, 141 a quarter. And then in 2023, this

47:33

last quarter, Q3, rocketing up to 2020.

47:35

So roughly three times what we see in the

47:38

boom markets, Saks. And any thoughts on

47:40

this data? I have a couple of observations, but

47:42

I want to go to you first. Well, this is not surprising

47:45

to me at all. This is the

47:47

bubble of 2021 working its way

47:49

through the system.

47:50

We know that there were these gigantic

47:53

rounds that were funded in 2021, especially

47:56

in the second half where you had this asset

47:58

super bubble. It wasn't just in. tech. It was

48:00

like all growth stocks, crypto,

48:03

everything. There were a lot of startups

48:05

that raised huge funding rounds at the

48:07

peak of the market and they haven't had to raise

48:10

for a couple of years. Well, now they're

48:12

starting to run out of cash and they

48:14

do have to raise. They're finally being forced to go back into

48:16

market. A lot of them are

48:19

either burning too much money or they don't have the numbers to justify

48:21

another round or if they do, it's a structured

48:23

round, a down round.

48:26

Or again, they just are unable to raise. They've

48:28

had a broken process and they

48:30

eventually start winding down.

48:32

So I think you're going to see this dynamic for the

48:34

next 18 months or so. But this is not

48:36

a new dynamic. This is the lagging indicator

48:38

of what we've been talking about

48:40

since the regime change of the

48:42

first half of 2022 is that the markets

48:45

started

48:46

looking for different things instead of growth at

48:48

all costs. It's been about

48:50

growth with uni economics and efficiency and

48:54

the valuations went way down and there's a lot

48:56

of companies that no longer qualify and they're getting weeded

48:58

out. So this is a delayed

49:00

reaction to things we already knew.

49:03

That's the key part, the delayed reaction as well.

49:05

Just note when a company does shut down,

49:07

that process typically takes two or three quarters.

49:10

And for a founder to accept the shutdown, that might

49:12

take one, two, three quarters as well. So anything

49:15

you're seeing in 2023, that might be a shutdown

49:18

where the employees were all laid off in late 2022. But

49:21

I mean, I have a question for

49:23

you guys. What turns this around? I'll tell you

49:25

what I'm seeing in the early stage. We

49:27

are seeing many companies come to

49:29

founder university and two or three

49:31

people who want to build a company who can't

49:33

get jobs at Google or Shrype,

49:36

they're not hiring. So we'll see two or three

49:38

developer teams working on a project and

49:40

then raising 250, 500k at

49:43

a five to $12 million valuation,

49:45

and then very quickly getting to 10 to 50k

49:48

monthly revenue. All this money that we

49:50

need to return so that we can recycle

49:53

and keep doing this job. What

49:56

needs to happen? Saks Friedberg, what

49:58

do you guys think needs to happen to get Because

50:00

the three IPOs we've had have

50:03

not fared particularly well, and

50:05

the market just seems to get

50:07

harder and harder for

50:09

tech

50:10

companies, even profitable ones, right?

50:13

Yeah, I think profitability is key. I think that's

50:16

the great evolutionary forcing function

50:18

here. It's like a tale of two startups. The

50:21

one startup needs cash

50:24

for a long period of time, and the other one's found a path to

50:26

profitability. Some that's found a path to profitability,

50:28

they have an infinite number of options

50:30

available to them. It might take longer to get public

50:32

or whatever, but they can wait

50:34

it out because they don't need money. The one that

50:36

needs cash continuously and will for a long period

50:39

of time

50:40

is really screwed. What about the multiple of

50:42

these profitable companies? That seems to have changed

50:44

materially as well. I'll tell you something that's starting

50:46

to happen as well, Chamath, is that the public

50:48

markets are looking at their stocks if they're undervalued,

50:51

and then Dara,

50:53

Uber is

50:54

reportedly planning like buying back

50:56

upwards of 20% of the Uber shares in

50:58

the next five years. Then you've got a company like Snap,

51:00

which is majority controlled with supervoting shares.

51:03

They're still losing $300 or $400 million a quarter. I

51:07

think Freiburg's exactly right. Tell it to cities.

51:09

Some people refuse. Then if the

51:11

stock is so cheap, people start buying it back. The

51:15

freezing of employees and the expenses

51:17

going down while revenue goes up and earnings

51:20

increase, I think that's the setup.

51:22

If you're looking for the setup, I think it's the public market company

51:24

showing the path to profitability, buying back stock, and

51:27

then these small companies not getting big. How

51:29

does that help private companies go public? If

51:32

the private companies follow suit and they're profitable

51:35

and they control costs and people

51:37

get greedy looking at how profitable they are

51:40

as opposed to their 50% growth rate, they start

51:42

looking at their increasing earnings and how much cash they're throwing

51:45

off. I think that's starting to trickle

51:47

down through the startup ecosystem. They're trying

51:49

to get to profitability quickly. The

51:53

question was, can people turn it around? If

51:56

they do, that's what it's going to be, is profitability.

51:58

talking about two different things,

52:01

sure, any particular company can still

52:03

get its house in order and create a great business

52:05

and they'll eventually get liquidity,

52:08

they'll go public. The question is, I

52:10

think what Chamath is getting at is that the exit

52:12

comps have changed. If you were

52:14

a tech investor or let's say a real

52:17

estate investor, before the regime

52:19

change, you were underwriting to completely

52:21

different exit comp. And now

52:23

those exit comps have totally changed. And so

52:25

it's going to be very hard

52:27

for those investors to make a good return. So

52:29

they're going to lose their money like Instacart. I'll

52:31

give you a mathematical example just to illustrate

52:34

what David just said.

52:36

If you have a company with 300 million of ARR,

52:40

you are in a rare group of say 30

52:43

or 40 companies period.

52:45

So very, very, very few companies

52:47

get to that level of scale. But if you are

52:50

at 100% net dollar retention,

52:52

which means that

52:55

you're kind of treading water essentially, your

52:58

customers may grow, but the value of each customer

53:00

isn't particularly growing. So you know, you

53:03

have pretty nominal growth. That

53:07

company now comps to roughly

53:09

three to five times ARR. Now

53:13

the problem is if you go and look back through Crunchbase

53:16

or any of these other server pitch book, the

53:19

number of companies

53:20

that traded

53:22

above $1.5 billion valuation

53:25

as a SaaS business, there's like 70 of

53:27

them, but there's only seven of them that have 300 million

53:30

of ARR.

53:33

So what happens, guys? Like the jig is up.

53:35

Okay. What's going

53:38

on here?

53:40

Consolidation, I guess, and some

53:42

of them will flame out. I mean, look at Instacart, the

53:45

people who were the last four rounds,

53:47

they either lost money or broke even.

53:49

So and that means time adjusted versus

53:52

what they could have made in the markets. They

53:54

lost money. So what happens is Stripe is only

53:56

worth 30. I mean, how much

53:59

has been invested in to that company. What's the total paid

54:01

in capital? Again, I think

54:03

we all want Stripe to be worth 100.

54:06

We want it to be worth 200 billion, because

54:09

it would help, frankly, it is the

54:11

rising tide that lifts all boats. But if

54:13

unit level profitability is scrutinized

54:16

and then comped appropriately to the public markets,

54:18

as SAC said, we're

54:21

going to have to take that signal and apply

54:23

it to our entire portfolio.

54:26

And so it goes all the way back to

54:29

eventually the seed in the Series A as well, which is

54:31

really good. Jason, as you've said many

54:33

times, just getting the inflation under control

54:35

and in check, but it will mean not just changing

54:37

valuations, but it will mean

54:39

changing salaries,

54:41

right? It will mean

54:43

totally different equity packages. A

54:45

lot of hard work. I almost think that maybe

54:48

none of the hard work has

54:50

actually yet started.

54:51

So I don't know, I'm just putting that out there, guys. Do you think

54:54

that we've all just kind of been

54:56

hoping, maybe, that all of this would pass

54:59

and now we're getting

55:01

more and more signals that we actually

55:03

have to do a pretty hard valuation reset? Yeah.

55:06

I mean, if you look at the altimeter charts

55:08

that Jamon Ball has put out, I mean, the valuation

55:10

levels are returning to,

55:13

let's call it the pre-COVID mean. In

55:15

fact, they're slightly below the pre-COVID mean because the

55:17

10-year treasury

55:20

has a higher rate. So, yeah,

55:22

we're going back to something that was

55:24

more like, I don't know, 2015 levels of valuation

55:28

and maybe even slightly worse, again, because long-term

55:31

rates

55:32

are higher. So, cost of capital and

55:34

hurdle rate are higher. That's what I'm saying. I'm seeing 2012 valuations.

55:38

Valuation of Uber when I invest was $5 million.

55:40

Yeah. Let me just tell you, it's a lot harder for people to

55:43

make money when the money supply is shrinking than

55:45

when the money supply is growing. If

55:48

we're obviously... Go figure. When the money

55:50

supply is shrinking, it's like you're playing a game of musical

55:53

chairs and you're

55:55

just hoping that you still have a seat.

55:57

Whereas when the pie is increasing, it's a lot easier

55:59

to get like...

55:59

a piece of it. But when the pie is shrinking, it's far

56:02

harder to get a piece. You just understand

56:03

musical chairs, as you described, is what you're

56:06

is literally the description of the venture capital industry

56:09

and GPs right now. A lot of people

56:11

are losing their seats. Yeah. And that's what happens. I think

56:13

there's going to be a lot of shutdowns of venture firms. I

56:15

think a lot of venture firms are going to be shut down. This

56:18

could be zombie funds. I think we got

56:20

to believe the

56:23

extraordinary outcomes make

56:25

up the bulk of returns in venture from

56:29

the singular companies. And there's a few

56:31

of them. There's 15

56:34

billion dollar exits created every

56:36

year. I don't know if it's unicorns as

56:38

valued in private markets or actual exits, but

56:42

as we know, every couple of years, there's a company

56:44

that comes along that's worth 10 billion. And every

56:46

once a decade, there's a company that comes along that ends up being

56:48

worth 100 billion.

56:50

And the bulk of the returns in the entire venture

56:52

landscape comes from those handful

56:55

of companies. I think we

56:57

end up focusing a lot on market

56:59

metrics as the

57:02

performance driver for venture returns.

57:04

But the truth is, it's the performance driver for the

57:07

mid-tier of venture returns. And

57:09

that mid-tier venture returns is skating along

57:11

at 2x multiple

57:14

after 10 years, or 3x after 10 years, 2 to 2

57:16

to 2.5x after 10 years. That's

57:19

a top quartile. Right. And so whatever it is, 1.8x,

57:21

and now those guys are all underwater. So instead of being 1.8x,

57:23

they're all going to return 0.7x or 0.5x, and they're

57:26

going to lose money. I

57:29

think the 50th percentile returns money. Okay.

57:32

But the truth is, so now they're going to lose money. But the truth

57:34

is, whichever funds get

57:37

the tiger by

57:39

the tail, whoever gets the Uber at 5 million,

57:42

whoever gets the slack at whatever you

57:44

got in at, whoever gets the SpaceX at whatever Saks

57:46

got in at,

57:48

you're going to be fine. Because like the multiples

57:50

in markets don't matter as much if you're generating 4,000.

57:53

I don't think that's true. I don't think that's true,

57:55

because if it happens in a fund,

57:57

and that all of those deals...

58:00

Except SpaceX, happened in

58:02

a different valuation framework where rates

58:04

were zero. So I think the

58:07

question, the more intellectually honest question is

58:09

what would Slack and Uber have gone public at

58:12

today with

58:13

a 5% tenure?

58:14

And I think the answer, if you're going to be intellectually

58:17

honest, is a

58:18

very different valuation than when it went out

58:20

when the tenure was zero. It's going to be hard

58:22

to make outsized returns unless

58:24

and until the entry price

58:26

is completely correct. They may have partially

58:29

corrected, but they may not have fully corrected

58:31

because people, I think, always

58:33

want to believe that there's going to be a bounce back

58:36

and it takes time to kill that hope.

58:39

I think that might be the capitulation.

58:43

I think that capitulation

58:45

is starting to happen, to be honest. That

58:48

was my observation. I feel like everything

58:50

was so shut down

58:52

last

58:53

year, the start of this year, through the summer, and then

58:56

in the fall, just

58:58

the last couple of months, it feels like there's this

59:00

capitulation where it's like, okay, we're

59:02

worth 80% less, but we need money. Let's do

59:04

the deal.

59:05

Okay, we'll put money in. I don't think

59:07

the reset can happen until Stripe comes public.

59:10

I'll be very specific. I think that is the company

59:13

that sets the

59:14

cascading valuation framework for every

59:16

other company. So I think all of this is

59:19

a bunch of people, us, blathering

59:22

on

59:23

and making stuff up. I think the true numerical

59:26

forcing function, the clearing event, happens when

59:28

they go public because you won't be able to hide. I

59:31

think we all would say it's the best front

59:34

company that's private. It's

59:37

the most technical. It's gotten the most people.

59:39

It's gotten the most pristine cap table. It's

59:41

raised the most money. It's done

59:43

everything right. It's the gold standard, yes.

59:45

What their valuation

59:48

is, is then what you can expect

59:50

if you are of that caliber,

59:53

or you can expect a lower valuation

59:55

if you are not of their caliber.

59:57

I think that until we know what that is...

1:00:00

We're all going to be hoping, but

1:00:03

we know that hope is in a strategy.

1:00:06

So my takeaway from all of this is

1:00:08

just more that

1:00:10

people have to really right size the portfolio,

1:00:12

sell what you can, find

1:00:14

liquidity where there are people that want to buy

1:00:17

at different entry prices. They may not be the price

1:00:19

that you thought originally, but

1:00:21

it makes sense for them and their risk profile

1:00:24

in this moment in time. All of this stuff has to happen

1:00:26

to actively manage to exits, I think. Well, and

1:00:28

there's a new phenomenon that's going on that

1:00:30

I've been seeing a lot of. I've been approached by a number

1:00:32

of people who are doing buying

1:00:34

strips of GP interest and strips

1:00:36

of LP interest in venture funds from

1:00:39

the last 10 years I got offered for a 5x

1:00:42

on paper fund, like 3. whatever

1:00:44

x, you know,

1:00:46

and you could clear out, like you're saying, some

1:00:48

of your shares. I got offered, you know, half price basically

1:00:52

by some people who I think I don't want to say the bottom

1:00:54

feeders, but I think they're

1:00:55

maybe

1:00:56

optimistic about certain names. And yeah,

1:00:59

I've noticed that the amount of activity

1:01:01

from secondary brokers seems to have increased.

1:01:04

And

1:01:05

yeah, and and specifically that the

1:01:07

emails that I get that are interesting are the ones where

1:01:09

they're asking me to

1:01:11

sell shares. So when someone's

1:01:13

offering you, that doesn't mean anything because

1:01:15

there may not be any transactions clearing, but when

1:01:18

they have definite buyer interest at a certain

1:01:20

price, that tells you that

1:01:22

the market now has found or is in

1:01:24

the process of finding the market clearing price.

1:01:27

Yeah. So I think I think we do

1:01:29

actually know

1:01:31

from the secondary market kind of where a lot

1:01:34

of these unicorns are at.

1:01:36

My guess is... And what would you say on average

1:01:38

half? Yeah. Half price. Yeah,

1:01:41

a lot of half price. That's what I say. I

1:01:43

see a lot of half price action. But that's not true. I'm not trying

1:01:45

to be a web blanket, guys, but the average SaaS company

1:01:47

that's public is down 75%. And

1:01:50

if you look at the FinTech space, these companies are down 80%

1:01:52

to 90%. So how can half

1:01:55

be reasonable? Well, just for certain names. Because

1:01:57

I think the really bad names don't get any...

1:01:59

liquidity like there's just no buyers. So

1:02:02

you're talking about names where there's already a buyer.

1:02:04

So that's going to bias it

1:02:06

towards the better companies. And

1:02:08

one square and odd yen, these are great companies,

1:02:10

right? That are down 80, 90%.

1:02:13

How can a private liquid

1:02:16

company be only down 50%? Maybe

1:02:18

it's not priced correctly, but maybe also there's

1:02:20

been two or three years of growth since that

1:02:22

last private valuation. So

1:02:25

maybe there's some selection bias, maybe

1:02:27

it's there's 20, 30% growth.

1:02:29

Yeah, but odd yen and stripe

1:02:32

of all, I mean, square have also grown by 50%. I mean,

1:02:34

you also have, let me, we have a comp on this, which is

1:02:36

Instacart, 39 billion peak

1:02:38

profit market valuation is trading at like

1:02:41

six and a half billion, which I think is

1:02:43

exactly what you said, Chamath. When we were pricing

1:02:46

it, we looked at that 800. I

1:02:49

think we're not, but I had said 800 million and

1:02:51

I just put it at like, there was 800 million

1:02:53

in advertising revenue. And I said, okay, you know,

1:02:56

seven, eight, nine times that top line,

1:02:58

or if I said, if it was, if it

1:03:00

was 50% margin, you can give it 20 X. So

1:03:03

I think that's how I came up with my number. And I think we

1:03:05

came up with eight

1:03:07

based on that. And

1:03:08

you're sure enough, that's basically where it's trading 6.8

1:03:11

billion. Yeah, that's amazing.

1:03:13

It's on 26% since that IPO.

1:03:16

Now I will say that Instacart is an example

1:03:19

of a company that has

1:03:21

historically had very high burn and it's a very

1:03:24

capital intensive business relatively.

1:03:26

Whereas a good software business, like

1:03:28

take a Clavio, for example, is

1:03:31

much more capital efficient and

1:03:33

should be doing better. Clavio is down 16% since this IPO

1:03:37

and market gap out 7 billion. So yeah, it's

1:03:39

an ugly story. I mean, even for the names that

1:03:41

just IPO'd, it's not looking too good.

1:03:44

Yeah. I mean, revenue profits that

1:03:46

clears it out.

1:03:48

I do think there's going to be a lot of GPs who are... Arm

1:03:50

down 21%.

1:03:51

It's a big

1:03:53

number. That's a lot of money. Look,

1:03:55

I think the market has just turned very negative

1:03:58

very recently. It comes back. to

1:04:00

this GDP report.

1:04:02

You know, when I saw the 4.9% number, I

1:04:05

mean, the thing that occurred to me, the larger

1:04:07

theme is that there's such a divergence right now

1:04:09

between Main Street and Wall Street.

1:04:12

Explain why the GDP is so strong right

1:04:14

now,

1:04:15

and that would indicate that the

1:04:17

economy is strong, therefore, stocks

1:04:19

should go up, right? Why is that not

1:04:21

happening? I think this is the, that's maybe confusing

1:04:24

for people.

1:04:24

Well,

1:04:25

I mean, I'm not sure I can fully

1:04:27

explain it, because I think there's a lot of contradictory data,

1:04:29

but if you look at Main Street, you're seeing

1:04:32

whatever, 4.9% GDP growth, you're

1:04:34

seeing pretty robust employment numbers. The

1:04:36

consumer seems to be holding

1:04:39

up, but if you look at Wall Street

1:04:41

and the investment side of things, it's pretty miserable.

1:04:43

The whole stock market this year is

1:04:46

being held up by seven stocks. The

1:04:48

so-called Magnificent Seven is the top seven

1:04:50

tech names in the S&P 500. If

1:04:53

you look at the overall S&P 500, excluding those names,

1:04:57

it's flat for the year, and

1:04:59

it's basically giving back all the gains, and now

1:05:02

those seven names are starting to crack. So just in

1:05:04

the last week or so. Google and Tesla went

1:05:06

down a bit, yeah. Yeah, we're seeing them go down.

1:05:08

And Facebook, yeah. And Facebook, so

1:05:12

we're seeing, and then Microsoft had a great quarter, but

1:05:14

it's now down. It's giving back that

1:05:17

pop. So you're

1:05:19

seeing that on the investment

1:05:21

side of things, it's still pretty

1:05:24

grim out there, because

1:05:25

people are now pricing in

1:05:27

higher rates for longer. That's basically

1:05:30

what's happening. And the thing I wonder

1:05:33

about, I mean, here's the disconnect, is

1:05:35

that

1:05:36

ultimately what happens on Wall Street affects

1:05:40

the consumer. There are 401ks

1:05:42

go down in value. The value

1:05:44

of their houses go down, because now

1:05:47

you can't, if you sell your house, you lose

1:05:49

your 3% mortgage, now you have to get a new one at 8%. So

1:05:52

everyone's stopped

1:05:53

trying to sell their house. The number of real estate transactions

1:05:56

has gone down a lot.

1:05:57

That's gradually working its way through the system.

1:05:59

So it's...

1:05:59

At some point, the consumer realizes that they're

1:06:02

just not as wealthy as they thought they were.

1:06:04

That's the wealth effect. And they just stop spending

1:06:06

as freely. And we already know that credit

1:06:09

card debt, and especially credit card

1:06:11

servicing costs,

1:06:12

are at all-time highs because of these high interest

1:06:14

rates. So at some point, you just wonder

1:06:17

if the consumer is like Wylie Coyote

1:06:20

and has gone off a cliff but just

1:06:22

hasn't looked down yet. Yeah, just like the country.

1:06:25

Just like our government. Everybody's

1:06:28

just spending, and nobody's actually

1:06:30

paying attention to the balance sheet, whether it's the government

1:06:32

or individuals, apparently, because credit card debt's

1:06:35

now at its highest. And people are

1:06:37

still yellow. The

1:06:40

only possible explanation with the consumer is

1:06:43

that consumers' wages and

1:06:46

the unemployment, the low unemployment,

1:06:48

persistent low unemployment, and the number of jobs available,

1:06:50

is just making everybody super confident.

1:06:52

But that's got to end at some point, right? Doesn't

1:06:54

it? Do they keep cutting their belts? I

1:06:56

don't think Wall Street and Main Street can be

1:06:58

disconnected forever. I think it's got to reconcile one

1:07:01

way or another.

1:07:02

Yeah, I agree. So I would describe

1:07:04

our economic situation as fragile.

1:07:06

I mean, I think

1:07:07

most commentators,

1:07:09

like Bill Ackman, still thinks that things

1:07:11

are going to turn

1:07:13

south, that this GDP number is

1:07:15

sort of a peak number. I don't know. It

1:07:17

just still seemed kind of shaky to me.

1:07:20

This could be one of the... Not exactly

1:07:22

the recipe that you want when

1:07:24

you have this massive geopolitical instability.

1:07:27

Yeah, exactly. That double Emmy. And

1:07:29

then plus the election coming up and

1:07:32

the chaos that that could cause in the country. It's

1:07:34

kind of like that quote about

1:07:36

going bankrupt. How did it happen? Slowly

1:07:38

and then all at once. I think that's kind

1:07:40

of what we're heading towards. This has been happening slowly,

1:07:43

and then everybody's going to wake

1:07:45

up with a heck of a credit card bill at 15% or 20%, and they're

1:07:47

not going to be able to pay it. The

1:07:51

government will have to intervene. They

1:07:54

can't be in a situation where... I

1:07:56

agree with Tamar. A large percentage of the US

1:07:58

consumers just can't.

1:08:00

This is my point of view on consumer

1:08:03

and all this commercial real estate and the bank

1:08:05

loans. Eventually the Fed monetizes all

1:08:07

this stuff. It's the only path, which by

1:08:10

the way, will inflate

1:08:12

a lot of financial assets.

1:08:14

And if that happens... Well, and actually, you bring up another data

1:08:16

point we haven't discussed, which is there's a major

1:08:18

storm cloud out there, which is major US

1:08:21

banks are facing large unrealized

1:08:23

losses. So Bank of America

1:08:25

had unrealized losses of $131 billion on securities in

1:08:27

Q3. JPMorgan

1:08:31

Chase had unrealized losses of $40 billion in

1:08:33

its held to maturity portfolio in Q3.

1:08:37

And Citigroup did not disclose

1:08:40

its losses for Q3, but it had $24 billion

1:08:42

of losses at the end of Q2. So

1:08:45

remember this dynamic that we had with SVP

1:08:47

and all these banks back in... Was it like March?

1:08:50

Yeah, first of all, yeah. General banks were basically had these

1:08:52

large unrealized losses and then it created

1:08:55

a run on a few of them. Well, now the

1:08:57

biggest banks are starting to face that

1:08:59

unrealized losses problem. Now I don't think

1:09:01

Bank of America, JPMorgan, or Citigroup

1:09:04

are going to have a run on the bank,

1:09:06

but they're clearly not doing that great.

1:09:09

And at some point, there's going to have to be a reconciliation

1:09:11

of that.

1:09:12

Unless they hold it to maturity, I guess. We should

1:09:14

do just a quick hit here on this cruise follow-up story.

1:09:17

We had talked earlier about the

1:09:19

cruise accident

1:09:22

and self-driving. Well, a lot of news

1:09:24

has come out about this gentleman that is potentially

1:09:28

explosive. As we

1:09:30

all know, just to catch everybody up, on October 2nd, there was a

1:09:32

hit and run accident. And this

1:09:35

tangentially included

1:09:37

that cruise vehicle. The cruise

1:09:39

vehicle, a woman tragically

1:09:42

got hit by a car, driven by a human. That

1:09:45

car ran off. That woman got

1:09:47

knocked into in front of a cruise

1:09:50

self-driving car, which then ran

1:09:52

her over. Okay. California's

1:09:55

DMV has suspended cruise and

1:09:57

their permit. allegedly,

1:10:00

the company withheld footage

1:10:03

of the incident. If you remember, we had a little discussion here

1:10:05

about the taxi had rolled over

1:10:07

the person, and then we talked about, hey, you know, you're

1:10:09

not supposed to move off of the person when we did

1:10:11

our whole joke about EMT JCal.

1:10:15

Well, it turns out, after

1:10:17

the AV collision, the

1:10:19

cruise vehicle apparently pulled

1:10:22

the woman for 20 feet. And

1:10:24

this has been confirmed now by cruise. But when cruise

1:10:27

gave that information to

1:10:31

the regulatory agency, the California DMV,

1:10:34

they didn't show that footage. In other

1:10:36

words, they showed just the first half of the footage.

1:10:39

And that has gotten their license suspended. So we

1:10:42

have or we're left to interpret why

1:10:44

did cruise not tell the full truth

1:10:47

to the DMV. And now, Friedberg,

1:10:50

to your point about society taking

1:10:52

risks, now we have allegedly

1:10:55

cruise. I

1:10:58

don't know what the most generous way to say this is, but

1:11:00

they either omitted or

1:11:03

they straight up lied

1:11:04

to the California DMV.

1:11:08

I mean, JCal, if it's true that they lied

1:11:10

and were deceptive about the video, then

1:11:12

yeah, that's like do not pass go go directly

1:11:14

to jail time. I mean, that's really bad.

1:11:17

Yeah. One point I made

1:11:19

last time was I didn't think cruise was

1:11:22

sophisticated enough tech or really GM,

1:11:24

who's their backer was sophisticated enough technologically

1:11:27

to get this right.

1:11:29

And I still maintain that. And so if

1:11:31

on top of that, they were deceptive

1:11:34

about what happened, then that's like

1:11:36

the kill shot. One question I have, JCal, is there

1:11:38

was an NBC reporter who

1:11:41

was on the scene, just happened to be on the scene. And

1:11:43

I remember her reporting

1:11:45

that cruise was not responsible. So I'm

1:11:47

just wondering,

1:11:49

like where the disconnect here is between

1:11:51

all

1:11:52

these various reports. I have a theory, I have

1:11:54

a theory, which is not responsible

1:11:56

for the accident, but then responsible

1:11:59

potentially. for the subsequent, the

1:12:01

dragging of the body. So I think

1:12:04

that's the issue here is that they

1:12:06

may be able to claim, hey, we had nothing to do with the accident.

1:12:09

But then in what happened after the accident,

1:12:11

yes, the technology fell apparently.

1:12:14

Or maybe the technology never took into account

1:12:17

what happens if you run somebody over that was rocketed

1:12:19

under your car. And maybe that's just a

1:12:21

free accident that we have to get used to, that possibility

1:12:24

happening. And that could happen

1:12:26

with obviously a human driver. So it's just a

1:12:28

possibility that that could happen. You don't think that

1:12:31

that case is hard coded? I

1:12:35

mean, the case of

1:12:37

how would the car know there's a person underneath

1:12:39

it? I don't know. But I think you're bringing

1:12:41

up something so obvious as to be comical,

1:12:44

which is like, of course, there

1:12:46

has to be some emergency

1:12:49

cutoff when there's like some obstruction.

1:12:52

Anyway, sure. Let's let all the facts. I

1:12:54

think we'll wait for the rest of the facts to come

1:12:57

out. We've got, I think, 80% of them here, 90% of them. But

1:12:59

Freiburg, you had told us in the group chat

1:13:02

that Hurricane Otis would potentially

1:13:05

be disastrous for Mexico.

1:13:08

And turns out you are correct.

1:13:11

27 people are dead in Mexico. And

1:13:15

maybe you could explain to us why this storm

1:13:17

is unique and why,

1:13:19

if you think this, that we're

1:13:21

seeing more of these. Or are we seeing more

1:13:23

of these? Or is the coverage in the media? Yeah,

1:13:26

you know, in the reaction to it

1:13:28

getting distorted. I don't know about the media coverage.

1:13:30

The big story with Hurricane Otis is

1:13:33

that it went from being

1:13:35

kind of a tropical storm to

1:13:37

being a category five hurricane in about six

1:13:40

hours. And then it made landfall

1:13:42

in Acapulco at a category five hurricane.

1:13:45

And no hurricane forecasting

1:13:47

models had predicted this. And hurricane forecasting

1:13:50

models are what are typically

1:13:53

run off of ensemble models, meaning that there are

1:13:55

multiple things that may happen. And

1:13:57

that those simulations are run on very...

1:13:59

compute intensive

1:14:01

systems. And there are many, many

1:14:04

simulations being run all the time. Every six

1:14:07

hours, these simulation runs are done. And

1:14:09

then you look at these and you create a probability of things

1:14:11

that may happen. And none of the

1:14:13

forecasts had any probability associated

1:14:15

with this event happening. It was so

1:14:18

out of the bounds of anything we have seen historically,

1:14:21

that none of the models had any chance

1:14:23

ascribed to this tropical

1:14:25

storm suddenly evolving into a

1:14:28

category five hurricane in six hours, and

1:14:30

then making landfall on a city with a million

1:14:32

people. We can look at pictures if you guys want

1:14:34

and what happened in Acapulco. It's obviously pretty

1:14:36

devastating. There's apparently no power

1:14:39

line standing in the entire region. Here's some

1:14:41

photos. Oh,

1:14:43

wow. 165 mile an hour sustained winds. The

1:14:46

eye wall went through the town's a million

1:14:48

people, by the way, many of whom live in not

1:14:51

concrete reinforced buildings up against the mountain

1:14:53

there. And so the devastation is really

1:14:55

extraordinary. But the shocking thing is that there was

1:14:58

no prep. There was no warnings. There was

1:15:00

no alerts. There were kind of tourists sitting in

1:15:02

these hotels. Look at the I don't know if you have any of the

1:15:04

hotel photos, Nick, but it's insane.

1:15:06

There are zero windows left in any of the hotels,

1:15:08

any of the condos, any of the resorts, they are gone.

1:15:11

So imagine you're like in Acapulco,

1:15:13

you're drinking beer and tequila. And

1:15:16

then you go to sleep and this thing hits

1:15:18

at 1am as a category five hurricane

1:15:21

and destroys everything.

1:15:23

There's no power. There's nothing.

1:15:25

So if you pull up the first chart, most

1:15:27

of the energy

1:15:29

that is absorbed from the sun

1:15:31

ends up in our ocean. So we talk about

1:15:33

atmospheric carbon increasing energy

1:15:36

retention.

1:15:37

And people can debate that all they want, where the carbon

1:15:40

comes from, etc, etc. At the end of the day, there

1:15:42

is energy coming into

1:15:44

the earth from the sun. And that

1:15:47

energy is being retained. The vast

1:15:49

majority of that energy is retained

1:15:51

by the oceans. So the first

1:15:54

couple hundred meters of the oceans retained

1:15:57

north of 90% of the energy. absorbed

1:16:00

by Earth. You go to the next slide. So

1:16:02

that results in water temperatures going up. So

1:16:04

if you look at this is compared to the 1955 to 2006

1:16:07

average and you can measure ocean

1:16:11

heat content, but ocean heat content has

1:16:13

risen fairly linearly

1:16:16

since the 90s and you can kind of see,

1:16:18

you know, how much excess is actually related

1:16:21

to temperature perfectly or no? So this is ocean

1:16:23

temperatures over time. So

1:16:26

here you can see 2023. And so this shows

1:16:29

you the average sea surface temperature.

1:16:31

So 2023 has been such an outlier. And this is

1:16:34

also because of these El Nino phenomena.

1:16:37

But there's obviously over

1:16:39

time, if you were to look at the average sea surface temperature

1:16:41

trend, it's rising linearly

1:16:43

with heat content over time. And in particular in 2023,

1:16:46

there's an extraordinary rise in temperature.

1:16:49

So off the coast of Acapulco, the sea surface

1:16:51

temperature was 88 degrees Fahrenheit. I mean, it

1:16:53

was so hot, the water like imagine an 80s like

1:16:56

a David Sacks swimming pool. It's

1:16:58

so warm, you know, going down

1:17:00

many meters in the ocean. So

1:17:02

when a storm goes over that level of heat, it

1:17:05

takes heat out of the ocean. And that heat

1:17:07

coming out of the ocean increases the wind speed. And

1:17:09

then the wind speed pulls more heat out of the ocean. And

1:17:11

that's how these things become escalatory until

1:17:14

they hit something cold, like a mountain

1:17:16

or the land, the land is much cooler.

1:17:18

And then these things start to dissipate and break apart. And

1:17:20

that's why these things form over the ocean. So

1:17:23

the point is, no models predicted

1:17:26

this. And that's because we've never

1:17:28

seen this level of energy stored in the oceans

1:17:30

before. And the model training has never

1:17:32

really accounted for this sort of extreme

1:17:35

condition. This extreme condition obviously

1:17:37

is what some folks are arguing is becoming more

1:17:39

frequent. So it brings into question, you

1:17:42

know, this, this, this ability

1:17:44

for us to actually forecast the

1:17:46

rise in the temperature over time

1:17:48

is driving this. And

1:17:50

then, oh, from an economic perspective,

1:17:52

this is one of the key points I wanted to make.

1:17:55

When an event like this happens, there's

1:17:57

a market called the reinsurance market. And

1:18:00

the reinsurance market sets the price for

1:18:02

covering insurance companies against a big

1:18:05

loss where you can lose a ton of stuff at

1:18:07

once. Insurance companies like to write

1:18:09

insurance policies like car insurance is a great business

1:18:12

because there's never one big event that

1:18:14

causes everyone to get in an accident on the same day. But

1:18:17

with property insurance, a hurricane

1:18:19

can cause everyone to lose on the same day. So

1:18:21

insurance companies need to buy reinsurance. And

1:18:24

then there's these big reinsurance companies and they have pools of capital

1:18:26

and there's capital markets involved in bonds that are

1:18:28

sold to protect reinsurance. So there's

1:18:31

hundreds of billions of dollars, trillion

1:18:34

dollar plus in reinsurance. When

1:18:36

an event like this happens, those reinsurance markets

1:18:38

take a loss. The loss

1:18:41

causes them to raise rates significantly. And

1:18:43

when that happens, the reinsurance markets harden,

1:18:46

is what they say. And then rates go up next

1:18:48

year for reinsurance. And then the insurance

1:18:50

companies pass those rates on to consumers and

1:18:53

to property developers and to the people

1:18:55

that have mortgages. And the

1:18:57

more of these events happen, even though it just happened

1:18:59

in Acapulco, it impacts insurance

1:19:01

rates everywhere. So as we see the events

1:19:04

like what happened in Maui, what happened

1:19:06

in Acapulco, what happened in Miami, you

1:19:08

can start to see more of these things start to happen at

1:19:10

the same time, the cost for

1:19:12

ensuring property goes up. And

1:19:14

that starts to make this whole system very difficult to

1:19:17

maintain because if the cost for insurance

1:19:19

doubles or triples and people can't really

1:19:21

afford it, but the mortgages require that

1:19:23

they have it in all of these high risk coastal

1:19:25

cities and coastal areas, that's where an economic

1:19:27

hit either has to be absorbed by the federal government

1:19:30

or we

1:19:34

take a massive economic loss.

1:19:36

And

1:19:38

so I just want to say like this seems like an outlier event

1:19:40

and oh my gosh, we should be sorry and sad. But the truth

1:19:43

is the frequency of these events and the risk

1:19:45

factors, which is this ocean heat temperature rising

1:19:48

continuously for a long period of time, are going

1:19:50

to drive that frequency of events. And

1:19:52

there's going to be a real economic cost to bear on the order

1:19:54

of several trillion dollars over time

1:19:57

because someone has to underwrite that real estate and

1:19:59

someone has to. to underwrite the insurance to support that real

1:20:01

estate. So it may seem like a one-off and oh,

1:20:03

you know, this won't be a big deal, but it actually translates

1:20:06

economically through the reinsurance and insurance markets into

1:20:08

the real estate markets fairly quickly. And so

1:20:11

I just wanted to kind of point out one of the

1:20:13

second order consequences. There was an article

1:20:16

in the Wall Street Journal a few weeks ago, Nick, you

1:20:18

can probably find it about

1:20:20

this exact issue where they profiled the handful

1:20:22

of homeowners, I think it was in Palm Beach or West Palm

1:20:24

Beach,

1:20:25

and they essentially had to sell and

1:20:28

leave because they couldn't afford the home insurance.

1:20:31

Or for those that own their

1:20:33

home outright, they just stopped insuring it because

1:20:35

they realized the land value would be fine.

1:20:37

And so they said if

1:20:38

a storm, there it

1:20:41

is, if a storm

1:20:43

hits West Palm and destroys

1:20:45

my home,

1:20:47

hopefully I'll be fine. And then I'll just

1:20:49

leave and I'll just sell it for the dirt.

1:20:52

But to your point, it's become economically

1:20:55

untenable in a lot of places for these folks to be able

1:20:57

to insure their home. Look at

1:20:59

this on this example, $121,000 a year for home

1:21:04

insurance.

1:21:06

What? By the way, so add up

1:21:08

the value. Well, that's because there's a one in 10 chance

1:21:10

that a hurricane is going to hit them on any given year, right? And

1:21:12

then they lose their whole value. So do the math

1:21:15

on what the total real estate value in that region

1:21:17

is. And think about what it gets

1:21:19

written down to as everyone starts to sell. And

1:21:22

then you do that across all these regions where there's now

1:21:24

high risk and lack of insurance available. And

1:21:26

you have a real economic question on who's going

1:21:28

to step in to support and buoy

1:21:31

those asset values. Now, but aren't there

1:21:33

state actors now that step

1:21:35

in and act as a reinsurer? Great question.

1:21:37

In Florida, they have a reinsurance pool

1:21:40

that is largely assumed to be completely underfunded.

1:21:43

And so everyone says like, Florida's got this reinsurance

1:21:45

pool, they're right yourself. But Florida, if

1:21:47

people if you ask people in the reinsurance industry, they're

1:21:49

like, this thing's basically bankrupt, it's completely

1:21:52

insolvent, this isn't real. So the federal

1:21:54

government is going to be asked to step in and cover that thing

1:21:56

at some point. And then someone's got to write

1:21:58

a trillion dollar check. you want to complain

1:22:00

about sending $100 billion to Ukraine and Israel,

1:22:02

wait until most of the country has to underwrite coastal

1:22:04

communities' real estate values. So Silicon

1:22:07

Valley actually needs to be pro-climate

1:22:10

change so that you can reinflate

1:22:12

the money supply. Wow,

1:22:15

I mean, and then the other, the other. I

1:22:17

mean, how, I'm being facetious,

1:22:19

but I'm kind of not. It's really crazy that

1:22:22

so many industries, it, I think SAC

1:22:24

said it really, really quite perfectly.

1:22:27

When the money supply is shrinking, there's just a lot

1:22:29

less money to go around. When the money supply is

1:22:31

growing, it's much easier for all of us to grab a

1:22:33

share of it.

1:22:34

And now that it's shrinking,

1:22:36

you have this weird effect where you actually want

1:22:38

government intervention,

1:22:39

which unfortunately only happens in

1:22:42

acute tragedies and calamities.

1:22:45

And so what are we hoping for now as a society?

1:22:47

That's a very scary idea. The second effect is

1:22:50

who's going to buy these homes if they can't be insured,

1:22:52

right? It's not going to crash home prices, Freiburg? That's

1:22:54

my point is that these assets aren't

1:22:57

worth what they're currently marked at. And

1:22:59

if you add up

1:23:00

all of the real estate assets in

1:23:02

all of these different regions that,

1:23:05

you know, everyone assumes are worth X, but

1:23:07

the only reason they're worth X is because they're insured.

1:23:10

And if they're not insured, people are going to have to start to sell them. And if they can't

1:23:12

afford the insurance, they're going to have to start selling them. Then the real value

1:23:14

started to come out. These sorts of events like Acapulco

1:23:17

are catalyzing events

1:23:19

for forcing the market to rewrite this back.

1:23:22

This is the beginning of a cascading effect. I saw a really

1:23:24

interesting study about the

1:23:26

risk of the rising oceans and just

1:23:29

the salinity of the oceans

1:23:31

to all the real estate in Malibu. And the reason

1:23:33

is that, you know, if you look at the Malibu coastline, there's

1:23:36

a small number of homes, but they trade at an

1:23:38

extreme amount of economic value.

1:23:41

But

1:23:42

what underpins all of that stuff are that these homes

1:23:44

are viable

1:23:46

and that you can live in them and that you don't have to replace

1:23:48

them. And that if you can sufficiently drill

1:23:50

far into the bedrock, you can keep these homes safe.

1:23:53

And this study was just talking about how the

1:23:55

corrosive effects of the ocean are such now that

1:23:57

you can't actually do that.

1:23:59

to the same rate when you actually

1:24:02

initially buy these homes. So now you have these $1,500 million

1:24:05

homes that are really at risk

1:24:07

of just corroding and falling into the sea.

1:24:09

Interesting.

1:24:10

Yeah, that's always been an issue there. And you're

1:24:13

right on the PCH highway, and there's a small

1:24:15

amount of land between you and the water. So if it starts

1:24:17

rising or it's corrosive, you know, I've

1:24:20

rented those homes before, friends of ours have as

1:24:22

well, and the water just goes right

1:24:24

underneath the homes. And every year it goes a

1:24:26

little bit further under the home. Right.

1:24:30

In some of the homes now, when

1:24:32

they rent them to you for the summer, they say, hey, listen, during high

1:24:34

tide, you can't get to the beach safely.

1:24:37

You can jump off your back porch and jump into

1:24:39

a wave, but at low tide, you can

1:24:41

get down and use the beach. If not, you

1:24:43

have to walk down the street and go down like another

1:24:46

person's alley to get to the water. Tikal, where are

1:24:48

you now? So I have been in the Middle East. I

1:24:50

got to go to Riyadh for the first time. I'm in the UAE

1:24:52

for the second time. I

1:24:54

don't have any business interests here, but I have been

1:24:57

taking a bunch of meetings. And the reason I went

1:24:59

is I'm actually, I'll

1:25:02

pre-announce it here, I'm going to be bringing this week

1:25:04

in startups. I'm going to do a series from

1:25:06

the Middle East and feature the capital allocators

1:25:09

and the startups that are growing here. The startup scene

1:25:11

here is extraordinary. And

1:25:14

I'm going to bring my founder university to the region as well.

1:25:16

And I'm going to start

1:25:18

teaching entrepreneurs

1:25:19

here in the region, Egypt, Saudi,

1:25:22

UAE, Qatar, anybody,

1:25:24

Jordan, who wants to learn how to build a company. I'm

1:25:26

going to be teaching startups in the region. And so

1:25:29

pretty exciting. And I think startups,

1:25:31

you know, at their core is hope and

1:25:34

personal freedom to change the world. And

1:25:36

I think if we build deep relationships between

1:25:39

these important countries that are playing a bigger and

1:25:41

bigger role in the global stage, and we build

1:25:44

companies together, that's going to be great for America

1:25:47

and American interests. So that's what I'm putting

1:25:49

here since people have been asking you. What if anything

1:25:51

has changed between what you thought of

1:25:53

the Middle East versus what you think of it now? Has

1:25:55

anything changed? Did you have a different view of

1:25:57

Saudi? Let's take Saudi, for example. Do

1:26:00

you think the Saudi and MBS before you went, and

1:26:02

what do you think now after you've been there? Well,

1:26:05

there was very little change

1:26:07

in that society over the last 30 or 40 years, and based

1:26:10

on what they've told me, you know,

1:26:13

spending a lot of time with a lot of people there, I maybe

1:26:15

had, I don't know, 30 individual

1:26:18

meetings or coffees, dinners, literally 30

1:26:22

different people, and they've

1:26:24

told me everything's changed. So personal

1:26:26

freedoms have changed radically, economic

1:26:28

freedoms have changed radically, the political

1:26:31

system hasn't changed. No, I

1:26:33

think that's going to change radically. But yes, my opinion

1:26:35

of it, the reality of it is it's changed

1:26:38

massively. And then on

1:26:40

top of that, yeah,

1:26:43

I have learned a lot. I've never been there. The

1:26:46

entrepreneurial excitement in the

1:26:48

region, Saudi... Do you

1:26:50

think you were too judgmental before?

1:26:54

I have some core principles

1:26:56

that I believe in. And what I will say is from doing

1:26:58

this podcast with the three of you, and

1:27:00

then being thrust into

1:27:03

like geopolitics, which, you know, I

1:27:05

really haven't been in my life, I felt I

1:27:07

needed to get more educated. I feel

1:27:09

I am more educated now, after

1:27:12

doing all these meetings. And I think the big

1:27:14

education is the people here are not

1:27:16

much different than the folks in

1:27:18

our country. And they all want

1:27:20

peace, prosperity, personal

1:27:23

freedoms. They want to have a great

1:27:25

life for their family. So to that extent,

1:27:28

I think... And each of the countries is very different,

1:27:31

you know, and so you can't paint with a wide brush. Now,

1:27:34

of course, I know that, but there's no substitute

1:27:36

for being here and spending time with people. So

1:27:38

do you think that you just had a misconception

1:27:41

or do you think you just fell for what the media

1:27:43

tried to portray these countries when

1:27:46

there were incidents?

1:27:48

Like how do you reconcile that

1:27:50

as you change your mind about them? Well,

1:27:53

I think things have actually changed here more

1:27:56

than I've changed my mind. I still feel the same way I

1:27:58

feel about human rights and... you

1:28:00

know, personal freedoms and everything like that. But what I've

1:28:02

learned is that this area is changing

1:28:04

so quickly. And that change is

1:28:06

hard. And David said something really important,

1:28:09

you know, is like, you need strong people to make these changes

1:28:11

here. And they're going to make the changes

1:28:13

on their time. So the other thing, I think,

1:28:16

if there's anything that has influenced

1:28:18

me, it's probably what David said, you know,

1:28:20

is like, this is gonna be hard

1:28:22

to make the changes here. And another thing you said, you know,

1:28:24

there was one point you said on the spot, like, hey,

1:28:27

do you think they care what you think, right? They

1:28:30

actually do care, they listen to the pod. But

1:28:32

the truth is, the changes are going to occur here, Trimoth, whether

1:28:35

we're involved or not. And so I think as

1:28:37

Americans, what we have to decide, and

1:28:39

as business leaders, how involved do we want

1:28:41

to be in that change? And how deep of those

1:28:43

relationships do we want to build? Because if

1:28:46

we don't build those relationships, there are other

1:28:48

people who would like to forge relationships, right? Russia,

1:28:51

China, etc. So I think

1:28:53

just in terms of the chessboard

1:28:56

that we see playing out right now, the

1:28:58

more America can engage with

1:29:01

this region, build companies with them, I think

1:29:03

it's going to be better for humanity and society.

1:29:06

But I think if you look at China, we disengaged.

1:29:08

And how's that going for us? Yeah,

1:29:12

it's going terrible. So I want to build companies

1:29:14

here. And that's the other thing is people are having big talks

1:29:16

about all of these issues, human rights, changes.

1:29:20

And so the

1:29:23

thing I want to make sure people understand is, I

1:29:25

want to see positive change in the world, including

1:29:28

our country here everywhere. And so,

1:29:30

you know, it's never coming from a place

1:29:32

of trying to be preachy to people, I just

1:29:34

want to see positive change in the world. And,

1:29:36

you know, now with this podcast being so popular,

1:29:39

people have expectations of us. And one of the

1:29:41

expectations is we know what we're talking about.

1:29:44

And I did not know what I was talking

1:29:46

about in this region, because I never spent time here, just like Saks

1:29:48

has never been to Ukraine. What does he know about Ukraine and Russia? He's

1:29:50

never been to either. So, you know,

1:29:52

just like Saks is going to go to Russia and Ukraine

1:29:54

and get educated, you know, I came here to get educated

1:29:57

so that I can represent the pod better. I've been to

1:29:59

the United

1:29:59

States and so I know that the US shouldn't be

1:30:02

involved there.

1:30:03

I'm joking with you my friend. I'm joking. I

1:30:06

think we should go do more travel. It's

1:30:09

really inspiring to see what's going on here.

1:30:11

On a very pragmatic basis, I will say

1:30:14

this is going to be the number two region in venture

1:30:16

capital. It's going to be that in 10 years

1:30:19

because I've met with a lot of the family offices. The

1:30:22

family offices here are extraordinary. They built

1:30:24

these businesses like really hard fought businesses 50

1:30:27

years ago. Welcome to being a capitalist

1:30:29

Jason. I love it. The water's warm in this bathtub.

1:30:31

Join us. Well, no. The thing

1:30:33

with these individuals

1:30:35

is, they're coming to the United States to invest

1:30:38

in companies here. They're not just like the dumb money

1:30:40

at the table. Of course they are. Of course, because they're smart

1:30:42

business people. We're all smart business people.

1:30:44

We've always wanted to be in business. Nobody,

1:30:47

it's what you said. Nobody was sitting here wanting to be some

1:30:49

preachy know it all. Yeah. So

1:30:51

anyway, I'm learning a lot. I'm having a great time here. I don't

1:30:54

currently have any business interests here, but I would say

1:30:56

a year from now, there'll be a 12 episode

1:31:00

run of this week in startups featuring folks here, and then

1:31:02

founding university to be here building companies with

1:31:04

people in the region. So I'll be investing in some companies

1:31:07

here and helping founders start companies.

1:31:09

All right. Yeah.

1:31:12

Tell us about the speaker. Saks, what do we know about

1:31:14

this guy? Who is this lunatic? Well, let's not call

1:31:16

him a lunatic because he's

1:31:18

third in line for the presidency. So Saks, who is

1:31:21

he? Okay. His name is Mike Johnson. He's

1:31:23

from Louisiana's 4th District. He's been in

1:31:25

Congress for since 2016. It's

1:31:27

his fourth term.

1:31:28

He is in relative terms of backbencher.

1:31:31

Apparently he's never met with Mitch McConnell.

1:31:33

That may be a good thing, but several members

1:31:35

had to Google him to find out who he was. Really?

1:31:39

Yeah. Here we are. The

1:31:41

good news in my view is that he did vote against

1:31:43

more funding for Ukraine. However,

1:31:47

as much as I like him on that issue, there are other

1:31:49

issues where I think his previously stated

1:31:51

views could be problematic for the

1:31:53

Republican caucus. So he's very

1:31:55

socially conservative. He voted to ban

1:31:58

abortion at the federal.

1:31:59

level. He's

1:32:01

called gay marriage a dark

1:32:03

harbinger of chaos and sexual

1:32:05

anarchy

1:32:06

that could doom even the strongest republic.

1:32:10

On the issue of entitlements, he

1:32:12

has expressed support for cutting Medicare and Social Security.

1:32:14

I think Trump has rightly figured out that that would

1:32:17

be death to the Republican Party.

1:32:19

Where he is aligned with Trump is that

1:32:22

he bought into the election denial theories

1:32:25

and particularly he bought into the Dominion

1:32:27

scam that was pushed by Cindy Powell. Shout

1:32:29

out Cindy Powell who is pleading

1:32:32

guilty this week. The kraken. Yeah, the kraken.

1:32:35

So was lunatic too

1:32:38

muted of a word to describe this guy? Shax,

1:32:40

would you say? I don't think he...

1:32:43

I wouldn't say... Sorry David, how did he get elected?

1:32:45

Because I thought there was like more moderates that

1:32:47

were like Emmers

1:32:48

and

1:32:50

even Scalise is more to the left of this

1:32:52

guy. So how did how did is it

1:32:54

that all of that ended up with

1:32:56

the far far far right person

1:32:58

getting elected? This is the crazy thing

1:33:01

is that

1:33:01

they had better choices. And so for

1:33:04

example, Jim Jordan is the guy who I think

1:33:06

should have gotten it. Jim Jordan is

1:33:08

always supremely prepared for any hearing.

1:33:10

He's one of the only Republicans who knows how to ask tough questions.

1:33:14

I think he would have run the house with tremendous discipline. This

1:33:16

is a case where you're plucking a guy out of obscurity.

1:33:19

He may not even have the experience to

1:33:21

run the house with the necessary discipline.

1:33:24

Moreover,

1:33:25

he's somebody who the Democrats are going to be able to

1:33:27

write campaign ads against very easily.

1:33:29

Now you asked the question how did this happen? I think

1:33:32

that the GOP

1:33:33

just kind of ran out of gas. I mean they went through

1:33:35

so many candidates that

1:33:36

they exhausted all

1:33:39

the options and there were three weeks of chaos

1:33:41

and the New York Times summed up the feelings

1:33:43

of the GOP caucus by saying they

1:33:45

view Johnson as someone who's sufficiently conservative

1:33:48

who they do not personally despise. So

1:33:50

that's really the reason at the end of the day

1:33:52

is they just perceive as a nice guy.

1:33:55

But as you know nice guys don't always

1:33:58

get the job done. I mean... What

1:34:00

is happening? They kind of ran out of candidates

1:34:03

and they chose this guy because he's a nice guy.

1:34:05

Now Jim Jordan. This guy's a nice guy? He's

1:34:08

a nice guy. He's very evangelical. Nice guy who

1:34:10

believes gay people are evil?

1:34:13

I certainly don't approve of that message

1:34:15

but it comes from his religious

1:34:17

views. Well done Republican

1:34:20

party. But look, Jim Jordan was the right guy

1:34:22

here but Jim Jordan sometimes has sharp elbows

1:34:24

and so he's rubbed people the wrong way. Mike

1:34:27

Johnson

1:34:28

on a personal level

1:34:29

has not rubbed people the wrong

1:34:32

way but

1:34:33

I agree that the campaign ads are

1:34:35

gonna write themselves here. He

1:34:38

apparently hasn't rubbed anyone.

1:34:42

And then the crazy thing is that

1:34:44

the one social issue. It gets crazier? Well

1:34:47

from my point of view, the one social

1:34:49

issue or cultural issue where he's not

1:34:51

that conservative apparently is on CRT.

1:34:55

He said a bunch of things that indicate

1:34:57

that he views the US as being

1:34:59

systemically racist and doesn't think

1:35:02

Republicans should be attacking

1:35:04

CRT which I think is

1:35:06

the one cultural issue where

1:35:08

Republicans should be on offense. They should be opposing

1:35:11

the woke mind virus. I would like to see them

1:35:14

go after that issue

1:35:15

and not be trying to re-litigate gay marriage

1:35:18

or abortion at the federal level. So in my

1:35:20

view, this guy is the wrong mix

1:35:23

of cultural issues and then of course his

1:35:26

views on entitlements are a surefire loser for

1:35:28

the Republicans. So the

1:35:29

Republicans are all like slapping each

1:35:31

other's backs and sucking each

1:35:33

other's s**ts over getting this done. They're all so happy

1:35:35

about it. But I think it's a disaster

1:35:38

to make them. Whoa,

1:35:41

it's a disaster. How long does this last?

1:35:44

How many days? How many moochies,

1:35:46

how many saccharuchies does this guy last? Yeah,

1:35:49

you give him seven?

1:35:51

Well, again the

1:35:53

Republicans now are so burned by the chaos they just

1:35:55

went through that I don't think they want to go

1:35:57

back into it too easily. Wow.

1:35:59

So it could last, look,

1:36:02

you're right, I don't

1:36:04

think he's going to last long term, but it may

1:36:07

be more than a few Scaramuche's.

1:36:09

Yeah.

1:36:10

Scaramucci only lasted 11 days. Yeah,

1:36:13

that's what I'm saying. 100 days?

1:36:16

A Scaramucci is a unit that equals 11

1:36:18

days.

1:36:19

Yes. So you think like 10 Scaramuche's?

1:36:22

Yeah. If you have

1:36:24

to get to like January 20th of 2025, which

1:36:27

is the inauguration, what are you talking about? 365 days,

1:36:29

right? Plus another... Yeah. We're

1:36:32

talking like 70 days. 90 Scaramuche's here. No, we're

1:36:34

talking about 41 Scaramuche's to get to January

1:36:36

20th. I mean... 40 Scaramuche's

1:36:39

in a wake up. Of 2025. 40 in a wake

1:36:41

up. Oh my Lord. to

1:36:44

be a drip, drip, drip of

1:36:46

all the things that he's ever said when he was kind

1:36:48

of a backbencher

1:36:56

and no one was paying attention.

1:36:58

All these sermons that he's given and so forth,

1:37:01

they're going to be writing stories about

1:37:03

that and they're going to make the guy seem like a wacko.

1:37:06

Or expose that he is a wacko. I mean... Well,

1:37:08

I think that I would

1:37:10

say that he's just somebody who's got very

1:37:13

socially conservative views based on being

1:37:15

evangelical and might

1:37:17

be wildly out of touch with

1:37:19

Americans. I don't want to like offend

1:37:22

people in that group by saying he's a wacko,

1:37:25

but I think you are right that it is not in

1:37:27

tune with

1:37:29

most voters. Let's say that.

1:37:31

Hey, before we go, Saks, we're going

1:37:34

to ask you about the Trump cases.

1:37:37

I mean, as a lawyer,

1:37:39

what do you think is going to happen here? We have

1:37:41

all of the crack and people have to answer the audience. Well, let's go into the audience.

1:37:44

What happened? Well, I mean, I think everybody's

1:37:46

following it. Jenna Alice, Kenneth

1:37:48

Cheesebrow, spelled

1:37:50

Cheesebrow, but it's Cheesebrow, and Sidney Powell

1:37:53

have all now pleaded guilty. Some

1:37:55

of them for felonies, in fact,

1:37:57

but the other is misdemeanors. They're

1:38:00

all really apologetic about basically

1:38:03

this fake electorate scam

1:38:06

they were running to try to overturn the election.

1:38:08

And they say there's six more of these 19

1:38:11

people in the RICO case who are going to flip next week.

1:38:14

At the same time, Trump was doing his case

1:38:17

in New York and was fined 10K for violating

1:38:20

the gag order the second time, third time.

1:38:23

They think he's going to actually potentially

1:38:25

be put in jail, which seems to be something

1:38:27

he's trying to do. So

1:38:31

what's your take here, Zach? Is it all a

1:38:34

deep state conspiracy still, January

1:38:36

6th stuff? Or were these lunatics actually trying to overthrow

1:38:38

the government?

1:38:39

To be honest, when you mentioned the name Jenna Ellis, all

1:38:41

I can really think of is that election

1:38:44

hearing in Michigan where she made a

1:38:46

face because Rudy Giuliani audibly

1:38:49

farted.

1:38:49

And

1:38:52

then it turned out that

1:38:54

she got COVID a few days later and that we think

1:38:56

that Giuliani had it at the hearing. So he

1:38:58

may have farted the COVID into her. That's

1:39:00

what we've learned after all of this with COVID is that

1:39:03

it's not actually in the airborne. It's

1:39:05

just flatulent space.

1:39:08

You could fart COVID onto somebody. We've

1:39:12

got to go to a second science corner here. We

1:39:14

need an emergency science corner. Can

1:39:16

you fart COVID into somebody's face, please?

1:39:20

You never know the side by the side. Can

1:39:23

I come out your bum as well as your mouth?

1:39:26

Come on. Should we have put masks or diapers

1:39:28

when we were on airplanes to block

1:39:30

the COVID from... We should have masked and... We

1:39:33

were masking the wrong place, yes, Friedberg?

1:39:35

I

1:39:37

got him to smile. He almost laughed. Hold

1:39:39

on. Put this on the screen. Yeah.