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