hey everybody welcome to another episode of the Allin pod the notorious threesome is here doing the show solo today threesome thle it's a thr it's a thle we have a thruple I think it's more like a cuddle puddle okay the dictator chamoth poopaa Rainman David Sachs sulan of science Dave fredberg happy to be here with you guys today we are absent jcal
taking the week off any other housekeeping let's do it let's jump been to it well you announced that we're going to hire a CEO right oh let's talk about that how's it going freeberg in our CEO search okay I got to admit I've had a few conversations but I got to get through the list there are 240 applicants so far wow wow and there's
some really like great people in there so we need to figure out how we're going to manage this but I think we're pretty excited I can't believe so many people want to work for us that's insane there's some really great folks I think the Jim you posted it and people were pretty positive right generally positive not everyone it was it was really
positive yeah I mean I think that people were very excited about the fact that we were going to try to kind of like professionalize us a little bit more so let's just talk about that we did The all-in Summit in September we thought it went really well folks really enjoyed it the survey data the folks that attended was really positive so we we want to do that
and do more of that live inperson stuff we all have full-time jobs and other things to do so we need someone to come and run this as a business and organize it and Carry It Forward a little bit for us and so we're really excited to hopefully get someone that can scale this no ads ever no subscription fees nothing's going to
change about the Pod so it's a media and events business and it might become a cpg business as well meaning was it cpg's consumer package Goods that's right TXS you're that is the correct use of the acronym David congratulations your first product uh would be what tequila I would do like a tequila or like a hard Seltzer or something like
that that seems to be a big growth category or we could figure out something very orthogonal I mean Mr Beast did candy bars and we found out at the all Summit that he's doing something like 250 million a year in Revenue growing very fast yeah we could do saxs nuts the sax nuts be too big to eat you wouldn't to fit them in your mouth Jamal
they just be old and salty let your win ride [Music] David we open source it to the fans and they've just gone crazy [Music] with well I think the other thing that's worth figuring out is this idea of like what is what does the community really look like I think that's the biggest that's the biggest upside for the CEO is like is it physical places like zero
Bond or is it virtual sort of like Community oriented things is it some combination of the two I'm really interested in trying to figure that out and and what answer they come up with then the other thing that I would really like to experiment with quite honestly is if we could do a little bit of a tour I just think it would be super fun to
kind of go to like five or 10 cities and just kind of like crash those places and have like a big get together and talk to people and do a big Q&A I think the thing that is really fun is just the interactive Q&A just because it allows everybody to get involved and then to be able to do dinners with each other and like there's just a really amazing
community so that person should be able to figure this out I don't know the answer to it but I I'm hoping they figure that out we should give a shout out to the guy who did the interview video or submitted you see that that's like a 4-minute video that somebody submitted his by video on on X I think I was on his podcast Sean you were I was on his
podcast like a year and a half ago I think can we pull it up welcome welcome to my five minute job application to become CEO of the all-in podcast this is the American dream baby that's great well he posted a tweet the day before saying if it gets a thousand likes he'll submit an application and instantly got a th likes
and then he put that video together so great job Sean I will be calling you later for your second round interview I think you're well qualified after that submission but I do remember like at the all-in summit I've never been to a conference where I'd say like 95% of the audience was actually in the theater for the entire content session like they
really sat through it it was really engaging so I think that's the sort of product that I'd love to bring bring out more which is some of these important conversations with people that can provide a perspective that folks might not be getting elsewhere Jam you also mentioned on Twitter that you're doing more content like you're you called it
learn with me what is that yeah I mean well I've been doing this for a while but I just wanted to wrap it up and kind of make it into a clean kind of produ eyes service so you know I have this newsletter that I've been using weekly to just kind of share everything that I read but then I thought okay why don't I actually like really invest just a
little bit of time every week to curate that even a little bit more and then write little summaries of probably the three most important news topics of the week and I just kind of give an insight into my process so when I read all of this stuff usually two to three times a month but the average is around twice a month I end up writing an essay and it's
like one or two pages really quick and I just keep them for myself and it's like right now I'm just I just finished one what is the Federal Reserve and the reason I did that was because dren Miller was on TV and was talking about all this stuff and I just wanted to remind myself about why the Federal Reserve exists the way it does but
basically what happens is from these quick essays and from what I read I typically start every month a deep dive where my team and I we probably allocate at least a month to a month and a half where we figure out something in really excruciating detail and we generate a slide deck and a write up and then we take that and we go and we ask
bunch of experts what they think and then we only keep it within ourselves but then I thought you know what why don't we just start sharing it so the reason I'm doing this is really to keep myself accountable to keep learning because I feel like in the last few years the thing that I lost most when things were going crazy was just the
incentive to learn and I thought if there are other people around me that are also relying on this I'll be more accountable and obviously to the extent that this thing can actually be self funding then I can take some of that Revenue reinvest it in more research Associates maybe publish more content but it's kind of like all the information I wish I had so that I could
make better decisions I'm just going to kind of take what I have share it with everybody and kind of go from there so we'll see so you're charging for the kind of higher end part of it at the end of it like it's kind of like I would say most of it is free the Twitter spaces obviously is not because the point of these or these X spaces is we just don't
want a bunch of bots controls but there's a bunch of people that signed up to be a subscriber so we'll do q&as monthly for subscribers and then once a month I'll publish a deck and like I said if you want the full one then you can be part of like a paying Community otherwise you'll get some portion of it for free and then you'll have cash to
reinvest in doing more content is that like right now I have a couple of research assistants that really help me and we have a pool of experts that we use but if this thing picks up some steam and we can have enough Revenue to hire three or four more ra maybe at some point instead of monthly we can go by weekly I don't know but the
idea is just to focus on sort of what I think is interesting so that I can have a general view of of things so that I can make better decisions and like I said to the extent people are interested now they can follow along at any level there you have it so people can go to your Twitter to see it right yeah okay by the way the other thing is it's kind
of cool to be in this like content creator economy you know that's the other thing is like I don't know about you guys but I feel like I'm on the sidelines looking in at Trends now whereas before I was in the middle of them like Web 2.0 social I was right in the heart of it and I was like okay this is amazing and then as an investor in
SAS and deep Tech I was kind of in the middle of those as well that felt great but this last push in AI I'm like wow I'm really on the sidelines looking in or this content creator stuff so I think it's it's a good forcing function for me to kind of learn as well to be active in the content creator economy basically to understand it better yeah I don't know
how else I'll ever learn how to because like I I could read all the stuff I want just so you know you do a podcast that a lot of people listen to yeah but I think that that's like a it's the lowest order bit quite honestly you know when you see like what Jimmy Donaldson does or even like Kim Kardashian what they do as content creators it's just an
intense process that then creates all this upside so even if what I want to have a more informed view of where Allin needs to go I want to be a little bit more on the ground and actually in the engine room doing it for myself yeah since we started doing the Pod sax has been creating a ton of content too I mean saak you wrote a piece this week
didn't you and on Ukraine or like the the time article on Ukraine didn't you yeah yeah like you weren't doing a lot of content before we started doing the Pod right no he was he was writing like a lot of blog posts on SAS those were excellent he had like an occasional blog post but he's like super active now particularly on Twitter no like has that changed a
lot well what basically happened is I would Express political views on the Pod you know on a weekly basis and I wasn't really tweeting much about politics but then it all kind of bled together I mean once you start talking politics on a pod people were clipping it they were putting it on Twitter and then I have to respond to it maybe correct yeah Mis
interpretations or respond to ATT or whatever so it all the politics and business stuff just kind of bled together on Twitter it' be nice if I just had two accounts and people could just follow me for what they wanted to follow my substack is just business and then I'll occasionally write an oped on the political stuff so I've written a
few on free speech and then I've written a few on Ukraine and so I wrote a piece for responsible statecraft this week on Ukraine which was based on a Time Magazine story that came out and then I did a version of it on X kind of a long post which I called the Ukraine Wars kronite moment which descri the the kronite moment in the Vietnam War was
that Walter kronite who was the top newscaster America's most trusted man in the 1960s he went on a fact-f finding mission for himself to Vietnam and he came back and he said the war is basically unwinable and that's when the public sentiment really turned against the Vietnam War it still took us 5 years to get out of bit but what kronite said
there's a great quote from kronite which I included at the end where kronite says it is increasing clear to this reporter that the only rational way out will be to negotiate not as Victors but as honorable people who lived up to their pledge to defend democracy and did the best they could so that that's basically what happened in 1968 what happened this
week is that Time Magazine wrote a cover story on zinsky where the main sources for the story were all of zelinsky's AIDS and advisers and what they told the time reporter was effectively this war is unwinable and moreover zalinsky is delusional that was a word they used delusional in in not confronting the battlefield realities that the Ukrainian
Army had been decimated and delusional in the sense that he refuses to engage in peace negotiations with the Russians he's utterly unmovable on this idea that Ukraine's going to somehow Prevail and the troops in the field are basically saying that they cannot follow the orders they're being given they literally they can't Advance they're
being ordered to advance and the officers in the field the Frontline commanders are rejecting the orders because they've been decimated so badly and they they consider the orders to be impossible so I consider this to be the kronite moment of the war when zelinsky's own Inner Circle is saying that the war is lost and the only
question is when are we going to realize that and start negotiating are we going to continue until the very end here with zinsky in this psychological bunker that he's created or are we going to recognize reality the way that kronite urged the nation to in 1968 do you think these AIDS to zalinski proactively reached out to the journalists to try and get this story
published how does a story like this come about that provides this kind of revealing Insight on the supposedly inner chamber in zinsky operations that can shed so much light on the challenges and with him and with the operation really interesting question and I think the starting point for understanding that is that this writer Simon Schuster
of Time Magazine wrote the in-depth profile zinsky for times person of the year at the end of 2022 so this reporter cannot be accused of unor this this is the person that profiled zinsky as person of the year yes yes exactly oh wow so so they so through that he probably had contacts in zin's inner circle and doing his
Preparatory work for that article back then absolutely yeah and maintained those relationships and has a back Channel now to be able to get this sort of insight well he was physically there I mean I think he was physically there to write the person the your profile and he was physically this isn't some like weirdly planted this is like a legit
source well that's my whole point is that this this reporter is and and Time Magazine obviously is mainstream media and this writer has given favorable coverage to zalinsky in the past and I believe that's what led to him having this kind of access to zelinsky's Inner Circle so you have to take all of that into account the key question Sach is
does this change anything so does this article change the sentiment of political leaders in the US or is nothing really different that we still need to defeat Putin continue to feed the war machine continue to support the effort against Putin or does this start to beg the question hey maybe we need to look at this tactically and and make a
change is anything actually going to change from any reason to think that in a certain sense this article isn't saying anything that's new I mean the article basically says the same things that I've been saying the same thing the same kinds of things that Professor Mir shimer has been saying Professor Jeffrey Sachs the all the critics of this war
have been saying these things for a number of months which is the Russians are winning there is no feasible way for the ukrainians to evict the Russians from their territory we are out of artillery and other types of ammunition to give them effectively the war is unwinable we should negotiate so a lot of people have been saying that for a
long time but what's different now is that if you believe this publication and this writer which I do because of his access it's zelinsky's own Inner Circle are now saying those same things so in other words the so-called Putin talking points that we're always accused of are coming from inside the house yeah and to me that's what makes this a kronite
moment now will policy makers in Washington changed their tune or Chang their perspective on this probably not the uni party of both Republicans and Democrats are still seems to be a majority who want to fund another 61 billion for Ukraine so is this penetrating The Blob I don't think so I mean but again think about Walter kronite in 1968 the country basically
came around to his point of view after that but it still took five years to get out of the Vietnam War so I think that this week was a Watershed in terms of the way that public perception is going to evolve over the next few months but it seems like the policy makers in Washington are the last ones to get the MEO well let's see what happens I mean
I've shared my point of view for a couple of years now I think the US is in a call it subconscious conflict escalatory state that would continue to drive us into these sorts of it's great for markets seems to be great for markets conflict is great for markets you're saying no no no no the the fact that it seems like there's a terminal outcome and all
we're debating is whether zilinsky sees it is actually very reassuring for the market oh you think the markets you think the markets recognizing that there may be an end to the Ukraine conflict well I I do think I I do think in part I don't think it explains why it's up necessarily today I think that's more because I think I I
mentioned this before but the end of the fiscal year for m UT funds was October 31st and so there was a lot of selling going into October 31 just to capitalize tax losses and tax loss Harvest but that leaves them with a lot of cash and so starting November 1st which is day one of the new fiscal year mutual funds are not allowed to really own cash that's
not why you pay them and so they're going to be active buyers so that's why in the short term the market is up but if you think about the overhang of risk that we've had right you had one Forever War and now the beginning of what potentially could be another Forever War that's definitely a dampener on market demand right and and and sentiment and investor
confidence but if a story like this is true it actually takes one of those big risks off the table which is this idea that now it's like every other kind of a thing which is it's the reason we spend money there is not to win something that's winnable it's just graft it's just typical corruption and the article says that quter Ukrainian officials
saying that people are stealing like there's no tomorrow right right so that that the US unfortunately enables in many places that's not new and so to the extent that that's now more of the status quo that's reassuring for investors because we're not talking about a war we're just talking about bleeding more money which I'm not saying is right but
it's morally more acceptable than the alternative so there you have it it's generally good for markets now that leaves I think Israel Gaza as a risk and I think people and I think the markets still view that as a potential War and the longer that goes on I think that there's a very good chance that we drisk that as well as again not a war but part of that
cycle between Israel and Palestine which is conflict timeout conflict timeout conflict timeout and so if what we think is now this is just a version of conflict timeout and the market Dr risks that then it's actually pretty positive for equities for startups because now the FED has a reason to actually say okay the economy is cooled off inflation is
calm it looks like the markets are stable let's cut rates right let's let's reintroduce some demand into the market it's generally a good thing and if if there's no reason to be risk off people will use that as a reason to be risk on yeah well treasure yield the 30y year cracked is yeah it's down uh cracked days0 days or three days yeah so
don't you think this is because the forecast or the outlook for Q4 or q1 next year it's starting to go down quite a bit that people are starting to see more recessionary indicators so you had this like Peak four .9% growth rate and then inflation seems to be tamed quite a bit too I think to be honest the look through on q1 looks also pretty good and
Q4 looks healthy as well so for example Shopify their read through on GDP was actually pretty healthy hary was on I think it was CNBC I saw this morning basically saying he thinks consumer spending is still strong and it's still there so I think in terms of just like economic strength I think it's pretty decent actually I think what Chang for
the market was the fed's rhetoric and I think that they were holding on to this option that they were going to show up out of nowhere with another 25 or 50 basis point increase and I think that that's fundamentally now off the table and I think that that's really hardening for the market that's good for the market grow stocks are ripping a firm
tuner are up 20% today ripping ripping ripping open door ripping door Dash ripping all these companies are up 20 and 25 and 30% it's crazy yeah so are we calling bottom stxs well maybe I mean I don't know it's so hard to predict the markets but if you believe that there's more upside to rates than downside meaning that the odds of a rate decrease
are much greater than the odds of a rate increase from here then there is upside to valuations particularly for gross stocks also for distressed real estate because all these things get more valuable when rates are lower so if you believe that we're going to be in a in a cycle of rate decreases and that whole thing has played its way out then
everything's going to Rally well let's talk about real estate because I think that's one of the biggest overhangs right now that hasn't fully been accounted for there's you know $3 trillion of commercial real estate loans sitting out on Commercial Banks balance sheets in the US today 3 trillion it's an insane number and we were all talking over T
the other day as you guys know about this building that's being shopped and got some attention on Twitter I think the it's 115 samom you guys know this building I've lived in San Francisco for 20 how long have I lived there 20 some odd years now so I know this building and it's 125,000 foot building that's going to likely be fully vacant
in call it two to three years so the guy puts it up for sale the equity owner he puts the building up for sale and he's basically like running auction on it and the Brokers are all saying hey it's currently at 199 bucks a square foot which translates to $25 million it'll probably get done at 300 bucks a square foot which is about $38 million for the
building the problem is if you look at the debt on the building there's 53 million of debt B OFA owns that note so Bank of America in 2016 issued a $54 million note on this building if this deal closes at $39 million the equity owner who's running this auction to sell the building makes 0 all that happens is that money pays down the debt and the
debt only gets 7 cents on the dollar and B of A has to take a write down on the rest so there's a rumor that in this particular case what's happening is the equity owner of the building is putting it up for auction to show the bank hey this thing's only worth 7 cents on the dollar for you on your debt you should
restructure my debt so apparently there have been a lot of building owners that have been going to their Bank and saying Hey I want to restructure my note I want to have longer payment terms I want to keep the rates lower for longer I want to have some of the debt forgiven anything they can do to get the cost of the debt down because the overhang of
the debt on all these buildings is so significant these buildings cannot make money and the owners will never make money so they're like why am I even wasting my time so they have one option which is to hand the keys back to the bank and say here you go you auction it and sell it good luck and the other option is to go to the bank and say hey
restructure my debt let's figure out a deal here's the problem the $3 trillion of debt that we just mentioned that's sitting on all the bank's balance sheets is all being held at par they're not discounting it at all and they're not marking it as being impaired in any way so as soon as they have to start writing this stuff down the bank's balance sheets all get
impaired and so there's a real risk in the market that I don't think's been fully accounted for that we're starting to see the cracks and to chim's point this might accelerate either fed action or as I've mentioned in the past I think the federal government steps in and starts to issue programs to support commercial real estate developers and
owners SX I know you've been following this quite a bit you know maybe you could share your point of view and if I'm off on this in terms of how significant of a problem this is how you know how much of the three trillion of debt really is impaired and by how much should it be impaired do we think massively I think it's a huge problem if
you talk to anybody any of these uh commercial real estate developers or sponsors they'll tell you many of them are just kind of hanging on by their fingernails I mean it's really ugly and you know how dist things are when you actually look at some of these sales that same account on Twitter that you posted he's got like a a tweet storm
here showing about half a dozen of these sales that have happened in the last few months and buildings are now selling for $2 to $300 a square foot in San Francisco these are buildings that could have sold for a th000 bucks a foot you know a couple of years ago and now they're selling for 2 to 300 the replacement cost if you were to try and recreate these buildings from scratch
given how expensive it is to build in San Isco and how complicated the entitlements process is probably be 1,200 plus a foot so these buildings are selling for 10 to 20% of their replacement cost these are fire sales if you look at the loans in the in the San Francisco commercial real estate market do you think that the loan value is probably
impaired by 40% because that's roughly what it would say on that 115 Sansom building is BFA would probably have to take a 30 40% markdown on their debt do you think that's the right way to think about the numberers 30 to 40 you could figure it out this way a typical commercial real estate deal is about 13 equity and 2/3 debt so somebody
bought a building at call it $1,000 a foot they would have had to have put in call it 333 of equity 666 of debt yeah now if that building is only worth I don't know 200 250 a foot there's $750 of loss per foot right and only 333 roughly half of it is equity so the debt is taking a huge haircut there too yeah debts about 40 50% right yeah and no one
wants to recognize that loss the equity holders certainly don't because they get wiped out and even the banks are reluctant to recognize that loss because who knows what that could trigger when their balance sheets are so impaired so what where these people gonna come from suck where they where like this is my this is my big problem with this
argument is I I think that numerically you're right that there is this bottoming or there is just like a lot of value to be had right the the problem is and I'll and I'll give you an example of a company that I own so it's not even a company that I'm just a minority investor in we used to be in San Francisco and we went virtual now all
the salaries are pegged to San Francisco salaries but now everybody's sort of like everywhere throughout the country we don't have an office space and I'm really struggling trying to figure out how to actually bring everybody together and my choices were I thought okay well let me find what it would cost to actually run this place in San Francisco
and my my Opex would have gone up 15 20% just for the building so then I'm like okay well where else can I go and it's like well I could go to a place like Las Vegas and I could put the people there it's an hour so it's close by we can fly there whenever we need to it's got no tax so maybe that's an advantage for the
employees and so I'm in this constant hamster wheel as an owner of a business I can't get people into the office if I do bring them into the office it's super expensive and it bloats my Opex so I'm just trying to figure out how does that get resolved for people like me so that we want to go back to San Francisco and rent those buildings that are so cheap
those buildings are going to have to get written down first so I set up my company in 2006 and I was paying $22 a square foot for my first office in '06 and then we ended up getting a really nice office and I think we ended up paying like3 to 40 bucks a square foot by the time we move to a super nice office around 2010 but around that time which was also
when GFC happened the global financial crisis in 0809 and that's when rates dropped to zero and that's also when all startups and tech companies said hey let's start setting up in San Francisco because it's mostly young people that are Engineers now they mostly want to live in the city they mostly want to be single and have a good life here rather
than go live in Suburban Silicon Valley and so real estate shot up because rates were zero all the tech companies were setting I mean sax you had Yammer in San Francisco didn't you were you in the peninsula yeah yeah and that was like the place to have your company was in the city and so I would argue like if you go back to the ' 0809 era that's
really when San Francisco started to take off and it was almost like a bit of an outlier of a bubble that started all the way back then and then you know the Zer environment kept things moving up and up and up over the years that followed I do think that this like this Market will likely normalize back back to pre 2010 pre 09 and that's when rates were like in
the 25 to 35 bucks a square foot range for you know but are you saying that I will move back to that building and I'll and I'll move my company back there when it gets repriced yes I do think so are you sure I don't see how I don't see how the market stays where it is yeah jamas argument is basically on the demand side basically saying where is all this
demand going to come from I think you could give it to me for zero and I wouldn't bring my team back there I'm just asking like again the math all makes sense on a spreadsh but the big issue is as an owner of a company why would I ever bring my team back to that place and I'm struggling even at like Oh you mean because it's a nasty City
because it's all messed up the city's messed up first of all what if you're if you're asking me to blow my Opex 10 20% the answer is absolutely not will I do that then if you're saying well chath how about at zero let's just go to zero right it's free take the building yeah I still wouldn't do it because then these people have to move from all around the
country come back here and all of a sudden just live in a slimy dungeon yeah so how does that get solved so that building should be zero Zach do you own buildings in San Francisco what's your answer as a landlord yeah I only own buildings in Jackson Square which is like the one decent part remaining of San Francisco and which is actually
where people want to be and we've seen pretty good leasing activity there because it's as people get driven out of Market Street and out of s they actually they substitute to Jackson Square look I think Jam makes a good point which is the demand picture for San Francisco is really unclear there's something like call it 30% vacancy so there's an
enormous number of these zombie buildings and it's really hard to understand where the demand is going to come back to fill them now the counterargument to that is yeah but it's so cheap I mean these buildings are so cheap they're basically selling for almost land value that's Jam's point it's like it goes to zero yeah so if
there's a recovery then it's very asymmetric right I mean you could get three or 4X upside on your money very very quick quickly rates come down over the next couple years you could refile your Equity out so that's the counterargument is yeah we're not exactly sure where the demands comes from but if you are willing to have a
long-term Outlook like five or 10 years then there's a pretty good chance that it'll come back somehow I think one of the things that has to happen in order to Foster that demand is for there to be some fundamental changes in the politics of the city and the question is how does that happen and I think one of the ways it could happen is the city starts
facing huge budget shortfalls which are coming there a there's going to be a huge budget shortfall over the next year and next couple of years because there's no activity I mean a third of the economic activity of the city has just dried up and what about the rest of the country so tell me like if if this is what's happening in San Francisco what's
happening in Boston Dallas New York City well I don't think those areas are as impaired they don't have the vacancy rates that San Francisco does I mean so if you look Major Market has 30% so just coming back to my prior question if you were to assume San Francisco commercial real estate debt is impaired on the order of 30% what do you think the debt
load for the for all commercial real estate around the country is impaired is it 10% 15% 20% I don't know I mean I I think that you probably for San Francisco I'd say probably half the debt should be written off I don't know what it is for the rest of the country there's already half a dozen these buildings that have traded in the range
that we're talking about and there'll be about 20 more that are coming to Market that'll trade in the next year it's going to be fire sale after fire sale and you you have to clear out all of this bad equity and then you've got to clear out all this bad debt and the market can reset itself look chath has has asked the you know $64,000 Question
here which is when will the demand come back and what will it consist of and that is the leap of faith here that you have to make just to finish the point I was making the city the politicians are going to be under extraordinary Str stress because there's not going to be any budget so what are they going to do are they going to lay off half the city
employees reform pensions and salaries or are they going to start to realize that all of their crazy transfer taxes all their crazy regulations and entitlements need to be stripped away to start fostering real activity in the city are they going to start investing in police again are they going to start cleaning up the city are they going to
act as a partner to business I mean that's where the incentives are going to be is for them to start acting like a partner again and that's a huge leap of faith given how crazy leftwing the politics of San Francisco have been but they may not have a choice because it's going to come down to do we fire half the government employees or do we start
working with business instead of driving them out of the city I don't want to get too caught up in San Francisco politics and San Francisco as a region I think you know we' we've hashed that one out but the bigger question is if there's this impairment on three trillion dollars of commercial real estate debt across the country who eats the loss so
who owns all the equity in these buildings and where does that ultimately flow through to what are the second order effects and who owns the debt and where does that all flow through to we know the debt sits on the commercial Banks do the bank stocks get beat up the Market's been cognizant of this folks have been shorting and selling Regional
Bank stocks and then Bill gross the well-known Bond Trader used to run Pimco came out this week and said hey I've been tracking all these Regional Bank stocks they're down so much it's insane they're they're trading at a huge discount to book I'm going to start buying and then this morning he put out a tweet saying I'm buying these stocks
and he listed the names of the bank stocks he's like the Bottom's been hit do you buy that I mean is is this already been priced into the market that this debt is going to be written off at some point and all these balance sheets are impaired because these banks are trading at a big discount to book value so well book well Book value is a term
that you need to put in quotes so my question would be what are the rules around the real Mark to Market because I think that when we talked about the banking crisis the biggest problem was these guys were playing fast and loose with valuations and so are these things actually valued to Market and do they have to they're not yet no that's the
point that's why they're trying to avoid these sort of these book values are ilate yeah and that's why they're trading at a discount but Bill gross is now saying they're trading at such a discount to whatever the accounting is that they're like now well below the fair value that's the argument for San Francisco real estate I sorry that at
least for these fire sales that are happening yeah well SX let me ask you one more question so I mentioned the Biden program Biden announced this program which is effectively $45 billion in federal money to convert commercial buildings into condos and residential buildings he basically relies on a 1998 transportation and infrastructure bill
that provides authority to the federal government to issue low interest interest loans for specific infrastructure projects if you're a developer is it realistic that this money is going to unlock potential for increasing affordable housing density in urban centers by converting Office Buildings into residential buildings people talk a lot about these office to
residential conversions the problem is it's easy to say and much harder to do most commercial Office Buildings don't meet the structural requirements or architecturally they're not really suitable if you think about most commercial Office Buildings they've got really big floor plates and if you think about like restructuring them into
Apartments there's not proper window coverage there's not proper utilities so it's a lot hard than it sounds and I'd say most Office Buildings don't meet a lot of the requirements for this but I think what's good about this executive order even though I don't really believe this is a great use of 45 billion is that it's sending a signal to all of
these cities all these local governments that we need to get with the program here in other words you've got you know a blue executive sending a message to all these blue cities and states that commercial real estate is in distress and you need to loosen up your entitlements you need to loosen up your regulations it's sending a message to
the city of San Francisco and all these other cities that you guys need to start doing positive things and this is my point about will San Francisco start acting like a partner for Real Estate development which is how you make real estate work or will they continue to drive all of these crazy regulations so I I mostly see this Biden program as
symbolic I see but the question is whether the symbolism will actually drive better Behavior by these blue cities I personally think they're just trying to find more ways to pump money into supporting commercial real estate markets because of the issues we just highlighted and I think this is the first of what will likely be several
programs to support framed as things like affordable housing but really designed to support the economic loss impairment that's going to be inevitable at some point right but but you know you can't you can't convert an office building to a residential building without resoning typically totally yeah yeah then this is where you need action
by these City governments they've got to reone they've got to reduce the regulations they've got to eliminate these transfer taxes um they have to make these project yeah exactly they have to make these projects economically viable I think that we'll be able to look back in San Francisco will be an incredibly measurable experiment on the return on invested
capital on the return on invested capital of Progressive left ideology and it will be a great case study now if it works it will prove that all of these ideas that were kind of talked about in kind of like high intellectual circles has some value and if it fails which it looks like it's failing it'll never be tried again for a very long
time either way you're going to have a very clear answer and the good news is we're we're probably another five or 10 years away from that bottoming well actually can I ask you a quick question Jam so there was a article here saying that the city Controllers Office for San Francisco has released its projected budget shortfalls for the coming years
it's almost half a billion for 20242 reaching 1.3 billion in 2728 so what do they do about this I mean they money they'll borrow money and you you can look at all of these other municipalities around the country as examples but counties and municipalities and cities that are in much worse fiscal shape than San franisco was able to stay
incompetent for a lot longer and so that Delta te of incompetence tends to be about 5 to 10 years I would say the midpoint is eight so if we're starting now you'll probably see some rationality by 2032 2033 right that's how much borrowing David I think you can tap in the in the mun Market because you know again this is sort of the the double-edged sword
right like when you're a Triple Tax advantag borrower you can paint the case for being in San Francisco which is part of California etc etc etc and your alternative is to own something in a state that's not nearly as economically vibrant it's a pretty easy case to make to be able to borrow the money I think and so the problem is that it'll take
like I said another probably eight years 10 years so before the the spigot gets turned off and they have to make some harsh changes so they'll keep running this experiment for at least I think if you want to be conservative for at least a decade another decade so they'll just pile on the debt until pile on the debt absolutely I don't want to keep harping
on San Francisco let's let's move on to we work because we work feeds into this real estate piece I don't know if you guys saw this article that U Wall Street Journal reported that we work it's going to file for chapter 11 as early as next week they have a significant debt burden owed to SoftBank Vision fund as part of
their go public they've signed leases in Office Buildings in San Francisco and elsewhere around the country $10 billion in total lease obligations due starting in the second half of 2023 through the end of 27 and after that an additional $15 billion starting in 2028 and as of June we work had 70 777 locations including 229 in the US in major cities the
business made about call it 840 million bucks in Revenue last quarter so that works out to call it a $3.5 billion Revenue run rate with you know $10 billion of lease obligations starting next year so the business is just drowning in these lease obligations and to restructure 777 lease obligations in this environment that we're talking about while doing what jamat is saying
lowering rents to attract employers to show up and actually rent space from them is obviously causing the business model to distort even worse than it has been historically they burned $8 billion doll of preash flow in since Q4 of 2019 8 billion of free cash there's no question that that wework has been a capital destruction machine that being
said I actually think that some private Equity player is going to buy this out of bankruptcy and make a fortune I agree with that too because out of those 777 locations a lot of them are good locations and have good tency they probably generate good Revenue the problem is that the leases are just bad and bankruptcy gives you the power to
break those leases or renegotiate them so a really smart private Equity player would come in here and say okay we're going to take these locations we're going to divide them into three buckets bucket number one is we're going to get rid of them because they're just bad locations we don't want them there's just no occupancy bucket number two is
we're going to go to the landlord and say that sorry like this lease doesn't work for us we will be willing to work for you as an operator of the space and you'll pay us a fee and a REV share on whatever it makes but we can't pay you a guaranteed rent so that's bucket number two and then bucket three which will be the best locations they'll go back to
the landlord and say Here's 60 cents on the dollar we're willing to pay you this in in rent that's it if that's not good enough for you we're breaking the lease we're out and those landlords are going to have to accept it because who they going to get who's any better and they don't even have the ti they don't have the capital to put some new tenant in
there and even if they could put someone in there it's not going to be at a rent that's much higher than 60 cents on the dollar because we work made a lot of these top of Market leases so I think the landlord will take the bird in the hand so think about it some private Equity player goes in there renegotiates all these leases sheds the bad ones and
all of a sudden the business is going to make a lot of money and the reason why it's going to make money is because we work poured all of this uh Capital into renovating these spaces and making them really nice I mean if you go into a Wei work they are really nice spaces and the reason for that is because we work spent
billions of TI dollars making these things incredibly nice was that a wise investment no it was a terrible investment but that money has been spent and already lost that that Capital has been wiped out so whoever buys this thing out of bankruptcy now is going to be the beneficiary of all of those absurd TI dollars that were spent when
Adam Newman oh my God you just convinced me let's go buy it let's put it in a bid is it filed is it filed the Brilliance of Adam Newman was somehow convincing wow all these investors to put in billions of dollars into TI money on the theory that it was a software business this was never a software business it's a real estate development company it was
reges it was reg it was so I got soft Bank put in a total of $16.9 billion in equity and debt oh my gosh is that incredible who did oh my gosh sof sof which is mostly through the vision fund which is as you guys know 45% Saudi money it was Regis with much better design but that design came at a huge expense which was again this overinvestment in in TI dollars combined
with the fact that they had no discipline around signing leases and they have so many topof Market lease deals yeah but again that's all fixable for someone who comes in old saying in real estate that it's the third owner who makes all the money like the first owner who does all the ground up they lose a fortune and they blown out then
the second guy comes in and thinks that they're going to make it work but they can't make it work either so then they get blown out and it's finally the third person who comes in who makes all the money and that's gonna happen here too oh my God that's just fantastic this is a story of the ages let's transition from one bubble to the most recent
bubble so AI regulation given the frenzy and frothiness and fear-mongering on AI destroying the world which I would personally argue as largely fear porn the Biden Administration took it upon themselves to try and be leaders in regulating Ai and published an executive order on October 30th this long anticipated executive
order covers a very broad range of matters in 111 page order document covers very specific actions in very detailed terms it uses technical terms of Art and I think it creates as much confusion as it does provide Clarity it's an executive order so it's not legislation and there's much in here that some would argue needs to be legislated as an executive order it can
be overturned very quickly and easily by the next Administration it largely demands voluntary action from technology companies to submit their models infrastructure and tools for review for proof of safety don't forget the equity and inclusion there's an equity inclusion component which is that your models have to account for diversity
equity and inclusion diversity equity and inclusion there's a phrase from the executive order the term dual use foundational model means an AI model that is trained on Broad data generally uses self-supervision contains at least tens of billions of parameters is applicable across a wide range of contexts and that exhibits high levels
of performance at tasks that pose a serious risk to Security National Economic Security Public Safety or any combination of those matters none of which ultimately describes end points none of which describes loss or applications to me this is the biggest problem I see with the executive order and with the approach to AI regulation broadly particularly with what's being
developed and has been leaked in what terms of what's being developed out of the EU which is that many of these government agencies government actors are trying to Define and regulate systems and methods rather than regulate outcomes and applications for example if you were to say you cannot commit fraud and falsely impersonate someone using
software you can rightly say that it follows the rule of law and we should be able to adjudicate that cleanly in courts instead to have government agencies and have what this executive order describes as a chief AI officer in every Federal agency responsible for regulating the systems and methods of all the actors and all the private
companies that are building software to say this is the scale that your software can get to you could have a certain number of parameters if you're bigger than this number of parameters we have to come in and check your software creates an outlandish standard and one that makes absolutely no sense particularly in the context of the pace
of AI progression remember the paper that was foundational to Transformer model development which is what a lot of people call AI today which is develop these llms and so on came out in 2017 and wasn't really widely adopted until 2018 as a standard we're five years into this so the way that we're making models the types of models we're building the
scale of the models the number of parameters being used the pace at which these things is changing is staggering we are only in the first inning and so to come out and say here are the standards by which we want to now regulate you this is the size that the model can be these are the types of models it's going to look like medieval
literature in three years none of the stuff's even going to apply anymore I'm just really of the point of view as you guys know that the market needs to be allowed to develop if we don't allow our Market to develop in the United States India and China and Singapore and other markets will get well ahead of us in terms of their model development and
their capabilities as a nation and their capabilities as an industry and the more our government actors step in and try and tell us what systems and methods we are allowed to use to build stuff the more at risk we are of falling behind that's my general statement on the matter I'll pass the the uh the mic I mean jamat you were advocating for AI
regs a couple months ago I think right I mean where does this fall with respect to what you were advocating for and what you were concerned about well I had a very specific lens that I viewed this stuff through and they didn't really address it I think that this was a little bit of a kitchen syn EO and I think what probably happened was depending
on look I I I mean I think the thing is like look they when this process first started it started in the Senate and it started with the majority leader Chuck Schumer and I met with Chuck and then I met with Chuck's team and then it morphed into this much bigger thing and I think it morphed into a lot of people trying to do the right thing meeting with a lot of
very important and very famous people and I think somewhere along the way it just became this convoluted and Confused document because I do agree with you that it's not super coherent there's a lot of arbitrary requirements you know like there's like I think there's a requirement here that at a certain number of parameters you have to like
self-report yourself to the government which is like what does that even mean why why is that even important so it it's it's just a lot of random stuff so it just seems like anybody who had the ear of the people writing this had a chance to write something in so it's a little confusing it's not going to do the job and I think that you're right in two or three years we're
going to look back and this is going to look medieval I'll just say I'll point out another point just one of many that I could highlight in this document I read most of it they say you know there's got to be legislation on watermarking AI content think about that for a second what is AI content we've been using Adobe Photoshop for 30 years
to change photographs and change documents we've been using various tools for doing audio generation and music I mean there's no music that doesn't run through a digital processor of some sort there's no video there's no movies that don't have some degree of CGI elements or some degree of post production digital rendering integrated into the
video itself what makes something AI is it the fact that 100% of the pixels are generated by software what if it's only 98% is Pixar AI because all of Pixar is made on computers is the autotune hip hop artist AI because his voice isn't coming through on the audio track so what is AI in this definition the fact that any piece of content needs to be
watermarked if it's AI I think is one of the most outlandish infringements on First Amendment rights I've seen and doesn't really understand any s in any sense how software is generally used in the world today which is frankly everywhere and to say that now there is a certain definition of a certain type of software that we're going to
arbitrarily call AI we want to Watermark the stuff and we want to get a stamp on that content so the government can track it and audit it I think is absurd sax over to you yeah okay three three quick points here number one AI has been convicted of a pre- crime this this EO it describes it describes this Litany of horribles this parade of horribles
that's gonna happen unless you know the wise people in the central government like Joe Biden and KLA Harris guide its development so that's what the EO say is going to do is guide the development of this technology because if we don't it's going to result in all these horrible things happening Steven sinowski who was a key executive of Microsoft in the I
think going back to the 80s wrote a really interesting blog post about this where he he was there at the beginning of the PC Revolution with the dawn of the microprocessor in the 70s and 80s yeah and he pulled a bunch of books off his bookshelf from that time period which were sort of these sci-fi books like forecasting Doom infringement on
privacy one was called The Assault on privacy another one was called electronic nightmare another one was called the rise of the computer State and so on and so it was also predicting all these horrible things that would come from the birth of the computer and it would put all these people out of work and so on totally but nobody allowed these fears to guide the
development of the industry there was no executive order at that time saying that we're going to guide the development of the micros processor to avoid all of these arms that haven't occurred yet and instead we're taking a a different approach here and he makes the point that if the industry had been guided in that way then it never would have
achieved the potential that It ultimately achieved and furthermore he makes the point that a company like IBM would have been more than happy to work with The Regulators to say yeah let's define a bunch of these rules to make sure that it doesn't go in this dark direction that everyone thinks it's going to go in and you would have gotten
very extreme regulatory capture can I precog one of the crazy lines in this thing here are the precogs what here's one when a foreign person trans acts with an infrastructure as a service provider so Azure Google Cloud Amazon to train a large AI model with potential cap with potential capabilities that could be used in malicious cyber enabled
activity they propose regulation that requires that I ask provider to submit a report so if you you have to know you have to know if a foreigner is using your apis on AWS and then file a TPS report oh my God what is going on I have a clarifying question what happens if you're a foreigner that's on an H1B at Facebook or you know Microsoft good
question well technically a foreigner right and then chamath meanwhile remember when SpaceX is now being sued by the doj because they haven't employed enough foreigners so it's like they outlaw both sides of it so that you're you're in non-compliance just by existing if you you know what I mean is by death if you uh employ foreigners in the creation
of these very sophisticated Technologies you're creating a national security threat if you exclude them you're violating their civil rights and these are regulations are promulgated by two different parts of the government so the the the government is basically getting to a point where no matter which side of the regulation you choose you're going
to be a non-compliance somewhere and this is just a recipe for the government to basically take action against anybody who they don't like politically yeah now on this pre- crime point you know one of the crazier stories that came out and I think this was in variety is that Biden grew more concerned about AI after screening the most recent Mission
Impossible movie in which the villain is a sensient AI that seizes control of the world's intelligence apparatus is that true that's not true well that's what the story said didn't the Press reporter ask the press secretary this and this was was the response who said this the white house chief of staff I guess said Reed said Reed who yeah wow unbelievable
the crazy thing is that I think the reason they're putting out this story is they don't want to admit how the EO really happened which is a bunch of lobbyists came in and like you said a lot of powerful people from Big Tech they're all clamoring for regulatory capture they're all clamoring to define the regulations so that they can benefit
themselves and keep out new entrance because one of the big targets here is going to be open source software so if you for example open AI which is no longer open it's closed Source the number one thing you want to do is pull up the ladder before open source software can get a lot of momentum and a big part of the regulation here does
apply to open source software I think one of the most problematic things about this just to move on to the next point is the way that it's not just this 110 page EO that's being promulgated the directive is for all these other parts of the federal government to start creating their own regulations so it says here that the National Institute of
Standards of Technology will develop standards for red team testing of these models it directs the Department of Commerce to develop standards for like you said freeberg labeling AI generated content it directs explicitly the FTC to use existing leg regulation to go and legislate it it requires the FCC to think about Spectrum licensing rules
through this lens you're absolutely right it activates every agency of the government to create more bureaucracy it no more importantly it creates Authority for agencies of the government to go into private servers and run audits you're allowing the government for the first time ever to have access to private information private Computing
infrastructure rather than do what the job of the government should be which is to regulate the outputs to regulate the outcomes to regulate illegal and illicit activities rather than um regulate systems and methods that as saxs point out are prec convicted of a crime there is no crime until a crime is committed and so this idea that the government can
come in and regulate and keep a crime from being committed by auditing and managing all the systems and methods that software companies are using puts the United States at an extraordinary and unfair disadvantage on a global stage by the way and by the way llama 2 is out there Hardware is out there all the tooling is out there for others to
start to get well ahead good news about the immigration thing there is they actually on the other side do streamline the immigration process for people with AI or other critical Technologies so on the one hand we should be able to hire them but then on the back end we'll have to file a TPS report about what they do let me just finish my point about all
these different agencies being directed now to promulgate regulations and by the way there's some new committee or Council that's being created of 29 different parts of the federal government that are now going to coordinate on this AI stuff so it's going to be a brussel style bureaucracy what's going to happen is that with all
of these different bodies issuing new regulations it's going to get more and more burdensome on technology companies until the point where they cry out for some sort of rationalization of this regime they're going to say listen we can't keep up with FCC and Department of Commerce and this nit Standards Board just give us one agency to deal with and
so the industry itself is eventually going to cry uncle and say like please just give us one and you're already here people like Sam Alman and so forth calling for the equivalent of atomic energy commission for AI this is how we're going to end up with a federal software commission just like we have a FCC to run uh big Communications and we
have a FDA to run big Pharma we're going to end up with a federal software commission to run software big software and the thing to realize about AI is that functionally there's no way to really say what the difference is between AI and software in general every single technology company it's look in Valley has AI on its road map it's a new
Computing Paradigm everybody is incorporating it everyone is using some elements of AI so this wave of AI is just becoming software so we're going to take the one part of our economy that has been free market and relatively unregulated which is software it's like the last Bastion of true entrepreneurial capitalism and we're going to create a new federal
agency to manage it that's where we're all ah headed here and we're going to end up as an industry in the same place that Pharma has ended up or Telecom has ended up which is you go for permission to Washington no I Nick can you just put this up so I I did you know write a blog post sort of asking for this AI regulation and and I
do think like the model of the FDA is probably the best one where in certain use cases I do think that you can create a Sandbox where these things can be tested and I think can be evaluated the problem is that this legislation or this executive order doesn't really do that so the way that I wrote this was well what are the arguments against what I'm proposing and
unfortunately I have to say every single one of those arguments is now valid so I I think that we should have in the direction of like a simplifying assumption which is that most of this stuff is just software and there are going to be some very specific kinds of businesses that before you take it to Market you should do something that's
equivalent to sticking it in a sandbox letting people see it and and I think it's easy to Define what those are actually and the fact that we didn't do that and we have this overly generalized approach is going to create more chaos and people will not know whether they're in violation or they're in support they're going to be sort of preg guilty
as you said sacks of a pre- crime it's just going to it's just going to be chaos so I think smus board for politicians because everyone's going to be lobbing them to try and shape the regulations the way they want I think it's going to be a schoras board for lawyers yeah I me everyone's going to hire lawyers and lobbyists and policy
people to try and shape these regulations good time to bet on India thank God for Mark Mark Zuckerberg and the open sourcing of the Llama 2 model it's entirely open source right I mean I think the biggest thing with llama 2 that I find problematic is that it has these arbitr arbitrated thresholds on the number of users one can have yes
before you have to go back to Facebook so yeah it's 700 million I think right yeah yeah before I give all the credit to Facebook I'd rather say that I think there are a lot of Open Source Alternatives including mistol that I think are much better yeah and uh free and open and in the clear where you can have unencumbered growth not dependent on anybody
else yeah yeah but I think your free your larger point about us versus India versus China I think this could have a major impact on our Global competitiveness of course because as you look around the what's happening in the American system there are so many things going wrong right our fiscal situation is untenable we're mired in massive debt
we have tremendous internal division in the country many of our cities are r with crime you just look at the number of people living on the streets it's not good I mean you know there's a lot of indicators that America's in Decline we're involved in way too many Foreign Wars so there's a lot of bad things happening however the one bright spot
that America's had going for it now I think for decades is that we've always been the leader in new technology development I mean we're the ones who pioneered the internet we're the place where mobile took off we're the place where the cloud took off and everyone else has been playing catchup with that and I think we are in the lead in terms
of AI development I mean other countries are doing it too but I think that we are in the lead and and it's not because of the involvement of government it's because we have this vibrant private sector that's willing to invest risk Capital where you know that nine out of 10 checks that you write are going to zero but that one check that one out of
10 hopefully could be a huge outcome so we've had this incredible ecosystem of software development that is free and unregulated that is clustered around Silicon Valley but it you know radiates out to many other places and the only reason that ecosystem has thrived and survived is the reason that bill Gurley stated at all in Summit which is was it 2200 miles
away from Washington and Washington has generally kept its Ms off and now we are headed to a place where not just AI but basically all software companies are headed for regulation and like I said right now it's 29 different agencies promulgating the regulations but where this is going to end up is that the industry is eventually going to beg
for its own agency just to rationalize all the spaghetti of different regulations we are eventually going to beg for our federal agency Overlord just to rationalize this whole mess and sadly I think that's where we're going to end up and a lot of what is special about our industry which is that two guys in a garage really can get started in a
completely permissionless way I think that's going to be jeopardized if that's the end game that's genius I think that is the end game I mean do you think that they wrote this thing in a way just to create enough confusion where we just cry uncle and say just regulate us give us one mute yeah look I don't know if it's that conscious I think what it is
is there's a lot of politicians in Washington and Biden and Harris definitely fall into this category who just think that Central planning or the central guiding of the economy or aspects of the economy to avoid certain problems that they think they can do this they think that they are wise enough to do this or maybe they're
cynical and they just know this a pathway to campaign contributions but either way they kind of believe in this approach and they threw the kitchen sink at this 110 pages every agency is's now going to be writing thousands of pages and I think where it's going to end up is with a new agency to manage software so I think Sach it's a the point you're
making is one that some folks in Silicon Valley have felt for a while which that is that a lot of the freedom and opportunity that the United States offers pioneers and entrepreneurs has been realized and born out in Silicon Valley that's feeling like it's been styed in a number of ways but the events in Israel couple weeks ago in my opinion
seems to have shocked a lot of people that are traditionally very liberal Democrats into being redpilled I have had a number of calls with individuals over the last few weeks that have historically been very dieh hard blue liberal Democrats have spent their their time with NOS with nonprofits with various efforts to promote liberal causes and these are folks who may or
may not be Jewish but who have been so shocked by what's happened in Israel and how many liberal organizations have created this narrative around being pro Palestinian in a way that is being deemed and coming across as highly and in many cases is very much anti-semitic and so I've had folks say I'm giving up everything else I'm doing
and all I'm going to do is change the causes I'm working on now and I have just been redpilled do you guys and and Sham you shared your story on our show a couple of weeks ago the clip of you saying that went viral on how you kind of recognize that maybe Trump was a good president in the context of what you're experiencing with the Biden
Administration now we're seeing what the bid Administration now you seem to be like the case study that I'm now hearing more from Silicon Valley folks yeah about this the shift I think that over the last three or four years my political positions really haven't changed that much but I think what's happened is that the the political party
that I've historically been affiliated with has just kept lurching further and further to the left and so it leaves me looking for a new home I think and I think that there were a lot of people that thought they were signing up for a set of beliefs around Free Speech around being pro Reproductive Rights around being supportive of lgbtq
issues but also supportive of a rational approach to the border and reasonable fiscal discipline these are all seem to just be totally out the window so I understand because I've I've actually talked to a lot of my friends and my friends some of them have been huge donors to both Elite colleges and the Democratic party and they've paused all
of it and it's definitely given me pause and I'm just trying to figure out where to go from here because I think the reality is that this is a really crazy situation so I think that there's just a lot of people that are in the center that don't really belong anymore the way that the Democrats represent themselves so there's clearly something going on that
we just need to get to the bottom of here because I think it's not probably the Democratic party that a lot of people thought that they belong to do you have other friends and folks that you know that have traditionally been Democrat donors in Silicon Valley chamat that you see are now maybe considering shifting where they're
giving money to Republican party candidates and causes I think it's easy to say that amongst my friends it's in the billions of dollars that's been paused that's insane that's a lot of money Z you used to be part of a niche in Silicon Valley Silicon Valley Republican Niche is your Niche growing I think so I actually made a list of I
think eight issues that have driven the shift and when you say there's been a shift right I wouldn't say that there's been a shift all the way to the right but I think there's a shift from the left to the center by the way that statement is consistent with what I've heard personally from a lot of folks which is I consider myself a Centrist
now that I see that some of these liberal causes are so they're extreme from my point of view right so let me rattle off what I think the key drivers are number one Reckless fiscal and monetary policies coming out of Washington as drunen Miller says we've been spending like drunken Sailors number two the Dismal state of San Francisco because of crime drugs
homelessness and so on and we all know that's an stream one party government number three the runis coid policies they botched the science they harmed the educational development of kids and they also harmed work Culture by making employees feel permanently entitled to work from home so that's number three number four this long con of reg
regulatory capture in both Washington and Sacramento that we just talked about with AI people are waking up to that number five the Betrayal of true liberal values like free speech and open inquiry number six the way that Tech Visionaries like Elon have been targeted for harassment by leftwing politicians remember Biden said we need to look into
the guy Raina Gonzalez was even less subtle she said simply Elon Musk number seven the growing awareness that wokeness has gone way off the rails uh we saw this even before the Israel Hamas War but now I would say number eight is this war it's really thrown gasoline on the fire by showing that wokeness leads to this simplistic breaking up of the
world into oppressor and oppressed categories and what we're seeing is that there's a lot of people in the woke left who are basically cheering for a terrorist organization and they're able to rationalize atrocities because of this simplistic woke dichotomy that being said I do think it's possible to support the desire for a Palestinian State and a two-state
solution without falling into that bucket I want to be clear about that but I think that there's been way too many people on the woke left who have blly disregarded the atrocity and were basically cheering for Hamas from day one on this thing and I think that has woken up a lot of liberals both Jews and non-jews who saw Jews as allies on the
left and when they see Jews being attacked this way that has led them to really I think question their their priors on this what did you think of the Cala Harris announcement yesterday that they're launching a program to combat islamophobia in the US at a time when my understanding is many of their Jewish donors are up in arms about their lack of action on
anti-Semitism I mean it just seems it seem turna I mean look I have not seen in this particular case I don't think I've really seen outpourings of islamophobia to be clear I'm against islamophobia I'm against hatred towards any particular group including Muslims or Jews to me you know any outpouring of hate towards a particular group is is
bad but yeah this seems like a a problem that we really haven't seen so it seems a little bit toned deaf and look this administration's been kind of stumbling around on on this whole issue it seems like they don't really know what to do I don't know how to quantify it I just think it's an anecdote what do you think
no I I like I'm saying I don't know how to quantify it but I think that the anecdote is a lot of folks no no I'm saying what what do you think what do you feel what do I feel yeah I mean I'm not a party guy taking a step back this is getting going to get a little esoteric but I think humans organize into social systems one social system is a family
one is a company and I think that the government is a social system the point of a social system is to get influence to achieve the things you want to achieve by aggregating together by creating a tribe by creating a system and that's what a government is it lets a lot of people pull resources to get things done as a group that you wouldn't
otherwise be able to get done individually same with a company same with a family to support each other Etc and I think that the problem with uh democratically elected governments or all governments for that matter frankly is like any other system they and I've said this in the past they have a natural incentive to grow I met with a government person the other day
well-known government person and I was struck by the the tone I I've been struck by the tone on multiple people I've met from the government on here's all the next things I'm going to get done and here's how we're going to grow and do more and be bigger just like if you're running a company that's your incentive that's your model of thinking and like with
your family you want to grow the balance sheet for your family you want to have another home you want to take care you want to build security Etc so governments as an organizing system are no different and so I think that in a democracy over time there is as sax points out a group of folks who get elected and as a result like a
philosophy that endures in that system that is all about overcoming the power that is that we all view there to be powers that are keeping us from doing the things we want to do and I think that this is the ultimate manifestation of what happens is that you push the government to be as big as possible with no end and you push the government to
destroy any system of power that gets in the way of those who are able to vote these folks in and now a lot of folks who thought that they were supporting liberal causes to help those in need are realizing that you're actually repressing minorities in the process that there are minorities that are viewed to be powerful like Jews that
there are minorities that are viewed to be unfairly advantaged like those in the tech industry that there are minorities who are viewed to be unfairly advantaged like billionaires and I know that this sounds insane to say that those terms but that's the objective is to destroy any system of power any individual of power that has any form of Leverage over
us it's also why I think we've generally been techn pessimistic in the west since the late 1960s early' 70s is because technology has been viewed as this point of Leverage for creating a power system for a minority of the people so I I generally view this as part of a longer Arc and a natural kind of conclusion to this stuff and you know I I'm I'm not
trying to be super pessimistic about where things are going because I do see that the a lot of folks are now waking up to this reality and they're like so my anecdote is I've had a lot of folks tell me in the last couple weeks we we have to be thoughtful about how we elect and how we govern so that we create a more balanced so what's the end game in
your framework my endgame is socialism I think that's where things go ultimately long term I think that there's a recapturing and a redistribution of power and value I think that there's some degradation of the system that erods to looking like something like France it's not like a nasty and it's like a a slow whimpering like you end up
looking like France or something and so that's my my endgame in that framework and I I I believe strongly is why we talked about this with doo that there are political actions decisions voting mechanisms that that hopefully we can put into place to stall out and to stop that from happening uh because I do think that human progress is critical
for the Min for the majority of people that are disadvantaged and we need to enable it okay so I'm guessing you're on the I don't want to be France side 100% that's right okay so and so what is the I want to be the wild west I want to be the 19th the the early 19th century what do you think that we should do in America right now I think we should
unwind a lot of laws and I think we should have as a mandate the objective is how do we get more of our economy and more of our people in this country to be supported by and progress through Private Industry rather than public support the federal government and the role that the federal government has in funding industry in hiring individuals
in pumping dollars into markets I think has gotten so far beyond the tell that we as we know are being sosed back and forth based on the decisions being made by the Federal Reserve that should have never been the case the free market should have always been allowed to operate progress should have always been allowed the government should have
stopped people from being hurt should stop negative outcomes but the idea that the government should come in and start to run things and employ people and get to the scale that it's gotten to this is the largest organization in human history the federal US federal government it has got the highest dollar spend the highest budget of any
organization in human history even accounting for the Roman Empire there should be accountability standards for every law which is how do I know that this thing did what it was supposed to do and how do I measure if it didn't and by the way if it doesn't and the dollars aren't returned to me at some multiple we shut that law down we shut that
department down we move on there should be an accountability standard for every dollar that's spent but we don't describe any outcomes we don't say here's the standard of measure and here's the accountability and if this doesn't work and this dollar isn't return to us we don't end it anymore and we don't keep doing this thing over and
over again and then layer something else on top and layer something else on top and then you've got 10 layers of nothing accountable to anything and that thing cost 10 times as much to do half as much I am optimistic still I'm always an optimist oh make sure you put in that caveat good yeah what's going right in your view I feel like we just killed the last good
thing yeah what is going right in your well the AI thing is what really pisses me off man I mean this whole idea that we're going to come in and tell people how to run businesses I hear you go just go back but do you think AI is going well right now we have nothing to really show for it yet so it's hard to say that it's it's cute and it's cool but there's
there's nothing really is AI I don't get the term when I started my company I had people that I called math people and statisticians then it was called data science then it was called Big Data then it was called ml now it's called AI at the end of the day it's software based algorithms that use three things data software and statistics and the
statistical tools and the approach to the software algorithm development have changed with the Transformer model that was paper that was described but it's the same thing we've been doing since the 1960s which is creating packages of software that make predictions and that do things for us and all that's happened in the last two years is we've seen a
piece of software that can communicate well with us based on these llms and we're like oh intelligence is here you know the first time a computer in the 1960s said hello world everyone was like oh my God we have ai now ai are sensient it just said hello world well the same thing happened when when big blue which was that big IBM Mainframe beat Kasparov
in chess people are like oh my God AI is just about here because at one time being great at chess was considered to be only a human capability and if a computer could ever get that good the theory was that it would have to be an AI but we actually found out that computers could do chess but that didn't make them an AI it just meant that they
could acquire that one capability I think kind of what you're saying is that computers now thanks to language models have some ability to interface with us using language and to understand Language by itself that is not artificial intelligence in the way that is portrayed in science fiction movies there's two key things that are
happening one is a new a new modality in human computer interaction through chat which is incredible and opens up lots of new software applications and markets which I think can be transformative and worth trillions of dollars no [ __ ] doubt and then the other one is in generative tooling where you can make art and you can make video and audio and
all this other sort of stuff so you're you're creating digital outputs that are not necessarily text but other forms that also start to represent the expectation that you might otherwise have and so that is really powerful and opens up all these new models for media content exploring new business models Etc so both of those are really
important new software capabilities that have emerged but this this notion that I think people confuse AI as being this like we've now got humans in software that can do things is almost like back in the0 when the computer said hello world and they said the same thing I think that what people are OD by right now is that a computer's ability to statistically guess has
gotten several orders of magnitude better than it ever was before and so these guesses seem human and lifelike but you'll find the edge cases where this stuff fails and we'll be asking ourselves yet again in a few years what the next leap is but the thing that is different is that there is a level of investment multiplied and Nick I I tweeted this so
you can just show the math here there's a level of investment multiplied by a level of improvement in the underlying Hardware multiplied by a level of improvement in the underlying models that's creating a 400x improvement from the Baseline every year and so the thing that I think is different is that we are taking this statistical guessing if you
want to just call it that and we're getting exponentially good at it so there is an efficient Frontier at which point you're like oh my gosh this is as good as certain humans you know maybe not the smartest of the smart humans but certain humans and I think that that's what's really really crazy and intense right now so I can understand why people
are like we need to get a handle on this but it may kill the Golden Goose although I would just say there is no Golden Goose yet there's just a lot of really interesting stuff that people can say is novel and it's inspiring to see but by no means has there been just a proven use case that is 10x in productivity yeah that hasn't happened
yet that's the reason to wait is this whole thing just seems very premature let the technology develop a little bit let the problems become a little bit clear more manifest let the Ws let the cake bake let the cake bake let the problems emerge in a way instead of we're guessing about them we can actually see them and also allow
there to be time for solutions to be developed by the industry on its own and we don't need KLA Harris's help or guidance to do that okay there you have it folks thank you for joining us for another episode of the Allin pod we hope that you walk away with the utmost of optimism enthusiasm for the world around us there's awe and wonder outside go take a
walk and enjoy it there's so much more than what is on Twitter I leave everyone with blessings and love gentlemen anything else final words David you better [ __ ] be there oh for poker yeah I will I will I'm coming last week saxs RSVPs to poker then texts he's supposed to be at dinner at 7 o' texts at 7:30 I'm on my way
11:00 rolls around no saxs no idea what happened to you you disappear into like the a triangle of the Bay Area I don't know where you go but you just disappear he gets in an Uber he has him Park in the airport and he just plays chess gets out of the house all right boys byebye byebye byebye let your winners ride Rainman David and instead we open sourced it to
the fans and they've just gone crazy with it love you queen of [Music] besties are that's my dog taking your driveways oh man we should all just get a room and just have one big huge orgy cuz they're all this useless it's like this like sexual tension that they just need to release your your your be that's going to we need to get merch [Music] our