0:00
Sacks, have some tequila.
Search this video
0:00
I tasted 10 samples the other day.
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One was heads and shoulders above the rest, which was a good sign. Oh.
0:07
So now we're taking that and making it the new baseline and I'm going to try 10 more samples and we're going to go from there.
0:15
I think we're very close to having something excellent. Great.
0:18
I did a a side-by-side taste test of the sample I liked the best compared to Clase Azul Ultra.
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And it was already better than Clase Azul Ultra, which retails for like 3,000 a bottle. Really? Yeah.
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Holy So it's going to be better.
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V1's better than their final product is what you're saying. Yes.
0:36
And that was not just your taste test, but like you and several people.
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It's me and two other guys who I trust, so we we did it together.
0:43
Now, when you say trust, you mean underlings or do you mean actually like No, he means alcoholics. Yeah.
0:49
Where in your pay hierarchy are they?
0:51
He recruited them at Alcoholics Anonymous in in West Hollywood.
0:54
Are they level two employees or level four employees?
0:57
No, one one works for me and one's a consultant. I say both work for you.
1:01
Should they both be on the payroll?
1:04
You let your winners ride. Rain Man David Sacks.
1:11
And I said We open-sourced it to the fans and they've just gone crazy with it. Love you, Sacksy. Queen of Quinoa.
1:19
Okay, are we over or underestimating the impact of the AI boom?
1:22
Nvidia's been on an all-time heater.
1:24
If you don't know, its market cap is now 1. 8 trillion, Friedberg.
1:30
This week it surpassed Google and Amazon as the fourth most valuable company in the world. There it is, folks.
1:38
Right behind Saudi Aramco.
1:40
16 months ago, stock was trading about $112 a share.
1:43
Since then, share price has gone up 6. 5x on a big number.
1:48
Shares went higher this week after it was reported that Nvidia plans to build custom AI chips with Amazon, Meta, Google, and Open AI.
1:58
In other news, Financial Times reported Open AI hit a $2 billion run rate for their reoccurring revenue.
2:03
It's about 165 million a month and they think they can double that number in 2025.
2:11
Tons of competition coming out.
2:11
If you didn't see, Google rebranded their generative AI suite to Gemini and they're charging 20 bucks a month for it.
2:20
And then there was this bizarre Wall Street Journal headline that Sam was going to raise $7 trillion. That makes no sense. Maybe that was the TAM. We'll get into that.
2:27
Friedberg, your thoughts on this ascension.
2:29
Are we underestimating or over-hyping AI?
2:32
I mean, it seems like the compute build-out is underway.
2:41
So this is going to continue for some time.
2:43
I think the real question that keeps getting asked is, you know, when do you really see the tides recede and what's what's there?
2:49
The compute build-out is underway, but are we seeing application and productivity gains associated with the capability of that compute?
2:58
Some would say yes, some would say no, but you've got to build out the infrastructure if you're going to assume that there's going to be these productivity gains in the application layer.
3:07
And everyone's assuming they'll be there, so we need to meet the demand, which is almost like building out an entirely new internet.
3:13
And so the core of AI is this matrix multiplication problem.
3:21
And you need these chips that do that really efficiently.
3:23
They're not traditional CPUs, which are general purpose chips, but they're chips that are very special purpose for a particular set of applications that render the output of whatever model is being run.
3:33
It's sort of like the internet.
3:35
Like you could pretty much create a bogey of any number on how big this can get.
3:41
At the same time, you're seeing some of the other players with different architectures and potentially that are going to be beneficiaries of this build-out because they're participants in other parts of the data center or alternative solutions like ARM.
3:52
And I don't know if you saw this, but in just the last couple of weeks or last week or two, ARM's valuation doubled.
4:00
It's come down a little bit since that big doubling.
4:02
Today ARM is sitting at 140 billion valuation.
4:08
Last week it got as high as 156.
4:08
And remember, it was only last August.
4:10
So if you guys remember, ARM was bought by SoftBank and the Vision Fund.
4:18
And then I think 25% of ARM was held by the Vision Fund and 75% was owned by SoftBank.
4:24
Last August, SoftBank bought from the Vision Fund the 25% that the Vision Fund owned at a valuation of 64 billion.
4:33
So now SoftBank owns 90% of ARM.
4:37
The last 10% trades publicly.
4:37
So at a $140 billion valuation, SoftBank's position in ARM is 125 billion.
4:43
And I think it really begs the question, did Masa have a masterful move here yet again?
4:50
Because everyone said for years with all the bets this guy was making in the Vision Fund and some of the mis- guided bets he was making with SoftBank and the leverage he was applying on himself and SoftBank to deploy all this capital during the ZIRP era, everyone was saying, you know, this guy had a one-hit, it was Alibaba and that was it.
5:08
And clearly he doesn't know what he's doing.
5:10
But now all of the sudden, his bet on AI was fairly prescient and it's paying off pretty powerfully.
5:18
He bought the whole business for 32 billion and now he has a a stake that's worth 125 billion seven years later.
5:25
Yeah, I mean, chip in a chair, right?
5:27
I mean Well, it's really begging the question, we need one, the power law, right?
5:30
When you're making a long-term investment, you can very easily look like a over the short term.
5:36
And to your point, the power law, all it takes is one of them to work out and it can wipe out the losses on the rest of the portfolio.
5:41
And we may be seeing Masa with his whole AI vision story that he's been telling for seven years, we may see Masa clawing his way out of the hole.
5:49
You only look like a to losers.
5:54
Meaning when people were throwing shade at Masa, it wasn't anybody that's any good.
5:59
I didn't see headlines that said John Malone thinks Masa is a fraud.
6:02
Warren Buffett thinks Masa is a fraud. Nobody was saying that.
6:07
Because those guys know what the game is and the game is exactly what you said, Chamath. You must always survive.
6:16
And you need to keep your wits about you and over time, if you're prepared and do enough good work, you'll get waves of good luck that amplify your hard work.
6:25
And Masa is an example of an incredibly talented person that has found a way to survive more than anything else.
6:30
And so waves of success will hit him.
6:35
The people that complain are the ones that are sort of a little bit stuck on the sidelines and are more frustrated with their own impotence and inability to do anything.
6:44
Now, on ARM specifically, the thing that I would keep in mind is that those guys floated I think about 15 million shares.
6:51
So there's about 100 45, 150 million shares outstanding. 90% owned by them.
6:58
So there's about 10 or 15 million shares outstanding.
7:02
And there was about 12 and 1/2 million shares short going into the earnings report.
7:08
And so the thing to remember is that there was almost an entire turn of the float that was short.
7:14
So I don't know how much of this reaction was just an enormous short squeeze of people that were largely long other chip companies and so they thought they could short ARM essentially as a spread trade to minimize volatility.
7:28
But this is an example of where if you don't do this analysis properly, GameStop was another where you misjudge or you sub-analytically look at the actual share count and what's actually free floating, you can get caught on the wrong side and these things can be very violent.
7:46
And to explain the float to folks, you can make a certain number of shares available to the public to trade.
7:54
When you have a small number of those, correct, Chamath, available to the public, weird things can happen because there's not enough available to short. That's exactly right.
8:02
And so that could have been the situation here with this run-up.
8:07
But I think I think the overall point of placing bets and being a capital allocator is the important one to discuss here.
8:13
Sacks, what are your thoughts on all the crazy bets that Masa made.
8:17
We watched a lot of our companies or companies adjacent to our companies get massively over-funded.
8:23
Some of them literally got drowned in capital.
8:25
But then you only need to hit one and and maybe win it all back.
8:27
What are your thoughts on this high alpha, you know, betting style of his?
8:36
Look, I mean, he's a gambler and he is playing a power law, so he only needs one really big return to basically make up for all the mistakes and it seems like he's hit that. Once again.
8:46
He did it with Alibaba, too, right?
8:48
Yeah, I mean, he's a major gambler.
8:48
Most people would be a little bit more risk-averse.
8:53
I don't think it was a great strategy to be pumping $500 million checks into what were effectively seed companies like they were doing with the Vision Fund.
9:00
However, yeah, obviously he made enough good bets that they're going to pay off that fund.
9:06
Well, it's a good point, Sacks.
9:06
I mean, none of the big I don't I I I probably need to be careful cuz I'm not super familiar with the portfolio, but it doesn't seem like any of the big winners were those seed bets.
9:17
Like he doesn't have any returns coming out of that kind of investment strategy. DoorDash. DoorDash. DoorDash. Yeah.
9:24
DoorDash was not Like what point did they invest?
9:26
Billion or two billion dollar round was it?
9:29
Yeah, pretty important moment.
9:29
We've heard at dinner, Jason and I at dinner, we've heard the the waterfall from the SoftBank side and it sounds like it was an enormous number. Yeah.
9:40
That was definitely their their biggest win. business.
9:43
It was a scaling business.
9:46
Seems a little different than some of these companies that were fairly early on that got monster valuations and large chunks of capital and then struggled to find ways to deploy that capital.
9:57
Which led to unhealthy behavior.
9:57
I think the thing you have to give him a lot of credit for is it's so easy to give up when the peanut gallery is chirping.
10:07
And so the thing that you have to give him a lot of credit for is he has the ability to tune those people out.
10:14
Now, he probably isn't even living in a world where any of those people that chirping even gets to him.
10:18
And I think that that's a very important thing. But kudos to him. I mean Yeah.
10:26
to be able to tag something for 100 billion here, 70 billion there. I mean, keep swinging.
10:30
And by the way, at the end of it all what is it going to change for him?
10:35
Absolutely nothing except he'll have some incredible stories to tell about the ball that he took and the roller coaster ride he was on.
10:40
And I think that's going to be the most valuable thing.
10:43
He's going to be able to tell his grandkids these stories and his their eyes will just be like, what?
10:50
And his friends, you know, I mean, I would love to have a dinner with him. I don't know him. it.
10:54
We should have him on the pod.
10:54
Come on the pod, Masayoshi. Let's talk about it.
10:57
I've only met him once by the I have a great story to tell about Masayoshi when I was at Facebook. I met him once.
11:01
But anyways Yeah, tell it. I mean, can you tell it?
11:03
All I'm saying is I would love to have dinner with him cuz I just want to hear these stories of ball.
11:06
Like up and down and up and down and in amazing lunches with him. We had lunch one day. We had such a good time.
11:13
He said, "Can we have lunch again tomorrow?
11:15
How long are you in Tokyo?" I said, "Yeah."
11:16
And I came back the next day and I had lunch with him twice. And it was great.
11:21
Like talking two or three hour lunches where we're just talking about every web 2. 0 company.
11:25
This is in you know, the 2009 Uber kind of Robinhood period.
11:27
And he was just fascinated by what was going on and and all the disruption happening. DoorDash series D, 1.
11:35
4 billion dollar post 2018 he did.
11:37
Well, the question I was asking is like DoorDash was a lot like an arm.
11:42
There's a point of view that the business is proven that there's a market that it can grow into, that there's a management team that knows how to deploy capital.
11:51
Versus a lot of these early stage bets where when they got too much money they ambled about Well, they didn't amble about.
11:59
They kind of incinerated it.
12:01
Incinerated because what do I do with this money?
12:04
I don't yet have a machine or an engine that can grow with this money.
12:08
And until the engine can handle the capital Like the pizza thing.
12:11
Zoom pizza you're talking about. Yeah.
12:13
I mean, if you give dozens of them in that portfolio, right? Yes.
12:17
If you don't have a business that can handle the gas you're putting in the tank the engine's going to blow up. The engine has to grow. It has to build.
12:27
The volume has to build so that it can actually handle the fuel.
12:30
And I think that's been part of the challenge.
12:31
And I will just say, I've said this in the past, but there was an era in Silicon Valley that started around 20 10, 2009.
12:38
Kind of right after right as right as web 2.
12:41
0 was starting to venture into more traditional markets, meaning tech companies were becoming other companies.
12:48
Kind of the mobile local era was was kicking off.
12:50
And there was a strategic concept that got popular in Silicon Valley on take the market.
12:55
Which is when you feel like you could be the winner give the person all the chips and say, "Now, go over bed and take the whole market because these are going to be winner take all or these could be winner take most markets.
13:07
So, get first mover advantage.
13:10
Here's more capital than you need."
13:11
And I remember being pitched this when I was raising my series B that I should raise more than I was trying to raise because I should use the extra capital to take the market.
13:19
And then that mantra just became the de facto standard, which is, "Oh, you have something that has something. It has some edge. It has some advantage.
13:26
It started to move in the market.
13:28
Here's a ton of capital you don't really need.
13:32
Now, go take the market."
13:32
And the reality is most of those businesses had absolutely no way of using that capital to quote take any market cuz they didn't even know what their market was yet.
13:42
Yeah, they when you're in the product market phase product market fit phase and you don't have the engine as you called it how do you make the engine go faster?
13:49
You're literally trying to take a bunch of car parts and then run a Formula 1 race.
13:54
The car's not even track worthy yet.
13:57
And Katerra, you know, not to not to pick on any companies, but I remember Katerra which was doing construction and they just thought they're going to take over the whole construction you know, industry with this company.
14:08
Raised like 900 million dollars and I believe it's like a zero the whole way.
14:12
You cannot you can't put the money to use.
14:13
Capital as a weapon maybe works if you're Uber, Lyft and DoorDash and you have customers and you can reduce the price, but Well, you know what's interesting is when you now look at all a bunch of these AI companies every day what you see is every round is a minimum of 100 million dollars.
14:30
But the the dirty little secret is not that these companies have found product market fit or are scaling revenue massively.
14:36
I'm not talking about OpenAI.
14:37
I'm talking about these other long tail businesses.
14:42
The 100 million dollars is largely going to compute.
14:44
But as we know and I think we'll talk about this next week when all these announcements are done, but you're about to see a 1/10 thing of the compute cost.
14:55
And so what's interesting for those companies is they're going to be left with a lot more money, but back to Freeburg's point they may be ambling about with too much money at that point.
15:03
So, today you raise 100 million dollars because you need to spend 70 or 80 on compute.
15:07
Tomorrow when you only need to spend seven or eight for the same amount of throughput on one hand you could say, "Well, this is great.
15:14
I have so much more money I can spend."
15:17
But again, we've seen example after example where if you raise too much money when you don't need it, you will just run yourself into a brick wall. You'll over hire. You'll miss hire. You'll misallocate.
15:26
And it just goes back to the same thing that we've said before, which is there's just not enough people that actually know how to run companies.
15:32
Yeah, and it just becomes a huge distraction. Did you see Sacks today? Sora? Did you see Sora? Control by OpenAI?
15:39
this is breaking news right now.
15:39
Yeah, this is unbelievable.
15:41
If you haven't seen it, Sora is the text video model from OpenAI.
15:45
They've been talking about this.
15:48
I guess this would compete with Does Stable Diffusion do video as well?
15:54
Anyway, you give a prompt.
15:54
I'll just read this one out loud.
15:56
Beautiful snowy Tokyo city is bustling.
15:57
The camera moves through the bustling city street following several people enjoying the beautiful snowy weather and shopping at nearby sta- stalls.
16:06
Gorgeous sakura petals are flying through the wind along with snowflakes.
16:11
And this if you weren't studying it would look like a major feature film. Or TV show. Yes, Sacks?
16:22
Yeah, I mean, it's unbelievable.
16:22
I mean, it looks to me like 4K video.
16:24
I mean, I'm not sure it actually is 4K, but it looks pretty darn close.
16:30
Yeah, the rendering resolution can be whatever you want it to be. Right.
16:33
The fact that you can describe the the way that you want the camera to move.
16:38
So, I'm going to speculate on this.
16:38
You guys know I talked about this quite a while ago on how I think we're going to be at prompt to video, meaning people are going to have personalized video games and personalized movie experiences and music eventually where rather than everyone watch the same product made centrally by a producer, we'll all make our own product locally.
16:58
I spent some time digging into this over the last year.
17:02
And the big challenge was that the traditional approach for rendering video is you create three-dimensional objects and then you have a rendering engine that renders those objects and then you have a system that defines where the camera goes.
17:12
And that's how you get the visual that you use to generate a 2D movie like this.
17:19
And the best tool out there is Unreal Engine 5, which is made by Epic Games.
17:21
I don't know if you guys have ever seen the demos of it. I've seen it.
17:25
Is that what Star Wars uses with their like virtual sets now when they did the Mandalorian?
17:29
I think they're using the Unreal Engine or Unity. They probably are.
17:32
And then there's other tools.
17:33
If you're in movie production, you'll use different stuff.
17:36
But Unreal Engine is just so incredible.
17:38
But it requires the placement and the rendering of 3D objects.
17:40
So, where do those objects go?
17:42
And then the physics of the light moving off those 3D objects to generate a 2D video is pretty straightforward.
17:48
That's been done for 20, 30 years.
17:52
And so the the density that the rate of improvement, the color contrast, etc.
17:57
has all improved, made it look incredible.
17:58
Now, it's super photo realistic.
18:00
You create photo realistic video.
18:01
But it still requires this concept of where are the 3D objects in 3D space. This doesn't do that.
18:06
This was a trained model.
18:09
So, we don't know what's going on in the model.
18:12
So, how would you train a model to do this without having a 3D space?
18:17
Because clearly there's thousands of objects in that rendering.
18:19
If you look at that video, thousands of little objects.
18:22
The compute necessary to define each of those objects, place them in 3D space is practically impossible today.
18:31
So, this is being done through some model that starts to render all of these things together.
18:35
So, it is very likely, my guess is that OpenAI used a tool like Unreal Engine 5 and generated tons and tons of video content tagged it, labeled it Mhm.
18:48
and were then able to use that to train this this model that can for whatever reason that we don't understand do this. output.
18:57
But what's interesting is that this output underneath You're referring to synthetic training data. And yeah, exactly. Exactly.
19:04
And and but what's amazing about this model is that underneath this this model on its own has rendered physics.
19:12
So, all of the rules of physics, all of the rules of motion, all of the rules of perspective, all of the rules of how objects sit upon one another next to each other, how fluids move.
19:21
If you look at some of the other demos on this tool, you can actually see fluid moving.
19:25
It's rendering the movement of fluid or rendering the movement of hair.
19:30
Those are like physics models that would typically be deterministically written.
19:35
Meaning that a programmer, an engineer writes the physics and then the the Unreal Engine renders the physics.
19:39
In this case, the model figured out the physics.
19:43
And the model probably did it in such a reduced way that you can use a reduced amount of compute to generate something that would otherwise take a ton of compute time. I mean, look at this. It's truly amazing.
19:53
Nick, find the one of golden retrievers playing in the snow.
19:57
This is way better than this one.
19:58
But what's amazing is that the And by the way, if you're listening to this, I really recommend going on Twitter and typing in OpenAI Sora, s o r a, and looking at some of these demo videos. It's bonkers.
20:07
And I think it really speaks to what's so incredible right now, which is that software is writing itself.
20:13
And it's replacing a lot of human determinism.
20:15
The way that humans think about constructing software is being completely redone with these uh uh learned models.
20:23
This model learned physics on its own. Yes.
20:24
It renders this thing that looks like the only way we know how to do this today is to create 3D object models in 3D space and use tons of compute to render the And just to to translate that from geek to you know, people listening, this is incredible because Pixar spent years, maybe a decade, trying to figure out hair.
20:43
I remember talking to Ed Catmull, and he told me hair was just so hard to get right with wind and lighting.
20:50
They've literally built the physics engine for years, like maybe even a decade, to make hair cross the uncanny valley.
20:56
What you're saying here, Freeberg, is somehow this language model, this image model, just outputs it.
21:04
And it doesn't actually have a physics model.
21:05
It just outputs it, correct?
21:07
Yeah, it it Well, we don't know, but the model I there may be some determinism built into it.
21:13
So so I don't want to assume anything.
21:16
But the general approach Determinism means you write the physics and you write the formula of the physics Yep.
21:20
so that the software can execute the physics and render the thing.
21:26
But in this case, it may very well be the case, like a lot of the other models that are being trained today, when you create a model, they're trained, that it's being trained and on its own, it resolves to figure out how to do the physics.
21:39
Is there a limit on the length of these Sora videos that you can generate right now? minute right now. 60 seconds today.
21:47
Obviously, that'll come off at some point.
21:49
way, if you can do 60 seconds, you can do 2 hours. Right.
21:51
The problem that you have is, I mean, if we're talking about creating a movie, is making edits.
21:55
So, I I obviously haven't used Sora yet cuz it just came out today, but I've used DALL-E, which is just their prompt to image service.
22:06
And I was designing the label for or the bottle for the All-in Tequila for you guys. Yeah.
22:11
And what I noticed is that it would spit out a bunch of ideas, and then I would take one, and then wanted to just make little changes, and I would just say, "Okay, keep this, but just change this one detail."
22:23
It would give me a completely new image.
22:27
So, the AI doesn't realize the layers inherent in what it's producing.
22:33
Somehow, it takes this prompt and generates a response.
22:37
And if you give it that same prompt 100 times, it'll give you 100 different answers.
22:42
And if you'd say, "Just modify this, this, or this," it can't do it. Can't reason. It can't take criticism.
22:47
Well, it seems like on some level it's unaware of the output that it's created. Again, Yeah.
22:51
a human creating this in Photoshop would have a lot of layers, and every object in that image would have its own layer, and you could have a layer for text, and just quickly modify the text.
23:03
When I wanted to do something as simple as edit the text or change the font, again, it would give me a completely different image.
23:09
And I just wonder about these videos.
23:12
If you want to create a movie, I think you're probably going to be stuck with like the what they give you, and then maybe you could import that at some point into an Unreal Engine and then do work from there.
23:23
The editing part is it doesn't exist yet.
23:26
When you do text, it's easy cuz you just ex you cut and paste it into your Grammarly or your Notion or whatever you use, and you start editing.
23:33
Here, there's no exporting, like you're saying, to Final Cut Pro or something.
23:38
bet that when they turn this into an API, that when you're working in Unreal Engine, you know, if you're like a VR designer or something like that, or you're like a um a filmmaker, you could probably just get it started with a prompt, and that could be hugely time-saving if they can make that integration work.
23:58
I think that's pretty interesting.
23:58
I looked at this a lot over the last year.
24:01
This was one of the biggest challenges is in order to have an interactive approach to video production or video game production, you have to be able to say, "Well, take that out, put that in."
24:13
But like like you said, the model doesn't distinguish the objects.
24:16
It doesn't distinguish each of those little flowers or each of those little cherry blossoms, or doesn't even distinguish if there's two people walking down the road.
24:23
The model doesn't have this concept of objects when it renders.
24:28
And so, um the traditional model, where you have objects in a 3D model that then get rendered into a video, allows you to do those sorts of things.
24:38
So, what may end up happening is a fusion, and this is something we talked about with Stephen Wolfram and others, that there are these models that are called compute models that do deterministic compute tasks.
24:47
Then there are these AI-trained models, where we don't really have a sense of how they work.
24:56
But the fusion of the two will unlock a lot of opportunities, and that's very likely the next generation of models is not just purely um non-human intervened trained models, but the integration of those models with these deterministic models, with these compute models.
25:09
And then you can start to do things like instead of saying, "Hey, render this whole scene," you're saying, "Render all the objects that would go in the scene."
25:17
They get placed in an Unreal Engine.
25:19
And then the Unreal Engine outputs the the video. Right.
25:22
that integration work, I think, is the next big phase in AI model development, and that'll unlock like insane Yeah, cuz right now you can't use this to create dialogue, like actors in a movie scene talking to each other and acting, especially like close-ups of those actors with their facial expressions.
25:40
I don't at least I don't see any examples like that.
25:44
humans want to have a creative process, it doesn't work. That's right.
25:46
Yeah, it'll get there, though.
25:47
And if you put something like this out there to the public and said it's 20 bucks a month to do this, or 50 bucks a month, you're going to have a lot of consumers who want to buy this product.
25:57
So, when I see this, I think people are going to pay for this, and then going back to Nvidia or ARM, okay, more infrastructure to your point, Freeberg, is like what infrastructure do we need for everybody to have Pixar on their laptop or on their, you know, phone.
26:14
And people people are willing to pay for these know if you guys saw this, but there was another big breakthrough announced today with the um the new Gemini Pro 1. 5.
26:22
Can you just pull up Sundar's announcement on it?
26:24
Yeah, Sundar now is found the password to his Twitter handle. He's he's tweeting. Yeah.
26:27
The reason I want to talk about this, if you just scroll down.
26:31
So, when you prompt an AI model, you put in a certain number of words into it, like an LLM model today, and it spits words back out.
26:39
The more words you put into the model, the more compute-intensive or challenging it is to do the compute work needed to render the output.
26:49
So, OpenAI, their GPT-4 Turbo model has 128,000 tokens, which means about 128,000 words can be fed into the model to get an answer back out.
27:00
So, you could put like a whole essay or 100 pages of text, and it will read a document for you.
27:05
You could get a whole book, and and it could give you a summary in a couple seconds.
27:11
What Google just announced with Gemini 1.
27:12
5 Pro is a 1 million token context window, up to 10 million token context window in total.
27:20
I don't know what's going on here.
27:21
Because the problem is the way these models are kind of traditionally built is that that creates a non-linear scaling in compute needs to be able to increase that that context window like that.
27:31
So, there is some architectural work that's gone on to allow these models to scale up in a way that we did not think possible when these models first came out, which is crazy to think was only like 24 months ago that they started to get kind of looked at like this. 18 months ago, yeah.
27:46
Yeah, and so there's two kind of things that are happening.
27:50
One is that these models are getting chopped up in a way that you can run small models in a highly trained way locally, and you don't need a massive general-purpose model.
27:57
And so, that's going to make compute needs very small for very specific tasks.
28:00
And the other one is that there's other architecture that's happening in deploying the models that's allowing massive context windows like this.
28:07
So, it totally changes how scalable they are with the same number of chips or the same amount of computer or the same amount of power.
28:12
So, there are all these amazing Moore's law effects happening right now in AI technology development on the chip level, on the architectural level, on the how they're being built and how they're being deployed that completely changes the concept that I think most folks had when these first came out 2 years ago and the potential.
28:28
So, I think sky's still the limit.
28:30
We don't really know how big this is going to get.
28:34
But all of these efficiency gains mean that we can do so much more with so much less.
28:39
And by the way, when you can do more with less, it doesn't mean you need less chips.
28:41
It means you need a lot more chips.
28:43
Because the fact that you can do a lot more with much fewer chips means everyone's going to want to do it now.
28:49
More people can afford to do it.
28:49
So, it unlocks the opportunity for for compute.
28:54
And so, it really starts to rationalize the Nvidia thesis that it could be worth $10 trillion potentially.
28:59
And for people in the audience to understand what this context window means, if I was too technical. No, no, no, no.
29:05
I'm just I always like to just give an example or two after you explain it.
29:09
The context window, for example, you could upload the transcript of this podcast, right?
29:13
And there were only certain services, like Claude, maybe, where you could put a PDF attachment, boom, you put it in there and say, "Hey, summarize this using your language model and using this content."
29:24
Now, you could be able to say, "Hey, take me every Mr. Beast video.
29:26
Take me you know, take the top 10,000 videos on YouTube.
29:32
Take the transcripts, summarize them for me, give some analysis on it."
29:35
And that was only available to developers prior to these large context windows being open.
29:42
And that's going to just open up a massive amount of application, right, Chamath?
29:47
The results actually not that much better.
29:48
There's these third-party service benchmarks.
29:49
Lambda is probably the most often referred to, but what you see if you just look at for example, all the GPTs, even as they increase the number of parameters in a model, the quality of that model doesn't necessarily increase with the rate of parameter increase.
30:04
So, you have this thing of a little bit of diminishing return, which is more a problem of what we said before, which is eventually when you're scouring the open internet, doesn't matter how fast or how how big you scour the open internet.
30:16
The open internet is a bounded space, and so you get the same answer.
30:19
So, all of these things are they're interesting marketing wear, but I would just encourage us all to keep in mind that the shift is not necessarily these kinds of things.
30:36
It's kind of like saying, you know, in a chip like, "Oh, wow, we built this chip on 3 nanometer." Okay, what does it mean?
30:41
Well, no, I think the piece, respectfully, you might be missing here is like your proprietary data might not be in that language model.
30:47
So, by having this context window and you can add something that you have on your hard drive. how it works.
30:54
So, my point is the context window is not correlated to the quality of the model outputs.
30:58
Correct, but consumers and business users haven't been able to put their data into the models cuz they're not conditioned. window.
31:08
That existed when the context window was smaller.
31:09
That that's what you think you do things like rag with.
31:12
Right, but most people don't have access to that.
31:14
This is like consumers can now just take something off their hard drive I have something to say.
31:19
Rag is different than what this is. Okay.
31:21
Like this is this, what what you guys just spent all this time talking about, is equivalent to saying I built this chip with on a 7 nanometer process or a 3 nanometer process.
31:31
And what I'm saying is it is technically more burdensome, as Friedberg said.
31:36
It's technically much more sophisticated and complicated, but the the translation to quality in the consumer is not what that means.
31:49
So, a 3 nanometer chip is not two times better than a 7 nanometer chip for the consumer.
31:53
Similarly, a context window that's five times bigger than the one before it doesn't make a model five times better to the consumer.
32:01
These are orthogonal ideas.
32:03
It's not to say that it isn't an important thing, but I I I would say that it's a reminder for me that we're in the early phases where there's a lot of hay that people can make, but it's important to look at these third-party benchmarks that try to sort through and sift through what matters and what doesn't matter.
32:23
And one of the interesting things that third-party benchmark services have figured out is that irrespective of the exponential growth of these things like parameter size, quality is only growing linearly and now sub-linearly.
32:39
So, just an interesting point.
32:40
I understand your point now.
32:42
My point is man, when we when you are a consumer of this and I've been talking to people trying to get their data into, you know, the context window to be able to ask a question.
32:52
There was like, "How do I put more in there?
32:53
How do I put more in there?"
32:54
And then these language models, because of the copyright issues, they're not able to upload Blade Runner and then say, "Hey, make me something."
33:03
But I was able to and just to give a very real example, I did um a podcast around the Ray Kroc movie, The Founder, that we were referencing earlier.
33:13
I uploaded the screenplay.
33:13
I found a PDF of the book and I found two other like essays about Ray Kroc, like HBS studies.
33:21
And I said, "Give me like a timeline of it."
33:22
And I used something called Google Notebook, which has a big context window and you can upload all this stuff.
33:27
And that's where I'm seeing consumers and what these things are capable of vis-à-vis the context window, it it just unleashes in people's minds so many applications that you can do.
33:38
There are two examples today that caught my eye that I think are worth bringing up.
33:41
The first one is from Meta.
33:42
Meta published this paper today, which is like pretty crazy.
33:46
And essentially what they said is that for the realm of the software worker, the software engineer, what they basically built is this LLM tool that runs over Llama called TestGen, and it essentially does automated unit testing to such a high degree of accuracy.
34:03
So, you know, in the software development, if you want to spit out a product, you have to go through this thing where you have to functionally run unit tests and make sure the thing works as advertised.
34:13
And this paper essentially now allows you to traverse a code base, understand it, generate these unit tests with high accuracy.
34:20
So, where is this valuable?
34:22
Think of remember the software bugs in like the Boeing 737 Max issue, Jay Cal, where it turned out that it was just bad software.
34:32
Tools like this now will able will be able to run unit tests where you will not be able to get out get that plane out the door unless all of these functional unit tests not only have been written, but run and have been passed successfully.
34:44
And it'll all be done by bots, which means that you can't game that system.
34:51
So, that's that's something today that Meta released.
34:54
thing developers get to is writing the unit tests, right?
34:55
It's always like Which is why there's all kinds of bugs and security holes in code.
34:58
Now, I thought that that was a pretty large breakthrough, and I think we're going to go through a bunch of fine-tunes on this that make it interesting.
35:05
And then I saw this other thing which caught my eye even more, which is this thing that Nat Friedman tweeted out, which is this thing called magic. dev.
35:14
And what essentially it is is like a co-worker.
35:17
And what they are claiming, and I don't know if it's true, is that now you can basically have this thing understand your style of code and actually be able to write code that is just as good as the way you write code.
35:33
So, now it's not a co-pilot, but effectively a co-worker.
35:37
And this is the first real example of what I've seen of a claim that basically says, "Hey, you know, we can now be an add-on to your workforce."
35:47
And this to me is just so gargantuan because like if you look at the amount of OPEX inside of any company that sits inside of R&D, if you look at the amount of stock-based compensation, right?
36:01
If you replace humans with bots, which is what this is, you're going to crush those things.
36:04
SBC at the limit goes to zero because you don't have to give stock to a bot, right?
36:11
You have to give stock to people.
36:14
And OPEX it gets shrunk because now you just pay a license to magic.
36:16
dev or I don't know how they're going to make money on this, but really, really, really fascinating stuff.
36:23
It is a scary But there was another open-source project, uh I think it's called Maggie, MGI E.
36:29
I don't know if you saw that, Friedberg, but Apple has been working on an open-source image project.
36:34
And so you're kind of going to see, I think, in iOS 18 or the next iPhone 16, they're going to have an image model on on that phone.
36:43
Where is Where is Apple in all of this? It's unbelievable.
36:46
No, they they're Where are they?
36:48
They are building an image model and you're going to be able to talk to your phone and say, anything.
36:54
I think you're going to see a chip on the next set of mobile devices by Apple that will run models locally. Yep.
37:03
And so, this goes back to the point about how the hell is the government going to regulate AI models, which is the stupidest thing I've ever heard.
37:10
Um well, not the stupidest.
37:10
It's probably, you know, probably top 20.
37:11
probably, you know, probably top 20. But the fact that they're going to like be able to be fully vertically designed, that they can have the hardware and the software and integrate all the way through to the application layer,
37:25
they're going to have I would imagine incredible intuitive AI features built into all of their products that can run locally rather than all the other stuff that's going on where you've got to make a request on the internet and get the results back over the internet. It'll be pretty powerful.
37:37
It'll be pretty powerful.
37:39
But obviously no data, right?
37:39
We don't know what they're doing.
37:42
We're just speculating here.
37:42
Well, no, I mean, you have breadcrumbs.
37:44
And the breadcrumbs are they have an image model and I just dropped it in the hugging face of it.
37:48
You can basically upload an image and just give it a text prompt of how to change the image.
37:53
So, you know, if Nick were to use this, he could upload a picture of you, Chamath, and say, you know, give him 5:00 shadow, give him a mustache, whatever.
38:00
And actually Nick, Nick, will you do that real quick while we're talking?
38:03
While you're doing that, can you bring up the video of the robot's life in a cyberpunk setting? Yeah, it's beautiful. Sora rendering? Yeah, this is Sora. So beautiful. So It's really cool.
38:14
So, but here's the the limitation.
38:16
And this goes back to what me and Friedberg were talking about earlier.
38:19
Okay, so you've got these people in the background.
38:23
Let's say that you're trying to make a movie.
38:25
theater backwards, by the way.
38:25
You can see the human feet aren't correct.
38:26
Sort of like a Dolly problem.
38:28
What what's cool is that Okay, so those cars aren't moving. They're static.
38:31
You've got some movement of these background people, right?
38:36
At least so they're kind of they're the extras in a movie.
38:42
But if you wanted to tell Sora, this is just my guess, that, "Okay, I want the people in the background to be doing this."
38:48
It would render a whole different image.
38:49
Like your robot might change, too. Right?
38:53
Well, Sax, this is where your context window matters.
38:55
So, if you repeat the statement, if instead of writing and then iterating, if you just re-prompt it and your prompt got longer and longer and longer with the degrees of specificity you needed, that's the way you use these models today.
39:08
And to your point, what humans are looking for from a UX perspective is an iterative approach to rendering.
39:15
It's an iterative approach, which isn't feasible in a world where the This is This is all a matrix.
39:20
It's a three-dimensional matrix.
39:23
There's two dimensions of pixels, and then the third dimension is the next image and the next image and the next image.
39:27
And so, that matrix is re-rendered from scratch.
39:29
It doesn't have a concept of what are the objects that I'm rendering.
39:35
It has a concept of a matrix of pixels.
39:36
And so, it will re-render a matrix of pixels based on a redefined prompt, but what you're describing would require a very different model architecture than the way all of these train models operate today.
39:47
This is going to revolutionize pornography.
39:50
I think it's the first play No, no, no, I'm not saying it as a joke.
39:53
I think that's where you're going to see this first because then all these issues, potential issues of underage people or exploited folks, it goes completely away.
40:01
You're the VR guy's going to cut this No, and and you know, it it'll kill only fans.
40:07
Yeah, I was about to say end of thing is where every revolution starts.
40:11
That's where Technological That's where payments That's where the web started.
40:14
That's where payments got refined, but I I think that in pornography you're going to see this basically destroy pornography and only fans.
40:23
Well, I don't I don't want to bring up something uh that's super offensive, but there was a certain pop music star who had a bunch of images just a couple of weeks ago that were AI generated. deep fakes, right?
40:35
Yeah, there were a bunch of deep fakes of a pop star.
40:36
I don't want to like actually highlight the person's name cuz then it just I think it sends more of it, but X did a really good job of blocking all of them, watermarking them, and saying you can't do this.
40:47
And so this is like a whole new world.
40:49
You can take any person on the planet and make porn out of them that is realistic.
40:53
Well, I don't I don't mean that.
40:55
I just mean that you'll be able to make pornography in a way that is totally non-human involved, which is generally better, I would say, for all humans involved.
41:06
What's great about the deep fakes is that if you have a sex tape come out, you can just say it's a deep fake. Totally.
41:12
I was about to ask you, Chamath, what is the prompt you're going to use to make love to yourself tonight with the new Sora model?
41:19
Chamath embraces Chamath.
41:19
All I hope is I I may just need to publish some data so that whatever deep fake gets some parts accurate. This is Apple? Oh, short Apple stock. This is terrible.
41:28
It's not a very good Yeah, what is this model? This is an Apple model?
41:33
It's called Maggie, MGI E.
41:34
This is Apple's open-source image model. It's way behind. This looks like GPT 0. 1.
41:40
They got work to do, but it's open-source. It's going to go faster.
41:43
It's very hard to make fine-tune changes in these models or to get the result that you want, but that's fine.
41:48
This is just a This is V0.
41:48
9, so If you guys want to see a great fine-tune, the Juggernaut XL fine-tune Uh-oh. I would just say try it.
41:56
It is a fine-tune that does not allow bad-looking people.
42:05
The whole The whole concept is only beautiful people.
42:07
So it doesn't matter what your prompt is, but these people come out with the most incredibly good-looking people I've ever seen.
42:12
As if the standard wasn't already high enough with filters and everything else, but This is going to be revolutionary for independent film.
42:20
I mean, this is obviously just tip of the iceberg, but you know, the problem with independent film right now is that the economic model literally doesn't work.
42:25
It's too expensive to make an independent movie relative to the return.
42:32
And so the independent movie business has almost dried up almost completely.
42:38
This is going to revolutionize it because it'll bring the cost down close to zero.
42:42
Now, I I don't I don't agree with Friedberg that everyone's going to design their own entertainment because most people are lazy.
42:46
No, I'm not saying design.
42:48
Exactly, the way you think about creative production processes is what's going to change.
42:52
It's all going to reduce down to sitting down and it's like when you ask your spouse or partner or whatever, "What do you want to watch tonight?"
42:59
and they answer something, that something will then be delivered to you instantly.
43:04
That's what's going to be so powerful.
43:05
Well, you mean the AI's going to create it on the spot for you?
43:07
It certainly will, but I I think that there's a certain element of culture that gets integrated into personal I I mean I I I don't think we have time for this, but I have like a whole philosophy.
43:18
People still want curation.
43:20
I mean, if you look at something like YouTube, um or really any user-generated content site, there are roughly 100 times more people who are passive than people who are active and actually create stuff.
43:31
Whatever the ratio is, there's always a lot more passive viewers than there are creators.
43:36
So there's I'd say most of the content will be created by people who actually care enough to do it.
43:40
Again, let's call it 1 or 2% of the population.
43:44
And then of those 1% might actually be really good at it.
43:48
Yeah, but here here's where Friedberg I think has a really good point cuz I have been looking into this.
43:52
Imagine if you took The Sopranos, something you and I love, Zach, and you just said, "Hey, for each season give me 10 more minutes per episode and give me like two more characters or whatever."
44:03
Now you when you watch it the next time, you can say just fill it in.
44:07
I want every episode to be 90 minutes instead of 50 minutes.
44:08
Or I've been doing this thing with my daughters, we're into uh Star Wars and The Clone Wars, etc.
44:15
People have been cutting shows like Andor or Rogue One, Clone Wars, the prequels, etc.
44:23
and The Bad Batch, and they're putting it together like timelines and they're making their new versions of it by supercutting the different series that are filling things in.
44:33
So you're going to be able to say, "Hey, tell me the whole Star Wars saga with a little more perspective from Obi-Wan or give me a little more perspective from this person."
44:42
And that that's going to just make these things like these franchises so much more watchable and deep and rich.
44:49
Yeah, so this is my point, Zach, is I don't think it's about ground-up personal media creation.
44:54
I think that it's about the curation model changes.
44:59
The creator or the central creative force comes up with a genre with a bunch of characters like a Star Wars and general like arcs of stories, and then you can go in and you can view it from any character's point of view.
45:11
Imagine watching the Star Wars movie from Darth Vader's point of view.
45:15
Imagine watching the Star Wars movie where you just stayed on Andor the whole time and you watch the news on the TV while you're hanging out at the bar.
45:25
That's your fantasy, you with the you with the Ewoks?
45:29
So you're right that there's a great opportunity for some of these cinematic universes to kind of open up the creative assets and let the fan base do whatever they want with them or create, you know, these alternatives.
45:38
I still think that it's that 1% of the viewership that actually cares enough to do that.
45:46
And the reason is because that I think what you see with all these uh demos is that it's really easy to get the first 90%.
45:53
It's really hard to get the next 9% and then the final 1%.
45:56
You know, to get to the level of Of course, yeah.
46:01
To get it dialed in to the point where again, the the first thing it gives you But the the benefits could outweigh those costs, and this is true in 3D video game playing.
46:09
I don't know if you play Fortnite, but there's all sorts of stuff that you feel could be better, but the overall value of that experience far outweighs the missing elements of it not being truly photorealistic.
46:19
And I think that's where the stuff goes. It's ski week next week.
46:26
And I've done this for all both of my older boys, and I'm doing it now for my youngest boy who is 4 and 1/2, almost 5.
46:35
We are going to watch this entire week all of the Star Wars movies. Fantastic.
46:41
And then I got it downloaded history all the movies, yeah, from and I got them ordered.
46:46
The order was not what I thought.
46:47
It's not as released, obviously.
46:50
No, you want to do timelines, so you want to have the prequels.
46:51
I did that once, and I will tell you it was super disappointing.
46:56
Rogue One uh the Star Wars, the original sequel.
47:00
Wait, you're saying this order is not good? Here's what I was told.
47:01
This is what was the internet was the most popular.
47:05
You start with The Phantom Menace, then Attack of the Clones, then Revenge of the Sith, then Solo is optional, Rogue One optional, Rogue One not optional.
47:17
Then four, five, and six, obviously, A New Hope, That's when your kids will lose their mind.
47:22
They'll be like, "What is this?"
47:22
It's like Empire Strikes Back, Return of the Jedi.
47:25
Four, five, and six are too slow for kids.
47:26
Yeah, that's the problem.
47:28
Seven, The Force Awakens, and eight, The Last Jedi, then nine, The Rise of Skywalker. Skip the last three.
47:32
Yeah, the last three are garbage.
47:34
They fall asleep during four, five, six.
47:36
Yeah, God, four, five, six are the best.
47:39
are probably the most watchable.
47:39
They're very They In In retrospect, they're great, but there's also The Clone Wars, which is absolutely fantastic.
47:45
I would sprinkle in some Clone Wars episodes.
47:51
us for this entire Nat's going to watch all this?
47:53
No, she's ready to shoot herself in the face.
47:56
Yeah, this is her worst nightmare.
47:56
She and my daughters are like this.
47:58
I put the over/under on Nat sticking through maybe 100 minutes of this. And she's done. She's done.
48:02
Amare, why do you poison the kids with this a nerd stuff?
48:07
And they're never going to get the girls.
48:09
Is that Federico Fellini?
48:11
What is this not a Fellini?
48:11
This is a How about they watch something where the people make a love instead of the lightsaber cut up people hand off? this? Exactly.
48:19
It's a no, there's a no love and a joy.
48:21
There's people with a so like lightsabers. It's a no fun.
48:27
But to bridge the gap between your two visions, Zach's and Friedberg's, sorry.
48:32
It's Nat's voice is so great.
48:35
It's Chamath and I will talk when we talk to each other for literally 20 minutes as Nat.
48:39
We'll just have a conversation.
48:42
But it's a conversation we're having.
48:43
I don't know why Chamath this idea has such a high interest rate on the convertible note.
48:50
So why would you do that to me? I'm a your friend.
48:51
Who's it going to be on the board?
48:53
This the person looks like a dum-dum. What's going on? I don't understand.
48:57
Well, it's a independent seat, Chamath.
48:59
You don't need to have a put the super smart person, just a different perspective.
49:03
Is it the opposite of a white truffle?
49:05
The white truffle is a delicious.
49:07
This a product that smells like a poo.
49:12
But anyway, between Zach's and Friedberg's, we're literally just talking.
49:18
Hey, when are you coming tonight, ask Are you making it for dinner or not?
49:19
I have to I'm not I'm I'm going to try to make it by dinner.
49:22
I just have I have to give a keynote at a podcasting conference. Oh my God.
49:25
Are you Wait, sorry, are you kidding me? No, I'm not kidding.
49:30
You guys banned me from having advertising here. I have to make cheddar. I got bills to pay.
49:33
Just because there's an eight in front of the Uber stock price doesn't mean I can retire. Plus it does. Yeah. by 7:00 p. m. or not?
49:41
I'm going to make it by 7:00. Yes, I do. Keep me informed.
49:45
are going to start dinner when you get there. Perfect.
49:48
I will not do David Sacks time, okay? Thank you.
49:53
But between Free Bird and Dave, you know, Sacks you said it's like 1 or 2% of the audience for, you know, a show with a million viewers or 10 million viewers, that could be tens of thousands of lunatics.
50:04
And I don't know if you knew this, but you remember when Luke Skywalker showed up, spoiler alert, in The Mandalorian?
50:09
Everybody was like, "Oh, his young face does not skip the uncanny valley."
50:11
This is why you got to watch The Mandalorian.
50:15
So then some kid did his own AI re-rendering of Luke Skywalker, you know, after Return of the Jedi, but you know, after he defeats the emperor, and they then hired that kid to work at Disney and Lucasfilm.
50:29
So what's happening is all these people who are making content for the Star Wars universe, they are going to be the next generation of creators. So between a Mr.
50:38
Beast way over here and Lucasfilm, there's going to be a new villain, and it's going to be all these great 1%ers making interesting with IP that's owned by other organizations.
50:50
I think it's a whole new paradigm for media and content.
50:52
It's going to be so different.
50:54
stuff that's customized for you.
50:54
It's almost like what YouTube and Instagram did for user-generated content, there's going to be this whole new model of AI generated content.
51:05
The the real winners are going to be the technology platforms that bring these tools in a simple, intuitive way that to Sacks's point doesn't challenge the user to do work, but makes their life feel easier and better, and brings them a more rich experience than they're getting today from any other media source, and that's going to be a game changer.
51:21
All right, lots going on in AI.
51:22
I thought I'd bring up a really interesting story that happened just around stock options and employees and advice you're going to get, generally speaking.
51:35
Just tons of chaos at the startup Bolt.
51:37
If you don't remember, that's a one-click checkout startup.
51:38
It was founded by a guy named Ryan Breslow.
51:42
He's been on my other podcast, This Week in Startups.
51:45
He went viral in 2022 after he called YC and Stripe like mob bosses and had this whole conspiracy theory of how they were trying to kill his company.
51:51
Don't know if it's true or not.
51:55
But at its peak, Bolt was valued at $11 billion, Chamath, and they're buying back shares at a $300 million valuation, down 97%, yada yada.
52:05
What makes this interesting was that in 2022, Breslow announced a new stock option program for his employees on Twitter, and he did this in a very bombastic, lecturing kind of way to the entire industry, saying that Bolt would offer loans to any employee to exercise their options early.
52:20
We all know about these type of loans. their balance sheet?
52:22
That is the idea here, yes.
52:25
And he called it the most employee-friendly plan possible, and said that half of Bolt's 600 plus employees took the deal.
52:35
Yeah, he since deleted the entire thread, but at the time, a lot of VCs who'd been through this before, you know, explained to Ryan, "This is a terrible idea."
52:42
Here's GGV's Jeff Richards.
52:45
For what it's worth, almost every private company Silicon Valley did this in the '90s, it was an absolute disaster.
52:49
Employees spent years paying back loans for worthless stock, tax bills from merely exercising, etc. , yada yada.
52:55
And his now-deleted tweet was, "Over half our employees chose this, plus I would strongly encourage my family and friends to choose this."
53:02
But VCs say it didn't work in the '90s, so it's a disaster.
53:04
VC Twitter pumps the tweet.
53:06
This is why VC-run companies are never able to make strides for employees.
53:10
Obviously, all those options at 11 billion are worthless now.
53:14
But sorry, they did this when they were worth 300 million? 11 billion.
53:19
And it was reported that at the same time in a new industry publication that Breslow was selling his shares in secondary.
53:28
Breslow confirmed with that newsletter that he had sold 10 million, and uh sources, uh anonymous sources, yada yada, take that for what it's worth, said he didn't tell the team he was doing that.
53:42
Two investors also accused the company of misleading shareholders in raising capital on inflated metrics.
53:48
SEC investigated, but did not recommend any action.
53:50
Sacks, Chamath, I don't know if either want to take this.
53:53
This is really mechanical, but it does speak to what happens when things implode.
53:58
Should employees be taking loans to buy these kind of stocks? Yeah.
54:01
At a minimum, hopefully these loans are non-recourse.
54:06
And at the maximum, if they were recourse, but it looked like these guys were doing these kinds of shady things, they have to kind of forgive the loans and eat it.
54:13
There's a reason why almost no one does these types of exercise loans anymore.
54:16
I mean, whoever the VC was who pushed back was right.
54:18
I mean, these things were common 20 something years ago.
54:22
People stopped doing it, and the reason why is that Well, there are a couple of reasons.
54:27
So, the mechanics of the loan are that the company loans you the money to pay down the exercise price, the strike price for the options, and then you're supposed to pay the company back at some future date, basically when you can sell the shares.
54:42
And in effect, from the point of view of the balance sheet of the company, this was cashless because it would loan the exercise price to the employee who would then exercise and pay that money back to the company.
54:52
So everyone's like, "Well, what's wrong with this?
54:54
This just seems like simple mechanics where no one loses.
54:57
The employee gets to start the clock on their shares for long-term capital gains.
55:03
That's why they would do it."
55:03
The problem is that what people discovered is that if then the employee is still on the hook for the loan, and if they don't pay the loan back, then there's a loan forgiveness issue.
55:21
In other words, the forgiven amount of the loan or the defaulted amount of the loan becomes ordinary income.
55:28
And so what happens is you end up having to recognize as income the loan that you never pay back. So you can lose.
55:34
Furthermore, if there's spread at the time that you exercise between the strike price and the fair market value of the shares, then although if if it's the right kind of option, if it's an ISO, you can defer paying tax on that spread.
55:47
However, people got whammy'd by the AMT, that that spread still counted for alternative minimum tax.
55:53
So there were a lot of people during the first dot-com bubble who exercised thinking they can't lose because the market was always up into the right.
56:03
And then the company would go bust, and they would get hit with a big AMT, and then they would get hit with a loan forgiveness issue.
56:08
So that's why everyone stopped doing these things. Yeah.
56:11
Yeah, I mean, really importantly, getting taxed on that spread, you owe that money no matter what. No matter what. No matter what.
56:16
The IRS demands that money, and the California Franchise Tax Board demands that money.
56:23
So I I I I I just want to be very specific so people understand this.
56:24
If the value of your company's gone up to $2 a share as a private company, and your options are 10 cents a share.
56:33
You pay 10 cents a share to get those shares. You owe tax on the $1. 90 difference.
56:41
And ultimately, if the company's now worth less than a dollar when you're finally able to sell or shuts down, you actually have money you have to pay to the IRS, the Franchise Tax Board, and you did not make enough money to cover the tax bill.
56:52
The way a lot of these companies do this is they do a cashless early exercise or cashless exercise loan.
56:58
Meaning you don't even have to put money up to to pay the 10 cents a share, the company is just covering it for you.
57:04
To Sacks's point, you end up getting taxed for that later if you don't pay it back.
57:07
So the whole thing creates a lot of tax obligations, and it's a very complicated structure and system, and the reason options exist is so that people could buy their options and not have to pay taxes at the time that they receive them.
57:20
Because if you just get shares in a company rather than options, the value of those shares is your tax bill, even if you can't sell the shares. Well, it's income. So it's income.
57:30
And so options were created as a way that you would have a strike, and the strike was the fair market value.
57:36
So you're actually not getting any value today, and so you can avoid the tax bill.
57:40
But now it leads to all these other tax loopholes and other tax stuff.
57:44
for rank-and-file employees is what it comes down to.
57:46
Like I I I saw all this with like senior executives trying to get like the top five positions, you know, a CFO or something. Or CTO might do this.
57:53
it's to reduce your tax bill from 50% to 20%, and at the end of the day, you open up all of these other problems if you try and do that. Completely.
58:00
One of the stupidest things about the way this was used is that they would give the exercise loan to employees who were leaving the company because they said that, you know, normally when you're a departing employee from a company, you have 3 months to exercise your options or you or you lose them.
58:19
So they were saying that this would be a solution to that, right?
58:21
We'll loan you the money to exercise.
58:24
All they're doing is creating a huge tax problem for that former employee.
58:25
And you're right, the average employee is not sophisticated enough to navigate all of these issues.
58:33
It's not clear also why you'd want to create this complicated benefit for departing employees.
58:38
Seems like if you're going to do this, it you would want to do it for a key exec who's joining the company.
58:43
That's the only context in which I've seen it, by the way. Yeah, same. Yeah.
58:46
So they were trying to solve a problem using this complicated device that that really backfired, but it's not even a problem that you should try and solve in that way.
58:57
I mean, there's a much simpler solution, which is extend the period of time that employees have to exercise.
59:00
If you don't want them to lose their option if they don't exercise within 3 months, give them 10 years.
59:05
And there are a bunch of companies that have done that, where they give you a lot longer to exercise the option.
59:11
The trend I'm seeing with startups, like early-stage startups, seed-stage startups, which are really indicative of what startups will do later on, hiring people, cash basis, paying them hourly, outside the United States, not having to worry about stock options, not having to worry about healthcare, just finding a global workforce and using these third-party tools.
59:33
There's a lot of third-party tools to manage employees in Portugal or Manila or Canada or whatever, South America.
59:39
And they're just saying, you know what, stock options are going to be for like an elite group, the top 10% of the company, and then we're going to automate the rest of the jobs with AI, and we're going to outsource and have hourly workers or full-time contractors outside the United States.
59:53
It's the undeniable trend. Why?
59:56
That's throwing the baby out with the bathwater.
59:58
One of the most magical things about startups in Silicon Valley is that when it worked, everyone got rich.
1:00:03
I mean, you have the story of the Google chef who made a hundred million dollars or the secretary at Microsoft who got to retire.
1:00:09
It, you know, those are extreme examples, but artist at Facebook.
1:00:13
The graffiti artist at Yeah.
1:00:15
He did really What was his name, David? David Choe. David Choe.
1:00:18
of the matter is that Silicon Valley had a share-the-wealth mentality where the rank-and-file employees did participate in the ownership of the company and they got equity.
1:00:26
And it was highly motivating or it is highly motivating Sure.
1:00:29
for not just like lower-level employees, but mid-level employees and senior employees to basically get equity in the company.
1:00:36
That's one of the things that makes Silicon Valley companies special or companies created outside Silicon Valley, but using this Yeah, the philosophy.
1:00:46
getting rid of options altogether is a terrible way to actually doing is more like for the core team that's in Silicon Valley, options.
1:00:52
But then like for work that is not considered as essential, you know, just hiring people offshore who don't come back to the company then to work nights and weekends the way that you might be if you're the owner of the company.
1:01:06
They're not going to have an ownership mentality. Yeah, I agree.
1:01:08
I mean, I I guess you get 9-5 workers that way.
1:01:10
And I think what people are starting to realize is like maybe there's with these remote workers, a lot of people are doing 9-5 work.
1:01:19
And maybe that like hard-working culture just doesn't exist in Silicon Valley like it used to.
1:01:22
You may be able to find hard-working entrepreneurial like folks that don't necessarily speak English that now with these AI tools basically become some of your best folks, but there are many countries that don't value equity, don't have an understanding of it, and so to Jason's point, it's almost more of a complication to try to give it.
1:01:45
So, that may be the balancing thing Sachs that happens, which is that all these tools actually allow somebody in some country that speaks some language that's not English, but who can be completely committed, who becomes this linchpin of a business and gets paid an extremely great salary in American terms that makes them rich in their country, get to the same place, maybe. Maybe, I don't know.
1:02:07
Their infrastructure needs to be built for stock options in other countries cuz I don't know that that exists.
1:02:12
And more cash because a lot of folks have different Again, stock options make sense when you have a a differential in taxation between stock equity and capital gains, yes.
1:02:23
But in other places where you have a flat tax or no income tax whatsoever, what's the difference?
1:02:30
Yeah, if you're in Dubai paying 1%, like you can just ship it, right? Yeah. You ship it.
1:02:36
I mean, you can always go back to a model where people vest shares rather than vest options, and those shares vest on a trigger of time and a liquidity event.
1:02:47
And that way they can't exercise or real or they won't get taxed prior to the liquidity event happening, but then they will have to pay ordinary income tax rates on their shares.
1:02:57
Hold on, we're making it sound like exercising options is a bad thing.
1:03:01
It can be a very good thing.
1:03:01
I mean, if you're an early employee of a startup and the options are worth pennies, and you can exercise for, I don't know, a few hundred dollars, then that's a great tax benefit because you start the clock ticking on long-term capital gains treatment.
1:03:17
And when you sell those shares eventually, if there's a liquidity event, you get taxed at a capital gains rate, not an ordinary income rate. That's the tax benefit.
1:03:26
That's why people want to be able to exercise their options in the first place.
1:03:29
The problem is that as you join the company later and later, the strike price of the options goes up.
1:03:36
And so therefore, if you want to exercise, you're going to have to write a pretty big check, and so you're going to take a meaningful risk.
1:03:43
Some people do that, and that's fine.
1:03:45
The trouble comes in when you try to get cute and go around taking that risk by saying, "Okay, well, the employee doesn't have to go out of pocket for their exercise price.
1:03:53
We're going to loan them the money."
1:03:55
Well, they thought that they had figured out a way to avoid taking that risk, but as it turns out, all you end up doing is potentially incurring AMT and a loan forgiveness issue.
1:04:05
So, there's no way around the fact that if you want to exercise your options to get the potential tax benefit of a lower tax rate, you have to also take the risk of losing the strike price, that that that check that you write into the company.
1:04:22
That's a fair trade, right?
1:04:22
If you want the potential benefit, you take the potential risk.
1:04:25
But that doesn't that doesn't mean that you should never exercise.
1:04:28
There's a lot of cases Again, I think if you're early at a company, you should exercise.
1:04:32
Low thousands of dollars, low hundreds of dollars, go for it.
1:04:36
There's all kinds of ways where when the basis is extremely low, it's nominally not a lot of money, so you can take the risk.
1:04:44
But when you start talking about tens of thousands or hundreds of thousands of dollars or millions of dollars and then using loans and leverage and the risk of ruin coming out.
1:04:53
Bad news bears all the way around. No bueno.
1:04:56
All right, Sachs, here's your red meat.
1:04:58
Did you see the poll about Biden's age and his the unfavorable percentage of people who think he is too old? How can I not see that?
1:05:07
I think the most important thing that we should talk about is that President Biden has decided to not go through a cognitive test as part of his annual physical.
1:05:17
It's the first time it's ever happened.
1:05:19
Joe Biden now 81 years old, 82 at the start of his second term if he wins.
1:05:23
He'll be 86 at the end, making him by far the oldest president ever. Trump is 77.
1:05:27
He would be 78 and a half when he gets his second term if he won, 82.
1:05:33
5 at the end of his term.
1:05:33
Here's a histogram of age of presidents. These are the oldest.
1:05:39
Just to give you a Everybody obviously refers to Reagan as the oldest president prior to this.
1:05:46
He was a spry 69 at the start of his presidency, and by the end he was 77, which is younger, obviously, than Biden and Trump today. So, Sachs thoughts? Or Chamath thoughts?
1:06:00
Let's just say that we've had a bunch of these issues over the last few years.
1:06:07
President Trump didn't disclose his tax returns. Is that a huge issue?
1:06:13
I think people made it to be a huge issue, but it's more of an issue of judgment, but I don't think it fundamentally compromises his ability to lead the country.
1:06:24
You had a different issue not with the president, but with the current sec- defense secretary who had prostate cancer.
1:06:31
The disclosures were, let's just say, somewhat sub-optimal. He had a UTI.
1:06:38
He got emergency admitted to the hospital.
1:06:42
He just had another acute issue, and those disclosures weren't good.
1:06:49
But you're talking about an acute kind of a thing where if you're incapacitated, there's a chain of command that immediately kicks in.
1:06:57
Those are a class of issue that I think people can find things that are wrong with, probably correlated to one's political affiliation.
1:07:07
The other side probably cares more than the side that the that the leader's on.
1:07:13
But I think this issue is a really big one, and I posted this clip of KJP basically saying, "Nothing to see here, move on."
1:07:20
And the first comment was Elon, which I think nailed it.
1:07:24
He said, "A basic cognitive test should not be something that someone who controls nuclear strikes is allowed to skip."
1:07:32
And I think that that is part of the fundamental issue that I have with what they decided to do here, which is that it just massively increases the risk that you could have somebody that was fundamentally unelected running and making decisions.
1:07:47
And I think that is a huge issue, and it's an enormous reason why for me this was sort of the straw that broke the camel's back and why I just absolutely cannot vote for Biden anymore.
1:08:00
I was trying to find every I was trying to find a lot of good reasons to support him.
1:08:08
Stability, normalcy, all of this stuff, but this is not what stability looks like.
1:08:16
And I go again back to this very simple thing, a cognitive test for somebody that can control the ability for us to go to war or for us to completely eviscerate entire populations through weaponry that he and he alone controls should be something that is just mandatory. You can't skip it.
1:08:33
This is not a thing where it's a nice to have.
1:08:37
I think it's a must-have, and in the absence of it, I think it compromises his ability to be a legitimate choice.
1:08:43
And we do have a minimum age.
1:08:44
Sachs, and what Chamath is saying is what the majority of Americans are saying. ABC News ran a poll.
1:08:53
86% of Americans, across both parties, think Biden is too old to be president.
1:08:58
59% vote said both Biden and Trump were too old.
1:09:01
You said on a previous episode, Sachs, that you thought the public should decide not a and that that doesn't need to be a cognitive test.
1:09:06
Are you sticking with that or do you think you're going to maybe move to Chamath's position and mine?
1:09:10
Cognitive test should be mandatory to be president.
1:09:15
Well, I think it's a tell that they won't take the cognitive test because they're worried that he might fail.
1:09:19
Just like it was a tell that they refused to do the Super Bowl interview, which the president always does.
1:09:26
That's the most softball interview that Biden could possibly have and they refused to do it obviously because his aides and advisors are nervous about how that might go.
1:09:35
We had the her report come out where the special counsel investigated the classified documents case for Biden said that we can't prosecute this guy.
1:09:44
He'll be too sympathetic a defendant because he's manifestly senile and he'll come across as an old man who can't remember what happened.
1:09:52
So that's why they decided not to prosecute him.
1:09:53
The Babylon B had a hilarious headline or take on this which was man deemed too senile to stand for trial still fit to run country.
1:10:01
That's the situation we're in.
1:10:03
He can't stand for trial but he's still running the country. Yeah.
1:10:08
And the thing that was most damning about the her report was not just what the special counsel wrote but it was Biden's reaction to it.
1:10:16
Apparently he demanded that he wanted to go out and do a press conference that very day to refute the idea that his memory was bad or that he was senile and he then did this press conference and it completely backfired.
1:10:30
He came across as kind of an old man shaking his fists yelling get off my lawn.
1:10:35
I mean that was basically the the vibe that he gave to the press and then the thing that he got wrong was he confused Egypt for Mexico in regards to the whole crisis in Gaza.
1:10:49
So it would have been one thing if it was just her saying that Biden was senile but then Biden himself came out and seemed to confirm it by making these mistakes and gaps.
1:11:02
So they know they have a problem.
1:11:02
So to my original question, would you be in favor and will you change your position here that we should have cognitive tests for the presidency of the United States? Yes or no?
1:11:12
I think that the real issue is that Biden would fail such a test.
1:11:14
I mean that's the problem is that he is cognitively impaired and the thing to realize about these sorts of conditions is they're not static.
1:11:23
There's a trajectory to them.
1:11:23
So in the same way that Biden is manifestly worse than he was a year ago or 3 years ago.
1:11:32
Yeah, when he took office he was obviously sharper, yeah.
1:11:34
Whatever this condition is it's going to be worse Okay.
1:11:38
I won't ask you a third time to answer the question but you're choosing not to answer the question. So free what do you say?
1:11:43
When you say that Should the president take a cognitive test?
1:11:45
Sure, he should take a cognitive test.
1:11:48
Should it be the law of the land just like we have a 35-year minimum age.
1:11:50
I'm just asking you to be specific.
1:11:54
You could make him take a cognitive test but the point is that let's say the doctor says yeah, he's cognitively impaired.
1:11:59
Is that going to bar someone from running for office constitutionally?
1:12:03
No, that's not going to be part of the the constitutional requirements.
1:12:07
You you have to pass a constitutional amendment. Yes.
1:12:11
Would it be a good idea for someone to take a cognitive test part of their physical to be president? Sure.
1:12:14
But is that going to be a constitutional requirement?
1:12:17
No, you can't have some doctor say by the way that that's my whole point.
1:12:21
Like you you could take a a physical Bill Clinton did and people used to joke about his cholesterol levels and he would go for a jog and stop at a McDonald's.
1:12:28
So I'm not saying by any means that the results should bar you from the ability to run.
1:12:33
It should still be up to the voters.
1:12:35
But just like we would make sure that acute or chronic health conditions were well understood. Right?
1:12:42
The idea that this entire body of judgment which is around your brain, around the judgment of the president of the United States to basically say no, we're good here. We can skip it.
1:12:53
I think that that's really dangerous and it's part and parcel of a systematic set of behaving now by the Democratic Party which I think is really not where they want to be.
1:13:05
So the only person that's really stood up to all of this is Dean Phillips. Yep.
1:13:08
But he is being prevented and railroaded from even being able to put that issue on the table so that the voters can decide.
1:13:15
My fundamental view is the voters should decide but all of these tests should be done and skipping them is a form of a tell as David said and I think that this is the most important tell that we've been given about the amount of cognitive decline that he's suffered.
1:13:31
And Jon Stewart by the way had the funniest version of this.
1:13:35
Jon Stewart's essentially monologue was like, hold on.
1:13:40
Everybody is out here giving sound bites that say he is a chess grandmaster in private but then he shows up in public and it looks like he can't even play checkers.
1:13:48
Yeah, Freeberg let me let me jump to you there.
1:13:50
You shared the clip with us.
1:13:50
What what are your thoughts?
1:13:51
What are your thoughts on this whole issue?
1:13:52
Cognitive test I mean I don't think a cognitive test should be the law cuz you're starting to get into edge cases where you'll create lots of different requirements.
1:13:59
Like what's the strategic test and you know, what's the under pressure test and there's obviously a a lot of ways that folks can game and challenge and create new systems for um and new criteria.
1:14:12
The system of democracy however is meant to solve these problems.
1:14:16
The system of democracy is meant to allow individual voters to say we judge that someone is not equipped or prove us wrong which is what the voters are saying and doing right now based on the polling data.
1:14:30
The majority of voters in the United States are saying we do not think that this individual is equipped to be president.
1:14:36
Rather than respond to that with a cognitive test we are stuck with a single candidate and I think it speaks more to the problem of the Democratic Caucus and how the electoral system works in the United States today where the insiders get to decide who the nominee is for the party.
1:14:54
And those insiders are self-dealt.
1:14:54
They are getting benefits by putting someone in the seat for next term because that person is in the seat this term and is approving things that they want this term.
1:15:07
And so it feels very corrupt and it feels very unfair and very undemocratic.
1:15:12
I think it leads to either a sense that the individual voters rise up and say we want a third party because the way that this two-party system works and the way that the caucus system works isn't fair or we end up seeing a really unfortunate outcome where you have a similar sort of like January 6th type event where folks are just fed up with the whole system and don't trust it and if the citizens lose faith in democracy we're we're in peril.
1:15:37
But as Jon Stewart said in his monologue, it is the responsibility of the citizens of this country to step up and not lose faith but to take action and to resolve to a solution.
1:15:45
We have the power, we have the authority as voters.
1:15:49
And if enough of us get together and say there should be a third party or we do not want this individual to be the candidate, something will change rather than just resolve to letting the insiders set the terms of the caucus.
1:16:02
Third party is seeming more and more viable as uh we've talked about here.
1:16:06
People forget the case of Ross Perot getting 19%.
1:16:11
RFK looking pretty favorable and the third party candidate something I think the two parties dismiss all the time but it is completely possible.
1:16:19
So maybe this is the time that this is the breakout season for as Sachs alluded to the her report also came out. It was released.
1:16:31
Special counsel Robert Hurr, Republican and Trump appointed AG declined to prosecute Biden because he feared they couldn't reach the standard of reasonable doubt as Sachs pointed out.
1:16:44
And I'll just quote from the report.
1:16:44
We conclude that the evidence does not establish Mr.
1:16:46
Biden's guilt beyond a reasonable doubt.
1:16:48
And they also said he was an elderly man with a poor memory or that's how a jury would view Biden.
1:16:57
Democrats felt this was partisan obviously and then pointed out a bunch of times that Trump has misstated people's names or been confused.
1:17:08
Is there any correlation here between the two candidates in your mind?
1:17:12
Chamath is Trump right behind Biden in terms of this and is he too old to run as well and do you think the gaps that he's made are comparable?
1:17:22
I think that he looks much younger and sprightlier than Biden does to be totally honest.
1:17:30
Yeah, and look at the schedule he maintains.
1:17:31
It's nothing like Biden's.
1:17:31
I mean look, Democrats are trying to both sides the issue because it's their only choice.
1:17:38
They're stuck with a candidate who's in obvious decline and the problem for Democrats wasn't just the her report which like you said Jay Cal, they can dismiss as partisan cuz they control the media.
1:17:47
The problem is that Biden himself demanded to go out in front of a press conference to refute the her report and he ended up confirming it.
1:17:54
And the people of the United States can just look at Joe Biden and every time he talks no matter how much they try to hide him.
1:18:02
When he does speak, the American people are left with the impression that this is somebody who's in visible decline.
1:18:07
Trump although he does misstate a word or two here and there does not give that impression.
1:18:13
Trump maintains a vigorous schedule.
1:18:13
Not only is he running a presidential campaign, he's battling he's in court every other day fighting all this lawfare.
1:18:20
He is willing to give interviews.
1:18:23
In fact, he barely turns down a press interview and most importantly he's willing to do a hostile interview.
1:18:28
He's willing to step into the lion's den.
1:18:30
He's willing to go on CNN to those town halls and basically battle with these reporters.
1:18:37
Whereas Biden won't even sit down for the Super Bowl interview which is as much of a softball softball interview as you're ever going to get. Yeah. Yeah, no no.
1:18:44
I mean that's your that's your best point.
1:18:46
I think who's the who's who who does a two or three if you can't do a two or three-hour interview I don't think you could be president.
1:18:54
do you think is going to run the country in the second term if if Biden were to win?
1:18:57
You know, that that is the question. Is Biden? No, the staff wants it.
1:19:00
Listen, this will be this will be a regent president where the presidency becomes an office instead of a person and it's run by powerful ministers like in some sort of European system. That's what we'll get.
1:19:14
Or happened under Reagan.
1:19:14
And the fact of the matter is look Or or Sachs as happened under Reagan.
1:19:19
Only in the last couple of years of Reagan's did senility start to or not senility he had Alzheimer's and it really I think started to become a factor in the last couple of years.
1:19:30
Last two it was the last two years.
1:19:30
But the first six years were very strong.
1:19:34
25% of his presidency it who was running the country is the question. Yeah.
1:19:38
So it's a valid question.
1:19:39
Do you think there's a difference Jake Cal between 25% and 50%?
1:19:40
No no it I I think it's like we only have I'm just looking for other correlaries where this happened and what happened.
1:19:46
Who who is Well no I think that this isn't a correlary exactly because when he ran when Reagan ran for a second term he was cognitively sharp.
1:19:55
It was true that he was diagnosed with early onset Alzheimer's in the second year of his second term.
1:20:03
And then that was not properly disclosed to Americans.
1:20:05
That was just it was just the beginning in the last two years.
1:20:07
If you look at if you look at the 1984 campaign the morning in America campaign Reagan still did debates.
1:20:13
He was still sharp on his feet.
1:20:15
He was debating Mondale remember? Yeah.
1:20:19
He gave speeches all the time.
1:20:19
He maintained a vigorous schedule.
1:20:21
There was no evidence of there being a problem.
1:20:24
My only point here Chamath is like does the public has a right to know when these things happen and it seems to have happened a couple of times in history.
1:20:30
Well so I would take Friedberg's side.
1:20:32
I'm not sure that the public you could say irrespective of whether the public has a right to know the public has a right to judge.
1:20:40
And I think in order to judge you have to make yourself available so that you can actually see it in front of your own eyes or hear it or listen to it or watch it or what have you.
1:20:50
And that's the second problem that I think we're starting to see which is it is so controlled how we get to interact with with our leader.
1:21:01
And I think that should give people some pause so that they ask themselves why would this happen?
1:21:09
And I think that that's worth internalizing here.
1:21:12
Friedberg would you vote for a presidential candidate who does not debate or who does not subject himself to you know serious strenuous confrontational adversarial interviews. Those two things.
1:21:24
Are those two things a requirement for you to vote for somebody?
1:21:29
I don't know how much that matters anymore.
1:21:30
Problem with the two-party system is you vote for your party. No I know but to you.
1:21:36
If like a Trump or Biden they just refuse to do it cuz we're we're getting to the point where maybe they're just going to refuse to actually Biden or Trump Trump has refused to do any debates.
1:21:43
So maybe they're just both going to refuse to debate.
1:21:46
Would you vote for a candidate if they refuse to debate is my question to you Friedberg.
1:21:54
I mean I'm just in a very different mindset on this stuff.
1:21:55
I'm not excited to vote for a candidate that's not making their priority to fix the fiscal problem of the US.
1:22:02
All right so you're back to that that topic. Yeah. It's not that topic.
1:22:06
It's like for me it's like there's a car driving towards a wall and you've got your foot on the gas pedal.
1:22:12
It's like which guy do you want to keep the foot on the gas pedal? Like I don't care.
1:22:15
Like we got to take the foot off the gas pedal. That's the point.
1:22:19
there's a difference between the two in spending.
1:22:20
You're talking you Okay so you're you're you're voting for a third-party candidate that would lean towards Chamath.
1:22:25
You would you vote for somebody can't win in this system.
1:22:29
Well I mean they can't until they can right until they do. So we'll see.
1:22:34
Chamath would you vote for a candidate who didn't debate or subject themselves to a rigorous adversarial interview?
1:22:43
Not unless I wanted a shadow government. Okay.
1:22:45
Sachs same question to you.
1:22:45
Jason you're acting as if we need to have all of these tests because we don't know whether Biden has a cognitive problem or not.
1:22:55
We was including Trump in this.
1:22:55
I'm including Trump in this like the debate issue.
1:22:58
Well I think we also know about Trump.
1:23:00
Trump maintains a vigorous enough schedule.
1:23:01
He takes enough difficult interviews. He does enough speeches.
1:23:05
What about the debate part?
1:23:05
That's the one I'm curious.
1:23:06
If he refuses to debate would you would you still be willing to vote for him?
1:23:10
You know or any candidate.
1:23:13
You're acting like we need to judge this question based on proxies for the real issue when the real issue is that we know one of these candidates has basically dementia. He's in visible decline.
1:23:23
I'm not asking you this about Biden.
1:23:25
I'm asking you in general.
1:23:28
Cuz we're talking about norms.
1:23:28
One of the norms of you know releasing your taxes.
1:23:31
I mean I'm not asking you about Biden.
1:23:33
I'm asking you about presidential norms.
1:23:35
from the core substantive issue.
1:23:35
We have already all agreed that Biden is in cognitive decline.
1:23:39
I'm asking you another question.
1:23:41
I'm opening up the aperture as the moderator here and I'm asking you to address another question.
1:23:46
I think candidates should debate period.
1:23:48
Candidates should debate. what I'm asking.
1:23:49
I don't know why you're going back and telling me what I think.
1:23:52
Because I think that the tactic of Democrats the mainstream media right now is that they can't there's no way for them to paper over or deny the visible reality of Biden's decline.
1:24:02
So they're trying to muddy up the waters.
1:24:04
They're trying to claim well Trump is old too or that Trump refused to debate too.
1:24:09
They're trying to both sides the issue.
1:24:11
I think we all know that Biden has a problem that Trump does not have.
1:24:17
Now I think that Chamath is also right that there's a lot of Democrats who are comfortable voting for a shadow government.
1:24:23
They're fine with the presidency being a figurehead or rubber stamp.
1:24:27
And I think the reason why they're fine with it is cuz Democrats basically control most of our ruling institutions really all of them.
1:24:32
I don't think you can name one major institution run by Republicans and they don't need a president to do anything other than be a rubber stamp.
1:24:42
Republicans are looking for something different.
1:24:43
Republicans need a president who's willing to push back on the permanent bureaucracy in Washington push back on the deep state or the State Department creating new wars.
1:24:53
They want someone to push back on Wall Street.
1:24:55
They want someone to push back on all these institutions.
1:24:59
Republicans are looking Populists are looking for a tribune of the plebs basically to push back on this senatorial class that runs Washington for their own benefit. Democrats are different.
1:25:10
Democrats are the ruling elite and they're fine with the president basically just being a a figurehead who will sign their legislation.
1:25:19
Does he drop out Chamath or veto bills they don't like?
1:25:21
Does he drop out Chamath at this point?
1:25:23
Is is this the moment we're going to look back on and say this is the peak when that 86% poll comes out and all this negative press.
1:25:30
Do you think Biden is there's an exit ramp here?
1:25:32
And do you think there'll be a different candidate fielded by the Democrats?
1:25:38
No this is this was their way of saying we're going for it. Okay.
1:25:43
Friedberg you have any thoughts on that?
1:25:44
Do you think they'll make a switch? On Biden?
1:25:46
I think there's a chance.
1:25:48
I think there's a chance.
1:25:48
Last week I had a few conversations that led me to think that there are not super influential people in the party but people that are in the party that you know have connections to people of influence in the party.
1:25:59
I'd love to hear Chamath's like conversations he may have had around this stuff too.
1:26:04
But people are not happy in the party.
1:26:07
They're very like very much unhappy.
1:26:11
And everyone would love to see someone else.
1:26:13
Now the assumption is Gavin is going to be shoved in that seat and that's also a losing proposition.
1:26:17
So if you shove Gavin in the seat they're in a worse place than you are with Biden in the seat with respect to your shot at winning.
1:26:24
And it's a little late now but I still think that there's a chance. Sachs what do you think? Biden drops out?
1:26:30
First of all the only reason these people are unhappy is cuz they think that Biden's problems have become so manifest that it might cost them the election.
1:26:35
That's what they're worried about.
1:26:37
They don't care about the fact that the Biden Biden presidency will be run by staffers.
1:26:41
As long as those staffers will basically do what they want sign their legislation or veto the wrong legislation.
1:26:48
is the question we're asking you. Will he drop out?
1:26:49
No he's already said he won't.
1:26:51
Look the problem that people in the Democratic Party have who have this concern about Biden Biden losing the election because of this cognitive issue is that there is no mechanism to replace a candidate who has won all the necessary primary votes against his will.
1:27:10
Biden has said he's going to be the nominee.
1:27:11
He has no desire to to drop out.
1:27:13
So unless he changes his mind or there's some act of God he's going to be the nominee.
1:27:18
The time for Democrats to make this change was a year ago.
1:27:19
It required mounting a primary challenge to Biden the way that Dean Phillips has done.
1:27:27
The problem is that the Democratic Party elders and the powerful people in the party said we're going with Biden.
1:27:31
And so no one wanted to run against him and they basically set up the primary calendar so that Biden would win. And he is going to win.
1:27:40
He'll have all the primary votes he needs locked up by the end of March.
1:27:45
And Dean Phillips is not going to be able to basically stop him.
1:27:48
So there is no mechanism to remove Biden.
1:27:50
He's going to be the candidate.
1:27:52
You know barring act of God.
1:27:54
Unless he can be persuaded to step down.
1:27:57
So it's not going to happen.
1:27:57
What do you think about this new third-party effort in DC No Labels. Have you heard about it?
1:28:02
Have you been pitched it? I've heard of it. I've been pitched it.
1:28:06
Chamath have you been pitched it?
1:28:06
I hosted a dinner at my house with some folks about it. And?
1:28:10
Yeah I mean I think like it could be interesting.
1:28:14
I think that the Is there room for a third party in the country you think?
1:28:17
Yes and I and I think that there is a very reasonable chance and I would put reasonable somewhere between 30 and 50% that this third party gets created after the presidential election.
1:28:36
And that is the one of the very likely outcomes of RFK's candidacy.
1:28:42
Because it is an infrastructure that will have gotten on presidential ballots in 50 states.
1:28:50
And it's an infrastructure that if people are willing to fund specifically No Labels and other people I think the artifact could be a third party.
1:28:58
And if if RFK can get 30 plus percent support which in some states I think he will I think that there's a decent chance.
1:29:08
That would be an enormous outcome.
1:29:10
Obviously the most disruptive outcome for RFK would be that he won the presidency but I'm just saying that a very powerful outcome that has huge longitudinal benefits to America would be that his candidacy essentially is the is the founding story of a third party. Yeah.
1:29:29
And that was the shame of what happened with Perot.
1:29:30
I think that there was a chance that Perot could have done that and he must have been under just an enormous amount of pressure.
1:29:34
I can't even imagine what he must have dealt with.
1:29:39
But that could have been the artifact back then, but it definitely can be the artifact today. So we'll see.
1:29:45
They haven't announced either and there's no timeline for them announcing.
1:29:49
They've asked to come on this program many times to just talk about the concept.
1:29:52
I think like they they want to have like the executive director on or Yeah, they they they've asked over the years. Yeah.
1:30:00
And I was like, well, maybe when you pick a candidate that would be a better time than just talking about it in the abstract.
1:30:07
I think it's a great idea.
1:30:07
I think that's what Americans want.
1:30:08
So maybe we'll get to the in 9 months.
1:30:11
We're running out of time.
1:30:13
I mean, it's entirely too late to be talking about new candidates who aren't even in the race. Not going to happen.
1:30:18
I mean, this whole Gavin Newsom thing is a fantasy.
1:30:19
Even if Biden were to see the light and step down, be pressured to do that.
1:30:25
Kamala Harris just said, "I'm ready to serve."
1:30:29
She wants to be president.
1:30:31
And even though she's not senile, she's actually even more unpopular than Biden.
1:30:36
So you have that huge problem in the Democratic Party that even if somehow they could prevail on Biden to step down, now you have Kamala Harris ready to serve.
1:30:44
So how do you pass over her? He's not stepping down.
1:30:46
He didn't go through all of this craziness this past week to step down.
1:30:51
They didn't evade the cognitive test for him to step down.
1:30:53
They're not doing all of that.
1:30:55
They're not keeping him away from the media so that he can step down.
1:30:58
None of that is happening.
1:30:59
They're not having people come out with the sound bites about how he's got mastery of everything in private so that he can step down. He's running.
1:31:09
Donald Trump is running and RFK is running.
1:31:10
Those will be the three people on the ballot in November of 2024.
1:31:17
Biden's staff are the absolute last people who would ever pressure him to step down. Why?
1:31:20
Cuz they'd be out of a job.
1:31:24
I mean, from the staff's point of view having a weak president who basically they administer It's not just a job.
1:31:30
It's like you you allocate the future as the president of the United States.
1:31:34
You It's the It's the best It's the best situation possible for a staffer to have a president who is borderline incapacitated and you get to just do whatever you want. You are the president. Yeah.
1:31:45
Chamath, I'll give us a rundown of the Tucker Putin thing. What do you think?
1:31:48
Just as a programming note, it came out, it dropped right after we taped.
1:31:51
We would have covered it.
1:31:52
Obviously, we're not covering it for a reason. I give him a B on it.
1:31:55
Could have been better, but it wasn't bad all things considered.
1:31:59
I don't think any journalist is ever going to be able to trap Putin or get good information out of him or any of those things.
1:32:08
And if you have somebody like Tucker who is obviously very sympathetic to Russia and who believes that, you know, the West forced Putin to invade Ukraine, you know, you're not going to get like a really great interview.
1:32:20
I did think he had a great moment where he asked for the Wall Street Journal reporter back at that moment to take back with him.
1:32:28
He did a lot of softball questions.
1:32:28
He asked 43 questions during the interview.
1:32:33
About 15 of them were kind of softballs and he had about six fastballs.
1:32:34
But he lost control over the interview very early.
1:32:39
Obviously, if you watched it.
1:32:42
And that's just kind of like losing asking for like a I'm You're like Chris Collins with you.
1:32:46
I'm not asking for a technical analysis of the play.
1:32:48
I'm asking you what did you think of the interview?
1:32:50
What did you take away from it?
1:32:52
What did you think going in? Nothing.
1:32:53
Was there a delta and a change going out?
1:32:56
Just a normal No, cuz I I've watched the other interviews. I watched Megan Kelly's. I watched NBC's.
1:33:00
He's done I did a research on He's done about nine interviews in the last 10 years.
1:33:07
So it's not like this was anything new.
1:33:08
And when you watch the other ones, it's just Putin spinning and pontificating and nothing gets accomplished.
1:33:13
He doesn't answer hard questions. So I had six questions.
1:33:16
I I said he should ask him. He did ask two of them.
1:33:21
But he didn't ask the other really hard questions I had.
1:33:22
And so you know, he's not I wouldn't say Tucker is like the useful idiot like Hillary Clinton said, but he is biased and he didn't ask enough hard questions.
1:33:35
I would have asked three or four harder questions, but you're not going to get a lot out of Putin.
1:33:38
This guy is like a KGB Stasi trained manipulator of media. It's his specialty.
1:33:43
I had two really interesting takeaways.
1:33:48
The first was if you had wanted to see some crazy madman you actually left that interview thinking, "Okay, this is a person that's leading a nation that has a deep historical context that goes back to basically the dawn of Christianity of which he has a pretty deep grasp of.
1:34:09
And it seems that his decisions are rooted in a multi-thousand-year history. I didn't know that.
1:34:14
And that was an interesting takeaway for me.
1:34:16
So that was a broad strategic takeaway.
1:34:20
So he was a little professorial, he was a little historical.
1:34:22
And all of that to me made it harder for me to leave that interview thinking that he was a crazy person.
1:34:29
In fact, it's more like he's a bit of a methodical thinker, I guess.
1:34:37
The second is much more tactical and I thought super salacious and I wish Tucker would have dug into it.
1:34:42
Which is that in 1999 when he was meeting Bill Clinton, he asked Bill Clinton, "Can we join NATO?"
1:34:50
And Bill Clinton said to him, "Yes, and let's go hash out the details over dinner."
1:34:56
And then that night they have dinner and Clinton says, "My team says no."
1:35:01
And to me when I looked at the arc of that interview, that was one of these really unique moments where it explains to me so much.
1:35:12
Which is a country that's at the that's birthing a democracy where Putin transitioning from Yeltsin had to make a lot of very important, difficult decisions.
1:35:22
The idea that he would have made an entreaty to Clinton to say, "Can we join NATO?"
1:35:28
And then to be told yes and then rebuffed I suspect has an underlying amount of emotion that explains a lot of what's happened since.
1:35:37
And I think that that should have been explored much, much more.
1:35:38
I think they glossed over it and they went on.
1:35:40
But it was a really important moment.
1:35:42
Those were my two big takeaways from from that from that interview.
1:35:46
Did you watch it, Freeberg? Any thoughts? I don't understand.
1:35:50
I think when he said that point, he was talking in the theoretical, not in the I'd like to join NATO because the intention of NATO was to create a unified defense against the Russian armament, which is the most significant besides the US and at that point uh before China's rise, um ahead of China.
1:36:11
So I think it doesn't make sense to be like, "Hey, there's two sides of this defense system.
1:36:15
Let's unify the two sides of the defense system."
1:36:18
It it literally is a nonsensical proposition. Not true in 1999. That's totally not true. What was the other side?
1:36:26
1999 was where we've tore this whole thing down.
1:36:29
It's no longer the Soviet Union.
1:36:31
Right, so what is Russia?
1:36:33
We're going to democracy.
1:36:34
It's probably just an organization that looks like any other organization. Like ASEAN. What's ASEAN?
1:36:40
Well, ASEAN is an organization.
1:36:40
Could they have military defenses? Supposedly.
1:36:45
It's but it's a grab bag of countries. What's the BRICS?
1:36:47
It's another grab bag of countries.
1:36:49
this is a defense alliance.
1:36:51
This isn't an economic alliance.
1:36:53
But in that moment, the the the justification for NATO was the least powerful it's ever ever been.
1:36:57
So in in some ways joining NATO would have been akin to dismantling NATO and saying, "We don't need this anymore." That's the point.
1:37:04
Like why would he say why would the US and the Western Europe allies say, "Let's dismantle NATO?"
1:37:10
He did cuz the historical context of that moment is important.
1:37:12
He did it at the moment where they were transitioning to a democracy. I don't know.
1:37:15
It's like saying, "Let's get rid of the defense system."
1:37:18
When Russia was transforming into a democracy?
1:37:19
Well, when the USSR was breaking down and transitioning to a democracy, yeah.
1:37:22
How did that democracy go?
1:37:24
If there was Yeah, if there was massive disarmament in Russia The question The question is what would have happened had they said yes and Clinton took a different path.
1:37:31
All I'm saying is, guys without prejudging it, that that was a I think a very important context that is not understood in history. I wouldn't dismiss it.
1:37:41
No, no, I certainly I think everybody raised their eyes like, "Really? That happened?"
1:37:46
What did you think of that moment?
1:37:47
And and and and also Clinton, who is so steeped in history and policy is not somebody that would say something like that in an uncalculated way only to pull back.
1:37:57
That does not seem and I know Bill Clinton, that is not who he is.
1:38:02
So just in that context, he's a very thoughtful person.
1:38:04
So he would have said that thinking, "Wow, this makes a lot of sense on many dimensions."
1:38:08
And again the concept was it was a it was kind of like, "Let's sit down for dinner and figure out the details."
1:38:16
And it's like, "My team says no."
1:38:19
And of course the team would say no because it's like, "Well, I don't know.
1:38:21
I also We haven't heard from Clinton, you know, confirming this or how it was structured.
1:38:26
This is Guys, it it sounds like it was a theoretical like That's That was my interpretation that this feels like a weird he said it and kind of shocked Clinton.
1:38:32
He's like, "Let me look into that." That's crazy.
1:38:33
What did you think of that moment, Sachs? And then overall?
1:38:38
Well, Jason, the fact that Putin sought to join NATO or at least made that offer is a well-known, well-documented historical fact.
1:38:45
This is definitely not the first time this has been raised.
1:38:49
More generally, I think what you heard in that interview, once you got past the the sort of the ancient history lecture is that Putin, when he first came to power, sought cordial relations with the US and with American presidents and he was rebuffed.
1:39:04
His uh attempt to join NATO was rebuffed.
1:39:06
More generally the US reneged on its promise to Gorbachev not to expand NATO 1 in eastward and instead we began multiple waves of of NATO expansion.
1:39:17
And I think it's very important to understand that you don't need to believe Putin on this or trust Putin.
1:39:24
American diplomats were saying at the time what the ramifications of this would be and I just want to put two data points in evidence.
1:39:33
One is George Kennan who is the father of the containment doctrine during the Cold War.
1:39:38
He was our most respected Cold War diplomat said in the late 90s when they were first debating on NATO expansion.
1:39:45
He said that quote expanding NATO would be the most fateful error of American policy in the entire post-Cold War era. So think about it.
1:39:55
This is somebody who's been around since the 1940s.
1:39:56
He was our chief diplomat and defined our containment policy towards the Soviet Union and he said that expanding NATO would be the most fateful error of American foreign policy.
1:40:06
And he said that a decision like that would inflame the nationalist, anti-Western, and militaristic tendencies in Russian opinion.
1:40:15
It would have an adverse effect on the development of Russian democracy and it would restore the atmosphere of the Cold War.
1:40:20
So this is somebody who really knew what he was talking about and warned us not to go down this path.
1:40:26
And then in 2008, second data point, is that Bill Burns who was our ambassador to Moscow who is now Joe Biden's own CIA director wrote a memo to Condoleezza Rice who was then Secretary of State called "Nyet Means Nyet".
1:40:38
And what he said in that memo is that NATO expansion to Ukraine specifically is the brightest of all red lines for the entire Russian elite, not just Putin.
1:40:49
In other words, the idea of bringing Ukraine into NATO was an idea that was rejected not just by Putin or by hardliners but even by liberal reformers inside of Russia.
1:41:00
And nevertheless we persisted in this policy and so I think what you hear in that interview are a lot of points by Putin around how he sought good relations with the West but what was our reaction to him?
1:41:15
Pressure, pressure, pressure.
1:41:17
We supported the Maidan coup in 2014.
1:41:20
We tried to expand NATO into his backyard on his most vulnerable border and then finally we supported these hard-right, ultra-nationalist, neo-Nazi elements in Ukraine.
1:41:32
Now whether or not you believe everything that Putin said, uh my takeaway is that this was a rational actor. This was not a madman.
1:41:41
This is somebody who we could have negotiated with and in fact there was still an opportunity before this war to prevent the war by taking NATO expansion off the table.
1:41:51
We refused to do that and even today there was this new press story that in the wake of this interview the Biden administration still rejects entering negotiations with Russia even though Putin held out that olive branch in that interview.
1:42:05
So you know, again, it's just very sad how we have conducted American Russian relations over the last 25 years.
1:42:15
We turned what could have been an ally into an enemy and proven George Kennan correct.
1:42:22
I think this has been the most fateful error of American policy in the last 30 years.
1:42:28
All right, what an amazing episode this has been.
1:42:30
I think we talked about Tucker and Putin enough. Love you boys.
1:42:32
For the Sultan of Science, the Dictator, and the Rain Man I am the world's greatest moderator. We'll see you next time. Bye-bye. Bye-bye. Let your winners ride.
1:42:46
Rain Man David Sacks And I said we open sourced it to the fans and they've just gone crazy with it. Love you guys. I'm Queen of Quinoa. Let your winners ride. Besties are gone.
1:43:06
Let us watch my dog taking a in your driveway. Oh, man.
1:43:10
My ambassador will meet me at the club.
1:43:13
We should all just get a room and just have a one big huge orgy cuz they're all just useless.
1:43:16
It's like this like sexual tension that we just need to release somehow. Let your beat beat. Let your beat beat. Let your beer beat. Beat. What? We need to get merch. Besties are gone. I'm going all in.