Cham who are you giggling with are you with your kids what's going on here you're you're making goog I got I got a message from that she's like is it hel no no I got a message from that she's so funny so you know we I was like blah blah blah she did a Uranus joke into my chat and I lost it it is like a Freo says your anus is right there at
the edge of the UN she's like no she's like are you hungry I could eat a Uranus oh no we could go to a great restaurant Urus they serve great meals there they have a great chocolate lava let your winners ride and instead we open sources to the fans and they've just gone crazy with iten of all right everybody welcome back to your favorite podcast of all time it's
episode 169 of Allin with me again the chairman dictator jamath ptia David freeberg your Sultan of Science and the Rainman yeah definitely David Sachs has his Monclair hat back again I guess they're back in stock how we doing boys welcome back to the show let's get to the docket here issue one Elon has sued open AI begun the meme Wars have after
we finished the recording last week the memes are incredible after we finished recording last week Elon sued Sam Waltman Greg Brockman and the open AI organization he's suing for breach of contract fiduciary duty and unfair competition and his argument is basically open AI started as an open source nonprofit as you know he he gave them something like 50 or 75 million if
both those numbers quoted and then of course everybody knows open AI turned into closed AI they became a closed Source for-profit Venture after the tech was deployed this enabled them obviously to to benefit from tax uh nonprofit tax breaks while building the tech but they now have two corporate entities this is nonprofit called open AI there's a for-profit it's called open AI Global
LLC that was created in 2019 and this all this funky relationship between the two we'll get into that because it's kind of interesting actually Elon said that if open AI is allowed to do this then it should be the standard for every company going forward that's an interesting point you can start by donating money to a nonprofit and then make a for-profit
seems pretty C Capital efficient so what do Elon want to get out of this according to the lawsuit he wants open AI to open source their models by the way that's what Facebook and Appo are doing right now so that that seems more than reasonable since that's how the company was formed and he wants to make sure that shareholders receive no Financial benefit from open
Ai and we can get more into a bunch of the open AI nonprofit status and and their structure it's super convoluted but I want to just get your initial reaction sacks I haven't read the legal filings Jason my knowledge of the case is just coming from following what's on Twitter and the last time I commented on one of elon's lawsuits on this pod I ended up
in six hours of deposition so remember that was the the whole Twitter lawsuit in any event my understanding of the case from the tweets that are flying back and forth is I think Elon is making two points one is that when open AI was set up it was set up to to be a nonprofit and to promote AI as an open source technology that everyone could benefit
from and no one large tech company would control in that case Elon was primarily concerned about Google I think now he's more concerned about Microsoft nonetheless the idea was that this would be open source so I think Point number one is Elon feels like the rug was pulled out from under him after he donated 40 something million dollars to this they
completely changed what it was going to be and I think he's used the word swindled before he feels like he was cheated and I think usually when there's a lawsuit like this um it's usually because somebody does feel phenomenally cheated by what happened so I think that's the first point the second is that I think that elon's making is well wait a second
if you can start a company as a nonprofit using pre-tax dollars and then all a sudden convert to for-profit then why wouldn't everybody do this in order to circumvent paying taxes and I think that's another I'd say valid and interesting point that that he's made now openai has responded to this by publishing some of elon's emails to them and they think that they have a Smoking
Gun here because apparently Elon told them they need to raise far more money in order to have a chance of taking on Google deepmind I just don't know whether that's the Smoking Gun they claim it is but that's that's basically what they're putting out there and then to add fuel to the fire you've got VCS coming over the top debating different aspects of this
you've got sort of venod Defending open AI he was the first VC investor in it and so he's been out there attacking Elon and then I think Mark Andre is responding to venod and may I know if he's exactly defending Elon anyway it's turned into a whole melstrom on X and then everyone else is start starting to put out a whole bunch of crazy memes so I don't know who's gonna win this case
in court but the memes are definitely lit and U maybe the funniest one is that Elon has said that uh if open AI will simply changed their name to closed AI he'll drop the lawsuit I think he's serious about that I think he is serious about it but I think he's making his point which is you ended up doing something different than what you
told me when you got me to write this big donation and when we co-founded this thing together so I think that sort of sums up elon's position on this Jam a year from now where do you think we'll be with this well I think I think there's one more thing which is that they used his name pretty aggressively to get more money and he was very instrumental in getting some of
the early critical hires particularly Ilia which has been I think well documented SS to leave Google right so that's probably sacks where also some of this feeling that he was Bamboozled comes from but I think that all of those emotions matter less than the rule of law which is his second point which is the important Point irrespective of
whatever one email says or another email it's not great for the US tax system if all of a sudden a big gaping loophole is identified and taken advantage of I think that there's a huge economic incentive for the State of California every other state where these open AI employees lived and have gotten equity and now have gotten paid there's an incentive for treasury there's an
incentive for the IRS it touches a lot of aspects of very complicated tax law and so I think that's why there will be a resolution to this case because I think that that answer is very important and I think it will as he has correctly identified motivate a lot of people's actions going forward so independent of what the emotional situation is amongst
all the all the actors in this play the reality is he's identified a loophole and that loophole needs to get fixed I'll give you a a different example of this that's much more benign but it dragged on for eight or nine years at Facebook there was a period where and this was public so I can I can tell you we transferred a lot of our IP to Ireland at one moment and there was a
transfer payment and whatnot and then a few years afterwards when when every everybody realized including us and we had miscalculated but when everybody realized the value of Facebook that transfer payment did not seem correct and it was a huge tax ARB that we had facilitated right because all of that IP sitting inside of Ireland gets taxed at you know a very different rate than that
IP would have gotten taxed in the United States and other companies had copied this long story short the IRS Su you know similar to you David I was in years of depositions and interviews and all of this stuff so the point is that the government really cares about these kinds of things because so much money is on the line and if open aai turns out to
be this multi hundred billion dollar Behemoth this will get figured out in court because there's just too much money at stick freeberg any thoughts and maybe Steelman if if you feel like it open eyes position I think we're all ignoring the documents that open AI put out yesterday showing emails and interactions with Elon where Elon acknowledged and recognized the
necessity of having a for-profit subsidiary that could pursue the interests of the foundation by raising billions of dollars of outside capital I think it's a really interesting set of facts that provides a different light on the story and it was really important that open AI released it I'm going to share a hold on fre I did mention that freeberg I mentioned
that too my point is it doesn't allow you to break the law yeah so let me just um tell you guys uh a little bit about another example my sister works at a nonprofit called the Cystic Fibrosis Foundation cystic fibrosis is an inherited disorder affects the lungs and digestive tract it's debilitating really affects children there was a nonprofit called
the Cystic Fibrosis Foundation established in 1955 they did tons of work on drug development research and it was a nonprofit profit for years until they realized that there needed to be a market-based system to create the necessary incentives to drive the capital needed to find a drug that could cure cystic fibrosis and in the year 2000 they invested out of their Foundation
endowment $40 million in a company called Aurora biosciences subsequently it was acquired by vertex and they continued to invest another $60 million so total of 100 million bucks in the lifetime of the development of a drug that could cure this disease in 2005 a drug was discovered and in 2012 the FDA approved it the nonprofit then sold their rights their
interest in this for-profit entity for $3.3 billion it was an incredible return it was the largest wow investment return by a nonprofit in history who did they sell it to back to the company I actually think they sold the rights to royalty Pharma who you and I know well and that $3.3 billion continued uh opened up this ability for them to continue to make
investments they now fund biotech VCS and they make direct Investments and other things but it really set the Benchmark for this concept of what's called Venture philanthropy where a nonprofit parent company can make investments in for-profits that can raise additional Capital that's needed to pursue the broad difficult interests of the nonprofit and I think that this
argument really kind of ties into what happened with open Ai and you can see it in the email exchanges with Elon where he was so impression that I I give Elon extraordinary credit for this that he saw that this is going to take billions of dollars a year of investment to realize the pursuit that open AI was going after and there was no way that
Elon was going to be able to generate that cash himself or that Reed or others were going to just be able to Pony up that money they needed to have some sort of for-profit vehicle that would allow the market to work and allow capitalists to find their Capital into this organization to make this this investment interest so I think the real question with respect to is open AI in
trouble as a foundation is does the nonprofit own a meaningful piece of the for-profit entity and I don't know the answer to that I don't know if you guys do sounds like it I mean yeah must right so if they do then they have an investment interest the second question is does the nonprofit parent still do charitable stuff because if it doesn't then there's a real
question on the nonprofit status I think you have to have a certain amount of your assets deployed every year in order to qualify for 501c3 so I think the test in the courts will likely end up being look it's totally reasonable to have a for-profit entity to fund a for-profit entity other nonprofits have done it particularly when you need to attract billions of
dollars of outside Capital to make it work the real question is does the nonprofit still do nonprofit stuff that's an interesting question because freeberg do you think that when they booted off the uh the nonprofit experts from the board that they they may have crossed a tripwire there yes yeah I'm no lawyer I'm no lawyer that's a great
question I did a little journalism and I talked to a couple of people who are in and around two other of these scenarios one of the key issues here is that the IP in your example freeberg it wasn't like that cystic fibrosis organization did the drug Discovery right they didn't do it correct well they I think they they handed over some some research that was
open and public at the time and they but they funded an independent forit and so what happened here was you had the IP and the employees of the nonprofit given gied they were transferred over to the for profit organization and they when the Mozilla Foundation did this and another company called SAS source and these both have two structures a nonprofit and a for-profit but in both
of their cases they set up separate boards and the two different boards you know answer to the for-profit concerns and the nonprofit concerns they also didn't give huge chunks of equity to all of the employees which then sold them in secondary so what's happened here is all of the IP in all likelihood has been and the wealth transfer has gone to all
these employees they've now done a secondary and this actually triggers a lot of IRS investigations the Mozilla Foundation which was making the Netscape browser which many of you probably have used over the years they were making hundreds of millions of dollars a year David from advertising with Google the IRS said hey wait a second you look like
a for-profit to us so they made a for-profit entity all of the and Mitchell Baker and the team over there set this up so all the money went back into the Mozilla foundation in their nonprofit efforts and they just paid above Market salaries but it was very important that these things be separated and that the employees not have equity and that all that money flowed back up
and I think this is where open AI is going to get super tripped up and I think the IRS is going to have a field day here here's the Nick can you please throw the image up this is from the open AI website that explains their structure so let's just speculate for a second because we're we just guessing but it has been reported that Microsoft owns
49% right that's the number of the for-profit in this example Microsoft where it says minority economic interest that number there would be 49 and that's what they own of this open AI Global LLC and the majority owner is this holding company okay so that means 51% is there but it says here that that 51% is owned by a combination of the nonprofit employees and investors so the
question is back to Sax's question we can know very precisely how much the the nonprofit owns by just exing out the investors and employees and I'm going to guess it's at least 30 or 40% I think that that's probably a pretty reasonable guess so it means that the open AI Foundation probably own somewhere between five to 20% is that fairly
reasonable guess at the maximum that's seems right yeah and so I think that they're going to have to show that ownership structure and and decompose all these entities and show the the actual percentages if it's a lot less than that if it's say like a 1% thing then it's a little bit more sketch I think but if it's really like 15 or 20% they're still going to have to prove
that all of this was done in um in a clean way because the the big thing that these guys did was because by creating this lpgp structure and these Capp profits it's clear that they were trying to avoid something and the question is in the discovery will everybody learn what it is that they were trying to avoid because I've been through this I
think saak you've been through it freeberg you were through it when you set up these large vehicles and pulled amounts of money folks come out of the woodwork with all kinds of convoluted structures and the discipline is always to tell these lawyers and accountants no and they'll be like let's set up a master feeder and you'll go through Bermuda and this and that and and it's
so easy to say yes because it's very seductive what they're selling you but it's always about trying to avoid something so the real question is why this convoluted structure what was it trying to avoid and where did this IP come from like all that IP sacks came from a nonprofit all those employees worked for the nonprofit then they decided to go from an open
source model to closed and then by doing that they capture all the value and then it's gifted to these employees and this investor base that's where I think but remember well it's important to remember the majority of the IP that exists at open AI today was generated after the for-profit was set up the real question was there a fair transfer at the time
when it was set up of value into this for-profit entity and my guess is that GP box that you just looked at the compensation that they're earning through that GP box that the nonprofit earns is likely meant to be kind of a a fair amount relative to what was contributed at the time the real question for me Still Remains What other nonprofit and charitable work does the
open AI 501c3 actually do and if there's the answer is nothing and it's just a shell nonprofit and under it the only thing that it owns is a for-profit interest then I think there's a real question on what's the activity and I I don't mean to speak out of turn on all this stuff I don't know enough but I think that's the only sort of lens I
would kind of look at this stuff through S going to say something well a couple of points one is one of my contentions has been never innovate on structure all you do is create legal problems there's a tried andrue way of creating a startup which is a a C Corp when you try to innovate on legal instead of product it almost always backfires the second Point here is I
think open AI is in a little bit of a damned if you do damned if you don't situation to go back to freeberg point about the nonprofit sitting at the top there remember what created all the problems when Sam briefly got fired as CEO and then came back is they had these directors from the nonprofit world who didn't really seem to understand how
startups worked and so either they fired Sam for no reason which was kind of incompetent or they had a really good reason but didn't communicate it properly which was Al incompetent either way that whole thing was a it was a spectacle and it just kind of showed that there was this like culture Clash going on between the for-profit company and like the standard way of running a
Silicon Valley startup to maximize the outcome and then this nonprofit board that was sitting on top of the whole thing so I think that now they're in the situation where they've changed that nonprofit board they've booted off the nonprofit people and that may have been the right thing for the for-profit entity but now it might get them in trouble because it
lends Credence to elon's lawsuit that they've completely changed the original Mission of of this organization it was supposed to be it was supposed to be open source yes and it was supposed to be nonprofit and now it's for-profit and closed Source think about this you know and again we are speculating here but if it if the mission was to be open sourced
and then you realize you've got something super valuable and you close Source it create a for-profit and then take all the employees and all the IP and put it into the for-profit lock it down break the original Mission that hey this was going to help Humanity because we're going to make it open source so if you donate money here and we get the tax exemption Humanity benefits because
everybody gets to look at that code at the same time and work on it and iterate now they they've just basically stolen all that in order to enrich themselves and I think think then you add to it Sam maybe doing some deal making which seems to be one of the triggers according to reports and this open AI Venture fund Etc maybe that deal making made the
nonprofit people say Hey listen you're doing even more for-profit stuff with the open AI name we're supposed to be a nonprofit here what's the Venture fund thing he started a venture fund to invest in companies called the open AI Ventures fund and he was the sole owner of it which they're saying now it's a clerical mistake or something but he's invested in a bunch of startups that
have unique access ACC to the open AI you know I think he's the he's the GP on behalf of open the open. fund he's a no but he said GP on behalf of himself or on behalf of open the way the paperwork was done it was on behalf of himself they're now saying that that was done in Era so okay fine maybe it was maybe it wasn't who knows actually we're gonna
wait wait the open AI fund yes whose money is that uh Sam raised the money to create an open ey fund to to invest in companies using open AI software okay so that's a different kind of issue that's called a corporate opportunity issue where open AI fund it's basically a a conflict of interest where the Economic Opportunity of the open AI starup fund should belong
to open AI if Sam created a separate fund with separate LPS that he's the GP of and gets economics in that then that's a potential usurpation of a corporate opportunity I don't I I don't know the truth of that matter I'm just saying that's a slightly different issue to go back to uses the open a name yeah that that's where like the corporate
opportunity becomes really explicit to go back to the point you were making a minute ago about the employees I just think and you use the word stealing I think it's like a really strong word I mean I think we have to complement the employees of this company if it is a company including Sam including Greg including Ilia for creating an amazing
product right incred they've created something incredible absolutely and they've created I think an amazing ecosystem and there's a lot of developers building on top of this and I think no one is attacking their work and I and I think it's a little too harsh to say that anyone's stealing anything because they have created all the value the question and and I think you have to
include Sam in that and say say that he's done a great job okay as CEO because they've built something amazing and saxs to your point right it's not stealing because very smart investors are putting in money Eyes Wide Open yeah I think that the criticism here is related to structure from my standpoint it's related to structure and whether Elon was told something at the beginning that's
different it got changed and clearly it got changed in a way that was not consistent with the terms under which he initially contributed all this money yeah I mine is I I'm stating what is the most cynical interpretation of what happened here there is the most you know benign and benevolent interpretation you could have as well and and maybe the truth is in between
the two but the series of events that occur does not look good when you have a mission to give this intellectual property to the world so no one person benefits from it all of humanity is supposed to benefit from it that was the point of being open source right then you close it now who gets the benefit if it's closed right the employes right
that's a good point and that's going to be the of this the EMP and and if you really want the investors the investors the investors that's how they were able to attract billions of dollars because you can't get billions of dollars great to invest in something that's going to be open sourced and and then the employees sell two billion in secondary so now you if you really want
to take the most cynical approach to this or interpretation again this is just one interpretation they took an open source project they closed it they raised money and then within the next two years on this incredible Innovation they sold $2 billion and put that in their pockets now those employees if it was a for-profit obviously no problem with that but they took a the stated
mission of giving this to all of humanity and then took three or four per of that gain and put it in their pockets that's where I think this whole thing is going to get really crazy and this is where the IRS Point yeah and the IRS also interpreted Mozilla which was just $100 million and none of the employees took any of it the 100 million that came out
of Mozilla they were just saying like I think you should pay tax on that should you pay tax on that and then they were investigated for years so I think the IRS is going to be on this like crazy based upon what happened to Mozilla which was Jason do you think do you think individual employee sellers are going to get audited by the IRS because of this I I don't I mean I'm know we're
in Uncharted Territory here when I did some tweets and said hey can everybody contact me who has information on these structures I was able to find the some Source example and they did it very clean and there was no like IP transfer or employees enriching themselves or you know a god king like Sam doing all kinds of deals and enriching himself it was a
very clean structure and then Mitchell Baker who set up Mozilla also did the same thing hey we's pay the employees an extra 50k on their salaries and they'll be a little overpaid in Silicon Valley but they're not getting billions of dollars in equity which again I have no problem with people getting billion dollar billions of dollars in equity in
a for-profit but this was supposed to benefit Humanity it was supposed to be open if this was open source and they took the 2 billion I would actually not have much of a problem with it because we could all be looking at that mission and then saaks and myself and Friedberg and anybody who wanted to use that code could go in there and adapt it and you
know what there are four profits apple and meta which are producing open- Source software so if they're producing Apple's pretty competent and meta is super competent in this respect they're able to do open source but Sam is claiming or open AI is claiming it's too dangerous to show us the open source code I call on that their code is not too dangerous for us to see
that's complete utter so you you think that there is a motivation for profit basically what you're saying is essentially that this was highly motivated by profit versus like even like like some of the emails the emails try to paint a picture of very industrious people on both sides who are trying to solve a very hard problem and dealing with a conundrum that's really
around Capital right yeah we need to we need to do all this training it's going to be so expensive but I think what you're saying which is a a deviation from that is actually come on guys these are all very smart people and those folks saw an opportunity to make a ton of money and they took it I mean that seems like what happened here to me I mean it's aam's Razer kind
of situation I think they if you look at it I think they probably regretted making this a nonprofit and then try to figure out a way to reverse it that's actually what I think is going on here and I do think there is part of it chth you're right that they needed servers and they needed capacity but they could have done that without giving the
employees tons of equity without selling billions of dollars keeping it Ops and source and then telling Microsoft hey if you want access to this open source or whatever and you know very you're making a very very good point in and and the reason is that if it was open source Microsoft could have just taken it and done its own training and just paid for
it yeah or make a donation to the foundation this is interesting because it's a very good point because open AI yeah open AI dropped a few of the emails that they had with Elon obviously those are Cherry Picked to help their case the most what we don't know is what do the other emails show like what were their alternatives to this particular structure could they have raised the
necessary funds in a way that was more consistent with the original Mission of the company could they have remained open source for example example also are there any emails where employees talk about the potential benefit to them of going private going for-profit right those emails have already been leaked there was this thing where in the open AI emails that were
leaked they talked about being able to swap this Phantom equity and open AI into either YC equity and then Elon said oh maybe SpaceX to but I'll have to figure that out well then also like Microsoft coming in and buying 4 % and then it's close this is the other piece that I would want to see in Discovery as well and again I don't have any problem
with any of the people I love Sam M I think he's great I think all the people there are great I think what they've done for Humanity is great I just think they should have kept this thing open source which was the mission but then they close Source at chth and then give 49% of it all the weights all the source code to Microsoft so that to me was like
a really like you you want to talk about taking this nonprofits IP and then it some amount of that bag gets given to the employees for billions of dollars and then Microsoft gets 49% of all that nonprofits effort to then go commercialize and Microsoft has added what $500 billion dollar in market cap since this whole thing has been announced so now right all that profit
has been aggregated into Microsoft stock and I think this is where you got to understand why Elon feels swindled is because not only are we going from nonprofit to for-profit and open source to closed Source he was specifically concerned about all the benefits of AI crew to one powerful big tech company now at that time he thought it was Google now it's Microsoft there's not
really that much of a difference he never wanted all the benefits of AI in the hands of one really powerful tech company right and Microsoft is the most it's now what the biggest company in the world by market cap so this is like the opposite of what he intended they gifted a trillion dollars to Microsoft probably there's an easy solution if they are
people of good faith and they're doing this for the right reasons open source it just go back and open source it Jason but to your earlier point that may solve the lawsuit and Elon may drop the lawsuit but it's opened a can of worms with respect to tax and structuring that's much bigger than just open AI yeah the entire nonprofit industry it's
a tax problem for every new company it's every other entrepreneur that studies this model and tries to replicate it for their own personal gain even if that wasn't intentional here so there's whole set of issues that we've we've really cracked the egg here we got we got to figure out how to unscramble there there's the IRS issues then there's what's morally right and then there's
elon's beef and if it is a for-profit company and Elon put in 50 million when it was a seed round what would he own saxs what would his ownership in this for profit be oh my God I mean probably 98% okay and so yeah we we need know the total size of that round he put in the first 40 million do we know what other people put in it was most of the money
right yeah it was most of the money so I mean if you put let's just put a crazy valuation on it 500 million okay he owns whatever 10% at that point at that point it it would AI was not what it is today so you would have raised that like you would have raised 150 on 50 pre okay I mean that's that's the way that that that a very capex intensive deal in a
space that wasn't thought to yield big outcomes that's unfortunate half the company at least at least right so give him 20% of the compan is $20 billion that's even half of what you're saying sack right we talked about on the show and that whole fracus with these nonprofit directors went down is we said go back and and restructure the whole thing to make it what it always should
have been which is just a clean for-profit entity give Elon his Equity give Sam his Equity because it never made sense that have Sam has no equity but he's got a venture firm it's it's all so convoluted it's a weird form of compensation in which they're giving him corporate opportunities in effect as like a type of compensation when really he should
just have compensation in the corporation and then the corporation should own all of its opportunities oh that's okay that's a really interesting thing you just said so basically yeah it's like he famously has no equity but then he has this retained optionality to monetize the ecosystem so even though he's not monetizing the thing he's he
gets to monetize everything around and it seems like the the board or at least the new board's okay with that because he is being undercompensated with respect to the main thing so then he gets the side things but that's not really the way it should work either you know Bill Gates said to us famously when we were at when I was at Facebook the value of an ecosystem is when the
economic value generated by the ecosystem exceeds that of the platform now in this case you'd actually rather have 50 basis points of the ecosystem than 5% of open AI if that's true because if this thing could be so revolutionary you're talking 10 2030 trillion dollars what a mess oo Sam should just be given like a a huge option Grant an open AI but then open AI should own its own
Venture fund yeah and the SEC is looking into all this stuff you know they look into a lot of things in fairness but they're looking into it what a mess and uh we'll keep track of it the other thing that's crazy I don't know if you guys know this but Nick just as we close here the most insane part of open's LP investment agreement which is on their website you
can just search for open LP agreement is this part the partnership exists to advance opening ey inc's mission of ensuring that safe artificial general intelligence is deployed and benefits all of humanity the general partner duty to this Mission and principles advance in open aing Charter y yada y take precedent over the obligation to
generate a profit the partnership may never make a profit and the general partner is under no obligation to do so the general partner is free to reinvest any and all of the operating entities cash flow into research and development activities Andor related expenses without any obligation to the limited partners and so they basically told everybody venod and employees or
whatever we can just basically make wipe your Equity out and we can do whatever we want with the profits and you're probably going to lose your money so this this structure is weird do you guys think that when the investors came in especially in this latest round the $86 billion round do you think they underwrote the legal risk inherit in the
structure or they just sort of handwaved over it and said no typically what happens in these deals is you hire somebody like KPMG or deoe or ernston young to do like the full Financial diligence packet right and that typically tends to be how a lot of late stage organizations document that they've done and manage their fiduciary responsibilities on behalf of their
limited partners so what happens is you will do a deal you'll sign a term sheet you'll turn it over to deoe you'll turn it over to KPMG and say please go and run this down and and then what they do is they will furnish a report that says yes this meets all the customary expectations I suspect that if these folks were doing a decent job of of running late
stage money they probably sent it to those folks and those folks probably produced something that said this looks fine now if you read Buffett's letter this year he has a really great commentary on deoe and KPMG and these sorts of letters which is not exactly the most supportive is the best way to say it you can find that mention in in his case it's deot and touch but
typically Sachs that's what they do they go to a KPMG or a deloid or a nurse and young and say and and by and by the way 99% of the time they're I mean they do really good work but it's a standard structure and they just want to make sure that nothing nefarious is a muck in this case I doubt anything was a muck anyways I doubt though that they looked
at the structure and then also elevated the the litigation risk of this getting Unwound I just don't see that that diligence report and I've seen enough of them typically has that section in it the other thing that's completely hypocritical here is they said when they hit AGI and they're going to be like a sentient artificial intelligent going on here Friedberg that
they would wrap up shop and they're going to no longer be a non nonprofit Etc but they haven't and but they're claiming they haven't hit that but they closed the soft so it should be open source if they haven't hit AGI and you don't think they've hit general intelligence right free barg or anything close to it maybe you could educate the audience on what that is and and that
claim that they have to shut off the for profit yeah they haven't but I think the we keep repeating this concept of the models should be open source versus closed Source making AI for the benefit of humanity can be interpreted in a lot of ways there may have been some anecdotal conversation at some point with Elon or others about we're going to make the models open
source uh but there was a reason that that change was made along the way which was to attract dollars and those dollars need to have some return of capital available to them because they're private investor dollars and so I don't think that that was necessarily and correct me if I'm wrong I don't think that's in the mission that the open AI
software models will be open source making AI for the benefit of humanity could probably be interpreted in a lot of different ways and we'll see but no I I don't think that anyone has this achieved this Holy Grail of general intelligence yeah I think one of the the one of the more interesting and kind of wacky things about open AI is that their mission is explicitly to create
AGI which most people would associate with some sort of sci-fi dystopian outcome and I think this has like raised the Fear Factor around AI because they're explicitly trying to create the sence that's going to replace Humanity now I think they defined AGI in a different way they say it's something that can replace 80% of the jobs but I think we all kind of know what it really
is so I just wonder if I think I think that that's like that assumes a steady state in the world so if you end up with a system and the system has all the capabilities of a bunch of really highly qualified knowledge workers and I can sit in front of a computer terminal and I can say let's design a mission to Mars a mission to Mars could be a 20-year
engineering project with hundreds of people involved to design the buildings to design the flight path to figure out the fuel needs to figure out how you would then be able to terraform ours and what if one person could interact with a computer and design a plan to go and inhabit Mars all of the technical detail docks could be produced all of the
engineering specifications could be generated all of the operating plans all of the dates the amount of Labor needed the amount of production needed the amount of capital needed what would otherwise take NASA or some you know International or well-funded private company many many decades to do a piece of software could do in a very short order I think that's like a really like
for me poignant example of the potential of having these tools broadly available that the potential of humanity starts to become much broader we could say I want to develop a city underneath the ocean because I want to explore more of the earth I I think humans need to go go solve cancer figure out the biologic drugs and the combination of biologic
drugs that would be needed to solve cancer based on this this patient's genotype the extensibility of Highly knowledgeable or what other people might call general intelligence type tooling is extraordinary that one individual starts to have an entire cohort of knowledge workers available at their disposal to do things that we can't even imagine today so I
don't think that it is nefarious it's nefarious because we assume a steady state of the world today that nothing changes therefore a piece of software replaces all of us but the potential of humanity starts to stretch into a new era that we're not really comfortable with because we don't really know know it or understand it yet I'm not saying
it's nefarious to uh want to develop AI because I agree with you about all the extraordinary potential of but I'm saying there's something a little bit cultish and weird about explicitly devoting yourself to AGI which I think in common parlance means Skynet yeah it mean you maybe that that parlance is what needs to be addressed which is Agi effectively enables equivalence to a a
human knowledge worker and that you know that can kind of unleash a new kind of set of opportunities you think that's what it is my definition for AGI is smarter than the smartest human being who ever lived yeah I was talking to somebody this week who's in a position who said the definition of AGI is very fuzzy that there isn't a clear definition and therefore it allows every
side to kind of anchor on their interpretation of what that term means and therefore kind of justifies their position so you know I don't really feel great about like just saying are we at AGI what is it we don't have a clear sense of what it means I do think if you look at some of the work that was done by anthropic and published in the cloud
3 Model this week did any of you guys see the demos that were done of the output of that model there was a guy who wrote a thesis in quantum physics on a very esoteric complicated problem set and he asked Claude 3 to solve this problem set and it came up with his thesis it was really like extraordinary and this is something he's like no one
in the world knows this stuff and he's like I can't believe this model like came up with my thesis and that's the sort of thing that very few people on Earth even read or understand and the cloud 3 Model was able to kind of recreate the basis the buildup and then the the the output of his desent was somebody writing a screenplay and then giving it the first two acts and say
guess the third act and it's like oh yeah this is the third act here's what happens like it's pretty impressive comp ask you like deep down when these guys say they're going to create AGI what do you think they really mean in their heart of hearts oh they mean the Terminator yeah they mean the sentient God you guys are you guys are propagating some bad you guys shouldn't
be I think that's what they think said it remember what Larry paage said to Elon don't be speciest yeah I think there's like I think there's a meaningful number of people in The Tech Community who deliberately want to give rise to the super intelligence there's another point of view of super intelligence where super intelligence means that the
software is now more intelligent than all humans and as a result the software may have its own motivations to figure out how to supersede humans on earth now the the Larry Page statement which which I I don't know firsthand I read the same article you did is one that a group of people might say evolution is evolution you know people that's right
and I know elon's taken this point of view that like you know we need to maintain human human Supremacy but uh my my favorite test is you know there was there's the Turing test which like you can't tell if it's a human or if it's a robot but Mustafa came up with the um with the modern touring test which is an AI mod is given $100,000 and has to obtain 1 million go it's kind of
interesting then the other other the other interesting one was Gary Marcus he said uh the Ikea test the flat pack Furniture test an AI views the parts and instructions of an Ikea flat pack product that controls a robot to assemble the furniture correctly oh look what's up sunny it's now time to do a just a quick little congratulations to our dear friend Sund deep mandra we call
him Sunny that's his nickname and he's one of our poker buddies he keeps building great companies and in this case sandep is the first person to collect all four besties we all invested in his company definitive and definitive uh was working in AI but we got some great news this week and we thought we would give him his flowers Sunny you want to tell us
what happened this week with our investment in your company definitive intelligence at definitive doio I believe is your demand yeah well you know with your guys support and you know we've been growing our company and we saw a really great opportunity to work together with grock and we've been working with them for a couple of months and all the hype that you've seen has
been built on the collaboration that we've done building the cloud offering the API offerings and so you know we've decided to merge with them and we're super excited and all the besties are now not only shareholders in definitive previously but now shareholders in Gro this is this is the first investment I think where we're all on the cap table
right so we can we're all rooting in the same Direction what's happening in the developer site how's the momentum going well the the momentum is incredible you know we have now 16,000 plus developers in our you know self- served playground there's well over like a thousand apps that people have developed using the API and all kinds of new functionality you
know the API allows people to get a higher rate of throughput on tokens and low latency so there all kinds of new applications from voice to real-time translation of web pages you know we're collecting on our Discord we have you know 3,000 people in the Discord as well it is a real Community that's come together building around Gro and what I will say is you know sort of the same
jump that developers saw when we went from dialup internet to broadband they're seeing that now and from using like traditional apis for llms to using you know the ones that we offer you guys support the latest anthropic models that they just launched that seem pretty kickass no we don't have those yet but we're we're in you know we're having
discussions with everyone out there there and we want to support their models right now what we've done given all the demand is we've kind of limited it to llama 270b and mix trol and we actually have a bunch of other models that we make available in private mode for folks we're pretty excited but if there's anyone out there that wants to have us you know give us a call and
we'll we'll get you going on our systems well Sunny congrats to you you're an incredible entrepreneur and it's always fun to kind of be on the journey with you this is my fourth business that I've done with sunny madra that's amazing extreme lands then there was a company between no no no there was before you have to understand sunny and I met because Sunny went to school where
I grew up he went to the University of Ottawa I grew up there and we met through a mutual friend and his first company was called sponge fish which I backed I think in 2006 maybe I mean I had no money I may have written a 0,000 10K maybe maybe less May 5K yeah I mean whatever I had I didn't have much I like it's scraped together and it's it's
our fourth business Sunny's a veritable rabbit's foot you're a rabbit's foot sun he is he is a lot Lu prefers the prepared well I mean I've been in two of Sund Deep's companies and uh I thank him for that and then extreme Labs actually to to thank you again you sponsored a lot of my events 10 years ago when I was coming up so I appreciate that so it's
just great to see a nice guy win as opposed to the three miserable people who I work with on this podcast keep winning so it's good now finally a good guy wins as opposed to the four of us I appreciate all your guys support it means a lot to us you guys getting the developers and keep keep putting it out there and and keep us honest as well so if we're not doing something right let
us know really appreciate you guys all s you want to say something motivational to sunny here I know you always have a great motivational word for your friends something you say that just gives people that thrill of being in the game go ahead sax you always have something say we're going to we're going to ship uh 20 million into your a safe note I know you
closed it but we're going to pry it open and uh get get some get some allocation hey wait a second if you're prying open that's safe if the safe if there's a wedge I know a guy with a podcast who could got 800,000 followers maybe I could slip in a quick five hundy is there possible what do you think Cy let us know right now I don't know we we did
a really big announcement with the Saudis this week so that price might be up let us ship something into that safe note so we actually have some real skin in the game David text me all right we'll do well no but seriously hey s wait a second if he I got to get a second Jason wants in for 500 by that he means $500 so we'll let you no I got a
gift card for you from Starbucks I got a $500 gift card for you and the team I think I got likeon that that Starbucks gift card you sell for 20 cents in the dollar and then ship let me zip it in let me zip it in maybe I can 100 Exit no seriously 500k from from your boy jcal all right everybody thanks uh to Sunny for jumping on congratulations on the mder thanks
guys all right issue two issue two apple is battling two major iOS developers and Regulators are siding with the devs you may know about the Apple versus epic gam Saga we've talked about it here epic games was planning to create a custom App Store on iOS because Europe's dma the the digital markets act has said that Apple now has to allow thirdparty
app stores in the EU so epic created a developer account based in Sweden and apple actually approved the account two weeks ago then on Wednesday Apple flipped terminated epic EU developer account and app said one of the reasons they terminated the account was because epic CEO publicly criticized their dma compliance plan additionally on Monday Apple was fined two billion by the eu's
antitrust regulators and was forced to remove its anti- steering rules uh from music apps like Spotify basically Apple has been restricting music apps from informing users about pricing and discounts and the European commission considered this anti-competitive since Apple runs Apple music and they want Spotify to pay 30% Daniel e friend of the Pod you know basically did a whole video
on this about how they can't charge 30% more yada yada sax you've uh spoken about Apple's Monopoly before your thoughts on what's happening in the EU and then we'll get into Apple's wider problems I mean did you just say that Apple booted Epic from their app store because they didn't like what epic said about them I think well like they're violating epic's Free
Speech because they don't like what epic is saying I mean according to Epic yes this is crazy heavy-handed by apple apple heavy-handed with developers yeah have they lost their minds I mean this is right out of power corrupts and absolute power corrupts absolutely yeah I mean whatever dispute you have with epic you don't boot them out of your app
store because you don't like their criticism of you I mean this is basically proving exactly what everyone's been saying about Apple which is they're too powerful and heavy-handed and Apple's coming along and saying let me confirm it for you guys by acting tyrannically against epic exactly I mean talk about a backfire this seems insane to me yeah it's super nuts chamat any
that'ss on this before we get into Apple's other problems I think it's the beginning of of the decay of Apple Peak Apple well let's let's get into that um there's tons of headwinds facing Apple you can add a bunch of other things to the list as well Jason yeah the thing is Apple for the last couple of years has been what is effectively what we call a
GDP plus Growth Company which means that take GDP 2 3 4% maybe they can grow by a couple of percentage points more than that but they are effectively levered to GDP meaning when you look at a Facebook or an Nvidia they're growing at 50% 200% 2,000% whatever it is that's not tied to GDP they're just taking share but Apple is is a company now that grows as the as
the economy of the world growth so that's not super great for its future prospects unless it can expand the surface area of where they operate and then on that Dimension the there are a few trillion dollar markets that they can really penetrate and they just announced that they've killed a project in one of those areas which is Autos right project Titan which was1 billion
turned out to be a failure so all of these things I think mean to me that it is effectively becoming a cyclical rate sensitive stock and then the Cuda is Warren Buffett and Nick and I were talking about it this week and what was interesting about Buffett's letter is that you can tell when Buffett has gotten disengaged with a company based
on the number of times he mentions it in his annual letter so in this example this is the number of times Apple was mentioned and just to be clear what I mean by mentions is not when it's included in a chart or part of a disclosure what I mean is when Warren actually explicitly mentions it in a positive or even negative way or he doesn't mention it at all which I think
Rings very loudly he went from basically saying Apple was the absolute endall and Beall and now what you can start to see is this shrinking and it's gone from basically a bunch of times to almost none he did mention it once but he mentioned it in the context of talking positively about Coca-Cola and AMX and he Wasing these two positions but just
mentioning that they were not as large in comparison to Apple that's the only mention in this year's annual letter what's interesting about that is the last time that that happened was with drum roll Wells Fargo over 15 and 20 years Buffett built up a huge position I think he was able to weather the vicissitudes of the market so even when the markets would contract he knew
when to hold on to that company until he realized that that company was not really one of his forever stocks and he got out of it and the number of times it basically was mentioned in his letter went to zero so interestingly I think this Buffet index is a really important one for Apple which is it went from a forever holding that he said he would
own forever to barely getting mentioned and above him on above apple on that list were all the Japanese trading companies that Buffett owns American Express Coca-Cola so that is a person that understands the economy I think better than anybody else in the world and so if you're basically taking a lever bet to the economy as a reason to own apple and the person that
understands the economy the most has now started to Pivot away he started to sell in quarter four and then you see all of these things Anti-Trust rules killing projects in in trillion dollar Tams unfortunately it speaks for a very bad next 5 to 10 years for this company unless they figure something out I think it's just such a great insight with the
Warren Buffett mentions and we should do that forward looking like who is he talking about now and let the monitor when he stops talking about them I have a theory about this I think this is really just about Peak iPhone if you look at the majority of their revenue it's obviously from the iPhone which has become massively profitable over time
but the iPhone Revenue has been flat for a couple of years now and they're starting to make their money from Services everybody knows Apple 1 iCloud storage Apple arcade Apple music apple plus TV they've got a great collection of services and services revenues growing but I don't think that they are filling in this growth problem with the iPhone and this happened to me for the
first time and I don't know if you gentlemen have had the same experience but I was buying every Apple phone and then I would buy every like M medium upgrade like when they would do like a 12 and then a 12s or an 11 11s and when I got to iPhone 13 I was like this thing's kind of peaked and I just forgot to buy the 14 didn't need it and then I
bought the 15 and I'm sitting here with my 15 and my 13 I really couldn't tell the difference between them and so now I'm a technologist who would buy it every year the latest one and I don't feel the need to upgrade it and I think that a lot of people and I I have family members who would take two generations off now they take three or four generations off so I don't even know
what number I'm on you know I don't even know either it all looks the same to me okay so I mean that's the problem here and then if you look at their road map what's what is the device post the Steve Jobs era that they have launched how do you know what device you have you go to General in your settings and about I just checked it I'm iPhone 13 Pro what
version are they on what is it General they're on 15 and I'm on 13 Pro I don't even know yeah and you're not price sensitive yeah and these things have gotten absurdly expensive so they're trying to really extract what is the what is the latest 15 15 I'm on a 14 I don't like the hassle of having to like reset everything when I get a new phone and it's easy to do now it's like all in
the cloud but even that going to the store buying it like who cares it's not my apps I have to relog in and freeberg what uh what what Android phone are you on are you you're a googler didn't the googlers all have Android phones or are you an your team iPhone I got the Macintosh original in 1984 I've only been on MacIntosh and Apple product since then
H what iPhone are you on be honest 15 Pro okay have you ever tried a pixel freeb I don't like it but I just I'm not used to the OS I just what was the rule at Google if you worked at Google did were you kind of forced to have an Android phone or did you just keep your iPhone in your pocket and not take out there weren't a lot of Androids on the market when I was at
Google because we acquired the company when I was there in O we acquired Andy Ruben's company in 04 and I think the first major devices started to roll out in 7 and so this was all post my era I left at the end of 06 wow freeberg that's an amazing chart holy so pull up this chart now here's the global here's the global statistics the US market share is 57% for iOS but
on a global basis iOS only has a 27% market share in uh mobile operating systems Android is 72% and all other is less than 1% but look at this it's all the future GDP is on Android Brazil Nigeria India holy but I think this is one counter to your point shamat that the macro driver is as um the economic uh position the GDP per capita scales in these bricks Nations they can start to
afford to buy iPhones which are generally some multiple of the Android devices in these markets that you see here so while today Android is 72% of the market if the Emerging Markets continue to grow GDP capita and iOS continues to be the superior product you'll see apple able to to steal into more share over time how do you but how do you do that when you have messaging
groups on Android when you have photos in Google photos and is it does the switching cost stop that do you think I don't know the answer to that it's a good question they're down to5 to $25 for these Android phones in India there's a famous that's the difference right so these Android devices I think apple is levered to GDP Global GDP so
they need to figure out some way to grow Superior to that is the market what could they do Services a company that generally has a bunch of cash flow being generated by some set of products today and you assume stasis over time the market share for those products could be eaten away you'll see the profits per year go down and a company like that
will trade anywhere from you know 7 to 20 times the technology value arises from the value of the brand that you can launch new products lever your brand leverage your distribution leverage the sale of new services and new products I think to your point shim off the challenge apple is facing is that the pool of options the portfolio of call options that you would get a new product
coming out of apple is shrinking very Lim with the you know with the car being taken out of that pool now Apple Vision Pro a lot of question marks on you know how much it can scale as you guys know I I feel like there's going to be a market for that device but it's a it's a high-end device today it has to become more cheap to be more ubiquitous the
thing that a lot of these companies confront though is that you can also grow inorganically right you don't necessarily have to incubate these projects we can remember the moment Apple had a chance to buy Tesla right didn't then they didn't take it Apple still has a chance to buy pick your company that that would take a sweet acquisition offer rivan Lucid
postar whatever it is I'm not saying that these companies are good or not good I'm just saying that Apple has the one tool that they've never used in their toolbox is the large inorganic acquisition and at this point if they are proving that they can't execute internally the market is going to demand that they prove they can use that balance sheet as a cudgel to go and
execute it externally yeah I think the challenge do that they're GNA discount that cash to zero the challenge is that there's a certain discipline and quality to the products and the businesses that apple produc es and runs and it's very hard to see that in other markets I mean why would they go buy a money losing low margin Hardware uh car hardware company
when they are proven to make you know quality on the reasons project tipan fil yeah the article in Bloomberg basically said that the reason that they abandoned the project was in part that they did not know how to go from where they were to a full production vehicle that could be level five and then when it was proposed that they step down and
just launch a level three autonomous vehicle everybody said no that it wasn't disruptive enough well if that's the case the the thing that they made a decision about there was not going into a market because of Regulation not because of technical capability and I don't think that that's necessarily a smart decision they would have been better off going into the car
market launching a level three vehicle and just letting the market play out they probably just like they were able to do music have the influence to change the laws yeah especially if they stepped in there with their rigor right and they they're not doing that so it's a little bit of a head scratch of what's going on over there they need some new products I
mean maybe Apple Vision Pro someday becomes the platform of the future but they've squeezed as much revenue as they can out of the iPhone Services seems like the best place for them to make money but as we see my idea under assault yeah my idea was just that they should launch a huge competitor to AWS as Ur and gcp so if you look every developer that Apple has theoretically
could have been running on an Apple not just on Apple's SDK and apis but they should be running in an Apple Cloud you could have made that claim and it would have made a ton of sense for app developers to have TurnKey access to that right and they could have subsidized it and by the way to Sax's point that would have been an incredible way to defend a 30% rev share okay
listen I'm taking 30% but here's a bunch of subsidized access to hardware and the market would have loved it and in this AI shift they can still do that where now people are chipping away at the 30% right people are saying well I can just build around you they need to do something and service is Jason the most valuable thing they could do would be to
launch a big cloud I think yeah I mean they have all the app developers on test flight ready to go they just email them and say hey here's your free storage I mean they could just slowly add features right and they're they're doing this uh open source I think it's called Maggie or Magpie or something but they're doing an image one and uh well look if they
could if they could just make Siri work like the way it was supposed to using an llm and have it be like Snappy that'd be a major upgrade to the iPhone I don't think you need to buy a new iPhone for that because it would just be a software upgrade but just getting Siri to work would be a big win I think that's where they're going with their silicon and
they just announced the M3 on the MacBook airs like they're making their own silicon and I think it's going to power llms locally on the devices and that's so powerful I was using I photo this week and in apple photos there's now on certain images if you swipe through them you'll see the little AI icon when you click it it tells you things in the photo like that's a
bulldog that's pasta and so they're already subtly adding these features now that's a feature Google's had in Google photos for five years but go ahead and open your phone right now and search for a dog or a bulldog or whatever type of dog you got you know uh Labrador and then watch golden retriever that it actually knows how to do it they never
announced it it's just subtly being put in there uh so there's so many opportunities if they required a hardware upgrade to get like actually good AI built into the software then everyone's going to have to upgrade for that that's a pretty big motivation to upgrade there you have it Tim Cook somebody send this clip to Tim Cook put put AI chips on your uh phone this isn't
hard right I mean all they got to do is just take the latest open source models and figure out how to customize them for their own products yeah and they're doing it doing it right now all right let's go to Issue four Tik Tock bipartisan ban will the CCP agree a bipartisan group of a dozen plus lawmakers introduced a bill that would effectively ban Tik Tock in the house
this week the bill is officially called the protecting Americans from foreign adversary controlled applications act gives bite dance 165 days to divest from Tik Tok that's the parent company the Chinese company that owns Tik Tok the app that's very popular in the west especially here in America it would make it legal for companies like Apple and Google to show Tik Tok in their app
stores as you know Tik Tok 170 million us users and they claim that they're headquartered headquartered in Singapore I know people who have worked at Tik Tok or do work at Tik Tok and they said that's nonsense to me the company said it has not and will not share user data with the CCP in my mind it's an obvious lie in 20121 the CCP took a board seat
on bite dance Beijing based subsidiary that's according to Reuters and then in 2022 by dance admitted that it accessed IP addresses and data by journalists covering Tik Tok to see if they'd been in the same places as B Dan employees obviously to find leakers and by Dan claims they fired the people involved y yada last year a former head of engineering at by Dan us said CCP
members had god mode access to user data in 2018 sax um I can go explain more of this but I just got to go to you here if this if bite dance is not spying on Americans and the CCP is on the board that would be make no logical sense to me and why are they fighting the divestiture if it's just a financial reason why would they take the CCP off
their board do you think it's spyware do you think the US is crazy for allowing this product here in the United States when we're not allowed to put Twitter Facebook Instagram pick your social network in China we have zero reciprocity here look if it's true that Tik Tok is sharing data with the CCP then I think the United States is well within rights to either ban it or cause
it to be divested and I personally like the divesture option I mean that's what Trump was suggesting during his term because we don't I think in the United States like to just essentially confiscate or destroy people's property but I think we're within our rights to require to be divested to an entity that we know is completely separate from and won't
cooperate with the CCP this bill is a better is better than the last bill we talked about that was targeted at Tik Tok I don't know if you remember that one but it was weirdly prohibiting Americans from using VPN and gave the government the right to go after Americans who are using VPN so this one seems cleaner and better and more narrowly targeted at divesture now
at the beginning of my response to you I did say if you know I know that everyone's just assuming that it's true that Tik Tok is sharing data with the CCP but I just want to confirm that that is the case because they are denying it and I can understand why people think it and why it might even be likely but since we do have a concept of due
process in America I do think some evidence should be provided that that actually is taking place well we've had you know whistleblowers inside there but chth if the CCP is spying on their own citizens what are the chances that they wouldn't take the opportunity to spy on government officials who have Tik Tok on their phone or their kids and get
comprom mod on them possibly or no locations of people what does your gut tell you is a CCP is this too dangerous for us to have here in America under CCP control or this kind of influence being on their board I think you're asking the exact right question I have two comments to make one is Nick if you can bring up this article about the Google AI IP case basically
what happened was that doj filed an indictment actually I think I sent I I think I sent you guys the actual indictment but essentially what happened is there was an engineer at Google that has been charged crazy that has been charged with stealing AI secrets for China and I don't know if whether he's back in China now or not but the whole point is that if it's happened at Google
right where there's a motivation for the Chinese intelligence apparatus and frankly every intelligence apparatus to infiltrate that organization and get access to all kinds of data I think we should presume by default that all of these organizations are infiltrated and I think that that's probably a more conservative and reasonable posture so Facebook is
infiltrated Google is infiltrated apple is infiltrated Tik Tok is infiltrated so on that Dimension I think that it should be considered 100% certainty that this data is getting back to not just the Chinese but multiple state sponsored actors so the question about Tik Tok then I think should be one of business and I think Paul mer lucky did a very
good job of simplifying this down to its Essence which is essentially what he called The Law of Equivalent Exchange if you want to just play this it's like just a few seconds I was kind of frustrated that people made Tik talk into a cultural issue by the way I'm totally on the culture War side of it uh but but but but I was saying practically speaking you should not make this a
culture War issue don't talk about how it's ruining our you's ideals just say strictly on a trade basis yes we cannot allow them to sell this thing to us if we can't sell the same thing to them like that that should be totally fair that's reciprocity that's reciprocity me and Palmer lucky and Sy right so this is what he calls the Law of Equivalent
Exchange and I think it just makes a lot of sense so on the face what I would say is Jal my response is I think that the CCP but also other intelligence organizations have infiltrated all of these big companies and all of our data is accessible by them I'm not going to say on a whim but I think it's accessible I think you have to deal with Tik Tok as a business issue and I agree
with Palmer lucky which is they should not be able to sell to us what we cannot sell to them and I think that that's a fair principle that we can live on Resto is a very simple position freedberg let me use your creativity Your Love of Cinema if you were to use this tool let's take the most cynical approach here or interpretation CCP has complete access to the algorithms and
they want to do maximum damage let's say during the election let's say in a conflict like the one going on in Ukraine with Russia or in Gaza what could they do using the algorithm using videos what would be the Doomsday scenario for America as in the C CP comes in and influences the management of this company and tells them what to tweak and how and why yes
content what would they do I think we saw this during after October 7th that there was a significant surge in Pro Hamas videos relative to Israel support videos that's the sort of thing where you could kind of see something that sets an opinion that maybe disruptive to the social fabric to the election cycle that starts to get shared more frequently and
show shows up in feeds more frequently unlike Facebook and other places where there's a linear feed where you can scroll up and select what you want to watch as you know Tik Tok has already lined the videos up so when you scroll up they've they automatically play the next thing for you so the ranking really matters in terms of viewership uh on Tik
Tok unlike a lot of other kind of Select to playay social media type sh an election hearts and Minds in a war well I've always said this I think it's the craziest thing in the world that someone can spend advertising dollars and change someone's vote like that like just think about that fact for a second I mean I've said this before and people have told me I'm an idiot for
saying it but meaning that you can or that it does that you that both that that that think about it like like people don't individually go and gather data and then make an informed opinion about who they're going to vote for their opin changes based on seeing an ad it is so crazy to me that that's the truth I think the I think the country knew that
it does that's why they prevented it from happening until yeah exactly but I mean I think that's what's so nuts is that there's no longer a forced discourse that kind of makes people go out and choose what content they want to consume what they want to hear debate stages Etc that now it's about who spends the most money to get the most views in front of someone
and that that actually influences someone's decision on who to vote for is what's so compelling to me about why all of these systems have such extraordinary power it's just so amazing to me that the more frequently someone sees an ad the more likely they are to buy something or do something here's the bottom line this the more frequently you show someone a
AIC on Tik Tok the more likely they are to vote something differently this thing is far too powerful for the CCP to have any kind of access to it for the Chinese government to have any kind of access to it it has to be divested if you look at what we went through in the last couple of election Cycles not being partisan here at all but we've said and we've
talked about Hunter Biden's laptop as but one example you know that was suppressed obviously on social networks that could have been Amplified in social networks and it could have had the opposite effect Hillary Clinton's emails you know Trump this Hillary this Biden that you you could really sway an election by putting in specific subtle information let alone taking a hack and
relasing it like they did with Hillary Clinton's email so you know those things might not have swayed an election but sax if Putin had access to this like somebody who's super capable and he had access always where it goes no I just secretly pulling the strings of our election okay Iran this is like the biggest threat inflation ever okay look
if you ask if you ask people out there do you think other people's votes are influenced by social media they'll say yeah of course people are brainwashed if you say to them is your own vote influenced by social media do you make up your own mind based on all the information you have they'll say yeah of course I'm not brainwashed everybody else is and I I believe that people are
closer to telling the truth when they're talking about themselves because they understand their own situation better than they understand everyone else's situation the fact of the matter is that all of us are constantly bombarded with information 24 hours a day 7 days a week through all of the channels both online and offline where we get information
some of those data points come from advertisements but I don't think we take ads very seriously we're trained to kind of even just block out the ads when I see banner ads or even ads in my stream I just like scroll past them they don't even factor in my Consciousness I am influenced by accounts that I follow but there are accounts I've chosen to follow
because I think they have signal over noise and the more noisy those accounts are the more I disregard them and and take them them less seriously with advertisements being the most noisy and least useful channels so look I think at the end of the day this idea that we're all being brainwashed and secretly influenced by malign foreign actors I think is at a minimum threat inflation
and that entire narrative might just be completely bogus nonetheless I do agree that for data collection reasons and reciprocity reasons I think it's like I said we're within our rights to require the divestment of of Tik Tok I you know s you don't make this into more than it is again I think this whole disinformation narrative by the way you want to know
why they push it so hard it's because our own intelligence Community wants to be involved and there are political actors in the US who want to regulate quote disinformation on our own social networks and I'm not talking about Tik Tok I'm talking about X I'm talking about Facebook insta and so on and we saw this in the Twitter files we saw what a cozy relationship the
intelligence Community had with Twitter they were all up in there trying to control what Legacy Twitter was allowing URL they blocked the New York Post URL and you've said on this program that you believe that could have swung the election well I think it was that I think that actually was genuine election interference I actually said I didn't
know whether it could swing the election I think that you think could have I think it was a story that deserve be publ published so that and distributed online so that the public could take that into account when they voted I mean and so if it had been widely received do you think I'm asking a question not answering it okay you're you're asking me a question that I
personally think is irrelevant how would I know whether the suppression of that story swung the election how could I know that the point is that the American people were deprived of information that they had Believe come it would have swung the election well I can't prove I can't prove that it swung the election what I'm saying is that it was a type of
election interference why was that story suppressed because 51 former intelligence officials who still maintain close relationships with the intelligence Community publish a bogus letter saying that it was Russian disinformation which it wasn't and then that caused our social media sites to suppress it so that to me is as concerning if not more concerning than
whatever it is that Tik tok's accused of so I don't want social media companies being used by the intelligence communities of either China or the United States to swing or to influence our elections and we need to be equally concerned about that as we are about supposed Chinese influence just to go back in time you probably remember the Willie Horton ad I mean that kind of
sunk dakus if you remember that I mean media and these ads can really have a big impact so people should just look historically there have been many moments where whether it's Nixon sweating on TV or the wiie Hort Ed there have been many moments where video can do this and I think the the they could be done even more subtly by the Chinese
by just you know promoting certain videos all right let's move on to bitcoin issue five bitcoin's back baby it hits an all-time high 69,000 interesting number on Tuesday 69,000 before dropping sitting around 68k as we're taping it be 75 by the time you hear this or 50 it's been ripping in 2024 of 70% since January 25th uh there's two things going on here uh that you've
probably heard about the Bitcoin ETFs finally arrived in the US they were approved by the SEC on January 10th we'll get into that in a minute moth obviously it's an ETF it's super easy to buy them and sell them they've been a total hit black rocks Bitcoin ETF became the fastest ETF to ever reach 10 billion in assets also as the technical crypto heads in the audience know there
is a having happening in April this happens about every four years at the current Pace last one was May of 2020 when these halfings happen the mining rewards are cut in half this reduces the supply of new Bitcoins entering circulation and can cause some swings shath uh we had a we released a clip I think um just about your prediction and you nailed it again
you said this would be a big year for Bitcoin so your thoughts on being right I don't have much thoughts on that but my two comments are that I talk to a lot of Bitcoin Traders and and folks that seem to have a very good pulse and touch on this Market I don't say that I I do because I don't really look at it every day but they seem to think that
this thing is on a death march to 100K I'm not sure whether that price is realistic or not in the year but I will say that we're going to get to a Tipping Point where everybody really talks about this I still don't think we're there yet I think we're just at the beginning but when you see the inflows into these ETFs jakal it's like a very big deal because
it just allows every mom and pop individual to buy some to the extent that they want to own it or they want to speculate on it whatever it is so I I think it's been a very big year and I think that psychologically it's proven a lot of folks wrong and it's a setup for something really constructive the other thing I'll say is that it's not just Bitcoin but as goes
Bitcoin there are a handful of other things people are now speculating that there's going to be an ethereum ETF that gets approved as well because you know if you approve one there's probably legitimate cause to approve a few others so these things are becoming part of the financial Fabric and I think that that should not be underestimated and the SEC
is still taking action against certain Bad actors in crypto there were a couple of those this week but Bitcoin fredberg is incredibly resilient just on a technological basis the fact that it hasn't broken down under stress it hasn't had you know a denial of service type of attack or a government hasn't been able to capture 51% of the mining or or some
great amount of it or just even be hacked in any way you have to be impressed by the the fundamental technology here free maybe you could speak to that level of success that this thing is so stable and trustworthy and reliable to date it's you know it's got a great incentive model as long as bitcoin price remains High the miners will still be there and the system will
keep running if bitcoin price drops transaction fees will decline the value of mining will Decline and you know it kind of goes the other way as well I think the real question is in the last couple of years have we really seen seen a change in Bitcoin being used for transactions or for Commerce in any meaningful way I think the answer is still likely not no
definitely not and it's really a stored value system and it's become this kind of stored value Asset freeberg this microplastics thing we talked about it on the show and uh since that time I refused to open plastic bottles I'm doing all glass I'm getting rid of all this goddamn plastic I I already did glass bottles in my house cuz I'm cheap and I like to fill it from my water
filter but we're uncovering more information and then I saw this headline this week that microplastics are in our blood streams in some cases and what the heck does that mean it's worse than that team of scientists in Italy collected samples from patients that had plaque removed from their cored artery it's a kind of common cardiac procedure where
you get plaque that blocks up in your cored they go in they removed the plaque so a total of 304 patients agreed to have the plaque that was removed from their artery submitted for analysis and then what this team did is they took that plaque and they studied it to see how much plastic was found in that plaque and they used a bunch of measurement techniques to do this
including electron microscopy and mass spec so they because it's really hard to find these molecules and microplastics or nanoplastics remember are less than 5 mm in size with a mean level of 21 microG per mg of plaque roughly 1 per 50 is the ratio of plastic to plaque that they found which is really incredible because it shows that Plastics these
little Nano and microplastics are accumulating good or incredible bad incredible bad that these micro Plastics these nanoplastics are accumulating in the human body now here's the the scary part they then did a followup 34 months later the patients that had plastic in their blood had a four and a half times higher Ratio or likelihood of having heart attack stroke or death from any
cause so all of these major health effects were four and a half times elevated in patients that had plastic in their blood this was published in the New England Journal of Medicine if I didn't say it it really indicates that there is this kind of cumulative problem and that the cumulative problem is likely leading to really adverse health outcomes and I'll just highlight one
other paper from a team in Germany and Norway back in May of 2022 and this team tried to figure out how Plastics are causing adverse health effects in the body and they had a theory like let's put little microplastics or nanoplastics together with all the human cells that we know shake it up and see what happens and what they found was that these
little plastic fragments were binding to dendritic cells and monocytes key cells in the immune system and when those cells were um Bound by PL IC they release these cyto and the pro-inflammatory signals go through the roof it causes the immune system to go Highwire increases inflammation and the cascading effects of that obviously can
ultimately lead to many of the events that we're mentioning were measured in this set of patients in Italy so um again we're just starting to uncover these effects this concept that microplastics and nanoplastics that are accumulating let me just say these Plastics are mostly pet which is what we use to make plastic bottles that we drink water and drinks out and PVC or
polyvinyl chloride which is what a lot of our plastic plumbing and piping is made from and so as little tiny bits of these plastic materials either are exposed to sunlight and break off and end up in our water and food supply and we consume them they are slowly accumulating in in bodies and they may be driving inflammatory response they may be driving adverse Health outcomes
we're really kind of tip of the iceberg and really studying this understanding and analyzing it but here's another really interesting empirical data set that highlights that this really is um pretty significant half the patients had it and of that half they had a four and a half times higher chance of dying or having a heart attack or a stroke in
the 34 months that followed yeah the scary data the thing the thing that that study said which was nuts is it it looked like the the nanop particles the nanoplastics and microplastics were effectively acting as scaffolding for plaque so in in almost like it was a it was a shim that allowed it to grow the question is would it grown faster than
it would have otherwise that's even scarier so I did not like reading that paper that really freaked me out really really freaked me out I was drinking water from plastic water bottles this week and time I drink water out of a plastic bottle now I'm like like nervous every time I take a Si you're not supposed to double your the risk of all cause mortality by drinking
yeah aiji water you know what I mean four and a half x four and a half X it's crazy in 34 months think about the cumulative effect over time long perod imagine drinking water out of a plastic bottle thinking you're doing the right thing and then trotting over to the recycling bin you know yeah and you do that for 20 years you may be killing yourself well there it is so wait what's
the if you if you if the water glass bottles you must use you cannot use plastic you just can it's over no plastic no plastic you got to stop it's over we're drinking it's done glass cans good plastic stainless steel stainless steel is fine just like I mentioned when we talked about this a few weeks ago the carbon footprint the environmental cost
the cash cost is much higher with all these alternatives to plastic so there are big challenges with respect to having some big massive response to Plastics used in our supply but you know living in the luxury world that we all get to live in we get to have that choice and we'll make that choice but it's a real problem for Humanity because
Plastics are so ubiquitous in so many things and they've they've enabled they've enabled affordability of consumer goods this is such honestly like all you have to do is have glass bottles or carry a water bottle with you like I have a Contigo one I like I carry it with me I empty it I it I have a water filter in my house and we fill water bottles and put them in the
fridge no but what if you like yogurt yogurt comes in a plastic container there's all kinds of stuff you can't avoid plastic that's so scary we try to that's so scary we we do have the French yogurt that comes in glass bottles but yes it is hard yes we do the French yogurt in glass where do you get it from there's a French yogurt that comes in glass it's called
like or something they been while no water water you just install a filter system which you have at the mum and just fill huge glass bottles just have your staff fill glass bottles and put them in the fridge and don't throw them away and give your kids like some of these thermoses or whatever but don't have the water bottles like you know it's so funny it's been a disaster in
the poker game in some ways we got rid of it and there's been way more broken glass people knock over the you know the the side tables I get it it's been a huge pain but I will not go back no it's the right thing to do absolutely the right thing to do okay well if if jamath is endorsing this I guess I'm gonna take it seriously I think you got to do it my
opinion doesn't matter with sex I'm not saying you're wrong I'm just saying that your threshold for becoming concerned is lower and then if Cham if it hits Chamas threshold Which is higher I'm gonna take it more seriously as your besti I would like you to stop using plastic for the rest of your life okay you're in a position to do it I would ask you to not
do it all right everybody Welcome can all you fers come back to the B so we can see each other absolutely I miss you guys all right love you guys I miss you I miss you guys too for the Sultan of science the chairman dictator and the Rainman David Sachs I am the world's greatest moderator okay love you guys I got to go love see you next time bye let your winners
ride and instead we open source it to the fans and they've just gone crazy with it love queen [Music] of besties are that's my dog taking your driveway oh man we should all just get a room and just have one big huge orgy cuz they're all this useless it's like this like sexual tension that we just need to release [Music] somehow we need to get merch our I'm going all [Music] in