rain man david hey everybody welcome to the all in podcast it was a slow news week so we decided we'd give you a special episode we're gonna go around the horn with our special picks we're each gonna pick three picks everybody we're gonna pick our favorite recipe our favorite new hobby and our
favorite streaming guilty pleasure because there was no news uh with us today the dictator chamath palihapatiya rainman david sachs with his new track from young spielberg just ripping across the charts uh young spielberg added again this time with a a track focused on the rayman himself and the queen of quinoa who everybody says we should upgrade to the king of quinoa
that's so sexist why is that an upgrade the queen of quinoa i don't know people just felt i was being i don't know how people could say that anointing him as queen would be derogatory i think these people are not woke and they need to be canceled jason here you go again making a lot of assumptions about people's pronouns yeah they they queen of quinoa they i take no offense i take
no offense your insults to me and uh today i'm having the emotion of excitement and i am ready uh for the conversation good we got the firmware upgraded all right so uh i think we might as well start with uh i don't know if you guys caught this but there's a red subreddit called um wall
street bets and what they do on wall street bets is they find angles and uh a thesis and then they bet on a stock the stock they picked uh for the past couple of months has been gamestop and boy jason hold on a second um that's that's that's not true so um do you uh i had actually a guy on my team put together two really important documents and i'm just going to read them
because it's full of so much interesting and then we can talk about um where are these from did you say from the wall street bats no no no i had a guy go in uh one of my team members one of my colleagues and go and summarize the entire saga from the beginning and then we can talk about the the corporatist scumbags that robin hood and other [ __ ] people over
so let's let's do that in that way okay um this is the way they call him the dictator let's uh you're an idiot because you you just want to defend people because you blindly stumbled into a [ __ ] trade that actually made a little money lo and behold you actually invested in a company that literally they got on television yesterday and they [ __ ] lied to americans right to their
face this is a company that was insolvent because now let's just put a pin in the following data point which i believe to be true i know more about this than you do because i live in these markets okay so i understand what it means to be putting on trades to being short to being gamma-squeezed
to have longs to do all of this risk management you're an early-stage investor so i know the intricacies of this stuff and what's happening in here this company was insolvent they did not have the capital requirements to post the margin that was being asked of them by their partners and so this was a platform level decision to ban and block people from trading securities
it cost individuals hundreds of millions probably billions maybe even tens of billions and these [ __ ] should go to jail now let me give you the timeline before we get into that june 2019 in june of 2019 a wall street bets user named deep [ __ ] value began buying long dated january 21 calls what that means is in june of 19 this person was betting
that the stock would go up by january of 2021. he spent 50 000 um which by the way today is worth about 25 million dollars by the way we should just highlight that there are forums where individuals that are trading stocks talk to each other and share tips and promote things to one another that's where this was taking place yeah and by the way those forums exist uh in the professional
organized world too amongst hedge funds you know i've been invited to idea dinners where we all get together and we talk about the ideas that we have and we're all expected to do fundamental analysis but some of those ideas are actually momentum driven ideas and a lot of the biggest dislocations
in the market just as a setup here have been because of momentum driven trading by organized capital okay so we've we've been stuck with this for a while so so this guy deep [ __ ] value posts this and every month since he's posted a screenshot of his position and he's titled it gme yolo update august 22nd of 2019 michael bury who is this guy famous from uh the big short
who's the guy that caught the mortgage thing he discloses a three percent position in the company and he highlights that ninety percent nine zero percent of gamestop's 5700 stores are free cash flow positive that's like pretty good he urges a buyback and he notes that the company was trading
at or near net cash levels so he's making a deep value oriented fundamental thesis as well i think also it's worth saying what gamestop is because even my wife asked me what the hell is gamestop last night gamestop is a retail store where people buy video games i used to go to the mall all the time and consoles and headphones and other stuff and they'll buy back your old games
and so the stock got beat up over the last couple of years as people stopped going to malls and stopped buying stuff in stores and everyone thought the company was going to die and so these guys observe that maybe there's real value in this company and it's making money digital downloads
no one buys dvd roms anymore or anything like that so and and the chewy founder who is very successful at e-commerce came in june 19 was the original post august 22nd of 19 michael bury comes in and says i'm long then a year later august 31st of 2020 ryan cohen who's the founder of chewie takes an almost 10
position in gamestop about two or three weeks later on september 19th of last year a member of wall street bets writes a post on gamestop and he notes that gamestop has a hundred and twenty percent short interest which i'll get to in a second so hold on what what does that mean 120 short interest and he defends the company as a result of a few things he says number one there's
a new console cycle coming just as jason mentioned number two consoles are are not going all digital immediately gamestop loyalty programs have 55 million users they have a strong balance sheet ryan cohen just bought a stake and the shorts were underwater and would be forced to cover
if the stock ran up he predicted the convergence of all these factors would lead to a big squeeze now november 16th of 2020 ryan cohen writes a letter to the gamestop board and he urges the company to conduct a strategic review and share a credible plan to capture market share in the gaming industry he said that they need to evolve into a technology company that delights gamers
and delivers exceptional digital experiences i'm just quoting here not remain a video game retailer that over prioritizes its brick and mortar footprint and stumbles around the online ecosystem november of 2020 someone in wall street bets highlights that a hedge fund called melvin capital was going long gamestop puts what does that mean that they are synthetically shorting the stock
by buying the right to sell it at a different price in the future okay um and that they had been longed that position for more than four years so all the way going back to 2016. fast forward to now 2021 of this year january of 2021 game stop strikes an agreement with ryan cohen and adds him to the board of directors
and gives two of his affiliates his former ceo and and cfo of chewie also two board seats they collectively you know bring their experience in e-commerce online marketing finance and strap planning the stock goes up 13 on that day and closes at about 20 bucks a share one day later and then over the next day after that so for january 12th and 13th of 2021
there's a ton of activity around gamestop in wall street bets and now in discord and in stock twits claiming that brian cohen is going to be the savior and then by january 14th so three days later the stock closes at 40 bucks so now it's up 125 so now comes the setup the pros versus the joes from january 12th to today there has
basically been a battle by institutional investors on one side shorting gamestop and retail investors on the other buying the stock and also buying the right to buy the stock or what's called call options and this is what has created this crazy nonsense we've seen so on the institutional side after you know retail drives the stock up the institutional guys are
like hey wait a minute you know ryan cohen's an idiot you know this company is [ __ ] [ __ ] these guys they have too many you know cyclical and secular tailwinds and they become so massively short that the infrastructure that's supposed to even count all the shares can't keep up and now
they are short more than the actual number of shares that actually exist so now they're 140 short the joes retail they start to aggressively purchase all these cobble options and on january 13th and 14th um this price keeps ticking up then a bunch of quant funds and momentum hedge funds notice all this activity and they also participate on the long side
and then over the past seven trading days we have traded over 100 billion dollars of stock in gamestock which is well in excess of what retail can support so here's what's crazy to realize a bunch of value-oriented non-computerized non-quantitative hedge funds short retail notices of dislocation initially fundamentally but then momentum-oriented buys other hedge funds realize
also buy and this is what's created this massive short squeeze on january 19th citroen research a research firm that basically tries to you know find shorts in the market announces that they were short game stop and they gave five reasons why it should go to 20 bucks the stock was at 35
50 on january 19th then over the next two days gamestop calls hit an all-time high and it runs a two-day rally of almost 70 percent and this is what really starts what's called a gamma squeeze okay which is what we saw in the first part of this week so january 25th ken griffin stevie cohen they inject almost three billion dollars into melvin capital the firm that was short
two billion from citadel and 750 from from stevie cohen stevie cohen had a billion in it from before and then now all of a sudden the squeeze keeps happening the squeeze keeps happening and then it starts to spill over to the rest of the market now all these hedge funds these original hedge funds
they are getting called by the bank saying hey wait a minute you've run over your collateral limits you need to post more collateral we need more money in your bank accounts so now not only do they have to cover gamestop they have to cover all their other shorts so those go crazy and they have to sell their longs so now they're selling you know facebook netflix
alibaba so those things are going down that accordion is what's been happening in the market in the last couple of days and then the coup de gras is what happened on january 28th of 2021. brokerage firms and this is where jason we should talk about this like robin hood and interactive
brokers because in fairness it wasn't just robin hood prevented their users from buying gamestop and a handful of other stocks they were only able to sell which resulted in such a one-way pressure it caused a 44 sell-off yesterday now that's been reversed today and so what it speaks to is a bunch of questions there are questions as to whether or not this was
mandated by the platforms or the regulators given the fact that it didn't impact all the brokerage accounts it was a platform level decision so some organizations like robinhood banned it some organizations did not and it could be that some of these platforms that banned it is likely because and this is where we get to the insolvency question
didn't have enough margin and so they knew that if they opened the doors there would be a run on the bank and there would be a run on robin hood and that's why they basically i believe had to stop um allowing people to trade and it just shows how um how fragile um the whole system is the last thing i'll say and then we can talk about this is uh how
does robinhood make money which i think is also important to understand this robinhood makes money through a mechanism that's called payment for order float so they don't make money from consumers right what they do is they watch and monitor your orders they create a data file about
that and they give it to these prime brokerage prime brokerage institutions like citadel milliseconds before you do the trade what that allows citadel to do is if they see a lot of people buying milliseconds before you buy they can buy and that allows them to make money so to be clear citadel is responsible for 47 percent of all the payment for order flow volume
they paid robinhood almost 60 million dollars in the third quarter okay um plus another i think you know seven and a half million for s p 500 stocks and 31 million for non s p 500 stocks they paid them almost 100 million in the quarter or a 400 million dollar run rate so if we had to summarize all of this in a nutshell that's what we know we know that it started out as
people debating the true fundamental value of gamestop and it morphed into a momentum trade where a bunch of folks got dogmatic about a short a bunch of folks got dogmatic about being long and belongs one and in the middle what happened was a bunch of firms basically decided at some point to gate the ability for people to transact in all of this
which i think caused a lot of economic disruption and that was because they didn't have the margin requirements and i think it's because they were insolvent i.e robin jason over to you okay um i think we probably agree on a lot of things here uh thank you for the concise over we agree that wall street vets and retail investors are incredibly
powerful now and we agree that that's a good thing we also probably agree that there are shenanigans going on with shorting of stocks i.e 120 or 130 percent short and we agree i think that some of these uh hedge funds do manipulate the markets with these we also agree that it's unfortunate
that uh in order to stay solvent robin hood apparently if this is the information we don't have complete information right now so the thing i do think that you're being tremendously unfair about and i'll try not to make it personal to mop is that you've been uncouth and you're attacking people without with partial information i'll let you respond to that in a minute and i think we
agree that robin hood is responsible robin hood is responsible for this revolution in retail trading they created the platform and they created the innovation that got millennials to on mass embrace trading stocks how did they do it they figured out a clever innovation of how to make it free
and friction free they did that because they did this selling of the data in the order flow okay we can debate whether that is fair or not but facebook did the same thing they created a data business they provided amazing products and services that you yourself built for five years and made a billion dollars off of in order to make it free for consumers now
there are unintended consequences of any company at scale whether it's uber robin hood tesla etc and they will all have to weather these storms and i think that there are pieces of information that you do not have chamoth and for you to say that they're criminal and for you to say their scumbags and to act this way is i think unprofessional does you a disservice and does your
argument a disservice and you did this as well with uber another one of my investments and that company weathered the storm and they've done great things in the world and they and i'm very proud of that no no no no no no no and i will be very proud of what i believe that and they brought in dara who cleaned it up oh agreed agreed but they got there
and so well what happens so why do you know that i don't know well i i haven't talked to vlad i saw what he cares about vlad he lied on he lied on television i don't believe he lied i liked it he lied on fox where did he know his life yesterday what is the lie well jason he was confronted about
whether there was a liquidity crisis and he said to their face no that is not true i think this is being misinterpreted and there'll be a clarification that occur i think because they were able to draw down 600 million and because they were able to take down a billion dollar investment from the top investors in the world that they s resolved
their liquidity problem nobody in history has ever created this many retail investors than robin hood they are responsible for the movement when they pitched me the company they wanted to create this revolution it is paradoxical that they are now the enemies of the revolution because they actually created and enabled this and i pre and they have been number
one in the app store since this whole fiasco nothing you're saying convinces me this is the they are the lehman brothers or bear stearns of 2008 to me they will not be they will get through this and there has this is an unprecedented black swan event i think we would all agree nobody had exactly what lehman and bear said that is exactly what they said and this and they will i
believe robin hood will write it out because they throttle the number of people coming to platform las vegas is not designed for everybody in america to come to las vegas in the same weekend what's happened will you admit that that the tens of millions of people that had their hard-earned
money inside of robin hood was prevented from participating in trades that could have been executed other places because of an arbitrary decision by robin hood that they had it was an arbitrary thing to stay insolvent how is that how is that jason an arbitrary decision do you think they wanted to make that decision jason that's me telling you that they were insolvent
that's not them saying it this is what i'm saying right now communication was not perfect i'll agree the communication was not perfect they should have just said we had no choice but to stop this or we would have been insolvent we cannot take this many trades is that but is that what we call lies
when people's money gets [ __ ] over just it's inconvenient let me just say one thing i'm going to interject your your your vigorous debate um the the important thing i think to note is robinhood makes money effectively as chamath pointed out um through arbitrage of pricing in the markets
and by providing leverage to their clients so the clients can trade beyond their means i used to be an investor in a forex trading company was the largest forex trading platform in the world for retail investors and 60 of those accounts went bankrupt uh over time so there was a lifetime value on an account because the uh the customer would come in they'd trade
foreign exchange rates up and down they would ultimately just get burnt up and that was it robin hood makes money when the market is non-volatile when there isn't a lot of swings suddenly when there is a swing and that's how they're able to provide their free pricing to people they're making a spread but suddenly when there is a swing and the spreads start to widen
they are actually exposed to losing money so jason it's true what chamath is saying like they did face a liquidity crisis to some extent that's why they had brought out they all agree but it was a function of their business model right their business model provides great benefit and value in some extent during good times but when times get bad it's like oh [ __ ] things are at risk
and that's very similar to kind of the lehman and and you know i don't disagree i don't disagree i i think this is an unprecedented situation with the number of participants it reminds me of surge pricing with uber during snowstorms and that also was an unintended thing that you know who knew
that it would go up to 400 to take a ride and that's something that companies will be faced with and they will have to then adjust and then make it work and i think you know in the case of robin hood they should have just came up on wednesday and said we can't take any more orders we can't take any more new customers we're pausing signups you'll be on a waitlist because we will
be insolvent if you guys make any more trades and that would have i don't know if you believe that would have i agree with that so jason let me just communication it's beyond poor communication people were blocked out of their accounts like there was hundreds of mill incalculable amounts
of economic loss that i don't know if that's gonna wind up being true because all these trades are occurring now and the stock is rock is a rocket ship who's to say that oh no i mean look i mean jason aren't the shorts all covered by now that's what they've been saying on cnbc no there are still people how do you know how many people are short right now and how many shares because it's
the primes put the data together and they send it to us do you have it handy because i've been looking for it online and they said ten times the number of shares short have traded hands in the last ten days or five years i mean jason i don't know i don't have it literally in front of me but
i could get it in the next yeah just text one of your people you've got all these researchers there um go ahead zach okay look i'm going to try and thread the needle here um i think j-cal is right that um we shouldn't impugn people's motives without having all the information and furthermore you know building these uh rapidly scaling startups is really tough and it could
have just been you know a function of you know not knowing how to deal with unprecedented growing pains so i don't think i don't want to be too judgmental can i just stop people hold on yeah nobody that's not right no but david that's not can but you guys are not being accurate they have known for decade for years sorry dears how this business work when somebody
buys a call option they are legally obligated when they send that order through they have to post margin on behalf of that person so they saw this building this happened in march of 2020 they went through this liquidity crisis they've had to draw credit lines before they saw it building in the system so this was nothing except negligence yeah so so i was about to
that i hadn't gotten to the part where i was about to agree with you chamath i mean look all i'm saying is even if it was negligence i'm not sure i would impugn all the motives to them that that's all i'm saying i'm trying to find some common ground with j column that point but where i totally agree with yuchimoth is with respect to the effects of their decision i mean the effects
of that decision they made to stop trading and specifically they didn't stop people from selling they only stopped people from buying so they shut down one side of the trade and the effect of that was we had these hedge funds from wall street they were on the ropes right i mean let's discuss who
these guys are these are the apex predators of wall street they are in the business of shorting companies to destroy them i mean that is their business model and they are not academic traders okay who are just speculating on outcome they engineer the outcome right look at their tactics just watch the show billions right they hire pr people they hire private investigators they're
participating on these message boards uh spreading disinformation look at the the year of hell that elon went went through right they tried to destroy like five years yeah yeah exactly they try to destroy uh companies to engineer that outcome they create nothing they're in the business of
of of destruction now the beautiful thing is you had these reddit kids these pirates who published this manifesto right on reddit basically being the heirs to occupy wall street they recognize look occupying like a like a physical space does nothing to these guys we are going to hurt them
where accounts in their pocketbook we are going to get together and we're going to basically create a trade mob that's even bigger than their cartel and they did they got 2.7 million people taking the other side of this trade and then when the hedge funds doubled down they said [ __ ] you we're gonna double we're gonna triple down and the guy on reddit said listen he uh paraphrasing
john maynard kane said we can be [ __ ] longer than you can be solvent and they were winning that was what they said right and they were winning the trade okay and melvin was dead busted and citron was on his way to being dead busted and they had to go to big papa stevie cohn
okay and ken griffin to get to get their rebuys to buy their revised to get back into the game okay and then they had these guys on the ropes they had them felted okay and then what happens just at the moment where they're gonna like basically bust them out of the game for good robin hood shuts down the buy side of the trade and so what does that do it gives these hedge
funds time to regroup to unspool the tray to reposition and save themselves and to get out of the trade if they want to get out of the trade you can never take that 24 hour time period back no matter what robin hood does now and so i agree with jamaat this was like don't you this was tremendous david on that point i think it's i am in agreement that the hedge funds deserve to get
their assets kicked 100 i also as i said we don't have complete information of why um you know robin hood had to pause trading and the other platforms and it was like five platforms by the way that had to stop or else they would be insolvent because nothing like this has ever happened before
this is a run that nobody's ever seen and now we're back in the game and don't you think all this attention then drives more people to buy gamestop which is what's happening today and that they're still going to get crushed because they're still going to have to cover i mean look i i i don't like like i said look where i agree with you is i think the consequences of
this decision by robin hood were i mean they were really bad right i mean we finally had these shorts on the ropes where they deserve to be finally they're getting a taste of their own medicine yes and it was really bad to pull the plug on on the though i wish they were they wish they didn't have to i'm sure okay exactly and i don't know what went into that decision
but here's the thing that i think kind of stinks about it is the point that your mother is making about who is doing the the trade execution for robin hood those trades are flowing to citadel well that's part who is that's part of it but 40 47 but who is now on the short side of the trade citadel went in and bailed out melvin and citron and so they're on both sides of this trade
now how does that make sense well citadel yeah but i mean what i would like to know specifically okay is did anybody from citadel reach out and touch robin hood did anybody at citadel put in the fix and saying to robin hood of course that's a good question we're gonna we're gonna cut you off
you know unless you freeze out the buy side now look 99 chance that didn't happen i don't know but that is a legitimate question we need to actually can i just tell you the the question is important but the way that you phrase it is you call them and you basically say listen uh you need to post
500 million dollars of margin why oh well these trades uh you know what we're going to arbitrarily change the margin requirements okay oh eight you need to raise uh you need to post so then what they did was they pulled all the credit lines okay they post margin trades are still happening like crazy right all these people are buying gamestop calls they have to go because look
when you buy a call when you as a user with david friedberg quinoa buys a call robinhood becomes synthetically shorted right robinhood doesn't have the share to sell you but it's giving it to you so they're technically short they got gotta go buy it okay so this is what creates this dynamic where
robinhood knew they knew every second of every moment what was happening and more importantly what could happen at a minimum it's negligence and at a maximum it's the fix well it was and it was it was fine to do it before the market started to swing volatile right and and so when the market wasn't high volume and when it wasn't volatile it didn't matter because they had appropriate
levels of surplus capital or statutory capital or whatever the definition is in this market uh to be able to cover the quote-unquote var or the value at risk of their portfolio of their customers worst-case outcome but as soon as that spiked as soon as the var spiked they had to go get more capital and so what do you do if you're the manager of robinhood in that situation where
your clients who've been making you a bunch of money by trading stocks over the last couple of years suddenly they all get themselves in a bind where the var on the portfolio is more than the cash robin hood has to clear assuming all these people go bankrupt that's where robin hood had
to scramble and so in that circumstance they drew down debt and they had to go get a billion dollars of equity but if you guys were running that business and i'm not speaking for robin hood's uh i'm not making the case for robin hood but what would you guys have done in that circumstance
you know suddenly all your and by the way i'm saying they created the problem for themselves because they allowed people to trade on margin with low bank with low account balances and volatile stocks prior to this it got away from them and because you can't you cannot run a business like that and be selective and arbitrary you can't say some stocks on certain days some
stocks on other days some options over here some puts over there that means you're a [ __ ] [ __ ] what do you do on tuesday or wednesday when all of a sudden you're not tuesday wednesday this if you were a reasonable manager of a business like this this conversation would have been happening at a
board meeting quarters ago hold on a second let me finish please okay it needs to happen quarters ago and in quarters ago what they would have said is hey guys we've run some scenario analyses we've done some sensitivity analyses here's what happens if all of these things can go against us that's a typical stress test that a bank has to do right when you're a structurally important
bank you have legislation that forces you to be under these conditions where you have to make sure that that you can understand some of these scenarios and then you have any any trading entity or insurance company they all have to have that analysis of what's the worst case scenario and how do you plan for it and you have to you and by the way coming out of 2008 we actually
legislated that we needed to have these two and three sigma you know event scenario planning and you needed to have proper credit so here's what happened really number one it was under equitized right at a minimum the business was massively relative to what they were letting their customers
do exactly and that's really important because the point is they let people trade with high margin and they let people trade in volatile stocks and it was working until not just stocks but options which is what which is what creates the real spin up the feedback loop that blows this whole thing up and and then number two is they don't know what they're doing
i think one thing that's really important i just want to say this we should stop pretending that trading in stocks is investing in businesses and uh this is something we've said for a long time on wall street but stocks shorting margin and derivatives those um those four things no longer look like what the capital markets were originally set up
for which was to help capitalize businesses and allow people to exit their investment in helping to capitalize that business to another investor that wants to come along it has effectively become a synthetic casino or a synthetic gambling model that lets people trade things up and down and this has been the mainstay of wall street for the last couple of decades and as you pointed out saks
uh it really is a leech on the system because the amount of money that trading firms and traders and hedge funds make doing this ultimately is taking away from capital that could be invested in actual businesses that could drive job growth drive economic prosperity drive innovation and um the
volatility that i think we've seen is the ultimate feedback loop that emerges from when you allow a casino to operate that sits under the guise of being business capital and investing in businesses it's not i'll give you guys a statistic i downloaded the data from cboe that analyzes
how much volume was traded across all the equity markets last year in the us stocks traded a total volume last year are you guys ready for this 121 trillion dollars of notional um across 2.7 trillion trades do you think that 121 trillion dollars of notional equity value trading provided capital to businesses anywhere close to one percent of that total
amount of trading volume it really is a synthetic instrument that allows people to participate in i bet that something is going to go up and i bet that something is going to go down with other people of an of a similar ilk and one person makes money and one person loses money and at the end of the day the underlying business entity doesn't benefit whatsoever
and you see it when shorts go against businesses like happened with elon and tesla and you see it when derivatives like cdos blow up the [ __ ] housing market where people basically trade these derivatives that sit on top of housing and that capital did not find its way into homes to help people buy homes it ultimately led to the uh collapse of the only the only reason
that lehman and bear stearns was shut down was in 2007 and eight when they were in a liquidity crunch in the same thing and they basically had all these trades blowing up against them and they couldn't collateralize them was that the people on the other side were hedge funds
and that's why you know they were put into the fed and that's why we were able to basically like you know come out relatively unscathed and but i mean by relatively unscathed is like a global calamity um the the tragedy of this is that this is the tragedy of the commons it's like you know there is no organization of people that can say hey listen i'm really rich and wealthy
and what happened here was wrong even though it's probably on the same scale and so everybody that was a participant in it is in in my opinion i think is guilty of all of this they were they were complicit in the robbing of america do you think calls and puts um and shorting should be allowed should those markets exist i i do have a sense of common sense solutions and
let me uh let me kind of give you them and then you can tell me what you think so the first is we need to use modern technology let's just start with that right to ensure that you know one share of stock right isn't loaned out multiple times so that you can't have a scenario where you have more than a hundred percent no brainer right that's a no-brainer so you still
support shorting some up yeah let me let me just go through the list and then you can tell me what you think if if high-frequency firms can trade tens of millions of shares per day there's no reason why we can't reconcile who the beneficial owner of every share is so maybe that's a you know now maybe we found the first obvious use case for a blockchain right um
like you can't borrow a share unless you can prove beneficial ownership in a in a you know nanosecond which can only be done on a you know decentralized ledger but the point is number one is we need to rebuild this infrastructure you can't have 136 percent of a company be short that makes no sense
the second what we've learned is that again the it's like are we going to basically have these blow ups every 10 years before we actually address the elephant in the room which is leverage like you need to have leverage limits so for example banks coming out of 08 have super strict oversight and leverage limits and because they're dubbed systematically important we don't do that
for hedge funds and i think we need to and i think that we need to have the ability to realize that these these guys can cause systemic risk right so um just on this example i don't know if you guys have ever heard about long-term capital management yeah this guy john merryweather the asian
currency crisis the whole thing collapsed so good there's a good book on it well so it's it's funny but if you guys think this is the second financial calamity it's not the first it's the third because the first one happened in 1998 so in 1998 it was a firm call it was the whole uh economic system was
going to collapse if the bailouts didn't happen so listen to what these guys did long-term capital management borrowed they had 4.8 billion dollars of capital that limited partners and investors gave them okay these [ __ ] crooks were able to then borrow 125 billion dollars 125 billion on the 4.8 billion of notional so they were able to lever themselves up 26 times by the way synthetic margin
right no actual capital was allocated to these uh to this transaction uh set it was all synthetic like no no money moved accounts when no money moved accounts so it was literally just writing stuff against debt that couldn't have existed yeah so they so they built 60 000 trading positions
and those individual positions represented again 1.4 trillion right us dollars so you took these guys in a room took 4.8 billion got knucklehead over here to give them 125 and then got these knuckleheads to sell them positions and all of a sudden 4.8 billion equaled 1.4 trillion and so then u.s u.s regulators had to step in they had to orchestrate
a bailout from a consortium of banks because they were concerned that if ltcm collapsed the whole system would collapse because they didn't understand so right so we have to we have to put leverage limits on top of hedge funds the third is we need to improve disclosure the the rules at the sec right now is to discourage disclosure that doesn't make any sense
we should force everybody to publish what they own on a weekly or monthly basis you have the ability to do it the technology is simple so you need to imp improve disclosure because then watchdogs and other people can basically be looking at it all day and identifying these risks faster not slower
the third is we need to do something around open trading like why is it that you're you know people are allowed to go to casinos why can you uh you know buy lottery tickets um but all of a sudden like we're gonna decide who's financially literate a platform like robin hood can decide what's bought and what's sold i don't think that's fair
um and then the last thing is i think that we should have a short-term trading tax um we tried to pass one in 2018 10 basis points if you had passed this 10 basis point tax in 2018 on short-term trading it would have created a trillion dollars almost i did the math on this because i actually the reason i ran all the equity numbers was to figure this number out
so in the u.s we generated 160 billion dollars in capital gains tax last year and if you look at the volume i described earlier in terms of notional traded of equities and number of shares traded if you charged 0.1 every time someone sold a share on the value of the share they sold it would equal
the capital gains tax so what you could do is you could charge 0.1 on every trade it would reduce all of this high frequency nonsense where people trade in and out of stocks it would force people to trade for the longer term or basically invest in companies and you could get rid of the capital gains tax think about that if we didn't have to pay capital gains tax and we were only taxed when
we traded out of a stock 0.1 percent you could see an incredible amount of capital making its way into businesses and this would fuel economic growth and jobs and prosperity um and so i think if you could pull that off put the two together a 0.1 percent sales tax on every share sold and get
rid of capital gains tax the lobby is incredibly powerful the lobbyists got to that bill but that 10 basis point tax on high frequency trading it just means like look if you're going to trade a whole bunch of [ __ ] every eight seconds you just have to pay 10 basis points in and out 777 billion dollars of incremental revenue to the federal government and it was lobbied out and i agree
with you and by the way the more more money goes in more money makes its way into companies right and that's the best you stop all the nonsense where people are basically trading to bet that something will go up in the short term and you get people to make investments in the business as
opposed to the momentum lowering the capital gains rate is genius because i think that if you if you are a retail investor and you can for every year you hold if you can decrease your cap gains rate by 20 by the fifth year now all of a sudden retail folks aren't necessarily gambling they're owning and their cap gains rate would be zero after five years that would be amazing
i i have a a basic question i'm interested in your position saks and maybe even around the horn what happens to the if the short positions get covered which they're going to be at some point in game stop i would think or some large amount of when the short squeeze is off what happens to
the people who are buying in you know to the meme stock as a retail investor let's say over the next 10 days are they going to be left holding the bags is there any way this company could be worth 20 billion or 25 billion because as freeberg points out there people are not buying gamestop they're they're trying to destroy a hedge fund uh who made a stupid manipulative bet
great we all love the the robin hood story of that not robin hood tm but the generic term robin hood um what happens to those people are they gonna be the last people holding the bag probably this is not going to end well there's no question about that i totally agree with you that people engaging in this kind of speculation and buying at these prices it's not going to end well
now i do think that the redditors actually had a brilliant strategy right when they noticed that these hedge funds were over short overexposed and they seized on that vulnerability they did to the hedge funds what the hedge funds usually do to everybody else which is find the achilles heel
right and pile in so i think the strategy started brilliant now anyone who's piling into it i'd be real careful because i think the hedge funds have regrouped you know and um you know the idea that you're gonna be beat them at their own game you know when look i mean citadel is executing your
trades i mean right that the trades are the order flow is going from robin hood to citadel they're not going to be caught flat-footed they're on the other side of this trade and so you know i just think the house always wins i'd be real careful about getting into it at this point robin hood just tweeted that now the list of uh restricted names is now up to almost 35 or 40.
i think it's worth um randomly picking companies guys rlx what is rlx uh i think that's uh ralph lauren nope you're not allowed to trade that um sndl i don't know what that is but you can only buy 10 shares would a better solution chamoth be for them if they can't handle this and they have the risk of ruin
to just say we're not adding any more accounts until we can digest all this and raise enough capital to float all this and do you think there's a chance the sec is telling them you got to pump the brakes on this because we can't have a market crash two questions jamal um i i think that the the the issue isn't um robin hood uh ability to grow it's that they don't have their ability to
run their business and so their incompetence is gonna cause them to i think have to deal with if they had well if they had 20 billion dollars in cash right now this would not be an issue right i think you're right okay so assuming they can line that up because that's probably what's
going on right now is a 10 billion dollar uh investment is going to go into this company pre-ipo so that they can actually take advantage of this situation and grow so despite the fact that you have an axa ground with them because you have sofia competitor that's very far behind them that had its own colossal problems let's put that aside for a second you're talking your
own book without even mentioning it do you think that if they had that 10 billion they would just open up all the doors or do you think maybe they should say hey we're not going to add anybody else i think that what's going to happen is they're going to get sued into oblivion i think that the class action lawsuits here when people talk about the uh implied losses that that
they that they had over the last 24 hours david sachs is right you can't undo it the thing is like what in all of these other situations like in the uber fiasco you know you can't claim much damage right because you can't measure it you could have taken a bus you could have taken a taxi you know
you could have taken a lift maybe you could have walked who knows what it is but the point is that the the economic impacts um i think were much less than maybe the psychological impact right like you were angry here it's the exact opposite which is that you prevented people from transacting in an open market and when people signed up to use the service that's what they thought they were
signing up for and they thought that the risk on the back end would be managed you have to remember it's not that the individuals did anything wrong by buying or selling it's that robinhood did something wrong by not being able to manage their business accurately and then that then impacted the users to the tune of tens of billions of dollars
that has to get adjudicated and so yeah i think the right thing to do is to stop the business hit the pause button allow people to elegantly transfer their money out do we have to remember on the back end of this whenever that you have one of these market failures the clearing houses are allowed to instantaneously close your account and transfer to another broker
instantaneously you have that right and so the market does understand the systemic risk at some level they just didn't push it all the way through to the end of retail and so we're going to have to unwind this and unscramble this egg because it's a really it's a really big problem yeah you imagine growing growing willy-nilly because everybody's infatuated with valuations and blah
blah and you move into a regulated market where you needed to understand capital constraints you needed to understand modeling you needed to understand three and four sigma events it just means you're under prepared which means at a minimum you can't be doing business until you get that [ __ ] under control yeah i i actually think we're almost in sync on this um
you have a little bit of an axe to grind because of your other portfolio company i think that you still won't recognize that you have a way let's talk about worse in the race wait because so far i just did they did they finish resolving all of their harassment lawsuits is that all resolved now
or is that still open yeah we've and then you took them public so did did you work all that out before you took them public yeah jason we we transitioned the ceo we've completely hired a new team um i mean it's incredible right so you so your company that you took public can resolve issues and you can give them time and then you can in fact become their mentor and you
can become their savior to get them public and save that company jason you should robin hood can't jump robin who can't can't talk about his company that's going public right now so just as his lawyer i'm gonna step in and okay no no make sure you don't go to him into saying
something companies all of our companies and i don't mean to create a lot of collateral damage here but sacks had a company that had challenges chamata companies are challenged we've all had companies have challenges and i think focusing on what is the role of an investor when your company faces challenges i think the role of the investor should be and i take umbrage to you chama trying
to dunk on me because i'm supporting an investment i think it's a low blow and i take it personally i'll be totally honest i am trying to work with the company to help them resolve the issues and i need to be loyal to my founders and i need to say hey how do we resolve this how do we get here
and work with them and you say that i'm right or die but that's how i approach this is i should be trying to be helpful as a shareholder could you i think you try to be too but could you make the argument that someone dunking on your company is the equivalent of a hedge fund shorting a company
i'm talking about my personal relationship with chamoth which you know it's different than you know the the public markets right i know but what i'm saying is like i think in the private markets we hear a lot about venture investors um you know often speaking good about their own companies where people really get irritated is when venture investors speak bad about
other companies it's the equivalent of the hedge fund short and uh you know jacob i mean chamoth may be dunking on robin hood i don't hear him dunking on you i mean i just said i stumbled into the investment at the opening well you stumbled into vlad in a bar i mean you told me jason you told the story jason you told the story recognized me in a bar and came up in pictures
but you told the story flippantly on television that you ran into man antonio's nut house what do you want us to think you didn't tell us hey listen i had i had systematic scouts reach out based on traffic growth i sat down my that's not how i get deal flow fine by doing a podcast decal if you
want me to apologize for your flower it's through this jason but jason if you want me to apologize for saying that you stumbled into it based on your public description on television then i'm sorry yeah but it doesn't but it doesn't take away from what we have i i think the investors responsibility this is what i think is fundamentally wrong with silicon valley
we are people that basically do this like hero worship around founders and it's stupid i think we have a job as fiduciaries to the users and to the employees and to everybody else that doesn't have a voice and most investors are incapable of actually pushing people to do the right thing okay i'm pushing to do the right thing and i always i've learned the hard way and in this
example what i'm saying is this problem should have been solved three and four quarters ago and that's a government yeah i mean look yeah you said your mother you're right about that but i mean just to give jkl a little support here i mean the reality is you know we've all been
on the inside of these hyper growth companies and you know like mistakes happen all the time because you're moving so fast and yes it should have it should have been fixed you know but but you know stuff happens now the question is when bad stuff happens is it an integrity issue or is it negligence or is it just people running too fast and i don't think we know that this was an
integrity problem i mean it could have just been people running too fast but david that's what i mean you knew what the rules were meaning i don't think i think it is an integrity issue the rules were not like all of a sudden in a crystal ball and all there's a magic 8-ball that spits out a
rule when you do a deal with dtcc when you did a deal with your holding company for clearing you sign contracts those contracts should have been modelable this is an excel problem this is not i i i i hear what you're saying and i'm saying i don't completely know i want to get to the bottom of the relationship between citadel and robin hood and i want to understand if there was
any undue influence there okay or whether this was just a case of hyper growth catching a company by surprise i'm not defending them i'm just saying i don't know and therefore i think it's a little bit premature to be talking about giving this company and i also don't think is there even a possibility
that this has ever happened in the history of the stock market or the modern stock market that's 10 million new and well done i even say what it is 10 million new retail investors came into a stock you know where millions of them a day and that the stock traded i don't think that we've ever had social media collide with finance like this and it's very reminiscent of our discussions with
democracy and journalism censorship and politics we we're having weird behaviors because of virality and i think that seems to me this is the most important learning from this experience forget about the fiduciary and the governance responsibility of these companies whether they
were good or bad will be resolved over the next couple of weeks and months i'm sure as more information comes to light but what's super interesting about what happened this week and i think is the most impactful societally over time um is that we're seeing this phenomena where um individuals in aggregate can believe something to be true and make it true and um
we saw this with tesla and i i don't think tesla got this level of notoriety because it was such a a longer play out cycle but elon you know was not hitting numbers that people thought he was gonna hit margins production volume etc people were shorting the stock but enough people believed in
the story that elon told about what he wanted the future to look like that they bought the stock and that gave him the ability to do shelf offerings raise additional capital and ultimately build the business and make it manifest in reality that he said would happen and the same is true of bitcoin and the same is true of trump and the same is true of storming the capital in all of these cases
there was a belief in something and there was an aggregation of individuals using social media as a mechanism for sharing and talking and engaging and creating a collective outcome that wouldn't have happened through a centralized system or a centralized process and wouldn't have happened in
the traditional way where history defines the future and i think that is what's so powerful about what's happening right now and we're seeing it in financial markets but we're also seeing it play out in politics and we're seeing it play out in the real world um in a remarkable way and it goes back to this notion that like a stock is worth the underlying value of the company and
that that's not true people can dream a stock to be anything as they did with tesla at the time that people were buying tesla stock the historical performance of that business was not what hedge funds considered to be a you know a profitable good business it shouldn't be worth anything but the belief in what it could be is what drove the value of that stock and ultimately that value
enabled that business to become true um and it's just it's it's amazing to see it happening and i think the the counter which is really what makes this so striking is the centralized institutions that are trying to block this from happening and um the shutting down of parlor and the shutting
down of robin hood trading are are equivalent from my point of view um or at least equivalent i think will be perceived to be equivalent broadly which is if a group of people get together and try and use an online service to make a change in the world by sharing and talking with one another and
communicating a belief a collective belief and that gets yanked away from them the institution that has the ability to yank it away from them is evil and it will force people to decentralize and it will enable new ways of trading new ways of communicating um new ways of building um and and that's the profound change that i think this decade is going to realize and we're
just seeing it start now i agree that parlor or wall street bets is parlor 2.0 right and and what happened as soon as wall street bets started which is the the reddit kids they started threatening and they wounded these powerful insiders these rich you know hedge fund magnates what happened they started getting banned off of discord they got discord as
a tech company to kick them off how did that happen they've been talking on there for months and all of a sudden just magically right at the critical moment where they're also not allowed to trade their free speech gets cut off that's a that that was deliberate now i'll tell
you how it happens is i guarantee you what these hedge funds did is they went through the discord room and they screenshotted you know any post that they could plausibly characterize as you know hate speech or what have you and you know and and by the way i mean those there's a lot of raunchiness in these rooms but it's not hate speech and it's not organized for the
purpose of hate it's organized for the purpose of trades but what they do is they weaponize these censorship rules and they go in and they screenshot and then they give it to discord and they get these guys kicked off and this is exactly what i've been talking about with censorship it starts with something you like and then becomes something you don't how many of the people
who support these you know reddit kids were in favor of de-platforming trump and parlor and now they can see where it goes this is slippery slope and we've only had to wait three weeks to see where it goes it goes to the same place which is when the people in power get threatened they use these rules they weaponize these rules to shut down the outsiders and the upstarts
that is the problem with censorship that is why you cannot let the beast get started i completely agree and i think this is exactly why how i think where we came out was you know the deep platforming of trump made no sense i think the the economic censorship of robin hood makes no sense
yeah and you can argue it's the right thing to do with a narrow context but when you take the broader point of view of the implications that's where this becomes really shaky and really scary and i think really enables a decentralized movement that is going to be a lot broader um than than folks are really realizing at this point you know folks don't want to be trading um
on a system that tells them how to trade and folks don't want to be communicating on a system that tells them how to communicate if i gave if i was running robin hood and i said uh we're going to have two options there's going to be a robin hood diamond membership and you pay by the trade and
you know you get these special features and then the robin hood free you know you you get uh your data is sold or however it works would that be a possible solution i think to the optics issue here where consumers could basically pick just like if facebook or instagram woke up one
day and said for 9.95 a month you can have none of your data no advertising ad free like hulu hula premium i would so here's the thing j cal um i i hope your robin hood investment is successful i just think that there are now three moments in robin hood's life there is pre this week and it is what it is it's an 11 billion unicorn god bless them then there was this week
where we have to frankly hold people accountable for the economic damage that they created this week because it is measurable okay it's not that it's not like missing it you know um uh it's it's not like you know surge pricing in uber it's not you know uh facebook growing too fast and allowing you know pictures of breasts getting posted and i'll have to catch up it's not
that okay it's not a bunch of like disinformation that we can't really judge this is very discreetly judgeable and so in this week robin hood existed as a different company and i think that there's an implication for that then to your point honestly i agree with you it's what happens from here and
i and they should survive but they have to learn and i think what they have to learn is you have to stop the account growth you have to massively shore up the balance sheet take the dilution get the capital you need because let's be honest i'm sorry but nobody's gonna show up with five or ten
billion dollars at 11 billion pre they'll show up at five or ten billion dollars at three billion pre and they should take the money and then they should allow the platform to work as intended or at least as perceived to be intended to their users and then they should reopen to everybody what would you do david if you were in charge and then let's move on to our next topic well i i mean
i i i i feel like we probably talked about robin hood enough and i kind of want to go back to the point that that freeberg was making just kind of up leveling this a minute which is i i definitely think this is part of this ongoing populism versus the elite war and social media is now the tool
that the people use to organize themselves against these powerful elites it's why we cannot allow censorship because it always comes down uh it to benefit the powerful the elites against the people trying to organize against them that was for to me one of the biggest takeaways from this week and and look the reason why people are organizing is they're asking the question what is the
societal benefit of these big hedge funds in relation to the enormous sums of money they make every year you go to like the forbes rich list or whatever and every year these guys are taking down the most money they're not creating companies you know and chamath is right we can't have founder
worship because they make mistakes too but at least founders are creating things right they're taking big risks that they're not providing risk capital like what we do okay we're investors but we're funding people's you know we're we're taking the risk of writing checks to to start the guy who's got nothing right or gal yep you know they them it's all all good all of them all of them
so so but try to keep you from getting canceled here but but but but what it what exactly is the societal value of these hedge funds now i know that they provide some price discovery and they provide greater liquidity to markets but is that really worth them really being the richest players
in the game it doesn't make any sense and then when they lose like in 2008 they get bailed out it makes sense it makes no sense something is wrong here now is this a right-wing view a left-wing view it feels to me like there's a political realignment happening here where the left and the right we're all getting on board with this idea and it's got to get fixed yeah this this
might be the legacy of trumpet way sacks that he created so much disruption over those four years that now we're actually finding out where the actual breaking points are in society and this is one of them and the healthcare system is one of them and freedom of speech is one of them and
we need to address each of these and they're complex but there is common ground i mean when aoc and ted cruz are both agreeing uh on the same issue with something's going on here like i think we have to fight the real enemy chamath and i should not be fighting over this because i can tell you if chamoth did the series a and this he would be backing up robin hood like this
to the end of the end of earth and that's totally fine and i agree with jason i just i just want you to know number one i love you with all my heart and i and i hope you make it i hope you i hope you make dinner hundreds and hundreds of millions of dollars but there's a it's just like you know you were you just got upset with me because you thought i was
kind of saying that you stumbled into it i didn't mean it that way i was just repeating the way that i heard the story but something that touches me equally ferociously is this idea of like the little guy getting run over by some like you know objective thing over here that makes a decision that's arbitrary i'm 100 agreement with you and so like the idea that like you know somebody who's on
an app all of a sudden gets censored somebody that you know makes a post gets cancelled somebody that all tries to make a trade can't it feels unfair it feels that each individual is suffering some pretty deep inequity yes and i can't i just can't stand that it really just touches me in a way
that tilts me and i get very and you know what it's interesting i think the reason i made the robin hood investment is because my belief in the underdog in my belief in people's ability to come up from being poor middle class to middle class or affluent freedberg you haven't chimed in yet as we wrap here and then move on to our second topic i think we're at an hour
so it's um so i just want to say um you know we talked about decentralization and you know we all feel the emotional response to the little guy getting screwed by the big guy that controls the system and we want to fight the system that's the basis of every great movie um it's worth highlighting though that decentralization and what i would kind of characterize as swarming behavior
uncontrolled swarming behavior can actually have negative consequences and there's a reason systems exist you know um when you put a bunch of people in a room let's say you put 100 people in a room and every time and someone says the word door and every time you hear the word door you're supposed
to repeat it within 30 seconds the entire room will be like deafening with everyone's screaming door door and suddenly everyone will be screaming it that's a feedback loop that occurs in an uncontrolled social system and that's what's occurred with gamestop and it's what occurred with with bitcoin so there are as we've seen remarkable outcomes when you allow systems to operate without
centralized control and without centralized brake pads that that kind of slow them down or put in place some rules and some obligations to how that system operates the problem with decentralization and this swarming approach uh to to resolution where lots of people basically work together
individually is you end up with things like cancel culture where um before a judge and jury determines whether or not someone did something wrong the community decides that person should be punished and shuts them down in the real world and their career and their life is ended and ruined and we saw the same and we saw the same with the capital riots you know people basically died
because of the swarm that occurred where this idea that the there was fraud in the election became an echoing deafening noise for these people and they swarmed and killed people and the system by which you can actually have vigorous debate and the system by which you can actually have controls
and processes and judges and juries and trials is what needs to be improved for this to work otherwise people will go to decentralization and you will have a lord of the flies moment that engulfs civil society because the tools are there today and so centralized systems can work but they
have to adapt and adapt quickly to be fair and to enable and to not um discriminate otherwise we're gonna see lord of the flies and we're gonna see decentralization being the solution to getting out of the system that's inhibiting us and we're gonna end up having really [ __ ] ugly outcomes there's a psychological term for what you're describing it's the diffusion of responsibility
when and also known as mob behavior when a group of people collectively do something their individual morality can evaporate and the larger the group and the uh more intense the behavior the less responsibility each person takes for it so five people on the steps of the capital you know one person breaks a window maybe somebody breaks it but once you have 500 or 5 000 and one
person breaks a window now you got a much higher percentage of people start breaking windows and that's when tragedies happen of course world war ii was the diffusion of responsibility with the team yeah you're totally right yeah you're totally here just just one quick point then we can just
move on yeah so i think these like viral tools these social networks they enable two things they enable mobs but they also enable movements i think the mobs are bad and the movements are good or they can be good depending on what their manifesto and what their mission is and so i think we want
to enable the movements but we want to be really careful about the mobs and you know one of the things that's kind of disturbing about twitter is i generally find that like the tweets that seem to go the most viral are the ones that are full of rage and anger and the ones that are trying to make more nuance points just kind of get lost and so there is something a little bit disturbing
about the mob behavior but but the movement the enabling of these new movements i think is really powerful and that's what wall street bets was at least in the early stage and they did not deserve to get shut down like that social social networks are a collective amygdala they are not a collective cerebral cortex and i think if someone can solve that problem and get people to think
about the rational objective outcomes in a social way in its engaging a fashion as it is to kind of be excited by the negative shift that excites the amygdala um you know it could be really powerful but that's probably we're gonna need politicians who we're gonna need some level of politician who
has some integrity and some expertise if only well don't you think don't you think don't you guys think that what this means is that uh entrepreneurs now can really think about decentralization as the key feature like in many of these markets or these systems where we have the centralized authority we have to move to a much more decentralized
democratized way of doing things whether it's stock trading or whether it's healthcare records or whether it's you know education systems and degrees and accreditation there has to be a way where you can't morally yeah but with morally and ethically inclined and or legally inclined systems that ensure that the behavior of that system doesn't run amok and you
know that's really where things can um can go can go awry uh as we've seen lately um but it's a hard problem to solve it i i don't think we're gonna solve it here today just uh a final update fif i don't know if this is exactly correct but i just asked on twitter how many shares of gamestop we're
still short apparently they're still 55 billion shares are so short uh of the 70 million or so total shares and 47 million in the float um so something very bad could still happen here i mean these shorts have not been covered so this is going to be an ongoing saga where i think every single platform if if consumers keep buying these shares what is the end does anybody
have an idea or a prediction on the end game here and then we'll move on what is the end game if another five million people buy the shares or 10 million people buy it it goes to a thousand or two thousand what happens if gamestop is worth a hundred billion dollars it's such a great
thing that's a great question well can i tell you jason what that means there's a great article in the information which sam lesson wrote i don't know if you guys read it but it basically said why did tesla win now this is not accurate but i think his framing is relatively accurate which is people were buying elon like they would buy a trading card that's right
and and tesla is a manifestation of elon that's right um and it actually is so visually it makes a ton of sense to me like then i think you know why have like richard branson's businesses worked or why is the jordan brand work or all the you know at a smaller level yeah at a smaller level
because we're brands and we have these values and people can imbue their their collective decision making and support to the person versus the institution it's a belief it's a belief in what that person represents too you know i can uh why did uh uh mbs buy that freaking painting that wasn't even a leonardo painting for a billion dollars you know there was some belief there
you know is it really worth a billion dollars it doesn't matter at the end of the day most assets are most assets are purchased under the premise that i believe the price will be higher tomorrow than it is today and if we all believe that then we will all buy it today and we will all find more
people buying it tomorrow that's what bitcoin is do we all agree though that gamestop is not tesla i don't agree with your premise i don't think that stocks necessarily need to be reflective of the underlying business and that's what so but but no just think about it that's what's so shocking about this week because we've all been taught in these freaking economics books and these financial
analysis books oh the stock is worth x dollars this kind of cash flow what company has ever paid out dividends that equal the amount that you paid to buy the freaking stock unless you lived in 1926 it hasn't happened so everything we've been taught about dcfs and future cash flows and everything
is nonsense at the end of the day every stock trades based on the assumption that someone will pay more for it than i am paying for it today that is it that is entirely what a stock is and so if everyone's belief is completely uncoupled from the underlying asset that that stock is meant to represent it doesn't freaking matter and it highlights what's really going on
trading stocks is not investing in businesses and can i say yeah can i say something else on top of this jason what was the name of the remember when we were talking about censorship what was the name of the the the left podcast that got canceled on twitter right side uh red scare red scare is gamestop red scare or at the real donald trump
and my point is who the hell are we to decide right how does it affect you all what's your prediction we're sitting here a year from now full year out what does gamestop january 2022 look like what does the stock price look like what is the business look like what how does this all resolve itself you know i'm i'm not a public
stock market trader i'm just not i i just feel like it's i'm not a day trader i don't i don't buy public stocks it's just kind of like to me it's a distraction what do you buy this end i you know just buy vanguard funds like guys if you're listening to this program and you're wondering where to put your money just buy vanguard funds and stop worrying about it
index low fees index yeah low fee index yeah i mean if you want to bet specific companies because you get enjoyment out of it do it but yeah okay so nobody has any idea what happens if it hits 100 billion or how this ends so i think that's that's illustrative of my point is that for somewhat intelligent people who have some degree of expertise in this area we have no idea
how this ends but this is the box no but this is the point it is a it is a collective ouija board moment everyone's got their hand on the ouija board and they're gonna craft the sentence any one of us individually cannot predict what a collective group of three million plus people are going to do and we've you know we we try and struggle and think about the underlying value of
a business which is what these hedge funds have done historically but at the end of the day this thing is going to be worth what the market tells you it's worth and what the market chooses to do we wouldn't know because we are not the collective three million um jason yeah yeah let me respect so
so look jason there's two questions right there's always this question of like what should the price be and then who gets to decide and look do i personally think gamestop is overvalued yes of course i think it's going to end very badly but the question is who gets to decide and is the game going to be rigged by powerful insiders against outsiders just it's just like the same question
with parlor okay which is who gets it's not about which look we can say that there are certain views that are bad okay but the question is who gets the power to decide that and it's and and that's what that's the thing we have to ask is that second order question of who has the power to decide is
there any outcome amazon got to decide and robin hood got to decide and the victims were parlor and gamestop 100 okay so this would be a good segue to move on uh apparently we had a discussion on the last episode about running for governor and uh i bought the domain name governor trimath.com
i had governorjason.com i got governor sachs and governor freedberg.com and i redirected them and you guys owned them and they're they're redirected to your twitter handles and lo and behold we wake up one day and uh chamath4ca is live chamboth everybody wants to know jump the gun we were going to have a vigorous debate and decide which one to be yeah who's gonna run but somebody jumped
in and i'm not saying other besties might not jump in other besties could jump in they have domains stay tuned stay tuned no jason we do not want to split the bestie vote i think we got all the best please this is this is the four musketeers we're all behind now we do not want to split the bestie vote okay it's on you tell us what's going to happen now what's going to happen
we are going to do an emergency pod and talk about exactly that so if folks want to know they're going to have to tune in midweek but uh you put out a platform what's the action been and no these the reactions been possible three guys midway i want to be i want to be very clear midweek midweek but i'll just tell
the quick stories three uh young people um these three amazing guys just they built it and i just retweeted it um i can say that tens of thousands of people have signed up for updates i know that much um all these three guys though here's the can i just if i can tell a shout out to these guys um
uh rahul samir and aman all these three guys um they don't live in california um two did but had to leave one uh wants to move but can't because he can't afford it and it's just such a microcosm of like how beautiful california as a place is and just what people think about when they think about the state is just so it's so lovely so for another time but um anyway shout out to those guys
for building the website thank you so essentially the entire market has now been driven by a group of all-in of the all-in army built a website you retweeted it and that's what this is all about so there has been no paperwork filed there is no action committee however it has traction
so it makes one hand and you know i mean there may be a shadow cabinet meeting maybe what is the chances well i think chamoth by publishing that website just went down the escalator escalator he's gone down the escalator and who knows what could happen now i'll tell you this i went on uh i'll i'll do a plug i went on bloomberg amazing this week amazing hit great
amazing it's on youtube we can put the link to the show notes yeah put the link in the show notes nick people need to watch that i went through all the the the ways in which california is hurting newsom hasn't done a very good job and i made my case for chamath so that's a prelude to what we'll talk about on the next pod but the the the amazing thing is the outpouring i mean
the number of people who texted me emailed me and chamath and all of us like there's a groundswell happening now 100 so you know i would say all the fans of the pod who are now behind this you guys are making it real uh free it's pretty crazy manifest destiny here what's going on is this another wisdom of the crowds or a mob or a movement
who am i to say are you are you in as chief science officer will you be our dr fauci you know here i i think we should have a good debate on our next pod and hear the platform and discuss the platform and um you know uh make sure that we all feel like this is uh uh this is where we should be
um and i think this is gonna take a little bit of time uh to uh to build um and i think you know the more we kind of build towards it the more likely we are to have that ground swell that we're going to need well let's give the oil in let's give the old i will tell you it seems pretty likely that this uh recall effort is going to get the signatures it needs so we can kind of put that
in the sand that it's very likely we're going to end up seeing a recall election okay so if people want to participate in recall gavin newsom what do they do because that is the first step yes towards governorship you gotta go you gotta go to rescuecalifornia.org rescuecalifornia.org go to that website sign the petition that is the first step we are very
we only need a few hundred thousand more signatures we have 1.2 million we need one point five million go there sign up and then go to chamas website which is chamath4ca.com jason i'll make one more point and i think um and i made this the other day on that clubhouse that sacks and i did i think we i made it before you joined if you think about the difference
between a leader and a manager um a manager is someone who typically delegates uh responsibility and authority a leader is effective at synthesizing uh multiple people's points of view and creates an opportunity defines a vision defines an objective that is the synthesis of all the people that that report to him and um and for which for whom he is responsible or she
and i think what we've seen in california in particular and really across leadership positions or governing positions across the country during this pandemic is a failure of leadership because when times are predictable if a then b it is easy to manage and it is easy to look successful i delegate down to the person who knows best and they are responsible for the
outcome and they do it well great all i'm doing is pointing to the right person to run something the pandemic is difficult and it is unpredictable it requires a synthesis of economic information social information and health information and more often than not a person who typically acts
like a manager points to the person they think should be in charge under the circumstance to make a decision and that person is not equipped to synthesize the economic and social ramifications of the decision so what we have seen during the pandemic is most often people in a governing position have pointed to the health officer or the medical person and said you make the decision
and that person does not necessarily account for the social and economic ramifications of the decision they're making a health person knows how to save lives the best way to save lives is shut everything down and so the the test of leadership during this pandemic has been a test of synthesis
and recommending an action that's associated with the understanding of the social economic and health implications of what's going on and that's really where so many governing um bodies and individuals have fallen apart during this pandemic is an inability to do that effectively and i think that is what is needed going forward it is a it is a moment of test it is a it is a moment
of truth about the difference between a manager and a leader and we're seeing across the nation who is what and i think it is highlighting why some folks may not be best suited to do this the second thing i'll say and i know i'm on a little bit of a diatribe but the second thing i'll say
is career we've been waiting for your diatribe by the way we took 19 episodes go career career politicians i think simply should not exist if you go back to the origins of this country right having your place in government and we talked about this over email having your place in government was meant to be something that everyone was supposed to take their turn doing and the
people that were sitting in political seats it was supposed to be the merchant and the local farmer and the banker and we were all supposed to take our turn representing our communities representing our people in government and what we've seen is people who have made a career out of being
a politician and the result of that is that their job depends on them getting re-elected in order to remain in their career they have to get re-elected and they ultimately end up making trade-offs that don't necessarily represent the best long-term interest of their community and this is broadly true across nations across centuries but it's particularly acute in the united states where
we've seen such wealth creation over the last 250 years and what's happened is when you have career politicians sitting in these seats for so long in an environment of severe wealth creation you end up having governments that are ineffective and creating systems that fail us and here we are
and what we need is to have someone go in that's not dependent on the traditional folks that get people elected and fund elections and result in re-elections we need someone that can go in as an outsider and make a change and so my advocacy for what's needed in california and i think nationally and that's a longer conversation is to find those types of folks to come in and lead and
be politicians that can take a leadership role synthesize information and not be worried about the re-election cycle and not have anything to lose related to a career in politics so i'm done on that note i want to say i love all of you and um let's do our emergency pod on tuesday um do you guys want to play poker tonight i i'm still in tahoe i was playing that original
graduation you guys come down in town my mom's in town my parents got vaccinated yeah i can play i can probably oh here we go maybe a little one note if you do fill out if you take if you go to rescue california.org is that the name yes yes if you go there you print out the petition and you hold it up and take a selfie with your signature
on it and you add the besties we will like it possibly retweet it and possibly follow you so go ahead and take a picture of your printout with your name on it and that proves that you're part of the all-in army and we will like it we might follow you and we might even retweet you
you could give your besties love you and we'll see you all next time on the all in pocket bye-bye see you at couples therapy tomorrow hey everyone hey everyone welcome you're talking about real money these are really big numbers is spread the opportunity that that technology represents we're probably gonna have four kardashians on there you