E106: SBF's media strategy, FTX culpability, ChatGPT, SaaS slowdown & more
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I'm now recording.

jesus, you look terrible.

What's going on?

Did you sleep last night? Do I tired? You .

look .

a little .

tired .

and .

I did. You drink?

I did think, yeah, what does voda ot taste like that? In a way, a White russian people star, but he said, got a way russian with, oh my god, actually, why? Why russian is way with only. And please compliment that with a huge punch of face.

Give me five minutes. I'm going to go.

I'm going to go to have and dog very.

Bear to beat the hang over. go.

man.

We open sources to the fans and we just.

All right, listen, we have to start with cam bk run fraud. I mean, sam free, I get that wrong sometimes. A, he was interviewed by uh, Andrew war sk in the suit, uh, a deal book who gave him soft bowl after softball. Then the next day he was on good morning.

we really fast, aggressive a little bit. A, D, A.

he's sticking the night. He's stick in the night then. But j cos got a point. He's got a point. A little Better.

a little. Anyway, the new york times continues to embarrass themselves by handling sand bike and fraud with kick loves. wow. George Stephenson opus, my greek brother. Stephen opus, the spartan came in and absolutely frequent and fed back my freed good morning america. Very important to note that good morning amErica a, the segment was between holiday cocktails and the cast of of the White lotus. And Andrea circon was at the deal book finance conference.

But you know that stuff up, the interview was two hours, but they reduced IT down to ten minutes. So they were probably a lot of sort of gradual conversation, banter and the software questions. And then he does stick the knife in and and does the furnaces, but he cuts out all the other stuff. So he just gets IT down to the ten years.

What stuff and up was did to him was extraordinary in that he said over and over again, in the F, T, X terms of service, you cannot touch the user accounts. But you at alamein were taking them and you were learning them out. I don't know who is advising, uh, sam bank free at this point, but why he is talking so much, he was also on a two hour twitter spaces after all this at this point sex, what do you think is going on here in the mind of sam bank man free? And also the media, which seems to have a very variable way of dealing with this obvious fraud and crime.

right? okay. Well, you know, I can speculate about bf. I think if there is a strategy here, IT is this, he is basically copying to criminal negligence in order to avoid the more serious charges of fraud.

And I think again, if there's a strategy here, IT is he saw himself being defined as berny made off two point o in the press. And if that image, which may well be true, uh, semmens around him, then prosecutors would never stop. They would never accept a plea.

That basic gave anything less than I made off like sense, which would be, you know, decades in prison, maybe a life sense. So he is out there doing what lawyers will tell you about to do, which is basically incriminate yourself, create more of a record. But he's doing IT to change the public perception, maybe mud up the public perception, get people thinking that, okay, he, you know that he's a meeting is something wrong.

But IT wasn't deliberate. IT wasn't fragile. Lent IT was just basically carelessness or stopping us. And fee succeeds in monday, the waters enough. Then maybe the prosecution will give him a plea deal that allows him to have his life back at some point. I think that would be the crazy like a fox explanation of what's happening now. There is an all term explanation as well, which is, I just think that these types of guys you could call IT, you know, of a norco stic fraudster, they think they can talk way out of anything, you know.

because they have.

they have what they've talked their way into.

getting hundreds of millions of dollars of investment, billions, billions in some cases. And so they just feel, and they've been trained by employees, partners, investors, is the press that they can talk their way .

out of anything yeah the average person is not really used to dealing with one of these personality types who um is I mean, they clearly are smart and they are articulate, articulate and they know what to say and they are mattering their words. What we've learned through their life is that if they use the precise magic words with a person, they can pretty much know convinced of anything, get them to do anything in.

In particular, I would say investors tend to fall for this, not because investors are dumb, but because investors are so clear about what they are looking for and what they want. They're particularly yeah like know VC, especially we're looking for the hundred x active or whatever. So it's easy for this type of personality to construct a story to essentially stroke the erosion zones of a VC yeah and and sort of trick them.

And so there is probably a positive unfortunate loop that gets created in the minds of one of these people who and they started to think that they can basically talk the way out of any situation. So I think that would be part of what's going on here. And you know, if you look at sort of the tactic city using to do this, all the sudden he's trying to portray himself, know before this, he's portrayed himself as a smart guy in the room of this is this baby in the woods impression where I didn't know IT was my suborn names.

I wasn't really in control. That was somebody else like each individual decision, he says, look sensible to him as just at all, added up to something you can anticipate like really, you know learning yourself a billion dollars of of basically the company's money, which was basic customer money. That seems reasonable to you.

I don't know how you defend that individual decision, and there's many like that. But but this is sort of the narrative that he's trying to construct. And let me stop there. But I think there's a lot more that we said to dismantle the narrow if he's trying to create.

But I take on this and free.

Can I make a comparison to S, B, F and trump through the lengths of the media? So if you go back to two thousand sixteen in Donald trump, violate every single establishment bias that is left progressive journalists to leeds had. And so they basically just attacked, attacked, attack, attacked.

But then you went into the election. And there was a very clear data point that said, whatever you thought was that was that best limited. And you missed the tone of the country because fifty plus percent of the country held a very different view about this person.

And instead of taking a step back and and then the left media, the mainstream media, we underwriting and learning and then saying, you know, at me a copper, I got this wrong. They just double down and they said, no, IT still doesn't meet our players. And so we're just going to ring fends this problem and we're going to just try to destroy this issue because, you know, we we want to control the narrative and and and fly result.

We want to control power. Now you look at S, P, F. It's the exact opposite.

He went to the perfect elite private high school. Then he went to one of the most prestigious elite private universities, M. I.

T. His parents teach governance of all things at one of the most elite liberal institutions in amErica effort. They are in the establishment of the progressive left.

And what happened was he took customer funds in all of this money. He made tens of millions of dollars of political donations. He wrapped ed himself in this blanket of a progressive left elan cars called effective altruism. Sm, and all of the mainstream media fell for IT and embraced him, as well as some politicians, because IT met everything that they themselves also bought into. yes.

And now you have this category event, a multiday ca billion dollar fraud, or bankrupcy millions of customer accounts who are frozen, you know, tens of millions to hundreds of millions to billions of dollars lost and stolen from them, and they refused to be underwrite this kid. And the reason is because in order to do so, it's like eating your own tail, and that's why they don't want to do IT. And so this is why you have the media basically allowing him to do an apology tour.

Now this is his second time at manipulating them. The first time he was able to manipulate them by basically being one of them, and now he's allowing them, and they are desired to basically protect themselves so that he can create some kind of a defense for himself. And I just think the whole thing is grows because he misses the entire mood of the nation. This is an enormous financial fraud that was perpetrated on tens of millions of people. And there's no accountability because in order to do so, the media would effectively have to admit that they missed, that they got a wrong and they refuse to do IT. And I think like that is the really big problem that nobody is really speaking out about is like, well, if these folks are meant to be the last stop to make sure that there's truth and honesty and transparently in society and you can count on them and in fact, they're just gonna flex their own narrative, what is one supposed to do to learn the .

truth in a way, what you're saying? And then I go to your free bird, is this flood was in case in all the guilded facade that amErica .

hate right now, reflects the institutional rot of america. IT reflects every single aspect of institutional rot that every non elites talks about all the time. But elite, when they have those labels, will refuse to give up and IT.

Just to add to that, the thing that's missing that I take one of the big issues with the institutional rot in our country is the lack of count ability when somebody gets IT wrong. We saw this with covet, right? The health establishment is saying that they want amnesty, and a landing magazine was willing to give IT to. So the point is that this this class of people think that when they get IT wrong, that there are the experts, but when they get IT wrong, there should be no accountability in such a math. To your point, the media and these institutions are not willing to read, write sbf when he's so clearly as a radscha freeburg.

What do you think the of this theory you had a large amount of donates to politicians. Uh, obviously you have coming from stanford M I T eeta. And then, uh, you have these investments, gift slash advertising slash donations to pro public of box, uh, this new publication, sam, before the intercept, that have all been uncovered.

Now did he do this paying off of all the elites, you know, splash hy cw SHE giving money to everybody because he knew he was doing a fraud, and that this is evidence of, this is a premeditated fraud. Or do you think this is a dane individual who just was seeking status? I don't know.

The the motivate, there's a video you can watch this guy, for some reason. F T X is left up all of their videos on youtube from three years ago called quantitative trading, seven and a half thousand cell wall of bitcoin on finance at seventeen and a half minute youtube video A S B F trading arbiters across markets. I think IT provides probably the best like natural, non scripted insight into the sky's behavior. That you could see.

you know if it's .

not like him being interviewed, that just him living in his world and he's just, you know a mouse trying to get a piece of cheese like his you know he's like out there is you scramblin around in the market. He's finding edges, he's finding advantages and he and he's clearly just taking advantage of them all day, every day. That's who he is.

Now you put a person like that in an unregulated environment. And there was this clustering demand for an unregulated environment because of a lot of what you guys are saying, which is people have this disdain for the elitism and the and the institutional route and all these things. So bitcoin emerged as a solution out of two thousand and eight to the, you know, what felt like institutional rot, that that governments have a key role in.

But when you have no regulation and you have no trusted central authority involved, my are trying to find cheese will rule the day. And I think that's what happened here. If I wasn't this guy, IT was someone else.

IT was gonna be someone else. And then all of a sudden everyone's clamb oring and saying, hey, we needed the government to protect us. No one protect IT us. Someone's gotta save us. Where are the regulators?

Where are people that are supposed to keep in I on the stuff, when the whole premise of so much of what was being sold was non regulatory regimes, was openness, was peer to peer trust, ort to calls and IT. Turns out that in that sort of an environment, the mouse that is hungry for the cheese will get the cheese. And that's exactly what happened and I I don't know how much of IT him saying i'm creating intentional fraud, which certainly seems to be the case versus him saying i'm gone to pay these guys. I know how much that was even that intelligent, but the guy was clearly like trying to get A P C. cheese.

Okay, so this cheese either this red is a league of legends um you know expert playing on eight different monitors at a time the cypher currency game while hopped up on speed. I've not saying that to be cruel. I'm saying that because they did IT, they talked about IT in their staff meetings instructing their traders and team members of how to take speed.

He admit to an interview this week. He said that he was all legal prescription drugs.

but they were taking me. Yes, yes. And literally in the same videos are referencing, people see speed patches, or I don't even understand this, but there are patches you can put on your body to deliver speed to you at some, you know.

So whatever sex you buy this theory, no care that this isn't about the elite de side of IT. It's about the non elite, the enter key side of IT. no. And this cheese eating red was just wanted to eat more cheese.

Don't buy this narrative because I see too much design intentionality behind what happened. So in other words, IT wasn't just a series of individual decisions that didn't add up. Many of those individual decisions by themselves were totally unjustifiable.

And moreover, there were too many. There are too much evidence of sophisticated behavior here again, he overnight went from train self as a smart guy in the room to to the baby in the woods. And so for example, when you look at the construction of all these entities and the corporate ork chart of all the related entities is a very sophisticated attempt to obscure and construct certain, you know, protections.

When you look at the way that alumina was exempted from the Normal margin requirements and ftc, this so called back doors, there was intentionality there. There was intentionality. In terms of who was hired to staff these organizations. Again.

I wasn't hired. No board, no C, F, O.

mission. And guy was in charge of compliance. Like to not talk about the previous episode was the guy who was involved in the ultimate bet poker training scandal.

No, not exactly. Yeah exactly. Or look at this goofy goof ball. Caroline and Allison was put in charge of alameda. It's being done for a reason, right? He's setting IT up in a certain way.

And you know, the one time I interacted with him at this tech conference, he was sitting their holding court and he had all of his millions around him who were following his orders. This was a guy who was controlling his business. He was making the decisions at, I think, a task level and um he knew exactly what was going on here. So look, I just don't buy I do not buy this idea that um that he was like a blind mouse who's to stimulus response you know in the moment by the way.

that that that wasn't my point sex. My point was whether IT was him or IT was gonna someone else IT was bound to happen that the idea, criminal idea, that we want to have completely free, unregulated, bihari and based trading, you know, environments that we can supposedly trust because someone puts on a good face when there is no real regulatory body and regulatory authority overseeing IT.

At some point, IT was gna happen. This is a fully regulated.

They are regular. They're not set up in the bahamas and they're not unregulated. He set up and he had no oversight, he had no board, there was no regulatory regime there.

But how was he able bit? Okay, the first look, I don't think this to happen. I think that again, I think that excuses to much because IT implies that if IT wasn't as me, if to be somebody else actually think that this was a highly concerted effort, listen, he corded regulators, he donated to politicians, he corded the media and donated.

This was really Operate.

was really good at IT. He was a really .

totally great on that, super smart, super connected, really thoughtful design on how he committed.

I only think an insider could have pulled off something at the scale.

I think I think this is where a trip .

you're exactly right.

I think you needed to leave and he admitted that you pointed this out with the chat that release where he said, he, he, he, he.

yeah, look, I mean, legit.

He chat. You look, I would like convoluted .

and intertwined. All these people are like gangsters intertwined with the parents. They are parents, apparently boundless, the bunch of money to Elizabeth war.

And, you know, he was dating the C. E. O. Of the business at o ninety percent in there, all these other random shell companies that he owned, one hundred percent of where they were lending back in fourth hundred millions to billions of dollars.

Yeah, the David's point that is a sophisticated con that you have to architect. And the way that he was able to get away with IT is that not a single reporter or regulator thought to dig in. And the reason, I think, is because he said all of the right things that wanted them to embrace him. And the reason .

is this is a dumb game that we woke. Westerns have to say the right to be less.

And then everyone think .

a good person is that.

yes, he is the game that we woke.

Westerns have to play. We say the right to life. Like he actually said.

the most uncomfortable thing out lague, which is look by having gone to Crystal springs high school, by having professor, by parents that went to stand for, by having gone to M I, T. I can pull this off. That's that's what he said because he can go with those things because i'm A, i'm a championing of effective author.

Sm, that I can justify any of these decisions how immoral or immoral that they be because i'm trying to help, you know, my brother stand up a multimillion dollar pandemic response business. I'm trying to do this. I'm trying to do that.

And all of these regulators and all of these reporters said, okay, you get the hall pass. Now imagine if you were placed him with some random kid in some developing country, or even from the united states, who did went to public high school, who went to some random state school. Do you think that they could have pulled any of the stuff off? Now you need .

the peta of the privilege class, the what he had, the pea of the privilege class.

Even after the fraud, the new ork times wrote more of a puff piece on him than the hit PC wrote on brian on strung last year, when brian on strong wouldn't toe the line on allowing politics at work.

Remember that? Yeah, unbelievable. yes.

So the beginning, I think what chamar is kind of thing here is that the big enabler here is not crypt op. Her say it's all these institutional biases and elite te biases that he was able to play into, partly because he was a big insider. I mean, in a way, he monotoned his parents life work.

The problem that I think this allows us to put a fine point on is the following. You know, in society, we've confused a lot of people to think that the opposite of liberal is conservative or republican. And I think that's the cycle that drives the mind virus inside the mainstream media.

The problem is, the opposite of liberal is in liberal. okay? And what a liberal means is to be narrow minded and unenlightened.

IT means to be pretty nal. IT means to be fundamentalist. And this is really what IT allows us to see now. We have now had six years of data, case after case after case, where if you are woke, if you are a social justice warrior, if you have the right credentials that justify your upbringing, if you have institutional uh, bond fies that come from your parents, you get to create the narrative and you get a hall pass and everybody else basically is at the subject in the mercy of the mainstream media.

And so if you don't kiss the ring and bow down to them, they will try to destroy you or run you out of town. But if you are one of them, they will give you a hall pass. And when it's time for them to change their mind in order to tell the truth, they won't do IT.

And so these types of griffe will continue as feedback ook side because there is no check and baLance. Without a healthy independent media, there is no way for all of us to actually know what's really going on. guys. Some person in the media could have asked the question and duggin and deeper around the connections between elemental and F T X. For the last twenty four months.

I know ledge at a venture firm.

At no point could any person had ask these questions and found x employees and said, you know, are there any unseemly connections here between F, T. Accent company that there is no disGrace to employee? I mean, every company has disGraced employee whistle blowers. But here, where there are billions of dollars being made by tens of people, not a single person who felt on the outs said anything. If he was also giving millions of dollars to Price I donations, the questions were asked.

and then this kid paid hush money to the main's responsibility. That there should have been a regulatory authority that had oversight of business like there is for every bank in every training Operation in the united states. And every one of those businesses has a compliance officer and has regulators of the wazoo, making sure the customers are kept safe and protected. Or do we think that, that should should offshore vehicles be allowed like this that allow people to Opera?

It's a reasonable question, but there is a chicken and neck question. We were all standing around holding our hands while the C, F, T, C, in the S, C, C, were fighting. That's not something that consumers can be expected to a.

So yes, we should have legislation that clearly defines all of this. But there were enough parameters that created regulatory frameworks where a bunch of good actors did Operate in them and are continuing to do so, like coin base. So I don't think this is a regulate issue. I think that if you believe there are people who are supposed to forensically examine things and get to the bottom of things and ask hard questions, those people did none of that here. And and what's what's even more worrisome is what they're showing is now with a massive amount of data that shows that you could ask card questions they don't care to because that makes them look bad.

I disagree with this trip. I think regulators felt here because they have been reactive to cypher. Do they have not been proactive and they have not been clear with the crypto community that what they were doing was illegal and they should have put the regulations in quicker and their plane catch up.

But all three groups felt the media fail. The regulators failed and VC failed. Capital allocators failed. I apparently to do diligence here and install proper governance. You cannot put a company like this, you know, in business with billions of dollars and have no board .

of directors .

like he or he. My .

point is, while regulators are are basically fighting a territorial .

for the media .

could have still done their job. They chose not to.

Guys, he was worse than that because it's not just the case where the esc failed to exercise in the oversight of him or dig into any of these questions. He was in the room with them crafting the next set of regulations. He was working on the regulations that you're talking about that are supposedly need, but they let the fox in the hand house.

He was gna crap. A A new type of regulatory license for these types of exchanges, with the result that he was going to get one of some of competence worked. This is one of the things that triggered cz to basically do what he did, which is basically that S, B, F was trying to get baLance and and competence like that band, while S P F would be .

one of .

the .

sole .

people to get the license. Do that? Or did he actually expose the fraud?

That's what I mean by rock pool. He was not what .

rock pole means.

okay? Well, he was partners with him. And then he realized he was weak and that he was doing sub stuff that we shared and decided he would eliminate a partner who was creating regulation. A sax said, what if you want to say?

He knew that he did was indicate a desire to liquid his position in a token that was supposedly perfectly liquid. That's basically that caused .

the everything to unravel. Yes, but these were partners, right? I mean, the partners .

part of the big loan that that initiated all of this stuff, like a year and half o was to buy F, T, X off the capable. So, you know, this album saying is that you used words and you're framing of a guy you know who's built a business is like he, is this the ferrous bad actor by David first on the second. But David, right, all the guy did, as far as we can tell right now, is tweet. I'm selling this token because I don't believe in the capital structure of entity. And he got those tokens by being bought out of the captain.

I know he was partners with them. So if if you if you don't like rug poll, how about back this business .

part that .

you still don't understand?

Course, I know he was the first investor. So to do this to an no.

then go about a part consideration. Part of the consideration were these tokens, these f token.

Yes, Jason, when you when uber went public, yes, and you got distributed stock yeah did you distribute and sell ua at any point .

previous that I had?

I saw some to my imagine your question when uber went public and you got distributed from at your stock. So you've never sold a .

single share of wob this public? No.

I sold IT before partner of a uber. You just a stockholder.

Yeah, this is slightly definitely. But okay, fine. You guys you guys want to see, no, the first investor in the company.

they want to be storage situation, but they're status at the time that season intwined ted, was that they were competitors.

Okay, fine, me. They became competence, I agree.

And by the way, it's a to mos point about this rock pulling language. I think we're getting kind .

of done rabid here.

C, C. Did performance service in this sense. okay. Sbf claims that four billion Moore was about to come in.

I personally to believe that sounds like posted to me, but if IT is true, that would have been a bad thing. The more money that came in to that Operation. S we have proved that he was a .

very poor custodian of cost.

The but the the i'm just highlighting the language that you use is sort of like again, part of that establishment elite narrative. And i'm just questioning you should maybe steel man take a second to just steel man? Yeah a more dispassionate which is here is a counter party OK yeah who when he left, the captain was given half cash, half tokens, okay? And he decided to sell his tokens, yeah.

And tweed publicly and cause of run on the bank.

So IT was not run on the bank. There was no bank. Where's the bank? This run on the bank language, okay, is something this was in the sim coverage OK did IT publicly.

That's my point. So i'll still no, no.

no.

These tokens are worthless. I need to liquidate them as fast as possible. But why would you do that publicly? why? Why would you do at Price you to move the market? He wanted to move the market, letting people know why. But he wanted to to kill his competitor, as you saying, wanted to petition.

We ve got to back .

up here because I think we've done a lot like thirty thousand foot like lessons, like take away from the whole thing, but we have to really establish what IT is that sbf did wrong. So I think we need to sort of take a second to unbutton the waters OK.

And part of that, I think we should start with the idea of a run on the bank because the the press we've been writing puff pieces about sbf, i'd say mainly some of four, which he was a big donor too, even trying to frame IT us around on the bank. And then that implies that not really has falled IT could happens anybody. Lots of banks have had this problem.

okay? First of they're not a bank. Banks actually have the legal ride under certain conditions to take customer deposits and loan them out.

okay? Yes, they did not. Their terms of use did not allow that as of phones pointed out, SBS answers to that well as well. We had this like march account program.

There are other provisions and other terms of use, but most of the customers who lost money, the vastness jy, did not option to that programme and they never agree to that. So that point number one, point number two is I think we need to look at this language of margin account. Okay, S, B S.

Explanation of how customer money was python of his own personal use, I eat to aleem, is that aleema had a margin account. So I think we can perform a service here by explaining why IT wasn't a margin account and know most and you guys understand this really well, the way that a margin account works is the following, okay? Because I think so must have them set up with investment banks. You go to an investment bank, say, Morgan stanly, and you over, you post collateral, you actually over collateralized. So for example, you might take one hundred million dollars of stock posted at the investment bank, and then they will let you loan a certain percentage, nowhere near one hundred percent, maybe fifty percent.

if you have a very, very liquid security, you may get fifty percent coverage, which means if you posted a hundred million dollars, you could get a fifty million dollar alone.

get a hundred million and amazon stock, your some amazon V, P, you can get fifty million one.

But and if it's a private asset, it's anywhere as high as thirty percent, thirty five percent, but typically it's about twenty five percent. My expectation is in a liquid token like this would have basically gotten five or ten percent cover ratio at the best of IT. And then what happens is you have these maintenance values.

So all of a sudden, the value of these entities multiply by that percentage that you're a lot alone falls below. You have to post money. That's how a marginal can works. It's just there is no free lunch in that.

Yes, exactly.

I just say quite simply, very simply, what I IT appears this guy did, he took customer deposits in U. S. dollars. He then converted those dollars into some other asset, and he had a mark on that asset, let's call IT a dollar, a token. And then those .

dollars were moved to .

somewhere else is because someone transferred in.

But we to finish, we need to finished to explain her around the margin account. Okay, because what s bf. Did is this. He took cover deposit, gave them to himself by the.

and he gave that he took customer deposits in U. S dollars, they were wired in. He took those dollars out and he put a fake token in and he called that and therefore he said, therefore, he said, the baLance eat is good, but the value of that token in IT .

turns out isn't a dollar, is ten cents.

That's right.

Made up token. He he controlled the training .

of at the Price.

But yeah yeah but but but here's a thing. IT wasn't just the fact that his cloud or was no good IT was also the fact that and this is from the bankrupcy a filing by the the non trust guy. He specifically said that although ea like every other margin account, the platform had the auto liquidation provisions turned off.

So we have to finish the thought around how margin works. So like Thomas said, you over post collateral and if the value of that collator goes down or the the the the position, your trading account, the value that goes down, you either have to post more collateral or they will actually liquidate your collateral to pay off the loan. So Morgan stanly will never lose money on a margin account, never like. The whole point is because they don't make money on that. They loan you the money at like you know a few percent like very .

cheap yeah libor .

plus yeah exactly. That is not a risk account to them.

In the example this in the case of the V P, and amazon has got a hundred million amazon that have a fifty million dollar alone. If amazon loses half its value, then that trigger the automatic selling of amazon shares to get IT back down to fifty percent coverage 50 of amazon shares。 If the four fifty million was pull down to get back down to twenty for fifty percent leverage.

yes. And they don't wait until like amon stock is at the exact level where now the cloud al equals one hundred percent of the loan, they will keep that fifty percent loan to you and they will liquidate you. And by the way, you can lose your entire amount, right? So yes, this is why trading a margin is so risky is that you get out, out very, very quickly with a small move down .

because they are the custodians of that amazon stock. They are holding IT for you now and they have the right to sell IT to cover your margin. You're saying that, governor, that basic, that basic safety control was turned off by alumina and it's even more minister alameda controlled, like ninety or ninety five percent of these F T T. Tokens and was owned by sam bank man fraud. So he owned that company.

then he claims he had no Operating. Happened is with that, is that the value of their position was going down? And or as the value the cloud was going down, IT should have been liquidated to pay off the margin loan, and that did not happen.

And the reason didn't happen is that alee to got a special exception on the platform to turn off auto liquidation, therefore, was never a margin account. If even if IT was a margin account, okay. And and F T X somehow missing.

Minister, the margin account IT should never have taking other customers deposits and use them to payback that money. What should have happened is if F T X was gonna lose money on a margin account that would hit the f tx. Corporate treasury, okay.

And when the f tx. Corporate treasury ran out, the company falls our banker seat. Then and then all the other customers hold on.

Their account is still there. Their money is there in segregated accounts and in bankers cy, they get their money back. The idea that a margin account could ever cause another customer to lose money that like whatever that is.

that's not a market. There's a great article. There's a great article.

This one was a journalist that did his job properly. His name is David zim. s. He wrote an article in coin desk that summed up for anybody that's interested, all of the actual fraud and all of the crimes that were committed in excitation detail.

And what's so sad about all these interviews and this dress is, if anybody would just read this article, you can construct the right questions to ask the sky just based on this one article. But but the point I wanted to make is that one of the most interesting insights was these guys had lost an enormous amount of money already in calendar year twenty one. And so this is what's so crazy, Jason, about, you know, you using language like rock pulling and like, know nobody actually trying to like, clear you guys are giving the sky a how pass.

Any industrialist reporter could have found an employee who said, wait to me that which is blew a three billion dollar hole in our baLance sheet. Count your twenty one twenty. And now we're sitting here at the end, two track .

to hold on I to respond. I am not giving him a pass and for you to blame journalists who are reflecting the crime and not putting any light on VC and the capital. Allocators, who made this investment and who did no diligence and not a government is the height of arguments. Cha, this is not the press of, this is the v the capital allocated. You are blamed.

the people who are telling the story. Jon.

covering this OK. Sten, can I get in here? Can I get in here?

I listen, Jason, I will defend you against to me saying that somehow you are that you're letting S, P, F off the OK. I know you don't want to let S P, F off. However, you are letting the press off the hook.

And the reason on a second, the reason why you're using this inaccurate language like rug pulling and run on the bank when there was no run and there was no bank, is because you've been infected by this language that the media has inserted into the discourse. The media, listen in all the second. Investors may have got IT wrong last year. Investors may have got IT wrong when they did that last round, but I think investors now understand what's happening. But the media is still covering for sbf by miss explaining what happened.

Okay, give me a percent sets of who's to blame here. VS who invested and didn't set up any governance, regulators who did not set a rules around crypt out. And then through the media, what percentage out of one hundred percent is the investors, the regulators and the press? Go three numbers.

I would say that before the flag got exposed, one third, one third, one one third each before the frog got exposed, but they were also jointly and severely liable. But after the frauds been exposed, no investor is still defending sbf. But I think that the investors who were swindled by him, they feel bad about IT.

So thirty, thirty, thirty is absurd. The press had no way to know that I was going on, just like the this is the money .

didn't talking. About he's the guy that went and did all the world joon Carry me celebration john, Carry you went and found this thing. Know when everybody else is like, this is perfect.

IT meets all of our players. Let me finish, please. IT meets all of our players.

This isn't john caron. And so john kerrey was like, this doesn't pass the smell test to me. Let me go do some work.

And he pulled one little string. And over the years of eighteen months, he exposed the whole bloody thing. So hold on a second.

So what is incredible to me is that IT was possible to expose this thing before. Nobody did I agree with David. It's about equal responsibility before. But afterwards, the bulk of the responsibility, t ie. S now sits with regulators to clean IT up and journalists .

to tell the truth. okay. And now may I respond to that. And you call me stupid, you are delusional. Number one, every one of those investors in the eros could have taking a fucking in blood test at two different places like john legacied and write a blog post and proved that the reno s didn't work and they withheld disbelief.

Investors putting in one hundred million dollars, including ripped murdoch, didn't even take a fucking blood test or tell one of their diligence teams to do IT. The same thing happened here with the investors in F, T. X.

They did zero diligence. They set up zero governance. This was a failure of the investors and the governance for ninety nine percent of the problem.

And then regulators should have caught IT. And the regulators, in fact, did catch there. No, so you're completely wrong.

Chmagh again, the journalist come in after the fraud happening. The investors and governance is responsible for stopping these things. Fx was a failure of governance and investors. And so with their nose, the end you're company.

The question is, post, post.

Why you guys obsess with post? How about avoiding these things?

You guys are going going because alist for something .

that is capital allocated responsibility. IT is our responsibility to do diligence. IT is our responsibility to create a board of directors that checks .

on Elizabeth homes .

and disagree. I all me student, you just call me stupid for pointing out something that you refuse to accept. what.

Older brother.

you can you guys are giving a pass to the investors.

You're to go to depression again.

I'm not doing fredo. I'm not doing freeze you guys for being absurd. This is why people say that were to.

Guy you can call dumb, totally .

loses.

You guys .

investors, I mean, I I think that they .

did .

a horrible .

job is a great.

But the reality is I think that if you think that you can if you but it's so if your decision is to defend the mainstream media, I think that that's fine.

I'm not laying the v different. The capability is with the investor class that has not had proper governance and relation.

How many articles have been written expLoring them?

Yeah I mean.

show show wasp's york to that malicious or that lack of oversight and holding them accountable in a way that you feel exposes this problem, create change.

Well if we look at the anos, uh those people uh who invested, including um trader and um to .

show me the examples for murdoch.

they really went after .

them for sure yeah what about here?

Uh wall street journal one day ago, sqa capital apologizes to its fund investors for F T X loss venture out perform tells fund investors IT will improve your diligence.

future investments after i'm i'm to i'm going to radio a sentence from the new york times coverage of S, B, F and same second sampling e for free is neither a visionary nor a criminal mastermind. He is a human who made the same poor choice generations of money managers made before him. Are you f ing kidding me? That was the newer times cover.

They also said that money that was a run on the being OK. Now, where is their apology? Hold on a second.

Where is their apology? So koa has apologized. Where is their apology?

Osa, i'm not defending the press. Yes, I am. I am really telling you that york times .

has been a year of the twitter. Spaces .

yesterday did a Better job of trying ask questions and get into the truth, and a single journalist has done. Or the collective body of .

all the journal solution, literally random .

on twitter. Spaces did a Better job. why? why? No, just press the, and they make a mistake. They never admit IT. When's the last time they did an apology or attraction once the last time they did? What scope did?

I don't know that and they need to, but I am an agreement with you on that. But I think we have to first say.

and this is where you guys have.

is what is the responsibility of capital allocators and s and regulators. I think it's one, two, three. Our industry is responsible for setting up proper governance. The regulators are responsible for making sure that your scientific client are back up. And and then press is a distant third.

you know, I think is responsible. S, B, F, one, two and three. And then we can talk about four.

five and six. Okay, four, five and six. Capital allocators regulators, the press, a distance.

Six, I agree. Let's go on to china guys. So spicing today here so hard. I mean.

I think I do think when we attacked the mainstream media, Jason feels a little in tension of like, uh, insecurity and illegitimacy because he were journalist. I my personal perception is I think that but I have I think that you have a an incredibly romantic view of the craft as you practiced back then, which is full of integrity. Yes, I think that I I think that you you don't adequately realize how massively the industry is changing the last to one years since .

you I realize that more than you do, I fully realized that the media has absolutely become biased. Are they going to have lost in some cases? yes.

I mean, if you're taking money, are they flying? Yes, are they him? They are corrupt.

If they are taking money from S, B, S. And then giving him give go off coverage, absolutely. That is the definition of corruption .

of my mind is what is IT called when you don't take money necessarily like the new york times and still .

treat them with the cows? What is extreme bias and the new york times becoming.

why do think bias? Why do you think that bias exists?

They were always left leaning. But I I can tell you why they, when truck came in, a generation of new journalist became activists, journalists. They didn't want to tell stories and take a straight down the middle and let the fact tell the story, that the audience make their own decision.

They felt that existential risk. When truck came into office, they got trumped arrangement in syndrome. They picked aside like M, S, N, B, C. And foxed. And the business model became for the new york times, pick aside and get the subscribers.

IT was a deliberate, cynical choice on the new york times part to go full M S N B C 或 full fox， the two extremes in mainstream media in order to get the subs. And they literally raced the troops there to do anti tech, anti trim uh, coverage and they became activists. And when journalists become activists, they are no longer journalists, their activists or commentators. And that's the problem is being presented as journalism when in fact, it's activism .

so and that's A T T A E B who just had a month debate on this ah on this very topic and he has a great great substate basic saying what you're saying, Jason and the best quote is the story is no longer the boss instead we cell narrative he's a lifelong journalist whose father was a lifelong journalist and he understands the way the businesses changed.

And it's like what you're saying and and this is why independent media, whether it's substances, whether it's call in shows, whether it's all in podcast or other podcast, joe rogue and sam haris, whoever IT is, independent voices are now what consumers are seeking out because they can sense the by as they know. Rachel matto and talker have an exact ground, and they are left and right. They didn't expect the york times, washington post and whale journal to, you know, they knew they were leaning. They didn't expect them to pica de.

Do you think we should cancel if folks do you think folks are Better off keeping their new york time subscription or replacing that new york time subscription with a basket of substances?

Yeah, you answered your own question is the latter. I think you're on your own as a consumer now. You're gonna have to. And I think this podcast and the nuance we have shot out to free .

bird for nuances, what we've .

done .

on this podcast is that explain.

nobody would describe .

David sax with the world .

partment one hundred percent he is.

but you would know that could you leave? I'm the truth department.

The point takes, summer need, consumers need to become extremely literate, and they have to do their own search for truth. In today's age, they don't. They shouted, trust new york times.

They shouldn't trust us. They should trust themselves. They shouldn't trust necessarily the cdc or you know, the world health organization. They should trust themselves and come up with their own process for figuring out the truth in the middle of this mess.

By the way, this is a good reflection on what's happened with the rest of media. With respect, the crater class, where right there used to be the movie studios and you know, a handful of kind of aggregated creators that made all of the content of the record labels. And now, you know, independent artists, independent producers, independent creators and now independent journalists are going to become the bulk of volume that's gonna consumed.

It's just a different consumption model. But we going to happen. We saw happen with movies, and we have seen this disruption happen across all of these media classes. Journalism and what we call the press is very likely going to be kind of that next layer of disruption.

I would trust having a conversation with you about science topics over reading a science article hundred percent in the new york times, the wall street y terrible. If i'm being hand, I would much prefer to talk to you about IT. And if I was markets, I rather talk to mark. And if I I would talk to actually Operating a company.

speaking of CoOperating, a company politics.

我 see.

我 see， but I think I think it's about having unique insight. Insight, right? Like that wasn't the case.

And what's interesting is that the people who are the professionals that have the knowledge in the touch points are also becoming journalists in the sense that they're also becoming speakers of their truth, right? And and I think twitters a good enabling platform for this. We see IT on youtube word like scientists are putting out their own videos.

Or market actors, like people that are traders in the market go out, they put out their own videos and they put up on podcast. And I think we're probably a good election of that yeah uh, in the sense that like we are the actors in the market and IT were not just the independent observer that has kind of a surface level view. We have the debt to be able to talk about the things that we choose to talk about. And I think that's where consumers find value and will continue to find value in terms of who the journalist or speaker is that they are going to start to trust for the information.

I had I saw I saw that I never you you did .

with newcomer oh yeah.

yeah, thanks. yeah. I saw that coverage. I mean, he speaks a lot about the a this phenomenon of going direct.

Of course, he's against that. Now he interprets going direct as an attempt by news makers to avoid answering tough questions or take tough questions. I think that's ridiculous because for example, I go on C N B C all the time.

I go on emerging and um bloomer all the time. I submit to like really tough questions. I actually like those sparing sessions.

Yeah, I did hard talk this way.

Yeah, exactly. So that thought, what's going on here? I think what's going on is we have expertise.

We want to communicate them. And we do feel like the media has become a very unreliable narrator. There is too much bias and sloppiness.

Not all of this is agenda so much, just pure. And there's no reason why we shouldn't go to that. And people want to hear from us. Their audience wants to .

hear from us same look a dress on, look at drawing in the success he's had with his part. But no basketball player has ever gone direct and credit a content like gray month credit. And it's totally changed the game.

And he was so clam. He's like, we are. I am the media .

now read, you know, old men in the three amazing, amazing pocket. I was going to tell you guys a story. So I was in the middle last week or this week, sorry.

And I had this crazy experience where I was trying to understand what was going on in china. And so I started on CNN. And the whole thing was the propaganda machine around a cradd revolt, you know, pushing for democracy and trying to depose you.

Then I moved to alarm ia, so one channel lop, I went from channel ten to channel eleven. And instead, what they were actually doing was interviewing people on the ground. And what they were talking about was literally how these P, C, R test has become far too burdensome.

M, and they just wanted IT to end and more reasonable restrictions to get in quarter. Then I went from there to, uh, B, B C. And A, B, B, C.

They had a china's scholar who was talking about how, for decades, actually, the communist party supports local level protest and demonstrations, because they realized that IT is a part of their political system to make sure that people feel like they have to say. And I was like taking a step back and i'm like if you listen to the U. S. Narrative and eve Jason, like in our group chat people formatting for like revolution and this is tannin two point zero and i'm like, well, i'm reading two other channels that tell us a completely different set of things. And I just thought, men, people just really fit the data to fit their bias.

We are projecting. We want to see a revolution in china. The people in china want to have their lives back.

I would love to see more democracy in the world. Yes, guilty as charged. I would like to see people be more .

free in the world. Dictator.

I think most people just want to improve their condition. And I don't think people are ads tied up on the philosophy of the government as they are about improving their condition. And as long as their condition is improving, they're willing to put up with any form of government.

And history shows that, by the way, the conditions in china have improved .

Better than everybody in anyone, anyone five hundred people out of object poverty. Uh, and that's the great success of ageing isolationism. IT would not have created that amazing outcome. Five hundred .

million people going out saying that, or if they want to build something over there, I guess that's Better than us. Thring out open our markets and giving china m fence status to destroy american manufacturing and build up their economists that they can become appear competent to the united states.

Yeah, I mean, this is the baLance of engagement. And if you engage too much, you get everything up.

sex. Which of the current republican agenda do you disagree with most strongly? Just as in a side.

well, most republicans are in favor of our ukraine policy, this sort of unlimited appropriation of weapons and aid to them.

Don't disagree with immigration policy of republicans and democrats.

Well, I have more unions, positional immigration, which is, I think we need to have a border. And IT can be just like an open border, which is the day factor we have now. At the same time, I do think that we should have each one b visas.

And we want to like to us, and we want to be an all star team for the world. We want to have the best people want to come here. So there's a baLances. It's and then look, I think that I was happy to see the marriage equality bill finally passed the senate. Yes.

they did get .

about a dozen yeah, but that's not the majority, unfortunately. You know, look on on what I would categorize as the old social issues um you like a area is like campus galiano. I was on the liberal side yeah I don't think, you know banning abortion entirely, a total abolition, is going to a work for this country. I think republicans will lose elections if they insist on that, and I think they're getting that message. So um so yeah I mean, look, I I think that um I always consider myself to be pretty rest.

And so you're not a global list. You don't believe in open global markets .

with the U S. In general, I understand the benefits of free trade, and I don't think we should be isolationist with respected trade. I don't think that we can be a successful country.

If we are, we isolate our economy. So I do want to trade. However, with china in particular, I think we made a mistake in throwing open our market to their parties, giving them ef status while ago.

in reaching them to the .

point where they became a peer compete of the united states. Now look, I understand why we made that mistake twenty years ago, because everybody thought the theory was that if we helped trying to become rich, that china would have never believe more democratic, and they'll be filled with gratitude towards united states, and that actually become more more hospital towards us, more western ized. And I think that theory is just proven to be wrong. I mean.

to have not or it's going very slowly. One of the other, uh, let's own our clips here. Uh, here is tomato s prediction from episode des sixty one and we will see you on the other side of this quick clip.

my worldwide uh, biggest political winner for twenty, twenty twenty two is zip ing. I think this guy is, uh, he's firing on all solondz and he is basically ascendant. So twenty twenty two Marks the first year where is essentially really ruler for life. And so I don't think we really know what he's capable ove and what he's going to do. And so that's just gonna ay out.

You think he's the biggest political really.

I think I think it's going to be a he's gonna run rough shot, not just domestically but also international because you have remember, he controls so much of the critical supply chain that the .

western world needs to be. I think the I think he's losing his power. He's scared. That's why took out all these s he's consolidate power because he fears that they're gonna win too big and then display him. And he has massive real world problems over there that could block at any moment in time he could face A T, I told isola m, major in their, there are only gets there.

What are you talking about? What they, what they get to right with?

Or did you not see t anim square? Did you not see the riots in hang kung or you not paying attention to month? There has been many riots in china. They are were crushed, massive amounts of A, I believe, protests. And yeah.

he'll have think that the bigger risk is, is that china gets Better for shing paint, but worse, everybody else in china is already worse for all the billionaires over there. It's worth with the tech industry, you now got ever grand that whole you know gigantic debt implosion. I think there could be contagion from china next year. I don't think she's going to lose his grip in any way, but i'm not sure china's going to have a good year next year.

Wow, now died. I think all three of us kind .

of got this you .

talking about. You ve got none of that right. What I I said, they're going to be in a both things happened.

I actually think I have a pretty decent ability to steel man pretty completely the details. I think that best when he comes to things like democracy and your belief in U. S.

Exceptionalism in a specific political world, due at best, use straw man. And I think that you get very bias without seeing the forest from the trees. The reason I said that is not because I like, you know, some huge g supporter. I'm just trying to steal men. What happens when one individual person gets annointed leader for life of one point three billion people that then controls twenty percent of the world's GDP? There is no other single human being as powerful as him as of this month, what can I say that the show.

the show is going to become unsufferable every time you sort of said something in the past that was sort of correct, we're going after .

replay IT.

I was like, I actually play in that one for you. Sex, I think you the melted .

I was giving that was a soft all to you. Actually, I play every .

clip and you guys, thank you to live grand thing. Look what he did this week. They said, okay.

you know what? The real estate .

industry .

can now issue secondary stocks, sales, raise equity and equalize themselves, so they're gone to find a soft landing for the equity part of the real state industry in china. And now they're reopening. So I don't know. I mean, like i'm not sure what we're supposed to comment.

What I what I will stand by is what I said, which is I don't think we have a very clear view of about what's going on, what the subsistance of these protests are and what people actually want if you're only consuming U. S. media. And so if you find a way to get a diet from a bunch of different sources all around the world, you maybe get a Better sense. I had an accidental window into that by being in a completely different part of the world this past week.

Freeburg, any final thoughts on china and what's going on there? Before we move on to ChatGPT, you are favorite story.

I think one of the things we often misses, the china, the C C, P, does have their hand on the throat like they throttle up and down. We always think that it's a linear line and that its super dogmatic can fix, but they're certainly responsiveness. And the release of the lockdowns and ground shaw and beijing this week seems to have been a pretty good indication that when things do get when when things when the tides do, do change leadership, there seems to respond not always, but a enough to kind of keep things going. And so should they reopen?

I think it's sixty percent of the population. So is vaccinated with the obviously vaccines that maybe aren't as don't have the same effect acy as the ones here in the united states, do you think they should open up and just let IT rip? Uh, or you think they should step still, try to maintain the zero code .

policy because that is the debate right now.

I from the objective of .

economic growth, they need to open up and they need to keep their economy working and they need to keep their labor force engaged or else you're gona continue to suffer. So if economic growth is the objective they they need to open up, right? If the long term health cost of the nation baLances skin against that is the calculus of their kind of wing.

There's probably some more new on to that. And certainly um my understanding is there may be a precedent setting, which is, hey, we've said that is a eoe policy. Therefore we have to hold strict to IT hold told the line um else that looks like we're weak.

And so there's also this you know maintaining the authority of the C C P. objective. Uh so there's a lot of maybe competing objectives right now. Uh, certainly don't have a sense of how the way them all. But but I think once, once all those videos came out this week, you guys saw them, but people were screaming.

There was an apartment on fire where the doors were locked with steel beans on the, on the base of the building, at least at what the the video said. I don't know how much truth there is to that, but that's what we said. And clearly, people are extremely distraught and unhappy with the conditions of the lockdown.

At some point, enough peace, people with enough oud voices. You know, something gonna change. I mean, let's just remember, like the bargain that struck in that country and with all countries is that, you know, the citizenry, to some extent, are are willing to tolerate their government so long as their conditions continue to improve and there's a bargain, there's some bargain that struck. And as soon as that bargain starts to go out for, for, for the citizens y then that that that governing entity is at risk. And I think that that's what we sort started to see this week was the conditions are getting far, far worse and ford less livable for so many people in that country that the government .

had to shift. You think chh this, uh, coverage strategy in the move on was basically jigging wanting to get to that congress is oration. And now that that's over, maybe he can change gears.

And then like I said, I my belief is that I have a very poor access to enough dated to have a to steel man. Um what is actually going on there? But one explanation could actually be that in the absence of enough hospital infrastructure and ventilators and a bunch of these other things, they had to take a pretty severe approach to this disease.

I don't know what they know or didn't know. Maybe they understood, you know, the violence of IT. Maybe that they have, uh, slightly different aging characteristics of population. Maybe they genetically responded to the source code to virus.

I don't know any of these things enough to tell you just yeah, but the reality is, but freeborn cess is right, which is that you cannot grow an economy if people are inside, locked in their apartments. And IT looks like they have decided that, that's coming to an end and they're going to, you know, deconstruct all of these things. So you know the the chinese growth engine is coming back. And I think that that's gonna an important factor economically that we're going have to figure out because it's going to have a huge implication to american growth and american inflation.

Sex if in fact, that if the lab league theory is correct, china might have some insights into this uh, disease that, uh, maybe the west didn't maybe that plays into their policy a bit.

And any five jack, i'm just surprised to hear that you have a problem with their lockdown, a policy over there because aren't they just implementing democratic party orthodoxy? I mean, he isn't this the .

policy that tony fouche eventually later day one?

Is this .

why I get you .

just .

a question as .

the moderator is basically .

question?

I was in favor of people wanted to stay home, stay home. And then if people wanted to granted the rist.

take the rest. I was always in chot. This what gration whitman in michigan and garden center, california subscribe to the idea that the way to fight over IT was through lockdowns. Now, yes, newsom had ten pages of exceptions for his political donors, and he didn't use the police to lock people in apartment buildings. He may have wanted to, but they didn't actually do that. But can you really tell me that this lockdown policy has been disavowed by people like foul chi or by the health authorities like the Barbara areas of this world? They so .

subscribe to .

this view, not able to do IT because no one agrees anymore. But tell me, tell me where anybody tell me we're any of the health experts who said that walk down through the correct response have repented and disavow that view?

Yeah, I don't know. I haven't haven't been tracking their a macos is new year self rate in favor of lockdowns for a period of time. If you were, you absolutely want .

I put favor of a mass man date. No, it's not true as an favor of the mass man date. And I said the mass min date was the alternative to lock downs. Okay, I was saying that by may of twenty twenty.

Sten, let's move on to the next thing I don't represent. I'm an independent. I don't represent the party. I don't represent fought.

No, you media.

I do not have main media. You just said I was an old school .

journalist who's modernized with where I is.

Thank obviously jack.

I'm giving your hard time too. I know I know that you are not a big lock down proponent, but you understand the point I was making, which there it's not.

Let's making me the democratic.

But you guys know i'm elling a lot Better after my beer. Let's talk about I can talk about the .

OpenAI is A A company that um bells artificial intelligence software and platforms. They have one platform called GPT. IT is on its third version as part of GPT three.

They created ChatGPT, which is a chat interface where you can ask questions to A I. The results are nothing short of stunning when they hit. Uh, some of them are a little bit mixed.

But uh, freeburg has spent the last forty eight hours a drinking White russians with olly milk and playing with ChatGPT, including his question to the ChatGPT, which was right script of chaos sax and J, L, uh, talking about the future of A I in the style of a quinton tern T, O movie. And I have to say, I was pretty great the result. Go ahead. Uh, freeburg.

tell us what you just I think you guys should read this road. We can cut out if it's stupid I read the script .

and the current you know part, right? I mean, there was like impressive .

but there's no f bombs. There's a look at all cursing violence from .

the that explains IT because this is a 2 tino scrip。

There be some choice language, but it's underway.

It's like the P, G.

tea. T, O.

yeah, you do the another good.

The scene opens on cham pala, peta, David sacks and Jason calico sitting at a dimly t table in a smoky bar. A bottle of whisky sits in the center of the table path, empty chairs leaning forward, his eyes intense. So what do you .

guys think about this ChatGPT thing David .

sarks takes a sip of? His draw is impressive.

no doubt about IT, a large language model trained by open ii that can generate human like text in a variety of thousand. Four mats is a game changer.

Js ods, definitely.

it's one of the most advanced AI systems we have seen today. It's gonna a huge impact on the way we use and interact with a to mark france.

That's what i'm worried about. With the technology like this, the possibilities are endless, but so are the potential dangers.

Sex leans back in his chair, come on to moths.

You're not still stuck on that whole AI is gna kill us all thing or .

you tomo leaned forward again, his voice slow and serious.

Look, i'm not saying ChatGPT is going to turn to sky that overnight, but we need to be careful about the way we develop and deploy A R. We need to make sure that we're using IT for good and not just for our old game.

Take our knots. I agree.

We need to make sure that we're responsible in a way we use A I. That includes making sure it's accessible and affordable to everyone.

not just a select few. Dirty, smart.

And let's not forget about the importance of regulation. We need to make sure that we have the right a in place. K O, K, 这个 是 必须 是 被 用来 的。

Cut .

mean it's sixty .

percent of the way there.

I actually there are you.

can you put a bite in for sex if you blame band? IT would have been perfect.

Let me tell you guys something stunning about this, this platform. So this is GPT three point five, which is an interview model to the where people are saying is belong away to GPT four point o model um which I think they announced in twenty twenty uh and has been in development for some time. So the model this GPT three point five model was trained in three steps.

They do a great job explaining IT on the OpenAI blog site where they collect some some data. And then there's a supervised model, meaning that there are humans that are involved in tagging. And then the model kind of, you know, learns from from that system.

Then you d ask the model question to get output and then humans rank the output. And so the model learns through that ranking system. And then there's kind of the third optimization being a minute fine team.

So the the model itself um has several steps of kind of human involvement and you know kind of sources is on data and build IT. You know what's incredible about this model? The total size of the software, a package that runs the models about a hundred gigabytes is not amazing.

Like you could fit this model on probably what twenty percent of the storage space on your iphone and you could run this thing and you could probably just talk to for the rest of your life. Um and it's really kind of an incredible milestone, but I think was so starting to me about this. So I I know you guys are probably expecting something to be said like this, but you could see so many human knowledge, worker rolls and and and functions being replaced by this extraordinary interface so kids can do homework.

That's easy. Uh, software engineers can get their code optimize and can get their code written for them as great examples of how software code has been written. H by the interface, you can see real estate insurance sales people being replaced by some sort of software like interface like copywriters.

You know, make me a hundred versions of a commercial or an ad in venues. Customer support completely replaced, right? If you guys remember, there are these automated customer support companies that started, uh, you know, two decades ago.

Now there was a great flurry. All B, P, O businesses were all about lower cost human labor. Now the cost of human labor goes to zero, my prediction, which is so everyone's got the obvious prediction, which is there is going to be a hundred thousand startups that are going to emerge.

I mean, this is kind of like this moment where the internet came along and everyone is like, this changes everything. I do think everyone thinks and feels. So the obvious next step is a bubble will form.

So question of freedom tomato, and I think .

everyone so hard about, and we all PC attention, all the investor attention, is shifting to this capability. And how do you apply this sort of capability across all of these different industries and all these different applications? And as a result, my guess is the next typed cycle, the next bubble cycle in sick valley, absolutely be this, generate A I business.

Okay, but this is a little technical. But how would you know the difference between like Y O U R and you are when IT is processing natural language? If you were to do like your anus or your annis, how would that free berg, how would I know the difference between rain, us and you are space aines?

I'll learn that.

You know, joke. He was .

joke. Body good and said.

like jack out and they were .

terrible so I A I to pretend you, the all in pod, best telling your inas jokes.

That would be pretty good. So let me just see one more thing about this opening. I think I do think that the biggest and most interesting thing to think about is how this will um this rub the search box, the search, you know the way search works, google and the internet search is there are these kind of servers, these web trawlers that go out and gather data, some of structure data fees and some of them are just crawlers.

And then that data is index or in the in the structured way is kind of made available for for serving directly on the search page. And so much of that is is indexing. So I searched for a bunch of keywords as keywords and and perhaps so some natural language contacts are matched to a result page, and I click on that and and it's linked out. Years ago, google started a product, all the one box where they could take structure data, like what is the weather in C F.

Ference cisco today? And that the top of the search result page just presented that data because that knows a high certainty the question you're asking and IT knows of high certainty the answer can give you A C, P, somebody y's website, right? So if that starts to become everything, then that one box interface and it's not just google's ability to access all this data and index IT and serve IT and store IT. There could be a lot of competitors to the one box and a lot of competitors ultimately research um and ultimately, you know google's core product search engine could be radically disrupted by an alternative set system or set of systems that have more of a natural language chat interface which and litter.

which is literally why a google bought deep mind and there were a collection of human power search engines maho included charges, a answers that com who are trying to do the human based version of this.

It's just in scale. We don't want to get ahead of ourselves because one of the things we don't know is how much is going on and deep mind, they're not very open like open a as they talk about some of the advances, frontier stuff like alpa fold and so on. And they have been public about that.

But a lot of that is really to generate interest and hype what's next. But my understanding is deep minds been applied to everything from add, add optimization, but also the ranking on youtube videos to get people more engagement on youtube. And all these ways, the deep minds been applied within google services. certainly.

Search question is, is there an entirely new interface for search? Yes, that risks google core search business. And I think that there certainly will be a lot of money thrown at this. And if anyone .

has any .

interesting ideas, send me email sex. And then you I saw thread on somebody was asking GPT, you know, a bunch of questions like they were like journal, like coding questions, and they were actually comparing the result in google versus GPT. And google will just give you a reference to like a link to some page where as GPT three would actually construct the answer, like a multi paragraph, the answer that was far more detailed and in a way, user friendly yeah.

Where I like the google page would kick you over to a reference where I was like this one, two, three, sort of maybe so when I created A A check list, but this wasn't that detailed IT really is pretty interesting, I thought, and recent tweet, a really interesting example as well, where he asked GPT to create a scene from a play storing in new york times journalist in a silicon valley tech entrepreneur. They were arguing about free speech in each past on, asserts the U. S.

C. With his profession and social circle, we don't need to read the whole thing. But I thought this was like spot on, where I was actually like both sides are making their best arguments and it's like to each other in a conversation that seems intelligible, like their their points at the right time in the conversation, it's like they're playing off each other.

In other words, IT actually reads like a conversation. I actually thought this one was more impressive than the one with the best impersonation because I actually thought that the one about all and didn't really capture our personality persave. But this one actually does a pretty good job capturing the arguments in this debate. So pretty any that here.

yeah, a lots. I mean, i've been spending a lot of time learning about this area six years ago. A team, the ripe partner with who was a google that built T.

P. U. We've been building silicon for the space, so we've been kind of going from the ground up for the last six years. Couple of things that i'll say. The first is that I think we're going to replace SaaS with what I call mass, which is models as a service.

And so you know a lot of what soft will be, particular in the enterprise will get replaced with a single use model that allows you to solve a function. So these chat examples are one, and you can name a bunch of sas companies that were prevails of sas that'll get replaced by essentially GPT three or some other language model and then it'll be a whole bunch of other things like that. If it's uh, you know expense management company, they'll have a model that i'll allow them to actually do expense management or blob lab forecasting Better.

So I think says will get replaced over time with these models incrementally. That's face one. But the problem with all of these models, in my opinion, is that they're still largely brittle. They are good at one thing. They are a single mode way of interfacing with data.

The next big leap, and I think IT will come from one of the big tech companies or from open eye, is, and we talked about this, I talked about this a few episodes ago, a multimillion moral, which then allows you to actually bring together and join video voice data in a unique way to answer real subsidy problems. So if I had the steel man, the opposite side reactions. So I think there's a lot of people gushing over the novelty of GPT three if I had to, or ChatGPT if I had to if I do still amend the opposite.

What I would say is it's gonna get summer between ninety five to ninety nine percent of all of these very simple questions, right? Because they're kind of cute and simple there. There is no consequence of saying right to play because there is no wrong answer, right?

You either kind of IT IT ticals your fancy, or a dozen that kind of entertains you, or a dozen when this stuff becomes very valuable, is that when you really need a precise answer, and you can guarantee that to be overwhelmingly right, that's the last one to two percent. That is exceptionally hard. And I don't think that we're at a place yet where these models can do that.

But when we get there, all of these models as a service will be very much commodity, ed. And I think the real value is finding non obvious sources of data that feed IT. So it's all about training.

So meaning you can break down machine learning and A I and do too simple things. There's training, which is what you do, a synching ously. And then there's inference, which is what you're doing in real time.

So when you're typing something into chat G P I or ChatGPT, that's an influence that's running and then you're generating an output. But the real key is where do you find propriety sources of data that you can learn on top of that, the real arms race. So one example would be, let's say, you build a model to detect tumors, right? There's a lot of people doing that.

Well, the company that will win may be the company that actually then vertically integrated by the hospital system and get access to patient data that is completely preparatory to them and covers the most number of women, of all age groups and of all ethnic categories. Those are the kinds of moves in business that we will see in the next five to ten years that I find much more exciting and trying to figure out how to play in that space. But I do think that ChatGPT is a wonderful example to point us in that direction.

But i'm sort of more of that case, which is, is a cute toy, but we haven't yet cracked ked the one to two percent of use cases that makes IT super useful. But I think the first step, but just but the first step will be the transformation of sto mass. And then from there, we think we can try to figure this out.

IT reminds me of in a way, when you when you give that description of, okay, this is really interesting, but it's not complete. Is remember when G, P S. Came out and like people are like doing turn by turn navigation, they drive off the road because they are trusting IT too much.

And then you know, over twenty years of GPS, we're kind of like yet pretty bullet proof, but keep your eyes on the road. Same thing that's happening 啊。 And and these changes .

tend to be right. These these last hundred or two other basis points literally takes decades exactly.

So the last percent of self driving is like the decade long.

You slow that take a century. Fifty percent may take a century, but the last two percent will take a.

like, the change happens very slowly, and then all at once. For people who don't know what is A T, P, U. Is that a tensor processing unit? This is good um application specific circuits right in the silicon that they invented .

for TensorFlow at the time. Yeah so if you want to try, although the city of A I, we've changed that as well. Now we're totally in the world of transformer are not even using you know you're not letting the TensorFlow .

the way they used to. All right, this is going to slow down in sax sax um what is happening .

in the software as a service world? There was a good update by ball, who does really great updates on what's happening in the south world. The big thing this week is that salesforce had its quarter, and I would consider sales force to be the bell weather for the whole site category.

I think there is the largest pure SaaS company. They were the first multi I tenant sas like company at scale. And what theyve is a huge slowdown. Basically, their net new arr that they just added in the previous quarter drop two thirds compared to the previous quarter.

But because their sales and marketing spend was the same as previous quarter, IT exploded their cat payback, which means the amount of time IT takes to pay back your costs acquisition costs for giving a customer. So you see there are hundred and fifty five months IT would take now to pay back the cost requisition costs that's over ten years. That doesn't work.

I mean, I think before this quarter, IT was more like two and a half years. That's something that you can afford. A company can if you're spending ten years of growth profit on a customer to acquire them, the business makes sense.

So now i'm not saying any of this to pick on salesforce. It's exceptionally run company. You know, one of the absolute best, marc benioff, fantastic CEO founder, great human being.

But I think the point here is that what you're seeing is the whole sas industry is really slowing down here. In the first half of the year, you saw sas valuations correct? Now we're actually seeing sas top line correct? And you know there's an interest question here.

If your cat payback goes from two half of years, you have to bring your cat down. How do you do that? You can either reduce marketing or you can reduce sales. So other words, you can reduce.

cut the sales team.

You can either cut people and have come from your own team, or you can cut spending you do on advertising or events or money that you spend on other companies. Either way, there's going to be a big contraction in jobs basically around this industry. And I think that what that could do is cause a vicious cycle .

where we started seeing.

I went a despair, I think, this vicious cycle for the next year. So where seat contraction becomes the norm instead of seat expansion. So if you go back over the last ten years, a major tailwind at the backs of starts as bin that every year year, you start with one hundred and twenty percent hundred and three hundred and fifty percent of last year's revenue. Just remember existing customers.

why? Because they were hiring more, more people and they need to buy more, more seats. But now headcount growth is frozen, and in fact, companies are doing major laos.

So the baseline for next year could be seek contraction since then, starting with one hundred twenty percent of last year revenue, you might start with eighty or ninety percent because this can be so much turn. So I think that, you know, SaaS companies need to take this into account. This idea that like growth is on autopilot, that could start to go in reverse, I don't think permanently. But I think for the next year or so this way also, I tweeted, you know, two access in new three acts, if you can grow to x year over year in this environs, that as good as or Better than growing three x last year.

clearly.

clearly Better like a lot of companies that weren't that week ago, three x last year because I was so times was so foothill, everyone was buying everything. But now IT is going to be really hard to even double year over year. Companies seem to take that into account into their financial planning. Uh, you need to restrain your burn because a lot of the revenue that you predict is gonna be there may not be there.

alright. Uh, thanks so much to the secretary of sas. I think you've got a board meeting one of the interesting beings I saw in terms of use cases, as somebody used the ChatGPT to describe rooms, and they took the descriptions of those rooms and then they put them into like golly or stable diffusion of those.

And I created the visual. I'm curious if you think, you know the self driving A P S, uh, and machine learning that's going on, then you get images, then you got chat, maybe you have proteins going on with the alcohol stuff. When these things start hacking to each other, is that going to be the emergent behavior that we see of general I and that's how will interpret IT in our world is these hundred different vertical AI, uh, hitting some level of reasonable ness to chaos, point on data set and then obvious. And the self driving AI is talking to the one that's looking at cancer and tumor diagnosis in the chat and the image ones and may be stable diffusion. The protein A I and the one that's looking at cancer cells start talking to each other.

Yeah, i'm mature that as likely as the there's a lot of solutions that will emerge within verticals. And I think you can distinguish them. So I couldn't give this example a few months ago. If you remember, kids power tools was a pluggin for adobe photoshop.

I came out in one hundred and ninety three, I believe course and kids power tls completely transformed the potential of adobe photoshop, because photoshop had all the basic brushing and editing capabilities within the kite power tools with statistical models that basically took the matrix of the pixel and you know, created some evolution of them into some visual output, like a blur. And so you could blur motion, blur something, and you could change the, and now your photo look like he was going through a motion blur. Ultimately, photoshop, bot and implement of those tools.

Those were similar. There are statistical models that made some representation of the input, which was the image, and they created output, which was an adjusted image. I would argue that that is very similar, although the models behind IT are very different uh in terms of the contextual application um of statistical models in software.

And you could see stuff like, for example, a chat pot that replaces help me figure out whether my credit card charges or correct or not, instead of having a customer service agent, an offshore customer service agent helping you resolve that or help me return my item. Um or they're very specific kind of vertical ze applications that can plug in that ultimately replay what was manual and human driven before because humans used to manually make the motion blue in photoshop. And then I was automated with software packages.

And I think you can kind of think about IT in the same way that these these are no known. They don't require necessarily a human physical labor or some, you know, human responsiveness that if ninety five percent of the work can be handled, IT will get handled by some vertical zed solution. So I think the physical labor, reverse of the non physical labor is one way to think about the distinction.

Meaning, is there some change in the physical world? Driving is absolutely a change in a physical world. You have to move physically through space.

So that one is a very distinct class. All the stuff that's like communication imagery, static imagery, audio and the visual video. There are some stacking that happens there and some of those be kind of silos and then some of them will merge. And you'll have these kind of unique of combo models. And so look, as they start to work together, I think we'll see them, you know completely rewrite some of these verticals like movie production or music production right or advertising or we're seeing IT now with with video and and creative arts uh with um know some the visual stuff on up. To be honest.

a lot of journalism, a lot of creative arts have become the wisdom of the crowds over the last two decades where, you know, artists we're looking at the collective works of the internet, interpreting IT and then coming up with content, which is kind of what these A S are doing and then who legally owns the collective content is going to be a big question to mothy talked about data sets and microsoft is being sued right now and get up because they a used open source to create tools in A I to help augment programmer like where the programme running code gives them suggestions and now the open source community in them for using their data sets.

So what what do you think about the legality of data sets? Dream often? And should they get some kind of protection if you make a GPT three based on core r or based on wikipedia, should you have to get approval to use that data?

What's the exact opposite? Yeah it's is the exact opposite. They say that this is actually your work um and I think that that's the right legal frame. But the the answer to your other question is this is why I think the hunt for propriety data actually becomes to the hunt that matters.

All of this other stuff, I think, is a lot less important, because I think you have to assume that all of these models will eventually just get commoditize. So delbier internet, you see like jasper a and you see a bunch these general of A I companies is really interesting. But the problem is when you sit in on top of the same substrate, you have a convergence, right? Everybody's chat model will eventually look and sound and feel like the same thing, unless you're giving IT a few special ingredients that other people are not. And so it's the hunt for those ingredients that will make this next generation of of models really valuable.

So to give you an example, you'd have wikipedia, which is creative comments anybody can use, but cora, as a data set, not everybody can use that own my company.

So advantage an extreme example, if cora didn't allow themselves to be crawled, right? Okay, which they and but then they and then they developed their own language model, which used the best of the internet. So call IT, you know, GPT and cora.

Maybe they are slightly Better in certain domains and others. The other extreme examples is the one that I used in health care, which is, you know if you have access to patient data that you will not license to anybody else. You know IT stands to reason that, that model actually that has much Better chances of a highly effective clen cloud. First, as any other model apple watch comes to mind.

right? Apple has all that watch data. They could pair that with epics.

Do, what can they .

do together? So this is gonna, like, this is the the new oil is gonna ata.

And by the way, like to to to talk about apple for second. The smart thing is they've gotten so method ally, they've never touted the A I. You know they introduce one or two distinguishing features every year, right? So like the the the E C G, which was introduced many, many years ago, IT has only gotten slightly more usable like five or six years later.

But in the meantime, there is, you know, tens of millions of watches collecting this kind of data. So to your point, it's it's using these devices as trojan horses to collect training data. That is, the oil.

Uber and tesla have all this data of the data being collected by, you know, the so these were the cameras in the cars.

The other difference though is that you have to be in realm where you don't need regulators to go the last mile. So the problem with a ads, I think we're level five autonomy, is that eventually you get to a point where even if the model becomes quarter quote perfect, you still need regulatory approval.

And what i'm saying is I think you have to focus on areas of the economy that are not subject to that or where the regulating pathways already defined. So for example. If you use that health care example, let's say that you had the largest corporations breast cancer image data, and you could actually build an A, I, that was a much Better classifier for tumors versus other things.

The F, D, A actually has a pathway to get that approved very quickly. The problem with in a level five autonomy is that there is no clear pathway. It's not again, we go back to almost uh, a crypto example. We don't really know who will govern that decision and we don't know how that will be govern. So I think the the thing that investors have to do and entrepreneurs, entrepreneurs have to pick their own market very carefully, and investors have to realized that this dynamics exists as well.

If you're going to do this right, imagine the Robin hood tradings trader dataset watching people sell in shares and then predicting markets with IT .

with a could payment that's used by city deal on the other big.

But I I can tell you, as .

somebody who sells, we saw a lot of machine learning hardware into this market. The biggest players are the U. S. Government and these ultrahigh concentrating.

organize any final butter. Give me the final word, how could this affect astronomy? How could this affect your, our search of the galaxies, you know, going out past pluto, breaching your, in this, any, any of those things.

How could IT .

impact and. I'll try to get your rated joke to let .

help me out to your to you know I think you need to have more .

uh space related .

um yeah which workshop .

this trick freedoms g into thinking or asking .

a serious question get him down the science the right so I tell us know .

when you're doing like super gut use promo o twisting twenty five percent when you're doing super gut, your analyzing people's guts. How would you then have machine learning in this, you know A P I uh h this chat A P I GPT three. How could that help with processing all of that, especially when he passes through uranium freebody OK their free perk? You are hung over.

I'm hung over. But I also had like a seventy and four meeting. So i'm just .

a little beat up on the get a are fine you can couple kept the raging .

and I had my cain fuel and I kind of cry down afterworld everybody.

we will see you next time for the secretary of sas, the dictator and the sulton of hangover we will see you next time. byebye.

Lovely guys.

Bay, bye.

We open sources to the fans and .

just .

got crazy with.

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只 get。