E28: Current state of public & private markets, Archegos debacle, US debt issues, wealth tax & more
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My name is David Sachs and I have a broomstick in my... That is why my voice is so deep. I have never had friends in my life. Somebody be my friend who I don't pay. What a mood we're in today, huh? What a vibe. Rain Man, David Sachs. We open source it to the fans and they've just gone crazy.

Hey everybody, hey everybody, welcome to another episode of the All In Podcast. With us today, the rotating cast of characters that you've come to know and love and follow on the Twitter, the Queen of Quinoa, David Friedberg is here, and the Rain Man, David Sachs, calling in from one remote location that is undisclosed, and the Dictator,

Chamath Palihapitiya with us again. Gentlemen, how's everybody doing? I'm punchy. You're punchy?

I'm punching. Chamath is in a mood. Is he in a mood? What's happening, Chamath? Nothing. I just finished a workout, so I think I'm high on endorphins. How much money did you lose in the market today? Wow. Just a flagrant foul on the first play of the game. No, he said he wasn't happy, so I was just hypothesizing. No, no, no. I am happy. I am happy. No, no, no. I am happy. I'm about to go on Easter vacation.

So I'm happy about that. Actually, can I just tell you? No, I mean, can I just tell you, March 2nd or whatever that day was, was an absolutely ludicrous day. We've kind of clotted all back. We're doing pretty decently for the year again. But I got to say, my gosh, like I've really learned to deal with drawdowns in the last 30 days. It's been an amazing learning process. I'm a better person for it. You did look pretty shell-shocked that episode. Yeah.

Dude, I mean, I lost more money than I ever thought I would make. I could bail out a small country, you know, and it just vanished. It just vanished. It just evaporated in a day. It was incredible. Then it came back and then, you know. Came back.

That's okay. Well, what do we think is happening in the markets right now in terms of retail investor participation and the number of SPACs that are coming into the market? I saw a statistic today that in Q1, there were 245 SPACs raised in Q1 overall.

Or 250. That's on top of the 250 that were raised last year. More capital was raised in Q1 than 2020, 2019, and 2018 combined in specs. And just in Q1. Just to put some further color on this, you had all these folks raise money.

you had some really questionable sponsors, to be completely honest with you. I'm not going to call any of these guys out because I don't want to give them any airtime. But like, you know, you literally had people who ran companies into the ground, people who were kicked out of their companies for, you know, sexual impropriety. It didn't matter. Any random dog and cat was able to raise us back in Q1. And now on the back end,

you're going to start seeing some real difficulty. So deals are getting retraded constantly, which means that, you know, IPOs that should have been done at price X is getting discounted by 20 and 30% to get the deal done. There are all kinds of side deals getting cut left and right. And this is just the beginning. And the reason is because that

How much did you say? $265 billion? There was about $110 billion raised in Q1, it looks like. But how many deals? 260 deals? 298. Yeah, almost 300. So those 300... 248 in 2020. So we're still in the first inning, right? If you think about it, these SPACs have two years to put the money to work. So we're only...

Max 90 days in to a two year shot clock, a 700 day shot clock. And so you're going to see some really crazy behavior, I predict in November of 2022. Right, like the last six months leading into the expiration of all these backs in between now and then, I think the market is really going to hold people accountable. So like when we see a pipe opportunity now,

we're incredibly firm on like, hey, listen, the 2025 projections, we're going to back off of those. We want to see 2023 numbers. We're going to price it to that. We're going to price it with a margin of safety. And so these people come back and recut the deals constantly. There's a situation where this one deal retraded three times before a price cut. Done. And it ended up being 35%, 40% below where they started. Wow.

I sent Chamath a note I got this morning from my friend who works at one of the banks and one of the bulge brackets. And they said there was like 50 pipes in the market last week. And they think only five of them are going to get done. 50. And like, you know, Chamath, what, like a quarter or two ago, like 100% were getting done or 80% were getting done, right? I mean... Yeah. And quite honestly, they were meaningfully oversubscribed.

And now we're demanding the people that look at these pipes, I'm one of them. But so I've talked to some other people who do it. And we're all in the same situation, because we're demanding much better terms.

And so it's going to, it's going to, the pressure is going to come on, not the founders and the companies, but it's going to come on the sponsors, because I think sponsors will really have to put up a lot of their money to get these deals done. And this is where you're going to separate the wheat from the chaff, because most of these sponsors are doing it for a quick buck. And you'll see, without debating who you think it is,

When you see people unable to post the money to get a deal done and that deal go away, that is the charlatan. Right. Chamath, it seems like there's also a deleveraging happening with the funds that bought a lot of these SPACs and D-SPAC listings in the aftermarket, right? Which kind of creates a bit of a log jam on the back end for a lot of these. So, you know, for those that are interested in some of these market dynamics, one thing that I have learned in the last little while is that

Depending on who you are, risk is managed really differently. So for example, like there's a friend gave me this language and I'm going to repeat it because I think the way he said it was very elegant.

There's what's called inception to date risk. And then there's year to date risk. So what is the difference? If you're a hedge fund, you're really in the year to date business, meaning how am I doing in this current moment in time, because your compensation is driven from that. And so you're very much forced to manage short term volatility in your portfolio. And a lot of it is very parametric when you know something goes down by x percent, then you have to sell. And

And then if something goes down by Y percent, you sell more. And if something goes by down by, you know, Z percent, you have to shut the position out. And those are extremely codified.

And so when you have a lot of hedge funds who are parametrically running year to date risk, and you have, you know, all of a sudden, you know, the threat of inflation, bond yields go up, factor rotation out of tech, it's a running to the exits, then you have other people who manage what's called inception to date risk. I would say Buffett is in that category, you know, for us, for the most part, we are inception to date risk, because we don't have external LPs.

And so you can manage these different risk buckets differently. But you have to appreciate that a lot of this volatility is a lot of year to date risk. Now, then you layer on top of it, these exogenous events, like what happened this week with Archegos. And it's just absolutely incredible, because it just further amplifies

All these people who would otherwise have made very rational decisions may forced to make irrational year to date risk management decisions. And that's what causes these massive swings and all this malaise in the market. Sacks, what are we seeing on in private company?

valuations. I know that while we're seeing the retreat in Chamath's part of the world and people buckling down and maybe some more guardrails, if we will, or maybe a tighter screening process for these companies going public. You didn't say Fisker, Chamath, but that was the one that had me like, what? Fisker? Didn't they fail twice already? Yeah.

What are you seeing on the private market, Sax, in valuations? Yeah, it's a very frothy time, to be honest. I think valuation levels are – I mean, they're probably the highest I've seen. I'm seeing seed deals now – hot seed deals, not every seed deal – get done in the high 20s. Same. Yeah.

This is pre-revenue. Yeah, pre-revenue. It used to be that like, you know, I remember when pre-revenue C deals were more like a 5 to 10 cap and then like that a little bit of revenue might be a 15 cap and like the hottest company out of YC. Just explain what that means, Saxx.

The hottest company out of... No, no, no. A CAPS. When you say 15... Oh, the CAPS is just a valuation. It's a $15 million valuation, effectively. It's just done on a convertible note called a SAFE. So it's... But for all practical purposes, it's a valuation. So it used to be, you know...

Pre-revenue seed deals used to be in the $5 to $10 million valuation range. Then a little bit of revenue would be $15. The hottest YC deal might be an $18 to $20 million valuation. Now we're seeing hot pre-revenue seed deals going for like $27 to $30. And what amount of capital is going into that round?

It's usually like a 10% to 20% dilution event. So it's 3 million to 6 million. Yeah, exactly. And they're not calling this the Series A. They're still calling this the seed round. It's the first money in the company, so it's still a seed. And I mean, we also do obviously A and B and increasingly some growth investments. The price levels are basically double where they were just, I would say, like a year ago. These same seed deals. Same thing I'm seeing. And it's making me think,

as a private market investor, that may be the right thing to do is to stop investing in some as many new companies and work with the existing portfolio to raise capital. So I told my team, let's go through the portfolio. Let's see who needs capital. And let's help them shore up their balance sheet when the market's hot. And

And valuations are high, as opposed to going and trying to get into every deal. So I think I'm going to do maybe 30% less deals and redeploy my time at getting the current portfolio cashed up and it's working. What do you think of this strategy, Chamath or Sachs or Friedberg?

I personally like it. I think that venture investors are typically trained, I was trained this way early on, which is to invest through the cycle, right? Just to think about this as a constant patter of capital. And to be honest with you, I have issues with doing that, Jason. And so I more agree with what you're saying, which is that I think like active risk management, especially I guess if it's your own capital, but I just think active risk management is important. It's important to acknowledge that

the incremental SaaS company may not be that great as it is. And so at 30 pre may be really stretching the bounds of reality. Whereas to your point, you know, what Sequoia has proven more than anything else to me is the value of doubling down and backing up your winners. And so to the extent that money isn't infinite, which it isn't for all of us,

That's when I do think it's worthwhile saying, well, I have a certain amount of money in my fund. If I think calm can 10x from here, then I'd rather put in a big check there. And you know, that's better than putting a bunch of seat checks into companies will still have a 90% failure rate at very, very high prices where I don't own that much. So I do think active risk management makes sense in moments like this.

I mean, I guess my philosophy is a little different, J. Cal. I mean, so my philosophy as a VC is that the market sets the price of the deals, that I'm ultimately a price taker. And my only decision really is which deals I want to be in. Like, I don't really get to set the prices. It's too easy for entrepreneurs to run a process and get competing bids.

So all I can really do is decide which deals I want to be in. And I think the more that you try to chase value as a VC, I think the more you end up investing in companies that aren't really that great. Like you're trying to find things that are mispriced as opposed to just investing in the best companies. So now look, do price levels affect my returns? I think, yes, I'm sure the vintages do matter to some degree, but

The most important thing is just to be in the right companies. Can I just – I'll give you the counterfactual to what you just said. If I look at my three big private funds, fund one was healthcare, education, fintech, and some deep tech. Fund two was a massive overindexation into SaaS.

And then fund three was a return to our knitting and a bunch of deep tech stuff. And a lot of fund three's decisions was basically me saying enough of this SAS. And the reason was because I didn't like the valuations, David. And I thought on the margin, if I'm going to invest $10 million, I'd rather get a 3D printing spaceship company off the ground than the N plus for a SAS business. And it's turned out

to have been in that cohort the right decision. So, I don't know. I think it's, I think that can also be true, which is like chasing what was the hottest thing was not in 2016 was not a good idea. So, so, so just let me respond to it real quick, Jason, because so, so, so,

I do like SaaS investing, but I was doing it before it got hot. You know, it's just, that's kind of my area. And I want to build a franchise in that area because that's where my expertise are. And so I can't like very well just say, Hey, the store is closed this year because price levels are high. Otherwise like founders won't come to me. You have to invest through this. Yeah, exactly. So I'm trying to create like a very specific franchise in being the leading VC and bottom up SaaS. And look, sometimes the price levels be favorable during COVID and,

There was like a four-month period where the markets were off, what, 50% of everyone? It felt like we had the market to ourselves, the VC market, I mean. Nobody else was investing. We did more deals during that four-month period than I think any other four-month period. So sometimes the price levels can bounce in your favor. But my view on it is I just want to invest in the best companies and the price levels will just work themselves out. The counter I would have to your counter, David, was if...

There are other startups who are of equal value, which pool you decide to go fishing in matters. So, you know, this $30 million deal, if I was to put $3 million into it, that could equal me putting with our accelerator, which not everybody runs an accelerator. It's arduous. It's painful. It takes a ton of work. But that equals for me 30 deals at 100k.

So I'm looking at it going, do I get one bet in this YC overpriced company with 50, you know, tier three venture capitalists and dentists backing up the truck, and now family offices who don't know anything are now competing against the people they are LPs and their funds? Or do I just say, you know what, you

If everybody's fighting in the market for the apples, I'm going to plant more apple trees and I'm going to run a better orchard. And that's what I decided to do is maybe I'll just move up to the orchard a little bit. But I guess there's multiple ways to win in what we do. But you guys are broader in your strategy than I am, right? Like you guys actually do invest in lots of different kinds of companies. I've kind of gravitated away from that because I'd rather just focus on my speciality, which I feel like is big enough for me to be successful, right?

Yeah, but what if there's a new category that comes out like on demand and something like Uber comes along or Airbnb and it doesn't fit the framework? Well, I invest in those companies, but so marketplaces. Would you do it now? Or would your team say, you know what? Don't bring this to David. He's going to say no. Because your team is doing the first round interviews, right? Yeah, but we do marketplaces. My partner Jeff does marketplaces. Those didn't look like marketplaces originally, though. Those were not considered like eBay or Craigslist. I invest in them because I thought they were marketplaces. Okay.

So look, we do marketplaces and we do SaaS. That's a huge part of the market. We're never going to suffer for deal flow focusing on those things. But look, will I do chips? No. Will I do pharma? No, because I don't know anything about those things. Yeah, no, those are too deep. Or quantum computing or something like that. These more esoteric hard tech subjects that I kind of make fun of Freeberg for.

Or at least, you know, when he starts giving his Qubit lecture. Yeah. Well, actually, no one's a big one. I actually think we need to really rethink our investment strategy here. I forgot to tell you guys. I'm going to start investing in laundromats. Very simple. Yeah. It's not a bad idea. I mean, one of our besties, who's a stealth bestie, was really into the Domino's chain.

And boy, was he right about that? That stock went crazy. I want to get into this. Is it Archie goes? Archie goes. Archie goes. Machiego. Jeez. I want to get this Archie goes thing. But I also want to point out two things from just housekeeping. Number one, I redirected wet your beak to a type form for people to pitch the besties. Guess how many pitches came in in the first week? How many?

Over 1000. I now have three researchers going through it and categorizing it, they're going to share a Google sheet back with y'all of by stage where they are to start going through them. But it's pretty amazing. I think there's some, I think there's some magic that's going to happen here where we're going to find a deal where all four besties can be in deal because we got two besties in pipe.

We're both in Cabana, Sax and I, and a couple of other companies. But we got to get a four. We need to get four of a kind. We've never had four of a kind. We've hit sets. We've hit a pair, but we've never hit that. Go ahead, Sax. What do you want to do? You want to talk about me stealing your deal flow? Yeah, exactly. I just need to put out a little PSA. So if you're a founder out there listening and you have a SaaS deal that's post-revenue, send it to me at Craft Ventures. And if it's everything else, you can send it to Jason on his little...

His. There were a lot of SAS companies, actually. And so what we should do is I can set the type form up if you want. If you give me an email address, anybody who picks SAS, I could have an email you or, you know, Kevin or whoever on your team you want to. And I could just redirect it in real time. But that could wind up being hundreds of emails. But I think that's what you want.

All right. Well, no, actually, well, no, Jason, you should divvy up all these pitches by subject matter and send it to the bestie who it's most relevant for. All right, sounds good. We'll do that. Sure. And then second on the...

housekeeping front people were really interested in this longevity discussion oh read the thing read the thing i think i want to because i want to talk about it again so ben sent this in to the all-in twitter handle which is i think the all-in pod and it's got 70 do you guys know we have 70 000 followers on that twitter handle it's crazy

Hey, just wanted to reach out with a positive message after listening to the podcast from two Fridays ago. If you could pass the message along to the besties. I think that's us. After Tremont's recommendation regarding longevity, I suggested to my dad, age 56 and perfect health. So he's 10 years younger than Saks looks to go get a calcium dye test.

It turns out he scored well above any safe number and a critical heart failure was inevitable. Now he's taking proactive steps with a cardiologist. It's hard to even fathom what would have happened if Chamath...

Hadn't passionately recommended this action. Thank you guys so much for providing value week in, week out. I want to... Chamath's saving lives. Chamath, he's saving lives and making billions. No, don't joke around. It's stupid on this topic. I really want to say this again. If anybody...

hasn't done it after the age of 40, you can get a CT angiogram. Most health services provide it. I would really ask your primary care physician, if they say no, tell them to go fuck themselves and find somebody who will give it to you

But this is one of these things where if your calcium score is greater than zero, it doubles every year. And there's a certain score right above several thousand where you are guaranteed to have some meaningful cardiac issue. And so whether it's for you or your parents,

Just ask the question, have you had a contrast CT and you're done? And if not, go and find a doctor who will prescribe it to them and get it done. It's just a no brainer. I, um, I took a no brainer. It's a no brainer. And I, I had my yearly physical and I got the, um, heart flow.

No, I just did my physical, but I'm going to do that full body scan you recommended. Pre-nuvo. Pre-nuvo I'm doing. And then I got on the NAT plus booster, the true nigen that I think that Freeburg suggested. And I'm taking it seriously. And I started with my personal trainer two Tuesdays ago and I changed my entire diet and I'm just really taking it seriously now because I hit 50. Okay.

So let me tell you about Archegos. So here's a guy. This is incredible. So this guy ran AsiaPAC for Julian Robertson. Julian Robertson is a legend of finance and capital markets and was the founder of Tiger Management. By the way, I heard this incredible story. Why did Julian –

name it Tiger Management. Apparently, he was incredibly bad with names. And so he would just call everybody Tiger. Like, hey, Tiger. How you doing, Tiger? Tiger, Tiger, Tiger. And so when he started this fund, I think his son apparently told him, Dad, you're not going to remember anybody's name. You're not even going to remember the name of the company. Just call it Tiger Management and you'll remember it.

Anyways, Julian is famous for having attracted an incredible roster of people to work for him. It's what the PayPal mafia would look like if it were disguised as a hedge fund. All these amazing people worked for Julian, went off and did these other incredible things.

And one of these guys was this guy, Bill Huang, who ran Asia Pack for Tiger. He leaves, he starts his own fund. And somewhere in 2011, he gets pinched by the feds for insider trading some Chinese bank stocks. He pays a $60 million criminal and civil penalty, and he's forced to give back all of his outside money. And so now he's a family office.

Then he takes however much money he had, and he runs it up to somewhere between five and $10 billion. So this is a guy who managed to just hit the ball out of the park. And then what he does is he goes to these banks, and he says, you know what, guys, I'm going to make a bunch of concentrated bets in a bunch of Chinese internet companies and media companies like Viacom and Discovery. So what he does is he does an equity swap. And what an equity swap is to get through all the noise is just a very simple way to

for you to bet on the appreciation of a stock relative to an index and hedge it against an index. And what it synthetically allows you to do is take big risk, own huge positions and not be listed in disclosures. Without buying the stock. Yeah. So if you don't want to know... So the word synthetic, just so I, because I'm confused, synthetic means you're not actually buying the stock. You're doing this in the ether. If you went and bought 4.9% of Viacom, nothing would happen.

The minute you got to 5%, you'd have a regulatory filing obligation that would say Jason Kalkanis owns 5% of Viacom. Then at 9.9%, nothing else would happen. But then at 10%, there's another incremental thing. So

This was a way of him accumulating up to 9.9 or 10% of these positions without having to disclose because he's not actually buying the stock. He's having Morgan Stanley, Goldman Sachs, Nomura, Deutsche Bank, Credit Suisse buy the stock for him using these

uh, over the counter derivatives. But they're not, in some cases didn't even buy the stock. It was like a forward purchase agreement almost, right? Like these, these were, uh, these were contracts for difference. So they didn't even have to buy the stock in a lot of cases, right? Right. And then I think it was hedged, uh, by, uh, the S and P right. So they basically hedged it out with the S and P and it was like factor weighted. Anyways, long story short, what happens is that, uh, the guy starts to get stopped out on a trade, uh,

And then they have to close out all these positions. And so all of a sudden, they realize, oh, my gosh, we actually each of us gave this guy five or 10 times leverage. So instead of a five or $10 billion hedge fund, it was $50 billion of notional exposure. And so in one day, you had Viacom go down 30%.

discovery went down 30 or 40 and we were playing cards looking at the market saying what's going on what's going on yeah so weird but another another example of like asymmetric information and a lack of transparency in financial yeah there were two drivers of this number one is the guy traded via the swap uh these these over-the-counter transactions so he didn't actually have to go buy the stock on the market um and number two is they uh

The guy relied on a number of exemptions as a family office, right? So he didn't have a lot of reporting requirements that say, you know, a lot of other funds might have to disclose. And so there was a kind of opacity to the transactions that were going on.

So ultimately, when everyone kind of looked under the hood, it was like, oh, this is a lot like that long term capital management fiasco that happened in 1997. I think we talked about it on one of the shows, but they had a book with like 60,000 derivative contracts with over a trillion dollars of notional exposure on a $5 billion book of business. So if the overall portfolio that they held moved by whatever it is, you know, half a percent,

the whole thing collapses. And that's effectively what happened when stocks got volatile in 1997 during that currency crisis. And then all the banks looked under the hood and they're like, oh, wait, I need more collateral. There was no collateral to post because everything was levered up. And then everyone's struggling to get a piece of the pie. Of the cash that's left, everyone was fighting to get a piece of it. Because if everyone had to sell off, the whole portfolio would collapse and everything starts to spiral out of control. And that's sort of what happened on Friday, right? Yeah.

Because as they started to sell off these positions via big block trades, the stock went down and made it even harder. And then everyone piles on and starts shorting the stock and it becomes this uncontrollable fiasco. I have a really dumb question. Why are people giving this amount of leverage and letting people make these trades? Is it because they have no responsibility, the brokerage houses or whoever's clearing these trades? No, they're going to lose money. I mean, I think JP Morgan, Nomura, these guys are all going to lose billions of dollars because there's not enough cash in this guy's actual account.

to cover all the losses now. Why would they let him do this? Is my really simple, stupid question. Cause they make money. They make money. I mean, if you're making five, look, I mean, think about it this way. It's sort of like an insurance deal, right? Like if I can make 5 cents by taking a dollar of exposure with you, but that exposure only pays out. If something terrible happens, that's very unlikely in my assessment.

I'll take that 5 cents all day long. You know, I'm collecting nickels. But once in a while, something really bad happens and then they got to pay out a dollar. How many more Manchiegos are out there? Well, I think it depends on how you define the problem. But if you say that leverage, everybody's levered. I think the question is by how much? I think it's pretty rare at this point.

that you're not levered. We don't run leverage, but it's tantalizing. I got to tell you, because like, you know, I could run, I don't know, 100, $150 billion of exposure. And then all of a sudden, you know, you only have to return, you know, one or 2% to make a ton of money. Yeah, Chibok, what would your margin interest rate be if you were to run your book levered? I could run it 10 times and pay

1%, 2%. Right. That's crazy, right? So with 10 times leverage on your money, you basically just have to beat one point or two point of return and you make money. That's why it's so attractive right now. That's why it's so attractive. And that's what a lot of these other organizations do. The business model that they've perfected, which I think is very reasonable, by the way, says...

Again, back to sort of like managing year-to-date risk, right? They manage extremely small movements in stocks because instead of saying to – if the four of us were running a hedge fund, hey, each of you do your best and we're going to run one times notional.

It's much better to say I'm going to severely constrain the parameters in which you guys can take risk. And on the back end, I'm going to lever the whole thing up 10 times. My only goal is for you guys to make me 1% a year, right? Because if I lever it up 10 times, now I've made 10%.

And that 1% a year now all of a sudden divided by 12 months of the year means you're generally, you know, you only have to do 80 basis. So all of a sudden, the math starts to work in your favor where everybody says, wow, let's raise as much money as possible. Let's make sure there's extremely tight risk parameters. Let's just tell David Friedberg and Jason Kalkanis and David Sachs, just give me 80 basis points.

And on the back end, I lever up. That's the whole business model of most hedge funds. And then, you know, you have some folks at the edges, as Friedberg says, you know, the insurance policy rarely pays out

But then every now and then you have this cataclysmic set of events and the long tail hits and you're wiped out. And that's what happened to you. And by the way, you know, there are stress tests against the banks to and where they basically look at scenarios of, you know, how bad can the overall portfolio get that the banks are exposed to, you know, all these clients that they have as counterparty risks. Because remember, like when they sign a contract with this hedge fund, they're not actually taking a position. What they're doing is they're taking, they're creating an obligation where this hedge fund has to pay them in the future.

Now, if the hedge fund effectively goes bankrupt, then they're not going to get paid. On the back end, they're expecting to get paid $2 billion or whatever the amount might be to cover the trade that they put in place with the guy. So this whole thing basically becomes a loss that they get exposed to. And so the stress tests are meant to kind of expose how bad can the loss be to make sure that the bank doesn't ultimately go bankrupt if a really bad scenario were to take place. Now, there's a lot of debate about whether those stress test methodologies actually work

and whether they adequately reflect the true risk in the markets and the true risk that these banks take on. And that has always been a debate. The problem is, if you make the stress tests too limiting, the cost of capital goes up, and it's very hard to trade and liquidity goes down in the market. That's the counter argument to why you wouldn't want to be kind of more regulatory on this front. And so it's an ongoing kind of fluid debate about what's the right way to stress test banks and make sure that they have adequate capital reserves, while still creating low cost

capital and having liquidity in the markets. But you add the risk of ruin. It's really hard to balance. You're playing with your entire net worth on the poker table. You're not just buying in with 1% of it or 10% of it. Whenever you read a story about some rich person going broke, there's always debt involved.

Right. Because let's say let's say you got like, I don't know, like a big number, like one hundred million dollars. Right. And let's say you're fully invested. The market goes down 50 percent. You still got 50 million bucks. You're still like a very rich person. Yeah. Yeah. But now let's say that you took that one hundred million and you levered it up to, I don't know, whatever, a billion. And then the market goes down 50 percent. You're worth zero.

Yeah, right. Or in that case, the market could go down 10% sacks. And that's what happened here, right? Like only 10%. Right, exactly. The guy levered it up. And this is what always this is what happened with LTCM. In LTCM case, the trades they had the whole portfolio only moved like 5%. But it caused a cataclysmic collapse of hundreds of billions of dollars of notional exposure.

And that's sort of like what happened with this guy. He was so levered up. It's so weird. I searched for this guy on YouTube just to kind of figure out who he was on Saturday. Oh, the Christian YouTube thing? You sent it? I sent it to the group. But there's like all these videos of him talking about Jesus. And it was just a...

I'm fine with him being deep into Jesus, especially, you know, on the way to Easter. God bless you. Praise Jesus. But it was very weird that this person has a very unique philosophy, clearly. And Nomura, the prime broker, on Monday warned of significant losses estimated at $2 billion from the unwinding of these trades.

Let me ask a question to you guys. If we all agree it's a really bad idea for individuals to get over levered like this, how bad an idea is it that the US government is getting so over levered? We now have 130% of our GDP. We are now in debt. It's the first. I mean, I think it only recently crossed 100%. So we have now borrowed as a country more than our entire GDP. Yeah.

I mean, if you look at that by country, there are other countries that are way over that. Like Japan, just about. There aren't that many. There aren't that many. And Japan's had a horrible decade, partly because of all that debt. Italy, Portugal, Greece, and Japan. Yeah, not a club you want to be part of. Not a club you want to be part of. I think that I'm more sympathetic to governments being over levered because I think because governments effectively are at this point still, that may not be the case in the future, but

The only form of too big to fail that I think we can tolerate. I have a much bigger issue with private market participants being over levered because I think that is a level of greed and risk that shouldn't exist. Unnecessary.

In large part because the governments themselves are so levered on the way in. So maybe that's the way to think about it, which is if we have to isolate risk and we know we can't tell governments to stop spending, then I think we should probably make sure that risk is better managed at the individual level, you know, people and companies. Why can't we tell governments to stop spending? Yeah, I was about to say, I think we can tell them that because we vote them in. But I mean, this...

I want to open up... People vote in spenders. People don't vote in cutters. Well, this is the thing. The Republicans were supposed to be the spendthrifts. Yeah, no one ever gets elected saying, I'm not going to do anything. Right? I mean, Donald Trump may be the first president to have ever actually said that and actually do something in that vein when he put a bunch of guys in charge of the CDC and the Department of Energy and they just cut heads. But you always go in and you say, I'm going to do X that isn't being done today. And as a result, over generations, it actually...

it adds up. And all of a sudden, you wake up and the United States is 250 years old, and we have debt equal to 130% of our GDP, and we're struggling to maintain the growth rates needed to fund that debt. And you're like, oh, that's the biggest challenge with democracy and keeping it alive is, is the fact that ultimately, everyone wants more. And so over time, you vote for more. And over time, it gets more expensive. And over time, it becomes really difficult to maintain.

Can I just count up the bill for just this year? So as we know, Biden already passed it. Yeah. So the bill so far for this year, first of all, the government is running like a $4.5 trillion deficit. A lot of that is COVID related. But in any event, Biden's already passed a $1.9 trillion deficit.

COVID bill. They're now about to pass a, at least $3 trillion infrastructure bill. The proposal came out. It's two. No. Yeah. Well, okay. Sorry. It's, it's two for the infrastructure plan, but then there's another, uh,

One to two billion that they're talking about doing. Sorry, trillion that they're planning as a second package called the American Families Plan that they're calling infrastructure, but it's not. It's more like social programs. They're kind of relabeling that as infrastructure.

social infrastructure or human infrastructure. And they're trying to figure out whether they can do them as two separate bills. There's this issue with reconciliation and they need a ruling from the Senate parliamentarian on whether they can do the second bill through reconciliation. If they can't, they may have to combine it into one bill. Otherwise, they'll do it as two separate bills. But you're looking at total, like about $4 trillion across those two bills.

In addition to the 1.9 we've already passed. So we're looking at like $6 trillion of spending this year. I think we had about $6 trillion of COVID emergency spending last year.

And so the numbers are getting really big, really fast. This reminds me of our last trip. This reminds me of our Las Vegas trip with Cipriani and then your markers. We may need to have some austerity measures. We might need to go to Olive Garden instead of Cipriani. Part of the issue, Sax, is, you know, I think if you guys will remember on election night, I told you the thing I was most concerned about.

was this Georgia runoff. And if the Senate takes, if the Democrats take the Senate, you have no balance of negotiation in this process of passing these bills and finding a point of fiscal responsibility versus social necessity, or what might be deemed necessity by some, but, you know, exuberance by others.

And it's frightening because with a single-party system, a single-party legislative branch right now, we have a real issue with the...

The fact that any bill can kind of be defined by one party, by a small group of people. They can get it passed. They can get it signed. And it's going to be a challenge for us to all kind of support this level of debt for generations to come. And it's not going to stop anytime soon. I mean, before the midterms, we've got another year and a half of this. 100%. And that's why I was rooting in the last election for gridlock as well.

And we almost had it. I mean, it was supposed to be a divided Senate. Perdue won that Senate seat, and then he lost. And Trump just decided to burn the entire Republican Party on the way out.

Congratulations, David. You've destroyed the Republican Party. Look, J. Cal, you have a little bit of a point there because the reality is as of election night, this was supposed to be a divided Senate. And then what happened in the two months that followed turned voters against those Senate candidates. So you definitely have a point there. But the price tag for that one Senate seat is going to be about $6 trillion. Yep. It's pretty disturbing that our –

Our debt to GDP ratio is now worse than Spain and Portugal. I mean, we're catching up to Italy and Greece. I think it's worth just explaining to people why that matters, right, Sax? I mean, like when you issue debt. Well, you have to pay the VIN. Here's the thing. Everyone's been lulled into a false sense of security because interest rates are so low so the debt service has actually been relatively small. But if interest rates ever go back up, say because of inflation –

like the debt service will be one of the biggest chunks of federal spending. We won't have money left for all the programs that we need, including entitlements, including defense, including everything else that the country wants to do. And so it's very dangerous. And the real problem I have with it right now is,

Everybody can see the economy is getting better, right? It looks like we're about to have the roaring 20s. The economy looks like it's rebounding. It's about to boom. Goldman Sachs says we're going to be down to like 3% unemployment by the end of the year. It's coming back really fast. COVID is going to be over in May. I mean, everything is trending the right way. And we're acting like...

You know, like there's an emergency happening still. I mean, I understand the six trillion last year during the middle of COVID to prevent a depression. But what is the rationale today when the economy is already coming back for this election? David, reelection to consolidate democratic power and to get reelected. Right. Pump the prime the pump.

But, you know, we're breaking the glass in case of emergency when there is no emergency. And what happens if there is another emergency? We'll go to 150%. Look, I don't think it's as intentional as getting reelected. I do think that the politicians and the people involved in the legislative process have very good intentions and think they're doing the right thing. And they got elected and they spent their whole lives and their whole careers dreaming of a day when they could create these programs using government money, dreaming of a day when they could make these opportunities real. Yeah.

And here's a moment in time where they can and where these visions for what they believe to be a better society and a better government and a better country for all its citizens, they have this moment now. And they are... And so, I'm not criticizing anyone. I think it's just...

I think it's, look, yeah, no, you can totally disagree with the point. And I think in many cases, I agree with you. But I do think that there isn't like this kind of evil incentive or this evil reason for folks doing it. I think, you know, a lot of people that work in government or politicians, they spend a lot of time thinking about doing what's best for their, you know, their kind of people that they represent.

And here's this moment where I can create all these programs and create all these jobs and spend all this government money to give my people locally all the support that I always thought that I... I always told them I would give them one day. And it's a moment where everyone's rushing. And because there's a single party system right now, everything's getting done. And it's all getting piled on top of pile. It's like eating cupcakes and then cake and then pancakes and then ice cream and then having a milkshake. It's going to have a really nasty stomachache at the end.

Yeah, I agree. It's it's we may have a sugar rush over the next year or two. Maybe maybe Biden gets reelected based on this. But, you know, eventually, I like I like your term stomach ache. Biden seems to me a little bit miscast. It's like he's cast from a different era.

And, you know, this is not 1933. We don't need this massive amount of pump priming by the federal government. We're not in a depression. We're not even in a recession right now. We're coming back really strongly. And so it just feels like we're passing all this anachronistic pork barrel spending, you know, like for why? It's like almost like it's just habitual as opposed to having a real need. I think that's a more nuanced take, which I agree with, which is like if you actually see

what that $2 trillion infrastructure bill looked like, there was a lot of stuff which did feel incredibly anachronistic where I was like,

I mean, paving a fucking road. I mean, we had China trolling us because the contents of it was just so stupid. Right? It's like, I mean, it's like paving a road is this one-time event that does nothing. And we're much better off building ongoing capability of things we need. So if we're going to like green the economy and, you know, we're going to go through an energy transition, there's all kinds of ways to spend the money. And so then you think,

advising these people? And then I think it comes back to lobbyists. Lobbyists and donors, yeah. Let's go through this list, right? So of the $2 trillion, it looks like about $620 billion is going into transportation infrastructure, like Chamath said, bridges, roads, public transit, etc. Now, if you think about the benefit to society, there's the benefit of having better roads, which we can debate, does it

Do all of these need this care, the $620 billion worth of care? I think some people would say yes, some people say no. But the question of where those dollars actually go, ultimately, if you kind of look at how government contract work is done, there will be a few people that own the majority of these contract service providers that will benefit heavily from this capital coming out of the government's coffers and will go into their bank accounts. And yes, there will be some jobs, but they will be temporary jobs.

And there will be temporary salary and wage support through this. A lot of that capital will go to the people that own the businesses that are doing all of the construction work and supporting this industry development. So, you know, it's concerning when you look at how much money is going to get funneled into effectively corporate contracting. I don't care. I don't care what side of the aisle you're on. But if you see $620 billion on,

of spending that's going to happen in the next few years for anything. If you're thinking anything other than this will be wasted and inefficient, you're being really naive. So, you know, the good, a good microcosm example of this is the one that you use Friedberg, which is how much money did California give to Anderson Consulting or, you know, to build that COVID website? It was, yeah, it was like 100 million bucks, like all in with the service costs and the customer support and all the stuff that was attached to it.

And realistically, you could have built it for 90 bucks using Wix. Squarespace. Use the promo code twist. Come on, use the promo code twist. So my thought is that exactly, like people should look at this irrespective of whether you're on the left or right. Think, well, of that 620, how much will actually get into the hands of people in a thoughtful way?

Probably like 300. How much of it will go into like lining the pockets of shareholders and folks in very specific companies who just print an enormous amount of profit over the next few years? Probably another 150 or 200 billion. Wait a second. Totally agree.

Did you send my red pills to Chamath's house? What's going on here? Those are my red pills. They got me lit. But let's have the counter argument, right? The counter argument is for decades... And I'll make it, right? So for decades, roads have been crumbling. Infrastructure in this country has been falling apart. We haven't taken care of federal highways. There's all this work that needs to be done to make sure that airports...

address rural communities and ports can take ships into the economy can grow. And someone's got to build all that stuff at some point. So, you know, rather than deal with this down the road, let's take advantage of the single party, you know, governing system we have right now and pass this bill and get it all done and get America ready for the future. That would be the argument, right? I'll give you the most cynical argument. The most cynical argument is

let's ratchet up spending, make everybody concerned about the debt so that the solution is raise taxes and let's create a wealth tax and let's create this tax and that tax. Well, Biden is raising taxes. He's raising the corporate tax rate to 28%. But that was brilliant. And individual. And individual, yeah. Like I think raising the corporate tax is a no-brainer. We should absolutely have done that. But David, I mean, Friedberg, back to what you said before, what I would have said is like, look, the counter argument would have been, let's take this $620 billion and plan the future.

So the plan, the future would be, you know, why is it that like Elon can, can bore a, a, you know, a traffic,

a bearing tunnel at a million dollars a mile, and the next best equivalent is 20 million a mile. Okay, maybe we should give these guys a bunch of contracts. Capitalism. Yeah. Well, just and technology, I would say, and less graft and less waste. So let these guys build a bunch of tunnels, and maybe they can figure out a way to build bridges too. Or, you know, if you really want to care about like future jobs in the national security of America, let's secure our own

precious metals and minerals, and let's have an entire supply chain that's independent of China. Well, you could spend a couple hundred billion dollars on that easily. So there's all kinds of ways to spend it. We could build high-speed rail.

They do have $580 billion, so a little over a quarter of this bill going to American manufacturing, R&D, and job training. So creating the next generation of jobs for Americans and re-domesticating industry here. I mean, honestly, those words sound nice. What are the details? Yeah, exactly. You like the words. You like the words. I love the words. I mean, one that I think...

Nobody can argue with this universal pre-kindergarten. That's easy. And I think community college tuition being free is a great one as well if people have a certain score to get in there. So it's a little bit of merit. Jason, what are these things even doing in an infrastructure bill?

I feel like – I think Freeburg has a point that like infrastructure is like one of the last things that people believe that the government should be spending money on. So now they're just branding anything that they want to do as infrastructure. It's human infrastructure. Infrastructure is supposed to be bridges and roads. Right. Not to say education and childcare and college. That's education. Right. Should be a different bill. But didn't – I mean Obama tried to get –

infrastructure passed he couldn't trump he did no no no no no obama passed close to a trillion i think it was like a 920 billion dollar bill remember the shovel ready projects it was supposed to be a trillion dollars of shovel ready projects they did it where'd that money go

Well, speaking about money, speaking about money disappearing, can you put a little shrug emoji con like the, I don't know. Here's the brown version. And I, here's the white, here's the pale white version. And there's the brown version. And it looks like you're the tan version. Freeberg. Yeah. Yeah.

A trillion dollars. Me, no, no. I don't know. We can all go to Vegas and we can lose money and just come up to our wives and go like this. I just think like the government's so bad at like properly dispensing all this money. Like that's the problem that, you know, and then that would look, I think if you're ever going to do infrastructure, the time to do it was in 2009 when Obama did it, like the economy was an absolute, like a great recession that made, that made sense. Um,

But now when the economy is doing – is rebounding so strongly, do you really believe that these $100 billion line items are going to be wisely spent? And most of it's borrowed money. So –

No. And the problem is like, by the time it gets into the details, well beyond what Biden is capable or has the time to learn about, it will be just completely misallocated. And, you know, some lobbyists will insert something that gets something that's important to some politician, the money and that and that and that's the that's the sad truth of it all. And we just have to hope that there's enough good that comes out of it. And now taxes are coming for you.

Well, I mean, that's, that's the next thing is the wealth tax is where that conversation is. What happened in that? What happened in the bill? Well, ACA, I saw I saw the corporate tax went up from 21 to 28. But what else happened?

Well, there's a wealth tax in California being discussed again. Who knows? Okay, but at the federal level, was there anything in the bill? No, I didn't hear anything about a wealth tax. I mean, I don't know if that's possible. The first bill is going to be funded by, like you said, an increase in the corporate tax from 21% to 28%. The second bill, the Families Act, is going to be funded in part by personal income tax increases, which I think will be more controversial. They're going to bump up – well, the campaign –

statement that Biden made was individuals, no one making under 400,000 would see a tax increase. So the plan was 400,000 going up to 39.6%. But here's where I think it could get very controversial is that the White House is already making noises that it wasn't 400,000 per individual, it was $400,000 per family, which would mean $200,000 per individual, which would be pretty much a broken campaign promise

So if that's where it ends up being, I think Biden could take a lot of heat for that. But the problem is if he sticks to $400,000 per individual, I'm not sure that it will raise enough – the tax increase will raise enough money to pay for everything he wants to pay for.

So it'll be interesting to see. I would be totally okay with this when I was 30 years old. I'm just putting that on the record. I'm not okay with it right now. This may sound dumb, but what is the federal tax rate? What is it going from? I think the top rate is like $37.

and a half something like that so it's a 2% it's not a big it's not a gigantic increase at all so it's a big nothing burger okay yeah and this is income tax again not capital gains it'll be yeah and then there's a bunch of questions about whether like so capital gains is still a big question mark and capital gains will all go to income

Yeah. There's a big push. No way. There's a big push, but they haven't said yet. So this is going to be part of the second bill, which they're talking about doing, I think, in October. So, yeah, watch out. Okay, wait a second. If the capital gains happens, then the whole idea of being a capital allocator –

it's going to change everything, wouldn't it? I think it's a bigger issue than that. It has less to do with that, but you have $30 trillion sitting in 401ks and IRAs. And the idea that you'll tax all of those gains in a differentiated way, I think is going to be a very complicated proposition. Well, those aren't taxed.

Well, they're taxed on the way out, right? You still pay something. Not if you hold them until you're 55. But I mean, whatever, you're going to live to 110. So, so yeah, Axios actually had a story just today that the infrastructure bill, it like does not include capital gains taxes. But the big question is what they'll do in the next bill.

you know, and that's and then so you combine that, let's just say, the federal government decides capital gains, we don't want to invest in companies anymore, we don't want to treat stock gains the same because we want to have more equity, equality, whatever.

Then you combine that with this wealth tax proposal in California. ACA has a resolution to propose an amendment to the Constitution of the State. Co-authors have proposed a wealth tax described as a 1% surcharge for amounts over $50 million and 1.5% for amounts over $1 billion. So if you're a billionaire, you're going to have to pay $50. Can I make a case to you guys? I've kind of been thinking about this, but I'd love your feedback on it. So I feel like there's a trade-off between freedom and equality.

And what I mean by that is, if you give a market freedom, a market of people doing things freedom, you maximize progress that that society achieves. And the United States is the best case study of this in history. In 250 years, we went from a bunch of people living on plantations or living on small farms to the largest economy in the world.

And so the more freedom you provide, the more innovation there is, the more entrepreneurship there is, the more of inventing new stuff there is. The problem with progress, progress takes everyone forward. But progress is always asymmetric, meaning some people end up in a greater point further ahead than others.

than a lot of other people do. Whereas like a socialist state with less freedom... And incentives. And incentives. You take everyone forward together, but you don't make as much progress. And so if you want to have freedom, you have the most amount of progress, but you have...

the least amount of equality over time. Even though everyone is further ahead than where they started 200 years ago, or 100 years ago, or even 10 years ago, everyone's in a better position than say they were some period of time ago, because we've all got better social security programs and whatnot. There are some people that get so much farther ahead, like Elon Musk and Jeff Bezos, and these people that you can now look to and say, this is unfair. This person's taken so much capital, and I've only made

you know, a 10% increase in the last 10 years. And so as a result, they're in a democracy, there's always this tension between freedom and equality. And those are the two things that cycle in terms of what voters vote for. We're coming into a cycle now, where we're going to start to vote down freedom and vote up equality. And this is sort of what the wealth tax in my mind represents is this this kind of redistribution or this returning to a kind of the mean or reversion to the mean in terms of like, get everyone back

on the same page. But as a result, we're going to see much less progress economically, we're going to see much less progress in terms of innovation, and other places that have more freedom, and enable more innovation and infrastructure and entrepreneurship are going to be able to kind of leap ahead and have greater progress than us. That's my kind of rant and thesis. But I'd love you guys as

I would amend your thesis slightly to say that freedom produces prosperity. Right. And prosperity does produce some inequality because there are always people like Elon or Jeff Bezos or whatever who are just going to be like super producers, especially in the era of technology where you can create a machine to produce goods and services and that machine –

can be thousands or millions of times as productive as the ordinary person. So they're going to build extraordinary wealth, but the, but look, the, the, the free, the basic idea of liberal society is you have a free enterprise system where people are generally free to create their companies and their businesses. And then you have a social safety net that's paid for by the largest of that system. And the thing about socialism is that,

We talked about this last time. It can only make everyone equally poor. It never makes everyone equally rich. You end up killing the golden goose for everybody. And you also end up with a lot less freedom because you end up with a gigantic state that exists to level everything and they accrue all this power for themselves. But is that actually true? Like if you look at China, is that really what's happened in China? China's kicking everybody's ass and they're basically a socialist. Well.

Yeah, they're authoritarian. Exactly. They're sort of politically – Using Friedberg's language, they don't have as much freedom or that freedom is granted by – Authority, a central authority. Yeah, a central authority. Which makes them authoritarian by definition, which means somebody like Jack Ma –

Can do amazing until he can't. But that's a perfect example. He's still doing fine. He's got 50 billion. Maybe he doesn't have 70 billion. Right, but imagine what he could do if he could keep going. And this is a point I wanted to make, which is what if you got Elizabeth Warren or Bernie Sanders proposals enacted? And Bernie Sanders has gone on TV many times and said there should be no billionaires. If Jeff Bezos stopped building Amazon when he made a billion dollars because he was forced to by the government,

At that point, all the future benefit of Amazon would have been lost. It's not like someone else would have been able to step in on top of that platform and build more. And then the next guy steps in and makes the next billion. And I just want to remind everyone, the benefits of Amazon are extraordinary. I mean, imagine going back 20 years and being or being a kid. And I can go on my friggin phone.

And I can say I want something and it shows up at my door the next day for very little... For same day. For same day for very little money. I mean, it is fucking mind-blowing what Amazon has built for us, for society. It's an incredible business at the same time. And we are all willing to give that business money because the benefit of what they do for us is so extraordinary. And if you had capped Jeff Bezos' wealth or capped his ability to kind of keep elongating what that business could do at some point...

it would have been an absolute travesty. And I would argue that even though Jack Ma is doing fine, there are people in China who are limited in terms of what they can do because of the way that that government limits freedom and limits flexibility. And so to me, I'm observing this tension between freedom and equality where equality is becoming such a sticking point for people now that it is far more important than freedom.

And as a result, we are going to start to see these little things creeping in like a wealth tax or a limit on billionaires or all this sort of stuff that ultimately limits the ability for people to kind of push their businesses and elongate progress. And if you looked at the great scientific and technical discoveries of the last 30 years, so many of them came from the United States because of this freedom, not from China. And China has certainly done fine. But they're a great photocopy machine. And they're great at saying, hey, here's some slave labor. The innovation has been here. The innovation has been in the United States.

China observed what was working in the US and they realized that they should adopt markets because markets create prosperity. They create goods. They create services. They create wealth for their people. So they've embraced markets. And then meanwhile, we're moving away from markets or we have such skepticism of markets. You've got this sort of extreme socialist sort of Bernie wing mentality.

of the party that is kind of moving away from markets. It's bizarre. Look at the free market in the Amazon example. They demanded a $15 minimum wage. They got the $15 minimum wage and now they're still attacking Amazon and Jeff Bezos. And so it's never going to be enough for them. They want to see him get rid of all of his money. No, no, no. That's right. I think that you're saying something else, Jason, which is really important. I

I think people, you have to think about the generation of kids that have been raised by boomers. And that'll explain the psychology of why they think that way. You know, we had all kinds of failure modes growing up. You know, we meaning, you know, I'm in my mid 40s.

If you think of our generation and older, we all had failure modes. You wouldn't get into the schools you wanted. You basically had a lot more freedom where after school, you were latchkey kid. You would have just all kinds of very nominal ways of growing up. You didn't necessarily get to play on the school team if you didn't make it. Those boundary conditions create these great stories like the Michael Jordans of the world.

And then you fast forward to how boomers felt. And I think that boomers felt an enormous amount of guilt about their stresses on the system. And what did they do to millennials and Gen Z? You got they got everything they wanted. It was kindergarten soccer, everybody gets a gold star. And now you have an entire generation of people that quite honestly, are like wondering, like, they actually have been raised in a quasi socialist setting.

If you go to school, there is no free speech. If you do a project and your grades aren't good, you can get a redo. Everything's a redo. Everything's a retrade. We're going to manage to the middle. You can't lose. You can't lose. In that not losing, I think people have forgot what it feels like to actually win and that humans are actually in many ways –

Like Darwin's perfect example of winning, you know, like why us and not another strain of chimpanzee? Because we need we wanted to win more than anybody else, as it turned out. And that's lost. We've lost that script. And so I think part of it is you have an entire generation of people who, whatever you do, it's not enough.

It's because they were raised in a society where they never had to actually learn what functional winning and losing felt like. Or it's been deeply minimized. Said another way that we've gotten soft and we're about to get our asses kicked by China if we don't start to realize that

that a vibrant competition of ideas and products and services is what wins. I think we have a more dangerous thing than that, Jason. It's not that that's gone. I think it's actually more this selective idea. So for example, like if you were a fashion designer creating clothes on Shopify or Fashion Nova, you're allowed to compete and win.

But if you build a technology that aggregates resources and that has these crazy gross margins and profit margins, you're not allowed to win. So we've actually gotten into this very contorted period where we want to choose how to define what winning feels like to us.

And I think that's where it's dangerous because that's a very subjective thing and it ebbs and flows. Can we go back to the wealth tax for a second? Because I think this is like monumentally. Yeah, hold on. Let me just finish the statistics on it. They claim there are 169 billionaires in California. So this wouldn't impact a lot of people. And they estimate the wealth tax would generate over 22 billion. We've already seen Elon and- It won't. It won't. That's a static analysis. It's such a stupid analysis because it's completely static. Well, Keith Ravoy left-

They're all going to leave. They're all going to leave. Look, I've talked to a lot of people. I've talked to a lot of people about the wealth tax who would be subject to it. Okay. Every single one tells me the same thing, which is if California passes this, this is a red light for me. I'll leave the state. Every single one.

So the exact same thing. Yes. You're not going to raise 22 billion from this. You're going to raise, it's actually going to lead to a decrease in tax revenue because so many of these people are going to leave the state and they're going to take investment with them, their businesses with them, their job creation with them. Um,

It's going to actually... More than half the tax revenue in the state of California comes from the... What is it? The top 1%? Is that the statistic? It will kill the California economy. Now, here's the crazy thing about it. Probably the most crazy part of that whole wealth tax proposal. And by the way, even if you support a wealth tax...

at the federal level, it's stupid for California to do it on its own because it's very easy for you to leave California. You just move some other part of the United States. Much, much harder to leave the United States. So the idea that like California can just do this on its own is like the height of stupidity by these legislators. So the stupidest part of the whole bill is that there's a 10-year look forward, which basically says that if you spend any time in California, we're going to try and tax your wealth for the next 10 years.

So that means that for all of us thinking about this concept, if we think this wealth tax might pass in the next 10 years, we

We might need to leave the state now. We might need to get ahead of the curve. And I'm hearing people now debating whether they should leave the state because they think it's inevitable that something like this passes. And the sooner they sever their nexus with the California, the less likely they are to be roped into it. So just the mere fact they're proposing this bill, I don't think they're going to get the votes in this legislator. There's six Democrats have already come out against it. So I don't think it's going to pass this year or next year. But.

But the fact that they're even putting it on the table is making a lot of people second guess whether California is the place they want to create their businesses. And what we really need is for the governor, Gavin Newsom, to come out right now and say, listen, like, this is a bad idea. I will veto it. I will not support this if I'm governor for the next five, six years.

And his mere failure to come out and say what he really thinks about this is hurting the state, because a lot of people are already contemplating, do I need to leave now? Zach, let me ask a philosophical question. Do you think that this kind of speaks to a broad challenge with democracy, as I kind of tried to point out earlier, which is, at some point, the majority can take things away from the minority by just passing a law by voting. And when you

make that vote. The majority of people aren't affected. Therefore, they'll say, sure, let me, I mean, I know that, you know, you have more background in this than the rest of us, but like, what is the political science principle here on how democracy kind of protects itself from having the majority eat the minority when the minority, you know, in this particular case,

funds the state's budget, right? And like, well, there's, there's a famous, and the voter doesn't see that. Yeah. There's a, there's a famous line in political philosophy that democracy is not two wolves and a sheep voting on what they're going to have for dinner. Okay. That there's a concept. There's a concept that,

In addition to democracy of rights, you know, that you have rights that the government can't just take away. And so part of the American founding wasn't just sort of the majoritarian machinery of government. It was a preoccupation with the rights of individuals and minorities to be protected against what majorities would do. That's why we have the Bill of Rights.

So, yeah, I mean, there have to be rights of individuals that are protectable on some level. And I think it's a real constitutional issue whether the wealth tax is even allowed. That's, I think, where it's going to get fought and lost because the clever –

and the Supreme Court will say, if this, what comes next? Are we going to go back and saying, you know, all of a sudden, the majority doesn't like certain kinds of other kinds of minorities? You can't have a certain kind of car or house. You can't have a certain car. Oh, wait, I actually don't like the tone of the color of your skin. Oh, wait, religious minorities. All of a sudden, we're back to the 1940s. And I just don't think this is going to pass because it's not –

justifiable. At the federal level, I do think that you can just basically jack up taxation and do a bunch of other things that that make it more fair. I'll be honest with you guys, I'm a little torn on this topic. And I'll tell you why. On the one hand, if I had to pay one and a half percent a year, I'm like, okay, what is the marginal utility of that money for me, it's basically zero.

So it's not as if I would feel that change of 1.5%. The thing that would upset me more is not having to pay the 1.5%, but then to see it wasted. That would drive me crazy because then I would think, you know, I could have bought potable water for, you know, a native Indian tribe in California. I mean, actually, here's a perfect example. I just found this out today. You guys would be shocked. There is an incredible shortage of clean water in the Central Valley.

There are places today where you and my fellow compatriots of California live, where they have to buy these huge $12 arrowhead jugs of water because the water is completely poisoned. And when I heard that yesterday, I thought in California, in the United States of America. And then he said to me, Chamath, you can give for two and a half million bucks, you can basically get 5,000 people clean water through this thing that he's working on. So for me, the thing that would be upsetting is not paying...

the 1.5%, it would see, it would be seeing nothing get solved from it. And then and then what it would really prove is what I said earlier, which is it's just a bunch of bellyaching from folks that actually just don't know how to

how to actually seek success. And that's a problem. The good thing, Tamath, is that you can run for the governor of the state of California and fix that fucking problem. We should build a website. That is the benefit of democracy is, you know, you can kind of run and you can step in and you can help solve these problems at the government level. Or we could start a podcast and try to use our influence or we could donate to things. Guys, I'll say something else. I also think that these kinds of bills are actually a shot across the bow to a handful of people.

that are not playing by the rules anymore. We're not towing the line and standing in line and saying, I'm clearly demarcating myself as a Democrat. I'm clearly demarcating myself as a Republican. I'll play nice. Because think of what's really happened in COVID. You've had a massive explosion in D to C distribution.

Think of the platform that we've created out of nothing. Think of the platform that Elon Musk has out of nothing. And if you take that writ large, it's extremely disruptive to people who is all about controlling the message which allows them to control power. And I think that a lot of these rules are these ways of almost like counterpunching against it, but they're ineffective. What I would encourage all of us to do is actually become completely Zen and

And instead, continue to aggregate distribution power, because that will replace the one and a half percent tax that you have to pay. Because if you can talk to people directly, and tell them your version of the truth, and allow them to underwrite their version of the truth against what you said, that is modern power. And that's worth a lot more than the money that you'll pay. Now, would you give that same power to Donald Trump? Because he's been cut out. I think you have to in that model.

All right, everybody. We'll be taking next week off because it's spring break and you can take the week off as well. Anybody have any plugs or things they want to promote? Why are we taking the week off? Because I don't want to take the week off. I'm fine with doing it. I think some people are going to be on vacation in there. Someone's going to be somewhere really nice. Can't you call in? I don't know if the place Chamath is going to be has internet access. Well,

We'll send you a Starlinked. We'll get Elon to send you a Starlinked. All of my undisclosed locations have internet access. For those of you who don't know, Chamath has rented the pyramids in Giza and he will be staying inside of them. And he'll be dismantling them and NFTing them and turning them to dust. I'll be sleeping. I will be getting wrapped as a mummy in King Tut's tomb. He has robotic waiters serving him the whole time he's there. He's living out a sci-fi fantasy next week. So, enjoy. Well, you know what? I did tweet.

that we're going to do a live show after everybody gets vaccinated. We've been doing over 3 million a day here in California starting tomorrow, April 1st. Live poker. Live poker can occur, but we are going to be hosting, I think, Chamath and I. New York City. New York City. Saks is partial to Miami because it's El Fuego. Is that right? Am I? I don't know. Are you? Yeah, we should go. We should do Miami. Jason, can we just agree then? Let's do this, guys. Let's do

May, we'll do it somewhere in New York City. And then June, we can do Miami. How about that? Well, June, it's going to be too hot. I would flip that because it's going to be too hot and may be better. But also, I'll tell you the other reason. Two-city tour. We could do both, but...

I also think that we should do Miami first because they're not afraid to come out to an audience. I think that people in New York and California still have, they have more PTSD. We need to go where people are the most reckless. Let's go where people have absolutely totally gone YOLO. I mean, just to close on this Friedberg as the, you know, man of science here on the, on the pod, um,

At this point, these vaccines have been proven to not only keep you from dying, keeping you out of the ICU. We now found out this past week, correct, that you're not going to carry it and infect other people in all likelihood. Very true. And another interesting- Wait, what happened? Really? And another interesting point was made this week by a paper that was published showing that you have effectively 80% efficacy from your first shot about two to three weeks after your first shot.

And then you go to 90% after your second shot. And then there's another paper that showed you're actually better off waiting over three months for your second shot, not getting it three weeks later. So you were right. You said we should do one shot and then come back to the second. That's right. And so there's now very good data that shows that that would have been a better move because we would have had double the throughput in terms of how many people we could have gotten shot in arms if we had done that. So everyone effectively gets 80%, 90% protected or...

or 80% protected after the first shot. And then it's better to wait three months. And so we could have done the back half of the year where everyone gets their kind of booster second shot, and the front half of the year, give the whole United States the first shot. But David, what's the where's the article that says you don't carry it if you've gotten the vaccine? I need to know that because that's like the thing that's always in the back of my mind. Yeah.

I tweeted it. I tweeted it this past week. I think Snacks put it out too. I don't follow you on Twitter. Experts say it appears. I'm reading. You blocked him? I ratioed him. I ratioed him.

I see you retweeting some of my ideas. You usually don't attribute them. Because I'm your friend and I fucking love you. You will say it back someday. You will say it back at some point. I don't know what I have to do for you. Yeah. I mean, I mark up your deals. I take care of your family. I'm here for you. You did mark up that pipe deal. That pipe deal has gone supernova with that Chamath.

Pixie dust on top of it. Experts say it appears COVID-19 vaccines can help reduce the transmission of the new coronavirus from person to person. They say this is accomplished by reducing the viral load in a vaccinated person's nose. Besides the statistics on this, you know, there is no documented proof that someone was fully vaccinated and transmitted COVID to someone else.

out of 400 million total vaccinations globally. So there's a, you know, also like a really strong kind of point to make, which is show me the evidence that it can, because, you know, everything about biology and, you know, science would, would indicate, you know, in terms of how this would work, there's no reason the virus should be spreading and that you suddenly become infectious and contagious with a virus that you can't be infected with. Of course.

This is like the most obvious study ever that look, if you get the vaccine, it prevents you from getting sick. You're also not going to transmit it to other people. But let me ask a question. Why is it that every time a politician says that the experts required it, it's always the stupidest position?

You know, because the experts on this show, we had Freeberg saying this stuff. We had Bob Wachter from UCSF who, you know, runs UCSF saying that, you know, we should have just done the first dose first, get everyone through on one dose and then come back and do the second dose. Of course,

Like no one in the federal government in position of authority took that position. Fauci didn't take that position. And then we had Fauci on top of it saying that we might have to wear masks until 2022. But, you know, because of this like asymptomatic – because you could be vaccinated and still spread it, which has now been totally disproven. So why is it that whenever somebody says we have to listen to the experts, they're always listening to the stupidest experts? Because, David, we are in a culture –

We are in a culture where independent thought is not valued, where it is better to abdicate and look to an expert to tell you what to do now. That is, again, I go back to we are in a cultural malaise of not wanting to make our own decisions. I'm working on my Dr. Fauci, Sacks. Mr. Sacks, that's correct.

Asymptomatic patients may, in fact, infect other people, but we don't know yet. So it's best to wear a mask, if not two masks, and to have proper distancing. By the way, Chamath, the point you just made, I think, is really important because I think it also reflects what I said earlier about economic inequality and economic progress.

When you have greater economic freedom, you have greater economic progress, and then you will inevitably have economic inequality. The same is true with ideas. So when you give people the opportunity to have the greatest freedom in terms of sharing and expressing their ideas, you have the greatest progress, but you also end up with this issue where people have vastly different ideas and inequality arises. And right now we're in a mode of cancel culture, and we're in a mode of telling people that they can't say certain things,

And they have to be very careful about, you know, what they're saying in what context. And it limits this ability for people to feel free to express themselves, share their ideas and push the boundary and push the envelope and find the truth and find the best outcome. And so I do think that we're in this kind of rationalization kind of stage of our democracy where we're reducing our kind of degrees of freedom. And it's playing out in terms of the ideas forum and the economic forum. And it just feels very resonant to me that both are very, very linked right now.

Can I try to answer my own question, actually? Yeah, I've never stopped you before. Okay.

Here's what I just realized. Okay, listen, if you're going to make an argument that fundamentally makes sense, you don't need to tell people, oh, go follow the science. You don't need to appeal to some external authority. You can just lay out your argument and it makes sense. When do you need to say to everybody, listen, you need to shut down your own brain. You need to shut down your own logical thought process and just follow what that person over there says. The people who need to make that argument are the people who are making arguments that don't make any sense.

I mean, this idea of wearing a mask after you've already been vaccinated never made any sense. This idea of locking down the whole economy instead of isolating the at-risk people for a whole year, it doesn't make sense. It's been done, David. It's been done by the left, and it's been done by the right in equal measure. Whenever you have an opportunity to grab power, people will abstract power.

And then they will aggregate and pull it in. And they will make decisions for people by pointing to these abstract ideas. It has happened in forever. This is not a new thing. It's just that now with social media, you can distribute this power grab more efficiently than before. And then you can see it for what it is, because you can debunk it. And that's the thing that's happened. That's why there's more anger around it. Because you can debunk all this nonsense, you can actually say, well, what's the data say? And

But most people don't want to do that. It's easier to abdicate responsibility. All right. We want to thank Dr. Fauci, our great guest today. You want to maintain social distancing. Don't think for yourself. The CDC has been very clear. The Chinese report from the WHO approved by Xi Jinping.

says it did not come from a weapons laboratory we take Xi Jinping at his word you know what you are you're not even Fauci you're that person what's your name the great actress the comedian from SNL she's got blonde hair

Oh, yeah. Katie McKinnon or something? Yeah, Kate McKinnon doing Fauci. That's what you are. You're like a babushka doll. I just love that. I just love that they have Ted Cruz being done by that other woman. It's like every time they want to troll the Republicans, they take... Okay, guys, Freeberg, Freeberg, you got to go. He's meeting... He's meeting... and a friend. Uh-oh. What are you meeting... Uh-oh. Be careful. Uh-oh. It got dirty. He got ugly.

Take that last part out, Nick. Beep the last part out. Beep! That he's having dinner with. Beep! And beep. All right, we'll see everybody. Love you guys.

Oh, man. My avatars will meet me at what it's like. We should all just get a room and just have one big Hugh Georgie because they're all just useless. It's like this sexual tension that we just need to release somehow. You're the B. What? You're the B. B? What? We need to get merch. These are facts. I'm going all in.