E54: Spread trading big tech, capital allocation, Zillow's misfire, Progressives suffer losses
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Hey everybody, welcome to another episode of the all in podcast. I am wearing a blue shirt. I am a paste White or man whose bolding and of noxious and with me today, no, no, no, no.

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say your pro and my prince are 啊， await all of my pronunciation. O ono s are b bib. And most people just call me a jerk with me. Today, of course, is my three locking arco look helali sweater.

Hello everybody. My name is to math. I have a salt, pepper, black hair, Brown eyes. Ah I am tall uh six for two I go by the pronounce we king and start and uh uh i'm here to talk to you about, uh, internet security protocols want .

I look like argo. I think .

people just come up and say like iro .

iro I about I like the very long and article to us. Welcome to the olive ocs do out of the four of us or cat so next africans .

olam sex yes, I am coming to you hear from the four of the new york stock exchange revisal once land that belong to the moon, the talk, the night of the area, coin tribes OK toria you forgot .

the irish.

We own the seven .

five you did IT you went for a tax. I love you.

Isn't IT important that at any moment that we're successful, we have to flat late ourselves or remind ourselves. But at one time office land was known by somebody else.

We stole them. How so the greeks conquer the but but you forgot to mention you're also wearing a brother shirt that is four sizes too large.

Is IT my slam .

fit so that, you know, before .

freezer.

does jack you wanna them why we're doing these .

intricate before I, okay. Yesterday on the internet emerged a series of videos that were clipped of microsoft presenting their new sweet of developers, tools, idio. Ta and corporate people got up and, without any explanation, started describing their physical appearance, their pronounce, their ethnicity, their skin tone and their hair styles.

And the entire internet was like, oh my god, this is crazy. wok. M like, what? What is happening here? This.

no, I thought I was a kid. I thought I was a saturday of ice.

And then as soon they got called up by the entire interact, they claim that they were doing this for visually impair people, which kind of begs the question of why visually impair people need to know what race are like. It's still playing into this like crazy weight race consciousness. But then on top of IT, IT doesn't just that we know it's not .

that because they but yeah if if you're blind and technically can see, you may not even know what blue means because you will have never seen the color blue or blond okay.

right? But they were also identifying their races, which kind of like the question why that's important.

But if you were born blind, you not know what that means either. You look I .

on the fit as people who are not you visually .

impaired, you're using the wrong language, that languages for decided people.

okay.

but i'm just calling bullshit on their stated explanation that has anything do with visually impair because then they went on to basically recite the names of ten tribes, native american drives in the ones ever heard of, on which the mark slog campus used to belong to. So which is why I was kind of making fun of that of my initial statement. But so luck, this is just what capitalism this is vocational m at a control. Obviously, they didn't see the election results earlier in the week.

It's clearly there were some level of virtually ly. I think in their defense, they were trying to do that. I think that visually impaired, the problem was they didn't explain the context and they didn't give instructions to the people on what to do.

So the people that J, K, L, that video, that was a clip pulled out of a broader context, like, apparently this is common on campus, that this is happening all over.

So because I was to the common on point.

I think the recent the internet .

reacted way IT was was I asked every single person who came out, because the work left came at me. I just said, can you show me another clip of this on youtube of any event with this occurred? And nobody could. So I think this was kind of a first.

when did you stopping a member of that? The world left. Jl.

what is the member like the historical site? I've never been for bernie. I've never been ill, have always been moderate.

Can I have? freeburg? Inter, yeah. Freeburg, can we .

hear yours?

My is, it's illusion created .

by the viewer, and you can call me whatever you want. I sit on the ground where during the haya period there was lava and magma and nothing but C O two and mEthane. And I represent those gases that are now lost to the oxygen, the o bacteria formed over this earth and took a everything over and let to the formation of you carriole life. And here we all sit today, our privileged existence.

Are you saying .

that you want to the interesting .

ways so he's like.

he's like, IT on are my biochemical .

quantum bath was quantum foam is my so would you like to formally .

apologize for colonizing the dark matter during the big bang now? Or would you .

like to do with your IT wasn't fair when the siona bacteria took over the the face of the earth and sucked up all this year, human created all the oxygen and .

and for that we all apologize for the genocide .

of but the genocide point of of co two and mEthane mean those molecules were really happy, and they had a very kind of like peaceful existence on this earth. And we just came and ripped all away. And, you know, and then the offspring and that are being us, and here we are. So apologies.

welcome to episode to fifty four. Everybody's cause the .

final episode.

Everybody is horrible. I don't think that the microsoft was that when you hear the broader contact that was like, you know that you know, I think it's a reasonable thing that .

because i'm so long, microsoft and google, in short, the rest of the tag. So i'm back .

to the stock.

I actually I do. Do you think that the google long, netflix short plays the right play?

I on the internet, the most obvious simple money making trade is long microsoft, google short, big tech short. The rest.

the big tech short, IBM short. Netflix.

no, no, no, no. Ort, no, no. Meaning you can, you can very comfortably short. Apple, facebook, amazon, netflix, s and belong g microsoft, google. So as a spread trade, right, it's the, it's the best risk parity trade on the period.

Can you expect explain the spread retry.

So look, look, I I tweet this a while ago, but it's like and and again, the I think like well, let let me be constructive and say the people on twitter that responded these threads are not totally stupid, although I think they're kind of idiotic um I said, you know here's how you can effectively you I said something about you know big tech and I said all I can comfortably put by short on and i'm kind of trolling people when I do that because i'm not telling them.

The full trade and the real trade, whenever you put anything on, in my opinion, is all about managing risk. And the best thing about the internet and the stock market is that, you know, when you're betting on internet stocks, you don't necessarily have to be naked long or naked short, which comes with a lot more risk. Then if you are long one security and short another against IT.

So for example, over the last ten years, you would have made a lot of money by being long amazon and short a baskets of traditional commerce companies, offline commerce, i'm going to make up a basket. But may S, J, C, penning, you know, came out sears, right? So if you are short those in long amazon, that's what's called the spread trade. You you're basically playing the gap .

between your logs and .

your shorts is dependent .

the not to near amazon. Yeah when you .

put that trade on, for example, it's I I mean bet that if everything goes up, amazon will go up more than ten mark walmart years. And if the stock market goes down, amazon won't go down that much, but these ones will go down a lot and you you're playing the spread. So just be very explicit.

You know, there was a very and I talked about this last week, but that this idea wasn't mind. It's a borough trade from somebody who's a very well known heads fn manager who put her on a massive size and you know, to be honest, not knowing much of anything. I just copied IT, but he is his initial trade was long google, short facebook.

And that trade basically was at parity, which meant that belong in the short, cancelled each other out for about the last four years. Until the last year, IT completely blew out and IT returned about eighty, eighty five percent. So if you had put one hundred dollars in, you ultimate about eighty five, eighty five box on the train, by being long google, short facebook. The the bigger trade at scale is actually long google and microsoft and short the rest of big tech. And there's a lot of vigorous why that this idea makes a lot of sense.

But what you're saying is they'll outperform the other basket of on a relative basis on a relative no, not like you're saying airbnb can co up or facebook can co up IT.

Could he is the trillion lars market companies not bear in the and the .

reason why focusing there makes sense, their hyper liquid markets, they have tremendous ways in which you can have massive size on. So you could put a trade ten billion long verses ten billion short. I mean, you can put magicians on on these things if you if you have real conviction. And in the third is when the banks look at that kind of position, they actually, from a risk management perspective, treat IT differently than if you are just naked long, anyone of these things, or make IT long, we will be just making one bit, or you know, or naked short, which is even more dangerous.

So because if the market collapses by thirty percent, both stocks might go down thirty roughly, but one will go down thirty two and other one will go twenty eight. And so you're really two two percent as opposed thirty percent of so all the market risk is taken out when you make trades like that. Yeah, the reason is possible also today to do so.

It's such a scale right to mop is interest rates are so low. So when you borrow on margin to go long, the rate is very low. And when you short the stock, if it's a highly liquid stock, IT doesn't cost a lot to borrow the short. So you're you're actual you know uh, Carry and costs on that trade ends up being pretty low relative to the outside you expect.

So just just to give you a sense of IT my um you know when I eat that tweet up to complete the picture, I was actually long. Something against my proposed short and I put IT on in in pretty meaningful leverage and its worked out really well because I was playing the spread. I was basically betting that you know the the safest company on the internet today is google because they're both the platform company.

And to the extent that they are risk at being an APP company, the risk is to apple. But because they pay apple so much for search, they are innocent later. And so in many ways, google is v safest. And it's also, as we have said before, the purse money making machine on the internet.

You're referring, of course, to google paying apple ten billion dollars to be the default search .

in the the own android. So one platform and on the other platform, they they pay them so much that they are going to be always protected. And the second past company is microsoft.

And you we even saw, by the way, this past week, I don't know you guys saw that, but microsoft decided to take a broadside attack against notion that is a productivity APP that's been growing very well. I felt this when I was on the board of slack. When microsoft put its gun sites on us, we always thought that they could not how compete with us.

And what IT turns out is when you have a massive distribution advantage, feature period is enough and you can actually be slightly less than good enough on the features because distribution and bungling and packaging over power of customers desire to adopt product. So in the case of slick, IT was very difficult, I think, for us to compete against microsoft boundings of teams with all the other software that they were selling and all the discounting that they could do made IT very difficult for to compete because we had a single product. And low and behold, eighteen months later, the only real long term protective solution for sack shareholders was to basically get bought by sales force that you could be part of a bigger hole. This past week, microsoft decided to go after notion and it's going to be, I think, a very similar story where you know once they decided sort of go after this A A product experience, they only need to be eighty percent is good. And then the distribution and bungling and packaging will take care of the other twenty percent.

IT doesn't kill the other company, but crazed headwinds .

that winds because because the company like notion cannot be fully valued over long periods of time. Simply being A S B company, you add a minimum, you'll have to move into the mid market. You may necessarily never have to go to the enterprise, but you probably have to go to the mid market.

And in that is a very troublesome path because microsoft has so much you know uh tent, so many denticles inside of those businesses, so many ways. The long microsoft, long google is a pretty obvious kind of like monopolistic, you know, pair trade. The question is, what are you short against IT so that you can take up the market volatility and you can place bread again?

Apple has severe you know headwinds with respective inflation pressures and margins and supply chain issues. Amazon has pretty meaningful headwinds now relative to a pricing power and competition. Facebook has pressure with .

respect regulatory over just came up with one.

What about L, B and b versus the airline?

You can get to talking smaller on a thursday night. Now be a good spread for me. No.

that's a stupid idea. And i'll tell you why OK. If you're gona put these things on, go to where the deepest liquid markets are because those are the safest OK.

right?

Like like don't try to be different being the same here.

Why are ban bay, which is an incredible margin business that's incredibly well run and growing versus airlines, which are horribly run and low margin? Why would that be a good spread trade?

I just think it's A I think it's a very, very to your picking two random companies out of a hat would .

like to both in uh, transportation and vacation and completely different .

businesses with completely different motivations, with different capital polls, with different people that on the stock, there's no point trying to acute on these things. My point is if you really want to be hedged against market risk, got a code, were heard safest. Find the simplest, most obvious thing.

Don't overthink IT or don't put IT on. So another obvious one, here's here's IT so obvious is within big tech, figure out which ones you want to be long, which ones you want to be short. That's a spread trade that over the next four, five years where if you expect a lot of market volatility, IT makes sense to maybe put some of this kind of stuff on right, uh, a different version of this idea, which makes sense in autos. Again, trillions of dollars of market cap and you can make a decision, do I want to be long tesla looted and um riviere and short the traditional odo's that could be a trade, you know but try to like trying to go after like let me pick A B N B versus united airlines is too random for me and I don't think they are correlated enough for IT to make any sense.

Or it's speaking of the stock market sacks. Um you've got the background of the new ork stock exchange as your zoom background today. What's that about? yes.

So bird listed on the new york socket change today. This is a company that i've been involved in pretty much just the beginning. We'd let the series around back in two thousand and seventeen. Actually, the first check I wrote as a VC to lead around at craft and four years later, public company in the new york's exchange, pretty amazing.

And so you're literally at the new york stock .

exchange as we .

see first remote besting.

yes. And you can see behind me um that is the fourth, the york socket change. It's not like you know, if you see the movie trading places is not like that anymore.

There are no stock brokers is no like paper flying around. I'm not really sure what the purpose of all those monitors are down there. I feels to me a little bit like a movie set is .

like a movie set.

Yes, yeah. And so people come here to record things, but as we all know, the all the trades are really happening inside .

giant machines. Can you turn around and just .

start .

yelling bua 像 bua less security .

comes in elevated above the flor known career here。 May arman, like this sort of broadcast booth.

uh, should take us behind the decision to go public. As a four year old company, we were expecting, you know, uh L B N B, uber and lifts took over ten years to go public. Now here we are sitting on a four year public company is like a good thing, a bad thing, something in between. And how does the board and the management to make that decision to go public?

I think it's a good thing um because the company well, the company wanted to. I think I had the opportunity to IT um aggam very, very quickly before coped. Then you had covered was like a rehumanize back. They I mean busy the students to stop for at least six months because the walk downs.

But then coming out of cover, they bounce back really strongly that kind of pivoted their model to, I was called a fleet manager model where basically they're putting a business in a box for a local Operator, a local entrer or to buy the screw ters with financing. Imagine the fleet themselves. So it's a much more highly virtualization model.

Uh and so as a result of that in q two, they just did sixty million in revenue in the last quarter. And I think um was the gross profit of smell twenty seven percent and um IT was had a loss of like twelve millions for the very, very close to getting to profitability. And you know company is only four years old, you know I took uber twelve years or whatever to get to public. So pretty it's been pretty amazing ride. They're been a lot of big ups and downs, but so it's kind of us pretty sweet.

What is a trading? And now I know a switchback was like the spat name.

right? So today was the first day start trading into the ticker. Simple B, R, D S. I guess all birds took b, rds.

So we took b rds and um you know there's a total number shares outstanding ing of I want to say roughly three or millions ons. It's about a two point four billion dollar market cap. You as the stands right now, which first series investors? Pretty great.

really happy free sex. Yo yeah, congratulations. congrats. We heard last week c ois going to do the scores on this ever Green fund. Keep owning shares now as a VC. Um do you distribute after four years of investment and you made multiple investments or do you make the decision? Hey, we think it's undervalued. We have you know conviction in the company we were going to be in, in for ten years? Or did you just take the quick way and give everybody the shares?

Well, I am going ever agree to beyon the board for the next year. So you know, i'm playing to do that and we have a trip six months lock up. And so at that point, we would have to make a decision about when or how much to distribute the shares.

And this is the first time we can front with decision. I mean, craft and cheers is only a four year old firm. And like I said, this is actually the first round that I let us a VC.

So at the first time we were confronted with a distribution of this magnitude, we've had some smaller distributions. So yeah, we have to make those decisions. If you say what we're going to do.

if you if the stock is up, let's say meaningful ly in the next six months and you get to that, you know six months in a day and you have the ability to distribute and it's up twenty five percent and you're looking at IT businesses thriving. You're on the board. Do you consider holding for a year to save that you can distribute at sixteen dollars, twenty five dollars or whatever your Price target is?

maybe? I mean, we were even got that point yet. So yeah, I mean, I guess what I would say is that are bias would be to distribute chairs to R L P S so that they can make their own decisions about whether hold or not. Um as long as we think the stock is you Price, surely if for some reason we thought IT wasn't, then would be a additional reason to hold on to and make the dispute later.

Check out what your thoughts on this given come up before in a number of us are going to be faced with this decision. And then we see the oil has got lp buying for an every Green fund.

Well, I think an every Green fund is different from having to figure out how to do distributions. So they're solving for two different ideas. The everGreen fund is really good because.

You don't have to do this continual fund raising process, and you can basically roll gains back into the next point of invested companies in an easier way. I like that idea. Um IT was pretty rare at the time. I remember when I was starting social capital, the only fund that did IT really well with sutter hill, and for whole hoster reasons, I decided to not do in every Green fund.

In hindsight, I think for me, that turned out to be Better, because then he was easier for me to wine down and have a clear demarch of when IT was just myself and other els verses when I was just my capital. But there were some really good reasons to do IT. The hardest thing, I think, that the air is going to find in this new iteration is, at some point somebodies reputation will be on the line for judging public equities.

And it's still not clear to me that people who live in breathe venture can context switch well enough to then live in breathe public equities, such as the best example would say is like tiger global. When you look inside that organization, which is incredibly well run, there are two superb investors that carved the universe up, right? You have chase common that runs a public book, and your scotch life for that runs a private able.

What is IT prove to me, approves. That is just very hard to find a person that can do both. And the context watching is very complicated. So maybe the coal fines, an incredible public market strategies that can then manage these .

positions otherwise. But you have done this for few years. A I don't know, people realize they up heritage. They set up with only GPS money. It's got billions under management and it's been making late stage private, but mostly public equity investing.

I know, but that's a fun of funds. What i'm saying is i'll be a very honest with you. If I wasn't L P of the choir, I would want the money back. And the reason is i'm not sure that so ca can compound money in the public markets anywhere near what I could.

So do you buy in the point that they make that like accepting this left most of the you know kind of value creation on the table when I think what .

there's say something much more solar, which is they exited and they have regrets for selling. You have to remember when zoia distributed google, every single partner got google shares. Now had they held those shares, they would be saying any of this.

And famously, i'll tell you what action they held their shares, what I what I actually do, fair enough, but maybe they did, maybe they didn't. But luscious put IT out there that, for example, I know explicit when I almost merge social capital with cinner perkins. Like six years ago, I spent so much time with john door. The most incredible thing that I was shown press the door was he was, he told me he had never sold a single share of amazon that was distributed to him, and he had only sold a handful of shares of google only to fund future capital requirements of at liner at the time. So I just think that ultimately, I think probably what's a coy I was saying is meant I wish I had not ld my google shares when they were distributed to me because othe wise they wouldn't make that claim.

No, I think what they're saying is more I think they're saying U S R, L, P, S. Should have held them. We are on the board of these companies from gay one.

We have Better insights in the second decade that in the first production board, uh, founder David friedberg, how do you think about early exits distributor capital because you do have also with a start up studio structure, which you should explain to the one how start up studio works because you create companies which is you know was a terrible place to be maybe five or ten years ago. But IT turns out you're in the best place because zero to one is where all the values created. Explain the two things. What to start up studio is for people who don't know. And then what's your view of selling early if a company of yours goes uh public?

I think there's a big um there there's a bigger kind of framing here, which is a lot of um investors uh you know professional money managers have tried to find ways to create what is called permanent capital, which is a vehicle where but they can continuously make investments, decide when to sell those investments and recycle the capital new investments with the idea being that over time, they're not at risk of capital outflows. Mining investors pull their money out and they're not at risk of .

uh you know needing to kind of go .

out and and raise more money. And they can they can share in the value equation as they grow their books value over time. Years ago, a bunch of hedge funds set up public reinsurance companies.

Then love did this um what I did basically did that. What they did is they set up a public company and public company a reinsure and then they use that that reinsure to underwrite reinsurance. And when you underwrite reinsurance, you get all this capital that you can then go invest and then the hedge fund manage that investment.

And because it's actually a public company, it's gotta baLanced. The the shareholders can pull their money out, right? It's just got a baLance sheet and the hedged fund was managing that baLance eat and you know generating good returns and effectively what warn buffer t does. And everyone looks to birch your health way and warn buffer is kind of the you know the the key kind of long term here um which is, uh hey look, if you can keep investing and keep compounding value, this thing can grow you know exponentially over time so know the way we set up the production board. I had the option of raising a fund.

And being a fund manager, I chose to set up the production board because I was much more interested in, I think, the similar sort of thing of what the court saying, which is like how do you become a longer term, uh, builder and a longer term holder and where you don't have these incentives to return capital because you only get paid if when you return capital and um know and then you're kind of making these decisions to you know because your shareholders are saying, well, you had a good return quickly, give me the shares back and let me and mark your profit and take your share. And I was also more interested in look, the fact is over time, there's always gonna opportunities to chase with the capital if we have a great game, if something works out really well, we can take the game and we can reinvest that capital on building new things. There is no shortage of opportunities to pursue for the rest of my life. So that's why I set up the production born initially and partnerships with alphabet. And then later on, we brought in bill gates and other Allen co and other kind of investors that have a similar source of mindset, which is like let's just if we haven't an exit, recycle that capital and continuously a quick in.

They don't have .

pension payments to make, right? They don't have a reason to distribute cash. And so same with me like I don't have a reason to take cash out.

So the objective was just build this thing over time and grow value over time. And that's why I set IT up the way I did. And I think that allows us to make you know really long term bets that are super risky. Um most of what we're doing is super technical and and difficult to may be very hard to pull off, many of which is still, after many years in a very.

very patient ital capital .

and the preference for not trying to find exit. But I I have found this. I'll tell you one thing. I have been through a number of circumstances where I have seen businesses.

I've been an investor in then that have traded long term value for short term opportunity, meaning there's an opportunity to make a business that you can then go raise capital against, you change your strategy to do that, then you go raise VC funding. And now the business looks like it's working. But the ten x are a hundred x opportunity was taken off the table because you ended up going down this different path.

That was a sure thing that was more likely to work that create a value in the short term that allowed you to mark up your investment, raise capital against that. But you gave up the big long term thing. And I think that something i've been trying to avoid with the IT certainly makes sense with some of these other folks .

and what they're going to do. So what we're getting at here, sex, is decision making by capital allocators and on behalf of their lp, s, or letting the L, P, S, make those decisions.

Inevitably, the cypher world says, well, why aren't you just doing this in a dow and, you know, having some decentralized authority make the decisions? I had viewing a bad, a conversation with our friend, the sonus, and and and multiple in capital, and we were talking about dawns for early stage investing or syndicates. And just brainstorming hay is a way to do this. And the problem I came to every time is, should a bunch of folks be making decisions who are not meeting with the companies or meeting with two thousand companies a year, what are your thoughts on a dough? Um representing sort of what we collectively do, but we all do IT obviously in different flavors.

Does this actually exist? Yeah.

well, there have been doubts, ed, that have existed to vote on buying nfs. So yes, for collectable.

I mean, I can feel like all let you know when that actually gets .

you so open mind to to IT but who know yeah but I mean.

we talk about these things if they ready are here and they're not quite here. I mean, anything, I know that they exist, but people have been really figure out how use them to, you know, to be a fun anago, for example.

I think David is right. I think look, I I there there are these three initial features of web three point out that we're going to have to figure out over the next few years. So the obvious ones are decentralized, right? That makes sense.

The second obvious one says the level of composition order, which means that you're plug and play with everything um but the third one is this idea of democratization and governance right and that's where doubts come in and David, right? We don't really know what the boundaries of that feature is. Um I think that exists in some small level scale, but we need to have many iterations of companies get built to figure out what I don't mean.

So I don't know. I'm taking a pretty traditional approach in which is that, you know it's kind of like a crawl Walker n strategy right now in the crawling phase. And i'm kind of saying how did. Web one point to and web two point o developed, and I tried as copying IT.

So, you know, in web one point to and two point o you needed companies like sun microsystems and cisco, and you know all of the plummers function to build plummet for the internet, to allow a thousand flowers to bloom at the application level. And you know, we had a very good reference model, by the way, for web one point out, for most people, if you want to look at IT is called the O S I reference stack. And if you actually look at that I stack, you can transit that to all kinds of value creation over the first, you know, two arts of the internet over twenty years.

Trillions of dollars is created by just following each of those substrates. And in those transitional layers was where these great, beautiful companies were built. And I think similarly, we're going to do that again, but we need a different stack to represent what what he is.

So yeah, you know this week we did something which was pretty raight forward, which was this idea of that if you're gone to build all these apps, you're going to need, uh, a distributed computing infrastructure, which means you're gna need very simple building blocks like remote procedure calls. R, P, C, that exists in web two point out is kind of a not something you don't really think about, but in web three doesn't exist. And so it's all of this A W S G C P like infrastructure that has to get built in. That's what syndicate dozen I am.

That's um a really very interesting uh observation there because everybody is trying to go to the application level and talk about the consumer experience. But before you even have the ability you know we're talking about cars before we have been made a transmission or know something that's exactly this is why cypher to comes across a so diluvial and strange sometimes they were three thousand and I C O papers, none of them were about infrastructure. They're all about some sort of n game.

The thing is, it's a very delicate balancing act, right? You need a handful of companies that capture consumer imagination, right? That then incentivize all of the plumbing companies to come in and build underneath the right.

So the it's a very delicate balancing that, right? So you need a compuserve in order to enable a bunch of companies. Then you need A, A, A well in order to enable another said, then you needed yahoo and you needed google. And in all of that, what happened was people were pull through, right? You needed amazon commerce to justify A W S. So we're in that world where it's going to be a little back and forth, where the pencil will swing back and forth between consumer experiences that capture imagination, get to some level of scale, that then create incentives for the developer ecosystem and the technology infrastructure to catch up.

Uh zero uh, which we talked to about previously, became an eye buyer. What's an eye buyer? That means you buy a bunch of single family homes, in all likelihood, like open door and redfin have been doing, and then you hope to flip them, uh, maybe improve them and maybe lower cost to the consumers by taking out real state brokers.

This is created a lot of bad feelings amongst real state brokers. A tiktok video trended a couple of months ago where a broker said or accused zillow, uh, of buying up these homes and what to do Price fixing in and to corner the market on homes well uh IT turns out that silo which has an incredible C E O uh in rich burton and has done tremendously over the decades. According head of their earnings call this week, loomer report, zillow is trying off at seven thousand, seven thousand homes for two point eight billion.

That's about a four hundred k average per home. And h zo. Shares dropped thirty seven percent this week alone from one hundred to sixty six.

Their market capes drop nine billion throughout the week, uh, and they're down seventy percent from a peak evaluation of forty eight billion just in february, about six months ago. H zyl o is going to reduce its word force by twenty five percent over the next few months. I'm assuming that all those eyeball ers and egotists, a lot of what i'm hearing is they bought homes in discriminately bianca.

Total stories that are breaking on twitter and other forms with real, say, brokers are they would look at at home. They didn't know that I had a noisy neighbor or IT was near power lines, whatever. The people who came in bot them in discriminating maybe too fast, where some other companies may be open door or red fin were more considered. I actually had been from redfin on the pod not long ago, and he said it's a very hard Operational business and to be very careful on what you buy in your entry Price, that seems to have turned out to be true. What do you think, freeman?

Rick parton, who runs s zillow, is considered a legend. And silicon valley, he uh has been involved in some of the most successful internet companies um and you know when he stepped back in as the founder of zillow set back in to run the business a few years ago, I was viewed as kind of a second you know resurrection of this business and he was going to take IT into new areas and then three and a half years ago, he announced a decide by our program, which everyone thought was such a you know incredibly strong move and obviously chased open door which two of this is that involved in? And i'm sure we will share more on.

Um but he was such an obvious opportunity that if you could add liquidity to the real estate market, the residential real state market, there's an incredible amount of value to be had. Now the way that they wrote about IT when they talk about IT initially, and then the way that y've kind of talk about in the earnings report this week was that they were trying to be a, quote, market maker in the business. And IT turned out that what they were really doing was being more of speculator, right? A marketing ker looks at bids and asked in the spread and tries to create a gap. And that spread and make and take some share of IT.

And by adding that liquidity.

T, V idea is the spreads can narrow and they can make money. In this case, they were looking at the historical velocity of selling Prices of homes and using that as a way to kind of project what was going to happen, which makes them much more of a speculator than a marked maker. Um and they clearly got this wrong and they're kind of caught on quote models on you know where the Prices is headed ended up getting them in trouble.

There's also the inherent conflict where they are now competing in a way with the brokers that generate a lot of revenue for them in a big part of their core business. And they were clearly um you know canalized their own business were the estimate and some of the other scoring that they provide as a data analytics platform to both sides of the existing market starts to get blown up because they're coming in and saying we're going to put our our foot down and say this is what the value is. And IT inevitably kind of capabilities is the core product that they provide to to both sides of the market.

So you know one could argue that was flawed from the beginning. The execution clearly was way off and back. The question where leadership and kind of tracking what was going on here as these guys were buying homes at market Prices that are well above what they were actually selling for in the market.

No one was actually doing on the ground work. They were all doing kind of speculative models and saying this is what we think will happen. And then they woke up way too late and lost wait too much money. I think they lost three hundred million dollars in the quarter. So um you know really a lot of questions and and a lot of chAllenges on this. Um i'm sure to matt has a point of view on what makes open door distinct from from zero um but there's a really important kind of um underlying here 我们 ah the maturity of a silicon valley uh to who's crushed at so many times， uh doesn't mean that they're perfect.

And you know this was a big miss yet you can go really too fast into a turn here and clearly they the car I don't how you are talking about 好 OK。

Number one, you know i'm not on the board um of open door of .

open door maybe tell us about your .

history of the other door gest individual is company summer between three and four percent of the business. I am we you know I came to own those shares with a large investment or as well as through the transaction. Um we emerged one of our backs into IT and took us out to be yes, couple of things to say.

The first is about the CEO and founder of open door iraq. Woo is special, special, special. So let me just leave at at that, uh, on that topic.

The second is I think that rich partner is very special. But IT speaks to two big mistakes that zillow made. The first is that catching a wave of disruption.

It's very difficult when you have an old line business that is fundamentally competitive with the new line of business. And silo, as David said, had this thing called estimate, whose entire job was to directionally drive drop top of fund traffic into the rest of their media business. Now imagine you go to a website to look up your house value or somebody else's house value.

Accuracy is a bug. The feature that makes the estimate work is a highly inflated house Price, right? Like if you go when you see a crazy house Price number, that's interesting.

That's more um click worthy. Then if you go in there and IT shows some depress value, you think the site sucks. That's the unfortunate psychological reaction. So I think whether we believe IT or not or whether zillow knew IT or not, exit a bit over time basically clarified this idea of Price inflation. So the accuracy was never a goal.

So then if you take that business and then you try to oriented towards home buying and you use probably estimate or some version of IT to underpin how you buy and take risk, IT creates a lot of risk. And I think this is essentially what played out where they were over buying homes and they didn't know how the Prices stuff accurately. So you know my partner of tweet this up, but you know the open door margin on average, about ten percent.

The zillow margin on average, three percent. So they had a much more raised margin of safety here, which again speaks to pricing. And then IT speaks to the third thing, which is that if you start doing one thing and do IT really well with software, the gains over years really compound.

And so when somebody else shows up and tries to pivot their business, try to copy IT, it's very, very difficult. The classic example is google versus yahoo. Yahoo had a beautiful directory driven business.

But when Larry and sergey, when really Larry, invented, paid, drank and then invented the first version of a google search index, as we saw IT play out over the next ten or fifteen years, IT was impossible for yahoo to really invest the technology, the technical capital necessary to catch up with google. And every day and every week and every year, as freebies talked about last week, those technical gains compound and compound. And now google is completely unassailable with respect to search.

I suspect we will look back and the ability to accurately forecast Price and volatility and the ability to sell these assets at a defined margin of safety in a predictable way is something software can solve. And IT seems that open door is the first doesn't necessarily, and it'll be the only one. But IT has an enormous had start now and as long as they can keep edging, those games will compound. Um so that's what I think. I just think this is a wonderful business run by an incredible .

idea to rap up this a zero story sacks. Uh, any thoughts on you know trimark point here? You know you're the rating agency and you at this business and the business might be or fog onal to the existing money printing machine on a strategic basis. What do you think any lessons or mistakes here, uh, in terms of when you hand to cap zero? Or do you want .

to just was see investor and open door because i'm i'm middle bias here, but I thin's pretty obvious ous what happened? A zo tried to copy them. The business is much more Operational, complicated than they realized.

It's a low business, no margin business with the which requires a tonic capital. So if you're awful a little bit, the losses can be huge. And they couldn't figure IT out they interested the difficulty.

That's what frequently happens in a big company tries to copy a smaller serve up star company. So I mean, that to me is what happened, not just, quite Frankly, were an hour into this point, we can discuss issues, any issue that I think is broadly relevant for most americans. I think this is one of our worst websites.

We're going to bore over one to tears. I Frankly don't understand what you're doing. I even know why we have a topic list when you start pulling to your house like dos. And I don't know what the is right.

right will talk about.

I got the dark question sucked.

All right, i'm just giving you the opportunity.

Be talking .

about .

cut out of the show. T I done?

Yeah, I agree. I .

think I J, I agree that that's alright. fine. You got something can lose you.

I'm trying to give you guys the benefit of the doubt just because I, no one cares. All right, calm down everybody. You want to talk about politics. We talk about politics.

So OK, that's going about the OK some salt here from blue states. We have a woke lash going on all across the country. That's the important thing in Virginia, a state that biden.

one by ten and .

huge upset republican kyn can beat. Teri mccolo, former governor, there he was. This was a huge upset. My call was supposed to win Young one fifty, one forty eight. So that's a thirteen point swing, uh, versus where biden was, uh, just a year ago in new jersey, a state that biden, one by sixteen point in the democrat held onto IT, but only by one point five points. And I bet you anything the R, N, C is kicking itself that didn't give any money to chat, to rely. Who is the chAllenger who I think almost who came very, very close and there were doing ticket seats that went republican so that the um this is really interesting in south jersey, which is a blue color bastion .

for democratic that's right.

the democratic state dental, Steve. When he lost to a truck driver, edr, who spent a grand total one hundred and fifty three dollars on his campaign. Okay, so those are some.

And then we had, right, like he was printing out worse to say.

write me and I think I know is a writing, but but an event. So so implications for twenty twenty two dave osman, a cook global report, calculates someone tween and forty four and fifty one c game from the G O P only need five six to win the majority. So it's looking very bleak for the democrats in twenty twenty two.

And then I think you also had some very interesting local elections in many apple is voters rejected a proposal to defend the police with fifty six percent of the vote uh, they there is a ballot proposition to changed the police department into some sort of larger public safety group. Voters in none of IT in seattle, which is a very liberal city, they voted for literal republican as city attorney, which is the office of prosecutes mister miners. So against a police abolitionist who said he would stop prosecuting mister miners.

You're forgetting that in Virginia, IT wasn't just gan yang can that one, but basically he was Terry mccaw and then a uta governor who is the milk toast individual and an attorney general candidate who was caught in black face, which, by the way, there is no more racist thing you can do just to put collection guys that everybody, all the non colors, okay, that guys please don't do black face or Brown face.

It's such a about it's .

and and you can and IT a IT was a black female lute governor and alo etna general, and they swept, right so, right?

So the luti governor was windom cars. H she's A A black woman republican. If you seen the photo, her, she's chicken.

Photograph of giant assault rifle in irans. Uh, that's her. And then they have been at catering.

General jack. mr. Is h one as well. So yeah, IT was a huge sweep. And then you know in long island and the island, which again are blue counties, you had two republican prosecutors beat the local sort of uh in combat democrat decorators.

D I I think this is very clear, which is um trump was behaviourally extreme and after four years people were sick of IT. Nobody wanted that behavioral extremism because I was unpredictable and people felt Frankly in danger. And I think that that was legitimate.

He also turned out to be extremely lazy and probably pretty dumb. Now what we're realizing is the different form of extremism, which is policy extremism, will also be met with the same response, which is that you you can't sustain election results in winds, right? So people care consistently about three things. They care about the economy. They care about the education of their children, and they care about safety.

And the thing that glen Young did, which I thought was at least the playbook for centrists and the right, and it's also a playbook for the democrats if they choose to embrace IT, is to understand that these things are reaching a tipping point where, you know, again, we've said this before, IT is possible to live in a state of mind where you believe in black life's matter and you believe in law in order, right? And and when you try to pit those two things against each other, for example, like you would have thought the one place where they would have basically defunded the police in its entirety wouldn't many apple as after George floy, but instead even they drew the line and said no or new york or new york there was there was a really compelling quote actually by this woman I think IT was in the new york times um and what he said was I didn't elect to biden to be F D. R. I elected him to tack to the middle and just calm things down so that everybody could tae so that we could reset same man and is .

that was A A gal membership actually she's a Virginia and yeah, she's a Virginia democrat who want to see and one of those blue counties are just flipped red to vote for. And since he got elected, I guess he got elected last year, she's been telling the democrat, but she's the one who called up policy in that mr. Caucus meeting saying, I don't even want to hear the words d from the police again, that is electoral poison and then he said, yes, nobody elected by to be after are the election. We Normal stop the chaos and so, yeah, yeah.

there is a big backlash .

going on because bian has decided to start governing like berny Sanders to do so.

X is the lesson dams learn learned this time around is is very easy to beat trump, but it's very hard to beat a moderate republicans.

No, it's not that. It's like you just have to be a rational, Normal person.

That's what I mean by a modern republic.

Well, you just have to be moderate. I don't think of matters when this.

but this is the key. dms. IT was so easy for them and be trump, you know. But these .

three topics are not a republican tent pole, nor their democratic tempt. They are the tent pole of reasonable people, yes, meaning which most people are reasonable. Hey, guys, get out of the way so that we can, you know, have a reasonable life in an economy.

Hey, folks, please make sure my kids, when I send them to school for eight hours a day, come back reasonably educated and please keep my stress safe. And i'm not really willing to incarcerate had hacked to such a degree that all of a sudden crime gets out of control. Those are not democratic or republican tempts. Those are just moderate cenac things to believe .

in and also behave Normally like I I think whatever have of these progresses where they couldn't pass you know the stimulus bills and things that almost everybody .

agreed on glen yung in was not behaviorally extremist and and from a policy perspective was pretty much down the middle. Eric atoms, eric atoms is not behaviorally extreme, and he is politically down the middle. The mayor of buffalo who got reelected is not behaviorally extreme, and he's politically down the middle. Do you start to see a pattern here?

Yeah nobody wants A O C, bernie, Elizabeth warn or trump.

I think it's not. It's not a question of A O C, your burning or trump s it's just that right now the temperature of amErica is less just all ex hail and just resent ourselves as a country yeah and so moderation and century is actually what calls were today. I don't know how to predict what happens in fifteen or twenty years.

And maybe A O C is the canary in the coal mine for where the country goes by a plurality of people in fifteen or twenty years. But what's clear is it's not where IT goes today. And I think that we IT all behaves us to just take a real step back in excel and just read the table, because every single thing that the democrats tried to do, to sort of like make this extreme, really didn't work.

The race, bedding all of that stuff really kind of fail. And I think that that's important to listen to, you know, because you had a lot of black, indian, chinese families that just showed up his panics. You know that, again, reliable democratic voters and voted for glycon in a way that was surprising to me, right? And then so if you compare a new jersey and and a Virginia biden, one Virginia by ten, he, the the democratic nominee lost. Biden won new jersey by sixteen. And phil Murphy, barely sweet by.

was like ten thousand votes. Terraces always had a, uh, a republic and kind of a meaning group. They're teen. I think that teen. How much of that is trump out of office is what we, I think, the democrats need to pass.

And I repudiating behavioral extremism and policy extremism. So I think we just need to realize rational, Normal, chill people who can do reasonable things scatter kids educated. So for example, on the education front, um I don't know if you guys saw this because I tweed and you can put the snake in the group chat.

But in california right now, there is a battle over math class ridiculous right where the title i'm just going to read the title because IT set set of california tries to close the gap and math but sets off a backlash. Proposed guidelines in the state would deemphasize calculus reject the idea that some children are naturally gifted and build the connection to social justice? Critics say math shouldn't be political.

Of course, the are le bois written is always about the backlash. You know, they don't talk about what what the people in charge trying to do to they degrade the correct ullum, of course, as backlash because parents don't like what the people in the schoolboy ds are doing. This was the sleepy issue in Virginia was the school board issue.

You had um our parents were already angry that the teacher's unions that kept the school closer a year and a half and covered and while their kids were at home, you work doing classes over a zoo. Parents got a good look at what some of their kids were learning and then like what they saw, I mean, we were talking about lessons, plans that incorporate C, R. T.

And, you know, the sixty nineteen project view of america, singing our kids by the race, making them focus on difference. And then there were some rather explicit materials at Young grade levels about LGBT issues. And so this LED to a whole lot of conversations as schoolboy means for parents of all races objected to the least lesson plans for for their kids and the schoolboys and administrators to dismissed complaint that hand.

And you know, their message was where we're not teaching. Cr, teach your kids. But if we were, it's a good thing and only White or premises would object. So you know, that was sort of what was happening in the background. And then a calf comes along and makes this gigging ic gaffe in the last debates about two weeks for the election, where he says, I don't think parents were telling the schools what to teach and yes.

customer.

who is leading .

through this whole thing until that debate, where in this was sort of A A kz ly gas in the sense that you michelin's ley said a gaffe, is when a canada inadvertently say something true, you know, this is my colors view, is that the teacher's unions be controlling the schools, not the parents well, yes. So this is what yanking uh, jump ed all over all of his ads in the last weeks of campaign really focus on this issue a poor gases on a fire.

And then the most tone deff thing mickle is that is he had rending wine garden. He was ahead of the uh the big teacher's union coming campaign from at the eleven hour. Well, of course that's not going to save them because people are second tired of the teachers unions.

So now this was basically the big slipper issue, C, R, T, in the schools in Virginia. And you, this is this, I think, specifically, is what the party has to wake up to as these progressive ologies are not popular. The other thing .

i'll say about glen yung is that this is another thing that the that the republican should hold late, pay attention to, which is you can look Normal, act Normal, be Normal. You know, this is not an extremist in any way. This guy was the coffee of Carole, which is a huge and very successful private equity firm so this is a very rational, reasonable person who um you know didn't embarrass anything that was really that protrude p and that should be a real wake up call to the republicans which is, hey, let's just run .

a fleet of Normal people I Virginia, is that the playbook that governors have just used to defeat? The recall california IT did not work in Virginia, which is he tried to uh paint yanking as a trump proxy and Young and very definitely you avoided that he got trumps yes he got an endorsement, but very early in the process he did not have trust come to the state um and you'd have to say and also help social media that trump isn't all over social media because he has been banned.

So you know in a weird way, facebook and twitter deserved in a six year um because they help keep trump out of the Virginia race. So you know this playbook that that newson defined that would work very effectively from california, which is simply to keep running at trump I think democrat thought to be able to win elections for years based on that that playbook to you in last two months. So, you know, so I think democrats are going to have to find a new playbook here.

okay. So freedoms, G A, on this california issue around education, one of the key or most controversial um concept is d tracking. In other words, instead of having high performing students go to a high performing track and then everybody else stay behind, maybe keeps in not all cases, but keeps some of the students together because there is some research that shows, if done right, if you track people together, the higher a performing students will pull up the ones who are slightly behind other people say, were basically, uh, throwing people who could be the next science stein or or the next world class leader in science math eta. Uh, any thoughts on the concept of the tracking? Since i'm assuming you were in the high speed track in science and math, maybe we should get .

rid of like jv and varsity sports teams as well and you know tribally baseball and major league baseball as well. And you know any distinction of performance um or exceptionalism goes away, you know and and that is kind of the the key social question is are we going to give up exceptionalism um to minimize uh the distance uh between the exchange of the average and that that makes people .

makes people feel bad. But i've said .

this point before, you know we're doing IT when we try think know the billion attacks or what have you as soon as you start to limit progress um you reduce inequality but you limit progress and the same will be true not just in science, not just in business uh but also in sports and athletics and and any other kind of system where you will have exceptionalism, you will have an average, you will have uh a distribution, a among the human performance. And as soon as we try and uh limit the difference in that distribution um we move the entire curve to the left.

Here's the um counter free bird. Um what some studies have shown is guess you will uh throw off the high performers but we're seeing a along race lines certain demographics being left behind. Other ones excel and that you can get yeah it's an .

ethic and values question right like do you think that individual freedom in the opportunity to pursue your opportunity, your exceptionalism um should be taken away from you such that others who aren't as exceptional as you are given um you know greater progress that they would have had on their own um and that's the the key cross of what all of these social systems are grappling with, whether it's in sports or business or finance or um uh or education, is what's the right thing to do and that ethics question is going to be defined by the social agenda of the moment and you know the means of the moment and what we all think is, is the right thing to do.

And it's different all over the world and it's different, different political system. But it's a very divisive point that I think folks who find themselves on one end of that exceptional spectrum in different aspects are going to have one point of view and focus on the other. Under that exceptional spector, we're going to have other points of view and everyone's to be sensitively cue to where they fall that spector.

I will say one thing no on that spectrum exceptionalism is rare than the average therefore IT is likely the case that over the next years and decades we will see the um the idea that we should remove exceptionalism in and exceptionalism in education and exceptionalism in sports because IT benefits the majority and um and and no one kind of recognizes and a lot of folks don't recognize the progress that is made by exceptionalism and and and then we're onna wake up one day. Be like a way to second. We don't have the the best fourth teams winning all the old medals. We don't have the smartest kids. We don't have the best businesses, china and europe and brazil, and whom ever else the emerging markets are india are going to start to a good .

I think this is a very old debate, is the debate between equality of opportunity and equality of results yeah and the progressive left is absolutely obsessed with equality of results or outcomes to state. Now call equity, which is we're going to take people to finish line and we're going to move them around.

We're going to redistribute the the outcomes to achieve a more proportional representation or something more fair as opposed to giving everybody as much opportunity at the outset as possible. That is the fixation on now. That is why they're taking out advances math in the schools.

They are trying to level people. It's not onna work. IT doesn't lead to a more we want to have an acceptable society where I think we should be focusing is creating as much opposition for everybody.

The way to do that would be to let every child go to to the school of they are choosing so that we would stop trapping kids and bad schools. But back to bring this back to the election for a second, because I think he was a very clear repudiation of this progressive mindset. And I think there's essentially two sets of reactions to IT. If you look at sort of all the left ring commentators, the one who I thought seem to get IT the most was CNN. Van Jones actually had, I thought, a rare man of introspections, where he said he was, this was, the results were a five lam fire he says a big, big wake up call for the democrats to stop annoying voters with worked Petering um he he actually advised by him to start regulating against the work left in the way that bill clinton did I mean, which is something that i've been suggesting on this this pot.

So you're seeing something super important. The game theory now is for biden to put to the test the progressive left, because now he can go firmly to the center and he can put all of the pressure on the progressive left in the house. And a Warren and berny Sanders in the senate.

He's right. The first time he should do, he should pull. He should pull his sisters soldier on berny Sanders. He can keep delegating the domestic agenda of bernie Sanders if he wants to say his presence you'll start regulating in the way that build did are not sure he's going to. I think there's already a misperception that the reason why they lost selection is because they didn't deliver the goods in this house reconciliation bill. Um that other words.

I don't think the public cares about the good is I mean, they care about this .

Normal sein centura part of the doesn't house reconciliation but here's the thing. Democratic turn on this election was extremely high. The democratic turnout for mccolo ff was higher. Then the democratic turned out four years ago for the democrats who won, that turned out that uh, in new jersey was higher than what murphies got four years ago.

And he want the problem the democrats have is that republican turnout was extremely high, even without trump showing that trump doesn't matter that much, uh, to turn out. And the independence came out in a big way for republicans. So this idea that democrats can just win elections by delivering, you know, programs for their base, that's not onna work.

So I think that's a misperception. I think van Jones has the right idea. They need to try regulate. But you turn the channel to M S, N, B, C, and they were just blaming the whole .

thing on light suprema, basically history, just on the detracting thing. This shows to me a severe lack of creativity. You, if you look at what happened in the N B A, they had this developmental league, which they didn't counter on, then became the g league.

They now have the ability to bring players fluidly from the warriors g league team up to the warriors are the next team up to the next. What this means is you don't have to say there's two different tracks and the the two never shell me in the season. They can move up and down in math.

A very easy solution to this would be to have the high track for high performers, have the regular track, and then spend with all this money we have. Say, hey, every schools going to be open from three to five o'clock, four days a week. If anybody wants to attempt to get into a higher track of math, just stay after school for two hours. Anybody can go and get one on one, two dering and just double the number of teachers.

the whole country, once excEllence. They don't want leveling. They don't want equality. They don't want equality of results, the quality.

They do want people to move up. They do want to see three. And students and immigrants do Better at that.

You're missing. Yes, that's about equality opportunity.

absolutely. No, it's not just the there so far behind. You need to do something new. What we're doing is not working, David. That's why people are .

picking this bad. They are eliminating the advances math because they want to actually look at the the problem.

What do you see the problem?

Well, if there is an another performance group, then you should work hard to raise them.

Object, give me grisons .

charters and school choice. O, K. Look, if you, if you're going to defund structural racism as conditions that that trap people of color in poverty across generations seems like a preferred definition, then you have to say the number one cause of structural racism is the school ism.

School ism is the school system. Because we know poor kids are trapped in schools that aren't very good. why? Because they are controlled by .

the education unions. They don't. 神雕侠侣。

So who is making that argument? Uh, on the on the side of the left, no one. why? Because everyone knows the unions, specially the education unions, are the number one donor to the democratic ty. So the democrat won't even look at this problem.

although this is the is public primacy who build their base is by saying we want to fix education. That would .

be if you have five of his panics in Virginia voted for Young. So minorities are shifting on this issue of charters and spoke choice.

These are, you check.

these are quality of life issues.

If yang can has a good four years in Virginia, he's key, can run for president .

and crush this thing likes, which is IT. Was this chart from this guy, Patrick C. H.

Refining, who's a pollster. And I think IT really illustrates the problem that progresses the democratic ty OK. So what this charge shows is IT basically shows where the democratic democrat rac.

Paris in the center republican party is in relation to the center of the country. okay? And basically, as you'd expect in a democracy, which our party is closer to five.

Okay, so in one thousand nine hundred and ninety four, when bill klin was president, the democratic party, the center of IT, was smacked dab as five. The republicans weren't that far away. There were six.

So the party, even though there is a lot of parson warfare, the, the, the political differences actually weren't that great. And clinton, I think, more accurately, found that dead center OK fast four to two thousand four. So George I bushes present now, the democrats are at four, republicans are at five.

That's why republicans one OK now go to two thousand seventeen, these phony ers, he did. And this is a few years ago. The democrats are all the way at two, okay? And the republicans are six in half. So it's true that both parties that have moved all away from the center, republicans are one and a half points away from the center, where as democrats are three points away. So the democrats have actually been further away from the center.

If you look at who are the activists in the door right party, who is the base, who is the energy, who does all the work, who does the contributions, is the progressive right? This is why mccoll f ran. As mccoll is not a progressive.

He was the clinton democrats going way back to the nineties. Okay, he was milk lns, you know, a right. And then in the party back in the nineties, but he nevertheless ran as a progressive in Virginia who supported the teacher's unions.

why? Because he was appealing to the baseline party, gave him to the same thing in california. Government was never a bernie bro.

I mean, he's always been liberal, but he he has moved very far left and biness move very far left to present. Why is that? Because the base of the party has moved very far left. So unless that gets fixed, I see maybe .

at the party space, but the country.

exactly. So you're going to need a strong democrats who can basically give the his man to that part of the base or they're onna keep losing elections. I think this could be a republican decade.

I know IT doesn't seem like IT right now because you had trump and the republicans loss. But look up quickly. Republicans turn around their electoral fortunes .

with trust on the .

side lines that .

if trump is the .

omi in twenty twenty four all bets are off but in twenty twenty two not the omi he still a nowhere .

he's really nowhere in sight and people people have a very short um memory IT turns out they've moved on very quickly. Yg can check the box because he felt he had to to get the nomination and to run on the republican platform. But then you think Young kis gna talk to trump once no, not one. And and I think .

and I onstar think this elections can help republicans move past trump because what republican believes in um in like that the electronic sym is right now, right? I mean all these blue cities and states to delivered big results are republicans so we're exactly is about stuffing. We're exactly is the school where .

the store election to stop .

the overnight, right? Because I mean.

but away Christian cinema probably knows is like, you know the the funny thing about all of this is when Peter til put in ten million dollars into this pack for Blake masters who used to work from and said, you know this in arizona, i'm going to run this guy against you. Cina attacked heart to the center instantly. So SHE SHE knew too. So small point.

The Blake is running against the other guy. Um the astronauts y every name but yeah but but cynical a is up uh in the next election cycle. So you got a bit more time but you're right. Like cinema is attuned and mentioned is a tuned there are some of the few democrats that are tuned to where the center of the country is. You are mentioned in the wake of this election said this is a center right country.

These guys Better wake up um you know they should really now look I think I think what's gonna en in the way this election IT is that this infrastructure builds gna sell through because one of the crazy or things that the progresses we're doing was holding that bill hostage IT might to help my I don't think I don't think we called with a one. But you might have help to buy a pointer two if they have gotten that infrastructure built done because a lot of those programmes are going be popular in a state like Virginia OK. But I mean but but I think that you know this house reconciliation bill, they just seem to help ban on gaming IT through with all these tax increases.

That's not popular. You know what the big issues in new jersey for one of the big issues in new jersey were you almost at the upset with one point was taxes. You know um there was A A gaffe by Murphy who said something like, you know, he said he said that if if taxes or someone's chief concern he said, quote, maybe we're not your state.

Can you imagine that wow. And he almost lost the election because of that. So I don't think all these big tax increases are what the country wants. And you know if fighting this is on allowing berny to dominate the agenda, Warren, I think it's you're going to forty to fifty seat losses by the democrats in twenty twenty two.

okay. Moving on to our final topic, crazy update at a china as a research team has developed a method of converting carbon dioxide into start science magazine publish this paper h from a research team a hundred grams of catalysts converting five grams of C O. To pour hour into start um and h freeburg, I saw you tweet that this is ten times more efficient than corn plants.

Uh, what's the impact of something like this? Could IT hit scale? Would IT have an impact on food security, carbon, global warming?

yeah. So I tweet this paper up because it's just it's a fantastic demonstration. What's possible in this new emerging, not emerging. It's been for a long time, but kind of know in the state of art in and by a manufacturing you know photo synthesis is the system by which most starches produced on planet or today, that is plants convert sunlight and use water and carbon dioxide to make starches and starches um uh and sugars which are were carbohydrate are account for sixty percent of human calories and we get all those calories from rice weet potatoes which you know grown on about sixty percent of our acts uh that we farm on planet earth so you know in in plants there's a series of these chemical reactions and what these guys did as they are uh isolated and um created a couple of specific proteins um which are uh a class of proteins called n zine and what an n zine is is is a protein that can take different molecules and combine them and enforced them to react and make something new and they identify a couple of enzymes and engineer a few enzymes and put them together in a cell free system, meaning there's no cells involved.

It's just a tk with a bunch of flu is in IT and and they stick in some carbon dioxide that they can suck in from the atmosphere and they they can and they have to drive IT with some hydrogen gas, which we can just get from water and the system basically convert set carbon dioxide into starch, uh which is um being done at a rate that's almost ten times higher than what we see with with corn plants. So it's it's an incredible demonstration. There's there's several steps to the system like six steps. And I did some back of the envelope map and my dg of the ended math on what they demonstrated. And and by the way, everything they did is publicly available for reproduce ability.

So people are going to horse open source .

of people going to try and copy this now but my back at the unblock math is um you know uh this system can produce about ten grants of starts per leader per day um which would mean I would take about two point seven trillion leaders to suck up all of the carbon dioxide that all of humans are putting in the atmosphere every year from all of industry that would require um about twenty seven million tanks that are about forty feet tall and about eight feet wide that hold all of those tags could sit in in the area about twenty five by twenty five miles.

You could attach one nuclear reactor to IT to suck up the um uh the water and converted into hydrogen and gas and feed this system. And those tanks, twenty five miles, by twenty five miles, would take out all of the carbon dioxide on planet earth and convert IT into usable start. And that starts by way that system could be tie, not just to make start for consumption.

IT could be used to make bio fuels. IT could be used to make bioplastics. IT could be used to make anything the tigro carbon based um and so you can kind of think about this being the entry point to a series of production system .

that we could use to make that frequently open source.

So there a research team of scientists from china and they've been iterating on this this process. This isn't the only process, right? And so what they're showing is that this is possible. And what I think we will see is a lot of people ratting their brains now saying not only do we use proteins and enzymes that we find in nature, but we're going to start to engineer our own proteins and our own animals that are even more efficient than what we see in nature.

And that's what's starting to happen, this system alone, what I just described, this twenty five miles by twenty five miles system, which is tiny, is the equivalent of starts production from forty two U. S. Corn belt. If you took all the corn growing in the united states is forty two times, that is what I would produce that's my back of the envelope math of kind of what these guys did um and so I think what they're showing is this is yeah yeah the implications. We could go in a hundred directions and we can talk for an hour about what this means and what you could do with IT.

But I think if IT really catalyzes this this point, that what kind of everyone's always like, how we going to get all this carbon out of the atmosphere, what are we going to do with this, where there is a will, there is a way. The science is here today, twenty seven million tanks made out of plastic. You could probably get that stuff produce, you know, a couple billion dollars, find a piece of land that's twenty five by twenty five miles, it's near some water, and put a nuclear power plant there, and you could suck up all the co. Two in the .

atmosphere. Anybody a guest of how many people on the team of the funny?

The funny thing about this, that I think is really interesting, is that IT came at the same week where we were ending, you know, what was this political theater of cock twenty six, you know, create fineberg a whose, you know, how dare you, how dare you SHE SHE share this very funny comment, which is like, ah, you know, IT was a bunch of corporate nonsense in the same will blow, blah blah. Was the description of cop twenty six.

You know, we had this great trickle love like I you know, agreements there was like on monday there was an agreement to stop deforestation uh, and then you realize it's a non binding agreement and you're like, oh, okay, well, I guess you're not gonna stop the forests. We're just onna keep they are doing that and all of the sub just kind of like took a lot of my enthusiasm um and I was a little dispute about what was going on. And then when I saw this thing, I was I was really quite impressed.

I will say that there is a very tRicky thing happening right now, which is that developing countries basically said, listen, if you want us to go after climate change um we want one point three trillion dollars a year to support us. And so, you know, the western world will have to figure out whether we're willing to pay, you know, what is the equivalent of, you know six or seven percent of U S, G, D. P. To hope, punch other countries every year for them to slow down. And if we don't make these payments to india and china and a bunch of other developing nations, they have said we're just going to continue to do what .

we're going to hear an idea, take half of that money and put IT for science.

Yeah, take half that money and go build a plant that uses this system that was just demonstrated and put IT in south texas and suck up ocean water and convert that ocean water into high rigid gas. By the way, ocean water can be turned into hydrogen gas by running electricity through IT. So you're putting a nuclear power plane to make the electricity.

You run IT through ocean water, you create hydrogen gas, you pumped into these figure tags, and IT sets up all the see or two. And IT makes stuff that humans can consume and that we can use. And suddenly you have this abundance of material, you have this abundance of food and um and you can turn this and jobs and you can turn this into a lot of different things. And you know, this kind of goes to the point I be making for a while, if we want to invest in infrastructure, this is the sort of thing that both solve climate change, creates jobs and has extraordinary economic return potential built into IT.

So how you get politicians reelected.

you know, I think the private market may come after this stuff, i'll be honest. Like i'm talking to people looking at this, like what do we make a plant that we can make bioplastics and food stuff que and it's going to be other iterations of this technique um but it's such .

a no brain cost like a functional prototype of this like a .

small prototyped. Nothing right? I mean, couple million bikes yeah like nothing. So um you know the other thing that .

happened this week beyond this request for one point three trillion dollars is that, you know we're now seriously considering carpenter s and we talked about this on the pod before, but you i've said I think this is the most disruptive thing in the capital markets and geopolitics that can happen in the next hundred twenty years of carbon terf which is to say that when a gooder service enters the borders of a country they will levy some tax that they think represents it's drag on the environment.

And so, you know, the simple example would be a car, you know, you make a car, you make a tesla in texas, but the minute crosses the border to canada, canada as well. Here's the true carbon intensity of this car. All of the energy that you put into the aluminum, to the batteries, you know, to the to the buildings were the engineers said that were that were building fsd. And you know, I in the church in eight thousand dollar tacks on this .

car or iphones coming out of china. Yeah.

that's happening. I think that's coming. So I think that you know the combination of terabits and these transfer payments is going to create a real economic and center for folks to make these kinds of big technological leap. So i'm pretty bullishness on all of that unless bullish on politicians ability to organize because unfortunately, again, this is the first time I really paid attention to cop and IT just look like a bunch of really use political feature. This is a lot of political theory sex.

This is science conversation about saving the planet. Do anything for you?

Would you to mean I think it's the way to solve the problem is you have to figure out new technologies to actually take carbon of the atmosphere because you're not going to do IT through, you know, these political programs. I mean, you know china, india paying them and another developing nation's one point three trillion in a year. I mean, foreign ate already is one of the least popular parts of of the government's budget. You're going to now pay one point three trillion .

to these countries so that they it's nonsense .

you and the education system .

right IT in. Yeah, I don't think there's a .

political solution to this problem that's to be powerful. The people I seems going to have to be solve through new technology.

Now let me ask you a question for you, berg. They said, this is a six step process given your experience building science and technology products is IT possible for each of those six steps to get but one eight percent more efficient a year.

Yeah look, I mean, um I just say that to describe that there is a series of steps in the system, you know um but um at the end of the day, this is a demonstration of science that has been no probably funded to some small amount but if you start to iterate on this approach and think big picture and think infrastructure solution here, uh, there is a lot of room for improvement.

i'm sure. So back at the envelope, twenty five by twenty five mile, if this is getting fifty percent more efficient, twenty five percent more efficient year over year, we could see that becoming, you know uh twice as efficient every two to three years. And your twenty five mile might be .

a five mile ratio on mars, and mars not going to grow frigid fields of corn and grow cows. And right, you're gonna need a system that literally takes the molecules that are in the atmosphere there are, uses some electricity that's probably going to be produce by a nuclear power plant and convert those molecules into what you want to make and consume. And that's what we can do on earth today.

The systems are going to get get Better. They're going na get cheaper. They are going to a get faster. And that's why I am highly optimistic about solutions to climate change in the century. It's not and and if it's about a when and you know the win is going to be defined by the willows of how we are going to allocate our people and our capital resources to solve these problems. In the near term, we have the tools to do IT.

I love the fact that we're sort of hitting this fork in the road where it's like, do we just want to give the money to a bunch of governments to pretend that gonna solve this in grifters? Or do we want to put IT into science, technology, innovation and entrepreneur and trees net former that execute a what you say, I pick the formal.

We should. Yeah.

let's give me to politicians. You don't know the fuck they are doing. I mean, IT really is like when you know anything, so you can say, like, if you want .

to solve world hunger, can you make us.

my god, to talk about that? So nothing.

nothing gets me up in the morning. Like funding .

shanna the stories.

Somebody was like made more money.

like an article that was an article that was sure.

And then he said, if you want to solve world hunger, i'm willing .

to sell share to you. You're in a, what do you? I was all .

I .

did put a this in your hand. You guys don't everything, but .

IT .

sso, there was an article that was written that basically said, you know you know, six point eight billion dollars, which is, you know what elan made like in a day or something could cure world hunger. And then the head, do you know U N.

World food program retweet that? Again, trying to further dunk on elan and then um elan responded well, if you can you show me a plan and just please reply in line here on twitter and it's credible and detailed all just out of this talk and I give to you and everybody was like, oh my god there was this oh my god moment like, wow, can this really happen? Ending poor hunger sounds like a beautiful idea. Can only the only ask you six point eight billion dollars? And obviously I went nowhere because the guide didn't have a plan and that was just a complete joke.

But that's what happened. Yeah and is again, just put all of your put all of your expenses out there showing h your plan. And I was like, poo crickets.

Nothing aren't everybody on behalf of the dictator chao peta, the queen of kwa, the salt of science of freedom and for the raining man himself, reporting from, definitely reporting from yeah, he's reporting from the new york stock exchange in graduate tions. Again, my best. David tacks on the trip. Ant I P L, bird, we will see you all next time on your .

own post by your.

Winter, man.

We open sources to the fans and just .

got crazy with.

We should all just get a room and just have one big, huge orgy because they all like, like sexual attention. And we.

we. Get more.

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