E78: VC fund metrics that matter, private market update, recession, student loans, Bill Hwang arrest
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Is we're going to be an open mike night. We were gonna .

have you speak freedoms? G but we real, you are not capable.

So we want to show to be entertaining.

I know I .

do not person for free. I'll tell you what makes my stand up. And so .

it's my creative .

sensibility. So if I have some time to prep and write my script and read my own creative insights.

yeah OK bring one joke next week, jack up.

For all the time we've spent together on this podcast, you know so little about me, so depressing.

I be honest. Know here, it's a two way street.

You gotten open up a little bit.

We've to go out and get struck one night.

We open sources to the fans and .

just got crazy.

I just want to a give a shadow to this guy, Andrew lacy. Okay, okay, shaw, he is the C. E. O of a company called renovo.

You can you just flash IT on the screen? Renovo, I went to prenez val in what they do is they do a head to toe mrs. Skin in forty five minutes and they use a bunch of machine learning, an image recognition to help a radiologist entrepreneurs in real time. Besides you, it's a service that you have to pay a few thousand dollars for. There's a location in silicon value in redwood city in a couple of others, and we mentioned that.

But the reason i'm bringing this up as he sent me an email yesterday and he said, I just want to thank you in the best is for mentioning premium val because we had a bunch of people come and he said we found no less than eleven, like saving diagnoses, eleven individual listening to the saves lives. Went to principal after hearing about IT had head to tell M. R. I found, you know, all, all kinds of issues, from a brain tumor and brain cancer to stomach cancer, other things, and was able to get the care that they needed. amazing.

Anyways.

I just want to give a shot up to him for for doing a lot of really important work. And for the folks that are listening that half some money, said aside, can afford to do this, I would just really encourage you. We have no financial taken at nothing other than we are users of IT. But check out renewal of documents and shut up.

And Andrew is steamer. Okay, here we got three, two. Lets start to show the war in ukraine has him insane in the membrane and binders.

New disinformation council is going to a have him detained to come up down from tanking salona. He started smoking at marijuana. You know, as the rain man, he's here again. David sax, do.

And every good week, yes.

all right. Uh, big energy this week OK. In high school I had no friends.

But thanks to the pot, undergrads are in his dms. All forms of stake. He's a verge in. He's the vang ard of all the virgin is the king of king of science, David bradbury.

I missed like half that because today is laughing.

Let me try .

from the time.

In high school he had no friends, but thanks to the pod, undergrads are in his dms. All firms mistake. He's a person on. He's the vanguard of all the virgins, the queen of kin. Walk the certain science, the river.

Just further record. There's no undergrads in my D. M, but appreciate .

the I two. And the show isn't start. I think .

i'm taken over in. True next week.

OK going to please.

by all means, next week to give me a week. You got IT res next week.

See these late and stand up skills and action yeah absolutely he's been hiding them from us. Yeah I don't know to stand up to hide their ability.

You know the funny thing about hiding something and not having something from the outside and they look the same. Sorry, jack, i'll go.

You okay? He's dropping annual letters in luxury ious sweers. As far as as pets go, well, you can only get Better himself. You must follow up a tear.

I cannot comment on the speed.

Ohh, my god, I think this is getting brutal. Who's writing this? Oh my, everybody. It's been a big week.

Did you read my annual letter and give you three assets?

I saw, you know.

no, I I I review .

the table where you list all your results. And I actually my team like nice way of summarizing you know a firms results over you know a long period time because you had every fund and your totals and all the cheetahs.

What can I talk about that for second? Yes, know what what's incredible about what your things I I was interested in a bunch of other funds and i'm invested in and their returns. And then i've also seen a bunch of leaked fundraising decks of all kinds of other firms from world stage across over the P.

E. And it's incredible that they are not standardized, right? Some people only show growth irr. Some people show net air r. Some people don't show the total value of the pain capital, which means, you know, if you have a hundred dollar fan, what is the total value of all of the holdings?

Some people don't show D, P, I, which is distributions of paid in capital, which means, okay, for every doll you've taken in, how many dollars of you sent up if you don't show all of them. What was shocking to me is how much you can kind of hide and play and manipulate the numbers. And one of the most crazy things that I saw is that there are these late stage funds that ride into their fund raising ducks, that what they actually use our lines of credit to juice I R R.

So what they do is if they're about do a deal, they'll actually get alone from a bank, put that money into a company, wait until it's about to get marked up. And then what they do is they actually call that original money from the alps and pay back their capital call line of credit. So what does to do IT inflate I R R. But this is why if you do if you see the other numbers, IT still shows that is kind of like, you know not doing much of anything. So if you ever see mult hundred percent irs or high huge irs with zero D P I and a marginal T V P I, it's folks that are playing games to trick l pes.

Just a heads up to that is so weird. So what you're saying is, understand, hey, we get judged on the rate of return each years of the stock market to seven, eight percent. We are expected to do triple that.

So we ve got to hit twenty, twenty five percent each year. Now the clock starts ticking when the money gets called from the L. P, S, the partners and gets put into the company.

So if you invest your tour of your fund, you pull the money, definitely see you put IT into youtube. Whatever is what you're saying is they will take alone against that future money from a bank at an absurdly low interest rate, let's say, one percent or two percent, correct. They make the youtube investment.

Then two years later, youtube has a Price around that Marks IT up twenty x then they put your cash in year three of the five, year two, and paid back alone. Now they pay two percent two years in a row. But the things gone up twenty acts correct. What that's that's dirty. Well.

so it's it's dirty enough that the S. C, C has actually now introduced legislation. IT was in february that basically is going to try to uncover all of this nonsense.

And so you'll have to be much more transparent. So the format that I used, in my opinion, is the most transparent way of not being able to hide the cheese. You show all the critical elements together in a simple table that will make IT very obvious who's playing games and who can actually make money.

So there is a leg mate version of the loan thing, which is, um you know where this comes from as a couple call loan. So you know we're making a button investment throughout the quarter. Million dollars here for A C deal, ten million for a series a you know this happen all the time.

You don't netty want to hit your old peace with capitals for every single little small investment. So we do is you get a couple of call line from sv B S. Like that, and then you do one capital call per quarter. And so they will learning the money for you know one, two, three months, but is not for a year.

The reality is if you have a reasonably well developed infrastructure, you have a cash forecast of what deals you may or may not close with probabilities and see you know what the amount of capital you need to have on your baLance sheet. So I agree with you to have a small amount at the edges to pay for expenses, to pay for salaries while you clean up at the end of a quarter, completely reasonable. But if you're making you know five or ten percent commitments into a company and you're using this as a way to basically create some interfusion hide, I think that that should not be loved.

Yeah yeah. The number of capital calls is unknowing for .

people you yeah. Anyway, I did share you that table with our team to because I did like the format quite a bit. I think start this week.

It's very hard for funds who are not performance to use that format that you are you you are very highly performance, so you can use that format. But I don't think people that have not returned money or or have fake paper mark cups can use that format.

because IT is too simple. Yeah.

yeah. I, I, at the end of day, what metric do we all look at when we are L, P, S. In a fund?

Well, this is what I put down. I put down the ones that I look at for everybody else. I'm an lp in.

you know. So what one is that for you?

I to cash? I I need to look at the the totality of IT. I need to understand what is your growing your net irs. Those are important things to understand because IT shows how efficiently you put the money to work, of course.

Then, but then ultimately then the other two things that really matter is what is the total value you've created? And then what percentage of that have you given back to me? Because that allows you to understand how much paper value this for. For example, of today, let should say you had a fund that at A T V P I, total value of paid in capital of a five ax. Five ax on a fund is incredible.

But if you've distributed none of that, well, guess what if we're sitting here in may of twenty twenty three or twenty twenty two, rather the total value of you're paying capitals, not really five acts IT may be only three acts and a maybe actually two and a half x considering what the uh, markets have done to these companies, right? And so IT allows me to really understand how performer funds are in not just being a part of the game, but actually generating realizations. And this is the hardest part.

As I told you, Jason, like this past quarter, I think I passed two acts across my funds when I was managing outside capital. And I think, my god, he took me eleven years. It's hard to return to to ask the money and that means that i've returned two and half billion dollars you know, heart, that was.

yeah I mean, you got to time the exit you have to have the ability.

you know you can't even tim, the exit you have, you have to be constantly managing and working your portfolio. Sometimes you're selling in secondary transactions. Sometimes you're actually trading up in private markets where you help this company merge with another private company.

Other times, you know, if I think about IT, if the number of I P. S. I've had is relatively dimension, so how do you make two billion dollars? I ve only had one IPO, which has been slack.

yeah. So this is a really, really hard business. And I was just a reminder that you know, in the last four, five years, managing capital has seemed relatively easy. But in these next few years, you're going to see who's really, really good kind of that old warm buffer co. You know you really you can see who's naked when the tide goes out.

I mean, said another way, the last five years raising a fund has been really easy and writing checks has been really easy. And now comes, you know, act three, which is returning a multiple, the money you easily collected. And boy, is that hard. And like all of these new is one thing.

All these l pas send me even i'm not an L P N in a potentially send potential l peas their performance because they are so proud of IT like quarterly am I going not even in this fund and they have these crazy mark ups, script investments, this whatever. But we've returned no capital. And so you just to .

give you a sense of IT, if you if you look at the most fantastic org ization in the world, if I were an investment manager, which is burker their long run fifty or track record is you know around twenty percent right grows. If you look at the most successful asset manager in the world, then I would put blackstone at that just incredibly good and best in class in probably three enormous parts of the worldwide economy, real estate credit um and private equity. You know their long run track record is that on two hundred and seven billion dollars of private equity and another hundred billion dollars of a real thing, they've returned to x so that's what the upper bound is, you know doubling people's money and generating fifteen to twenty percent is the best you can expect. If you are really excEllent and long lived, that's the best.

What do you look at freeburg? When you're an lp, what number do you care about? Is you lp other france? And and I think all of us do at times.

I made my first venture fund investment in two thousand six, and I I am still getting distributions from that fund. And i'm looking at on my this is a two point four x over that period of time. I like, what the hell why did I even put this money into this fund? I guess this makes sense for pension funds and know very large baLanced long range investors and need to kind of diversify. But as an individual, I should have put my money and have had liquidity on IT for sixteen years, rather than have IT locked up and and a bunch of private companies flash around to the out and end of all this. I only get two and half times my money back.

two and half times your money in sixteen years. What's that? I R R? It's .

like .

low .

teens. And that's right.

And so for me, I think the the the king, the metric the only metric that matters, which I think you're saying some of, is how much cash I got out relative to cash I put in. And so initially, my my I R R is negative ninety seven percent and then IT goes up to negative eighty and then negative sixty and negative thirty and negative twenty. And now it's fourteen percent because I finally got more money out than I put in.

And so IT doesn't feel to me like, uh you know the the just generally private investing, everyone gets excited because we all get sold stories and individuals all get sold stories of you put a dollar and you get a hundred box and I mean jack wrote a book called how I made one hundred million box from whatever you invest um in uber yes and and that story I think it's everyone kind of excited. But the reality is the vast majority of the time, and if you diversify your bets like this, you're gna end up waiting a long time to get your money back. You're gonna be locked up and a top performing fund is returning two and a half x after fifteen years, which is not not much Better than kind of investing in the S N P. Or you could sell that anytime you want and use that cash running purpose you want.

Well, if you did a hundred thousand dollar investment, you return two hundred sixty thousand and fifteen years on an I R calculator right now. Internal rate return .

six point five eight percent yeah.

yeah, yeah. I mean, and if you do Q Q, Q, Q, depending on yeah how hot the market was, then yeah .

and it's really, really.

really hard to actually make money. There are always going to be periods where people look like geniuses and have markup. But you can really see when people have skill after a decade in a couple of up and down .

cycles of fans by the beach funds put up a score year, and in certain maco cycles that can last many, many years, everyone looks like they're doing well. And then all of a sudden tides go out and you lose more than you made over that period of time. And then you realize, holy crap, I was actually in an insurance business where you get paid some small premium every year and then you have some massive loss one year.

And that massive loss that turns out your underwriting wasn't good because you lose more than the sum of all of the premium you collected over that period time. And unfortunately, a lot of investing looks like this, which is you have small returns for a long period of time and then some massive laws and uh and the whole business makes you look like, you know, long the way a genius. But the reality is over any any long cycle, um most folks end up kind of in a bad position .

um and and end up you know the I C C by the way has um has solved this for mutual funds, right and etf you is there's very strict there's very strict standard reporting.

And I do think that as um you know, for example, like if you go to the big banks started sex in rope, I just on first last night, if you go to the big banks and you have if you're an individual like a doctor or dentist or somebody and and they will aggregate in poor capital and put IT into these funds on your behalf as an example. So you know IT looks like J P Morgan or golden sex is a you know fifty one hundred million dollar L P. In one of these big funds, but in fact is just the sum of a bunch of folks on their platform.

IT stands to reason that if the S, C, C can actually Mandate standardized reporting for private investing, IT would actually be a really good thing, because all of these games will, and probably currently are, as far as i've seen in these presentations, tricking a lot of folks to put their harder and money into things that actually will ever make money. And it's because if you selectively Cherry pick how you present the data, you, you you can tell a partial truth. So you know, I would really I would love, i'm happy to be compared to to any organza. But every time I hear somebody tripping about how good they are, my only comment is I just want to see your table in the same format as my table and we can compare because IT allows me to .

really understand yeah little returns. And by the way, the point I made earlier about um when markets are generally good hedged fund public market investors generally can look like they're doing well by having a good marginal return above the the benchmark every year and then one year have a big drawd down and suddenly they realized that their underwriting wasn't that could the same can be true in in private investing in the opposite way in the sense that you will put in small checks, small checks and lose money and lose money and lose money and then have one big banger and you get one hundred return and you look like a genius because your whole portfolio looks good.

But you fast forward and you keep doing that another ten years as although small checks may not even add up to the bank. And that's um that's the flip reality that you realized. And by the way, I think that's a good analogy for the difference between public and private investing.

You have similar cash flow economics. We can have small returns of a big loss in public, and you can have small losses and then a big return in private. And the timing of when you present your data can make anyone look good if you catch a good hit at the right time or you don't have a bad hit at the wrong time. And then the frame over a long enough period of time, I think, really becomes the key measure. And that the reality is most people don't make IT long enough in their career to actually actually present true result in how they really do on the right.

And by the way, to the extent anybody's listening is able to invest in these private funds, I think Jason mention this uh, superficially. So let me just dig into IT because I think it's really, really thoughtful what he said, which you should understand if you have the option to invest in a private fund, you have to understand that private fund has two huge negative things, working against IT relative to investing in the S, M, P. Five hundred.

So you could put your money into a van guard, D, T, F, or if you could put your money into a private fund, you need to realize two things. Number one is IT is illiquid, not just for ten years, but I could be a liquid for twelve or fourteen or in you know um freeburg k sixteen years. So you need to get paid a premium for owning that.

And then the second is, depending on the business model, you may have very high failure rates, which means that you need to really hit these outside grand slammed home runs. And if you don't, then you're going to be worse often if you are invested in the S. M. P. Five hundred. So that deserves a premium.

And so Jason's right, which is the S M P, is between seven and eight percent over long periods of time, predictable compounding that you have to add another seven hundred and eight percent for this illiquidity premium and another seventy eight percent for the business model viability of, for example, being adventure. When you add those three things together, you do need to get paid basically in the low to mid chinese returns to be justified. Otherwise you are much Better off just one in the S. M. P. Five hundred, much, much.

much Better off sex, do you what do you look forward? You're l, and now that you have many large funds, what do you think L, P S. Are looking for now? And what do you advise them to stay focused on?

The number one metric that matters is D P I, which is the ratio of distributions to pay in capital. And it's basically money versus money out, right at the end of the day, that's all that matters is how much money did you put in the fun? How much money did you get out?

The issue is that to mostly these are tend to talk your funds and IT takes a long time to get distribution. So all the other metrics are basically regulations or approximations of what you think the fund is going going to do until you actually get to distribution. So I would say in the long term, it's all D P I.

In the short term, you look at t vpi. The total value to pay in capitals is basically what's the marked up value of all the positions in the portfolio versus how much cash has gone in. And then the big question is, does the TV TV P I turn into D P I. Does the total about .

you change that people, if chamar had invested in slack, but they're had to put an outcome, IT could be on the books for a billion dollar position so that TV pi is looking really great. But until that company goes public and the shares are distributed, you know the L P S. Haven't realized IT. So it's IT could be a final IT or I could go down significantly .

as we we seen with public markets. yeah. So in the last four months, we just returned our fund one uh in terms of like real distribution, I think we have like A D P I of like one point one, one point two on that fun. Now uh, the T V P I is like four to five. So but IT feels great to distribute entire fund out literally .

in my first two funds. I think we did that as well, and it's a really great feeling. Know sometimes selling ten percent or twenty percent of a position early and getting over that hurdle and just getting into the the one to two x, that's a pretty great feeling.

By the way, just to talk about how difficult that is to convert paper gains into real gains, let just say, Jason, in your example, you had a fun that have these huge paper gains but haven't distributed anything as coming into this year. Okay, here's a little interesting data about the ultimate buyer of all of these text talks, which is the aztec. right? People that buy stocks in the aztec.

Listen to this. As of yesterday, more than forty five percent of stocks on the nasdaq are now down fifty percent, so basically one in two, more than twenty two percent of stocks on the aztec are down seventy five percent, so almost one in four and more than a one in five, and then more than five percent of stocks. So one and twenty on the assets are down ninety percent.

So you can use this to actually get a blended average. But what IT means is that the ultimate buyers of tax talks are taking a sixty percent discount to what they had were able to buy even just four months ago, sixty percent. So there is no public mark that will support a private mark on line. It's also discounted by at least sixty percent. Now think about that when you talk about this entire panoply of companies that have been overfunded, many who are under executing and burning enormous amounts of money, who now have to come back out to the market as any sophisticated buyer will have to tell them the truth, which is, i'm sorry, guys, but the data says there is a sixty percent discount to this mark. Are you willing to accept IT or not othe wise the lights .

you're going to go off? Yeah and these Marks only happen at least in the private markets and venture funds when a transaction occurred. So if somebody raised a bunch of money, as we talked about a previous episodes at a billion dollars, you know um and there are now worth five hundred million, that's only gonna a work itself out uh in fun documents and reports for a year too later when the next transaction occurs.

So there is a lagging effect one day. I want to bring up before we go into um maybe GDP or the bill. Uh, wine situation is what we talked about on this problem last year about what was going to happen in private markets.

I've been seeing the last two or three weeks and I I don't know sex and freeburg what you're seeing in private markets, but really acutely people who are going out and skipping rounds this like i'm going, you know, just skip my seat round and just do a series. I don't have product market fit. I'm going to get credit for work that hasn't been done.

I'm going to raise ten million without product market fit. Oh my lord, has this a has the dialogue changed? I've been on many calls with founders who have met with fifty VS and the conversations are moving to you know how many months to break even and um you know how many customers you have and have the increase.

And let's talk about the turn. IT is getting a super pragmatic out there if you're a founder and we said this a year ago, but at its worth stating here, this is not the moment I will try to over optimize if you have a term sheet or money on the table, I would I would close IT, uh, just founder to founder. What do you think?

sex? Yeah, I think it's gone a lot of harder. I think birthrate. Ds, we actually have signed to growth charm sheet recently, and I was much harder for us to do growth rounds last year just because you had these huge megaphone come in at crazy valuations.

But now they're of looking their wounds and we're starting to see some really attractive growth opportunities. Everyone else backed off. So it's interesting.

Yeah that changed quickly.

yeah. Now one thing to your tortosa, raise a good point about you know private only your private valuations for the sticky, but private Marks are sticky. And you know companies only get remarked every couple of years. And so as the public markets get remarked every day, so IT is hard to know like what is the proper valuation of a company that raise money last year because, yes, valuation multiple have come way down, but then also they may have grown and their performance is Better.

So the analysis that I saw Jason lumpkin do in his lp news and we're basic repeating IT for our entire portfolio is to calculate what was the A R multiple that you pay, easy evaluation divided by A R. What was that entry multiple and what is IT today. And so we're doing that across our portfolio. So what you see is sorry.

sorry, sex L T M err, or you know A N T M I err.

which one last? Yeah, no, you just look at their current error.

which is N N take january, you times said by twelve. Yeah.

basically. Yes, you take the current .

t motifs by twelve, but they have to be annual commitments, right? So if it's not IT has to be annually occurring revenue. If they're not if it's not an annual commitment with an expectation as occurring, you can't count IT. So for example, you don't count professional services revenue in that in any event. So the point is you you basically calculate what was the multiple that you paid at, you know entry in the company and what is IT today as a functions of the current valuation.

And what we see is, yeah, there's a lot of companies that we're got into, I know, two years ago at evaluation multiple that you couldn't defend today sixty times, eight times, one hundred times, but the multiple today is more like ten or twenty times because is actually grown really fast. So you need to look at both sides of the equation, and that's analysis running for every company, our portfolio. And then you know L, P, S can decide how how to market.

I mean, the most important thing is what's the next investor if they need more capital, go on a market.

And well, the question is, are you growing faster than valuation multiple are falling?

correct. And then can you that means you could have a downward and neutral round or possibly an up round, but IT doesn't. So are you starting to see people or people discussing on the board level or in your firm? Hey, maybe we take A A sideways around a neutral round. We just go to last year's Price and top off another ten million. Are you seeing that?

I've so told some of the boards amount and just keep fundraising to keep around open and top off. There is money available because you know especially if you raised around eight months ago, six months ago, those Prices, like if people are still want to invest in those terms, that's a good deal.

And little had this conversation with the founder this week where they had raised that in a great valuation and they turned money away because they were like.

there was mistake show growing.

So yeah, why would we take the money now if our valuations going to be no double in nine months and now looks like, yeah, maybe you know that extra one to five million dollars would have been good to lock up. okay. So adding to these headwinds, I think we um we've been talking about the possibility of a recession for those uh new to the concept of version of you under the age of thirty and haven't really lived through one as an adult.

It's two quarters, the official definition, two quarters of negative growth of the GDP. Well IT turns out uh U S G D P fell one point four percent in one. Uh and uh q four we had a six point nine percent growth rate. Q one was the weaker since the spring of twenty twenty one .

covered head nick, you the clip word sex. And I, uh, basically said this may happen in january of this year.

So the concern is that you know what our losses were seeing. And I mean, every day this keeps, I keep seen more red, that this could turn into a recession. You know, popping of bubbles is usually followed by bia recessions or so. I think you, the fortune of the economy could turn really quickly here that that .

is the marginal rise. The marginal risk is actually for a recession. David is saying something really important.

The risk, in my opinion, is not of runaway inflation anymore. The fed is now in this really delay situation where china cut rates. Last week, we have an F O, M C meeting the open markets committee that sets rates on wednesday.

I think of this coming week. What is he supposed to do? The risk is to a recession. Because if we overcorrect yes, and the leading indicators all around the world tells that their economies are weak, then inflation may have actually been much more transitory than we thought. And right now, we have to decide, because if we overcorrect, we are going to plunge the united states economy into a recession.

There's a lot of day to here. Obviously, this is when this data is always in the review mirror. So obviously, we talking about kowa. IT takes a while to collect this data, and there's a lot of different factors going on at the same time, obviously, IT and obvious ly supply chains.

Consumer spending rose at a two point seven percent annual rin q on a slight acceleration from q 4。 IT was also in nine point two percent rise in business spending. So we have a lot of spending going on. Who knows if that is spending that actually occurred in the previous quarters? And because of supply chains like people's cars are being delivered, people's machines and manufacturing equipment, uh, is being delivered.

Now we had negative G D P in q 1n for a whole host of reasons that effectively be summarized by the fact that we are still trying to restart an economy at the tail end of academic。 And we're doing IT in fits and starts. And so we have these small bursts of incredible GDP, which we had last year, and then contractions in the economy, right?

The thing that's always been true about the united states is that we are a consumer driven economic engine, which means that as long as people feel confident and they're buying things, the economy tends to do well and we tend to move ford as a society when consumer confidence ABS and people contract their spending. We are in, uh, a world of heart. The last couple of years, we've had a lot of consumer savings, right? We ve had a lot of money that's been penned up in the system, whether its stimulus jacker, you know, loan forgiveness for all of this stuff has allowed people to feel much richer.

And as a resolve, they started to spend in drops and drops. The problem now is that because Prices are so high, all of those savings have largely been depleted. I just sent you guys A A taxing the group chat of what consumer spending looks like in consumer savings rather and IT tells a really, really scary story, which is that the savings boom is largely over.

Personal savings rate fell to six point two percent in march, the lowest since twenty thirteen. And so what does that mean while that means that the setup is there for um us to sort of really contract what we are able to spend as a society. So I think now the odds even push further in this direction that we could have more quarters of negative GDP.

And all of the sudden were back to what we talked about before, which is a twenty nineteen like scenario where the government or the fed, specifically racist, forward to tackle inflation. And in two thousand and nineteen, IT turned out to be a head fake. And by the way, in two and nineteen, the stock market ended up more than thirty percent, up thirty two percent or something like that crazy numbers here.

And by the way, back then in two thousand and eighteen, china turned over IT looked like IT was gonna, uh, a fast moving economic recovery for china. And instead they sort of slow down. We have the same thing here.

We have a quarter of negative G, D. P. We have china and lockdowns. We have every company that's that's in the manufacturing, supply and ecosystem telling the world. That we don't really know what this is gonna, like intel today actually said there's going to be shortages in ships through twenty twenty four. So I think I think if you could be A A very difficult path ahead for the fed, how do you raise rates four hundred basis points into into a slowing economy? You could raise basis point in seventy five me know seventy five bits, maybe a hundred BBS, but IT gives them very little freedom to Operate without really tanking the economy.

There's also another point to highlight here, which is um in some of this data that was released um there was a strong indication that there are real in issues right now with inventories. I I don't know if you guys have tried buy an appliance or a car lately um more piece of furniture but like .

I I tried in the q four to buy a car and I was absurd.

I mean, right now, there's like one year delays to get a frigid touch. I mean, like everything in the in the global supply chain somewhat related to the kind of big inflationary pressure that hit us at the end last year. And everyone plays daughters.

All the factories kind of had to produce a lot. They all could not keep up through to what's going on in china right now where there's lockdowns and factories are shut down. I have several businesses in the hardware space that are actively searching and frantically trying to find components, suppliers, specific parts, even basic raw materials like aluminum are very hard to get a hold of.

Um and so there's also a very chAllenging inventory supply chain problem. When that happens, I can actually wire money and looking for aluminum to show up. I can't wire and buy the, the, the microchips I want.

I can't wire money to my car dealership and buy money. So that doesn't get credit on the G, D, P. Counter because those sales didn't close that quarter as we saw an amazon recently.

And other is uh and apples just said that they're expecting, I think, close to a ten million dollars yet this quarter because of supply chain issues. A lot of folks want to spend the spending interest is there. The capital flows are there is just that the supply chain is cloud up.

And I was so dependent on getting atoms and molecules moved around and they're all kinds held up in different places that folks simply can't get their purchases in. And so the revenue trigger don't get hit. And so the customers don't look good from a growth perspective.

But IT doesn't necessarily mean that the demand isn't air. This is A A significant inventory problem and supply chain problem that's that's thriving. A lot of this uh um this university right now, the market .

seems interestingly.

And by that doesn't that doesn't mean sorry, that doesn't mean that we're not going to have a recession because you when i'm not able to money on apple, apple spending less on their suppliers and they are spending less on their suppliers. So there is A A trickling effect of capital flows and add the recessionary effect maybe had. But you know there is capital, there is demand, uh, for consumption. Uh, it's just that, that we're really .

clogged up right now. But the consumer confidence index has been on a bit of a role of coster. We were at one hundred and thirty before the pandemic for the year of the pandemic, we were down in the high eighty, eighty seven, eighty eight, eighty nine.

We rock IT back up. You know, in twenty twenty one people started to feel like, oh, we've got these vaccines. Things are going to go back to Normal.

Rock IT back up to hundred twenty eight, and it's been a slow take down a to where we're now one hundred and seven. And so I think consumers don't know what to think. They don't know if the inflation is transformed ory.

They don't know if gas is gonna seven dollars as a four dollar as they don't know if they should spend a big uh to spend on a big vacation or not. And so this I think in terms of people's planning, I don't know if people can plan how their own personal budgets, right. And I think that's on the confidence to treats point.

We need to have a predictable economy. You know you can't be this schizophrenic a to use a term sex. What what do you think about what we're seeing here in terms of we're obviously either in a recession or dip, you know dancing around IT, we're basically know on the edge of the Cliff right now, I think is probably .

the most accurate. I tweet in february, anyone noticed that we've just another a recession and I got dunk down by all the professional conomo sts .

and all these people.

But the right, and now it's like the data came out negative, one point five percent economic growth in q one. So what I wrote at the time was exactly right. And you know I don't know how the threat the fed thread this needle.

I mean, we've got a slowing economy with negative GDP growth. You've got inflation is still um it's not as I don't think it's to me as high as last year just because we're lapping a much bigger number from last year. So on a year over your basis, the comments are, are you you started a higher Price level but inflation still there. So you know I don't know what you do about that. Um it's it's a really tough situation.

And when you have this kind of wealth destruction in the stock market, I mean, you know and there was a good tweet that um to math you share if you put up on the screen I mean so much like wealth has been destroyed, you don't actually see if you just look at the cap indexes, but you look at all the engines of proof growth and prosperity, small caps, the recent IP s gross stocks. They're been absolutely hammer that really hasn't been this bad since the dom crash of two thousand and like and not just the like April period, but like all way in october where kept going. And then um the two thousand yeah two thousand eight real state crash. So already like top three worse situations for growth stocks in the last twenty years. And when you have that kind of like wealth destruction and eventually trickles down in the economy because people just feel, you know, company, we start cutting budget, people have lost money field, the spending goes down.

That dynamic that we're referring to in this tweet and that images called this version, which means you know, people baby may be confused when you hear why are all these stocks down so much but the the indexes are not down as much. And it's exactly for the reason that David is said, which is that um underneath the surface, the mega cap tax consume so much of the market cap of these indexes.

So the google, the microsoft, the apples and the tesla, those four just plug up an enormous percentage. I think it's approaching forty percent of these of these indexes. And so underneath the surface, you have dispersed sion, which means you have these tale of two kinds of stocks.

You have these four big mega caps, and then you have everybody else. And the mega caps are generating so much cash that they're just basically keeping the market of flat. So at this point, maybe there's a small silver lining. And that silver lining is that to be barri shed right now is effectively not being barri shed these growth stocks because, as we said, they've been just designated at this point to be barry shed the indexes means very specifically to be barry shed those four names and only those four names. And so that may actually mean that the market is effectively crashed already.

Yeah, by the way, i'm not nearly barish on gross stocks from here because like you said, they're ready to beat up so badly. The stock markets usually a leading indicator. What i'm what i'm A A barrier h about is just the state of the economy because the stark work is traded down IT trade down on expectations. So IT was already trading down months ahead of the slowdown in the real economy.

So the market new in december, the market new in november, market market was .

in around november, six of last.

They win.

Market knew when we talked about the sales that bases and must the you when we when we saw equities, we were saying like it's like you can't keep all of your money on the table all the time unless you have the declaration ware with all meaning, you're just not time bounded and you can just be there forever. And not everybody's in that position. An enduring .

could be in position, but individuals with no .

an indian is not because they have to create distributions of you, right?

I'm talking about the Megan downs where the four or harvard may not need to do this, but a smaller ones might actually be Operating morial cattery ing might be Operating their budget from IT.

Ah but just to go back to David point, like it's a really difficult spot like what is the fed supposed to do? So they're probable in a tighten and fifty basis points in may that's relatively well expected. Will be will be able to digest that reasonably well.

But what did they say to David's point? You know, if they all of sudden go on a crazy program of quantitative tightening, right? And what is that again?

That's when, you know, we were spent, they were spending, they were printing, you know, money, billions and billions of dollars going into the market, buying securities and giving people the money, right? That's called quantitative easing. Now we're doing the opposite, right where they're selling and they want the money back.

Now the problem is what that does is that removes liquidity from the market. And when you remove liquidity from a market, you actually make IT a little bit more fragile, a little bit more precarious, a little bit more Price sensitive. And so IT puts us in a very tough situation when the economy is slowing, when these guys may be raising rates and then at the same time, removing money from the system.

IT may be a lot for all of us to handle. And so I think that they're under a really difficult well. And if decisions .

there is a business cycle, there are always sessions period ly every seven, ten years. But they have really magnified this because you had the fed for years, maintain interest strates really too low and doing quantitative of easing during a boom. And then the federal government was printing trillions and trillions of dollars, and they didn't stop.

IT was one thing to do IT during that sort of covered recession. But then last year they printed that last two trillion, and that's what set off this wave of inflation. So, you know, when I was like in school learning about economics, and they will tell us that all these government programs and actions are like automatic stabilizers, or what I have you like, the government helps baLance out the business cycle. No, the government like magnify is the business cycle. They've made this so much worse.

Well, they are putting their hand on the steering war, right? Like let the economy drive, let the free market do this. And if you start you, you might oversee her into .

the federal government is greater setting incentives, right, and creating like tax created programs and incentence for private enterprise to invest money. But when they act as a direct market participant and start that, you direct capital flows and make decisions about how the capital market should work IT never ends well because this is not what the good well.

I think there's also another I mean, just to counter that there there's also the other issue of not just incentives, but when they create uh, A A free capital, that then allows a market to find a way to take advantage of that free capital. And that's effectively what we've seen happen with medicare, medicare as well as with the student long program. And um you know I I don't I don't know forget to get to the student long program today.

But I think you know to your point of one of the things that happened with the cost of education in this country is that the federal program, which was, uh, you know and I I took a bunch of no tear to talk about this today, but the federal government began guarantee student loans in one thousand nine hundred sixty five, was called the federal family education long program. And that program may capital available for students to borrow to spend on universities or or uh whatever education they want to go, go get A H of their own choice. And the idea being that, that will give them the ability to go make more income and and extend their careers and and educate the workforce.

And the problem is that when that capital was made available, a lot of private university started to emerge and private for profit loges started to emerge. And in the years since that, that program was introduced, I just want to give you guys in crazy statistics. So in the nine hundred and sixty nine and seventy era, the cost for a public four year college was twelve thousand a year.

That's room board tuition and fees. And in twenty twenty, that cost roads to twenty one thousand dollars. And here's the the uh the the other crazy step for private four year college in one thousand hundred and seventy twenty five hundred year, twenty one thousand and twenty twenty twenty six thousand dollars year.

And so that capital basically allow these four profit um organizations of these organizations are trying to grow their in dominance, which are effectively like four profits to charge any Price they wanted. And the consumer the student would be able to get free capital to fund that quote unquote education because IT was available to them for free from the federal government as though the federal government created a bubble in education cost. And that bubble in education cost has now overburdened fifteen percent of american adults with student loans that many of which would they would never be able to pay back.

And now were in this really awkward situation of saying, hey, maybe we should forgive those loans because it's unfair that people are burden by this and um and doing so obviously doesn't solve the fundamental problem, which is that making those loans available on the first place create an inflationary bubble effect in the end asset, in the end asset, in this cases education. But we have seen the same thing with housing and we've seen the same thing with pharmacy, tics, drugs and medical care and other services. So any place where the federal government steps in and says I will provide a backstop, I will provide free capital to support and create quote, incentive for this market to accelerate. You end up with these inflationary bubble.

You to have people game the system right? You get whatever university of hoenig types, you even the large uh universities raising uh tuition to observe things. And people take these loans to mah before the frontal lobes are even fully developed and they have long term, uh, understanding of the ramifications of this. So where do you stand?

This is so there's a there's an interesting article in the atlantic about who really wins when you forgive student loan. That and I and I just pulled out some facts, so i'm just onna, look down here and read them just so I get them right, IT said in the article, thirteen percent of the U. S.

Population Carries federal student loan. det. Grad students account for thirty seven percent of that federal student loan dollars. Currently is one point six trillion of totals. Total student debt veris about tendring of mortgage debt.

So the average debt has gone from about twenty five k in two thousand and twelve to thirty seven k and twenty twenty two. So you know, almost the fifty percent increase in a decade, the majority of student debt is held by White borrowers. Only twenty three percent of black americans age twenty four or greater have a college degree in twenty nineteen.

So the majority of the black population would not be directly benefit by student loan forgiveness. In twenty twenty, the median weekly earnings for someone without a high school diploma was six hundred and fifty dollars for those with some college, but no degree, that number was eight hundred and seventy seven dollars. For those with the batches degree, IT was one thousand, three hundred and five dollars. And that number continues to grow for masters and professional degrees in and P H, D. Interesting in the last two points, the gala uh organization who who ran a hole is unable quote to report the percentage of americans who have mentioned student debt or student debt cancellation because IT hasn't garnered enough mentions to do so and twenty twenty two, according to the article across four gala pols quote, just one respondent mention student debt has the most important problem facing the nation on quo and then lasting is here at forty three percent of the twenty twenty bite electorate graduated from a four year college or university versus thirty six percent of democrats in twenty twelve. So, you know, one of the takeaway is that this may be an issue that affects a certain percentage of the dms who went to college, but IT may not represent a plurality of all democrats and IT doesn't rote to represent a majority of val.

To your point I think yeah .

I look this is I I think that there are two motivations uh political motivations for doing this. Now they are they're pretty obvious um and then I just want to say three things on on kind of a concern about this and why I feel very strongly that if we don't fix the underlying system, you cannot forgive student loans. You have to fix the system before forgiving student fix IT first.

What's the number one fix?

Well, so let me just say the two motivations. The two motivations, number one, this is a stimulus. So this morning, the by administration said that they were thinking about taking executive action to make the first ten thousand dollars of student loans forgiven.

So if you do the math across forty three million people, that's a roughly half trillion dollar forgiveness. What happens that half trillion dollars, much like we saw last year, becomes a stimulus payment. IT is money that people now have that they didn't have before.

IT is capital the day or freedom from debt that they didn't have before. And I will stimulate the economy. So there is a very um um important economic incentives here to do this, which is if we do IT, IT will be stimulating to the economy and um people will spend more and the economy will grow.

by the way, that is a two and a half percent boost to GDP, right?

So half a trillion dollars of free money just flushes under the system. The second thing is that I will help in the mid d terms of their point of you, right? So they have obviously done the point. They've done the polling here, right? And and it's like when I was in during your high, the kid that ran for class president was like i'm going to make everything in eventing machine free.

Guess what that kick got again? So you know the idea that you're just going to give everyone free, give you your loans back to you for free, everyone is like, my gosh h this is the best thing ever I was with warn your genius you know burning Sanders, your genius job ite and your genius let's say yes um and so they believe through polling that this is gonna um help them in the mid terms um but the chAllenges, if we don't solve the problem, if there is no standard of value of an education, if there's no standard around whether not a specific accredited university increases your income and earning potential in individual or increases the opportunity for you as an individual, you are wasting money. You are giving federal dollars to private companies who are profit tearing from that.

And the individuals are not going to benefit from IT. And I think that, that we're seeing this sorry and and we're seeing the structurally continue in a lot of other places where the federal government doesn't hold itself accountable to the standards of how their stimulus is meant to benefit the individuals that, that is being funded for. The individuals are not getting a good education.

In many cases, they're not learning more by getting this education to month data speaks to the average, but a large percentage of people go to crappy universities that don't improve their earnings potential. And then the federal government says, here's this free money that private university just made a bunch of money and no one's Better off and guess you end up paying for. Taxpayers are going end up paying that private company bunch of money because we're going to forgive all the loans.

And so we have to have a standard around whether or not a dollar should be loan to pay for education of a specific university by having met university. Prove that IT improves the potential. And by the way, if you stop the federal student loan program today, fewer people would go to college.

And if fewer people went to college, guess what would happen? Colleges would drop their tuition, the reason they are able to raise and supplying demand and the reason they are able to raise their two issues because there's so much demand because there's free money. And so if we actually saw the federal loan program cut back or put these standards in place because of situiation would actually decline and profiteering would decline. People will get a Better education and the taxpayers that would be Better off.

End of diatribe. Sorry no no I I think is completely legitimate sex. We talked on a previous episode about how people make things like immigration. Um you know such a charge physical hc debate when there are a point bed systems being used in canada, australia, in other places that make IT much biological.

Do you think that the solution here is to free burks point of just and i'm interpreting free burks point as what is the value of this degree? Nursing great nurses can take out a hundred percent of the allows because we know there's a nursing shortage. Uh, you know philosophy graduate student maybe can take out more than five thousand dollars in that because we don't. See a butch job openings for that getting a history .

degree prop university a lot different than getting .

a nursing degree. So what's the solution here? Uh and then will give you your um you're uh swing at bad in terms of buying votes yeah .

with the solution .

first before we .

go partition. Look, I think that alone only makes sense when IT generates are while right, IT makes you're going to generate more income on the other side of that loan to make that loan worthwhile. And the problem here in too many cases is these kids go to these schools.

They spent five years there. They get a degree in some woke nonsense. Of course, IT doesn't help their earnings power. I mean, that's that's a formal issue or is that these degrees are worthless, right? I mean, if you if you go to if you're go to college to get you know to become a doctor or maybe a computer program or something where the skills have value, then of course you can pay back alone because you get up a gainful job.

But you know otherwise, if you just major in fine arts at harvard or something like that, I mean, you basically graduate. You get a job at what the new york times is your dream. You can pay back your alone. You're subtle with this enormous debt. And think about the cultural impact that has. You have this Young generation who believes in socialism, and I think there's is a big part of the reason why is they have no capital and they have no ability to accumulate capital because they are so tight with debt.

So to interpret where you set sex living capitalism, if you got no capital right.

if you start, if you start the race at negative two hundred fifty thousand dollars in debt to get a degree that was basically worthless for you.

yes.

the system is, I think maybe what we do is we reform the debt I actually okay with, for giving the dead in some instances, if you got a reform of the system. In other words, if we stop funding these worthless degrees, but if you're basically going to acknowledge that, hey, we need that forgiveness because these degrees are worthless, why would you keep funding those degrees? So we to have a like a more honest, comprehensive solution here.

The other thing we should do actually is one really crazy part of bankers cy law is that student debt is one of the only types of debt that's not dischargeable in bankrupcy. And if you guys know that, right? Yes, if you ever get to the point where you have too much dead and you can never pay a back, you declare bankrupcy, and then the court starts to over from zero, so you can at least start building some wealth.

right? You lose.

quit and exactly, no one's gona want to give you credit for that, but at least you're not so deep in the whole you can never recover. So that's the point of of a personal bankrupcy. But the crazy thing is that in bankrupcy, you can knock at your college debt.

Your student debt cancelled. You can get your credit card dad cancelled. You get other types of that cancel.

You can get your student loans cancel. It's crazy. So that's one thing they should fix immediately, is make these death destroy with private market sex.

You would need to do that right? The reason that the cases of its federal dollars that are funding those loans, but if IT was private market dollars, people actually, if bank and and lenders took a loss when people couldn't pay back the loans, then the market would work itself out. The problem is that the federal government stepping in and try to be a market maker and IT rates .

totally crazy. And IT is double on. The one thing like you said IT. IT basically means that because government's money e's funny everything, the tuition goes up because college is take adventure of IT. But then also nobody. He's really making a smart R Y decision about whether a smart underwriting decision about whether this loan is worth making, whether IT actually stands a reason shot of being paid back.

There is such an easy free market solution here. It's called the an I S A stand for income sharing agreement. This is where you give alone to somebody and you get a percentage of their income are over a period of time kept at a certain multiple, say two x ah and what this does is IT alliance, the person giving the loan with the job that's expected to come from the education .

you really that usually have that it's called taxes.

Yeah but here's the problem. No boy's watching the store. So nobody y's looking at IT saying .

I will give an isa at this percentage return we to if .

the federal government tries to do this IT really is just about buying votes going into a metric election. And here's why if you arbitrary give a bail out of one sliver of the population, unless that sliver is really, really large, which we know that is not, it's going to really anger everybody else.

Think of all the people that are trades people, working class people who don't have a college degree, what are they think? What about all the people that just finished paying off their debt? What are they going to think it's going to upset so many people? And ultimately, what this is, is a bunch of coastal elites who are miscast in jobs and settled with death, is pushing for a program that isn't abroad based mechanism to create a quality at all.

It's just to get out of gel free card for a small people, a small group of people who unfortunate were taking advantage of. And this is the thing that we're not losing side. We're losing side up.

You can only pay back alone if you're making more money than you. Oh and the fact that this exists shows that these loans were really poorly constructed and they were given in instances where they should not have been in the private markets. We've seen that happened, but we go through a cleansing mechanism, took sort IT out, right?

We've gone. That's literally what happened during the two thousand and a realest bubble. People gave more ages to people who .

could not exactly. Hey, I is a lender, think that you're not going to be able to pay back alone. I don't give you the loan. That's the simple mechanism that exists in free markets.

And part of the issue is a lot of people got loans thinking without doing the calculation, will I ever be able to pay this back? And they took alone to get an education. The other other finally concept that I will just make money. But let me ask one other question of you guys. At what age, at at what level do you think individuals should take responsibility for the decisions that they are making when they take on personal debt? Because we see ourselves getting in the cycle where consumers are given debt, they don't think about the consequences of that debt down the road or do the analysis themselves and maybe they're not a quit to and they'll take out alone on a car, on a house on.

But the problem is on.

on, on education.

But here's a thing like the education is a very dangerous thing because we put so much societal credit and external signaling to IT, and we gave everyone effectively the same quantum of risk. But that's not true for a credit card, nor is the true for a car loan. So the private markets are efficient in that when you first try to get a credit card, sure, you don't get an M X century on a platter.

You're given a chase self fire card with a five hundred dollar limit, and you earn the right to borrow more. Same if you applied for a car alone, the same with a mortgage is based on a downy's. So there is differential risk pricing. And if you don't have differential risk pricing, you're getting a lot of people.

how would you eat? education?

The market would figure IT out the market would because you .

would differently Price the risk as as you. So right now, what are grades? What course did you? What's whatever skills we're not going to get IT right? The market will get IT right, but the market would figure out the problem is and and and sorry, the incentive was and this is a really important point.

Know if you guys read read alios book, which we talked about a number of times. He's identified and highlighted that a growing economy and a successful um uh country improved by improving education and having more people get higher education, generally speaking. And so the initial instance of the initial intention behind the federal student learn program was a good one which was to give people access to capital that the private markets were not providing at the time, so that they could go out and get a higher education.

We could improve the education of our workforce and we could grow our economy. Nowadays, the question that we always forget, member, we always get one step away and the two steps away. In five steps away, we miss the point.

We're in that moment. Now, where the question really is, is the federal student long program doing more harm than good? We, we are, we are.

We actually creating value from our higher education system in this country or not. And most importantly, is the private market there. Because you look at the total dead outstanding one point seven trillion dollars, there would be a private .

date market free, don't sell beyond close the answers. We have a massive employment gap. okay? The data tells you in every single which way possible that we are not educating our Young people to take the jobs that are needed for a high growth, functionally moving economy. We know that.

So we are just educating these folks and then we are giving them access to enormous amounts of death that they have no reasonable chance to payback. And I think that that should be fixed by fixing the incentives of the universities. You are right, universities today are four profit asset management businesses wrapped by this philanthropy. C do good or nonsense that they try to tell people to get you to go there and pay fifty thousand dollars year in tuition is a joke.

And they come out in people to think that these degrees are actually going to make them successful humans.

They come out this educated and uneducated and incapable of in the economy's needs separately. The other thing, if you take a step back and take student loan off the table for second, to say any consumer handout that touches less than, you know, forty or fifty percent of the economy or of the population of a country is very precarious. So students, is that in this case, fifteen percent of the U.

S. Population, a lot of people, but that also means that there's eighty five percent who don't benefit. What will those eighty five percent of the people say when they have to fit the bill for the first fifteen percent? And then what do you think happens with other kinds of debt? What happens when the oil lobby says, forgive our debt because we're a national energy crisis? what? What will all the climate of accountants? Well, IT creates a slight slope.

And and and my last point on this is to the extent that that we actually want to forgive student that i'm fine if that's a love of land, that's great. IT should go to the floor and is used to be debated in congress. And it's a law that should be passed, but IT should not be by executive edict trying to back in to buying .

votes in a mitter .

election politic. I think this potentially hurt them because to me, to your point, this is basically a bailout of the work professional class is the it's the unemployed graduates of these universities who again remembers the professional class. They measured in things that didn't increase the earnings potential.

Meanwhile, the majority of the country is working class, something like two thirds of the country is still working classroom, non college educated, and they have to pay pay for this bail out in one way or another, either through you higher taxes or more death spending or more debt. The burden of this bailouts gona fall on them. And why should they have to pay to bail like somebody .

working in retail is paying for somebody y's graduate school degree in creative writing or something is completely, profoundly unfair to the answer to freeburg question. We actually know when executive function fully matures in adults, it's twenty five years old, and that's when you can actually make a long term thinking.

So there is an argument that people .

should not be allowed to take these loans, uh, that are not even, uh, that you can get out of or there should be some cap on the amount of loans you can take because people at the age of seven, eighty and thousand and twenty are absolutely not able to make this decision.

There are other programs as well. So in canada, I went to a school called the university of waterloo and and tasted engineering. The reason I went there, I did electrical engineering there, is that they had a program well after the first year.

So the first year looks like every other year at every other school. okay. But you're therefore, you know two semesters from september to me.

But after that, you start working and you alternate four months of work with four months of school and you get paid for that work. And what that allowed me to do was graduate with meaningfully less debt. But IT also allowed me to graduate with a commercial skills set, and I was able to get a job.

And in that moment, actually, I was working at a bank, and I got profoundly lucky, which is I I work for an individual, and I was trading interest free, driving aves. And I was learning to trade technology, talks on the side. And, uh, this guy, mike Fisher, incredible human being, and I made in one year, like twenty five or thirty thousand dollars for this.

He wrote me a check and he said, here you have twenty five thousand dollars a student that go paid off right now. I'll let you cash out this whole book. I graduated with about twenty eight thousand of duck.

I had about eight thousand.

I think I um somewhere between ten and fifteen thousand, ten and twenty thousand, and then I got my first bonus check after my first uh year of work after undergrad and I paid off all my dead and I felt incredible when I paid off my dad. I've never been in dead sense. I walk .

downstairs to the bank and I pay. I gave them the chat and I endorsed and I said, is my student loan number and I was like, oh my god, I was free for though .

it's like IT was an enormous sense of relief .

for me if I didn't .

go to waterloo, I went, have had double the dead because I wouldn't have had work. But then also, like I think about all these scenarios, I wouldn't had two years of work experience. I may not have gotten the job that I did a bank of montreal all of the time that may not have been able to give me a chance to meet mike Fisher.

All these things could have happened. So you can't rely on the luck of the butterfly effect so that you have a reasonable shot of building a good life. Yeah, right? So there are all these things in universities that I think are really mismanage today, and they go and work against what is right in society.

So i'll give you another example. The the dean of the engineering school, the president of university water, was here this week with me, and I asked them, tell me about these global rankings and they said, you know, it's just a really difficult game. They said, if we wanted to compete, try to get high on the list, we would have to do the things that would undo all the things that made us great and unique in the first place.

And I was like, you know what, I am such a huge supporter of this school. Please just continue to do what you're doing. And i'm so proud that they have the strength to just stand on their own two feet.

But every other school is running this shell game of, you know, Jerry mander oring all of these statistics, trying to get high on the list to trick some parent, to force their kid to go to some school to the graduate with two hundred thousand dollars of that to get a job. But that doesn't think, give give them any liner side to pay off IT is, I don't think it's your kids is fault, but you have to reform the system. And I think the first thing you need to do is look inside these universities and hold these folks accountable.

I mean this incentive systems are just crazy um speaking about crazy uh we talked about billings um and .

is that's your creation your creation sorry.

they can all be as elegant and smooth jack out.

He's looking at the agenda for today and he sees bill home and he's like, okay.

how do I do this?

How do I go? Yeah OK crazy, crazy. The linkage is crazy OK go.

no, no, no, no, no, no, no. Hold on the liner is, uh, trillions and billions. yeah.

And speaking a trillions and billions, trillion dollar mistakes. We got lying in a CFO arrested on wednesday charge with recovery ring wired for IT and conspiracy. We talked about this when that happened.

H his uh firm argos archive. S his poorly named firm uh and family office. We covered this in real time back on epsom twenty eight h they famous ly lost twenty lion dollars over two days when they were margin called.

Back in march of twenty twenty one, he worked a tiger management. Iota and IT was at the time reported that they were trading billions of dollars at over five x leverage cording to the S. C.

C. complaint. At its peak, the firm was managing thirty six billion with one hundred and sixty billion of exposure, which is four point five times leverage.

But are chagos. So what? A harvard could not started with only one point five billion in assets in march of twenty twenty.

So wang flipped one point five billion in capital into one hundred sixty billion of exposure, twelve months, essentially trading summer in the ivor of one hundred to one outs peak, according to this complaint. Um a bunch of banks have lost money because they were supporting this credit. Sweets lost five point five billion. Morgan stanly lost a billion, ubs seven hundred seventy four million. The new york times described IT as, quote, orchestrating a stock manipulation scheme that relied on the masking and concealing the enormous risk they had taken to have you had some thoughts on this?

I think so first, I think we should probably explain how he did this, right? So that's .

everybodys question is how did the banks let this happen so well.

I think first, it's once the mechanism. So you know there are ways in capital markets to take really extreme bets. This way is called what's called, uh, total return sort.

And so the basic way that this works is you have two people on on each side of the trade. And what you basically say is let's agree on what's called the reference asset. So i'll just use an example.

Let's just say it's uh, I think discovery was one of the companies that they were trading. So discovery communications, let's look at let's that's the reference asset. That's stock.

And what i'm going to do is by protection and what you're going to do is um cell protection. And essentially what happens is as the stock goes up and down, you're going na net the difference between these two people. And when you do at that way via addi ative.

So what is what IT forces the person to do? The bank in this case is to go out and buy the stock OK show that they are hedged in case the Price goes up a lot because they have to pay that difference, in this case to, uh, bill huang. And if the Price goes down, bill huang has to pay that difference back to the bank. So what happened is that he went to three different banks, Morgan stanly, golbin, sacks and credit swiss.

And effectively what he did was he bought he, he made these bats across a handful of names, but he did IT with so much leverage that he ended up bonne sixty or seventy percent of some of these companies and in more of last year, when the stock market turned over um he owed them enormous amounts of money so much so that these banks had to unwind these trades which caused further downdraft in the stock and almost spilled over to the broader stock market. Jason said. The numbers from the S.

C, C. Complaint are pretty crazy. As of march thirty first of twenty twenty, they had one point six billion invested on a gross exposure of ten point two billion, which that what that means is they were able to go and lever up this one point six billion to behave in the market as if they had ten point two billion by january first of twenty twenty one.

So nine months later, they had seven point seven billion dollars of invested capital. So they're done really well, right? Y'd made seventy percent on this ten billion, but they never died up again.

And so they had growth exposure of fifty four billion dollars. And then just, uh, I think three months later, by march twenty second, they have thirty six billion dollars of investor capital, meaning they have thirty six billion dollars of cash. This guy had taken one point six and spended up to thirty six billion in the .

the sky was like .

twenty in a year. But then he, uh level that up again. And he had one hundred and sixty billion dollars of growth exposure. And then the market turned, and he told all this money. And so all these folks had to get out of IT.

but alleged that he was trying to do short ezy on the socks to try make them even more. There was a massive manipulation because of its position.

size, cork. So this is what happen. But then here's how IT is allowed to happen. So if you try to do the same thing in interest rates, in the interest rates market versus the equity market is not possible.

why? If I wanted to go and buy a credit default swap effectively, think of that is the same kind of thing he did. But on the dead of a company, on the debt of discovery, what I would do is I would be able to enter into that trade with a bank, but IT goes into a clearing house.

And that clearing house is able to tell all the banks how much risk is building up in the system. And the reason we implemented this clearing house was to make sure, coming out of the great financial crisis, none of that chaos ever happened again. But we did not include the equity markets in that clearing house and in the laws that regulated.

And so what this is, is a very shadow, great part of the of the market that is poorly regulated, that has very little oversight. So what do the banks do? The bank say to you, if you want to put this thing on, give me a baLance.

So I understand what the risk is, a piece of paper or report. And I think what what they're alleging is that these guys lied so that any individual bank, in this case, golden Morgan and credit, had no idea because they kind of doctor these reports to each other. And that's why, that's why all this risk built up in the system IT, would be solved if you had a clearing house for equity drivin. Tis the same way you have registrator.

IT is crazy to think that somebody was doing this and thought they would get away with IT and had been up twenty eight at the psychology of these people that made off of the world. I just find fascinating. Why wouldn't he if point that way?

We talked about how the three, the four of us, we talked about how the four of us are grinding to return two weeks .

of our money in ten years.

seven x or ten x two, you know, one point six billion dollars. And IT was not enough.

It's not enough. I mean, people have I me. What do you think the psychology of this is like.

I know I do.

And that's what i'm trying to feel at sax. What's the psychology of somebody who tries him do this? They're already a billionaire. We've already got their jet, they could go anywhere, they could have anything, they could buy any home, they can go on any vacation. What that saying I never understand about these people, is like, this is gotto be some crazy social palsy behavior.

Chick out. Did you always want to get.

by the way, that got I just got a business select on southeast when .

you started your career. What do you .

want the next? And as I .

tell you, you want to a house right? Then you got the house and you wanted the home and tell then you or the home, you know, the vacation, and then and then you want them to do. And then, I mean, I don't know why. Why is this confusing.

although, but I don't wanted enough to put my entire freedom at risk or the cheap.

I early, this dude was a Christian, i'll put in quotes because .

ran bible study .

and stuff in the mornings. He lived in some modest thousand injuries. Ba ba ba, but you know, he was a bit of a freak.

Dick, what is me? So what I mean, the guy, could you? By the way, the dude was pinched in two thousand inside trading, or and had to pay a settlement and back. Everybody's got penchant crazy.

And is what that is when you grow in the street.

You, that is .

what happened to this guy. I got pinched .

when you grow up .

in the streets. The guy, a cheese.

didn't rait on his.

on his friends. The CF got pinch to they. They flip them. This is super danged. Speaking of strange. Transitions where we going, where we going know someone need to do.

someone needs to take all of jack health transitions from and them together. Crazy being .

of rage. On wednesday, the department of homework security.

speaking of billions.

announced a disinformation governance board. Disinformation governance board, according to the announce with the board, will immediately, immediately began focusing on misinformation aimed at migrants at the U. S.

Mexican board. To the board will be LED by disinformation expert nina jank utz jack kutz. He has researched russian misinformation tactics and online harassment. This is also the woman who sings show tunes on tiktok. Take the information.

be running. You should be running information, but you always have such a strong opinion, have such a nose. For what? If it's not.

here's what's going on here. So first of all, this woman claims be at disinformation less evaluate that claim. He was an active pusher of the steel doc a, which IT turns out is this information for what people are now diet ment.

He also was active in trying to sensor the hundred by and laptop story, which, as IT now turns out, was not this information. IT was absolutely true, as acknowledge by the new or times the washroom post. You would think that these blemishes on her record might disqualify her from being an experience of information, but actually interview that people are hiring her.

These are actually qualifications because they are not interested in the truth there IT. The reason the department is set up at what they mean by this information is they have hired her to push partisan political points. That's what's going on here.

That's what this information is now IT used to be, that if you disagree with somebody, you to say, listen, I disagree with you, or maybe you an idiot, whatever, you're wrong. But now the way that these debates are set up in the way they work is they don't just say you're wrong or that's not true. They try to label, use information so you can get you sensor. And the point of hiring this disadventure tions are is is basically to sensor the basis, shut down the debate that is basic. The whole point .

of the there's any timing here with you on, of .

course, it's what there was a great eat about. I mean.

I love conspiracy sex.

by the way, one of this is conspiracy theory. There was a great tweet about this that that we live in a future where it's like a master of George orwell in iran because here you have, you know, elan must the heroic loan on for the door trying to rescue freedom speech. At the same time, you have this orwellian istory of truth being created by the federal government.

So mean, no awareness of naming.

Yeah that. But think about IT. This information .

governance war is such a .

destoyer name. The thing about IT that's a little bit scary here. I know you play the video of hurting ing show tunes seems sort of silly, but the thing that scary is that this is under the homeland security department.

That all is there.

It's the most militarized department in our government. So it's really scary to put the ministry under the department that .

has all the service .

is not the name of IT, but it's .

pretty dar close. Now when I wiis IT there, i'll tell you why, because this was built up to.

there was A T shout. Well.

a couple of month ago, as a new story that we might have covered on the spot where the homeless security department redefined disinformation to comprise, they said IT represented an escalation of the terror threat level. So other words, a basis said that this map was turned out to terrorist. Remember that didn't we talk about that? This is the payoff to that.

First they define, they basic define the other side as being disaffection of the debate, as being disinformation. Then they define distribution as as spicy terrorism. Then they have the holland uh. Security department, which is smoothly, responsibly terrorism, creative ministry of truth, this is what's going on here.

really weird. Just remind everyone, there was concerned in the last election I am going to play a dbs find myself doing here that, uh, just just to try to explain the world. That's the reason I often play this role because I trying to understand the world but um you know there was a real concern that you know the russian government was using uh you know information warfare and propagate through social media to influence voting and um and the bed is considered a security threat to the integrity of our elections therefore this is a homeland security issue.

And there is a question mark, of course, that everyone has on how how far they going to go once you set this president, when would they ever stop in terms of coron code, policing information and policing what's true, and managing internal propaganda, internal media delivered to us by the government. That's the other side of the coin. But the primary side of the coin, the initial side, the initial representation that I think folks do have concerns around is how do we keep foreign actors from creating misinformation campaigns that go viral and influence elections and sex? I don't know if you think that that's a concern we shouted shouldn't have, but how would you address IT if you were the president? And that was the chAllenge. Not like how do we stop that from happening?

Foreign actors interfering our elections is certainly a concern we should have if what was actually happening on a big scale or in a meaningful way. I mean, ally, look, this a okay john dorm is basically out. They're making ditech right now, proving the extent of this oak IT started with the whole steel dc, which was a piece of campaign opposition research that was manufactured by hilary clinton campaign.

The lawyers who basically produced IT are under entitlement, and that's where this whole thing of rest of this formation came from. And the only proof for that thesis is that supposedly the russians bought one hundred thousand dollars of facebook ads on facebook. So i'm not denying that, that occurred. But IT was relatively minor as a drop in the bucket of all the activity going on around.

To be clear, to be clear, that was just the ads that were bought with with like critical cards I said like F S B on IT .

who but you probably know didn't .

count all the number of credit cards that were stolen. And i'm pretty sure the russians are capable of stealing john Smith credit cards and using .

that to buy as as well. Well, I you see those as they were later quest. They are going to commence anybody of anything.

I mean, they had, like jesus and the devil armrests each other. And the jesus figure was basically said, no, IT was a subsurface mean. The jesus figure was saying.

going to be clear, that happened and you've now step back your position on like IT just wasn't that scale to your opinion?

I think I think look that the scale interference in the election was committed by big tech. I mean, they answered the honor biden story, two easter for the election IT. Turns out that's a completely true story.

That hour, biden has extensive business dealings in ukraine, the country we are now, yes, but we are now deeply involved in a war there. And that story, the electorate had the right to take that into account. Big text, thanks for that story. So, well, he was the reason for that.

I couldn't I respond to that just just to give people like making a very difficult sion. You have to remember trump s to put in on stage to hack Hillary emails, and they did. Then he asked the ukraine um to take action against the vidends or he wouldn't give them a support.

He was impeached for that. So if you put yourself in the and i'm not saying twitter made the right decision here, but there and there was also sexual material, you know, people's news, which PC material and nudes are against the terms of service. So I think two things happened concurrently.

One, listen to people working at twitter, or ninety eight percent liberal. They don't want trump. They sort as an identity threat. And then two, they don't want a link to hacked .

material or really hold on a second. Hold on in the whole nadian. Try to finish point. The .

third point, o is in addition to all that, the body is a grater go. Okay.

agree with you on that one. yes. So look, during the whole canadian trucker thing, remember when all the people who contributed to those canadian truckers, they got dogs? I mean, basically there is a hacker who leaked all the people who have donated and social networks were happy to print all that information.

So this idea that they sent or have information is nonsense. The lives of tiktok account just got dogs by ta little rends. Look, whether you think that was a good idea or not.

The point is these principles are invoked very selectively when there's a story they want to suppress. And the new york in the washing post have both not come out and said that the laptop was real, it's been authenticate, the story was real. And this whole idea that I was this formation that was just invented, I mean, I was just invented, well.

no hat IT. Wasn't that this severity that I was potentially hacker? And you and trump, here's a thing, trump set the stage for that. And the the the people at twitter and facebook who also made these decisions, they were informed by three later agencies to primary justice and an FBI. Hey, this is potentially hat material design to interfere with the election.

New ja n. Jack events and other democratic party Operatives just made up at a whole cloth that the hundred biden story was. This information IT was true, is being acknowledged is true. The washington post is true.

The time is true. So you ve.

it's about improving IT look well.

not I eating fear. My sense I think this is where social media can improve, which is if they had to explain every one of these decisions they make in fall in transparency. I think that's something elon could bring to this party, which is if you're gonna block something, we need to know why and you'd never explain why and who made the decision.

And I think that that transparency would benefit situations like this. If the J, U, fd, I told them this is hack material, then they got to go to the D, O, J and said, you got to give us cover here. If this is in fact, hack material, you told us not to print IT, we're not going to present. But I was just bizarre that one publication got doing .

like the new york post. IT didn't. T in america, america. And IT doesn't matter not not for twitter in a publication that had a true in the account and people like nina jank, it's whatever. Our new zar of the ministry of truth, SHE was out in the forefront, basically calling this story deformation. Meanwhile, she's pushing in the steel those day.

which really confirmed with band have one I don't .

know I don't know the insert to that, but the point is that this should have been suppressed that that was election in your ference now. Elon came out this week and specifically treated that that that .

was basic mistake.

the jack s and the the same thing that they should have done.

that I think everybody agree to bad call in hintin.

of course, but in hintin, right? But what was the reaction to what you want said? He was accused by virtue of criticising the policy decision that twitter made that that was targeted harassment of the legal council at twitter, who made the decision, who gets paid seventy million dollars a year to make those decisions. You see this debate, this happened last year, this this last week. So the point is that if you criticize somebody who's on a certain side of the debate that harassment, but he'd even mentioned her by name, this absurd, this this this is one.

Can I make a prediction?

Yes, question is great. Um I think people .

misunderstand .

elands incident. Tis were buying twitter. So and I haven't talked to well, this i'm just came making a complete um subjective prediction.

I think he's going to buy twitter. I think he's going to clean that up. I think he's probably going to generate something like a two acts on this.

You know we talked about how yeah you know that's like a good terminal valuation in six or seven years that basically you know puts that asset worth around one hundred billion dollars. In the meantime, he's onna open source as much as possible. I think he's gonna IT very difficult for misinformation and this information to get very far.

He said. He's gone to authentic cate, every human being that uses the platform. He said all of these things publicly already.

And then here's the master stroke again. This is just me speculating. I think he's gonna donate IT into a foundation in a trust. And I think it'll be an incredibly powerful competitive alternative to all these other four profit businesses because everything you guys are talking about is the incentives that get perverted when you have to layer economics.

Inside the new york post, inside the washington post, inside the new york times, the wall street journal, everything eventually devolves the clip paid to hearsay to doxy. So whatever can get you more revenue. But if you can take that off the table and run these things as a public trust, you can actually win back a bunch of confidence.

And a lot of these h cases go away. Now you would say, why would anybody do that? Well, I think the real answers because and if if we were to donate into a foundation, he could get a hundred billion dollar credit that he could use, you know, to offset the gains when a space acts were starlin go public. Interesting, very interesting there. There you go.

Well, I agree with everything of the Donna part because he's raising .

twenty seven billion from private part, and he'll pay people are a very fair living wage and it'll attract people that want to seek out the truth that wanna work in an a political environment. He's already said that ten percent of the extremes, you know, are are both equally crazy. He's going to force this thing to be rational and predictable.

I think that goes .

public again. And IT goes to five times a value.

We gonna able to ask these questions.

And sure.

So let me ask you a question. What would you do? Because a lot of people have point that out in response to what is obviously become a very polarizing set of discussions this week around what should be censored, what should be banned, what you into central islands like bullies and hate speech, kind of proliferate. Other people have said we need to release, you know, the restrictions.

And like people say what they want to say, freedom of speech has no bounds and set a what do you guys think about the um the argument that there there does need to be constraints and boundaries set around things related to health and safety, meaning if someone is making calls to violent action, should that the sensor sacks and how do you make that interpretation because IT becomes a fuzz grey interpretation. And then separately, like when there are scientific papers that say one thing and someone says that's not true and says something else, how do you kind of decide whether not that should be, uh, allowed or sensor on the platform? Because I think those are two very key issues that .

we've got to take them separately. Let's do violence first, sex. That this plenty of precedent in law, you just explain the violence.

Look around because this was the whole truth argument.

right? IT was like he was insisting violence was the argument that was being made. But like generally speaking, is that appropriate form of sensor on this private platform? And if so, how do you set that standard?

Let's not hear with you hear this argument a lot, which is that if elon brings free speech back to twitter, then we're going all of this horrible content on there. You're going to violence. You're are going to have racism, going to have harassment in all all these bad things.

On fraud, the truth, the matter is that it's really a straw man argument because what is basically arguing is that free speech means anything goes but free speech does not mean anything goes. There's we have two hundred and thirty years a stream core case law basically um discussing this question of what speech protected and what's not and there are the stream court has ruled that there is nine major categories of speech that are not protected by the first moment. why? Because that speech is concerned to be dangerous in one degree or another.

So for example, you can commit fraud like you, the article, sky, whatever, and then say, well, that speech was protected by the first member. First moment doesn't protect fraud first. Ma doesn't protect incitement to commit violence or a crime.

You know, IT doesn't protect fighting words. So you could ban, you know, all ethnic or racial slur on these social networks under the concept fighting words. So I think if you actually look at some court, yeah well, what I would do is I is that is making up the content moderation policies.

As I went along. I would look at the peak at the cases where people have been wrestling with these decisions for decades. And I would create a context moderation policy inspired red by first memc case law, where I would take these nine categories of a sort of dangerous speech or harmful speech, and I would Operation alive. So for example, you get to fame. People right know ah the first moment doesn't protect you against claims of deformation.

Would you make people go to court though, in order them to down? right?

This is where the word Operationalize ed really comes in. It's not practical for a social network to require a court level burden of proof to prove defamation. So what I would do is I would say that if you are a person who claims be defamed, you can file a report on twitter and provide the tweet and provide, you know, some explanation.

And as long as IT looks like a colleran al claim of deformation, meaning the person is attacking you in a way that seems out of bouncing, to say that could be taken down, you don't have to subject IT to a jury trial or something like that. So what I would do is I won't you can literally impose for some memc case law, but I would use IT as the basis for defining a connote AA people. Can I just say something?

I think of the best things about being your friend is sometimes you say stuff that is so powerfully smart and uh, because it's so simple, basically what sax said for everybody else, because this is how I he's like the P, R, D. For content. Moderation has existed. It's called the constitution. This is that nobody in any of these companies has taken an effort to actually try to write code that maps to this P, R D, where the P R T is the constitution, whose rights have been established for hundreds of years by pd.

You be product requirement document. Yes, yeah, yes. What a product manager would do use. Yeah, yeah, exactly.

So that making this up all as they go along, I would look to the categories of speech. The team court is really right. right? A P R D. right?

P, R D, I just do the health. one. Sax, so there's a scientific paper that says this drug doesn't care covered. And then someone goes on twitter and says, take this drug appears cove IT what's the what's your and I know you're not obviously of uh uh constitutional lawyer at this point, your career. But how would you kind of think about um about that and and how how do you think that would ultimately resolve uh, in this uh regulatory framework?

That's a deb that exist. I am I know that debate .

so if someone says declarative vely on twitter, this drug will kill covered which by the way the I just by the way you know the F D A actually regulate tes claims like that on boxes and material and in a commercial setting. And if you're making money off twitter, you're getting a lot of followers and then you make more money .

by putting out a tweet that said .

you're you're not making money off the drug. Yes, look.

person selling the product .

should never say that, right? Someone went on twitter and they said, take this drug is there using .

facts and authority. Twitter is riddled with people that have zero authority that spit out what they think of facts, right? So I I think I think what you're speaking to is something very different, which is if you're going to design a social network, i've been part of helping to design one.

So let me just give you my two cents on this topic. There are layers of of of decision making that need to go into an algorithm to get to a sense of rank. okay.

Rank means. Do we believe with some reasonable probability distribution in some probability distribution that this thing is worth showing to somebody else? And the way that you get there is through multiple layers. So there's obviously a layer where you can get signal relative to the authenticity of the person and individual making. The claim is IT a bot.

Is that a real person? Then there is a separate layer, which is how, you know, roughly accurate, do we think this? Then there is another layer, which is, is this person believable in making all of those statements? And my point is there are different subsystems you build for those things.

He is already said all these algorithms are going to be open source. And what you're talking about, his authority, you should allow people to say stupid things. It's not illegal.

right? Yes, a person can be on a street quarter or saying, jesus is the sun of god and he will save ourselves. Sex doesn't have to believe him.

And somebody can say that on twitter. The issue here is, does IT trend. And do you show to people the algorithm? If you fix those problems, then who cares if a person .

says he later has an authority problem and a ranking problem? And the authority problem comes from the fact that there's all kinds of long tail non human individuals. In the system.

So solve for identity and this problem can get easier solved and solve for trending.

And if you guys were running twitter, you would not put on these code. Nineteen warnings. This is misinformation and rely soly on cdc guidance and recommendations. And after April, when IT comes to treatments and vaccine and risks. And so I let .

anyone .

say .

what are .

they anted? And I wouldn't label IT right or wrong. I'd say either mecon is a drug. Here's the week of on here's the wikipedia page on iver mec.

Let's say there's a lot of confusion about I V mecon, which there was you could just put any time, any besides the word I mecon. Here's a sentence of what I V mecon is. Here's the wikipedia page, the C, D, C page, the U. K. Government's page d, for more information about this topic.

So I just wanted nice morning. Yeah I just wanted to learn more, jack, I want to disagree with what you're proposing OK, because IT is the topic.

The jr IT was the one off that then trigger the ability for everyone to buy for kate on their point of view on what should I shouldn't be done, as opposed to having a universal standard that is univerSally applied that doesn't speak specifically to just the COVID nineteen pandemic or just I meet in or just what truck said or didn't say, but each one of these things can and should be univerSally standardized and then univerSally communicated and then treated with universal um standards across everyone and every topic rather than have each of these break out where you ve got someone to twitter scratching their heads saying this seems to be an important topic. Let's come in and Anita, let's create a classification for this and that's where everyone get rid of. In my opinion. I think if there was a university of standard, there was university without give another .

example of topic, example.

example.

First of all, nobody contradicted the C, D, C. More than the C. C itself.

IT constantly, IT constantly put out revisions of its own opinions. First is said that covet was not spread human to human. That IT obviously said that I was IT basically was against mass. And IT was for them. And on and on on IT went, okay, the that you cannot criticize your government or an agency of the government is absurd, but that is the type person trip that was being levels in these social networks, is that that basically they are preventing OSS from criticizing the so called experts. That is precisely the kind of censorship that should not exist on these networks that .

president debate. I talked about IT.

The problem with making the problem labelling is once again is done selectively. And the people at twitter based decide, they think, is right in a debate, and they basically want to act as a referee to raise the hand of one of the participants the debate, raise your hand over their head and declare them the Victor. Now is a lot Better to label than is a sensor of the other size point of view. But still, IT is a form of the labeling I described.

where in which happens on our pockets on spotify, where says, here's the covent information center, you know, for more information and they give a range of so if it's executed in that way, do you oppose IT if there is like a very confusing public interest going on.

if you worked at to algorithms, ally post related stories or something like that, that was done a completely fair and speech neutral way. And IT was this as a feature of twitter? fine. But if you have employees at twitter sitting around discussing issues and deciding who the winner is in very debates, and then putting their fact their a thun on the scale to tilt the debate towards those people, that's not what they should be doing now, you know, and that is basic, what they are doing with censorship.

If you let's go back to this topic of misinformation because this is really the courts of the debate, okay, once again, on the basis of first memc call, you could remove offensive material on twitter on the basis IT is fighting words, it's a slurp. It's harassment, incitement to violence, you could. It's fraud, okay, in authentic that the the account is not who they proposed to be.

You remove all the boss so all that consent can get removed. So what is really left then, IT, is basically this idea of misinformation, this idea that we are going to clare, one party, the Victor in this debate. And I think that is what is so offensive about this mystery truth, that the home and security setting up was so offensive about the sorry that twitter has been practicing, which is they are trying to end the debate. They are trying to say, look, this is a person with the on the side of truth and that is not what they should be doing. It's up to the marketplace to decide what the truth is.

Alright.

there have a fox. Do you disagree with that? I I agree with you to your point.

David. Um I do think in a situation where the public good and there is confusion, in a situation sending people to more information isn't a bad idea. I do think a lot of this ah there were thumbs on the scales and IT wasn't transparent what was happening. I think if you air transparency.

So I think every time there's an action that taken, I should say agent number and what their agent number is took this action on this tweet for this reason, and then data scientists can look at all the actions that occur and then say, look, we're looking at this agent number and here's their managers agent number and here's why they took down this post. You know that at least you could have a starting point to figure out what's going on. We don't even have enough information to know what what dumps are on what scales, if at all, or or to what extent.

And I would like to see transparently first, so we could have a more informed decision and then sending people to trusted information sources, a group of them isn't a bad idea. What trusted? yeah.

I mean, so to your point, do you don't need to look to a podcast, a social network or the government to find truth in the world? You have to have a process yourself. That's part of what this pocket is. It's for people .

to the being far of being an adult.

Yes, you have to come up with your own process of coming to the truth. You could trust some people trust the government agencies. Some people trust a joo gan or a post or this.

Some people trust a folk singer, trust yourself. That's the number one thing. You have to learn how to do as an adult in life taking all this information and make a reasonable decision to take our remittance or cannot take our mcintyre's, a perfect example.

People said, there's no downside to IT. People have been taking the drug forever. It's cheap.

And then another group, people said, while you're taking horse medicine is like, no, that's something completely different. And the whole conversation became, I felt very easy to pass you about. Do your research, do your own research, right? Talk to your doctor.

do your own research, but you can do your own research if you're not permitted to see everything.

And um and you think about like with think about how many drugs over the last thirty, forty years have become the basis for product liability lawsuits because that undertake the side effects or consequences and they revise the use of those drugs or drugs were taken off the market if people weren't allowed to question those things because supposedly the experts had ruled on the issue and ended the debate. How would we've gotten a correction on that? How we have gotten to the truth. So just because the experts say something .

doesn't mean that is there's process. We have kids getting tons of kids taking all kinds of S R. Rise and entire depression and all kinds of drugs.

Parents have to make difficult decisions, adults to make difficult sions. Do they do this? They not.

And by the way, there's no we don't know. We're doing large scale experimentations on the population in real time with drugs. That is a decision you have to do the process cons for .

the medical establishment. The medical establishment, at one point time, thought that was a good idea to ebola ize people like they were doing. That is like a medical procedure, so these people can be wrong. You know, this idea that we've arrived at the end .

of history and we .

know the truth. Here's all, no new fast or no .

new knowledge is being a is red wine good for you or bad for you? Because every three or four fucked in years coffee and red wine, or good for you or bad for you.

depending on the year. Well, I saw I saw a latitude no study that just came out that said, there are no collor c benefits of international sting. Now there's a lot of people that would be up in arms with that.

What are you supposed to do if if you know, maybe there's some value to organ health, maybe there's some value to managing your classroom c index? But again, the point is there are study upon study. There's work going on all the time. All these things are in an area of grey. And so if all of a sudden you jump down one persons throat and basically become very judges because you think that the total bounded body of knowledge is already been created, you or are making an enormous mistake.

I M Steve jobs thought he could cure some cancer. I mean, intelligent people are free to make bad decisions with one of the most intelligent, talented people in the world who by all accounts might have survived longer if he had driven to this very specific .

method of juicing. Um you know there's there's a certain sliver of folks. There's a really incredible documentary action and netflix, if you want to understand IT of people that went down this path of juicing the, uh, trying to eliminate .

their micro .

nutritive. Irony is that the people who you are, I think some of the stupidest people like that woman singing show tunes, they were like these. The people who are making these determinations over what is true and what is false and what is label's information and what we get to discuss.

it's bias. It's little, little little bias.

You have to make your own decisions in these cases. And you know like it's great to have smart friends to have a dialogue with, and it's a beautiful dialogue.

Is the beautiful thing about being in amErica and working so hard to get to this country is the independence and the freedom to be your own self. I mean, why is that such a bad thing? And why would anybody want to give that up to nameless, faceless blob in organization?

What I and they and they respond to get back from .

people is i'm not abducting my ability to think for myself to this render woman singing show tunes.

And then people say like, oh, well, the response I got when I said and trust yourself is like, what what about all these grows? We are listening to joe rogan and they're making decisions on their health, according to joe roan. I I like it's called personal responsibility. I'm not responsible .

for jog's listers person told that mo dosing and thinking I .

was a solution to you from the child od roma .

they had when they didn't win there you know, soccer, metal and body. Harvard, so they have in a big yeah nobody knows no, we we, we all know so little actually. We know you live, you die the end, and we're all just trying to do our best. And so why don't we all just try to have a reasonably decent time and be nice each other?

All right, everybody, it's been an amazing episode. We will see you in miami, which will be absolutely fun and thrilling, sold out our first all in time and last because I don't know .

what the fuck going to do this work.

I.

Your winter.

We open sort of things .

and got crazy.

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