E97: SPAC updates, public/private market overview, Putin's end game & more
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I'm in a very Daniel plainview mood this week. The there will be, have a competition in me.

I don't want to see other people succeed.

That's right.

That seen over you are the furthest from that character like that is not your spirit animal.

There will be blood. That guy Daniel day is .

nothing to do with you. Ho, you must .

be so store. And roy, oh my god. I mean, like.

did you not see my roofed at the success burton exit?

Not see. I lived in IT was the most off color. Disgusting, a greg's mean diatribe i've ever heard. My lord, I have a .

competition in me.

Don't like to see others succeed. I can't stand that. Jake out is a good moderate.

man.

We open sources to .

the fans and.

I guess everybody wants to know her. Mah, you've wound down two spaces. Thank you for doing this for ipl. S, specifically, because people are replying to me every day asking, what are you going to back? But I, P, O, D, N, F, the money has been returned to investors.

Know if it's going going to be returned, going to be .

returned to investors. Thank you. And bill ackman. H, of course, he wound down his back. Returning four billion is over five hundreds backs out there looking for deals. Tell us why this decision I I .

raised ten back, six, six in technology and form biotechnology. And i've done six deals, two in tech and two and .

biotech.

Uh, sorry for ren tech, for ren tech. Thank you in two and biotech. So the the the reason to shut IT down is pretty strait forward. It's like, you know when we launched these things, the stock market was in a much different place than IT is today. And so over the last two years at looking at deals, um it's gotten harder and harder to find a good risk of reward.

Now why is that? Well, the the thing with this back is you do a deal today, but IT doesn't usually close for six or seven months in the future. And so you have to do a deal where you have a really good sense that in six or seven months, when the deal is comes to close, that the Price will be the same or even higher than what IT is today.

And if IT isn't, all of the investors that you've brought along in this back have a right to redeem, which is to say they file a notice that says you can complete the deal, but I want my money back. And what they get back is the initial ten dollars that they used to buy the stock in the first place because when we so when we started at this back, we we sold stock at ten dollars. And so for my perspective, I was looking at this, and i'm like, you know, this is a super volant ugly point in the market this last year has been really problematic.

I, I, I and I kind of said this last november, and we can we can play the clip after and we can come back to IT. But basically, my decision was that at this point, to do a deal would probably know put a lot of capital at risk and in all of these deals on typically investing a hundred million dollars, at least in each of them. And so I couldn't justify that.

I couldn't see a good risk reward. And I thought the right thing to do, the responsible thing to do, was just the why me things down, you know, i'll lose that, you know, ten, fifty, twenty million books for having accept these things up. But we gave everybody their money back at ten dollars.

And I think that's actually Better over the next five or six months. Then what did all of the wise do if you are invested in the market? Now that's a belief that I have, but hopefully people get the ten dollars back in the next few weeks if they want, they can go and put that money back in the market and hopefully, we'll do well. But know from my perspective, the risk reward was not good .

is part of the issue. The inventory that's available of great companies as well. That's one of things I heard speculated on C, M, B, C. It's hard to convince a private company to go up.

Here's my experience. You know, I when I was talking to all of these C, S, of these civilian valley companies, initially, there was a lot of misunderstanding about what backs were. And I think we were able to dispell that because we had some really successful transactions.

Then there is a lot of interest in being a part of IT. In this phase, we were suffering from two very important things. One was that valuations were just completely up in here.

People had a huge question mark on late stage valuations. We would come in, we would do the work and we would say the company's worth x. And that number typically was fifty or sixty percent lower than their last private valuation. And so when I came time for us to negotiate, you know, doing the deal, even if the founder was roughly on board, the rest of the board was not because a lot of them would have seen some pretty meaningful markdowns in their private assets. And when the company had enough money to kind of like, you know, at least stay private for another year or so without having to raise money unbaLance ed, those investors felt there was more prudent and for them to not take the mark and to not take the deal had such a lower discount. So that was a big issue that we ran into because every time we would Price a deal, again, we're trying to create a margin of safety for us in our investors again because it's going to take six and nine months to close a deal.

And so ideally.

you and then sorry, the second thing was just volatility. So when you see volatility in the public markets, you know for a CEO and I and I can understand this, it's much easier to go public in a point where the markets are generally going in one direction because IT gives them the confidence to be able to learn the rose because this is a complicated process being public.

Um and when you introduce tremendous market based volatility independent of your company, I think a lot of C E O and c fs and I R people were a little nerves. You I take the risk and that was that was the second piece. But by in a way, the first one was valuation.

We could not find market clearing Prices make sense for assets. And by the way and and i'll talk about one company specific, which just this week had a pretty public blow up around this whole issue. And look, I been pretty clear about this since november, the marginal trade should have been to be trimmed risk.

And maybe you play the clip because I really want to make sure that it's it's very clear and on the record, what I said, almost an entire europe, let me put crypto in the context of the markets and where we are today. At the end of the week after you know q the earnings in november of of twenty twenty one, we have the stock market is absolute all time highs ripping. We have crypto at absolute all time highs working.

We have the art markets. I don't know if you guys saw phillips and Christies. And so the basis last week at absolute all time hires saw another people for twenty five million.

We have inflation at a thirty year high. We have ten year break evens at at twenty five year high. We have you know one point, some are trillion dollars that we just approved last weekend. We're still hor strating on another three in one point, eight trillion dollars of stimulus that we're going to put in.

And I think the the most important thing, which is the two most important founders of our generation, the two smartest people who have really consistently won elon musk jack bases, have collectively sold more than eleven billion dollars of their holdings this year alone. And if you can't take all of that and decide for yourself what's right for you and your family, you're doing yourself at the service. I think it's important for me and never sort of like you know, be forced to tell folks whether i'm buying or selling, although i'm willing to do IT in moments where I think it's important, but I think it's really important to understand the context.

And so I think like these folks that I think derisively about individuals who are managing risk, I think it's really naive and I think it's IT creates a lot of missed opportunity for them as well. If the smartest people in the world are now selling their core holdings that they told you they would never sell and you are not reconsidering your position on things, you're either much smarter than them or you're being really, really reckless. The reason I I said all of those things was because I was getting really worried about where we were um and then and then I think on the heels of that, I published um a tweet and I and I said i'm starting to sell you know when I sold like a hundred million dollars of sofa, but then I was a systematic seller um through the end of last year and and through this year to try to manage my own liquidity because IT changed profoundness as I saw what was happening in the markets.

So you know I think that is just an important thing to call out that um things don't always go up and uh you have to pay attention to a mosaic of information and you have to do the work yourself because you know your situation is unique to you. Nobody else understands IT, so you can help source that decision to somebody else. Obviously, you can use IT as a guide.

You know, it's fair to say, you know, when the thirteen fs of important hetch ones come out, do I read them, of course, because i'm trying to figure out, you know what don't I know what may I be missing? Maybe there's a great company in there that I that I should be taking a look at. So you know i'm not to similar to everybody else and I use other people that I look up to our respect as a leading indicator of what to buy.

But I still take responsibility for my own decisions and I manage my liquidity as best as I can based on my conditions. And those are always changing. And so I think this is just a good reminder that everybody else has to do the same such a math.

What do you think happens to the remaining five hundred? Every school sponsor friend of mine that I know is not seeking targets anymore. They're all expecting to wind up and return capital.

How many of the five hundred you think will actually find the target? And how many do you think of, of remaining spaces? How many of um wind up and return capital?

I mean, I I think that there is still some really good deals to do. They're not necessarily in tech per same. So you know I think you did a really great deal.

And I tech, I think that that's that's really interesting. So time i'll tell how that does. I think there is some really interesting deals and energy. In fact, we spent a lot of time actually pivoting and spending time and energy looking at you know everything from you know uh, producers of net gas and oil to you know folks that were building terminals to L N G. Facilities and the but it's just a very different return profile than what we were used to.

So I think if you can understand some of these other markets and you can underwrite to a different rate of return, some decent deals will have done. The overwhelmed majority of the text bags, I think, probably will just wind up. Some folks will be really focused on trying to.

Uh, you know monetize their founder, promote so they'll do any kind of deal. The problem as you see, is even whether you do a good deal or bad deal with the kind of volatility we're seeing in the market, the likelihood is that is gonna de down pretty significant anty. So I think most will not find the home.

I think some will find some really interesting targets in areas like energy, I think are really interesting agriculture, like what you did freeburg, I think is really interesting deal. And then you know what? It'll be an opportunity for us to retool this back.

I don't think it's gona go away. I think that IT is a useful tool and a tool box of many tools. So there's ipos, there's direct listings, there's backs, there's obviously private fundraising, there's convertible their structure deals.

So IT is a tool and I think when used properly, you can be really helpful. You know, for the companies that we work with, uh, IT would have been impossible for them to raise the quantum of capital that they did, primary capital from sophistic ted hetch funds and mutual funds. You know, we raised billions and billions of dollars for companies like so far in open door.

And I think that that's onna go a long way for them to achieve their goals. So I think it's gonna a good tool, but we're going to go through a wash out of most of these folks. We're not going to be able to successfully targets sex.

We look at private companies, especially the late stage ones. You and I involved in a number of them. They're doing rifts.

We've got headwinds and their valuations are underwater in many cases. How are they thinking about the public market? Windows Sparks directly things or just a traditional IPO?

I don't know that they are thinking about IT. Just think I think like going public seems like a fantasy at this point. I think the whole public markets eggs that ideas frozen for two years, two years. Yeah, I can surprise what you are thinking.

What are these late age companies that raised my ground doing to work out valuation issues? Because as trim off just pointed out with backs, one of the problems was clearing market. The lake stage investors who came in maybe you know don't want to accept the haircut evaluation in .

the house productive. I mean, what they're doing is, is using their warchest to grow into their valuations, which is the smart strategy. And if they're really smart, they will be slushing their burn while they do that.

But yet it's not a different we've talked about before. I think that the main significance of this past week is that you had the fed meeting IT raised another thirty five basis points. There is no surprise that, that was predicted.

What was new was the forecast. They are now saying that they expect to raise another one and a half percent just two months ago at the last, meaning they were saying seventy five at this meeting in plus fifty after that. Now there's saying one fifty after this.

So you know in just two months, they've they are now revised their forecasts for an extra hundred basis points of rate increases. why? Because inflation worse than they thought.

So things are worse than we thought two months ago that the last inflation print didn't get Better as fast as people wanted. We talk about that last week. Now the fed is revising its forecasts.

Trajectory is bad and getting worse. And you finally had power how to throw in the town on his returning around soft landing. I mean, first I was, well, we can race rates and we won't have a recession.

Then IT was, we might have like a mild recession. Now he's basically saying hard landing if you if you read these F, M, C comments. So I think this was a really bad week, uh, for the economy and you're singing in the markets this week. I mean, we are retracing almost within five percent of the june laws with the gross stocks being the ones that are harder state.

By the way, speaking of gross stocks, have you guys been following this trials and tribulations with by juice, which is like uh, one of the largest valued private companies, but it's a private indian attack company essentially I think like you know, there was this delayed audit and delayed couldn't certify a bunch of things and then finally they were able to come up with the report that essentially showed instead like breaking even or making money.

They lost um almost six hundred million dollars this year and that a lot of the revenue that they were booking were actually loans two millions of uh indian families who have basically zero probability of paying the back. So a lot of the revenue was not real as well. And this is like a whose who of investors.

It's everybody from scola, tiger, U B, S, black rock, uh, chance, ochberg. It's incredible. I think when the tide goes out.

we find out, right? And this is what's happening. The tides out and you're going to find all the weakness in the system. It's all going to get flushed.

I this is a bit of an outlier, obviously. Like I I don't think that you know all these companies that are were tens of billions of dollars are running so close to the sun. But IT just goes to show you that you know how to how does how how does this happen? Like, uh, how do you not get a date this on the sea uh stage uh.

in series a, we would ask for a data room. The person would say you're the only investor asking for IT and you're putting in you know ten percent of around these other people are not even asking for. Is that okay? Can we still see the data room? And turned out there wasn't one.

People were just making bets. They were making blind bets. They were bedding without even looking at the cards. Are thinking about the other people's cards.

This goes back to what freedoms ook was saying before. You know, I think I think there's there's A A sliver of the retail invest base that is not declared to a sliver of the private equity and hedge fund and venture capital space, which is these folks are not willing to do the work. I think most people are, and most people wanted come to their own conclusions, but some people wanted to take the easy moment of driven decision, and they typically always get punished over time.

There is a concept of adverse selection, which is that the negative actors will find them, will seek them out and IT will be a match. And so you'll ultimately get adversely selected into the deals that blows them up.

So the bad deals what you're saying is the bad deals would find the bad investors who don't do the work and then they spiral and crash together. That's a really brilliant observation.

Yeah yeah. I think I think the other I think the other thing is like you you have the situation where if IT wasn't sad, it's focus outsourcing their diligence of the person that did around before only, you know, oh, silver lake did IT okay there. These guys are very open istis ted investors.

I don't need to do the work. And I turned out you did because, you know, it's IT. IT was a very. Cavalier way of recognizing revenue.

You there was a specific playbook here, too, that I don't know if you saw this acts in the early stage where people would get their friends to invest in the company or some you know high network individuals. And then you look at the deal and the valuation didn't make sense. And then you say, well, we would always ask how much money as each person put again.

And we like, well, they're Normal bet size in the city is seven or one point five million, but they are putting fifty came to this or one hundred k what's going on here? And I was, oh, their friends with them. They worked in a previous company together.

They were in the same. They went to the same college. And so people were using social proof, but manipulating IT to get some other soccer at the table to pay full Price and not do diligence. Really strange behavior.

I I was in singapore this week. There was um I I had a great meeting with this Young investor. Really dynamic guy was telling me about a company indonesia that he didn't invest in, but he turned out that that is, founder was literally running two parallel sets of accounting systems.

And so he was, you know, showing a business and fundraising from this set. But the the real books were over here, and I looked a completely different system, and that was basically like a pony skin. And you know, he was killing me, that it's I impossible to root these things out.

So what he said he relies on is like you have to have a network when you're doing these frontier country deals where, you know, he says, I need to find at least ten people that know this person so that there is sort of like a moral, social proof and moral diligence that happens because that person will never try to commit something that grees in the face of all of their friends. And so you know that a mechanism are filling this stuff out, but I thought that was a really interesting way of of designing a diligence process um in at least in a frontier market here. I don't think you have that much time to do this really.

You fast pay deals and the social proof matters last because you theoretically um you know are looking for signals of traction. But there has to be a Better systematic way of getting this diligence done because these things should be pretty obvious. Sax well before first, well before the .

multitude billion doll company last year when people are moving really fast, saying they don't have time for how did you approach diligence during those peak periods? And did you have those experiences where people were trying to push you to close without talking to customers? Are looking at bank statements?

Yo, we won't play the game because we always run fast matrix, always a starting point for us. But now most asked companies, they have such matrix. But I mean, they so standardized that I would be such a red flag if they didn't. Yes, I think he would might be companies that are you know have unusual business models or maybe they would say something like that. No, we can never do asset investors without SaaS matrix.

right? Well, this a good segway because right now us. Venture capitals are sitting on two hundred and ninety billion dollars in dry powders we had talked about this last year how much dry powder was there.

The market is obviously collapsed. Um but here's a chart um from our friends over a pitch book. It's just extraordinary how much has built up and how much has been raised.

USB c funds raised one hundred and twenty one billion dollars during the first half of this year, twenty twenty two. So lps, uh, still have an appetite, which kind make sense that investing into the downmarket for private companies mean you're going to get Better deals. Uh, and you have a ten year horizon.

U svc raised one hundred thirty nine billion in all of twenty twenty one. So if you put those two numbers together, yeah, you're looking at two hundred and sixty billion dollars in the last eighteen months. And this is all record numbers being put up on the board. What is a safe for private .

company insects? I dispute analysis .

a little bit. I think there's a couple of things going on that need retain consideration. First of all, new funds don't get IT announced till after the process completes and then you know may even be some time after that when the VC form feels like they want to make the announcement.

You can announced a fund till the process completely over. You get subject additional S C C rule. So you know these funds might be announced in twenty twenty two, but they may have actually been raised in twenty twenty one. So that, I think is a really important point. Moreover, a lot of the funds may ready deploy capital before the crash.

So there was that I remarkable story that we talk about months ago in tech lunch on how the latest tiger fund, which wasn't the announced to martial April of twenty twenty two, but I already been two thirds deployed by the time they even announced IT. And so that was pretty stunning. So I I think that we don't really have a great sense of um how much of this so called dry powders already been deployed, how much of IT was really raised before the crash.

IT is true that lp relationships with VC firms have done well, are sticky and good. L, P, S, stick with their partners during a downturn. So look, I mean, the VC worlds uncle on a business string thing like that.

But I would tend to think that this is an overly optimistic, overly rosy scenario. We do VC have new funds that they are going to be ready to employ. And great companies, yes.

But does this mean it's gonna easy? No, I think that the bar has gone up, valuations have gone down. Founder, looking at this tweet storm, I would not get load into a false in of security.

Yeah, I agree with .

just to explain that this probably a six months lag on when these funds are announced. The reason is there is five or six b and c designations most people raise under five of which means you cannot even say that your fundraising, therefore, pitch book can never have that data. So there's a leg and people are deploying at a very high velocity. Therefore, crisp number could be off thirty five people.

People were deploying at a pace where they thought you had to go back for a new fund every year, which is what I was looking like in twenty, twenty, twenty one. You know if that six month three or might be you've to play half the fund.

So um but look if if you just go back to a two and half or three year paced appointment and before in twenty twenty one, we're at a one year pace of deployment ment divide the availability of capital by two third. I mean the only one third is much be deploy given year is reduction. So um I think founders should be aware that the markets going to be a lot tighter.

And I think given what we're seeing in the public markets this week, IT doesn't look to me like I think you any Better. IT looks to me like we're had IT for i've been I called a double debt recession, I think a couple of months ago. That's exactly what it's looking like.

In fact, the fed basis that as much the fed said, there would be just marginally positive next quarter, so would bounce back to slightly positive growth on a real basis. But then you expect IT to go negative again and know recession once all these interest strates kick in. And by the way, I mean, could do such a math for basically calling that, you know when the fed st couple months ago was saying that so called neutral would be three to three and half percent, mother was saying, no, it's going to four and a half five percent plus. Now the fed just in two months of revised to saying that neutral is four point six percent of something like that and and they don't think it's going to be any rate reductions in twenty twenty three. So this is not looking good.

How much truth of the issue here is we don't the data that we're seeing, the ground truth were seeing, as you would often say, ah might be very different than like the reports that are coming out. People are talking about inflation from, you know sixty days ago, job reports that are thirty days old, sixty. We don't really have live data IT. Seems like our government doesn't use live data when they make these decisions.

Is that they unfortunate they unfortunately don't have access to IT really know they are they have empirical sampling um but to say that you know the the U S. Economy is automated in away where they consider phanish dashboard and you know see in real time what the true on the ground IT is is is not really accurate.

Unfortunately, maybe there's a manhattan project type you know effort to do that at some point for the united states, but it's not now um i'll give you uh, a bit of bad news and a bit of good news and this is just me kind of you know again looking at the musae can and kind of judging where we are today. The bad news is I think that it's gonna be a really tough sticky time for the U. S.

Consumer probably over the next eighteen months. And so I tend to think that you know, through the course of this year and through twenty, twenty three and possibly even a little bit of twenty four, it's gonna a grind. Unemployment will go back up, inflation will be sticky, real earnings will shrink, consumption will abb, and earnings will not be that great.

But the silver lining is I think that we are starting a bottom ing process for the equity markets. And I think that by the end of this year or the early part of next year, most of that will be done. And the reason is that you know, the equity markets, I think, do a reasonable job of one looking at the bond market and then two looking sixty nine months into the future and pricing in that future today. And so by the end of this year, begin of next year, I think that we will have kind of bottom and will start to build a base. The thing to remind us though is that, no, I just say a stock goes down to twenty fifty percent, even if IT ralles fifty .

percent from there is still twenty percent understand.

And so I think you know um tell people that you know I think that David is right. I think that is going to um we're gna feel this for a while. Um it's this inflation, as i've said for a long time, is going to be sticking and persistent. I think you're gna see fed funds at or breaching five percent. And but I think that in terms of in a risk, assets will bottom out by the end of this year, beginning of next year.

For about what you thought you think when the process of boarding mountain, it's going to be a year of this kind of slog through the muck?

And what signs are you are looking .

forward that maybe we're getting out of IT returning a corner?

I mean, Larry summers had some good tweets this week. The weird you know the weird thing is Larry summer seems to be like almost trying to make the case and make certain points because he's not being listened to. Uh, it's it's it's so ironic and sad to watch, uh because he's such a thought ful economist and has such A A A great point of view and experienced uh to leverage here.

And clearly, you know he was playing in the drum's last year and no one was listening and then he got public about IT and now he's more repeatedly public about things. The point that he's made, which I think plays into the the political cycle question, which is where the tension arises, is in order to resolve ultimately the inflation problem, you're gonna have to see a significant increment and unemployment. And and so when you raise interest rates, uh, you know, generally, purchasing goes down, demand goes down, revenue goes down.

Layoff s happened, some businesses go bankrupt at sea. So then there is this trickle in the economy of less people being employed. And when that happens, IT ultimately drives a political response, which is hay. We're losing our jobs. People start asking their representatives to do something about this in congress and then these programs and these things get past which themselves are inflationary.

And that's why it's very hard to predict ultimately when and how this all gets resolved because we seem to have an administration that is enacting and um embracing uh inflationary policies to support what they consider to be economic growth and um improved employment conditions in this country and the unfortunate effect of many of those policies is inflation and then IT forces this difficult central bank decision making cycle. And so there's attention right now that doesn't seem to have a clear path to resolution. That um is why it's very hard to to have a clear prediction here.

We also have a very significant question over hanging, uh, all of these markets related to the Price of energy, which is a key input to so many industries and and and drives cost uh, as well as food and also the military conflict in eastern europe. And you know and there's in the financial markets this big overhand question on what's gona happen with various countries that may default on their debt as well as china's real estate bubble bursting. So I made this point, I think, a few episodes ago, but there's no easy answer that I can just say deterministic ally, here's my prediction.

What's gona happen? Uh, as to mah users, the term, I think it's a great term is a mosaic of things that are under under consideration right now and there's a attention between them all uh and um and that's what makes a difficult sight and really answer the question. But that kind .

of how is a political rip? I mean, we're kind of ignoring what happened this week where putin basically is putting looks back on the table. Now i'm not saying that's likely to happen.

but I don't .

know how again, I don't know how this market gets a lot Better with the risk of all three of our heads. I mean, who wants to enter the market with that?

And by the way, that the news just to be clear, um you can hear certain military commander speaking publicly about this. Uh but in the russian military playbox, uh, there is specifically defined actions that can lead to tactical nuclear weapon use in the field. There's no direct indication that these things are going to be used right away.

But the S S. Success there is like this weird, like turning up the volume happening on hey, maybe we're getting closer to a point where if putin is having tactical failure in this conflict, there's more weapons you can use that has greater impact. And unfortunately, there are these tactical nukes in his arsenal. And you know A A guy that maybe has a certain psychology that has, as our friends have said, his back against the wall. He's not a person who in his career uh or in his history has ever actually to defeat .

alex carpets on C N B. C. He was really, really sharpen concise about this, which is that you know in the west, when leaders fail in their objectives, they just get elected out and somebody else takes their place. Yeah but for somebody like putin, there is nobody to take his place because it's a very zero some situation and so his actions will as a result, also be zero summer. I think folks.

he's never acquired in his life.

And yeah well, we've never we've never really kind of like we don't understand well what .

zero some decision making .

looks like when IT comes. Two things. I think it's been made pretty clear that both india and china will not stand beside russia if they do something like this. Um and I think that that is important because they still are the two biggest purchases of of russian oil. And so I think that matters a lot because you're talking about a lot of revenue that, that would go away.

And in the second days, I mentioned this last week and and this may sound dumb to some of you but um don't sleep on the russian mothers and what happened this hundred percent right on what happened this week was really interesting, which is that he calls up all these reserves, these coming from the major cities of russia. You're starting to see protest. You're starting to see Young people saying, I don't want to do this yeah and who's that really activating? It's activating the moms yep. And so lose you on the russian month.

three hundred people are being drafted you know, to basically go five and I actually think, David, right? So I the question I have for you is do you think and I know you don't agree with this, but do you think the strategy is to back him into a corner um and then have this like read a pike to then force a resolution? I know it's a danger strategy is a crazy just move, but do you've think that's actually what the west is thinking?

I see no evidence that we have any intentions of seeking A A diplomatic frame. I see no evidence that there are looking for to give my golden bridge like you then do you .

think they're trying to break him and have regime?

I think biden stated the policy, which is this man cannot remain power. I think he blurted out, the truth is policy. This is a regime changed policy, that what they are going for, they are back into a corner.

Ja, I thought that you were right this whole time, which is we're going to build a golden bridge. We're going to find a way to egress this guy. I'm now sort of in the David camp pushes.

I think that the the stated strategy of the western alliance is essentially to cause him make such a categorical catastrophic mistake so as to become a para so as to either get over thrones or you know something so I I do think that on baLance the risk is now for things to escalate. Maybe not in quantity and and all users word in the wrong way but you know coron quote like the intensity of a that so um I I think David is right. It's a lot of pressure to the economy to to you got to .

get something going over here. I don't see the red need for all this risk. So look at and the the risk .

would be the reward. What would you see? The reward of putin was removed? Oh my lord.

Well, IT depends who replaces. And what if we get a hard liner? You gonna member, putts taken out, all the liberal reformers, all that's left a hard line. So I know, I know there's more was protested in the streets, but he's also under intense pressure from his his right wing you know, he's got hawks on his side who basically, if in criticizing him, making this A A special limited military Operation instead of a war, they're like, why do you try to do this with two .

hundred thousand troops? We should gone in a .

heavy with a million in your times article about this, he has his own military hard liners in the his security state, his talks so so he's not just under pressure from peaceful CS who are protested in the streets. He's also under pressure from hard liners in his own government who think he's been too soft.

Yeah, it's a chAllenging situation. He's going to to be seventy years old. How many years as he have left, we just need to contain .

him for a decade is on our and contain for more.

more decade. And that's my best idea, contain for a decade.

The most trouble with is, if you look at the media portrait of this. So I said last week when we had the successful counter offensive, that maybe we will get what we won, which is russia moral collapse. And I just stuck their till between their legs and go back to moscow.

Or maybe, you know, the russians really do see this war existent al for them. Putin seized as existent al for himself, and he escalates. Well, what happened this week? We went up wrong on the escalator, latter basically put, drew down three and thousand more troops, and he basically indicated his his willingness to use tackle nukes.

And he basically said, i'm not, be laughing. So now what is the reaction in the american press? He must be bluff. I mean, that basically is a reaction.

And look, I don't know how you know that you know in poker what in poker, what do we do when someone might be? We put him on a range. It's called a hand range, right? Yes, you can't possibly know exactly what they're going to do or what cards are holding.

So you put him on a range of possible hands, and then you valuate the story and light to their past actions. What do they do before the flop on the flop? And you you basically come to a assessment of what is likely based on their story. Now take coin story. Like freeburg said, he's never back down his life for anything um he has said this war is accidentially you know he basically threatened to invade and so he did I mean, like I how you can immediate jump to the conclusion this is just a block.

Maybe IT is. But well, could I could still be a blood? But to your point, the range of outcomes does include a shopping on the river.

moving all in. I, an, he, A, K, G, B agent. Do you want program K, G, B with nukes.

right? And so Jason, you said throughout this guy's of mad men well, exactly. I mean, personally I think he's more like ruthless mopy, a boss and a madman. But people say, you're right, that is a madman.

What is the story about what we're doing that makes sense? If he is a mad man, why would we want a basically backend or corner like that? Why wouldn't give the golden offer? And by the way, just on this idea that no, whatever use taco nux means, just give you three data points. First, all we use them, we drop two atomic bombs on japan to end war. War two, we could have won that war without doing IT.

but we didn't want to lose the troops.

They are. They were tackled. Nuk size atomic bombs. Number two, mcCarter wanted to use twenty thirty atomic bombs.

And the korean war, he had a whole plan crew man fired him. He thought he basically had jumped the shark. But mccarthy was the most respected in admired american in thousand nine hundred and fifty. And the reason why trump could not run for your elections, because he fire my artha master, would have used pacing of covalent of tackle nukes to win the korean war. And his plan to prevent china from reinvent ing from the north was to irradiate the border so completely the chinese .

troops could not go through at at the we n up against nuclear.

We had an american commander ahead of army, military who is willing to use nukes to win a war. So this idea that he won, I mean, we've been willing to do that. And the third examples is obvious, ly, to keep a missile crisis.

All of Kennedy military advisers, we're willing to, to use nukes. I mean, and the best in kind he did was not listen to his military advisers. They were all super hawkish.

And Kennedy, what did he do? He look for a way out. He looked for a compromise. 你是 八百 Kennedy to go cut a secret deal with the russians were Kennedy agreed to pull the r super missiles out of turkey if the russians would pull their missile out of cuba and they lie to america？ Public about IT because he didn't want to be perceived as back down but that's the kind of you know, flexibility and mental beauty that I think you would need in a nuclear showdown to avoid a catastrophe if things do escalate to the private nuclear showdown. Do we believe that we have a leadership on the level of a jack Kennedy or bobbi Kennedy who can basically show the flexibility and adaptability to cut a deal, to basically pull .

us back from the brink?

Was by in response, I was, he gave this speech, the new nations in response to poon. And is is more of the same as more of this, as I called the abe symptom speech is old man, you know, yelling at the cloud, I mean, is basically just yelling at a teleprompter. Now, I think that the strategically smart play would have been to say, listen, putin, you said that you want the people of ukraine to decide where these territories go.

Okay, we can hold a references we wanted administer by the united ation. So have so they'll have some credibility behind IT. I mean, why not throw that out there as a potential way to get diplomas?

He started IT felt like at the end of last year, you guys remember I thought like conflict was likely this year. I don't think that the conditions that. I was reference, have really gotten Better. I think we've gotten worse.

And that's why I think we all talk about this in a rational way, meaning like cover conscious mind would you know debate the merits and and chAllenges and risks of having a golden bridge or continuing conflict. But if you look historically, the us. Has often been in the middle of or at the tail end of some either recessionary cycle or inflationary cycle when conflict escalated. Uh externally wagged the .

dog referred. I I don't know if I .

would call IT that, but I think that there is IT in a nate human anxiety when things aren't going well, you feel like you have to do something about IT and um you're either going to have internal conflict or external conflict as as a result to try and resolve when when things are going great, the economy is booming, you don't enter a war, you don't start a conflict with the nation, when when people are happy at home, when you're constituent and um and you know the the unemployment rate is low and job a wage growth is high. The economy is growing.

How you are referred to the next states or are russia .

in this case i'm referred to the U. S. And I think know I just know curious if yeah coming out of covered and coming out of uh the the the big question Marks that loomed over our economy the end the last year around inflation, uh, economic growth, uh, interest rates in the effect and nowhere in the middle of the turmoil. Markets are down thirty percent and in some cases seventy eighty percent for high growth markets there is there a in inevitability now that unemployment is gonna rise? There is an inevitability now that the economy is gonna tract leadership is more likely in that scenario to find uh an outlet, to find a place of conflict.

And I don't get to explain why in this area, explain why wag the dog. Understand the because you're saying freeburg g the dog.

I don't think it's a conscious decision. I don't think that it's like a let's go start a war with russia because the economy is bad. I think it's the same anxiety. The economy is bad and there's not a lot we can do about IT. And over here, on the other hand, there is a problem and there's something we can do about that.

We can build strength and we can build integrity um and we can build support and we can get people to get behind something together and we can get something to to to create A A driving mechanism to achieve something like a distraction. You're saying, yeah, I don't think that psychologies is simple as a distraction or a wag dog. gr. He is not even as simple as the military industrial complex will see revenue growth and wage growth and nel drive the economy. But I think all those things together are true, and I think in in whole where we are more likely to want to pursue conflict right now than we were even a year ago.

You buy that.

Cha H, I think he's more right than wrong. I think that when things aren't easy, you need to find sort of distractions essentially to know, get people to focus on other things, so that the core problem is IT. As obvious we have in the united states.

I think, to go create another problem.

yeah like the best I think the best way that I can describe this as I see this institutional rot. And the more that were left to our own devices, that amount of institutional decay becomes more and more obvious. Our governments don't work the way that they should.

You know, our state assemblies are basically quoted by special interest. The federal institutions we rely on to make rules are not that great. Enormous amounts of money get wasted every day and has more, more people become aware of these things.

It's just the trend is just so bad. You know, civic engagement goes down, everything just gets worse. And so when you take that and then on top that you sit IT on on a poor economy, that is a real powder cake, I think. And so folks like to I think if your politician, it's easier to kind of go in and point to taiwan and say, you know, we're going to go and defend these folks. If there's a war, point to russia and see this point. All these other things, it's whether it's implicit as free, precise or it's more explicit of a strategy, I don't know, but the underline causes the same, which is that if the foundation of the house is not strong and you're not sure what to do to fix IT or you don't have the courage to fix IT, the Better strategic alternative is the distract and talk about your neighbors coming out of .

coming out of the financial crisis. In two thousand and eight, two thousand nine, obama recommitted to afghanistan and and seventeen thousand troops to afghanistan. Early two thousand, when he took office, we entered the person golf with the gulf for one thousand nine hundred ninety one, coming out of the great recession or the the the the the mild recession one thousand nine hundred ninety and one thousand and ninety one two thousand and two thousand one dot com crash uh we um uh you know we obviously entered um entered the rock.

Yeah that was post nine.

post nine, nine, seven, but was a sk. But he was also in the .

midst of a recession and A G.

And by the way, we can do the, you can do the same analysis. The time we enter the korean war and the time we enter the vietnam war, they were both tied to recessions. And um and so I I know I don't know how explicit this this action and behavior is. I just think there's some data to IT.

There was a study that just came out by a touch university on american military interventions throughout american history. And what they found was that we had the least in the period before the cold war, then the second most was from the during the cold war. But actually the most hyperactive period of american military interventions was post called war. So since a una polar moment, even though it's been the safest period for america, right we haven't .

explain you polar for .

people know that there's only one great power in the system before during the cold wars of bipolar world where is basically amErica verse the soviet .

union and you obviously .

the um nato and .

the western lions the .

all free world and moving we couple of decades, but now are moving towards multi polar, or at least .

by polar with china yeah multi polar would be maybe including india, maybe including india, brazil.

china in the future in the future. But but so the irony is that the safer amErica become, the more we've gotten military involved to overseas. And part of that is because there's no great power in the system to oppose us.

But it's also got us in a lot of trouble. I mean, all of these wars in the middle, ast, that costs us something like a trillion dollars. Another survey costs a war study. Uh, the direct number of desks from these wars, from the warm terrors, over a million lives, lost eight trillion dollars. And that does even include the excess mortality caused by the destruction of infrastructure, wastewater treatment, fame and all that kind of stuff.

which could be a higher, you know, the crazy part about that sex, that a trillion dollars, if we had deployed that in energy independence, solar, nuclear, what a the whole reason to be in the middle ACE was oil and energy, and we could have just deploy that to be energy independent in the .

west and not had all of this pain. The reason to be afghanistan was to the election.

nine, eleven.

And maybe I can. Actually, that was .

really proven.

And well, first, while we did kill, we did kill bin lot in pakistan with just a ray by the seals and infiltration, so we would need to occupy that country. And then more recently, we finally got our hero in afghanis an using a drone after we left the country. So what the hell do we need to be there for twenty years when we could kill these guys using phones and helicopter? Team, yeah.

this is where we needed to have an adversary who could check our power. IT would have been healthier that against the premise to the top study.

right? But but look, I think the freebies point is that do we become more military tic when things are going well at home? I don't know.

But IT feels to me like just in general, over the last thirty years, we've become hyper military tic. It's the use of military force is typically the first option, and we resort to a too quickly, and we don't use diplomacy enough. And you can see that in just the number of lives lost, the failure of these wars and the an order deficit we're running.

I do no sex. I can't stand from the two things. He got right, no words, and he was the dictator.

Whispers that guy knew, had to talk to a dictator, know whether there was north korea, china, russia. He just know how to bond with them. I was like a superpower for him. Okay.

we have three directions.

I mean, it's literally his only saving Grace. Alright, gentlemen, we have to talk about what's going on in iran. We have to talk about the world street editorial boards, cabo.

talk about, talk about, talk about new son because there's a bunch of energy that happening important.

right? So the wall street journal editorial board, uh, which obviously has aside, wrote an ipad on california grid, issues some of the quotes from the ued. California can barely keep the lights on as its climate policies, electric grid.

But David museum is unaware. On friday, he signed no fewer than forty new climate bills to amp up california Green energy stock shock experiment. Even as gasoline Prices nationwide have fall into an average of three six a gang, californians are still paying five forty five a gallon. California an election rates are already more than double those in neighbor states. This is what happens when politicians tried to eliminate fossil fuels with a molotov cocktail of regulation, taxes in renewable Mandates and subsidies.

The quote to this is um authentick e but can you please play the clip as well of russia lab trying to uh schure jammy diamond where he just destroyed .

her that's embarrassing.

That was embarrassing.

I mean, we should buy IT. I mean, it's SHE SHE made no sense.

Nick, can you play that up please?

You have all committed, as you all know, uh, to transition the emissions from lending and investment activities to line with pathways to their own twenty fifty do you know, uh, what the international energy energy um agency has said is required to meet our global twenty fifteen several targets of limiting global temperature rise to two point seven degrees are in high or one point, uh five degrees cellars is so no new fossil field production starting today that so that's like zero.

I would like to ask all of you and go down the list because again, you all agreed to doing this. Please answer with a simple yes or no. Does your bank have a policy against finding new oil and gas products? mr.

Diamond, absolutely not. And that would be the road to help for america. Yeah, that's fine. That's my sir. You know what? Everybody that got relief student loans has a bank account with your bank should probably take out their account and close the account. The fact that you're not even bare to help or leave many of the folks that are in debt extremes debt because the student long that in your earth there are criticizing IT.

My favorite was when he said.

seller is that was the hours like, okay.

it's just so much the attack.

Ics russia lb represents .

a thirteen district congressional district in michigan. The the median age in that district is thirty five point nine years old, the twenty twenty poverty rate is twenty eight point two percent, so more than almost one in three people and uh the twenty twenty median household income is thirty seven thousand six hundred and one dollars. So you know SHE represents A A group of people that you know I think at best is lower middle class.

And the idea that SHE doesn't even basically understand what would happen in her district if you actually did not have cheap Allen g again, just kind of speaks to the institutional kind of decay in washington. SHE is not the person that should be advocating for this like, you know, it's districts like this more than any other that don't have the money to spend on, you know, very expensive solar installations that cost thirty and forty thousand dollars. These are the districts that need coal, coal fire plants, L N G. Oil to keep going to sort of minimize the impacts of inflation. And so you know, that was just like a grandstanding moment moving .

to california hearings because of these are important discussions and they have become the atrix, and this is a chance to educate the public with some charts and data.

She's either so hungry for power that he actually doesn't care about her constituent or SHE scientifically and numerically literate that I think .

the latter is probably the issue here.

And so this is this is what such a shame on on the other side, you know, at the end, at at the other end of the coast in california, the cost of power generation, just see you guys know, has fAllen by ninety percent when you look at renewables. And that is because of a good job that the federal government did in introducing subsidies that essentially gave the the right sets of incentives for people to build this infrastructure.

But while the cost of generating renewable power has fAllen by ninety percent to virtually, it's on power is cheaper than any other former generation. Your electricity costs have doubled and are public. And to double again in the state like california.

So you know we're cagnes ing our our our utility rates by you know seven to eleven percent um every year. That is unsustainable in california. And what do you have? You have again a different version of the same flu that recited to lab has, which is you run forward to kind of virtue signal and to try to do all of these things.

You don't spend enough time to really understand what's happening on the ground. And you make IT impossible for people to make the decisions to actually be resilient for themselves. At the end of the day, there are tens of utilities in america, but there are one hundred million households, and the only path energy independence is to get every single hundred million household to be resilient, which means they need their own solar panels, they need battery storage, they need their own portable able water.

And all of these systems are now affordable and available. And now the federal government with the I R A has created the financial incentives to pulled IT forward. So I don't know.

I I just think like this is a hugely start reminder about how poorly or energy policy has been managed. And if you leave IT to the hands of the progressive left, they will do things that don't map to what people on the ground actually need. People in california.

Most people in california cannot pay utility rates that are going to double every six and seven years, just like people in the congressional thirteenth district of michigan cannot afford to pay for solar. If rushed to lay is able to get, you know, all these banks are not finance. Allen, Colin and and other forms of hydrocarbon as a bridge fuelled.

Look at all forty of these bills independently, and you have to think of bills.

I mean, who's reading these things? What is in these things?

I an each one has to be addressed individually, like one of them could be to help people put solar panels on top of schools in batteries. That that, that could be a good bill um but there definitely needs that. We have that .

mechanism at the federal level. The I R A passed an incredible set of incentives built for the producers of these things and for the for the end companies that actually deploy them here. And so we've solved that problem, me know.

So I just think like IT just goes to show you a ton of regulation does not actually add and get to the solution that we want. The government will not solve your problems. I hate to be the bear of bad news, but they are going to make things more complicated and more expensive.

And the resilience that you expect out of your utility infrastructure. By the way, we saw just what happened last week. There was a massive er and a mass a battery installation that california installed one hundred eighty two gig wa system megawatt system. Could you imagine if that had actually let on fire two weeks earlier in the middle of this crazy heat wave that we had? So even even utility scale renewables are very complicated projects to undertake that mean .

people are dying there because the great keeps going down.

IT is much safer and more liable if every home owner in united states took responsibility. And and you use these incentives to basically become your own little virtual power .

plant and you technology getting generators for natural gas back up. So we going to have to figure out how to take the load off the grid and build resiliency until enough. You guys saw in a related story that all this esg staff is kind of come into ahead, but delbert t cancel this week.

And like two hundred and newspapers, did you see this what? Yeah possible. Well, because he's been going after esg in this cartoon and so addressed in your take on this.

But here I don't know the characters in delbert except for Albert, but he says this person who is in charges are esg. Score will drop if we open a new factory that had see two to the atmosphere. But we can baLance that out by adding more diversity to our board.

And I guess the cat says, how much C, O, two do you plan to add? And he said one, nine binary board members were showing the E, S. And the g being put together makes no sense but that that panel, obviously of cancelled LED.

what? what? What does he mean is cancelled? Like he was fired from national newspapers.

I think one of the one hundred and seventy seven newspapers, because are all part of chains now. And I guess something because because of that cartoon, that cartoon plus it's like a series going after the social governance part of you know, environmental and pointing out he stated on his podcast that he wants to kill a esg. So this all esg debate, he's trying to further IT. But I guess yeah I mean.

the the concept of V S G makes a ton of sets. I think the problem is that implements yeah this version one pointer implementation was financial zed, by people that have no care about this year at all. And so all this done is create complexity and consultants and you said.

makes sense or IT doesn't make sense?

No, the words E S N G make, right? They have commerce .

or periods between them. I guess is a question that's fine too.

But my point is saying that you want, you know, diversity, and you want sustainability and you want Better governance. And all of these things are really great ideas. It's just that in this first implementation, IT got financially poverty.

And so what you have, our folks that are, you know, probably not the best position or should not really have an opinion about the opining about things that they never were given the authority to a pinup. And then as a result, what is really created is a cottage industry of consultants that can basically make you know hundreds of millions dollars writing all of these reports. And I think that that's why this implementation doesn't work.

So esg today is broken and I think is largely meaningless. The concept of what people want is, is a very good idea. We just need a Better way to implement.

I agree with that. You can connect these things. We're going to put social and governance with environment. It's all going to do hold back the environment.

right? Sax, sax were having all tonight. This is.

you need to .

try IT. No, you have to have to do IT x once you to do magine fed Green lives. I can tell you, I can tell you how IT looks.

Delicious is a Green.

It's the most delicious stake you've had in your life. It's the most delicious.

I don't come for that.

It's incredible. So are you going to drive me with your driver?

Text me your address. I know .

where to get.

you know, I ve. Freeburg sex is playing IT this thing, this, this game a job, but this game is no more flips. The flips are ridiculous, you know, now, now that tax is coming, i'm going to tell him to break out the early White like the trouble pink not just walked to my office. SHE looked at me what I said. White troubles, she's like.

For best, dinner is happening.

Everybody happening .

is happening. You know, what I saw was help the other day on one of his heads up matches where he got that .

huge fight with that guy just that and you this .

was like some heads up and the guy um had flopped some insane. I think he was like quite something or and help me had like top R S. T.

And on this I IT was incredible to watch the play. Like the viable, he is incredible. He's the fragment fee on that guy.

He's pretty great. He's got unable.

The reason he's the greatest poker player in the world, he really he has are unbelievable.

Do you think that what percentage of IT is? Obviously, he is incredible player. But there's another piece of this that we all see, which is people play into him. They want to be in a hand with him, they want to bust him. So in those tournaments.

what do you think? No, I think I think what's happening is that the highest level, there's like all these people that have gone in this one direction. And by the way, this is probably a good, we can talk about chess in the same way, which is that you have these solvers right POS selves.

There are these chess solves. And the Young generation spends all this time training on the solvers so that they know every permutation of every move. And what is what people call game theory, optimal G T O.

The problem with G T O is that you can actually be very exploitative against somebody that actually playing perfectly, because the A I is perfected around what is the rational set of decisions in every spot. And so you can set people up to make a lot of really bad mistakes. And I think how me you've understands that.

And so because he is one of like this dying breed of people that plays live, he's able to just be so exploitative. Um and these folks that are basically playing from road memory, right? Um what is the G T O moving every pot? They end up making a bunch of mistakes in um and feeding chips into him.

And so I think like it's a it's probably the same as it's sort of this madness crossing. He kind of knew what to expect from people. And the minute this get deviated into this realm, you were like, how could you make that decision? Probably because you know the the computer y eye is able to calculate, make a slightly losing move.

Now three moves later, you're going to actually be ahead. IT caught him off guard, where he was basically like, I think this guy's cheating really, really crazy. But I think like if you if you have a bunch of gt or kids folks are a little bit older that have been playing in a live situation can be hyper exploitative.

By the way, this is a good point generally about about this gaming is the computation has played um and puter that plays such an incredible role IT almost becomes questionable on how much can the human really differentiate anymore uh in these uh in these games and in these systems. You guys watched the the chess players on youtube and they have solvers live and not be getting light scoring as they kind of walk through a match or uh walk.

by the way, free area. That's the same with poker. You have these hot he sets up displays and a lot of the poker sites are basically given up. They try to spot the cheating and you can, I could, because you have this basically layer that's helping you, and it's effectively impossible because of these things run locally, there are screen scraping locally, and you just have no idea, except when they make moves that are just so unpredictable from a human and could only come from a, from a, from a machine.

All games maybe become observed because there is no real way to qualify the performance of one human against another. When the A, I itself, for the technology, for the computing itself, you know, over shadows, human potential .

and human capability. You guys may not know this story, but when I met demis, the the founder of deep mind, I can introduce by teal, like in two thousand eleven or twelve, so like a decade ago, and I met him in london, i'll never forget this at the we we are having breakfast at the corner hotel.

And he explained to me deep mind in the context of the again, because at that time, how they were building the first versions of the ai was perfecting how to play certain video games. And I can't remember the name of the video game, but he was one of the famous first persons shooter games. And the whole idea there was, like, you know, if you can perfect in A I, that that basically plays G, T, O, and can win the game, what you have effectively solve for for is, is like a layer of A I that can then solve other generalized problems.

I was blown away. I thought, this is the crazier thing i've ever heard a decade ago. So it's it's pretty natural that theyve taken this stuff and adapted to meet every day. It's a little sad though, too. No.

don't you think? Yeah but I mean, maybe there's a different model of performance for human that really change is what the gaming is.

right? What makes IT?

I I don't know what that is. I think I think that these games themselves completely um uh you know that the intent of a game which is to measure ones kind of decision making abilities gets obsolete because the software ultimately is a Better decision maker than the human. So the question then is what is the human going to rise to that create a new playing field um and I think there's probably elements of creativity. And actually using the software to become part of the game opens up a whole new opportunity for what gaming is. And we were talking about little bit about video games, but you can see um artificial constructs in gaming that arise from the human interacting with the computer and then creating a new sort of playing field in gaming.

Yes, tax. What do you think about all this huge big chest play? Yeah.

i've been following IT for the last couple of weeks. It's obviously have been the big story in the chest world. Um what basically happened is that a couple of weeks ago make cross lost that game to hans.

Yes, exactly. And the next day he pulled out of the tournant. This is the same field cup, and he is never pulled out of eternal before.

Everyone was speculating as he sick or have covered like that. And then he tweed out a video from some soccer coach, say, I can't in trouble. yeah.

Yeah, so clearly he was in a passed regressed away making an accusation. And then he doubled down a few days ago, he was another tournament and he had to play hands. You forgetting the guys name? Yeah, he had a player and he resigned on move too.

So basically he doubled down in his accusation. He won't specifically say what leads to believe that this guy is cheating, but he thinks he is he's he's a Young player. He's something like eighteen and he's had a pretty mark rise in the chest world.

I think his ratings is gone up a couple hundred points over the last two years is the fastest rise in just rating that anyone's ever had before. It's been the case that players have Young players especially have reason quickly. But this is it's a pretty boy.

Well, that's the thing. So the the issue is that is easy to cheap and online chess, but in over the board, you would either need to have a device or to be signalled by somebody in the crowd. You need human assistance or the insistence of a device that almost be like, you know, in casino or something where they're using the contraption here on the guy's leg to signal to information to him.

So nobody really knows how he would have done IT. And of course, he wasn't caught doing IT so he can never prove that he wasn't. Uh, so there's this a real question here.

but they did make some changes after after a magnet curls and resigned. They put the feed on a fifteen minute delay. You know I I think like at some point, you're going to have to start winding people and having them go through a metal detector.

Yeah they're have to toughen up all of the anti cheating standards.

One of the grand mather was like, we should play naked in a local.

So yeah, there was an online site that basically offered to pay me on a lot of money to play basically naked to prove that he could really do what he's been doing, that the theory on why he's not cheating and the rise is justified, is that, in theory, this is the argument, is that he's grown up learning from all these neural nets. These not just chess engines, the first generation of chess engines were like stock fish.

There were just computational machines that were programmed by humans with thousands of rules on how to play chess, and then they could discourage the lines Better than a human cut. More recently, thanked the deep mind as a whole different type of machine is basically these neural networks, where all the programs with are the rules of chess, and then they IT placed thousands of games, or millions of games against itself. And IT learns the best way to play chess. And the neural nets play in a whole different way than the then stockfish, than the pure engines. The engines is played like a human is able to calculate really well well as the .

neural nets do things like .

sacrifices for direct ece activity. So you know Normally when a human makes the sacrifice, they they all recapture the material within a few moves where um deep mind will sacrifice upon. And you know just for the positional adventure for the piece, the increasing .

doesn't the ability model of .

moves out is that I think .

people thought that magness picked up on something because it's like those sorts of moves are rare in the absence of some layer of intervention because typically it's like, you know, and sex, you know this much Better than I, but it's like, you know, the opening and the closings of all of these chest matches are so tightly regulated, there's not a lot of creativity.

It's sort of in the mid game that you have these slight positional advantages and disadvantages. And so I think IT was amplified that one of these positional sacrifices made no sense in the context of our game unless you have the ability you think really conclusively about six, seven moves from now. By the way, it's the same.

It's the same thing in poker. So there's a thing if you guys want a download, it's called I think it's called poker snowy. That was like the first layer of a pretty basic A I, but it's gotten Better and Better.

And really what IT allows you to do is, in every situation, spot whether IT heads up all the way to a six handed ring game. You can really understand. You know what to do now pogis meaningly more complicated than chess um as IT turns up because again, you have if you're not playing against one player, you're playing against some teen number players.

You we don't know when each of them is going to step into a part and then there's all of those elements. So it's a little bit more complicated to build the true kind of like neural, none around IT. But even still, you can kind of get a sense of um of what you should be doing in different spots. And what you see is that there is literally like trillions of actions. And so IT really is impossible for human being to really memorize in every single situation what the true you know, probably waited G T O optimize move is going to be and and so this is why I think a lot of people, I guess, LED by magnets was saying, how could you have known this unless you were aided by something .

where that this guy cheated is pretty? I think it's what's profound is that mastery of the game may not be achievable by a human, but mastery of any one of these games may actually be achievable by neural nets.

And I think that's what's really frustrated to magness and to other top care players in the world that are the best humans at a particular game is they are now realizing, you know, that they really aren't the true masters, that the true masters are the neural nets and more than just the guy cheating, which may feel like bad sportsmanship or or whatever. Fundamentally, once ego being built entirely on one's mastery of the game and being the best of the game is fundamentally chAllenge because a computer is Better at the game than you. It's a really profound moment .

for think that that shift sealed a long time ago. Yeah, I I mean.

I know the chest was very well.

Well, no. IT IT was way back when memorie casbah play deep blue.

which bm IT was just a neuroleptics was just A A terminally model. Deterministic model .

system was a number one. And that was when computer intelligence and chest tip to be able to beat the world champion. Since then, there's no king back.

I think every human who plays in the chest world understands that computers are Better, and there's no way for a human to be Better than a computer. So and certainly not A A neural net, I mean, magnet certainly knows that. I don't think anyone is bothered by that.

I think that everyone understands that humans played in a certain way and their goals to be the best human. I think the concern is just obviously, if a human IT gets added during a game by computers. But the way that chest works now, the preparation is all about working with computers.

These top players spend huge amounts of time researching openings and looking for novelties in openings, using computers to help them do their research. So know, working with computers is now become an goal. Part of the game is kind of like, you know, in many sports, where the technology has enabled the athlete to get Better. And and this really technology becomes the key vector of competition.

This actually has, yes, this happened in the N. B. A, where there is A A special technology for three point shooting and your form eta and the nicks, actually in a couple of other teams implemented in a couple of years ago, and you saw the entire team became Better at three point shooting.

So people who are, you know, two hundred percent, three hundred percent, you know, moved up ten percent each. But this kid is clearly cheating because he cheated in the past. And people who cheat the past, cheat in the future is my basic belief.

And this guy mean in public. He admitted that he used electronic devices to cheat when he was just a kid on online games when he was welf to sixteen years old. So my question is like nobody.

Jason is worse than anything because then chest a com came out and said .

actually the cheating was .

more ranten than just .

those two incidents .

playing well because he said, he said that was those games were not for money and was just rating fast.

And like the poker guy, and if you're a poker guy, you cheat before you play with those players. Again, they are cheers.

issue. What the issue here is that this was an over the board tournament where um the one that magnets pulled out of the in order protest. So the question is, how could he have been cheating right now?

I think what .

what adds to the complexity of IT is that you have to remember that when you're dealing with a player, look if if IT was us playing magness, we didn't to see on every single move. But if you are twenty six or twenty seven hundred player and you know, manages twenty eight, sixty or something, the higher the rating, the Better. And chest called the ello. But even if you are like a twenty six, twenty seven hundred player like me on, you only need help with a few moves in the game. Another words, if you could get a tip at a critical moment of the game that might be all you need to put you over the top wouldn't need other words to beat magas wouldn't need to cheat on every move you, if you just cheat on two or three moves at the right time.

that could put you over the top so something could vibrate on your leg four times, and then I put times over to tell you which piece to move.

That's what they were saying. Jack O, I get like a vibrator and is .

like a very so there .

was a mean that became like a whole thing where I was like.

he had something in his bud or something computer .

and you know, chess computers.

what you're saying OK, look.

that's post saying that he was being communicated with through vibrating anal beds and then that went five role you long tweed IT, although I think he deleted IT look, it's absurd. But the point is there is a question of how would you have done that if he did IT? There are have been cases before, though, people getting caught up, people getting caught going the bathroom and then you know.

checking their first. There's a grand bulger's grammar's got caught back from checking his phone .

and metal detectors on the way. And and they have R, F detectors in the room, right? So they look for any sort of communication. I didn't remember that going into the event.

you just can have nobody watching all I get a half hour delay.

I added a minute I after these accusations. So yeah, I think they're going for more precautions, basically. But we saw in her from magnet what made him think that there was fell play in the specular game and he's been very elected ant.

He wanted anything. It's it's sort of passive aggressive. Now the first IT is that magnus carlson has been the morning player chest for over a decade and he's a very classic player. I, I, I, you know, everyone's never heard a word set about him that was now he can be cocky. He can definitely be cocky, but he's a very classes player, so I just don't see him doing something like this lightly. So that's what so dramatic to understand about IT dramatic is yet really hard to understand how nimo could have cheat IT but also magnet isn't see like the kind of player to just make a wild in pulse ve allegation. So this is why the chest walls has been really roiled by this.

Is there like any kind of equivalent of like pd scandal here, like people taking out of all of for visual or any other kind of neotropical to get an edge?

There's a good documentary. I think that was advice on how a lot of the top chess players actually get ready for matches. And um they're incredibly diligent about their sleep, their workout routine, alcohol, they do take supplements. I forgot to we made the documentation, but is actually incredibly intense.

how physical these people are like over two thousand calories or something like that, like the amount of of calories I get burned just by using your brain. So intense.

that of all is rampant in the poker community, especially in tournament. So when you play the the higher tournaments and I played them and I just kind of step in and and it's uh I felt very underpowered tive to the to the kids I was playing because they were all on at all there.

These are twelve hours. It's ten hour sessions over twelve hours.

It's exhAusting. It's really, really physically exhausted to play. That's why I stopped playing tournament about a decade ago.

I just couldn't sit there for that long.

I can justify the time. It's like it's so it's just so physically and uh emotionally demanding to be able to play that well and make no mistakes over ten hours. Um and so you know the only solution that all these kids were returned to was um was at all and I was like, this is not worth for me so I stop I stop playing tournament and which was too bad because I I thought that I could have a real chance of actually doing reason.

We want somebody things. And I just keep up. By the way, the other thing I want you to mention is there's there's been like cheating in all these other kind of sports and always gets exposed like whether it's the tour, the front IT turned out that everybody was using P, E, D. Or you know, the rational olympic team.

everybody was using P E D patristic nal, right? Listen, let's just talk about the iran protest for a moment. Iran has shut off internet assets, internet access in parts of, and blocked access to instagram.

And what's up to try to stop these protests? Protest started after the death of a twenty two year old curdish woman a while in police custody. Masa, a mini, was detained on september sixteen for allegedly wearing uh, his job headscarf in an improper way.

SHE later died in police custody, and activists are saying he suffered a fatal blow to her head. And now you have fifteen cities with very large crowds. Women are burning there. He jobs and IT seems to be escalating at a pretty, uh, fast pace. Iranian authorities, uh, are denying that they had any part in her death that's on this horrible.

I wish them well.

If you look at the demographics of iran, it's pretty amazing how many Young people there are here. Uh, this feels like a country that can turn over that.

Be great. And you know why IT has a chance of working because we're not the ones behind IT.

I mean, absolutely yeah we we cannot um yeah run the revolution. The revolution h has to be done but to the women and Young people of iran protesting, you have our support and we're rooting for you and don't let the basterds ground you down or at everybody for .

a David got her names. Did you forget her names?

No, i'm just I was going to try to come up with a new name for, uh, rage burg, like free rage burger g burger place, view place, the David, the dove and the host with the most. To mah, poli, tia and the world's .

greatest moderator. I'm so excited to see all three view.

Honest, I think I love you guys.

I really want tell you again, resulting .

game you.

Rainman give.

And we open sources to the fans and .

just got crazy.

You should all just get a room, just have one big huge org because.

a.

tension. b.

We need to get more.