All-In with Chamath, Jason, Sacks & Friedberg - E0: COVID-19 Political, Economic & Social Ramifications featuring The Production Board's David Friedberg (frmly Founder/CEO, The Climate Corporation)

Episode Date: March 15, 2020

Follow @chamath: https://twitter.com/chamath Follow @jason: https://twitter.com/Jason   https://linktr.ee/calacanis   0:01 Jason intros Chamath and Episode 0 of All-In and they discuss their current self-quarantine 0:55 Jason intros David Friedberg 1:35 Chamath gives the inaugural (& potentially final) All-In ad read 2:17 As a Warriors owner, Chamath gives his reaction to the NBA postponing & uncoordinated actions of government & private sectors 4:37 Why was the US so slow to react on both an individual & governmental level? What did the OpenTable data show? 9:03 David explains the actions he would take if he was president 12:37 Thoughts on Trump’s private sector involvement 16:58 Has the press failed in its coverage, or are they just feeding people what they want? 23:52 What will the next few weeks in the US look like? Why has the virus spread severely in Italy, but not yet in India? 37:20 How the COVID-19 viral coefficient compares to the early days of Facebook’s numbers 40:26 Chances of Trump testing positive for the virus? What effect would that have on markets? 48:53 What should we do differently next time? 53:13 Will there both more deaths due to second order effects of the virus than direct deaths? 1:01:06 Should there be a global stimulus package? Effect of low-volatility during recent bull run? 1:11:26 Chances of a quick resolution? 1:16:48 How are Jason & Chamath advising their portfolio companies? How are IPO’s of companies like Airbnb & DoorDash being effected? 1:21:17 How to approach the next year in startups & VC?

Hey everybody, welcome to the first episode of the All In podcast with Chimau. And Jason Galkat is that cackling where we're trying to save ourselves from the end of the world. It is literally, you know, we thought we'd start this podcast on April 1st, Chimau. And everybody thinks it's a big joke that it's an April Fool's joke just happened to be the time. We've perfectly we had full intentionality of starting the podcast But we're sitting here at home quarantine How many days have you been home when so last time you went out of your eye? Well, I've gone out But I've basically been self-quarantine for two weeks now

I haven't left my house since Tuesday night. And this is the first shower in about 72 hours. I, it is, you know, and then, Shamatha and I decided since, you know, we're going to talk about, obviously, the coronavirus. Today, we bring in the smartest person we know in terms of the biotech in health space and that's David Freberg, who's a close friend of ours. He founded

or co-founded climate.com Metro Mile and he now is the CEO of the production board which is a biotech incubator accelerator startup. What do you have to refer to it, David? Yeah, we're a foundry and broadly life sciences, food, agriculture, and human health. Got it. So Jay, actually, before we do that, can we actually give a shout out to our sponsor, which is all the incredibly shitty enterprise software

that nobody fucking uses. And there are no coupon codes because there are no ads in this podcast, nor will there ever be back to you, Jason. Which I really appreciate. It's like, this deal gets better battered. Trimot's like, hey Jason, I wanted you a podcast. I want you to put all your resources into it

and all your time into it. And here's the best part. The entire business model is we lose money. Thanks, Tramon. Fantastic. It's like a microcosm of the venture industry all in one podcast. So let's just talk about and start off here with, we're sitting here and today is the 14th of March. This entire coronavirus epidemic and essentially the chaos really has only started here in the United

States in the last 72 hours or so that people are actually taking it seriously. They canceled the NBA and I think that is the definitive tipping point of when it hit public consciousness that this is no joke. And it was really kind of dramatic and traumatic obviously you're a part owner of the Warriors. And so I think it's a good thing for you to discuss. When you saw that announcement that at tip off they found out that one of the players tested positive and they canceled the game and sent people home what were you thinking obviously there's a financial aspect of this but the

more important one is the unprecedented nature of this. I actually had two thoughts the first thought was it's incredible that all these organizations, other than the federal bureaucracy were taking such swift measures on the realm. I mean, typically these things, a reaction to a pandemic should be institutional and very much top down. I think even every libertarian amongst us would sort of say, I mean, this is the kind of thing where the president of the government needs to step in first

and kind of like dictate how things should happen. Instead, it was local government, state governments, sports leagues, companies, all making decisions in the absence in a vacuum of leadership. That's the first thing I thought. And then the second thing I thought was, these actions are too unpredictable, and they're too all over the place. So you have some states and some organizations

acting in a really decisive, aggressive way, and others not. And so in the absence of highly coordinated action, this kind of half-in-half-out approach is probably as bad as the no strategy, sort of clapping as a strategy in Blackjack. And so those are my two thoughts. I don't know, David, what did you react?

I mean, it seems like it's a bad time. We're kind of a little bit behind the times in terms of the behavior on reducing social isolation. There are a lot of people calling for it weeks ago that the US is behind the eight ball on this thing and we really missed it. Mr. Mark, but obviously as soon as a person shows up and tests positive at a game, it's like and you know, your objective is don't put anyone at risk, you got to shut it all down. So it seemed inevitable, you know,

it's unfortunate that this sort of behavior wasn't done earlier where we could have kind of mitigated the spread as we've seen kind of be successful elsewhere. David, why didn't we do that? You were tracking this from an early stage, we were talking about it during the poker games and just, you know, when we were chatting in our online group.

And you seem to understand that this was very serious, very early, Balji, I'm pronouncing his name correctly, from a formerly of Andreessen Horowitz was on this, like in what, late January, early February. And here we are six weeks later, and we're taking it seriously six weeks later. Why do you think there was this crazy failure to anticipate this? I mean, it was right there in front of us.

We were watching the streets of Wuhan being blasted with chemical cleaners. And we just sat there and just retweeted it and we didn't do anything. I think it's a lot like climate change. If it's not immediate in terms of time and space, You don't take action as soon as it becomes immediate in time and space. You kind of you know jump to action And it may be a little too late at that point because the fire is already kind of run down the meadow So we also we also politicized it from day one I mean, you know people had to draw a line in the sand Trump had to draw a line in the sand

Which is I'm not gonna threaten my presidency and so people had to draw a line in the sand, Trump had to draw a line in the sand, which is, I'm not gonna threaten my presidency. And so he had to downplay it, and he had to sort of, you know, puff up his chest a little bit, and that kind of rhetoric from the president of the United States, whether you like it or not, flows downhill. It touches the CDC, it touched the HHS, it touches Fox News. And, you know, you have behaviors that

were dependent and that are pretty correlated to sets of attitudes. So for example, I don't know if you guys saw, but there's been this incredible retweeting of open table reservation data. Incredible. It's incredible. And what it shows on the open table blog, and I'm glad that they put this data out. I don't know how long they've been doing it. But it shows reservation volume on a state level and on a city level and as it trends over time. And what you essentially see is in places that have taken social isolation seriously, if you use restaurant reservations as a proxy for people's propensity to take this pandemic seriously

and socially isolate, it's fallen off a cliff and reservations are down 50%. are down 50% and in other places where you would otherwise be a believer of the rhetoric or a believer of different versions of the news that painted this thing as anything less than a pandemic. What you saw was in some cases, I saw Oklahoma City as of yesterday, where traffic to restaurants was up. And so if you have a multi-week asymptomatic, you know, super spreader population in any of those states, you're going to see some really difficult circumstances. And it will, unfortunately, in the near term be drawn on what seems like political lines not dissimilar to climate change, as David says. Hey David, when you hear Tremont's sort of breakdown of Trump didn't want to risk his presidency

by being alarmist, having the stock market crash, and then as somebody who has spent their life in technology and science, the anti-science, anti-expertise kind of paradigm we've been living with in these last couple of years. How frustrating is that for you when it's so obvious what needs to be done and then in terms of what needs to be done, if you were president and you had And then in terms of what needs to be done, if you were president and you had seen this in January, what would you have done, David? If you actually had the ability, and it was January, it was February 1st

and you had seen what happened to Wuhan, what would your line of attack have been? Well, I think that the anti-science rhetoric, by the way, is just nothing new. We view it reasonably widespread now. There's been anti-science rhetoric, by the way, is just nothing new. We view it reasonably widespread now. There's been anti-climate change. I've got a personal history because I sold my last company to Monsanto. So I sat on the side of the anti-GMO movement.

And we've seen this throughout the course of history, right? Anti-Copernican, anti-Galayo. I mean, this is not new. There's institutions and systems that benefit from people not kind of necessarily being connected to science and what it can prove. And what it demonstrates, the reality is, over time, truth emerges, right? So science will find truth more than fiction will.

And so hopefully we'll realize that over time. The problem is the interim kind of damage it can cause. From a presidential point of view, I think the first thing that was missing is just testing. And I just want to talk about testing for a second because it's so critical. We've talked a lot over the last couple of weeks in the media and as a group about,

where's all the tests, where's all the tests. One of the important things to understand is the tests that we're doing today, and the tests that everyone talks about are called PCR tests. And these are tests that basically measure active living viruses in your body. So measures there are in a. And so if you do a PCR test and you're positive,

what it's telling you, there's an active virus that was in your body. If you did a PCR test and you were sick with a virus a few weeks ago, it would show up as negative. But you were still exposed to that virus. And one of the things that we don't really know is how many people have actually been exposed to this particular virus and for how long.

So the PCR tests are really important about getting an acute case care for as quickly as possible and quarantining as quickly as possible. So that means you're in this kind of active, infectious state. But what we really have missed the bowdon, and we're still missing the bowdon, is knowing who's been infected and to what extent this thing has actually spread already. And you can do that with what's called an IGG test or an IGM test, where you're measuring the antibodies that show up in your blood,

and they'll be there for months for IGM and then for years with IGG, and you can see if someone's actually been infected. And these tests are super cheap to administer, super easy to make. And I think that would have been the first thing to kind of kick off. You know, you should still have the PCR tests, but they're expensive and they take a long time to run and they require chemical labs and all this stuff. And IGG or IGM tests, you can do like a pregnancy kit anywhere on the street. So we should have had 10 million of these things distributed as quickly as possible.

We should be putting them in airports or in local hospitals, local community centers to really understand when this thing hits us. That's the best way to know. Taking someone's temperature, all that that tells you is, hey, this person has a fever. By the way, only 80% of people that get this thing end up with a fever when they kind of get checked in.

And so that's kind of a crazy stat, right? One fifth of the people don't even have a fever that are actively infected with this virus. So we're missing a huge percentage of infections if we're just taking temperatures and then doing a PCR test and we're missing all the people that just were infected. So I think that would have been the first thing is like figure out where this thing is infecting people to what extent and getting in front of it. And testing right now. Yeah. What is the state of testing right now? They keep having these press conferences.

I think Trump on Friday or yesterday, they sat on the 14th of March, on the 13th on Friday the 13th. He had what most people thought was his best performance, he had his best leadership, he had obviously way too late. And he said, hey, we're going to have millions of these tasks. We're going to do them out wall greens and we're going to tap the private sector. This seemed like a really smart move to tap the private sector, Chimoff. Do you think that this is going to be effective? Well, I think the only way that we'll know whether this was effective is if we can actually figure out how to get enough throughput so that we can manage the number of beds and the hospital facilities we have.

So at this point, I think everybody admits that this thing is going to roll through the population of the United States. What we're basically betting on now is how long that takes and how well that's managed. And in part of that has to do with how we can differentiate, as David said, people who are symptomatic from the people that are asymptomatic but still positive, and then we can sort of enforce a more strict code on quarantining. If all of those things can happen, we'll be in a reasonable place to at least manage the onslaught. The thing with tapping the private sector in many ways is,

it's a brilliant strategy politically because it now sort of embraces a whole bunch of companies that are in the consciousness of America as part of the solution, which actually by implication means that if this thing gets worse, they are also then part of the problem. And I think that from that perspective, being able to spread out and smear the blame while preserving the optionality for leadership in case it works, I think was the right thing to do. Incredibly cynical and probably accurate.

You're basically saying. I'm not being cynical. No, I'm saying incredibly cynical to actually do that. I mean, if that was actually Trump's thinking to say, let me spread the risk here. I'll make pens and Walgreens and these companies, the fall guys, if it doesn't work out. Well, I mean, look, let's be fair. These guys were inside the tent for two weeks.

So the only reason to bring them outside of the tent and have a presser where you shake their hand is to do exactly that, right? And so they were part of the solution when we thought the solution could be contained. But that solution was kept relatively private and the front facing person on the front lines was the president of the United States, all reasonable. When it looked like this thing was getting out of control, what we needed to do was reestablish

some sense that there was a broader team in place and put all of these other people out in front. I mean, in fact, if you heard the presser, the most interesting part of it was how adamant he was that people asked these other people questions. I don't know if you guys were listening to it, but it was this constant verb, is anybody want to ask these brilliant geniuses on stage with me any questions? And the press had zero interest because they really wanted to understand his mindset. So, you know, I think that from a political game of poker, we've done the right

things. He has done the right things, which is he's kept optionality to say, look, you need a steady hand at the till. That was me. I didn't do a react on the front end. I brought in these people in the middle of it. And if he is able to salvage an enormous economic stimulus package, I think the odds are on a side that history will judge that he will have done a good job. And more than that, his odds of getting reelected are actually higher than in the absence of Corona. Wow. Now, if none of those things come to pass or many of the other path dependencies tick in and things are much worse, then that's probably not true. But from a political kind of poker game,

I think he has done the best he could from where he was, you know, the last three days. He's in the best position. He could have been in all things considered. Unless he had actually done the testing and taking it seriously from the beginning, which is something also the press seemed very weird about. David, I want to get your perspective on when Bellagy was tweeting about this and then the information. Jason, his name. I'm sorry, I always forgot. B-A-L-A-G-I.

I've had him on the podcast, but that was not. It is Bellagy. It is Bellagy. Bellagy. Bellagy. It's an, it only took me six years to figure out how to say Polyhompetia, and now I'm correcting everybody on how to that your last name? David when you saw his I didn't know it's a my last name

That's the best DC when when The recode journalist who wrote that ridiculous story about like Silicon Valley is paranoid And also, I think, Rico journalists who wrote that ridiculous story about Silicon Valley's paranoid about handshakes. How much of what the media is doing is just completely inaccurate over these last couple of weeks. And what are your thoughts as an expert who's quoted in the media about this moment in late-stage journalism where they seem to be more concerned with dunking and clicks and link bait than the actually accurate

transmission of information. And when I asked you to just even be on the podcast with Chimapa and I today, you were like, well, listen, I'm not an expert. And you're the smartest person we know in the room about this topic. What do you think's contributing there with the press and their ability to even process something like this? Like, I mean, it's really, like talking about science generally is really hard.

Science-based journalism is really hard. I mean, there's just so much to this. Like, I'm not gonna explain to people the difference between a PCR test and an IGG test. It's like, you gotta go do Bio 101 and have a conversation and talk about this stuff. There's a learning curve. So it's a 30-minute conversation to explain that.

It's a 30-minute conversation to explain GMOs. It's a 30-minute conversation to explain that. It's a 30 minute conversation to explain GMOs, 30 minute conversation to explain climate change. But I would argue that the journalists solve or not the journalists. I don't want to kind of put down journalists. But I would argue that consumers consume the media they want to consume and that that media wins in the marketplace for media. And I think this is just generally true. Like we want to have six second sound bites, we want to have 140 character statements as a consumer class, and as a result, like the media production that taters to that demand

is going to win and is going to do better. So if we want to see stuff that shit talks other people and blows up companies and puts down presidents and puts down speakers of the house. We're gonna look for that. We're gonna buy it. It's gonna get more ad dollars. It's gonna and then those journalists are gonna stay employed and the journalists that are writing long-form articles that are science-based and require 30 minutes to sit down and read the whole article are not doing as well. And you know there's no one to blame but the consumer the same might be said of the presidency and know, and other things like we end up buying what we want to buy.

It's not that the president showed up and he's the guy that got elected. He's the product of what we want it, of what the general population wanted. By the way, back to the discussion earlier, the open table reservation data in my mind is the single closest thing we're going to get to to a referendum on exactly this issue, meaning if you listen to MSNBC or CNN or CBS and ABC and you believe that's drain of journalism on this pandemic and You took precautionary steps a little bit earlier then say people who read bright barred or you know watched Fox news and Then it turns out that disproportionately those states where those media consumption patterns are prevalent are more affected It'll be really interesting to see how people, after all of that, deal with those choices and the implications and then start to realize that, you know, we've been past the days of journalism for a long time. We're in the business of editorializing,

and we've been in that business since basically Facebook and Google, you know, kind of destroyed the ability for journalism as it stands to remain intact. Now they didn't do it on purpose, but it was the implication of building one and a half trillion of market cap and consumers in many ways as David said, not only let it happen, but added gasoline to those fires. But those things never resulted in anything meaningful until today.

The linkages to depression were kind of relatively brittle. The linkage to other things were relatively brittle. So there weren't necessarily direct health implications to your media consumption patterns. This may be the first time where we can actually show a direct correlation to you consume a specific media and a specific editorialization of a problem you end up with one result versus another. If that doesn't end up happening, it'll be really interesting how people internalize that result after this is all said and done.

So if you're watching Fox News and they tell you Corona is a hoax, which the president and Fox were literally saying 10 days ago, this is a hoax. It's part of the rushing conspiracy, the Ukraine conspiracy, and now they're going Corona crazy. And this is a conspiracy. And then you decide you would go out to eat, which the open table data is showing they're doing on mass. And you die, or your grandparents got for a bid die, maybe you're going to reflect on

the actual consumption. Well, I think I said it right. Well, it's not just that. Because the weekode is a left-leaning publication. And they told us that we were crazy for not wanting to shake hands. Well, I think, I look, let's be honest, weekode is the, you know, it's fine, but it's in this situation with what we have to deal with, it's kind of the pimple on the dogs ass,

that let's not worry about Recode. Yeah. Like you have, you know, major media outlets who now have a responsibility to get on the same page and tell one version, which is the truth. They have that responsibility now. I don't think there should be any variability between what CBS, PBS, NBC, MSNBC, CNN, Fox,

they all need to speak from one set of scientific facts as of yesterday when the President declared a state of emergency. If they're not, in my opinion, there is some level of culpability in those organizations, because if those people consuming those outlets then behave in a different way, which they otherwise would not have, that they had the different version of the news, that's not individual's faults. That's the fault of an organization that's optimizing for positioning, narrative, and monetization over a moral authority and an ethical duty that they have to the United States.

Let's look forward here at what is going to happen from March 14th forward. We have every Apple store closed, the NBA on hiatus obviously as we discussed. And supposedly a bunch of tasks are going to be done in the coming weeks, who knows, but people seem to be in the major cities quarantining in place, obviously stocking up food for a couple of weeks. If everybody in these major cities does what they're supposed to do and basically rides out the next three weeks, four weeks, what do you think the outcome in those cities will be, David? It'll be, you know, what we see in China. A lot of people look at the curve at the beginning and it looks like an exponential curve of growth and it is exponential,

but, you know, exponential curves end up consuming everything. So they don't go on forever. So what they resolve to is what's called a sigmoid curve. So they eventually flatten out the second derivative kind of changes and they flatten out and you end up with this thing kind of down the other side as most biological systems can be modeled with this sort of a function, a sigmoid function. And so, you know, a couple of weeks away, hopefully, from that happening, if everyone kind of stays locked down. The reality is we just don't know who's affected, infected, who's been infected. And I do still believe that we're probably at least one,

maybe more orders of magnitude off in our infected population count, especially here in the United States. But we'll find that out over the next couple of months as these IGG tests get produced in China. They're getting shipped over here right now. They're in Italy right now being used on the front lines. And we'll start to use those to identify how many people actually are infected and things will start to resolve. And so, yeah. So, Ethan, David, what do you think are the best protocols of care and how do you think we're positioned if people bombard ice-loos over the next few weeks?

Look, there's a bunch of published reports now on what's working and what's not working in China and elsewhere. Italy, I think, is just swamped and overwhelmed. I just want to give you guys these stats, right? So Italy has about 12 and a half critical care beds per capita, per 100,000, sorry, population. The US has 35, so we're, you know, 3X, the number of ICU or critical care beds per person than Italy has. And there are now published reports on how you can reports on how you can manage symptoms and reduce the duration of the infection and reduce the severity of the symptoms for different populations.

And these are starting to be employed and they're showing really great results. There are active clinical trials that will be published in the next two weeks on a Randesavera, which is this antiviral compound from Giliad, that anecdotally has had really great efficacy and has really reduced the severity as long as you catch it early enough and start giving it to patients right away. We're already starting to use it on a compassionate use basis in the United States. The first guy that gave it to in Washington State recovered, started recovering the next day.

That was anecdotal, but we're going to get more data on that soon. I think that we're like, we have the pieces now on how to care for people and how to get them to a point of recovery. We just got to make sure we have enough beds and an offental later. Cities like San Francisco have already taken over hotels like Manhattan here and they're being converted into effectively ICU departments that they can be used for the overflow or the mass crunch as patients show up. Luckily, we haven't gotten to that point yet. But I think that all the tools are there that we should be able to manage down and get the, you know, the fatality rate, hopefully within a range that looks a lot more like what

was called rest of China, which is like, you know, basically 20 basis points, fatality rate of infected patients versus like Wuhan, which is like 4%. I thought Remdesivir, David, Remdesivir has to start literally right when your viral load starts to kick in. And I read, but tell me if this is true, for maximum efficacy, it needs to be administered intravenously. Yes. intravenously is the way it's been. Gilead just launched a clinical trial.

I think now or last week or this week, where they're going to try some oral remdesivir. Yeah. Yeah, it has been used as an intravenous treatment to date. There is a public study now that shown like, you know, earlier treatment with remdesivir had a higher efficacy rate versus later. And that may explain why it didn't work in Ebola because remdesivir failed.

And Ebola is a very similar virus to this coronavirus. And remdesivir quote unquote failed in a clinical trial for Ebola, but they didn't have a duration window on like how long you've been infected before you start getting remdesivir. For the patients that had only been infected for a short period of time that got remdesivir, they actually had a much higher recovery rate in both the patients. And so that is kind of buttressing that argument. And these patients also were on chloroquine tuna.

So it's like the combo of the two that seems to be the most efficacious. Yeah, it's unclear. I mean, chloroquine is a widely used compound. It's used for malaria. It's got really nasty side effects. So, you know, you don't want to overuse it or use it if you don't have to, but it's also shown significant efficacy and it's being used at some protocols in some countries right now for infected patients of coronavirus with good results. Again, like it's so early, we don't have enough data and people haven't actually published enough on these things for it to really be kind of scientifically validated.

But anecdotally, a lot of folks, and the chatter is that Chloroquine, Rindesiveer, having really great effects. And people are, you know, some commentary about zinc. anti-viral compound, it can stop RNA replication and viral compounds. A lot of people supplement with zinc for this reason when they have a cold or when they have the flu. And so, you know, there's high dose zinc remedies that are being postulated as having some efficacy, but it's too early to say with great certainty what the best protocol is, but there are different variations of the protocols that are being employed that are working and reducing the fatality rate. Where you do have, by the way, you have to have hospital beds, you have to have availability

of staff otherwise. So you have what you got in Italy, Italy has already gone over the abyss. People just can't get treatment because there aren't enough healthcare workers to the number of patients. So it's a shit show. What, why is it that, you know, when we look at, you know, if you look at our GISO world meter, where are the cases in India? Why is it that when we look at sort of, if you look at our GIS or World Meter, where are the cases in India?

Yeah, so this is where the cases in Nigeria, like what the hell is going on in those two countries? Why aren't those countries going off the charts? India is just crazy to me, because if you've ever been to India, it is a friggin' B-Hive, right? Like population density is crazy. You can't do, like as much as they say, they've got social isolation going on in India, it is a friggin' B-Hive, right? Like population density is crazy. You can't do, like as much as they say, they've got social isolation going on in India. Now the same was true with SARS and MERS. So SARS and MERS did not take off in India either.

And so some people have speculated that India's failure to have coronavirus pandemic outbreaks has been a result of the high temperature. But if you look at the temperature in India over the last couple of weeks, it hasn't necessarily been that much higher than than and yes, there's a tipping point I think it's around 77 Fahrenheit But there's there's there's evenings there are people in India that have been sick

So if someone's sick and they're on a bus with 80 people in India and it's evening It's unlikely that you know something is not going on there now and by the way in places like Delhi and places that are even north It's cold. I mean it's like it's like a winter in Milan, for example. I mean, it's roughly the same temperature. So the conditions are right for this thing to spread, but it hasn't, it seems like. So there's three risk factors I want to highlight that have been identified as potential risk factor, that real risk factors for coronavirus. The first is the age of the population.

So people over 65 as a percent population, Italy is the third oldest country in the world. Okay, so about a quarter of Italians are over 65. That is nearly 3x or 2x with the USs, as a percentage of population being over 65. And it looks like if you're over 65, you have a 10 to 15 percent, sorry, 10 to 15 X likelihood of having a severe reaction to the SARS-coronavirus

that we're experiencing right now. The second is smoking and there's differences of opinion on smoking. But here's a crazy statistic on smoking for you. So the number of people, let me find the statistic, have actually pulled it up for you guys to mention it. The number of people that smoke per, okay here it is. Number of cigarette consumed per year per person in Italy. Oh, let's guess. Let's set the under over under. Per person in Italy. So a pack of day would be 20.

That's 7,000 a year or so. If you smoke to pack a day, if half the people do that, I'm going to set the line at 3500 per year per person. You want to take the over? I'll take the over. I'll take the over. Okay. You guys are both off. It's 1,500.

Okay. Okay. So it's on the United States. The United States is 1,000. So the United States smokes 1,000, third less. And India is 89. Like no one smoked in India. And the percentage of the population in India

that's over 65 is less than like 9%. So India has this confluence of low smokers, older population, warm weather. Younger population. Sorry, younger population, warm weather. And so this may start to, and the smoker rate is just like two orders of magnitude off from the rest of these guys. So these things multiply, right? So think about Italy. Italy has a very, very

old population, like 2x with the US indexes. And again, that multiplies by 10. So now you're talking about 20x, the impact of a coronavirus hitting everyone. So 20x, the impact, they smoke about 50% more, so call it 30x, and they have a third the number of beds. And that's a nonlinear relationship because as soon as you max out on ICU beds or critical care beds, boom, you're over the abyss and everyone starts to die. And so the Italy problem may be a confluence of this elderly population, maybe a smoking population and the critical care beds per capita, and the opposite may kind of explain what's going on in India.

So do you think that India is sort of one or two sigma to the left and Italy's one or two sigma to the right, and which means that, you know, inter reasonably well-managed, but even in a poorly managed situation, you know, we may be a multiple of the flu in terms of its impact plus reminds. Yeah. I don't know. And we look, one of the things that's crazy

is the like ACIM, the fact that this, to talk about like distributions to mock, like some percentage of people have this incredibly bad experience with this virus and then a huge chunk of the curve have like mild cold and flu symptoms. And yes, there's anecdotal people saying, oh my god, it's sock, it was like worse than the flu, but there's a large percentage of people who are recovering reasonably quickly and seem to be getting over this thing. And that's of the people that we've actually tested positively with a PCR, we don't know how many people there are. It's going to be asymmetric, right? It's not like we're

going to have an unusually high number of people that had really bad symptoms that didn't show up. We're likely going to have a much higher percentage of people that didn't have symptoms that didn't show up. And so there is some like multiple probably of people that we aren't accounting for at this point that have had this virus in them. If that's true then there's a lot of logic actually to being out because then if a lot of people have gone through this then you're promoting that point where you get to herd immunity faster because then the folks that basically have these antibodies are out in the field absorbing all of the spreaders and actually mitigating the The herd immune the herd concept So if you end up being exposed to a virus like this virus you develop antibodies to it and they stay in your body for Say 20 years so when you hit that virus again, whether it's like chicken pots or measles are very similar

Your body will automatically wipe that virus out of your body. You don't have to develop the antibodies. They're already there. So you know a longer carrier. Yeah, you're actually technically, they call it immune, right? You're immune to that virus now. And so the more people are immune, think about a network with nodes on it. Yeah.

There's a node and any nodes that it touches get infected. If one of those nodes gets infected and now it turns off and it can't infect other nodes, any virus that gets near that node is no longer going to be a point of transmission. And so the more people have this thing and the more people develop immunity, this is why you have a sigmoid curve at a certain point, it stops spreading with as high a rate. The current statistical rate that's estimated for this virus is 2.5 infections per person infected, and flu just by kind of comparison is 1.5. And so this looks like a very contagious infection today, but after enough people get infected, the curve flattened out.

And for people to understand this, Tremoff, what was the, when you were heading growth at Facebook, what was the viral coefficient at the peak? You know, one person joined Facebook. How many people did they have? 7 act with Facebook. 7. Right. So if you have something like 7 at the peak for Facebook, it hits over a billion users in some 10 year period. Here, we're talking about, you know, a fraction of that. Well, actually, that's an incredible example because like, if you, we used to call that K, but in science, we call it R-NOT. But if R-NOT is 7, then you actually can see how, in about two and a half years, you touch basically 3 billion people. Now, that's like, if you consider, so in this interesting way, actually, Facebook's growth of not of users, but of registered users.

So people that may have churned out, that's an incredibly interesting model for a highly viral super spreader disease in many ways. And it shows you the window of time you have to act decisively to get in front of something. Yeah. Which Facebook did to Myspace. Like, Myspace, Facebook basically, and Myspace,

they have that viral coefficient because the products were so, they had so much friction. They had friction. David, but David, do you think that people, if we run enough testing now to figure out that people have these antibodies, they should be out. No? They should be mingling and interacting,

and should we be sending all people out? Like, how do you actually have herd mentality become a useful thing? Because what if everybody just isolates? Look, there's a few, it's so successfully that none of us have this in unity. Look, this is a general, there's a philosophical question about, and it's how the FDA operates and the CDC, and you have to ask these philosophical questions first, which is what is the FDA operates and the CDC, and you have

to ask these philosophical questions first, which is what is your objective, what are you solving for? If your objective is to minimize the number of people that die from this particular virus, you're going to have one decision. And if your objective is to minimize the economic impact relative to the number of people that will die as a result of bad economic impact, you're going to have a different decision. It's really hard to think in the broader context. If you're saying, don't let anyone get sick and don't let anyone die, everyone should stay home and not take any risk.

That's effectively what we're doing. Given the uncertainty, it certainly seems to make sense from a policy perspective. We should be doing that today. The result of, look, we now know that some percentage of people have the IGG. Let me ask the other question. If I knew that 99% of people that got this thing had no lasting effects and got over it as if it were a cold, would that rationalize everyone should go outside because you have a 99% chance if you catch it, whereas 1% of people, if they caught it, will still die.

So how do you draw the line? What's the right philosophical decision in that context? And so even if what we're saying is true, that 99% of people can get it, they're asymptomatic, they get over it, they develop immunity, and we can kind of develop herd immunity, and very quickly kind of reduce this thing, we're still going to be putting 1% of people

at risk of death by doing that. And so, you know, what's, guys, what's the over under today? The president said he had a coronavirus test administered last night. He did? The 13th, he said that. And finally, somebody cornered and said, we're on a 24 hour shock lock or less. I have my own view. I'll go last but what do you got? What's the deal we're under on? What the results are? You know he shakes a lot

of hands and he had a lot of foreign visitors and some of them have had it. I'm going to put it at I think he's got a 20% chance of having it 30 something in that range. One in five, one in three, something in that range. Yeah, I don't know. Five, five percent. I think that the answer, the answer that we will get is that he's negative. I think that the way in which they do this test is incredibly important. And so if I had to guess, I talked to SAC this morning about this

as well. If I had to guess, here's what they would do, which is they test 50 people in the White House. I love how you get the same time. You know, this is what we would do. You test 50 people in the White House, right? And an incredibly small number of people know which file is which person. Then you send it to the lab and you get the results. So no lab tech can ever know. If there's even one positive result, you quarantine everybody. And that's probably the most risk minimizing thing you can do so that it's not just the president that gets tested and then we're not waiting with baited breath for a positive test

And then the government can can basically manage how they treat him Because I think it's highly problematic in the next two or three days if we found out that he was positive And I think it's much more manageable to say there were 50 people tested, one person was found to hit be a care, or two or three positive tests and record. And everyone's quarantined. Yeah. So yeah, what are the chances? Anonymous.

Anonymous. Anonymous. What if the chance is that he has it already, he's been tested and they're already lying in the sake in that they're telling us he's getting tested on front? I don't think so. I don't think so. I think that's zero just because I think he's, he really is, look, he's, you know, by being the president of the United States, the most powerful person in the world, the richest

person in the world, and the best taken care of person in the world. And in as much as those, we all believe in those things, which I think everybody around the world probably does, I think it's really important that he is there healthy as a sign of strength, quite honestly. But what if he's sick and he recovers jamab? What happens in markets, right? So let's say he gets declared to have a coronavirus, markets tank as you're saying.

And then I have to ask forward five days and he comes out of it and he's like, yeah, that's not, but it was like having a bad deal. So I think it's more that we will not be told that he is sick, but that he is quarantined for safety on the presumption that he recovers. That's the smartest thing to do if I were them. All right, well let me do what I would do.

Now, I mean, the only, because the thing is, you want him to come out of this, 100%, and you want him to be healthy and say, guys, much do do about nothing to your point. Because if he can say that, I think that a lot of people will calm down. And then, which by the way, we all need to start talking about, which is the second and third order effects of literally shutting the world down for what looks like somewhere between three and nine weeks, if not more.

So we can get to that task and figure out what's there. The real corner case scenario is if his situation degrades and Mike Pence has to become the president, that's a real bad situation. Yeah, let's talk about that. And this is dark, but this is the way you have to think about all possibilities if you're making strategic decisions. If he gets on a ventilator, what happens? Is he going to just cause a pure terror and panic the sock market collapses if he dies?

Got for a bed, and I know some people hate him and wish death upon him. I don't I mean I don't like him But I don't want to see the product. Let's get clear anybody. Nobody should die from this. Unfortunately people will he did what happens I think that I think the odds of that are incredibly low So let's not even kind of deal with that I think what if I I think that I think the odds of that are incredibly low. So let's not even kind of deal with that. What if I celebrity dies? I mean, I, we, we, we sit here in America with the NBA and Tom Hanks with the things that made people finally pay attention to this. If Tom Hanks or an NBA player dies from this or is put on a ventilator and almost dies. What is that? Well, let me ask the question. Let me ask the question of like, if they die, and then if they recover in the next week.

So as you see, because no one's had these recovery stories, there have been zero of them out there. Everything is about you're in the hospital and you're dying. And you're gonna die. Yeah, well, sorry. No, no, there have been zero here, but there are tons of them on WeChat. And so, you know, for example, like when you,

when you look at how the Chinese have responded, you know, they went from a massive lockdown to a partial lockdown to what is being a graduated decline and a ramping backup of life as they knew it. Now, in terms of the top-down control measures, I think if in Western culture we have to deal with a lot of very visible people dealing with this successfully, I think if in Western culture we have to deal with a lot of very visible people dealing with this successfully, I think people will be more laxed asical than not. I think if people self-quarantine and then get better, that's the best result. If people get sick that we all know and unfortunately are in really terrible straits. It's real, I think it's really bad psychologically for folks to have to deal with. That is the worst path. Not good.

Yeah. The care of the celebrities is going to obviously be great. And it's very likely that Tom Hanks and the NBA players who are in fantastic health are gonna, they're low comorbidity in fantastic health are going to, they're low-comorbidity and they're getting great care and they're going to come out of this thing in the next 10 days. And when Tom Hanks goes back on Instagram and says, like, hey, look, like I had a bad cold, that's what it felt like. It was like just being knocked out for two days.

It just seems to like create a different story that I think most people at least in the United States are assuming, which is this thing is just pure debt. And we're all going to die from it. We were talking before about Italy's profile. I ran also had a breakout. I ran is very young and they seem to be I just pulled up the Wikipedia page about cigarette consumption per year and they're right behind the United States with 936 per year per capita. But on a demographic basis, they're very young, looks like only 10% of the population, 12% of the population, yeah, 12 or 13%

of the population is over 55, the rest are under 55. Well, maybe David says it's kind of, it's now we may be, we may look back and realize that this is a disease of combinatorics, right? So if you have a bunch of ants, that's the worst case scenario. So if you are old and you have comorbidities and you have limited critical ferric acidities and you have a high smoking incidence, and so your pulmonary compromise, as well as immunocompromise, and end and end, you have an exponential, unfortunately, decay function here. And ACE2 receptor, and ACE2 receptor, exactly.

So it turns out that, so the ACE2 receptor is this protein that shows up on cells, and it is the point of entry for this virus into cells. And so they have now identified that Asian men that smoke have a higher production of this ACE2 receptor than other men that smoke, that there may not be a difference between smokers and non-smokers and white people. So they're starting to identify that there may actually be both genetic and behavioral underlines that can increase the entry points for this virus on yourself.

And so we don't know yet what, as Timok calls it, the combinatorics are, we don't know yet like what combination of things is going to increase the risk factor. There may be something genetically in the Iranian population or in the behavior of the Iranian population that may increase either the receptors or it may increase the help of the recovery of the lungs and so on and so forth. I have one question and then I want to move to economics because I think it's really important. David, what do we do from here so that if this type of thing were to happen again and I'm speaking specifically

about the science, the rapid prototyping, the figuring out of both the testing, the identification, and then a pathway to drugs. What do we need to do as a world, frankly, differently than what we've been doing today to make sure that we're better positioned? So, there's definitely got to be emergency protocols that are more clearly defined for these sorts of circumstances. In the US, to be able to do testing under CDC guidelines, you had to have a CLIO lab and you had to have a test certified.

And there was all the certification bureaucracy that made it really hard to be a tester for this thing. So then they had emergency use authorization or EUA where you could kind of say, hey, this test and this lab can be used to figure out what's going on. And that also then turned into a bureaucratic nightmare where you have to go submit a request for doing emergency use authorization and so on and so forth. We've got to fix that so it's not so specific to each test in each lab and it could be a generalized guideline for this type of test, for this type of disease, can be very rapidly

prototyped and launched in production. And so you don't have to go through an approval for every one of the tests under an emergency circumstance. I got the second thing is we got to get production of these tests in the US and we shouldn't be limited to PCR tests. Their new technology is called Sherlock assays that use CRISPR molecules and you can print the test on a strip of paper and it can find DNA or RNA in a segment and light up the strip of paper

until you write away if that DNA or RNA is in the sample. And you can do that like on a pregnancy test. You don't need to ship it through a lab. And so we've got to get those things approved. We've got to get them standardized and they can be broadly applied to any viral infection that could start coming out to the population. And then we've got to get production for those in the United States. But right now we're dependent on the Chinese and Koreans to make the tests for us and

then we're sitting around waiting, meanwhile, they're unlocked down and they want all the tests. And so there's a couple of things to fix here. What about how the FDA goes through the approval process for candidate compounds, including an unlimited to sort of the time and the cost and the process for double-blind studies? And we treat humans, We treat citizens like idiots.

And I don't think that it's fair and reasonable that people shouldn't have the right to decide what they do and don't want to use. And that's just my personal point of view on this stuff. And we basically act a little bit like a paternal state. And going back to my earlier point, about what's the philosophy here. The philosophy is, do no harm. It's not to do the most good net of harm. And so when you say a do no harm

It's like you cannot put a drug out there that might kill people Even if you might kill let's say two percent of people that take it but 80 percent of people now double their lifespan Or 80 percent of people that otherwise would have died to now live right so the the framing of like the regulatory approach To drug development and approval is really challenged in the United States. It makes it hard for an expensive for new drugs to get built and launched very quickly, even though we have the manufacturing and science capacity to do it. It also makes it really hard because individuals don't have choice.

They have to wait for FDA approvals before they can decide whether or not to take the risk themselves on whether they want to try this drug. Rendesaver should be broadly and widely available right now. People shouldn't have to file for compassionate use to get it. They should be making it, printing it, should be in every hospital, and people can decide whether or not they want to take the risk. There doesn't seem to be any mortality associated with taking Rendezziere, so it seems pretty clear cut

that most people would raise their hand and say, do you need that shit? It's crazy that you have to- It reminds me when you say that of the same patriarchal approach we have to allowing people to invest in private companies. How do we're trying to protect them from what? From placing a bat on investing in a private Airbnb or LinkedIn or something like that. We have these rules that might be 50 or 100 years old in the case of accreditation laws

and not sure how old these FDA double blind laws are, but this might be something we need to rethink. And you see with the crypto space too, where people can experiment with cryptocurrency, is they have to go to Switzerland or another geography or location to do that. So when we start thinking about the economic ramifications, and obviously this is, I think for some people,

they might feel this tasteful to start talking about money in the face of a global pandemic, but as you said earlier, David, people will die because of economic issues as well. There are more people, let's be clear, more people will die because of the second and third order effects of coronavirus than these first order effects. Give us some examples of that.

Give us some examples, so that people understand what some examples to that. People understand what we're saying here. So, you know, this is the tragedy that's unfolding before our very eyes right now. It is the slow motion train wreck. You know, if I go back to 2008 for a second, let's just talk a second about that.

In 2008, what we really saw was a very, very focused kind of contagion that was very much lost on most people except for those that had been the victim of predatory lending and subprime mortgages Who lost their houses that was terrible But the real financial Impacts were born by institutions and their shareholders The long-term effects, however, did come back and spill over to Main Street because a lot of people then as a result Had a lot of time hard time getting really back on their feet and that economic malaise spread like a pandemic all over the United States.

But the immediate short-term pain was felt by a handful of institutions that for most people are nameless, faceless organizations run by, you know, to quote Bernie Sanders, millionaires and billionaires and Billy. Okay? One cent of the one percent. Yeah. This is completely the opposite. This is Main Street first and foremost. And that kind of impact in all of our lifetimes we've never had to deal with. And it's not going to be the two to three or four months, you know, eight to 12 week social isolating lockdowns that we are in. It's all of the downstream effects to all kinds of industries, you know, obvious like the obvious ones, airlines, cruises, hospitality, retail, and then the non-obvious.

So, you know, again, let's imagine that you're a startup and you sell software. Well, you would say to yourself, I sell enterprise software, so no big deal. Nothing happens to me. Not true, because some of your customers, or some of your customers' customers are either in those impacted industries,

or their customers are those impacted industries. So this is the first time in a very long time, where we're really gonna see the domino effect of economic contraction, this combination of a supply side shock and a demand shock. And supply side shocks can be fixed. They can be fixed actually relatively quickly. It's the demand shocks that are much harder to recover from because they're deeply psychological

in nature. They drive de-leveraging. And de-leveraging is going to be an important term that folks will hear over and over over the next nine months and That process of the leveraging this multi trillion dollar credit bubble that we have to Hopefully in a in a in a reasonable way, but probably not it'll be violent and messy unwind We'll leave I think a lot of people unemployed, a lot of businesses out of business. Or quick. Or quick, because can't we have some kind of

basic intervention here? I saw today Alamo Draftass as an example, which is a smaller business of movie chain than many people love. They were getting sort of dunked on barbecued and potentially canceled on the social media because they furloughed their employees for 30 days. They're hourly employees. So now these hourly employees, basically furlough means we're not paying you anything and we're shutting down. So now can it Trump or anybody just give people a stipend or something and this might be the UDI tab

or any for? Well, how? I mean, for example, there are millions and millions and millions of small businesses. What are we going to do? We're going to have them go to a website, fill out a form, and all of a sudden what, you get as much money as you want, you somehow prove what your monthly burn is. Yeah, you basically could just say, here's my last three paychecks and we give you four paychecks. I mean, you go to that paper, we're not going to apply for it.

The easiest way is going to be a tax refund as a percentage of your taxes paid over the last three years. It's going to be some like rebate. But I think these kinds of surpluses, guys, don't do the trick. I think that, for example, if you are all of a sudden in receipt of, you know, let's just say a year's worth of your, you know, average three-year taxes over the lot. I bet you you put it in a savings account and you don't do anything with it. Yeah. You're not going to go to Alamo Drafthouse now. Let's look at Alamo. Alamo Drafthouse, more than likely, I don't know, but I'm guessing, rents their retail footprint. And there is a rate, there is a rate, or there's an MLP, or there's a landlord that owns that retail, retail real estate footprint. That person has

probably bought that building at 80% loan to value at a 4% capital. The math doesn't matter except to say that you are not in a position to forgive 4, 5, 6, 7 months of rent. You're not in a position to, thanks will foreclose in default. And so you will demand that money available. Alamo will then first deplete their savings. It'll be very difficult for them to tap the debt markets and get alone, unless they get it from the government, and hopefully they can. But those are the knock on effects that are going to happen right now. We have to see the first of those dominoes fall and follow that trail of breadcrumbs.

And to me, it's in that devastation where addiction goes up, where all of the sort of things that we've seen in the last 10 years, we have seen it right in front of our eyes, what the impact is when we lack a social safety net, where we don't take care of the poorest men and women to side us. And then we have a financial shock to the system. We already know how bad it is. We saw it.

Sorry, we saw it. We saw it with the impact just with a few companies. And now, we've expanded industry by industry. No, I totally agree. I mean, we saw it in the rural markets in the 30s. And we saw it in the rust Belt in the last 20 years. The statistic today is that 48% of all US employees work for a business that's got 10 or fewer employees.

Now these businesses are not only retail, it's also the plumber, the gardener, the housekeeper, the, you know, any local service provider at any one of these markets. And like, in this market, we're not having folks come out and do local services. We're not, you know, going to the local hair salon. We're not going to the local coffee shop. All of those people are typically living on two to four weeks of cash flow.

63% of Americans have less than $500 of savings. And a huge percentage of them. And another 10% of Americans work in either the energy sector or as retail workers. In addition to that small business market. So we're talking about nearly 60% of American employees being exposed to the fallout from shutting down business for anywhere from two to six weeks to two to nine weeks, whatever the number is. And most of them only have two to three weeks maximum of cash flow or bills owed in their

bank accounts. Travel is an 8.8 trillion, nine trillion dollar part of the economy of the world, right? So 10% of two-quarter shock is basically four to five trillion dollars. The implications of that rippling through every economy in every country, I don't think has been really internalized. And this is where we need massive coordination at the federal level across the world. This is where the presidents and the prime ministers of the most important countries need to come together now, decide on a global stimulus package, and make sure that they drown the markets with confidence that they will be there.

Because otherwise, when you see draw downs like this in the stock market, we've had this conversation in our group chat, the bottom isn't put in 20 days into a draw down like this. It doesn't happen on day 20. We are in day 20, Monday will be day 21 or 22 or 22 right so the bottom comes in somewhere between day 200 and day 250 what that means is that September to October and what typically happens is we react in a partisan way okay so check the box so far we do half measures check the box so far. We do half measures, check the box so far.

Then we correct on the first order problem. Let's just say we've done that now. And now we have to start the economic rationalization of these impacts, trace them all, and then start to fix them. And if it's anything like 2008, it's going to dribble out in phases, which means that the real damage won't really be understood for another quarter or two after people print the quarter and after people guide. And when these

public companies do that, the stock market and investors by and large will realize, wow, this is a much bigger problem than 2008. And if that plays out... I think this is a bigger problem than 2008? Absolutely. I agree. By the way, on Shamaaf's point, I pulled up these stats and I put them in your documentation, but 1987, peak to trough took 14 weeks. The dot-com bubble bursting took 25 months.

2008 took 5 months and we're only, as Sh Timot said, less than a month into this one. 1987 we saw 33% retracement, 2000 we saw 47%, 2008 we saw 56% and we're only 20% into this one. And by the way, another way to think about retracement is not a percentage loss because we've had a massive bull market here for the last couple of years. But it's how many months did you retrace back in terms of the S&P? In 87, we traced back 23 months, in 2000, we traced back 5 and a quarter years. In 2008, we traced back 12 and a half years, and so far, we've only traced back 13 months to the S&P where it was 13 months ago.

The other thing you guys have to keep in mind is the thing that is very different. So it's not as if everything is going to be the same. It's not going to be a repeat of the dot com bubble or 2000, but they're similar and they rhyme. But the differences are important. The difference this time around is that we have gone through a multi-year period of incredibly low volatility. And in that period of low volatility, two things have happened. The first is that we have had public market financial capital market participants get absolutely levered up. So I'll explain what that is in a minute. And the second is the emergence of computers and quad funds in algorithmic trading.

So on the first side, let's just say David and I ran a hedge fund, Jason, and we took money from you. And we'd say, Jason, we're going to give you 10%. And you're like, that sounds like a good deal. You know, bonds are at zero. Here's my money. Now, David and I would look at ourselves and say, well, we would love to stay in business forever. And we want to collect 2% off of Jason's money. So let's try to do this in the most conservative way possible. We're going to try to get 1% a year. Can we make 1% a year? David and I look at each other and we say, yeah,

we can make 1% a year. How do we do it? Well, let's break it down, divided by 12. OK, we've got to get 82, 83 basis points every month. Okay, we can do that. We can make 80 basis points a month. Or sorry, eight basis points a month, sorry, whatever the map is, 8.5 basis points a month. And so let's say we figure out a way

being really conservative, we make eight and a half basis points, one percent a year. Well, eventually we look at each other and say, okay, well, we need to multiply this by 10. Oh, I got it. I'm gonna go to my prime broker, JP Morgan, Goldman Sachs, Morgan Stanley, and say, guys, I want you to lend me 10 times on my money. And they'll say, whoa, whoa, whoa, big boy, hold it up, and I'll say, listen, And they'll say, whoa, whoa, whoa, big boy, hold it up. And I'll say, listen, look at the volatility. There's no volatility.

This is a really safe thing to do. For every dollar I put up, you give me 10. And now, everything that I was doing is multiplied by 10. My 1% a month becomes the 10% a year. Voila, I look like a genius to you. In reality, David and I are making 1% a year, voila, I look like a genius to you. In reality, David and I are making 1% a year multiplied by 10 turns of leverage, okay? Every hedge fund runs this way.

Now, when volatility goes from zero to 50, to 60, to 70, in a matter of days, which is what's happened now. The banks who are not stupid say, hold on a second, you owe me money. You need to post more money if you want me to continue to give you this kind of leverage. There's no volatility. I cannot guarantee that Amazon is worth 50% of what you say. I have to assume Amazon is worth 50% of what you say. I have to assume Amazon is worth 20% of what you say.

So I can't use Amazon stock as collateral. I can't use these 10-year bonds as collateral. I can't use whatever you're giving me as collateral. You need to post more money. And then what happens is I have to deliver. I had make margin calls. I have to deliver. I sell my safe assets. I sell gold. I sell all these things, which is what's been happening now. So that's number one. The second, which is why you see all of this massive volatility and it kind of builds on top of itself is you have these algorithmic

quad funds that just see price signals and then they act. just see price signals and then they act. It doesn't matter if it's a good day, it doesn't matter if it's a bad day. They know that the next tip is going to be up if the last tick was up or down if the last tick was down. And when you have hundreds of participants putting in billions of dollars multiplied by that leverage. So hundreds of billions, you get these tsunami effects

where one day you're down 10% and then the next day you snap back 9% Because even if there are a few individuals making idiosyncratic human-led decisions All of a sudden it's drowned out by the computers and the leverage That's a really big difference that exists today that doesn't really exist or didn't exist these last times And so we're gonna be in a very violent, thrashy environment as we do. Right. As we figure out which credit funds are upside down, there's about 75 billion dollars of debt across the top seven or eight petroleum companies

that comes to you over the next few years. And the average price for a barrel of oil needs to be 50 bucks for them to not be upside down. It's 30 in falling. Some of these guys, I can't see petroleum, needs oil to be at $80 a barrel for them to make their debt payments. So we're going to start a very awkward period of de-laveraging and a very long period where we're going to have stresses and shocks that are not industry-specific. It's not just going to be Lehman and Bear. It's going to be brand-name

companies that many people that are listening to this know and understand who are put under financial pressure, who cannot make their interest payments, who default on debt, who miss their earnings. And so this is an environment where cash becomes king and an incredibly clean balance sheet becomes the single most important thing that you can have.

So the Google's apples, Amazon's in the world are sitting on tons of cash, Microsoft's, I mean they're just going to go on an M&A spree, you think, or they're just going to sit tight. Well, the anger that'll turn onto those five companies is going to be incredible because you talk about a trillion dollars of cash, a trillion dollars plus, with five companies, they represent 20% of the S&P 500. And, you know, the only thing that hasn't really sold off yet are those five big names. They've come off a lot, but not nearly as much as the rest of the market.

If and when those things break, not because of their balance sheet or of debt issues, but just because of how risk off everybody is in the broader market. You're going to look at those companies and they're going to get in a really difficult situation. You could have forced repatriations where the US government says, sorry guys, the money has to come back and I'm going to tax it. And you know, all these things people say will never happen, but there are these moments in time where you just can never say never. And I would say to all of us, this is a moment where your presumptions of normalcy need

to get paused. Yeah. Well, and we've had these moments before with 9-11, the financial crisis, rare recession, and the dot-comb bus, David. What are the chances percentage wise that this results in a very quick resolution? So quick resolution being defined as, hey, we quarantined for a month, turns out America is similar to countries

that don't seem to be impacted by it, and we're back to business as usual in the fourth quarter. Look, I think the chances that this resolves in a month and we're all, and we hit that sig, I'm actually just looking at today's reported numbers and it looks like hopefully we end up in the same number of new cases as yesterday, but we'll see by midnight. But hopefully that starts to happen, people recover. Again, I pray that we get these IGG tests out there

so that we can show that there are 10 times or hopefully some large number of people that were asymptomatic that have this thing, not from a showing it that it's going to cause more contagion. But the general case of this or the average case of this or the 99th percentile case of this is relatively mild and people calm down. But, I do think it's non-linear in terms of that second order and third order effects that we've been talking about.

Even if we got back to business as usual in a month, we don't yet know how losing two to four weeks of cash flow is going to affect every salon in every major city, every local restaurant, every local movie theater, every local plumber. All these businesses that have been, how their revenue literally turned to zero in the last two to four weeks. of city, every local restaurant, every local movie theater, every local plumber, all these businesses that have been, had their revenue literally turned to zero in the last two to four weeks. If they only have two weeks of cash, they're bankrupt. If they have six weeks of cash, they're reducing their investments this year.

If they have eight weeks of cash, they're probably cutting a couple of people from their, uh, from their payroll. So we won't know for a couple of months going back to this point about, hey, we're talking about Q3 when this all finally kind of comes to there What the shutdown that we're in right now and are going to continue to be in probably for another two to four weeks is going to do and we're going to find that out over the next couple of months But it's going to be ugly And so I'm not feeling like very confident that in four weeks we're going to say hey guys We're out of the woods unless the federal government shows up with a $3 trillion loan package that any small business can access

in any unemployed person can access, and it really fills the gap. And then you're effectively talking about one year of a Bernie Sanders tax hike anyway. So like, hey, it doesn't really make that much of a difference. Look, it's a 20% of GDP that we're given away for one year to keep the economy from completely collapsing. And I think that's where we have to end up, but until we get that package, and we know how big it is, and we really know that it's going to fill the hole, we don't know if we're driving off a cliff or not.

It is 100%. Yeah. 100% certainty that Trump will do something like this because he wants to save his presidency, correct? Jamal? See, only chance he has. I think the problem is that the Republicans and the Democrats are playing political chicken with each other. And this happened during TARP. It was a trickle, trickle, trickle, trickle, trickle.

And I think it's going to happen here. You don't think they're going to get on the same page and realize, gosh, we're all going to lose in this case. Or do you think the Democrats have a reason to let Trump fail and let the economy fail, so they have a clearer path to victory? I mean, I know that's a good thing. No, no, no, no. Because then I think that they, then I think Trump should get reelected because they

have a bigger responsibility to the people than, you know, blockading the president of the United States. That's ridiculous. I think the reality is that we are willfully underestimating the second and third order effects. We will be, we started with an $8 billion package. This last package, I think when we put the numbers together, will probably be an order of magnitude bigger.

Okay, whatever. We'll wait a few months and then we'll probably be in order of magnitude bigger. Okay, whatever. You know, we'll wait a few months and then we'll have a couple hundred billion dollars. It'll be kind of tarp-like. It'll probably be a bailout of a couple of specific industries. But, you know, you can't bail out every industry. And the ultimate package probably needs to be on the order of a year to a year and a half of world GDP spread across all the major countries of the world.

And so, you know, for the developing countries, the mechanism is probably the IMF and the World Bank, but we need somebody real in there doing it, you know, not these kind of like career bureaucrat dipshits that are in there now. So, you know, get somebody like Bloomberg, maybe he steps in and, you know, he can allocate the money. And then the G8 or the G20 basically then puts 75% of the dollars into their economies. You know, Germany has to basically go into deficit big time. They can't kind of run this austerity campaign.

So there's a lot of big decision-sciation that need to happen. These things can't happen in days, nor weeks, and they're precipitated on data and political pressure, and that takes sort of weeks to months to build. So, you know, I kind of think we're in a kind of wait and see mode here where, you know, there'll be these relief rallies because people, I mean, look, legitimately, we all don't want to be living through this nightmare. And so every chance people get to buy as a signal that this is over, they will take, like they didn't know it. But eventually, the news just kind of is, you can't overlook it. And you can't take the ostrich strategy of managing a business.

So I've had a company already who did a deal yesterday at two times forward ARR. Two times. This is a company that will do 35 million of revenue. 35 million of revenue, 35 million of revenue. Now you could say, hey that's crazy, like we're a startup, like you know we are funded by Siri, you know, the best of this, you know, tier one, tier two, venture capital, and honestly my reaction is shut the fuck up and go fuck yourself. You are going out of business. And that was the market clearing price,

but that CEO did right by his team. And history will look favorably on that guy, because like Buffett said, in moments like this, and in your life, in business anyways, but I guess also in life, the most important thing is to not go out of business. It's to survive. Yeah, I mean, I was explaining it to my founders in our group Slack room and I said, this is job number one. If you take the seat as a captain, you got to keep the plane in the air.

You know, you got to find a place to land the plane and you need to know your altitude and that's your runway. And, you know, you know, you know, I think in this way, start-up CEOs are the greatest canary in the coal mine because you know They are the ones that are the most resistant to these implications. They love the Halcyon days of the Cinderella ball They love it the clock never strikes midnight They're never running down the stairs leaving the glass simpler, you know, that's that's that's what makes them great in many ways. They live beyond what their station in life is and hopefully they make it. But in moments like this, you really have to realize that the that the shot clock is on and it has nothing to do with you.

And if you are losing money and your op-ex is high and you don't have 24 to 36 months of cash, you have to really figure out how to get that money because it's going to get harder and not easier. Like, give you a simple example. I was thinking about like all these companies in the next few years that had plans to go public. They have options that have to invest. They have RSUs that will expire. I've read about Airbnb. These are really complicated examples of companies that are great companies with unbelievable

employees who deserve the hard to be rewarded for the hard work that they put in. And now you're faced with the situation where you're money losing, burning cash, you know, options about to expire. I mean, people have to read. Should have gone public. I mean, this is why Bill Gurley was sounding in alarm what three or four years ago saying, listen, if the window's open to go public, get out.

And, you know, clean up the balance sheet. Yeah, I mean, the IPO went from one year. I, you know, my last year, last year, I wrote this in my letter, like last year, I took a lot of heat from some folks around me because I focused on liquidity. You know, I generated one, I put 1.7 billion on the balance sheet last year and I just remember like people like, you're an idiot to sell. Why are you selling at these prices? And I said, honestly, I've been through the dot com bubble. I went through that. It took me 13 years to get even. From 99 to 2012. Look, 13 years. I went through, oh wait, but it wasn't so bad because I was mostly head down working at Facebook at the time. And I just thought after 10 years of building something, I don't want to have all my chips on the table anymore.

And what I want to be in a position is to be a good, steady source of capital in moments like this. You know, call it a white night, call it whatever. But now, you know, what I'm telling everybody is put out the work. I have billions of dollars in a balance sheet. I'm willing to put it to work. I want to work with founders who are sober and realizing how important this moment is for their company. But there's going to be an incredible number of businesses that have to act and they're

not going to act for the next two to three quarters, I get it. But they like the government, like the stock market, like everybody else will capitulate. And hopefully when they do it, the money is there. David, how are you approaching the next year when you look at yourself building startups? I mean, obviously, you know, as I was self I myself people you know fortunes are made in the down market They're just collected in the up market as Shemoff just pointed out as well How do you look at the next year and then going into this next decade as a founder? So yeah, we build businesses and then we eventually bring in outside investors into those businesses

So we are eventually going to be looking to capital markets to help fund our projects. And so we put money off our balance sheet into starting these businesses and we fund them during that initial phase. So the first thing we've kind of talked to folks about is like, don't optimize for time, optimize for survivability now. I've had one VC text me earlier this week

and say, we're all leaving the office. And this was a VC who had given us an offer to invest in one of our companies, Yank the offer this week and said he's gonna go, they're shutting up shop, no one's gonna be in the office, they're not doing any deals until things kind of come back, whatever that means.

And then I've seen another venture firm, which is a much larger firm, say it's business as usual. We don't care about up markets, down markets, we're still investing. Valuations will ship, hopefully, and the markets are going to ship what we're going to invest in, but we're still here and we're still doing business. So I think the first thing is, for the right business, there's always capital. I built my company, I raised my series A in November of 2017, sorry, 2007, and then 2008 happened. And I'm really glad I raised more money than I wanted to for my series A. We made it

through that period. We built a business and then by 2011 we had such a great business. We raised a nice series B and then a series C a year later and then we sold. So it was an incredible run, but we went through that period of building. And it was great that we had the cash. For the businesses great that we had the cash. For the businesses that don't have the cash, I'm worried about, are we going to have to put money off our balance sheet to help fund them? Because it seems like there's less of these convertible

notes and safes and people interested in bridging stuff. And all the stuff that was a little bit, like Chimoff was saying earlier, I'll take more volatility right now, or I'll take more risk because the ball is low. It's very likely that everything ends up raising their next round. Now we're talking about probably 60% of things are not gonna make it to their next round.

So I'm gonna take less fall, and that has a kind of exponential effect in terms of accessing capital. So we're telling everyone cut costs, make sure that you manage for survival, do not manage for optimization on time. Traditionally, we've kind of been aggressive and said, try and get as much done in six months as you can and hit these big milestones as quickly as possible.

Now we're saying, you know what, take your time to hit the milestones, just make sure you de-risk a little bit, even if it takes two years instead of six months, as long as we have enough cash to survive two years. As soon as we get out of this, you know, we'll be fine, but that's kind of what we're doing. Sounds like wise advice. Chances, Chimoff, as we wrap up here, we're 80 minutes into the first episode zero of the All in Podcast, emergency pod here talking about coronavirus with David Friedberg and Jamal Paihapatia. Jamal, chances right now that this is resolved in a couple of months and we get back to business

as usual, what would you set the percentage chance up? Zero. If you, I think we deal with the first order effects of the disease in eight to 12 weeks, so, you know, probably by May we'll have a decent handle on the impacts and we'll be through most of the worst of it. And I think the economic bottom is probably Q3, Q4. And I think that we're going to touch 2,000 on the S&P. If not lower, I hope we don't, but I think we are. And I would just encourage everybody to start internalizing the second and

third-order effects. We are the world. As of now, it shut down for two months, the world. And, you know, much like an old car, you can turn it off fast, but sometimes when you turn it on. Yes, but sometimes when you turn it off, it's better to have it open. Yes, it's open. How would it take a look under there, maybe clear out some? It takes a while. It takes a while. You know, traveled, by the way, you know, it's an interesting anecdote.

Whenever there is a demand shock in travel, I like travel, by the way, just because it's a really good, another canary in the coal mine for so many industries that are interconnected and highly dependent on each other. When there's a demand shock it typically takes 19 months for it to recover. One nine months. So almost three years now. really, really encourage folks to batten down the hatches, keep enough dry powders so that you can withstand what can happen in two years. And stop worrying about valuation, find good capital partners in moments of distress

like this, who can be, you know, fast and decisive and in size and try to get back to work and keep the people that work for you safe. Yeah. And if you were worried about civil unrest, right, it's break down a society, that's something that people have been hypothesizing about. No. And they always put it on the internet. The internet people are the ones who are most paranoid about this because Peter Tio and whoever bought some museum in real estate. There's a lot of us that fucking scratched our whole lives to get to the United States.

And I don't think that's who we are. Yeah. I wouldn't have come if that's who we were. David, you think of any chance of civil unrest at this sort of society breakdown kind of issue? Yeah, we're an incredible country. I mean, you can read Buffett's letters and he talks about with a great perspective

of the last, you know, what we've built in this country over the last 200 years. I mean, the economy, the infrastructure, the food availability, the health availability, the housing availability, government's challenge, but it's not as challenged as elsewhere in the whorehole. I don't think in the United States where, you know, it's gonna be a shitty time for people with capital.

It's gonna be a shitty time for people with retail jobs and hourly jobs and so on. The government's gonna be there to help them, but I don't see this government failing the people no matter who's in charge. I just don't think we're set up that way. Other countries have different models. I think there's other places where that may happen, but not here. 100%.

100%. All right. Listen. This has been a great episode. Zero emergency podcast for the oil and podcast. Thank you to my co-host Jamal Polyhapatia for pushing us to do this podcast and David Friedberg continued success building companies and we'll see you all next time. Bye bye. Love you boys. Thanks for your free burgers. When do you think the next

poker? When can we all get tested and play game of cards? God please Friedberg give us some tests so that we just get together and I'm losing so much money in every other part of my life. Why not lose money at the poker table can we do a zoom setup like this later and then I'll get on the poker star table like we do yeah I think we just have to get something going here because we can do we can do a play poker starts table and just play PLO. And the problem is, let's do it. Let's get on poker starts.

All right, everybody. See you next time. Bye-bye.