All-In with Chamath, Jason, Sacks & Friedberg - E162: Live from Davos! Milei goes viral, Adam Neumann's headwinds, streaming's broken model, microplastics & more

Starting point is 00:00:00 All right, everybody, welcome to the 54th annual World Economic Forum here in Davos. You guys didn't know this, but as elites ourselves, we were invited to kick off these festivities. Cirplicities. Yeah, you know, the all-in-podcast, very popular. And so they wanted us to come and represent the pod and our audience there. And it's been amazing. If you haven't seen some of the great musical performances this year. I mean, they're so notable.

Starting point is 00:00:27 Let's just start off here. I mean, guys, we were here for this live. Soak it in. I mean, I'm the replay headshot. So good. There's the air flute. So good. Wait, wait, there's a great moment where she really starts vibing. Wait, wait for the head shake. Eyebrows are great, but the head shake

Starting point is 00:00:52 comes in and about there. There it is. There it is, there it is. I like your moomoo, I like your moomoo. Have you ever played the air flute? Or just a skin flute, Jamal? Just a skin flute. I mean, I got it.

Starting point is 00:01:02 Well, there it is, like a high school, but guys, guys, this isn't it. There were other, there was a witch doctor or something, I'm not sure exactly what's going on here at the blowing of the hair Way too much for sure So they're blowing the COVID on each person's forehead here to spread the COVID They've all taken the mRNA vaccine, but you know we each have a speaking gig each of us is speaking and so I thought to kick us off here gentlemen instead of Us just telling everybody our schedule, I would sing our schedule. And so let me just grab a, let me see if I got my guitar here. Hold on.

Starting point is 00:01:53 Yeah, I have a guitar here. At least grab it here. Oh, here it is. Okay. Hold on. It's happened to have the guitar here. It's on the air guitar or real guitar. Oh, no, real guitar.

Starting point is 00:02:01 Real guitar. Real guitar here. So, but I thought, you know, everybody is really excited about each of our speaking gigs. So I thought we would just kick it off here. Let me just see if it's in tune. You guys hear that? Oh, okay. All right.

Starting point is 00:02:14 I think we got it. Kum baya malo Lord a cum baya in the dictator lounge at noon a cum baya conquering your up cum baya and now I'm gonna it's a little audience participation in here besties I need you each to sing with me. Okay. It's, uh, we're gonna start here. It's gonna be just listen one time and then you're gonna repeat. Okay.

Starting point is 00:02:50 Here we go. I tried to keep it together. Oh, Davos Kumbaya. So just Oh Davos Kumbaya. Ready? Three, two. Oh Davos Kumbaya., ready? Three, two. Oh Davos, Kumbaya. Okay, very good, very good. Okay, now go to the next verse here.

Starting point is 00:03:12 Chimaz in Loro Piana, Kumbaya. Hosting Steve Bannon at 1 p.m. Kumbaya. Three Bergs at 2 PM a cum baya Billionaire bunker panel a cum baya Till just bought one cum baya Hunter biting after party at a 1 a.m. Eight balls and S-corts for everyone.

Starting point is 00:03:49 Brought to you by Burisma. That's for you, Saks. And now you all sing. Oh, Davos. Scoom by ya. Wow. KU-M-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y-Y They just go crazy. Love you best, I see. Queen of the world. I'm going crazy. All right, everybody. Yes, the world economic forum is wrapping up in Davos.

Starting point is 00:04:32 If you don't know what the W E F is, I'll just give you the brief over you. 3,000 people, five days, tons of parties, happens in Davos, Switzerland, it's run by a foundation. They call these non-government organizations, NGOs. I could think of it kind of like the TED conference. Topically, she was rebuilding trust. It's politicians, business leaders, economists, journalists, all the elites, the mission statement of the WF, improving the state of the world by engaging business,

Starting point is 00:04:57 political, academic, and other leaders of society. I've shaped global, regional, and industry agendas, somebody's a money printing machine. I'll give you a funny backstory later if you care to know. But basically they try to shake it down for about 40 grand a year to go to this thing. Tons of notable moments that we can get to on the docket here. Freebreak any highlights for you watching this, you know, get mocked on social media. The sheer it's been a slow unraveling from this being something That people used to flex about going to Davos now people are literally apologizing

Starting point is 00:05:32 on social media x Twitter etc Explaining why they're going because they're kind of feeling shame and going to this event So what do you thoughts on the sort of whole flipping of this from being a flex to requiring an apology in advance? You guys know Andrew Ross Sorkin the journalist for CMBC. I think he posted on Twitter You know, I know I know forgive me. I got to go to Davos It's almost like Embarrassing now that you were associating yourself with the elite cabal in the Swiss helps during a time of rising global populism and all the criticism that's been rained down on Davos in the last couple

Starting point is 00:06:12 of years. And then Davos is trying to adapt by trying to be more cool and appeal to the the populist notions that have criticized them, thus the flute playing, thus the shamanism. And thus, I think a lot of what Javier Nilei has called a general economic support for what he defines as collectivism, which I'd love to talk about, but why don't we just say that? So I think there's generally been a response from the community that attends Davos, but there's a lot of conflict here with the fact that folks are flying in on private jets and telling everyone to stop producing carbon,

Starting point is 00:06:49 the fact that they're all dining and spending lots of money and telling everyone that we should move to more towards socialist conditions and higher taxation. It's all a lot of irony wound up in this whole thing. It's almost like a like a Simpsons show. It's what it's become. Well, and the theme rebuilding trust is kind of insulting at its face, at least to me, like, we don't trust you.

Starting point is 00:07:11 You don't need to rebuild trust with us. We're not going to trust you. There's no way for you to do that, especially after what happened with COVID. Sax, did you have any sort of reaction to this year's Davos and just how people are reacting to it? You heard Freiburg sort of thoughts on it. Well, Davos has become a parody of itself, and that's why you saw these clips go viral of these ridiculous antics of the priestess doing, I don't know what she was doing, but the only two

Starting point is 00:07:40 sets of remarks that actually were taken seriously on their own terms was the speech by Malay from Argentina and then also comments by Jamie Diamond. And the reason why they went viral is because they were actually saying sensible things that contradicted the sort of established wisdom or consensus at Davos. I mean, they were effectively sub-tweeting the other elites at Davos I mean they were effectively sub tweeting the other elites at Davos. I mean melee gets up there and I think he's introduced by class Schwab and he immediately starts denouncing collectivist experiments and Says that the West is in danger because it's elites have been co-opted by a vision of the world Which leads in Exorbit lead to socialism and thereby to poverty

Starting point is 00:08:26 so me like basically says that's right in front of clashwab i mean he's describing the the people at doves that's why that took off and went viral it was incredible i mean yeah in a similar way any fluid their commercial i don't know that yeah could as to him jamey diamond gave this interview.

Starting point is 00:08:46 I think it was on CNBC where he basically went full-chim-off. You know, he basically admitted that Trump had been right. And that, you know, a lot of the criticism of Trump and all the drugitary comments for years were basically just lazy. And he said that, you know, Trump was largely right on NATO, on immigration, on tax reform. He grew the economy. Immigration. Immigration. He was mostly right on China, he said. Diamond said he didn't always like how Trump said things or talked about people, but he said his policies were largely sound. And only look better in time since we've abandoned them

Starting point is 00:09:26 and he's basically saying that, you know, look at where we are right now and he questioned that kind of everything is hunky-dory narrative that the Biden campaign is pushing out. So he really went off script there and like I said, I think Jamal said it first here on this pod three months ago

Starting point is 00:09:41 and now Jamie Diamond is accepting that. So that was a huge subtweet, you could say, of all the elites at Davos and the accepted wisdom and the narrative that they're all pushing out. So that was the other big interview that went viral. And I think that's really saying something that the elites now have Pairity themselves to the point where Davos has become a joke and the only Talks or remarks out of Davos that people pay attention to are the ones talking sense To the people at Davos because they're not listening

Starting point is 00:10:21 Trim off your thoughts Look everything has a season. And I think that when there was a much more singular hierarchy of status, Davos played a very important role to signal to other people that you had made it. But you know, these things come and go. And I think that this is sort of in the the back half of its usefulness and half life. What is it probably more than anything else now? A glorified enterprise software sales conference where the reason to go to these conferences for a lot of these companies, I suspect is that it allows you to close very big deals, multi-million dollar licenses of this, that,

Starting point is 00:11:05 and the other thing, where you can get the leaders of that counterparty across the table from you and hammer out a deal. And I think you pay 40 grand a ticket for the right to get everybody together to do that. So I think they want to pretend that it's a lot more than what it is, and I think what it is is that. And I think whenever you have the ability to convene

Starting point is 00:11:25 people to close business, that's valuable. Beyond that, I think it's sort of in the eye of the beholder. And it used to be that the beholder thought that this was important. And now I think we realize it's much of nothing. It's shaman and airfluits and all kinds of stupidity, which is why people have the courage to go and mock it. And I think that Malay's comments and Jamie Diamond's comments exemplify that. The only other thing I would say is that I had heard, although I haven't seen it, so I don't know. Is it Alex Carr apparently did a very thoughtful speech about anti-semitism? And it is also, which is also very countercultural to the established logic that the surplus elites at Davos want to believe, which is the anti-Israel pro-Palestine line.

Starting point is 00:12:12 I haven't heard it though, so I don't know how impactful that was. But those are the three things that I've just seen on Twitter, just kind of... The malaise speech, I think, is the one that everybody is keying on. And correctly, so, correctly so, obviously he's the new president of Argentina. This speech was amazing. People might not also know that he was an economics teacher. This talk about collectivism leading to suffering and regulatory capture and bloat, which we'll

Starting point is 00:12:43 talk a little bit about when we talk about Boeing today, it was incredibly powerful. It's super basic. Listen, free markets work. There are people opting into either side of it. He went over, essentially, without saying it, the rule of 72, and 200 years of GDP growth and how GDP growth under capitalism rises everybody up, and then collectivism, aka socialism is a bit of a disaster. But it's well worth watching it. There was a really cool thing that a company called Hagen did, HEYGEN, with their AI tool. They just immediately took his speech, put it in his own words, and published it and translated it as if he was speaking English because he was speaking this native tongue.

Starting point is 00:13:27 So, really worth checking it out. And yeah, it was super notable. It's very basic, but I think it's everybody wants to hear this right now, which is if you're picking collectivism and socialism and redistribution of wealth, Argentina has like a really good history of watching this foul and now they're in the process of dismantling it. And I'll say something else before freeberg says something here which I think is going to be very thoughtful. Jason, the other reason why Argentina is a really good example to use is that what does

Starting point is 00:14:00 Davos represent at a different level? Well, what it is is Old Europe getting together in a way that allows them to continue to coalesce power and what's interesting is if you had presented the case of any other country trying collectivism and failing It wouldn't get nearly the same attention as Argentina and the reason is that Argentina has so many ethnic Europeans. And I think that's another reason, which is like when you present people that are telling you it didn't work, that frankly look like you speak the same language as you, I think it actually goes further in making the point. Then if you found somebody in South Asia or Africa that said the same thing to these folks,

Starting point is 00:14:42 which they have, which they've not listened to. And so this is why I think Malay is so interesting and important because he looks the part of a Western leader. And I think that that, unfortunately, is what it's going to take for some of these folks to listen. And everyone's acutely aware. I mean, I'll say three things on this. One is just talking to your point, Jim, off about the history of Argentina and how it relates to this position that Malay holds in being able to speak credibly to this. Second is what he said, which I think is really important and third is how it relates to the United States. But this was clearly, to my, for my view, one of the most important media events of the year, I do think that

Starting point is 00:15:15 anyone that's listening to us right now should go watch it and go listen to the entirety of the speech. It is so important. I hope everyone really takes in what he said. Just briefly on Argentina, in the mid 19th century, Argentina was a colonial nation, very agricultural, but a lot of free market pioneers and going on. Businesses were built and an economy flourished in Argentina. This photo I put up here is from 1913, Buenos Aires, which at the time was called Paris of the West. I was about to say it looks like Paris, right? The architecture and everything.

Starting point is 00:15:51 It's beautiful. And stunning. But here's some statistics. A lot of people don't know. Argentina at this time was wealthier than France or Germany. Twice as wealthy as Spain, and had one of the top 10 highest GDP per capita as of any nation on earth in 1913.

Starting point is 00:16:06 And so it was this flourishing, vibrant economy with a lot of innovation, a lot of arts, a lot of building, a lot of employment, a lot of immigration. And then the series of military coups began. I don't know if you guys are aware, but there was a military coup in 1930, 1943, 1955, 1962, 1966, 1976. And in every one of these cases, the essence of the coup was one of relativism, which is some people have benefited more than others. As a result, we need to change

Starting point is 00:16:39 the way that the government and the social structure is functioning, and it has to be taken by force. government and the social structure is functioning and it has to be taken by force. And I think this is the big story of Argentina that says so much more than any other nation of the past century, century and a half, which is that these cycles happen based on not absolutism but on relativism. And I'll just give you what I mean by that. Millay made this point, which is so important from the year 1800 to the year 2020. In the year 1800, we saw 95% of the world's population in extreme poverty. By 2020, it was less than 5%. And this was driven by free market capitalism, democracies,

Starting point is 00:17:20 that allowed people, individuals to pursue their own self-interest and as a result, deliver products into a marketplace that people wanted and were willing to pay for. And that incentive, that market-based system allowed the entire world to move forward. The relativism problem is that some people move forward faster than others. And that causes this great cycle of what some people might call envy or jealousy. And Belay said it best, the West is in jeopardy, which is the key statement he was trying to make in his point that countries are no longer defending free markets.

Starting point is 00:17:50 This is a quote, private property and other institutions of libertarianism due to errors in their theoretical framework and ambition for power. Opening doors to socialism and condemning us to poverty, misery, and stagnation, socialism has failed in all countries where it was attempted. And then he started to harp on about neoclassical economic theory and the issues with that. But I want to show you one last image which speaks so clearly to the point that he's making, which is as these governments that are well-intentioned and the people that elect the governments

Starting point is 00:18:20 and put them in power are well-intentioned. Then try to redistribute wealth by getting the governments to step in and play a market role. The market role that they play causes inflation, causes degradation and economic opportunity, economic mobility, and prosperity for most people. And you can see this in this chart, which we've looked at many times. But everything on the top of this chart, this is a chart that shows the 20 years of price changes of various goods and services in the United States. Everything that's gone up in price is something that the US government has a role in buying or paying for.

Starting point is 00:18:55 Yeah, controlling. Yeah. And everything that's gone down in price is where there is a free market that has allowed people to access goods and services at a lower price over time as opposed to a higher price over time. And while the intention is that the government is doing good for people by making education, healthcare, and other goods and services available to them,

Starting point is 00:19:17 the government stepping in and intervening in the free market causes the price to go up and ultimately you end up in a really negative cycle that resol results in this collectivism approach that he's talking about. And that's why I just wanted to tie back what he said to what's going on in the US today. And I've just harped on this a lot, but the growing role that the federal government is playing and the intention is good, but the impact is bad over time. And that's really, I think why it was such an important speech. He was so clear, it was so important for me to

Starting point is 00:19:44 hear it. I'm sorry I harped on, but I just really felt like I was a highlight. The key of his speech is, hey, good intentions can lead to a bad outcome here. Yeah, you want everybody to have health care, you want everybody to have education. The government is providing it and there's no customer and there's no market, there's no competition. And the products and services that you are referring to, they include medicine, they include college, they include tutoring, they don't just include, and they include air conditioning, they include refrigerators and televisions, smartphones, all of that. And picking which system and which set of problems you want to have, I guess, is what societies

Starting point is 00:20:18 need to do. And free markets. It's a weird reflexive loop, though, for governments, because these people, what he also said was these aren't just well-intentioned people. They're also a small class of elites that wanted to feel like they were better than everybody else by implementing things that worked. And so there is a dark part of this as well,

Starting point is 00:20:35 which is their desire for power. And I think it's important to not gloss that over. So this was just a bunch of bumbling do-goaters that screwed things up. This was also a bunch of folks that irrespective of the data had an opportunity to gain influence in power. I think that that's an important thing to acknowledge because it created a very negative reflexive loop that governments used, meaning if you look at freeberg's charts, why did

Starting point is 00:21:03 that happen? Well, part of what happened was the administrative state became more and more powerful. They were able to pass laws. They were there to decide who the winners and losers were. That is a drug and that drug is very addictive. And so what happened as this happened was the laws went and reinforced those dynamics of those people being able to decide winners and losers. The thing that it has that has not happened yet though and we're maybe we're beginning to see it in some of these markets that the government is to involved in is that it is bread a level of incompetence and in capability that we now have to unwind because the average everyday citizens lives are

Starting point is 00:21:47 we now have to unwind because the average everyday citizens' lives are either at risk or these services are just so expensive that it's just untenable. And I think that's where we are now. It's a great segue, I think, into this Boeing issue that we've seen because here's an issue of regulation and safety where you want the government and you want safe plans and you want some level of regulation, but then you get regulatory capture. But the government has not been the supporter of the safety agenda that citizens think. Yes.

Starting point is 00:22:11 Meaning when you look at what has happened in the US airline industry, there are a handful of end user providers, but those are all using OEM equipment from one of two vendors, Boeing or Airbus. So it's a duopoly, but in many ways it's a monopoly, the way that these folks fight with respect to tariffs and imports and incentives. So the United States airline industry is a monopoly of one company. Now, if you look at what's happened, what they would say is what planes have become safer and safer and safer. Yes, but they've become safer in some ways, in the most simple and obvious ways, but they've become unsafe in that you have these fleets of planes that are now behaving very unpredictably. And if you look under the hood, what happens is bowing as an example.

Starting point is 00:23:04 What happens is Boeing as an example, and like the last four years, how much money do you think they've spent on lobbyists and packs? I'll tell you, $65 million. How much have they spent just in the last year, almost $11 million? They're like the 15th most active spender in politics in Washington. Now, what did they use that money for? Well, that's also documented.

Starting point is 00:23:23 See, the crazy thing is, this stuff happens in plain sight. So they were able to water down the safety regulations. What does that allow you to do? It allows you to have a situation like this unfold. And then on the other side, the pilot's unions can lobby those same politicians who are taking money from Boeing and prevent systems that would actually make these planes safer. You can have more improvements in the guide by wire technology. You can have more improvements in GPS.

Starting point is 00:23:54 You can have more improvements in a computer's ability to help improve and augment the capability of the pilot. Unfortunately, that would result either in fewer pilots or less pay. And so that doesn't happen nearly as fast and obviously as it should. It's the same for air traffic control. And all of these issues build up because we've allowed monopolies to build up. So, as much as we think we are a capitalist society, we have veered into this collectivism in certain markets. And where it's measurable and obvious, we need to point at it and say, let's go fix it.

Starting point is 00:24:27 Yeah, and this would be, let me just tee up a little bit of what you're referring to in case people don't know, but everybody probably saw the news that on January 5th, the door blew off of one of these Boeing 737 Max jets. If you've heard that name before, it's because this isn't the first time that the Max jets have had problems. This plane safely landed Thank God, and there was nobody sitting in the row with a door blew off and this has to do with Some bolts on the doors, but this is just the start of problems with the 737 max

Starting point is 00:24:56 There's an incredible documentary if you haven't see it. Well, we'll put it in the show notes Boeing's fatal flaw and The version before this the 737 max nine is one that had the the bolts come off, Jamal. The max eight, if you remember, there were two really harrowing instances were tragically 346 people died in these two instances because the plane literally, the software on the plane, which is called max maneuvering characteristics, augmentation system, which was designed because they were trying to get more fuel efficiency and they had positioned the engines in a weird way on the wings. So they had to kind of help pilots level this stuff into your point about regulatory capture.

Starting point is 00:25:37 There was all this behind the scenes manipulation of the market to try to get these planes built, to try to get them out the door because there was so much money at state well on these two terrible accidents the plane the nose literally dove and the pilots were fighting it in both cases right they just crashed and everybody on board died and for 20 months the the 737 max models were grounded and that cost the company over $21 billion. So there is no competition to your point. And then in a free market, if there were 10 providers, would this be much different from off?

Starting point is 00:26:12 Absolutely. Yeah. So I think that's what you have to realize here is that these do-op will be, you think there's competition. And a do-op will be, there is competition. No, I mean, like, for example, like if you look at the car market, how many instances, I think the last big incidents that I remember was was I think Ford had an issue with the fuel tanks of some cars that were exploding, right?

Starting point is 00:26:30 Yeah. But the reality is when that happens, there are alternatives. One is that there's legal requirements for Ford to just fix these things quickly. There are lawsuits that happen. There was class actions, there was settlements, but there's also the ability for folks that can afford it is just a switch vendor and of which there are 50 other vendors to choose from. That is a healthy dynamic. So today when you look at the auto market, what do you see? A plethora of choice. And when you see fatalities or safety issues, they are overwhelmingly driver error. And we assume that and we get insurance to deal with that. When you look at airplanes, you have these three sections of risk that each are compounding because there is no competition.

Starting point is 00:27:14 Number one is that the monopoly vendor has zero pressure to actually test these things adequately. Because on the other side of building something well is shareholder pressure to deliver something sooner and faster so that they can reap more profits. Then second is you have a regulatory infrastructure that puts rules on top of rules, but then will bend the rules if you donate to them. And that's measured and known. And then the third are the folks that actually operate the planes who have this actual incentive to not see technical improvements because it defends their job for longer. And in all of these cases, there isn't enough competition to shine the light on this to

Starting point is 00:27:55 say, how does society actually want this market to operate? This is collectivism. It's not working. Freiburg, you have thoughts on this Boeing regulatory capture in the issue of only having two vendors there, and the complexity of these machines now in relation to that. Nick, you can pull this up. This is an audit of the business model for a company called TransDime Group.

Starting point is 00:28:19 TransDime Group is a aircraft aerospace parts manufacturer. They sell certified, regulated aircraft parts to aviation companies, as well as. So, Timoff, to your point a couple weeks ago, about what's the appropriate competitive EBITDA margin that a company can ultimately achieve, their EBITDA margin is 53%. It's company. Better than Facebook. Incent. On seven billion of revenue and growing, Nick, if you want to pull up their stock chart, and you guys can see how the business has performed over the years, and their business model has been relatively simple. They've acquired aerospace companies got that have certified parts they drop the cost and raise the price and they do that over and over again and here's the business over the last 10 years. This thing is.

Starting point is 00:29:17 You know, roughly 10 bagger 8 to 10 bagger in the last 10 years. The market cap is 60 billion today. No end in sight. And so there was a government audit done of the business by using uncertified cost data, which is one of the most reliable sources of information to perform cost analysis. We found that Transtime earned excess profit profit of at least $21 million on 105 spare parts on 150 contracts. So they're selling spare parts into the government. The government auditor came in, audited them and identified because there's no real audit, there's no real accountability in government as purchasers, but there is regulatory authority

Starting point is 00:29:56 on deciding who are the winners and who are the losers in the market. Transtime has been elected a winner because they have regulatory approval to make and sell these parts. The cost to get approval to make and sell these parts is so high that it makes it prohibitive for startups to come in and compete in this marketplace. And now that they're a preferred supplier and they get these single contracts where there's no competition to be a supplier, they can raise the price every year. Multiple audit reports over the last 23 years have highlighted the problem of the Department of Defense paying excess profits on sole source contracts where cost analysis was not used to determine

Starting point is 00:30:31 fair and reasonable prices, and this problem continues to occur. Now, I'm not necessarily saying that this is a negative on trans time, it's a fantastic business, it's well run, it's one of the best run public companies with a multi-ten billion dollar market cap in the world. But the condition is that the US government comes in and picks and chooses through its regulatory authority, which companies can make products, the cost to enter and compete becomes prohibitively high, and then the company has complete pricing power and there's very little accountability in the overall system. And I think that this plays out not just with

Starting point is 00:31:01 this company, but obviously also with Boeing and the fact that we've narrowed down the competitive market space to just a few soul source providers that have very little accountability and eventually these sorts of conditions arise either prices get too high quality degrades all the other things that natural market forces would keep a check on. competition, Chimoff, the, I guess the only thing you could say is consumers could potentially maybe try to avoid the 737 max. I know I did when all these accidents happen. I just told, you know, my person who books the flights, hey, do not put me on a 737 max period full stop. And you know what, you're going to wind up paying a lot more, you're going to have a hard time getting certain routes, you're going to reduce it because, you know most airlines, I think, have these 737 maxes in there. So you, when you have such a few number of providers to your

Starting point is 00:31:51 point about, it's not like cars, it's not fragmented like that, you can't avoid a certain car type, a plane type, the way you can avoid a car type. So, just wrapping up your trim off, what changes should we see in terms of late stage capitalism, something in the example like air travel and and manufacturers? Is there any way to unwind this reasonably? Or is it too late because we're at this I go back to

Starting point is 00:32:18 Some of the examples that we've made fun of before you have to rely on the government to actually be competent in key moments in time. I think this is one of them. The organization that could do something about it, for example, take the FTC or even take the DOJ. We are investigating Amazon's purchase of the portable vacuum cleaner, roombaugh, right? Critically important issue. And that is apparently for the American people higher than the sclerosis that the government

Starting point is 00:32:55 has enabled, enabled in the airline industry, which affects everybody. So could the right government agencies choose to actually focus on something important here and actually figure out? Why is this happening? Because I think the door plugs issue is in-demick of a much bigger problem. This is a company that's rotting because there is no accountability and the reason there's no accountability is there's no real functional competition. And I have not seen any good answer to accountability other than competition. Yeah, I mean, the good news is the FAA really took quick action to ground these 171 Boeing 7379 max aeroplanes, but they don't, they do not understand the scope of the problem if they let them back in the

Starting point is 00:33:45 fleet and this is happening. The bigger picture problem of lack of competition. Yeah. They are no, no, no, my point is like you had to adjudicate the interaction of very complicated hardware and software in that first go around. Here is just a pure systemic hardware failure. So the point is that whether it's them or their suppliers, there's just some complacency that sets in when you know you will always have the business to Friedberg's point. It is a very corrosive thing in running a business, trying to have motivated employees when they know on the back end of it that they could make anything in the world and they'll just be able to sell it to somebody and they'll have to take it. That's that example that Freeberg just cited.

Starting point is 00:34:38 Twenty odd million dollars for just random stuff. What is it? 15 pieces. That's crazy. That's just straight up theft. And so when you have that, how do you expect the employees of that organization to give a s***? I don't see how you could expect that. And so my point is the FAA has a much bigger problem. So for example, like the DOE has a loan program to try to create a diverse energy infrastructure in the United States, maybe we need to look to create a diverse energy infrastructure in the United

Starting point is 00:35:05 States. Maybe we need to look at some of these sectors and instead of building the administrative state, take some of that money instead and just create programs to get more competition. All right. In other news, Adam Newman, you remember from WeWorkInfamy-slashfame, it has a new startup. You may have heard of it flow. They've raised a ton of money. He started buying a bunch of apartment buildings.

Starting point is 00:35:27 The idea, people can rent nice apartments in cool cities. That focus more on social interaction and hanging out, common spaces, all that great stuff. And there's also allegedly or reportedly some sort of rent to own where renters can receive equity in the company over time. And I don't think this has ever been released, but the idea would be maybe you own shares and flow, flow manages around 3000 units, most of which were

Starting point is 00:35:53 purchased by Newman after he left. We work and you know, he took down a windfall as an exit package. And so according to the real deal, this is a real estate publication. Newman had a 60 million variable rate mortgage on one of these properties in June. Sax, maybe you could explain to us what's going on here since you have a lot of experience in real estate. Well, it's pretty simple. He can't make his interest payments.

Starting point is 00:36:15 Okay. So the reason is because he had floating rate debt. So if he had locked in his debt over, say, 10 years back in when he bought this building in 2021 or whenever it was, when interest back in when he bought this building in 2021 or whenever it was, when interest rates were extremely low. You know, that was during the Zorke period. Probably could have locked in long-term debt at maybe even 3%, 3% or 4%. And instead, he got floating rate debt.

Starting point is 00:36:40 And if you look at where commercial debt is now, I mean, it's 7, 8%, 9%. If you can get it, which is pretty hard. So he maxed out on debt when he bought these buildings. He bought them top of market. It sounds like in 2021 because real estate, like a lot of things, moves inversely to interest rates. So when interest rates spiked over the last year or so, then real estate valuations went down. So he bought a bunch of buildings,

Starting point is 00:37:07 top of market using a lot of debt that was floating rate, interest rates spiked, perfect storm. Now he can't make his interest payments. And crazy part about this when I was watching it happen, Shemath, and we talked about it, I think, on the program at the time was, in recent horror, it's put in like over $300 million at a billion dollar valuation,

Starting point is 00:37:24 but they didn't do that in peak Zerp. They did that in 2022 and the writing was on the wall. What do you have thoughts on why they would make a bet like that and Yeah, just tech VCs betting on real estate for a second time. How does that occur? Well, I don't think it occurs because they cared about real estate. I think it allows them to take $300 million of committed capital and put it out there so that they're $300 million less available, which means that they're $300 million closer to raising a new fund, which means that they can raise, they can charge 2% on more money. That's why they did it. Got it.

Starting point is 00:38:04 So just keep the money train deploying capital. It's a place where you can put a big huge check and you can raise your next fund. And yeah, why not? Yeah. Okay. Well, there you have it. Okay. I mean, let me, let me offer. I mean, I don't disagree. I think that candidly what you've said is exactly how mega funds are thinking about it. We have to deploy capital to raise our next fund. And if we still have capital in our last fund, then we can't deploy.

Starting point is 00:38:26 Jason, Fribberg. Well, if you're going to have to deploy large amounts of capital, wouldn't you feel better deploying that capital with an entrepreneur who's actually run a big business before, even though the business failed? No, no, if you're not optimized for fees, you would do what Peter Teal did and just have the fund and return the money.

Starting point is 00:38:46 Right. And for Peter too, I thought that's because he's already won. But probably else that's trying to win, the only way to win in a world where your exits are not that great is to actually generate money via fees. Even though that fees are taxed at current income, that's the way to win, inventor. It's not caring, it's by fees. And so, and I don't blame Andrewson. I think like that's smart for them to do. And if they have folks that are willing to enable that by giving the money, they should do it. But are they gonna generate huge rates of return?

Starting point is 00:39:20 Probably not, because that's not what real estate is known for. Real estate is known for long steady tax arms That's slowly compound for the for the owner of the company over 20 or the owner of the business over 25 to 35 years That's not what adventure fund is supposed to be doing for a 10 year or 12 year return cycle So obviously they're doing it for fees. That's okay. I think that's capitalism What are the LPs then think sacks if we look at look at this, you're an LP and a technology firm. I'll take Andreessen out of it for a second,

Starting point is 00:39:48 but let's just say some giant LP gives giant amounts of money to adventure capital firm, and then they'd deployed in real estate. What happens in their minds? Is there any kind of tension that would occur? Just handing out in the situation. You can never judge a VC based on one investment. If we were to do that, every VC would have a lot of egg

Starting point is 00:40:09 on their face because we're supposed to take big swings and swing for the fences and try and hit home runs and grand slams and a lot of them are gonna make you look foolish. You have to look at an investment portfolio and track returns over time. So I wouldn't judge any particular investor based on one investment. So I don't think that's fair. Now, in the case of this investment, if you want me to explain what I think went wrong, I think Adam Newman had a compelling vision.

Starting point is 00:40:37 His vision was to create a new experience in, I guess you call it, apartment living, and that people would be willing to pay more for that because he would create this national brand in Apartments and right now apartments are super local and there's there is no brand in you know apartment living So I think as a entrepreneur as an operator he had a great vision and I Think he actually achieved his vision if you read these articles carefully what they say is that his occupancy was high and people were willing to pay at least a little bit more for the experience of being in a flow apartment. The problem, Fradam Newman, is that at the end of the day his plan to raise rents by creating experience, even though it worked, it just didn't raise rents that much. And what ended up being much more important were the moves and interest rates and how he capitalized these acquisitions and the price he paid on the acquisitions. So there's an old saying in real estate that you make money based on the buy, not on the sell, meaning

Starting point is 00:41:41 that, you know, when you go and sell, you're a part of a building office building or whatever, you're monetizing an acquisition that you did correctly. And if you don't buy it the right price, you're never going to be able to make money on the sale. And I think this is a really good example of this, where he bought at top of market, his capital stack was over a liant on, and he had floating rate debt. I mean, those are just financial mistakes and timing mistakes that you can't make up for,

Starting point is 00:42:10 no matter how good an operator you are in real estate. And in a way, I mean, this is the same thing that happened with we work, which is, he delivered an excellent product. I mean, people love we work offices. Absolutely, yeah, they pick them over other offices because of the vibes, because of the culture, because of the community. So he has some mastery of that, but to your point, entry price matters.

Starting point is 00:42:34 And the economics matter. If you look at we work, it didn't fail because the product wasn't good. It was because he didn't pay enough attention to the financial aspects of the business. With we work, he leased a bunch of offices at the absolute top of the market and then over invested in TI's 10 improvements. With flow, he bought a bunch of real estate at the top of the market and sort of did it with the wrong capital stack. So this is the problem is that when you get into a real estate business, it doesn't really

Starting point is 00:43:01 matter how great you are as an entrepreneur operator. If you're not good at sort of the legacy old school real estate part of it. And the old school real estate guys were saying during we work, this is not going to work. This is a regis, but with a bad capital structure. And the old school real estate guys were saying, something similar about this. And it just goes to show that if you are gonna try and disrupt a legacy industry, you do have to kind of understand

Starting point is 00:43:32 the ins and outs of that legacy industry. And the great paradox of this act was, when he did Green Desk, which was the precursor to we work, when he did the first we works in San Francisco and other places, his playbook was find a building that's empty, that cannot be leased. So he got 25 Taylor Street, like sixth and market.

Starting point is 00:43:51 The worst area by the tenderloin, and we had an office there for a little bit, and I have my podcasting studio there for a little bit. This was a terrible off, this was a terrible area, but he made it hip and cool, and it was really cheap, and man, it sold out, and it was packed, and the vibes were great. But then, as you're saying, then he moved all of a sudden to Soma and he started opening up these glass-filled ones and, you know, he was renting them for less with all their giveaways

Starting point is 00:44:16 in six months, three and all this stuff, then they could have reformed. So he kind of had mission drift, right? The playbook, they just, they changed the playbook. And it economically was not viable. Well, the timing, the timing got really bad. And again, they didn't pay attention to the financial aspects as much as they should. In this case, I think that if he was trying to execute this play today and doing his acquisitions today, he could actually make it where you would, you need a lot more equity because you wouldn't be able to get as much debt financing. But if he had the equity and could do more of an acquisition based on equity, the prices he had paid right now would be much lower. And then as interest rates come down, he could ride that way.

Starting point is 00:44:54 He could refi, pull his equity out, and put debt on it that is cheaper as the price goes down. So there was a way to maybe make this work, but you know, with real estate, the timing is just so important. Again, your cost basis of when you get in the investment is probably the most important thing in terms of whether you make money or not. Did you see this by chance,

Starting point is 00:45:17 the real estate piece in 60 minutes, the package they did last week, Sachs? It was basically what we were talking about here a year ago, super compelling, if you haven't seen it. It's basically the only podcast from 12 or 18 months ago. Has anything changed on the field in terms of commercial real estate or is it just continuing to collapse?

Starting point is 00:45:34 No, I mean, nothing's changed. I think that all the commercial real estate guys, the sponsors and the deal makers and so forth, they're all kind of hanging on by their fingernails, waiting for interest rates to come down. And all the leases are still coming off, right? Like people are still who had six, seven, eight year leases that were signed pre-COVID before. It depends on the market. I mean, some of the markets are coming back.

Starting point is 00:45:56 But again, what this flow news show, this Adam Newman news shows is that you could be fully occupied And you could still default and the reason is because your capital structure the interest rates have spiked up You're now paying you know all of your Operating income is being eaten up by your debt service The only way to to make it through that is you go to your bank is one of these regional banks And you work out a deal to extend,, it's one of these regional banks, and you work out a deal to extend, they call it pretend and extend, and they let you hang on there,

Starting point is 00:46:32 you'll extend the term of your low... Kick the can down the road, yeah. Yeah, the lower your debt payments in exchange for more term, and you just try to get to the other side of these high interest rates, and then once you get to the other side, again, you're hanging on, you're hanging on and you're not defaulting. That's what everyone's doing. So, if rates don't come down as expected this year, I think the market's expecting 150

Starting point is 00:46:53 basis points of rate cuts. If that doesn't actually happen, there's a lot of real estate sponsors who are in trouble. And in turn, there's a lot of regional banks who are in trouble because they're the ones who made all these loans to these sponsors. So everyone's trying to, like you said, kick the can down the road. Yeah, and the 60 minutes piece also talked about how there's some emergency rezoning going on in New York specifically where they take the floor plate in the middle, which I think you talked about, SAC, you have to have windows if you want to convert to residential. And they just make an empty space, the void they call it, in the middle of the building that they'll deal with in the future.

Starting point is 00:47:31 But they just have this empty space in the middle of the building that's not going to get used. And then the rest that has windows gets used to be converted into lofts, et cetera, in New York. So people are starting to think creatively if people don't come back to office. Okay. Let me ask you a question just based on that set of comments

Starting point is 00:47:48 given Adam Newman's experience as an investor in this space and this general opportunity. Wouldn't you rather back and known someone who knows and has been through the market and has experience versus some founder who shows up and has never run a business in this space? I mean, it's more experienced than you. It's such a great point.

Starting point is 00:48:06 Well, here's the thing, Freiburg. The great point about that is you don't see a lot of founders who explicitly come out and say, I want to build a hundred billion dollar business. I want to build a giant business. They're so rare that VCs who have a lot of chips, they would like to back those, you know, swing for the fences folks.

Starting point is 00:48:22 And so I do understand why people would back him again. And they've run out of it before they've done it. To something. So me, I think he failed to learn from mistakes and this time around, he, he was in the same state. Exactly. So therefore they made the bad bad. I'm not advocating, by the way, I'm just asking. You know, I understand, to your point, freeberg, I can understand people want to bet on somebody who is crazy and swings for the fences this entrepreneur Clearly does not learn from their mistakes. I think both of those things could be true Right, Shama? What I would say is that I think that

Starting point is 00:48:52 Where I've made the biggest mistakes in my investing career is When I confused what I was investing in for one thing when it was the other and so when I look back and I had a was the other. And so when I look back and I had a small dolly ounce in biotech, because I thought, oh, this is going to be more computational biology and I understand computation. So this gives me an edge. Turned out I was wrong.

Starting point is 00:49:15 There was another time where I have invested in certain sectors of the economy because I thought they were technology businesses and at best they were tech enabled versions of an existing industry. And when I look at those investments, the thing that I got wrong was not listening to the very experienced investors in those sectors and why they passed. And that has caused me no shortage of headache and grief.

Starting point is 00:49:43 And so if I had to learn anything from all of this, it would be that if it looks like a duck and it quacks like a duck, it's a duck, it's not a tech company. And so if that duck means it's a real estate business, I would talk to a real estate investor and wonder to myself why they wouldn't have done this deal. Similarly, when it's a biotech business, I have to ask myself, why wouldn't they have done it? They know more than I ever will in this deal. Similarly, when it's a biotech business, I have to ask myself, why wouldn't they have

Starting point is 00:50:07 done it? They know more than I ever will in this space. So similarly, I kind of look at this as an example of that, which could be a very talented person in an industry. I think it's just important for us to be very clear and lucid and intellectually honest about what industry that is. I think it's a great point. Look, I think whenever you're dealing with a tech-enabled business, which I would define as a more traditional business model with some sort of software layer,

Starting point is 00:50:35 you know, on top of it, you have to kind of assess like how much of a difference does that software really make at the end of the day. In this case, this is a real estate business with a very thin software slash of a year of technology. Yeah, the experienced layer is a very small part of the overall, let's call it P&L of this business. Such a great point. Sacks, I mean, perfect analogy would be like,

Starting point is 00:51:06 if you're taking a flight on United, the United app is delightful now. It's a really good app. You, this is a commercial airline. It's called United Airlines Sex. You pay for one ticket instead of the whole plane. But have you been to a McDonald's recently? I actually went to McDonald's, yeah.

Starting point is 00:51:18 You order through an app now and there's a big screen. The point is you walk in there and it's probably not the McDonald's you knew 15 or 20 years ago. It's not about waiting in line and ordering and that's not how it works anymore. So the point is, is that a tech-enabled business or is that still a restaurant? Well, if you spend a lot of your time intellectually contorting yourself to try to justify why the next version of McDonald's is a tech-enabled business, you're just going to lose a lot of money. It's a restaurant. Now, all restaurants need technology. And what you see by McDonald's is even

Starting point is 00:51:49 the oldest and most established are running forward very quickly to implement technology because they know that it creates efficiency, which then flows to the bottom line for them. So, the reality is that we have lived in this wonderland where we've looked at these software businesses that have 80 and 90% gross margins and imposed that expectation on other markets and then made investment decisions by trying to justify how that it's a tech-enabled realist business, a tech-enabled healthcare business, a tech-enabled energy business without being honest with ourselves that those businesses have over decades because of lots of competition found a consistent and reliable resting place in terms of gross

Starting point is 00:52:32 margins far below 80 and 90 percent. And so instead of willing tech-enabled businesses to be at 80 and 90 and tricking oneself, I think it's more realistic to ask yourself, why aren't 80 and 90 percent gross margin businesses decaying to 30 and 40% growth margins like every other part of the economy, when everything will be technology enabled. I think that that's a very reasonable question. I think the answer is, there is no safe place. I don't think that you can justify 80 and 90% growth margins in software when you can use a model and whip up a competitor.

Starting point is 00:53:04 I just think that we are all going to a place where everything is a tech-enabled version of some. Yeah, marketplaces would be a notable exception there with network effects. So, door to edge versus the tech-enabled restaurant, asset-light marketplaces, UNI and SACs have been involved in a bunch of different marketplaces together.

Starting point is 00:53:21 Sometimes they're asset-heavy, sometimes they're asset-light, when they're asset-heavy, man, it's really hard to make those businesses for our costs. Yeah, I mean, I think we should differentiate between gross margin and then the net operating margin or profit, right? And so, you know, gross margin is what is the cost on the margin of providing one incremental unit. And the thing about pure software businesses is that on the margin, you can provision another instance of the product, almost free.

Starting point is 00:53:51 I mean, there's a little bit of hosting, cost at AWS or whatever. So on the margins, it's like the perfect gross margin business. As opposed to a hamburger. As opposed to a restaurant is gonna have very large cost of goods sold or cogs. The simple heuristic that I use is just does this company have large cogs, cost of goods sold

Starting point is 00:54:15 and are they physical world cogs? If they are, it's not a software business, It's a best-to-tech enabled business. So just look for that. You know, does this business have large physical world cogs? Now what I would say is if the cogs are virtual, like, you know, it could be hosting costs or it could be paying Twilio for telephony or something like that, then at least it's still not like as good a business because the the margins are as good but it's very scalable right because you're not you don't have that like huge friction of me to scale up physical world infrastructure physical world supply chains that kind of stuff so i like virtual cogs a lot better the original cogs a lot better than physical cogs i love it when marketplaces that, though. I mean, we could speak to that too, you know, when I had Dar on the pod the other week. And when he launches an adjacency, hey, we're going to sell alcohol,

Starting point is 00:55:11 hey, we're going to sell groceries, hey, we're going to add this thing that's right next to the already, you know, portfolio of, of Uber offerings doesn't cost them much, right? They just have to get the supply side up and running, but they already have the demand side. And I think that's where like these super apps are doing really well, or Airbnb adding some inventory in a new city that they unlock, right? Well, true marketplaces are perfect gross margin businesses as well, because they don't have a fiscal inventory that they themselves own. What you'll see is, with a lot of marketplaces, they'll cheat by buying the inventory themselves, at least to jumpstart the market and then selling it. Yeah.

Starting point is 00:55:48 And so when you see that line item on the P&L, the, you know, that they have real costs of good sold, you know, wait a second, this isn't a true marketplace. They're providing the service. Yeah. And so again, it's a way to like catch whether the business is truly one of these great high-grows margin businesses or whether it's more of a tech-enabled business that's pretending to be a pure software business. Yeah, direct consumer got people in a lot of trouble during the last cycle and venture capital. If you look at a lot of these companies, even the best SaaS businesses, have seen their gross margins

Starting point is 00:56:28 erode by about 15 to 20%. It used to be that best in class software business can generate 90, 91%, 8 high 80s to low 90s gross margins. Now that's not true. You see a lot of these best in class companies that are in the high 60s to low 70s. So it already just shows you that that pressure has come upon the market. And so, is it that the software enabled business goes towards 85 or is that the 85% gross margin business goes towards 30 and looks like it's the latter?

Starting point is 00:56:55 That's just what the data says. Well, may I'm just categorizing certain costs differently than you are, but I don't know why a software business would go all the way to 30, right? Because again, sales and marketing don't count in the gross margin GNA doesn't count even R&D doesn't count in the gross margin has to be You know a unit cost that you can attribute on the margin to that incremental instance of the product so things like again paying Twilio for meter to left knee or paying open AI for like meter to API access,

Starting point is 00:57:26 all of that is definitely in cogs. And I think some customer support costs that can be attributed on kind of a per instance basis that goes in there. But if sales and marketing and R&D and GNA aren't going in there, I mean, I don't know why I go all the way to 30. I guess I'm just saying that I still think software businesses and marketplaces for that

Starting point is 00:57:47 matter are still the best kinds of businesses on a margin profile basis. The problem is that there's a lot of fake software businesses or fake marketplaces out there that are pretending to be pure tech businesses when actually they're more like old school businesses that have the veneer of technology. to be pure tech businesses, when actually they're more like old school businesses that have the veneer of technology. And I think to your point, they're like the trick of saying, I'm an 80% gross margin business,

Starting point is 00:58:13 but having no profitability is then who cares? So when you look at the profitability of these businesses, again, you'll be in the 20 to 30%. That's why when you see companies that are in the high 30s to low 50s, they're a very unique and b, you should expect that they are something fundamentally monopolistic about them. And that is a simplest way to filter out these companies because in a highly competitive market, you cannot extract those kinds of profit dollars. Capitalism says you can't do that. So you can only do it when you have an end of one or enough to kind of competitive dynamic where there's essentially

Starting point is 00:58:54 a mutual detot with your biggest competitor. Yeah, it is a good point that just because you have good, unique economics who good gross margins doesn't mean that the business is profitable at the end of the day. It's good. Yeah, it could be total. I mean, you can have 80% gross margins and still be losing a ton of money because you've got too much overhead, you've got too much sales and marketing, you've got too much guarantee.

Starting point is 00:59:15 Yes. So you're selling to customers who don't really need it and then they eventually cancel them, right? Like we see that a lot. Look at the streamers, look at the streamers. That's just a big recycling exercise. It's just like people come to the top of the funnel, they use the product, and then they leave, and then you have to reacquire them over and over again.

Starting point is 00:59:31 It could be the case that SaaS actually looks a little bit like that too at the bottom line level. When you hit your natural audience, it does get challenging. This is why in SaaS, there's a heuristic called the Rule of 40, which is for public market SaaS companies You want to see that they're operating margin plus their growth rate equals 40 or is greater than 40 ideally So in other words, you could have a SaaS business with a 20% Operating margin and a 20% growth rate and that would hit rule of 40 and that would be a very attractive business or you could have

Starting point is 01:00:09 I don't know, it could be growing 50% year over year, and its operating margin could be negative 10%. And that'd be okay, too, because they're losing money, but at least the investment is leading to a well above average growth. Or you could be growing slower, you could have a 10% growth rate and have a 3% operating margin and that would also be hitting the rule of 40. So it's just a simple way of like tracking whether this is a good business at scale.

Starting point is 01:00:35 I don't think startups have to worry about this until they get to kind of the later growth stage. Yeah, when you're in your BC round, you're making 50, 100 million, yeah, you gotta be really thoughtful about this and the beginning of trying to get product market fit and try and get on something. So, Jermac just mentioned streaming NBC Universal

Starting point is 01:00:50 if you didn't know it paid the NFL $100 million for the exclusive streaming rights to one. That's right, one first round playoff game for the NFL. That happened last weekend between the chiefs and the dolphins. That was on their service peacock NBC's app, basically their version of Netflix or Disney Plus. It garnered 23 million viewers, which makes it the most streamed live event in US history. Even so, that's almost half of what

Starting point is 01:01:19 if the Packers and Cowboys had about 40 million lines versus Rams, same weekend, 36 million. And so this has brought into question, what's going on with streaming? Have these businesses gotten ahead of their skis? Just give you a couple of charts. Disney Plus took off like a massive rocket, peaked in Q4 of 2022 at 164 million subscribers. They're now at 150 million, here's a chart.

Starting point is 01:01:43 I mean, just amazing how quickly they got to Netflix-ish numbers. Here's Netflix's chart. Again, this is quarterly. They're up to now in all time high 247 million subscribers and the annual growth rate all the way back to 2001. Still pretty spectacular. And they're revenue. Also very respectful for Netflix. However, they overspend massively during the peak streaming era 2019 to 2022. And that's when subscriber growth started to slow. Obviously, they were spending way too much. And other entrance came in like Apple Plus and Amazon Prime where they really didn't even think that they had to make a profit. They were using streaming, maybe to sell more iPhones or to get more Amazon Prime subscribers.

Starting point is 01:02:30 So here is the major problem. Here's the chart. Basically, churn means people cancel, right? And so as these services have cut what they're offering, the number of Marvel shows or Disney, you know, having Star Wars shows, the churn goes way up. People are also having subscription overload. I don't know how many of these I subscribe to, but I think it's all of them. Or maybe out of these one, two, three, four, five, six, seven, eight, nine on the chart, I think I have seven of these. So there is definitely

Starting point is 01:03:01 some unbelievable subscription burnout. And the streamers in order to get these businesses above water have raised their prices. We all know that. You've probably seen your streaming bills, you know, have three, four, five bucks added to them every month. And at the same time, they're cutting how much they're spending.

Starting point is 01:03:16 So you're paying more for last month your thoughts on this dynamic. If you bring the chart back up, here's the most important thing that's worth noting. Let's take stars as an example. It turns all percent of their users every month, which means that over a year they've turned to 144% of their user base. That means that they have to basically turn their entire membership base one and a half times in order just to tread water. Right? So if you start with 100, it's a lot of money that you have to spend to make sure you end the year at 100.

Starting point is 01:03:50 Forget about growing. If you look at peacock, they're gonna lose 100% of their subscribers in a year. If you look at Discovery, they're gonna lose 75%. If you look at Max, they're gonna to lose 50% Apple TV, same. Hulu and Disney Plus will lose 60%. Netflix will lose almost 40%. So the only winner in all of this is Facebook and Google.

Starting point is 01:04:19 The only winners are Facebook and Google because that's where the ads will appear to try to reacquire these folks, right? So I guess that's a positive indication. But the reality is that money isn't infinite. And so what happens in a dynamic where you have a category where there's just a lot of consumer turn? I think what happens is it evolves in phases and in phase one, which is sort of where we are now, where there's a bunch of relatively well-established folks, is that they are going to initially overspend on content because they are going to try to differentiate the cost of acquisition based on content, right, which makes sense. I have a

Starting point is 01:04:56 tent pole come and watch it here. You can't watch it anywhere else. And I think that was the Peacock example where they had this football game and all these people showed up and they thought this is exactly why we're paying so much money. For these rights because people will show up. I think the problem is that when everybody is doing it. Everybody's doing it. And so you don't know how to differentiate even in our group chat. Look at the number of times when somebody randomly says is there something to watch and everybody's everybody's got 50 recommendations. Guess what I do? I tune it all out because I'm like 50 across six different services. I have no way to track it. And then I lose interest. And I'm like,

Starting point is 01:05:35 you know, I'll just stick to you too. So I think what happens is in phase one, folks spend a lot of content. In phase two, they realize that actually what you need to do is spend on a long tail of content in a much more disciplined way. So there's a company that I know about, for example, they just signed a pretty big deal with Amazon hundreds of millions of dollars. And I was trying to figure out is that a lot or a little? And it turns out that Amazon is trying to get three or four or five versions of these coming, which means that before we probably could have gotten five or six hundred million and instead

Starting point is 01:06:15 you get two or three hundred million. It's still an incredible thing, but it just goes to show you that there's a lot of competition. And so instead of having a single mode, right, if you were to grab something where there's a few pieces that just get all the money, now you're smearing this content across all kinds of stuff. And I think that that makes it very difficult to keep folks. So I suspect that you're just gonna see a lot of churn.

Starting point is 01:06:40 I don't like this category at all as an investor. It's clearly there's been an overspend here, but consolidation is coming. Freeberg and your thoughts on the streaming space. I just think this is the opposite of what we were talking about earlier, where there's a free market competing, and it's benefiting consumers. I mean, the point that you made is a really good one that there's a lot of great content to watch. Folks that raise prices, people cancel, so you got to drop prices, you got to offer good content. And I actually think this is a really good and healthy thing to see happen is competition that benefits consumers. And there'll be some set of winners

Starting point is 01:07:14 here and some set of losers. But I think ultimately it's just really good to see this, how it all shakes out, who's willing to put up the big bucks, who's got the smarter algorithm that predicts how fresh your content has to be and how unique it has to be relative to other platforms to keep the audience attention? I would argue if you look at those numbers and you look at the performance over time Netflix absolutely rules the roofed in the sense. They're an incredible operating team. They have an incredible capability of predicting what content will work. How quickly they have to refresh content. How much they should be investing in content per quarter per month, and they're clearly retaining users and making money. And others maybe that are newer to the game haven't figured that out yet, but it's just very good to see the competition.

Starting point is 01:07:54 So I don't know how to predict what's going to happen here, but it's good to see. It's clearly going to be massive consolidation. Also, these folks are launching advertising based version. So you probably saw Netflix has an advertising tier. And so a lot of these folks didn't have those Disney plus. I think it's going to have one as well. You know what no one's paying attention to is YouTube TV. I don't know. Do you guys subscribe to YouTube TV? I'm a Hulu person. Yeah, I think it's fantastic. If you look at some third party data on YouTube TV, the subscriptions are going through the friggin' roof. And it's really interesting to see, because with YouTube TV,

Starting point is 01:08:26 you're basically re-bundling the unbundling that happened in cable, except you're doing it over the internet, and you can access it anywhere. So they've basically converted the pipe as the value to the service itself as the value which you can access anywhere you want on any TV, in any room without boxes, while you're on the road, on your phone, on your laptop. And it seems to be kind of highlighting that maybe it wasn't necessarily the bundling that was the problem, but the way that the service was being offered. So who knows, maybe bundling versus all of this part and parcel, you got to pick five different providers and buy content on the fly.

Starting point is 01:09:00 Maybe that's not what consumers want. Young people don't care about the live channels, old people do, but yeah. Hulu and YouTube TV are really wonderful products because they work really well on Apple TV, the apps work great, but they also work great on your iPhone, your iPad, so they're really spectacular in that way. Saks? Well, this is Ty. This conversation back to what you're talking about with margins and SaaS and tech enabled versus real software businesses.

Starting point is 01:09:27 I personally have never seen a beta-c subscription business that works. The turn is just too high. What I've seen is that the monthly turn rates on a software subscription for consumers is somewhere in the 5-10% range. On a full-year basis, you're retaining maybe 50% of your customer base. You're effectively rebuilding your business from scratch every two years.

Starting point is 01:09:50 It's a very tough place to be. This is why I basically skewed towards B2B SaaS is because a good B2B SaaS business will have net expansion. Instead of 50% churn, you'll do 120% expansion. And so you're actually building a subscriber base with long-term value. Now, how did Netflix do it? I mean, Netflix avoided that prohibitive level of turn by spending literally billions at dollars on content and original programming. And again, it goes back to the

Starting point is 01:10:18 point, this is not a pure software, pure tech business. It includes an old school studio, which is very capital intensive. And they financed a lot of that content acquisition with billions and billions of dollars raised during that Zerp period from, I think, both equity and debt. And you have to wonder if that could be done again in this post-Zerp period, where capital is just a lot scarcer. I think this is going to work really well, though, for Netflix and Disney, man, these huge archives that they own, these libraries are going to get them to 3, 4, 500 million global subs and it's become money printing machines that I don't think they're going to need a ton of new content. The question is whether you could recreate an archive of that level today, given how much more expensive capital is.

Starting point is 01:11:07 My point is that Zerp helped Netflix catch up to these studios and create this huge library. But still, I think that what the streaming services have shown in their turn is that if you don't provide original content and original programming, then users will turn off that. So you have to kind of have both. You kind of have like the library is filler, but if you don't have a hot show, come along every so often, the subscribers will turn off that. You need to have some new content depending on how deep the library is. It feels like Netflix and Disney Plus have done a great job with our libraries, just

Starting point is 01:11:40 a given idea. Revenue for Netflix for 2023, $33.5 billion, $247 million subs. That's an RPU yearly revenue for those folks, $136 a year. Now the reason you're seeing that number not makes sense if you're paying $15 a month is because internationally Netflix is a lot, lot cheaper. But I love those two businesses. I think they're gonna be extraordinary over time. Netflix has to acquire 100 million people a year just to stay even. What's their turn rate?

Starting point is 01:12:14 4% a month. I think it's fine. Right, so they're turning half their customer base every year. That's my point. A hundred million people. They're rebuilding their customer base from scratch every two years.

Starting point is 01:12:25 How does that make sense? It's totally fine because what happens is you have people coming off their parents' plan, getting their own, people go through a bad beat, they don't like it, you know, whatever, they unsubscribe, but they all come back, back and forth, back and forth, and then it just keeps growing over time. I think you're describing something that's true.

Starting point is 01:12:43 I think David is describing why it's a shit business. I mean, if they make more of money than they spend, and I don't think they need to do a ton of advertising. Eventually, you turn through so much of the market that actually you can't maintain that growth rate. I mean, if you reactivate, maybe you can do it, but I think that's what's happening. From a business perspective, the only logical thing that I would do if I was running one of these businesses Is attach it to another business where you can think about it in terms of LTV So the only obvious example of that I think is Amazon video because you can stick it beside prime and a bunch of other things and now you have a very different way of justifying

Starting point is 01:13:24 LTV and minimizing churn. And that seems like a I buy that argumentation. I don't buy like a standalone business like this trying to do it. Yucky. Sorry, real quick. Have you guys dug in the Netflix's business? I mean, there's still growing top line. The EBITDA margin continues to expand. I mean, all those facts might be true, but that churn engine and that recapture engine seems to be working in a way that they're printing cash and growing. It's pretty impressive. I don't know if there's a limit there, but I mean, I haven't looked at the analyst, but

Starting point is 01:13:53 I think that is the key question. Yeah. To the bundling point, Apple Plus, which is the TV component, not the hardware product, is bundled as part of this Apple One program, which is kind of like Amazon Prime. And so I think you're seeing a little bundling there. Netflix also added video games to make it even more sticky. So I think there's like a subscription super app coming, which the New York Times is kind of down, right, with Word, old, crosswords, the athletic, wire cutter, and the New York Times. So I think you're gonna start to see

Starting point is 01:14:22 our cutter and the New York Times. So I think you're going to start to see. I want to see you just at a jumble of names that went in one year and out the other. I don't remember a single one. You said, this is my point. For most people, Jason, not at a media, aficionado like you, New York Times is doing fantastic, doing the spundling. Some people come for the crosswords and word, and that's why they subscribe. And they like the news. Other people come for the news. They discover crosswords and wire cutter and the athletic and they stay for that. So I do think there's going to be an incredible business here. I'll take the other side of it for that. So I do think there's going to be an incredible business here. I'll take the other side of it.

Starting point is 01:14:46 Yeah. They spent a lot on content though during that period where Disney Plus came in. And I think everybody's now has a little more discipline and a budget's came way down. If you didn't know the Hulk cost 250 million or something, the she-hulk rather, that cost 225 million for nine episodes. What? The first eventers? 225 million. Wait, sorry, 250 million for nine episodes of the She-Homai.

Starting point is 01:15:09 And people criticize it for having bad CGI, so I think there's like new discipline coming down. Was this a Netflix show? A Disney Plus show. A Disney Plus show. I don't know about you guys. I've been rewatching the sopranos. I find some of the content on HBO Max

Starting point is 01:15:22 to be the best content out there. Oh my God. I'm watching this. There's so much re watchability on it. Disney doesn't have that much rewatchability. I don't know. The only reason I keep my max description is waiting for House of the Dragon season two. I mean, they didn't have that one show.

Starting point is 01:15:35 I'd be like, yeah, cut it, you know. Yeah. I do think this could help Netflix because a lot of these streaming services came along. We had way too many, right? We got saturated with streaming services. And most of them you subscribe to, you may now even remember subscribing, you may just subscribe to a free trial to get an NFL game. And then you get billed because you forgot to cancel it. By the way, yeah. Have you guys ever gone into Apple, I cloud settings and looked at your subscriptions. Oh, boy. Yeah. Get in there.

Starting point is 01:16:05 Guys, just, if you have like an extra five minutes, you will save so much money by going into subscriptions in your settings and just turning them all off. I was shocked. I was shocked. I mean, this is part of your austerity measure. Absolutely. You know how many subscriptions to Disney Plus I had?

Starting point is 01:16:23 How many? Well, this is what's so gross is why they even let me do this. I had three What? Three Yeah, how's it going possible? One for the plane, one for the kids. I had three. I had three. I had two HBO's. I had Two Netflix. Oh, no Netflix keeps sending a message saying, hey, you need to update your payment information. But then I'm watching Netflix on my Apple TV.

Starting point is 01:16:49 So I'm like, I'm clearly paying for it somehow. I'm so confusing and sh**. I have the perfect solution for you. There are credit cards now where you can set a spending limit. And so what I do is every year, I just turn off the limit on that credit card. I just take it from unlimited or on cap down to zero. And I do this for business as well.

Starting point is 01:17:09 And then all the subscriptions time out. You know what I call that? What? Jeff. Jeff does that for me. Jeff does it for me. Yeah. But I mean, having somebody go in there and then you just have a Jeff.

Starting point is 01:17:19 I have a Jeff. Do you know what it's very simple? You only use one card for subscriptions and then you turn it off every year. So which one do you want to keep going? It works really well. And then you move the other ones to a new turn. I don't even want to say how many thousands of dollars I was wasting on like dual lingo.

Starting point is 01:17:32 I was like, I'm paying for dual lingo and then I was paying for Italian. And you're like, it's still terrible. Yeah, terrible. And then I had, I had like a kiss against that. No, then I had dual lingo and I had babble and I had Rosetta Stone. So I'm like

Starting point is 01:17:50 My Italian is not improving because of any of these three apps, but I was paying them collectively like $400 I had a whoop subscription. I don't even have a whoop When Rick Thompson started Manscaped I was I signed up for Manscaped I get all this bald theodorant I've never used it once we know we know We see that you're poker. We know It's not working, bro. Just a message to Manscaped. I have tried to cancel. I have hauled.

Starting point is 01:18:10 I have emailed. I took it upon myself to try. It's impossible to cancel. They won't even let you reset your account so you can get a link to cancel. It's so hard. And still your balls are terrible. Yeah.

Starting point is 01:18:23 My balls are phenomenal. Now, I sat next to you and pokerman, not in real. Okay, let's get into plastics and get off Chimouth's balls. I mean, how did we get here? Uh, subscription services, subscription services. Yes, streaming is that across words, across words, apparently.

Starting point is 01:18:41 So they're really trying to make that ball deodorant happen, aren't they? They're trying to make it happen Aren't they they're trying to make it happen? Well, they're trying to make fetch happen ball deodorant's not happening. I'm sorry. I mean, what are you supposed to do squat and swipe? Has the work? Is it a spray? Are you lifting and spraying? You're gonna give them points for creativity trying to create like a new thing, but yeah, I was trying to support my friend in signing up for a subscription service, and now I can't cancel. That's my problem, that's my predicament. Could you also take a shower?

Starting point is 01:19:09 Are you soap? I don't know, just put it out there. I'm trying, it's, what's going on in there, trim off? Does it have to do with the product? I signed out because Rick was the venture investor that seeded it and started,

Starting point is 01:19:20 I supported my friend. Yes. And now I want out. And I cannot get out. Every time I try I want out. And I cannot get out. You can't get out. Every time I try to get out, they pull me back in. I'm just going to say, when it comes to manscape, no testimonials, please, no testimonials. The worst part is like, you know, it comes to the house and, oh, somebody opens your

Starting point is 01:19:38 ball the other end and puts it on your desk. They do, no, they put it right on the table. They do it. They do it. Well, that's what's so funny. They put it right on the kitchen counter. So as I walk through the bathroom, everybody, this is the walk I They do. No, they do. They do. They do. You balls. Well, that's what's so funny. They put it right on the kitchen counter. So as I walk through the everybody, but I'm like, who's seen this bottle? Oh, there's. What is it? There are bottles. Oh my god. So how do you apply it? Is it just a little dab will do you?

Starting point is 01:20:07 No, I mean, you know, I just pray it's apparently an ointment, sacks. It's an ointment. This is far too much information. Yeah, I'll try it. Don't you guys. I'll try it. Get it. Get it.

Starting point is 01:20:20 You know what? I'm gonna give you my my subscription. It's gonna drop. Oh, my subscription. It's gonna drop. Oh, fall deal. Why not? Oh, man. Used to promo code Jamath for 10% off your, use the promo code, DicTator, you get to

Starting point is 01:20:36 deposit. You can never get somebody to get this. D-I-C-K Tater. DicTator, yeah, youK Tater. Dic Tater. Yeah, you stick from a dictator. Oh, yeah. Get 10% off your ball, Deodorant at Manscafe. All right, freeberg, it's your turn to shine.

Starting point is 01:20:53 No, not ball, Deodorant. We wanted to talk about microplastics. Study came out. It's terrifying. We've known plastics have been terrible for years. Obviously, it's turned into some sort of political discourse which straws and everything, but plastics are horrible. We shouldn't be using them, but the study confirms a bunch about drinking microplastics, educate us on this study that everybody is talking about right now. Dr. Friedberg.

Starting point is 01:21:17 I wouldn't start with the statement that plastics are awful. Plastics are polymers, which are long chains of what are called monomers. This is hydrogen, carbon and oxygen that comes together to form these specific molecules. And then we can kind of bake them into crystal-like structures. And the reason the plastic industry took off is because it ended up being very cheap to create materials that we could turn into chairs, that we could turn into bottles, to move stuff around. A lot of applications, everything from solar, photovoltaics to our computers, to our laptops, to our phones, everything has some form

Starting point is 01:21:53 of these polymers in it. The polymers that are commonly used for making bottles that we consume beverages out of or PET plastics, these PET plastics are made from a combination of natural gas and crude oil. So we kind of have a production process where we get the carbon hydrogen and oxygen that's naturally found in natural gas and crude oil converted into these molecules that we turn into long chains and we turn them into bottles and fill those bottles and they end up being

Starting point is 01:22:26 And fill those bottles and they end up being a lower carbon footprint than using glass about 5x, the carbon footprint to use glass instead of plastic and making a bottle to store stuff and liquids around 40% cheaper and a lot of other reasons why the industry and the world adopted plastics, not just for bottle beverages, but for other applications. So in bottle beverages, because these are polymers, there are these long chains of little molecules that are stuck together, some of those chains break. And then some of those little chunks of those molecules end up floating around in the liquid that we're consuming.

Starting point is 01:23:00 And what this study did that kind of highlighted a set of data that hadn't really been studied well before is they used a form of spectroscopy, so kind of a multi-spectral light system, shining light to different wavelengths, on the liquid in a bottle, in a plastic bottle, to figure out how many of these little plastic particles there were in the liquid. And in doing that, they found that there was on the order of 10,000 little plastic particles per liter of water, per liter of soda, or drink, or gatorade, or whatever, the beverages that you're drinking.

Starting point is 01:23:33 The real question then is, well, how risky is that? So if you look at a lot of the health agency studies, the kind of well adopted and well researched efforts on is there toxicity associated with PET plastics on its own? They find that there's very little genotoxicity or no genotoxicity meaning it doesn't change your DNA. There's no carcinogenicity, so it doesn't cause cancer. But there are other studies recently that have shown different mechanisms by which these little tiny microplastics might end up in your cells because they absorb into your body and they're small enough that they can cross into barriers, they can get into your brain, they can get into your cells when they're in your cells.

Starting point is 01:24:12 There are other mechanistic studies that are done in a petri dish as opposed to being studied in the body where they've demonstrated that they could actually disrupt the function of organelles like mitochondria, endoplasmic reticulums, all these little things that operate in your cell. They can cause irritation, they can trigger chemicals to be produced that might cause allergies, that might cause inflammation, and so on and so forth. So while the general molecule of PET itself isn't known or shown in any way to cause cancer or to cause changes in your DNA, there are other mechanisms by which these little tiny plastics might be disrupting

Starting point is 01:24:45 cellular function, might be causing other health issues. And that's now going to open up a big area of research that's going to be predicated, I think, on the fact that this study now shows that there are thousands, hundreds of thousands of little pieces of tiny plastic in these plastic bottles that we're drinking water and soda and juice from that are getting into our body and into ourselves. 240,000 little pieces in the average one liter plastic bottle. It's a pretty scary statistic when you see that small enough to cross the blood brain barrier. Right. And in rats and mice, they've shown that these little microplastics can actually accumulate in the brain if they consume enough of them. Now, the reason this hasn't been well understood or studied in the past is we kind of look at the

Starting point is 01:25:28 aggregate amount of plastic that's in a liquid. And it's like, oh, the amount is so small, it doesn't matter. But when you start to look at how small these little pieces of plastic are, and add them up, the cumulative effect over time that they can actually cross into cells, cross the blood-dame brain barrier, maybe you're not getting removed from the body. That's opening up a whole lot of research because there's no easy way to just scan a body and say is there plastic in it? How much plastic is there?

Starting point is 01:25:52 Because there isn't a good chemical signature for it. And what these guys did is they used light to look in the liquid to find the plastics, which we can't easily do in the body today. So, Freyberger, are you gonna drink plastic bottle water anymore? I'm not. Okay, Chama, I've already stopped. This started for me about four months ago. My wife basically said we're getting rid of all plastic. And at first, I really push back and I'm like, this is crazy. And she just kept talking to me about it and showing me all this data. And

Starting point is 01:26:20 yeah, about a month ago, I would say I switched. So now use glass and a graph like this. Yeah, about a month ago, I would say I switched, so now I use glass and a craft like this. Yeah, much better. We got rid of all of the plastic in our house, in the gym, no more bottles. It's wasteful anyway. Like, why not? You have beautiful filter and water at home, put it in a craft. Sure, but this scary thing. I mean, it's a little bit more inconvenient, I'll be honest with you, but it is very scary.

Starting point is 01:26:43 And I think that it does alter the phenotype of the human body over time. And I think you'd have to be insane to bet against that. And I suspect when you look at the rates of depression and autism and Alzheimer's and dementia and autoimmune diseases, Crohn's rheumatoid arthritis, to think that all of these environmental factors have no impact, I think, is taking a very scary bet. Here's what I do. I buy these glass bottles on Amazon, you know, two or three cases of them. I have the best water filter system at home.

Starting point is 01:27:17 We fill them. We put them in the refrigerator and we have them bought plastic in years. Wow. In years? In years. Only because I care about the environment because I'm a good person. SACs. Wow. In years? In years, only because I care about the environment, because I'm a good person. Good for you.

Starting point is 01:27:28 Yeah. Jason, I'll also say that application is a pretty small, I think on the order of I'm right, 80% of bottle beverages are drunk outside the home. So people are buying stuff at convenience stores, at gas stations, at markets, taking them with them to work. And that's how a lot of plastic bottles are considered. I carry a container with me. Remember, I have such a small percentage of the global population.

Starting point is 01:27:52 You go to Africa, you go to Brazil, you go to China. There isn't a great, like, people don't have these amenities that we have in our upper and middle class America. That plastic bottles have provided access to products that consumers around the world have, but otherwise wouldn't be able to afford. So there's a reason they exist. But by the way, I also want to just be really clear, there isn't conclusive evidence or science that shows these plastic micro particles or nanoparticles are causing these health effects. There's certainly a lot of questions that it brings on, well, what is the cumulative effect

Starting point is 01:28:22 of these little things getting into cells? Did they get into cells? Why? Why would anybody bet that it brings on, well, what is the cumulative effect of these little things getting into cells? Did they get into cells? Why? Why would anybody bet that it's zero? Right, so that's the real one. So the outside. Right. Well, the outside is that people get to access cheap averages on the street. That otherwise, people that are living on $13,000 a year

Starting point is 01:28:36 that can buy a, you know, a plastic soda for 25 cents. You can also buy it. That's what it can, though. Yeah, so that's definitely an alternative. They're a little more expensive, generally. Classic just became the cheapest container. Sacks, your thoughts. Sorry, guys. I stepped out to get a drink here. Time is same thing.

Starting point is 01:28:54 It would be better if you had put a straw in your water bottle than with drinking plastic bottles. Now I understand your level of depression. It's just glassy good. Saxony is killing those arrow water bottles. Yeah. Dymus something? Yeah. That's a science course I stepped out.

Starting point is 01:29:15 Also, I use these beautiful contigos. I think some people use yaddies or other kind of things. And I actually carry that with me only because I try to like think about the environment, just the amount of plaques is being created. I don't know if you've seen this, but like you go to Whole Foods now or you go to any supermarket and you see this wall of salads, Freiburg, like this is unconscionable. Like, we're literally giving people salad in a giant plastic box. I don't know if that's the first, yeah, let me just say a couple things about this, because there's this conception that this is just awful,

Starting point is 01:29:48 awful, awful, but plastics, there is a degradation of these PETs when they're exposed to sunlight. There is a recycling system that many of, much of this material ends up in. Out of it? Yeah, I mean, I don't think that's actually correct. Not a lot. But what would the alternative be, right?

Starting point is 01:30:04 So the alternative is you put it in a class thing and you charge people $15 for a couple of pieces of lettuce. The reason the reason plastic industry emerged is because it provided a low cost way to transport materials. And that we're all very wealthy. So we have to just step outside of our bubble for a second and recognize that most people,

Starting point is 01:30:21 the dollar difference is a huge difference for most consumers. They're not gonna make that dollar leap. So, the fact that plastics emerge is to support a consumer market that's grown up all over the world. Yeah, but how does this make sense? Look at these bananas, just as an example. To give people an idea, bananas already come with a case.

Starting point is 01:30:39 It's called the key. And they're literally wrapping bananas in plastic now. And, you know, I think this is where regulation makes sense No, they must be a gas in here or something because they're trying to keep the bananas from going bad That's what I want to put in it. I want to shout out like this is where I think regulations Actually do work France Spain a lot of countries now are just saying you know what for fruits and vegetables like Yeah, don't put them in plastic. Please. We're not gonna allow you to do that. And I think, I'm not pro plastic, by the way,

Starting point is 01:31:08 I'm not drinking plastic, from plastic bottles, but we have to be cognizant of where this industry emerged from, what the science has about it. Like, I don't want to just be flip-batting. But what is going to be plastic about it? What is giving the oceans freeberg is unconscionable? Like, this is not like a do-good or thing. It's just, there's no reason that we need to have plastic as a stand. I'll give you some good

Starting point is 01:31:30 optimism around this. There's a lot of efforts right now to develop microbes that can actually biodegrade these PET plastics. So there's, so we're engineering these microbes that will produce enzymes. These are little bacteria that will produce enzymes, those enzymes can then be made in the plastic itself. So then the plastic will biodegrade within a year after you use it. So there's a lot of this kind of effort on how do you make naturally biodegrading plastics using biosources

Starting point is 01:31:57 and biological molecules as part of the production process and a lot of big plastic packaging companies and industrial biotech companies are investing in this area. This is where collectivism can do good. If we actually, as a society say, we want to do sustainable packaging, because of the tragedy of the comments, like you're saying, Freeberg, because it's cheaper capitalism, there's no floor here to stop people from doing this and stop from using plastics unnecessarily, like wrapping

Starting point is 01:32:26 bananas, etc. All right, listen, it's been an amazing episode of the All In podcast for the dictator. Wish me luck today, boys. Wish me luck. Use the promo code dick. We'll be following the live stream on the channel. We'll be following the live stream. Use promo code dick to get 20% off your ball the other end. Hey, what do you guys think about actually like running some poker tournaments through the year called ball and 100% that would be super fun. No 100% I think we could replace the WSOP pretty quick. I mean, I mean, pretty good place. I'm not kidding.

Starting point is 01:32:59 We have to help you on our. I think Jason's right. I'm not just helping you. I think you can get all the pros because I think the problem is like those championships have been so watered down, right? There's 52 of them just in Vegas in June and July. And then now you have like the circuit rings so that there's bracelets and rings.

Starting point is 01:33:18 And then there's the European one and there's this one. There's the, the hauling, all the amazing. You can't have, I think you know it'd be a world champion Can you really have like 150 winners a year sex are you bored with hold him? Well, I play with you guys, but yeah, I'm kind of bored with it Yeah, I played a tournament yesterday big O37 players. I came in first. I don't know if you played I had to play I had a speaking gig yesterday in LA after the speaking gig

Starting point is 01:33:45 I was going to the airport had a little time and I just stopped by Hollywood Park I don't know there's nothing more boring Always playing in a tournament with people you don't know. Oh, it was great. It was great. There was like a fight The tournament's loud forever. I mean I did the WSOP a couple of times and you know, I think I lasted like three days It's a long time to be playing poker and table some people I got to the final table and they wanted to chop and I was the short stack I was like, well, you know, my flights in for a couple hours. I'd rather not chop and this woman I got in a fight at the casino almost this This woman was wearing a mask and she goes,

Starting point is 01:34:25 this mother-affer won't chop. And I said, man, it's my option to not chop. Madam, madam. I said, man, madam, whatever. Say them. And she went crazy. And the floor came over and said, man, you have to sit down.

Starting point is 01:34:42 She called me a mother-affer twice. To my face. Come on, you went on a win. She called me a mother effort twice to my face. Come on, you went on a win. And I was the short stack and I went on to win the tournament. I kid you're not. How much did you win? $1,400. So what is your, what is your early rate on that?

Starting point is 01:34:56 You make like $14 an hour. That was $100 buy. So yeah, it was $200 an hour, but here's what happened. So I had this guy massively. You came for seven hours? Six hours, maybe it was awesome. It was great. I had the time of my life.

Starting point is 01:35:08 It was the first time I played in a tournament for life since we played the one drop that time. I haven't played in a tournament for seven. It was so much fun. Jason goes from playing the 100 K. But it's $100. I had a time of my life because I've never played big O before. It's where you have five cards and it was high low.

Starting point is 01:35:26 It was so dynamic and fun. Oh yeah, yeah, big O. Yeah, yeah, yeah, yeah, yeah, yeah. I've seen it. I've seen it. I've seen it. I've never played it. I've never played it.

Starting point is 01:35:35 I've never played it. I've never played it. I've never played it. I've never played it. I've never played it. I've never played it. I've never played it. I've never played it.

Starting point is 01:35:43 I've never played it. I've never played it. I've never played it. I've never played it. I've never played it's me and this one guy. And, you know, I've got like, I've got them like three to one or whatever. And he's like, listen, I gotta go. Please, I got my kids. I was like, no problem. I'll chop it with you. If we take 400 off the top for the dealers, the dealer, Christ, who's like, what?

Starting point is 01:35:55 And I was like, yeah, I'll chop it with you evenly. And so I won and I just chopped it up and gave a big tip. What did you, did you get like a certificate? Or like that? I think they put you on the website or something like that. Like for this. Yeah, it's on the poker classic website that I, or I don't know if it's called the poker class

Starting point is 01:36:11 or whatever it is, but my point is we would have a great tournament. We do each of the games. Each of us gets a free roll into the game and then everybody else buys it and I like it. Sacks you like PLO or you just like Chesno? No, I like the hold on, but I'm just saying I wouldn't play with a bunch of strangers.

Starting point is 01:36:26 Yeah, I like playing with friends, you know, but... To goof off and have fun. Yeah, yeah, yeah, yeah, yeah. Like sitting in the problem with tournaments. Your RSVP to my game show up at six or so later at 8.30. Yeah. And then listen to yourself on the pod and then leave. Yeah, he's editing the pod on the table.

Starting point is 01:36:44 There's a lot of things you can do while at a poker game. You can watch your podcast, you can edit your podcast. Four, the Sultan of Science, the King of Beep, David Freiburg and yeah, definitely the rain man himself. We're live from Davos. We'll see you next year. Bye bye. Wait, did you give me the shout out?

Starting point is 01:37:01 Am I? I did for the dictator himself. I'll do the promo code. I'm a dictator. No, a German dictator for the dictator himself? Use the promo chair. A pro-mokow chair. No, a chairman dictator. A chairman dictator. Use the promo-co chair. Man or dick.

Starting point is 01:37:10 You got 10 money or 30% off. Can somebody from manscape please let me cancel, please, please. He's five, it's like 10 bucks a month. It's just 10 bucks a month. I'll give you the money. I just don't want to get get I want to be able to and they've just gone crazy with it. I'm the US, I'm the queen of kilowatt. I'm going all in! What? What? What? What? What? What? What? What?

Starting point is 01:37:50 Besties are gone. Go thrift. That's my dog taking a wish to drive away to the next. Get it off! Oh man, my hamlety ass will meet me at the police station. We should all just get a room and just have one big hug or two because they're all just like this like sexual tension that we just need to release them out What you're the big what you're the

Starting point is 01:38:11 Here we are Big what we need to get Merchys aren't there I'm doing all this I'm doing all this I'm doing all it.

All-In with Chamath, Jason, Sacks & Friedberg - E162: Live from Davos! Milei goes viral, Adam Neumann's headwinds, streaming's broken model, microplastics & more

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