All-In with Chamath, Jason, Sacks & Friedberg - E20: Robinhood wrap up, Insiders vs. Outsiders, California's failing report card & how to fix it

Episode Date: February 3, 2021

Follow the besties: https://twitter.com/chamath https://linktr.ee/calacanis https://twitter.com/DavidSacks https://twitter.com/friedberg Follow the pod: https://twitter.com/theallinpod https://linktr.ee/allinpodcast Intro Music Credit: https://rb.gy/tppkzl https://twitter.com/yung_spielburg Intro Video Credit: https://twitter.com/MikeSylvan Referenced in the show: The Insiders' Game by David Sacks https://www.persuasion.community/p/the-insiders-game ABC News - CA EDD admits paying as much as $31 billion in unemployment funds to criminals https://rb.gy/g8uwfj Forbes - Why California Is In Trouble – 340,000 Public Employees With $100,000+ Paychecks Cost Taxpayers $45 Billion https://rb.gy/5bhfsf Rescue California - Recall Gavin Newsom https://rescuecalifornia.org Show Notes: 0:00 Wrapping up the Robinhood situation: major lessons learned, Elon’s Clubhouse interview with Vlad, is the cash infusion to Robinhood a trade of the year candidate in 2021? 20:21 Understanding short positions - why do firms short, more transparency & margin requirements 26:08 Sacks on the growing insider vs. outsider theme in politics & finance, importance of institutions in chaos 31:45 Breaking down California’s report card, why the state is such a mess, what structural problems plague it & how to fix them 1:02:04 Chamath’s Aziz Ansari story, Governor potential, top ways to save California

I'm going all in, All right, everybody, welcome. It is the podcast you've been waiting for the all in pod emergency episode 20, the number 11 podcast in the world. Number one in tech number 11 overall Joe Rogan sway pivot N, Pivot, NPR, Rachel Maddo, left in the dust. Welcome to the number 11 podcast in the world. Can you believe it besties with us? The queen of Kenwai himself, David Friedberg, Rayneman, David Sacks, hot off the banger by Young Spielberg,

closing up episode 19. And of course The dictator, Chimath, Pauli Haapatia, how are we doing boys? Lovely. How are you, Shika? Lovely, Friedberg. Lovely. Lovely to lovely Tuesday emergency pod. And sex. Nice to be with you guys. Retired from craft ventures to pursue his dream of being a Fox news host. How's that going for his next now that you've got full media blitz?

Well, yeah, I've been I've been invited. I was on Bloomberg. I've been invited on CNBC tomorrow I might even be on Fox on Thursday So everybody maybe Tucker everybody wants a piece of the besties everybody wants a piece Maybe Tucker everybody wants a piece of the besties everybody wants a piece. Unbelievable. For Paryas in our own industry, and now we've transcended tech, taken our rightful position. I got invited on CNN, which is crazy. On what show? On what show?

The guy with the British accent. He kind of does the peers Morgan. No, there's another guy who does CNN international. And they were doing like holding. Oh, that guy. Yeah, yeah, you know the guy with the glasses He's funny. I He's pretty funny. Yeah, I didn't do it. I really do not want to speak for Robin Hood, but we do need to Pick up where we left off in episode 19 which a lot of people were wondering

Chimath are we still friends? Or are we still fasties? But I do want to say one thing. Jason and I talked this weekend and he said something to me which I actually thought about a lot. Which is that, hey, Chimath, when you get that emotional, you know, I think the point of what you're saying gets lost. And I had a lot of time to think about that. So one, I wanted to say, if anything I said, you know, hurt your feelings, I wanna say I'm sorry.

I think you are the most incredibly loyal person. And that, you know, spans friendship to being an investor too. So I just wanted to say, I'm sorry to you. And to be quite honest with you, when I listened to a couple of my comments, I was like, wow, you know, I was a little emotional. And I think it didn't need to be that super extreme. I think, you know, the thing that it touches

for me is like, I forget sometimes maybe where I'm at today, and I go back to where I was 20 years ago or how I felt that's a 16 year old. And I channeled that a little bit. So anyways, Jacob, I just want to say I love you with all my heart and I'm sorry. I love you to Chimau. You know, it did get a little bit personal and we're all passionate about, you know, our positions. And, you know, it was a little difficult for me because I'm trying to give my guys,

my team or Robin Hood, the benefit of the doubt. And it wasn't an easy week, obviously, to do that. But just to recap here, Sunday Vlad was on Clubhouse with Elon Musk, our pal, who almost blew up Clubhouse. And there were so many people trying to get into that room. And I think it tops out in 5,000 on Clubhouse that people were holding their phones up to their YouTube accounts. I think that's probably how most of us listen to it was the YouTube people were just syndicating it live to YouTube.

But Elon did a tremendous job interviewing Vlad, which leads to a really interesting topic, David, about subjects just routing around the press and going directly. I mean, Elon is now the best interviewer in the business. And he basically said, listen, did you have a gun to your head? And I think it was pretty much that, according to the reports that have come out, the depository and trust and clearing corporation, which is Wall Street's being clearing house for stock trades demanded $3 billion in addition collateral from Robin Hood, which they said was an order of magnitude more than usually required.

We all know they raised 2.4 billion this week on top of the one billion from Wednesday, on top of the $600 million credit line that's $4 billion in cash. Apparently, the requirement for them went from $3 billion to $700 million, so it seems like that's, there's some equaling out of what they have to cover. And the GME short interest dropped in half today. It's Monday, I'm sorry, it's Tuesday, but yesterday had dropped in half. The squeeze seems to have settled down. Wall Street bets is clearly one. And of course, episode did Jason did supernova. I didn't listen to it, but did do you guys think that Elon and Vlad got to the truth?

Like was it clear? Sax? Well, it's got an independent part of here, Sax. Yeah. So, I thought that the interview was a bit curious because it took Elon several tries to get Vlad to say the, quite frankly, the obvious answer. Elon said it up, saying, you know, what, what I think all of us were thinking, which is, look, were you either forced to do this or is it an action that you decided to take?

And if so, why? And, you know, and, and, and Elon kept trying to get him to say, yeah, we were forced to do this. And Vlad wouldn't quite say that. He gave these very vague and big-o'-s' answers, which is why Elon finally said, listen, did you have a gun to your head or not? Blink twice, you know? And so it was, I don't know whether it was a function of miscommunication or whether we just don't know all the facts yet, but I don't feel like the interview put everything

to rest the way that it easily could have. And look, I don't wanna be, I don't wanna pile on to the situation. I'm profounder, I'm gonna give Vlad and Robinhood the benefit of the doubt here. I think probably they were compelled in some way to do this, I don't think they wanted to do it. But if we're gonna make this a teaching moment, what I would say is, like, to any founder, if you're ever

in the position of having to take an action that is inimical to your stated mission, right? And their stated mission is freedom to trade. What was the word you used? Animical. Animical. Anathema. Sure. Yeah. If you're going to basically violate your state admission, you either need to post the government order that required you to do that, or you need to post a very well reason blog explaining why you're doing that. And you know, if I were Robin Hood and I got a call in the middle of the night saying that you have to basically take this tradeoff line, I would say, well, give that to me in writing because I'm going to have to post that on my website, right? If I don't have a choice about that, I need

to be able to refer back to this industry order that I'm receiving. And the fact they didn't do that, and the fact that they didn't post a blog explaining the reasons behind the choice, and in fact, Vlad's now had to go back three times to explain it, I think that's created this world of problems for them. There's a difference between this being a regulatory requirement and a commercial requirement. Correct. If you think about the law, the regulatory body that oversees the law, that oversees what they're doing, business-wise, the SEC, or whoever could have come in and said the here's what I'm telling you you have to do I'm your regulator. But what happened was there

there are these clearing firms that they partner with that said I need you to post more capital and rather than post more capital or take the risk of going bankrupt they said we are going to restrict trading to minimize the capital requirements that we have on our book. And so if you think about what that decision comes down to, it's a decision of either our customers are going to lose money or we're going to lose money. And I know that it's not that black and white, but it's very difficult to kind of explain

the nuance of what took place there, but it really was a point of like, we are going to lose money or we are going to go bankrupt or our customers are going gonna have to lose money. And that's such a tough decision. I can't imagine any executive, any of us being in that situation and deciding do you protect your shareholders

or do you protect your customers and how much do you let your shareholders lose, how much do you let your customers lose. And it was a very complicated situation that they found themselves in because their business model was predicated on this clearing, you know, on this model that they ran that when suddenly a lot of risk came on the book, they didn't have the capital to cover it. And they had to basically, you know,

limit their customers as a result. It was a pretty ugly situation. But David, well, to kind of say one thing, I actually think that if the choice is simply between you losing money, you the company, or customers or your users losing money, I think that's an easy choice. I think the company eats it. Look what Airbnb did during COVID, right? When they had a whole ton of cancellations because of COVID, they ate all those deposits. They made good on that. I actually think if that's all that was involved, that was a big mistake.

I think Robin Hood should have eaten it. Jamal, do you want to chime in here as we go around the horn? Look, I think here's what we've learned which is that there's all kinds of ways in which this financial infrastructure works that none of us really understand. It turns out that it may have also included the people running Robinhood to be quite honest. And so, you know, we know what payment for order flow is now. We know that, you know, some companies like public have completely issued it. You know, folks like Robinhood make a ton of money from it. I think it's clear that, you know, Elizabeth Warren to AOC to whomever are going to now spend a bunch of time talking about it, it may or may not change, but the problem with the whole

situation of games thought actually doesn't really surround that, because it's more of a symptom. The real problem was what led up to it, and what led up to it was the insistence that a bunch of organizations needed access to a preferential set of data so that they could theoretically participate in that order flow before. And the second was that the rules for certain organizations are different than those for

banks. And so hedge funds can leverage themselves up to such a massive degree that you create that LTCM type of issue where you take 5 billion and all of a sudden you have 1.5 trillion. So that shouldn't happen right. So we need to figure out how we can actually deal with those systemic issues upstream and then we need to have better disclosure downstream so that consumers could choose. Hey listen if you want you know PFOF by the way as I've learned in the last couple days payment for order flows actually not necessarily such a bad thing in certain cases because it actually guarantees better price execution. In some cases, but that's not always true for options. I think it's somewhat more true for stocks.

There are, for example, like Jason, when you ask me, I asked the team at Sofai, like, what's the, how much is, how much is made on payment for order flow? And the answer was $1.5 million. And the forecast for next year was like 400k. So that's materially different than $400 million, right? So you start to figure out like, OK, how should we think about these problems? And I think that's what we have to face.

We have to get answers to these questions. Yeah, there's definitely going to be a lot of investigations into this. And thinking it through, I think there are kind of three possibilities here. When you, when we analyze this, now that we're a week out from it, I think, all going down, which is, was there poor communications or other non-disclosures in place, right? We're trying to figure that out with Robinhood. It feels like there's both, right? There could very well be non-disclosures with this private company, the DTCC. I mean, obviously they could have optimized communications. And then, was this a black swan event or to your point, is it poor preparedness, Jamoth? We have to figure that out, how prepare

of these companies to deal with this kind of stuff. And then, is it really bad optics that sit it down and all these people are involved? Or is it a grand conspiracy? And then if there is going to be an investigation, it's going to be pretty hard to cover up any conspiracy, right? Can I offer one idea? I think that there are certain parts of the economy or the way in which the world works where you can't distinguish bad operational capability and black swan events. I'll give you an example, airplanes. There is just no situation where you can say a plane crash was a black swan event and you move on. And we decided that a long time ago. And so as a result, just the amount of risk, management, and compliance is so high that every time something like that happens, it's an enormous

process. And we've seen that in the 737 thing for Boeing. Right. 737 max. By the way, they could just got settled too for just a $2.5 billion, which is kind of crazy. Those plans are back on and nobody went to jail. Right. So that's an example. At the other end of the example, we have things that have happened on Facebook and Twitter and Instagram and Snapchat, which is like, hey, all of a sudden, certain kinds of content or certain things happened like the Christchurch mass shooting. The societal judgment there was that that was a black one event. We don't need rules and regulations. I think that another important question that we have to ask is, is the financial plumbing that allows the capital markets to work, and specifically the financial plumbing that allows retail normal folks to participate in

order to try to make money and get ahead, should that be deemed more like what you said, Jason, black swan, like infrastructure where it's like sometimes should happens and we just move on, where is it more like an airplane crashing where you say? None of this stuff should be allowed to happen. Can I add one more point to that, which is I think that it's frankly spin to be trying to characterize concerns about what happened as a conspiracy theory. I heard Vlad use that word and Jason, now you're echoing the company's talking points. The reason this is not a conspiracy is because Citadel is on both sides of the trade. It's a conflict of interest. We should be using the word conflict, not conspiracy.

Now the question is, how do we interpret that conflict of interest? You have Citadel providing payment for order flow, so they're basically executing Robinhoods trades, they're their biggest customer, and at the same time, they're moving in, and they're backing up Citron and Melvin. So they're on both sides of this trade. How does that work? How can we not have questions about that? And to then characterize that,

oh, it's a conspiracy theory, if you have questions about it, really? No, no, I'm totally fine with people having, investigating if there is a conspiracy, right? And the conspiracy that people were floating is Robinhood was told to stop trading these stocks by Citadel. That did not happen. If that did happen, that would be explosive and

impossible to cover up. What it was is, does this DTCC have some influence or does Citadel have influence on the DTCC? You know, those are the questions that I think remain unanswered. The DTCC is a cooperative. So it's a collection of its member organizations. So by, so I think what we'll find out, which organizations were part of DTCC, who made the decision, who then told Robinhood. We'll also find out by the way, who put in the money to Robinhood. Did they have a direct beneficial interest in them having the DTCC make that decision? And so I think we're David's right, imagine this conflict of interest. I, now let's just use me as an example.

I associate capital. I am buying their order flow. I am also a member of the cooperative. I'm also backstopping their investment. And now all of a sudden, you would say, well, which month your hands are way too messy here, right? Like your fingers are in a lot of pots. And how do I know what you know,

exploding message on signal wasn't sent? You don't know. You don't know. Yeah, all we do know is that you had all these insiders, right? You had you had Citadel, you had this industry consortium, whether it's the collective or Citadel individually, they were under pressure by the industry. And at the same time, you had these outsiders, you had these Reddit kids who had basically taken them for $20 billion, right? They had finally figured out a way

to beat the insiders at their own game. And just at the moment that these outsiders were winning and about to deliver the coup d'arras and bust these guys out of the business for good. Somehow the insiders managed to tip the board over and start a new game. That is what people are reacting to. Look, I'm not saying that I don't know why Vlad would have done it unless he was frankly forced to do it, right? Because why would he?

So I'm not blaming him, but there is something fundamentally very corrupt at the way that the system and these insiders who have all the power and all the money, when they finally got threatened, they basically figured out a way to turn the board over about the outsiders. By the way, the other thing that isn't getting covered, and this is going to be the tragedy of this, is none of us really knows the cost of the $3.4 billion that they took in. I'll tell you the only group of people that are for sure going to get completely creamed in this, which they were employees. Right. I mean, we know that you think they're going to get too much preference stack.

Because they got diluted. Oh my gosh. I mean, how do you not put three, do you put $3.4 billion in at par? Who would do that? Yeah, I think that's what's exactly happened. I don't have it's that information. That's think that's exactly what happened. Yeah. That's my I mean if I think that were perhaps a discount to the IPL which is imminent from what I've been reading online. Yeah talk about terrible timing too right I mean they were trying to go public this year Mike or maybe terrible timing or maybe perfect timing I mean it may be that Jason if it turns out that they were able to, I mean, then it creates a whole host of issues, which is how stupid are these investors.

But if that is, in fact, what happened? Because you look at the, for example, the pound of flesh that, you know, silver like got out of Airbnb, what a brilliant trade. I mean, so like if there was one organically, that was my deal of the year from last year, from our, from our bestie awards. You're going to have to explain it, freeberg. Yeah. They put in debt and then they got warrants and the warrants ended up making them like

silk for work. Forks, it's insane. They made like $34 billion. Right. But the company's worth over $100 billion now. So as a downside protection during a pandemic that could have gone on for three years. No, no, no, no, no. That's the whole point.

If you think about the trade of the great financial crisis, it was Warren Buffett putting capital into Goldman Sachs, which was, and Swiss Re, he did the same deal. Yeah, he did five billion at each of them the same weekend. Exactly, and he said, hey guys, everything is fine. These guys are going to be fine. They're backed by Berkshire. And it turned out everything was fine.

And he made an incredible fortune. And I think, I mean, on top of his already fortune. So the point is he made a great trade. I think that, I mean, on top of his already fortune. So the point is, he made a great trade. I think that in the Silver Lake example, they did the exact same thing. They were like, hey guys, we believe in this. Everything's going to be fine. And when all of us were literally losing our mind,

because we were stuck in our apartments and houses, thinking the world is going to end, Silver Lake saw, they had clarity, they did a deal, which was the trade of the year. David's right And so similarly you would have thought that this moment was the opportunity for the trade of the year of 2021 I mean we're early on but all I know is I've been getting increasing offers for my Robin Hood shares in the secondary market You know throughout

Two questions here. We have been having a hard time understanding who's short, what the short interest is. There's a bunch of like data companies that are providing estimates, and maybe the data is only clear. The best, you're right. The best source of data that I have access to is a company called Market, M-A-R-K-I-T. They're quite large. But as of this Friday, the short interest was still, I think, about 50% in games up. And so it's been, it's been ebbing down. I didn't check today. Well, the report was it got cut in half again. And that there was a very small short interest now. But the stock dropped another 60% today. So obviously, if you're short, the stock, you may start buying and taking your profit and your gains and going home at this point.

And moving on. So do we need to, is this going to start a discussion of transparency and shorting and should all that information be short? Should you be allowed to short more than the shares that are available or that are available in the flow? I think there should be readdress shorting in general. No, there's a simple, there's an even, I think shorting is that healthy component of the market. And I wouldn't, I would leave it alone because there, I think there are some legitimate organizations that short for three reasons.

Reason number one is that they are developing a market neutral strategy for their clients and people should be allowed to pay for that, right? Number two is people are directionally betting on a trend or investing on a trend and they are trading that against potentially some other position where they are long. So that's an explicit view less about being market neutral. And then the third is that some people see outright frauds and they're trying to vote loudly that hey listen

there's something untoward happening here. So I think shorting is really good. I actually think the simpler solution and tell me if you guys agree is just go to T plus zero settlement. Why? All these margin requirements go away altogether. The reason why we have all these margin requirements is all of a sudden you have this rear 48 hour period that it's like, oh wait, who's got the shares? Do I have the shares? No, do you have the shares? So did I lend them to you? Did you lend them to me? Are you going to pay me first? I'm going to pay you first. And Instead, this is the kind of thing where it's like in 2021, this should be real time and automatic. Every share should be ID, right?

And then you should know exactly where it is. By the way, there's another point that Timoptin make, which is that there is a benefit to the longholders and equities when there is shorting of that equity in the market, which is that they're getting paid borrow on those shares. So for folks that don't realize, or their broker is, but you can access that borrow. If you own shares in a company that you're gonna keep holding, let's say you own some shares in Amazon,

and someone else wants to short Amazon, they have to borrow those shares from someone, and they're paying a fee and interest rate to borrow those shares, and so the cost to short a stock is actually a fee, an interest rate, to borrow those shares. And so the cost to short a stock is actually not zero. You have to pay a borrow to borrow someone else's shares. So if you're holding those shares in Amazon, you can actually make money if you have the appropriate broker relationship for those shares being sold short by someone else. And so this isn't just a people are coming in the market and slamming down stocks.

They are paying the people that are long to stock for the right to borrow their shares and sell them ahead of buying them back later. And so in the case of GameStop, I think the cost of borrow got so high that you're basically paying 30, 40, 50, 60 percent interest rate to borrow GameStop shares to sell them short, because there was so much interest in selling short. But there is a market dynamic in the cost to sell short that doesn't come at a negligible or free cost. So my initial, my introduction to shorting, in that example, was when I first bought Tesla,

that my broker said, you know, Jamal, if you lend your shares out, you can make 24%. I remember this conversation, 24% to your interest. Right. And I thought, oh my God. And then I said, well, what am I really doing? And he's like, well, you're allowing people to bet against Tesla. And I said, no. And I just kept the shares.

And I was like, I'm never going to allow people to do anything. And since then, to be clear, I've never, I've never, ever, ever allowed my shares to be borrowed, ever. And it's just a philosophical decision. I don't like shorting, but I believe that you should be allowed to do it. I mean, if you're gonna be a long hold or anyway, and you're saying I'm gonna hold these shares for five years, 10 years, whatever, you know, it's a way to juice your returns.

It's true. It's how a lot of people think about, especially mutual funds that own large positions and stocks they'll they'll make really good juice returns because they're getting straight to the bar. And David, it gets even better if you're running a levered book because then you know you take a buck you spin it up to six bucks you buy six bucks a Tesla. Now a little sudden you're earning 24% on six shares even though you've notionally bought one share. Right. I've still never done it. I can't bring myself to do it. I just feel like it's just so...

It's more like I just can't do it. I just like, it's like, how can you be long and then bet against your own company? I guess. Well, yeah, it doesn't make sense. Sorry, Saks, should we limit the amount of shares that can go short against a company in some way and should we add a transparency where if you short more than X percentage of those shares, we know your short position because that seems to be also very confusing here.

There are people speculating on Twitter that the Wall Street Bets crew, and I have no knowledge of this, or other hedge funds came in and saw this mess, and that what we've seen the last couple of days, were other people shorting at 300 or it could have even been the same traders or some portion of the traders who ran this up

with the short squeeze, then flip their position from long to short. Yeah, I look, clearly we need more transparency. We need to resolve some of these conflicts of interest but not from happening. I think a lot of the users of Robinhood didn't understand that they were the product, not the customer, that is a real issue.

But let me kind of uplevel this and speak to the politics of this because something really interesting happened. You had everybody from AOC to Ted Cruz basically denouncing what happened here, taking the side of Wall Street bets against these Wall Street moguls. And so what you're seeing now is a new fault line

in American politics in the post-Trump era. It's not just about left and right anymore. It's about insider versus outsider. And I think this is gonna be a major, major theme that we see. And let me actually, I wanna share something. You know, I just wrote a blog post called The Insiders Game about this idea.

And I found a passage in Elizabeth Warren's book, which is really interesting, because it describes how The Insiders Game works. And the person who described it to Warren is... Larry Summers. No, none of the Larry Summers, who was the former Treasury Secretary under Obama, he was president of Harvard, he's the consummate insider, and he taught the insider's game to generations of Harvard students.

So here's what he said. He presented Warren with a choice. He said to her, well, she said, I could be an insider or I could be an outsider. This is from her memoir in 2014 of fighting chance. She's she wrote, outsider, and recording Larry Stumbors. Outsiders can say whatever they want, but people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas, people, powerful people, listen to what they have to say, but insiders also

understand one unbreakable rule they don't criticize other insiders. That is the insiders game. It's a protection racket where these powerful insiders, these powerful elites of wall street, of big business, big media and politics, they get together and they protect each other no matter how incompetent they are, how corrupt they are. Silicon Valley. Silicon Valley, they're involved in this too, but big tech. And this is the revolution I think that's going to happen. I think Trump was kind of a forerunner of that is that we are going to see a movement of people across this country who are sick and tired

of the insiders game and they are going to rise up and vote these insiders out of office and put in some new people who aren't beholden to these powerful special interests. What you're speaking to is populism, right, Sacks? You can call it populism. I call it insiders versus outsiders. I think it's going to be very important for folks to not be a career anything, meaning career executive, career politician, career regulator, career, whatever you're in, if you can put that word in front of your existence, I think what people will see is someone who, as you said, thrives on being an insider. And I think that there's just going to be a ton of distrust. Career school administration official, career admissions person.

Career anything now is not what you want to be. You want to be sort of a little bit more dynamic because you can have multiple arcs to your life and you're not beholden to anybody. I mean, I think it's not as black and white as institutions are bad or institutions are good. There are many examples where the institutional framework allows for continuity and performance over time. A lot of Trump's rhetoric, and I know that we're past the Trump era at this point, but there was a lot of conversation about this notion of a deep state because there was frustration

with how some or many of these institutions, government institutions, were operating. But if not for that deep state, we may have found ourselves in a lot of very ugly situations over the last four years that there really were layers and layers of career public servants that did incredible and incredibly heroic things to preserve democracy, to preserve the rights that we all hold dear in the Constitution. And those were really important roles. And the institution played a really important role

in providing continuity and providing trust and security. And so I think it's easy to bash institutions when things aren't working perfectly, but we also have to keep in mind that it's not that all institutions are always bad It is absolutely true that there is corruption But there is certainly benefits that we have to kind of not not allow populism to become a runaway framework for how we deal with everything We're frustrated with I'm not saying that I think I think what I'm saying is institutions are Critically important, but now I think we have to change the rules for how you can be a part of

them and then how long you can stay. So for example, like if the rule was, you know, you can only be a two-term politician. Wow, that would be what a cleansing effect that would have on anybody that chose to serve in politics. Up and down the board, you know, at the federal level, at the state level, two terms in and out. California, California has that, a 12-year limit in the state assembly in Senate. And so I think we're seeing that happen in progressive places like California. Obviously, a good segue. But I think very much agree that the notion that there needs to be, we talk about this last time, we need to ensure that the institutions don't become beholden to special interests and that there isn't accountability because the failure, the lack of accountability

is really where things bloat over time because you just add stuff on, you don't ever take stuff apart and ultimately you have kind of a non-functioning institution. So let me give you the report card on California and then we can figure out if turn limits can't fix it, what can fix it? So here's some data points. First I'll do one section, first section number one economy and jobs. Nearly the highest unemployment rate in the US at 8% plus, highest poverty rate in the US, 18.5% of all Californians, highest poverty rate in the US, 18.5% of all Californians,

highest income taxes in the US, 13.3%. $30 billion of potential fraudulent unemployment benefits from 2020, $11 billion already determined fraudulent, doubled the oil and gas drilling permits instead of incentivizing, you know, maybe climate or biotech or tech jobs, a $227 billion spending plan for 2021, in terms of quality of life, highest homelessness in the country, worst graduation rate in the country, around 17% of students in California don't graduate, the worst slash highest cost of living in the country,

and the worst wildfires in the country, 1.8 million plus acres burned. On COVID-19, third highest rate of COVID-19 infections in the world, 658 cases per 100,000 people, and then the worst vaccination deployment in the US around 50%. And then culturally, I didn't know this. I don't know if you guys know this, but here are the number of companies. This is just a subset that have left California. Toyota, Charles Schwab, Tesla, and Oracle, in some way,

shape or form, which is estimated now to have cost California $77 billion of future revenues and 300,000 jobs. Over the past few years, nearly 3 million people have left the state, 53% of Californians want to leave the state and 63% of Californians believe the American dream is dead. Okay, so if let's go and figure out. Okay, so if if if term limits at 12 years don't work, what do we do? Well, I think I think we have to have politicians who stand up to special interests aren't in the pocket of special interests. I mean, the problem we have in California, the biggest problem, the reason why California is such a mess is that we have government of the special interests, by the special interests, for the special interests.

I mean, the politicians in Sacramento, that we have a one-party state effectively, and they are beholden completely to these special interests. Look at the deals they make. I mean, so example, in California, we have over 340,000 public employees who make over $100,000 a year, that cost taxpayers over $45 billion, okay? And, you know, we have lifeguards making a quarter million dollars a year, it's crazy, right? I mean, because the people making these deals

are in the pocket of these government unions. They're the biggest contributors to California politicians. And this is my fundamental concern or beef with Gavin Newsom. Is that fundamentally, he's worked his way up the latter of California politics by basically benefiting from these special interests. Throughout his rise, you step by step, he's never talented insiders or any special interests. He just kind of catures to this political class.

And so that's why I think fundamentally he's not gonna be part of the solution. It just feels like every job he's had in politics is just a stepping stone to get to the next step. And even the governorship now is just a stepping stone to get to whatever's next. And I think, you know, Californians are tired of being stepped on in this way. There's, I mean, there are some structural challenges in the state, right guys? I mean, like we should not forget the fact that there are some voter mandated supported propositions that have passed over the last couple of decades that really create a structural

challenge in terms of how do you allocate resources in capital and how can you effectively govern in the state? You know, the three that are often highlighted is Prop 13, which passed in 1978, which is the state property tax limits. We've talked about that one, I believe, in the past. There was a proposition for in 1979 that limits the amount of money that states can appropriate, that the state can appropriate, and then Prop 98,

which passed in 1988, and this is the big one. Prop 98 has been challenged in courts and there have been many, many kind of efforts at finding loopholes and getting around it and litigating it, but it mandates funding levels in the state from pre-K through community colleges. And it creates a structure that is really difficult to navigate around and really difficult

to operate or manage. It's almost as if you guys were running a private company. And your board said, here's how much you as the CEO have to spend this year. And here's how you have to spend it. It is such a difficult decision for the governor to have to say, well, I'm going to make some changes to that because he'll end up in court. I want to highlight that there are structural challenges to the way the state operates. Obviously, to get a lot of things done, you still have to pass through the state assembly

and the state senate. It's not as simple as making better decisions than the governor's mentioned. There's a lot that we have to kind of resolve structurally in the state. It's going to take a long, friggin' time and a lot of cooperating parties to get there. And so I know for those of us who are very much about making fast, quick, and accurate decisions,

good decisions, this is a really difficult place to do that this state, the way the laws have been set up and the way that the legislature has oversight. Well, I mean, look, you're right, but this is why we need real leadership. We need somebody who's going to come forward and say, listen, we need to change this proposition. Another one needs to change is Prop 47 that decriminalized a whole bunch of behavior. I mean, crime is exploding in the state. That proposition needs to be looked at as well. I mean, we need somebody who's gonna come at government from completely different perspective, which is to think about the citizens of California,

first of all, to pay attention to the middle class of California, and to think about us as consumers of government services who need to be satisfied. And right now, if you were to think about the services governments providing, people are churning off of it. We had net immigration of 135,000 people, net left the state, right? You know, 40,000 families in California pay about half the taxes.

If say 10,000 of them leave, we've got a giant hole in the budget that no one knows how to replace. And we have no idea how many people have even left. How many families have left the state. So we really need leadership here to not just go along with a special interest who are in power and who are willing to stand up and push for some of these reforms. By the way, I think it's worth just highlighting some of these numbers because they also speak to the structural challenge in the state. The state of California generates about $140 billion in revenue, 70% of that comes from personal income tax, and as SACs pointed out, half of that comes from the way, that top tax rate of 13.3% applies to households over a million dollars of income, and for those that don't know, there's income strata

that are defined by the state. And depending on what strata you pay a different tax rate, the highest strata is making over a million dollars a year when you pay 13.3%. And that's where these 40,000 households cover most of that budget. And 20% to sales and use tax and 10% is corporate tax. To speak to the corporate tax rate for a second, that's 10% of our revenue as a state. We charge a 9% average corporate tax rate in the state to operate. That's incredibly high and it's one of the reasons besides kind of the challenge that Elon and others kind of made very public care over the past year.

But that corporate tax rate makes it very difficult to operate in the state relative to other states that are offering no tax rate, lower cost of labor, and less of a regulatory burden to operate. And it's why we're seeing an exit. It's not just of people from the state because the services are obviously not being well-managed, but also of businesses, you know, finding a better place to operate.

In Canada, there's an approach that I think is really useful here, which is that, you know, the Canadian government offers credits, called Shred Credits. I can't remember if it's at the federal level, but it's definitely in the state of Ontario because I've used this for some of our companies. You hire engineers and you can basically capitalize their salary and you can offset their costs so that when you're a young company, you're effectively playing zero tax

or if you're a small company, you effectively pay zero tax. And that seems really right. Where you're a small business person, and you know, you're holding, you know, 5-10 employees, and you're making, you know, a million bucks a year in revenue, whether you're a restaurant or a software company, you basically pay nothing. But then at the other end of the spectrum, you know, when those credits burn off, theoretically, if you're a Facebook or a Google or an Amazon, now all of a sudden, you know, you can pay a much larger percentage of of what to do. And I think that there's all kinds of progressive tax schemes that work on the corporate

side. There's a bunch of tax credits that you can use to sort of incentivize certain kinds of jobs. And I think you're just much better off because then, you know, these companies can't leave if all the people want to stay in one place. I want to highlight one more structural problem. So even if you do resolve that, even if you do resolve these propositions that have passed in the past, and they're causing us problems in terms of budgeting and ability

to budget adequately going forward, one of the other challenge, and even if you do resolve the tax structure to generate a more balanced revenue model that allows for innovation and allows for employment, allows for opportunity. We have a, this is an interesting stat I found this week. How many Americans, I'll just say the number, one out of nine Californians are a member of a public pension fund in the state of California, one out of nine. And the public pension funds in California, as of the last reporting, are roughly $250 billion underfunded relative to the payment obligations they have to their members.

Think about that for a second. So not only does the state have a lot of debt, we've got a $250 billion whole for paying people money that they believe they're owed in the future. And that is creating a massive problem where the state needs to figure out how do we fill that hole, how do we meet these obligations to our citizens who worked, who earned what they believe to be a fair income stream for the rest of their lives, that they may not ever get. You know, and so, so we've got both the legislative problem in terms of how the state is structured.

We've got these propositions that have passed that kind of buckle down the governor and buckle down the decision makers in terms of what they can and can't do legally. We've got an income generation problem with respect to concentration, and we've got some of these heavy burdens on us like health services, but also this underfunded pension liability that is almost like such a priority, and no one's really paying attention to it because the sirens are going off and meanwhile the service providers in the state are completely effing up the service that there's supposed to be providing You know, to mop highlighted a bunch of great ones in terms of fire response and whatnot at the beginning and obviously the vaccine rollout

We know it's just completely flawed but You know here's another interesting stat the California EDD This is the link I just sent out by the way on our Zoom chat, but there is $114 billion in unemployment claims paid since COVID. This is an insane statistic, but it looks like roughly 27% or $30 billion of fraudulent claims were paid by the EDD on those unemployment claims.

So the folks that are actually running these institutions themselves aren't even operating well, not to mention the actual huge liability to the state has accrued over the years and the structural deficiencies. So as much as I would love to kind of propose that we could all come up with a simple solution, this is a complex friggin' set of problems that probably require several books to resolve.

And I just want us to be honest and real about that, that this is gonna be a challenging issue probably for decades to come, for this state to get itself out of the holes that stuck itself into. You know, one thing I'll say is, as goes California, so goes every other state and so goes America,

because if there is one state that theoretically, you think would have been positioned from a human capital perspective to figure these out, and political will, it's this state. And if this state can't figure it out, we're in a whole, fucked under trouble. Well, we're not doing a very good job figuring it out right now. That's why we need to make a change.

I mean, David, you're right about the magnitude of the problems, the challenges, but it all starts with some sort of, you know, outside of rebellion. And that's what's going on with this recall. That's why we have to support it. That's why I support it. It's not going to be the end of the, it's not the, it's the beginning of the solution, not the end of the solution. The beginning of the beginning. It's a beginning of the beginning. But we need to create an institution to solve the problems over time, right? It's going to be, it's going to be the coalescence of what you're pointing out,

Zach, which is the, you know, the, the, the will of the straw, the will of the rebellion to figure this out and resolve the problem. The institution may be the all-in pod, but let me build on. Yeah, but let me build on, yeah, I would actually, Jake, how you post a tweet saying what should we call our party? And anyway, my suggestion was the outside respect. I'm surprised, party.

Yeah, that's why it's party. That's why it's party. Let me build on Freeberg's point about the pensions. Where did these giant underfunded pension obligations come from? Because I think that's a really important point to explain. So here's what basically happens. If you're a government worker in California, you could typically retire after 20 years with all of your benefits and not just 100% of your salary, but the salary you made in your last year.

And so what happens is, when people get to that 20 year mark, they get a lot of overtime. And so that's why we've seen articles about people retiring, you know, after, you know, if you're retiring after 20 years, you could be in your 40s, okay? Well, wait, don't you get a half pay for your pension? So they double up their overtime, they get to 250K, then they get a pension of 125. You don't get your full salary in retirement, you get your half. Right, yeah, there's a, there's a complicated formula

about the point is you can stuff it with overtime and it's very generous. And then they can go because they're still in their 40s, they can go get another government job somewhere else and then stack that pension on top. And then by the way, it doesn't just last until they die, but it lasts until their spouse dies. So now there was a proposal years ago to move this whole system to like a 401k type of system. And it was swashed by who, the unions and Newsom opposed it because he doesn't do anything that the unions don't want.

And so we have these completely unsustainable pension liabilities. Everybody can see this train wreck coming, but nobody has the guts to stand up for the unions and do something. Yeah, I mean, there's very few careers that still offer pensions. Even the New York Times, over a decade ago, got rid of their pension because people lived too long, they retired too early, and then the cost of healthcare is just so ginormous here that it's going to crush any pension fund. So you have to move to a 401k and we're, it's kind of hard to say to a cop or a firefighter who's running into a burning building or putting themselves in harm's way that they don't get one because it's such a high-risk job, but we really do need to think of something more reasonable like a 401k. And that's coming from my entire family is, you know, cops and firefighters and of service in New York City.

And they all have pensions. And you are right, David. There is a tradition of trying to get a little extra overtime because the average out, usually you're last three or four years to give your average salary to base your pension off them. And then of course you can do another job or go work, go from a firefighter to a cop, vice versa garbage, sanitation worker to get those things. We didn't talk about the nimbyism and how extraordinarily hard it is to build homes here and how extremely expensive it is. A lot of the young people who are thinking of coming to California

are looking at the housing prices, they want to come here to start companies, they love the California vibe, but the housing is a non-starter. You can't live in the peninsula or anywhere in the wider Bay Area unless you are a dual household income with what, $40,500, $600,000. Minimum. Minimum. Minimum. Minimum. And that's not even counting you know, a dual household income with what, $40,500, $600,000 minimum minimum minimum. And that's not even counting private school, but you're talking about where are there sub one million dollar homes within the proximity of the Bay Area. They don't exist. You go to Austin, and I've been looking at Austin real estate just coincidentally, and there are many homes that are $300,000 that are $400 a square foot everywhere within 30, 40 minutes of downtown

Austin. And that's where young people are going. And then finally, if we look at our, to law and order, David, we are not treating fentanyl like the super drug it is. You know, it's one thing to have drug reform and to have prison reform. We know these are important, but you can keep that in your mind that we want to make a more just legal system while at the same time, not allowing people to deal fentanyl.

And if you just type into Google fentanyl versus heroin, lethal dose, and click on the image search, you will see two vials and it's a very famous photo where there's like, you know, a pinch of, you know, heroin. That's the lethal dose. And then in the other vial, there are like seven grains of fentanyl and that's the lethal dose. And we are conflating a homeless problem with a super drug. Yeah, can I add to that? So, so you know, I was on the side of decriminalizing cannabis, and I think that, and I think that there, we overcharged too many people for drug crimes when they were disusers and should have been in treatment,

and that's why I think there's been a reaction against over incarceration, and I understand that. But I agree with you that fentanyl is in a separate category. It is the super drug. And here's the problem. It is so powerful. It is so addictive. It is so destructive.

Nobody can hold down a job and get off that drug once they start taking it. I mean, it's this game over. So they end up living in the streets and turning to crime and petty theft to support their habit. And that's the situation we're in today. So they end up living in the streets and turning to crime and petty theft to support their habit and That's the situation we're in today and we have this growing mass This massive numbers of people living in the streets addicted to this super drug and we got to stop it We got to get tough on this because it's just you know right now the the the solution that our our DA seems to be pushing Whether it's gas going to an LA or chase a booted

in in San Francisco, is there just not prosecuting anything? We had Prop 47 downgrade a whole bunch of property felonies to misdemeanors, and now the DAs aren't prosecuting the misdemeanors, so they basically just decriminalize burglary, and so you've got all these drug addicts living on the streets committing these crimes, and they need to be in treatment. So I think part of what we need to do here,

I actually think this is a big investment California used to make. We need giant treatment centers to address this problem. And if somebody gets caught committing a crime and they're addicted to drugs, I don't want to send them to jail, but I would make them go to treatment. We have to think about true compassion.

True compassion for somebody who is addicted to fentanyl is getting them off the street and getting them into a rehab program or giving them the choice of going to jail for the crimes they may have committed so that there is this pressure to go into treatment just to give you a stat. In 1999, we had like 18,000 overdoses. We're not over 70,000. And if you look just in San Francisco, we're talking four or five times the number of overdose deaths to COVID deaths. This is a level of human suffering that just makes no sense. And it's such a nuanced

discussion, right? You can't, you can, you have to be able to hold into your brain that cannabis, you know, psychedelics, MDMA, psilocybin, old plastic. You have a log list. I have a log list here of the drugs. I've your own drugs. They you want to be recreational. Here are the drugs I'm a fan of.

Good. Here are the drugs that I don't take bad. No, fentanyl, I think you just have to look at the chance of recovery and the chance of addiction. And fentanyl and heroin are just tragedies Tragedies, you know, we also have to like have the courage to actually not look at just this symptom like I think Treatment centers are a great idea. I think not sending people to jail is like an obvious idea I also think if you take two or three steps back and you think about what are the two things that send people off the rails

Number one, I think is lack of a job and then number two is a lack of mental health resources. You put those two things together, it's, you're done. It's like, it's like kindling and it's like kerosene and a match all in one and boom, it goes. And, you know, we didn't need to know that answer because you saw that over the last decade building up in the rust bill. So we knew that that was the, those are the boundary conditions for this. So how do you get people back to work? How do you actually give some, you know, the crazy thing about Reagan, I mean, we all forget but Reagan was the one that defunded all of the mental health institutions, you know, when

he was governor of California and sent all these folks billing into the streets. Well, think about how many jobs that would create if we brought back, you know, psychiatric facilities and made them free. Well, think about how many jobs that would create if we brought back psychiatric facilities and made them free. This is where, if we look at healthcare, not having a national healthcare program, especially for mental health, is costing us more on the other side when we come to suicide. If we're going to spend money and if we're going to be in debt, be in debt for the right reasons, find a way to be accountable and transparently spend money. That's fine. Spending money is fine. Government should not be for profit.

Government should, I don't even think government should be breaking even. I think that government should be generally running at a loss. And then the net GDP, as long as that's positive and accretive, we're doing right as a society. Right. So government should be doing the things that they need to do for people to have an even starting line. But I just want to, yeah, go ahead, sorry, tomorrow. No, I was just going to say that that's where we get it wrong. Because like we, you know, we, we like pat ourselves on the back when a government turns a surplus. And then we, you know, we like explode when a government runs a deficit. Instead, they're managing to the political theater of a number instead of really understand how to run a business. But I just want to be clear, like the entire premise of how that is run and how we think

about this from an economic point of view is that we have to have GDP growth. And if you don't have GDP growth, the whole formula fails. So let's just break this down in a simple way. If I'm working and I'm making 60 grand a year, I can take out some credit card debt, knowing that I'm going to make an extra 10% next year and extra 10% the year after. If I know my income's going to climb, I can afford to take on some debt, which means spending more than I'm making right now, because I know that in the future I'll be making more than I am today and I'll be able to pay down that debt.

And so the whole premise of how we run government is we should run at a deficit, we should accrue debt, we should build infrastructure, but in order for that work, to work, I have to increase my tax revenue in the future. And there's two ways to do that. Raise taxes or see significant GDP growth. And if you raise taxes, you suffer the problem that California may be suffering now, which is very high network people leaving the state, which is gonna cause a collapse in the revenue stream

and the whole system fails. If you want GDP growth, well, you have to kind of enable the system to allow for GDP growth, which means reducing taxes and growing housing. But the problem is the life that people wanna live doesn't necessarily mean that we need to have have and so this goes back to the housing question Do we need to have more business growth in the state?

Therefore do we need to reduce tax rates to encourage business growth and by doing so we have to also build more housing and the reason people Want to build more housing is because they want to see more business here and the whole premise is want to build more housing is because they want to see more business here. And the whole premise is kind of flawed. If at the end of the day, getting more business here means you also have to lower tax rates and cause all this problem. It's also how you have community and it's also how you have diversity. Like nobody wants to live in a monoculture where everybody's really, really poor or everybody's really, really rich. I grew up, it's so sickening, I grew up in a place where everybody was really, really poor. I now live in a place where everybody is really, really rich. I grew up, it's so sickling, I grew up in a place where everybody was really, really poor. I now live in a place where everybody is really, really rich.

And the monoculture sucks. And instead, what you want is you want transitions, you want people moving up, you want people moving down, you want the hard luck story, you want the gut lucky story, you want it all. And this is where we've lost it. I'm gonna ask you a question, Freiburg. Are you saying that if 40,000 people

left California, we would blow a $70 billion whole in the budget? No, we would blow a, yeah, about 40,000 count for half the income tax. So it's about 35% of 140. Yeah, so we would we would blow a 50 $60 billion whole in the budget 40,000 people 40,000 Yeah, out of 60 million 40,000 homes 40,000 homes out of 60 million 40 million out of 40 million. Yeah Yeah, 40,000 things happen to New Jersey and Connecticut when they had everybody moving down to Florida And so this is not unprecedented Especially with hedge funds and really high taxpayers, you know. But what I'm asking is, is there a better way where you don't have to depend on GDP growth

to balance your budget and to provide the social services you want to provide to the state? No, of course, of course not. It all starts with having a healthy economy, I mean, always, right? Because that's what generates the prosperity to pay for all the social programs. And it's to pay ahead of the curve, right? That's my point. We're always paying ahead of the curve,

which forces us to find GDP growth, which is how we get stuck in these cycles and these problems. And this is true, not just of the state, but of nations as well. The US faces this and others, but by spending ahead of the curve, by creating infrastructure, by creating social services, by setting up these pension obligations, the only way to get out of the

debt you've just taken on is to grow. And that creates all of the systemic problems and ultimately lead to populism and all of these kind of frameworks for failure that are going to ultimately end here. No, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no,

no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no kind of, kind of, kind of disagree with that. Look, growth is a precondition for everything else that's good, okay? Growth, growth needs to be managed, okay? But it does, growth is not the problem here. The problem is a set of policies that are actually killing growth and driving entrepreneurs and innovators out of the state. We saw Elon Musk leave the state, why he said that California was starting to take its success for granted and it had been winning too long, okay. California needs to realize it's in a highly competitive situation

now. And because of COVID, you can work from anywhere and Austin has become a tech hub and Miami's become a tech hub and those states have no income tax and we have politicians in California just keep raising taxes as if we're not competing against these other states. What we are and people are leaving. We're seeing a mass excess here. We've got to realize that we can't raise tax rates beyond the point where people are willing to bear them. This is the, this is your, I think your best point, David,

is that what the great pause did was it let people reassess their lives. How many people do we know who either left the state, changed job, broke up with the spouse, whatever it is? People reassessed everything in their life and what people uniformly came to was, why am I paying this much and getting this little in the Bay Area, in California,

when I could get twice as much, three, basically three times as much, in Austin or Miami, and not pay this amount of taxes, and be happier. And that is an existential problem for the Bay Area. If, you know, this is not just Elon Musk or Larry Ellison Oracle, it's also rank and file developers and the developers don't need to be in the office. So you could have this massive middle leave too that nobody anticipates. And if all the developers said, you know what, I want to be on the Reno side of Lake Tahoe. You know, I want to be in Austin or wherever I'm paying less taxes and I'm making the same money

and I got a better quality of life. What do you guys think happens? So, Jay Cal, what happens to California or Connecticut or New Jersey and what happens to Florida? Just tell me what happens. I think it's a debt spiral for New York and for California where it unless the representatives in government start to represent the people who are voting and living there and voting their interests as opposed to the special interests. David's point about the insiders. We have disconnected what the citizens of California want from what the government officials are providing.

They're just not in sync. They're basically cow-towing to teachers unions or special interests and not the people who are building companies or just people living here. People want to build housing and they won't let them. You can't build apartments in Palo Alto or, you know, any anywhere in the city. I mean, this is crazy. You're right. The only middle class that's going to be left in California pretty soon are government workers. I mean, that's it. That's the only people going to be making over $100,000 a year in California are the government workers because everyone who's middle class who's running a business is just finding it too difficult

and too difficult to earn with the level of taxation that's run their business and their legalization. Regulation and their leaving. I mean, just think about the regulation issues of doing any real world, I mean, you've done construction in San Francisco. We've had businesses that are real world businesses with storefronts, it's jumping over hurdle after hurdle, after. I have an idea. It's brutal. What if whenever you started a

company in California, you got, you know, three or four years worth of tax credits for engineers in return for one percent of the equity that California was not allowed to sell? Sure. I mean, some equity upside would be great. I have an idea. Tremoth, how about you run for governor? Yeah, Tremoth. There's an idea. Why don't you? Isn't that why we're doing the emergency pod?

Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah.

Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. speaking of politics though, I do need to tell the story. This is a complete, complete non-sequitor. In 2012, 12 or 13, I can't remember which year Mike Bloomberg invites a bunch of us from technology to the White House correspondent center. We're like, yes, the White House correspondent center. Where do you go? It's off course. I went once year. So, you know, myself, Ian Osborne, Hossein Ramon, the founder of

Jobbone, and I have two amazing stories about my experience at the White House course, positive. Number one, well, three, number one is like the dinner itself is kind of like a prom just because there's just so many people, right? And so, you know, you have to have a rubber chicken dinner because there's like a thousand people in the room. But the second was that Ella McPherson was there, and I've never seen more incredible hair in my life. Just, I have this image of this person's hair, and it was like the thickest,

like it was like curly, but like it looks so soft, and after such, this is the most incredible hair I've ever seen. I think those are called extensions or a wig, but go ahead. It didn't look like that. It looked like real hair, but it just... It looked meant terrible. Like a lion, like the mane of a lion. And then the third story is we're in a reception.

There's an after party at the French ambassador's place. I start talking to this person randomly, and there's like all these stars everywhere, but I just start talking to this person. You know, she's very chatty, and I'm chatty chatty chatty, blah blah blah blah blah, we're talking talking to him. And then at the end of this like sort of like five minute conversation and we had not really introduced each other, she just kind of said, hey, and I said, hi, and so we started talking. She says to me, you mind if we take a picture? And I'm like, Jeff, of course, and I had no idea what was coming. So I was like, so we take a picture. And she serves to me. And she says, you know, I think you're really fantastic

in Parks and Recreation. Oh my Lord. And I thought so hard. You thought I was a Z's. I'm sorry. Jesus Christ. How does this happen? At least she didn't call you Erkel. I mean, oh my God. That was her second choice. Oh my gosh, I love you in parts and rec. Anyways, that's my interaction with politics. I think you're ready for politics because you just avoided the question.

I was just wondering, no, look. Let's be really honest. Like, I'm not ready to do any of that. What I need to do is I need to figure out, you know, A, my business and where it's going. And then B, I do think it's worth figuring out, what are the conflict of interest laws and what do you have to do if all of this were to come to pass? Because I cannot make a credible decision unless I knew that. Because I just have things that I want to do. And that to me are the most important things. Like I'll just be really honest with you.

Like I'm working on something in batteries that I think is, it's important for a lot of places much more than just California. And so like if I have to abandon this battery project, I wouldn't do it, you know, just that simple. So I gotta figure that out. And you gotta write down all the illegal things you've done on a piece of paper

and all the illegal things you're doing on a basis. And then we got to make sure that you have a clear. You have a case of moleskins because I can start for sure. I can start filling that in. They're never going to get uncovered. The op-o research has to be God. Right. That's what the dinner on Thursday should be about since start the op-o research program.

Oh my gosh. That's a long program. But there's certainly a groundswell on interest, right, Saks? And there's certainly... Oh yeah, it's crazy. I think Chimoff has a lot of folks that love his passion and the way he speaks to them and that he has a real sense for what I think people are feeling and can speak to that. And obviously has experience in kind of making decisions and allocating resources, right? So, you know, I think there's a lot of interest, Jamaat, then a lot of drive to see you. Here's what I'll say.

You know, shit or get off the pot. Here's what I'll say. Here's what I'll say. I've grown up with nothing. And getting to the other side, I'm completely convinced that poverty is a disease. That it is, except in this disease, it is systematically reinforced. You know what I mean? So, Jason, stop that, Jason.

I'm talking to Bob, it's good. And I would like to say, all Americans in the set of sins of California, I came from nothing. I came from nothing. I would eat rice three days a week and then I would eat the plate the other four. By the way, the reality is that if I were to do it, if like all the checks came back and it seemed like it was a plausible thing, I would only do it for the 18 months and just kind of, you know, but you'd have to get elected on a mandate where it was so clear that it's like all of California wanted these

five or six laws to pass. Like I think it's like, you're not running a candidate, you're running a platform. So it doesn't matter who it is, you know, whoever goes in, it could be me, but it could be, frankly, Kim Kardashian or the rock or David Sacks. I think what's really important is we should get alignment on a handful of laws that change the trajectory of the state. And the reason why that's important is if those laws can pass and the state turns around, then that's a roadmap for the other 49 states. And I think that's a big deal.

That's a really big deal. I think it's about a getting adoption of a playbook, a playbook to fix California. And if that playbook is something that a group of people from different parties and different backgrounds can coalesce around and you know, publish that playbook in a way that's easily understood and you can take it and run it. Let's pick what our top item would be. For me, it's the building of multi-family unit housing, I think, would be in my top three. What's in your top three, SEX? Well, if I were to write a catchphrase for a campaign,

it would not be make California great again, but it would be something more like tough and tolerant. Because that's what I think California wants. So tolerant on LGBTQ rights, tolerant towards people of different nationalities towards immigration, tolerant on social issues, but I think what California is really want now is tough on crime, tough on hard drugs, negotiate tougher deals with these unions and special interests who are just pillaging the state.

And then, frankly, tough on the politicians because they're making it too tough on the people to live and to run their businesses. And we need to make it easier on the people and tougher on the politicians. Freeberg, what do you got in your top three items? If we could only put three items on the docket, one, two, and three, I think creating much more affordable housing through multi-family, going up as opposed to building out and just allowing anybody who wants to add

a couple of stories, add a couple of stories and just more housing would lower the price of housing. And maybe we have to change the taxation and maybe reevaluate the value of homes because right now you buy a home in 1970 for 50K, you're paying 1% of that for the rest of your life, right? Which then makes it impossible to move. And you got two people living in a 5,000,

five bedroom square foot home because they can't move because their tax basis is so low on it, right? What do you got, freeberg? I mean, I don't look, but challenges with any one of these things, you have to balance it. It's like we talked about last time.

You know, we talked about adding a transaction tax to trading on markets, but you also have to get rid of the capital gains tax, right? If you're gonna get rid of that proposition that locks in the property tax rate, I think it's Prop 13, right, sex. If you're going to get rid of Prop 13, you've got to face it out over time. But to create the opportunity on the other side, which means how do you create more affordable housing at the same time that you get rid of Prop 13, you've got to enable, as you pointed out, the ability for more rapid housing to be

developed and dropping regulatory constraints and maybe removing some of the union pricing and some of the work that gets done and the supply chain and so on. And so, I think it's about the balanced trade-off amongst these things. If we're going to talk about trying to keep the top 40,000 households in California and you're going to drop the tax rate on them to keep them here, which is an extremely controversial anti-populous move right now. You'd have to find another way to resolve that gap, or at the same time reduce the cost of our top cost

as education. So you need education reform. Our second top cost is healthcare and other related services and how you resolve that. There's a lot of structural things in there. There's probably a checklist of 10 things that you would say, let's go negotiate better prescription drug prices. Let's make the services more efficient, meaning how many patients does a doctor get to see

per hour, per day, per week, whatever. There's all these things that you go through and you make each one of those dollars that are being spent more efficient. So as much as I'd love to kind of rattle it up to three different things, this is a management problem. And, you know, as those of us who have run businesses that are struggling or challenged to have experienced, there isn't one thing to do to fix a problem when something is not operating well, but you really, it really does come down to talent. And so, you know, I would think that the people that are sitting in those assembly

and senate seats need to be the right people, and the person sitting in the governor's mansion needs to be the right person, who will surround him or herself with the right people who are operators and managers and leaders, you know how to resolve these problems, and go through and do just like that guy did and Dave with the napkin, and, you know, right out.

Look, here's the 10 simple things we can do to fix HHS, and here's the 10 simple things we can do to fix HHS and here's the 10 simple things we can do to fix higher education and go in and cut half the expense and if you cut half the expense you have a lot of things you can start to do. And so yeah I don't have a simple answer for you Jake hell but I think it comes down to balance. Would you say and I school vouchers since you brought up education or the quickest solution there is to create more competition quickly by giving parents the ability to take their voucher and go to whatever school they want.

I'll be honest, I haven't read enough on school vouchers to know the ramifications of the programs that have been proposed. So I'm not going to be very thoughtful in that. Well, I'll speak in favor of the idea of giving parents more choice. I mean, these schools are being run are they being run for the students or for the special interest? Because right now the parents don't really get any choice. I mean, look, if we can recall the governor, why can't we, why can't the parents of a school

recall the headmaster? I mean, why don't we give them the ability to circulate a petition if they're unhappy? I think in the case of the governor recall, if we get 12% of voters to sign the recall petition, then you get a recall election. So what if you had a system where the parents of a school could sign a petition, and then they vote. And if the majority of the parents, yeah, majority of the parents vote to recall a school, then they can face

the replace the headmaster and run it in a different way. Why shouldn't they have that choice? It's crazy to me. For who's that's what? Yeah, yeah. Yeah, but for it. Yeah, let me give you a little math that is did on my calculator here. So the average student in California costs $18,000 a year roughly, okay? And we have a classroom size on average of about 25 students. It's actually higher than the national average.

So you multiply 18,000 by 25. That's $450,000 per classroom. Okay, now how much does a teacher cost? I mean, okay. No, that's the average in California for teachers. It's fine, but let's say that we paid teachers extremely well. Let's say we paid the teachers 100,000 a year because we all believe in having great teachers, okay?

That would still leave $350,000 left over. And remember, you don't have a real estate cost, right? The state already owns all these schools. So where is the money going? We systematically entrench poverty. I think that what happened to you, freeberg or sacks or me or J. Cal, I don't think it's possible anymore. And I think that we happened to you, Freiburg or Sacks or me or J. Cal, I don't think it's possible anymore.

I think that we are aberrations, and I think that folks that are younger than us would look at us, and they look at us, I think in part because they're like, God, I would love to have that shot, and I don't think they know where to start, and I think they also see a system that feels very much rigged against them.

Just by Bitcoin, I mean, this is why they're attracted to buying Bitcoin or doing what they did with GameStop and why Wall Street Meditators versus outsiders. They feel like they have this opportunity to show the man and they don't, this is why they don't want to take on school debt. I mean, I don't blame millennials for being disgruntled

if they got 100 or 200 K in debt. And they were told this degree would get them, you know, this would be their ticket. And it was it's a lot of disconnected. It's a lot. It's a great lie. It's a great lie. And so, you know, that's that's one of the big lies. And I think we're sacrificing it now because like, you know, where we're making this great sacrifice because we're exposing these lies to be exactly as they are. So I mean, if I had to pick a couple of things, Jay Kal, I would say the most important thing for me is school vouchers tied to,

like I would increase public school salaries, you pick your number. I don't really care what it is. All hundred grand, 125 grand. But you need to tie it to school vouchers so that any parent can put their kid into the best school that is for them. Or start their own school.

Like there needs to be competition. Or start the five parents get together and they each get an 18k voucher. They can spend 100,000 on a teacher to teach five students. And if they hit their goals, they're going to do better. What five parents, even the most disadvantaged parents would take advantage of this? To me, that would be the first above all else because I think it creates accountability. It allows our kids to have a decent shot. The second thing I would probably do is I would actually just cut all taxes to zero on

the personal side, but I would introduce a progressive taxation system for corporations. I would try some of these novel things like getting equity in turn for credits and allowing folks to capitalize certain expenses. I mean, these are like, I know people think that's also stupid, but like, you know, if all we did was just own 1% of Apple Google Facebook, you'd have $3 trillion, $4 trillion, trillion with a T. You know what I mean? Well, not, that's $4 trillion a market cap, but you know what I'm trying to say. Like if you control one percent of that, it goes a long way. So there's that. And then I do think that there's something that we need to do for people to be able to live.

I remember interviewing somebody and, you know, he's what he said to me, he just made me so sad. He's like, I, you know, he drives an hour and a half into work every day and then drives an hour and a half home. And I was like, how is this possible? And I just thought to myself, like, what does that do to you and your family? He goes, I don't see my family. And I'm like, well, can we just increase your salary? And you know, that's not possible because of the job that he had. And then he couldn't afford to live. And so all these things just build up in the system. So those would be my three things. It sounds like we have a Bestie platform.

Bestie. We need to figure out who the Bestie candidate is going to be. Hopefully we can convince Tramoth to do it. But the first thing we got to do is, we got to make sure this recall happens. There's another five weeks or so to gather signatures. So everybody should check out the website. It's rescuecalfornia.org.. It's rescuecalifornia.org.

It's rescuecalifornia.org. If you have the means to donate, please do. I donated $50,000 to it. They are taking donations. And even if you're out of state, but believe in this cause, like Jamal said, what happens in California or as California goes, so goes the nation, you know, it would be a really good thing to send a message, even if you're out of state, to these special interests who are ruining the state that this isn't going to be tolerated because every politician in the country is going to hear that. And they're going to start realizing, oh, I can't just pay attention to the insiders. I need to start paying attention to the outsiders to the majority of citizens who've never been organized before, but now they are getting organized. And so we need to send this message. That is the first step. We're not going to get any positive change in this state until the politicians are held accountable.

And this recalls the starting point for that. And if you take a picture with the forum and CC your besties, we'll follow you back or retweet you or like you some combination of that. I saw a couple people did it after the last pod. So print out the form and go ahead and take pictures. The next, the next podcast, just for everybody to know, episode 21, we are gonna start by reading mean tweets. There have been some unbelievably vicious tweets targeted. So 21 we are going to start by reading mean tweets.

There have been some unbelievably vicious tweets targeted, you typically at Jason and then at me, a little bit at David's Acts, but finally, we really went after the queen. We have broken the seal and the queen has been targeted. Really? He was called, he was called, what's the joke?

He was called Sanctimone, he's a? Stimotious, he was called St. DiPoni, it's up to you. We are going to make him read his lead tweet to kick off episode 21. And we will see you all next time on The All in Podcast. Love you guys. And it said we open source it to the fans and they've just gone crazy with it. Lumbi West, I squeed a kid while I'm going to be a We should all just get a room and just have one big huge or because they're all It's like this like sexual tension that we just need to release that I'm going on leave!