All-In with Chamath, Jason, Sacks & Friedberg - E28: Current state of public & private markets, Archegos debacle, US debt issues, wealth tax & more

Episode Date: April 1, 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 Referenced in the show: Axios - Changes to capital gains taxes omitted from Biden's infrastructure plan https://www.axios.com/biden-infrastructure-plan-capital-gains-taxes-318224d2-84f8-4c48-b5db-bbcec5fdd74f.html Cal Matters - A wealth tax could sabotage California’s recovery https://calmatters.org/commentary/my-turn/2021/03/a-wealth-tax-could-sabotage-californias-recovery Healthline - COVID-19 Vaccines May Help Stop Virus Transmission: Here’s What We Know https://www.healthline.com/health-news/covid-19-vaccines-may-help-stop-virus-transmission-heres-what-we-know Show Notes: 0:00 Besties intro, state of the public & private markets 18:54 Chamath receives inspiring note re: last week’s longevity talk 21:17 Archegos debacle, issues with trading on margin 32:26 Biden’s infrastructure bill, US government becoming overleveraged 45:45 Potential tax hikes, inefficient deployment of capital, California wealth tax impact 52:59 Trade off between freedom & equality, how free markets spur innovation, generational changes 1:05:14 Is a wealth tax constitutional? Vaccine update

My name is David Sachs and I have a broomstick in my b****** That is why my voice is so deep. I have never hacked friends in my life. Somebody be my friend who I don't pay. What a mood we're in today. What a vibe. Hey everybody, everybody. Welcome to another episode of The All in Podcast with us today, the rotating cast of characters that you've come to know and love and follow on the Twitter, the queen of Kenwa, David Friedberg is here, and the rainman, David Sacks, calling in from one remote location that is undisclosed, and the dictator,imath Polly Hapatia with us again.

Gentlemen, how's everybody doing? I'm punchy. You're punchy? I'm punchy. Chimath isn't a mood. Is he in a mood? I mean, he's happening, Chimath. Nothing, I just finished a workout,

so I think I'm high on endorphins. How much money did you lose in the market today? Wow. It's just a flagrant foul of the first play in the game. He said he wasn't happy. So I was just hypothesized. I'm happy. I'm happy. No, no, I am happy. I'm about to go on Easter vacation. So I'm happy about that. Have you been successful? Jesus. No, I mean, can I just tell you, March, March 2nd or whatever that day was, was an absolutely

ludicrous day. We've kind of clotted all back. We're doing pretty decently for the year again, but I gotta say, my gosh, like I've really learned to deal with drawdowns in the last 30 days. It's been an amazing learning process. I'm a better person for it. You did look pretty shell-shocked that episode. I lost more money than I ever thought I would make. I could bail out a small country. It just vanished. It just evaporated in a day. It was incredible. Then it came back and then came back. That's okay. Well, what do we think is happening in the markets right now

in terms of retail investor participation and the number of SPACs that are coming into the market. I saw a statistic today that in Q1, there were 245 SPACs raised in Q1 or 250, that's on top of the 250 that were raised last year. More capital was raised in Q1 than 2020, 2019 and 2018 combined in specs. Just to put some further color on this, you had all these folks raise money. You had some really questionable sponsors to be completely honest with you.

I'm not going to call any of these guys out because I don't want to give them any air time, but you literally had people who ran companies into the ground, people who were kicked out of their companies for sexual impropriety. It didn't matter. Any random dog and cat was able to raise us back in Q1. And now on the back end, you're going to start seeing some real difficulty. So deals are getting retreated constantly, which means that, you know, IPOs that should have been done at price X is getting discounted by 20 and 30% to get the deal done. There are all kinds of side deals getting cut left and right.

And this is just the beginning. And the reason is because that free procurement, she's a 265. A hundred bit. There was about 110 billion raised in Q1. But how many deals, 260 deals? 298. Yeah, almost 300. So those 300, 248 and 2020, just the rest of the price. So we're still in the first inning, right? If you think about it, these backs have two years to put the money to work. So we're only max 90 days in to a two-year

shot clock, a 700-day shot clock. And so you're going to see some really crazy behavior I predict in November of 2022, right? Like the last six months leading into the expiration of all these backs in between now. And then I think the market is really going to hold people accountable. So like when we see a pipe opportunity now, we're incredibly firm on like, Halus and the 2025 projections, we're going to back off of those. We want to see 2023 numbers. We're going to price it to that. We're going to price it with a margin of safety. And so these people come back and recut the deals constantly. You know, there's a situation where this one deal retraided three times before a price cut done. And it was ended up being 35, 40% below where they started. I sent Chimoff a note I got this morning from my friend who

works at one of the banks and one of the bulge brackets. And they said there was like 50 pipes in the market last week. And they think only five of them are gonna get done. 50, and like, you know, Chimoff, what, like a quarter or two ago, like 100% were getting done, or 80% were getting done, right? I mean, yeah, and I'll quite honestly, they were meaningfully oversubscribed. And now we're demanding the people that look at these pipes,

I'm one of them, but so I've talked to some other people who do it, and we're all in the same situation because we're demanding much better terms and So it's gonna it's gonna the pressure is gonna come on not the founders and the companies But it's gonna come on the sponsors because I think sponsors We'll really have to put up a lot of their money to get these deals done And that's is where you're gonna separate the wheat from the chaff because most of these sponsors are doing it for a quick buck And you'll see without debating who you think it is, when you see people unable to post

the money to get a deal done and that deal go away, that is the charlatan. Right. Timoth, it seems like there's also a deleveraging happening with the funds that bought a lot of these SPACs and despaque listings in the aftermarket, right, which kind of creates a bit of a log jam on the backend for a lot of these. So you know, it's for those that are interested in some of these market right, which kind of creates a bit of a log jam on the back end for a lot of these. So, you know, for those that are interested in some of these market dynamics, one thing that I have learned in the last little while is that, depending on who you are, risk is managed really differently.

So, for example, like there's a friend gave me this language and I'm going to repeat it because I think the way he said it was very elegant. There's what's called inception to date risk risk and then there's year to date risk. So what is the difference? If you're a hedge fund, you're really in the year to date business, meaning how am I doing in this current moment in time because your compensation is driven from that. And so you're very much forced to manage short-term volatility in your portfolio. And a lot of it is very parametric.

When something goes down by X percent, then you have to sell. Then if something goes down by Y percent, you sell more. If something goes down by Z percent, you have to shut the position out. Those are extremely codified. When you have a lot of hedge funds

who are parametrically running year-to-date risk, and you have all of a sudden the threat of inflation, bond yields go up, factor rotation out of tech, it's a running to the exits. Then you have other people who manage what's called inception-to-date risk. I would say Buffett is in that category. For us, for the most part, we are inceptionception to date risk because we don't have external LPs. And so you can manage these different risk buckets differently. But you have to appreciate that a lot of this volatility is a lot of year to date risk. Now, then you layer on top of it, these exogenous events, like what happened

this week with our Chegos. And it's just absolutely incredible because it just further amplifies all these people who would otherwise have made very rational decisions, may force to make irrational, year-to-date risk management decisions. And that's what causes these massive swings and all this malaise in the market. Sax, what are we seeing on in private company valuations? I know that while we're seeing the retreat in Shamaat's part of the world, and people buckling down and maybe some more guardrails, if we will, or maybe a tighter screening process

for these companies going public. You didn't say Fiskard, Shamaat, but that was the one that had me. Like, what? Fiskard, didn't they fail twice already? What are you seeing on the private market sex? In value? Yeah, it's a very frothy time, to be honest.

I think valuation levels are, I mean, they're probably the highest I've seen. I'm seeing seed deals now, hot seed deals, not every seed deal, get done in the high 20s. Same. Yeah, exactly. It used to be, yeah, pre-revenue. It used to be that like, I remember when pre-revenue CDOs

were more like a five to 10 cap, and then like that a little bit of revenue might be a 15 cap, and like the hottest company out of I.C. Just like what that means, sex. The hottest company out of a cap. No, no is its evaluation. So $15 million valuation effectively. It's just not on a convertible note called a safe. So it's, but for all practical purposes, it's evaluation. So it used to be, you know, pre-revenue C deals

used to be in the five to 10 million dollar valuation range. Then, you know, a little bit of revenue would be 15. The hottest YC deal might be an 18 to 20 million dollar valuation. Now we're seeing hot pre-revenue C deals going for like 27 to 30. And what percent, what amount of capital is going into that round? It's usually like a 10 to 20% dilution event. So it's 3 million to 6 million. Yeah, exactly. And they're not calling this the series A. They're still calling the seed round. It's the first money in the company. So it's still a seed and I mean just we also do obviously A and B and

Increasingly some growth investments everything the price levels are basically double where they were Just I would say like a year ago, you know these same seed deals Same thing I'm seeing and it's making me think as a private market investor that maybe the right thing to do is to stop investing in some as many new companies and work with the existing portfolio to raise capital. So I told my team, let's go through the portfolio, let's see who needs capital and let's help them shore up their balance sheet when the market's hot evaluations are high as opposed to going and trying to get into every deal.

So I think I'm going to do maybe 30% less deals and redeploy my time at getting the current portfolio cashed up and it's working. What do you think of this strategy, Chimath or Saks or Friedberg? I personally like it. I think that venture investors are typically trained, I was trained this way early on, which is to invest through the cycle, right? Just to think about this as a constant pattern of capital. And to be honest with you,

I have issues with doing that, Jason. And so I more agree with what you're saying, which is that I think like active risk management, especially I guess if it's your own capital, but I just think active risk management is important. It's important to acknowledge that the incremental SaaS company may not be that great as it is. And so at 30 pre, maybe really stretching the bounds of reality. Whereas to your point, what Sequoia has proven more than anything else to me is the value of doubling down and backing up your winners. And so to the extent that money isn't infinite, which

it isn't for all of us, that's when I do think it's worthwhile saying, well, I have a certain amount of money in my fund, if I think calm can 10x from here, then I'd rather put in a big check there, and you know, that's better than putting a bunch of seat checks in a company's, we'll just have a 90% filter rate at very, very high prices where I don't own that much. So I do think active risk management makes sense in moments like this. I mean, I guess my philosophy is a little different, Jake-Hell. I mean, so my philosophy is a VC is that the market sets the price of the deals, that I'm ultimately a price taker. And my only

decision really is which deals I want to be in. Like I don't really get to set the prices. It's too easy for entrepreneurs to run a process and get competing bids. So all I can really do is decide which deals I want to be in. And I think the more you that you try to chase value as a VC, I think the more you end up investing in companies that aren't really that great. Like you're trying to find things that are mispriced as opposed to just investing in the best companies. So now look, does do price levels affect my returns? I think yes, I'm sure the vignages do matter to some degree,

but the most important thing is just to be in the right companies. Can I just, I'll give you the counterfactual to what you just said. If I look at my three big private funds, Fund 1 was healthcare education, Fintech, and some deep tech. Fund 2 was a massive over-indixation into SaaS. Then Fund 3 was a return to our knitting and a bunch of deep tech stuff. And a lot of Fun 3's decisions was basically me saying enough of the SaaS.

And the reason was because I didn't like the valuations, David. And I thought, on the margin, if I'm going to invest $10 million, I'd rather get a 3D printing spaceship company off the ground than the N plus for a SaaS business. And it's turned out to have been in that cohort the right decision. So I don't know, I think that can also be true, which is like chasing what was the hottest thing was not in 2016 was not a good idea.

So let me just want to real quick, Jason, because so I do like SaaS investing, but I was doing it before it got hot. It's just that's kind of my area, and I want to build a franchise in that area, because that's where my expertise are. I can't very well just say, hey, the store is closed this year, because price levels are high. Otherwise, founders won't come to me.

I'm doing that through this. Yeah, exactly. So I'm trying to create a very specific franchise in being the leading VC in bottom up SaaS and look sometimes the price levels be favorable during COVID There was like a four month period where the markets were off what 50% everyone like it felt like we had the market to ourselves the VC market I mean nobody else was investing we did more deals during that four month period that I think any other four month period So like sometimes the price levels can bounce in your favor. But, you know, my view on it is, I just want to invest the best companies and kind of the price levels was working themselves out.

The counter, I would have to your counter, David, was... If there are other startups who are of equal value, which pool you decide to go fishing in matters. So, you know, this $30 million deal, if I was to put $3 million into it, that could equal me putting with our accelerator, which not everybody runs an accelerator. It's arduous. It's painful. It takes a ton of work. But that equals for me, 30 deals at 100K each. So I'm looking at it going, do I get one bet in this YC over pricericed company with 50,

you know, tier three venture capitalists and dentists backing up the truck and now family offices who don't know anything are now competing against the people they or LPs and their funds? Or do I just say, you know what, if everybody's fighting in the market for the apples, I'm going to plant more apple trees and I'm gonna run a better orchard. And that's what I decided to do is maybe I'll just move up to the orchard a little bit. But I guess there's multiple ways to win in what we do. But yeah, you guys are broader in your strategy than I am, right?

Like you guys actually do invest in lots of different kinds of companies. I've kind of gravitated away from that because I'd rather just focus on my speciality, which I feel like is big enough for me to be successful, right? Yeah, but what if there's a new category that comes out like on demand and something like Uber comes along or Airbnb and it doesn't fit the framework?

Well, I invest in those companies, but so marketplace is definitely what you do now or with your team say, you know what, don't bring this today, but he's going to say no. Cool. Your team is doing the first round interviews, right? Yeah, but we do marketplaces and my partner, just didn't look like marketplaces originally, though, those are not considered like eBay or crisis. I invest in those because I thought they're marketplaces.

So, you know, so look, we do marketplaces and we do SaaS. That's a huge part of the market. We're never going to suffer for, for deal flow focusing on those things. But look, well, I do chips. No, will I do farm at no? Cause I don't know anything about those things. Yeah, no, those are too detailed. Or quantum computing or something like that. You know, these more esoteric heart tech subjects that I kind of make fun of freeberg for. Or at least, you know, when he starts giving his

qubit lecture. Yeah. Well, actually, you know, what is it? No, it's a big one. I actually think we need to really rethink our investment strategy here. I forgot to tell you guys. I'm gonna start investing in laundromats. Very simple. I wanna, yeah, it's not a bad idea. I mean, one of our mutual, one of our besties, who's a stealth bestie was really into the Domino's chains.

And boy, was he right about that? That's not when crazy. I wanna get into this. Is it Art Chegos? Art Chegos when crazy. I want to get into this. Is it archie ghosts? Archie ghosts. Archie ghosts. Archie ghosts. Machiego. Cheese. I want to get this archie ghost thing. But I also want to point out two things from just housekeeping. Number one, I redirected wet your beak to a type form for people to pitch the besties. Guess how many pitches came in in the first week? How many? Over 1000. I now have three researchers going through it and

categorizing it. They're going to share a Google sheet back with y'all of by stage where they are to start going through them. But it's pretty amazing. I think there's some magic that's going to happen here where we're going to find a deal where all four besties can be in deal because we've got two besties in pipe. We're both in Cabana, Saxony and a couple of other companies, but we've got to get a four. We need to get four of a kind. We've never had four of a kind. We've had we've hit sets. We've hit a pair, but we've never hit that. Go ahead, Saks. What do you want to do?

You want to talk about me selling your deal flow? Yeah, exactly. I just want you to put out a little PSA. So if you're a founder out there listening and you have a Sastiel that's post-revenue, send it to me at Craft Ventures. And if it's everything else, you can send it to Jason on his little...

There were a lot of SaaS companies actually. And so what we should do is, I can set the type form up if you want. If you give me an email address, anybody who picks SaaS, I could have an email you or, you know, Kevin or whoever on your team you want to. And I could just redirect it in real time. But that could wind up being hundreds of emails.

But I think that's what you want. All right, well, no, actually, well, no, Jason, you should divvy up, Jason, you should divvy up all these pitches by subject matter and send it to the bestie who it's most relevant for. All right. Sounds good. Don't you think? Don't you think?

Sure. And then second on the housekeeping front, people were really interested in this longevity discussion. Oh, read the thing, read the thing. I think I want to, because I want to talk about it again. So Ben sent this in to the all-in Twitter handle, which is I think the all-in pod. And it's got 70, you guys know we have 70,000 followers

on that Twitter handle, it's crazy. Hey, just wanted to reach out with a positive message after listening to the podcast from two Fridays ago, if you could pass the message along to the besties, I think that's us. After Tremott's recommendation regarding longevity, I suggested to my dad, age 56, and perfect health. So he's 10 years younger than Saks.

Looks to go get a calcium dye test. It turns out he scored well above any safe number and a critical heart failure was inevitable. Now he's taking proactive steps with the cardiologist. It's hard to even fathom what would have happened if Chemaaf had impassionately recommended this action. Thank you guys so much for providing value, weekend weekend. I just I want to Chemaaf saving lives. Chemaaf saving lives and making billions. No, don't don't joke around it stupid on this topic. I really want to say this again, if anybody hasn't done it after the age of 40, you can

get CT angiogram. Most health services provide it. I would really ask your primary care physician if they say no, tell them to go fuck themselves and find somebody who will give it to you. But this is one of these things where if your calcium score is greater than zero, it doubles every year, and there's a certain score right above several thousand where you are guaranteed to have some meaningful cardiac issue.

And so whether it's for you or your parents, just ask the question, have you had a contrast CTN, you're done, and if not, go and find a doctor who will prescribe it to them and get it done. It's just a no-brainer. I, uh, I took a... It's a no brainer. It's a no brainer. And I, I had my yearly physical and I got the, um, heart flow. No, I just did my physical, but I, I'm going to do that, um, full body scan. You recommended pre pre, pre new vo pre new vo. I'm doing. And then I got on the NAD plus booster, the true Nijin that I think the freebergs

suggested. And I'm taking it seriously. And I started with my personal trainer two days ago. And I changed my entire diet. And I'm just really taking it seriously now because I had 50. So let me tell you about our Chegos. So here's a guy. This is incredible. So this guy ran Asia pack for Julian Robertson. Julian Robertson is a legend of finance and capital markets and was the founder of Tiger Management. By the way, I heard this incredible story. Why did Julian name it Tiger Management?

Apparently, he was incredibly bad with names. And so he would just call everybody Tiger. Like, hey, Tiger, how you doing, Tiger? Tiger, Tiger, Tiger. And so when he started this fun, I think his son apparently told him, Dad, you're not going to remember anybody's name. You're not even going to remember the name of the company. Just call it Tiger Management and you'll remember it.

Anyways, Julian is famous for having attracted an incredible roster of people to work for him. It's what the PayPal Mafia would look like if it were disguised as a hedge fund. All these amazing people, work for Julian, went off and did these and other incredible things. And one of these guys was this guy Bill Huang, who ran Asia Pack for Tiger. He leaves, he starts his own fund. And somewhere in 2011, he gets pinched by the feds for insider trading some Chinese bank stocks He pays a $60 million criminal and civil penalty and he's forced to give back all of his outside money and so now he's a family office

Then he takes however much money he had and he runs it up to somewhere between five and ten billion dollars So this is a guy who managed to just hit the ball out of the park And then what he does is he goes to these banks and he says, you know what, guys, I'm going to make a bunch of concentrated bets in a bunch of Chinese internet companies and media companies like Viacom in Discovery. So what he does is he does an equity swap. And what an equity swap is to get through all the noise. It's just a very simple way for you to bet on

the appreciation of a stock relative to an index and hedge it against an index. And what it synthetically allows you to do is take big risk on huge positions and not be listed in disclosures. So if you don't want to buy a stock. Yeah, so if you don't want to know, so the word synthetic, just so,

because I'm confused, synthetic means you're not actually buying the stock. You're doing this in the ether. If you went and bought 4.9% of Viacom, nothing would happen. The minute you got to 5%, you'd have a regulatory filing obligation. That would say Jason Calcanis owns 5% of Viacom. Then at 9.9% nothing else would happen, but then at 10 percent, there's another

incremental thing. So this was a way of him accumulating up to 9.9 or 10 percent of these positions without having to disclose, because he's not actually buying the stock. He's having Morgan Stanley, Goldman Sachs, Nomura, Deutsche Bank, Credit Suisse, buy the stock for him using these over-the-counter derivatives. But in some cases, it didn't even buy the stock for him using these over the counter derivatives. But they're not in some cases didn't even buy the stock. It was like a forward purchase agreement almost, right? Like these were contracts for difference. So they didn't even have to buy the stock in a lot of cases, right? Right. And then I think it was hedged by the S&P, right? So they basically hedged it out with the S&P and it was like factor-weighted. Anyways, long story short, what happens is that the guy starts to get stopped out on a trade

and then they have to close out all these positions. And so all of a sudden they realize, oh my gosh, we actually each of us gave this guy five or ten times leverage. So instead of a five or ten billion dollar hedge fund, it was 50 billion dollars of noional exposure. And so in one day, you had Viacom go down 30%, discovery went down 30% and we were playing cards looking at the market saying, what's going on? What's going on? So weird. But another example of asymmetric information and a lack of transparency and financial

issues. There were two drivers of this. Number one is the guy traded via the swap, these over-the-counter transactions. So he didn't actually have to go by the stock on the market. And number two is the guy relied on a number of exemptions as a family office, right? So he didn't have a lot of reporting requirements

that say a lot of other funds might have to disclose. And so there was a kind of opacity to the transactions that were going on. So ultimately, when everyone looked under the hood, it was like, oh, this is a lot like that long-term capital management. A few ask go that happened in 1997. I think we talked about it on one of the shows, but they had a book with like 60,000 derivative contracts with over a trillion dollars of noional exposure on a five billion dollar book of business. So if the overall portfolio that they held moved by whatever it is, you know, half a

percent, the whole thing collapses. And that's effectively what happened when stocks got volatile in 1997 during that currency crisis. And then all the banks looked under the hood and they're like, oh wait I need more collateral There was no collateral to post because everything was levered up and then everyone's struggling to get a piece of the pie And you know of the cash that's left everyone was fighting to get a piece of it Because if everyone had to sell off the whole portfolio would collapse and everything starts to spiral out of control And that's sort of what happened on Friday, right? Because as they started to sell off these positions via big block trades the stock went down and, it made it even harder, and then everyone piles on and starts shorting the stock, and

it becomes this uncontrollable fiasco. I have a really dumb question. Why are people giving this amount of leverage on letting people make these trades? Is it because they have no responsibility, the brokerage houses, or whoever's clearing these trades? No, they're going to lose money. I think JP Morgan, these guys are all going to lose billions of dollars because it's not enough cash in this guy's actual account to cover all the losses now.

Why would they let him do this? Is my really simple, stupid question? Could somebody know this? Could they make money? They make money. I mean, if you're making five, look, I mean, think about it this way. It's sort of like an insurance deal, right? Like, if I can make five cents by taking a dollar of exposure with you, but that exposure only pays out if something terrible happens that's very unlikely in my assessment, I'll take that five cents all day long, you know, I'm collecting nickels. But once in

a while, something really bad happens and then they got to pay out a dollar. How many more manche egos are out there? Well, I think it depends on how you define the problem. But if you say that leverage, everybody's levered, I think the question is by how much. I think it's pretty rare at this point that you're not levered. We don't run leverage, but it's tantalizing. I got to tell you, because I could run, I don't know, $150 billion of exposure. And then all of a sudden, you only have to return one or two percent to make a ton of money. Yeah, Chimac. So what would your margin interest rate be if you were to run your book, Levert?

I could run it 10 times and pay 1 percent, 2 percent. Right. That's crazy, right? So with 10 times leverage on your money, you basically just have to beat one point or two point of return and you make money. That's why it's so attractive right now. That's why it's so attractive. And that's what a lot of these other organizations do.

The business model that they've perfected, which I think is very reasonable, by the way, says again, back to sort of like, you know, managing year-to-date risk, right? They manage extremely small movements and stocks because instead of saying to, you know, if the four of us were running a hedge fund, each of you do your best and we're going to run one times notional, it's much better to say, I'm going to severely constrain the parameters in which you guys can take risk. And on the back end, I'm going to lever the whole thing up 10 times. My only goal is for you guys to make me 1% a year, right? Because if I lever it up 10 times, now I've made 10%. And that 1% a year, now all of a sudden divided

by 12 months of the year means you're generally, you only have to do 80 basis. So all of a sudden, the math starts to work in your favor where everybody says, wow, let's raise as much money as possible. Let's make sure there's extremely tight risk parameters. Let's just tell David Friedberg and Jason Calcanis and David Sox just give me 80 basis points. And on the back end, I lever up.

That's the whole business model of most hedge funds. And then you have some folks at the edges, as Friedberg says, the insurance policy rarely pays out. But then every now and then you have this cataclysmic set of events and the long tail hits and you're wiped out. And that's what happened And by the way, you know, there are stress tests against the banks to and where they basically look at scenarios of you know How bad can the overall portfolio get that the banks are exposed to you know all these clients that they have its counterparty risks Because remember like when they sign a contract with this hedge fund

They're not actually taking a position what they're doing is they're taking to contract with this hedge fund, they're not actually taking a position. What they're doing is they're creating an obligation where this hedge fund has to pay them in the future. Now, if the hedge fund effectively goes bankrupt, then they're not going to get paid. On the back end, they're expecting to get paid $2 billion or whatever the amount might be to cover the trade that they put in place with the guy. This whole thing basically becomes a loss that they get exposed to. The stress test stress tests are meant to kind of expose how bad can the loss be to make sure that the bank doesn't ultimately go bankrupt if a really bad scenario were to take place.

Now, there's a lot of debate about whether those stress test methodologies actually work and whether they adequately reflect the true risk in the markets and the true risk that these banks take on. And that has always been a debate. The problem is, if you make the stress tests too limiting, the cost of capital goes up, and it's very hard to trade, and liquidity goes down in the market. That's the counter-argument to why you wouldn't want to be kind of more regulatory

on this front. And so it's an ongoing kind of fluid debate about what's the right way to stress test banks and make sure that they have adequate capital reserves while still creating low cost capital and having liquidity in the markets. But you add the risk of ruin. So it's really hard to balance. You're playing with your entire net worth on the poker table. You're not just buying in with

1% of it or 10% of it. Well, whatever you read a story about some rich person going broke, it's always debt involved, right? Because like, let's say you got like, I don't know, like a big number, like $100 million, right? And, and let's say you're fully invested in the market goes down 50%. You still got 50 million bucks. You're still like a very rich person. Yeah. Yeah. But now, let's say that you took that 100 million and you levered it up to, I don't know, whatever, a billion. And then the market goes down 50%. You're worth zero. Yeah. Right. Or the, or in that case, the market goes down 50% you're worth zero. Right. Or in that case, the market could go down 10% sacks and that's what happened here, right?

Right. Right. Right. Right. Exactly. The guy levered it up and this is what always this would happen with LTCM. In LTCM's case, the trades they had the whole portfolio only moved like 5%, but it caused a cataclysmic collapse of hundreds of billions of dollars of nocturnal exposure.

And that's sort of like what happened with this guy. He was so levered up. It's so weird. You know, I searched for this guy on YouTube just to kind of figure out who he was on Saturday. Oh, the Christian YouTube thing. You said, I sent it to the group, but there's like all these videos of him talking about Jesus and it was just, I'm fine with him being deep into Jesus, especially, you know, on the way to Easter.

God bless you, praise Jesus, but it was very weird. This person has a very unique philosophy clearly, and Nomura, the Prime Broker Monday warrant of significant losses, losses, estimated at two billion from the unwinding of these trades. Let me ask a question to you guys. If we all agree, it's a really bad idea for individuals to get over-leverd like this.

How bad an idea is it that the US government is getting so over-leverd? We now have 130% of our GDP we are now in debt. It's the first, I mean, I think it only recently crossed 100%. So we have now borrowed as a country more than our entire GDP. Yeah, but we're, I mean, if you look at that by country, there are other countries that are way over that. Like Japan, just about, there aren't that many.

There aren't that many. And Japan's had a horrible decade partly because of all that debt Italy Portugal Greece in Japan. Yeah, not You're not a part of not a part of high I I think I'm more sympathetic to governments being overlavered because I think because Governments effectively are at this point still that may not be the case in the future The the only form of too big to fail that I think we can tolerate. I have a much bigger issue with private market participants being over

lever because I think that is a level of greed and risk that shouldn't exist. In large part because the governments themselves are so levered on the way in. So maybe that's the way to think about it, which is if we have to isolate risk and we know we can't tell governments to stop spending, then I think we should probably make sure that risk is better managed at the individual level, you know, people and companies. Why can't we, why can't we tell governments? Yeah, it's about to say it. I think we can't tell them that because we vote them in. But I mean, this, I want to open it up. People like people vote in spenders. People don't

vote in others. Well, this is the thing, you know, the Republicans were supposed to be the spend thrifts. Yeah, no one ever gets elected saying, I'm not going to do anything, right? I mean, Donald Trump may be the first president who have ever actually said that and, you know, actually do something in that vein when he put a bunch of guys in charge of like the CDC

and the Department of Energy and they just cut heads. But, you know, you always go in and you say, I'm going to do X that isn't being done today. And as a result, over generations, it adds up. And all of a sudden, you wake up and the United States is 250 years old and we have debt equal to 130% of our GDP. And we're struggling to maintain the growth rates needed to fund that debt.

And you're like, uh-oh, that's the biggest challenge with democracy and keeping it alive. There's the fact that ultimately everyone wants more. And so over time, you vote for more and over time, it gets more expensive and over time, it becomes really difficult to maintain. Can I just count up the bill for just this year? So as we know, by any rate of pass, the bill so far for this year. First of all, the government is running

like a four and a half trillion dollar deficit. A lot of that is COVID related, but in any event, Biden's already passed a $1.9 trillion COVID bill. They're now about to pass at least $3 trillion infrastructure bill. Two, two, two. The proposal came out, it's two, no?

Yeah. Well, okay, sorry, The proposal came out. It's two, no? Yeah. Well, okay, sorry. It's two for the infrastructure plan, but then there's another one to two billion that they're talking about doing, sorry, trillion, that they're planning as a second package called the American Families Plan that they're calling infrastructure, but it's not. It's more like social programs. They're kind of relabeling that as social infrastructure or human infrastructure. And they're trying to figure out whether they can do

them as two separate bills. This is issue with reconciliation and they need, they need it really from the Senate Parliamentarian on whether they can do the second bill through reconciliation. If they can, they may have to combine it into one bill, otherwise they'll do it as two separate bills. But you're looking at total,

like about four trillion across those two bills, you know, in addition to the 1.9 already passed. So we're looking at like six trillion of spending this year. I think we had about six trillion of COVID emergency spending last year. And so the numbers are getting really big, really fast. It reminds me of our last trip, this reminds me of a Las Vegas trip with Chip Rionny

and then your markers. That's what I think we're, we may need to have some austerity measures. We might need to go to Olive Garden instead of Chip Rionny. Part of the issue, SACs, is, you know, I think if you guys will remember on election night, I told you the thing I was most concerned about was this Georgia runoff. And if the Senate takes, if the Democrats take the Senate, you have no balance of negotiation

in this process of passing these bills and finding a point of fiscal responsibility versus social necessity or what might be deemed necessity by some, but, you know, exuberance by others. And it's frightening because, you know, with a single party system, right, or a single party legislative branch, or right now, we have a real issue with the, the fact that any bill can kind of be come up, can kind of be defined by one party, by a small group of people, they can get it passed, they can get it signed, and you know, it's going to be a challenge for us to all kind of support this level of debt for generations to come. And it's not going to stop anytime soon. I mean, you know, before the midterms, we've got another year and a half

of this. 100% and that's why I was rooting in the last election for gridlock as well. And we almost had it. I mean, it was supposed to be a divided Senate, Purdue won that Senate seat, and then he lost the role. And Trump just decided to burn the entire Republican Party on the way out. Congratulations, David. You destroyed the Republican Party. You got to look. You Jake, you have a little bit of a point there because the reality is, as

of election night, this was supposed to be a divided Senate. And then what happened in the two months I followed, turned voters against those Senate candidates. So you have it. You definitely have a point there. But the price tag for that one Senate seat is going to be about $6 trillion. Yeah. It's pretty disturbing that our debt to GDP ratio is not worse than Spain and Portugal. I mean, here's the Italy agrees. Well, I think it's worth just explaining to people why that matters, right, SACs? I mean, like when you use your debt, you have to pay the... Well, here's the thing.

Everyone's been lulled into a false sense of security because the interest rates are so low so that debt service has actually been relatively small. But if interest rates ever go back up, say because of inflation, like the debt service will be one of the biggest chunks of federal spending. We won't have money left for all the programs that we need, including entitlements, including defense, including everything else that the country wants to do. And so it's very dangerous.

And the real problem I have with it right now is everybody can see the economy is getting better, right? It looks like we're about to have the roaring 20s. The economy looks like it's rebounding. It's about to boom. Goldman Sachsman says we're going to be down to like 3% unemployment by the end of the year. It's coming back really fast.

COVID is going to be over in May. I mean, everything is trending the right way. And we're acting like, you know, like there's an emergency happening still. I mean, I understand the 6 trillion last year during the middle of COVID to prevent a depression. But what is the rationale today when the economy is already coming back for this election? David re-election to consolidate democratic power and to get re-elected. Right. Pump the prime the pump. But you know, we're breaking the glass in case there's emergency when there is no emergency. And what happens if there is another emergency? We'll go to 150%. Look, I don't think it says as intentional is getting re-elected. I do think that

the politicians and the people involved in the legislative process have very good intentions and Think they're doing the right thing and they got elected and they spent their whole lives and their whole career is dreaming of a day When they could create these programs using government money dreaming of a day when they could make these opportunities real and Here's a moment in time where they can and where these visions for what they believe to be a better society and a better government and a better country for all its citizens, they have this moment now and they are, and so I'm not criticizing anyone. I think it's just, I think it's, look, you can totally disagree with the point and I think in many cases I agree with you, but I do think that there isn't like this kind of evil incentive or this evil reason for folks doing it. I think a lot of people that work in government or politicians, they spend a lot of time thinking

about doing what's best for their kind of people that they represent. And here's this moment where I can create all these programs and create all these jobs and spend all this government money to give my people locally all the support that I always thought that I always told them I would give them one day. And it's a moment where everyone's kind of rushing. And because there's a single party system right now, everything's getting done. And it's all getting piled on top of pile.

It's like eating cupcakes and then cake and then pancakes and then ice cream and then having a milkshake. It's going to have a really nasty stomach cake at the end. Yeah, I agree. We may have a really nasty stomach ache at the end. Yeah, I agree, it's it's we may have a sugar rush over the next year or two. Maybe, maybe Biden gets reelected based on this, but you know, eventually I like the like your term stomach ache. Biden seems to me a little bit miscast. It's like he's cast from a different era. And you know, this is not 1933, we don't need this massive amount of pump priming by the federal government. We're not in a depression. We're not even in a recession right now. We're coming back

really strongly. And so it just feels like we're passing all this inachronistic, pork barrel spending, you know, like for why? It's like almost like it's just habitual as opposed to having a real need. I think that's a more nuanced take, which I agree with, which is like, if you actually see what that $2 trillion infrastructure will look like, there was a lot of stuff which did feel incredibly and agronistic where I was like, I mean, paving a fucking road. I mean, we had China trolling us because the contents of the business is so stupid, right? It's like, I mean, it's like paving a road is this one time event that does nothing. We're much better off building ongoing capability of things we need.

So if we're going to like green the economy and go through an energy transition, there's all kinds of ways to spend the money. So then you think, who's advising these people? Well, and then I think it goes back to lobbyists. Yeah, lobbyists and donors. Yeah. Let's go through this list, right? So of the $2 trillion, it looks like about 620 billion is going into transportation infrastructure, like Shemoff said, bridges, roads, public transit, et cetera. Now, if you think about the benefit to society, there's the benefit of having better roads, which we can debate. Does it, you know, do all of these need this care? The $620 billion worth of care.

I think some people would say, yes, some people would say no, but the question of where that those dollars actually go ultimately, if you kind of look at how government contract work is done, there will be a few people that own the majority of these contract service providers that will benefit heavily from this capital coming out of the government's coffers and will go into their bank accounts. And yes, there will be some jobs, but they will be temporary jobs and there will be temporary salary and wage support through this. A lot of that capital will go to the people that own the businesses that are doing all

of the construction work and supporting this industry development. So you know, it's concerning when you look at how much money is going to get funneled into effectively corporate contracting. I don't care. I don't care what side of the aisle you're on, but if you see $620 billion of spending that's going to happen in the next few years for anything, if you're thinking anything other than this will be wasted and inefficient, you're being really naive. So, you know, the good, a good microcosm example of this is the one that you use freeberg, which is how much money did California give to Anderson consulting or, you know, to build that COVID website? It was like a hundred million bucks, like all land with the service cost and the

customer support and all the stuff that was attached to it. And realistically, you could have built it for 90 bucks using Wix. You know, where's-dady. You used the promo code, twist, come on. You used the promo code, twist. So my thought is that exactly, like people should look at this, irrespective of whether you're on the left or right, think, well, of that 620, how much will actually get into the hands of people in a thoughtful way? Probably like 300.

How much of it will go into like lining the pockets of shareholders and folks in very specific companies who just print an enormous amount of profit over the next three years, probably another 150 or 200 billion. Wait a second. Sat, did you send my red pills to Chimalt's house? What's going on here? Chimalt's red pills.

They got me, Liz. But let's have the counter argument, right? The counter argument is for decades, and I'll make it, right? So for decades, roads have been crumbling infrastructure in this country's been falling apart. We haven't taken care of federal highways. There's all this work that needs to be done to make sure that airports address rural communities

and ports can take ships in to the economy can grow. And someone's got to build all that stuff at some point. So rather than deal with this down the road, let's take advantage of the single party governing system we have right now and pass this bill and get it all done. And get America ready for the future. That would be the argument, right?

I'll give you the most cynical argument. The most cynical argument is, let's ratchet up spending, make everybody concerned about the debt so that the solution is raise taxes. And let's create a wealth tax on that's great this tax and that's. Well Biden is raising taxes.

It's raising the corporate tax rate to 28%. But that was probably an individual. An individual. Like I think raising the corporate taxes is a no-brainer. We should absolutely have done that. But David, I mean, Friedberg, back to what you said before, what I would have said is like, look, the counter argument would have been, let's take the $620 billion and plan the future. So the plan the future would be,

you know, why is it that like Elon can, can bore a, you know, a traffic bearing tunnel at a million dollars a mile and the next best equivalent is 20 million a mile. Okay, maybe we should give these guys a bunch of contracts. Capitalists, yeah. Well, just technology, I would say.

And less graft and less waste. So let these guys build a bunch of tunnels and maybe they can figure out a way to build bridges too. Or, you know, if you really wanna care about like future jobs in the national security of America, let's secure our own precious metals and minerals and let's have an entire supply chain that's, you know, independent of China.

Well, you could spend a couple hundred billion dollars on that easily. So there's all kinds of ways to spend it. We could build high-speed rail. They do have 580 billion. So almost a quarter, a little over a quarter of this bill going to American manufacturing, R&D, and job training. So creating the next generation of jobs for Americans and you know, redemesticating industry here.

I like that. I mean, honestly, those words sound nice. What are these things? Yeah, exactly. You like the words. You like the words. You really think. I love the words.

I mean, I like, I mean, one that I think nobody can argue with is universal pre-Candaguar and that's easy. And I think community college tuition being free is a great one as well. If people have a certain score to get in there, so it's a little bit of a merit. Jason, what are these things even doing in an infrastructure bill? I feel like, I think Freeberg has a point that infrastructure is like one of the last things that people believe that the government should be spending money on.

So now they're just branding anything that they want to do as infrastructure. You know, it's human infrastructure. Infrastructure supposed to be bridges and roads. Right. branding anything that they want to do as infrastructure. There, you know, it's human infrastructure. Infrastructure supposed to be bridges and roads, not as a education and childcare and college. That's education. Should be a different bill. But didn't, I mean, Obama tried to get infrastructure past.

He couldn't Trump try. He did. No, no, no, no, no, no, no, no, no, no, Obama passed close to a trillion. I think it was like a $920 billion bill. Remember the shovel ready projects? It was supposed to be a trillion dollars of shovel ready projects, they did it.

Where'd that money go? No. No. No. Well, speaking of money, speaking about money disappearing, can you be able to go into the little shiraga mojicon? Like the, I don't know.

I don't know. Yeah. Here's the brown version and I. Yeah, I was like, here's the white, here's the pale white version. And Here's the brown version in that. Here's the white version. Here's the brown version. Here's the brown version. Here's the brown version.

And it looks like you're the 10 version free version. You get a little son. A trillion dollars. Me no, no. I don't know. We can all go to Vegas and we can lose money and just come up to our wives and go like this. I just think like the government's so bad bad at properly dispensing all this money.

That's the problem. You're ever going to do infrastructure. The time to do it was in 2009 when Obama did it. The economy was in an absolute great recession. That made sense. But now when the economy is re-bounding so strongly, do you really believe that these $100 billion light items are going to be wisely spent? And most of it's borrowed money.

So the problem is by the time it gets into the details, well beyond what Biden is capable or has the time to learn about, it will be just completely misallocated. And you know, some lobbyists will insert something that gets something that's important to some politician, the money, and that's the sad truth of it all. And we just have to hope that there's enough good that comes out of it. And now, tax is are coming for you. Well, I mean, that's the next thing is the wealth tax. Is where that conversation is what happened and that what happened in the bill.

Well, ACA, I saw I saw the corporate tax went up from 21 to 28, but what else happened? Just well, there's a wealth tax in California being discussed again. Who knows? Okay, but at the federal level, was there anything? No, I didn't know about wealth tax. I mean, I don't know if that's possible. The first, the first bill is going to be funded by, like you said, an increase in the corporate tax from 21 to 28%.

The second bill, the Families Act, is going to be funded in part by personal income tax increases, which I think will be more controversial. They're going to bump up. The campaign statement that Biden made was individuals, no one making under 400,000 would see a tax increase. So the plan was 400,000 going up to 39.6%. But here's where I think I could get very controversial is that the White House is already making noises that it wasn't 400,000 per individual.

It was 400,000 per family, which would mean 200,000 dollars per individual, which would be pretty much a broken campaign promise. So if that's where it ends up being, I think Biden could take a lot of heat for that. But the problem is if he sticks to 400,000 per individual, I'm not sure that it will raise enough, the tax increase will raise enough money to pay for everything he wants to pay for.

So it'll be interesting. Well, I would be totally okay with this. When I was 30 years old, I'm just putting that on the record. What is that? I'm not okay with it right now. This may sound dumb, but what is the federal tax rate? Like what is it going for?

I think the top, the top rate's like 37 and a half. So it's a 2%. It's not a big, it's not a gigantic increase at all. So it's a big nothing burger, okay. Yeah, and this is income tax again, not capital gains. It'll be, yeah, and then there's a bunch of questions about whether, like, so capital gains is still a big question mark.

And capital gains, it'll all go to income. Yeah, well, there's a big question. There's a big question. I don't think so. There's a big question, but they haven't said yet. So this is gonna be part of the second bill, which they're talking about doing, I think in October. So, yeah, watch out.

Okay, wait a second. If they go, if they, if the capital gains happens, then the whole idea of being a capital allocator, it's going to change everything, wouldn't it? I think it's a bigger issue than that. It has less to do with that, but you have $30 trillion sitting in 401Ks in Ira's, and the idea that you'll tax all of those gains in a differentiated way, I think is going to be a very complicated proposition. Well, those aren't taxed.

Well, they're taxed on the way out, right? You still pay something on that. Not if you hold until you're 55. But I mean, whatever, you're going to live to 110. So, yeah, Axio has actually had a story just today that the infrastructure bill, it like does not include capital gains taxes, but the big question is what they'll do in the next bill, you know? Yeah, and that's and then so you combine that let's just say the federal government decides capital gains

we don't want to invest in companies anymore we don't want to treat stock gains the same because we want to have more equity equality whatever. Then you combine that with this wealth tax proposal in California, ACA is a resolution to propose. An amendment to the Constitution of State co-authors have proposed a wealth tax described as a 1% surcharge for amounts over 50 million and 1.5% for amounts over 1 billion, so if you're a billionaire, just you're gonna have to pay 50.

Can I make a case to you guys? I've kind of been thinking about this, but I'd love your feedback on it. So I feel like there's a tradeoff between freedom and equality. And what I mean by that is if you if you give a market freedom, a market of people doing things freedom, you maximize progress that that society achieves. And the United States is the best case study of this in history. In 250 years, we went from a bunch of people living on plantations or living on small farms to a, you know, the largest economy in the world.

And so the more freedom you provide, the more innovation there is, the more entrepreneurship there is, the more of inventing new stuff there is. The problem with progress, progress takes everyone forward, but progress is always asymmetric, meaning some people end up in a greater point further ahead than a lot of other people do. Whereas a socialist state with less freedom, and it's said that you take everyone forward together, but you don't make as much progress.

And so if you want to have freedom, you have the most amount of progress, but you have the least amount of equality over time. Even though everyone is further ahead than where they started 200 years ago or 100 years ago or even 10 years ago, everyone's in a better position than say they were some period of time ago because we've all got better social security programs and whatnot. There are some people that get so much farther ahead like Elon Musk and Jeff Bezos and these people that you can now look to and say,

this is unfair. This person's taken so much capital and I've only made a 10% increase in the last 10 years. And so as a result, in a democracy, there is always this tension between freedom and equality. And those are the two things that cycle in terms of what voters vote for. We're coming into a cycle now where we're going to start to vote down freedom and vote up equality. And this is sort of what the wealth tax, in my mind, represents, is this kind of redistribution

or this returning to a kind of the mean or reversion to the mean in terms of like, get everyone back on the same page. But as a result, we're going to see much less progress economically. We're going to see much the mean in terms of like, get everyone back on the same page, but as a result, we're gonna see much less progress economically, we're gonna see much less progress in terms of innovation and other places that have more freedom and enable more innovation and infrastructure and entrepreneurship are gonna be able to kind of leap ahead

and have greater progress than us. That's my kind of ramps and pieces, but I'd love you guys as... I would amend your thesis slightly to say that freedom produces prosperity. And prosperity does produce some inequality because there are always people like Elon or Jeff Bezos or whatever who are just gonna be like super producers,

especially in the era of technology where you can create a machine to produce goods and services and that machine can be thousands or millions of times as productive as the ordinary person. So they're going to build extraordinary wealth. But look, the basic idea of liberal society is you have a free enterprise system where people are generally free to create their companies and their businesses. And then you have a social safety net that's paid for by the large S of that system.

And the thing about socialism is it can only make it, we talked about this last time, it can only make everyone equally poor. I never makes everyone equally rich. You end up killing the golden goose for everybody. Um, and, and you also end up with a lot less freedom because you end up with a gigantic state that exists to level everything and they accrue all this power for themselves. But is that actually true? Like if you look at China, is that really what's happened in China? China's kicking everybody's ass and they're basically as socialists. Well, yeah, there's a authoritarian. Exactly.

They're common. They're sort of politically. They're using, using Friedberg's language, they don't have as much freedom or that freedom is granted by, you know, a central authority. Yeah, a central authority. Which makes them authoritarian by definition, which means somebody like Jack Ma

can do amazing until he can't. But that's a perfect example. He's still doing fine. He's got 50 billion. Maybe he doesn't have some. Well, I'd imagine what he could do if he could keep going. And this is a point I wanted to make,

which is what if you got Elizabeth Warren or Bernie Sanders proposals enacted. And Bernie Sanders got on TV many times and said there should be no billionaires. If Jeff Bezos stopped building Amazon when he made a billion dollars because he was forced to by the government, at that point all the future benefit of Amazon

would have been lost. It's not like someone else would have been able to step in on top of that platform and build more. And then the next guy steps in and makes an ex billion. And I just want to remind everyone, the benefits of Amazon are extraordinary. I mean, imagine going back 20 years and being a kid, and I can go in my frigging phone,

and I can say I want something, and it shows up at my door the next day for very little money. I mean, it is fucking mind blowing what Amazon has built for us, for society. It's an incredible business at the same time, and we are all willing to give that business money because the benefit of what they do for us is so extraordinary.

And if you had Capp Jeff Bezos as wealth or capped his ability to kind of keep elongating what that business could do at some point, it would have been an absolute travesty. And I would argue that even though Jack Ma was doing fine, there are people in China who are limited along getting what that business could do at some point, it would have been an absolute travesty. And I would argue that even though Jack Ma is doing fine, there are people in China who are limited in terms of what they can do because of the way that that government limits freedom and limits flexibility.

And so to me, I'm observing this tension between freedom and equality, where equality is becoming such a sticking point for people now that it is far more important than freedom. And as a result, we are going to start to see these little things creeping in, like a wealth tax or a limit on billionaires or all this sort of stuff that ultimately limits the ability for people to kind of push their businesses and elongate progress. And if you looked at the great scientific and technical discoveries of the last 30 years, so many of them came from the United States because of this, this freedom, not from China. And China's certainly done fine. But they're a great, you know,

total copy machine and they're great at saying, Hey, here's some slave version has been here. The innovation has been in the United States. Yeah. China observed what was working in the US and they realize that they should adopt markets because markets create prosperity. They create goods, they create services. They create, you know, wealth for their people. So they've embraced markets. And then meanwhile, we're moving away from markets or we have skepticism of markets.

You've got this extreme socialist, sort of Bernie wing of the party that is kind of moving away from markets. It's bizarre. You know, it's just a nervous. Yeah, and then you're just, look at the free market in the Amazon example. they demanded a $15 minimum wage.

They got the $15 minimum wage. And now they're still attacking Amazon and Jeff Bezos. And so it's never going to be enough for them. They want to see him get rid of all of his money. No, no, no, that's right. I think I think that you're saying something else, Jason, which is really important. I think people, you have to think about the generation of kids that have been raised by boomers.

And that'll explain the psychology of why they think that way. We had all kinds of failure modes growing up. We meaning, I'm in my mid-40s. If you think of our generation and older, right? We all had failure modes. You wouldn't get into the schools you wanted. You, you know, basically had a lot more freedom where, you know, after school, you were

latchkey kid, you know, you would have just all kinds of like very nominal ways of growing up. You didn't necessarily get to play on the school team if you didn't make it, you know, in those boundary conditions create these great stories like the Michael Jordan's of the world. And then you fast forward to how boomers felt. And I think that boomers felt an enormous amount of guilt about their stresses on the system. And what do they do to millennials in Gen Z? You got, they got everything they wanted. It was kindergarten soccer. Everybody gets a gold star. And now you have an entire generation of people that quite honestly are like wondering, like they actually have been raised in a quasi-socialist setting. You know, if you go to school, there is no free speech. If you do a project and you know,

your grades aren't good, you can get a redo. Everything's a redo. Everything's a retrait. Everything's a we're going to manage to the middle. You can't lose. And you can't lose. And in that not losing, I think people have forgot what it feels like to actually win. And you can't lose. And in that not losing, I think people have forgot what it feels like to actually win. And that humans are actually in many ways, like Darwin's perfect example of winning, you know, like why us and not at other strain of chimpanzee? Because we need, we wanted to win more than anybody else as it turned out. And that's lost. We've lost that script. And so I think part of it is you have an entire generation of people who, whatever you do, it's not enough.

It's because they were raised in a society where they never had to actually learn what functional, winning, and losing felt like. Or it's been deeply minimized. Set another way that we've gotten soft and we're about to get our asses kicked by China. If we don't start to realize that a vibrant competition of ideas and products and services is what wins. I think we have a more dangerous thing than that Jason. It's not that that's gone. I think it's actually more of this selective idea.

So for example, like if you were a fashion designer creating clothes on Shopify or fashion Nova, you're allowed to compete and win. But if you build a technology that aggregates resources and that has these crazy gross margins of profit margins, you're not allowed to win. So we've actually gotten into this very contorted period where we want to choose how to define what winning feels like to us. And I think that's where it's dangerous because that's a very subjective thing, and it ebbs and flows. Can we go back to the wealth tax for a second? Because I think this is like the money mentally.

Yeah, hold on, let me just finish this statistics on it. They claim there are 169 billionaires in California, so this wouldn't impact a lot of people, and they estimate the wealth tax would generate over 22 billion. We've already seen Elon and it won't. That's a static analysis. That's a stupid analysis because it's completely static. Well, keep your eye left. Elon. They're all going to leave. They're all going to leave. Look, I've talked to a lot of people, I've talked to a lot of people about the the wealth tax who would be subject to it. Okay. Every single one tells me the same thing, which is if California passes this,

this is a red light for me, I'll leave the state. Every single one. So, you're not gonna raise... I prefer not gonna raise the same thing. Yes, you're not gonna raise 22 billion from this, you're gonna raise, it's actually gonna lead to a decrease in tax revenue because so many of these people are gonna leave the state

and they're gonna take investment with them, their businesses with them, their job creation with them. It's going to actually... More than half the tax revenue in the state of California comes from the, what is it? The top 1% is Episodistic? It will kill the California economy. Now here's the crazy thing about it.

Probably the most crazy part of that whole wealth tax proposal. And by the way, even if you support a wealth tax at the federal level, it's stupid for California to do it on its own, because it's very easy for you to leave California. You just move some of the part of the United States, much, stupid for California to do it on its own because it's very easy for you to leave California. You just moved some of the part of the United States, much, much harder to leave the United States. So, the idea that like California can just do this on its own is like the height of stupidity

by these legislators. So the stupidest part of the whole bill is that there's a ten year look forward, which basically says that if you spend any time in California, we're going to try and tax your wealth for the next 10 years. So that means that for all of us, thinking about this concept, if we think this wealth tax might pass in the next 10 years, we might need to leave the state now. We might need to get ahead of the curve. And I'm hearing people now debating whether they should leave the state because they think

it's inevitable that something like this passes. And the sooner they sever their nexus with the California, the less likely they are to be rupt into it. So just the mere fact they're proposing this bill, I don't think they're going to get the votes in this legislator. There's six Democrats have already come out against it. So I don't think it's going to pass this year or next year, but the fact that they're even putting it on the table is making a lot of people second guess whether California is the place they want to create their businesses. And what we really need is for the governor, Gavin Newsom, to come out right now and

say, listen, like, this is a bad idea. I will veto it. I will not, you know, support this if I'm governor for the next, you know, five, six years. And his mere failure to come out and say what he really thinks about this is hurting the state because a lot of people are already contemplating, do I need to leave now? Zach, let me ask a philosophical question. Do you think that this kind of speaks to a broad challenge with democracy as I kind of tried to point out earlier, which is at some point, the majority can take things away from the minority by just passing a law, by voting.

And when you make that vote, the majority of people aren't affected, therefore they'll say, sure, I know that you have more background in this than the rest of us, but what is the political science principle here on how democracy kind of protects itself from having the majority eat the minority when the minority, you know, in this particular case, funds the state's budget, right?

Right. Well, there's a famous, and the voter doesn't see that, yeah. There's a, there's a famous line in political philosophy that democracy is not two wolves and a sheep voting on what they're going to have for dinner. Okay. That there's a concept. There's a concept in addition to democracy of rights, you know, that you have rights that the government can't just take away. And

so part of the American founding wasn't just sort of the majoritarian machinery of government. It was a preoccupation with with the rights of individuals and minorities to be protected right. I guess what majorities would do. That's why we have the bill of rights. So yeah, I mean, there have to be rights of individuals that are protectable on some level. And I think it's a real constitutional issue whether the wealth tax is even allowed. Well, that's I think where it's gonna get fought and lost

because the clever order in the Supreme Court will say, if this, what comes next, is it, are we going to go back and saying, you know, all of a sudden, the majority doesn't like certain kinds of other kinds of minorities? It is a lot. You can't have a certain kind of car or house. You can't have a certain car. Oh, wait, I actually don't like the tone of the color of your skin. Oh, wait, religious minorities.

All of a sudden, we're back to the 1940s. And I just don't think this is going to pass because it's not justifiable. At the federal level, I do think that you can just basically jack up taxation and do a bunch of other things that make it more fair. I'll be honest with you guys, I'm a little torn on this topic and I'll tell you why. On the one hand, if I had to pay 1.5% a year, I'm like, okay, what is the marginal utility of that money for me? It's basically zero. So it's not as if I would feel that change of 1.5%. The thing that would upset me more is not having to pay the 1.5% but then to see it

wasted. That would drive me crazy. Because then I would think, you know, I could have bought potable water for, you know, a native Indian tribe in California. I mean, actually, here's a perfect example. I just found this out today. You guys would be shocked. There is an incredible shortage of clean water in the Central Valley. There are places today where you and my fellow compatriots of California live, where they have to buy these huge $12 arrowhead jugs of water because the water is completely poisoned. And when I heard that yesterday, I thought in California, in the United States of America,

and then he said to me, each month, that you can give for two and a half million bucks, you can basically get 5,000 people clean water through this thing that he's working on. So for me, the thing that would be upsetting is not paying the 1.5%. It would be seeing nothing get solved from it. And then what it would really prove is what I said earlier, which is it's just a bunch of belly aching from folks that actually just don't know how to actually seek success. The good thing to moth is that you can run for the governor of the state of California and fix that fucking problem. Hey, we should build a website.

That is the benefit of democracy, you can kind of run and you can step in and you can help solve these problems at the government level. We could start a podcast and try to use our influence or we could donate to things. Guys, I'll say something else. I also think that these kinds of bills are actually a shot

across the bowel to a handful of people that are not playing by the rules anymore. We're not towing the line and standing in line and saying, I'm clearly demarcating myself as a Democrat. I'm clearly demarcating myself as a Republican. I'll play nice because think of what's really happened in COVID. You've had a massive explosion in D to C distribution.

Think of the platform that we've created out of nothing. Think of the platform that Elon Musk has out of nothing. If you take that writ large, it's extremely disruptive to people who is all about controlling the message which allows them to control power. I think that a lot of these rules are these ways of almost like counter-punching against it, but they're ineffective. What I would encourage all of us to do is actually become completely zen

and instead continue to aggregate distribution power because that will replace the one and a half percent tax that you have to pay. Because if you can talk to people directly and tell them your version of the truth and allow them to underwrite their version of the truth against what you said That is modern power and that's worth a lot more than the money that you'll pay Now would you give that same power to Donald Trump because he's been cut out?

I think you have to in that model All right everybody will be taking next week off Because it's spring break and you can take the week off as well Anybody have any plugs or things they want to promote why are we taking the week off? Because I don't want to take the week off. I'm fine with doing it I think some people are gonna be on vacation in there someone's gonna be somewhere really nice among Catch you fall in Jamath

I don't know if the place to be has Internet access I don't know if the place to be has internet access. We'll send you a starlinked. We'll get you all of my undisclosed locations of internet access. For those of you who don't know, Timoth has rented the pyramids in Giza and he will be staying inside of them.

And he'll be dismantling them and NFTing them and turning them to dust. He will be getting wrapped as a mummy and kicktuts to him. He has robotic waiters serving him the whole time he's there. He's living out of sci-fi fantasy next week. So enjoy. Well, you know what? I did tweet that we're going to do a live show after everybody gets vaccinated.

We've been doing over three million a day here in California, starting tomorrow April 1st. Live poker. Live poker can occur, but we are going to be hosting. I think, Jamatha. New and I, New York City, SACs is partial to Miami, because it's Elfway. How is that right? Am I? I don't know. Are you? Wait, Jason, can we just, can we just, can we just agree? Then let's do this, guys. Let's do may. We'll do it, uh, uh, uh, do it somewhere in New York City.

And then June, we can do Miami. How about that? Well, June, it's gonna be too hot. I would flip that. And I would, because it's gonna be too hot and may better. But also, I'll tell you the other reason. Two city tour. We could do both, but I also think that we should do Miami

first because they're not afraid to come out to an audience. I think that people in New York and California still have more PTSD. Yeah, we need to go where people are the most reckless. Yeah. Let's go where people have absolutely totally gone. Yo, lo. I mean, just to close on this freedberg as the, you know, man of science here on the, on the pod, at this point, these vaccines have been proven to not only keep you from dying, keeping you out of the ICU, we now found out this past week correct that you're not going to

carry it and infect other people in all likelihood. Very true. And another interesting point was made this week by paper that was published showing that you have effectively 80% efficacy from your first shot about two to three weeks after your first shot, and then you go to 90% after your second shot. And then there's another paper that showed you're actually better off waiting over three months for your second shot, not getting it three weeks later. So you said we should do one shot and then come back to the set. And so there's now there's now very good data that shows that that would have been a better move because we would have had double the throughput in terms of how many people we could have gotten shot in arms if we had done that. So everyone effectively gets 80 90% protected

or 80% protected after the first shot. And then it's better to wait three months. And so we could have done the back half of the year where everyone gets their kind of booster second shot and the front half of the year give the whole United States a first shot. But David David, what's the, where's the article that says you don't carry it if you've gotten a vaccine? I need to know that because that's like the thing that's always in the back of a mind.

Yeah. No, I tweeted it. I tweeted it. I think so. I put it to. Yeah. I don't, I don't follow you. Expert, expert say it.

I'm reading. I blocked him. I ratioed it. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't follow you. I don't know what I have to do for you. I mean, I mark up your deals. I take care of your family. I mean, I'm here for you. I did mark up that pipe deal. That pipe deal has gone supernova with that chum off. Pixie dust on top of it. Experts say it appears COVID-19 vaccines can help reduce the transmission of the new coronavirus from person to person. Say this is accomplished by reducing the virus. In a vaccinated person's nose. Besides the statistics on this, there is no documented proof that someone

was fully vaccinated and transmitted COVID to someone else. Out of 400 million total vaccinations globally. So there's also a really strong point to make, which is show me the evidence that it can. Because everything about biology and science would indicate you know in terms of how this would work. There's no reason the virus should be spreading and that you suddenly become infectious and contagious of coronavirus that you can't be infected with.

This is like the most obvious study ever that look if you get the vaccine and prevents you from getting sick you're also not going to transmit it to other people. But let me ask a question. Why is it that every time a politician says that the experts required it, it's always the stupidest position, you know, because the experts on this show, we had freeberg saying this stuff, we had Bob Wockter from UCSF who, you know, runs UCSF saying that, you know, we should have just done the first dose first, get everyone through on one dose and then come back and do the second dose. Of course, like no one in the federal government, a position of authority took that position,

Fauci didn't take that position. And then we had Fauci on top of it saying that we might have to wear masks until 2022. But you know, because of this like asymptomatic, because you could be vaccinated, so spread it, which is now been totally disproven. So why is it that whenever somebody says we have to listen to the experts, they're always listening to the stupidest experts. Because David, David, we are in a culture where independent thought is not valued, where it is better to abdicate and look to an expert to tell you what to do now. That is, again, I go back to, we are in a cultural malaise of not wanting to make a room.

I've been working on that for years. I'm working on my Dr. Fauci sacks. Mr. Sacks, that's correct. A symptomatic patient. By the way, may in fact, in fact other people, but we don't know yet. So it's best to wear a mask if not two masks and to have proper distancing.

By the way, Shema, at the point you just made, I think it's really important because I think it also reflects what I said earlier about economic inequality and economic progress. When you have greater economic freedom, you have greater economic progress, and then you will inevitably have economic inequality. The same is true with ideas. So when you give people the opportunity to have the greatest freedom in terms of sharing and expressing their ideas, you have the greatest progress, but you also

end up with this issue where people have vastly different ideas and inequality arises. And right now, we're in a mode of cancel culture, and we're in a mode of telling people that they can't say certain things, and they have to be very careful about, you know, what they're saying and what context, and it limits this ability for people to feel free to express themselves, share their ideas and push the boundary and push the envelope and find the truth and find the best outcome. And so I do think that we're in this kind of rationalization

kind of stage of our democracy where we're reducing our kind of degrees of freedom and it's playing out in terms of the ideas for them and the economic forum. And it just feels very resonant to me that both are very linked right now. Can I try to answer my own question actually? Which is, never stop your before.

Here's what I just realized, okay, listen. If you're gonna make an argument that fundamentally makes sense, you don't need to tell people, oh, go follow the science, you don't need to appeal to some external authority, you can just lay out your argument and it makes sense. When do you need to say to everybody, listen,

you need to shut down your own brain, you just shut down your own logical thought process and just follow what that person over there says? The people who need to make that argument or the people who are making arguments that don't make any sense. I mean, this idea of wearing a mask after you've already been vaccinated,

never made any sense. This idea of wearing a mask after you've already been vaccinated never made any sense. This idea of locking down the whole economy instead of isolating the at risk people for a whole year, it doesn't make sense. It's been done, David. It's been done by the left and it's been done by the right in equal measure. Whenever you have an opportunity to grab power, people will abstract and then they will aggregate and pull it in and they will make decisions for people by pointing to these abstract ideas. It has happened

in forever. This is not a new thing. It's just that now with social media you can distribute this power grab more efficiently than before and then you can see it for what it is because you can debunk it. And that's the thing that's happened. That's why there's more anger around it because you can debunk all this nonsense. You can actually say, well, what's the data say? And, but most people don't want to do that. It's easier to abdicate responsibility. All right, we want to thank Dr. Fauci

on Greg Kastabe. You want to make pan social distancing? Don't think for yourself, the CDC has been very clear. The Chinese report from the WHO approved by Xi Jinping says it did not come from a weapons laboratory. We take you to Ping at his work. You know what you are. You're not even Fauci. You're that person. What's your name? The great actress, the comedian from SNL. She's got blonde hair. Oh yeah. Katie McKinnon or something. Yeah, Kate McKinnon doing Fauci. That's a joy. I'm kidding, I'm doing Fauci. You're like a babushka.

You're like a babushka doll. Fucking dodging, I just love that. I just love that they have Ted Cruz being done by that other woman. It's like every time they want to throw the Republicans, they take guys freeberg, freeberg, freeber, and they go, he's meeting. He's meeting **** and a friend.

Oh, what do you mean he ****? Oh, be careful. Oh, it got dirty. He got ugly. Oh What do you mean? Be careful got dirty he got ugly take that last part out Nick Be the last part out yeah that he's having dinner with Beep and beep all right we'll see everybody love you guys I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car.

I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car.

I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get a car. I'm going to get it away. It's your driveway. Sit down.

Oh, man. My ham is a disaster when we get to Eiffelate. We should all just get a room and just have one big huge or two, because they're all just like this like sexual tension that we just need to release that out. What, your, the, the, the, what, your, your, your, your, your, your feet? Beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep, beep. We need to get merges out of that. I'm going on leave. I'm going on leave.