All-In with Chamath, Jason, Sacks & Friedberg - E91: SoftBank's $21B+ Vision Fund loss, signals of a bubble, macro picture, Trump raided by FBI

Episode Date: August 13, 2022

0:00 Bestie intros 3:02 Where Masa and SoftBank went wrong, why VC isn't scaleable, Vision Fund impact 27:59 Metrics that signify a bubble or the top of a market 36:46 US macroeconomic picture 50:45 FBI raids Mar-a-Lago, Trump back in news 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/TheZachEffect Referenced in the show: https://group.softbank/system/files/pdf/ir/presentations/2022/earnings-presentation_q1fy2022_01_en.pdf https://www.wsj.com/articles/softbank-reports-23-billion-quarterly-loss-as-tech-downturn-hits-11659940047 https://cloudedjudgement.substack.com/p/clouded-judgement-81222 https://www.wsj.com/articles/u-s-housing-affordability-in-june-was-the-worst-since-1989-11660312801 https://fred.stlouisfed.org/series/FIXHAI https://www.newyorkfed.org/microeconomics/hhdc https://twitter.com/AndrewYang/status/1556987104219090945 https://twitter.com/andrewcuomo/status/1556990308424028163 https://twitter.com/elonmusk/status/1546669610509799424 https://twitter.com/michaeljburry/status/1557934401505308672

How mad is Saks gonna get when he sees my button situation today? I'm gonna join you. What you're about to do? Oh my god. Look at the collar situation. Look at the button situation. Look at that! Oh, this is fantastic.

Okay, besties. It's got off the lake. Where's the lake? It's got the lake. Yeah, I was just on the lake with the boat. Lake Cuomo? Where were you? I was doing a little wakeboarding.

Taha, yeah, still wakeboarding. It means that. Me and that took all five kids and we navigated the entire island of Sardinia for eight days. Amazing. And by when you say we navigated, you mean the crew navigated and you are seafood. Yeah, it took a really fun.

What? You're like your winners, right? Bring man David Sardin said. I'm going to win. Oh, yeah. We open source into the hands of the name. Just go. We welcome to episode 91, episode 91 of the All in podcast. Yeah, we're still here.

Lots of news to discuss this week with me, of course, to chop it up from his deposition room, the war room, the rainman himself, David Sacks. How are you doing, brother? Good. Big week for you? They're all big weeks. They're all big weeks. Yeah. You look tired. Or recording pretty early today. It's a little exhausting. You actually look really tired. What are you talking about? It's got off the lake. I feel fresh. I was just wakeboarding this morning. I'm like, uh-huh. I'm gonna refresh. I'm refreshed.

Uh, and of course, in front of his $9 clip art that he blew up on easyprints.org, the Sultan of science himself, David Prieberg. How are you, sir? Always great to be with you, Jake Hell. Are you working? It boosts myself, esteem, and my morale to be with you every morning that we get to connect over Zoom. Well, I'm glad that your performance has been stratospheric the last three weeks.

You're going on a hot streak. Let's see if you can continue it on episode 91. And missing many buttons this week. We've got at least a three or four button August going. How are you doing, dictator, from your island, the remote island? Did you, you invaded an island? Markets go up another 5% and one more button comes undone. Oh, I love it.

So this is 20% up and we keep going to 25. That's a bullshirt. Daddy's not. The more bullish he gets on the market, the more he unbuttons. Daddy's back, so the bullsh. Well, the low rise jeans on right now, or you were in shorts.

What are you wearing? Shoes, though, stick right. I'm wearing these beautiful linen shorts. What are you wearing? Show us those sticks, right? I'm wearing these beautiful linen shorts. Can you stand up and show us? Yeah, come on, this is a 360, come on. Let's see, let's see. Come on, come on, come on. But these are the most beautiful.

Oh, they are. Oh, inner thigh. Oh, inner thigh. That's a little too much thigh. Yeah. That's like a chicken wing. You guys like this? It looks tight too.

Very tight, are you? Yeah, those are definitely yours. Are you wearing like a children's size or something? Is that a junior size? I like the tighter sizes. You do. I do like the tighter sizes.

I think they, they, they, they shape my body tight. Accentuate all the little bumps and, and nodules. So much information. All right. Let's start with, is a lot to talk about this week.

I think one of the most interesting things last week we're talking about it in the group chat that doesn't exist. Vision Fund's $21 billion investment loss for the quarter of Masayoshi Saan did a really great YouTube video. I sent it around. Did any of you guys watched the video? Yes, no.

Okay, it's really interesting to watch. We'll put it in the show notes. It's like a six minute interview he put on his earnings page, right? Like right when they put out quarterly earnings, he's like, here's my interview. Yeah, he comes to a podium and basically talks about the vision fund. Obviously, if people don't know, the vision fund, one was a hundred billion dollars. The largest venture fund ever raised.

And SoftBank's current market cap is 66 billion. Here's the quote from the FTR article, Sunset on Monday, that SoftBank would now subject itself to dramatic cost-cutting exercise after a $59 billion investment gain at the two vision funds, almost completely reversed over the past six months. They were up almost $60 billion at the peak

and it came crashing down. Masha kicked off the presentation showing portraits of Togu Gawa, Togu Gawa, Yasu. This is the founding show gun of Japan's Togu Gawa, Shogunat, and you ruled Japan for six. I mean, I'm killing this. Such a long intro. Got it so hard.

Yeah, I mean, but it was just so great. Let me just play a clip for you Here's a 68 second clip and we'll talk about it right after and then we'll get into what all this means This is a portrait of Tokugawa Ieyasu. He Actually made a big loss against Takedashi in game and came back in the background of that Tokugawa Ieyasu Had to face Takedashi in game, which is much much larger army than theirs and most of the allies特側へやすハッツフェイス高田震言大きなラジャーアーミー ダンデース 最高のアライス

さらに このアイスは ラウスのバトルを手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手を手 to lose his face so that he get out from the castle, had a battle, made a complete loss and suffer and came back. And that actually learned lesson, he tried to remember and remind his own learnings and put it into this drawing. So since the foundation of Sostpang Group, I made a two consecutive quotas loss.

So previous quota and this time quota, consecutively, we made three trillion yen never of the loss. So in total, six trillion yen loss was made in the past six months. So I believe I need to remind that myself. Pretty spectacular loss. And then he goes on to take some Q&A. And this is the, I guess, the killer quote. When we were turning out, big profits, I became somewhat delirious. And looking

back at myself, I am quite embarrassed and remorseful. You remember, of course, and he complained a little bit in this whole thing about how there was a giant bubble without ever recognizing that he kind of created the bubble with a $4 billion check to we work at a $47 billion valuation after a 20-minute meeting with Adam Newman. This chart is pretty incredible. This is the net income quarterly. Essentially, you can think of soft bank as like a holding company of a bunch of different assets, including Alibaba, previously Uber and all of this vision-fun stuff. 97% decrease in terms of deployment of capital. So if you look at capital deployment as well,

nobody ever put this much money to work, especially in privates. The second chart, if you're looking Q1 of 2021, they put 20 billion to work. And then Q1 this year, they're putting 600 million to work. Just quick reflections on this, what we saw here with Masio Sh on deploying $100 billion at the top of the market into. I mean, it's basically creating the market top,

Shama, other lessons here, or takeaways for you. I mean, I think that people don't seem to understand that if you're going to attempt to be great, there are going to be moments where you look the exact opposite of great. You know, the guy that takes the final shot is the same guy that can miss the final shot. And here is a guy over a, you know, 50 year career has had some huge ups and downs. This is also the same guy that found a way to rip in 25 or $30 million and made $125 billion off of Ali Baba. That's the same kind of person who has that kind of risk tolerance. He was for seven minutes or something, the richest person in the world. And then lost 99% of his wealth in the

dot com bubble. I have enormous respect for a person like this because I feel like it takes enormous amounts of courage. I've said this before, most people jibber jabber about investing and all of this stuff and when push comes to shove, they crumble like little bitches and run into mommy's coattails. It's hard to put lots of money to work and this is a guy that's done it. So the same person that can make $125 billion turns out as the same person that can lose $30 billion. And so one thing is, I would just keep in mind that this is a resilient guy who seems to land on his feet. And the second thing that nobody talks about

is how smart Saudi Arabia and Abu Dhabi were in how they structured the investment into the vision fund because more than half their investment is in preferred equity, which is effectively debt that pays a coupon. And you see it now where Softbank, by the way, who has been pretty smart in how they've managed your Alibaba position, have been using these derivatives and forward swaps to be able to sell and manage their liquidity. So it turns out that, you know, even if the Vision Fund breaks even Saudi Arabia and Abu Dhabi will have made money because I think they paid a 6% coupon on $50 billion.

There's a lot of money over $67, $89 years. It's a lot. Soft bank has found a way to sell down 25% of all the Baba, which is no trivial feat for a half a trillion dollar company. And this guy gets to keep swinging. And if he hits it one more time, he'll end up with half a trillion. This chart is pretty great. Sax, if you look at this, this is the gain and loss on investments at the vision fun.

You can see the first vision fund racing up. Then coming down, I think, after that summer of IPOs that we had in the Airbnb, Uber days, and then a huge peak run up in 2021 and then come and crashing down. Apparently he wasn't selling any portion of this. That's a me, it was a big lesson of like maybe pairing some of these winners. If it sold 10 or 20% on the way up, this could look like a completely different outcome. But I agree with it, Jimoff, he swung for the fences and And there was downside protection built in for the LPs into some of these sacks. Where are your thoughts, any lessons here in terms of the impact on our overall ecosystem or that

you can take as a capital allocate yourself? Well, Jason, I think Mossa did something you could never do, which is a mid-a mistake. Oh, here we go. Wow. Personal quick. Well what I have my first mistake I'm certainly willing to admit it I'm waiting. Imagine that you ran a hundred billion for sovereigns instead of a hundred thousand for doctors and dentists and you can kind of put yourself in a mosses position. Yeah. Oh I love sacks in the morning. Sacks in the morning. Don't cough. Don't cough early, Ben.

You've been blessed in here. You've been blessed. Let's go to a night AM. He's coming. It's like a beer. There have been hibernating and you poke him. Wow. You know, look, I think that Softbank obviously made

some decisions that were, you know, they were sort of peak decisions. They were a little bit bubbly. They didn't take chips off the table when they probably should have. It's easy to fall into these chips off the table when they probably should have. It's easy to fall into these bubbles because the psychology of it is so powerful. And as Bill Gurley pointed out,

these bull markets are more like a sawtooth, which is they gradually go up for 9, 10, 11, 12 years. And then when they end, they just, it's like an elevator going down. So, if the market had continued for another couple of years, Mossapai would have made a lot of money. But any event, look, he took responsibility for the losses.

This was a very, you sort of culturally Japanese speech. I mean, he didn't commit subduku at the end, but it was kind of the- He was in that direction. They might have moved the camera off. Oh my God, what are you doing with that sword? It was the verbal equivalent, basically.

And look, he took responsibility. What else can you do? Now, one thing I would agree about is the idea that that soft bank caused this bubble. You know, it wasn't just soft bank. We had tons of new money. Tiger comes to mind. Tiger had huge funds.

They were deploying very quickly, but there was a lot of so-called tourist money, basically money from crossover funds. Investors who are not primarily VCs came into the ecosystem over the last few years, and a lot of that was driven by sovereigns and by liquidity. So you can't forget that we had $10 trillion

of liquidity pumped into the system over the last couple of years. And many billions of that found its way into the tech ecosystem. And fundamentally, VC is not that scalable. There was an attempt to make it scalable. There's an attempt to push more money into VC based on... Why isn't it scalable? Why isn't it scalable?

Because people have tried, right? This is not the part. Well, it's a craft business. I mean, what does it mean? It is scalable. It's just that if you try to scale it, your returns will go to zero. Yeah, that's kind of the same thing, right?

Like, I want to just critique the strategy for a second because, you know, we're talking about, as if market conditions cause these massive write downs. And that is the only reason that these funds have suffered. these massive write downs and that is the only reason that these funds have suffered. But, you know, if you read a lot of the stories of Mosa's investments in a number of these companies and the full list is available and how much he invested, there are many, many stories and I've heard many of them personally from CEOs that have met with Mosa and raised money from him. You go into Mosa, you tell some, the bigger the story you tell, the more excited he gets,

the more of the world you can capture. And you go in and you're raising $100 million, he's like, all invests $400 million. You say you're raising $25 million, he's like, I want to give you $150 million. And his motivation was always give you more capital so you can go capture the market. And the problem in that model is that by giving you so much money, capital becomes your primary asset as a business. And capital needs to be the fuel that enables your assets as a business to accelerate. But as soon as capital itself becomes your primary asset, the business is doomed to fail.

And that's a really key point. Let's say, and let me be very specific about what I mean. Let's say you have a direct to consumer business that requires online marketing. And your business grows well. You spend $100 to acquire a customer. Suddenly, someone says, here's a billion dollars to spend on acquiring customers. As soon as you have to start deploying a billion dollars,

your cost of acquisition goes up. The number of customers per dollar spent goes down. And the business itself starts to look upside down and fail. And that's what happened with the number of these businesses that Mossett put in, and he put oversized checks in, we work as a really well documented example in terms of what happened. When they started to accelerate their growth beyond the natural course of the business, because of the amount of capital that they took, it really started to hurt the fundamental profitability and unit economics of the core assets of the business.

This strategy theoretically can work to a degree, but Mossett took it to a level that had not been seen before. I think I highlighted for you guys like back in 2011, I think when Andreets and Horowitz, they pitched me on this idea. I was trying to raise $25 million in my company. Mark was like, we'll give you $40 million. You can accelerate your growth. And he's like, we want you to go capture the market.

Peter T. Lowe always use these terms, go capture the market. And these- And Blitz Scaling. And Blitz Scaling. Yeah, and Reed Hoffman with Blitz Scaling. And the motivation is, look, we'll give you more money because the core asset of the business works, the core assets of the business work.

So the money should be more fuel for the fire. The problem is if you overindulge, if you put too much money in, and the asset cannot handle that much capital, the whole thing collapses. Yeah, I would say that he documented an example of this in his portfolio. And I think that the strategy is worth highlighting that there are some issues with that strategy across all these business categories. It doesn't always work. Right. The core issue here, I think, is, and then I'll go to you, Sachs and then Jamal. The core

issue here that you're describing is exactly correct, and it really is up to the founder to decide what they're going to do with that capital. We work, for example, so instructive because they were buying undermarket buildings in the tenderloin and then marking them up to, you know, class A office space and getting those prices once they got the most of money. He started buying class A and offering kit at class B prices and flipped the whole business upside down. The rate at which you can deploy capital does not flex, right? And so in all businesses, understanding the rate at which you can deploy capital to grow

is critical to understand how much capital you can raise. And then if you raise too much money and you flex beyond what the natural condition of the business is, in terms of capital deployment, the economics fall apart and the business itself looks terrible, and eventually you will have a right down. And the distraction on the founder is the key. I mean, look at Adam Newman, he was easily distracted. He started buying surf machines and companies and starting kindergarten. You can't not really deploy that much capital, so you find unnatural ways to deploy. Maybe I'll build on that point. I think there was a belief on the part of soft bank that they did publicly espouse, which is that they could be the kingmaker.

Totally. In fact, we had some startups that were in competitive markets and soft bank would basically announce that we're going to be picking a winner, anointing a winner, and writing them a huge check. Everyone had to play along because if your competitor got that $100 or $500 million check, then you would be presumably way behind. So there was this belief that they could be a kingmaker and make the difference. And I think that what we saw is that for whatever reason, partly because of the dynamics that Freepers talking about, that that strategy just didn't really work that well.

And what it really goes down to is that VCs can be helpful, but they don't ultimately cause the winning companies to be the winner. So this idea that you could be a kingmaker, I think, was a little bit flawed. And I think one way that Tiger actually improved on this model was that they never tried to be a kingmaker. They actually went the other direction, which is we're going to own less your company. They tried to be passive, non-delutive capital. And they would do high-pice rounds with reasonably-sized checks, but they didn't try to go for 25-30% of ownership at a late stage. And founders did like that model better. Now, as it turned out,

they both had the market timing wrong. But I think this Kingmaker aspect was a problem. And one other aspect of that, I think, is that, and I don't want to beat up on soft bank too much. I'll see something nice about the minute second. But I think one of the mistakes they made is you'd see them writing multi-hundred million dollar checks into companies that were at a very, very early stage. Pre-product market fit. Pre-product market. If companies, frankly, that we thought were like seed investments. Brandless was the perfect example. It was a company that made like soaps and dishwashers and cereal, but they had no brand on it. It was like uniclaw of this. And they gave

them, I think, $200 million. And I was like, this is a seed stage company. It makes no sense. Right. Right. They were, I mean, look, they wrote like $500 million seed checks into robotics companies effectively. And it's because that the Softbank had a thesis. And I think sometimes, again, this goes back to Kingmaker, if you're a VC and you think you're the one with the thesis and you're the one who's gonna make the difference, it's actually a seductive fallacy to fall into. It's the founder who has the thesis.

And you can only do so much to help, and you can't really force it. And so I think they ended up making some up cutting some really big checks into some companies that were really risky. The way that we do growth investing is that it's milestone-based. We're writing the size of the check is proportional to the amount of proof that the company has. Look, the nice thing I'll say about Softbank is recently we've actually done some sass deals with them that I think are some really good deals and they've written checks that I think are appropriate to the size of the of the company in the amount of proof they have and they've been really easy to work with that I look for to doing more deals with them but I think it would be who to do more deals like that

where again check sizes related to proof I think that soft bank in hindsight made one critical critical error and only one. And everything else was sort of a fact that complete with that one error, which is that in their fund documents, they made this a 10 year fund. Now, let me explain why is that an error? That is the status quo for all these funds and The more nuanced part of that decision to make it a 10-year fund is that your investment period is only five years So you're only allowed to put the money in for the first five and Then you have to basically manage the portfolio because there's an expectation that you're raising new fund

So if all of a sudden you have a100 billion in a five year investing life, the math says, oh my gosh, okay, well, I need to put 20 billion out per year. And then you try to look for, I don't know, let's say 50 companies a year, while the mean check size now, all of a sudden balloons to 400 million. That was the error.

You see afterwards, the very, very smart private equity folks who saw that that was the error fixed it. So, Blackstone, Silver Lake, when they came on the heels of Softbank, what they did was they raised funds with a 15 and 20 year life. And what that allows them to do and what it would have allowed Massa to do in this situation was just slow it way, way down. Pay for yourself and do fewer deals with much more capital and then be patient and say,

I'm going to have a 10-year investment with you. And I think that that would have saved them and they would have looked incredible right now because they would be the kingmaker in a moment where there is no money flowing into venture and early stage tech. So in my opinion, I think it was just that it was such an ambitious feat that when it came time to execute, whoever was really in charge of those details kind of fucked it up. And they should have realized the math didn't work for a five year fund life. And they should have made it a 10 year fund life or 10 year investment life, which would

have put a 20 year fund life on the thing. And I think they would have been fun. Yeah. I mean, if you look at it as 60 months, maybe you take out August and like the holidays, or 10-year investment life, which would have put a 20-year fund life on the thing. And I think they would have been fun. Yeah, I mean, if you look at it as 60 months, maybe you take out August and like the holidays, you got basically 50 months to deploy 100 billion. It's 2 billion a month. Cross 500 billion a week. I mean, how do you even process that many deals? It's impossible. The quality of the diligence by necessity has to go to zero.

Yeah, it's, it was a crazy strategy. If you can breathe, you get money. If you can get a meeting, you get the money. I mean, basically, I mean, and if they had just, I'll say there was one, sorry, just you know nothing. You got no, and it forces you to have a team that is so broad and large and diffuse. That is not this game.

This is another thing I would love to, you know, for us to be correct, correct. Investing has never will never and is not ever a team sport. Okay. It is like basketball. You can be on a team, but you are Steph Curry or you are not Steph Curry. You are Drain on Green or you're not Drain on Green. You are LeBron James or you're not. There are Jarrah Smiths on a team. There are Tristan Thompson's on a team. And you come together and the team can win a championship, but there are these exceptional individuals. Yes. And the firms that have really done well consistently over decades embrace that philosophy. Benchmark, benchmark, support, you know, these guys don't try to create this team oriented,

glad-handing approach, but they also don't allow the teams to get so confused that there's 500 people running around ripping money in, because you basically then return the beta of the market. And if the market doesn't look good in that vintage, then all of your returns look pretty crappy. The lesson for being all of this is, I think, we talk about riding your winners on the show.

That came from just so people understand. When we said ride your winners, and it's famously in the opening song here, what we were talking about was, like, don't sell your entire position, like when Sequoia sold their entire Apple position or other people have done, but pairing your position would have changed this whole story.

If you had paired 10, 20% of some of these names that were breaking I disagree with that too. Along the way. Oh, why go ahead because I I think the opposite he would have had it up a year ago Sequoia just put out an entire Document and a road map for becoming an evergreen fun, but and I read that And what I thought to myself is all of this looks incredible unless the market goes down. And then the market went way way down. Why?

Because their whole thesis is, we're gonna park and hold money. Well, okay. But they also allowed a revolving liquidity mechanism for their LPs. Every year. You know, you're a cancer foundation and you want to fund cancer research

and you expect Sequoia to give you back money. You fill out a form and Sequoia basically fronts you the money. Well, excuse me, but you can see how all of a sudden this can very quickly get out of control because then where does Sequoia get that money? They'll have to borrow it or liquidate some positions. But the whole point is to not liquidate positions. This is what they said.

Yeah. So my point is I really think, and David said this before, I think a VC's job is to be a VC. It's hard enough to do that job well. And if you think that you're going to cascade across all asset classes and do better than the market, it's an extremely high bar that creates tremendous pressure and forces you to bring things on like debt and all of these leverage lines, which when markets go up, we'll work in your favor, but can very quickly turn against you. I disagree completely, because if you look at,

when you're in a private company and you own some private shares, you know the revenue, you know the velocity, you know the management team, you have more insights than everybody, you got a massive information edge, because it's all based on insider information before its public. And pairing your positions in private can be amazing because you have some overvalued company because someone like Moss or Tiger comes along that overvalues it.

So for venture funds, I think when you start hitting these 50, 100Xs, pairing 10%, pairing 20% along the way, which Moss could have done in these private names, especially would have been brilliant. You're saying don't distribute and just hold on and use debt and give your LPs a lot of liquidity. No, no, no. I'm saying, if you have the opportunity to sell in secondary, you should pair your position in your winners.

I'm not saying it's not possible. I'm not saying that. I'm not saying that. I'm saying if it's not possible. I'm saying this would be a different position. No, but like you're using soft, you're using Apple and Sequoia as an example. You do remember the trajectory of Apple. Basically went to a $4 billion market cap for years

languishing. I mean, the idea that Sequoia would have held those shares because they had some proprietor of use ludicrous. Why is it ludicrous? What if they just had a philosophy of keeping money? Company was on death store step. You can see the YouTube videos. When Steve Jobs came back, he said, we may not make it. Yes, but Tremoth, that is part of the opportunity, but putting that aside, that's exactly what

Sequoia is doing. He's saying, we want to hold the legendary company's legendary branch with the great founders for all easy and hindsight. How do you do it today? Is Unity a legendary company or should you have distributed at $165 a share? That's an extremely hard question. And I'm saying you can mitigate that question by pairing your position 10, 20%. So you have the best of both worlds. So Axe, what do you think? Well, I think it's hard to pair down a position while the company is still private

because the companies don't want you to buy in large. But once they do become public, then the question is when you distribute and we talked about this, I think it sounds like soft bank was sitting on quite a few large public positions and could have distributed. I'm not fully familiar with their structure, but given that they had all this debt, it seems like you'd want to pay off all the debt

as soon as you could. And missing the chance to do that. They'd have preferred coupon. They had to pay PIF and an idea every year. I think it's like three or four billion dollars. It's well, it's documented. But that's the 6% that they that they were owed on their 50 billion dollars. But did they pay it off? The, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, Well, you have to pay it every year. You have to pay it every year. Okay, so they did it. I mean, look, I would just say these bubbles, it's easy, you know, hindsight's 2020. It's really easy to point out these mistakes after the market's cratered. You know, my experience with these bubbles, whether you go back to night 29 or 2021, is when you're in them, they're very powerful psychologically.

You know, everyone's talking about how everything's going up, and we, I think, actually had some really good commentary on the show about back in November about how it could be the peak, how it could be all liquidity fueled. We didn't know for sure, but there were some pretty good predictions on this pod. But by and large, it's pretty hard to know whether you're, you know, whether you're in the middle.

Is there a grounding metric that you use? I'll open up to Freeberg and then everybody else. We know that the market is overheated. Freeberg is something you look at and go, founding metric that you use, I'll open up to freeberg and then everybody else, to know that the market is overheated. Freeberg is something you look at and go, okay, we've disconnected from reality. Price, earnings, price of sales, some valuation metrics, the things you look for, so you know that this is overheated and maybe it is time to pair positions. What would have you learned over now our third collective down market?

Valuation trophy hunting? I would say is a pretty good indicator of things being, things being, explain what that is. In a heated market, like if the, the businesses, the CEO, the founder, the venture firms. Everyone is all about how much you can mark up your investment as opposed to talking about the quality of the business and the quality of the earnings.

And then you revert back as we just recently did to now people talking about, okay, how strong are the gross margins of this business? How effectively can they deploy capital? What's the return on invested capital? Key metrics around the fundamentals of the business versus the value that the market is willing to pay for the business. And the more heated the market gets,

the more everyone focuses on terms like unicorn, decacorn, you know, and that becomes the key metric as opposed to saying this business is so good. For every dollar they spend, they make $3 in gross profit in 12 months. That's what fundamentally says, that's a high quality, you know, a valuable business over time.

As opposed to, here's what the market is telling me, it's worth today. And if the market is telling you, it's worth that much today. and that's what you focus on, you inevitably end up in these bubbly moments where you miss out on focusing on core value creation, which will actually pay off much, much more over time. Jim, after you point you out another signal, hey, when smart people who have the largest amount of capital in the markets are clearing positions,

maybe that's a signal of a top. And then I think it's a really good insight by Freiburg. When the conversation and the narrative is about the valuation and the status and vanity metrics as opposed to the quality of the earnings, hey, that's a really good indicator we're in a bubble. Maybe you should start clearing positions. What are indications for you that we're either in a bubble or the market is undervalued? Because we're really talking about this timing, right? Timing is very important. It's not possible. This is why I think that You have to define what game you want to play before you start playing the game. Okay This is why I think it's

kind of nonsensical for example. I believe that at best, I am an equity investor in technology companies or things that have a technology bias because I can generally understand them. Maybe a few seconds faster than everybody else which allows me to make a decision a little bit quicker. But if all of a sudden I started investing in debt, you should expect that I'll lose my money,

because I don't know what I'm doing. And that's not the game that where I have any advantage. So I think the most important thing to do is to not try to do all of this crazy stuff, because this is what happens in moments where either things are very, very good or things are very, very bad. People try to create all these stupid rules. The only rule is there are no rules. So I don't know. I just think it's like stick to your knitting. If you're a product builder, build products.

If you're an early stage investor, just do that. It's hard enough to do any one of those things really, really, really well. But this idea that you're going to come up with some mosaic and a system, I think it's just highly suspect. And I think the market returns have showed that everybody that tries has failed except for maybe one or two. Sax, let me tell you something. She's not going to work. What's the point? So I don't know if you're an early stage investor, make good deals and then give the shares and book the win. That's what I do. Yeah, that's my philosophy. Sax, where do you go? That's there's a couple of metrics that I'll be looking at from now on that I wasn't paying a huge amount of attention to before.

One is the price to ARR of the median public SaaS company. And so like Brad Gerstner has these great charts, where you saw that historically, that number was around six. The median SaaS company was trading at about six times their next 12 months revenue. And it went all the way to 15 during this sort of COVID bubble in 2021.

And for the high gross SaaS companies, which are the ones growing 40% and say 20%, it went from 8 to 35%. So I'll definitely be looking at that. What you're looking for is just how off the historical mean are we? Positively or negatively, because these public valuations are the exit comps for the private markets.

Those valuations do eventually trickle down. If there is a bubble in the public markets, it will trickle down to the private markets and those valuations do eventually trickle down. And so if there is a bubble in the public markets, it will trickle down to the private market. So that would be like one metric. I mean, again, it's not something that like affects me daily, but it's something I'd want to periodically keep tabs on. The other is just interest rate policy. I mean, I've never spent so much time

in my entire career, like looking at inflation and interest rates that I have this year, because who knew how much this stuff was affecting us? I thought I was a micro investor. I thought I was just picking companies on a micro level. As it turns out, we were all massively impacted by macroeconomic policy.

And it got so we didn't even notice it, the zero interest rate policy, the zero, along with the quantitative easing. These are supposed to be exceptional measures that started back in 2008, but we stopped noticing them. They continued for years and years and years. They continued until our last year, and again, we just stopped noticing

because we got used to it. We kind of got hooked on drugs. So the market did. So I'm just gonna have to pay a little bit more attention to what the Fed is doing now. And you know, if you go all the way back to the dot com, bubble was interesting, is that the Fed fund rate back in 1999 wasn't low. It was like 4%. It wasn't like it was even today. And we still had a bubble. But what popped the bubble was that interest rates went from 4% to 6%. And from 1999 to 2000, that but what popped the bubble was that interest rates went from 4% to 6%

and from 1999 to 2000 that's what popped the bubble. So, you know, I don't know if we'll ever have a situation again like we had over the last years with the Zerp, but I mean that probably looking for that next time is fighting the last battle instead of the next one, but you do probably have to be a little bit more aware of monetary policy with the Fed is doing. Yeah, this chart exhibited six from the Vision Fund benchmarking against peer funds that Shamaath just put into the group chat is absolutely spectacular. It puts Sequoia insight and Softbank, you know, large, large funds against each other. Fund size, a hundred billion

Fisof bank, eight billion for Sequoia, 6.3 billion for insight, and Tutur Motspoint earlier, the pace is really crazy. 130 deals per month, but then the average check size is 620 million versus 130 and 70. And the deals per month, 3.5 versus 0.6 versus 4.2. So insight going pretty fast with small checks, soft bank going very fast with huge checks. Is really, you know, Sequoia has the benefit of being able to back test against 40 years of returns.

And so if essentially what they're saying is there's really no more than five or six companies a year that are worth investing in. That's a really big signal that's worth thinking about. And so, you know, five or six companies, maybe they can absorb even $600 million each. You know, it still puts you at three and a half, four billion dollars. Doesn't put you at 20, which is what you need to put a hundred into the ground and five billion a month.

I mean, my lord, it's like Brewster's millions or something. It's like some crazy premise. I think in fairness to Softbank again, these are the same guys that invested in Yahoo. They invested in all of these.com companies and brought them into Japan, including great businesses like Cisco. These guys have been big time serial winners. I think the tactical mistake was not having a 10 year investment life. You know, these guys have been big time serial winners. I think the tactical mistake was not having a 10 year investment life.

I mean, and we could be sitting here next year, Alibaba could double in value, a couple of other positions could recover 50%. Okay, but we could be sitting there, and they could have closed the gap massively. Anything's possible. I think actually a good jump off point here, great discussion gentlemen.

Do we want to talk about the markets? We got the inflation print, SACs, I guess, depending on what political party here in it's either 8.5% or zero, 0% month over month. If you're a Democrat, if you're a Republican, it's 8.5% in our polarized times. Democrat, if you're a Republican, it's 8.5% in our polarized times. But what does this tell us, SACs, just at least about maybe inflation is tipped over and we're going to be flat for a little bit. That obviously caused the market to rip a little bit and we had this incredible jobs report. We're now at 3.5% unemployment. And that's why we love many jobs.

As we predict it, I mean, it's pretty extraordinary. What happened in the last 30 days to the to these prints? Yeah, look, I think that overall the economic data is mixed, but we got a couple of good data points in the last month. So inflation did decrease from 9.1 to 8.5%. Inflation was until now measured on a year-over-year basis, not a month-over-month basis, but since we got the first good, month-over-month reading, all of a sudden now, it's been redefined to be on a month-over-month basis. Just this is the same thing that happened with the definition of recession, where recession

used to mean two quarters of negative GDP growth. Of course, that happened. And so all of a sudden the definition became unknowable. We have to defer to this economic board that won't render a decision until next year. By the way, if that were true, how can we ever contemporaneously talk about a recession? You know, if you had to wait until this economic board

declares a recession a year from now, the press could never have ever reported on a recession. I'm shocked. Yeah press could never have ever reported on a recession. I'm shocked, Paula. It's a policy. The politics of this are obvious, which is to keep redefining terms rather than admit that there's any bad data at all. Now look, I don't think the data is catastrophic.

I don't think it's an anyone's interest to catastrophize the data, but there's a lot of negative data out here. I mean, look, inflation is still very high, eight and a half percent. and anyone's interest to catastrophize the data, but there's a lot of negative data out here. I mean, look, inflation is still very high, 8.5%. If you had told any of us that in August, that inflation would still be 8.5% at the beginning of this year, we would have said that is horrible because remember, the investment banks were all saying it's going to come down to 3% by the end of the year. So inflation is still high.

The jobs picture is good, we're technically in a recession. If I were to predict, I think what's going to happen now, I think, you know, look for a double dip, I wouldn't be surprised at all if in Q3 or Q4 were back to positive GDP growth. But I don't think we're necessarily out of the woods because I think those are pretty good chance that next year, these rate hikes really kick in. It takes six and nine months for them to ripple through the economy. So if you look at the construction industry, the construction industry has been devastated. New housing starts, you talk to the builders, they tell you that the construction industry

has been clobbered by these rate hikes. The inventories are piling up and the affordability of, there's a chart today about the affordability of home prices at a 40-year low. And so the construction industry is really the bell weather. When a recession starts, they're the ones who are first impacted, but it's probably going to take six to nine months. Because the loans are so expensive and cost of capital is expensive. Right. You can't start the projects. So look, I think we're in a shallow technical recession right now.

I bet that we probably bounce out of it in Q3 or Q4, but I think there's a significant risk that we're back in, we're back in it next year. Just my guess. Freeberg, we've been talking about consumer credit a whole bunch by now pay later. Household debt now totals more than 16 trillion credit card balances, make up $890 billion of that. Obviously, student loans, mortgages, other things are in there. And the number of credit cards is now at a massive high, 550 million of them issued here in the United States. We added a massive amount of debt. It's still lower, the credit card debt just to be clear, is still lower than the pre-pandemic

level of 930 billion, but consumers seem to be taking out credit, I guess, to deal with inflation or to enjoy their lives because they're not stopping their spending. We see that in some of the stocks and the earnings reports that are coming out as well. What's your take on this conflicting data we have or have you made some sense of it and what is your prediction of Q4? Sorry, are you asking what my take is on the consumer credit? Well, basically the overall macro situation here. We've got consumer credit.

People taking on a lot of debt, while jobs look great, while inflation is still high, what does that look like as we go into Q4 and next year? What are the just telling you? Is there some signaling you can take from this? Sacs that shallow recession, things we might double dip. I'm kind of getting to your prediction of Q4. I mean, this is a little repetitive. I mean, I've said this, I've first said it in May at the all-in summit, and I said it

again on the show twice, which is I think that the definition of a recession of negative GDP growth when you're coming off of inflated GDP is, you know, it's not a binary catch-all term. I mean, the fact is we had inflated assets and as a result of inflated assets, we had inflated earnings and we had inflated valuation and we inflated income. And, you know earnings and we had inflated valuation and we inflated income and You know now the capital is coming out and things are gonna go down inevitably But I don't think that this should be deemed that there's something fundamentally Negative about the US economy the biggest risk I still see is this rising consumer credit balance particularly in a rising rate environment

People are taking on more debt if you look at the New York Fed, here I'll just give you the latest. This is the household debt and credit report. They put out household debt rises to $16 trillion in mid growth and housing and on-housing balances. And so there are variable rate loans in there in the auto home and credit card markets. Those variable rates mean that as interest rates climb, the amount to service existing debt will go up each month and the amount of debt that's being taken on is also going up each month. And so the key economic question is does the income gain

that's being experienced or the asset value gain that's being experienced outpace the increase in monthly debt service needed for a large number of consumers. Student loans are also in here, by the way. And so when you put that all together, it's a very technical question, which is technically where do you start to see defaults rise? And when you have defaults rise, then the money that's owed in the services that are, the service payments that are owed on that debt trickles through the economy because bond start to default, equity start to decline, and so on.

So, this is why I can speak at a high level from a macro point of view that the rate at which debt is going up and consumer credit is going up, and the rate at which rates are climbing that affect the revolving and variable rate debt that consumers hold could outpace the income and the asset value gain particularly when equities are down 401k are down housing prices are down and so there's a tipping point and When that starts to happen then you start to really hit an economic crunch and I've mentioned this multiple times now that it's the thing I would kind of watch most closely while there are core elements of the current economy that looks strong. There are real concerns around whether consumers can keep up with their debt payments in the board.

Shabbat, are you following this consumer credit surge? Do you think that this could be a blocks one type event? This could be a major event? It's no blocks one because it's right here in front of us. Like I would say like a massive contagion where there's massive number of defaults creating a blocks one contagion like event. But yes, so it's not, it's maybe hidden in plain sight.

What do you think, Chimato? Is this important data or impacting your view on things? Yeah, I think it's important. It's maybe hidden in plain sight. What do you think, Shemoth, is this important data or impacting your view on things? Yeah, I think it's important. It's part of them, Mosze. It can, I don't really know. Look, what are we trying to get from this discussion? I don't understand. Like, are we trying to predict what's going to happen?

I mean, I think David basically said it best. Like, if you actually just take a step back and stop overlaying what we want to happen, look, the reality is all four of us want things to go up and we like it when there's money in the system and everything's flush. But if we had said last year that we would open an envelope and you know we would show these inflation prints, we would be shocked and we would have been scared and quite honestly, you know, in the process in November when I started selling, I would have sold even more violently than I sold. And all I can say is I saved my ass in November last year, looking at what's happened in the last six eight months.

So I don't know, I just think that if you look at the CPI print and you look at the components, we were saved because energy basically fell off a cliff. And for whatever reason, a bunch of people decided not to travel and, you know, we didn't import as much oil and we were able to keep costs contained and that kept CPI from being really out of control. But again, we're in the summer where we don't have the pressure on energy that we're going

to have in October and November this year. So I really don't know. I mean, I just think that there is like freeberg has his pet issue. I have my pet issue, sacs has his pet issue. You ask 100 economists, they'll have their own pet issue, housing affordability, whatever it is. The point is, we have 100 whack-a-mull problems. And the question is, which mouse traps sets off the rest of the mouse traps? I have no idea. And so, you know, I just think that right now things are a little bit too calm and that makes me feel very unsettled.

Another issue might drop. I mean, the point of the conversation is to try to understand and make better decisions in capital allocation, company formation, and placing bets in the next year. So I think that's the point of the discussion. We now have the spectacle of the president saying he's going to pass an inflation reduction act to solve a 0% inflation problem to get us out of a recession that he says doesn't exist. You guys know this, but the politics and the political commentary on this are absurd. I think what we're describing here is to simply more honest, which is to say that the

data is mixed. We don't exactly know what's going to happen. Yeah. I mean, the thing that I think is encouraging is when you look at this jobs data and you look at the debt that consumers are putting on, my theory is, and I could be wrong, that people want to keep spending. They want to keep living their lives.

They're taking on a little bit of debt to deal with inflation and to keep spending, but they're also going back to work. And I'm seeing that anecdotally, a lot more people going back to work. And the numbers show that, that feels to me, and I said this on previous episodes, that that feels like a possible, you know, very helpful path out here. And I think you brought it up, SACS as well, which is, hey, if we have increased participation, that's great. Increases monetary velocity, increases participation in the economy. That's a possible path out. Do you feel like that's still holding trust? Even in secular decline on that trend for 25 years. So maybe maybe on the margins of few folks, um,

run out of stimulus and decide to go and get a job. But I don't think again, it's it's kind of like, you know, when you're when you're the blackjack table in Vegas and clapping at the strategy, clapping at the strategy, I feel like all the like what we're talking about right now is clapping as a strategy. Maybe this can happen, maybe that can happen. You know what? Maybe it'll start raining gold fucking coins that we can use and just do it. I feel like the last 15 minutes have been like not a good conversation. I think it's a great conversation. I think it's a great conversation.

I think it's totally repetitive. It's totally repetitive. Jake Al, because look, the structure of the problem I think is very well defined, which is, we have an inflation problem. Great, it went down from 9.18.5%, it's still really high. Two to three percent would be normal, okay?

So that's half the problem is how fast is inflation going to go back down to normal based on the interest rate cuts. The other side of the problem is, is sorry, interest rate increases not cuts. The other side of the problem is how much will the economy be hurt by these rising rates? And those are the two variables and we see that there is a slowdown. There's still a lot of jobs being filled, which is good, but there is unquestionably an economic slowdown. And those are the two sides of this equation. And we just need to see some economic data.

It's going to play out over there. You're going to ask you the same question for three fucking weeks. If you guys don't want to talk about the new data, that's fine. Hey, look at you guys. It's like, you're not aware of what's getting in you. Not of us, we don't have an opinion. Other than we don't know, how many ways can we say that we don't know about inflation or recession or jobs

or any of that shit anymore, unless there's something really for us all to say, like something news come out. Well, some fucking economic report was really important. I mean, that was a massive print. It's not that it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it is. Twice it is, it's on the track of what we've all,

it's one data point, it's one's right. It is twice as many track of what we've all day to point it's one day point There were some bad job supports before that print. Yeah, I think we should stop doing the recession inflation chat every week It honestly is like we're better job moderating. Can you not dilating? You got no you guys asked to talk about it You guys put some of these things on the talk about it anymore. I think we should move on. What do you what do you want? I think soft bank was a great chat. I think you know, that was a good anymore. I think we should talk about shit. Let's move on. What do you want to move on? I think Soft Egg was a great chat. I think that was a good talk. We should do that kind of shit.

We should talk about Trump. I don't know why you guys think about the Sequoia Evergreen Fund. Tell me what you guys think about that. Come on, geniuses. The Sequoia, like when they restructured. Are you joking? No, I love when these two go silent.

No, no, I always didn't want it to erupt anybody. I don't understand what you're saying. I don't understand why you guys are trying so hard to avoid the obvious news of this week. Is there something else in the news this week? Exactly. If Trump actually had some material in Mar-a-Lago that was related to the nuclear program,

and there was an attempt to try and get recover those documents through normal means. And they were not recoverable. What would your course have been if you were the director of the FBI or the president of the US in that condition? Because I think that seems to be the party line of what's going on here. Well, the Democratic kind of spin on what's going on here. But like, you know, honestly, in that circumstance, what do you think would have been appropriate? So there's there's some sort of confidential material related to our nuclear program When nuclear weapons something something there in those materials that work attempted to be recovered or were taken without approval And then they try to recover it for you know, assume there's no nefarious intent

What would be the right kind of course here? Well, so I don't know exactly what's going on. I just think that you can't necessarily give the F sadly. I don't think you can necessarily give the FBI the benefit of the doubt here in light of their history. But let's back up. I mean, first you had this raid on Mar-a-Lago where you got 30 FBI agents. They're not wearing suits with holstered side arms. They're carrying AR-15s, you know, weapons

of war, fingers just outside the trigger guard. They're wearing body armor. It looks like a paramilitary raid on Mar-a-Lago. It's utterly unprecedented. And you look at tweets by Andrew Cuomo, for example, or Andrew Yang. I mean, these guys actually turn out to be pretty, I think, intellectually, Democrats on this point saying, this is unprecedented and it's really going to, you know, I want to read this by Andrew. I'm getting there. I know you're going to cut me off. So I'd like to just read these tweets. So maybe you, because you know, maybe you'll give more credence to Andrew Yang. He said, I'm no Trump fan. I want to miss far away from the White House as possible.

But a fundamental part of his appeal has been that it's him, it gets a corrupt government establishment. This raised strength since that case. For millions of Americans, we'll see this as unjust persecution. You have Andrew Cuomo saying, DOJ must have immediately explained the reason for its rate. It must be more than a search for inconsequential archives that would be viewed as a political tactic and undermine any future credible investigation and legitimacy of January 6th

investigations. as a political tactic and undermine any future credible investigation and legitimacy of jane r6 investigations and let me read one other tweet uh... by elan that's not directly about the speed to eat this on july eleven so a month ago and he said i don't hate the man but it's time for trump to hang up his head and seal the sunset that was the part that was widely reported but he also said

them should also call off the attack don't make it so that Trump's only way to survive is to regain the presidency. I think there was a lot of wisdom in that. And I'm old enough to remember when the case for Biden getting elected is we have to move past this partisan warfare, this extreme rancor and derangement. And we were told that the media, you know, all these people who had

TDS, that their psychosis was due to Trump. And if we could just move past Trump, this, all this sort of partisan warfare would end. And now, and, and I was certainly hoping that would be true. And now, sadly, it seems like we're right back in this thing, where we're right back with the media being obsessed with TDS, portraying this narrative that somehow he's a traitor. And what is this whole thing hang on, just these two words, nuclear documents. Well, listen, until they actually produce those documents, I'm going to suspend judgment. Because the FBI, the last time they did this, remember, they manufactured a falsified warrant

to the FISA court for this type of investigation. They have that history. So I'm just going to suspend judgment on what's going on here until they actually produce the documents they're talking about. Can I ask a few key questions? Now, the stinks. Do you honestly question the integrity of leadership and agents of the FBI. Are you serious? Like, you don't think, yeah, all right, let me

read you this tweet from Michael Burry. I don't want to hear the tweet. I want to hear your point. Well, I agree with what Michael Burry saying. So I think sometimes there's a lot of thoughtful commentary about this. And what Burry says is Jager Hoover led the FBI for five decades denied them off he existed, fought the civil rights movement, shielded the KKK. Multiple presence acknowledged fear of him. So what he's saying is that the FBI, since its inception, has political origins and basically meddled politically in the affairs

of the country. Then he says, the FBI lied to the FISA court, this is back in 2016, to lead true, altered emails leaked lies to the press to get TrumpISA court. This is back in 2016. Totally true. Altered emails leaked lies to the press to get Trump nothing shocking. So, Freiburg, listen, I don't know whether the FBI's telling the truth, but are you honestly going to say that the FBI's leadership has never been political, that it's never Harvard or pursued their own agenda, and that it's never had a desire to go after. I'm not making that opinion. We saw the text messages from Komi, Struck, Page, McCabe. I mean, these guys basically took it upon themselves when Trump was elected to be the quote-unquote insurance policy. And an FBI lawyer pled guilty to falsifying

documents to seek a warrant from the FISA court. So I just think anything's possible here. And now I'm not saying the FBI is lying about this. I don't know, but the idea that the FBI is automatically entitled to the benefit of the doubt in light of their proven history of basically pursuing Trump like, eh, I pursued the white whale. I mean, these guys have been after him. I'm just gonna zoom out for a second.

The reason I'm interrogating SACs on this is, like, it's just so telling to me that a guy like you SACs, in your position, are actually questioning the integrity of like the highest justice, authority, and institution in the United States, really says a lot about kind of the state of the U.S US citizenry, the state of our society today. I think it speaks a lot to the Americans. I know it's incredible. And what Ray Dahlio said in his book about how during these periods when the empires

begin, they're decline. And you know, when you're challenged with kind of the economic conditions, that the US is challenged by printing lots of money, lots of debt, very hard to service all that debt, and we have a ton of obligations over the next decade or two that are going to be very hard to meet given our economic growth and inflation conditions right now, that you start to see these sorts of behaviors historically. It's happened six times in the last 500 years where large empires like the United States or large, you know, economic empires like the United States or large economic powerhouses like the United States started to decline that the civil war begins, that the institutions

get challenged by a minority and then a majority of the citizenry. And it really starts to crumble and challenge the integrity of the institution and its ability to hold itself together. I'm not challenging, hold on a second, I'm not challenging me. Well, you're questioning the integrity of the Department of Justice, right? Listen, I'm not arguing, I'm just pointing out. Like, it's an incredible condition

for us to find ourselves in. Yeah, but my questioning did not create that condition. There, this lack of trust is earned. It's earned by the FBI in light of behaviors they took just a few years ago. Now listen, I'm not defending Trump per se. I don't know what he did or didn't do, okay. But I think that you can't just accept at face value without further proof these leaked, what are basically leaked comments by the FBI.

Listen, I'm not a naive child. The fact of the matter is that power can be corrupt and power corrupts. We have seen that the FBI from its earliest days did engage in corruption and more recently against Trump himself had a vendetta against Trump. All I'm doing is, I'm not gonna automatically accept at face value what they're saying until I see some proof. Now I'm not saying that they're wrong

or they're lying about this. I'm simply saying I'm not gonna accept it at face value. Yeah, I'm glad, and remember Trump was elected on the platform that there is this deep state that there is institutional corruption, that there is this deep state, that there is institutional corruption, that there is malaise and lethargy in these institutions of the government that are funded on the order of trillions of dollars a year,

and that that's what he was intended to go and blow up and repair. And there's a very strong and potentially close to majority percentage of voting Americans that feel that there is this core deep state corruption institutional lethargy that is challenging our ability to give everyone the freedom and liberties that they deserve. Freeber, these agencies are supposed to be nonpartisan.

They're not supposed to have a horse in the race. And what we saw is that when Trump was in office and these texts came out, clearly the top levels of the FBI, these top agents. I'm not talking about the rank and file, I'm not talking about the field agents. I understand that a lot of them are law and order types to vote Republican. I get it, but I'm talking about the leadership, the highly political leadership in Washington. And it was pretty clear that they had a horse in the race. They did not like Trump and they were out to get Trump.

And, you know, again, Trump is not my preferred candidate for 2024, but what the FBI has done with this raid, quite frankly, I think it's polarized the outcomes. They are basically going to send Trump to the big house or the White House. I mean, because now there are Republicans have rallied around Trump. I think he's going to be very, very hard to beat. As the nominee in 2024. Unless the FBI comes up with ironclad evidence to show that he did something significantly wrong. I care less about who did what and what was done wrong. I care more about the fact that this conflict is escalating.

It's creating a real condition of continuing polarization. It really is the conditioning that Biden had some historians in the White House. There was a report on this last week. And these historians spoke about how the conditions in the United States are just as they were right before the Civil War. And that there's real concerns. I'm not sure how. Yeah, well, I mean, they can go read the anecdotal reporting that was done on this thing,

but that was the general theme of the conversation. And it really kind of concerns me more that this level of discourse is escalating to a point of there's corruption, this person is a criminal. And that sort of discussion happens in more dire circumstances and economic circumstances, then has ever been seen. The US is the largest economy in history, and we're now having these sorts of conversations that typically lead to some degree of conflict, and it's really concerning.

Well, I just think, listen, I think that Trump was out of office. We were told that this partisan rancor would stop once he was out, and they're pulling him back in. And all I can say is that when the, I think we know maybe 1% of the story, okay? I think this leak around nuclear documents is, it feels like a selective leak. It's not certainly-

But all sides are inflammatory. All sides are cantankerous. Exactly. And I'm suspending judgment. What I'm saying is though, that when all the information comes out, there better be a very significant there there. No, no, no, we've made that impossible too because he Trump came out and he basically

said, Hey, listen, if these guys find something, it was planted. And now you're going to have at least a 10 or 15% of the population that believes, okay, this was planted. It wasn't actually there. So whatever the outcome is will not be good. Nobody will be satisfied. And both of the extremes in the United States will be even more angry.

Further inflamed, yeah. Further inflamed. Well, that's what I'm saying. The inflammatory index has now skyrocketed. Yeah. By the way, this is why I think at some level, maybe the lack of faith in these institutions is well deserved because where is the, you know, the, the, the, the

prudence of all of this, like where is the, the circumspect thoughtful, methodical thinking about all of the different outcomes that could be possible, so that you exhaust every option, and this is the only option left. And then even then, if Merrick Garland was open to basically saying unseal the warrant, why didn't you do it before and say, we're going to have to serve this guy unless he actually gives us these things? There's all kinds of things you could have done. Oh, clearly, they did. Keep the, hold on a second, to keep the temperature of this thing way, way down. And that's what's going to.

And to your point, Jamal, if they could have let Trump's lawyers watch them, do the search so that nobody could claim anything about anything being planted. So they let that happen. The inflammatory index is spiking. I think that's my key takeaway on all of this. I care less about what Trump did and what the DOJ did and what the FBI did. And when you're more concerned about where this takes us, because the next step regardless of the outcome. Well, you know where it takes us. You know where it takes us. When you're on tilt at the poker table, what do you do? You cannot think properly. That's what that's where everyone's at right now. When people are so inflamed with emotion, they start to

make very poor decisions. I don't know whether the DOJ and main justice made a poor decision or not. I think this is where we have to hold our breath and hope they didn't. I don't know whether the White House knew anything or not. But the whole point of all of this is that we pulled this guy right back in to the to the to the main stage. Absolutely. I mean, like I said, you've polarized the outcomes. You're either gonna basically send the sky to jail or you're gonna send to the White House.

No, I think there's very likely, no, I think there's very likely a middle path where nothing happens, but it will further erode what Freeberg says, which is it's just a little bit less trust in the D.A. Institutional integrity is eroding. And when institutional integrity erodes, the fabric of what keeps everything working starts to fall

apart. And I'm not saying this is some cataclysmic civil war happening just to be clear. I'm not saying that some cataclysmic civil war happening next year, but it's an unfortunate decline in everyone's faith and the stability of the institutions that we all rely on to support and service us because the inflammatory index is going to go up and everyone's going to be criticizing everything. And that's an asking point. But this is why I think we really have to ask, was this really necessary? I mean, why did the DOJ and the FBI think this was necessary?

Yeah, these boxes were just in there. I think that's a reasonable question. It's like, if these things were actually sitting in a box with a lot, that they changed, there must have been something more that was so grievous where you had to do something like this. Now, by the way, David, I just want to, I read, so I don't know if it's true or not, I think maybe it was in Barry Weiss's sub-sac, or Matt Taibe's sub-sac. These folks weren't armed to the teeth. They came in jeans and shorts and t-shirts.

In fact, main justice told them, like, do it as well. I've seen the photos. I've seen the photos at eight. Oh, yeah, air of the jeans. I'm saying the people inside were there for six or seven hours, and only a few people knew about it. They were there for nine hours. They basically told Trump's people,

they couldn't be there that to leave. They told to turn the cameras off, and they had like highly militarized, there were something like 40 people and something like 30 of them were heavily armed. The optics were terrible. If there was some nuclear confidential nuclear material in Mar-a-Lago and through normal means of communication they had asked several times to have it returned and identified this

for him and he had refused which I think is a very reasonable kind of conditioning for what may have happened here and then they okay, we got to go get it. There's no choice. This is like super confidential nuclear material. We've got to get this stuff. The only way to get it is to serve a warrant and go in there and get it. You know, under those circumstances, you know, do you think that this would have been kind of inappropriate?

Like assume all other kind of communication means were exhausted. Like, you know, what would you have done if you were president? Listen, I think there is information that could still come out to convince me that this raid was warranted. I just haven't seen that information yet, and I think the optics of it were terrible. Right. I like the point I was making. I don't know why it wouldn't have been good enough to send in the FBI agents with holstered

side arms. Not AR-15 weapons of war, you know, where the fingers were just outside the trigger guard. It looked like a paramilitary raid. So whoever was thinking about the political ramifications, this clearly didn't do a very good job. I also don't know why you wouldn't give the courtesy to a former President of the United States to give them either more of a heads up or to let his lawyers attend so

that just for their own protection so they can't be accused of planning anything that would have been smart. And I don't know why they would have said to trans people that they couldn't record it. And I don't know why there have been reports that the FBI went through Melania's closet. I mean, seriously, they're like going through Melania's clothes. It's just weird. It's weird. So there's a lot about this that we don't know.

I'm not conclusively rendering judgment about it because there are things that absolutely come out to convince me that it was warranted, but I haven't heard them yet. Okay, everybody, we'll see you on the next episode of The All in Podcast. Love you, besties. We'll let your winners ride.

Bring man David Sack. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties.

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I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. I love you besties. Besties are gone, go thrifty. That's my dog, take it away, she's right, wait. Sit down. Oh man, my ham is the actual meat, the apple is the actual. We should all just get a room and just have one big hug, or because they're all just like this sexual tension that we just need to release some time.

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