Breaking Points with Krystal and Saagar - 1/24/23: RussiaGate FBI Agent Arrested, Biden's New Chief of Staff, Microsoft Invests In ChatGPT, Universities Shocked By AI, Ruben Gallego Runs Against Krysten Sinema, Jeff Bezos Sale of Washington Post, Federal Debt, Tech Sector Layoffs, Derek Thompson

Episode Date: January 24, 2023

Krystal and Saagar discuss how a retired FBI Agent formerly involved in the Trump Russia probe was arrested for ties to a Russian oligarch, Biden taps corporate fraud Jeff Zients as his new Chief of Staff, Microsoft invests 10 billion dollars into ChatGPT, MBA's are shocked to see ChatGPT pass the exam, Democrat Ruben Gallego challenges Krysten Sinema in her state of Arizona, Bezos to possibly sell Washington Post for the Commanders, Saagar takes a look at how we accumulate our Federal Debt historically, Krystal takes a look at how JP Morgan Chase was scammed by a fraud business for 175 million dollars, and Derek Thompson (@DKThomp) joins the show to talk about his new piece in The Atlantic on what's really going on behind the scenes of these massive media and tech layoffs.To become a Breaking Points Premium Member and watch/listen to the show uncut and 1 hour early visit: https://breakingpoints.supercast.com/To listen to Breaking Points as a podcast, check them out on Apple and SpotifyApple: https://podcasts.apple.com/us/podcast/breaking-points-with-krystal-and-saagar/id1570045623 Spotify: https://open.spotify.com/show/4Kbsy61zJSzPxNZZ3PKbXl Merch: https://breaking-points.myshopify.com/AUSTIN LIVE SHOW FEB 3RDTickets: https://tickets.austintheatre.org/9053/9054 Learn more about your ad choices. Visit megaphone.fm/adchoicesSee omnystudio.com/listener for privacy information.

This is an iHeart Podcast. that is possible. If you like what we're all about, it means the absolute world to have your support. What are you waiting for? Become a premium subscriber today at BreakingPoints.com. Good morning, everybody. Happy Tuesday. We have an amazing show for everybody today. What do we have, Crystal? Indeed we do. Boy, oh boy, do we have a perfect story for you about the deep state and the FBI. One of the people who was charged with investigating Trump over Russian collusion has now himself been indicted for Russian collusion. So we've got all those details for you.

Amazing story. We also have a new chief of staff incoming to the White House, and he actually kind of sucks. So we'll break those details down for you. We also have a big deal being done between OpenAI's chat, GBT, and Microsoft. So what is that going to mean for the future of that? We also have a challenger to Kyrsten Sinema in the Arizona Senate race, Ruben Gallego. He's a member of Congress right now. This was expected, but he officially announced yesterday, put out a video that I think was pretty solid. So we'll break all of that down for you. And we

are tracking rumors that Jeff Bezos may be selling the Washington Post and buying the Washington Commanders. Interesting. Now, right now he's saying no, but the rumors are flying. As I said, Sagar is taking a look at the history of federal debt. I am taking a look at JPMorgan Chase admitting they were scammed for $175 million by basically like a fake company. Amazing story. We also have Derek Thompson back to talk about the mass tech layoffs. But we did want to start with this FBI story, which is just incredible. Like, it sounds like it was honestly made up. Let's put the Fox News tear sheet up on the screen here. So two indictments released yesterday regarding this top FBI counterintelligence agent, a guy by the name of Charles McGonigal, former special agent in charge of FBI's counterintelligence division

in New York. He retired back in 2018. While he was at the FBI, he spent a lot of time supervising and participating in investigations of Russian oligarchs, including a guy you might remember from Russiagate by the name of Oleg Deripaska. Deripaska had a relationship with Paul Manafort. This is part of how the whole Russiagate investigation gets kicked off. Charles McGonigal is there at the very beginning, at the origins of the Russiagate investigation. And lo and behold, McGonigal, after he leaves the FBI, gets caught, is accused by the government. Of course, he, I'm sure, proclaims his innocence. But what the government is saying here is that he was taking money from Oleg Deripaska, which is illegal because he is a sanctioned individual and has been for a number of years now, both to help him try to get off of that sanctions list, a process they call

delisting, and also to investigate another rival oligarch on his behalf. Apparently, Deripaska and this other oligarch that they don't name in the indictment were in some sort of dispute over control of some sort of Russian company. So our FBI, former FBI dude was being paid a lot of money through a bunch of shell companies and, you know, using fake names and fake email addresses to try to hide his tracks in order to investigate this other oligarch to see if he had hidden assets abroad, if he had a different non-Russian passport, and to see what was going on with this fight that they were involved in for this Russian company. So truly, truly incredible. Let me give you a few of the

specific details about McGonigal's involvement with the Trump-Russiagate investigation, because this seems important. Let's put this next piece up on the screen here from the Washington Free Beacon. They say, plot twist, ex-FBI agent involved in Trump-Russia probe indicted for violating Russia sanctions. Charles McGonigal is accused of conspiring to lift sanctions off Russian businessman with ties to Vladimir Putin. So he was one of the first individuals at the FBI, they say, to learn that a Trump campaign advisor, I think that was George Papadopoulos, had discussed Hillary Clinton's emails with a foreign diplomat. That helped to cause the FBI to open its investigation

of the Trump campaign based on that conversation, later found no evidence of collusion between the Trump campaign and Russia. He also, when he left, he left the FBI in 2018, he was involved in the bureau's probe of Trump campaign advisor Carter Page, according to text messages that were released by Senate Republicans. And they go on to say it's unclear what other involvement McGonigal had in the Trump Russia probe. And just let's go ahead and put the press release here from the Southern District of New York, where they tout this indictment. And then last night, there was actually a second indictment that was filed. This one was in Southern District of New York, this first one regarding Deripaska. But the second one was filed in D.C. and had to do with while he was still in the FBI, taking about $250,000 in cash from a former Albanian spy. And, you know, I think he had set up shell companies to do this sort of work as well. So dude was corrupt while he was in the FBI, corrupt when he was out of the FBI.

He was actually involved, given a heads up of which individuals would be on the sanction list. So he certainly can't plead innocence here. And reportedly, a lot of people who are high up in that, yeah, really freaked out about this because of the high level of sensitive information this man had access to while he was at the bureau. Look, he can contest his innocence. Yeah, that's his right as an American citizen. That said, you read this indictment. I mean, they pretty much have him dead to rights. Like he was creating New Jersey based shell companies while he was a special agent in charge of investigating these Russian oligarchs specifically to create a money laundering scheme through which Deripaska and this Albanian official could funnel money to him personally. At one point, Deripaska was paying him some $42,000 per month through this New Jersey-based shell company. So he's guilty, or appears to be guilty, of not only money laundering, but straight up violating U.S. sanctions to the tune of potentially

hundreds and hundreds of thousands of dollars. And when you read it, what comes through? We are talking here not even just about a run-of-the-mill FBI agent. He was a special agent in charge, charged with our nation's highest, most sensitive secrets whenever it comes to Russian oligarchs, who literally was working for Russian oligarchs. What's also crazy, Crystal, in the indictment is he went to had connections to FBI agents and had seen some very top-secret intelligence. Like what? The daughter of a Russian spy working at the NYPD who says and told openly. And in their counterintel division too. In the counterintelligence division of the New York City Police Department. So we have that. I mean, the secondary part though, the scheme in terms of being hired by Deripaska. And also, let's just be clear here. Like first he was working at least for a cutout law firm where

his checks were coming from. Eventually he just started straight up working for the guy. Also, in terms of how they refer to him in emails, it's so funny. It's like out of a movie. They're like, the big guy. You know who? The rich Russian guy. It's like, yeah, I wonder who you're talking about. He literally flew to London and to Vienna just to go meet with Deripaska at his house there. Straight corruption. Outrageous. And here's the question. How many more people they got in these things? I mean, it's funny, too, because I guess it's probably par for the course. In Russia, you bribe the security states to investigate your rival business opponents. But now this is coming here to New York,

to the top division of the FBI. And you can't ignore, as my friend Chuck Ross wrote in the Free Beacon, that he was intimately involved in the Trump-Russia investigation in the first place. So it seems that the person most guilty of Russian collusion is one of the FBI agents investigating Russian collusion. And who appears to have helped to spark the Russiagate investigation. I mean, again, we really don't have a lot of insight into how directly he was involved throughout the entirety of the Russiagate investigation.

But he was definitely there at the beginning. who initially reported those conversations between with Papadopoulos and that helped to spark this whole thing and was involved in the investigation of Carter Page, which, you know, was a shameful episode in and of itself. So it's just, I could not make it up. You could not make it up. And I do find the details here extremely fascinating. It wasn't just McGonagall that was indicted. There was another dude, Sergei Shestakov, a former Soviet and Russian diplomat who later became a U.S. citizen, Russian interpreter for courts and government offices. He was apparently McGonagall's sort of partner in all of this. And he's charged with these same crimes as McGonagall with regards to Deripaska and, you know, violating the sanctions that were levied on Deripaska after Russia's invasion of Ukraine during, it was the Obama administration that initially listed Deripaska as a sanctioned individual. So he's charged with those same

things as well. But the day before the FBI came and, I don't know, arrested them or raided them or whatever, this other associate, Shestakov, sat with FBI agents and totally lied. Oh, no, we don't do any business. No, not whatsoever. I barely know Charles McGonigal. Of course, we're not in business together. So he also is charged with lying to the feds. So look, that's the long and short of it. Again, the details here are fascinating. And it does raise the question of like, how common is this? You know, it's so brazen that you thought you were going to get away with this for hundreds and hundreds of thousands of dollars, especially given all the scrutiny that's on Russian oligarchs right now. Deripaska is an interesting figure in his own right. He became an oligarch by winning what was called the Aluminum

Wars back right after the dissolution of the Soviet Union. So he's able to gain control of this incredibly valuable resource. So he's a big industrialist, incredibly wealthy man, ends up being one of the wealthiest men in the world. It was also reportedly one of the closest advisors, like really tight buddies with Putin. Since this Ukraine invasion has happened, though, he has made some critical comments on Telegram, calling it a war, which you're not supposed to do, calling for peace, et cetera, et cetera. So he's kind of a fascinating figure in his own right, but just an extraordinary turn of events here. Yeah, well, he's probably saying that because all of his yachts and houses in London, all those things are gone. He's trying to get off the sanctions list.

What they really live for are the London houses and the yachts. He's got houses here. Yeah, that's right. I mean, in New York also. He's a famous doyen, apparently, of Davos. He used to pair, allegedly, used to throw some of the best parties in Davos with Dom Perignon.

Yeah, so he's sad he couldn't make it to Davos this year. All the Russians were banned. You gotta feel for the guy, right? Rough for him, you know. Rough out there for an oligarch. It's really rough out there to be a multi-billionaire. But, here's what I take away. There is no such thing as former FBI and former CIA.

You may not have a badge anymore. If anything, it's worse because you use the badge effectively to sell to the highest bidder. How many other people, former FBI agents, former CIA, maybe some that you see on TV, are on the take to the people that they were supposedly investigating. It's a disgusting practice that, look, the only reason we know about this is because Oleg Deripaska is on the sanctions list. And otherwise, none of this would be illegal, guys. He probably would have gotten away with the Albanian cash grab, the 250K he got from this Albanian spook. He probably would have gotten away with that one. The only reason is because Oleg is on the sanctions list. How many people in this town, within walking distance of where we're shooting this show,

are on the take to the kingdom of Saudi Arabia, to Dubai, Oman, Brunei, Thailand, China? I mean, look, those people may not be sanctions, but in many ways, they are much richer than Oleg Deripaska. And there's an army, a cadre of former spooks, officials, and law enforcement officials who are all on the take for them. So just think, like, this is the one that we know about. It's just the tip of the iceberg. The richest people in this town are the ones who are willing to do the scummiest work. That came out from Manafort. Remember, Manafort's pulling $25 million.

It wasn't just Russians he was working for. He was working for the highest bidder. Anybody. So he could buy all these Persian rocks. Other outrageous outfits. It was like an ostrich jacket or whatever. One of my proudest pieces that I wrote at the Daily Caller was an interview with Roger Stone,

specifically only about Paul Manafort's wardrobe. His fashion. Wait, so was Roger a fan? Roger's a fashion critic. Right, I know. Oh, no, he hated it. He hated it. He thought it was gross. Even though they were friends and former business colleagues,

he was like, this is quite possibly the worst wardrobe I've ever seen. So, yeah, it's a fun piece. You should go. Wish we could have Roger Stone critique Kirsten Sinema's outfit

at Davos this year. I could. You can call him if you want to. Dressed as a sheep. You might be interested to know what his thoughts were. She literally looks like Cruella de Villa up there.

It was amazing. We'll show you later. We got be interested to know what his thoughts were. She literally looks like Cruella de Villa up there. It was amazing. We'll show you later. We got that later in the show. I will save my fashion content for later in the show. Let's go ahead to the next piece here. All right. The next chief of staff at the White House. We now know who that person is going to be.

Let's go and put this up there on the screen. Biden is going to tap Jeff Zients as his next White House chief of staff to replace Ron Klain, who's been in charge of the White House now for two years. Klain, apparently, I mean, it's normal in terms of the life cycle of chief of staff. Wants to step down sometime after the State of the Union. By the way, we will have special coverage for that here on the show. And what does that mean? Zients has worked in the White House both as a deputy chief of staff, but really made his bones and got Biden's trust by working as the COVID czar while he was there. So coordinating the vaccine response, policy response, and some of the American Rescue Plan in the early days. Now, why does any of that matter?

It's not just who he worked for before he was in the White House and how exactly he leveraged his position from the Obama administration to then become a very, very wealthy man before he went to work for Biden. Let's put this up there on the screen. according to his own disclosure and built his wealth through healthcare companies that were forced to pay tens of millions to settle allegations of Medicare and Medicaid fraud. For those who've been watching us for quite some time, this is not a new story. This is somebody who we focused on a lot in the early days of the Biden administration, specifically when he was tapping AIDS. I specifically remember this report, let's put it up there on the screen, from December of 2020. It's kind of a mini biography of what he did. I mean, this is a person who was working for the Obama administration, worked in the economic departments and was a key advisor, who leaves

the White House with key knowledge and with connections and leverages it, Crystal, into private equity behemoth working in some cases at Bain Capital, the former Mitt Romney firm, which you can't even make that up, that Obama runs against Romney, bashes him and really wins on a message of this person would bankrupt you the way he bankrupted all these companies. And then one of his top deputies leaves and goes works for Bain in terms of private equity and then starts doing like leveraged activity whenever it comes to the healthcare sector. It's as scummy as it gets. And no one in liberal media bats an eye. No. Nobody even noticed like, hey, this guy worked at Bain Capital. Weren't you just saying that the work they were doing was evil and like the American people actually really agreed with

you on that? Nah, nobody really said a word about that. I mean, it does represent somewhat of an evolution. I think post-Obama era, when there was very little room on the left of the spectrum to criticize anything that was happening within a democratic administration, at least now you have a little bit of a rump caucus that will say, hey, maybe don't bring in the dude that got five millions of dollars and made a bunch of money off of defrauding Medicare. Tiny, a few little news items will be there at least. A few lonely voices will say something about it at least. But not only does he have that ugly past in terms of making tens of millions of dollars off of effectively health care fraud. He also was one of the Obama administration's chief liaisons to executives and lobbyists

when anger at Wall Street over the 07-08 crisis was at its peak. Top lobbyists such as the Business Roundtable and the U.S. Chamber of Commerce have praised Mr. Zients as someone who heard them out. So that's who we're bringing in now as Biden's chief of staff, someone who probably belongs in prison, given the level of fraud that he is accused of here, in which he had his company's affiliated companies had to pay fines for, and instead being elevated to White House chief of staff, one of the most powerful positions in the entire country. Yeah, here's an interesting one. He also owns $5 million in gold bars and $25 million in a security that's actually tied to the value of gold. Somewhat ironic because that's

obviously an inflation hedge and he is actually going to be Joe Biden's literal chief of staff. Absolutely kind of hilarious. So anyway, why does this matter exactly? Because this person is now going to be the most powerful person in the White House. And let's also not forget this. Biden, he's an old man to the extent that he controls his calendar, legislation, meetings, and all of that, the actual day-to-day operations of the White House. Who knows? And if anything, you know, chiefs of staff have been incredibly powerful under Trump, who was also a disinterested president, and now under Biden as well. I mean, Klain was a top negotiator for a lot of the bills that were happening. He basically controls the president's schedule, where events and all these things go. He really can't

underestimate the power of these bureaucratic positions. And now this person is going to hold that. And Crystal, as you were saying, Jeff Zients, named in Politico, let's put this up there on the screen. Do you want to read your favorite quote from this piece? Yeah. Well, I love the concerns that they raise here in this article about Zients. Now, to be fair, they do have a quote from the Revolving Door Project expressing concerns over his corporate background. But they also end with this. Zine's selection is also likely to disappoint some Democrats who saw Klain's exit as a prime opportunity for Biden to appoint a woman or person of color as his top aide. So leave it to Politico to make the most surface-level critique and observation and

not go an inch deeper than that level of analysis. So there you go. Just couldn't resist putting that one in. It's just like, come on. Are we really being serious here about what's happening? This guy, any objection to him, it should not have to do with... I don't even care if it could be a black woman, if they were also a former Bain consultant and at least ran a company that was guilty of Medicare fraud, again, that they paid fines and fully acknowledged what they were doing, I think that would be the same criticism. Oh, 100 percent. I mean, to be fair to Politico, they're actually right that this would be the critique that some Democrats would level. Whereas if it was, you know, a minority person or some sort of like trailblazing figure who had this exact same terrible track record, they'd be, oh, this is amazing. This is a step forward, most diverse administration in

history, whatever. And it's like, okay, that's good. But what would be more important is to have someone who's going to be committed to, you know, the common person in America and not just cozy, with business and doesn't have a track record coming in of basically defrauding the government. So that's what we're looking at. And Sagar, to your point about how important this position is, under any presidency, it matters a lot what ends up in front of the president. And it especially matters in a presidency where you have a declining 80-year-old man who is really dependent on his staff to know what is going on and what's important and to frame issues for him. And so this individual who has, again, a very troubling, very closely tied to both corporate America and Wall Street

in his past is being brought into a position of extraordinary power. Absolutely correct. All right, let's go on. Chat GPT, even more stuff that's going on there. We'll talk about tech recessions with Derek Thompson a little bit later. But a big business announcement of which there's actually a lot to say. Let's put this up there on the screen. Microsoft is announcing a $10 billion investment into OpenAI, specifically to

fund the ChatGPT platform. And it's a partnership where they want to, quote, accelerate breakthroughs in AI and help both companies commercialize the advanced technology. So this is the real test for what is the future of ChatGPT. And actually, I think it goes to a lot of questions around the internet. So right now, it's 2023. We came off the future of ChatGPT? And actually, I think it goes to a lot of questions around the internet. So right now, it's 2023. We came off the heels of a lot of hype around Web3 and what that would look like, crypto, Ethereum, et cetera. But fundamentally, it came from this.

There was a frustration that the promises of Web2, of the Facebook, Google, and all of that, they became centralized. It felt like innovation was stifling. And it didn't feel like using the internet was fun or cool anymore. I haven't seen that level of enthusiasm around technology and specifically online then basically until now with ChatGPT.

But then just like with those questions of what we should have asked with Facebook and with Google about centralized and monopolized control over ad space around attention and commodities, we've got to ask the same questions, too, around AI and what exactly the quote-unquote uses for this are going to be. Are these going to be open source? Open AI says that they want to have that mission, but Microsoft clearly is eyeing this for what do they do best, enterprise business control. And look, there are some cool things that could come out of it, right? Maybe you're using your Microsoft Teams, and it will draft a response for you to an annoying email or in a chat. That sounds cool. But what if they also use it to automate somebody's

job? Or what if they also use it to, let's say, predict exactly how many emails you should be sending in a day and then benchmarking and then stacking everybody up against each other? There are all kinds of dystopian corporate ways that you could push these things, as well as what the innovations could be. And clearly, that's where they see the business opportunity. That's why they're investing $10 billion into this. Yes. So OpenAI, they built this thing, but they aren't really in the business of figuring out how to make it profitable, make money. And so they've basically partnered with Microsoft so that Microsoft can figure out how this thing will make money for them. And, you know, that always is a direction that starts to make me nervous because what is

going to make money for a gigantic corporation, a gigantic monopoly like Microsoft is not necessarily what is in the best interest of society. I am not wise enough to predict what all of those applications could ultimately be. I will just say it makes me wary. I mean, some of the things that have been predicted or I guess are in the sort of rumor mill are like including ChatGPT as part of the Office suite. Yes, exactly. So when you're like writing your Microsoft Word document, you might have access to the ChatGPT tools right there where you can help use it to write whatever you're writing or ask questions or learn from it.

They also might incorporate it into their search tool to help sort of like, you know, garner better results or more useful answers to questions that people are asking there. So those are some of the like obvious directions, which are not from the jump deeply troubling. We've talked about some of the concerns, which I think are justified among academics about like students cheating. Ultimately, I think that ship has sailed, though. You're just going to have to grapple with this as a totally new world. And part of why there is a real discomfort with chat GPT, which, again, I think is understandable, is the fact that now automation is coming for knowledge worker and even creative type

jobs. People like journalists, for example, won't be needed in those large quantities if they get this working really well, where they can actually spit out articles or explainers that are accurate and useful to the public. I will say that just this morning, I sent you an article. What was it? The Verge that was experimenting already with using ChatGPT to create a lot of these like explainers and basic articles. And they had to stop the project because a number of the articles contained significant factual errors. And they did disclose that they were written by ChatGPT, but apparently some of the, you know, some of the journalists at The Verge felt like it wasn't disclosed sufficiently. And so, and listen,

and people are reading through this article, they're assuming that it's accurate. So they sort of had to pull the plug on that because the technology is just not quite there yet. It was CNET, but yeah, CNET, which has a partnership with Bankrate. But I mean, look, that also highlights like we're not there yet, but also it's not that far away. It also shows you where a lot of the big dollars are going to be invested by the tech companies in the coming years. So I would say that the two frontiers where they're pumping the most amount of money is AI and then obviously the metaverse. Apple rumored to release its virtual reality headset sometime in the next year or so. That's going to rival the Oculus or whatever the new name is for it over at Meta.

Then Microsoft is investing this $10 billion, specifically, it seems, to try and get an edge on Google by possibly incorporating ChatGPT into the Bing search engine. But at the same time, Google itself is already ramping up and has had a long, decades-long project on artificial intelligence and maybe rolling out their own competitor to this soon. So this does seem like the next frontier. And I do think it's just really important. There's a lot of questions around this stuff, right? Which is already, you know, if you go and you ask ChatGPT like sensitive social political questions, oh, shocker, you know, it's got bias or whatever

in some direction. So even the way that these things get programmed, I mean, it has a lot of impact on the way that people might think about things, especially if we become very reliant on that technology and even put the social aspects aside. Like, what is this going to look like at an enterprise level? Well, that is the real question. And that's why Microsoft, remember, this is a big corporate. Somehow, we never really talk about it. But it's a multi-billion dollar behemoth. I think it's like a trillion dollar or something company. And they're openly also not only competing against Google, but also Amazon, which wants to incorporate AI into its web suite. So I think overall, this really is one of the next frontiers. And they've been working on it for quite some time, but this does show you the moment is here. And

I think we're going to be covering this for the next couple of years. Yeah, no doubt about it. I listened to a long interview with Sam Altman, who is the CEO of OpenAI. They're the makers of ChatGPT. There was a lot there that was interesting from him. I mean, one thing he was kind of shooting down rumors that the next iteration of ChatGPT would really be this dramatic step forward. I mean, obviously, it'll be an improvement. But there are people out there theorizing that it would be, you know, a sort of like difference in kind where you're getting close to that organic, they call it AGI. What does that stand for? Artificial something, something intelligence. Right. Anyway, clearly, I'm just new learning this. But he says, listen, it's not going to be everything that people are selling and sort of

downplaying that. He also talked about how surprised he was that the reception to ChatGPT has been what it is, like that it has been so like people so interested in it and so freaked out about it and sparked this whole national conversation because he felt like they had sort of intentionally released things step by step by step where this was the logical next step. But something about this particular iteration and people's ability to really interact with it, you know, it really kind of shocked people. And so he was surprised by that. He also talked about the Microsoft partnership. Now, they had already had a partnership. This latest announcement is an additional tranche of money and a deepening of that partnership. So this conversation happened before the latest announcement. But these comments from Sam still give you a sense of how they are ultimately thinking about it. Let's take a listen.

Can you talk a little bit about your partnership with Microsoft, I guess, how it's going and how they're using your tech? It's great. They're the only tech company out there that I think I'd be excited to partner with this deeply. I think Satya is an amazing CEO, but more than that human being and understands. So do Kevin Scott and Mikhail, who we work with closely as well, like understand the stakes of what AGI means

and why we need to have all the weirdness we do in our structure and our agreement with them. And so I really feel like it's a very values aligned company. And there's some things they're very good at, like building very large supercomputers and the infrastructure we operate on and putting the technology into products.

There's things we're very good at, like doing research. And it's been a great partnership. So he's saying, listen, I mean, as we kind of lay down, what we're good at is building this thing. They're good at figuring out how to market it and incorporate in products in order to make money. And he feels comfortable with the partnership. So that's sort of his view. And by the way, it's artificial general intelligence was the word that I was looking for there. Yeah, that's right. At the same time, in terms of education, this thing continues to make head roads. Let's put this up there on the

screen. The Chachi BT actually passed, I believe it was a 10 question test on the MBA exam at the Wharton School of Pennsylvania. It earned a, quote, solid grade and outperformed some humans on the Wharton course. So what they did is they took one of their test exams. I think it was 10 questions. And then it's in his white paper. It's like, would ChatGPT get a Wharton MBA? GPT would receive a B to B minus grade on the exam. So obviously, that's still a passing grade. Now, I'm not saying they obviously would have passed the entire curricula, but it does highlight like, wow, this is going to really just test the grounds of knowledge working, what it means. I mean, we talked previously about what level of memorization possibly that this could free up maybe in some students,

not even necessarily for this, but I did see one where ChatGPT actually worked on, it was one of the medical school exams. And one of the reasons why it was so powerful and was able to do well is a lot of people in medicine, I believe it from what I've told and some of the doctors and med students who I know, they have to memorize a lot of chemistry, a lot of like rote facts and other things they have to be able to recall off the top of their head. Obviously, chat GPT with the availability of information that they have at their disposal would be, it'd be much easier for them to have that on a general knowledge type test. And then that comes to the question of like, well, how is that possibly going to manifest in terms of the actual room? Like, right, you could have a future doctor

who may not have to memorize all that stuff and could rely on the technology, be generally familiar and be able to type in something if they need to have a recall and then use that knowledge for future diagnosis or future course of action. So the actual disruption here to education and to a lot of these fields, I'm finding that really, really fascinating. Like, what does that look like? Absolutely. I mean, many management consultants looking at these results and sort of quaking wondering if they're going to become, you know, the Pete Buttigieg's of the world are going to ultimately become irrelevant here. I mean, in playing with the tool as it exists now, like yesterday I was playing

with it, I asked it to write a monologue in the style of crystal ball about chat GPT. And it, you know, it put out a thing that was reasonably good, but it was kind of surface level. Yeah. It's not bad. You know, I mean, you can definitely tell the difference. It's lacking some like soul to it. You can tell. And there's also, they talked about with regards to this MBA test, there were certain things that I was really good at. You know, the sentences are perfectly structured. The grammar is precise. You know, the factual references are totally, you know, totally there and thorough, et cetera. But actually on some just sort of

elementary math, they said it was abysmal, just like totally incapable. Now that seems like the sort of thing that maybe even in the next iteration, they're going to be able to fix. But I do think it's a long way to go before these chat AI or other similar technology, like the image generation or whatever, before it's really in a position where you can't tell the difference between the output put from chat GPT and the output from a creative, thoughtful human being. So don't worry, human beings, you're not irrelevant yet. I guess that's my bottom line. Not yet. Also, though, you know, in terms of education and what we're talking about here, put this up there on the screen. The Stanford Daily did a survey of its students and asked, how many of you use ChatGPT on your final exams? They have a quarterly system at Stanford, I believe.

And the results said that a hell of a lot of people were using ChatGPT in the fall quarter of 2022. Now, to what extent did you use it? So it was about 17% of all Stanford students admitted in an anonymous poll to using it. So I don't know how many of them actually did it. I would presume it'd probably be a little bit higher. So how did they use it? I mean, it's also not a precise poll. Yeah, right. Not scientific or whatever. It's not like perfect, but whatever. Stanford Daily, good for them. Good sense, yeah. They did a good job here. So to what extent did you use ChatGPT in your finals? They said brainstorming, outlining, and forming ideas.

That was 60%. That's kind of what I talked about before in terms of getting people started. Answering multiple choice questions with the help of ChatGPT, 30%. Submitted written material from ChatGPT with edits, 7.3%. Submitted written material from ChatGPT with edits, 7.3%. Submitted written material from ChatGPT without edits, 5.5%. I want to meet some of those people. That's a bold move to take a straight up copy and paste. Yeah, to just do it.

Especially after some of the stories and all of that that has come out. I can't remember if it was, I think it was this article where one of the professors had caught a student using it. And he was like, it was pretty easy to tell because a student using it and he was like it was pretty easy to tell because it said in whatever the essay was like as a artificial intelligence chat creator something like that person clearly didn't even just like read through to pull out any self references that this was in fact written by chat gpt so come on guys if you're gonna use it don't be that lazy at least like reread it and make a few edits for yourself. Here's the other interesting thing. If you ask the students, you're like, do you think that using ChatGPT is a violation of the academic

honor code? So they had over 5,000 results here, right? So they said, yes, if used for more than just ideas, 31%. Yes, if used at all, 22%. Yes, if submitted with no edits, 21%. No, 13%, 12%. 12% said that they were unsure. So a lot of people, it's funny because 20% or so of them are using it. But 30, a vast majority seem to say that if you use it, at least in some capacity, it is a violation of the academic honor. People kind of divided, though. Yeah, they are divided. I mean, the students seem as sort of mixed on it

as the professors that we've been reading about here. And I get that, for sure. I just feel like you're fighting an uphill battle if you're not thinking of ways to test your students and build the skills that they're going to need given that ChatGPT is now here and it's not going away, not going anywhere, and it's only going to

get better from here on out. So I definitely get the angst around it and it's going to be a difficult transition. But ultimately, I think the most fruitful thinking is, okay, how do we use this tool and then build onto it? What are the pieces that human beings still bring to the table that are additive to this existing technology? That's right. All right, guys, big political story. So as you all know, Kyrsten Sinema, with much fanfare, at least in her own mind, declared her independence. Of course, she has never been truly independent. She is fully beholden to her corporate donors. We'll have more on that in a moment. But that opened up a big

question of, OK, well, what are Democrats going to do in terms of this next Senate cycle? Because Kyrsten Sinema is up for reelection this next cycle, this next time around. And you could see how they have a bit of a problem here. She was not going to be able to win a Democratic primary because Democrats basically hate her guts now. So she declares that she's going to run as an independent. So you have her in the race, a Republican in the race, and you would assume that she would probably take away from any Democrat who jumps in the race. So there was this question, are Democrats just going to let her run and sort of tacitly back her, or are they going to run their own candidate? And now we seem to have a pretty clear answer.

It was always likely to go in this direction, which I think is a good thing because I think democracy is a good thing and more choices are more better. Ruben Gallego, who is a progressive member of Congress and a Iraq War veteran, he has officially announced for Senate and put out his big announcement video yesterday. Let's take a look at a little bit of that. Growing up poor, the only thing I really had was the American dream. An opportunity. It's the one thing that we give every American no matter where they are born in life. Having to step up and be a father figure to my three sisters and skipping my

teenage years. I really did feel that I owed the country something and we got sent to Iraq. Losing all my friends, consistently being shot at, and people trying to blow you up all the time. You never really fully come back from the war. I will be challenging Kyrsten Sinema for the United States Senate and I need all of your support. Most families feel that they are one or two paychecks away from going under. That is not the way that we should be living in this country. Very smart way, I think, to announce. Emphasizing the background, military service, of course, genuinely heroic in terms of,

for those who were just listening, it actually put up on the screen that his Marine units suffered one of the highest casualties, actually, casualty rates, I believe, while he was deployed in Iraq. And then with the economics there at the end to really punch home the message combined with the bio. It's a strong ad. I think it's a very smart play. Yeah, I thought it was well done, too. It was emotional. He talks about growing up in poverty, what that meant, how he had to basically, you know, be a kind of a leader or father figure to his three sisters. You know, his mom struggling with paying bills and and he would throw in it didn't seem gratuitous, but there were a few lines that were thrown in in Spanish to kind of, you know, for Arizona, like make clear to voters that he is also fluent in Spanish and culturally connected. So, yeah, I thought it was I thought it was ultimately very effective. And it's going to be interesting to see how this all ultimately plays out, because if it was just Rubin versus whoever the Republicans put up and there's already talk of Blake Masters running again, there's already talk of Kerry Lake

running again. I think you'd have a pretty good shot at that. But it is complicated by the fact that Kyrsten Sinema is like hanging out there and, you know, likely to run as an independent. She's not going to be able to win as an independent. But again, which pot does she pull from more? You would have to think it's the Democratic side. So this is going to be complex. It's hard to predict exactly what way this is all going to go because she does not have high favorability ratings among any group in the state of Arizona, not among Democrats, not among Republicans, not among independents. But if she's going to pull votes from somewhere, you would think since she was a former Democrat, it might come more from the Democratic side. We'll see.

At the same time, you know, we covered Davos last week and all the elites gathering at the World Economic Forum. And lo and behold, guess who was there hobnobbing with a bunch of bankers and other global elites? Kirsten Sinema herself, real woman of the people. Let's take a listen to a little bit of what she had to say there. So as folks know, I have declared, formally declared my independence from what I consider to be a deeply broken two-party system. Those who know me know that I was always an independent voice and always have been for the things that I believe in and for my state and for my country.

But I do think it's important to note that what you've heard about partisanship, I believe, is accurate. You know, in the last two years, we think, you know, January 6th, which is a horrible day from two years ago, created, I think, concern and fear for every patriotic American across the country. But in the resulting two years,

the Democratic Party shared a narrative that said we would not have any more free and fair elections in this country if the United States Congress didn't eliminate the filibuster and pass a massive voting rights package. As we all know, the filibuster was not eliminated. Joe and I were not interested in sacrificing that important guardrail for the institution. That massive voting rights bill was not passed through Congress. And then we had a free and fair election all across the country. We still don't agree on getting rid of the filibuster. That's correct.

Thank you. A little high five there between two of the most corrupt members of the entire Senate. I mean, it just drives me crazy. We'll fight about the filibuster another day. But it just drives me crazy the way that she postures herself like this, oh, truly independent. And she's just speaking up for the voices of Arizona. This is total, complete garbage. She is there for one reason. It's to serve her donors. And I say this because there is a really clear track record. By the way, you know, report from CNBC, of course,

she and Manchin and Chris Coons, one of Biden's top advisors, put this up on the screen. They went ahead and met with CEOs at a private Davos luncheon for World Economic Forum. Again, real woman of the people stuff there. And also, she has been the top ally of private equity, keeping their goodies in the tax cut, a gigantic loophole giveaway that they get in the tax code. She got a bunch of cash from them. She preserved what's called the carried interest loophole. She has continued after she went to bat for them to take their money and receive donations even from executives at the private equity firm whose founder owns the winery where she interned and fundraised. So guys,

just don't buy her nonsense here about how she's so independent minded and she's really there for the people because it could not possibly be further from the truth. Well, most people don't buy it. I mean, that's why she has such low favorability. And by the way, it's not like it's actually winning amongst Republicans. She has a low favorability amongst Republicans. The Cary Lake people actually hate her guts. She has a low favorability. I believe it's under 40 percent amongst Arizona Democrats. One of the reasons that she went independent. But even independents seem to be underwater there. I think that Gallego is going to really push her because the only way that I could see it is if the DSCC and the Democratic

top party comes in and intervenes on her behalf. So for example, Senator Schumer yesterday would not say anything about whether he would endorse Ruben Gallego. Neither would Dick Durbin, I believe one of the top Democrats. I know he's one. I think he's so lame who's there. So they wouldn't even come out and say, yeah, we might support Gallego. Actually, even Bernie Sanders was asked about it. And he was like, well, he hasn't asked yet for my endorsement. I guess to be fair, there are other Democrats who may get into this. That's true. So I think it's I think

it's reasonable to wait and see who else gets into the race. But if you're really staring at a three way race between Gallego, Sinema and whoever the Republicans ultimately put up to to then stay out is, you know, I think that's absurd. Meanwhile, Manchin is already saying that he would back Sinema. So they've got their, you know, corrupt bond there, I guess, made of with the folks over at Davos. Yeah, it's an important story. We'll continue to track it. It could end up being one of the hottest primaries. And probably, you know, in terms of her donors, like that would come in big for her. There could be a hell of a lot of money that happens in this race.

One last thing, just to put this in context, I was looking at the first Larry Sabato crystal ball ratings for the Senate for the next cycle, and Democrats are on defense in a lot of places, including Arizona. Arizona, Ohio, and Montana, they have labeled as toss-ups. These are all Democratic-held seats. West Virginia, also Joe Manchin is up. He hasn't said he's running for reelection again, by the way. In fact, he sort of like flirted with running for president. OK, dude, give me a break. But anyway, they have West Virginia, which is currently held by a Democrat as lean Republican. So that's four states where Democrats are at best a toss up. Republicans, every single Republican seat that is held right now is effectively safe for them.

Right. As the ratings stand today, you know, looking forward to the next Senate election cycle. So this state is going to be extremely key if Democrats have any prayer of holding on to their control of the Senate. There you go. All right, let's move on. Final, the rumors are flying here in Washington, basically have been ever since Dan Snyder said that he might be open to a sale of the Washington Commanders. So the richest doyen of Washington, our richest resident, Jeff Bezos, let's go ahead and put this up there on the screen, may sell, and this is according to sources from the New York Post, may sell the Washington Post to buy the commanders. Now, immediately this report was denied by Bezos saying that the Washington Post is not for sale. But what the New York Post learned from a source that they say that was close to the situation said that Bezos had told the paper's senior staff in private meetings

that while he had no plans to sell the paper, that there were others who he had reportedly discussed the actual sale of the Post to do so. The only reason why I think that this might be dubious is the man is worth, what, $200 billion? Does he really need the, okay, he bought the Post for $250 million. Does he really need the $1 billion maybe that he would get for the Washington Post, which is a failing business and has yet to turn a profit and is currently undergoing layoffs? Does he really need that to fund, let's say, at max is like what a five to $10 billion purchase for the Washington commanders? It could be. And I think this is actually more likely the case that if he does sell the posts, one of the reasons would be he just lost interest. I mean, remember he bought the post in 2013.

That was kind of his respectability era. That's why he came in here to Washington. He built the largest house here in Washington, which is truly a sight to behold. At the same time, he started attending all of these major political dinners like the Gridiron Dinner and others, the White House Correspondents Dinner. But then his life all kind of changed after he started dating his girlfriend and started taking TRT and getting jacked and hanging out on yachts at St. Bart's and in the Caribbean. It's like he kind of resigned as the Amazon CEO. He's now like the chairman of Amazon, not involved as much in the day-to-day operations. It seems like his interests have gone much more

in the Hollywood pop culture direction. So that's why it would make more sense for him to be one of the deans of America's billionaires, an NFL owner, right? Like that's as good as it gets for a lot of these people in pop culture. Whereas with the Washington Post, that's more something that you want to own if you want to influence the political process. That's the only reason I think he might sell it. There were a couple of other things that people were theorizing about why he might want to get rid of the Post. In particular, I don't know if you guys remember, he got into the spat with Joe Biden over corporate tax rates. And obviously, when you own the Washington Post, this is no longer just sort of your opinion being put out

there. People then are going to look at the op-eds and the articles that are being written at the Post and take a look at whether they are being reflective of the view that you have publicly put forward. Like, you now are no longer just like a neutral observer out there having your take. It has huge implications for what is happening at the newspaper that you own and pay the salaries at. So some people are saying, okay, maybe he realized like he didn't like being muzzled this way. And then there's another little sort of drama with regards to any potential interest he might have in purchasing the Washington Commanders, which is that the current owner, Dan Snyder, who's got to be the worst owner in all of NFL football history as a long-suffering Washington sports fan, he hates Bezos and he hates the

Washington Post. Why? Because they were the ones that did those investigations into all sorts of allegations of impropriety and sexual harassment rife throughout the now Washington Commanders organization. And Snyder, they said, suspects that Bezos encouraged that tough coverage in a bid to force him to sell the team so that he could then sort of pick up the pieces. So, you know, Snyder would have to agree to sell it to Bezos. And he apparently, reportedly, hates his guts. I mean, that's another complicating factor. Five billion dollars is a real easy way to make that stomach. And again, ultimately, these guys are all just a member of the Green Party. They care about the money. Yeah. Put this up there on the screen. Bezos immediately denied the report, but he's not ruling out buying the commanders. I'd seen other speculation that he was considering bringing in outside. I know that this is the way a lot of people do it now. They'll

do like a conglomerate, like a couple of famous people or whatever with some investments and then buy it, the team as a whole. I know they do that in the NBA. I'm not quite sure if they do that in the NFL. You're looking at a real NFL fan here, people, who knows quite a bit. But I do think that it is important because, for me, it just tracks with Bezos's evolution, clearly, in the way he sees himself. At first, he was donating all this money to the Air and Space Museum, $100 million to the Obama Foundation, naming the auditorium or whatever. He was going for the respectability game. Didn't Dan Jones get a bunch of cash in that? Yes.

Oh, yeah. Listen, there's the Bezos Genius Grants, which just happened to fund some of the non-geniuses in our society. Though, he now appears to be much more interested in Amazon Studios, going to the Oscars, hanging out with The Rock. Getting a bridge disassembled in order to get his super yacht. Buying a super yacht. What did he got into that weird thing with Leo DiCaprio

where he joked about Leo stealing his girlfriend and now buying the NFL. Somehow I believe that. This seems to be the next evolution of Bezos. I mean, you know, it seems fun. Yeah, it's got some real midlife crisis kind of vibes to it. Especially that photo of him with his Miami shirt, like, bawling out. I think he literally looked like he was in Miami.

It makes sense. He's from there. So maybe you could take the boy out, but that's something that clearly sticks with you. Anyway, that's Bezos' next evolution. All right, Tiger, what are you looking at? Well, the debt is one of those things that instantly evokes a lot of emotion in people. It's something that has animated American politics since the founding of the republic and the fights over it. The increase in it and the way that we manage it actually tells us a lot about the times that we're in.

In the 2010s, it seemed that we were living in the era of debt politics. The rise of the Tea Party, and Greece, and then the immense fights that were picked with President Obama. Trump seems to have wiped some of that away. But with this temporary disappearance, that we're back. Back to what, though, exactly? What is debt? Should we even care about it at all?

How did it even get like this anyways? The modern history of U.S. debt is actually fascinating, and it tells us a lot about American elites and their priorities, both in the last 30 years and throughout our entire history. So let's go all the way back in time to the very beginning. When did we first incur debt? The first debt incurred by the sovereign United States technically happened during the Revolutionary War, but as we understood it today, after Alexander Hamilton structured the debt to the tune of nearly $77 million in 1790. Debt continued to increase throughout the early 19th century with the Louisiana Purchase despite attempts at the time to pay it down. It especially ballooned during

the War of 1812 to approximately $127 million. Now, a familiar story begins to emerge in U.S. history. We get a lot of debt during territorial expansion and during war, followed by a period of kind of paying it off, but not really. President Andrew Jackson, in his campaign against the National Bank of the United States, actually reduced the debt to approximately zero in 1835, only for it to then explode again during the Mexican War. From that period onward, internal strife, territorial expansion, and more continued the debt upwards until it blew up during the American Civil War. There again, we saw an increase,

a historic rise in the debt crossing the billion-dollar threshold and peaking at approximately $2.8 billion in 1865. From there, the wild economic ups and downs of the Gilded Age kept us in debt, combined with the Spanish-American War and other attempts at establishing the American Empire. Overall, the debt remained relatively stable, approximately consistent at $2-3 billion, until, you guessed it, another war, the First World War. It exploded American debt from $2.9 billion in 1913 to $5.7 billion when the war ended. And somehow it began ballooning to $25 billion in 1920. The Roaring Twenties helped pay down some of America's debt or at least keep it stable, dropping below $16 billion, but going down until somewhat until the Great Depression.

The election of FDR and the establishment of social welfare programs, unprecedented at the time, exploded the debt again, beginning in 1933 at $22 billion and ending after World War II at a whopping $258 billion. Here again, we see a new normal. America is the world leader. It has the expansion programs. These things seem to be okay right up until 1965, with the simultaneous expansion of Medicare combined with the Vietnam War pushed the debt up to some $350 billion before it just kept blowing up even more exponentially. By 1980, we began teetering on the edge of $1 trillion. And when Reagan came into office, he did two simultaneous things. He massively expanded the military budget, and he cut taxes. And when Reagan came into office, he did two simultaneous things. He massively expanded

the military budget, and he cut taxes. And from there, we are off to the races. The debt was increasing fivefold under Ronald Reagan and George H.W. Bush. Under Clinton, we had a very brief respite, mostly because of the dot-com boom, which massively increased federal tax revenues, and because finally we weren't fighting anymore, damn worse. We reduced our military spending, and we actually had a budget surplus for an extraordinary period. A very rare occurrence in U.S. history. But all things come to an end.

We got smacked by the dot-com crash, then 9-11. Bush then did the two things that you shouldn't do if you care about the national debt. He massively cut taxes, and he invaded two foreign nations. Doesn't take a genius to figure out what comes next. A doubling of the national debt under George W. Bush to finance programs and disastrous foreign wars to the tune of trillions of dollars with more actual money. Obama, similar story. You keep the war machine going in Afghanistan and Iraq, debt keeps ballooning, a trillion dollars or more so per year, in addition to Obamacare and some moderate expansion of the federal government. Then, of course, you get Donald Trump, who cut taxes again,

and for the most part, kept the war machine running up until 2019. Then COVID happens, and that accelerated the game even more. Unprecedented bailouts, stimulus checks, et cetera. So here we are, $31 trillion in debt today, counting. What do we do about it? If you look back at the story I just told, there are three major components that actually contribute the most over time to our debt. One is social spending, which is enormously popular

and effectively untouchable. Two is foreign wars. Since our founding, wars have historically ballooned the federal debt and expanded the role of government to levels that we never quite seem to ever get away from. Three is major economic downturn. Every major economic downturn has ballooned the debt, requiring in recent years not only less federal revenue, but bailouts. Now, I'm not against bailouts per se, as long as they're for the average American and not industry, but you can guess where the vast majority of

bailout money has gone in the last two centuries, which brings us to the choice that we face today. Our debt has increased by $10 trillion just this year in 2022, up to 2023. Worse, our actual debt servicing payments are going up astronomically because the Federal Reserve is now raising rates. Now, to the extent that this is a problem, I think it just highlights how futile much of our discussion around this is. Here is the reality. 16% of the $6.27 trillion federal budget is non-military, non-entitlement spending. That's basically a rounding error on our debt.

We really only have a few good options for actually solving it, and those are stopping military adventurism abroad, ensuring proper federal revenues come in instead of slashing taxes repeatedly for the wealthy, and having a stable, non-financialized economy that doesn't crash all the time. I've yet to see anyone actually lay it out this way, and when you look at the story over nearly 300 years, it actually seems pretty simple. Unfortunately, we know that at every point, we almost never learn the right lesson. It's really interesting. And if you want to hear my reaction to Sagar's monologue, become a premium subscriber today at BreakingPoints.com. Crystal, what are you taking a look at? Well, guys, as you probably noticed, my new obsession this year is how we seem to be living in a golden era of scams.

Crypto, MLMs, scam influencers, scam members of Congress. It truly feels like today the con man or con woman is king. But it's not just listless young men or dumb rich people or desperate housewives who are being scammed routinely. No, the highest echelons of society, they are falling victim to the same charlatans and predations as everyone else. The latest mark here, Wall Street titan JPMorgan Chase. They have now admitted they got scammed by a fraud business to the tune of $175 million. Now, before I get to all of the details here, and you are going to love some of the details here, let's just set the table. One thing that is core to a successful con is getting the story right.

Figuring out what it is that your mark wants to hear. What are their vulnerabilities, their wants, their fears, their desires? at the heart of this Chase scam knew exactly the part to play and the song to sing to successfully defraud people who are supposed to be among the most sophisticated investors in the entire world. So here's what happened. It all started with a big announcement. JPMorgan Chase, led by famed CEO Jamie Dimon, they issued a big press release crowing that they were buying a company called Frank, which supposedly made it easier for college students to apply for financial assistance. Here's how CNBC framed that news. Jamie Dimon declared last year he planned to get more aggressive in seeking takeovers, and he certainly made good on that promise with JP Morgan buying another financial startup. This

time it's college financial planning platform, Frank. CNBC.com's Hugh Sun has the exclusive details on the story, and he joins us now. Hugh, why this deal? Hey, it's good to be with you, Kelly. So the short answer is what they're getting is a software platform that's been pretty effective at serving people, young people who are heading to college and need to try to pay for it. So it's got a bunch of tools. The biggest, I think the main tool is an automated service that helps students apply for federal aid. It's got 5 million users. And, you know, J.PPMorgan wants to get in on that. They want to basically have an affinity program, essentially, that, you know, as you're thinking

about attending college, you've got to chase, you know, if all goes according to plan, you've got to chase bank account. And after that, you know, if you graduate, perhaps you're going to add a credit card, mortgage, and auto. So this is their play to sort of get people hooked into the chase ecosystem at an early age. So Frank, this company specifically claimed to J.P. Morgan that they had more than 4 million customers who were already using their tools to apply for financial aid. And as the CNBC analyst coldly observes, this represented an enticing opportunity for Chase to be able to get these young people hooked on their debt products early. Sure, starts with a streamlined aid process. But before you know it, you've got these

18-year-olds into credit cards and many other services. Wonderful new way for Chase to profit off of the college affordability crisis while also hooking young people into a whole lifetime of high interest indebtedness. The business prospect of getting their hooks into these young people early through a seemingly charitable service was absolutely irresistible. And the young founder of Frank herself, Charlie Javis, like Elizabeth Theranos and Sam McEnfreed before her, she had exactly the right personal narrative to sell to elites. As the New York Times put it quite well, I thought, Ms. Javis's story is an archetypal tale of late-stage startup hustle culture, a teenage prodigy turned Ivy League social enterprise maven, and shape-shifting savior of higher education, or so she would have the world believe. Let's get a sense of our protagonist here, alleged con woman

extraordinaire. Here is Charlie Javis on some show that's sponsored by American Express, answering a question about what she's had to overcome as a female entrepreneur. Major roadblock, and you might hear it from other female entrepreneurs who are trying to pitch like tampon companies or like underwear, who knows, but male investors just don't know about that whole segment of the market. Now Major roadblock, and you might hear it from other female entrepreneurs who are trying to pitch like tampon companies or like underwear. Who knows? But male investors just don't know about that whole segment of the market. Now, try and take a segment of the market where investors who are usually wealthy have inherited it or made their money have zero exposure to FAFSA or the financial aid process. And so it's almost like take odds where you might have 15, 20 percent female investors. Now flip it to people where literally maybe one person out of the hundreds I've spoken to has had personal exposure with it. And that's the largest roadblock.

In selling Frank, Javis spun elaborate tales of the pain that she had personally suffered in trying to afford college. She recounted difficult stories of her mother weeping as she tried to sort through the complicated financial aid process, months of agony as they waited to get answers. In her telling, Javis started Frank to keep other struggling students from dealing with the excruciating ordeal her own family had supposedly been put through. Of course, turn out, both her parents had master's degrees. Her dad literally worked on Wall Street for Goldman Sachs and Merrill Lynch for decades. Hard to imagine Javis was quite as financially strapped and struggling with complex financial bureaucracy

as her corporate origin story would have you believe. But no one in the female empowerment press or business journalist world looked into any of these inconsistencies. So Javis started peering in all the important lists of up-and-coming entrepreneurs. She made Forbes 30 under 30. She made Cranes 40 under 40. She got this weird quote in 40 under 40, by the way, in this write-up where she says that since women disproportionately hold student loan debt, Frank is, quote, not as masculine

around money, whatever that means. As time went on, academics and even government agencies in the student loan space started growing suspicious of the many claims made by Frank about their services, their customer base, and their purported college partners. But JPMorgan Chase apparently didn't talk to any of them. So when presented the seemingly perfect package of 4 million plus receptive young Frank customers that they could market their products to and a fresh-faced founder named on all the right lists, they jumped right in with that $175 million offer. It was just one little problem. Those 4 million plus established customers

that Frank claimed that they had, they were fake. All but a few hundred thousands of them were invented out of whole cloth in order to get through the JPMorgan Chase vetting process. I'm talking fake names, fake birthdays, high schools, everything. As Chase put it in their legal filing against Javis, quote, in reality, Frank was nearly 4 million short of its representations to JPMorgan Chase.

You see, after her initial pitch to Chase claiming she had 4 million plus customers, she had to actually put together a fake list in order to pass that vetting process. So to accomplish this, she took a couple of different approaches. First off, she hired a data scientist to generate a quote, synthetic list, just totally fabricated data is what that means. That was enough to get her through that deal diligence and get the deal closed. But then Javis had another problem. Chase obviously wanted to market to those 4 million customers, and they're going to need to send some actual real email addresses solicitations. So to solve that issue, Javis purchased a list of real college students

and their email addresses, hoping that these acquired addresses would be enough to continue tricking JPMorgan Chase. Red flags started to pop up with this list, though, almost immediately. First of all, this is kind of a funny detail, a Chase engineer noticed that the number of lines in one of the files that they received from Frank

suspiciously matched precisely the maximum number of rows that you're allowed in an Excel spreadsheet. The whole cover story was completely blown, though, when emails went out to a subset of this new purchased list. More than 70% of Chase's marketing emails to this supposed Frank customer list bounce back as undeliverable. Of the emails that did go through, almost no one opened the email or clicked on any link contained therein. That's the sort of result that you might expect from a purchase list of random college students, which is in truth what this list actually was, definitely not the result they expected from a cultivated list of students that had supposedly affirmatively signed up with interest in the products and services that Frank and Chase were then offering.

After the marketing campaign test run crashed and burned, the whole plot was uncovered quite easily. Hilariously, all of Javis' scheming about how to generate these fake names and make it look real, that was all done on Frank email accounts. And once JPMorgan Chase acquired Frank, they also acquired those email accounts and And once JPMorgan Chase acquired Frank, they also acquired those email accounts and could just go back through the email traffic that documented every step of the fraud. In the merger, all told, Charlie Javis pocketed about $30 million in proceeds and also secured a $20 million retention bonus. JPMorgan Chase is, of course, trying to claw all of their money back. And I should add here for the lawyers, Ms. Chavez, of course, denies any wrongdoing and is, in fact, countersuing JPMorgan

Chase. So what is the big takeaway here? Number one, know yourself and your vulnerabilities. Know what stories you would be susceptible to and don't be an easy mark. Because I truly do believe we're living in a moment that is awash in audacious schemes and audacious fraud. And if JPMorgan Chase can be tricked, you can be too. Number two, it's humiliating that one of the world's most sophisticated financial institutions could be duped by such a brazen scam. Remember, all of the supposedly brilliant minds and elite investors and famous business journalists who were fooled by Elizabeth Holmes of Theranos and Sam Bankman-Fried of FTX. These people are not half as smart or all-knowing as they think that they are. Finally, in these successful cons, we can see the outlines of the failures that exist in our society.

And that, honestly, is the part that fascinates me the most. With this story, we catch a glimpse of a criminal higher education system that inflicts deep financial pain on millions to the profit of a few. We see greedy banks licking their lips at the chance to market a lifetime of debt to these young people. We see bio and identity weaponized to gloss over failed products and fake claims. We see how little due diligence any of our higher institutions of media and finance are actually doing, at least when it comes to people who have been vouched for by other elites. If we are in a golden age of con artists, it's because we are in a dark age

of societal failures that have left almost everyone vulnerable. And this was a humiliating experience for Chase because they had to pull down the website. And if you want to hear my reaction to Crystal's monologue, become a premium subscriber today at BreakingPoints.com. So joining us now, we have the aforementioned Derek Thompson. He's a staff writer at The Atlantic and host of the podcast Plain English, the latest episode of which looks at these tech layoffs. Great to see you, Derek. Good to see you, man. Good to see you guys too. Yeah, absolutely. So let's go ahead and throw his piece from The Atlantic up on the screen here.

The headline is, what the tech and media layoffs are really telling us about the economy. About 130,000 people have been dismissed from their jobs at large tech and media companies in the past 12 months. Why? And what you get out here, Derek, is something that we've been really interested in as well, which is, you know, in previous years, you had these sort of knowledge economy and tech workers that were in very high demand and years, you had these sort of knowledge economy and tech workers that were in very high demand and seemed to be able to sort of like name their price. And at the other end of the spectrum, we had service sector workers who, you know, employers were basically treating as disposable. Well, now you have a very low unemployment rate. But at the

same time, you see these huge layoffs in the tech sector in particular, but also, as you point out, in the media sector as well. So what is going on here? Isn't it an incredible flippening? Like, in the first part of this century, in, let's say, late 2000s, 2010s, the story was that the labor market was terrible and Silicon Valley was the future. And then the pandemic was sort of that narrative on steroids. We had a flash freeze depression in 2020, but the big tech companies continue to hire more and more people. Now the opposite is happening. The overall unemployment rate is 3.5%.

The first decimal, that is the lowest unemployment rate of the 21st century and the lowest unemployment rate going back at least 40, 50 years. At the same time now, you have 130,000 people laid off from the big tech and media companies, 130,000 people. To give you an impression, that's the size of Apple before the pandemic. That is a lot of people. And yet it's not showing up in the unemployment rate because we are having a kind of jobs recession that is concentrated in big tech. So why is this happening? I run through a bunch of reasons, both in that article and on my podcast, Planet English. I'll start with this. People thought that the pandemic was going to be an acceleration. We said, you know,

we're going to be living like this forever in the future. We're working from home, ordering all of our groceries from online, never going to grocery stores, never going to movies, streaming everything that we watch. But what happened as the pandemic wound down, or as we got into the sort of, let's call it, late pandemic period, we flipped back. We started going out to restaurants. We started seeing movies a little bit more. We started commuting to work a little bit more. And as a result, this future that tech thought would materialize did not materialize in the exact same way. Obviously, at the same time, inflation went up, rates went up. That means their stock valuations came down. And they said, we hired for a future that did not materialize.

That means we have to start laying people off. And that brings you to 6%, 10% layoffs. I just want to throw one more thing in here and we can discuss that whatever you want. I also think there's an element of what's called in psychology social proof. That is, if Microsoft lays off 10,000 people, it's much easier for Google to then lay off exactly 10,000 people. Much easier for Salesforce to then lay off 10,000 people. You can have kind of coordinated layoffs or de-risked layoffs as a CEO because you don't

expect the media to get as mad at you if everybody is doing it, right? It's a little bit like a riot. If the first person throws a rock through a window, they're crazy. If the 19th person throws a rock through a window, they're just a part of the crowd. So I do think there's an economic story to tell here, but there's also a psychology story to tell here with regard to the CEOs that are doing this to juice up their stock valuations. That's a really excellent point. Actually, Derek, I've seen a lot of Silicon Valley guys who were looking at the Elon situation. Many of them were like, look, I'm not even a fan excellent point. Actually, Derek, I've seen a lot of Silicon Valley guys who were looking at the Elon situation. Many of them were like, look, I'm not even a fan of Elon.

They're like, but if you can fire, you know, 70 some percent of your staff and your product still works. And I'm putting aside the ad revenue and the down on that. But the core product itself doesn't appear to have as many problems as predicted. He said, you're an idiot if you think every Silicon Valley CEO is not paying attention to that. Do you think that that might have played some role in this in addition to the cheap money discussion? Yeah, it's a really interesting point. Let me say two things here. The first point to make is that you're putting meat on the bones of the social proof theory. Elon might have offered in this story social proof that you can lay off a ton of engineers and computer programmers and people, maybe in HR or in some other part of the company. And the company seems to be, or at least the product seems to be still moving predictably through the rails. Okay, fine. I understand

why that might get some people to say, I thought about laying off 5% of my workforce. Now maybe I can lay off 10% of my workforce and I won't fundamentally damage the underlying product. But you also put your finger on something that's very important how is twitter doing as a company yes terribly terribly their advertising revenue is down 40 you go on the platform and it's a bunch of like recommended promoted tweets from people that i don't even follow the product the product might basically look the same but as a a business, it is suffering to the point that Elon now has to scrounge up more money to make that first interest rate payment. So if I'm a CEO, if I'm a smart CEO in Silicon Valley, you want to be careful about what lesson to draw

from Twitter. Yes, maybe you could argue that your company is overstaffed in terms of computer programmers, and therefore you can lay off some people and, you know, whatever, Google or Azure, whatever, can still function. But at the same time, I don't think that what Elon Musk is doing to the business of Twitter should offer any kind of roadmap to anybody yet, because Twitter is a dumpster fire in terms of its finances. Right. Excellent point. Let's talk a little bit more about the cheap money piece, which has shifted just in the past year, because I find this part really interesting. I was listening to an interview with Sam Altman, who's the CEO of OpenAI, and he was saying counterintuitively, like, listen, I actually think now is the best time

to start a business. Why? Yeah, financing is going to be difficult, but everything else is actually easy because you're going to have an easier time getting people. You're going to have an easier time distinguishing yourself and being able to innovate and create sort of real value. And inherent, he put this all very diplomatically, by the way, but inherent in his analysis was the fact that you had a bunch of tech companies that really didn't have a business model that only were able to continue to exist because of the ability to grab some of this cheap cash and sort of like float their debt forever and ever and ever. So I have a lot of compassion for the people who are being laid off right now. Like that's an incredibly traumatic

event ultimately, even if you are higher up on the income scale. But do you think there could be a silver lining here where there is more of an emphasis on actual real business models that generate a profit and include innovation in ways that consumers and others ultimately benefit from? It's certainly possible. You could definitely tell a pretty compelling story that when rates are low and money is easy, hiring is easy, which means hiring the right person is hard because everyone is trying to hire at the exact same time. But it's a different story when rates go up and then hiring is a little bit harder. People are laying off rather than adding to their headcount. That means that there are more people that are available to be hired. And as a result, you know, you take the 10,000 people that are being laid off from Google, you add it to the 10,000 people being laid off from Salesforce and

Microsoft and Amazon, you think, wow, this could be the kindling for a really interesting startup. So yeah, I think it's important to both have a lot of, you know, compassion for people who are losing their jobs right now. Losing your job sucks, even with what I hope would be the fantastic or relatively fantastic severance packages from a place like Alphabet. I also think that we could be primed for a pretty interesting period of innovation, because now these kind of employees are in the marketplace and they're thinking, OK, what do I do next? Do I go right back to, you know, trade desk? Do I go right back to a Shopify? Or do I think, you know, I really want to do something that matters to the world. I want to start a company or belong to a startup that's

really doing something interesting for the world and not just creating a new way of digitized gambling, which I think is what a lot of these crypto startups were. That is an optimistic read to put on this. Of course, it's economics. The most optimistic read that you can put on something is not always the thing that happens, but it certainly could happen theoretically. Yeah, I think that's the most important. Derek, I know that you're really interested in the history of innovation. Where do you see things right now? Are you optimistic about this in terms of possibly changing the terms of the way that tech is going to operate, or do you think think they were entering more of a lull period? I think that we are entering a period where tech is going to continue to be an absolutely massive part of our lives. And that we would make a mistake if we think

that 130,000 people being laid off from big tech is going to change the role of Google in our lives or Amazon in our lives or Microsoft in our lives. These companies continue to be the largest, most powerful, most profitable company in the world. Yes, they laid off 6% to 10% of their workforce. Yes, that is, in many cases, the largest layoff in these companies' history. But these still are the most significant institutions, organizations maybe in the world. So if you're a regulator or if you're just an analyst, I would say don't let up. Continue to scrutinize. Continue to look at what they're doing and criticize what they're doing if it looks like they're abusing their power, because they still have quite a lot of it. Great. I think that is all very well put.

Guys, follow Derek. He does fantastic work, and it's going to make you think harder about a lot of it. Great. I think that is all very well put. Guys, follow Derek. He does fantastic work and it's going to make you think harder about a lot of different topics. Great to see you, my friend. Good to see you, man. Thank you.

Thank you guys so much for watching. Really appreciate it. I'm sure you guys enjoyed our videos on Instagram yesterday modeling some of the new Austin merch.

You can check that out at the actual Austin show. All made in the USA and in a union shop which we're very proud of here. Thanks so much to our pre-union subscribers who helped support the show. Look out for CounterPoints tomorrow. Yeah, they got some great stories planned.

They've got some good stuff. I'm always excited to see what they do. It's just nice to have a continuous flow throughout the week. And then, of course, we'll be back here on Thursday. Love y'all. See you Thursday. this is an iHeart podcast