Tech Brew Ride Home - (Bonus) Who's Right About The Economy? Wall Street Or Silcon Valley? With Alex Wilhelm @alex

Episode Date: April 18, 2020

I wasn’t supposed to do a weekend episode this weekend. I’ve got one scheduled for next week that I still need to record. But a few days ago, I saw Alex Wilhelm at TechCrunch tweet that he was doing a piece about why everyone in Silicon Valley and the VC world and the startup world still seem to be preparing for a nuclear winter, while the stock market has been roaring back to life, and I was like YES! I need to talk about that with somebody right now! I’m asking myself that question every day. It’s not that I’m rooting for a crash, it’s not that I want the economy to suffer, but everyone I know in the Tech world thinks we're in for a bad recession and yet… well, we get into all this. I needed to have this discussion with somebody right away, so forgive me if this is a little self indulgent, but join Alex and I as we ask the question: who’s right about the economy right now? Silicon Valley, or Wall Street? PS: This is Alex's piece I was referring to: As stocks recover, private investors aren't buying the hype Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to another weekend bonus episode of the TechMeme Ride Home. I'm Brian McCullough. So I wasn't supposed to do a weekend bonus episode this weekend.

I've actually got one scheduled for next week that I still need to actually book and then actually record. But a few days ago, I saw Alex Wilhelm at TechCrunch tweet that he was doing a piece this week asking why everyone in Silicon Valley and the VC world and the startup world still seem to be preparing for nuclear winter. while meanwhile the stock market seems to be roaring back like nothing has really happened over the last two months. And I was like, yes, I need to talk about that very thing. I need to talk with somebody about that right now. I'm asking myself that question every single day. It's not that I'm rooting for a crash. It's not that I'm rooting against the economy, want people to suffer, anything like that.

But everyone I know in the tech world is convinced right now we're in for a really, really bad recession. everyone's hunkering down. And yet, the stock market. We'll get into all that on this episode. I just needed to have this discussion with somebody right away, so forgive me if this one is a little self-indulgent. But join Alex and I as we sort of bat around the question. Who's right about the economy right now, Silicon Valley or Wall Street?

Well, let me start by saying that we're going to hopefully have a really speculative, high-level discussion about the global economy here. and I'm pretty, I know for a fact I'm not qualified to have that kind of a discussion. And maybe you aren't at the level that I'm aspiring to here either. So I think we're going to caveat that guys at the top. But Alex, look, the reason we're talking is because on Twitter I saw you were doing a piece, the gist of which was, you know, everyone that I talked to in tech and Silicon Valley and investing and venture, the venture side of investing.

They're all sort of battening down for a nuclear winner. And then meanwhile, the stock market, while not back to where it was, is sort of roaring back. And so I've sort of been asking people all the time, like, who's right here? Wall Street or Silicon Valley? And so let's start with your piece and let's start with the tech side, which is, I guess you've been hearing the same things that I've been hearing from venture folk and stuff like that? Yeah, it seems like we're on the same page.

But going back to your very generous intro, I want to say that not only are you and I not qualified to have this conversation, I don't think there's a person alive who is because no one's really seen this before. The scale of unemployment, the rapid rise of unemployment, the complete destruction of travel. I mean, like, this is, I hate the term unprecedented because it's so kind of lazy. It's a catch-all for like, oh, gosh. But, I mean, this is unprecedented. We do not know what's going to happen. And so I think speculation is the right game here. We'll do our best to be as coaching to reasonable as we can.

But we're going to be a bit off our shoulder here. We're going to be maybe, like I said to you, over DM. We're going to be in our dorm room getting a little high kind of. We're going to be on that level a little bit. Yes, that's the goal. So you go first. And you don't have to name names, but give me a broad sense of what you're hearing. Because you cover SaaS a lot and enterprise a lot, but also investing in those areas, too.

Yeah, yeah, yeah. So I, part of my job as a as a reporter in the technology and kind of financial world is that I talk to a lot of venture capitalists. A lot of folks who put the money into the startups that you kind of hear and read about in the media. And usually speaking for the last forever years, they've been upbeat, they've been positive. Their complaints have been, you know, my portfolio companies can't hire fast enough or, you know, everyone's flooding the same channel with ads. And now the tone is different. And the tone is is much more negative and down. And people are generally pretty okay about this. Like, look, this happens every 10 years, no big deal. But certainly, companies in their portfolio are struggling. And what I'm hearing from them is we're in for a tough patch. People are going to be going through layoffs. The economy is going to go through recession. This is going to take some time. It's not going to be a V-shaped recovery. As the talking point loves to point out, it's going to be a U-shaped recovery at best. And then I turn around and I look at the stock market and any small news item that could be construed construed as positive, sends the dialogue by 500 points or 1,000 points. And I'm just in here

going, what in the hell is going on? Because, you know, to me, both these people, both these groups of people can't be right at the same time. And the piece was an attempt to begin to kind of poke at that and tear apart. Yeah. And I want to come back a little bit to, we'll say the stock market speculation, such as we can do for the second half. But the, okay, the folks that I know in the venture world are basically, we're still at the stage where they're telling their companies like stop hiring, hoard cash, like, you know, batten down the hatches. The people that I know that are the entrepreneurs are like, you know, basically everyone that I'm talking to in that world is like, what's the quote from Last of the Mohe can stay alive, whatever occurs, I will find you.

And so, first of all, in the SaaS space, like in your piece, you were talking about, like, startups in the SaaS space are seeing things like 50 and 80 percent drops in, like, new bookings and stuff. Like, give me some of those anecdotes. Yeah. So if you cover the software space at all, or even just really any startup out there that sells a product that recurs, that you pay for more than once, what they really care about is churn. And they want to keep churn down to an absolute minimum. churn is when someone who was paying you no longer is.

It's like the worst thing. And enterprise software companies tend to have very good churn, which means they have very little churn. And that's why they're so attractive to investors. And that's why they've become such a huge part of the venture capital world. So when we talk about the health of enterprise SaaS, we're talking about really the health of a big chunk of the world of venture capital. And investors that have put tons of money into this group of companies and really believe

in the business model and the sector focus, bigger companies, are saying that, churn is going up and that's impacting everyone's ability to grow. On the other hand, they're also seeing new bookings, you know, new business coming in the door go down. So they're seeing churn go up and they're seeing new bookings go down, which is a double effect on growth. It brings growth down very sharply because you're losing stuff. Your bucket is leaky and there's less new stuff coming into the bucket. So it's kind of a double whammy. And that's why I think a lot of people are doing kind of what you said. They are slamming the door on hiring. They are hoarding cash. And ironically, their pullback in spend. is going to hurt other companies that are selling stuff to companies like them. So there's a circular firing squad effect here to some degree. To get really dorky, if listeners want the kind of insider stuff, we're seeing stuff like ACVs go down. ACVs average or annual contract values. You want those to be as high as you can.

It means that when you've landed a customer, they're worth more. People are not being forced to sell for lower prices and trying to give more discounts. So ACVs are also slipping. and it's hard to find a positive talking point inside this mix of stuff. It's a mess, in other words. So let's do devil's advocate for a second. Again, you're talking about largely enterprise software. So what if everybody just collectively over the last six weeks or so did the thing where

they're like, all right, everyone freeze in place? And then, well, okay, maybe it's not so bad, which again, we'll get to that with the stock market. Maybe that's what's happening. Maybe it's not as bad as we thought. And so then things will start to creep back. Are we seeing any sort of signs that that might be the case right now, or is it too soon to tell that sort of stuff? I think it's important to note that we're still on the downward slope of, I would say, the broader economy.

And narrowing that down in Silicon Valley, the state of fear is getting worse as opposed to better still. And people are talking about Q2 being pretty terrible. So that may happen. that kind of is to sit back and go, okay, maybe things are opening back up. Maybe the economy's about to get better again. But I think it's a Q3 discussion. And I'm not predicating that on just my gut instinct and kind of my thoughts. That's based on what people are telling me about what to expect for Q2.

And just to add context to that. I spoke to a number of VCs with my partner, Natasha at TechCrunch. And we're looking at the Boston market that we love. And those investors are saying, Q1 won't be as bad as you thought because January and in February, pretty good for these startups. Q2 is going to be a hot mess. So the people that are putting the money into the firm expect the next quarter to be terrible. Maybe your point holds up in Q3, but those green shoots are more like, you know, late summer as opposed to early spring.

Well, speaking of your podcast, correct me if I'm wrong, but at least, and again, this could be again a Q1 versus Q2 versus Q3 thing. At least as far as I know, we haven't seen like actual numbers of investments that VCs have been making season. up terribly, right? Like it's just it might be down. You would think it would be down, but it's not like horribly down yet. A very similar point to what we just went over because VC, as you know, and everyone probably listening to the show knows, it's very laggy. You'll hear about around in March that was closed in December, totally standard. So the Q1 numbers are just the rounds that were announced in Q1 effectively. And here's the thing. Even inside those metrics, you can see some deterioration in March. And I'm just beginning to parse through all the reports that are

coming out from CB Insights and pitchbook and everyone else. So I don't have the firmest view yet. I will in about a week and a half. But March is bad. The numbers weren't as good as they could have been. And people are expecting, once again, Q2 to be worse. VCs are not contrarians. They are momentum investors.

And they don't like to say, they don't like to be called that, but they are. And they're all listening to each other and listening to the prior carnage in the stock market somewhat. And I think they're pulling back dramatically. Valuations are going down. And new deals are getting harder. and harder to land because VCs are focused more of their portfolio than new bets. So I think it gets, again, a Q2 problem. May the economy come back in Q3.

May this get better. I also own index funds and would like to retire before I'm 1,000 years old. But I don't think it's time yet for optimism. So, and this is maybe we're getting into the dorm room getting high sort of conversation. As far as we can speculate, it's not that the VCs are seeing anything different. It might just be that the herd, and by the way, we should give VCs and the Valley credit in general for being early on and right about the fact that this virus was coming and it was going to be a big deal. But what I'm trying to say is maybe the herd mentality is that right now on Sandhill Road and VC land is that hunker down, hunker down, and the sentiment just hasn't turned there yet, or they're not ready to be less cautious yet. So you're describing a really interesting phenomena that I'm struggling to put into words because

we have kind of shortening our economy right now. On one hand, unemployment just spiked by 22 million people in four weeks. On the other hand, some things look okay. Where does it actually land? And so I've come up with an analogy about this or a metaphor. I forget which one it is. You remember in like Roadrunner and Coyote when Coyote would chase Roadrunner and he run off a cliff and he would keep spinning his legs for a while before he realized there was no ground in

them and then he dropped like a stone, that's where we are. I don't think people realize yet how bad this is because I think a lot of people who make decisions don't know any hourly workers. I do. They all got laid off. It's brutal. And I think that effect will stack up in the economy and you can't fix a whole that large and the demand side of a economy as big as ours with good sentiment from VCs. I think demand is about to take an enormous drop. And I think that's going to shock the system. Yeah. All right. I can't put this off anymore because get ready. I I've got a whole thing of notes here. So I feel like one of those guys who's, again, I don't know anything about economics,

the economy, shit like that. But the, you know, people there are always like, the government can't print money. The government's got to balance its books. And that's not exactly true. The government can just print money to a certain extent, and it's fine. But, like, we have had a fourth of the workforce at least laid off or something like that. You know, like just before we got on the air here, I was reading about how. I think the LA Times was speculating that half of LA County is out of work now.

Like, that can't be good. So I'm one of those guys that's like, there's no way that you can have that number of Americans out of work. And by the way, all in a compressed period and have there not be some sort of shock. The cumulative number of people out of work right now is equal to the population of 23 states. Yeah. So how can that not, how can the stock market? So there's a number of theories about this, none of which I find to be particularly compelling.

The quip that I get thrown in my face most on Twitter, because you ever go viral by accident and really sucks? It's just terrible. I've made some snarky tweets about the stock market, which, you know, three months ago would have gotten completely ignored by everybody. And now snarky stock market tweets are doing very well on Twitter, which is ruining my life because then people just randomly send me crap. But one quip that I get a lot is, you know, the stock market's not the economy. And this is actually a lefty quip in my experience that people used to say that if the stock market was going up under Trump, it didn't mean that wealth was increasing for working people. Super valid because most people don't own sucks, right? Most people don't have a 401K.

But the narrative and the idea that there's no connection between the two is wrong because a lot of the companies that comprise the SMB 500 sell toothpaste. And everyone buys toothpaste or not everyone, but most people buy toothpaste, etc. You can see the connection there. So there is at least a loose connection between the two. and one is saying this, which is an up, and one is saying down. So that blows my mind. The other one is that how to phrase this, that investors think that companies, once they've laid off people, won't hire them again, and therefore they'll have more profits. But who's going to buy their stuff?

Yeah, yeah, yeah, yeah. All right, wait, wait. We can come around back to that. Let me try my first theory on you, because, again, like you, I've been collecting these that I've been seeing on Twitter. So number one, this is as sort of pedestrian as what you just said. The stock market prices in the future, right? So when – and the call area of that is that the stock market hates uncertainty, right? So the stock market crashed like it did because all of a sudden, oh, my God, this could be worse than we know.

And then the first time we get hints that maybe it's not as bad as we feared, the markets go back up because that's what the markets do. and so they're assuming that three months from now would be better. What's your take on that? So my friend, Anshu Sharma, formerly a VC and now the CEO of Skyflow, has been hitting me with a similar idea for a while, that the markets are pricing in kind of the post-troth. Look at this, and they're really thinking ahead, and they're discounting the current issue.

To me, it makes no sense whatsoever. And I know if he hears this, he's going to call me and tell me why I'm wrong again. But the reason why that doesn't make sense to me is it's built on the presumption of a recovery rapidly to a similar, if not better economy than the one we have now. And historically, that's not been the way we've acted as a nation post-recession. The economy we had post-2009 was different than the one we had in 2007. Same goes for 2000. Same goes for other large and small corrections that you and I can talk about ad nauseum. Also, if you're pricing in the future, if you're pricing discounted future cash flow,

as people love to talk about when they value businesses, how can you not price in those cash flows going to hell for the next 18 months? Isn't that relevant? And then my third point here is, you know, stocks trade based on news. So we all know that there is a shorter term market trading function that isn't always looking 36 quarters ahead from now or whatever. And so if the news is bad, why should the stocks go up?

I feel like I'm explaining gravity to people. Like if I drop a rock, it goes down. But what if it bounces? Well, what if it doesn't? What if it just drops? Okay, so another theory that I've seen is that, well, just wait. We're waiting on the quarterly reports to start coming in, and they're not reflecting that yet because they're not reflecting what's happened in March or early April. At which point, I'm like, but wait, isn't that what the market is supposed to do? But then, so like, all right, let's use a tech example for this. Sure. So let's say Facebook comes out in their next.

report and says, you know, we've seen a 25% drop in CPM rates across the board, okay? And then you can almost guarantee that the stock would be up that day on that news, because then people would say, well, it could have been worse and it's already priced into Facebook stock, right? So on the one hand, I guess my question is, could the market be that dumb? I'll be really pissed if all of a sudden earnings reports are bad and then the market crashes. Because then what the hell is the market good for if it's not predicting stuff like that? Well, I don't think the market's very good at predicting things. And I'd also think the market's sufficient.

I think the market has shown intense periods of long-term distortion ahead of corrections, which is what corrections essentially are. It's taking the wrong and bad guesses out of the stock market. I just pulled out of Facebook stock for this dorm room conversation. So pass the joint and we'll keep going. Facebook's currently worth about 180 a share. And at the start of this year, I got up to 220. So let's say they announced a 25% cut in CPMs and the stock does nothing.

How do we feel about that? Well, they're down 40 bucks a share from their all-time highs. You could argue that that's a fair price. To me, I think the company is not going to be posting the sort of growth that its prior multiples allowed for. So there should be also a decline in valuation based on that. So to me, if I was an investor, I would be surprised by that because it wouldn't match my understanding of the capital markets and what businesses are worth. That said, markets can be strange for long periods of time. And I don't try to view the stock market as the arbiter of the truth for that matter,

because it used to value Enron very strongly, for example, and then that went to zero, et cetera, et cetera, et cetera. Facebook, though, is a strong business. There's going to be Facebook at the end of this impending recession. We all know that Google will still be here. All those companies probably have a bit more stability to them. But, flip it around and look at like, I don't know, Peloton or Casper that went public very recently. they don't have the sort of cash and business that's going to ensure viability long term. I think they'll be a bit more reactive to earnings and negative results than a Facebook or an alphabet or Microsoft.

You know, you reminded me of something that was in your piece about we've already seen multiples for the public SaaS and cloud companies contracting a bit. Yeah. So that might be an example of where if we actually saw them report what you were talking about, like we're increased churn or, you know, we're not, we're not growing as much as we, like, that would be an easy thing to be like, well, that explains why the multiples are coming down a bit. Yeah, those businesses, though, are much more mathable. Like, if you look at SaaS businesses,

you can just do projections and figure things out. You can be much more scientific about than you can with Facebook, which is based on CPM rates, demand, mobile percentage of ads. It's a little bit more difficult. And then other companies, which are just kind of random boxes of sales, like Peloton's a little bit different than these firms. But I think going back a little bit to what you said a few minutes ago about Q1 and how

reflective it will be of the issues is good because it's not going to be super illustrative of what we're going to see ahead. So these trailing results, these Q1 results we're going to get over the next couple of weeks are going to be kind of useful but not very. I think it's going to be the forecast, the projections, the expectations that are set that really determine things because a lot of companies are just ripping out their 2020 guidance entirely and saying, nah. And here's a mind-blowing example of the distance.

that you and I are talking about. Uber yesterday. I was just going to say that. Do you mind if I go through it? Yeah, please. They tore up their 2020 guidance. They said, nope, it's all wrong. They announced they were going to take write downs worth 1.9 to like $2.5 billion somewhere

in there. Around the $2 billion mark in Q1 that will show up against their earnings. And their stock was up like 7% last time I looked, which is just insane. They said, we're not going to grow like we said. and we're going to take a $2 billion charge in Q1, and investors went, yeah. I saw a tweet that Uber Eats might be generating more revenue now than Uber regular or whatever. Was that ever confirmed anywhere? I haven't heard that confirmed.

But I mean, we laugh, but also it would make sense. Here's the flip side, though. Uber rides was the financial juggernaut of the business in terms of generating adjusted EBITDA, which is this awful faux profit metric that tech companies love to show out as if they were actually making money. Uber Eats was not. Uber Eats turned gross merchandise volume into adjusted net revenue, into adjusted EBITL losses that were even worse than you would expect. It was a torch of money. And Uber sends me a push notification every other day saying, zero dollar delivery.

How does that work out economically? Have the economics gotten worse or have they gotten better? I don't think they've gotten better. So if most of their business is that, holy crap. All right, let me try another theory on for you. And this gets back to what we sort of touched on a little bit ago. The theory that companies can do just fine even and maybe especially if workers aren't doing just fine. And listen, look, we've kind of seen that for the last decade.

This is what we talk about when we talk about, you know, the incoming inequality and the economy not being. a winner take-all for some people and not for others. But that's one of the things that maybe makes sense to me is, okay, you know, there's a lot of companies now who aren't very labor intensive and they can still be making money even if the consumer isn't solvent, doesn't have any income coming in. So what's your take on that one? I think that, so one, it's funny in that really macab, awful kind of way. It's gallows humor to some degree. I don't buy the argument entirely because I think about the impact of select shutdowns.

Like, let's just say, for example, consumer spending falls, and Starbucks sees same store sales decline rapidly. It's a metric they care about in the kind of retail footprint business. What does that mean? Well, probably, you know, Starbucks is going to buy less stuff, which means their supply chain. is going to get hit, which means lots of smaller manufacturers, smaller distribution companies, smaller trucking companies are all going to go down. And you wouldn't think if just consumer spending drop, like you said, that trucking would get hit, but yet it's going to. And if trucking gets hit, well, then it's going to be fuel, which is refining, which is another set of

truckers, you know, which is tires, which is tire manufacturing. Starbucks could screw up tire manufacturers because we're all one big supply chain in marketplace. Of course, it's not a direct connection, but it's loosely tied together. And so if you take away this, this enormous pillar of the economy called consumer demand, I don't see how nothing else, how other things don't get hit, unless I fundamentally do not understand anything, which I admit, likely. I'm just one dude, you know, I'm not particularly special at all. But I don't see how that can be true at the same time. Well, here's another thing that kind of makes sense to me is the idea that the reason that the stock market is up is, like, for example, Apple, Microsoft,

and Amazon alone make up 15% of the value of the S&P 500. And, you know, Amazon is approaching all-time highs again and things like that. So it's sort of like, again, if the winners are winning, even if 90% of the rest of the economy isn't doing well, like it's, again, if the winners are representing 15, 30% of the stock market, then it's going to be hard to get the crash that you and I might think the market is due for. Well, fine. Let's just then let's let's allow for that and make a separate point. I don't,

I don't think that Amazon's in trouble. I don't think that any of the tech big five are going to suffer worse than modest haircuts to staff and they're going to curtail some business class flying and maybe drop a private jet or two. Like, there will be, there will be some haircuts at these businesses if things get bad. But I mean, Alphabet's going to be just fine. They're super rich. They have high margin products. They own sections of the market. They're going to be okay. Fine. It's everyone else that I'm concerned about. And so I think the argument that people often bring up, as you and I have seen, that, well, you know, they are such a large percent of this particular index or that particular index or that market or whatever is relatively immaterial. Not that many people work for Alphabet. Amazon does have a larger workforce, to be clear. But it's in the hundreds of thousands. We've lost 22 million jobs. Even if Amazon doubles its staff and crushes the universe, it does a single digit percent. of recovery compared to the damage that we're seen. And if it is true that the economy can survive

without, you know, what is that, 22, 200, 150 million, I can't do mathematics, 13% unemployment that we're already at somewhere in there, 1314. If we can have 14% unemployment and nothing else changes in the economy, holy crap, that's just a sad state of affairs. So let me bring up two things that I've always heard as a layman as sort of like these, you know, they came from Ben Franklin or something like sayings that you always hear, which is number one, small businesses are the lifeblood of the economy. So that's the thing where when I look around all of the small businesses here in Park Slope that I'm like, if we're closed down another two months, none of them are coming back. And I'm talking about hair cutting places, restaurants, I'm cutting, so literal mom and pop

small businesses. And so this would be, so either one of these two things can't be true. Either small businesses are 90% of our economy makeup, the lifeblood of our economy. or we can lose all them and don't worry the economy is going to be fine. Once again, highlighting the exact dissonance that we're talking about, I think that the way that phrase is used, and I'm just riffing here, I'm just making this up, when we say that small business is the lifeblood of the economy, I think we mean employment. And I think that's what we've seen. It is the small businesses that have just shut down. Now, I live in Providence, Rhode Island, a town that I have adopted and come to honestly

really love. And I live near a street. I'm not going to say exactly. where but I live near a street called Wigenden Street and it is a street full of small shops, coffee spots, restaurants, really great people that live around here, that run companies. And I'm doing my best as someone who can kind of walk there to go and frequent the places that I love and still buy coffee from the same grinder because I want to support them so they will be able to come back. But it's grim. It's really grim.

These are not businesses that floated a lot of cash. They don't really have access to a lot of credit. Who's going to loan to a restaurant that's closed? Right. You know, and the loans of the government is going to put up, put together are already all gone. So I think you're right. And if we lose all those businesses, I mean, GDP will go down, right? I mean, people will not have, will not have as many jobs. There will be less money. Well, right. And so then let me give you the other one that's the old saw that I hear my whole life, which is that the consumer is the heartbeat of the economy.

The consumer is always what keeps the economy going. So how can there be a consumer if, in the worst case scenario, a quarter of a all households have no income coming in? A really good point. I would ask the same question. How the hell can that be true? A small business is the lifeblood of the economy and consumers are the heartbeat or whatever the hell these analogies work out to be. We have a circulatory system that powers and brings oxygen to all parts of the economy essentially, right? That's the metaphor. Bodies die without oxygen and they die without a heartbeat.

So in my relatively unlettered opinion, this looks bad. If we're going to believe the analogies, both of those analogies, those analogies sound fairly grim and fatal. Are we taking the metaphor to literally, probably? Is it Friday afternoon? Yes, it is. It's been a long, long week, definitely. All right, I'm going to try to wrap up. I got two or three more here on my list. Sure. And these, let's group these in the, here's what I think is going to, if we are right and the stock market is due for another swoon, here's what's going to start to prick it. Number one, the PPP program, all these small business loans, like all,

we've been hearing all week is all the people that didn't get it or didn't get enough or whatever. So maybe that'll dawn on people on Wall Street that this is exactly what we're saying. Because when you were saying that the stock market goes up 1,000 points, 2,000 points in a day, it's because the Fed announces this or, oh, the government's going to backstop this. So part of this has been, oh, look at what they did. They pumped $2 trillion into the economy right. But what if it didn't get to anybody and it's not effective? And that might be the thing that.

it's going to be slow to be felt by the people who are looking only at signals that they prefer is my take. But I absolutely agree with you. I have seen 1,000 times as many PPP didn't get to me in time. It didn't get approved. The system is broken, et cetera. Then I have seen people saying, PPP is great. I'm keeping my staff. I mean, I have not seen the other side of this because I don't think it's happening too often. And so to me, what that means is that these these all businesses, these lifeblood, these pulses, these whatever the hell they are in the analogy, aren't going to make it because we're not about to reopen the economy. And even if we did today declare stupidly that everyone's back to work, go for it, I wouldn't go. Oh, wait, wait, don't step on that one.

That's my very last one. Okay. Okay, because here's my second to last one. Because unfortunately, I've been doing a daily coronavirus news podcast for the last six weeks. So I'm unfortunately, plugged into this sort of stuff. The next thing that I think is going to dawn on the markets in the next couple weeks is all they've been seeing, everyone's been hearing flatten the curve, flatten the curve. So testing numbers have plateaued, like, you know, confirmed cases plateaued. Deaths, thankfully, look like they're plateauing. But number one, they're not going down yet. And then number two, you know, like, again, for the show today, like there's these stories that come out that when they're finally doing antibody testing, the one in China was less than 1% of people

in Wuhan had antibodies for it. And the one that just came out this afternoon about California was only 2 to 3%. Yeah. So if you, if the only thing that's really going to save us is a vaccine, and that's 18 months away, in the best case scenario you could ever imagine. Yeah. If we're only at 2 to 3% of people potentially have it, 70% of the 1% of people potentially have it, 70% is what we need to get to for herd immunity to kick in. So the point is, we could be not only just an inning one of this, but we're talking about multiple innings of, you know, the disease surging back to higher waves than we currently are seeing.

You know, lockdowns that have to be more severe than we're currently seeing. Like, the thing that's pissing me off is that the stock market is seeing the plateauing and is like, great, we can flip a switch and go back to where it was. But A, and we'll get to that on the last one, I don't know that we can go back to where it was. But more importantly, I don't think that that's what's going to happen. Like, it's so polyanish to think that, oh, boy, we had a bad six weeks. But guess what? Games are back on. So one mistake that people have made is that flatten the curve doesn't mean the curve goes down.

It means the curve goes flat. And the whole point of those infinite graphics that everyone saw, the two curves flattened them. the flat curve is really long. And that once you squish that pointy curve like this, and you squish it all the down so it's flat, it goes on for a long time. And the idea wasn't that people wouldn't get infected, that we end infections. It was that we would keep them to a point in which our health care system could endure them, I don't know, to handle them.

Well, not have the health care system break. But let me interrupt you real quick, because what I just said was, let's say best case scenario, it has been more widespread than we know. and currently 2 to 3% of the U.S. population has already had it. And, you know, the symptoms weren't bad enough that half of us didn't even know it or whatever. But that would still mean that we've reached 2 to 3% of the population right now over the last eight weeks of what we've endured that feels like hell right now. That means we have to do that how many more times to get from 3% to 70%, how many more weeks that would take? That would be the year and a half that we're looking at.

Yeah. So that's what, so I'm trying to learn how to be less pessimistic and be less of a mopey, Mopey sad kid. So I hear all of that. And I don't have a good argument for why it's wrong, which is a disappointment. I will say that I talk to some people who don't like to be quoted in New York, who have a lot of money, who do investing type things, who think they have had it, who claim they've had it. But what I can't weigh in my mind is are the people out there who think that they think

they've had it all wrong, or are there certain places that have seen higher levels of infection, and therefore we might see higher percentage of people with the antibodies? Like, for example, New York City, which is actually where you are right now. Right. And by the way, the two to three percent number came from, I think it was San Jose or something like. It was somewhere in the Bay Area, which the point there was some people were saying, well, this is hopeful because their, you know, deaths have been lower than other places. They're confirmed. cases have been lower than other places. So, oh, but it turns out 3% of people have it, then that means it's more widespread. But no, that still means that there's tons of people that

can still get it. All right, let's end with the one that you wanted to say earlier, which is the obvious one, which is, I don't understand how people think, all right, let's open the doors and windows, let's restart the economy, let's restart society. Why do we assume that everyone's going to just go back. And there's already data for that, which is, like, I think it was the open table data or whatever, where, like, New York didn't lock down until the third week of March, but already hospital, not hospital, restaurant reservations were down 80%. If they told me and my wife, okay, go back to work May 1st, I don't think we're doing it. And, and reopen the doors of the restaurants, who's going to go? Like, so that's, that's, that's,

what's also pissing me off. Why is Wall Street assuming that this is a switch you can flip? So usually this moment when I'm talking to someone, a money person of some variety, they get dismiss up, ah, you know, people will show up, people always show up, they always show up, and they get this kind of like faster cadence of voice, as if they're trying to like just dismiss these points. To pick a personal example about why you're right, at least from my perspective, I live in Providence, my in-laws are here, and they're lovely people, and I spend a lot of time with them. I haven't for a month because I've been locked down. But they're not, they're not young. You know, they're not. They're people that are a bit older. And I am not going to endanger them.

So I'm not going to go over there. So I'm not going to stop and grab a bottle of wine and bring it over. I will do less commerce, less travel, and less stuff because I want to protect them. That is one teeny example, multiply it by 300 million for the entire country. And you begin to see the economic impact of just that little bit. The restaurant point? Brilliant. I'm not going to go to a restaurant for a long time. I want to support them, but I'm not going to show up. Why? Because my wife works in health care. You know, like, there's just, we're so far from out of the woods on this.

I am so shocked that the stock market can declare every small bit of good hope as a succession of the entire affair. Well, right. And maybe a bigger economic impact example would be the airlines, which again, like, let's say you and I talk again in August. And we've all been back to work for three months. I still don't think by August I'd be willing to take a plane ride unless I really, really had to. So think of that, like, where, you know, the airlines are getting bailed out and things like that because they're assuming, all right, we got to make it through the summer or whatever. But you could easily see a scenario where even by Christmas, half the people that would normally fly

around holidays would still be skittish about it and maybe, you know what, we're going to stay home for this Christmas and things like that. Yeah, we're not going to fly to Grandma's house because Grandma's 83. And if she gives us, her mortality rate's like 25%, because she also has asthma or whatever. I mean, like, it's going to, there's going to be a long-term drag on the economy. And I say this with zero happiness. I own index funds in my 401K. I miss having someone else cook me food.

It turns out I'm crap in the kitchen. I thought I was medium good. Turns out I can make four things. So I'm really trying to level up my entire adultness. But like, I'll just say, just because I want it to be better, it doesn't mean it's going to be. and I'm trying to not let myself fall suspect here to wish thinking. Yeah, you know, I'm glad you said that, so let's wrap up by saying that. Neither of us are thrilling at the prospect of this.

Neither of us are saying we want to be right about this. It's just both of us, and I thank you for indulging this with me, both of us are looking around and being like, there's a lot of things that aren't adding up. And, you know, I love nothing more than for the switch to be pulled and everything to be back to normal. but I don't know that that's possible right now. No, but I'll tell you this, though, the first thing I'm going to do, Thai food, then Wohawkan, then more Mexican, than Italian, more Thai.

Like, I'm an Indian three times in a row. I'm just going to go out and I'm going to eat everything that I miss, and I'm going to tip like I'm trying to give it away, because I hope everyone makes it through this and all the small businesses that are so amazing and that are the bedrock of my life, the bookstores, the cafes, and so forth can come back. So I'm going to be more cognizant of my shopping when this is all over. Try to be a better citizen.