The Pomp Podcast - #1109 Vivek Ramaswamy On Using Money As A Weapon

Starting point is 00:00:00 What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Vivek Ramaswamy is the co-founder of Strive Asset Management. In this conversation, we talked about being a capitalist, a citizen, how they pursue excellence in the corporate boardroom, why money is a weapon, how wokeism doesn't challenge the system, but may actually have become the system, whether the free market exists or not, China, Taiwan, and many other geopolitical topics. I really enjoyed this conversation, and I hope you guys enjoy it as well. Once you get done listening, jump on Twitter and let us know what you agreed with,

Starting point is 00:00:43 what you disagreed with, where we could have done better, and generally what you thought of our various conversation and topics. All right, let's get into this episode. I hope you guys enjoy this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I thought a great spot to start is your Twitter bio. You got two words,

Starting point is 00:01:22 citizen and capitalist uh why are those two things what you identify with and like why in that space where so many people go every single day to see who the hell is this guy tweeting all stuff on the internet that's what they read like what is the importance of those two words yeah i mean i'm probably overthinking the twitter bio there but what was going through my head when i wrote it is you know i mean look there's there's this question about what does it mean to be american in the year 2022 and i think being an american is a is a pretty core part of my identity but American is just a word. What does the actual identity mean? And yeah, I write about this in one of my books, but I spent a good amount of time thinking about it. I think there are,

Starting point is 00:02:01 there's basically two parts of what it means to be an American. Okay. I think there's the part of our, you know, part of our brain that wants to be an individual pursuing our own individualist dream, the rugged individual, the American dream through the system of free market capitalism. I think if we're being honest, there's a side of every one of us that is that rugged individual that wants to pursue our own individualistic dreams full stop, and that's what it means to be American, and that's an important part of the story. But there's also the other half, and I think that sometimes, especially people on the right but across the board, are afraid to admit there's the other half, but there's the other half too. that thinks of and wants to be part of a whole that is greater than the sum of its parts, that strives and hungers for unity as well, and that identity as a citizen. And so the beautiful thing, I think, about American identity is that it's not one of those things.

Starting point is 00:02:53 It is both of those things, right? I mean, 1776, funny fact, not a lot of people know. Obviously, it was the year of the Declaration of Independence. It was also the year of the wealth of nations. And the way I look at it is these are both of our parents, right? individualism and unity, capitalism and democracy. The tension between the two is what produces this unique child of this country we think of as America. Myself, first generation American, think of myself as an American. And so my way of saying that I'm American, the way I say it is I'm

Starting point is 00:03:23 capitalist and citizen. And that's what it meant to me. So when I see you tweeting, when I see you on television when i see you uh writing things when i see people quoting you uh i go wow that guy's got a point of view and the point of view is sometimes on markets sometimes on politics sometimes on social issues uh and it kind of cuts across but you run a business that is very much an asset management firm it's literally got asset management in the name of the business uh talk about this like intersection of all these different topics where maybe our grandparents or our great grandparents, it was kind of like, Hey, shut up. We don't want to hear about all this other stuff. Like just do your job. Right. Like shut up and dribble, you know, type, uh, uh, approach versus

Starting point is 00:04:07 like, well, now it feels like there's like a little bit of an information war going on around an asset management firm, but also other types of businesses as well. Yeah. So, so it's funny because it comes full circle and there's even a certain version of it where I might even be hypocritical relative to the direction I want to see the economy go. I do separate what one believes as a citizen from what one believes as an executive or a CEO or an asset manager. And so for me, I think keeping those lines straight is pretty important. It's actually, I did not know that I was going to start an asset management firm. So Strive, this company I started this year, brand new. I thought I was done starting businesses. So I ran a biotech

Starting point is 00:04:44 company for seven years. That was the thing I did till January of 2021. And I stepped down because I actually was pretty bothered by the rise of, you know, what I view as this cancerous mix of politics and business in our economy. And so that's what led me to actually say that, you know what, I can't be an effective biotech CEO. And by that point, you know, the company had been, you know, in its own world, reasonably high profile and, you know, had developed a number of drugs that were on their way to approval. There was no way I was going to be the CEO of a multi-billion dollar biotech company and also be able to speak freely as a citizen on the issues that I felt that I needed to speak out on without having an adverse impact on the business. So what

Starting point is 00:05:28 I did in the beginning of 2021 was actually step down from my role as CEO, pass the torch to my good friend who was the CFO for years. He now runs the company to say that, okay, I'm going to speak as a citizen. And if you want to hear about the biotech company, great, listen to Matt. And that's what that looked like. So I thought I was done actually with my career in business. That's when I wrote the couple of books that I wrote. I wrote Woke Inc. We can talk about that. I wrote a sequel to Woke Inc., which Woke Inc. was about the merger of business and politics and makes the case that that's a threat to both capitalism and democracy.

Starting point is 00:05:58 But there was an objection that I never fully answered in that book, which was, OK, why are companies – some companies still selling this narrative? They're only selling it if people are willing to buy it, victimhood identities and the kinds of one-sided progressive agendas that were pushed through corporate America. And so the second book was about, well, asking what it was about our cultural state and our national psyche that caused an entire generation, generally people my age and younger, to eat up these narratives that corporate America served them. But anyway, that's what I thought I was doing is writing these books. I ended up getting back to starting an asset manager because one of the things that – one of the epiphany moments for me in writing these books was that there is one industry that is basically upstream of all of the others that directs the flow of capital into basically all sectors of the economy. And that is the large-scale, predominantly passive asset management industry. Three big firms dominate it, BlackRock, State Street, and Vanguard. Those three manage, depending on the given day, at least as of a few months ago, over

Starting point is 00:06:58 $20 trillion, that's more than the U.S. GDP or on the scale of the U.S. GDP, that were using those dollars to advance social and political agendas that most of the people whose money they were investing didn't agree with, or at least many of them didn't agree with. And so as much as I enjoyed writing books and writing on the pages of the Wall Street Journal and sort of making observations about this problem and the threat that I thought thought it posed to American democracy. At the end of the day, I built my career up to that point as an entrepreneur. And I said, you know what, I'm going to put the hat back on. But this

Starting point is 00:07:30 time, I'm going to start an asset management firm that competes with those big guys along the axis of voice and vote. So to say that we're going to launch index funds, but the key difference is going to be the voice and vote we bring to the table. And this is the part where it's ironic is the voice and vote we bring to the table as an asset manager is to mandate that companies focus exclusively on their products or their services, do it for profit without apologizing for it, and leave politics to the politicians. And so in a certain way, if you look at it in a full circle sense, there's a certain way in which it's kind of a meta hypocrisy where I'm actually, as a citizen, unconstrained and vocal on a wide range of political, cultural, and social questions.

Starting point is 00:08:14 But when I'm wearing my hat as the leader of Strive, the sole message I'm bringing to the table is mandating that companies focus exclusively on their products and that companies actually stay out of politics. And so that's the distinction I draw is, you know, if I'm speaking in my capacity as an investor, I'd like to think that I have some authority and maybe because of my experiences and education in capital markets and whatever, in the areas where I have a view, maybe my view might be better informed than the average person whose expertise is somewhere else. But if I'm opining about a political question or about a question that relates to how people vote at the ballot box, my voice absolutely does not count any more, any greater importance than, you

Starting point is 00:08:55 know, my neighbors in central Ohio or the people I went to school with in Cincinnati or my former colleagues at a hedge fund in Manhattan. Everyone's voice counts equally. And so that's the kind of distinction I draw. So when you go to these businesses and you basically say, knock off the nonsense, right? Stop trying to virtue signal and kind of do all these other things. Just focus on what your business was set out to do, which is drive profits by serving your customers with great products and services, what's the response? Are they like, no, no, no, no,

Starting point is 00:09:25 it's not really what our business is about, like, and they have some other responses? Or is it like a thank you, we don't have to like bend the knee to asset managers that are like pressuring us to do things we don't wanna do? So behind closed doors, it's closer to the ladder, okay? But my view is if you bring a diversity of voices

Starting point is 00:09:43 to the table, that's strictly a good thing. Right now, the thing they hear is one monolithic voice from the – especially if you're a public company in the United States. The big asset managers are all pushing an agenda wrapped around with fancy three-letter acronyms. Today, ESG is the chosen acronym of the day. And so if you're going to have an influence on underlying companies, I think there are basically three things that allow you to have influence, OK? One is just the quality of the arguments that you make. These are human beings on the other side, after all, making these decisions, right? But the second is just the selection of the companies you engage with.

Starting point is 00:10:17 Not all companies are the same. Not all industries are the same, right? I mean, Elon Musk can be a new shareholder of Twitter and bring a new shareholder mandate to Twitter. That's harder than it sounds when you have 10,000 or 15,000 employees who don't want to do the thing that the new shareholder wants them to do. But the inverse is true, too, that if you have an industry, say the oil and gas industry in this country, where people who work in that industry, including as executives, as

Starting point is 00:10:42 CEOs or as board members, presumably, and it turns out I think this is true, did not actually enter that industry because they thought they were destroying the planet or raising an existential threat for the future of humanity, but because they thought they were contributing to human prosperity and human flourishing. And guess what? If they've been told top down by the other public shareholders, and I use shareholders in air quotes because they're not the real shareholders, I'll come back to that. But if they're told by their air quotes shareholders that they need to adopt emissions caps or net zero pledges by 2050 or scope three emissions reductions plans or whatever's been imposed. And we can talk about the specific examples in the oil industry.

Starting point is 00:11:21 Actually, if somebody else comes to the table and says, you know what, if you're an oil company, you should drill, you should frack, you should do whatever allows you to be most successful over the long run as a company. A lot of them are hungering for someone to come to the table with that message. And I even think they haven't said in so many words, but I think basically they're looking for cover would not exactly be the word I would use, but enough latitude to say, well, some of those shareholders are saying that we need to focus on ESG. Some of those shareholders are saying we need to focus exclusively on our products and services without regard to those agendas. So you know what? We're just going to make our own business judgment. And in the industries

Starting point is 00:12:02 where people who joined that industry cared about those products, they're going to end up doing a better job. So that's actually the play is just bring a diversity of voice to the table that at least empowers the kinds of people who are quietly thinking in the boardroom the things that I'm saying out loud

Starting point is 00:12:17 in the letters that I'm writing to these boards. I mean, do you see the letter I wrote to Chevron by chance? Okay, yeah. I can talk about that one or Disney or Apple. I mean, the kind of things- Explain the Chevron one. Yeah, since we're talking about energy, yes. So I wrote a letter to the board of directors of Chevron,

Starting point is 00:12:30 which my firm owns a position in. And the basic message to Chevron was, listen up, over the last couple of years, the last year in particular, you've taken some interesting steps coming out in favor of a carbon tax, coming out in favor of the Paris Climate Accords, adopting scope three carbon intensity targets that look like they were the product of shareholder pressure on your business, tripling the amount of investment into Chevron new energies relative to what your prior targets were. And there was a turning point when this happened, which was after a shareholder vote in 2021 on a so-called scope three emissions reduction proposal. Okay. So what happened in 2021 was there was a Dutch nonprofit founded by a former refrigerator salesman in the

Starting point is 00:13:22 Netherlands and, you know, I respect anyone following their passion. So, so as is his right to do as a shareholder of Chevron, that nonprofit put up a proposal. That proposal called for what's called a scope three emissions reduction plan at Chevron. So what's the scope three emissions reduction plan? My general rule of thumb is the more boring the nomenclature, the more you probably want to pay attention to what it is because it was designed to be anodyne and boring for a reason. So, so let's, this one sounds pretty anodyne and boring. That means let's pay attention to it. OK, so scope one emissions refers to your own company's direct emissions. Scope two refers to indirect contributions to emissions through your use of electricity and power and so on.

Starting point is 00:14:02 But scope three refers to the emissions along your entire supply chain, all the way from your suppliers to your customers. That's not real. This is real. So scope three emissions, this is like this is the new parlance. It's the new hot topic in ESG. So what a scope three emissions cap requires an oil company to do is effectively cause its own customers to reduce the utilization of the core product that they sell. It would be like the equivalent of – not the equivalent of it. It really would involve Chevron taking responsibility for every unit of fuel that it sells to Caterpillar, and Chevron is responsible for actually reducing the emissions contribution from that fuel without asking Caterpillar or an Amazon Prime truck or anyone else to share any of that responsibility.

Starting point is 00:14:52 That makes about as much business sense as McDonald's voluntarily committing to reduce the adult body weight of anyone who's eaten a Big Mac without asking the customer to share in any of that responsibility, even if that was a desirable thing to do. So the question I asked to the board of Chevron was not why is a scope three emissions reduction target in society's best interests. That's a separate question for politics and politicians. Leave politics to the politicians. That's my philosophy. me. But why is it in Chevron's best interests for Chevron as a firm to adopt this scope three emissions cap? And the funny thing is, the non-profit, the Dutch non-profit that proposed it, they didn't claim that it had much to do with shareholder value. What they claimed was that

Starting point is 00:15:39 this is what they needed to do to fight climate change. The board of Chevron initially, is a key word, initially opposed the proposal. They thought it made such little sense that they petitioned the SEC to leave it off their shareholder ballot. The SEC denied that. They then recommended to all of their shareholders to vote against it. But then sloppily waddling into that debate are none other than BlackRock, State Street, and Vanguard, who in 2021 voted for that Scope 3 emissions reduction plan. And so the question, and then by the way, now these shareholder resolutions are technically non-binding, so the board can still take its own action. But very few times will you find a board that stands up to a majority shareholder vote

Starting point is 00:16:19 that goes in a given direction. And so what do you see the board doing? They adopt the tripling of their target to Chevron New Energies, which I don't think competes, is unlikely, even based on things they've said on their own right, to definitively compete for returns on capital with the rest of their core oil and gas business.

Starting point is 00:16:38 You have a number of steps that they took in the public adoption of scope three intensity targets, the public embrace of the Paris Climate Accord, the public embrace of a carbon tax, a lot of which was emphasized following this shareholder vote. So our point was, okay, that's the voice those shareholders are bringing to the table. Well, we have a post-ESG mandate, and our post-ESG mandate is that you ought to focus exclusively on what maximizes long-run value for your shareholders. That scope three emissions target, as best we can tell, makes no business sense. We'd like to see you rescind that scope

Starting point is 00:17:13 three emissions target. Now, here's the rub, right? It's hard for you to do that when your other shareholders are pressuring you in this direction. You want to know the mystery at the heart of this? The people who claim to be your shareholders, BlackRock, State Street, Vanguard, they're not the actual capital owners of your firm. The actual capital owners are the everyday citizens whose money is being managed by BlackRock, State Street, and Vanguard. And the irony at the heart of this, all right, is that those firms and firms like them, I mean, Invesco is no better, in my opinion, but these firms have aggregated massive assets, largely because they said, we're going to offer you low fees through these passively managed index funds, because we're too

Starting point is 00:17:57 dumb to pick your stocks. Okay, we're too dumb to pick stocks, we'll just give you low fees. And this is not a crazy idea. I mean, good logic behind this. We're not going to beat the market, we're going to give you very low fees, offer you exposure to the market. But the very people who said, we're too dumb to pick stocks, have somehow become sagacious enough to know how to design an entire social universe, weaponizing the money of everyday citizens to do it. And the irony is that they're using the money of everyday citizens, many of whom even disagree with the underlying agendas that they're pushing with their own money. So our view is, look, if you want to advance an environmental agenda or a social agenda with your own money, you're free to do that. This is a free

Starting point is 00:18:42 country and you can invest accordingly. Strive would not be a good home for your capital. And that's cool, right? This is a free country, diverse opinions. We ought to have those diverse opinions represented by the diversity of people who wield their capital accordingly. But if you want with your money to deliver a message to corporate America that's exclusively focused on maximizing your bottom dollar and say, you know what, I might be on the left, I might be on the right. I want you to make as much money as I can so that I have enough to support the causes I want to support in my private life another way. Well, for you, we would hope that Strive is hopefully a good home. And that was what the premise was for launching Strive, but it's also

Starting point is 00:19:21 been the premise for some of the public charitable letters I've written to Chevron and some of these other companies. And I should say, by the way, I mean, Mike Worth, the CEO of Chevron, he responded that night. Cody's reply, he asked his CFO and other executives who offered to fly out to meet. We, you know, I think the next week had an extensive dinner where we, you know, had a healthy exchange. That is what's missing in corporate America's boardrooms today is right now, if you have the view that I'm articulating, you shut up and keep it to yourself. If you have the prevailing ESG orthodoxy beholden view, great. You voice that. And then there's a disproportionate airtime with respect to who gets airtime in that public debate,

Starting point is 00:20:00 be it in a boardroom or be it in our capital markets, that creates the illusion that this is actually what most people want. When in fact, there's a big asymmetry between what most capital owners actually want versus the capital owners who are actually willing to speak up, actually say they want. And I think that that's what tilts the scales of public debate. So when you write a letter like that to Chevron, you said that the CEO responded. He is responding publicly or privately and he replied on email i mean i sent sent it to him by email he replied to me privately by email now to his credit he was on bloomberg tv i think like the next day when he was i was on cnbc that the next morning he was on you know or whatever you know that week whenever

Starting point is 00:20:35 it was he was on bloomberg tv and he was asked about it and i appreciated some of the things he said i mean i think that people generally expect you to criticize you know a so-called apparently activist investor i forget exactly what he said but it was basically at the end to the effect of, you know, this is him speaking that saying that, you know, look, I want to take a more balanced, I've been trying to take a more balanced approach to this energy debate and engagements like this help us take a more balanced approach. I said, okay, great. I'm glad to hear him saying that because that's part of the point is to, by bringing a diverse voice to the table and a diverse mandate to the table, you know, I intentionally use the word diverse here because

Starting point is 00:21:12 there's a, there's been a monopolization of what diversity means in corporate America. We bring a diverse voice to the table, diversity of thought to the boardroom. Then, you know what? Good things can happen. And so in that sense, I'm a big believer in diversity. That's actually what's been missing. And so when the executives come out and they have dinner with you, and I'm using them as just an example, but I'm assuming they engage in conversations when you write these letters across a bunch of different kind of engagements. What are they seeking?

Starting point is 00:21:39 Are they like, oh, we never thought of this? Are they, okay, you know, help us understand your viewpoint? like what is that conversation it was a multi-hour dinner uh in this case i was i happened to be in the middle of uh they i think they offered to come out to ohio where i am i happen to be in new york that next week launching my launch my second book so i was in the middle of the book tour but we said we'd take an evening in the middle of the book tour and and you know have dinner with these guys so the cfo and then there was another executive from their team you know had dinner they booked up a place and you know i i you know showed up at 7 30 or whatever they

Starting point is 00:22:09 were both there and we spent a few hours together and the purpose it seemed to me was to actually hear the view, to actually understand what was the premise of this engagement, what was behind this view, to give them a chance to respond to some of those arguments. And my sense was they agreed with certain things. They had a different point of view on other things. But I think that one of the things that was interesting to me about the range of engagements we've had, not just this one, is that there's such pressure on these companies to justify the steps they've taken in the language of long-run shareholder value, when in fact,

Starting point is 00:22:45 for many of these socially motivated actions, long-run shareholder value had little to do with it. Now, why is that? We have this fiduciary canon in this country, fiduciary duty, fiduciary law in this country, that says that if you're an asset manager investing someone else's money, or even if you're a member of a board of directors or an executive who has a fiduciary duty to shareholders, you have to operate with what's called a sole interest. It's called the sole interest rule, which says that your sole interest has to be to maximize long run value. If it's your sole interest, that means there's no room for mixed motivations. Maximize long run value and X, long run value and Y. No, there is no and X and and Y if you're operating under the sole interest

Starting point is 00:23:27 rule. That's a pretty demanding standard. And I think there's reasonable room for debate about whether that standard should even be framed the way it is. That's a public policy debate. I have views on this. Nonetheless, that's what the sole interest rule demands. And so if you want to get to the heart of what happened, I think, over the last 10 years or so, and I think a lot of this dated back to the 2008 financial crisis, and I can talk about that at length, but on the back of the 2008 financial crisis anyway, this trend began.

Starting point is 00:23:55 What happened was there was a newly ascendant camp in public discourse about the future of American capitalism that said that the greed is good mantra didn't work. That's what got us into the 08 financial crisis. I disagree with that diagnosis, but nonetheless, that's a – it's a worthy point of view. And so we need something new out of American capitalism. And you know what? Milton Friedman, who in 1970 famously said that the social purpose of a corporation is to pursue profit, he missed something. And this is, I think, the most powerful argument in favor of the ESG movement and stakeholder capitalism.

Starting point is 00:24:29 It's an argument that deserves to be carefully considered, okay? What they said is Milton Friedman never responded to the following, and they're right. He never responded to this, which is the idea that, you know what? In that state of nature that the libertarian fantasizes about, there was no such thing as limited liability. What is limited liability? Limited liability is a legal creation. It's a law.

Starting point is 00:24:52 It's a set of laws that basically say that the owners of a corporation, the shareholders of a corporation, are not liable for the debts or other liabilities of that corporation, legal claims made against it and so on. But they enjoy all of the upside, all of the profits that come out of that corporation's activities. That doesn't exist in the state of nature. It's a legal creation. And so the argument for stakeholder capitalism goes, as it goes, is that, you know what? There's a quid pro quo. There's a grand bargain at the birth of the American corporation, which says that in return for those great gifts that society bestowed upon corporations and their shareholders, like limited liability, we have an ask. And the ask is that you, corporations and shareholders, have to at least be charitable in taking those social responsibilities into account too.

Starting point is 00:25:46 You have to act in society's best interests at times, especially when it comes to containing your negative externalities. And you know what? That's part of the grand bargain, the social bargain that allows capitalism to exist. I don't actually agree with that view, but I respect that view. It's a worthy view. I think that the legal history is mostly wrong there. OK, so for the actual legal history, and I trace this in Woking, is actually the fact that there was a grand bargain at the inception of the American corporation codified in American corporate law. But it wasn't the one presupposed by the stakeholder capitalists, that it was an unspoken grand bargain.

Starting point is 00:26:21 They say, no, no, no, this was an explicit grand bargain. It's written into the law. And the explicit grand bargain is in return for these great gifts like limited liability, which would otherwise make corporations incredibly powerful. You're shielded from liability while corporate shareholders enjoy all the upside. With that great power comes a responsibility to stay in your lane, to actually – you can be Frankenstein's monster, but Frankenstein's monster has to stay in his cage, the cage of the market, without wielding undue power over the political process by engaging in a wide range of social and political issues. And there's great proof for that in the legal history. Actually, back in the day, you know, 1800s, even early 1900s, if you got a charter from the state to have a corporation, a charter gives you the benefits like limited liability, which you would need in order to raise money. If you went beyond the charter that the state granted you, let's say you had a charter to be a bridge building company and you try to build a toll road instead, you lose those benefits.

Starting point is 00:27:18 So they say you lose your limited liability and you lose all of this if you go beyond the narrow purpose for which that corporation got its charter. Over the years, that got expanded to any profit-seeking activity. But that was baked into the grand bargain. So anyway, that's woke ink stuff and legal history I could tell you about. But back to the argument for stakeholder capitalism. So even though I disagree with it, it's at least a coherent view that deserves careful consideration and debate. That's what Larry Fink, the CEO of BlackRock, I believe it is what he meant. when he repeatedly said for years that businesses have to earn their social license to operate

Starting point is 00:27:54 every day. Refers to this idea of the grand bargain between businesses and society. There's something interesting that happened in the last couple of years. Like this is in the last, you know, 12 to 24 months. A lot of this I think is in response to the arguments I made in my book and elsewhere. So I made, I made the counter case and I expected, you know, I'm a big believer in get the best ideas on the table, be open to changing your mind if a better one comes along. You know, your ideas aren't like your kids, okay? If a better one comes along, you can just take it instead, right? More like a set of clothes. You try it on, something else fits better, you try that on instead. I try to bring that attitude to the table. I hope my, you know, peers in public

Starting point is 00:28:31 discourse do the same. So I was waiting for maybe there's a better idea. Maybe there's a better counter-argument to the case that I made. It turns out that the other side made a really interesting move. They didn't come back with a different argument. What they said is instead, no, actually, forget everything we said before. We didn't really mean that. Stakeholder capitalism is really just capitalism. It's just about long run value. So all that stuff about earning the social license to operate and the quid pro quo and the grand bargain at the inception of the corporation. Now, forget about that. You don't know why, because their in-house lawyers told them actually there's the sole interest rule in the fiduciary duty in the United States demands

Starting point is 00:29:09 that you actually act in financial interest. So he was kind of right about that. And, you know, if you keep saying this, you're going to get us, you're going to get us in trouble. So they said, okay, actually, you know what? Disregard that. It's just about long run financial value. And so what happens is you then get these shareholder proposals like that Dutch nonprofit, whose motivation has nothing to do with long run financial value. It's about addressing climate change, worthy goal, perhaps, but nonetheless, okay, that's a, not a goal that relates to the best interests of Chevron as a business. And the board of Chevron initially says that, okay, yeah, we agree that's not in the best long-run shareholder interest, so we stand against the

Starting point is 00:29:42 proposal. So if you just flash freeze that, the guy who is in favor of the proposal and the board who's against it agree on one thing, which is it has nothing to do with long-run shareholder value, yet when BlackRock and Vanguard and State Street waddle in and then choose to vote in favor of that proposal, they have to justify it. And then the management team and board of Chevron, which then bend the knee to BlackRock and State Street, have to change their story to say that, no, no, no, actually, never mind. This is just about long-run value maximization. That is a farce. It is a lie. I believe it is mostly intellectual jujitsu that has no truth at its core. By the way, same thing at Apple. Just as a side note, I'm going to share a little letter to Apple.

Starting point is 00:30:19 There was about a racial equity audit proposal. The group that was advancing the racial equity audit proposal at Apple, one of their stated objectives is to hold companies like Apple accountable for their role in perpetuating white supremacy. noble goal perhaps debate for another day i have my views on that too but that's as is they're right apple's board initially said that doesn't make very much sense for us to adopt so thank you very much we won't but then waddling in our black rock and state street in that case that vote in favor of it that's just this year in 2022 vote in favor of it nonetheless and then apple lo and behold months later is now conducting a racial equity audit and so i think we should just be honest about what the motivations are. Maybe businesses shouldn't just focus on maximizing

Starting point is 00:31:06 overall value. But if that's the case, let's have that debate. But instead, I think failing to win that debate, what this camp did instead, the pro-ESG camp, is they completely changed their justification in tune to say that actually it wasn't about making society a better place. It was just about long run value maximization all along, which just introduces this dishonesty in the debate and confuses the public as to what's actually going on. And so what I'm trying to do these, you know, shareholder letters and engagements with boards, et cetera, is pierced through that, okay? Where it's a farce, let's actually get into the specifics and smoke out what's actually going on. Because once you smoke out what's actually going on, we can all agree

Starting point is 00:31:43 or disagree. And some of us might agree and others might disagree, but at least we can understand exactly what we're debating as opposed to creating the smoke screen, which I think leaves us all worse off. This episode is brought to you by Unstoppable Domains. They've partnered with blockchain.com to create NFT domain names ending in .blockchain. It's the perfect ending to show that you're a believer in a decentralized future. The blockchain.com community can join a short waitlist to get one for free at blockchain.com slash waitlist slash blockchain domain. Free NFT domains provide all the benefits of premium unstoppable domains, including fee-free lifelong ownership. If you don't have a blockchain.com wallet, no worries. There's new free domains

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Starting point is 00:33:06 ever hit a snag, world-class customer service is available 24-7. More of your favorite chains are on the way, so run, don't walk, over to Exodus.com slash POM to download the Exodus Web3 wallet right now. Again, Exodus.com slash Pomp. Go check them out today. One of my big questions here is you guys have $400 million, give or take, in assets. Many of these other organizations have trillions in assets. Why are they responding to you? Is it the power of the idea? Is it the fear that you are going to whip up public support? Is it the reply to everybody who writes them a letter? Why do you think it is that whether Chevron or I don't know if Apple or others, You know, I've responded like, why are they engaging given, you know, in the grand scheme of things, you guys are still growing, but small compared to the Black Rocks and the Neos.

Starting point is 00:33:56 Yeah, I mean, so we launched our first fund in August, right? So I would say one thing is I think, you know, most people who would be in the industry would tell you if you have a firm that launches its first fund in August and then it's at, you know, $400 million by whatever, mid-October or where we are right now, two months later, you know, that's considered to be actually a sign of the velocity. Well, yeah, I mean I think it would defy industry norms, but it's tiny in the scheme of the multi-trillion dollar asset managers that are out there. So like I said, I think these are human beings on the other side. Human beings I think are persuaded by arguments. I mean you can read the Chevron letter and judge for yourself what you think about the quality of the arguments made in that letter. But I have spent some time on this over the last couple of years analyzing these issues. You could read Woking.

Starting point is 00:34:44 think you can, you know, evaluate what the quality and merits of the arguments are in their own right. You know, every reader can come to their own judgment, but that's a factor that independently matters, irrespective of the weight of capital behind it. I think a lot of people forget that, right? I think that at the end of the day, when it comes to debating ideas, the quality of the ideas and the arguments that back them up inherently have value in their own right. Okay. And then I think, you know, selection of which companies you engage with, look, I think Twitter is not Chevron. I think that there are companies that in many cases, I mean, Exxon appears to be a company that also had bent its knee after an activist campaign. And that actually

Starting point is 00:35:19 brings me to the next point, which is Exxon in part bent its knee on the back of an activist campaign run by a tiny shareholder, engine number one, who led an activist campaign that then got BlackRock and others on board, but nonetheless influenced America's largest energy company, A company that as recently as 2013 was the largest company in the world by market capitalization. So I know people forget that. And now it's whatever, Apple, Facebook, Google, or no, not Facebook, whatever, Apple, Amazon, Google, and Microsoft. Those are four U.S. tech companies. And then Saudi Aramco are the top five, at least as of a month ago.

Starting point is 00:36:00 Yet as recently as 2013, it was Exxon. And Exxon's own direction was changed by a tiny activist investor that had its own success. So explain this, what kind of what happened here, right? Because I think this is like a very interesting one. And then maybe we'll talk about Netflix, which kind of, you know, changed its course then and now it's almost reversed its course a little bit. But in the Exxon example, the business is the largest business in the world. An activist investor shows up, tiny in size, makes a lot of noise and kind of persuasive arguments. What does Exxon do differently and then how did that impact the business?

Starting point is 00:36:31 Yeah, so they basically put new directors on the board of Exxon to vote for a revised change in its climate change strategy. So when BlackRock cast its decisive vote to say they're going to vote for three of those dissident directors, it was basically a done deal. There was going to be a new board at the table at Exxon. And who makes the decision inside of these large organizations, these large asset managers? It's a great question. So opaque. It is so opaque. So they have these governance departments, these stewardship teams. But it's like people joke about the deep state in government. This is like deep corporate within the private sector, right?

Starting point is 00:37:08 These are the people – they're not the ones with skin in the game. Many of them aren't even professional investors. They're professional bureaucrats hired within the so-called governance departments of these organizations, the shareholder stewardship or shareholder engagement arms, whatever each firm calls it, that are professionally making the decisions to say that this is the right thing that the company must do. Is that a problem that it's not the investors making the decision and it's somebody else? I think it's part of the problem. Absolutely. Now, some firms are saying that they would take more input from their portfolio managers who are at least closest to the investments. I mean, if you had to pick, that's definitely a better approach, right? Now, I think

Starting point is 00:37:45 that- If you are optimizing for shareholder value, but if you are optimizing for other things, maybe it's not the best approach. It's not the best approach. Exactly. And so that's actually making a statement. And again, that gets back to the debate that's going on is maybe businesses shouldn't actually optimize for shareholder value. It's not my view, but that could be a coherent view. But if that's what's going on, that's definitely consistent with the way the behaviors have played out, with the way the organizations are structured. But then they claim after the fact and wrap it in the veneer of long-termism or whatever. But yeah, there's basically professional bureaucrats. A lot of people who are populating these new ESG ranks are basically people who

Starting point is 00:38:20 bring the technical appearance of doing finance, right? It's like a guy, Goldman's daughter or whatever, son or daughter that would have otherwise gone to work at a nonprofit or Greenpeace or whatever. And then they say, oh, no, you don't have to do that anymore. You can actually just go do that Greenpeace stuff inside the private sector. And I can be more proud of you because I think you have a real job. And then they joined the ESG department where they probably don't know how to run a discounted cash flow analysis of how you actually value a firm, but they do know how to create spreadsheets. And they knew that you do a discounted cash flow analysis on a spreadsheet. So it feels like I'm doing finance, like I'm making a spreadsheet for a different thing. I'm

Starting point is 00:38:58 doing ESG scoring on the spreadsheet. And so it creates this illusion of, oh yeah, yeah, those people who did finance, I'm doing finance now too, except it's actually has nothing to do with the actual financial attributes of assessing the value of a firm, but the veneer, the look and feel of finance that the quasi rigor associated with investment analysis to bring that masquerade to actually just implementing what is a political or social agenda that they would have otherwise done at that, you know, at a nonprofit or at a political organization. So it's kind of a funny cultural thing that's happening. Yeah. So this is fascinating because, uh, I don't think that any large asset manager is all Democrats, all Republicans, uh, or frankly, it's probably not

Starting point is 00:39:40 live in 50 50 there's people who have all kinds of uh uh differing views uh some of them think american politics are stupid right some people think that uh that is literally life and death right that's right uh do they have disagreements internally on some of these issues i think they do um i think that there's especially now that it's resulting in in backlash to these organizations i think that there is more dialogue at least and i'm talking very recently i think coming up in the ranks of these big asset managers we've recruited some people out of and we had two co-heads we took out of state street who joined strive that run our institutional business now they clearly did not agree with the direction that state street what's interesting is because

Starting point is 00:40:17 you're providing the diversity of opinion and thought inside of the boardroom and now they can sit there and say well this group of shareholders thinks a this group of shareholders thinks b we've talked about what the pros and cons of that are but if you also provide an opinion a different opinion inside of the asset management firms in some way i think of it as career uh um like a cover. You're allowing people now to voice the opinion that may have otherwise been quiet. And what it does is it creates dialogue, discussion, debate, and people who disagree with the other side will say that's bad. Right. But I think the objective view would be, well, don't we want people to discuss and debate which way should we vote before we vote rather than just

Starting point is 00:41:00 say, we're always going to vote one way on every single topic, uh, because it is a social or political you know leaning so so i will say this i mean it's one of the things i said in the opening to my first book is i think the best measure of the health of any democratic society is the percentage of people who feel free to say what they actually think in public how it matters how is america doing on that i think we're doing pretty poorly is the answer to that question i think i i believe i agree we might we might have hit our we made it we might have hit our nature in like the summer of 2020 through summer of 2021. That might have been the low point.

Starting point is 00:41:38 I think we're on the beginning of a rebound, actually. And I feel good about that. And whatever small role I have played in that, that's probably one of the most important things I've done. I think about a pendulum. But I think that that's, but more of us need, but we need, it's a little bit of a pendulum, right? Swinging back.

Starting point is 00:41:51 You know, so it's swinging back. And this is something I talk about in my more recent book too, is people do analogize, you know, even I did this before I refreshed myself on the history, analogize the rise and fall of the American experiment to the rise and fall of the Roman Empire. If you actually study the history of Rome,

Starting point is 00:42:06 there wasn't one rise and one fall. There were many rises and many falls. And I think the same goes, if you take a careful study of American history too, there were many rises and many falls. And so I think we might've hit a nadir on this attribute that I think is the most important hallmark for democracy. People think it's about,

Starting point is 00:42:24 there's a lot of discussion these days about our democracy. What does it mean to defend our democracy? People, I think in some ways, fetishize the number of ballots that are cast every November. And I'm not saying that's not important, but that's just the final act at the end of the process. The real litmus test of the health is if you have an opinion, do you feel free as a citizen to share that in public or not? And if you don't, I think that's an indictment of the health of a democratic society.

Starting point is 00:42:50 So part of my mission – I mean this is even pre-strive. Just as a human being, what is part of the impact I want to have on the country and the world is at least to create the space where we close that gap between what you believe in private and what you're willing to say in private and what you're willing to say in public. The smaller that gap is, the healthier our body politic is, the healthier capital markets are, the healthier our system of American capitalism is. I could – I think that's – I mean we could just talk about that for hours. I mean, I think that just to close the BlackRock theme up for a second, one of the things, the story would be incomplete if I didn't know one of the reasons why they're doing what they're doing. Okay. Is that some of their clients actually want them to be doing it. In fairness, right?

Starting point is 00:43:36 You know, the state streets and vanguards and BlackRock's of the world will tell you our clients are demanding it. They're not, they're not totally wrong about that. So CalPERS, the pension fund in California and New York pension funds or whatever, and I'm traveling so much, I'm losing track of where we are. I'm like, are we in California? No, we're not. We're in Florida. But Florida is very different. But CalPERS and New York, they're effectively demanding that these asset managers adopt these values. And what they say is we're not going to do business with you unless you adopt a firm-wide commitment to the Paris Climate Accords, to modern diversity, equity, inclusion standards, to net zero pledges, et cetera. So what that means is a firm-wide commitment means not only with our money but with everyone else's money too.

Starting point is 00:44:20 You have to vote accordingly. See, that's where this hit a rub, which is put yourself in BlackRock or State Street's shoes. These are big clients. They're demanding it. They want me to be a signatory of the Climate Action 100 Plus Network. Look that one up, right? It's a horizontal network representing $68 trillion of assets under management globally. Majority market share in the global asset management industry.

Starting point is 00:44:43 Usually, if the actors with majority market share in a sector get together and sign a common set of commitments that affect consumers, we have a word for that. We call that an antitrust violation or a price-fixing violation, but somehow today we call that ESG if it's the Climate Action 100 Plus Network's pledge. Has anyone gone after it from an antitrust standpoint? Just started to very recently. So Arizona's attorney general has opened up an investigation. I think numerous other states are expressing concern about this as well.

Starting point is 00:45:10 So that's a whole separate angle here. I think the title of his op-ed in the Wall Street Journal was that ESG may be the largest antitrust violation hiding in plain sight. I think it might have been the opening line of his piece. I think he had a good argument for it. I've spoken extensively about this as well. But anyway, that's part of the reason guiding this behavior is there's a cynical economic force lurking behind the scene too, which is, you know, the way this basically goes is Europe adopts some disastrous energy policy that caused them to live a second world lifestyle.

Starting point is 00:45:40 California doesn't think it's cool to be like Europe, so California adopts those disastrous policies, but they don't want to be uncompetitive as a state, so they use their pension fund dollars to make sure that the private sector is the vehicle and investment dollars are used as the vehicle to ensure the rest of the country suffers their same fate. That's what we're seeing basically in this so-called green energy revolution that we're watching unfold in plain sight as a slow-motion disaster. But anyway, that's part of what's driving this too is it's not just the culture of fear. There's an economic component to this. But anyway, back to the more important point is I just think that our capital markets are better off.

Starting point is 00:46:15 Corporate decision-making is better off, and American democracy is better off. If people don't feel like they have to choose between the First Amendment and the American dream, between speaking their minds freely and putting food on the dinner table, say for an employee at one of these firms or an executive at one of the underlying companies, but where people feel like their experience of being a citizen, part and parcel of it is being able to disagree in the open, to dissent with a prevailing view. That's, I think, the real thing that matters. We started a conversation about what it means to be American. I think that's a pretty darn important part about what it means to be American, and I think we've been missing it for a few years. So when these pension funds are doing this, right, it's kind of interesting because you have companies

Starting point is 00:47:00 that are receiving pressure from asset management firms. The asset management firms have very opinionated views in terms of what they want the companies to do, but then they point and they say, oh, that's because our pension fund people are telling us to do that. do the pension fund people say like, yep, I am the CIO, the director, the, you know, executive at the pension fund. And this is what I believe we should do. Or are they then kind of passing, you know, the hot potato and saying, Oh no, our pensioneers are the ones who are demanding

Starting point is 00:47:25 it. Like, so how far back does it go? I think we're getting pretty close to where the buck stops, but, but then what they do is they just point all around them. So it's just like every, it's a pointing game at somebody else. So, you know, S and P or Moody's or, you know, Morningstar. These are ratings kind of agencies. They're adopting these ESG factors. And so they'll say, this is the way the world is going. So we're just guiding the underlying asset managers to go in the direction the world is already going. So I told you about the Climate Action 100 Plus Network of Asset Managers. There's a very similar industry association of consultants, indeed, the very pension fund consultants who tell pension funds where to invest. And that horizontal

Starting point is 00:48:06 industry association says they will not make a recommendation to a pension fund to allocate dollars to an asset manager that isn't a signatory of the climate action 100 plus network or that isn't on board with the paris climate accords and so it becomes a one giant circular reference but you're right the asset managers are basically pointing upstream to say this is what our clients are demanding so there's a funny little story about this even the last few weeks so so a bunch of i think like 19 state attorneys general generally from i think red states sent a letter to BlackRock saying that they were concerned with BlackRock using its investment dollars, its client dollars, to pressure oil companies to reduce production.

Starting point is 00:48:47 Then BlackRock issued a response some number of weeks later. It said, you guys are wrong. We're not doing that. We don't use money, client funds that we manage for clients to pressure oil companies to reduce production. Just wrong. You got it wrong. There's our refutation.

Starting point is 00:49:00 within a week the comptroller of the city of new york says that you know what i find blackrock's response alarming that's the word he uses alarming and basically that's not what you told us that's not the commitment you made to us so in a certain sense you you just see you see a bifurcation in this market is inevitable okay you have clients with diverse interests it's like you know i went law school as well along the way as part of my you know winding background but you know basic point in law school you can't represent the plaintiff and the defense in the same case it's a basic shocking yeah shocking especially if you're going to be a vocal advocate you can't vocally be an advocate for the plaintiff in the defense well i'm not sure that california and

Starting point is 00:49:46 texas have aligned interests on energy policy right now and the energy policies that are in part implemented really through the companies that operate respectively in those states. Well, if you have clients with fundamentally different underlying interests, I don't think you can be a vocal financial fiduciary for those clients with divergent interests at the same time. If one state wants you to pursue profit and another state wants you to pursue social agendas that are orthogonal to profit, you can't be a good fiduciary to both at the same time if you're only bringing one voice to the table. So are the pension funds that disagree with the way the asset managers are voting or their perspectives, are they not pulling their assets because there's

Starting point is 00:50:25 no alternative or are they simply, they don't want to rock the boat or they are thinking it in private, but if they pull the funds, then that's basically a public expression of their viewpoint. Like why is it that California and Texas, if they have diverse views, but the asset manager, which is kind of a central point of failure, if you will, in this system is voting one way. Well, obviously one of those two state pension funds disagrees with the way that the vote goes. And so why is the dissenting voice not pulling the funds? Short answer is it's starting to happen slowly, right? So even this issue, people forget this sometimes. It's a relatively recent issue, right? I mean, BlackRock only changed its posture on voting, you know, using

Starting point is 00:51:07 aggressive social agendas in its voting practices starting, I think, like 2018. And 2018 is when a lot of this ESG steam picked up a new fervor. Okay. Why 2018? I don't know. But I think Donald Trump had something to do with it. He pulled out of the Paris climate accords or sort of rejected joining the Paris climate accords. For some reason, there was something about that moment that really caused this behavior to pick up. So in the scheme of things, that's not that long ago, right? It takes a couple of cycles to even see what voting behavior looked like. Around then he was firing off tweets talking about little rocket man and our North Korean dictator friend, right? Yeah, exactly. Like doing the whole thing. There was something about Donald

Starting point is 00:51:41 Trump, right? That just made everyone, especially the people politically on the other side of him, lose their ability to otherwise engage in constructive, rational thoughts, smart, intelligent, often even brilliant people. It's like, it's like you hit them with like mad cow disease or something like that. They just lose their ability to think and process thoughts as a grown adult human being. It goes back to your comment about democracy. Like now, uh, somehow in public discourse, almost on a daily basis, I see someone on one of the sides of the aisle talking about threat to our democracy. Yeah. And I'm like, there's a lot of threats to democracy that just popped up over the last four years, five years, right?

Starting point is 00:52:16 The threats to democracy are plural, okay? And the people who are most fervent, wherever they are in the debate, the most fervent defenders of our democracy are almost uniformly posing a significant threat to it that they fail to see themselves. I mean, I think this merger of state power and corporate power that we're seeing in the last four years,

Starting point is 00:52:37 including between large tech firms and the government, I mean, this is to me where the biggest threat to democracy lies. Okay, explain. Yeah, I mean, look, I mean, I think most of what's going on in the private sector today, this is true in the ESG debate, but I also think it's true about censorship on the internet. It's all part of this broad discussion we're having, is effectively the government using private companies to do through the back door what the government could not get done directly through the front door under the Constitution. This is frightening stuff, right? So if you take a look at like this guy – I mean I don't know him, but this guy Alex Berenson or whatever was taken down on Twitter, OK? My full extent of knowing the guy's exchange is on Twitter.

Starting point is 00:53:19 Never met him outside of it, all right? But I could care less about defending what he said or not. I don't even have a view on the content of what he said that caused him to get taken down. But whatever. Twitter shut down his account. What we discovered in recent months was that that happened after the White House specifically pressured Twitter to take down his account. Just pause on that for a second. Explicitly said his account.

Starting point is 00:53:43 There's a meeting that Twitter executives have – are having in the White House, and they're asked multiple times, why haven't you shut down Alex Berenson by name? This is the stuff of founding fathers rolling over in their graves. What did Alex Berenson do? He was a critic of the government. So the government censoring critics of the government, this is the paradigmatic First Amendment violation that the founding fathers had in mind when they wrote the thing called the First Amendment. It's pretty damn important. That's why they called it the First Amendment to the Constitution of the United States. So now it's even worse, though.

Starting point is 00:54:17 It's not that the government is censoring those people because there's a pesky thing called, you know, doggone it, the founding fathers put that First Amendment in. This is going to be kind of hard to do. Here's what we'll do. We'll use private companies and use threats to those private companies and give them some carrots too. You got to have the velvet glove as well. Combination of inducements and threats to get them to do what we can't do, to give them our dirty work because they're not bound by the First Amendment. This is the stuff of fascism. Fascism, classical definition of fascism is the merger of state power and corporate power to do what neither could do on its own, the state deputizing the workings of industry to effectuate the state's agenda.

Starting point is 00:55:01 And you see that, by the way, in the environmental agenda as well, right? The Green New Deal couldn't pass Congress, no problem. We'll just get John Kerry to go around and travel around in a private jet to meet the banking CEOs of this country and pressure them into signing the climate pledge, which includes some of the same policy objectives of the Green New Deal that they couldn't pass through Congress. Why is it that Alaskan drilling doesn't take place? There's no Arctic drilling, almost no financing for Arctic drilling. Is it because it's illegal? Not quite. It's because every financial institution in this country, every mainstream major financial institution, has signed the climate pledge.

Starting point is 00:55:33 banks are not charitable institutions the question is what are they getting in return right and this gets to your world a little bit here about about the corruption of of even centralized finance but that's that's a separate topic the thing i'm talking about is the repeatable the repeated pattern we now see in the private sector is the use of corporations and asset managers and financial institutions included in that to be able to indirectly accomplish what the government could not directly accomplish under the constitution and i find that to be you're talking about threats to democracy that i think is the single greatest threat to democracy today i mean it goes different people use different words you know it's what klaus schwab the founder

Starting point is 00:56:16 of the world economic forum calls the great reset it's the dissolution of boundaries between the public sector and the private sector to do what actually neither one could do on its own you know This is – the good version of this is solving shared global challenges that government could not itself address on its own, that the private sector needs to step up to the plate, that misinformation and hate speech and the perpetuation of disinformation online and the challenges of a warming planet for the future of humanity, governments are not doing enough. And so this is what requires us to dissolve the boundaries between public and private institutions to address these issues together. I mean, agree or not, that's the view, right? That's the view of the World Economic Forum. It's the Klaus Schwab view. It is the view of the proponents of stakeholder capitalism.

Starting point is 00:57:04 It is the view of the proponents of the Great Reset. Let's debate that because I find – I shudder at that world in which that boundary between the public and private sectors is dissolved. That's exactly where we find ourselves today. And we're talking about threats to our democracy by the very people who are perpetuating that agenda. That's why I say actually you might want to actually take a look in the mirror. and, you know, engagements of introspection in terms of what contribution you're making to fueling the so-called threats to our democracy as well. How much is that blending received in a positive way by executives at whether they're private

Starting point is 00:57:41 companies, asset management firms or whatever, because there seems to be a revolving door between the people from those organizations going into positions of power and influence in the government and back? So it's worse than the revolving door. It's so how much is influencing it? Absolutely. But it's even worse. It's like the revolving door is the second best option. The first best option is you don't even have to go into government to exercise political power. So I was at a dinner a couple of years ago with Jamie Dimon. There was a founders forum or whatever they whatever they call it to get a bunch of, you know, young up and coming company CEOs in a room together with the big guy, Jamie Dimon, big marketing event that JP Morgan runs. And so this is back when I was CEO of the biotech company that I founded. So I was there in that capacity.

Starting point is 00:58:26 But he's spouting off about one political topic after another. And so somebody says, hey, Jamie, would you ever consider running for president? He doesn't miss a beat. First thing he says is, of course, I would want to be president. I just don't want to go through the process of running for president. And everyone in the room laughs, not because it was so obviously false, but because it was so obviously true. And there's a certain honesty in what he said too, which is that I want to exercise quasi-political power without the inconveniences of actually being politically accountable.

Starting point is 00:58:59 That's the Jamie Dimon problem. It is the Larry Fink problem. It is the ESG industrial complex at its finest, which is the use of political power using capital as a force to effectuate normative agendas that ought to be settled through free speech and open debate in the public square where every citizen's voice and vote counts equally. And that's the main problem with stakeholder capitalism, woke capitalism, ESG-influenced capitalism, whatever you want to call it. That's my main problem with it. it's not just the Milton Friedman problem, okay? I mean, I love the guy, but he only got half the story in my opinion.

Starting point is 00:59:37 Yeah, is it going to lead companies to be maybe less effective at making widgets for profit if they're distracted by their social issues? Sure. But that's old 1980s stuff, asked and answered, okay? My problem is the inverse. The problem I have is that what this stakeholder capitalist ESG capitalism movement demands

Starting point is 00:59:55 is that the guys with the gold get to make the rules. The guys who wield capital set the rules for not only whether it's this bottle of water that rises to the top in the marketplace for products. And by the way, I'm fine with that. That's how capitalism works. It's not a one-person, one-vote system. It is a $1, one-vote system, and that's okay. That's how the market rules work in the marketplace for products and services. But in the marketplace of ideas, how and whether to fight systemic racism, how and whether to combat global climate change,

Starting point is 01:00:26 I mean these are fundamental normative questions where every citizen's voice and vote ought to count equally regardless of the number of dollars, the number of green pieces of paper they control in the marketplace. And I think what the stakeholder capitalism movement does is it conflates the rules of the market that say that my dollars decide whether my iPhone or my Samsung phone rises to the top of the market or this bottle of water or the shares of who get voted in terms of who gets to be on the board of directors of Apple. That's a $1 one-vote system, and that's OK. It applies those rules to a different game that's supposed to work according to a different set of rules. That's my issue with it. And so you go back to the beginning, capitalist and citizen. It's not capitalist-citizen. It's capitalist and citizen because those are two different rules of the road for two different spheres of our lives, and we live in this weird moment where we've somehow convinced ourselves that the two are commingled and we've jumbled them up where in the end we're left with neither capitalism nor democracy but a perverted version of both. This episode is brought to you by Bullish.

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Starting point is 01:02:06 idle assets. Learn more at Bullish.com and follow at Bullish on Twitter today. a regulated exchange. They currently are listed in the U.S. under the DEFTF stock ticker and on the Canadian NEO exchange under DEFI. For more information or to subscribe to receive company updates and financial information, visit their website at valor.com. That's V-A-L-O-U-R.com. The asset management firms, the corporations that I'll say that you're critiquing, right? And you agree with them on some things, you disagree with them on some things, but generally that you're critiquing uh they wield power uh and use money as a weapon yes it is uh ironic but also uh i think uh um important to call out you have an asset management firm

Starting point is 01:03:17 and the question becomes if money is power or money is a weapon is part of this almost an arms race where you, your colleagues have to go and get as many assets as possible so that you now have weapons in the fight? It's a, it's a great question. And this is something I struggle with. If we were starting from neutral territory, I absolutely would not be started, have started strife. Interesting. There's better ways to have, there's bigger problems to solve, better ways to, you know, have an impact, to have fun and, you know, find meaningful work than to do this. But we're not starting from neutral territory. And I'm a big fan. I always say, you know, I don't like to fight fire with fire. I prefer fighting fire with water. Water tends to be more

Starting point is 01:03:58 effective. So, so I think that there's the fire with fire version of this. Let me give you what the fire with fire version of this looks like is to say, well, you know what? You're advancing left-wing values in the boardroom. Well, guess what? I'm going to raise a bunch of capital from Republicans and bring right-wing values into the boardroom. You want to push environmental agendas and diversity, equity, inclusion. Well, we're going to push, I don't know, fill in the blank, you know, pro-gun agendas or funding for, you know, right to life and pro-life groups. Okay. Coherent possibility. That's fighting fire with fire. I prefer to fight it with water. And so the voice we're bringing to the table is one that says that, you know what, if we're managing money

Starting point is 01:04:40 for somebody who's mandated us to manage that money with maximizing financial value, we say, get all politics out of the boardroom. That's the fire extinguisher, okay? We don't want left-wing values, right-wing values, no values. Focus exclusively on products and services for profit to maximize value for shareholders. So in a certain sense, are we using capital to bring a different voice to the table? Yes, because it's been so weaponized in the way that it has. But I'd like to think, you know, I mean, there's nothing, there's no such thing as a pure answer to a complicated problem. But on balance, I'd like to think that what we're doing

Starting point is 01:05:17 is we're fighting fire with water. And I hope at the end of it, this debate is out of the top 10 issues that we ought to be focused on. I think it's absolutely in the top 10 today. It's probably pretty close to the top, if you ask me, because of this merger of state power and corporate power. But let's get it out of the top 10.

Starting point is 01:05:33 And I think that we can take the temperature down a little bit and focus on other problems that need to be solved in ways that this problem has gotten in the way of. Talk to me about Netflix. Netflix is an interesting case where I think the public conversation was Netflix is awesome. It's $9.99 to subscribe. I recently looked, they now charge me $16.99. I'm not sure how we got there, but that's what they charge me. Inflation. They got me. I'm still paying. And over the last, I don't know, year or two, all of a sudden I saw a bunch of conversation that basically could be summed up as like

Starting point is 01:06:11 netflix went woke right and there was different examples there were certain things people agreed with didn't agree with whatever but like that was uh although small at first became a louder uh kind of critique of the company uh then i saw that subscribers for the first time in their history decreased rather than increased in one of the quarters and of course the people who were critiquing netflix and saying you're going woke and all this stuff they basically were running like ticker tape parades and saying like we told you right like your business is gonna suffer uh you know go woke go broke and like i saw it all right now subscriber growth has started to re-accelerate but it seems at least from the outside that there has been i don't know if you

Starting point is 01:06:54 call it a shift i don't know if you call it a uh refraining of uh kind of the politics like i don't know how you would even describe you spend more time on this than i do um but talk a little bit as to like what happened there and how much of the political conversation both pro and con had an impact on the actual results of the business in your opinion yeah so it's a it's a good microcosm of an example because i think it's it's a good microcosm of a bigger theme and a bigger prediction i have for what's happening in american culture over the next five years but it's pretty encouraging right so there's a lot of netflix's behaviors over the course of the last couple of years that you know i might be critical of their content and programming and obsession with skin deep

Starting point is 01:07:32 attributes or whatever. But when push came to shove, they had a disastrous quarterly earnings report where subscriber growth was down, revenues down, profitability was down. That was, you know, I believe earlier this year, after which Netflix restated its cultural document. They put seeking excellence. That was at the top of the cultural document. You'll know this is a word that means a lot to me. We at Strive talk about excellence capitalism rather than stakeholder capitalism, The motto of the company is invest in excellence. The second book in the subject header ends with the path back to excellence. Talk about American national identity.

Starting point is 01:08:06 So that stood out to me. They added the word excellence back to the top of their cultural document. And they had a clear message to their employees. And this was after the whole employee walkout, after the Dave Chappelle special that they hosted on some of the transphobia allegations or whatever that Netflix and Dave Chappelle faced. When the dust had settled on that, they said, all right, look, we're going to put artistic merit first. That's what we do. deliver high quality content. And that's going to require working on a diverse range of projects. And if you're assigned to work on a project where you have a problem with that project,

Starting point is 01:08:40 then you can probably find a different company to work at because that's the kind of company Netflix is going to be going forward. I thought it was powerful. I mean, this is in the heart of Hollywood, a company that themselves, I think, had been guilty of some of the same sins. You know, I think there was a whole controversy about firing people for using the wrong words or whatever. But taking an affirmative stand to say that, you know what, we are going to prioritize excellence at the top of our cultural document, our statement of culture of who we are. And so much so to the employees, the activist employees are going to whine about, you know, working on a project that doesn't align with their politics. Say, you know what, you can show yourself the

Starting point is 01:09:13 door and close the door on your way out. If that's the kind of place you want to work, Netflix isn't the place for you. That was powerful. And, you know, is it causally related to the fact that they actually just had a really successful, you know, even rebound in their subscribers. I don't know, but I don't, but it didn't have nothing to do with it. I probably not. You know, I think that this, I think these things are powerful, hard to quantify, but important in customers who want to come back and actually see high quality content without being preached to at every step of the way. Now, why did I say it's a microcosm? I think it's interesting. If you look at what catalyzed that change of heart, it was undoubtedly a form of economic hardship. You lose money,

Starting point is 01:09:56 it wakes you up. And I think that a lot of this virtue signaling that we've seen from corporate America in the last couple of years is totally the product of excess. It's actually, people get mad when I make this analogy in my first book, but I got my first job in New York City on the eve of the 2008 financial crisis. And I just think that's the big bang, the origin story for this whole explosion of wokeism in contemporary culture and corporate America. I think the 2008 financial crisis plays a pretty good role for the start of that modern origin story. But I got my job in 2007, and I had done an internship at an over-the-top financial firm called Amaranth in the summer of 2005. And so to me, the analogy I draw is the cultural excesses

Starting point is 01:10:44 of wall street or whatever strip clubs throwing little people off boats you know the kinds of stuff that wolf of wall street stuff right cultural excess the social virtue signaling are the strippers and little people tossing parties of the pre-2008 era it's just a different form of excess that you have money raining from on high like mana from heaven printed by the federal reserve for the course of the last 14 years that have allowed an entire culture to ski on artificial snow, forgetting what it was like to ski on the real thing. And that culture of excess created this new moral sanctimony that in many ways caused organizations like Netflix, but other companies like them to forget about the essence of who they were. And it took hardship

Starting point is 01:11:30 to be able to remind them that, okay, I don't get to indulge in that excess forever. Strip clubs, little people tossing or virtue, woke virtue signaling, whatever it might be. I've put all of those in more or less the same category. Is it a religion? Actually, there's a chapter in my first book, Woken. It said wokeness is like a religion. Actually, wokeness is literally a religion. So in a legal sense, it is.

Starting point is 01:11:54 Yeah, I think it meets the legal definition of what counts as a religion. And, you know, I mean, a couple of chapters making the legal argument for it. But the interesting thing is I think hardship can be a wake-up call out of that cult. You know, my definition, a cult is in some ways a religion that has not yet withstood the test of time. So if this is a religion, I think we'd be better calling it a cult because it has not yet withstood the test of time. But the interesting thing is economic hardship is a great way to wake you up out of whatever cult you're professing allegiance to. And, you know, I think that in some ways we're about to enter a really tough time economically in our country. This is a prediction I made in my next book.

Starting point is 01:12:32 by the way, I had finished writing this book, you know, before even in much of this year had played out, right? So, you know, made this prediction, we've already seen it play out over the course of this year with inflation, rising interest rates, the economic hardship, possible recession. I think that's, I think we're in for harder times to come. There's a longer story for another day, but unlike 1980s, early 1980s style inflation busting with raising interest rates, Well, that was when we're doing it against the backdrop of Reagan's deregulatory tax lowering policies. Today, we're raising rates against the backdrop of Biden economic policies that actually create a potential one-two punch. I think we're going to be in for an era of a few years of economic hardship, but I think that could actually be a good thing for our culture if we remind ourselves hardship is not the same thing as victimhood, as I often say.

Starting point is 01:13:23 what does that mean is just like netflix you need a wake-up call a quarterly earnings report that's a disaster before you put excellence back at the top of your cultural document as a company i think the same thing might be true for our entire economy for our entire country is it might take us to a chance of actually going through a period of economic hardship against the backdrop of not only inflation but rising rates reminding ourselves that mana does not fall like heaven from free from on high but reminding ourselves where actual value creation may come from from industriousness productivity of creating goods and services that make people's lives better, that's hard work. It's different than an economy that's effectively fueled by that artificial snow.

Starting point is 01:14:02 That could actually strengthen and create a stronger economy and a stronger culture on the back of it. But I think the path from the victimhood narratives that we wallow in today, ironically, which are a product of actually a period of excess, we wallow in these victimhood narratives, not because we've had it so hard for the last 10 years, but because we haven't had it hard enough the path from victimhood back to excellence ironically is going to run through a period of hardship that's what i see coming in the next couple of years but i also think that could be that could be you know one version of the story at least is good for our culture and come out as a stronger nation on the other side of it that's what the many rises in the many falls

Starting point is 01:14:40 of rome look like hopefully this won't be the last fall of that american experiment but we still have you know a couple a couple rises still left in us and if we don't then then maybe we are in the beginning of that national decline. Yeah. I recently had a conversation with a Harvard professor, Ranjay Gulati, and he's done a bunch of study, talked to hundreds of companies about purpose. And so when you first hear that, you think ESG, virtue signaling. I don't. Like all these things. I actually don't. Okay. I actually don't. Purpose is fundamental to a company. So that's his point. It is not that stuff. It is the most ambitious mission attracts the best talent period the yeah just just if you have a super ambitious mission people want to work

Starting point is 01:15:24 on hard problems people want to work on things that are going to be big and are going to work and do all this stuff if you have a very clear purpose going back to the netflix example coinbase many of these companies who have come out and said this is what we stand for there are other things that are important in the world but they are not important to us and this is if you work at our company this is what we are focused on that clarity attracts a certain type of employee it attracts a certain type of business partner. It attracts a certain clarity in action of what we will focus on and what we won't focus on. And so he goes through all these things. And I found the conversation fascinating because that terminology, that entire mechanism, all this stuff has almost

Starting point is 01:16:05 been co-opted to some degree and pulled where, to your point, the purpose of companies may not be to maximize shareholder value, the purpose of a company may be to essentially pursue political or social issues or do all this other stuff. And he's able to just strip it away and say, listen, purpose of the business and the clarity and the ambition of it is maybe one of the most important things in order to make sure that you sustain for very long periods of time and you continue to succeed regardless of management changes, market changes, competitive changes, product changes or anything else and so it feels like you and him are saying very similar things absolutely i'm a big believer in purpose and mission orientation okay i don't question even even

Starting point is 01:16:49 think about strive right we don't second guess a company's true stated mission disney's stated mission is to be the world's premier entertainment company okay what does that have to do with transgender education in florida public schools right they will disguise that say this about purpose and being purposeful interaction. How does that relate to providing high quality entertainment for children and their families? I mean, this is a good worthy question to ask. So I think this idea of purpose and mission, mission comes first. If you want to be a great solar company, great, be a great solar company. If you want to be a great coal company, be a great coal company. That's different from telling the coal company that has to be a solar company.

Starting point is 01:17:26 And so I think that mission orientation comes first. And when all of this discussion we have about diversity or equity or inclusion or whatever. My view is, in order to pursue your mission, there are certain kinds of diversity you're going to want, you're going to need. There's going to be certain kinds of diversity you're not going to want, you're not going to need. So let's say you're running a steakhouse, okay, and your mission is to serve excellent, high-quality, good-tasting steak that delights your customers. You probably don't want even the ever-prized a diversity of thought when it comes to viewpoints on whether it is morally reprehensible to kill animals for culinary pleasure. One of the many reasons I would not make for a good employee

Starting point is 01:18:11 at a steakhouse. I'm a vegetarian for that reason. I don't believe in killing animals for culinary pleasure. For health reasons, if it's necessary for human health, absolutely. Short of that, for culinary pleasure, I'd rather not do it. I would not make for a good employee at a steakhouse because I would not be mission aligned with the purpose of that organization. And that's okay. That means that different organizations are going to take diverse approaches to diversity itself, right? Diversity or other parameters that contribute to the success of a mission have to fall out of the mission. And what we've seen happen in the ESG revolution is that one common set of centralized purpose or missions have supplanted and diluted the true, truly diverse missions that different companies and different institutions actually have. So right now, why is there a common – why are there three-letter acronyms, ESG or DEI, that should govern what a technology company does versus what an energy company does versus what a fast food company does versus what a nonprofit does or a university does?

Starting point is 01:19:13 Why do all of them have the same purpose rather than each being guided by their own unique purpose? That's what I call institutional pluralism. Institutional pluralism is the heart of American pluralism. And yet what we've done in the name of purpose – and so I actually wrote an op-ed in the Wall Street Journal. It's basically like the place that – I love the Wall Street Journal, by the way, because something about my way of presenting ideas jives with the way they present ideas. So that's basically the only place I publish anymore, but do it pretty frequently. But one of mine earlier this year was on responding to Larry Fink's annual letter to CEOs where he says companies need to be guided by purpose. It in that same letter says that we want to see from you how you're complying with the standards of the Sustainability Accounting Standards Board.

Starting point is 01:19:55 We want to understand what your climate action 100 goals are, what your climate action pledges are, what your path to net zero by 2050 is. We need to see this information. You can't say both those things at once. Either you believe each company has its own purpose or you believe that your purpose is more important than their purpose and all institutions should pursue your purpose instead. But you can't say both at the same time. And yet that's the ESG doublespeak is in the name of purpose and mission. What they're really saying is that our mission and purpose is more important than yours, and that's why you need to follow it or else, and we're going to use our capital as a weapon

Starting point is 01:20:24 to make sure you do. When you see this playing out in the market, it feels like employees don't really have a say at many of these companies. The executives are playing a game of almost like a virtual tennis, right, with these asset management firms. What do the regulators think? how do they kind of play into this are they like oh the people with a lot of money like uh they're cool to kind of run around and do whatever they want are there rules against this stuff or they're

Starting point is 01:20:53 not rules against it like i kind of almost think about uh we usually think of two market participants but there is a third yeah there's a third yeah i mean so i i can you know i have views on this i mean i think there's an interplay between what the regulators and the regulated and sometimes you worry about you you wonder who's regulating who actually um i think if you look at what some of these new SEC rules are that are coming down the pike. That's in some ways just borrowing exactly from the ESG textbook, but codifying it in law. And it's all one giant circular reference too. They're saying, well, we need these added ESG disclosures and put them into rule because that's what the investors are demanding. Well, those investors are themselves behaving like

Starting point is 01:21:30 regulators in the way they behave, the Black Rocks of the world. So I think that there's a discursive relationship between the two. But I look at it a little bit differently. I think that – you brought up employees. I think that there's something deeper going on here. In our moment in American history, modern Western history, I think the defining social, political, and cultural divide is not between left and right, black and white, or even rich and poor. Okay. It is between the managerial class and the everyday citizen. There's an everyday citizen in every organization, be it an employee, a stockholder, a voter in government, that everyday individual agent versus this horizontal managerial class, the professional bureaucracy, the people

Starting point is 01:22:27 who staff that 80 person department that decides how BlackRock votes its shares, the middle manager at the three-letter alphabet soup in the federal government that isn't politically accountable and is hired for life under civil service rules cannot be fired. The person who's serving on as a professional director, a renter director, or a renter CFO hopping around seats in corporate America in the executive ranks. This is the rise of this managerial class. This guy, Michael Lind, actually, the center-left guy, wrote about this a little bit ago. I have a chapter in my last book called The Rise of the Managerial Class, the bureaucratization of decision making and the people who staff those bureaucracies, I think they are crushing the will of the everyday

Starting point is 01:23:12 citizens who these institutions were supposed to represent, okay? Be it a university, be it a philanthropy, be it a nonprofit, be it a company, or be it our government. And I think that's the real distinction that matters. So when you talk about the regulator, the regulator and the regulated, are basically today more or less run by members of that managerial class, the professional, bureaucratized, technocratic, green hat wearing, square suit. Hall monitor. They're all kind of regulated. The hall monitor, exactly.

Starting point is 01:23:42 And the hall monitor in America, in the modern West for the last 10 years or so, the hall monitor is running the show. And I think that that's the – we sort of mix this up by trying to retrofit this into a left-wing versus right-wing debate. You're missing the point. it's the managerial class versus the everyday citizen why do the managerial class become the managerial class and i always they couldn't be creators themselves okay so this is an interesting uh kind of path to get there we we have the benefit of hindsight now is it the education

Starting point is 01:24:13 system is it all the wealthy families of america came together and told their kids hey we're going to put you in these places of the managerial class so i'm going to resist both of those okay for a second because i think i think this this distinction i'm drawing does not map neatly onto the people with money or even the people with education so like this is where some of the populist right frustrates me at times i i'm very sympathetic to actually people who identify with themselves as everyday citizens being on the populist right it's a whole separate discussion we can have for another day but the the slogans of the people who lead that movement when they talk about the elites. I think it's too sloppy. It's too low resolution. So even if you just like

Starting point is 01:24:54 double click on one institution, let's take the university, okay? Modern liberal arts university, whatever. Take Harvard or Yale, my alma maters or whatever. Elite institutions. The students are elites. The professors are elites. The associate deans are elites. But I'm making a different point. I'm saying that that institution is about educating the constituents of that institution, the students, and the creative minds who are pushing the frontiers of knowledge, like the Zany professors. Neither of those are strictly speaking in my definition of the managerial class as applied to the university members of the managerial class. But the members of the managerial class are the cancerous proliferation of associate deans and administrators at universities. I mean,

Starting point is 01:25:42 Michigan State, you know, the growth in the number of DEI officials, diversity, equity, inclusion officers, outpaces the growth in professors at that university. So all of them are elites in some sense, but I'm not even talking about left or right or rich or poor or drawing all those distinctions. I'm literally talking about the people who didn't have the creativity of mind to be a professor, but didn't have the humility to actually know that there shouldn't be exercising power then in a university either. But it's the confluence of absence of creativity sufficient to be a creator, but with a power hungriness combined with insecurity that still wants you to be able to exercise control. Those are the features of a member of the managerial class.

Starting point is 01:26:30 It's a feature of the managerial class of somebody who staffs the alphabet soup from the FTC to FDA to SEC to FBI to pick your favorite three, TSA. That's what characterizes, I think, a lot of the civil service class in this country, the civil servant, unfireable civil servant class in the federal government bureaucracy. It's what characterizes a lot of middle management in corporate America. It's what characterizes the cancerous proliferation of the associate deans in the modern university, the same people who get the ambassadorships that are sort of mid-level donors to a campaign and get to be sent off to be the ambassador to Lithuania or whatever. You see it in the military increasingly in the United States too, the rise of a managerial class

Starting point is 01:27:11 that didn't really rise the ranks as a soldier, nor actually had the vision to be an outsider that was a general that thought about things differently, but were sort of this halfway house in between. And I just look at one institution after another, people serve on some godforsaken nonprofits board that gets together to have a boondoggle four times a year because they could care less about the mission but they will be able to say to their friends at the country club that i'm on the board of a non-profit as though we didn't have to fill in the blank about what non-profit it was it doesn't matter point they're on the board right and if they're not on that board they're gonna make sure they get another one that's what they call their board card i i get

Starting point is 01:27:44 sick of it when i hear people in corporate america or in the non-profit world talk about their board card refers to the card of boards they're on that their board card is full or that they have an extra slot like they have to fill it it's about them and their exercise of power but there's a It's sort of – you kind of have the everyday – I think there's kind of three camps here, right? This may make a lot of people uncomfortable to characterize this. Maybe it is elitist. Maybe it is elitist. I could care less.

Starting point is 01:28:07 But I'm just telling you how I see it. You have everyday citizens. You got the managerial class. And then you got the third class who are neither everyday citizens, ordinary everyday citizens, nor members of the managerial class, but the creators. OK? what we have right now going on is a tug of war between the three and and both the everyday citizen and the creators are losing and the managerial class is winning and that applies whether you're looking at the private sector the non-profit sector the for-profit sector or

Starting point is 01:28:36 government the managerial class is winning and i think that that's what's fueling the fanning the flames of global populism both left-wing and right-wing populism they'll point each other and think they're different, they're not so different from each other. I think what they're hungry for is reviving that voice of the citizen. I think the creators have more or less been muzzled. And that's kind of the current state of affairs that, you know, once you see that problem clearly, it becomes pretty clear what you need to do. But I think the first step is we haven't really seen that problem with clarity put into relief in its own right, because we have these blinders on that have taught us to see this through Republican or Democratic struggles or

Starting point is 01:29:13 black versus white or intersectional woke narratives of invisible power struggles. No, that's all missing the point. It's the managerial class, the everyday citizen and the creators. We need creators who serve the everyday citizens and the managerial class are intermediating that at best without exercising independent power of their own. That's the right ordering of affairs in an American society. the top competitors. There are no fixed minimums, no ACH transaction fees, and no withdrawal fees. Download the FTX app today and use referral code POMP to earn free crypto on every trade over $10. The more you trade, the more you earn. Go download the FTX app today and use referral code POMP.

Starting point is 01:30:00 This episode is brought to you by Compass Mining, the world's largest marketplace for mining hardware and hosting. With Compass, everyone can mine Bitcoin. You can do it at home or in one of there are 23 hosting facilities around the world. All you need to do to start mining your own Bitcoin is go to compassmining.io today. Again, if you want to get into Bitcoin mining, go check out compassmining.io today. We've talked a lot about the insular critiques and of the American economy of society. But also there are external components to the American experiment. China probably is the biggest one that people talk about. And when it comes to China, it feels like there is also this tug of war. It feels like there are countries who seem to align with China. There

Starting point is 01:30:50 are countries who seem not to align with China. But the countries are really just the like the warm up game, because it seems like the companies are actually the ones who are maybe in the most uh sympathetic view you could say caught in the crossfire in the most uh critical view you could argue that they are the ones who are actually doing the shooting yep and it is not clear to me why some companies are uh welcome some companies are uh kicked out and why so many companies in the United States seems so focused on appeasing China. Yeah. Sometimes at the detriment to Americans, American society,

Starting point is 01:31:37 or the economics of their P&L and their balance sheet. So this is the defining threat to the future of American existence, I think, is the way in which China defeats the United States, not militarily from the outside, but from within. The 500-year game. The 500-year game. And so speaking of going hundreds of years back to learn the lesson, so I'll draw an analogy to the Trojan War, okay? Greece was never going to defeat Troy militarily.

Starting point is 01:32:04 The walls of Troy were too strong. What they realized, though, is that there was the Trojan horse that— Literally the Trojan horse. Literally, that literally Troy could not resist. The beautiful horse, the gift of that Trojan horse, they offered that as a peace offering. And what happened? they loaded their they loaded their infantry within

Starting point is 01:32:24 and they burned Troy from the inside out that's what happened that's how the battle of Troy ended that's what China's recognized to the United States global capitalism is the gift we could not resist it was the sweet fruit whose taste we could not resist

Starting point is 01:32:41 that is the gift they offered us in return to use that as a vehicle for advancing their agendas not militarily from the outside in through force but from the inside out through actually infecting our system from within. It sounds conspiratorial. I'll just lay it out exactly how it works, okay?

Starting point is 01:32:58 Well, let's do it. We tell ourselves, right, we live in this system of global free market capitalism, okay? Well, it doesn't work if other actors in that system are playing a mercantilist game of state-directed capitalism. So what China does, they realize they have a big growth area for most companies. Most companies that need growth, the place where they get that growth is by going to China. China is the biggest growth area for our business or whatever. Fill in the blank. That's what you can hear from half of America's public companies. What China does,

Starting point is 01:33:29 though, is they build a great wall, a great Chinese wall that prevents you from entering the Chinese market. If you criticize the CCP, if you apply any constraints on what Chinese companies are or aren't able to do, you have a great Chinese wall that prevents you from entering the Chinese market. But if you criticize the United States, or you apply some of those constraints that you don't apply in China to your American counterparts, they will roll out the red carpet. And that is how you get to the farcical world in which Chevron and Exxon have their large shareholders like BlackRock imposing ESG constraints, scope three emissions caps, emissions reduction targets by 2050 to Exxon's and Chevron's business without saying a peep,

Starting point is 01:34:12 while they're also a large shareholder of PetroChina that operates according to none of those ESG constraints. You want to know why? Because if you apply those ESG constraints to a Chinese company, the CCP is going to tell you, you know what? Again, you can show yourself out and close the door on your way out. You can't do business here. It's how you get to a place where Disney, okay, will wax eloquent about transgender education of first graders in the state of Florida, or says it can't shoot a film in Georgia if they pass some kind of new anti-abortion statute or whatever. Disney will proudly stand on the right side of history over here, while they literally go to Shenzhen, the ground zero starting point of the Uyghur human rights crisis, where

Starting point is 01:34:52 there are over one million religious minorities enslaved in concentration camps. A lot of people don't know this. Subject to forced sterilization, communist indoctrination, and worse, Disney doesn't say a peep as they film Mulan there, until they muster up the courage at the very end of the movie, you can see in the credits to the film today, where they said, we thank the local authorities for allowing us the privilege of filming here. The very local authorities that are responsible for some of the worst human rights atrocities committed by a major nation since the Third Reich of Germany. That's how you get to that asymmetry. And what does that do? It creates a false moral equivalence between the United States and China. It morally legitimizes

Starting point is 01:35:31 China's behaviors relative to those of the United States, because when the new corporations, multinational corporations headquartered in America become the new international arbiters of moral justice. The people who are always known to criticize injustice, Nike, the NBA critiquing systemic racism and white supremacy in the United States, not saying a peep about actual human rights atrocities in China. You know, Nike complaining about slave labor 250 years ago in this country without actually doing a thing to reduce its own reliance on slave labor today that produces $250 sneakers that they sell to black kids in the inner city who can't afford to buy books for school. I mean, this is a two-sided game that's laughable if it weren't

Starting point is 01:36:10 for the fact that it was actually a product of China's strategy. And how do you know it's a product of China's strategy? Listen to Xi Jinping when he's pressed, say, by the UN on the Uyghur human rights crisis. The first thing he often says is that Black Lives Matter shows that the United States is no better. His top diplomat, Yang Jiechi, came to Alaska about a year and a half ago, electors our Secretary of State, Tony Blinken, for 15 minutes in his opening statement, this guy from China, says, what did he say? I want to see the United States stop slaughtering, this is his word, slaughtering black Americans, and that China wants to see the U.S. do better on human rights. I mean, these statements would be laughable if it weren't for

Starting point is 01:36:52 the fact that our own corporations lend implicit credibility to those claims by regularly critiquing injustice on the S-prong of the ESG movement in the United States without saying a peep in China. In fact, when they go to China, if the CCP says jump, the number one question they ask is how high. And that erodes our number one geopolitical asset of all. And I'm sorry, that is not our nuclear arsenal. It is our moral standing on the global stage, creating this false equivalence between Chinese nihilism and American idealism. Thank you, LeBron James. Thank you, Nike. Thank you disney thank you airbnb that's the net effect that it has and i think that that is how this version of grease burning troy from within that is how you get to a place where airbnb gets to

Starting point is 01:37:39 post a nice little neat black square on its instagram account and says that black lives matter and they compensate their executives according to social social and environmental goals yet every unit of data they gain from a user even the private messages exchanged between a host and actually a person who's staying at a host's house are information that's available to the CCP as a condition for Airbnb's ability to do business in China. I bet a lot of people didn't know that. No, explain that. Yeah, I mean, Wall Street Journal reporting on this from a year or two ago.

Starting point is 01:38:07 I mean, it's staggering stuff, okay? I mean, like Nate Blacharchuk, he was a couple years ahead of me at Harvard or whatever. I don't think I knew the guy. But his quote at the end of this, I mean, I knew of him, staggering. We're not here to promote American values. That's what he says behind closed doors to their head of privacy who resigned when the company didn't do anything to change this. China's condition for Airbnb doing business in China is that they turn over data from American users, geolocational data. I mean the private messages like emails between a host and someone who's renting on the platform, those are messages that you can bet if the CCP wants to look at it, it's available to them because that was the ticket for entry.

Starting point is 01:38:49 That's the price for entering the great Chinese wall. To cross the Chinese wall, that's your ticket fee if you're Airbnb to go after the Chinese market. And what does China want to do with stuff like that? Well, I'm not sure they know exactly what they want to do, right? They're in a data collection game. Part of knowing data is you don't necessarily know exactly what you're going to use until you see what you find. But it's a long-run game of gaining a competitive strategic advantage because they know we couldn't resist the sweet gift, the sweet taste of global capitalism. That's our Trojan horse.

Starting point is 01:39:15 When they're not actually playing by those same rules, they're playing mercantilist capitalism. But giving us the Trojan horse that makes it look like we're all playing in the same game of global actual capitalism. And so now companies – and you could say my view is that companies should just focus on their products and services, maximize profits. Well, wouldn't they be doing this in China because this is actually their cost-benefit analysis that tells them that's what they're going to do? Maybe. Almost certainly yes, actually. But they wouldn't come out of it smelling like a rose. And the public would be able to – it's like tampering with the smoke detector at the urinal on the airplane.

Starting point is 01:39:47 The reason you don't tamper with the smoke detector is there's a system that's designed to check this behavior. Users would not trust Airbnb quite as much if it didn't pretend to be a Silicon Valley, goody-two-shoe, ESG-compliant, DEI-promoting company that posts a neat little black square on its Instagram account, which you're supposed to do after George Floyd dies. This is a game. It's a decoy. It's a tripwire. It's messing with the smoke detector.

Starting point is 01:40:16 that otherwise would have had the system work itself out except for the consumer duping aspect of it. Now we're in the worst of all worlds where they're actually subsidizing human rights atrocities, selling you and your privacy down the river as a condition for them doing business in China. Nate Blacharczyk and the other co-founders of Airbnb get to be billionaires in the back of it,

Starting point is 01:40:34 but leaving the everyday consumer here believing that they're looking after their societal interests when in fact it was all bogus in the two-faced behavior that we're seeing between how they actually behave in China versus how they behave here. I think it borders on fraud. I think it is a direct product of China calling our bluff, our own addiction to what we thought

Starting point is 01:40:53 of as capitalism, they weaponized back against us to actually advance the agenda that was you're seeing Xi Jinping's true colors now show, the communist and dictatorial agenda using the temporary, and it was, I think, a fleeting engagement in playing the rules of global capitalism to really just create the vectors that, I think, plant the seeds from our demise from within. And I know that sounds dramatic and overwrought, but I think if you just look at – if you just look at – I mean this is not a conspiracy theory. It's a conspiracy reality hiding in plain sight. And I think the later we wake up to it and the later we do something about it, the more we're heading towards an inevitable shift in the balance of global power between the United States and China.

Starting point is 01:41:34 Do you guys go short companies or are you only long on that? Not yet. I mean back in my old career. So my first job is my third career. I can say it's my fourth career, I guess. My first career was as a hedge fund person. So I was a partner in a hedge fund, did that from 2007 to 2014. I spent three of those years at the same time in law school. That's when I kind of got my law degree on the side. That was just for fun. But I was a biotech investor, you know, foremost from 2007 to 2014. That was long short. So I lived in that world. So I stepped down from that job to start the biotech company that I led. So I did that for seven years from 2014 to 2021, stepped down to then do the author thing, do the writer writing and speaking and thought leadership thing. And I really enjoyed that. It did that for two years, but then got back to starting this company.

Starting point is 01:42:22 What you're almost doing is you're putting a social, geopolitical, ethical ethos, whatever you want to call it, kind of viewpoint or vector on top of it. And you're basically saying there is a argument that if everyone was playing with perfect information, they knew all these things about these companies are doing or whatever, then you could actually get an edge in investing in the market because that would have an impact on how these companies perform. You know, I would say that's a couple of things about that. I mean, I think that it's not clear that just because Airbnb does this, it's going to be a less successful company. It might be a more successful company. So I'm not sure that shorting that just because you don't like it, just because you don't like the way a company behaves. If the users knew it. But if the users knew it.

Starting point is 01:43:01 Right. That's what I'm saying. If it's a perfect set, if it's a perfect information set. I'll give you another – just to sort of go on a side tangent here, but I'll give you another area where something like this might be more even on the money here. So are you familiar with the notion of Chinese tech stocks that trade on the New York Stock Exchange not actually being stocks? Is this something – These are the – what is it called? Variable interest entities, VIEs.

Starting point is 01:43:26 Yeah, yeah, yeah, yeah, yeah. So this is the part that shocks me, right? You think about like the regulators, you know, investor protection and all of that, you'll hear, okay, well, let's talk about investor protection here. So China's about to, I mean, I think in the coming years about to invade Taiwan. I wrote about this, you know, last couple of weeks. That's something we should probably talk about. But I think that's one of the unseen investment risks, underappreciated investment risks, probably coming sometime in the next half decade, okay? Anyway, what are one of the risks that we might be able to think are foreseeable risks that's

Starting point is 01:43:55 hiding in plain sight? Well, most people who invest in Alibaba, for good reason, the ticker is BABA after all, think that they own a share of Alibaba. Or most people that invest in Tencent think that they own a share of Tencent. Here's the bad news. You don't actually own a share of Tencent or Alibaba if you're an American investor that thinks you're buying Tencent or Alibaba on the New York Stock Exchange. Why is that? Because there's a Chinese law that says that for certain sectors, including the tech sector, you can't be a foreign owner of a Chinese company. It doesn't work. Can't be a non-Chinese national who owns that company. So what did a bunch of these financial institutions in the US do? They created what are called these variable interest entities. What's

Starting point is 01:44:41 that? It's a Cayman Shell company that has a contract with Alibaba or with Tencent to receive a stream of profits. And that Cayman Shell Company is what masquerades as a share of Alibaba or Tencent on the New York Stock Exchange or wherever else that investors can actually buy. The problem is that contract is itself invalid under Chinese law because there's a different provision of Chinese law that says that any contract written to sidestep a legal prohibition is itself invalid. And how do we know that it's actually invalid? Chinese courts have held in certain cases where that's been litigated, that those contracts are invalid, including, by the way, even in the case of Alibaba, where Yahoo, actually, this is a big, funny enough case

Starting point is 01:45:26 because you can do this kind of thing in China. Jack Ma says that, you know what, the most valuable part of Alibaba's business or one of the most valuable parts is Alipay. Let me just take it out and call it financial and put that under 100% owned company that I own 100% of. Well, Yahoo was a shareholder in Alibaba and didn't like that very much, so they tried to sue, in which case the Chinese courts actually say, well, you don't actually have an ability to sue because your whole entitlement to owning a share in Alibaba was itself illegal under Chinese law. So already been demonstrated how farcical this is. And by the way, Jack Ma almost got to take Ant Financial again because US investors were still going to eat that up, notwithstanding that

Starting point is 01:45:59 having happened to Yahoo. Crazy if you think about it. But when China invades Taiwan and the US takes steps towards retaliating in some way economically or otherwise, an easy thing for China to be able to do is to say that, you know, the one to two trillion dollars of market capitalization of Chinese stocks that trade on your exchanges that are really just variable interest entities? You know, I know we haven't enforced that very much, but we're just going to tell you that that's wiped out. That's illegal under Chinese law. And those investors are left holding worthless instruments. You might say that we'd go to the WTO and say that, hey, World Trade Organization, you admitted China, aren't they foul playing here? And actually,

Starting point is 01:46:43 they would say, well, actually, Chinese law has been pretty clear for a long time. So under Chinese law, that was an invalid contract all the way along. I believe the WTO is likely to side with China on that. That's an investment risk. That's a geopolitical view, an underappreciated risk, an underappreciated risk because of the, let's just say, the beholden, the ways in which these financial institutions like BlackRock and others are beholden to China. I think that if they warned investors about this risk explicitly, I don't think the CCP would like that very much. If the CCP doesn't like that very much, then they're going to say that you can't be an asset manager in China. You have an undereducated investing public. Does that create opportunities for risk mitigation,

Starting point is 01:47:23 for protection, et cetera? I think it does. I think it can. But my view is if you want to be an active fund manager, generating alpha is a really hard thing to do. I spent my first part of my career, you know, having some success as a biotech investor, you know, generating alpha is hard. So I'm a big skeptic of, of just sort of armchair quarterbacking and alpha thesis. But that's why, you know, this business is almost a very different business from running edge fund. It's really running a company that offers a financial product that just offers beta exposure to the market. But we're focusing more on the voice and vote. And, you know, in the future, we might have actively managed products as well. That's something we're contemplating for next

Starting point is 01:48:05 year. But you know, at that time, that would be the case where we would sort of take advantage of the market inefficiencies. But for now, we're just focusing on voice and vote to get off the ground. If China invaded Taiwan, what do you think the US would do? Great question. So so we I mean, I have a lot of views on this. I think it's I got a lot of time. I think it's pretty, I think it's a pretty important topic that people are way undereducated about. So Once Nancy Pelosi visited and nothing happened, I think people are like, ah, it's not going to happen. Yeah, well, I don't know. Right?

Starting point is 01:48:36 I think that's kind of the sentiment online. I think it's like way undereducated. So, yeah, forget online. Yeah, yeah, yeah. I mean, you get what you pay for online. Yeah, that's my read. Let's do a little like a brief history lesson here. All right.

Starting point is 01:48:50 So how does Taiwan get outside of China? Yeah, so it's a brief history lesson just because history teaches us a lot. If you view the present a little bit differently, if you have at least some historical context. So, you know, like the Qing Dynasty, the Ming Dynasty, the end of the Chinese Empire, that was kind of, you know, pre-World War I, 1910s, early 1910s, 1912. That's kind of what's going on in China. Now, Sun Yat-sen is this guy who actually goes and camps out in Singapore. So think about Taiwan is outside China.

Starting point is 01:49:18 I want to come back to that. Singapore is even further away. Sun Yat-sen goes all the way down to then critique actually the empire and sort of sends a bunch of missives that basically caused the empire itself to come crumbling down now what happens in the wake is you kind of have two parties you have the the chinese communist party and you have the the chinese nationalist party and there's a power struggle for who actually holds the keys to power and there's this chinese civil war that starts you know i'm getting the i mean i'm i you know i didn't refresh myself before this but let's call it 1920s you know

Starting point is 01:49:47 thereabouts i'm gonna get this about right um post-world war one chinese civil war between the two factions that civil war continues till about like the beginning of 1937 when they put that on pause when japan actually makes its invasion on china so people europeans think about world war ii is actually beginning 1939 well the japan china theater actually begins starts to begin the clock on world war ii a little bit earlier around 1937 they put the civil war on pause and they said we're going to be united front against fighting against japan but then after World War II ends, you know, famously, when the story of World War II ends, 1945, they go back to warring factions. And then they go for four more years of civil war. And Chiang Kai-shek, who

Starting point is 01:50:26 Chiang Kai-shek, who basically leads the nationalist faction, loses out to Mao Zedong, who is the leader of the Communist Chinese Party. So Chiang Kai-shek flees to Taiwan. But his objective in fleeing to Taiwan wasn't to sort of set up a new nation, a new country there, but to sort of set up a campground or sort of a holding pattern for planning his retakeover of china mainly china because they were in a power struggle remember for who controlled china if you watch game of thrones or you watch game of thrones or is that i haven't watched it but i mean whatever i was like the equivalent of like dragon stone as like a waiting stone island if any for any viewer who's familiar with that but whatever it's a waiting house for then taking over so if china views

Starting point is 01:51:05 this as unfinished business in its civil war right it was a dissident camp this is unfinished business that they need to tie up. Now, Taiwan does something interesting. Chiang Kai-shek actually, and there's a number of interesting dynamics in Taiwan that people forget about too, is that there was actually an indigenous Taiwanese population. So most of Taiwan and the Taiwanese party that Chiang Kai-shek actually led in the nationalist party that came over to Taiwan, they were actually Chinese people that sort of took control of this island. So there's this whole separate dynamic in Taiwan too, between the native Taiwanese and between the native Taiwanese and the Chinese the internationalist party that came over. But nonetheless, he sets an agenda, rules with an

Starting point is 01:51:45 iron fist of his own, and decides to place his bets on the semiconductor industry. So that's where we want to be a leader. Turns out, that becomes a really important leadership position. A really good bet that pays off pretty well. Taiwan then becomes the world's leading fountainhead for producing semiconductors, starting with the biggest of those companies, TSMC, which manufacturers, basically the majority of the world's leading edge semiconductors. So like the way semiconductors are basically the chips that power our iPhones, our TVs, our computers, even the refrigerators that probably kept this bottle of water cold before we're drinking it, powered by semiconductors. And the way a semiconductor works is that, depends on how much detail you

Starting point is 01:52:26 want to get into here, but you can pack more onto a chip, the smaller the transistor is. And so in the United States, we make like 10 to 20 nanometer sort of transistors, semiconductors. That's kind of the most advanced we've gotten to today. In Taiwan, TSMC gets to single-digit nanometers, 7 meters, maybe even sub-7 nanometers semiconductors where you're talking about the width of the transistor, which means you can fit more transistors on a chip, which in turn gives it a lot more power. So that's what you call leading-edge semiconductors. Taiwan is like the leading island for producing these semiconductors for the global supply chain globally, including Apple relying heavily, all the major companies you'd know, relying for leading-edge semiconductors from Taiwan.

Starting point is 01:53:06 And even the best military equipment relies on more advanced semiconductors. So Taiwan becomes this leader. Now, China still has this piece of unfinished business, but something's happened in the meantime. Both China and the US, the economies, as we know it, our modern way of life comes to depend on the semiconductors produced in Taiwan. So China adopts this industrial policy, pouring a bunch of money into the semiconductor industry

Starting point is 01:53:31 with mixed results. And it's still, to me, as somewhat of an observer of this space, a little bit opaque as to how well China is actually doing on this front. Some reports say that they're actually making progress on 7-nanometer semiconductors. Others say that actually they've launched these corruption investigations which is usually a sign that something didn't work in the CCP as they investigate the people who did it for corruption. They actually were just failed at doing it. So that's what China's

Starting point is 01:53:58 doing. Meanwhile, in the United States, we got the CHIPS Act, $52 billion CHIPS Act passed here, et cetera. We could debate the merits of that policy, but that's what's going on. But what's actually economically at stake for the invasion of Taiwan is control of that semiconductor supply chain. It's actually related to the theme of one of the more recent funds that we launched, one of our most recent funds is a fund called SHOC, S-H-O-C, preparing for the shock to the global financial system if and when China does make its move to annex Taiwan. Because if China makes that move to annex Taiwan, what people in the United States miss is that if China controls the global semiconductor supply chain, what that means is that we may lack access, American

Starting point is 01:54:41 companies may like access to produce the very goods that we rely on for our modern way of life, that's going to be a shock to the system. Most of the market is going to probably react very poorly to that. I think that's not a controversial thing to say. But the one potential glimmer of hope in that scenario could be the US semiconductor stocks, if those companies actually step up to the plate and start shoring up their domestic production capabilities starting now, which they're not ready to do. And the irony, though, is this kind of relates to the earlier part of the conversation we had, is the top shareholders of those companies, companies like BlackRock, that will add Intel to its climate-focused universe. So Intel is part of BlackRock's

Starting point is 01:55:23 so-called climate-focused universe, the universe of stocks that need to focus more on emissions caps, have underprepared and underengaged with these companies to say a peep about this actual risk, surprisingly quiet about it. And so that's what we point out with Chakas. Strive doesn't do business in China. We're not beholden to whether China is going to be happy with what we're saying or not. But SHOC is a US semiconductor index fund, a fund that tracks the underlying index of US semiconductor companies, where we tell those companies, focusing on long run value, this is a risk and opportunity to prepare ahead of China's invasion of Taiwan. Now, when and how is China going to do it? We could debate that extensively. I have a lot of

Starting point is 01:56:01 views on that. But this is probably, I think it's probably one of the biggest, if not the biggest risk factor, if you ask me, that the investing public is undereducated on is the likelihood. And by the way, we're chatting at an interesting month right now. This is the month that Xi Jinping is literally taking over his third term as leader of the CCP, breaking the chain of succession in the CCP. It's a big deal. He's now going to become, as of this week, actually becomes the longest serving Chinese leader since Mao Zedong. He wasn't going to actually go for Taiwan. And I've been saying – I've said this for a long time. He wasn't going to go for Taiwan before he took that third term over this October because that was a big deal.

Starting point is 01:56:41 Did not want to take any risk of internal instability. International backlash could be a source of instability. But now that he has that grip on power, I think that starts the clock for when he's likely to make that move on Taiwan. And I think the global financial system is undereducated and underprepared for it precisely because of this semiconductor issue. Talk a little bit about the agreement between Taiwan and China and the independence, but the independence expires. That's right. And when does that happen and how does that play into the calculation as to if and when China would make a move? So China says what they want to get to is a one country, two systems model like they had for Hong Kong, although that agreement itself has slowly dissolved, right?

Starting point is 01:57:24 So I think they want Taiwan to go the direction of Hong Kong. First, bring it into the orbit, one country, two systems, but then eventually, as we're seeing with Hong Kong, dissolving that as well. I can't get into Xi Jinping's head, but I think those who are scholars in the area, I think point to 2049 as kind of the drop-dead date for doing this.

Starting point is 01:57:45 Why 2049? That's the 100-year anniversary of when the Chinese Civil War ended with Chiang Kai-shek fleeing to Taiwan. They think of these 100-year time rises. I don't think he wants to get to that 100-year anniversary without tying up that piece of unfinished business. I think there are scenarios where it could happen much, much, much sooner than that. I mean there's a Taiwanese presidential election where a new Taiwanese president takes office in May of 2024. There's a US presidential election where there's a new US president, I could remind you, who could take office as soon as January 2025.

Starting point is 01:58:19 It's entirely possible Xi Jinping doesn't want to take either of those risks, right? And now he's past his, you know, past his date of taking that third term over. So I think the clock is actively ticking. And this is a big risk factor. So, I mean, what can you do as an asset manager? OK, you offer an index fund for the semiconductor index, where if U.S. semiconductor stocks outperform in that scenario, great, that's a good way for investors to possibly hedge their portfolio, fine.

Starting point is 01:58:42 But geopolitically, what do we do? That's actually a much more complicated question. What do you think the U.S. would do? So I'm debating, I go back and forth on this. I think that there's a couple of complicated considerations. I think it depends on whether you think China cares more about finishing its unfinished business of reunifying – that's what they call it, reunification of Taiwan and the unfinished business of its civil war. Do they care more about that as a national pride issue and a domestic piece of cultural unfinished business more than they care about owning the global semiconductor supply chain, which gives them a great competitive advantage on a forward-looking basis? So if they care about the backward-looking finishing business more, that dictates one U.S. policy, and I'll say what that is.

Starting point is 01:59:29 If they care more about the forward-looking great power struggle with the United States, which allows them to control the global semiconductor supply chain, that dictates a different policy in the United States. So I can go through each in turn. Let's say it's the latter, that they care more about the global semiconductor supply chain and the great power struggle with the United States. My gut is I think that's what Xi Jinping probably cares more about, looking to the future than to the past. in this case i think it becomes really important for the u.s to do two things one is shore up our own domestic semiconductor production capabilities now and do it in the meantime make sure that they don't invade taiwan full stop okay there's some extreme things one could do here i mean there's some interesting ideas i mean you could buy those semiconductor

Starting point is 02:00:10 companies in taiwan locks the u.s government could buy them or fund other parties to buy them bring those companies over here and prepare for that now. Get ahead of that. And by the way, China's probably not militarily quite ready to take over Taiwan in the next six to 12 months, but 12 months onward, all bets are off. That's something the US could do. The US also, by the way, has, I think, this harebrained policy in the US Navy right now of the divest to invest program, where we are literally actively decommissioning ships. You talk about that Nancy Pelosi visit to Taiwan, the very ships that we flaunted in that China-Taiwan strait, the Taiwanese strait, are probably going to be decommissioned by the time that China actually invades Taiwan. Because

Starting point is 02:00:54 the divest-invest program says we need to up the game of our fleet. The technological advances were behind. That's going to only happen after 2030. So I think Xi Jinping is looking at for when are we going to be at a nadir at our actual naval fleet versus, by the way, China's navy has actually surpassed that of the United States measured by number of ships in the fleet. when is that delta going to be highest that could be a pretty good window to go to that could be in the 2025 2026 2027 time frame is he anticipating military war is it i don't think either side wants military war yeah i don't think either side wants military war so i think the way this works in the version of the world where china cares more about upending the united states one-upping the

Starting point is 02:01:32 united states on having control of the semiconductor supply chain is something like this china waits for you know some window either maybe it's before the taiwanese election maybe it's before the u.s presidential election, or maybe they wait for both of those to hit the U.S. to hit a nadir on our naval capabilities as part of our divest to invest program nadir. But somewhere in that window, let's call it the next five-ish years, they probably blockade Taiwan. And then Xi Jinping at some point picks up the phone, calls the Taiwanese president, says, OK, here's how it's going to go down. You're going to be completely blockaded from your economy is going to be sequestered from the rest of the world. We've militarily blockaded you. And on the other hand,

Starting point is 02:02:10 if you rejoin like we did and this is where the history matters by the way remember that civil war i told you they were in civil war for 20 years they still joined forces to stand up to japan they put that on pause for eight years before going back to war so one of those moments of let's reunify here's what i can do for you personally here's what i can do and will do for your people let's make this one nation again or else you're going to be blockaded and isolated and it's going to be hell and miserable for you and by the way if you don't do it we're just going to invade anyway i think it's possible depending on what the carrots and sticks are in that that they would have a peaceful reunification, to borrow Xi Jinping's – I cringe as I use that word.

Starting point is 02:02:46 But from a China perspective, achieve that reunification. And then they show up to the United States and say, hey, guess what? Rules have changed a little bit, guys. We have a grand bargain for you. I don't think they want to go to war with the United States. I think we have a grand bargain for you. You know all that intellectual property we've been trying to steal by planting moles in your companies and people running around with notebooks and flying back to China? I mean, that wasn't working too well for us anyway. It wasn't that way of great of stealing intellectual property anyway. Here's the grand bargain. We make your stuff and you give us your IP. See, if China came to us with that grand bargain, we would laugh them off the stage

Starting point is 02:03:21 because we can still have our stuff made somewhere else, but we can't have our semiconductors made somewhere else. And our modern way of electronic modern life depends on the semiconductors. This is what puts China in the position to come to that grand bargain and say that, okay, now we've got Taiwan. We did it peacefully. China doesn't want to go to war with Taiwan because if there's a risk that even TSMC is destroyed. China's screwed then too. Both China and the US probably go into depression in that scenario. Okay. And Taiwan calls TSMC and their semiconductor industry their silicon shield. What does that mean? They're effectively implying that they would kind of, it's like holding a gun to your own head as hostage, almost like they would turn the lights

Starting point is 02:03:56 off if China did invade. And that screws both China and the US enough. But if China is able to do the bear hug approach, to be able to peacefully do this on a negotiated basis with Taiwan, that allows them to, I think, achieve the real grand bargain with the United States. And what would it look like for the U.S. to send IP there? Well, I mean, everything that we invest in, our competitive advantage on the global stage is then gone. We then share that competitive advantage with China. So our knowledge economy, our key competitive advantage economically on the global stage

Starting point is 02:04:24 is completely a shared asset then with China. And China then achieves what its long run next step is, which isn't to be the global single global hegemon. That's maybe the thousand year plan, but they achieved the hundred year plan, which is to be on equal parity and footing with the United States. We're mutually codependent on one another. Wasn't where the U.S. was 20 years ago. Wasn't where the U.S. was 10 years ago. Isn't even where the U.S. is now. We have the upper hand. That changes. That's the version of the world where they care more about actually achieving parity with the United States. And I think that's the

Starting point is 02:04:53 right state of the world. But I go back and forth. When you look at this through the Chinese historical lens, does he care more about the Chinese history and the nationalistic identity and finishing Mao Zedong's unfinished work. In that view of the world, the story completely changes. And it's kind of fascinating. Where he doesn't care about the semiconductor industry. He cares about this unfinished business between the Chinese Civil War,

Starting point is 02:05:16 between Mao Zedong and Chiang Kai-shek. And we need to reunify for the sake of that legacy. And if he cares about that more, the thing you do in China is say, let the U.S. have the semiconductors. Wait for the U.S. to achieve self-sufficiency on the semiconductor industry like give the u.s time to catch up such that when we do go for taiwan they don't care they're not going to stop us so i think it really matters to understand which

Starting point is 02:05:40 xi jinping is it would be wild it seems to care more about that unfinished business unfinished business it would but we don't but we don't understand then controlling the that's why i don't think that i don't think that's what's going on here but but this is so important that you've just got to try on each set of clothes each lens and see it and and the funny thing is you try on the two sets of lenses here it's a totally different answer in terms of what we're supposed to do and what china would do yeah i've i've never heard anyone talk about the blockade and then uh the negotiated uh i think that's what's gonna happen approach and when that happens i guess what becomes interesting about it is like you basically have to do it so

Starting point is 02:06:24 quickly that the u.s doesn't have time to act to you know break the blockade or engage in any sort of military fight which i don't think the appetite on either side to your point uh appears at least from the information we have publicly uh to be that high um but if there is that uh uh coming together there was you know reunification or whatever you mentioned the civil war well when they came together and paused that civil war it was a pause for eight years and they fought and And then they went back to the Civil War. Is the thought process here that the olive branch would be let's come together for five or ten years. Let's fight the U.S. together.

Starting point is 02:07:03 I don't think it's that. I think that if he's prioritizing this, it would be kind of this is the end game, the reunification. And they have their thousand-year strategy to supersede the United States. But we're talking on century rather than millennial time frames. This is a pretty good destination. We're at equal parity with the United States. We control the global semiconductor supply chain. and we've achieved reunification, get that grand bargain, and we're co-equals.

Starting point is 02:07:26 I don't think China wants to go to war. And I don't think the U.S. wants to go to war. Who would win? So it's a good question. It's a good question right now. I think the conventional wisdom, and so I've gotten to know a lot of the top U.S. policymakers, people who served in the last administration, people who are knowledgeable about this. They will all tell me until their face goes blue that the U.S. is definitely set up to win this.

Starting point is 02:07:50 I'm not so sure, actually. When you look at the naval capabilities, they have a bigger navy than ours. Ships aren't everything. Quality matters too, but I think a lot of their ships are also more technologically enabled than ours. That's why we are embarking on this divest-to-invest program. We're literally on a downward slope right now in our naval capabilities. So it depends on how much military strategy we want to get into here, but I think that this is where India comes into the story. It's kind of interesting.

Starting point is 02:08:19 I haven't had this kind of in-depth conversation. This is fun for me. But if we're getting too detailed, just tell me. Why does India matter? So this is where China's vulnerability comes in, is they still need to get their oil supplies from the Middle East. That goes through the Indian Ocean. So if India sides with the United States, I think China loses.

Starting point is 02:08:46 If India sides with China, I think China wins. And so this is kind of complicated. But if India is lock, stock, and barrel with the United States, what the United States would want India to do and partner with India to do is to blockade that Indian Ocean passageway for just like Middle Eastern oil to get to China and other supplies crossing through the Indian Ocean. Now, I think this gets to another question of what the Chinese prioritization is. do they care more about Taiwan or do they care more about some of those regions in northern India that they took over in the Indo-Chinese wars in the latter half of the 20th century? They took over a lot of territories in northeast India, areas of Ladakh. You talk about what's happening in Tibet. I mean, China does care about that. They fought wars to secure that added

Starting point is 02:09:35 territory. But the only version of the world in which India, I think, doesn't go with the United States. I mean, India and the U.S. should be natural allies, but there's a complicated history with some love lost there based on the U.S.'s support of Pakistan during the Cold War vis-a-vis Russia, right? So, you know, India and Pakistan are famously, you know, arch enemies or historically have been arch enemies. One quick comment on this. I went to India and I was blown away that they have the ceremonial face-off at the border every single, I think it's morning and night. That's right and uh i was watching a video somebody's explaining to me everything yeah yeah and i was like wait hold on a second here so like they actually don't like each other but they still

Starting point is 02:10:17 like cooperate in the ceremonial thing or whatever and i was like play like sports or cricket they have like cricket matches between the two i was like holy shit like i don't understand like i'm just like so out of my element but it just fascinated me that has its own history and you know i think that i think that it's gone through rocker times and more peaceable times but the India-Pakistan rivalry is well known. But that dates back to the Cold War where the United States actually sided more with arming Pakistan because India was perceived to be more allied with the Soviet Union. And so that, I think, has eroded what otherwise should and would have been a natural trust

Starting point is 02:10:47 between, I think, global democracies like Israel, India, Japan, United States, Australia. I think that there's a possibility for a deeper allegiance between the world's self-governing democratic nations than has obtained in the past. NATO, I think, is outdated in its relevance relative to, I think, what I think could be a pan-democratic alliance vis-a-vis checking China's power. That's where the U.S., I think, should go because the Indian Ocean matters in the battle versus Taiwan. Now, let's say that India gets the deal done with China in reverse to get, say, those territories

Starting point is 02:11:18 back, some sort of peace agreement for India to get what it needs out of China and is more skeptical of the United States as a reliable partner, then I think China wins the war because with the US over Taiwan. And the US may even conclude that, which is why the US may not even go to war over Taiwan. So I think if you ask the question of who's going to win, I think China has an edge on us on the ships. China has an edge on us even in supersonic missiles. This is another area where the United States is dramatically behind is in our supersonic missile capabilities. These are missiles that travel faster than the speed of sound and can carry nuclear warheads if necessary. You know, war is a game of poker, right? Which you ultimately play the hand you

Starting point is 02:12:00 have. I think the U.S. has a weaker hand than we realize in our military. It's not 1946 anymore, right? And so I think that that, you know, tips into the calculus, which makes India's ability to potentially blockade the Indian Ocean a big factor in whether or not the U.S. is in a position to actually win a putative war that we'd go to in Taiwan. But I think it's all that's going to happen more or less in a negotiated settlement in the shadow of what each side believes its hand is in the case of actually going to war which um in conflict uh there's a navy seal marcus latrell who he's got this uh famous uh video went super viral on the internet uh and what he talks about is he says you know uh i'm a war fighter right he goes i do some nasty shit i was trained by my government

Starting point is 02:12:48 to do that nasty shit you better spend every single waking second doing everything you can possibly do on the diplomatic front before you call me because when you send me i'm bringing hell fury and death to wherever you send me i'm gonna be really honest i i i'm happy to hear people like that still exist in our military that sounds pretty good to me yeah because we're gonna need them that's what they're doing on the other side and so this is a guy who uh uh the movie lone survivor he is the lone survivor he's the guy he's one of the the four seals who ends up surviving so he's been through a lot of shit and all stuff and his point in this is uh everyone wants when conflict arise let's send the military right the military the military all this stuff

Starting point is 02:13:31 and he's like listen you don't understand what that entails you should try everything else and this is the last resort the violence is the last resort because it's nasty yep and it feeds into you know uh uh there's all the controversy around the seal training now and kind of all the crazy craziness uh about how it's too hard yeah of course i mean there was this there was this yale kid who you know joined and then died during training and yes yeah and so that i've had seals on we've talked about it right like all these different things but what i think it ultimately just feeds back to is this thing of like if we are going to go to war uh that has to be the last resort right and the reason why we want to have people who are trained in a certain way is because

Starting point is 02:14:12 we were asking them to do the most impossible task in the world yeah and so the diplomatic kind of uh game theory the chess becomes incredibly important vital vital because actually in the outcome like disparity like 90 of the outcomes are not total military conflict totally diplomatic one shade of difference and just understanding i mean if i had one wish of what i would want to know right let's say let's say i'm you know calling the shots here and someone else calling the shots there the thing i would in to see the person's calling the shots for us, the number one factor that we need to understand is which is Xi Jinping's higher priority. Is it achieving his unfinished business from the Chinese civil war of the 20th century,

Starting point is 02:14:55 or is it gaining the technological upper hand in semiconductor production when it comes to the great power struggle with the United States in the 21st century? If we know which one he prioritizes more, and by the way, it's increasingly about this one man, right? It used to be the party system, but he's now taken this third term over. I mean, China's really heading to, is already, as of this month, I think basically an autocratic state. If we understand what that prioritization is, we're going to be able to make a better decision. Either way, the path runs through self-reliance for us in the semiconductor industry is the thing that we need to do to prepare for either a wartime scenario where TSMC is blown up or whatever, or a scenario where

Starting point is 02:15:35 China's just, 10, hurry up guys, get it done already so that we know that you're not going actually go to war over this so we can invade Taiwan. In either of the two scenarios, that's what this points to. And more mundane matters, but as it relates to capital markets, great way for investors to also at least achieve a hedge and protect themselves. That's why we created this index fund, et cetera. But that's just boring commercial stuff. But I think that the substance of this, of how the US policymakers are to respond, I think depends on which Xi Jinping shows up when it comes to the debate about what they do in taiwan until very recently even still i would say that like it's so hard for me to be imagine being in his shoes to say that it would

Starting point is 02:16:17 be anything other than the forward-looking approach but it that that view presumes a hubris to think that he would think like you or i would think or like an average american would think when he has very complex motivations i mean i've been reading i've been studying his own biography for that reason a little bit more i mean it's a very complication relation complicated relationship with mal are you familiar with this uh not with their relationship no so his his father was persecuted by mal and he was like banished to the countryside and you know his family was actually as part of the cultural revolution was was actually like physically harassed etc by students he didn't see his dad his dad went to be tortured he only saw his dad much later in life

Starting point is 02:17:02 and his dad, you know, barely didn't recognize his kids. I mean, he had clearly been through a lot that no one knows exactly what he went through. There was one instance where apparently Xi Jinping had to, like, wear, like, a tin hat of shame on his head in front of a large audience that was sort of insulting him as a child of sort of the elite class that Mao Zedong actually encouraged the students

Starting point is 02:17:21 in the uprising of the Cultural Revolution to turn against. And so he has this complicated relationship with Mao, but then he also kind of idolizes Mao. and even some of the clothing he wears emulates the kind of clothing that Mao wore and so it's this complicated daddy complex that he's got with Mao and I don't have all the answers yet

Starting point is 02:17:44 but I think we've got to be able to put ourselves in his shoes to understand whether he cares more about besting the United States or about completing that unfinished business whatever Freudian analysis there is to do I think human beings are human beings in the end whether they're Chinese or American, and a lot of their motivations date back to their childhood and their upbringing, and there's a lot going on in his childhood and upbringing. If we can just understand that better, I think we can make vastly better decisions that could save lives,

Starting point is 02:18:14 save our economy, if we can be more precise about wrapping our head around that. And that's why, I mean, it's kind of, I would like to hope that there are, that this is what our policymakers in the state department etc focused on uh you'd hope but you know i mean i'm one citizen among many trying to learn as much as i can about this did you read uh the long game uh it's uh i didn't read it but i'm familiar with it yeah what was the theme was it it's difficult to read um i've read most of it kind of dense uh super dense it's translated i mean it's just like it's just if you're gonna read anything this is like one of the harder things to read but uh one of the big takeaways is just the long-term thinking right i mean and it's just like and it's like little

Starting point is 02:18:54 things it's not even explicit all the time but like all of these components and i was recently having a conversation uh uh with a friend and and he kept talking about uh if that compounds for 20 years and and and it blew me away because i don't have a lot of friends who think uh about you know 10 or 20 year time frames right and then 100 years in contrast of you know these guys think a hundred and thousand years and so it was like oh wow like this person that i really respect uh here in the united states he thinks in 10 and 20 year time frames like amazing how of a long-term thinker and it's just a different game it's a different mentality here's the interesting part about this though and on the bright side for us from an american perspective at least is

Starting point is 02:19:34 when you combine autocratic hubris with long-term thinking you can actually get to dangerous places for yourself too, right? Because short-term mistakes, yeah, at least the short term I can foresee, but she should be, okay, well now I'm really in charge and I, everything's going to go exactly as I planned for a thousand years. That's the demise of most autocracies is the ego and the hubris of the guy who thinks he has it all mapped out. So in a certain sense, that could also be, it could be their strength can be their Achilles heel too. And so there's a lot of kinks in our system that they know how to exploit, right? That Trojan horse, our love for that Trojan horse that they served us up that i talked about earlier but there are kinks in their system too

Starting point is 02:20:14 and i think a lot of that relates to the ego and the psychological and personal motivations of xi jinping like let's say i mean let's let's say it was that second state of the world where he actually cares more about closing up his unfinished business and and you know the mao daddy complex that he has and and you know invading taiwan for that or peacefully annexing taiwan or whatever for that reason that'd be a big boon for the united states because that means he's letting us and giving us the opportunity to build up our semiconductor industry because his priority is to know that once we're self-sufficient enough, he knows that we're not going to get in his way. That actually might actually be in the great power struggle what would give us that

Starting point is 02:20:51 competitive advantage. So I'm not sure that's where his headspace is on that narrow issue. But history would teach us that it is the hubris of the autocratic dictator who thinks he's also able to plan for 100, 1,000 years that actually leads to the ultimate demise in their calculus. And so far, it's worked all right for his rise. But there will be a point in time where that could itself be a vulnerability too. So we have kinks in our system and kinks in our armor, but they have some kinks in theirs too. And I think the more aware we are of theirs, I think we're less aware of theirs than they are of ours. But the more awareness we gain of theirs, the more we're going to be able to make effective military decisions and economic decisions. Last thing

Starting point is 02:21:25 I want to talk about, Bitcoin. I have no clue what your views on Bitcoin are. Positive, negative, anywhere in between? I'm still figuring it out. So I'm not shy about spouting off in areas where I think I have expertise, which are diverse, you know, if I may say so myself. But Bitcoin is not one of them. I'm still like a nascent student. I'll give you my impressions maybe. One of the things I was hoping to do was to learn a little bit from you, even from our chat here. So I'm favorably disposed, very favorably disposed to the idea of having competition with central fiat money.

Starting point is 02:22:04 I think that competition is going to be good for the world. that you would uh be against that so yeah that doesn't surprise me but i'm like quite strongly in favor of of that proposition you know without repeating boring platitudes that you know more of your you know presumably pro-bitcoin audience is already on board with like you know i could maybe focus on one of the areas of of limited um outsider feedback here that i think that the Bitcoin proponents, I worry, ask it to do too much. Interesting. We've sort of put too much on Bitcoin's shoulders, right?

Starting point is 02:22:41 I think the end of competing with fiat money, sort of that as an end, that as a goal, is a worthy enough goal for what that can accomplish for human flourishing and for economic freedom and for autonomy and for even economic prosperity. and keeping central governments in check with respect to Federal Reserve in the United States, et cetera, in check with respect to behaviors that otherwise create a – I think a form of hubris of our own. But I think that sometimes what I hear from Bitcoiners – is that a term you use? Yeah. It's sort of the belief that like when I'm talking about the cultural challenges from ESG to challenges in American culture to these victimhood narratives is Bitcoin is the answer. Decentralization is the answer.

Starting point is 02:23:27 Bitcoin solves this. Bitcoin solves this. And I think that that's asking too much of a currency. I mean, at the end of the day, we're creating a new form of paper, right? It's a new form of paper that competes with the old forms of paper, but gold is still paper.

Starting point is 02:23:40 Bitcoin is still paper. Maybe you don't agree with that, but I think that at the end of the day, these are just different forms of paper that compete with one another. And I think that the idea that that's somehow going to solve challenges that are fundamentally cultural in nature

Starting point is 02:23:55 makes a bit of an error in conflating cultural or normative challenges with technocratic ones. And I think we've got to be careful about that. So what's interesting, you're probably talking to the best and worst person about these because on some aspects, I think that my views align and would be completely 100% agreed upon

Starting point is 02:24:17 with almost any Bitcoiner you would talk to. So many of the things around decentralization, around competition uh with fiat centralized currencies like all of that stuff yeah uh i think i'm in line with and understand uh and agree with the part that uh i think around bitcoin solves this what the bitcoin argument would be is that many of societal problems that we face are all traced back to the corruption of money so if you basically take a first principles approach right uh the argument would be uh why is there an obesity problem in america well you can trace it back through the food system through you know corporate greed through all this and like you

Starting point is 02:24:58 eventually just get to like there's a corruption of money and like if you solve the corruption of money then eventually you can solve that problem right yeah and so like i see that argument yeah right and uh i am sympathetic to that argument i actually in fact would uh like it to be that simple yeah exactly if only it were but but it's a weird thing and where maybe uh i have views that maybe some bitcoiners don't agree with is that like theoretically that is true in reality there's other things there's additional steps and maybe this is kind of what you're getting at which is like yes a first principle solution to that problem is fix the money right so fix the money fix the world is kind of the the mantra yeah and and for the most part like actually like i do

Starting point is 02:25:47 think the corruption of money has like immense negative impacts on all sorts of you know crazy parts of society that don't seem connected but they are but bitcoin alone i don't think is enough to solve some of these problems because you need other solutions as well right and am i wrong or do you get the sense that a lot of bitcoiners kind of believe it is like it is a little bit of like a panacea to it's just a theoretical uh uh it's a theoretical belief that if you simply solve the corruption of money the cascading impact is positive so here's where i am i believe the corruption of money is the source of a lot of problems actually my latest book does talk extensively about this even in the modern american context however i don't believe it's responsible

Starting point is 02:26:32 for all of our problems and i think that a different there's a different problem that i'm focused on uh that i focused on my first book which is that i also think there's a problem going on in in our country in our modern contemporary culture right now which is that you know how old are you man you're 34 34 okay you're younger than i am i'm 37 right but we're part of this generation you're old yeah i'm old exactly late 30s late and early 30s we're both millennial you're millennial right that's still millennial oh yeah okay yeah millennial and younger is we are hungry we're so hungry for a cause we're all so hungry for purpose and meaning and identity and belonging that the kinds of things and we're by the way we're living in a

Starting point is 02:27:14 moment where the sorts of things that used to fill that hunger for purpose and meaning and identity like the f word faith you know patriotism national identity hard work family whatever it might have been. I mean, those things are undoubtedly receding in modern life. And so my theory of the case is that there's a black hole of identity in our generation, in our American moment. And that's what allows the isms to fill the void, woke ism, scientism, which is different from science, right? It's a belief, unquestioning belief in authority. But I worry that actually, if we miss that, reality and just put it all in the corruption of money and there's other there's other views i have too of other fundamental social conundrums one of which is the corruption of

Starting point is 02:28:08 money but but there are others too that if we just pin it all to the corruption of money bitcoin becomes a newism and bitcoinism just like wokeism or scientism or whatever is going to fill that void of hunger and purpose and meaning and identity and sense for belonging that is asking too much of a currency that's not what a currency was supposed to currency supposed to fix the corruption of money by competing in the marketplaces for currencies that's all good i'm like whole hogging on that but i think that where we where we sometimes you know i don't think we as though i'm i feel like a newcomer but but a part of the community anyway but where we sometimes um you know might might veer a little bit is expecting too much out of it by thinking that

Starting point is 02:28:52 that's going to solve problems that are fundamentally normative or moral or cultural in nature and in the process may actually recreate some of the same cultural failures that led us to that led to the esg informed world or that led it to the to the the dei influenced culture or whatever it is that bitcoinism becomes a new substitute secular religion that the thing we love about it is the fact that it's not a religion it's just a rational path to autonomy when it comes to relationship of money right and and and i think we don't need to and i see this a little bit and here's the other place where i sort of see evidence of this a little bit is and you totally correct me if i'm wrong because this is like i said at the beginning of this section not my world

Starting point is 02:29:38 and so i'm still a new student here but it seems to me like sometimes the bitcoiners are trying to play the game in the marketplace of ideas and the debates and the critiques of bitcoin oh no we're green too oh oh no no we're we're doing the diversity thing we have the bitcoin diversity thing and trying too hard to sort of prove to the critics that no no we're one of the good guys when in fact you should just be yourself this is good as being yourself there's a uh a splitting i think kind of if uh you know if bitcoin is the macro idea there are micro factions uh, where, uh, some people are very much, uh, yes, we are, uh, uh, ESG compliant. We are this, we are that we are, you know, all this stuff. We're the good guys, you know, exactly. And then

Starting point is 02:30:23 actually I think probably the people who, uh, are a little bit more hardcore believers, more libertarian in nature, that those types of things, they're like, we reject your framework. We, we, we, you know, fuck you. Do not even praise that on me. Yeah. Just like, like consuming energy is good yeah and i mean by the way part of the reason i find this attractive is precisely because it is outside of the centralized systems yes that enforce that one religious ideology and a religion that i don't want to bend the knee to yeah right so i'm kind of there i'm kind of in that camp and i and i sort of worry a little bit that the bitcoin solves everything movement one of the things that's wrong with it is that it also requires accommodating these other agendas

Starting point is 02:31:07 as a way of proving that bitcoin is compatible with if not causally linked to solving problems relating to racism or climate change when in fact that wasn't what bitcoin was set up to do is set up to solve the corruption of money solve that and do that through competition and be yourself rather than pretending to be something you aren't so that's something that it sounds like i'm not a hundred percent off then and you are closer than you think and i'll even give you kind of a personal anecdote. So over the last number of years, I was very outspoken about Bitcoin and talked about it over and over and over and over again. And at one point, somebody came to me and was like, hey, you don't have Bitcoin in your bio on Twitter. Well, I never thought about

Starting point is 02:31:53 that. I never put an asset in my bio before. But I really respect the person I was talking to. And And they were like, you know, you do whatever you want, but like it may be a good thing for the community. Like, you know, people would know that you're into Bitcoin. I'm like, OK, well, that's pretty much all I tweeted about. But like, OK, put it there. And then the whole laser eyes thing started and a kid DM to me my own photo with laser eyes already on it. And I was like, well, if everyone else is doing it, then like, sure. Right. Like, like, cool, whatever's fine.

Starting point is 02:32:24 And so this all continued. I took the laser eyes off this year. bitcoin out of the bio and i wrote something because when i did it there was like a concern uh-huh did he you know did he leave the religion right i mean church no one said it exactly in those terms but like there was a little bit of like did he sell his bitcoin right did he give up does he not believe anymore is he not a believer and all this and so i wrote a piece and i just said listen uh you know aptly titled uh um you know did i change my mind on bitcoin right just like let's get right to the heart of the issue no uh actually i have more conviction

Starting point is 02:33:00 today than i ever have uh but uh there was somebody who who had uh texted me at one point he said uh why'd you take your laser eyes off i said because i couldn't see with them on as a way to basically say just like listen uh i think i am more valuable in talking about it by being able to walk in and say i don't have laser eyes i don't have my identity tied up in This is so funny. It's not unique to Bitcoin. I think it's unique to our cultural moment where it is this idea that you have to signal the tribe you're a part of. Bitcoin ought not be a tribe. It ought not be a faith. It ought not be a religion. It ought be a currency that competes with fiat money to realize – to solve the problem of the corruption of money, not more, not less. and you know i see this sort of cultishness um like let's just leave bitcoin for a second but

Starting point is 02:33:50 what you just said is like you've seen the republican party with respect to like fealty to like one man you see it in like the tech in certain segments of the of the tech and investing community i think like a lot of the elon musk followership has this quality that if you're not believing in like everything that he spouts off on a given day that somehow you're not allegiant to everything else worthy that he does and like i feel this i i i feel like i smell i smell a little bit of that in the in the uh bitcoin is here's what i would say here's what i would say i am pro bitcoin i i'm i'm in the in the you know what you call the purest pro libertarian don't you impose this centralized set of values on me sense of pro bitcoin and i'm and

Starting point is 02:34:34 I am mildly skeptical of what I call Bitcoinism, which is the religionization of it, that are you with us or are you against us concept. I'm against Bitcoin victimhood culture. I'm against all forms of victimhood culture. You probably got it from some of our earlier discussion. You wrote a book called Nation of Victims. I'm pretty sure that's not your thing. What else are you going to expect? You do something new.

Starting point is 02:35:01 You're going to have arrows coming for you. Toughen up and get over it. I think the Bitcoin community mostly is, but I'm against the religiosity of it. I'm skeptical of the religiosity of it. I'm skeptical of the sort of the victimhood culture that they're coming for us attitude as opposed to figuring out how we actually achieve the solution to the problem of the corruption of money. But at its essence, what the true thing is, I'm all about it. And I think the superstructure we've created, you know, there's the, you use Freudian psychology, there's the id, there's the ego, and then the superego.

Starting point is 02:35:36 I think that for the id, the thing itself, the true essence, I'm all in. For this ego structure that's been created around it, which is the sort of the religiosity and the, you know, the defensiveness of feeling like it's being attacked, I think it's a false structure that's been created. And then, you know, there's the superego, which is the regulators or whatever that say, don't do it. You know, you got to you got to superego always starts with don't, you know, in your head, like when you hear in your own head, you know, don't do X. It's probably your parental voice or whatever telling you not to, you know, not to be the true essence of yourself. I'm against the don't culture as well, which is to say that just because this is new and uncontrollable, that we're going to be against it.

Starting point is 02:36:19 I'm rabidly against that. But I'm also even against the ego shell that's kind of formed around. And that's what I call the Bitcoinism versus the true essence of what it is. That's what I think we've got to stay true to. I find when I have conversations with people both incredibly prominent and also no one even knows that they know anything about Bitcoin, the one commonality is that regardless of where you are on the spectrum of the religiosity, the essence of it is the common thread. and if you had to choose you would want the essence of the technology to be the common thread rather than the religiosity of it right obviously and so uh it gives me hope that uh although what i find fascinating about the entire community is there's uh people on the left people on the right there's people in the center there's people who don't give a shit right there's there's uh

Starting point is 02:37:10 every race religion creed just like everything it's it is uh this unifying thing for so many different types of people that like the power of the crowd actually is uh uh drastically miss uh underestimated or it's just like underestimated by uh both the incumbents and even the community itself of like in 14 years look what's happened so far and you have people all around the world working and i always remind folks like there are tens hundreds of thousands millions of nodes around the world, these mining machines, et cetera, there is no CEO, there's no marketing department, there's no board of directors, there's no, you know, uh, balance sheet, right? It's just a true essence of what it is. It's just a bunch of weirdos on the internet who

Starting point is 02:37:57 all have a common belief in something and they're doing their part, which I think is part of the beauty of, uh, of this. Um, but they're voting their own voice. They're voting their own voice. That's right. That's a, that's a, that's true essence to sort of a strive mission as well. Yes, exactly. Match your voice with your actual capital. That match is what Strive is all about creating. So in that sense, we're deeply, deeply, deeply sort of synchronous and aligned with the Bitcoin mission as well, which I think is which I think is pretty cool. The one area of food for thought, it just occurs to me also, given that we went into such depth with China and Taiwan here, is that I think there's a strand of certainly, you know, the Bitcoin movement that appropriately rejects fetishization of national identities, right? This is transpartisan, as you said, but it's also transnational, right? And that's part of what makes it beautiful is it's a community of people that can transcend national boundaries and reject the oppression of fiat and the corruption of fiat money as a concept wherever that fiat money is coming from. But I would just – I would inject one cautionary note into this, which is to say that in the obsession over the American reluctance to achieve Bitcoin and thereby – I was reading Bitcoin magazine or whatever.

Starting point is 02:39:16 or is that what it's called? Did you read this article about the rise of the petrodollar? It was a pretty good piece. Did you see that one? Yeah, I think Alex Gladstone. Yeah, that sounds about right. Yeah, so I learned a lot from that piece. I thought it was pretty good,

Starting point is 02:39:29 but it had this sort of anti-nationalist streak to it from an American perspective, which I think can lead to a self-defeating place where let's say in that great power struggle, So let's fast forward it. Let's do the Chinese thing and think of longer-term horizons here for a second. Let's fast forward that 200 years. Well, you know who's going to be opposed to decentralized autonomy in non-fiat currency?

Starting point is 02:39:59 It's going to be the future Chinese state. It's the CCP. It's Xi Jinping and his progeny of leadership. And I think that if we're sowing the seeds for – and I don't think we are, but I think we've got to be careful about this. This article had undertones of it, of sort of rejecting the importance of the preservation of American national leadership. Not only is that something that is personally important to me as a category of citizen. I'm sort of weirdly American nationalistic with respect to the ideals that define this nation and all that good stuff. But forget that.

Starting point is 02:40:34 Even from a Bitcoiner perspective, I think a world in which China rather than the United States is the leading hegemon, 2045 is like 1945 except with China in the position of the United States. I don't think it's a good or even tenable future for the future of Bitcoin or anything like it. And I think it's important that people in the transnational – the coolness of it being a transnational community not lose sight of the fact that the boundaries between the nation-states that we have today are still relevant to the future of Bitcoin itself too. And that – the guy who wrote that article, which was otherwise a good piece, I think that's something that he missed. And I don't know if that's representative of the broader community or not. But if it is, that would be one, you know, cautionary note I'd inject into that. Bitcoin is unique in that it has a lot of the American ideals and ethos kind of codified in the system itself. I think so. I think so.

Starting point is 02:41:32 And it's interesting because even if you were to look at like the Bitcoin system and the decentralization, people will talk about the hash rate and mining. And that is an important, almost, you know, I would argue essential piece of Bitcoin and what sets it apart with proof of work and the decentralization. But there's still checks and balances. It's a lot like the American political system, right? Like you have three bodies of the U.S. government in the Bitcoin system. If you want to change rules, you have the miners, you have the nodes, you have the software operators. That's right. And so you get some of these components that I think are just really, really powerful.

Starting point is 02:42:09 And we shouldn't shy away from that. We should – if Bitcoin embodies these American ethos, then we should be a leader. I think so, right? Exactly. But I think that that's the way I would look at it. Yeah. America should want to be a leader. And it's not a zero-sum game.

Starting point is 02:42:25 That doesn't mean that nobody else can be a leader or nobody else can embrace it. It's just like we want to be a leader. So why the heck are we regulating this in a way that rejects the idea that we want to be a leader in going the way of the future? I'm all in on that, and that's exactly the framing I prefer versus the undertone, at least in that little article that I read, It was more in terms of like this idea of the outdatedness of national boundaries and the idea of this new transnational community that transcends the otherwise American corruption that created the petrodollar system that perpetuated war and financed war. So I think he makes some compelling arguments, but I think that that is ultimately a self-defeating route to go all the way down if it ultimately contributes to the rise of other hegemons that supplant the position the United States has filled in a way that's going to be self-defeating for Bitcoin itself. If it was the Human Rights Foundation, Alex Gladstein is the chief strategy officer. If it was him who wrote that, they've been very outspoken about the issues in China.

Starting point is 02:43:25 so it's interesting in that I'm saying it more less in terms of impugning the goal but more in terms of my two cents on tactics to get there makes complete sense where can we send people to find you on the internet

Starting point is 02:43:41 yeah I mean strive.com is a good place to start so strive is the company I founded so that's probably the easiest one to remember but we have vivekramaswami.com where my books are online as well I haven't been a big social media guy but I got on social media a couple years ago with Twitter

Starting point is 02:43:58 you're very good on Twitter Twitter's the only one that I use so I at Vivek G Ramaswamy and check out strive.com if you wanted to know what I'm spending my day job on but if you want my ideas where I'm spouting off about one topic or another

Starting point is 02:44:14 I usually use Twitter as my closet for an idea that I get off my chest once in a while Awesome. Well, listen, thank you so much for your time. I really enjoyed this. I learned a ton. We'll definitely have to do it again in the future. Cool, man. Thanks for having me. Exactly what you need to know to break into the industry, including live interview prep

Starting point is 02:44:55 and resume review. Our students have been hired at over 75 of the world's best Bitcoin and crypto companies. Go to thecryptoacademy.io to learn more. Again, that's thecryptoacademy.io. If you enjoyed today's episode, make sure you share it with your friends, and I'll see you all for the next episode.

The Pomp Podcast - #1109 Vivek Ramaswamy On Using Money As A Weapon

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