The Ricochet Podcast - We're FTXed!

Episode Date: November 18, 2022

Another reminder that glitter doesn't always lead to gold. FTX and its oh-so-scruffy whiz kid have tanked, and they're bringing a lot of risk takers down with them. But some of us can't help but wonder if they were even tricked by actual glitter. If they had been paying attention to Rich Goldberg—host of our Cryptonite podcast—they might've seen it coming. If they tune in today, they might at least learn a lesson or two. And while we're on the subject of misguided expectations, we've invited back Charles McElwee of RealClearPennsylvania. He's here to explain the demographic entanglements that make PA a hard state to call and the mistakes the GOP made that've made us blue these days. And Elon Musk sure has a way of keeping us talking about his new tweet factory. Happy Thanksgiving! See you all in two weeks. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Mr. Gorbachev, tear down this wall. It's the Ricochet Podcast with Peter Robinson and Rob Long. I'm James Lilacs. Today we talk to Charles McAwee about Pennsylvania. What happened? And Rich Goldberg about crypto. What happened? So let's have ourselves a podcast. I can hear you! Welcome, everybody. It's the Ricochet Podcast, number 619. I'm James Lilacs in Minneapolis,

joined by Peter Robinson and Rob Long in their respective locations. And gentlemen, I went to bed last night with a heavy heart, knowing that Twitter was over. They were telling us that the technical teams were gone, the servers were in danger, the cards had been deactivated, and Twitter would be no more. And then I woke up today, and there was Twitter, as ever. I've noticed absolutely no change whatsoever since Elon Musk took over, which is is great because where else would you keep up with the crazy things that are happening in the world including of course our favorite thing crypto meltdowns peter rob welcome thank you james i was like you last night i said a lot of sappy farewells to people on twitter i got up this morning and realized i don't really

even like them that much to to tell you the truth. I take it all back if you're listening. Okay, good. And Rob, too, is in sconce on Twitter, as ever, tweeting a mile a minute. No. But what we're going to do is get right to it. I mentioned crypto. You're probably wondering exactly what that means and how it relates to the show. Well, I am a seasoned crypto investor.

I put $5 into Ethereum, and I think it's worth a relates to the show. Well, I am a seasoned crypto investor. I put $5 into Ethereum, and I think it's worth a penny at the moment. I regarded that as a good learning experience. We've got some guy who knows a lot more about it, Rich Goldberg, senior advisor, the founder for Defensive Democracies, and the host of the podcast, Kryptonite, with Rich Goldberg. And I wonder where you can find that. Oh, right. Ricochet. At that podcast, Cryptonite, he guides listeners through the confusing world of blockchains and digital currencies. And Rich, welcome. We're obviously going to talk about, you know, that guy and that thing. How are you doing? I'm great. It's great to be back. I think the last time I was on was when we were kicking off

and everybody was sky high. FTX was running Super Bowl ads. Everybody was into it. And, you know, we started having a lot of guests on who were painting a little bit of a different picture saying, hey, this might all be a Ponzi scheme. You might want to all be careful. And we really got into it. And as sure as it is, first the crypto winter set in and now FTX. So I'm doing just fine because like you, I'm a little bit more, I'm tenfold over you in the crypto market at $50, which means my losses are tenfold as well. So we saw the crypto winter when everything started heading south. For some strange reason, these incorporeal bits of imagined assets with no exchangeable value in the real world started to depreciate.

Was that one of the things that led to what happened to FTX? Or was the FTX thing just simply a Ponzi scheme collapsing of its own accord? And maybe back up and give people who have no idea what we're talking about a brief praises of what happened. Yeah, I think the question is a good one. I think it's a little bit of it helped precipitate it. And also, we don't know yet because we don't actually know the financials quite extensively because most of it's hidden. And as we've now learned in the last few days, FTX doesn't really have accounting, as you would expect from a publicly traded company. What we've seen is, obviously, a lot of the frenzy, the hype over crypto drove up prices incredibly, and it was euphoria. Anything that was called crypto, anything that was called decentralized finance or DeFi

just attracted billions and billions of venture capital dollars because it was an ecosystem. It's hot.'s it's happening it's going up everybody's you're having super bowl ads i mean they're they're naming stadiums celebrities are endorsing new coins every day cnbc has a new celebrity on to tell us about their new coin and what they're doing i mean it was totally crazy and by the way everyone in washington everyone who is on the dime the payroll of the crypto industry all the business networks who started featuring vcs all complicit

by the way and now trying to be like whoa this is terrible with you so it's been coming a mile away rich i have a couple of basic questions yeah so big professional operations or operations that we think of as professional here in Silicon Valley put money, a lot of money into FTX. A lot of money. 30 years old and who appears already in his young life to have made and lost at least $16 billion personally, what was it that he did or had or figured out that enabled him to become one of the leading figures while still a child in this new industry? That's question number one. And question number two, as I recall, Sequoia is one of the VC firms that put money into FTX. I know some Sequoia partners. These guys weren't born yesterday. They must have had some idea of how they were going to make money.

This is the least sentimental investing group I know out here what did sam bankman freed have and what did people think how did people think they were going to make money on this thing what did he have well he was young he had a lot of money already because he was early in bitcoin he had a model what you mean you mean he made money from personal investments well yeah he he is already this young generation of bros you know random nerds or whatever who are getting rich as as bitcoin starts gaining value but he's also an early mover and understanding how to trade different cryptocurrencies how to become an exchange for cryptocurrencies. And there's only a handful of those in the world that are processing the bulk of exchanges of coins and tokens. And so if you

can dominate the exchange market and start having everybody want to be with your exchange, you start having all the wallets coming to you, all the different coins processing through you, that's a ton of money that you're generating as well, just like any other type of exchange that you would think of, right? How does CBOE or others make money, right? I mean, they're taking money from those that are using the platform. So he just got there first? He was lucky? He was a first mover? It was pure first mover advantage? That's my view, is a mover it was pure first mover advantage i that's my view

is a lot of its first first mover advantage and then he has the story of like idealism and and altruism and all this money is going to go to charity and i and we're building a better world and if you're yeah that was my question how much of this was his ethical utilitarian uh philosophy that seems to be sweeping the left well that was a draw i think that could absolutely be a big part of it but i think also if if you're into speculation and hedging and taking big bets and things like that and the trajectory of crypto is is pointing upward and you're not counting on uh you know massive inflationary hit to the economy that would start drawing down everything including crypto because don't forget crypto we were told

was supposed to be this hedge against inflation right put your money into crypto well yeah that goes down you believe that you know but go ahead sorry right and and as the market's collapsing uh starting to see the fundamentals of some of these other kinds of coins and these stable coins and things that are literally just like manipulated with code and algorithms that are built on nothing. So that if there is an economic slowdown or recession, you're just gone right but he starts but i think these people either these are smart people you're right in the vc firms they either were presented with false accounting uh and and information which by the way this is going to be a key question of federal investigators now is what did they show the sequoias of the world what model did they have in mind they thought they were buying part of a company that was the equity stake that they wanted?

You're sitting at the top of the crypto pyramid when you're at the exchange. You're being able to literally look around the entire decentralized finance ecosystem and start buying up pieces of it and start being the empire, the emperor of crypto. I mean, that's basically what this is. You're the mothership here. And you saw what Bank of Freed was trying to do was, again, buying up different parts of the decentralized finance world so that everything ultimately runs through something that FTX touches and makes money for FTX. How does it make the money, though? Does it make the money off the gas, which is from what I understand is what they charge to transfer a crypto from one to another or to make a purchase? Is that how they make their, how do they make their money?

You're making money through every processing of transactions, of having the amount of money that's being put into those accounts being made available like like it's an exchange like any exchange makes money takes a little little tiny little crumb off the top of every transaction takes the gas right new york stock exchange the commodities exchange is the same thing it's not crazy to me that the concept of an exchange is going to make you money and that if you can really continue to build up the value and start buying different pieces of the industry that are also moneymakers, that you'll continue to make even more money. Right. And I guess the problem here is or the benefit here for him is or for the for the business is that it's kind of complicated. So not everybody is going to get into it.

And the people who do get into it tend to outsource the thinking to the smart guy who's i'll relax i'm doing the thinking for you and there isn't a robust marketplace like there is in the new york stock exchange or even the you know the bond market where you're seeing a lot of intelligent people a lot of intelligent analysts working together to come to the one thing that a market does which is price discovery right i mean it i guess what i'm trying to get to get at is what actually to me it doesn't seem that different from any other financial scandal he um cheated his investors he front traded on them and then and then dumped stuff on them and then when he made speculations that turned south he bought he took their money

to pay his bills that correct like that is no in many ways it's a classic fraud this is a classic ponzi scheme fraud yes however the question i think is really really good i come back to peter's question is did vcs and just broader business sector, you know, mainstream go all in on this FTX? And by the way, we're having a couple of great episodes on Crypto Night that are going to come out next week. We usually do it every couple of weeks. With this crisis, we're doing one on Monday. It's going to be a former DOJ prosecutor who has done crypto cases. He's going to tell us exactly what they're gonna be looking at right now and then we're gonna have coin uh coin desk which broke the news originally that led to

the collapse right now the senior editor at coin does who worked on this uh on tuesday coming out as well but but i'll tell you that the the real um question that i have, did he present to these investors just false numbers, false projections, and that will be the evidence primarily of fraud going on? Or did these investors, these VCs, just get into this idea of, hey, it's a new way of doing things. You don't need controls. We don't need to see a general counsel. We don't need to see an accounting department. We don't need to see an HR department. We're not going to like basic checks that we would do with any other company that's not illegal it's a bro-y system you know yeah but if that's the system that they didn't do anything illegal he if they are that done that is a real question they do not demand financial

control i guess i just want to like make an distinction with these these words because they're they're confusing me at least there are investors who are customers of the exchange those people were defrauded and you don't it could be crypto it could be marbles it could be bubblegum it doesn't matter let's call them the customers let's call them the customers the customers were customers whose money was stolen right the venture can't get back right the business investors may or may not they will claim that they have been defrauded i'm sure they will try to make that case it will be i think it will probably be very difficult for them to make that case that they were defrauded and not just um they were careless well this is exactly what we get

into on our very next episode monday everybody make sure you're subscribing and waiting for this episode to drop because this is going to be the coolest thing that's not being talked about on tv but but this is just – Rob, go ahead, Peter. Well, no, I'm just wondering, to Rob's point, I'm starting to think, I don't understand this stuff. And the thing that's so shocking to me is that the kid was the whole point, that the reason up at Sequoia they said, give him the money, is that I just looked up, I just checked online, Mark Andreessen, whom I still think of as a kind of enfant terrible, is no longer an enfant. Mark Andreessen is 51. The guys with budget authority in the VC firms around this valley are all too old to

understand this. And they may have recognized exactly that. Don't bury me with details. This is a kid's game. And they bring in some of their kids and say, oh, this is exciting. It's happening. And it may be something like that, only a 26 year old which seems to be his age when he started to become a boy well I think he was a billionaire at 26 only a 26 year old could have pulled off this con I think what do you what do you make of that I think that's a good argument I think that this is the culture how do you say a beer with a hint of Italian sea salt for a crisp and full flavor? Sale di mare. Sale di mare?

Si, new birra moretti sale di mare. Available for you to enjoy in all good retailers nationwide. Salute! Get the facts. be drink aware visit drinkaware.ie we've had guests on from industry we've had guests on who have like been like trying to create their own versions of what we see in traditional finance in this decentralized finance world in this crypto world and it's very loose it's a lot of jargon it's it's cultural not actually grounded in financials and if you sort of buy into that it's also not really right it's a movement so there's

a customer base and it's going to be there and if we just grow it right if there's just enough people who get into if we dump enough money into these coins so it's also not a business it's also not a real business in the following sense as best i could tell there were two are in best i could tell informed by listening to several of your podcasts as best i could tell the appeal of crypto was twofold one crypto was going to become an actual medium of exchange and people could do deals in crypto and maybe the government wouldn't be able to track all those deals well a they've never become media of exchange nobody does deals in bitcoin and b it turns out the regulations have just washed over this industry. Gary Gensler is just producing regulation.

It's like a smokestack belching smoke the way regulations have been issuing from Washington. And then the other bit was that they were going to become a really useful store of value because the dollar, we couldn't trust the dollar. The Fed didn't know what it was doing but you could trust crypto and that hasn't happened either because the price of crypto has gone up and down inside it's just far too erratic to be so what you have is a purely speculative product the only value of crypto is that somebody else thought it was valuable and was pouring money in right and since that doesn't make sense anyway all the vcs said i don't know this is a tulip craze why should i try to understand the business model when it's pure speculation am i am i oh you're well what do you think of that i i think that there's a little bit i can make sense of it is to say that it never made sense all i'm telling you is that like, you go back to the podcast episode we did with Anthony Scaramucci, and I pressed him on this.

You know, not a dumb guy in finance, not a dumb guy on Wall Street, been around the block in plenty of wars. And I was just like, you know that in what you're saying here because he tells the story about how he was at sun valley and there you know somebody got up and and talked about this whole concept where he was going to sell online and you know brick and mortar is over and blah blah blah and it was 20 22 years ago and this old guy from omaha up and said, I'm not putting a dime into your company ever. Well, it was Jeff Bezos. And so Anthony missed the Amazon train and he won't do that again. And this is the future

and there's clearly a movement here and it's ups and downs, but the trajectory remains up even after every down. And once it's widespread enough, it's taking over because the technology is just the processes, all that. right i have a okay sorry james go well let rob go first and then i'll see if i could so i i do two questions one uh uh you know high-end question one super low tacky question based on rumor and innuendo so i'm gonna end with

that one because i i really i am fascinated by this. Okay. First question. I mean, here's, I posit this. The argument for, I mean, these are, I think these are separate issues, that this was an exchange, a financial institution that was run by a crook. customers and his investors take the secrecy and the unregulated and the wild west sort of vibe of crypto as part of its you know chief asset and so it's easy to steal from people who are talking about how great it is that they are operating without any financial or regulatory oversight fine like at that point caveat emptor i mean boo-hoo-hoo for the people who lost their money i'm sorry i can't really you know i you know, I have no sympathy for them.

But the argument for crypto as a category is all the universal, the store of value, Federal Reserve, but also the fact that the value of the dollar is exchanged at a trillion small transactions every day by individuals back and forth. And until that happens in crypto, it will always be a tulip. It will never be real because I can't buy my paper with it i can't buy a cup of coffee with it and all the crypto oh it's coming it's coming it's coming but i would say to them stop building exchanges stop building financial structures on top of it and instead tell me how i'm gonna buy a snickers bar with my coinbase wallet and make that happen invest in that infrastructure not in the financial engineering infrastructure what do you think about that i think that's right in fact the true

believers in bitcoin right and this is the original bitcoin crowd that just cares about being anonymous and getting getting away from government and getting and they don't care what the value is today or tomorrow they they are in it for the long term they want to be in bitcoin and that's how they want to pay for things and have people accept bitcoin right they they they just believe in bitcoin itself they believe in the altruism of the model of bitcoin they say right now they say right now everything that's not bitcoin is a fraud that is the original bitcoin crowd this is their message everyone everything else is a fraud bitcoin is bitcoin you can like it or not you can use it or not

everything else is a fraud the short phrase i heard from a friend of mine who's into this who's explaining this to me the other day was that if there's a if if there's a person that you can drag into court that it's not crypto crypto is the thing that doesn't have a person that you can drag into court that it's not crypto crypto is the thing that doesn't have a person that you can drag into court because you can't drag a blockchain into court um is that fair yes that is certainly not decentralized certainly not decentralized otherwise you're just in another mode of centralized finance right right keep going back to what was Peter was asking, why sensible people got sucked into this. And part of it, as you mentioned, is this whole quantum woo-woo and hand-waving about the future in these terms, DeFi, and the rest that they all just sling around and cold storage and the rest of it. You know, I go to a site called Web3 is just going great.

I don't know if you've seen it. It's a daily accounting of everything that happens in the crypto and the NFT world about people, about the rug pulls, which is when people announce a great new project, a great new crypto project. And they get the money in and the fees are flowing and then they just pull the rug and disappear and take your money. Or the fact that Monkey Drainer was using a phishing account to hoover up coins from unsecured. This jargon is impenetrable to anybody as opposed to dollar cents and the rest of it. We can get our hands and our brains around the monetary system that we have right now. Crypto, we have to defer to these tech,

to these messianic tech bros who are often just spouting nonsense because they either want our money and are scammers or they deeply believe. I've known people who are deep believers in this to the point of religious obsession. But when Rob was saying before about how this is just like any other financial scam, he's right in a sense that, yes, you had investors, you had defrauded investors, whether or not he was defrauding them by saying, I'll never invest your stuff,

when he was actually giving it to somebody else to invest, that'll be worked out in court. But it is different in this respect. It's like J.P. Morgan could issue, if he wanted to get out of a pitch, some financial instrument, bonds, right? He could do something like that, and there would be a mechanism and a structure for that. But J.P. Morgan could not say, I'm going to invent a new currency. I'm going to call it the dollar and the dollar will have this value. And then, and then give, and then tell people that I'll pay you in, in dollars. This guy S S B F not only had FTT as his token, he had,

I don't know when he just decided to invent a new coin called Serum, right? And Serum, which he put out there, he said it's worth $2 billion. And the Serum market looked at it and said, actually, no, it's worth $78 billion. We all know the value of Serum. There's nothing there. It's a nonsensical invention. So that's the difference, is that once you get a whole bunch of people inured to the idea of a currency that is not backed by anything, and I know fiat currency, I get that, but I can opt out at some point, exchange it for pieces of paper, which I can go over and buy gold or zinc or useful things that

actually have value in the real world. None of this has any real value in the real. Once you get people divorced from that concept and into this airy realm you are asking for this to happen on an ongoing basis until everybody slaps himself and wakes up and says this all is a house of cards that's me that's how i view the whole well i'll say two warning signs that i see and a demand that's needed. Number one, we're not actually learning a lesson here. We're instead ganging up on one 30-year-old and saying that this is just a bad actor. This is one fraudster. And we're not having a conversation that we're having here on national television in Washington

about the systemic issues that likely are going on at a whole bunch of other firms as well. And the lack of accounting standards that we have allowed as a business community to go forward for now a couple of years in this euphoria, a lack of control, a lack of transparency, a lack of regulation. Wasn't this not a choice? I mean, Coinbase is open to regulation. Coinbase is regulated as a wallet. Well, FTX was regulated. FTX was regulated. FTX was subject to the same... Well, then you're arguing my point, which is that FTX was a fraud.

Enron was a fraud, and FTX was a fraud, and Madoff was a fraud, and we have frauds every cycle of frauds every few years. And this is the libertarian dream come true. The people who should have been paying attention are the ones who are going to have to pay who needs regulation suddenly people are wide awake in a way that they were not well two weeks ago the vcs are still you know in right so they can't let everything collapse so there's still a lot of money in the system in lobbyists in washington

and ads on tv not for long cnbc is telling me every single second right now of like oh let me tell you the next thing about how spf is terrible okay well it says at the bottom sponsored by crypto.com right right that's that can i can i ask my tacky question i know we got to run but there's one tacky question i've been reading yeah um these are all young people i saw a an interview that um sam bank is it bankman freed or bank freed yes bf he uh gave on cnbc and and he's like he's like jittery he's like bouncing on his chair he looks he looks high on adderall or pro correct or one of those not a well or both and to what extent and what i've been reading about about um fdx is that they they encourage that kind of culture

right yeah to what extent were these just super high on amphetamine kids like the uh you know the nazi high command making a whole bunch of really really bad decisions but doing them really quickly and feeling really great about it and reinforcing each other until it all came crashing down i mean there's a certain young person's sense of like the risks don't apply to me i can bet make these bets and i know something great's going to happen that's a gambling mentality every gambler has that and if it goes south then i'm going to look to see what in this house i can steal and pawn to pay my debt and if it's your car or your watch so be it i'll settle up with you later i have this is a sure thing you don't understand this horse is going to come in number

one i mean to what extent are we just talking about young people who are high uh it could be there there is there is like one of the biggest things that's going wild that the media won't report on right now because it's not proper to do so but it's pretty wild i don't care about proper i think i think i don't know if you heard about this but there's supposedly from a former employee a discreditable former employee there's a there's you know potentially an spf sex video of him and all the other people in the Bahamas. I don't know if that's true. But the point is that clearly that's a culture. Rich, you need to understand what Rob is saying is

that FTX reminds him of a writer's room in the old days in Hollywood. Yeah, except that we had an audience and we had to put our stuff on a product. But how many other rooms like that are going on how many other rooms right the guest on monday the former prosecutor will say on the show as you'll hear uh not the last shoe to drop not the last fraudster out there plenty more down the line but because they're based in the bahamas we have a little bit of a hiccup here and that is

a lot of the evidence the f FBI does not yet have access to. And so that's a piece of this that we'll see how it all plays out. If the media show you're seeing the New York Times headlines of, oh, you know, woe is SBF and all his altruistic dreams going away and his tweets and all that is to try to, if he can conceal the evidence and keep in the Bahamas or destroy it, and there is no deck out there that's clearly false that they gave to an investor, basically say, I'm just a total F-up, right? I'm just an idiot, instead of saying I'm a fraudster.

And at that point, there may not be a criminal charge, only civil penalties, but good luck to anybody recovering the money. Nobody knows where the money is today. Well, there's a Vox interview out there and DMs is going to come back in court to haunt him, I'm sure. But the one thing we do know, of all of this, there's one person who made it out unscathed, and that's Larry David. Even though he's being sued in this big lawsuit that's going after all of the people who were doing FTX ads, Larry David's ads consist entirely of him saying, nah, I don't think so. So he's on record as saying, don't invest in FTX because I wouldn't personally do so. Wise man. Hey, Rich, thanks a lot.

The podcast can be found on the Ricochet Audio Network, of course. It's called Kryptonite with Rich Goldberg. And I get the feeling this isn't over by any means. And so we'll talk to you again soon about the next step, the next shoe in this centipede. How do you say a beer with a hint of Italian sea salt for a crisp and full flavor? Sale di mare. Sale di mare? Si. New Birra Moretti Sale di mare. Sale di mare? Si. New birra moretti sale di mare.

Available for you to enjoy in all good retailers nationwide. Salute! Get the facts. Be drink aware. Visit drinkaware.ie. Do drop. Thanks, Rich. And Rich, when does the next podcast?

We're going to drop. We're going to drop Monday. New episode with former DOJ prosecutor talking about uh what he sees in this case what prosecutors are we looking for and then we're going to talk to coinbase 24 hours later okay finish your pitch the name of the podcast again is and where people can where can people find it kryptonite kryptonite on the ricochet network kryptonite with a c c like you get the joke c-r-y-p-t-o-n-i-t-e kryptonite right get it that's funny because guess what happens when you touch it yeah well now we know right thanks rich thanks guys you know one of the i think i can't remember which uh the online news sources is saying that the Almeda Research, the paramour, former paramour of SBF, apparently is an alt-right darling. I don't think so,

but we do know that SBF himself was lauded for his many philanthropic contributions and the way that he wanted to push the world to a better place. Well, good luck with that in the future. However, for you, if that's your objective, we've got some good news as well. Yes, charitable giving, where to put your money. Well, here's an idea. We are sponsored today by the Giving Ventures podcast from Donors Trust, your principled charitable giving partner. Seem to you like so many charities are shifting left.

You're not crazy, no. A report from The Economist shows American philanthropy is going woke and funding liberal causes more and more. If charitable giving is important to you and you want your giving to match your values, then you need to add the Giving Ventures podcast to your playlist. Giving Ventures helps donors like you discover new opportunities to change the world for the better. Twice a month, the Giving Ventures podcast highlights nonprofit efforts that are making America more free and prosperous. Recent episodes, well, they've highlighted free market groups fighting homelessness, black conservatives' efforts to take the ideas of liberty to new audiences, groups challenging the

rising ESG movement, and so much more. The show is a product of Donors Trust, and you've heard us talk about Donors Trust before. It's the oldest and largest donor-advised fund helping conservative and libertarian givers simplify, protect, and grow their giving. The team at Donors Trust can help you have a real impact with your giving, and the Giving Ventures podcast will give you a taste of how Donors Trust can be a partner in helping you have a real impact. Grow your giving the smart way. Listen to Giving Ventures from Donors Trust. Visit DonorsTrust.org to catch up on all the latest episodes or sign up for new episode reminders. Or just search Giving Ventures to subscribe wherever you get your podcasts. You can even find it on, dare we say, the Ricochet podcast feed.

That's DonorsTrust.org. And we thank Donors Trust for sponsoring this, the Ricochet podcast. And now we welcome to the podcast, back again, Charles McElwee, editor of Real Clear Pennsylvania. He's a contributing writer for Real Clear Politics and City Journal. Charles was with us about six weeks ago when we were looking at the Pennsylvania race. I'd ask him what happened, which is the obvious first question, but I understand that Peter Robinson has a bone to pick. Peter, pick that bone. Charlie's putting up posts about driving through central Pennsylvania and seeing no posters for Fetterman at all.

Oz is big, big, big. It's going to happen. It's going to happen. Charlie gets me so excited. I put money on Oz and predict it dot whatever it's called in the prediction markets. Crypto. And election night, I was going fine. I'm up.

The market's pushing me up and up and up. And then the thing just takes a nosedive. And I lost five bucks before I was able to close out my position. So, Charlie, you owe me a Vente Grande at a Starbucks in Philadelphia. It's a deal. I'll buy two. But it's also a lesson. You never take... Never listen to you is what the lesson is. Catholic luck. You don't, I mean, for me, I mean, you don't get like that. So what happened? What went wrong? What happened?

It was a perfect storm, wasn't it? I mean, look, full disclosure, we talked a few weeks ago and all indications were a very Republican mood in Pennsylvania. I felt this. I'm driving all over the state. That's true. And while there were Fetterman signs throughout the state, when you talk to any voter, any locale, the sense was that the Republican Party had the upper hand. And instead, in hindsight, we saw how it was a perfect opportunity for the Democratic Party. So what were the components to this perfect storm? One, it goes back to 2019. Republicans agreeing to an election reform bill in the Pennsylvania state legislature, signed into law by Governor Tom Wolf, Democrat, that leads to this controversial mail-in balloting that Republicans are woefully behind on when it comes to

mobilizing voters on their side to vote. And that's driven, of course, in part by the fact that Trump was opposed to those mail-ins in 2020. And since then, Republicans throughout Pennsylvania aren't using them. Democrats have the upper hand. by the time of the october 25th debate when you know two weeks before the election you had voters uh you had almost 50 percent mail-ins had already been submitted at that at that time right but there were so many factors here peter i mean you had at the top of the ticket on on the gubernatorial side, Doug Mastriano. You're trying to make me feel sorry for you, Charlie. I'm the one who's out five bucks. The worst nightmare imaginable for the Republican Party, the greatest scenario for Josh Shapiro's

gubernatorial campaign. In fact, his campaign ran advertising in the primary, hoping that Mastriano would be the candidate. They targeted voters who would vote for Mastriano. You have Trump's steep unpopularity in suburbia. You have abortion that turned out to be a mobilizing issue in suburban areas. And Republicans, it turns out, overplayed their hand on the issue of crime. One thing we can learn from this election is that suburbanites are living a parallel existence. I mean, just where I am outside Philadelphia, people are no longer going into the city. The morning commute is a distant memory. It's something we did before COVID. So crime is not as frightening if you're working from home on the main line outside Philly.

Right. And then the retailers on Walnut Street, they're opening their second locations on the main line. So you don't have to go to Boyd's off of Rittenhouse Square. You can go to Wayne and shop at Boyd's there. So there's this parallel existence. They're unaffected by District Attorney Larry Krasner. They may question Krasner's leadership in the city of Philadelphia, but they're unaffected by it. And they vote a Democrat resoundingly in this election cycle.

And are they unaffected? Are they unaffected by politically or do they just did they have something else more important on their mind when they voted? I guess what I'm trying to say is republicans went in and they vote i mean uh dr oz got more votes did he not then mastriano right oz compared to mastriano as well but mastriano turned out to be the electoral doomsday machine for all republican candidates right so I guess what I mean is that there were some Republicans, a bunch of them who went in to the ballot, went in the voting booth and voted for Dr. Oz and did not vote for Mastriano. That's right. We had ticket splitters, it turns out, throughout suburbia. To give you one example, there was report recently uh after the election that in

bucks county for example the perennial swing county uh 40 000 voters in bucks who vote against mastriano voted for brian fitzpatrick the republican congressman there who's a moderate and we learned from 2016 that republicans can still do well in suburbia with pat to me for example that year he won chester and bucks but i think even since 2016 the suburbs have veered so leftward especially these health care driven suburbs right that it's a long-term challenge for the republican party charlie let me ask you a question so okay so go ahead go ahead i just want to ask a question that i know is on rob's mind but rob is trying to be very very good so i'll be bad for him and i'll be the first one to use the t word as in trump there are two states we can think of where republicans were up for the governorship and the senate and they won both and they won both, and they won both very, very well. Ohio, Mike DeWine was elected

governor by some 25 points. J.D. Vance won by what was the final six or seven points, which is very solid. It's not as good as Rob Portman, who six years ago won by 21 points, but six or seven points is very solid. And then, of course, you know where I'm going. Ron DeSantis won by almost 20 points, the governorship of Florida, and Marco Rubio won by 16 points. And what those two have in common is that Trump had nothing to do with them. And what beleaguered the difficulty in Pennsylvania is that Mastriano and Mehmet Oz were both Trump's candidates, and Trump sat on the GOP in Pennsylvania like a mattress. Charlie, true or false? So, at least in the suburbs, I find it hard to believe that when you consider all the concerns ranging from crime and right, they may not be affected by it because they live in the suburbs, but nevertheless, their children live in the city.

So crime, economy, inflation. I find it hard to believe that those issues supersede their memories of Trump's tweets. I think in the case of Pennsylvania, you were facing a crisis. The Republican Party was facing a crisis of candidate quality. On the governor's side, Doug Mastriano, the fact that he took extreme positions on social issues to the right of the average Trump voter. Now, the story of Oz, he got Trump's endorsement, but throughout the campaign, he tried to, as best as he could, avoid Trump. And he did have a rally with Trump right before the election, but nevertheless targeted suburbia, ran a very centrist, moderate, bipartisan campaign. Really, if anything, he was in past elections would have been totally palatable to the sensibilities of the average suburban voter. But let's say David McCormick have pulled it out over in the primary. Let's talk about this. Give listeners a sentence or two on McCormick. So David McCormick ran against Oz in the primary. Kathy Barnett was a late-stage insurgent in that

primary, but that was an overstated component to what turned out to be this razor thin victory for oz over mccormick mccormick rand mccormick mccormick is west point he's a rich man he did extremely well in the financial markets and i think he was at uh where was he not black rock black something or other what's ray dalio's firm in connecticut uh bridgewater. And he served in the Trump administration. This guy, he could present himself as a Trump guy, but overall he's just this fantastically impressive human being. Is that fair?

The resume is stellar, but there's this theory that holds that McCormick would have done better than Oz. McCormick could have won. I don't buy that at all. Fetterman in hindsight ran this perfect campaign in Pennsylvania. All indications were there that this would go well for him. He won. I had a stroke. He lucked out. He won all 67 counties in Pennsylvania against Conor Lamb, who in the past would be considered

a blue dog democrat he targeted trump regions he was campaigning heavily in counties like erie which went for trump in 16 of biden and 20 and has treaded down but mccormick was a perfect uh he was central cassie for fairman fairman could have gone to those regions that i'm up against the former head of the hedge fund a a Bush administration alum in a region where Bush is still unpopular and in areas that were suffering from

manufacturing. He would have been perfect for Fetterman's campaign. Okay, so let me try this out on you. In 2016, I was sitting having dinner with a bunch of people and a Pennsylvania political watcher told me with confidence, she slapped her hand on the table and said, Trump's going to win Pennsylvania. I thought she was nuts.

Trump won Pennsylvania. Right. And the and the response from the Republican Party was, I guess we win Pennsylvania now. I guess that's how it works. Pennsylvania is ours now. This is the kind of how Republicans strategize. We won it once. It's ours. So in 2020, they were surprised when they lost it. They complained and moaned and whined, but they lost it fair and square. And in 2022, they still had this attitude that there's this base in Pennsylvania that they don't have to work for. And it seemed to me that what you just described is the Fetterman campaign saying, no, no, we're going to work for everything.

We're going to go for, we know that Pennsylvania is not in our camp or in their camp. It's up for grabs. And we're going to battle in Trump districts for votes. And we're not going to try to outsmart ourselves. You know, whereas the Republican side was trying to outsmart itself and figured they had all these sort of demographic thing. They figured it out was we know we're going to win there.

We know we're going to win here. And the Fetterman went hunting everywhere. That the Trump voters were knowing that in Pennsylvania, at least every single every single a huge portion of those Trump voters were also Obama voters before they were Trump voters. And so isn't that the strategy for a state like Pennsylvania, maybe other states, too, which is to do not attempt to grow a brain and just try to get everyone all over the state to vote for you and stop trying to outsmart yourself? Yeah, that's right. I mean, it's this battle for voting margins throughout a culturally fractious map. So all those working class areas only a decade ago were when Romney ran against Obama, they were Democrat. And in many instances, those voters are still voting for Obama over Romney. They only flocked to Trump in 16. But their vote for Trump, the Republicans fell

into the trap of believing that their votes are now assured. They are not assured in places like Luzerne County, Erie, Northampton County, and the Lehigh Valley. It's a two-front challenge for Republicans. Hey, I have to interrupt you for just a second, because you're probably thinking about these things, as you do, during the Ricochet podcast and wondering, hmm, I wonder if I could make money on that. I got a great idea. The thing that guy said, that was brilliant. I could do something. Well, if you've thought about starting your own business,

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in there and they did not vote for the top of the Republican ticket in 2020. And then a governor a gubernatorial candidate ran telling them that there was fraud and it was unfair and there was it was stolen and there were a whole lot of republicans in arizona wisconsin and pennsylvania who thought no it wasn't stolen i didn't vote for the guy and the cognitive dissonance of being told by a by a politician that what you did did you didn't do is just too much for them to bear and that's why they went in they said look i can hold my nose and vote for blake masters i can hold my nose and i can vote for um dr ross but i cannot hold my nose and vote for somebody who is so out of touch they don't realize that i am a republican and did not vote for Trump. Is that possibly what happened in Pennsylvania? There are...

I've stumped you. I've stumped you. Well, no, there are voters in Pennsylvania who are not fixated with the past, and they're not talking about the 2020 election. They're not talking about COVID either. I even think Republicans to some extent... They're not as fixated as Rob. Is that roughly what you're trying to suggest here, Charlie? In some cases, Republicans overplayed

their hand on the fact that Wolf, as governor, indisputably enacted what were in hindsight terrible policies. I mean, they were known as terrible at the time, but very restrictive. But people want to forget about COVID the way people, the way my grandmother wanted to forget about the 1918 flu. We don't want to talk about it. You're moving forward. And Republicans, I remember seeing billboards about COVID-19, Mastriano, that's how it became popular, talking about COVID-19 on social media. And it just didn't work. But there's also this telling trend in Pennsylvania that is really not getting covered, but I think it's essential to understanding

how the demography is playing out. In so many of the, let's say, state house seats that Republicans or that Democrats flipped, so Democrats will now have a majority in the state house of representatives of Pennsylvania. The seats that they flipped are in areas that were Republican when Trump was elected. But in most instances, health care is the primary employer. So take Pennsylvania, for example. We think that's a chocolate town. We associate that with Hershey Kisses.

In reality, that's home to Penn State Health. And it's undergoing this massive residential project that's projected to add 10 to 15000 people in the next decade. Who are those voters? They're voters that are coming from other areas, graduating from medical school, doing their residency there. They're all Democrats. And we've seen this past year. I mean, there's been great reporting from like like like Tevi Troy, a commentary, Heather McDonald, a city journal talking about how the medical profession has just gone so leftward the medical profession is now progressive that was once a republican base they're now democrat and the university of pittsburgh medical system alone upmc is the largest non-government employer in pennsylvania so it would say that again that's incredible say that again the largest non-government

employer in Pennsylvania is UPMC if you live in Pittsburgh UPMC stands for for listeners University of Pittsburgh Medical Center and if you live in Pittsburgh and you just voted for Summer Lee who was whose career was backed by DSA if you vote for her you're more likely or not you were employed by UPMC. Yeah, I mean, that model is working all over the country. The biggest employer is the state. After that, it's the health care. And after that, it's the insurance companies that pay for the health care. I want to go back to something you said before, not at the risk of dragging this conversation backwards, but why were those people Trump voters in 2016 and not in 2020?

What what made them Trump voters in 2016 that had evaporated by four, four, four or six years later? So the mistake that Mastriano made, for example, was running a campaign consumed with social concerns. And the beauty of Trump's campaign is 16 in a state like Pennsylvania was he was not focused on social issues at all. It was an economic popul where in the middle of the summer you have the Dobbs decision, of course. And abortion, it turns out, was more of a mobilizer amongst suburbanites and concerns about crime and the economy. And that, I think, is the difference between Trump and 16 in Pennsylvania and the Republican candidate in this cycle. The Republicans prevailed that year because they weren't focused on social issues, social issues were the concern this year, and they got punished in suburbia. That's a great answer, and I have absolutely nothing to add to it, so I won't spoil it. But Peter, I believe. I have sort of a last question for Charlie, and it's this.

Charlie, you were wrong. Wait, wait. I was too. Before we start. Wait, it's Charles, though, right? It's Charles. Oh, do you go by Charles? Charles, but Charlie's just fine.

Just not Chuck. Listen, you lose me five bucks, and you get demoted from Charles to Charlie. And if you lose me money next time, Ron, you're going to be Chuck. You can call me whatever you want, Peter, for my predictions a few weeks ago exactly right actually that's exactly what if you're lucky i'm not calling you chuck the way things went okay so charles you were wrong as it happens i was mistaken and rob was mistaken and james we were all wrong but you're a profession you were mistaken and furthermore you love your home state. I watch your Twitter feeds. You actually do love Pennsylvania.

You've been posting pictures of autumn in Pennsylvania, the countryside, the beautiful red barns as trees turn. You even found picturesque corners of Harrisburg. How? I don't know. So this pains you. You love Pennsylvania, and they just voted for the wrong guys. And then the Phillies lost to the Astros. And so, Charles, I just want to know, how are you? I'm not doing well, especially with the Phillies' loss.

But look, it's funny. I did predict that Trump will win Pennsylvania 16, but we can't get it right. Oh, is it that bad? You've got to go back to 16 to control yourself. I'm on the record predicting that would happen. But look, all indications were that this was going to be a good Republican year. Polling indicated that it was going to be that that Oz would pull it out. But you talked about the Phillies, and the issue there is the Phillies went to the World Series two days before that debate on October 25th, which was a stark display of Fetterman's condition following his stroke. But what's lost in the story is that there was a battle at that time between Nexstar and Verizon Fios. So as a result, anybody who had Fios in Pennsylvania, due to that distribution battle, had an issue accessing the debate on TV. And I experienced this firsthand. I wanted to watch the debate that night and I had to scramble

on my laptop and turn it on. But that's a lost factor that so many voters did not see the debate, but voters were also more focused on the Phillies going to the World Series than they were on the campaign at that point. So in hindsight, Fetterman's condition, what Oz thought would help him actually won either voters sincere or two. So many voters throughout Pennsylvania empathized with Fetterman and gave him credit for even showing up. And in a strange way, Fetterman's revolting development worked out for him. Right. Can I ask one question about Pennsylvania, but probably about larger issues too? Isn't it, I mean, I don't know, I'm, very big way for the predictors to be wrong, for the polls to be still within the margin of error, incorrect, for the prognosticators to have prognosticated incorrectly, and for a state and its voters to continue to surprise people and to make decisions the way they're supposed to make decisions, which is by not really listening to what they're told to do on TV.

And so when we get these moments like Pennsylvania, we can kind of maybe overdetermine the solutions or overdetermine the responses, which, you know, everyone's we all do it. It's human. And certainly if I was running a political party, I would do it. But isn't the deep down here that the mystery of the voter and the mystery of that one day or that one process that we have, and thank God it's still mysterious? Or am I a Pollyanna whistling past the graveyard as Pennsylvania turns Marxist? Well, no, I actually think this election shows that Pennsylvania, when it comes to, compared to other states, remains quite competitive because

even though Democrats had such a good year in the state, all indicators are that voter registration numbers, for example, continue to trend upward for the Republican Party in Pennsylvania. They have dramatically narrowed Democrats' voter registration advantage in Pennsylvania. You have the city of Philadelphia, meanwhile, where there is an upcoming mayoral race. And it will be interesting to see who does prevail in May of next year and how that will play a role headed into 2024. But if anything, the state remains competitive. Are the suburbs trending blue? That's indisputable at this point. Republicans face a real crisis there. But there are opportunities for the Republican Party, including in all those Hispanic majority cities, where voters aren't even necessarily mobilized

yet. They're not voting in high numbers yet. Is there an opportunity for Republicans to tap into that? But the challenge for the Republican Party is what is their message for those voters? What is the economic message for the average small Pennsylvania city where the majority of the population is Hispanic, second to third generation, recently located to that city for a better quality of life and where the primary employer is warehousing the state that has become this global hub for logistics and distribution. What is the mess? How will the Republican Party target those types of voters while also trying to improve their margins in suburban areas that even a decade ago were still republican but since then where republicans have even flipped courthouses that were held by the gop for generations charles get a transcript of

this interview because you just outlined your next article for city journal that's right well we thank you for being with us we know it's been a tough, tough, tough time in the fall for Pennsylvania here. Thoughts and prayers. I just hope that you realize that Minnesota

was acting in a philanthropic fashion when we decided to let the Eagles win because we knew we had so many victories to come. We might as well just let them win.

It was a charitable contribution from us, the Vikings, to you because we can afford it this year, can't wait. Appreciate it. Charles Michael, we thank you very much. Links to the work that he does should be found on Ricochet.com.

And we should say you run the RealClearPolitics Pennsylvania, right? Yeah, go to RealClearPennsylvania.com. RealClearPennsylvania, right. Check our stuff out. Great. Talk to you later. Hey, thanks, guys. Two years, four years, six years. Thank you.

Spend the weekend eating cheesesteak. Just cheese. It'll make you feel better. Yeah, exactly. There you go. I'm still on the road to recovery. Yeah, there you go. Think about the cheesesteak. Think about the cheesesteak though, depending on the quality of the meat, you can get that kind of stuff that's a little bit stringy somehow, you know, and it's great. You're enjoying it. You're wolfing it down, but you get a little bit of that steak caught in your teeth. And you know, most of's great. You're enjoying it. You're wolfing it down, but you get a little bit of that steak caught in your teeth. And, you know, most of us don't have an implement when we're out eating cheese. No way to get rid of that.

Well, you have to go home. You have to go home and you have to brush, as your mother told you. But it's not enough to just brush. Even if that works, toothbrushes are terrible. Well, you know, it used to depend. There used to be a prophylactic was the name of a brand back in the 40s when they used hog bristles. And when they went to a new nylon bristle, which was just the absolute fantastic scientific innovation of the post-war era, they would show all these hogs in the ads who were, I don't know if they were happy or if they were sad.

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incorporeal world in which shadows chase shadows. Not like that in the real world where Ricochet people get together and they don't chase each other in the bars or in the whatever, but they sit down and talk like humans have always done since the first Neanderthals said, hey, come over here and tell me what you're eating. Here's Rob Long to tell you where people are meeting in real life. I can easily tell you that. We want you to join Ricochet so that you can help us keep these podcasts going. The R is that it, like Pennsylvania, is not a sure thing um and nor is the site we do

need you to join but the best part about joining besides the site and the conversations and the podcast is that you could go to a ricochet meetup and they are uh happening all over the country that's where you get to meet real people in real life and um and you join ricochet.com you'll know exactly where to go for instance uh rush babe 49 and Ray Kujawa are hosting their holiday open house and chili party on December 3rd in Everett, Washington. There's a meetup scheduled in Pittsburgh on December 10 and 11. There's one in Sarasota in January over the weekend of the 14th. I mean, that is actually, that's good planning.

Sarasota in January, I recommend it. And there's another one in Vacaville, California on the 28th of of january and of course we're doing one uh in new orleans next year probably uh sometime around the um uh french quarter festival i think uh and there are others in the works and then i know some of you thinking i have maybe too far to go or the schedule doesn't really work or whatever look it's a big country and i know money tight, so if our meetup locations are out of your reach, you aren't doomed to a lonely Ricochet-less existence. Just join, give us a place and a time, and Ricochet will come to you. That's what Ricochet is made up of, people who travel for fun. So for details on our Ricochet meetups, go to ricochet.com slash events and find the module in the sidebar on the site, and we look forward to seeing you. IRL. Before we go, again, we began the podcast by saying, with our astonishment and relief,

that Twitter had survived, right? Peter, you apparently went out in the place of glory last night and told everybody to bleep off, and then now you find out that you're still on the platform and you have to go back and mend all these fences. I have to live with these people. Right. Well, we'll leave with this, because this is what's interesting about this. We're in a big tech purge at the moment. I understand that more tech jobs have been lost numerically than happened during the dot-com crash, which is interesting. And a lot of people are being dumped in the market. And whether or not these people have the sort of skills that will immediately find use in the rest of the world is all of a sudden a question. There's a couple of tweets

from Antonio Garcia Martinez, who is a guy who's into this stuff, and I believe he's also into the crypto realm and the rest of it and all the DeFi side, etc. But he made a great point. Elon, he said, simply defenestrating the entire HR regime, the ESG grifters, the skittles hair people with mouse clicking jobs who think themselves bold social crusaders rather than a parasitic weight around any organization's neck is an intolerable overturning of the social order. Twitter must fail after the purge of such former elite. For if Twitter does not fail, if in fact it manages to emerge stronger than before, then what sort of example would this set for every other organization similarly captured by this elite? Unthinkable. Which is why the wailing and the gnashing and the renting of garments is going on people who thought themselves indispensable to the creation

of the next upcoming social order are being told that they're they're not the the the the brusqueness and the and the glee with which musk is firing people who mouth off to him on the internal slack channels is really something to behold we haven't seen this in a long time have we well we saw in the white house uh well yes there was there was a lot of the sort of i mean look i this is also part of the problem is looking at the you know people just i'm sure that i agree with the larger point that he's making, but the idea that this sort of applies to firing engineers and a company that was an engineering company that was trying to, I mean, this is just a silly thing to either get worked up about in the negative or the positive. It is not meaningful in the politics or the culture. What's interesting is all those people who are fired they're all you know this like huge number of engineers you know there are there's about 290 maybe 300 billion dollars

in venture capital right now that is not deployed they call it dry powder that means that a whole bunch of really i mean I imagine some of them are going to be talented, resourceful engineering folks who've seen a big company and have some experience are now going to be sitting there with their three-month severance and saying, well, what can I do now? And there's $300 billion in Silicon Valley and other venture capital firms just waiting to look at their 11-slide deck and hear their pitch. So this may be a good thing for everybody. Bravo for them, yes. It's that the Twitter engineers, I'm not exactly sure what they do, given that Twitter's infrastructure is not held by Twitter, and it's AWS from what I understand.

But we'll see, we'll see. Yes, if the dry tender leads to a whole bunch of new, incredible, wonderful companies, that would be fabulous. If some of that tender wants to come over and build the Ricochet crypto token, we're here. You know, there are seats at the table. In the meantime, of course, we rely on you who joined Ricochet, right?

You would love to? Yes, you would. You would also like to use Donor's Trust. You would like to use Hover. You would like to use use quit because your life will be immeasurably richer for them and we love when our sponsors are patronized not talked down to but given money and of course that five-star review at apple you've been waiting all these years to do it now's the week so i just don't have to say it anymore but i will in any case we're off next week for thanksgiving have a happy thanksgiving everybody we'll see you in a fortnight and we'll see everybody in the comments at ricochet 4.0 next week or no week after that

week after next week after next boys happy thanksgiving ricochet join the conversation