This Week in Startups - The LA Fire's Cost and the U.S. Jobs Report | E2070

Episode Date: January 10, 2025

This Week in Startups is brought to you by… Northwest Registered Agent. For just $39 plus state fees, Northwest will handle your complete business identity. Visit ⁠https://www.northwestregisteredagent.com/twistt today. Atlassian. Head to https://www.atlassian.com/Startups/TWiST to see if you qualify for 50 free seats for 12 months. LinkedIn Ads. To redeem a $100 LinkedIn ad credit and launch your first campaign, go to http://www.linkedin.com/thisweekinstartups Today’s show: Jason and Alex cover the LA wildfires and their eventual total cost, as well as the U.S. jobs report and the rise of static team size in tech. (0:00) Jason and Alex kick off the show. (1:45) Jason’s trip to Japan (3:09) Ski industry disputes and resolutions (9:51) Northwest Registered Agent. For just $39 plus state fees, Northwest will handle your complete business identity. Visit ⁠https://www.northwestregisteredagent.com/twist⁠ today. (11:07) Ongoing fires in LA, federal aid, and insurance challenges (18:18) Startup Stand Insurance's wildfire risk simulation (20:18) Atlassian. Head to Atlassian.com/Startups/TWiST to see if you qualify for 50 free seats for 12 months. (24:48) Could people sue the state of California over the wildfires? (29:32) Analysis of California government competence (29:37) LinkedIn Ads. To redeem a $100 LinkedIn ad credit and launch your first campaign, go to http://www.linkedin.com/thisweekinstartups (34:56) Economic impact of job report, inflation, and Trump administration policies (42:31) Inflation's psychological effects and tech industry responses (46:03) Static team size and its effect on the labor market (50:13) Impact of automation and AI on startups and the job market (54:08) TikTok's Supreme Court case begins Subscribe to the TWiST500 newsletter: https://ticker.thisweekinstartups.com Check out the TWIST500: https://www.twist500.com Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp Follow Alex: X: https://x.com/alex LinkedIn: ⁠https://www.linkedin.com/in/alexwilhelm Follow Jason: X: https://twitter.com/Jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis Links to topics that were discussed on the show: Iwanai Ski Resort: https://iwanairesort.com/ Stand Insurance: https://www.inc.com/bruce-crumley/how-a-startup-plans-to-offer-coverage-to-high-risk-homeowners-dropped-by-big-insurers/91067831 U.S. Jobs Report: https://www.bls.gov/news.release/empsit.nr0.htm Salesforce Job Freeze: https://www.businesstoday.in/technology/news/story/this-big-tech-company-has-stopped-hiring-coders-due-to-boost-provided-by-ai-460260-2025-01-10 Thank you to our partners: (9:51) Northwest Registered Agent. For just $39 plus state fees, Northwest will handle your complete business identity. Visit ⁠https://www.northwestregisteredagent.com/twist today. (20:18) Atlassian. Head to Atlassian.com/Startups/TWiST to see if you qualify for 50 free seats for 12 months. (29:37) LinkedIn Ads. To redeem a $100 LinkedIn ad credit and launch your first campaign, go to http://www.linkedin.com/thisweekinstartups Great TWIST interviews: Will Guidara, Eoghan McCabe, Steve Huffman, Brian Chesky, Bob Moesta, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland Check out Jason’s suite of newsletters: https://substack.com/@calacanis Follow TWiST: Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin Instagram: https://www.instagram.com/thisweekinstartups TikTok: https://www.tiktok.com/@thisweekinstartups Substack: https://twistartups.substack.com Subscribe to the Founder University Podcast: https://www.youtube.com/@founderuniversity1916

aggregate fire budget for LA. Political reported that the actual assertion that it was cut at all is incorrect because, and I quote, the city was in the process of negotiating a new contract with the fire department at the time the budget was being crafted. And so 50 million more was added. I think it's good for you to state it because it's been changing every 12 hours. The human mind tries to place blame or understand what's happening here.

If you are for less government, you might have wanted to cut budgets to reduce deficits, right? and that's reasonable. And then now you're left with the position, well, okay, hey, we've got the fire department's budget and here's what happened. Or you might think, oh, the fire chief is a lesbian and this is a DEI hire and not double click on and then look at her track record. And her track record is she was in the top 50 of 16,000, 16,000 applicants when she went to it and she's got this incredibly storied career. Yeah. Just I hate to break the news people.

I don't think lesbians cause the Santa Ana wins. This week in startups is brought to you by Northwest Registered Agent. Starting your business should be simple. With Northwest Registered Agent, you can form your entire business identity in just 10 clicks and 10 minutes. From LLCs to trademarks, domains to custom websites, they've got you covered. Get more privacy, more options, and more done. Visit Northwest Registeredagent.com slash twist today. Atlassian.

From MVP to IPO, Atlassian for startups provide your team the right tools to plan, and collaborate on work. Head to atlasian.com slash startups slash twist to see if you qualify for 50 free seats for 12 months. And LinkedIn ads. To redeem a $100 LinkedIn ad credit and launch your first campaign, go to LinkedIn.com slash This Week in Startups. Hey, everybody.

Welcome back to This Week in Startups. I'm your host, Jason Calacados. I'm my co-host. Again, Alex Wilhelm, he's on the East Coast. I am in Naseco in the province of Hokkaido doing a little deep powder skiing. Yes, your boy, J-Pow, is hitting the Japanese powder right now. The J-Ranch era is paused while I'm out here, crushing powder, and then I'll be back in the United States to go to the inauguration.

We're going to have a little – I'm going to be doing a couple of live shows from the inauguration for All-In, and I think we might even have a little tiny All-In VIP party. It's all coming together quite nicely. Alex, how are you doing? I'm fantastic. I'm on the East Coast, like you said. So instead of it being very, very late, it's very, very early. But as we said last time, Twist does not stop.

We roll along. And I- The show goes on. Yeah. You know what I need, though? I think I think I'm going to give up on journalism. And I'm going to go into, I don't know, private equity. And I'm going to make a billion dollars. And then, critically, this is what's all working towards, I'm going to hire an in-house

barista. Just someone to make me fancy espresso in the mornings. That would be great. I mean, we could have an apron on and a whole counter. You could build a whole mock. Starbucks setup. Yeah. And then they can hand it to my

ballot, right? He would then bring it out to my work shed. And then they can bring me as we converse. I could have my, you know, it's going to be great.

No, I'm good. We have a lot of going news this morning. Jason, I do want to say for everybody who's curious, we are going to talk

about the jobs data that comes out in 16 minutes, but we're going to hold off on that until a little bit later. I want to start with ski lawsuits, Jason. What? I'm being sued

for going to Japan and no. No, no, no, no. Skiing in the deep powder in EW&I yesterday, I went to cat skiing, which is where you go on a cat, which is like the tractor, and you have the whole mountain to yourself, and you go to untouched ski runs and backcountry. It was peak experience. I've done it two other times in my life, and I have to say, just on a recreation basis, best day of the past two years. Absolutely crushed the powder and had a great time. Wow.

I mean, it is a unique experience to be at the top of a Japanese mountain with fat skis and a couple of friends on your own private ski slope. And it's a I-W-A-N-A-I. You can pull it up. Iwani, if you just type in Iwani cat skiing, you will find a video on YouTube from their resort or, you know, from their website. And you'll see some vistas there. We'll pull it up here for the crowd to see. but it's a peak peak experience for me

because cat skiing is really unique you don't have anybody else on the mountain and what happened here Alex is in Japan the population has changed obviously they don't have this crazy population growth that they did have for a while

in fact it's maybe going down a little bit and so this isn't me but this I think is other people skiing Yuani and as you can see there's a cat right there on the right and you see how deep that powder is Wow. This is an abandoned ski resort.

So there were all these ski resorts in the 80s and 90s that were built. There were too many of them. They shut down because there weren't as many people. And so now this is empty. And you go and there's a total of, I think, a maximum of 16 or 24 people. We had a private kind of situation going on. And we were skiing there. So you get driven up in the cat because all the lifts are down.

It is absolutely. extraordinary and beautiful. And my friend John runs it. A really nice guy who is an American who saved this abandoned ski resort. And now the locals have one lift operating naked to come there. And all the locals get to ski at a very, very, very affordable price. I think $10 a day, $100 a year for a lift ticket, which is essentially free. Right, yeah, essentially zero.

Wow. Yeah. And then people from Australia, Hong Kong, United States, and China and some other folks, New Zealand, all come from around the world if they can get one of the precious days on Iwani Catskying Mountain in this resort. And if you can get one of the days available,

you get to have this crazy experience. And it was just incredible. I'm very glad we shared all that because now my jealousy has reached an absolute critical level. I was thinking, though, about ski lawsuits much closer to home for me, Jason. I'm thinking about Park City and the fact that they are being sued by someone who says that he spent $15,000 and skied fewer than 10 runs. Well, he was there visiting due to the strike that we discussed the other day.

And I'll just say, if I spend $15,000 and got 10 runs, at $1,500 a run, I better be in Naseko doing first powder cat skiing because that's what I think that should cost. skiing is not cheap. It is a sport for, I mean, you can do it on a budget. I can explain how that happens, but we talked about the other week, you know, product market fit, creating new innovative products. One of the innovative products to come to skiing was Vail Resorts doing the epic ski pass. What that meant was all you can eat. 400 bucks, 500 bucks, $600, depending on when you buy the ticket and what mountain you have access to and some block out date, it looks like the holidays. But for, for you. as cheap is, say, $400, $500, you can ski unlimited. So the ski industry learned how to create an incredible value proposition, but it's still a tough business. They had a terrible season because snow was off last year. It was one of the least, it was one of the shorter seasons, right? Snow came late and it melted early.

That happened some years, so you make less money. And so, but the bigger issue was they didn't want to pay. Ski Patrol. ski patrol when you five bucks an hour? It turns out it's 23. And I can tell you, Jason, as of this morning, as of really about two hours ago, if I'm being totally honest, it has been resolved. Yay, everybody. We've sorted it out.

The Park City Mountain Ski Patrol Strike is over and the data points are as follows. They are now going to get $23 an hour starting through 2007, several years. And you get $4 more an hour if you are a veteran. So all of this, the lawsuit, the complaints, the media, the angry billionaires, over not much money, a couple bucks an hour for a couple hundred people. It strikes me as just a really small amount of money to have a fight over. It sounds like they made a poor decision. So I will, you know, the management of this company is disgraceful

and the number of tickets and how they manage the support there. So disgraciad.com. I'm going to make a jingle here for the show. Disgratia. We'll say that like part angry.com. Like it's nice. So you say, dysraxia.

Dot com. And then you go to disgracia.com. We pointed whoever the biggest disgraces. Right now it's Vail Resorts for me, although I may need to change that, giving California's leadership with these fires, and we'll get to that as our next story, I am sure. But yeah, congratulations to the ski patrol

for getting a meager extra two bucks an hour. these people at Vail are nuts. They're charging a fortune, and everybody who's buying a lift ticket and a pass could afford to pay a little extra to be safer on the mountain. They should have never done this travesty, and I hope that it's painful, and they have to settle an expensive lawsuit,

so they learn a lesson about not being cheap and paying their employees a living wage or something decent. Listen, I know it's a great job skiing for a living and being on the mountain. So it's kind of like being an actor or something like that. It's kind of a dream to be on ski patrol. I'll be honest, but still, they should need two bucks an hour. Come on. Hey, founders, you want to build the next great billion dollar business, right?

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Your business can be up and running in no time at all. Get more value, more convenience, and more peace of mind only with Northwest registered agent. All right. So let's talk about the fires in our life. First of all, as a reminder, these are still ongoing. Hopefully, with the winds dying down a little bit, the fires can be contained and fully extinguished.

Our thoughts are with everyone who's been impacted. There are lots of ways to donate and support, so we'll link those in the show notes, but also just Google it. There's a lot of fundraisers going on. And the latest news, Jason that I saw is from Biden, actually. And he announced, quote, that the federal government will cover 100% of the cost of measures to protect lives and property in SoCal for six months. So the federal government has arrived with a truck full of cash to try to help out with rebuilding and safety.

Wait a second, though. It says to protect lives and property, that sounds like he's saying to prevent the stuff, but I don't think that means that if it's a thousand or two thousand, five, ten million dollar homes, they're going to just automatically pay to rebuild those. No, I don't think so. You know, that really is the bigger issue, not picking up the tab for the firefighters who are there, etc. That is a cost, but I think that cost is somewhat baked into LA's budget already in the California budget. So I think that's going to be the bigger, higher order is, can you economically figure out how to pay for rebuilding a home in an area like Malibu or the Pacific Palisades? It's going to be

very interesting because the regulations in California are really hard to build, as are the cost of building. So building something in California like a home, friends of mine who have done it, a remodels a two-year process, a new home is a four or five-year process. The cost of building a remodel in Texas or Florida might be six months to 12 months, and a building a new home might be one to two years. The cost of doing it in Texas or Florida might be $500 square of it. It will be literally double in California, plus regulations. Now, if you look at some of these homes, they're on the beach, which is managed by the Coastal Commission of California, which is a very rigorous organization that doesn't let you do anything. So there's going to be a big debate in the coming years about are they going to be able to build how many years? So these poor families, you know, just the trauma of losing your home and your goods. I have a very close friend who was renovating his home. He was living in another place. So he's safe. His mementos were in his house. That was being.

renovated passport, photos, kids' drawings, you know, just anything that they had, just gone. Which is just absolutely devastating. And so the penciling out, the cost of this is going to be really hard. It's so hard that actually

I struggled to find the right number to put in the show notes because I saw numbers, you know, people are still sorting through the record here, so I don't want to sound glib, but, you know, I saw numbers that this is $20 billion in damage. Jason, I saw that it's $50,000. million dollars in damage. I saw that it's 57. Like, I mean, it's so much money. Pretty straightforward.

You know, the homes in Pacific Palisades, having lived right next door to it, were 5,000 square foot homes. Somebody might have six or seven thousand square foot homes. Somebody might have something as four, small as three or four. But generally, I'd say six, seven thousand square feet is what you're looking at in that town. Now you put that at $1,000 to construct it, right? All in. So that's $6, 7 million, I think to rebuild each home. I think 1,000 or 2,000 homes have been lost. So if we look at just homes in Pacific Palisades, if it's 2,000 homes were lost,

at an average reconstruction of 6 or 7 million, and you're looking at $15 billion right there. It doesn't count any of the other stuff, schools and commercial buildings. And infra, just straight up infra. There's a lot of infrastructure there, you're correct, that would need to be rebuilt. And so it's going to be tens of billions of dollars. Then people are just going to have to make this very strange decision, do I rebuild or not?

And do I rebuild in that area. And then if I do rebuild in that area, when is this going to happen again? Can I get insurance? Right. And if you can't get insurance, well, where, and you didn't have insurance because you got canceled six months ago, where are you going to get the money from? I mean, do these people have $7 million on liquid funds just sitting there to build a new home? and while they pay for another home to live in that they have to rent,

you know, renting a $7 million home would be 5% of that cost per month per year. So 5%, 7,000, $350,000. Like, this does not pencil out. No. On the what to do, I think we are going to see in the wake of several hurricanes in Florida and this fire in California, a real national conversation on states setting the, essentially regulating how fast you can raise the price of insurance. Because the problem that they have in Florida and California, both states with a large economy, lots of people, and natural disasters,

and a state-run insurer of last resort is they're always doing a dance between allowing insurance companies on the private side to raise their prices and then therefore create more supply. or they want to keep those prices low so that way it's affordable to live there so they get elected again and then you end with a lot of people on the state insurer of last resort. Citizens in Florida Fair in California. I just don't think that works anymore

in a climate change world. I think these rates have to be free market floating and it's going to cause a lot of people to struggle but it does not work. Yeah. So putting aside like a terrible trauma these people are going through, you're 100% correct

and you went exactly where I was going to go, which is you have to let the free market mechanics work here. Because if the government is underwriting these or bailing them out over time, what that does is it raises prices of homes because the government is now subsidizing them. And then you raise the prices of homes. They become more unaffordable. And then these tragedies happen every 20, 30, 40 years when I lived in California. I just said in our previous episode,

I talked a little bit about an all-in coming out about the same time as this. These kind of fires in this area happen every 20, 30 years. And in 1962, there was a major one called the Bel Air Brentwood Fire. And that one, hundreds, if not low thousands of homes. It was same thing. Santa Ana wins. The cause of it was people were just doing a trash fire. They were thought they were doing a controlled burn, burning some trash in a backyard,

and some embers flew. And that's what happens with 100 mile winds when you have a bunch of trees and leaves and everything in a mountain range that bakes in the sun every year, year after year. So the free market's going to have to take care of this. There's pictures of the Bell Air Fire online. You can look it up. 1961. So this was, you know, quite a while ago.

So we don't have the quality of footage and the thousand TikToks that I think people are accustomed to seeing. But here's some of the historical record of that. It's just brutal and really just tragic. So it's. I want to say, Jason, this is this weekend startups. And I'm so happy to report that there. There's a perfectly apropos startup for this moment in December, December 16th,

2024th, as last year came to an end. I saw this story and I thought, that's a really cool idea. So I give to you stand insurance just raise $20 million series A. They want to use software to go in and insure essentially homes that you can't insure it any other way. What I mean, it's exactly on the nose for this moment. And I think that using software to, quote, simulate the physical effects of a wildfire on a home to identify changes that a homeowner could make to decrease risks is a great

way to actually, I think, make insurance feasible in certain markets where homeowners have made the right choices. And because you went through the cost of insurance and what that kind of works out to be, they think that coverage for a $3 million home, this is per the Wall Street Journal, in a high wildfire risk region, would cost between $12,000 and $15,000 a year to insure. That's impossible. That's impossible. One percent would be $30,000. So they're saying, would be one in 200 chance, one every 200 years. That's not how often this happens. But I think what they're saying here is when I remember when the Tahoe fires were happening

and people were doing cleanups there, I was looking at what people were suggesting to do. Now, if you cut down trees, you get stopped. When you live in one of these Tony neighborhoods, they have essentially a Bible, a plan, and this is the standards for your neighborhood. I don't know if you have that in your neighborhood, but, you know, if you change your fence. Yeah. Yeah. So you have a historical commission, even worse. So there's like a, there's a master plan that happens where it's like you have to have, you know, the height of the fence, the height of the shrubs, this and that. So you can't make a lot of changes because regulations. When I talk to portfolio founders about what's slowing them down, they always vent to me about

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Again, that's atlasane.com slash startups slash twist. The truth is, if you put a metal roof on these homes, if you put stones around them, if you don't have trees around them, you will lower the chances of your house going up in flames in one of these Santa Ana driven fires.

There's pictures now of the homes that survived. And you're starting to see like, you know, there's a hundred homes and then there's one standing there. It's a new home. It's constructed with the metal roof. In Texas, we have all these homes with beautiful metal roofs.

It's not to everybody's aesthetics, but these metal barn roofs are very common. They're not perfect. They have heating, insulation issues as well. But putting all that aside, you can't light them on fire. They're made them metal. It's like a high temperature. And if an ember lands on them, it blows off.

You're right. Then clearing the area and the brush around your house, putting stones around your house. Again, the embers land. This is all obvious stuff. And the embers go out. You can't do that in a lot of these neighborhoods. The master plans and the, you know, et cetera, it will stop you from doing that.

So it does make sense to me that they could hit that number with a fireproof house. I think we talked on the last episode about homes. You mentioned one that are 10 feet up in flood zones. Yeah. We're going to have to start building resilient homes. And if you build a resilient home, you should get a different price. And Metro Mile, which this person co-founded, I think with David Freeberg from the Olin podcast, was the other co-founder on Metro Mile.

Wait, really? I didn't know that. How did I not know that? Oh, I covered Metro Miles so much. That's so funny. Yeah. And so, and I am full disclosure in LP in Chris Saka's fund, lower carbon capital. So I like to say this is great. I'm actually, it turns out I have a conflict here and an interest. So interestingly, this is a great idea to match the insurance, not just to the place you live, but to how the home is constructed and what steps you're taking to mitigate these things. Yeah, I think, I think, you know, you're never going to get, I have been to State Farm's offices in in Bloomington, uh, Illinois.

I think. Sounds exciting. You went to an insurer's office. Well, it was the only time my life I've given a paid talk. I was in college. And they invited me to come down and, uh, they paid me some subtle hundred dollars to do this. I just did it for, you know, the experience. But I, I got to tour State Farms office and headquarters and walk around. And it was the first time I've actually, and I, no offense to everyone there. They all seemed incredibly lovely. But it was my first time seeing the actual Dilbert style office, you know, like, like actual like floors of cubicles, you know? And if you're, if you're, 20, that is a revelation to you about what life can be. And I bring all this up to say that

there's lovely people there, but they definitely seem to be an insurance mindset, which is not the most progressive, you might say. Actuarial tables don't attract people who want to rip up the whole world. So I think that we're going to have to have something different and with a strong technology base to fix this problem for high risk homes because I just don't think that other companies want to take it on because that's not what they do. They just want to insure your car and spend a lot of money on ESPN advertisements and make us look at a weird lizard all day. You know, we got an interesting question here from the live audience. If you're listening to the pod on the replay gang, uh, we do it live and you can go to YouTube.com and search for this week's startups,

click subscribe, turn on the bell and you'll get an alert, uh, actually from YouTube when we go live and you can click on it and you can ask us questions and Keith Jordan asked us, do you think there'll be a class action lawsuit against the state of California since the stated reason, for the insurance company's dropping fire policies was because government neglect of not probably mutating bush clearing and preparedness. So, yeah, you could sue the state of California

for incompetence. And I do think there is definitely an issue of incompetence. When you hear these leaders talking about their preparedness, you're getting an incredible amount of deflection. And I actually think this is going to be a turning point for the people in California who have dealt with a lot of maybe the priorities in California not matching the amount of tax. They're extracting and maybe not having leaders,

you know, who are executives who know how to run organizations. So I do think that's quite possible. I don't think you can see the insurance companies because they are not canceling your insurance, which I tweeted, and somebody made a interesting distinction without a difference, but the distinction is they're just not renewing as opposed to cancel them. Right. I, I, I, I should say,

for the person who's the homeowner, it doesn't matter what, canceled, you know, three months early or,

you know, not renewed on time. You live in a home for 30 years. You pay your insurance for 30 years and year 31, which must have happened

to some people. Oh, my Lord. Yes. To have that year, you don't have your home insured. I understand Jimmy Woods, who have played cards

with a bunch of times. Next guy. The actor, you know, I feel terrible from him lost his home. I don't know if he had insurance. Someone like that, a famous actor, maybe they have the wherewithal to take that hit as hard as it is, but, you know, other people don't have it. I read the State Farm letter that they sent to the state of California going over why they were going to be not renewing certain policies and so forth.

I'll just share it. Why not? I have it pulled up here. It's mostly financial, as far as I can tell. You know, this particular paragraph here, sorry, I'm not zoomed in. I wasn't going to share this. The State Farm says, you know, we recognize and appreciate that there has been a rate increase that will take time to come in, but more rate increases are needed because market conditions are not static, inflationary trends, costs. And in short of getting to charge more money very soon, the current rain template may necessitate homeowners having, essentially it's about money.

And so I think that to answer this question, maybe, maybe, but I think it's going to be. really hard to nail down who's in charge of local municipal city or state regulations on brush clearing. But I think fundamentally you solved this with the free market and I think that's the way people want to go. On the, what you're getting

paid for in California, did you look at the LA city data and how much money they moved around in the 2024 to 25 budget versus the 2020 to 24? I think it's good for you to state it because it's been changing every 12 hours. There was one report early on on social media.

And again, you know, I think it's a bit of a raw shock test. And the human mind tries to place blame or understand what's happening here based on tribalism and just filling in the blanks. If you are for less government, you might have wanted to cut budgets to reduce deficits, right? And that's reasonable. And then now you're left with the position, well, okay, hey, we've cut the fire department's budget. And here's what happened. Now, if you're anti-Ukraine and you're pro-Pudin, you might be looking at it and saying, why did these people do a tweet or a blog post that they were donating equipment to Ukraine? Or you might think, oh, the fire chief is a lesbian and this is a DEI hire and not double click on it and then look at her track record.

And her track record is she was in the top 50 of 16,000, 16,000 applicants when she went to it and she's got this incredibly storied career. Yeah. just I hate to break the news people. I don't think lesbians cause the Santa Ana wins that have been burning this specific area down for thousands of years, apparently. And certainly in our lifetime, when humans have been living there, they've burnt down homes over and over again. So it's a raw shock test. People who have grievances across either side of the aisle will project into it. Yes. The truth is, there's incompetence in California's government. We see it all over the time. There's incompetence in all government everywhere. Right. But if you've lived in

California. It's specifically not high functioning. Okay, everybody, 2025 is here. With every startup hitting the ground running, it's time for you to be competitive and to beat those competitors in B2B selling. So if your ad strategy doesn't include relentless focus on targeting the right prospects, well, listen, your message might get lost in the noise. Well, LinkedIn ads is going to ensure that you reach the right audience at the right time in the right place. LinkedIn's advertising tools connected to decision makers, based on their job title, their industry, and the company size, and many other factors. So maybe you're targeting your beachhead market, your ideal customer profile, the one most likely

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is the best platform for paid media. LinkedIn ads allows you to build the right relationships, drive results, and reach your customers in a respectful environment. I mean, it's really about business. When I say business, you think LinkedIn. When I say LinkedIn, you think business. That's why you want to put your B2B message there. Start converting your B2B audience into high quality leads today. We'll even give you a $100 credit on your next campaign. Go to LinkedIn.com slash this week in startups to claim your credit. That's LinkedIn.com slash this week in startups. Terms and conditions apply. LinkedIn, the place to be to be. The thing that I'll say is, I mean, there's one particular venture capitalist who's been really all over this issue and putting out some what I would consider to be

very sexist tweets. I just think it's disappointing that that's become platform to such a degree. But just to throw some data out there for everybody, because I know you've seen this all over Twitter. I went ahead and did a little research. Here is changes, Jason, in the 2024 to 25 LA budget. This is an infographic from the city controller. As you can see, quite a lot more money to spend on police, a little bit more on library, housing, building, safety, city planning, et cetera. And then as you get down into the negatives, this is where they save money, cut costs, fire was cut by 17.6 million in this budget and from this perspective, two things to know about that, however.

One, the aggregate fire budget for L.A. in that year after the cuts was 820 million. So we're talking about roughly 2% cut, not very big. And then also political reported that the actual assertion that it was cut at all is incorrect because, and I quote, the city was in the process. of negotiating a new contract with the fire department at the time the budget was being crafted, and so 50 million more was added. So the idea that California gave all the money to DEI and gave no money to fire department, firefighters is wrong. And also we're using prison labor in California and not paying them much to do the hard work here. So. Well, by the way, and that program, my brother, as many people know, as a retired firefighter, my grandfather, rest of pieces, was the oldest living firefighter for a long period of time in New York City and very

storied. Shut up. And I come from a fire, yeah, I come from a firefighting and law enforcement family. And in fact, that was going to be my chosen career before the internet happened. And I got very lucky to get into the industry. You know, the issues around DEI in the fire department, there's a very logical argument there that you should have the ability to carry a person out of a building. So, okay, sure, that's logical.

All firefighters and firefighter families agree, you've got to be able to carry a person. Does it matter if you're male or female? And those standards should not be altered. Some places, they did alter the standard. So that's like a logical argument that has nothing to do with this fire. Put that aside, obviously. You can have that debate separate from this. Additionally, you know, people would pay to, you know, clear this underbrush and put more fire lines in.

It's so crazy, like in Tahoe and other places where people fight against clearing the brush because they're like, well, that's the natural way, in order of things, you want that brush to break down and biodegrade. and I've been given the speech countless times in California and in Texas, in fact, that that's the best practice. Hey, when a tree falls, let it, let it rest and, you know, go back into the earth and what kinds of great critters and, you know, live in these old trunks and it's awesome for whatever. It's not good in the Santa Monica Mountains near a city. So, really deadly.

That's the thing. There's a simple distinction, folks. If we're going to have people live places, we cannot keep the natural environment because burns down. I'm actually, I'm perfectly fine with, with relatively natural forest management. I grew up in Oregon. My, my child of best friend's dad was the dean of forestry OSU. And I grew up in the trees as a Boy Scout, you know? So like I have a deep appreciation for nature. And I've been around the United States camping and backpacking and so forth. But where you build houses, where people live, where our stuff is, we need different rules. And if you don't

think we should change nature, then let's not build houses there. But as a big fan of housing stock, you're going to have a hard time getting me to agree to fewer housing during our current crisis. Let's talk about the jobs report because I think the data just came out. The data just came out. Ladies and gentlemen, uh-oh, uh-oh. Uh-oh. So don't steal my thunder. I want to do this.

Okay. So ladies gentlemen, here we have the December jobs report fresh off the presses. Expectation was about 155 to 165,000 jobs, depending on how you did the average. The actual number, Jason, we gained 256,000 net jobs in December. a hundred thousand more. That means that the unemployment rate was expected to stay at about 4.2. Instead, it fell to 4.1.

Jason, never have you seen such lovely a... Tell people why you're about to cry. Tell people. Well, I mean, the bad news about this is, you know, and it sounds crazy to be like, oh my God, more jobs, which would normally be better. Right. But inflation is going to go up

and, you know, what these interest rates and this kind of job growth does is it puts more money into the economy and then the cost of goods go up. And so, you know, this means the Fed now, instead of cutting rates, maybe needs to pause them or at some point even raise them. So this economy keeps surprising us in how resilient it is. And inflation was so really damaging, I think, to people's lifestyles, but not having a job also sucks. And so then you put in the plan to have less immigration, how low does this number need to be, you know, to have a functioning society. And having a 4% unemployment, this is the lowest of our

lifetimes and our lifetimes being, if you're like under 70 years old. This is really low. I'm a, I'm trying to prepare an elaborate joke here. I'll see if this works. Here's my take on this current moment in time, which I believe summarizes. is my view of the United States. Here we have a man holding an American flag will head banging in the middle of a street in the rain. Yes. Go, go America. But I regret to informing Jason that this does mean I have to ask a Trump question. Not to put you on the spot, but I just want to like spitball this with you. So Trump had a press conference to the day and a long answer many questions, said many things. And one of the things that I recall correctly he said was he thinks

interest rates are too high and inflation is too high. Now, Now, you just detailed the link between inflation and then how the central bank of the U.S., the Fed, changes rates. Trump does not run the Fed, but he will be able to exert pressure on it. So where does this net out? If he wants lower rates and less inflation, those are contradictory. So what wins do you think there? Yeah. I mean, and then you also have a populace who believes immigration, you know, a significant

portion of the populace now in America wants to have less immigration. certainly 80% of people reasonably don't want illegal immigration, and then a significant point one, just no immigration because they believe immigration means less jobs, less opportunity for people who are already here, which is reasonable if you can't find a job. And so I've always felt immigration and how many people we let into the country legally, let's assume it's all legal, should just be based on need. And so, you know, we see these numbers, but how many accountants do we need? How many nurses and doctors? do we need? How many construction workers do we need? You know, if people come across that, if people want to come to America and they're construction workers or they're working as nurses, we should be taking a lot of them because we don't have either of those covered. We need more construction workers. We need nurses. Hopefully we eventually, between one of these two parties or a new party, have a thoughtful immigration policy tied to what all Americans need because if you, whether you're poor or your seventh generation or second generation, whether you're rich,

if your, you know, parent is in hospice care, God forbid, or in a nursing home and you can't get a nurse to take care of them or to come as a home aide, you know, you might want some of those amazing nurses aides from Jamaica or Mexico or, you know, these amazing caring people, you know, my mom's in nursing, so I know some of the demographics there. And these people are incredible human beings, you know, these Jamaican nurses that, you know, would come in and were just wonderful when I was an EMT. I was an EMT for a period of time and, you know, I got to watch this immigration process. God bless them. Thank the Lord. We were short nurses. I mean, so we need immigration. That's what this is going to cause. And then you have a portion of the MAGA

movement, which will be this whole, I think this will be a big part of, you know, what we'll see hash out in the first year is if you want growth, you can need some healthy immigration in specifically areas where you have need. I think Trump's a business person. He's going to go for that. So then taking that by analogy, then more focused on rate cut reductions than concern about inflation would be the net net there back to... Maybe, you know, I really haven't thought it. It was a really great question. I haven't given enough thought. I'm going to have to give it some thought, but I do think a thriving economy. Yeah.

is what we all want. So how do you define a thriving economy? People have jobs, people have wage increases, and reasonable inflation. So I think these numbers have to feel reasonable. The thing that scared everybody was like the back-to-back years of like, I think we peaked at eight, and then there was one year like with four or five. And like when you have two of those back-to-back, you know, on top of the three percent inflation years, that's when you see a Big Mac and a Happy Meal.

or French rise at McDonald's, I brought up the McDonald's index on this program a couple of times, you know, when you see a Happy Mill cost twice as much, people start noticing because every American seemingly, like it's some incredible number. When you see the statistics of how many Americans went to a McDonald's in the last 30 days,

and when you see the sticker shock of a French fries costing three times as much and a Big Mac costing 50% twice as much, that actually affects families. And so we are, are, and it also more importantly affect people psychologically, I think. And I think that's the bigger issue because you might save money on your TV. You might save money on clothes. You can cut corners by making coffee at home.

You know, you get the idea. But, you know, sometimes you've got to go out to eat with your family. You've got to go to the grocery store. You can't not have food. You're not going to sustain yourself on, you know. Yeah, so there it is. That's the Fred chart of inflation. Yeah, you're over here?

Yep. Reached just about 8%. This is inflation CPI for. the U.S. This is not seasonally adjusted. But the good news is that it went down in 2023 and it's going down further. But to Jason's point about the economy looking strong,

you can also have an environment where you just don't cut rates. They just stay static and that's going to be to me that's the most likely thing for 2025. For the next couple meetings, just stay flat. Because inflation's not getting much worse. It's also

not getting much better. The economy is doing pretty well. we're not in a Goldilocks moment where inflation's at 1.9% and unemployment's at 3.5%. But if we have 2.7% inflation or whatever and 4.2% unemployment, 4.1% now, that's pretty good. I think we're under the handle now, right? Like the handle was 3 and now it's like 2.9, 2.8. So when you psychologically get under, you know, when you're under 4 and you're in the threes,

we're like, okay, this isn't great, but it's not terrible. And when you're in the 2.X, I think people are fine with inflation, but it doesn't go down. So, you know, when you had those back-to-back years that went up, people are still feeling, you're feeling that, I think, and it just takes a while for their salaries to catch up or whatever to catch up. It's so true. And I want to just double-click on your McDonald's point, because it's so apropos to just, I think, regular life for people. It's amazing how expensive everything has gotten.

And I say that as someone who has enough money. I think we should close up today with static team size. There is two things coming here. This was a theme last year. I think it's going to be an even bigger theme this year because AI cometh. But the first thing that I'm going to point out is that Salesforce is going to be pretty much moving away from hiring net new software engineers. And I have a quote here from a podcast that Mark Benioff did. And I think it's very illustrative of where the market is.

Salesforce, quote, we're not adding any. more software engineers next year because we've increased the productivity this year with Asian Force and other AI technology. Essentially, they're 30% more productive. And that means that they don't need to hire more people, Jason. That is oddly familiar. Oddly familiar. Where have I heard this before? There's also a really interesting story for Microsoft. They are cutting 1% of their staff focused on performance. You have discussed the importance of keeping your team on their toes, if you will. I'm not a big fan of GE cut 10%, but small reductions here and there makes sense? Check. Jack Weld, you know, I think he felt 5% or 10% was the number. I can't

remember if it was 5 or 10, I think 5. But yes, he said if, you know, it's one in 20 people, if you cut one in 20 people, you give that opportunity to somebody new to hit the top. It's not just to keep people on their toes. It's just makes sense, right? Like, just there's somebody else out there who would do a better job than the 20th of 20 people in your organization. And so what are we seeing with Microsoft going through these regular cuts? Well, what we're seeing is their team size overall. And this is a chart from Geekwire. Shout out to Mr. Bishop

and everyone on Geekwire. Lovely, lovely publication that I love. What does this chart show you, Jason? This is Microsoft's headcount over time. It peaked in Q3, 2023. These are fiscal quarters. So Microsoft's Q125 was Q3-2020 calendar. So that's- A lot of people do this fiscal.

calendar thing. It's so I told Microsoft this and you know what they told me? Alex, thank you for telling us we don't care what you're saying. Fair enough. But yeah.

So you know, what you really want to look at at a chart like this is and shout out to Geekwire, if they want to really make this a great chart, show the revenue against this and then show revenue for employee. So you just put top line revenue and earnings

and then you divide that by the head count and you got this already in a Google show. sheet and that would really make it interesting. Because what you see is if you keep a static team size and you're growing 10 to 30% a year, that means the revenue per employee is going up 10 to 30% per year. Absolutely. And you're just overall more efficient.

This is the thing that has me candidly a little worried. Talk to me about why you're worried. The jobs data and we're just saying, wow, this is crazy. That we still have the lowest unemployment of our lifetime. You have to also take into. to account one more chart when you're looking at this, which is the chart of

labor participation, which is typically 60, 61%. So of people who want to work, what percent are working? Now, some people might be a stay-at-home parent or retired or children, but of people who want to work where percentage are working,

is that Microsoft's revenue for employee? This is the Microsoft Revenue chart. I'm chasing about 10 seconds behind you. But people will keep in mind that we were looking at a roughly three-year geekwire chart, I think. And if you look at the last three years of this chart, it's not perfect best I can do in a second. Revenue is going up very steeply.

Well, Microsoft's overall employment does seem to be either flat or trending down. So Jason's point, average revenue per employee, definitely going up. Now, I'm going to stop sharing this. I'm going to grab the labor force participation chart for you. And what I'll just say about that is this is a reason to own the Mag 7. If you are wondering, like, my God, why do so many people own the Mac 7? why are their, you know, price to sales ratios, earnings charts, you know, why is there so much concentration in those specific names? It's because those businesses keep growing with the same

number of people. And, you know, I called this a couple of years ago that it's actually easier to train employees, to give them tools, and to automate, you know, just relentlessly. and then your organization winds up being a really tight-knit group of people who are getting better and better at their jobs, and it's better for culture. You know what new people do to an organization? It's a lag on business. Now, this is not like any social commentary, but as somebody who runs businesses and has seen businesses, you know, if you got whatever number of people, 100,000 people at Microsoft and you try to grow to 120,000 because you want to grow revenue by 20%, you're like, we're going to grow. the employee base representative

that means somebody's got to hire these people and find them and train them. And then when you hire new people, you only keep, you know, roughly one out of three becomes long term. One leaves on their own. It's not for them. One gets fired.

You made a bad hiring decision or they disappointed you or whatever. So just generally in corporate America, long term, one out of three stays, one out of three involuntary leaves. One out of three voluntarily leaves so that means you really got to hire 60,000 people to get 20,000 good people. Think about the effort that takes.

So this is the trend that has me a bit worried that that unemployment number we saw, that may be a trailing indicator, and that's something that's happening behind static team side. I'll leave it there. So I just want to say, Jason brought up the labor force participation rate. Here is the chart, once again, leading on Fred data. Shout to the Fred team. I love you guys. You're the best.

I, I can't see it there. Is it 60% now, 61? We are currently at 60, 62, 63%. Got as high as 67 in the 90s, and then there was a decline. Shout out, Bill Clinton. There's some recessions. And then COVID took it from 63 down to 60. And now we've regained roughly back to where we were before.

So the chart starts at the baseline of the chart is at 50. 1950, and it was 58.6%. And then, you know, we did have a long period of time in which women joined the world. workforce in greater quantities. And then that peaked in the late 90s, boom times. And then since then, actually, to your point about technology and labor, Jason, what have we seen a lot of since 2000? Well, the internet, remote work, more productivity.

And you've also seen labor force participation decline. I think gig work is another factor here that this data might not be properly accounting for. So, you know, they'll eventually sort of correct for that. but a lot of people also choose the underemployed to do light fire. As we talked about financial independence for tomorrow early, some people have chosen to do light fire, which means, hey, you know, I made a little bit of money. I put a million dollars away and I get some amount of interest on that to live off of.

And then I work 20 hours a week. I do three shifts a week. And, you know, I pursue art or raise my family during the other time. So the opportunity here, I think, is that startups are going to be, able to play the same playbook, which is, you know, they're so resourceful, you might have five people at a company, you know, 10 people at a company, and the revenue per employee could be wildly significant. For that company, that's going to be wonderful, though, for those employees, to have a very high

amount of revenue per year, year in and year out, and, you know, just really enjoy life and not have to hire a lot of people. And if somebody leaves, you're just like, ah, well, we'll just automate what they're doing or use AI for it. And I'm seeing it. I'm seeing it on the front line. So here's, okay, I'm just playing this out in my head. So let's say we have higher average revenue per employee and we have AI taking away a lot of

the grunt work, a lot of repetitive work and a lot of the stuff that humans probably can automate away. All right, fair enough. So we need fewer people to do the same amount of work, higher productivity per person. Good, good, good, good, good. But as digital systems get better and more intelligent to better integrated, into the economy, I can actually really see a system in which we don't need as many humans and the high performers are going to perform even better economically while those who are

average or less in terms of capabilities and intelligence and decided with nothing but love to my fellow humans, it end up essentially a second or third class citizen. I think the possibility here that it could be that if we have more entrepreneurs, then And even though Microsoft's not growing, maybe there's another Microsoft. Maybe there's, you know, 10 more companies. Absolutely. And so we do need to create more products and services and companies to keep things going. The other possibility is as you automate things away, let's say robots could build houses.

Sure. Let's say robotoxies existed and that $75 Uber I was lamenting went back down to $30. Well, then people don't know. need as much money. Now, this sounds incredibly elitist of me to say. I totally say that with complete self-awareness. But the truth is, in like my coffee example before, or, hey, my flat panel TV now, like, it used to be you'd spend $5,000 to $10,000 on a TV setup. And now, like, you can go buy some Vizio at Costco, 500 bucks. That's 80 inches. And you're like, wait a second, that's better than the best TV at CES five years ago. Yep. So maybe, or, you're

you can replace your iMac, your Mac every five years and your iPhone every four years. Sure. So this kind of hedonic treadmill, this capitalistic consumption-based economy is part of the problem. And that could be part of the solution, which is, hey, if you can't make as much money, there's not as many jobs, but your Uber rides go down and cost. Your cost of food goes down again, which it was. Remember, food didn't change prices for decades or you could buy a pair of jeans for 30 bucks. When I was a kid, it was $20 for a pair of jeans.

And then I remember in the 90s, it was $20 for a pair of jeans. I remember in 2000, you get a pair of jeans for $20, you know, at Old Navy. And I was like, what's going on here? Oh, people are building stuff in factories, automation, all that kind of stuff. And globalization, too, yeah. Globalization, but also goods and services, like some goods were made with machines instead of humans. Like, we're making denim in middle America. Jason, you're talking about the deflationary impact of technology.

All right. Just before we go, everybody, today is oral arguments for TikTok in front of the Supreme Court. That's going to kick off at 10 a.m. Eastern time today. So by the time you listen to this, if you're not live, that will have happened. Check the news. If you are live with us, that's coming up in about 45 minutes. It's going to be an absolutely busy, busy day in Capitol.

and we're back, Jason, on Monday. We'll see you on Monday. Thanks for tuning in and stay safe and our thoughts and prayers are with my friends. And people I don't know. Gosh, everyone in Los Angeles, I'm just so glad that the death toll, the property can be replaced as tragic as it is.

Thank God, you know, the death toll has stayed so low. So I think, I guess, a society, people listened and they got out of Dodge. So thank God for that. I mean, sometimes when these things happen, you have hundreds of people die or dozens of people die. The last death toll I heard was five people. And so that seems to me, given the scale of the damage and this tragedy, seems like an

incredibly low number. I thought it was going to be 100 or 200 people had died. I mean, like these floods, yeah. Good and bad news. The latest number that I saw was larger than that, but it was 10. okay so 10 is still a tragedy but 10 is not 200 it's not 2,000 it is 10 yeah it's lower than I expected too all right everybody we will see you next time bye bye bye bye everybody