Yet Another Value Podcast - How Countries Go Broke (June 2025 Fintwit Book Club)

Episode Date: June 26, 2025

In this monthly book club edition of Yet Another Value Podcast, host Andrew Walker is joined by Byrne Hobart of The Diff and Capital Gains to unpack Ray Dalio’s latest book, How Countries Go Broke: The Big Cycle. The pair probe Dalio’s sweeping macroeconomic theories, debt cycles, historical analogies, and technology’s role in shaping the future. They scrutinize the credibility of Dalio’s claims, the real-world implications of sovereign debt risks, and the potential misapplications of macro trading skills to macroeconomic policymaking. The conversation winds through AI’s effect on productivity, the staying power of elites through societal upheavals, and even the viability of crypto as a hedge. It's a rich analysis with sharp skepticism and economic nuance._________________________________________________[00:00:00] Podcast and guest introduction[00:01:38] Initial thoughts on Dalio’s book[00:05:26] Short vs. long debt cycles[00:06:40] Historical cycle timing critique[00:07:24] Pre-WWI and 1930s comparison[00:10:11] Disconnection between theories and globalization[00:16:25] Institutional trust and economic cycles[00:18:18] Credibility of Dalio’s theories[00:21:26] Macro trading vs. macro policy[00:24:42] Trump-era policy implications[00:26:19] Foreign debt selling as signal[00:28:14] Put options in tail events[00:32:35] Buffett’s strategic puts example[00:35:32] Technology optimism in final chapter[00:40:25] AI effects on labor, productivity[00:45:43] Older professionals using AI[00:47:00] Book’s global bearish stance[00:51:22] Historical elite persistence examples[00:53:45] Bitcoin in crisis scenarios[01:01:54] Sovereign wealth fund proposal critiqueLinks:Yet Another Value Blog: https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer

You're about to listen to the yet another value podcast. Today is my monthly book club with my friend Bern Hobart from the Diff and Capital Gains. We read Principles, How Countries Go Broke, the Ray Dalio's new book. We had a really interesting conversation. I really alternatively loved and hated reading this book. We had a really interesting conversation about a ton of different stuff. If you're a fan of either of ours, hopefully you are if you're listening to this, but if you're a fan, I think you're really going to enjoy this podcast.

so we're going to get there in one second. But first, a word from our sponsor. Today's episode is brought to you by FinTool. Fintill is the AI junior analyst tailored specifically for individual investors. Everyone in finance is racing to figure out how AI can best be integrated into their investment process,

and one of the biggest areas that is catching on with institutional investors is analyzing SEC filings and earnings call transcripts. FinTool takes hours of combing through filings and control-effing transcripts down to seconds, whether it's comparing the current call with prior quarters, finding that sneaky change in the footnotes,

or compiling the key facts into an easy to digest one-pager, FinTool is saving you hours so that you can go deeper and search wider because your time is better spent, turning over more rocks or researching the things that AI can't. Go to fintool.com to transform your research process. That's fintool. All right. Hello and welcome to the yet another value podcast. It's our monthly book club. I'm your host, Andrew Walker, with me today, my co-host, Byrne Hobart from the diff and capital gains. Byrne, I need to start saying from Capital Gains, so I didn't realize Capital Gaines had the referral program.

I can start getting that sweet, sweet merch. Yes, yes. Go forth, get merch. Before we start a disclaimer, nothing in this podcast is investing advice. We're talking about a book, but remember that disclaimer, full disclaimer at the end of the episode, if anyone wants to listen to it. Burn, we read Ray Dalio's principles. I think this is the third in a series of books.

This one is on How Countries Go Broke. He finished writing up in March 2025. He released it earlier this month. it's in the name. It's talking about how companies go broke, the big debt cycles and everything. I alternatively loved and hated reading this book for a reason and so I'm sure will come up, but I'd love to turn it over to you. What did you kind of think of just the overall book? And then I want to dive into so many different points on it. Yeah, yeah. So I read the, I read Dahlia's, I don't know if it was principles. It's the one where he does lay out his

macro theories. I read that when that came out. And it was actually pretty illuminating for me just to think about the credit cycle and the way that he did. I think he is an actual good student of the credit cycle and has this understanding of how expansion in available credit in one place, feeds into other places, and, you know, things look good for a while, and then things get overextended, they look bad. And if you can time that and you can think about the real constraints and, you know, just when this has to end,

then, you know, you're in a position to run a big macro fund. And on the other hand, whenever I was reading it, I kept getting struck by this idea that he's kind of, I think if he were writing a book about a world where we just hit whatever technological maximum we could hit, you know, whether it's a world that's stuck in the medieval era or stuck in the Industrial Revolution or stuck in 1950 or whatever, I think the book would make a lot more sense because in that world, you do have these cycles and they do involve balance sheets expanding and then contracting around some natural steady state. But the actual world we live in, is just really different, and I think, you know, a lot of money has been lost by investors who have at various points believed that because, you know, that the optimal PE ratio for equities is infinity because technology QED. You know, you get very rich for a while saying that and then you lose all your money. On the other hand, he doesn't seem to put a lot of stock in either the idea of technology actually changing what these relationships should be or demographics exchanging it. I think the demographics thing is a big one because when I read this book,

and he's talking about this grand sweeping cycle of the 20th and early 21st centuries and how it has echoes of the rise and fall of the British Empire, et cetera, one of the things I'm thinking is they just didn't have a lot of retired people. They didn't have a lot of pension funds. They didn't have massive life insurance sectors. And so they just, they actually didn't have as much demand for debt. So you're just talking about something completely different. If you talk about the Dutch merchants defaulting on their loans in early 18th century, Amsterdam versus today, and you also, you're looking at a world where there are central banks, and, you know, to his credit, he is very much aware that central banks exist.

And a lot of the book is about central banks taking over at one point in the cycle and basically monetizing a ton of the debt. And that's how we get to the next stage of the cycle or how things reset. But I did wonder, you know, you can find a secular trend that looks like previous cycles. And if you don't recognize that sometimes things do just inflect for a while and there's still a cycle, but there's an epicycle that's longer than you can really comprehend and longer than any one person's career, I think you can really blow up. Like, I'm sure a lot of people who've been tracking, I feel like take Nvidia, if you've been following Nvidia for 20 years, that was actually a huge liability in the end of 2022 because you could look at, okay, this is just another cycle. People are going to massively stock up, massively over order, at one point orders get cut. there's a big inventory write down, stock collapses, and that's when you buy, and we're still waiting.

No, I love everything you just said, and you hit on a lot of the points I wanted to bring up. Like, one of the things he says, hey, the, so he calls it the short debt cycle, which is kind of like, think of it as basically a boom-bust recession, and then the long debt cycle, which is the overall country's finances, and basically they get stretched and then they pull back and everything. And, you know, the long debt cycle, he says, it plays out over the course of 80 years plus or minus 25 years, I was like, look, I understand there are things that take longer than investors' lifespan, but you basically just called, hey, it plays on over a century. Like, I can call anything that plays on over a century.

And I'm not sure if saying, hey, we're, you know, right now he says we're, the U.S. is kind of at the tail end of one of these, which I don't think is crazy. But saying, hey, it's been 60 years in this one. It could end now or it could go for another 45. I don't know if that's going to make anybody a lot of money. Oh, yeah. Like, it is kind of funny that his range, his comment. confidence interval does actually span just a standard career.

If you think on the long end, it spends three to four standard careers, right? Yeah. Let me see. Let me start with, I mean, this is not a bullish book by any means. It's not surprising. Let's just start with the end. I personally thought the last chapter was by far the best. I wish the book had been more of the last chapter.

And the last chapter is where, you know, the first 18 chapters he builds out his theories. He gives a few examples, but not many. we can talk about those more. But the last chapter, he says, here's where we are today. Here's what I think happens going forward, and here's why. I wish more of the book had been like that. There's the old joke. Most books can be blog posts. I think this could have been a blog post instead of book. But I'd love to start with the last chapter. He says, hey, the U.S. today reminds me a lot of the U.S. in 1905 to 1914 and 1933 to 1938. Both of those are the pre-World War periods. It's not a surprise. He basically says the world's hunting towards World War III. But I'd love

to each of your thoughts, what did you think about those two comparisons, saying we're like those two? Because on one hand, I thought it was interesting, but the other hand, I would take a lot I'd take a lot of caveat. So I'd love your thoughts on kind of where we are versus what Dahlia thinks. Yeah, yeah. I think in terms of those parallels, you know, the, I think the pre-World War I one parallel is probably just going to be more coherent because there was this long cycle of trade that kind of peaked. I think it peaked, I think global trade peaked in, as a percentage of GDP, peaked in 1913, and then there's like a 50-year period where it's below that.

And it's a little higher in the 20s and then drops massively in the 30s and then it takes us a while to just reconfigure the economy to the point that trade makes sense again. If people can listen to our book on tariffs from April, they really want to learn more about that. Yeah. And so then 19, you know, late 1930s, that feels more like a post, you know, crisis, financial crisis to post crisis kind of analog where you have these massive losses on private sector financial institution balance sheets. And it's going to take a long time to work them off. So we move as many of those liabilities as we can to the federal balance sheet, in part because there's essentially unlimited demand for risk-free assets. And, you know,

eventually we work off the overhang and basically the faster that we can move those into federal rather than corporate liabilities, the better off will be. And I think there's another, you know, you look at 1920s, there was just a huge expansion in the financial system. And actually this is one of things I read this book. I'm blanking on the title right now, but it's just this incredibly detailed look at everything that happened in the stock market from 1929 to 1933. And one of the things the book pointed out, like the author, the author's clearly a value guy. He's a Goldman partner, I think. He's a really big believer in return on equity.

And so you can just feel the outrage, like blasting off the page when he tells you that the big banks were trading at five to ten times book value, and they all had mediocre returns on equity, like 10%. So that felt a lot like this analog to, say, 2007, where if you look at it on a return on assets basis, the banks are not a great business, they do lever up a lot, and that does get their returns on equity to pretty good numbers. but then it all collapses pretty fast. But now we just, we've moved a lot of the leverage already off of the corporate balance

sheets and onto the government's balance sheet. And that is just a healthier place to be if you're trying to avoid a crisis. In terms of the unwind of global supply chains, you know, that's very TBD. Like there's, it's the extent that that's the story that you tell about the next 30 years, you have a very limited number of protagonists. And I guess you could have the debate. of is Trump a, did Trump actually cause this rupture in the history of globalization or was Trump able to get elected because globalization was in various ways not delivering on its promises.

And so if it hadn't been Trump, it would have been somebody else. Let me, let me pull there. So before we talk to the Trump thing, it's one interesting thing that jumps up. So in the last chapter, he talks about, you know, there's a lot of bearish things. He compares us to pre-World War III. It talks about how rising nationalism, that probably play into the Trump and everything. Talks about all that debt cycles. He's bearish on all the big economies, all the big, like all that. And, you know, when you read this book, you can see why, and I can see why a lot of my macro historian friends have been so bearish for so long. But then he almost casually says, hey, all that's tough, you know, the world's

going to disentangle a lot. But then he says, globalism is here to stay. And, you know, if you're a private business doing global deals, that's going to go up and up and up, like the world's too interconnected, which also makes sense given the internet. But I didn't like that he didn't bridge the two, right? Because one of the tough things with Trump and doing the trade war, and doing the tariffs and everything, yeah, in the 1910s, you could just slap a ton of tariffs on because, hey, they're importing what over here we slap a tariff on? How do you do it? How do you tariffs when, you know, the parts are getting manufactured over here, shipped over here, shipped over there, finished here, a lot of its intellectual property. Like, it's a lot more difficult. And, you know,

we never had interconnected this. How many people were coming from China to study in Harvard or Columbia 120 years ago? Not many. Now, like, people compete for these people. And I didn't think his grand theory of, kind of to your point earlier, his grand theories of the debt cycle, I would have liked if he had tied it into, hey, maybe one of the ways I'm wrong or maybe one of this way to extend is because the world's a lot more interconnected now and how that kind of ties into the debt cycle. Yeah, I guess in one sense, you could say this book could have either been way less ambitious or way more ambitious. Because the way less ambitious version is Ray is looking at the economy of 2025 saying, here are the vulnerabilities of calling

my shot. This is not just like 2008, but it is a whole lot more like 2008 than it is like other years. And you know, you should consider that connotation. And then I think the more ambitious version of this book is to say that the debt cycle is just symbolic of some broader sense of trust in institutions and they're functioning, you know, the fact that we treat treasuries as a risk-free asset when the Treasury department, like they're part of the government is entirely made up of human beings who are just as normal and fallible as us. The idea that we can trust an arbitrary number of them, most of whose names we don't know, we don't know what they're up to, what their motivations are, et cetera. We literally call it a risk-free asset when

we entrust them with our money. That is a huge testament to how much institutional clout the U.S. government has accumulated over time. But it's also the case that there were lots of other trusted institutions. And, you know, there were Victorian and Edwardian savers who were buying the consoles, which were permanent just perpetuities, where they just pay your three pounds per year forever and they just got destroyed after the World War I inflation. And they were, they were very trusting people. And they were entrusting their money to a very competent institution, but it just wasn't able to handle those challenges. And I think this was something I mentioned this when I briefly reviewed the book in the newsletter is I think sometimes he's looking a little

bit too much at the accounting and not enough at the economics because I have this view that, like, and I think it's a realistic normal view that the broad definition of debt is just, anytime you can trust someone else to do something such that you behave as if that thing is going to happen. And so the example I always like to give of like a credit-fueled boom versus credit-fueled bust is if you're throwing a party and you just start inviting your friends and you tell everyone that everyone else is coming, you have created credit. You have borrowed against the other people coming, but if you can get enough people to show up, then it's actually a great party. So your debt gets paid off. And then if people don't show up, then the people who do show up, they turn around and leave. They realize it's not a happening party.

And so you have this rapid deflationary collapse. So either equilibrium can happen. And in each case, you know, you're borrowing against something and you're expecting people to trust you. In this case, you're lying. But in other cases, you could imagine a true version where it just, things didn't work out for whatever reason and it has these compounding effects. But if you look at, when he looks at the cycle and talks about how we were very, we had very low leverage in the 1950s.

But I looked at that. I was thinking, well, wait, we actually, you know, most Western governments are massively expanding their welfare states. You know, a lot of, a lot of them did that before the U.S., but, you know, U.S. by the 1960s is a pretty comprehensive welfare state. And then very, if there are a lot of protections for workers, you know, protections for unions and efforts to make it hard to fire workers, that is essentially a form of borrowing. You are taking whatever the economics of GM and Ford are circa 1955, and you're just a. extrapolating and you are giving, if you are GM or Ford, you're giving yourself a fixed liability that's backed by your assessment of those economics. So I think some of what we did in this transition from much more labor favorable to much more capital favorable legal systems from say the 1930s through today, part of what we did was we just actually put

this stuff on ballot sheets. And instead of a worker at GM knowing, that the job is safe and also knowing that there's a pension at the end and knowing exactly what the raise looks like, et cetera, now this stuff gets marked to market. It's not as certain, but you actually get higher returns and you have a more flexible market so people end up better off. And if we don't all have pensions that we don't see, we just get the checks at the end, then if we don't have that, we are just all capitalists. Like we all have, to the extent that we have any savings at all, it is in some kind of market asset. So we do benefit if those asset prices go up, although, of course, the people who have a lot more of those assets benefit a lot more

than the rest of us. So I think, you know, if you told that broader story of the big cycle is about institutional capabilities and that the institutions get big and a certain set of circumstances, circumstances change, now the institution is too big and it can either gracefully restructure or it can start falling apart and you'll probably get a little bit of each. I think that is an interesting story, but it's also a story where I think you're first question if Dahlia had written that book is, okay, why, why am I listening to a bond guy, give me his theory of human history? There was a lot to go there, but I'll just start at the end, because it's one of the points I wanted to make. One of the worries I had here was Dahlio,

he does not cite any sources for the most part. He does not, for the most part, until he start, until the middle of the book, he does go through a few examples. He goes to the example of China. He goes to the example of Japan. He casually mentions a few other examples, but he doesn't get counter examples. A lot of the book is, trust me, I'm Ray Dalio. And I think he even says it at the front. He says, like, hey, I know my theories and a lot of the things I present in here are unconventional, but I've made money over my career. So listen to me. This stuff works. And like what I was my favorite things on that? Because you mentioned not setting a lot of sources and, you know, saying, trust me, bro. He has this acknowledgement's been at the beginning where he lists a ton of people,

he thinks. Summer's guy. Yeah, it's like, you know, all retired central bankers and people like that. And what was funny to me was normal, in a lot of cases, if you do that, if you say, I talk to a bunch of people to come up with this grand theory, one of the things you add is, by the way, all mistakes are mind, you know, and don't blame them. Like, don't blame Larry Summers if I thought that the, I don't know, if I thought Argentina defaulted in the wrong year or whatever. But he doesn't, he doesn't do that, which is kind of funny to me that he brings in a lot of really rich people. I assume he pays them quite well to talk to, to talk to Bridgewater, and I assume they also get their money's worth because

they're smart central bankers. You can tell you how they really think. Yeah. But it was kind of funny. Like, there's a little bit of an ego trip thing going on there. And just like typographically, the fact that he will, he has all these different ways to call out, okay, this part is in bold. You should absolutely read this no matter what, even if you're just flipping through

the book. And we have a little icon here to say that this is timeless wisdom from Ray and it applies to everything in your life, et cetera. It was a, it's clearly a labor of love. I agree, but I did not pick up on that in the citations. It's funny. But, you know, he is kind of like, by doing that, as you said, he might be paying these guys $250,000 for speech or something, right? And then he's saying, hey, I talk to them. He's not, he's kind of whitewashing, not whitewashing. He's using the temperature of I talk to central bankers to bless all these unconventional theories. And we don't even know if they agree with them or not. Now, I do think some of the central bankers give blurbs and everything. But I don't know. I was just, we, I Again, our last book club was on the snowball, and one of the things that struck me is the Charlie Munger chapter, where Charlie Muggers is my entire career, I've been worried about shoe button complex, where, you know, you're a person, you're a businessman who runs a shoe button company, just absolutely kills it, becomes super wealthy on the shoe button business. And then all of a sudden, you think you can opine on every subject. And no, you were just really good at the shoe button business, but now you think you're an expert on, you know, the famous Twitter thing.

I didn't realize it was following so many experts on Ukrainian politics and nuclear weapons and stuff. You know, and it is funny, Charlie Munger says that because if you want to talk about one man who, well, extremely smart thinks he's an expert in everything, Charlie Munger is a very good example. But, you know, I was kind of reading this. I was saying, look, read all that you built a great investment organization. You were a very good trader. You're very good at bonds. I understand you're macro, but the skills to be a macro trader are not necessarily the skills to run a macro economy, right? Like you're looking for convex risk reward, right? It's places where you bet things don't go your way. You Don't lose much. Things go your way. You make a ton. That's what you're looking for. When you're running a macro economy, you're looking for a lot of different stuff. And I was just struck by the shoe button complex and all of that. Yeah. And I think, you know, going back to this idea of there is a big cycle. And, you know, the part of it that's definitely true is balance sheets are a lot larger. Central banks are a lot more important than they used to be. The financial system is maybe more in the driver's seat than it has been historically, although, you know, if you read histories of 19th century U.S., there are a lot of cases. where it's, you know, one bank messed up, one underwriting, and therefore we have a depression. So maybe in the aggregate, they have a larger impact, but specific ones are a little bit less likely to mess everything up for all of us. But, you know, in that world, you can be really good at macro if what you do, what you're actually doing is having a really good mental

model of given this headline, what will central banks do next? Or really even given this headline, what is the difference between what central banks do next and what traders think they'll do next. That's what you have to know, to know whether you are buying or selling Euro or 10 year or tips or whatever. And that kind of, that kind of thinking, it obviously really helps to understand what's actually going on in the real world. And I think a lot of the really big headline-worthy wins in macro have been cases where you are betting against a central bank or central government that you know is making a policy mistake. And your bet is they're going to to have to give up like they they are much more wrong than they realize and i want to be on the other side

of the trade you know stuff like the like the obviously one that comes to midasoros and the pound well soros is a great example of what i was talking about right because that was also a very convex trade if source is right they have to from from memory they have to devalue the pound right break the exchange rate so if he's right he's going to make a fortune on leverage and if he's wrong and the exchange rate stays in place because the government's enforcing the exchange interest he doesn't really lose a lot of money, right? So that's a great example of, hey, if you're a trader, great instincts, unlimited, no downside, huge upside, you can put that trade on all day long. It doesn't give you the right to go to the British government and say, hey, let me tell you how to restructure your balance sheets

and stuff. Let me jump to this. The book ends in March 2025, which is really interesting, right? And some of the things, I'll give him tons of credit for some of the things he's talking about because the things that are in the news in the next four weeks he's clearly thought about before. You know, I've got one quote, the history of this central governments will, or central banks will get influenced by the governments. He's talking about the big red flag you want to look for is foreigners selling off government assets, and that would come really into play. Now, I don't know if you went back and changed a little bit of the stuff after he wrote it,

but I did want to say he ends in March 2025. And, you know, it's notable because he's talking about Elon Moss and Doge, being best friends with Trump, all this sort of stuff. He allegedly doesn't have the tariff news, all this sort of stuff. Just wanted to ask you, what did you think about where the book ends, how he talks about how, with the benefit of three months of hindsight, how kind of where he's talking about plays out. No, I think it's incredible timing. Like, I think about this a lot with book publishing because I've been in that process

and I know that there's this lag between when you deliver the final manuscript and when the actual book is available to people. And so, yeah, incredible timing, just calling out that there would be this period of high volatility. And, you know, he had, I think, some of the drivers right. And then, you know, some of it's just kind of, I guess his model does sort of fully generalize where if you see the market going down, you can talk about how things are unwinding. Now, the dollar stuff was really interesting. And yeah, the idea that the foreigners trust the dollar, like that that's, that's actually meaningful signal because the dollar, you know, we talked about it being a risk-free asset, but

it's also, it's risk-free because people believe that it's risk-free. It's really risk-free because it is a risk off trade where if people, but I guess the way I would think about it is that it's risk off because people owe dollars and they need to source dollars. And so when things get a little scary, people will sell what they can and convert it to dollars just as a precautionary measure. And there's actually an article in the Wall Street Journal this morning that was talking about that with Israel and Iran and saying, hey, the dollar actually worked. Like it actually went up when Israel started bombing and that does mean that it's still a safe, asset, you know, when the thing making the world feel unsafe is not some direct threat to the dollar

status is reserve currency. So, yeah, I thought that was reasonably, reasonably accurate, you know, really pressing given just how tight the sequencing was. And I do wonder if he actually want to just get it, like, get the manuscript out before Liberation Day on the assumption that Trump, you know, I'm sure he has better access to Trump than most of us, that Trump is as crazy as he sounds. and, you know, when he says he's a tariff man, you should believe him. He's got a lot of prescriptions for the government getting their debt and everything down.

And one of the prescriptions for, he's got the 3% solution, which is very similar to the Secretary of Tregor, I believe, before he was talking about 3% growth, 3% inflation, 3% deficit or whatever. It sounds very similar. One of the things I was interested in that, he had, hey, here's how much we'd cut into the deficit by putting 10% tariffs on all imports. And this was, if you believe him, you know, March. Now, Trump was making a lot of noise. about tariffs and everything in March, but he had pretty much the prescribed policy and where it seems it's all going to settle out at. So one more question on turning it in March.

Again, one of the quotes that jumped out to me was he said, look, the next big red flag for a debt crisis here would be significant selling of government debt by foreign asset holders, right? So let's just say he wrote that in March. In April, everyone remembers Liberation Day. Everybody remembers dollar melting down, bonds melting down, rumors of foreign central governments, foreign banks, foreign holders selling bonds, right? I wonder if Dahlia would say, with benefit of hindsight, hey, what happened in April and what we're still kind of seeing the lingering after effects of today,

like I remember last month, people pulling up the chart of U.S. Treasury and say, look, interest rates are now higher than they were a Free Liberation Day. Like, yeah, you kind of reverse it, but they keep ticking up. I wonder if you would say what happened in April was another sign of a looming debt crisis, or if you would say, no, that was kind of a one-off driven by, now it's all part of the cycle, right? He argues Trump and the nationalism is part of the part of the cycle like this shit's the hard, right? But I wonder if you said, no, that was kind of like a one-time thing. It's also going according to trend, but you can't really read anything. It's that one-time issue. Where do you think he would fall on that? I don't know. Like it, it, I was maybe,

you know, I was taken by surprise in the sense that I was not short on Liberation Day. It should have been. In retrospect, actually, I guess I should have been flat. You know, you weren't sure, but you did, as soon as the volatility picked up, you launched the risky asset you can launch a VC fund. So you did bottom tip the markets. Now it's too bad we couldn't deploy the VC fund there. Right. No, that's fair.

That's fair. Yeah. You know, long, being long vol, but with quasi positive carry as part of our, part of how we talk about it when we are talking to allocators and things. Because it is like, you know, if you were just worried about volatility in general, you and look at the long-term track record of buying puts and say, okay, well, I will always regret this over time, even if there are particular months in history where I don't. Let me push.

So I agree with that, right? Like, if you buy puts, there are insurance businesses. They're not, there are not businesses for buying insurance, right? So if you buy put, you're paying a pretty heavy big. But one thing I've kind of, I've come around. I've evolved on my thinking a little bit. Yes, the buying puts will give you a negative EV over time. but if you believe the world has a little bit of thicker tails, more volatile, you know,

if you're buying puts over time, where they really come in is, hey, from March 15th to April 15th in 2025 or February 15th to March 31st in 2020, the stock market just drops like a stone and your puts go up 40x. And yes, over time you have lost money in the puts, but when the market is at its absolute cheapest, you have the puts as a source of capital. Now, Now, I don't know, like I don't, because you could also just say, hey, skip the puts and instead of being 100 net, be 80 net, and then you still have the cash then. So I don't know the right answer, but it's just one thing I've been evolving on, so we can talk about that.

No, so I think the really interesting way to do that is there are prop trading firms that do buy that kind of tail risk insurance. And I was thinking about this because I'd heard references to it. And I was thinking, you know, at one level, okay, this is just if you're minting money, why not just protect your downside risk. But I was also thinking, well, what happens when the market is crashing? So VIX is up, spreads are up, volume is up. And so if you are the best capitalized market participant at a time when people are doing a lot of trades at very widespread,

then you make so much money from that that it doesn't matter how much you were bleeding on. Of course, you want to quantify those things and you want to figure out, okay, like, what is the point at which I kind of break even on that bet. But what I decided was that it probably makes the most sense for someone like that, someone who is a liquidity provider who is going to step in and just offer lots and lots of liquidity. And if they can actually expand their balance sheet at a point when everybody else is pulling back, then they're in a really good position. They have maximum market share at the time when it's the best time to be in that market. And, you know, those things are just really lumpy, right? And then for other market participants, I do think,

that it, I guess there's, there's kind of, I guess the other piece of it is scale. So in my case, yeah, it would be nice if I'd been able to snap up some, you know, some of the companies that I thought were pretty good companies at low teens, EV to EBITDA. If I could get them at high single digits instead, because my puts paid off, then maybe I'm better off. But I could have also just been less lever, been less long, and I would have had the same opportunity.

But if I'm managing a balance sheet that is large enough, that I can actually do deals and I can find distressed companies and just buy them, then maybe that's a case where it does make sense for me to own a lot more tail risk insurance because I want to be unusually well capitalized at times when there's a company where I can look at it. I could say, this company needs X million dollars to survive, but if it gets it, it will survive. It's just they have some, you know, they have a loan that is coming due in a week and they're not going to be able to raise that capital.

But, you know, the business is actually a viable one. So if I pay off that loan, I could probably, you know, make my own terms. And the natural analog there is the serious XM deal, where if you go back and read the headlines at that time, it's just this daily TikTok of they have, you know, a week of cash left. Malone is going to start returning their calls. They have three days of cash left, et cetera. And he buys it at basically the bottom. And it's because he had liquidity. They didn't.

And he knew that this was structurally an okay business. It's funny. Malone has liquidity and they didn't because of the loan, if I remember quickly, the global financial crisis, he gets margin called. A lot of the Liberty Complex gets margin called during the COVID crash. It's just funny that he makes, I mean, one of the best investments of all time with Liberty Series X-M. But no, to your point, we just read the Snowball. And one of the things I'm going to publish a post on this, I've been thinking about, hey, now the Snowball, it's much more Warren Buffett personal life than Warren Buffett investor. But if you just read the Snowball, you would say a lot of Buffett's wealth, fortune, best trades. And Buffett and Munger have both said over time, hey, take away our 12 best deals and the Berkshers returns are average. A lot of Buffett's best deals come from buying into distress. And some of it is just distress as in, hey, there's a strike at the Washington Post. But a lot of it, to your point, the Geico deal he does in the late 70s, right? Geico is bankrupt without him. With him, he writes a check. And now you've gotten access to this incredible franchise and everything at a hugely discounted valuation. You think about the global

financial crisis. I mean, it has both sides at that point, right? He's making all these deals, Constellation Energy. I believe he agrees to bail them out. And two months later, somebody comes over the top, but he gets like an insane breakup fee, all this sort of crazy stuff. So great example of having liquidity when no one else is there. But also in the global, in the financial crisis, everyone will probably remember he wrote a lot of puts on the indices. And because he wrote those puts. Ultimately, they were profitable. I knew they were probably going to be profitable, ultimately, but he's having to post-collateral, and he can't be as aggressive in the financial crisis. Go ahead. Go ahead. I think that was, so there was a thread from, I think, Ben Eifford

recently talking about this, and that that was the actual thing that Buffett did right, was he negotiated no, no variation margin? I, I, you know, I think you are right. He didn't have to post-collateral, but because the rating agencies were downgrading Berkshire in part of the long-term exposure from this, I think he got in trouble. And maybe, I can't remember, I know he restruck them at some point. Maybe the restripe was no collateral. I can't remember exactly. But yeah, I'll, yes to all.

So the thread, it's a fun thread. I'll send it to you if I find that you can link it in the show notes. Because it does talk about how, like the anecdote is apparently that at one of the banks, some team went through and they just tried to model what is the value of not having to post collateral if you have sold a massive amount. of 15-year index splits. And basically the conclusion was, that's why index puts are priced where they are, is that you are wiring, if you do that trade and you're not Warren Buffett,

you're wiring Goldman and Morgan Stanley and all these guys, lots of money right when you really don't want to be selling anything. And I guess, I can't tell how much of this is just that Buffett did the folksy, you know, I'm just a, like, you know, an insurance guy. from the Midwest and I don't understand these fancy derivatives, but of course we're triple A, you know, we're good for the money and so we shouldn't need to put up any margin for all gentlemen here, et cetera. I don't know. It was like it was a little bit suspicious to me that nobody would actually model that until after they had done the deal. But it also, it does

make Buffett sound a lot like it, you know, it makes them sound like more of a shark that he actually he did this deal where the main driver of it was understanding the interplay of a, options pricing and collateral and the correlation between when you'd put up the cash and when other assets would be distressed, et cetera. It's really funny to me. Like, anybody who thinks Worm Buffett isn't a sharp, you don't even have to read Snowball, but you read Snowball, and I think you and I mentioned it, the paint sheet stuff where he's calling people and saying, hey, 450 bid.

And a week later, they come forth from you, he's like, it's $4.25. And they go, what? They call him back a week later and like, all right, we finally got in touch with our seller is four. like anyone who thinks that man isn't a shark is so effing out of their mind you know here's here's how you could have made it more sharky he could have done the trade and not that's supposed collateral and then he could have gone and shortened all the banks on the theory that if things really went to hell they would right hey you know we've got a mark to market gain of seven billion

on this one thing but our counterparty isn't posting collateral so we're having to take like huge huge reserves against them or something that would be pretty interesting yeah i could imagine him buying them out, you know, at the, well, I don't know what his time it would have been like, but buying them out at a point when things are pretty distressed and they would really want to just get the cash. His mark to market is negative $7 billion. He says, hey, but, you know, back to the book we're talking about, not last, you know, you mentioned technology, the interplay and everything.

At the end, again, I think the last chapter was the best chapter. He had a really interesting claim. Now, again, I wish he had citations. I wish he had sources. But it's interesting, his one big hope when you read this, right? Everything's going negative, and his one big hope is technology, right? And he talks about AI's productivity, inventions, things we can't even dream about. That's his one big hope.

He has an interesting claim. He says, look, when I model out the cycle of the future, I have estimated that the positive impacts of technology will be 150% of what happened over the last 30 years. And I read that and I put the book down. I was about to go for my afternoon walk anyway. And I thought about it on the whole walk just like 150%. Because on one hand, over the past 30 years, we had email, we had mobile phones. We had the rise of all the giant internet companies.

The past 50 years is really the first time you can imagine where the classic take George Washington and put him in today's world, he wouldn't have understood us staring at phones. You know, past 50 or past 30 years, we're basically going from 10 channels. past the big three, but we're going from 10 to thousands to streaming. It's wild. So on that hand, it was like, man, 150% that's pretty big. On the other hand, AI replacing jobs already and people don't realize it. This isn't you and I talking on the podcast. This is AI, Andrew and AI Byrne talking. But, you know, AI's coming. Technology progress seems to be accelerating a lot of field. So I don't know. I don't know. But I'd love to get your thoughts. You know, when he makes

that big claim, how do you think about it or where do you think over underestimate anything you want to talk about. Yeah, I think, I think usually when when tech stocks are at record highs and a depreement of everything else, probably people are overestimating forward productivity growth and vice versa. That said, then there's the other piece of the distribution, which is if AI turns out really, really well, then none of this stuff actually matters, that the AIs will be trading energy credits back and forth and will all be trillionaires in vealtern. and, you know, nothing, nothing will be especially disturbing when you're on your Martian vacation or whatever.

So I guess, yeah, the more extreme your projections get, the more you're just talking about a completely different world. So I think base rate, like, especially if you're trying to manage an economy, you probably don't want to manage on the basis of, well, there could be this massive improvement of productivity. What you do want to manage on the basis of is there's a distribution, there are ranges, and actually U.S. productivity numbers have been, pretty good for the last, last couple years. It's, you know, kind of looks like that late 90s

spurt of productivity growth. So I think there's, there is a positive argument there. And I also think this, this ties into the question of what is the optimal level of stability for the economy? And if you're running a low growth economy, you actually want to run things in a pretty stable way and you want to tamp down on leverage. You'll have a lot of leverage because if It's a stable economy where people are aging and leaving the workforce and not dying right away and where kids spend a lot of time not in the workforce because they're in school. It's an economy where you do actually have lots of people accumulating liabilities on their balance sheet, paying those off, accumulating assets, and those assets are claims on the liabilities of the next generation.

That's just how it has to work. But the higher your growth rate is, or the higher your productivity growth rate is, the more transformative technologies that are being deployed, the more you probably want to go for variance. You actually want there to be more a higher probability of a recession at a time when AI is being rapidly deployed because you know that there's a set of companies where AI will kill them at some point. They are dead companies walking. And if you get it done, then people will recognize that and they will reallocate their

resources towards things that make more sense. And also, you just want to know, like what, and this is something I'm really curious about is what does unemployment look like, especially white-collar unemployment, in our first post-LLM recession. How many of these jobs get destroyed and don't come back? How many companies are going to be, instead of expanding revenue and keeping headcount flat the way big tech is right now, it'll be keeping revenue flat and shrinking headcount five or ten percent a year.

And, you know, that leads to its own macro concerns because at that point you have this kind of similar to the late 90s dynamic where corporate profits are way up. and it's just that money has to, like, corporate profits are up, deficit is low in that period. And so the liabilities have to come from somewhere, and they basically have to come from consumers borrowing more. It was the diff that wrote LLMs might be the best for the 80-year-old portfolio manager. Am I remember, correct?

Do you want to give that story? Because I'll follow on with a comment on that. But just for listeners who should subscribe, but don't subscribe or might not have read that specific episode of the diff. Yeah, like I was thinking about how I use LLMs, where I basically give them their marching orders. I tell them exactly what I want, and then I give them feedback, and that they are doing all the detailed finicky work, and then I'm looking at their results and trying to figure out, okay, are there any obvious mistakes? And also, they really help with things like just the tip of the tongue, like I remember, you know, I'm, I know I'm thinking of something that actually happened.

I don't remember enough details to Google it, but if I give you enough circumstantial description, you'll be able to tell me. And that's the kind of thing where I think as people aid, that is one of the really annoying cognitive speed bumps is just, you know that you know it. You don't remember it quite well enough to actually identify it. And, you know, you may just end up forgetting it before you figure out what it is that was on the tip of your tongue. So, like, all of these things actually seem really useful for someone who doesn't have the maximum fluid intelligence that they had when they were younger, but does have just lots of. Lots of experience, lots of wisdom, lots of different touch points, like is good at evaluating results. And in particular, in the case of an older executive, like a lot of their day job is use natural language to tell someone to do a, like to vaguely describe a specific task and have someone else do it and then review the results. So I think it ends up being a nice substitute for some of the memory that you would lose and some of the cognitive capabilities that you would lose over time.

And so I do think it will keep people in the top seat, you know, in the, in the corner office a little bit. long than the other rest would be. Just two things with that. So I think it's a little tangential to what we're talking about, but I think it does sell nicely. A, to your thing on white collar unemployment, like, it is interesting to think about. But, you know, you've got this issue where take U.S. Congress, Senate, right? Like the Senate, we've got more people 70, 80, 90.

They're holding on for longer. You know, with LLMs, you can imagine a lot of other areas, McKinsey partners, legal partners, like we're the top brass who, what they get paid for, is their experience, their knowledge, their wisdom, and everyone under them kind of is there to serve the functions of, you know, a low-level lawyer. Go do the citations. Go do the research and everything. Well, they also have their reputational stake. Like, that's part of what they're doing is investing their reputation in the work of their juniors. Fantastic point. And also, like, part of the reason you hire the top legal mind is, you know, if you've got the top legal mind,

they go out and they hold the press conference, they talk to the judge. Like, there's a lot of the bravada that comes with that. There's a, they're putting. their reputation on their line and the other party knows, oh, my God, like the best lawyer put their, neither here or not. I guess what I was thinking is, we're seeing it in the Senate, I think we'll see it increasingly in fields where, hey, maybe the top guys at their field, you know, when they were 65, they would hand the reins over to the 50-year-old. Maybe that's not happening anymore. And you see white collar, that's not unemployment. I mean, we have seen unemployment. The other thing I was going to say was recent college graduates,

I think the unemployment rate there has ticked up quite a bit. And I do wonder if part of it is, hey, we don't need 20 analysts, we need 10 analysts, and then LLMs will serve the role of the other 10 acts. They'll serve the role of the 30 and the 10 others are just backup. But I wonder if there's are two pulls on unemployment and everything going forward, where the 50-year-old who's at the partner level, but wanted to go to the director level, says there's no director level for me because that director won't retire. Maybe that director is working longer.

Maybe that's great for the economy. Maybe it's not great for the economy. I have no idea. But it is really going to change productivity and how the economy works. I rambled like crazy there. I'll let you say anything you want on that. No, I think that so this was part of part of why Buffett was able to make so much money in the 1950s was that the people who were in charge of companies then were often the people who'd been in charge

in the 19, in 1929, they had not levered up too much. They'd been pretty cautious. They cut costs before everyone else did. And so they stuck around. And for them, they'd kind of learned that that's what you do to succeed in business. And because there wasn't very much private sector growth, a lot of the ambitious proto executives were not going to not working at big companies. They were working for the federal government instead. So you just had less pressure to move up the ranks and a lot more people who are very glad to have a job.

And that's how you get companies that trade it less than net cash and the CEO doesn't really care and isn't going to pay a dividend or buy back stock. Now, in this case, the kink there would be that this hypothetical never retiring person who stays productive, even though they're mentally slowing down because they are paying for the best version of whatever the chat pot is. That person is a little bit more forward-looking and a little bit more of an early adopter. So it's just, it would be a kind of new archetype.

And we'll have to figure out what that looks like over time. My guess is that a lot of people will just get tired of waiting and they will quit, start their own thing. Some of those things will fail. Some of them will do well. And so you'll get the same kind of restructuring energy that you want from, that you want your economy to exhibit when there's rapid technological change.

You're probably right, but, you know, if I thought hedge funds have already had that, right? Because as we've seen with Buffett, like, you can keep running a hedge fund to 70s, 80s, icons, something, like all these guys can keep running them. And maybe they handled some of the capital to junior guy, but you've already, but, you know, for McKinsey, just to choose another one, if the top directors, if they're hanging on for another 10 years, you can say, yes, the partners can leave and go start their own thing. And there's always partners who've left to start their own boutique things. But it is different.

Like having that brand name getting stickier and stickier, right? In the Senate, hey, one of the reasons you're seeing both parties lack depth is because senators used to retire when they were 60. Now the senators are hanging on until when they're 90. Only two Senate slots per state. So, like, you're not seeing that depth, that young depth come through. Let me switch complaining. The book is very bearish.

I wanted to ask you, you know, when you read this book, again, when I talk to my macro historian friends who've been embarrassed for 10 years, you read this book, and like, okay, I get one. He is very bullish on a couple of select emerging markets, I would say. Vietnam was one that comes to mind a few others. He was very bullish on that. And I had one other bullish thought when I was doing it. But I'd love to ask you, when you read this book,

was there anything you were particularly bullish on coming out of the book? Not, like, taking the premises seriously. Not really. And I also, I think if you are betting on this turnover in the world order, I don't think the right way to hedge your bets is identify the next winning country and move your money there. Yes. Now, you can kind of cheat here or, you know, I guess history kind of cheats us here because

the last big transition was from the British Empire to the United States. And in that case, it was one Anglophone country to another, and there were already lots of commercial ties, and the Brits have been moving their capital to the U.S., had been moving their capital to the U.S. to get higher returns since before there was United States of America. So in that case, I guess, you know, if you were a very savvy young British aristocrat and it's 1905, you should be putting a lot of money into U.S. Steel and GE and all these American companies instead. But I don't, I mean, I don't think the Vietnamese would be especially excited to make sure that I maintain my standard of living because I've been a passive owner of assets in their country. So, you know, maybe the advice is you should learn Vietnamese and you should go to Vietnam and you should meet a nice Vietnamese girl and have a family there and become a Vietnamese person to the extent that you can. I was going to say I'm down for all that until you said meet a nice Vietnamese girl. I think my wife might have an issue with this part of the recommendation, but I love Vietnam. I'm ready to go spend some time there.

But no, I think sometimes you're just, you're stuck. And if you, I guess there's like a near possible version of the late 19th, early 20th century where Germany pulls ahead a little bit more relative to the UK. And then it's actually, you know, a German 19th century and you still have a transition to an American 20th century. And in that case, I just don't see a lot of the German aristocrats maintaining their level of wealth and influence purely because they knew that the U.S. was coming next. I think they just didn't have a lot to do other than, again, if they send their kids to Harvard

and have their kids settle down in America, then their kids are just nice, German-Americans a good standing. But the people who did that, like, they don't think of themselves as Germans who happen to be colonizing the United States. They just think of themselves as normal Americans. And, you know, they may just notice they have a German surname or something, but it's not really a huge part of their identity. So I think sometimes, like, that is, if you take seriously the idea of a world order collapsing, a lot of the metrics you'd even use for status within that world order just don't make any sense for whatever comes next. One of the interesting things is, like, look, he is bearish the U.S. He is bearish China.

You can tell that he spent a lot of time in China. I mean, he says it. And he really likes China, but I think something changed around 2018. And he's bearish China. He's bearish the US. He's bearish all of Europe. You know, he's bullish some select emerging markets. But it's just interesting how he's bearish everything, right? So if you were like, what's the trade? You know, I do not know. I did not live during the 19th century. But as you're saying, if you were in the UK during the 19th century, you were already

investing in the U.S. to try to increase your returns. A lot of German people were, you know, at this point, he thinks there's a rising world power war. He's saying, don't be in the U.S., don't be in China. There's kind of nowhere else to be is interesting. All right. Last thought. Or did you want to say anything else there?

No, well, I guess, you know, when you look at, at societies that collapse and then the people within the former elites in those societies, often later generations of those elites do just fine. So there's that famous study that looks at wills in, I think, early 15th century Florence, and it looks at the frequency of last names that show up in the wills versus other records, like baptismal records, I think. And then you look at people of the will having, you know, air having. demographic over 500 years ago, and people with those last names are still more likely to

be doctors and lawyers and accountants and the rest. And this happened with the descendants of slave owners in the Deep South, where they get, you know, totally wiped out by the Civil War. And then their kids and grandkids are actually still earning above average incomes. The only place that I've read about where they actually had an elite that ended up flipping to where their kids were actually poorer than average was China. I'm going to try to guess. Let me try and guess. Oh, okay. Russia post-USSR?

Or sorry, Russia pre, like, as the USSR is emerging. I mean, London was technically minor nobility. I guess, yeah, Russia, Russia, I don't know about. Okay, so what was it? It was China. So China, during the cultural revolution, the children of the former elites, like children of landlords, doctors, lawyers, et cetera, were actually poorer than the average person in China. But then the next generation, they got richer again. I'm going to give myself credit for that because it was the same thought process, right?

Yeah. The general point there is like there are persistent kinds of human capital that can survive a complete, like just a drawdown to zero in terms of financial net worth in terms of just real assets. Like you can go through an experience where you are just as poor as you can imagine being. And if you were pretty well off, statistically your kids or grandkids are probably going to be better off than average. in whatever order comes next, but what you can pass down to them is not that you bought Google at the IPO and they get to inherit your stock and they get the cost basis step up. No, it is like, you know, you raise them with a particular set of values and they have these

experiences and they behave in ways that are conducive to having a better life. Wouldn't be bad to pass the Google at the IPO stock onto them too. But no, exactly. Like, yes, you can lose all your material wealth, but you still have your education. you can pass down a lot of that, all that sort of stuff. Last thought, and then we can wrap it up here. You know, I and I'll admit it, a no-coigner. I've always been very skeptical of crypto.

But when you read this book, you know, you read it and you're like, oh, I could get why a person who is very bearish macro would want to buy Bitcoin, right? Like he's just talking about, hey, it's inevitable. The debt gets monetized every major economy. economy is screwed. Taxes go up. You want something that you can easily get out of. You're reading it. It's the closest I've ever come to wanting to buy crypto when reading a book. So I don't know if you have, I mean, I'm talking to the man who wrote Bubbles. So any thoughts on the kind of crypto? I don't even know if Dahlia likes crypto or not. He's obviously technology.

That was something I wondered about reading the book. And I, you know, I didn't wonder in the sense of, come on, Ray, why don't you allocate 30% of rich water in crypto and then take it public it threw a spec and we'll trade it two times now. It's a good question, though. If he did it quick enough, he might go from, he might be the richest man in the world if he did it quick enough. Right, yeah. If he pulled it off, if you got the timing exactly right.

But anyway, yeah, there's crypto, I think people like to think of apocalyptic-ish scenarios. But there's always, there's always a worse apocalypse where your apocalypse head doesn't pay off. And this was why I've been generally kind of negative on the idea of. owning gold as a literal worst-case scenario hedge because I just, I don't think I would actually hold on to my physical gold all that well in a scenario where I'm glad I bought the physical and not the ETF. Yes. I think when you're thinking about that scenario, you sort of, you want to have some kind of dynamic hedging thing where it's like if gold hits 10,000 an ounce, you sell your GLD, you buy physical gold bars, but then at $20,000 an ounce, you trade your gold bars for guns and canned food.

and then you're out of your gold position you'll probably be able to get some gold from whichever neighbors did not make that trade in time So like That was a very nice way to burn You know, there's always There's always an exchange rate with these things

And I just I always felt like that kind of apocalyptic view Like you're just you're thinking of a really narrow band of apocalypse where that was more prudent than making purely financial hedging decisions, but it was still actually worth doing. So I think Bitcoin is kind of like that, too, where in a world where things, you know, in a world where central banks are mostly inflating away debt and there's still this overhang, so real rates are basically zero.

And perhaps if the economy, if more fiat transactions are digitized, perhaps you can get to pretty steeply negative real rates, you know, that's a world where crypto is actually really valuable. And knowing that your Bitcoin is not going to have a negative 5% interest rate the way that your Chase checking account might in that world, that's worth a lot. That means you basically have 5% carry and whatever capital appreciation you get on top of that. But then in that world, he also talks throughout the book about how countries put up barriers to moving money around when they're getting a little bit nervous about this stuff and that in the U.S. has done capital controls in various ways at different times.

In that case, you can still use crypto to hedge, but you get to do that once. You get to take your USB drive on a plane and not use your return ticket and go to some other country. And now you are a financial fugitive from the U.S. government. And presumably in a world where the U.S. actually has pretty stripped capital controls and you can't just move your Bitcoin overseas and enjoy it, but it's also a world where that decision is politically popular and where there's a lot of narratives. And, you know, it can be left. It could be MAGA-flavored or AOC-flavored saying these financial elites have, you know, they've ruined the Fiat system. And now they're taking their crypto and going to some nice beach somewhere and leaving the rest of us to deal with the mess they made. So maybe you end up being pretty unpopular in that situation.

And maybe you're okay with that. But now your problem is you have a bearer instrument. You are a U.S. citizen, but you're probably not especially under the protection of the U.S. government. And so how do you hold on to that? No, I love the point you're making. It reminds you two quick things and I'll let you comment after it and then we can go. But number one, like all the guys who are super bullish Bitcoin is like, hey, look at what happened in China. China banned mining.

Like I get your bullish now, but the governments can take a turn and you want to say, oh, I've got all this Bitcoin. U.S. bans mining. You know, U.S. goes and get some of those marathon facilities that they've got and they're not going to seize them, but they shot them down. say, hey, go find some other use for this facility. You know, I think Bitcoin's go, it's going at least very unstable because you're talking about risks of like the miners XUS can take control the chain pretty quickly. But I think you're going to see issues there. And then number two, related to what you said, like the Bitcoin people, the crypto people

and everything right now, it's kind of funny that a Bitcoin, which originally was very tinge libertarian, hey, governments don't touch it. It's a unique bit. It's very funny for them to see them go all all in. on the Trump administration and passing, you know, the genius legislation and you look at what's happening with Circle right now, but all in on this administration and the government, let's buy a Bitcoin, sovereign wealth. Oh, I wanted to ask about sovereign wealth in soon. Maybe we'll do that another time. But, you know, it's funny because administrations can change.

And really all you think we might be going the authoritarian way. But if we go the other way and you get a liberal administration in there, yes, the Biden administration wasn't a huge friend of the crypto administration, but the next administration might be all. a lot, lot harsher with things. And you could imagine with the Genius Act and right, you could imagine taxes, everything can change really fast. But to your point on, look, if gold, as, you know, if gold, the real doomers thing came, you'd rather guns and you'd rather guns and ammo

and canned food. Bitcoin, if you're the real domer things came, you'd rather guns and you'd rather did, it's just like kind of the worst case scenario is kind of like really top for what you would be buying this for. Yeah, yeah. I think it was probably a strategic mistake for crypto to. to move in that direction, you know, it's just, it's really tough to back down. And it's not like photos of the Trump birthday army parade brought to you by Coinbase. Like, those photos are not

going away. Those are going to be in campaign ads for a while, depending on what crypto does and what Trump does, et cetera. Yeah, maybe, maybe part of the bet is like Trump just is an outrage factory and we won't even remember the things he was doing in 2025 by the time Vance is running in 2028. I think part of the bet is we're going to get, we're going to unload our bags and we're going to be out before. Yeah. Yeah. I think there's some of that. And, you know, it is, it is tougher to claw that stuff back. But I don't know of that many cases where people have really pulled it off, where they kind of intervene in the political system to make a ton of money and then just exited before things got that. I guess, I guess there are people who were born in various

developing countries and now are retired in Dubai, who did pull that off in different ways. But you have to move to Dubai at the end of this process. It's not, I don't know, I kind of prefer. If you make billions on Bitcoin, I don't think you're going to become a political enemy, but people have timed the cycle. Mark Cuban, right? Broadcast.com was worthless. He sold it to, I'm going to get in trouble for saying, sold it to Yahoo. He sold the Yahoo stock. He did all of that at this top, and he bought the Mavericks. And now he might run for president in 2020. He might be the next president.

But if he had held broadcast.com, zero. Have he held Yahoo? He's a tens of millionaire. He's not a multi-billionaire. So people have done it. I think Bitcoin just because of the Trump administration, the scale, the liquidity there, I think you are going to see a lot of people. Now, look, I'm talking as a no-coigner, but there are a lot of people who are getting

them bags and getting out now. Michael Saylor, we mentioned him. Go look at the insider sales of Bitcoin. Bitcoin goes to zero. Bitcoin goes to $2 million. Hiker Sailor, it's going to be at least 100 millionaire, probably a billionaire for the rest of his life. Last question, then we have to go, just real quick. I was really interested in Dahlia talks very glowingly about the U.S. launching a sovereign wealth fund.

And I've certainly seen people around the administration talk about the U.S. having a sovereign wealth fund. Kind of surprises me just because, A, the Trump administration, Dahlia, they seem to be a little bit more laxer regulation, lighter government, everything. The sovereign wealth funds, to me, scream of, A, emerging market where you've got a lot of the sales, natural resources going to the government, but B, it screams a lot of issues with, hey, governing Gryft and all that sort of stuff. I was just surprised. I'd love to quickly get your thoughts, the sovereign wealth fund issue.

Like, where would you kind of sit on it? Yeah, I could see it being a useful thing for the government to do depending on who is in charge, how they're running it, what they're trying to do. Like, at one level, it's just a carry trade. So the world is still willing to buy low-risk assets from the U.S. you could issue slightly more treasuries, use that to accumulate other things that you think will have a pretty good return, and then you're just free writing on the low cost of capital. It's like the, I forget who had this story, might have been bookstabber or someone.

There was someone who was writing about how at Solomon Brothers in the 80s, they actually had different cost of capital calculations for different teams, and there were teams that had a low cost of capital that would just buy trades from other teams within Solomon, because they would make money and the other team wouldn't. So, you know, at one level, it's just an accounting gimmick. And also, I think this is something Tyler Con wrote about, like, the world, the world wants to buy the U.S. dollar denominated safe assets. And so the world kind of, like, for the economy, for the global economy to be balanced, the U.S. needs to be continuously owing more and more money to the rest of the world.

And we, so it's hard to, like, having the U.S. accumulate financial claims instead of selling financial claims is pushing in exactly the opposite direction of the general flow of things. So I guess, like, the, you kind of have to split in up a couple things. There's like just the balance sheet management piece of it where the U.S. doesn't need a sovereign wealth fund in the way that, say, Saudi Arabia does. Saudi Arabia has a pegged currency and that's what I was saying. Yes. One really volatile commodity.

So, yeah, of course, they need. some, they need dollars in order to be able to exchange their currency for dollars and vice versa. And yeah, so we don't, we don't need that at all. So we have less of a reason to have one. You know, there is a case for the U.S. government just making strategic investments in low margin, low return industries that are complements to higher margin, high return stuff that we do actually want domestically. So, you know, maybe you do want the U.S. government to be lending to people, you know,

lending to steel mills that are going to sell domestic. and lending at, you know, 3% or something, so that we have a bunch of really cheap steel, and that means it's cheaper to build manufacturing companies that use that steel. But I think to pull that off, you need a lot of sophistication, and you need a, you need the fund to be managed by people who are very apolitical, technocratic. And, yeah, if it's Eric Trump, and he has a $500 billion checkbook, and he can put it into whatever company he wants, you know, it's just going to turn out that his favorite crypto project is this matter of national security

and they need lots of capital and so on. So, yeah, it's a good idea for a different set of people. It's a potentially good idea for a different set of people. I have no idea what Ray's deal is thinking that this is a good idea. Because, like, he's a student of these financial imbalances. What imbalance are you solving? You could solve a real economy imbalance, but you're not solving any kind of balance sheet problem

by having the U.S. issue more treasuries in order to buy real assets. That's why I'm so surprised by it, because he's a student of history. He understands these really well, you know, the whole thing. And then he just says, hey, the U.S. should start a sovereign wealth fund. And I just, I didn't know where it came from. It was very surprised because you know what the U.S. sovereign wealth fund is. We've got the best capital markets in the world.

And our sovereign wealth fund is Facebook started here and Facebook IPO. And now how much does Facebook pay in taxes and the jobs and the payroll? Like that's the sovereign wealth fund. I was just surprised, you know, people, the DOE loans, slinger, all this sort of stuff. Like, you want to start talking about, I was just so surprised by it. That's why I wanted to ask you about it. I mean, there have been cases where government spending was able to bootstrap industries. Oh, there's no doubt about it.

I was just surprised to have a lot of wholesale soft of wealth. Yeah. Yeah. Yeah. Yeah. So, like, there's, you know, it can be done. But in that case, it wasn't a, it wasn't a fund. It wasn't like they were buying, it wasn't like they were making an investment.

It wasn't like they were buying the SMP 500 or something, which is kind of when you're buying the actual products. Yeah. I completely fine with saying, hey, it's in our national security to. bootstrap the shipping industry to bootstap the atomic bomb and nuclear research, but to just say, hey, we're just going to go buy assets because I was surprised that. Anyway, Byrne, I actually have to go. This has been awesome.

Everybody knows, I say it all the time, the diff, one of my favorite publications and Capital Games. I actually read that once a week. I read pretty much all of them. So, Byrne Hobart, we'll have to figure out a book and come back for the dead, the dog days of summer. But thanks so much for coming on and looking for it the next month. Absolutely.

All right. Thank you. A quick disclaimer. podcast should be considered investment advice. Guests or the host may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.