All-In with Chamath, Jason, Sacks & Friedberg

Industry veterans, degenerate gamblers & besties Chamath Palihapitiya, Jason Calacanis, David Sacks & David Friedberg cover all things economic, tech, political, social & poker.

E28: Current state of public & private markets, Archegos debacle, US debt issues, wealth tax & more

E28: Current state of public & private markets, Archegos debacle, US debt issues, wealth tax & more

Thu, 01 Apr 2021 08:28

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Referenced in the show:

Axios - Changes to capital gains taxes omitted from Biden's infrastructure plan

Cal Matters - A wealth tax could sabotage California’s recovery

Healthline - COVID-19 Vaccines May Help Stop Virus Transmission: Here’s What We Know

Show Notes:

0:00 Besties intro, state of the public & private markets

18:54 Chamath receives inspiring note re: last week’s longevity talk

21:17 Archegos debacle, issues with trading on margin

32:26 Biden’s infrastructure bill, US government becoming overleveraged

45:45 Potential tax hikes, inefficient deployment of capital, California wealth tax impact

52:59 Trade off between freedom & equality, how free markets spur innovation, generational changes

1:05:14 Is a wealth tax constitutional? Vaccine update

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My name is David Sacks and I have a broomstick in my. That is why my voice is so deep. I have never had friends in my life. Somebody be my friend who I don't pay. What a mood we're in today, huh? What a vibe. Let your winners ride. Rain Man davidsons. We open sources to the fans and they've just gone crazy with it. Hey everybody, hey everybody, welcome to another episode of the All In podcast with us today, the rotating cast of characters that you've come to know and love and follow on the Twitter. The Queen of Kinoa, David Friedberg is here and the Rain Man David Sacks calling in from 1 remote location that is undisclosed. And the dictator? Chamath, Polly Hypatia with us again. Gentlemen, how's everybody doing? And punchy? You're punchy. Timothy is in a mood. Is he in a mood I'm in? It's happening chamath nothing. I just. I just finished a workout, so I think I'm high on endorphins. Ohh, how much money did you lose in the market today? Wow. Hey, just a flagrant foul of the first play of the game, he said. He said he wasn't happy, so I was just. I was just hypothesizing on what may be the cause. I am happy. No, no, I am happy. I'm about to go on Easter vacation, so I'm happy about that, actually. Jesus, no, I mean, can I just tell you March, March 2nd or whatever that day it was, was an absolutely ludicrous day. We've kind of cluttered all back. We're doing pretty decently for the year again. And but I gotta say, my gosh, like, I've really learned to to, to, to deal with drawdowns in the last 30 days. It's been an amazing learning process. I'm I'm a better person for it. You did look pretty shellshocked, that episode. I mean I I lost more money than I ever thought I would make. I could bail out a small country, you know, and it just it just it just it just vanished. It just evaporated in a day. It was incredible. Then it came back and then came back. That's OK. Well what are we, what do we think is happening in the markets right now in terms of retail investor participation and the number of specs that are coming into the market? I saw a statistic today that in Q1 there were 245. Spacs raised in Q1. Or 250. That's on top of the 250 that were raised last year. More capital was raised in Q1 than 2020, 2019 and 2018 combined in specs. Just to and just think Q1. Just to put some put some further color on this. You had all these folks raise money? You had some really questionable sponsors. To be completely honest with you, I'm not going to call any of these guys out because I don't want to give him any airtime. But like, you know, you literally had people who ran companies into the ground, people who were kicked out of their companies for, you know, sexual impropriety. It didn't matter. Any random dog and cat was able to raise us back in Q1 and now on the back end. You're going to start seeing some real difficulties. So deals are getting retreaded constantly, which means that you know IPOs that should have been done at, at at price X is getting discounted by 20 and 30% to get the deal done. There are all kinds of side deals getting cut left and right. And this is just the beginning and the reason is because that free brokerage is a 200 and 65100 bit there was there was about 110 billion raised in Q1. It looks how many deals 200 and 62198 yeah raised almost 300. So those three hundred 248 and 2020 just so we're we're still in the first inning, right. If you think about it these these spacks have two years to put the money to work. So we're only Max 90 days in to a two year shock like a 700 day shot clock and so you're going to see some really crazy. Behavior I predict in November of 2022, right, like the last six months leading into the expiration of all these facts in between now and then I think the market is really going to hold people accountable. So like when we see a a pipe opportunity now we're incredibly firm unlike, hey listen, the 2025 projections, we're going to back off of those. We want to see 2023 numbers, we're going to price it to that. We're going to price it with a margin of safety. And so these people come back and recut the deals constantly. You know there is a situation where this one deal retreated. Three times before a price cut. Done, and it was ended up being 3540% below where they started. I sent chamath a note I got this morning from my friend who works at one of the banks and one of the bulge brackets, and they said there was like 50 pipes in the market last week and they think only five of them are going to get done 50. And like, you know, tomorrow, what, like a quarter or two ago, like 100% we're getting done or 80% we're getting done. Right? I mean, yeah. And and quite honestly, they were meaningfully oversubscribed. And now we're demanding the people that look at these pipes. I I'm one of them, but so I I've talked to some other people who do it and we're all in the same situation because we're demanding much better terms. And so it's gonna it's gonna the pressure is going to come on, not the founders and the companies, but it's gonna come on the sponsors, because I think sponsors will really have to put up a lot of their money to get these deals done. And this is where you're going to separate the wheat from the chaff, because most of these sponsors are doing it for a quickbook. And you'll see without debating who you think it is. When you see people unable to post the money to get a deal done and that deal go away, that is the charlatan, right? Tumath. It seems like there's also a deleveraging happening with the funds that bought a lot of these spacs and dpac listings in the aftermarket, right, which, which kind of creates a bit of a logjam on the back end for a lot of these. So, you know, it's for those that are interested in some of these market dynamics. One thing that I have learned in the last little while is that. Depending on your who you are risk is managed really differently. So for example like there's there's a friend gave me this language and I'm going to repeat it because I think the way he said it was very elegant. There's what's called inception to date risk and then there's year to date risk. So what is the difference? If you're a hedge fund you're really in the year to date business, meaning how am I doing in this current moment in time because your compensation is driven from that and so you're very much forced to manage short term volatility in your portfolio. And a lot of it is very parametric. When you know something goes down by X percent, then you have to sell. And then if something goes down by percent, you sell more. And if something goes by down by zero percent, you have to shut the position out. And those are extremely codified. And so when you have a lot of hedge funds who are parametrically running year to date risk and you have, you know, all of a sudden you know, the threat of inflation, bond yields go up, factor rotation out of tech. It's a running to the exits. Then you have other people who manage what's called inception to date risk. I would say Buffett is in that category. You know, for us, for the most part, we are inception to date risk because we don't have external LP's. And so you can manage these different risk buckets differently. But you have to appreciate that a lot of this volatility is a lot of year to date risk. Now then you layer on top of it these exogenous events like what happened this week with archegos. And it's just absolutely incredible because it just further amplifies all these people who would otherwise have made very rational decisions, made forced to make irrational year to date risk management decisions. And that's what causes these massive swings and all this malaise in the market. Sax, what are we seeing on in private company valuations? I know that while we're seeing the retreat in Chamotte part of the world and people buckling down and maybe some more guardrails if we will, or maybe a a tighter screening process for these companies going public. You didn't say Fisker Chamath, but that was the one that had me like what Fisker didn't they fail twice already? What are you seeing on the private market sex in valuations? Yeah, it's a very frothy time to be honest. I think valuation levels are, I mean they're probably the highest I've seen. I'm seeing seed deals now hot seed deals, not every seed deal get done in the high 20s, same this is 3 used to be yeah pre revenue. It used to be that like you know, I remember when you know pre revenue C deals were more like a 5 to 10 cap and then like that a little bit of revenue might be a 15 cap and like the hottest company out of YC might be like what that means sex. The hottest company out of a cap cap, when you say cap is this evaluation, it's a $15 million valuation. Effectively it's just done on a convertible note called a safe. So it's but and and for all practical purposes it's evaluation. So it used to be, you know. Pre revenue see deals used to be in the five to $10 million valuation range. Then you know a little bit of revenue 15, the hottest YC deal might be an 18 to $20 million valuation. Now we're seeing hot pre revenue C deals going for like 27 to 30 and what percent, what amount of capital is going into that round? It's usually like a 10 to 20% dilution event. So it's 3,000,000 to 6 million. Yeah exactly and they're not calling this the series. Hey they're still calling the seed round. It's the first money in the company so it's still a seed and I mean just to we also do obviously A&B and and increasingly some growth investments every the the price levels are basically double where they were just I would say like a year ago. You know these same seed deals same thing I'm seeing and it's making me think as a private market investor that may be the right thing to do is to stop investing in some as many new companies and work with the existing portfolio to raise capital. So I told my team, let's go through the portfolio, let's see who needs capital and let's help them shore up their balance sheet when the market's hot and valuations are high as opposed to going and trying to get into every deal. So I think I'm going to do maybe 30% less deals and redeploy my time at getting the current portfolio cashed up and it's working. What do you think of this strategy, chamath or sacs or Friedberg? I I personally like it. I think that. Venture investors are typically trained. I was trained this way early on, which is to invest through the cycle, right. Just to think about this as a constant pattern of of capital. And to be honest with you, I have issues with doing that, Jason. And and so I more agree with what you're saying, which is that I think like active risk management, especially I guess if it's your own capital. But I just think active risk management is important. It's important to acknowledge that. The incremental SAS company may not be that great as it is, and so at 30 pre may be really stretching the bounds of reality. Whereas to your point, you know, what Sequoia has proven more than anything else to me is the value of doubling down and backing up your winners. And so to the extent that money isn't infinite, which it isn't for all of us. That's when I do think it's worthwhile saying, well, I have a certain amount of money in my fund. If I think calm can 10X from here, then I'd rather put in a big check there and you know, that's better than putting a bunch of seat checks in. The companies will have a 90% failure rate at very, very high prices where I don't own that much. So I I do think active risk management makes sense in moments like this. I mean, I guess my philosophy is a little different jakal. I mean, so I my my philosophy is a VC is that the the market sets the price of the deals. But I'm ultimately a price taker and my only decision really is which deals I want to be in. Like, I don't really get to set the prices. It's too easy for entrepreneurs to run a process and get competing bids. So all I can really do is decide which deals I want to be in. And I think the more that you try to chase value as a VC, I think the more you end up investing in companies that aren't really that great like you're trying to. You're trying to find things that are mispriced as opposed to just investing in the best companies. So now look, does do price levels affect my returns? I think yes. I'm sure the vintages do matter to some degree, but. The the most important thing is just to be in the right, in the right companies. Can I just, can I just, I'll give you the counterfactual to what you just said. You know, if I if I look at my three big private funds. Fund one was healthcare, education, fintech and some deep tech. Fun 2 was a massive over indexation into SAS. And then fund three was a return to our knitting and a bunch of deep tech stuff and a lot of fun. Three decisions was basically me saying enough of this class and the reason was because I didn't like the valuations, David. And I thought on the margin, if I'm going to invest $10 billion, I'd rather get a 3D printing spaceship company off the ground, then the N plus first SAS business and it's turned out to have been in that cohort, the right decision. So I don't know, I think it's, I think that can also be true, which is like. Chasing what was the hardest thing was not in 2016 was not a good idea so so so just let me just respond to it real quick Jason cause so so I I do like SAS investing but I was doing it before it got hot. You know it's just that's kind of my area and I want to build a franchise in that area that's my expertise are and so I can't like very well just say hey the store is closed this year because price levels are high otherwise like founders won't come to invest through this. Yeah exactly. So I'm I'm trying to create like a very specific franchise. And being the leading VC and bottom up SAS and look sometimes the price levels be favorable during COVID there was like a four month period where the markets were off what 50% everyone like it felt like we had the market to ourselves, the VC market, I mean nobody else was investing. We did more deals during that four month period than I think any other four month period. So like sometimes the price levels can bounce in your favor. But you know my view on it is I just want to invest the best companies and kind of the the price levels just work themselves out the counter I would have to your counter. David was. If there are other startups who are of equal value, which pool you decide to go fishing in matters. So you know this $30 million deal, if I was to put $3 million into it, that could equal me putting with our accelerator, which not everybody runs an accelerator. It's arduous, it's painful, it takes a ton of work. But that equals for me 30 deals, that 100K each. So I'm looking at it going, do I get one bet in this YC overpriced company with. 50 You know, Tier 3 venture capitalists and dentists backing up the truck and now family offices who don't know anything are now competing against the people they or LP's and their funds. Or do I just say, you know what, if everybody's fighting in the market for the apples, I'm going to plant more apple trees and I'm going to run a better orchard. And that's what I decided to do, was maybe I'll just move up to the orchard a little bit. But I guess there's multiple ways to win and what we do, but you guys are broader in your strategy than I am, right? Like you guys. Actually, do invest in lots of different kinds of companies. I've kind of gravitated away from that because I'd rather just focus on my speciality, which I feel like is big enough for me to be successful, right? Yeah, but what if there is a new category that comes out like on demand and something like Uber comes along or Airbnb and it doesn't fit the framework? Well, I invested in those companies, but. So marketplace, would you do it now or would your team say, you know what? Don't bring this to David. He's gonna say no because, well, your team is doing the first round interviews, right? Yeah, but but we do marketplaces and my partner. Interested in look like marketplaces originally, though, those were not considered like eBay or Craigslist. I invest in them, I thought their marketplaces. So, you know, so look, we we do marketplaces and we do SAS. That's a huge part of the market. We're never gonna suffer for, for deal flow, focusing on those things. But look, well, I do chips. No. Will I do pharma? No, because I don't know anything about those things. You know, those are too deep or quantum computing or something like that, that, you know, these more esoteric hard tech subjects that I kind of make fun of Freeburg for. Or at least you know when he starts giving his qubit lecture. Yeah, well, actually, no one said no one's a big one. I I actually think we need to really rethink our investment strategy here. I forgot to tell you guys, I'm gonna start investing in laundromats. Very simple. I wanna. Yeah, it's not a bad idea. I mean, our one of our mutual friend, one of our besties who's who's a a stealth bestie was really into the dominoes chains. And boy, was he right about that. That's stock went crazy. I want to get into this. Is it archigos? Archegos archegos manchego cheese. I wanna get this archegos thing, but I also want to point out two things from just housekeeping #1. I redirected what your beak to a type form for people to pitch the besties. Guess how many? Pictures came in in the first week. How many over 1000? I now have three researchers going through it and categorizing it. They're going to share a Google sheet back with y'all of by stage where they are to start going through them. But it's pretty amazing. I think there is some, I think there is some magic that's going to happen here. We're going to find a deal where all four besties can be in deal because we got 2 besties in pipe. We're both in Cabana, Saxonia and a couple of other companies, but we got to get a four. We need to get four of a kind. We've never had four of a kind. We've had. We've hit sets. We've hit a pair, but we've never hit that. Go ahead, sacks. What do you wanna do? You wanna talk about me stealing your dealflow? Yeah, exactly. I just wanted to put out a I need to put out a little PSA. So if you're a founder out there listening and you have a sassy deal that's post revenue, send it to me. A craft ventures. And if it's everything else, you can send it to Jason on his little. His uh, yeah, I know there. There were a lot of sass companies, actually. And So what we should do is I can set the type form up if you want. If you give me an e-mail address, anybody who picks Sass, I could have it e-mail you or, you know, Kevin or whoever on your team you want me to. And I could just redirect it in real time, but that could wind up being hundreds of emails. But I think that's what you want. Alright, well, that's actually. Well, you know, Jason, you should, you should divide up Jason. You should divvy up all these pitches by subject matter and send it to the bestie. It's most relevant for. Alright, sounds great. We'll do that. Sure. And then second, on the housekeeping front, people were really interested in this longevity discussion. Oh, read the thing, read the thing. I think I wonder because I want to talk about it again. So Ben sent this in to the all in Twitter handle, which is I think the all in pod and it's got Stephanie. Do you guys know we have 70,000 followers on that Twitter handle? It's crazy. Hey, just wanted to reach out with a positive message after listening to the podcast from 2 Fridays ago. If you could pass the message along to the besties. I think that's us. After Chamath's recommendation regarding longevity, I suggested to my dad, age 56, in perfect health so he's 10 years younger than sacks, looks to go get a calcium dye test. It turns out he scored well above and he's safe number and a critical heart failure was inevitable. Now he's taking proactive steps with a cardiologist. It's hard to even fathom what would have happened if Chamath. Had him passionately recommended this action. Thank you guys so much for providing value week in week. I guess I I wanna team up saving lives. Like I wanna saving lives and billions. No, don't don't joke around. That's stupid. On this topic, I I really wanna say this again. If anybody hasn't done it after the age of 40, you can get a CT angiogram. Most health services provided. I would really ask your primary care physician. If they say no, tell them to go ****. Themselves and find somebody who will give it to you. But this is one of these things where if your calcium score is greater than zero, it double s every year and there's a certain score right above several 1000 where you are guaranteed to have some meaningful cardiac issue. And so whether it's for you or your parents, just ask the question, have you had a contrast CT and you're done and if not, go and find a Doctor Who will prescribe it to them and get it done. It's just a no brainer. I it's a no brainer. It's a no brainer. And I I had my yearly. Physical and I got the heart flow. No, I just did my physical, but I I'm gonna do that full body scan you recommended pre, pre nuvo, pre nuvu I'm doing. And then I got on the Nat plus booster, the true nigen that, yeah, I think that Freeberg suggested and I'm taking it seriously. And I started with my personal trainer two Tuesdays ago and I changed my entire diet and I'm just really taking it seriously now because I hit 50. So let me, let me tell you about our chicos. So here's a guy. This is incredible. So this guy ran Asiapac for Julian Robertson. Julian Robertson is a legend of finance and capital markets and was the founder of Tiger. Tiger management. By the way, I heard this incredible story. Why did Julian name it? Tiger management? Apparently he had. He was incredibly bad with names. And so he would just call everybody tiger. Like, hey, Tiger, how you doing, Tiger, Tiger, tiger, tiger. And so when he started this fun. I think his son apparently told him, Dad, you're not gonna remember anybody's name. You're not even remember the name of the company. Just call it Tiger management and you'll remember it anyways. Julie and is famous for having attracted an incredible roster of people to work for him. It's what the PayPal mafia would look like if it were disguised as a hedge fund. All these amazing people work for. Julian went off and did these other incredible things. And one of this guy, one of these guys was this guy Bill Huang who ran Asia pack for Tiger. He leaves. He starts his own. Fund and summer in 2011, he gets pinched by the feds for insider trading, some Chinese bank stocks. He pays a $60 million criminal and civil penalty, and he's forced to give back all of his outside money. And so now he's a family office. Then he takes however much money he had and he runs it up to somewhere between 5:00 and $10 billion. So this is a guy who managed to just hit the ball out of the park. And then what he does is he goes to these banks and he says, you know what, guys, I'm going to make a bunch of concentrated bets. In a bunch of Chinese Internet companies and media companies like Viacom and Discovery, So what he does is he does an equity swap and what an equity swap is to get through all the noise is just a very simple way. For you to bet on the appreciation of a stock relative to an index and hedge it against an index and what it synthetically allows you to do is take big risk on huge positions and not be listed in disclosures. So if you don't want buying the stock, yeah. So if you don't want to know, so if you want synthetic, just so because I'm confused. Synthetic means you're not actually buying the stock, you're doing this in the ether. If you went and bought 4.9% of Viacom, nothing would happen. The minute you got to 5%, you'd have a. A regulatory filing obligation that would say Jason Calcanis owns 5% of Viacom, then at 9.9%, nothing else would happen. But then at 10% there's another incremental thing. So this was a way of him accumulating up to 9.9 or 10% of these positions without having to disclose because he's not actually buying the stock. He's having Morgan Stanley, Goldman Sachs, Nomura, Deutsche Bank, Credit Suisse buy the stock for him using these over the counter derivatives. But they're not. They in some cases didn't even buy the stock. It was like a forward purchase agreement almost, right, like these, these were, these were contracts for difference. So they didn't even have to buy the stock in a lot of cases, right, right. And then I think it was hedged by the S&P, right. So they basically hedged it out with the S&P and it was like factor weighted. Anyways, Long story short, what happens is that the guy starts to get stopped out on a trade. And then they have to close out all these positions. And so all of a sudden they realize, Oh my gosh, we actually, each of us gave this guy 5 or 10 times leverage. So instead of A5 or $10 billion hedge fund, it was $50 billion of notional exposure. And so in one day you had Viacom go down 30%. Discovery went down 30 or 40% and we were playing cards, looking at the market, saying what's going on, what's going on, yeah, so weird. But another another example of like asymmetric information and a lack of transparency in financial there. There were two drivers of this, number one is the guy traded via the swap these these over the counter transactions, so he didn't actually have to go buy the stock on the market and #2 is they. The, the guy relied on a number of exemptions as a family office, right shimatsu. He didn't have a lot of reporting requirements that say, you know, a lot of other funds might, might, might have to disclose. And so there was a kind of opacity to the transactions that were going on. So ultimately when when everyone kind of looked under the hood, it was like, oh, this is a lot like that long term Capital Management fiasco that happened in 1997. I think we talked about it on one of the the shows, but they had a book with like 60,000 derivative contracts. With over a trillion dollars of notional exposure on a $5 billion book of business. So if the, you know, if the overall portfolio that they held moved by whatever it is, you know, half a percent, the whole thing collapses. And that's effectively what happened when stocks got volatile in 1997 during that currency crisis. And then all the banks looked under the hood and they're like, oh wait, I need more collateral. There was no collateral to post because everything was levered up and then everyone struggling to get a piece of the pie and, you know, of the cash that's left, everyone was fighting to get a piece of it because if everyone had to sell off. The whole portfolio would collapse and everything starts to spiral out of control. And that's sort of what happened on Friday, right? Because as they started to sell off these positions via big block trades, the stock went down and made it even harder, and then everyone piles on and start shorting the stock and it becomes this uncontrollable fiasco. I have a really dumb question for the why are people giving this amount of leverage and letting people make these trades? Is it because they have no responsibility? The brokerage houses or whoever's clear and they're gonna lose, they're gonna lose money. I mean, I think JP Morgan omora these guys are all gonna lose billions of dollars because there's not enough cash in this guy's actual account to cover all the losses. Now why would they let him do this is my. Really simple, stupid questions. Somebody who does not. Because they make money, they make money. I mean, if you're making five, look, I mean, think about it this way. It's sort of like an insurance deal, right? Like if I can make $0.05 by taking a dollar of exposure with you, but that exposure only pays out if something terrible happens. That's very, very unlikely in my assessment. I'll take that $0.05 all day long. You know, I'm, I'm collecting nickels. But once once in a while, something really bad happens and then they gotta pay out a dollar. How many more Manchegos are out there? Well, I think, I think it depends on how you define the problem. But if you say that leverage. Everybody's levered. I think the question is by how much? I think it's pretty rare at this point. That you're not levered. We don't run leverage but it's tantalizing. I gotta tell you because like you know I could run, I don't know hundred $150 billion of exposure and then all of a sudden you know you only have to return you know one or 2% to make a ton of money. So what would your margin interest rate be if you were to run your your book levered I I could run it 10 times and pay. One percent, 2%, right. That's crazy, right. So with 10 times leverage on your money, you, you basically just have to beat one point or two point or return and you make money that that's why it's so attractive, right. That's why it's so attractive and that's what that's what, that's what a lot of these other organizations do. The business model that they've perfected, which I think is very reasonable by the way says again back to sort of like you know managing year to date risk, right, they manage extremely small movements in stocks because instead of saying to. You know, if the four of us were running a hedge fund, each of you do your best, then we're gonna run one times notional. It's much better to say I'm going to severely constrain the parameters in which you guys can take risk. And on the back end I'm going to lever the whole thing up 10 times. My only goal is for you guys to make me 1% a year, right? Because if I lever it up 10 Times Now, I've made 10% and that 1% a year now all of a sudden divided by 12 months of the year means you're generally, you know, you only have to do 80 basis. So all of a sudden the math starts to work. In your favor, where everybody says, wow, let's raise as much money as possible. Let's make sure there's extremely tight risk parameters. Let's just tell David Friedberg and Jason Calcanis and David Sachs just give me 80 basis points. And on the back end, I lever up. That's the whole business model of most hedge funds. And then, you know, you have some folks at the edges, as Friedberg says, you know, the insurance policy rarely pays out. But then every now and then you have this cataclysmic set of events and the long tail hits and you're wiped out. And that's what happened here. And by the way, you know there are stress tests against the banks to and where they basically look at scenarios of, you know, how bad can the overall portfolio get that the banks are exposed to you know, all these clients that they have as counterparty risks because remember, like when they signed a contract with this hedge fund. They're not actually taking a position. What they're doing is they're taking, they're creating an obligation where this hedge fund has to pay them in the future. Now if the hedge fund effectively goes bankrupt, then they're not going to get paid on the mean on the back end. They're expecting to get paid $2 billion or whatever the amount might be to cover the the, you know, the trade that they put in place with the guy. So this whole thing basically becomes a loss that they get exposed to. And so the stress tests are meant to kind of expose how bad can the loss be to make sure that the bank doesn't ultimately go bankrupt if it really bad. Scenario where to take place. Now there's a lot of debate about whether those stress test methodologies actually work and whether they adequately reflect the true risk in the markets and the true risk that these banks take on. And that has always been a debate. The problem is if you make the stress tests too, limiting the cost of capital goes up and it's very hard to trade and liquidity goes down in the market. That's the the counter argument to why you wouldn't want to be kind of more regulatory on this front. And so it's it's an ongoing kind of fluid debate about what's the right way to stress test banks and make sure that they have adequate capital reserves while still creating. Low cost capital and and having liquidity in the markets, but you add the risk of ruin. So you literally, it's really, it's really hard to balance. You're playing with your entire net worth on the poker table. You're not just buying in with 1% of it or 10% of it. Well, the. Yeah, whatever. You read a story about some rich person going broke. It's all, there's always debt involved, right, because, yeah, like let's say let's say you got like I don't know like a big number like $100 million, right. And and let's say you're fully invested, the market goes down 50%. You still got 50 million bucks. You're still like. Every person. Yeah. Yeah. But now let's say that you took that 100 million and you levered it up to, I don't know, whatever, a billion. And then the market goes down 50%. You're worth zero. Yeah, right. Or in that case, the market could go down 10% sacks. And that's what happened here, right? Like only 10%, right? Exactly. The guy levered it up. And this is what all this is what happened with LTCM. In LTCM's case, the the the trades they had, the whole portfolio only moved like 5%, but it caused a cataclysmic collapse of hundreds of billions of dollars of notional exposure. And that that's sort of like what happened with this guy. He was so levered up, so small movement. I I searched for this guy on YouTube just to kind of figure out who he was on Saturday. Ohh the the Christian YouTube thing you said. I sent it to the group but there's like all these videos of him talking about Jesus. And it was just a, I'm fine with him being deep into Jesus, especially right, you know, on the way to Easter. God bless you. Praise Jesus. But it was very weird that he, this person has a very unique philosophy, clearly and no Nomura. The prime broker on Monday warned of significant losses, losses estimated at 2 billion from the unwinding of these trades. Let me ask, let me ask a question to you guys. If if we all agree it's a really bad idea for individuals to get over levered like this, how bad an idea is it that the US government is getting so over levered? We now have 130% of our GDP. We are now in debt. It's the first I mean. I think it only recently crossed 100%, so we we have now borrowed as a country more than our entire GDP. Yeah but I mean if you look at that by country there are other countries that are way over that like Japan just about there aren't that many there aren't that many in Japan's had a horrible decade partly because of all that debt. Italy, Portugal, Greece and Japan. Yeah yeah night Club you want to be part of not not be part of I I I I I I think that I'm more sympathetic to governments being over levered because I think because governments effectively are at this point still that may not be the case in the future the. The only form of too big to fail that I think we can tolerate. I have a much bigger issue with private market participants being over levered because I think that is a level of greed and risk that shouldn't exist, simply unnecessary in large part because the governments themselves are so levered on the way in. So maybe that's the way to think about it, which is if we have to isolate risk and we know we can't tell governments to stop spending, then I think we should probably make sure that risk is better managed at the individual level. You know people. What companies? Why can't we, why can't we tell? Governments suspect is about to say, like, I think we can tell them that because we vote them in. But I mean this I I wanna people like people vote in spenders people don't vote in. Well, this is the thing. You know, the Republicans were supposed to be the spendthrifts. Yeah. No one ever gets elected saying I'm not gonna do anything, right. I mean, Donald Trump may be the first president to have ever actually said that and, you know, actually do something in that vein when he put a bunch of guys in charge of like the CDC and the Department of Energy and they just cut heads. But, you know, you always go in and you say. I'm gonna do X. That isn't being done today. And as a result, over generations it adds up. And all of a sudden you wake up and the United States is 250 years old and we have debt equal to 130% of our GDP, and we're struggling to maintain the growth rates needed to fund that debt. And you're like, oh, that's the biggest challenge with democracy and keeping it alive is, is the fact that ultimately everyone wants more. And so over time you vote for more, and over time it gets more expensive, and over time it becomes really difficult to maintain. Can I can I just count up the bill for just this year so as we know Biden already passed. It won't. Well yeah. So the the bill so far for this year. First of all the government is is is running like a four and a half trillion dollar deficit. A lot of that is you know, COVID related. But in any event, Biden's already passed a $1.9 trillion COVID bill. There are now about to pass A at least $3 trillion infrastructure Bill 222. The proposal came out. It's two. Yeah. Well, OK, sorry, it's it's two for the infrastructure plan, but then there's another one to 2 billion that they're talking about doing. Sorry, trillion that they're they're planning is a second package called the American Families Plan that they're calling infrastructure. But it's it's not, it's more like social programs. They're kind of relabeling that as social infrastructure or human infrastructure and they're trying to figure out whether they can do them as two separate bills. There's an issue with reconciliation and they need they need a ruling. In the Senate parliamentarian on whether they can do the second bill through through reconciliation. If they can, they have to combine it into one bill. Otherwise, I'll do it as two separate bills, but you're looking at total like 4 about four trillion across those two bills. You know, in addition to the 1.9 we've already passed, so we're looking at like 6 trillion of spending this year. I think we had about 6 trillion of COVID emergency spending last year. And so the numbers are getting really big, really fast. Reminds me of our last trip. This reminds about Las Vegas trip with Cipriani and then your markers. I think we're we may need to have some austerity measures. We might need to go to Olive Garden instead of sipriano. Part of the issue, sacks, is, you know, I think if you guys will remember on election night, I told you the thing I was most concerned about was this Georgia runoff. And if the Senate takes, if the Democrats take the Senate, you have no balance of negotiation in this process of of passing these bills and finding a point of fiscal responsibility versus social necessity or what might be deemed necessity by some. But but you know exuberance by others and and it's it's it's frightening because you know with a with a single party system right a single party legislative branch or right now we have a real issue with the the fact that any bill can kind of be come up it can kind of be defined by one party, by a small group of people. They can get it passed, they can get it signed and you know it's going to be a challenge for for us to all kind of support this level of debt for generations to come. And it's it's not gonna stop anytime soon. I mean you know, before the midterms we've got another year and a half of this 100%. And that's why I was rooting in the the the last election for gridlock as well. And and we we almost had it. I mean it was supposed to be a divided Senate. Purdue won that Senate seat and then he lost from the runoff, decided to burn the entire Republican Party on the way out. Congratulations, David. You've destroyed the Republican Party. Look, you you you you take out you have a little bit of a point there. Because the reality is, as of election night, this is supposed to be a divided Senate. And then what happened in the two months that followed turn voters against those Senate candidates? So you have it, you definitely have a point there. But but the the price tag for that one Senate seat is going to be about $6 trillion. Yeah, it's pretty disturbing that our, our debt to GDP ratio is not worse than Spain and Portugal. I mean, and here's Italy and Greece. Well, I think it's worth just explaining to people why that matters. Exactly. I mean, like when when you when you have to pay, you have to pay the here's, here's the thing, here's the thing everyone's been. Everyone's been lulled into a false sense of security because interest rates are so low so that debt service has actually been relatively small. But if interest rates ever go back up, say, because of inflation, like the debt service will be one of the biggest chunks of federal spending, we won't have money left for all the programs that we need, you know, including entitlements, including defense, including everything else. You know the country wants to do and so it's very dangerous. And and and and the the the real problem I have with it right now is everybody can see the economy is getting better, right. It's it looks like we're about to have the roaring 20s. The economy looks like it's rebounding, it's about to boom. Goldman Sachs says we're going to be down to like 3% unemployment by the end of the year. It's coming back really fast. COVID is going to be over in May. I mean everything is trending the right way and we're acting like you know like there's an emergency happening still. I mean I understand the six trillion last year. During the middle of COVID to prevent a depression. But what is the rationale today when the economy is ready coming back for this level option David reelection to consolidate democratic power and to get reelected right pump the prime the pump. But you know we're we're we're breaking the glass in case of emergency when there is no emergency. And what happens if there is another emergency we'll go to 150%. Look I I don't think it says as intentional as getting reelected. I do think that the politicians and the people involved in the legislative process have very good intentions and think they're doing the right thing. And they got elected and they spent their whole lives and their whole careers dreaming of a day when they could create these programs using government money, dreaming of a day when they could make these opportunities real. And here's a moment in time where they can and where these visions for what they believe to be a better society and a better government and a better country for all its citizens. They have this moment now and they are right. And so I'm not criticizing anyone. I think it's just it's. I think it's look, yeah, no, you can totally disagree with the point. And and I think in many cases, I agree with you. But I I do think that there isn't like this, this kind of evil incentive or this evil reason for folks doing it. I think, you know, a lot of people that work in government or or politicians, they spend a lot of time thinking about doing what's best for their, you know, their, their, their, their kind of people that they represent. And here's this moment where I can create all these programs and create all these jobs and spend all this government money to give my people locally, all these all the support that I always thought that I always told them I would give them one day. And it's a moment where everyone's kind of rushing and because there's a single party. System right now, everything's getting done and it's all getting piled on top of pile. It's like reading, eating cupcakes and then cake and then pancakes and then, you know, ice cream and then having a milkshake. You know, it's it's it's gonna have a really nasty stomach ache at the end. Yeah, I agree. It's it's we may have a sugar rush over the next year or two maybe maybe Biden gets reelected based on this. But, you know, eventually I like, I like your term stomach ache. Biden seems to me a little bit miscast. It's like he's cast from a different era and you know, this is not 1933. They don't need this massive amount of pump priming by the federal government. We're not in a depression. We're not even in a recession right now. We're coming back really strongly. And so it just feels like we're passing all this anachronistic pork barrel spending, you know, like, for why? It's like almost like it's just habitual as opposed to having a real need. I think that's a more nuanced take, which I agree with, which is like, if you actually see what that $2 trillion infrastructure bill look like, there is a lot of stuff which did feel incredibly anachronistic where. It was like. I mean paving a ******* Rd. I mean we had China trolling us because the the contents of that was just so stupid, right. It's like, I mean it's like painting a road is just one time event that does nothing and we're we're much we're much better off building ongoing capability of things we need. So if we're going to like green the economy and you know we're going to go through and go through an energy transition, there's all kinds of ways to spend the money. And so then you think who's advising these people and then and then I think it comes up to. Lobbyists, lobbyists and donors, yeah, let's go through this list, right. So of the $2 trillion, it looks like about 620 billion is going into transportation infrastructure. Like Chemaf said, bridges, roads, public transit, etcetera. Now, if you think about the benefit to society, there's the benefit of having better roads, which we can debate. Does it, you know, do all of these need this care, the $620 billion worth of care? I think some people would say yes, some people say no. But the question of where that those dollars actually go, ultimately, if you kind of look at how government contract work is done. There will be a few people that own the majority of these contract service providers that will benefit heavily from this capital coming out of the government's coffers. And we'll go into their bank accounts. And yes, there will be some jobs, but they will be temporary jobs and there will be temporary salary and wage support through this. A lot of that capital will go to the people that own the businesses that are doing all of the construction work and supporting this industry development. So, you know, it's concerning when you look at how much money it's going to get funneled into effectively corporate contracting. I don't care. I don't care what side of the aisle. Iran. But if you see $620 billion of spending that's going to happen in the next few years for anything. If you're thinking anything other than this will be wasted and inefficient, you're being really naive. So you know the the good. A good microcosm example of this is the one that you use Friedberg, which is how much money did California give to Andersen consulting or you know, to build that COVID website. It was yeah, it was like 100,000,000 bucks like all in with the service cost and the customer support and all the stuff that was attached to it. And and and and realistically you could have built it for 90 bucks using Wix. You know, use the promo code twist. Come on, use the promo code. So, so, my, so, my, my, my thought is that exactly like people should look at this irrespective whether you're on the left or right. Think well of that 620, how much will actually get into the hands of people in a in a thoughtful way? Yeah, probably like 300. How much of it will go into like lining the pockets of shareholders and folks in very specific companies who just print an enormous amount of profit over the next few years? Be another 150 or 200 billion. Wait a second. Second. Did you, did you send my red pills to Chamotte house? What's going on here? Tomorrow. Tomorrow? But let's have the counter argument right? The counter argument is for decades, and I'll and I'll make it right. So for decades, roads have been crumbling, infrastructure in this country has been falling apart. We haven't taken care of federal highways. There's all this work that needs to be done to make sure that airports address rural communities and ports can take ships into the economy can grow. And someone's got to build all that stuff at some point. So, you know, rather than deal with this down the road, let's take advantage of the single party, you know, governing system we have right now and pass this bill and get it all done and get and get America ready for the future. That would be the argument, right? I'll give you the most cynical argument. The most cynical argument is let's ratchet up spending, make everybody concerned about the debt so that the solution is raise taxes and let's create a wealth tax on let's create this tax. And then Biden is raising taxes, raising their corporate tax rate to 28%. That was proposed. Really? Individual. Individual. Like I think raising the corporate tax is a no brainer. We should absolutely have done that. But David, I mean freebook back to what you said before. What I would have said is like look the the counter, the counter argument would have been let's take this $620 billion and plan the future. So the plan the future would be, you know why is it that like Elon can can bore a, you know, a traffic bearing tunnel at $1,000,000 a mile and the next best equivalent is 20 million a mile. OK, maybe we should give these guys a bunch of contracts. Same. Yeah. Well, just and technology, I would say and and less graft and less waste. So let these guys build a bunch of tunnels and maybe they can figure out a way to build bridges too. Or you know, if you really want to care about like future jobs and the national security of America, let's secure our own precious metals and minerals and let's have an entire supply chain that's you know, independent of China. Well, you could spend a couple $100 billion on that easily. So there's all kinds of ways to spend it. We could build high speed rail, you know, in a much. They do have 580 billion, so almost 1/4, a little over 1/4 of this bill going to American manufacturing, R&D and job training, right. So creating the next generation of jobs for Americans and yeah, we like that you know read domesticating industry here. I know, but I mean honestly, those words sound nice. What are the exact right exactly you like the words. You like the words. You really love the words. Well, the words I mean, I like, I mean one that I think nobody can argue with is Universal pre kindergarten. That's easy. And I think Community College tuition being free is a great one as well. If people have a certain score to get in there, so it's a little bit of marriage, Jason, what are these things even what are these things even doing in an infrastructure bill? I feel like I I think Freeberg has a point that like infrastructure is like one of the last things that people believe that the government should be spending money on. So now they're just branding anything that they want to do as infrastructure there. You know, it's human infrastructure to bring social infrastructure roads, right? Not essay education and childcare and college. That's education should be a different bill. But didn't I mean Obama tried to get. Infrastructure past. He couldn't. Trump tried. No, no, he did. No, no, no, no. Obama passed close to a trillion. It was like a $920 billion bill. Remember the shovel ready projects? It was supposed to be a trillion dollars of shovel ready projects. They did it. Where did that money go? Windows. Well, Speaking of money, speaking about money disappearing, can you ever go into this little shrug emoji con? Like the. I don't know. There's no. Yeah, there's the. Here's the brown version in I am. Now, look, here's the white, here's the pale white version, and there's the brown version. Here's the brown version. And it looks like you're the 10 version free bird. You got a little son. Yeah. A trillion dollars. Me? No, no, I don't know. We could all go to Vegas and we can lose money. And to just come up to our wives and go like this. Yeah. I I just think like the government's so bad at like properly dispensing all this money. Like that's the problem that you know and then that would look I think if you're ever gonna do infrastructure, the time to do it was in 2009 when Obama did it. Like the economy was an absolute like like the Great Recession that made that made sense. But now when the economy is doing is is rebounding so strongly, do you really believe that these, you know, $100 billion line items are going to be wisely spent, you know? And and most of its borrowed money so. No. And the problem is, like, by the time it gets into the details well beyond what Biden is capable or has the time to learn about it will be just completely misallocated. And you know, some lobbyists will insert something that gets something that's important to some politician, the money and that and that. And that's the, that's the sad truth of it all. And we just have to hope that there's enough good that comes out of it. And now taxes are coming for you. Well, I mean that's that's the next thing is the wealth tax is or where that conversation is. What happened in that? What happened in the build? Well, ACA, I saw, I saw the corporate tax went up from 21 to 28. But what else happened, Jason? Well, there's a wealth tax in California being discussed again. Who knows it? OK. But at the federal level was there anything in the bill I didn't hear anything about wealth tax. I mean I don't know if that's possible. The first, the first bill is gonna be funded by like you said, an increase in the corporate tax from 21 to 28%. The second bill, the Families Act is going to be funded in part by personal. Income tax increases, which I think will be more controversial, they're gonna bump up. And well, the the campaign statement that Biden made was individuals. No one making under 400,000 would see a tax increase. So the plan was 400,000 going up to 39.6%. But here's here's where I think it could get very controversial is that the White House is already making noises that it wasn't 400,000 per individual. It was $400,000 per family, which would mean $200,000 per individual, which would be, I pretty much a camp, a broken campaign promise. So if that's where it ends up. Being I think Biden could take a lot of heat for that and but but the problem is if he sticks to 400,000 per individual, I'm not sure that it will raise enough. The tax increase will raise enough money to pay for everything he wants to pay for. So it'll be interesting to see. I would be totally OK with this when I was 30 years old. I'm just putting that on the record. I'm not OK with you right now. This may sound dumb, but what is the federal tax rate? Like, what, what is it going from the top? The top rates like 37 1/2. So like that. So it's a 2%. It's not a big. It's not a gigantic increase at all. It's a bit big nothing. Burger. OK. Yeah. And this is income tax again, not capital gains. It'll be. Yeah. Then there's a bunch of questions about whether, like, so capital gains is still a big question mark and they're not gonna be all go to income. Yeah. Well, so there's there's a big question. Yeah. No, there's a big question. I don't see a big push, but they haven't said yet. So this is gonna be part of this. Second, Bill, which they're talking about doing, I think in October. So, you know, watch out. OK, wait a second. If they go, if they, if the capital gains happens, then the whole idea of being a capital allocator, it's gonna change everything, wouldn't it? I I think it's a bigger issue than that. It has less to do with that. But you have $30 trillion sitting in 401K's in IRAS, and the idea that you'll tax all of those gains in a differentiated way, I think is going to be a very complicated proposition. Well, those aren't taxed. Well, they're tax on the way out, right? You still pay something on if you hold until you're 55. But I mean, whatever, you're gonna live to 110. So, so yeah, Axios actually had a story just today that the infrastructure bill like does not include capital gains taxes. But the big question is what they'll do in the next bill. You know, yeah. And that's and then so you combine that, let's just say the federal government decides capital gains. We don't want to invest in companies anymore. We don't want to treat stock gains the same because we want to have more equity, equality, whatever. Then you combine that with this wealth tax proposal in California. C8 is a resolution to propose an amendment to the Constitution of State co-authors have proposed a wealth tax described as a 1% surcharge for amounts over 50 million and 1.5% for amounts over 1 billion. So if you're a billionaire just you're going to have to pay, you know, 50. Can I make a case to you guys? I've kind of been thinking about this, but I'd love your your feedback on it. So I feel like there's a a tradeoff between freedom and equality and and what I mean by that. Is if you if you give a market freedom, a market of people doing things, freedom, you maximize progress that that society achieves. And and the United States is the best case study of this in history. In 250 years we went from a bunch of people living on plantations or living on small farms to a, you know, the largest economy in the world. And so the more freedom you you provide, the the more innovation there is, the more entrepreneurship there is, the more of. Inventing new stuff there is the problem with progress. Progress takes everyone forward, but progress is always asymmetric, meaning some people end up in a greater point further ahead than everyone than a lot of other people do. Whereas like a socialist state with less freedom and incentives and incentives, you take everyone forward together, but you don't make as much progress. And so if you want to have freedom, you have the most amount of progress. But you have. The least amount of equality over time, even though everyone is further ahead than where they started 200 years ago or 100 years ago or even ten years ago, everyone's in a better position than say they were some period of time ago because we've all got better Social Security programs and whatnot. There are some people that get so much farther ahead, like Elon Musk and Jeff Bezos and these people that you can now look to and say, this is unfair, this person's taken so much capital, and I've only made, you know, a 10% increase in the last 10 years. And so as a result, they're in a in a democracy. There is always this tension between freedom and equality, and those are the two things that cycle in terms of what voters vote for. We're coming into a cycle now where we're gonna start to vote down freedom and vote up equality. And this is sort of what the wealth tax, in my mind, represents. Is this this kind of redistribution or this returning to kind of the mean or reversion to the mean in terms of like, get everyone back on the same page. But as a result, we're going to see much less progress economically. We're going to see much less progress in terms of innovation and other places that have more freedom. And enable more innovation and infrastructure and entrepreneurship are going to be able to kind of leap ahead and have greater progress than us. That's my kind of rant and pieces, but I'd love you guys I I would amend your your thesis slightly to say that freedom produces prosperity, right? And Prosperity does produce some inequality because there are always people like Elon or Jeff Bezos or whatever who are just gonna be like super producers, especially in the era of technology where you can create a machine to produce. Business services and that machine can be thousands or millions of times as productive as the ordinary person. So they're gonna build extraordinary wealth. But the, the, but look, the, the, the free, the the basic idea of liberal society is you have a free enterprise system where people are generally free to create their companies and their businesses, and then you have a social safety net that's paid for by the largesse of that system. And the thing about socialism is it can only make it. We talked about this last time. It can only make everyone equally. Before, it never makes everyone equally rich. You end up killing the golden goose for everybody and and you also end up with a lot less freedom because you end up with a gigantic state that exists to level everything, and they accrue all this power for themselves. But is that actually true? Like, if you look at China, is that really what's happened in China? China is kicking everybody's *** and they're basically a socialist do. Yeah. This authority, they're authoritarian. Exactly. There are, there are cops. They're sort of sort of politically using, using friedberg's language. They don't have as much freedom or that freedom is granted by, you know, authority. A central authority. Yeah. Which makes them authoritarian by definition. Which means somebody like Jack Ma can do amazing until he gets it. But that's a perfect example. He's still doing fine. He's got 50 billion. Maybe he doesn't have right, but imagine what he could do if he could keep going. And, and this is a point I wanted to make, which is what if you got Elizabeth Warren or Bernie Sanders proposals enacted and Bernie Sanders has gone on TV many times and said there should be no billionaires if Jeff Bezos stopped? Holding Amazon when he made a billion dollars because he was forced to by the government. At that point all the future benefit of Amazon would have been lost. It's not like someone else would be able to step in on top of that platform and build more and then the next guy steps in and makes the next billion. And I I just want to remind everyone the the the benefits of Amazon are extraordinary. I mean imagine going back 20 years and being or being a kid and I can go in my freaking phone and I can say I want something and it shows up at my door the next day for same little for same day for very little. Funny. I mean, it is ******* mind blowing what Amazon has built for us, for society. It's an incredible business at the same time, and we are all willing to give that business money because the benefit of what they do for us is so extraordinary. And if you had capped Jeff Bezos as wealth, or capped his ability to kind of keep elongating what that business could do at some point, it would have been an absolute travesty. And I would argue that even though Jack Ma is doing fine, there are people in China who are limited in terms of what they can do because of the way that that government limits freedom. Limits, flexibility. And so to me, I'm observing this tension between freedom and equality, where equality is becoming such a sticking point for people now that it is far more important than freedom. And as a result, we are going to start to see these little things creeping in like a wealth tax or a limit on billionaires or all this sort of stuff that ultimately limits the ability for people to kind of push their businesses and elongate progress. And if you look at the great scientific and technical discoveries of the last 30 years, so many of them came from the United States because of this, this freedom. Not from China and China, certainly done fine, but they're great photocopy machine and they're great at saying, hey, here's some slave labor and has been here, the innovation has been in the United States. Yeah. China observed what was working in the US and they realized that they should adopt markets because markets create prosperity. They create goods, they create services, they create, you know, wealth for their people. So they've embraced markets. And then meanwhile, we're moving away from markets or we have such skepticism of markets. You've got this sort of extreme socialist. Sort of Bernie wing of the of the party that is kind of moving away from markets. It's it's bizarre, you know, it's just you just look at the free market in the Amazon example, they demanded a $15 minimum wage. They got the $15 minimum wage and now they're still attacking Amazon and Jeff Bezos. And so it's never going to be enough for them. They want to see him get rid of all of his money. No, no, no, that's right. I think, I think that you're saying something else, Jason, which is really important, I think. People, you have to think about the generation of kids that have been raised by boomers and and that'll explain the psychology of why they think that way. You know, we had all kinds of failure modes growing up, you know, we meaning, you know, I'm in my mid 40s. If you think of our generation and older, right, we all had failure modes. You wouldn't get into the schools you wanted. You, you know, basically had a lot more freedom where, you know, after school you were latchkey kid. You know, you would have just all kinds of, like, very nominal ways of growing up. You didn't necessarily get to play on the school team if you didn't make it, you know, and those boundary conditions create these great stories like the Michael Jordans of the world. And then you Fast forward to how boomers felt. And I think that boomers felt an enormous amount of guilt. About their stresses on the system and what did they do to millennials and Gen Z, you've got, they got everything they wanted. It was kindergarten, soccer, everybody gets a Gold Star. And now you have an entire generation of people that quite honestly are like wondering, like they actually have been raised in a quasi socialist setting. You know, if you go, if you go to school, there is no free speech. If you do a project and you know your grades aren't good, you can get a redo. Everything's a redo. Everything's a retraite, everything's a we're going to manage to the middle. You'll lose and you can't lose. And in that not losing. I think people have forgot what it feels like to actually win and that humans are actually in many ways like Darwin's perfect example of winning. You know, like why us and not at other strain of chimpanzee? Because we need, we wanted to win more than anybody else, as it turned out. And that's lost. We've lost that script. And so I think part of it is you have an entire generation of people who whatever you do, it's not enough. It's because they were raised. In a society where they never had to actually learn what functional winning and losing felt like and or or it's been deeply minimized, set another way that we've gotten soft and we're about to get our ***** kicked by China. If we don't start to realize that a vibrant competition of ideas and products and services, it is what wins. I think we have a more dangerous thing than that, Jason. It's not that that's gone. I think it's actually more this selective idea. So for example, like if you were. A fashion designer creating clothes on Shopify or fashion Nova. You're allowed to compete and win, but if you build a technology that aggregates resources and that has these crazy gross margins and profit margins, you're not allowed to win. So we've actually gotten into this very contorted. Where we want to choose how to define what winning feels like to us. And I think that's where it's dangerous because that's a very subjective thing, and it ebbs and flows. Can we go back to the wealth tax for a second? Because I think this is, like, monumentally. Yeah. Hold on. Let me just finish the statistics on it. They claim there are 169 billionaires in California, so this wouldn't impact a lot of people. And they estimate the wealth tax would generate over 22 billion. We've already seen Elon, and it won't. And that's a static analysis. That's such a stupid analysis because it's completely well, Keith boy left Elon. They're all gonna leave. They're all gonna leave. Look, I've talked to a lot of people. I've talked to a lot of people about the the wealth tax who would be subject to it. OK. Every single one tells me the same thing, which is if California passes this, this is a red light for me. I'll leave the state every single one. So the same thing, yes, you're not going to raise 22 billion from this. You're going to raise, it's actually going to lead to a decrease in tax revenue because so many of these people are going to leave the state and they're going to take investment with them, their businesses with them, their job creation with them. It's going to actually more than half the tax revenue in the in the state of California. Right from the what is it the top 1%? Is that the statistic? It will kill the California economy. Now, here's the crazy thing about it, probably the most crazy part of that whole wealth tax proposal. And by the way, even if you support a wealth tax at the federal level, it's stupid for California to do it on its own, because it's very easy for you to leave California. You just moved some other part of the United States, much, much harder to leave the United States. So the idea that, like, California can just do this on its own is like the height of stupidity by these, by these legislators. So the stupidest part of the whole bill. Is that there's a 10 year look forward, which basically says that if you spend anytime in California, we're gonna try and tax your wealth for the next 10 years. So that means that for all of us thinking about this concept, if we think this wealth tax might pass in the next 10 years, we might need to leave the state now, we might need to get ahead of the curve. And I'm hearing people now debating whether they should leave the state because they think it's inevitable that something like this passes. And the sooner they sever their Nexus with the California, the less likely they are to be roped into it. So just the mere fact they're proposing this bill, I don't think they're gonna get the votes in this legislature. There's six Democrats already come out against it. So I don't think it's gonna pass this year or next year. But the fact that they're even putting it on the table is making a lot of people second guess whether California is the place they want to create their businesses. And what we really need is for the Governor, Gavin Newsom, to come out right now and say, listen, like, this is a bad idea. I will veto it. I will not, you know, support this if I'm governor. For the next, you know, 5-6 years and his mere failure to come out and say what he really thinks about this is hurting the state because a lot of people are already contemplating, do I need to leave now? Sex. Let me ask a philosophical question. Do you think that this kind of speaks to a broad challenge with democracy, as I kind of tried to point out earlier, which is at some point the majority can take things away from the minority by just passing a law, by, by voting. And when you make that vote, the majority of people aren't affected. Therefore they'll say, sure, let me. I mean, I, I know that, you know, you, you have more background in this than the rest of us, but like, what is the political science principle here on how democracy kind of protects itself from having the majority? Eat the minority when the minority, you know, in, in this particular case, funds the state's budget. Right. And like, well, there's there's a famous vote and the voter doesn't see that. Yeah. There's a, there's a famous line in political philosophy that democracy is not two wolves and a sheep voting on what they're gonna have for dinner. OK. That there's a concept, there's a concept in addition to democracy of rights, you know, that that you have rights that the government can't just take away. And so part of the American founding wasn't just sort of the majoritarian. Machinery of government, it was a preoccupation with, with the rights of individuals and minorities to be protected against what majorities would do. That's why we have the Bill of Rights. So yeah, I mean there have to be rights of individuals that are protectable on some level. And I and I think it's a real constitutional issue whether the wealth tax is even allowed. And that's the thing, that's the thing where it's going to get fought and lost because the the cleverer. Order in, the Supreme Court will say, if this what comes next is it, are we going to go back and saying, you know, all of a sudden the majority doesn't like certain kinds of other kinds of minorities? There is a lot. And you can't have a certain kind of car or house. You can't have a certain car. Oh, wait, I actually don't like the tone of the color of your skin. Ohhh, wait, religious minorities, all of a sudden we're back to the 19, you know, 40s. And I just don't think this is going to pass because it's not. Justifiable at the federal level. I do think that you can just basically Jack up taxation and do a bunch of other things that that make it more fair. I'll be honest with you guys, I'm a little torn on this topic and I'll tell you why. On the one hand, if I had to pay 1 1/2% a year, I'm like, OK, what is the marginal utility of that money? For me, it's basically 0. So it's not as if I would feel that change of 1.5%. The thing that would upset me more is not having to pay the 1.5%, but then to see it wasted. That would drive me crazy, because then I would think, you know, I could have bought potable water for, you know, a native Indian tribe in California. I mean, actually, here's a perfect example. I just found this out today. You guys would be shocked. There is an incredible shortage of clean water in the Central Valley. There are places today where you are. And my fellow compatriots of California live where they have to buy these huge $12.00 Arrowhead jugs of water because the water is completely poisoned. And when I heard that yesterday, I thought in California, in the United States of America. And then he said to Mcmath, you can give for 2 1/2 million bucks, you can basically get 5000 people clean water through this thing that he's working on. So for me, the thing that would be upsetting is not paying the 1.5% it would see, it would be seeing. Nothing gets solved from it. And then and then what it would really prove is what I said earlier, which is it's just a bunch of belly aching from folks that actually just don't know how to actually seek success. And that's the truth, is that you can run for the governor of the state of California and fix that ******* problem, but we should build a website. Yeah, that is the benefit of democracy. As you, you know, you can kind of run and you can step in and you can help solve these problems at the government level. But we could start a podcast and try to use our influence or we could donate to things. Guys, I'll say something else. I also think that these kinds of bills are actually a shot. Across the bowl to a handful of people that are not playing by the rules anymore, we're not towing the line and standing in line and saying I'm clearly demarcating myself as a Democrat. I'm clearly demarcating myself as a Republican of play Nice because think of what's really happened in, in, in COVID you've had a massive explosion in DC distribution, right? Think of the platform that we've created out of nothing. Think of the platform that Elon Musk has out of nothing. And if you if you take that writ large, it's extremely disruptive. The people who it's all about controlling the message, which allows them to control power. And I think that a lot of these rules are these ways of almost like counterpunching against it, but they're ineffective. I what I would encourage all of us to do is actually become completely Zen and instead continue to aggregate distribution power because that will replace the 1 1/2% tax that you have to pay. Because if you can talk to people directly and tell them your version of the truth and allow them to underwrite their version of the truth against what you said, that is. Modern power, and that's worth a lot more than the money that you'll pay. Now, would you give that same power to Donald Trump because he's been cut out? I think you have to in that model. All right, everybody, we'll be taking next week off because it's spring break and you can take the week off as well. Anybody have any plugs or things they wanna promote? Why are we taking the week off? Because I don't wanna take the week off. I'm fine with doing it. I think some people are gonna be on vacation in there. Someone's gonna be somewhere really nice amongst. I can't. Can't you call in chamath? Can you call? The place is gonna be. Has Internet access. We'll send you a star linked. We'll get you on. All of my undisclosed locations have Internet access. For those of you who don't know, Timothy has rented the pyramids in Giza, and he will be staying inside of them. And he'll be dismantling them. And NFT being them. Yeah, and turning them to dust, obviously. Will be get wrapped as yeah as a mummy and King Tuts tomb. He has robotic waiters serving him the whole time he's there. He's living out of sci-fi fantasy next week. So enjoy it. Well, you know what? I did tweet that we're gonna do a live show after everybody gets vaccinated. We've been doing over 3,000,000 a day here in California starting tomorrow, April 1st. Live poker. Live poker can occur but we are going to be hosting I think Chamath New York City, NY. New York City. Sax is partial to Miami. Because it's al Fuego. Is that right? Am I? I don't know. Are you? You can we do, Jason, can we just, can we just agree then let's do this guys, let's do. May, we'll do it a some somewhere in New York City and then June, we can do Miami. How about that? Well June, it's gonna be too hot. I would I would flip that and I would because because it's gonna be too hot and made it better but also tell you the other reason. Two city tour. We could do both. But I also think that we should do Miami first because they're not afraid to come out to an audience. I think that people in New York and California still have they have more people need to go where people are the most reckless. Yeah. Let's go where people have. Absolutely. Totally gone. Yolo. I mean the just to close on this freedberg as the you know, man of science here on the on the pod. At this point these vaccines have been proven to not only keep you from dying, keeping you out of the ICU. We now found out this past week, correct, that you're not going to carry it and infect other people. In all likelihood very true. And another. Sorry, sorry, sorry. What, what? Wait, what happened? Really? And and another interesting point was made this week by a paper that was published showing that. You have effectively 80% efficacy from your first shot about two to three weeks after your first shot and then you go to 90% after your second shot. And then there's another paper that showed you're actually better off waiting over three months for your second shot, not getting it three weeks later you. So there's, there's, you said we should do one shot and then come back to this. That's right. And so there's now, there's now very good data that shows that that would have been a better move because we would have had double the throughput in terms of how many people we could have gotten shot in arms. If we had done that, so everyone effectively gets 8090% protected or 80% protected after the first shot. And then it's better to wait three months. And so we could have done in the back half of the year where everyone gets their kind of booster second shot and the front half of the year give the whole United States a first shot. But David, David, what's the, where's the article that says you don't carry it if you've gotten the vaccine? I need to know that because that's like the thing that's always in the back of my mind. Yeah. No, I I tweeted it. I tweeted it. Exactly. Put it out too. Yeah, I don't. I don't follow. Expert experts say it appears. I'm reading. He blocked. Betsy block. Hey Ray showed up. My ratio showed up. I I see you. I see you're retweeting some of my ideas. Usually because attribute, OK? Because I'm your friend and I ******* love you. Usually some point you usually you will say it back, some you will say it back. At some point. I don't know what I have to do for you. Yeah. I mean, I'm mark. I mark up your deals. I, you know, I take care of your family. I mean, I'm there for you. They did mark up that pipe deal, that pipe deal's gone supernova. With that chamath Pixie dust. On top of IT, experts say it appears COVID-19 vaccines can help reduce the transmission of the new coronavirus from person to person. They say this is accomplished by reducing the viral load in a vaccinated person's nose. Besides the statistics on this, you know, there is no documented proof that someone had was fully vaccinated and transmitted COVID to someone else out of 400 million. Total vaccinations globally. So there's a, you know, also like a really strong kind of point to make, which is show me the evidence that it can cause, you know, everything about biology. And you know, science would would indicate, you know, in terms of how this would work. There's no reason the virus should be spreading and that you suddenly become infectious and contagious virus that you just respected with. This is like the most obvious study ever, that look, if you get the vaccine it prevents you from getting sick. You're also not going to transmit it to other people. But let me ask a question. Why is it that every time a politician says that the experts. Acquired it. It's always the stupidest position, you know, because the experts on this show we had freeberg saying this stuff. We had bought Bob Walker from UCSF who you know, runs UCSF saying that, you know, we should just on the 1st dose first, get everyone through on one dose and then come back and do the second dose. Of course, like no one in the federal government position of authority took that position. Fauci didn't take that position and then we had Fauci on top of it saying that we might have to wear masks until 2022. But you know, because because because of this, like, asymptomatic, because you could be vaccinated and soul spread it, which has now been totally disproven. So why is it that whenever somebody says we have to listen to the experts, they're always listening to the stupidest? Because, David, David, we are, we are, we are in a culture where independent thought is not valued, where it is better to abdicate and look to an expert to tell you what to do. Now that is again, I go back to we are in a cultural malaise of not wanting to make a run. I've been working. We have our own working on my doctor Fauci sacks. Mr Sachs, that's correct. Asymptomatic patients, by the way, may in fact infect other people, but we don't know yet. So it's best to wear a mask, if not 2 masks. And to have proper by the way, shamat the point you just made, I think is really important because I think it also reflects what I said earlier about economic inequality and and economic progress. When you have greater economic freedom, you have greater economic progress, and then you will inevitably have economic inequality. The same is true with ideas. So when you give people the opportunity to have the greatest freedom in terms of sharing and expressing their ideas, you have the greatest progress. But you also end up with this, this issue where people have vastly different ideas and inequality arises. And right now we're in a mode of canceled culture, and we're in a mode of telling people that they can't say certain things and they have to be very careful about, you know, what they're saying and what context. And it limits this ability for people to feel free to express themselves, share their ideas and push the boundary and push the envelope and find the truth and find the best outcome. And so I do think that we're in this kind of rationalization kind of stage of our democracy where we're reducing our, our, our kind of degrees of freedom and it's it's playing out in terms of the ideas for him and the Economic Forum and it just feels very resonant to me that both are very, very linked right now. Can can I try to answer my own question actually, which never stopped you before here, here, here's, here's what I just realized. OK, listen, if you're going to make an argument that fundamentally makes sense, you don't need to tell people, ohh, go follow the science, you don't need to appeal to some external authority. You can just lay out your argument and it makes sense. When do you need to say to everybody, listen, you need to shut down your own brain. You just shut down your own logical thought process and just follow what that person over there says. The people who need to make that argument are the people who are making arguments that don't make any sense. I mean, this idea of wearing a mask after you've already been vaccinated never made any sense. This idea of locking down the whole economy instead of isolating the at risk people for a whole year, it doesn't make sense. It's been done, David. It's been done. To the left, and it's been done by the right in equal measure. Whenever you have an opportunity to grab power, people will abstract. And then they will aggregate and pull it in and they will make decisions for people by pointing to these abstract ideas. It is happened in forever. This is not a new thing. It's just that now with social media, you can distribute this power grab more efficiently than before, and then you can see it for what it is because you can debunk it and that's the thing that's happened. That's why there's more anger around it, because you can debunk all this nonsense you can actually say, well, what's the data say? And but most people don't want to do that. It's easier to abdicate responsibility. All right. We want to thank Doctor Fauci, our great guest today. You wanna maintain social distancing? Don't think for yourself. The CDC has been very clear. The Chinese report from The Who approved by Xi Jinping says it did not come from a weapons laboratory. We teach shipping at his word. You know what you are. You're not even fouchy. You're you're that person. What's your, what's your name? The the great actress, the comedian from SNL. She's got blonde hair. Oh yeah. Katie McKenna or something. Yeah. Kate McKinnon doing Fauci. Fauci. You're like a babushka. You're like a babushka doll. A *******. I just love that they have Ted Cruz being dumped by that other woman. It's like every time they wanna troll the Republicans, they they guys free bird. Free bird to go. He's meeting. He's meeting and a friend. Ohh, what do you mean? Ohh, be careful. Ohh it got dirty. You got ugly. Take that last part out, Nick. Yeah, keep the last part out. Yeah, yeah, Yep. That he's having dinner with beep and beep. Alright, we'll see everybody. Love you guys. Let your winners ride Rain Man David Sachs. We open sources to the fans and they've just gone crazy with it. Working. Why? Why? Why? Besties are. Your driveway. Ohh man. We should all just get a room and just have one big huge order because they're all useless. It's like there's like sexual tension that they just need to release somehow. Beep. Beep. See what? Where did you get merch? I'm going all in.