All-In with Chamath, Jason, Sacks & Friedberg - E97: SPAC updates, public/private market overview, Putin's end game & more

I’m in a very Daniel Plainview mood this week.

The there will be competition in me.

I don’t want to see other people succeed.

That’s right. Best scene ever.

You are the furthest from that character.

Like that is not your spirit animal.

Oh, there will be blood.

That guy, Daniel Day-Lewis, has nothing to do with you.

I’ve watched it a hundred times. Incredible.

You must be so stormy and roiled on the inside.

Oh, my gosh.

I mean, like, did you not see my roast at Saksa’s birthday?

It’s just I not see it.

I lived it. It was the most off color.

Disgusting, egregious, mean diatribe I’ve ever heard.

My Lord, I have a competition in me.

I don’t like to see others succeed.

I can’t stand that.

Jekyll is a good moderate.

Let your winners ride

Rain Man, David Saksa.

And it’s said we open source it to the fans

and they’ve just gone crazy with it.

Love you, Wes.

Nice Queen of Kinwana.

I guess everybody wants to know, Chamath, you’ve wound down two SPACs.

Thank you for doing this for IPOF specifically,

because people are replying to me every day asking, what are you going to SPAC?

But IPO, D and F, the money has been returned to investors.

No, it’s going to be returned, going to be returned to investors.

Thank you.

And Bill Ackman, of course, he wound down his SPAC returning four billion.

There’s over 500 SPACs out there looking for deals.

Tell us why this decision?

Well, I’ve raised 10 SPACs, six in technology and four in biotechnology,

and I’ve done six deals, two in tech and two in biotech.

Four in tech.

Sorry, four in tech.

Four in tech, thank you. And two in biotech.

So the reason to shut it down is pretty straightforward.

It’s like, you know, when we launched these things,

the stock market was in a much different place than it is today.

And so over the last two years of looking at deals,

it’s gotten harder and harder to find a good risk reward.

Now, why is that?

Well, the thing with the SPAC is you do a deal today,

but it doesn’t usually close for six or seven months in the future.

And so you have to do a deal where you have a really good sense

that in six or seven months when the deal comes to close,

that the price will be the same or even higher than what it is today.

And if it isn’t,

all of the investors that you’ve brought along in the SPAC

have a right to redeem, which is to say they file a notice

that says you can complete the deal, but I want my money back.

And what they get back is the initial $10

that they used to buy the stock in the first place,

because when we sold when we started this back, we sold stock at $10.

And so from my perspective, I was looking at this and I’m like,

you know, this is a super volatile, ugly point in the market.

This last year has been really problematic.

I and I and I kind of said this last November and Nick,

we can we can play the clip after and we can come back to it.

But basically, my decision was that at this point

to do a deal would probably, you know, put a lot of capital at risk.

And in all of these deals, I’m typically investing

$100 million at least in each of them.

And so I couldn’t justify that.

I couldn’t see a good risk reward.

And I thought the right thing to do, the responsible thing to do

was just to wind these things down.

You know, I’ll lose, I don’t know, 10, 15, 20 million bucks

for having set these things up.

But we give everybody their money back that $10.

And I think that’s actually better over the next five or six months

than what it’ll otherwise do if you’re invested in the market.

Now, that’s a belief that I have.

But hopefully when people get the $10 back in the next few weeks,

if they want, they can go and put that money back in the market.

And hopefully they’ll do well.

But, you know, from my perspective, the risk reward was not good.

Is part of the issue, the inventory that’s available of great companies as well.

That’s one of the things I heard speculated on CNBC,

it’s hard to convince a private company to go public.

Here’s my experience.

You know, when I when I was talking to all of these CEOs

of these Silicon Valley companies,

initially, there was a lot of misunderstanding about what SPACs were.

And I think we were able to dispel that because we had some really

successful transactions.

Then there was a lot of interest in being a part of it.

In this phase, we were suffering from two very important things.

One was that valuations were just completely up in the air.

People had a huge question mark on late stage valuations

because we would come in.

We would do the work and we would say the company is worth X.

And that number typically was 50 or 60 percent lower

than their last private valuation.

And so when it came time for us to negotiate, you know, doing the deal,

even if the founder was roughly on board, the rest of the board was not

because a lot of them would have seen some pretty meaningful markdowns

in their private assets.

And when the company had enough money to kind of like, you know,

at least stay private for another year or so without having to raise money

on balance, those investors felt it was more prudent for them

to not take the mark and to not take the deal at such a lower discount.

So that was a big issue

that we ran into because every time we would price a deal again,

we’re trying to create a margin of safety for us and our investors again,

because it’s going to take six to nine months to close a deal.

And so ideally, you want a valuation indigestion.

And then sorry, the second thing was just volatility.

So when you see volatility in the public markets,

you know, for a CEO, and I can understand this.

It’s much easier to go public in a point where the markets are generally

going in one direction because it gives them the confidence

to be able to learn the ropes because it is a complicated process being public.

And when you introduce tremendous market based volatility,

independent of your company,

I think a lot of CEOs and CFOs and IR people

were a little nervous.

You want to take the risk.

And that was that was the second piece.

But by in a way, the first one was valuation.

We could not find market clearing prices.

Makes sense for assets.

And by the way, and I’ll talk about one company in specific,

which just this week had a pretty public blow up around this whole issue.

And look, I’ve been pretty clear about this since November.

The marginal trade should have been to be trimming risk.

And Nick, maybe you can play the clip, because I really want to make sure

that it’s very clear and on the record what I said almost an entire year ago.

Let me put crypto in the context of the markets and where we are today

at the end of the week after, you know, Q3 earnings in November of 2021.

We have the stock market at absolute all time highs.

Ripping. We have crypto at absolute all time highs.

Ripping. We have the art markets.

I don’t know if you guys saw Phillips and Christie’s and Sotheby’s this past week

at absolute all time highs.

Sold another vehicle for 25 million.

We have inflation at a 30 year high.

We have 10 year break evens at a 25 year high.

We have, you know, one point

some odd trillion dollars that we just approved last weekend.

We’re still horse trading on another three, you know, one point

eight trillion dollars of stimulus that we’re going to put in.

And I think the the most important thing, which is

the two most important founders of our generation,

the two smartest people who have really consistently won

Elon Musk and Jeff Bezos have collectively sold more than 11 billion dollars

of their holdings this year alone.

And if you can’t take all of that and decide for yourself

what’s right for you and your family, you’re doing yourself a disservice.

I think it’s important for me to never sort of like, you know,

be forced to tell folks whether I’m buying or selling, although I’m willing

to do it in moments where I think it’s important.

But I think it’s really important to understand the context.

And so I think like these folks that like think derisively

about individuals who are managing risk, I think it’s really naive.

And I think it’s it creates a lot of missed opportunity for them as well.

If the smartest people in the world

are now selling their core holdings that they told you they would never sell

and you are not reconsidering your position on things.

You’re either much smarter than them

or you’re being really, really reckless.

The reason I said all of those things.

Was because I was getting really worried about where we were.

And then and then I think on the heels of that, I published a tweet

and I and I said, I’m starting to sell, you know,

and I sold like 100 million dollars or so five.

But then I was a systematic seller

through the end of last year and through this year

to try to manage my own liquidity, because it changed profoundly

as I saw what was happening in the markets.

So, you know, I think that it’s just an important thing to call out

that things don’t always go up.

And you have to pay attention to a mosaic of information

and you have to do the work yourself because, you know,

your situation is unique to you.

Nobody else understands it.

And so you can’t outsource that decision to somebody else.

Obviously, you can use it as a guide.

You know, it’s fair to say, you know, when the 13 F’s of important

hedge funds come out, do I read them?

Of course, because I’m trying to figure out, you know, what don’t I know?

What may I be missing?

Maybe there’s a great company in there that I that I should be taking a look at.

So, you know, I’m not dissimilar to everybody else in that I use other people

that I look up to or respect as a leading indicator of what to buy.

But I still take responsibility for my own decisions,

and I manage my liquidity as best as I can based on my conditions.

And those are always changing.

And so I think this is just a good reminder that everybody else has to do the same.

So, Chamath, what do you think happens to the remaining 500?

Every SPAC sponsor friend of mine that I know is not seeking targets anymore.

They’re all expecting to wind up and return capital.

How many of the 500 do you think will actually find a target?

And how many do you think all of remaining SPACs,

how many of them will wind up and return capital?

I mean, I think that there’s still some really good deals to do.

They’re not necessarily in tech, per se.

So, you know, I think you did a really great deal in ag tech.

I think that that’s that’s really interesting.

So time will tell how that does.

I think there’s some really interesting deals in energy.

In fact, we spent a lot of time actually pivoting and spending time and energy

looking at, you know, everything from, you know,

producers of nat gas and oil to, you know, folks that were building terminals

to LNG facilities and the.

But it’s just a very different return profile than what we were used to.

So I think if you can understand some of these other markets

and you can underwrite to a different rate of return.

Some decent deals will get done.

The overwhelming majority of the tech SPACs, I think, probably will just wind up.

Some folks will be really focused on trying to.

You know, monetize their founder, promote, so they’ll do any kind of deal.

The problem, as you see, is even whether you do a good deal or bad deal

with the kind of volatility we’re seeing in the market,

the likelihood is that it’s going to trade down pretty significantly.

So I think most will not find a home.

I think some will find some really interesting targets in areas like energy,

I think are really interesting.

Agriculture, like what you did, Freeburg, I think is really interesting deal.

And then you know what?

It’ll be an opportunity for us to retool the SPAC.

I don’t think it’s going to go away.

I think that it is a useful tool in a toolbox of many tools.

So there’s IPOs, there’s direct listings.

There are SPACs.

There’s obviously private fundraising.

There’s convertible, there’s structured deals.

So it is a tool.

And I think when used properly, it can be really helpful.

You know, for the companies that we worked with.

It would have been impossible for them to raise the quantums of capital

that they did primary capital from sophisticated hedge funds and mutual funds.

You know, we raised billions and billions of dollars for companies

like SoFi and Open Door.

And I think that that’s going to go a long way for them to achieve their goals.

So I think it’s going to be a good tool.

But we’re going to go through a washout of most of these folks

who are not going to be able to successfully find targets.

Saks, when we look at private companies, especially the late stage ones,

you and I are involved in a number of them.

They’re doing riffs, they’ve got headwinds,

and their valuations are underwater in many cases.

How are they thinking about the public market windows, SPACs,

direct listings, or just a traditional IPO?

I don’t know that they are thinking about it.

I just think I think like going public seems like a fantasy at this point.

I think the whole public markets exit idea is frozen for two years.

Two years.

I think that’s yeah, I think that’s probably what people are thinking.

What are these late stage companies that raised mega rounds

doing to work out valuation issues?

Because as Chamath just pointed out, with SPACs,

one of the problems was clearing market the late stage investors who came in.

Maybe they, you know, don’t want to accept the haircut and valuation,

even if they have productive.

Probably not enough.

I mean, what they’re doing is is using their war chest

to grow into their valuations, which is the smart strategy.

And if they’re really smart, they’ll be slashing their burn while they do that.

But yeah, it’s no different than we’ve talked about before.

I think the main significance of this past week

is that you had the Fed meeting, it raised another 75 basis points.

There’s no surprise to that.

That was predicted.

What was new was the forecast.

They’re now saying that they expect to raise another one and a half percent.

Just two months ago at the last meeting,

they were saying 75 at this meeting, plus 50 after that.

Now they’re saying 150 after this.

So, you know, in just two months, they’ve they’ve

they’re now revised their forecast for an extra 100 basis points of rate increases.

Why? Because inflation is worse than they thought.

So things are worse than we thought two months ago.

The last inflation print didn’t get better as fast as people wanted.

We talked about that last week.

Now the Fed is revising its forecast.

The trajectory is bad and getting worse.

And you finally had Powell kind of throw in the towel

on his rhetoric around soft landing.

I mean, first it was, well, we can raise rates and we won’t have a recession.

Then it was we might have like a mild recession.

Now he’s basically saying hard landing if you if you read

these FOMC comments.

So I think this was a really bad week for the economy.

And you’re seeing it in the markets this week.

I mean, we are retracing almost within five percent of the June lows.

With the growth stocks being the ones that are hardest hit.

By the way, speaking of growth stocks, have you guys been following this

trials and tribulations with by Jews, which is like the one of the largest

valued private companies, but it’s a private Indian tech company.

Essentially, I think like, you know, there was this delayed audit.

And Deloitte couldn’t certify a bunch of things, and then finally

they were able to come up with a report that essentially showed

instead of like breaking even or making money,

they lost almost 600 million dollars this year and that

a lot of the revenue that they were booking were actually loans

to millions of Indian families

who had basically zero probability of paying them back.

So a lot of the revenue was not real as well.

And this is like a who’s who of investors, it’s everybody from,

you know, Sequoia, Tiger, UBS, BlackRock,

Chan Zuckerberg, it’s incredible.

I think when the tide goes out, we find out. Right.

And this is what’s happening.

The tide’s out and you’re going to find all the weakness in the system.

It’s all going to get flushed.

I think this is a bit of an outlier, obviously, like I don’t think that,

you know, all these companies that are worth 10s of billions of dollars

are running so close to the sun.

But it just goes to show you that, you know, how to how does.

How does this happen, like how

how do you not get a deal on this on the seed stage in series A,

we would ask for a data room, the person would say,

you’re the only investor asking for it.

And you’re putting in, you know, 10% of the round.

These other people aren’t even asking for it.

We said, OK, can we still see the data room?

And turned out there wasn’t one.

People were just making bets.

They were making blind bets.

They were betting without even looking at their cards

or thinking about the other people’s cards.

But this goes back to what Friedberg was saying before.

You know, I think I think there’s a there’s a.

A sliver of the retail investor base that is not dissimilar

to a sliver of the private equity and hedge fund and venture capital space,

which is these folks are not willing to do the work.

I think most people are.

And most people want to come to their own conclusions.

But some people want to just take the easy, momentum driven decision.

And they typically always get punished over time.

There’s this concept of adverse selection, which is that

the negative actors will find them will seek them out and it will be a match.

And so they’ll ultimately get adversely selected into the deals that blow them up.

So the bad deals, what you’re saying is the bad deals

would find the bad investors who don’t do the work and then they spiral

and crash together.

That’s a really brilliant observation. Yeah.

Yeah, I think I think the other that’s what I’m here.

I think the other thing is like you have this situation where

if it wasn’t that it’s folks outsourcing their diligence

to the person that did the round before it totally, you know.

Oh, Silver Lake did it.

Same problem. Tiger did it.

OK, these guys are very sophisticated investors.

I don’t need to do the work.

It turned out you did because, you know, it was a very

you know, cavalier way of recognizing revenue.

There was a specific playbook here, too, that I don’t know if you saw this

acts in the early stage where people would get their friends

to invest in the company or some, you know, high net worth individuals.

And then you look at the deal and the valuation didn’t make sense.

And then you say, well, we would always ask how much money is each person

putting in? And we like, well, their normal bet size in the seed is 750

or 1.5 million.

But they’re putting 50k into this or 100k. What’s going on here?

And it was, oh, they’re friends with them.

They worked at a previous company together.

They were in the same they went to the same college.

And so people were using social proof, but manipulating it

to get some other sucker at the table to pay full price and not do diligence.

Really strange behavior.

I was in Singapore this week.

There was a I had this great meeting with this young investor,

really dynamic guy, and he was telling me about a company in Indonesia

that he didn’t invest in.

But it turned out that that this founder

was literally running two parallel sets of accounting systems.

And so he was, you know, showing a business and fundraising from this set.

But the the real books were over here and it looked a completely different system.

And it was basically like a Ponzi scheme.

And, you know, he was telling me it’s like it’s like impossible

to root these things out.

So what he said he relies on is like you have to have a network

when you’re doing these frontier country deals

where, you know, he says, I need to find at least 10 people that know this person

so that there is sort of like a moral social proof and moral diligence

that happens because that person will never try to commit something

that egregious in the face of all of their friends.

And so, you know, that’s a mechanism of filtering this stuff out.

But I thought that was a really interesting way of of designing a diligence

process, at least in a frontier market here.

I don’t think you have that much time to do these really, you know, fast paced deals.

And the social proof matters less because you theoretically,

you know, are looking for signals of traction.

But there has to be a better systematic way of getting this diligence done,

because these things should be pretty obvious.

Saks did well before it’s a well before it’s a multi deca billion dollar company.

Saks last year, when people were moving really fast, saying they don’t have time

for diligence, you’re going to lose the deal, yada, yada.

How did you approach diligence during those peak periods?

And did you have those experiences where people were trying to push you to close

without talking to customers or looking at bank statements, yada, yada?

No, we wouldn’t play that game because we always run SAS metrics.

That’s always the starting point for us.

But, you know, most SAS companies, they have SAS metrics.

I mean, they it’s so standardized that it would be such a red flag if they didn’t.

Yeah, I think it might be companies that are, you know, have unusual business models

or maybe they would say something like that.

But no, we can never do a SAS investment without SAS metrics.

All right.

Well, this is a good segue, because right now, U.S.

venture capitalists are sitting on two hundred ninety billion dollars in dry powder.

We had talked about this last year, how much dry powder was there.

The market is obviously collapsed.

But here’s a chart from our friends over at PitchBook.

Just extraordinary how much has built up and how much has been raised.

USVC funds raised one hundred and twenty one billion dollars

during the first half of this year, 2022.

So LP’s still have an appetite, which kind of makes sense.

Investing into the down market for private companies

means you’re going to get better deals and you have a 10 year horizon.

USVC has raised one hundred thirty nine billion in all of 2021.

So if you put those two numbers together,

yeah, you’re looking at two hundred and sixty billion dollars in the last 18 months.

And this is all record numbers being put up on the board.

What does this say for private companies, Zach?

I dispute this analysis a little bit.

I think there’s a couple of things going on that need to be taken into consideration.

First of all, new funds don’t get announced till after the process completes.

And then, you know, it may even be some time after that

when the VC firm feels like they want to make the announcement.

You can’t announce a fund until the process is completely over.

You get subject to all sorts of additional SEC rules.

So, you know, these funds might be announced in 2022,

but they may have actually been raised in 2021.

So that I think is a really important point.

Moreover, a lot of the funds may have already deployed capital before the crash.

So there was that, I think, remarkable story that we talked about months ago

in TechCrunch on how the latest Tiger Fund,

which wasn’t even announced till March or April of 2022,

but it had already been two thirds deployed by the time they even announced it.

And so that was pretty stunning.

So I think that we don’t really have a great sense of

how much of this so-called dry powder has already been deployed,

how much of it was really raised before the crash.

It is true that LP relationships with VC firms that have done well are sticky

and good LPs stick with their partners during a downturn.

So, look, I mean, the VC world’s not going out of business or anything like that.

But I would tend to think that this is an overly optimistic, overly rosy scenario.

Do VCs have new funds that they’re going to be ready to deploy

in great companies? Yes.

But does this mean it’s going to be easy? No.

I think that the bar has gone up.

Valuations have gone down.

Founders looking at this tweet storm, I would not get lulled into a false sense of security.

Yeah, I agree with just to explain that.

There’s probably a six month lag on when these funds are announced.

The reason is there’s 506 B and C designations.

Most people raise under 506 B, which means you cannot even say that you’re fundraising.

Therefore, PitchBook can never have that data.

So there’s a lag and people were deploying at a very high velocity.

Therefore, this number could be off.

Thirty five people were deploying at a pace where they thought

you had to go back for a new fund every year, which is what it was looking like

in 2020, 2021.

You know, if that six month period might mean you’ve deployed half the fund.

So but look, if if you just go back to a two and a half

or three year pace of deployment and before in 2021,

we’re at a one year pace of deployment, divide the availability of capital by two thirds.

I mean, you know, only one third as much will be deployed in any given year.

That’s a significant reduction.

So, yeah, I think founders should just be aware that the market’s going to be a lot tighter.

And I think given what we’re seeing in the public markets this week,

it doesn’t look to me like it’s going to get any better.

It looks to me like we’re headed for I mean, I call it a double dip recession.

I think a couple of months ago, that’s exactly what it’s looking like.

In fact, the Fed basically said as much.

The Fed said that would be just marginally positive next quarter.

So we’d bounce back to slightly positive growth on a real basis.

But then, you know, expect it to go negative again and, you know,

recession once all these interest rates kick in.

And by the way, I mean, kudos to Chamath for basically calling that,

you know, when the Fed just a couple of months ago was saying that so-called neutral

would be three to three and a half percent.

Chamath was saying, no, it’s going to be four and a half, five percent plus.

Now the Fed just in two months has revised to saying that neutral is four point

six percent or something like that.

And and they don’t think there’s going to be any rate reductions in 2023.

So this is not looking good.

How much Chamath of the issue here is

we don’t the data that we’re seeing, the ground truth

we’re seeing, as you would often say, might be very different

than like the reports that are coming out.

People are talking about inflation from, you know, 60 days ago,

job reports that are 30 days old, 60 days old.

We don’t really have live data.

It seems like our government doesn’t use live data

when they make these decisions, is that the unfortunately?

Well, they unfortunately don’t have access to it, really.

You know, they are they have empirical sampling.

But to say that, you know, the the US economy is automated in a way

where, you know, they can sit in front of some dashboard and,

you know, see in real time what the true on the ground data is

is not really accurate, unfortunately.

Maybe there’s a Manhattan project type, you know, effort to do that

at some point for the United States, but it’s not now.

I’ll give you a bit of bad news and a bit of good news.

And this is just me kind of, you know, again, looking at the mosaic

and and kind of judging where we are today.

The bad news is, I think that

it’s going to be a really tough, sticky time for the U.S.

consumer probably over the next 18 months.

And so I tend to think that,

you know, through the course of this year and through 2023

and possibly even a little bit of 24, it’s going to be a grind.

Unemployment will go back up.

Inflation will be sticky.

Real earnings will shrink.

Consumption will ebb.

And earnings will not be that great.

But the silver lining is, I think that we are starting

a bottoming process for the equity markets.

And I think that by the end of this year or the early part of next year,

most of that will be done.

And the reason is that, you know, the equity markets, I think,

do a reasonable job of one looking at the bond market

and then to looking six to nine months into the future

and pricing in that future today.

And so by the end of this year, beginning of next year,

I think that we will have kind of bottomed and we’ll start to build a base.

The thing to remind us, though, is that, you know, let’s just say

a stock goes down 20, 50 percent, even if it rallies 50 percent from there,

it’s still 25 percent off from where people don’t understand that.

And people don’t understand that.

Climb back up the mountain.

So I would just I would just think, you know,

tell people that, you know, I think that David is right.

I think that it’s going to we’re going to feel this for a while.

It’s this inflation, as I’ve said for a long time,

is going to be sticky and persistent.

I think you’re going to see Fed funds at or breaching five percent.

And but I think that in terms of, you know, risk assets

will bottom out by the end of this year, beginning of next year.

River, what are your thoughts?

You think we’re in the process of bottoming out and it’s going to be

a year of this kind of slog through the muck?

And what signs are you looking for that maybe we’re getting out of it

or turning a corner?

I mean, Larry Summers had some good tweets this week.

The weird you know, the weird thing is Larry Summers seems to be.

Like almost trying to make the case and make certain points

because he’s not being listened to.

It’s it’s it’s so ironic and sad to watch

because he’s such a thoughtful economist and has such a great point of view

and experience to leverage here.

And clearly, you know, he was banging the drums last year.

No one was listening.

And then he got public about it.

And now he’s more repeatedly public about things.

The point that he’s made,

which I think plays into the political cycle question,

which is where the tension arises, is in order to resolve ultimately

the inflation problem,

you’re going to have to see a significant increment in unemployment and.

And so when you raise interest rates,

you know, generally purchasing goes down, demand goes down,

revenue goes down, layoffs happen, some businesses go bankrupt, et cetera.

So then there’s this trickle in the economy of less people being employed.

And when that happens, it ultimately drives.

A political response, which is, hey, we’re losing our jobs.

People start asking their representatives do something about this in Congress.

And then these programs and these things get passed,

which themselves are inflationary.

And that’s why it’s very hard to predict ultimately

when and how this all gets resolved, because we seem to have an administration

that is enacting and embracing

inflationary policies to support what they consider to be economic growth

and improved employment conditions in this country.

And the unfortunate effect of many of those policies is inflation.

And then it forces this difficult central bank decision making cycle.

And so there’s a tension right now that doesn’t seem to have a clear path

to resolution.

That is why it’s very hard to have a clear prediction here.

We also have a very significant question overhanging

all of these markets related to the price of energy,

which is a key input to so many industries and drives cost

as well as food and also the military conflict in Eastern Europe.

And, you know, and then there’s in the financial markets,

this big overhang question on what’s going to happen with various countries

that may default on their debt, as well as China’s real estate bubble bursting.

So I made this point, I think, a few episodes ago,

but there’s no easy answer that I can just say deterministically.

Here’s my prediction of what’s going to happen.

As Chamath uses the term, I think it’s a great term.

There’s this mosaic of things that are under under consideration right now.

And there’s a tension between them all.

And and that’s what makes it difficult.

I’m sorry, I didn’t really answer the question, but that’s that’s kind of how

I think about it.

There’s a lot of geopolitical risk.

I mean, we’re kind of, you know, ignoring what happened this week

where Putin basically is putting nukes back on the table.

Now, I’m not saying that’s likely to happen, but.

I don’t know how, again, I don’t know how this market

gets a lot better with the risk of war three over our heads.

I mean, who wants to enter the market with that on the table?

And by the way, the nukes, just just to be clear, you know,

you can hear certain military commanders speaking publicly about this.

But in the Russian military playbooks,

there is specifically defined actions

that can lead to tactical nuclear weapon use in the field.

There’s no direct indication that these things are going to be used right away.

But the as a sack says, there’s like this weird

like turning up the volume happening on, hey, maybe we’re getting closer to a point

where if Putin is having tactical failure in this conflict,

there’s more weaponry he can use that has greater impact.

And unfortunately, there are these tactical nukes in his arsenal.

And, you know, a guy that maybe has a certain psychology

that has, as our friends have said, his back against the wall.

He’s not a person who in his career

or in his history has ever acquiesced to defeat.

Alex Karp was on CNBC.

He was really, really sharp and concise about this, which is that, you know,

in the West, when leaders fail in their objectives,

they just get elected out and somebody else takes their place. Yeah.

But for somebody like Putin, there is nobody to take his place

because it’s a very zero sum situation.

And so his actions will, as a result, also be zero sum.

And I think, folks, he’s never acquiesced in his life.

And yeah, yeah, we’ve never we’ve never really kind of like

we don’t understand well what zero sum decision making looks like

when it comes to stuff like this.

He needs the Golden Bridge, right?

You need to give him the golden job.

But I’ll just say two things.

One is that.

I think it’s been made pretty clear

that both India and China will not stand beside Russia

if they do something like this.

And I think that that is important because they still are the two biggest

purchasers of of Russian oil.

And so I think that matters a lot because you’re talking about a lot of revenue

that would that would go away.

And then the second is I mentioned this last week,

and this may sound dumb to some of you, but don’t sleep on the Russian mothers.

And what happened this.

Oh, you’re 100 percent right on that.

Well, what happened this week was really interesting,

which is that he calls up all these reservists.

These reservists are not coming from the major cities of Russia.

You’re starting to see protests.

You’re starting to see young people say, I don’t want to do this.

Yeah. And who’s that really activating?

It’s activating the moms. Yeah.

And so I don’t lose on the Russian moms.

Three hundred people are being drafted, you know, to basically go fight.

And I actually think David’s right.

Oh, sorry. Sorry. Go ahead.

The question I have for you is, do you think I know you don’t agree with this,

but do you think the strategy is to back him into a corner

and then have this like rhetoric spike to then force a resolution?

I know it’s a danger strategy. It’s a crazy chess move.

But do you think that’s actually what the West is thinking?

I see no evidence that we have any

intentions of seeking a diplomatic off ramp.

I see no evidence that they’re looking for to give him a golden bridge.

Like you said, then do you think they’re trying to break him and have regime?

I think Biden stated the policy, which is this man cannot remain in power.

I think he blurted out the truth of his policy.

This is a regime change policy. That’s what they’re going for.

They are backing him into a corner.

Jake, I thought that you were right this whole time, which is

we’re going to build a golden bridge.

We’re going to find a way to egress this guy.

And I’m now sort of in the David camp, which is I think that.

The stated strategy of the Western alliance

is essentially to cause him to make such a categorically catastrophic mistake

so as to become a pariah, so as to either get overthrown or, you know, something.

So I do think that on balance, the risk is now for things to escalate,

maybe not in quantity, and I’ll use this word in the wrong way,

but, you know, quote, unquote, like the intensity of of it.

So I think David’s right.

It’s a lot of pressure to the economy and to the high risk assets.

High risk is a high risk strategy.

We got a good thing going over here.

I don’t see the need for all this risk.

So look, and the risk would be the reward.

What would you see the reward if Putin was removed?

Oh, my Lord.

Well, it depends who replaces him.

What if we get a hardliner?

You got to remember, Putin’s taken out all the liberal reformers.

All that’s left are hardliners.

So I know I know there’s moms protesting in the streets, but he’s also under

intense pressure from his his right wing.

You know, he’s got hawks on his side who basically have been criticizing him

for making this a special limited military operation instead of a war.

They’re like, why do you try to do this with 200000 troops?

We should have gone in heavy with a million.

So is that right?

There’s criticism internally.

There’s a New York Times article about this.

He has his own, you know, military hardliners in his security state, his hawks.

So so he’s not just under pressure from peaceniks who are protesting in the streets.

He’s also under pressure from hardliners in his own government

who think he’s been too soft.

Yeah, it’s a challenging situation.

He’s and he’s he’s going to be 70 years old.

How many years does he have left?

We just need to contain him for a decade was on our side.

I don’t contain him for more and more decade.

That’s my best idea.

Contain him for a decade.

The thing I have the most trouble with is if you look at the media portrayal of this.

So I said last week when we had this successful counteroffensive

that maybe we’ll get what we want, which is Russian morale collapses.

They just tuck their tail between their legs and go back to Moscow.

Or maybe, you know, the Russians really do see this war is existential for them.

Putin sees it as existential for himself and he escalates.

Well, what happened this week?

We went up a rung on the escalatory ladder.

Basically, Putin drew down 300000 more troops

and he’s basically indicated his his willingness to use tactical nukes.

And he’s basically said, I’m not bluffing.

So now what is the reaction in the American press?

He must be bluffing.

I mean, that basically is the reaction.

And look, I don’t know how you know that.

You know, in poker, what you in poker, what do we do

when someone might be we put them on a range?

It’s called a hand range, right? Yes.

You can’t possibly know exactly what they’re going to do or what cards are holding.

So you put them on a range of possible hands and then you evaluate the story

in light of their past actions.

What do they do before the flop on the flop?

And you basically come to an assessment of what is likely based on their story.

Now, take Putin’s story.

Like Freiburg said, he’s never backed down in his life from anything.

He has said this war is existential.

You know, he basically threatened to invade.

And so he did.

I mean, like, I don’t know how you can immediately jump to the conclusion.

This is just a bluff.

Maybe it is, but.

Well, it could still be it could still be a bluff.

But then to your point, the range of outcomes does include shoving on the river,

moving all in.

He could move all in.

I mean, he’s a KGB agent.

Do you want to play poker with a KGB agent with nukes?

It’s right.

And so, Jason, you said throughout this guy’s a madman.

Well, exactly.

I mean, personally, I think he’s more like a ruthless mafia boss than a madman.

But but let’s say you’re right, that he is a madman.

What is the story about what we’re doing

that makes sense if he is a madman?

Why would we want to basically back him into a corner like that?

Why wouldn’t we give him the gold and offer him?

And by the way, just on this idea that no one would ever use tactical nukes.

Let me just give you three data points.

First of all, we use them.

We dropped two atomic bombs on Japan and to end World War Two.

We could have won that war without doing it, but we didn’t want to lose the troops.

Well, no, wait.

Those weren’t Japanese.

Those are just they were tactical nuke sized atomic bombs.

Number two, MacArthur wanted to use

20 to 30 atomic bombs to end the Korean War.

He had a whole plan.

Truman fired him.

He thought he basically had jumped the shark.

But MacArthur was the most respected and admired American in 1950.

And the reason why Truman could not run for your elections

because he fired MacArthur, MacArthur would have used

basically the equivalent of tactical nukes to win the Korean War.

And his plan to prevent China from reinvading from the north

was to irradiate the border so completely that Chinese troops cannot go through it.

Keep in mind, there wasn’t as many nukes at the time.

So we weren’t up against nine different nuclear enabled countries.

But I understand that we had an American commander ahead of our military

who was willing to use nukes to win a war.

So this idea that he wouldn’t I mean, we’ve been willing to do that.

And the third example is obviously the Cuban missile crisis.

All of Kennedy’s military advisers were willing to get to use nukes.

I mean, and the best thing Kennedy did was not listen to his military advisers.

They were all super hawkish.

And Kennedy, what did he do?

He looked for a way out. He looked for a compromise.

He sent Bobby Kennedy to go cut a secret deal with the Russians

where Kennedy agreed to pull the Jupiter missiles out of Turkey

if the Russians would pull their missiles out of Cuba.

And they lied to the American public about it

because he didn’t want to be perceived as backing down.

But that’s the kind of, you know, flexibility and mental acuity

that I think you would need in a nuclear showdown to avoid a catastrophe.

If things do escalate to the point of a nuclear showdown,

do we believe that we have leadership on the level of a Jack Kennedy

or Bobby Kennedy who can basically show the flexibility and adaptability

to cut a deal to basically pull us back from the brink?

Yeah, it doesn’t seem like that.

What was Biden’s response?

It was he gave this speech to the United Nations in response to Putin.

And it’s more of the same as more of this, as I call it, the Abe Simpson speech.

This old man, you know, yelling at the cloud.

I mean, he’s basically just yelling at a teleprompter.

Now, I think the strategically smart play would have been to say, listen, Putin,

you said that you want the people of Ukraine to decide where these territories go.

OK, we can hold a referendum, but we want to administer by the United Nations.

So it’ll have so it’ll have some credibility behind it.

I mean, why not throw that out there as a potential way to get diplomacy started?

It felt like at the end of last year.

You guys remember, I thought like conflict was likely this year.

I don’t think that the conditions that.

I was referencing have really gotten better, I think they’ve gotten worse.

And that’s why I think we all talk about this in a rational way,

meaning like how the conscious mind would, you know,

debate the merits and and challenges and risks of having a golden bridge or

continuing conflict.

But if you look historically, the US has often been

in the middle of or at the tail end of.

Some either recessionary cycle or inflationary cycle when conflict

escalated externally, wag the dog, you’re referring to.

I don’t I don’t know if I would call it that, but I think that there is.

An innate human anxiety when things aren’t going well, you feel like you have to do

something about it and you’re either going to have internal conflict or external

conflict as a result to try and resolve when when things are going great, the

economy is booming.

You don’t enter a war, you don’t start a conflict with a nation when when people

are happy at home, when your constituents and and the

unemployment rate is low and job wage growth is high, the economy

is growing. Are you referring to the United States or Russia in this case?

I’m referring to the US. And I know I just curious if you’re coming out of COVID

and coming out of the big question marks that loomed over our economy at the end

of last year, around inflation, economic

growth, interest rates and the effect.

And now we’re in the middle of the turmoil, markets are down 30%.

And in some cases, 70 to 80% for high growth markets.

There’s a there’s an inevitability now that unemployment is going to rise, there

is an inevitability now that the economy is going to contract.

Leadership is more likely in that scenario to find an outlet to find a place

of conflict. And I don’t think I explained why in this theory.

Explain why? I understand the concept.

Is that what you’re saying? Freeberg wag the dog?

Yeah, I don’t I don’t think it’s a conscious decision.

I don’t think that it’s like, hey, let’s go start a war with Russia because the

economy is bad. I think it’s this anxiety, the economy is bad, and there’s not a

lot we can do about it. And over here, on the other hand, there’s a problem and

there’s something we can do about it, we can build strength, and we can build

integrity. And we can build support, and we can get people to get behind something

together. And we can get something to create a driving mechanism to achieve

something big, like a distraction, you’re saying? Yeah, yeah. And I don’t think

that psychology is as simple as a distraction or a wag the dog or hey, it’s

not even as simple as the military industrial complex, we’ll see revenue

growth, and wage growth, and that’ll drive the economy. But I think all those

things together are true. And I think in whole, we’re we are more likely to want

to pursue conflict right now than we were even a year ago. You buy that

chamath? I think he’s more right than wrong. I think that when things aren’t

easy. You need to find sort of distractions, essentially, to get people

to focus on other things so that the core problem isn’t as obvious. We have

in the United States, I think, yeah, let’s go create another problem that’s

solvable. Yeah, like the best I think the best way that I can describe this as I

see it as institutional rot. And the more that we’re left to our own devices,

that amount of institutional decay becomes more and more obvious. Our

governments don’t work the way that they should. You know, our state assemblies

are basically co opted by special interests. The federal institutions we

rely on to make rules are not that great. enormous amounts of money get wasted

every day. And as more and more people become aware of these things. It’s just

the trend is just so bad, you know, civic engagement goes down, everything

just gets worse. And so when you take that, and then on top of that, you sit

it on a on a poor economy. That is a real powder keg, I think. And so folks

like to I think if you’re a politician, it’s easier to kind of go and point to

Taiwan and say, you know, we’re going to go and defend these folks if there’s a

war, point to Russia and say this point to all these other things. It’s a whether

it’s implicit, as Friedberg says, or it’s more explicit of a strategy, I don’t

know. But the underlying cause is the same, which is that if the foundation of

the house is not strong, and you’re not sure what to do to fix it, or you don’t

have the courage to fix it. The better strategic alternative is to distract and

talk about your neighbor’s house.

Coming out of coming out of the financial crisis in 2008 2009. Obama

recommitted to Afghanistan and sent 17,000 troops to Afghanistan in early

  1. When he took office, we entered the Persian Gulf with the Gulf War in

  2. Coming out of the Great Recession, or the the mild recession 1990 to 1991

2000 crash. We, you know, we obviously entered, entered Iraq.

Yeah, well, that was post nine, post 911. But it was also a risk. But it was also

in the midst of a recession and coming out of the but that was that one was

clearly reaction is that you buy this, you think this is a wag the dog or,

and by the way, you can do the same, you can do the same analysis on the time we

entered the Korean War, and the time we entered the Vietnam War, they were both

tied to recessions. And, and so I don’t I don’t know, I don’t know how explicit

this this action and behavior is. But I just think there’s some data to it.

There was a study that just came out by Tufts University on American military

interventions throughout American history. And what they found was that

we had the least in the period before the Cold War, then the second most was from the during

the Cold War. But actually, the most hyperactive period of American military

interventions was post Cold War. So since the unipolar moment, even though it’s been

the safest period for America, right, we haven’t explained unipolar for people don’t know,

just that there’s only one great power in the system. Before during the Cold War is a

bipolar world, whereas basically America versus the Soviet Union, and you obviously had the,

you know, NATO and the Western Alliance, the so called free world, and then you receive

check and balance proceed, you’d have the Warsaw Pact on on the other side, we have

unipolar moving to buy. Well, it was it was Yeah, we were unipolar for a couple of decades.

But now we’re moving towards multipolar, or at least bipolar with China.

Yeah, multipolar would be maybe including India, maybe including India, Brazil,

China in the future in the future. But But so the irony is that the safer America has become,

the more we’ve gotten militarily involved overseas. And part of that is because there’s

no great power in the system to oppose us. But it’s also gotten us in a lot of trouble. I mean,

all of these wars in the Middle East, that cost us something like $8 trillion. Another survey cost

of war study, the direct number of deaths from these wars from the war on terror was over a

million lives lost $8 trillion. And that doesn’t even include the excess mortality caused by the

destruction of infrastructure, wastewater treatment, you know, famine, all that kind of

stuff, which could be as high as 5 million, you know, the crazy part about that sex, that $8

trillion, if we had deployed that in energy independence, solar, nuclear, whatever, the

whole reason to be in the Middle East was oil and energy. And we could have just deployed that to

be energy independent in the West and not had all of this pain, but not the whole I mean, not the

whole reason. I think the reason to be in Afghanistan was to kill with the exception of 911.

And maybe we could have done that without taking over the whole country and gone on this 20 year

nation could have been done very strategically. I mean, actually, that was really proven when

well, first of all, we did kill. We did kill bin Laden in Pakistan, with just a raid by the seals

in infiltration to occupy that country. And then more recently, we finally got so we’re hearing in

Afghanistan drone using a drone after we left the country. So what the hell do we need to be there

for? We don’t 20 years when we could kill these guys. So I’m using drones and you know, a helicopter

team. Yeah, this is where we needed to have an adversary who could check our power, it would

have been healthier is I guess the premise to the tough study. Right. But But look, I think to

freebirds point is it? Do we become more militaristic when things aren’t going well at home?

I don’t know. But it feels to me, like just in general, over the last 30 years, we’ve become

hyper militaristic. It’s the use of military force is typically the first option. And we resort to

it too quickly. And we don’t use diplomacy enough. And you can see that in just the number of lives

lost the failure of these wars, and the enormous deficit we’re running. As you know, sex, I can’t

stand Trump. The two things he got right, no wars. And he was the dictator whisperer, that guy knew

how to talk to a dictator. You know, whether it was North Korea, China, Russia, he just knew how

to bond with them. It was like a superpower for him. Okay, we have three directions keeps us out

of war is great. You know, I mean, it’s literally his only saving grace. All right. Gentlemen, we

have to talk about what’s going on in Iran. We have to talk about the Wall Street editorial boards,

California, talk about talk about talk about Newsom, because there’s a bunch of energy stuff

happening in the United States, I think is important. All right. So the Wall Street Journal

editorial board, which obviously has a side wrote an op ed on California’s grid issues, some of the

quotes from the op ed, California can barely keep the lights on as its climate policies,

bite the electric grid, but Gavin Newsom is undaunted on Friday, he signed no fewer than 40

new climate bills to amp up California’s green energy stock shock experiment, even as gasoline

prices nationwide have fallen to an average of 368 a gallon. Californians are still paying 545

a gallon California’s electric rates are already more than double those in neighboring states.

This is what happens when politicians try to eliminate fossil fuels with a Molotov cocktail

of regulation taxes and renewable mandates and subsidies. The coda to this is I’ll send it to

you, Nick, but can you please play the clip as well of Rashida Tlaib trying to skewer Jamie

Diamond where he just destroys her? That’s embarrassing. That was embarrassing. I mean,

we should play it. I mean, it’s she made no sense. Nick, can you play that clip, please?

You have all committed, as you all know, to transition the emissions from lending

and investment activities to line with pathways to net zero in 2050. You know, what the International

Energy Agency has said is required to meet our goal global 2050 net zero targets of limiting

global temperature rise to 2.7 degrees Fahrenheit or 1.5 degrees Celsius. So no new fossil fuel

production starting today. So that’s like zero. So I would like to ask all of you and go down the list

because, again, you all have agreed to doing this. Please answer with a simple yes or no.

Does your bank have a policy against funding new oil and gas products, Mr. Diamond?

Absolutely not. And that would be the road to hell for America.

Yeah, that’s fine. That’s fine, sir. You know what? Everybody that got relief from student

loans has a bank account with your bank should probably take out their account and close their

account. The fact that you’re not even there to help relieve many of the folks that are in debt,

extreme debt because of student loan debt and you’re out there criticizing it.

My favorite was when she said sell us this. That was the I was like, okay.

It’s just so much theatrics.

The brochure to labor represents the 13th district congressional district in Michigan.

The median age in that district is 35.9 years old. The 2020 poverty rate is 28.2%. So more than

almost one in three people. And the 2020 median household income is $37,601. So you know, she

represents a group of people that, you know, I think, at best is lower middle class. And the

idea that she doesn’t even basically understand what would happen in her district, if you actually

did not have cheap LNG. Again, just kind of speaks to the institutional kind of decay in

Washington. She is not the person that should be advocating for this. Like, you know, it’s districts

like this more than any other that don’t have the money to spend on, you know, very expensive

solar installations that cost 30 and $40,000. These are the districts that need coal, coal fired

plants, LNG oil, to keep going, to sort of minimize the impacts of inflation. And so you

know, that was just like a grandstanding moment moving to California hearings, because these are

important discussions, and they’ve become theatrics. And this is a chance to educate the public with

some charts and data. She’s either so hungry for power that she actually doesn’t care about her

constituents. Or she’s scientifically and numerically illiterate. That’s I think the

latter is probably the issue here. And so this is this is what’s such a shame on the on the on the

other side, you know, at the end at the other end of the coast in California. The cost of power

generation, just so you guys know, has fallen by 90% when you look at renewables. And that is

because of a good job that the federal government did in introducing subsidies that essentially

gave the right sets of incentives for people to build this infrastructure. But while the cost of

generating renewable power has fallen by 90%, you know, virtually, it’s on par and it’s cheaper than

any other form of generation, your electricity costs have doubled and are probably going to

double again in a state like California. So you know, we’re catering our, our utility rates by,

you know, seven to 11%. Every year, that is unsustainable in California. And what do you have

a different version of the same flu that Rashida Tlaib has, which is you run forward to kind of

virtue signal and to try to do all of these things. You don’t spend enough time to really

understand what’s happening on the ground, and you make it impossible for people to make the

decisions to actually be resilient for themselves. At the end of the day, there are 10s of utilities

in America, but there are 100 million households. And the only path to energy independence is to

get every single 100 million household to be resilient, which means they need their own solar

panels, they need battery storage, they need their own potable water. And all of these systems are

now affordable and available. And now the federal government with the IRA has created the financial

incentives to pull it forward. So I don’t know, I just think like this is a hugely stark reminder

about how poorly our energy policy has been managed. And if you leave it to the hands of

the progressive left, they will do things that don’t map to what people on the ground actually

need people in California, most people in California cannot pay utility rates that are

going to double every six and seven years. Just like people in the congressional 13th District

of Michigan cannot afford to pay for solar, if Rashida Tlaib is able to get, you know,

all these banks and not finance LNG, coal and, and, and other forms of hydrocarbons as a bridge fuel

to look at all 40 of these bills independently. And you have to think about any bills. I mean,

who’s reading these things? What is in these things? I mean, each one has to be addressed

individually, like one of them could be to help people put solar panels on top of schools and

batteries in there, that could be a good bill. But there definitely needs to be have that mechanism

at the federal level, the IRA passed an incredible set of incentives, both for the producers of these

things. And for the for the end companies that actually deploy them. Yeah. And so we’ve solved

that problem, you know, so I just think like, it just goes to show you a ton of regulation

does not actually add and get to the solution that we want. The government will not solve

your problems. I hate to be the bearer of bad news. But they are going to make things more

complicated, and more expensive. And the resilience that you expect out of your utility infrastructure,

by the way, we saw just what happened last week, there was a massive fire and a massive battery

installation that California installed 182 gigawatt system, megawatt system. Could you

imagine if that had actually lit on fire two weeks earlier in the middle of this crazy heat wave that

we had? So even even utility scale renewables are very complicated projects to undertake.

Look at Texas, I mean, people are dying there, because the grid keeps going down.

It is much safer and more reliable. If is if every homeowner in the United States took

responsibility, and, and use these incentives to basically become your own little virtual power

plant, and you will technologies there. I mean, people are getting generators for natural gases,

backups, we’re gonna have to figure out how to take the load off the grid and build resiliency

into it. I don’t know if you guys saw in a related story that all this ESG stuff is kind of coming to

a head. But Dilbert got canceled this week, and like 200 newspapers. Did you see this?

What? Yeah, so possible.

Well, because he’s been going after ESG in his cartoon. And so I’m interested in your take on

this. But here, I don’t know the characters in Dilbert, except for Dilbert. But he says,

this person who’s in charge says our ESG score will drop if we open a new factory that adds co2

to the atmosphere. But we can balance that out by adding more diversity to our board.

And I guess the cat says, how much co2 do you plan to add? And he said, one non nine

binary board members were showing the ES and the G being put together makes no sense.

But that that panel obviously got him canceled.

What does he mean? He’s canceled like he was fired from national newspapers.

I think one of the 177 newspapers because they’re all part of chains now. And I guess

some of those because because of that cartoon, that cartoon, plus it’s like a series going after

the social governance part of you know, environmental and pointing out he stated on

his podcast that he wants to kill ESG. So this whole ESG debate, he’s trying to further it,

but I guess that Yeah, well, I mean, the the concept of ESG makes a ton of sense. I think

the problem is that it does implement this. Yeah, this version 1.0 implementation was

financialized by people that have no care about ESG at all. And so all it’s done is create

complexity and consultants and, you know, studies sense or it doesn’t make sense.

No, the words ESG make a lot of they have commas or periods between them,

I guess is the question. That’s fine, too. But my point is saying that you want, you know,

diversity, and you want sustainability, and you want better governance, all good,

all of these things are really great ideas. It’s just that in this first implementation,

it got financially perverted. And so what you have are folks that are, you know, probably not

the best position or should not really have an opinion about ESG opining about things that they

never were given the authority to opine on. And then as a result, what it’s really created is a

cottage industry of consultants that can basically make, you know, hundreds of millions of dollars

writing all of these reports. And I think that that’s why this implementation doesn’t work. So

ESG today is broken. And I think it’s largely meaningless. The concept of what people want is

is a very good idea. We just need a better way to implement. I agree with that. You can’t connect

these things. We’re going to put social and governance with environment. It’s all that’s

going to do is hold back the environment, right? sacks, sacks, we’re having all of fed beef tonight.

Oh, this is great. You need to try it. I’ll see what I can do.

No, you have to do it. You have to do it sucks. Okay. Once you have to say sacks,

commit no bullshit anymore. So you cannot imagine what does a beef look like that has been only fed

green olives, pitted green olives that I can tell you I can tell you how it looks delicious.

It’s a green. It’s the most delicious steak you’ve had in your life. It’s the most delicious.

All right, I’ll come for that. Okay, it’s incredible. Awesome. You’re gonna drive me

with your driver. Text me your address. So I know where to get you.

Oh, I love it. Oh, this is gonna be great. Game on. Listen to this lineup. Me. J. Cal.

Friedberg sacks.

It’s flying it. This thing. This is gonna jump up. This game is gonna

no more flips. The flips are ridiculous. Okay, you know what now now that sacks is coming,

I’m going to tell them to break out the early white truffles.

I’m just kidding. You’re setting the truffle pigs. Not not just walk to my office. She looked at me

when I said white truffles. She’s like for bestie dinner. It’s happening everybody.

Oh, it’s happening. It’s happening. You know, what I saw was Helmut the other day

on one of his heads up matches where he got in that huge fight with that guy. Did you guys see

that? And he called every match you just described every match. He’s like some heads up thing.

And the guy had flopped some insane I think it was like quads or something or and Helmut had

like top pair except yeah, yeah. And Helmut folded on this guy. It was incredible to watch the play

like the read from Helmut was unbelievable. He is incredible. He’s a friggin phenom that guy.

He’s pretty great. He’s got unbelievable. He’s the greatest poker player in the world. He really

he his reads are unbelievable. I think that what percentage of it is obviously he is incredible

player. But there’s another piece of this that we all see which is people play into him. They

want to be in a hand with him. They want to bust him. So in those tournaments, what do you think?

No, I think I think what’s happening is at the highest level, there’s like all these people that

have gone in this one direction. And by the way, this is probably a good, we could talk about chess

in the same way, which is that you have these solvers, right? There’s poker solvers. And now

they’re there these chess solvers. And the young generation spends all this time training on the

solvers so that they know every permutation of every move and what is what people call game

theory optimal or GTO. The problem with GTO is that you can actually be very exploitative against

somebody that’s actually playing perfectly, because the AI is perfected around what is the

rational set of decisions in every spot. And so you can set people up to make a lot of really

bad mistakes. And I think Helmuth understands that. And so because he is one of like this dying

breed of people that plays live, he’s able to just be so exploitative. And these folks that are

basically playing from rote memory, right? What is the GTO move in every spot, they end up making a

bunch of mistakes and, and feeding chips into him. And so I think like, it’s, it’s probably the

same as sort of this Magnus Carlsen, he kind of knew what to expect from people. And the minute

this get deviated into this realm where you were like, how could you make that decision?

Probably because you know, the the computer AI is able to calculate, make a slightly losing move.

Now, three moves later, you’re going to actually be ahead. It caught him off guard where he was

basically like, I think this guy’s cheating. Really, really crazy. But I think like, if you

if you have a bunch of GTO kids, folks that are a little bit older that have been playing

in a live situation can be hyper exploitative. By the way, this is a good point, generally about

about this gaming is that computation has played and computers have played such

an incredible role, it almost becomes questionable on how much can the human really differentiate

anymore. In these, in these games, and in these systems, you guys watch the chess players on

YouTube, and they’ll have solvers live, and they’ll be getting live scoring as they kind of

walk through a match or walk by the way, free burn areas. That’s the same with poker, you have

these huts, these heads up displays. And a lot of the poker sites have basically given up, they try

to spot the cheating. And you can it could because you have this basically layer that’s helping you.

And it’s effectively impossible, because, you know, these things run locally,

they’re screen scraping locally, and you just have no idea, except when they make moves that

are just so unpredictable from a human and could only come from a from a from a machine.

All games maybe become obsolete, because there is no real way to qualify the performance of

one human against another, when the AI itself or the technology or the computing itself,

you know, overshadows human potential and human capability.

You guys may not know this story. But when I met Demas, the founder of DeepMind,

I got introduced by Teal, like in 2011, or 12. So like a decade ago, and I met him in London,

I’ll never forget this at the we were having breakfast at the con at hotel. And he explained

to me DeepMind in the context of a game because at that time, how they were building the first

versions of the AI was perfecting how to play certain video games. And I can’t remember the

name of the video game, but it was one of the famous first person shooter games. And the whole

idea there was like, you know, if you can perfect an AI that basically plays GTO and can win the

game, what you’ve effectively solved for is is like a layer of AI that can then solve other

generalized problems. I was blown away. I thought this is the craziest thing I’ve ever heard a

decade ago. So it’s pretty natural that they’ve taken this stuff and adapted it to meet every

game. It’s a little sad, though, to know, don’t you think? Yeah, I mean, yeah. But I mean, maybe

there’s a different model of performance for humans that really changes what the gaming is,

right? Well, I don’t know what it is. I mean, I think that these games themselves completely,

you know, the intent of a game, which is to measure one’s kind of decision making abilities

gets obsoleted, because the software ultimately is a better decision maker than the human.

So the question then is, what is the human going to rise to that creates a new playing field?

And I think there’s probably elements of creativity and actually using the software

to become part of the game that opens up a whole new opportunity for what gaming is. I mean,

we’ve been talking a little bit about video games, but you could see artificial constructs

in gaming that arise from the human interacting with the computer and then creating a new sort

of playing field in gaming. Yeah. Saks, what do you think about all this? You’re a big chess player.

Yeah, I’ve been following it for the last couple of weeks. It’s obviously been the big story in

the chess world. What basically happened is that a couple of weeks ago, Magnus Carlsen lost that

game to Hans, what’s his last name? Niemann, I think. Niemann, yeah, exactly. And the next day,

he pulled out of the tournament. This is the Sinkfield Cup. And he’s never pulled out of a

tournament before. Everyone was sort of speculating, is he sick or have COVID or something

like that? And then he tweeted out a video from some soccer coach saying, I can’t talk about it,

I’ll get in trouble. Yeah. So, clearly he was in a passive-aggressive way of making an accusation.

And then he doubled down a few days ago. He was in another tournament and he had to play Hans,

I keep forgetting the guy’s name. Hans Niemann.

Niemann, yeah. He had to play him and he resigned on move two. So, basically,

he doubled down in his accusation. And he won’t specifically say

what leads him to believe that this guy is cheating, but he thinks he is.

He’s a young player. He’s something like 18. And he’s had a pretty meteoric rise in the chess

world. I think his rating has gone up a couple of hundred points over the last two years.

It’s the fastest rise in chess rating that anyone’s ever had before. It’s been the case that

players have, and young players especially, have risen quickly, but this is a pretty,

it’s the biggest rise that’s happened. How is he cheating?

Well, that’s the thing. So, the issue is that it’s easy to cheat in online chess,

but in over the board, you would either need to have a device or to be

signaled by somebody in the crowd. You’d need human assistance or the assistance of a device.

It’d almost be like a casino or something where they’re using the contraption on the guy’s leg to

signal information to him. So, nobody really knows how he would have done it. And of course,

he wasn’t caught doing it. So, he can never prove that he wasn’t. So, there’s just a real question

of- But they did make some changes after

Magnus Carlsen resigned. They put the feed on a 15-minute delay. I think at some point,

you’re going to have to start wanding people and having them go through a metal detector.

Yeah, they’re going to have to toughen up all of the anti-cheating standards.

One of the grandmasters was like, we should play naked in a locker room.

Yeah, there was an online site that basically offered to pay

Neiman a lot of money to play basically naked to prove that he could really do what he’s been

doing. The theory on why he’s not cheating and the rise is justified is that in theory,

this is the argument, is that he’s grown up learning from all these neural nets,

not just chess engines. The first generation of chess engines were like stockfish. They were

computational machines that were programmed by humans with thousands of rules on how to play

chess. Then they could just crunch the lines better than a human could. More recently,

thanks to DeepMind, it’s a whole different type of machine. It’s basically these neural networks

where all they’re programmed with are the rules of chess. Then it plays thousands of games or

millions of games against itself and it learns the best way to play chess. The neural nets play

in a whole different way than stockfish, than the pure engines. The engines display like a human

that’s able to calculate really well, whereas the neural nets do things like-

They’re sacrifices that a human would never make.

Yeah, they’ll make sacrifices just for peace activity. Normally, when a human makes a sacrifice,

they’ll recapture the material within a few moves, whereas DeepMind will sacrifice a pawn.

And just for the positional advantage or for the increase in peace activity, it gets-

Which doesn’t show up for many, many moves.

Right, exactly.

And so the ability to model like 12 moves out is really-

But that’s where I think people thought that Magnus picked up on something because it’s like,

those sorts of moves are rare in the absence of some layer of intervention because typically it’s

like, and Sax, you know this much better than I, but it’s like, the opening and the closings of

all of these chess matches are sort of tightly regulated. There’s not a lot of creativity. It’s

sort of in the mid-game that you have these slight positional advantages and disadvantages. And so

I think it was amplified that one of these positional sacrifices made no sense in the

context of that game unless you had the ability to, you know, think really conclusively about

six, seven moves from now. By the way, it’s the same thing in poker. So there’s a thing,

if you guys want to download it, it’s called, I think it’s called Poker Snowy.

That was like the first layer of a pretty basic AI, but it’s gotten better and better. And really

what it allows you to do is in every situational spot, whether it’s heads up all the way to a

six-handed ring game, you can really understand, you know, what to do. Now, poker is meaningfully

more complicated than chess, as it turns out, because again, you have, you’re not playing

against one player, you’re playing against some umpteen number of players. You know,

we don’t know when each of them is going to step into a pot or step out of a pot.

And then there’s all of those elements. So it’s a little bit more complicated to build a true

kind of like neural net around it. But even still, you can kind of get a sense of,

of what you should be doing in different spots. And what you see is that

there’s literally like trillions of actions. And so it really is impossible for a human being

to really memorize in every single situation, what the true, you know,

probability probabilistically weighted GTO optimized move is going to be. And and so this

is why I think a lot of people, I guess, led by Magnus was saying, How could you have known this

unless you were aided by something? It’s pretty clear that this guy cheated. It’s pretty it’s I

think it’s it was it was profound is that mastery of the game may not be achievable by a human,

but mastery of any one of these games may actually be achievable by neural nets. And I think that’s

what’s really frustrating to Magnus and to other top tier players in the world that are the best

humans at a particular game is they’re now realizing, you know, that they really aren’t

the true masters that the true masters are the neural nets. And more than just the guy cheating,

which may feel like bad sportsmanship or whatever, fundamentally, one’s ego being built entirely on

one’s mastery of the game and being the best at the game is fundamentally challenged because a

computer is better at the game than you. It’s a really profound moment. That shouldn’t be I think

that that ship sailed a long time ago. Yeah, I mean, I know the chess world very well. Yeah,

well, no, it was so it was way back when remember when Kasparov played deep blue,

which is the IBM? Yeah, that was the first which wasn’t even a sophisticated neural net. That was

just a almost realistically modeled. Yeah, it was deterministically modeled system. It was like

Stockfish. It was just a number cruncher. And that was when computer intelligence and chess

tip to be able to beat the world champion. Since then, there’s no looking back. I think every

human who plays in the chess world understands that computers are better and there’s no way

for a human to be better than a computer. So it’s certainly not a neural net. I mean,

Magnus certainly knows that. I don’t think anyone’s bothered by that. I think that everyone

understands that humans play in a certain way and their goal is to be the best human.

I think the concern is just obviously if a human it gets aided during a game by computers. But

the way that chess works now, the preparation is all about working with computers. These top

players spend huge amounts of time researching openings and looking for novelties in openings,

using computers to help them do their research. So, you know, working with computers has now

become an integral part of the game. It’s kind of like, you know, in many sports where the technology

has enabled the athlete to get better, you know, and, and it’s really technology becomes the key

vector of competition. This actually happened in the NBA, this happened in the NBA, where there’s a

special technology for three point shooting and your form, etc. And the Knicks actually,

and a couple of other teams implemented it a couple of years ago, and you saw the entire team

became better at three point shooting. So people who were, you know, 200%, 300%, you know, moved

up 10 20% each. But this kid is clearly cheating, because he’s cheated in the past. And people who

cheat in the past cheat in the future is my basic belief. So this guy, Neiman, publicly admitted

that he used electronic devices to cheat when he was just a kid on online games when he was 12 to

16 years old. So the question is, like, No, but Jason, it’s worse than that, I think, because

then came out and said, actually, the cheating was more rampant than just those two

incidents. Their algorithm determined it. Yeah, yeah. So why are people playing with him?

Well, because he said, yeah, he said that was those games were not for money. And he was just

gonna build his rating fast. And he was a poker guy. So if you’re a poker guy, and you’ve cheated

before, you never play with those players. Again, they’re cheaters. It’s obviously an issue.

Well, the issue here is that this was an over the board tournament, where the one that Magnus

pulled out of in order to protest. So the question is, how could he have been cheating?

Right? Now, I think what what adds to the complexity of it is that you have to remember

that when you’re dealing with a player, look, if it was us playing Magnus, we need to cheat on

every single move. But if you’re a 26 or 2700 player, and you know, Magnus is a 2860 or something

higher, the rating, the better in chess called the Elo. But in any event, if you’re like a 262700

player, like Neiman, you only need help with a few moves in the game. In other words, if you could

get a tip at a critical moment of the game, that might be all you need to put you over the top,

you wouldn’t need to, in other words, to beat Magnus, you wouldn’t need to cheat on every move,

you could just if you just cheat on two or three moves at the right time, that could put you over

the top. So something could vibrate on your leg, four times, and then two times over to tell you

which piece to move. That’s what they were saying, Jake, like he had like a vibrator in his like,

where was the vibrator? In his shoe. There was a meme that became like a whole thing where it was

like he had something in his butt or something. Vibrating anal beats. An anal chess computer is

what you’re saying? Okay, no, look, that’s not real. Somebody speculated on Reddit. Somebody

did a Reddit post saying that he was being communicated with through vibrating anal beads,

and then that went viral. Elon tweeted it, although I think he deleted it. Look,

it’s absurd. But the point is, there is a question of how would he have done it if he did it?

Yeah, there have been cases before though of people getting caught. Yeah, people getting caught

going to the bathroom and then you know, checking their phone. There’s a there’s a grand Bulgarian

grandmaster, he got caught in the bathroom checking his phone and Oh, God, metal detectors

on the way in and they have RF detectors in the room, right? So they look for any sort of

communication. I didn’t remember that going into this event, you just can’t have nobody watching.

No, they did it after a half hour delay. The St. Phil Cup added a 15 minute delay after

these accusations. So yeah, I think there’s gonna be there’s gonna be more precautions,

basically. But we still haven’t heard from Magnus what made him think that there was foul play here

in this particular game. And he’s been very reluctant to he won’t say anything. It’s it’s

sort of passive aggressive. Now the flip side of it is that Magnus Carlsen has been the number one

player in chess for over a decade. And he’s a very classy player. I mean, I don’t you know,

everyone’s never heard a word said about him that you know, was now he can be cocky. He can

definitely be cocky, but he’s a very classy player. So I just don’t see him doing something

like this lightly. So that’s what’s so dramatic to understand about it. Dramatic is Yeah, it’s

really hard to understand how Neiman could have cheated. But also Magnus doesn’t seem like the

kind of player to just make a wild impulsive allegation. So this is why the chess world has

been really roiled by this. Is there like a any kind of equivalent of like PD scandal here like

people taking Adderall or for vigil or any other kind of nootropics to get an edge?

There’s a good documentary. I think it was on vice on how a lot of the top chess players

actually get ready for matches. And they’re incredibly diligent about their sleep, their

workout routine, alcohol, they do take supplements. I forgot who made the documentary, but it’s

actually incredibly intense how physical these people are. Well, like one game of classical

chess can burn like over 2000 calories or something like that, like the amount of

calories that get burned just by using your brain so intensely.

Adderall is rampant in the poker community, especially in tournaments. So when you play the

higher tournaments, and I played them, and I just kind of step in and, and it’s, I felt very

underpowered relative to the to the kids I was playing with, because they were all on Adderall.

Well, there are 12 hours. Well, it’s 10 hour sessions over 12 hours. It’s exhausting. It’s

really, really physically exhausting to play. That’s why I stopped playing tournaments about

a decade ago, I just couldn’t sit there for that long. It can’t justify the time suck of it, too.

It’s like, it’s just so it’s just so physically and emotionally demanding to be able to play that

well and make no mistakes over 10 hours. And so you know, the only solution that all these kids

would turn to was, was Adderall. And I was like, this is not worth it for me. So I stopped, I

stopped playing in tournaments, and which was too bad, because I thought like, I could have a real

chance of actually doing reasonably well in some of these things. And I just gave up. By the way,

the other thing I wanted to mention is there’s, there’s been like cheating and all these other

kinds of sports and always gets exposed, like whether it’s, you know, the Tour de France,

it turned out that everybody was using PEDs, or, you know, the Russian Olympic team, everybody was

using PEDs, New England Patriots stealing signals. Yeah. All right, listen, let’s just talk about the

Iran protest for a moment. Iran has shut off internet access, internet access in parts of

Tehran, and blocked access to Instagram and WhatsApp to try to stop these protests. The

protests started after the death of a 22 year old Kurdish woman. While in police custody,

Masa Amini was detained on September 16, for allegedly wearing hijab headscarf in an improper

way. She later died in police custody. And activists are saying she suffered a fatal blow to her head.

And now you have 15 cities with very large crowds, women are burning their hijabs, and it seems to be

escalating at a pretty fast pace. Iranian authorities are denying that they had any

part in her death. Thoughts on this? It’s horrible. Yeah. I wish them well. If you look at the

demographics of Iran, it’s pretty amazing how many young people there are here. This feels like a

country that could turn over. That’d be great. And you want to know why it has a chance of working

because we’re not the ones behind it. I mean, absolutely. Yeah, we cannot. Yeah. Run the

revolution. The revolution has to be done. But to the women and young people of Iran protesting,

you have our support. And we’re rooting for you. And don’t let the bastards grind you down.

All right, everybody. For

David got her names. Did you forget her names? No, I’m just I was gonna try to come up with a

new name for Rageberg. Like Friedberg. David Plainview. Rageburger rage for Rageburger

Plainview. The David the Dove, and the host with the most Chamath Palihapitiya. I’m the world’s

greatest moderator. I’m so excited to see all three of you. Honestly, because sacks don’t

flake. I love you guys. I really want to play sacks. Don’t fall. We got it. We should roll

down together. Let’s roll baby. Big game. All right. We’ll tell you the results in the game.

Love you besties.

Oh, man. We should all just get a room and just have one big huge orgy because they’re

all just useless. It’s like this like sexual tension that they just need to release somehow.

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