All-In with Chamath, Jason, Sacks & Friedberg - E123: Trump indictment, de-dollarization, should VCs back Chinese AI? RIP Bob Lee

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I can’t see what’s on your hat. What does it say? Super gut?

One of my most exciting companies called Oh, hollow.

Oh, Mahalo. I still have Mahalo calm.

No, not Mahalo. Unrelated, completely unrelated, nothing whatsoever to do with Mahalo.

I remember Mahalo great product. Sorry, I didn’t

become up against, you know, we were making $10 million in revenue at the peak.


And 100 people writing, like human curated search result pages.

I remember that.

Look at chat. You’re doing so well.

You’re a great guy to reference the chat GPT thing coming out of that.

Well, then what happened was they did the panda update and we went from 10 million down to

500,000 in revenue overnight.

What was the panda update?

They looked at who the top sites were, ehow, Mahalo, etc. And they just said,

nobody can get any more than this amount of traffic. And they literally throttled the

number of unique users they would send to you. And that was it game over. And then everybody I

knew at Google wouldn’t return my emails. And they were like, we don’t have partnerships

with anybody. That’s what Matt Cutts told me.

Are you saying that Mahalo’s lack of success had nothing to do with a poor product

and execution? It was Google’s malfeasance.

It got really rave reviews. It was backed by Sequoia.

So did the movie, but it’s

you know, when you build a company that gets to 10 million in revenue in 18 months,

you can talk to them. But basically looking at your resume here,

I see that you’ve created nothing in your entire career.

When you get in the arena, the arena, and you actually build a product,

then you can talk to me. I had the number one blog in the world, one of the top five tech

magazines in the world. And this is the number one tech and business podcast.

So good. I touched a soft spot. I got to the warm underbelly there.

Jake House so rarely goes after Chamath when he does. It’s just gold.

It’s incredible.

You’re talking to three founders here, Chamath. You’re the odd person out.

So when you want to talk about product, then make one.

Okay. So gross. And yet I’m the richest.

It’s so tilting. It must tilt you.

Totally fine. So’s Kim Jong-un. So’s Putin. Okay. There’s a lot of rich people in the world,

but these are three product. Okay. Dictator. There’s your cold open. Let’s go.

We open source it to the fans and they’ve just gone crazy.

All right, let’s get started, everybody. It’s been a big week. There’s a lot to talk about.

Might be a little bit of a controversial spicy agenda today here on the all in podcast with me

again, the Sultan of science, who is tearing up the YouTube comments, everybody asking the Sultan

of silence to contribute more and to speak more. But when he does speak, my Lord, he drops those

knowledge bombs. How are you doing? Sultan of science. I’m hanging in there. You’re hanging

in there. Okay. Well, I’m hanging in there, man. A few words, I guess. Hanging in there. Okay,

great. With us again, of course, another Android, David Sachs. Sachs, how are you doing?

I am doing fine. How are you? Wait, let me ask GPT. What’s the question?

How are you doing? Let me ask it. Hold on. Let me see what it says.

I mean, basically chat GPT four is the ultimate Asperger’s equalizer.

You guys are going to benefit most from this. I asked it. How are you? It says,

as an AI language model, I don’t have feelings or consciousness, so I don’t experience emotions

or states of being like a human does. However, I’m here and ready to help you with any

questions or topics you’d like to discuss. How can I assist you today?

That’s pretty similar to how you feel, except you don’t offer to help anybody. Okay. Also with us

is the dictator himself. I’m here to talk about topics.

Looking forward to today’s episode. And with us, the dictator with a shockingly,

shockingly low cut. There’s only one button on the shirt.

Only one button. Okay. Made from a tiny albino baby.

Right here, they were like, should we put buttons in there? Like,

wipe the buttons. Wipe the buttons. It’s a button conservation movement.

Exactly. No, no, no, no. The one button is what counts. That is a baby

albino rhinoceros that was killed, fed to Chamath on his vacation, and then

attached to his linen shirt. I guess let’s just get this out of the way. Trump was

arraigned, I guess is the term. He was charged in New York with 34 felony counts of falsifying

business records. Alvin Bragg alleged Trump orchestrated a catch and kill scheme as well

to suppress damaging information before the 2016 election. Of course, Trump pleaded not guilty and

did a feisty press conference or speech rally at Mar-a-Lago after that. Prosecutors say the scheme

involved falsifying business records to conceal payments to Stormy Daniels. We know all that.

Same thing Michael Cohen went to jail for. The indictment wasn’t a speaking indictment,

where it explained all the details. So Alvin Bragg hasn’t tipped his cards by explaining in detail

what the legal theories are and which information he has. And he was pretty clear about that,

that he was not going to tip his cards, which makes this even more

hard to understand what’s going on and creates even more divisiveness.

Predictably, the right is framing this as a witch hunt. But surprisingly, many on the left,

including former SDNY head Preet Bharara of the amazing podcast, Stay Tuned with Preet,

which I love. He felt this was the weakest of the four major investigations that Trump

is under. And he expressed some concerns on his podcast that it was light and not detailed.

And he might have not actually pursued this unless he had a 99% or something like that

chance, because it is the president’s sacks, I guess, everybody’s expecting us to fight over

this, but to just be a little preemptive here, as much as I think Trump is like the most unethical

person to ever hold the office, this does seem a little light. And I’m hoping Bragg has the goods

on him, because why bring a misdemeanor case? You know, and these are all, I guess, misdemeanors

that are being elevated to felonies because of tax evasion, possibly or election interference. So

what are you, a steel man, or just generally speak about the case here? Because I know that

you’re a man of law and order. Well, many people on the left are criticizing this case. Jonathan

Chait, who’s a liberal writer for the New York Magazine, wrote a good column about it. And look,

here are the reasons why. Number one, the underlying behavior here is that Trump engaged

in a private settlement with Stormy Daniels. That’s not illegal. Even if it is, you know,

so-called hush money, that is legal. You’re allowed to do that.

Number two is that he used personal funds to do it. He did not use campaign funds.

And this is why Alvin Bragg has had to make this kind of distorted, ridiculous claim that he should

have used campaign funds to do it. But does anyone believe that if Trump had used campaign funds,

that wouldn’t be alleged as the crime? So he’s kind of damned if he does, damned if he doesn’t

here. I think that, you know, what the law is trying to do with these rules around campaign

funds is protect donors from candidates misappropriating them. And Trump had every

right to use personal funds to engage in the settlement. It’s a major distortion of campaign

finance rules. Third, these campaign finance rules are federal laws. They’re not state laws. So it’s

not up to Alvin Bragg to enforce them. And in fact, the feds looked at this and decided not

to prosecute it because if they did, they’d have to enforce similar laws against Hillary Clinton.

Recall that Hillary Clinton had a problem where she used campaign funds to fund the payment to

Christopher Steele to write the Steele dossier. And that was a real problem. And it was miscategorized

as legal fees. And she had to pay a fine for that. But no one talked about locking her up over it.

And no one was talking about, you know, indicting her and sending her to jail.

And so part of the reason why I think the feds didn’t want to look at this is because they’d

have to look at similar cases that are even more egregious. And then finally, the last thing is

that we’re well past the statute of limitations on this whole matter. So Alvin Bragg is really out

here on a limb. He’s past the statute of limitations. He’s enforcing laws that are not his business to

enforce. They’re distorted interpretations of those laws. And the underlying conduct here is

fully legal. So I think everybody is kind of like wondering why he’s doing this. And I think

there’s two theories. Either Alvin Bragg is incredibly stupid.

Aaron Powell, which he’s not.

Or he’s incredibly smart. And the sort of three-dimensional chess explanation that

Ann Coulter has is that this is all a giant honeypot for Republicans because they’re all

rallying around Trump here because they perceive, I think correctly, that he’s being railroaded and

he is the victim of a political prosecution. But in rallying around him to defend him,

you see that Trump’s poll ratings among Republicans in the primary are going through the

roof. DeSantis’ are going down. And so what Ann Coulter fears is that this is all an elaborate

ruse to make Trump the nominee because Biden would much rather face a re-election against Trump than

against a young, youthful, vigorous governor like a DeSantis.

Do you think Bragg has a bunch of more information and maybe that tax evasion is the issue he’ll go

after? Because that seems to be the other theory here is he’s not going to do the federal election

stuff. He’s going to go after the tax evasion, which is what they already got the Trump organization

on when Wiesel, I guess the CFO, is going to jail for six months.

It’s going to be hard to connect the dots on these things.

And they did 1.6 million. Fine for that company. Go ahead, Shma.

These are misdemeanor crimes. And to convert them to a felony, the crime needs to have been done

in the process of aiding and abetting another crime.

And tax evasion is the concept here.

When he listed the bullet point list of all of the reasons that are all of his evidence,

it seemed to point to what David said, which was just these campaign finance violations.

This whole thing just seems like such an enormous waste of time. Just think about

the amount of money that will have to be spent on just securing New York City every time he shows up

the five car motorcades, the Secret Service, the police, the this, the that, the disruption to

people for what really, ultimately, I think is right is kind of like, you know, it’s a bit of

like, man, this case should have been brought years ago. Well, not at all.

In relation to that, they were told to stand down from doing that because of the

you can’t indict a sitting president. And that’s paused. So that’s another

legal theory that’s going to have to be tested.

Jason, the feds looked at this years ago, and they decided not to press charges.

They were told to not do it because he was a sitting president. No, they were.

No, he’s been out of office now for a couple of years. Why didn’t they move forward?

They were. That was the process they were doing. So that’s been established.

The previous DA said he was told to stand down because the pressure was in office.

Cyrus Vance decided not to prosecute on the same underlying offenses.

That was his decision. He decided not to. Who told him to stand down? No one could

tell him to stand down. Yeah, the office of…

Cyrus Vance decided not to move forward with this very same case

when the statute of limitations had not expired. Now it has, and Alvin Bragg’s moved forward.

Yeah, that’s…

I mean, you really have to stretch here to come up with any kind of plausibility to this

case. And I mean, you have to wonder why he’s doing it. Is it just naked partisanship?

Or are they trying to make Trump the Republican nominee?

Well, here’s what Vance said on Meet the Press this weekend. I was asked

by the US Attorney’s Office in the Southern District to stand down on the investigation.

And they were asked to stand down as well because of the… you can’t indict a sitting president.

So anyway, all this stuff’s going to get done in the wash. I don’t think we have to spend too much

time on it because we’ll find out, I think, in the coming weeks.

Do the Democrats actually want him to get convicted? Then what? He’s going to be under

house arrest in Mar-a-Lago because he’s not going to be sent to jail. And then what? Then

DeSantis actually will win the nomination. So what exactly is the perfect outcome, which is to

create this theater, waste taxpayer resources only to have Trump acquitted just so that he

can win the nomination and then he can go against Biden and lose? This seems so far-fetched and

idiotic. Move on. Close this chapter and move on. Totally. This is ripping the country apart

for no reason and such a stupid case. Such a stupid case. Even the people who would like

to prosecute Trump, like you, Jason, I think have a problem with it. And one of the reasons why

this is going to be counterproductive even to the anti-Trump forces is that by going first with

this case, Alvin Bragg is poisoning the well for any future case he might bring against Trump.

Because now all future cases against Trump are going to be seen as painted with the same brush,

which is a nakedly partisan sort of witch hunt. And there may be other cases out there that have

more validity to them, but they’re all going to be seen as of a piece with this sort of Alvin

Bragg prosecution. Yeah, that was pre-exposition. I think it’s a logical one. I don’t disagree.

What do you think of the other three cases, January 6th, the interference in Georgia,

where they recorded him on tape, and then the stolen documents and the obstruction of justice?

Or do you think all four cases are politically motivated and none of them have any validity to

them, Sax? I mean, look, the question you have to ask is if Donald Trump was a private citizen

who never ran for president, would he be the target of any of these prosecutions? I mean,

he was, you know, a high profile business figure for decades and he wasn’t prosecuted like this.

And so that’s really the question you have to ask. And, you know, do we want to live-

Well, in this case, you actually had Cohen go to jail. Cohen did go to jail for the same crime,

so the answer is yes.

What? Michael Cohen wasn’t prosecuted until after Trump was president, but-

No, what I’m saying is, you asked if he was not president, if he would-

Do you really believe-

Let me finish. You asked if Trump was not a president, if he would have been prosecuted

for this crime. In fact, another person, Michael Cohen, was prosecuted for this crime and did

serve jail time. So the answer is yes, he would have been. And they brought these cases, this

banking kind of cases, and they brought the other one for the 1.6 million fine and Wieselberg going

to jail. So I think they would, actually. But anyway, my question to you is, of the other three,

are any- Do you think all four are politically motivated is my question to you? Or do you think

any of them have a literacy?

I don’t want to comment on the other cases until I see what cases actually made and what the

merits of them are. However, I don’t believe that all these prosecutors all over the country

would be looking at Donald Trump this way if he was just a private citizen who never ran for

office. And I think we have a big problem in our political system when political disagreements are

criminalized. And this has been a nasty trend that’s been going on for many years. It was

usually, I guess, practice against staffers. Here or there, you’d have some executive branch

staffer would find themselves on the wrong end of a prosecution, and they’d end up going to jail.

Maybe they get pardoned or not. But now it’s reached all the way to the top. And you have

presidential candidates basically being prosecuted. And I do not believe they’d be prosecuted if they

were not major political figures. And it looks really bad for the political figure who is leading

right now in the Republican Party to be Joe Biden’s opponent in the next election to be

prosecuted by one of Joe Biden’s political allies. I mean, if this were happening in some other

country, the United States would be criticizing it as some sort of Banana Republic type move.

So this is not the direction we want our politics to go. And look, I don’t want Trump to be the

nominee. I support a different candidate. But I think that to be interfering in our elections,

for Alvin Bragg to be interfering in the political process this way is a reach, and it’s setting a

horrible precedent for the future. I mean, we’re talking about major presidential candidates

being prosecuted by local DAs. I mean, why would we want this?

So let me ask a follow up question then. The DOJ is currently investigating Hunter Biden,

and then obviously that goes up to the big guy with the 10%. Do you think the DOJ should be

investigating Hunter Biden? Or do you think we should be giving a pass to presidents and their

families? Well, the Hunter Biden case, I mean, this is one where you’ve got foreign governments

basically paying off Hunter Biden for political access. Now, that may ultimately be legal because

I think influence peddling is kind of a business that takes place all over Washington. But that

actually does speak to the integrity of our political system. At the end of the day, would

I send Hunter Biden to jail? No, I don’t think so. Like I said, I don’t like criminalizing political

disagreements, but what Hunter Biden did was definitely pretty shady. And, you know, and

I think these are two of the… Hunter Biden and Trump and his family are both shady is my feeling

on it. We got to get better candidates in here. Nikki Haley, your candidate, Chamath, raised $11

million last week. She’s on fire. Freeberg, you want to jump into this and touch the third rail?

You want us to move on? Let’s move on.

All right. So there’s been a lot of Twitter back and forth about the de-dollarization.

And if it’s real, if it’s happening, if it’s not… Last week, China and Brazil struck a deal

to trade in their own currencies. The Brazilian government announced the two countries will no

longer use the US dollar as an intermediary. I don’t know if that’s for everything they trade

or for certain things they’re trading. It’ll be a straight one for Reaiz trade. China is the

top US rival, obviously, and Brazil is one of the largest economies in Latin America.

What are your thoughts? Generally speaking, Freeberg, I know that you have some

exposure here, you know, with your company that I think you spacked recently,

and you have some knowledge of the space, right?

Well, I mean, China and Brazil are pretty sizable trade partners.

I think it’s around $150 billion a year of bilateral trade. So China historically has

made a lot of investments through their companies in railways, infrastructure, waterways, ports,

and infrastructure to support the agriculture manufacturing economies in Brazil. And it’s a

very deep tie. Obviously, the closeness of that relationship, China became a bigger trading

partner for Brazil in 2009, surpassing the US. By the way, China has had similar trading strategies

in Africa, in Australia, they’ve bought several companies in Australia, they’ve made massive

infrastructure investments. The currency of trade is one element of a broader intertwining

that China has kind of enabled by using its resources to invest in infrastructure development

and then participating in the economic value and gain that arises from that. It still also

supports the local country, the local population, the local economies in a meaningful way.

I think it’s worth noting that the anti globalization moment that we’re having in the US,

and it may be a longer term trend, doesn’t mean that globalization and global trade is going to

slow down between China and other really important well resourced nations around the world. So the

Brazil China summit that happened a week ago, where a lot of Brazilian executives went to China

and had a very deep set of dialogues, but they also signed a ton of agreements on trade.

And also in some of those cases, the trade being done in non US dollar denominated currency

is worth noting as being that if the US does continue to push for de globalization,

we can only leverage our side of those relationships, China will continue to make

investments continue to develop trade and continue to develop really deep tie ins

with countries around the world. From a resource perspective, from an economic perspective,

and ultimately, the leverage will sit with them on what currency folks are going to trade in.

So you know what we’re seeing with the China Saudi discussion around the Petro Yuan,

which doesn’t seem to be really a standard thing yet. But we’re starting to see inklings of some

deals happening in Yuan, but it’s more related to the depth of the Chinese trade relationship

with all these nations around the world. So the more we kind of as the US think we want to

de globalize and reduce our trade relationships with other nations,

the more you know, we’re out of the way and allowing China to do that. I think it’s worth

observing that the Chinese economy will grow the depth of their relationships will grow potentially,

the strength and importance of their currency will continue to mount as they build these really deep

infrastructure and investment tie ins around the world.

Chamath, what does a party trading in one do with the one? Do they buy a bunch of stuff from

China? What happens to the one? Yeah,

this whole thing is a huge nothing burger. This is the third deal that China has done. The other

two countries are Pakistan and Brazil. And the reason why is I’ve seen like people on Twitter

now breathlessly rambling on about de dollarization and all of this stuff. And

I think if any of these people would think from first principles, the first thing that you would

know is that the yuan is pegged to the US dollar. And so as long as it’s pegged, whether you trade

through the US dollar, or you don’t, and you directly go to yuan, your index to the US dollar,

and then you use a dollar swap to convert it into the currency you need. So I don’t know,

I think this is kind of like a lot of folks who don’t really know what’s going on.

What do you think about the depth of China’s trade relationship? So forget about the

denomination of the currency. But the fact that the statistic now is that you can’t

try to get a top trading partner with 120 countries. You know, they surpassed the US

with many of these countries over the last, you know, decade or two in particular,

and continue to increase the scale relative to the US where we’re kind of decreasing our

dependence on on nations and reducing our trading. The reason why China has had

so much dominance as a trading partner, and the reason why China’s central bank has the largest

amount of foreign US dollar reserves, about three and a half trillion dollars, is exactly because

of the thing that you want to ignore in order to have this highfalutin intellectual conversation.

It is pegged to the US dollar. And until it is unpegged in a free floating currency,

we will never know what the real market clearing price is. And just China has been able to hold

on China has been very effectively able to manipulate this currency. Since they were

brought into the WTO. In order to engender that trading partner status, they were able to

artificially suppress the value of their currency, so that exports from China could gain

traction in countries all around the world, you have to take into account this currency peg.

And you have to ask the question, where would the currency be if it wasn’t free floating? And

then what would the incentives be for folks to replace the dollar? And I think that there’s a

lot of interesting questions are that are worth asking. But I think you have to be a little bit

more intellectually honest to have the discussion. And just for clarity, Chamath, you said they

already have these deals with Pakistan and Pakistan, Russia, you met Pakistan and Russia,

I think they already have those deals with those two Pakistan and Russia.

Right. Okay, good. I just want to make sure it’s clear there.

Sachs, do you have any thoughts on this? Is this an example of people just maybe

taking the Ray Dalio book and it fits a certain narrative and overhyping it? Or do you think

this is an actual real trend in the world to be concerned about?

I think D dollarization hasn’t happened yet. But I think it’s a risk. And I think there’s a bunch

of reasons why the risk is growing. So first of all, we have $32 trillion in debt,

someone has to finance that debt. And the bigger that number gets, the more unattractive our debt

is, because they have to be concerned that we’re eventually going to monetize the debt,

pay it back by printing a bunch of new dollars. So that’s point number one is we have these massive

deficits and debts. Number two is that we have, I think, in the last couple of years,

really weaponized the dollar. So if you look at like what we’ve done with Ukraine and Russia,

we basically seized hundreds of billions of dollars of Russian reserves that were held in

dollars. We’ve excluded them from the swift banking system. We’ve imposed massive sanctions

on them. And in fact, we now have sanctions on a huge number of countries all over the world. So

we’re very sanctioned happy, all of which makes these countries view the dollar as an unreliable

store of value, why would you store your money in something that can be taken away by the US,

and specifically by the State Department. So I think this is a major change in the way that

we view the dollar the last couple of years is we’re going to use it as a weapon that again,

that makes it view that’s not the first time we’ve ever done that, right? We’ve done sanctions

against many different. We’ve done sanctions. But as far as I know, we’ve never seized foreign

currency reserves and excluded a country from SWIFT, which is the banking system. So as an

instrument of US foreign policy. So I mean, I could be wrong about that. But this was a major

event when it happened. Remember, we also did stuff like seize the the yachts and the foreign

holdings of Russian oligarchs. Remember their ill gotten gains, we suddenly decided they were

all gotten. Let me tell you, we didn’t think they were ill gotten when those Russian billionaires

were buying those yachts or buying New York real estate or London real estate or investing in

Facebook or investing in companies here or buying sports teams or what have you. So hold on, we

didn’t think they were ill gotten at the time that they were actually made and spent. But we

decided subsequently, we’re just going to seize those things. Well, again, if you are a foreign

country, or a wealthy person in a foreign country, or just trying to decide where you’re going to

keep your money, you may not want it to be liable to the vagaries of US foreign policy.

So I think all these things do matter. And when you’re running the kind of debt and deficits we

have, and you’re making the US dollar less attractive, you are running a risk. I mean,

as we should be keeping people we have disagreements with on the dollar standard,

because that’s good in terms of power for us, which I think opens us up to a broader discussion.

Okay, just to clarify this, it’s not even the dollar standard, right? Like what this deal was,

is to use this thing called sips and sips is the non dollar competitor to swift. And so you settle

right across, let’s just say you have two trading partners in two completely different countries

that use a bank in each of their local areas. They typically swap the dollars and then they transfer

right using this this backbone of the financial infrastructure called swift.

China has built a competitor to it called sips CPS. And China has been going around and signing

folks up makes a ton of sense, right? Hey, listen, if we’re trading between each other,

let’s just use that. So I think it’s important to not paint this with more of a brush than it

should be. I’m not saying that D dollar ization couldn’t happen. I just think that everybody

tries to take one random data point and conflate it all together to reinforce or a Dahlia point

from book three years ago, I do think there’s a group of catastrophists who maybe are maybe

hoping this happens or it’s a great Twitter fodder. I think we are headed for some sort

of government debt crisis. I said that there’s gonna be three prongs to this financial crisis.

One was these long dated bonds having unrealized losses, which is causing problems in regional

community banks. The second piece of it’s the commercial real estate crisis, which I think is

metastasizing right now, which is also going to be a banking crisis once all those unrealized

losses come to you. And the third piece of it is government debt crisis, we have

this $32 trillion debt that we’re now having to refinance at much higher interest rates.

I’ve read somewhere that half our government debt, so 16 billion is going to come due 16,

sorry, trillion. Yeah. And it’s gonna have to be refinanced in the next three years,

the average rate on that debt is 1.7%. Well, if you want to refinance it at 10 year rates,

you’re going to be looking at somewhere between three and a half or 4%, maybe more.

So you’re looking at a doubling of the interest costs. And I also read that by 2030, we’re going

to have over a trillion dollars of interest expense owed by the US government every year.

That is money that’s not funding anyone’s social security, it’s not funding anyone’s healthcare,

it’s not funding one weapons program, it’s not funding anything we want. It’s this the VIG,

it’s gonna be more than a quarter of our total federal budget.

Yeah. And this is where you start gambling. When you’re chasing that VIG payment,

you start taking risks.

This is also where you have to expect the Fed will really want inflation to stay high. That’s

sort of what we’ve said before, the only way out of this mathematically is to keep rates high.

But the other thing, David, that you when you mentioned all of this is,

what about every other country? If you think that’s happening in the United States,

I think it’s important to make sure we at least consider every other major economy,

because it’s not as if they’re pristinely sitting on the sidelines. While this happens to the US,

this is my whole argument the whole time, which is if you’re going to have this argument,

you need to do it thoughtfully and relatively, right, because the euro is in the same amount

of trouble. If you look across, it’s not as if China is actually sitting pretty and smelling

like roses, either. Every major economy or trading block in the world is going to go through this at

the same time. So it becomes a relative trade argument. And there, I just don’t know enough to

know whether the US is poorly positioned versus Europe or China. But it just seems like you get

back to a place where it’s like, okay, we need to find the flight to safety. What is the canonical

flight to safety? If it’s not a commodity like gold, it’s probably the dollar until it’s not.

Yeah, okay, free bird. Obviously, other countries have even more acute problems,

higher debt to GB GDP, which means higher debt payments. Just rounding third here on this issue.

Any final thoughts on the dollarization and servicing our debt?

Look, it’s we’re in trouble. And it’s, it’s unclear the timing and the path. But

the arithmetic is pretty simple. In addition to the point sacks made, you guys saw the news,

the city of Chicago has a $44 billion pension hole. That’s just the tip of the iceberg on

unfunded pension liabilities from both state government, city government, even private

institutions. This is, again, hundreds of millions of people worldwide that are expecting money

coming to them from institutions that ultimately the federal government of the US is likely going

to have to backstop to some degree. So that’s another huge check that’s going to need to be

written that the federal government is inevitably going to have to write because we’re not going to

just let all these people have no money and become starving. And Social Security right now is

projected to go bankrupt sometime between 2030 and 2035. So we’re gonna have to write a check

to cover the hole there. Plus, the interest payment checks.

So much points freeberg of like,

relative to other societies, other countries.

Yeah, so the very likely case is that relative wealth will decline.

So in the near term, I think it’s inevitable we have higher tax rates. I’ve said this before,

because in order to kind of meet the gap, even if we have these austerity measures,

or reduce costs or reduce the budget as the republicans are going to push for is this debt

ceiling debate reaches its apex in 60 days from now, which you better believe this is going to be

pretty, pretty damn dramatic. And there’s going to be real questions of what happens if the US

defaults on its treasuries. If the US defaults on obligations it has on treasuries, there will be

a real shift away from using those assets as the baseline of the risk free rate worldwide,

what the net what the other thing will be, I don’t know. I’ll speak about the challenges I

see with Bitcoin. You know, if we want to at some point, Oh, did you hit a million yet?

But if you put all of this together, you’re gonna have to source income somewhere, you’re gonna have

to take a piece of the assets and a piece of the income away from the private citizenry. So you’re

gonna have to tax and that tax will be used to kind of fill some of the hole. And then more of

the hole will be filled by printing money. And that will lead to this kind of inflation of asset

values, which ultimately means that the relative cost of things go up and relative wealth goes

down. And I think that’s the point to take note is that anyone who’s concentrated assets is going

to have them effectively lost in the washout. Zach, you want to add?

Well, yeah, I just want to add a couple of details there, because

Freeberg went pretty quickly over a couple of those examples. So just to take that,

that Chicago case, the numbers I saw in an article this week, I think it was in the Wall

Street Journal was that 80% of the property taxes in Chicago are now going just to pay for pensions.

So 80% are going to pay former workers, not current city workers. And moreover,

those pensions are only 25% funded. So they’ve already over promised by 75%

benefits that they can’t afford. How is this going to work? And you saw that we just had an election

there. And rather than fix the problem, they voted for a candidate, Brandon Johnson, who is even

softer on crime than Lori Lightfoot. And the reason for that is because the government workers unions

basically all supported him. So you have a situation in these blue cities and states where

there is a massive civil service. They are the strongest special interest in local and state

politics. They have already taken huge appropriations out of the state budget in the

form of these pensions, which aren’t even adequately funded, we can barely afford them as

they are. Should we have pension sacks? What do you think? Should we just have people doing 401Ks?

Sure. So what happened in the 1980s, when there was a lot of pension reform,

in the private sectors, you move from defined benefit to define contribution.

So you start having more defined contribution like 401K. The way that these public pensions

work is defined benefit. So what they’ll do is they’ll say that we’re going to take your last

year of employment with the city or state. And whatever the amount of money was you made that

last year, you’re going to get 80% or 90% of it for the rest of your not just your life, but your

spouse’s life too. And moreover, any overtime you earned becomes part of that calculation.

So everyone knows this game. And so what you see is in their final year,

state or city employees will load up on the overtime, they’ll earn twice as much,

and then they’ll get 90% of that. They get 90% of that for the rest of them and their spouse’s life.

We just can’t afford to have rules like that that don’t make any sense. And so, but the point is

that the benefit that’s been defined bears no relationship to the amount of money that’s gone

into these pensions, right? And so you have a huge solution here, you have a huge unfunded

liability. Yeah. But to free burst point, every blue city and state in the country

is going to have this problem. And who’s going to pick up these expenses,

you bring up great points, but you just mash them all together in this

mashed potato of random things like unfunded pension liabilities, you want remember,

realize trading, and they’re like the same thing. They’re not the same thing.

They’re driven by totally different, but we’re talking about

throw them in this like, all this debt, amalgam soup, and outcomes. So I’m just saying like,

if these are important topics, but I’m just saying, I do think they’re motivated by totally

different things. And they’re not related as much as we think they are related.

I think they’re related. Let me walk you through how they’re related. Okay,

I want to hear how the Ray eyes you want trade is connected to the Chicago pension system,

the holes need to be filled. So the money is not going to just not get paid to the pensioners,

social security is not going to go away. Just like we saw in France. If you start to do that,

you have revolutions in the street. There’s literally bonfires at intersections in France

in Paris today, because people don’t want to wait another two years before they get their pension

payments. So ultimately, that check has to be written. When you add up the column of how much

money is not on the balance sheet today, how much liability is not on the balance sheet today,

that is ultimately going to have to get paid out. And the US government is going to print money to

pay it out. It indicates that there is a higher degree of uncertainty on whether or not I’m

actually going to get the value back for the bonds that I’m buying in US dollar denominated form,

or that the US dollar is actually going to be strong enough to cover the cost or has enough

kind of, you know, or has too much volatility, because of this uncertainty. And I think that

that’s really where people start to say, well, maybe the US dollar isn’t that risk free rate,

where it’s a strong economy with a great balance sheet, great economic growth, there’s certainly

extraordinary potential because of the freedoms that we have to operate in this country as

individuals, through the enterprise, through the innovation, through the entrepreneurship,

through the attraction of talent from all over the world to come here. But at the end of the day,

we do seem to have a very big set of checks that we’re gonna have to write. And as those, you know,

liabilities start to mount, there becomes a real question on Do I really want to hold dollars?

Maybe I want to hold something else. And maybe I diversify a little bit. And maybe instead of

holding just dollars, I also hold other things. And as that starts to happen, you see a little

bit of a shift. It’s not an overnight thing. It’s all catastrophic one or the other. But it starts

to bring into question whether the US dollar is the standard de facto system that’s used for trade

around the world. That’s the point. And sacks, there is a solution to this superannuation is

done in the UK and in Australia, where you contribute, you’re forced to contribute to

your 401k, essentially, but you get to learn how to put money away, and you become a little more.

You have a little more authority over your future with these pensions where you’re responsible for

saving and you’re kind of forced to save. And it seems to have worked really well in Australia

and other places where people have great savings. And you don’t have this major debt load by the

government doing it. So it’s something for people to look into. Sacks, did you want to add anything

to this? Because I think we’ve beaten this one to death. Just make it quick.

Well, I don’t think we’ve necessarily beaten it to death, because I think it is a huge issue. I

mean, look, the part of Chamath’s argument that I agree with is that you do have to evaluate

the dollar on relative terms. And you can argue that the US and the dollar, it’s still the,

you know, let’s call it the most eligible bachelor in the leper colony.

You know, nothing started falling off on the man yet. But that doesn’t mean that it won’t.

That’s really good. That’s really good. By the way, the first default

might be the noses fall. You know,

the economist Herb Stein once said that if something cannot go on forever, it won’t.

What we’re doing right now cannot go on forever. We are running deficits and debts and unfunded

liabilities that we cannot afford. And so it will stop. And the only question is how it stops.

Well, I think there’s Yeah,

and it may stop in a way that is not vault. It’s not a voluntary choice by us.

We crash the car, basically, guys want to make a bet a friendly wager for charity.

Oh, no, what happens in June? I’ll make a bet with you guys.

June, you mean the debt ceiling?

Yeah. What do you guys think happens? You think this is going to be a

fractious chaotic thing where the markets get roiled?

No, I think is going to be a pretty

rubber stamp forward deal where they’re gonna it’s going to come down to the wire. But my

guess is no one’s going to want to default on the debt. Yep. And there’s going to be some

concessions on spending. And ultimately, the debt ceiling will get extended. And that those

concessions on spending will allow the Republican Party to save face with their voters and say,

look, we, we got some concessions here, I’m not sure they’re going to be enough to really

address any of the major problems that the US is facing over the longer term.

But you know, certainly letting the

debt ceiling hit and defaulting is catastrophic. Everyone knows that.

I’m with Freeberg. I think the majority case is a bunch of hand wringing, and then

they make a concession.

All the people that are interested in this topic, I would go use the Wayback Machine

and go and read all of the articles in the 80s, where you could replace China with Japan.

And what happened with Japan is that Japan just hit a demographic wall, not dissimilar to what

not dissimilar to what China is about to hit in the next 15 or 20 years.

Right? It’s a good counter argument. Yeah, that’s a really good point. And I think that

there is this element of, you know, China as the primary threat. But I think the bigger problem,

Chamath is that we have voted ourselves into a stupor, we have allowed ourselves to accrue

these liabilities that are, in many cases, not on the balance sheet, that we simply cannot afford

to pay. And the social unrest that will arise with if and when we don’t pay them, or the economic

cost of us actually paying them, either of those are going to be pretty significant. But that’s

under that’s water under the bridge. And it has nothing to do with China. It has just everything

to do with how the US is spending. Thank you for being intellectually honest. This is my point.

I agree with you about the importance of these unfunded liabilities. I just completely disagree

with you that this argument about these things being so hyper connected, or that all of a sudden,

we’re at the cliff of D dollar ization. I don’t think it’s rooted in facts. And I think again,

it ignores this unbelievably important piece of logic that all of you guys that say this

tend to ignore. And it’s still in it’s not even well addressed in Dalio’s book,

which is it is a pegged currency. And the minute you unpack it, none of you know what happens to

it, except that it probably isn’t where it’s trading today. And if you actually then have

to factor in dollar reserves that everybody holds, that thing would skyrocket in value,

and it would crush the export value of the yuan. And it happens to all currencies. And this is

this funny thing that has happened to the United States, which is that it ran forward, and it

transitioned its economy to a service led economy faster than other countries and other economies

and other currencies did. And nobody wants to just talk about that. Except if we’re talking about

that sort of drives us. Good sex. I don’t think the big risk is that all of a sudden, the dollar

gets replaced by the yuan as the world’s reserve currency. I think Freeberg lays out a more

intermediate path, which is people start to hedge their dollar exposure. And decisions that used to

be automatic, like trading oil and dollars, you know, the so called petrodollar now becomes a

little bit, you know, more of a decision. So you know, the sound happened, that’s what happened

with the pound sterling. It was a similar story. And it was not an overnight collapse. I mean,

there were certainly these kind of punctuated moments where there were hits, but, you know,

the history is that there was a slow devaluation over time. And the, you know, as a result of

obviously, the economic pressure and uncertainty. No, what happened to pound sterling was that it

was pegged to the US dollar, and then it became unpegged. So exactly what I’m talking about. No,

even post that, even post that if it’s a free floating currency, yeah, you’re proving my point

when Soros broke the back of the US dollar, what he forced George Brown, or what he forced the

Chancellor of the Exchequer to do was to basically depeg the pound. And then yes, you’re right,

it’s been like this ever since. Yeah, it was what I’m saying was not if you let it be free

floating, nobody wants to trade in that other currency. Everybody wants the dollar.

David’s right, it is the the worst affected leper in the leper colony.

Yes. So in the colony, this is why you have to have if you’re going to be intellectually honest,

just have a relative conversation about all of the currencies, and all the things that

they’re also going through, which are also not not perfect, the debt payments for the emerging

and the frontier markets are extraordinary, just realize that if you want to go and peg your

economy to somebody else’s back, they also come with their own trials and tribulations that you

have to risk manage as well. And now you have to decide on balance, do you want to risk manage

a centrally governed economy, right from a central bureau, or a freewheeling democratic,

like these are all the discussions that people should have. Yeah, there’s a lot of choices there

just back to the the non currency part of this for a second. There are a lot of like connections

between these things. I actually think there is a strong connection between what’s happening,

for example, in Chicago with the out of control civil service and unfunded pensions all the way

to the dollar status. But there’s also a connection between commercial real estate

and these pensions. So on a previous show, we talked about the commercial real estate

looming crisis. And a lot of people thought that, you know, some of the comments were just talking

our book, which is not true, I don’t own, I don’t have a dollar invested in these office towers.

But you know, who does pension funds? Yes, who owns these office towers. So you’re talking about

pension funds that are three quarters unfunded. And they may have a lot less funds than they even

think they do, because we’re about to have a huge reckoning, where all of a sudden, these

office towers that were supposed to be blue chip, that we’re supposed to have the best collateral

there was in major American cities. Now, all of a sudden, they may not be nearly as valuable as

they thought they were. Yeah, and and if they don’t own the building, they definitely own the

debt 100% for sure. In the fixed income portfolios of all these pension systems are the debt that

was used to finance these buildings by the REITs and by you know, the big real estate funds that

put those things together. So you’re absolutely right. They are 100% impacted by what’s about

to happen. We’re not, we’re not going to allow given the civil unrest and social unrest risk.

And obviously, as a democracy, we’re not going to allow that all to go to zero. And we’re not

going to let pensioners not get paid. Ultimately, that’s just a kiss of death. Maybe pension

payments are reduced to some degree. But again, Paris is a really great example of as you start

to try and shift the economic guarantees that have been made to pensioners even slightly.

Yeah, what was it two years in retirement? 60?

Yeah, and it was certainly like, you know, you could sit here and argue what people for years

for their whole life had this expectation set. We have all for our whole careers invested in

the Social Security benefits that were owed as retirees through every paycheck that we’ve

received. And those Social Security payments may not end up coming back to us if Social Security

is allowed to go bankrupt. So ultimately, the government has to set step in and issue new

dollars to make that up. Then the economic question is what happens to the value of the

dollar, what happens to the value of the economy, and so on as you issue trillions of dollars to

fill these holes. Let me ask a question that’s a little more positive here, perhaps.

Which is, is there a path out of this, you know, debt cycle we’re in? And what are the

top ways in which we’re going to get ourselves out of this? I have three that come off the top

of my head. Hold on, I have three off the top of my head. Number one is austerity measures. Number

two is productivity through technology. And perhaps number three is maybe recruiting more

entrepreneurs here to start more companies. And, you know, fill some of these jobs. So

intelligent immigration, which I want to hire taxes. Yeah, number one is higher taxes,

in terms of what’s likely to happen. That would be a fourth one. That’s outstanding.

Yeah. So look, higher taxes, because you can go after assets, you can go after well,

so there will be higher taxes. Okay. So I still think I still think we’ll end up seeing 70%

tax rates on the wealthiest people 70%. I don’t see I don’t see it being like unpopular. I think

it’s going to be unpopular with the wealthy, it’s going to be popular elsewhere to fill the hole.

Second is cut back on spending. But that’s a really hard thing to do. Because, you know,

as we’ve talked about in the past, people vote to get more stuff. So you put the politician in

is going to vote to get you more stuff, you don’t vote people in to go cut spending. So generally,

you know, we’re going to likely see number one happened first, maybe there’ll be a reckoning

where you kind of reduce spending, it’s going to take extraordinary political will, and an

extraordinary depth of education and diffusion of understanding of this, this key critical economic

problem amongst the voting class, which is a really hard thing to realize. I think number

three, you’re saying get the public to understand to understand that we have to have austerity

measures. Yeah, number three, and basically, people are going to have to make sacrifices.

So the first sacrifice will be the wealthy, they’re going to have to sacrifice their higher

taxes. The second sacrifice will be everyone else by seeing reduced spending and reduced kind of

service, the services, etc. The third is the hopeful one, but we don’t have a guarantee on

this, which is do we see economic growth through productivity gains? Can we create leverage with

our resources and our people by using new technologies to get more with less? And you

know, anytime? Yeah, like, again, I gave the example last time, but when a tractor was introduced in

agriculture, all the people that were farming the ground didn’t have a job anymore. But what

happened is new jobs emerged in making tractors and servicing those tractors in, you know, gas

pipelines to get gas to the tractors, all these economies emerged as a result of that economic,

technical innovation. So I think as we see AI and other innovations hit the market, you know, new

economies and new industries, hopefully, really blossom. And and we can benefit from that economic

growth and also lower costs for people on purchasing goods and services. We’ve identified

four things when Reagan came in, wasn’t wasn’t the highest tax rate like like 70%. Yes, yeah,

that was the top marginal tax rate was 70%. And 70% is not unheard of, it will happen again in

this year in the US. Well, and but Reagan unleashed an economic boom by flattening the tax structure

because marginal tax rates created disincentive for people to work and produce more. And so there

is a big economic hit from this. Yeah. And remember what this 1970s were like, it was the malaise days

of Jimmy Carter, we had a horrible economy with high inflation, and everybody was paying high

tax rates, and the government wasn’t making that much revenue, because there wasn’t as much

economic activity going on. And during the 1980s, we had an economic boom, and the government

actually collected more revenue with lower tax rates, because so much economic progress was

unlocked. sex, we identified four things, just like we’ve learned nothing, which one is the

most important here? Which ones are the most important? We talked about austerity, we talked

about increasing taxes, we talked about innovation and efficiency. And then we talked about immigration

recruiting more highly talented people, when you look at those four, do you have any to add to that

list to get out of this? And which ones do you think are the most important? And why when you

look at federal tax revenue, over a 50 year period, go look at the Fred charts, what you see

is that quite independent of the top marginal tax rate, the amount of federal receipts that the

government’s able to collect is roughly around 19%, plus or minus 2%. And so you can only get

so much blood from a stone, you can try to raise the top marginal rates, but then rich people have

an incentive to basically find more tax protected strategies. So the history of this thing going

back 50 years is you can only extract so much from taxes. And what you’re better off is a lower tax

rate that is broader based. And you go for economic growth that produces more activity. But look, if

you if you’re spending too much, there’s no way out of that. So austerity, critically important,

and entrepreneurial, I mean, when Bill Clinton left office, and I think Reagan through Clinton

was the biggest 25 year period of economic boom, we’ve ever had federal spending, as a percentage

of GDP was 18 and a half percent. He got it down from like 22%. And he did it through economic

growth. And he bragged about it. Yep. So you know, look where you want to be is I think, federal

spending should be in the low 20s. I think you want tax revenue to be in the high teens 19%.

You can have a small deficit. Those are the conditions for economic growth.

Jamal, any thoughts here on our way out?

I’m going to take the complete opposite of all of this, which is the

anti chicken little version, which is I think not much at all changes. I think that jet debt to GDP

will continue to rise, not just for us, but for every other country in the world whose fate is

worse than the United States. And I think that on a relative basis, the United States will continue

to be exceptional. And that this will not really be an issue in our lifetimes. Okay. And I’m not

saying that’s a good thing. And I’m not saying that’s a just thing. And I’m not saying that’s

what I want to happen. But pragmatically, I think that that’s what will happen. And I don’t think

that there is a magic number, where all of a sudden things start to break, where there’s some

magic number for jet debt to GDP, where all of a sudden everybody finds religion. Instead, I think

that it just creeps higher. And by the way, if you look at where debt to GDP was at the turn of

the 19th century, and then what happened through the World War Two, what we’ve really done is,

you know, we’ve retraced a lot as well. So there have been moments where we’ve been out over our

ski tips a lot. And so I think it’s just important to keep in mind that sometimes what works just

continues to work. And I keep asking myself the relative question, which is what country,

what economy, what group of human capital is better positioned in the United States. And

despite all of the things that are screwed up with this country, it’s hard to find a better

example. So yeah, unless you happen to have the lucky mineral or oil club, like Norway or Saudi

Arabia, you’re, you’re going to be hard pressed to find a better place to plant your money. And I

think entrepreneurship and immigration are the two most important things we can do, as well as

austerity. And I think Joe Manchin is like, or these moderate candidates in the middle who might

actually be able to talk about cutting. But by the way, you said something, you said something

really interesting, which is if you look at Norway, Saudi, Abu Dhabi, what are those countries

effectively becoming by monetizing the oil, they invest in all of the economies that are working

perfect segue. Thank you. It’s not as if the Saudis and Abu Dhabi and the Norwegians aren’t

trying to invest in America. They’re trying to put as much money to work as possible. They’re

just trying to pace it out so that they have time diversity and asset diversity. So to your point,

Jason, it’s so this is a it’s sort of a bit of a self fulfilling prophecy. I think that

what has worked continues to work. And then the burden for disruption gets higher and higher.

Yeah, that changes. There’s two things that work in the world, having those natural resources,

or having entrepreneurship. Let’s make a segue here.

This is the final point on that. Oh, God, we’ve been final point for 20 minutes here. Go ahead.

Quick final point. This is an important discussion, I think,

okay. So Adam, Adam Smith once said that there’s a great deal of ruin in a nation, meaning

it takes a lot of political bungling to screw up something as big as a nation, especially a nation

that’s the number one superpower in the world that has the world’s reserve currency.

So we are, in some ways, a beneficiary and coasting on hundreds of years of excellence

of economic performance and great political leadership in this country. And the question

to ask is not whether we can still post on that, but whether the political leadership we have today

is living up to the standard we had in the past. And I think it’s clearly not. And the only question

is when it breaks. And it’s hard to predict exactly when it’s going to break. But what I

do believe is that if we keep going the way we’re going, it will have to stop.

Well said. We’re definitely bending it right now. And when you bend it, sometimes it breaks.

Right. And by the way, the reason why we are going to pursue AI at breakneck speed,

even though it may lead to some sort of weird dystopian future,

is because we need that productivity boost. We have no choice now because we are so

tired of debt.

And frankly, better us than the next guy.


And better us than the next guy.

Whoever gets there first wins.

And we don’t have a choice.

Another perfect set of ways.

We don’t have a choice.

Two major stories this week that we need to discuss. The first is Saudi Arabia’s public

investment VC arm took a very interesting PR step of listing their funds that they have backed. And

it’s a significant list. Everybody from Andreessen Horowitz to KOTU, not surprising there. And Mark

Andreessen and Ben Horowitz and Adam Newman had a major keynote at a Saudi startup conference. I

was actually asked to keynote the next one in Riyadh, which I’m debating doing. And then,

in sync with that happening, at the same time, there’s been a debate of should LPs in America

be backing firms like Sequoia China, Matrix China, et cetera, because those firms are now backing

open AI competitors. And if we believe AI is the big race here, should we, as a country,

we’re not allowed to back military stuff, obviously, in these countries. But how do we,

on this global chessboard, decide should we be taking money from Saudi? Should we be investing

money in AI startups in China? So I think Chamath, you’ve got a big perspective here.

Globally. Let’s start with you. Two separate issues. Any surprises here by Saudi, the kingdom

actually releasing the list of who they’re backing? And why would they do that at this point in time?

And then us investing in China, because we are at a moment here, a crossroads, I think,

of should we be engaging or not engaging and building bridges with China and Saudi?

You know, for obvious reasons,

look, Saudi Arabia, Abu Dhabi, all of the UAE, these are countries that are really important

on the world stage, and increasingly so because they manage peace and prosperity regionally now,

right, they have huge balance sheets that can accelerate all kinds of projects all around the

world. And so they have to be taken seriously. And so this is a very smart marketing move

by the PIF, which is to essentially say, look, we are an established blue chip LP

of the blue chip organizations that you’re used to hearing about and celebrating.

And I think that’s very smart of them. Because what it does is it reinforces the feedback loop

that other great firms should be going to them to raise capital when it comes time for them to

raise their n plus first fund. And so I suspect, especially now, it makes even more sense because

everything we’ve heard, Friedberg mentioned it a couple of episodes ago, the United States

limited partner market is essentially closed for business, they have huge misallocation problems,

the endowments are sort of closed, the universities are closed, a lot of the family offices

are licking their wounds. And so this is a perfect time for folks in Saudi Arabia and the UAE to

basically put the foot on the gas and basically tell everybody, hey, we are open for business.

So I think that that makes a lot of sense. And I think that it’ll be successful. It’ll work,

especially in a moment now where US dollar flows from US dollar limited partners are

very difficult and harder to come by.

Well, and we’re also selling billions of dollars in weapons to the kingdom.

And we are a major part of their valuable, their valuable security partner of the United States,

their valuable economic partner in the United States, it’s no different than doing business

with any other country. I think it’s smart by the PIF. On the other thing, though,

with US firms investing in Chinese AI, it should not be allowed. And I do think that

the folks that are responsible for CFIUS need to get a handle on this.

Look, I’ve done a bunch of deals where I have had to jump through a bunch of CFIUS hoops,

where explain CFIUS, please. So basically, CFIUS is the committee on foreign investment in the

United States. Now, what that means is, if folks want to invest in certain things that are on a

list of things, and I’ll tell you the things that I’ve been involved with that that came under

CFIUS, rocketry, and certain chip technologies are so advanced that the United States has very

specific rules that limit the ability for foreign actors to invest in those businesses.

And in those situations where a few folks invested beside me in some of these companies,

we had to go through a process to get CFIUS approval before that investment was allowed.

Now, what’s interesting about that is that’s about money coming in.

But I do think that the reverse now becomes important, because if US dollars are going

to go and see these extremely complicated advanced technologies abroad,

especially into the hands of countries that are frenemies at best of the United States,

I think we have a responsibility to have a point of view on that. And so I think Keith

Raboi was the one that was very definitive and said this should not be allowed. I do think it

is so early, Jason, we talked about this, we’re on this curve of fuck around and find out which

means there will be some crazy examples of stuff that are very uncomfortable. Yep. I don’t think

we want us fingerprints on this stuff being perfected outside of us borders.

sacks when we look at the history of engagement with China, maybe we can take a multi decade

globalization perspective here. When you look back on it, the engagement with China created

so much prosperity, so much intertwined dependency, iPhones being the best example,

possibly, we’re selling them in China, we’re making them in China. China loses Apple as a

customer that would be absolutely devastating for them. And it would obviously be devastating

for Apple as well. So when we look back on that, as a general rubric here, do you think

we enabled a competitor? Or we avoided future conflict because of the interdependency? And

where do you sit in terms of thinking about engagement, versus maybe isolation or something

in between those two frenemies, best of frenemies, etc. The policy of constructive engagement,

as it was called 20 something years ago, the the idea behind it was that if we engage with

China economically and help make them rich, then that they would become more like us,

they would somehow turn into a democracy, and they would have tremendous gratitude towards us.

And we’d become friends. It’s not the way it worked out. There were people who warned that

this was a foolish approach. So most notably, the realist scholar john Mearsheimer at the

University of Chicago warned back in 2002, that that was not the way this was going to play out.

If we made China rich, they would seek to convert that wealth into political power.

And then they would act the way that all other great powers have behaved throughout human history,

which is they want to dominate their region, and they would seek to push the United States out of

Asia. And the future that he predicted 20 years ago is the future that’s come true. And I think

the you know, all the constructive engagers, I think, has some egg on their face. Now,

I understand where they’re coming from. This is a fundamental difference between whether you see the

world in economic terms, which is about creating positive some games, basically trade, or whether

you see the world fundamentally in geopolitical terms, which is about the balance of power,

which is more of a zero sum game. And I think that both views, they’re both extremely important,

we want to engage in positive some relationships that generate more trade and more wealth for the

United States. At the same time, we have to be aware and concerned about the balance of power,

we do not want a number two country in the world who can rival the United States,

in terms of power, who basically could win a security competition with us. And we certainly

don’t want a country in the world to be more powerful than us. So I think this is sort of

the yin and the yang is geopolitics versus economics. And I think what’s happened with

China over the last several years is it’s flipped, I think we used to see the relationship primarily

in positive some economic terms, and now we see it in geopolitical terms. And I think there’s a lot

of firms now in the United States who haven’t embraced this new reality. And to go back to your

question about, you know, when should a venture capital firm take money from a foreign country

when it should, and I think there’s a very simple rule for this, which is, if the country is a US

ally, I think it’s fair game because the US has said this is a partner of ours. So why can’t you

do business with them? But if the United States government has said this is an adversary, you’re

putting yourself in a really difficult, precarious spot by doing business with them, because then you

have to explain yourself to the US government. Yeah, this is the very simple rule we would use

is I don’t we would never consider taking money from Russia or China, any country that the US

government says is an adversary of ours. But if the US government says this is a partner and an

ally, then I think you could consider it. Do you think there’s a way sacks to salvage the

relationship with China and make it productive? Or do you think it’s a far gone conclusion at

this point, because one might argue, and I’ve heard people argue this, maybe China would have

invaded Taiwan already if it wasn’t for the interdependency. So I know we’re dealing with,

you know, a lot of we’re doing a lot of predictions here. But do you think it can be salvaged? And do

you think it would have been a worse relationship if we hadn’t had this interdependency that’s been

built up? I’m not quite sure that the economic interdependence theory, preventing war has been

definitively proven. If you go back to World War One, for example, it was the case that

Britain and Germany actually were each other’s number one trading partners, and they still got

in World War One, for reasons that in hindsight seem really silly. So I’m not sure that economic

interdependence can prevent, it certainly doesn’t prevent security competitions from arising. And

therefore, I don’t think it can necessarily prevent a war. Although, you know, having business ties

can lead to positive interactions. So I’m just saying the jury’s still out on that. But I think

that, like I said, I think once you’re in a security competition, the way that we are with

China, I think geopolitics rather than economics is in the driver’s seat. And that’s what’s happening

right now.

Super easy, Friberg, intellectually way, I think, to process this, you would never invest in a

North Korean AI company, a Russian AI company, or an Iranian AI company. How do you think about

China, and then just generally this topic of when to engage, when venture capitalists, when

startups, you know, and trade partners should engage with various countries? How do you think

about it, Friberg?

In what role as an investor?

Well, we could we could take multiple roles here. Founder, investor would be the top two for this

program, I think. Or taking money from any of those three possibilities.

Very few portfolio companies that don’t benefit some way from the trade relationship with China.

So, you know, to Sax’s point, I’m not sure you can really say China is a true and complete

adversary in the sense that we’re on opposite sides. There’s obviously deep interdependencies.

So, you know, it’s hard to kind of say, I draw the line at this kind of technology investing there,

but I benefit from their technology investing that’s going on there in other ways with some

of my other businesses. Right? I think that that’s really where you kind of run into a

bit of a conundrum that we do have a deep interdependency.

So, you know, like with respect to like investing in China, I don’t know, I think the investing in

China thing, it’s pretty difficult, given that there is a single power that gets to decide what

does or doesn’t happen. I mean, look at what happened with Alibaba. A lot of shareholders got

pretty wiped out there. These governments where you have like, the potential of getting completely

wiped out by government action is a pretty scary place to invest in general. I’d be more oriented

as an investor around those concerns than I am about, you know, it’s really hard to do the

calculus on, am I helping or hurting America versus China? You know, you could argue 100

ways, each of those sides. What do you think of sexes framework? If we’re partners? You know,

fair game, if not partners, not a good idea to put your neck out. But we’re sorry, are you asking?

Are you saying like, we’re not partners with China? Well, it seems like the US government has

said we’re adversaries now, and that we’re in a in a pretty dogged competition. Well,

Jake, I’ll just be specific. I’m talking about a situation in which you’re taking money from them.

Yes, in a situation where you’re taking money.

I do think that selling them products that are, you know, not like super strategic,

like I think selling them our most advanced chips is dangerous. But, you know, look,

I think if you’re selling them products that help restore the trade deficit and correct that.


I don’t have a problem with that. Yeah, I don’t have a problem with

selling movies or cars or something like that to China. The question is, though,

I think if you’re a venture capital firm, do you take their money? That’s what I’m

specifically talking about. And I think whether you’re allowed to or not, we don’t because

we just don’t have to think about what complications that could cause down the road.

Also getting your money out of China, also a difficult task, it seems these days.

Cash app creator Bob Lee, aka Crazy Bob on Twitter, that was his Twitter handle was

stabbed to death tragically in San Francisco earlier this week. He was squares for CTM.

He worked at Google on Android. He was the chief product officer at mobile coin.

Also an angel investor in a ton of companies, figma space x clubhouse.

Well known in the industry. Officers responded at about 235am to a report of a stabbing

on the 300 block of Main Street, and arrived to find Lee who had been taken to hospital

and succumbed to his injuries there. No arrests has been made. A lot of San Francisco

politicians are sending their thoughts and prayers. But obviously, San Francisco is still

very dangerous place, it seems. Any thoughts on this and how it might act as some sort of

crossroads or not? And thoughts and prayers, obviously, to his family.

I think this

was a pretty tragic event. There’s a lot of people who I knew that were pretty close with him. I got

several messages on his passing. He was I didn’t know him. Personally, I think we met maybe once

or twice. He worked on Android at Google, and obviously had a key role at square in the early

days and was a pretty impactful and important person. But also supposedly, I didn’t know him

very well again. But everyone says just such an incredibly kind and generous person. So

tragic loss. I used to live two blocks from where the event happened. I’ll zoom out.

Is it a bad place in Soma at Rincon Center? Right by the big condo towers there. And that’s right

where the Salesforce offices used to be. And, you know, block from the waterfront.

Is a part of all that drug craziness? No, it’s not in the heart of the camping district. It’s just

a nice area and Soma quiet area, right? So at night, there’s no one there. I went to San Francisco

a few weeks ago, I told you guys, I pulled up to a restaurant on the Embarcadero. And I joked with

my buddy in the car. I’m like, Oh, my car is going to get broken into while we’re at dinner,

because I’m parking on the street. We went to dinner 90 minutes later came out. Of course,

my car had been broken into the trunk had been popped up. And it’s just like, this is the fancy

area of Soma, Chamath. Very fancy area of Soma. Look, here’s the thing. If you park at a parking

meter in San Francisco for eight minutes too long, you get a 60 to $100 parking ticket. And San

Francisco has become an upside down town. What I mean by that is I think that like so much of

the response that we’ve had in the last couple of years to power dynamics and concerns about the

powerful having too much influence over those who are less powerful, who have less influence and who

suffer as a result of their demeaned influence. The response has been to turn things upside down,

which is to give those who are lacking in the power structure everything and to try and take

everything away from those who are at the top of the power structure. So if you want to deal drugs

in the open air, if you want to walk into Walgreens and steal 1000s of dollars of goods

and walk out, nothing will happen to you. Because you were embedded with this powerless kind of

position in life. But if you have a car and you park at a parking meter, and you say at the parking

meter for more than 10 minutes, you get a ticket. And the consequences of responding to power

dynamics by flipping the power structure upside down is obviously can be more negative as we’re

kind of experiencing, I think, acutely in San Francisco, but also around the nation.

And by the way, I think that this applies in a lot of other ways in terms of how we’re doing

college admissions, in terms of how we’re selecting people for jobs, in terms of, you know,

recent applications for pilots for doctors, where the assessment is less about did the person who

was disadvantaged at the beginning of their life or career or trajectory, or educational path,

be given greater opportunity, and greater resources to catch up and to get there? Or did

we just flip the power dynamic upside down and just give them the endpoint. And as a result,

there’s a massive kind of detriment that I think can arise. And it’s not necessarily always the

case that it will arise, it is not necessarily the case that selecting someone based on some

demographic profiling to be an airline pilot necessarily means that that airline is more

likely to have airplane crashes. But in certain cases, when you don’t prosecute certain crimes,

like robberies, or people walking into stores, or breaking windows or dealing drugs in the middle of

the street or camping on the street, and you fast forward a couple of years, that power dynamic,

the flip of that power dynamic causes the whole town to go upside down. And everyone who’s sitting

on the bottom ends up becoming a victim themselves. And I think we’re starting to see inklings of this

in San Francisco, we certainly have for years, Sachs has ranted on about this with respect to

some of the non prosecution that’s happened historically. And I totally agree with him

on those points. And I think that it’s come to a breaking point in San Francisco, but that’s

really a beacon for what else is going on. And you know, some people call it wokeism. I think maybe

this notion of wokeism is one small element or segment of the broader issue with how we are

tackling with and dealing with embedded power structure issues in this world today. And the

flipping of those power structures upside down doesn’t necessarily yield the outcome we all want.

And I think we’re starting to see reasons why.

Sachs, any thoughts here?

That’s my rant.

I can’t disagree with you.

Yeah. So similar to Freeberg, I didn’t know Bob Lee, but I know many people who knew him,

and I was getting texts. And obviously, we feel really bad for him, his whole family, his kids,

his father, his co workers, friends. We don’t know exactly what happened yet. But I think

we suspect, and I would bet dollars to dimes that the story is very similar to a case we had in LA

recently, the Brianna Kupfer case, where a young woman was basically stabbed for no reason by a

psychotic homeless person who had been through the revolving door of the jail and criminal justice

system, who could have been locked up, who was arrested multiple times, but was not kept locked

up because of this push for decarceration. And you can argue that maybe it’d be better for that

person to be in mandatory treatment, or even maybe a mental asylum. But this idea of just

releasing these people onto the street, I just think is an outrageous abdication of responsibility

by our elected officials who run the criminal justice system, who pass our laws. And the thing

I just wish is that I could lock for 24 hours, the people like our supervisors, or our governor,

or the people who basically make these laws, or the people who are pushing for decarceration of

these violent offenders by these nonprofits, I wish I could lock them up in a room for 24 hours

with the people that they think are safe to release on our streets. Let’s see if they really

would take that test. Because it seems to me that these elected leaders and these nonprofits

who are pushing for these outcomes, they are setting loose on us a predatory criminal or

psychotic element that jeopardizes our safety and makes these cities unlivable. And we should not

tolerate that. And quite frankly, the responsibility goes beyond those elected leaders. It goes to all

the voters as well, because we keep putting up with this. And where was our governor when this

happened? He was in Florida doing some singalong at some high school where he was trolling

Ron DeSantis because DeSantis has taken on DEI at that school. So that’s where Newsom was. And he’s

extremely popular in California. Fighting culture wars instead of saving people. Fighting culture

wars in a distant state. Instead of basically fixing the criminal justice system in California,

it’s even worse than that because he’s actually shut down two prisons and released lots of people.

So where is the push for criminal justice reform in California and protecting the citizenry? And

until the voters in San Francisco and California start demanding this, there’s never going to be

a change. So start listening to Gary Tan. Just vote for whoever the f*** Gary Tan tells you to

vote for, okay? I can’t disagree. And the supervisors seem to control a lot of this.

And Chamath shared just this week, Mayor Francis Suarez is talking about on his Twitter,

the reduction in homicide shootings. And they have literally counted the,

if you want to say, drug addicted, mentally ill, homeless, there’s obviously three or four

different things going on here when you look at the population that’s living on the street.

Some number of them down on their luck, some number mentally ill, some number addicted to

drugs, and some number a combination of those things. He seems to be getting it done in Miami.

And, you know, other states seem to and other cities seem to have gotten this under control.

Is there any hope for San Francisco Chamath? Or is this just going to take five or 10 years to

bottom out? I mean, it takes regime change. I think New York had a long period of lawlessness,

where people were afraid to walk down the streets, it took a handful of mayors to draw a hard line

in the sand, to increase policing, sometimes to introduce some pretty controversial concepts at

the time, or at the time that were supported, which now seem controversial. You’re talking

about stop asking for us, I think it was called the broken windows theory of policing. Yep, take

care of the lyrics, take care of the little things so that the little things don’t compound into the

big things. But whatever you believe needs to get done. I think it’s pretty clear that what is being

done isn’t working. And so the real question is, can people see through the naked partisanship

to agree that this is not working? And sadly, what I would tell you guys is that I don’t think

they’re there yet. And the reason is because America is the most divided it’s ever been,

especially on issues of race and social justice and social norms. And I think that crime has

gotten caught and painted with that brush, which means that the idea of very aggressive policing

and safety are now viewed as opposite and antithetical to social justice.

And I don’t know how that happened. But the result of it is this, which is these folks

will never agree that this is not working. And you’ll have to go through recall election after

recall election. And even then, it’s not going to be enough, because the smart politicians will say

what they want, in terms of like, safety matters. But then a lot of voters will vote the opposite.

The example in Chicago that David brought up earlier is really interesting, because it was

essentially a social justice candidate versus a law and order candidate through their democratic

ranks. And the social justice candidate one, the progressive candidate one and the person

that wanted to tax businesses and individuals one, and the person that wanted to sort of focus

on law and order lost. So what does that say? It says that we are still in a moment where we can’t

agree on what is important. Yeah, that’s really scary. And so I think you kind of have to

unfortunately vote with your feet if you are lucky enough to do so. And that’s the key. Yeah.

Who’s left over, or a lot of people who are not in a position to just up and leave.

And then they are unfortunately left behind.

Tragic situation all around. And I will never host a conference or any event in San Francisco until

this is solved. Because when people ask us to do events, I’m like, people don’t want to come to San

Francisco, they’re afraid. So I do my events in Napa, or in San Mateo,

not not started a bilingual school, Italian English that is on the IB system,

international baccalaureate system. And it’s a sister school to a school in the city,

we had a fundraiser, which was literally right downtown in that encampment area.

And when I pulled up, I was like, is this for real? It’s an open air drug market, where folks

are doing drugs, selling drugs right in front of you. They’re passed out completely incapacitated,

about a third of the guys are wearing balaclavas. So you can identify them, you have no idea what

they look like. I grew up in Brooklyn in the 70s and 80s, when it was legit, dangerous. And

when I walk in San Francisco, it feels much more dangerous.

Then the that crazy era, it feels random, it doesn’t feel like there’s organized crime,

gang crime, like I grew up in a pretty crappy neighborhood. And you knew who the gangs were,

you knew who the tough guys were, you knew how to avoid trouble, it didn’t come in randomly,

come and stab you to death. Right? And so yeah, Jason, you become street smart growing up in a

culture like that, because you know how to avoid it. You know how to be alert. This doesn’t feel

like that. This is just like a bad roll of the dice. And you could get stabbed to death just

walking down the street that does not. Where Where are the politicians to stop this?

I mean, they don’t care. There’s the level of corruption in San Francisco is unbelievable.

The incompetence amongst those supervisors, the mayor, the DAs, everybody, it’s just incompetence.

And nobody has the chutzpah or the wherewithal to say enough. And I think the other group to blame

are all the rich people and powerful people who just haven’t been active in politics. And I know

some of us have in different ways, but I think it’s going to take a coordinated effort by people

who really care to vote out all these supervisors and bring in. It’s got to be regime change. And I

just don’t know if there’s the wherewithal to do because every time as a person who has some means

or is successful in some way that you stick your neck out there like you have done sacks,

the the attacks that you will get from this insane, left. I don’t want to even use the word

woke. I think it’s a different derangement. I think it’s actual corruption where they’re making

so much money off of this homeless industrial complex. They’re getting paid so much money that

the grift is so deep that they are going to fight for this. And it’s going to take some really

courageous people like Gary Tan and maybe David Sacks and other folks to back a slate of people

to change this. And we need people to run for government who are brave and who want to put

their neck out there and say, enough is enough. We’re going to police the city. I just don’t know

if it’s going to happen. All right, listen. Yeah, I mean, the issue is that it takes more than one

election. So listen, I think we made a positive change by removing Chesa Boudin. I think Brooke

Jenkins has the right attitude. She cares about victims. I think she wants to prosecute. The issue

is that you’ve got a police department that’s 50% of the number of officers that they want because

they flirted with this whole defund the police movement. You’ve got the Board of Supervisors and

you’ve got an oversight board on the police that basically make their jobs harder. And it’s not

one election because even the mayor doesn’t control it because the Board of Supervisors really

has all the power in San Francisco. So they take a job that really should be one or two people’s

jobs, like the DA, like the mayor, and they break it up into this like Board of Supervisors where

you’ve now got to be familiar with a dozen different races in order to effectuate a change.

Well, the machine knows how to do that, but the average citizen doesn’t. So they make it really

hard to effectuate change. But there are groups that are springing up in San Francisco like Grow

SF and people like Gary who are on top of it. And that’s why just follow them and vote for their

recommendations because they’re actually tracking how to make a difference. All right. I think on

that, we will wrap for the dictator Chamath Palihapitiya, the Rain Man David Sachs, and the

sultan of science, David Friedberg. I am the world’s greatest moderator. We’ll see you at the

All In Summit 2023 in September. Bye-bye.

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.

I’m going all in.