SPEAKER_03: shout out to a company Saxon. What are you doing? What the fuck? No, I just wanted to give a powder up.
SPEAKER_03: You're such a scumbag. The fuck?
SPEAKER_04: How tired of me? I've woken up now. Now I'm awake. You've awakened the drug.
SPEAKER_00: I'm done. I quit. I'll give a shout out to you, which has got acquired by a rain man.
SPEAKER_03: David
SPEAKER_04: Hey everybody.
SPEAKER_03: Welcome to the all in podcast. I'm Jason Calacanis with us today. The rain man himself calling in from an undisclosed location, the queen of Kena and of course, the dictator himself, Jamal poly Apatia. All right, boys, how are we doing?
SPEAKER_02: Feels low energy today. What's going on?
SPEAKER_01: Great. How are you? What's going on? Let's go. Let's do this. I love it.
SPEAKER_03: Let's go. All right. You're hot. You're coming in hot. Yeah. Yeah. Breaking news. Breaking news. Biden will propose his capital gains tax hike. I don't think this impacts any of us. But Biden will propose almost doubling the capital gains tax rate for wealthy individuals from 20% to not 25, not 28 39.6% to help pay for the social spending
SPEAKER_03: and in equality for those earning 1 million or more. So nobody on this call, federal tax rates could be as high as 43.4%. The capital gains increase would raise 370 billion over a decade. Yada yada. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22% and Californians 56.7%. Biden has previously warned that those earning over 400,000 can expect to pay more in taxes. This was just breaking news a couple of hours before we started the pod. And the stock market is down. And people are freaking out. Jake, Jake, I want to hear your take on this actually.
SPEAKER_00: I want to tell me body was gonna tell me this is gonna hit me so hard.
SPEAKER_00: Jake Jake Jake, I was ranting on this topic 15 minutes ago, we were talking. And I'm like, dummy, what did you think was gonna happen? You know, he's saying they're going off, he's saying they're going off. It's like, what did you expect?
SPEAKER_02: Just before we get into it, we should do a quick primer on what this means, right? So capital gains taxes are the taxes you pay when you make an investment and you sell that investment at a profit, that you pay a tax on the profit you make. And there's a difference between capital gains on the short term, which means less than one year, and long term, which means you've had the investment for more than a year. So economic policy historically has dictated that having a low capital gains tax rate relative to what an income tax rate might make, might be incentivizes people to make long term investments, and it gets more money moving in the economy. And as a result, the economy will grow. And so the idea of increasing the long term capital gains tax from 20%, which it currently is to 40%, is a real striking economic policy shift rationalized as we're going to use this money for social spending. But I think the historical context and what this is, is really important as we get into the conversation. And just speaking historically, the maximum tax rate on long term capital gains got up to 40%. You probably have the history on this in 1978 for a year, right? Or like 76 to 78. And then it's been largely 15 to 20% for the last 20 years or so. And so to jump up, and prior to that, in the early part of the 20th century, it's like 40% pretty consistently for a long time. So to jump up to 40%, it's a really big shift. And there's a lot of debate around the economic implications of doing this. I thought that was important.
SPEAKER_04: Let's take a step back and actually see the forest from the trees. And the forest from the trees is that I don't think Biden thinks that it's a credible plan in as much as I probably think he needs, you know, this is like it's performative. Because it was a lot larger, the number, the headline number was a lot larger than what people were whispering was going to be the number, right? It was supposed to be like in the low 30s, or maybe kind of like, you know, 33, 34. And then all of a sudden, like to come out of 39.6, I think it's almost like, okay, he's giving the pound of flesh to the left, kind of like woke mob of the Democratic Party, who probably doesn't understand how capitalism works in the first place and doesn't care because they're not participants in it. Now, my reaction is, I don't think it's going to pass. I think it's going to be really tough to get done. And I think it probably, you know, maybe there's a watered down version, but this version, I'm not super worried about. And then it just comes back to the same thing over and over. The fewer the number of people that get to participate in the growth and see the upside, the more there are that just wants to just kind of, you know, tear it all down. And so I don't know, it's just yet another signal that we have these structural issues to fix. It's not reasonable that a few people get super rich and everybody else gets left on the sidelines.
SPEAKER_03: Sax, where are your thoughts? It's not going to pass, but it's not going to pass. It's not going to pass. Sax, is it going to pass? Is it an opening salvo where he wants to get to 32? So he's starting at 39?
SPEAKER_00: I think it could pass because I think they're planning to do this tax increase as part of the second infrastructure bill. It's not really an infrastructure bill. They're calling it human infrastructure. We've talked about this. Infrastructure is one of the last categories of federal spending that's still popular. So they're rebranding a bunch of social programs as human infrastructure. I think that bill will pass. I don't know if the rate will stay at 39.6, but I think there will be a big increase clearly in the cap gains rate. I mean, I think it's worth remembering how it got to 20%. It got to 20% because Bill Clinton lowered it from 28 to 20 as part of an overall package of tax reforms that he did in the mid-90s. And that led to some of the best years of economic performance, GDP growth in the US, productivity growth, deficit reduction. And so I think we are experimenting with breaking something that's been working, I think, pretty well since the Reagan-Clinton years, which is to have reasonably low taxes on capital formation and investment. I think it's a category error to treat capital gains or to think about it just as income. You have to remember that all of this money has already been taxed once, right? So you make the money the first time as income, you earn it, you pay tax on it, then you decide to save some of it and invest it, and then you get taxed again on that amount. So capital gains is a form of double taxation. That was the original reason, one of the reasons to have a different tax rate for it. And I think that this risk kind of messing up the economic recovery that's really underway already.
SPEAKER_04: But think about what just happens to any organization that has to pay cap gains, right? It's not just individuals. Last time I checked, organizations aren't exempt from cap gains, for-profit organizations. And I don't exactly know what they will do as well. So you're putting a lot of people under a huge strain when you double the effective rate of return. So if you're, for example, a pension fund, and you have an enormous investment in a private equity fund or a hedge fund, part of these things is that they're these complete pass-through vehicles. And so as long as you've structured yourself in a way where you don't have to pay that tax, I guess you're indifferent. But if you're any organization or institution or a person or a collection of people that bears that tax, all of a sudden, your returns have been basically cut in half. That's pretty nuts.
SPEAKER_03: Let's talk about the average Joe for a second, or Jane, as it were. 401ks would take a hit here. And then when you go to your retirement and you have to liquidate them,
SPEAKER_02: You don't pay tax on the 401k gains.
SPEAKER_03: Otherwise your portfolio, because 401k is going to be a small amount you can contribute to a year. So retirees who happen to have stock market gains or cryptocurrency, people trading that. Yeah, you'll basically pay the same as income tax as opposed to paying a lower tax.
SPEAKER_04: It'll diminish investment, Jason. It's exactly what David says, which is that on a marginal basis, what will happen is inflation probably goes up because people just decide to consume rather than invest because they think, well, what's the point? There's already risks that I bear. And so the earliest risk assets, the riskiest ones that we all participate in, which is early stage venture and company formation, you may not be thinking about the capital gains rate, but it's implicit in the returns that you're expecting for the risk and the time you're going to take. And we've been trained to feel that rate. And if you double that rate from 20 to 40, I suspect that there's a lot of people whose risk tolerance changes and they're going to feel their after tax gains differently. And they'll wonder to themselves, is this worth it? And then I think what happens as a result is entrepreneurship drags. I don't know if anybody's done an analysis, but I suspect part of the reason why America is such an amazing sink for capital, it absorbs capital all around the world, is that you've created incentives that get people very excited because they think they can get rewarded. If you take those rewards away, I think the implications are much bigger than just the cap gains rates here. Because as the people change their behavior, then the capital formation pools outside of the United States change their behavior. And the whole thing has a knock on effect. And it was more muted in Clinton. It was less muted in 78. It basically didn't exist in the 40s and 50s. But it is a huge force today. I mean, like we are an indebted nation that owes money to all kinds of countries around the world, including China, we're supposed to generate growth and sort of pay it back.
SPEAKER_03: And where will the growth come from if LPs don't want to back venture funds or venture funds? But let's be honest and check out.
SPEAKER_02: Let's be honest and direct. I mean, are any of you guys going to change your investment behavior if the cap gains tax goes to 40%?
SPEAKER_00: No, but there'll be less of it. You know? So look, anything, anything- My behavior will change.
SPEAKER_03: I think my behavior will change. How will it change?
SPEAKER_04: It's exactly what David said. So I just put in $100 million into a climate change company two weeks ago. Under this promise, I could only put in 50. So there's 50 million less progress that's going to happen on that business. I'm not sure that that's the right answer for what that company is trying to do in the world.
SPEAKER_03: And the way it will change-
SPEAKER_02: You're saying the profits you would have had from before are diminished in half, therefore you would only have half as much money to invest as an investor.
SPEAKER_04: Right. So however way you want to cut it, whether it's like the 10 companies gets cut down into five or the five, 10 companies that I invest in get half my money. The point is at some point, the money starts to run out, not just for me, but for everybody else.
SPEAKER_02: Yeah. Basically at the end of the day, the money goes into the hands of government legislators and administrators to decide how that money gets spent. And it's not in the hands of capitalist investors to decide where to invest. That's the fundamental kind of shift that that's going to happen. Right.
SPEAKER_00: Right. Capital has been taken out of the economy. Risk capital has been taken out of the economy and it's now going to be spent by government. Look, anything that you tax, you punish and disincentivize and anything you subsidize, you create incentive for there to be more of. And so this is just- we always talk about these things in terms of who they're going to hurt, is it that this only falls on the backs of rich people, so we shouldn't care. But the real question is, what is this going to do to the economy? And I think we've talked in previous podcasts, the last part that we have with Brad Gerstner, it feels like everything in the American system is kind of broken except for one thing, which is this sort of opportunity economy that's been created by risk capital, right? And people creating new companies, like these big, stultifying political corporations, the S&P 500 are completely broken, government's completely broken, the federal debt is out of control, the media is broken. Everything in America is either broken or needs to be revitalized or reformed, except one thing is working really well, which is risk capital and its allocation to founders who have nothing but a good idea, right? And when all of a sudden you double the cap gains rate, that is an attack on that opportunity society. Now, I think there is a legitimate conversation to be had about how do we spread this sort of system of opportunity to more and more people. I think like Brad framed it really well in the last episode, like how do we get more people involved in that? I would submit the answer has a lot to do with school choice and charter schools, giving people, everyone in this country deserves to have a first rate education. And so that is a very legitimate conversation to have. But I think to have punitive taxation on it is, I think it is at risk breaking that last thing that is working so well in the American system. I think it's really well said.
SPEAKER_03: And I think this is going to take redomisiling to another level. I mean, if you're in New York or California right now, and you were thinking about Wyoming or Utah or Texas or Florida, I mean, this kind of makes the decision for you, if it does go to 40. And because that's what you could actually meet, would you get to neutral if you left? And so I remember, I remember when I moved to the United States in 2000, the marginal
SPEAKER_04: tax bracket that I was in, and I was making maybe, you know, 100. No, I was probably making 80 or $90,000 a year was 55%.
SPEAKER_04: And I remember coming to the United States and seeing my after my take home pay, my first paycheck, and I was shocked because I was like, you know, I was paying maybe 36%, all blended in federal and local at the time in our state at the time in California. And slowly, slowly, it's creeping up with with if you play it out today, where we are plus New York State just passed laws, you're going to be sort of in the 50 to 55%, almost upwards of 56% for certain folks. And maybe the answer is that's the right thing. But I think we have to acknowledge that there's going to be a bunch of unintended consequences. So maybe the intended consequence is to actually create more equality between the richest few and, you know, not even the poorest, frankly, because but it'll just be the richest few, and the next richest few, quite honestly, because like, you know, the investing class is still a small number of people. But the unintended consequences of that decision, I think is what exactly what David said, which is that over the next five or 10 year period, you will, at a practical level, see less investment. And the the only way to make that whole is if the government then takes all that money, and all of a sudden allocates it from their own coffers back into the economy. And we know that that's not going to happen. Well, right. It's going to be riddled with waste and graft and corruption. So unfortunately, the setup is that, you know, you're going to really impact entrepreneurship. And then I then I wonder to myself, by the way, guys, like, what was the actual goal of this, meaning there was 20 or 30 guys that were just making so much money on their equity. But then that's then then we need to blame like the these lists like the Forbes billionaires list because those are inaccurate because a lot of these stuff is like, unrealized, unrealized paper gains. Right. And so they're not they're not paying any capital gains because they haven't sold anything. And most of these guys that are uber uber rich, you know, have no desire to sell because it's for them. It's a control issue to sell.
SPEAKER_02: I'm not sure the I'm not sure that the consequence of taxing uber rich people is the true motivation. I think for some people, maybe it is. But if we just take a step back, I mean, a year ago, the US debt level was significantly lower than it is today. We've taken on a tremendous amount of federal debt to fund a series of programs that we believe we're going to kind of keep, you know, the American population employed and keep our economy moving. That was a massive burden we accrued and in the past year. So ultimately, over time, the only way to kind of support this, this new federal budget, and you know, the this new servicing costs that we've taken on at the government level, you really only have kind of like three options. Option one is you're going to continue to raise more debt and massively kind of inflate everything and the dollar declines in value. Option two is to reduce spending, which means starting to cut these programs and option three is to raise taxes. And it's pretty clear that option one is one where we're kind of already at the economic limit. Option two is going to be very hard to swallow at a time like this. So you can't just cut spending right now. Across the board, so many aspects of the US economy and so many individuals in the United States are dependent on the federal government for support. And so option three is the only real one that's left on the table. And so then the question is, who are you taxing? You're not going to go tax the people that are struggling, you're going to tax the corporations and the wealthy. And the capital gains tax is the one place where you can kind of say, look, the tax rate that you're paying today is half of what an income tax rate would be if you were earning that as income. Let's get it to be fair and even. And I think just just to argue this other side, like there's a motivation, there's a point of view where this is coming from. It's not just let's go tax the rich, screw the economy. It's that we find ourselves in a circumstance where we need to do one of those three things. The most rational to do is to, or the most kind of sensible politically to do is to increase taxation and this is the first place to go, the most obvious place to go.
SPEAKER_04: It's not because so when you think about like, so for example, like, you know, you would say, okay, who are the folks that we're talking about? There can be entrepreneurs that are building companies. Again, they're never selling, so they're never going to pay these taxes. It's not the case that Elon Musk or Mark Zuckerberg is all of a sudden going to write a $40 billion check because that's not how much they make. That may be how much they're worth, but they will never sell a single share unless they have to to fund some other project, in which case it's a diminutive. So which of those three things would you do, Jamal? So what I was going to say is, and then you look at somebody else, like maybe you say, oh, well, you know, the people that manage money, like let's go after those guys because like those guys shouldn't be, you know, rich. But then the problem is those guys are already paying W2 income. They're already paying nominal income tax rates. That's how the entire hedge fund industry works right now. You know, you get paid in current income. And so, okay, so you're not getting their money because they're already paying at the prevailing rate. So again, this goes back to if you actually trace the problem and see who it affects, it's exactly what David said. It's these folks that are in the middle that are actually putting the money to work, that are trying to invest in things that now have a very different return profile. And you're right, the core business that they do, they may still keep doing. But then all of the incremental things in the future that they want to do, they won't do. For example, look at all of the talk right now about how everybody needs to stand up, you know, more angel investing, more minority investing, more women, GPs, all of this stuff. Well, all of the folks, let's just be honest, all the folks that were in a position to put money into those folks are now 50% on a dollar rated basis poorer if this thing passes.
SPEAKER_04: And I bet you what they're going to do is they're not going to cut their allocations in Sequoia. They're going to cut their allocations to all these other folks. Yeah, that's exactly what I was thinking, Chamath, is who's it going to hurt?
SPEAKER_04: It's, again, it's going to hurt all the people that you want to get into the game. It's going to hurt all the people that are here. But the richest, richest, rich folks, that is not unless you ex appropriate the money from them. That's not you're not going to get a single cent.
SPEAKER_03: And then that was the that was the concept of the wealth tax, wasn't it that you would take the total value what you have and just take away 1% a year from Bezos is, you know, or Zuckerberg's hundred billion dollars. So would that not have been a better solution than this? If you had to pick one a 1% wealth taxes, that's a slippery slope or whatever, Jason, then then we're no better than a banana republic that could also then expropriate
SPEAKER_04: a mine, because we don't like the way that the mining is happening or you know, another critical asset because the government decides that it's important. I mean, what's the difference between a stock and any other asset that either a person or a corporation owns? It's very, I think that the definitions are thin. They're all the same things at the end of the day.
SPEAKER_02: Let's go back to the federal budget problem. Like how do you address it, Sax? I mean, what's the right course here?
SPEAKER_00: What I think is amazing is we're about to spend we're raising this hundreds of billions of taxes in order to fund, you know, trillions of new spending. I don't really hear the administration selling these new programs, selling the spending. All we're really talking about is that there's too many rich people. We have these millionaires and billionaires. We got to tax them more. And so all we're really talking about is whether it's appropriate to be punishing the rich and super rich. We're not really talking about where's this money going? Are these programs justified? What do we get out of it? Exactly. And my point is forget about like who it's going to hurt. I think it's eventually going to hurt the economy. And the question is, what do we get out of it? And I think what's amazing is this isn't even paying for the big ticket items on the progressive wish list. We're not getting to universal healthcare with this. We're not getting to universal higher education. We're not getting to any of the we're not getting to like forgiveness of student loans or anything like that. We're not getting to any of the really big ticket items on the progressive wish list. And yet we're maxing out the taxes relative to anything we've done historically. And so where do you go from here? You know, because this is just the tip of the iceberg in terms of the progressive agenda.
SPEAKER_02: Doesn't that speak to the problem? Like the fact that we have such an extraordinarily high debt burden and federal budget that we're kind of scrambling to figure out a way to kind of make ends meet effectively, right? I mean, because our alternative again is to just like massive inflation run, you know, issue a ton of a ton of new debt or to cut spending. No, no, no. But David, either of those seem to be on the table. No, no, no.
SPEAKER_04: You're going to exacerbate this issue. I'm telling you, I know it doesn't seem likely, but I think on a marginal basis, this will be an incentive to spend. And the reason is that it's a very frustrating idea for somebody to think about putting money in the ground, especially a sophisticated investor at a rate of return that just changed in half. And so from my perspective, I would be more likely to spend because I would rather just YOLO the money than I would rather put it into the ground because I would be worried that that could then get taken away from me. It could also change even further and further. And I think that's a very frustrating idea. I'd rather take a vacation. Again, let's go back to the example. I'd rather take a vacation with that $10,000 than go on to Jason Syndicate and put it into the hands of folks because I'm just like, you know what, it's going to turn into even if even if Jason hits it and I get back, you know, I'd rather just go on vacation. Enough of those decisions. And I think I think you have a very different kind of economy. You have you know what you have? You have what everybody else has.
SPEAKER_02: So do we reduce spending?
SPEAKER_04: I think you have to reduce expenses. I think that we have an infrastructure that is not well accounted for meaning if you're a company, you can go to a company like Tableau, you can go to a company like, you know, pick your pick your metrics company. And within, you know, a few weeks and months of work, you can literally understand where all the dollars are, right, you can understand your business, and you can figure out where money is being wasted and where it's not. In a government that's impossible to do, right, because you have these laws, and these laws are artificial constructs that we construct. And those artificial constructs are influenced by money in and of itself. And so these dollar flows are impossible to map, so you don't know where it goes. So for example, the $700 billion budget in the Pentagon, does anybody have any idea what the ROI is on that, or even a way to measure it, like even to actually make it simple? Well, like if you were if you had $700 billion of investment capital, the the market has a really simple way of saying, Okay, David, what's your ROI? What's your return on invested capital, and you can say all kinds of fancy things, you can have all kinds of fancy projects or simple projects. But at the end of the day, what is measurable is $1 in and what that dollar grew into, and that's a return on invested capital, it is impossible to know that. And so you know, we could say, for example, you could define it and say, well, I'm going to basically get every single person to graduate high school. And now I'm going to spend $500 billion a year to make sure that the graduation rate is 100%. That would be an incredible goal. You know what that is absolutely measurable, right? And and you'd be able to back into all of these programs and the one that's ones that didn't work, you'd cut, you know, and you'd end up with what David said, which is school vouchers. I mean, just I think I think the absence of that accountability, to mop has led us to
SPEAKER_02: a scary dilemma. And the dilemma is, over 10 million Americans are directly employed by federal government. And a large swath of the remainder of the economy is supported by federal government spending, which is basically your point, right? So large, large amounts of defense and military construction, healthcare and pharma, and the list goes on. But like the direct employees of the federal government, plus the amount of revenue that depends on federal spending is so significant now, as a percent of the total income generated by Americans, that it is very hard to say, like, let's create accountability in a system when so much of the economy is functionally dependent on it. Am I missing something, Sax? Like, I mean, isn't that the circumstance we're in right now?
SPEAKER_00: Yeah, I mean, the thing that like, is amazing to me is, you know, I lived through the 1980s and 1990s, like, like you guys did from 1982 to 2000. That 18 year period, we had sort of an unrivaled economic performance, it was roughly around, we had two bad years under George Herbert Walker Bush, that's why he lost reelection. But we had close to 40% growth in GDP. Every year, we had great productivity. And we had massive deficit reduction. It's the last 4% a year.
SPEAKER_03: Yeah.
SPEAKER_00: And we and we had we actually had government surpluses, budget surpluses the last few years. So it seems to me that we had the winning formula as a country. And look, this is not partisan. I think it's bipartisan. I think the right solution is somewhere between what Reagan and Bill Clinton did. And you know, Clinton, he rose, he increased the individual tax rate to 39.6%. So he did do that from 36%. But he cut it from the cut the investment to the cap gains rate from 28 to 20. It was in that ballpark. You know, we know that works. You know, we know that works. And, you know, somehow we've moved away from what we learned in that time period because, you know, I think the left in this country has has become kind of, you know, has embraced this.
SPEAKER_04: We're saying the same thing, you set up the incentives for people to invest, they do if you set up the incentives for people to spend, they will do that as well. I see this, I think Shema is exactly right.
SPEAKER_03: There are a lot of people in a use the example of the syndicate calm. When I do my syndicate deals, there are people who are recreationally saying, you know what, I love the idea of putting five or 10k into a flyer, they're gonna, you know, half of them will go away a third of them, all these people who are, you know, involved in day trading or crypto or real estate investing, they're gonna look at and say, Is this worth the time? Or is it worth this amount of time, maybe I'll cut back from doing 40 hours a week of this to 20. And if you look at what happened, crypto people, they went to Puerto Rico, you look what happened to venture capitalists and CEOs, they went to Florida, Miami, Austin, this is going to, if it does pass, you could be pushing people to Singapore. Well, we have another very complicated problem.
SPEAKER_04: And this is what freeboard brought up, which is, and I don't know the answer, David. So I'm trying to I'm actually talking around your question, because I think it's a it's the right, absolute question. But think about this, what happens in a world where now let's just say that the revenue of the government goes up, right? But outcomes stay the same or get worse. And at the same time, and you could claim that that's effectively what's been happening over the last 20 or 30 years, right? Government revenues have gone up, impact has stayed the same or probably been net negative. But then at the same time, you have this, you know, program of quantitative easing, where then you can essentially print money on demand. And when you think about that, it's like, wait a minute, I am giving you money. But then then you are also going to the photocopying machine with my money to make more money. And all of that total money does less than what it did when it was half that or a quarter or a third of it. That's a very scary realization, I think that people, you know, will eventually come to. And I don't know what the answer to that is. I, you know, I think David Saxipu said it, which is like, you know, the states are this incredible AB test, right? Because you get to test like theories, right? And you have you have now every complexion of theory, you have like, you know, the low tax states, the no tax states, the mid tax states, you have high real estate taxes, low real estate taxes, high estate tax, whatever, you get every grab bag of incentives, and you're going to see. And the other thing is that was assuming that the federal government kind of mostly stayed out of the way.
SPEAKER_01: Right. You have this massive overlay. Yeah, I just posted a chart in the chat that Nick can put up, which is federal spending
SPEAKER_00: federal outlays of percentage of GDP. And it's really interesting because federal outlays of percentage GDP have generally been around the 20% line plus or minus a couple of percent since you know, the 1980s. And last year in 2019, it was 20.7%. It jumped to 31.3% under COVID. And it now feels like we're trying to make this new level of, you know, going from 20 to 30 permanent.
SPEAKER_02: It's like mask mask wearing.
SPEAKER_04: Well, the the problem is the only time we did that in history was in World War Two. Now we were trying to fight the Nazis, which was worth spending the money on. Yeah, I would say that was a good use of capital.
SPEAKER_02: But it's very hard to step back, right? Because what starts out as temporary becomes permanent. Is that kind of the concern? Well, that's what that's what Milton Friedman said is there's nothing quite so permanent
SPEAKER_00: as a temporary government program. But what they're threatening to make permanent is this new permanently higher level of federal spending in the economy. And I think it's a very dangerous experiment because it either takes tremendous money printing to support it, or a tremendous tax burden. And neither one of them is good for the economy. By the way, you know, again, when Bill Clinton left office, I remember, you know, you can go to the time machine for whitehouse.gov when he left in 2000. And he bragged about how, under his terms, under his eight years as president, they reduce federal spending from 22% of the economy to 18% of the economy. Can you imagine a democrat today boasting of that?
SPEAKER_03: Or even a republican? I mean, what who was the guy who was your guy who was like, the Tea Party people who there was somebody who was like in charge of the set? Oh, I don't know who was but it was just like, we got to cut spending.
SPEAKER_00: Oh, yeah. Oh, yeah. Ryan, the speaker, the Speaker of the House, Paul Ryan. Yeah. All right. You're right. You're right. Based on this. Spending restraints kind of gone out the window and in both parties, and we're public, and it did. It did happen under Trump, the Republicans don't seem to find their principles on spending unless and until there's a democrat in the White House. So they definitely deserve their share of the blame on this. But we do seem to be entering a new territory here of this, again, levels of spending we've never seen before.
SPEAKER_03:
SPEAKER_04: It's incredible. It's absolutely – the problem is it would be so much better if we just said we're going to do this one very specific thing with a huge number attached to it. Like I would rather say we're going to Mars, here's a trillion dollars. We're cutting student debt, here's a trillion dollars. We're going to double down on cyber and we're going to get completely pivot the military or something and here's 500 billion. Green New Deal, whatever. Something aspirational that is not just anti-rich people, let's tax the rich.
SPEAKER_03: Right now we have labels, we have a label, and then we have a spaghetti mess of spending
SPEAKER_04: that just isn't really attached to what the label means. And none of it is accountable and so you don't really get anything for it. I know this is a silly question, but why wouldn't we test this and say, hey, 20, 40, there are
SPEAKER_03: numbers between these two, maybe we'll increase it 2% a year for eight years and we'll see what happens.
SPEAKER_04: This is the other problem with like this idea of American exceptionalism. We believe that we can't learn anything from anybody else and that's also not true. We actually know what it looks like when you have government as a massive portion of the economy. And we also know examples where government basically enables human capital outcomes but remains relatively small and fixed. Singapore, right? There's this incredible example where I think right when Lee Kuan Yew became the head of Singapore, the GDP of Singapore was the same as the GDP of Jamaica. What you saw was this complete divergence in these two countries. Think about this country, which is basically this little spot of land surrounded apolitical, a religious, surrounded by these Muslim countries and they still thrived and they kicked ass. They were never invaded, et cetera, et cetera. And underneath that was this belief that it's what you said, Friedberg, where you focus on an outcome, you spend against the outcome and you try to measure in a reasonable way and you double down on the things that work. And then on the other hand, if you look at Europe, Europe is a good example when spending sometimes for the greater good in the best interest can run amok. And really what happens is you start to stagnate.
SPEAKER_03: And Singapore is only what, 6 million people? I mean, it's like Ireland or Norway or Denmark. I mean, this is not a huge place. Sounds like we didn't solve any problems in that last piece.
SPEAKER_02: We didn't solve. I mean, what do we think is going to happen in four years? Does this give Donald Trump a clear path into office if he said, hey, we're taxes again?
SPEAKER_02: The worst case scenario is you see what happened in France when they had that 75% super tax and then they introduced the wealth tax and they had massive emigration of invested dollars out of the country and people out of the country. They did get rid of George.
SPEAKER_03: That was a bonus. He went to Russia.
SPEAKER_00: At what point, how many red pills do you guys have to take before you're willing to reassess your political party? Because it seems obvious to me. Now, look, we could talk about how bad the Republican party is, but there's no question in my mind that the Democratic party, all the energy, the base, the activists and the politicians who have the microphone, they are woke socialists. That is the dominant ideology in the Democratic party. What Biden is doing right now is catering to that. He's compromising with it. Yeah, but he wasn't catering to that until this point.
SPEAKER_03: He didn't put Bernie or Elizabeth Warren into any cabinet positions. He kind of marginalized them and now he's like, okay, let's do something. Would Warren and Bernie have done this?
SPEAKER_04: No, but Jason, I think you're right. This is why I think this is like a sacrificial lamb and I don't think anything's going to happen. I think Biden is a fundamental centrist. That's why I like him. I think he's a – Yeah. He's a stable, predictable figure and that's I think what you want in the presidency. I think that this is sort of like, okay, you guys want a pound of flesh? Here you go. But I think he's so politically smart that he probably does have a bunch of millennial woke socialists whispering and chattering like, hey, do this, do that, do the other. But he's probably the only one there who's smart enough to realize this won't get passed. It's not going to muster enough support. I don't know.
SPEAKER_00: I think I – Biden is not governing like a centrist right now. He's proposing what, four trillion of new spending, new tax increases and he's just getting started. But look, and I would challenge this idea just slightly of him being a centrist. What I would say is he's always tacked to the center of the Democratic Party. So I do think he's a triangulator and a calibrator. He's not like a conviction politician the way that Bernie Sanders is or an Elizabeth Warren. But what he's tacked to is the center of the Democratic Party and the center of the Democratic Party has moved very far left because all the activists have moved to the left. And so he's been dragged left. Remember, Biden was Clinton's floor manager in the Senate when he passed all this legislation. And so now Biden is very far to the left of where Biden was in the 1990s. And the reason for that is because the Democratic Party has moved. So once again, I guess my question to all of you guys is what does it take? How far does the Democratic Party have to go to the left? Not Donald Trump. Not Donald Trump. I wouldn't call this as much of a radical policy shift as I think it's being framed.
SPEAKER_02: I honestly think this is a natural and inevitable consequence of the circumstances we find ourselves in right now with respect to the spending level, the dependence we have on federal spending across the board with respect to individual employment and the economy, the need for a variety of social services to get us through this COVID economic collapse. I just don't see another way out. And I feel like it's the natural course to do exactly what's going on right now. I think it's gonna pass. I think something like it's gonna pass. I think something like it's gonna pass, but I don't think it's gonna pass.
SPEAKER_04: Yeah. Where do you put it at?
SPEAKER_03: You think it's gonna be equidistant?
SPEAKER_02: I'm not saying it's good or bad. I think obviously, we just find ourselves in this circumstance in this country in this moment in time, that this is the only path. I'm just not sure you could go in and go slash a ton of spending right now. That anyone would win reelection or most Americans would be anything but unhappy. It's just the consequence of where we are.
SPEAKER_04: Let's play the glass half fold. Here's a crazy idea. For example, somebody like me, what I would think about, which I think is a little... It's crazy, but I would do it, is, okay, I'm just gonna move literally every single thing, every dollar that isn't nailed down into a charitable vehicle and I will invest through my charity because I still have to donate 5% a year, but then I can compound tax-free. Now, I care more about the businesses that I'm a part of and the progress that I can create, so that may be okay and I'll just pay myself a salary to fund my lifestyle. But that could be a way around this. To me, the biggest issue isn't how much money I have personally. The biggest issue is how much money I will have to put back into the world. The idea that then it goes to a place where it's profligately spent in a way that isn't accountable really bothers me. That idea bothers me a lot. David, that would cause me to tack even more to the right if I could find somebody who understood that principle. What I don't want to have is, in the absence of social programs, the problem that the Republicans leave is this no man's land where then you're forced to believe that this one man for yourself, it's all about you, you can figure it out, the rugged individualism, that's just not realistic. I am a complete byproduct of a social safety net. That should exist. The problem is that Republicans don't give you that option to have then accountability on spending. Just somebody please just say that. I don't care what you call yourself.
SPEAKER_00: Yeah. Well, look, I think Republicans have gotten a lot more comfortable with the idea of entitlements and the social safety net. I don't really hear anyone opposing that anymore. The same thing has happened with like the Tories in England. No one's really trying to roll back the social safety net. We need a Republican messenger to come forward and say, listen, we don't care who you love, what you smoke, where you're from, what you look like. We believe in an opportunity society. We want to spread that option to everybody. But ultimately, opportunity comes from the private sector. We're going to have a strong social safety net. And we're going to basically give everybody the most opportunity to participate by giving them a great education. That's basically what the agenda should be.
SPEAKER_03: Yeah, I'm in. I'm in. I mean, to your point. Even the starting line.
SPEAKER_01: Hallelujah.
SPEAKER_03: I like it. I mean, I would.
SPEAKER_04: The problem is your boy tried to dismantle Obamacare. You know, unfortunately. The problem is Trump.
SPEAKER_03: Like Trump, I'm a never Trumper, obviously, but I'm kind of purple. I would, you know, I'm considering Austin or Miami as a place to locate myself. And a decision like this makes it easier.
SPEAKER_04: I would never do that. I'm actually very I love Texas.
SPEAKER_03: I love Austin. Austin is the kind of purple I like. Like I like personal freedom. And I like what you're saying like love who you love smoke what you want.
SPEAKER_02: What year did you move to the Bay Area? Five, six years ago.
SPEAKER_03: I was in LA for 10 New York for 30.
SPEAKER_02: I feel like it's a last in first out thing that's going on right now with respect to immigration out of California. I've been here since 2000.
SPEAKER_04: I'm not leaving. Yeah, I've been here my since I was six years old in California, and I'm not leaving.
SPEAKER_02: And I've been in the Bay Area since college. So I'm not, you know, I feel like it's a lot harder to leave when you've been here longer. It's a lot easier to leave when you've been here less time. That certainly seems to be the pattern I've seen amongst friends and colleagues with respect to leaving the state.
SPEAKER_03: All right. The Chauvin trial came back guilty all three charges.
SPEAKER_02: What is there to even talk about here? What is there to talk about? I don't even know. I mean, I feel like we should like,
SPEAKER_04: can I give it can I give a shout out to a really good friend of mine. His name is Neil Cachal. He was the former Solicitor General under Obama. He was one of the prosecutors that worked on that case. He's a partner at Hogan's, runs a Supreme Court practice here, but basically went into this pro bono trial on behalf of the state of Minnesota, working with the district attorney. And I just want to say, Neil, proud of you. It's an incredible thing. Thank you for keeping America safe. Okay. I mean, you know, what's crazy is like, but then, you know, the same day there was there was a shooting of this, this unfortunate shooting of this, I think, I think she was 16 years old, this black girl in Ohio, and then, you know, LeBron tweeted something out. And then LeBron had to basically delete the tweet because it was causing people to go absolutely crazy.
SPEAKER_03: Well, I mean, each of these situations is unique. And in that situation, somebody was going to stab another person, the cop didn't know what was going to happen. And, you know, in another time period, like, maybe that would have been saving somebody's life who had potentially been stabbed. And, you know, the George Floyd, I think he had a reserve judgment on each of these, until you get all the information. But the information here was just super conclusive, like the gymnastics Ben Shapiro, and some of these far right people had to go through to say what you saw in George Floyd being murdered was not what happened. Well, that's that's performative theater trying to get people to watch.
SPEAKER_03: And it was I mean, it was just gross to watch.
SPEAKER_04: I just want to call it what it is like that's acting I feel like probably if anybody if any one of us found Ben Shapiro in a bar and just hung out and had a beer, you'd find out that he was like, he was like the Meryl Streep of our generation. You know, like this incredible actor. Like an incredible actor. I think I'm Adams and his pockets.
SPEAKER_03: All these guys are just trying to figure out how to say that this was a travesty of justice. And I'm like, I don't know what you saw.
SPEAKER_00: But yeah, let me explain where they went wrong. Okay, so. So look, I agree with you guys. Fundamentally, this was an easy look, this was, you know, finding a fact by the jury guilty on all charges. Obvious, right? The tape shows it. His the show Vince record as a cop, numerous complaints. You know, this was a bad apple. This was a bad cop. He deserved to be convicted. End of story. That's where the analysis should end. But of course, the people on cable news would have nothing to say if that was the end of it. And so look, I think both the right and the left kind of went off the rails on this where, you know, the right kind of went off the rails is you had well, what happened is you had Maxine Waters, you know, come out. And while the jury was still deliberating, she was basically calling for activists to get more confrontational in the streets if the verdict went the wrong way. And so then the defense... Not helpful. Not helpful, right? And so then the defense made a motion saying that this was affecting the deliberations. There's no proof of that. The judge ruled against that motion, but he did, the judge reiterated his desire for the politicians to stop talking about the case, right? And so then what happened is the right wing commentators were criticizing Maxine Waters and implying that there was an effort to try and coerce the jury. And there's no proof of that, right? And I think the mistake is in somehow framing Derek Chauvin as like a sacrificial lamb to the mob. He was not. He was guilty. He deserved it. That being said, I do think that the judge had a point that it would be helpful if these politicians would just stay out of it, stop commenting on it while the jury is deliberating. I think there was a legit point there. But the left made some weird comments as well. You had Nancy Pelosi made this really bizarre statement. That was very strange.
SPEAKER_03: I think that was like a slip up of like just trying to say something... I mean, being charitable, she was trying to say something nice that George Floyd is going to create a wave of justice. And that's a great idea. She said, yeah, she said, thank you, George Floyd, for sacrificing your life for justice.
SPEAKER_00: Yeah, that didn't come out exactly as she intended. No, no. I mean, because look, George Floyd did not go out that day intending to be a martyr. No. No. And so it sort of expressed kind of what she's thinking, which is how am I going to use this politically? Yeah, that's how they trained. It came out pretty gross, right?
SPEAKER_03: It came out gross for sure.
SPEAKER_04: I think that's how they're trained. It's kind of like if you take a finely tuned athlete in a sport and give them... They're reactive because they're so instinctual. I think it's kind of like this. She's an incredibly finely trained athlete and her domain is politics. And so what is that phrase? Every crisis is an opportunity kind of thing. So I think...
SPEAKER_03: Yeah. I mean, they all flew there to be there for the trial, et cetera. And that couldn't have helped the judge with the impartial jury. And maybe that causes a mistrial. I mean, I don't know, David, you're an attorney. Is there any chance on appeal that a Maxi-Water quote like that could result in...
SPEAKER_00: Well, the judge actually said that the defense could reserve that issue and use it on appeal. So yeah, they could use it. But I don't think it's going to work unless they can prove that somehow the jury was contaminated by what they were hearing on TV or something like that. The judge's instructions were pretty clear.
SPEAKER_04: Like I watched a couple of the ending days and he's very clear. Like he's like, guys, I don't want you to watch the news, you know, stuff like that. He was very directive in making sure that they tried to be as uncontaminated as possible. So I think the surface area for an appeal is pretty thin here.
SPEAKER_03: The fact that the police chief and everybody who worked with him said like, this is not standard, and they just threw him right under the bus. They didn't want to be associated with this in any way. By the way, well, they're not going to be able to hide much longer though, because the
SPEAKER_04: DOJ said they're opening an investigation into the Minnesota police force. So I think they're just trying to crack open the police reform in that state and just get those guys on the right side. It's going to be, you know, again, here's this other issue where it's like, okay, this is where like, it's very difficult for the federal government to do anything. But you know, so whatever they try to do won't really result in what you want to have because every state, again, Jason, to your point, has completely different political ideologies. Nobody wants to behave the same. Everybody wants to be independent. Everybody wants to get reelected as not kowtowing to somebody else. And so you just don't get these consistent outcomes. And then people are forced to vote with their feet and move across the country, you know, to get a bunch of simple things that I think should be pretty consistent across the entire country.
SPEAKER_03: The thing that I found particularly deranged was these people who are like, listen, he's a fentanyl addict, he's an opioid addict, which by the way, there are tons of affluent people. Everybody in this country is addicted to opioids. Fentanyls are everywhere. Fentanyl is everywhere. And then you're trying to say like, because he had that addiction, but in some way that negates the person kneeling on his back while he's in handcuffs. Like you're you have a duty as a police officer to take care of somebody when he's in handcuffs. How is he any threat in any way and then to listen to Scott Adams and Ben Shapiro on these absolute pieces of garbage, try to say, Oh, you know, there was the fentanyl that killed
SPEAKER_03: him. It's like, yeah, no, the person on his back kneeling on him for nine minutes.
SPEAKER_04: It's about it's about ratings. Now switching topics and to talk about ratings something a little lighter. The most interesting popcorn thing that I watched was the Hulu documentary.
SPEAKER_03: You did watch the Hulu documentary on WeWork? WeWork, yeah.
SPEAKER_04: I gotta watch it.
SPEAKER_00: I gotta watch it. I haven't seen it yet.
SPEAKER_04: Yeah. It is in a word. I think the right word is like, outrageous. I think the guy who stole it, Jason, was the lawyer who they interviewed. He had some incredible kind of like one-liners. Yeah. I think it's the... I'll be honest, and this may sound crazy, but I actually had a fair amount of sympathy for Adam Newman in watching it. I think that he, at least in the documentary, it came out that he, you know, not that he didn't create this issue, but that I think it was a little overly scapegoated because it's very hard for you to incinerate $45 billion without the complicity at a minimum of your board of directors, and a bunch of like extremely well-heeled, thoughtful investors. And so there was just so much complicity in this thing. So if anything, my takeaway was that he shares the blame with a lot of other people. And it wasn't him and him only. But my gosh, that documentary, some of the things guys are just... They're fabulous.
SPEAKER_02: This is always true in these businesses that end up with bad actors that are enabled. Right? Which has been the case in public and public success stories and failures, right? I mean, there's a cult of personality. The personality provides... The high beta personality provides the alpha. And it can also provide like a Theranos outcome. And you know, the thing that you'll see when you watch this is...
SPEAKER_03: I don't know if you guys watch The Vow about that Nexium cult, which is just equally loathsome, horrible people behaving badly. But he really targeted young people to work there and indoctrinated them into this, we're changing the world. And then there were no adults there. And you see him behind the scenes when he's talking at the IPO roadshow, and he's having basically a panic attack. And he's psychotic. I mean, he was really deranged. And they have this video of him trying to get through the IPO roadshow. What show is it? What movie is this? It's the WeWork documentary. The WeWork documentary. Just get Hulu. It's on Hulu. Yeah. It is so deranged. It's awesome. I mean, it's fire festival level.
SPEAKER_04: Deranged is a big word. I'm not sure that it's deranged. But I think it's like, it's juicy. It's gossipy. What about his wife?
SPEAKER_03: And like that whole thing, like WeSchool? They're like, we have to democratize education for $60,000 a year.
SPEAKER_01: Have you guys ever regretted enabling quirky personality entrepreneurs that you've backed
SPEAKER_02: and then you've regretted it later?
SPEAKER_04: Yeah. I mean, the problem is it's hard to know in the midst of it. I guess it's like kind of like that line, like the line between genius and insanity is very thin. But yeah, I mean, the one thing I will say is I've only ever had one issue of outright fraud. And so in a… Do tell. Well, no. I mean, in hundreds of companies that I've invested in, luckily, I've only seen one issue where the CEO was extremely, I don't know, aggressive in how they accounted for and booked revenue. This is where one thing that we don't have at the early stage companies, we don't have the check and balance of a reporting infrastructure and a third party watchdog and all these other people. And so you guys all know this. When we go in and we sit in a meeting, in a board meeting, and the entrepreneur puts slides up, there is an inherent 100% categorical belief that they aren't lying. You don't even have to check that assumption. It's just assumed that nobody's lying. Good or bad, we're just presenting the data. And I had one case where the guy lied and it wasn't one was it was. And our CFO and our team figured it out and there were other investors and we all were just really shocked and we had to kind of clean it up as best we could.
SPEAKER_03: I have literally a dozen and they we didn't wind up investing in I think 10 of the 12. And the reason is, we took diligence to your point, she mouth like do you how do you even know in a board meeting? I just said, screw it, I'm going to build a diligence team. And we asked people for all their bank statements, and for their iTunes account and for their Google Analytics. And if a company doesn't give those to us, we just know that something's up. And we figure it out before we invest because the two times we did get dinged on this. We had one where somebody was giving themselves a loan and you know, we did.
SPEAKER_03: We just basically have a diligence list that says give us the incorporation docs and all these bank statements. Now somebody could fraudulently change a bank statement that is possible. So there, it depends on how deep you want to go in the fraud.
SPEAKER_02: But did you guys ever like enable a personality that was just like so over the top and then you're like, Oh, shit, this is actually gonna, this is actually an explosion. Like it's a total disaster. Only in the top three investments.
SPEAKER_00: That's a good point there. That's a good point, right? Like, yeah. So because, okay, so I wrote about this in my blog post Blitz Fail about the sort of how founder psychology can actually cause a company to go off the rails. Oh, zenefits.
SPEAKER_00: The thing is that founders do need to be much more aggressive than the average person. You know, we like to think that a quality, that a personality trait like aggressiveness, there's like some sort of normal distribution of it and you kind of want to be somewhere in the middle of the curve. And it's actually not true. You want founders to be much more aggressive than the average person because if they're not, they're just not going to persevere and push hard enough. And I mean, we saw this with Uber, right? I mean, TK was a super aggressive personality. The company would not have been as successful. How do you not push that hard? And so the curve in the real world, it's not a normal distribution. It looks more like a curve where there are returns to aggressiveness and they're keeping increasing returns to it until suddenly the person goes too far and then they jump the shark and the whole thing craters.
SPEAKER_04: Can I say something? Like, you know, having been in the engine room with Zuck in a critical moment, Zuck was an aggressive guy, but he wasn't over the top and he wasn't just this like crazy weirdo personality. He wasn't enabling sexual harassment. He wasn't doing any of that stuff. Would you say? Yeah. He was an intellectually incisive, he was an aggressive thinker. So this is why my reaction to David's question is I haven't backed assholes because I just think that archetype doesn't work.
SPEAKER_00: Zuck is a very cool analytical personality. There are these founders that, you know, I've heard the term wild stallion to describe them where they are, you know, they're like these wild stallions. They have tremendous upside, but they're also a little bit, you know, wild. And unless they sort of learn – They're getting hit with the hoof. Yeah. I mean, they've got a lot of talent, right? The amount of talent you have is like the horse you're riding on and some people are riding on a Bronco. They got a lot of talent, but it might buck them off. I just think the real edge in investing is figuring out what is bluster and window dressing
SPEAKER_04: and show and what is actually aggressive thinking. Like John and Patrick Collison, there's zero bluster with those guys. Those guys, that company is going to be the most valuable company that's private right
SPEAKER_02: now besides SpaceX.
SPEAKER_04: These guys are incredible intellectually thoughtful killers. That's what they are. That's true. They outthink everybody.
SPEAKER_00: But there's also a maturation process that a lot of founders go through, right? I mean, the Collisons and Zuck, I think, got very mature, very young. I think there's other founders that it takes them a while to get more polished, get more disciplined, reign in those emotions. I'm not saying they're fraudulent. We don't want to bet on fraudulent founders, but some founders need to learn how to harness the talent they have. Yeah, I agree with that. I agree with that. And those are the ones where it's very hard to know earlier in their career whether to bet on them or not, right? Because they may get it under control or they may not. You can't tell at the beginning.
SPEAKER_03: Here's the analogy we use internally. It's like being Professor X and the X-Men, you could have a Jean Grey or a Wolverine and everybody's got a different superpower, but you need to teach them how to use that superpower so they don't self-destruct or cause chaos. They can bifurcate the other way, right?
SPEAKER_03: They could be Magneto, right? You could go the other way. I'm not sure I get all the references, but I hear you.
SPEAKER_03: Well, I mean, I'm kind of shocked given how much of a huge nerd you are that you don't understand the X-Men. Jason.
SPEAKER_04: I love that movie with the guy who's made of all the rocks and the little tree guy who's his buddy. That's Guardians of the Galaxy.
SPEAKER_03: Yes.
SPEAKER_00: I think Jason's favorite character is the blob.
SPEAKER_03: Is that the one? You brought COVID-20. I dropped COVID-15. What are you talking about? How many of those Cubano sandwiches are you having? Look at your face, dude. How many croquettes? No croquettes, Sax. I shouldn't have gotten there. Side salad. Bad idea.
SPEAKER_00: I shouldn't have gotten there. You're right. Yeah. Side salad.
SPEAKER_01: What is your health plan?
SPEAKER_02: Now that we're coming out of COVID, are you running? We got an intervention right now.
SPEAKER_01: You look terrible. You do look a little bloated.
SPEAKER_04: You look like a puffed fish. Oh, geez.
SPEAKER_00: I need to lose like 20 pounds.
SPEAKER_03: I'm down 12 from my peak of the COVID peak. I'm feeling good. Just get a personal trainer.
SPEAKER_04: Speaking of COVID, what the hell is going on in India? Oh, my Lord. It's scary. The whole thing was they were taking hydroxychloroquine for totally different reasons, and this is why it's all fine.
SPEAKER_03: Or that they had some immunity, or that it was hot. I mean, there was a million reasons of why they were not going to get hit, and then now they're surging. We have 60 million shots on the shelf, and the number of people getting shots is going down. This is America's chance to use, instead of battleships and nuclear weapons, we can use this COVID to shape global policy. We should be getting vaccines to other countries and be, once again, the shining light of the entire planet and humanity. Why are we not bringing shots to India now?
SPEAKER_02: We have so many extra. I'm not sure. I'm just trying to pull up the India VAX data per day. I'm not sure that there's a... That's as much the issue, right?
SPEAKER_03: I mean, it is scary to watch. I mean, you're our go-to science guy, Freiberg. Tell us what we're looking at here on this chart. The daily COVID cases are now hitting 250,000. 300,000 a day, Jason, right now.
SPEAKER_03: It broke 300? Oh, my Lord. In the United States, it's gotten down to 50, 60. Our deaths are under 800.
SPEAKER_02: India is now past the peak of the US. India is now seeing more cases per day than any country has seen worldwide during the whole pandemic at over 300,000 a day right now. And it doesn't seem to be letting up, and we're now questioning whether it's testing that's the limiting factor in terms of reporting on these cases. So it's pretty nasty. Now, there's a famous Indian politician who had been double-vaxxed, who claims that he is COVID-positive as is his mother and sister. And so it's also creating a little bit of a concern in the market about getting COVID. Now, he doesn't seem to be having a severe case, which is one of the kind of important things to take note of in vaccination is it's not necessarily binary. But it's certainly making a lot of creating a lot of fear as a result of his kind of public statement about this. This isn't just about cases either.
SPEAKER_03: 30 days ago, they were at 200 deaths a day. And I mean, tragically, they're at 2100. So it's 10x in 30 days. If it 10x is again, that's 20,000 people a day dying. This is a different level than any other country has experienced. And they don't look at the end of the day, the hospitals hospitals to handle this, do
SPEAKER_03: they this could become a crisis of epic proportions.
SPEAKER_00: At the end of the day, a country success and battling COVID is going to be about how fast they can get their population vaccinated. It's very simple, right? I mean, Israel was first they got everyone vaccinated. Now their cases are down to almost nothing. The US is doing pretty well. Although there's some room for concern. We were doing, you know, close to 4 million vaccinations a day. Now we're at like three, three and a half, they're starting to slip a little bit. And that does not do it Johnson and Johnson, right?
SPEAKER_03: That has to do with people not showing up for appointments. Yeah, and I think you got to blame the media a little bit because they keep running all
SPEAKER_00: these vaccine scare stories about you know, how this person or that person the vaccine punched through and they got sick despite getting the vaccine. They keep selling. They keep selling all this like, you know, COVID scary and porn. You know, the the the right, you know what I noticed the other day on CNN, this is how
SPEAKER_03: insincere and ratings desperate they are. When they put up their COVID stats, they put up cumulative cases and cumulative deaths. That's what they obsess on. And it's like, hey, dummies, we know what you're doing here. You're trying to scare people. You should show the graph of the deaths going down. And then why can't you take your mask off if you're vaccinated and you're outside? Let's give a reward. You were talking about this last week. Yeah, Nate Silver had a really good tweet about this.
SPEAKER_00: He said that wearing a mask after you're vaccinated is now it's like the blue equivalent of the red MAGA hat, where it's completely performative to say, hey, I'm on team blue. You know, even though like scientifically, it's meaningless. It's like the press, they keep talking about this possibility that even after you're vaccinated, you could somehow keep transmitting the virus to other people. Look, viruses, I mean, freebir can explain this better than me, but viruses do not have in themselves the machinery for replication, right? They have to take over your cells, hijack your cells, machinery to replicate themselves. So first they have to infect somebody, then that person gets the virus, starts producing a lot of it, then they start shedding it. If you don't get really sick, you're not going to be shedding a lot of the virus, you're not going to be transmitting it to a lot of other people. And they talk about this possibility as if it's like a real possibility that people could still be transmitting the virus after they're vaccinated. I mean, it's not a statistically relevant possibility. Right.
SPEAKER_02: It comes down to this interpretation of everything being binary. And the reality is that all of this is on a statistical curve or on a kind of a grayscale. And the SACHS's point is 100% correct that the probability of someone who's been double vaccinated, getting infected and then being infectious in a meaningful way is so remote that it is not even worth kind of considering in a way. And being double vaccinated gives you such a significant typically, not for everyone, all immune systems are different. And some of what we might be seeing is the difference in kind of how people develop immunity. But it is such a rare case that one could have a severe infection after getting a vaccination is such that it shouldn't even be considered and kind of mentioned as being a reason for continuing to wear masks and not gather and not do things. And so, we started out as SACHS pointed out, and I think this is such a true and important point. We started out with this like immediate politicization of what's the right thing to do to reduce the spread of the virus. And then that became the mainstay for that political affiliation. And now the transition of the new world that we live in, where most people are vaccinated, we have a better understanding of the science and the statistics and the mechanisms of transmission, we hold on and we grasp on to that initiating kind of belief system that was correct at the time, but isn't correct anymore. And it seems so difficult to get people to shift their mind, this kind of this behavior is an ignorant behavior. And you see it in so many manifestations right now, in particular with respect to masks and behavior after vaccination and so on. And it's really brutal to watch. But we obviously digress a bit from the Indian circumstance, which is a really nasty one. So it looks like...
SPEAKER_04: Why now and not a year ago?
SPEAKER_02: You know, it's not clear, right? So there's someone provided an indication today that there may be as many as somewhere between 100 and 200 unique variants that we're seeing emerge in India. So there may be a lot of interesting, very interesting technically, but not obviously for human life. But a lot of dramatic variants or significant variants that might be increasing the infectiousness right now. And in particular, behavior has shifted in a way that's enabling some of these transmissions to occur. A lot of people let their guard down and so on in a way that maybe they weren't six months ago. And there may be some forced evolution associated with partial vaccination, totally a theory right now, where 110 million doses have been given in India so far. So in order for a virus to succeed, the viral variants that are going to infect more likely through a partially vaccinated population are the ones that are winning out. So there's a lot of confounding factors here. We're not really sure. But it is pretty brutal what is going on. I will say like this notion that vaccination does not prevent protection against variants is not a binary statement either. This is really, really important. I've been wanting to say this for a couple of our shows. When you get this vaccine, what you're doing is you're training yourselves, you're giving yourself the RNA to print the spike protein and that protein is now in your body. Everyone's immune system then reacts differently to create antibodies to that protein. The antibodies that Chamath makes and Jason makes and Sax makes and I make are all going to be different.
SPEAKER_04: But if you had to pick, whose would be better? I can tell you Sax is probably going to be the worst off.
SPEAKER_01: But yeah, but there are likely tens of thousands of novel variants that our B cells will make
SPEAKER_02: that will bind to that spike protein and get rid of it. And we will each have many hundreds or potentially thousands of novel antibodies that our immune system will make. So keep that in mind. You now have a portfolio of antibodies that your body is producing to that spike protein. So now when a SARS-CoV-2 virus shows up in your body, some of those antibodies are going to be really effective at getting rid of it. Some of them are not. Now the protein in the SARS-CoV-2 virus changes slightly. Some of the other antibodies you have are going to be effective and some of the other ones are not. And it is that portfolio that is going to change, sorry, that portfolio that is going to define your success at fighting off a specific variant of SARS-CoV-2 where the spike protein is changing slightly with each variant. So these variants change the composition of the protein. The antibodies that you have are going to be more or less successful depending on how that variant changes. And that's where there may be cases where the number of antibodies that you are producing or the success of the antibodies that you particularly have are a little bit lower for a particularly new variant. It doesn't mean that you're going to have an infection that's going to be a runaway infection in your body. It means that it might take you longer or it might be a little bit harder for you to clear that particular variant given the repertoire of antibodies that you've produced. That's why this isn't binary, right? It could be that it's like, hey, this variant shows up, boom, instantly I got rid of it. I don't have any infection. But someone else might have like, you know, maybe a slight bit of, you know, there might be a couple days where they'll feel a cold as your body's clearing it out. And the measure of this is this neutralizing titer, which is where they take people's blood with all of their antibodies in it and they put these different variants in. And they can measure how effective your antibodies are getting rid of that new variant. And the less effective your antibodies are, the higher this titer needs to be. And as a result, it could be a little bit longer, a little bit harder for you to get rid of that virus. And so, again, like when viral variants start to emerge in the population, and as they kind of take off and become more dominant, it doesn't mean that we don't have immunity. It means that immunity might be slightly affected. But it's not one or zero, right? Because you've got hundreds or thousands of antibodies to fight against COVID in your body. And I think that's really important. So, we should, you know, while there may be some variants that might be what we call variants of concern, meaning they can kind of slip away a little bit from most of the antibodies you have, it doesn't mean you're not going to be able to fight them off with the antibodies. And so, I don't know if that was too technical or too difficult to understand. But I think it's really important. It makes total sense.
SPEAKER_00: Yeah. Yeah. And one thing just to add to that is that most of the variants that the press keeps reporting with alarm that are somehow, that basically are going to be vaccine proof, they turn out not to be. You know, very shortly, there comes out a new article basically saying that the vaccines work. And so, the press keeps reporting these isolated cases as proof of something that's not actually true.
SPEAKER_03: Yeah. I mean, this is I just want to give the press a kind of just want to get accounting for the press in the last 30 days, one, obsessing about every single shooting, and then inspiring more shootings. When you obsess about these mass shootings, you inspire more of them. It is a proven fact, it is inducing people to do this more. It's not exactly correlated, but there is proof about this same thing with suicides. That's why we don't cover any young people killing themselves in the Bay Area in a certain town that we all know how to rash of them. Or we don't cover suicides on the Golden Gate Bridge anymore, because when they used to cover them, and put it on the cover of the Chronicle, two more people would jump off the next week. Number two, they were obsessing about riots. I mean, I don't know if you turned on the TV during the deliberations, they were absolutely gleeful about the potential of trouble happening. And that, of course, incense more people to go out and see what's going on, because you're going to get on TV and because other people are doing it and humans model other humans. And then finally, with the goddamn Johnson and Johnson, eight people have blood cuts, nobody died. Am I correct in that? And the one person died, one person died. Okay, so we don't even know. And then they obsess about that for days, like, you can't cover these things wall to wall and not think that they don't have culpability, the CNNs, the foxes, etc. You're obsessing over these things. And it's scaring people to not take vaccines. It's incenting people who are crazy, you're dog whistling crazy people to go get a gun, and to use that as a way to get famous. And you're doing the same thing, you know, with it with these, you know, riots in the streets.
SPEAKER_04: We're all in the opinion business.
SPEAKER_00: But the problem is when they just when they don't just hype things, but they actually give you factually incorrect information because, you know, it's they're trying to scare people into getting higher ratings, you know, fear porn, it's also framing David, which is a different thing than lying about statistics, they would
SPEAKER_03: say, we're not lying about the statistics. That's how many people died of COVID. But what they're doing is they're framing the cumulative number to make you scared. Today 400,000 people have died from COVID. It's like, no, over 14 months, 400 people have COVID 700 people die today. And that's the lowest number since November, but that wouldn't get more people to tune in.
SPEAKER_04: Boys, I want to tell you guys something. It's frustrating. Yeah. I'm vaccinated. I want to see I want to see you. I want to hug you. Keep a shirt on. And it's it's 530pm. And I've been working since 5am this morning. Oh, is that what that look is exhausted?
SPEAKER_04: I came back from Easter vacation guys. And I had been up between either at 5am or 6am. Every fucking you're working. You're working hard. I am grinding, but I am tired. All right, let's wrap here. When we asked me wrap what what's going on?
SPEAKER_03: Just because people have been asking, what's going on with the SEC and SPACs and just some more reporting or something? Because I was watching CNBC and they said, Hey, you're doing everything right. But there's a lot of other people doing things wrong. Explain to us what's going on.
SPEAKER_04: It's, I mean, it's a it's a very specific accounting issue, which is that some SPACs, many SPACs, and in fact, many companies, let's just put it that way, not just SPACs, but many companies use warrants. And the prevailing guidance on certain warrants was that they were equity. And basically, that gets put into a balance sheet statement where you have equities, assets and liabilities. And you know, it's it's on one side. And basically, what they said was they issued some refined guidance that said, actually, in these specific cases, these should be really listed as liabilities. So then it needs to move from this column to that column. But when that when you do that, you go through, you know, a bunch of cascading implications and effects and, you know, revisions and restatements. And so that's what the that's what the entire securities industry is dealing with right now, which was, you know, this guidance by the SEC and the implications. So that was on the 12th. I mean, just so you know, today, we just filed the updated all of our updated docs plus the updated S4 for SoFi. So we were able to work around the clock and just kind of get it done. And hopefully, what we've also done is create a bit of a way forward and a path that other folks can use to kind of like accelerate their progress. But it's definitely created a ton of work. But but we're, I think we're I think we found the right answer. So ultimately, good for you, because you want to see it.
SPEAKER_03: Yeah.
SPEAKER_04: And also, I think like the simpler path forward. So I mean, if you just think about capital market stability for a moment, like, warrant coverage should probably go away. Number one, right. So take all the warrants to zero. Second thing that should happen is that, you know, I think this is an opportunity to take a step back and figure out how to really make sure that the SPAC sponsors are of the highest quality. Somebody told me this incredible thing today. I am one of five groups that put up any money when we do a pipe in our deals. Meaning he said to me 95% of sponsors put up literally zero. And so of course, you're going to have, you know, extremely loose underwriting requirements, if that's the case. And so, you know, the idea that I'm thinking about, which someone proposed to me, which I think is very clever is this idea that, you know, you earn more of the promote more money you put up, right. So for example, like, you know, in so far, I think we put in $275 million. So I mean, we really, you know, that's a meaningful commitment. And it closes the gap between, you know, what your equity is issued at and what investors are buying at. And that's very healthy, right. And so I think there's all these mechanisms that will clean up the SPAC market, we need to have a much more refined criteria to allow people to be sponsors.
SPEAKER_04: And we need to make sponsors in a position where they must put in money so that they actually do the work. If you get something for free, let's be honest, you won't do the work. If you're forced to write a check, so I'm gonna really think about it,
SPEAKER_03: show me an incentive or show the outcome. And this happened on Angel List, where in the beginning days of Angel List, you had some angels, quote unquote, who didn't have any money, so they put 1000 or 2000 into a deal, then they would have 500,000 come behind them. And so you had this 500 to one ratio of dollars to skin in the game. And it was like, well, why wouldn't a syndicate lead put every company out there and not even put, you know, they have no skin, which is why when you have a venture fund, I don't know what they expect us to put in typically, well, the problems are one to 2%.
SPEAKER_04: I was 25%. Well, one to 2% is it can be pretty significant.
SPEAKER_03: If you're doing a fund every three years, I'm doing this. And it's, it winds up being millions of dollars for me, but I'm happy to do it because I believe in my own ability. All right, as we wrap, anybody have a plug or anything they want to let people know about?
SPEAKER_04: I want to talk about this one little thing I just not to talk about it, but I would like to tell you guys to read it because it is so interesting. Basically like European soccer tried to incite a revolt, where like the top teams across all the different leagues came together to try to create a super league, but it ended up like they were like a band of evil villains and like fans erupted, everybody erupted and then, you know, it existed for 24 hours, but in that 24 hours, it looked like a complete rewriting of sports and sports, like, laws and you know, it was an incredible thing. There's an article in the New York Times, I'll post it in here and folks want to read it. It's really, really fucking funny. And that will be on season two of Ted Lasso.
SPEAKER_03: I don't know if you guys watched Tim Cook's keynote this week with the new IMAX, which are really beautiful. He was so excited about Ted Lasso and Ted Lasso is a great show. But I mean, it literally is the the Apple show. You guys see Ted Lasso yet? What is it this television show?
SPEAKER_04: You guys haven't seen Ted Lasso the TV show yet? Is it on NBC or CBS? What channel is it on TV plus, whatever that is, channel six, is it on channel six TV plus
SPEAKER_03: you got to go on your Apple TV and then find an Apple TV plus on your TV.
SPEAKER_03: And you'll find it eventually it's one of their paid you know, they have their own Netflix competitor called Apple TV plus. So on your phone, if you type Apple TV, you'll have Apple TV, TV, I have Apple TVs behind
SPEAKER_04: my TV. No, no, but there's Apple TV plus, which is their Netflix.
SPEAKER_03: So there's a better is it a better Apple TV? No, no, no, it's content. It's a content subscription you could have that they just they screwed that part up. Hey, shout out much wanted to get sorry, so who's who's Ted Lasso? Ted Lasso is a Jason Sudeikis comedy that is incredibly heartwarming about a really heartwarming joyful kind person who goes from America to the UK to become a soccer coach. Yeah, really? Great. I hate that's boring.
SPEAKER_04: That sounds really kind.
SPEAKER_01: You would hate it. I do. I hate it.
SPEAKER_04: You should watch you should watch Gomorrah on HBO. I started it.
SPEAKER_03: Yeah. Whoa, whoa, here we go.
SPEAKER_04: It is so super. And also, you should watch it in the original language because it's not really Italian. It's like Neapolitan. And so like, you know, I can catch and understand maybe 20% of the words and I said to Nat I said, what languages she's like, I had no idea I watched it in Italian subtitles. So it was it was beautiful. It's beautiful, beautiful. It's so intense. It's like the wire but like I mean, you know, set in Italy. It's incredible.
SPEAKER_03: afterlife is also good Ricky Gervais if you want something cynical and heartwarming. That's for you, sex.
SPEAKER_04: Love you guys. Love you, sex. Come back to the Bay Area so we can play poker. Yeah.
SPEAKER_01: Why don't you just go to Miami?
SPEAKER_02: Are we going to Miami?
SPEAKER_03: I'm going. I'm going on a trip. I'll just leave it at that. I'll talk to you guys. What? What? Recognizance trip. What? Recognizance? Yeah, Recognizance. I'm going to be able to understand what's going on.
SPEAKER_04: Do you understand that that term is more associated with bail and in jail than it is what you think it means? Jason, you are released on your own recognizance. That's what I'm talking about. You want to do reconnaissance. Recognizance.
SPEAKER_01:
SPEAKER_03: That's what I said. Recognizance. Yeah, I think you'd be wearing an ankle bracelet on your recognizance.
SPEAKER_00: Actually, no, they don't fit on his ankles.
SPEAKER_01: I just have to mispronounce one word to make it a good episode.
SPEAKER_00: For Jason, it'll be a cankle bracelet.
SPEAKER_03: You can't talk, Mr. Doughboy. What are you talking about?
SPEAKER_04: My God. Is it called a bracelet if your calf and your ankle are the same in circumference?
SPEAKER_03: Put it this way. If Sax is wearing two of them right now, you'd never know.
SPEAKER_01: Sax is wearing one of his neck. What happened to your neck, Sax? We're out. We're out. Where's your neck, Jabba? See you. See you.
SPEAKER_03: Jabba the Hutt over here. Sax the Hutt. Love you. Love you besties. Bye-bye.
SPEAKER_00: We'll see you all next time. We'll see you all next time. Bye. We should all just get a room and just have one big huge orgy because they're all just
SPEAKER_00: useless. I'm going all in. I'm going all in.
