SPEAKER_00: aggregate fire budget for LA. Politico reported that the actual assertion that it was cut at all

SPEAKER_01: is incorrect because, and I quote, the city was in the process of negotiating a new contract with the fire department at the time the budget was being crafted. And so 50 million more was added.

SPEAKER_04: I think it's good for you to state it because it's been changing every 12 hours. The human mind tries to place blame or understand what's happening here. If you are for less government, you might've wanted to cut budgets to reduce deficits, right? And that's reasonable. And then now you're left with the position. Well, okay. Hey, we've got the fire department's budget and here's what happened. Or you might think, oh, the fire chief is a lesbian and this is a DEI hire and not double click on it and look at her track record. And her track record is she was in the top 50 of 1,600, 16,000 applicants when she went to it and she's got this incredibly storied career. So just, I hate to break the news for people. I don't think lesbians cause the Santa Anna wins.

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SPEAKER_10: Hey, everybody. Welcome back to This Week in Startups. I'm your host, Jason Calagato. So my co-host, again, Alex Wilhelm. He's on the East Coast. I am in Niseko in the province of Hokkaido. Doing a little deep powder skiing. Yes, your boy J-Pow is hitting the Japanese powder right now. The J-Ranch era is paused while I'm out here crushing powder. And then I'll be back in the United States to go to the inauguration. We're going to have a little, I'm going to be doing a couple of live shows from the inauguration for All In. And I think we might even have a little tiny All In VIP party. It's all coming together quite nicely. Alex, how are you doing?

SPEAKER_14: I am, I am fantastic. I'm on the East Coast, like you said. So instead of it being very, very late, it's very, very early. But as we said last time, twist, it does not stop. We roll along and I, yeah. The show goes on. Yeah. You know what I need though? I think, I think I'm going to give up on journalism and I'm going to go into, I don't know, private equity and I'm going to make a billion dollars. And then critically, this is where it's all working towards. I'm going to hire an in-house barista, just someone to make me fancy espresso in the mornings.

SPEAKER_13: That would be great. I mean, we could have an apron on and a whole counter. You could build a

SPEAKER_18: whole mock Starbucks setup. Yeah. And then they can hand it to my valet, right? Who would then bring it out to my work shed. And then they can bring me as we, as we converse, I could have my,

SPEAKER_14: you know, it's going to be great. No, I'm good. We have a lot of news this morning, Jason. I do want to say for everybody who's curious, we are going to talk about the jobs data that comes out

SPEAKER_20: in 16 minutes, but we're going to hold off on that, uh, until a little bit later, I want to

SPEAKER_22: start with ski lawsuits, Jason. What I'm being sued for going to Japan and no, no, no, no,

SPEAKER_10: skiing in the deep powder in E when I yesterday, I went to, uh, cat ski, which is where you go on a cat, which is like a tractor and you have the whole mountain to yourself and you go to untouched ski runs and, and back country. It was a peak experience. I've done it two other times in my life. And I have to say, uh, just on a recreation basis, best day of the past two years, absolutely crushed the powder and had a great time. Yeah. I mean, it is a unique experience to be at the top of a Japanese mountain with fat skis and a couple of friends on your own private, uh, ski slope. And it's, uh, I w a n a I you can pull it up. You want me. Um, if you just type in, you want a cat skiing, you will find a video on YouTube, uh, from their resort or, you know, from their website and you'll see some vistas. They will pull it up here for the crowd to see. Uh, but it's a, it's a peak peak experience for me because cat skiing, um, is, uh, really unique. You don't have anybody else on the mountain. And what happened here, Alex is in Japan, uh, the population has changed. Obviously they don't have this crazy population growth that they did have for a while. In fact, it's maybe going down a little bit. And so this isn't me, but this I think is other people skiing. You want to, and as you can see, there's a cat right there on the right. And you see how deep that powder is. Wow. This is an abandoned ski resort. So there were all these ski resorts in the eighties and nineties that were built. There were too many of them. They shut down because there weren't as many people. Uh, and so now this is empty and you go, and there's a total of, I think a maximum of 16 or 24 people. We had a private kind of situation going on and we were skiing there. So you get driven up in the cat because all the lifts are down. It is absolutely extraordinary and beautiful. And, uh, my friend, John runs it, a really nice guy who, um, is an American who gave this, saved this, uh, abandoned ski resort. And now the locals have one lift operating naked to come there. Uh, and all the locals get to ski at a very, very, very affordable price. I think $10 a day, a hundred dollars a year for a lift ticket, which is essentially free. Right. Yeah. And then people from Australia, Hong Kong, United States, and China, uh, and some other folks, uh, you know, New Island all come from around the world. If they can get one of the precious days on Iwani cat skiing mountain in this resort. And if you can get one of the days available, you get to have this crazy

SPEAKER_04: experience. And, uh, it was just incredible. I'm very glad we shared all that because now my

SPEAKER_00: jealousy has reached an absolute critical, critical level. Uh, I was thinking though, about ski

SPEAKER_14: lawsuits much closer to home for me, Jason, I'm thinking about, uh, Park city. And the fact that they are being sued by someone who says that he spent $15,000 and skied fewer, uh, than 10 runs. Well, he was there visiting due to the strike that we discussed the other day. And I'll just say, if I spend $15,000 and got 10 runs at $1,500 a run, I better be in Niseko doing first powder cat

SPEAKER_28: skiing. Cause that's what I think that should cost. Uh, skiing is not cheap. It is a sport for,

SPEAKER_10: uh, I mean, you can do it on a budget. I can explain how that happens, but we, we talked about the other week, you know, product market fit, creating new, innovative products. One of the innovative products to come to skiing was Vail Resorts doing the epic ski pass. What that meant was all you can eat 400 bucks, 500 bucks, 600 bucks, depending on when you buy the ticket and what mountains you have access to. And some block out day, it looks like the holidays, but for us cheap to say $400, $500, you can ski unlimited. So the ski industry learned how to create an incredible value proposition, but it's still a tough business. They had a terrible season because snow was off last year. It was one of the least, uh, it was one of the shorter seasons, right? Snow came late and it melted early. That happens some years. So you make less money. Uh, and so, but the, the bigger issue was they didn't want to pay ski patrol when you find bucks an hour. Uh, it's 20 turns as 23. And I

SPEAKER_14: can tell you, Jason, as of this morning, uh, as of really about two hours ago, if I'm being totally honest, uh, it has been resolved. Yay. Everybody. We've sorted it out. The park city mountain ski patrol strike is over and the data points are as follows. They are now going to get $23 an hour starting through 2027, several years and you get $4 more an hour if you are a veteran. So all of this, the lawsuit, the complaints, the, the media, the angry billionaires, um, over not much money, a couple of bucks an hour for a couple of hundred people. It, it strikes me as just a really small

SPEAKER_50: amount of money to have a fight over. It sounds like they made a poor decision. So I will, uh,

SPEAKER_04: I, you know, the management of this company is disgraceful. Um, and the number of tickets and how

SPEAKER_09: they managed the support there. So disgrace the odd.com. I'm going to make a jingle here for the show. Disgracia. We'll say that like part angry.com. Like it's a nice, right? So you say, Disgracia.com. And then you go to Disgracia.com. We pointed whoever the biggest disgrace is right now. It's Vale of Resorts for me. Although I may need to change that given California's

SPEAKER_04: leadership with these fires. And we'll get to that as our next story. I am sure, but yeah, congratulations to the ski patrol for getting a meager extra two bucks an hour. These people at Vale are nuts. They're, they're charging a fortune and, uh, everybody who's buying a lift ticket in a pass could afford to pay a little extra to be safer on the mountain. They should have never done this travesty. And I hope they, I hope that it's painful and they have to settle an expensive lawsuit. So they learn a lesson about not being cheap and paying their employees a living wage or something decent. Listen, I know it's a great job skiing for a living and being on the mountain. So it's, it's, it's kind of like being an actor or something like that. It's kind of a dream to be on ski patrol. I'll be honest, but still they should be two bucks an hour. Come on. Hey founders, you want

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SPEAKER_14: Northwest registered agent. All right. So let's talk about, um, the fires in LA. First of all, as a reminder, uh, these are still ongoing, hopefully with the winds dying down a little bit,

SPEAKER_00: the fires can be contained and fully extinguished. Our thoughts are with everyone who's been impacted.

SPEAKER_14: There are lots of ways to donate and support. So we'll include those in the show notes, but also just Google it. There's a lot of fundraisers going on. And, uh, the latest news Jason that I saw, uh, is from Biden actually. And he announced quote that the federal government will cover 100% of the cost of measures to protect lives and property in SoCal for six months. So the federal government has arrived with a chuck full of cash to try to help out with rebuilding and safety.

SPEAKER_09: Wait a second notes. It says to protect lives and property. It, that sounds like he's saying to put, to prevent the stuff. But I don't think that means that if it's a thousand or 2,005 to $10 million homes, they're going to just automatically

SPEAKER_67: pay to rebuild those. No, I don't think so.

SPEAKER_04: You know, that really is the bigger issue, not picking up the tab for the firefighters who are there, et cetera. That is a cost, but I think that cost is somewhat baked into LA's budget already in the California budget. So I think that's going to be the bigger higher order is, can you economically figure out how to pay for rebuilding a home in an area like Malibu or the Pacific Palisades? It's going to be very interesting because the regulations in California are really hard to build as are the costs of building. So building something in California, like a home, uh, friends of mine who have done it, a remodel is a two year process. A new home is a four or five year process. The cost of building a remodel in Texas, uh, or Florida might be six months to 12 months. And a building, a new home might be one to two years. The cost of doing it in, you know, uh, Texas or Florida might be $500 a square foot. It will be literally double in California plus regulations. Now, if you look at some of these homes, they're on the beach, which is managed by the coastal commission of California, which is a very rigorous organization that doesn't let you do anything. So there's going to be a big debate in the coming years, uh, about, are they going to be able to build how many years? So these poor families, you know, just the trauma of losing your home and your, your goods. I have a, I have a very close friend who, uh, was renovating his home. He was living in another place. So he's safe. His mementos were in his house that was being renovated, passport, photos, kids, drawings, you know, just anything that they had just gone. Um, which is just absolutely devastating. And so the penciling out the cost of this is going to be really hard.

SPEAKER_51: It's so hard that actually I struggled to find the right number to put in the show notes because,

SPEAKER_14: um, I saw numbers, you know, people are still sorting through the wreckage here. So I don't want to sound glib, but you know, I saw numbers that this is $20 billion in damage. Jason, I saw that it's $50

SPEAKER_01: billion in damage. I saw that it's 57. Like, I mean, it's so much money.

SPEAKER_04: Pretty straightforward. You know, the homes in Pacific Palisades having lived right next door to it, uh, were 5,000 square foot homes. Somebody might have a six or 7,000 square foot home. Somebody might have something as four, uh, small as three or four, but generally I'd say six, 7,000 square feet is what you're looking at in that town. Now you put that at a thousand dollars to, uh, construct it, right. All in. So that's six, $7 million. I think to rebuild each home, I think a thousand or 2,000 homes have been lost. So if we look at just homes in Pacific Palisades, if it's 2000 homes were lost at an average reconstruction of six or 7 million, you know, you're looking at $15 billion right there. It doesn't count any of the other stuff, schools, uh, and commercial buildings. And infra just straight up infra. Uh, there's a lot of infrastructure there. You're correct. That would need to be rebuilt. And so it's going to be tens of billions of dollars. Then people are just going to have to make this very strange decision. Do I rebuild or not? And do I rebuild in that area? And then if I do rebuild in that area, when is this going to happen again? Can I get insurance? Right. And if you can't get insurance, well, where, and you didn't have insurance because it got canceled six months ago, where are you going to get the money from? I mean, do these people have $7 million in liquid funds just sitting there to build a new home. And while they pay for another home to live in for that, they have to rent, you know, renting a $7 million home would be 5% of that cost per month per year. So 5%, $7 million, $350,000. Like, oh, this does not pencil out.

SPEAKER_14: Okay. No, on the, what to do. I think we are going to see in the wake of several hurricanes in Florida,

SPEAKER_00: uh, and this fire in California, a real national conversation on states setting the essentially

SPEAKER_14: regulating how fast you can raise the price of insurance. Because the problem that they have in Florida and California, both states with a large economy, lots of people and natural disasters, and a state run insurer of last resort is they're always doing a dance between allowing insurance

SPEAKER_00: companies on the private side to raise their prices and then therefore create more supply, or they want to keep those prices low. So that way it's affordable to live there. So they get elected again. And then you end up with a lot of people on the state, uh, insurer of last resort citizens in Florida fair in California. I just don't think that works anymore in a climate change world. I think these rates have to be free market floating and it's going to cause a lot of people to

SPEAKER_04: struggle, but it's, it does not work. Yeah. So putting aside like the terrible trauma these people are going through, you're a hundred percent correct. And you went exactly where I was going to go, which is you, you have to let the free market mechanics work here because if the government is underwriting these or bailing them out over time, what that does is it raises prices of homes because the government is now subsidizing them. And then you raise the prices of homes, they become more unaffordable. And then these tragedies happen every 20, 30, 40 years. When I lived in California, as I said in a previous episode, I talked a little bit about an all in coming out, uh, about the same time as this, these kinds of fires in this area happen every 20, 30 years. And in 1962, there was a major one called the Bel Air Brentwood fire. And that one hundreds, if not low thousands of homes, it was same thing. Santa Ana winds. The cause of it was people were just doing a trash fire. They were thought they were doing a controlled burn, burning some trash in the backyard and some embers flew. And that's what happens in, uh, with a hundred mile, uh, winds, when you have a bunch of trees and leaves and everything in a mountain range that bakes in the sun every year, year after year. So, uh, the free market's going to have to take care of this.

SPEAKER_90: There's pictures of the Bel Air fire online. You can look it up. 1961. So this was, you know, quite

SPEAKER_45: a while ago, so we don't have the quality of footage and the thousand TikToks that I think people are accustomed to seeing, but here's some of the historical record of that. Oh, what am I?

SPEAKER_51: It's just brutal, uh, and really just tragic. So, um, but it's, um, I, I want to say, Jason,

SPEAKER_14: this is this week in startups. And I'm so happy to report that there is a, a perfectly apropos startup for this moment in December, December 16th, 2024 as last year came to an end. I saw this story and I thought that's a really cool idea. So I give to you stand insurance just with this $20 million series, a, they want to use software to go in and insure essentially homes that you can't insure in any other way. What I mean, it's exactly on the nose for this, this moment. And I think that using software to quote, simulate the physical effects of a wildfire on a home to identify changes that a homeowner can make to decrease risks is a great way to actually, I think, make insurance feasible in certain markets where homeowners have made the right choices. Uh, and because you went through the cost of insurance and what that kind of works out to be, they think that coverage for a $3 million home, this is per the wall street journal and a high

SPEAKER_01: wildfire risk region would cost between 12 and $15,000 a year. It's impossible.

SPEAKER_09: That's impossible. 1% would be 30,000. So they're saying it would be one in 200 chance,

SPEAKER_04: one every 200 years. That's not how often this happens. But I think what they're saying here is, um, when I, uh, I remember when, uh, the Tahoe fires were happening and people were, um, you know, doing cleanups there, I was looking at what people were suggesting to do. Now, if you cut down trees, you get stopped. When you live in one of these Tony neighborhoods, they have essentially a Bible, a planning guide. And this is the standards for your neighborhood. I don't know if you have that in your neighborhood, but you know, if you change your fence, yeah. Yeah. So you have a historical commission, even worse. So there's like, um, there's a master plan that happens where it's like, you have to have, you know, the height of the fence, the height of the shrubs, this and that. So you can't make a lot of changes because regulations.

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SPEAKER_09: if you put stones around them, if you don't have trees around them, you will lower the chances of

SPEAKER_04: your house going up in flames in one of these Santa Ana, you know, driven fires. There's pictures now of the homes that survived and you're starting to see like, you know, there's a hundred homes and then there's one standing there. It's a new home. It's constructed with a metal roof. In Texas, we have all these homes with beautiful metal roofs. It's not to everybody's aesthetics, but these metal barn roofs are very common. They're not perfect. They have heating, insulation issues as well, but putting all that aside, you can't light them on fire. They're made of metal. It's like a high temperature. And if an ember lands on them, it blows off. Then clearing the area and the brush around your house, putting stones around your house. Again, the embers land, this is all obvious stuff and the embers go out. You can't do that in a lot of these neighborhoods, the master plans and the, you know, et cetera, will stop you from doing that. So it does make sense to me that they could hit that number with a fireproof house. I think we talked in the last episode about homes. You mentioned one that are 10 feet up in flood zones. Yeah, we're going to have to start building resilient homes. And if you build a resilient home, you should get a different price and Metro mile. Um, which this person, uh, co-founded, I think with David Freeberg from the Olin podcast was the other co-founder on Metro mile. Um, really? I didn't know that. How did I not know that?

SPEAKER_112: Oh, I, I, I've covered, I covered Metro miles so much. That's so funny. Huh?

SPEAKER_11: Yeah. And so, and, uh, I am a full disclosure and LP in Chris Saka's fund, lower carbon capital.

SPEAKER_67: So I like to, this is, this is great. I'm actually turns out to have a conflict here and an interest.

SPEAKER_04: So interestingly, this is a great idea to match the insurance, not just to the place you live, but to how the home is constructed and, and what steps you're taking to mitigate these things.

SPEAKER_115: Yeah. I, I think, I think, you know, you're never going to get, I have been to state farms offices in,

SPEAKER_45: in Bloomington, uh, Illinois, I think. Sounds exciting. You went to an insurance office.

SPEAKER_14: Uh, well, it was the only time in my life I've given a paid, a paid talk. I was in college and, uh, they invited me to come down and, uh, they paid me some several hundred dollars to do this. I just did it for, you know, the experience, but I, I got to tour state farms office and headquarters and walk around and it was the first time I've actually, and I, no offense to everyone there. They all seem incredibly lovely, but it was my first time seeing the actual Dilbert style office, you know, like, like actual, like floors of cubicles, you know, and if you're 20, that, that is a revelation to you about what life can be. And I bring all this up to say that there's lovely

SPEAKER_40: people there, but they definitely seem to be in an insurance mindset, which is, um, not the most progressive. You might say actuarial tables don't attract people who want to rip up the whole world. So I, I think that we're going to have to have something different and with a strong technology base to fix this problem for high-risk homes, because I just don't think that other companies

SPEAKER_01: want to take it on because that's not what they do. They just want to insure your car and spend a lot of money on ESPN advertisements and make us look at a weird lizard all day. You know, we got an

SPEAKER_04: interesting question here from the live audience. If you're listening to the pod on the replay gang, uh, we do it live and you can go to youtube.com and search for this week in startups, click subscribe, turn on the bell and you'll get an alert, uh, actually from YouTube when we go live and you can click on it and you can ask us questions and Keith Jordan asked us, do you think there'll be a class action lawsuit against the state of California since the stated reason for the insurance companies dropping fire policies was because government neglect of not probably mutating bush clearing and preparedness. And I do think there is definitely an issue of incompetence. When you hear these leaders talking about their preparedness, you're getting an incredible, um, amount of deflection. And I actually think this is going to be a turning point for the people in California who have dealt with a lot of maybe the priorities in California, not matching the amount of tax there they're extracting and maybe not having leaders, you know, who are executives who know how to run organizations. So I do think that's quite possible. I don't think you can sue the insurance companies because they are not canceling your insurance, uh, which I tweeted and somebody made a interesting

SPEAKER_67: distinction without a difference, but the distinction is they're just not renewing as opposed to canceling.

David Friedberg: Right. I, yeah, please. Well, I should say for the person who's a homeowner, it doesn't matter what canceled, you know, three months earlier, you know, not renewed on time. You live in a home for

SPEAKER_04: 30 years, you pay your insurance for 30 years and you're 31, which must have happened to some people. Oh my Lord. Yes. To not have that year, you don't have your home insured. I understand Jimmy Woods, who I've played cards with a bunch of times. Nice guy, the actor. Um, you know, I feel terrible for him. He lost his home. I don't know if that he had insurance. Now, someone like that, a famous actor, maybe they have the wherewithal to take that hit as hard as it is, but you know,

SPEAKER_45: other people don't have it. So I read the state farm letter, uh, that they sent to, um, the state

SPEAKER_14: of California going over why they were going to be not renewing certain policies and so forth. And I bought, I'll just share it. Why not? I have it pulled up here. It's mostly financial, as far as I can tell, you know, this, this particular paragraph here, so I'm not zoomed in. I wasn't going to share this. Um, the state farm says, you know, we recognize and appreciate

SPEAKER_00: that there has been a rate increase that will take time to come in, but more rate increases are needed because market conditions are not static, inflationary trends, costs, and in short of getting to charge more money very soon, the current rain template may necessitate homeowners, um, having essentially it's about money. And so I think that to answer this question, uh, maybe, maybe, but I think it's gonna be really hard to nail down who's in charge of, uh, of local municipal cities or state regulations on, on brush clearing, but I, I think fundamentally you solve this with the free market. And I think that's the way people want to

SPEAKER_50: go on, on the, what you're getting paid for in California. I, did you look at the LA city data

SPEAKER_133: and how much money they, they moved around in the 2024 to 25 budget versus the 2023 to 24?

SPEAKER_03: I think it's good for you to state it because it's been changing every 12 hours. Uh, there was one report early on on social media and again, you know, I think it's a bit

SPEAKER_04: of a raw shock test and the human mind tries to place blame or understand what's happening here based on tribalism and just filling in the blanks. If you are for less government, you might've wanted to cut budgets to reduce deficits. Right. And that's reasonable. And then now you're left with the position. Well, okay. Hey, we've got the fire department's budget and here's what happened. Now, if you're anti Ukraine and you're pro Putin, you might be looking at and saying, why did these people do a tweet or a blog post that they were donating equipment to Ukraine? Uh, or you might think, oh, the fire chief is a lesbian and this is a DEI higher and not double click on it and look at her track record. And her track record is she was in the top 50 of 1600, 16,000 applicants when she went to it. And she's got this incredibly storied career. Yeah. So just, I hate to break the news people. I don't think lesbians cause the Santa Anna wins that have been burning this specific area down for thousands of years, apparently. And certainly in our lifetime, when humans have been living there, they've burnt out homes over and over again. So it's a raw shock test. People who have grievances across either side of the aisle

SPEAKER_67: will project into it. Yes. The truth is there's incompetence in California's government. We see it all

SPEAKER_140: over all the time. There's incompetence in all government everywhere. Right.

SPEAKER_141: But if you've lived in California, it's a specifically not high functioning.

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SPEAKER_14: The thing that I'll say is, I mean, there's one particular venture capitalist who's been really all over this issue and putting out some, what I would consider to be very sexist tweets. I just think it's disappointing that that's become platform to such a degree, but just to throw some data out there for everybody, cause I know you've seen this all over Twitter. I went ahead and did a little

SPEAKER_00: research here is changes Jason in the 2024 to 25 LA budget. This is an infographic from the city controller. Um, as you can see quite a lot more money was spent on police, a little bit more on library housing, building safety, city planning, et cetera. And then as you get down into the negatives, this is where they save money, cut costs. Fire was cut by 17.6 million in this budget.

SPEAKER_40: And from this perspective, two things to know about that, however, uh, one, the aggregate fire budget for LA in that year after the cuts was 820 million. So we're talking about about roughly 2% cut, not

SPEAKER_00: very big. And then also political reported that the actual assertion that it was cut at all is incorrect because, and I quote, the city was in the process of negotiating a new contract with the fire

SPEAKER_01: department at the time of the budget was being crafted. And so 50 million more was added. So the idea

SPEAKER_40: that California gave all the money to DEI and gave no money to a fire department firefighters is wrong. And also we're using prison labor in California and not paying them much to do the hard work here.

SPEAKER_04: So, well, by the way, and that program, my brother, uh, as many people know, uh, is a retired firefighter and my grandfather rest in pieces was the oldest living firefighter for a long period of time in New York city. And very storied shout out. Um, and I come from a fire. Yeah. I come from a firefighting and law enforcement family. And in fact, that was going to be my chosen career before the internet happened. And I got very lucky to get into the industry. You know, the issues around DEI in the fire department, there's a very logical argument there that you should have the ability to carry a person out of a building. So, okay, sure. That's, that's logical. All firefighters and firefighter families agree. You gotta be able to carry a person. Doesn't matter if you're male or female and those

SPEAKER_34: standards should not be altered. Some places they did alter the standards. So that's like a logical argument that has nothing to do with this fire. Put that aside. Obviously, uh, you can have that

SPEAKER_04: debate separate from this. Additionally, you know, people would pay to, you know, clear this under brush and put more fire lines in. It's so crazy, like in Tahoe and other places where people fight against clearing the brush because they're like, well, that's the natural way and order of things. You want that brush to break down and biodegrade. Um, and I've been given the speech countless times in California and in Texas, in fact, that that's the best practice. Hey, when a tree falls, let it, let it, let it rest and, you know, go back into the earth and, and what kinds of great critters and, you know, live in these old trunks and it's awesome for whatever. It's not good in the Santa Monica

SPEAKER_50: mountains near a city. So really deadly. That's the thing. It's a simple distinction, folks. If we're going to have people live places, we cannot keep the natural environment because it burns down.

SPEAKER_40: I'm actually, I'm perfectly fine with, with relatively natural forest management. I, I grew

SPEAKER_14: up in Oregon. My, my child, the best friend's dad was a, was the Dean of forestry OSU. And I, I grew up in the trees as a boy scout, you know? So like, I, I, I have a deep appreciation for nature and I've

SPEAKER_01: been around the United States camping and backpacking and so forth, but where you build houses, where

SPEAKER_40: people live, where our stuff is, uh, we need different rules. And if you don't think we should change nature, then let's not build houses there. But as a big fan of housing stock, you're going to have a hard time

SPEAKER_45: need to agree to fewer housing, uh, during our current crisis.

SPEAKER_161: Let's talk about the jobs report. Cause I think the data just came out and, uh,

SPEAKER_163: The data just came out ladies and gentlemen, uh, uh, uh, so don't, don't steal my thunder. I want to do

SPEAKER_40: this. Okay. So ladies and gentlemen, uh, here we have the December jobs report fresh off the presses. Expectation was about 155 to 165,000 jobs, depending on how you did the average. The actual number, Jason, we gained 256,000 net jobs in December, a hundred thousand more. That means that the unemployment rate was expected to stay at about 4.2. Instead, it fell to 4.1. Jason, never have you seen such lovely, tell people why you're about to cry. Tell people.

SPEAKER_04: Well, I mean, the bad news about this is, you know, um, and it sounds crazy to be like, oh my God, more jobs, which would normally be better. Right. But inflation is going to go up. And it, you know, what these interest rates and this kind of, uh, job growth does is it puts more money into the economy and then the cost of goods go up. And so, you know, this means the, the fed now, uh, instead of cutting rates, maybe needs to pause them or at some point even raise them. So this economy keeps surprising us in how resilient it is. And inflation was so really, uh, damaging, I think, to people's lifestyles, but not having a job also sucks. And so then you put in, uh, the plan to have less immigration. How low does this number need to be, you know, to have a functioning society and having

SPEAKER_129: a four percent unemployment, this is the lowest of our lifetimes and our lifetimes being, if you're like under 70 years old, this is really low. I'm, uh, I'm trying to prepare an elaborate joke here.

SPEAKER_45: I'll see if this works. Yeah. Um, here's my take on, uh, this current moment in time, which I believe, uh, summarizes my view of the United States. Here we have a man holding an American flag while head banging in the middle of a street in the rain. Yes. Go, go America. Uh, but I, I regret to inform Jason that this does mean I have to ask a Trump question, not, not to, not to put you on the spot, but I just want to like spitball this with you. So Trump had a press conference the other day

SPEAKER_14: and, um, a long answer of many questions, said many things. And one of the things that I recall correctly, he said was he thinks interest rates are too high and inflation is too high. Now you just detailed the link between inflation and then how the central bank of the U S the fed changes rates. Trump does not run the fed, but he will be able to exert pressure on it. So where does this net out? If he wants lower rates and less inflation, those are contradictory. So what, what wins do you think

SPEAKER_10: there? Yeah. I mean, and then you also have a populace who believes immigration, you know,

SPEAKER_04: a significant portion of the populace now in America wants to have less immigration. Certainly 80%

SPEAKER_70: of people reasonably don't want illegal immigration. And then a significant point, one,

SPEAKER_04: just no immigration because they believe immigration means less jobs, less opportunity for people who are already here, um, which is reasonable if you can't find a job. And so I've always felt immigration and how many people we let into the country legally, let's assume it's all legal. Sure. Should just be based on need. And so, you know, we see these numbers, but how many accountants do we need? How many nurses and doctors do we need? How many

SPEAKER_67: construction workers do we need? You know, if people have come across that, if people want to come to America and they're construction workers, or they're working in as nurses, we should be taking a lot of them because we don't have either of those covered. We need more construction workers. We need

SPEAKER_04: nurses. Hopefully we eventually between one of these two parties or a new party have a thoughtful immigration policy tied to what all Americans need. Because if you, whether you're poor or you're seventh generation or second generation, whether you're rich, if your, you know, parent is in hospice

SPEAKER_179: care or God forbid, or in a nursing home and you can't get a nurse to take care of them or to come as a home aid, you know, you might want some of those amazing nurses aides from Jamaica or Mexico, or,

SPEAKER_04: you know, these amazing caring people. Um, you know, my mom's in nursing, so I know some of the

SPEAKER_179: demographics there and these people are incredible human beings, you know, these Jamaican nurses that,

SPEAKER_04: you know, would come in and were just wonderful. Uh, when I was an EMT, I was an EMT for a period of time and, you know, I got to watch this immigration process. God bless them. Thank the Lord. We were we're short nurses. I mean, so we need immigration. That's what this is going to cause. And then you have a portion of the MAGA movement, which will be this whole, I think this will be a big part of, you know, what we'll see hash out in the first year is if you want growth, you can need some

SPEAKER_129: healthy immigration in specifically areas where you have need. I think Trump's a business person.

SPEAKER_115: He's going to go for that. Um, and, uh, so then taking that by analogy, then, uh, more focused on

SPEAKER_51: rate cut reductions than concern about inflation would be the, the net net there back to maybe, you know, I really haven't thought it was a really great question. I haven't given enough thought. I'm

SPEAKER_04: gonna have to give it some thought, but I do think, um, a thriving economy is what we all want. So how do you define a thriving economy? Um, people have jobs, people have wage increases and reasonable inflation. So I think these numbers have to feel reasonable. The thing that scared everybody was like the back to back years of like, I think we peaked at eight and then there was one year like with four or five. And like, when you have two of those back to back, you know, on top of the 3% inflation years, that's when you see a big Mac and a happy meal, uh, or French fries at McDonald's. I brought up the McDonald's index on this program a couple of times, you know, when you see a happy meal cost twice as much people start noticing because every American seemingly like it's some incredible number. When you, when you see the statistics of how many Americans went to a McDonald's in the last 30 days, and when you see the sticker shock of a French fries costing three times as much and, and a big Mac costing 50% twice as much that actually affects families. And so we are, and it also more importantly affect people psychologically, I think. Um, and, and I think that's the, the bigger issue because you might save money on your TV. You might save money on clothes. You can cut corners by making coffee at home. You know, you get the idea, but, but you know, sometimes you gotta go out to eat with your family. You gotta go to the grocery store. You can't not have food. You're not gonna sustain

SPEAKER_175: yourself on, you know, uh, yeah. So there it is. That's the, the Fred chart of inflation. Yeah. You're over

SPEAKER_115: here. Yep. Reached, uh, just about 8%. This is, uh, inflation, um, CPI for the U S this is not seasonally

SPEAKER_45: adjusted. Um, but the good news is, is that it went down in 2023 and it's going down further. But

SPEAKER_00: uh, to Jason's point about the economy looking strong, um, you can also have an environment where you just don't cut rates. They just stay static. And that's gonna be, uh, to me, that's the most likely thing for, for 2025 for the next couple meetings, just, just stay flat because inflation's not

SPEAKER_40: getting much worse. It's also not getting much better. The economy's doing pretty well. We're not in a Goldilocks moment where inflation's at 1.9% and unemployment's at 3.5%. But if, if we have 2.7% inflation or whatever, and 4.2% unemployment, 4.1% now, uh, that's pretty healthy. That's pretty good.

SPEAKER_04: I think we're under the handle now, right? Like the handle was three and now it's like 2.9, 2.8. So when you psychologically get under, you know, when you're under four and you're in the threes, people are like, okay, this isn't great, but it's not terrible. And when you're in the 2.x, I think people are fine with inflation, but it doesn't go down. So, you know, when you had those

SPEAKER_70: back-to-back years that went up, people are still feeling, you're feeling that I think, um, and it just takes a while for their salaries to catch up or whatever to catch up. It's, it's so true. And I

SPEAKER_00: want to just double click on your McDonald's point because it's so apropos to just, I think, regular life for people. It's amazing how expensive everything has gotten. And I say that as someone who, um,

SPEAKER_40: has enough money, I think we should close up today with static team size. There is two things coming here. This was a theme last year. Uh, I think it's going to be an even bigger theme this year because AI comes. Uh, but the first thing that I'm going to point out is that Salesforce is going to be pretty much moving away from hiring net new software engineers. And I have, um, a quote here

SPEAKER_00: from a podcast that, uh, Mark Benioff did. And I think it's very illustrative of where the market is Salesforce quote, we're not adding any more software engineers next year, because we've increased the productivity this year with the Asian force and other AI technology. Essentially,

SPEAKER_50: they're 30% more productive. And that means that they don't need to hire more people, Jason.

SPEAKER_197: This sounds oddly familiar. Oddly familiar. Where have I heard this before? There's also

SPEAKER_14: a really interesting story from Microsoft. They are cutting 1% of their staff focused on performance. You have discussed the importance of keeping your team on their toes, if you will. I'm not a big fan

SPEAKER_41: of the GE cut 10%, but small reductions here and there make sense. Check, check. Well, you know,

SPEAKER_04: I think he felt 5% or 10% was the number. I can't remember if it was five or 10, I think five, but yes, he said if, you know, it's one in 20 people, if you cut one in 20 people, you give that opportunity to somebody new to, to hit the top. It's not just to keep people on their toes. It's just makes sense, right? Like just, there's somebody else out there who would do a better job than the 20th of 20 people, uh, in your organization.

SPEAKER_14: And so, uh, what are we seeing with Microsoft going through these regular cuts? Well, what we're seeing is their team size overall, and this is a chart from GeekWire shout out to, uh, uh, Mr.

SPEAKER_01: Bishop and everyone on GeekWire. Lovely, lovely publication that I love. What does this chart show you,

SPEAKER_14: Jason? This is Microsoft headcount over time. It peaked in Q3 2023. Uh, these are fiscal quarters. So Microsoft's Q1 25 was Q3 2024 calendar. So that's a lot of people do this fiscal calendar thing. It's so I told, I told Microsoft this and you know, they told me, uh, Alex, thank you for telling

SPEAKER_205: us we don't care what you think. Fair enough, but yeah. So I, you know, what you really want

SPEAKER_04: to look at at a chart like this is, uh, and you shout out to GeekWire if they want to really make

SPEAKER_67: this a great chart, show the revenue against this and then show revenue for employee. So you just put

SPEAKER_209: top line revenue and earnings, and then you divide that by the head count and you got this already in

SPEAKER_129: a Google sheet. And that would really make it interesting because what you see is if you keep a static team size and you're growing 10 to 30% a year, that means the revenue per employee is going up 10 to 30% per year, uh, and, uh, you're just overall more efficient. This is the thing that has

SPEAKER_179: me candidly a little worried. Talk to me about why you're worried the jobs data. And we were just

SPEAKER_129: saying, wow, this is crazy that we still have the lowest unemployment of our lifetime. You have to also take into account one more chart when you're looking at this, which is the chart of, uh, labor

SPEAKER_04: participation, which is typically 60, 61%. So of people who want to work, what percent are working? Now, some people might be a stay-at-home parent or retired or children, but of people who want to work, what percentage are working? Oh, here's, is that Microsoft's revenue per employee?

SPEAKER_14: This is the Microsoft revenue chart. I'm chasing about 10 seconds behind you. Um, but people will keep in mind that we were looking at a roughly three-year GeekWire chart, I think. Yeah. And if you look at the last three years of this chart, it's not perfect. Best I could do in a second. Uh, revenue is going up very steeply. Well, Microsoft's overall

SPEAKER_00: employment does seem to be either flat or trending down. So Jason's point, average revenue per employee, definitely going up. Now I'm going to stop sharing this. I'm going to grab the labor force

SPEAKER_04: participation chart for you. And what I'll just say about that is this is a reason to own the mag seven. If you are wondering like, my God, why do so many people own the mag seven? Why are there, you know, price to sales ratios, earnings charts, you know, why is there so much concentration

SPEAKER_129: in those specific names? It's because those businesses keep growing with the same number of people. And, uh, you know, I called this a couple of years ago that it's actually easier to train

SPEAKER_179: employees to give them tools and to automate, you know, just relentlessly. And then your organization winds up being a really tight knit group of people who are getting better and better at their jobs.

SPEAKER_129: And it's better for culture. You know what new people do to an organization? It's a lag on business. Now I, this is not like any social commentary, but as somebody who runs businesses and has seen

SPEAKER_179: businesses, you know, if you got, uh, whatever number of people, a hundred thousand people at Microsoft and you try to grow to 120,000, cause you want to grow revenue by 20% and you're like,

SPEAKER_04: we're going to grow the employee base. That means somebody's got to hire these people and find them and train them. And then when you hire new people, you only keep, you know, roughly one out of three

SPEAKER_179: becomes long-term one leaves on their own. It's not for them. One gets fired. You made a bad hiring decision or they disappointed you or whatever. So just generally in S in corporate America, long-term one out of three stays one out of three involuntary leaves one out of three voluntarily

SPEAKER_04: leaves. So that means you really got to hire 60,000 people to get 20,000. Good people think about the effort that takes. So this is the trend that has me a bit worried that that unemployment number we saw that may be a trailing indicator. And that's something that's happening behind static team side.

SPEAKER_160: I'll, I'll leave it there. So I just want to say, Jason brought up the labor force participation rate. Uh, here is the chart. Once again, leading on Fred data, shout out to the Fred team. I love you

Chamath Palihapitiya: guys. You're the best. I, I, I follow my heart. What is it? I can't see it. There's a 60% now 61.

SPEAKER_14: Uh, we are currently at 60, uh, 62, 63%. Got as high as 67 in the nineties. And then there was a

SPEAKER_45: decline. Shut up, Bill Clinton. Yeah. There's some recessions and then COVID took it from 63 down to 60 and now we've regained roughly back to where we were before. So the chart starts at the baseline of the chart. Is that 50 or 60? 1950 and it was 58.6%. Uh, and then, uh, you know, we did have a, a long period of time in which women joined the workforce, um, in greater quantities. And then that peaked in the, uh, the late nineties boom times. And then the, since then actually to your point about technology and labor, Jason, uh, what have we seen a lot of since 2000? Well, the internet remote work,

SPEAKER_235: more productivity and you've also seen labor force. Participation decline gig work is another factor

SPEAKER_175: here that this data might not be properly accounting for. Uh, so true, you know, they'll eventually sort

SPEAKER_04: of correct for that, but a lot of people also choose the underemployed to do light fire. As we talked about financial independence, retire early. Yep. Some people have chosen to do light fire, which means, Hey, you know, I made a little bit of money. I put a million dollars away and I get some amount of interest on that to live off of. And then I work 20 hours a week. I do three shifts a week and, and, you know, I pursue art or raise my family during the other time. So, um, the opportunity here, I think is that startups are going to be able to play the same playbook, which is, you know, they're so resourceful. You might have five people at a company, you know, 10 people at a company and the revenue per employee could be wildly significant for that company. That's going to be wonderful though, for those employees to have a very high amount of revenue per year, year in and year out, and, you know, just really enjoy life and not have to hire a lot of people.

SPEAKER_179: And if somebody leaves, you're just like, ah, well, we'll just automate what they're doing or use AI for it. And, uh, I'm seeing it. I'm seeing it on the front lines.

SPEAKER_00: A model. So here here's okay. I'm just playing this out in my head. So let's say we have higher average revenue per employee, and we have AI taking away a lot of the grunt work, a lot of repetitive work and a lot of the stuff that humans probably can automate away. All right, fair enough. So we need fewer people to do the same amount of work, higher productivity per person.

SPEAKER_40: Good, good, good, good, good. But as digital systems get better and more intelligent and better integrated into the economy, I can actually really see a system in which we don't need as many humans and the high performers are going to perform even better economically while those who are average or less in terms of capabilities and intelligence and decided with nothing but love to my fellow humans, end up essentially a second or third class citizen.

SPEAKER_04: I think the possibility here that it could be that if we have more entrepreneurs, then even though Microsoft's not growing, maybe there's another Microsoft, maybe there's, you know, 10 more companies. Absolutely. And so we do need to create more products and services and companies to keep things going. The other possibility is as you automate things away, let's say robots could build, um, houses. Sure. Let's say robo taxis existed and that 75 $5 Uber, I was lamenting went back down to $30. Well, then people don't need as much money. Now this sounds incredibly elitist of me to say, I totally say that with complete self-awareness, but the truth is in like my coffee example before, or, Hey, my flat panel TV. Now, like it used to be, you would spend five to $10,000 on a TV setup. And now like you can go buy some Vizio at Costco, 500 bucks,

SPEAKER_183: that's 80 inches. And you're like, wait a second, that's better than the best TV at CES five years

SPEAKER_04: ago. Yep. So maybe, or you can replace your iMac, your, your Mac every five years and your iPhone every four years. Sure. So this kind of hedonic treadmill, this capitalistic consumption-based economy is part of the problem. And that could be part of the solution, which is, Hey, if you can't make as much money, um, there's not as many jobs, but your Uber rides go down in costs, your cost of food goes down again, which it was right. Remember food didn't change prices for decades, or you could buy a pair of jeans for 30 bucks. When I was a kid, it was 20 bucks for a pair

SPEAKER_179: of jeans. And then I remember in the nineties, it was 20 bucks for a pair of jeans. I remember in 2000, you get a pair of jeans for 20 bucks, you know, at old Navy. And I was like, what's going on here? Oh, people are building stuff in factories, automation, all that kind of stuff and globalization

SPEAKER_175: too. Yeah. Globalization, but also goods and services. Like some goods were made with machines instead of humans. Like we're making denim in middle America. We're talking about the deflationary

SPEAKER_163: impact of technology. All right. Uh, just before we go, everybody, um, today is oral arguments for

SPEAKER_00: TikTok, uh, in front of the Supreme court. That's going to kick off at, uh, 10 AM Eastern time today. So by the time you listen to this, if you're not live, that will have happened. Check the news. If you are live with us, that's coming up in about 45 minutes. It's going to be an absolutely busy,

SPEAKER_13: busy day in capital. And, um, we're back Jason on Monday. Jason on Monday. We'll see you on Monday. Thanks for tuning in and, uh, stay safe. And our thoughts

SPEAKER_129: and prayers, uh, are with my friends, uh, and people, I don't know. Uh, gosh, everyone, um, in Los Angeles, I'm just so glad that the death toll, um, you know, the property can be replaced as, as tragic as it is. Thank God, you know, the death toll has stayed so low. So I think, I guess a society people listened and they got out of Dodge. So thank God for that. I mean, there, sometimes when these things happen, you have hundreds of people die or dozens of people die. The last death toll I heard was five people. And so that seems to me, given the scale of the damage

SPEAKER_253: and this tragedy seems like an incredibly low number. I thought it was going to be a hundred

SPEAKER_14: or 200 people had died. I mean, like these floods. Yeah. Good and bad news. The latest number

SPEAKER_257: that I saw was larger than that, but it was 10. Okay. So 10 is still a tragedy, but 10 is not 200. It's not 2000. It is 10. Yeah. It's lower than I expected to. All right, everybody. We will see you

SPEAKER_263: next time. Bye. Bye. Bye everybody.