SPEAKER_00: is there going to be an open mic night in we were going to have you speak friedberg but we realize you're not capable so we want the show to be entertaining yeah it's not that's not

SPEAKER_04: personal free you guys are missing out i'll tell you guys what makes my stand-up comedy

SPEAKER_05: so good okay here we go oh my god we're back on this jesus christ it's my creative sensibility so

SPEAKER_06: if i have some time to prep and write my script and read my own creative insights yeah okay bring

SPEAKER_04: one joke next week jake out for all the time we've spent together on this podcast you know so little about me it's so it's so depressing i gotta be honest well you know here's the thing about

SPEAKER_10: friendship it's a two-way street you gotta open up a little bit we gotta go out and get drunk one night

SPEAKER_20: absolutely i just want to give a shout out to this guy andrew lacy okay okay shout out he is the ceo

SPEAKER_21: of a company called prenuvo oh yeah can you just flash it on the screen prenuvo i went to prenuvo and what they do is they do a head-to-toe mri scan in 45 minutes and they use a bunch of machine learning and image recognition to help a radiologist interpret these mris in real time beside you it's a service that you have to pay a few thousand dollars for there's a location in silicon valley in redwood city and a couple of others and we mentioned it but the reason i'm bringing this up is he sent me an email yesterday and he said i just want to thank you and the besties for mentioning prenuvo because we had a bunch of people come and he said we found no less than 11 life-saving diagnoses 11 11 people 11 individual listening to the pod pod saves lives went to prenuvo after hearing about it had a head-to-toe mri found you know all kinds of issues from a brain tumor and brain cancer to stomach cancer and other things and uh was able to get the care that they needed amazing anyways i just want to give a shout out to him for for doing a lot of really important work and for the folks that are listening that have some money set aside and can afford to do this i would just really encourage you we have no financial stake in it nothing other than we are users of it but check out prenuvo.com and uh shout out to andrew and his team there okay here we go three

SPEAKER_26: three two let's start the show the war in ukraine has him insane in the membrane and biden's new disinformation council is gonna have him detained to calm him down from tanking solana he started smoking that marijuana you know him as the rain man he's here again david sacks how you doing have a

SPEAKER_31: good week yeah not bad all right uh well big energy this week huh okay in high school he had no friends but thanks to the pod undergrads are in his dms all forms of steak he's a purgeon he's the vanguard of all the virgins the king of quinoa the sultan of science david friedberg

SPEAKER_33: wait i missed like half of that because tomorrow's laughing so hard i can do it again do it again do it

SPEAKER_31: again let me try from the top um outtakes in high school he had no friends but thanks to the pod

SPEAKER_26: undergrads are in his dms all forms of steak he's a purgeon he's the vanguard of all the virgins the queen of quinoa the sultan of science david freeberg just for the record there's no undergrads in my

SPEAKER_38: dms but i appreciate the intro all right we'll check all right in three two he's trying more free

SPEAKER_43: bird is tweaked and the show hasn't started i think i'm taking over intros next week okay i'm at least

SPEAKER_46: gonna do jcal yeah please by all means next week you do mine you're a comedian who has a chance to prepare in advance and think your thoughts go ahead big boy give me a week you got it okay

SPEAKER_35: yours next week let's see these latent stand-up skills in action yeah absolutely he's been hiding

SPEAKER_51: them from us yeah i don't know a lot of stand-ups who hide their ability you know the funny thing about

SPEAKER_54: hiding something and not having something from the outside in they look the same

SPEAKER_57: sorry jake i'll go over to you okay he's dropping annual letters in luxurious sweaters

SPEAKER_26: as far as the specs go well it can only get better the dictator himself jamoth polyhapatea

SPEAKER_62: ouch cannot i cannot comment on the specs oh my god i mean this is getting brutal who's writing these oh my lord all right everybody it's been a big week uh did you did you read my annual letter

SPEAKER_63: any of you three assholes i uh i started you know that's a no that's a no i get it i get it i reviewed

SPEAKER_51: the table where you listed all your results and i actually sent it to my team i was like this is a

SPEAKER_35: really nice way of summarizing you know a firm's results over you know a long period of time because you had every fund and your totals and uh and all the key metrics well can i talk about that for a

SPEAKER_68: second yes you know what's what's incredible about what you're saying sax is i i was interested in a

SPEAKER_21: bunch of other funds that i'm invested in and their returns and then i've also seen a bunch of leaked fundraising decks of all kinds of other firms from growth stage to crossover to pe and it's incredible that they are not standardized right some people only show gross irr some people show net irr some people don't show the total value of the paid in capital which means you know if you have a hundred dollar fund what is the total value of all of its holdings some people don't show dpi which is distributions of paid in capital which means okay for every dollar you've taken in how many dollars have you sent up if you don't show all of them what was shocking to me is how much you can kind of hide and play and manipulate the numbers and one of the most crazy things that i saw is that there are these late stage funds that write into their fundraising decks that what they actually use are lines of credit to juice irr so what they do is if they're about to do a deal they'll actually get a loan from a bank put that money into a company wait until it's about to get marked up and then what they do is they actually call that original money from their lps and pay back their capital call line of credit so what does it do it inflates irr but this is why if you don't if you see the other numbers it still shows that it's kind of like you know not doing much of anything so if you ever see multi-hundred percent irrs or high huge irrs with zero dpi and a marginal tvpi it's folks that are playing games to trick lps just a heads up that is so weird so what you're saying

SPEAKER_74: is just to summarize for people in the audience who don't understand hey we get judged on the rate of

SPEAKER_76: return each year so if the stock market does seven or eight percent we're expected to do triple that so we got to hit 20 25 percent each year now the clock starts ticking when the money gets called from the lps the partners correct and gets put into the company so if you invest in your tour of your fund you pull the money down from the lps you put it into youtube whatever it is what you're saying is they will take a loan against that future money from a bank at an absurdly low interest rate let's say one percent or two percent correct they make the youtube investment then two years later youtube has a price round that marks it up 20x then they put your cash in in year three of the fund and pay back the loan now they've paid two percent two years in a row but the thing's gone up 20x correct what a

SPEAKER_21: that's that's dirty well so it's it's dirty enough that the sec has actually now introduced legislation it was in february that basically is going to try to uncover all of this nonsense and so you'll have to be much more transparent so the format that i used in my opinion is the most transparent way of not being able to hide the cheese you show all the critical elements together in a simple table that will make it very obvious who's playing games and who can actually make money so there is a um

SPEAKER_35: semi-legitimate version of the the loan thing which is um you know where this comes from as a capital call loan so you know we're making a bunch of investments throughout the quarter a million dollars here for a c deal 10 million for a series a you know that's happening all the time you don't necessarily want to hit your lps with capital calls for every single little small investment so what we do is you get a capital call line from svb or something like that and then you do one capital

SPEAKER_87: call per quarter and so they will loan you the money for you know one two three months but it's not

SPEAKER_72: for a year but the reality is if you have a reasonably well developed infrastructure you have a cash

SPEAKER_21: forecast of what deals you may or may not close with probabilities and so you know what the weighted amount of capital you need to have on your balance sheet is so i agree with you to have a small amount at the edges to pay for expenses to pay for salaries while you clean up at the end of a quarter completely reasonable but if you're making you know five or ten percent commitments into a company and you're using this as a way to basically create subterfuge and hide i think that

SPEAKER_92: that should not be allowed yeah yeah the number of capital calls is annoying for people yeah yeah

SPEAKER_35: anyway i did share that table with our team too because i did like the format quite a bit i i think

SPEAKER_21: we'll start reading it this weekend it's very hard for funds who are not performant to use that format now yours you're you're you are very highly performant so you can use that format but i don't think people that have not returned money or or have fake paper markups can use that format

SPEAKER_76: because it is too simple yeah yeah i i at the end of the day what metric do we all look at when we

SPEAKER_21: are lps in a fund well this is what i put down i put down the ones that i look at for everybody else

SPEAKER_106: that i'm an lp in you know so what one is that for you i i i look multiple cash investment i i

SPEAKER_21: need to look at the totality of it i need to understand what is your gross and your net irrs those are important things to understand because it shows how efficiently you put the money to work

SPEAKER_72: of course but then but then ultimately then the other two things that really matter is what is

SPEAKER_21: the total value you've created and then what percentage of that have you given back to me because that allows you to understand how much paper value this so for example today let's just

Chamath Palihapitiya: say you had a fund that had a tvpi total value of paid in capital of a 5x a 5x on a fund is incredible

SPEAKER_72: but if you've distributed none of that well guess what if we're sitting here in may of 2023 or 2022 rather the total value of your paid in capital is not really 5x it may be only 3x and

SPEAKER_21: it may be actually two and a half x considering what the markets have done to these companies right and so it allows me to really understand how performant funds are in not just being a part of the game but actually generating realizations and this is the hardest part as i told you jason like this past quarter i think i passed 2x across my funds when i was managing outside capital and i think my gosh it took me 11 years it's hard to return 2x the money and that means i've returned two and a half billion dollars you know how hard that was yeah i mean you got to time the exit you

SPEAKER_72: have to have the ability to you know you can't even time the exit you have to you have to be constantly managing and working your portfolio sometimes you're selling in secondary transactions sometimes you're actually trading up in private markets where you help this company merge with another private company other times you know if i think about it the number of ipos i've had is relatively diminished so how do you make two billion dollars where i've only had one ipo which has

SPEAKER_21: been slack yeah so this is a really really hard business and it was just a reminder that you know in the last four or five years managing capital has seemed relatively easy but in these next few years you're going to see who's really really good it's kind of that old warren buffer code you know you really you know you can see who's naked when the tide goes out i mean said

SPEAKER_120: another way the last five years raising a fund has been really easy uh and writing checks has been

SPEAKER_122: really easy and now comes you know act three which is returning a multiple on the money you easily collected and boy is that hard and i you know i all of these um new lps the other thing that i want to tell you is one thing though all these lps send me even i'm not an lp and a potential they send potential lps their performance because they're so proud of it like quarterly i'm like

SPEAKER_123: not even in this fund and they have these crazy markups crypto investments this whatever but

SPEAKER_21: they've returned no capital and so just to give you just to give you a sense of it if you if you look at the most fantastic organization in the world if it were an investment manager which is berkshire their long-run 50-year track record is you know around 20 percent right gross if you look at the most successful asset manager in the world and i would put blackstone at that just incredibly good and best in class in probably three enormous parts of the worldwide economy real estate credit um and private equity you know their long-run track record is that on 200 and some odd billion dollars of private equity and another hundred billion dollars of of um of real estate they've returned 2x so that's what the upper bound is you know doubling people's money and generating 15 to 20 percent is the best you can

SPEAKER_72: expect if you are really excellent and long lived that's the best what do you look at freeberg when

SPEAKER_126: you're an lp what number do you care about because you lp other funds and and i think all of us do at

SPEAKER_04: times i made my first venture fund investment in 2006 and i i am still getting distributions from that fund and i'm looking at i'm like this is a 2.4x over that period of time i'm like what the hell why did i even put this money into this fund i guess this makes sense for pension funds and you know very large balance sheet long-range investors that need to kind of diversify but as an individual i should

SPEAKER_128: have put my money and have had liquidity on it for 16 years rather than have it locked up and a bunch of private companies sloshing around and you know kind of dribble out and at the end of all this i only get

SPEAKER_72: two and a half times my money back two and a half times your money in 16 years what's that irr it's

SPEAKER_132: like low teens yeah not a great deal no no it's lower and you would have been you would have been

SPEAKER_04: better owning the s p 500 that's right and so for me i think the the the key the the metric the only metric that matters which i think you're saying chamath is how much cash i got out relative to cash i put in and so initially my my irr is negative 97 percent and then it goes up to negative 80 and then you negative 60 and negative 30 and negative 20 and now it's 14 because i finally got more money out than i put in and so it doesn't feel to me like uh you know the the just generally private investing everyone gets excited because we all get sold stories and individuals all get sold stories of you put a dollar in you get 100 bucks in i mean j cal wrote a book called how i made 100 million bucks from whatever you invested um in uber yeah and um and that story i think gets everyone kind of excited

SPEAKER_128: but the reality is the vast majority of the time and if you diversify your bets like this you're going to end up waiting a long time to get your money back you're going to be locked up and a top performing fund is returning two and a half x after 15 years which is no not much better than kind of

SPEAKER_131: investing in the s p where you could sell that anytime you want and use that cash for any purpose you

SPEAKER_122: want well if you did a hundred thousand dollar investment and you return 260 000 in 15 years i'm on an ir calculator right now internal rate of return it's 6.58 percent yeah better off in the s p

SPEAKER_138: uh yeah i mean and if you did qqqq depending on yeah how hot the market was then yeah and you get

SPEAKER_68: really it's really really really hard to actually make money there are always going to be periods

SPEAKER_21: where people look like geniuses and have markups but you can really see when people have skill after a decade and a couple of up and down cycles same with hedge funds by the way right hedge funds put

SPEAKER_04: up a score every year and in certain macro cycles that can last many many years everyone looks like they're doing well and then all of a sudden tides go out and you lose more than you made over that

SPEAKER_128: period of time and then you realize holy crap i was actually in an insurance business where you get paid some small premium every year and then you have some massive loss one year and that massive loss it turns out your underwriting wasn't good because you lose more than the um sum of all of the premium you collected over that period of time and unfortunately a lot of investing looks like this which is you have small returns for a long period of time and then some massive loss and uh and the whole business makes you look like you know along the way a genius but the reality is over any any long cycle um most folks end up kind of in a bad position um and they end up you know the sec by the

SPEAKER_68: way has um has solved this for mutual funds right and etfs you know there's there's very strict there's

SPEAKER_21: very strict standard reporting and i do think that as um you know for example like if you go to the big banks sorry sax interrupt i just want to finish the last thought if you go to the big banks and you have if you're an individual like a doctor or a dentist or somebody and then and they will aggregate and pool capital and put it into these funds on your behalf as an example so you know it looks like jp morgan or goldman sachs is a you know 50 or 100 million dollar lp in one of these big funds but in fact it's just the sum of a bunch of folks on their platform it stands to reason that if the sec can actually mandate standardized reporting for private investing it would actually be a really good thing because all of these games will and probably currently are as far as i've seen in these presentations tricking a lot of folks to put their hard-earned money into things that actually will never make money and it's because if you selectively cherry pick how you present this data you you can tell a partial truth so you know i would really i would love i'm happy to be compared to to any organization but every time i hear somebody chirping about how good they are

SPEAKER_72: my only comment is i just want to see your table in the same format as my table and we can compare it because it allows me to really understand yeah liquid returns and by the way the point i made earlier

SPEAKER_04: about um when markets are generally good hedge fund public market investors generally can look like they're doing well by having a good marginal return above the the benchmark every year and then one year have a big drawdown and suddenly they realize that their underwriting wasn't that good

SPEAKER_128: the same can be true in in private investing in the opposite way in the sense that you'll put in small checks small checks and lose money and lose money and lose money and then have one big banger and you get 100x return and you look like a genius because your whole portfolio looks good but you fast forward and you keep doing that for another 10 years all those small checks may not even add up to the banger and that's um that's the flip reality that you realize and by the way i think that's a good analogy for the difference between public and private investing you have similar cash flow economics where you can have small returns and then a big loss in public and you can have small losses and then a big return in private and the timing of when you present your data can make anyone look good if you catch a good hit at the right time or you don't have a bad hit at the wrong time and then the framing over a long enough period of time i think really becomes the key measure and the the reality is most people don't make it long enough in their career to actually to actually present true results in in how they really do underwrite and by the way to the extent anybody's listening is

SPEAKER_21: able to invest in these private funds i think jason mentioned this uh superficially so let me just dig into it because i think it's really really thoughtful what he said which you should understand

SPEAKER_72: if you have the option to invest in a private fund you have to understand that that private fund has two huge negative things working against it relative to investing in the s p 500

SPEAKER_21: so you could put your money into a vanguard etf or if you could put your money into a private fund you need to realize two things number one is it is illiquid not just for 10 years but it

Chamath Palihapitiya: could be illiquid for 12 or 14 or in you know um freebrook's case 16 years so you need to get paid

SPEAKER_21: a premium for owning that and then the second is depending on the business model you may have very high failure rates which means that you need to really hit these outsized grand slam home runs and if you don't then you're going to be worse off than if you had invested in the s p 500 so that deserves a premium and so jason's right which is the s p is between seven and eight percent over long periods of time predictable compounding that's you have to add another seven to eight percent for this illiquidity premium and another seven to eight percent for the business model viability of for example being in venture when you add those three things together you do need to get paid basically in the low to mid 20s returns to be justified otherwise you are much better off just owning

SPEAKER_115: the s p 500 much much much better off sex uh do you what do you look for when you're lp-ing and now

SPEAKER_74: that you have many large funds what do you think lps are looking for now what do you advise them to

SPEAKER_155: stay focused on the number one metric that matters is dpi which is the ratio of distributions to paid in

SPEAKER_35: capital and it's basically money in versus money out right at the end of the day that's all that matters is how much money did you put in the fund how much money did you get out the issue is that to jamas point these are 10 to 12 year funds and it takes a long time to get distributions so all the other metrics are basically triangulations or approximations of what you think the fund's going to do until you actually get to distributions so i would say in the long term it's all dpi in the short term you look at tvpi the total value to paid in capital so it's basically what's the marked up value of all the positions in the portfolio versus how much cash has gone in

SPEAKER_157: and then the big question is does the tvi tvpi turn into dpi does the total value explain that to people

SPEAKER_122: if chamath had invested in slack but there hadn't been an outcome it could be on the books for a

SPEAKER_76: billion dollar position so the tvpi is looking really great but until that company goes public and the shares are distributed you know the lps haven't realized it so it's it could be ephemeral

SPEAKER_161: or it could go down significantly as we've seen with public markets yeah so in the last four months

SPEAKER_35: we just returned our fund one uh in terms of like real distribution so i think we have like a dpi of like 1.1 or 1.2 on that fund now uh the tvpi is like four to five so but it feels great just to

SPEAKER_115: distribute the entire fund out i literally in my first two funds i think we we did that as well

SPEAKER_76: and it's a really great feeling and you know sometimes you know selling 10 or 20 of a position early and getting over that hurdle and just getting into the the one to 2x that's a pretty

SPEAKER_21: great feeling by the way just to talk about how difficult it is to convert paper gains into real gains let's just say jason in your example you had a fund that had these huge paper gains but haven't distributed anything as coming into this year okay here's a little interesting data about the ultimate buyer of all of these tech stocks which is the nasdaq right people that buy stocks in the nasdaq listen to this as of yesterday more than 45 percent of stocks on the nasdaq are now down 50 so basically one in two more than 22 percent of stocks on the nasdaq are down 75 percent so almost one in four and more than uh one in five and then more than five percent of stocks so one in 20 on the nasdaq are down 90 percent so you can use this to actually get a blended average but what it means is that the ultimate buyers of tech stocks are taking a 60 discount to what they were able to buy even just four months ago 60 so there is no public mark

SPEAKER_72: that will support a private mark unless it's also discounted by at least 60 percent now think about that when you talk about this entire panoply of companies

SPEAKER_21: that have been overfunded many who are under executing and burning enormous amounts of money who now have to come back out to the market as any sophisticated buyer will have to tell them the

SPEAKER_72: truth which is i'm sorry guys but the data says there's a 60 discount to this mark are you willing

SPEAKER_74: to accept it or not otherwise the lights are going to go off yeah and these marks only happen uh at least in the private markets and venture funds when a transaction occurs so if somebody raised a

SPEAKER_115: bunch of money as we talked about in previous episodes at a billion dollars you know uh and they're now worth 500 million that's only going to uh work itself out uh in fund documents and reports for a year or two later when the next transaction occurs so there's a lagging effect one thing i just want to bring up before we go into um maybe gdp or the bill uh hawaiian situation is what we talked about on this pod last year about what was going to happen in private markets uh i've been seeing the last two or three weeks and i don't know sax and freeberg what you're seeing in private markets but really acutely people who are going out and skipping rounds this like i'm going to you know just skip my seed round and just do a series a i don't have product market fit i'm going to get credit for work that hasn't been done i'm going to raise 10 million without product market fit oh my lord has this uh that has the dialogue changed i've been on many calls with founders who've met with 50 vcs and the conversations are moving to you know how many months to break even and uh you know how many customers do you have and how have they increased and let's talk about the churn it is getting uh super pragmatic out there if you're a founder and we we said this a year ago but it's worth stating here this is not the moment i would try to over optimize if you have a term sheet or money on the

SPEAKER_174: table i would i would close it uh just you know founder to founder what are you seeing sax

SPEAKER_177: yeah i mean it's gotten a lot harder i think especially at the growth rounds we actually

SPEAKER_35: have signed two growth term sheets recently and it was much harder for us to do growth rounds last year just because you had these huge mega funds come in at crazy valuations but now they're kind of licking their wounds and we're starting to see some really attractive growth opportunities everyone else has backed off so it's interesting yeah it's changed quickly yeah now one thing to you know

SPEAKER_157: to raise a good point about you know private not only are private valuations sort of sticky but

SPEAKER_35: private marks are sticky and you know companies only get remarked every couple of years and so where's the public markets get remarked every day so it is hard to know like what is the proper valuation of a company that raised money last year because yes valuation multiples have come way down but then also they may have grown and their performance is better so the analysis that i saw jason lemkin do in his lp newsletter and we're basically repeating it for our entire portfolio is to calculate what was the arr multiple that you paid basically valuation divided by arr what was that entry multiple

David Sacks: and what is it today and so we're doing that across our whole portfolio so what you see is

SPEAKER_88: sorry sorry sax clear location ltm arr or you know uh ntm arr which one basically you last 12 months

SPEAKER_51: next 12 months yeah no you just look at their current arr which is you know run rate their

SPEAKER_185: current run rate revenue yeah exactly january you times it by 12 or in this case april yeah basically

SPEAKER_35: yes you take the current month and multiply by 12 but they have to be annual commitments right so if it's not it has to be annually recurring revenue if they're not in if it's not an annual commitment with an expectation that's recurring you can't count it so for example you don't count professional services revenue in that in any event so the point is you you basically calculate what was the multiple that you paid at you know entry in the company and what is it today as a function of the current valuation and what we see is yeah there's a lot of companies that we got into i don't know two years ago at a valuation multiple that you couldn't defend today 60 times 80 times 100 times but the multiple today is more like 10 or 20 times because it's actually grown really fast so you need to look at both sides of the equation and that's the analysis we're running for every company in our portfolio and then you know lps can decide how to how to market i mean the the most important thing is

SPEAKER_121: what's the next investor if they need more capital gonna market at well the question is are you growing

SPEAKER_122: faster than valuation multiples are falling correct and then can you that means you could have a down round a neutral round or possibly an up round but it doesn't so are you starting to see people just

SPEAKER_115: or people discussing on the board level or in your firm hey maybe we take a sideways round a neutral round we just go to last year's price and top off another 10 million are you seeing that i've still

SPEAKER_35: told some of the boards i'm on just keep fundraising just keep the round open top off if there's money available because you know especially if you raised your round eight months ago six months ago those prices like if people are still willing to invest in those terms that's a good deal

SPEAKER_115: i literally had this conversation with the founder this week where they had raised that in a great valuation and they turned money away because they were like yeah that was a mistake we're still

SPEAKER_76: growing so why would we take the money now if our valuation is going to be you know double in nine months and now it looks like yeah maybe you know that extra one to five million dollars would

SPEAKER_174: have been good to lock up okay so adding to these headwinds i think we um we've been talking about the possibility of a recession for those uh new to the to the concept of recession if you're under the age of 30 and haven't really lived through one as an adult it's two quarters the official definition two quarters of negative growth of the gdp well it turns out uh usgdp fell 1.4 percent in q1 uh and uh q4 we had a 6.9 growth rate q1 was the weakest since the spring of 2020 when covet hit

SPEAKER_143: nick cue the clip where sax and i uh basically said this may happen in january of this year

SPEAKER_157: so the concern is that you know with the losses we're seeing and i mean every day it just keeps like you see more red that this could turn into a recession you know popping of bubbles is usually followed by uh by recessions or so i think you know the fortunes of the economy could turn really

SPEAKER_198: quickly here and that is that is the marginal risk the marginal risk is actually for a recession david is saying something really important the risk in my opinion is not of runaway inflation anymore the fed is now in this really delicate situation where china cut rates last week we have an fomc meeting the open markets committee that sets rates on wednesday i think of this coming week what is he supposed to do the risk is to a recession because if we overcorrect yes and the leading indicators all around the world tell us that their economies are weak then inflation may have actually been much more transitory than we thought and right now we have to decide because if we overcorrect we're gonna plunge the united states economy into a recession there's a lot of data here and obviously uh this is

SPEAKER_174: when this data is always in the review mirror so obviously we're talking about q1 it takes a while to collect this data and there's a lot of different factors going on at the same time obviously covid and obviously supply chains consumer spending rose at a 2.7 percent annual rate in q1 a slight acceleration from q4 there was also a 9.2 percent rise in business spending so we have a lot of spending going

SPEAKER_76: on who knows if that is spending that actually occurred in the previous quarters and because

SPEAKER_174: of supply chains like people's cars are being delivered people's machines and manufacturing

SPEAKER_21: equipment is being delivered now we had negative gdp in q1 for a whole host of reasons that can effectively be summarized by the fact that we are still trying to restart an economy at the tail end

SPEAKER_110: of a pandemic and we're doing it in fits and starts and so we have these small bursts of incredible

SPEAKER_21: gdp which we had last year and then contractions in the economy right the thing that's always been true about the united states is that we are a consumer driven economic engine which means that as long as people feel confident and they're buying things the economy tends to do well and we tend to move forward as a society when consumer confidence ebbs and people contract their spending we are in a world of hurt the last couple of years we've had a lot of consumer savings right we've had a lot of

SPEAKER_72: money that's been pent up in the system whether it's stimulus checks or you know loan forgiveness or all of this stuff has allowed people to feel much richer and as a result they've started to spend in dribs and drabs the problem now is that because prices are so high all of those savings have largely been depleted i just sent you guys a text in the group chat of what consumer spending looks like and consumer savings rather and it tells a really really scary story which is that the savings boom is largely over personal savings rate fell to 6.2 percent in march the lowest since 2013 and so what does that

SPEAKER_21: mean well it means that the setup is there for um us to sort of really contract what we are able to spend as a society so i think now the odds even push further in this direction that we could have more

SPEAKER_72: quarters of negative gdp and all of a sudden we're back to what we talked about before which is a 2019 like scenario where the government or the fed specifically races forward to tackle inflation and in 2018 and 19 it turned out to be a head fake and by the way in 2019 the stock market ended up more than 30 percent up 32 percent or something like that crazy numbers here and by the way back then

Chamath Palihapitiya: in 2019 china turned over it looked like it was going to be a fast moving economic recovery for china

SPEAKER_72: and instead they they sort of slowed down we have the same thing here we have a quarter of negative gdp we have china in lockdowns we have every company that's that's in the manufacturing supply chain ecosystem telling the world that we don't really know what this is going to look like intel today actually

SPEAKER_21: said there's going to be shortages in chips through 2024 so i think uh i think it it could be a very difficult path ahead for the fed how do you raise rates 400 basis points into uh into a slowing economy you could raise basis point 75 you know 75 bips maybe 100 bips but it gives them very little freedom

SPEAKER_04: to operate without really tanking the economy there's also another point to highlight here which is um in

SPEAKER_128: some of this data that was released um there was a strong indication that there are real in issues right now with inventories i don't know if you guys have tried to buy an appliance or a car lately

SPEAKER_211: um or a piece of furniture but like i tried in the q4 to buy a car and it was absurd i mean right now

SPEAKER_128: there's like one year delays to get a friggin couch i mean like everything in the in the global supply chain somewhat related to the kind of big inflationary pressure that hit us at the end of last year and then everyone placed orders all the factories kind of had to produce a lot they all couldn't keep up through to what's going on in china right now where there's lockdowns and factories are shut down i have several businesses in the hardware space that are actively searching and frantically trying to find components suppliers specific parts even basic raw materials like aluminum are very hard to get a hold of and so there's also a very challenging inventory and supply chain problem when that happens i can't actually wire money and buy aluminum because i'm waiting for aluminum to show up i can't wire and buy the the microchips i want i can't wire money to my car dealership and buy money so that doesn't get credited on the gdp counter because those sales didn't close that quarter and as we saw with amazon recently and others and apple just said that they're expecting i think close to a 10 billion hit this quarter because of supply chain issues a lot of folks want to spend the spending interest is there the capital flows are there it's just that the supply chain is clogged up and we're so dependent on getting atoms and molecules moved around and they're all kind of held up in different places that folks simply can't get their purchases in and so the revenue triggers don't get hit and so the numbers don't look good from a growth perspective but it doesn't necessarily mean that the demand isn't there this is a significant inventory problem and supply chain problem that's that's driving a lot of this uh um this adversity right now in the market

SPEAKER_131: it seems and interestingly and by the way that doesn't that doesn't mean sorry that doesn't mean

SPEAKER_128: that we're not going to have a recession because you know when when i'm not able to spend money on apple apple spending less on their suppliers they're spending less on their suppliers so there is a a trickling effect of capital flows and the recessionary effect may be hit but you know there is capital and there is demand uh for consumption uh it's just that that we're really

SPEAKER_115: clogged up right now well and the consumer confidence index has been on a bit of a roller coaster we were at 130 before the pandemic for the year of the pandemic we were down in the high 80s 87 88 89 we rocketed back up um you know in 2021 people started to feel like oh we've got these uh vaccines things are

SPEAKER_76: going to go back to normal rocket back up to 128 and it's been a slow tick down uh to where we're now at 107 and so i think consumers don't know what to think they don't know if you know inflation is transitory they don't know if gas is going to be seven dollars or four dollars they don't know if they should spend a big uh spend on a big vacation or not and so this i think in terms of people's planning

SPEAKER_115: i don't know if people can plan how their own personal budgets right and i think that's on the confidence thing to chamat's point we need to have a predictable economy you know it can't be this um schizophrenic uh to use a term sax what do you what do you think about what we're seeing here in terms of we're obviously either in a recession or dip you know dancing around it we're basically

SPEAKER_161: you know on the edge of the cliff right now i think it's probably the most accurate i tweeted in february

SPEAKER_35: hey anyone noticed that we've just entered a recession and i got dunked on by all the professional economists and you know all these people but the experts the experts yes exactly correct and now it's like the data just came out negative 1.5 economic growth in q1 so what i wrote at the time was exactly right and you know i don't know how the thread the fed threads this needle i mean we've got a slowing economy with negative gdp growth you've got inflation is still rampant um it's not as i don't think it's gonna be as high as last year just because we're lapping a much bigger number from last year so on a year over year basis the comps are are you start at a higher price level but inflation's still there so you know i don't know what you do about that um it's it's a really tough situation and when you have this kind of wealth destruction in the stock market i mean you know and we uh there was a good tweet that um you shared we should put it up on the screen i mean so much like wealth has been destroyed you don't necessarily see it if you just look at the big cap indices but you look at all the engines of process sort of growth and prosperity the small caps the recent ipos the growth stocks they've been absolutely hammered it really hasn't been this bad since the dot-com crash of 2000 like and and not just the like april period but like all the way in october where it kept going and then uh the 2008 recession yeah the 2008 real estate crash so we're already like top three worst situations for gross stocks in the last 20 years and when you have that kind of like wealth destruction it eventually trickles down into the economy because people just feel

SPEAKER_220: you know companies start cutting budgets people have less money the spending goes down that dynamic

SPEAKER_21: that that we're referring to in this tweet in that image is called dispersion which means you know people may be being confused when you hear why are all these stocks down so much but the the indices are not down as much and it's exactly for the reason that david just said which is that underneath the surface the mega cap techs consume so much of the market cap of these indices so you know the google's the microsoft's the apples and the teslas those four just clog up an enormous percentage i think it's approaching 40 percent of these of these indices and so underneath the surface you have dispersion which means you have these tail of two kinds of stocks you have these four big mega caps and then you have everybody else and the mega caps are generating so much cash that they're just basically keeping the market afloat so at this point maybe there's a small silver lining and that silver lining is that to be bearish right now is effectively not being bearish these growth stocks because as we said they've been just decimated at this point to be bearish the indices means very specifically to be bearish those four names and only those four names and so that may actually mean that the market has effectively

David Sacks: crashed already yeah but by the way i'm not necessarily bearish on growth stocks from here

SPEAKER_35: because like you said they've already been beat up so badly the stock market is usually a leading indicator what i'm a what i'm a bearish about is just the state of the economy because the stock market is traded down it trades down on expectations so it was already trading down months ahead of the

SPEAKER_221: slow down in the real economy so now new in december the market knew in november the recession was

SPEAKER_51: coming in like around november 6 of last year and they knew it was coming in yeah market knew when

SPEAKER_68: we talked about the sales that bezos and musk did the you know when we sold when we sold equities we

SPEAKER_21: were saying like it's like you can't keep all of your money on the table all the time unless you have the the durational wherewithal meaning you're just not time-bounded and you can just be there forever

SPEAKER_224: and not everybody's in that position an endowment could be in that position but individuals with no

SPEAKER_165: an endowment is not because they have to create distributions every year right they have to talk

SPEAKER_122: about the mega endowments where they you know for you know you know ford or harvard may not need to do this but yeah smaller ones might actually be operating you know memorial sloan kettering might

SPEAKER_76: actually be operating their budget from it yeah but just to go back to david's point like it's a

SPEAKER_21: really difficult spot like what is the fed supposed to do so they're probably going to tighten 50 basis points in may that's relatively well expected we'll be we'll be able to digest that reasonably well but what did they say to david's point you know if they all of a sudden go on a crazy program of quantitative tightening right and what is that again that's when you know we were spent they were spending they were printing you know money billions and billions of dollars going into the market buying securities and giving people the money right that's called quantitative easing now we're doing the opposite right where they're selling and they want the money back now the problem is what that does is that removes liquidity from the market and when you remove liquidity from a market you actually make it a little bit more fragile a little bit more precarious a little bit more price sensitive and so

Chamath Palihapitiya: it puts us in a very tough situation when the economy is slowing when these guys may be raising rates and then at the same time removing money from the system it may be a lot for all of us to handle

SPEAKER_21: and so i think that they're under a really difficult well and if you've had a decisions there is a

SPEAKER_35: business cycle and you know there are always recess recessions periodically every seven to ten years but they have really magnified this because you had the fed for years maintain interest rates really too low and doing quantitative easing during a boom and then the federal government was printing

SPEAKER_157: trillions and trillions of dollars and they didn't stop it was one thing to do it during that sort of covid recession but then last year they printed that last two trillion and that's what set off this wave of inflation so you know when i was like in school learning about economics and they would tell us that all these government programs and actions are like automatic stabilizers or what have you like the government helps balance out the business cycle no the government like magnifies the business

SPEAKER_122: they've made this so much worse well they're putting their hand on the steering wheel right it's like let the economy drive let the free market do this and if you start you know you might oversee or into

SPEAKER_72: the federal government is great at setting incentives right and creating like tax credit programs and incentives for private enterprise to invest money but when they act as a direct market participant and start to actually direct capital flows and make decisions about how the capital market should work it never ends well because this is not what they're good at well i think there's

SPEAKER_04: also another i mean just to counter that there's there's also this other issue of not just incentives

SPEAKER_128: but when they create uh a free capital that then allows a market to find a way to take advantage of that free capital and that's effectively what we've seen happen with medicare medicaid as well as with the student loan program and um you know i i don't know if we're going to get to the student loan program today but i think you know to your point chamath one of the things that's happened with the cost of education in this country is that the federal program which was uh you know and i i took a bunch of notes here to talk about this today but the federal government began guaranteeing student loans in 1965 it's called the federal family education loan program and that program made capital available for students to borrow to spend on universities or or um whatever education they want to go go get um of their own choice and the idea being that that will give them the ability to go make more income and and extend their careers and educate the workforce and the problem is that when that capital was made available a lot of private universities started to emerge and private for-profit colleges started to emerge and in the years since that that program was introduced i just want to give you guys some crazy statistics so in night the 1969 70 era the cost for a public four-year college was 1200 bucks a year that's room board tuition and fees and in 2020 that cost rose to 21 000 dollars and here's the the uh the other crazy stat for private four-year college in 1970 2500 a year 2019 2020 46 000 a year and so that capital basically allowed these for-profit um organizations of these organizations that try and grow their endowments which are effectively like for-profits to charge any price they wanted and the consumer the student would be able to get free capital to fund that quote unquote education because it was available to them for free from the federal government and so the federal government created a bubble in education cost and that bubble in education cost has now overburdened 15 percent of american adults with student loans that many of which would they would never be able to pay back and now we're in this really awkward situation of saying hey maybe we should forgive those loans because it's unfair that people are burdened by this and um and doing so obviously doesn't solve the fundamental problem which is that making those loans available in the first place creates an inflationary bubble effect in the end asset and the end asset in this case is education but we've seen the same thing with housing and we've seen the same thing with pharmaceutical drugs and medical care and other services so any place where the federal government steps in and says i will provide a backstop i will provide free capital to support and create a quote unquote incentive for this market to accelerate you end up with these inflationary bubbles you're going to have people game the system

SPEAKER_115: right you get whatever university of phoenix types and and you even the large uh hey jacob universities raising uh tuition to observe things and people take these loans chamath before their frontal lobes are even fully developed and they have long-term uh understanding of the ramifications

SPEAKER_72: of this so where do you stand on this chamath yeah so there's a there's an interesting article in

SPEAKER_21: the atlantic about who really wins when you forgive student loan debt and i and i just pulled out some facts so i'm just going to look down here and read them just so i get them right it said in the article 13 of the u.s population carries federal student loan debt grad students account for 37 of that federal student loan dollars currently it's 1.6 trillion of total total student debt versus about 10 trillion of mortgage debt so the average debt has gone from about 25k in 2012 to 37k in 2022 so you know almost a 50 increase in a decade the majority of student debt is held by white borrowers only 23 percent of black americans aged 24 or greater have a college degree in 2019 so the majority of the black

SPEAKER_72: population would not be directly benefited by student loan forgiveness in 2020 the median weekly

SPEAKER_21: earnings for someone without a high school diploma was 619 dollars for those with some college but no degree that number was 877 dollars for those with a bachelor's degree it was 1305 dollars and that

SPEAKER_72: number continues to grow for masters and professional degrees and and phds interestingly the last two points

SPEAKER_21: the gallup uh organization who ran a poll is unable quote to report the percentage of americans who have

SPEAKER_72: mentioned student debt or student debt cancellation because it hasn't garnered enough mentions to do so

SPEAKER_21: in 2022 according to the article across four gallup polls quote just one respondent mentioned student debt as the most important problem facing the nation unquote and then last thing is here is that 43 percent of the 2020 biden electorate graduated from a four-year college or university versus 36 percent of democrats in 2012. so you know one of the takeaways is that this may be an issue that affects a certain percentage of the dems who went to college but it may not represent a plurality of all democrats and it doesn't represent you know a majority of all they sure are vocal though to your point i think yeah i mean

SPEAKER_247: look this is i think that there are two motivations uh political motivations for doing this now

SPEAKER_128: they're pretty obvious um and then i just want to say three things on on kind of the concern about this and why i feel very strongly that if we don't fix the underlying system you cannot forgive student loans you have to fix the system before forgiving student fix it first what's the number one fix for you well so let me just say the two motivations the two motivations number one this is a stimulus so this morning the biden administration said that they were thinking about taking executive action to make the first ten thousand dollars of student loans forgiven so if you do the math across 43 million people that's a roughly half trillion dollar forgiveness what happens that half trillion dollars much like we saw last year becomes a stimulus payment it is money that people now have that they didn't have before it is capital that they or freedom from debt that they didn't have before and it will stimulate the economy so there is a very um important economic incentive here to do this which is if we do it it will be stimulating to the economy and um people will spend more and the

SPEAKER_194: economy will grow by the way that's it it's a two and a half percent boost to gdp right so half a

SPEAKER_128: trillion dollars of free money just flushes into the system the second thing is that it will help in the midterms is their point of view right so they've obviously done votes they've done the polling here right and and it's like hey when i was in junior high the kid that ran for class president was like i'm gonna make everything in the vending machine free guess what that kid got voted in so you know the idea that you're just going to give everyone free give your your loans back to you for free everyone's like my gosh this is the best thing ever elizabeth warren you're a genius you know bernie sanders you're a genius joe biden you're a genius let's say yes and so they believe through polling that this is going to help um help them in the midterms but the challenge is if we don't solve the problem if there's no standard of value of an education if there's no standard around whether or not a specific accredited university increases your income and earning potential as an individual or increases the opportunity for you as an individual you are wasting money you are giving federal dollars to private companies who are profiteering from that and the individuals are not going to benefit from it and i think that that we're seeing this sorry and we're seeing this structurally continue in a lot of other places where the federal government doesn't hold itself accountable to the standards of how their stimulus is meant to benefit the individuals that it is being funded for the individuals are not getting a good education in many cases they're not earning more by getting this education chamoff's data speaks to the average but a large percentage of people go to crappy universities that don't improve their earnings potential and then the federal government says here's this free money that private university just made a bunch of money and no one's better off and guess who's ended up paying for it taxpayers are going to end up paying that private company a bunch of money because we're going to forgive all the loans and so we have to have a standard around whether or not a dollar should be loaned to pay for education at a specific university by having that university prove that it improves the potential and by the way if you stop the federal student loan program today fewer people would go to college and if fewer people went to college guess what would happen colleges would drop their tuition the reason they're able to raise demand supply and demand and the reason they're able to raise their tuition is because there's so much demand because there's free money and so if we actually saw the federal loan program cut back or put these standards in place the cost of tuition would actually decline and profiteering would decline people would get a better education and the taxpayers would be better off end of diatribe sorry no no it's i think it's

SPEAKER_76: completely legitimate sex we talked on a previous episode about how people make things like immigration uh you know such a charge philosophical debate when there are point-based systems being used in canada australia and other places that make it much more logical do you think the the solution here is to freeberg's point of just and i'm interpreting freeberg's point as what is the value of this degree nursing great nurses can take out a hundred percent of their loans because we know there's a nursing shortage uh you know philosophy graduate students maybe can't take out more than

SPEAKER_80: five thousand dollars in debt because we don't see a bunch of job openings for that getting a history

SPEAKER_254: degree trump university is a lot different than getting a nursing degree so sax what's the solution

SPEAKER_115: here uh and then we'll let give you your um your uh swing at bat in terms of buying votes yeah let's go

SPEAKER_35: solution first before we go partisan look i think that a loan only makes sense when it generates roi right it makes you're gonna generate more income on the other side of that loan to make that loan worthwhile and the problem here in too many cases is these kids go to these schools they spend five years there they get a degree in some woke nonsense and of course it doesn't help their earnings power

SPEAKER_157: i mean that's that's the fundamental issue here is that these degrees are worthless right i mean if you go if you go to if you go to college to get you know to become a doctor or maybe a computer program or something where the skills have value then of course you can pay back the loan because you get a gainful job but you know otherwise if you just major in fine arts at harvard or something like that i mean you basically graduate you get a job at what the new york times is your dream you can't pay back your loan you're saddled with this enormous debt and think about the cultural impact that has you have this young generation who believes in socialism and i think this is a big part of the reason why is they have no capital and they have no ability to accumulate capital because they're so

SPEAKER_76: saddled with debt so to interpret what you said sax hard to believe in capitalism if you got no capital

SPEAKER_157: right if you start if you start the race at negative 250 000 in debt to get a degree that was basically worthless for you yeah so the system is so look i think maybe what we do is we reform the the debt i i'd actually be okay with forgiving the debt in some instances if you got a reform of the system in other words right if we stop funding these worthless degrees but if you're basically going to acknowledge that hey we need debt forgiveness because these degrees are worthless why would you keep funding those degrees so you know we need to have a like a more honest comprehensive solution here the other thing we should do actually is one really crazy part of bankruptcy law is that student debt is one of the only types of debt that's not dischargeable in bankruptcy i don't know if you guys know that but right under george w bush's presidency explain it to everybody yeah yeah basically look when when if if you ever get to the point where you have too much debt and you can never pay it back you declare bankruptcy and then the court starts you over from zero so you can at least start building some wealth right but you lose credit but you lose exactly no one's going to want to give you credit after that but at least you're not so deep in the hole you can never recover so that's the point of of a personal bankruptcy but the crazy thing is that in bankruptcy you cannot get your college debt your student debt cancelled you can get your credit card debt cancelled you can get other types of debt cancelled you can't get your student loans cancelled it's crazy so that's one thing they

SPEAKER_269: should fix immediately is make these debts just charged with private market sacks you wouldn't need

SPEAKER_04: to do that right the reason that's the case is because it's federal dollars that are funding

SPEAKER_128: those loans but if it was private market dollars people actually if banks and and lenders took a loss when people couldn't pay back the loans then the market would work itself out the problem is it's the federal government stepping in and trying to be a market maker right and it creates this

SPEAKER_157: this totally crazy incentive right it creates it creates double distortions on the one hand like you said it it basically means that because government's money is funding everything the tuition goes up because colleges take advantage of it but then also nobody is really making a smart roi decision about whether a smart underwriting decision about whether this loan is worth making whether it actually stands a reasonable shot of being paid back there is such an easy free market

SPEAKER_74: solution here it's called an isa it stands for income sharing agreement this is where

SPEAKER_76: you give a loan to somebody and you get a percentage of their income uh over a period of time capped at a certain multiple say 2x and what this does is it aligns the person giving the loan with the job that's expected to come from the education you already have that you already have that it's called taxes yeah but here's the problem nobody's watching the store so nobody's looking at it saying i will give an isa at this percentage return for nursing nursing i gotta pay 50 percent of my income every

SPEAKER_280: year to the federal government to the government like i pay taxes the the thing we have to remember

SPEAKER_110: is like if the federal government tries to do this it really is just about buying votes going into a

SPEAKER_72: midterm election and here's why if you arbitrarily give a bailout of one sliver of the population

SPEAKER_21: unless that sliver is really really large which we know it is not it's going to really anger everybody else think of all the people that are trades people working class people who don't have a college degree yeah what are they gonna think what about all the people that just finished paying off their debt what are they gonna think it's going to upset so many people

Chamath Palihapitiya: and ultimately what this is is a bunch of coastal elites who are miscast in jobs and saddled with debt is pushing pro for a program that isn't a broad-based mechanism to create equality at all it's just a get-out-of-jail-free card for a small people so for a small group of people who unfortunately were taken advantage of and this is the thing that we're not losing sight we're losing sight of you can only pay back a loan if you're making more money than you owe and the fact that this exists shows that these loans were really poorly constructed and they were given in instances where they should not have been in the private markets we've seen that happen but we go through a cleansing mechanism to sort it out

SPEAKER_81: right we've gone that's literally what happened during the 2008 real estate bubble people gave

SPEAKER_287: mortgages to people who could not exactly pay them if i as a lender think that you're not going to be able to pay back the loan i don't give you the loan that's the simple mechanism that exists in free

SPEAKER_128: markets and part of the issue is a lot of people got loans thinking without doing the calculation will i ever be able to pay this back and they took the loan to get an education the other the other scenery concept that i will just make money but let me ask one other question of you guys at what age and at what level do you think individuals should take responsibility for the decisions that they're making when they take on personal debt because we see ourselves getting in this cycle where consumers are given debt they don't think about the consequences of that debt down the road or do the analysis themselves and maybe they're not equipped to and they'll take out a loan on a car on a house on a no but the problem is and on a loan on education but car but here's the

SPEAKER_72: thing like education is a very dangerous thing because we put so much societal credit and external signaling to it and we give everyone effectively the same quantum of risk but that's not true for a credit card nor is it true for a car loan so the private markets are efficient in that when you first try to get a credit card sure you don't get an amex centurion or platinum card you're given a chase sapphire card with a 500 limit and you earn the right to borrow more same if you applied for a car loan the same with a mortgage it's based on a down payment so there's differential risk pricing and if you don't have differential risk pricing you're getting a lot of people how would you add

SPEAKER_294: it to education the market would figure it out the market would because you would

SPEAKER_254: differentially price the risk as as you guys literally a brainstormer right now like what are your grades well no what courses did you take whatever whatever it is skills we're not going to

SPEAKER_296: get it right the market will get it right but the market would figure it out the problem is and and

SPEAKER_128: sorry the incentive was and this is a really important point you know if you guys read ray dalio's book which we've talked about a number of times he's identified and highlighted that a growing economy in a successful um uh country improves by improving education and having more people get higher education generally speaking and so the initial incentive the initial intention behind the federal student loan program was a good one which was to give people access to capital that the private markets were not providing at the time so that they could go out and get a higher education we could improve the education of our workforce and we could grow our economy nowadays the question that we always forget remember we always get one step away and then two steps away and five steps away and we miss the point we're in that moment now where the question really is is the federal student loan program doing more harm than good well that's actually are we actually creating value from our higher education system in this country or not no and no most importantly is the private market there because you look at the total debt outstanding 1.7 trillion dollars there would be a private market freeberg don't sell beyond

SPEAKER_194: the close the answer is no we have a massive employment gap okay the data tells you in every

Chamath Palihapitiya: single which way possible that we are not educating our young people to take the jobs that are needed for a high growth functionally moving economy we know that so we are miseducating these folks and then we are giving them access to enormous amounts of debt that they have no reasonable chance to pay back and i think that that should be fixed by fixing the incentives of the universities you are right universities today are for-profit asset management businesses wrapped by this philanthropic do good or nonsense that they try to tell people to get you to go there and pay fifty thousand dollars a

SPEAKER_81: year in tuition it's a joke and they're calling people to think that these degrees are actually going to make them successful humans they come out miseducated and under educated and incapable of

Chamath Palihapitiya: servicing the economy's needs separately the other thing if you take a step back and take student loan

SPEAKER_21: off the table for a second and just say any consumer handout that touches less than you know 40 or 50 percent of the economy or of the population of a country is very precarious so students student debt in this case 15 of the u.s population so a lot of people but it also means that there's 85 percent

Chamath Palihapitiya: who don't benefit what will those 85 percent of the people say when they have to foot the bill for the first 15 percent and then what do you think happens with other kinds of debt what happens when

SPEAKER_21: the oil lobby says forgive our debt because we're in a national energy crisis what what what will

SPEAKER_302: all the climate no accountability it's no accountability well it creates a slippery slope

SPEAKER_47: and and and my last point on this is to the extent that we actually want to forgive student debt

Chamath Palihapitiya: i'm fine if that's the law of the land that's great it should go to the floor and it should be debated in congress and it's a law that should be passed but it should not be by executive edict trying to back in to buying votes in a midterm election it's gross uh sacks uh by the way just

SPEAKER_35: on the politics of that i think this could potentially hurt them because jamoth to your point this is basically a bailout of the woke professional class it's the it's the underemployed graduates of these universities who again are members of the professional class they majored in things that didn't increase their earnings potential meanwhile the majority of the country is working class

SPEAKER_157: something like two-thirds of the country is still working class meaning non-college educated and they're gonna have to pay pay for this bailout in one way or another either through higher taxes or more uh deficit spending or more debt the burden of this bailout is going to fall on them and why should

SPEAKER_76: they have to pay to bail out literally like somebody working in retail is paying for somebody's

SPEAKER_115: graduate school degree in creative writing or something is completely and profoundly unfair to the answer to freeberg's question we actually know when executive function fully matures in

SPEAKER_76: adults it's 25 years old and that's when you can actually make long-term thinking so there is an argument that people should not be allowed to take these loans uh that are not even uh that you can't

SPEAKER_122: get out of or there should be some cap on the amount of loans you can take because people at the age of 17 18 19 20 are absolutely not able to make these decisions there are other programs as well that work

SPEAKER_72: so in canada i went to a school called the university of waterloo and fantastic engineering school the

SPEAKER_21: the reason i went there and i did electrical engineering there is that they had a program where after the first year so the first year looks like every other year at every other school okay but you're there for you know two semesters from september to may but after that you start working and you alternate four months of work with four months of school and you get paid for that work and what it allowed me to do was graduate with meaningfully less debt but it also allowed me to

Chamath Palihapitiya: graduate with a commercial skill set and i was able to get a job and in that moment actually i was

SPEAKER_21: working at a bank and i got profoundly lucky which is i worked for an individual and i was trading interest rate derivatives and i was learning to trade technology stocks on the side and uh this guy mike fisher incredible human being and uh i made in one year like 25 or 30 thousand dollars for him yum yum zip zip he wrote me a check and he said here you have 25 000 of student debt go pay it off right now i'll let you cash out this whole book i graduated with about 28 000 of debt i had about

SPEAKER_128: 8 000 i think i had a um somewhere between 10 and 15 000 10 and 20 000 and then i got my first bonus check after my first year of work after undergrad and i paid off all my debt and it felt incredible incredible it was amazing when i paid off my debt i've never been in debt since i walked downstairs to

SPEAKER_54: the bank and i paid i gave them the check and i endorsed it and i said here's my student loan

SPEAKER_21: number and i was like oh my god i was free for the it's like it was an enormous sense of relief for

SPEAKER_247: me it was credit card debt i had accumulated all the credit card because i went to cal it was like four grand a year to go to college but it was a lot cheaper back then if i didn't go to waterloo

Chamath Palihapitiya: i would have had double the debt because i wouldn't have had work but then also like i think about all these scenarios i wouldn't have had two years of work experience i may not have gotten the job that i did at bank of montreal at the time that may not have been able to give me a chance to meet

SPEAKER_21: mike fisher hey all these things could have happened so you can't rely on the luck of the butterfly effect

Chamath Palihapitiya: so that you have a reasonable shot of building a good life yeah right so there are all these things in universities that i think are really mismanaged today and they go and work against what is right in

SPEAKER_21: society so i'll give you another example the the dean uh of the engineering school and the president of university of waterloo was here this week with me and i asked them tell me about these global rankings

Chamath Palihapitiya: and they said you know it's just a really difficult game they said if we wanted to compete to try to get

SPEAKER_21: high on the list we would have to do the things that would undo all the things that made us great and unique in the first place and i was like you know what i am such a huge supporter of this school please

Chamath Palihapitiya: just continue to do what you're doing and i'm so proud that they have the strength to just stand on their own two feet but every other school is running this shell game of you know gerrymandering all of these statistics trying to get high on the list to trick some parent to force their kid to go to some school to then graduate with two hundred thousand dollars of debt to get a job that that

SPEAKER_21: doesn't then give them give them any line of sight to paying it off it is i don't think it's their kids's fault but you have to reform the system and i think the first thing you need to do is look inside

SPEAKER_161: these universities and hold these folks accountable i mean these incentive systems are just crazy um

SPEAKER_115: speaking about crazy uh we talked about bill wang uh and his uh that's your transition that's your transition sorry they can't all be as elegant and smooth here's jake out he's looking at the agenda

SPEAKER_04: for today and he sees bill wang and he's like okay how do i do this how do i whanger okay the whanger

SPEAKER_333: right yeah okay crazy crazy the linkage is craziness okay go i mean no no no no no hold on the the

SPEAKER_334: linkage is uh trillions and billions yeah link speaking of trillions and billions trillion dollar mistakes

SPEAKER_76: we gotta whang and his cfo were arrested on wednesday in charge with racketeering wire fraud and conspiracy uh we talked about this when it happened uh his uh firm archway ghost i think it's archegos archegos archegos archegos archegos his poorly named firm uh and family office we covered this in real time back on episode 28 uh they famously lost 20 billion dollars over two days uh when they were margin called uh back in march of 2021 uh he worked at tiger management yada yada and it was at the time reported that they were trading billions of dollars at over 5x leverage according to the sec complaint at its peak the firm was managing 36 billion with 160 billion of exposure which is 4.5 times leverage but archegos or however it's pronounced started with only 1.5 billion in assets in march of 2020. so wang flipped 1.5 billion in capital into 160 billion of exposure in 12 months

SPEAKER_174: essentially trading somewhere in the neighborhood of 100 to 1 at its peak according to this complaint a bunch of banks have lost money because they were supporting this credit suisse lost 5.5 billion morgan stanley lost a billion ubs 774 million the new york times described it as quote orchestrating

SPEAKER_76: a stock manipulation scheme that relied on them masking and concealing the enormous risk they had taken chamath you had some thoughts on this i think so first i think we should probably explain

SPEAKER_24: how he did this right so that's every that's everybody's question is how did the banks let this

SPEAKER_21: happen so well well i think first it's what's the mechanism so you know there are ways in capital markets to take really extreme bets this way is called what's called a total return swap and so the basic way that this works is you have two people on on each side of a trade and what you basically say is let's agree on what's called a reference asset so i'll just use an example let's just say it's um i think discovery was one of the companies that they were trading so discovery communications let's look at let's that's the reference asset that stock and what i'm going to do is buy protection and what you're going to do is um sell protection and essentially what happens is as the stock goes up and down you're going to net the difference between these two people and when you do it that way via a derivative so what it what it forces the person to do the bank in this case is to go out and buy the stock okay so that they are hedged in case the price goes up a lot because they have to pay that difference in this case to uh bill huang and if the price goes down bill huang has to pay that difference back to the bank so what happened is that he went to three different banks morgan stanley goldman sachs and credit suisse and effectively what he did was he bought he made these bets across a handful of names but he did it with so much leverage that he ended up owning 60 or 70 percent of some of these companies and in march of last year when the stock market turned over um he owed them enormous amounts of money so much so that these banks had to unwind these trades which caused further downdrafts in the stock and almost spilled over to the broader stock market jason that the numbers from the sec complaint are pretty crazy as of march 31st of 2020 they had 1.6 billion invested on a gross exposure of 10.2 billion which that what that means is they were able to go and lever up this 1.6 billion to behave in the market as if they had 10.2 billion by january 1st of

SPEAKER_72: 2021 so nine months later they had 7.7 billion dollars of invested capital so they'd done really well right they they'd made 70 percent on this 10 billion but they levered that up again and so they

SPEAKER_21: had gross exposure of 54 billion dollars and then just uh i think three months later by march 22nd

Chamath Palihapitiya: they had 36 billion dollars of invested capital meaning they had 36 billion dollars of cash this guy had

SPEAKER_81: taken 1.6 and spun it up to 36 billion and basically yum yum this guy went like 20x in a year but then

SPEAKER_21: he had uh levered that up again and he had 160 billion dollars of gross exposure and then the market turned and he owed all this money and so all these folks had to get out of it but they also alleged

SPEAKER_76: that he was trying to do short squeezes on the stocks to try to make them goose even more so there was

SPEAKER_95: massive manipulation because of his position size correct yes so this is what happened but then here's how

Chamath Palihapitiya: it is allowed to happen so if you try to do the same thing in interest rates in the interest rates market versus the equities market it's not possible why if i wanted to go and buy a credit

SPEAKER_21: default swap effectively think of that as the same kind of thing he did but on the debt of a company

Chamath Palihapitiya: on the debt of discovery what i would do is i would be able to enter into that trade with a bank but it goes into a clearing house and that clearing house is able to tell all the banks how much risk is building up in the system and the reason we implemented this clearing house was to make sure coming out of the great financial crisis none of that chaos ever happened again

SPEAKER_21: but we did not include the equity markets in that clearing house and in the laws that regulate it and so what this is is a very shadowy great part of the of the market that is poorly regulated that has very little oversight so what do the banks do

Chamath Palihapitiya: the banks say to you if you want to put this thing on give me a balance sheet so i understand what the risk is a piece of paper a report and i think what what they're alleging is that these guys

SPEAKER_21: lied so that any individual bank in this case goldman morgan and credit suisse had no idea because they kind of doctored these reports to each other and that's why that's why all this risk built up in the system it would be solved if you had a clearing house for equity derivatives the same way you have for

SPEAKER_76: interest rate derivatives it is crazy to think that somebody was doing this and thought they would get away with it and had been up 20x and the psychology of these people the madoffs of the world

SPEAKER_80: i just find fascinating why wouldn't he if he just by the way we we talked about how the three the four

SPEAKER_184: of us we talked about how the four of us are grinding to return 2x of our money in 10 years

SPEAKER_63: and this guy is like yolo he's 7x or 10x to you know 1.6 billion dollars and it was not enough

SPEAKER_174: it's not enough i mean people have i mean what do you think the psychology of this is like i have no idea that's what i'm trying to figure out sacks what's the psychology of somebody

SPEAKER_76: who tries to do this they're already a billionaire they've already got their jet they could go anywhere they could have anything they could buy any home they could go on any vacation well that's the thing i never understand about these people is like this has got to be some crazy sociopathic

SPEAKER_353: behavior jakel did you always want a jet by the way the guy i just got a business select on southwest

SPEAKER_133: when you started your career what did you want the knicks that's what i still want well when you

SPEAKER_06: started you wanted a house right and then you got the house and you wanted the home in tahoe and then you or the home you know the vacation home and then and then you want the jet and then i mean

SPEAKER_07: i don't know why this is confusing well no but i don't want it enough to put my entire freedom at

SPEAKER_24: risk or to cheat apparently this dude was a christian i'll put that in quotes because i don't i

SPEAKER_21: mean i don't sound like christian behavior ran ran bible study and stuff in the mornings he lived in some modest house in jersey blah blah blah but you know he was a bit of a freaky deke what does that

SPEAKER_72: mean so weird i mean the guy couldn't get it up by the way the the dude was pinched in 2012 for insider trading and had to pay a settlement and like give back everybody's money he got pinched

SPEAKER_365: it's crazy and what is what it is you know i got pinched he got pinched yeah he got pinched when you

SPEAKER_63: grow up in the streets you know that is what happened to this guy i got pinched he got pinched

SPEAKER_364: when you grow up in the streets the guy ate cheese he didn't run out he ratted on his friends

SPEAKER_103: and he ratted on his friends now the cfo got pinched too they flipped him this is super deranged uh

SPEAKER_371: speaking of deranged uh transitions today where are we going where are we going you know what

SPEAKER_333: someone needs to do someone needs to take all of jcal's transitions from the last couple of shows

SPEAKER_378: and just put them together in a row yeah just a super crazy okay speaking of deranged yeah on wednesday the department of homeland security speaking of billions announced a disinformation

David Friedberg: governance board disinformation governance board according to the announcement the board will

SPEAKER_76: immediately immediately begin focusing on misinformation aimed at migrants at the us mexican board of the board will be led by disinformation expert nina jank uwitz jank uwitz he has researched russian misinformation tactics and online harassment this is also the woman who sings

SPEAKER_80: show tunes on tiktok jaykel i feel like you should be running you should be running our disinformation

SPEAKER_277: board you always have such a strong opinion and you have you have such a nose for what's bs and what's

SPEAKER_35: not here's what's going on here so first of all this woman claims to be an expert in disinformation let's evaluate that claim she was an active pusher of the steel dossier which turns out is disinformation

SPEAKER_157: for what people are now under indictment she also was active in trying to censor the hunter biden laptop story which as it now turns out was not disinformation it was absolutely true as acknowledged by the new york times the washington post you would think that these blemishes on her record might disqualify her from being an expert on disinformation but actually in the view that people are hiring her these are actually qualifications because they are not interested in the truth they're it the reason this department is set up and what they mean by disinformation is they have hired her to push partisan political points that's what's going on here that's what disinformation is now it used to be that if you disagreed with somebody you just say listen i disagree with you or maybe you're an idiot whatever you're wrong but now the way that these debates are set up and the way they work is they don't just say you're wrong or that's not true they try to label you as disinformation so you can get you censored and the point of hiring this disinformation czar is is basically to censor the this is basically to shut down the debate that that is basically the whole point of this do you think

SPEAKER_210: there's any timing here with elon yes of course it's it's um well it's it's there was a great tweet

SPEAKER_381: about this i mean i love conspiracy sacks by the way i don't think it's conspiracy theory it's there

SPEAKER_157: was a great tweet about this that um that we live in a future where it's like a mashup of george orwell and ayn rand because here you have you know elon musk the heroic lone entrepreneur trying to rescue freedom of speech at the same time you have this orwellian ministry of truth being created

SPEAKER_383: by the federal government so i mean no awareness of naming yeah it's just bizarre but but the disturbing

SPEAKER_384: thing about it is disinformation governance board is such a dystopian name the um the thing about it

SPEAKER_157: that's a little bit scary here i know you play the video of of her doing show tunes and it seems sort of silly but the thing that's scary is that this is under the homeland security department that's another wrinkle why is that there it's it's the most militarized department in our government so it's really scary to put the ministry of truth under the department that has all the soldiers it's not the name of it but it's close pretty darn close now now why is it there i'll tell you why because this was built up to there was a truth shout out george orwell a couple of months ago there's a news story that we might have covered on this pod where the homeland security department redefined disinformation to comprise uh they said it represented an escalation of the terror threat level so in other words they basically said that disinformation was tantamount to terrorism remember that didn't we talk about that this is the payoff to that first they define they basically define the other side as being disinformate of the debate as being disinformation then they define disinformation as as basically terrorism then they have the homeland uh security department which is supposed to be

SPEAKER_389: responsible for terrorism create this ministry of truth this is what's going on here it's really weird

SPEAKER_04: just to remind everyone there was concern in the last election i i'm going to play devil's advocate

SPEAKER_128: as i often find myself doing here okay that uh just just to try and explain the world that that's the reason i often play this role because i try to understand the world but um you know there was a real concern that you know the russian government was using uh you know information warfare and propaganda through social media proven to influence voting and um and that that is considered a security threat to the integrity of our elections therefore this is a homeland security issue and there is a question mark of course that everyone has on how far are they going to go once you set this precedent when would they ever stop in terms of quote unquote policing information and policing what's true and managing internal propaganda and internal media delivered to us by the government that's the other side of the coin but the primary side of the coin the initial side the initial representation that i think folks do have concerns around is how do we keep foreign actors from creating misinformation campaigns that go viral and influence elections and sex i don't know if you think that that's a concern we should or shouldn't have but how would you address it if you were the president and that was the the challenge you know to like how do we stop that from happening the foreign actors

SPEAKER_35: interfering in our elections is certainly a concern we should have if it was actually happening on a big scale or in a meaningful way i mean this is basically look this is basically a hoax okay john

SPEAKER_157: durham is basically out there making indictments right now proving the extent of this hoax it started with the whole steel dossier which was a piece of campaign opposition research that was manufactured by hillary clinton's campaign the lawyers who basically produced it are under indictment and that's where this whole thing of russian disinformation came from and the only proof for that thesis is that supposedly the russians bought a hundred thousand dollars of facebook ads on facebook so i'm not denying that that occurred but it was relatively minor it was a drop in the bucket

SPEAKER_68: of all the activity going on around no wait wait to be clear to be clear that was just the ads that were bought with with like credit cards that said like fsb on it like but who way to go facebook

SPEAKER_72: you probably you know didn't count all the number of credit cards that were stolen i'm pretty sure the russians are capable of stealing john smith's credit card and using that to buy ads as well

SPEAKER_399: well i saw i looked at those ads are you seen those ads they were ludicrous they weren't going to

SPEAKER_157: convince anybody of anything i mean they had like jesus and the devil arm wrestling each other and the jesus figure was basically said and the you know it was just absurd i mean the jesus figure was saying

SPEAKER_383: that okay wait to be clear it happened and you've now stepped back your position on like it just wasn't

SPEAKER_157: that scale to your opinion i think i think look the the scale interference in the election was committed by big tech i mean they censored the hunter biden story two weeks before the election it turns out that's a completely true story that hunter biden has extensive business dealings in ukraine the country we are now yes but we are now deeply involved in a war there and that story the electorate had the right to take that into account big tech censored that story so there was a reason for that

SPEAKER_404: can may i respond to that just to give people like making a very difficult decision you have to

SPEAKER_76: remember trump asked putin on stage to hack hillary's emails and they did then he asked the ukraine um to take action against the bidens or he wouldn't give them uh support he was impeached for that so if you put yourself in the and i'm not saying twitter made the right decision here but there was and there was also sexual material you know people's nudes which and hacked material and nudes are against the terms of service so i think two things happened concurrently one listen the people working at twitter are 98 liberal they don't want trump they saw it as an existential threat and then two they

SPEAKER_409: don't want a link to hacked material oh really hold on a second hold on during the whole canadian trucker

SPEAKER_76: let me finish this point no i have to finish my point the third point and then i'll let you go is that in it in addition to all that hunter biden is completely a grifter go okay i agree with you on

SPEAKER_157: that one yeah so look during the whole canadian trucker thing remember when all the people who contributed to those canadian truckers they got docs i mean basically there was a hacker who leaked all the people who had donated and social networks were happy to print all that information so this idea that they censor hacked information is nonsense the libs of tick tock account just got docs by taylor lorenz look whether you think that was a good idea or not the point is these principles are invoked very selectively when there's a story they want to suppress and the new york times and the washington post have both not come out and said that the laptop was real it's been authenticated the story was real and this whole idea that it was disinformation that was just invented i mean it was just invented

SPEAKER_123: well no hacked it wasn't that it was disarray is that it was potentially hacked and you and trump

SPEAKER_122: nothing was here's the thing trump set the stage for that and the uh the the people at twitter and facebook who also made these decisions they were informed by three later agencies department of justice and fbi etc hey this is potentially hack material designed to interfere with the election

SPEAKER_157: listen it also is true that biden is nina jankovitz and other democratic party operatives just made up out of whole cloth that the hunter biden's story was disinformation it was true it's been acknowledged is true the washington post is true i mean i think this is true so hold on so social media can improve

SPEAKER_122: no it's not about improving it look well no no you didn't fear my sentence i think this is where social

SPEAKER_76: media can improve which is if they had to explain every one of these decisions they make in full in transparency i think that's something elon could bring to this party which is if you're going to block something we need to know why and they'd never explain why and who made the decision and i think

SPEAKER_80: that that transparency would benefit situations like this if the doj or fbi told them this is hacked material then they got to go to the doj and say hey you got to give us cover here if this is in fact hack material you told us not to print it we're not going to print it but it was just bizarre that

SPEAKER_115: one publication got dinged like the new york post it didn't the oldest the oldest newspaper in america the oldest newspaper in america the bastion of like it doesn't matter that's not for you to decide it's

SPEAKER_157: not for twitter to decide it's a legitimate publication that had a true story and i don't disagree it was relevant to the election and the american people should have been able to take that into account and people like nina jankovitz whatever our new czar of the ministry of truth she was out in the forefront basically calling that story disinformation meanwhile she's pushing the steel dosti which really was i think if that story was confirmed would biden have won i don't know i don't know the answer to that but the point is that it shouldn't have been suppressed that was that was election interference now elon came out this week and specifically tweeted that that that was basically a mistake that jack also said it was a bad jack said it was a mistake too and elon repeated the same thing that they shouldn't have done that i think everybody can agree it's a bad call in hindsight yeah of course but in hindsight right but what was the reaction to what elon said he was accused by virtue of criticizing the policy decision that twitter made that that was supposedly targeted harassment of the legal counsel at twitter who made the decision who gets paid 17 million dollars a year to make those decisions do you guys see this debate this happened last year this last week so the point is that if you criticize somebody who's on a certain side of the debate that's harassment but he'd even mention her by name this absurd this discourse has

SPEAKER_21: gotten can i make a prediction yes predictions great um i think people misunderstand elon's incentives for buying twitter so and i haven't talked about this so i'm just making a complete um subjective prediction i think he's going to buy twitter i think he's going to clean it up i think he's probably going to generate something like a 2x on this you know we talked about how yeah you know that's like a good terminal valuation in six or seven years that basically you know puts that asset worth at around

SPEAKER_72: a hundred billion dollars in the meantime he's going to open source as much as possible i think he's going to make it very difficult for misinformation and disinformation to get very far he said he's going to authenticate every human being that uses the platform he said all of these things publicly already and then here is the masterstroke and again this is just me speculating i think he's going to donate it into a foundation and a trust and i think it'll be an incredibly powerful competitive alternative to all these other for-profit businesses because everything you guys are talking about is the incentives that get perverted when you have to layer economics inside the new york post inside the washington post inside the new york times the wall street journal everything eventually

Chamath Palihapitiya: devolves to clickbait to hearsay to doxing to whatever can get you more revenue but if you can take it off the table and run these things as a public trust you can actually win back a bunch of

SPEAKER_21: confidence and a lot of these edge cases go away now you would say why would anybody do that well i think the real answer is because then if he if he were to donate it into a foundation he'd get a hundred billion dollar credit that he could use you know to offset the gains when uh spacex or

SPEAKER_35: starlink go public interesting very interesting very there you go well i i agree with everything except for the donation part because he's raising 20 something billion from private equity partners

Chamath Palihapitiya: he'll pay the debt off he'll own it a hundred percent and he'll pay people a very fair living wage

SPEAKER_21: and it'll attract people that want to seek out the truth that want to work in an apolitical environment he's already said the 10 of the extremes you know are are both equally crazy he's going to force this thing to be rational and predictable it's an interesting it's an interesting

SPEAKER_185: prediction i think it goes public again at and it goes to five times evaluate are we going to be

SPEAKER_06: able to ask him these questions in miami sure why not so let me ask you guys a question what would

SPEAKER_04: you do because a lot of people have pointed out in response to what has obviously become a very

SPEAKER_128: polarizing set of discussions this week around what should be censored what should be banned what shouldn't etc elon's going to let bullying and hate speech kind of proliferate other people have said we need to release you know the restrictions and let people say what they want to say freedom of speech has no bounds etc what do you guys think about the um the argument that there there does need to be constraints and boundaries set around things related to health and safety meaning if someone is making calls to violent action should that be censored sex and how do you make that interpretation because it becomes a fuzzy gray interpretation and then separately like when there are scientific papers that say one thing and someone says that's not true and says something else how do you kind of decide whether or not that should be uh allowed or censored on the platform because i think those are

SPEAKER_254: two very key issues that we got to take them separately let's do violence first sacks there's plenty of precedent in law yeah just explain the violence look the biggest straw man around because this was

SPEAKER_04: the whole trump argument right it was like he was inciting violence was the argument that was being

SPEAKER_128: made but like generally speaking is that an appropriate form of censorship on this private platform and if so how do you set that standard let's start here with you hear this argument a lot

SPEAKER_51: which is that if elon brings free speech back to twitter then we're gonna have all this horrible content on there you're gonna have violence you're gonna have racism you're gonna have harassment you're gonna have all you know all these bad things on fraud the truth of matter is that it's

SPEAKER_35: really a straw man argument because what it's basically arguing is that free speech means anything goes but free speech does not mean anything goes there's we have 230 years a supreme court case law basically um discussing this question of what speech is protected and what's not and there the supreme court has ruled that there's nine major categories of speech that are not protected by the first amendment why because that speech is considered to be dangerous in one degree or

SPEAKER_157: another so for example you can't commit fraud like you know the um archer ghost guy or whatever and then say well that speech was protected by the first amendment first moment doesn't protect fraud first amendment doesn't protect incitement to commit violence or a crime you know it doesn't uh protect fighting words so you could ban you know all ethnic or racial slurs on these social networks under the concept of fighting words so i think if you actually look at supreme court case law yeah well what i would do is i instead of just making up the content moderation policies as i went along i would look at the peep at the cases where people been wrestling with these decisions for decades and i would create a content moderation policy inspired by first amendment case law where i would take these nine categories of sort of dangerous speech or harmful speech and i would operationalize those so for example you can't defame people right def you know uh the first amendment doesn't protect you against

SPEAKER_445: claims of defamation would you make people go to court though in order for them to take it down right so

SPEAKER_157: this is where the word operationalize really comes in it's not practical for a social network to require a court level burden of proof to to prove defamation right so what i would do is i would say that if you are a person who claims to be defamed you could file a report on twitter and provide the tweet and provide you know some explanation and as long as it looks like a colorable claim of defamation meaning the person is attacking you in a way that seems out of bounds and potentially that can be taken down you don't have to subject it to a jury trial or something like that so what i would do is i wouldn't you can't literally impose first amendment case law but i would use it as the basis for defining a content

SPEAKER_21: moderation policy can i just say something i think one of the best things about being your friend is sometimes you say stuff that is so powerfully smart and elegant uh because it's so simple basically what sachs said for everybody else because this is how i he's like the prd for content moderation has existed it's called the constitution it's just that nobody in any of these companies has taken an effort

SPEAKER_184: to actually try to write code that maps to this prd where the prd is the constitution right whose rights have been established for hundreds of years by prd you mean product requirements document

SPEAKER_157: yeah sorry yeah yeah it's what a product manager would use yeah yeah exactly instead of them making this up at all as they go along i would look to the categories of speech the supreme court has already

SPEAKER_04: ruled out right exactly let's just do the health one sack so there's a scientific paper that says

SPEAKER_128: this drug doesn't cure covid and then someone goes on twitter and says take this drug it cures covid what's the what's your and i know you're not obviously a uh a constitutional lawyer at this point in your career but how would you kind of think about um about that and and how would how do you think that that would ultimately resolve uh in this uh regulatory framework that's a debate

SPEAKER_154: that should exist i mean i don't know why we need to suppress that debate so if someone says

SPEAKER_128: declaratively on twitter this drug will cure covid which by the way the trends and just to be clear by the way you know the fda actually regulates claims like that on boxes and material and in a commercial setting and if you're making money off twitter you're getting a lot of followers and then you make more money by putting out a tweet that says yeah but you're not you're not making money

SPEAKER_06: off the drug yeah right exactly look if the person is selling the drug rose should never say that

SPEAKER_333: right so if someone went on twitter and they said take this drug it cures covid but there's a sign

Chamath Palihapitiya: you're confusing facts and authority twitter is riddled with people that have zero authority that spit out what they think are facts right so i i think i think what you're speaking to is something very different which is if you're going to design a social network i've been part of helping to design one so let me just give you my two cents on this topic there are layers of of of decision making that need to go into an algorithm to get to a sense of rank okay rank means do we believe

SPEAKER_72: with some reasonable probability distribution in some probability distribution that this thing is worth showing to somebody else and the way that you get there is through multiple layers so there's obviously a layer where you can get signal relative to the authenticity of the person

SPEAKER_21: and individual making the claim is it a bot is it a real person then there's a separate layer which is how you know roughly accurate do we think this is then there is another layer which is is this

Chamath Palihapitiya: person believable in making all of those statements and my point is there are different subsystems you build for those things he's already said all these algorithms are going to be open sourced and what you're talking about is authority you should allow people to say stupid things it's

SPEAKER_76: not illegal right yes a person can be on a street corner saying jesus is the son of god and he will save your soul sex doesn't have to believe him and somebody can say that on twitter the the issue here is does it trend and do you show to people the algorithm and if you fix those problems then who

SPEAKER_95: cares if a person says hey listen twitter has an authority problem and a ranking problem and the

Chamath Palihapitiya: authority problem comes from the fact that there's all kinds of long tail non-human individuals in the

SPEAKER_468: system so solve for identity and this problem can get easier solved and solve for trending and

SPEAKER_128: so if you guys were running twitter you would not put on these covet 19 warning this is misinformation and rely solely on cdc guidance and recommendations and fda variables when it comes to treatments and vaccines and risks and so on i what i would do you would let anyone say whatever they wanted

SPEAKER_472: freeberg how often was the cdc wrong label yeah i'm not i'm not i'm not arguing against i'm just

SPEAKER_123: trying to get clarity here yeah he's just asking the question i what i would do is and i'm going to

SPEAKER_76: use taxes i would label it and i would i wouldn't label it right or wrong i'd say ivermectin is a drug here's the wikipedia page hold on yeah here's the wikipedia page on ivermectin let's say there's a lot of confusion about ivermectin which there was you could just put anytime anybody says the word ivermectin i here's a sentence of what ivermectin is here's the wikipedia page the cdc page the uk

SPEAKER_80: government's page dhs whatever uh for more information about this topic so i just want to just not a warning yeah i just wanted to learn more jacal i want to disagree with what you're

SPEAKER_128: proposing okay because it is the topic du jour it was the one-off that then triggered the ability for everyone to bifurcate on their point of view on what should or shouldn't be done as opposed to having a universal standard that is universally applied that doesn't speak specifically to just the covet 19 pandemic or just ivermectin or just what trump said or didn't say but each one of these things can and should be universally standardized and then universally communicated and then treated with universal standards across everyone and every topic rather than have each of these breakouts where you've got someone at twitter scratching their head saying this seems to be an important topic let's come in and annotate it let's create a classification for this and that's where everyone gets riled up in my opinion i think if there was a universal standard that was universally applied

SPEAKER_478: without give another example the topic give an example go ahead can i address this well vaccines

SPEAKER_35: is another good example but yeah first of all nobody contradicted the cdc more than the cdc itself it constantly it constantly put out revisions of its old opinions first it said that covet was not spread

SPEAKER_157: human to human then it obviously said that it was it basically was against mass then it was for them and on and on and on it went okay the idea that you cannot criticize your government or an agency of the government is absurd but that is the type of censorship that was being uh leveled in these social networks is that basically they are preventing us from criticizing the so-called experts that is precisely the kind of censorship that should not exist on these networks that is precisely the kind of

SPEAKER_485: debate what about labeling in the way i talked about it like the problem with more information

SPEAKER_157: the problem with labeling is once again it's done selectively and the people at twitter basically decide who they think is right in a debate and they basically want to act as a referee to raise the hand of one of the participants of the debate raise their hand over their head and declare them the victor now it's a lot better to label than to just censor the other side's point of view but still

SPEAKER_122: it is a form of soft labeling i described where and which happens on our podcast on spotify where it says here's the covet information center you know for more information and they give a range of so if it's executed in that way do you oppose it if there's like a very confusing public interest going

SPEAKER_35: on if if you were to algorithmically post related stories or something like that and it was done in a completely fair and speech neutral way and it was just as a feature of twitter fine but if you have

SPEAKER_157: employees at twitter sitting around discussing issues and deciding who the winner is in various debates

SPEAKER_35: and then putting their their thumb on the scale to tilt the debate towards those people that's not what they should be doing now you know and that is basically what they're doing with censorship if you look again let's go back to this this topic of misinformation because this is really the crux of the debate okay once again on the basis of first amendment case law you could remove offensive material on twitter on the basis that it is you know fighting words it's a slur it's harassment incitement to violence you could it's fraud okay inauthentic that the the account is not

SPEAKER_157: who they purport to be you remove all the bots so all that content can get removed so what is really left then it is basically this idea of misinformation this idea that we are going to declare one party the victor in this debate and i think that is what is so offensive about this ministry of truth that homeland security is setting up it's what's so offensive about the censorship that twitter has been practicing which is they are trying to end the debate they're trying to say look this is the person with the on the side of truth and that is not what they should be doing it's up to the marketplace to decide what the truth is all right there you have it folks do you disagree with that

SPEAKER_174: i i agree with you to your point david um i i do think in a situation where the public good and there's confusion in a situation sending people to more information isn't a bad idea i do think a lot of

SPEAKER_76: this uh there were thumbs on the scales and it wasn't transparent what was happening i think if you add transparency so i think every time there's an action that's taken it should say agent number and what their agent number is took this action on this tweet for this reason and then data scientists can look at all the actions that occur and then say look we're looking at this agent number and here's their manager's agent number and here's why they took down this post you know then at least you could

SPEAKER_80: have a starting point to figure out what's going on we don't even have enough information to know what what thumbs are on what scales if at all or to what extent and i would like to see transparency

SPEAKER_76: first so we could have a more informed decision and then sending people to trusted information sources a group of them isn't a bad idea i think what's trusted yeah i mean and so to your point

SPEAKER_80: you don't need to look to a podcaster a social network or the government to find truth in the world you have to have a process yourself that's part of what this podcast is it's for people to develop being a part of being an adult yes you have to come up with your own process of coming to the truth you could trust some people trust the government agencies some people trust a joe rogan or a podcast or this podcast some people trust a folk singer trust yourself that's the number one thing you have to learn how to do as an adult in life taking all this information and make a reasonable decision to take ivermectin or to not take ivermectin is a perfect example people said there's no downside to it people have been taking this drug forever and it's cheap and then another group of people said well you're taking horse medicine it's like no that's something completely different and the whole conversation became i felt very easy to parse when you think about do your own research do your own

SPEAKER_157: research right and and talk to your doctor do your own research but you can't do your own research if you're not permitted to see everything and um and you think about like with drugs think about how many drugs over the last 30 40 years have become the basis for product liability lawsuits because they had unintended side effects or consequences and they revised the use of those drugs or drugs were taken off the market if people weren't allowed to question those things because supposedly the experts had ruled on the issue and ended the debate how would we have gotten a correction on that how we've gotten to the truth so just because the experts say something doesn't mean well and by the way there's there's

SPEAKER_497: pros and cons to this we we have kids getting tons of kids taking all kinds of sris and antidepressants

David Friedberg: and all kinds of drugs parents have to make difficult decisions adult need to make difficult decisions do they do this do they not and by the way there's no we don't know we're doing large-scale

SPEAKER_80: experimentations on the population in real time with drugs it is a decision you have to do the pros

SPEAKER_499: and cons for the medical establishment the medical establishment at one point in time thought it was

SPEAKER_157: a good idea to lobotomize people like they were doing that as like a medical procedure so these people can be wrong you know and this idea that we've arrived at the the end of history

SPEAKER_184: and we know the truth here's all truth exactly no new facts are being or no new knowledge is being

SPEAKER_445: created for sake i mean it's a dangerous assumption is red wine good for you or bad for you because

SPEAKER_503: every three or four years coffee and red wine are good for you or bad for you depending on the year

SPEAKER_72: well i saw i saw a longitudinal study that just came out that said there are no caloric benefits

SPEAKER_21: of intermittent fasting now there's a lot of people that would be up in arms with that what are you supposed to do if if you know maybe there's some value to organ health maybe there's some value

SPEAKER_72: to managing your glycemic index but again the point is there are study upon study there's work going on all the time all these things are in an area of gray and so if all of a sudden you jump down one person's throat and basically become very judgy because you think that the total bounded body of

SPEAKER_306: knowledge is already being created you are making an enormous mistake i mean steve jobs thought he

SPEAKER_80: could cure his own cancer i mean intelligent people are free to make bad decisions was one of the most intelligent talented people in the world who by all accounts might have survived longer if he had

SPEAKER_24: trusted to this very specific method of juicing um you know there's a there's a certain sliver of folks

SPEAKER_72: there's a really incredible documentary actually on netflix if you want to understand it of people that went down this path of juicing their uh trying to eliminate their cancer micronutrients

SPEAKER_177: the irony is that the people who are i think some of the stupidest people like that woman singing

SPEAKER_157: show tunes that you were like these are the people who are making these determinations over

SPEAKER_512: what is true and what is false and what is labeled as information and what we get to discuss

SPEAKER_122: it's crazy bias it's riddled with bias you have to make your own decisions in these cases and you know like it's great to have smart friends to have a dialogue with

SPEAKER_72: no but it's a beautiful dialogue it's the beautiful thing about being an american and working so hard to

SPEAKER_110: get to this country is the independence and the freedom to be your own self i mean why is that

SPEAKER_21: such a bad thing and why would anybody want to give that up to a nameless faceless blob in an

SPEAKER_103: organization well and the and the response you get back from people is i'm not abdicating my ability

SPEAKER_21: to think for myself to this rando woman singing show tunes and then people say like oh well

David Friedberg: the response i got when i said just trust yourself is like well what about all these bros who are listening to joe rogan and they're making decisions on their health according to joe rogan i'm like i'm like yeah it's called personal responsibility well like i'm not responsible for

SPEAKER_72: joe rogan's listeners if joe you know the same the same person that told you that is probably micro dosing and thinking ayahuasca is a solution to everything they've ever had fasting and micro juicing

SPEAKER_67: and from the childhood trauma they had when they didn't win their you know soccer medal and nobody

SPEAKER_72: knows any get into harvard so they're on ayahuasca every day i mean give me a break yeah nobody knows no we we all know so little here's what we know you live you die the end and we're all just trying

SPEAKER_21: to do our best and so why don't we all just try to have a reasonably decent time and be nice to each

SPEAKER_76: other all right everybody it's been an amazing episode we will see you in miami which will be absolutely fun and thrilling sold out our first all-in assignment and last uh because i don't know who the

SPEAKER_95: fuck's gonna do this work next time you will you're doing an amazing job oh thank you bye bye bye

SPEAKER_532: i love you boys