GDP growth negative in Q2, $SHOP layoffs, Alzheimer's fraud, Ginkgo acquires Zymergen & more
Full transcript · Read the full conversation in order, with its original context.
§01Segment 1
Alright. His monthly burn rate would make even Bezos wins. He's living the life of a Sri Lankan prince. He drinks nothing but the absolute highest top shelf. He's lifting Italy's GDP by himself.
The dictator is back to mouth Palihapitiya. I'm back to the program.
Thank you, Jake. Okay.
When you mentioned that burn rate, I thought you could be talking about me.
I don't know. You're talking about anything.
Sometimes these intros, you're not sure which which way you're
gonna go. It's a misdirect. It's a misdirect. comedy, a mystery.
It is inconceivable that my burn is higher than David Sachs.
I have I own
one house. How is it possible? And maybe
1 or 2 next week.
You're such an ass.
He's analyzing macroeconomic charts and grids while at the same time ignoring his kids. He's the sultan of SAS. It's no surprise. The only thing heavier than his pockets The bag's under his eyes, the rain matter of fact. David Sacks.
It's not bad.
Oh, here we go. Here we go. The Adbro of anxiety he's rife with Schrive, he plays a -- out his PS Five, and he also plays one in real life. Meow. the commander of the Catboy's, David Friedberg.
I mean, I'm totally cool with that opening because you're gonna look like an asshole. It's all good.
I mean, more of an asshole? I mean --
If you didn't ignore it, every time Friedberg spoke, you would have heard that the guy from Anuporna pictures reached out to him. gave him a link to download a free game about cats, which he downloaded, and he's been playing. It's now the most popular video game in the world.
You introduced the cat game. It's on you.
By the way, what
shirt are you wearing? This looks like a carpet.
Yeah. You really do look for, like, one of the characters from Goodfellas, like, one of the older guys in the Kansas City. Yeah.
I have extra guards right off screen here, and I got my ex wealthy. I got from Dunkin' Donuts.
Do you
mind me one of the guys in Kansas City from Casino? Absolutely. I sit around the table in that restaurant.
It's like, should we
whack him? Why take a chance? Boom.
Listen. You'll get he got my style icon. Joe Petsey is my style icon. You look really bad.
Thank you. Thank you. The
wet your winter's ride. Rainman, David Satterton.
And I said we resources to
the fans and made discovery.
GDP fell by point 9 percent in q2 marking 2 straight quarters of negative growth. In q1, we all know GDP fell 1.6 percent. Here's the real GDP chart. Current dollar GDP increased 7.8% at annual rate or 465,000,000,000 in q 2 to a level of 24.85,000,000,000. Home construction down 14%, up stencil because of the interest rates increasing.
Inventories which helped boost GDP in 2021 dragged down growth in q 2, so supply chains easing. taking away two percentage points. Chamath, what's your take? Do these year over year comparisons work? We were talking in the chat a little bit about the spike in 2021 versus the the dip in 2020.
What's your take on this?
I mean, I think you just summarized that people are really fixated on these numbers without understanding basic statistics. So just taking a step back, if you go to the Bureau of Economic Analysis, which is an official website of the government of the United States that hosts GDP. The title makes it pretty self obvious what we're dealing with here, which it says, Nick, you can put it up there. Real GDP, the percent change from the preceding quarter. So things can still go up positively but still be negative if it doesn't go up by the same or more than the quarter before it.
The thing that we really have going on is that over the last eight quarters, we've had all kinds of very turbulent data that's made the trend line unpredictable. And the most obvious way to see this is actually in one specific subsector, which we'll get to in a second, which is around USecommerceadoption. You see this one huge spike coming out of nowhere. And then eventually, everything has settled back to trend. The same way, I think what we're waiting to figure out is how many quarters does it take for us to get back to on trend growth in the economy.
We had a massive shortfall in q 2 of 2020. We had a massive surplus in q 3 of 2020. We've had a country that's been getting back to finding equilibrium over the last five quarters, so we don't really know what the steady state growth should be. This is why I specifically had such an issue with the tone the White House took which was trying to explain away this that this isn't a recession by trying to create doubt in the definition. Instead, I think it would have been better off just repeating what I just said and explaining basic statistics and actually showing that the country is headed in the right direction largely speaking from a really crazy one time externality that nobody could have predicted, that it's gonna take some number of quarters.
And so, really, what you should look at, and Jason, you've pointed to this, is employment and wages and try to be a little bit more circumspect and overreacting to any one quarter of data. By the way, the fed exactly just said the same thing. yesterday when they raised 75 basis points. They said we are not gonna give guidance anymore because things are too turbulent. We're gonna remain vigilant on inflation, but mostly we're going to be very near term data dependent.
So I would boil all of this in saying, Let's not overreact to a quarter's print here or there and specifically the label. I think the White House made a mistake in trying to basically think, you know, we all didn't understand what our technical recession was. I think instead, we should just focus on what we have to do to get back to solid state equilibrium. Yeah.
And just to put a pin in the definitions. We all know the common definition, 2 successive quarters of negative GDP, However, people have said it's a a temporary economic decline during which trade and industry activity are reduced. So there's a sort of debate in splitting hairs going on Saks, which was kind of stupid.
The big news this morning is that we no longer know what a recession is. This is such a vast and complicated question. You might as well be asking, what is the meaning of life? Now I remember in the days of components, we had a very simple definition of recession, which was 2 quarters of negative GDP growth. But now that we have a Democrat in the White House, we just can't know these things.
Why even ask such difficult questions. Right? I mean, that's basically the media coverage today, and that's absurd. I mean and you saw it for the last week, the administration that spokespeople have been trying to muddy the waters on the definition of recession. And it was laughable as they're doing it, but now you see the media coverage today and you realize like they've bought into this nonsense and they're carrying so much water for the administration.
Look. The headline should be the Biden recession has begun. That's it.
If you had 3 minutes of 45 seconds, for your Biden over under with Saxx, you took the under you won. We're
in a recession. He's the president. And if we had a republican in the White House, it would be Republican president recession has begun. Yes. So the media here is carrying so much water to try and avoid the obvious headline.
I just explained it. Instead of reporting the obvious headline, they're now saying that we're approaching a recession or we might be in a recession. We have all these difficult technical issues. list. Listen.
We're in a recession. It started. It might be a shallow recession. We don't know yet. Yeah.
The it's it's it's a recession in which the unemployment rate as of today is low, although the labor participation rate's also low. So listen. We're at the beginning of a recession. It might Turn out, we might have a bounce in q 3. This might be more of a double dip.
I suspect that's what it will be. But we know the cause of this. The cause of this recession is inflation. If you look at the economy's growth in nominal terms, it grew at 7 point something percent, but because inflation was at 9%, you have to subtract them in real terms the economy is shrinking. And who is to blame for reset for inflation?
Well, j pallet the Fed because he reacted way too slowly. but also the Biden administration for all the spending they did.
How much sooner do you think they
could have reacted two quarters?
No. Like 9 months earlier,
So three questions.
We got the we got that first surprise inflation print last summer. It was May, I believe, that 5.1%. We started
to talk about 10 year break evens tips in May of last year.
Yeah. So they could have gotten quarter 2 quarter 2.
No. The 9 months. And they continued. Not only did they not raise rates. or or signal any desire to raise rates for 6 months, they continue their quantitative easing for 9 months, which just makes no sense they should have taken their fur off the the accelerate right away.
9
months, they only start they only stopped in June of this past year. So we've only been quantitatively tightening for 2 months.
I thought they stopped the bond buying program in March.
Maybe that's right. Yeah.
Yeah. But they they saw quantitative easing in March, but you're right. The tightening is just something they're getting started with. But the point is, they should have stopped easing. Right?
Like, why would you need to keep intervening in in the in the markets to buy more to basically push out more money.
Is the reason for this that Powell and Yellen just haven't lived through highly inflationary times. I just read --
They're older than I am. They have left 2 sides.
They haven't been in office and doing fed policy like I I just read Volcos if you haven't read it, it's pretty great, his biography. I mean, what he had to do in 81, 82 was super severe. But we just haven't lived through this in our life, so I people are just not used to having to tap the brakes in in our No.
No. Look. What happened is that the administration reacted in the political way to the inflation print. They invented this well, the the word transitory existed but they applied it. You heard this word used relentlessly for about 6 months.
So the administration went into denial mode. Yeah. And then by the end of the year, it became clear that it was persistent. And I think the issue with Powell is that he is basically responding to headline risk. Right?
So he didn't respond to you know, the inflation problem last summer. He waits until the in the headlines, tell him he has to react. And so now the the thing that he's worried about is is recession. Obviously, he knew
-- No. He's worried about inflation mostly. Right? He he wants inflation. --
inflation, but if you look at yesterday's right. But if you look at his comments yesterday, He it was more dovish comments. They did a 75 point rate hike, but the comments were more dovish. And I think it's because he knows that today, we have this 2nd consecutive quarter of negative GDP growth. So now he's trying to balance recession risk against inflation risk.
But the point is that the Fed's been very slow to react, and the administration basically just tries to relabel and rebrand problems instead of confronting them head on.
§02Segment 2
Hey, Shamoth. When we look at this chart you pulled up 4 and we see this massive spike q3, q4, q1, q2, a little bit in q3, and then q4. I mean, this massive 1, 2, 3, 4, 5, 6 just extraordinary quarters or 5 out of 6 in terms of GDP, that's all stimulus in your mind. Right? This is the money drop.
So that was lockdowns and q 2 2020, Jason, they locked the economy down.
Yeah. But some people were standing online and we'll get to the Chamath story about Spotify.
But it's not all of it, but the the point is
It's some combination of lockdown
and sex. Access money.
Right?
Access money.
Right. Access money because because of loose financial conditions. distort what true supply and demand should be.
Got it.
Right? And excess money can come from the government. But in this case, excess counting money when from the government into the hands of individuals who then participated in the public markets, and they distorted what it what it all looked like. And so There was a lot of purchasing activity that was propped up by what seemed like an endless supply of free money.
Right. So we look at yeah. Go ahead.
And and so now that that money is getting taken out, we don't yet know what the real equilibrium economic growth rate should be because you have to remember, we have not seen an era without federally introduced spending. without federally introduced forms of quantitative easing since the great financial crisis. So we have been propping up our economy. for 14 years straight now. So we have distorted the prices of bonds and fixed income.
We've distorted the prices of equities. We've we've created an asset bubble in crypto out of nowhere, and now we have to do the hard work of figuring out what the real supply demand is in the economy. And we don't know.
It took six quarters here. There there's six quarters of just massive GDP spike there from the preceding quarters. And we have 2 down quarters. Is it gonna take six quarters to to wash this out or longer, I guess, to make -- --
longer because what David said is now making the problem even worse. So because Powell was catering to whatever pressure he's been getting and he must be getting some severe pressure from the White House, Those were really dovish comments, but what is the problem when he is dovish? Well, the practical reality is a couple of things. Number 1 is typically the yields of long dated bonds go down. Okay?
That essentially tells everybody else to reprice assets. What does that practically do? It makes the cost of borrowing roughly cheaper. Okay? It makes the price of equities particularly ones that are far out on the risk spectrum.
So specifically, let's focus on NASDAQ and crypto. Right? Text stocks, biotech stocks, and and crypto stocks go up much more aggressively. So what is Powell effectively done He has synthetically created a form of easing again. Right?
Like, his job at the Federal Reserve, if you think about the money supply as a pipe, It's to shrink the pipe to close off demand to get things in equilibrium. So even though he's doing this, by the language that he's doing, he's effectively allowing market participants to basically guess that the worst is over, and now we're gonna start to span the pipe again. And so they go to the end state. So what he effectively did in one speech is basically put a pin at the end of this year and is telling the markets I'm mostly going to be done and if anything I'm probably gonna be cutting in the half of
23,
go on your merry way.
And there is no c So the problem
with that, Jason, is it's now pushing the problem out another eight quarters. Like, we need to stop this nonsense. He needs to be definitive and he needs to fundamentally break the back of inflation so that you find out what the true demand is in the economy.
Yeah. And it we did point 75 yesterday. The markets rallied on his sort of the assumption that he would do a couple of more of these rate hikes and then he'd be done at the second half of the year and then, hey. Maybe we can get back to growth. or some normalcy in in relate related to all of this.
And by the way, there was an interesting story the Saks would be interested in. I don't did you read Paul Volker's biography at sex?
No. I've not read it. It's I mean, I'm familiar with this record -- Yeah.
--
record but yeah.
like, at one point, Baker and Ray took Reagan and Volker into a room off of the White House, so it wasn't recorded and just said, Volker to Volker, the president does not want you to raise rates going into the 84 election, full stop, and Volker's like, I wasn't planning on raising them. So there's a lot of politics in this even though people claim -- They've
already done enough. I mean, Volker raised rates all the way up to, like, 20 He broke the back
of -- Yeah.
--
inflation. It created a very severe recession in, I think, 1981, 82. But by 1983, the economy was rocketing back. Yeah. with lower interest rates, and and they basically solve the inflation problem.
Hopefully, we're not in that situation where Powell has to jack up rates so much to break the back of inflation because it means that we'd be in an even more serious recession. So I hope we're not in a Volker type situation.
But just think about that spread, Sax. 20% versus, like, 3 or 4% we're trying to get to.
We've never in the history of America. ever had CPI print above 4 and a half or 5 percent without inflation being brought down by having fed funds not also be greater than 4 a half or
5%.
So at some point, inflation will turn over and will print
6%
and 7%, but that's still not below
4
and a half or 5. And right now our target Fed funds rate is between 2.25percent2.5percent. So we could still be only 50% of the way there if inflation remains at 4 to 4 to 5 to percent. And this is what I think market participants don't want to hear They don't wanna hear that there has to be a meaningful form of tightening, and politicians don't wanna hear that. The White House for sure doesn't wanna hear The problem is that if Powell caters to too much of that feedback, he's not gonna do what he's supposed to do and why he's put in that job.
His job is to get it to 2% and keep price stability and full employment.
I do
think there is a balance here. I mean, the the reality is we do not want Powell tightening more than he should or more than is necessary to solve inflation because it will cause a serious recession. So I think we're we're caught between 2 pretty bad options here, and it's I think that what happened last year contributes to this. I mean, look, if you go back to that chart that you just showed, what happened? In q 2 of 2020, we had a very healthy economy going into 2020 in 2019.
Right? And then in q 2 of 2020, we had COVID, but we made the situation even worse with lockdowns and we should basically shut down the whole economy, brought it back at least in most states in q 3. And then the Fed started printing and congress started printing $10,000,000,000,000. Well, still, by last year, the economy was back. We had something like
5.7%
annualized growth. This year it's negative. Why why is that? I mean, this may be the lingering effect of all that stimulus, but I think that It is, but I do think that the administration made it worse by sending checks into an overheated economy. They also created energy scarcity And they just kept, you know -- Yeah.
-- spending more money. So -- I'm
not saying the White House isn't without fault, David. But I do think that if all of these geniuses Could have actually just taken a simple econ and stats 101 class and explained how year over year measurements work to the American people. I think they're smart enough to understand it. We didn't have to go down this convoluted route. We could have just explained.
We put a lot of excess money in the economy. We don't yet know what the full effect of that is. We need to let that wash through. In the meantime, you're gonna see some crazy numbers from time to time, and we just have to be patient.
And the other crazy things you're gonna have looking at second and third order effects is all these downstream effects. People are making business decisions going into these economies. Shopify just laid off 10% of its workforce. About a thousand people on Tuesday, their stock is down 10% past 5 days. Overall, 70% year to date.
And if you look at this chart and and Toby took blame for this. He basically said, listen. We thought that this was going to be a, you know, fast forward into the future that people would adopt ecommerce in a major way, and that would stick Here's US, ecommerce, adoption growth rate, massive spike when people were forced to buy all their goods online, and now it is regressing to the mean.
I mean mean reversion is a bit. If you look at Shopify stock, if you look at Peloton stock, if you look at a firm stock, if you look at arc. You know, a lot of these things were trending in a great direction. They had this short term crazy behavior in the middle of all of free money, and now they'd mean reverted. And, you know, we're in the midst of finding out what the real price is.
I got to give Toby a huge round of applause because he is such a great CEO, and I'll tell you why. Last year in the middle of all of this wokeism, he wrote this incredible memo which was, you know, we're not a family. We're a team, which I thought was exceptionally well written and Willie got the point across. this time around, he just owned it. He's like, you know, I made a huge bet that all of this behavior change was going to be discontinuous and permanent and it turned out I was wrong.
I'm sorry for that and here's how we're gonna have to course correct. In both cases, he kinda just put it all out there, and he owned it. And I think that that's all you can do when you make a bet in its room.
And here's what he said. It's now clear that bet didn't pay ultimately placed in this bet was my call to make, and I got this wrong. Now we have to adjust. As a consequence, we have to think about some of you today, and I'm deeply sorry for that.
mean, everybody made that mistake. Right? So, you know, it is it's just you're right, Jean. Just to own it, everyone was thinking the same thing. We all were talking about how COVID was this accelerate as virus, and it was gonna accelerate all these trends.
And
--
Well, that's
--
The the acceleration -- -- food awakening
is gonna be for all these people who made all these bets assuming that it's permanent. And specifically, I mean, you know, especially around real estate and work from home and all of this stuff, benefits and it's all going to change now. And the reason I say that is the combination of reversion to the mean will impact a company's bottom line And those boards of directors and CEOs will say, okay, we're just gonna have to reset expectations and that's gonna touch the employees. I don't know if you saw this leaked transcript, but, you know, Zuck was asked a question from this old school in Chicago. That was unbelievable.
§03Segment 3
He was asking like, emotional support days or some shit?
I think in the in the middle of, like, zuck having, like, a really serious, you know, heart to heart with the company about how we're gonna have to buckle down and you know, aforementioned track. -- performance. One dude one dude, you know, Schmendi from the back races, Sandy goes, what about the COVID extra vacation days? Will those get cancer.
I mean, Zuckerberg almost like, he literally his head almost exploded. He's like, did you not just listen to what I said? I just said, if people are not performing at a high level, maybe they shouldn't be here, and you're asking me about more days off --
Just fire that person. To say, like, you obviously you don't get it. You didn't listen to anything I said. You're not right for this team at this time. Goodbye.
He said a version of that. He's like, there's a lot of people here that may not be the right shit.
Friedberg, when we look at these trends, okay, commerce seems like people are going back to shopping, but I wanna ask you about 2 specific ones. Healthcare, it does seem like telemedicine was one of those things that got got accelerated during COVID, do you think that's gonna revert to the mean, or do you think that, you know, doing doctor's visits over, you know, FaceTime and Tack all these consultations gonna stick with us. And then what about work from home? Because that does not seem to be shifting all that much.
Freeburn. The work the work from home is not shifting?
Well, I mean, it's people are still staying home and, you know, Amazon just put a hold on 6 buildings where they said you can finish the outsides, but let's not do the insides because we don't even know what we're gonna do with these buildings and what hybrid's gonna look like. And Zuckerberg hasn't been able to get people to come back to the office, and Apple seems to be getting people 2 or 3 days a week. So it seems like it's still been a struggle, and downtown San Francisco is empty. So we we're getting mixed we're getting mixed results back now, I would say, is the best way to to describe it. So work from home and and telemedicine.
What do you think, Frebert?
I mean, certainly, the knowledge economy seems to prefer work from home. I mean, if you're working on a computer and you don't need to interact with people, and you got kids. For family, you're inclined to stay home. So that seems to be a sticking point. you know, younger people probably have their own motivations.
But there was a good stat on telehealth. I'm just trying to find it. and I think telehealth surged during COVID, and 36% of
patients used a
telehealth service in
2021, 420
percent increase over
2019.
And so despite some
reversion post COVID, post lockdowns, There's a significant sticking point that
and I think
60%
of telehealth patients are women. So there's particularly female services that are being rendered through telehealth at an increasing rate than pre COVID. And so there's a lot of stuff. I mean, look. We've all had to go sit in the doctor's office for 2 to get some prescription or get a doctor to give us some advice on something they don't need to physically check us out for.
So, you know, it certainly seems to be a acceleration in that department. offices. Was the Amazon, like, was working on 15 warehouses they shut down as well? Right? I mean, if you guys remember at the start of COVID, When you placed something on Amazon, it was like a 2 week delay because they didn't have enough capacity to fulfill the order volume.
You know? You looked at Toby's chart, it's nearly a doubling in ecommerce volume in a week. When that happens, Amazon's, you know, plus or minus 5% supply chain has to revert to servicing twice as many customers. It's just not gonna happen. So they overbuilt tried to get ahead of the curve, remember they hired, like, a, you know,
100,000
workers. And, you know, they they they had to make a pipeline for quarters ahead to build warehouses. Now they're realizing the demand's not gonna be there, and they're cutting back on 15 warehouses around country and not gonna build them.
They were buying up so many warehouses. That a couple of companies that were looking for warehouses in Los Angeles, Northern California. And Amazon just bought an option on every single warehouse they could find, and now they're putting them back on the market. So they they definitely went too heavy. And then Everybody started betting on Peloton and Teladoc.
And if you look at Teladoc, I mean, it's off 90% from the peak. I I would show the I would show the Peloton chart as well, but that would just be gratuitous.
Some some of the stuff to note like, at the end of the day, Whatever product is better for the consumer they're gonna pick. You know, what's the better way to buy shirts? You know, what's the better way to get
--
Well, define define better.
Yeah. I mean, for the consumer, it's like, do you wanna try them on, or do you know what your size? Right? Do you buying a brand that you know and a size you know, you're gonna buy it online? at this point.
I mean, the one thing COVID did is it basically created a trial by fire. My parents never used DoorDash before COVID, so then they were forced to use DoorDash during COVID. Now they know what it's like. And so, you know, there are now people that never trialed a lot of these services that have trialed them and are now making decisions based on that experience.
But that's a beautiful example. So just use your parents. Why do you think let's assume they did. Why do you think they mean reverted to now using DoorDash only in the same percentage as it would have otherwise excelled
a little bit of everything. I think the quality of the food, the the time to wait, the experience of going out to dinner, there's a lot of motivating factors that are different by different demos. And so whatever the consumer wants, they're gonna pick. If I wanna go have a dining experience in person with my friends, I'm gonna go do that instead of sitting at home ordering DoorDash, and I think everyone comes sit on the couch and eat dinner together. So I think that there is this you know, this call it mean reversion, but we have seen, call it, a broader exposure, and we're really gonna see the true market dynamics play out.
I don't think everyone wants to buy shoes online. I don't think everyone wants to buy every piece of clothing online. I think people wanna go to the store and try stuff on.
I think it's that, and I think that there's a lot of ancillary social benefits that come with a lot of these activities that you lose if you just optimize for efficiency. So to your point like Yeah. You can get a burrito, but even going to Chipotle with your friend is more fun.
Totally get out of the house.
Get out of the house, shooting the shit. You know? Yep. seeing people -- -- and the serendipity. Yeah.
You may run into somebody that you nothing beats that.
I will tell you, by the way, I I I do believe that there is a counter narrative to the idea of work from home and ecommerce moving together. I think as people work from home, they wanna go be in person for other activities more.
Yes. So the
the more you're working from home, the more you wanna go to dinner with people or lunch to people, the more you wanna go shop in person, because you're stuck in the house all day, and you wanna go do other stuff. And so if you're working in the office, you're gonna do more ecommerce. And if you're working at home, you're probably gonna do less ecommerce. So there's probably some net net balance. We saw both of them rise together during COVID, But now there's more of an equilibrium being reached.
Well, I mean, if you don't -- And by
the way, if I were
-- --
change your behavior, makes stay home
for 3 days straight and all of a sudden
it's low. And and remember 60% of the US population lives in urban areas where this is kind of an effective kind of conversation we're having. I think outside of that, it's a very different world. And so for 40% of Americans, this is not, like, the conversation that you know, in in in deeply suburban and rural areas.
Do you guys know what shadow or ghost quitting is? You know what ghost quitting is? Ghost quitting. I saw it on TikTok.
You stop you stop working
I saw it on TikTok.
But you're still getting paid.
It's when you decide to quit mentally, but don't actually quit.
And so you basically get
out get off the corporate rat race by doing the bare minimum to not get fired at a company.
Oh, like Saks during the science segment?
And so I, you know, I I think that there's all of these, like, invented things that people do that they think they can get away with, which they generally can in a moment of prosperity. where in a moment of actually, like, buckling down when earnings matter and profits matter and investor pressure matters, all of this stuff I think is going to mean reverse. So this is sort of my my opinion on all of this, which is I think that most of these behaviors will eventually take over But it's still many years away. And right now, we have to go through the process of just getting back to where we were meant to be in the first place.
I think one area with significant dis disequilibrium right now, I mean, to your point, is is productivity.
I think it's
very hard to assess and qualify productivity for knowledge workers in this environment. And this is for employed base. Right? Remember, we talked about it last time, like a large percentage of the US workforce has moved to more of an independent contractor sole service provider kind of model for how they're interacting and working in the world. but I'm talking about knowledge workers in an employed environment.
And it is becoming difficult for managers and for companies to assess you know, the the quality and the level of work being produced relative to its potential. It's not the same as it used to be when you'd be able to -- Exactly.
--
in person monitoring and interaction, And so, you know, I saw a staff the other day where it was like most companies are asking workers to come home. Most of the workers are to come to the office. Most of the workers say no, and then most of the bosses don't know what to say in response. And they're still sitting on the sidelines like, okay. Okay.
Don't come to work.
Okay. I
get fired.
Yeah. And so there is
this and and by the way, this this may yield a competitive
advantage for businesses in the marketplace that figure out how to assess productivity and how to assess performance in their organization right now in this rapidly shifted totally different workforce than what we had a few years ago. Because it's so easy to take 4 hours off in the afternoon, go to lunch, hang out, have beers, come back, get back online, get back on Slack, do stuff, And so there's this real challenge, I think, for organizations and and a real disequilibrium of productivity and output right now.
I've had to deal with this. --
guys looked at the TikToks of these people that are, like -- Yes.
--
day in the life of, like, a Google engineer or day in the life.
They work for 30 -- It worked. Then they're, like, 4 hours at the gym. -- work. They don't work. They're literally smoking weed and playing video games.
And everyone knows it
too. -- cats.
Managers know it.
-- talking about it.
Managers know it. Senior VP's know it. The CEOs know it. It's this is my point. People just don't know how to manage it.
It's a real -- I
figured out --
It's a it's a real disequilibrium in the workforce, because the way you managed it before is everyone would choke to work or they wouldn't. someone's not in the office, they're not working. They get fired. Now what do you do? Period.
You know,
we and and no one wants to be monitored. No one wants to manage keystrokes through a Friedberg remote computer and figure out how much you're typing.
Actually, it's interesting. You mentioned that. --
do, Jake. Health, your employees No. No. No. No.
No. There there are people doing that. Call centers actually do that. So call centers, that makes sense. Yeah.
Teams. they have monitoring software.
Customer service and call centers totally. Yes. Salespeople, you can totally track productivity. I'm talking about creators' producers. Right?
Like, yeah.
I actually have come up with some strategies for this. So we have a lot of writers doing newsletters and stuff like that. And so we did was we created a block in the afternoon. We've been testing where 3 writers will get together in a pod, and they work on a newsletter together. So instead of 3 writers writing 3 different newsletters, you have 3 writers collaborate on 3 different newsletters.
They do one for 2 hours, one for 2 hour. 1 for a 90 minutes, 1 for 90 minutes.
§04Segment 4
And then total of 3 people read the newsletters?
Well, it's doing 4, $5,000,000 commoditizing. It's hundreds of thousands of people a day. But okay. But, anyway, the point is, I didn't mention the name of the company. There's no plug in here, but By -- I thought
that you're going to a Zoom. Yeah. No. No.
You you put people in a Zoom or a Huddl on Slack, which is like an audio only. And then they have to deliver work to each other. It's kinda how developers work or sales teams work with leads. And then in things like coding,
Like peer program.
It's like peer program. Exactly. And then with and it also makes people less lonely, and it builds social fabrics. So there are techniques that are emerging The other one I've looked at is I tell anybody if you're doing any type of knowledge work, you need to create a notion or a code a page depending on what you use. and update us on that and then send it to the group chat, you know, to the general channel.
Hey. I was working on the strategy for this. So when people say they're working on strategy, I have them documented. And I say share us share with us the Google Doc, and I use the Amazon 6 page, you know, philosophy of a right first culture. and now people have to write it down.
So I've been teaching people how to write, use Grammarly or Hemingway app to be better writers. And then what you can do is, as a manager, you can just look at your Notion or your CODA and see the change log. And when I see people in a change log and I see they made no commits, I'm like, what is this person doing? They said they did all the strategies. So where is is the strategy stuff?
Write it down. So if you switch to a right first culture and then train people how to write and become more confident writers, all that knowledge gets captured on your knowledge base, you can actually see people getting done. It's not perfect, but I think it's actually intellectually better than being in an office if you know how to do it. Because in an office, people are also performative. They're doing, like, bullshit meetings.
They're pretending they're working. They they're they're actually reading the news or, you know, or whatever. So What are you doing to monitor your employees covertly and keep them productive?
We don't need to monitor our employees that way because we're a small team of -- Yes.
--
then they're highly motivated, you know. But look, it it it is an issue. I don't I I think where work from home is beneficial is on the hiring side. Right? It's so much easier to hire for a job when you're potential pool is anyone in the world.
You're not just geographically limited to the city in what your office is. So that was the temptation for all these companies to go remote is it made hiring so much easier. But there's no question that it makes management much harder and scaling the company much harder and building culture much harder. And so there's some real trade offs there. I don't think companies have totally wrapped their heads around it.
But, look, in addition to productivity, there's one other aspect of this economy that I think is really broken. So the the Chamber of Commerce says that
3,250,000
fewer Americans are working today than they were in February of 2020. So basically, if you go back to the month before COVID, we had over 3,000,000 more Americans in jobs than we do today. and yet the unemployment rate is still in the 3% range. And the reason is because that if somebody drops out of the labor force and isn't looking for work, they don't get counted in the unemployment rate. So we do have a if you define unemployment as a large number of people who aren't working, we have a huge unemployment problem.
But the problem is they're not they're not counted because they're supposedly not not looking for work. So I don't think this economy is that healthy and And I think that there's a lot of distortions that have been created by governor of
the last couple of years. -- suspect is what you're saying. Like, labor participation is down.
All this data the the data is suspect, the labels are suspect. I mean, like we talked about, all of a sudden, we can't know what a recession is. let's just bring up one other thing that just happened today. So, Mansion cut a deal with Schumer to bring back to bring back a slimmed down version of BBB. Thankfully, it's not 4,000,000,000,000 like Biden 1.
It's 750,000,000,000,000. Okay? But what do they call it? Billy 1,000,000,000. Right.
Okay. So you know, thankfully, it's it's a slim down bill. But what are they calling this? They're all of a sudden calling it the inflation reduction act -- Wait.
What? -- of 2022.
What? Like,
are you kidding? This doesn't pass
the laughter.
Are they trolling us with the names of these bills? The bills are never what's in the bill. Why don't they just call it the green energy bill and the screw private equity bill? I mean, that's basically what it is.
Yeah. Well, inflation reduction sells to everyone. Right?
But, Jason, the media the media is not holding the administration accountable. If we had if we had an honest media, They the the headline today would be
by recession begins. -- left the station sacks. We you you can only get it on this pod or other podcast.
Yeah.
What what did president Mention get for this deal? Can you agree to it? What did what did president Mention get?
Well -- because he he he
secured some bag. Right? Did you
see what he's
got through
in the group
the there are gonna be white
he agree. He's like, I got a pipeline.
There's gonna be huge handouts and pork for the state of West Virginia. There's no question about it. I mean, if you look at this bill, okay, they I mean, we just we should just look at what's in it. And -- Yeah.
--
more and more is gonna come out over the next few weeks. Right? It's only one day hold. So Yeah. we're gonna learn a lot more about what's in this.
But the largest -- The
Republicans feel like can you explain the dynamic as well after you get through this of why the Republicans felt like now that he double crossed them because the Democrats felt double crossed by man president mansion, and now the Republicans are feeling double crossed by president mansion.
Well, I I don't know that you can use the word double cross because he's not a Republican, and he had no obligation. But the look. The the the the but there's no question that Mansion went back on what he just a few weeks ago, he was saying that build back better was unacceptable because it would contribute to the inflation problem. In fact, he's
Sounds reasonable.
since last summer, he's been saying that we have a growing inflation problem. We can't contribute to it with a lot more government spending. Now he's agreed to a
$750,000,000,000
of of which something like 450 is new spending. So, yeah, it's it's it's a smaller package than what we had before. But if you're concerned, was inflation a few weeks ago, you can't justify this, and you certainly can't call it an inflation reduction act. I mean, that's just patently dishonest.
how do they come up with it being inflation reduction? Is it because the the health care stuff is theoretically gonna help consumers have more money to spend?
because it's a it's a 10 it's a tenuous argument. But if you wanna if you wanna make the argument, there's some cap on what seniors pay for prescription drugs. And then their subsidies for people are in the market for an electric vehicle. However, those are small adjustments those are small rebates to a small segment of the population. I don't think you can argue in good faith that this bill will reduce CPI.
just so, you know, that's just not a plausible argument. And the vast majority of the bill, like you said, are subsidies for clean energy which are basically handouts to special interest in the donor class and the Democratic Party. Just to let's just itemize some of these things. So the largest single outlay, 60,000,000,000 is for, quote, environmental justice initiatives to address the unequal effects of pollution on low income communities and communities of color, This includes $3,000,000,000 to invest in community led projects in disadvantaged communities and another $3,000,000,000 to support neighborhood, equity, safety and affordable transportation access, Another 30,000,000,000 shovels of states in the form of grant and loan programs for states electric utilities to advance the green energy transition, 30,000,000,000 for additional production tax credits to accelerate domestic manufacturing of solar panels, wind turbines, batteries, and critical minerals processing. So it's basically going to companies.
Right? $20,000,000,000 in loans to build new clean vehicle manufacturing facilities across the US and $2,000,000,000 to revamp existing auto plants to make clean vehicles 20,000,000,000 for the agricultural sector to, quote, curb emissions,
3,000,000,000
to reduce air pollution at ports, 10,000,000,000 investment tax credit to manufacturing facilities for things like electric vehicles, wind turbines, and solar panels, it seems redundant to the $30,000,000,000 outlay I just mentioned, but it's another giveaway to Democratic donors and
Wouldn't that be good
for you?
Chamath wouldn't that spending be good for energy independence in addition to climate because we've been talking about being energy independent. If we have more EVs, more batteries, more solar, that's a good thing. Right? We wanna be energy independent. So this seems like we get 2 wins.
We're possibly 3. 1, we we get economic activity. 2, We reduce our dependence on foreign oil. And 3, we stop burning a hole in the ozone and increasing the temperature of the planet. It seems like 3 good things.
we have to I think we have to see the forest and the trees here. And there's a there's one good part of this build. and then there's the kind of more ugly reality that it avoids. The ugly reality is unfortunately Fortunately or maybe without taking the motion out of it. We are dependent on fossil fuels for a very long time.
It is a necessary bridge fuel. And so we need to if we're talking about energy independence, it can't happen without us frankly drilling more and subsidizing the capital incentives of private companies to go and do this exploration work, which they have stopped, Jason. And the reason they've stopped is that they don't trust that these oil prices will stay this high. And so they don't wanna make these outlays and investments for the next 5 to 10 years because they're worried that it's gonna be a ruggable, which did happen to them in the back half of last decade and the early parts of this So they're, like, once bitten and quite shy. They're not they're not gonna touch this thing.
So -- -- oil companies that would do some exploration. It would cost them whatever amount $2 to get the gasoline out to get the gasoline out of the earth and then process it, but they're afraid it's gonna be negative. they're not gonna be able to sell that gasoline away.
I think they're afraid that, you know, the United States government may impinge on their ability to actually process it, that it may there may be tariffs and costs and taxes that they don't
-- They'll be upside down.
Forecast, they'll be upside down. So they just don't wanna beat. And right now and you saw this I don't know if you guys saw it, but like Shell and Exxon and these guys are printing enormous record profits. So their incentives to change the status quo right now is
0. They want less supply because then they can raise prices.
They have the perfect situation right now, which is it's an incredibly energy intensive world we live in, and we don't have nearly enough energy to do the work that needs to get And and by the way and you saw this this week already where, you know, Putin cut Nord Stream by another
50%.
It was already running at 40% capacity. He cut it down to
20%.
It's only getting worse. So I don't know. I mean, I think this bill could be good. I haven't looked at the specific to give you a very
-- Well, the specifics aren't even out yet where it's
trickless section.
I did see the EV credits, Friedberg, and I thought that these were particularly well constructed 75100 bucks off of a new car, but you have to be in the 150 k salary or less on your taxes, a rich people can't get these, and it can only be for an $80,000 new car, a $50,000 or $25,000 used, And so they they did seem to be Steyr pretty well. And I do know that those incentives did work in the early days of Tesla because when you went to the website, you would look at the price and you know, this would be 10% off of a of a new car, and they and they did drive sales, and it it was pretty significant. What are your thoughts on the EV tax credits? Is that something that's a wise thing. And then what do you think overall about spending a couple of $100,000,000,000 on reducing emissions and becoming more energy independent at the same time.
§05Segment 5
Seems like a laudable strategy team?
Nope. Seems like a total waste of money.
Okay. Unpack it, please.
So e the EV tax credit is just giving away money to EV car manufacturers. There's already enough demand. The prices are low enough. There's enough consumer interest. There's enough consumer intent.
I don't think you need to put this money out there. It distorts a market that's already functioning well. And this goes back to my point about the role of, you know, government and how we create, you know, create incentives or spend money This is not a place we need to be spending money because there isn't an absolute need. There's no data that indicates that this will accelerate transition to a carbon free economy or that it's even needed. It really is a a point of view that people hold and they believe that EVs are good.
They're good for climate change. We should accelerate it. Therefore, we should spend money on it without any accountability or proof that these tax credits will actually motivate a market to move faster or quicker than it is already moving. And so it is just spending taxpayer dollars that could theoretically not be spent or be spent in a more effective way to improve the lives of people broadly in this country. So Yeah.
I don't I don't fully agree that I haven't seen any data that tells me this makes sense.
Anecdotally, you don't think $75100 off of $75,000
EV is
I don't think
they give you the same for a $1000. GM and others have great low priced EVs, and there's a ton of market demand, and they can't keep up with production. And, you know, giving people $75100 off a car that manufacturers are still struggling to keep up with making because there's so much demand already You don't need to do it. It is so much cheaper to drive an electric vehicle now by plugging this thing in and spending money on gas that people already wanna buy these things. They pay for themselves super fast.
Every consumer wants to save money on transportation, and you will save money by buying an electric vehicle. So you will already buy an electric vehicle. you don't need government money to get you to buy an electric vehicle.
To Friedberg point, there was a lot of analysis that's been done on consumer adoption patterns. And typically for a new gooder service, the tipping point is around 5% mass market adoption from when it goes from early adopters to the mass market. and EVs just crossed 5%. So to his point, the historical data would tell you that we're now past the critical point where it's no longer questionable and now it's just gonna happen.
So -- It's not early adopters. We're getting to the the mass market. --
mass market. I mean, I'll tell you, like, the best the best thing about EV adoption, or for me, for having an EV is never having to go to the gas station to process.
Amazing. Yeah.
I just just that one thing is -- Well,
I'll just
give you guys currently, it's about
34.6
kilowatt hours per hundred miles. Okay? I'll just do let's just do some math together. Let's say a kilowatt hour in the US costs about 10¢. Okay?
So that's about $3.50 to drive a hundred miles in an electric car. That's a lot cheaper than paying $15 for gas to drive the same distance in a gas car. You don't need the tax credit to get people to buy these things. These cars are financeable. There's a very liquid, very active lending market.
You you get paid back on these cars within a 3 months if you're
better else
you need? -- direct if you were gonna direct some stimulus to --
I would not really need anything right now. We don't we just talked about how we don't need to stimulate the economy. would not
even know where the economy is.
-- about the economy. I'm talking about to you you believe global warming's happening, Friedberg. Yes?
Look. You want my point of view on climate change, industry. I I think I think humans I think humans are on a driven, naturally market driven path. to resolving carbon output in our industrial systems. And I don't think that government intervention with tax credits and specific consumer products is actually gonna accelerate or resolve, you know, these changes that are needed.
We need to not change consumer behavior. Consumers always wanna have cheaper, faster, better. What we need and, you know, at the end of the day, what we need to do is change the way that we're producing and making things because that's ultimately what's gonna drive this transition. And guess what? consumers are demanding things that are, you know, more efficient, that are more effective.
And efficiency ultimately resolves to less carbon, ultimately resolves to less land. less energy. And industry has always resolved to greater efficiency. Natural market forces improve the efficiency of every industrial system
-- So stimulus is not necessary.
Mankind is ever created, and I -- -- does it. It is a matter of time and a matter of natural evolution that we will resolve all of the factors that are driving climate change from animal agriculture to transportation systems to energy systems. These are all gonna get completely rebuilt.
-- do it in time, though,
with schools? We absolutely will. And at the end of the day, We can pull carbon out of the atmosphere and resolve it into products. We have tools to do that as well. So I am an eternal optimist, but in this particular case, I think that this century much of what we're throwing our hands about.
And, you know, remember, at the beginning of 20th century, we thought we were gonna run out of food. Then suddenly, we invented the Habber Bosch process and created fertilizer out of air. It was an incredible incredible invention that saved mankind. We have had time and time again in the history of humanity these aunts that weren't an existential crisis.
We thought we would have peak oil,
and we have had these and we have had these points of view that weren't an existential crisis and humanity is about to end. And every single time, we figured out a way out of it. And we didn't figure out a way out of it because the government came along and said, here's a tax credit. And we've gotten sick And we've gotten drunk on government spending, and we think that it is the the solution to every problem we have as a species. You know what the biggest solution to our problems is?
Our ingenuity. And then they'll let the markets figure it out. Consumers are smart. Businesses are smart. They will figure out ways to resolve these solutions.
They don't need to have these handouts. And I think that that's that's a really important point that we've kinda missed. And I'll say, we were talking earlier about the economy. This stimulus, we've been giving ourselves caffeine since 2008 when the feds started to build up this balance sheet. And we got used to the idea.
Remember, before this, it was like, oh my god. Multimillion dollar bills, and then it became multibillion dollar bills we had an $800,000,000,000 payout in 2008. And, suddenly, it was the multiple of 100,000,000,000 and the multiple of a trillion. And this expectation now, we've kind of reset the clock and Everything now is in what multiple of 100,000,000,000 or what multiple of trillion we're gonna spend on stuff. And no one's even batting an eye at the size of these the the the bills anymore.
Freeburg, what is a bigger existential threat to the United States? Is it climate or is it overspending by our government?
I think it's over I I think the biggest threat is is productivity. I think that as a as a society, we've gotten to the point that we are so well off that we have so many things that we don't realize we didn't have 50 years ago and, you know, read Pinkner's book on enlightenment now and just go through those 200 charts he puts in there it will blow your mind, and then if you actually sit down and think about it and have a broader perspective on where we sit in this country today versus where we were a 100 years, 50 years, even 30 years ago. you will say, oh my god, we live in an absolute luxurious state in this country. Golden -- And
--
golden era, and it is a condition that unfortunately reaps, you know, a decline in productivity, because at that point, we're entitled to some degree, some people are entitled There are many people in this country that are still very hungry. There are many people in this country that still wanna progress. And, frankly, I think a lot of the the the lax behavior from government entities actually holds us back from accelerating our productivity offerings because it gives people many incentives and many reasons and industry many incentives and many reasons to not solve problems. And I think that we solve problems and
we're left to our own.
There was an article I posted, Nick. You can put it in about the Congo. and that they've decided to auction a bunch of land to oil companies. And I think before they tried to heed sort of, you know, the West's directives and they said, okay. Well, let's build a land bank and we'll put a bunch of money in and so then the know people in the in the Congo will have money for things and you won't have to sell off the oil rights and only tens of 1,000,000 of dollars showed up.
And then the Congolese were like, they threw up their hand. I'll just read the quote because I think it's interesting. Congo sole goal for the auction said the government officials to earn enough revenue to struggling nation finance programs to reduce poverty and generate badly needed economic growth. That is our priority, he said. our priority is not to save the planet.
That's quite a stark statement when you read it. But but the reality is in one generation, what will happen is they will feed the world's desire for fossil fuels that will generate a lot of revenue Hopefully, it doesn't get pilfered and so it gets invested in health care and education. And within a generation, this country could be in a completely different situation. allowing the productivity of that entire population of that country to do what they think is right. So I'm I'm generally of the belief that that that Friedberg right on this.
Do you think that we should subsidize EVs to increase the percentage and then also for solar? Just give me those 2, Chamath. Solar and EVs. Do you think they should be subsidized or not in the United States?
It depends on how and at what point of the market cycle. The government's job is to create economic incentives that tip the balance of power towards investment. So if you are sitting here 15 years ago, the price of solar panels was sky high. It was incomprehensible that we could make solar equivalent to any other form of energy. The only way that we were able to close the gap was through government subsidies.
But what that did was allow a bunch of companies to build businesses, to make revenues, and then also to make profits that then the public markets valued, those public markets then put pressure on those companies to take those profits to become more efficient, to make the panels cheaper. And 15 years later, we're now at parity. So that was a a really great example. of the government stepping in to smooth out an imbalance in the investment incentive of the private markets. That is where they are exceptional.
So in any market, they should be able to do this. But I think what Frebrooke is saying is when then they do do it successfully and a market starts to germinate on its own, where supply and demand happens naturally between the private markets, the worst thing a government can do is step in. because it completely perturbs what true supply or true demand is. And that is what causes all of this crazy stuff that we deal with.
§06Segment 6
Jake, how fast forward, assume that there's a $75100 tax credit for EVs that artificially makes EVs cheaper. And then a better technology than EVs comes along. Let's assume it's some nuclear fusion, cold fusion, and whisker fusion car, like, from back to the future. And that car inevitably has to fight against the cheaper car because the cheaper car is subsidized by the government. We see this in a lot of markets that already exist in food, in energy, in infrastructure, where government subsidies that are embedded in the operating model of that industry, and that industry becomes kind of reliant and dependent on it.
totally distorts the ability for the market to naturally transition to a more productive, more efficient state, and that more productive, more efficient state ultimately, is cheaper, better for consumers and better for the planet. And we're we hold ourselves back when we insert government dollars into well functioning markets. I do think the government has an important role as I mentioned last time in pure science, in seeding new markets, in seeding these opportunities in identifying paths that are quantum leap efficiency improvements in production systems, in industrial systems, in ways of living. Once those have been identified, if those breakthroughs have been kind of catalyzed, boom, let the market take off because it's gonna take off. but we shouldn't be in the business.
-- believe EVs and solar are there already?
Absolutely. They're cheaper. And so let me point let me just give you one one point of record. Let's let's use Shamoff's Congal ACE example, let's assume that there's someone that lives in the Congo. And I said to this person who's probably subsisting on less than $3000 a year of income, and they're probably living you know, day to day on finding food.
And you said to this person in the United States, they have these cars. They're called electric cars, and they're cheaper than gas cars. and they're you you make more money or you save money by buying one of these cars, and they're cheaper now. And we're giving people $75100 to buy 1. This person who's making $3 a year would say, what?
It is a state of luxury that allows us to do this. And frankly, I think it's It's a state of excess abundance, and that's what I'm most worried about.
Sachs, what are your thoughts on the government giving these type of subsidies to accelerate solar and EVs.
The whole bill seems anachronistic. You know, first of all, it's raising taxes by 739,000,000,000 at time when we're entering a recession. I don't know any economists who thinks that tax increases help the economy. We just talked about how the economy is in a really tenuous position. So, this is not the right medicine right now.
Then, you've got the fact that the vast majority of the spending this bill goes to these energy subsidies, which are they're not gonna help the average person. There's very little money in this bill that helps the average working class person. These are basically handouts. There's basically pork barrel spending for democratic party donors and special interests and like Friedberg, I think, just articulated very well. They're not necessary right now.
The what's driving demand for electric vehicles, solar panels, and so on is first of all, the products just keep getting better and better. And second, they keep moving down the cost curve. As technology and innovation gets better, these products get cheaper. that's what's fundamentally driving the demand. We don't need the government now.
Again -- We only need to accelerate it. --
in an an anachronistic way to shovel out all this money at a time we can't afford it. And I look. I'm glad that 300,000,000,000 of the bill is supposedly going to deficit reduction. I hope those numbers actually materialize. But we're still
30,000,000,000,000
in debt, and now that interest rates have gone from basically 0 to around 3%. the imputed debt service on our debts basically gone has increased by almost a $1,000,000,000,000. That is a lot of money. So
just like somebody who had a variable mortgage, the United States is on a variable mortgage with our debt. And so when -- Yeah. -- interest rates go up, we're gonna have to
pay more interest. If interest rates stay at the call it 3% level, which is roughly where the 10 year t bill's been, you know, bouncing around at. That is a lot of debt service, a $1,000,000,000,000 a year of debt service. So I think we're probably entering an era an overall era of austerity that lasts more than just this year or even this presidency. And I think we'll look back at all this wasteful spending, this last 10, 20,000,000,000,000 of spending as money we do need to spend that we're gonna be paying for for a long time.
So to be shoveling out another 300,000,000,000 plus of these programs, and again, once again, going at corporations and special interest not to the average, you know, person who needs it, it's just so irresponsible. I
have a question for free bird. One of the one of your exceptions there was investments in Science. You wanna talk about your opinion on the quality of the grant process at the NIH and whether we are doing the real work necessary to get the right things funded?
Yeah. I mean, I think it's a good transition to what happened this week, which was that there was a a major potential fraud uncovered in Alzheimer's research, which has led to over a $1,500,000,000 of funding and grants being given out to follow on Alzheimer's research programs in the years that followed this initial paper. So, you know, in
2006,
there was a paper published in the journal Nature about amyloidbetaproteins that impaired memory and brains, which then became kind of the leading theory for the cause and the driver of Alzheimer's disease. and much of the research and funding that followed from there, which is now up to
9
several $1,000,000,000 in total funding in private and public institutions. Last year alone, the NIH funded
$287,000,000
in research into amyloid beta. And it turns out that the initial paper was shown to be fraudulent. And so, you know, just recently, the journal science published in detail an analysis of the photos of the Western blot measurements, the protein recognition images that the scientists used in this initial paper were forged and that many papers of his work then forged years later. And this paper is one of the most cited papers in Alzheimer's research, and much of the work that's been done in Alzheimer's out of this. And if you guys remember last year, we talked about that Biogen drug.
That Biogen drug is meant to stop amyloid beta plaque. And, you know, the projection is that Alzheimer's drug. And and remember, there was a panel of scientists that looked at the data for that drug that Biogen got approval for from the FDA. and they all said this does not show conclusively in any way that it improves Alzheimer's. And the FDA still approved the drug because so much of the NIH funding went into the research, for amyloid data.
And so the assumption has always been, this is the cause of Alzheimer's. This is the way to resolve it. and everyone gets so strongly held in that core belief, and there's so much money behind it that we can't turn away and say maybe we're wrong. And this is the problem when science meets money. Once you go from funding something and then sign suddenly a whole bunch more money pours into it, Everyone's gonna look bad, and everything's gonna fall apart, and everyone fears that the system fails if you realize that something you did and said was so totally wrong.
We can even argue this is what happened recently with COVID, the masks, the vaccines, all of the statements that were made that you have to keep doubling down. every system has bad actors, you know, people, plagiarize, fraud, whatever, is this like a systematic thing? And doesn't science protect against this because people then do double blind studies and try to replicate studies? Two things.
Because, like, Jason Blair eventually got caught, right, at the New York Times? It was only a matter of time before somebody said, like, his description of my back porch was not accurate, and I never talked to this journal.
Let's say that you're a smart up and coming scientist. Your job is to is to publish research that gets attention and that you can then go raise grants from the NIH and others from on. you wanna get some good papers out, you wanna get attention, and then you wanna forward the research that's already being done. It is to no one's incentive. to go out and try and retest something that someone's already published on, even though that's what you're supposed to do in science.
There's no motivation. There's no dollars to do this. It's it's a disincentive to your career. It's a disincentive to your ability as a scientist to source funding and to source grants to go back and retest assumptions that are already strongly held beliefs in the industry. I'll give you another strong example that just came out 2 weeks ago.
You know, You guys heard of SSRI anti depressant drugs. Right?
37,000,000
Americans are on these drugs. The market is is projected to be at about 25,000,000,000 in the next few years. That's how much Americans are spending on these on these antidepressant drugs.
Half a sacs. the Escalon.
Yeah. Right. So there was a paper published in Nature a few weeks ago, and the Nature Journal pulled all the research and all the data from 17 other studies that was across several 100,000 patients. And their conclusion was that there is effectively no proof that these SSRI drugs have an effect on depression have a positive effect on depression. that, you know, serotonin and the idea that, you know, serotonin uptake should kind of have a a driving effect on on depression, And this has been the assumption that's been held now for, you know, for many years.
I mean, you know, I think the original paper on this was published probably north of 20 years ago, but the industry is so big. Right? The drug companies are making 20, $25,000,000,000 a year on this drug on these drugs. and scientists are incentivized to further that research that supports that research, and so they can go out and get NIH grants because it's already an accepted proven belief that this is driving
-- Is there a solution to this? Like, for every dollar that's spent on primary, you know, a dollar needs to be sent on double blind testing it and making sure that it's accurate. Should there because we have this issue in journalism. Right? Everybody is a content creator, reblog, or an opinion journalist.
but there's very few now investigative journalists left.
The actual problem is the pure is peer review systems entirely in my opinion. like the the problem with this study is that this was done by an up and coming researcher in 2006 at the University of Minnesota. under a researcher who is well known. And so there was zero incentive as Friedberg said to really push back. When well residential scientists tried to find this amyloid beta star 56.
§07Segment 7
They couldn't find it. And, you know, lo and behold, those articles don't get published because they don't get accepted. Why? Because it unravels the entire game that folks will play. So, you know, if you're a well educated PhD with postdoc in the right places, supporting other people.
It's just a loop that goes on forever. The article goes on to talk about how that person who wrote that initial article eventually got this very prestigious multiyear grant from the NIH by a person who was his reviewer who worked on the 2006 paper with him. I mean, these are some pretty blatant conflicts of interest But the reason they don't get uncovered is, like, who is who's gonna step in and all of a sudden become the
--
Let me strike an analogy here. You know, there's a seedling of fraud here, obviously. Some guy took some freaking photos and photoshopped him and doctored him or whatever. But we then tell ourselves stories, and those stories get us access to money which allows us to pursue more science which is meant to forward the market. And then eventually, the market gets forwarded so much and you spend a 1,000,000,000 and a half dollars, and it turns out the whole thing doesn't work.
Just like stock markets, It starts out as a voting machine in the beginning and it's a weighing machine over time. The same is true in science. You will have a voting machine in the beginning where everyone has some belief some theory, some hypothesis, and they all wanna believe it, and they forward it, and they fund it, and they fund it. But ultimately, if it's not true, and it doesn't actually resolve in real world change, the market will collapse. The stock will collapse.
And that's what just happened with amyloid data in Alzheimer's to a large degree. there's a billion and a half dollar market cap you can think about it or a billion and a half dollars of funding that's gone into this -- No. That's -- -- product idea.
That's pretty -- No.
No. There was a billion and a half of NIH funding over It's just the NIH money.
No. No. What I'm saying is the NIH budget per year for Alzheimer's and dementia is
1,900,000,000.
Yeah. Yeah. If the and the
isn't it? And half of it, if you look at the tags, if you just search the tags, half the money has gone into Alzheimer's disease, amyloid beta. So the point is you could orient the terms you used and the way in which you wrote your grants to disproportionately affect the the likelihood of getting money. Separately, there's a whole body of researchers that have felt for a very long time that specific forms of infection viruses Lyme disease could actually be a precursor to Alzheimer's, and it has been poorly researched because the funding dollars weren't there. So the the
--
There's a lot of other theory. Michael can't rule this function. Yeah.
Yeah. Yeah. So, Friedberg, when we look at this, a bad actor committing fraud can send the entire deployment of capital in science on a multi $1,000,000,000. -- trajectory
of the human race. Come on. Like, it's not just about, like, we didn't get the dollars in. It's if you don't take the path, the drug doesn't get discovered. That's a really big deal.
And now the just and now the drug is in the market, Biogen gets approval and people start taking it, and we're seeing the data. It doesn't work, and no one wants to use it so the market has collapsed. and you kinda go back to the origin, it's like, the market collapses ultimately. The weighing machine happens because the science doesn't work. It's not there.
and there was no incentive. No one got paid along the way. Imagine if there was a bounty program to go and disprove papers. I mean, imagine if there was that's what
I was talking about. What is the safeguard? And we do have that in public markets. It's called shorting -- No. There is.
-- short stocks.
It's called Pumppeer, the problem is if you go to Papier and all of a sudden, put your name out there -- Yeah.
--
as someone calling it out, your professional career inside a research institution is finished.
Right. If if your job is to not heroes no. If your job is to disprove other people's stuff, you don't you don't forward your career. Right? I mean, there's a it's a real challenge.
Those people should be heroes. There was those are, like, bug bounty programs. They have to look at it like bug bounty programs in tech or shorting stocks. The problem is
that this community is extremely small, highly specialized, and their impacts are enormous on all of society. But you can't replace them with somebody else very easily because it takes an enormous amount of expertise. Like, if you read that science article, the amount of work, science took 6 months of due diligence before they even had the courage to put this thing out there. They had all kinds of different teams trying to prove what this guy had found before they were re willing to put ink to this
Yeah. When things are starting to feel like they're ultimately moving to market or getting to market, the more money starts to flow in. Another good example of this is Zymragen and Genco. Okay. So in the past week, ZymriGen was acquired for $300,000,000, there was announced that they're gonna be acquired by Ginkgo Bioworks.
Both of whom are public companies, Ginkgo went public at, I think, a $20,000,000,000 market cap as a spec a few months ago. XimerGEN went public at, you know, 4,000,000,000 or whatever they went public at. Zymergen being acquired for $300,000,000 comes off of them having raised a total of $1,500,000,000 of capital from many investors, including SoftBank, and in their IPO since they were founded in 2013. Both of these businesses do exactly the same thing or similar things, which is pursue the industrialization of synthetic biology. synthetic biology has been talked about, you know, or pursued for 20 years in an industrial setting.
The kind of Gen 1 of synthetic bio companies was Amyris, Gevo, Kyor, Solazyme. These companies were all engineering cells. You changed the genome or the DNA of the cells. You get those cells to make a product you want them to make. You put them in what's called a bioreactor, and they make the product.
You can make bioplastics. You can make animal proteins, you can make fuel. And so these and you put sugar water in the tank. So you're programming the organism to make stuff for you. And there's a lot of technical challenges.
Right? How do you change the genome? How do you get it to be more productive? What are the environmental conditions of the bioreactor? How do you scale this thing up and so on?
And so many of them had early stage proof points and then extrapolated out that this is gonna work at scale. So all the Gen 1 companies largely failed, Gevo, Kyor, Solazyme, were all trying to compete with the price of oil, and they lost. And so they could never actually, the science worked in the lab, but getting it to a big scale, there was a million things that went that suddenly were kind of proven or disproven along the way, and they all kind of pivoted and became cosmetics companies and kind of did high end food and other stuff. And then Ginkgo and Zymurgen were kinda Gen 2. And they were like, we're gonna reduce the cost, improve the timescale of the synthetic biology programs.
and they started using industrial robots and arms, Zymurgen made a bunch of kind of strategic errors where they were like, we're gonna make the product and design the organisms So it took a lot more money, a lot more time. And as they kind of stepped up and tried to scale up, turns out a lot of the things that they believe to be true weren't quite true. But the CEO did a great job selling the story, Josh Hoffman. He went out for years, and he told everyone, you know, we're gonna kind of create the this factory, and we're gonna make everything in the world using biology. It's gonna transform the world and
-- You've talked about this. Is it a true story?
Yeah. And so look. There's so much of the fundamentals are true, but the industrialization, the amount of capital these guys raised and what they promised they would deliver on when, turned out not to quite beep the economics, not to quite get there. And the market decisions they made about what products to go after, how quickly to scale up, building their own facilities. There was just a lot of strategic errors, and I think the storytelling got ahead of where the business was.
You know, we saw this a lot in other businesses in the past year as we've talked crypto and other markets. But these were really key examples because the science is so compelling, and the narrative is so compelling. And if it's right and if it works, it changes the world. And I think the same was true of amyloid beta and Alzheimer's. Everyone wanted it to be true.
SSRI's. Everyone wants there to be a cure for depression that you take a pill and you solve depression. Everyone wants to, you know, have a drug that you take, and it and it ends Alzheimer's. Everyone wants to print all the world's products in a factory using cells But there's a lot more to it. And as you kinda get through the Nuance 10 to 20 year cycle of science, moves to technology, moves to industry, those stages or rock with errors and issues, and, ultimately, may not actually yield what we expected it to yield, and those stories start to fall apart.
And that's what happened on SeimerGen. They're getting boxes of that thing.
-- look back on this Friedberg in 20 years and say, hey. Yeah. These things were total train wreck. They flipped the car, but it was a step in the right direction.
And, yeah, that was 100% step in the right direction.
-- capital, but, you know, it it something will be built on top of it just like mainframes or mini computers to smartphones.
The first system of call it synthetic biology or recombinant DNA where we took DNA from one organism, and we put it in a in a in a microbe to make stuff for us was Genentech in 1978. Prior to 1978, the way we got insulin is we actually processed pig parts. So it would take, like, you know, 100 of kilograms of pig parts to make just a few grams of insulin. And Genentech took the DNA for human insulin, and they put it in a bacterial cell, and they made human insulin in a bioreactor. And that really kind of ushered in this this era of, you know, industrial synthetic biology that all of these companies kind of follow suit to do in different markets.
But remember, biologics, the entire pharma industry and biologic drugs, it's all made this way. We take the the DNA to code for certain antibodies or proteins We put it in microbes, and those microbes make those products for us. That Biologics Drug Industry is a
$350,000,000,000
annual revenue industry today. And so it works. It's just a matter of when and what the right products are. Industrial enzymes, $25,000,000,000 annual revenue today. So there are markets that are working.
It is working, but this whole, like, we're gonna change the world overnight isn't really, you know, true, and so these stories catch up to us. And I think We've seen this where I call it science meets money. You know, money usually wins, and the science isn't quite there yet.
And so we've seen this kind
of -- The Genent
the Genentech story is amazing. I mean, Tom Perkins from Kleiner Perkins fame, like, will that company into being, and they Yeah. It it's pretty amazing how in the old days of Venture -- I don't know
if you've
ever -- They basically built these companies like you're doing today, Frabert, in like a production board model. He he basically incubated Genentech and then surprised the world with, like, hey. We have synthetic insulin here. It was, like, true -- Yeah. Look.
I mean, the potential main story -- -- Silicon Valley. Yeah.
There isn't a single material or food or a fuel or product that we ultimately won't be able to make using synthetic biology. It's just a matter of how do we get from here to there. And the storytelling kinda gets you a bunch of money, and then you get ahead of your skis and then boom, you fall down. Same happened in Alzheimer's. Same happened with SSRIs.
And I think we'll see this happen a lot. But, like, when science gets exciting, a lot of money gets behind it, and sometimes it can kind of, you know, get ahead of its skis and fall down.
But -- And, Saks, how excited are Saks, how excited are you for this revolution instead of --
Biology, investor with us in one of our companies in synthetic biology. He may not remember, but he's got some money in. Oh, I won't name the company, but he's got some money
in it.
How's that doing?
Yeah. I will. Did you fall asleep in the board meeting?
No. We're not we're not on the board. We're we're passive. We didn't is that the one we brought to you, Friedberg?
Yeah. Well, I it was three people brought them, but I've known them since they were small. But, yeah, I I
§08Segment 8
I -- No. There was a deal that came in that looked interesting, but it was a little bit out of our area. So we went Friedberg with it.
It is an interesting business because these guys provide a tooling service to other Syn Bio Companies. And so it's a recurring revenue.
-- in shovels.
Yeah. Like -- Yeah. It's a picks and shovels. Exactly. Yeah.
Yeah. It was very SaaS like in that regard. Like
babushkadahl of nerds.
Yeah. And they were --
They were -- So
we've broken SaaS is awake. Okay, Seth.
We're talking about an area where, you know, I'm not gonna be able to contribute a lot to discussion of SSRI. I'm not gonna pretend to note
I'm just a consumer. I'm not. I'm not. I'm not. I am not.
I am not. So Sachs. Have these SSRIs helped you in any way with your depression about Biden? No? Okay.
The story that I think kinda fits with everything we're talking about this week even rumors
about this -- -- 5 minutes in. Yeah. --
is there was more there were more stories this week about this cynical ploy by the Democratic Party to fund pocket candidates. No. Hold on.
There it is.
We talked
we talked
a little bit about this last week, but they spent you should be really opposed to this, Jake Elle.
Yeah. Listen. As an independent, I think it's gross. As an independent? I am an independent.
You're an independent only votes for Democrats.
So Not true. Not true. I'm gonna vote for Liz Cheney for president, I think. Liz Cheney or Bezos? Those are my -- Jake, have
you ever voted for a Republican candidate for any office ever?
I had yeah. I have. You have, really? Yeah. Yeah.
I and people I I am a moderate, but I don't feel like -- -- do when. I voted for 954.
Were you about to say Reagan? Were you about to say Robin?
No. No.
No. No. We're too young
to up front.
Patrick Boyse.
He was a democrat.
It's been a long life, but I did I did vote, I remember, for Republican, and and when I lived in New York.
David Sacks has a look on his face that says, finish your stupid banter so I can go on my monologue.
Okay. Go go Hold on.
Henry Balcaster in 3, 2, go. No.
I don't I don't really have a monologue on it, but I just think that this is this is a pretty amazing story that you've got Democrats spending almost $50,000,000 this primary season boosting MAGA candidates -- Yes.
--
at the expense of moderate GOP candidates. Perfect. And so
-- Let's get the crazies in there.
Yeah. I mean, it's
-- You're easier to repeat. Right? And that's the theory. If you get crazy,
but in a in a year in in a year in which you get a red wave, it's really dangerous. And it totally undermines what the Democrats are saying in their January 6 Completely it's completely cynical. I agree.
You can't you can't on the one hand say
-- -- as backing Trump.
You can't on the one
hand say that we're facing an unprecedented existential crisis for our democracy, and on the other hand, be giving money to the very same people you're saying are the threat to democracy. It makes no sense. It just shows that
the whole
deer -- -- are completely cynical backing anything that is toxic -- No.
You're -- No. No. No. No. No.
You're what you're saying
-- -- Malika people are -- --
trying to both you're trying to both sides it. You're trying to negate anything besides no. But the difference here is that there there is this is, I'd say, partisan political gamesmanship. But The point is you can't, on the one hand, be engaging in ordinary partisan gamesmanship while you're saying the democracy faces an unprecedented threat. That's the disconnect.
No. No.
I I got it.
You're you're trying to get you to shoot.
What do
you think about Liz Jamie? I'm curious.
Did you
vote for her if she was a nominee?
she's a warmonger just like her father. She's like she's basically Darth Vader 2.0. So that's my biggest problem with her is, no. I would not I would not vote
for her.
There's not there's not there's not a war. She doesn't wanna get us involved in, and there's not a country she wouldn't try and impose democracy at the end of a barrel. Okay? So that's why I don't like her. But to your point, Democrats say they wanna work with more Republicans like Liz Cheney, but If you look at who they're donating money to, they're donating money to support
the
MAGA election denier against every single republican who voted for impeachment. Okay? So you look at, like, the specific races.
It's completely cynical, and it's just about winning just like the Republican. --
one example. Deborah that's they gave. They launched $450,000 of ads to take out a grand rapids congressman, Peter Major, who also voted for Trump's impeachment. They did this with a with a republican in California, David Valodal, and and just on and on. So you've got on the one hand, you've got Democrats saying that this is an unprecedented threat to democracy.
They wanna work with more reasonable Republicans who are denying the election while at the same time trying to basically fund the campaigns of the MAGA candidate.
Yeah. The reason they're doing it, obviously, is if you fund one of these maniacs, then they're easy to beat. So they're trying to serve up somebody who's an easy candidate to be able to get get this right.
But in a but in a year
-- -- effective strategy?
think it's a very dangerous strategy because
What is
it effective? It was my question.
No. I I I don't I don't think so because This year, I think this November is likely to be a wave election. And when you get a wave election, the specific candidate matters less and party matters more. So you could get some of these crazy swept into office. So I think it's a cynical and and counterproductive strategy.
and you say that Republicans do it too. I can't remember any example -- Well,
I think Trump itself is like, supporting Trump is the --
I can't I can't remember I can't remember A single time ever where Republicans have had basically funded
-- Hold on. --
have funded the Soros -- Like,
if the
audience loves it, your mom.
I just think this is very stupid and dangerous, but Let
me ask you a
question. It's of a peace. Listen. It's of a peace. Okay?
It's of a peace with the administration claiming we're not in a recession. trying to redefine recession now that we're in
1.
It's of a piece with Joe Manchen all of a sudden calling, the slimmedown BBB, the deficit reduction act, after saying that it would increase the deficit. And the media is not holding these guys accountable. That's why they're doing it politicians. Hold on a second. politicians are gonna be as dishonest as the media allows them to be, and the media is not holding
their accountable. Conan O'Brien kept the White House on us. He tweets out The White House now says it's only a recession if you see a salamander wearing a top hat. Absolutely. The compliments are
the best. One guy is like -- -- a moments.
What about a what about a rabbit wearing a pancake? There's a round of
a pancake. But let me ask you a serious question. But Jake
but Jake, I'll seriously going beyond just the the specifics of the political issue, I think we really have a problem with the media class. I mean, the media is carrying water for these Democrats because they agree with the ideological agenda, we do not have an honest media who's willing to hold the party in power accountable.
given what you've said about being disgusted by, like, the, you know, denying of, you know, this voter fraud conspiracy stuff by Trump or whatever. If Trump wins the nomination, which I think he will, how are you gonna be able to when we're on the show a year from now and Trump has the nomination, or, you know, 18 months from now, whenever it is, that it he locks it up, and he will lock it up if he runs.
I don't think so.
So if he does, though,
I don't think so. I don't think so.
-- conceivably be able to back Trump for a second term? Would you be able to fund this program and say I back Trump? as a republic because you don't wanna vote for a Democrat. What would you do? Just not vote because you don't like Trump.
You said you would not support him.
Listen, Paul is always a choice of the lesser of 2 evils. There are a lot
So you would vote
for Trump. So I hope I'm not in that situation. Listen. I I
What would you do?
Listen. The the election that America does not want in 24 as Biden versus Trump. I think the raise that they want, I think the choice they wanna make
--
Mhmm. -- is actually DeSantis versus Newsom. That's the choice I'd like to make. So look, I'm on the DeSantis strain. That's what I'm supporting for 24.
You know, if it ends up being something different, we can talk
about that. bezos DeSantis, what would you do? Would you vote for Basos or DeSantis? You go DeSantis, really. Yeah.
What about Nutramov? Would you go Bezos or DeSantis? Who would you vote for? Bezos or DeSantis?
I I Bezos or DeSantis. Well, that's a tough one. Probably DeSantis.
Okay. Friedberg? Bezos.
I'm good. I'm gonna sit this question out. Let's keep going. Okay.
Alright, everybody. There you have it,
everybody. It's a it's a dumb question, Jake, out, because Bezos is not running. I mean, And and honestly, the the the fact that people were even discussing
that -- He's he's a thought experiment. No. But his thought though but the thought experiment, the reason why I would go to Santa's is at least he knows how to play the game of politics. Bezos would just, in a matter of a week, be like, why did I do this? I have the best life in the world.
Exactly. There's just no way.
It's a stupid
-- --
living the best life.
Listen, Jacob. Bezos had 2 tweets criticizing the administration on inflation, and you're like, he's running for president. He's running -- No.
No. No. No. There's 2 there's other reasons.
Come on. Satveen's such
a foul.
He bought the Washington Post. He bought the biggest house in DC, and he gave that $10,000,000,000 climate patch. I think those are all little cards that you could check boxes. And if he writes a biography --
Bezos probably has houses all over the world. Doesn't mean he's running for president of countries.
Come on. I'm just saying you're just scared. You're scared of the Bezos presidency. You know that he would roll over DeSantis. He would roll DeSantis.
even if Bezos were dumb enough to run for president, I think he's too smart to do that. The democratic party would never nominate him. That's not
-- Why he wouldn't ask, like, some purity test because if
he is -- -- look in a Bloomberg. I mean, listen. Don't don't get me wrong. I'd love to see a candidate like Bloomberg or Bezos nominated by the Democratic Party because they clearly understand economics. Right?
Would it
be a masterstroke by the democratic party to embrace a modern subscription?
I would love to
see a
candidate like that. But look at look what happened to Bloomberg. Bloomberg spent a $100,000,000 and he lasted to the first question of the first debate.
Yeah. They knocked him out.
The first question of the first debate. And then, you know, Elizabeth Warren knocked him out by just basically calling the a billionaire, and he's there done. He had no answer.
Terrible. Yeah. He did terrible. Terrible. But, I mean, it would be a masterstroke if they went with a moderate.
You know it. Alright, everybody. For David Sachs, Chamath, and Friedberg. I'm Jay Kal. We'll see you next time on episode 90.
Love you back, actually. Love you. tax appeal.
We'll let your winners ride.
Rainman, David Saffens. I'm going all the way.
And it says open source it
to the fans, and they've just gone crazy with it.
what airliners were. Besty's our car.
driveway. We should
all just get a room and have one big you, George, because they're all just useless. It's like it's like sexual tension, but they just need to release that mountain.
What? You're the bee What? You're
a thief.
What? What?
Where did you get Murphy's r back?