SPAC updates, public/private market overview, Putin's end game & more
Full transcript · Read the full conversation in order, with its original context.
§01Segment 1
I'm in a very Daniel Plainview mood this week. The there will be
one scene either. -- competition in me. I don't want to see other people succeed.
That's right. Best scene ever.
You are the furthest from that character. Like, that is not your spirit animal.
Oh, there will be blood? That guy, Daniel Day Lewis.
He has nothing to do with you. watching about a hundred times. Incredible.
You must be so stormy and roiled on the inside. Oh my gosh. I mean, like, I Did
you not see my roast at Saksa's birthday? It's just
a roast.
--
not see it? I lived it. It was the most off color, disgusting, egregious mean Diatribe, I've ever heard. My lord. I
have a competition in me.
I don't like to see others succeed. I can't stand that Jake House a good muttering. The weather winner's wide. Rainman David Sachs.
And I said We open source it to the fans and they've discoveries.
I guess everybody wants to know Chamath. You've wound down 2 specs. Thank you for doing this for IPOF specifically because people are replying to me every day asking what are you going to spack. But IPO, d and f, the money has been turn to investors.
No. It's it's going going to be returned.
Going to be returned to investors. Thank you. And Bill Ackman, of course, he wound down his back returning
4,000,000,000.
There's over 500 backs out there looking for deals. Tell us why this decision.
Well, I I've raised 10 specs, 66 in technology and foreign biotechnology. And I've done 6 deals, 2 in tech, and 2 in biotech. Foreign tech. Sorry. Foreign tech.
Foreign tech. Thank you. And 2 in biotech. So the the the reason to shut it down is pretty straightforward. It's like, You know, when we launched these things, the stock market was in a much different place than it is today.
And so over the last 2 years at looking at deals, it's gotten harder and harder to find a good risk reward. Now why is that? Well, the the thing with this back is you do a deal today but it doesn't usually close for 6 or 7 months in the future. And so you have to do a deal where you have a really good sense that in 6 or 7 months when the deal comes to close that the price will be the same or even higher than what it is today. And if it isn't, all of the investors that you brought along in this back have a right to redeem, which is to say they file a notice that says you can complete the deal, but I want my money back.
And what they get is the initial $10 that they used to buy the stock in the first place because when we sold when we started this back, we we sold stock at
$10.
And so from my perspective, I was looking at this and I'm like, you know, this is a super volatile ugly point in the market. This last year has been really problematic. I I and I and I kind of said this last November and Nick, we can we can play the clip after and we can come back to it. But basically, my decision was that at this point to do a deal would probably you know put a lot of capital at risk. And all of these deals, I'm typically investing a $100,000,000 at least in each of them.
And so I couldn't justify that. I couldn't see a good risk or And I thought the right thing to do the responsible thing to do was just to wind these things down. You know, I'll I'll lose, I don't know, 10, 15, 20000000 bucks for having set these things up. But we give everybody their money back that $10. And I think that's actually better over the next 5 or 6 months than what it'll otherwise do if you're invested in the market.
Now a belief that I have. But hopefully, when people get the $10 back in the next few weeks, if they want, they can go and put that money back in the market. And, hopefully, they'll do well. But, you know, from my perspective, the risk reward was not good.
Is part of the issue the inventory that's available of great companies as well that's one of the things I heard speculated on CNBC. It's hard to convince a private company to go public.
Here's my experience. You know, when I when I was talking to all of these CEOs of the Silicon Valley companies. Initially, there was a lot of misunderstanding about what specs were. And I think we were able to dispel that because we had some really successful transactions. Then there was a lot of interest in being a part of it.
In this phase, we were suffering from 2 very important things. 1 was that valuations were just completely up in the air. People a huge question mark on late stage valuations because we would come in. We would do the work, and we would say the company is worth x And that number typically was 50 or 60 percent lower than their last private valuation. And so when it came time for us to negotiate you know, doing the deal even if the founder was roughly on board, the rest of the board was not because a lot of them would have seen some pretty meaningful markdowns in their private assets.
And when the company had enough money to kind of like, you know, at least stay private for another year or so without having to raise money. On balance, those investors felt it was more prudent for them. to not take the mark and to not take the deal at such a lower discount. So that was a big issue that we ran into because every time we would price a deal, Again, we're trying to create a margin of safety for us and our investors. Again, because it's gonna take 6 to 9 months to close a deal.
And so ideally, you want the
valuation and digestion. And then sorry.
The second thing was just volatility. So when you see volatility in the public markets, you know, for a CEO and I and I can understand this. It's much easier to go public in a point where the markets are generally going in one direction because it gives them the confidence to be able to learn the ropes because it is a complicated process being public. And when you introduce tremendous market based volatility independent of your company, I think a lot of CEOs and CFOs and IR people were a little nervous.
You wanna take the risk.
And that was this that was the second piece. But by in a way, the first one was valuation. We could not find market clearing prices
--
Makes sense.
--
for assets. And by the way and and I'll talk about one company in specific, which just this week had a pretty public blow up around this whole issue. And look, I've been pretty clear about this since November. The marginal trade should have been to be trimming risk. And, Nick, maybe you can play the clip because I really wanna make sure that it's very clear and on the record what I said almost an entire year ago.
Let me put crypto in the context of the markets and where we are today at the end of the week after, you know, q3 earnings in November of of 2021. We have the stock market at absolute all time highs. Ripping. We have crypto at absolute all time highs. Ripping.
We have the art markets. I don't know if you guys saw Phillips and Christie's and Sotheby's this past week. at absolute all time highs, sold another vehicle for
25,000,000.
We have inflation at a 30 year high, We have 10 year breakevens at a 25 year high. We have, you know, one point somewhat $1,000,000,000,000 that we just approved last weekend. We're still Horstrating on another $3, you know, $1,800,000,000,000 of stimulus that we're going to put in. And I think the the most important thing, which is The 2 most important founders of our generation, the 2 smartest people who have really consistently won Elon Musk and Jeff Bezos have collectively sold more than $11,000,000,000 of their holdings this year alone. And if you can't take all of that and decide for yourself, what's right for you and your family, you're doing yourself a disservice.
I think it's important for me to never sort of, like, you know, be forced to tell folks whether I'm buying or selling, although I'm willing to do it in moments where I think it's important. But I think it's really important to understand the context. And so I think like these folks that, like, think derisively about individuals who are managing risk, I think it's really naive, and I think it's it creates a lot of missed opportunity for them as well. If the smartest people in the world are now selling their core holdings that they told you they would never sell, and you are not reconsidering your position on things. You're either much smarter than them or you're being really, really reckless.
The reason I I said all of those things was because I was getting really worried about where we were. And then and then I think on the heels of that, I published a tweet and I And I said, I'm starting to sell. You know? And I sold, like, a $100,000,000 of SoFi, but then I was a systematic seller through the end of last year and and through this year. To try to manage my own liquidity because it changed profoundly as I saw what was happening in the markets.
So, you know, I think that it's just an important thing to call out that things don't always go up. and you have to pay attention to a mosaic of information. And you have to do the work yourself because Your situation is unique to you. Nobody else understands it. And so you can't outsource that decision to somebody else.
Obviously, you can use it as a guide. It you know, it's fair to say, you know, when the 13 apps of important hedge funds come out, do I read them? Of course. Because I'm trying to figure out you know, what don't I know? What may I be missing?
Maybe there's a great company in there that I that I should be taking a look at. So, you know, I'm not dissimilar to everybody else and that I use other people that I look up to or respect as a leading indicator of what to buy. But I still take responsibility for my own decisions, and I manage my liquidity as best as I can based on my conditions, and those are always changing. And so I think this is just a good reminder that everybody else has to do the same.
So, Shamal, what do you think happens to the remaining 500? Every spat sponsor friend of mine that I know is not seeking targets anymore. They're all expecting to wind up and return capital. how many of the 500 do you think will actually find a target and how many do you think of of remaining specs? How many of them will wind up and return capital?
I mean, I I think that there's still some really good deals to do. They're not necessarily in tech per se. So, you know, I think you did a really great deal in AgTech. I think that that's that's really interesting, so time will tell how that does. I think there are some really interesting deals in energy in we spent a lot of time actually pivoting and spending time in energy, looking at, you know, everything from, you know, producers of natgas and oil to folks that were building terminals to LNG facilities and the but it's just a very different return profile than what we were used to.
§02Segment 2
So I think if you can understand some of these other markets and you can underwrite to
a different rate of return,
some decent deals will get done. The overwhelming majority of the tech specs, I think, probably will just wind up. Some folks will be really focused on trying to, you know, monetize their founder promote, so they'll do any kind of deal. The problem as you see is even whether you do a good deal or bad deal with the kind of volatility we're seeing in the mark likelihood is that it's gonna trade down pretty significantly. So I think most will not find a home.
I think some will find some really interesting targets in areas like energy, I think are really interesting. Agriculture, like what you did, Freiberg, I think, is a really interesting deal. And then you know what? It'll be an opportunity for us to retool this back. I don't think it's gonna go away.
I think that it is a useful tool in a toolbox of many tools. So there's IPOs. There's direct listings. There's specs. There's obviously private fundraising.
There's convertible. There's structured deals. So it is a tool. And I think when used properly, it can be really helpful. You know, for the companies that we worked with, it would been impossible for them to raise the quantums of capital that they did.
Primary capital from sophisticated hedge funds and mutual funds, you know, we raised 1,000,000,000 and
1,000,000,000
of dollars companies like SoFi And Opendoor. And I think that that's gonna go a long way for them to achieve their goals. So I think it's gonna be a good tool But we're gonna go through a a washout of most of these folks who are not gonna be able to successfully find targets.
Saks, when we look at private companies, especially the late stage ones, you and I are involved in a number of them. They're doing rifts. They've got headwinds, and their valuations are underwater in many cases. How are they thinking about the public market windows, specs, direct listings, or just a traditional IPO?
I don't know if they are thinking about it. I just think I think, like, going public seems like a fantasy at this point. I think the whole public markets exit. Idea is frozen for 2 years.
2 years. I
think that's yeah. I think that's probably what people are thinking.
What are these late stage companies that raised mega rounds doing to work out valuation issues because as Shamov just pointed out, with specs, what are the problems was clearing market, the late stage investors who came in, maybe they, you know, don't wanna accept the haircut evaluation even if they have -- -- enough. -- productive.
Probably not enough. I mean, what they're doing is is using their war chest grow into their valuations which is the smart strategy. And if they're really smart, they'll be slashing their burn while they do that. But, yeah, it's it's no different than what we've talked about before. I think the the main significance of this past week is that you had the Fed meeting it raised another 75 basis points.
There's no surprise to that that was predicted. What was new was the forecast. They're now saying that they expect to raise another one and a half percent. Just 2 months ago at the last meeting, they were saying 75 at this meeting plus 50 after that. Now they're saying 150 after this.
So, you know, in just two months, they've they've they're now revised their forecast for an extra 100 basis points of rate increases Why? Because inflation is worse than they thought. So things are worse than we thought 2 months ago. The the last inflation print didn't get better as fast as people wanted. We talked about that last week.
Now the Fed is revising its forecast. The trajectory is bad and getting worse. And you finally had Powell kinda throw in the towel on his rhetoric around soft landing. I mean, first, it was Well, we can raise rates and we won't have a recession than it was. We might have, like, a mild recession.
Now he's basically saying hard landing if you if you read these FOMC comments. So I think this was a really bad week for the economy, and you're seeing it in the markets this week. I mean, we are retracing almost within 5% of the June lows with the growth stocks being the ones that are hardest at?
By the way, speaking of growth stocks, have you guys been following this trials and tribulations with BYJU'S, which is like the one of the largest valued private companies, but it's a private Indian EdTech company. Essentially, I think, like, you know, there was this delayed audit, and Deloitte couldn't certify a bunch of things and the finally, they were able to come up with a report that essentially showed. Instead of, like, breaking even or making money, they lost almost $600,000,000 this year, and that A lot of the revenue that they were booking were actually loans to millions of Indian families who had basically zero probability of paying them back. So a lot of the revenue was not real as well. And this is like a who's who of investors.
It's everybody from, you know, Sequoia, Tiger, UBS, BlackRock, Chan Zuckerberg, it's incredible.
Well, I think when the tide goes out, we find out. Right? And this is what's happening. The tide's out and You're gonna find all the weakness in the system. It's all gonna get flushed.
I think this is a bit of an outlier, obviously. Like, I don't I don't think that, you know, all these companies that are worth tens of 1,000,000,000 of dollars are running so close to the sun, but it just goes to show you that, you know, how how does How how does this happen? Like, how how do you not get a deal room?
--
saw this on the seed stage in series a. We would ask for a data room. The person would say, you're the only investor asking for it. And you're putting in, you know, 10% of the round. These other people aren't even asking for it, which we said, okay.
Can we still see the data room and turned out there wasn't one? people were just making bets. They were making blind bets. They were betting, without even looking at their cards or thinking about the other people's cards in their hand.
This goes back to what Friedberg was saying before. You know? I think I think there's a there's a a sliver of the retail investor base that is not dislimmer to a sliver of the private equity and hedge fund and venture capital space, which is These folks are not willing to do the work. I think most people are and most people wanna come to their own conclusions, but some people wanna just take the easy momentum driven decision. and they typically always get punished.
Over time, there's this concept of adverse selection, which is that the negative act actors, we'll find them. We'll seek them out, and it will be a match. And so they'll ultimately get adversely selected into the deals that blow them up.
So the bad deals, what you're saying is the bad deals would find the bad investors who don't do the work, and then they spiral and crash together. That's a really brilliant observation. Yeah.
Yeah. I think I think the other that's what I'm here. I think the other thing is, like, you you have this situation where If it wasn't that, it's folks outsourcing their diligence to the person that did the round before it. Totally. You know, oh, Silver Lake did it.
Same problem. Tiger did it. Okay. They they're these guys are very sophisticated investors. I don't need to do the work.
It turned out you did because, you know, it's it it was a very cavalier way of recognizing revenue.
There was a specific playbook here too that I don't know if you saw this acts in the early stage. where people would get their friends to invest in the company or some high net worth individuals. And then you'd look at the deal, and the valuation didn't make sense. And then you say, well, we would always ask how much money is each person put again? And we're like, well, their normal bet size in the seat is
750
or 1,500,000. but they're putting 50 k into this or a
100
k. What's going on here? And it was, oh, they're friends with them. They worked at a previous company together. They were in the same they went to the same college, and so people were using social proof, but manipulating it to get some other sucker at the table to pay full price and not due diligence.
Really strange behavior.
I I was in Singapore this week. There was a I I had this great meeting with this young investor, really dynamic guy, and he was telling me about a company in Indonesia that he didn't invest in. But it turned out that the that this founder was literally running 2 parallel sets of accounting systems. And so he was, you know, showing a business and fundraising from this set, but the the real book over here and it looked a completely different system, and it was basically like a ponzi scheme. And, you know, he was telling me it's like it's like impossible to root these things out.
So What he said he relies on is, like, you have to have a network when you're doing these frontier country deals, where, you know, he says I need to find at least ten people that know this person so that there is sort of like a moral social proof and moral diligence that happens because that person will never try to commit something that egregious in the face of all of their friends. And so, you know, that's a mechanism of filtering this stuff out, but I thought that was a really interesting way of of designing a diligence process in at least in a frontier market. Here, I don't think you have that much time to do these really, you know, fast paced deals. And the social proof matters less because you theoretically you know, are looking for signals of traction. But there has to be a better systematic way of getting this diligence done because these things should be pretty obvious.
Sachs did you have
--
Well before it's a multi decabillion dollar company.
Saks last year when people were moving really fast, saying they don't have time for diligence. You're gonna lose the deal. Yada yada. How did you approach diligence during those peak periods? And did you have those experiences where people were trying to push you to close without talking to customers or looking at bank statements yadayadayada?
No. we wouldn't play that game because we always run SaaS metrics. That's always the starting point for us.
Got it.
But, you know, most SaaS companies, they have SaaS metrics. I mean, they they it's so standardized that it would be such a red flag if they didn't. Yeah. I think it might be companies that are, you know, have unusual business models.
or
maybe they would say something like that. But -- Got it. No. We can never do a SaaS investment without SaaS metrics.
Alright. Well, this is a good segue because Right now, US Venture Capitals are sitting on
$290,000,000,000
in dry powder. We had talked about this last year how much dry powder was there. the market has obviously collapsed. But here's a chart from our friends over at PitchBook. Just extraordinary how much has built up and how much has been raised.
USB funds raised a $121,000,000,000 during the first half of this year, 2022. So LPs still have an appetite, which kinda makes sense that investing into the down market for private companies means you're gonna get better deals and you have a 10 year horizon. US VCs raised a 139,000,000,000 in all of 2021. So if you put those two numbers together, yeah, you're looking at $260,000,000,000 in the last 18 months, and this is all record numbers being put up on the board. What does it say for private company, Zach?
§03Segment 3
I dispute this analysis a little bit. I think there's a couple of things going on that need to take into consideration. First of all, new funds don't get announced till after the process completes. And then, you know, it may even be some time after that when the VC firm feels like they wanna make the you can't announce a fund until the process is completely over or you get subject to all sorts of additional SEC rules. So you know, these funds might be announced in 2022, but they may have actually been raised in 2021.
So that I think is a really important point. Moreover, a lot of the funds may have already deployed capital before the crash. So there was that I think remarkable story that we talked about months ago in TechCrunch on how the latest Tiger Fund which wasn't even announced till March or April of 2022, but it had already been 2 thirds deployed by the time they even announced it. And so that was pretty stunning. So I I think that we don't really have a great sense of how much of this so called dry powder has already been deployed, how much of it was really raised before the crash.
It is true that LP relationships with VC firms that have done well are sticky and good LPs stick with their partners during a downturn. So look, I mean, the VC world's not going out of business or anything like that. But I would tend to think that this is an overly optimistic, overly rosy scenario. Do VCs have new funds that they're gonna be ready to deploy in great companies. Yes.
But does this mean it's gonna be easy, no. I think that the bar has gone up valuations have gone down. Founders looking at the this tweet storm, I would not get lulled into a false sense of security.
Yeah. I I agree with
just to explain that, There's probably a 6 month lag on when these funds are announced. The reason is there's 506 b and c designations. Most people raise under 506 b, which means you cannot even say that you're fundraising. Therefore, pitch book can never have that data. So there's a lag, and people are deploying at a very high velocity Therefore, this number could be off 35 percent.
People were deploying at a pace where they thought they were gonna go back for a new fund every year, which is what it was looking like in
20 2021,
you know, if that 6 month period might mean you've deployed half the fund. Right.
So
but look, if if you just go back to a two and a half or 3 year pace of deployment. And before in 2021, we're at a 1 year pace of deployment divide the availability of capital by 2 thirds. I mean, you know, only 1 third as much will be deployed in any given year. That's a, you know, a significant reduction. So, yeah, I think founders should just be aware that the market's gonna be a lot tighter.
And I think given what we're seeing in the public markets this week, doesn't look to me like it's doing it any better. Right? It looks to me like we're headed for I mean, I called a double dip recession, I think, a couple of months ago. That's exactly what it's looking like. In fact, the Fed basically said as much.
The Fed said that would be just marginally positive next quarter. So we'd bounce back to slightly positive growth on a real basis, but then, you know, expect it to go negative again and you know, recession once all these interest rates kick in. And by the way, I mean, kudos such a mouth for basically calling that, you know, when the Fed just couple months ago was saying that so called neutral would be 3 to 3 and a half percent. Jamath was saying no. It's gonna be four and a half, five percent plus Now the Fed, just in 2 months, is revised to saying that neutral is 4.6% or something like that.
And and they don't think there's gonna be any rate or in
2023.
So this is not looking good.
How much Chamath of the issue here is we don't the the data that we're seeing, the ground truth we're seeing, as you would often say, might be very different than, like, the reports that are coming out, people are talking about inflation from, you know, 60 days ago, job reports that are 30 days old, 60 days old. We don't really have live data it seems like our government doesn't use live data when they make these decisions. Is that -- They unfortunately
well, they unfortunately don't have access to it really. You know, they're they have empirical sampling. But to say that, you know, the the US economy is automated in a way where they can sit in front of some dashboard and, you know, see in real time what the true on the ground data is is is not really accurate, unfortunately. Maybe there's a Manhattan project type, you know, effort to do that at some point for the United States, but it's not now. I'll give you a bit of bad news and a bit of good news.
And this is just me kind of, you know, again, looking at the mosaic and and kind of judging where we are today. The bad news is I think that it's gonna be a really tough sticky time for the US consumer probably over the next 18 months. And so I tend to think that, you know, through the course of this year and through
2023,
and possibly even a little bit of 24, it's gonna be a grind. Unemployment will go back up Inflation will be sticky. Real earnings will shrink. Consumption will ebb and earnings will not be that great. But the silver lining is I think that we are starting a bottoming process for the equity markets.
And I think that by the end of this year or the early part of next year, most of that will be done. And the reason is that, you know, the equity markets, I think, do a reasonable job of 1, looking at the bond market and then 2, looking 6 to 9 months into the future and pricing in that future today And so by the end of this year, beginning of next year, I think that we will have kind of bottomed, and we'll start to build a base The thing to remind us though is that, you know, let's just say a stock goes down
20 50%.
Even if it rallies 50% from there, it's still 25% off from work.
Yeah. don't understand that. And people don't understand that.
--
that fly back up mountain.
So I I would just I would just think, you know, tell people that, you know, I think that David is right, I think that it's gonna we're gonna feel this for a while. It's this inflation, as I've said for a long time, is going to be sticky and persistent. I think you're gonna see fed funds at or breaching
5%.
And But I think that in terms of, you know, risk assets, we'll bottom out by the end of this year, beginning of next year.
Farebert, what are your thoughts? Do you think we're in the process of bottening mount, and it's gonna be a year of this kinda slog through the muck? And what signs are you looking for that maybe we're getting out of it or turning a corner?
I mean, Larry Summers had some good tweets this week. The weird you know, the weird thing is Larry Summers seems to be, like, almost trying to make the case and make certain points because he's not being listened to. It's it's it's so ironic and sad to watch because he's such a thoughtful economist and has such a a a great point of view and experience to leverage here. And clearly, you know, he was bang in the drums last year, and no one was listening, and then he got public about it. And now he's more repeatedly public about things.
The point that he's made, which I think plays into the the political cycle question, which is where the tension arises, is in order to resolve ultimately the inflation problem, you're gonna have to see a significant increment in unemployment. And and so when you raise interest rates, you know, generally purchasing goes down, demand goes down, revenue goes down, layoffs happen. Some businesses go bankrupt, etcetera. So then there's this trickle in the economy of of less people being employed. And when that happens, it ultimately drives A political response, which is, hey, we're losing our jobs.
People start asking their representatives do something about this in congress, and then these programs and these things get passed, which themselves are inflationary. And that's why it's very hard to predict ultimately when and how this all gets resolved because we seem to have an administration that is enacting and embracing inflationary policies to support what they consider to be economic growth and improved employment conditions in this country. and the unfortunate effect of many of those policies is inflation. And then it forces this difficult central bank decision making cycle And so there's attention right now that doesn't seem to have a clear path to resolution that is why it's very hard to to have a clear prediction here. We also have a very significant question overhanging all of these markets related to the price of energy, which is a key input to so many industries and and and drives cost as well as food and also the military conflict in Eastern Europe.
And, you know, we and and and then there's in the financial markets, this big overhand question on what's gonna happen with various countries that may default on their debt as well as China's real estate bubble bursting. So I made this point, I think, a few episodes ago, but there's no easy answer that I can just say deterministically, here's my prediction on what's gonna happen. As Timothe uses the term, I think it's a great term. There's this mosaic of things that are under under consideration right now, and there's a tension between them all. And that's what makes it difficult.
I'm sorry I didn't really answer the question, but that that's that's kinda how I
think about it.
There's a
lot of geopolitical risk.
Yeah.
I mean, we're kind of you know, ignoring what happened this week where Putin basically is putting nukes back on the table. Now I'm not saying that's likely to happen, but I don't know how again, I don't know how this market gets a lot better with the risk of war 3 hanging over our heads. I mean, who wants to enter the market with Adam?
And and
by the way,
the the nukes, just just
to be clear, you know, you can hear certain military commanders speaking publicly about this But in the Russian military playbooks, there is specifically defined actions that can lead to tactical nuclear weapon use in the field. There's no direct indication that these things are going to be used right away, but the as as Saks says, there's, like, this weird, like, turning up the volume happening on, hey. Maybe we're getting closer to a point where if Putin is having tactical failure in this conflict, there's more weaponry he can use that has greater impact, and unfortunately, there are these tactical nukes in his arsenal And, you know, a a guy that maybe has a certain psychology that has as our friends have said, his back against the wall he's not a person who in his career or in his history has ever acquiesced to defeat.
§04Segment 4
Alex Karp was on CNBC. He was really, really sharp and concise about this, which is that, you know, in the west when leaders fail in their objectives, they just get elected out and somebody else takes their place.
Yeah.
But for somebody like Putin, there is nobody to take his place because it's a very 0 sum. situation. And so his actions will, as a result, also be 0 sum. And I think folks
-- He's never acquiesced in his life. And Yeah.
Yeah. We've never we've never really kind of like we don't understand, well, what 0 sum decision making looks like when it comes to stuff like
He needs the Golden Bridge. Right? You can get the give him the Golden Bridge job.
What but what I'll I'll just say 2 things. One is that I think it's been made pretty clear that both India and China will not stand beside Russia if they do something like this. And I think that that is important because they still are the 2 biggest purchasers of of Russian oil. And so I think that matters a lot because you're talking about a lot of revenue that would that would go away. And then the second is I mentioned this last week, and and this may sound dumb to some of you, but don't sleep on the Russian mothers.
And what happened this week -- You're a 100% right on that. But what happened this week was really interesting, which is that he calls up all these reservists. These reservists are not coming from the major cities of Russia. You're starting to see protests. You're starting to see young people say, I don't wanna do this.
Yep. And who's that really activating? It's activating the moms.
Yep.
And so don't sit on the Russian moms
-- 300
people are being drafted, you know, to basically go fight. And I actually think -- But David's right.
Oh, sorry. Sorry. Go ahead.
The question I have for you is do you think I know you don't agree with this. But do you think the strategy is to back him into a corner and then have this, like, rhetoric spike to then force a resolution. I know it's a danger strategy. It's a crazy chess move. But do you think that's actually what the West is thinking?
I see no evidence that we have any intentions of seeking a diplomatic off ramp. I see no evidence that they're looking for it to give him a Golden Bridge like you said.
Then do you think they're trying to break him and have regime change?
I think Biden stated the policy, which is this cannot remain in power. I think he blurted out the truth of his policy. This is a regime change policy. That's what they're going for. They're they are vacuuming corner.
Jacob, I thought that you were right this whole time, which is we're gonna build a Golden Bridge. We're gonna find a way to egress this guy. And I'm now sort of in the David camp, which is I think that the the stated strategy of the Western alliance is essentially to cause him to make such a categorically catastrophic mistake. So as to become a pariah, so as to either get overthrown or or, you know, something. So I I do think that on balance, The risk is now for things to escalate.
Maybe not in quantity, and and I'll use this word in the wrong way, but, you know, quote, unquote, like, the intensity of of it. So I I think David's right. It's a lot of pressure to the economy and to to
So high risk strategy. High risk strategy. There's a
high risk strategy. We got a good thing going over here. I don't see the need for all this risk. So look. And and part of all my math
-- --
the reward. What would you see the reward if Putin was removed? Oh my lord.
Well, it depends who replaces him. What if we get a hardliner? You gotta remember Putin's taken all the Liberal reformers. All that's left are hard line.
Raleigh jail.
So I know I know there's moms protesting in the streets, but he's also under intense pressure from his his right wing. The you know, he's got Hawks on his side who basically have been criticizing him for making this a special limited military operations set of a war. They're like, why did you try to do this with 200,000 troops? We should have gone into heavy with a
1,000,000.
So -- Right? There's criticism in
There's a New York Times article about this. He has his own, you know, military hardliners in the his security state.
His hawks.
So the so he's not just under pressure from peace mix who are protesting in the streets. He's also under pressure from hardliners in his own government if you think he's been too soft.
Yeah. It's a it's a challenging situation. He's and he's he's gonna be seventy years old. How many years does he have left? We need to contain him for a decade.
I
that's my best idea.
Contain him for a decade. I that's my best idea. Contain him for a decade.
The thing I have the most trouble with is if you look at the media portrayal of this. So I said last week when, you know, we had this successful counter offensive. that maybe we'll get what we want, which is Russian morale collapses. They just tuck their toe between their legs and go back to Moscow or maybe you know, the Russians really do see this war as existential for them. Putin sees it as existential for himself, and he escalates.
Well, what happened this week? We went up and wrong on the escalatory ladder. Basically Putin drew down 300,000 more troops, and he's basically indicated his his willingness to use tackle nukes. And he's basically said I'm not bluffing. So now what is the reaction in the American press?
He must be bluffing.
I mean
--
That basically is the reaction. And look, I don't know how you know that. You know, in poker, what you in poker, what do we do when someone might be we put them on a range. It's called a hand range. Right?
Yes. you can't possibly know exactly what they're gonna do or what cards they're holding. So you put them on a range of possible hands. And then you evaluate the story in light of their past actions, what do they do before the flop on the flop? And you you basically come to a assessment of what is likely based on their story.
Now take Putin's story like Friedberg said. He's never backed down his life from anything. He has said this war is existential. You know, he basically threatened to invade, and so he did. I mean, Like, I don't know how you can immediately jump to the conclusion.
This is just a bluff. Maybe it is. But
--
Well, it could still be it could still be a bluff, but then to your point, the range of outcomes does include shoving on the river moving all in
or pick up a Volley. I mean, he's a KGB agent. Do you wanna play the poker with a KGB agent with nukes?
It's Right. And so, Jason, you said throughout this guy's a mad man. Well, exactly. I mean, personally, I think he's more like ruthless mafia boss than and mad man. But But let's say you're right that he is a madman.
What is the story about what we're doing that makes sense if he is a madman? Why would we wanna basically back him into a corner like that? Why wouldn't we give him the the golden off ramp? And by the way, just on this idea that no one would ever use tactical nukes. Let me just give you 3 data points.
First of all, we use them. We dropped 2 atomic bombs on Japan and to end world war 2. We could've won that war without doing it, but we didn't wanna lose the troops.
Oh, no. Wait. Those weren't tactical nukes. Those are just
--
They were tactical nuke sized atomic bombs. Number 2, MacArthur wanted to use 20 to 30 atomic bombs to end the Korean war. He had a whole plan. Truman fired him. He thought he basically had jumped the shark.
But MacArthur was the most respected and admired American in 1950. And the reason why Truman could not run for your elections because he fired MacArthur. MacArthur would have used basically the equivalent of tactical nukes to win the Korean war and his plan to prevent China from reinvading from the north was to irradiate the border so completely that Chinese troops cannot go through it.
Keep in mind, there wasn't as many nukes at time. So we weren't up against 9 different nuclear enabled countries. But -- I
understand, but we had an American commander, a head of our military, who was willing to use Nukes to win a war. So this idea that he wouldn't I mean, we've been willing to do that. And the third example is obviously the Cuban Missile Crisis. This all of Kennedy's military advisors were willing to get to use Nukes. I mean, And the best thing Kennedy did was not listen to his military advisers.
They were all super hawkish. And Kennedy, what did he do? He looked for a way out. He looked for a compromise. He sent Bobby Kennedy to go cut a secret deal with the Russians where Kennedy agreed to pull the our Jupiter missiles out of Turkey if the Russians pull their missiles out of Cuba.
And then he lied to the American public about it because he did wanna be perceived as backing down. But that's the kind of you know, flexibility and mental acuity that I think you would need in a nuclear showdown to avoid a catastrophe. If things do escalate to the point of a nuclear showdown, Do we believe that we have leadership on the level of a Jack Kennedy or a Bobby Kennedy who can basically show the flexibility and adaptability to cut a deal to basically pull us back from the brink.
Yeah. It doesn't seem like that.
What was Biden's response? It was he gave this speech to the United Nations in response to Putin. And it's it's more of the same. It's more of this as I call it the ape Simpson speech. It's old man, you know, yelling at the cloud.
I mean, he's basically just yelling at a teleprompter. Now I think the strategically smart play would have been to say, listen, Putin, you said that you want the people of Ukraine to decide where these territories go. okay, we can hold a referendum, but we wanna administer by the United Nations so it'll have so it'll have some credibility behind it. I mean, why not throw that out there as a potential way to get diplomacy started?
It felt like at theendoflastyear, you guys remember I thought, like, conflict was likely this year. I don't think that the conditions that I was referencing have really gotten better. I think they've gotten worse, and that's why I I think we all talk about this in a in a rational way, meaning, like, how the conscious mind would, you know, debate the merits and and challenges and risks of having a Golden Bridge or continuing conflict. But if you look historically, the US has often been in the middle of or at the tail end of some either recessionary cycle or inflationary cycle when conflict escalated externally.
Wag the dog you're referring to?
I I
don't I don't know if
I would call it that, but I I think that there is an innate human anxiety when things aren't going well, you feel like you have to do something about it, and you're either gonna have internal conflict or external conflict as as a result to try and resolve. When when things are going great, the economy is booming, you don't enter a war. You don't start a conflict with a nation when when people are happy at home, when your constituents, And and, you know, the the unemployment rate is low, and job wage growth is high. The economy is growing.
§05Segment 5
Are you referring to the United States or Russia in this
I'm I'm referring to the US, and I think -- I know.
I was just -- -- curious if you were -- Yeah.
Coming out of COVID and coming out of the the the big question marks that loomed over our economy at the end of last year around inflation, economic growth, interest rates and the effect, and now we're in the middle of the turmoil. Markets are down 30% and in some cases 70 to 80% for high growth markets. there's a there's a inevitability now that unemployment is gonna rise. There is an inevitability now that the economy is gonna contract. leadership is more likely in that scenario to find an outlet, to find a place of conflict, and don't
think I can explain why in this theory. Explain why.
Wag the dog. -- understand the concept. Is that what you're saying, Fredericksburg? Wag the dog?
Yeah. I I don't think it's
a conscious decision. I don't think that it's like, hey. Let's go start a war with Russia because the economy is bad. I think it's this anxiety, the economy is bad, and there's not a lot we can do about it. And over here, on the other hand, there's a problem, and there's something we can do about it.
We can build strength, and we can build integrity, and we can build support, and we can get people to get behind something together. and we can get something to to to create a a driving mechanism to achieve something big.
Like a distraction, you're saying. Yeah.
Yeah. And I I I don't think that psychology is as simple as a distraction or a Wag the Dog or, hey. It's not even as simple as the military industrial complex. We'll see revenue growth and wage growth, and that'll drive the economy. But I think all those things together are true.
And I think in in whole, we're we're more likely to wanna pursue conflict right now than we were even a year ago.
You buy that, Chamath? I think he's more right than wrong. I think that when Things aren't easy. You need to find sort of distractions essentially to -- Yeah.
--
get people to focus on other things so that the core problem isn't as obvious. We have in the United states, I think
yo, let's go create another problem that's solvable.
Yeah. Like, the best I think the best way that I can describe this is I see it is institutional rot. And the more that we're left to our own devices, that amount of institutional decay becomes more and more obvious. our governments don't work the way that they should. You know, our state assemblies are basically co opted by special interests.
the federal institutions we rely on to make rules are not that great. Enormous amounts of money get wasted every day. And as more and more people become aware of these things, It's it just the trend is just so bad, you know. Civic engagement goes down. Everything just gets worse.
And so when you take that and then on top of that, you sit it on a on a poor economy. That is a real powder keg, I think. And so folks like to I think if you're a politician, it's easier to kind of go and and point to Taiwan and say, you know, we're gonna go and defend these folks if there's a war point to Russia and Sylvia's point to all these other things. It's a whether it's implicit as Friedberg says or it's more explicit of a strategy, I don't know. But the underlying cause is the same, which is that if the foundation of the house is not strong and you're not sure what to do to fix it or you don't have the courage to fix it?
The better strategic alternative is to distract and talk about your neighbor's house.
Coming out of coming out of the financial crisis in 2008 2009, Obama recommitted to Afghanistan and sent 17,000 troops to Afghanistan in early 2009 when he took office. We entered the Persian Golf with the gulf war in 1991 coming out of the Great Recession or the the the the the mild recession 1990 to 1991. 2000, 2001.com crash. We, you know, we obviously entered entered Iraq.
Yeah. Well, that was post 9 post 911. But it was also
and coming out of the -- That was that one
was clearly a reaction. Stacked you by this? Do you think this is a wag the dog? Or
-- And by the way, you can do the same you can do the same analogy this on the time we entered the Korean war and the time we entered the Vietnam war, they were both tied to to recessions. And and so I don't I don't know I don't know how explicit this this action and behavior is, but I I I just think there's some data to it.
There was a study that just came out by Tufts University on American military interventions. throughout American history. And what they found was that we had the least in the period before the Cold War. than the second most was from the during the Cold War. But, actually, the most hyperactive period of American military interventions was post cold war.
So since the Unipolar moment, even though it's been the safest period for America. Right? We haven't
--
Explain Unipolar for people who don't know.
that there's only one great power in the system. Before, during the Cold War, it was a bipolar world, whereas basically America versus the Soviet Union, and you had basically had the you know, NATO and the Western Alliance, the the so called free world. And then you have the
-- --
check and bell. -- perceive check
and bell. -- the Warsaw pact on on the other side.
And now we have Unipolar moving to buy
--
Well, it was yeah. We were unipolar for a couple of decades, but now we're moving towards multi polar or at least bipolar with China.
Yeah. Multipolar would be maybe including India, maybe including
India, Brazil, China. In the future. In the future, bud. But so
The the irony is that the safer America has become the more we've gotten militarily involved overseas And part of that is because there's no great power in the system to oppose us. But it's also gotten us in a lot of trouble. I mean, all of these wars in the Middle East that cost us something like $8,000,000,000,000. Another survey cost of war study, the direct number of deaths from these wars from the war on terror is over a million lives lost $8,000,000,000,000. And that doesn't even include the excess mortality caused by the destruction of infrastructure, wastewater treatment you know, Chamath all that kind of stuff, which could be as
high as
5,000,000.
You know the crazy part about that, Saks? That $8,000,000,000,000, if we had deployed that in energy, independence, solar, nuclear, whatever, the whole reason to be in the Middle East was oil and energy, and we could have just deployed that to be energy independent in the west and not had all of this pain.
Not the not the whole I mean, not the whole reason. I think the the reason to be in Afghanistan was to catch some of
the mark. -- of 911 and made protecting
that without taking over the whole and got on this 20 or 18th.
That could have been done very strategically.
I mean, actually that was really proven when well, first of all, we did kill. we did kill Bin Laden in in Pakistan
--
Yeah. -- with just a raid by the seals, you know, in filtration. So we need to occupy that country. And then More recently, we finally got Zoey here in Afghanistan
--
Drone truck.
--
using a drone after we left the country. So what the hell do we need to be there for
--
We don't.
--
for 20 years when we could kill these guys
so obvious.
--
drones and, you know, a helicopter team.
Yeah. This is where we needed to have an adversary who could check our power. It would have been healthier as, I guess, the premise -- Right.
--
to the tough study.
Right. But but look, I think to Friedberg point, is it do we become more militaristic when things aren't going well at home. I I don't know, but it feels to me, like, just in general, over the last 30 years, we've become hyper militaristic. It's the use of military force is typically the first option. And we resort to it too quickly and we don't use diplomacy enough.
And you can see that in just the number of lives lost, the failure of these wars and the enormous deficit we're running.
As you know, sex, I can't stand Trump. The two things he got right, no wars, and he was the dictator whisperer. That guy knew how to talk to a dictator.
You
know? Whether it was North Korea, China, Russia. He he just knew how to bond with them. It was like a superpower for him. Okay.
We have 3 directors ago.
--
keeps us out of war. It's great.
You know?
I mean, it it's literally his only saving grace. Alright. Gentlemen, we have to talk about what's going on in Iran. We have to talk about the Wall Street editorial boards. California.
Talk about talk about newsom because there's a bunch of energy stuff happening in the United States who really think is important.
Alright. So the Wall Street Journal editorial board, which obviously has a side wrote an op ed on California's grid issues. Some of the quotes from the op ed, California can barely keep the lights on as its climate policies bite the electric grid, but Gavin Newsom is undaunted. On Friday, he signed no fewer than 40 new climate bills to amp California's green energy stock shock experiment even as gasoline prices nationwide have fallen to an average of 3.68 a gallon. Californians are still paying 5.45.
A gallon California's electric rates are already more than double those in neighboring states. This is what happens when politicians to eliminate fossil fuels with a molotov cocktail of regulation taxes and renewable mandates and subsidies.
The quota to this is I'll send it to you, Nick. But can you please play the clip as well of Rashida Tlaib trying to skewer Jamie Dimon where he destroys her. That's embarrassing. That was embarrassing.
I mean, we should play it. I mean, it's she made no sense.
Nick, can you play that clip, please?
You have all committed, as you all know, to transition the emissions from lending and investment activities to line with Pathways to net 0 on
2050.
Do you know what the international energy energy agency has said is required to meet our go global 2015 net several targets of limiting global temperature rise to 2.7 Degrees Fahrenheit OR 1.5 degree Cellesys So no new fossil fuel production starting today. That's so that's, like, 0. Well, I would like to ask all of you and go down the list because, again, you all agree to doing this. Please answer with a simple yes or no. Does your bank have a policy against funding new oil and gas products?
Mister Diamond.
Absolutely not. And that would be the road to hell for America.
Yeah. That's fine. That's my, sir. You know what? Everybody that relief from student loans has a bank account with your bank should probably re take out their account and close their account The fact that you're not even there to help relieve many of the folks that are in debt, extreme debt because of student loan debt, and you're out there criticizing it.
My favorite was when she said Solicis.
§06Segment 6
That was yeah. I was like, okay. It's just so much theatrics.
Brescia Taleay represents the 13th district Congressional District in Michigan. The the median age in that district is thirty five point nine years old. The 2020 poverty rate is 28.2 percent, so more than almost 1 in 3 people. And the 2020 median household income is
$37,601.
So, you know, she represents a a a group of people that, you know, I think at best is lowermiddle class. And the idea that she doesn't even basically understand what would happen in her district, if you actually did not have cheap LNG, again, just kind of speaks to the institutional kind of decay in Washington. She is not the person that should be advocating for this. Like, you know, it's districts like this more than any other that don't have the money to spend on, you know, very expensive solar installations that cost $340,000. These are the districts that need coal, coal fired plants, LNG, oil to keep going to sort of minimize the impacts of inflation.
And so, you know, that was just like a grandstanding moment. Moving to California.
--
hearings because, Shamal, these are important discussions, and they've become theatrics and This is a chance to educate the public with some charts and data.
She's either so hungry for power that she actually doesn't care about her constituents or she's scientifically and numerically illiterate.
That's, I think, the latter is probably the issue here. And so this is
this is what's such a shame. On the on the on the other side, you know, at the end at the at the other end of the coast in California, The cost of power generation, just so you guys know, has fallen by 90% when you look at renewables. And that is because of a good job that the federal government did in introducing subsidies that essentially gave the the right sets of incentives for people to build this infrastructure. But while the cost of generating renewable power has fallen by 90% to you know, virtually, it's on par and it's cheaper than any other form of generation. Your electricity costs have doubled and are probably going to double again in a state like California.
So we're cagering our our our utility rates by, you know,
7
to 11% every year. That is unsustainable in California. And what do you have? You have, again, a different version of the same flu that Rashida Tlaib has, which is you run forward to kind of Virtu signal and to try to do all of these things, you don't spend enough time to really understand what's happening on the ground and you make it impossible for people to make the decisions to actually be resilient for themselves. At the end of the day, there are tens of utilities in America.
but there are a 100,000,000 households. And the only path to energy independence is to get every single 100,000,000 household to be resilient, which means they need their own solar panels. They need battery storage. They need their own potable water. and all of these systems are now affordable and available.
And now the federal government with the IRA has created the financial incentives to pull it forward. So I don't know. I I just think like this is a hugely stark reminder about how poorly our energy policy has been managed. And if you leave it to the hands, of the progressive left, they will do things that don't map to what people on the ground actually need. People in California, most people in California, cannot pay utility rates that are going to double every 6 7 years.
Just like people in the Congressional 13th District of Michigan, cannot afford to pay for solar if Rashida Tlaib is able to get, you know, all these banks to not finance LNG, colon, and and other forms of hydrocarbons as a bridge fuel
--
Yeah. We have to
we have to look at all forty of these bills independently, and you have to Think about
any bills? I mean, who's reading these things? What is in these things?
I mean, each one has to be addressed individually. Like, one of them could be to help people put solar panels on top of schools and batteries in there. That could be a good bill. But there definitely needs to
We have that mechanism at the federal level. The IRA passed an incredible set of incentives both for the producers of these things and for the for the end companies that actually deploy them. Yep. And so we've solved that problem. You know?
So I I just think like it just goes to show you a ton of regulation does not actually add and get to the solution that we want. The government will not solve your problems. I hate to be the bearer of bad news. But they are going to make things more complicated. and more expensive and the resilience that you expect out of your utility infrastructure.
By the way, we saw just what happened last week, there was a massive fire and a massive battery installation that California installed a 182 gigawatt system megawatt system Could you imagine if that had actually lit on fire 2 weeks earlier in the middle of this crazy heat wave that we had? So even even utility scale renewables, are very complicated projects to undertake.
Look at Texas. They I mean, people are dying there because the grid keeps going down.
It's It is much safer and more reliable if is if if every homeowner in the United States took responsibility and and used these incentives, to basically become your own little virtual power plant, and you will
--
Technology is there. I mean, the people are getting generators for natural gas as backups. we're gonna have to figure out how to take the load off the grid and build resiliency into it. I don't know if you guys saw in a related story. All this ESG stuff is kinda coming to a head, but Dobert got canceled this week in, like, 200 newspapers.
Did you see this? What?
Yeah. How's that possible?
Well, because he's been going after ESG, in his cartoon. And so I'm interested in your take on this. But here, I don't know the characters in Delbert except for Delbert, but he says this person who's in charge says, our ESG Swarer will drop if we open a new factory that adds CO2 to the atmosphere. But we can balance that out by adding more diversity to our board. And I guess the cat says, how much CO 2 do you plan to add?
And he said 199 binary board members were. showing the e s and the g being put together makes no sense. But that that panel obviously got him canceled.
What what does he mean he's canceled? Like, he was fired from national newspapers?
I think one of the a a 177 newspapers because they're all part of chains now. I guess some of
the -- Because of that cartoon?
That cartoon plus, it's like a series going after the social governance part of, you know, environmental and pointing out he stated on his podcast that he wants to kill ESG. So this whole ESG debate, he's trying to further it. But I guess that yeah. Well, he
I mean, the the concept of ESG makes a ton of sense. I think the problem is that it does implement This yeah. This version 1.0 implementation was financialized by people that have no care about ESG at all. And so all it's done is create complexity and consultants and, you know, studies
-- --
sense or it doesn't make sense?
No. The words. e, s, and g make -- Right.
--
a lot of sense.
--
commas or periods between them, I guess, is the question.
That's fine too. But my point is saying that you want, you know, Diversity, and you want sustainability, and you want better governance.
All good. All of these
things are really great ideas. It's just that in this first implementation, it got financially perverted. Mhmm. And so what you have are folks that are, you know, probably not the best positioned or should not really have an opinion about ESG opining about things that they never were given the authority to opine on. And then as a result, what it's really created is a cottage industry of consultants that can basically make, you know, 100 of 1,000,000 of dollars writing all of these reports, and I think that that's why this implementation doesn't work.
So ESG today is broken, and I think it's largely meaningless. The concept of what people want is is a very good idea. We just need a better way to implement.
I agree with that. You can't connect these things. The we're gonna put social and governance with environment. It's all that's gonna do is hold back the environment. Right?
Saks Saks, we're having all of Fed beef tonight. Oh, this is -- -- lateness. You need to try it.
see what I can do. No.
You have to do it. You have to do it, Saks.
Okay.
Once you have to say Saks, commit. No bullshit anymore. Saks.
You cannot imagine what does a beef look like that has been only bad green olives. Pitted green olives at that. I can tell
you I can tell you how it looks delicious.
Is it green?
It the most delicious steak you've had in your life. Exactly.
--
do. Alright. I'll come for that.
Okay. Great. It's incredible.
Awesome. -- gonna drive me with your driver?
Text me your address so I know where to get you.
Oh, I love it.
Oh, this is gonna be great.
Game on. Listen to this line up. Me, Jakal
--
Friedberg, Saxx, It's flying it. This thing this this game is gonna chop up. This game is gonna
--
No more flip.
the flips are ridiculous.
Okay. You know what? Now now that Saks is coming, I'm gonna tell him to break out the early white truffles. What? I'm just kidding.
You're sending me truffle pig's book.
Not not just walked to my office. She looked at me when I said white trouble. She's like,
4
bestie dinner. It's happening, everybody.
Oh, it's happening. It's happening.
You know what I saw was Hellmuth the other day on one of his heads up matches where he got in that huge fight with that guy. Did you guys see that? And he called the guy -- -- match. You just described every she's ever -- This was, like, some heads up thing. And the guy had flopped some insane I think it was, like, quads or something or and hellmuth had, like, pair except the top pair.
Yeah. Yeah. Yeah.
And Helmut folded on this guy. It was incredible to watch the play. Like, the read from Helmut was unbelievable. He is incredible. He is a freaking female on that guy.
He's pretty great.
He's got unbelievable -- -- why?
-- reason he's the greatest poker player in the world. He really he his reads are unbelievable.
Do you think that what percentage of it is obviously, he is an incredible player. But there's another piece of this that we all see, which is people play into him. They to be in a hand with him. They want to bust him. So in those tournaments, what do you think?
No. I think I think what's happening is at the highest level, there's, like, all these people that have gone in this one direction. And by the way, this is probably a good we could talk about chess in the same way, which is that you have these solvers. Right? There's poker solvers, and now there there are these chess solvers.
And the young generation spends all this time training on the solvers so that they know every permutation of every move and what is what people call game theory optimal or GTO. The problem with GTO is that you can actually be very exploitative against somebody that's actually playing perfectly Because the AI is perfected around what is the rational set of decisions in every spot. And so you can set people up to make a lot of really bad mistakes. And I think Halmuth understands that. And so because he is one of, like, this dying breed of people that plays live He's able to just be so exploitative.
§07Segment 7
And these folks that are basically playing from broke memory. Right? what is the GTO move in every spot? They end up making a bunch of mistakes and and feeding chips into him. And so I think like it's it's probably the same as as sort of this Magnus Carlson.
He kind of knew what to expect from people And the minute this get deviated into this realm where you were like, how could you make that decision? Probably because, you know, the the computer AI is able to calculate make a slightly losing move now, 3 moves later you're gonna actually be ahead. It caught him off guard where he was basically like I think this guy's cheating. really, really crazy. But I I think, like, if you if you have a bunch of GTO kids, folks that are a little bit older that have been playing, in a live situation can be hyper exploitative.
By the way, this is a good point generally about about this gaming is that computation has played and computers have played such an incredible role, it almost becomes questionable on how much can the human really differentiate anymore in these in these games and in these systems. You guys watch the the chess players on YouTube, and they'll have solvers live, and they'll be getting live scoring as they kind of walk through a map or walk By the way, Friedberg area,
that's that's the same with poker. You have these huds, these heads up displays. And a lot of the poker sites have basically given up they try to spot the cheating.
And -- You can't. --
and it could could because you have this basically layer that's helping you, and it's effectively impossible. Because, you know, the these things run locally. They're screen scraping locally, and you just have no idea, except when they make moves that are just so unpredictable from a human and could only come from a from a from a machine,
ultimately, all yeah. All games maybe become obsolete because there is no real way to qualify the performance of one human against another when the AI itself or the technology or the computing itself you know, overshadow human potential and human capability.
You guys may not know this story, but when I met Demus the the the founder of DeepMind. I got introduced by Teal, like, in 2011 or 12, so like a decade ago. And I met him in London. I'll never forget this at the We were having breakfast at the haunted hotel. And he explained to me deep mind in the context of the game because at that time, how they were building the first versions of the AI was perfecting how to play certain video games.
And I can't remember the name of the video game, but it was one of the famous first person shooter games. And the whole idea there was, like, you know, if you can perfect an AI that that basically plays GTO and can win the game, what you've effectively solve for is is like a a layer of AI that can then solve other generalized problems. I was blown away. I thought this is the craziest thing I've ever heard a decade ago. So it's it's pretty natural that they've taken this stuff and adapted it to meet every game.
It's a little sad though too. No? Don't you think?
Yeah. Yeah. But, I mean, maybe there's a different per model of performance for humans that really changes what the gaming is. Right?
Well, all major.
I I don't know what it is.
I mean, I think that these games themselves completely, you know, the the the intent of a game which is to measure one's kind of decision making abilities gets obsoleted because the software ultimately is a better decision maker than the human. So the question then is what is the human going to rise to that creates a new playing field? And I think there's probably elements creativity and actually using the software to become part of the game. It opens up a whole new opportunity for what gaming is. I mean, we've been talking about a little bit about video games.
but you could see artificial constructs in gaming that arise from the human interacting with the computer and then creating a new sort of playing field in in gaming.
Yeah. Saks, what do you what do you think about all this? You're a big chess player.
Yeah. I've been following it for the last couple of weeks. It's obviously been the big story in the chess world. What basically happened is that a couple weeks ago, Magnus Carlson lost that game to Hans. What's his last name?
Neman, I think.
Neman. Yeah. Exactly. And the next day, he pulled out of the tournament. This is the Singfield Cup.
And he's never pulled out of a term but before everyone was sort of speculating as he's sick or have COVID or something like that. And then he tweeted out a video from some soccer coach saying I can't
--
Was he greedy? -- get in trouble. Yeah. Yeah. He'sivering.
Yeah. So, clearly, he was in a passive aggressive way of making an accusation. And then he doubled down a few days ago. He was in another tournament and he had to play Hans. I keep forgetting the guy's name.
Hans Neman.
Neman. Yeah. He had to play it, and he resigned on move too. So, basically, he doubled down in his accusation. He won't specifically say what leads him to believe that this guy is cheating, but he thinks he is.
He's he's a young player. He's something like
18,
and he's had a pretty mediocre rise in the world. I think his ratings gone up a couple hundred points over the last 2 years. It's the fastest rise in just rating that anyone's ever had before. it's been the case that players have and young players especially have risen quickly, but this is it's a pretty It's it's the biggest line that does happen. Well, that's the thing.
So the the issue is that it's easy to cheat in online chat. But in over the board, you would either need to have a device or to be signaled by somebody in the crowd. You'd need human assistance or the assistance of a device. It almost be like, you know, a casino or something where they're using the contraption
--
Yeah. -- on the guy's leg to signal, you know, to information to him. So nobody really knows how he would have done it. And, of course, he wasn't caught doing it, so he can never prove that he wasn't. So there's just a real question here of
--
But they did make some changes after after Magnus Carlson resigned. They put the feed on a 15 minute delay You know, I I think, like, at some point, you're gonna have to start wandering people and having them go through a metal detector.
Yeah. They're gonna have to toughen all of the anti cheating standards.
1
of the grand masters was like, we should play naked in a locker room. So Yeah.
There was an online site that basically offered to pay Neiman a lot of money to play basically naked to prove that he could, you know, really do what he what what he's been doing. The the theory on why he's not cheating and and the rise is justified is that in theory, this is the argument is that he's grown up learning from all these neural nets, these not just chess engines. The 1st generation of chess engines were like Stockfish. They were just computational machines that were programmed by humans with thousands of rules on how to play chess. and then they could just crunch the lines better than a human could.
More recently, thanks to deep mind, it's a whole different type of machine. It's basically these neural networks. where all they're programmed with are the rules of chess. And then they it plays thousands of games or millions of games against itself, and it learns the best way to play chess. And the the neural nets play in a whole different way than the than stockfish than the pure engines.
The the engines display like a human that's able to calculate really well. Whereas the neural nets do things like there's
-- --
mean, their sacrifices for they a human would never make.
Yeah. They'll make they'll make sacrifices for just for peace activity. So you know, normally when a human makes a sacrifice, they they'll recapture the material within a few moves. Whereas, deep mind will sacrifice a pawn and you know, just for the positional advantage or for the piece of the increase in
-- Which doesn't show up for many, many moves. Right.
Exactly. It's exactly.
And so the ability to model, like, 12 moves out is is really but that's that's where I
think people thought that Magnus picked up on something because it's like those sorts of moves are rare in the absence of some layer of intervention because, typically, it's like, you know and Saks, you know this much better than I, but it's like, you know, the opening and the closings of all of these chess matches are so tightly regulated. There's not a lot of creativity. It's sort of in the mid game that you have these slight positional advantages and disadvantages. And so I think it was amplified that one of these positional sacrifices made no sense in the context of that game unless You have the ability to, you know, think really conclusively about 6, 7 moves from now. By the way, it's the same it's the same thing in poker.
So there's a thing if you guys wanna download it. It's called I think it's called Poker Snowy. That was like the first layer of a pretty basic AI, but it's gotten better and better. And really what it allows you to do is in every situational spot whether it's heads up all the way to a 6 handed ring game, you can really understand you know what to do. Now poker is meaningfully more complicated than chess as it turns out because, again, you have you you're not playing against one player.
You're playing against some umpteen number of players you know, we don't know when each of them is gonna step into a pot or a cherry pot. And then there's all of those elements. So it's a little bit more complicated to build a true kind of like neural net around it. But even still, you can kind of get a sense of of what you should be doing in different spots. And what you see is that there is literally like trillions of actions.
And so it really is impossible for a human being to really memorize In every single situation, what the true, you know, probabilistically weighted GTO optimized move is gonna be And and so this is why I think a lot of people, I guess, led by Magnus was saying, how could you have known this unless you were aided by something?
Pretty clear that this guy cheated.
It's pretty it's I mean, it's what's what's profound is that mastery of the game may not be achievable by a human. but mastery of any one of these games may actually be achievable by neural nets. And I think that's what's really frustrating to Magnus. and to other top tier players in the world that are the best humans at a particular game, is they're now realizing you know, that they really aren't the true masters, that the true masters are the neural nets. And more than just the guy cheating, which may feel like bad sportsmanship or whatever, Fundamentally, One T Go being built entirely on one's mastery of the game and being the best at the game is fundamentally challenged because a computer is better at the game than you.
§08Segment 8
It's a really profound moment.
That shouldn't be
I think I
think that that shift sailed a long time ago. Yeah.
So I
I mean, I know that Ches went very well, but it was -- Right? Yeah. Well, no. It was so it was way back when remember when Kasparov played Deep Blue
-- Deep Blue. -- which is the IBM.
Yeah. That was the first -- Which
wasn't even a sophisticated neural net. That was just a almost deterministic model. Yeah. Was it terminated model system here? --
like Stockfish. It was just a number cruncher. And that was when computer intelligence and chest tip to be able to beat the world champion. Since then, there's no looking back. I think every human who plays in the chess world understands that computers are better and there's no way for a human to be better than a computer.
So It's certainly not a a neural net. I mean, Magnus certainly knows that. I don't think anyone's bothered by that. I think that everyone understands that humans play in a certain way and their goal is to be the best human. I think the concern is just obviously if a human, it gets aided during a game by computers.
But the way that chess works now, the preparation is all about working with computers. These top players spend huge amounts of time researching openings and looking for novelties in openings using computers to help them do their research. So you know, working with computers has now become an integral part of the game. It's kinda like, you know, in many sports where the technology has enabled the athlete to get better You know? And and it's really technology becomes the key vector of competition.
This actually happened in the NBA. This happened in the NBA where there's a a space technology for 3 point shooting and your form, etcetera. And the Knicks actually and a couple of other teams implemented it a couple of years ago. And you saw the higher team became better at 3 point shooting. So people who were, you know, 200%, 300%, you know, moved up 10, 20% each.
But this kid is clearly cheating because he's cheated in the past. And people who cheat in the past cheat in the future is my basic belief. So this guy Neiman Public admitted that he'd use electronic devices to cheat when he was just a kid on online games when he was twelve to sixteen years old. So then the question is,
like no. But Jason, it's worse than that, I think, because then chest.com came out and said, actually, the cheating was more rampant than just those 2 incidents.
Their algorithm determined it. Yeah.
Yeah. definitely cheating. So why are people playing with him?
Well, because he said that
--
A live date. Yeah. He said that was those games were not for money, and He was his grandpa was reading fast, and
he was -- It's like the poker guys who cheat. You you and what if you're a poker guy and you've cheated before, you never play with those players again. They're they're cheaters. It's obvious. And
they could just
issue well, the issue here is that this was an over the board tournament where the the one that Magnus pulled out of in order to protest. So the question is how could he have been cheating.
Right.
Now I think what what adds to the complexity of it is that you have to remember that when you're dealing with a player, Look, if if it was us playing Magnus, we'd need to see on every single move. But if you're a
26
or 27100 player, And, you know, Magnus is at 2860 or something. The higher the rating, the better in chess, called the Elo. But any event, if you're, like, a 26, 27100 player like Niemont, you only need help with a few moves in the game. In other words, if you could get a tip at a critical moment of the game, that might be all you need to put you over the top. You wouldn't need to in other words, to beat Magnus, you wouldn't need to cheat on every move.
You could just if you just cheat on
2
or 3 moves at the right time
--
Right.
--
that could put you over the top.
So something could vibrate on your leg four times and then two times over to tell you which piece to move.
That's what they were saying, Jake. Like, he had, like, a vibrator in his, like, what made a shoot?
Where was the vibrator? In his shoot.
there was a meme that became, like, a whole thing where it was, like, he had something in his butt or something. He had a vibrator
in his chest computer and an email chest computer is what you're saying.
Okay. In fact, look. That's not real. Somebody So someone
made it yeah.
And then it became
Somebody did a Reddit post saying that he was being communicated with through vibrating anal beads, and then that went final. Elon tweeted it. Although, I think he deleted it. Look. The it's absurd, but the point is, there is a question of how would he have done it if he did it.
And there have been cases before, though. People getting caught Yeah. If you'll getting caught going to the bathroom and then, you know, checking their phones.
Yeah. There's a there's a grand ballgearing Grand Master. He got caught in the bathroom checking his phone, and Oh god.
Metal detectors on the way in, and they have RF detectors in the room. Right? So they look
for -- Now
they have any sort of communication. I think -- -- that going into this event?
You just could have nobody watching why. No. They did it. I'll make it a half hour delay.
They the the Springfield cup added a 15 minute delay after these accusations. So, yeah, I think there's gonna be there's gonna be more precautions, basically. But we still haven't heard from Magnus what made him think that there was foul play here in this particular game, and
he's been very
reluctant to he won't say anything. It's it's sort of passive aggressive. Now the full side of it is that Magnus Carlson has been the number one player in chess for over a decade, and he's a very classy player. I mean, I don't you know, everyone's Never heard a word said about him that, you know, was now he can be cocky. He can definitely be cocky, but he's a very classy player.
So I just don't see him doing something like this lightly. So that's what's so -- Dramatically.
--
to understand about it. Dramatic is, yeah, it's really hard to understand how Neman coulda cheated, but also Magnus doesn't seem like the kind of player to just make a wild impulsive allegation. So this is why the chess world's has been really roiled by this.
Is there, like, a any kind of equivalent of, like, PED scandal here? Like, people taking Adderall or provigil or any other kinda nootropics to to get an edge?
No. I wasn't doing service. So -- There's
a good documentary. I think it was on vice. on how a lot of the top chest players actually get ready for matches, and they're incredibly diligent about their sleep, their workout routine, alcohol. They do take supplements. I forgot who made the documentary, but it was actually incredibly intense how physical these people are.
Well, like, one game of classical chess can burn like over 2000 calories or something like that, like the amount of
--
Wow.
--
of calories that get burned just by using your brain so intensely.
Adderall Adderall is rampant in the poker community, especially in tournaments. So when you play the the higher tournaments and I played them and I just kind of step in and And it's I felt very underpowered relative to the to the kids I was playing with because they were all on Adderall.
Well, they're these are 12 hour requests.
10
hour sessions over 12 hour sessions.
It's exhausting. It's really, really physically exhausting to play. That's why I stopped playing tournaments about a decade ago. I just couldn't sit there for that long.
It can't justify the time suck of it too. It's like
It's just so it's just so physically and emotionally demanding to be able to play that well and make no mistakes over 10 hours. And so, you know, the only solution that all these kids would turn to was was Adderall. And I was like, this is not worth it for me. So I stopped I stopped playing in tournaments, and which is too bad because I I thought, like, I could have a real chance of actually doing reasonably well in some of these things, and I just gave up. By the way, the other thing I wanted to mention is there's there's been, like, cheating in all these other kind of sports, and it always gets exposed like whether it's, you know, the Tour de France.
It turned out that everybody was using PEDs or you know, the Russian Olympic team, everybody was using PEDs, New England Patriots stealing signals. Yeah. Alright.
Listen. Let's just talk about the Iran protest for a moment. Iran has shut off Internet access Internet access in parts of Tehran and blocked access to Instagram and WhatsApp to try to stop the protests, the protests started after the death of a twenty two year old, Kurdish woman, while in police custody, Masa, Amini was detained on September 16th for allegedly wearing a hijab, headscarf in an improper way. She later died in police custody, and activists are saying she suffered a fatal blow to her head. And now you have 15 cities with very large crowds.
Women are burning. Their heat jobs and It seems to be escalating at a a pretty fast pace. Iranian authorities are denying that they had any part in her death. Thoughts on this? It's horrible.
Yeah.
I wish them well.
If you look at the demographics of Iran. It's pretty amazing how many young people there are here. This feels like a country that could turn over.
That'd be great. And you wanna know why it has a chance of working because we're not the ones behind it.
I mean, absolutely. Yeah. We we cannot, yeah, run the revolution. The revolution has to be done, but to the women and young people of Iran protesting, you have our support and we're rooting for you. And don't let the bastards grind you down.
Alright, everybody. for
David -- For got her name for -- Did you forget her names? No. I'm just
I was gonna try to come up with a new name for Rageburg, like, Freight
Burger, and all his rage.
-- David Plainview.
Rage Burger. Rage for Rage Burger, Plainview.
Rage Burger, plain
the David, the dove, and the host with the most, Chamath Polyhappatthia. I'm the world's greatest moderator.
We'll see you so excited to see all three of you. Honestly, big hogs. Don't flake. I love you guys. I really wanna
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Don't flake. Sacks. Don't grow up in a fall.
We gotta we should roll down together.
Let's roll, baby. Big game.
Alright. We'll tell you
--
Love it, guys.
--
results in the game.
Love you, best in the spot. We'll let your winners ride. Rainman David Sachs.
And it said -- We open source it to the fans, and
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besties are
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We should all just get a room
and just have one big
huge door because they're all just useless.
It's like it's like sexual tension that they just need to release that mountain. What?
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