Trump Takes On the Fed, US-Intel Deal, Why Bankruptcies Are Up, OpenAI's Longevity Breakthrough
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§01Bestie intros: The Moose is loose at J-Cal Ranch!§02All-In Summit updates, Jason's new program§03Trump vs the Federal Reserve: Is the Fed partisan, what should a modern Fed look like?§04US-Intel Deal: Sustainability, China comparison, could deals like this save Social Security?§05US Sovereign Wealth Fund§06Why corporate bankruptcies are trending up in 2025§07OpenAI's novel LLM-based approach to longevity research Join us at the All-In Summit§01Bestie intros: The Moose is loose at J-Cal Ranch!
Oh, look at that.
Sorry, guys. You got a little visitor. Moose. Hey, buddy. The moose has landed.
Oh, he's up on my desk. Oh, why is your uncle Jason?
Let's see that handsome face. There he is.
There's the moose. The moose is loose. Let's see. So I do a side by side.
What a handsome visage.
There it
is. There's no good stuff.
That's a stately animal.
Come here, buddy. You ready for ranch time? Alright. Get him out of here. Get him out of here.
Gotta show the prediction.
Let your winners ride. Rain man David Saxon. Here we go. And it said we open source it to the fans, and they've just gone crazy with it. Love you, West.
Queen of kiwap. I'm going all in.
§02All-In Summit updates, Jason's new program
Alright, everybody. Welcome back to the number one podcast in the world, the all in podcast. We're back. We're back. It's the original crew.
You got your classic. You got your classic. And speaking of a classic, Freiberg's been tearing it up. What an amazing event we're gonna have September in Los Angeles, the fourth annual All In Summit, allin.com/events. And now comes the incredibly awkward moment in the program, David Sachs, where we see Friedberg attempt to do an ad read.
I'm gonna let him just try to do the first one, and then I'll interrupt him and say, let let a professional handle it. But let's give a shot here. Let's see how Friedberg does with his uncomfortable promo.
These are not your typical event sponsorships. Every summit partner is building an insane activation. Alright. Stop.
It's it's terrible. Three two. Okay. Alright. Oracle's coming, and they've done an amazing job.
They're gonna build out this amazing bar in the Expo Hall drinks on our friends at Oracle. Yes. And they're gonna be sponsoring the PE and VC dinner as well as the AI infrastructure dinner. We have all these bird of a feather dinners where you can meet people in your tribe. Our friend, Jeremy O'Leara at Circle, he's also supporting it.
He's building out a huge teched out networking lounge right in the heart of the event. And Circle and BVNK are also partnering to sponsor the Stablecoin dinner. Jamath loves his Stablecoins, he'll be there. And iRen, they operate data centers powered by my favorite, renewable energy. They're putting on the CDACO.
That's right. You're gonna be at that. Yeah.
Absolutely. Me and my pal, Chris Wright, are gonna go there, and we're gonna be in the solar tent, and it's gonna heat up. Yeah. And we also have how crazy is this? BVNK.
It's not enough they're doing the stablecoin dinner with Circle. They're gonna build out an arcade in the Expo Hall so you can get
some We have to have a competition. You Do you wanna do a arcade showdown? What
do you wanna do? You wanna play Stargate, Tempest? What are gonna
Whatever they have. What's your game?
Tell me your game.
You and I, we'll see. Street Fighter two maybe championship edition. We'll do a one v one ten k, you know, two out of three. I feel like I'm
getting angle shot here. Did you, like, did you write the code in that? Did you write the emulator?
We rented the arcade for my bar mitzvah, so I played a lot.
That makes sense. Yeah. Yeah. And all seven people showed up for your bar mitzvah. What was your bar mitzvah like?
I we was in the backyard. We had Street Fighter two was the arcade. That was kind of the highlight. It was in the backyard. I didn't have a fancy thing.
That was the big deal. We got to rent an arcade.
Your mom rented an arcade game. Yeah. That's like a big deal, and you didn't
have a pool. And then but, you know, but then we had it in the the backyard, and that was it. It was pretty chill.
Very nice. Yeah. Very nice. Alright. Well, David Sachs is with us again.
Your bar mitzvah, Jacob? I'm from Brooklyn. We didn't have any of this stuff, man. You know what we have for our birthday parties? You had a choice.
Pizza, bowling, or both. And, basically, we rent a bowling alley, get a couple of lanes, get a couple of pizzas, and, yeah, you're can invite a dozen of your friends, and that was fun.
It was fun. There you go.
And after that, we we robbed some stores and tagged some tagged the train, some petty crime. So very basic. Yeah. How about you, Sax? Did you have a bar mitzvah, Sax?
What was your theme in your bar mitzvah? Was it Reagan? Was it Reagan? Bush was your theme? What did you have as your theme, man?
The Reagan bar mitzvah?
No. I mean, when would this have been? This has been 1985, I guess.
Yes. As a tribute to Richard Nixon or was it
I wasn't involved in politics back then.
You weren't into politics yet?
I was not. No. I didn't know anything about it.
When did you get the political bug? Was it in Stanford when you
Poly Stanford. Yeah. They tried to shove political correctness down our throat, had a negative reaction to that. They created a reactionary. Kinda like this whole gen z.
I mean, if you look at the polling, this generation of kids are like super conservative because it's a big reaction to wokeness being shoved down their throats.
And they're total squares. They do not like to do anything that is on the margin in any way unethical or a hack. I have my daughters. I I I pieced off the, maitre d to skip the line. My daughters wouldn't I they wouldn't let me hear at the end of it.
And I said, what do you think the maitre d is there for? What do you think $50 bills are for? They they designed the 50 to get a table before everybody else.
Like it was inequality? That it was unfair?
They literally gave you know, everybody else is waiting on line, and then you went to the front line. You gave the woman $50, and she sat you immediately. That's not right. There's other people who can't afford to do that. And I said, yeah.
That's their problem. Work harder. Important lesson for me. I don't know what I told them. How are you doing, Shammoth?
You're back. Shammoth, you're back on American Soul. Back. I can tell you're back. Really?
How's how's your how's your decompression? You did a decompression stop in Vegas or something. How did you decompress? Did you stop at, like, Loropiana and do a decompression stop, or what did you do?
No. Nat and I went to this island last week, which is between Sicily and Tunisia called Pantelleria. It's an incredibly beautiful island, but she got really sick. So we didn't have much of a vacation last week, actually. When I was posting from there, she was she was not well at all.
And we were gonna consider flying home early, but then she got better. Then we went to Milan and decompressed for a few days and packed her bags and came home on Monday. So
Do a little shopping in Milan? Good shopping in Milan. No? You're you're all
gearing up. By the way, by the way, let me say something. Nat and I bought a pair of Ons. Do you guys have a pair of Ons?
I've I've resisted. You're talking about the fun on running shoes.
Yeah. Yeah. We bought the we bought the walking shoes. I I and I walked all summer. These shoes kick ass.
They're really good. I'm ditching all my Nikes.
Ditching your Nikes for on running? Yeah. On cloud is actually technically
Yeah. I think I bought, like, the Cloud Monster, I think, or something like that.
Very nice. And use the
promo code comfortable.
Use the promo code, and you get 15% off on your
If my friend Roger Federer is listening, which I know he does from time to time, I would love to help on.
Oh my god. Hold on a second. He dropped that, Chamath. Here's the name back. This guy's name dropping on the pod.
You know, he did a great deal with On. He got, like, a bunch of equity, and he helped build that business. He deserves all the success in the world. He's a he's a phenomenal human being.
A lot of brand extensions going on. My friend, Ben Stiller, I was talking with him this week. I'm sorry. I dropped a sorry. I dropped another name here.
We got back on the I
was talking to my friend Ben Stiller. He's doing you're gonna love this, David. Stiller's sodas. He's doing his own soda brand. So we did a little powwow.
Little powwow.
Ben Stiller.
The comedian. The comedian, the actor, the genius.
The Jewish Tom Cruise? Wait. Wait. Wait. Was that guy?
I haven't heard that name in a long time. Is he still relevant? No.
The shot's fired. Shots fired.
Oh, Jason, you had an announcement this week you wanted to make?
I did. We just sort of soft launched that we're gonna be bringing founder university. It's one of the things I do in my day job is invest in startups. So we created this founder university. We do it here in The United States.
But we had a lot of interest to bring this course on how to build companies, around the world, and we decided our first city would be Riyadh. So we will be bringing our founder university along with Sonabol, which is the leading venture firm in the region there in November. So I'm gonna be spending a week there, and I'm really excited about it. If, anybody's starting a company and you wanna come, just go to MENA, M E N A, .launch.co, and you can apply. But, yeah, I'm really excited.
And then we're gonna launch it in Asia next. So we'll have it in three cities starting next year.
You take equity in the startups that they start? This is like YC?
It's, kind of a pre accelerator. So what we do is we most of the teams are not incorporated yet. Some are, some aren't, and we teach them how to do that. And then some of them, like, tax GPT went on to Y Combinator or they'll go on to our accelerator or another one. And when we watch them work for twelve weeks, we will invest in maybe 10% of them.
So we don't have a fund in the We're obligated, but
No, they're not obligated. Like, you obligated.
We just do it to help the community and get more startups built in
But that must be good. So it sounds like it's deal flow for you too. Right? So you get to see the companies?
Yeah. What happens is couple thousand people apply. Uh-huh. And we meet with half of them on a Zoom call, and then we accept the best. And then we invest in the best after that.
So it goes from, like, 5,000 people applying to 50 people going to 10 of them we invest in. So, yeah, it's a filtering mechanism. Okay. So lots of stuff going on here, and I think the number one story remains that Trump is still fighting with the Fed. They say you can't fight the Fed sacks, but apparently, president Trump is fighting the Fed.
§03Trump vs the Federal Reserve: Is the Fed partisan, what should a modern Fed look like?
You remember he was threatening to replace Jay Powell when he did the site visit and all that drama. Well, Trump recently fired one of the members of the Fed, governor Lisa Cook. And you remember he called Powell, too late, stupid, numbskull, all these great adjectives here. But breaking as we're taping this on Thursday, Lisa Cook has officially sued the president, arguing that the White House has no authority to fire her. And to just give a little background before we get everybody's opinions, she's one of seven fed governors.
The governor's vote, obviously, on the rate cuts. We've talked about here, maybe they were too late to raise rates. Maybe they're too late to cut rates now. Big debate going on. She was nominated by Joe Biden in 2022.
And two weeks ago, the Federal Housing Finance Agency director accused Cook of mortgage fraud, claiming she had two different homes listed as her primary residence. You're obviously only allowed to have one. This is allegedly. And she did this long before she was fed governor, but they have sent a criminal refer to the DOJ, and Cook has not been charged in any crime yet. So that's important to put out there.
And this is all important because Fed governors can only be fired for cause. You need to have cause. And so Trump has asked Cook to resign. She declined. On Monday, he said he was firing Cook for cause for deceitful and potentially criminal conduct.
The first time in US history that a president has fired a fed governor. This has brought up a lot of issues around the independence of the Fed, which it's supposed to be in its best iteration. We can debate that as well. And important note, there is an emergency hearing set for 10AM Friday morning in DC. So by the time we publish, there might be a decision of whether she can continue serving or not.
ABC News reported this will likely go to the Supreme Court. Here's your polymarket, folks. Shout out to my guy, Shane. Congratulations on the investment from Donald Trump junior, also joining the board. There's a 25% chance that Lisa Cook will be out by the end of the year.
So it's not huge, but it's not a long shot. Let's stop there. There's more to discuss about the Fed mechanically. Chamath, we'll start with you from the market's perspective. The Fed's supposed to be independent.
So do you have concerns about it being independent? And then does this feel like lawfare or ticky tacky or they're weaponizing the justice department to you to, you know, get what they want, which is rate cuts faster and more of them.
I think that the Fed is no different than any other appointee to a part of the government, which is that they are partisan. Meaning, if I said to you, is the Supreme Court viewed as partisan or nonpartisan? I think that most people at this point would say that the president that appointed them did so because they aligned with his ideology. If I asked you the political appointees to any department of the United States federal government, are they political or nonpolitical? And the answer is that they're political.
And the idea that we still can't admit that the Federal Reserve is political is part of the problem. The reality is that the people that appointed these governors did so because the people that were appointed were aligned with their philosophy. And so we should stop pretending that they're independent because they're not. And in as much as they are closer to a regular civil servant than the Supreme Court appointee, which is to say a lifetime appointment, which it's not, then I think it's very reasonable to say that any sitting president should be allowed to remove a fed governor if he believes it's not aligned with the wishes of the electorate and the voters and the plan that was voted in. I think that that's a reasonable thing.
It's true for the rest of government. It should be true here. That's the narrow issue. But the bigger issue, I think, is asking from first principles, what does the Fed actually do in 2025? So we have an extremely vibrant and complicated and interconnected $130,000,000,000,000 global economy.
It's moving at the speed of light. The Fed gets together once a month, tries to divine what monetary policy, what the money supply should look like based on data that is often incorrect. We see that in the BLS data. We see that in the GDP prints. We see it in all of the inputs.
And so we've turned over responsibility to a handful of humans using bad inputs. So I think the real question is there are certain parts of what the Fed does that they can continue to do, and I think everybody would probably say it's an okay thing. So just to be very specific here so I get this right. Could they be a lender of last resort? Personally, in my opinion, no.
I think that treasury does a better job. I think we saw treasury do that during GFC, and I think that treasury has a better mechanism to get the American taxpayer a win than the Fed does. Do they actually create monetary policy and price stability? I would say that the capital markets and the free markets actually do a better job of that. They define much more what the spread is.
I think SOFR is a much better rate mechanism than the Fed funds rate at this point. Do they do banking supervision and regulation? Yeah. They probably do a reasonably good job of that. That is probably something that most people would say they could continue to do.
Do they do a good job as a payment system and a clearinghouse? Again, probably something that's pretty uncontroversial that they could continue to do. So I guess my point is, Jason, the bigger picture is the two things that are the most dynamic, they are the worst at doing. And so I would actually question whether that responsibility should sit with a handful of humans looking at faulty month old data. So for example, today, the commerce department did something that was pretty exceptional.
They said we're gonna start publishing data to the blockchain. All the GDP data is now going into a blockchain. So can you imagine what this starts? I think, and we've talked about this before, I think employment data from all these employment companies and payroll companies should get published this way. GDP data can get published this way.
All kinds of economic measures scrubbed for anonymity should get published so that you can have pricing oracles that actually tell you what's happening in real time. And the markets will then react and set rates in real time. Those are the two most sensitive things that I think the Fed does that creates controversy that they shouldn't be doing anymore.
Friedberg, I guess the question that Chamath didn't get to there when he zoomed up was, do you have concerns about
the independence of the Fed?
It's designed to be a very rigorously independent No. I said they're not independent. They're partisan. I know that. But the question I had also for you, do you have concerns about, you know, whether it's president AOC in four years or eight years or president Shapiro moving these things around and firing people like this and the weaponization of the government against government workers as some people are claiming.
That that was the sort of other
Why do
you have
to use the word weaponization? Like, when you appoint somebody to the commerce department or to treasury, is that weaponizing that? No. It's a big political appointee.
No. No. The concern people have is that this that the head of FHFA is the one who is researching, you know, her mortgages and that that felt like lawfare to people. You know, same way people accuse lawfare of, you know First of all, James against Trump. Right?
First of
all, Bill Pulte's an exceptional American. He's a brilliant businessman. He's actually probably better served sitting at the Fed in some role, quite honestly, because he has been in the rate markets and the mortgage markets his whole entire life. So if Bill Pulte was able to get this in a in a reasonable, fair, and transparent way, which I have no doubt that he would have done anything other than that, the data is what the data is. And I don't know.
I'll let somebody else litigate whether that's important. The more important issue for me is just acknowledging these people are political appointees. These are partisan employees. And this idea that the Fed is independent is maybe something that we should revisit because most of the things that they do can be done by treasury and other people better.
Okay. Freiburg, what are your thoughts?
The members of the board of governors at the Fed, they're appointed to fourteen year terms specifically to try and insulate them from the political cycles that occur. I think that that system has meant to kind of create a bit more resiliency to the institution, and so it can operate without necessarily being affected by the, you know, inter election year kind of whims of of politics. It seems like there's a lot of declarations to basically reduce the overnight rates, the short end of the curve. So the short term rates come down, interest rates come down. The problem is, as a lot of economists have talked about and as we've seen in the bond market, is that that could really push up the long end of the curve.
Because if you suddenly start to flood the market with capital in the short term by dropping rates today, so everyone will borrow, everyone will buy, it'll stimulate the economy, it'll stimulate growth, but it'll also stimulate inflation and it'll stimulate government spending, then the ability for the government to make its debt payments and the cost of the inflation bears out in the long range. So you end up having thirty year rates spike up. So there's a sensitivity that's, like, worth noting here that it's not just, hey. The Fed is in control of the money supply, but there's a consequence to the effect the money supply will have ultimately on the cost of borrowing over the long term and The US ability to service its debt. And so I do think it's very important to have an independent board of economists that makes those trade off assessments that looks at short term inflation, short term money supply, short term demand for capital, elasticity of pricing in the market, and also has considerations for the long term cost of capital.
So this independence notion, I think, is very critical. The the fourteen year appointment term to me solves this problem. We have the same issue in the Supreme Court where they serve till the end of their life. And so I do think that the consideration here isn't just about taking action to fire a member of the board, but perhaps we should go back and relitigate whether the fourteen year term is appropriate and whether it'd be much more specific about the rights that we want to impart on the executive branch of the government to be in charge of the money supply.
Any concerns about the yeah. We'll go to you next, Sax. You'll you'll you'll back clean up. But any concerns, Freiberg, on how this is going down that you have another governing agency looking into the feds, governors, and then looking for ways to remove them if they're in the other political party. Do you have concerns about that at all?
And this is, by the way, a concern that Republicans have also said, hey. This feels like lawfare. This feels like weaponization. Yeah. I mean,
obviously, I I just think that once people are appointed, if there's reasons that they're breaking the law, then they should be investigated. Everyone in government should be all the time. So there should be ethics, and there should be rules, and they should be investigated. But I don't think that we should use that as a mechanism to get around the fourteen year term. Got it.
Fourteen year term is the term. And if we wanna affect that, we should change the fourteen year term and actually get congress to do its job, which both sides may agree on to reduce the term.
Okay, Sachs. What's your take on what we're seeing here? You were obviously quite animated about lawfare in the previous administration against Trump. What do you think about what's going down here?
Well, this isn't lawfare. This is the president pushing back on, I think, a Fed that's been overly political. And just to agree with Jamath on something, I have to kind of push back on this shibboleth that the Fed is strictly apolitical. All the Fed governors are politically savvy and connected people, and they understand the politics of this. And the best example is Powell himself.
So let's just go back through the history. So in the 2021, we got that 5% shock inflation print. And it was Powell who played along with Biden and Yellen that this was transitory. And that transitory narrative they used to basically avoid any interest rate cuts or any change of policy for six months. Now what was the importance of that timing?
Well, Powell was renominated for a second term by Biden on 11/22/2021. So in other words, he went along with this whole transitory narrative to get renominated by Biden. And then a week later on November 30, he said it was time to retire the word transitory. And he then essentially announced that there'd be a policy shift, and then they didn't raise interest rates for another several months.
And it was a historic tightening cycle, meaning the shock to the economy was incredible because the rate and the velocity of which he raised rates was unprecedented. So the real question is, had he been truthful going into a nomination process and done it much sooner, would the economy have been better off? And the answer is probably.
Yeah. For sure. Because in that 2021, we had a bubble. We had an asset bubble. We saw it in startups.
We saw it in real estate. And that bubble was caused not just by artificially low rates, but also by the continued QE buying. I think Stan Druckenmiller has noted that the Fed, I think they bought something like 180,000,000,000 of government bonds and add them to the Fed's balance sheet. So not only were they resisting rate increases during that roughly six month period, they were continuing a QE policy designed to simulate the economy, even though we were clearly in a new type of inflationary period.
But do
you think that was incompetence or do you think that was political sacks?
It was obviously political because think about it, if Powell had stood up and said, no, I think Biden and Yellen are wrong and this isn't transitory, or even if it might be transitory, it's still a 5% inflation print. We gotta raise rates or at least we gotta stop QE. That's what he should've done. But he didn't do that because it would've been hold on. It would've been contradicting the Biden administration, and it probably would've cost him getting reanimated for a
second term.
So that was intensely political behavior by Powell, and it's the only reason he's in the job right
now. 100%.
And it caused an asset bubble in 2021. It caused the 9% inflation that we had the following year, and it caused the crash that we saw in 2022 and 2020
And it's causing, what we'll talk about later, all these bankruptcies now.
So just to give the counter here.
Think about all those real estate deals that got done in late twenty twenty one because rates were artificially low, and they were able to finance them and valuations were artificially high. And now that wall of debt needs to be refinanced.
Jason, what should the Fed do that is valuable today? Meaning when it was created, I could understand how the government moved faster than industry. I could I I think I can give that claim.
Or it was about providing liquidity too.
But fifty, sixty, seventy years later, where all of private industry is operating literally at nanosecond scale using infinite data, using a financial motive to price risk, how is it possible that a handful of humans looking at data that's a month old has any sense of what's really happening? How is it even I possible that
think it's probably unfair to say they're looking at only data that's one year old, and it's also unfair to say that they're a partisan
group because if you just look at statistically. They meet monthly.
Yeah. That's true. But I don't think that they take the other 29 off, obviously. And if you look just statistically, two of them are nominated by Trump and one was made chairman by Trump, and then three were nominated by Biden. There's one vacant seat.
So right now, when you look at it, it doesn't make sense that it would be political, and they have been acting with very little dissent in their decisions. So just I hate to bring the facts to the table here, gentlemen, but it doesn't seem like they're doing this in a partisan way. It seems like they're doing it. You could argue maybe they're too slow to react or they're not perfect, but it's certainly not partisan if half
They don't wanna publicly contradict the Fed chairman. By the way, you didn't let me
You didn't me Before you say that, have dissented. There's been dissent. There's been one or two people who will dissent and say, I think we should have a rate cut now, and they vote. And Powell it's not like Powell has like five of the votes. They each vote.
It's not a God king kind of situation. So just factually and statistically, it's an even balance, unlike say the supreme court at the moment. And there's one seat open, and there might be two seats open now.
Powell is the leader of the fed. He needs to get renominated. This is why we had a six month delay in stopping QE and not recognizing the fact that we had this big inflation spike. And that lines up perfectly. Look at the timing.
He was renominated But last you say
it's political.
You just
glossed over what I just explained that it's that Trump placed him.
Okay. Maybe it's just a huge coincidence, Jay Cal. But Biden nominates Powell for a second term on 11/22/2021. And then on November 30, Powell finally acknowledges that transitory is wrong. Week later.
Okay. You don't think that's a big coincidence? Let me give you another one. I didn't get to present the second part of my argument here, which is that Powell started the rate cutting cycle last fall with a 50 basis point cut right before the election shortly after Elizabeth Warren sent him a letter demanding a cut. Let me just read you.
Let me just hold on. I wanna bring up this letter for a second. I wanna read this because there's so much hypocrisy here on this issue.
By the way, it was expected to be a 25 cut, and you ripped in a 50 going into the election. But everybody was saying
by the what's going on here? Saying at that time, not just Elizabeth Warren. We were all saying
Jason Edmunds do be hold on.
Let me finish my sentence, please. We were all saying on this very podcast that there should be rate cuts because we had seen that 7% inflation come down and that you were arguing at that time, Shermoff, that it was time for a rate cut. It wasn't just Elizabeth Warren. There was consensus that they were slow to cut rates during that time period. So again, I don't want
a political We could we could all read it and realize what was happening to the economy, which was like, okay. It's time to find a glide path. But meaning, a glide path means 25, 25, wait, 25. Not 50, then zero. Okay.
That's not a plan.
This is from Elizabeth Warren to Powell on 09/16/2024, so a few months before the election. She says that we're writing to urge the Fed to cut the Fed funds rate. And she says for months, we've been calling on you to cut the Fed funds rate. And it says, in fact, it may be too late. Your delays have threatened the economy and left the fed behind the curve.
Inflation has fallen to 2.5%, well below the mid twenty two peak of 7%. And then, you know, goes on to basically say that employment numbers adjust slowly so the Fed should front load rate cuts to avoid sliding towards a potential crisis. So the bottom line here is that Elizabeth Warren was saying that Powell needed to cut dramatically when inflation was at two and a half percent. Now Elizabeth Warren is saying that Powell needs to stand up to Trump and not cut rates. So you can see the hypocrisy here.
You've got Democrats like Elizabeth Warren were brow beating Powell to cut rates before the election. He apparently gave into that pressure, cut rates 50 basis points. And then once Trump won instead of Kamala, then he stopped the rate cutting cycle.
Just a little correction there. The it wasn't you keep saying that Powell makes his decision. He is but one vote. When they had that September basis point cut, which we were all a little bit shocked about, people thought it was gonna be 25, so it was double. There was one dissenting vote from one of Trump's appointees.
So, basically, the Trump appointees were opposed to it. It's One
was. The other two weren't. And you'll remember that at the last, I think it was July, two people voted out of step with Powell. So they do have dissent there sometimes. So this idea that it's just nakedly political just doesn't add up.
He's putting together the majorities.
You're cherry picking the Elizabeth Warren because Elizabeth Warren is but one person.
You just think all these things are coincidences.
This argument that it was political just can't be true if there's other Republicans on there who also voted for
it. Well, they're establishment Republicans.
Okay.
Sure. They don't like Trump.
I know I know well, okay. I I mean, I know there's some conflict within the within both parties, actually.
So he does a 50 basis point cut a few months before the election, which can only help the incumbent administration, Kamala. That didn't work. And then when Trump gets elected, he pauses the rate cutting cycle.
That is factually true.
What what what is also factually true is that inflation started to tick up a bit. Additionally, that what the Fed said, not just Powell, the entire Fed said, we don't know the impact of Trump's tariff policy. And since they didn't understand that and it was unprecedented as well, and we all admit it was unprecedented, and we all admit that it was kinda shocking, which is why the stock market took a nosedive when he started, you know, making really, like, intense tariff demands. They said, hey. When the tariff stuff when the data comes in for tariffs, which came in in May, June, and they were No.
When that when that tariff data came
in I'll push back on that.
Said That's not we're work towards a cut in September. So we're talking about a five month period here.
Hold on a second. You're saying something really important. Okay. Look. I just wanna pause on this.
Let's Okay. Talked about this, what you said was the markets reacted and they went down. You're absolutely right. But you know what they did? They also repriced that risk well before the Fed got back together.
It was within a few weeks that the market had completely repriced what was happening with tariffs. This is why I'm telling you that we are better off imparting the rate setting mechanism to the free market. Because when you have places like commerce and treasury increasingly publish all this real time data into a blockchain, You can have pricing oracles, Jason, that make these decisions in real time and reprice this just like the stock market does
every Oracle, explain to the audience what you mean by that. You mean an AI would tell us what the rate should be?
No. Every bank will have oracles that divine what they believe the risk free rate would be. Then what happens is when you have a treasury auction, in an auction, you submit a bid. And when people submit bids, what happens is you converge on a market clearing rate. That happens independent of the Fed.
And so what I'm saying is that if you actually inspect the ability to finance the United States government, The two critical things that happen can be done and are done well today by treasury plus the free market.
So you want to abolish the Fed No. For for this purpose,
for for setting the rates? Listen to me. They have four major responsibilities. I think that if you revisit what's happening, you can find two of those responsibilities that probably they can continue to do with a lot of usefulness. But it is clear that the free market does a much better job of setting the actual rate.
It's called SOFR. We all use it. We use Fed funds as a guide, but Fed funds isn't even specific anymore. It's now a range. They don't give a specific rate.
They give a range because they don't know. And it's okay to not know, but we should just acknowledge that that's where we are today, which is we have precise data in the free markets, imprecise data in a group of people.
So there are 12 people that vote in these meetings. Seven are the Fed governors that we've talked about, and then five are the Fed bank presidents who also get votes. And it's very simply the majority wins, and there's a vacant slot now, so there's 11 votes now.
We've all been in large board meetings, and we all know that the dynamics of these meetings, there's a leader. That person's either the CEO and chairman or just the chairman of the board, and they're the ones who lead the discussion, and they put together the majorities, and they set the agenda, and it takes a revolt by the rest of the group to basically stop their decisions. So you're trying to diffuse accountability for Powell's decisions here when he's a leader of the Fed and he ultimately has responsibility for their decisions. And by the way, I don't think you'd be seeking to diffuse accountability that way if Powell had made a bunch of good decisions. Right?
Why would you be trying to diffuse that accountability if I it's
don't saying you're have a horse in this race. I don't have zero horse
in this But clearly, you're trying to defend you're trying to defend the Fed here.
I'm just trying to correct the facts. There are 12 well, there's 11 people
He's the leader of the institution. He's
He one gets one vote. He gets one vote. And just in the last
He's putting together the majorities.
Just again, I hate to bring facts into the discussion, but there were two dissenting votes, Bowman and Waller. They preferred a 25% rate cut in July. So there is dissent in this organization. They're gonna cut 25, obviously, in September. Some of them wanted to do it in July.
And then August, they said, yeah, it's time to do it. And so that's why the market popped and poly market is showing that's gonna happen in September.
So we're talking about a sixty
day period.
Let's move on. Here's the well, maybe just
You wanna have the last one? Go ahead, Sax. You get the last one.
Look, Here's the bottom line is I think Trump is right to be frustrated. Powell has been intensely political. He went along with the transitory narrative on inflation to get renominated for six months. That created a horrible misallocation of capital. And then a few months before the election, he went along with a 50 basis point rate cut.
There was no outrage about Elizabeth Warren jawboning him then like there is now about Trump. And then he stopped the rate cutting cycle when Trump won.
When Elizabeth Warren said that, we actually said she shouldn't be doing that. So I you know, that wasn't like Elizabeth Warren speaks for the country. She's totally irrelevant, Saxe. We all know she's irrelevant.
I don't
think she's irrelevant. That they were behind in the rate cuts. We we all agreed she's behind the rate cuts. Okay. Let's go to the next story.
Okay. We're not gonna agree on this one. And there's gonna be a rate cut in September. So it's all good. The US government just took a 10% stake in Intel.
§04US-Intel Deal: Sustainability, China comparison, could deals like this save Social Security?
Last Friday, Trump announced that the US government would acquire 10% of the chip maker. As we all know, there was this chips act to try to onshore chip manufacturing. There's a lot of chip companies that are US, but they don't actually make the chips here in The United States. Most of chips in the world are made in Taiwan, obviously, by TSMC. And so these grants were created, 9,000,000,000 of them were grants.
There were also tens of billions in loans. And that was the CHIPS Act. We talked about it here many times two years ago. These grants have been allocated. They were not paid out.
So Trump and Butnik came in and said, hey, instead of giving this money for free, we would like to get something for it. And they are going to get nonvoting shares. There's no golden share like in China where, you know, you get board representation and you can kinda control the board. This will be passive. No board seats, no governance rights.
Letnick was very clear about that on CNBC. This all happened three weeks after Trump called Intel's CEO or called for Intel's CEO to resign over his ties to China. President Trump said, quote, the CEO of Intel is highly conflicted and must resign immediately. There is no other solution to this problem, but they found a solution, which was to take 10% of the company. Let's stop there.
This has been pretty controversial, I think, Chamath, in terms of people wondering if this is gonna become a playbook. Do you have any concerns with swapping the grant to getting equity? And do you think this should become a playbook where the US government starts to own percentages of companies in exchange for loans and grants as opposed to giving loans and grants?
Yeah. I think some historical context is important. In 02/2006, Hu Jintao gave this speech. And in that speech, he talked about, you know, six or seven boxes. And the way that he described these boxes was that these are the critical parts of the Chinese economy that they must persevere and win over the next twenty or thirty years to ensure safety, security, and prosperity for the Chinese people.
And in those boxes were things like semiconductors, things like rare earths, were things like pharmaceutical APIs. And what it described was a willingness by state governments in China as well as the federal government in China to use the balance sheet to support those companies. Incrementally, Jason, as you said correctly, they would also ask for a golden vote. In return, what did they do? I can talk to you about rare earths as one very specific example through my involvement with MP and and now with Intelis.
The Chinese have an extremely sophisticated market driven approach to how they help when they are on the cap table. They'll price shape. They'll price dump. They will change the spot markets. They'll perturb the ability for other people to compete.
And what that does is it locks the capital markets because it says we can't compete with these companies, so we're not gonna finance an alternative. That has long term strategic negative consequences for everybody that isn't those Chinese companies. So let me just pause there. Now look at The United States. What The United States has always done is we have been the lender of last resort, but we've never participated in the upside that being that lender of last resort has given us as the American taxpayer.
So for example, in 02/2008, you know, we created TARP where we bailed out all kinds of toxic assets. What did we get in return for that? Nothing. We barely got our money back. When Warren Buffett stepped in to backstop Goldman Sachs, he was able to get the United States government to help him backstop that.
Who got all the gains? Buffett and shareholders of Berkshire Hathaway. Who put up more money? The United States taxpayer. Those are but two examples.
I think that this approach is the much better approach, which is to say we can do exactly what China did with a couple of tweaks. It's way better, as you said, Jason, to just put in the equity, own something on the balance sheet of The United States, not have a golden vote, have complete transparency, allow the capital markets to finance these businesses, but give them a chance to compete all around the world, and then The US taxpayer gets some of the upside. That is awesome. What we have done up until now, until what Lutnick has done and what the president has done, is the opposite, which is we have given money away in times of duress with absolutely no upside, and I think it has to change.
Sachs, what are your thoughts here on, this model? It, is something to think about when it comes to, as Chamath correctly points out, China will subsidize their champions. It's happening right now with BYD. The car company, allegedly, all these car companies are dumping cars all around the world, and supposedly, they're being underwritten by the Chinese government explicitly to do this, to take away American, German, European auto manufacturers' ability to compete. So what are your thoughts on this?
Do you wanna see it continue, or do you think this is kind of a one off specialized situation?
Well, I agree with Jamath that if you're going to give large amounts of money to chip manufacturers, it's better to get equity for that than for it to be a freebie. And I think there's two reasons for it. One is it's a better deal for taxpayers. We might be able to recoup the money and even make a return on it. But the other is the incentive for companies.
We don't really want our companies going to the federal government to try and get bailed out. And at least if they have to give up equity or warrants, things like that, there's a cost to it. We would rather that these companies get financed privately. But that didn't happen here. Intel received something like over $8,000,000,000 under the CHIPS Act because we let the free market do its thing and it resulted in chip manufacturing being offshored.
And it all ended up on the island of Taiwan. And that's a huge national security issue for The United States because now our whole supply chain for this critical resource is single threaded on Taiwan. So we made the decision as a country to onshore chip manufacturing. That's what the CHIP Act was about. It had large bipartisan support.
So there's this priority to bring chip manufacturing back onshore, and the question is how you do it. And I think that if you are gonna hand out billions of dollars to these companies, you're better off at least, again, getting something for it, having the taxpayers have some upside in it, allowing the government to recoup, and creating the right incentive for these companies so they're not constantly seeking bailouts. So I think this is a big improvement over where the CHIPS Act started. But to answer your question, I mean, would I be looking for lots more opportunities to do this? I think there has to be a national security interest or something of that kind, and I think it has to be a situation where, for whatever reason, the free market has failed to deliver on that priority.
Freeburg, looks we're gonna have consensus here that we all agree it's better to get some upside or equity for the American taxpayers as opposed to giving free money. There are have been some pushback as to the style in which this was done, the, bullying of the CEO, and then three weeks later, a deal. So thoughts on that criticism of the administration.
Well, just taking a step back, I think, it is an indication that the free market has failed in some way. If the government is stepping in to either provide unique regulatory unlock or the government is providing capital or the government is basically stepping in to be the biggest or primary buyer of a private company's products or services. Those are the three kind of reasons why I think these scenarios are emerging. So regulatory unlock that's unique, providing capital, or being a buyer. All three, I think, indicate that the free market has failed and the government is playing too big a role in our economy.
So I think that that's just the unfortunate circumstance that we find ourselves in, and we can recount as we have many times here before why the government has become so big, why it is too big, and why it is having such an outsized influence on job creation, on economic growth, on stimulus, on market strategy, etcetera. And I and I hear Sax's point that there are very specific circumstances where we have to fix free market action, and I totally get that. But I think there's these bigger, broader kind of things that are happening, which is the government's also the biggest buyer of products for a lot of companies. And the government's providing capital either through contracts or procurement or some structure that is stimulating a very large percentage of the economy. So I do think there is a notion that some have shared, which I don't fully disagree with, which is that there is some degree of socialism underway, that the government is providing such a large role in the economy and replacing so much of the free market.
We can argue why that is and have different points of view on why that is, but that de facto state is an unfortunate state. Now I think the question is under these circumstances, should the government be getting equity? I think the answer is yes. I agree with that. And if the government is getting equity, the key question I wanna ask is where does it go?
There's three places that equity could land. It could just sit on the balance sheet of the federal government, in which case there's no real goals or oversight of the investments. There's no overarching strategy on what to do with that equity over time. How do we how does the American taxpayer benefit the most? When does the government sell?
How does the government choose to sell? Who makes that decision? So the second is then when you form a new sovereign wealth fund to hold all these equity assets, you form a new sovereign wealth fund, then you have a whole group of people that are gonna be hired to oversee those investments. They're gonna make good decisions, hopefully. They're gonna be good investors, good fiduciaries on behalf of the American taxpayer.
But I would argue that what we should be doing instead, and as I've mentioned in the past, is use what we already have, which is the OASI, the old agent survivors insurance fund, which is the trust fund behind Social Security. That's actually where Social Security's assets lie. Today, the only thing in that trust fund is US treasuries, and they're actually a special form of treasuries. So if you've paid into Social Security, you're effectively loaning the federal government your money, and then they're supposed to pay you back your retirement benefits in the future. Rather than just loan the federal government money, those assets should be held and will become the largest sovereign wealth fund to make strategic investments and grow those assets over time on behalf of those American taxpayers as retirees.
So I would argue that the right solution of the three options, form a sovereign wealth fund, sit on the balance sheet with no strategy, instead would be to have that sovereign wealth fund sit within OASI that would require statutory changes because the, Social Security trust funds were set up in the nineteen thirties, and Congress passed an act that said, you know, you kinda gotta hold only treasuries. So we would have to get congress to kind of revisit that concept. But I do think that if we are gonna be in the state where the federal government's playing this outsized role in the market, we should take equity, but we should be very strategic about where that equity goes. And I think the best place to put it is in the Social Security trust funds, and it can kill two birds with one stone. So rather than create new holes in the government, meaning new spending, new debt, creation of of new vehicles for us to spend capital, I think we should fill holes.
And one of the holes we need to fill is Social Security, which is gonna go bankrupt sometime between 2030 and 2033. I would encourage us to kind of strategically think about evolving this system. I think it's a major moment, by the way, because as I've mentioned in the past, in addition to setting up an equity vehicle based on these deals, the Social Security Trust Fund could also be buying public equities on behalf of the the retirees, which would, have a significant compounding effect for them. J. Cal, what do you think?
So this I love love the substance of it. We talked about it actually back in the day here. There were a series of loans that Obama set up for, Tesla, Solyndra, and, Fisker. A bunch of those companies blew out, didn't pay back their loans. Elon paid back his ahead of time, But the government had no upside to use.
With interest, of course. Yes. And imagine if they just owned but warrants for 1% of Tesla or something. It could have been incredible, and I'm sure Tesla would have still taken that deal. It wouldn't have been crazy.
The thing I don't like about this is the bullying of the CEO of Intel. This is giving a lot of you know, this is a lot of my challenge with Trump is sorry, president Trump is sometimes the style in which he does something detracts from the actual substance of it. The substance of this is great, but we are now getting into a situation where it feels like a narco capitalism. Like, this is crazy that the president goes and bullies the CEO of a company and then says they're gonna be deported and then settles a deal like this. The optics look terrible.
And it would have just been much better to say, instead of giving you a grant, we'd like the option to have equity. What would you prefer? And then have a decent negotiation where you don't have to threaten to kick the guy out of the country.
Do you think maybe that happened, Jay Kal, and it just wasn't public? And this was, like a lot of things, a public negotiating strategy?
Yeah. I mean, I think probably that is what Trump does. He beats somebody up and then says they're incredible. I just think it detracts from the substance and the good work when you do those techniques because it's now
very easy for Yeah. Do you think we should have a sovereign wealth fund?
Not when we're in debt.
The president addressed what happened. Tom Cotton, you know, senator, wrote a letter attacking Intel and questioning the CEO, Lee Butteham's past. And the president posted a truth in response to that, but he hadn't met Lee Buch before. And so the CEO of Intel went in there, got an audience, and told his side of the story, which was that, yes, he invested in China, but when everybody was doing it, it wasn't controversial at the time. And I think he hasn't been involved in China for like six years or something like that.
So he cleared up the situation, and that's how the conversation so it's fine. Fire
aim ready is like the thing I don't like about when Trump does these things. So yes.
Well, think the American people like when Trump gets results.
Me too.
Absolutely. You gotta break some eggs to make an omelet. And the question is, is he getting good results? And I think the American people are happier getting something in exchange for billions of dollars as opposed to just being handed out.
Also, I say something, my point to your
would do it in a more thoughtful way, but maybe it wouldn't work.
It's you, Jason, you've met Absolutely. You mentioned that you don't think that there should be a sovereign wealth fund until we're out of debt.
§05US Sovereign Wealth Fund
I didn't finish my thought on that. So that's an interesting question. If we had a sovereign wealth fund and we're $3,637,000,000,000,000 dollars in debt, I'm with Lutnick's position that, maybe we pay down that debt, and then we can think about that. But sovereign wealth funds usually come from some natural resource, Norway's, UAE, Saudis. We don't have some natural resource that is throwing off all this money.
And and yeah. So I don't know how we get one.
I'll take the other side. I think that we should start a sovereign wealth fund right now. And who should fund it? Well, the great news is that these Trump tariff deals come with huge amounts of capital that these other countries have committed to spending inside The United States. For example, there is $600,000,000,000 now that Japan has to spend inside The United States.
There's 300,000,000,000 that Korea has to spend. There's another several 100,000,000,000 that Europe has to spend. If you add that all up, we've exceeded a trillion dollars of inbound capital on the investment side. And in those things, we get 90% of the upside, if you remember. So I think that a lot of that capital should be the seed capital for a sovereign wealth fund.
You're right, Jason, that we can then choose to direct some of those gains to things like debt reduction. Freebrook is right. We could direct some of those gains to fund Social Security. I think we should set that up right now, and it can be additive. So for example, there's the trillion dollars that these countries are investing in The US, ninety ten carry.
It's unbelievable. All of that should go into a balance sheet that the American taxpayer can benefit from, number one. Two, when we do these programs like we did with MP and we've done with Intel, they're really smart. We need it anyways for strategic reasons, but now we get the back end participation of the equity. That should go into a sovereign wealth fund.
All these things make a ton of sense, I think.
Yeah. World's power
what I would say.
The concern I have is anytime we create a new income stream at the federal government or we have some sort of growing asset that you mark up on the book, someone tends to invest ahead of the curve on that. Meaning someone takes that and they're like, oh, great. I can spend more now. I mean, we even saw this in California. You know, Gavin Newsom and the budget skyrocketed as the income went up.
And rather than take the surplus and book it for a rainy day, they went and spent ahead of it. Then all of a sudden they had a huge deficit. And I do worry that the tendency in the federal government, which is what happened with social security is it's like, okay, all these people are providing this income every year to the federal government, which they're they're supposed to be paying into their social security trust fund. But then what happened is we raided the coffers. We took all that money and we started spending it on random new programs.
And the problem is by giving the government more assets, by giving the government more income, we set ourselves up for a circumstance where the federal government, the congress says, great. We got more money to spend. Let's do x y and z program, and let's do this great. Let's build a high speed train. Let's do this.
These are all good for American people. And all of a sudden, you know, you don't actually solve any real problems. And this is why my my argument is like we should use it to fill the hole that we have, for example, in social security, and that needs to become an asset that's strictly used as an offset on social security. Because if you don't put it in that box, it just becomes another spending mechanism.
I don't like the sound of taking people's social security savings or the money that's earmarked for social security and having the government act as a venture capitalist and start investing willy nilly trying to get us out of this hole. I mean, I don't think that's gonna go very well. But what I think makes sense is that any
Well, maybe it's just, know, it's just incremental where it goes liquid. It can be used to pay down the social security treasury obligations is my point.
Yeah, look, think we should be selective about this. Think it makes sense in situations where the government was gonna do a bailout anyway because there's a national security priority or some other kind of priority that the government's determined we have to do. You wanna get equity for it. It doesn't make sense to, you know, give mean, even Solyndra
and Where that Tesla equity go? Is
is I the key think that would And be a help on the
how do you keep everyone's grubby hands off of it? Right? So, like, how do we use it for as an asset rather than have it be another Put your moth in charge. Mechanism of spend.
He wants to be a civil servant.
Like the idea of putting I like the idea of putting that equity in the sovereign wealth fund, yeah, it could go to Social Security. I think that makes a lot of sense.
I just want Sachs on record saying he agreed that it should go into Social Security and then
Well, I like I like that idea. I don't like the idea of taking people's Social Security funds.
I I know. That's massive. But but look. Not funds don't exist. Those funds were already taken by the government and spent, and there's an IOU sitting in a fucking account.
Yeah. It's
like literally a piece of paper. It is. Owe you your retirement.
We're we're talking about situations we're talking about situations like TARP where you had all these Wall Street firms bailed out. Yeah. I agree. And then some of them paid back, but the government should have equity.
A 100%. I'm not sure equity in those forms. Wanna make sure that equity goes somewhere because people book it as income and then they take a lower deficit year and they're like, great. The deficit was lower. We can spend more.
That's how this gets So if it's not if it's not accounted for separately, it gets blown out. That's what I hate.
That's a perfect segue. Grover Norquist wrote an op ed in the Dallas News. You can pull it up, Nick, and show it there about, the discussion we had here on the podcast a month ago. I had talked about this. You know, he has his taxpayer protection pledge that Republicans made back in the eighties where, you know, people signed on to agree not to increase taxes.
Well, we had talked here and I had proposed something similar for spending because we all have concerns about the debt. And he pointed out that this is very difficult to do, but he had a really interesting piece of information that I hadn't heard. In Colorado, a Democrat state, they have limited the size of the budget to be based upon the population and inflation. So they have been returning money to taxpayers and lowering their state interest rate. And he says this model pioneered in Colorado, but other states are now getting onto this, that this could be the model that saves America and that we could have a situation where the population plus a little bit of inflation equals what you're allowed to spend.
Gentlemen, your thoughts on Grover Norquest responding to our pitch on the Olin Pond, or my pitch on the Pond, I guess. What? Okay. Crickets. Somebody's gotta have an opinion.
This is so uncontroversial. I don't know what there is to talk about.
What's the analysis we're gonna do? Yeah.
It'd be a good thing if every politician pledged to not increase spending.
But Let me ask this. Were you guys aware of Colorado doing this, that they had this device, set up? Yeah. Nobody was aware
of it.
Yeah. It's pretty interesting. So Grover Northwest, come on the pod anytime. I actually told Elon, and I I tweeted as well. This is what the America party should do.
This should be the entire America party platform. Just get senators, house of representatives who believe in this and just work on that one issue, balancing the budget. That's the thing that neither party will take on. Alright. Let's talk about corporate bankruptcies.
§06Why corporate bankruptcies are trending up in 2025
According to an S and P Global report, so far in 2025, we've seen the most corporate bankruptcy filings since 2010. That was after the great financial crisis, you remember, or some of you might have been too young. So corporate bankruptcies, according to the S and P, are public companies with debt of at least 2,000,000 and private companies with assets or liabilities of at least 10,000,000. I'm not sure why the public companies is less than the private. It didn't make sense to me, but there must be a reason.
These are also called large bankruptcies. Here's a chart showing you corporate bankruptcies since 02/2008. The blue bar is through July, gray bar is the full year. So we're looking at a partial year here, obviously, in 2025. We're at four forty six large bankruptcies, seven months into 2025, which would put us on track for the most since 2010.
And yeah, nothing close to GFC numbers, but you know, it's not trending well. And if you look at corporate bankruptcies broken down by month since 2020, you can see that bankruptcies are increasing after the massive rate hike cycle in 2022 and 2023. So obviously, rates have something to do with this. What are your thoughts, Chamath, on what we're seeing here? It's not, like, super dramatic, but it's definitely, notable.
Yeah. It's notable, but I think it's notable not for the reasons that the mainstream media tries to describe it in. I read these articles, and I was a little bit caught off guard because initially what it said was the tariffs were causing this. And I was like, large companies don't go bankrupt thirty, sixty days.
Yeah. Of the tariffs, which
has been said. This makes no sense. But the narrative was very strong, basically trying to paint the Trump administration as having caused this. So I just started to look into this, and couple of interesting things to note that I the conclusions that I came to. I think the most interesting is that there were a lot fewer bankruptcies over the last four or five years than there should have been.
And I think that there are two reasons. The first reason is that you had rates artificially suppressed at zero for an incredibly long amount of time. And so you had all kinds of companies able to raise enormous, enormous amounts of capital that they probably shouldn't have been able to or at a minimum should have done at much higher rates, which weren't really there because the poor rate was at zero. So what that means is that many companies were able to fill the reservoir of money. And then when the core structural business started to fail, they had a lot more oxygen in the tank to survive a lot longer.
So I think a lot of what you're seeing, and if you look, Jason, at some of these companies like Joann's Fabrics and Party City, these were businesses that were upside down for years.
Yep. And a number of these, right, were PE buyouts that, you know, their strategy is to saddle them up with a bunch of debt too. So that that speaks to what you're saying.
So I think I think the reason why bankruptcies are up right now is because the reservoir of free money, the money printer that printed, frankly, since 2010 up until about 2021, because, you know, we still gave an enormous amount of money in COVID, is finally starting to run up. That's number one. But the second is that we actually haven't had a process of creative destruction in American company formation for a while.
Probably since GFC, right? Yeah. A similar thing happened at that time too, Chamath. Right? We had all these backed up companies that probably should have died and it kind of
ended up
Well, think what happened was startups ran out of money. There was certain parts of of industries that had some trouble. But by and large, there was no transformational or catalyzing m and a that could have actually happened. And that in part was a structural issue because of the way the federal bureaucracy reacted to it, not just in The United States, to be fair, but around the world. And I think when you relax those constraints, what you can start to see are companies identify assets that they want inside of other businesses, be much more aggressive in getting them, businesses that are floundering, being able to see that they're about to run out of money and have the confidence to try to do an m and a deal to survive.
You need all of these things to work in lockstep for a market to be efficient. The market was incredibly inefficient since 2010. Artificially suppressed rates, a regulatory regime that disallowed any form of M and A and consolidation. Now that those constraints are lifted, you're going to see a lot of this creative destruction work its way through the economy. That's one big trend.
The other big trend, and I think we saw this in Nick, can you please find a tweet from Deleon where he talked about the Chipotle competitor that TK launched? I just wanna point to this because I think this is another wave of competition that's gonna put a bunch of categories of business under duress, which is, you know, our friend Travis Kalanick, who's the founder of Citi. What is it called? Citi Logistics? Is that what it's called?
Yeah. Cloud Kitchens is how it's
referred Okay. He launched a Chipotle competitor, and it's apparently totally kick ass and way better than Chipotle. And it just starts to show that there's an a wave of competition that's also coming from completely different companies you never would have expected going after a bunch of these businesses. So if you put these two things together, I think you're going to see more, not less bankruptcies, but I think the outcome is probably positive in that you clean out a bunch of businesses that were taking up time and resources. You should allocate a lot of the human capital that are in those companies to different businesses, and I think we're
pretty better off. Man, it's a long list of companies, but I just wanna know which one hit you harder, Forever twenty one or Hooters? Which one of those bankruptcies hit harder for you? I'm trying to game it out here. I think that we should buy By the way, we should buy Hooters Chabot.
Guys, should have
a kidney as a CEO.
If you
have a teenage daughter, what I'll tell you is Forever twenty one was shit. That was gonna go to zero anyways. Like, you need to be long Brandy Melville. You need to be long. Oh god, what is this other one that's like the closest so-
Like yoga pass aloe?
Hold on. Mean, the kids wear
a lot of those. They're into the athletic wear.
But what's the name of that clothing store? Viore? You know, where Sloan, like, always wants the, you know, the the skirts and stuff, not Brandy Melville, but the other
Oh,
fuck. Anyways,
there's all these brands. Yeah, Forever twenty one was not it.
Yeah. What do you guys think? Should we do a should we buy out Hooters and put Sydney Sweeney as CEO? This could be a great brand extension. I don't know if the chicken wings are amazing.
Sax, any thoughts here on the creative destruction and what we're seeing? Obviously, it can't have to do with tariffs because they're only three months old, and it seems largely the company's Well,
every company you've mentioned every company you've mentioned is a retail business. They have physical locations that people have to go to do stuff or get stuff. And I think that the stock You is a man
had twenty twenty me. You had Wag. You had a yeah. But yeah. I think But I
think The mom's got a
right eye it. Flushed out makes sense in the age of Amazon and Sheen and Target. Yeah.
Well, the retail channel like others is highly levered because in order to have a retail store, you have to pay a monthly fee to the physical real estate owner. And so it's unlike other businesses that are services or are more nimble and can relocate. You actually it's the equivalent of having debt. When you sign a lease, you're stuck in a ten year debt cycle. You have to pay every month a fixed amount of money, and you can't get out of it.
So the retailers make a lot of sense. They were basically levered businesses in addition to all of the kind of macro trends of people not going to physical locations and COVID. But I think Chamath has it right, which is this is all kind of Zurp era, you know, indigestion that's being washed out. And to the point, like, some percentage of overfunded negative unit economic type businesses are also getting cleaned up in the kind of call it tech space, which involves typically a lot of companies that are not tech, but math does tech. So Yeah.
That definitely makes sense to me.
Sax, any insights here?
Well, just to pick up on this. So, you know, when you showed those charts on the bankruptcies, I didn't see a huge trend there. I mean, I can see that there's some pickup since the ZERP era, but it doesn't look like a huge trend to me. We just had a 3.3% GDP print for q two. I think it But that
was restated. Right? That's what
happened today is they restated it.
Well, no. There was an estimate. Remember the Atlanta Fed had this 3.3% estimate, then they reduced it to three point zero, but now the actual number is in at So 3.3 the economy seems pretty hot and it's doing well. But I would say that there is some softness in the economy in those sectors that are exposed to high interest rates. And the best example of this is real estate.
I remember on this program a year and a half ago, we talked about the wall of debt on commercial real estate that was coming due and had to be refinanced. And there's 2,200,000,000,000.0 of debt, CRE debt, that's maturing before 2028. And what we talked about back then was the banks don't really wanna foreclose on these buildings because then it hits their balance sheet. So everyone has an incentive to restructure this debt. And there were a lot of these blend and extend type deals where they would extend the debt and work out a lower interest rate.
Some people call these deals pretend and extend because you're pretending that the real estate sponsor still has equity in these buildings and they might have
been What's
happened since? Wiped
Have these started to come back?
What I'm seeing is that some real estate developers are starting to lose buildings now. The reason for that is that the debt is coming due and it has to be refinanced. And there's two problems when you refinance. One is you're paying a higher interest rate. So now you take a building that was cash flowing, and now at that higher interest rate, it might have negative cash flow.
In other words, it's basically bankrupt. So those buildings don't make sense anymore and those are situations where you're gonna lose the building to the bank. The other problem is when you refinance, you might not be able to get the loan to value that you had before because valuations have also come down because real estate valuations are inverse to interest rates. Right? So in other words, if, you know, let's say you had a building that was worth a $100,000,000 before at ZERPA interest rates, you could borrow two thirds of that, so call it 66,000,000.
Now if the building's only worth, I don't know, $60,000,000, then you can only borrow $40,000,000 So the amount of proceeds you can get when you refinance is much lower, and that gap has to be replaced with something. So in that situation, the equity holders would have to come in and do an equity in refinancing where they've gotta put up that gap. And the example I gave, that gap would be $26,000,000. So the equity holders have to come out of pocket, which is very difficult to do, and they might not wanna do it. In that case, you're also gonna lose the building.
Sachs, I have a question. Nick, can you show up show this image? Sachs, how does this trend build on top of that other trend, which is on top of everything else now, it just seems like the real estate financing flows are moving far away from typical office construction towards data centers. So if you add that to the mix, then people seeking funding for traditional office are gonna find or refinancing are gonna find fewer lenders. Is that true or not true?
Well, yeah, I think there has been a little bit of a credit crunch, but also there's no reason to really be building so much office space when there's so many buildings that are underwater
or Vacant.
Yeah. Like, a third of the real estate in San Francisco is basically vacant.
Still.
Still. So why would you build any more real estate? But what needs to happen is those buildings effectively need to go back to the bank and then they need to be auctioned off at some lower price so that new equity holders can come in and new capitals can be formed. And then you can get the money you need to do the tenant improvements, the TIs, so that you can get more tenants in there. Because right now, one of the reasons why a lot of these buildings are empty is because the equity holders don't have an incentive to put in more money to do the TIs necessary to sign new tenants.
So you got these zombie buildings that even if there was a tenant who wanted the space at some lower rent, the owners of the building have no incentive to do that because they can't put any money into the deal. So like we finally need a bunch of these buildings to go back to the bank, or we need rates to come down so that
you can
do refinancings without them being these punitive refinancings. And I do think that there is a lot of risk in the economy in this sector because, again, of this wall of commercial real estate debt that's coming due. And I think this is the problem. You got Powell sitting there. You got too late Powell sitting there in his ivory tower.
He's willing to keep rates artificially low so he can get renominated and he can help Biden and Yellen. He's willing to cut rates to help Kamala, but as soon as Trump gets in there, he stops the rate cutting cycle even though inflation's down to 2%. So you got this too late Powell and the rest of his Fed cronies. J. Cal wants to make it sound like they have some dissenting voice.
It's nonsense. In any event, they're all collectively sitting there in their ivory tower, completely out of touch with what's happening in the economy, and they're being slow to cut rates. And I do think that at least sectors like real estate do need these cuts.
Preberg, tell us about Yamanaka factors.
§07OpenAI's novel LLM-based approach to longevity research Join us at the All-In Summit
Yeah. How long can I make this bulldog last? Can I make them last forty years? That's what I got left.
Well, in mice, they're using these Yamanaka factors to make the mice age the equivalent of, like, 250 years now. It's really incredible. And there are human clinical trials starting. So the Yamanaka factors you guys will recall are the four proteins that were identified that basically can turn any cell back into a stem cell. And, you know, we'll call those four proteins o s k and m.
When these four proteins are applied to a cell, it basically starts to trigger a bunch of gene expression that then turns that cell back into a stem cell. And so that cell becomes youthful again, and you can then turn it into any other cell. Later, there was research done where they took those four Yamanaka factors and they applied a low dose of them to a cell. And rather than have the cell turn all the way back into a stem cell, that cell effectively became young again. It started to repair and heal itself, repair its DNA, repair its gene expression networks, and the cell returned back to its original state.
So the equivalent to think about this in a body is now you've got skin that loses its wrinkles, eye cells that start to see better, brain that starts to work better, muscles that start to work better. And so that is rejuvenation. And so the search has been on on how do we turn this incredible discovery of using these four proteins into therapeutics that we can then apply and humans can take that rejuvenate cells, reverse aging, and create youthfulness, which has been done, by the way, in mice. And then the mice end up living for the equivalent of hundreds of years, and there's incredible phenotype, meaning physical characteristics that you can see. So this week, it was announced amazingly by OpenAI that they developed a model that they call GPT four b micro.
So what they did is they took the the GPT four model, and they reduced it down so that they just had, like, you know, typical good general knowledge, language capabilities, and so on. And then they added on a bunch of training data. And the training data that they added on was mostly protein sequences and some biological text data. And then they also said tokenized three d structure data. So that is describing a three d structure with words or with some sort of textual form.
And so this was kind of a a really interesting dataset that they then built into the model. And then they use this to say, okay. What else can we do with the OSK and M to make those proteins more effective? So remember, a protein is a series of amino acids. That o protein that I mentioned is a 360 amino acids long.
There's 20 different amino acids. So that you were to change just one of those amino acids and perturb them a little bit, you have 20 to the three hundred and sixtieth power. That's how many changes you could make to just that o protein to just to try and perturb it. That's more than there are atoms in the universe. So this is a very, like, numerically difficult problem to tackle if you're gonna try and make more efficient proteins.
So the goal was like, how do you make a new protein by changing the amino acid sequence? And so they asked that question of this trained LLM and they got a bunch of results back. And remember, each amino acid, by the way, is encoded by three letters of DNA. So you can easily make new proteins by creating DNA, sticking it in a bacteria or yeast, and it'll make the protein you want it to make. And so you can run all these different DNA sequences, try them out and see what happens with that protein.
So that's exactly what they did. They did it in partnership with a group called Retro Biosciences. They had the LLM or the four B micro model come up with all these ideas on how OSK and M could become more effective. And why do they wanna make them more effective? Well, today, than 0.1% of the cells that you apply those proteins to actually convert, actually go through the rejuvenation.
So we have a long way to go to discover new proteins or getting these proteins to be more efficient. So rather than doing three d modeling and all the other stuff that other people might be doing, this LLM basically predicted a bunch of proteins and said, here's the amino acid sequence, and here's the DNA you need to make those proteins. RetroBio made them. They tested them, and then they got these incredible results. They actually got these new proteins to be 50 times more effective than the OSK and M proteins and basically rejuvenation or cellular reset.
Within seven days, they got more than 30% of the cells to show the the markers. And by day twelve, eighty five percent of them expressed critical stem cell markers. So this really showed that these new proteins that this model came up with worked. The results really are amazing. But I think couple things to take away from this.
Number one, we have a really incredible path we're on to reversing aging using proteins. We have identified so many new proteins just with this experiment. There are multiple other companies like Altos and others that are investing heavily in this area. We're gonna develop therapeutics around these proteins, and they're gonna have an incredible ability to reset ourselves, make them young again, fix all the DNA damage, fix all the gene expression damage that causes aging. The functional driver of aging is that gene expression networks are messed up in our cells, and it turns out that this sort of therapy can reset that.
So that's number one. It's like, we should be very optimistic about the path we're on in reversing aging. Number two is, like, it's incredible what these LLMs can do. This kind of follows that EVO two model story I mentioned a few weeks ago that the ARC Institute put out where they just took DNA data. The model didn't know what the DNA data represented, and they found that if you fed DNA into it, they'll tell you if there's an error in it.
And they identified all these variants, pathogenic variants in DNA, in genes that, you know, they did had no knowledge of. It just identified patterns. Some of the stuff in protein structure, protein shape, protein function may actually be these kind of emergent phenomena, and we can simply reduce them down to letters of DNA. And these LLNs can come up with new ones and write new ideas and they're working. So there's this whole new area that we don't need to build completely new neural networks that are using graph nets or something else to try and develop, predictive models and protein structure, which is gonna open up new areas for therapeutic drugs.
Free
book one. Yeah. It's working with just text. Yeah.
When do you think we go from cellular level to packages of cells to multicellular to like, how does that cascade work? Is there do these guys have an idea of
how is that a couple of the therapeutic companies that are working on this reverse aging stuff is they're actually targeting specific health conditions, and then they have their therapeutics in clinicals now to test for efficacy in that particular target. The idea that aging itself as in, like,
a two a, two b, or you're still, like you're past tox and now you're?
Yeah. They're still in one with everything. They're testing to make sure humans can handle it and what the dosing is and all that sort of stuff. So it's still, like, stage one. They got lots of animal model data that seems pretty good, but as we know, that stuff can all change as you go into two a.
But for now, they are targeting specific disease indications. That's how they're gonna get approval of the first batch. And then as that happens, the goal over time is to get aging itself to become an indication and then apply for aging. But what's your results?
Under on the first drug using these pathways, using these mechanisms of action that get approved? When do you think?
Just knowing the clinical path there, I would say we're probably somewhere between seven and twelve years.
Seven and twelve years away. Okay. Yeah. So the midpoint is, like, ten. Call it ten.
Yeah. Like a decade.
Yeah. And then, you know, what'll happen just like we see today
You think there's a version where people fly to Costa Rica, making Costa Rica up interesting, and can do something for themselves in the next three to four years?
Yeah. That's a great question. That's a great question. I think that's a very interesting idea that might happen. That's a really interesting idea that might happen because these are proteins.
And Because I
own land in Costa Rica, so I'd love to develop kind
of like
a hospitality. I'm just kidding.
Well, I mean, people are doing this for stem cells right now.
I'm totally kidding. I'm totally kidding. I own no land to Costa Rica. No.
Mean, yeah.
People are using peptides and stem cells and all of these kind of call it alternative modalities. But, you know, the the the risk with these historically Well, we could partner with Jay
Chang and open something in, Wyoming. Is it Wyoming?
Right. But when they over when when you get overdosed on on the early version of these proteins and they give too much to someone or to an animal, when you have your cells reverse all the way back to being a stem cell, it starts dividing and growing like crazy, and that looks like cancer, and you can't stop it. It doesn't know how to differentiate back into senescent cells. So there's a major risk in this, therapy still because you're actually changing the gene expression networks in cells and taking a skin cell in turn. If it turns all the way back into a stem cell, you don't want a bunch of stem cells growing on your skin.
That's not gonna be good. Those are gonna end up turning into what looks like an acts like cancer. And so there's a real path that needs to be explored here on how do you mediate that and how do you modulate that. I thought this was both incredible from a breakthrough perspective for this cellular rejuvenation work, but also on, like, what you can do with LLMs. I mean, this is not, like, something that people were like, hey.
Let's use LLMs. And by the way, I think it also shows importantly that we're gonna have these fine tuned smaller models for specific applications rather than have one massive AI model that does everything for everyone in every context. People are gonna take these base models, tune them, and they're gonna be far less compute intensive and be extraordinary at specific applications. And this is one very narrow example of that, but it certainly seems to be the a use case that should open up the door for many others like
it. Yeah. Agreed.
Hey, Friedberg. I I am not fully briefed on this, and it wasn't on the docket. So we can skip this if you're not as well. But RFK has made a lot of decisions about mRNA vaccines and funding them by the government and who should get the COVID vaccine and should we be spending for it? What what are your thoughts generally, and have you been monitoring?
I wanna be I wanna be more prepared for that conversation. Cool.
Yeah. I think it's an interesting
because I wanna make this
I've heard different things about the funding, and then I've heard different things about the rule change. So I just wanna make sure I know the fact.
Alright. We'll tackle it next week. Yeah. It was interesting. I think he largely wound up where we all wound up, which was like healthy people.
Maybe it's not necessary. People at risk, it is necessary, but they're codifying that now. And some people are losing their minds and other
people Sorry. Are happened? I wasn't.
So this is all like sort of moving target right now, but RFK, withdrew federal funding for mRNA vaccine development, and he removed the COVID vaccine from the CDC recommendations for healthy children and pregnant women. And if you want to go get a COVID vaccine, healthy individuals must consult with the physician first. Remember, you could just go to any pharmacy and get shot. Now you have to, like, consult with the physician. So it's I'm I'm very think the COVID the COVID obsessed people are losing their minds.
Everybody else is like, isn't that kind of standard where we wound up anyway?
Yeah. So I'm I'm really interested in hearing or reading his report on autism linkages that he says he seems to have found data.
Yeah. Yeah. Yeah. I wanted to know.
Really wanna know what they're gonna publish on that. That that, I think, is such an incredibly important conversation to be had, and I I'd really like to see what they come up with.
What's the story then, Friedberg, of why people are so bent out of shape of even talking about the number of vaccines we give to kids? I mean, I understand people are scared or whatever, but it just feels like people are losing their mind over even having a study or a discussion of it.
It's one of dogmatic things, man. I mean, you know, it's like fall in line or there's something wrong with you
asking questions. It's this idea that you may have made a mistake about the most precious thing in your life, which is your child. I think that there are a certain group of people that when they underwrite a decision, it's just so firm and set in stone that anything that sort of says you made a bad choice
Yeah. Cognitive dissonance.
Right? Sends sends them off the rails.
I mean, I I re underwrite my decision. I was like, yeah. I was excited to get it because they told me it would be good for society and it would stop the spread. So I was like, okay. I'm more than willing to do
that. You're so magnanimous, Jason.
That's what you're I still want grandma and grandpa to die.
They're like, Mr. Magnanimous.
You did your part.
You did your part.
That's what
it felt like. That's explicitly how Such a they said to healthy selfless person. They said to healthy people, Do your part. And I was like, Okay, I'll do my
part. You're like the Mohammed Yunus
mean, I'm saying I'm Gandhi over here of vaccines. You
should be nominated for a Nobel. I mean, wait-
Maybe I should be nominated for getting the vaccine.
Yeah. You're you're taking medical advice from Stephen Colbert, and then you wonder why you regret your From
the CDC. I thought that they could be trusted. Okay. Thought they would tell us the truth. Sorry.
Didn't get the memo that these guys were all
in good news. A here's a little newsflag.
Companies and they
were lying Here's on a newsflag for you, Jason. If your underwriting process is going to LinkedIn and looking at somebody's educational credentials, you're an idiot.
Yeah. I I would I would agree with that. Yeah. I would agree with that. Yeah.
Alright.
But, Gal, if you've if you've come to this realization about the CDC, why can't you come to it about the Fed? In other words, these are hyperpartisan actors who are very political, and they don't know what they're doing.
Totally.
They're not like this high cast of priests
who are making these decisions.
I'm all for questioning everything. I'm I'm for questioning I question everything. Of course. As long as I was pointing out.
Nick, Nick. Make a grok. Make a grok.
Oh my gosh.
Here we go.
Smoke bubbling out of a cauldron.
No. I'm Here we are, folks. Okay.
I the rate should be the same. Hold on. Hold on. What a joke.
I mean, what is Uber trading at? Is it over $88? I okay. Fine. Let it rip.
Hunt let's let's go for the full 75 bips. Let's go. Free money for everybody. I'm in. Let it rip.
Alright, everybody.
Too late, pal. He'll cut for Biden. He'll cut for Yellen. He'll cut for Kamala. He will not cut for Trump.
Alright. There's the party position. Okay.
Even though we have 2% PCE.
Take out what's your favorite go ahead.
What's your favorite government agency?
I'm I'm in favor of less government. I I could take that seriously.
Nick, pull this image up.
Do I have a favorite agency? Maybe it's oh, good god.
The secret camera from the Fed.
Here's your Fed meeting.
The scrolls. Isn't it hilarious, Jamal? None of us are part of any clubs. You two knuckleheads had to start your own club.
I'm the part of a club. You had to start one. I'm a founding member of executive branch. There you go. And You had to start your own.
I have Locker Number 27 at Shadow Creek in Las Vegas. Oh. Four lockers down for my hero, Michael Jordan.
Oh, really? Which is right next to Phil Hellmuth, actually. Phil Hellmuth is
He does not have a locker then.
No. No. Phil Hellmuth shares Michael Jordan's with him. It's like it says MJ Okay. NPH.
They share their locker. They both have their their shoes in the same locker. Alright.
Shout out to Michael. I'm also a
member of
Zero Bond in New York and Little Beach House in Malibu.
Oh, look at you. Look at you.
It's Jigal, it's called the Groucho Marx rule. We don't wanna be members of any club that would have us as a member.
Absolutely. Can
I say one club that I went to by accident I was invited, never been invited again, was the Lynx Club in New York, but here's the hack at the Lynx Club, which I think is incredible? They have bought so much wine over so many years that the menu shows the price of the wine when they bought it. So I saw Buck
75?
No. Dude, there was like a 82
Well, dude, that's like a What's that? 86
Lynch Baje, and it was a $120.
Yeah. That's like Deutsche's Club.
It's Deutsche's Club. That
place. It's incredible.
But what a what a thought
special with with for a member. And we tried to buy all the wine because we're like, what the They sell it. They'll price you
at that price. It's insane. No sense.
And then they wouldn't let us buy it because we weren't fucking members. But it is
an incredible benefit to start. It's the price you buy it at. They can't credit that.
Why don't we start an all in club? The all in club. Maybe I'll get my membership approved. I don't know. We're waiting.
Mean, it's like, I don't know what club all four of us would want to be in. I'll be honest with you.
Stogie. All right, everybody. This has been Love you, boys. Absolutely amazing fun episode of the All In podcast, your favorite podcast, the number of podcasts in the world. But while you're at it, why don't you tell your knucklehead friends who haven't heard of the pod?
Well, three of that are left that haven't heard
of Click the subscribe.
And tell them to link and subscribe and whatever. Go to allin.com, put your email in, maybe you get invited to a party. See you at the summit, everybody. It's gonna be super exciting. Saks came over the top at the last minute and added three spectacular speakers that I'm not gonna say, but Sax came through.
In the final minute, he added three amazing speakers. Surprise speakers coming at. Bye bye. Love you guys.
Bye bye. We'll let your winners ride. Rain man David Sack. And it said we open sourced it to the fans, and they've just gone crazy with it. We should all just get a room and just have one big huge orgy because they're all just useless.
It's like it's like sexual tension that they just need to release somehow.
Wet your Beat beat. Wet your
your feet.
Your We need to get Mercy's art back.